10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file no. 333-134748

Chaparral Energy, Inc.

(Exact name of registrant as specified in its charter)

Delaware	73-1590941
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
701 Cedar Lake Boulevard Oklahoma City, Oklahoma	73114
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code:

(405) 478-8770

Securities registered pursuant to Section 12(b) of the Act:

None.

Securities registered pursuant to Section 12(g) of the Act:

None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  x    No  ¨

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ¨    No  x

(Explanatory Note: The registrant is a voluntary filer and is not subject to the filing requirements of the Securities Exchange Act of 1934. However, during the preceding 12 months, the registrant has filed all reports that it would have been required to file by Section 13 or 15(d) of the Securities Act of 1934 if the registrant was subject to the filing requirements of the Securities Exchange Act of 1934.)

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	¨	Accelerated Filer	¨
Non-Accelerated Filer	x	Smaller Reporting Company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The aggregate market value of common equity held by non-affiliates of the registrant is not determinable as such shares were privately placed and there is no public market for such shares.

1,401,376 shares of the registrant’s common stock were outstanding as of April 14, 2010.

CHAPARRAL ENERGY, INC.

Index to Form 10-K

Part I
Items 1. and 2.	Business and Properties	8
Item 1A.	Risk Factors	32
Item 1B.	Unresolved Staff Comments	43
Item 2.	Properties	43
Item 3.	Legal Proceedings	43
Item 4.	[Reserved]	43
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	44
Item 6.	Selected Financial Data	45
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	69
Item 8.	Financial Statements and Supplementary Data	72
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	112
Item 9A.	Controls and Procedures	112
Item 9B.	Other Information	113
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	113
Item 11.	Executive Compensation	115
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	131
Item 13.	Certain Relationships and Related Transactions, and Director Independence	132
Item 14.	Principal Accounting Fees and Services	135
Part IV
Item 15.	Exhibits and Financial Statement Schedules	136
Signatures		139

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CAUTIONARY NOTE

REGARDING FORWARD-LOOKING STATEMENTS

The statements contained in this report that are not purely historical are forward-looking statements. The forward-looking statements include, but are not limited to, statements regarding our expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this report may include, for example, statements about:

• fluctuations in demand or the prices received for oil and natural gas;

• the amount, nature and timing of capital expenditures;

• drilling of wells;

• competition and government regulations;

• timing and amount of future production of oil and natural gas;

• costs of exploiting and developing properties and conducting other operations, in the aggregate and on a per-unit equivalent basis;

• increases in proved reserves;

• operating costs and other expenses;

• cash flow and anticipated liquidity;

• estimates of proved reserves;

• exploitation of property acquisitions; and

• marketing of oil and natural gas.

The forward-looking statements contained in this report are based on our current expectations and beliefs concerning future developments and their potential effects. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include those factors described under the heading “Risk Factors.” Specifically, some factors that could cause actual results to differ include:

• the significant amount of our debt;

• worldwide demand for oil and natural gas;

• volatility and declines in oil and natural gas prices;

• drilling plans (including scheduled and budgeted wells);

• the number, timing or results of any wells;

• changes in wells operated and in reserve estimates;

• future growth and expansion;

• future exploration;

• integration of existing and new technologies into operations;

• future capital expenditures (or funding thereof) and working capital;

• borrowings and capital resources and liquidity;

• changes in strategy and business discipline;

• future tax matters;

• any loss of key personnel;

• future seismic data (including timing and results);

• the plans for timing, interpretation and results of new or existing seismic surveys or seismic data;

• geopolitical events affecting oil and natural gas prices;

• outcome, effects or timing of legal proceedings;

• the effect of litigation and contingencies; and

• the ability to generate additional prospects.

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Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. All forward-looking statements included herein are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

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Glossary of terms

The terms defined in this section are used throughout this Form 10-K:

Bbl	One stock tank barrel, of 42 U.S. gallons liquid volume, used herein in reference to crude oil, condensate or natural gas liquids.
BBtu	One billion British thermal units.
Bcf	One billion cubic feet of natural gas.
Btu	British thermal unit, which is the heat required to raise the temperature of a one-pound mass of water from 58.5 to 59.5 degrees Fahrenheit.
Basin	A large natural depression on the earth’s surface in which sediments generally brought by water accumulate.
Boe	Barrels of oil equivalent using the ratio of six thousand cubic feet of natural gas to one barrel of oil.
Enhanced oil recovery (EOR)	The use of any improved recovery method, including injection of CO2 or polymer, to remove additional oil after secondary recovery.
Field	An area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature or stratigraphic condition. The field name refers to the surface area, although it may refer to both the surface and the underground productive formations.
Henry Hub spot price	The price of natural gas, in dollars per MMbtu, being traded at the Henry Hub in Louisiana in transactions for next-day delivery, measured downstream from the wellhead after the natural gas liquids have been removed and a transportation cost has been incurred.
Horizontal drilling	A drilling technique used in certain formations where a well is drilled vertically to a certain depth and then drilled at a right angle within a specified interval.
Infill wells	Wells drilled into the same pool as known producing wells so that oil or natural gas does not have to travel as far through the formation.

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MBbls	One thousand barrels of crude oil, condensate, or natural gas liquids.
MBoe	One thousand barrels of crude oil equivalent.
Mcf	One thousand cubic feet of natural gas.
MMBbls	One million barrels of crude oil, condensate, or natural gas liquids.
MMBoe	One million barrels of crude oil equivalent.
MMBtu	One million British thermal units.
MMcf	One million cubic feet of natural gas.
NYMEX	The New York Mercantile Exchange.
Net acres	The percentage of total acres an owner has out of a particular number of acres, or in a specified tract. An owner who has a 50% interest in 100 acres owns 50 net acres.
Net working interest	A working interest owner’s gross working interest in production, less the related royalty, overriding royalty, production payment, and net profits interests.
PDP	Proved developed producing.
Play	A term describing an area of land following the identification by geologists and geophysicists of reservoirs with potential oil and gas reserves.
PV-10 value	When used with respect to oil and natural gas reserves, PV-10 value means the estimated future gross revenue to be generated from the production of proved reserves, net of estimated production and future development and abandonment costs, excluding escalations of prices and costs based upon future conditions, before income taxes, and without giving effect to non-property-related expenses, discounted to a present value using an annual discount rate of 10% in accordance with the guidelines of the Securities and Exchange Commission.
Primary recovery	The period of production in which oil moves from its reservoir through the wellbore under naturally occurring reservoir pressure.
Proved developed reserves	Reserves that can be expected to be recovered through existing wells with existing equipment and operating methods, or in which the cost of the required equipment is relatively minor compared to the cost of a new well.
Proved reserves	The quantities of oil and gas which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain.
Proved undeveloped reserves	Reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion.
Sand	A geological term for a formation beneath the surface of the earth from which hydrocarbons are produced. Its make-up is sufficiently homogeneous to differentiate it from other formations.

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SEC	The Securities and Exchange Commission.
Secondary recovery	The recovery of oil and natural gas through the injection of liquids or gases into the reservoir, supplementing its natural energy. Secondary recovery methods are often applied when production slows due to depletion of the natural pressure.
Seismic survey	Also known as a seismograph survey, it is a survey of an area by means of an instrument which records the vibrations of the earth. By recording the time interval between the source of the shock wave and the reflected or refracted shock waves from various formations, geophysicists are able to define the underground configurations.
Spacing	The distance between wells producing from the same reservoir. Spacing is often expressed in terms of acres, e.g., 40-acre spacing, and is often established by regulatory agencies.
Unit	The joining of all or substantially all interests in a reservoir or field, rather than a single tract, to provide for development and operation without regard to separate property interests. Also, the area covered by a unitization agreement.
WTI Cushing spot price	The price of West Texas Intermediate grade crude oil, in dollars per barrel, in transactions for immediate delivery at Cushing, Oklahoma.
Waterflood	The injection of water into an oil reservoir to “push” additional oil out of the reservoir rock and into the wellbores of producing wells. Typically a secondary recovery process.
Wellbore	The hole drilled by the bit that is equipped for oil or natural gas production on a completed well. Also called well or borehole.
Working interest	The right granted to the lessee of a property to explore for and to produce and own oil, natural gas, or other minerals. The working interest owners bear the exploration, development, and operating costs on either a cash, penalty, or carried basis.
Zone	A layer of rock which has distinct characteristics that differ from nearby layers of rock.

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PART I

Unless the context requires otherwise, references in this annual report to the “Company”, “we”, “our”, “ours” and “us” refer to Chaparral Energy, Inc. and its subsidiaries on a consolidated basis. We have provided definitions of terms commonly used in the oil and natural gas industry in the “Glossary of terms” at the beginning of this annual report.

ITEMS 1. AND 2. BUSINESS AND PROPERTIES

We are an independent oil and natural gas company engaged in the production, exploitation, and acquisition of oil and natural gas properties. Our core areas of operation include the Mid-Continent and Permian Basin with additional operations in the Gulf Coast, Ark-La-Tex, North Texas, and the Rocky Mountains. We maintain a portfolio of proved and unproved reserves, development and exploratory drilling opportunities, and enhanced oil recovery (EOR) projects.

On April 12, 2010, we sold 475,043 shares of our common stock to CCMP Capital investors II (AV-2), L.P., CCMP Energy I LTD., and CCMP Capital Investors (Cayman) II, L.P. (collectively, “CCMP”) for a purchase price of $325.0 million. In connection with the closing of the sale, we entered into and closed an Eighth Restated Credit Agreement, which has an initial borrowing base of $450.0 million, is collateralized by our oil and gas properties, and is scheduled to mature on April 12, 2014. We used the proceeds from the sale of common stock to CCMP, along with proceeds available under the Eighth Restated Credit Agreement, to repay the amounts owing under our Seventh Restated Credit Agreement. As of April 14, 2010, we had $275.3 million of availability under our Eight Restated Credit Agreement. See Note 14 to our consolidated financial statements for additional information regarding these transactions.

As of December 31, 2009, based on SEC pricing as defined below, we had estimated proved reserves of 141.9 MMBoe with a PV-10 value of approximately $1.3 billion. Our reserves were 66% proved developed and 63% crude oil. For the year ended December 31, 2009, our average daily production was 20.9 MBoe with an estimated reserve life of 19 years, and our oil and natural gas revenues were $292.4 million. We set forth our definition of PV-10 value (a non-GAAP measure) and a reconciliation of the standardized measure of discounted future net cash flows to PV-10 value on page 24.

Our reserve estimates as of December 31, 2009 were prepared using an average price for oil and natural gas based upon the first day of each month for the prior twelve months as required by the SEC’s Modernization of Oil and Gas Reporting. Our reserve estimates prior to December 31, 2009 were prepared using the spot price for oil and gas on the last day of the reporting period. If our reserves had been prepared based on the guidelines in effect prior to December 31, 2009, including spot prices on the last day of the reporting period of $79.36 per Bbl of oil and $5.79 per Mcf of natural gas at December 31, 2009, our estimated proved reserves would have been approximately 160.7 MMBoe with a PV-10 value of approximately $2.2 billion.

From 2003 to 2009, our proved reserves and production grew at a compounded annual growth rate of 19% and 20%, respectively. During this period, we have grown primarily through a combination of developmental drilling and a disciplined strategy of acquiring proved oil and natural gas reserves, followed by exploitation activities and the acquisition of additional interests in or near these acquired properties. We typically pursue properties in the second half of their life with stable production, shallow decline rates and with particular producing trends and characteristics indicative of production or reserve enhancement opportunities. In 1993, we began acquiring properties with CO₂ EOR potential. To date, over 72 of these properties have been acquired and CO₂ injection operations have been initiated in ten of these units. In 2005 and 2006, we completed two larger acquisitions of $152.9 million and $480.5 million of oil and natural gas properties which contained substantial CO₂ EOR potential and complemented our existing property base. We currently expect our future growth to continue through a combination of developmental drilling, exploitation projects, and acquisitions, complemented by a modest amount of exploration activities.

For the year ended December 31, 2009, we made capital expenditures for oil and natural gas properties of $150.9 million, including $77.8 million for developmental drilling and $18.3 million for acquisitions. The majority of our capital expenditures for developmental drilling in 2009 were allocated to our core areas of the Mid-Continent and Permian Basin. The wells we drill in these areas are primarily infill or single stepout wells, which are characterized as lower-risk. We have budgeted $268.0 million for capital expenditures for oil and natural gas properties in 2010.

Business Strengths

Consistent track record of reserve additions and production growth. From 2003 to 2009, we have grown proved reserves and production by a compounded annual growth rate of 19% and 20%, respectively. We have achieved this through a combination of drilling and acquisition success. A number of high impact wells that we expect will support our production throughout 2010 are currently being drilled and should be completed and on line during the first and second quarters of 2010. Six of these wells are located in the Texas Panhandle Atoka Wash and one is located in the Haley Area of Loving County, Texas. However, we cannot accurately predict the timing or level of future production.

Our reserve replacement ratio, which reflects our reserve additions from acquisitions, extensions and discoveries, and improved recoveries in a given period stated as a percentage of our production in the same period, has averaged 514% per year since 2002. We replaced approximately 243%, 200%, and 372% of our production in 2009, 2008, and 2007, respectively.

8

Disciplined approach to proved reserve acquisitions. We have a dedicated team that analyzes all of our acquisition opportunities. This team conducts due diligence with reserve engineering on a well-by-well basis to determine whether assets under consideration meet our acquisition criteria. We typically target properties where we can identify enhancements that we believe will increase production rates and extend the producing life of the well. The large number of acquisition opportunities we review allows us to be selective and focus on properties that we believe have the most potential for value enhancement. In 2009, 2008 and 2007, our capital expenditures for acquisitions of proved properties were $14.6 million, $39.2 million, and $41.7 million, respectively. These acquisition capital expenditures represented approximately 10%, 13%, and 18%, respectively, of our total capital expenditures and approximately 4%, 17%, and 13%, respectively, of our increase in reserves related to purchases of minerals in place, extensions and discoveries, and improved recoveries for those periods. We have budgeted $20.0 million, or 7% of our total capital expenditures, for acquisitions in 2010.

Property enhancement expertise. Our ability to enhance acquired properties allows us to increase their production rates and economic value. Our typical enhancements include the repair or replacement of casing and tubing, installation of plunger lifts and pumping units, installation of coiled tubing or siphon strings, compression, workovers and recompletion to new zones. Minimal amounts of investment have significantly enhanced the value of many of our properties.

Inventory of drilling locations. Based on SEC pricing for the year ended December 31, 2009 of $61.18 per Bbl of oil and $3.87 per Mcf of natural gas, we had an inventory of 1,333 proved undeveloped drilling locations.

	Identified proved undeveloped drilling locations
Mid-Continent	1,061
Permian Basin	47
Gulf Coast	7
Ark-La-Tex	3
North Texas	128
Rocky Mountains	87
Total	1,333

Identified drilling locations represent total gross drilling locations identified by our management as an estimation of our multi-year drilling activities on existing acreage. As more fully discussed in the section “Risk factors,” our actual drilling activities may change depending on the availability of financing and capital, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, drilling results and other factors. We have experienced a high historical drilling success rate of approximately 99% on a weighted average basis during 2009, 2008 and 2007. For the year ended December 31, 2009, we spent $82.8 million of developmental drilling and exploration costs to drill 51 (48 net) operated wells and to participate in 121 (4 net) wells operated by others, representing 80% of our additions to reserves. For 2010, we have budgeted $173.0 for developmental and exploratory drilling.

9

Enhanced oil recovery expertise and asset. Beginning in 2000, we expanded our operations to include CO₂ EOR. CO₂ EOR involves the injection of CO₂, which mixes with the remaining oil in place in the producing reservoir, followed by the injection of water in cycles to drive the hydrocarbons to producing wells. We have a staff of eight engineers that have substantial expertise in CO₂ EOR operations, and we also have specific software for modeling these projects. We own a 29% interest in and operate a large CO₂ EOR unit in southern Oklahoma and have installed and operate a second CO₂ EOR unit with a 54% interest in the Oklahoma and Texas panhandles. We began CO₂ injection in our Perryton Unit in December 2006 and in our Booker Area Units in September 2009, and plan to initiate CO₂ injection in our NW Camrick Unit, our North Farnsworth Unit, and our NW Velma Hoxbar Unit in 2010. At December 31, 2009, our proved reserves included nine units where CO₂ EOR recovery methods are used, representing approximately 7% of our total proved reserves. In addition, we operate a polymer EOR flood in the North Burbank unit. This unit is in the early phases of a polymer EOR flood which was proven up by Phillips Petroleum Company through a pilot program in the early 1980’s before being shut down due to low prevailing oil prices at that time. We initiated polymer injection in this unit in a pilot program in December 2007. In the pilot area, we are seeing production response as production has increased from 90 Bbls of oil per day to 160 Bbls of oil per day. We plan to expand this polymer EOR program and introduce CO₂ injection into this unit after acquiring a source of CO ₂ in this area.

Experienced management team. Mark A. Fischer, our Chief Executive Officer and founder, has operated in the oil and natural gas industry for 38 years after starting his career at Exxon Mobil Corporation as a petroleum engineer. Joe Evans, our Chief Financial Officer, has over 30 years of experience in the oil and natural gas industry. Individuals in our 23-person management team have an average of nearly 30 years of experience in the oil and natural gas industry.

Business Strategy

We seek to grow reserves and production profitably through a balanced mix of developmental drilling, enhancements, acquisitions, EOR projects, and a modest number of exploration projects. Further, we strive to control our operations and costs and to minimize commodity price risk through a conservative financial hedging program. The principal elements of our strategy include:

Continue lower-risk developmental drilling program. During the year ended December 31, 2009, we spent approximately $77.8 million on development drilling, which represents 52% of our capital expenditures for such period. A majority of these drilling wells are in our core areas of the Mid-Continent and the Permian Basin. The wells we drill in these areas are generally infill or single stepout wells, which are characterized as lower risk. We currently plan to spend a total of approximately $163.0 million, or approximately 61% of our capital expenditures, on developmental drilling in 2010.

Acquire long-lived properties with enhancement opportunities. We continually evaluate acquisition opportunities and expect that they will continue to play a significant role in increasing our reserve base and future drilling inventory. We have traditionally targeted smaller asset acquisitions which allow us to absorb, enhance and exploit the properties without taking on excessive integration risk. During the year ended December 31, 2009, we made approximately $14.6 million of proved reserve acquisitions, or 10% of our total capital expenditures. We have budgeted $20.0 million, or 7% of our total capital expenditures, for acquisitions in 2010.

Apply technical expertise to enhance mature properties. Once we acquire a property and become the operator, we seek to maximize production through enhancement techniques and the reduction of operating costs. We have built our business around a strong engineering team with expertise in the areas where we operate. We believe retaining our own field staff and operating offices close to our properties allows us to maintain tight control over our operations. We have 21 field offices in Oklahoma, Texas and Kansas. Our personnel possess a high degree of expertise in working with lower pressure or depleted reservoirs and, as a result, are able to identify enhancement opportunities with low capital requirements such as installing a plunger lift, pumping unit or compressor, as well as returning inactive wells to production by repairing various mechanical problems. As of December 31, 2009, our reserve report included 840 shut-in and behind-pipe enhancement projects requiring total estimated capital expenditures of $69.6 million over the life of the reserves.

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Expand CO₂ EOR activities. As of December 31, 2009, we have accumulated interests in 72 properties in Oklahoma, Kansas, New Mexico and Texas that meet our criteria for CO₂ EOR operations, and are expanding our CO₂ pipeline system to initiate CO₂ injection in certain of these properties. We began CO ₂ injection in our Perryton Unit in December 2006 and in our Booker Area Units in September 2009, and plan to initiate CO₂ injection in our NW Camrick Unit, our North Farnsworth Unit, and our NW Velma Hoxbar Unit in 2010. To support our existing CO₂ EOR projects, we currently inject approximately 50 MMcf per day of purchased and recycled CO₂ and have developed a CO ₂ pipeline infrastructure system with ownership interests in over 374 miles of CO₂ pipelines. This consists of a 100% ownership interest in our 86-mile Borger CO₂ pipeline, a 29% interest in the 120-mile Enid to Purdy CO₂ pipeline, a 58% interest in the 23-mile Purdy to Velma CO₂ pipeline, which we operate, and a 100% interest in the 126-mile Booker CO2 pipeline. Most of our injected CO₂ is anthropogenic (man-made) CO₂ which we capture from three different sources. We recently installed compression and purification facilities, on which we have applied for a patent, that are currently capturing approximately eight to ten MMcf per day of CO₂ from the Arkalon ethanol plant in Liberal, Kansas. We began injecting CO₂ captured from this plant into the Booker Area fields in the third quarter of 2009. After the completion of additional work, we expect these facilities to capture approximately 15 to 19 MMcf per day of CO₂.

Pursue modest exploration program. During the year ended December 31, 2009, we spent $5.0 million on exploration activities. We have budgeted $10.0 million for exploration activities in 2010.

Control operations and costs. We seek to serve as operator of the wells in which we own a significant interest. As operator, we are better positioned to control the (1) timing and plans for future enhancement and exploitation efforts; (2) costs of enhancing, drilling, completing and producing the wells; and (3) marketing negotiations for our oil and natural gas production to maximize both volumes and wellhead price. As of December 31, 2009, we operated properties comprising approximately 86% of our proved reserves.

Hedge production to stabilize cash flow. Our long-lived reserves provide us with relatively predictable production. To protect cash flows that we use for on-going operations, for capital investments, and to lock in returns on acquisitions, we enter into commodity price swaps, costless collars, and basis protection swaps. We consider all these derivative instruments to be economic hedges of our proved developed production, regardless of whether hedge accounting is applied. As of December 31, 2009, we had commodity price swaps and costless collars in place for approximately 77% and 73%, respectively of our most recent internally estimated proved developed oil and natural gas production for 2010 through 2011. For the year ended December 31, 2009, we received net derivative settlements of $157.9 million. While our derivative activities protect our cash flows during periods of commodity price declines, we paid net derivative settlements of $51.6 million and $20.5 million for the years ended December 31, 2008 and 2007, respectively, through a period of increasing commodity prices.

During the fourth quarter of 2008, we monetized oil and natural gas swaps and collars with original settlement dates from January through June of 2009 for proceeds of $32.6 million. During the first quarter of 2009, we monetized additional natural gas swaps with original settlement dates from May through October of 2009 for proceeds of $9.5 million. During the second quarter of 2009, we monetized additional oil swaps and collars with original settlement dates from January 2012 through December 2013 for proceeds of $102.4 million. The proceeds from these monetizations are included in the net settlements described above.

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Properties

The following table presents our proved reserves and PV-10 value as of December 31, 2009 and average daily production for the year ended December 31, 2009, by our areas of operation. Reserves as of December 31, 2009 were estimated using SEC pricing, which was $61.18 per Bbl of oil and $3.87 per Mcf of gas.

	Proved reserves as of December 31, 2009							Average daily production (MBoe per day) Year ended December 31, 2009
	Oil (MBbl)	Natural gas (MMcf)	Total (MBoe)	Percent of total MBoe		PV-10 value ($MM)
Mid-Continent	76,837	208,590	111,602	78.7	%	$	1,045.0	13.7
Permian Basin	6,687	56,898	16,170	11.4	%		148.8	4.4
Gulf Coast	1,785	30,300	6,835	4.8	%		57.3	1.3
Ark-La-Tex	1,002	10,140	2,692	1.9	%		22.4	0.7
North Texas	1,844	3,366	2,405	1.7	%		30.9	0.4
Rocky Mountains	1,314	5,136	2,170	1.5	%		19.1	0.4
Total	89,469	314,430	141,874	100.0	%	$	1,323.5	20.9

Our properties have relatively long reserve lives and highly predictable production profiles. In general, these properties have extensive production histories and production enhancement opportunities. While our portfolio of oil and natural gas properties is geographically diversified, 87% of our 2009 production was concentrated in our two core areas, which allows for substantial economies of scale in production and cost effective application of reservoir management techniques. As of December 31, 2009, we owned interests in 8,174 gross (2,807 net) producing wells and we operated wells representing approximately 86% of our proved reserves. The high proportion of reserves in our operated properties allows us to exercise more control over expenses, capital allocations and the timing of development and exploitation activities in our fields.

Mid-Continent

The Mid-Continent Area is the larger of our two core areas and, as of December 31, 2009, accounted for 79% of our proved reserves and 79% of our PV-10 value. We own a working interest in 5,392 producing wells in the Mid-Continent Area, of which we operate 2,100. The Mid-Continent Area has nine of our top ten largest plays in terms of PV-10 value. During the year ended December 31, 2009, our net average daily production in the Mid-Continent Area was approximately 13.7 MBoe per day, or 66% of our total net average daily production. This area is characterized by stable, long-life, shallow decline reserves. We produce and drill in most of the basins in the region and have significant holdings and activity in the areas described below.

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North Burbank Unit—Osage County, Oklahoma. The North Burbank Unit is our largest property. The unit was developed in the early 1920’s, is 23,080 acres in size and has cumulative production of approximately 317.1 MMBbls of oil (primary and secondary). The North Burbank Unit accounted for 27.2 MMBoe of our proved reserves and $187.1 million of our PV-10 value as of December 31, 2009, and 566 (492 net) MBoe of our production for the year ended December 31, 2009. The producing zones are the Red Fork and Bartlesville and occur at a depth of 3,000 feet. We own a 99% working interest in and are also the operator of this unit. As of December 31, 2009, the field was producing approximately 1,531 (1,330 net) Bbls of oil per day from 285 producing wells. There are also 201 active service wells and 469 temporarily abandoned wells at December 31, 2009. Upside potential exists in restoring a majority of the temporarily abandoned wells to production and in reinstituting the polymer EOR program that Phillips Petroleum Company instituted in the field from 1980 to 1986 as a project on 1,440 acres called “Block A.” Production increased from 500 Bbls of oil per day to 1,200 Bbls of oil per day in this project area as a result of the polymer injection program. The project was shut down in 1986 due to low oil prices. We reinstituted a polymer flood on 485 acres adjacent to Block A on a 19-well pattern in December 2007. Production has increased in this pilot area from approximately 90 Bbls of oil per day to approximately 160 Bbls of oil per day as of December 31, 2009. Since taking over the field on November 1, 2006, we have returned 99 temporarily abandoned wells to production with initial rates of production as high as 29 Bbls of oil per day. We believe that this field also may have upside with the injection of CO₂.

Osage-Creek Area—Osage and Creek Counties, Oklahoma. The Osage-Creek area accounted for 16.2 MMBoe of our proved reserves and $228.1 million of our PV-10 value at December 31, 2009, and 846 (625 net) MBoe of our production for the year ended December 31, 2009. The majority of our recent activity has been in Osage County, with the largest portion of that being in our South Burbank Unit.

The South Burbank Unit is the southward extension of the “Stanley Stringer” sand development and lies to the south of the North Burbank Unit and covers 2,720 acres. It was discovered in 1934 and unitized in 1935. The South Burbank Unit has produced 56.9 MMBbls of oil from the Burbank Sand from both primary and secondary recovery efforts. The Burbank Sand occurs at a depth of 2,850 feet. Recently, we have been drilling infill and stepout locations in the unit area for both the Mississippi Chat, which occurs some 50 feet below the Burbank Sand, and to the Burbank Sand. It is currently estimated that the Mississippi Chat may be productive under a significant portion of the southern half of the South Burbank Unit. Seventeen wells have been drilled in the South Burbank Unit in 2009. Ten wells have been completed in the Burbank Sand with initial potentials ranging between 5 and 150 Bbls of oil per day. Seven wells are completed and produce from the Mississippi Chat with initial potentials as high as 210 Bbls of oil per day and 100 Mcf of gas per day. Any well drilled inside the South Burbank Unit is being developed with a pattern and spacing plan that will maximize any future EOR efforts.

Numerous other properties throughout Osage and Creek Counties are held by production and hold significant upside development potential. Recent new drilling activity outside of the South Burbank Unit has focused on the Mississippi Chat and Burbank reservoirs. We currently have a Company-owned drilling rig working full time in this area. Many of our Osage County units in which we have a large working interest also hold promise for future EOR efforts.

