-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GkJ48p/xKvXsE3GTZi7sXOeI8dJjeasOdE6d6J11jQ379VG3xTpwagRk1hGYFmzx 3ylYNhZrr1Q12Ux4g2961w== /in/edgar/work/0000950129-00-005299/0000950129-00-005299.txt : 20001107 0000950129-00-005299.hdr.sgml : 20001107 ACCESSION NUMBER: 0000950129-00-005299 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20001106 GROUP MEMBERS: SHELL CAPITAL INC GROUP MEMBERS: SHELL CAPITAL INC. GROUP MEMBERS: SHELL OIL COMPANY GROUP MEMBERS: SHELL PETROLEUM INC. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BRIGHAM EXPLORATION CO CENTRAL INDEX KEY: 0001034755 STANDARD INDUSTRIAL CLASSIFICATION: [1311 ] IRS NUMBER: 752692967 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-51001 FILM NUMBER: 753928 BUSINESS ADDRESS: STREET 1: 6300 BRIDGE POINT PARKWAY STREET 2: BLDG 2 SUITE 500 CITY: AUSTIN STATE: TX ZIP: 78730 BUSINESS PHONE: 5124273300 MAIL ADDRESS: STREET 1: 6300 BRIDGE POINT PARKWAY STREET 2: BLDG 2 SUITE 500 CITY: AUSTIN STATE: TX ZIP: 78730 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SHELL CAPITAL INC CENTRAL INDEX KEY: 0001108513 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 760555907 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: P O BOX 2463 STREET 2: 910 LOUISIANA CITY: HOUSTON STATE: TX ZIP: 772522463 BUSINESS PHONE: 7132413515 MAIL ADDRESS: STREET 1: P O BOX 2463 STREET 2: P10 LOUISIANA CITY: HOUSTON STATE: TX ZIP: 772522463 SC 13D/A 1 h81438a1sc13da.txt SHELL CAPTIAL INC. FOR BRIGHAM EXPLORATION COMPANY 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 1) BRIGHAM EXPLORATION COMPANY --------------------------- (Name of Issuer) COMMON STOCK, PAR VALUE $0.01 PER SHARE --------------------------------------- (Title of Class of Securities) 109178 10 3 -------------- (CUSIP Number) MS. E.V. PHILLIPS CORPORATE SECRETARY 910 LOUISIANA, ROOM 4555 D HOUSTON, TX 77002-2463 TEL: (713) 241-3518 --------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) NOVEMBER , 2000 ------------------------------------ (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box: [ ] NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. Seess.240.13d-7(b) for other parties to whom copies are to be sent. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). 2 AMENDMENT NO. 1 TO SCHEDULE 13D - --------------------- ------------------ CUSIP No. 109178 10 3 Page 2 of 18 Pages - --------------------- ------------------ - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON SHELL CAPITAL INC. 76-0555907 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS AF - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - -------------------------------------------------------------------------------- NUMBER OF SHARES 7 SOLE VOTING POWER BENEFICIALLY OWNED BY -0- EACH REPORTING PERSON ------------------------------------------------------ WITH 8 SHARED VOTING POWER 6,730,769(1) ------------------------------------------------------ 9 SOLE DISPOSITIVE POWER -0- ------------------------------------------------------ 10 SHARED DISPOSITIVE POWER 6,730,769(1) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 6,730,769(1) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 29.6%(2) - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- - ---------- (1) Includes shares of Common Stock issuable upon the exercise of either Warrants to purchase Common Stock or certain rights to convert debt into Common Stock pursuant to the Equity Conversion Agreement. (2) Based on 15,975,543 shares of Common Stock outstanding as of November 1, 2000. 3 AMENDMENT NO. 1 TO SCHEDULE 13D - --------------------- ------------------ CUSIP No. 109178 10 3 Page 3 of 18 Pages - --------------------- ------------------ - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON SHELL OIL COMPANY - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - -------------------------------------------------------------------------------- NUMBER OF SHARES 7 SOLE VOTING POWER BENEFICIALLY OWNED BY -0- EACH REPORTING PERSON ------------------------------------------------------ WITH 8 SHARED VOTING POWER 6,730,769(1) ------------------------------------------------------ 9 SOLE DISPOSITIVE POWER -0- ------------------------------------------------------ 10 SHARED DISPOSITIVE POWER 6,730,769(1) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 6,730,769(1) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 29.6%(2) - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- - ---------- (1) Includes shares of Common Stock issuable upon the exercise of either Warrants to purchase Common Stock or certain rights to convert debt into Common Stock pursuant to the Equity Conversion Agreement. (2) Based on 15,975,543 shares of Common Stock outstanding as of November 1, 2000. 4 AMENDMENT NO. 1 TO SCHEDULE 13D - --------------------- ------------------ CUSIP No. 109178 10 3 Page 4 of 18 Pages - --------------------- ------------------ - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON SHELL PETROLEUM INC. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS AF - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - -------------------------------------------------------------------------------- NUMBER OF SHARES 7 SOLE VOTING POWER BENEFICIALLY OWNED BY -0- EACH REPORTING PERSON ------------------------------------------------------ WITH 8 SHARED VOTING POWER 6,730,769(1) ------------------------------------------------------ 9 SOLE DISPOSITIVE POWER -0- ------------------------------------------------------ 10 SHARED DISPOSITIVE POWER 6,730,769(1) - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 6,730,769(1) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 29.6%(2) - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- - ---------- (1) Includes shares of Common Stock issuable upon the exercise of either Warrants to purchase Common Stock or certain rights to convert debt into Common Stock pursuant to the Equity Conversion Agreement. (2) Based on 15,975,543 shares of Common Stock outstanding as of November 1, 2000. 5 ITEM 1. SECURITY AND ISSUER This amendment to Schedule 13D (the "Amendment") amends and restates the initial statement on Schedule 13D filed by the Shell Capital Inc. ("Shell Capital"), Shell Oil Company and Shell Petroleum Inc. (collectively, the "Reporting Persons") with the Securities and Exchange Commission on March 27, 2000. This Amendment relates to (i) warrants (the "Initial Warrants") issued to Shell Capital on February 17, 2000 to purchase up to 5,480,769 shares of the common stock, par value $0.01 per share (the "Common Stock"), of Brigham Exploration Company (the "Issuer") and, in the alternative, certain rights held by Shell Capital to convert a portion of the debt issued pursuant to an Amended and Restated Credit Agreement (the "Credit Agreement") dated February 17, 2000 among Brigham Oil & Gas, L.P., a Delaware limited partnership (the "Borrower"), certain financial institutions (including Shell Capital) (the "Lenders"), and the Bank of Montreal, as agent for the Lenders (the "Agent"), into up to 5,480,769 shares of Common Stock of the Issuer pursuant to the terms of an Equity Conversion Agreement dated February 17, 2000 between Shell Capital, the Borrower and the Issuer and (ii) warrants (the "Additional Warrants" and together, with the Initial Warrants, the "Warrants") issued to Shell Capital on October 31, 2000 to purchase up to 1,250,000 shares of the Common Stock of the Issuer in connection with the execution of a Subordinated Credit Agreement (the "Subordinated Credit Agreement") dated October 31, 2000 among Borrower, certain financial institutions (the "Subordinated Lenders") and Shell Capital, as agent for the Subordinated Lenders. The principal executive offices of the Issuer are located at 6300 Bridge Point Parkway, Building 2, Suite 500, Austin, Texas 78730. ITEM 2. IDENTITY AND BACKGROUND This Amendment is being filed by the Reporting Persons. Shell Capital is a wholly-owned subsidiary of Shell Oil Company which is a wholly-owned subsidiary of Shell Petroleum Inc. The principal business of Shell Capital is investment activities. Shell Capital is organized under the laws of the State of Delaware and the address of its principal place of business is 910 Louisiana, Suite 5000, Houston, Texas 77252-2463. Shell Oil Company, including its equity companies, is engaged, principally in the United States, in the exploration for, and development, production, purchase, transportation and marketing of, crude oil and natural gas, and the purchase, manufacture, transportation and marketing of oil and chemical products. In addition, Shell Oil is engaged in the exploration for, and production of, crude oil and natural gas outside the United States on a limited and selected basis. Shell Oil Company is organized under the laws of the State of Delaware and its principal place of business is at One Shell Plaza, 910 Louisiana, Houston, Texas 77002. Shell Petroleum Inc. is a holding company. Shell Petroleum Inc. is organized under the laws of the State of Delaware and has its principal place of business at One Shell Plaza, 910 Louisiana, Houston, Texas 77002. The shares of Shell Petroleum Inc. are directly or indirectly owned 60% by N.V. Koninklijke Nederlandsche Petroleum Maatschappij (Royal Dutch Petroleum Company), the Hague, the 5 6 Netherlands, and 40% by The "Shell" Transport and Trading Company, p.l.c. These companies are all holding companies of the Royal Dutch/Shell Group of Companies, the members of which are severally engaged throughout the greater part of the world in oil, natural gas, chemicals, coal and other businesses. This Amendment does not describe these entities as Reporting Persons because as parent companies, The "Shell" Transport and Trading Company and Royal Dutch Petroleum Company do not themselves engage in operational activities and they exercise no material voting influence over the voting or disposition of the securities covered by this Amendment except to the extent that they may have officers and directors in common with the Reporting Persons described above. The attached Schedule I is a list of the executive officers and directors of the Reporting Persons which contains the following information with respect to each such Reporting Person: (i) name; (ii) business address; (iii) present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is conducted; and (iv) citizenship. None of the Reporting Persons, nor to their knowledge any person listed on Schedule I hereto, has been during the last five years (a) convicted of any criminal proceeding (excluding traffic violations or similar misdemeanors) or (b) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, United States federal or state securities laws or finding any violations with respect to such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION Pursuant to the terms of the Credit Agreement, the Lenders thereunder made available to the Borrower a revolving credit facility in an aggregate amount of $75,000,000, conditioned on the satisfaction of certain conditions precedent, to be repaid in full by December 31, 2002. Thomas E. McGraw, acting as trustee for the Agent, has been granted security interests over certain of the assets of the Issuer and its subsidiaries pursuant to the Credit Agreement. Pursuant to the terms of the Credit Agreement, the Issuer has agreed to guarantee the obligations of the Borrower under the terms of the Credit Agreement. The foregoing summary of the Credit Agreement is qualified in its entirety by reference to Exhibit A, which is hereby incorporated by reference. To finance fundings under the Credit Agreement, Shell Capital used funds borrowed from Shell Oil Company. As a condition precedent to the funding of the Credit Agreement, the Issuer, the Borrower and Shell Capital entered into an Equity Conversion Agreement (the "Equity Conversion Agreement") dated February 17, 2000, whereby Shell Capital has the right to convert up to $30,000,000 of outstanding debt issued under the Credit Agreement into shares of Common Stock (the "Conversion Shares"), exercisable on or after the 90th day after the date of the Equity Conversion Agreement and only upon the occurrence of certain events as follows (subject to adjustment in accordance with the terms of the Equity Conversion Agreement): (i) the first $10,000,000 of outstanding debt may be converted into Common Stock at $3.90 per share; (ii) the next $10,000,000 to $20,000,000 of outstanding debt may be converted into Common Stock at $6.00 per share; and (iii) any outstanding debt over $20,000,000 up to $30,000,000 may be converted into 6 7 Common Stock at $8.00 per share. Should either Shell Capital choose to convert some or all of the outstanding debt into Conversion Shares or the Borrower force Shell Capital to convert some or all of the debt into Conversion Shares, then the number of Initial Warrant Shares (as defined below) into which the Initial Warrants may be converted pursuant to the First Warrant Agreement (as defined below) shall be reduced by the number of Conversion Shares issued to Shell Capital pursuant to the Equity Conversion Agreement. The Borrower has the right to force the conversion of outstanding debt under the Credit Agreement into shares of Common Stock on or after one year from the date of the Equity Conversion Agreement, subject to specified limitations. The foregoing summary of the Equity Conversion Agreement is qualified in its entirety by reference to Exhibit B, which is hereby incorporated by reference. Also as a condition precedent to the funding of the Credit Agreement, the Issuer entered into a Warrant Agreement (the "First Warrant Agreement") with Shell Capital on February 17, 2000. Pursuant to the First Warrant Agreement, the Issuer granted to Shell Capital the Initial Warrants representing the right to acquire up to 5,480,769 shares of Common Stock of the Issuer (the "Initial Warrant Shares"), exercisable upon the repayment by the Borrower, which repayment meets certain additional conditions, of a certain portion of the debt issued by Shell Capital under the Credit Agreement as follows (subject to adjustment in accordance with the terms of the First Warrant Agreement): (i) 2,564,102 Initial Warrants exercisable at $3.90 per share of Common Stock; (ii) 1,666,667 Initial Warrants exercisable at $6.00 per share of Common Stock; and (iii) 1,250,000 Initial Warrants exercisable at $8.00 per share of Common Stock. The number of Initial Warrant Shares held by Shell Capital is subject to reduction as described above upon the conversion of a portion of the outstanding debt issued by Shell Capital under the Credit Agreement into Conversion Shares. The foregoing summary of the First Warrant Agreement is qualified in its entirety by reference to Exhibit C, which is hereby incorporated by reference. The source of the funds that will be used for the exercise of the Initial Warrants to purchase Initial Warrant Shares, if applicable, will most likely be working capital then on hand or funds borrowed from Shell Oil Company. Pursuant to the terms of the Subordinated Credit Agreement, the Subordinated Lenders thereunder made available to the Borrower a subordinated credit facility in an aggregate amount of $20,000,000, conditioned on the satisfaction of certain conditions precedent, to be repaid in fully by October 31, 2005. Pursuant to the terms of the Subordinated Credit Agreement, the Issuer and certain of its subsidiaries have agreed to guarantee the obligations of the Borrower under the terms of the Subordinated Credit Agreement. The foregoing summary of the Subordinated Credit Agreement is qualified in its entirety by reference to Exhibit D, which is hereby incorporated by reference. To finance fundings under the Subordinated Credit Agreement, Shell Capital used funds borrowed from Shell Oil Company. As a condition precedent to the funding of the Subordinated Credit Agreement, the Issuer entered into a Warrant Agreement (the "Second Warrant Agreement") with Shell Capital dated as of October 31, 2000. Pursuant to the Second Warrant Agreement, the Issuer granted to Shell Capital the Additional Warrants representing the right to acquire up to 1,250,000 shares of Common Stock of the Issuer (the "Additional Warrant Shares"), exercisable from October 31, 2000 through October 31, 2007 at an exercise price of $3.00 per share of Common Stock (subject to adjustment in accordance with the Second Warrant Agreement). The foregoing summary of the Second Warrant 7 8 Agreement is qualified in its entirety by reference to Exhibit E, which is hereby incorporated by reference. The Second Warrant Agreement permits a cashless exercise, but if Shell Capital elects to exercise the Additional Warrants by paying the applicable exercise price in cash, the source of the funds that will be used to pay such exercise price will most likely be working capital then on hand or funds borrowed from Shell Oil Company. ITEM 4. PURPOSE OF TRANSACTION Shell Capital acquired the Warrants and its rights under the Equity Conversion Agreement in connection with its participation in the funding of the Credit Agreement and the Subordinated Credit Agreement as described in Item 3. Shell Capital engaged in the underwriting of the Credit Agreement and the Subordinated Credit Agreement for investment purposes. During such time as Shell Capital owns 10% or more of the issued and outstanding Common Stock of the Issuer, Shell Capital shall have the right to designate one member of the Board of Directors of the Issuer as provided in Section 2.08 of the Equity Conversion Agreement. In connection with the execution of the First Warrant Agreement and the Equity Conversion Agreement, the Issuer and Shell Capital entered into a Registration Rights Agreement dated as of February 17, 2000 (the "Registration Rights Agreement"), which requires the Issuer to register for sale under the Securities Act of 1933, as amended (the "Securities Act") on a Form S-3 registration statement the Initial Warrant Shares, the Conversion Shares and all other shares of Common Stock owned by Shell Capital and its affiliates as of the date of filing of such registration statement (collectively, the "Registrable Securities") acquired by Shell Capital. The foregoing summary of the Registration Rights Agreement is qualified in its entirety by reference to Exhibit F, which is hereby incorporated by reference. In connection with the execution of the Second Warrant Agreement, the Issuer and Shell Capital executed an amendment to the Registration Rights Agreement (the "Registration Rights Amendment") which provides the Additional Warrant Shares registration rights equivalent to the Initial Warrant Shares. The foregoing summary of the Registration Rights Amendment is qualified in its entirety by reference to Exhibit G, which is hereby incorporated by reference. Except as set forth in the preceding paragraph, Item 3 and Item 6 hereof and as otherwise contemplated by the Credit Agreement (attached hereto as Exhibit A), the Equity Conversion Agreement (attached hereto as Exhibit B), the Warrant Agreement (attached hereto as Exhibit C), the Subordinated Credit Agreement (attached hereto as Exhibit D), the Second Warrant Agreement (attached hereto as Exhibit E), the Registration Rights Agreement (attached hereto as Exhibit F), the Registration Rights Amendment (attached hereto as Exhibit G) and the Ancillary Agreement (attached as Exhibit H), none of the Reporting Persons and, to the best knowledge of the Reporting Persons, none of the persons set forth on Schedule I, has any current plans or proposals that relate to or would result in (a) the acquisition by any person of additional securities of the Issuer or the disposition of securities of the Issuer; (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation of the Issuer or any of its subsidiaries; (c) a sale or transfer of a material amount of assets of the Issuer or any of it subsidiaries; (d) any change in the present board of directors or management of the Issuer, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; (e) any material change in the present capitalization or dividend policy of the Issuer; (f) any other material change in the Issuer's business or corporate structure; (g) changes in the Issuer's charter, by-laws or instruments corresponding 8 9 thereto, or other actions which may impede the acquisition of the control of the Issuer by any other person; (h) any of the Issuer's securities being de-listed from a national securities exchange or ceasing to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) any of the Issuer's equity securities becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, as amended; or (j) any action similar to any of those enumerated above. Notwithstanding the foregoing, the Reporting Persons may in the future determine to acquire additional Common Stock or to dispose of Common Stock. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a) Reference is made to the applicable cover page for each Reporting Person for information concerning (i) the number of shares of Common Stock beneficially owned by such Reporting Person, and (ii) the percentage of outstanding Common Stock beneficially owned by such Reporting Person, in each case as of the date of this filing. (b) Reference is made to the applicable cover page for each Reporting Person for information concerning beneficial ownership of shares of Common Stock as to which such Reporting Person has sole power to vote or to direct the vote, shared power to vote or direct the vote, and sole or shared power to dispose or to direct the disposition, in each case as of the date of this filing. (c) During the past sixty days, none of the Reporting Persons acquired or disposed of beneficial ownership of Common Stock except as described herein. (d) No person other than the Reporting Persons has the right to receive dividends on the Common Stock issuable upon exercise of the Warrants beneficially owned by the Reporting Persons described in this Amendment and proceeds from the sale thereof. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER See the description of the Credit Agreement, the Equity Conversion Agreement, the First Warrant Agreement, the Subordinated Credit Agreement, the Second Warrant Agreement, the Registration Rights Agreement and the Registration Rights Amendment in Item 3 and Item 4 hereof, and as more fully set forth in Exhibits A through H, respectively. Other than as previously set forth, neither any of the Reporting Persons nor, to the best knowledge of such persons, any person named in Schedule I to this Amendment has any contract, arrangement, understanding or relationship (legal or otherwise) with any person with respect to any securities of the Issuer, including, but not limited to, transfer or voting of securities, finder's fees, joint ventures, loan or option agreements, puts or calls, guarantees of profits, division of profits or losses or the giving or withholding of proxies. 9 10 ITEM 7. MATERIAL TO BE FILES AS EXHIBITS Exhibit A Amended and Restated Credit Agreement, dated as of February 17, 2000, among Brigham Oil & Gas, L.P., the Bank of Montreal, as agent, and the lenders (including Shell Capital Inc.) signatory thereto (incorporated herein by reference to Exhibit 10.1 of Form 8-K (Current Report) for the period ending February 17, 2000 and filed by the Issuer with the Securities and Exchange Commission on February 29, 2000). Exhibit B Equity Conversion Agreement, dated as of February 17, 2000, among Brigham Oil & Gas, L.P., Brigham Exploration Company and Shell Capital Inc. (incorporated herein by reference to Exhibit 10.6 of Form 8-K (Current Report) for the period ending February 17, 2000 and filed by the Issuer with the Securities and Exchange Commission on February 29, 2000). Exhibit C Warrant Agreement, dated as of February 17, 2000, between Brigham Exploration Company and Shell Capital Inc. (incorporated herein by reference to Exhibit 10.7 of Form 8-K (Current Report) for the period ending February 17, 2000 and filed by the Issuer with the Securities and Exchange Commission on February 29, 2000). Exhibit D Subordinated Credit Agreement, dated as of October 31, 2000, among Brigham Oil & Gas, L.P., Shell Capital Inc., as agent, and the lenders signatory thereto (the "Subordinated Credit Agreement")(filed herewith). Exhibit E Warrant Agreement, dated as of October 31, 2000, between Brigham Exploration Company and Shell Capital Inc (filed herewith). Exhibit F Registration Rights Agreement, dated as of February 17, 2000, between Brigham Exploration Company and Shell Capital Inc. (incorporated herein by reference to Exhibit 10.8 of Form 8-K (Current Report) for the period ending February 17, 2000 and filed by the Issuer with the Securities and Exchange Commission on February 29, 2000). Exhibit G Amendment No. 1 to Registration Rights Agreement dated as of October 31, 2000, between Brigham Exploration Company and Shell Capital Inc. (filed herewith). Exhibit H Ancillary Agreement dated October 31, 2000 between Shell Capital and Brigham Oil & Gas, L.P. (filed herewith). Exhibit I Letter dated as of February 17, 2000, regarding certain fees pursuant to Credit Agreement dated as of February 17, 2000, among Brigham Oil & Gas, L.P., Bank of Montreal, as agent, Shell Capital Inc. and the lenders signatory thereto (incorporated herein by reference to Exhibit 10.9 of Form 8-K (Current Report) for the period ending February 17, 2000 and filed by the Issuer with the Securities and Exchange Commission on February 29, 2000). Exhibit J Amended and Restated Guaranty Agreement dated as of February 17, 2000 by 10 11 Brigham Exploration Company in favor of Bank of Montreal, as Agent, and each of the Lenders party to the Amended and Restated Credit Agreement (incorporated herein by reference to Exhibit 10.2 of Form 8-K (Current Report) for the period ending February 17, 2000 and filed by the Issuer with the Securities and Exchange Commission on February 29, 2000). Exhibit K Partial Assignment of Notes dated as of February 17, 2000 among (i) Bank of Montreal, (ii) Societe Generale, Southwest Agency, (iii) Shell Capital Inc., and (iv) Brigham Oil & Gas, L.P. (incorporated herein by reference to Exhibit 10.3 of Form 8-K (Current Report) for the period ending February 17, 2000 and filed by the Issuer with the Securities and Exchange Commission on February 29, 2000). Exhibit L Joint Filing Agreement dated as of November __, 2000 among Shell Capital Inc., Shell Oil Company and Shell Petroleum Inc. (filed herewith). 11 12 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: November 6, 2000 SHELL CAPITAL INC. By: /s/ R. W. LEFTWICH -------------------------------- Name: R. W. Leftwich Title: President SHELL OIL COMPANY By: /s/ R. W. LEFTWICH -------------------------------- Name: R. W. Leftwich Title: Treasurer SHELL PETROLEUM INC. By: /s/ R. W. LEFTWICH -------------------------------- Name: R. W. Leftwich Title: Assistant Treasurer 12 13 SCHEDULE I SHELL CAPITAL INC.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND THE NAME BUSINESS ADDRESS NAME CITIZENSHIP - ---- ---------------- ---- ----------- DIRECTORS: R. W. Leftwich P.O. Box 2463 Director/Chairman U.S.A. Houston, Texas 77252-2463 D. J. Palmer P.O. Box 2463 Director British Houston, Texas 77252-2463 M. Treanor Shell Centre Director British London, SE1 7NA OFFICERS: R. W. Leftwich P.O. Box 2463 President U.S.A. Houston, Texas 77252-2463 R. W. Bohan P.O. Box 2463 Senior Vice President and General U.S.A. Houston, Texas 77252-2463 Counsel; Director of Legal D. J. Palmer P.O. Box 2463 Senior Vice President - Finance U.S.A. Houston, Texas 77252-2463 J.F. Bridgers P.O. Box 2463 Senior Vice President and General U.S.A. Houston, Texas 77252-2463 Tax Counsel D. A. Ayars P.O. Box 2463 Vice President U.S.A. Houston, Texas 77252-2463 J. D. Culbertson P.O. Box 2463 Vice President U.S.A. Houston, Texas 77252-2463 R. S. De P.O. Box 2463 Vice President U.S.A. Houston, Texas 77252-2463 G. E. La Doe Shell Centre Vice President U.S.A. London
13 14
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND THE NAME BUSINESS ADDRESS NAME CITIZENSHIP - ---- ---------------- ---- ----------- M. C. McMurray P.O. Box 2463 Vice President U.S.A. Houston, Texas 77252-2463 E. J. Norris P.O. Box 2463 Vice President U.S.A. Houston, Texas 77252-2463 R. L. Roberts P.O. Box 2463 Vice President U.S.A. Houston, Texas 77252-2463 Z.A. Vitenson P.O. Box 2463 Vice President U.S.A. Houston, Texas 77252-2463 E. V. Phillips P.O. Box 2463 Secretary U.S.A. Houston, Texas 77252-2463 S. J. Paul P.O. Box 2463 Assistant Secretary U.S.A. Houston, Texas 77252-2463 W. L. Campbell P.O. Box 2463 Director of Business Development U.S.A. Houston, Texas 77252-2463 M. R. Keener P.O. Box 2463 Director of Business Development U.S.A. Houston, Texas 77252-2463 T.E. Doughman P.O. Box 2463 Vice President U.S.A. Houston, Texas 77252-2463 G.D. Neill P.O. Box 2463 Vice President U.S.A. Houston, Texas 77252-2463 T.L. Jackson P.O. Box 2463 Head of Deal Operations U.S.A. Houston, Texas 77252-2463
14 15 SHELL OIL COMPANY
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND NAME BUSINESS ADDRESS THE NAME CITIZENSHIP - ---- ---------------- -------- ----------- DIRECTORS: Joseph E. Antonini 1800 W. Maple Road Director; Retired Chairman, U.S.A. Troy, MI 48084 President and CEO, K-Mart Corporation M. Moody-Stuart Shell Centre Director; Chairman & Managing British 2 York Road Director, The "Shell" Transport London SE1 7NA, England and Trading Company, p.l.c. Rand V. Araskog 125 Worth Avenue Director; Retired Chairman and U.S.A. Suite 300 CEO, ITT Corporation Palm Beach, FL 33480 Harold A. Poling Fairlane Plaza North Director Emeritus; Retired U.S.A. 290 Town Center Drive, Ste. 322 Chairman and CEO, Ford Motor Dearborn, MI 48126 Company Robert F. Daniell United Technologies Building Director; Retired Chairman, U.S.A. 755 Main Street United Technologies Corporation Hartford, CT 06101 Gordon R. Sullivan 2425 Wilson Blvd. Director; President, Association U.S.A. Arlington, VA 22201 of the U.S. Army Vilma S. Martinez 355 S. Grand Avenue Director; Partner, Munger, U.S.A. 35th Floor Tolles & Olson LLP Los Angeles, CA 90071 - 1560 John F. Woodhouse 1390 Enclave Parkway Director; Senior Chairman, Sysco U.S.A. Houston, TX 77077-2099 Corporation S. L. Miller P.O. Box 2463 Chairman; President and Chief U.S.A. Houston, Texas 77252-2463 Executive Officer, Shell Oil Company
15 16
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND NAME BUSINESS ADDRESS THE NAME CITIZENSHIP - ---- ---------------- -------- ----------- OFFICERS: S. L. Miller P.O. Box 2463 President and Chief Executive U.S.A. Houston, Texas 77252-2463 Officer S.M. Borches P.O. Box 2463 Vice President - (Corporate U.S.A. Houston, Texas 77252-2463 Affairs) N. J. Caruso P.O. Box 2463 Vice President - Finance and U.S.A. Houston, Texas 77252-2463 Chief Financial Officer C.A. Lamboley P.O. Box 2463 Vice President, General Counsel U.S.A. Houston, Texas 77252-2463 and Corporate Secretary D.H. Ohle P.O. Box 2463 Vice President - (Human U.S.A. Houston, Texas 77252-2463 Resources) P.M. Dreckman P.O. Box 2463 Vice President and General Tax U.S.A. Houston, Texas 77252-2463 Counsel S. E. Ward 1401 Eye Street, N. W., Suite 1030 Vice President - (Government U.S.A. Washington, D.C. 20005 Affairs) S. J. Paul P.O. Box 2463 Assistant Secretary U.S.A. Houston, Texas 77252-2463 E. V. Phillips P.O. Box 2463 Assistant Secretary U.S.A. Houston, Texas 77252-2463 R. W. Leftwich P.O. Box 2463 Treasurer U.S.A. Houston, Texas 77252-2463 G.R. Hullinger P.O. Box 2463 Controller U.S.A. Houston, Texas 77252-2463
16 17 SHELL PETROLEUM INC.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND THE NAME BUSINESS ADDRESS NAME CITIZENSHIP - ---- ---------------- ---- ----------- DIRECTORS: N. J. Caruso P. O. Box 8985 Director USA Wilmington, DE 19899 C.A. Lamboley P. O. Box 8985 Director USA Wilmington, DE 19899 S. L. Miller P. O. Box 8985 Director USA Wilmington, DE 19899 M. Moody-Stuart P. O. Box 8985 Director and Chairman British Wilmington, DE 19899 OFFICERS: M. Moody-Stuart P. O. Box 8985 President British Wilmington, DE 19899 P.M. Dreckman P. O. Box 8985 Vice President - Tax USA Wilmington, DE 19899 N. J. Caruso P. O. Box 8985 Treasurer and Controller USA Wilmington, DE 19899 C.A. Lamboley P. O. Box 8985 Corporate Secretary USA Wilmington, DE 19899 R. W. Leftwich P. O. Box 8985 Assistant Treasurer USA Wilmington, DE 19899 L.W. Sutherland P. O. Box 8985 Assistant Controller USA Wilmington, DE 19899 E. V. Phillips P. O. Box 8985 Assistant Secretary USA Wilmington, DE 19899
17 18 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- Exhibit D Subordinated Credit Agreement, dated as of October 31, 2000, among Brigham Oil & Gas, L.P., Shell Capital Inc., as agent, and the lenders signatory thereto (the "Subordinated Credit Agreement")(filed herewith). Exhibit E Warrant Agreement, dated as of October 31, 2000, between Brigham Exploration Company and Shell Capital Inc (filed herewith). Exhibit G Amendment No. 1 to Registration Rights Agreement dated as of October 31, 2000, between Brigham Exploration Company and Shell Capital Inc. (filed herewith). Exhibit H Ancillary Agreement dated October 31, 2000 between Shell Capital and Brigham Oil & Gas, L.P. (filed herewith). Exhibit L Joint Filing Agreement dated as of November 6, 2000 among Shell Capital Inc., Shell Oil Company and Shell Petroleum Inc. (filed herewith).
