-----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, MqScg9uyL3bSaptwseGDon4eXA2ZCtWaiF/9o0ihlGa955O2UIVqm+PXbbGR+6q7 wojvPELzSFn7/pqisnzJwQ== /in/edgar/work/0001104659-00-000646/0001104659-00-000646.txt : 20001109 0001104659-00-000646.hdr.sgml : 20001109 ACCESSION NUMBER: 0001104659-00-000646 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 20001102 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20001108 FILER: 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: 8-K/A SEC ACT: SEC FILE NUMBER: 000-22433 FILM NUMBER: 755974 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 8-K/A 1 0001.txt CURRENT REPORT AMENDMENT NO. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM 8-K CURRENT REPORT AMENDMENT NO. 1 PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 --------------- Date of Report (Date of earliest event reported): NOVEMBER 2, 2000 BRIGHAM EXPLORATION COMPANY (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 000-22433 75-2692967 (STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.) 6300 BRIDGEPOINT PARKWAY BUILDING TWO, SUITE 500 AUSTIN, TEXAS 78730 (ADDRESS, INCLUDING ZIP CODE, OF PRINCIPAL EXECUTIVE OFFICES) Registrant's telephone number, including area code: (512) 427-3300 Items 5 and 7 are hereby amended by deleting such items in their entirety and substituting therefor the following: Item 5. OTHER EVENTS. On November 2, 2000, Brigham Exploration Company ("Brigham") announced that it entered into a series of financing agreements that provide funding (i) to repurchase all subordinated debt and equity securities in Brigham held by affiliates of Enron North America (the "Enron Affiliates") at a substantial discount, and (ii) to continue and expand Brigham's planned drilling program into 2001. A copy of Brigham's press release regarding the financing transactions contemplated thereby is attached hereto as Exhibit 99.1. The following summaries of the financing transactions are qualified in their entirety by reference to the related financing agreements, copies of which are attached hereto as Exhibits 4.1, and 10.1 through 10.13, and are incorporated in these summaries by reference. FINANCING AND REPURCHASE TRANSACTIONS. Brigham has raised an aggregate of $40 million in these financing transactions through the issuance of (i) $20 million in new subordinated notes and warrants to purchase Brigham common stock to Shell Capital Inc., and (ii) $20 million in new mandatorily redeemable preferred stock and warrants to purchase Brigham common stock to affiliates of Donaldson, Lufkin & Jenrette. With a portion of the proceeds from these two financing transactions, Brigham has purchased all of the Enron Affiliates' interests in Brigham, which included (i) $51.2 million of outstanding senior subordinated notes due 2003 (which bore interest at annual rates of 12% to 14%) and associated accrued interest obligations, (ii) warrants to purchase one million shares of common stock at $2.43 per share, and (iii) 1,052,632 shares of common stock (collectively, the "Enron Securities"), for total cash consideration of $20 million. The remaining approximate $17.5 million in net capital availability raised from these financing transactions after the repurchase of the Enron Securities and the payment of estimated fees and expenses will be used by Brigham to fund its planned drilling program into 2001. NEW SUBORDINATED NOTES. The $20 million of new subordinated notes issued to Shell Capital (the "SCI Notes") will bear interest at 10.75% per annum and will have no principal repayment obligations until maturity in 2005. At Brigham's option, up to 50% of the interest payments on the SCI Notes during the first two years can be satisfied by payment-in-kind ("PIK") through the issuance of additional SCI Notes in lieu of cash. The SCI Notes will be secured obligations ranking junior to Brigham's existing $75 million senior credit facility. The SCI Notes have a five-year maturity, are redeemable at Brigham's option for face value at anytime, and have certain financial and other covenants. The 1,250,000 warrants to purchase Brigham common stock issued to Shell Capital (the "SCI Warrants") have a term of seven years, an exercise price of $3.00 per share and a cashless exercise feature. NEW PREFERRED STOCK. The $20 million of new mandatorily redeemable preferred stock issued to the DLJ Affiliates (the "Preferred Stock") will bear dividends at a rate of 6% per annum if paid in cash and 8% per annum if 2 paid-in-kind through the issuance of additional Preferred Stock in lieu of cash. At Brigham's option, up to 100% of the dividend payments on the Preferred Stock during the first five years can be satisfied through the issuance of PIK dividends. The Preferred Stock has a ten-year maturity and is redeemable at Brigham's option at 100% or 101% of par value (depending upon certain conditions) at anytime prior to maturity. The 6,666,667 warrants to purchase Brigham common stock issued to the DLJ Affiliates (the "DLJ Warrants") have a term of ten years, an exercise price of $3.00 per share and must be exercised, if Brigham so requires, in the event that Brigham common stock trades at or above $5.00 per share for 60 consecutive trading days. If Brigham requires exercise of the DLJ Warrants, proceeds from the exercise of the DLJ Warrants will be used to fund the redemption of a similar value of then outstanding Preferred Stock. Brigham has agreed with the DLJ Affiliates to convene a special meeting of shareholders as promptly as practicable to approve the DLJ Warrants and any future adjustments to the exercise price of the DLJ Warrants pursuant to the terms thereof. The following Brigham shareholders, owing an aggregate of 8,693,407 shares of Brigham Common Stock, have agreed, pursuant to a Voting Agreement dated October 31, 2000, to vote for such approval: Ben M. and Anne L. Brigham, Harold D. Carter, General Atlantic Partners III, L.P., GAP-Brigham Partners, L.P., GAP Coinvestment Partners II, L.P., and Aspect Resources, LLC. Pursuant to the terms of the securities purchase agreement related to the Preferred Stock, the holders of the Preferred Stock have the right to designate one member to Brigham's board of directors. As a result, Steven A. Webster has joined the board of directors of Brigham contemporaneously with the issuance of the Preferred Stock, increasing the number of Brigham directors from six to seven members. Mr. Webster is a Managing Director of Global Energy Partners, Ltd., a merchant banking affiliate of Donaldson, Lufkin & Jenrette that makes investments in energy companies. In addition, Mr. Webster also serves on the boards of directors for a number of energy companies, including serving as Chairman of Carrizo Oil & Gas, Inc., an oil and gas exploration and production company operating principally in the Gulf Coast region of the United States, and as Vice Chairman of the Board of R&B Falcon Corporation, an international oil and gas drilling company that was created by the merger of Falcon Drilling Company and Reading & Bates. Mr. Webster is the founder and an original shareholder of Falcon Drilling Company. As a result of these collective financing and repurchase transactions, the number of shares of Brigham common stock outstanding has decreased from approximately 17.0 million shares to 16.0 million shares, while its number of fully-diluted shares outstanding (including all stock options and warrants to purchase common stock) has increased from approximately 26.7 million shares to 32.5 million shares. Brigham's stock price had traded at or below $3.00 per share for over 120 consecutive trading days prior to negotiation of the financing agreements with Shell Capital and the DLJ Affiliates. DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS. Brigham or its representatives may make forward looking statements, oral or written, including statements in this report, press releases and filings with the SEC, regarding estimated future net revenues from oil and natural gas reserves and the present value thereof, planned capital expenditures (including the amount and nature thereof), increases in oil and gas production, the number of wells Brigham anticipates drilling in its planned capital expenditure programs and Brigham's financial position, business strategy and other plans and objectives for future operations. Although Brigham believes that the expectations reflected in these forward looking statements are reasonable, there can be no assurance that the actual results or developments anticipated by Brigham will be realized or, even if substantially realized, that they will have the expected effects on its business or operations. Among the factors that could cause actual results to differ materially from Brigham's expectations are general economic conditions, inherent uncertainties in interpreting engineering data, operating hazards, delays or cancellations of drilling operations for a variety of reasons, competition, fluctuations in oil and gas prices, the ability of Brigham to successfully integrate the business and operations of acquired companies, government regulations and other factors set forth among the risk factors in its filings with the SEC. All subsequent oral and written forward looking statements attributable to Brigham or persons acting on its behalf are expressly qualified in their entirety by these factors. Brigham assumes no obligation to update any of these statements. 3 Item 7. FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits Item Exhibit --------- ------------------------------------------------------------------- 4.1* Certificate of Designations of Series A Preferred Stock (Par Value $.01 Per Share) of Brigham Exploration Company filed October 31, 2000. 10.1* Securities and Note Acquisition Agreement dated as of October 31, 2000 by and among Brigham Oil & Gas, L.P., Brigham, Inc., Brigham Exploration Company, Brigham Holdings I, LLC, Brigham Holdings II, LLC, ECT Merchant Investment Corp., and Joint Energy Development Investments II Limited Partnership. 10.2* 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. 10.3* Subordinated Guaranty Agreement dated as of October 31, 2000 by Brigham Exploration Company in favor of Shell Capital Inc., as Agent, and each of the Lenders party to the Credit Agreement. 10.4* Ancillary Agreement dated as of October 31, 2000 by and among Brigham Oil & Gas, L.P. and Shell Capital Inc. 10.5* Intercreditor and Subordination Agreement dated as of October 31, 2000 by and among Bank of Montreal, as Senior Agent and a Senior Lender, Societe Generale, Southwest Agency, as a Senior Lender, Shell Capital Inc., as a Senior Lender, Shell Capital Inc., both as a Subordinated Agent and a Subordinated Lender, Brigham Exploration Company, Brigham Oil & Gas, L.P., Brigham, Inc., Brigham Holdings I, LLC, and Brigham Holdings II, LLC. 10.6* Warrant Agreement dated as of October 31, 2000 by and between Brigham Exploration Company and Shell Capital Inc. 10.7* First Amendment to Amended and Restated Credit Agreement dated as of October 31, 2000 by and among Brigham Oil & Gas, L.P., Bank of Montreal, Societe Generale, Southwest Agency, and Shell Capital Inc. 4 Item Exhibit --------- ------------------------------------------------------------------- 10.8* First Amendment to Amended and Restated Guaranty Agreement dated as of October 31, 2000 between Brigham Exploration Company and Bank of Montreal. 10.9* Securities Purchase Agreement dated as of November 1, 2000 between Brigham Exploration Company, DLJ MB Funding III, Inc., and DLJ ESC II, LP. 10.10* Registration Rights Agreement dated November 1, 2000 by and between Brigham Exploration Company, DLJ MB Funding III, Inc., and DLJ ESC II, LP. 10.11* Warrant Certificate dated as of November 1, 2000 by and between Brigham Exploration Company and DLJ MB Funding III, Inc. 10.12* Warrant Certificate dated as of November 1, 2000 by and between Brigham Exploration Company and DLJ ESC II, LP. 10.13* Stockholders Voting Agreement dated as of October 31, 2000 by and among Brigham Exploration Company, DLJ ESC II, L.P., DLJ MB Funding III, Inc., and certain shareholders of Brigham Exploration Company. 99.1** Press Release dated November 2, 2000. - ------- * filed herewith. ** previously filed. 5 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BRIGHAM EXPLORATION COMPANY Date: November 8, 2000 By: /s/ CURTIS F. HARRELL ------------------------- Curtis F. Harrell Chief Financial Officer 6 INDEX TO EXHIBITS Item Exhibit --------- ------------------------------------------------------------------- 4.1 Certificate of Designations of Series A Preferred Stock (Par Value $.01 Per Share) of Brigham Exploration Company filed October 31, 2000. 10.1 Securities and Note Acquisition Agreement dated as of October 31, 2000 by and among Brigham Oil & Gas, L.P., Brigham, Inc., Brigham Exploration Company, Brigham Holdings I, LLC, Brigham Holdings II, LLC, ECT Merchant Investment Corp., and Joint Energy Development Investments II Limited Partnership. 10.2 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. 10.3 Subordinated Guaranty Agreement dated as of October 31, 2000 by Brigham Exploration Company in favor of Shell Capital Inc., as Agent, and each of the Lenders party to the Credit Agreement. 10.4 Ancillary Agreement dated as of October 31, 2000 by and among Brigham Oil & Gas, L.P. and Shell Capital Inc. 10.5 Intercreditor and Subordination Agreement dated as of October 31, 2000 by and among Bank of Montreal, as Senior Agent and a Senior Lender, Societe Generale, Southwest Agency, as a Senior Lender, Shell Capital Inc., as a Senior Lender, Shell Capital Inc., both as a Subordinated Agent and a Subordinated Lender, Brigham Exploration Company, Brigham Oil & Gas, L.P., Brigham, Inc., Brigham Holdings I, LLC, and Brigham Holdings II, LLC. 10.6 Warrant Agreement dated as of October 31, 2000 by and between Brigham Exploration Company and Shell Capital Inc. 10.7 First Amendment to Amended and Restated Credit Agreement dated as of October 31, 2000 by and among Brigham Oil & Gas, L.P., Bank of Montreal, Societe Generale, Southwest Agency, and Shell Capital Inc. Item Exhibit --------- ------------------------------------------------------------------- 10.8 First Amendment to Amended and Restated Guaranty Agreement dated as of October 31, 2000 between Brigham Exploration Company and Bank of Montreal. 10.9 Securities Purchase Agreement dated as of November 1, 2000 between Brigham Exploration Company, DLJ MB Funding III, Inc., and DLJ ESC II, LP. 10.10 Registration Rights Agreement dated November 1, 2000 by and between Brigham Exploration Company, DLJ MB Funding III, Inc., and DLJ ESC II, LP. 10.11 Warrant Certificate dated as of November 1, 2000 by and between Brigham Exploration Company and DLJ MB Funding III, Inc. 10.12 Warrant Certificate dated as of November 1, 2000 by and between Brigham Exploration Company and DLJ ESC II, LP. 10.13 Stockholders Voting Agreement dated as of October 31, 2000 by and among Brigham Exploration Company, DLJ ESC II, L.P., DLJ MB Funding III, Inc., and certain shareholders of Brigham Exploration Company. 99.1 Press Release dated November 2, 2000. EX-4.1 2 0002.txt CERTIFICATE OF DESIGNATIONS [filed October 31, 2000] CERTIFICATE OF DESIGNATIONS OF SERIES A PREFERRED STOCK (PAR VALUE $.01 PER SHARE) OF BRIGHAM EXPLORATION COMPANY ---------------------------- PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE ---------------------------- Brigham Exploration Company, a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY that, pursuant to the authority conferred on the Board of Directors of the Corporation by the Certificate of Incorporation, as amended, of the Corporation and in accordance with Section 151 of the General Corporation Law of the State of Delaware, the Board of Directors of the Corporation on October 31, 2000, duly adopted the following preamble and resolution establishing and creating a series of 1,500,000 shares of Preferred Stock, par value $.01 per share, of the Corporation: RESOLVED, that pursuant to the authority vested in the Board of Directors of the Corporation (the "Board of Directors") in accordance with the provisions of its Certificate of Incorporation, as amended, a series of Preferred Stock, par value $.01 per share, of the Corporation is hereby created, and that the designation and number of shares thereof and the preferences, limitations and relative rights thereof are as follows: SECTION 1. DESIGNATION AND NUMBER OF SHARES OF SERIES A PREFERRED STOCK. There is hereby authorized and established a series of Preferred Stock that shall be designated as "Series A Preferred Stock" (hereinafter referred to as "Series A Preferred"), and the number of shares constituting such series shall be 1,500,000. Such number of shares may be increased or decreased, but not to a number less than the number of shares of Series A Preferred then issued and outstanding, by resolution adopted by the full Board of Directors. The "Stated Value" per share of the Series A Preferred shall be equal to Twenty Dollars ($20.00). SECTION 2. DEFINITIONS. In addition to the definitions set forth elsewhere herein, the following terms shall have the meanings indicated: "Business Day" means any day other than a Saturday, Sunday or a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to close. "Change of Control" means (i) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation and its Subsidiaries; or (ii) the acquisition by any Person or group of related Persons for purposes of Section 13 (d) of the Exchange Act, of the power, directly or indirectly, to vote or direct the voting of securities having more than 50% of the ordinary voting power for the election of directors of the Corporation or of any direct or indirect holding company thereof; or (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Corporation cease for any reason to constitute a majority of the Board of Directors then in office; provided that any person becoming a director subsequent to the beginning of such two-year period whose election, or nomination for election by the stockholders of the Corporation, was approved by a vote of at least a majority of the directors then comprising the Board of Directors of the Corporation shall be, for purposes of this definition, considered as though such person were a member of such Board at the beginning of such two-year period. "Common Stock" means the common stock, par value $0.01 per share, of the Corporation. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Junior Securities" means the Common Stock or any other series of stock issued by the Corporation ranking junior as to the Series A Preferred upon liquidation, dissolution or winding up of the Corporation. "Original Issue Date" means the date on which shares of the Series A Preferred are first issued. "Parity Security" means any class or series of stock issued by the Corporation ranking on a parity with the Series A Preferred upon liquidation, dissolution or winding up of the Corporation. "Person" means any individual, corporation, association, partnership, joint venture, limited liability company, trust, estate, or other entity or organization, other than the Corporation, any subsidiary of the Corporation, any employee benefit plan of the Corporation or any subsidiary of the Corporation, or any entity holding shares of Common Stock for or pursuant to the terms of any such plan. "Redemption Date" means the date fixed for any redemption of the Series A Preferred as provided in Section 6 or 7. "Senior Securities" means any class or series of stock issued by the Corporation ranking senior to the Series A Preferred upon liquidation, dissolution or winding up of the Corporation. "Warrants" means the warrants to purchase Common Stock originally issued to DLJ MB Funding III, Inc. and DLJ ESC II, LP on or about October 31, 2000, pursuant to Warrant Certificates in the form attached hereto as EXHIBIT A. "Warrant Certificates" means the Warrant Certificates representing the Warrants. 2 SECTION 3. DIVIDENDS AND DISTRIBUTIONS. (a) The holders of shares of the Series A Preferred shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available therefor, dividends at the times and at the rates provided in this Section 3. Subject to the provisions of Section 3(c) below, dividends shall accrue on each outstanding share of the Series A Preferred at the rate of six percent (6%) per annum of the Stated Value (the "Dividend Rate") of such share. Such dividends on shares of Series A Preferred shall be cumulative from the date such shares are issued, whether or not in any period there shall be funds of the Corporation legally available for the payment of such dividends and whether or not such dividends are declared, and shall be payable quarterly, when, as and if declared by the Board of Directors, on March 31, June 30, September 30 and December 31 in each year (each a "Dividend Payment Date"), except that if such Dividend Payment Date is not a Business Day, then such dividend shall be payable on the first Business Day immediately thereafter to the holders of the Series A Preferred Stock. Such dividends shall accrue whether or not there shall be (at the time such dividend becomes payable or at any other time) profits, surplus or other funds of the Corporation legally available for the payment of dividends. Except as provided below, the dividends shall be payable in cash. (b) Dividends shall be calculated on the basis of the time elapsed from and including the date immediately following the most recent preceding Dividend Payment Date (or, if none, the date of issuance) to and including the Dividend Payment Date or the final distribution date relating to conversion or redemption or to a dissolution, liquidation or winding up of the Corporation. Dividends payable on the shares of Series A Preferred for any period that is not a full quarter shall be calculated at the Dividend Rate on the basis of a 360-day year of twelve 30-day months. (c) Notwithstanding anything to the contrary in Section 3(a), on any Dividend Payment Date occurring on or before the fifth anniversary of the Original Issue Date, if the Corporation does not pay all or part of the cash dividend payable on such Dividend Payment Date (or, if applicable, the first Business Day immediately thereafter), then the Corporation shall pay such unpaid portion of the dividend payable on such Dividend Payment Date to the holders of Series A Preferred Stock in shares (including fractional shares) of Series A Preferred Stock (a "Payment in Kind"). Each Payment in Kind shall be payable as of such Dividend Payment Date, except that if such Dividend Payment Date is not a Business Day, then such Payment in Kind shall be on the first Business Day immediately thereafter to the holders of the Series A Preferred Stock. The issuance of additional shares of Series A Preferred pursuant to subparagraphs (c) and (d) of this Section 3 shall constitute full payment of any dividend paid through Payment in Kind, and such dividends shall not accumulate. (d) Each Payment in Kind shall be equal to that number of additional shares of Series A Preferred Stock that is equal to A divided by B where: "A" = 133.33% of the aggregate dollar amount of the unpaid cash dividends payable on any such Dividend Payment Date; and "B" = the Stated Value. Certificates representing the shares of Series A Preferred Stock issuable on payment of any Payment in Kind shall be delivered to each holder entitled to receive such Payment in Kind (in appropriate denominations) on or before the twentieth (20th) day following the Dividend Payment Date for which such Payment in Kind is elected to be paid hereunder. Shares of Series A Preferred Stock issued on payment of any Payment in Kind shall be duly authorized, validly issued and nonassessable and, upon issuance, shall have rights (including without limitation, dividend, voting and redemption rights) and a Stated Value identical to the outstanding shares of Series A Preferred Stock in respect of which they are issued. (e) Except as provided in Section 8, no interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series A Preferred which are in arrears. (f) Dividends payable on each Dividend Payment Date shall be paid to record holders of the shares of Series A Preferred as they appear on the books of the Corporation at the close of business on the tenth Business Day immediately preceding the respective Dividend Payment Date or on such other record date as may be fixed by the Board of Directors of the Corporation in advance of a Dividend Payment Date, provided that no such record date shall be less than ten nor more than 60 calendar days preceding such Dividend Payment Date. (g) So long as any shares of Series A Preferred are outstanding, the Corporation shall not issue any Senior Securities. (h) No dividends (other than those payable solely in the common stock of the Corporation) shall be paid on any common stock unless and until all accrued and unpaid dividends on the Series A Preferred have been paid. SECTION 4. LIQUIDATION PREFERENCE. (a) In the event of any liquidation, dissolution or winding up of the Corporation (in connection with the bankruptcy or insolvency of the Corporation or otherwise), whether voluntary or involuntary, before any payment or distribution of the assets of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of shares of any Junior Securities, the holders of the shares of Series A Preferred shall be entitled to receive an amount per share equal to (i) the Stated Value per share held by them plus (ii) an amount equal to the aggregate dollar amount of all accrued and unpaid dividends through the final distribution date. To the extent the available assets are insufficient to fully satisfy such amounts, then the holders of the Series A Preferred shall share ratably in such distribution in the proportion that the number of each holder's Series A Preferred Shares bears to the total number of shares of Series A Preferred outstanding. No further payment on account of any such liquidation, dissolution or winding up of the Corporation shall be paid to the holders of the shares of Series A Preferred or the holders of any Parity Securities unless there shall be paid at the same time to the holders of the shares of Series A Preferred and the holders of any Parity Securities proportionate amounts determined ratably in proportion to the full amounts to which the holders of all outstanding shares of Series A Preferred and the holders of all such outstanding Parity Securities are respectively entitled with respect to such distribution. For purposes of this Section, neither a consolidation or merger of the Corporation with one or more partnerships, corporations or other entities nor a sale, lease, exchange or transfer of all or any substantial part of the Corporation's assets for cash, securities or other property shall be deemed to be a liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary. 4 (b) After the payment of the full amount to the holders of Series A Preferred pursuant to the preceding subparagraph (a), and subject to the rights of holders of Junior Securities other than the Common Stock, the holders of Common Stock shall share ratably in the distribution of the remaining available assets of the Corporation, in the proportion that each holder's shares of Common Stock bears to the total number of shares of Common Stock of the Corporation outstanding. (c) Written notice of any liquidation, dissolution or winding up of the Corporation, stating the payment date or dates when and the place or places where the amounts distributable in such circumstances shall be payable, shall be given by first class mail, postage prepaid, not less than 15 days prior to any payment date stated therein, to the holders of record of the shares of Series A Preferred at their respective addresses as the same shall appear in the records of the Corporation. SECTION 5. OPTIONAL REDEMPTION BY THE CORPORATION. The outstanding shares of Series A Preferred are subject to redemption in accordance with the following provisions: (a) Subject to the terms hereof, the Corporation may at its option, so long as it has sufficient funds legally available therefor, elect to redeem, in whole or in part, the outstanding shares of Series A Preferred at any time after the date of issuance of such shares. (b) (i) The redemption price per share for Series A Preferred redeemed on any optional redemption date shall, subject to the provisions below in this Section 5(b), be an amount equal to 101% of the Stated Value of such share plus, without duplication, all accrued and unpaid dividends on such share to and including such Redemption Date (the "Optional Redemption Price"). The Optional Redemption Price shall be paid in cash from any source of funds legally available therefor. (ii) In the event the holders of the Warrants exercise any or all of such Warrants for cash consideration (otherwise than pursuant to the mandatory exercise provisions in Section 5 of each Warrant Certificate), then the Optional Redemption Price for a number of shares of Series A Preferred equal to (A) the aggregate exercise price received by the Corporation pursuant to such exercise divided by (B) the Stated Value as of the exercise date, shall thereafter be deemed to be 100% of the Stated Value of such share plus, without duplication, all accrued and unpaid dividends on such share to and including such Redemption Date. If less than all of the outstanding Series A Preferred are to be redeemed pursuant to this Section 5(b) at the price specified in the preceding sentence, then the Corporation shall redeem a pro rata portion from each holder of Series A Preferred according to the respective number of shares of Series A Preferred held by such holder. (iii) In the event the holders of the Warrants exercise any or all of such warrants for consideration consisting of shares of Series A Preferred, then (A) such exercise shall be deemed an optional redemption of such Series A Preferred, (B) the notice required by Section 5(c) shall not be required, (C) the exercise date shall be the Redemption Date, (C) the Optional Redemption Price per share in such event shall be 100% of the Stated Value of such share as of the Redemption Date, plus, without duplication, all accrued and unpaid dividends on such share to and including such Redemption Date and (D) the Optional Redemption Price shall be paid as set forth in Section 1 of the Warrant Certificate. 5 (c) Not less than 30 nor more than 60 days prior to the date fixed for any redemption of any shares of Series A Preferred, a notice specifying the Redemption Date and place of such redemption and the number of shares to be redeemed shall be given by first class mail, postage prepaid, to the holders of record of the shares of Series A Preferred to be redeemed at their respective addresses as the same shall appear on the books of the Corporation (but no failure to mail such notice or any defect therein shall affect the validity of the proceedings for redemption except as to the holder to whom the Corporation has failed to mail such notice or except as to the holder whose notice was defective), calling upon each such holder of record to surrender to the Corporation on the Redemption Date at the place designated in such notice such holder's certificate or certificates representing the then outstanding shares of Series A Preferred held by such holder being redeemed by the Corporation. On or after the Redemption Date, each holder of shares of Series A Preferred called for redemption shall surrender such holder's certificate or certificates for such shares to the Corporation at the place designated in the redemption notice and shall thereupon be entitled to receive payment of the Optional Redemption Price. Unless there shall have occurred an Event of Noncompliance (as defined hereinafter) that is continuing, from and after the Redemption Date, dividends on the Series A Preferred called for redemption shall cease to accumulate and all rights of the holders of Series A Preferred designated for redemption (except the right to receive the Optional Redemption Price without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever. In the event that less than all of the shares represented by any such certificate are redeemed, a new certificate shall be issued representing such unredeemed shares. SECTION 6. MANDATORY REDEMPTION. (a) As soon as possible following the tenth anniversary of the Original Issue Date the Corporation shall redeem each outstanding Series A Preferred share for cash for an amount per share equal to the Stated Value of such share plus, without duplication, all accrued and unpaid dividends on such share to and including such Redemption Date (the "Redemption Price"). (b) In the event that (i) the Corporation gives a "Company Notice" (as defined in the Warrant Certificates) and (ii) the Warrants are thereafter exercised pursuant to the mandatory exercise provisions in Section 5 of each Warrant Certificate for cash consideration, then the Corporation shall redeem, for cash for an amount per share equal to the Redemption Price, a number of shares of Series A Preferred equal to (A) the aggregate exercise price received by the Corporation pursuant to such mandatory exercise divided by (B) the Redemption Price as of the Redemption Date, rounded down to the nearest whole share of Series A Preferred. Such redemption shall occur not more than ninety days after the date on which such Warrants are exercised. If less than all of the outstanding Series A Preferred are to be redeemed pursuant to this Section 6(b), then the Corporation shall redeem a pro rata portion from each holder of Series A Preferred according to the respective number of shares of Series A Preferred held by such holder. (c) Not less than ten nor more than sixty days prior to the Redemption Date fixed for any redemption of any shares of Series A Preferred under Section 6(a), a notice specifying the mandatory Redemption Date and place of such redemption and the number of shares to be redeemed shall be given by first class mail, postage prepaid, to the holders of record of the shares of Series A Preferred at their respective addresses as the same shall appear on the books of the Corporation, calling upon each such holder of record to surrender to the Corporation on the mandatory Redemption Date at the place designated in such 6 notice the holder's certificate or certificates representing the number of shares of Series A Preferred owned by such holder and being redeemed on such mandatory Redemption Date. On or after the mandatory Redemption Date, each holder of shares of Series A Preferred shall surrender his certificate or certificates for such shares to the Corporation at the place and amount designated in the redemption notice and shall thereupon be entitled to receive payment of the aggregate Redemption Price for such shares. Unless there shall have occurred an Event of Noncompliance that is continuing, from and after the mandatory Redemption Date, dividends on the Series A Preferred called for redemption shall cease to accumulate and all rights of the shares of Series A Preferred being redeemed (except the right to receive the Redemption Price without interest upon surrender of the related certificate or certificates) shall cease, and such shares shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever. In the event that less than all of the shares represented by any such certificate are redeemed, a new certificate shall be issued representing such unredeemed shares. (d) In connection with a redemption under this Section 6, if the Corporation has insufficient funds (whether by legal or contractual prohibition or otherwise) to initially redeem all shares required to be redeemed thereunder, then the Corporation shall from time to time whenever possible use the maximum amount of funds available (until all shares of Series A Preferred are redeemed), and in each partial redemption the number of shares redeemed and the redemption price therefor shall be allocated according to the relative number of Series A Preferred shares owned by each holder as compared to the total number of shares of Series A Preferred outstanding at such time. SECTION 7. CHANGE OF CONTROL. (a) Within 20 days of the occurrence of a Change of Control, the Corporation shall make an offer to purchase (the "Change of Control Offer") the outstanding Series A Preferred shares at an amount per share equal to (x) 101% of the Stated Value of such shares plus, without duplication, (y) all accrued and unpaid dividends on such shares to and including the Change of Control Payment Date (such applicable purchase price being hereinafter referred to as the "Change of Control Purchase Price") in accordance with the procedures set forth in this Section 7. (b) Within 20 days of the occurrence of a Change of Control, the Corporation also shall send by first-class mail, postage prepaid, to each holder of Series A Preferred, at the address appearing on the stock books of the Corporation, a notice stating: (i) that the Change of Control Offer is being made pursuant to this Section 7 and that all Series A Preferred tendered will be accepted for payment, and otherwise subject to the terms and conditions set forth herein; (ii) the Change of Control Purchase Price and the purchase date (which shall be a Business Day no earlier than 20 Business Days from the date such notice is mailed (the "Change of Control Payment Date")); (iii) that any Series A Preferred not tendered will continue to accumulate dividends; 7 (iv) that, unless the Corporation defaults in the payment of the Change of Control Purchase Price, any Series A Preferred accepted for payment pursuant to the Change of Control Offer shall cease to accumulate dividends after the Change of Control Payment Date; (v) that holders accepting the offer to have their Series A Preferred purchased pursuant to a Change of Control Offer will be required to surrender their certificates representing Series A Preferred to the Corporation at the address specified in the notice prior to the close of business on the Business Day preceding the Change of Control Payment Date; (vi) that holders will be entitled to withdraw their acceptance if the Corporation receives, not later than the close of business on the third Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the holder, the number of shares of Series A Preferred delivered for purchase, and a statement that such holder is withdrawing his election to have such Series A Preferred purchased; (vii) that holders whose Series A Preferred is being purchased only in part will be issued new certificates representing the number of shares of Series A Preferred equal to the unpurchased portion of the certificates surrendered; and (viii) any other procedures that a holder must follow to accept a Change of Control Offer or effect withdrawal of such acceptance. (c) In the event that a Change of Control occurs and the holders of Series A Preferred exercise their right to require the Corporation to purchase Series A Preferred, if such purchase constitutes a "tender offer" for purposes of Rule 14e-1 under the Exchange Act at that time, the Corporation will comply with the requirements of Rule 14e-1 as then in effect with respect to such repurchase and, in the event of a conflict between the requirements of the Exchange Act and this Certificate of Designation, the provisions of the Exchange Act shall govern. (d) On the Change of Control Payment Date, the Corporation shall (A) accept for payment the shares of Series A Preferred validly tendered pursuant to the Change of Control Offer, (B) promptly mail to the holders of shares so accepted the Change of Control Purchase Price therefor and (C) cancel and retire each surrendered Certificate and execute a new Series A Preferred certificate equal to any unpurchased shares represented by a certificate surrendered. Unless the Corporation defaults in the payment for the shares of Series A Preferred tendered pursuant to the Change of Control Offer, dividends shall cease to accrue with respect to the shares of Series A Preferred tendered and all rights of holders of such tendered shares shall terminate, except for the right to receive payment therefor, on the Change of Control Payment Date. (e) The Corporation will not be required to make a Change of Control Offer upon a Change of Control if a third party makes such Change of Control Offer contemporaneously with or upon a Change of Control in the manner, at the times and otherwise in compliance with the requirements of this Section 7 and purchases all Series A Preferred validly tendered and not withdrawn under such Change of Control Offer. (f) Prior to the mailing of the notice referred to in Section 7(b), but in any event within 20 days following the date on which a Change of Control occurs, the Corporation covenants that, if the purchase of the Series A Preferred would 8 violate or constitute a default or be prohibited under any instrument governing indebtedness outstanding at the time, then the Corporation will, to the extent needed to permit such purchase of Series A Preferred, either (i) repay in full all such indebtedness or (ii) obtain the requisite consents under such instruments to permit the redemption of the Series A Preferred as provided above. The Corporation will first comply with the covenant in the preceding sentence before it will be required to redeem Series A Preferred pursuant to the provisions described above. SECTION 8. EVENTS OF NONCOMPLIANCE. (a) Notwithstanding any provision to the contrary contained herein, an "Event of Noncompliance" shall have occurred if the Corporation: (i) fails to pay on or before twenty days after any Dividend Payment Date the full amount of dividends then accrued on the Preferred Stock, whether or not such payments are legally permissible; or (ii) the Corporation fails to pay the deemed Optional Redemption Price that is payable pursuant to Section 5(b)(iii) or the Redemption Price payable pursuant to Section 6 on the date that the certificates for the shares of Series A Preferred are properly presented to the Corporation for redemption, whether or not such payment is legally permissible; or (iii) the Corporation fails to pay the Optional Redemption Price payable pursuant to Sections 5(b)(i) and (ii) on the date that the certificates for the shares of Series A Preferred are properly presented to the Corporation for redemption, whether or not such payment is legally permissible. (b) Immediately upon an Event of Noncompliance pursuant to Section 8(a)(i), the Dividend Rate then in effect shall be increased to an amount equal to the Dividend Rate then in effect plus 2.0%, until such time as the dividends accrued but not paid on the applicable Dividend Payment Date are paid in full. (c) Immediately upon an Event of Noncompliance pursuant to Section 8(a)(ii), the Dividend Rate then in effect shall be increased to an amount equal to the Dividend Rate then in effect plus 1.0% and, until such time as the Option Redemption Price, or the Redemption Price, as applicable, is paid in full, such Dividend Rate then in effect shall be further increased by 100 basis points on every 90th day after the date any prior adjustment is made pursuant to this Section 8(c). SECTION 9. REACQUIRED SHARES. Any shares of Series A Preferred repurchased, redeemed, converted or otherwise acquired by the Corporation shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock, without designation as to series. SECTION 10. VOTING RIGHTS. (a) Except as otherwise required by law and as specified in this Section, the holders of shares of Series A Preferred shall not have any right or power to vote on or consent with respect to any matter or in any proceeding or to be 9 represented at any meeting of stockholders of the Corporation. In any action taken as a class, each holder of shares of Series A Preferred shall be entitled to one vote for each share held. (b) So long as any shares of Series A Preferred remain outstanding, the affirmative vote or consent of the holders of 75% of the shares of Series A Preferred outstanding at the time, voting as a class, given in person or by proxy, either in writing or at a meeting, shall be necessary to permit, effect or validate (i) the issuance of any shares of Series A Preferred Stock, other than as a Payment in Kind of dividends payable thereon (ii) the authorization, creation or issuance, or any increase in the authorized or issued amount, of any class or series of Parity Security, other than any Payment or Kind or any increase in the number of authorized shares of Series A Preferred in connection therewith, or (iii) the amendment, alteration or repeal of any of the provisions of the Certificate of Incorporation, as amended, of the Corporation which would adversely affect any right, preference, privilege or voting power of shares of Series A Preferred or of the holders thereof. The increase in the amount of authorized Preferred Stock of the Corporation or the creation and issuance, or increase in amount of authorized shares of other series of Parity Security or Junior Security shall not be deemed to affect materially and adversely such rights, preferences, privileges or voting power. SECTION 11. CERTAIN TAXES. So long as any shares of Series A Preferred are outstanding the Corporation shall pay all taxes and other governmental charges (other than any income, franchise or similar taxes) that may be imposed with respect to the issue or delivery of shares of Common Stock upon conversion of Series A Preferred as provided herein. The Corporation 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 Common Stock in any name other than that of the registered holder of the shares of the Series A Preferred surrendered in connection with the conversion thereof, and in such case the Corporation 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 Corporation's satisfaction that no tax or other charge is due. SECTION 12. RANKING. For purposes of the distribution of assets upon liquidation, dissolution or winding up of the Corporation, (i) the Junior Securities shall rank junior to the Series A Preferred and (ii) the Parity Securities shall rank on a parity with the Series A Preferred. SECTION 13. RECORD HOLDERS. The Corporation may deem and treat the record holder of any shares of Series A Preferred as the true and lawful owner thereof for all purposes, and the Corporation shall not be affected by any notice to the contrary. SECTION 14. NOTICE. Except as may otherwise be provided by law or provided for herein, all notices referred to herein shall be in writing, and all notices hereunder shall be deemed to have been given upon receipt, in the case of a notice of conversion given to the Corporation, or, in all other cases, upon the earlier of receipt of such notice or three Business Days after the mailing of such notices sent by Registered Mail (unless first-class mail shall be specifically permitted for such notice under the terms hereof) with postage prepaid, addressed: If to the Corporation, to its principal executive offices or to any agent of the Corporation designated as permitted hereby; or if to a holder of the Series A Preferred, to such holder at the address of such holder of the Series A Preferred as listed in the stock record books of the Corporation, or to such other address as the Corporation or holder, as the case may be, shall have designated by notice similarly given. 