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Camrick Area—Beaver and Texas Counties, Oklahoma and Ochiltree County, Texas. The Camrick area accounted for 7.8 MMBoe of our proved reserves and $89.7 million of our PV-10 value at December 31, 2009. This area consists of three unitized fields, the Camrick Unit, which covers 9,168 acres, the NW Camrick Unit, which covers 2,980 acres and the Perryton Unit, which covers 2,508 acres. We currently operate these three units with an average working interest of 54%. Production in the Camrick area is from the Morrow reservoir that occurs between the depths of 6,900 and 7,500 feet. The three units have produced approximately 16.6 MMBbls of primary reserves and approximately 13.6 MMBbls of secondary reserves. There were 55 active producing wells in this area that produced 507 (249 net) MBbls during the year ended December 31, 2009. Currently, CO₂ injection operations are continuing in the Phase I, II and III areas of the Camrick Unit and the Perryton Unit. CO₂ injection has improved the gross production in the Camrick Area from approximately 115 Bbls of oil per day in 2001 from 11 wells to approximately 1,443 (710 net) Bbls of oil per day from 55 producing wells as of December 31, 2009. We plan to continue expansion of CO₂ injection operations across all of the units.

Southwest Antioch Gibson Sand Unit (SWAGSU)—Garvin County, Oklahoma. SWAGSU accounted for 5.5 MMBoe of our proved reserves and $47.4 million of our PV-10 value at December 31, 2009, and 423 (368 net) MBoe of our production for the year ended December 31, 2009. SWAGSU encompasses approximately 9,520 acres with production from the Gibson Sand, which occurs between the depths of 6,500 and 7,200 feet. We currently operate this unit with an average working interest of 99%. The field has produced approximately 40.3 MMBbls of oil and 262.5 Bcf of natural gas since its discovery in 1946. The field was unitized in 1948 and began unitized production as a pressure maintenance operation, utilizing selective production (based on gas/oil ratios) and gas injection. Water injection began in 1952. Gas injection ceased in 1960 without significant blowdown of the injected gas. Field shutdown and plugging activities began in 1965, and all water injection ceased in 1970. A program is currently underway to re-enter abandoned wells and drill new wells to produce the injected gas. We have 37 active producing wells in this unit as of December 31, 2009. We drilled one well in this area in 2009.

Sycamore Unit—Carter County, Oklahoma. The Sycamore Unit, which is 2,120 acres, was discovered in 1950 and unitized in 1973. A three stage development of the Sycamore Unit began in 1975 and was completed in 1992. This unit accounted for 2.8 MMBoe of our proved reserves and $40.9 million of our PV-10 value at December 31, 2009, and 243 (158 net) MBoe of our production for the year ended December 31, 2009. We operate this unit with a working interest of approximately 76%. Producing zones include the Deese and Sycamore, which occur at depths between approximately 2,500 and 4,900 feet. Cumulative production is 11.0 MMBbls of oil and, as of December 31, 2009, the unit has 107 producing wells and 44 active service wells. The unit is currently producing approximately 560 (363 net) Bbls of oil per day.

Cleveland Sand Area—Ellis, Custer, and Dewey Counties, Oklahoma and Lipscomb County, Texas. The Cleveland Sand Area accounted for 4.9 MMBoe of our proved reserves and $38.7 million of our PV-10 value as of December 31, 2009, and 439 (242 net) MBoe of our production for the year ended December 31, 2009. This area includes the West Shattuck Cleveland Sand Play and the Aledo Bray Cleveland Sand Play.

We own approximately 6,864 net acres in the West Shattuck Cleveland Sand Play, which is located in Ellis County, Oklahoma and Lipscomb County, Texas. The Cleveland Sand occurs at depths between 7,900 and 8,300 feet and is considered a tight gas sand reservoir. As of December 31, 2009, we own interests in 27 Cleveland Sand producing wells. We participated in the drilling of one well in 2009. We employed horizontal drilling technology in most of our drilled wells in this area.

We own approximately 2,135 net acres in the Aledo Bray Cleveland Sand Play, which is located in Custer and Dewey Counties, Oklahoma. The Cleveland Sand occurs at 9,700 feet and is considered a tight gas sand reservoir. As of December 31, 2009, we own interests in two Aledo Bray vertical producing wells. We drilled one horizontal well in this play during 2009.

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Granite Wash and Atoka Wash Areas—Washita County, Oklahoma and Wheeler County, Texas. The Granite Wash and Atoka Wash Areas accounted for 2.9 MMBoe of our proved reserves and $27.4 million of our PV-10 value as of December 31, 2009, and 781 (238 net) MBoe of our production for the year ended December 31, 2009. We have ongoing drilling activity in both these play areas.

The objective target of the Colony Granite Wash Horizontal Play, which is in Washita County, Oklahoma, is the Des Moinesian Granite Wash zones at an average depth of approximately 12,500 feet. To date, this play has encompassed an area approximately three townships in size. The Granite Wash is a quartz rich alluvial wash containing high concentrations of feldspar that results in reducing permeability and therefore reducing ultimate recoveries. Conventional vertical well bores in this area have recovered on average approximately 1.5 Bcfe. The technological advances of horizontal drilling allow maximum exposure of this tight gas filled reservoir to the well bore (most horizontal wells are drilled up to 4,800 feet horizontally in the Granite Wash), resulting in substantially improved recoveries that are currently estimated to be up to three to four times the recoveries of the typical vertical well in this play. We drilled and/or participated in the drilling of seven Colony Granite Wash wells in 2009.

The objective target of the Granite Wash and Atoka Wash Play, which is in Wheeler County, Texas, is the Des Moinesian Granite Wash and Atoka Wash zones at average depths ranging from approximately 12,600 feet to 14,500 feet. To date, this play has encompassed an area approximately two townships in size. The Granite Wash is a quartz rich alluvial wash containing high concentrations of feldspar that results in reducing permeability and therefore reducing ultimate recoveries. Conventional vertical well bores in this area have recovered on average approximately 1.5 Bcfe. The early Atoka Granite Wash is typically a carbonate wash sourced from the carbonates of the Wichita/Amarillo Uplift. The later Atoka Wash as found in the Britt area is an Arkosic wash with quartz with potassium and sodium feldspars. Other minerals present are calcite, dolomite, illite, and chlorite. The Britt Atoka Wash is producing a dryer gas with less condensate then the younger Des Moines Wash. The technological advances of horizontal drilling allow maximum exposure of this tight gas filled reservoir to the well bore (most horizontal wells utilize a lateral drilled up to 4,800 feet horizontally in the Granite Wash and Atoka Wash), resulting in substantially improved recoveries that are currently estimated to be up to three to four times the recoveries of the typical vertical well in this play. We participated in the drilling of six Atoka Wash wells in 2009. All of these wells were completed during the first quarter of 2010 and had initial producing rates of between 15 and 23 MMcf of gas per day.

Anadarko Basin Woodford Shale Play-Western Oklahoma. As of December 31, 2009, we have a significant acreage position in the emerging Woodford Shale Resource Play of western Oklahoma. We own and control approximately 68,780 gross acres and 22,270 net acres, which primarily are held by production from other formations. The Woodford Shale beneath our acreage ranges in thickness from approximately 80 to 280 feet thick at depths from 9,500 feet to 16,000 feet. The horizontal development of this non-conventional resource play began in 2007 in Canadian County and has expanded to include the nearby counties of Blaine, Grady and Caddo with approximately 100 Woodford targeted wells drilled to date. Natural gas in place is estimated to be between 120 to 160 Bcf per section with initial development well density to be four wells per section. The average recovery is expected to be four to six Bcf per well at an average cost of seven to nine million dollars. We participated in the drilling of two wells in this play during 2009, and an additional well in which we own a working interest was completed in the first quarter of 2010. These wells have reported initial daily production rates in the range of one to seven MMcf of natural gas per day per well.

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Velma Sims Unit CO₂ Flood—Stephens County, Oklahoma. The EVWB Sims Sand Unit accounted for 1.9 MMBoe of our proved reserves and $16.0 million of our PV-10 value as of December 31, 2009, and 342 (88 net) MBoe of our production for the year ended December 31, 2009. This unit, which covers approximately 1,300 acres, was discovered in 1949 and unitized in 1962. We currently operate this unit with an average working interest of 29%. Hydrocarbon gas injection into the Sims C2 Sand was initiated in the top of the structure in 1962. Waterflood operations began in 1972. Hydrocarbon gas injection ended around 1977 and a miscible CO ₂ injection program was initiated in 1982. This miscible CO₂ injection was first begun in the updip portion of the reservoir and in 1990 expanded into the mid-section area of the Sims C2 reservoir. In 1996, miscible CO₂ injection began in the downdip section of the Sims C2. As of December 31, 2009, we had 43 active producing wells in this unit.

Fox Deese Springer Unit—Carter County, Oklahoma. The Fox Deese Springer Unit, which is 2,335 acres, was discovered in 1915 and unitized in 1977. This unit accounted for 4.7 MMBoe of our proved reserves and $39.8 million of our PV-10 value at December 31, 2009, and 138 (94 net) MBoe of our production for the year ended December 31, 2009. We operate this unit with a working interest of 82%. Producing zones include the Deese, Sims, and Morris, which occur at depths between 3,300 and 5,500 feet. Cumulative production is 12.6 MMBbls of oil and, as of December 31, 2009, the unit has 62 producing wells and 48 active service wells. The unit is currently producing approximately 330 (224 net) Bbls of oil per day.

Sivells Bend Unit—Cooke County, Texas. The Sivells Bend Unit is 3,863 acres in size, produces primarily from the Strawn, which occurs at depths between 6,200 and 7,000 feet, and has recovered 39.4 MMBbls of oil to date. This unit accounted for 2.6 MMBoe of our proved reserves and $35.9 million of our PV-10 value at December 31, 2009, and 83 (48 net) MBoe of our production for the year ended December 31, 2009. There are currently 26 producing wells and 14 active service wells, with production of approximately 218 (126 net) Bbls of oil per day. We operate the field with a working interest of 65%. Upside potential exists in increased density drilling from 80 acres to 40 acres in the Strawn. The only 40-acre increased density well drilled in the unit has recovered over 390 MBbls of oil. Additional potential exists in deeper Ellenburger, as an Ellenburger well tested approximately 193 Bbls of oil per day in 1964 in the adjacent East Sivells Bend Unit, and one well in our unit tested 104 Bbls of oil per day for a short time. 3-D seismic will be required to better define the fault blocks for an Ellenburger test. We own approximately 1,000 acres of fee minerals in this Sivells Bend Unit and own approximately half of the rights below the Strawn, which includes the Ellenburger.

CO₂ EOR—Various counties, Oklahoma, Kansas, New Mexico and Texas.  As of December 31, 2009, we have accumulated interests in 72 properties in Oklahoma, Kansas, New Mexico and Texas that meet our criteria for CO₂ EOR operations. These CO₂ EOR projects accounted for 6.2 MMBoe of our proved reserves and $80.2 million of our PV-10 value as of December 31, 2009, and 1,512 (449 net) MBoe of our production for the year ended December 31, 2009. We own a 100% interest in our 86-mile Borger CO₂ pipeline, a 29% interest in the 120-mile Enid to Purdy CO ₂ pipeline, a 58% interest in the 23-mile Purdy to Velma CO ₂ pipeline, which we operate, and a 100% interest in approximately 126 miles of pipeline that includes a CO₂ pipeline located between Liberal, Kansas and Booker, Texas as well as additional pipeline extensions in the SW Kansas and Texas Panhandle areas. We initiated CO₂ injection in three Booker units in 2009, and plan to expand CO₂ injections into our NW Camrick Unit, our North Farnsworth Unit, and our NW Velma Hoxbar Unit in 2010. As of December 31, 2009, we had in place transportation and supply agreements to provide the necessary CO₂ for these projects. We have installed compression and purification facilities that are currently capturing approximately eight to ten MMcf per day of CO₂ from the Arkalon ethanol plant in Liberal, Kansas. We initiated injection of CO₂ captured from this facility into the Booker area fields in the third quarter of 2009. After the completion of additional work, we expect these facilities to capture approximately 15 to 19 MMcf per day of CO₂.

Arrangements to secure additional sources of CO₂ for potential future projects are currently in process. The U.S. Department of Energy-Office of Fossil Energy provided a report in February 2006 estimating that significant oil reserves could be technically recovered in the State of Oklahoma through CO₂ EOR processes. With our infrastructure, we believe that we will be well positioned to participate in the exploitation of these reserves.

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Permian Basin

The Permian Basin Area is the second of our two core areas and, as of December 31, 2009, accounted for 11% of our proved reserves and 11% of our PV-10 value. We own a working interest in 1,693 producing wells in the Permian Basin, of which we operate 318. The Permian Basin Area has one of our top ten plays in terms of PV-10 value. During the year ended December 31, 2009, our net average daily production in the Permian Basin Area was approximately 4.4 MBoe per day, or 21% of our total net average daily production. Similar to the Mid-Continent Area, the Permian Basin Area is characterized by stable, long-life, shallow decline reserves.

Tunstill Field Play—Loving and Reeves Counties, Texas. Our Tunstill Field Play covers approximately 20,440 acres. We operate 86 producing wells in this play with an average working interest of 99%, and own a working interest in 120 producing wells operated by others. The Tunstill Field Play represented 2.7 MMBoe of our proved reserves and $33.6 million of our PV-10 value at December 31, 2009, and 252 (179 net) MBoe of our production for the year ended December 31, 2009. Primary objectives in this play are the Bell Canyon Sands that occur at depths from 3,200 to 4,200 feet and the Cherry Canyon Sands that occur at depths from 4,200 to 5,400 feet. Older wells produce from the shallower Bell Canyon Sands including the Ramsey and Olds, while more recent wells have established production from the deeper Cherry Canyon Sands as well as the shallower sands. We drilled three wells in this play during the year ended December 31, 2009.

Haley Area Play—Loving County, Texas. The Haley Area—Bone Springs, Strawn, Atoka, and Morrow play encompasses 3,840 gross acres. We own interests in and operate ten producing wells in this play. The Haley Area accounted for 4.7 MMBoe of our proved reserves and $27.7 million of our PV-10 value at December 31, 2009, and 1,163 (805 net) MBoe of our production for the year ended December 31, 2009. Production has been established from four main intervals: (1) the Bone Springs at a depth of approximately 9,800 to 11,500 feet; (2) the Strawn at a depth of approximately 15,000 feet; (3) the Atoka at a depth of approximately 15,300 feet; and (4) the Morrow at a depth of approximately 17,500 feet. Recent activity in the area, on all four sides of our acreage, has established significant producing wells from the Strawn/Atoka/Morrow commingled interval with some initial potentials of 3 to 5 MBoe per day. The Bowdle 47 No. 2 began selling natural gas in late November 2008, and is currently producing at approximately 12.0 (8.7 net) MMcf per day. We are currently drilling an offset to the Bowdle 47 No. 2 well, the Bowdle 47 No. 4, which is expected to be completed in the second quarter of 2010.

Gulf Coast

The Gulf Coast Area is the most active of our four growth areas and accounted for 5% of our proved reserves and 4% of our PV-10 value as of December 31, 2009, and 6% of our production for the year ended December 31, 2009. We own an interest in 200 wells in the Gulf Coast Area, of which we operate 128. Unlike our core areas, the Gulf Coast Area is characterized by shorter-life and high initial potential production. We believe a balance of this type of production complements our long-life reserves and adds a dimension for increasing our near-term cash flow.

Mustang Island & Mesquite Bay—Aransas and Nueces Counties, TX. We own interests in approximately 1,700 net producing acres and 10,650 net non-producing acres. Multiple producing sand intervals are found from depths of 6,500 feet to 11,500 feet. We operate seven active producing wells in this area. As of December 31, 2009, this area accounted for 1.3 MMBoe of our proved reserves and $14.2 million of our PV-10 value. We recorded a 58-square mile proprietary 3-D seismic survey over parts of this area where we have entered into an area of mutual interest with a 50% ownership in an attempt to find bypassed reserves or other potential reservoirs. We drilled one Mustang Island well in 2009.

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Ark-La-Tex

The Ark-La-Tex Area accounted for 2% of our proved reserves and 2% of our PV-10 value as of December 31, 2009, and 3% of our production for the year ended December 31, 2009. We own an interest in 120 wells in the Ark-La-Tex Area, of which we operate 53. These reserves are characterized by shorter life and higher initial potential. We participated in the drilling of one Ark-La-Tex well in 2009.

North Texas

The North Texas Area accounted for 2% of our proved reserves and 2% of our PV-10 value as of December 31, 2009, and 2% of our production for the year ended December 31, 2009. We own an interest in 588 wells in the North Texas Area, of which we operate 107. We participated in the drilling of 81 North Texas wells in 2009.

Rocky Mountains

The Rocky Mountains Area accounted for 1% of our proved reserves and 2% of our PV-10 value as of December 31, 2009, and 2% of our production for the year ended December 31, 2009. We own an interest in 181 wells in the Rocky Mountains Area, of which we operate 39. We participated in the drilling of five Rocky Mountains wells in 2009.

Oil and Natural Gas Reserves

Proved reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain. Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined, and exclude escalations based upon future conditions.

Our policies regarding internal controls over the recording of reserves are structured to objectively estimate our oil and natural gas reserve quantities and values in compliance with SEC regulations. Users of this information should be aware that the process of estimating quantities of crude oil and natural gas reserves is very complex, requiring significant subjective decisions in the evaluation of all available geological, engineering and economic data for each reservoir. The data for a given reservoir may also change substantially over time as a result of numerous factors, including additional development activity, evolving production history and continual reassessment of the viability of production under varying economic conditions. Consequently, material revisions to existing reserve estimates occur from time to time. Responsibility for preparation of our reserve estimates is delegated to our reservoir engineering group, which is led by our Senior Vice President of Reservoir Engineering and Acquisitions who is a registered Professional Engineer with 37 years of diversified management and operational and technical engineering experience.

Technical reviews are performed throughout the year by our geologic and engineering staff who evaluate pertinent geological and engineering data. This data, in conjunction with economic data and ownership information, is used in making a determination of proved reserve quantities. We have internal auditing guidelines and controls in place to monitor the reservoir data and reporting parameters used in preparing the year-end reserves. Technologies and economic data used include updated production data, well performance, formation logs, geological maps, reservoir pressure tests and wellbore mechanical integrity information.

This data is then provided to the independent petroleum engineering firms of Cawley, Gillespie & Associates, Inc. and Ryder Scott Company, L.P. who prepare reserve estimates for the majority of our properties using their own engineering assumptions and the economic data which we provide. The person responsible for overseeing the preparation of our reserve estimates at Cawley, Gillespie & Associates, Inc. is a registered Professional Engineer with 26 years of petroleum consulting experience. The person responsible for overseeing the preparation of our reserve estimates at Ryder Scott Company, L.P. is a registered Professional Engineer with over 27 years of reservoir engineering experience.

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Our reserves are reviewed by senior management. Senior management, which includes the President and Chief Executive Officer, the Senior Vice President of Reservoir Engineering and Acquisitions and the Chief Financial Officer, is responsible for reviewing and verifying that the estimate of proved reserves is reasonable, complete, and accurate. Members of senior management may also meet with the key representative from Cawley, Gillespie & Associates, Inc. and Ryder Scott Company, L.P. to discuss their process and findings. Final approval of the reserves is required by our Senior Vice President of Reservoir Engineering and Acquisitions and our President and Chief Executive Officer.

The table below summarizes our net proved oil and natural gas reserves and PV-10 values at December 31, 2009. Information in the table is derived from reserve reports of estimated proved reserves prepared by Cawley, Gillespie & Associates, Inc. (59% of PV-10 value) and by Ryder Scott Company, L.P. (23% of PV-10 value). Copies of the summary reserve reports prepared by these independent reserve engineers are attached as exhibits to this annual report. Our internal engineering staff has prepared a report of estimated proved reserves on the remaining smaller value properties (18% of PV-10 value) at December 31, 2009. We set forth our definition of PV-10 value (a non-GAAP measure) and a reconciliation of the standardized measure of discounted future net cash flows to PV-10 value on page 24.

	Net proved reserves as of December 31, 2009
	Oil (MBbl)	Natural gas (MMcf)	Total (MBoe)	PV-10 value (In thousands)
Developed—producing	40,793	183,150	71,318	$	813,407
Developed—non-producing	15,068	44,856	22,544		180,239
Undeveloped	33,608	86,424	48,012		329,895
Total proved	89,469	314,430	141,874	$	1,323,541

Our reserve estimates as of December 31, 2009 were prepared using new guidelines set forth in the SEC’s Modernization of Oil and Gas Reporting. The following changes impacted our reserves:

• Commodity prices used to estimate proved reserves were the average price based upon the first day of the month for the twelve months ended December 31, 2009, or $61.18 per Bbl of oil and $3.87 per Mcf of natural gas. Under the previous method, commodity prices used to calculate estimated proved reserves at December 31, 2009 would have been the year-end price of $79.36 per Bbl of oil and $5.79 per Mcf of natural gas. We estimate that the lower commodity prices used decreased estimated proved reserves and PV-10 value by approximately 15.9 MMBoe and $881.2 million, respectively.

• As a result of the expanded definition of estimated proved undeveloped reserves that can be recorded, we added proved undeveloped reserves and PV-10 value of approximately 0.9 MMBoe and $10.3 million, respectively, primarily related to horizontal wells.

• The new guidelines limit the recording of estimated proved undeveloped reserves to those reserves in undrilled locations that are scheduled to be developed within five years, unless specific circumstances justify a longer time. As a result of implementing this change in the guidelines, our proved undeveloped reserves and PV-10 value decreased by approximately 3.8 MMBoe and $38.5 million, respectively.

The following table summarizes our estimated net proved oil and natural gas reserves and PV-10 values at December 31, 2009, assuming they had been prepared under the old guidelines:

	Net proved reserves as of December 31, 2009 based on prior methodology
	Oil (MBbl)	Natural gas (MMcf)	Total (MBoe)	PV-10 value (In thousands)
Developed—producing	44,169	206,376	78,565	$	1,281,588
Developed—non-producing	15,345	49,266	23,556		278,269
Undeveloped	35,934	135,774	58,563		673,040
Total proved	95,448	391,416	160,684	$	2,232,897

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The following table shows material changes in proved undeveloped reserves that occurred during the year ended December 31, 2009.

Proved undeveloped reserves (MBoe)	For the year ended December 31, 2009
Proved undeveloped reserves as of January 1, 2009	29,073
Undeveloped reserves transferred to developed(1)	(881	)
Extensions and discoveries	10,989
Revisions and other	8,831
Proved undeveloped reserves as of December 31, 2009(2)	48,012

(1) Approximately $17.8 million of capital expenditures during the year ended December 31, 2009 related to undeveloped reserves that were transferred to developed.

(2) Includes 4.0 MMBoe of reserves that have been reported for more than five years that relate specifically to our Camrick area CO₂ EOR projects. Development of these projects is ongoing.

The estimated reserve life as of December 31, 2009, 2008 and 2007 was 18.6, 16.0, and 24.3 years, respectively. The estimated reserve life was calculated by dividing total proved reserves by production volumes for the year indicated. The shorter reserve life in 2009 and 2008 was primarily a result of reduced proven reserves associated with lower SEC pricing.

The following table sets forth the estimated future net revenues from proved reserves, the PV-10 value, the standardized measure of discounted future net cash flows and the prices used in projecting those measures over the past three years.

(Dollars in thousands, except prices)	2009		2008		2007
Future net revenue	$	3,080,410	$	1,918,270	$	6,203,720
PV-10 value		1,323,541		932,692		2,671,982
Standardized measure of discounted future net cash flows		971,364		755,013		1,793,980
Oil price (per Bbl)	$	61.18	$	44.60	$	96.01
Natural gas price (per Mcf)	$	3.87	$	5.62	$	6.80

The following table sets forth information at December 31, 2009 relating to the producing wells in which we owned a working interest as of that date. We also hold royalty interests in units and acreage in addition to the wells in which we have a working interest. Wells are classified as oil or natural gas according to their predominant production stream. Gross wells is the total number of producing wells in which we have a working interest, and net wells is the sum of our working interest in all producing wells.

	Total wells
	Gross	Net
Crude oil	5,870	2,058
Natural gas	2,304	749
Total	8,174	2,807

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The following table details our gross and net interest in producing wells in which we have a working interest and the number of wells we operated at December 31, 2009 by area.

	Total wells		Operated Wells
	Gross	Net
Mid-Continent	5,392	2,122	2,100
Permian Basin	1,693	361	318
Gulf Coast	200	117	128
Ark-La-Tex	120	48	53
North Texas	588	120	107
Rocky Mountains	181	39	39
Total	8,174	2,807	2,745

The following table details our gross and net interest in developed and undeveloped acreage at December 31, 2009 by area.

	Developed		Undeveloped
	Gross	Net	Gross	Net
Mid-Continent	903,160	398,598	56,096	45,309
Permian Basin	71,962	49,302	18,101	16,983
Gulf Coast	73,356	43,891	25,546	19,476
Ark-La-Tex	22,366	10,106	—	—
North Texas	26,073	18,343	181	17
Rocky Mountains	48,837	15,921	3,251	2,611
Total	1,145,754	536,161	103,175	84,396

The following table sets forth information with respect to wells drilled during the periods indicated. The information should not be considered indicative of future performance, nor should a correlation be assumed between the number of productive wells drilled, quantities of reserves found or economic value. Development wells are wells drilled within the proved area of an oil or natural gas reservoir to the depth of a stratigraphic horizon known to be productive. Exploratory wells are wells drilled to find a new field or to find a new reservoir in a field previously found to be productive of oil or natural gas in another reservoir. Productive wells are those that produce commercial quantities of hydrocarbons, exclusive of their capacity to produce at a reasonable rate of return.

	2009				2008				2007
	Gross		Net		Gross		Net		Gross		Net
Development wells
Productive	168.0		49.5		319.0		74.9		214.0		51.7
Dry	2.0		1.9		4.0		2.0		3.0		1.2
Exploratory wells
Productive	2.0		1.0		3.0		2.2		6.0		5.9
Dry	0.0		0.0		0.0		0.0		0.0		0.0
Total wells
Productive	170.0		50.5		322.0		77.1		220.0		57.6
Dry	2.0		1.9		4.0		2.0		3.0		1.2
Total	172.0		52.4		326.0		79.1		223.0		58.8
Percent productive	99	%	96	%	99	%	97	%	99	%	98	%

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The following table summarizes our estimates of net proved oil and natural gas reserves as of the dates indicated and the present value attributable to the reserves at such dates (using an average price for oil and natural gas based upon the first day of each month for the year ended December 31, 2009, and using prices in effect on December 31, 2008 and 2007), discounted at 10% per annum. Estimates of our net proved oil and natural gas reserves as of December 31, 2009 and 2008 were prepared by Cawley, Gillespie & Associates, Inc. (59% and 68% of PV-10 value, respectively), and Ryder Scott Company, L.P. (23% and 7% of PV-10 value, respectively). Estimates of our net proved oil and natural gas reserves as of December 31, 2007 were prepared by Cawley, Gillespie & Associates, Inc. (36% of PV-10 value), and Lee Keeling & Associates, Inc. (52% of PV-10 value). Our internal engineering staff has prepared a report of estimated proved reserves on our remaining smaller value properties (18%, 25%, and 12% of PV-10 value in 2009, 2008, and 2007, respectively).

	As of December 31,
Proved Reserves	2009			2008			2007
Oil (Mbbl)		89,469			51,283			99,104
Natural gas (MMcf)		314,430			372,366			392,269
Oil equivalent (MBoe)		141,874			113,344			164,482
Proved developed reserve percentage		66	%		74	%		65	%
PV-10 value (in thousands)	$	1,323,541		$	932,692		$	2,671,982
Estimated reserve life in years(1)		18.6			16.0			24.3
Cost incurred (in thousands):
Property acquisition costs
Proved properties(2)	$	14,552		$	39,201		$	41,724
Unproved properties		3,781			6,677			8,032
Total acquisition costs		18,333			45,878			49,756
Development costs(3)		127,640			251,690			165,177
Exploration costs		4,942			5,108			15,287
Total	$	150,915		$	302,676		$	230,220
Annual reserve replacement ratio(4)		243	%		200	%		372	%

(1) Calculated by dividing net proved reserves by net production volumes for the year indicated.

(2) Includes $15.6 million of amounts disbursed from escrow related to title defects and other purchase price allocation adjustments on the Calumet acquisition in 2007.

(3) Includes $3.6 million and $16.1 million of costs related to the construction of a compressor station and CO₂ pipeline in 2009 and 2008, respectively.