18 EX-99.D 2 h81438a1ex99-d.txt SUBORDINATED CREDIT AGREEMENT - 10/31/2000 1 EXHIBIT D SUBORDINATED CREDIT AGREEMENT Dated as of October 31, 2000 Among BRIGHAM OIL & GAS, L.P. as Borrower, SHELL CAPITAL INC., as Agent, and THE LENDERS SIGNATORY HERETO 2
ARTICLE 1 DEFINITIONS AND ACCOUNTING MATTERS.................................................................1 Section 1.01 Terms Defined Above.................................................................1 Section 1.02 Certain Defined Terms...............................................................2 Section 1.03 Accounting Terms and Determinations................................................17 ARTICLE 2 COMMITMENTS.......................................................................................17 Section 2.01 Loans..............................................................................17 Section 2.02 Borrowings, Continuations and Conversions..........................................17 Section 2.03 Changes of Commitments.............................................................18 Section 2.04 Fees...............................................................................19 Section 2.05 Several Obligations................................................................19 Section 2.06 Notes..............................................................................19 Section 2.07 Prepayments........................................................................19 Section 2.08 Lending Offices....................................................................20 ARTICLE 3 PAYMENTS OF PRINCIPAL AND INTEREST................................................................20 Section 3.01 Repayment of Loans.................................................................20 Section 3.02 Interest...........................................................................20 ARTICLE 4 PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC...................................................21 Section 4.01 Payments...........................................................................21 Section 4.02 Pro Rata Treatment.................................................................21 Section 4.03 Computations.......................................................................22 Section 4.04 Non-receipt of Funds by the Agent..................................................22 Section 4.05 Set-off, Sharing of Payments, Etc..................................................22 Section 4.06 Taxes..............................................................................23 ARTICLE 5 [INTENTIONALLY OMITTED]...........................................................................27 ARTICLE 6 CONDITIONS PRECEDENT..............................................................................27 Section 6.01 Initial Funding....................................................................27 Section 6.02 Initial, Subsequent Loans..........................................................29 Section 6.03 Conditions Precedent for the Benefit of Lenders....................................29 Section 6.04 No Waiver..........................................................................30
i 3 ARTICLE 7 REPRESENTATIONS AND WARRANTIES....................................................................30 Section 7.01 Corporate Existence................................................................30 Section 7.02 Financial Condition................................................................30 Section 7.03 Litigation.........................................................................31 Section 7.04 No Breach..........................................................................31 Section 7.05 Authority..........................................................................31 Section 7.06 Approvals..........................................................................31 Section 7.07 Use of Loans.......................................................................31 Section 7.08 ERISA..............................................................................32 Section 7.09 Taxes..............................................................................33 Section 7.10 Titles, etc........................................................................33 Section 7.11 No Material Misstatements..........................................................34 Section 7.12 Investment Company Act.............................................................34 Section 7.13 Public Utility Holding Company Act.................................................34 Section 7.14 Subsidiaries.......................................................................35 Section 7.15 Location of Business and Offices...................................................35 Section 7.16 Defaults...........................................................................35 Section 7.17 Environmental Matters..............................................................35 Section 7.18 Compliance with the Law............................................................36 Section 7.19 Insurance..........................................................................37 Section 7.20 Hedging Agreements.................................................................37 Section 7.21 Restriction on Liens...............................................................37 Section 7.22 Material Agreements................................................................38 Section 7.23 Gas Imbalances.....................................................................38 Section 7.24 Partnership Agreement..............................................................38 ARTICLE 8 AFFIRMATIVE COVENANTS.............................................................................38 Section 8.01 Financial Statements and Other Reports.............................................38 Section 8.02 Litigation.........................................................................41 Section 8.03 Maintenance, Etc...................................................................42 Section 8.04 Environmental Matters..............................................................43 Section 8.05 Further Assurances.................................................................44
ii 4 Section 8.06 Performance of Obligations.........................................................44 Section 8.07 Engineering Reports................................................................44 Section 8.08 Reserved...........................................................................46 Section 8.09 Additional Collateral..............................................................46 Section 8.10 ERISA Information and Compliance...................................................47 Section 8.11 Subsidiary Security................................................................47 Section 8.12 Payment of Trade Payables..........................................................48 ARTICLE 9 NEGATIVE COVENANTS................................................................................48 Section 9.01 Debt...............................................................................48 Section 9.02 Liens..............................................................................49 Section 9.03 Investments, Loans and Advances....................................................49 Section 9.04 Dividends, Distributions and Redemptions...........................................50 Section 9.05 Sales and Leasebacks...............................................................51 Section 9.06 Nature of Business.................................................................51 Section 9.07 Limitation on Leases...............................................................51 Section 9.08 Mergers, Etc.......................................................................51 Section 9.09 Proceeds of Notes..................................................................51 Section 9.10 ERISA Compliance...................................................................51 Section 9.11 Sale or Discount of Receivables....................................................53 Section 9.12 [Intentionally Omitted]............................................................53 Section 9.13 Sale of Oil and Gas Properties.....................................................53 Section 9.14 Environmental Matters..............................................................53 Section 9.15 Transactions with Affiliates.......................................................53 Section 9.16 Subsidiaries.......................................................................53 Section 9.17 Negative Pledge Agreements.........................................................54 Section 9.18 Gas Imbalances, Take-or-Pay or Other Prepayments...................................54 Section 9.19 Borrower as Operator...............................................................54 Section 9.20 Restrictions While Outstanding Indebtedness Exceeds the Borrowing Base.............54 Section 9.21 Debt to RAPRV......................................................................55
iii 5 ARTICLE 10 EVENTS OF DEFAULT; REMEDIES......................................................................55 Section 10.01 Events of Default..................................................................55 Section 10.02 Remedies...........................................................................58 Section 10.03 Production and Proceeds............................................................58 ARTICLE 11 THE AGENT........................................................................................59 Section 11.01 Appointment, Powers and Immunities.................................................59 Section 11.02 Reliance by Agent..................................................................60 Section 11.03 Defaults...........................................................................60 Section 11.04 Rights as a Lender.................................................................60 Section 11.05 INDEMNIFICATION....................................................................60 Section 11.06 Non-Reliance on Agent and other Lenders............................................61 Section 11.07 Action by Agent....................................................................61 Section 11.08 Resignation or Removal of Agent....................................................62 ARTICLE 12 MISCELLANEOUS....................................................................................62 Section 12.01 Waiver.............................................................................62 Section 12.02 Notices............................................................................62 Section 12.03 Payment of Expenses, Indemnities, etc..............................................63 Section 12.04 Amendments, Etc....................................................................65 Section 12.05 Successors and Assigns.............................................................66 Section 12.06 Assignments and Participations.....................................................66 Section 12.07 Invalidity.........................................................................68 Section 12.08 Counterparts.......................................................................68 Section 12.09 References.........................................................................68 Section 12.10 Survival...........................................................................68 Section 12.11 Captions...........................................................................68 Section 12.12 NO ORAL AGREEMENTS.................................................................68 Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION..........................................69 Section 12.14 Interest...........................................................................70 Section 12.15 Confidentiality....................................................................71 Section 12.16 Effectiveness......................................................................71 Section 12.17 EXCULPATION PROVISIONS.............................................................72 Section 12.18 RELEASE............................................................................72
iv 6 THIS CREDIT AGREEMENT dated as of October 31, 2000 is among: BRIGHAM OIL & GAS, L.P., a limited partnership formed under the laws of the State of Delaware (the "Borrower") and Shell Capital Inc., individually ("SCI"), and any other lender which becomes a signatory hereto as provided in Section 12.06 (individually, together with its successors and assigns, a "Lender" and collectively, "the Lenders"), and SCI, in its capacity as agent for the Lenders (in such capacity, together with its successors in such capacity, the "Agent"). R E C I T A L S A. Reference is made to that certain Amended and Restated Credit Agreement (the "Senior Credit Agreement") dated as of February 17, 2000, as amended by that certain First Amendment to Amended and Restated Credit Agreement of even date herewith and as further amended or supplemented from time to time in accordance with the Subordination Agreement described below, among the Borrower, BANK OF MONTREAL, a Canadian bank, in its individual capacity (in its individual capacity, "BMO"), and BMO, in its capacity as agent (in such capacity, together with its successors in such capacity, the "Senior Agent"), Societe Generale, Southwest Agency ("Soc-Gen") and SCI. BMO, Soc-Gen and SCI and their respective successors and assigns in the capacity as lenders under the Senior Credit Agreement are herein collectively called "Senior Lenders". B. The Lenders have agreed to provide senior subordinated debt in the amount of up to $20,000,000 (plus any amount of interest paid in kind pursuant to Section 3.02(b) hereof) consisting of advances to the Borrower for purposes set out below, and the Borrower, the Agent and the Lenders now desire to set forth their agreements with respect to such credit facility. C. Pursuant to that certain Intercreditor and Subordination Agreement dated as of October 31, 2000, among BMO, Soc-Gen, SCI, Senior Agent, Lenders and Agent (as from time to time amended or supplemented, the "Subordination Agreement") the Indebtedness (as hereinafter defined) is expressly subordinated to the Senior Indebtedness (as hereinafter defined). D. In consideration of the mutual covenants and agreements herein contained and of the loans, extensions of credit and commitments hereinafter referred to, the parties hereto agree as follows: ARTICLE 1 Definitions and Accounting Matters Section 1.01 Terms Defined Above. As used in this Agreement, the terms "Agent," "BMO," "Borrower," "Lender," "Lenders," "Senior Credit Agreement," "Prior Notes", 1 7 "SCI", "Senior Agent", "Senior Lenders", "Soc-Gen" and Subordination Agreement shall have the meanings indicated above. Section 1.02 Certain Defined Terms. As used herein, the following terms shall have the following meanings (all terms defined in this Article I or in other provisions of this Agreement in the singular to have the same meanings when used in the plural and vice versa): "Affiliate" of any Person shall mean (i) any Person directly or indirectly controlled by, controlling or under common control with such first Person, (ii) any director or officer of such first Person or of any Person referred to in clause (i) above and (iii) if any Person in clause (i) above is an individual, any member of the immediate family (including parents, spouse and children) of such individual and any trust whose principal beneficiary is such individual or one or more members of such immediate family and any Person who is controlled by any such member or trust. For purposes of this definition, any Person which owns directly or indirectly 20% or more of the securities having ordinary voting power for the election of directors or other governing body of a corporation or 20% or more of the partnership or other ownership interests of any other Person (other than as a limited partner of such other Person) will be deemed to "control" (including, with its correlative meanings, "controlled by" and "under common control with") such corporation or other Person. "Agent's Fee Letter" shall mean that certain letter agreement from the Agent to the Borrower dated of even date with this Agreement concerning certain fees in connection with this Agreement and any agreements or instruments executed in connection therewith, as the same may be amended or replaced from time to time. "Agreement" shall mean this Subordinated Credit Agreement, as the same may from time to time be amended or supplemented. "Aggregate Commitments" at any time shall equal the amount calculated in accordance with Section 2.03 hereof. "Aggregate Maximum Credit Amounts" shall mean the amount of $20,000,000, plus any amount of interest paid in kind pursuant to Section 3.02(b) hereof, as the same may be reduced pursuant to Section 2.03(b) and Section 2.07(c). "Applicable Lending Office" shall mean, for each Lender, the lending office of such Lender (or an Affiliate of such Lender) designated on the signature pages hereof or such other offices of such Lender (or of an Affiliate of such Lender) as such Lender may from time to time specify to the Agent and the Borrower as the office by which its Loans are to be made and maintained. "Assignment" shall have the meaning assigned such term in Section 12.06(b). "Borrowing Base" has the meaning assigned to it now and from time to time hereafter in the Senior Credit Agreement. 2 8 "Brigham Exploration" shall mean Brigham Exploration Company, a Delaware corporation and owner of 100% of the capital stock of the General Partner. "Business Day" shall mean any day other than a day on which commercial banks are authorized or required to close in Houston, Texas. "CAPEX Plan" shall mean each Capital Expenditures Plan detailing the projected capital expenditures of the Borrower for the twelve month period covered thereby the first of which is to be submitted on the Closing Date with similar plans for each succeeding twelve month period to be submitted in accordance with Section 8.01(l). "Closing Date" shall mean October 31, 2000, or any date thereafter acceptable to Borrower and Agent. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time and any successor statute. "Commitment" shall mean, for any Lender, its obligation to make Loans up to such Lender's Maximum Credit Amount . "Consolidated Net Income" shall mean with respect to Brigham Exploration and its Consolidated Subsidiaries, for any period, the aggregate of the net income (or loss) of Brigham Exploration and its Consolidated Subsidiaries after allowances for taxes for such period, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from the calculation of such net income (to the extent otherwise included therein) the following: (i) the net income of any Person in which Brigham Exploration or any Consolidated Subsidiary has an interest (which interest does not cause the net income of such other Person to be consolidated with the net income of Brigham Exploration and its Consolidated Subsidiaries in accordance with GAAP), except to the extent of the amount of dividends or distributions actually paid in such period by such other Person to Brigham Exploration or to a Consolidated Subsidiary, as the case may be; (ii) the net income (but not loss) of any Consolidated Subsidiary to the extent that the declaration or payment of dividends or similar distributions or transfers or loans by that Consolidated Subsidiary is not at the time permitted by operation of the terms of its charter or any agreement, instrument or Governmental Requirement applicable to such Consolidated Subsidiary, or is otherwise restricted or prohibited in each case determined in accordance with GAAP; (iii) the net income (or loss) of any Person acquired in a pooling-of-interests transaction for any period prior to the date of such transaction; (iv) any extraordinary gains or losses, including gains or losses attributable to Property sales not in the ordinary course of business; and (v) the cumulative effect of a change in accounting principles and any gains or losses attributable to writeups or writedowns of assets. "Consolidated Subsidiaries" shall mean each Subsidiary of Brigham Exploration (whether now existing or hereafter created or acquired) the financial statements of which shall be (or should have been) consolidated with the financial statements of Brigham Exploration in accordance with GAAP, including, without limitation, the Borrower. 3 9 "Conversion Agreement" shall mean that certain Equity Conversion Agreement dated as of February 17, 2000 by and among Borrower, Brigham Exploration and SCI. "Covenant Release Date" means the first Borrowing Base Redetermination Date on which the outstanding Senior Indebtedness (excluding any obligation of any kind under any Hedging Agreement) is less than or equal to the Borrowing Base set by the Senior Lenders pursuant to the Senior Credit Agreement. "Credit Advances Termination Date" shall mean, unless the Commitments are sooner terminated pursuant to Sections 2.03(b) or 10.02 hereof, the Covenant Release Date. "Debt" shall mean, for any Person the sum of the following (without duplication): (i) all obligations of such Person for borrowed money or evidenced by bonds, debentures, notes or other similar instruments (including principal, interest, fees and charges); (ii) all obligations of such Person (whether contingent or otherwise) in respect of bankers' acceptances, letters of credit, surety or other bonds and similar instruments; (iii) all obligations of such Person to pay the deferred purchase price of Property or services (other than for borrowed money) excluding Trade Payables; (iv) all obligations under leases which shall have been, or should have been, in accordance with GAAP, recorded as capital leases in respect of which such Person is liable (whether contingent or otherwise); (v) all obligations under leases (other than capital leases and oil and gas leases) which require such Person or its Affiliate to make payments exceeding $100,000 over the term of such lease, including payments at termination, which are substantially equal to at least eighty percent (80%) of the purchase price of the Property subject to such lease plus interest at an imputed market rate of interest; (vi) all Debt (as described in the other clauses of this definition) of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person; (vii) all Debt (as described in the other clauses of this definition) of others guaranteed by such Person or in which such Person otherwise assures a creditor against loss of the Debt of others; (viii) all obligations or undertakings of such Person to maintain or cause to be maintained the financial position or covenants of others including without limitation agreements expressed as an agreement to purchase the Debt or Property of others or otherwise; (ix) obligations to deliver Hydrocarbons in consideration of advance payments; (x) obligations to pay for goods or services whether or not such goods or services are actually received or utilized by such Person; (xi) any capital stock of such Person in which such Person has a mandatory obligation to redeem such stock; (xii) any Debt of a Special Entity for which such Person is liable either by agreement or because of a Governmental Requirement; (xiii) the undischarged balance of any production payment created by such Person or for the creation of which such Person directly or indirectly received payment; and (xiv) all obligations of such Person under Hedging Agreements. "Default" shall mean an Event of Default or an event which with notice or lapse of time or both would become an Event of Default. "Dollars" and "$" shall mean lawful money of the United States of America. 4 10 "EBITDA" shall mean, for any period, the sum of Consolidated Net Income for such period PLUS the following expenses or charges to the extent deducted from Consolidated Net Income in such period: interest, taxes, depreciation, depletion and amortization, and other noncash charges, MINUS (i) all non cash income added to Consolidated Net Income in such period and (ii) capitalized general and administrative charges for such period. "ECT" shall mean Enron Capital & Trade Resources Corp., a Delaware corporation. "ECT Merchant" shall mean ECT Merchant Investments Corp., a Delaware corporation. "Effective Date" shall have the meaning assigned such term in Section 12.16. "Enron Indebtedness" shall mean any and all Debt incurred under the Indenture and/or secured by the Enron Mortgages. "Enron Mortgages" shall mean the Mortgage, Deed of Trust, Assignment of Production, Security Agreement and Financing Statement agreements executed by Borrower pursuant to the terms and provisions of the Indenture. "Enron Notes" means the promissory notes issued pursuant to the Indenture or the Securities Purchase Agreement. "Enron Shares" shall mean both (a) the 263,158 shares of common stock in Brigham Exploration that Brigham Exploration issued to ECT pursuant to the Securities Purchase Agreement, as evidenced by certificate number 0089, as replaced by certificate number 0131 issued in favor of ECT Merchant evidencing the change in Ownership from ECT to ECT Merchant and (b) the 789,474 shares in Brigham Exploration that Brigham Exploration issued to JEDI-II, as evidenced by certificate number 0131. "Enron Warrants" shall mean the warrants issued by Brigham Exploration to ECT (as predecessor to ECT Merchant) and JEDI-II pursuant to the Securities Purchase Agreement for the purchase of an aggregate of 1,000,000 shares of common stock of Brigham Exploration, and any warrants issued upon the transfer thereof or in substitution therefore, pursuant to any warrant certificates issued in accordance with the Securities Purchase Agreement. "Environmental Laws" shall mean any and all Governmental Requirements pertaining to the environment in effect in any and all jurisdictions in which the Borrower or any Subsidiary is conducting or at any time has conducted business, or where any Property of the Borrower or any Subsidiary is located, including without limitation, the Oil Pollution Act of 1990 ("OPA"), the Clean Air Act, as amended, the Comprehensive Environmental, Response, Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal Water Pollution Control Act, as amended, the Occupational Safety and Health Act of 1970, as amended, the Resource Conservation and Recovery Act of 1976 ("RCRA"), as amended, the Safe Drinking 5 11 Water Act, as amended, the Toxic Substances Control Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended, and other environmental conservation or protection laws. As used in the provisions hereof relating to Environmental Laws, the term "oil" shall have the meaning specified in OPA, the terms "hazardous substance" and "release" (or "threatened release") have the meanings specified in CERCLA, and the terms "solid waste" and "disposal" (or "disposed") have the meanings specified in RCRA; provided, however, that (i) in the event either OPA, CERCLA or RCRA is amended so as to broaden the meaning of any term defined thereby, such broader meaning shall apply subsequent to the effective date of such amendment and (ii) to the extent the laws of the state in which any Property of the Borrower or any Subsidiary is located establish a meaning for "oil," "hazardous substance," "release," "solid waste" or "disposal" which is broader than that specified in either OPA, CERCLA or RCRA, such broader meaning shall apply. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time and any successor statute. "ERISA Affiliate" shall mean each trade or business (whether or not incorporated) which together with the Borrower or any Subsidiary of the Borrower would be deemed to be a "single employer" within the meaning of section 4001(b)(1) of ERISA or subsections (b), (c), (m) or (o) of section 414 of the Code. "ERISA Event" shall mean (i) a "Reportable Event" described in Section 4043 of ERISA and the regulations issued thereunder (other than such an event with respect to which the requirement to give notice has been waived), (ii) the withdrawal of the Borrower or any ERISA Affiliate from a Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, (iii) the filing of a notice of intent to terminate a Plan (other than a defined contribution Plan) or the treatment of an amendment to such a Plan as a termination under Section 4041 of ERISA, (iv) the institution of proceedings to terminate a Plan by the PBGC or (v) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. "Event of Default" shall have the meaning assigned such term in Section 10.01. "Excepted Liens" shall mean: (i) Liens for taxes, assessments or other governmental charges or levies not yet due or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (ii) Liens in connection with workmen's compensation, unemployment insurance or other social security, old age pension or public liability obligations not yet due or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (iii) operators', vendors', carriers', warehousemen's, repairmen's, mechanics', workmen's, materialmen's, construction or other like Liens arising by operation of law in the ordinary course of business or incident to the exploration, development, operation and maintenance of Oil and Gas Properties or customary landlord's liens, each of 6 12 which is in respect of obligations that have not been outstanding more than 90 days or which are being contested in good faith by appropriate proceedings and for which adequate reserves have been maintained in accordance with GAAP; (iv) any Liens reserved in leases or farmout agreements for rent or royalties and for compliance with the terms of the farmout agreements or leases in the case of leasehold estates, to the extent that any such Lien referred to in this clause does not materially impair the use of the Property covered by such Lien for the purposes for which such Property is held or materially impair the value of such Property subject thereto; (v) encumbrances (other than to secure the payment of borrowed money or the deferred purchase price of Property or services), easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations in any rights of way or other Property for the purpose of roads, pipelines, transmission lines, transportation lines, distribution lines for the removal of gas, oil, coal or other minerals or timber, and other like purposes, or for the joint or common use of real estate, rights of way, facilities and equipment, and defects, irregularities, zoning restrictions and deficiencies in title of any rights of way or other Property which in the aggregate do not materially impair the use of such rights of way or other Property for the purposes of which such rights of way and other Property are held or materially impair the value of such Property subject thereto; (vi) deposits of cash or securities to secure the performance of bids, trade contracts, leases, statutory obligations and other obligations of a like nature incurred in the ordinary course of business; (vii) Liens permitted by the Loan Documents; and (viii) Liens securing the Senior Indebtedness; and (ix) liens securing any Debt described in Section 9.01(f) hereof that is owing, at the time such Debt is incurred, to either a Senior Lender, a Lender, an Affiliate of a Senior Lender or an Affiliate of a Lender. "Federal Funds Rate" shall mean, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight federal funds transactions with a member of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (i) if the date for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if such rate is not so published for any day, the Federal Funds Rate for such day shall be the average rate charged to the Agent on such day on such transactions as determined by the Agent. "Final Maturity Date" means October 31, 2005. "Financial Statements" shall mean the financial statement or statements described or referred to in Section 7.02. "Fixed Rate" means 10.75% per annum, but in no event to exceed the Highest Lawful Rate. "GAAP" shall mean generally accepted accounting principles in the United States of America in effect from time to time. 7 13 "General Partner" shall mean Brigham, Inc., a Nevada corporation, general partner of the Borrower. "Governmental Authority" shall include the country, the state, county, city and political subdivisions in which any Person or such Person's Property is located or which exercises valid jurisdiction over any such Person or such Person's Property, and any court, agency, department, commission, board, bureau or instrumentality of any of them including monetary authorities which exercises valid jurisdiction over any such Person or such Person's Property. Unless otherwise specified, all references to Governmental Authority herein shall mean a Governmental Authority having jurisdiction over, where applicable, the Borrower, the Subsidiaries or any of their Property or the Agent, any Lender or any Applicable Lending Office. "Governmental Requirement" shall mean any law, statute, code, ordinance, order, determination, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization or other directive or requirement (in the case of banking regulatory authorities whether or not having the force of law), including, without limitation, Environmental Laws, energy regulations and occupational, safety and health standards or controls, of any Governmental Authority. "Guarantors" shall mean Brigham Exploration, the General Partner, Brigham Holdings I, LLC and Brigham Holdings II, LLC and any other Person who becomes party to a Guaranty Agreement pursuant to the terms of Section 8.11. "Guaranty Agreements" shall mean the agreements executed by the Guarantors in form and substance satisfactory to the Agent guarantying, unconditionally, payment of the Indebtedness, as the same may be amended, modified or supplemented from time to time. "Hedging Agreements" shall mean any commodity, interest rate or currency swap, cap, floor, collar, forward agreement or other exchange or protection agreements or any option with respect to any such transaction. "Highest Lawful Rate" shall mean, with respect to each Lender, the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the Notes or on other Indebtedness under laws applicable to such Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow. "Hydrocarbon Interests" shall mean all rights, titles, interests and estates now or hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding royalty and royalty interests, net profit interests and production payment interests, including any reserved or residual interests of whatever nature. 8 14 "Hydrocarbons" shall mean oil, gas, casinghead gas, drip gasoline, natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all products refined or separated therefrom. "Indebtedness" shall mean any and all amounts owing or to be owing by the Borrower to the Agent and/or Lenders in connection with the Loan Documents. "Indemnified Parties" shall have the meaning assigned such term in Section 12.03(b). "Indemnity Matters" shall mean any and all actions, suits, proceedings (including any investigations, litigation or inquiries), claims, demands and causes of action made or threatened against a Person and, in connection therewith, all losses, liabilities, damages (including, without limitation, consequential damages) or reasonable costs and expenses of any kind or nature whatsoever incurred by such Person whether caused by the sole or concurrent negligence of such Person seeking indemnification. "Indenture" shall mean that certain Indenture dated as of August 20, 1998 between Brigham Exploration, as the issuer of the Subordinated Debt, and Chase Bank of Texas, National Association, as the trustee as amended by that First Amendment to Indenture dated March 26, 1999 and that Second Amendment to Indenture dated as of February 17, 2000. "Initial Funding" shall mean the funding of the initial Loans pursuant to Section 6.01 hereof. "Initial Reserve Report" shall mean the report of Cawley, Gillespie & Associates with respect to the Oil and Gas Properties of the Borrower as of December 31, 1999, a copy of which has been delivered to the Agent. "Interest Coverage Ratio" shall have the meaning assigned such term in the Guaranty Agreement dated as of the date hereof, as from time to time amended, executed by Brigham Exploration. "Interest Payment Dates" has the meaning assigned to it in Section 3.02. "JEDI-II" shall mean Joint Energy Development Investments II Limited Partnership, a Delaware limited partnership. "Lending Relationship" shall refer to this Agreement and the other Loan Documents, together with any and all negotiations, discussions, acts, omissions, renewals, extensions, and other agreements or events related to this Agreement and such other Loan Documents, the parties' obligations thereunder and the transactions contemplated thereby, including, without limitation, any such negotiations, discussions, acts, omissions, renewals, extensions, other agreements or events that may occur on the date hereof and the instruments and documents executed and delivered in connection herewith or relating hereto. 9 15 "Lien" shall mean any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on the common law, statute or contract, and whether such obligation or claim is fixed or contingent, and including but not limited to (i) the lien or security interest arising from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes or (ii) production payments and the like payable out of Oil and Gas Properties. The term "Lien" shall include reservations, exceptions, encroachments, easements, rights of way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting Property. For the purposes of this Agreement, a Person shall be deemed to be the owner of any Property which it has acquired or holds subject to a conditional sale agreement, or leases under a financing lease or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person in a transaction intended to create a financing. "Loan Documents" shall mean this Agreement, the Subordination Agreement, the Notes, the Agent's Fee Letter, the Warrant Agreement (and any warrants issued pursuant thereto), the agreements or instruments described or referred to in Exhibit D, and any and all other agreements or instruments now or hereafter executed and delivered by the Borrower or any Subsidiary or Affiliate of the Borrower including, without limitation, Brigham Exploration (other than assignments, participation or similar agreements between any Lender and any other lender or creditor with respect to any Indebtedness pursuant to this Agreement) in connection with, or as security for the payment or performance of the Notes, or this Agreement, as such agreements may be amended, supplemented or restated from time to time. "Loans" shall mean the loans as provided for by Section 2.01. "Majority Lenders" means at any time while no Loans are outstanding, Lenders having at least seventy-five percent (75%) of the Aggregate Commitments of the Lenders and, at any time while Loans are outstanding, Lenders holding at least seventy-five percent (75%) of the outstanding aggregate principal amount of the portion of the Loans allocable to the Lenders (without regard to any sale by a Lender of a participation in any Loan under Section 12.06(c)). "Material Adverse Effect" shall mean any material and adverse effect on (i) the assets, liabilities, financial condition, business, operations or affairs of Brigham Exploration and its Subsidiaries taken as a whole or the Borrower and its Subsidiaries taken as a whole, from those reflected in the Financial Statements or from the facts represented or warranted in any Loan Document, or (ii) the ability of Brigham Exploration or the Borrower or Brigham Exploration or the Borrower and their respective Subsidiaries taken as a whole to carry out their business as at the Closing Date or as proposed as of the Closing Date to be conducted or meet their obligations under the Loan Documents on a timely basis. "Maximum Credit Amount" shall mean, as to each Lender, the amount set forth opposite such Lender's name on Annex I under the caption "Maximum Credit Amounts" plus such Lender's Percentage Share of any amount of interest paid in kind pursuant to Section 10 16 3.02(b) hereof (as the same may be reduced pursuant to Section 2.03(b) hereof as modified from time to time to reflect any assignments permitted by Sections 12.06(b) and (c)). "Mortgages" shall mean, collectively, any Standard Mortgages and any New Mortgages. "Mortgaged Property" shall mean the Property owned by the Borrower and which is subject to the Liens existing and to exist under the terms of the Loan Documents. "Multiemployer Plan" shall mean a Plan defined as such in Section 3(37) or 4001(a)(3) of ERISA. "Net Seismic and Land Expenditures" shall mean those costs incurred after the Closing Date for seismic services, seismic data, and acquisition of undeveloped Hydrocarbon Interests, less the net proceeds, if any, received after the Closing Date through the sale or licensing of interests in undeveloped Hydrocarbon Interests and/or seismic data. "New Mortgage" shall mean, collectively, the "New Mortgages" referred to in item 11 of Exhibit D and any mortgages and supplements executed pursuant to Section 8.09 (a) hereof. "Notes" shall mean the Notes provided for by Section 2.06, together with any and all renewals, extensions for any period, increases, rearrangements, substitutions or modifications thereof. "NSLE Limit" shall have the meaning set forth in Section 9.20(a). "Oil and Gas Properties" shall mean Hydrocarbon Interests; the Properties now or hereafter pooled or unitized with Hydrocarbon Interests; all presently existing or future unitization, pooling agreements and declarations of pooled units and the units created thereby (including without limitation all units created under orders, regulations and rules of any Governmental Authority) which may affect all or any portion of the Hydrocarbon Interests; all operating agreements, contracts and other agreements which relate to any of the Hydrocarbon Interests or the production, sale, purchase, exchange or processing of Hydrocarbons from or attributable to such Hydrocarbon Interests; all Hydrocarbons in and under and which may be produced and saved or attributable to the Hydrocarbon Interests, including all oil in tanks, the lands covered thereby and all rents, issues, profits, proceeds, products, revenues and other incomes from or attributable to the Hydrocarbon Interests; all tenements, hereditaments, appurtenances and Properties in any manner appertaining, belonging, affixed or incidental to the Hydrocarbon Interests; and all Properties, rights, titles, interests and estates described or referred to above, including any and all Property, real or personal, now owned or hereinafter acquired and situated upon, used, held for use or useful in connection with the operating, working or development of any of such Hydrocarbon Interests or Property (excluding drilling rigs, automotive equipment or other personal property which may be on such premises for the purpose of drilling a well or for other similar temporary uses) and including any and all oil wells, gas 11 17 wells, injection wells or other wells, buildings, structures, fuel separators, liquid extraction plants, plant compressors, pumps, pumping units, field gathering systems, tanks and tank batteries, fixtures, valves, fittings, machinery and parts, engines, boilers, meters, apparatus, appliances, tools, implements, cables, wires, towers, casing, tubing and rods, similar equipment, surface leases, rights-of-way, easements and servitudes together with all additions, substitutions, replacements, accessions and attachments to any and all of the foregoing. "Other Taxes" shall have the meaning assigned such term in Section 4.06(b). "Partners" shall mean the General Partner, Brigham Holdings I, LLC and Brigham Holdings II, LLC. "Partnership Agreement" shall mean the written partnership agreement of the Borrower among the Partners dated December 30, 1997, as amended from time to time. "PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions. "PDNP Reserves" shall mean proved, developed, non-producing Hydrocarbon reserves, as determined in conformity with the guidelines in effect from time to time as promulgated by the Society of Petroleum Engineers or its successor association. "PDP Reserves" shall mean proved, developed, producing Hydrocarbon reserves, as determined in conformity with the guidelines in effect from time to time as promulgated by the Society of Petroleum Engineers or its successor association. "Percentage Share" shall mean the percentage of the Aggregate Commitments to be provided by a Lender under this Agreement as indicated on Annex I hereto, as modified from time to time to reflect any assignments permitted by Section 12.06(b) or (c). "Person" shall mean any individual, corporation, company, voluntary association, partnership, joint venture, trust, limited liability company, unincorporated organization or government or any agency, instrumentality or political subdivision thereof, or any other form of entity. "Plan" shall mean any employee pension benefit plan, as defined in Section 3(2) of ERISA, which (i) is currently or hereafter sponsored, maintained or contributed to by the Borrower, any Subsidiary or an ERISA Affiliate or (ii) was at any time during the preceding six calendar years sponsored, maintained or contributed to, by the Borrower, any Subsidiary or an ERISA Affiliate. "Post-Default Rate" shall mean, in respect of any principal of any Loan or any other amount payable by the Borrower under this Agreement or any Note, a rate per annum during the period commencing on the date of an Event of Default until such amount is paid in 12 18 full or all Events of Default are cured or waived equal to 2% per annum above the Fixed Rate, but in no event to exceed the Highest Lawful Rate. "Principal Office" shall mean the principal office of the Agent, presently located at 910 Louisiana, Suite 5000, Houston, Texas 77002. "Property" shall mean any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "Proved Reserves" means PDP, PDNP and PUD Reserves. "PUD Reserves" shall mean proved, undeveloped Hydrocarbon reserves, as determined in conformity with the guidelines in effect from time to time as promulgated by the Society of Petroleum Engineers or its successor association. "PV7%" shall mean the present value, determined utilizing the Agent's price forecast (which will take into account any Hedging Agreements of Brigham Exploration, Borrower or any Subsidiary) and applying the Agent's reasonable adjustments (positive or negative) to the engineering analysis prepared by Brigham Exploration's independent reserve engineers or in-house reserve engineers, whichever the case may be, of the forecasted future cash flow attributable to the subject Hydrocarbon reserves, discounted at an annual rate of 7%. "PV10%" shall mean the present value, determined utilizing the Agent's price forecast (which will take into account any Hedging Agreements of Brigham Exploration, Borrower or any Subsidiary) and applying the Agent's reasonable adjustments (positive or negative) to the engineering analysis prepared by Brigham Exploration's independent reserve engineers or in-house reserve engineers, whichever the case may be, of the forecasted future cash flow attributable to the subject Hydrocarbon reserves, discounted at an annual rate of 10%. "RAPRV 10%" means the risk adjusted proved reserve value which is equal to the lesser of (i) 100% of the PV10% of the Borrower's and any Guarantor's PDP Reserves, and (ii) the sum of 65% of the PV10% of the Borrower's and any Guarantor's PDP Reserves, plus 43% of the PV10% of the Borrower's and any Guarantor's PDNP Reserves, plus 33% of the PV7% of the Borrower's and any Guarantor's PUD Reserves. For purposes of this definition, only Proved Reserves subject to a Mortgage shall be included. "RAPRV 7%" means the risk adjusted proved reserve value which is equal to the lesser of (i) 100% of the PV7% of the Borrower's and any Guarantor's PDP Reserves, and (ii) the sum of 65% of the PV7% of the Borrower's and any Guarantor's PDP Reserves, plus 43% of the PV7% of the Borrower's and any Guarantor's PDNP Reserves, plus 33% of the PV7% of the Borrower's and any Guarantor's PUD Reserves. For purposes of this definition, only Proved Reserves subject to a Mortgage shall be included. 