10 SECTION 15. SUCCESSORS AND TRANSFEREES. The provisions applicable to shares of Series A Preferred shall bind and inure to the benefit of and be enforceable by the Corporation, the respective successors to the Corporation, and by any record holder of shares of Series A Preferred. RESOLVED FURTHER, that the appropriate officers of the Corporation be, and they are hereby, authorized and directed from time to time to execute such certificates, instruments or other documents and do all such things as may be necessary or advisable in their discretion in order to carry out the terms hereof, including the filing with the Secretary of State for the State of Delaware of a copy of the foregoing resolution executed by an officer of the Corporation. Dated: October 31, 2000 BRIGHAM EXPLORATION COMPANY By: /s/ David Brigham ------------------------------------- Name: David T. Brigham ------------------------------- Title: Vice President ------------------------------ 11 EX-10.1 3 0003.txt SECURITIES AND NOTE ACQUISITION AGREEMENT SECURITIES AND NOTE ACQUISITION AGREEMENT ----------------------------------------- RECITALS: (a) Brigham Exploration Company ("BEC") and Chase Bank of Texas, National Association, now The Chase Manhattan Bank, as Trustee (in such capacity, herein called "Trustee"), have entered into that certain Indenture dated as of August 20, 1998, as amended under that certain First Amendment to Indenture dated as of March 26, 1999, and that Second Amendment to Indenture dated as of February 17, 2000 (as so amended, and as otherwise heretofore amended, herein called the "Indenture"); all capitalized terms used but not defined herein shall have the meanings assigned to them in the Indenture or, if not defined in the Indenture but defined in the form of Term ORRI Conveyance, they shall have the meanings assigned to them in the form of Term ORRI Conveyance. (b) Enron Capital & Trade Resources Corp. ("Enron Capital"), predecessor in interest to ECT Merchant Investments Corp. ("ECT"), and Joint Energy Development Investments II Limited Partnership ("JEDI II") (ECT and JEDI II are herein collectively called "Noteholders") and BEC have entered into that certain Securities Purchase Agreement dated as of August 20, 1998 (as heretofore amended, the "SPA"). (c) Pursuant to the terms of the SPA and the Indenture, BEC (i) issued in favor of Enron Capital a Senior Subordinated Secured Note, in the original principal amount of $12,500,000, which Senior Subordinated Secured Note was replaced by a Senior Subordinated Secured Note issued to ECT (as same may have been supplemented, amended or modified, and any other notes given in substitution therefor or in renewal or extension thereof, herein called the "ECT Note"), in the original principal amount of $12,500,000, and (ii) issued in favor of JEDI II a Senior Subordinated Secured Note, in the original principal amount of $37,500,000 (as same may have been supplemented, amended or modified, and any other notes given in substitution therefor or in renewal or extension thereof, herein called the "JEDI II Note") (the JEDI II Note and the ECT Note are herein collectively called the "Notes"). (d) Pursuant to the SPA, (i) BEC issued to Enron Capital 263,158 shares of BEC's common stock, as evidenced by certificate number 0089, as replaced by certificate number 0131, issued in favor of ECT, evidencing the change in ownership of said 263,158 shares (the "ECT shares") from Enron Capital to ECT, and (ii) BEC issued to JEDI II 789,474 shares of BEC's common stock, as evidenced by certificate number 0131 (the "JEDI II Shares); the ECT Shares and the JEDI II Shares are herein collectively called the "Shares". (e) Pursuant to the SPA and the Indenture, (i) BEC issued to ECT 250,000 warrants (the "ECT Warrants") to purchase common stock of BEC, as evidenced by Warrant No. A-5 (the "ECT Warrant Certificate"), and (ii) BEC issued to JEDI II 750,000 warrants to purchase common stock of BEC (the "JEDI II Warrants"), as evidenced by Warrant No. A-6 (the JEDI II "Warrant Certificates"); the ECT Warrants and the JEDI II Warrants are herein collectively called the Warrants, the ECT Warrant Certificate and the JEDI II Warrant Certificate are herein collectively called the "Warrant Certificates", 1 the shares of common stock and other securities, if any, receivable upon exercise of the ECT Warrants are herein called the ECT Warrant Shares and the shares of common stock and other securities, if any, receivable upon exercise of the JEDI II Warrants are herein called the JEDI II Warrant Shares, and the ECT Warrant Shares and the JEDI II Warrant Shares are herein collectively called the "Warrant Shares". (f) Pursuant to the Indenture, Brigham Oil & Gas, L.P. ("BOG") has, at the direction of BEC, executed in favor of Noteholders a series of instruments, each entitled Conveyance of Adjustable Term Overriding Royalty Interest, recorded as set forth in Schedule I hereto (such instruments, as well as any other "Term ORRI Conveyance" executed pursuant to the Indenture, are herein collectively called the "Conveyances"). (g) BEC desires to (i) reacquire the Shares, (ii) except as expressly provided otherwise herein below, acquire the Notes, and all other Obligations, including without limitation the Accrued PIK Amount (the Notes, together with such other Obligations being herein collectively called the "Enron Indebtedness"), together with any and all rights and interests (the "Collateral Interests") under any Mortgage or other Collateral Documents securing same, including without limitation under any Collateral Document described in Schedule 1 to the "Full Release", hereafter defined, (iii) acquire, terminate and cancel the Warrants and extinguish all rights of Noteholders under the Warrant Certificates and in relation to the Warrant Shares, and (iv) extinguish all rights and interests, whether vested or contingent, accrued or unaccrued, under the Indenture, the SPA and any other Equity Documents or Loan Documents, including without limitation under any Guaranty Agreement (all of items (i) through and including (iv), above, are herein collectively called the "Acquired Interests"), all upon and subject to the terms and conditions hereof. AGREEMENT: 1. PURCHASE PRICE. The aggregate purchase price (the "Purchase Price") to be paid by BEC for the Acquired Interests is Twenty Million Dollars ($20,000,000). The Purchase Price shall be paid, in immediately available funds, in the relative percentage shares of 25% to ECT and 75% to JEDI II, upon performance by Noteholders and Trustee of their respective obligations hereunder. As conditions precedent to the Noteholder's obligations hereunder, BEC shall (i) pay all outstanding fees and expenses of the Noteholder's counsel incurred in connection with the Acquired Interests and (ii) deliver to the Noteholders, a consent and release from the Senior Lenders, in form and substance identical to that attached hereto as Schedule III. 2. ACQUISITION. Except as expressly provided otherwise in subsection (a) below, Noteholders hereby severally and not jointly, generally assign, transfer, release, surrender and deliver unto BEC all of their collective right, title and interest in respect of the Acquired Interests, and Trustee hereby, at the direction of Noteholders, hereby generally assigns, transfers, releases, surrenders and delivers unto BEC all of its right, title and interest, of any kind or character, in, to and under the Collateral Documents and the Collateral Interests; in order to give further effect to the foregoing, the parties covenant and agree as follows: 2 (a) THE TERM ORRI. ------------- (1) At the direction of BEC, Noteholders shall, on even date herewith, reassign, grant and convey to BOG, its successors and assigns, under a form of reassignment substantially identical to that attached hereto as Schedule I (the "Reassignment"), the Term ORRI and any other rights titles and interests created under a Conveyance or otherwise under or pursuant to Section 7.12 of the Indenture (collectively, the "Reassigned Interests"). The Reassignment shall be duly executed by Noteholders, in a sufficient number of counterparts as BEC shall reasonably request. (2) Noteholders agree that all proceeds from or attributable to the Reassigned Interests (regardless of when the severance of the production to which such proceeds relates occurred), other than only those proceeds that are attributable to periods prior to the "Effective Date" of the Reassignment and that are actually received by Noteholders on or before the date hereof, shall be the property of and should be paid to BOG. (3) Brigham Exploration Company is an intended third party beneficiary of the Reassignment. (b) THE SHARES. On even date herewith, the originals of the stock certificates representing the Shares, duly endorsed in blank, or accompanied by stock powers duly executed in blank, and otherwise in form acceptable to BEC for transfer on the books of BEC, shall be delivered to BEC, and BEC shall receive from Noteholders the written resignation of Jempy Neyman, a representative of Noteholders as an observer on the Board of Directors of BEC, such resignation to be effective as of October 31, 2000. (c) THE WARRANTS. On even date herewith, the original Warrant Certificates, together with the associated Transfer Forms, duly endorsed in blank, shall be surrendered to BEC. (d) THE NOTES. On even date herewith, the Original Notes shall be endorsed "pay to the order of Brigham Exploration Company, without recourse or warranty" and delivered to BEC (or an allonge will be attached to the same effect). (e) RELEASE OF LIENS. On even date herewith, Trustee shall, at the direction of Noteholders, execute a Full Release, in a form substantially identical to that attached hereto as Schedule II (the "Full Release"), in a sufficient number of counterparts as BEC shall reasonably request. RELEASE: (a) DEFINED TERMS. As used in this section, the following terms shall have the following meanings: 3 "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 ATTORNEY'S 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 OR RELATED TO THE ACQUIRED INTERESTS, THE TRANSACTIONS EVIDENCED THEREBY AND THE ACTIONS AND RELATIONSHIP ARISING OUT OF OR RELATED THERETO, OTHER THAN CLAIMS ARISING OUT OF A BREACH OF ANY REPRESENTATION, WARRANTY OR COVENANT MADE OR UNDERTAKEN BY ANY NOTEHOLDER OR TRUSTEE UNDER THIS AGREEMENT, THE FULL RELEASE AND/OR THE REASSIGNMENT. "RELEASED PARTY" shall mean each of the Trustee, the Noteholders and their representative 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"). 4 "RELEASING PARTY" shall mean each of BEC, BOG 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"). (b) RELEASE. 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 AMENDMENT. IN CONNECTION WITH THE FOREGOING RELEASE: (i) BEC, BOG and each of the Guarantors, represents and warrants that it has the full power and authority to perform the release granted in this section and that it has not in any manner made any assignment of any Released Claim to any third party. (ii) The release granted in this section will be effective upon execution of this Agreement by all of the parties hereto. (iii) Each party executing this Agreement understands and agrees that the release granted in this section 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. 5 ADDITIONAL PROVISIONS: 1. REPRESENTATIONS AND WARRANTIES: (a) REPRESENTATIONS AND WARRANTIES OF NOTEHOLDERS. Each Noteholder severally and not jointly represents and warrants that: (i) it owns its respective Acquired Interests, free and clear of any liens, encumbrances, security agreements, equities, options, claims or charges created by, through or under such Noteholder. (ii) in connection with the sale of the Acquired Interests to BEC, each Noteholder has (A) had available such information concerning BEC and the Acquired Interests as it has deemed necessary in order to make an informed investment decision with respect such Noteholder's disposition of the Acquired Interests; (B) completed its own independent investigation, analysis and evaluation of BEC; (C) made all such reviews and inspections of the business, assets, results of operations, condition (financial or otherwise) and prospects of BEC as it has deemed necessary or appropriate; and (D) has such knowledge and experience in financial and business matters that it is capable of, and has relied solely upon the information described above in evaluating the risks relating to its disposition of the Acquired Interests. (iii) In connection with the transactions contemplated hereby, such Noteholder has full legal right, power and authority to execute and deliver this Agreement and that this Agreement is a valid and binding agreement of such Noteholder, enforceable in accordance with its terms, and other than consents already obtained, no consents, notices, filings or approvals are required to be made or received from any person in connection with BEC's and the Noteholders' execution of this agreement and the transactions contemplated hereby. (iv) Except for the representations and warranties contained in this Section 1, neither of the Noteholders makes any representation or warranty regarding the Acquired Interests (including the amount or enforceability thereof). (v) There are no suits, actions, claims, investigations, inquiries, proceedings or demands pending (or to the best of such Noteholder's knowledge, threatened) which affect Noteholder's title to any of the Acquired Interests, or the execution and delivery of this Securities and Note Acquisition Agreement (this "Agreement") or the consummation of transactions contemplated hereby. (b) REPRESENTATIONS AND WARRANTIES OF BEC. In connection with the transactions contemplated hereby, BEC hereby represents and warrants to Noteholders that (i) BEC has full legal right, power and authority to execute and deliver this Agreement and that this Agreement is a valid and binding agreement of BEC, enforceable in accordance with its terms, (ii) there are no suits, actions, claims, investigations, inquiries, proceedings or demands 6 pending (or to the best of BEC's knowledge, threatened) which affect any of the Acquired Interests, or the execution and delivery of this Agreement or the consummation of transactions contemplated hereby, and (iii) other than consents already obtained, no consents, notices, filings or approvals are required to be made or received from any person in connection with BEC's or the Guarantor's execution of this agreement and the transactions contemplated hereby. (c) SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES. All representations, warranties, covenants and agreements contained herein shall not be discharged or dissolved upon, but shall survive, the Closing. 2. COUNTERPARTS: This Agreement is being executed in several counterparts, all of which are identical; all such counterparts together shall constitute one and the same instrument. 3. CHOICE OF LAW: THIS 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. 4. FURTHER ASSURANCES: After the date hereof, Noteholders shall execute and deliver, and shall otherwise cause to be executed and delivered, from time to time, such further instruments, notices, division orders, transfer orders, lien releases, financing statement releases and other documents, and do such other and further acts and things, as may be reasonably necessary to more fully and effectively assign or release to BOG the Acquired Interests provided that BEC shall pay all reasonable costs and expenses incurred by the Noteholders in connection therewith (including reasonable attorney's fees). 5. SUCCESSORS: This Agreement shall be binding upon and shall enure to the benefit of Noteholders and BEC and their respective permitted successors and assigns. 6. ENTIRETY AND MODIFICATION. This 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. No modification, alteration, amendment or supplement to this Agreement shall be valid or effective unless the same is in writing and signed by all parties hereto. This Agreement is executed and delivered on this 31st day of October, 2000. ECT Merchant Investment Corp. By: /s/ JESSE E. NEYMAN ---------------------------- Name: JESSE E. NEYMAN ---------------------------- Title: VICE PRESIDENT ---------------------------- Brigham Oil & Gas, L.P. Joint Energy Development Investments II By: Brigham, Inc. Limited Partnership Managing General Partner By: Enron Capital Management II Limited Partnership, General Partner By: /s/ KAREN E. LYNCH By: Enron Capital II Corp., -------------------------- General Partner Name: KAREN E. LYNCH By: /s/ JESSE E. NEYMAN -------------------------- ---------------------------- Title: VICE PRESIDENT Name: JESSE E. NEYMAN -------------------------- ---------------------------- Title: AGENT AND ATTORNEY-IN-FACT ---------------------------- 7 Brigham, Inc. Brigham Exploration Company By: /s/ KAREN E. LYNCH By: /s/ KAREN E. LYNCH -------------------------- ---------------------------- Name: KAREN E. LYNCH Name: KAREN E. LYNCH -------------------------- ---------------------------- Title: VICE PRESIDENT Title: VICE PRESIDENT -------------------------- ---------------------------- Brigham Holdings I, LLC Brigham Holdings II, LLC a Nevada Limited Liability Company a Nevada Limited Liability Company By: /s/ BEN M. BRIGHAM By: /s/ BEN M. BRIGHAM -------------------------- ---------------------------- Name: BEN M. BRIGHAM Name: BEN M. BRIGHAM -------------------------- ---------------------------- Title: PRESIDENT Title: PRESIDENT -------------------------- ---------------------------- 8 EX-10.2 4 0004.txt SUBORDINATED CREDIT AGREEMENT 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 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...................16 ------------ ------------------------------------ Article 2 Commitments....................................................16 - --------------------- Section 2.01 Loans.................................................16 ------------ ------ Section 2.02 Borrowings, Continuations and Conversions.............16 ------------ ------------------------------------------ Section 2.03 Changes of Commitments................................17 ------------ ----------------------- Section 2.04 Fees..................................................18 ------------ ----- Section 2.05 Several Obligations...................................18 ------------ -------------------- Section 2.06 Notes.................................................18 ------------ ------ Section 2.07 Prepayments...........................................18 ------------ ------------ Section 2.08 Lending Offices.......................................19 ------------ ---------------- Article 3 Payments of Principal and Interest.............................19 - -------------------------------------------- Section 3.01 Repayment of Loans...................................19 ------------ ------------------- Section 3.02 Interest.............................................19 ------------ --------- Article 4 Payments; Pro Rata Treatment; Computations; Etc................20 - ---------------------------------------------------------- Section 4.01 Payments.............................................20 ------------ --------- Section 4.02 Pro Rata Treatment...................................20 ------------ ------------------- Section 4.03 Computations.........................................20 ------------ ------------- Section 4.04 Non-receipt of Funds by the Agent....................20 ------------ ---------------------------------- Section 4.05 Set-off, Sharing of Payments, Etc....................21 ------------ ---------------------------------- Section 4.06 Taxes................................................22 ------------ ------ Article 5 [Intentionally Omitted]........................................25 - --------------------------------- Article 6 Conditions Precedent...........................................25 - ------------------------------ Section 6.01 Initial Funding......................................25 ------------ ---------------- Section 6.02 Initial, Subsequent Loans............................27 ------------ -------------------------- Section 6.03 Conditions Precedent for the Benefit of Lenders......28 ------------ ------------------------------------------------ Section 6.04 No Waiver............................................28 ------------ ---------- i Article 7 Representations and Warranties.................................28 - ---------------------------------------- Section 7.01 Corporate Existence..................................28 ------------ -------------------- Section 7.02 Financial Condition..................................28 ------------ -------------------- Section 7.03 Litigation...........................................29 ------------ ----------- Section 7.04 No Breach............................................29 ------------ ---------- Section 7.05 Authority............................................29 ------------ ---------- Section 7.06 Approvals............................................29 ------------ ---------- Section 7.07 Use of Loans.........................................30 ------------ ------------- Section 7.08 ERISA................................................30 ------------ ------ Section 7.09 Taxes................................................31 ------------ ------ Section 7.10 Titles, etc..........................................31 ------------ ------------ Section 7.11 No Material Misstatements............................32 ------------ -------------------------- Section 7.12 Investment Company Act...............................32 ------------ ----------------------- Section 7.13 Public Utility Holding Company Act...................32 ------------ ----------------------------------- Section 7.14 Subsidiaries.........................................33 ------------ ------------- Section 7.15 Location of Business and Offices.....................33 ------------ --------------------------------- Section 7.16 Defaults.............................................33 ------------ --------- Section 7.17 Environmental Matters................................33 ------------ ---------------------- Section 7.18 Compliance with the Law..............................34 ------------ ------------------------ Section 7.19 Insurance............................................35 ------------ ---------- Section 7.20 Hedging Agreements...................................35 ------------ ------------------- Section 7.21 Restriction on Liens.................................35 ------------ --------------------- Section 7.22 Material Agreements..................................35 ------------ -------------------- Section 7.23 Gas Imbalances.......................................36 ------------ --------------- Section 7.24 Partnership Agreement................................36 ------------ ---------------------- Article 8 Affirmative Covenants..........................................36 - ------------------------------- Section 8.01 Financial Statements and Other Reports...............36 ------------ --------------------------------------- Section 8.02 Litigation...........................................39 ------------ ----------- Section 8.03 Maintenance, Etc.....................................39 ------------ ----------------- Section 8.04 Environmental Matters................................41 ------------ ---------------------- Section 8.05 Further Assurances...................................41 ------------ ------------------- ii Section 8.06 Performance of Obligations..............................42 ------------ --------------------------- Section 8.07 Engineering Reports..................................42 ------------ -------------------- Section 8.08 Reserved.............................................43 ------------ --------- Section 8.09 Additional Collateral................................43 ------------ ---------------------- Section 8.10 ERISA Information and Compliance.....................44 ------------ --------------------------------- Section 8.11 Subsidiary Security..................................45 ------------ -------------------- Section 8.12 Payment of Trade Payables............................45 ------------ -------------------------- Article 9 Negative Covenants.............................................45 - ---------------------------- Section 9.01 Debt.................................................45 ------------ ----- Section 9.02 Liens................................................46 ------------ ------ Section 9.03 Investments, Loans and Advances......................46 ------------ -------------------------------- Section 9.04 Dividends, Distributions and Redemptions.............48 ------------ ----------------------------------------- Section 9.05 Sales and Leasebacks.................................48 ------------ --------------------- Section 9.06 Nature of Business...................................48 ------------ ------------------- Section 9.07 Limitation on Leases.................................48 ------------ --------------------- Section 9.08 Mergers, Etc.........................................48 ------------ -------------- Section 9.09 Proceeds of Notes....................................48 ------------ ------------------ Section 9.10 ERISA Compliance.....................................48 ------------ ----------------- Section 9.11 Sale or Discount of Receivables......................52 ------------ -------------------------------- Section 9.12 [Intentionally Omitted]..............................50 ------------ ----------------------- Section 9.13 Sale of Oil and Gas Properties.......................50 ------------ ------------------------------- Section 9.14 Environmental Matters................................50 ------------ ---------------------- Section 9.15 Transactions with Affiliates.........................50 ------------ ----------------------------- Section 9.16 Subsidiaries.........................................50 ------------ ------------- Section 9.17 Negative Pledge Agreements...........................50 ------------ --------------------------- Section 9.18 Gas Imbalances, Take-or-Pay or Other Prepayments.....51 ------------ ------------------------------------------------- Section 9.19 Borrower as Operator.................................51 ------------ --------------------- Section 9.20 Restrictions While Outstanding Indebtedness ------------ Exceeds the Borrowing Base...........................51 ------------------------- Section 9.21 Debt to RAPRV........................................52 ------------ -------------- iii Article 10 Events of Default; Remedies...................................52 - -------------------------------------- Section 10.01 Events of Default....................................52 ------------- ------------------ Section 10.02 Remedies.............................................54 ------------- --------- Section 10.03 Production and Proceeds..............................55 ------------- ------------------------ Article 11 The Agent.....................................................56 - -------------------- Section 11.01 Appointment, Powers and Immunities...................56 ------------- ----------------------------------- Section 11.02 Reliance by Agent....................................56 ------------- ------------------ Section 11.03 Defaults.............................................56 ------------- --------- Section 11.04 Rights as a Lender...................................57 ------------- ------------------- Section 11.05 INDEMNIFICATION......................................57 ------------- ---------------- Section 11.06 Non-Reliance on Agent and other Lenders..............57 ------------- ---------------------------------------- Section 11.07 Action by Agent......................................58 ------------- ---------------- Section 11.08 Resignation or Removal of Agent......................58 ------------- -------------------------------- Article 12 Miscellaneous.................................................59 - ------------------------ Section 12.01 Waiver...............................................59 ------------- ------- Section 12.02 Notices..............................................59 ------------- -------- Section 12.03 Payment of Expenses, Indemnities, etc................59 ------------- -------------------------------------- Section 12.04 Amendments, Etc......................................62 ------------- ---------------- Section 12.05 Successors and Assigns...............................62 ------------- ----------------------- Section 12.06 Assignments and Participations.......................62 ------------- ------------------------------ Section 12.07 Invalidity...........................................64 ------------- ----------- Section 12.08 Counterparts.........................................64 ------------- ------------- Section 12.09 References...........................................64 ------------- ----------- Section 12.10 Survival.............................................64 ------------- --------- Section 12.11 Captions.............................................64 ------------- --------- Section 12.12 NO ORAL AGREEMENTS...................................64 ------------- ------------------- Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION............65 ------------- ------------------------------------------ Section 12.14 Interest.............................................66 ------------- --------- Section 12.15 Confidentiality......................................67 ------------- ---------------- Section 12.16 Effectiveness........................................67 ------------- -------------- Section 12.17 EXCULPATION PROVISIONS...............................67 ------------- ----------------------- Section 12.18 RELEASE..............................................68 ------------- -------- iv 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", "SCI", "SENIOR AGENT", "SENIOR LENDERS", "SOC-GEN" and Subordination Agreement shall have the meanings indicated above. 1 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. "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. 2 "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. "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. 3 "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. "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. 4 "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 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. 5 "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 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, 6 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. "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. 7 "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. "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. 8 "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. "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. 9 "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 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). 10 "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 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). 11 "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 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 12 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. "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, 13 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"). "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. 14 "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 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 15 reserves and any writeup in the book value of assets resulting from a revaluation thereof. "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 16 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. 17 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, provided that interest on the principal prepaid, accrued to the prepayment date, shall be paid on the prepayment date. 18 (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. (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 19 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. 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 20 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 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 21 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. (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 22 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. (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 23 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 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 24 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 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 25 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. (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. 26 (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. (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 27 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. 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 28 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 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. 29 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 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. 30 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 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 31 information in its possession, that its most recently delivered Reserve Report 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. 32 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 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 33 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 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 34 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 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) 35 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 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 36 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). (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. 37 (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 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. 38 (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, 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 39 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 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 40 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 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 o r 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 41 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 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 42 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 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 43 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. (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. 44 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. 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. 45 (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 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: 46 (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; (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. 47 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 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 48 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; (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 49 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. 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 50 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 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 51 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 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 52 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) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, 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 53 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 (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 54 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 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. 55 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 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 56 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 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 57 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 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. 58 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. 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 59 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, 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 60 (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 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. 61 (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 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 62 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 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 63 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 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 64 PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 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 DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (III) CERTIFY THAT NO PARTY HERETO NOR 65 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 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 66 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). 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 67 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 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 68 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. 69 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 70 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 71 EX-10.3 5 0005.txt SUBORDINATED GUARANTY AGREEMENT SUBORDINATED GUARANTY AGREEMENT BY BRIGHAM EXPLORATION COMPANY in favor of SHELL CAPITAL INC., AS AGENT AND EACH OF THE LENDERS PARTY TO THE CREDIT AGREEMENT October 31, 2000 TABLE OF CONTENTS ----------------- ARTICLE 1 GENERAL TERMS 1 - --------- ------------- Section 1.1 Terms Defined Above 2 Section 1.2 Certain Definitions 2 Section 1.3 Credit Agreement Definitions 2 ARTICLE 2 THE GUARANTY 3 - --------- ------------ Section 2.1 Liabilities Guaranteed 3 Section 2.2 Nature of Guaranty 3 Section 2.3 Agent's Rights 3 Section 2.4 Guarantor's Waivers 3 Section 2.5 Maturity of Liabilities; Payment 4 Section 2.6 Agent's Expenses 4 Section 2.7 Liability 4 Section 2.8 Events and Circumstances Not Reducing Or Discharging Guarantor's Obligations 4 ARTICLE 3 REPRESENTATIONS, WARRANTIES AND COVENANTS 6 - --------- ----------------------------------------- Section 3.1 By Guarantor 6 Section 3.2 No Representation by Lenders 10 ARTICLE 4 SUBORDINATION OF INDEBTEDNESS 11 - --------- ----------------------------- Section 4.1 Subordination of All Guarantor Claims 11 Section 4.2 Claims in Bankruptcy 11 Section 4.3 Payments Held in Trust 11 Section 4.4 Liens Subordinate 12 Section 4.5 Guarantor's Enforcement Rights 12 ARTICLE 5 CERTAIN ADDITIONAL COVENANTS 12 - --------- ---------------------------- Section 5.1 AFFIRMATIVE COVENANTS 12 Financial Statements 12 Section 5.2 NEGATIVE COVENANTS 13 ARTICLE 6 MISCELLANEOUS 18 - --------- ------------- Section 6.1 Successors and Assigns 18 Section 6.2 Notices 18 Section 6.3 Business and Financial Information 18 Section 6.4 Construction 18 Section 6.5 Invalidity 18 Section 6.6 Entire Agreement 19 SUBORDINATED GUARANTY AGREEMENT THIS SUBORDINATED GUARANTY AGREEMENT (this "GUARANTY AGREEMENT") by BRIGHAM EXPLORATION COMPANY (hereinafter called "GUARANTOR"), is in favor of SHELL CAPITAL INC., as agent (the "AGENT") for the lenders (the "LENDERS") that are or become parties to the Credit Agreement defined below, and the Lenders. W I T N E S S E T H: - - - - - - - - - - WHEREAS, on even date herewith, BRIGHAM OIL & GAS, L.P., a Delaware limited partnership (hereinafter called "BORROWER"), the Agent and the Lenders have entered into that certain Subordinated Credit Agreement (as the same may be amended from time to time, the "CREDIT AGREEMENT"); and WHEREAS, Borrower has entered into that certain Amended and Restated Credit Agreement with Bank of Montreal, as agent (the "SENIOR AGENT") and the Lenders that are or become parties thereto (the "SENIOR LENDER") dated as of February 17, 2000 (as the same may be amended from time to time, the "SENIOR CREDIT AGREEMENT"); and WHEREAS, pursuant to the terms of the Senior Credit Agreement, Guarantor has entered into that certain Amended and Restated Guaranty Agreement in favor of Senior Agent for the Senior Lender dated as of February 17, 2000 (as the same may be amended from time to time, the "SENIOR GUARANTY AGREEMENT"); WHEREAS, one of the terms and conditions stated in the Credit Agreement for the making of the loans described therein is the execution and delivery to the Agent for the benefit of the Lenders of this Guaranty Agreement; NOW, THEREFORE, (i) in order to comply with the terms and conditions of the Credit Agreement, (ii) to induce the Lenders, at any time or from time to time, to loan monies, with or without security to or for the account of Borrower in accordance with the terms of the Credit Agreement, (iii) at the special insistence and request of the Lenders, and (iv) for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Guarantor hereby agrees as follows: ARTICLE I GENERAL TERMS Section 1.1 TERMS DEFINED ABOVE. As used in this Guaranty Agreement, the terms "Borrower", "Credit Agreement", "Guarantor", "Lenders", "Senior Agent", "Senior Credit 1 Agreement", "Senior Guaranty Agreement" and "SeniorLender" shall have the meanings indicated above. Section 1.2 CERTAIN DEFINITIONS. As used in this Guaranty Agreement, the following terms shall have the following meanings, unless the context otherwise requires: "GUARANTOR CLAIMS" shall have the meaning indicated in Section 4.1 hereof. "GUARANTY AGREEMENT" shall mean this Guaranty Agreement, as the same may from time to time be amended or supplemented. "LIABILITIES" shall mean (a) any and all indebtedness, obligations and liabilities now or hereafter incurred by the Borrower pursuant to the Credit Agreement, including without limitation, the unpaid fees and principal of and interest on the Notes; (b) payment of and performance of any and all present or future obligations of Borrower to a Lender according to the terms of any Hedging Agreement; (c) any additional "Indebtedness", as defined in the Credit Agreement, (d) all renewals, rearrangements, increases, extensions for any period, amendments or supplement in whole or in part of the Notes or any documents evidencing the above. "SUBORDINATION AGREEMENT" shall mean that certain Intercreditor and Subordination Agreement of even date herewith among the Senior Agent, Senior Lender, Agent, Lender Guarantor, each of the Subsidiary Guarantors and Borrower. "SUBSIDIARY GUARANTOR" shall mean a Subsidiary of the Guarantor which is itself a "Guarantor" under the Credit Agreement. Section 1.3 CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined herein, all terms beginning with a capital letter which are defined in the Credit Agreement shall have the same meanings herein as therein. 