(4) Calculated by dividing the sum of reserve additions (from purchases of minerals in place, extensions and discoveries, and improved recoveries) by the production for the corresponding period. The values for these reserve additions are derived directly from the proved reserves table located in Note 16 of the notes to our consolidated financial statements. In calculating reserves replacement, we do not use unproved reserve quantities. Management uses the reserve replacement ratio as an indicator of our ability to replenish annual production volumes and grow reserves, thereby providing some information of the sources of future production. It should be noted that the reserve replacement ratio is a statistical indicator that has limitations. As an annual measure, the ratio is limited because it typically varies widely based on the extent and timing of new discoveries and property acquisitions. Its predictive and comparative value is also limited for the same reasons. The reserve replacement ratio is comprised of the following:

	Year ended December 31,
	2009				2008				2007
	Reserves replaced		Percent of total		Reserves replaced		Percent of total		Reserves replaced		Percent of total
Purchases of minerals in place	9	%	3.5	%	35	%	17.2	%	46	%	12.5	%
Extensions and discoveries	195	%	80.4	%	155	%	77.6	%	214	%	57.4	%
Improved recoveries	39	%	16.1	%	10	%	5.2	%	112	%	30.1	%
Total	243	%	100.0	%	200	%	100.0	%	372	%	100.0	%

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The following table sets forth certain information regarding our historical net production volumes, average prices realized and production costs associated with sales of oil and natural gas for the periods indicated.

	Year ended December 31,
	2009		2008		2007
Production:
Oil (MBbls)		3,874		3,773		3,356
Natural gas (MMcf)		22,584		19,795		20,504
Combined (MBoe)		7,638		7,072		6,773
Average daily production:
Oil (Bbls)		10,614		10,309		9,195
Natural gas (Mcf)		61,874		54,085		56,175
Combined (Boe)		20,926		19,323		18,558
Average prices (excluding derivative settlements):
Oil (per Bbl)	$	55.04	$	92.47	$	69.85
Natural gas (per Mcf)		3.51		7.72		6.41
Combined (per Boe)	$	38.28	$	70.95	$	54.03
Average costs per Boe:
Lease operating expenses	$	12.33	$	17.05	$	15.42
Production taxes		2.66		4.78		3.87
Depreciation, depletion, and amortization		13.62		14.24		12.61
General and administrative		3.11		3.16		3.22

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Non-GAAP Financial Measures and Reconciliations

The PV-10 value is derived from the standardized measure of discounted future net cash flows, which is the most directly comparable financial measure computed using generally accepted accounting principles (“GAAP”). PV-10 value is a computation of the standardized measure of discounted future net cash flows on a pre-tax basis. PV-10 value is equal to the standardized measure of discounted future net cash flows at December 31, 2009 before deducting future income taxes, discounted at 10%. We believe that the presentation of the PV-10 value is relevant and useful to investors because it presents the discounted future net cash flows attributable to our proved reserves prior to taking into account future corporate income taxes, and it is a useful measure of evaluating the relative monetary significance of our oil and natural gas properties. Further, investors may utilize the measure as a basis for comparison of the relative size and value of our reserves to other companies. We use this measure when assessing the potential return on investment related to our oil and natural gas properties. However, PV-10 value is not a substitute for the standardized measure of discounted future net cash flows. Our PV-10 value measure and the standardized measure of discounted future net cash flows do not purport to present the fair value of our oil and natural gas reserves.

The following table provides a reconciliation of the standardized measure of discounted future net cash flows to PV-10 value as of December 31, 2009 for our major areas of operation:

(dollars in millions)	PV-10 Value		Present value of future income tax discounted at 10%		Standardized measure of discounted future net  cash flow
Mid-Continent	$	1,045.0	$	256.1	$	788.9
Permian Basin		148.8		51.0		97.8
Gulf Coast		57.3		18.6		38.7
Ark-La-Tex		22.4		8.6		13.8
North Texas		30.9		10.7		20.2
Rocky Mountains		19.1		7.1		12.0
Total	$	1,323.5	$	352.1	$	971.4

We define adjusted EBITDA as net income (loss), adjusted to exclude (1) interest and other financing costs, net of capitalized interest, (2) income taxes, (3) depreciation, depletion and amortization, (4) unrealized (gain) loss on ineffective portion of hedges and reclassification adjustments, (5) non-cash change in fair value of non-hedge derivative instruments, (6) interest income, (7) deferred compensation expense (gain), (8) gain or loss on disposed assets, and (9) impairment charges and other significant, unusual non-cash charges. Any cash proceeds received from the monetization of derivatives with a scheduled maturity date more than 12 months following the date of such monetization are excluded from the calculation of adjusted EBITDA.

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Management uses adjusted EBITDA as a supplemental financial measurement to evaluate our operational trends. Items excluded generally represent non-cash adjustments, the timing and amount of which cannot be reasonably estimated and are not considered by management when measuring our overall operating performance. In addition, adjusted EBITDA is the financial measurement that is used in the covenant calculation required under our Credit Agreement described in the Liquidity and Capital Resources section of Management’s Discussion and Analysis of Financial Condition and Results of Operations. We consider compliance with this covenant to be material. Adjusted EBITDA is used as a supplemental financial measurement in the evaluation of our business and should not be considered as an alternative to net income, as an indicator of our operating performance, as an alternative to cash flows from operating activities, or as a measure of liquidity. Adjusted EBITDA is not defined under GAAP and, accordingly, it may not be a comparable measurement to those used by other companies. The following table provides a reconciliation of net loss to adjusted EBITDA for the specified periods:

	Year Ended December 31,
	2009			2008			2007
Net loss	$	(144,318	)	$	(54,750	)	$	(4,793	)
Interest expense		90,102			86,038			87,656
Income tax benefit		(85,936	)		(34,386	)		(2,745	)
Depreciation, depletion, and amortization		104,734			101,973			85,842
Unrealized (gain) loss on ineffective portion of hedges and reclassification adjustments		(21,752	)		(12,549	)		8,343
Non-cash change in fair value of non-hedge derivative instruments		149,106			(89,554	)		23,031
Proceeds from monetization of derivatives with a scheduled maturity date more than 12 months from monetization date		(102,352	)		—			—
Interest income		(283	)		(409	)		(755	)
Deferred compensation expense (gain)		1,145			(306	)		831
Gain on disposed assets		(10,463	)		(177	)		(712	)
Loss on impairment of oil and natural gas properties		240,790			281,393			—
Loss on impairment of ethanol plant		—			2,900			—
Loss on litigation settlement		2,928			—			—
Adjusted EBITDA	$	223,701		$	280,173		$	196,698

Competition

The oil and natural gas industry is highly competitive. We encounter strong competition from other independent operators and from major oil companies in acquiring properties, contracting for drilling equipment and securing trained personnel. Many of these competitors have financial and technical resources and staffs substantially larger than ours. As a result, our competitors may be able to pay more for desirable leases, or to evaluate, bid for and purchase a greater number of properties or prospects than our financial or personnel resources will permit.

We are also affected by competition for drilling rigs and the availability of related equipment. In the past, the oil and natural gas industry has experienced shortages of drilling rigs, equipment, pipe and personnel, which have delayed development drilling and other exploitation activities and have caused significant price increases. We are unable to predict when, or if, such shortages may again occur or how they would affect our development and exploitation program.

Competition is also strong for attractive oil and natural gas producing properties, undeveloped leases and drilling rights, and we cannot assure you that we will be able to compete satisfactorily. Many large oil companies have been actively marketing some of their existing producing properties for sale to independent producers. Although we regularly evaluate acquisition opportunities and submit bids as part of our growth strategy, we do not have any current agreements, understandings or arrangements with respect to any material acquisition.

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Markets

The marketing of oil and natural gas we produce will be affected by a number of factors that are beyond our control and whose exact effect cannot be accurately predicted. These factors include:

• the amount of crude oil and natural gas imports;

• the availability, proximity and cost of adequate pipeline and other transportation facilities;

• the success of efforts to market competitive fuels, such as coal and nuclear energy and the growth and/or success of alternative energy sources such as wind power;

• the effect of federal and state regulation of production, refining, transportation and sales;

• the laws of foreign jurisdictions and the laws and regulations affecting foreign markets;

• other matters affecting the availability of a ready market, such as fluctuating supply and demand; and

• general economic conditions in the United States and around the world.

The supply and demand balance of crude oil and natural gas in world markets has caused significant variations in the prices of these products over recent years. The North American Free Trade Agreement eliminated most trade and investment barriers between the United States, Canada and Mexico, resulting in increased foreign competition for domestic natural gas production. New pipeline projects recently approved by, or presently pending before the Federal Energy Regulatory Commission (FERC), as well as nondiscriminatory access requirements, could further increase the availability of natural gas imports to certain U.S. markets. Such imports could have an adverse effect on both the price and volume of natural gas sales from our wells.

Members of the Organization of Petroleum Exporting Countries establish prices and production quotas from time to time with the intent of reducing the current global oversupply and maintaining, lowering or increasing certain price levels. We are unable to predict what effect, if any, such actions will have on both the price and volume of crude oil sales from our wells.

In several initiatives, FERC has required pipeline transportation companies to develop electronic communication and to provide standardized access via the Internet to information concerning capacity and prices on a nationwide basis, so as to create a national market. Parallel developments toward an electronic marketplace for electric power, mandated by FERC, are serving to create multi-national markets for energy products generally. These systems will allow rapid consummation of natural gas transactions. Although this system may initially lower prices due to increased competition, it is anticipated it will ultimately expand natural gas markets and improve their reliability.

Environmental Matters and Regulation

We believe that our properties and operations are in substantial compliance with applicable environmental laws and regulations, and our operations to date have not resulted in any material environmental liabilities. To reduce our exposure to potential environmental risk, we typically have our field personnel inspect operated properties prior to completing each acquisition.

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General

Our operations, like the operations of other companies in our industry, are subject to stringent federal, state and local laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. These laws and regulations may:

• require the acquisition of various permits before drilling commences;

• require the installation of expensive pollution control equipment;

• restrict the types, quantities and concentration of various substances that can be released into the environment in connection with drilling and production activities;

• limit or prohibit drilling activities on lands lying within wilderness, wetlands and other protected areas;

• require remedial measures to prevent pollution from former operations, such as pit closure and plugging of abandoned wells;

• impose substantial liabilities for pollution resulting from our operations; and

• with respect to operations affecting federal lands or leases, require preparation of a Resource Management Plan, an Environmental Assessment, and/or an Environmental Impact Statement.

These laws, rules and regulations may also restrict the rate of oil and natural gas production below the rate that would otherwise be possible. The regulatory burden on the oil and natural gas industry increases the cost of doing business in the industry and consequently affects profitability. Additionally, Congress and federal and state agencies frequently revise environmental laws and regulations, and any changes that result in more stringent and costly waste handling, disposal and clean-up requirements for the oil and natural gas industry could have a significant impact on our operating costs.

We monitor our properties and operations in an effort to ensure that our properties and operations are, and remain, in substantial compliance with all current applicable environmental laws and regulations. If, at any time, we determine that our properties and/or operations do not substantially comply with all current applicable environmental laws and regulations, we take action to remedy such noncompliance on our own volition and do not delay taking action until ordered to do so by a regulatory authority. For example, we are currently undertaking additional construction tests of our CO₂ pipeline to fully document it is in substantial compliance with rules and regulations regarding natural gas pipeline safety. We cannot predict how future environmental laws and regulations may affect our properties or operations. For the years ended December 31, 2009 and 2008, we did not incur any material capital expenditures for installation of remediation or pollution control equipment at any of our facilities. As of the date of this report, we are not aware of any other environmental issues or claims that will require material capital expenditures during 2010 or that will otherwise have a material impact on our financial position or results of operations.

Environmental laws and regulations that could have a material impact on the oil and natural gas exploration and production industry include the following:

National Environmental Policy Act

Oil and natural gas exploration and production activities on federal lands are subject to the National Environmental Policy Act (NEPA). NEPA requires federal agencies, including the Department of Interior, to evaluate major agency actions having the potential to significantly impact the environment. In the course of such evaluations, an agency will typically prepare an Environmental Assessment to assess the potential direct, indirect and cumulative impacts of a proposed project and, if necessary, will prepare a more detailed Environmental Impact Statement that may be made available for public review and comment.

All of our current exploration and production activities, as well as proposed exploration and development plans, on federal lands require governmental permits that are subject to the requirements of NEPA. This process has the potential to delay the development of oil and natural gas projects.

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Waste Handling

The Resource Conservation and Recovery Act (RCRA), and comparable state statutes, regulate the generation, transportation, treatment, storage, disposal and cleanup of “hazardous wastes” and the disposal of non-hazardous wastes. Under the auspices of the federal Environmental Protection Agency (EPA), individual states administer some or all of the provisions of RCRA, sometimes in conjunction with their own, more stringent requirements. Drilling fluids, produced waters, and most of the other wastes associated with the exploration, development, and production of crude oil, natural gas, or geothermal energy constitute “solid wastes,” which are regulated under the less stringent non-hazardous waste provisions. However, there is no guarantee that the U.S. Congress, EPA or individual states will not adopt more stringent requirements for the handling of non-hazardous wastes or categorize some non-hazardous wastes as hazardous for future regulation.

We believe that we are currently in substantial compliance with the requirements of RCRA and related state and local laws and regulations, and that we hold all necessary and up-to-date permits, registrations and other authorizations to the extent that our operations require them under such laws and regulations. Although we do not believe the current costs of managing our presently classified wastes to be significant, any legislative or regulatory reclassification of oil and natural gas exploration and production wastes could increase our costs to manage and dispose of such wastes.

Comprehensive Environmental Response, Compensation and Liability Act

The Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), also known as the “Superfund” law, imposes strict, and in certain circumstances joint and several liability, on persons who are considered to be responsible for the release of a “hazardous substance” into the environment. Responsible parties include the current, as well as former, owner or operator of the site where the release occurred and persons that disposed or arranged for the disposal of the hazardous substance at the site. Under CERCLA, such persons may be liable for the costs of cleaning up the hazardous substances released into the environment, for damages to natural resources and for the costs of certain health studies. In addition, neighboring landowners and other third parties may file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment.

We currently own, lease, or operate numerous properties that have produced oil and natural gas for many years. Although we believe we have utilized operating and waste disposal practices that were standard in the industry at the time, hazardous substances, wastes, or hydrocarbons may have been released on, under, or from the properties owned or leased by us, or on or under other locations, including off-site locations, where such substances have been taken for disposal. In addition, some of these properties have been operated by third parties or by previous owners or operators whose treatment and disposal of hazardous substances, wastes, or hydrocarbons was not under our control. These properties and the substances disposed or released on them may be subject to CERCLA, RCRA, and analogous state laws. Under such laws, we could be required to remove previously disposed substances and wastes, remediate contaminated property, or perform remedial plugging or pit closure operations to prevent future contamination.

Water Discharges

The Federal Water Pollution Control Act, also known as the Clean Water Act, and analogous state laws impose restrictions and strict controls on the discharge of pollutants, including produced waters and other oil and natural gas wastes, into waters of the United States. The discharge of pollutants into regulated waters is prohibited, except in accordance with the terms of a permit issued by EPA or the relevant state. The Clean Water Act also prohibits the discharge of dredge and fill material in regulated waters, including wetlands, unless authorized by a permit issued by the U.S. Army Corps of Engineers. Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with discharge permits or other requirements of the federal Clean Water Act and analogous state laws and regulations. We believe we are in substantial compliance with the requirements of the Clean Water Act.

The Safe Drinking Water Act, groundwater protection, and the Underground Injection Control Program

The federal Safe Drinking Water Act (SDWA) and the Underground Injection Control (UIC) program promulgated under the SDWA and state programs regulate the drilling and operation of salt water disposal wells. EPA directly administers the UIC program in some states and in others it is delegated to the state for administering. Permits must be obtained before drilling salt water disposal permits, and casing integrity monitoring must be conducted periodically to ensure the casing is not leaking saltwater to groundwater.

Contamination of groundwater by oil and natural gas drilling, production, and related operations may result in fines, penalties, and remediation costs, among other sanctions and liabilities under the SDWA and state laws. In addition, third party claims may be filed by landowners and other parties claiming damages for alternative water supplies, property damages, and bodily injury.

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We engage third parties to provide hydraulic fracturing or other well stimulation services to us in connection with many of the wells for which we are the operator. The U.S. Congress is considering legislation that would repeal the exemption for hydraulic fracturing from the SDWA, which would have the effect of allowing the EPA to promulgate regulations requiring permits and implementing potential new requirements of hydraulic fracturing under the SDWA. This could, in turn, require state regulatory agencies in states with programs delegated under the SDWA to impose additional requirements on hydraulic fracturing operations.

The Clean Air Act

The federal Clean Air Act and comparable state laws regulate emissions of various air pollutants through air emissions permitting programs and the imposition of other requirements. In addition, the EPA has developed and continues to develop stringent regulations governing emissions of toxic air pollutants at specified sources. Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with air permits or other requirements of the federal Clean Air Act and associated state laws and regulations. The EPA proposed in a consent decree, which has not been approved by a federal court, that it will issue by January 31, 2011 a proposal to revise its national emissions standards for hazardous air pollution for crude oil and natural gas production, as well as gas transmission and storage and its new source performance standards for oil and natural gas production.

Some of our new facilities may be required to obtain permits before work can begin, and existing facilities may be required to incur capital costs in order to comply with new monitoring and reporting requirements and/or emission limitations. These regulations may increase the costs of compliance for some facilities, and federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance. We believe we are in substantial compliance with the current requirements of the Clean Air Act.

In December 2009, the EPA promulgated a finding that serves as the foundation under the Clean Air Act to issue other rules that would result in federal greenhouse gas (GHG) regulations and emissions limits under the Clean Air Act, even without Congressional action. As part of this array of new regulations, in September 2009, the EPA also promulgated a GHG monitoring and reporting rule that requires certain parties, including participants in the oil and natural gas industry, to monitor and report their GHG emissions, including methane and carbon dioxide, to the EPA. The emissions will be published on a register to be made available on the Internet. These regulations may apply to our operations. The EPA has proposed two other rules that would regulate GHGs, one of which would regulate GHGs from stationary sources, and may affect sources in the oil and gas exploration and production industry and pipeline industry.

The EPA’s finding, the greenhouse gas reporting rule, and the proposed rules to regulate the emissions of greenhouse gases would result in federal regulation of carbon dioxide emissions and other greenhouse gases, and may affect the outcome of other climate change lawsuits pending in United States federal courts in a manner unfavorable to our industry. See “Risk factors—Regulation related to global warming and climate change could have an adverse effect on our operations and demand for oil and natural gas.”

Other Laws and Regulation

The Kyoto Protocol to the United Nations Framework Convention on Climate Change became effective in February 2005. Under the Protocol, participating nations are required to implement programs to reduce emissions of greenhouse gases that are suspected of contributing to global warming. The United States is not currently a participant in the Protocol, and Congress is considering proposed legislation directed at reducing greenhouse gas emissions. Also, there has been support in various regions of the country for legislation that requires reductions in greenhouse gas emissions, and some states have already adopted legislation addressing greenhouse gas emissions from various sources, primarily power plants. The oil and natural gas industry is a direct source of certain greenhouse gas emissions, namely carbon dioxide and methane, and future restrictions on such emissions could impact our future operations. Our operations are not adversely impacted by current state and local climate change initiatives and, at this time, it is not possible to accurately estimate how potential future laws or regulations limiting or otherwise addressing greenhouse gas emissions would impact our business.

Other Regulation of the Oil and Natural Gas Industry

The oil and natural gas industry is extensively regulated by numerous federal, state and local authorities. Legislation affecting the oil and natural gas industry is under constant review for amendment or expansion, frequently increasing the regulatory burden. Also, numerous departments and agencies, both federal and state, are authorized by statute to issue rules and regulations binding on the oil and natural gas industry and its individual members, some of which carry substantial penalties for failure to comply. Although the regulatory burden on the oil and natural gas industry increases our cost of doing business and, consequently, affects our profitability, these burdens generally do not affect us any differently or to any greater or lesser extent than they affect other companies in the industry with similar types, quantities and locations of production.

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Legislation continues to be introduced in Congress and development of regulations continues in the Department of Homeland Security and other agencies concerning the security of industrial facilities, including oil and natural gas facilities. Our operations may be subject to such laws and regulations. It is not possible to accurately estimate the costs we could incur to comply with any such facility security laws or regulations, but such expenditures could be substantial.

Drilling and Production

Our operations are subject to various types of regulation at the federal, state and local levels. These types of regulation include requiring permits for the drilling of wells, drilling bonds, and reports concerning operations. Most states, and some counties and municipalities, in which we operate also regulate one or more of the following:

• the location of wells;

• the method of drilling and casing wells;

• the rates of production or “allowables”;

• the surface use and restoration of properties upon which wells are drilled;

• the plugging and abandoning of wells; and

• notice to surface owners and other third parties.

State laws regulate the size and shape of drilling and spacing units or proration units governing the pooling of oil and natural gas properties. Some states allow forced pooling or integration of tracts to facilitate exploration while other states rely on voluntary pooling of lands and leases. In some instances, forced pooling or unitization may be implemented by third parties and may reduce our interest in the unitized properties. In addition, state conservation laws establish maximum rates of production from oil and natural gas wells, generally prohibit the venting or flaring of natural gas, and impose requirements regarding the ratability of production. These laws and regulations may limit the amount of oil and natural gas we can produce from our wells or limit the number of wells or the locations at which we can drill. Moreover, each state generally imposes a production or severance tax with respect to the production and sale of oil, natural gas, and natural gas liquids within its jurisdiction.

Natural Gas Sales Transportation

Historically, federal legislation and regulatory controls have affected the price of the natural gas we produce and the manner in which we market our production. FERC has jurisdiction over the transportation and sale for resale of natural gas in interstate commerce by natural gas companies under the Natural Gas Act of 1938 and the Natural Gas Policy Act of 1978. Since 1978, various federal laws have been enacted which have resulted in the complete removal of all price and non-price controls for sales of domestic natural gas sold in “first sales,” which include all of our sales of our own production.

FERC also regulates interstate natural gas transportation rates and service conditions, which affects the marketing of natural gas that we produce, as well as the revenues we receive for sales of our natural gas. Commencing in 1985, FERC promulgated a series of orders, regulations and rule makings that significantly fostered competition in the business of transporting and marketing gas. Today, interstate pipeline companies are required to provide nondiscriminatory transportation services to producers, marketers and other shippers, regardless of whether such shippers are affiliated with an interstate pipeline company. FERC’s initiatives have led to the development of a competitive, unregulated, open access market for gas purchases and sales that permits all purchasers of gas to buy gas directly from third-party sellers other than pipelines. However, the natural gas industry historically has been very heavily regulated; therefore, we cannot guarantee that the less stringent regulatory approach recently pursued by FERC and Congress will continue indefinitely into the future nor can we determine what effect, if any, future regulatory changes might have on our natural gas related activities.

Under FERC’s current regulatory regime, transmission services must be provided on an open-access, non-discriminatory basis at cost-based rates or at market-based rates if the transportation market at issue is sufficiently competitive. Gathering service, which occurs upstream of jurisdictional transmission services, is regulated by the states onshore and instate waters. Although its policy is still in flux, FERC recently has reclassified certain jurisdictional transmission facilities as non-jurisdictional gathering facilities, which has the tendency to increase our costs of getting natural gas to point-of-sale locations.

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Natural Gas Pipeline Safety

The Department of Transportation, specifically the Pipeline and Hazardous Materials Safety Administration, regulates transportation of natural and other gas by pipeline and imposes minimum federal safety standards pursuant to the pipeline safety laws codified at 49 U.S.C. 60101, et seq. and the hazardous material transportation laws codified at 49 U.S.C. 5101, et seq.

Natural Gas Gathering Regulations

State regulation of natural gas gathering facilities generally includes various safety, environmental and, in some circumstances, nondiscriminatory-take requirements. Although such regulation has not generally been affirmatively applied by state agencies, natural gas gathering is addressed in EPA’s proposed greenhouse gas monitoring and reporting rule and may receive greater regulatory scrutiny in the future.

State Regulation

The various states regulate the drilling for, and the production, gathering, and sale of, oil and natural gas, including imposing severance taxes and requirements for obtaining drilling permits. States also regulate the method of developing new fields, the spacing and operation of wells, and the prevention of waste of oil and natural gas resources. States may regulate rates of production and may establish maximum daily production allowables from oil and natural gas wells based on market demand or resource conservation, or both. States do not regulate wellhead prices or engage in other similar direct economic regulation, but there can be no assurance that they will not do so in the future. The effect of these regulations may be to limit the amounts of oil and natural gas that may be produced from our wells, and to limit the number of wells or locations we can drill.

The petroleum industry is also subject to compliance with various other federal, state and local regulations and laws. Some of those laws relate to occupational safety, resource conservation, and equal employment opportunity. We do not believe that compliance with these laws will have a material adverse effect on us.

Seasonality

While our limited operations located in the Gulf Coast and the Rocky Mountains may experience seasonal fluctuations, we do not believe these fluctuations have had, or will have, a material impact on our consolidated results of operations.

Properties

We believe that we have satisfactory title to all of our owned assets. As is customary in the oil and natural gas industry, we initially conduct only a cursory review of the title to undeveloped leasehold acreage rights acquired through oil and natural gas leases or farm-in agreements. Prior to the commencement of drilling operations on undeveloped leasehold, we conduct a title examination and perform curative work with respect to any significant title defects. Prior to completing an acquisition of an interest in significant producing oil and natural gas properties, we conduct due diligence as to title for the specific interest we are acquiring. Our interests in oil and natural gas properties are subject to customary royalty interests, liens for current taxes and other similar burdens and minor easements, restrictions and encumbrances which we believe do not materially detract from the value of these interests either individually or in the aggregate and will not materially interfere with the operation of our business. We will take such steps as we deem necessary to assure that our title to our properties is satisfactory. We are free, however, to exercise our judgment as to reasonable business risks in waiving title requirements.

Employees

As of December 31, 2009, we had 689 full-time employees, including 14 geologists and geophysicists, 32 reservoir, production, and drilling engineers and 16 land professionals. Of these, 293 work in our Oklahoma City office and 396 work in our district and field offices. We also contract for the services of independent consultants involved in land, regulatory, accounting, financial and other disciplines as needed. None of our employees are represented by labor unions or covered by any collective bargaining agreement. We believe that our relations with our employees are satisfactory.

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ITEM 1A. RISK FACTORS

The following are some of the important factors that could affect our financial performance or could cause actual results to differ materially from estimates contained in our forward-looking statements. We may encounter risks in addition to those described below. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may also impair or adversely affect our business, financial condition or results of operation.

Oil and natural gas prices are volatile. A decline in oil and natural gas prices could adversely affect our financial condition, financial results, cash flows, access to capital and ability to grow.

Our future financial condition, revenues, results of operations, rate of growth and the carrying value of our oil and natural gas properties depend primarily upon the prices we receive for our oil and natural gas production. Oil and natural gas prices historically have been volatile and are likely to continue to be volatile in the future, especially given current geopolitical conditions. This price volatility also affects the cash flow we will have available for capital expenditures as well as our ability to borrow money or raise additional capital. The prices for oil and natural gas are subject to a variety of factors that are beyond our control. These factors include, but are not limited to, the following:

• the level of consumer demand for oil and natural gas;

• the domestic and foreign supply of oil and natural gas;

• commodity processing, gathering and transportation availability, and the availability of refining capacity;

• the price and level of foreign imports of oil and natural gas;

• the ability of the members of the Organization of Petroleum Exporting Countries to agree to and maintain oil price and production controls;

• domestic and foreign governmental regulations and taxes;

• the price and availability of alternative fuel sources;

• weather conditions;

• financial and commercial market uncertainty;

• political conditions or hostilities in oil and natural gas producing regions, including the Middle East and South America; and

• worldwide economic conditions.

These factors and the volatility of the energy markets generally make it extremely difficult to predict future oil and natural gas price movements with any certainty. Declines in oil and natural gas prices would not only reduce our revenue, but could reduce the amount of oil and natural gas we can produce economically, and as a result, could have a material adverse effect on our financial condition, results of operations, and reserves. If the oil and natural gas industry experiences significant price declines, we may, among other things, be unable to meet our financial obligations, including payments on our senior secured credit facility and our Senior Notes, or be unable to make planned capital expenditures.

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Price declines at the end of 2008 and early 2009 resulted in write downs of the carrying values of our properties, and further price declines could result in additional write downs in the future, which could negatively impact our results of operations.