13 19 "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as the same may be amended or supplemented from time to time. "Regulatory Change" shall mean, with respect to any Lender, any change after the Closing Date in any Governmental Requirement (including Regulation D) or the adoption or making after such date of any interpretations, directives or requests applying to a class of lenders (including such Lender or its Applicable Lending Office) of or under any Governmental Requirement (whether or not having the force of law) by any Governmental Authority charged with the interpretation or administration thereof. "Released Claims" shall mean any and all claims (including without limitation any liabilities, damages, demands and causes of action arising therefrom), whether (a) at law or in equity, (b) on the alleged commission of a tort, (c) on the alleged breach (or anticipatory breach or repudiation) of any contract, duty, or warranty (whether oral or written, express or implied), (d) on the alleged violation of any statute, tariff, or regulation (whether promulgated by the United States, any state thereof, any foreign state or country, or any other governmental agency or entity, wherever located), or (e) on any other factual, legal or equitable theory, including, without limitation, any claim for damages of any type or nature, for injunctive or other relief, for attorneys' fees, interest or any other liability whatsoever on any theory, including without limitation any loss, cost or damage in connection with or based upon "lender liability", unfair dealing, duress, coercion, control or undue influence, extortion or commercial bribery, breach of an implied covenant or duty of good faith and fair dealing, material misrepresentation or omission, overreaching, unconscionability, conflict of interest, bad faith, malpractice, disparate bargaining position, detrimental reliance, promissory estoppel, estoppel by deed, waiver, laches, or any other equitable theory, equitable subordination, breach of fiduciary duty or any other duty, or tortious inducement to commit such breach, tortious interference with contract or prospective business relations, negligent performance of contractual obligations, or other theories of negligence, negligent or intentional infliction of emotional distress, slander, libel, other defamation, fraudulent transfer, conversion, trespass to (or clouding the title of) property, usury, violations of the Racketeer Influenced and Corrupt Organizations Act, deceptive trade practices, conspiracy, or any theory of liability as partners or joint venturers, that any Releasing Party may have as of the date hereof against any Released Party with respect to the Lending Relationship. "Released Party" shall mean each of the Agent, the Lenders and their respective predecessors, successors, assigns, directors, officers, partners, employees, agents, attorneys, principals and Affiliates and all other Persons liable or who might be claimed to be liable on their behalf (collectively, the "Released Parties"). "Releasing Party" shall mean each of the Borrower and the Guarantors and their respective predecessors, successors, assigns, directors, officers, partners, employees, agents, attorneys, principals, Affiliates and all other Persons who might have a claim against any Released Party (collectively, the "Releasing Parties"). 14 20 "Required Payment" shall have the meaning assigned such term in Section 4.04. "Reserve Report" shall mean a report, in form satisfactory to the Agent, setting forth, as of the dates set forth in Section 8.07(a) and (b) (or such other date in the event of an unscheduled redetermination); (i) the proved oil and gas reserves attributable to the Borrower's and its Subsidiaries' Hydrocarbon Interests together with a projection of the rate of production and future net income, taxes, operating expenses and capital expenditures with respect thereto as of such date, based upon the pricing assumptions consistent with SEC reporting requirements at the time (or other pricing provided by the Agent) and (ii) such other information as the Agent may reasonably request. The term "Reserve Report" shall also include the Initial Reserve Report, the supplemental Reserve Reports described in Section 8.07(a), and the information to be provided by the Borrower of each year pursuant to Section 8.07(c). "Responsible Officer" shall mean, as to any Person, the Chief Executive Officer, the President or any Vice President of such Person and the Chief Financial Officer of such Person. Unless otherwise specified, all references to a Responsible Officer herein shall mean a Responsible Officer of the Borrower. "SEC" shall mean the Securities and Exchange Commission or any successor Governmental Authority. "Securities Purchase Agreement" shall mean that certain Securities Purchase Agreement dated August 20, 1998 among Brigham Exploration, ECT (as predecessor to ECT Merchant) and JEDI-II, as agent for such purchasers regarding the Subordinated Debt, as heretofore amended. "Senior Indebtedness" shall mean any and all amounts owing or to be owing by Borrower, Brigham Exploration or any Subsidiary of Borrower or Brigham Exploration in connection with (a) the Senior Loan Documents, and/or (b) any Hedging Agreements now or hereafter existing between (i) Borrower and BMO and its successors or assigns (a "BMO Hedge Party") and Soc-Gen and its successors or assigns (a "Soc-Gen Hedge Party") entered into while such BMO Hedge Party or such Soc-Gen Hedge Party is a Senior Lender; and (ii) Borrower and SCI and its successors or assigns (with Loans or Commitments of $20 million or more) or any Affiliate of SCI (SCI and any Affiliate of SCI a "SCI Hedge Party") entered into while such SCI Hedge Party or Fathom Energy Capital I, L.L.C, is a Senior Lender and permitted by the terms of the Senior Credit Agreement and all renewals, extensions and/or rearrangements of any of the above. "Senior Loan Documents" means the "Loan Documents" as such term is at this time and from time to time defined in the Senior Credit Agreement. "Special Entity" shall mean any joint venture, limited liability company or partnership, general or limited partnership or any other type of partnership or company other than a corporation in which a Person or one or more of its other Subsidiaries is a member, owner, partner or joint venturer and owns, directly or indirectly, at least a majority of the equity of such 15 21 entity or controls such entity, but excluding any tax partnerships that are not classified as partnerships under state law. For purposes of this definition, any Person which owns directly or indirectly an equity investment in another Person which allows the first Person to manage or elect managers who manage the normal activities of such second Person will be deemed to "control" such second Person (e.g. a sole general partner controls a limited partnership). "Standard Mortgage" shall mean, collectively, the "Standard Mortgages" referred to in item 10 of Exhibit D and any mortgages and supplements executed pursuant to Section 8.09 (b) hereof. "Subordination Agreement" means that certain Intercreditor and Subordination Agreement of even date herewith by and between Borrower, Senior Agent, Senior Lenders, Agent and Lenders, as from time to time amended, supplemented or modified. "Subsidiary" shall mean (i) any corporation of which at least a majority of the outstanding shares of stock having by the terms thereof ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether or not at the time stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by a Person or one or more of its Subsidiaries or by a Person and one or more of its Subsidiaries and (ii) any Special Entity. Unless otherwise indicated herein, each reference to the term "Subsidiary" shall mean a Subsidiary of the Borrower. "Tangible Net Worth" shall mean, as at any date, the sum of the following for Brigham Exploration and its Consolidated Subsidiaries determined (without duplication) in accordance with GAAP (determined without regard to any write up or write down resulting from any changes in GAAP subsequent to September 30, 1999): (i) the amount of preferred stock and common stock at par plus the amount of surplus of Brigham Exploration, plus (ii) the retained earnings (or, in the case of retained earnings deficit, minus the amount of such deficit), minus (iii) the sum of the following: cost of treasury shares and the book value of all assets of Brigham Exploration and its Consolidated Subsidiaries which should be classified as intangibles (without duplication of deductions in respect of items already deducted in arriving at surplus and retained earnings) but in any event including as such intangibles the following: goodwill, research and development costs, trademarks, trade names, copyrights, patents and franchises, unamortized debt discount and expense, all reserves and any writeup in the book value of assets resulting from a revaluation thereof. 16 22 "Taxes" shall have the meaning assigned such term in Section 4.06(a). "Term ORRI" shall mean the term overriding royalty interest created pursuant to that certain Conveyance of Adjustable Term Overriding Royalty Interest between Borrower, ECT Merchant and JEDI-II. "Trade Payables" shall mean customary trade payables incurred in the ordinary course of business. "Warrant Agreement" means as agreement in substantially the form attached hereto as Schedule 6.01(o). "Wholly-Owned Subsidiary" shall mean, as to a Person, any Subsidiary of which all of the outstanding shares of stock (or other ownership interests) having by the terms thereof ordinary voting power to elect the board of directors (or other managing persons) of such entity, other than directors' qualifying shares, are owned or controlled by such Person or one or more of the Wholly-Owned Subsidiaries or by such Person and one or more of the Wholly-Owned Subsidiaries. Section 1.03 Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all financial statements and certificates and reports as to financial matters required to be furnished to the Agent or the Lenders hereunder shall be prepared, in accordance with GAAP, applied on a basis consistent with the audited financial statements of the Borrower referred to in Section 7.02 (except for changes concurred with by the Borrower's independent public accountants). ARTICLE 2 COMMITMENTS Section 2.01 Loans. Each Lender severally agrees, on the terms of this Agreement, to make Loans to the Borrower during the period from and including (i) the Closing Date or (ii) such later date that such Lender becomes a party to this Agreement as provided in Section 12.06(b), to but excluding, the Credit Advances Termination Date in an aggregate principal amount at any one time outstanding up to but not exceeding the amount of such Lender's Commitment as then in effect; provided, however, that the aggregate principal amount of all such Loans by all Lenders hereunder at any one time outstanding shall not exceed the Aggregate Commitments. The principal amount of the Loans which are repaid may not be reborrowed. Section 2.02 Borrowings, Continuations and Conversions. (a) Borrowings. The Borrower shall give the Agent (which shall promptly notify the Lenders) advance notice as hereinafter provided of each borrowing 17 23 hereunder, which shall specify the aggregate amount of such borrowing, and the date (which shall be a Business Day) of the Loans to be borrowed. (b) Minimum Amounts. Any borrowings shall be in amounts of at least $1,000,000 or any whole multiple of $1,000,000 in excess thereof. (c) Notices. All borrowings, continuations and conversions shall require advance written notice to the Agent (which shall promptly notify the Lenders) in the form of Exhibit B hereto (or telephonic notice promptly confirmed by such a written notice), which in each case shall be irrevocable, from the Borrower to be received by the Agent not later than 11:00 a.m. Houston, Texas time at least three Business Days prior to the date of each borrowing. Without in any way limiting the Borrower's obligation to confirm in writing any telephonic notice, the Agent may act without liability upon the basis of telephonic notice believed by the Agent in good faith to be from the Borrower prior to receipt of written confirmation. In each such case, the Borrower hereby waives the right to dispute the Agent's record of the terms of such telephonic notice except in the case of gross negligence or willful misconduct by the Agent. (d) Advances. Not later than 11:00 a.m. Houston, Texas time on the date specified for each borrowing hereunder, each Lender shall make available the amount of the Loan to be made by it on such date to the Agent, to an account which the Agent shall specify, in immediately available funds for the account of the Borrower. The amounts so received by the Agent shall, subject to the terms and conditions of this Agreement, be made available to the Borrower by depositing the same, in immediately available funds, in an account of the Borrower, designated by the Borrower and maintained at the Principal Office. Section 2.03 Changes of Commitments. (a) The Aggregate Commitments shall at all times be equal to the Aggregate Maximum Credit Amounts. (b) The Borrower shall have the right to terminate or to reduce the amount of the Aggregate Maximum Credit Amounts at any time or from time to time upon not less than three (3) Business Days' prior notice to the Agent (which shall promptly notify the Lenders) of each such termination or reduction, which notice shall specify the effective date thereof and the amount of any such reduction (which shall not be less than $1,000,000 or any whole multiple of $1,000,000 in excess thereof) and shall be irrevocable and effective only upon receipt by the Agent. (c) The Aggregate Maximum Credit Amounts once terminated or reduced may not be reinstated. 18 24 Section 2.04 Fees. (a) Commitment Fee. The Borrower shall pay to the Agent (to be allocated to the Lenders) a commitment fee on the daily average unused amount of the Aggregate Commitments for the period from and including the Closing Date up to but excluding the earlier of the date the Aggregate Commitments are terminated or the Credit Advances Termination Date at a rate per annum equal to 5/8 of 1%. Accrued commitment fees shall be payable quarterly in arrears on each Quarterly Date and on the earlier of the date the Aggregate Commitments are terminated or the Credit Advances Termination Date. (b) The Borrower shall pay to the Agent for its account such other fees as are set forth in the Agent's Fee Letter on the dates specified therein to the extent not paid prior to the Closing Date. Section 2.05 Several Obligations. The failure of any Lender to make any Loan to be made by it on the date specified therefor shall not relieve any other Lender of its obligation to make its Loan or provide funds on such date, but no Lender shall be responsible for the failure of any other Lender to make a Loan to be made by such other Lender or to provide funds to be provided by such other Lender. Section 2.06 Notes. The Loans made by each Lender shall be evidenced by a single promissory note of the Borrower in substantially the form of Exhibit A hereto, dated (i) the Closing Date or (ii) the effective date of an Assignment pursuant to Sections 12.06(b) and (c), payable to the order of such Lender in a principal amount equal to its Maximum Credit Amount as in effect plus such Lender's Percentage Share of $3,000,000 (to accommodate deemed advances through payment in kind pursuant to Section 3.02(b) hereof) and otherwise duly completed and such substitute Notes as required by Section 12.06(d). The date, amount, interest rate and Interest Period of each Loan made by each Lender, and all payments made on account of the principal thereof, shall be recorded by such Lender on its books for its Note, and, prior to any transfer, may be endorsed by such Lender on a schedule attached to such Note or any continuation thereof or on any separate record maintained by such Lender. Failure to make any such notation or to attach a schedule shall not affect any Lender's or the Borrower's rights or obligations in respect of such Loans or affect the validity of such transfer by any Lender of its Note. Section 2.07 Prepayments. (a) The Borrower may prepay the Loans upon not less than one (1) Business Day's prior notice to the Agent (which shall promptly notify the Lenders), which notice shall specify the prepayment date (which shall be a Business Day) and the amount of the prepayment (which shall be at least $1,000,000 or the remaining aggregate principal balance outstanding on the Notes) and shall be irrevocable and effective only upon receipt by the Agent, 19 25 provided that interest on the principal prepaid, accrued to the prepayment date, shall be paid on the prepayment date. (b) If, after giving effect to any termination or reduction of the Aggregate Maximum Credit Amounts pursuant to Section 2.03, the outstanding aggregate principal amount of the Loans exceeds the Aggregate Maximum Credit Amounts, the Borrower shall prepay the Loans on the date of such termination or reduction in an aggregate principal amount equal to the excess, together with interest on the principal amount paid to the date of such prepayment. (c) Prepayments permitted or required under this Section 2.07 shall be without premium or penalty. All payments of principal on the Loans shall reduce the Aggregate Maximum Credit Amounts. Section 2.08 Lending Offices. The Loans made by each Lender shall be made and maintained at such Lender's Applicable Lending Office. ARTICLE 3 PAYMENTS OF PRINCIPAL AND INTEREST Section 3.01 Repayment of Loans. On the Final Maturity Date the Borrower shall repay the outstanding aggregate principal and accrued and unpaid interest under the Notes. Section 3.02 Interest. (a) The Borrower will pay to the Agent, for the account of each Lender, interest on the unpaid principal amount of each Loan made by such Lender for the period commencing on the date such Loan is made to but excluding the date such Loan shall be paid in full, either in cash or, if permitted under Section 3.02 (b) in kind, at the Fixed Rate. Notwithstanding the foregoing, the Borrower will pay to the Agent, for the account of each Lender interest at the applicable Post-Default Rate on any principal of any Loan made by such Lender, and (to the fullest extent permitted by law) on any other amount payable by the Borrower hereunder, under any Loan Document or under any Note held by such Lender to or for account of such Lender, for the period commencing on the date of an Event of Default until the same is paid in full or all such Events of Default are cured or waived. Accrued interest on Loans shall be payable on the last day of each January, April, July and October, through the Final Maturity Date, starting January 31, 2001 (individually, an "Interest Payment Date" and, collectively, the "Interest Payment Dates"), except that interest payable at the Post-Default Rate shall be payable from time to time on demand. The foregoing rates shall apply to interest paid in cash and to interest paid in kind. 20 26 (b) On any Interest Payment Date occurring on or before October, 2002, Borrower shall have the absolute right to pay 50% of all accrued interest on the Notes in kind, instead of in cash, as provided in this Section 3.02(b). In the event any accrued interest due on any particular Interest Payment Date is paid in kind, it shall be deemed an advance of principal under the Notes and, as of the Interest Payment Date, shall be added to the outstanding principal balance of the Notes (notwithstanding that the outstanding principal balance may exceed, in the aggregate, the face amount of the Notes). In order to exercise its option to pay interest in kind under this Section 3.02(b), the Borrower shall, on or, at any time, before the applicable Interest Payment Date, deliver written notice to the Agent, executed by a Responsible Officer, specifying its election to pay interest in kind. Should Borrower fail to deliver such written notice in a timely fashion, Borrower shall be deemed to have irrevocably elected to make payment of such accrued interest in cash. In the event Borrower elects to pay interest in kind, such interest shall be calculated at the Fixed Rate. ARTICLE 4 PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC. Section 4.01 Payments. Except to the extent otherwise provided herein, all payments of principal, interest and other amounts to be made by the Borrower under the Loan Documents shall be made in Dollars, in immediately available funds, to the Agent at such account as the Agent shall specify by notice to the Borrower from time to time, not later than noon Houston, Texas time on the date on which such payments shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). Such payments shall be made without (to the fullest extent permitted by applicable law) defense, set-off or counterclaim. Each payment received by the Agent under this Agreement or any Note for account of a Lender shall be paid promptly to such Lender in immediately available funds. If the due date of any payment under this Agreement or any Note would otherwise fall on a day which is not a Business Day such date shall be extended to the next succeeding Business Day and interest shall be payable for any principal so extended for the period of such extension. Section 4.02 Pro Rata Treatment. Except to the extent as otherwise provided herein each Lender agrees that: (i) each borrowing from the Lenders under Section 2.01 shall be made from the Lenders pro rata in accordance with their Percentage Share, each payment of commitment fee or other fees under Sections 2.04(a) and (b) shall be made for account of the Lenders pro rata in accordance with their Percentage Share, and each termination or reduction of the amount of the Aggregate Maximum Credit Amounts under Section 2.03(b) shall be applied to the Commitment of each Lender, pro rata according to the amounts of its respective Commitment; (ii) each payment of principal of Loans by the Borrower shall be made for account of the Lenders pro rata in accordance with the respective unpaid principal amount of the Loans held by the Lenders; and (iii) each payment of interest on Loans by the Borrower shall be made for account of the Lenders pro rata in accordance with the amounts of interest due and payable to the respective Lenders. 21 27 Section 4.03 Computations. Interest on Loans shall be computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed (including the first day but excluding the last day) occurring in the period for which such interest is payable. Section 4.04 Non-receipt of Funds by the Agent. Unless the Agent shall have been notified by a Lender or the Borrower prior to the date on which such notifying party is scheduled to make payment to the Agent (in the case of a Lender) of the proceeds of a Loan or (in the case of the Borrower) a payment to the Agent for account of one or more of the Lenders hereunder (such payment being herein called the "Required Payment"), which notice shall be effective upon receipt, that it does not intend to make the Required Payment to the Agent, the Agent may assume that the Required Payment has been made and may, in reliance upon such assumption (but shall not be required to), make the amount thereof available to the intended recipient(s) on such date and, if such Lender or the Borrower (as the case may be) has not in fact made the Required Payment to the Agent, the recipient(s) of such payment shall, on demand, repay to the Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Agent until but excluding the date the Agent recovers such amount at a rate per annum which, for any Lender as recipient, will be equal to the Federal Funds Rate, and for the Borrower as recipient, will be equal to the Fixed Rate. Section 4.05 Set-off, Sharing of Payments, Etc. (a) The Borrower agrees that, in addition to (and without limitation of) any right of set-off, bankers' lien or counterclaim a Lender may otherwise have, each Lender shall have the right and be entitled (after consultation with the Agent), at its option, to offset balances held by it or by any of its Affiliates for account of the Borrower at any of its offices, in Dollars or in any other currency, against any principal of or interest on any of such Lender's Loans, or any other amount payable to such Lender hereunder, which is not paid when due (regardless of whether such balances are then due to the Borrower), in which case it shall promptly notify the Borrower and the Agent thereof, provided that such Lender's failure to give such notice shall not affect the validity thereof. (b) If any Lender shall obtain payment of any principal of or interest on any Loan made by it to the Borrower under this Agreement through the exercise of any right of set-off, banker's lien or counterclaim or similar right or otherwise, and, as a result of such payment, such Lender shall have received a greater percentage of the principal or interest then due hereunder by the Borrower to such Lender than the percentage received by any other Lenders, it shall promptly (i) notify the Agent and each other Lender thereof and (ii) purchase from such other Lenders participations in (or, if and to the extent specified by such Lender, direct interests in) the Loans made by such other Lenders (or in interest due thereon, as the case may be) in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all the Lenders shall share 22 28 the benefit of such excess payment (net of any expenses which may be incurred by such Lender in obtaining or preserving such excess payment) pro rata in accordance with the unpaid principal and/or interest on the Loans held by each of the Lenders. To such end all the Lenders shall make appropriate adjustments among themselves (by the resale of participations sold or otherwise) if such payment is rescinded or must otherwise be restored. The Borrower agrees that any Lender so purchasing a participation (or direct interest) in the Loans made by other Lenders (or in interest due thereon, as the case may be) may exercise all rights of set-off, banker's lien, counterclaim or similar rights with respect to such participation as fully as if such Lender were a direct holder of Loans in the amount of such participation. Nothing contained herein shall require any Lender to exercise any such right or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of the Borrower. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a set-off to which this Section 4.05 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section 4.05 to share the benefits of any recovery on such secured claim. Section 4.06 Taxes. (a) Payments Free and Clear. Any and all payments by the Borrower hereunder shall be made, in accordance with Section 4.01, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Agent, taxes imposed on its income, and franchise or similar taxes imposed on it, by (i) any jurisdiction (or political subdivision thereof) of which the Agent or such Lender, as the case may be, is a citizen or resident or in which such Lender has an Applicable Lending Office, (ii) the jurisdiction (or any political subdivision thereof) in which the Agent or such Lender is organized, or (iii) any jurisdiction (or political subdivision thereof) in which such Lender or the Agent is presently doing business in which taxes are imposed solely as a result of doing business in such jurisdiction (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to the Lenders or the Agent (i) the sum payable shall be increased by the amount necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 4.06) such Lender or the Agent (as the case may be) shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxing authority or other Governmental Authority in accordance with applicable law. 23 29 (b) Other Taxes. In addition, to the fullest extent permitted by applicable law, the Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement, any Assignment or any other Loan Document (hereinafter referred to as "Other Taxes"). (c) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER WILL INDEMNIFY EACH LENDER AND THE AGENT FOR THE FULL AMOUNT OF TAXES AND OTHER TAXES (INCLUDING, BUT NOT LIMITED TO, ANY TAXES OR OTHER TAXES IMPOSED BY ANY GOVERNMENTAL AUTHORITY ON AMOUNTS PAYABLE UNDER THIS SECTION 4.06) PAID BY SUCH LENDER OR THE AGENT (ON THEIR BEHALF OR ON BEHALF OF ANY LENDER), AS THE CASE MAY BE, AND ANY LIABILITY (INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR WITH RESPECT THERETO, WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR LEGALLY ASSERTED UNLESS THE PAYMENT OF SUCH TAXES WAS NOT CORRECTLY OR LEGALLY ASSERTED AND SUCH LENDER'S PAYMENT OF SUCH TAXES OR OTHER TAXES WAS THE RESULT OF ITS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ANY PAYMENT PURSUANT TO SUCH INDEMNIFICATION SHALL BE MADE WITHIN THIRTY (30) DAYS AFTER THE DATE ANY LENDER OR THE AGENT, AS THE CASE MAY BE, MAKES WRITTEN DEMAND THEREFOR. IF ANY LENDER OR THE AGENT RECEIVES A REFUND OR CREDIT IN RESPECT OF ANY TAXES OR OTHER TAXES FOR WHICH SUCH LENDER OR THE AGENT HAS RECEIVED PAYMENT FROM THE BORROWER IT SHALL PROMPTLY NOTIFY THE BORROWER OF SUCH REFUND OR CREDIT AND SHALL, IF NO DEFAULT HAS OCCURRED AND IS CONTINUING, WITHIN THIRTY (30) DAYS AFTER RECEIPT OF A REQUEST BY THE BORROWER (OR PROMPTLY UPON RECEIPT, IF THE BORROWER HAS REQUESTED APPLICATION FOR SUCH REFUND OR CREDIT PURSUANT HERETO), PAY AN AMOUNT EQUAL TO SUCH REFUND OR CREDIT TO THE BORROWER WITHOUT INTEREST (BUT WITH ANY INTEREST SO REFUNDED OR CREDITED), PROVIDED THAT THE BORROWER, UPON THE REQUEST OF SUCH LENDER OR THE AGENT, AGREES TO RETURN SUCH REFUND OR CREDIT (PLUS PENALTIES, INTEREST OR OTHER CHARGES) TO SUCH LENDER OR THE AGENT IN THE EVENT SUCH LENDER OR THE AGENT IS REQUIRED TO REPAY SUCH REFUND OR CREDIT. 24 30 (d) Lender Representations. (i) Each Lender represents that it is either (1) a corporation or banking association organized under the laws of the United States of America or any state thereof or (2) it is entitled to complete exemption from United States withholding tax imposed on or with respect to any payments, including fees, to be made to it pursuant to this Agreement (A) under an applicable provision of a tax convention to which the United States of America is a party or (B) because it is acting through a branch, agency or office in the United States of America and any payment to be received by it hereunder is effectively connected with a trade or business in the United States of America. Each Lender that is not a corporation or banking association organized under the laws of the United States of America or any state thereof agrees to provide to the Borrower and the Agent on the Closing Date, or on the date of its delivery of the Assignment pursuant to which it becomes a Lender, and at such other times as required by United States law or as the Borrower or the Agent shall reasonably request, two accurate and complete original signed copies of either (A) Internal Revenue Service Form 4224 (or successor form) certifying that all payments to be made to it hereunder will be effectively connected to a United States trade or business (the "Form 4224 Certification") or (B) Internal Revenue Service Form 1001 (or successor form) certifying that it is entitled to the benefit of a provision of a tax convention to which the United States of America is a party which completely exempts from United States withholding tax all payments to be made to it hereunder (the "Form 1001 Certification"). In addition, each Lender agrees that if it previously filed a Form 4224 Certification, it will deliver to the Borrower and the Agent a new Form 4224 Certification prior to the first payment date occurring in each of its subsequent taxable years; and if it previously filed a Form 1001 Certification, it will deliver to the Borrower and the Agent a new certification prior to the first payment date falling in the third year following the previous filing of such certification. Each Lender also agrees to deliver to the Borrower and the Agent such other or supplemental forms as may at any time be required as a result of changes in applicable law or regulation in order to confirm or maintain in effect its entitlement to exemption from United States withholding tax on any payments hereunder, provided that the circumstances of 25 31 such Lender at the relevant time and applicable laws permit it to do so. If a Lender determines, as a result of any change in either (i) a Governmental Requirement or (ii) its circumstances, that it is unable to submit any form or certificate that it is obligated to submit pursuant to this Section 4.06, or that it is required to withdraw or cancel any such form or certificate previously submitted, it shall promptly notify the Borrower and the Agent of such fact. If a Lender is organized under the laws of a jurisdiction outside the United States of America, unless the Borrower and the Agent have received a Form 1001 Certification or Form 4224 Certification satisfactory to them indicating that all payments to be made to such Lender hereunder are not subject to United States withholding tax, the Borrower shall withhold taxes from such payments at the applicable statutory rate. Each Lender agrees to indemnify and hold harmless the Borrower or Agent, as applicable, from any United States taxes, penalties, interest and other expenses, costs and losses incurred or payable by (i) the Agent as a result of such Lender's failure to submit any form or certificate that it is required to provide pursuant to this Section 4.06 or (ii) the Borrower or the Agent as a result of their reliance on any such form or certificate which such Lender has provided to them pursuant to this Section 4.06. (ii) For any period with respect to which a Lender has failed to provide the Borrower with the form required pursuant to this Section 4.06, if any, (other than if such failure is due to a change in a Governmental Requirement occurring subsequent to the date on which a form originally was required to be provided), such Lender shall not be entitled to indemnification under Section 4.06 with respect to taxes imposed by the United States which taxes would not have been imposed but for such failure to provide such forms; provided, however, that should a Lender, which is otherwise exempt from or subject to a reduced rate of withholding tax becomes subject to taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Lender shall reasonably request to assist such Lender to recover such taxes. (iii) Any Lender claiming any additional amounts payable pursuant to this Section 4.06 shall use reasonable efforts (consistent with legal and regulatory restrictions) to file any certificate or document requested by the Borrower or the Agent or to change the jurisdiction of its Applicable Lending Office or to contest any tax imposed if the making of such a filing or change or contesting such 26 32 tax would avoid the need for or reduce the amount of any such additional amounts that may thereafter accrue and would not, in the sole determination of such Lender, be otherwise disadvantageous to such Lender. ARTICLE 5 [INTENTIONALLY OMITTED] ARTICLE 6 CONDITIONS PRECEDENT Section 6.01 Initial Funding. The obligation of the Lenders to make the Initial Funding is subject to the receipt by the Agent and the Lenders of all fees payable pursuant to Section 2.04 on or before the Closing Date and the receipt by the Agent of the following documents and satisfaction of the other conditions provided in this Section 6.01, each of which shall be satisfactory to the Agent in form and substance: (a) A certificate of the Secretary or an Assistant Secretary of each of Brigham Exploration, the General Partner and the manager of each other Guarantor setting forth (i) resolutions of its board of directors with respect to its authorization to execute and deliver the Loan Documents to which it is a party and to enter into the transactions contemplated in those documents, (ii) the officers (y) who are authorized to sign the Loan Documents to which it is a party and (z) who will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with this Agreement and the transactions contemplated hereby, (iii) specimen signatures of its authorized officers, and (iv) its articles or certificate of incorporation and bylaws or operating agreement, certified as being true and complete. The Agent and the Lenders may conclusively rely on such certificate until the Agent receives notice in writing from the Borrower to the contrary. (b) Certificates of the appropriate state agencies with respect to the existence, qualification and good standing of the Borrower and the Guarantors. (c) A compliance certificate which shall be substantially in the form of Exhibit C-1, duly and properly executed by a Responsible Officer and dated as of the Closing Date. (d) The Notes, duly completed and executed. 27 33 (e) The Loan Documents listed on Exhibit D hereto, duly completed and, where necessary or appropriate, executed in sufficient counterparts for recording. (f) Evidence satisfactory to the Agent that the Enron Indebtedness has been paid and satisfied in full, the Enron Mortgages and all other Liens securing the Enron Indebtedness have been fully released in proper recordable form, the Term ORRI has be reconveyed to the Borrower, the Enron Warrants have been cancelled, and the Enron Shares returned to Brigham Exploration by payment by Brigham Exploration of a sum not to exceed $20,000,000 plus reasonable Enron legal fees. (g) Execution and delivery of the Subordination Agreement. (h) An opinion of Thompson & Knight LLP, special counsel to the Borrower and the Guarantors in form reasonably satisfactory to the Agent. (i) A certificate of insurance coverage of the Borrower evidencing that the Borrower is carrying insurance in accordance with Section 7.19 hereof. (j) The Agent shall be reasonably satisfied with the environmental condition of the Mortgaged Properties. (k) Appropriate UCC search certificates reflecting no prior liens or security interests, except those securing the Senior Indebtedness. (l) Borrower shall have submitted to the Lenders the initial CAPEX Plan, which CAPEX Plan shall be satisfactory in form and substance to the Majority Lenders. (m) Borrower shall have submitted to the Lenders the Hedging Agreements described on Schedule 7.20, which Hedging Agreements shall be satisfactory in form and substance to the Majority Lenders. (n) Execution and delivery of the Agent's Fee Letter. (o) The Warrant Agreement, duly executed and delivered. (p) Execution and delivery of the Ancillary Agreement between SCI and Borrower pertaining to the reduction, under certain circumstances, of a portion of SCI's outstanding indebtedness under the Senior Credit Agreement. (q) The issuance by Brigham Exploration of preferred equity securities for a consideration of not less than $20,000,000, before deduction of fees and commissions, and otherwise on terms reasonably acceptable to the Agent. 