2 ARTICLE II THE GUARANTY Section 2.1 LIABILITIES GUARANTEED. Guarantor hereby irrevocably and unconditionally guarantees the prompt payment at maturity of the Liabilities. Section 2.2 NATURE OF GUARANTY. This Guaranty Agreement is an absolute, irrevocable, completed and continuing guaranty of payment and not a guaranty of collection, and no notice of the Liabilities or any extension of credit already or hereafter contracted by or extended to Borrower need be given to Guarantor. This Guaranty Agreement may not be revoked by Guarantor and shall continue to be effective with respect to debt under the Liabilities arising or created after any attempted revocation by Guarantor and shall remain in full force and effect until the Liabilities are paid in full and the Commitments are terminated, notwithstanding that from time to time prior thereto no Liabilities may be outstanding. Borrower and the Lenders may modify, alter, rearrange, extend for any period and/or renew from time to time, the Liabilities, and the Lenders may waive any Default or Events of Default without notice to the Guarantor and in such event Guarantor will remain fully bound hereunder on the Liabilities. This Guaranty Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment of the Liabilities is rescinded or must otherwise be returned by any of the Lenders upon the insolvency, bankruptcy or reorganization of Borrower or otherwise, all as though such payment had not been made. This Guaranty Agreement may be enforced by the Agent and any subsequent holder of any of the Liabilities and shall not be discharged by the assignment or negotiation of all or part of the Liabilities. Guarantor hereby expressly waives presentment, demand, notice of non-payment, protest and notice of protest and dishonor, notice of Default or Event of Default, and also notice of acceptance of this Guaranty Agreement, acceptance on the part of the Lenders being conclusively presumed by the Lenders' request for this Guaranty Agreement and delivery of the same to the Agent. Section 2.3 AGENT'S RIGHTS. Guarantor authorizes the Agent, without notice or demand and without affecting Guarantor's liability hereunder, to take and hold security for the payment of this Guaranty Agreement and/or the Liabilities, and exchange, enforce, waive and release any such security; and to apply such security and direct the order or manner of sale thereof as the Agent in its discretion may determine; and to obtain a guaranty of the Liabilities from any one or more Persons and at any time or times to enforce, waive, rearrange, modify, limit or release any of such other Persons from their obligations under such guaranties. Section 2.4 GUARANTOR'S WAIVERS. (a) GENERAL. Guarantor waives any right to require any of the Lenders to (i) proceed against Borrower or any other person liable on the Liabilities, (ii) enforce any of their rights against any other guarantor of the Liabilities (iii) proceed or enforce any of their rights against or exhaust any security given to secure the Liabilities (iv) have Borrower joined with Guarantor in any suit arising out of this Guaranty Agreement and/or the Liabilities, or (v) pursue any other remedy in the Lenders' powers whatsoever. The Lenders shall not be required to mitigate damages or take any action to reduce, collect or enforce the Liabilities. Guarantor waives any defense arising by reason of any disability, lack of corporate authority or power, or other defense of Borrower or any other guarantor of the Liabilities, and shall remain liable hereon regardless of whether Borrower or any 3 other guarantor be found not liable thereon for any reason. Whether and when to exercise any of the remedies of the Lenders under any of the Loan Documents shall be in the sole and absolute discretion of the Agent, and no delay by the Agent in enforcing any remedy, including delay in conducting a foreclosure sale, shall be a defense to the Guarantor's liability under this Guaranty Agreement. (b) SUBROGATION. Until the Liabilities have been paid in full, the Guarantor waives all rights of subrogation or reimbursement against the Borrower, whether arising by contract or operation of law (including, without limitation, any such right arising under any federal or state bankruptcy or insolvency laws) and waives any right to enforce any remedy which the Lenders now have or may hereafter have against the Borrower, and waives any benefit or any right to participate in any security now or hereafter held by the Agent or any Lender. Section 2.5 MATURITY OF LIABILITIES; PAYMENT. Guarantor agrees that if the maturity of any of the Liabilities is accelerated by bankruptcy or otherwise, such maturity shall also be deemed accelerated for the purpose of this Guaranty Agreement without demand or notice to Guarantor. Guarantor will, forthwith upon notice from the Agent, pay to the Agent the amount due and unpaid by Borrower and guaranteed hereby. The failure of the Agent to give this notice shall not in any way release Guarantor hereunder. Section 2.6 AGENT'S EXPENSES. If Guarantor fails to pay the Liabilities after notice from the Agent of Borrower's failure to pay any Liabilities at maturity, and if the Agent obtains the services of an attorney for collection of amounts owing by Guarantor hereunder, or obtaining advice of counsel in respect of any of their rights under this Guaranty Agreement, or if suit is filed to enforce this Guaranty Agreement, or if proceedings are had in any bankruptcy, probate, receivership or other judicial proceedings for the establishment or collection of any amount owing by Guarantor hereunder, or if any amount owing by Guarantor hereunder is collected through such proceedings, Guarantor agrees to pay to the Agent the Agent's reasonable attorneys' fees. Section 2.7 LIABILITY. It is expressly agreed that the liability of the Guarantor for the payment of the Liabilities guaranteed hereby shall be primary and not secondary. Section 2.8 EVENTS AND CIRCUMSTANCES NOT REDUCING OR DISCHARGING GUARANTOR'S OBLIGATIONS. Guarantor hereby consents and agrees to each of the following to the fullest extent permitted by law, and agrees that Guarantor's obligations under this Guaranty Agreement shall not be released, diminished, impaired, reduced or adversely affected by any of the following, and waives any rights (including without limitation rights to notice) which Guarantor might otherwise have as a result of or in connection with any of the following: (a) MODIFICATIONS, ETC. Any renewal, extension, modification, increase, decrease, alteration or rearrangement of all or any part of the Liabilities, or of the Notes, or the Credit Agreement or any instrument executed in connection therewith, or any contract or 4 understanding between Borrower and any of the Lenders, or any other Person, pertaining to the Liabilities; (b) ADJUSTMENT, ETC. Any adjustment, indulgence, forbearance or compromise that might be granted or given by any of the Lenders to Borrower or Guarantor or any Person liable on the Liabilities; (c) CONDITION OF BORROWER OR GUARANTOR. The insolvency, bankruptcy arrangement, adjustment, composition, liquidation, disability, dissolution, death or lack of power of Borrower or Guarantor or any other Person at any time liable for the payment of all or part of the Liabilities; or any dissolution of Borrower or Guarantor, or any sale, lease or transfer of any or all of the assets of Borrower or Guarantor, or any changes in the shareholders, partners, or members of Borrower or Guarantor; or any reorganization of Borrower or Guarantor; (d) INVALIDITY OF LIABILITIES. The invalidity, illegality or unenforceability of all or any part of the Liabilities, or any document or agreement executed in connection with the Liabilities, for any reason whatsoever, including without limitation the fact that the Liabilities, or any part thereof, exceed the amount permitted by law, the act of creating the Liabilities or any part thereof is ULTRA VIRES, the officers or representatives executing the documents or otherwise creating the Liabilities acted in excess of their authority, the Liabilities violate applicable usury laws, the Borrower has valid defenses, claims or offsets (whether at law, in equity or by agreement) which render the Liabilities wholly or partially uncollectible from Borrower, the creation, performance or repayment of the Liabilities (or the execution, delivery and performance of any document or instrument representing part of the Liabilities or executed in connection with the Liabilities, or given to secure the repayment of the Liabilities) is illegal, uncollectible, legally impossible or unenforceable, or the Credit Agreement or other documents or instruments pertaining to the Liabilities have been forged or otherwise are irregular or not genuine or authentic; (e) RELEASE OF OBLIGORS. Any full or partial release of the liability of Borrower on the Liabilities or any part thereof, of any co-guarantors, or any other Person now or hereafter liable, whether directly or indirectly, jointly, severally, or jointly and severally, to pay, perform, guarantee or assure the payment of the Liabilities or any part thereof, it being recognized, acknowledged and agreed by Guarantor that Guarantor may be required to pay the Liabilities in full without assistance or support of any other Person, and Guarantor has not been induced to enter into this Guaranty Agreement on the basis of a contemplation, belief, understanding or agreement that other parties other than the Borrower will be liable to perform the Liabilities, or the Lenders will look to other parties to perform the Liabilities. (f) OTHER SECURITY. The taking or accepting of any other security, collateral or guaranty, or other assurance of payment, for all or any part of the Liabilities; 5 (g) RELEASE OF COLLATERAL, ETC. Any release, surrender, exchange, subordination, deterioration, waste, loss or impairment (including without limitation negligent, willful, unreasonable or unjustifiable impairment) of any collateral, property or security, at any time existing in connection with, or assuring or securing payment of, all or any part of the Liabilities; (h) CARE AND DILIGENCE. The failure of the Lenders or any other Person to exercise diligence or reasonable care in the preservation, protection, enforcement, sale or other handling or treatment of all or any part of such collateral, property or security; (i) STATUS OF LIENS. The fact that any collateral, security, security interest or lien contemplated or intended to be given, created or granted as security for the repayment of the Liabilities shall not be properly perfected or created, or shall prove to be unenforceable or subordinate to any other security interest or lien, it being recognized and agreed by Guarantor that Guarantor is not entering into this Guaranty Agreement in reliance on, or in contemplation of the benefits of, the validity, enforceability, collectibility or value of any of the collateral for the Liabilities; (j) PAYMENTS RESCINDED. Any payment by Borrower to the Lenders is held to constitute a preference under the bankruptcy laws, or for any reason the Lenders are required to refund such payment or pay such amount to Borrower or someone else; or (k) OTHER ACTIONS TAKEN OR OMITTED. Any other action taken or omitted to be taken with respect to the Credit Agreement, the Liabilities, or the security and collateral therefor, whether or not such action or omission prejudices Guarantor or increases the likelihood that Guarantor will be required to pay the Liabilities pursuant to the terms hereof; it being the unambiguous and unequivocal intention of Guarantor that Guarantor shall be obligated to pay the Liabilities when due, notwithstanding any occurrence, circumstance, event, action, or omission whatsoever, whether contemplated or uncontemplated, and whether or not otherwise or particularly described herein, except for the full and final payment and satisfaction of the Liabilities. ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS Section 3.1 BY GUARANTOR. In order to induce the Lenders to accept this Guaranty Agreement, Guarantor represents and warrants to the Lenders (which representations and warranties will survive the creation of the Liabilities and any extension of credit thereunder) that: 6 (a) BENEFIT TO GUARANTOR. Guarantor's guaranty pursuant to this Guaranty Agreement reasonably may be expected to benefit, directly or indirectly, Guarantor. (b) CORPORATE EXISTENCE. Guarantor is a corporation duly organized, legally existing and in good standing under the laws of the State of Delaware and is duly qualified in all jurisdictions wherein the property owned or the business transacted by it makes such qualification necessary. (c) CORPORATE POWER AND AUTHORIZATION. Guarantor is duly authorized and empowered to execute, deliver and perform this Guaranty Agreement and all corporate action on Guarantor's part requisite for the due execution, delivery and performance of this Guaranty Agreement has been duly and effectively taken. (d) BINDING OBLIGATIONS. This Guaranty Agreement constitutes valid and binding obligations of Guarantor, enforceable in accordance with its terms (except that enforcement may be subject to any applicable bankruptcy, insolvency or similar laws generally affecting the enforcement of creditors' rights) or by general principles of equity. (e) NO CONSENT. Guarantor's execution, delivery and performance of this Guaranty Agreement does not require the consent or approval of any other Person, including without limitation any regulatory authority or governmental body of the United States or any state thereof or any political subdivision of the United States or any state thereof. (f) SOLVENCY. The Guarantor hereby represents that (i) it is not insolvent as of the date hereof and will not be rendered insolvent as a result of this Guaranty Agreement, (ii) it is not engaged in business or a transaction, or about to engage in a business or a transaction, for which any property or assets remaining with such Guarantor is unreasonably small capital, and (iii) it does not intend to incur, or believe it will incur, debts that will be beyond its ability to pay as such debts mature. (g) FINANCIAL CONDITION. The audited consolidated balance sheet of the Guarantor and its Consolidated Subsidiaries as at December 31, 1999 and the related consolidated statement of income, stockholders' equity and cash flow of the Guarantor 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 the Guarantor and its Consolidated Subsidiaries as at June 30, 2000 and their related consolidated statements of income, stockholders' equity and cash flow of the Guarantor 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 the Guarantor 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 the Guarantor nor 7 any of its Subsidiaries 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 of the Credit Agreement. Since December 31, 1999, there has been no change or event having a Material Adverse Effect. Since the date of the Financial Statements, neither the business nor the Properties of the Guarantor and its 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 cancellation of contracts, permits or concessions by any Governmental Authority, riot, activities of armed forces or acts of God or of any public enemy. (h) LITIGATION. Except as disclosed to the Lenders in Schedule 7.03 of the Credit Agreement, 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 Guarantor threatened against or affecting the Guarantor or any of its Subsidiaries which both (a) involves the possibility of any judgment or liability against the Guarantor or any of its Subsidiaries not fully covered by insurance (except for normal deductibles), and (b) would be more likely than not to have a Material Adverse Effect. (i) NO BREACH. Neither the execution and delivery of this Guaranty Agreement, 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 respective charter or by-laws of the Guarantor or any of its Subsidiaries or any Governmental Requirement or any material agreement or instrument to which the Guarantor or any of its Subsidiaries 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 Guarantor or any of its Subsidiaries pursuant to the terms of any such agreement or instrument other than the Liens created by the Loan Documents. (j) ERISA. (1) The Guarantor, its Subsidiaries and each ERISA Affiliate have complied in all material respects with ERISA and, where applicable, the Code regarding each Plan. (2) Each Plan is, and has been, maintained in substantial compliance with ERISA and, where applicable, the Code. (3) No act, omission or transaction has occurred which could result in imposition on the Guarantor, any of its Subsidiaries or any ERISA Affiliate (whether directly or indirectly) of an amount of $100,000 or more as (i) either a civil penalty assessed pursuant 8 to section 502(c), (i) or (l) 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. (4) 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 Guarantor, any of its Subsidiaries or any ERISA Affiliate has been or is expected by the Guarantor, any of its Subsidiaries 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 expected to result in liabilities of $100,000 or more. (5) Full payment when due has been made of all amounts which the Guarantor, any of its Subsidiaries 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. (6) 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 Guarantor'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. (7) None of the Guarantor, any of its Subsidiaries 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 Guarantor, any of its Subsidiaries or any ERISA Affiliate in its sole discretion at any time without any material liability. (8) None of the Guarantor, any of its Subsidiaries 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. (9) None of the Guarantor, any of its Subsidiaries 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. (k) TAXES. Except as set out in Schedule 7.09 of the Credit Agreement, each of the Guarantor and its Subsidiaries 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 Guarantor or any of 9 its Subsidiaries, 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 Guarantor and its Subsidiaries in respect of taxes and other governmental charges are, in the opinion of the Guarantor, adequate. No tax lien has been filed and, to the knowledge of the Guarantor, 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. (l) TITLE TO OWNERSHIP INTEREST IN GENERAL PARTNER AND LIMITED PARTNERS OF BORROWER. The Guarantor has good and unencumbered title to all of the capital stock of the General Partner of the Borrower and, directly or indirectly, all of the ownership interests in the limited partners of the Borrower. (m) INVESTMENT COMPANY ACT. Neither the Guarantor nor any of its Subsidiaries is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. (n) PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Guarantor nor any of its Subsidiaries 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. (o) SUBSIDIARIES. Except as set forth on Schedule 1 hereto or as permitted by Section 9.16 of the Credit Agreement, the Guarantor has no Subsidiaries. (p) COMPLIANCE WITH THE LAW. Neither the Guarantor nor any of its Subsidiaries 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. Section 3.2 NO REPRESENTATION BY LENDERS. Neither the Lenders nor any other Person has made any representation, warranty or statement to the Guarantor in order to induce the Guarantor to execute this Guaranty Agreement. 10 ARTICLE IV SUBORDINATION Section 4.1 SUBORDINATION. (a) SUBORDINATION OF ALL GUARANTOR CLAIMS. As used herein, the term "GUARANTOR CLAIMS" shall mean all debts and liabilities of Borrower or any Subsidiary of the Borrower to Guarantor, whether such debts and liabilities now exist or are hereafter incurred or arise, or whether the obligation of Borrower or such Subsidiary thereon be direct, contingent, primary, secondary, several, joint and several, or otherwise, and irrespective of whether such debts or liabilities be evidenced by note, contract, open account, or otherwise, and irrespective of the person or persons in whose favor such debts or liabilities may, at their inception, have been, or may hereafter be created, or the manner in which they have been or may hereafter be acquired by Guarantor. The Guarantor Claims shall include without limitation all rights and claims of Guarantor against Borrower or any Subsidiary of the Borrower arising as a result of subrogation or otherwise as a result of Guarantor's payment of all or a portion of the Liabilities. Until the Liabilities shall be paid and satisfied in full and Guarantor shall have performed all of its obligations hereunder, Guarantor shall not receive or collect, directly or indirectly, from Borrower or any Subsidiary of the Borrower or any other party any amount upon the Guarantor Claims. (b) SUBORDINATION OF THIS GUARANTY AGREEMENT. The payment and performance of this Guaranty Agreement is subordinated pursuant to the terms and provisions of the Subordination Agreement. Section 4.2 CLAIMS IN BANKRUPTCY. In the event of receivership, bankruptcy, reorganization, arrangement, debtor's relief, or other insolvency proceedings involving Borrower or any Subsidiary of the Borrower, as debtor, the Lenders shall have the right to prove their claim in any proceeding, so as to establish their rights hereunder and receive directly from the receiver, trustee or other court custodian, dividends and payments which would otherwise be payable upon Guarantor Claims. Guarantor hereby assigns such dividends and payments to the Lenders. Should the Agent or any Lender receive, for application upon the Liabilities, any such dividend or payment which is otherwise payable to Guarantor, and which, as between Borrower or any Subsidiary of the Borrower and Guarantor, shall constitute a credit upon the Guarantor Claims, then upon payment in full of the Liabilities, Guarantor shall become subrogated to the rights of the Lenders to the extent that such payments to the Lenders on the Guarantor Claims have contributed toward the liquidation of the Liabilities, and such subrogation shall be with respect to that proportion of the Liabilities which would have been unpaid if the Agent or a Lender had not received dividends or payments upon the Guarantor Claims. Section 4.3 PAYMENTS HELD IN TRUST. In the event that notwithstanding Sections 4.1 and 4.2 above, Guarantor should receive any funds, payments, claims or distributions which is prohibited 11 by such Sections, Guarantor agrees to hold in trust for the Lenders an amount equal to the amount of all funds, payments, claims or distributions so received, and agrees that it shall have absolutely no dominion over the amount of such funds, payments, claims or distributions except to pay them promptly to the Agent, and Guarantor covenants promptly to pay the same to the Agent. Section 4.4 LIENS SUBORDINATE. Guarantor agrees that any liens, security interests, judgment liens, charges or other encumbrances upon Borrower's or any Subsidiary of the Borrower's assets securing payment of the Guarantor Claims shall be and remain inferior and subordinate to any liens, security interests, judgment liens, charges or other encumbrances upon Borrower's or any Subsidiary of the Borrower's assets securing payment of the Liabilities, regardless of whether such encumbrances in favor of Guarantor, the Agent or the Lenders presently exist or are hereafter created or attach. Section 4.5 GUARANTOR'S ENFORCEMENT RIGHTS. Without the prior written consent of the Lenders, Guarantor shall not (a) exercise or enforce any creditor's right it may have against the Borrower or any Subsidiary of the Borrower, or (b) foreclose, repossess, sequester or otherwise take steps or institute any action or proceeding (judicial or otherwise, including without limitation the commencement of or joinder in any liquidation, bankruptcy, rearrangement, debtor's relief or insolvency proceeding) to enforce any lien, mortgages, deeds of trust, security interest, collateral rights, judgments or other encumbrances on assets of Borrower or any Subsidiary of the Borrower held by Guarantor. ARTICLE V CERTAIN ADDITIONAL COVENANTS Section 5.1 AFFIRMATIVE COVENANTS. FINANCIAL STATEMENTS. The Guarantor shall cause the Borrower to deliver as and when required, the financial statements and other information called for in Section 8.01 of the Credit Agreement and Guarantor shall: (a) NOTICE OF DEFAULT. Promptly after the Guarantor knows that any default in any covenant herein has occurred, the Guarantor will give notice of such default to the Agent, describing the same in reasonable detail and the action the Guarantor proposes to take with respect thereto. (b) PAYMENT OF TRADE PAYABLES. The Guarantor will pay and cause all of its Subsidiaries to pay all of their respective Trade Payables now or hereafter incurred within 60 days of the date of invoice, unless subject to legal offset or unless being contested in good faith by 12 appropriate proceedings and reserves adequate under GAAP shall have been established therefor. Section 5.2 NEGATIVE COVENANTS. The Guarantor covenants and agrees that, so long as any of the Commitments are in effect and until payment in full of the Liabilities hereunder, all interest thereon and all other amounts payable by the Guarantor hereunder, without the prior written consent of the Majority Lenders: (a) DEBT. The Guarantor will not and will not permit any of its Subsidiaries to incur, create, assume or suffer to exist any Debt, except: (1) 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; (2) Debt existing on the Closing Date which is reflected in the Financial Statements or is disclosed in Schedule 9.01 to the Credit Agreement, and any renewals or extensions (but not increases) thereof; (3) Debt permitted under the Credit Agreement; (4) Debt owing to the Borrower, the Guarantor or a Subsidiary Guarantor which (other than Debt owing to the Borrower) is subordinated to the Indebtedness as provided in the Guaranty Agreement of the Guarantor or such Subsidiary Guarantor; (5) Debt of the Guarantor not described in Sections 5.2 (1) through (4) above which together with all Debt of the Borrower allowed under Section 9.01(h) of the Credit Agreement does not exceed $1,000,000 at any one time outstanding; and (6) The Senior Indebtedness and any other Debt arising under or otherwise in relation to the Senior Loan Documents. (b) LIENS. The Guarantor will not and will not permit any of its Subsidiaries to create, incur, assume or permit to exist any Lien on any of its Properties (now owned or hereafter acquired), except: (1) Liens securing the payment of any Indebtedness; (2) Excepted Liens; (3) Liens created, incurred, assumed or permitted to exist by the Borrower and the Borrower's Subsidiaries as permitted under the Credit Agreement; and 13 (4) Liens securing the payment of the Senior Indebtedness. (c) INVESTMENTS, LOANS AND ADVANCES. The Guarantor will not and will not permit any of its Subsidiaries to remain outstanding any loans or advances to or investments in any Person, except that the foregoing restriction shall not apply to: (1) investments, loans or advances by the Guarantor or a Subsidiary Guarantor (other than a Subsidiary of the Borrower) in or to the Borrower, the Guarantor or a Subsidiary Guarantor; and (2) any other investments, loans and advances by the Borrower or a Subsidiary of the Borrower as permitted under Section 9.03 of the Credit Agreement. (d) DIVIDENDS, DISTRIBUTIONS AND REDEMPTIONS. The Guarantor will not declare or pay any dividend, purchase, redeem or otherwise acquire for value any of its stock now or hereafter outstanding, return any capital to its stockholders or make any distribution of its assets to its stockholders; provided that Guarantor may pay dividends on its preferred equity securities so long as they are paid in kind and not in cash. (e) SALES AND LEASEBACKS. The Guarantor will not and will not permit any of its Subsidiaries to enter into any arrangement, directly or indirectly, with any Person whereby such Person shall sell or transfer any of its Property, whether now owned or hereafter acquired, and whereby such Person shall then or thereafter rent or lease as lessee such Property or any part thereof or other Property which such Person intends to use for substantially the same purpose or purposes as the Property sold or transferred. (f) NATURE OF BUSINESS. The Guarantor will not allow any material change to be made in the character of its business as presently conducted. (g) LIMITATION ON LEASES. The Guarantor will not and will not permit any of its Subsidiaries to create, incur, assume or suffer to exist any obligation for the payment of rent or hire of Property of any kind whatsoever (real or personal 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 Guarantor and its 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. (h) MERGERS, ETC. The Guarantor will not and will not permit any of its Subsidiaries 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 Guarantor, the Borrower or any Subsidiary 14 Guarantor whose Guaranty Agreement is in full force and effect is the surviving entity and no Default exists or will be created thereby. (i) ERISA COMPLIANCE. The Guarantor will not and will not permit any of its Subsidiaries to at any time: (1) Engage in, or permit any ERISA Affiliate to engage in, any transaction in connection with which the Guarantor, any of its Subsidiaries or any ERISA Affiliate could be subjected to either a civil penalty assessed pursuant to section 502(c), (i) or (l) of ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code in excess of $100,000; (2) 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 Guarantor, any of its Subsidiaries or any ERISA Affiliate to the PBGC in excess of $100,000; (3) Fail to make, or permit any ERISA Affiliate to fail to make, full payment when due of all amounts which under the provisions of any Plan, agreement relating thereto or applicable law, the Guarantor, any of its Subsidiaries or any ERISA Affiliate is required to pay as contributions thereto; (4) 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; (5) Permit, or allow any ERISA Affiliate to permit, the actuarial present value of the benefit liabilities under any Plan maintained by the Guarantor, any of its Subsidiaries 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; (6) 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; (7) 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, (a) any Multiemployer Plan, or (b) 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 15 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; (8) 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 in the aggregate for all such liability exceeds $100,000; (9) 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 (10) Amend or permit any ERISA Affiliate to amend, a Plan resulting in an increase in current liability such that the Guarantor, any of its Subsidiaries or any ERISA Affiliate is required to provide security to such Plan under section 401(a)(29) of the Code. (j) SALE OR DISCOUNT OF RECEIVABLES. The Guarantor will not and will not permit any of its Subsidiaries to discount or sell (with or without recourse) any of its notes receivable or accounts receivable. (k) CAPITAL EXPENDITURES. The Guarantor will not and will not permit Borrower to exceed the capital expenditure limitations provided in Section 9.20 of the Credit Agreement. (l) ENVIRONMENTAL MATTERS. The Guarantor will not and will not permit any of its Subsidiaries to cause or permit any of its Property to be in violation of, or do anything or permit anything to be done which will subject any such Property to 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. (m) TRANSACTIONS WITH AFFILIATES. The Guarantor will not and will not permit any of its Subsidiaries to enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of Property or the rendering of any service, with any Affiliate unless such transactions are otherwise not in violation of the Credit Agreement, are in the ordinary course of its business and are upon fair and reasonable terms no less favorable to it (or, if the Borrower is involved, no less favorable to the Borrower) than it would obtain in a comparable arm's length transaction with a Person not an Affiliate. 16 (n) SUBSIDIARIES. The Guarantor will not and will not permit any of its Subsidiaries to, create any additional Subsidiaries except for the Subsidiaries of the Borrower as permitted by the Credit Agreement. (o) NEGATIVE PLEDGE AGREEMENTS. The Guarantor will not and will not permit any of its Subsidiaries 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 the granting, conveying, creation or imposition of any Lien on any of its Property or which requires the consent of or notice to other Persons in connection therewith. (p) CAPITAL STOCK OF GENERAL PARTNER OF BORROWER. The Guarantor will not permit any of the capital stock of the General Partner of the Borrower or any ownership interest in any limited partner of the Borrower to be owned or controlled by any Person other than the Guarantor or Brigham Inc.. (q) CURRENT RATIO. The Guarantor will not permit its ratio of (i) consolidated current assets of the Guarantor and its Consolidated Subsidiaries (including, without limitation, any unused and available Aggregate Commitments) to (ii) their consolidated current liabilities (excluding the Indebtedness) to be less than 1.0 to 1.0 at any time. (r) INTEREST COVERAGE RATIO. The Guarantor will not permit its Interest Coverage Ratio as of the end of any fiscal quarter of the Guarantor (calculated quarterly at the end of each fiscal quarter) to be less than the ratio set forth below for such period. INTEREST COVERAGE RATIO shall mean the ratio of (i) EBITDA to (ii) the sum of all required payments of interest (whether paid in cash or in kind) during such period on borrowed money: (i) not less than .75 to 1.0 for the twelve (12) month period ending September 30, 2000; (ii) not less than .80 to 1.0 for the twelve (12) month period ending December 31, 2000; (iii) not less than .90 to 1.0 for the twelve (12) month period ending March 31, 2001; (iv) not less than 1.3 to 1.0 for the twelve (12) month period ending June 30, 2001; (v) not less than 1.5 to 1.0 for the twelve (12) month period ending September 30, 2001; 17 (vi) not less than 1.7 to 1.0 for the twelve (12) month period ending December 31, 2001; (vii) not less than 2.0 to 1.0 for the twelve (12) month period ending March 31, 2002; (viii) not less than 2.25 to 1.0 for the twelve (12) month period ending June 30, 2002; and (ix) thereafter, not less than 2.50 to 1.0 for the twelve (12) month period ending September 30, 2002, and each twelve (12) month period ending at the end of each fiscal quarter of Guarantor. ARTICLE VI MISCELLANEOUS Section 6.1 SUCCESSORS AND ASSIGNS. This Guaranty Agreement is and shall be, in every particular, available to the successors and assigns of the Lenders and is and shall always be fully binding upon the legal representatives, heirs, successors and assigns of Guarantor, notwithstanding that some or all of the monies, the repayment of which this Guaranty Agreement applies, may be actually advanced after any bankruptcy, receivership, reorganization, death, disability or other event affecting Guarantor. Section 6.2 NOTICES. Any notice or demand to Guarantor under or in connection with this Guaranty Agreement may be given and shall conclusively be deemed and considered to have been given and received in accordance with Section 12.02 of the Credit Agreement, addressed to Guarantor at the address on the signature page hereof or at such other address provided to the Agent in writing. Section 6.3 BUSINESS AND FINANCIAL INFORMATION. Subject to any applicable confidentiality agreements, the Guarantor will promptly furnish to the Agent and the Lenders from time to time upon request such information regarding the business and affairs and financial condition of the Guarantor and its subsidiaries as the Agent and the Lenders may reasonably request. Section 6.4 CONSTRUCTION. This Guaranty Agreement is a contract made under and shall be construed in accordance with and governed by the laws of the State of Texas. Section 6.5 INVALIDITY. In the event that any one or more of the provisions contained in this Guaranty Agreement shall, for any reason, be held invalid, illegal or unenforceable in any 18 respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Guaranty Agreement. Section 6.6 ENTIRE AGREEMENT. THIS WRITTEN GUARANTY AGREEMENT EMBODIES THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE LENDERS AND THE GUARANTOR AND SUPERSEDES ALL OTHER AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF. THIS WRITTEN GUARANTY AGREEMENT REPRESENTS 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. WITNESS THE EXECUTION HEREOF, as of this the 31st day of October, 2000. BRIGHAM EXPLORATION COMPANY 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: 19 SCHEDULE I SUBSIDIARIES OF BRIGHAM EXPLORATION Brigham Exploration has the following Subsidiaries: 1. Brigham, Inc., a Nevada corporation, all of whose shares are owned by Brigham Exploration. 2. Brigham Holdings I, LLC, a Nevada limited liability company, whose only member is Brigham Exploration. 3. Brigham Holdings II, LLC, a Nevada limited liability company, whose only member is Brigham, Inc. 4. Borrower, a Delaware limited partnership, whose only General Partner is Brigham, Inc., and whose only limited partners are Brigham Holdings I, LLC and Brigham Holdings II, LLC. 20 EX-10.4 6 0006.txt ANCILLARY AGREEMENT 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. (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-10.5 7 0007.txt INTERCREDITOR AND SUBORDINATION AGREEMENT INTERCREDITOR AND SUBORDINATION AGREEMENT THIS INTERCREDITOR AND SUBORDINATION AGREEMENT (this "AGREEMENT") is made as of October 31, 2000, by and between Shell Capital Inc. as agent (in such capacity, and together with any successor in such capacity, the "SUBORDINATED AGENT") for each of the lenders that is signatory to, or which becomes a signatory to, the Subordinated Credit Agreement (as defined below) (collectively, the "SUBORDINATED LENDER"), and Bank of Montreal, individually ("BMO") and as agent for the Senior Lenders, as defined below (in such capacity as agent, and together with any successor in such capacity, the "SENIOR Agent"), Societe Generale, Southwest Agency ("SOC-GEN"), Shell Capital Inc. ("SCI") (BMO, Soc-Gen, SCI and any other lender that becomes a signatory to the Senior Credit Agreement, as defined below, are herein collectively called the "SENIOR LENDER"). BRIGHAM EXPLORATION COMPANY, a Delaware corporation (the "PARENT"), BRIGHAM OIL & GAS, L.P., a Delaware limited partnership ("BOG"), BRIGHAM, INC., a Nevada corporation ("BI"), BRIGHAM HOLDINGS I, LLC, a Nevada limited liability company ("BH-I") and BRIGHAM HOLDINGS II, LLC, a Nevada limited liability company ("BH-II", and together with BI and BH-I, the "OBLIGORS") are signatories hereto solely for the purpose of evidencing their acknowledgment and consent to the terms and conditions of this Agreement and their agreement to make payment of the Senior Indebtedness and Subordinated Indebtedness (as such terms are defined below) in accordance with Section 2.2 of this Agreement. RECITALS A. BOG, as the borrower, the Senior Agent and the Senior Lender are parties to that certain Amended and Restated Credit Agreement dated as of February 17, 2000 (such agreement, as the same may be from time to time amended, modified, supplemented, restated, refinanced or replaced, the "SENIOR CREDIT AGREEMENT"), pursuant to which the Senior Lenders have made certain credit available to and on behalf of BOG. B. BOG has executed one or more Mortgages (as such term is defined in the Senior Credit Agreement) and associated security agreements and/or financing statements (such agreements, as the same may have heretofore been or may hereafter be from time to time amended, supplemented or replaced, the "SENIOR MORTGAGE") in favor of the Senior Agent to secure, INTER ALIA, the obligations outstanding under the Senior Credit Agreement. C. Parent has executed an Amended and Restated Guaranty Agreement dated as of February 17, 2000, as amended by a First Amendment to Amended and Restated Guaranty Agreement of even date herewith (the "PARENT GUARANTY AGREEMENT"), and BI, BH-I and BH-II have each executed a Guaranty Agreement dated as of January 26, 1998, as each has been amended by a First Amendment to Guaranty Agreement dated as of February 17, 2000 (such Guaranty Agreements, together with the Parent Guaranty Agreement, as each of the same may be from time to time further amended, supplemented or replaced, being referred to herein as the "SENIOR GUARANTY AGREEMENTS"), in favor of the Senior Agent and the Senior Lender to guarantee, INTER ALIA, the obligations of BOG under the Senior Credit Agreement. D. Parent has executed a Security Agreement dated as of January 26, 1998 and a Security Agreement dated as of August 28, 1998, each as amended by an Amendment to Security Agreement dated as of February 17, 2000 (as the same may be from time to time further amended, supplemented or replaced, the "SENIOR PARENT SECURITY AGREEMENT") to secure, INTER ALIA, the obligations of BOG under the Senior Credit Agreement. E. BOG has executed a Security Agreement dated as of January 26, 1998, as amended by a First Amendment to Security Agreement dated as of March 26, 1999 and a Second Amendment to Security Agreement dated as of February 17, 2000 (as the same may be from time to time further amended, supplemented or replaced, the "SENIOR BOG SECURITY AGREEMENT") to secure, INTER ALIA, the obligations of BOG under the Senior Credit Agreement. F. BI has executed a Security Agreement dated as of August 20, 1998, as amended by a First Amendment to Security Agreement dated as of March 26, 1999, and a Second Amendment to Security Agreement dated as of February 17, 2000, (the "SENIOR BI SECURITY AGREEMENT"), BH-I has executed a Security Agreement dated as of August 20, 1998, as amended by a First Amendment to Security Agreement dated as of March 26, 1999, and a Second Amendment to Security Agreement dated as of February 17, 2000, (the "SENIOR BH-I SECURITY AGREEMENT"), and BH-II has executed a Security Agreement dated as of August 20, 1998, as amended by a First Amendment to Security Agreement dated as of March 26, 1999, and a Second Amendment to Security Agreement dated as of February 17, 2000, (the "SENIOR BH-II SECURITY AGREEMENT") The Senior BI Security Agreement, the Senior BH-I Security Agreement and the Senior BH-II Security Agreement are herein collectively called the "SENIOR AFFILIATE SECURITY Agreements". The Senior Credit Agreement, the Senior Mortgage, the Senior Guaranty Agreements, the Senior Parent Security Agreement, the Senior BOG Security Agreement, the Senior Affiliate Security Agreements and any other documents or instruments given in connection therewith or otherwise in connection with the Senior Credit Agreement are collectively referred to herein as the "SENIOR LOAN DOCUMENTS". G. Of even date herewith, BOG has entered into that certain Subordinated Credit Agreement with the Subordinated Agent and the Subordinated Lender (the "SUBORDINATED CREDIT AGREEMENT") pursuant to which the Subordinated Lender will make loans to BOG, such advances to be evidenced by a promissory note executed and delivered by BOG in accordance with the Subordinated Credit Agreement (the "SUBORDINATED NOTE"). H. In connection with the execution and delivery of the Subordinated Credit Agreement, BOG has executed, or will execute, one or more Mortgages (as such term is defined in the Subordinated Credit Agreement) and associated security agreements and/or financing statements (as the same may be from time to time amended, modified, supplemented or replaced, the "SECOND MORTGAGES") in favor of the Agent to secure, INTER ALIA, the obligations outstanding under the Subordinated Loan Documents (as hereinafter defined). -2- I. In connection with the execution and delivery of the Subordinated Credit Agreement, Parent, BI, BH-I and BH-II have each executed and delivered a Subordinated Guaranty Agreement dated of even date herewith (as the same may be from time to time amended, modified, supplemented or replaced, being referred to herein as the "SUBORDINATED GUARANTY AGREEMENTS"), in favor of the Subordinated Agent, for the benefit of the Subordinated Agent and the Subordinated Lender to guarantee, INTER ALIA, the obligations of the BOG under the Subordinated Loan Documents. J. In connection with the execution and delivery of the Subordinated Credit Agreement, Parent, Borrower, BI, BH-I and BH-II have each executed and delivered a Second Security Agreement in favor of the Subordinated Agent dated of even date herewith (as the same may be from time to time further amended, modified, supplemented or replaced, the "SECOND SECURITY AGREEMENTS"). K. The Subordinated Credit Agreement, the Subordinated Note, the Second Mortgages, the Subordinated Guaranty Agreements, the Second Security Agreements and those other documents or instruments now or hereafter given in connection therewith, and including those identified on Exhibit "A" attached hereto, as any of such documents or instruments may be amended, supplemented or replaced are collectively referred to herein as the "SUBORDINATED LOAN DOCUMENTS". L. Therefore, (i) in order to comply with the terms and conditions of the Subordinated Credit Agreement, (ii) at the special insistence and request of the Senior Agent and the Senior Lender, and (iii) for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Subordinated Agent, the Subordinated Lender, the Senior Agent on behalf of the Senior Lender, and the Parent, BOG and the Obligors agree as follows: ARTICLE I DEFINITIONS Section 1.1 TERMS DEFINED ABOVE. As used in this Agreement, the terms defined above shall have the meanings respectively assigned to them. Section 1.2 CERTAIN DEFINITION. As used in this Agreement the following terms shall have the following meanings, unless the context otherwise requires: "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 -3- 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. "HEDGING AGREEMENT" 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 permitted by the terms of the Senior Credit Agreement, now or hereafter existing between (i) BOG and BMO and its successors or assigns ("BMO HEDGE PARTY") and Soc-Gen and its successors and assigns ("SOC-GEN HEDGE PARTY") entered into while such BMO Hedge Party or Soc-Gen Hedge Party is a Senior Lender; and (ii) BOG and SCI and its successors or assigns (with Loans (as defined in the Senior Credit Agreement) or Commitments (as defined in the Senior Credit Agreement) 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. "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 the lien or security interest arising from a mortgage, encumbrance, pledged, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. "OIL AND GAS PROPERTIES" shall have the meaning attributed to such term in the Senior Credit Agreement. "PAYMENT BLOCKAGE PERIOD" means the period commencing on (i) the date on which a default in the payment of any principal of or interest on the Senior Indebtedness occurs or (ii) the date on which a Payment Blockage Notice (as defined below) is given, and expiring on the date which is 60 days following the first day of the Payment Blockage Period. "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. "PROPERTY" shall mean any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "SENIOR INDEBTEDNESS" shall mean the principal balance of all loans advanced to or letters of credit issued for the account of BOG pursuant to the terms and conditions of the Senior Loan Documents, not to exceed $75,000,000 in principal amount plus such additional amounts as are permitted under Section 2.6(a)(ii) of this Agreement, and accrued but unpaid interest thereon, all fees, expenses, reimbursements obligations, liabilities, indemnities or other monetary obligations of BOG, the Parent or any Obligor under any Senior Loan Document, and all swap settlement amounts or other amounts due and payable under any -4- Senior Loan Document, and all swap settlement amounts or other amounts due and payable under any Hedging Agreements, whether any of the foregoing is (i) absolute or contingent, direct or indirect, joint, several or independent, (ii) now outstanding or owing or which may hereafter be existing or incurred, (iii) due or to become due, or (iv) held or to be held by the Senior Agent or any Senior Lender, and all renewals, extensions, rearrangements, refundings and modifications thereof permitted by the terms hereof. "SUBORDINATED INDEBTEDNESS" shall mean the principal balance of all loans advanced to BOG and/or rearranged pursuant to the terms and conditions of the Subordinated Loan Documents (including interest paid in kind as permitted by the Subordinated Loan Documents), and accrued but unpaid interest thereon, and all fees, expenses, reimbursement obligations, liabilities, indemnities or other monetary obligations of BOG, the Parent or any Obligor under any Subordinated Loan Document, whether any of the foregoing is (i) absolute or contingent, direct or indirect, joint, several or independent, (ii) now outstanding or owing or hereafter existing or incurred, (iii) due or to become due, or (iv) held or to be held by the Subordinated Agent or any Subordinated Lender, and all renewals, extensions, rearrangements, refundings and modifications thereof permitted by the terms hereof. ARTICLE II SUBORDINATION Section 2.1 AGREEMENT TO SUBORDINATE. The payment of any and all Subordinated Indebtedness and the Subordinated Loan Documents are expressly subordinated to the extent and in the manner set forth in Sections 2.2 through 2.8 hereof to the Senior Indebtedness and the Senior Loan Documents. Section 2.2 PAYMENT SUBORDINATION UPON DEFAULT. (a) The Subordinated Agent and the Subordinated Lender agree, that: (i) the Subordinated Indebtedness is subordinate in right of payment, to the extent and in the manner provided in this Agreement, to the prior payment in full of all Senior Indebtedness (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed); (ii) BOG, the Parent and the Obligors may not make any payment (whether by redemption, purchase, retirement, defeasance, set-off or otherwise) upon or in respect of the Subordinated Indebtedness, until all principal and other obligations with respect to the Senior Indebtedness have been paid in full if: (A) a default in the payment of any principal of or interest on the Senior Indebtedness occurs; or (B) the payment of the Subordinated Indebtedness would result in a default or event of default under the Senior Loan Documents or any -5- other default has occurred and is continuing with respect to the Senior Indebtedness that permits, or with the giving of notice or passage of time or both (unless cured or waived) would permit, the Senior Agent or the Senior Lender to accelerate its maturity and the Subordinated Agent receives a notice of the default (a "PAYMENT BLOCKAGE NOTICE") from the Parent, BOG, and Obligor, the Senior Agent or any Senior Lender with regard to the foregoing. (iii) BOG, the Parent and each Obligor may resume payments on and distributions in respect of the Subordinated Indebtedness upon: (A) in the case of a default referred to in Section 2.2(a)(ii)(A), the date upon which the default is cured or waived, or (B) in the case of a default referred to in Section 2.2(a)(ii)(B), the earliest of (1) the date on which such nonpayment default is cured or