We utilize the full cost method of accounting for costs related to our oil and natural gas properties. Under this method, all costs incurred for both productive and nonproductive properties are capitalized and amortized on an aggregate basis using the units-of-production method. However, these capitalized costs are subject to a ceiling test which limits such pooled costs to the aggregate of the present value of estimated future net revenues attributable to proved oil and natural gas reserves discounted at 10%, adjusted for derivatives accounted for as cash flow hedges and net of tax considerations, plus the lower of cost or market value of unproved properties. The full cost ceiling is evaluated at the end of each quarter using the SEC prices for oil and natural gas in effect at that date as adjusted for our derivative positions deemed “cash flow hedge positions.” A write-down of oil and natural gas properties does not impact cash flow from operating activities, but does reduce net income. Once incurred, a write-down of oil and natural gas properties is not reversible at a later date.

During the fourth quarter of 2008, our evaluation of our full cost ceiling required a non-cash impairment charge of $281.4 million to the value of our oil and natural gas properties as a result of a decline in oil and natural gas prices at the measurement date. The impairment was calculated based on December 31, 2008 prices of $44.60 per Bbl of oil and $5.62 per Mcf of natural gas. During the first quarter of 2009, natural gas prices declined significantly (as compared to the December 31, 2008 spot price of $5.62 per Mcf), and based on March 31, 2009 spot prices of $49.66 per Bbl of oil and $3.63 per Mcf of natural gas, our reserves declined by 13.5%, as a result of which we recorded a non-cash ceiling test impairment of $240.8 million during the first quarter of 2009. Oil and natural gas prices have remained volatile and this and other factors, without mitigating circumstances, could require us to further write down capitalized costs and incur corresponding non-cash charges to earnings. Any such write downs could have a material adverse effect on our financial condition, results of operations, and our ability to comply with debt covenants.

The actual quantities and present value of our proved reserves may be lower than we have estimated.

Estimating quantities of proved oil and natural gas reserves is a complex process. It requires interpretations of available technical data and various estimates and assumptions, including estimates based upon assumptions relating to economic factors such as commodity prices, production costs, severance and excise taxes, capital expenditures, workovers, remedial costs, and the assumed effect of governmental regulation. There are numerous uncertainties about when a property may have proved reserves as compared to possible or probable reserves, including with respect to our EOR operations. Reserve estimates are, therefore, inherently imprecise and, although we are reasonably certain of recovering the quantities we disclose as proved reserves, actual results will vary from our estimates. Any significant variations in the interpretations or assumptions underlying our estimates or changes of conditions (e.g. economic growth or regulation) could cause the estimated quantities and net present value of our reserves to differ materially. In addition, we may adjust estimates of proved reserves to reflect production history, results of exploration and developmental drilling, prevailing oil and natural gas prices and other factors, many of which are beyond our control. Our properties may also be susceptible to hydrocarbon drainage from production by operators on adjacent properties.

You should not assume that the present values referred to in this report represent the current market value of our estimated oil and natural gas reserves. The timing of production and expenses associated with the development and production of oil and natural gas properties will affect both the timing of actual future net cash flows from our proved reserves and their present value. In accordance with requirements of the Securities and Exchange Commission, the estimates of present values are based on prices and costs in effect as of the date of the estimates and exclude escalations based upon future conditions. Actual future prices and costs may be materially higher or lower than the prices and costs as of the date of these estimates. In addition, the effects of derivative instruments are not reflected in these assumed prices. Our December 31, 2009 reserve report used realized prices based on an average price of $3.87 per Mcf for natural gas and an average price of $61.18 per Bbl for oil.

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A significant portion of total proved reserves as of December 31, 2009 are undeveloped, and those reserves may not ultimately be developed.

As of December 31, 2009, approximately 34% of our estimated proved reserves were undeveloped. Recovery of undeveloped reserves requires significant capital expenditures and successful drilling and EOR operations. The reserve data assumes that we can and will make these expenditures and conduct these operations successfully. While we are reasonably certain of our ability to make these expenditures and to conduct these operations under existing economic conditions, these assumptions may not prove correct and we may ultimately determine the development of all, or any portion of, such proved but undeveloped reserves is not economically feasible.

Some of our reserves are subject to EOR methods and the failure of these methods may have a material adverse affect on our financial condition, results of operations and reserves.

As of December 31, 2009, approximately 14% of our proved reserves were based on EOR methods including the injection of CO₂ and polymers, a synthetic chemical. Some of these properties have not been injected with CO₂ or with polymers having the identical chemical composition as polymers used in historical production, and recovery factors cannot be estimated with precision. Accordingly, such projects may not result in significant proved reserves or improvements in anticipated production levels. Our ability to develop future reserves will depend on whether we can successfully implement our planned EOR programs, and our failure to do so could have a material adverse effect on our financial condition, results of operations and reserves.

Competition in the oil and natural gas industry is intense and many of our competitors have greater financial and other resources than we do.

We operate in the highly competitive areas of oil and natural gas production, acquisition, development, and exploration and we face intense competition from both major and other independent oil and natural gas companies:

• seeking to acquire desirable producing properties or new leases for future development or exploration; and

• seeking to acquire the equipment and expertise necessary to operate and develop our properties.

Many of our competitors have financial and other resources substantially greater than ours, and some of them are fully integrated oil companies. These companies may be able to pay more for development prospects and productive oil and natural gas properties and may be able to define, evaluate, bid for and purchase a greater number of properties and prospects than our financial or human resources permit. Our ability to develop our oil and natural gas properties and to acquire additional properties in the future will depend upon our ability to successfully conduct operations, select suitable prospects and consummate transactions in this highly competitive environment.

Significant capital expenditures are required to replace our reserves.

Our development, exploration, and acquisition activities require substantial capital expenditures. Historically, we have funded our capital expenditures through a combination of cash flows from operations and debt financing. Future cash flows are subject to a number of variables, such as the level of production from existing wells, prices of oil and natural gas, and our success in developing and producing new reserves. If our cash flow from operations is not sufficient to fund our capital expenditure budget, we may not be able to access additional bank debt or other methods of financing on commercially reasonable terms to meet these requirements. If revenue were to decrease as a result of lower oil and natural gas prices or decreased production, and our access to capital were limited, we would have a reduced ability to replace our reserves which may have an adverse effect on our results of operations and financial condition.

If we are not able to replace reserves, we may not be able to sustain production.

Our future success depends largely upon our ability to find, develop, or acquire additional oil and natural gas reserves that are economically recoverable. Unless we replace the reserves we produce through successful development, exploration or acquisition activities, our proved reserves and production will decline over time. In addition, approximately 34% of our total estimated proved reserves (by volume) at December 31, 2009 were undeveloped. By their nature, estimates of undeveloped reserves are less certain. Recovery of such reserves will require significant capital expenditures and successful drilling and EOR operations. Our December 31, 2009 reserve estimates reflect that our production rate on current proved developed producing reserve properties will decline at annual rates of approximately 14%, 11%, and 9% for the next three years. Thus, our future oil and natural gas reserves and production and, therefore, our financial condition, results of operations, and cash flows are highly dependent on our success in efficiently developing our current reserves and economically discovering or acquiring additional recoverable reserves.

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Development and exploration drilling may not result in commercially productive reserves.

Drilling activities are subject to many risks, including the risk that commercially productive reservoirs will not be encountered. We cannot assure you that new wells we drill will be productive or that we will recover all or any portion of our investment in such wells. The seismic data and other technologies we use do not allow us to know conclusively prior to drilling a well that oil or natural gas is present or may be economically recovered and/or produced. Drilling for oil and natural gas often involves unprofitable efforts, not only from dry wells but also from wells that are productive but do not produce sufficient net reserves to return a profit at then realized prices after deducting drilling, operating and other costs. The cost of drilling, completing and operating a well is often uncertain, and cost factors can adversely affect the economics of a project. Further, our drilling operations may be curtailed, delayed or cancelled as a result of numerous factors, including:

• unexpected drilling conditions;

• title problems;

• pressure or lost circulation in formations;

• equipment failures or accidents;

• adverse weather conditions;

• compliance with environmental and other governmental requirements; and

• increases in the cost of, or shortages or delays in the availability of, drilling rigs, equipment and services.

If, for any reason, we are unable to economically recover reserves through our exploration and drilling activities, our results of operations, cash flows, growth, and reserve replenishment may be materially affected.

We are subject to complex laws and regulations, including environmental and safety regulations, which can adversely affect the cost, manner, and feasibility of doing business.

Our operations and facilities are subject to certain federal, state, and local laws and regulations relating to the exploration for, and development, production, and transportation of, oil and natural gas, as well as environmental and safety matters. Although we believe that we are in substantial compliance with all applicable laws and regulations, we cannot be certain that existing laws or regulations, as currently interpreted or reinterpreted in the future, or future laws or regulations will not harm our business, results of operations and financial condition. We may be required to make large and unanticipated capital expenditures to comply with environmental and other governmental regulations such as:

• land use restrictions;

• drilling bonds and other financial responsibility requirements;

• spacing of wells;

• reporting or other limitations on emissions of greenhouse gases;

• unitization and pooling of properties;

• habitat and endangered species protection, reclamation and remediation, and other environmental protection;

• well stimulation processes;

• produced water disposal;

• CO₂ pipeline requirements;

• safety precautions;

• operational reporting; and

• taxation.

Under these laws and regulations, we could be liable for:

• personal injuries;

• property and natural resource damages;

• oil spills and releases or discharges of hazardous materials;

• well reclamation costs;

• remediation and clean-up costs and other governmental sanctions, such as fines and penalties;

• other environmental damages; and

• reporting or other issues arising from greenhouse gas emissions.

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Our operations could be significantly delayed or curtailed and our costs of operations could significantly increase as a result of regulatory requirements or restrictions. Additionally, future regulations promulgated pursuant to the Clean Air Act or other mandatory federal legislation may require monitoring and reporting of greenhouse gas emissions and eventually may impose restrictions on these emissions resulting in liability for exceeding permitted air pollutant emission rates or other mandatory caps on greenhouse gas emissions. We are unable to predict the ultimate cost of compliance with these requirements or their effect on our operations.

Properties that we acquire may not produce as projected and we may be unable to accurately predict reserve potential, identify liabilities associated with the properties or obtain protection from sellers against such liabilities.

Acquisitions of producing and undeveloped properties have been an important part of our historical growth. We expect acquisitions will also contribute to our future growth. Successful acquisitions require an assessment of a number of factors, including recoverable reserves, exploration or development potential, future oil and natural gas prices, operating costs, and potential environmental and other liabilities. We perform an engineering, geological, and geophysical review of the acquired properties, which we believe is generally consistent with industry practices, and also endeavor to evaluate environmental risks. However, such assessments are inexact and their accuracy is inherently uncertain for a number of reasons. For instance, in connection with our assessments, such a review may not permit us to become sufficiently familiar with the properties to fully assess their deficiencies and capabilities. We do not physically inspect every well. Even when we inspect a well, we do not always discover structural, subsurface, and environmental problems that may exist or arise. Our review prior to signing a definitive purchase agreement may be even more limited. Often we are not entitled to contractual indemnification for pre-closing liabilities, including environmental liabilities associated with acquired properties. Normally, we acquire interests in properties on an “as is” basis with limited remedies for breaches of representations and warranties. As a result, significant unknown liabilities, including environmental liabilities, may exist and we may experience losses due to title defects in acquisitions for which we have limited or no contractual remedies or insurance coverage. In addition, we may acquire oil and natural gas properties that contain economically recoverable reserves which are less than predicted. Thus, liabilities and uneconomically feasible oil and natural gas recoveries related to our acquisitions of producing and undeveloped properties may have a material adverse effect on our results of operations and reserve growth.

We cannot control the activities on properties we do not operate and we are unable to ensure the proper operation and profitability of these non-operated properties.

We do not operate all of the properties in which we have an interest. As a result, we have limited ability to exercise influence over, and control the risks associated with, the operation of these properties. The success and timing of drilling and development activities on our partially owned properties operated by others therefore will depend upon a number of factors outside of our control, including the operator’s:

• timing and amount of capital expenditures;

• expertise and diligence in adequately performing operations and complying with applicable agreements;

• financial resources;

• inclusion of other participants in drilling wells; and

• use of technology.

As a result of any of the above or an operator’s failure to act in ways that are in our best interest, our allocated production revenues and results of operations could be adversely affected.

If the third parties we rely on for gathering and distributing our oil and natural gas are unable to meet our needs for such services and facilities, our future exploration and production activities could be adversely affected.

The marketability of our production depends upon the proximity of our reserves to, and the capacity of, third-party facilities and third-party services, including oil and natural gas gathering systems, pipelines, trucking or terminal facilities, and refineries or processing facilities. Such third parties are subject to federal and state regulation of the production and transportation of oil and natural gas. If such third parties are unable to comply with such regulations and we are unable to replace such service and facilities providers, we may be required to shut-in producing wells or delay or discontinue development plans for our properties. A shut-in, delay or discontinuance could adversely affect our financial condition.

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The loss of our Chief Executive Officer or other key personnel could adversely affect our business.

We depend, and will continue to depend in the foreseeable future, on the services of Mark A. Fischer, our Chief Executive Officer, and other officers and key employees with extensive experience and expertise in evaluating and analyzing producing oil and natural gas properties and drilling prospects, maximizing production from oil and natural gas properties, marketing oil and natural gas production, and developing and executing financing and hedging strategies. Our ability to retain our officers and key employees, or hire replacements if we should lose one or more, is important to our continued success and growth. The unexpected loss of the services of one or more of these individuals could have a detrimental effect on our business.

Oil and natural gas drilling and production operations can be hazardous and may expose us to environmental or other liabilities.

Oil and natural gas operations are subject to many risks, including well blowouts, cratering, explosions, pipe failure, fires, formations with abnormal pressures, uncontrollable flows of oil, natural gas, brine or well fluids, and other environmental hazards and risks. Our drilling operations involve risks from high pressures and from mechanical difficulties such as stuck pipes, collapsed casings and separated cables. If any of these events occur, we could sustain substantial losses as a result of:

• injury or loss of life;

• severe damage to or destruction of property, natural resources and equipment;

• pollution or other environmental damage;

• clean-up responsibilities;

• regulatory investigations and administrative, civil and criminal penalties; and

• injunctions or other proceedings that suspend, limit or prohibit operations.

Our liability for environmental hazards includes those created on properties prior to the date we acquired or leased them. While we maintain insurance against some, but not all, of the risks described above, our insurance may not be adequate to cover any or all resulting losses or liabilities. Moreover, in the future, we may not be able to obtain any such insurance on commercially reasonable terms. The occurrence of, or failure by us to obtain or maintain adequate insurance coverage for, any of the events listed above could have a material adverse effect on our financial condition and results of operations, as well as our growth, exploration, and employee recruitment activities.

Costs of environmental liabilities could exceed our estimates and adversely affect our operating results.

Our operations are subject to numerous environmental laws and regulations, which obligate us to install and maintain pollution controls and to clean up various sites at which regulated materials may have been disposed of or released. It is not possible for us to estimate reliably the amount and timing of all future expenditures related to environmental matters because of:

• the uncertainties in estimating clean up costs;

• the discovery of additional contamination or contamination more widespread than previously thought;

• the uncertainty in quantifying liability under environmental laws that impose joint and several liability on all potentially responsible parties; and

• future changes to environmental laws and regulations and their enforcement.

Although we believe we have established appropriate reserves for known liabilities, including clean up costs, we could be required to set aside additional reserves in the future due to these uncertainties, incur material clean up costs, other liabilities, and/or expend significant sums to defend ourselves against litigation related to legacy environmental issues, which could have an adverse effect on our operating results.

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If we are not able to generate sufficient cash to service all of our long-term indebtedness, we may be forced to take other actions to satisfy our obligations under our Credit Agreement, which may not be successful.

Our ability to make scheduled payments on or to refinance our long-term indebtedness obligations depends on our financial and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our long-term indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or seek to restructure or refinance our long-term indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to attempt to meet our debt service and other obligations. Our Credit Agreement and the indentures governing our Senior Notes restrict our ability to dispose of assets and use the proceeds from the disposition. We may not be able to consummate those asset sales to raise capital or to sell assets at prices that we believe are fair, and proceeds that we do receive may not be adequate to meet any debt service obligations then due.

If we cannot make scheduled payments on our long-term indebtedness, we will be in default and, as a result:

• debt holders could declare all outstanding principal and interest to be due and payable;

• we may be in default under our master (ISDA) derivative contracts and counter-parties could demand early termination;

• the lenders under the Credit Agreement could terminate their commitments to loan us money and foreclose against the assets securing their borrowings; and

• we could be forced into bankruptcy or liquidation.

Our level of indebtedness may adversely affect our operations and limit our growth.

As of December 31, 2009, our total long-term indebtedness, including current maturities, was $1,177.0 million. As of April 14, 2010, our total long term indebtedness was approximately $841.0 million, and our maximum commitment amount and the borrowing base under our Eighth Restated Credit Agreement was $450.0 million. We may incur additional indebtedness, including significant secured indebtedness, in order to make future acquisitions or to develop our properties for production or for other purposes, and we expect to continue to be highly leveraged in the foreseeable future. Covenants set forth in the indentures for our Senior Notes, including the Adjusted Consolidated Net Tangible Asset debt incurrence test (the “ACNTA test”), limit the amount of secured debt we can incur. Certain thresholds set forth in the ACNTA test are principally reliant upon the levels of commodity prices for crude oil and natural gas at specified dates.

Our level of indebtedness affects our operations in several ways, including the following:

• a significant portion of our cash flows from operating activities must be used to service our indebtedness and, therefore, is not available for other purposes such as acquisitions, exploration, or property development;

• we may be at a competitive disadvantage as compared to similar companies that have less debt;

• the covenants contained in the agreements governing our outstanding indebtedness and future indebtedness may limit our ability to borrow additional funds, pay dividends and make certain investments and may also affect our flexibility in planning for, and reacting to, changes in the economy and in our industry;

• additional financing in the future for working capital, capital expenditures, acquisitions, general corporate or other purposes may have higher costs and more restrictive covenants;

• changes in the credit ratings of our debt may negatively affect the cost, terms, conditions and availability of future financing, and lower ratings may increase the interest rate and fees we pay on our revolving bank credit facility; and

• we may be more vulnerable to general adverse economic and industry conditions.

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We may not have sufficient funds to repay bank borrowings if required as a result of a borrowing base redetermination.

Availability under our Credit Agreement is subject to a borrowing base, which was $450.0 million as of April 14, 2010, and which is set by the banks semi-annually on May 1 and November 1 of each year. In addition, the banks may request a borrowing base redetermination once between each scheduled redetermination and in the event of early termination of our derivative contracts. If we issue Additional Permitted Debt, as defined in the Eighth Restated Credit Agreement, the borrowing base will be automatically reduced by an amount equal to 25% of the aggregate stated principal amount of the debt issued. If the outstanding borrowings under our Credit Agreement were to exceed the borrowing base as a result of a redetermination, we would be required to eliminate this excess. Within 10 days after receiving notice of the new borrowing base, we would be required to make an election: (1) to repay a portion of our bank borrowings in the amount of the excess either in a lump sum within 30 days or in equal monthly installments over a six-month period, (2) to submit within 30 days additional oil and natural gas properties we own for consideration in connection with the determination of the borrowing base sufficient to eliminate the excess or (3) to eliminate the excess through a combination of repayments and the submission of additional oil and natural gas properties within 30 days. If we are forced to repay a portion of our bank borrowings, we may not have sufficient funds to make such repayments. If we do not have sufficient funds and are otherwise unable to negotiate renewals of our borrowings or arrange new financing, we may have to sell significant assets. Any such sale could have a material adverse effect on our business and financial results.

Our use of derivative instruments could result in financial losses or reduce our income.

To reduce our exposure to the volatility in the price of oil and natural gas and provide stability to cash flows, we enter into derivative positions, some of which are designated as cash flow hedges for accounting purposes. These derivative products include fixed-price swaps, collars, and basis swaps with financial institutions or other similar transactions. As of December 31, 2009, we had entered into swaps for 23,700 BBtu of our natural gas production for 2010 through 2011 at average monthly prices ranging from $6.90 to $8.00 per MMBtu of natural gas. We also entered into collars for 3,360 BBtu of our natural gas production for 2010 at a floor of $10.00 per MMBtu. As of December 31, 2009, we had entered into swaps for 4,482 MBbls of our crude oil production for 2010 through 2011 at average monthly prices ranging from $67.39 to $69.03 per Bbl of oil. We also entered into collars for 444 MBbls of our crude oil production for 2010 through 2011 at a floor of $110.00 per Bbl of oil. As of December 31, 2009, we had basis protection swaps for 29,590 BBtu of our natural gas production for 2010 through 2011 at average monthly prices ranging from $0.70 to $0.94 per MMBtu. The fair value of our oil and natural gas derivative positions outstanding as of December 31, 2009 was a liability of approximately $26.8 million.

Derivative instruments expose us to risk of financial loss in some circumstances, including when:

• our production is less than expected;

• the counter-party to the derivative instruments defaults on its contractual obligations; or

• there is a widening of price differentials between delivery points for our production and the delivery point assumed in the derivative instruments.

Derivatives also expose us to risk of income reduction as derivative instruments may limit the benefit we would receive from increases in the prices for oil and natural gas. Additionally, derivatives that are not hedges must be adjusted to fair value through income. If the derivative qualifies and is designated as a cash flow hedge, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income (loss) until the hedged item is recognized in income. The ineffective portion of a derivative’s change in fair value, as measured using the dollar offset method, is immediately recognized in gain (loss) from oil and natural gas hedging activities in the statement of operations.

If it is probable the oil or natural gas sales which are hedged will not occur, hedge accounting must be discontinued and the gain or loss reported in accumulated other comprehensive income (loss) is immediately reclassified into income. If a derivative which qualified for cash flow hedge accounting ceases to be highly effective, or is liquidated or sold prior to maturity, hedge accounting must be discontinued. The gain or loss associated with the discontinued hedges remains in accumulated other comprehensive income (loss) and is reclassified into income as the hedged transactions occur.

While the primary purpose of our derivative transactions is to protect ourselves against the volatility in oil and natural gas prices, under certain circumstances, or if hedges are deemed ineffective, discontinued, or terminated for any reason, we may incur substantial losses in closing out our positions, which could have a material adverse effect on our financial condition, results of operations, and cash flows.

Our working capital could be adversely affected if we enter into derivative instruments that require cash collateral.

The use of derivatives may, in some cases, require the posting of cash collateral with counterparties (i.e. margin requirements). Although we currently do not, and do not anticipate that we will in the future, enter into derivative transactions that require an initial deposit of cash collateral, our working capital, and by extension, our growth, could be impacted if we enter into derivative transactions that require cash collateral and if commodity prices move in a manner adverse to us, we may be required to meet margin calls. Future collateral requirements are uncertain and will depend on arrangements with our counterparties and highly volatile oil and natural gas prices.

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We are subject to financing and interest rate exposure risks.

Our future success depends on our ability to access capital markets and obtain financing on reasonable terms. Our ability to access financial markets and obtain financing on commercially reasonable terms in the future is dependent on a number of factors, many of which we cannot control, including changes in:

• our credit ratings;

• interest rates;

• the structured and commercial financial markets;

• market perceptions of us or the oil and natural gas exploration and production industry; and

• tax burden due to new tax laws.

Assuming a constant debt level of $513.0 million, equal to our borrowing base at December 31, 2009, the cash flow impact for a 12-month period resulting from a 100 basis point movement in interest rates, regardless of whether the spread widens or tightens, would be $5.1 million. As a result, any increases in our interest rates, or our inability to access the equity markets on reasonable terms, could have an adverse impact on our financial condition, results of operations, and growth prospects.

The concentration of accounts for our oil and natural gas sales, joint interest billings, or hedging with third parties could expose us to credit risk.

Substantially all of our accounts receivable result from oil and natural gas sales or joint interest billings to third parties in the energy industry. The concentration of customers and joint interest owners may impact our overall credit risk in that these entities may be similarly affected by changes in economic and other conditions. Historically, we have not experienced any material credit losses on our receivables. Future concentrations of sales of oil and natural gas to a limited number of customers, combined with decreases in commodity prices could result in adverse effects.

In addition, our oil and natural gas swaps or other hedging contracts expose us to credit risk in the event of non-performance by counterparties. Generally, these contracts are with major investment grade financial institutions and historically we have not experienced any credit losses. We believe that the guarantee of a fixed price for the volume of oil and natural gas hedged reduces volatility in our reported results of operations, financial position and cash flows from period to period and lowers our overall business risk. However, as also discussed along with other risks specific to hedging activities, we may be exposed to greater credit risk in the future.

Regulation related to global warming and climate change could have an adverse effect on our operations and demand for oil and natural gas.

Recent scientific studies have suggested that emissions of gases, commonly referred to as “greenhouse gases” including carbon dioxide, methane, and nitrous oxide among others, may be contributing to warming of the earth’s atmosphere. In response to such studies, the U.S. Congress is actively considering legislation to reduce emissions of greenhouse gases. In addition, several states have already taken legal measures to reduce emissions of greenhouse gases.

As a result of the U.S. Supreme Court’s decision on April 2, 2007 in Massachusetts, et al. v. EPA, 549 U.S. 497 (2007), finding that greenhouse gases fall within the Clean Air Act (“CAA”) definition of “air pollutant,” the Environmental Protection Agency (“EPA”) was required to determine whether emissions of greenhouse gases “endanger” public health or welfare. In April 2009, EPA proposed a finding of such endangerment. Consistent with its proposed endangerment finding, in September 2009, EPA proposed regulations to control greenhouse gas emissions from light duty vehicles. The EPA also announced that its proposed action to control greenhouse gas emissions from light duty vehicles, should it become final, would automatically trigger application of the CAA prevention of significant deterioration and Title V operating permit programs to major stationary sources of greenhouse gas emissions. In September 2009, EPA issued a proposed “tailoring” rule explaining the legal mechanism upon which it would rely to raise the “major stationary source” air pollutant emission threshold of 250 tons per year and 100 tons per year to 25,000 tons per year. With its proposed “tailoring rule,” EPA also explained the manner in which it would implement the CAA permitting programs to major stationary source greenhouse gas emission sources. In September 2009, EPA promulgated a final mandatory greenhouse gas reporting rule which will assist EPA in implementing the major stationary source permitting programs triggered by the mobile source rules. This reporting rule became effective on December 29, 2009. On December 15, 2009, EPA promulgated its final endangerment rule, “Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act.” This final rule became effective on January 14, 2010. Currently, EPA is expected to promulgate its final rules regulating and controlling greenhouse gas emissions from light duty vehicles, as well as its final “tailoring rule,” in March 2010. Though subject to legal challenge, EPA’s rules promulgated thus far are currently final and effective, and will remain so unless successfully challenged directly in court, or unless Congress adopts legislation preempting EPA’s regulatory authority to address greenhouse gases under the CAA.

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Beyond legislative and regulatory developments, there have been several court cases impacting this area of risk. First, in September 2009, the United States Court of Appeals for the Second Circuit issued its decision in Connecticut v. American Electric Power Co., 2009 U.S. App. LEXIS 20873 (2d Cir. Sept. 21, 2009). With this case, the Second Circuit reversed a lower court’s dismissal of plaintiff claims that public utilities greenhouse gas emissions created a “public nuisance.” In reversing, the Second Circuit rejected the lower court’s reliance on defenses including political question, preemption and lack of standing to dismiss. In this case, the plaintiffs consist of State entities and public trusts, and are seeking to enjoin excessive greenhouse gas emissions. Second, on October 16, 2009, the United States Court of Appeals for the Fifth Circuit issued its decision in Comer v. Murphy Oil USA, 2009 U.S. App. LEXIS 22774 (5th Cir. Oct. 16, 2009). With this case, the Fifth Circuit reversed a lower court’s dismissal of plaintiff claims that corporations operating energy, fossil fuel and chemical industries caused the emission of greenhouse gases that ultimately resulted in additional property damage from Hurricane Katrina, asserting claims of public and private nuisance, trespass, negligence, unjust enrichment, fraudulent misrepresentation and civil conspiracy. In reversing, the Fifth Circuit rejected the lower court’s reliance on similar defenses, including the political question defense. In this case, the plaintiffs consist of property owners and they are seeking only damages. A similar case, Native Village of Kivalina v. ExxonMobil Corp., Case No: C 08-1138 SBA (N.D. Cal., Oakland Div.) (Sept. 30, 2009) (order granting defendants’ motion to dismiss for lack of subject matter jurisdiction), was appealed to the Ninth Circuit in November, 2009. These cases expose other significant emission sources of greenhouse gases to similar litigation risk. The effect of this recent caselaw may be mitigated by actions that the courts determine displace federal common law, potentially including Congressional adoption of greenhouse gas legislation and, or, EPA’s final adoption of the light duty vehicle emission regulations which, without legislative intervention, will trigger application of other CAA provisions to greenhouse gas emissions.