28 34 (r) Such other documents as the Agent or any Lender or special counsel to the Agent may reasonably request. Notwithstanding the foregoing, the execution and delivery of the Loan Documents may occur at any time on or before November 3, 2000 and, in connection therewith, Borrower will deliver a supplementary or replacement opinion of counsel that supplements or replaces the original opinion delivered pursuant to subsection (h) above, with such opinion to cover Brigham Holdings I, LLC and Brigham Holdings II, LLC additionally and to the same effect as the original opinion delivered pursuant to subsection (h) above. Failure to deliver the documents described in this paragraph shall constitute an "Event of Default" under this Agreement. Section 6.02 Initial, Subsequent Loans. The obligation of the Lenders to make Loans to the Borrower upon the occasion of each borrowing hereunder (including the Initial Funding) is subject to the further conditions precedent that, as of the date of such Loans and after giving effect thereto: (a) no Default shall have occurred and be continuing; (b) no Material Adverse Effect shall have occurred and be continuing; and (c) the representations and warranties made by the Borrower in Article VII and in the Loan Documents or by any Guarantor in any other Loan Document shall be true in all material respects on and as of the date of the making of such Loans with the same force and effect as if made on and as of such date and following such new borrowing, except to the extent such representations and warranties (i) are expressly limited to an earlier date or the Majority Lenders may expressly consent in writing to the contrary or (ii) in the case only of the representations and warranties made by the Borrower in subsections 7.09 and 7.22 of Article VII, if not true in all material respects, such failure does not give rise a Material Adverse Effect or a Default. Each request for a borrowing by the Borrower hereunder shall constitute a certification by the Borrower to the effect set forth in Section 6.02(a), (b) and (c) above (as of the date of such notice and, unless the Borrower otherwise notifies the Agent prior to the date of and immediately following such borrowing). Section 6.03 Conditions Precedent for the Benefit of Lenders. All conditions precedent to the obligations of the Lenders to make any Loan are imposed hereby solely for the benefit of the Lenders, and no other Person may require satisfaction of any such condition precedent or be entitled to assume that the Lenders will refuse to make any Loan in the absence of strict compliance with such conditions precedent. 29 35 Section 6.04 No Waiver. No waiver of any condition precedent shall preclude the Agent or the Lenders from requiring such condition to be met prior to making any subsequent Loan or preclude the Lenders from thereafter declaring that a subsequent failure of the Borrower to satisfy such condition precedent constitutes a Default. ARTICLE 7 REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Agent and the Lenders that (each representation and warranty herein is given as of the Closing Date and shall be deemed repeated and reaffirmed on the dates of each borrowing as provided in Section 6.02): Section 7.01 Corporate Existence. The Borrower: (i) is a limited partnership duly organized, legally existing and in good standing under the laws of the jurisdiction of its formation; (ii) has all requisite power, and has all material governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as now being or as proposed to be conducted; and (iii) is qualified to do business in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary and where failure so to qualify would have a Material Adverse Effect. Section 7.02 Financial Condition. The audited consolidated balance sheet of Brigham Exploration and its Consolidated Subsidiaries as at December 31, 1999 and the related consolidated statement of income, stockholders' equity and cash flow of Brigham Exploration and its Consolidated Subsidiaries for the fiscal year ended on said date, with the opinion thereon of Price Waterhouse heretofore furnished to each of the Lenders and the unaudited consolidated balance sheet of Brigham Exploration and its Consolidated Subsidiaries as at June 30, 2000, and their related consolidated statements of income, stockholders' equity and cash flow of Brigham Exploration and its Consolidated Subsidiaries for the six-month period ended on such date heretofore furnished to the Agent, are complete and correct and fairly present the consolidated financial condition of Brigham Exploration and its Consolidated Subsidiaries as at said dates and the results of its operations for the fiscal year and the six-month period on said dates, all in accordance with GAAP, as applied on a consistent basis (subject, in the case of the interim financial statements, to normal year-end adjustments). Neither Brigham Exploration nor any Consolidated Subsidiary has on the Closing Date any material Debt, Trade Payables, contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments, except as referred to or reflected or provided for in the Financial Statements or in Schedule 7.02. Since December 31, 1999, there has been no change or event having a Material Adverse Effect, except as disclosed to the Agent in writing. Since the date of the Financial Statements, neither the business nor the Properties of Brigham Exploration Consolidated Subsidiaries, taken as a whole, have been materially and adversely affected as a result of any fire, explosion, earthquake, flood, drought, windstorm, accident, strike or other labor disturbance, embargo, requisition or taking of Property or 30 36 cancellation of contracts, permits or concessions by any Governmental Authority, riot, activities of armed forces or acts of God or of any public enemy. Section 7.03 Litigation. Except as disclosed to the Lenders in Schedule 7.03 hereto, at the Closing Date there is no litigation, legal, administrative or arbitral proceeding, investigation or other action of any nature pending or, to the knowledge of the Borrower threatened against or affecting the Borrower or any Subsidiary which both (a) involves the possibility of any judgment or liability against the Borrower or any Subsidiary not fully covered by insurance (except for normal deductibles), and (b) would be more likely than not to have a Material Adverse Effect. Section 7.04 No Breach. Neither the execution and delivery of the Loan Documents, nor compliance with the terms and provisions hereof will conflict with or result in a breach of, or require any consent which has not been obtained as of the Closing Date under, the Partnership Agreement, the respective charter or by-laws of any Subsidiary or any Governmental Requirement or any material agreement or instrument to which the Borrower or any Subsidiary is a party or by which it is bound or to which it or its Properties are subject, or constitute a default under any such agreement or instrument, or result in the creation or imposition of any Lien upon any of the material revenues or assets of the Borrower or any Subsidiary pursuant to the terms of any such agreement or instrument other than the Liens created by the Loan Documents. Section 7.05 Authority. The Borrower and each Subsidiary has all necessary power and authority to execute, deliver and perform its obligations under the Loan Documents to which it is a party; and the execution, delivery and performance by the Borrower and each Subsidiary of the Loan Documents to which it is a party, have been duly authorized by all necessary action on its part; and the Loan Documents constitute the legal, valid and binding obligations of the Borrower and each Subsidiary, enforceable in accordance with their terms, except as such enforceability may be limited by bankruptcy, insolvency, fraudulent transfer and similar laws affecting creditors' rights generally or by general principles of equity. Section 7.06 Approvals. No authorizations, approvals or consents of, and no filings or registrations with, any Governmental Authority are necessary for the execution, delivery or performance by the Borrower or any Subsidiary of the Loan Documents or for the validity or enforceability thereof. Section 7.07 Use of Loans. Subject to the terms and conditions elsewhere herein, the proceeds of the Loans shall be used (a) to pay fees and payables, (b) to provide additional drilling capital and (c) for general working capital purposes; provided, however, the proceeds of the Loans shall not be used to pay any of the Senior Indebtedness. In no event shall the proceeds of the Loans be used to finance in whole or in part any hostile acquisition. The Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying margin stock (within the meaning of Regulation U or X of the Board of Governors of 31 37 the Federal Reserve System) and no part of the proceeds of any Loan hereunder will be used to buy or carry any margin stock. Section 7.08 ERISA. (a) The Borrower and each ERISA Affiliate have complied in all material respects with ERISA and, where applicable, the Code regarding each Plan. Each Plan is, and has been, maintained in substantial compliance with ERISA and, where applicable, the Code. No act, omission or transaction has occurred which could result in imposition on the Borrower or any ERISA Affiliate (whether directly or indirectly) of an amount of $100,000 or more as (i) either a civil penalty assessed pursuant to section 502(c), (i) or (1) of ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary duty liability damages under section 409 of ERISA. No Plan (other than a defined contribution plan) or any trust created under any such Plan has been terminated since September 2, 1974. No liability to the PBGC in excess of $100,000 (other than for the payment of current premiums which are not past due) by the Borrower or any ERISA Affiliate has been or is expected by the Borrower or any ERISA Affiliate to be incurred with respect to any Plan. No ERISA Event with respect to any Plan has occurred which could reasonably be expected to result in liabilities of $100,000 or more. Full payment when due has been made of all amounts which the Borrower or any ERISA Affiliate is required under the terms of each Plan or applicable law to have paid as contributions to such Plan, and no accumulated funding deficiency in an amount of $100,000 or more (as defined in section 302 of ERISA and section 412 of the Code), whether or not waived, exists with respect to any Plan. The actuarial present value of the benefit liabilities under each Plan which is subject to Title IV of ERISA does not, as of the end of the Borrower's most recently ended fiscal year, exceed the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities by $100,000 or more. The term "actuarial present value of the benefit liabilities" shall have the meaning specified in section 4041 of ERISA. None of the Borrower or any ERISA Affiliate sponsors, maintains, or contributes to an employee welfare benefit plan, as defined in section 3(1) of ERISA, including, without limitation, any such plan maintained to provide benefits to former employees of such entities, that may not be terminated by the 32 38 Borrower or any ERISA Affiliate in its sole discretion at any time without any material liability. None of the Borrower or any ERISA Affiliate sponsors, maintains or contributes to, or has at any time in the preceding six calendar years, sponsored, maintained or contributed to, any Multiemployer Plan. None of the Borrower or any ERISA Affiliate is required to provide security under section 401(a)(29) of the Code due to a Plan amendment that results in an increase in current liability for the Plan. Section 7.09 Taxes. Except as set out in Schedule 7.09, the Borrower has filed all United States Federal income tax returns and all other tax returns which are required to be filed by it and has paid all material taxes due pursuant to such returns or pursuant to any assessment received by the Borrower, except for any taxes which are being contested in good faith and by proper proceedings and against which adequate reserves are being maintained. The charges, accruals and reserves on the books of the Borrower in respect of taxes and other governmental charges are, in the opinion of the Borrower, adequate. No tax lien has been filed and, to the knowledge of the Borrower, no claim is being asserted with respect to any such tax, fee or other charge, except for any taxes, fees or other charges which are being contested in good faith and by proper proceedings and against which adequate reserves are being maintained. Section 7.10 Titles, etc. (a) Subject to the matters set out in Schedule 7.10, each of the Borrower and the Subsidiaries has good and defensible title to (i) the Oil and Gas Properties that are both evaluated (A) in the most recently delivered Reserve Report and (B) described in a Standard Mortgage, free and clear of all Liens except Liens permitted by Section 9.02, and (ii) to the best of Borrower's knowledge, the balance of Borrower's material (individually or in the aggregate) Oil and Gas Properties (and/or those of the Subsidiaries) that are described in any other Mortgage or that are otherwise evaluated in the most recently delivered Reserve Report, free and clear (to the best of Borrower's knowledge) of all Liens except Liens permitted by Section 9.02. Except for immaterial divergences, after giving full effect to the Excepted Liens and the matters set forth in Schedule 7.10, the Borrower owns the net interests in production attributable to the Hydrocarbon Interests that are both (A) evaluated in the most recently delivered Reserve Report and (b) reflected in a Standard Mortgage, and the ownership of such Hydrocarbon Interests shall not in any material respect obligate the Borrower to bear the costs and expenses relating to the maintenance, development and operations of each such Hydrocarbon Interest in an amount in excess of the working interest of such Hydrocarbon Interest set forth in a Standard Mortgage (without a corresponding increase in net revenue interest). The Borrower does not believe, based upon information in its possession, that its most recently delivered Reserve Report 33 39 materially overstates its oil and gas reserves, bearing in mind that reserves are evaluated based upon estimates and assumptions with respect to which reasonable minds of competent reserve engineers may differ. (b) All leases and agreements necessary for the conduct of the business of the Borrower and the Subsidiaries are valid and subsisting, in full force and effect and there exists no default or event or circumstance which with the giving of notice or the passage of time or both would give rise to a default under any such lease or leases, which would affect in any material respect the conduct of the business of the Borrower and the Subsidiaries. (c) The Properties presently owned, leased or licensed by the Borrower and the Subsidiaries, including, without limitation, all easements and rights of way, include all Properties necessary to permit the Borrower and the Subsidiaries to conduct their business in all material respects in the same manner as its business has been conducted prior to the Closing Date. (d) All of the Properties of the Borrower and the Subsidiaries which are reasonably necessary for the operation of their business are in good working condition in all material respects and are maintained in accordance with prudent business standards. Section 7.11 No Material Misstatements. Taken as a whole, the written information, statements, exhibits, certificates, documents and reports furnished to SCI by the Borrower or any Guarantor in connection with the negotiation of this Agreement do not contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statements contained therein not materially misleading in the light of the circumstances in which made and with respect to the Borrower or any Guarantor. As of the Closing Date, there is no fact peculiar to the Borrower or Guarantor which has a Material Adverse Effect or in the future is reasonably likely to have (so far as the Borrower can now foresee) a Material Adverse Effect and which has not been set forth in this Agreement or the other documents, certificates and statements furnished to SCI by or on behalf of the Borrower or any Guarantor prior to, or on, the Closing Date in connection with the transactions contemplated hereby or the Senior Loan Documents. Section 7.12 Investment Company Act. Neither the Borrower nor any Subsidiary is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. Section 7.13 Public Utility Holding Company Act. Neither the Borrower nor any Subsidiary is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," or a "public utility" within the meaning of the Public Utility Holding Company Act of 1935, as amended. 34 40 Section 7.14 Subsidiaries. Except as set forth on Schedule 7.14 or as allowed by Section 9.16, the Borrower has no Subsidiaries. Section 7.15 Location of Business and Offices. As of the Closing Date, the Borrower's principal place of business and chief executive offices are located at the address stated on the signature page of this Agreement. The principal place of business and chief executive office of each Subsidiary are located at the addresses stated on Schedule 7.14. Section 7.16 Defaults. The Borrower is not in default nor has any event or circumstance occurred which, but for the expiration of any applicable grace period or the giving of notice, or both, would constitute a default under any material agreement or instrument to which the Borrower is a party or by which the Borrower is bound which default would have a Material Adverse Effect. No Default hereunder or under the Senior Credit Agreement has occurred and is continuing or will result from the execution, delivery and performance of this Agreement and the other Loan Documents. Section 7.17 Environmental Matters. Except as provided in Schedule 7.17 or for matters which are more likely than not to not to have a Material Adverse Effect (or with respect to (c), (d) and (e) below, where the failure to take such actions is more likely than not to not have a Material Adverse Effect): (a) Neither any Property of Brigham Exploration or any of its Subsidiaries nor the operations conducted thereon violate any order or requirement of any court or Governmental Authority or any Environmental Laws; (b) Without limitation of clause (a) above, no Property of Brigham Exploration or any of its Subsidiaries nor the operations currently conducted thereon or, to the best knowledge of the Borrower, by any prior owner or operator of such Property or operation, are in violation of or subject to any existing, pending or threatened action, suit, investigation, inquiry or proceeding by or before any court or Governmental Authority or to any remedial obligations under Environmental Laws; (c) All notices, permits, licenses or similar authorizations, if any, required to be obtained or filed by Brigham Exploration or any of its Subsidiaries in connection with the operation or use of any and all Property of Brigham Exploration and each of its Subsidiaries, including without limitation present, or to the best of Borrower's knowledge, past treatment, storage, disposal or release of a hazardous substance or solid waste into the environment, have been duly obtained or filed, and Brigham Exploration and each Subsidiary thereof are in compliance with the terms and conditions of all such notices, permits, licenses and similar authorizations; (d) All hazardous substances, solid waste, and oil and gas exploration and production wastes, if any, generated at any and all Property of Brigham 35 41 Exploration and each of its Subsidiaries have in the past, during the tenure of ownership of Brigham Exploration and its Subsidiaries and to the best of Borrower's knowledge, prior thereto, been transported, treated and disposed of in accordance with Environmental Laws and so as not to pose an imminent and substantial endangerment to public health or welfare or the environment, and, to the best knowledge of the Borrower, all such transport carriers and treatment and disposal facilities have been and are operating in compliance with Environmental Laws and so as not to pose an imminent and substantial endangerment to public health or welfare or the environment, and are not the subject of any existing, pending or threatened action, investigation or inquiry by any Governmental Authority in connection with any Environmental Laws; (e) The Borrower has taken all steps reasonably necessary to determine and has determined that no hazardous substances, solid waste, or oil and gas exploration and production wastes, have been disposed of or otherwise released and there has been no threatened release of any hazardous substances on or to any Property of Brigham Exploration or any of its Subsidiaries except in compliance with Environmental Laws and so as not to pose an imminent and substantial endangerment to public health or welfare or the environment; (f) To the extent applicable, all Property of Brigham Exploration and each of its Subsidiaries currently satisfies all design, operation, and equipment requirements imposed by the OPA or scheduled as of the Closing Date to be imposed by OPA during the term of this Agreement, and the Borrower does not have any reason to believe that such Property, to the extent subject to OPA, will not be able to maintain compliance with the OPA requirements during the term of this Agreement; and (g) Neither Brigham Exploration nor any of its Subsidiaries has any known contingent liability in connection with any release or threatened release of any oil, hazardous substance or solid waste into the environment. Section 7.18 Compliance with the Law. Neither the Borrower nor any Subsidiary has violated any Governmental Requirement or failed to obtain any license, permit, franchise or other governmental authorization necessary for the ownership of any of its Properties or the conduct of its business, which violation or failure would have (in the event such violation or failure were asserted by any Person through appropriate action) a Material Adverse Effect. Except for such acts or failures to act as would not have a Material Adverse Effect, the Oil and Gas Properties (and properties unitized therewith) have been maintained, operated and developed in a good and workmanlike manner and in conformity with all applicable laws and all rules, regulations and orders of all duly constituted authorities having jurisdiction and in conformity with the provisions of all leases, subleases or other contracts comprising a part of the Hydrocarbon Interests and other contracts and agreements forming a part of the Oil and Gas Properties; specifically in this connection, but subject to the Material Adverse Effect 36 42 qualification set forth above, (i) after the Closing Date, no Oil and Gas Property is subject to having allowable production reduced below the full and regular allowable (including the maximum permissible tolerance) because of any overproduction (whether or not the same was permissible at the time) prior to the Closing Date and (ii) none of the wells comprising a part of the Oil and Gas Properties (or properties unitized therewith) are deviated from the vertical more than the maximum permitted by applicable laws, regulations, rules and orders, and such wells are, in fact, bottomed under and are producing from, and the well bores are wholly within, the Oil and Gas Properties (or in the case of wells located on properties unitized therewith, such unitized properties). Section 7.19 Insurance. Schedule 7.19 attached hereto contains an accurate and complete description of all material policies of fire, liability, workmen's compensation and other forms of insurance owned or held by the Borrower and each Subsidiary as of the Closing Date. Schedule 7.19 shall be updated by the Borrower as appropriate from time to time and the representations in this Section 7.19 shall apply to such updated Schedules. All such policies are in full force and effect, all premiums with respect thereto covering all periods up to and including the Closing Date have been paid, and no notice of cancellation or termination has been received with respect to any such policy. Such policies are sufficient for compliance with all requirements of law and of all agreements to which the Borrower or any Subsidiary is a party; are valid, outstanding and enforceable policies; provide adequate insurance coverage in at least such amounts and against at least such risks (but including in any event public liability) as are usually insured against in the same general area by companies engaged in the same or a similar business for the assets and operations of the Borrower and each Subsidiary; will remain in full force and effect through the respective dates set forth in Schedule 7.19 without the payment of additional premiums; and will not in any way be affected by, or terminate or lapse by reason of, the transactions contemplated by this Agreement. Schedule 7.19 identifies all material risks, if any, which the General Partner of the Borrower, the Subsidiaries and their respective Board of Directors or officers have designated as being self insured. Neither the Borrower nor any Subsidiary has been refused any insurance with respect to its assets or operations, nor has its coverage been limited below usual and customary policy limits, by an insurance carrier to which it has applied for any such insurance or with which it has carried insurance during the last three years. Section 7.20 Hedging Agreements. Schedule 7.20 sets forth, as of the Closing Date, a true and complete list of all Hedging Agreements (including commodity price swap agreements, forward agreements or contracts of sale which provide for prepayment for deferred shipment or delivery of oil, gas or other commodities) of the Borrower and each Subsidiary, the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark to market value thereof, all credit support agreements relating thereto (including any margin required or supplied), and the counterparty to each such agreement. Section 7.21 Restriction on Liens. Neither the Borrower nor any Subsidiary is a party to or subject to any agreement or arrangement (other than the Loan Documents, the Senior 37 43 Loan Documents, the Indenture, and any other documents permitted under Section 9.02(f)), or subject to any order, judgment, writ or decree, which either restricts or purports to restrict its ability to grant Liens to other Persons on or in respect of their respective assets or Properties. Section 7.22 Material Agreements. Set forth on Schedule 7.22 hereto is a complete and correct list of all material agreements, leases, indentures, purchase agreements, obligations in respect of letters of credit, guarantees, joint venture agreements, and other instruments in effect or to be in effect as of the Closing Date (other than Hedging Agreements) providing for, evidencing, securing or otherwise relating to any material Debt of the Borrower or any Subsidiary, and all obligations of the Borrower or any Subsidiary to issuers of surety or appeal bonds (excluding operator's bonds, plugging and abandonment bonds, and similar surety obligations obtained in the ordinary course of business) issued for account of the Borrower or any such Subsidiary, and such list correctly sets forth the names of the debtor or lessee and creditor or lessor with respect to the Debt or lease obligations outstanding or to be outstanding and the property subject to any Lien securing such Debt or lease obligation. Section 7.23 Gas Imbalances. As of the Closing Date, except as set forth in the most recent Reserve Report furnished to Agent or on Schedule 7.23 or on the most recent certificate delivered pursuant to Section 8.07(b), on a net basis there are no gas imbalances, take or pay or other prepayments with respect to the Borrower's or any Subsidiary's Hydrocarbon Interests which would require the Borrower or such Subsidiary to deliver five percent (5%) or more of the monthly production from the Borrower's and its Subsidiaries' Hydrocarbons produced on a monthly basis from the Hydrocarbon Interests, at some future time without then or thereafter receiving full payment therefor. Section 7.24 Partnership Agreement. The Partnership Agreement has not been terminated, is in full force and effect as of the date hereof and no default has occurred and is in continuance thereunder which would have a Material Adverse Effect. ARTICLE 8 AFFIRMATIVE COVENANTS The Borrower covenants and agrees that, so long as any of the Commitments are in effect and until payment in full of all Indebtedness hereunder, all interest thereon and all other amounts payable by the Borrower hereunder: Section 8.01 Financial Statements and Other Reports. The Borrower shall deliver, or shall cause to be delivered, to the Agent with sufficient copies of each for the Lenders: (a) Annual Financial Statements. As soon as available and in any event within 90 days after the end of each fiscal year of Brigham Exploration, the audited consolidated statements of income, stockholders' equity, changes in financial position and cash flow of Brigham Exploration and its Consolidated 38 44 Subsidiaries for such fiscal year, and the related consolidated and unaudited consolidating balance sheets of Brigham Exploration and its Consolidated Subsidiaries as at the end of such fiscal year, and setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, and accompanied by the related opinion of independent public accountants of recognized national standing acceptable to the Agent which opinion shall state that said financial statements fairly present the consolidated financial condition and results of operations of Brigham Exploration and its Consolidated Subsidiaries as at the end of, and for, such fiscal year and that such financial statements have been prepared in accordance with GAAP except for such changes in such principles with which the independent public accountants shall have concurred and such opinion shall not contain a "going concern" or like qualification or exception. (b) Quarterly Financial Statements. As soon as available and in any event within 60 days after the end of each of the first three fiscal quarterly periods of each fiscal year of Brigham Exploration, consolidated statements of income, stockholders' equity, changes in financial position and cash flow of Brigham Exploration and its Consolidated Subsidiaries for such period and for the period from the beginning of the respective fiscal year to the end of such period, and the related consolidated and consolidating balance sheets as at the end of such period, and setting forth in each case in comparative form the corresponding figures for the corresponding period in the preceding fiscal year, accompanied by the certificate of a Responsible Officer, which certificate shall state that said financial statements fairly present the consolidated financial condition and results of operations of Brigham Exploration and its Consolidated Subsidiaries in accordance with GAAP, as at the end of, and for, such period (subject to normal year-end audit adjustments). (c) Monthly Financial Statements. As soon as available and in any event within forty-five (45) days after the end of each calendar month that is not also the end of one of Brigham Exploration's first three fiscal quarterly periods or of Brigham Exploration's fiscal year, consolidated statements of income and changes in financial position of Brigham Exploration and its Consolidated Subsidiaries for such period and for the period from the beginning of the respective fiscal year to the end of such period, and the related consolidated balance sheets as at the end of such period and beginning statements setting forth in each case in comparative form the corresponding figures for the corresponding period in the preceding fiscal year, accompanied by the certificate of a Responsible Officer, which certificate shall state that such financial statements fairly present the consolidated financial condition and results of operations of Brigham Exploration and its Consolidated Subsidiaries in accordance with GAAP, as at the end of, and for, such period (subject to normal year-end audit adjustments). 39 45 (d) Notice of Default. Promptly after the Borrower knows that any Default or any Material Adverse Effect has occurred, a notice of such Default or Material Adverse Effect, describing the same in reasonable detail and the action the Borrower proposes to take with respect thereto. (e) Other Accounting Reports. Promptly upon receipt thereof, a copy of each other report or letter (excluding routine correspondence) submitted to the Borrower or Brigham Exploration by independent accountants in connection with any annual, interim or special audit made by them of the books of the Borrower or Brigham Exploration, and a copy of any response by the Borrower or Brigham Exploration to such letter or report. (f) SEC Filings, Etc. Promptly, upon its becoming available, each financial statement, report, notice or proxy statement sent by Brigham Exploration to stockholders generally and each regular or periodic report and any registration statement, prospectus or written communication (other than transmittal letters) in respect thereof filed by Brigham Exploration with or received by Brigham Exploration in connection therewith from any securities exchange or the SEC or any successor agency. (g) Notices Under Other Loan Agreements. Promptly after the furnishing thereof, copies of any statement, report or notice furnished to any Person pursuant to the terms of any indenture, loan or credit or other similar agreement including, but not limited to, any statement, report or notice furnished to any Person pursuant to the Senior Credit Agreement, other than this Agreement and not otherwise required to be furnished to the Lenders pursuant to any other provision of this Section 8.01. (h) Other Matters. Subject to any applicable restrictions on disclosure, from time to time such other information regarding the business, affairs or financial condition of the Borrower or Brigham Exploration (including, without limitation, any Plan or Multiemployer Plan and any reports or other information required to be filed under ERISA) as any Lender or the Agent may reasonably request. (i) Annual Budgets. On or before January 31 of each year, a one-year financial projection for Brigham Exploration and its Subsidiaries in form acceptable to the Agent, which projection shall include revenues, expenses and capital expenditures. (j) Monthly Operating Statements. As soon as available and in any event within 30 days after the end of each month, monthly operating statements of the Borrower for the month preceding the month during which the written request was received, including, without limitation, production reports and general and 40 46 administrative cost summaries by lease for its Oil and Gas Properties, which reports shall include quantities or volume of production, revenue, realized product prices, taxes, capital expenditures by category and lease operating costs which have accrued to the Borrower's accounts in such period, and such other information with respect thereto as the Agent may require. (k) Weekly Cash Budgets. For the period required under the Senior Credit Agreement, the Borrower will cause Brigham Exploration to deliver weekly cash budgets reasonably satisfactory to the Agent and each Lender and weekly cash flow statements reasonably satisfactory to the Agent and each Lender based on such form, with variance analysis to budget (including accounts receivables and accounts payables reporting) not later than the Friday following the week to which such budgets and statements relate. (l) CAPEX Plans. A CAPEX Plan, delivered simultaneously with each of the Reserve Reports to be delivered in March and September of each year; the first such CAPEX Plan, to be submitted on the Closing Date, shall be for the twelve month period beginning September 1, 2000, and ending August 31, 2000, and each subsequent CAPEX Plan shall cover the next succeeding twelve-month period. Each such CAPEX Plan shall include a blended risk profile that does not deviate materially from the risk profile of the CAPEX Plan required under the Senior Credit Agreement for so long as the Senior Lenders require a CAPEX Plan and, thereafter, from that submitted on the Closing Date. The Borrower will furnish to the Agent, at the time it furnishes each set of financial statements pursuant to paragraph (a) or (b) above, a certificate substantially in the form of Exhibit C-2 hereto executed by a Responsible Officer (i) certifying as to the matters set forth therein and stating that no Default has occurred and is continuing (or, if any Default has occurred and is continuing, describing the same in reasonable detail), (ii) setting forth in reasonable detail the computations necessary to determine whether Brigham Exploration is in compliance with Sections 5.2(q), (r) and (s) of its Guaranty Agreement as of the end of the respective fiscal quarter or fiscal year, and (iii) certifying that said financial statements fairly present the consolidated and consolidating financial condition and consolidated results of operations in accordance with GAAP, as at the end of, and for, such period (subject to normal year-end audit adjustments). Section 8.02 Litigation. The Borrower shall promptly give to the Agent notice of: (i) all legal or arbitral proceedings, and of all proceedings before any Governmental Authority involving the Borrower or any Guarantor, except proceedings which, if adversely determined within any reasonable range of loss, would not have a Material Adverse Effect, and (ii) of any material litigation or material proceeding against the Borrower or any Guarantor in which the amount involved is not covered in full by insurance (subject to normal and customary deductibles), or in which injunctive or similar relief is sought. The Borrower will, and will cause each of the Guarantors to, promptly notify the Agent and each of the Lenders of any claim, 41 47 judgment, Lien or other encumbrance affecting any Property of the Borrower or any Guarantor if the value of the claim, judgment, Lien, or other encumbrance affecting such Property shall exceed $1,000,000. Section 8.03 Maintenance, Etc. (a) The Borrower shall and shall cause each Subsidiary to: preserve and maintain its corporate existence and all of its material rights, privileges and franchises; keep books of record and account in which full, true and correct entries will be made of all dealings or transactions in relation to its business and activities; comply with all Governmental Requirements if failure to comply with such requirements will have a Material Adverse Effect; pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its Property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained; upon reasonable notice, permit representatives of the Agent or any Lender (accompanied by the Agent), during normal business hours, to examine, copy and make extracts from its financial books and records, to inspect its Properties, and to discuss its business and affairs with its officers, all to the extent reasonably requested by such Lender or the Agent (as the case may be); and keep, or cause to be kept, insured by financially sound and reputable insurers all Property of a character usually insured by Persons engaged in the same or similar business similarly situated against loss or damage of the kinds and in the amounts customarily insured against by such Persons and carry such other insurance as is usually carried by such Persons including, without limitation, environmental risk insurance to the extent reasonably available. (b) Contemporaneously with the delivery of the financial statements required by Section 8.01(a) to be delivered for each year, the Borrower will furnish or cause to be furnished to the Agent and the Lenders a certificate of insurance coverage from the insurer in form and substance satisfactory to the Agent and, if requested by the Agent, will furnish the Agent and the Lenders copies of the applicable policies. (c) The Borrower will and will cause each Subsidiary to operate its Oil and Gas Properties or cause such Oil and Gas Properties to be operated in a good and workmanlike manner in accordance with the practices of the industry and in compliance in all material respects with all applicable contracts and agreements and in compliance in all material respects with all Governmental Requirements. (d) The Borrower will and will cause each Subsidiary to, at its own expense, do or cause to be done (to the extent it has the power to do so) all things 42 48 reasonably necessary to preserve and keep in good repair, working order and efficiency all of its Oil and Gas Properties and other material Properties including, without limitation, all equipment, machinery and facilities, and from time to time will make all the reasonably necessary repairs, renewals and replacements so that at all times the state and condition of its Oil and Gas Properties and other material Properties will be fully preserved and maintained, except to the extent a portion of such Properties is not capable of producing Hydrocarbons in economically reasonable amounts. The Borrower will and will cause each Subsidiary to promptly: (i) pay and discharge, or make reasonable and customary efforts to cause to be paid and discharged, all delay rentals, royalties, expenses and indebtedness accruing under the leases or other agreements affecting or pertaining to its Oil and Gas Properties, (ii) perform or make reasonable and customary efforts to cause to be performed, in accordance with industry standards, the obligations required by each and all of the assignments, deeds, leases, sub-leases, contracts and agreements affecting its interests in its Oil and Gas Properties and other material Properties, (iii) will and will cause each Subsidiary to do all other things necessary to keep unimpaired, except for Liens described in Section 9.02, its rights with respect to its Oil and Gas Properties and other material Properties and prevent any forfeiture thereof or a default thereunder, except to the extent a portion of such Properties is no longer capable of producing Hydrocarbons in economically reasonable amounts. The Borrower will and will cause each Subsidiary to operate its Oil and Gas Properties and other material Properties or cause or make reasonable and customary efforts to cause such Oil and Gas Properties and other material Properties to be operated in a good and workmanlike manner in accordance with the practices of the industry and in compliance with all applicable contracts and agreements and in compliance in all material respects with all Governmental Requirements. The covenants contained in this Section 8.03(d) shall not apply to insignificant Properties unless a failure of such covenant could have a Material Adverse Effect. (e) The Borrower will provide to the Agent from time