waived or (2) the expiration of the applicable Payment Blockage Period unless the maturity of the Senior Indebtedness has been accelerated. (iv) Upon any payment or distribution of property or securities to creditors of the Parent, BOG or any Obligor in a liquidation or dissolution of such person or its property, or in an assignment for the benefit of creditors or any marshaling of its assets and liabilities: (A) the Senior Lender shall be entitled to receive payment in full of all Senior Indebtedness (including interest after the commencement of any such proceeding at the rate specified in the Senior Loan Documents, whether or not a claim for such interest would be allowed in such proceeding) before the Subordinated Agent and/or Subordinated Lender shall be entitled to receive any payment with respect to the Subordinated Indebtedness; and (B) until the Senior Indebtedness is paid in full, any payment or distribution to which the Subordinated Agent and/or the Subordinated Lender would be entitled shall be made to the Senior Agent for its benefit and the benefit of the Senior Lender. (C) Under the circumstances described in this clause (iv), the Parent, BOG, and Obligor, or any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person making any payment or distribution of cash or other property or securities is authorized or instructed to make any payment or distribution to which the Subordinated Agent and/or the Subordinated Lender would otherwise be entitled (other than securities that are subordinated at least to the same extent as the Subordinated Indebtedness) directly to the Senior Agent for its benefit and the benefit of the Senior Lender to the extent necessary to pay all Senior -6- Indebtedness in full, after giving effect to any concurrent payment, distribution or provision thereof to or for the Senior Agent and the Senior Lender. (b) The Senior Agent and the Senior Lender shall have the right, in their sole and absolute discretion, to waive the conditions of Section 2.2(a) prohibiting the payment of the Subordinated Indebtedness whether in an enforcement action brought by the Senior Agent or Senior Lender on the Senior Indebtedness or otherwise. (c) The foregoing provisions of Section 2.2 shall not impair or prohibit the rights of the Subordinated Lender to receive payments in the form of equity securities or additional subordinated debt (including the payment of interest in kind as permitted by the Subordinated Loan Documents) that is subordinated to the Senior Indebtedness in accordance with the terms of this Agreement. Nothing in this Agreement shall limit or restrict the accrual or charging of default interest on any of the Subordinated Indebtedness not paid when due. In addition, the foregoing provisions of this Section 2.2 shall not prevent the Subordinated Agent or any Subordinated Lender from exercising its available remedies upon a default or event of default under the Subordinated Loan Documents, subject to (y) the rights of the Senior Agent and the Senior Lender to receive distributions and payments otherwise payable to the Subordinated Lenders, and (z) the expiration of any then applicable Payment Blockage Period. Section 2.3 PAYMENTS RECEIVED OR MADE IN VIOLATION OF THIS AGREEMENT. (a) In the event the Subordinated Agent or any Subordinated Lender shall receive any payment or distribution on account of the Subordinated Indebtedness which is not entitled to receive under the provisions of Section 2.2, the Subordinated Agent or such Subordinated Lender will hold any amount so received in trust for the Senior Lender and will forthwith turn over such payment to the Senior Agent in the form received by it (together with any necessary endorsement) to be applied to the Senior Indebtedness. In the event of any failure by the Subordinated Agent or any Subordinated Lender to make any such endorsement, the Senior Agent is hereby irrevocably authorized and granted a power of attorney (which is irrevocable and coupled with interest) to make the same. (b) If the Parent, BOG or any Obligor shall become aware that a "Default" or an "Event of Default" has occurred under the Senior Credit Agreement then such Person shall give the Senior Agent, the Senior Lender and the Subordinated Agent prompt written notice thereof. (c) This Agreement defines the relative rights of the Senior Agent and the Senior Lender and the Subordinated Agent and Subordinated Lender. Nothing in this Agreement shall: (i) impair, as between the Parent, BOG or any Obligor, the Subordinated Agent and the Subordinated Lender, the obligations of the Parent, BOG and each Obligor, which are absolute and unconditional, to pay the Subordinated Indebtedness in accordance with the terms of the Subordinated Loan Documents, or (ii) prevent the Subordinated Agent or any Subordinated Lender from exercising its available remedies subject to any applicable Payment Blockage Period. -7- Section 2.4 LIENS SUBORDINATE. (a) The Subordinated Agent and the Subordinated Lender agree that any Liens upon the Property of any of the Parent, BOG or any Obligor securing payments of the Subordinated Indebtedness are and shall be and remain inferior and subordinated to any Liens securing payments of the Senior Indebtedness in such Property regardless of whether such encumbrances in favor of the Subordinated Agent or any Subordinated Lender or the Senior Agent and the Senior Lender presently exist or are hereafter created or attached and regardless of the date of execution and delivery or the date of filing or recording. Any obligation of the Parent, BOG or any Obligor under the Subordinated Loan Documents to deliver possession of any Property to the Subordinated Agent or the Subordinated Lender, whether for purposes of perfection or realization of any rights thereunder shall be subordinate in all respects to the Parent's, BOG's or any Obligor's obligation to deliver possession of any such Property to the Senior Agent or Senior Lender under the Senior Loan Documents for such purposes. (b) The Subordinated Agent and the Subordinated Lender covenant and agree not to contest or dispute, whether in any proceeding or otherwise, the validity, enforceability, attachment, priority or perfected status of any Lien granted in favor of the Senior Agent or any Senior Lender or take any steps or actions, including the institution of any proceedings, to enjoin or restrain the Senior Agent or any Senior Lender from the exercise of the remedies afforded them under the Senior Loan Documents or applicable law in and to any of the Senior Lender Collateral. Section 2.5 AGREEMENT NOT TO PURSUE ACTION. (a) Following the commencement of any Payment Blockage Period, the Subordinated Agent and each Subordinated Lender covenants that it will not, until the earlier of the date (1) of expiration of the applicable Payment Blockage Period, (2) the Senior Indebtedness is paid in full or the event which gave rise to the Payment Blockage Period is cured or waived, (3) there occurs an event which would cause an automatic acceleration of the Subordinated Indebtedness under any of Sections 10.01(f), (g), (h) or (l) but only to the extent (l) relates to (f), (g) and (h) of the Subordinated Credit Agreement, or (4) the Senior Indebtedness is accelerated and the Senior Agent or Senior Lender takes any action to enforce any of their respective rights under the Senior Credit Agreement, do any of the following unless the Senior Agent or Senior Lender shall also join in such action or commence a similar action: (i) commence any action or proceeding against the Parent, BOG or any Obligor to recover all or any part of the Subordinated Indebtedness or join with any other creditor in bringing any proceedings against such Person under any bankruptcy, reorganization, readjustment of debt, arrangement of debt, receivership, liquidation or insolvency law or statute of the Federal or any state government, (ii) accelerate the maturity of any Subordinated Indebtedness, or (iii) foreclose, repossess, sequester or otherwise take steps or institute any action or proceeding to enforce any Lien, collateral right, judgment or other encumbrances on any Property of the Parent, BOG or any Obligor held by the Subordinated Agent or any Subordinated Lender, or to take possession of any such Property; provided the foregoing will not prohibit (A) such presentment as may be necessary to prevent the discharge of any liable parties on any instrument, (B) the filing of claims or notices to prevent -8- the running of any applicable statute of limitations, or (C) or similar actions necessary to preserve the legal rights of the Subordinated Lender and/or the Subordinated Agent. (b) Notwithstanding anything contained in this Agreement to the contrary, the Subordinated Agent and the Subordinated Lender shall not be prohibited at any time, whether during a Payment Blockage Period or otherwise, from delivering any notice of default to the Parent, BOG or any Obligor, and the existence of any Payment Blockage Period shall not prevent, abate or delay the running of any applicable cure period under the Subordinated Loan Documents following any default or notice of any default under the Subordinated Loan Documents. (c) The Senior Lender and Senior Agent may enforce no more than two (2) Payment Blockage Periods during any 365 day period. Section 2.6. RIGHTS OF THE SENIOR AGENT AND THE SENIOR LENDER. The Senior Agent and the Senior Lender may, at any time, and from time to time, without the consent of or notice to the Subordinated Agent or any Subordinated Lender, without incurring responsibility to the Subordinated Agent and/or any Subordinated Lender, without impairing or releasing any of the Senior Agent or the Senior Lender's rights or any of the obligations of the Subordinated Agent and the Subordinated Lender under this Agreement: (a) change the amount, manner, place or terms of payment, or change or extend for any period the time of payment of, or renew, increase or otherwise alter the Senior Indebtedness or any Senior Loan Document or any other instrument or agreement now or hereafter executed or evidencing any of the Senior Indebtedness in any manner, or enter into or amend in any manner any other agreement relating to the Senior Indebtedness, except as follows: (i) To increase rate of interest; or (ii) To increase the principal amount of the Senior Indebtedness (excluding obligations of any kind under any Hedging Agreements) above $75,000,000, unless such increase does not violate the terms of or create a default under the Subordinated Credit Agreement; or (iii) To further restrict (beyond those restrictions in the Senior Credit Agreement as in effect on the date hereof) any payment of dividends or similar distributions by any subsidiary of the Parent to the Parent or the granting of any Lien or other security interest securing payment of the Subordinated Indebtedness or any guarantees of the Subordinated Indebtedness; or (iv) To restrict any payments of the Subordinated Indebtedness except as provided in Section 2.2 above; (b) sell, exchange, release or otherwise deal with all or any part of any Property by whomsoever at any time pledged or mortgaged to secure, howsoever securing, the Senior Indebtedness; -9- (c) release any Person liable in any manner for payment or collection of the Senior Indebtedness; (d) exercise or refrain from exercising any rights against the Parent, BOG or any Obligor or others, including the Subordinated Agent and the Subordinated Lender; and (e) apply any sums received by the Senior Agent and/or Senior Lender, paid by any Person and however realized, to payment of the Senior Indebtedness in such a manner as the Senior Agent and the Senior Lender, in their sole discretion, may deem appropriate. Upon request by the Senior Agent prior to the funding of any Senior Indebtedness (excluding obligations of any kind under any Hedging Agreements) in excess of $75,000,000, if such funding is permitted under Section 2.6(a)(ii) above, the Subordinated Lender will confirm, based upon the information available to it, whether or not such proposed additional Senior Indebtedness is permitted under Section 2.6(a)(ii). Section 2.7 SUBORDINATION MAY NOT BE IMPAIRED BY THE PARENT, BOG OR ANY OBLIGORS. No right of any present or future Senior Agent or Senior Lender to enforce the subordination as provided in this Agreement will at any time or in any way be prejudiced or impaired by any act or failure to act on the part of the Parent, BOG or any Obligor or by any act or failure to act, in good faith, by the Senior Agent or any Senior Lender, or by any noncompliance by the Parent, BOG or any Obligor with the terms of any Subordinated Loan Document, regardless of any knowledge thereof that the Senior Agent or any Senior Lender may have or otherwise be charged with. The provisions of this Section 2.7 are intended to be for the benefit of, and shall be enforceable directly by, the Senior Agent or the Senior Lender. Section 2.8. AUTHORIZATION TO FILE PROOF OF CLAIM. If the Subordinated Agent or any Subordinated Lender does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 2.2(a)(iv) hereof at least 30 days before the expiration of the time to file such claim, the Senior Agent is hereby authorized to file an appropriate claim for and on behalf of the Subordinated Agent and the Subordinated Lender. ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANT Section 3.1. REPRESENTATIONS OF SUBORDINATED AGENT AND SUBORDINATED LENDER. The Subordinated Agent and each Subordinated Lender represent and warrant that: (a) neither the execution nor delivery of this Agreement nor fulfillment of or compliance with the terms and provisions hereof will conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, any agreement or instrument which it is now subject to; (b) it has all requisite authority to execute, deliver and perform its obligations under this Agreement; and -10- (c) this Agreement constitutes the legal, valid, and binding obligation of the Senior Agent and the Subordinated Agent, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency or similar laws and general principles of equity. Section 3.2. REPRESENTATIONS OF SENIOR AGENT. The Senior Agent represents and warrants that: (a) neither the execution nor delivery of this Agreement nor fulfillment of or compliance with the terms and provisions hereof will conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, any of the Senior Loan Documents or any other agreement or instrument which it is now subject to; (b) it has all requisite authority for itself and as agent acting on behalf of the Senior Lender to execute, deliver and perform its and the Senior Lender's obligations under this Agreement; and (c) this Agreement constitutes the legal, valid, and binding obligation of the Senior Agent, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency or similar laws and general principles of equity. Section 3.3 SUBORDINATED AGENT, SUBORDINATED LENDER COVENANTS. The Subordinated Agent and each Subordinated Lender covenant that so long as any of the Senior Indebtedness remains outstanding and until the termination of the "Aggregate Commitments" (as defined in the Senior Credit Agreement), it will: (a) cause any note, debenture, or instrument evidencing or securing the Subordinated Indebtedness to contain a statement or legend to the effect that such note, debenture, or other instrument is subordinated to the Senior Indebtedness in the manner and to the extent set forth in this Agreement; (b) not assign or transfer to others the Subordinated Indebtedness or any claim it has or may have against the Parent, BOG or any Obligor as long as any of the Senior Indebtedness remains outstanding, unless such assignment or transfer is expressly made subject to this Agreement; (c) not amend, supplement or otherwise modify the terms of the Subordinated Indebtedness, (including, without limitation, the Subordinated Loan Documents) without the express written consent of the Senior Agent, which consent will not be unreasonably withheld, which has the effect of (i) increasing the outstanding principal amount of the Subordinated Indebtedness above $20,000,000, provided that the foregoing shall not affect the BOG's right to make payment in kind of accrued interest or the Subordinated Lender's ability to accept payment in kind as provided in the Subordinated Loan Documents, thereby increasing the principal amount of the Subordinated Indebtedness and (ii) increasing the rate of interest or any fees charged on the Subordinated Indebtedness. -11- (d) not ask for, sue for, take, or demand any payment on such indebtedness, except as permitted hereby; and (e) execute any and all other instruments necessary as reasonably required by the Senior Agent or the Senior Lender to effect the subordinations intended hereby. ARTICLE IV MISCELLANEOUS Section 4.1 ACCEPTANCE BY THE SENIOR AGENT AND THE SENIOR LENDER. The foregoing subordination provisions are, and are intended to be, an inducement and a consideration to the Senior Agent and each Senior Lender, whether such Senior Lender's Senior Indebtedness is created or acquired before or after the issuance of Subordinated Indebtedness, to acquire and hold, or continue to hold, such Senior Indebtedness and each such Senior Lender shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. Notice of acceptance of this Agreement is waived, acceptance on the part of the Senior Agent and the Senior Lender being conclusively presumed by their request for this Agreement and delivery of the same to them. Section 4.2 ASSIGNMENT BY THE SENIOR AGENT AND THE SENIOR LENDER. This Agreement may be assigned by the Senior Agent and the Senior Lender in connection with any assignment or transfer of the Senior Indebtedness or any replacement or refinancing of the Senior Loan. Section 4.3 NOTICE. All notices and other communications provided for herein shall be given or made by telecopy, courier or U.S. Mail or in writing and telecopied, mailed or delivered to the intended recipient at the "Address for Notices" specified below its name on the signature pages hereof or at such other address as shall be designated by such party in a notice to each other party; and in the case of the Senior Agent or any Senior Lender in care of the Senior Agent at the following address: Bank of Montreal, as Agent 700 Louisiana, Suite 4400 Houston, Texas 77002 Telecopier No.: (713) 223-4007 Telephone No.: (713)546-9700 Attention: Client Services Group or at such other address as shall be designated by the Senior Agent in a notice to each other party. Except as otherwise provided in this Agreement, all such communications shall be deemed to have been duly given when transmitted by telecopier or personally delivered or, in the case of a mailed notice, five (5) days after the date deposited in the mails, postage prepaid, in each case given or addressed as aforesaid. Section 4.4 AMENDMENTS AND WAIVERS. The Senior Agent's, Subordinated Agent's, any Senior Lender's or Subordinated Lender's acceptance of partial or delinquent payments or any forbearance, failure or delay by any of the foregoing in exercising any right, power or -12- remedy hereunder shall not be deemed a waiver of any obligation of the Parent, BOG or any Obligor or the Senior Agent, Senior Lender, Subordinated Agent or Subordinated Lender, or of any right, power or remedy of the Senior Agent, Senior Lender, Subordinated Agent or Subordinated Lender; and no partial exercise of any right, power or remedy shall preclude any other or further exercise thereof. The Subordinated Agent and the Subordinated Lender hereby agree that if the Senior Agent and/or any Senior Lender agrees to a waiver of any provision hereunder, or an exchange of or release of collateral, or the addition or release of any Person as an Obligor, any such action shall not constitute a waiver of any of the Senior Agent's and/or any Senior Lender's other rights or of the Subordinated Agent's or any Subordinated Lender's obligations hereunder. This Agreement may be amended only by an instrument in writing executed jointly by the Subordinated Agent and the Senior Agent and may be supplemented only by documents delivered or to be delivered in accordance with the express terms hereof. Section 4.5 PARTIES TO THE AGREEMENT. The provisions of this Agreement are and are intended solely for the purpose of defining the relative rights of the Subordinated Agent, the Subordinated Lender, the Senior Agent and the Senior Lender, and are solely for the benefit of the Senior Agent, the Senior Lender, the Subordinated Agent and the Subordinated Lender (including their respective assignees and successors); and may not be relied upon or enforced by any other Person. The Parent, BOG and each Obligor have joined herein solely for the purpose of evidencing their acknowledgment and consent to the terms and conditions of this Agreement and their agreement to make payments of the Senior Indebtedness and Subordinated Indebtedness in accordance with the terms of Section 2.2. Section 4.6 REINSTATEMENT. To the extent that any payments on the Senior Indebtedness or proceeds of any collateral are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid by the Senior Agent or any Senior Lender to a trustee, debtor in possession, receiver or other Person under any bankruptcy law, common law or equitable cause, then to such extent, obligations hereunder with respect to the Senior Indebtedness so satisfied shall be revived and continue as if such payment or proceeds had not been received and the Senior Agent's and the Senior Lender's Liens, interests, rights, powers and remedies under the Senior Loan Documents and this Agreement shall continue in full force and effect. In such event, each Senior Loan Document and this Agreement shall be automatically reinstated and the Parent, BOG, the Obligors, the Subordinated Agent and the Subordinated Lender shall take such action as may be reasonably requested by the Senior Agent and the Senior Lender to effect such reinstatement. Any Senior Lender which has assigned its rights hereunder shall continue to be entitled to the benefits of this Section notwithstanding such assignment. Section 4.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVNERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS. Section 4.8 ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT EMBODIES THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE SENIOR AGENT AND THE SENIOR LENDER, THE SUBORDINATED AGENT AND THE SUBORDINATED LENDER AND SUPERSEDES ALL OTHER AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF. THIS WRITTEN AGREEMENT REPRESENTS THE -13- FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. Section 4.9 REFERENCES AND TITLE. All references in this Agreement to articles, sections, subsections and other subdivisions refer to the articles, sections, subsections and other subdivisions of this Agreement unless expressly provided otherwise. Titles appearing at the beginning of any subdivisions are for convenience only and do not constitute any part of such subdivisions and shall be disregarded in construing the language contained in such subdivisions. Section 4.10 SEVERABILITY. All rights, remedies and powers provided herein may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law; and all the provisions hereof are intended (a) to be subject to all applicable mandatory provisions of law which may be controlling and (b) to be limited to the extent necessary so that they will not render this Agreement invalid under the provisions of any applicable law. If any term or provision of this Agreement shall be determined to be illegal or unenforceable, all other terms and provisions of this Agreement shall nevertheless remain effective and shall be enforced to the fullest extent permitted by applicable law and the parties agree to promptly meet and negotiate in good faith to establish new arrangements which have the effect of preserving in the economic and commercial benefits established by this Agreement. Section 4.11 SUBROGATION. Subject to the terms of Section 4.6, after all Senior Indebtedness is paid in full and until the Subordinated Indebtedness has been paid in full, the Subordinated Lender shall be subrogated to the rights of the Senior Agent and the Senior Lender to receive distributions and payments applicable to the Senior Indebtedness to the extent that distributions and payments otherwise payable to the Subordinated Lender have been applied to the payment of Senior Indebtedness. A payment or distribution made under this Agreement to the Senior Agent and/or the Senior Lender that otherwise would have been made to the Subordinated Lender is not, as between Parent, BOG or any Obligor and the Subordinated Agent and Subordinated Lender, a payment on the Subordinated Indebtedness. WITNESS THE EXECUTION HEREOF, as of this the 31st day of October, 2000. SENIOR AGENT AND SENIOR LENDERS: BANK OF MONTREAL, both as Senior Agent and a Senior Lender By: /s/ Thomas E. McGraw Name: Thomas E. McGraw Title: Director -14- SOCIETE GENERALE, SOUTHWEST AGENCY, as a Senior Lender By: /s/ Mark A. Cox Name: Mark A. Cox Title: Director SHELL CAPITAL INC., as a Senior Lender By: /s/ Robert L. Roberts Name: Robert L. Roberts Title: Vice President SUBORDINATED AGENT AND SUBORDINATED LENDER: SHELL CAPITAL INC. both as a Subordinated Agent and a Subordinated Lender By: /s/ Robert L. Roberts Name: Robert L. Roberts Title: Vice President Address for the Subordinated Agent and Subordinated Lender: 910 Louisiana Street, Suite 5000 Houston, Texas 77002 and Attention: Donna Lowry Telecopy: (713) 646-4039 PARENT: BRIGHAM EXPLORATION COMPANY, a Delaware corporation By: /s/ Curtis F. Harrell Curtis F. Harrell Chief Financial Officer -15- BOG: BRIGHAM OIL & GAS, L.P., a Delaware limited partnership By: Brigham, Inc., a Nevada corporation, its General Partner By: /s/ Curtis F. Harrell Curtis F. Harrell Chief Financial Officer OBLIGORS: BRIGHAM, INC., A Nevada corporation By: /s/ Curtis F. Harrell Curtis F. Harrell Chief Financial Officer BRIGHAM HOLDINGS I, LLC, A Nevada limited liability company By: /s/ Ben M. Brigham Name: Ben M. Brigham Title: President BRIGHAM HOLDINGS II, LLC, A Nevada limited liability company By: /s/ Ben M. Brigham Name: Ben M. Brigham Title: President Addresses for notices of the Parent, BOG and each Obligor: 6300 Bridge Point Parkway Building 2, Suite 500 Austin, Texas 78730 Telecopy No.: 512-427-3400 -16- EXHIBIT A SUBORDINATED LOAN DOCUMENTS 1. The Subordinated Credit Agreement. 2. Subordinated Note in the aggregate face amount of $23,000,000 issued by BOG in favor of the Subordinated Lender. 3. Second Mortgage, Deed of Trust, Assignment of Production, Security Agreement and Financing Statement agreements dated as of October 31, 2000 and thereafter executed by BOG in favor of the Subordinated Agent, for the benefit of the Subordinated Agent and the Subordinated Lender. 4. Subordinated Guaranty Agreement dated as of October 31, 2000 executed by Parent in favor of the Subordinated Agent for the benefit of the Subordinated Agent and the Subordinated Lender. 5. Subordinated Guaranty Agreement dated as of October 31, 2000 executed by BI in favor of the Subordinated Agent for the benefit of the Subordinated Agent and the Subordinated Lender. 6. Subordinated Guaranty Agreement dated as of October 31, 2000 executed by BH-I in favor of the Subordinated Agent for the benefit of the Subordinated Agent and the Subordinated Lender. 7. Subordinated Guaranty Agreement dated as of October 31, 2000 executed by BH-II in favor of the Subordinated Agent for the benefit of the Subordinated Agent and the Subordinated Lender. 8. Second Security Agreement (Pledge) dated as of October 31, 2000 executed by Parent in favor of the Subordinated Agent for the benefit of the Subordinated Agent and the Subordinated Lender. 9. Second Security Agreement dated as of October 31, 2000 executed by Parent in favor of the Subordinated Agent for the benefit of the Subordinated Agent and the Subordinated Lender. 10. Second Security Agreement dated as of October 31, 2000 executed by BOG in favor of the Subordinated Agent for the benefit of the Subordinated Agent and the Subordinated Lender. 12. Second Security Agreement (Pledge) dated as of October 31, 2000 executed by Brigham, Inc. in favor of the Subordinated Agent for the benefit of the Subordinated Agent and the Subordinated Lender. 13. Second Security Agreement (Pledge) dated as of October 31, 2000 executed by Brigham Holdings I in favor of the Subordinated Agent for the benefit of the Subordinated Agent and the Subordinated Lender. 14. Second Security Agreement (Pledge) dated as of October 31, 2000 executed by Brigham Holdings II, LLC in favor of the Subordinated Agent for the benefit of the Subordinated Agent and the Subordinated Lender. 15. Financing Statements in connection with any of the items above. 16. Any guaranty agreements, pledges, security agreements or financing statements that may hereafter be executed by any subsidiaries of the Parent in favor of the Subordinated Agent or the Subordinated Lender. 2 EX-10.6 8 0008.txt WARRANT AGREEMENT 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 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 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 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"). W I T N E S S E T H: 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 "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 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 "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 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 "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 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 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. 2.6 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 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 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 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 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 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 (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 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 (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 50,000,000 shares, consisting of (i) 40,000,000 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 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 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 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 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 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 Holder or such participating Person, if any, who controls such Warrant 21 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 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 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 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 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 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 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 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 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 EX-10.7 9 0009.txt FIRST AMEND. TO AMEND. AND REST. CREDIT AGMT FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT, dated October 31, 2000 (this "First Amendment") is among: BRIGHAM OIL & GAS, L.P., a limited partnership formed under the laws of the State of Delaware (the "BORROWER"); BANK OF MONTREAL, a Canadian bank, in its individual capacity (in its individual capacity, "BMO"), SHELL CAPITAL INC. ("SCI"), SOCIETE GENERALE, SOUTHWEST AGENCY ("Soc-Gen") and any other lender which becomes a signatory thereto as provided in Section 12.06 of the Senior Credit Agreement (individually, together with its successors and assigns, a "LENDER" and, collectively, the "LENDERS"); and BMO, in its capacity as agent for the Lenders (in such capacity, together with its successors in such capacity, the "AGENT"). RECITALS: A. Borrower, Bank of Montreal, in its individual capacity and in its capacity as Agent for the Lenders, as such term is defined in the Senior Credit Agreement and in its capacity as Agent, "Senior Agent"), Soc-Gen, SCI and any other lender which becomes a signatory to the Senior Credit Agreement (collectively, the "Senior Lenders") are parties to that certain Amended and Restated Credit Agreement dated as of February 17, 2000, (the "Senior Credit Agreement"); all capitalized terms used but not defined herein shall have the meanings assigned to them in the Senior Credit Agreement. B. Borrower has, on even date herewith, entered into that certain Subordinated Credit Agreement (the "Subordinated Credit Agreement") with Shell Capital, Inc. (in its capacity as a subordinated lender, together with any successors and assigns in such capacity, herein called "Sub-Lender"). C. Brigham Exploration Company ("Brigham Exploration") intends to, on even date herewith, prepay the "Obligations," as such term is defined in the Indenture in accordance with the Securities and Note Acquisition Agreement dated of even date herewith between Brigham Exploration, Borrower, ECT Merchant Investment Corp. ("ECT"), and Joint Energy Development Investments II Limited Partnership ("JEDI-II"); and ECT and JEDI-II shall reassign, grant and convey the Term ORRI to Borrower. D. Borrower, Brigham Exploration, the Guarantors, Sub-Lender and Senior Lenders desire to enter into this First Amendment in order to recognize the new Subordinated Debt and to amend certain provisions of the Senior Credit Agreement and other Loan Documents. NOW, THEREFORE, in consideration of the premises, covenants and agreements contained herein, the parties hereto hereby agree as follows: Section 1. AMENDMENTS TO SENIOR CREDIT AGREEMENT. The Senior Credit Agreement is amended hereby as follows: A. The term "Subordinated Debt", as defined in or referred to in the Senior Credit Agreement or any other Loan Documents, shall be replaced and amended to read as follows: "SUBORDINATED DEBT" shall mean any Debt borrowed or permitted to be borrowed under the Subordinated Credit Agreement, with such Debt to be subordinated to the Indebtedness pursuant to the Subordination Agreement. B. The term "Indenture", as defined in or referred to in the Senior Credit Agreement or any other Loan Documents, shall be replaced and amended to read as follows: "SUBORDINATED CREDIT AGREEMENT" shall mean that certain Subordinated Credit Agreement dated as of October 31, 2000, by and between Sub-Lender and Borrower, as same may hereafter be amended, restated, modified or replaced. C. The term "Subordination Agreement", as defined in or referred to in the Senior Credit Agreement or any other Loan Documents, shall be replaced and amended to read as follows: "SUBORDINATION AGREEMENT" shall mean that certain Intercreditor and Subordination Agreement dated as of October 31, 2000 and from time to time amended, restated, modified, or replaced, among Borrower, Sub-Lender and Senior Agent, for the benefit of the Senior Lenders. D. By inserting the following definition where alphabetically appropriate: "SUB-LENDER" shall mean Shell Capital, Inc. (in its capacity as a subordinated lender), together with any successors and assigns in such capacity. E. All references to the terms "Subordinated Debt," "Subordinated Credit Agreement," "Subordination Agreement" and "Sub-Lender" wherever found in the Senior Credit Agreement or other Loan Documents shall have the meanings assigned to them in this First Amendment. F. The last sentence in the definition of "Consolidated Net Income" in Section 1.02 of the Senior Credit Agreement shall be deleted in its entirety. G. All references to the terms "ECT Merchant," "JEDI-II," "Term ORRI" and "Securities Purchase Agreement" shall be deleted from the Senior Credit Agreement or any other Loan Documents. 2 Section 2. CONSENTS AND WAIVER. A. The Senior Lenders hereby consent to the prepayment, in part or in full, of the Subordinated Debt, as such term was defined prior to giving effect hereto and the "Obligations," as such term was defined in the Indenture. B. The Senior Lenders consent to the Subordinated Credit Agreement and the incurrence of Subordinated Debt thereunder and to the other "Loan Documents" as defined therein; provided that borrowings thereunder, other than borrowings to pay interest, shall not exceed $20,000,000 at any one time outstanding. C. The BMO/Soc-Gen Lenders hereby waive their right to determine the Target Asset Value as of the First Asset Valuation Date. Section 3. CONDITIONS PRECEDENT. This First Amendment shall become binding upon receipt by the Agent of the following documents and satisfaction of the other conditions provided in this Section 3, each of which must be satisfactory to the Agent in form and substance: A. counterparts of this First Amendment executed by the Borrower, Brigham Exploration, the Guarantors, the Agent, the Senior Lenders and the Sub-Lender; B. counterparts of the New Mortgage executed by the Borrower; C. certificates of the Secretary or an Assistant Secretary of the Borrower, Brigham Exploration and each of the Guarantors setting forth for each of them (i) the resolutions of its board of directors or managers (or if such Guarantor is a partnership, resolutions of the general partner of such partnership), as applicable, with respect to the authorization to execute and deliver this First Amendment and consummate the transactions contemplated hereby; (ii) the Responsible Officer of such entity authorized to sign this First Amendment, and (iii) the signature of such authorized Responsible Officer of such entity; D. a First Amendment to Amended and Restated Guaranty Agreement executed by Brigham Exploration; E. the Intercreditor and Subordination Agreement executed by Brigham Exploration, Borrower, each Guarantor and Shell Capital, Inc., individually and as agent for the Sub-Lender as defined therein; F. an opinion of in-house counsel to Borrower substantially in the form attached hereto as EXHIBIT A; G. payment of the expenses of the Agent and the Senior Lenders in accordance with Section 8.B hereof; and 3 H. such other documents as Agent or its counsel may reasonably request. Section 4. REPRESENTATIONS AND WARRANTIES. A. Except as provided in subsection (iii) of this Section 4.A. or as affected by the Subordinated Debt, the Subordinated Credit Agreement, or the "Loan Documents" as defined therein, the Borrower hereby reaffirms that, as of the date of this First Amendment, the representations and warranties made by the Borrower and Brigham Exploration in the Senior Credit Agreement are true and correct as though made on and as of the date hereof, and further, the Borrower represents that, (i) as of the date hereof, no Default or Material Adverse Effect has occurred and is continuing except as previously disclosed to the Agent in writing; (ii) the execution, delivery and performance by the Borrower or the Guarantors of this First Amendment and the other Loan Documents and all instruments and documents to be delivered by the Borrower or the Guarantors, to the extent a party thereto, hereunder and thereunder and the creation of all Liens provided for herein and therein: (a) are within the Borrower's or such Guarantor's corporate power; (b) have been duly authorized by all necessary or proper corporate action, including the consent of stockholders, members and/or partners therein or thereof; (c) are not in contravention of any provision of the Borrower's or such Guarantor's certificate of incorporation, bylaws or similar organizational and/or governing documents; (d) will not violate (1) any law or regulation or (2) any order or decree of any court or governmental instrumentality; (e) will not conflict with or result in the breach or termination of, constitute a default under or accelerate any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which the Borrower or any of the Guarantors is a party or by which the Borrower or any of the Guarantors or any of their respective property is bound; (f) will not result in the creation or imposition of any Lien upon any of the property of the Borrower or the Guarantors other than those in favor of the Agent pursuant to the terms of this First Amendment and the other Loan Documents to be delivered in connection herewith; and (g) do not require the consent or approval of any governmental body, agency, authority or any other Person that has not been duly obtained, made or complied with prior to the date hereof. At or prior to the date hereof, each of this First Amendment and the other Loan Documents to be delivered in connection herewith shall have been duly executed and delivered for the benefit of or on behalf of the Borrower or the Guarantors, in each case to the extent a party thereto, and each shall then constitute a legal, valid and binding obligation of the Borrower or such Guarantor, enforceable against it in accordance with its terms; and (iii) notwithstanding the foregoing, the representations and warranties contained in the last sentence of Section 7.10(a) of the Senior Credit Agreement (and not those contained in the first two sentences) are reaffirmed with respect to the Mortgaged Property covered by or described in the New Mortgage. 4 B. Each of the Borrower and the Guarantors further represents and warrants, for itself only that it (i) is executing this First Amendment after consultation with counsel of its own choosing, (ii) has read and understands the release granted by Section 5 hereof, (iii) desires to execute this First Amendment and (iv) has the requisite authority to enter into and be bound by this First Amendment, including the release granted by Section 5 hereof. Section 5. RELEASE. A. DEFINED TERMS. As used in this section, the following terms shall have the following meanings: "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 attorney's 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 tortuous inducement to commit such breach, tortuous 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 Senior 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 Brigham Exploration, 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"). 5 B. 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 First Amendment. In connection with the foregoing release: (i) Brigham Exploration, Borrower and each of the Guarantors represents and warrants that it has the full power and authority to perform the release granted in this section and that it has not in any manner made any assignment of any Released Claim to any third party. (ii) The release granted in this section will be effective upon execution of this First Amendment by all of the parties hereto. (iii) Each party executing this First Agreement understands and agrees that the release granted in this section 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. Section 6. LIMITATIONS. The amendments set forth herein are limited precisely as written and shall not be deemed to (a) be a consent to, or waiver or modification of, any other term or condition of the Senior Credit Agreement or any of the other Loan Documents, or (b) prejudice any right or rights which the Lenders or the Agent may now have or may have in the future under or in connection with the Senior Credit Agreement or any of the other Loan Documents. Except as expressly supplemented, amended or modified hereby, the terms and provisions of the Senior Credit Agreement or any other Loan Documents are and shall remain in full force and effect. In the event of a conflict between this First Amendment and any of the foregoing documents, the terms of this First Amendment shall be controlling. 6 Section 7. 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 decision to enter into this First Amendment, 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 First Amendment or the Senior Credit Agreement. The Agent shall not be required to keep itself informed as to the performance or observance by the Borrower of this First Amendment or any other Loan Document or any other document referred to or provided for herein or therein 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 and under the Senior Credit Agreement, 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 Weil, Gotshal & Manges LLP is acting in this transaction as special counsel to the Agent only. Each Lender will consult with its own legal counsel to the extent that it deems necessary in connection with this First Amendment and the matters contemplated herein. Section 8. PAYMENT OF FEES AND EXPENSES; FORM OF PAYMENT. A. The Borrower agrees, whether or not the transactions contemplated hereby are consummated, to pay all reasonable expenses of the Agent and the Lenders (including, without limitation, all reasonable fees and disbursements of counsel and other outside consultants for the Agent and/or the Lenders) in connection with the negotiation, investigation, preparation, execution and delivery of, recording and filing of, preservation of rights under and enforcement of this First Amendment and the other Loan Documents to be delivered in connection herewith. B. All payments to be made by the Borrower under this First Amendment shall be made in Dollars, in immediately available funds, to the Agent at such account as the Agent shall specify by notice in accordance with Section 4.01 of the Senior Credit Agreement. Section 9. GOVERNING LAW. This First Amendment and the rights and obligations of the parties hereunder and under the Senior Credit Agreement shall be construed in accordance with and be governed by the laws of the State of Texas and the United States of America. Section 10. DESCRIPTIVE HEADINGS, ETC. The descriptive headings of the several Sections of this First Amendment are inserted for convenience only and shall not be deemed to affect the meaning or construction of any of the provisions hereof. 7 Section 11. COUNTERPARTS. This First Amendment may be executed in any number of counterparts and by different parties on separate counterparts and all of such counterparts shall together constitute one and the same instrument. Section 12. SUCCESSORS: This First Amendment shall be binding upon and shall enure to the benefit of Senior Lenders, Brigham Exploration, Borrower, Guarantors and their respective permitted successors and assigns. Section 13. BENEFICIARY: Sub-Lender is an intended third party beneficiary of this First Amendment. 