Other nations have already agreed to regulate emissions of greenhouse gases, pursuant to the United Nations Framework Convention on Climate Change, also known as the “Kyoto Protocol,” an international treaty pursuant to which participating countries (not including the United States) have agreed to reduce their emissions of greenhouse gases to below 1990 levels by 2012. Though the 15th meeting of the Council of the Parties in Copenhagen in December 2009 failed to result in a final agreement, international negotiations continue, with the participation of the United States. International developments, passage of state or federal climate control legislation or other regulatory initiatives, the adoption of regulations by EPA and analogous state agencies that restrict emissions of greenhouse gases in areas in which we conduct business, or further development of caselaw allowing claims based upon greenhouse gas emissions, could have an adverse effect on our operations and demand for oil and natural gas.

Potential legislative and regulatory actions could increase our costs, reduce our revenue and cash flow from oil and natural gas sales, reduce our liquidity or otherwise alter the way we conduct our business.

Pending federal budget proposals released by the White House on February 26, 2009 and February 1, 2010 would potentially increase and accelerate the payment of federal income taxes of independent producers of oil and natural gas. Proposals that would significantly affect us include, but are not limited to, repealing the expensing of intangible drilling costs, repealing the percentage depletion allowance, repealing the manufacturing tax deduction for oil and natural gas companies and increasing the amortization period of geological and geophysical expenses. Additionally, the Senate Bill version of the Oil Industry Tax Break Repeal Act of 2009, introduced on April 23, 2009, and the Senate Bill version of the Energy Fairness for America Act, introduced on May 20, 2009, include many of the proposals outlined in the federal budget proposals. It is unclear, however, whether any such changes will be enacted or how soon such changes could be effective. The passage of any legislation as a result of the budget proposals, either Senate Bill or any other similar change in U.S. federal income tax law could eliminate certain tax deductions that are currently available with respect to oil and natural gas exploration and development, and any such change (i) would make it more costly for us to explore for and develop our oil and natural gas resources and (ii) could negatively affect our financial condition, results of operation and, thus, our ability to make payments on the notes.

The U.S. Congress is considering measures aimed at increasing the transparency and stability of the over-the-counter (“OTC”) derivative markets and preventing excessive speculation. We maintain an active price and basis protection hedging program related to the oil and natural gas we produce.

Additionally, we have used the OTC market exclusively for our oil and natural gas derivative contracts and rely on our hedging activities to manage the risk of low commodity prices and to predict with greater certainty the cash flow from our hedged production. Proposals being considered would impose clearing and standardization requirements for all OTC derivatives and restrict trading positions in the energy futures markets. Such changes would likely materially reduce our hedging opportunities and could negatively affect our revenues and cash flow during periods of low commodity prices.

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Unusual weather patterns or natural disasters, whether due to climate change or otherwise, could negatively impact our financial condition.

Our business depends, in part, on normal weather patterns across the United States. Natural gas demand and prices are particularly susceptible to seasonal weather trends. Warmer than usual winters can result in reduced demand and high season-end storage volumes, which can depress prices to unacceptably low levels. In addition, because a majority of our properties are located in Oklahoma, Texas, and Louisiana, our operations are constantly at risk of extreme adverse weather conditions such as tornadoes and hurricanes. Any unusual or prolonged adverse weather patterns in our areas of operations or markets, whether due to climate change or otherwise, could have a material and adverse impact on our business, financial condition and cash flow. In addition, our business, financial condition and cash flow could be adversely affected if the businesses of our key vendors, purchasers, contractors, suppliers or transportation service providers were disrupted due to severe weather, such as hurricanes or floods, whether due to climate change or otherwise.

Climate change and government laws and regulations related to climate change could negatively impact our financial condition.

In addition to other climate-related risks set forth in this “Risk Factors” section, we are and will be, directly and indirectly, subject to the effects of climate change and may, directly or indirectly, be affected by government laws and regulations related to climate change. We cannot predict with any degree of certainty what effect, if any, possible climate change and government laws and regulations related to climate change will have on our operations, whether directly or indirectly. While we believe that it is difficult to assess the timing and effect of climate change and pending legislation and regulation related to climate change on our business, we believe that climate change and government laws and regulations related to climate change may affect, directly or indirectly, (i) the cost of the equipment and services we purchase, (ii) our ability to continue to operate as we have in the past, including drilling, completion and operating methods, (iii) the timeliness of delivery of the materials and services we need and the cost of transportation paid by us and our vendors and other providers of services, (iv) insurance premiums, deductibles and the availability of coverage, (v) the cost of utility services, particularly electricity, in connection with the operation of our properties, and (vi) factors arising from possible greenhouse gas legislation, in addition to previously identified factors, depending upon, but not limited to, the following considerations: whether and to what extent legislation is enacted, the nature of the legislation (such as a cap and trade system or a tax on emissions); the GHG reductions required; the price and availability of offsets; the amount and allocation of allowances; costs required to improve facilities and equipment to reduce emissions in order to comply with regulatory limits or to mitigate the financial consequences of a GHG emission limitations; changes to profit or loss arising from increased or decreased demand for oil and natural gas we produce arising directly from legislation or regulation, and indirectly from changes in production costs. In addition, climate change may increase the likelihood of property damage and the disruption of our operations, especially in coastal states. As a result, our financial condition could be negatively impacted by significant climate change and related governmental regulation, and that impact could be material.

Certain risks are amplified by the current economic environment.

During 2007, the U.S. and many other countries began to exhibit signs of economic weakness, which continued throughout 2008 and 2009. This weakness has had an adverse impact on the global financial system, stressing a number of large financial institutions. Capital constraints coupled with significant energy price volatility have produced pervasive liquidity issues for many companies. Such events have created uncertainty in the economic outlook, and have amplified the potential likelihood of certain risks inherent in our business, such as:

• increased cost of capital and increased difficulties accessing capital to fund expansion and acquisition activities as well as routine operating requirements;

• the failure of counterparties to fulfill their delivery or purchase obligations;

• business failures by vendors, suppliers or customers that result in (i) delays in progress on our capital projects, (ii) nonpayment of receivables or (iii) expensive and protracted court or bankruptcy proceedings; and

• decreases in domestic consumption or in volumes imported to or produced in the United States and related reductions in transportation or marketing margins.

Competition for experienced technical personnel may negatively impact our operations or financial results.

Our continued drilling success and the success of other activities integral to our operations will depend, in part, on our ability to attract and retain experienced explorationists, engineers and other professionals. Despite the recent decline in commodity prices and lower industry activity levels, competition for these professionals remains strong. We are likely to continue to experience increased costs to attract and retain these professionals.

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Federal and state legislation and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays.

Congress is currently considering legislation to amend the federal Safe Drinking Water Act to require the disclosure of chemicals used by the oil and natural gas industry in the hydraulic fracturing process. Hydraulic fracturing involves the injection of water, sand and chemicals under pressure into rock formations to stimulate natural gas production. Sponsors of bills currently pending before the Senate and House of Representatives have asserted that chemicals used in the fracturing process could adversely affect drinking water supplies. The proposed legislation would require the reporting and public disclosure of chemicals used in the fracturing process, which could make it easier for third parties opposing the hydraulic fracturing process to initiate legal proceedings based on allegations that specific chemicals used in the fracturing process could adversely affect groundwater. In addition, these bills, if adopted, could repeal the exemptions for hydraulic fracturing from the Safe Drinking Water Act which would allow the EPA to establish an additional level of regulation at the federal level that could lead to operational delays or increased operating costs and could result in additional regulatory burdens that could make it more difficult to perform hydraulic fracturing and increase our costs of compliance and doing business.

We are responsible for the decommissioning, abandonment, and reclamation costs for our facilities, which could decrease funds available for servicing our debt obligations and other operating expenses.

We are responsible for compliance with all applicable laws and regulations regarding the decommissioning, abandonment and reclamation of our facilities at the end of their economic life, the costs of which may be substantial. It is not possible to predict these costs with certainty since they will be a function of regulatory requirements at the time of decommissioning, abandonment and reclamation. We may, in the future, determine it prudent or be required by applicable laws or regulations to establish and fund one or more decommissioning, abandonment and reclamation reserve funds to provide for payment of future decommissioning, abandonment and reclamation costs, which could decrease funds available to service debt obligations. In addition, such reserves, if established, may not be sufficient to satisfy such future decommissioning, abandonment and reclamation costs and we will be responsible for the payment of the balance of such costs.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

See Items 1. and 2. Business and Properties—Properties. We also have various operating leases for rental of office space, office and field equipment, and vehicles. See Liquidity and Capital Resources—Contractual Obligations in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Note 13, “Commitments and Contingencies,” to the Consolidated Financial Statements. Such information is incorporated herein by reference.

ITEM 3. LEGAL PROCEEDINGS

In the opinion of management, there are no other material pending legal proceedings to which we or any of our subsidiaries are a party or of which any of our property is the subject. However, due to the nature of our business, certain legal or administrative proceedings may arise from time to time in the ordinary course of business.

ITEM 4. [RESERVED]

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock has not been registered under the Securities Exchange Act of 1934, and there is no established public trading market for our common equity.

As of April 14, 2010, we had 1,401,376 shares of common stock outstanding held by 21 record holders.

We have not paid any dividends on our common stock in either of the last two years and we do not currently anticipate paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain all future earnings to fund the development and growth of our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and will depend on our results of operations, financial condition, capital requirements and other factors deemed relevant by our board. We are also currently restricted in our ability to pay dividends under our Credit Agreement. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources for more information regarding the restrictions on our ability to pay dividends.

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ITEM 6. SELECTED FINANCIAL DATA

You should read the following historical financial data in connection with the financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this report. The financial data as of and for each of the five years ended December 31, 2009 was derived from our audited financial statements. Our historical results are not necessarily indicative of results to be expected in future periods.

	Year Ended December 31,
(dollars in thousands, except per share data)	2009			2008			2007			2006			2005
Operating results data:
Revenues
Oil and natural gas sales	$	292,387		$	501,761		$	365,958		$	249,180		$	201,410
Gain (loss) from oil and natural gas hedging activities		19,403			(76,417	)		(28,140	)		(4,166	)		(68,324	)
Total revenues		311,790			425,344			337,818			245,014			133,086
Costs and expenses
Lease operating		94,155			120,547			104,469			71,663			42,147
Production tax		20,341			33,815			26,216			18,710			14,626
Depreciation, depletion and amortization		103,998			100,672			85,431			52,299			31,423
Loss on impairment of oil & natural gas properties		240,790			281,393			—			—			—
Loss on impairment of ethanol plant		—			2,900			—			—			—
General and administrative		23,741			22,372			21,838			14,659			9,808
Litigation settlement		2,928			—			—			—			—
Total costs and expenses		485,953			561,699			237,954			157,331			98,004
Operating income (loss)		(174,163	)		(136,355	)		99,864			87,683			35,082
Non-operating income (expense)
Interest expense		(90,102	)		(86,038	)		(87,656	)		(45,246	)		(15,588	)
Non-hedge derivative gains (losses)		11,169			126,941			(23,781	)		(4,677	)		—
Merger costs		(2,169	)		(1,400	)		—			—			—
Termination fee		—			3,500			—			—			—
Other income		14,403			1,845			2,276			792			665
Net non-operating income (expense)		(66,699	)		44,848			(109,161	)		(49,131	)		(14,923	)
Income (loss) from continuing operations before income taxes and non-controlling interest		(240,862	)		(91,507	)		(9,297	)		38,552			20,159
Income tax expense (benefit)		(89,895	)		(35,301	)		(3,386	)		14,817			7,309
Non-controlling interest		—			—			—			(71	)		—
Income (loss) from continuing operations		(150,967	)		(56,206	)		(5,911	)		23,806			12,850
Income from discontinued operations, net of related taxes		6,649			1,456			1,118			—			—
Net income (loss)	$	(144,318	)	$	(54,750	)	$	(4,793	)	$	23,806		$	12,850
Income (loss) per share (basic and diluted):
Continuing operations	$	(172.14	)	$	(64.09	)	$	(6.74	)	$	29.74		$	16.58
Discontinued operations		7.58			1.66			1.27			—			—
Net income (loss) per share (basic and diluted)	$	(164.56	)	$	(62.43	)	$	(5.47	)	$	29.74		$	16.58
Weighted average number of shares used in calculation of basic and diluted earnings (loss) per share		877,000			877,000			877,000			800,500			775,000
Cash flow data:
Net cash provided by operating activities	$	98,675		$	145,831		$	113,070		$	89,154		$	55,744
Net cash provided by (used in) investing activities		21,904			(262,905	)		(239,069	)		(703,804	)		(325,068	)
Net cash provided by (used in) financing activities		(99,274	)		157,499			128,883			621,855			257,080

	As of December 31,
(dollars in thousands, except per share amounts)	2009			2008		2007			2006			2005
Financial position data:
Cash and cash equivalents	$	73,417		$	52,112	$	11,687		$	8,803		$	1,598
Total assets		1,353,920			1,712,836		1,530,898			1,331,435			647,379
Total debt		1,177,007			1,271,589		1,114,237			976,272			446,544
Retained earnings (accumulated deficit)		(122,978	)		21,340		76,090			80,883			58,126
Accumulated other comprehensive income (loss), net of income taxes		17,618			82,133		(73,839	)		(3,946	)		(47,967	)
Total stockholders’ equity (deficit)		(4,433	)		204,400		103,178			177,864			10,167
Cash dividends per common share		—			—		—		$	1.35		$	4.40

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes included elsewhere in this report. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this report, particularly in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”

Overview

We are an independent oil and natural gas company engaged in the production, exploitation and acquisition of oil and natural gas properties. Our areas of operation include the Mid-Continent, Permian Basin, Gulf Coast, Ark-La-Tex, North Texas and the Rocky Mountains. We maintain a portfolio of proved reserves, development and exploratory drilling opportunities, and EOR projects.

Our reserve estimate as of December 31, 2009 was prepared using an average price for oil and natural gas based upon the first day of each month for the prior twelve months as required by the SEC’s Modernization of Oil and Gas Reporting. As of December 31, 2009, we had estimated proved reserves of 141.9 MMBoe, with a PV-10 value of approximately $1.3 billion. Our reserves were 66% proved developed reserves and 63% crude oil. Despite the decline in SEC gas price from $5.62 per Mcf as of December 31, 2008 to $3.87 per Mcf as of December 31, 2009, our estimated proved reserves have increased significantly since December 31, 2008 due in part to an increase in SEC oil price from $44.60 per Bbl as of December 31, 2008 to $61.18 per Bbl as of December 31, 2009. As of December 31, 2008, we had estimated proved reserves of 113.3 MMBoe with a PV-10 value of $932.7 million, of which 74% were proved developed reserves and 45% were crude oil.

Our revenues, profitability and future growth depend substantially on prevailing prices for oil and natural gas and on our ability to find, develop and acquire oil and natural gas reserves that are economically recoverable. The preparation of our financial statements in conformity with generally accepted accounting principles (“GAAP”) requires us to make estimates and assumptions that affect our reported results of operations and the amount of our reported assets, liabilities and proved oil and natural gas reserves. We use the full cost method of accounting for our oil and natural gas activities.

Generally our producing properties have declining production rates. Our reserve estimates reflect that our production rate on current proved developed producing reserve properties will decline at annual rates of approximately 14%, 11%, and 9% for the next three years. To grow our production and cash flow we must find, develop and acquire new oil and natural gas reserves to replace those being depleted by production. Substantial capital expenditures are required to find, develop and acquire oil and natural gas reserves.

Oil and natural gas prices fluctuate widely. We generally hedge a substantial portion of our expected future oil and natural gas production to reduce our exposure to commodity price decreases. The prices we receive for our oil and natural gas production affect our:

• cash flow available for capital expenditures;

• ability to borrow and raise additional capital;

• ability to service debt;

• quantity of oil and natural gas we can produce;

• quantity of oil and natural gas reserves; and

• operating results for oil and natural gas activities.

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Operating summary

Our production for 2009 was 7,638 MBoe, an 8% increase over 2008, primarily due to our capital expenditures in the Permian and Mid-Continent areas during 2008 and 2009. However a 46% decline in our average sales price before derivative settlements resulted in a 42% decrease in revenue from oil and natural gas sales compared to 2008. Although total operating costs and expenses decreased by 13% compared to 2008, the decrease was not commensurate with the decrease in revenue. In addition, due primarily to changes in the NYMEX forward commodity price curves, our gain on non-hedge derivatives decreased by 91%. Primarily as a result of these factors, we had a net loss of $144.3 million in 2009 compared to a loss of $54.8 million in 2008.

The following are material events that have impacted liquidity or results of operations in 2009 or are expected to impact these items in future periods:

• Current Market Conditions. Our business in 2009 was negatively impacted by constraints in the credit markets and continued commodity price volatility. Prices declined significantly during the fourth quarter of 2008 and into 2009. Although partially offset by our commodity derivatives, lower commodity prices reduced our cash flows from operations as compared to prior years. If commodity prices decline again, our cash flows from operations would be further reduced, which may cause us to alter our business plans.

• Impairment of oil and natural gas properties. In accordance with the full-cost method of accounting, the net capitalized costs of oil and natural gas properties are not to exceed their related estimated future net revenues discounted at 10%, as adjusted for our cash flow hedge positions and net of tax considerations, plus the lower of cost or estimated fair value of unproved properties. During the first quarter of 2009, gas prices declined significantly as compared to the December 31, 2008 spot price of $5.62 per Mcf. Based on March 31, 2009 spot prices of $49.66 per Bbl of oil and $3.63 per Mcf of natural gas, the internally estimated PV-10 value of our reserves declined by 13.5% compared to our PV-10 value at December 31, 2008. As a result, we recorded a ceiling test impairment of oil and natural gas properties of $240.8 million during the first quarter of 2009.

• Monetization of Derivative Assets. During the first quarter of 2009, we monetized certain derivative instruments with original settlement dates from May through October of 2009 for net proceeds of $9.5 million. None of the monetized derivatives were incorporated into the determination of the borrowing base under our Seventh Restated Credit Agreement. During the second quarter of 2009 we monetized additional derivative instruments with original settlement dates from January 2012 through December 2013 for net proceeds of $102.4 million. As a result of this monetization, effective June 8, 2009, the borrowing base was reduced from $600.0 million to $513.0 million, resulting in a payment to the banks of $87.0 million. The remaining proceeds of $15.4 million increased our cash balance.

• Production Tax Credit. During 2006, we purchased interests in two venture capital limited liability companies resulting in a total investment of $15.0 million. Our return on the investment was the receipt of $2 of tax credits for every $1 invested and was recouped from our Oklahoma production taxes. The investments were accounted for as a production tax benefit asset and were netted against tax credits realized in other income using the effective yield method over the expected recovery period. During the years ended December 31, 2009, 2008, and 2007, we received cash of $27.2 million, $2.1 million, and $0.7 million, respectively, and recorded pre-tax income of $13.5 million, $0.7 million, and $0.8 million, respectively, from application of these tax credits. This source of cash and income will not be available in future periods.

• Discontinued operations. During the second quarter of 2009, we committed to a plan to sell the assets of Green Country Supply, Inc. (“GCS”), a wholly owned subsidiary that provides oilfield supplies, oilfield chemicals, downhole electric submersible pumps, and related services to oil and natural gas operators primarily in Oklahoma, Texas, and Wyoming. During the year ended December 31, 2009, we sold the Electric Submersible Pumps (“ESP”) division and the Chemicals division of GCS in two separate transactions, for which we received cash totaling $25.3 million and recorded a pre-tax gain totaling $10.4 million.

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Liquidity and capital resources

Crude oil and natural gas prices have fallen significantly from their peak levels during the second and third quarters of 2008. Lower oil and natural gas prices decrease our revenues. An extended decline in oil or natural gas prices may materially and adversely affect our future business, liquidity or ability to finance planned capital expenditures

We pledge our producing oil and natural gas properties to secure our Credit Agreement. The banks establish a borrowing base by making an estimate of the collateral value of our oil and natural gas properties. We utilize the available funds as needed to supplement our operating cash flows as a financing source for our capital expenditures. Our ability to fund our capital expenditures is dependent on the level of product prices and the success of our acquisition and development program in adding to our available borrowing base. If oil and natural gas prices decrease from the amounts used in estimating the collateral value of our oil and natural gas properties, the borrowing base may be reduced, thus reducing funds available for our capital expenditures. We mitigate a potential reduction in our borrowing base caused by a decrease in oil and natural gas prices through the use of commodity derivatives.

Historically, our primary sources of liquidity have been cash generated from our operations and debt. At December 31, 2009, we had approximately $73.4 million of cash and cash equivalents and $3.1 million of availability under our Seventh Restated Credit Agreement with a borrowing base of $513.0 million.

On March 23, 2010, we entered into a stock purchase agreement (the “Stock Purchase Agreement”) with CCMP Capital Investors II (AV-2), L.P., CCMP Energy I LTD., and CCMP Capital Investors (Cayman) II, L.P. (collectively, “CCMP”). On April 12, 2010, we sold 475,043 shares of our common stock to CCMP for a purchase price of $325.0 million. In connection with the closing of the Stock Purchase Agreement, we entered into and closed an Eighth Restated Credit Agreement, which has an initial borrowing base of $450.0 million, is collateralized by our oil and natural gas properties, and is scheduled to mature on April 12, 2014. We used the proceeds from the sale of common stock to CCMP, along with proceeds available under the Eighth Restated Credit Agreement, to repay the amounts owing under our Seventh Restated Credit Agreement. As of April 14, 2010, we had $275.3 million of availability under our Eighth Restated Credit Agreement. See Note 14 to our consolidated financial statements for additional information regarding these transactions.

Covenants set forth in the indentures for our 8 ¹ /2% Senior Notes and the 8 ⁷/8% Senior Notes, including the ACNTA test, limit the amount of secured debt we can incur. Certain thresholds set forth in the ACNTA test are principally reliant upon the levels of commodity prices for crude oil and natural gas at specified dates.

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Sources and uses of cash

Our net increase in cash is summarized as follows:

	Year ended December 31,
(dollars in thousands)	2009			2008			2007
Cash flows provided by operating activities	$	98,675		$	145,831		$	113,070
Cash flows provided by (used in) investing activities		21,904			(262,905	)		(239,069	)
Cash flows provided by (used in) financing activities		(99,274	)		157,499			128,883
Net increase in cash during the period	$	21,305		$	40,425		$	2,884

Substantially all of our cash flow from operating activities is from the production and sale of oil and natural gas, reduced or increased by associated hedging activities. Cash inflows from oil and natural gas sales net of hedging settlements and cash outflows for operating expenses both decreased sharply from 2008 to 2009 due to the decline in commodity prices after having increased significantly from 2007 to 2008 as commodity prices rose. Operating cash flows also include production tax credits of $13.7 million, $1.0 million, and $0.3 million for the years ended December 31, 2009, 2008, and 2007, respectively. This source of cash received will not be available in future periods. Primarily as a result of the above activity, cash flow from operating activities decreased by 32% from 2008 to 2009 after having increased by 29% from 2007.

We use the net cash provided by operations to partially fund our acquisition, exploration and development activities. For the years ended December 31, 2009, 2008, and 2007, cash flows provided by operating activities were approximately 55%, 48%, and 51%, respectively, of cash used for the purchase of property and equipment and oil and natural gas properties. In February 2008, loss of well control occurred at the Bowdle 47 No. 2 well in Loving County, Texas. Total costs attributable to the loss of well control were approximately $10.6 million. Our insurance policy has covered 100% of these costs, with the $0.6 million insurance retention and deductible being payable by us. We received insurance proceeds of $1.9 million and $8.1 million in 2009 and 2008, respectively, and no further receipts are expected. Insurance proceeds received are recorded as a reduction of oil and natural gas properties on the balance sheet and in the statement of cash flows.

During 2009, 2008, and 2007, the monetization of derivatives provided investing cash inflows of $111.9 million, $32.6 million, and $0, respectively, and the return of our prepaid production tax credits provided investing cash inflows of $13.5 million, $1.1 million, and $0.4 million, respectively. Cash flows provided by investing activities for the year ended December 31, 2009 also included proceeds of $25.3 million from the sale of the ESP and Chemicals divisions of GCS. See the Results of operations section for additional discussion of these transactions.

Net cash provided by (used in) financing activities was ($99.3) million, $157.5 million, and $128.9 million, during 2009, 2008, and 2007, respectively. As a result of our monetization of derivatives in the second quarter of 2009, the borrowing base under our Seventh Restated Credit Agreement was reduced from $600.0 million to $513.0 million, and proceeds from the monetization of $87.0 million were paid to the banks. Borrowings under our Seventh Restated Credit Agreement were $147.0 million and $110.0 million in 2008 and 2007, respectively, and were used to finance our capital expenditures. On January 18, 2007, we issued $325.0 million aggregate principal amount of 8 ⁷/8% Senior Notes maturing on February 1, 2017. The net proceeds from the issuance of the notes were used to pay down outstanding amounts under our Seventh Restated Credit Agreement.

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Capital expenditures

Our actual costs incurred for the year ended December 31, 2009 and our current 2010 budgeted capital expenditures for oil and natural gas properties are detailed in the table below:

(dollars in thousands)	Year ended December  31, 2009(1)		2010 budgeted  capital expenditures
Development activities:
Developmental drilling(2)	$	77,826	$	163,000
Enhancements		34,767		12,000
Tertiary recovery		15,047		63,000
Acquisitions:
Proved properties		14,552		20,000
Unproved properties		3,781		—
Exploration activities		4,942		10,000
Total	$	150,915	$	268,000

(1) Includes $1.3 million of additions relating to increases in our asset retirement obligations.

(2) Includes $3.6 million of costs related to the construction of a compressor station and CO₂ pipeline in 2009.

In addition to the capital expenditures for oil and natural gas properties, we spent approximately $2.6 million for acquisition and construction of new office and administrative facilities and equipment during 2009.

Our oil and natural gas property capital expenditures for 2009 represent a 50% reduction from our 2008 levels. Despite this reduction, production for 2009 increased to 7,638 MBoe as a result of capital investments made in 2008 and the first quarter of 2009. Our actual costs incurred for the year ended December 31, 2009 and our current 2010 budgeted capital expenditures for oil and natural gas properties summarized by area are detailed in the table below:

(dollars in thousands)	2009 capital expenditures(1)		Percent of total		2010 budgeted capital expenditures		Percent of total
Mid-Continent(2)	$	117,820	78	%	$	209,000	78	%
Permian Basin		17,390	11	%		34,000	13	%
Gulf Coast		11,881	8	%		14,000	5	%
Ark-La-Tex		2,306	2	%		1,000	0	%
North Texas		1,262	1	%		4,000	2	%
Rocky Mountains		256	0	%		6,000	2	%
	$	150,915	100	%	$	268,000	100	%

(1) Includes $1.3 million of additions relating to increases in our asset retirement obligations.

(2) Includes $3.6 million of costs related to the construction of a compressor station and CO₂ pipeline in 2009.

A majority of our oil and natural gas capital expenditure budget for development drilling in 2010 is allocated to our core areas of the Mid-Continent and Permian Basin. The wells we drill in these areas are primarily infill or single stepout wells. A number of high impact wells that we expect will support our production throughout 2010 are currently being drilled and should be completed and on line during the first and second quarters of 2010. Six of these wells are located in the Texas Panhandle Atoka Wash and one is located in the Haley Area of Loving County, Texas. However, we cannot accurately predict the timing or level of future production.

We continually evaluate our capital needs and compare them to our capital resources. Our actual expenditures during 2010 may be higher or lower than our budgeted amounts. Our level of exploration and development expenditures is largely discretionary, and the amount of funds devoted to any particular activity may increase or decrease significantly depending on available opportunities, commodity prices, cash flows and development results, among other factors.

As of December 31, 2009, we had cash and cash equivalents of $73.4 million and long-term debt obligations of $1.2 billion.