to time upon request by the Agent the certificate of a Responsible Officer of the Borrower stating that, except as disclosed in a schedule thereto, the Borrower has not received written notice that any mechanics' liens have been filed or will be filed on the Mortgaged Properties; provided that mere receipt of an invoice for services rendered shall not constitute written notice that a mechanics' lien will be filed. Section 8.04 Environmental Matters. (a) To the extent that a reasonably prudent owner or operator would do so under the same or similar circumstances, the Borrower will and will cause each Subsidiary to establish and implement such procedures as may be reasonably necessary to periodically determine and assure that any failure of the following does not have a Material Adverse Effect: (i) all Property of the Borrower and the 43 49 Subsidiaries and the operations conducted thereon and other activities of the Borrower and the Subsidiaries are in compliance with and do not violate the requirements of any Environmental Laws, (ii) no oil, hazardous substances or solid wastes are disposed of or otherwise released on or to any Property owned by any such party except in compliance with Environmental Laws, (iii) no hazardous substance will be released on or to any such Property in a quantity equal to or exceeding that quantity which requires reporting pursuant to Section 103 of CERCLA, and (iv) no oil, oil and gas exploration and production wastes or hazardous substance is released on or to any such Property so as to pose an imminent and substantial endangerment to public health or welfare or the environment. (b) The Borrower will promptly notify the Agent and the Lenders in writing of any threatened action, investigation or inquiry by any Governmental Authority of which the Borrower has knowledge in connection with any Environmental Laws with respect to the Property of the Borrower or any Subsidiary, excluding routine testing, compliance and corrective action. Section 8.05 Further Assurances. The Borrower will and will cause each Guarantor to cure promptly any defects in the creation and issuance of the Notes and the execution and delivery of the Loan Documents. The Borrower at its expense will and will cause each Guarantor to promptly execute and deliver to the Agent upon request all such other documents, agreements and instruments to comply with or accomplish the covenants and agreements of the Borrower or any Guarantor, as the case may be, in the Loan Documents, or to further evidence and more fully describe the collateral intended as security for the Notes, or to correct any omissions in the Loan Documents, or to state more fully the security obligations set out herein or in any of the Loan Documents, or to perfect, protect or preserve any Liens created pursuant to any of the Loan Documents, or to make any recordings, to file any notices or obtain any consents, all as may be necessary or appropriate in connection therewith. Section 8.06 Performance of Obligations. The Borrower will pay the Notes according to the reading, tenor and effect thereof; and the Borrower will and will cause each Guarantor to do and perform every act and discharge all of the obligations to be performed and discharged by them under the Loan Documents, at the time or times and in the manner specified. Section 8.07 Engineering Reports. (a) Not later than March 30 and September 30 of each year, the Borrower shall furnish to the Agent and the Lenders a Reserve Report as of the preceding December 31 and June 30, respectively. The Reserve Report to be furnished in March of each year shall be prepared by certified independent petroleum engineers or other independent petroleum consultant(s) acceptable to the Agent and the Reserve Reports to be furnished in September of each year shall be prepared by or under the supervision of the chief engineer or Vice President of 44 50 Operations of the Borrower who shall certify such Reserve Report to have been prepared in accordance with the procedures used in the immediately preceding March Reserve Report. At Borrower's option, the Reserve Report to be furnished in September of each year may instead consist of a report from the independent petroleum engineers referred to above on any new wells and a roll-forward by Borrower on any wells previously reported in the Reserve Report described in the immediately preceding March. (b) In the event of an unscheduled Borrowing Base redetermination, under the Senior Credit Agreement, the Borrower shall furnish to the Agent and the Lenders a copy of any Reserve Report that is furnished to the Senior Agent. (c) With the delivery of each Reserve Report, the Borrower shall provide to the Agent and the Lenders: (A) a certificate from a Responsible Officer certifying that, to the best of his knowledge and in all material respects: (i) the most recently delivered Reserve Report does not in the belief of such officer and based upon information in the Borrower's possession, materially overstate the oil and gas reserves of the Borrower and the Subsidiaries as a whole bearing in mind that reserves are evaluated based upon estimates and assumptions with respect to which reasonable minds of competent engineers may differ, (ii) except as set forth in such Reserve Report or on an exhibit to the certificate, on a net basis there are no gas imbalances, take or pay or other prepayments with respect to its Oil and Gas Properties evaluated in such Reserve Report which would violate Section 9.18, (iii) none of its proved Hydrocarbon Interests have been sold since the date of the last Borrowing Base determination except as set forth on an exhibit to the certificate, which certificate shall list all of its proved Hydrocarbon Interests sold and in such detail as reasonably required by the Majority Lenders, (iv) attached to the certificate is a list of its proved Hydrocarbon Interests added to and deleted from the immediately prior Reserve Report and a list showing any change in working interest or net revenue interest in its Hydrocarbon Interests occurring, (v) at the Agent's request, attached to the certificate is a list of all Persons disbursing proceeds to the Borrower from its Oil and Gas Properties and (vi) except as set forth on a schedule attached to the certificate all of proved Hydrocarbon Interests evaluated by such Reserve Report are Mortgaged Property; and (B) a certificate from a Responsible Officer certifying that, to the best of his knowledge and in all material respects (i) the representations of the Borrower in Section 7.10 are true and correct and apply to the Hydrocarbon Interests evaluated in the Reserve Report that are described in a Standard Mortgage and (ii) the Borrower has, with respect to those 45 51 material Hydrocarbon Interests that are evaluated in the most recently delivered Reserve Report, but that are not covered by a Standard Mortgage, conducted overall title due diligence that, in all material respects, equals or exceeds industry standards given the applicable facts and circumstances. Section 8.08 Reserved. Section 8.09 Additional Collateral. (a) The Borrower will grant and will cause each of its Subsidiaries to grant to the Agent as security for the Indebtedness a perfected Lien on the Borrower's or such Subsidiary's interest in any Oil and Gas Properties that are (i) acquired after the date hereof at the cash acquisition cost to the Borrower or such Subsidiary equal to or exceeding $1,000,000, and (ii) do not constitute Proved Reserves, which Lien will be created and perfected by and in accordance with the provisions of deeds of trust, security agreements and financing statements, or other Loan Documents, all in form substantially the same as the New Mortgage (subject to such changes as are necessary as a result of, to reflect and/or to account for changes in applicable law) and in sufficient executed (and acknowledged where necessary or appropriate) counterparts for recording purposes. (b) The Borrower will grant and will cause each of its Subsidiaries to grant to the Agent as security for the Indebtedness a Lien interest (subject only to Excepted Liens and the matters set forth on Schedule 7.10 hereto) on the Borrower's or such Subsidiary's interest in any Oil and Gas Properties identified after the Closing Date as containing Proved Reserves, which Lien will be created and perfected by and in accordance with the provisions of deeds of trust, security agreements and financing statements, or other Loan Documents, all in form substantially the same as the Standard Mortgage (subject to such changes as are necessary as a result of, to reflect and/or to account for changes in applicable law) and in sufficient executed (and acknowledged where necessary or appropriate) counterparts for recording purposes. (c) Concurrently with the granting of the Lien or other action referred to in Section 8.09(b) above, the Borrower will provide to the Agent title information in form and substance satisfactory to the Agent in its sole discretion with respect to the Borrower's and its Subsidiaries' interests in such Oil and Gas Properties to the extent needed to cause the Agent to have received, together with title information previously delivered to the Agent, satisfactory title information on at least 90% of the value of the proved Hydrocarbon Interests evaluated by the most recent Reserve Report. 46 52 (d) Also, promptly after the filing of any new Loan Document in any state, other than the New Mortgage and any other mortgage filed pursuant to subsection (a) of this Section 8.09 or any other mortgage substantially in the form of the New Mortgage, upon the reasonable request of the Agent, the Borrower will provide to the Agent an opinion addressed to the Agent for the benefit of the Lenders in form and substance reasonably satisfactory to the Agent in its sole discretion from counsel acceptable to Agent, stating that such Loan Document is valid, binding and enforceable in accordance with its terms and in legally sufficient form for such jurisdiction. Section 8.10 ERISA Information and Compliance. The Borrower will promptly furnish and will cause any ERISA Affiliate to promptly furnish to the Agent with sufficient copies to the Lenders (i) if requested by the Agent promptly after the filing thereof with the United States Secretary of Labor, the Internal Revenue Service or the PBGC, copies of each annual and other report with respect to each Plan or any trust created thereunder, (ii) immediately upon becoming aware of the occurrence of any ERISA Event or of any "prohibited transaction," as described in section 406 of ERISA or in section 4975 of the Code, in connection with any Plan or any trust created thereunder, a written notice signed by a Responsible Officer specifying the nature thereof, what action the Borrower or the ERISA Affiliate is taking or proposes to take with respect thereto, and, when known, any action taken or proposed by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto, and (iii) immediately upon receipt thereof, copies of any notice of the PBGC's intention to terminate or to have a trustee appointed to administer any Plan. With respect to each Plan (other than a Multiemployer Plan), the Borrower will, and will cause each ERISA Affiliate to, (i) satisfy in full and in a timely manner, without incurring any late payment or underpayment charge or penalty and without giving rise to any lien, all of the contribution and funding requirements of section 412 of the Code (determined without regard to subsections (d), (e), (f) and (k) thereof) and of section 302 of ERISA (determined without regard to sections 303, 304 and 306 of ERISA), and (ii) pay, or cause to be paid, to the PBGC in a timely manner, without incurring any late payment or underpayment charge or penalty, all premiums required pursuant to sections 4006 and 4007 of ERISA. Section 8.11 Subsidiary Security. Should the Borrower create or acquire any Subsidiary pursuant to Section 9.16 hereof it will promptly grant to the Agent for the benefit of the Lenders a security interest and pledge of all the capital stock of such Subsidiary in form and substance satisfactory to the Agent, such security interest and pledge to be second to any such security interest and pledge granted to secure the Senior Indebtedness and the Borrower will cause such Subsidiary to enter into a guaranty of the Indebtedness in form and substance satisfactory to the Agent, and such guaranty to be subordinate to any similar guaranty guaranteeing the Senior Indebtedness. The delivery of such security and guaranty shall be accompanied by such back up corporate authority and opinions of counsel (addressed to the Agent as well as the Senior Agent) as furnished to the Senior Agent, or as the Agent may reasonably request. 47 53 Section 8.12 Payment of Trade Payables. The Borrower will pay and cause all of its Subsidiaries to pay all of their Trade Payables now or hereafter incurred within 60 days of the date the invoice is received by Borrower, unless subject to legal offset or unless being contested in good faith by appropriate proceedings and reserves adequate under GAAP shall have been established therefor. ARTICLE 9 NEGATIVE COVENANTS The Borrower covenants and agrees that, so long as any of the Commitments are in effect and until payment in full of the Indebtedness hereunder, all interest thereon and all other amounts payable by the Borrower hereunder, without the prior written consent of the Majority Lenders: Section 9.01 Debt. Neither the Borrower nor any Subsidiary will incur, create, assume or suffer to exist any Debt, except: (a) the Notes or other Indebtedness arising under the Loan Documents or any guaranty of or suretyship arrangement for the Notes or other Indebtedness arising under the Loan Documents; (b) Debt of the Borrower existing on the Closing Date which is reflected in the Financial Statements or is disclosed in Schedule 9.01, and any renewals or extensions (but not increases) thereof; (c) accounts payable for the deferred purchase price of Property or services (other than Trade Payables) from time to time incurred in the ordinary course of business which, if greater than 60 days past the date the invoice is received by Borrower, are being contested in good faith by appropriate proceedings if reserves adequate under GAAP shall have been established therefor; (d) Debt owing to the Borrower or a Guarantor which is subordinated to the Indebtedness. (e) Debt of the Borrower under capital leases (as required to be reported on the financial statements of the Borrower pursuant to GAAP) not to exceed $2,000,000; (f) Debt of the Borrower under Hedging Agreements made with a Person that is made (i) with a Person that is, at the time such Hedging Agreement is made, either a Senior Lender or an Affiliate of a Senior Lender, or (ii) with another investment grade counterparty, provided that the aggregate notional amounts under all such Hedging Agreements do not exceed 80% of Borrower's 48 54 anticipated oil and/or gas production to be produced during the term of such Hedging Agreements and that such Hedging Agreements are entered into as a part of its normal business operations as a risk management strategy and/or hedge against changes resulting from market conditions related to the Borrower's and its Subsidiaries' operations; (g) Debt associated with bonds or surety obligations required by Governmental Requirements in connection with the operation of the Oil and Gas Properties; and (h) Debt of the Borrower described on Schedule 9.01(h) and such other Debt of the Borrower related to the acquisition of software and licensing rights related thereto that does not exceed $100,000 at any one time outstanding. (i) The Senior Indebtedness and any other Debt arising under or otherwise in relation to the Senior Loan Documents. Section 9.02 Liens. Neither the Borrower nor any Subsidiary will create, incur, assume or permit to exist any Lien on any of its Properties (now owned or hereafter acquired), except: (a) Liens securing the payment of any Indebtedness; (b) Excepted Liens; (c) Liens securing leases allowed under Section 9.01(e) but only on the Property under lease; (d) Liens disclosed on Schedule 9.02; (e) Any Permitted Encumbrances as described in any Mortgage. (f) Liens securing the Senior Indebtedness. Section 9.03 Investments, Loans and Advances. Neither the Borrower nor any Subsidiary will make or permit to remain outstanding any loans or advances to or investments in any Person, except that the foregoing restriction shall not apply to: (a) investments, loans or advances reflected in the Financial Statements or which are disclosed to the Lenders in Schedule 9.03; (b) accounts receivable arising in the ordinary course of business; 49 55 (c) for the Borrower only, direct obligations of the United States or any agency thereof, or obligations guaranteed by the United States or any agency thereof, in each case maturing within one year from the date of creation thereof; (d) for the Borrower only, commercial paper maturing within one year from the date of creation thereof rated in the highest grade by Standard & Poors Corporation or Moody's Investors Service, Inc.; (e) for the Borrower only, deposits maturing within one year from the date of creation thereof with, including certificates of deposit issued by, any Lender or any office located in the United States, Canada, or England of any other bank or trust company which is organized under the laws of the United States, Canada or England or any state or province thereof, has capital, surplus and undivided profits aggregating at least $100,000,000.00 (as of the date of such Lender's or bank or trust company's most recent financial reports) and has a short term deposit rating of no lower than A2 or P2, as such rating is set forth from time to time, by Standard & Poors Corporation or Moody's Investors Service, Inc., respectively; (f) for the Borrower only, deposits in money market funds investing exclusively in investments described in Section 9.03(c), 9.03(d) or 9.03(e); (g) intentionally omitted.; (h) investments by the Borrower in direct or indirect (through a Subsidiary to the extent permitted by Section 9.16 below) ownership interests in additional Oil and Gas Properties and gas gathering systems, gas plants, and similar assets related thereto; (i) investments, distributions, loans and advances by a Subsidiary to the Borrower; and (j) investments, distributions, loans and advances by the Borrower: (a) to Brigham Exploration, Brigham, Inc., Brigham Holdings I, LLC and/or Brigham Holdings II, LLC to pay Federal or State taxes owing by any of them, payroll and payroll related taxes and other reasonable general and administrative expenses, or consisting of forgiveness of indebtedness; and (b) to Subsidiaries which are Guarantors. Section 9.04 Dividends, Distributions and Redemptions. The Borrower will not declare or pay any dividend, purchase, redeem or otherwise acquire for value any of its stock 50 56 now or hereafter outstanding, return any capital to its stockholders or make any distribution of its assets to its partners, except as permitted under Section 9.03(j)(a) above. Section 9.05 Sales and Leasebacks. Neither the Borrower nor any Subsidiary will enter into any arrangement, directly or indirectly, with any Person whereby the Borrower or any Subsidiary shall sell or transfer any of its Property, whether now owned or hereafter acquired, and whereby the Borrower or any Subsidiary shall then or thereafter rent or lease as lessee such Property or any part thereof or other Property which the Borrower or any Subsidiary intends to use for substantially the same purpose or purposes as the Property sold or transferred. Section 9.06 Nature of Business. Neither the Borrower nor any Subsidiary will allow any material change to be made in the character of its business as an independent oil and gas exploration and production company. Among other things, a transfer of a substantial portion of Borrower's seismic data and Hydrocarbon Interests which do not contain identified proved Hydrocarbon reserves (other than transfers to participants of any participation interest earned by them in the ordinary course of Borrower's business and abandonment of prospects) shall be considered a material change in Borrower's business. Section 9.07 Limitation on Leases. Neither the Borrower nor any Subsidiary will create, incur, assume or suffer to exist any obligation for the payment of rent or hire of Property of any kind whatsoever (real or personal including capital leases but excluding leases of Hydrocarbon Interests and the equipment used thereon), under leases or lease agreements which would cause the aggregate amount of all payments made by the Borrower and the Subsidiaries pursuant to all such leases or lease agreements to exceed $2,000,000 in any period of twelve consecutive calendar months during the life of such leases. Section 9.08 Mergers, Etc.. The Borrower will not and will not permit any Subsidiary to merge into or with or consolidate with any other Person or sell, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its Property or assets to any other Person unless the Borrower, Brigham Exploration or any Guarantor whose Guaranty Agreement is in full force and effect is the surviving entity and no Default exists or will be created thereby. Section 9.09 Proceeds of Notes. The Borrower will not permit the proceeds of the Notes to be used for any purpose other than those permitted by Section 7.07. Neither the Borrower nor any Person acting on behalf of the Borrower has taken or will take any action which might cause any of the Loan Documents to violate Regulation U or X or any other regulation of the Board of Governors of the Federal Reserve System or to violate Section 7 of the Securities Exchange Act of 1934 or any rule or regulation thereunder, in each case as now in effect or as the same may hereinafter be in effect. Section 9.10 ERISA Compliance. The Borrower will not at any time: (a) Engage in, or permit any ERISA Affiliate to engage in, any transaction in connection with which the Borrower or any ERISA Affiliate could be subjected 51 57 to either a civil penalty assessed pursuant to section 502(c), (i) or (1) of ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code in excess of $100,000; (b) Terminate, or permit any ERISA Affiliate to terminate, any Plan in a manner, or take any other action with respect to any Plan, which could reasonably be expected to result in any liability of the Borrower or any ERISA Affiliate to the PBGC in excess of $100,000; (c) Fail to make, or permit any ERISA Affiliate to fail to make, full payment when due of all amounts under the provisions of any Plan, agreement relating thereto or applicable law, the Borrower or any ERISA Affiliate is required to pay as contributions thereto; (d) Permit to exist, or allow any ERISA Affiliate to permit to exist, any accumulated funding deficiency in excess of $100,000 within the meaning of Section 302 of ERISA or section 412 of the Code, whether or not waived, with respect to any Plan; (e) Permit, or allow any ERISA Affiliate to permit, the actuarial present value of the benefit liabilities under any Plan maintained by the Borrower or any ERISA Affiliate which is regulated under Title IV of ERISA to exceed the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities by an amount in excess of $100,000. The term "actuarial present value of the benefit liabilities" shall have the meaning specified in section 4041 of ERISA; (f) Contribute to or assume an obligation to contribute to, or permit any ERISA Affiliate to contribute to or assume an obligation to contribute to, any Multiemployer Plan; (g) Acquire, or permit any ERISA Affiliate to acquire, an interest in any Person that causes such Person to become an ERISA Affiliate with respect to the Borrower or any ERISA Affiliate if such Person sponsors, maintains or contributes to, or at any time in the six-year period preceding such acquisition has sponsored, maintained, or contributed to, (1) any Multiemployer Plan, or (2) any other Plan that is subject to Title IV of ERISA under which the actuarial present value of the benefit liabilities under such Plan exceeds the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities; (h) Incur, or permit any ERISA Affiliate to incur, a liability to or on account of a Plan under sections 515, 4062, 4063, 4064, 4201 or 4204 of ERISA which the aggregate for all such liability exceeds $100,000; 52 58 (i) Contribute to or assume an obligation to contribute to, or permit any ERISA Affiliate to contribute to or assume an obligation to contribute to, any employee welfare benefit plan, as defined in section 3(1) of ERISA, including, without limitation, any such plan maintained to provide benefits to former employees of such entities, that may not be terminated by such entities in their sole discretion at any time without any material liability; or (j) Amend or permit any ERISA Affiliate to amend, a Plan resulting in an increase in current liability such that the Borrower or any ERISA Affiliate is required to provide security to such Plan under section 401(a)(29) of the Code. Section 9.11 Sale or Discount of Receivables. Neither the Borrower nor any Subsidiary will discount or sell (with or without recourse) any of its notes receivable or accounts receivable. Section 9.12 [INTENTIONALLY OMITTED] Section 9.13 Sale of Oil and Gas Properties. The Borrower will not, and will not permit any Subsidiary to, sell, assign, farm-out, convey or otherwise transfer any Hydrocarbon Interests except for (i) the sale of Hydrocarbons in the ordinary course of business; and (ii) the sale or transfer of equipment that is no longer necessary for the business of the Borrower or such Subsidiary or is replaced by equipment of at least comparable value and use. Section 9.14 Environmental Matters. Neither the Borrower nor any Subsidiary will knowingly cause or permit any of its Property to be in violation of, or knowingly do anything or permit anything to be done which will subject any such Property to any remedial obligations under any Environmental Laws, assuming disclosure to the applicable Governmental Authority of all relevant facts, conditions and circumstances, if any, pertaining to such Property where such violations or remedial obligations would have a Material Adverse Effect. Section 9.15 Transactions with Affiliates. Neither the Borrower nor any Subsidiary will enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of Property or the rendering of any service, with any Affiliate unless such transactions are otherwise not in violation of this Agreement, are in the ordinary course of its business and are upon fair and reasonable terms no less favorable to it than it would obtain in a comparable arm's length transaction with a Person not an Affiliate. Section 9.16 Subsidiaries. The Borrower will not, and will not permit any Subsidiary to, create any additional Subsidiaries or make any additional investment in a Subsidiary. All Subsidiaries together at no time shall own or hold Oil and Gas Properties having proved reserves with a net discounted present value calculated in the same manner as in the most recent Reserve Report in excess of 10% of the total net discounted present value of Proved Reserves of the Borrower and its Subsidiaries as reflected in said Reserve Report (plus such Subsidiaries' proved reserves not included in such Reserve Report). No Subsidiary may enter into any agreement other than the Loan Documents or the Senior Loan Documents which limits upstream transfer of dividends to the Borrower No assets may be transferred to a Subsidiary which is not a Guarantor. 53 59 Section 9.17 Negative Pledge Agreements. The Borrower will not and will not permit any Subsidiary to create, incur, assume or suffer to exist any contract, agreement or understanding (other than the Loan Documents and the Senior Loan Documents) which in any way prohibits or restricts (i) the granting, conveying, creation or imposition of any Lien on any of its Property or (ii) any Subsidiary from paying dividends or making any other distribution to the Borrower or which requires the consent of or notice to other Persons in connection with any of the foregoing. Section 9.18 Gas Imbalances, Take-or-Pay or Other Prepayments. The Borrower will not allow gas imbalances, take-or-pay or other prepayments with respect to the Hydrocarbon Interests of the Borrower and its Subsidiaries which would require the Borrower or its Subsidiaries to deliver five percent (5%) or more of the Borrower's and its Subsidiaries' Hydrocarbons produced on a monthly basis from the Hydrocarbon Interests at some future time without then or thereafter receiving full payment therefor. Section 9.19 Borrower as Operator. The Borrower will not and will not permit any of the Subsidiaries to voluntarily resign as operator of more than twenty-five percent (25%) of their currently operated Oil and Gas Properties unless the new operator is acceptable to the Senior Agent. Section 9.20 Restrictions While Outstanding Indebtedness Exceeds the Borrowing Base. The Borrower covenants and agrees that until the Covenant Release Date without prior written consent of the Majority Lenders: (a) The Borrower will not permit Net Seismic and Land Expenditures to exceed three million dollars (the NSLE Limit). Beginning December 31, 2000, the NSLE Limit will increase at the beginning of each succeeding quarter of a year by an amount equal to 15% of the total projected capital expenditures for such quarter. This limitation in this subsection (a)shall only be in place at any time that Indebtedness at the end of the quarter plus actual Net Seismic and Land Expenditures for such quarter divided by such quarter's EBITDA minus capitalized general and administrative expenses is greater than 16:1 (or 4:1 on an annualized basis). (b) For so long as SCI remains a "SCI Lender", as such term is defined in the Senior Credit Agreement, Borrower will not permit its capital expenditures to deviate materially from the then current CAPEX Plan under the Senior Credit Agreement, with the materiality of any such deviation to be determined by the SCI Lenders in their sole but reasonable discretion and at any point when SCI does not remain an SCI Lender, the Borrower will not permit its capital expenditures to deviate materially from the then current CAPEX Plan submitted 54 60 hereunder, with the materiality of any such deviation to be determined by the Majority Lenders, in their sole but reasonable discretion. (c) The Borrower will not allow growth in general and administrative expenses to exceed the amount which is reasonable and necessary to retain key employees and to execute the Borrower's business plan to maximize growth in resources, net assets, cash flow and equity value. (d) Borrower will not permit any new wells to be spudded for which the weekly cash budget indicates that there will be insufficient working capital to complete, after taking into account availability under this Agreement and the Senior Credit Agreement. Section 9.21 Debt to RAPRV. Upon receipt of the reports required by Section 8.07 and such other reports, data and supplemental information as may from time to time be reasonably requested by the Agent (the "Engineering Reports"), the Agent will determine or redetermine, as appropriate, the RAPRV 10% and the RAPRV 7%. The Agent shall propose to the Lenders the RAPRV 10% and the RAPRV 7% within ten (10) Business Days following receipt by the Agent and the Lenders of the Engineering Reports in a timely and complete manner. (a) The Borrower will not permit RAPRV 7% to fall below a value of (i) from January 1, 2001 to July 30, 2001, $62,500,000; (ii) from July 31, 2001 to January 30, 2002, $67,500,000; and (iii) on and after January 31, 2002, the amount of the Senior Indebtedness actually outstanding under the Senior Credit Agreement, excluding any obligations of any kind under any Hedging Agreement. (b) If the "Aggregate Commitments" under the Senior Credit Agreement, determined without regard to any Debt arising under or in relation to Hedging Agreements, exceed $75,000,000, the Borrower will not permit RAPRV 10% to fall below the amount of the Senior Indebtedness actually outstanding under the Senior Credit Agreement, excluding any obligations of any kind under any Hedging Agreement. ARTICLE 10 EVENTS OF DEFAULT; REMEDIES Section 10.01 Events of Default. One or more of the following events shall constitute an "Event of Default": (a) the Borrower shall default in the payment or prepayment when due of any principal of or interest on any Loan or any fees or other amount payable by it hereunder or under any other Loan Document and such default, other than a 55 61 default of a payment or prepayment of principal (which shall have no cure period), shall continue unremedied for a period of three (3) Business Days; or (b) the Borrower or any Guarantor shall default in the payment when due of any principal of or interest on any of its other Debt aggregating $1,000,000 or more, or any event specified in any note, agreement, indenture or other document evidencing or relating to any such Debt shall occur if the effect of such event is to cause, or (with the giving of any notice or the lapse of time or both) to permit the holder or holders of such Debt (or a trustee or agent on behalf of such holder or holders) to cause, such Debt to become due prior to its stated maturity; or (c) any representation, warranty, or certification made or deemed made herein or in any other Loan Document by the Borrower or any Guarantor, or any certificate furnished by the Borrower or any Guarantor to any Lender or the Agent pursuant to the provisions hereof or any Loan Document, shall prove to have been false or misleading as of the time made or furnished in any material and adverse respect; or (d) the Borrower shall default in the performance of any of its obligations under Article IX or Section 8.01(c) of this Agreement; or the Borrower shall default in the performance of any of its obligations under any other Article of the Agreement or under or any other Loan Document to which it is a party (other than the payment of amounts due which shall be governed by Section 10.01(a)) and such default shall continue unremedied for a period of thirty (30) days after notice thereof to the Borrower by the Agent or any of the Lenders (through the Agent); or (e) any Guarantor shall default in the performance of its obligation to pay the Liabilities (as defined therein) at maturity or, with respect to Brigham Exploration, performance of any covenant under Section 5.1(i) or Section 5.2 of its Guaranty Agreement; or any Guarantor shall default in the performance of any of its other obligations under its Guaranty Agreement and such default shall continue unremedied for a period of thirty (30) days after notice thereof to the Guarantor by the Agent or the any of the Lenders (through the Agent); or (f) the Borrower shall admit in writing its inability to, or be generally unable to, pay its debts as such debts become due; or (g) the Borrower shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of its creditors, (iii) commence a voluntary case under the Federal Bankruptcy Code (as now or hereafter in effect), (iv) tile a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, 56 62 winding-up, liquidation or composition or readjustment of debts, (v) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the Federal Bankruptcy Code, or (vi) take any corporate action for the purpose of effecting any of the foregoing; or (h) a proceeding or case shall be commenced, without the application or consent of the Borrower, in any court of competent jurisdiction, seeking (i) its liquidation, reorganization, dissolution or winding-up, or the composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of the Borrower of all or any substantial part of its assets, or (iii) similar relief in respect of the Borrower under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, and such proceeding or case shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of 60 days; or an order for relief against the Borrower shall be entered in an involuntary case under the Federal Bankruptcy Code; or (i) a judgment or judgments for the payment of money in excess of $1,000,000 in the aggregate shall be rendered by a court against the Borrower and the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within thirty (30) days from the date of entry thereof and the Borrower shall not, within said period of 30 days, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal; or (j) the Loan Documents after delivery thereof shall for any reason, except to the extent permitted by the terms thereof, cease to be in full force and effect and valid, binding and enforceable in all material respects in accordance with their terms, or cease in any material respect to create a valid and perfected Lien of the priority required thereby on any of the collateral purported to be covered thereby, except to the extent permitted by the terms of this Agreement, or the Borrower or any Guarantor shall so state in writing; or (k) any Guarantor discontinues its usual business or suffers to exist any material change in its ownership, control or management; or (l) any Guarantor takes, suffers or permits to exist any of the events or conditions referred to in paragraphs (f), (g), (h) or (i) hereof or if any guaranty agreement related thereto shall for any reason cease to be valid and binding on such Guarantor in all material respects or if such Guarantor shall so state in writing; or 57 63 (m) Brigham Exploration ceases to own (directly or indirectly) 100% of the Borrower; or (n) the Borrower ceases to be the primary operating entity for Brigham Exploration and its Subsidiaries and the Borrower and its Subsidiaries cease to be the only Brigham Exploration entities owning Oil and Gas Properties. Section 10.02 Remedies. Subject to any contrary or other provisions of the Subordination Agreement: (a) At any time during the continuance of an Event of Default other than one referred to in clauses (f), (g) or (h) of Section 10.01 or in clause (l) to the extent it relates to clauses (f), (g) or (h), the Agent, upon request of the Majority Lenders, shall, by notice to the Borrower, cancel the Commitments and/or declare the principal amount then outstanding of, and the accrued interest on, the Loans and all other amounts payable by the Borrower hereunder and under the Notes to be forthwith due and payable, whereupon such amounts shall be immediately due and payable without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other formalities of any kind, all of which are hereby expressly waived by the Borrower. Once an acceleration has been declared pursuant to the foregoing, no subsequent cure of the Event of Default shall negate such acceleration or the rights and remedies of the Agent and the Lenders with respect thereto without the express written consent of all of the Lenders. (b) In the case of the occurrence of an Event of Default referred to in clauses (f), (g) or (h) of Section 10.01 or in clause (l) to the extent it relates to clauses (f), (g) or (h), the Commitments shall be automatically canceled and the principal amount then outstanding of, and the accrued interest on, the Loans and all other amounts payable by the Borrower hereunder and under the Notes shall become automatically immediately due and payable without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other formalities of any kind, all of which are hereby expressly waived by the Borrower. (c) All proceeds received after maturity of the Notes, whether by acceleration or otherwise shall be applied first to reimbursement of expenses and indemnities provided for in the Loan Documents; second to accrued interest on the Notes; third to fees of the Lenders; fourth pro rata to principal outstanding on the Notes and other Indebtedness of the Lenders; and any excess shall be paid to the Borrower or as otherwise required by any Governmental Requirement. Section 10.03 Production and Proceeds. Notwithstanding that, by the terms of the various Mortgages and other Loan Documents, the Borrower and any other mortgagors are and will be assigning to Agent all of the Hydrocarbons covered thereby and all of the products 58 64 thereof and proceeds and revenues attributable thereto and all payments in lieu of such Hydrocarbons (in this section collectively called the "Production and Proceeds"), so long as no Default has occurred and is continuing (a) the Borrower and such mortgagors may continue to receive all such Production and Proceeds, subject, however, to the Liens created under the Mortgages and other Loan Documents, and (b) upon the Borrower's request the Agent will confirm to any purchasers of Hydrocarbons, title examiners, or other Persons that the Borrower and such mortgagors continue to have the right so to receive such Production and Proceeds until notification by the Agent of the occurrence of a Default. During the continuance of a Default, however, the Agent may exercise its rights and remedies granted under the Mortgages and the other Loan Documents, including the rights and remedies granted under the Mortgages and the other Loan Documents, including the right to obtain possession of all Production and Proceeds then held by the Borrower and such mortgagors and to receive directly from the purchasers of Hydrocarbons all other Production Proceeds, subject in each instance to the terms of the Subordination Agreement. In no case shall any failure by the Agent to collect directly any such Production and Proceeds constitute in any way a release of any of its rights under the Loan Documents. ARTICLE 11 THE AGENT Section 11.01 Appointment, Powers and Immunities. Each Lender hereby irrevocably appoints and authorizes the Agent to act as its agent hereunder and under the other Loan Documents with such powers as are specifically delegated to the Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. The Agent (which term as used in this sentence and in Section 11.05 and the first sentence of Section 11.06 shall include reference to its Affiliates and its and its Affiliates' officers, directors, employees, attorneys, accountants, experts and agents): (i) shall have no duties or responsibilities except those expressly set forth in the Loan Documents, and shall not by reason of the Loan Documents be a trustee or fiduciary for any Lender; (ii) makes no representation or warranty to any Lender and shall not be responsible to the Lenders for any recitals, statements, representations or warranties contained in this Agreement, or in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement, or for the value, validity, effectiveness, genuineness, execution, effectiveness, legality, enforceability or sufficiency of this Agreement, any Note or any other document referred to or provided for herein or for any failure by the Borrower or any other Person (other than the Agent) to perform any of its obligations hereunder or thereunder or for the existence, value, perfection or priority of any collateral security or the financial or other condition of the Borrower, the Subsidiaries or any other obligor or guarantor; (iii) except pursuant to Section 11.07 shall not be required to initiate or conduct any litigation or collection proceedings hereunder; and (IV) SHALL NOT BE RESPONSIBLE FOR ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY IT HEREUNDER OR UNDER ANY OTHER DOCUMENT OR INSTRUMENT REFERRED TO OR PROVIDED FOR HEREIN OR IN CONNECTION HEREWITH INCLUDING ITS OWN ORDINARY NEGLIGENCE, EXCEPT FOR ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. The Agent may employ agents, accountants, attorneys and 59 65 experts and shall not be responsible for the negligence or misconduct of any such agents, accountants, attorneys or experts selected by it in good faith or any action taken or omitted to be taken in good faith by it in accordance with the advice of such agents, accountants, attorneys or experts. The Agent may deem and treat the payee of any Note as the holder thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof permitted hereunder shall have been filed with the Agent. The Agent is authorized to release any collateral that is permitted to be sold or released pursuant to the terms of the Loan Documents. Section 11.02 Reliance by Agent. The Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telex, telecopier, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the Agent. Section 11.03 Defaults. The Agent shall not be deemed to have knowledge of the occurrence of a Default (other than the non-payment of principal of or interest on Loans or of fees) unless the Agent has received notice from a Lender or the Borrower specifying such Default and stating that such notice is a "Notice of Default." In the event that the Agent receives such a notice of the occurrence of a Default, the Agent shall give prompt notice thereof to the Lenders. In the event of a payment Default, the Agent shall give each Lender prompt notice of each such payment Default. Section 11.04 Rights as a Lender. With respect to its Commitments and the Loans made by it, Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as the Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include the Agent in its individual capacity. Agent and its Affiliates may (without having to account therefor to any Lender) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Borrower (and any of its Affiliates) as if it were not acting as the Agent, and Agent and its Affiliates may accept fees and other consideration from the Borrower for services in connection with this Agreement or otherwise without having to account for the same to the Lenders. Section 11.05 INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY THE AGENT RATABLY IN ACCORDANCE WITH THEIR PERCENTAGE SHARES FOR THE INDEMNITY MATTERS AS DESCRIBED IN SECTION 12.03 TO THE EXTENT NOT INDEMNIFIED OR REIMBURSED BY THE BORROWER UNDER SECTION 12.03, BUT WITHOUT LIMITING THE OBLIGATIONS OF THE BORROWER UNDER SAID SECTION 12.03 AND FOR ANY AND ALL OTHER LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF: (I) THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR ANY OTHER DOCUMENTS 60 66 CONTEMPLATED BY OR REFERRED TO HEREIN OR THE TRANSACTIONS CONTEMPLATED HEREBY, BUT EXCLUDING, UNLESS A DEFAULT HAS OCCURRED AND IS CONTINUING, NORMAL ADMINISTRATIVE COSTS AND EXPENSES INCIDENT TO THE PERFORMANCE OF ITS AGENCY DUTIES HEREUNDER OR (II) THE ENFORCEMENT OF ANY OF THE TERMS OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR OF ANY SUCH OTHER DOCUMENTS; WHETHER OR NOT ANY OF THE FOREGOING SPECIFIED IN THIS SECTION 11.05 ARISES FROM THE SOLE OR CONCURRENT NEGLIGENCE OF THE AGENT, PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY OF THE FOREGOING TO THE EXTENT THEY ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE AGENT. Section 11.06 Non-Reliance on Agent and other Lenders. Each Lender acknowledges and agrees that it has, independently and without reliance on the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Borrower and its decision to enter into this Agreement, and that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement. The Agent shall not be required to keep itself informed as to the performance or observance by the Borrower of the Loan Documents or any other document referred to or provided for herein or to inspect the properties or books of the Borrower. Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition or business of the Borrower (or any of its Affiliates) which may come into the possession of the Agent or any of its Affiliates. In this regard, each Lender acknowledges that Vinson & Elkins is acting in this transaction as special counsel to the Agent only, except to the extent otherwise expressly stated in any legal opinion or any Loan Document. Each Lender will consult with its own legal counsel to the extent that it deems necessary in connection with the Loan Documents and the matters contemplated therein. Section 11.07 Action by Agent. Except for action or other matters expressly required of the Agent hereunder, the Agent shall in all cases be fully justified in failing or refusing to act hereunder unless it shall (i) receive written instructions from the Majority Lenders (or all of the Lenders as expressly required by Section 12.04) specifying the action to be taken, and (ii) be indemnified to its satisfaction by the Lenders against any and all liability and expenses which may be incurred by it by reason of taking or continuing to take any such action. The instructions of the Majority Lenders (or all of the Lenders as expressly required by Section 12.04) and any action taken or failure to act pursuant thereto by the Agent shall be binding on all of the Lenders. If a Default has occurred and is continuing, the Agent shall take such action with respect to such Default as shall be directed by the Majority Lenders (or all of the Lenders as required by Section 12.04) in the written instructions (with indemnities) described in this Section 11.07, provided that, unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interests of the 61 67 Lenders. In no event, however, shall the Agent be required to take any action which exposes the Agent to personal liability or which is contrary to this Agreement and the other Loan Documents or applicable law. Section 11.08 Resignation or Removal of Agent. Subject to the appointment and acceptance of a successor Agent as provided below, the Agent may resign at any time by giving notice thereof to the Lenders and the Borrower, and the Agent may be removed at any time with or without cause by the Majority Lenders. Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Majority Lenders and shall have accepted such appointment within thirty (30) days after the retiring Agent's giving of notice of resignation or the Majority Lenders' removal of the retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent from among the Lenders. Upon the acceptance of such appointment hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Article XI and Section 12.03 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Agent. ARTICLE 12 MISCELLANEOUS Section 12.01 Waiver. No failure on the part of the Agent or any Lender to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under any of the Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under any of the Loan Documents preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. Section 12.02 Notices. All notices and other communications provided for herein and in the other Loan Documents (including, without limitation, any modifications of, or waivers or consents under, this Agreement or the other Loan Documents) shall be given or made by telex, telecopy, courier or U.S. Mail or in writing and telexed, telecopied, mailed or delivered to the intended recipient at the "Address for Notices" specified below its name on the signature pages hereof or in the Loan Documents or, as to any party, at such other address as shall be designated by such party in a notice to each other party. Except as otherwise provided in this Agreement or in the other Loan Documents, all such communications shall be deemed to have been duly given when transmitted, if transmitted before 1:00 p.m. Houston time on a Business Day (otherwise on the next succeeding Business Day) by telex or telecopier and evidence or confirmation of receipt is obtained, or personally delivered or, in the case of a mailed notice, three (3) Business Days after the date deposited in the mails, postage prepaid, in each case given or addressed as aforesaid. 62 68 Section 12.03 Payment of Expenses, Indemnities, etc. The Borrower agrees: (a) whether or not the transactions hereby contemplated are consummated, to pay all reasonable expenses of the Agent in the administration (both before and after the execution hereof and including advice of counsel as to the rights and duties of the Agent and the Lenders with respect thereto) of, and in connection with the negotiation, syndication, investigation, preparation, execution and delivery of, recording or filing of, preservation of rights under, enforcement of, and refinancing, renegotiation or restructuring of, the Loan Documents and any amendment, waiver or consent relating thereto (including, without limitation, the reasonable fees and disbursements of counsel and other outside consultants for the Agent and, in the case of enforcement, the reasonable fees and disbursements of counsel for the Agent and any of the Lenders); and promptly reimburse the Agent for all amounts expended, advanced or incurred by the Agent or the Lenders to satisfy any obligation of the Borrower under this Agreement or any other Loan Document, including without limitation, all costs and expenses of foreclosure; (b) TO INDEMNIFY THE AGENT AND EACH LENDER AND EACH OF THEIR AFFILIATES AND EACH OF THEIR OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES, AGENTS, ATTORNEYS, ACCOUNTANTS AND EXPERTS ("INDEMNIFIED PARTIES") FROM, HOLD EACH OF THEM HARMLESS AGAINST AND PROMPTLY UPON DEMAND PAY OR REIMBURSE EACH OF THEM FOR, THE INDEMNITY MATTERS WHICH MAY BE INCURRED BY OR ASSERTED AGAINST OR INVOLVE ANY OF THEM (WHETHER OR NOT ANY OF THEM IS DESIGNATED A PARTY THERETO) AS A RESULT OF, ARISING OUT OF OR IN ANY WAY RELATED TO (I) ANY ACTUAL OR PROPOSED USE BY THE BORROWER OF THE PROCEEDS OF ANY OF THE LOANS, (II) THE EXECUTION, DELIVERY AND PERFORMANCE OF THE LOAN DOCUMENTS, (III) THE OPERATIONS OF THE BUSINESS OF THE BORROWER AND THE SUBSIDIARIES, (IV) THE FAILURE OF THE BORROWER OR ANY GUARANTOR TO COMPLY WITH THE TERMS OF ANY OTHER LOAN DOCUMENT OR THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (V) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OF THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS, (VI) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE LOAN DOCUMENTS OR (VII) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL AND ALL OTHER REASONABLE EXPENSES INCURRED IN CONNECTION WITH INVESTIGATING, 63 69 DEFENDING OR PREPARING TO DEFEND ANY SUCH ACTION, SUIT, PROCEEDING (INCLUDING ANY INVESTIGATIONS, LITIGATION OR INQUIRIES) OR CLAIM AND INCLUDING ALL INDEMNITY MATTERS ARISING BY REASON OF THE ORDINARY NEGLIGENCE OF ANY INDEMNIFIED PARTY, BUT EXCLUDING ALL INDEMNITY MATTERS ARISING SOLELY BY REASON OF CLAIMS BETWEEN THE LENDERS OR ANY LENDER AND THE AGENT OR A LENDER'S SHAREHOLDERS AGAINST THE AGENT OR LENDER OR BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART OF ANY INDEMNIFIED PARTY; AND (c) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE INDEMNIFIED PARTY FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST RECOVERY ACTIONS, ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND LIABILITIES TO WHICH ANY SUCH PERSON MAY BECOME SUBJECT (I) UNDER ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY OF ITS PROPERTIES, INCLUDING WITHOUT LIMITATION, THE TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (II) AS A RESULT OF THE BREACH OR NONCOMPLIANCE BY THE BORROWER WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER, (III) DUE TO PAST OWNERSHIP BY THE BORROWER OF ANY OF ITS PROPERTIES OR PAST ACTIVITY ON ANY OF ITS PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, RESULTS IN PRESENT LIABILITY, (IV) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR (V) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS, PROVIDED, HOWEVER, NO INDEMNITY SHALL BE AFFORDED UNDER THIS SECTION 12.03(c) IN RESPECT OF ANY PROPERTY FOR ANY -------- ------- OCCURRENCE ARISING FROM THE ACTS OR OMISSIONS OF THE AGENT OR ANY LENDER DURING THE PERIOD AFTER WHICH SUCH PERSON, ITS SUCCESSORS OR ASSIGNS, OR THEIR AGENTS OR REPRESENTATIVES, SHALL HAVE OBTAINED POSSESSION OF SUCH PROPERTY (WHETHER BY FORECLOSURE OR DEED IN LIEU OF FORECLOSURE, AS MORTGAGEE-IN-POSSESSION OR OTHERWISE). (d) No Indemnified Party may settle any claim to be indemnified without the consent of the indemnitor, such consent not to be unreasonably withheld; provided, that the indemnitor may not reasonably withhold consent to any 64 70 settlement that an Indemnified Party proposes, if the indemnitor does not have the financial ability to pay all its obligations outstanding and asserted against the indemnitor at that time, including, without limitation, the maximum potential claims against the Indemnified Party to be indemnified pursuant to this Section 12.03. (e) In the case of any indemnification hereunder, the Agent or Lender, as appropriate shall give notice to the Borrower of any such claim or demand being made against the Indemnified Party and the Borrower shall have the non-exclusive right to join in the defense against any such claim or demand provided that if the Borrower provides a defense, the Indemnified Party shall bear its own cost of defense unless there is a conflict between the Borrower and such Indemnified Party. (f) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED PARTIES NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE INDEMNIFIED PARTIES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR MORE OF THE INDEMNIFIED PARTIES. TO THE EXTENT THAT AN INDEMNIFIED PARTY IS FOUND TO HAVE COMMITTED AN ACT OF GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, THIS CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL CONTINUE BUT SHALL ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS DEEMED TO HAVE OCCURRED BY REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY. (g) The Borrower's obligations under this Section 12.03 shall survive any termination of this Agreement and the payment of the Notes and shall continue thereafter in full force and effect. (h) The Borrower shall pay any amounts due under this Section 12.03 within thirty (30) days of the receipt by the Borrower of notice of the amount due. Section 12.04 Amendments, Etc. Any provision of this Agreement or any other Loan Document may be amended, modified or waived with the Borrower's and the Majority Lenders' written consent; provided that (i) no amendment, modification or waiver which extends the final maturity of the Loans, increases the Aggregate Maximum Credit Amounts, forgives the principal amount of any Indebtedness outstanding under this Agreement, releases any guarantor 65 71 of the Indebtedness or releases all or substantially all of the collateral, reduces the interest rate applicable to the Loans or the fees payable to the Lenders generally, affects Section 2.03(a), this Section 12.04 or Section 12.06(a) or modifies the definition of "Majority Lenders" shall be effective without consent of all Lenders; (ii) no amendment, modification or waiver which increases the Maximum Credit Amount of any Lender shall be effective without the consent of such Lender; and (iii) no amendment, modification or waiver which modifies the rights, duties or obligations of the Agent shall be effective without the consent of the Agent. Section 12.05 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Section 12.06 Assignments and Participations (a) The Borrower may not assign its rights or obligations hereunder or under the Notes without the prior consent of all of the Lenders and the Agent. (b) Any Lender may sell, assign, transfer or negotiate to one or more other lenders, commercial banks, insurance companies, other financial institutions or any other Person all or any portion of its rights and obligations hereunder pursuant to an Assignment Agreement substantially in the form of Exhibit E hereto ("Assignment"), and acceptance of such Assignment by any assignee shall constitute the agreement of such assignee to be bound by the terms of this Agreement applicable to the assigning Lender. (c) Promptly after receiving evidence of an assignment under Section 12.06(b), the Agent shall send a notice of such assignment to the Borrower. Upon receipt of such notice and of the Notes that are the subject thereof, the Borrower will, at its own expense, execute and deliver new Notes to the assignor and/or assignee, as appropriate, in accordance with their respective interests. Upon receipt of such executed Assignment and of the Notes which are the subject thereof, the Borrower will, at its own expense, execute and deliver new Notes to the assignor and/or assignee, as appropriate, in accordance with their respective interests as they appear. Upon the effectiveness of any assignment pursuant to Section 12.06(b) the assignee will become a "Lender," if not already a "Lender," for all purposes of this Agreement and the other Loan Documents. The assignor shall be relieved of its obligations hereunder to the extent of such assignment (and if the assigning Lender no longer holds any rights or obligations under this Agreement, such assigning Lender shall cease to be a "Lender" hereunder except that its rights under Sections 4.06, 5.01, 5.05 and 12.03 shall not be affected). The Agent will prepare on the last Business Day of each month during which an assignment has become effective pursuant to Section 12.06(b) a new Annex I giving effect to all such assignments effected 66 72 during such month, and will promptly provide the same to the Borrower and each of the Lenders. (d) Each Lender may transfer, grant or assign participations in all or any part of such Lender's interests hereunder pursuant to this Section 12.06(d) to any Person, provided that: (i) such Lender shall remain a "Lender" for all purposes of this Agreement and the transferee of such participation shall not constitute a "Lender" hereunder; and (ii) no participant under any such participation shall have rights to approve any amendment to or waiver of any of the Loan Documents except to the extent such amendment or waiver would (x) forgive any principal owing on any Indebtedness or extend the final maturity of the Loans, (y) reduce the interest rate (other than as a result of waiving the applicability of any post-default increases in interest rates) or fees applicable to any of the Commitments or Loans in which such participant is participating, or postpone the payment of any thereof, or (z) release any guarantor of the Indebtedness or release all or substantially all of the collateral (except as provided in the Loan Documents) supporting any of the Commitments or Loans in which such participant is participating. In the case of any such participation, the participant shall not have any rights under this Agreement or any of the other Loan Documents (the participant's rights against the granting Lender in respect of such participation to be those set forth in the agreement with such Lender creating such participation), and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation, provided that such participant shall be entitled to receive additional amounts under Article V on the same basis as if it were a Lender and be indemnified under Section 12.03 as if it were a Lender. In addition, each agreement creating any participation must include an agreement by the participant to be bound by the provisions of Section 12.15. (e) The Lenders may furnish any information concerning the Borrower in the possession of the Lenders from time to time to assignees and participants (including prospective assignees and participants; provided that, such Persons agree to be bound by the provisions of Section 12.15 hereof. (f) Notwithstanding anything in this Section 12.06 to the contrary, any Lender may assign and pledge its Note to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any operating circular issued by such Federal Reserve System and/or such Federal Reserve Bank. No such assignment and/or pledge shall release the assigning and/or pledging Lender from its obligations hereunder. (g) Notwithstanding any other provisions of this Section 12.06, no transfer or assignment of the interests or obligations of any Lender or any grant of 67 73 participations therein shall be permitted if such transfer, assignment or grant would require the Borrower to file a registration statement with the SEC or to qualify the Loans under the "Blue Sky" laws of any state. Section 12.07 Invalidity. In the event that any one or more of the provisions contained in any of the Loan Documents 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 the Notes, this Agreement or any other Loan Document. Section 12.08 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 12.09 References. 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 or schedule shall be deemed to refer to the applicable exhibit or schedule attached hereto unless otherwise stated herein. Section 12.10 Survival. The obligations of the parties under Section 4.06, Article V, and Sections 11.05 and 12.03 shall survive the repayment of the Loans and the termination of the Commitments. To the extent that any payments on the Indebtedness or proceeds of any collateral are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver or other Person under any bankruptcy law, common law or equitable cause, then to such extent, the Indebtedness so satisfied shall be revived and continue as if such payment or proceeds had not been received and the Agent's and the Lenders' Liens, security interests, rights, powers and remedies under this Agreement and each other Loan Document shall continue in full force and effect. In such event, each Loan Document shall be automatically reinstated and the Borrower shall take such action as may be reasonably requested by the Agent and the Lenders to effect such reinstatement. Section 12.11 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 12.12 NO ORAL AGREEMENTS. THE LOAN DOCUMENTS 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. 68 74 Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION. (a) THIS AGREEMENT, THE LOANS AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS EXCEPT TO THE EXTENT THAT UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO CHARGE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH LENDER IS LOCATED. CHAPTER 346 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT, THE LOANS, OR THE NOTES. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS SHALL BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER 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. THE BORROWER 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 AGENT OR ANY LENDER FROM OBTAINING JURISDICTION OVER THE BORROWER IN ANY COURT OTHERWISE HAVING JURISDICTION. (c) EACH OF THE BORROWER 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 69 75 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 OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.13. Section 12.14 Interest. It is the intention of the parties hereto that each Lender shall conform strictly to usury laws applicable to it. Accordingly, if the transactions contemplated hereby would be usurious as to any Lender under laws applicable to it (including the laws of the United States of America and the State of Texas or any other jurisdiction whose laws may be mandatorily applicable to such Lender notwithstanding the other provisions of this Agreement), then, in that event, notwithstanding anything to the contrary in any of the Loan Documents or any agreement entered into in connection with or as security for the Loans, it is agreed as follows: (i) the aggregate of all consideration which constitutes interest under law applicable to any Lender that is contracted for, taken, reserved, charged or received by such Lender under any of the Loan Documents or agreements or otherwise in connection with the Loans shall under no circumstances exceed the maximum amount allowed by such applicable law, and any excess shall be cancelled automatically and if theretofore paid shall be credited by such Lender on the principal amount of the Indebtedness (or, to the extent that the principal amount of the Indebtedness shall have been or would thereby be paid in full, refunded by such Lender to the Borrower), and (ii) in the event that the maturity of the Notes is accelerated resulting from any Event of Default under this Agreement or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes interest under law applicable to any Lender may never include more than the maximum amount allowed by such applicable law, and excess interest, if any, provided for in this Agreement or otherwise shall be cancelled automatically by such Lender as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited by such Lender on the principal amount of the Indebtedness (or, to the extent that the principal amount of the Indebtedness shall have been or would thereby be paid in full, refunded by such Lender to the Borrower). All sums paid or agreed to be paid to any Lender for the use, forbearance or detention of sums due hereunder or under any other Loan Document shall, to the extent permitted by law applicable to such Lender, be amortized, prorated, allocated and spread throughout the full term of the Loans evidenced by the Notes until payment in full so that the rate or amount of interest on account of any Loans hereunder does not exceed the maximum amount allowed by such applicable law. If at any time and from time to time (i) the amount of interest payable to any Lender on any date shall be computed at the 70 76 Highest Lawful Rate applicable to such Lender pursuant to this Section 12.14 and (ii) in respect of any subsequent interest computation period the amount of interest otherwise payable to such Lender would be less than the amount of interest payable to such Lender computed at the Highest Lawful Rate applicable to such Lender, then the amount of interest payable to such Lender in respect of such subsequent interest computation period shall continue to be computed at the Highest Lawful Rate applicable to such Lender until the total amount of interest payable to such Lender shall equal the total amount of interest which would have been payable to such Lender if the total amount of interest had been computed without giving effect to this Section 12.14. To the extent that Chapter 303 of the Texas Finance Code is relevant for the purpose of determining the Highest Lawful Rate, such Lender elects to determine the applicable rate ceiling under such Article by the weekly ceiling from time to time in effect. Section 12.15 Confidentiality. In the event that the Borrower or any Guarantor (hereinafter called the "Subject Entities") provides to the Agent or the Lenders written confidential information or, if communicated as confidential, oral confidential information belonging to any Subject Entity, the Agent and the Lenders shall thereafter maintain such information in confidence in accordance with the standards of care and diligence that each utilizes in maintaining its own confidential information. This obligation of confidence shall not apply to such portions of the information which (i) are in the public domain, (ii) hereafter become part of the public domain without the Agent or the Lenders breaching their obligation of confidence to any Subject Entity, (iii) are previously known by the Agent or the Lenders from some source other than any Subject Entity, (iv) are hereafter developed by the Agent or the Lenders without using a Subject Entity's information, (v) are hereafter obtained by or available to the Agent or the Lenders from a third party who owes no obligation of confidence to any Subject Entity with respect to such information, (vi) are disclosed with a Subject Entity's consent, (vii) must be disclosed either pursuant to any Governmental Requirement or to Persons regulating the activities of the Agent or the Lenders, or (viii) as may be required by law or regulation or order of any Governmental Authority in any judicial, arbitration or governmental proceeding. Further, the Agent or a Lender may disclose any such information to any other Lender, any independent petroleum engineers or consultants, any independent certified public accountants, any legal counsel employed by such Person in connection with this Agreement or any other Loan Document, including without limitation, the enforcement or exercise of all rights and remedies thereunder, or, subject to Section 12.06, any assignee or participant (including prospective assignees to which the Borrower has consented and participants) in the Loans; provided, however, that the Agent or the Lenders shall receive a confidentiality agreement from the Person to whom such information is disclosed such that said Person shall have the same obligation to maintain the confidentiality of such information as is imposed upon the Agent or the Lenders hereunder. Notwithstanding anything to the contrary provided herein, this obligation of confidence shall cease three (3) years from the date the information was furnished, unless the Borrower requests in writing at least thirty (30) days prior to the expiration of such three year period, to maintain the confidentiality of such information for an additional three year period. Section 12.16 Effectiveness. This Agreement shall be effective on the Closing Date (the "Effective Date") upon its execution and delivery by Borrower and SCI. Although Brigham Exploration, Brigham, Inc., Brigham Holdings I, LLC and Brigham Holdings II, LLC, are not parties to this Agreement they are executing this Agreement as Releasing Parties under Section 12.18 below and Section 12.18 will become effective as to each Releasing Party as described in Section 12.18(c). 71 77 Section 12.17 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT "CONSPICUOUS." Section 12.18 RELEASE. (a) Each of the Releasing Parties desires and intends fully to compromise, release and settle any and all of the Released Claims; and each of the Releasing Parties hereby covenants, warrants and represents unto each of the Released Parties that such Releasing Party does hereby FOREVER RELEASE, ACQUIT, WAIVE AND DISCHARGE each of the Released Parties of and from the Released Claims and each of the Releasing Parties hereby declares the same FOREVER RELEASED, ACQUITTED, WAIVED, SETTLED AND DISCHARGED. This release is effective without regard to whether (i) such Released Claims are known or unknown, (ii) damages arising out of such Released Claims have yet accrued, (iii) such Released Claims arose collaterally, directly, derivatively, or otherwise between the parties hereto or (iv) an ordinary person in the same or similar circumstances would or would not, through the exercise of due care, have discovered such claims by the date of this Agreement. In connection with the foregoing release: (b) Borrower and each of the Guarantors represents and warrants that it has the full power and authority to perform the release granted in this 72 78 Section 12.18 and that it has not in any manner made any assignment of any Released Claim to any third party. (c) The release granted in this Section 12.18 by each Releasing Party will be effective upon execution of this Agreement by such Releasing Party hereto. (d) Each party executing this Agreement understands and agrees that the release granted in this Section 12.18 is a full, final and complete release of the Released Claims and that such release may be pleaded as an absolute and final bar to any or all suits which may hereafter be filed or prosecuted by any one or more of the Releasing Parties or anyone claiming by, through or under any one or more of the Releasing Parties in respect of any of the matters released hereby, and that no recovery on account of the Released Claims may hereafter be had from any of the Released Parties; and that the consideration given for such release is not an admission of liability or fault on the part of any of the Released Parties (it being the express intent of the parties hereto to obtain peace of mind and avoid the expense and uncertainty of potential litigation), and that none of the Releasing Parties or those claiming by, through or under any of them will ever claim that it is. (e) The parties hereto acknowledge that the release granted by this Section 12.18 does not have any effect with respect to relationships between the Borrower and each of the Guarantors and the Lenders and the Agent other than in connection with the Lending Relationship. 73 79 The parties hereto have caused this Agreement to be duly executed as of the day and year first above written. BORROWER: BRIGHAM OIL & GAS, L.P. By: Brigham, Inc., its General Partner By: /s/ CURTIS F. HARRELL -------------------------------- Name: Curtis F. Harrell Title: Chief Financial Officer Address for Notices: 6300 Bridge Point Parkway Building 2, Suite 500 Austin, Texas 78730 Telecopier No.: (512) 427-3400 Telephone No.: (512) 427-3300 Attention: Curtis F. Harrell GUARANTOR: BRIGHAM EXPLORATION COMPANY (for purposes of Section 12.18) By: /s/ CURTIS F. HARRELL -------------------------------- Name: Curtis F. Harrell Title: Chief Financial Officer GUARANTOR: BRIGHAM, INC. (for purposes of Section 12.18) By: /s/ CURTIS F. HARRELL -------------------------------- Name: Curtis F. Harrell Title: Chief Financial Officer 74 80 GUARANTOR: BRIGHAM HOLDINGS I, LLC (for purposes of Section 12.18) By: /s/ BEN M. BRIGHAM -------------------------------- Name: Ben M. Brigham Title: President GUARANTOR: BRIGHAM HOLDINGS II, LLC (for purposes of Section 12.18) By: /s/ BEN M. BRIGHAM -------------------------------- Name: Ben M. Brigham Title: President AGENT AND LENDER: SHELL CAPITAL INC. By: /s/ ROBERT L. ROBERTS -------------------------------- Name: Robert L. Roberts Title: Vice President Address for Notices: 910 Louisiana Street, Suite 5000 Houston, Texas 77002-4916 Telecopier No.: (713) 241-5222 Telephone No.: (713) 241-4130 Attention: Robert L. Roberts 75 81 ANNEX 1 LIST OF MAXIMUM CREDIT AMOUNTS
Maximum Credit Name of Lender Percentage Share Amount -------------- ---------------- -------------- SCI 100.00000000% $20,000,000
i 82 EXHIBIT A FORM OF PROMISSORY NOTE THIS INSTRUMENT IS SUBORDINATED TO THE EXTENT AND IN THE MANNER PROVIDED IN THE SUBORDINATION AGREEMENT REFERRED TO BELOW. PROMISSORY NOTE $ ---------------- -------------- FOR VALUE RECEIVED, BRIGHAM OIL & GAS, L.P., a Delaware limited partnership (the "Borrower") hereby promises to pay to the order of ____________________. (the "Lender" and "Agent"), at its Principal Office at _________________________________, the principal sum of ____________________________ ($______________) (or such lesser amount as shall equal the aggregate unpaid principal amount of the Loans made by the Lender to the Borrower under the Subordinated Credit Agreement, as hereinafter defined), in lawful money of the United States of America and in immediately available funds, on the dates and in the principal amounts provided in the Subordinated Credit Agreement, and to pay interest on the unpaid principal amount of each such Loan, at such office, in like money and funds, for the period commencing on the date of such Loan until such Loan shall be paid in full, at the rates per annum and on the dates provided in the Subordinated Credit Agreement. The date, amount, interest rate and maturity of each Loan made by the Lender to the Borrower, and each payment made on account of the principal thereof, shall be recorded by the Lender on its books and, prior to any transfer of this Note, may be endorsed by the Lender on the schedules attached hereto or any continuation thereof or on any separate record maintained by the Lender. This Note is a Note referred to in the Subordinated Credit Agreement dated as of October 31, 2000, among the Borrower, the Lenders which are or become parties thereto (including the Lender) and the Agent, and evidences Loans made by the Lender thereunder (the same may be amended or supplemented from time to time, the "Subordinated Credit Agreement"). Capitalized terms used in this Note have the respective meanings assigned to them in the Subordinated Credit Agreement. In connection with the execution and delivery of the Subordinated Credit Agreement, Shell Capital Inc., as Agent under that certain Subordinated Credit Agreement, Bank of Montreal, as Agent ("Senior Agent") under that certain Amended and Restated Credit Agreement dated as of February 17, 2000 between the Borrower, Senior Agent and the Lenders thereto (as the same may be amended or supplemented from time to time, the "Senior Credit Agreement"), the Lenders under the Senior Credit Agreement, Borrower, Brigham Exploration Company, Brigham, Inc., Brigham Holdings I, LLC and Brigham Holdings II, LLC have entered into that certain Intercreditor and Subordination Agreement dated as of October 31, 2000 (as the same may be amended or supplemented from time to time, the "Subordination Agreement"). Payments of principal and interest on this Note are subordinated to the extent provided in the Subordination Agreement. ii 83 This Note is issued pursuant to the Subordinated Credit Agreement and is entitled to the benefits provided for in the Subordinated Credit Agreement and the other Loan Documents. The Subordinated Credit Agreement provides for the acceleration of the maturity of this Note upon the occurrence of certain events, for prepayments of Loans upon the terms and conditions specified therein and other provisions relevant to this Note. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. BRIGHAM OIL & GAS, L.P. By: Brigham, Inc., its General Partner By: ------------------------------ Name: Title: iii EX-99.E 3 h81438a1ex99-e.txt WARRANT AGREEMENT - DATED 10/31/2000 1 EXHIBIT E THIS WARRANT AGREEMENT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THE WARRANTS HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS PROMULGATED THEREUNDER, ANY SUCH STATE SECURITIES LAWS OR THE PROVISIONS OF THIS WARRANT AGREEMENT. WARRANT AGREEMENT for the Purchase of Common Stock By and Between BRIGHAM EXPLORATION COMPANY and SHELL CAPITAL INC. Dated as of October 31, 2000 2 TABLE OF CONTENTS
Page 1. DEFINITIONS.....................................................................................1 2. ISSUANCE AND EXERCISE OF WARRANTS...............................................................6 2.1 Issuance of Warrants...................................................................6 2.2 Manner of Exercise.....................................................................6 2.3 Payment of Taxes.......................................................................8 2.4 Fractional Shares......................................................................8 2.5 Continued Validity.....................................................................8 2.6 Conditions to Exercise.................................................................8 3. TRANSFERS, DIVISION AND COMBINATION.............................................................8 3.1 Transfer...............................................................................8 3.2 Division and Combination...............................................................9 3.3 Expenses...............................................................................9 3.4 Maintenance of Books...................................................................9 4. ADJUSTMENTS.....................................................................................9 4.1 Stock Dividends, Subdivisions and Combinations.........................................9 4.2 Certain Other Distributions...........................................................10 4.3 Issuance of Additional Shares of Stock................................................11 4.4 Issuance of Warrants or Other Rights..................................................11 4.5 Issuance of Convertible Securities....................................................12 4.6 Superseding Adjustment................................................................13 4.7 Other Provisions Applicable to Adjustments Under This Section.........................13 4.8 Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets......14 5. NOTICES TO WARRANT HOLDERS.....................................................................15 5.1 Notice of Adjustments.................................................................15 5.2 Notice of Certain Corporate Action....................................................15 6. REPRESENTATIONS AND WARRANTIES.................................................................15 7. CERTAIN COVENANTS..............................................................................17 7.1 No Impairment.........................................................................17 7.2 Reservation and Authorization of Common Stock; Registration with, or Approval of, any Governmental Authority...............................................17
3 8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS............................................18 9. RESTRICTIONS ON TRANSFERABILITY...............................................................18 9.1 Restrictive Legend...................................................................18 9.2 Notice of Proposed Transfers; Requests for Registration..............................19 9.3 Incidental Registration..............................................................19 9.4 Registration Procedures..............................................................20 9.5 Expenses.............................................................................21 9.6 Indemnification and Contribution.....................................................21 9.7 Termination of Restrictions..........................................................24 9.8 Listing on Securities Exchange.......................................................24 10. SUPPLYING INFORMATION.........................................................................25 11. LOSS OR MUTILATION............................................................................25 12. OFFICE OF THE ISSUER..........................................................................25 13. APPRAISAL.....................................................................................25 14. LIMITATION OF LIABILITY; NO RIGHTS AS STOCKHOLDER.............................................25 15. MISCELLANEOUS.................................................................................26 15.1 Non-waiver and Expenses..............................................................26 15.2 Notice Generally.....................................................................26 15.3 Indemnification......................................................................27 15.4 Remedies.............................................................................27 15.5 Successors and Assigns...............................................................27 15.6 Complete Agreement; Amendment........................................................27 15.7 Severability.........................................................................28 15.8 Headings.............................................................................28 15.9 Governing Law; Consent to Jurisdiction and Venue.....................................28 15.10 Consent to Jurisdiction and Venue....................................................28 15.11 Counterparts:........................................................................29 Exhibits: Exhibit A -Form of Warrant Certificate..........................................................Exh. A-1 Schedules: Schedule A -Capital Stock of the Issuer, Including Shares Subject to Outstanding Warrants, Options, Conversion Rights, Etc..............................Sch. A-1