8 IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed as of the date first written above. NOTICE PURSUANT TO TEX. BUS. & COMM. CODE SS.26.02 THIS FIRST AMENDMENT AND OTHER LOAN DOCUMENTS EXECUTED BY ANY OF THE PARTIES BEFORE OR SUBSTANTIALLY CONTEMPORANEOUSLY WITH THE EXECUTION HEREOF TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT AND 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 AGREEMENT BETWEEN THE PARTIES. Brigham Oil & Gas, L.P. By: Brigham, Inc., its General Partner By: /s/ Curtis F. Harrell Name: Curtis F. Harrell Title: Chief Financial Officer Bank of Montreal, individually and as Agent for the Senior Lenders By: /s/ Thomas E. McGraw Name: Thomas E. McGraw Title: Director Societe Generale, Southwest Agency By: /s/ Mark A. Cox Name: Mark A. Cox Title: Director 9 Shell Capital Inc., individually (as a Senior Lender and as Sub-Lender), and as Agent for Sub-Lenders By: /s/ Robert L. Roberts Name: Robert L. Roberts Title: Vice President Brigham Exploration Company By: /s/ Curtis F. Harrell Name: Curtis F. Harrell Title: Chief Financial Officer Brigham, Inc. By: /s/ Curtis F. Harrell Name: Curtis F. Harrell Title: Chief Financial Officer Brigham Holdings I, LLC By: /s/ Ben M. Brigham Name: Ben M. Brigham Title: President Brigham Holdings II, LLC By: /s/ Ben M. Brigham Name: Ben M. Brigham Title: President 10 EX-10.8 10 0010.txt FIRST AMEND. TO AMEND. AND REST. GTY. AGMT. FIRST AMENDMENT TO AMENDED AND RESTATED GUARANTY AGREEMENT THIS FIRST AMENDMENT TO AMENDED AND RESTATED GUARANTY AGREEMENT (this "AMENDMENT") dated as of October 31, 2000, is between BRIGHAM EXPLORATION COMPANY, a Delaware corporation (the "GUARANTOR") and BANK OF MONTREAL, as agent ("AGENT") for the lenders (the "LENDERS") that are or become parties to the Credit Agreement defined below. RECITALS A. Brigham Oil & Gas, L.P., a Delaware limited partnership (the "BORROWER"), the Agent and the Lenders previously entered into that certain Amended and Restated Credit Agreement dated as of February 17, 2000, as amended by First Amendment to Amended and Restated Credit Agreement of even date herewith (as amended, the "CREDIT AGREEMENT"), pursuant to which the Lenders agreed to make certain loans and extensions of credit to the Borrower. B. Pursuant to the terms and conditions stated in the Credit Agreement, Guarantor executed that certain Amended and Restated Guaranty Agreement dated February 17, 2000, by Guarantor (the "GUARANTY AGREEMENT"). C. Guarantor and the Agent now desire to amend certain provisions of the Guaranty Agreement. NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained, the Guarantor, the Agent and the Lenders hereby agree that the Guaranty Agreement shall be amended as follows: SECTION 1. CERTAIN DEFINITIONS. As used in this Amendment, the terms "Agent", "Amendment", "Borrower", "Credit Agreement", "Guarantor" and "Lenders" shall have the meanings indicated above; and unless otherwise defined herein, all terms beginning with a capital letter which are defined in the Guaranty Agreement shall have the same meanings herein as therein unless the context hereof otherwise requires. SECTION 2. AMENDMENTS TO GUARANTY AGREEMENT. (a) Section 5.2(r) of the Guaranty Agreement is hereby deleted in its entirety, and the following is substituted therefor: "(r) INTEREST COVERAGE RATIO. The Guarantor will not permit its Interest Coverage Ratio as of the end of any fiscal quarter of the Guarantor (calculated quarterly at the end of each fiscal quarter) to be less than the ratio set forth below for such period. INTEREST COVERAGE RATIO shall mean the ratio of (i) EBITDA to (ii) the sum of all required payments of interest (whether paid in cash or in kind) during such period on borrowed money: (i) not less than .75 to 1.0 for the twelve (12) month period ending September 30, 2000; (ii) not less than .80 to 1.0 for the twelve (12) month period ending December 31, 2000; (iii) not less than .90 to 1.0 for the twelve (12) month period ending March 31, 2001; (iv) not less than 1.3 to 1.0 for the twelve (12) month period ending June 30, 2001; (v) not less than 1.5 to 1.0 for the twelve (12) month period ending September 30, 2001; (vi) not less than 1.7 to 1.0 for the twelve (12) month period ending December 31, 2001; (vii) not less than 2.0 to 1.0 for the twelve (12) month period ending March 31, 2002; (viii) not less than 2.25 to 1.0 for the twelve (12) month period ending June 30, 2002; and (ix) thereafter, not less than 2.50 to 1.0 for the twelve (12) month period ending September 30, 2002, and each twelve (12) month period ending at the end of each fiscal quarter of Guarantor. (b) The phrase "; provided that Guarantor may pay dividends on its preferred equity securities so long as they are paid in kind and not in cash" shall be added to the end of subsection 5.2(d). SECTION 3. REPRESENTATIONS AND WARRANTIES. Guarantor hereby reaffirms that as of the effective date of this Amendment, the representations and warranties made by the Guarantor in Article III of the Guaranty Agreement will be true and correct as though made on and as of the effective date of this Amendment. SECTION 4. RATIFICATION. Guarantor hereby expressly ratifies and affirms its obligations under the Guaranty Agreement as amended by this Amendment and agrees that the Guaranty Agreement as amended by this Amendment remains in full force and effect. SECTION 5. GOVERNING LAW. This Amendment and the rights and obligations of the parties hereunder and under the Credit Agreement shall be construed in accordance with and be governed by the laws of the State of Texas and the United States of America. SECTION 6. DESCRIPTIVE HEADINGS, ETC. The descriptive headings of the several Sections of this Amendment are inserted for convenience only and shall not be deemed to affect the meaning or construction of any of the provisions hereof. - 2 - SECTION 7. COUNTERPARTS. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts and all of such counterparts shall together constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered and effective as of the date first above written. NOTICE PURSUANT TO TEX. BUS. & COMM. CODE ss.26.02 THIS AMENDMENT AND OTHER LOAN DOCUMENTS EXECUTED BY ANY OF THE PARTIES BEFORE OR SUBSTANTIALLY CONTEMPORANEOUSLY WITH THE EXECUTION HEREOF TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT AND 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 NOT UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. GUARANTOR: BRIGHAM EXPLORATION COMPANY By: /s/ Karen E. Lynch --------------------------------------------- Name: Karen E. Lynch ------------------------------------------- Title: Vice President ------------------------------------------ AGENT AND LENDER: BANK OF MONTREAL By: /s/ Thomas E. McGraw -------------------------------------------- Thomas E. McGraw Director - 3 - EX-10.9 11 0011.txt SECURITIES PURCHASE AGREEMENT SECURITIES PURCHASE AGREEMENT This SECURITIES PURCHASE AGREEMENT (this "Agreement"), is entered into as of November 1, 2000, between Brigham Exploration Company, a Delaware corporation (the "Company"), DLJ MB Funding III, Inc., a Delaware corporation ("MB"), and DLJ ESC II, LP, a Delaware limited partnership ("ESC") (collectively referred to as "Investors"). WHEREAS, the Company has authorized the sale and issuance of an aggregate of up to one million, (1,000,000) shares of its Series A Preferred Stock (the "Shares") and warrants to acquire six million, six hundred sixty-six thousand, six hundred sixty-seven (6,666,667) shares of its Common Stock, (the "Warrants"), in the form attached hereto as EXHIBIT A; Whereas, Investors desire to purchase the Shares and the Warrants on the terms and conditions set forth herein; and Whereas, the Company desires to issue and sell the Shares and the Warrants to Investors on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the Company and Investors hereby agree as follows: ARTICLE I TERMS OF THE TRANSACTION 1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as defined in Section 2.1 below), the Company shall have authorized (a) the sale and issuance to Investors of the Shares and the Warrants and (b) the issuance of such shares of Common Stock to be issued upon exercise of the Warrants (the "Warrant Shares"). The Shares shall have the rights, preferences, privileges and restrictions set forth in the Certificate of Designations of the Company, in the form attached hereto as EXHIBIT B (the "Certificate of Designations"). 1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof, at the Closing the Company hereby agrees to issue and sell to MB and ESC, and MB and ESC agree to purchase from the Company, respectively, 905,500 units (each a "Unit") and 94,500 Units at a purchase price of Twenty Dollars ($20.00) per Unit, with each such Unit consisting of (i) one Share and (ii) Warrant to purchase 6.666667 Warrant Shares. ARTICLE II CLOSING 2.1 CLOSING. The closing of the sale and purchase of the Shares and Warrants under this Agreement (the "Closing") shall take place at the offices of Vinson & Elkins L.L.P., 2300 First City Tower, 1001 Fannin, Houston, Texas 77002-6760, at 10:00 a.m., local time, on the date of this Agreement or at such other time or place as the Company and Investors may mutually agree (the "Closing Date"). All closing transactions at the Closing shall be deemed to have occurred simultaneously. 2.2 CLOSING DELIVERIES. At the Closing, subject to the terms and conditions hereof, the Company will deliver to each Investor, against payment of the purchase price therefor by wire transfer made payable to the Company, a certificate representing the applicable Shares and a Warrant representing the applicable Warrants to purchase Warrant Shares. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Investors, as of the date hereof, that: 3.1 CORPORATE ORGANIZATION. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority in all material respects to own, lease, and operate its properties and to carry on its business as now being conducted. No actions or proceedings to dissolve the Company are pending or, to the best knowledge of the Company, threatened. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification is necessary, except where the failure to so qualify or to be in good standing would not reasonably be expected to have a Material Adverse Effect. 3.2 CAPITALIZATION OF THE COMPANY. (a) On the Closing Date, the authorized capital stock of the Company will consist of 50,000,000 shares of Common Stock and 10,000,000 shares of preferred stock, $.01 par value, 1,500,000 of which are designated as Series A Preferred Stock. As of the date hereof, but prior to giving effect to the Enron Transactions and the Financing Transaction (i) 17,028,175 shares of Common Stock are outstanding and no shares of preferred stock are outstanding and (ii) 1,426,500 shares of Common Stock are reserved for issuance upon exercise of outstanding employee, officer and director stock options and 8,212,476 shares of Common Stock are reserved for issuance upon exercise of outstanding warrants or conversion rights. All outstanding shares of capital stock of the Company have been validly issued and are fully paid and nonassessable, and no shares of capital stock of the Company are subject to, nor have any been issued in violation of, preemptive or similar rights. On the Closing Date, the rights, preferences, privileges and restrictions of the Shares will be as stated in the Certificate of Designations. (b) Except as set forth above in subparagraph (a) of this Section 3.2, there are outstanding (i) no shares of capital stock or other voting securities of the Company; (ii) no securities of the Company convertible into or exchangeable for shares of capital stock or other voting securities of the Company; (iii) no options or other rights to acquire from the Company, and no obligation of the Company to issue or sell, any shares of capital stock or other voting securities of the Company or any securities of the Company convertible into or exchangeable for such capital stock or voting securities; and (iv) no equity equivalents, interests in the ownership or earnings, or other similar rights of or with respect to the Company. (c) Neither the execution of this Agreement nor the performance of the Company's obligations hereunder, nor the consummation of any other transaction currently contemplated by the Company or any of its Subsidiaries, including the Financing Transaction (as hereinafter defined) and the Enron Transaction (as hereinafter defined), will trigger or cause any adjustment under any anti-dilution provisions or any other similar provisions contained in any agreement as currently in effect that have the effect of (i) causing a decrease in any exercise price or conversion price in any security exercisable for or convertible into shares of Common Stock (a "Common Stock Equivalent"), or (ii) causing an increase in the number of shares of Common Stock that may be acquired upon conversion or exercise of a Common Stock Equivalent. 2 3.3 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has full corporate power and authority to execute, deliver, and perform this Agreement and to execute, deliver, and where applicable, perform the Ancillary Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by the Company of this Agreement and the execution, delivery, and where applicable, performance by it of the Ancillary Documents to which it is a party, and the consummation by it of the transactions contemplated hereby and thereby, have been (or prior to the Closing will have been) duly authorized by all necessary corporate action of the Company. This Agreement has been duly executed and delivered by the Company and constitutes, and each Ancillary Document executed or to be executed by the Company has been, or when executed will be, duly executed and delivered by the Company and constitutes, or when executed and delivered will constitute, a valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, except that such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and (ii) general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). 3.4 NONCONTRAVENTION. The execution, delivery, and performance by the Company of this Agreement and the execution, delivery, and where applicable, the performance by it of Ancillary Documents to which it is a party and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or result in a violation of any provision of the Company's Certificate of Incorporation, as amended, or the Company's Bylaws, as amended, or the charter, bylaws, partnership agreement or other governing instruments of any Subsidiary, (ii) conflict with or result in a violation of any provision of, or constitute (with or without the giving of notice or the passage of time or both) a default under, or give rise (with or without the giving of notice or the passage of time or both) to any loss of material benefit, or of any right of termination, cancellation, or acceleration under, any Material Agreement, (iii) result in the creation or imposition of any Encumbrance upon the properties of the Company or any Subsidiary or (iv) assuming compliance with the matters referred to in Section 3.5, violate any Applicable Law binding upon the Company or any Subsidiary, except, in the case of clauses (ii), (iii) and (iv) above, for any such conflicts, violations, defaults, terminations, cancellations, accelerations, or Encumbrances which would not, individually or in the aggregate, have a Material Adverse Effect on the Company. 3.5 CONSENTS AND APPROVALS. No consent, approval, order, or authorization of, or declaration, filing, or registration with, any Governmental Entity is required to be obtained or made by the Company or any Subsidiary in connection with the execution, delivery, or performance by the Company of this Agreement and the execution, delivery, and where applicable, performance of Ancillary Documents to which it is a party or the consummation of the transactions contemplated hereby and thereby, other than (i) compliance with any applicable requirements of the Securities Act; (ii) compliance with any applicable requirements of the Exchange Act; (iii) compliance with any applicable state securities laws; (iv) filing of the Certificate of Designations with the Delaware Secretary of State; (v) compliance with any applicable requirements of the HSR Act as a result of the exercise of any of the Warrants; and (vi) such consents, approvals, orders, or authorizations which, if not obtained, and such declarations, filings, or registrations which, if not made, would not, individually or in the aggregate, have a Material Adverse Effect on the Company. Except for such consents as are obtained before or contemporaneously with consummation of the Closing, no consent or approval of any person other than the Company, Investors or any Governmental Entity is required to be obtained or made by the Company or any Subsidiary in connection with the execution, delivery, or performance by the Company of this Agreement and execution, delivery and, where applicable, performance of the Ancillary Documents to which it is a party or the consummation of the transactions contemplated hereby and thereby, other than such consents, approvals, orders, or authorizations which, if not obtained, and such declarations, filings, or registrations which, if not made, would not, individually or in the aggregate, have a Material Adverse Effect on the Company. 3 3.6 AUTHORIZATION OF ISSUANCE; RESERVATION OF SHARES. When issued and delivered pursuant to this Agreement and the Certificate of Designations against payment therefor, the Shares and the Warrants will be validly issued, fully paid and nonassessable. The Warrant Shares have been duly and validly reserved for issuance. The issuances of the Shares and the Warrants are not subject to any preemptive or similar rights. 3.7 FINANCIAL CONDITION. The audited consolidated balance sheet of the Company and its Subsidiaries as at December 31, 1999 and the related consolidated statement of income, stockholders' equity and cash flow of the Company and its Subsidiaries for the fiscal year ended on said date, with the opinion thereon of Price Waterhouse heretofore furnished to the Investors and the unaudited consolidated balance sheet of the Company and its Subsidiaries as at June 30, 2000, and their related consolidated statements of income, stockholders' equity and cash flow of the Company and its Subsidiaries for the six-month period ended on such date hereto fore furnished to the Investors, are complete and correct and fairly present the consolidated financial condition of the Company and its 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 the Company nor any Subsidiary has on the Closing Date any 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 3.7 or except to the extent that the existence of any of the foregoing would not have a Material Adverse Effect relative to the Company. Since December 31, 1999, there has been no change or event having a Material Adverse Effect relative to the Company, except as disclosed to the Investors in writing. Since the date of the Financial Statements, neither the business nor the properties of the Company's 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 cancellation of contracts, permits or concessions by any Governmental Entity, riot, activities of armed forces or acts of God or of any public enemy. 3.8 LITIGATION. Except as disclosed in Schedule 3.8 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 Company, threatened against or affecting the Company or any Subsidiary which both (a) involves the possibility of any judgment or liability against the Company 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 relative to the Company. 3.9 ERISA. The Company 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 Company 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 Company or any ERISA Affiliate has been or is expected by the Company 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. 4 Full payment when due has been made of all amounts which the Company 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 Company'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 Company 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 Company or any ERISA Affiliate in its sole discretion at any time without any material liability. None of the Company 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 Company 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. 3.10 TAXES. The Company 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 Company, 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 Company in respect of taxes and other governmental charges are, in the opinion of the Company, adequate. No tax lien has been filed and, to the knowledge of the Company, 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 not material or which are being contested in good faith and by proper proceedings and against which adequate reserves are being maintained. 3.11 TITLES, ETC. (a) Subject to the matters set out in Schedule 3.11, each of the Company and the Subsidiaries has good and defensible title, in all material respects, to the material Oil and Gas Properties that are evaluated in the most recently delivered reserve report, free and clear of all Liens, other than Excepted Liens. Except for immaterial divergences, after giving full effect to the Excepted Liens, the Company owns, in all material respects, the net interests in production attributable to the Hydrocarbon Interests that are evaluated in the most recently delivered reserve report, and the ownership of such Hydrocarbon Interests shall not in any material respect obligate the Company 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 (without a corresponding increase in net revenue interest). The Company does not believe, based upon information in its possession, that its most recently delivered reserve report 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 Company 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 have a Material Adverse Effect on the conduct of the business of the Company and the Subsidiaries. 6 (c) The Oil and Gas Properties presently owned, leased or licensed by the Company and the Subsidiaries, including, without limitation, all easements and rights of way, include all properties necessary to permit the Company 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 Company 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. 3.12 NO MATERIAL MISSTATEMENTS. Taken as a whole, the written information, statements, exhibits, certificates, documents and reports furnished to Investors by the Company or any Subsidiary 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 Company or any Subsidiary. As of the Closing Date, there is no fact peculiar to the Company or Subsidiary which has a Material Adverse Effect relative to the Company or in the future is reasonably likely to have (so far as the Company 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 Investors by or on behalf of the Company or any Subsidiary prior to, or on, the Closing Date in connection with the transactions contemplated hereby. 3.13 INVESTMENT COMPANY ACT. Neither the Company 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. 3.14 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Company 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. 3.15 SUBSIDIARIES. Except as set forth on Schedule 3.15, the Company has no Subsidiaries. Each Subsidiary is a corporation or limited partnership, duly incorporated or organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization, if applicable, and has all requisite corporate power and authority in all material respects to own, lease, and operate its properties and to carry on its business as now being conducted. Each Subsidiary is duly qualified to do business as a foreign corporation or limited partnership, if applicable, and is in good standing in each jurisdiction where such qualification is necessary, except where the failure to so qualify or to be in good standing would not reasonably be expected to have a Material Adverse Effect. There are outstanding (i) no securities of any Subsidiary of the Company convertible into or exchangeable for shares of capital stock or other voting securities of any Subsidiary of the Company and (ii) no options or other rights to acquire from any Subsidiary of the Company, and no obligation of any Subsidiary of the Company to issue or sell, any shares of capital stock or other voting securities of any Subsidiary of the Company or any securities of any Subsidiary of the Company convertible into or exchangeable for such capital stock or voting securities. 3.16 DEFAULTS. Neither the Company nor any Subsidiary is in default nor has any event or circumstance occurred which, but for the expiration of any applicable grace period or the giving of notice, or both, would constitute a default under any material agreement or instrument to which the Company is a party or by which the Company is bound, which default would have a Material Adverse Effect. 3.17 ENVIRONMENTAL MATTERS. Except 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): 6 (a) Neither any Oil and Gas Property of the Company or any of its Subsidiaries nor the operations conducted thereon violate any order or requirement of any court or Governmental Entity or any Environmental Laws; (b) Without limitation of clause (a) above, no Oil and Gas Property of the Company or any of its Subsidiaries nor the operations currently conducted thereon or, to the best knowledge of the Company, 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 Entity 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 the Company or any of its Subsidiaries in connection with the operation or use of any and all Property of the Company and each of its Subsidiaries, including without limitation present, or to the best of Company'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 the Company 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 Oil and Gas Property of the Company and each of its Subsidiaries have in the past, during the tenure of ownership of the Company and its Subsidiaries and to the best of the Company'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 Company, 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 Entity in connection with any Environmental Laws; (e) The Company 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 Oil and Gas Property of the Company 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; and (f) To the extent applicable, all Oil and Gas Property of the Company 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 Company does not have any reason to believe that such Oil and Gas 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 the Company 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. 3.18 COMPLIANCE WITH THE LAW. Neither the Company 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 Oil and Gas 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 7 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 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). 3.19 INSURANCE. Schedule 3.19 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 Company and each Subsidiary as of the Closing Date. 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 Company 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 Company and each Subsidiary; will remain in full force and effect through the respective dates set forth in Schedule 3.19 with 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 3.19 identifies all material risks, if any, which the Company, the Subsidiaries and their respective Board of Directors or officers have designated as being self insured. Neither the Company 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. 3.20 HEDGING AGREEMENTS. Schedule 3.20 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 Company and each Subsidiary. 3.21 MATERIAL AGREEMENTS. Set forth on Schedule 3.21 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 Company or any Subsidiary, and all obligations of the Company 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 Company or any such Subsidiary. 3.22 GAS IMBALANCES. As of the Closing Date, except as set forth in the most recent Reserve Report furnished to Investors, on a net basis there are no gas imbalances, take or pay or other prepayments with respect to the Company's or any Subsidiary's Hydrocarbon Interests which would require the Company or such Subsidiary to deliver five percent (5%) or more of the monthly production 9 from the Company'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. 3.23 BROKERAGE FEES. The Company has not retained any financial advisor, broker, agent, or finder or paid or agreed to pay any financial advisor, broker, agent, or finder on account of the sale by the Company and the purchase by Investors of the Shares pursuant to this Agreement, except for CIBC World Markets Corp. (or an Affiliate), and the Company hereby agrees to pay all fees owing to CIBC World Markets Corp. on account of the consummation of such transaction, which fees are not to exceed $1,200,000. 3.24 SEC FILINGS. The Company has complied in all material respects with its obligations to file with the Securities and Exchange Commission all forms, reports, schedules, statements and other documents required to be filed by it since May 9, 1997 under the Securities Act and the Exchange Act. All forms, reports, schedules, statements, and other documents (including all amendments thereto) filed by the Company with the Securities and Exchange Commission since such date are herein collectively referred to as the "SEC Filings". The SEC Filings, at the time filed, complied in all material respects with all applicable requirements of federal securities laws. None of the SEC Filings, including, without limitation, any financial statements or schedules included therein, at the time filed or as same may have been amended, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading. 3.25 STOCKHOLDER APPROVAL. Neither the execution of this Agreement nor the consummation of the transactions contemplated hereunder require the approval of the stockholders of the Company under the applicable listing rules of the Nasdaq Stock Market, Inc. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF INVESTORS Each Investor represents and warrants to the Company that: 4.1 ORGANIZATION. MB is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. ESC is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware. Each Investor has all requisite corporate power and authority in all material respects to own, lease, and operate its properties and to carry on its business as now being conducted. No actions or proceedings to dissolve either Investor are pending or, to the best knowledge of any Investor, threatened. 4.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each Investor has full corporate or (if applicable) other power and authority to execute, deliver, and perform this Agreement and execute, deliver and, where applicable, perform the Ancillary Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution, delivery, and performance by each Investor of this Agreement and execution, delivery, and, where applicable, performance of the Ancillary Documents to which it is a party, and the consummation by it of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate (if applicable) action of such Investor. This Agreement has been duly executed and delivered by each Investor and constitutes, and each Ancillary Document executed or to be executed by each Investor has been, or when executed will be, duly executed and delivered by such Investor and constitutes, or when executed and delivered will constitute, a valid and legally binding obligation of such Investor, enforceable against such Investor in accordance with its terms, except that such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and (ii) general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). 9 4.3 NONCONTRAVENTION. The execution, delivery, and performance by each Investor of this Agreement and the execution, delivery and, where applicable, performance of Ancillary Documents to which it is a party and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or result in a violation of any provision of MB's Certificate of Incorporation or Bylaws or ESC's Certificate of Limited Partnership or partnership agreement, (ii) conflict with or result in a violation of any provision of, or constitute (with or without the giving of notice or the passage of time or both) a default under, or give rise (with or without the giving of notice or the passage of time or both) to any right of termination, cancellation, or acceleration under, any bond, debenture, note, mortgage, indenture, lease, agreement or other instrument or obligation to which any Investor is a party or by which Investor or any of its properties may be bound, (iii) result in the creation or imposition of any Encumbrance upon the properties of any Investor, or (iv) violate any Applicable Law binding upon any Investor, except, in the case of clauses (ii), (iii) and (iv) above, for any such conflicts, violations, defaults, terminations, cancellations, accelerations, or Encumbrances which would not, individually or in the aggregate, have a Material Adverse Effect on any Investor. 4.4 CONSENTS AND APPROVALS. No consent, approval, order, or authorization of, or declaration, filing, or registration with, any Governmental Entity is required to be obtained or made by Investors in connection with the execution, delivery, or performance by Investors of this Agreement. No consent or approval of any person other than any Governmental Entity is required to be obtained or made by any Investor in connection with the execution, delivery or performance by Investors of this Agreement and the execution, delivery and, where applicable, performance of the Ancillary Documents to which it is a party. 4.5 PURCHASE FOR INVESTMENT. Each Investor understands that none of the Shares, the Warrants or the Warrant Shares have been registered under the Securities Act. Each Investor also understands that the Shares, the Warrants and the Warrant Shares are being offered and sold pursuant to an exemption from registration contained in the Securities Act based in part upon Investors' representations contained in the Agreement. Each Investor hereby represents and warrants as follows: (a) INVESTOR BEARS ECONOMIC RISK. Each Investor has substantial experience in evaluating and investing in private placement transactions of securities in companies similar to the Company so that it is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests. Without limiting the generality of the foregoing, each Investor further represents that it has such knowledge regarding the oil and gas industry and the business of the Company and the current circumstances surrounding such industry and business that it is capable of evaluating the merits and risks of the acquisition of the Shares, the Warrants and the Warrant Shares. Each Investor must bear the economic risk of this investment indefinitely unless the Shares, the Warrants or the Warrant Shares are registered pursuant to the Securities Act, or an exemption from registration is available. Each Investor understands that the Company has no present intention of registering the Shares, the Warrants or the Warrant Shares. Each Investor also understands that there is no assurance that any exemption from registration under the Securities Act will be available and that, even if available, such exemption may not allow an Investor to transfer all or any portion of the Shares, Warrants or Warrant Shares under the circumstances, in the amounts or at the times an Investor might propose. (b) ACQUISITION FOR OWN ACCOUNT. Each Investor is acquiring the Shares, the Warrants and Warrant Shares for such Investor's own account for investment only, and not with a view towards their distribution. 10 (c) INVESTOR CAN PROTECT ITS INTEREST. Each Investor represents that by reason of its, or of its management's, business or financial experience, such Investor has the capacity to protect its own interests in connection with the transactions contemplated in this Agreement and the Ancillary Agreements. Further, neither Investor is aware of no publication of any advertisement in connection with the transactions contemplated in the Agreement. (d) ACCREDITED INVESTOR. Each Investor represents that it is an accredited investor within the meaning of Regulation D under the Securities Act. (e) COMPANY INFORMATION. Each Investor has had access to the Company's SEC Filings and has had an opportunity to discuss the Company's business, management and financial affairs with directors, officers and management of the Company and has had the opportunity to review the Company's operations and facilities. Each Investor has also had the opportunity to ask questions of, and receive answers from, the Company and its management regarding the terms and conditions of this investment. Each Investor hereby acknowledges and affirms that it has completed its own independent investigation, analysis, and evaluation of the Company and its subsidiaries, that it has made all such reviews and inspections of the business, assets, results of operations, condition (financial or otherwise), and prospects of the Company and its subsidiaries as it has deemed necessary or appropriate, and that in making its decision to enter into this Agreement and to consummate the transactions contemplated hereby it has relied solely on its own independent investigation, analysis, and evaluation of the Company and its subsidiaries, or that of its own independent advisers in evaluating its investment in the Shares, Warrants and Warrant Shares. (f) RULE 144. Each Investor acknowledges and agrees that the Shares and the Warrants, and, if issued, the Warrant Shares, must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Each Investor has been advised or is aware of the provisions of Rule 144, which permits limited resale of shares purchased in a private placement subject to the satisfaction of certain conditions, including, among other things: the availability of certain current public information about the Company, the resale occurring following the required holding period under Rule 144 and the number of shares being sold during any three-month period not exceeding specified limitations. (g) TRANSFER RESTRICTIONS. Each Investor acknowledges and agrees that the Shares, the Warrants and the Warrant Shares are subject to restrictions on transfer as set forth in Section 5.5, below, and further understands that the Shares, the Warrants and the Warrant Shares will not have been registered pursuant to the Securities Act or any applicable state securities laws, that the Shares, the Warrants and the Warrant Shares will be characterized as "restricted securities" under federal securities laws, and that under such laws and applicable regulations the Shares, the Warrants and the Warrant Shares cannot be sold or otherwise disposed of without registration under the Securities Act or an exemption therefrom. In this connection, each Investor represents that it is familiar with Rule 144 promulgated under the Securities Act, as currently in effect, and understands the resale limitations imposed thereby and by the Securities Act. Appropriate stop transfer instructions may be issued to the transfer agent for securities of the Company (or a notation may be made in the appropriate records of the Company) in connection with the Shares, the Warrants or the Warrant Shares. (h) CONFIRMATION. The acquisition of the Shares by an Investor at the Closing shall constitute such Investor's confirmation of the foregoing representations. 4.6 NO OTHER SHARES. Except for such rights as may be conferred on an Investor by this Agreement and the Ancillary Documents, Investors do not beneficially own, directly or indirectly, any shares of capital stock or other securities of the Company or any of its Subsidiaries. 4.7 FINANCIAL RESOURCES. Each Investor has the financial resources available to it as are necessary to perform its obligations to acquire the Shares pursuant to the terms of this Agreement. 11 4.8 BROKERAGE FEES. No Investor has retained any financial advisor, broker, agent, or finder or paid or agreed to pay any financial advisor, broker, agent, or finder on account of the sale by the Company and the purchase by Investors of the Shares pursuant to this Agreement. ARTICLE V ADDITIONAL AGREEMENTS 5.1 REASONABLE BEST EFFORTS. (a) Each party hereto agrees that it will use its reasonable best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things reasonably necessary, proper, or advisable under Applicable Laws to consummate the transactions contemplated by this Agreement, including, without limitation, (i) cooperation in determining whether any consents, approvals, orders, authorizations, waivers, declarations, filings, or registrations of or with any Governmental Entity or third party are required in connection with the consummation of the transactions contemplated hereby; (ii) reasonable best efforts to obtain any such consents, approvals, orders, authorizations, and waivers and to effect any such declarations, filings, and registrations; (iii) reasonable best efforts to cause to be lifted or rescinded any injunction or restraining order or other order adversely affecting the ability of the parties to consummate the transactions contemplated hereby; (iv) reasonable best efforts to defend, and cooperation in defending, all lawsuits or other legal proceedings challenging this Agreement or the consummation of the transactions contemplated hereby; and (v) the execution of any additional instruments necessary to consummate the transactions contemplated hereby. (b) Without limiting the generality of Section 5.1(a), to the extent required by the HSR Act, each of the parties hereto shall (i) file or cause to be filed, as promptly as practicable but in no event later than five (5) consecutive Business Days after the execution and delivery of this Agreement, with the Federal Trade Commission and the United States Department of Justice, all reports and other documents required to be filed by such party under the HSR Act concerning the transactions contemplated hereby and (ii) promptly comply with or cause to be complied with any requests by the Federal Trade Commission or the United States Department of Justice for additional information concerning such transactions, in each case so that the waiting period applicable to this Agreement and the transactions contemplated hereby under the HSR Act shall expire as soon as practicable after the execution and delivery of this Agreement. Each party hereto agrees to request, and to cooperate with the other party or parties in requesting, early termination of any applicable waiting period under the HSR Act. Notwithstanding the foregoing, if any report or other document is required to be filed by any Investor under the HSR Act solely as result of the purchase and sale of the Shares or the Warrants (with no regard to any other securities held by such Investor or its Affiliates), the Company shall pay any and all fees and expenses, including filing fees and legal expenses, incurred by such Investor in connection with the filing of such reports or other documents and any other actions required to comply with the provisions of the HSR Act. 5.2 PRESS RELEASES. Except as may be required by Applicable Law or by the rules of any national securities exchange or registered securities association, prior to the Closing, neither Investors nor the Company shall issue any press release with respect to this Agreement or the transactions contemplated hereby without the prior consent of the other party (which consent shall not be unreasonably withheld under the circumstances). Any such press release required by Applicable Law or by the rules of any national securities exchange or registered securities association shall only be made after reasonable notice to the other party. 5.3 FEES AND EXPENSES. Except as otherwise expressly provided in this Agreement, all fees and expenses, including fees and expenses of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such fee or expense. 12 5.4 SURVIVAL. The representations and warranties made herein shall survive the Closing, regardless of any investigation made by or on behalf of any party, until the second anniversary of the Closing Date; provided, however, the representations and warranties contained in Sections 3.9, 3.10 and 3.18 shall survive until the expiration of the applicable statute limitations relating to the subject matters of such representations and warranties (the "Survival Date".) All statements as to factual matters contained in any certificate or other instrument delivered by or on behalf of the Company pursuant hereto in connection with the transactions contemplated hereby shall be deemed to be representations and warranties by the Company herein for purposes of this Section 5.5. No action may be brought with respect to a breach of any representation or warranty after the Survival Date unless, prior to such time, the party seeking to bring such an action has notified the other parties of such claim, specifying in reasonable detail the nature of the loss suffered. 5.5 TRANSFER RESTRICTIONS. (a) Notwithstanding any provision contained in this Agreement to the contrary, each Investor agrees that it will not, directly or indirectly, sell, assign, transfer, pledge, encumber, or otherwise dispose of any of the Shares, Warrants or Warrant Shares except: (i) In compliance with Rule 144; provided, however, that the Investor shall provide the Company with copies of all filings made with the Securities and Exchange Commission with respect to sales of securities under Rule 144 and with such other information and documents as the Company shall reasonably require in order to assure full compliance with Rule 144; or (ii) Pursuant to a no-action letter or other interpretive statement or release of the Securities and Exchange Commission to the effect that the proposed sale or other disposition may be effected without registration under the Securities Act; or (iii) Pursuant to an applicable exemption (other than Rule 144) under the Securities Act; provided, however, that the Investor shall have furnished the Company with an opinion of counsel, which opinion and counsel shall be reasonably acceptable to the Company, to the effect that such disposition does not require registration of such securities under the Securities Act; provided further, however, that no opinion of counsel shall be required in the case of a transfer to an affiliate (as defined in Rule 405 of the Securities Act) of Investor if such affiliate shall have furnished the Company with the representations contained in Section 4.5 of this Agreement and shall have agreed with the Company to be subject to the terms of this Agreement to the same extent as if an original holder of securities pursuant hereto. (iv) Pursuant to an effective registration statement filed under the Securities Act. (b) It is agreed and understood by each Investor that the certificates or instruments representing the Shares, Warrants and Warrant Shares shall each 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 SECURITIES PURCHASE AGREEMENT, DATED AS OF __________, 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." 13 5.6 TRANSACTION FEE. The sum of Two Hundred Thousand Dollars ($200,000), plus all reasonable out-of-pocket expenses incurred by the investors, including attorneys fees, shall be paid by the Company to Investors on the Closing Date upon Closing; provided, however, that in no event shall the Company be obligated to pay more than $235,000 pursuant to this Section 5.6. 5.7 SPECIAL MEETING OF STOCKHOLDERS. (a) The Company shall take all action necessary in accordance with applicable law and the Company's Certificate of Incorporation and Bylaws to duly call, give notice of, convene, and hold a special meeting of its stockholders as promptly as practicable after the date hereof to consider and vote upon the matters described in the Stockholders Voting Agreement dated as of October 31, 2000 by and among the Company and certain of its stockholders (the "Stockholder Approval"). The Company shall not mail or otherwise distribute the proxy statement or information statement (or any related proxy materials or amendments or supplements thereto, if any) relating to such special meeting to its stockholders without consultation with Investors and their counsel, and such proxy statement or information statement and such other items shall be in such form as Investors and their counsel shall approve (such approval not to unreasonably withheld. (b) The Company covenants and agrees that, prior to obtaining the Stockholder Approval, it shall not take any action that would cause an adjustment, pursuant to the terms of the Warrants, to the Exercise Price (as defined in the Warrant Certificates evidencing the Warrants) of the Warrants but for the requirements of Section 2(i) of such Warrant Certificates. 