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Credit Agreements

At December 31, 2009, we were a party to a Seventh Restated Credit Agreement, which was scheduled to mature on October 31, 2010, and was collateralized by our oil and natural gas properties. As a result of our derivative monetization during the second quarter of 2009, the borrowing base was reduced from $600.0 million to $513.0 million effective June 8, 2009. At December 31, 2009, we had $507.0 million outstanding under our Seventh Restated Credit Agreement and all of our borrowings were Eurodollar loans. The borrowing base, which was reaffirmed effective November 23, 2009, was $513.0 million as of December 31, 2009. We believe we were in compliance with all covenants under the Seventh Restated Credit Agreement as of December 31, 2009.

On April 12, 2010, in connection with the closing of our Stock Purchase Agreement with CCMP, we entered into and closed an Eighth Restated Credit Agreement, which has an initial borrowing base of $450.0 million, is collateralized by our oil and natural gas properties, and is scheduled to mature on April 12, 2014. We used the proceeds from the sale of common stock to CCMP, along with proceeds available under the Eighth Restated Credit Agreement, to repay the amounts owing under our Seventh Restated Credit Agreement.

The terms of the Eighth Restated Credit Agreement are described below. The terms of the Seventh Restated Credit Agreement were substantially similar to those contained in the Eighth Restated Credit Agreement. All discussions of interest rates and ratios as of dates prior to April 12, 2010 relate to the Seventh Restated Credit Agreement. Availability under our Credit Agreement is subject to a borrowing base which is set by the banks semi-annually on May 1 and November 1 of each year. In addition, the lenders may request a borrowing base redetermination once between each scheduled redetermination and in the event of early termination of our derivative contracts. If we issue Additional Permitted Debt, as defined in the Eighth Restated Credit Agreement, the borrowing base will be automatically reduced by an amount equal to 25% of the aggregate stated principal amount of the debt issued. As of April 14, 2010, we had $275.3 million of availability under our Eighth Restated Credit Agreement.

The agreement has certain negative and affirmative covenants that require, among other things, maintaining a specified current ratio and debt service ratio.

Borrowings under our Credit Agreement are made, at our option, as either Eurodollar loans or Alternate Base Rate (“ABR”) loans.

Interest on Eurodollar loans is computed at the Adjusted LIBO Rate, defined as the rate applicable to dollar deposits in the London interbank market with a maturity comparable to the interest period (one, two, three or six months, selected by us) times a Statutory Reserve Rate multiplier, as defined in the Credit Agreement, plus a margin where the margin varies from 2.500% to 3.500% depending on the utilization percentage of the conforming borrowing base. Interest payments on Eurodollar borrowings are due the last day of the interest period, if shorter than three months or every three months.

Interest on ABR loans is computed as the greater of (1) the Prime Rate, as defined in our Credit Agreement, (2) the Federal Funds Effective Rate, as defined in our Credit Agreement, plus 1/2 of 1%, or (3) the Adjusted LIBO Rate, as defined in our Credit Agreement, plus 1%; plus a margin where the margin varies from 1.625% to 2.625%, depending on the utilization percentage of the borrowing base.

Commitment fees of 0.50% accrue on the unused portion of the borrowing base amount, depending on the utilization percentage, and are included as a component of interest expense. We have the right to make prepayments of the borrowings at any time without penalty or premium.

Interest was paid at least every three months during 2009 and 2008. The effective rate of interest on the entire outstanding balance was 6.081% and 5.299% as of December 31, 2009 and 2008, respectively, and was based upon LIBOR.

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Our Credit Agreement contains restrictive covenants that may limit our ability, among other things, to:

• incur additional indebtedness;

• create or incur additional liens on our oil and natural gas properties;

• pay dividends in cash or other property, redeem our capital stock or prepay certain indebtedness;

• make investments in or loans to others;

• change our line of business;

• enter into operating leases;

• merge or consolidate with another person, or lease or sell all or substantially all of our assets;

• sell, farm-out or otherwise transfer property containing proved reserves;

• enter into transactions with affiliates;

• issue preferred stock;

• enter into negative pledge agreements or agreements restricting the ability of our subsidiaries to pay dividends;

• enter into or terminate certain swap agreements;

• amend our organizational documents; and

• amend, modify or waive under our permitted bond documents (i) any covenants that would make the terms materially more onerous to us or (ii) certain other provisions.

Our Credit Agreement requires us to maintain a current ratio, as defined in our Credit Agreement, of not less than 1.0 to 1.0. The definition of current assets and current liabilities used for determination of the current ratio computed for loan compliance purposes differs from current assets and current liabilities determined in compliance with GAAP. Since compliance with financial covenants is a material requirement under our Credit Agreement, we consider the current ratio calculated under our Credit Agreement to be a useful measure of our liquidity because it includes the funds available to us under our Credit Agreement and is not affected by the volatility in working capital caused by changes in the fair value of derivatives. At December 31, 2009 and 2008, our current ratio as computed using GAAP was 1.38 and 1.34, respectively. After giving effect to the adjustments, our current ratio computed for loan compliance purposes was 1.51 and 1.19, respectively. The following table reconciles our current assets and current liabilities using GAAP to the same items for purposes of calculating the current ratio for our loan compliance:

(dollars in thousands)	December 31, 2009			December 31, 2008
Current assets per GAAP	$	161,682		$	218,363
Plus—Availability under Credit Agreement		3,145			3,270
Less—Short-term derivative instruments		(18,226	)		(51,412	)
Less—Deferred tax asset on derivative instruments and asset retirement obligations		(1,079	)		—
Current assets as adjusted	$	145,522		$	170,221
Current liabilities per GAAP	$	117,529		$	163,123
Less—Short term derivative instruments		(20,677	)		—
Less—Deferred tax liability on derivative instruments and asset retirement obligations		—			(19,755	)
Less—Short-term asset retirement obligation		(300	)		(300	)
Current liabilities as adjusted	$	96,552		$	143,068
Current ratio for loan compliance		1.51			1.19

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The monetization of derivatives in the fourth quarter of 2008 and the first and second quarters of 2009 allowed us to exceed our required current ratio by a higher margin.

Prior to the amendment described below, the Seventh Restated Credit Agreement required us to maintain a Consolidated Total Debt to Consolidated EBITDAX Ratio, as defined in our Seventh Restated Credit Agreement, of not greater than 5.00 to 1.0 for the annualized period commencing on January 1, 2007 and ending on the last day of the fiscal quarter ending on March 31, 2007. As of March 31, 2007, we did not meet this ratio.

Effective May 11, 2007, the Seventh Restated Credit Agreement was amended to replace the Total Debt to EBITDAX ratio with a Consolidated Senior Total Debt to Consolidated EBITDAX ratio. For purposes of the amended ratio, Consolidated Senior Total Debt consisted of all outstanding loans under the Seventh Restated Credit Agreement, letters of credit and obligations under capital leases, as defined in the First Amendment to our Seventh Restated Credit Agreement. The amended Seventh Restated Credit Agreement required us to maintain a Consolidated Senior Total Debt to Consolidated EBITDAX ratio, as defined in our Seventh Restated Credit Agreement, of not greater than:

• 2.75 to 1.0 for the annualized periods commencing on January 1, 2007 and ending on the last day of the fiscal quarter ending on March 31, 2007, June 30, 2007 and September 30, 2007 and for the four consecutive fiscal quarters ending on December 31, 2007; and

• 2.50 to 1.0 for the four consecutive fiscal quarters ending on March 31, 2008 and for each period of four consecutive fiscal quarters ending on the last day of such applicable fiscal quarters thereafter.

The Seventh Restated Credit Agreement, as amended effective May 21, 2009, required us to maintain a Consolidated Senior Total Debt to Consolidated EBITDAX Ratio, as defined in the Fifth Amendment to our Seventh Restated Credit Agreement, of not greater than:

• 2.50 to 1.0 for the four consecutive fiscal quarters ending on March 31, 2009; and

• 3.00 to 1.0 for the four consecutive fiscal quarters ending on June 30, 2009, September 30, 2009, December 31, 2009, and March 31, 2010.

For purposes of the amended ratio, Consolidated Senior Total Debt consisted of all outstanding loans under the Seventh Restated Credit Agreement, letters of credit and obligations under capital leases, minus cash on hand in excess of accounts payable and accrued liabilities that are more than 90 days past the invoice date, as defined in the Fifth Amendment to our Seventh Restated Credit Agreement.

The Eighth Restated Credit Agreement requires us to maintain a Consolidated Total Debt to Consolidated EBITDAX ratio, as defined in the Eight Restated Credit Agreement, of not greater than:

• 4.50 to 1.0 for the annualized periods commencing on April 1, 2010 and ending on the last day of the fiscal quarter ending on June 30, 2010, September 30, 2010, and December 31, 2010;

• 4.25 to 1.0 for the four consecutive fiscal quarters ending on March 31, 2011, June 30, 2011, and September 30, 2011; and

• 4.00 to 1.0 for the four consecutive fiscal quarters ending on December 31, 2011 and for each period of four consecutive fiscal quarters ending on the last day of such applicable fiscal quarters thereafter.

The Credit Agreement also specifies events of default, including:

• our failure to pay principal or interest under the Credit Agreement when due and payable;

• our representations or warranties proving to be incorrect, in any material respect, when made or deemed made;

• our failure to observe or perform certain covenants, conditions or agreements under the Credit Agreement;

• our failure to make payments on certain other material indebtedness when due and payable;

• the occurrence of any event or condition that requires the redemption or repayment of, or an offer to redeem or repay, certain other material indebtedness prior to its scheduled maturity;

• the commencement of a voluntary or involuntary proceeding seeking liquidation, reorganization or other relief, or the appointment of a receiver, trustee, custodian or other similar official for us or our subsidiaries, and the proceeding or petition continues undismissed for 60 days or an order approving the foregoing is entered;

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• our inability, admission or failure generally to pay our debts as they become due;

• the entry of a final, non-appealable judgment for the payment of money in excess of $5.0 million that remains undischarged for a period of 60 consecutive days;

• a Change of Control (as defined in the Credit Agreement); and

• the occurrence of a default under any permitted bond document, which such default continues unremedied or is not waived prior to the expiration of any applicable grace or cure under any permitted bond document.

If the outstanding borrowings under our Credit Agreement were to exceed the borrowing base as a result of a redetermination, we would be required to eliminate this excess. Within 10 days after receiving notice of the new borrowing base, we would be required to make an election: (1) to repay a portion of our bank borrowings in the amount of the excess either in a lump sum within 30 days or in equal monthly installments over a six-month period, (2) to submit within 30 days additional oil and natural gas properties we own for consideration in connection with the determination of the borrowing base sufficient to eliminate the excess or (3) to eliminate the excess through a combination of repayments and the submission of additional oil and natural gas properties within 30 days.

Senior Notes

Senior Notes at December 31, 2009 and December 31, 2008 consisted of the following:

	December 31,
	2009			2008
8.5% Senior Notes due 2015	$	325,000		$	325,000
8.875% Senior Notes due 2017(1)		325,000			325,000
Discount on Senior Notes due 2017		(2,123	)		(2,325	)
	$	647,877		$	647,675

(1) Upon completion of a qualified equity offering prior to February 1, 2012, we are entitled to redeem up to 35% of the aggregate principal amount of the 8 ⁷ /8% Senior Notes from the proceeds, so long as:

• we pay to the holders of such notes a redemption price of 108.875% of the principal amount of the 8  ⁷/₈% Senior Notes, plus accrued and unpaid interest to the date of redemption; and

• at least 65% of the aggregate principal amount of the 8  ⁷/₈% Senior Notes remains outstanding after each such redemption, other than 8 ⁷ /8% Senior Notes held by us or our affiliates.

As part of the indenture, we entered into a registration rights agreement in which we agreed to file a registration statement with the SEC related to an offer to exchange the notes for an issue of registered notes within 270 days of the closing date. The exchange offer was not completed within the 270-day period ending October 15, 2007 as required by the registration rights agreement. As a result, we accrued liquidated damages of $0.3 million during the year ended December 31, 2007. On February 29, 2008, we completed the exchange offer, and liquidated damages ceased to accrue as of that date. Total liquidated damages paid in 2008 were $0.4 million.

The Senior Notes are our senior unsecured obligations, rank equally in right of payment with all of our existing and future senior indebtedness, and rank senior to all of our existing and future subordinated debt. The payment of the principal, interest and premium on the Senior Notes is fully and unconditionally guaranteed on a senior unsecured basis by our existing and some of our future restricted subsidiaries, as defined in the indentures.

On and after the fifth anniversary of the issue date, we may redeem some or all of the Senior Notes at any time at redemption prices specified in the indentures, plus accrued and unpaid interest to the date of redemption.

Prior to the fifth anniversary of the issue date, the Senior Notes may be redeemed in whole or in part at a redemption price equal to the principal amount of the notes plus accrued and unpaid interest to the date of redemption plus an applicable premium specified in the indentures.

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We and our restricted subsidiaries are subject to certain negative and financial covenants under the indentures governing the Senior Notes. The provisions of the indentures limit our and our restricted subsidiaries’ ability to, among other things:

• incur additional indebtedness;

• pay dividends on our capital stock or redeem, repurchase or retire our capital stock or subordinated indebtedness;

• make investments;

• incur liens;

• create any consensual limitation on the ability of our restricted subsidiaries to pay dividends, make loans or transfer property to us;

• engage in transactions with our affiliates;

• sell assets, including capital stock of our subsidiaries; and

• consolidate, merge or transfer assets.

As of December 31, 2009, we are not able to incur additional secured debt as a result of the ACNTA test under the Senior Notes.

If we experience a change of control (as defined in the indentures governing the Senior Notes), including making certain asset sales, subject to certain conditions, we must give holders of the Senior Notes the opportunity to sell to us their Senior Notes at 101% of the principal amount, plus accrued and unpaid interest.

Alternative capital resources

We have historically used cash flow from operations and debt financing as our primary sources of capital. As done on April 12, 2010, and as may be done in the future, we may use additional sources such as asset sales, additional public or private issuances of common or preferred stock, or project financing. While we believe we would be able to obtain funds through one or more of these alternative sources, if needed, we cannot provide assurance that these resources would be available on terms acceptable to us.

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Contractual obligations

The following table summarizes our contractual obligations and commitments as of December 31, 2009:

(Dollars in thousands)(1)	Less than 1 year		1-3 years		3-5 years		More than 5 years		Total
Debt:
Revolving credit line—including estimated interest(2)	$	532,695	$	—	$	—	$	—	$	532,695
Senior notes, including estimated interest		56,469		112,938		112,938		735,414		1,017,759
Other long-term notes including estimated interest		5,548		6,627		2,739		15,552		30,466
Capital leases including estimated interest		265		134		—		—		399
Abandonment obligations		300		600		600		35,965		37,465
Derivative obligations		20,677		30,163		—		—		50,840
Purchase commitments		4,876		3,641		—		—		8,517
Total	$	620,830	$	154,103	$	116,277	$	786,931	$	1,678,141

(1) As of December 31, 2009, we had no off-balance sheet arrangements.

(2) On April 12, 2010, we sold 475,043 shares of our common stock to CCMP for a purchase price of $325.0 million. In connection with the closing of the sale, we entered into and closed an Eighth Restated Credit Agreement, which has an initial borrowing base of $450.0 million, is collateralized by our oil and natural gas properties, and is scheduled to mature on April 12, 2014. We used the proceeds from the sale of common stock to CCMP, along with proceeds available under the Eighth Restated Credit Agreement, to repay the amounts owing under our Seventh Restated Credit Agreement. As of April 14, 2010, we had $275.3 million of availability under our Eighth Restated Credit Agreement. See Note 14 to our consolidated financial statements for additional information regarding these transactions.

We have long-term contracts to purchase up to all of the CO₂ manufactured at two existing ethanol plants. Under one contract, we own the rights to purchase or otherwise take all of the plant’s CO₂ production, which is an average of approximately four MMcf per day. The contract’s ten-year term will begin upon our first purchase. We are currently purchasing approximately eight to ten MMcf per day of CO₂ under the second contract, and we expect to purchase an average of approximately 15 to 19 MMcf per day over the fifteen-year contract term, which began on May 1, 2009. There were no significant purchases under either of these contracts in 2009, 2008, or 2007. Pricing under both contracts is variable over time and both contracts have renewal language.

We have rights under two additional contracts that require us to purchase CO₂ for EOR projects. Under one of these contracts, we may purchase a variable amount of CO₂, up to 20 MMcf per day. We have historically taken approximately 10 MMcf per day under this contract, and we project we would purchase an average of approximately 16 MMcf per day over the remainder of the initial term of the contract, which expires in February 2011. Purchases under this contract were $0.8 million, $0.9 million, and $0.3 million during 2009, 2008, and 2007, respectively. The contract automatically renews for an additional ten years unless terminated by the other party in the event we fail to match a higher competing offer for the CO₂, or unless otherwise terminated by us. Under the second of these contracts, we currently purchase an average of approximately six MMcf per day of CO₂ and we have nominated to purchase ten MMcf per day of CO ₂ through 2011. Purchases under this contract, which include transportation charges, were $2.3 million, $2.3 million, and $1.5 million during 2009, 2008, and 2007, respectively. The contract expires in 2016. We may terminate or permanently reduce our purchase rate under this second additional contract at the end of any calendar year with 13 months notice. Pricing under both of these contracts is dependent on certain variable factors, including the price of oil.

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Results of operations

Overview

Production has increased in each of the last three years. However, oil and natural gas price volatility has had a significant impact on our revenues and cash flows from operations. Average sales prices and oil and natural gas sales decreased by 46% and 42%, respectively, from 2008 to 2009 after having increased by 31% and 37%, respectively, from 2007 to 2008. In addition, we recorded non-cash pre-tax ceiling test impairments of our oil and natural gas properties of $240.8 million and $281.4 million in 2009 and 2008, respectively. As a result of these and other transactions discussed below, our net loss increased $89.6 million from 2008 to 2009 and $50.0 million from 2007 to 2008.

	Year ended December 31,
	2009			2008			2007
Production (MBoe)		7,638			7,072			6,773
Oil and natural gas sales (in thousands)	$	292,387		$	501,761		$	365,958
Net loss (in thousands)	$	(144,318	)	$	(54,750	)	$	(4,793	)
Net loss per share (basic and diluted)	$	(164.56	)	$	(62.43	)	$	(5.47	)
Cash flow from operations (in thousands)	$	98,675		$	145,831		$	113,070

Revenues and production

The following table presents information about our oil and natural gas sales before the effects of hedging:

	Year ended December 31,				Percent increase		Year ended December 31,		Percent increase
	2009		2008		(decrease)		2007		(decrease)
Oil and natural gas sales (dollars in thousands)
Oil	$	213,207	$	348,907	(38.9	)%	$	234,428	48.8	%
Natural gas		79,180		152,854	(48.2	)%		131,530	16.2	%
Total	$	292,387	$	501,761	(41.7	)%	$	365,958	37.1	%
Production
Oil (MBbls)		3,874		3,773	2.7	%		3,356	12.4	%
Natural gas (MMcf)		22,584		19,795	14.1	%		20,504	(3.5	)%
MBoe		7,638		7,072	8.0	%		6,773	4.4	%
Average sales prices (excluding derivative settlements)
Oil per Bbl	$	55.04	$	92.47	(40.5	)%	$	69.85	32.4	%
Natural gas per Mcf	$	3.51	$	7.72	(54.5	)%	$	6.41	20.4	%
Boe	$	38.28	$	70.95	(46.0	)%	$	54.03	31.3	%

Oil and natural gas revenues decreased $209.4 million, or 42%, to $292.4 million during 2009 due to a 46% decrease in the average price per Boe, partially offset by an 8% increase in sales volumes. Oil and natural gas revenues increased $135.8 million, or 37%, to $501.8 million during 2008 due to a 31% increase in the average price per Boe and a 4% increase in sales volumes.

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The relative impact of changes in commodity prices and sales volumes on our oil and natural gas sales before the effects of hedging is shown in the following table:

	Year ended December 31,
	2009 vs. 2008					2008 vs. 2007
(dollars in thousands)	Sales increase (decrease)			Percentage increase (decrease) in sales		Sales increase (decrease)			Percentage increase (decrease) in sales
Change in oil sales due to:
Prices	$	(145,040	)	(41.6	)%	$	85,350		36.4	%
Production		9,340		2.7	%		29,129		12.4	%
Total increase (decrease) in oil sales	$	(135,700	)	(38.9	)%	$	114,479		48.8	%
Change in natural gas sales due to:
Prices	$	(95,210	)	(62.3	)%	$	25,872		19.7	%
Production		21,536		14.1	%		(4,548	)	(3.5	)%
Total increase (decrease) in natural gas sales	$	(73,674	)	(48.2	)%	$	21,324		16.2	%

Oil and natural gas production for 2009 increased primarily due to our drilling program and enhancements of our existing properties, much of which was accomplished in 2008 and the first quarter of 2009. Oil production for 2008 increased primarily due to the addition of volumes from acquisitions, our expanded drilling program, and enhancements of our existing properties. Production volumes by area were as follows (MBoe):

	Year ended December 31,		Percent increase		Year ended December 31,	Percent increase
	2009	2008	(decrease)		2007	(decrease)
Mid-Continent	5,014	4,733	5.9	%	4,389	7.8	%
Permian Basin	1,600	1,145	39.7	%	1,047	9.4	%
Gulf Coast	461	564	(18.3	)%	631	(10.6	)%
Ark-La-Tex	260	291	(10.7	)%	317	(8.2	)%
North Texas	164	184	(10.9	)%	230	(20.0	)%
Rocky Mountains	139	155	(10.3	)%	159	(2.5	)%
Total	7,638	7,072	8.0	%	6,773	4.4	%

We have focused our capital expenditures in the Mid-Continent and Permian areas. As a result, production in our four growth areas has declined and is expected to continue to decline, since our planned capital expenditures for 2010 are also focused in our core areas of the Mid-Continent and Permian Basin.

The increase in production in the Permian area is primarily due to the Bowdle 47 No. 2, which began selling natural gas in late November 2008 and accounted for approximately 9% of total production for 2009. We expect production from this well to decline by approximately 52% in 2010. We are currently drilling an offset, the Bowdle 47 No. 4, which is expected to come online in the second quarter of 2010. If successful, this well, combined with several other high impact wells that we are currently drilling or participating in, will support our production levels throughout 2010. However, we cannot accurately predict the timing or level of future production.

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Derivative activities

Our results of operations, financial condition and capital resources are highly dependent upon the prevailing market prices of, and demand for, oil and natural gas. These commodity prices are subject to wide fluctuations and market uncertainties. To mitigate a portion of this exposure, we enter into commodity price swaps, costless collars, and basis protection swaps. Certain commodity price swaps qualified and were designated as cash flow hedges. All of our derivative instruments are considered to be economic hedges regardless of whether they are designated as cash flow hedges for accounting purposes.

Our realized prices are impacted by realized gains and losses resulting from commodity derivatives contracts. The following table presents information about the effects of derivative settlements, excluding derivative monetizations, on realized prices:

	Year ended December 31,
	2009			2008			2007
Oil (per Bbl):
Before derivative settlements	$	55.04		$	92.47		$	69.85
After derivative settlements	$	56.36		$	71.95		$	61.35
Post-settlement to pre-settlement price		102.4	%		77.8	%		87.8	%
Natural gas (per Mcf):
Before derivative settlements	$	3.51		$	7.72		$	6.41
After derivative settlements	$	5.32		$	7.38		$	6.80
Post-settlement to pre-settlement price		151.6	%		95.6	%		106.1	%

The estimated fair values of our oil and natural gas derivative instruments are provided below. The associated carrying values of these instruments are equal to the estimated fair values.

	As of December 31,
(dollars in thousands)	2009			2008		2007
Oil swaps	$	(68,551	)	$	111,416	$	(155,782	)
Natural gas swaps		30,340			13,312		4,709
Oil collars		12,290			57,716		—
Natural gas collars		14,065			21,682		—
Natural gas basis differential swaps		(14,964	)		1,618		539
Net derivative asset (liability)	$	(26,820	)	$	205,744	$	(150,534	)

During the fourth quarter of 2008, we determined that our natural gas swaps are no longer expected to be highly effective, primarily due to the increased volatility in the basis differentials between the contract price and the indexed price at the point of sale. As a result, we discontinued hedge accounting and applied mark-to-market accounting treatment to all outstanding natural gas swaps. The change in fair value related to these instruments, after hedge accounting was discontinued, is recorded immediately in non-hedge derivative gains (losses) in the consolidated statements of operations. In the past, a portion of the change in fair value would have been deferred through other comprehensive income (loss), and the ineffective portion would have been included in the gain (loss) from oil and natural gas hedging activities, which is a component of revenue.

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In addition, we monetized certain oil and natural gas swaps and collars in 2009 and 2008. Certain swaps that were monetized had previously been accounted for as cash flow hedges. As of December 31, 2009 and 2008, accumulated other comprehensive income (loss) (“AOCI”) included $83.4 million and $23.7 million, respectively, of deferred gains related to discontinued cash flow hedges that will be recognized as a gain from oil and natural gas hedging activities when the hedged production is sold.

The effects of derivative activities on our results of operations and cash flows were as follows:

	Year ended December 31,
	2009						2008						2007
(dollars in thousands)	Non-cash fair value adjustment			Cash receipts (payments)			Non-cash fair value adjustment			Cash receipts (payments)			Non-cash fair value adjustment			Cash receipts (payments)
Gain (loss) from oil and natural gas hedging activities:
Oil swaps	$	14,114		$	(2,349	)	$	7,770		$	(73,170	)	$	(6,636	)	$	(28,528	)
Natural gas swaps		7,638			—			4,779			(15,796	)		(1,707	)		8,731
Gain (loss) from oil and natural gas hedging activities	$	21,752		$	(2,349	)	$	12,549		$	(88,966	)	$	(8,343	)	$	(19,797	)
Non-hedge derivative gains (losses):
Oil swaps and collars	$	(30,791	)	$	7,490		$	80,297		$	(4,258	)	$	(24,416	)	$	—
Natural gas swaps and collars		9,455			46,100			24,144			3,086			—			—
Natural gas basis differential contracts		(16,582	)		(5,189	)		1,079			5,970			1,385			(750	)
Derivative monetizations		(111,188	)		111,874			(15,966	)		32,589			—			—
Non-hedge derivative gains (losses)	$	(149,106	)	$	160,275		$	89,554		$	37,387		$	(23,031	)	$	(750	)
Total gains (losses) from derivative activities	$	(127,354	)	$	157,926		$	102,103		$	(51,579	)	$	(31,374	)	$	(20,547	)

Due to the low oil prices prevalent during 2009, we received payments on oil derivatives of $5.1 million; however, we recognized non-cash losses on oil derivatives of $16.6 million in 2009 primarily due to the significant improvement in the NYMEX forward strip oil price as of December 31, 2009 compared to December 31, 2008. This includes gains of $14.5 million reclassified into earnings that are associated with derivatives for which hedge accounting was discontinued in 2008.

Due primarily to the low natural gas prices prevalent throughout 2009 and to lower average NYMEX forward strip gas prices as of December 31, 2009 compared to December 31, 2008, we recognized a gain on gas derivatives of $63.2 million in 2009. This includes gains of $7.7 million reclassified into earnings that are associated with derivatives for which hedge accounting was discontinued in 2008. Losses on natural gas basis differential contracts were $21.8 million during 2009, primarily due to lower differentials indicated by the forward commodity price curves as well as low differentials throughout 2009.

In addition, during the first quarter of 2009, we monetized natural gas swaps with original settlement dates from May through October of 2009 for proceeds of $9.5 million. During the second quarter of 2009, we monetized additional oil swaps and collars with original settlement dates from January 2012 through December 2013 for proceeds of $102.4 million. As a result of these monetizations, gains of $0.7 million were recognized in earnings, and gains of $81.9 million were deferred through AOCI.

Due primarily to the high commodity prices prevalent during the first nine months of 2008, we made payments on oil and natural gas derivatives of $77.4 million and $12.7 million, respectively. However, these losses were offset by non-cash gains on oil and natural gas derivatives of $88.1 million and $28.9 million, respectively, which resulted from the decline in the NYMEX forward strip oil and natural gas prices as of December 31, 2008 compared to December 31, 2007, and which included gains of $57.7 million and $21.7 million, respectively, on costless collars covering 1,666 MBbls of oil at a weighted average floor of $103.75 per Bbl and 6,540 BBtu of natural gas at a floor of $10.00 per MMBtu that were entered into during 2008 and remained outstanding as of December 31, 2008. Gains on natural gas basis differential swaps were $7.0 million in 2008, primarily due to high differentials during 2008.