4 THIS WARRANT AGREEMENT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THE WARRANTS HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS PROMULGATED THEREUNDER, ANY SUCH STATE SECURITIES LAWS OR THE PROVISIONS OF THIS WARRANT AGREEMENT. WARRANT AGREEMENT THIS WARRANT AGREEMENT, dated as of October 31, 2000 (this "Agreement"), is entered into by and between Brigham Exploration Company, a Delaware corporation ("Issuer"), and Shell Capital Inc. a Delaware corporation (the "Warrant Holder" or "SCI"). WITNESSETH: WHEREAS, Brigham Oil & Gas, L.P., a limited partnership formed under the laws of the State of Delaware (the "Borrower"), the financial institutions party to the Credit Agreement referred to below (each a "Lender" and collectively, the "Lenders"), and SCI, as agent for Lenders under the Credit Agreement (in such capacity, the "Agent"), are parties to that certain Subordinated Credit Agreement, of even date herewith (as so amended and restated, the "Credit Agreement"); and WHEREAS, the Issuer has guaranteed the obligations of the Borrower to the Lenders and the Agent; WHEREAS, as a consequence of the contractual relationships between the Borrower and the Lenders, the Issuer has and will continue to receive substantial benefits from the Lenders; WHEREAS, in order to induce the Lenders to enter into the Credit Agreement, the Issuer has agreed to execute and deliver this Agreement and to issue to SCI the warrants herein described; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the receipt and sufficiency of which is hereby acknowledged, the parties hereby stipulate and agree as follows: 1. DEFINITIONS Capitalized terms not otherwise defined herein shall have the meaning set forth in the Credit Agreement. As used in this Agreement, the following terms have the respective meanings set forth below: "Additional Shares of Common Stock" shall mean all shares of Common Stock issued by the Issuer after the Closing Date, other than Warrant Stock or Common Stock issued pursuant to the Equity Conversion Agreement or pursuant to the Other Warrants. 1 5 "Appraised Value" shall mean, in respect of any share of Common Stock on any date herein specified, the fair saleable value of such share of Common Stock (determined without giving effect to the discount for (i) a minority interest or (ii) any lack of liquidity of the Common Stock or to the fact that the Issuer may have no class of equity registered under the Exchange Act) as of the last day of the most recent fiscal month to end prior to such date specified, based on the value of the Issuer, as determined by an investment banking firm (selected pursuant to Section 13 of this Agreement) in accordance with such firm's customary practices, divided by the number of Outstanding shares of Common Stock, after giving pro forma effect to the exercise or conversion of all exercisable or Convertible Securities (including the Warrants) for Common Stock and the payment of the exercise or conversion price therefor. "Book Value" shall mean, in respect of any share of Common Stock on any date herein specified, the consolidated book value of the Issuer as of the last day of any month immediately preceding such date, divided by the number of Outstanding shares of Common Stock, after giving pro forma effect to the exercise or conversion of all exercisable or Convertible Securities (including the Warrants) for Common Stock and the payment of the exercise or conversion price therefor, as determined in accordance with GAAP by any firm of independent certified public accountants of recognized national standing selected by the Issuer and reasonably acceptable to the Required Holders. "Business Day" shall mean each day which is not a day on which banks in Houston, Texas are generally authorized or obligated by law or executive order to close. "Cashless Conversion" shall have the meaning set forth in Section 2.2(b)(ii) hereof. "Cashless Conversion Notice" shall have the meaning set forth in Section 2.2(b)(ii) hereof. "Closing Date" shall mean the date hereof. "Commission" shall mean the Securities and Exchange Commission, or any other federal agency then administering the Securities Act and other federal securities laws. "Common Stock" shall mean the common stock, $0.01 par value per share, of the Issuer, as constituted on the Closing Date, and any capital stock into which such Common Stock may thereafter be changed, and shall also include (i) capital stock of the Issuer of any other class (regardless of how denominated) issued to the holders of shares of Common Stock upon any reclassification thereof which is also not preferred as to dividends or assets over any other class of stock of the Issuer and which is not subject to redemption and (ii) shares of common stock of any successor or acquiring corporation (as defined in Section 4.8 of this Agreement) received by or distributed to the holders of Common Stock of the Issuer in the circumstances contemplated by Section 4.8 of this Agreement. "Convertible Securities" shall mean evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable, with or without payment of 2 6 additional consideration in cash or property, for Additional Shares of Common Stock, either immediately or upon the occurrence of a specified date or a specified event. "Current Market Price" shall mean, in respect of any share of Common Stock on any date herein specified, (a) if there shall then be a public market for the Common Stock, the average Price per share for the 20 trading days preceding such date; or (b) at any time that there is no public market for the Common Stock, the fair market value per share of Common Stock on such date as determined reasonably and in good faith by the board of directors of the Issuer (determined without giving effect to any discount for a minority interest, any restrictions on transferability or any lack of liquidity of the Common Stock or to the fact that the Issuer has no class of equity registered under the Exchange Act), such fair market value to be determined by reference to the cash price that would be paid between a fully informed buyer and seller under no compulsion to buy or sell, provided that (i) if Current Market Price is being determined in connection with an issuance of shares of Common Stock, solely to one or more Affiliates of the Issuer, then if so requested by the Required Holders, Current Market Price shall be the Appraised Value; and (ii) Current Market Price shall never be less than Book Value. "Current Warrant Price" shall mean, in respect of a share of Common Stock at any date herein specified, three dollars ($3.00) per share of Common Stock, subject to adjustment from time to time as provided in this Agreement. "Demanding Security Holder" shall have the meaning set forth in Section 9.3. "Equity Conversion Agreement" shall mean that certain Equity Conversion Agreement dated as of February 17, 2000 among the Issuer, the Borrower and SCI. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. "Exercise Period" shall mean the period during which the Warrants are exercisable pursuant to Section 2.2. "Expiration Date" shall mean October 31, 2007. "GAAP" shall mean generally accepted accounting principles in the United States of America, as from time to time in effect. "Material Adverse Effect" shall mean, as to the Issuer, any material adverse effect on the business, assets, operations, prospects or financial or other condition of the Issuer and its Subsidiaries, taken as a whole. "NASD" shall mean the National Association of Securities Dealers, Inc., or any successor thereto. "Other Property" shall have the meaning set forth in Section 4.8. 3 7 "Other Warrants" shall mean the warrants to purchase Common Stock originally represented by a Warrant Certificate dated February 17, 2000 issued to SCI. "Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all issued shares of Common Stock, except shares then owned or held by or for the account of the Issuer or any Subsidiary, and shall include all shares issuable in respect of outstanding scrip or any certificates representing fractional interests in shares of Common Stock. "Permitted Issuances" shall mean (i) the issuance of shares of Common Stock upon exercise of the Warrants or pursuant to the Equity Conversion Agreement or upon the exercise of the Other Warrants, (ii) the issuance of shares relating to any benefit plan, stock option plan or any other compensation plan offered solely to the Issuer's officers, directors and/or employees, (iii) the issuance of shares of Common Stock as consideration for the purchase of any property, stock, business or securities from any Person who is not an Affiliate of the Issuer or any Subsidiary immediately prior to such transaction whether such shares are issued directly by the Issuer or by a Subsidiary of the Issuer in connection with any merger, consolidation or other business combination, (iv) if there shall then be a public market for the Common Stock, the issuance of shares of Common Stock upon receipt by the Issuer of no less than the Current Market Price therefor as described in clause (a) of the definition of "Current Market Price" and (v) if there shall then be no public market for the Common Stock, the issuance of shares of Common Stock, warrants or Convertible Securities on terms that are at least as favorable to the Issuer as terms that could be obtained in an arm's length transaction with third Persons not Affiliates of the Issuer or any Subsidiary and for consideration equal to the fair value of such shares as determined in good faith by a majority of disinterested members of the board of directors of the Issuer. "Person(s)" shall mean any individual, sole proprietorship, partnership, joint venture, trust, limited liability company, incorporated organization, association, corporation, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof). "Price" means the average of the "high" and "low" prices as reported in The Wall Street Journal's listing for such day (corrected for obvious typographical errors) or if such shares are not reported in such listing, the average of the reported "high" and "low" sales prices on the largest national securities exchange (based on the aggregate dollar value of securities listed) on which such shares are listed or traded, or if such shares are not listed or traded on any national securities exchange, then the average of the reported "high" and "low" sales prices for such shares in the over-the-counter market, as reported on the National Association of Securities Dealers Automated Quotations System, or, if such prices shall not be reported thereon, the average of the closing bid and asked prices so reported, or, if such prices shall not be reported, then the average of the closing bid and asked prices reported by the National Quotations Bureau Incorporated. The "average" Price per share for any period shall be determined by dividing the sum of the Prices 4 8 determined for the individual trading days in such period by the number of trading days in such period. "Registrable Securities" shall mean, at any particular time and as to each Warrant Holder, (i) all shares of common stock issuable upon the exercise of such Warrant Holder's Warrants and (ii) all of such Warrant Holder's issued and outstanding Warrant Stock. "Registration Expenses" shall have the meaning set forth in Section 9.5 of this Agreement. "Registration Statement" shall have the meaning set forth in Section 9.4 of this Agreement. "Required Holders" shall mean the Warrant Holders of Warrants exercisable for an amount exceeding 50% of the aggregate number of shares of Common Stock then purchasable upon exercise of all Warrants, whether or not exercisable. "Requirement of Law" shall mean, as to any Person, any requirement contained in any certificate of incorporation, bylaws, or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other governmental authority, in each case applicable to or binding such Person or any of the property or to which such Person or any of its property is subject. "Restricted Common Stock" shall mean shares of Common Stock which are, or which upon their issuance on the exercise of a Warrant would be, evidenced by a certificate bearing the restrictive legend set forth in Section 9.1 of this Agreement. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Subsidiary" of a Person means (i) a corporation, a majority of whose stock with voting power, under ordinary circumstances, to elect directors is at the time of determination, directly or indirectly, owned by such Person or by one or more Subsidiaries of such Person, or (ii) any other entity (other than a corporation) in which such Person or one or more Subsidiaries of such Person, directly or indirectly, at the date of determination thereof has at least a majority ownership interest. "Transfer Notice" shall have the meaning set forth in Section 9.2 of this Agreement. "Warrant Certificate" shall mean a certificate evidencing one or more Warrants, substantially in the form of Exhibit A hereto, with such changes therein as may be required to reflect any adjustments made pursuant to Section 4 of this Agreement. "Warrant Holder" shall mean such Person in whose name the Warrants are registered on the books of the Issuer maintained for such purpose or each Person holding any Warrant Stock. As of the Closing Date, the SCI is the Warrant Holder hereof. 5 9 "Warrant Price" shall mean, for any exercise of Warrants pursuant to Section 2.2 of this Agreement, an amount equal to (i) the number of shares of Common Stock being purchased upon such exercise multiplied by (ii) the Current Warrant Price, for each share of Common Stock as of the date of such exercise. "Warrant Stock" shall mean the shares of Common Stock purchased by the Warrant Holders upon the exercise thereof. "Warrants" shall mean the Warrants issued pursuant to this Agreement, and all Warrants issued upon transfer, division or combination of, or in substitution for, such Warrants. All Warrants shall at all times be identical as to terms and conditions and date, except as to the number of shares of Common Stock for which they may be exercised and the Current Warrant Price. A Warrant shall entitle the record holder thereof to purchase from the Issuer one share of Common Stock (subject to adjustment as provided in Section 4 of this Agreement). 2. ISSUANCE AND EXERCISE OF WARRANTS 2.1 Issuance of Warrants. The Issuer hereby agrees to issue to the Warrant Holder on the Closing Date ONE MILLION TWO HUNDRED FIFTY THOUSAND (1,250,000) Warrants. On the Closing Date, the Issuer shall deliver to the Warrant Holder a Warrant Certificate evidencing the Warrants issued to the Warrant Holder. 2.2 Manner of Exercise. (a) The Warrant Holder may, from and after the Closing Date until 11:59 p.m., Central Standard Time on the Expiration Date, exercise the Warrants evidenced by a Warrant Certificate, on any Business Day, for all or part of the number of shares of Common Stock purchasable thereunder. (b) In order to exercise the Warrants, in whole or in part, the Warrant Holder shall either (i) deliver to the Issuer at its principal office at 6300 Bridge Point Parkway, Building 2, Suite 500, Austin, Texas 78730, Attention: Chief Financial Officer, or at the office or agency designated by the Issuer pursuant to Section 12 of this Agreement (the "Principal Office"), (x) a written notice duly executed by the Warrant Holder or its agent or attorney, substantially in the form of the form of election to purchase appearing at the end of the Warrant Certificate as Exhibit A thereto, of such Warrant Holder's election to exercise the Warrants, which notice shall specify the number of shares of Common Stock to be purchased, (y) payment of the Warrant Price in the manner provided below, and (z) the Warrant Certificate or Warrant Certificates evidencing the Warrants. Payment of the Warrant Price shall be made in cash in an amount equal to the Warrant Price; or (ii) deliver to the Issuer on any Business Day at the Principal Office (x) a Cashless Conversion Notice in substantially the form appearing at the end 6 10 of the Warrant Certificate as Exhibit B thereto (the "Cashless Conversion Notice"), duly executed by the Warrant Holder and setting forth such Warrant Holder's election to receive the number of shares of Common Stock specified in the Cashless Conversion Notice ("Cashless Conversion") and (y) the Warrant Certificate or Warrant Certificates evidencing the Warrants. Such presentation and surrender shall be deemed a waiver of the Warrant Holder's obligation to pay all or any portion (as the case may be) of the Warrant Price in connection with such Cashless Conversion. In the event of a Cashless Conversion, the Issuer shall deliver to the Warrant Holder (without payment by the Warrant Holder of any Warrant Price), in respect of the Warrants being exercised, that number of shares of Common Stock equal to: the number of shares of Common Stock intowhich such Warrants would have been converted if exercised under clause (b)(1) above multiplied by a fraction, (x) the numerator of which shall be the Current Market Price on the date of such exercise less the Current Warrant Price on the date of such exercise and (y) the denominator of which shall be the Current Market Price on the date of such exercise. The Warrant Holder may exercise its Cashless Conversion rights, at any time or from time to time, prior to the Expiration Date. Upon receipt of the items described above required for exercise of the Warrants, the Issuer shall, as promptly as practicable, and in any event within three (3) Business Days thereafter, execute or cause to be executed and deliver or cause to be delivered to such Warrant Holder a certificate or certificates representing the aggregate number of full shares of Common Stock issuable upon such exercise, together with cash in lieu of any fraction of a share, as hereinafter provided. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as such Warrant Holder shall request in the notice and shall be registered in the name of the Warrant Holder or, subject to Section 9 of this Agreement, such other name as shall be designated in the notice. The Warrants shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and such Warrant Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the notice, together with payment of the Warrant Price (if applicable) and the Warrant Certificate or Warrant Certificates, are received by the Issuer as described above and all taxes required to be paid by such Warrant Holder, if any, pursuant to Section 2.3 of this Agreement prior to the issuance of such shares have been paid. If the Warrants evidenced by a Warrant Certificate shall have been exercised, the Issuer shall, at the time of delivery of the certificate or certificates representing the Warrant Stock, deliver to the Warrant Holder a new Warrant Certificate evidencing the rights of the Warrant Holder to purchase the unpurchased shares of Common Stock represented by the old Warrant Certificate, which new Warrant Certificate shall in all other respects be identical to the old Warrant Certificate. 7 11 2.3 Payment of Taxes. The Issuer shall pay all expenses in connection with, and all transfer taxes and other governmental charges that may be imposed with respect to, the issuance or delivery of Warrant Stock. The Issuer shall not be required, however, to pay any tax or other charge imposed in connection with any transfer involved in the issue of any certificate for shares of Warrant Stock issuable upon exercise of Warrants in any name other than that of Warrant Holder, and in such case the Issuer shall not be required to issue or deliver any stock certificate until such tax or other charge has been paid or it has been established to the satisfaction of the Issuer that no such tax or other charge is due. 2.4 Fractional Shares. 2.5 The Issuer shall not be required to issue a fractional share of Common Stock upon the exercise of Warrants as provided in Section 2(b)(i) and (ii). As to any fraction of a share which the Warrant Holder would otherwise be entitled to purchase upon such exercise, the Issuer shall pay a cash adjustment in respect of such fraction in an amount equal to the same fraction of the Current Market Price per share of Common Stock on the date of exercise. If the determination of Current Market Price for purposes of this Section 2.4 would otherwise require an appraisal to be made by an investment banking firm, then Current Market Price for purposes of this Section 2.4 only shall mean Book Value per share of Common Stock on the date of exercise, unless a determination of Appraised Value shall have been made within six months prior to such date in which case such Appraised Value shall be utilized for the purposes of determining Current Market Price. 2.5 Continued Validity. A holder of Warrant Stock (other than a holder who acquires such shares after the same have been publicly sold pursuant to a Registration Statement under the Securities Act) shall continue to be entitled with respect to such shares to all rights to which it would have been entitled as a holder of Warrant Stock under Sections 9, 10 and 15 of this Agreement. The Issuer will, at the time of each exercise of Warrants or upon the request of the holder of Warrant Stock issued upon the exercise thereof, acknowledge in writing, in form reasonably satisfactory to such holder of Warrant Stock, its continuing obligation to afford to such holder of Warrant Stock all such rights; provided, however, that if such holder of Warrant Stock shall fail to make any such request, such failure shall not affect the continuing obligation of the Issuer to afford to such holder of Warrant Stock all such rights. 3. TRANSFERS, DIVISION AND COMBINATION 3.1 Transfer. Subject to compliance with Section 9 of this Agreement, transfer of Warrants, in whole or in part, shall be registered on the books of the Issuer to be maintained for such purposes, upon surrender of the Warrant Certificate representing such Warrants at the principal office of the Issuer referred to in Section 2.2 of this Agreement or the office or agency designated by the Issuer pursuant to Section 12 of this Agreement, together with a written assignment substantially in the form of Exhibit C to the Warrant Certificate and a written agreement, in form reasonably satisfactory to the Issuer, setting forth the new Warrant Holder's agreement to be bound by all of the terms of this Agreement each duly executed by the Warrant Holder or its agent or attorney, and funds sufficient to pay any transfer taxes payable by such Warrant Holder upon the making of such transfer. 8 12 Upon such surrender and, if required, such payment, the Issuer shall, subject to Section 9 of this Agreement, execute and deliver a new Warrant Certificate or Warrant Certificates in the name of the assignee or assignees and in the denomination specified in such instrument of assignment, and shall issue to the assignor a new Warrant Certificate or Warrant Certificates evidencing the portion of the old Warrant Certificate not so assigned, and the old Warrant Certificate shall promptly be canceled. A Warrant, if properly assigned in compliance with Section 9 of this Agreement, may be exercised by a new Warrant Holder for the purchase of shares of Warrant Stock without having a new Warrant Certificate or new Warrant Certificates issued. 3.2 Division and Combination. Subject to the provisions of Section 9 of this Agreement, any Warrant Certificate may be divided or combined with other Warrant Certificates upon presentation thereof at the aforesaid office or agency of the Issuer, together with a written notice specifying the names and denominations in which new Warrant Certificates are to be issued, signed by a Warrant Holder or its agent or attorney. Subject to compliance with Section 3.1 of this Agreement as to any transfer which may be involved in such division or combination, the Issuer shall execute and deliver a new Warrant Certificate or Warrant Certificates in exchange for the Warrant Certificate or Warrant Certificates to be divided or combined in accordance with such notice. 3.3 Expenses. The Issuer shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant Certificate or Warrant Certificates provided for under this Section 3. 3.4 Maintenance of Books. The Issuer agrees to maintain, at its aforesaid office or agency, books for the registration of, and the registration of transfer of, the Warrants. 4. ADJUSTMENTS The number of shares of Warrant Stock for which Warrants are exercisable, and the price at which such shares may be purchased upon exercise of Warrants, shall be subject to adjustment from time to time as set forth in this Section 4. The Issuer shall give each Warrant Holder notice of any event described below which requires an adjustment pursuant to this Section 4 within three (3) Business Days after such event. 4.1 Stock Dividends, Subdivisions and Combinations. If at any time the Issuer shall: (a) take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, Additional Shares of Common Stock, (b) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or (c) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, 9 13 then (i) the number of shares of Common Stock for which a Warrant is exercisable immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Common Stock which a record holder of the same number of shares of Common Stock for which a Warrant is exercisable immediately prior to the occurrence of such event would own or be entitled to receive after the happening of such event, and (ii) the Current Warrant Price shall be adjusted to equal the Current Warrant Price multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock for which a Warrant is exercisable immediately prior to the adjustment and the denominator of which shall be the number of shares for which a Warrant is exercisable immediately after such adjustment. 4.2 Certain Other Distributions. If at any time the Issuer shall take a record of the holders of its Common Stock for the purpose of entitling them to receive any dividend or other distribution of: (a) cash; (b) any evidences of its indebtedness (other than Convertible Securities), any shares of its stock (other than Additional Shares of Common Stock or Convertible Securities) or any other securities or property of any nature whatsoever (other than cash); or (c) any warrants or other rights to subscribe for or purchase any evidences of its indebtedness (other than Convertible Securities), any shares of its stock (other than Additional Shares of Common Stock or Convertible Securities) or any other securities or property of any nature whatsoever; then (i) the number of shares of Common Stock for which a Warrant is exercisable shall be adjusted to equal the product obtained by multiplying the number of shares of Common Stock for which a Warrant is exercisable immediately prior to such adjustment by a fraction (A) the numerator of which shall be the Current Market Price per share of Common Stock at the date of taking such record and (B) the denominator of which shall be such Current Market Price per share of Common Stock, minus the amount allocable to one share of Common Stock of any such cash so distributable and of the fair value (as determined reasonably and in good faith by the board of directors of the Issuer) of any and all such evidences of indebtedness, shares of stock, other securities or property or warrants or other subscription or purchase rights so distributable, and (ii) the Current Warrant Price shall be adjusted to equal (A) the Current Warrant Price multiplied by the number of shares of Common Stock for which a Warrant is exercisable immediately prior to the adjustment divided by (B) the number of shares for which a Warrant is exercisable immediately after such adjustment. A reclassification of the Common Stock (other than a change in par value, or from par value to no par value or from no par value to par value) into shares of Common Stock and shares of any other class of stock shall be deemed a distribution by the Issuer to the holders of its Common Stock of such shares of 10 14 such other class of stock within the meaning of this Section 4.2 and, if the Outstanding shares of Common Stock shall be changed into a larger or smaller number of shares of Common Stock as a part of such reclassification, such change shall be deemed a subdivision or combination, as the case may be, of the Outstanding shares of Common Stock within the meaning of Section 4.1 of this Agreement. 4.3 Issuance of Additional Shares of Stock. (a) If at any time the Issuer shall (except as hereinafter provided) issue or sell any Additional Shares of Common Stock, other than Permitted Issuances, for consideration in an amount per Additional Share of Common Stock less than the Current Market Price, then the Current Warrant Price shall be adjusted by multiplying the Current Warrant Price by a fraction, the numerator of which shall be (A) an amount equal to the sum of (X) the number of shares of Common Stock Outstanding immediately prior to such issuance or sale multiplied by the Current Market Price immediately prior to the first to occur of (i) board action by the Issuer authorizing such action or (ii) the public announcement of an intent to take such action, plus (Y) the consideration, if any, received by the Issuer upon such issuance or sale, and the denominator of which shall be (B) the total number of shares of Common Stock Outstanding immediately after such issuance or sale multiplied by the Current Market Price as determined in clause (A) above. (b) The provisions of Section 4.3(a) of this Agreement shall not apply to any issuance of Additional Shares of Common Stock for which an adjustment is provided under Sections 4.1 or 4.2 of this Agreement. No adjustment of the number of shares of Common Stock for which a Warrant shall be exercisable shall be made under Section 4.3(a) of this Agreement upon the issuance of any Additional Shares of Common Stock which are issued pursuant to the exercise of any warrants or other subscription or purchase rights or pursuant to the exercise of any conversion or exchange rights in any Convertible Securities (i) if any such adjustment shall previously have been made upon the issuance of such warrants or other rights or upon the issuance of such Convertible Securities (or upon the issuance of any such warrants or other rights) pursuant to Section 4.4 or Section 4.5 of this Agreement, (ii) if no adjustment was required pursuant to such sections upon the issuance of such Convertible Securities, warrants or other rights or (iii) in the event the issuance of such Convertible Securities, warrants or other rights predates or is of the same date as this Agreement, if no adjustment would have been required pursuant to such sections upon such issuance had this Agreement been in effect. 4.4 Issuance of Warrants or Other Rights. If at any time the Issuer shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a distribution of, or shall in any manner (whether directly or by assumption in a merger in which the Issuer is the surviving corporation) issue or sell, any warrants or other rights to subscribe for or purchase any Additional Shares of Common Stock or any Convertible Securities, other than Permitted Issuances, whether or not the rights to exchange or convert thereunder are 11 15 immediately exercisable, and if the price per share for which Common Stock is issuable upon the exercise of such warrants or other rights or upon conversion or exchange of such Convertible Securities shall be less than the Current Market Price in effect immediately prior to the time of such distribution, issue or sale, then the Current Warrant Price shall be adjusted as provided in Section 4.3(a) of this Agreement on the basis that (A) the maximum number of Additional Shares of Common Stock issuable pursuant to all such warrants or other rights or necessary to effect the conversion or exchange of all such Convertible Securities shall be deemed to be Outstanding immediately following such issuance, (B) the price per share for such Additional Shares of Common Stock shall be deemed to be the lowest possible price per share in any range of prices per share at which such Additional Shares of Common Stock are available to such holders, and (C) the Issuer shall be deemed to have received all of the consideration payable therefor, if any, as of the date of the actual issuance of such warrants or other rights. No further adjustments of the Current Warrant Price shall be made upon the actual issuance of such Common Stock or of such other rights or upon exercise of such warrants or other rights or upon the actual issuance of such Common Stock upon such conversion or exchange of such Convertible Securities. 4.5 Issuance of Convertible Securities. If at any time the Issuer shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a distribution of, or shall in any manner (whether directly or by assumption in a merger in which the Issuer is the surviving corporation) issue or sell, any Convertible Securities, other than Permitted Issuances, whether or not the rights to exchange or convert thereunder are immediately exercisable, and if the price per share for which Common Stock is issuable upon such conversion or exchange shall be less than the Current Market Price in effect immediately prior to the time of such issue or sale of Convertible Securities, then the Current Warrant Price shall be adjusted as provided in Section 4.3(a) of this Agreement on the basis that (A) the maximum number of Additional Shares of Common Stock necessary to effect the conversion or exchange of all such Convertible Securities shall be deemed to be Outstanding immediately following such issuance, (B) the price per share of such Additional Shares of Common Stock shall be deemed to be the lowest possible price in any range of prices at which such Additional Shares of Common Stock are available to such holders, and (C) the Issuer shall be deemed to have received all of the consideration payable therefor, if any, as of the date of actual issuance of such Convertible Securities. No adjustment of the Current Warrant Price shall be made under this Section 4.5 upon the issuance of any Convertible Securities which are issued pursuant to the exercise of any warrants or other subscription or purchase rights therefor if any such adjustments shall previously have been made upon the issuance of such warrants or other rights pursuant to Section 4.4 of this Agreement. No further adjustments of the Current Warrant Price shall be made upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities and, if any issue or sale of such Convertible Securities is made upon exercise of any warrant or other right to purchase any such Convertible Securities for which adjustments of the Current Warrant Price have been or are to be made pursuant to other provisions of this Section 4, no further adjustments of the Current Warrant Price shall be made by reason of such issue or sale. 12 16 4.6 Superseding Adjustment. If, at any time after any adjustment of the Current Warrant Price shall have been made pursuant to Section 4.4 or Section 4.5 of this Agreement as the result of any issuance of warrants, options, rights or Convertible Securities, and such warrants, options or rights, or the right of conversion or exchange in such other Convertible Securities, shall expire, and all or a portion of such warrants, options or rights, or the right of conversion or exchange with respect to all or a portion of such other Convertible Securities, as the case may be, shall not have been exercised, then such previous adjustment shall be rescinded and annulled and, if applicable, the Current Warrant Price shall be recalculated as if all such expired and unexercised warrants, options, rights or Convertible Securities had never been issued. 4.7 Other Provisions Applicable to Adjustments Under This Section. The following provisions shall be applicable to the making of adjustments of the number of shares of Common Stock for which a Warrant is exercisable provided for in this Section 4: (a) Computation of Consideration. To the extent that any Additional Shares of Common Stock shall be issued for cash consideration, the consideration received by the Issuer therefor shall be the amount of the cash received by the Issuer therefor, or, if such Additional Shares of Common Stock are sold to underwriters or dealers for public offering without a subscription offering, the initial public offering price (in any such case subtracting any amounts paid or receivable for accrued interest or accrued dividends, but not subtracting any compensation, discounts or expenses paid or incurred by the Issuer for and in the underwriting of, or otherwise in connection with, the issuance thereof). To the extent that such issuance shall be for a consideration other than cash, then, except as herein otherwise expressly provided, the amount of such consideration shall be deemed to be the fair value of such consideration at the time of such issuance as determined reasonably and in good faith by a majority of the disinterested members of the board of directors of the Issuer. (b) When Adjustments to Be Made. The adjustments required by this Section 4 shall be made whenever and as often as any specified event requiring an adjustment shall occur, except that any adjustment to the number of shares for which the Warrants are exercisable that would otherwise be required may be postponed (except in the case of a subdivision or combination of shares of the Common Stock, as provided for in Section 4.1 of this Agreement) up to, but not beyond, the date and time of exercise of any Warrants if such adjustment either by itself or with other adjustments not previously made adds or subtracts less than 1% to the number of shares of Common Stock for which the Warrants initially issued pursuant to this Agreement are exercisable immediately prior to the making of such adjustment. Any adjustment representing a change of less than such minimum amount (except as aforesaid) which is postponed shall be carried forward and made as soon as such adjustment, together with other adjustments required by this Section 4 and not previously made, would result in a minimum adjustment or on the date of exercise. For the purpose of any adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. 13 17 (c) Fractional Interests. In computing adjustments under this Section 4, fractional interests in Common Stock resulting from an issuance of additional Warrants to any Warrant Holder pursuant to this Section 4 shall be taken into account to the nearest 1/10th of a share, subject to Section 2.4 of this Agreement. (d) When Adjustment Not Required. If the Issuer shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights and shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights, no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. (e) Escrow of Warrant Stock. If after any property becomes distributable pursuant to this Section 4 by reason of the taking of any record of the holders of Common Stock, but prior to the occurrence of the event for which such record is taken, any Warrant Holder exercises Warrants, any Additional Shares of Common Stock issuable upon exercise of such Warrant by reason of such adjustment shall be held in escrow for a Warrant Holder by the Issuer to be issued to such Warrant Holder upon and to the extent that the event actually takes place, upon payment of the balance, if any, of the Warrant Price for such Warrant at such date (after taking into account any overpayment of the Warrant Price made at any time of the initial Warrant exercise). Notwithstanding any other provision to the contrary herein, if the event for which such record was taken fails to occur or is rescinded, then such escrowed shares shall be canceled by the Issuer and escrowed property returned. 4.8 Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In the event the Issuer shall reorganize its capital, reclassify its capital stock, consolidate or merge with and into another corporation or entity (where the Issuer is not the surviving corporation or where there is a change in or distribution with respect to the Common Stock of the Issuer), or sell, transfer or otherwise dispose of all or substantially all its property, assets or business to another corporation or entity and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation or entity, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation or entity ("Other Property"), are to be received by or distributed to the holders of Common Stock of the Issuer, then the Issuer shall, as a condition precedent to such transaction, cause effective provisions to be made so that each Warrant Holder shall have the right thereafter to receive, upon exercise of a warrant, solely the number of shares of "common stock of the successor or acquiring corporation" or of the Issuer, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets, by a holder of the number of shares of Common Stock for which a Warrant is exercisable immediately prior to such event. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, such provisions shall include the express assumption by the successor or acquiring corporation 14 18 or entity (if other than the Issuer) of the due and punctual observance and performance of each and every covenant and condition of this Agreement to be performed and observed by the Issuer and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined by resolution of the board of directors of the Issuer) to provide for adjustments of shares of the Common Stock for which a Warrant is exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 4. For purposes of this Section 4.8, "common stock of the successor or acquiring corporation" shall include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock or other securities of such corporation or entity and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock or other securities, either immediately or upon the arrival of a specified date or the happening of a specified event, and any warrants or other rights to subscribe for or purchase any such stock or securities. The foregoing provisions of this Section 4.8 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets. 5. NOTICES TO WARRANT HOLDERS 5.1 Notice of Adjustments. Whenever the number of shares of Common Stock for which a Warrant is exercisable, or whenever the price at which a share of such Common Stock may be purchased upon exercise of the Warrants, shall be adjusted pursuant to Section 4, the Issuer shall forthwith prepare a certificate to be executed by the chief financial officer of the Issuer setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated (including a description of the basis on which the board of directors of the Issuer determined the fair value of any evidences of indebtedness, shares of stock, other securities or property or warrants or other subscription or purchase rights referred to in Section 4 of this Agreement), specifying the number of shares of Common Stock for which a Warrant is exercisable and (if such adjustment was made pursuant to Section 4.8 of this Agreement) describing the number and kind of any other shares of stock or Other Property for which a Warrant is exercisable, and any change in the purchase price or prices thereof, after giving effect to such adjustment or change. The Issuer shall promptly cause a signed copy of such certificate to be delivered to each Warrant Holder in accordance with Section 15.2 of this Agreement. The Issuer shall keep at its office or agency designated pursuant to Section 12 of this Agreement copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any Warrant Holder or any prospective purchaser of a Warrant designated by a Warrant Holder thereof. 