5.8 CAPITALIZATION CERTIFICATION. The Company shall provide, immediately after the Closing, a schedule reflecting the capitalization of the Company as of immediately after the transactions contemplated by this Agreement and those contemplated in the Enron Transactions and the Financing Transaction, including at least the information provided in the representation in Section 3.2 and indicating the number of fully-diluted shares of Common Stock, and certified by the Chief Financial Officer of the Company (the "Certificate"). Until the second anniversary of the Closing Date, the Company shall amend the Certificate at any time after the Closing to reflect any changes to the Certificate (which in all cases shall reflect the capitalization of the Company as of immediately after the transactions contemplated by this Agreement and those contemplated in the Enron Transactions and the Financing Transaction) if the Company learns that the Certificate is incorrect or not complete in any respect. Notwithstanding any provision contained in this Agreement, the Registration Rights Agreement and the Warrant Certificate, if the number of fully-diluted shares of Common Stock as reflected in the Certificate at any time is more than 32,531 shares in excess of 32,531,187 shares of Common Stock, then the number of shares purchasable upon exercise of the Warrant shall be increased to a number of shares equal to 20.49% of the fully-diluted shares of Common Stock. Upon any such adjustment to the number of shares to be acquired upon exercise of the Warrant, the holder of the Warrant shall deliver to the Company the Warrant Certificate for cancellation and immediately thereupon the Company shall issue a new Warrant Certificate reflecting the adjusted number of shares purchasable thereunder. For purposes of this Section 5.8, the term "fully-diluted shares of Common Stock" means the sum of shares of Common Stock outstanding, plus all shares of Common Stock issuable pursuant to (i) the conversion or exchange of securities that are convertible into or exchangeable for shares of Common Stock or the exercise of any option, warrant or other right to acquire shares of Common Stock from the Company, (ii) the conversion or exchange of any security that is convertible into or exchangeable for any securities referenced in 5.8(i) or the exercise of any security that is exercisable for any securities referenced in 5.8(i), and (iii) the exercise of any rights under any agreement regarding equity equivalents, interests in the ownership or earnings, or other similar rights of or with respect to the Company. 14 ARTICLE VI CONDITIONS TO OBLIGATIONS OF THE COMPANY The obligations of the Company to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment on or prior to the Closing Date of each of the following conditions: 6.1 REPRESENTATIONS AND WARRANTIES. All the representations and warranties of Investors contained in this Agreement shall be true and correct in all material respects, except as affected by transactions contemplated or permitted by this Agreement. 6.2 COVENANTS AND AGREEMENTS. Investors shall have performed and complied with in all material respects all covenants and agreements required by this Agreement to be performed or complied with by them on or prior to the Closing Date. 6.3 HSR ACT. All waiting periods (and any extensions thereof) applicable to this Agreement and the transactions contemplated hereby under the HSR Act shall have expired or been terminated. 6.4 LEGAL PROCEEDINGS. No Proceeding shall, on the Closing Date, be pending or threatened seeking to restrain, prohibit or obtain damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby. 6.5 CONSENTS. All consents, approvals, orders, authorizations and waivers of, and all declarations, filings and registrations with, third parties (including Governmental Entities) required to be obtained or made by or on the part of the parties hereto, or otherwise reasonably necessary for the consummation of the transactions contemplated hereby, shall have been obtained or made, and all thereof shall be in full force and effect at the time of Closing. 6.6 ENRON TRANSACTIONs. All conditions precedent to the closing of the Enron Transactions (other than conditions with respect to the consummation, simultaneously with such closing, of the transactions contemplated hereby) shall have been satisfied or waived at or prior to the Closing, and such closing shall have occurred prior to or be occurring simultaneously with the Closing. For purposes of this Agreement, the "Enron Transactions" mean (i) the repurchase by the Company from affiliates of Enron North America Corp. of an aggregate of 1,052,632 shares of the Company's Common Stock, warrants to purchase an aggregate of 1,000,000 shares of the Company's common stock and (ii) the repayment in full (and/or repurchase or cancellation) of the Company's Senior Subordinated Secured Notes due 2003, for an aggregate repurchase/repayment price of no more than $20,000,000 in cash, excluding fees and commissions. 6.7 FINANCING. All conditions precedent to the closing of a Financing Transaction (other than conditions with respect to the consummation, simultaneously with such closing, of the transactions contemplated hereby) shall have been satisfied or waived at or prior to the Closing, and such closing shall have occurred prior to or be occurring simultaneously with the Closing. For purposes of this Agreement, a "Financing Transaction" means the financing arrangements described in the Subordinated Credit Agreement dated as of October 31, 2000 among Brigham Oil & Gas, L.P. and Shell Capital, Inc. 15 ARTICLE VII CONDITIONS TO OBLIGATIONS OF INVESTORS The obligations of Investors to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment on or prior to the Closing Date of each of the following conditions: 7.1 REPRESENTATIONS AND WARRANTIES. All the representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects, except as affected by transactions contemplated or permitted by this Agreement (or the announcement thereof). 7.2 COVENANTS AND AGREEMENTS. The Company shall have performed and complied with in all material respects all covenants and agreements required by this Agreement to be performed or complied with by it on or prior to the Closing Date. 7.3 HSR ACT. All waiting periods (and any extensions thereof) applicable to this Agreement and the transactions contemplated hereby under the HSR Act shall have expired or been terminated. 7.4 LEGAL PROCEEDINGS. No Proceeding shall, on the Closing Date, be pending or threatened seeking to restrain, prohibit or obtain damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby. 7.5 LEGAL OPINION. Thompson & Knight, L.L.P., counsel to the Company, shall have delivered to the Investors a legal opinion satisfactory in form and substance to the Investors. 7.6 CONSENTS. All consents, approvals, orders, authorizations and waivers of, and all declarations, filings and registrations with, third parties (including Governmental Entities) required to be obtained or made by or on the part of the parties hereto, or otherwise reasonably necessary for the consummation of the transactions contemplated hereby, shall have been obtained or made, and all thereof shall be in full force and effect at the time of Closing. 7.7 APPOINTMENT OF DIRECTOR. On or before the Closing Date, Steven A. Webster shall be appointed as a member of the Board of Directors of the Company. 7.8 ENRON TRANSACTIONS. All conditions precedent to the closing of the Enron Transactions (other than conditions with respect to the consummation, simultaneously with such closing, of the transactions contemplated hereby) shall have been satisfied at or prior to the Closing, and such closing shall have occurred prior to or be occurring simultaneously with the Closing. 7.9 FINANCING. All conditions precedent to the closing of a Financing Transaction (other than conditions with respect to the consummation, simultaneously with such closing, of the transactions contemplated hereby) shall have been satisfied at or prior to the Closing, and such closing shall have occurred prior to or be occurring simultaneously with the Closing. 7.10 CLOSING DELIVERIES. Investors shall have received the certificates, instruments and documents required to be delivered by the Company by Section 2.2. 16 ARTICLE VIII BOARD REPRESENTATION The Company covenants to nominate one representative of the Investors appointed by MB to serve as a member of the Board of Directors of the Company (the "Board") for so long as the Investors or their Affiliates own at least 10% of the Shares or at least 5% of the outstanding shares of Common Stock of the Company. Notwithstanding the foregoing, should a representative of the Investors not be elected to the Board at a meeting of the stockholders of the Company, the Company shall provide such representative with notice of each meeting of the Board and shall provide such representative with access to such meeting as an observer. ARTICLE IX COVENANTS 9.1 AFFIRMATIVE COVENANTS. The Company covenants and agrees that, so long as any of the Shares are outstanding: (a) FINANCIAL STATEMENTS AND OTHER REPORTS. The Company shall deliver, or shall cause to be delivered, to the Investors: (i) ANNUAL FINANCIAL STATEMENTS. As soon as available and in any event within 90 days after the end of each fiscal year of the Company and its consolidated Subsidiaries for such fiscal year, and the related consolidated and unaudited consolidating balance sheets of the Company 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 which opinion shall state that said financial statements fairly present the consolidated financial condition and results of operations of the Company 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. (ii) 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 the Company, consolidated statements of income, stockholders' equity, changes in financial position and cash flow of the Company 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. (iii) 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 the Company's first three fiscal quarterly periods or of the Company's fiscal year, consolidated statements of income and changes in financial position of the Company 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. (b) SEC FILINGS, ETC. Promptly, upon its becoming available, each financial statement, report, notice or proxy statement sent by the Company to stockholders generally. 17 (c) ENGINEERING REPORTS. Not later than April 30 and October 30 of each year, the Company shall furnish to the Investors a Reserve Report as of the preceding December 31 and June 30, respectively. The Reserve Report to be furnished in April of each year shall be prepared by certified independent petroleum engineers or other independent petroleum consultant(s) and the Reserve Reports to be furnished in October of each year shall be prepared by or under the supervision of the chief engineer or Vice President of Operations of the Company who shall certify such Reserve Report to have been prepared in accordance with the procedures used in the immediately preceding April Reserve Report. At Company's option, the Reserve Report to be furnished in October 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 Company on any wells previously reported in the Reserve Report described in the immediately preceding April. (d) EXCHANGE ACT REPORTS. At all times (i) timely file all reports required to be filed by the Company under Section 13(d) or Section 15 of the Exchange Act and the rules and regulations thereunder, and (ii) if the Company is no longer subject to the requirements of the Exchange Act, provide holders of the Shares reports in substantially the same form and at the same times as would be required if the Company were subject to the Exchange Act. (e) NASDAQ LISTING. Maintain at all times a valid listing for the Common Stock on a national securities exchange or the National Market System or SmallCap Market of the Nasdaq Stock Market, Inc. (f) FURTHER ASSURANCES. The Company at its expense will promptly execute and deliver to the Investors upon request all such other documents, agreements and instruments to comply with or accomplish the covenants and agreements of the Company in this Agreement or any other agreements and documents executed by and between the Company and the Investors. 9.2 NEGATIVE COVENANTS. The Company covenants and agrees that, so long as at least 10% of the Shares are outstanding, without the prior written consent of the persons holding 75% of the then outstanding Shares: (a) DIVIDENDS, DISTRIBUTIONS AND REDEMPTIONS. The Company will not declare or pay any dividend, purchase, redeem, or otherwise acquire for value any of its Parity Security or Junior Security now or hereafter outstanding, return any capital or make a distribution of its assets to its stockholders. (b) NATURE OF BUSINESS. Neither the Company nor Brigham Oil & Gas, L.P. will allow any material change to be made in the character of its business as an independent oil and gas exploration and production company. (c) ENVIRONMENTAL MATTERS. Neither the Company 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. (d) TRANSACTIONS WITH AFFILIATES. Neither the Company 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, 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. 18 ARTICLE X AMENDMENT AND WAIVER 10.1 AMENDMENT. This Agreement may not be amended except by an instrument in writing signed by or on behalf of all the parties hereto. 10.2 WAIVER. No failure or delay by a party hereto in exercising any right, power, or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power, or privilege. The provisions of this Agreement may not be waived except by an instrument in writing signed by or on behalf of the party against whom such waiver is sought to be enforced. ARTICLE XI MISCELLANEOUS 11.1 NOTICES. All notices, requests, demands, and other communications required or permitted to be given or made hereunder by any party hereto shall be in writing and shall be deemed to have been duly given or made if (i) delivered personally, (ii) sent by prepaid overnight courier service, or (iii) sent by telecopy or facsimile transmission, answer back requested, to the parties at the following addresses (or at such other addresses as shall be specified by the parties by like notice): (a) If to the Company: Brigham Exploration Company 6300 Bridge Point Parkway Building 2, Suite 500 Austin, TX 78730 Attention: Chief Financial Officer Telefax: 512-427-3400 with a copy to: Thompson & Knight L.L.P. 1700 Pacific Avenue, Suite 3300 Dallas, Texas 75201 Attention: Joe Dannenmaier Telefax: 214-969-1751 (b) If to either Investor, to such Investor at: 277 Park Avenue New York, New York 10172 Attention: Michael Isikow Telefax: 212-892-2689 with a copy to: Gardere Wynne Sewell, LLP 1000 Louisiana, Suite 3400 Houston, Texas 77002 Attention: N.L. Stevens III Telefax: 713-276-5807 19 Such notices, requests, demands, and other communications shall be effective (i) if delivered personally or sent by courier service, upon actual receipt by the intended recipient, or (ii) if sent by telecopy or facsimile transmission, when the answer back is received. 11.2 ENTIRE AGREEMENT. This Agreement, together with the Schedules, Exhibits, Annexes, and other writings referred to herein or delivered pursuant hereto, constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, between the parties and their Affiliates with respect to the subject matter hereof. 11.3 BINDING EFFECT; ASSIGNMENT; NO THIRD PARTY BENEFIT. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Except as otherwise expressly provided in this Agreement, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the other party. Nothing in this Agreement, express or implied, is intended to or shall confer upon any person other than the parties hereto, and their respective heirs, legal representatives, successors, and permitted assigns, any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement. 11.4 SEVERABILITY. If any provision of this Agreement is held to be unenforceable, then this Agreement shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable, and in all other respects this Agreement shall remain in full force and effect to the maximum extent permitted by Applicable Law. 11.5 INJUNCTIVE RELIEF. The parties hereto acknowledge and agree that irreparable damage would occur in the event any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement, and shall be entitled to enforce specifically the provisions of this Agreement, in any court of the United States or any state thereof having jurisdiction, in addition to any other remedy to which the parties may be entitled under this Agreement or at law or in equity. 11.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. 20 11.7 JURISDICTION. Except as otherwise expressly provided in this Agreement, any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby may be brought in the United States District Court for the Southern District of New York or any other New York State court sitting in New York City, and each of the parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 10.01 shall be deemed effective service of process on such party. 11.8 COUNTERPARTS. This Agreement may be executed by the parties hereto in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same agreement. Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all, the parties hereto. ARTICLE XII DEFINITIONS 12.1 CERTAIN DEFINED TERMS. As used in this Agreement, each of the following terms has the meaning given it in this Article: "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 50% or more of the securities having ordinary voting power for the election of directors or other governing body of a corporation or 50% 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. "Ancillary Documents" means each agreement, instrument, and document (other than this Agreement) executed or to be executed by the Company or any Investor in connection with the sale and purchase of the Shares and the other transactions contemplated by this Agreement. "Applicable Law" means any statute, law, rule, or regulation or any judgment, order, writ, injunction, or decree of any Governmental Entity to which a specified person or property is subject. "BOG" means Brigham Oil & Gas, L.P. "Business Day" shall mean any day other than a Saturday, a Sunday, or a day on which banking institutions in Austin, Texas are authorized or obligated by law or executive order to close. 21 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time and any successor statute. "Common Stock" means the common stock, par value of $.01 per share, of the Company, and such other class of securities as shall represent the common equity of the Company. "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; (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) 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 (xiii) all obligations of such Person under Hedging Agreements. "Encumbrances" means liens, charges, pledges, options, mortgages, deeds of trust, security interests, claims, restrictions (whether on voting, sale, transfer, disposition, or otherwise), easements, and other encumbrances of every type and description, whether imposed by law, agreement, understanding, or otherwise. "Environmental Laws" shall mean any and all Governmental Requirements pertaining to the environment in effect in any and all jurisdictions in which the Company or any Subsidiary is conducting or at any time has conducted business, or where any Oil and Gas Property of the Company 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 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 "disposal") have the meanings specified in RCRA; provided that to the extent the laws of the state in which any Oil and Gas Property of the Company 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. 22 "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 Company or any Subsidiary of the Company 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. "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 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; and (vii) Liens (including "Excepted Liens") permitted by or created pursuant to the Senior Credit Agreement and Liens permitted by or created pursuant to the Subordinated Credit Agreement. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Governmental Entity" means any court or tribunal in any jurisdiction (domestic or foreign) or any public, governmental, or regulatory body, agency, department, commission, board, bureau, or other authority or instrumentality (domestic or foreign). 23 "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 Entity. "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. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "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. "Hydrocarbons" shall mean oil, gas, casinghead gas, drip gasoline, natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all products refined or separated therefrom. "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. "Material Adverse Effect" means, relative to the Company or the Investors, as the case may be, any change, development, or effect (individually or in the aggregate) which is, or is reasonably likely to be, materially adverse (i) to the business, assets, results of operations, condition (financial or otherwise), or prospects of the Company and the Subsidiaries considered as a whole, or the Investors, as the case may be, or (ii) to the ability of the Company or the Investors, as the case may be, to perform on a timely basis any material obligation of the Company or the Investors, as the case may be, under this Agreement or any agreement, instrument, or document entered into or delivered in connection herewith. "Material Agreement" means (a) any written agreement, contract, lease, commitment, understanding, instrument or obligation to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary or any of their respective properties may be bound involving total value or consideration or liability in excess of $500,000, (b) any loan or credit agreement, bond, debenture, note, mortgage or indenture by which the Company or any Subsidiary or any of their respective properties may be bound, or (c) any agreement set forth as an exhibit to the Company's Form 10-K for the fiscal year ended December 31, 1999. 24 "Person" or "person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, enterprise, unincorporated organization, or Governmental Entity. "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 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. "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 Company, 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 Company, any Subsidiary or an ERISA Affiliate. "Proceeding" means any action, suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative, any appeal in such an action, suit or proceeding, and any inquiry or investigation that could lead to such an action, suit or proceeding. "reasonable best efforts" means a party's best efforts in accordance with reasonable commercial practice and without the incurrence of unreasonable expense. "Rule 144" means Rule 144 promulgated under the Securities Act. "Securities Act" means the Securities Act of 1933, as amended. "Senior Credit Agreement" means that certain Amended and Restated Credit Agreement dated as of February 17, 2000, by and between BOG, Bank of Montreal, as Agent, and the Lenders signatory thereto, as amended on October 31, 2000, together with the "Loan Documents" described therein. 25 "Subordinated Credit Agreement" means the Subordinated Credit Agreement dated as of October 31, 2000 by and between BOG, Shell Capital, Inc., as Agent, and the Lenders signatory thereto. "Subsidiaries" means Brigham Oil & Gas, L.P.; Brigham, Inc.; Brigham Holdings I, LLC and Brigham Holdings II, LLC. IN WITNESS WHEREOF, the parties have executed this Agreement, or caused this Agreement to be executed by their duly authorized representatives, all as of the day and year first above written. THE COMPANY: BRIGHAM EXPLORATION COMPANY Address: By: /s/ Karen E. Lynch ----------------------------------------- Karen Lynch Vice President Investor: DLJ MB FUNDING III, INC. Address: By: /s/ Ivy B. Dodes ----------------------------------------- Ivy B. Dodes Principal DLJ ESC II, LP By: DLJ LBO Plans Management Corporation, its general partner Address: By: /s/ Ivy B. Dodes ------------------------------------------- Ivy B. Dodes Principal EX-10.10 12 0012.txt REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is entered into as of November 1, 2000, by and among Brigham Exploration Company, a Delaware corporation (the "COMPANY"), and the parties listed on SCHEDULE A hereto (the "INVESTORS"). RECITALS WHEREAS, each Investor is a party to a certain Warrant Certificate (the "WARRANT CERTIFICATE") dated as of November 1, 2000, by and between the Company and such Investor; WHEREAS, the Warrant Certificates were executed and delivered in connection with the consummation of transactions contemplated by that certain Securities Purchase Agreement dated as of November 1, 2000 by and among the Company and the Investors; WHEREAS, pursuant to the Warrant Certificates, the Holder (as defined below) has been issued a warrant (the "WARRANT") to purchase shares of the Company's common stock, par value $.01 per share (the "COMPANY'S COMMON STOCK"); WHEREAS, to induce the Investors to enter into the Warrant Certificates and the Securities Purchase Agreement, the Company has agreed to grant the registration and other rights contained in this Agreement; AGREEMENT 1. DEFINITIONS For purposes of this Agreement, the following terms have the following meanings: (1) "FORM S-3" means such form under the Act as in effect on the date hereof or any registration form under the Act subsequently adopted by the Securities and Exchange Commission (the"SEC") that similarly permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC; (2) "HOLDER" means any person owning or having the right to acquire Registrable Securities who is a party to this Agreement as of the date hereof or who may be added as a party pursuant to the terms of this Agreement, and any assignee thereof; (3) "REGISTER," "REGISTERED" and "REGISTRATION" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act of 1933, as amended (the "ACT"), and the declaration or order of effectiveness of such registration statement or document; 1 (4) "REGISTRABLE SECURITIES" means (i) the Common Stock of the Company issuable or issued upon exercise of the Warrants and (ii) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, such Warrants or Common Stock, excluding in all cases, however, any Registrable Securities sold by a person in a transaction in which its rights under this Agreement are not assigned ; and (5) "REGISTRABLE SECURITIES THEN OUTSTANDING" means the number of shares of Common Stock outstanding which are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities which are, Registrable Securities. (6) "SEC" means the Securities and Exchange Commission. 2. REQUEST FOR REGISTRATION (1) If the Company shall receive a written request from the Holders of at least 25% of the Registrable Securities then outstanding (the "INITIATING HOLDERS") that the Company file a registration statement under the Act covering the registration of at least 25% of the Registrable Securities, then the Company shall, within 10 days after the receipt of such request, give written notice of such request to all Holders and shall, subject to the limitations set forth below, use its reasonable best efforts to effect as soon as practicable the registration under the Act of all Registrable Securities that the Holders request to be registered in a written request to be given within 30 days of receipt of such notice by the Company. (2) The Company is obligated to effect only two registrations pursuant to this Section 2. (3) Notwithstanding the foregoing, if the Company shall furnish to the Initiating Holders requesting a registration pursuant to this Section 2 within 30 days of receiving such request a certificate signed by the President of the Company stating that in the good faith Judgment of the Board of Directors of the Company it would be seriously detrimental to the Company and its stockholders for such in registration statement to be filed and it is therefore essential to defer the filing of such registration statement, the Company shall have the right to defer such filing for up to 2 periods of not more than 45 days each after receipt of the request of the Initiating Holders; provided, however, that the Company may not use this right more than once (for a total of up to 90 days) in any 12-month period; provided, however, that the Company shall promptly notify the Initiating Holders requesting a registration pursuant to this Section 2 of any decision by the Company to abandon or indefinitely delay such public offering. 3. COMPANY REGISTRATION If the Company proposes to register (including for this purpose a registration effected by the Company for stockholders (ARequesting Holders@) other than the Holders) any of its stock or other securities under the Act in connection with the public offering of such securities solely for 2 cash (other than a registration relating solely to the sale of securities to participants in a Company stock plan, or a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of Registrable Securities), the Company shall, at each such time, promptly give each Holder written notice of such registration. Upon the written request of each such Holder given within 20 days after receipt of such notice by the Company, the Company shall, subject to the provisions of Section 8, use its reasonable best efforts to cause to be registered under the Act all of the Registrable Securities that each such Holder has requested to be registered. In the event that the Company decides for any reason not to complete the registration of shares of Common Stock other than Registrable Securities, the Company shall have no obligation under this Section 3 to continue with the registration of Registrable Securities. Any request pursuant to this Section 3 to register Registrable Securities as part of an underwritten public offering of Common Stock shall specify that such Registrable Securities are to be included in the underwriting on the same terms and conditions as the shares of Common Stock otherwise being sold through underwriters under such registration. 4. FORM S-3 REGISTRATION (1) If the Company shall receive a written request from the Holders of 25% of the Registrable Securities then outstanding that the Company effect a registration on Form S-3, the reasonably anticipated aggregate offering price to the public of which would equal or exceed $2,000,000,then the Company shall, within 10 days after the receipt of such request, give written notice of such request to all Holders and shall, subject to the limitations set forth below, use its reasonable best efforts to effect as soon as practicable the registration under the Act of all Registrable Securities that the Holders request to be registered in a written request to be given within 30 days of receipt of such notice by the Company. (2) Notwithstanding the foregoing, the Company shall not be obligated to effect any such registration pursuant to this Section 4 if (i) Form S-3 is not available for such offering by the Holders; (ii) the Company shall furnish to the Holders a certificate signed by the President of the Company stating that, in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Form S-3 registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than 90 days after receipt of the request of the Holders under this Section 4; provided, however, that the Company shall not use this right more than once in any 12-month period; or (iii) if the Company has, within the 12-month period preceding the date of such request, already effected one such registrations on Form S-3 for the Holders pursuant to this Section 4. 5. OBLIGATIONS OF THE COMPANY Whenever required under this Agreement to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: (1) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective, and, upon the request of the Holders of 25% of the 3 Registrable Securities registered thereunder, keep such registration statement effective for up to one year. (2) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement. (3) Furnish to the Holders such copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Act and such other documents as they may reasonably request to facilitate the disposition of all securities covered by such registration statement (4) Use commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (5) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering. Each Holder participating in such registration shall also enter into and perform its obligations under such an agreement. (6) Notify each Holder of Registrable Securities covered by such registration statement, during the time when a prospectus is required to be delivered under the Act, of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. (7) At the request of any Holder selling Registrable Securities in such registration, furnish on the date that such Registrable Securities are delivered to the underwriters for sale in connection with such registration (i) an opinion, dated such date, of legal counsel representing the Company for the purposes of such registration, in form and substance as is customarily given by Company counsel to underwriters in an underwritten public offering, addressed to the underwriters and (ii) a letter, dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters. (8) List the Registrable Securities being registered on any national securities exchange on which a class of the Company's equity securities is listed or qualify the Registrable Securities being registered for inclusion on Nasdaq if the Company does not have a class of equity securities listed on a national securities exchange. 4 6. FURNISH INFORMATION It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Agreement that the selling Holders shall furnish to the Company such information regarding themselves, the Registrable Securities held by them and the intended method of disposition of such securities as shall be reasonably required to effect the registration of their Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request. 7. EXPENSES OF REGISTRATION In connection with any registration pursuant to this Agreement, the Company shall be responsible for the payment of all reasonable expenses of the registration, with the exception of (i) underwriting discounts and commissions, which shall be paid by the Company, the Holders and any other selling holders of the Company's securities in proportion to the aggregate value of the securities offered for sale by each of them, and (ii) the fees and expenses of more than one law firm acting as counsel to the selling Holders selected by a majority in interest of the selling Holders, which additional counsel, if any, shall be paid by the Holder or Holders that engage such counsel. The expenses to be paid by the Company shall include, without limitation, all registration, filing and qualification fees, printing and accounting fees, the fees and disbursements of counsel for the Company and the fees and disbursements of one counsel for the selling Holders; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2 or 4 if the registration request is subsequently withdrawn (other than a withdrawal due to a material adverse change in the Company's business or financial condition), unless, in the event of a registration initiated pursuant to the provisions of Section 2, the Holders of 25% of the Registrable Securities agree to forfeit the right to one demand registration. 8. UNDERWRITING REQUIREMENTS (1) The Holders requesting registration under Section 2 must distribute the Registrable Securities covered by their request by means of a public offering underwritten by a reputable national or regional underwriter. The right of any Holder to include its Registrable Securities in such registration under Section 2 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall (together with the Company as provided in Section 5(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by a majority in interest of the Initiating Holders. Notwithstanding any other provision of Section 2, if the underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities which would otherwise have been underwritten pursuant to Section 2, and the number of shares of Registrable Securities that may be included in the registration shall be apportioned first pro rata among the selling Holders, including the Initiating Holders, according to the total amount of Registrable Securities requested to be sold in such registration by such Holders, then to the Company and then pro rata among any other selling stockholders according to the total amount of securities otherwise entitled to be included therein 5 owned by each such selling stockholder, or in such other proportions as shall mutually be agreed to by such selling stockholders. (2) The Company shall not be required under Section 3 to include any of the Holders' securities in an underwritten offering of the Company's securities unless such Holders accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it. If the underwriters advise the Company that marketing factors require a limitation on the number of shares, including Registrable Securities, to be included in such offering, then the Company shall so advise all Holders of Registrable Securities that would otherwise have been underwritten pursuant to Section 3, and the number of shares, including Registrable Securities, that may be included in the registration shall be apportioned first to the Company or Requesting Holders, as the case may be, then pro rata among the selling Holders according to the total amount of Registrable Securities requested to be sold in such registration by such Holders, then pro rata among any other selling stockholders according to the total amount of securities otherwise entitled to be included therein owned by each such other selling stockholder, or in such other proportions as shall mutually be agreed to by such selling stockholders; provided that in no event shall the amount of securities of the selling Holders included in the registration be reduced below 20% of the total amount of securities included in such registration. 9. DELAY OF REGISTRATION No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration of the Company as the result of any controversy that might arise with respect to the interpretation or implementation of this Agreement. 10. INDEMNIFICATION In the event any Registrable Securities are included in a registration statement under this Agreement: (1) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, any underwriter (as defined in the Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Act or the Securities Exchange Act of 1934, as amended (the "1934 ACT"), against any actual expenses (including legal fees and costs), losses, claims, damages (including settlement amounts) or liabilities joint or several) (collectively, "LOSSES") to which they may become subject under the Act, the 1934 Act or other federal or state law, insofar as such Losses arise out of or are based upon any of the following statements, omissions or violations (collectively, a "VIOLATION"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein, or any amendments or supplements thereto, untrue in light of the circumstances under which they were made, (ii) the omission or 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, or (iii) any violation or alleged violation by the Company of the Act, the 1934 Act, any state securities law or any rule or regulation promulgated under the Act, the 1934 Act or any state securities law. The Company will reimburse (as incurred) each such Holder, underwriter or controlling person for 6 any Losses reasonably incurred by them in connection with investigating or defending any Violations; provided, however, that the indemnity agreement contained in this Section 10(a) shall not apply to amounts paid in settlement of any claims for Violations if such settlement is made without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable in any such case for any Losses that arise out of or are based upon a Violation that occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by, or on behalf of, any such Holder, underwriter or controlling person. (2) To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company and its officers, directors, agents and employees, each underwriter and each other Holder selling securities in such in registration statement, and any person who controls any of the foregoing within the meaning of the Act or the 1934 Act, against any Losses to which the Company or such officer, director, agent, employee, or underwriter or other selling Holder or controlling person may become subject under the Act, the 1934 Act or other federal or state law, insofar as such Losses arise out of or are based upon any Violation that occurs in reliance upon and in conformity with written information furnished by, or on behalf of, such Holder expressly for use in connection with such registration; and each such Holder will reimburse any Losses reasonably incurred by the Company or its officers, directors, agents, employees, or underwriters or other selling Holders or controlling persons in connection with investigating or defending any Violations; provided, however, that (i) the indemnity agreement contained in this Section 10(b) shall not apply to amounts paid in settlement of any claims for Violations if such settlement is made without the consent of the Holder, which consent shall not be unreasonably withheld and (ii) the obligations of such Holders shall be limited to an amount equal to the gross proceeds before expenses and commissions to each such Holder of Registrable Securities sold as contemplated herein. (3) Promptly after receipt of notice of the commencement of any action (including any governmental action), an indemnified party will, if a claim is to be made against any indemnifying party under this Section 10, deliver to the indemnifying party a written notice of the commencement, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly notified to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying Party, if, in the opinion of counsel for the indemnifying party, representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in the proceeding. The failure to deliver written notice to the indemnifying party within a reasonable period of time after notice of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section 10 to the extent such failure is prejudicial to its ability to defend such action, but the omission to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 10. (4) If the indemnification provided for in this Section 10 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any 7 Losses, 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 in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the Violations that resulted in such Losses as well as any other relevant equitable considerations; provided, that, in no event shall any contribution by a Holder under this Section 10(d) exceed the gross proceeds before expenses and commissions to each such Holder, except in the case of willful fraud by such Holder. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the Violation resulting in such Losses relates to information supplied by the indemnifying party or by the indemnifying party and the parties= relative intent, knowledge, access to information, and opportunity to correct or prevent such Violation. (5) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control. (6) The obligations of the Company and Holders under this Section 10 shall survive the completion of any offering of Registrable Securities and the termination of Registration Rights pursuant to Section 15. 11. REPORTS UNDER THE ACT With a view to making available to the Holders the benefits of SEC Rule 144 promulgated under the Act and any other rule or regulation of the SEC that may at an time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to use commercially reasonable efforts to: (1) Make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the first registration statement filed by the Company for the offering of its securities to the general public; (2) File with the SEC in a timely manner all reports and other documents required of the Company under the Act and the 1934 Act; and (3) Furnish to any Holder, so long as the Holder owns any Registrable Securities, promptly upon request (i) a written statement by the Company that it has complied with the reporting requirements of the 1934 Act (at any time after the date on which it becomes subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration or pursuant to such Form S-3. 8 12. ASSIGNMENT OF REGISTRATION RIGHTS The rights to cause the Company to register Registrable Securities pursuant to this Agreement may be assigned by a Holder to a transferee or assignee of such securities who shall, upon such transfer or assignment, be deemed a AHolder@ under this Agreement; provided that the Company is, within a reasonable period of time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; provided, further, that such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Act and that such transferee or assignee is (a) a partner or retired partner of any Holder that is a partnership, (b) a member of the immediate family or a trust for the benefit of any Holder that is an individual, (c) an entity controlling, controlled by or under common control with any Holder that is not an individual, (d) a transferee or assignee that after the transfer or assignment holds (i) 10% of the Registrable Securities of the transferor, or (ii) Registrable Securities prior to the transfer, or (e) a constituent member of any Holder that is a limited liability company. 13. LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of 25% of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that would allow such holder or prospective holder to (a) include such securities in any registration filed under Section 2, 3 or 4, unless under the terms of such agreement such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of its securities will not reduce the amount of the Registrable Securities of the Holders which is included or (b) make a demand registration which could result in such registration statement being declared effective prior to 180 days of the effective date of any registration effected pursuant to Section 2. 