In addition, during the fourth quarter of 2008, we monetized oil and natural gas swaps and collars with original settlement dates from January through June of 2009 for proceeds of $32.6 million. As a result of this monetization, gains of $16.6 million were recognized in earnings, and gains of $17.9 million were deferred through AOCI.

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Primarily as a result of higher average NYMEX forward strip oil prices during 2007 compared to 2006 and strong oil prices during 2007, losses on oil swaps were $59.5 million in 2007. These losses were partially offset by gains on natural gas swaps and natural gas basis differential swaps of $7.0 million and $0.6 million, respectively.

As a result of the above transactions, total gains (losses) on derivative activities recognized in our statements of operations were $30.6 million, $50.5 million, and ($51.9) million in 2009, 2008, and 2007, respectively.

Lease operating expenses

	Year ended						Year ended
(dollars in thousands)	December 31,				Percent		December 31,		Percent
	2009		2008		decrease		2007		increase
Lease operating expenses	$	94,155	$	120,547	(21.9	)%	$	104,469	15.4	%
Lease operating expenses per Boe	$	12.33	$	17.05	(27.7	)%	$	15.42	10.6	%

Lease operating costs are sensitive to changes in demand for field equipment, services, and qualified operational personnel, which is driven by demand for oil and natural gas. Our lease operating expenses decreased by 22% from 2008 to 2009 after having increased by 15% from 2007 to 2008, which is consistent, though not commensurate, with the changes in commodity prices during the same periods. Commodity prices have recently started to improve, and if this upward trend continues, we expect absolute and per Boe operating costs to increase as well.

Due primarily to higher production mostly associated with the Bowdle 47 No. 2 well, the shut-in of uneconomic wells, and our efforts to reduce production costs, lease operating expenses for 2009 decreased by $26.4 million, or $4.72 per Boe, compared to 2008. Per unit expenses were lower for all categories of lease operating expenses due to downward pressure on service costs, labor, and materials resulting from the low commodity prices prevalent throughout 2009. Electricity and fuel costs and workover costs decreased by $4.4 million and $8.3 million, respectively, for operated properties from 2008 to 2009.

During 2008, lease operating expenses increased $16.1 million, or $1.63 per Boe, compared to 2007, primarily due to increases in the number of net producing wells and higher oilfield service costs, including costs associated with artificial lift on oil properties. Per unit expenses were higher for all categories of lease operating expenses due to upward pressure on service costs, labor and materials resulting from the strength of commodity prices during the first nine months of 2008. Electricity and fuel costs and workover costs increased by $4.0 million and $1.8 million, respectively, for operated properties from 2007 to 2008.

Production taxes (which include ad valorem taxes)

	Year ended						Year ended
	December 31,				Percent		December 31,		Percent
(dollars in thousands)	2009		2008		decrease		2007		increase
Production taxes	$	20,341	$	33,815	(39.8	)%	$	26,216	29.0	%
Production taxes per Boe	$	2.66	$	4.78	(44.4	)%	$	3.87	23.5	%

Production taxes generally change in proportion to oil and natural gas sales. The decrease in production taxes from 2008 to 2009 was primarily due to the 46% decrease in average realized prices, partially offset by an 8% increase in production volumes. The increase in production taxes from 2007 to 2008 was due primarily to the 31% increase in average realized prices and the 4% increase in production volumes.

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Depreciation, depletion and amortization (“DD&A”) and losses on impairment

	Year ended				Percent		Year ended
	December 31,				increase		December 31,		Percent
(dollars in thousands)	2009		2008		(decrease)		2007		increase
Total DD&A:
Oil and natural gas properties	$	92,561	$	91,316	1.4	%	$	78,717	16.0	%
Property and equipment		8,510		6,644	28.1	%		4,322	53.7	%
Accretion of asset retirement obligation		2,927		2,712	7.9	%		2,392	13.4	%
Total DD&A	$	103,998	$	100,672	3.3	%	$	85,431	17.8	%
DD&A per Boe:
Oil and natural gas properties	$	12.12	$	12.91	(6.1	)%	$	11.62	11.1	%
Other fixed assets		1.50		1.33	12.8	%		0.99	34.3	%
Total DD&A per Boe	$	13.62	$	14.24	(4.4	)%	$	12.61	12.9	%

We adjust our DD&A rate on oil and natural gas properties each quarter for significant changes in our estimates of oil and natural gas reserves and costs, and thus our DD&A rate could change significantly in the future. DD&A on oil and natural gas properties increased $1.2 million from 2008 to 2009. Higher production volumes increased DD&A by $7.3 million, which was offset by a $6.1 million reduction in DD&A due to a lower rate per equivalent unit of production. Our DD&A rate per equivalent unit of production decreased $0.79 to $12.12 per Boe primarily due to the decrease in capitalized costs resulting from the ceiling test impairments recorded in the fourth quarter of 2008 and the first quarter of 2009, combined with lower estimated future development costs for proved undeveloped reserves. DD&A on oil and natural gas properties increased $12.6 million from 2007 to 2008. Higher production volumes increased DD&A by $3.5 million, and an increase in the rate per equivalent unit of production increased DD&A by $9.1 million. Our DD&A rate per equivalent unit of production increased $1.29 to $12.91 per Boe primarily due to higher estimated future development costs for proved undeveloped reserves and higher cost reserve additions.

Our DD&A expense for property and equipment increased in both 2008 and 2009 primarily due to drilling rigs that were acquired and placed into service in 2008 and the expansion of our corporate office space during 2008.

We record the estimated future value of a liability for an asset retirement obligation in the period in which it is incurred, discounted to its present value using our credit adjusted risk-free interest rate, with a corresponding increase in the carrying amount of oil and natural gas properties. The liability is accreted each period, and the capitalized cost is depreciated over the useful life of the related asset.

Impairment of oil and natural gas properties. In accordance with the full-cost method of accounting, the net capitalized costs of oil and natural gas properties are not to exceed their related estimated future net revenues discounted at 10%, as adjusted for our cash flow hedge positions and net of tax considerations, plus the lower of cost or estimated fair value of unproved properties.

During the fourth quarter of 2008, we recorded a ceiling test impairment of oil and natural gas properties of $281.4 million as a result of a decline in oil and natural gas prices at the measurement date. The impairment was calculated based on December 31, 2008 spot prices of $44.60 per Bbl of oil and $5.62 per Mcf of natural gas. The effect of derivative contracts accounted for as cash flow hedges, based on the December 31, 2008 spot prices, increased the full-cost ceiling by $192.1 million, thereby reducing the ceiling test write down by the same amount.

During the first quarter of 2009, gas prices declined significantly as compared to the December 31, 2008 spot price of $5.62 per Mcf. Based on March 31, 2009 spot prices of $49.66 per Bbl of oil and $3.63 per Mcf of natural gas, the internally estimated PV-10 value of our reserves declined by 13.5% compared to our PV-10 value at December 31, 2008. As a result, we recorded a ceiling test impairment of oil and natural gas properties of $240.8 million during the first quarter of 2009. The effect of derivative contracts accounted for as cash flow hedges, based on the March 31, 2009 spot prices, increased the full cost ceiling by $169.0 million, thereby reducing the ceiling test write down by the same amount.

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As of December 31, 2009, the cost center ceiling exceeded the net capitalized cost of our oil and natural gas properties by $294.2 million, and no additional ceiling test impairment was recorded. The PV-10 value of our reserves was estimated based on average prices of $61.18 per Bbl of oil and $3.87 per Mcf of gas for the year ended December 31, 2009. The effect of derivative contracts accounted for as cash flow hedges, based on these average prices, increased the full cost ceiling by $25.5 million. The qualifying cash flow hedges as of December 31, 2009, which consisted of commodity price swaps, covered 3,741 MBbls of oil production for the period from January 2010 through December 2011. See Note 4 to our consolidated financial statements for a further discussion of hedging activity.

A decline in oil and natural gas prices subsequent to December 31, 2009 could result in additional ceiling test write downs in future periods. The amount of any future impairment is difficult to predict, and will depend on the average oil and natural gas prices during each period, the incremental proved reserves added during each period, and additional capital spent.

Impairment of ethanol plant. We owned a 66.67% interest in Oklahoma Ethanol LLC, a joint venture to construct and operate an ethanol production plant in Blackwell, Oklahoma. Oklahoma Ethanol LLC retained a financial advisor to arrange project financing to fund construction costs and for related start-up working capital. Because financing did not close by September 15, 2008, the minority owner, Oklahoma Sustainable Energy LLC, was no longer able to participate in the joint venture, and we now own 100% of Oklahoma Ethanol LLC. The City of Blackwell was also unable to obtain financing for the railroad upgrades and storage facilities that would be necessary to support ethanol production. During the third quarter of 2008, we determined that we would be unlikely to obtain equity capital or new project financing for an ethanol plant. We accordingly recorded an impairment charge of $2.9 million, which was the amount of our investment in the ethanol plant.

General and administrative expenses (“G&A”) and litigation settlement

	Year ended						Percent		Year ended			Percent
	December 31,						increase		December 31,			increase
(dollars in thousands)	2009			2008			(decrease)		2007			(decrease)
Gross G&A expenses	$	34,565		$	33,552		3.0	%	$	32,652		2.8	%
Capitalized exploration and development costs		(10,824	)		(11,180	)	(3.2	)%		(10,814	)	3.4	%
Net G&A expenses	$	23,741		$	22,372		6.1	%	$	21,838		2.4	%
Average G&A cost per Boe	$	3.11		$	3.16		(1.6	)%	$	3.22		(1.9	)%
Full-time employees as of December 31		689			859		(19.8	)%		726		18.3	%

G&A expenses increased $1.4 million from 2008 to 2009, primarily due to higher deferred compensation costs. Due to a reduction in the fair value of our phantom stock during 2008, we recognized a deferred compensation gain which reduced G&A expenses by $0.3 million. The fair value of our phantom stock increased during 2009, and deferred compensation expense increased G&A expenses by $1.0 million in 2009. G&A expenses increased $0.5 million from 2007 to 2008, primarily due to an increase in our office staff and related requirements caused by the increase in our level of activity. On a per Boe basis, G&A decreased by 2% in both 2009 and 2008 as higher production more than offset the increase in costs.

Litigation settlement—Effective April 15, 2009, we settled our pending lawsuit against John Milton Graves Trust u/t/a 6/11/2004, et al. This case was related to (i) a post-closing adjustment of the price we paid for Calumet Oil Company (“Calumet”) in 2006 (the “Working Capital Adjustment”) and (ii) a contractual payment related to an election to be made by the sellers of Calumet (collectively, the “Sellers”) under the federal tax code (the “Tax Election”).

Pursuant to the settlement agreement, which was based upon net calculations of the receivable and payable, the Sellers paid us $7.1 million, which amount is intended to settle all claims related to both the Working Capital Adjustment and the Tax Election claims, and we retained $0.4 million contained in an escrow account covering any losses incurred by us for title defects related to our purchase of Calumet. In addition, the parties issued mutual releases, dismissed with prejudice the pending litigation and the claims made therein, and the Sellers will take action to clear the title to certain properties purchased by us in the Calumet acquisition.

As of December 31, 2008, the recorded receivable for the Working Capital Adjustment was $14.4 million, and was included in other assets on the consolidated balance sheet. As of December 31, 2008, the recorded payable related to the Tax Election was $4.4 million, and was included in accounts payable and accrued liabilities on the consolidated balance sheet. As a result of the settlement, as of December 31, 2009, the receivable related to the Working Capital Adjustment and the Tax Election payable were eliminated, the escrow cash account was reclassified to operating cash, and we recorded a charge to expense of $2.9 million.

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Other income and expenses

Interest expense. Interest expense increased by $4.1 million, or 5%, from 2008 to 2009 primarily as a result of increased levels of borrowings accompanied by slightly higher interest rates. Interest expense decreased by $1.6 million, or 2%, from 2007 to 2008 primarily as a result of lower interest rates, partially offset by increased levels of borrowings. The following table presents interest expense:

	Year ended December 31,
(dollars in thousands)	2009		2008		2007
Revolver interest	$	26,950	$	23,574	$	27,387
8 1/2 % Senior Notes due 2015		28,415		28,348		28,285
8 7/8 % Senior Notes due 2017		29,601		29,578		28,413
Bank fees and other interest		5,136		4,538		3,571
Total interest expense	$	90,102	$	86,038	$	87,656
Average long-term borrowings	$	1,216,540	$	1,178,243	$	1,057,142

Merger costs and termination fee. On October 9, 2009, we entered into an Agreement and Plan of Reorganization with United Refining Energy Corp. (“United”) under which we would merge with United, a publicly held Special Purpose Acquisition Company, in a reverse merger. The merger was to be accounted for as a reverse recapitalization, whereby we would be the continuing entity for financial reporting purposes and would be deemed, for accounting purposes, to be the acquirer of United. On December 11, 2009, United announced that the merger did not receive the stockholder vote required for approval, and the Agreement and Plan of Reorganization was terminated. As a result, costs of $2.2 million associated with the merger were expensed.

On July 14, 2008, we entered into an Agreement and Plan of Merger (“Merger Agreement”) with Edge Petroleum Corporation (“Edge”), whereby Edge would merge with and into our wholly owned subsidiary, Chaparral Exploration, L.L.C. During the fourth quarter of 2008, the parties concluded that it was highly unlikely that all of the closing conditions set forth in the Merger Agreement would be met, and therefore the merger would not be consummated on or prior to December 31, 2008, the date on which either party could, subject to the terms of the Merger Agreement, terminate the Merger Agreement unilaterally. As a result, we and Edge executed a Merger Termination Agreement on December 16, 2008, and costs of $1.4 million associated with the merger were expensed.

On July 14, 2008, we entered into a Stock Purchase Agreement with Magnetar Financial LLC (“Magnetar”), which provided for Magnetar and its affiliates to purchase 1.5 million shares of our Series B convertible preferred stock for an aggregate purchase price of $150.0 million. On December 16, 2008, we executed a Termination and Settlement Agreement (the “Magnetar Termination Agreement”) with Edge and Magnetar, which terminated the Stock Purchase Agreement. Pursuant to the Magnetar Termination Agreement, Magnetar paid a total of $5.0 million, of which $1.5 million was paid to Edge at our direction to reimburse Edge for certain expenses, and $3.5 million was paid to us and recorded as a termination fee.

Production tax credits. During 2006, we purchased interests in two venture capital limited liability companies resulting in a total investment of $15.0 million. Our return on the investment was the receipt of $2 of Oklahoma tax credits for every $1 invested and was recouped from our Oklahoma production taxes. The investments were accounted for as a production tax benefit asset and were netted against tax credits realized in other income using the effective yield method over the expected recovery period. Other income for 2009, 2008, and 2007 includes Oklahoma production tax credits of $13.5 million, $0.7 million, and $0.8 million, respectively. This source of income will not be available in future periods.

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Income taxes

	Year ended December 31,
(dollars in thousands)	2009			2008			2007
Current income tax benefit	$	23		$	28		$	16
Deferred income tax benefit		89,872			35,273			3,370
Total income tax benefit	$	89,895		$	35,301		$	3,386
Effective tax rate		37.3	%		38.6	%		36.4	%
Total net deferred tax asset (liability)	$	64,212		$	(62,395	)	$	1,632

Our income tax provision was based on an estimated statutory rate of approximately 39% in 2009, 2008 and 2007. Our effective tax rate has generally been less than our estimated statutory rate due to the impact of our deduction for statutory depletion and other adjustments.

As of December 31, 2009, our federal and state net operating loss carryforwards were approximately $235.4 million and $214.9 million, respectively, and will begin to expire in 2010. As of December 31, 2009, approximately $103.3 million of the state net operating loss carryforwards have been reduced by a valuation allowance based on our assessment that it is more likely than not that a portion will not be realized.

Realization of our deferred tax assets is dependent upon generating sufficient future taxable income. Although realization is not assured, we believe it is more likely than not that the deferred tax asset will be realized. The amount of the deferred tax asset considered realizable, however, could be reduced in the near-term if estimates of future taxable income are reduced.

Discontinued operations

Discontinued operations consist of third-party revenue and operating expenses of GCS, which was acquired on April 16, 2007. Revenues are generated through the sale of oilfield supplies, chemicals, downhole submersible pumps and related services to oil and natural gas operators primarily in Oklahoma, Texas, and Wyoming. Operating expenses consist of costs of sales related to product sales and general and administrative expenses.

During the second quarter of 2009, we committed to a plan to sell the assets of GCS, and on May 14, 2009, we entered into an agreement to sell the assets of the ESP division of GCS to Global Oilfield Services, Inc. (“Global”) for a cash price of approximately $24.6 million after working capital adjustments as provided in the agreement. We paid off notes payable attributed to certain assets sold to Global in the amount of $1.6 million, and recorded a pre-tax gain associated with the sale of $9.1 million.

On December 11, 2009, we entered into an agreement with Reef Services, LLC (“Reef”) under which we exchanged the assets of the Chemicals division of GCS for the assets of the Reef Acid Division and cash of $0.7 million. The assets received consist primarily of acid trucks and related equipment and have an estimated fair value of approximately $3.0 million. This transaction is considered a non-monetary exchange accounted for at fair value. We paid off notes payable attributed to certain assets sold to Reef in the amount of $0.3 million, and recorded a pre-tax gain associated with the exchange of $1.3 million.

The operating results of GCS have been reclassified as discontinued operations in the consolidated statements of operations as detailed in the table below:

							April 16, 2007
	Year ended December 31,						through December 31,
(dollars in thousands)	2009			2008			2007
Revenues	$	11,142		$	33,821		$	20,611
Operating expenses		(10,983	)		(31,450	)		(18,852	)
Gain on sale		10,449			—			—
Income before income taxes		10,608			2,371			1,759
Income tax provision		3,959			915			641
Income from discontinued operations	$	6,649		$	1,456		$	1,118

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There were no assets held for sale or liabilities associated with discontinued operations as of December 31, 2009. At December 31, 2008, the assets and liabilities of GCS are classified as assets held for sale and liabilities associated with discontinued operations, respectively, on our consolidated balance sheet.

Critical accounting policies and estimates

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements. The preparation of these statements requires us to make assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and other sources that we believe are reasonable at the time. Actual results may differ from the estimates and assumptions we used in preparation of our financial statements. We evaluate our estimates and assumptions on a regular basis. Described below are the most significant policies and the related estimates and assumptions we apply in the preparation of our financial statements. See Note 1 to our consolidated financial statements for an additional discussion of accounting policies and estimates made by management.

Revenue recognition. We derive almost all of our revenue from the sale of crude oil and natural gas produced from our oil and natural gas properties. Revenue is recorded in the month the product is delivered to the purchaser. We receive payment on substantially all of these sales from one to three months after delivery. At the end of each month, we estimate the amount of production delivered to purchasers that month and the price we will receive. Variances between our estimated revenue and actual payment received for all prior months are recorded in the month payment is received.

Derivative instruments. Certain of our oil and natural gas derivative contracts are designed to be treated as cash flow hedges under GAAP. This policy significantly impacts the timing of revenue or expense recognized from this activity, as our contracts are adjusted to their fair value at the end of each month. The effective portion of the hedge gain or loss, meaning the portion of the change in the fair value of the contract that offsets the change in the expected future cash flows from our forecasted sales of production, is recognized in income when the hedged production is reported as revenue. We reflect this as an adjustment to our revenue in the “Gain (loss) from oil and natural gas hedging activities” line in our consolidated statements of operations. Until hedged production is reported in earnings and the contract settles, the effective portion of change in the fair value of the contract is reported in the “Accumulated other comprehensive income (loss)” line item in stockholders’ equity. The ineffective portion of the hedge gain or loss is reported in the “Gain (loss) from oil and natural gas hedging activities” line item each period. Our derivative contracts that do not qualify for cash flow hedge treatment, or have not been designated as cash flow hedges, are marked to their period end market values and the change in the fair value of the contracts is included in the “Non-hedge derivative gains (losses)” line in our consolidated statements of operations. As a result, our reported earnings could include large non-cash fluctuations, particularly in volatile pricing environments.

We determine the fair value of our crude oil, natural gas, and basis swaps by reference to forward pricing curves for oil and natural gas futures contracts. The difference between the forward price curve and the contractual fixed price is discounted to the measurement date using a credit risk adjusted discount rate. In certain less liquid markets, forward prices are not as readily available. In these circumstances, swaps are valued using internally developed methodologies that consider historical relationships among various commodities that result in management’s best estimate of fair value. These contracts are classified as Level 3 in accordance with the fair value hierarchy defined by the Financial Accounting Standards Board (“FASB”). We have determined that the fair value methodology described above for the remainder of our swaps is consistent with observable market inputs and have categorized them as Level 2. We determine fair value for our oil and natural gas collars using an option pricing model which takes into account market volatility, market prices, contract parameters, and credit risk. Due to unavailability of observable volatility data input for our collars, we have determined that all of our collars’ fair value measurements are categorized as Level 3. Derivative instruments are discounted using a rate that incorporates our nonperformance risk for derivative liabilities, and our counterparties’ credit risk for derivative assets. Our derivative contracts have been executed with the institutions that are parties to our revolving credit facility. We believe the credit risks associated with all of these institutions are acceptable.

Oil and natural gas properties.

• Full cost accounting. We use the full cost method of accounting for our oil and natural gas properties. Under this method, all costs incurred in the exploration and development of oil and natural gas properties are capitalized into a cost center. These costs include drilling and equipping productive wells, dry hole costs, seismic costs and delay rentals. Capitalized costs also include salaries, employee benefits, consulting services and other expenses that directly relate to our exploration and development activities.

• Proved oil and natural gas reserves quantities. Proved oil and natural gas reserves are the quantities of crude oil and natural gas which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain. The estimates of proven reserves for a given reservoir may change significantly over time as a result of changing prices, operating cost, additional development activity and the actual operating performance.

66

Our proved reserve information included in this report is based on estimates prepared by Cawley, Gillespie & Associates, Inc., Ryder Scott Company, L.P., and Lee Keeling & Associates, Inc., each independent petroleum engineers, and our engineering staff. The independent petroleum engineers evaluated approximately 82% of the estimated future net revenues of our proved reserves discounted at 10% as of December 31, 2009, and our engineering staff evaluated the remainder. We continually make revisions to reserve estimates throughout the year as additional information becomes available.

• Depreciation, depletion and amortization. The quantities of proved oil and natural gas reserves are a significant component of our calculation of depreciation, depletion and amortization expense and revisions in such estimates may alter the rate of future expense. The depreciation, depletion and amortization rate is determined using the units-of-production method based on estimates of proved oil and natural gas reserves and production, which are converted to a common unit of measure based on the relative energy content.

• Full cost ceiling limitation. Under the full cost method, the net capitalized costs of oil and natural gas properties recorded on our balance sheet cannot exceed the estimated future net revenues discounted at 10%, adjusted for the impact of derivatives accounted for as cash flow hedges, plus the lower of cost or fair market value of unproved properties. The ceiling calculation requires that prices and costs used to determine the estimated future net revenues exclude escalations based upon future conditions. If oil and natural gas prices decline or if we have downward revisions to our estimated reserve quantities, it is possible that write downs of our oil and natural gas properties could occur in the future.

• Costs not subject to amortization. Costs of unevaluated properties are excluded from our amortization base until we have evaluated the properties. The costs associated with unevaluated leasehold acreage and seismic data, exploratory wells currently drilling, and capitalized interest are initially excluded from our amortization base. Leasehold costs are either transferred to the amortization base with the costs of drilling a well or are assessed quarterly for possible impairment. Our future depreciation, depletion and amortization rate would increase if costs are transferred to the amortization base without any associated reserves.

• Future development and abandonment costs. Our future development costs include costs to be incurred to obtain access to proved reserves such as drilling costs and the installation of production equipment. Future abandonment costs include costs to plug and abandon our oil and natural gas properties and related facilities. We develop estimates of these costs for each of our properties based on their location, type of facility, market demand for equipment and currently available procedures. Because these costs typically extend many years into the future, estimating these future costs is difficult and requires management to make numerous judgments. These judgments are subject to future revisions from changing technology and regulatory requirements. We review our assumptions and estimates of future development and future abandonment costs on a quarterly basis.

We record a liability for the estimated fair value of an asset retirement obligation in the period in which it is incurred and the corresponding cost is capitalized by increasing the carrying value of the related asset. The liability is accreted to its present value each period and the capitalized cost is depreciated over the useful life of the related asset.

We use the present value of estimated cash flows related to our asset retirement obligation to determine the fair value. Significant assumptions used in estimating such obligations include estimates of the ultimate costs of dismantling and site restoration, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental and political environments, all of which are Level 3 inputs in the fair value hierarchy. To the extent future revisions to these assumptions impact the present value of the existing asset retirement obligation liability, a corresponding adjustment will be required for the related asset. We believe the estimates and judgments reflected in our financial statements are reasonable but are necessarily subject to the uncertainties we have just described. Accordingly, any significant variance in any of the above assumptions or factors could materially affect our estimated future cash flows.

Income taxes. Deferred income taxes are provided for the difference between the tax basis of assets and liabilities and the carrying amount in our financial statements. This difference will result in taxable income or deductions in future years when the reported amount of the asset or liability is settled. Since our tax returns are filed after the financial statements are prepared, estimates are required in valuing tax assets and liabilities. We record adjustments to actual in the period we file our tax returns.

67

Valuation allowance for NOL carryforwards. In computing our income tax expense, we assess the need for a valuation allowance on deferred tax assets, which consist primarily of net operating loss, or NOL, carryforwards. For federal income tax purposes these NOL carryforwards expire 15 to 20 years from the year of origination. We generally assess our ability to fully utilize these carryforwards by estimating expected future taxable income based on the assumption that we will produce our existing reserves, as scheduled for production in our reserve report and by analyzing the expected reversal of existing deferred tax liabilities. These computations are imprecise due to the extensive use of estimates and assumptions. Each quarter we assess our ability to utilize NOL carryforwards. We will record a valuation allowance for the amount of net deferred tax assets when, in management’s opinion, it is more likely than not that such asset will not be realized.

Recent accounting pronouncements

In January 2010, the FASB issued new authoritative guidance regarding “Improving Disclosures about Fair Value Measurements and Disclosures” that requires additional disclosure of transfers in and out of Level 1 and 2 measurements and the reasons for the transfers, and a gross presentation of activity within the Level 3 roll forward. The guidance also includes clarifications to existing disclosure requirements on the level of disaggregation and disclosures regarding inputs and valuation techniques. The guidance is effective for the first interim or annual reporting period beginning after December 15, 2009, except for the gross presentation of the Level 3 roll forward information, which is required for annual reporting periods beginning after December 15, 2010 and for interim reporting periods within those years. We will adopt the guidance on January 1, 2010, except for requirements regarding the gross presentation of Level 3 roll forward information, which we will adopt on January 1, 2011. Because this guidance only requires additional disclosures, it is not expected to have a significant impact on our financial statements.

In December 2008, the SEC issued its Modernization of Oil and Gas Reporting, which revises reserves requirements for oil and natural gas companies. The most significant amendments to the requirements include the following:

• economic producibility of reserves and discounted cash flows is now estimated using an average price for oil and natural gas based upon the first day of each month for the prior twelve months rather than prices on the last day of the reporting period;

• proved reserves may be estimated through the use of new technologies if those technologies have been demonstrated empirically to lead to reliable conclusions about reserve volumes;

• reserves may be classified as proved undeveloped if there is a high degree of confidence that the quantities will be recovered and they are scheduled to be drilled within the next five years;

• additional disclosure is required regarding the qualifications of the chief technical person who oversees the reserves estimation process and the internal controls used to assure the objectivity of the reserves estimate; and

• probable and possible reserves may be disclosed separately on a voluntary basis.

In January 2010, the Financial Accounting Standards Board also issued guidance regarding Oil and Gas Reserve Estimation and Disclosures to provide consistency with the new SEC rules. The new guidance amends existing standards to align the reserves calculation and disclosure requirements under US GAAP with the requirements in the SEC rules.

We adopted the new SEC reserves requirements and GAAP reserves guidance as a change in accounting principle that is inseparable from a change in estimate, and applied the guidance prospectively effective December 31, 2009. See Note 16 to our financial statements for a discussion of the impact of these changes on our reserves.