5.2 Notice of Certain Corporate Action. Each Warrant Holder shall be entitled to the same rights to receive notice of corporate action as any holder of Common Stock. 6. REPRESENTATIONS AND WARRANTIES The Issuer makes the following representations and warranties, each and all of which shall be true and correct as of the date of execution and delivery of this Agreement and shall survive the execution and delivery of this Agreement: 15 19 (a) Due Organization; Etc. The Issuer is a corporation duly organized validly existing and in good standing under the laws of the State of Delaware, and has the power and authority to execute and deliver this Agreement and the Warrant Certificates, to issue the Warrants and to perform its obligations under this Agreement and the Warrant Certificates. (b) Due Authorization; No Violation. The execution, delivery and performance by the Issuer of this Agreement and the Warrant Certificates, the issuance of the Warrants and the issuance of the Warrant Stock upon exercise of the Warrants have been duly authorized by all necessary corporate action and do not and will not violate, or result in a breach of, or constitute a default under or require any consent under, or result in the creation of any lien or security interest upon the assets of the Issuer pursuant to, any Requirement of Law or any contractual obligation binding upon the Issuer. (c) Due Execution; Etc. This Agreement has been duly executed and delivered by the Issuer and constitutes a legal, valid and enforceable obligation of the Issuer. When the Warrants and the Warrant Certificates have been issued as contemplated hereby, (i) the Warrants and the Warrant Certificates will constitute legal, valid, binding and enforceable obligations of the Issuer and (ii) the Warrant Stock, when issued upon exercise of the Warrants in accordance with the terms hereof, will be duly authorized, validly issued, fully paid and non-assessable shares of Common Stock with no personal liability attaching to the ownership thereof. (d) Capitalization. The total number of shares of all classes of stock that the Issuer shall on the Closing Date have authority to issue is 40,000,000 shares, consisting of (i) 30,000,000 shares of Common Stock, par value $0.01 per share, of which, after giving effect to the transactions contemplated herein or in the Credit Agreement and all other issuances of capital stock of the Issuer on or prior to the Closing Date, 15,975,543 shares of Common Stock will be issued and outstanding and 1,250,000 shares of Common Stock will be reserved for future issuance pursuant to this Agreement and (ii) 10,000,000 shares of Preferred Stock, par value $0.01 per share (1,500,000 of which are designated as Series A Preferred), of which, after giving effect to the other issuances of capital stock of the Issuer on the Closing Date, 1,000,000 shares of Series A Preferred will be issued and outstanding. Schedule A sets forth a complete list of the outstanding capital stock of the Issuer, including any options, warrants or rights to purchase the capital stock of the Issuer (including the warrants issued on the Closing Date). The delivery hereunder by the Issuer to the Warrant Holder of the Warrants issued on the Closing Date will transfer and convey to the Warrant Holder good and marketable title to such Warrants and, upon exercise of such Warrants in accordance with this Agreement, good and marketable title to the Common Stock purchased upon such exercise, free and clear of all preemptive rights, liens, charges and encumbrances, except for restrictions on transfer referred to in this Agreement, or arising under the Federal and state securities laws. Except as otherwise disclosed on Schedule A, the Issuer does not have outstanding any 16 20 stock or securities convertible into or exchangeable for any shares of its stock, nor, except as so set forth, does it have outstanding any agreements, rights or options entitling any person to subscribe for or to purchase any capital stock or securities convertible into or exchangeable for any of its shares of stock. (e) Full Disclosure. No information contained in this Agreement, the financial statements referred to in the Credit Agreement or any written statement furnished by or on behalf of the Issuer pursuant to the terms of this Agreement to the Warrant Holder contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which made. (f) Warrant Price. The Issuer has taken all corporate action, and obtained all necessary authorizations or exemptions from any public regulatory body or bodies or governmental entity or entities having jurisdiction thereof, as may be necessary in order that the Issuer may validly and legally issue fully paid and non-assessable shares of Common Stock upon to exercise of the warrants at the Warrant Price, as the same may be adjusted pursuant hereto. (g) Other Representations and Warranties. The Issuer hereby affirms and reaffirms for the express benefit of the Warrant Holders that the representations and warranties made by the Issuer in that certain Subordinated Guaranty Agreement dated of even date herewith are true and correct, as if made in favor of the Warrant Holder on the date hereof. 7. CERTAIN COVENANTS 7.1 No Impairment. The Issuer shall not by any action including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Agreement, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of each Warrant Holder against impairment. Without limiting the generality of the foregoing, the Issuer will use reasonable good faith efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable it to perform its obligations under this Agreement. Upon the request of a Warrant Holder, the Issuer will, at any time during the period this Agreement is in effect, acknowledge in writing, in form satisfactory to such Warrant Holder, the continuing validity of this Agreement and the obligations of the Issuer hereunder. 7.2 Reservation and Authorization of Common Stock; Registration with, or Approval of, any Governmental Authority. From and after the Closing Date, the Issuer shall at all times 17 21 reserve and keep available for issue upon the exercise of Warrants such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding Warrants. All shares of Common Stock which shall be so issuable, when issued upon exercise of any Warrants and payment therefor in accordance with the terms of this Agreement, shall be duly and validly issued and fully paid and non-assessable, and not subject to preemptive rights. Before taking any action which would result in an adjustment in the number of shares of Common Stock for which a Warrant is exercisable or in the Current Warrant Price, the Issuer shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies or governmental entity or entities having jurisdiction thereof. If any shares of Common Stock required to be reserved for issuance upon exercise of Warrants require registration or qualification with any governmental authority under any federal or state law (otherwise than as provided in Section 9 of this Agreement) before such shares may be so issued, the Issuer will in good faith and as expeditiously as possible and at its expense endeavor to cause such shares to be duly registered. 8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS In the case of all dividends or other distributions by the Issuer to the holders of its Common Stock with respect to which any provision of Section 4 of this Agreement refers to the taking of a record of such holders, the Issuer will in each such case take such a record as of the close of business on a Business Day. The Issuer will not at any time, except upon dissolution, liquidation or winding up of the Issuer, close its stock transfer books or Warrant transfer books so as to result in preventing or delaying the exercise or transfer of any Warrants. 9. RESTRICTIONS ON TRANSFERABILITY The Warrants and the Warrant Stock shall not be transferred before satisfaction of the conditions specified in this Section 9, which conditions are intended to ensure compliance with the provisions of the Securities Act and applicable state securities laws with respect to the transfer of any Warrant or any Warrant Stock. Each Warrant Holder, by entering into this Agreement and accepting the Warrants, agrees to be bound by the provisions of this Section 9. 9.1 Restrictive Legend. Except as otherwise provided in this Section 9, each certificate representing Warrants or Warrant Stock, shall be stamped or otherwise imprinted with a legend in substantially the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM. SUCH SECURITIES ARE SUBJECT TO THE RESTRICTIONS AND PRIVILEGES SPECIFIED IN A WARRANT 18 22 AGREEMENT, DATED AS OF OCTOBER 31, 2000, BETWEEN BRIGHAM EXPLORATION COMPANY AND THE INITIAL HOLDERS OF SECURITIES NAMED THEREIN, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF BRIGHAM EXPLORATION COMPANY AND WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER HEREOF UPON WRITTEN REQUEST, AND THE HOLDER OF THIS CERTIFICATE AGREES TO BE BOUND THEREBY." 9.2 Notice of Proposed Transfers; Requests for Registration. Prior to any transfer of any Warrants or any shares of Restricted Common Stock, the Warrant Holder of such Warrants or Restricted Common Stock shall give five days prior written notice to the Issuer of such Warrant Holder's intention to effect such transfer (a "Transfer Notice"). Each Warrant Holder agrees that it will not sell, transfer or otherwise dispose of Warrants or any shares of Restricted Common Stock, in whole or in part, except pursuant to an effective registration statement under the Securities Act or an exemption from registration thereunder. Each certificate, if any, evidencing such shares of Restricted Common Stock issued upon such transfer shall bear the restrictive legend set forth in Section 9.1, and each Warrant Certificate issued upon such transfer shall bear the restrictive legend set forth in Section 9.1 of this Agreement, unless in the opinion of the transferee's or Warrant Holder's counsel delivered to the Issuer in connection with such transfer such legend is not required in order to ensure compliance with the Securities Act. The Warrant Holders of Warrants and Warrant Stock shall have the right to request registration of such Warrant Stock pursuant to Section 9.3 of this Agreement. 9.3 Incidental Registration. If the Issuer at any time proposes to file on its behalf and/or on behalf of any of its security holders (the "Demanding Security Holders") a Registration Statement under the Securities Act on any form (other than a Registration Statement (i) filed pursuant to demand under the Company's Registration Rights Agreement with Joint Energy Development Investments II Limited Partnership, a Delaware limited partnership, and Enron Capital & Trade Resources Corp., a Delaware corporation, dated August 20, 1998, as amended, or (ii) on Form S-8 or any similar or successor form or any other registration statement relating to an offering of securities solely to the Issuer's existing security holders or employees) to register the offer and sale of its Common Stock for cash, it will give written notice to all Warrant Holders of Warrants or Warrant Stock at least twenty (20) days before the anticipated date of initial filing with the Commission of such Registration Statement, which notice shall set forth the Issuer's intention to effect such a registration, the class or series and number of equity securities proposed to be registered and the intended method of disposition of the securities proposed to be registered by the Issuer. The notice shall offer to include in such filing all of the Warrant Holder's Registrable Securities. Each Warrant Holder desiring to have Registrable Securities registered under this Section 9.3 shall advise the Issuer in writing within fifteen (15) days after the date of receipt of such offer from the Issuer, setting forth the amount of such Registrable Securities for which registration is requested. The Issuer shall thereupon include in such filing the number of shares of Registrable Securities for which registration is so 19 23 requested, subject to the next sentence, and shall use its best efforts to effect registration under the Securities Act of such securities. If the managing underwriter of a proposed public offering shall advise the Issuer in writing that, in its opinion, the distribution of the Registrable Securities requested to be included in the registration concurrently with the securities being registered by the Issuer or any Demanding Security Holder would materially and adversely affect the distribution of such securities by the Issuer or such Demanding Security Holders, then all selling security holders (but not the Issuer or the Demanding Security Holders) shall reduce the amount of securities each intended to distribute through such offering on a pro rata basis to the greatest aggregate amount which, in the opinion of such managing underwriter, would not materially and adversely affect the distribution of such securities. Nothing in this Section 9.3 shall preclude the Issuer from discontinuing the registration of its securities being effected on its behalf under this Section 9.3 at any time prior to the effective date of the registration relating thereto. Notwithstanding any provision herein, the rights of the Warrant Holder under this Section 9.3 are subject to the express limitations contained in registration rights agreements in effect on the date hereof between the Issuer and other parties; provided, however, that the Issuer shall not on or after the date of this Agreement enter into any registration rights agreement with respect to its securities that conflict with the registration rights granted to the Warrant Holder herein. 9.4 Registration Procedures. If the Issuer is required by the provisions of this Section 9 to use its best efforts to effect the registration of any of its securities under the Securities Act, the Issuer will, as expeditiously as possible: (a) prepare and file with the Commission a registration statement with respect to such securities (a "Registration Statement") and use its best efforts to cause such Registration Statement to become and remain effective for the period described in paragraph (b) below; (b) prepare and file with the Commission such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities covered by such Registration Statement until the earlier of such time as all of such securities have been disposed of in a public offering or the expiration of 90 days; (c) furnish to such selling security holders such number of copies of a summary prospectus or other prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents, as such selling security holders may reasonably request; (d) use its best efforts to register or qualify the securities covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions within the United States as each holder of such securities shall 20 24 request (provided, however, the Issuer shall not be obligated to qualify as a foreign corporation to do business under the laws of any jurisdiction in which it is not then qualified or to file any general consent to service or process), and do such other reasonable acts and things as may be required of it to enable such holder to consummate the disposition in such jurisdiction of the securities covered by such Registration Statement; (e) enter into customary agreements (including an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities; and (f) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, but not later than 18 months after the effective date of the Registration Statement, an earnings statement covering the period of at least 12 months beginning with the first full month after the effective date of such Registration Statement, which earnings statements shall satisfy the provisions of Section 11(a) of the Securities Act. It shall be a condition precedent to the obligation of the Issuer to take any action pursuant to this Section 9 in respect of the securities which are to be registered at the request of any Warrant Holder of Registrable Securities that such Warrant Holder shall furnish to the Issuer such information regarding the securities held by such Warrant Holder and the intended method of disposition thereof as the Issuer shall reasonably request and as shall be required in connection with the action taken by the Issuer. 9.5 Expenses. All expenses incurred in complying with this Section 9, including, without limitation, all registration and filing fees (including all expenses incident to filing with the NASD), printing expenses, fees and disbursements of counsel for the Issuer, the reasonable fees and expenses of one counsel for the selling security holders (selected by the Person holding the plurality of the securities being registered), expenses of any special audits incident to or required by any such registration and expenses of complying with the securities or blue sky laws of any jurisdictions pursuant to Section 9.4(d) of this Agreement (all of such expenses shall be collectively referred to herein as "Registration Expenses"), shall be paid by the Issuer; provided, however, the Issuer shall not be responsible for any discount or commission or cost reimbursement to any underwriter in respect of the securities sold by such Warrant Holder of Registrable Securities. 9.6 Indemnification and Contribution. (a) In the event of any registration of any of the Registrable Securities under the Securities Act pursuant to this Section 9, the Issuer shall indemnify and hold harmless each Warrant Holder of such Registrable Securities, such Warrant Holder's directors and officers, each Affiliate of such Warrant Holder, and each other Person (including each underwriter) who participated in the offering of such Registrable Securities and each other Person, if any, who controls such Warrant 21 25 Holder or such participating Person, if any, who controls such Warrant Holder or such participating Person within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such Warrant Holder or any such director or officer or participating Person or Affiliate or controlling Person may become subject under the Securities Act or any other statute or at common law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any alleged untrue statement of any material fact contained, on the effective date thereof, in any Registration Statement under which such securities were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or (ii) any alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and shall reimburse such Warrant Holder or such director, officer or participating Person or Affiliate or controlling Person for any legal or any other expenses reasonably incurred by such Warrant Holder or such director, officer or participating Person or Affiliate or controlling Person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Issuer shall not be liable in any such case to the extent that any such loss, claim, damage or liability directly arises out of or is directly based upon any alleged untrue statement or alleged omission made in such Registration Statement, preliminary prospectus, prospectus or amendment or supplement in reliance upon and in conformity with written information furnished to the Issuer by such Warrant Holder specifically for use therein. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Warrant Holder or such director, officer or participating Person or Affiliate or controlling Person, and shall survive the transfer of such securities by such Warrant Holder. (b) Each Warrant Holder of any Registrable Securities, by acceptance thereof, agrees to indemnify and hold harmless the Issuer, its directors and officers and each other Person, if any, who controls the Issuer within the meaning of the Securities Act against any losses, claims, damages or liabilities, joint or several, to which the Issuer or any such director or officer or any such Person may become subject under the Securities Act or any other statute or at common law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) directly arise out of or are directly based upon (i) information in writing provided to the Issuer by such Warrant Holder of such Registrable Securities contained, on the effective date thereof, in any Registration Statement under which securities were registered under the Securities Act at the request of such Warrant Holder, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto or (ii) that such Warrant Holder's obligation under this Section 9.6(b) to indemnify and hold harmless the Issuer shall in no event exceed the lesser of (x) the damage attributable solely to the inclusion of such written information in such Registration Statement, preliminary prospectus, final prospectus, or amendment or supplement suffered by the Person or Persons whose claims gave rise to such losses, claims, damages or liabilities and (y) the net 22 26 proceeds received by such Warrant Holder from the sale of Registrable Securities giving rise to such indemnification. (c) If the indemnification provided for in this Section 9 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or related to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party under this Section 9 as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 9.6(c) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this subsection (c), no Warrant Holder shall be required to contribute any amount in excess of the total amount received by it upon the sale of its securities pursuant to the Registration Statement to which the losses, claims, damages, liabilities and expenses referred to above relate. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The obligations of each of the Warrant Holders under this subsection (c) to contribute are several and not joint. (d) Conduct of Indemnification Proceedings. Any person or entity entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying party after the receipt by the indemnified party of a written notice of the commencement of any action, suit, proceeding or investigation or threat thereof made in writing for which such indemnified party will claim indemnification or contribution pursuant to this Agreement; provided, however, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under Section 9.6 hereof, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice, and (ii) unless in such indemnified party's reasonable judgment a conflict of interest may exist between such indemnified and indemnifying parties with 23 27 respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If the indemnifying party is entitled to, and does, assume the defense of such claim, the indemnified party shall have the right to employ separate counsel and to participate in the defense thereof, but the fees and expenses of such counsel shall be borne by the indemnified party. Whether or not such defense is assumed by the indemnifying party, the indemnifying party shall not be subject to any liability for any settlement made without its consent (but such consent will not be unreasonably withheld). No indemnifying party shall be permitted to consent to the entry of any judgment or to enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel in any one jurisdiction for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels. 9.7 Termination of Restrictions. Notwithstanding the foregoing provisions of this Section 9, the restrictions imposed by this Section 9 upon the transferability of the Warrants, the Warrant Stock and the Restricted Common Stock (or Common Stock issuable upon the exercise of the Warrants) and the legend requirement of Section 9.1 of this Agreement shall terminate as to any particular Warrant or share of Warrant Stock or Restricted Common Stock (or Warrant Stock) (i) when and so long as such security shall have been registered under the Securities Act and disposed of pursuant thereto, or (ii) when the Warrant Holder thereof shall have delivered to the Issuer the written opinion of counsel to such Warrant Holder, stating that such legend is not required in order to ensure compliance with the Securities Act. Whenever the restrictions imposed by this Section 9 shall terminate as to any Warrants or any Restricted Common Stock, as hereinabove provided, the Warrant Holder thereof shall be entitled to receive from the Issuer, at the expense of the Issuer, a new Warrant Certificate or a new certificate representing such Common Stock, as the case may be, not bearing the restrictive legend set forth in Section 9.1 of this Agreement. 9.8 Listing on Securities Exchange. If at any time the Issuer shall list any shares of Common Stock on any securities exchange, it will, at its expense, use its best efforts to list thereon, maintain and, when necessary, increase such listing of, all shares of Common Stock issued or, to the extent permissible under the applicable securities exchange rules, issuable upon the exercise of the Warrants so long as any shares of Common Stock shall be so listed during the Exercise Period. 24 28 10. SUPPLYING INFORMATION The Issuer shall cooperate with each Warrant Holder of a Warrant and each Warrant Holder of Restricted Common Stock in supplying such information as may be reasonably necessary for such Warrant Holder to complete and file any information reporting forms presently or hereafter required by the Commission as a condition to the availability of an exemption from the Securities Act for the sale of any Warrant or Restricted Common Stock. 11. LOSS OR MUTILATION Upon receipt by the Issuer from any Warrant Holder of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of a certificate representing Warrants or Warrant Stock and indemnity reasonably satisfactory to it (it being understood that the written agreement of the Warrant Holder or an Affiliate thereof shall be sufficient indemnity) and in case of mutilation upon surrender and cancellation hereof or thereof, the Issuer will execute and deliver in lieu hereof or thereof a new Warrant or new stock certificate as the case may be, of like tenor to such Warrant Holder; provided, in the case of mutilation, no indemnity shall be required if the certificate representing Warrants or Warrant Stock in identifiable form is surrendered to the Issuer for cancellation. 12. OFFICE OF THE ISSUER As long as any of the Warrants remain outstanding, the Issuer shall maintain an office or agency (which may be the principal executive officers of the Issuer) where the Warrants may be presented for exercise, registration or transfer, division or combination as provided in this Agreement. 13. APPRAISAL The determination of the Appraised Value per share of Common Stock shall be made by an investment banking firm of nationally recognized standing mutually agreed to by the Issuer and the Required Holders. If the investment banking firm selected by the Issuer is not acceptable to the Required Holders and the Issuer and the Required Holders cannot agree on a mutually acceptable investment banking firm, then the Required Holders and the Issuer shall each choose one such investment banking firm and the respective chosen firms shall agree on another investment banking firm which shall make the determination. The Issuer shall retain, at its sole cost, such investment banking firm as may be necessary for the determination of Appraised Value required by the terms of this Agreement. 14. LIMITATION OF LIABILITY; NO RIGHTS AS STOCKHOLDER No provision hereof, in the absence of affirmative action by any Warrant Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of any Warrant Holder, shall give rise to any liability of such Warrant Holder for the purchase price of any Common Stock or as a stockholder of the Issuer, whether such 25 29 liability is asserted by the Issuer or by creditors of the Issuer. Except as may otherwise be provided by law or by separate agreement between a Warrant Holder and the Issuer, no Warrant Holder, as such, shall be entitled to vote or be deemed the holder of Common Stock or any other securities (other than Warrants) of the Issuer which may at any time be issuable on the exercise hereof, nor shall anything contained herein be construed to confer upon any Warrant Holder the rights of a stockholder of the Issuer or the right to vote for the election of directors or upon any matters submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action or to receive notice of meetings or other actions affecting stockholders (except as provided herein), or to receive dividends or otherwise, until the Warrants shall have been exercised in accordance with the terms and conditions hereof. 15. MISCELLANEOUS 15.1 Non-waiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of any holder of Warrant Stock shall operate as a waiver of such right or otherwise prejudice such holder of Warrant Stock's rights, powers or remedies. If the Issuer fails to comply with any provision of this Agreement, the Issuer shall pay to the applicable holder of Warrant Stock such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees, including those of appellate proceedings, incurred by the holder of Warrant Stock in enforcing any of its rights, powers or remedies hereunder. 15.2 Notice Generally. Any notice, demand, request, consent, approval, declaration, delivery or other communication hereunder to be made pursuant to the provisions of this Agreement shall be sufficiently given or made if in writing and either delivered in person with receipt acknowledged or sent by registered or certified mail, return receipt requested, postage prepaid, telex, telecopier or overnight air courier guaranteeing next day delivery, addressed as follows: (a) If to SCI, as Warrant Holder, at: Address: 910 Louisiana, Suite 5000 Houston, Texas 77002-4916 Attention: Robert L. Roberts, Vice-President Telecopier No. (713) 241-5222 (b) If to the Issuer at: Brigham Exploration Company 6300 Bridge Point Parkway Building 2, Suite 500 Austin, Texas 78730 Attention: President Telecopier No.: (512) 427-3300 or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the 26 30 party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration, delivery or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, or three (3) Business Days after the same shall have been deposited in the United States mail. 15.3 Indemnification. Except to the extent otherwise provided in Section 9.6 of this Agreement, the Issuer agrees to indemnify and hold harmless Warrant Holder and its officers, directors, employees, agents, attorneys and Affiliates (each an "Indemnified Party") from and against any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses and disbursements of any kind which may be imposed upon, incurred by or asserted against such Indemnified Party relating to or arising out of (i) such Warrant Holder's exercise of the Warrants and/or ownership of any shares of Warrant Stock issued in consequence thereof, or (ii) any litigation to which such Warrant Holder is made a party in its capacity as a stockholder or Warrant Holder of the Issuer; provided, however, that the Issuer will not be liable hereunder to the extent that any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses or disbursements (A) arise solely from any violation by such Warrant Holder of any law or regulation applicable to it or (B) are found in a final non-appealable judgment by a court to have resulted from such Warrant Holder's bad faith or willful misconduct or violation of law. The procedures to be followed for claims of indemnification under this Section 15.3 shall be as set forth in Section 9.6(d) of this Agreement. 15.4 Remedies. Each Warrant Holder of Warrants and Warrant Stock, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under Section 9 of this Agreement. The Issuer agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of Section 9 of this Agreement, and hereby agrees to waive any defense to the contrary in any action for specific performance that a remedy at law would be adequate. 15.5 Successors and Assigns. Subject to the provisions of Sections 3.1 and 9 of this Agreement, this Agreement and the rights evidenced hereby shall inure to the benefit of and be binding upon the successor of the Issuer and the successors and assigns of any Warrant Holder. The provisions of this Agreement are intended to be for the benefit of all Warrant Holders from time to time of the Warrants and Warrant Stock, and shall be enforceable by any such Warrant Holder. 15.6 Complete Agreement; Amendment. This Agreement, the Warrant Certificates, the Credit Agreement and the Loan Documents constitute the complete agreement among the parties with respect to the subject matter hereof. This Agreement may be modified or amended or the provisions hereof waived only with the written consent of the Issuer and the Required Holders, provided that no Warrant may be modified or amended to reduce the number of shares of Common Stock for which such Warrant is exercisable or to increase the price at which such shares may be purchased upon exercise of such Warrant (before giving effect to any adjustment as provided herein) or to accelerate the Expiration 27 31 Date without the prior written consent of the Warrant Holder thereof, and any amendment of Section 9 of this Agreement shall also require the written consent of Warrant Holders of Warrants and/or Warrant Stock representing more than 50% of the total of (i) all shares of Warrant Stock then subject to purchase upon exercise of all Warrants then Outstanding, and (ii) all shares of Warrant Stock then Outstanding. 15.7 Severability. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 15.8 Headings. The headings used in this Agreement are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Agreement. 15.9 Governing Law; Consent to Jurisdiction and Venue. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. 15.10 Consent to Jurisdiction and Venue. (a) THE ISSUER AND EACH WARRANT HOLDER HEREBY EXPRESSLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS. FINAL JUDGMENT AGAINST SUCH PARTY IN ANY SUCH SUIT SHALL BE CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR AS OTHERWISE PERMITTED BY APPLICABLE LAW, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACTS AND OF THE AMOUNT OF ANY INDEBTEDNESS OR LIABILITY OF SUCH PARTY THEREIN DESCRIBED; PROVIDED, HOWEVER, EACH PARTY MAY AT ITS OPTION BRING SUIT, OR INSTITUTE OTHER JUDICIAL PROCEEDINGS AGAINST THE OTHER PARTY OR ANY OF ITS ASSETS, IN THE COURTS OF ANY COUNTRY OR PLACE WHERE SUCH PARTY OR SUCH ASSETS MAY BE FOUND. (b) THE ISSUER AND EACH WARRANT HOLDER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING BROUGHT IN ANY COURTS OF THE STATE OF TEXAS OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS 28 32 AND HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. 15.11 Counterparts: This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 29 33 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. BRIGHAM EXPLORATION COMPANY, as Issuer By: /s/ CURTIS F. HARRELL ------------------------------------------- Name: Curtis F. Harrell Title: Chief Financial Officer SHELL CAPITAL INC., as Warrant Holder By: /s/ ROBERT L. ROBERTS ------------------------------------------- Name: Robert L. Roberts Title: Vice President 30 34 Exhibit C To Warrant Certificate ASSIGNMENT FORM FOR VALUE RECEIVED the undersigned registered owner of the attached Warrant Certificate hereby sells, assigns and transfers unto the assignee named below all of the rights of the undersigned under this Warrant Certificate, with respect to the number of shares of Common Stock set forth below: Name and Address of Assignee: ----------------------------------- ----------------------------------- ----------------------------------- ----------------------------------- No. of Shares of Common Stock ------- and does hereby irrevocably constitute and appoint ___________________________ attorney-in-fact to register such transfer on the books of [ ] maintained for that purpose, with full power of substitution in the premises. Dated: ------------------------------------ Name: ------------------------------------- Signature: -------------------------------- Witness: ----------------------------------- The assignee named above hereby agrees to purchase and take the attached Warrant Certificate pursuant to and in accordance with the terms and conditions of the Warrant Agreement, dated as of ______________, 2000, between [ ] and the initial Holder named therein and agrees to be bound thereby. Dated: ------------------------------------- Name: -------------------------------------- Signature: --------------------------------- EXH C-1 35 SCHEDULE A*
Shares of Stock Options Common Outstanding Total Stock ------------------------- Warrants/Conversion Rights Outstanding Vested Unvested Outstanding As of the Closing Date 15,975,543 233,485 1,193,015 15,129,144
* After giving effect to the transactions contemplated herein or in the Credit Agreement. SCH A-1 EX-99.G 4 h81438a1ex99-g.txt AMEND. #1 TO REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT G FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT This First Amendment (the "Amendment") to the Registration Rights Agreement dated as of February 17, 2000 (the "Registration Rights Agreement"), by and between Brigham Exploration Company, a Delaware corporation (the "Company"), and Shell Capital Inc. (the "Purchaser"), is effective as of October 31, 2000. Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Registration Rights Agreement. RECITALS WHEREAS, the Company and the Purchaser desire to amend the Registration Rights Agreement in the manner set forth in this Amendment. NOW, THEREFORE, the parties hereto, intending legally to be bound, hereby agree as follows: AGREEMENTS 1. The second recitals paragraph of the Registration Rights Agreement shall be amended and restated in its entirety to read as follows: "WHEREAS, the Company has agreed to issue certain capital stock of the Company ("Common Stock") in connection with the exercise of certain equity conversion rights pursuant to that certain Equity Conversion Agreement of even date herewith among the Company, Purchaser and BOG (the "Equity Conversion Agreement") and in connection with Warrants issued pursuant to those certain Warrant Agreements dated as of February 17, 2000 and October 31, 2000, in each case between the Company and the Purchaser (the "Warrants")." 2. As amended hereby, the Registration Rights Agreement is hereby specifically ratified and reaffirmed. IN WITNESS WHEREOF, the parties hereto have executed this Amendment effective for all purposes as of October 31, 2000. BRIGHAM EXPLORATION COMPANY By: /s/ CURTIS F. HARRELL -------------------------- Name: Curtis F. Harrell Title: Chief Financial Officer SHELL CAPITAL INC. By: /s/ ROBERT L. ROBERTS -------------------------- Name: Robert L. Roberts Title: Vice-President EX-99.H 5 h81438a1ex99-h.txt ANCILLARY AGREEMENT - DATED OCTOBER 31, 2000 1 EXHIBIT H ANCILLARY AGREEMENT RECITALS: A. Reference is made to that certain Amended and Restated Credit Agreement (the "Senior Credit Agreement") dated as of February 17, 2000, among Brigham Oil & Gas, L.P. ("Borrower"), Bank of Montreal, a Canadian bank, in its individual capacity (in its individual capacity, "BMO"), and BMO, in its capacity as agent (in such capacity, together with its successors in such capacity, the "Senior Agent"), Societe Generale, Southwest Agency ("Soc-Gen") and Shell Capital Inc. ("SCI"); all capitalized terms used but not defined herein shall have the meanings assigned to them in the Senior Credit Agreement or in the Equity Conversion Agreement, as such term is defined in the Senior Credit Agreement. B. Borrower and SCI have reached an understanding concerning the reduction of a portion of the Loans made by the SCI Lenders under the Senior Credit Agreement, and desire to evidence such understanding by entering into this Ancillary Agreement. AGREEMENT: 1. In the event Borrower does not reduce the outstanding Loans of the SCI Lenders under the Senior Credit Agreement by at least $15,000,000 on or before January 31, 2001, Borrower shall permanently forfeit its right to force conversion of the Tranche One Convertible Amount at $3.90 per share. 2. Until such time as the Borrower reduces the outstanding Loans of the SCI Lenders under the Senior Credit Agreement by $15,000,000 the Borrower shall not have the right to force a conversion of the Tranche One Convertible Amount pursuant to Section 2.02(a) of the Equity Conversion Agreement. 3. The Borrower does not have the right to force conversion on any tranche pursuant to Sections 2.02(a), (b) and (c) of the Equity Conversion Agreement ("Tranche") prior to the release of first quarter 2001 financial information unless the Guarantor's EBITDA to Interest as of December 31, 2000 is at least .9:1.0 and it does not have the right to force conversion on any Tranche after the release of the first quarter 2001 ratios and prior to the release of second quarter 2001 financial information unless the Guarantor's EBITDA to Interest as of the first quarter 2001 is at least 1.1:1.0. MISCELLANEOUS: (a) Counterparts: This Ancillary Agreement is being executed in several counterparts, all of which are identical; all such counter parts shall be construed together as the same instrument. 2 (b) CHOICE OF LAW: THIS ANCILLARY AGREEMENT SHALL, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW, BE GOVERNED AND CONSTRUED UNDER AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. (c) Entirety and Modification. This Ancillary Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supercedes any and all prior agreements and understandings, whether oral or written, between the parties hereto relating to such subject matter. This Ancillary Agreement is executed and delivered on this 31st day of October, 2000. SHELL CAPITAL INC. By: /s/ ROBERT L. ROBERTS ------------------------------------- Name: Robert L. Roberts Title: Vice President BRIGHAM OIL & GAS, L.P. By: Brigham, Inc., as General Partner By: /s/ CURTIS F. HARRELL ------------------------------------- Name: Curtis F. Harrell Title: Chief Financial Officer EX-99.L 6 h81438a1ex99-l.txt JOINT FILING AGREEMENT 1 EXHIBIT L JOINT FILING AGREEMENT The undersigned each agree that (i) the amendment to Schedule 13D (the "Amendment") relating to the common stock, par value $0.01 per share, of Brigham Exploration Company has been adopted and filed on behalf of each of them, (ii) all future amendments to such Amendment will, unless written notice to the contrary is delivered as described below, be jointly filed on behalf of each of them, and (iii) the provisions of Rule 13d-1(k)(1) under the Securities Exchange Act of 1934 apply to each of them. This agreement may be terminated with respect to the obligation to jointly file future amendments to such Amendment as to any of the undersigned upon such person giving written notice thereof to each of the other persons signatory hereto, at the principal office thereof. EXECUTED as of November 6, 2000 SHELL CAPITAL INC. By: /s/ R. W. LEFTWICH ------------------------------ Name: R. W. Leftwich Title: President SHELL OIL COMPANY By: /s/ R. W. LEFTWICH ------------------------------ Name: R. W. Leftwich Title: Treasurer SHELL PETROLEUM INC. By: /s/ R. W. LEFTWICH ------------------------------ Name: R. W. Leftwich Title: Assistant Treasurer -----END PRIVACY-ENHANCED MESSAGE-----