14. "MARKET STANDOFF" AGREEMENT The Holders hereby agree that they shall not, to the extent requested by the Company and an underwriter of Common Stock (or other securities) of the Company, sell or otherwise transfer or dispose (other than to donees who agree to be similarly bound) of any Registrable Securities for 180 days following the effective date of a registration statement of the Company filed under the Act; provided, however, that the foregoing shall not be effective unless all officers and directors of the Company (whether or not pursuant to this Agreement) enter into similar agreements and the Company has used all reasonable efforts to obtain similar agreements from all holders of at least 1% of the Company=s then outstanding Common Stock. To enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Registrable Securities of the Holders (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period. 9 15. TERMINATION OF REGISTRATION RIGHTS The registration rights granted under Sections 2, 3 and 4 of this Agreement shall terminate as to each Holders on the earlier of (a) the tenth (10th) anniversary of the date of this Agreement and (b) the date on which all Registrable Securities held by or issuable to such Holder (and its affiliates) may be sold under Rule 144 during any 90 day period. 15. MISCELLANEOUS 15.1 NOTICES Any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given (a) upon personal delivery to the party to be notified, (b) upon confirmation of receipt by fax by the party to be notified, (c) one business day after deposit with a reputable overnight courier, prepaid for overnight delivery and addressed as set forth in (d), or (d) three days after deposit with the United States Post Office, postage prepaid, registered or certified with return receipt requested and addressed to the party to be notified at the address indicated for such party on the signature page, or at such other address as such party may designate by 10 days= advance written notice to the other parties given in the foregoing manner. 15.2 AMENDMENTS AND WAIVERS Any term of this Agreement may be amended and the observance of any term may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the holders of a majority of the Registrable Securities then outstanding. Additional Holders may be added to this Agreement with such consent by amending SCHEDULE A and adding a signature page executed by such additional Holder. 15.3 GOVERNING LAW; JURISDICTION; VENUE This Agreement shall be governed by and construed under the laws of the State of New York without regard to principles of conflict of laws. The parties irrevocably consent to the jurisdiction and venue of the state and federal courts located in New York City in connection with any action relating to this Agreement. 15.4 SUCCESSORS AND ASSIGNS The terms and conditions of this Agreement shall inure to the benefit of and be binding on the respective successors and assigns of the parties as provided herein. 15.5. SEVERABILITY If one or more provisions of this Agreement are held to beunenforceable under applicable law, such provision shall be excluded from this Agreement, and the balance of this Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 10 15.6 ENTIRE AGREEMENT; COUNTERPARTS This Agreement constitutes the entire agreement between the parties about its subject and supersedes all prior agreements. This Agreement may be executed in two or more counterparts, which together shall constitute one instrument. [Signature page follows] 11 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. BRIGHAM EXPLORATION COMPANY By: /S/ KAREN E. LYNCH ------------------------------------- Its: Vice President Address: Brigham Exploration Company 6300 Bridge Point Parkway Building 2, Suite 500 Austin, TX 78730 Attention: Chief Financial Officer Fax: 512-427-3400 DLJ MB FUNDING III, INC. By: /S/ IVY B. DODES ------------------------------------- Ivy B. Dodes Principal Address: 277 Park Avenue New York, New York 10172 Attention: Michael Isikow Telefax: 212-892-2689 DLJ ESC II, LP By: DLJ LBO Plans Management Corporation, its general partner By: /S/ IVY B. DODES ---------------------------- Ivy B. Dodes Principal Address: 277 Park Avenue New York, New York 10172 Attention: Michael Isikow Telefax: 212-892-2689 12 SCHEDULE A TO REGISTRATION RIGHTS AGREEMENT HOLDER NAME NUMBER OF SHARES ----------------------- ---------------- DLJ MB Funding III, Inc., 6,036,667 a Delaware corporation DLJ ESC II, LP, 630,000 a Delaware limited partnership 13 EX-10.11 13 0013.txt WARRANT CERTIFICATE 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 THIS WARRANT CERTIFICATE AND IN A SECURITIES PURCHASE AGREEMENT, DATED AS OF NOVEMBER 1, 2000, BETWEEN BRIGHAM EXPLORATION COMPANY AND THE INITIAL HOLDER 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. WARRANT CERTIFICATE NUMBER OF WARRANTS: 6,036,667 WARRANT NO. 1 This Warrant certificate ("Warrant Certificate") certifies that, for value received, DLJ MB Funding III, Inc., a Delaware corporation, is the registered holder of the number of warrants (the "Warrants") set forth above. Each Warrant entitles the holder thereof, at any time or from time to time during the Exercise Period, to purchase from the Company one fully paid and nonassessable share of Common Stock at the Exercise Price, subject to adjustment as provided herein. Initially capitalized terms used but not defined herein shall have the meanings ascribed to them in the Securities Purchase Agreement. "COMMON STOCK" means the common stock, $.01 par value per share, of the Company and such other class of securities as shall then represent the common equity of the Company. "COMPANY" means Brigham Exploration Company, a Delaware corporation. "EXERCISE PERIOD" means the period of time between the Closing Date, as defined in the Securities Purchase Agreement and 5:00 p.m. (New York City time) on the Expiration Date. "EXERCISE PRICE," subject in all circumstances to adjustment in accordance with SECTION 2, means $3.00 per share. "EXPIRATION DATE" means the tenth anniversary of the Closing Date. "ISSUANCE DATE" means November 1, 2000. 1 "PERSON" means any individual, corporation, company, 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. "PREFERRED STOCK" means shares of the Series A Preferred Stock, par value $0.01 per share, of the Company. "PREFERRED VALUE" per share of Preferred Stock means the Stated Value of such Share, plus, without duplication, all accrued and unpaid dividends on such share to and including the applicable date of Warrant exercise. "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 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 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 determined for the individual trading days in such period by the number of trading days in such period. "SECURITIES PURCHASE AGREEMENT" means the Securities Purchase Agreement, dated as of November 1, 2000, between the Company, DLJ MB Funding III, Inc. and DLJ ESC II, LP. "STATED VALUE" means the stated value per share of Preferred Stock, which is $20.00 per share. Section 1. EXERCISE OF WARRANTS. (a) The Warrants may be exercised in whole or in part, at any time or from time to time, during the Exercise Period, by (i) presentation and surrender to the Company at its address set forth in SECTION 10 of this Warrant Certificate with the Election To Exercise, attached hereto as EXHIBIT A, duly completed and executed, and (ii) payment of the Exercise Price, for the number of Warrants being exercised by either: (1) bank draft or cashiers check, or (2) provided that the Company receives at least 5 days prior notice and subject to Section 1(d), delivery to the Company of certificate(s) representing a number of shares of Preferred Stock having an aggregate Preferred Value equal to the aggregate Exercise Price for the number of Warrants being exercised. If the aggregate Preferred Value of the Preferred Stock delivered in payment of the aggregate Exercise Price exceeds (because of fractional shares) the aggregate Exercise Price for the number of Warrants being exercised; then (subject to Section 1(d)) the Company will promptly pay to the 2 holder of the Warrants in cash such excess amount; provided that such excess amount shall in no event be more than the Preferred Value of one share of Preferred Stock. If the holder of this Warrant Certificate at any time exercises less than all the Warrants, the Company shall issue to such a holder a warrant certificate identical in form to this Warrant Certificate, but evidencing a number of Warrants equal to the number of Warrants originally represented by this Warrant Certificate less the number of Warrants previously exercised. Likewise, upon the presentation and surrender of this Warrant Certificate to the Company at its address set forth in SECTION 10 and at the request of the holder, the Company will, without expense, at the option of the holder, issue to the holder in substitution for this Warrant Certificate one or more warrant certificates in identical form and for an aggregate number of Warrants equal to the number of Warrants evidenced by this Warrant Certificate. (b) To the extent that the Warrants have not been exercised at or prior to the Expiration Date, such Warrants shall expire and the rights of the holder shall become void and of no effect. (c) Upon surrender of this Warrant Certificate in conformity with the foregoing provisions, the Company shall transfer to the holder of this Warrant Certificate appropriate evidence of ownership of the shares of Common Stock or other securities or property (including any money) to which the holder is entitled, registered or otherwise placed in, or payable to the order of, the name or names of the holder or such transferee as may be directed in writing by the holder, and shall deliver such evidence of ownership and any other securities or property (including any money) to the Person or Persons entitled to receive the same, together with an amount in cash in lieu of any fraction of a share. (d) In connection with payment of the Exercise Price with shares of Preferred Stock, the Company may require that at the time of such exercise it receive representations and warranties from the applicable holder of the Warrants regarding such holder's title to the Preferred Stock and the lack of encumbrances thereon. If the Company is unable to consummate an exercise of Warrants through payment of the Exercise Price with shares of Preferred Stock because of any limitations contained or construed in the Delaware General Corporation Law, the Company shall use its best efforts to take all such action as may be necessary to place the Company in a position to do so. In the event the Company, after the taking of any action by it as contemplated above, is unable to consummate such exercise, the Company shall accept such number of shares of Preferred Stock in payment as it shall then be authorized to do so under the Delaware General Corporation Law. (e) The Company shall not be required to issue a fractional share of Common Stock upon the exercise of Warrants. As to any fraction of a share which the Warrant holder would otherwise be entitled to purchase upon such exercise, the Company may pay a cash adjustment in respect of such fraction in an amount equal to the same fraction of the Price per share of Common Stock on the date of exercise. Section 2. ANTIDILUTION ADJUSTMENTS. The shares of Common Stock purchasable on exercise of the Warrants are shares of Common Stock as constituted as of the Issuance Date. The number and kind of securities purchasable upon the exercise of the Warrants, and the Exercise Price, shall be subject to adjustment from time to time upon the happening of certain events, as follows: 3 (a) MERGERS, CONSOLIDATIONS AND RECLASSIFICATIONS. In case of any reclassification or change of outstanding securities issuable upon exercise of the Warrants at any time after the Issuance Date (other than a change in par value, or from par value to no par value, or from no par value to par value or as a result of a subdivision or combination to which SECTION 2(B) applies), or in case of any consolidation or merger of the Company with or into any entity or other person (other than a merger with another entity or other person in which the Company is the surviving corporation and which does not result in any reclassification or change in the securities issuable upon exercise of this Warrant Certificate), the holder of the Warrants shall have, and the Company, or such successor corporation or other entity, shall covenant in the constituent documents effecting any of the foregoing transactions that such holder does have the right to obtain, upon the exercise of the Warrants, in lieu of each share of Common Stock, other securities, money or other property theretofore issuable upon exercise of a Warrant, the kind and amount of shares of stock, other securities, money or other property receivable upon such reclassification, change, consolidation or merger by a holder of the shares of Common Stock, other securities, money or other property issuable upon exercise of a Warrant if the Warrants had been exercised immediately prior to such reclassification, change, consolidation or merger. The constituent documents effecting any such reclassification, change, consolidation or merger shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided in this SECTION 2(a). The provisions of this SECTION 2(a) shall similarly apply to successive reclassifications, changes, consolidations or mergers. (b) SUBDIVISIONS AND COMBINATIONS. If the Company, at any time after the Issuance Date, shall subdivide its shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced, and the number of shares of Common Stock purchasable upon exercise of the Warrants shall be proportionately increased, as at the effective date of such subdivision, or if the Company shall take a record of holders of its Common Stock for such purpose, as at such record date, whichever is earlier. If the Company, at any time after the Issuance Date, shall combine its shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased, and the number of shares of Common Stock purchasable upon exercise of the Warrants shall be proportionately reduced, as at the effective date of such combination, or if the Company shall take a record of holders of its Common Stock for purposes of such combination, as at such record date, whichever is earlier. (c) DIVIDENDS AND DISTRIBUTIONS. If the Company at any time after the Issuance Date shall declare a dividend on its Common Stock payable in stock or other securities of the Company to the holders of its Common Stock, the holder of this Warrant Certificate shall, without additional cost, be entitled to receive upon any exercise of a Warrant, in addition to the Common Stock to which such holder would otherwise be entitled upon such exercise, the number of shares of stock or other securities which such holder would have been entitled to receive if he had been a holder immediately prior to the record date for such dividend (or, if no record date shall have been established, the payment date for such dividend) of the number of shares of Common Stock purchasable on exercise of such Warrant immediately prior to such record date or payment date, as the case may be. 4 (d) CERTAIN ISSUANCES OF SECURITIES. Subject to SECTION 2(f), if the Company at any time after the Issuance Date shall issue any additional shares of Common Stock (otherwise than as provided in subsections (a) through (c) of this SECTION 2) at a price per share less than the Average Price per share of Common Stock for the 20 trading days immediately preceding the date of the authorization of such issuance (the "Market Price") by the Board of Directors or its compensation committee (as applicable), then the Exercise Price upon each such issuance shall be adjusted to that price determined by multiplying the Exercise Price by a fraction: i. the numerator of which shall be the sum of (1) the number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares of Common Stock multiplied by the Market Price, and (2) the consideration, if any, received by the Company upon the issuance of such additional shares of Common Stock, and ii. the denominator of which shall be the Market Price multiplied by the total number of shares of Common Stock outstanding immediately after the issuance of such additional shares of Common Stock. No adjustments of the Exercise Price shall be made under this SECTION 2(d) upon the issuance of any additional shares of Common Stock that (v) are issued pursuant to any grant or award made prior to the Issuance Date under any thrift plan, stock purchase plan, stock bonus plan, stock option plan, employee stock ownership plan, incentive or profit sharing arrangement or other benefit or compensation plan for the benefit of the Company's officers, directors and/or employees ("Employee Benefit Plans") that has been approved by the Board of Directors of the Company or its compensation committee and that otherwise would cause an adjustment under this SECTION 2(d); (w) are issued pursuant to any grant or award made on or after the Issuance Date under any Employee Benefit Plan if the "Market Price" of any such issuance is not less than the lesser of the Market Price as determined above and the "Fair Market Value", as defined under the applicable Employee Benefit Plan, on the date of Board or compensation committee authorization; (x) are issued pursuant to any Common Stock Equivalent (as hereinafter defined) (i) if upon the issuance of any such Common Stock Equivalent, any such adjustments shall previously have been made pursuant to SECTION 2(e), (ii) if no adjustment was required pursuant to SECTION 2(e), or (iii) if such Common Stock Equivalent was issued prior to this Warrant Certificate; (y) are issued pursuant to a public offering by the Company; or (z) results in an adjustment pursuant to SECTION 2(f). (e) COMMON STOCK EQUIVALENTS. i. Subject to SECTION 2(f), if the Company shall, after the Issuance Date, issue any security or evidence of indebtedness which is convertible into or exchangeable for Common Stock ("Convertible Security"), or any warrant, option or other right to subscribe for or purchase Common Stock or any Convertible Security, other than pursuant to Employee Benefit Plans (together with Convertible Securities, "Common Stock Equivalent"), then the Exercise Price upon each such issuance shall be adjusted as provided in SECTION 2(d) on the basis that (i) the maximum number of additional shares of Common Stock 5 issuable pursuant to all such Common Stock Equivalents shall be deemed to have been issued as of the date of issuance of such Common Stock Equivalent; and (ii) the aggregate consideration for such maximum number of additional shares of Common Stock shall be deemed to be the minimum consideration received and receivable by the Company for the issuance of such additional shares of Common Stock pursuant to such Common Stock Equivalent. ii. Notwithstanding the foregoing, no adjustment shall be made pursuant to this SECTION 2(e) unless the consideration received and receivable by the Company per share of Common Stock for the issuance of such additional shares of Common Stock pursuant to such Common Stock Equivalent is less than the Market Price. No adjustment of the Exercise Price shall be made under this SECTION 2(e) upon the issuance of any Convertible Security which is issued pursuant to the exercise of any warrants or other subscription or purchase rights therefor, if any adjustment shall previously have been made in the Exercise Price then in effect upon the issuance of such warrants or other rights pursuant to this SECTION 2(e). No adjustment shall be made under this SECTION 2(e) if an adjustment is to be made under SECTION 2(f). No adjustment shall be made as a result of adjustment in the exercise or conversion price of Common Stock Equivalents, if those adjustments occur by the terms of such Common Stock Equivalents. (f) SPECIAL ADJUSTMENTS OF EXERCISE PRICE. Notwithstanding anything to the contrary in SECTION 2(d) or SECTION 2(e), this SECTION 2(f) shall govern adjustments to the Exercise Price for the transactions described in this SECTION 2(f). i. If the Company at any time after the Issuance Date and prior to the second anniversary of the Issuance Date shall issue any additional shares of Common Stock (otherwise than as provided in subsections (a) through (c) of SECTION 2; pursuant to any Employee Benefit Plan; pursuant to any Common Stock Equivalent outstanding as of the Issuance Date) or upon the issuance of any such Common Stock, any adjustments shall previously have been made pursuant to Section 2(e) or Section 2(f)(ii); and the New Stock Issue Price (defined below) of such additional shares is less than the Exercise Price then in effect, then the Exercise Price upon each such issuance shall be adjusted to the New Stock Issue Price of such additional shares. The "New Stock Issuance Price" shall be determined by dividing the total amount of consideration received by the Company for such issue or sale by the number of shares of Common Stock issued or sold. ii. If the Company at any time after the Issuance Date and prior to the second anniversary of the Issuance Date, issues any Common Stock Equivalent (which by definition excludes Employee Benefit Plan securities) (otherwise than as provided in subsections (a) through (c) of Section 2; or pursuant to any Common Stock Equivalent outstanding as of the Issuance Date) and the New CSE Exercise Price (defined below) of such Common Stock Equivalents is less than the Exercise Price then in effect, then the Exercise Price upon each such issuance shall be adjusted to the New CSE Exercise Price of such Common Stock Equivalents. The "New CSE Exercise Price" shall be determined by dividing (x) the total amount, if any, received or receivable by the Company as consideration for the issuance of such Common Stock Equivalents, plus the minimum aggregate amount of additional consideration payable to the Company upon the exercise, conversion or exchange of such Common Stock Equivalents, plus, in the case of any such Common Stock Equivalents which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange of such Convertible Securities, by (y) the total maximum number of shares of Common Stock issuable upon the exercise, conversion or exchange of all such Common Stock Equivalents. 6 (g) MISCELLANEOUS. The following provisions shall be applicable to the making of adjustments in the Exercise Price hereinbefore provided in this SECTION 2: i. The consideration received by the Company shall be deemed to be the following: (I) to the extent that any additional shares of Common Stock or any Common Stock Equivalent shall be issued for cash consideration, the consideration received by the Company therefor, or, if such additional shares of Common Stock or Common Stock Equivalent are offered by the Company for subscription, the subscription price, or, if such additional shares of Common Stock or Common Stock Equivalent are sold to underwriters or dealers for public offering without a subscription offering, the initial public offering price, in any such case excluding any amounts paid or receivable for accrued interest or accrued dividends and without deduction of any compensation, discounts, commissions or expenses paid or incurred by the Company for and in the underwriting of , or otherwise in connection with, the issue thereof; (II) to the extent that such issuance shall be for a consideration other than cash, then, except as herein otherwise expressly provided, the fair value of such consideration at the time of such issuance as determined in good faith by the Board of Directors, as evidenced by a certified resolution of the Board of Directors delivered to the holder of this Warrant Certificate setting forth such determination. The consideration for any additional shares of Common Stock issuable pursuant to any Common Stock Equivalent shall be the consideration received by the Company for issuing such Common Stock Equivalent, plus the additional consideration payable to the Company upon the exercise, conversion or exchange of such Common Stock Equivalent. In case of the issuance at any time of any additional shares of Common Stock or Common Stock Equivalent in payment or satisfaction of any dividend upon any class of stock other than Common Stock, the Company shall be deemed to have received for such additional shares of Common Stock or Common Stock Equivalent (which shall not be deemed to be a dividend payable in, or other distribution of, Common Stock under SECTION 2(c) above) consideration equal to the amount of such dividend so paid or satisfied. In the event additional shares of Common Stock or Common Stock Equivalents are issued together with other shares or securities or other assets of the Company or its subsidiaries for consideration which covers both, the consideration for such shares of Common Stock and Common Stock Equivalents shall be computed based on the respective portions of such consideration so received, computed as provided in this SECTION 2(g)i., as determined and allocated in good faith by the Board of Directors of the Company. ii. Upon the expiration of the right to convert, exchange or exercise any Common Stock Equivalent the issuance of which effected an adjustment in the Exercise Price, if any such Common Stock Equivalent shall not have been converted, exercised or exchanged, the number of shares of Common Stock deemed to be issued and outstanding because they 7 were issuable upon conversion, exchange or exercise of any such Common Stock Equivalent shall no longer be computed as set forth above, and the Exercise Price shall forthwith be readjusted and thereafter be the price which it would have been (but reflecting any other adjustments in the Exercise Price made pursuant to the provisions of SECTION 2(d) after the issuance of such Common Stock Equivalent) had the adjustment of the Exercise Price made upon the issuance or sale of such Common Stock Equivalent been made on the basis of the issuance only of the number of additional shares of Common Stock actually issued upon exercise, conversion or exchange of such Common Stock Equivalent and thereupon only the number of additional shares of Common Stock actually so issued shall be deemed to have been issued and only the consideration actually received by the Company (computed as in this SECTION 2(f)(i) shall be deemed to have been received by the Company. III. THE NUMBER OF SHARES OF COMMON STOCK AT ANY TIME OUTSTANDING SHALL NOT INCLUDE ANY SHARES THEREOF THEN DIRECTLY OR INDIRECTLY OWNED OR HELD BY OR FOR THE ACCOUNT OF THE COMPANY OR ITS WHOLLY OWNED SUBSIDIARIES. IV. UPON EACH ADJUSTMENT OF THE EXERCISE PRICE AS A RESULT OF THE CALCULATIONS MADE IN SECTION 2(d), (e) AND (f) HEREOF, THIS WARRANT SHALL THEREAFTER EVIDENCE THE RIGHT TO PURCHASE, AT THE ADJUSTED EXERCISE PRICE, THAT NUMBER OF SHARES OF COMMON STOCK OBTAINED BY (i) MULTIPLYING THE NUMBER OF SHARES COVERED BY THIS WARRANT IMMEDIATELY PRIOR TO SUCH ADJUSTMENT OF THE NUMBER OF SHARES BY THE EXERCISE PRICE IN EFFECT IMMEDIATELY PRIOR TO SUCH ADJUSTMENT OF THE EXERCISE PRICE AND (ii) DIVIDING THE PRODUCT SO OBTAINED BY THE EXERCISE PRICE IN EFFECT IMMEDIATELY AFTER SUCH ADJUSTMENT OF THE EXERCISE PRICE. v. For the purpose of this SECTION 2, the term "shares of Common Stock" shall mean shares of (i) the class of stock designated as the Common Stock at the date hereof or (ii) any other class of stock resulting from successive changes or reclassifications of such shares consisting solely of changes in par value, or from par value to no par value, or from no par value to par value. If at any time, because of an adjustment pursuant to SECTION 2(a), the Warrants shall entitle the holders to purchase any securities other than shares of Common Stock, thereafter the number of such other securities so purchasable upon exercise of each Warrant and the Exercise Price of such securities shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in this SECTION 2. (h) CALCULATION OF EXERCISE PRICE. The Exercise Price in effect from time to time shall be calculated to four decimal places and rounded to the nearest thousandth. 8 (i) NASDAQ MATTERS. Notwithstanding anything to the contrary herein, any adjustment to the Exercise Price that would require shareholder approval pursuant to the Nasdaq Market Rules shall be subject to the Company's obtaining such requisite approval. Section 3. NOTICE OF ADJUSTMENTS. Whenever the Exercise Price or the number of shares of Common Stock is required to be adjusted as provided in Section 2, the Company shall forthwith compute the adjusted Exercise Price or the number of shares of Common Stock issuable and shall prepare and mail to the holder hereof a certificate setting forth such adjusted Exercise Price or such number of shares of Common Stock, showing in reasonable detail the facts upon which the adjustment is based. Section 4. VOLUNTARY REDUCTION. (a) The Company may at its option, but shall not be obligated to, at any time during the term of the Warrants, reduce the then current Exercise Price by any amount selected by the Board of Directors; PROVIDED that if the Company elects so to reduce the then current Exercise Price, such reduction shall be irrevocable during its effective period and remain in effect for a minimum of 30 days following the date of such election, after which time the Company may, at its option, reinstate the Exercise Price in effect prior to such reduction. Whenever the Exercise Price is reduced, the Company shall mail to the holder a notice of the reduction at least 30 days before the date the reduced Exercise Price takes effect, stating the reduced Exercise Price and the period for which such reduced Exercise Price will be in effect. (b) The Company may make such decreases in the Exercise Price, in addition to those required or allowed by this SECTION 4, as shall be determined by it, as evidenced by a certified resolution of the Board of Directors delivered to the holders, to be advisable to avoid or diminish any income tax to the holder resulting from any dividend or distribution of stock or issuance of rights or warrants to purchase or subscribe for stock or from any event treated as such for income tax purposes. Section 5. MANDATORY EXERCISE. (a) If (i) the Price of the Common Stock is greater than $5.00 per share (as adjusted to reflect any stock split, combination, reclassification, recapitalization, exchange, stock dividend or other distribution payable in Common Stock with respect to shares of Common Stock) for sixty (60) consecutive trading days in the principal market in which the Common Stock is traded and (ii) the Company gives written notice (the "Company Notice") to the holder hereof of the satisfaction of the condition in clause (i), then within fifteen (15) days after the effective date of the Company Notice, the holder hereof shall exercise all of the Warrants. If required by this SECTION 5, the holder hereof agrees to exercise the Warrants, and to purchase shares of Common Stock pursuant to the terms of this Warrant Certificate. If the holder has not fulfilled its obligations to exercise the Warrants pursuant to this Section 5 within fifteen (15) days after the holder's receipt of the Company Notice, then (without limiting the Company's available remedies) (A) the obligations of holder under this Section 5 shall continue but the purchase rights otherwise represented by this Warrant Certificate shall terminate, (B) the Company may thereafter refuse, in its sole discretion, to allow holder to exercise the Warrants (including pursuant to this Section 5), (C) all obligations of the Company under Sections 3, 6, 7 and 8 shall terminate, (D) no further adjustments to the Exercise Price shall be made unless the Company in its sole discretion consents in writing. Each Warrant holder's obligations under this Section 5(a) shall be subject to the expiration or termination of all waiting periods (and any extensions thereof) applicable to exercise of such holder's Warrants under the HSR Act (as defined below); provided that such holder shall have certified in writing to the Company that a filing under the HSR Act is required and provided further that such holder shall use its best efforts to cause the expiration or termination of such waiting period to occur as promptly as practicable. 9 (b) Holder represents and warrants to the Company that holder has full corporate power and authority to execute, deliver, and perform this Warrant Certificate and to consummate the transactions contemplated hereby. The execution, delivery, and performance by holder of this Warrant Certificate have been duly authorized by all necessary corporate action of holder. This Warrant Certificate has been duly executed and delivered by holder and constitutes a valid and legally binding obligation of holder, enforceable against holder in accordance with its terms, except that such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and (ii) general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). (c) The right to require exercise of the Warrants is hereby declared by the parties hereto to be a unique right, the loss of which is not readily susceptible to monetary quantification. Consequently, the parties hereto agree that an action for specific performance of the exercise and purchase obligations created by this Section 5 is an available remedy for the breach of the provisions of this Section 5. If the Company is forced to institute legal proceedings to enforce its rights in accordance with the provisions of this Section 5, it shall be entitled to recover its reasonable attorneys' fees and court costs incurred in enforcing such rights. (d) Holder is executing this Warrant Certificate in order to make and agree to the covenants, representations and warranties of holder contained in this Section 5, which shall be binding upon the holder's successors and assigns. Section 6. NOTICES TO WARRANT HOLDERS. In the event: (a) the Company shall authorize any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required, or of the conveyance or sale of all or substantially all of the assets of the Company, or of any reclassification or change of the Common Stock or other securities issuable upon exercise of the Warrants (other than a change in par value, or from par value to no par value, or from no par value to par value or as result of a subdivision or combination), or a tender offer or exchange offer for shares of Common Stock (or other securities issuable upon the exercise of the Warrants); or (b) the Company shall declare any dividend (or any other distribution) on the Common Stock or any other class of its capital stock, other than dividends on the Shares, as defined in the Securities Purchase Agreement; or (c) the Company shall authorize the granting to the holders of Common Stock or any other class of its capital stock of rights or warrants to subscribe for or purchase any shares of any class or series of capital stock or any other securities convertible into or exchangeable for shares of stock; or 10 (d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; then the Company shall cause to be sent to the holder hereof, at least 30 days prior to the applicable record date hereinafter specified, or promptly in the case of events for which there is no record date, a written notice stating (x) the date for the determination of the holders of record of shares of Common Stock (or other securities issuable upon the exercise of the Warrants) entitled to receive any such dividends or other distribution, (y) the initial expiration date set forth in any tender offer or exchange offer for shares of Common Stock (or other securities issuable upon the exercise of the Warrants), or (z) the date on which any of the events specified in subsections (a)-(d) is expected to become effective or consummated, and the date as of which it is expected that holders of record of shares of Common Stock (or other securities issuable upon the exercise of the Warrants) shall be entitled to exchange such shares for securities or other property, if any, deliverable upon any such event. Failure to give such notice or any defect therein shall not affect the legality or validity of any such event, or the vote upon any such action. Section 7. REPORTS TO WARRANT HOLDERS. The Company will cause to be delivered, by first-class mail, postage prepaid, to holder at such holder's address appearing hereon, or such other address as the holder shall specify, a copy of any reports delivered by the Company to the holders of Common Stock. Section 8. COVENANTS OF THE COMPANY. The Company covenants and agrees that: (a) Until the Expiration Date, the Company shall at all times reserve and keep available, out of the aggregate of its authorized but unissued Common Stock (and other securities), for the purpose of enabling it to satisfy any obligation to issue shares of Common Stock (and other securities) upon the exercise of the Warrants, the number of shares of Common Stock (and other securities) issuable upon the exercise of such Warrants. (b) The Company shall pay all expenses, taxes and other charges payable in connection with the preparation, issuance and delivery of new warrant certificates on transfer of the Warrants. (c) All Common Stock (and other securities) which may be issued upon exercise of the Warrants shall upon issuance be validly issued, fully paid, non-assessable and free from all preemptive rights and all taxes, liens and charges with respect to the issuance thereof, and will not be subject to any restrictions on voting or transfer thereof except as set forth in the Securities Purchase Agreement, any stockholders agreement and except for restrictions arising under state or federal securities laws. (d) All original issue taxes payable in respect of the issuance of shares of Common Stock to the registered holder hereof upon the exercise of the Warrants shall be borne by the Company; provided, that the Company shall not be required to pay any tax or charge imposed in connection with any transfer involved in the issuance of any certificates representing shares of Common Stock (and other securities) in any name other than that of the registered holder hereof, and in such case the Company shall not be required to issue or deliver any certificate representing shares of Common Stock (and other securities) until such tax or other charge has been paid or it has been established to the Company's satisfaction that no such tax or charge is due. 11 (e) As soon as practicable after the receipt from the holder of this Warrant Certificate of notice of the intent to exercise of a number of warrants sufficient to require a filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules, regulations and formal interpretations thereunder, as amended from time to time (the "HSR Act") (and after the receipt, if applicable, of the notice referred to in Rule 803.5 of the HSR Act), but in any event no later than the 15th business day after receipt of such notice(s), the Company will (i) if required by the HSR Act, prepare and file with Antitrust Division of the Department of Justice (the "DOJ") and the Federal Trade Commission (the "FTC") the Notification and Report Form (accompanied by all documentary attachments contemplated thereby) required by the HSR Act, (ii) upon request of the holder, request early termination of the waiting period imposed by the HSR Act, and (iii) coordinate and cooperate with the holder in responding to formal and informal requests for additional information and documentary material from the DOJ and the FTC in connection with such filing. Notwithstanding the foregoing, if the holder is required to file with the DOJ and FTC the Notification and Report Form solely as a result of its holding and/or purchasing shares of Common Stock issued pursuant to this Warrant (with no regard to any other securities held by such holder or its affiliates) and the holder certifies such fact to the Company in writing, the Company agrees to promptly reimburse the holder for all fees and expenses for the preparation and filing of such form, including all legal expenses and filing fees. (f) The Company will not change the par value of the Common Stock from par value $0.01 per share to any higher par value which exceeds the Exercise Price then in effect, and will reduce the par value of the Common Stock upon any event described in Section 2 that would, but for this provision, reduce the Exercise Price below the par value of the Common Stock. Section 9. NO RIGHTS AS STOCKHOLDER. The holder of the Warrants shall not, by virtue of holding such Warrants, be entitled to any rights of a stockholder of the Company either at law or in equity, and the rights of the holder of the Warrants are limited to those expressed herein. Section 10. NOTICES. All notices, requests, demands, and other communications required or permitted to be given or made hereunder by any party hereto shall be in writing and shall be deemed to have been duly given or made if (i) delivered personally, (ii) sent by prepaid overnight courier service, or (iii) sent by telecopy or facsimile transmission, answer back requested, to the parties at the following addresses (or at such other addresses as shall be specified by the parties by like notice): if to the holder, to such holder at: 277 Park Avenue New York, New York 10172 Attention: Michael Isikow Telefax: 212-892-2689 with a copy to: Gardere Wynne Sewell, LLP 1000 Louisiana, Suite 3400 Houston, Texas 77002 Attention: N.L. Stevens III Telefax: 713-276-5807 and, if to the Company: Brigham Exploration Company 6300 Bridge Point Parkway Building 2, Suite 500 Austin, Texas 78730 Attention: Chief Financial Officer Telecopier: (512) 472-3400 12 Such notices, requests, demands, and other communications shall be effective (i) if delivered personally or sent by courier service, upon actual receipt by the intended recipient, or (ii) if sent by telecopy or facsimile transmission, when the answer back is received. Section 11. GOVERNING LAW. This Warrant Certificate shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflict of laws. Section 12. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT CERTIFICATES. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Warrant Certificate, then, in the absence of notice to the Company that such Warrant Certificate has been acquired by a bona fide purchaser, the Company shall execute and deliver, in exchange for or in lieu of the lost, stolen, destroyed or mutilated Warrant Certificate, a substitute Warrant Certificate of the same tenor and evidencing a like number of Warrants. Section 13. TRANSFER. Subject to Section 14 and the Securities Purchase Agreement, transfer of Warrants, in whole or in part, shall be registered on the books of the Company to be maintained for such purposes, upon surrender of the Warrant Certificate representing such Warrants at the principal office of the Company referred to in SECTION 10, together with a written assignment substantially in the form of Exhibit B to this Warrant Certificate and a written agreement, in form reasonably satisfactory to the Company, setting forth the new Warrant holder's agreement to be bound by all of the terms of this Warrant Certificate (including without limitation Section 14) and Section 5.5 of the Securities Purchase Agreement, each duly executed by the holder, and funds sufficient to pay any transfer taxes payable by such holder upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall 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. Section 14. RESTRICTIONS ON TRANSFERABILITY. The Warrant Certificate represents Warrants referred to in the Securities Purchase Agreement. Said Securities Purchase Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of certain limitations of rights, obligations, duties and immunities thereunder of the Company and the holders, and in the event of any conflict between the terms of this Warrant Certificate and the provisions of the Securities Purchase Agreement, the provisions of the Securities Purchase Agreement shall control. * * * IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be executed as of November 1, 2000, by the undersigned, thereunto duly authorized. BRIGHAM EXPLORATION COMPANY By: /s/ KAREN E. LYNCH ------------------------------------- Karen E. Lynch Vice President DLJ MB FUNDING III, INC. By: /s/ IVY B. DODES ------------------------------------- Ivy B. Dodes Principal EX-10.12 14 0014.txt WARRANT CERTIFICATE 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 THIS WARRANT CERTIFICATE AND IN A SECURITIES PURCHASE AGREEMENT, DATED AS OF NOVEMBER 1, 2000, BETWEEN BRIGHAM EXPLORATION COMPANY AND THE INITIAL HOLDER 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. WARRANT CERTIFICATE NUMBER OF WARRANTS: 630,000 WARRANT NO. 2 This Warrant certificate ("Warrant Certificate") certifies that, for value received, DLJ ESC II, LP, a Delaware limited partnership, is the registered holder of the number of warrants (the "Warrants") set forth above. Each Warrant entitles the holder thereof, at any time or from time to time during the Exercise Period, to purchase from the Company one fully paid and nonassessable share of Common Stock at the Exercise Price, subject to adjustment as provided herein. Initially capitalized terms used but not defined herein shall have the meanings ascribed to them in the Securities Purchase Agreement. "COMMON STOCK" means the common stock, $.01 par value per share, of the Company and such other class of securities as shall then represent the common equity of the Company. "COMPANY" means Brigham Exploration Company, a Delaware corporation. "EXERCISE PERIOD" means the period of time between the Closing Date, as defined in the Securities Purchase Agreement and 5:00 p.m. (New York City time) on the Expiration Date. "EXERCISE PRICE," subject in all circumstances to adjustment in accordance with SECTION 2, means $3.00 per share. "EXPIRATION DATE" means the tenth anniversary of the Closing Date. "ISSUANCE DATE" means November 1, 2000. "PERSON" means any individual, corporation, company, 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. "PREFERRED STOCK" means shares of the Series A Preferred Stock, par value $0.01 per share, of the Company. "PREFERRED VALUE" per share of Preferred Stock means the Stated Value of such Share, plus, without duplication, all accrued and unpaid dividends on such share to and including the applicable date of Warrant exercise. "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 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 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 determined for the individual trading days in such period by the number of trading days in such period. "SECURITIES PURCHASE AGREEMENT" means the Securities Purchase Agreement, dated as of November 1, 2000, between the Company, DLJ MB Funding III, Inc. and DLJ ESC II, LP. "STATED VALUE" means the stated value per share of Preferred Stock, which is $20.00 per share. Section 1. EXERCISE OF WARRANTS. (a) The Warrants may be exercised in whole or in part, at any time or from time to time, during the Exercise Period, by (i) presentation and surrender to the Company at its address set forth in SECTION 10 of this Warrant Certificate with the Election To Exercise, attached hereto as EXHIBIT A, duly completed and executed, and (ii) payment of the Exercise Price, for the number of Warrants being exercised by either: (1) bank draft or cashiers check, or (2) provided that the Company receives at least 5 days prior notice and subject to Section 1(d), delivery to the Company of certificate(s) representing a number of shares of Preferred Stock having an aggregate Preferred Value equal to the aggregate Exercise Price for the number of Warrants being exercised. If the aggregate Preferred Value of the Preferred Stock delivered in payment of the aggregate Exercise Price exceeds (because of fractional shares) the aggregate Exercise Price for the number of Warrants being exercised; then (subject to Section 1(d)) the Company will promptly pay to the holder of the Warrants in cash such excess amount; provided that such excess amount shall in no event be more than the Preferred Value of one share of Preferred Stock. If the holder of this Warrant Certificate at any time exercises less than all the Warrants, the 2 Company shall issue to such a holder a warrant certificate identical in form to this Warrant Certificate, but evidencing a number of Warrants equal to the number of Warrants originally represented by this Warrant Certificate less the number of Warrants previously exercised. Likewise, upon the presentation and surrender of this Warrant Certificate to the Company at its address set forth in SECTION 10 and at the request of the holder, the Company will, without expense, at the option of the holder, issue to the holder in substitution for this Warrant Certificate one or more warrant certificates in identical form and for an aggregate number of Warrants equal to the number of Warrants evidenced by this Warrant Certificate. (b) To the extent that the Warrants have not been exercised at or prior to the Expiration Date, such Warrants shall expire and the rights of the holder shall become void and of no effect. (c) Upon surrender of this Warrant Certificate in conformity with the foregoing provisions, the Company shall transfer to the holder of this Warrant Certificate appropriate evidence of ownership of the shares of Common Stock or other securities or property (including any money) to which the holder is entitled, registered or otherwise placed in, or payable to the order of, the name or names of the holder or such transferee as may be directed in writing by the holder, and shall deliver such evidence of ownership and any other securities or property (including any money) to the Person or Persons entitled to receive the same, together with an amount in cash in lieu of any fraction of a share. (d) In connection with payment of the Exercise Price with shares of Preferred Stock, the Company may require that at the time of such exercise it receive representations and warranties from the applicable holder of the Warrants regarding such holder's title to the Preferred Stock and the lack of encumbrances thereon. If the Company is unable to consummate an exercise of Warrants through payment of the Exercise Price with shares of Preferred Stock because of any limitations contained or construed in the Delaware General Corporation Law, the Company shall use its best efforts to take all such action as may be necessary to place the Company in a position to do so. In the event the Company, after the taking of any action by it as contemplated above, is unable to consummate such exercise, the Company shall accept such number of shares of Preferred Stock in payment as it shall then be authorized to do so under the Delaware General Corporation Law. (e) The Company shall not be required to issue a fractional share of Common Stock upon the exercise of Warrants. As to any fraction of a share which the Warrant holder would otherwise be entitled to purchase upon such exercise, the Company may pay a cash adjustment in respect of such fraction in an amount equal to the same fraction of the Price per share of Common Stock on the date of exercise. Section 2. ANTIDILUTION ADJUSTMENTS. The shares of Common Stock purchasable on exercise of the Warrants are shares of Common Stock as constituted as of the Issuance Date. The number and kind of securities purchasable upon the exercise of the Warrants, and the Exercise Price, shall be subject to adjustment from time to time upon the happening of certain events, as follows: (a) MERGERS, CONSOLIDATIONS AND RECLASSIFICATIONS. In case of any -3- reclassification or change of outstanding securities issuable upon exercise of the Warrants at any time after the Issuance Date (other than a change in par value, or from par value to no par value, or from no par value to par value or as a result of a subdivision or combination to which SECTION 2(B) applies), or in case of any consolidation or merger of the Company with or into any entity or other person (other than a merger with another entity or other person in which the Company is the surviving corporation and which does not result in any reclassification or change in the securities issuable upon exercise of this Warrant Certificate), the holder of the Warrants shall have, and the Company, or such successor corporation or other entity, shall covenant in the constituent documents effecting any of the foregoing transactions that such holder does have the right to obtain, upon the exercise of the Warrants, in lieu of each share of Common Stock, other securities, money or other property theretofore issuable upon exercise of a Warrant, the kind and amount of shares of stock, other securities, money or other property receivable upon such reclassification, change, consolidation or merger by a holder of the shares of Common Stock, other securities, money or other property issuable upon exercise of a Warrant if the Warrants had been exercised immediately prior to such reclassification, change, consolidation or merger. The constituent documents effecting any such reclassification, change, consolidation or merger shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided in this SECTION 2(A). The provisions of this SECTION 2(A) shall similarly apply to successive reclassifications, changes, consolidations or mergers. (b) SUBDIVISIONS AND COMBINATIONS. If the Company, at any time after the Issuance Date, shall subdivide its shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced, and the number of shares of Common Stock purchasable upon exercise of the Warrants shall be proportionately increased, as at the effective date of such subdivision, or if the Company shall take a record of holders of its Common Stock for such purpose, as at such record date, whichever is earlier. If the Company, at any time after the Issuance Date, shall combine its shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased, and the number of shares of Common Stock purchasable upon exercise of the Warrants shall be proportionately reduced, as at the effective date of such combination, or if the Company shall take a record of holders of its Common Stock for purposes of such combination, as at such record date, whichever is earlier. (c) DIVIDENDS AND DISTRIBUTIONS. If the Company at any time after the Issuance Date shall declare a dividend on its Common Stock payable in stock or other securities of the Company to the holders of its Common Stock, the holder of this Warrant Certificate shall, without additional cost, be entitled to receive upon any exercise of a Warrant, in addition to the Common Stock to which such holder would otherwise be entitled upon such exercise, the number of shares of stock or other securities which such holder would have been entitled to receive if he had been a holder immediately prior to the record date for such dividend (or, if no record date shall have been established, the payment date for such dividend) of the number of shares of Common Stock purchasable on exercise of such Warrant immediately prior to such record date or payment date, as the case may be. (d) CERTAIN ISSUANCES OF SECURITIES. Subject to SECTION 2(F), if the Company at -4- any time after the Issuance Date shall issue any additional shares of Common Stock (otherwise than as provided in subsections (a) through (c) of this SECTION 2) at a price per share less than the Average Price per share of Common Stock for the 20 trading days immediately preceding the date of the authorization of such issuance (the "Market Price") by the Board of Directors or its compensation committee (as applicable), then the Exercise Price upon each such issuance shall be adjusted to that price determined by multiplying the Exercise Price by a fraction: i. the numerator of which shall be the sum of (1) the number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares of Common Stock multiplied by the Market Price, and (2) the consideration, if any, received by the Company upon the issuance of such additional shares of Common Stock, and ii. the denominator of which shall be the Market Price multiplied by the total number of shares of Common Stock outstanding immediately after the issuance of such additional shares of Common Stock. No adjustments of the Exercise Price shall be made under this SECTION 2(D) upon the issuance of any additional shares of Common Stock that (v) are issued pursuant to any grant or award made prior to the Issuance Date under any thrift plan, stock purchase plan, stock bonus plan, stock option plan, employee stock ownership plan, incentive or profit sharing arrangement or other benefit or compensation plan for the benefit of the Company's officers, directors and/or employees ("Employee Benefit Plans") that has been approved by the Board of Directors of the Company or its compensation committee and that otherwise would cause an adjustment under this SECTION 2(D); (w) are issued pursuant to any grant or award made on or after the Issuance Date under any Employee Benefit Plan if the "Market Price" of any such issuance is not less than the lesser of the Market Price as determined above and the "Fair Market Value", as defined under the applicable Employee Benefit Plan, on the date of Board or compensation committee authorization; (x) are issued pursuant to any Common Stock Equivalent (as hereinafter defined) (i) if upon the issuance of any such Common Stock Equivalent, any such adjustments shall previously have been made pursuant to SECTION 2(E), (ii) if no adjustment was required pursuant to SECTION 2(E), or (iii) if such Common Stock Equivalent was issued prior to this Warrant Certificate; (y) are issued pursuant to a public offering by the Company; or (z) results in an adjustment pursuant to SECTION 2(F). (e) COMMON STOCK EQUIVALENTS. i. Subject to SECTION 2(F), if the Company shall, after the Issuance Date, issue any security or evidence of indebtedness which is convertible into or exchangeable for Common Stock ("Convertible Security"), or any warrant, option or other right to subscribe for or purchase Common Stock or any Convertible Security, other than pursuant to Employee Benefit Plans (together with Convertible Securities, "Common Stock Equivalent"), then the Exercise Price upon each such issuance shall be adjusted as provided in SECTION 2(D) on the basis that (i) the maximum number of additional shares of Common Stock issuable pursuant to all such Common Stock Equivalents shall be deemed to have been issued as of the date of issuance of such Common Stock Equivalent; and (ii) the aggregate consideration for such maximum number of additional shares of Common Stock shall be deemed to be the -5- minimum consideration received and receivable by the Company for the issuance of such additional shares of Common Stock pursuant to such Common Stock Equivalent. ii. Notwithstanding the foregoing, no adjustment shall be made pursuant to this SECTION 2(E) unless the consideration received and receivable by the Company per share of Common Stock for the issuance of such additional shares of Common Stock pursuant to such Common Stock Equivalent is less than the Market Price. No adjustment of the Exercise Price shall be made under this SECTION 2(E) upon the issuance of any Convertible Security which is issued pursuant to the exercise of any warrants or other subscription or purchase rights therefor, if any adjustment shall previously have been made in the Exercise Price then in effect upon the issuance of such warrants or other rights pursuant to this SECTION 2(E). No adjustment shall be made under this SECTION 2(E) if an adjustment is to be made under SECTION 2(F). No adjustment shall be made as a result of adjustment in the exercise or conversion price of Common Stock Equivalents, if those adjustments occur by the terms of such Common Stock Equivalents. (f) SPECIAL ADJUSTMENTS OF EXERCISE PRICE. Notwithstanding anything to the contrary in SECTION 2(D) or SECTION 2(E), this SECTION 2(F) shall govern adjustments to the Exercise Price for the transactions described in this SECTION 2(F). i. If the Company at any time after the Issuance Date and prior to the second anniversary of the Issuance Date shall issue any additional shares of Common Stock (otherwise than as provided in subsections (a) through (c) of SECTION 2; pursuant to any Employee Benefit Plan; pursuant to any Common Stock Equivalent outstanding as of the Issuance Date) or upon the issuance of any such Common Stock, any adjustments shall previously have been made pursuant to Section 2(e) or Section 2(f)(ii); and the New Stock Issue Price (defined below) of such additional shares is less than the Exercise Price then in effect, then the Exercise Price upon each such issuance shall be adjusted to the New Stock Issue Price of such additional shares. The "New Stock Issuance Price" shall be determined by dividing the total amount of consideration received by the Company for such issue or sale by the number of shares of Common Stock issued or sold. ii. If the Company at any time after the Issuance Date and prior to the second anniversary of the Issuance Date, issues any Common Stock Equivalent (which by definition excludes Employee Benefit Plan securities) (otherwise than as provided in subsections (a) through (c) of Section 2; or pursuant to any Common Stock Equivalent outstanding as of the Issuance Date) and the New CSE Exercise Price (defined below) of such Common Stock Equivalents is less than the Exercise Price then in effect, then the Exercise Price upon each such issuance shall be adjusted to the New CSE Exercise Price of such Common Stock Equivalents. The "New CSE Exercise Price" shall be determined by dividing (x) the total amount, if any, received or receivable by the Company as consideration for the issuance of such Common Stock Equivalents, plus the minimum aggregate amount of additional consideration payable to the Company upon the exercise, conversion or exchange of such Common Stock Equivalents, plus, in the case of any such Common Stock Equivalents which relate to Convertible Securities, the minimum aggregate amount of additional consideration, -6- if any, payable to the Company upon the conversion or exchange of such Convertible Securities, by (y) the total maximum number of shares of Common Stock issuable upon the exercise, conversion or exchange of all such Common Stock Equivalents. (g) MISCELLANEOUS. The following provisions shall be applicable to the making of adjustments in the Exercise Price hereinbefore provided in this SECTION 2: i. The consideration received by the Company shall be deemed to be the following: (I) to the extent that any additional shares of Common Stock or any Common Stock Equivalent shall be issued for cash consideration, the consideration received by the Company therefor, or, if such additional shares of Common Stock or Common Stock Equivalent are offered by the Company for subscription, the subscription price, or, if such additional shares of Common Stock or Common Stock Equivalent are sold to underwriters or dealers for public offering without a subscription offering, the initial public offering price, in any such case excluding any amounts paid or receivable for accrued interest or accrued dividends and without deduction of any compensation, discounts, commissions or expenses paid or incurred by the Company for and in the underwriting of , or otherwise in connection with, the issue thereof; (II) to the extent that such issuance shall be for a consideration other than cash, then, except as herein otherwise expressly provided, the fair value of such consideration at the time of such issuance as determined in good faith by the Board of Directors, as evidenced by a certified resolution of the Board of Directors delivered to the holder of this Warrant Certificate setting forth such determination. The consideration for any additional shares of Common Stock issuable pursuant to any Common Stock Equivalent shall be the consideration received by the Company for issuing such Common Stock Equivalent, plus the additional consideration payable to the Company upon the exercise, conversion or exchange of such Common Stock Equivalent. In case of the issuance at any time of any additional shares of Common Stock or Common Stock Equivalent in payment or satisfaction of any dividend upon any class of stock other than Common Stock, the Company shall be deemed to have received for such additional shares of Common Stock or Common Stock Equivalent (which shall not be deemed to be a dividend payable in, or other distribution of, Common Stock under SECTION 2(C) above) consideration equal to the amount of such dividend so paid or satisfied. In the event additional shares of Common Stock or Common Stock Equivalents are issued together with other shares or securities or other assets of the Company or its subsidiaries for consideration which covers both, the consideration for such shares of Common Stock and Common Stock Equivalents shall be computed based on the respective portions of such consideration so received, computed as provided in this SECTION 2(G)I., as determined and allocated in good faith by the Board of Directors of the Company. ii. Upon the expiration of the right to convert, exchange or exercise any Common Stock Equivalent the issuance of which effected an adjustment in the Exercise Price, if any such Common Stock Equivalent shall not have been converted, exercised or exchanged, the number of shares of Common Stock deemed to be issued and outstanding because they were issuable upon conversion, exchange or exercise of any such Common Stock Equivalent shall no longer be computed as set forth above, and the Exercise Price shall -7- forthwith be readjusted and thereafter be the price which it would have been (but reflecting any other adjustments in the Exercise Price made pursuant to the provisions of SECTION 2(D) after the issuance of such Common Stock Equivalent) had the adjustment of the Exercise Price made upon the issuance or sale of such Common Stock Equivalent been made on the basis of the issuance only of the number of additional shares of Common Stock actually issued upon exercise, conversion or exchange of such Common Stock Equivalent and thereupon only the number of additional shares of Common Stock actually so issued shall be deemed to have been issued and only the consideration actually received by the Company (computed as in this SECTION 2(F)(I)) shall be deemed to have been received by the Company. III. THE NUMBER OF SHARES OF COMMON STOCK AT ANY TIME OUTSTANDING SHALL NOT INCLUDE ANY SHARES THEREOF THEN DIRECTLY OR INDIRECTLY OWNED OR HELD BY OR FOR THE ACCOUNT OF THE COMPANY OR ITS WHOLLY OWNED SUBSIDIARIES. IV. UPON EACH ADJUSTMENT OF THE EXERCISE PRICE AS A RESULT OF THE CALCULATIONS MADE IN SECTION 2(D), (E) AND (F) HEREOF, THIS WARRANT SHALL THEREAFTER EVIDENCE THE RIGHT TO PURCHASE, AT THE ADJUSTED EXERCISE PRICE, THAT NUMBER OF SHARES OF COMMON STOCK OBTAINED BY (I) MULTIPLYING THE NUMBER OF SHARES COVERED BY THIS WARRANT IMMEDIATELY PRIOR TO SUCH ADJUSTMENT OF THE NUMBER OF SHARES BY THE EXERCISE PRICE IN EFFECT IMMEDIATELY PRIOR TO SUCH ADJUSTMENT OF THE EXERCISE PRICE AND (II) DIVIDING THE PRODUCT SO OBTAINED BY THE EXERCISE PRICE IN EFFECT IMMEDIATELY AFTER SUCH ADJUSTMENT OF THE EXERCISE PRICE. v. For the purpose of this SECTION 2, the term "shares of Common Stock" shall mean shares of (i) the class of stock designated as the Common Stock at the date hereof or (ii) any other class of stock resulting from successive changes or reclassifications of such shares consisting solely of changes in par value, or from par value to no par value, or from no par value to par value. If at any time, because of an adjustment pursuant to SECTION 2(A), the Warrants shall entitle the holders to purchase any securities other than shares of Common Stock, thereafter the number of such other securities so purchasable upon exercise of each Warrant and the Exercise Price of such securities shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in this SECTION 2. (h) CALCULATION OF EXERCISE PRICE. The Exercise Price in effect from time to time shall be calculated to four decimal places and rounded to the nearest thousandth. (i) NASDAQ MATTERS. Notwithstanding anything to the contrary herein, any adjustment to the Exercise Price that would require shareholder approval pursuant to the Nasdaq Market Rules shall be subject to the Company's obtaining such requisite approval. -8- Section 3. NOTICE OF ADJUSTMENTS. Whenever the Exercise Price or the number of shares of Common Stock is required to be adjusted as provided in Section 2, the Company shall forthwith compute the adjusted Exercise Price or the number of shares of Common Stock issuable and shall prepare and mail to the holder hereof a certificate setting forth such adjusted Exercise Price or such number of shares of Common Stock, showing in reasonable detail the facts upon which the adjustment is based. Section 4. VOLUNTARY REDUCTION. (a) The Company may at its option, but shall not be obligated to, at any time during the term of the Warrants, reduce the then current Exercise Price by any amount selected by the Board of Directors; PROVIDED that if the Company elects so to reduce the then current Exercise Price, such reduction shall be irrevocable during its effective period and remain in effect for a minimum of 30 days following the date of such election, after which time the Company may, at its option, reinstate the Exercise Price in effect prior to such reduction. Whenever the Exercise Price is reduced, the Company shall mail to the holder a notice of the reduction at least 30 days before the date the reduced Exercise Price takes effect, stating the reduced Exercise Price and the period for which such reduced Exercise Price will be in effect. (b) The Company may make such decreases in the Exercise Price, in addition to those required or allowed by this SECTION 4, as shall be determined by it, as evidenced by a certified resolution of the Board of Directors delivered to the holders, to be advisable to avoid or diminish any income tax to the holder resulting from any dividend or distribution of stock or issuance of rights or warrants to purchase or subscribe for stock or from any event treated as such for income tax purposes. Section 5. MANDATORY EXERCISE. (a) If (i) the Price of the Common Stock is greater than $5.00 per share (as adjusted to reflect any stock split, combination, reclassification, recapitalization, exchange, stock dividend or other distribution payable in Common Stock with respect to shares of Common Stock) for sixty (60) consecutive trading days in the principal market in which the Common Stock is traded and (ii) the Company gives written notice (the "Company Notice") to the holder hereof of the satisfaction of the condition in clause (i), then within fifteen (15) days after the effective date of the Company Notice, the holder hereof shall exercise all of the Warrants. If required by this SECTION 5, the holder hereof agrees to exercise the Warrants, and to purchase shares of Common Stock pursuant to the terms of this Warrant Certificate. If the holder has not fulfilled its obligations to exercise the Warrants pursuant to this Section 5 within fifteen (15) days after the holder's receipt of the Company Notice, then (without limiting the Company's available remedies) (A) the obligations of holder under this Section 5 shall continue but the purchase rights otherwise represented by this Warrant Certificate shall terminate, (B) the Company may thereafter refuse, in its sole discretion, to allow holder to exercise the Warrants (including pursuant to this Section 5), (C) all obligations of the Company under Sections 3, 6, 7 and 8 shall terminate, (D) no further adjustments to the Exercise Price shall be made unless the Company in its sole discretion consents in writing. Each Warrant holder's obligations under this Section 5(a) shall be subject to the expiration or termination of all waiting periods (and any extensions thereof) applicable to exercise of such holder's Warrants under the HSR Act (as defined below); provided that such holder shall have certified in writing to the Company that -9- a filing under the HSR Act is required and provided further that such holder shall use its best efforts to cause the expiration or termination of such waiting period to occur as promptly as practicable. (b) Holder represents and warrants to the Company that holder has full corporate power and authority to execute, deliver, and perform this Warrant Certificate and to consummate the transactions contemplated hereby. The execution, delivery, and performance by holder of this Warrant Certificate have been duly authorized by all necessary corporate action of holder. This Warrant Certificate has been duly executed and delivered by holder and constitutes a valid and legally binding obligation of holder, enforceable against holder in accordance with its terms, except that such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and (ii) general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). (c) The right to require exercise of the Warrants is hereby declared by the parties hereto to be a unique right, the loss of which is not readily susceptible to monetary quantification. Consequently, the parties hereto agree that an action for specific performance of the exercise and purchase obligations created by this Section 5 is an available remedy for the breach of the provisions of this Section 5. If the Company is forced to institute legal proceedings to enforce its rights in accordance with the provisions of this Section 5, it shall be entitled to recover its reasonable attorneys' fees and court costs incurred in enforcing such rights. (d) Holder is executing this Warrant Certificate in order to make and agree to the covenants, representations and warranties of holder contained in this Section 5, which shall be binding upon the holder's successors and assigns. Section 6. NOTICES TO WARRANT HOLDERS. In the event: (a) the Company shall authorize any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required, or of the conveyance or sale of all or substantially all of the assets of the Company, or of any reclassification or change of the Common Stock or other securities issuable upon exercise of the Warrants (other than a change in par value, or from par value to no par value, or from no par value to par value or as result of a subdivision or combination), or a tender offer or exchange offer for shares of Common Stock (or other securities issuable upon the exercise of the Warrants); or (b) the Company shall declare any dividend (or any other distribution) on the Common Stock or any other class of its capital stock, other than dividends on the Shares, as defined in the Securities Purchase Agreement; or (c) the Company shall authorize the granting to the holders of Common Stock or any other class of its capital stock of rights or warrants to subscribe for or purchase any shares of any class or series of capital stock or any other securities convertible into or exchangeable for shares of stock; or (d) of the voluntary or involuntary dissolution, liquidation or winding up of the -10- Company; then the Company shall cause to be sent to the holder hereof, at least 30 days prior to the applicable record date hereinafter specified, or promptly in the case of events for which there is no record date, a written notice stating (x) the date for the determination of the holders of record of shares of Common Stock (or other securities issuable upon the exercise of the Warrants) entitled to receive any such dividends or other distribution, (y) the initial expiration date set forth in any tender offer or exchange offer for shares of Common Stock (or other securities issuable upon the exercise of the Warrants), or (z) the date on which any of the events specified in subsections (a)-(d) is expected to become effective or consummated, and the date as of which it is expected that holders of record of shares of Common Stock (or other securities issuable upon the exercise of the Warrants) shall be entitled to exchange such shares for securities or other property, if any, deliverable upon any such event. Failure to give such notice or any defect therein shall not affect the legality or validity of any such event, or the vote upon any such action. Section 7. REPORTS TO WARRANT HOLDERS. The Company will cause to be delivered, by first-class mail, postage prepaid, to holder at such holder's address appearing hereon, or such other address as the holder shall specify, a copy of any reports delivered by the Company to the holders of Common Stock. Section 8. COVENANTS OF THE COMPANY. The Company covenants and agrees that: (a) Until the Expiration Date, the Company shall at all times reserve and keep available, out of the aggregate of its authorized but unissued Common Stock (and other securities), for the purpose of enabling it to satisfy any obligation to issue shares of Common Stock (and other securities) upon the exercise of the Warrants, the number of shares of Common Stock (and other securities) issuable upon the exercise of such Warrants. (b) The Company shall pay all expenses, taxes and other charges payable in connection with the preparation, issuance and delivery of new warrant certificates on transfer of the Warrants. (c) All Common Stock (and other securities) which may be issued upon exercise of the Warrants shall upon issuance be validly issued, fully paid, non-assessable and free from all preemptive rights and all taxes, liens and charges with respect to the issuance thereof, and will not be subject to any restrictions on voting or transfer thereof except as set forth in the Securities Purchase Agreement, any stockholders agreement and except for restrictions arising under state or federal securities laws. (d) All original issue taxes payable in respect of the issuance of shares of Common Stock to the registered holder hereof upon the exercise of the Warrants shall be borne by the Company; provided, that the Company shall not be required to pay any tax or charge imposed in connection with any transfer involved in the issuance of any certificates representing shares of Common Stock (and other securities) in any name other than that of the registered holder hereof, and in such case the Company shall not be required to issue or deliver any certificate representing shares -11- of Common Stock (and other securities) until such tax or other charge has been paid or it has been established to the Company's satisfaction that no such tax or charge is due. (e) As soon as practicable after the receipt from the holder of this Warrant Certificate of notice of the intent to exercise of a number of warrants sufficient to require a filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules, regulations and formal interpretations thereunder, as amended from time to time (the "HSR Act") (and after the receipt, if applicable, of the notice referred to in Rule 803.5 of the HSR Act), but in any event no later than the 15th business day after receipt of such notice(s), the Company will (i) if required by the HSR Act, prepare and file with Antitrust Division of the Department of Justice (the "DOJ") and the Federal Trade Commission (the "FTC") the Notification and Report Form (accompanied by all documentary attachments contemplated thereby) required by the HSR Act, (ii) upon request of the holder, request early termination of the waiting period imposed by the HSR Act, and (iii) coordinate and cooperate with the holder in responding to formal and informal requests for additional information and documentary material from the DOJ and the FTC in connection with such filing. Notwithstanding the foregoing, if the holder is required to file with the DOJ and FTC the Notification and Report Form solely as a result of its holding and/or purchasing shares of Common Stock issued pursuant to this Warrant (with no regard to any other securities held by such holder or its affiliates) and the holder certifies such fact to the Company in writing, the Company agrees to promptly reimburse the holder for all fees and expenses for the preparation and filing of such form, including all legal expenses and filing fees. (f) The Company will not change the par value of the Common Stock from par value $0.01 per share to any higher par value which exceeds the Exercise Price then in effect, and will reduce the par value of the Common Stock upon any event described in Section 2 that would, but for this provision, reduce the Exercise Price below the par value of the Common Stock. Section 9. NO RIGHTS AS STOCKHOLDER. The holder of the Warrants shall not, by virtue of holding such Warrants, be entitled to any rights of a stockholder of the Company either at law or in equity, and the rights of the holder of the Warrants are limited to those expressed herein. Section 10. NOTICES. All notices, requests, demands, and other communications required or permitted to be given or made hereunder by any party hereto shall be in writing and shall be deemed to have been duly given or made if (i) delivered personally, (ii) sent by prepaid overnight courier service, or (iii) sent by telecopy or facsimile transmission, answer back requested, to the parties at the following addresses (or at such other addresses as shall be specified by the parties by like notice): if to the holder, to such holder at: 277 Park Avenue New York, New York 10172 Attention: Michael Isikow Telefax: 212-892-2689 -12- with a copy to: Gardere Wynne Sewell, LLP 1000 Louisiana, Suite 3400 Houston, Texas 77002 Attention: N.L. Stevens III Telefax: 713-276-5807 and, if to the Company: Brigham Exploration Company 6300 Bridge Point Parkway Building 2, Suite 500 Austin, Texas 78730 Attention: Chief Financial Officer Telecopier: (512) 472-3400 Such notices, requests, demands, and other communications shall be effective (i) if delivered personally or sent by courier service, upon actual receipt by the intended recipient, or (ii) if sent by telecopy or facsimile transmission, when the answer back is received. Section 11. GOVERNING LAW. This Warrant Certificate shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflict of laws. Section 12. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT CERTIFICATES. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Warrant Certificate, then, in the absence of notice to the Company that such Warrant Certificate has been acquired by a bona fide purchaser, the Company shall execute and deliver, in exchange for or in lieu of the lost, stolen, destroyed or mutilated Warrant Certificate, a substitute Warrant Certificate of the same tenor and evidencing a like number of Warrants. Section 13. TRANSFER. Subject to Section 14 and the Securities Purchase Agreement, transfer of Warrants, in whole or in part, shall be registered on the books of the Company to be maintained for such purposes, upon surrender of the Warrant Certificate representing such Warrants at the principal office of the Company referred to in SECTION 10, together with a written assignment substantially in the form of Exhibit B to this Warrant Certificate and a written agreement, in form reasonably satisfactory to the Company, setting forth the new Warrant holder's agreement to be bound by all of the terms of this Warrant Certificate (including without limitation Section 14) and Section 5.5 of the Securities Purchase Agreement, each duly executed by the holder, and funds sufficient to pay any transfer taxes payable by such holder upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall 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 -13- so assigned, and the old Warrant Certificate shall promptly be canceled. Section 14. RESTRICTIONS ON TRANSFERABILITY. The Warrant Certificate represents Warrants referred to in the Securities Purchase Agreement. Said Securities Purchase Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of certain limitations of rights, obligations, duties and immunities thereunder of the Company and the holders, and in the event of any conflict between the terms of this Warrant Certificate and the provisions of the Securities Purchase Agreement, the provisions of the Securities Purchase Agreement shall control. * * * -14- IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be executed as of November 1, 2000, by the undersigned, thereunto duly authorized. BRIGHAM EXPLORATION COMPANY By: /s/ Karen E. Lynch ------------------------------------------------- Karen E. Lynch Vice President DLJ ESC II, LP By: DLJ LBO Plans Management Corporation, its general partner By: /s/ IVY B. DODES ----------------------------------------- Ivy B. Dodes Principal -15- EX-10.13 15 0015.txt STOCKHOLDER VOTING AGREEMENT Exhibit 10.13 BRIGHAM EXPLORATION COMPANY STOCKHOLDERS VOTING AGREEMENT This STOCKHOLDERS VOTING AGREEMENT, dated October 31, 2000 (this "Agreement"), is made and entered into by and among Brigham Exploration Company, a Delaware corporation (the "Company"), DLJ ESC II, L.P., a Delaware limited partnership ("ES"), and DLJ MB Funding III, Inc., a Delaware corporation ("MB"), and the following shareholders of the Company (the "Shareholders"): Ben M. and Anne L. Brigham, individual residents of Travis County, Texas, Harold D. Carter, a resident of Dallas County, Texas, General Atlantic Partners III, L.P., a Delaware limited partnership, GAP-Brigham Partners, L.P., a Delaware limited partnership, GAP Coinvestment Partners II, L.P., a Delaware limited partnership, and Aspect Resources, LLC, a Colorado limited liability company. W I T N E S S E T H: WHEREAS, the Company, DLJ and Webster, propose to enter into a Securities Purchase Agreement concurrently with the execution hereof (the "Purchase Agreement"), pursuant to which the Company will issue and sell to DLJ and Webster an aggregate of up to one million shares of its Series A Preferred Stock and warrants (the "Warrants") to acquire 6,666,667 shares (the "Warrant Shares") of its common stock (the "Common Stock") at an exercise price of $3.00 per share (the "Exercise Price"); WHEREAS, the Warrant Shares represent greater than 20% of the outstanding Common Stock before issuance; WHEREAS, the Exercise Price was the closing sales price on the date a binding term sheet was signed between the Company and DLJ, and, therefore, was "market" price; WHEREAS, the rules of the Nasdaq Stock Market require shareholder approval of issuances of warrants to purchase shares representing greater than 20% of a company's outstanding voting securities at a price below market. WHEREAS, the Warrants contain anti-dilution provisions that reduce the Exercise Price, if the Company issues Common Stock or other securities exchangeable for or convertible into Common Stock at a price below $3.00 or below market price at the time of such issuance. WHEREAS, the Nasdaq Stock Market has required that the Company's shareholders approve these anti-dilution provisions and any future adjustments to the Exercise Price pursuant to such provisions; and WHEREAS, as a condition to the agreement of the parties to this Agreement to enter into the Purchase Agreement, the Company and the Shareholders have agreed to enter into this Agreement to provide for certain agreements relating to approval of the Warrants and any future adjustments to the Exercise Price pursuant to the terms thereof; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements set forth herein, the parties to this Agreement hereby agree as follows: 1. AGREEMENT TO VOTE SHARES. Each Shareholder agrees that, at any special or annual meeting of shareholders of the Company, such Shareholder shall vote all shares of Common Stock registered in its, his or her name or beneficially owned by it, him or her as of the date hereof and any and all other capital stock of the Company legally or beneficially acquired by such Shareholder after the date hereof to approve the Warrants and any future adjustments to the exercise price of the Warrants pursuant to the terms thereof. In the event that the Purchase Agreement is terminated for any reason, then this Agreement shall automatically terminate and none of the parties hereto shall have any liability hereunder. Each Shareholder represents to ES and MB that as of the date hereof such Shareholder owns the number of outstanding shares of Common Stock set forth opposite such Shareholder's name on attached SCHEDULE I. 2. SUCCESSORS, ASSIGNS AND TRANSFEREES. The terms and provisions of this Agreement shall not bind, inure to the benefit of or be enforceable by or against the successors, assigns or transferees of each of the parties hereto. No party hereto may assign its rights under this Agreement. 3. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, and such additional instruments as may be concurrently executed and delivered pursuant to this Agreement, constitutes the entire understanding of the parties with respect to its subject matter. There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings other than those expressly set forth herein or in the documents delivered concurrently herewith. This Agreement may be amended only by a written instrument duly executed by all the parties hereto. 4. HEADINGS. The section headings contained in this Agreement are for reference purposes only and shall not effect in any way the meaning or interpretation of this Agreement. 5. NOTICES, All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given if so given) by hand delivery, facsimile or by mail (registered or certified, postage prepaid, return receipt requested) to the respective parties as follows: If to Brigham: Brigham Exploration Company 6300 Bridge Point Parkway Building Two, Suite 500 Austin, Texas 78730 Attention: Ben M. "Bud" Brigham Fax No: (512) 427-3400 If to DLJ ESC II, L.P.: Donaldson Lufkin & Jenrette 277 Park Avenue New York, New York 10172 Attention: Michael Isikow 2 Fax No: 212-892-2689 and Mr. Steve Webster 1000 Louisiana, Suite 4900 Houston, Texas 77002 Fax No: (713) 652-6050 with a copy to: Gardere Wynne Sewell, LLP 1000 Louisiana, Suite 3400 Houston, Texas 77002 Attention: N.L. Stevens III Telefax: 713-276-5807 If to DLJ MB Funding III, Inc.: Donaldson Lufkin & Jenrette 277 Park Avenue New York, New York 10172 Attention: Michael Isikow Fax No: 212-892-2689 and Mr. Steve Webster 1000 Louisiana, Suite 4900 Houston, Texas 77002 Fax No: (713) 652-6050 with a copy to: Gardere Wynne Sewell, LLP 1000 Louisiana, Suite 3400 Houston, Texas 77002 Attention: N.L. Stevens III Telefax: 713-276-5807 If to Ben M. Brigham: Ben M. Brigham Brigham Exploration Company 6300 Bridge Point Parkway Building Two, Suite 500 Austin, Texas 78730 Fax No: (512) 427-3400 If to Anne L. Brigham: Anne L. Brigham Brigham Exploration Company 6300 Bridge Point Parkway Building Two, Suite 500 Austin, Texas 78730 3 Fax No: (512) 427-3400 If to Harold D. Carter: Harold D. Carter 5949 Sherry Lane, Suite 620 Dallas, Texas 75225 Fax No.: (214) 692-7820 If to General Atlantic Partners III, L.P.: General Atlantic Partners III, L.P. c/o General Atlantic Service Corporation 3 Pickwick Plaza Greenwich, CT 06830 Attention: Mr. Thomas J. Murphy Fax No: (203) 622-8818 If to GAP-Brigham Partners, L.P.: GAP-Brigham Partners, L.P. c/o General Atlantic Service Corporation 3 Pickwick Plaza Greenwich, CT 06830 Attention: Mr. Thomas J. Murphy Fax No: (203) 622-8818 If to GAP Coinvestment Partners II, L.P.: GAP Coinvestment Partners II, L.P. c/o General Atlantic Service Corporation 3 Pickwick Plaza Greenwich, CT 06830 Attention: Mr. Thomas J. Murphy Fax No: (203) 622-8818 If to Aspect Resources, LLC: Aspect Resources, LLC 511 16th Street, Suite 300 Denver, CO 80202 Attention: Mr. Alex Cranberg Fax No: (303) 573-7340 or to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above. 6. GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, without reference to the conflict of laws principles thereof. 4 7. WAIVER. Any waiver by any party of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Agreement. The failure of a party to insist upon strict adherence to any term of this Agreement on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. 8. CHALLENGES TO AGREEMENT. In the event that any part of this Agreement or any transaction contemplated hereby is temporarily, preliminarily or permanently enjoined or restrained by court of competent jurisdiction, the parties hereto shall use their reasonable best efforts to cause any such injunction or restraining order to be vacated or dissolved or otherwise declared or determined to be of no further force or effect. 9. SPECIFIC PERFORMANCE. Each of the Shareholders acknowledges and agrees that irreparable harm would occur if any provision of this Agreement were not performed in accordance with the terms thereof, or were otherwise breached, and that such harm could not be remedied by an award of damages. Accordingly, each of the Shareholders agrees that any non-breaching party shall be entitled to an injunction to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof. 10. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be an original, but each of which together shall constitute one and the same Agreement. * * * * * 5 IN WITNESS WHEREOF, and intending to be legally bound hereby, each of the undersigned parties has executed or caused this Agreement to be executed on the date first above written. BRIGHAM EXPLORATION COMPANY By: /s/ DAVID T. BRIGHAM --------------------------------------- Name: DAVID T. BRIGHAM ------------------------------- Title: VICE PRESIDENT ------------------------------- DLJ ESC II, L.P. By DLJ LBO Plans Management Corporation Its General Partner By: /s/ IVY P. DODES -------------------------------------- Name: IVY P. DODES -------------------------------- Title: PRINCIPAL ------------------------------- DLJ MB FUNDING III, INC. By: /s/ IVY P. DODES -------------------------------------- Name: IVY P. DODES -------------------------------- Title: PRINCIPAL ------------------------------- /s/ BEN M. BRIGHAM ------------------------------------------ Ben M. Brigham /s/ ANNE L. BRIGHAM ------------------------------------------ Anne L. Brigham /s/ HAROLD D. CARTER ------------------------------------------ Harold D. Carter 6 GENERAL ATLANTIC PARTNERS III, L.P. By GAP III Investors, Inc. Its General Partner By: /s/ STEPHEN P. REYNOLDS -------------------------------------- Name: STEPHEN P. REYNOLDS ------------------------------ Title: PRESIDENT ------------------------------ GAP-BRIGHAM PARTNERS, L.P. By: /s/ STEPHEN P. REYNOLDS -------------------------------------- Name: STEPHEN P. REYNOLDS ------------------------------ Title: GENERAL PARTNER ------------------------------ GAP COINVESTMENT PARTNERS II, L.P. By: /s/ MATTHEW NIMITZ -------------------------------------- Name: MATTHEW NIMITZ ------------------------------- Title: GENERAL PARTNER ------------------------------- ASPECT RESOURCES, LLC By Aspect Management Corporation Its Manager By: /s/ ALEX CRANBERG -------------------------------------- Name: ALEX CRANBERG ------------------------------ Title: ------------------------------ 7 Schedule I Number of Outstanding Shareholder Shares of Common Stock Owned - ----------- ---------------------------- Ben M. and Anne L. Brigham, 3,719,792 collectively Harold D. Carter 314,893 General Atlantic Partners III, L.P. 2,679,418 GAP-Brigham Partners, L.P. 127,725 GAP Coinvestment Partners II, L.P. 975,610 Aspect Resources, LLC 487,805 8 -----END PRIVACY-ENHANCED MESSAGE-----