See Note 1 to the financial statements for a discussion of additional accounting pronouncements adopted during 2009.

Effects of inflation and pricing

While the general level of inflation affects certain of our costs, factors unique to the oil and natural gas industry result in independent price fluctuations. Historically, significant fluctuations have occurred in oil and natural gas prices. In addition, changing prices often cause costs of equipment and supplies to vary as industry activity levels increase and decrease to reflect perceptions of future price levels. Although it is difficult to estimate future prices of oil and natural gas, price fluctuations have had, and will continue to have, a material effect on us.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Oil and natural gas prices. Our financial condition, results of operations and capital resources are highly dependent upon the prevailing market prices of, and demand for, oil and natural gas. These commodity prices are subject to wide fluctuations and market uncertainties due to a variety of factors that are beyond our control. We cannot predict future oil and natural gas prices with any degree of certainty. Sustained declines in oil and natural gas prices may adversely affect our financial condition and results of operations, and may also reduce the amount of net oil and natural gas reserves that we can produce economically. Any reduction in reserves, including reductions due to price fluctuations, can reduce our borrowing base under our Credit Agreement and adversely affect our liquidity and our ability to obtain capital for our acquisition, exploration and development activities.

Based on our production for the year ended December 31, 2009, our gross revenues from oil and natural gas sales would change approximately $2.3 million for each $0.10 change in natural gas prices and $3.9 million for each $1.00 change in oil prices.

To mitigate a portion of our exposure to fluctuations in commodity prices, we enter into commodity price swaps, costless collars, and basis protection swaps. For commodity price swaps, we receive a fixed price for the hedged commodity and pay a floating market price to the counterparty. The fixed-price payment and the floating-price payment are netted, resulting in a net amount due to or from the counterparty.

Collars contain a fixed floor price (put) and ceiling price (call). If the market price exceeds the call strike price or falls below the put strike price, we receive the fixed price and pay the market price. If the market price is between the call and the put strike price, no payments are due from either party. Our collars have not been designated as hedges. Therefore, the changes in fair value and settlement of these derivative contracts are recognized as non-hedge derivative gains (losses). This can have a significant impact on our results of operations due to the volatility of the underlying commodity prices.

We use basis protection swaps to reduce basis risk. Basis is the difference between the physical commodity being hedged and the price of the futures contract used for hedging. Basis risk is the risk that an adverse change in the futures market will not be completely offset by an equal and opposite change in the cash price of the commodity being hedged. Basis risk exists in natural gas primarily due to the geographic price differentials between cash market locations and futures contract delivery locations. Natural gas basis protection swaps are arrangements that guarantee a price differential for natural gas from a specified pricing point. We receive a payment from the counterparty if the price differential is greater than the stated terms of the contract and pay the counterparty if the price differential is less than the stated terms of the contract. We do not designate these instruments as hedges; therefore, the changes in fair value and settlement of these derivative contracts are recognized as non-hedge derivative gains (losses).

Our outstanding oil and natural gas derivative instruments as of December 31, 2009 are summarized below:

	Crude oil swaps						Crude oil collars
	Hedge			Non-hedge			Non-hedge
	Volume MBbl	Weighted average fixed price to be received		Volume MBbl	Weighted average fixed price to be received		Volume MBbl	Weighted average range		Percent of PDP production(1)
1Q 2010	520	$	68.13	102	$	65.80	60	$	110.00 - $168.55	78.2	%
2Q 2010	516		68.06	90		65.47	60		110.00 -   168.55	79.0	%
3Q 2010	499		68.24	90		65.10	60		110.00 -   168.55	79.2	%
4Q 2010	480		68.08	90		64.75	60		110.00 -   168.55	78.7	%
1Q 2011	444		70.05	99		64.24	51		110.00 -   152.71	75.9	%
2Q 2011	444		69.97	90		63.93	51		110.00 -   152.71	76.4	%
3Q 2011	424		69.02	90		63.61	51		110.00 -   152.71	75.2	%
4Q 2011	414		68.40	90		63.30	51		110.00 -   152.71	75.3	%
	3,741			741			444

69

	Natural gas swaps			Natural gas collars
	Non-hedge			Non-hedge
	Volume BBtu	Weighted average fixed price to be received		Volume BBtu	Weighted average range		Percent of PDP production(1)
1Q 2010	3,300	$	7.62	840	$	10.00 - $11.53	74.3	%
2Q 2010	3,300		6.98	840		10.00 -   11.53	79.6	%
3Q 2010	3,150		7.27	840		10.00 -   11.53	81.4	%
4Q 2010	3,150		7.69	840		10.00 -   11.53	85.6	%
1Q 2011	2,700		7.80	—		—	60.6	%
2Q 2011	2,700		6.95	—		—	63.1	%
3Q 2011	2,700		7.12	—		—	65.5	%
4Q 2011	2,700		7.47	—		—	67.7	%
	23,700			3,360

	Natural gas basis protection swaps
	Non-hedge
	Volume BBtu	Weighted average fixed price to be paid
1Q 2010	4,950	$	0.94
2Q 2010	4,120		0.73
3Q 2010	3,930		0.74
4Q 2010	3,600		0.79
1Q 2011	3,600		0.80
2Q 2011	3,260		0.71
3Q 2011	3,120		0.71
4Q 2011	3,010		0.72
	29,590

(1) Based on our most recent internally estimated PDP production for such periods.

70

Subsequent to December 31, 2009, we entered into the following derivative instruments:

	Crude Oil Swaps			Natural Gas Swaps
	Hedge			Non-hedge
	Volume MBbl	Weighted average fixed price to be received		Volume BBtu	Weighted average fixed price to be received
1Q 2010	—	$	—	540	$	5.54
2Q 2010	48		79.54	930		5.45
3Q 2010	48		80.57	550		5.56
4Q 2010	48		81.39	300		6.05
1Q 2011	45		87.31	450		6.83
2Q 2011	45		87.57	300		6.09
3Q 2011	45		87.82	300		6.21
4Q 2011	45		88.05	300		6.63
1Q 2012	150		89.90	—
2Q 2012	150		90.27	—
3Q 2012	150		90.65	—
4Q 2012	150		91.01	—
	924			3,670

Five of the counterparties to our derivative contracts as of December 31, 2009 are no longer lenders under our Eighth Restated Credit Agreement, which closed on April 12, 2010. As a result, we will novate oil swaps covering a total of 2,175 MBbls from April 2010 through December 2012, natural gas swaps covering a total of 8,180 Bbtu from April 2010 through December 2011, and natural gas basis swaps covering a total of 10,860 Bbtu from April 2010 through December 2011. In addition, we have unwound oil swaps and collars covering a total of 255 MBbls from April 2010 through December 2011 and gas collars covering a total of 1,170 Bbtu from April 2010 through December 2010 for net proceeds of approximately $7.2 million.

Interest rates. All of the outstanding borrowings under our Credit Agreement as of December 31, 2009 are subject to market rates of interest as determined from time to time by the banks. We may designate borrowings under our Credit Agreement as either ABR loans or Eurodollar loans. ABR loans bear interest at a fluctuating rate that is linked to the discount rate established by the Federal Reserve Board. Eurodollar loans bear interest at a fluctuating rate that is linked to LIBOR. Any increases in these rates can have an adverse impact on our results of operations and cash flow. Assuming a constant debt level of $513.0 million, equal to our borrowing base at December 31, 2009, the cash flow impact for a 12-month period resulting from a 100 basis point change in interest rates would be $5.1 million.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to financial statements

	Page
Chaparral Energy, Inc. consolidated financial statements:
Report of independent registered public accounting firm	73
Consolidated balance sheets as of December 31, 2009 and 2008	74
Consolidated statements of operations for the years ended December 31, 2009, 2008 and 2007	75
Consolidated statements of stockholders’ equity (deficit) and comprehensive income (loss) for the years ended December 31, 2009, 2008 and 2007	76
Consolidated statements of cash flows for the years ended December 31, 2009, 2008 and 2007	77
Notes to consolidated financial statements	79

72

Report of independent registered public accounting firm

Board of Directors

Chaparral Energy, Inc.

We have audited the accompanying consolidated balance sheets of Chaparral Energy, Inc. and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity (deficit) and comprehensive income (loss) and cash flows for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Chaparral Energy, Inc. and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1, the Company changed its method of estimating oil and gas reserves and related disclosures in 2009.

/s/ GRANT THORNTON LLP

Oklahoma City, Oklahoma

April 14, 2010

73

Chaparral Energy, Inc. and subsidiaries

Consolidated balance sheets

	December 31,
(dollars in thousands, except per share data)	2009			2008
Assets
Current assets:
Cash and cash equivalents	$	73,417		$	52,112
Accounts receivable, net		51,950			64,937
Production tax benefit		19			13,685
Inventories		10,551			17,289
Prepaid expenses		5,729			4,177
Derivative instruments		18,226			51,412
Deferred income taxes		1,790			—
Assets held for sale		—			14,751
Total current assets		161,682			218,363
Property and equipment—at cost, net		62,197			66,925
Oil & natural gas properties, using the full cost method:
Proved		1,910,583			1,751,096
Unproved (excluded from the amortization base)		19,728			16,865
Work in progress (excluded from the amortization base)		19,206			31,893
Accumulated depreciation, depletion, amortization and impairment		(906,584	)		(573,233	)
Total oil & natural gas properties		1,042,933			1,226,621
Funds held in escrow		1,672			2,350
Derivative instruments		5,794			157,720
Deferred income taxes		62,422			—
Assets held for sale		—			6,343
Other assets		17,220			34,514
	$	1,353,920		$	1,712,836
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued liabilities	$	48,283		$	90,165
Accrued payroll and benefits payable		10,849			9,215
Accrued interest payable		14,394			15,408
Revenue distribution payable		18,673			19,827
Current maturities of long-term debt and capital leases		4,653			5,890
Derivative instruments		20,677			—
Deferred income taxes		—			19,696
Liabilities associated with discontinued operations		—			2,922
Total current liabilities		117,529			163,123
Long-term debt and capital leases, less current maturities		524,477			615,953
Senior notes, net		647,877			647,675
Derivative instruments		30,163			3,388
Deferred compensation		1,142			762
Asset retirement obligations		37,165			33,075
Deferred income taxes		—			42,699
Liabilities associated with discontinued operations		—			1,761
Commitments and contingencies (Note 13)
Stockholders’ equity (deficit):
Preferred stock, 600,000 shares authorized, none issued and outstanding		—			—
Common stock, $.01 par value, 3,000,000 shares authorized; 877,000 shares issued and outstanding as of December 31, 2009 and 2008, respectively		9			9
Additional paid in capital		100,918			100,918
Retained earnings (accumulated deficit)		(122,978	)		21,340
Accumulated other comprehensive income, net of taxes		17,618			82,133
		(4,433	)		204,400
	$	1,353,920		$	1,712,836

The accompanying notes are an integral part of these consolidated financial statements.

74

Chaparral Energy, Inc. and subsidiaries

Consolidated statements of operations

	Year Ended December 31,
(dollars in thousands, except per share data)	2009			2008			2007
Revenues:
Oil and natural gas sales	$	292,387		$	501,761		$	365,958
Gain (loss) from oil and natural gas hedging activities		19,403			(76,417	)		(28,140	)
Total revenues		311,790			425,344			337,818
Costs and expenses:
Lease operating		94,155			120,547			104,469
Production tax		20,341			33,815			26,216
Depreciation, depletion and amortization		103,998			100,672			85,431
Loss on impairment of oil & natural gas properties		240,790			281,393			—
Loss on impairment of ethanol plant		—			2,900			—
General and administrative		23,741			22,372			21,838
Litigation settlement		2,928			—			—
Total costs and expenses		485,953			561,699			237,954
Operating income (loss)		(174,163	)		(136,355	)		99,864
Non-operating income (expense):
Interest expense		(90,102	)		(86,038	)		(87,656	)
Non-hedge derivative gains (losses)		11,169			126,941			(23,781	)
Merger costs		(2,169	)		(1,400	)		—
Termination fee		—			3,500			—
Other income		14,403			1,845			2,276
Net non-operating income (expense)		(66,699	)		44,848			(109,161	)
Loss from continuing operations before income taxes		(240,862	)		(91,507	)		(9,297	)
Income tax benefit		(89,895	)		(35,301	)		(3,386	)
Loss from continuing operations		(150,967	)		(56,206	)		(5,911	)
Income from discontinued operations, net of related taxes		6,649			1,456			1,118
Net loss	$	(144,318	)	$	(54,750	)	$	(4,793	)
Income (loss) per share (basic and diluted)
Continuing operations	$	(172.14	)	$	(64.09	)	$	(6.74	)
Discontinued operations		7.58			1.66			1.27
Net loss per share (basic and diluted)	$	(164.56	)	$	(62.43	)	$	(5.47	)
Weighted average number of shares used in calculation of basic and diluted earnings (loss) per share		877,000			877,000			877,000

The accompanying notes are an integral part of these consolidated financial statements.

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Chaparral Energy, Inc. and subsidiaries

Consolidated statements of stockholders’ equity (deficit)

and comprehensive income (loss)

(dollars in thousands)	Common stock			Additional paid in capital		Retained earnings (accumulated deficit)			Accumulated other comprehensive income (loss)			Total
	Shares	Amount
Balance at January 1, 2007	877,000	$	9	$	100,918	$	80,883		$	(3,946	)	$	177,864
Net loss	—		—		—		(4,793	)		—			(4,793	)
Other comprehensive loss, net
Unrealized loss on hedges, net of taxes of $52,048	—		—		—		—			(82,512	)		(82,512	)
Reclassification adjustment for hedge losses included in net loss, net of taxes of $7,960	—		—		—		—			12,619			12,619
Total comprehensive loss													(74,686	)
Balance at December 31, 2007	877,000		9		100,918		76,090			(73,839	)		103,178
Net loss	—		—		—		(54,750	)		—			(54,750	)
Other comprehensive income, net
Unrealized gain on hedges, net of taxes of $65,602	—		—		—		—			103,998			103,998
Reclassification adjustment for hedge losses included in net loss, net of taxes of $32,784	—		—		—		—			51,974			51,974
Total comprehensive income													101,222
Balance at December 31, 2008	877,000		9		100,918		21,340			82,133			204,400
Net loss	—		—		—		(144,318	)		—			(144,318	)
Other comprehensive loss, net
Unrealized loss on hedges, net of taxes of $32,601	—		—		—		—			(51,683	)		(51,683	)
Reclassification adjustment for hedge gains included in net loss, net of taxes of $8,095	—		—		—		—			(12,832	)		(12,832	)
Total comprehensive loss													(208,833	)
Balance at December 31, 2009	877,000	$	9	$	100,918	$	(122,978	)	$	17,618		$	(4,433	)

The accompanying notes are an integral part of these consolidated financial statements.

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Chaparral Energy, Inc. and subsidiaries

Consolidated statements of cash flows

	Year Ended December 31,
(dollars in thousands)	2009			2008			2007
Cash flows from operating activities
Net loss	$	(144,318	)	$	(54,750	)	$	(4,793	)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation, depletion & amortization		103,998			100,672			85,431
Depreciation, depletion & amortization of discontinued operations		736			1,301			411
Loss on impairments		240,790			284,293			—
Deferred income taxes		(85,913	)		(34,358	)		(2,729	)
Unrealized (gain) loss on ineffective portion of hedges and reclassification adjustments		(21,752	)		(12,549	)		8,343
Non-hedge derivative (gains) losses		(11,169	)		(126,941	)		23,781
Gain on sale of business and other assets		(10,463	)		(177	)		(712	)
Other		2,141			2,750			1,404
Litigation settlement		2,928			—			—
Change in assets & liabilities, net of assets and liabilities of business acquired
Accounts receivable		17,648			(3,599	)		(13,660	)
Inventories		6,048			(8,278	)		3,568
Prepaid expenses and other assets		12,084			1,373			(1,452	)
Accounts payable and accrued liabilities		(13,265	)		(1,957	)		8,426
Revenue distribution payable		(1,154	)		(1,643	)		4,221
Deferred compensation		336			(306	)		831
Net cash provided by operating activities		98,675			145,831			113,070
Cash flows from investing activities
Purchase of property and equipment and oil and gas properties		(178,154	)		(304,568	)		(220,651	)
Acquisition of a business, net of cash acquired		—			—			(21,569	)
Proceeds from dispositions of property and equipment and oil and gas properties		515			1,808			526
Cash in escrow		378			1,385			(2,156	)
Proceeds from sale of a business		25,346			—			3,158
Return of prepaid production tax asset		13,544			1,083			373
Settlement of non-hedge derivative instruments		160,275			37,387			(750	)
Other		—			—			2,000
Net cash provided by (used in) investing activities		21,904			(262,905	)		(239,069	)
Cash flows from financing activities
Proceeds from long-term debt		158			162,511			119,865
Repayment of long-term debt		(94,795	)		(5,692	)		(304,240	)
Proceeds from senior notes		—			—			322,329
Principal payments under capital lease obligations		(258	)		(244	)		(171	)
Settlement of derivative instruments acquired		—			184			(1,898	)
Fees paid related to financing activities		(2,210	)		(1,360	)		(7,002	)
Proceeds from termination fee		—			3,500			—
Fees paid related to merger activities		(2,169	)		(1,400	)		—
Net cash provided by (used in) financing activities		(99,274	)		157,499			128,883
Net increase in cash and cash equivalents		21,305			40,425			2,884
Cash and cash equivalents at beginning of period		52,112			11,687			8,803
Cash and cash equivalents at end of period	$	73,417		$	52,112		$	11,687
Supplemental cash flow information
Cash paid (received) during the period for:
Interest, net of capitalized interest	$	86,778		$	82,334		$	73,892
Income taxes		(23	)		(28	)		(16	)

The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated statements of cash flows—(continued)

Supplemental disclosure of investing and financing activities

During the years ended December 31, 2009, 2008, and 2007 we entered into capital lease obligations of $111, $592, and $21 respectively, for the purchase of machinery and equipment.

During the year ended December 31, 2009, oil and natural gas property additions of $27,511 previously included in accounts payable and accrued expenses were settled and are reflected in cash used in investing activities. During the years ended December 31, 2008 and 2007, oil and natural gas property additions of $25,407 and $24,527, respectively, were recorded as increases to accounts payable and accrued expenses, and were reflected in cash used in investing activities in the periods that the payables were settled. Non-cash additions to oil and natural gas properties for 2007 also include $15,597 related to final settlement of the Calumet acquisition.

In December 2009, we exchanged the assets of the Chemicals Division of Green Country Supply for assets received from Reef Services, LLC and cash of $696. The assets received consist primarily of acid trucks and related equipment and have an estimated fair value of approximately $2,950. This transaction is considered a non-monetary exchange accounted for at fair value. Non-cash additions to property and equipment for 2008 include $1,707 related to final settlement of the Green Country Supply acquisition.

During the years ended December 31, 2009, 2008, and 2007, we recorded an asset and related liability of $1,322, $707, and $266, respectively, associated with the asset retirement obligation on the acquisition and/or development of oil and natural gas properties.

Interest of $836, $1,370, and $1,613 was capitalized during the years ended December 31, 2009, 2008, and 2007, respectively, related to unproved oil and natural gas leaseholds. Interest of $0, $214, and $70 was capitalized during the years ended December 31, 2009, 2008, and 2007, respectively, primarily related to the construction of our office building.

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Notes to consolidated financial statements

(Dollars in thousands, unless otherwise noted)

Note 1: Nature of operations and summary of significant accounting policies

Chaparral Energy, Inc. and subsidiaries (collectively, “we”, “our”, “us” or the “Company”) is involved in the acquisition, exploration, development, production and operation of oil and natural gas properties. Properties are located primarily in Oklahoma, Texas, New Mexico, Louisiana, Arkansas, Montana, Kansas, and Wyoming.

A summary of the significant accounting policies applied in the preparation of the accompanying consolidated financial statements follows.

Principles of consolidation

The consolidated financial statements include the accounts of Chaparral Energy, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates affecting these financial statements include estimates for quantities of proved oil and natural gas reserves, valuation allowances associated with deferred income taxes, asset retirement obligations, fair value of derivative instruments, and others, and are subject to change.

Reclassifications

Certain reclassifications have been made to prior period financial statements to conform to current period presentation.

Cash and cash equivalents

We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. We maintain cash and cash equivalents in bank deposit accounts and money market funds which may not be federally insured. As of December 31, 2009, cash with a recorded balance totaling $70,787 was held at JP Morgan Chase Bank, N.A. We have not experienced any losses in such accounts and believe we are not exposed to any significant credit risk on such accounts.

Accounts receivable

We have receivables from joint interest owners and oil and natural gas purchasers which are generally uncollateralized. We generally review our oil and natural gas purchasers for credit worthiness and general financial condition. We may have the ability to withhold future revenue disbursements to recover non-payment of joint interest billings on properties of which we are the operator. Accounts receivable from joint interest owners are stated at amounts due, net of an allowance for doubtful accounts. Accounts receivable are generally due within 30 days and accounts outstanding longer than 60 days are considered past due. Interest accrues beginning on the day after the due date of the receivable. Accounts receivable past due 90 days or more and still accruing interest at December 31, 2009 and 2008 were $687 and $1,124, respectively. We determine our allowance by considering the length of time past due, previous loss history, future net revenues of the debtor’s ownership interest in oil and natural gas properties we operate, and the owner’s ability to pay its obligation, among other things.

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Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

We write off accounts receivable when they are determined to be uncollectible. Bad debt expense (recovery) for the years ended December 31, 2009, 2008, and 2007 was $317, $351, and ($11), respectively. When the account is determined to be uncollectible, all interest previously accrued but not collected is reversed against the allowance for doubtful accounts. Accounts receivable consisted of the following at December 31:

	2009			2008
Joint interests	$	11,986		$	21,136
Accrued oil and natural gas sales		33,600			27,432
Hedge settlements		5,977			15,315
Other		1,204			1,671
Allowance for doubtful accounts		(817	)		(617	)
	$	51,950		$	64,937

Production tax benefit asset

During 2006, we purchased interests in two venture capital limited liability companies resulting in a total investment of $15,000. Our expected return on the investment was the receipt of $2 of tax credits for every $1 invested and was recouped from our Oklahoma production taxes. The investments were accounted for as a production tax benefit asset and were netted against tax credits realized in other income using the effective yield method over the expected recovery period. As of December 31, 2009 and 2008, the carrying value of the production tax benefit asset was $19 and $13,685, respectively. Oklahoma production tax credits of $13,544, $711, and $745 were included in other income in the consolidated statements of operations for the years ended December 31, 2009, 2008, and 2007, respectively.

Inventories

Inventories are comprised of equipment used in developing oil and natural gas properties, oil and natural gas production inventories, and inventory for resale. Equipment inventory and inventory for resale are carried at the lower of cost or market using the average cost method. Oil and natural gas product inventories are stated at the lower of production cost or market. We regularly review inventory quantities on hand and record provisions for excess or obsolete inventory if necessary. The provision for excess or obsolete inventory for the years ended December 31, 2009, 2008, and 2007 was $274, $615, and $136 respectively. Inventories consisted of the following at December 31:

	2009			2008
Equipment inventory	$	6,673		$	10,484
Oil and natural gas product		2,642			3,467
Inventory for resale		2,356			4,184
Inventory valuation allowance		(1,120	)		(846	)
	$	10,551		$	17,289

Property and equipment

Property and equipment are capitalized and stated at cost, while maintenance and repairs are expensed currently.

Depreciation and amortization are provided in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives using the straight-line method. Estimated useful lives are as follows:

Furniture and fixtures	10 years
Automobiles and trucks	5 years
Machinery and equipment	10 – 20 years
Office and computer equipment	5 – 10 years
Building and improvements	10 – 40 years

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Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

Oil and natural gas properties

We use the full cost method of accounting for oil and natural gas properties and activities. Accordingly, we capitalize all costs incurred in connection with the exploration for and development of oil and natural gas reserves. Proceeds from the disposition of oil and natural gas properties are accounted for as a reduction in capitalized costs, with no gain or loss generally recognized unless such dispositions involve a significant alteration in the depletion rate. We capitalize internal costs that can be directly identified with exploration and development activities, but do not include any costs related to production, general corporate overhead or similar activities. Capitalized costs include geological and geophysical work, 3D seismic, delay rentals, drilling and completing and equipping oil and natural gas wells, including salaries, benefits and other internal costs directly attributable to these activities.

Depreciation, depletion and amortization of oil and natural gas properties are provided using the units-of-production method based on estimates of proved oil and natural gas reserves and production, which are converted to a common unit of measure based upon their relative energy content. Our cost basis for depletion includes estimated future development costs to be incurred on proved undeveloped properties. The computation of DD&A takes into consideration restoration, dismantlement, and abandonment costs, and the anticipated proceeds from salvaging equipment. Depreciation, depletion and amortization expense of oil and natural gas properties was $92,561, $91,316 and $78,717 for the years ended December 31, 2009, 2008, and 2007, respectively.

In accordance with the full cost method of accounting, the net capitalized costs of oil and natural gas properties are not to exceed their related estimated future net revenues discounted at 10% (“PV-10 value”), as adjusted for our cash flow hedge positions and net of tax considerations, plus the lower of cost or estimated fair value of unproved properties. During the fourth quarter of 2008, we recorded a ceiling test impairment of oil and natural gas properties of $281,393 as a result of a decline in oil and natural gas prices at the measurement date. The impairment was calculated based on December 31, 2008 spot prices of $44.60 per Bbl of oil and $5.62 per Mcf of natural gas. Based on these year-end prices, the effect of derivative contracts accounted for as cash flow hedges increased the full cost ceiling by $192,108, thereby reducing the ceiling test write down by the same amount.

During the first quarter of 2009, natural gas prices declined significantly as compared to the December 31, 2008 spot price of $5.62 per Mcf. Based on March 31, 2009 spot prices of $49.66 per Bbl of oil and $3.63 per Mcf of natural gas, the internally estimated PV-10 value of our reserves declined by 13.5% compared to the PV-10 value at December 31, 2008. As a result, we recorded a ceiling test impairment of oil and natural gas properties of $240,790 during the first quarter of 2009. The effect of derivative contracts accounted for as cash flow hedges, based on the March 31, 2009 spot prices, increased the full cost ceiling by $169,013, thereby reducing the ceiling test write down by the same amount.

As of December 31, 2009, the cost center ceiling exceeded the net capitalized cost of our oil and natural gas properties by $294,173, and no additional ceiling test impairment was recorded. The PV-10 value of our reserves was estimated based on average prices of $61.18 per Bbl of oil and $3.87 per Mcf of gas for the year ended December 31, 2009. The effect of derivative contracts accounted for as cash flow hedges, based on these year-end prices, increased the full cost ceiling by $25,468. The qualifying cash flow hedges as of December 31, 2009, which consisted of commodity price swaps, covered 3,741 MBbls of oil production for the period from January 2010 through December 2011. See Note 4 for a further discussion of hedging activity.

A decline in oil and natural gas prices subsequent to December 31, 2009 could result in additional ceiling test write downs in future periods. The amount of any future impairment is difficult to predict, and will depend on the average oil and gas prices during each period, the incremental proved reserves added during each period, and additional capital spent.

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Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

In December 2008, the SEC issued its Modernization of Oil and Gas Reporting, which revises reserves requirements for oil and natural gas companies. The most significant amendments to the requirements include the following:

• economic producibility of reserves and discounted cash flows is now estimated using an average price for oil and natural gas based upon the first day of each month for the prior twelve months rather than prices on the last day of the reporting period;

• proved reserves may be estimated through the use of new technologies if those technologies have been demonstrated empirically to lead to reliable conclusions about reserve volumes;

• reserves may be classified as proved undeveloped if there is a high degree of confidence that the quantities will be recovered and they are scheduled to be drilled within the next five years;

• additional disclosure is required regarding the qualifications of the chief technical person who oversees the reserves estimation process and the internal controls used to assure the objectivity of the reserves estimate; and

• probable and possible reserves may be disclosed separately on a voluntary basis.

In January 2010, the Financial Accounting Standards Board also issued guidance regarding Oil and Gas Reserve Estimation and Disclosures to provide consistency with the new SEC rules. The new guidance amends existing standards to align the reserves calculation and disclosure requirements under US GAAP with the requirements in the SEC rules.

We adopted the new SEC reserves requirements and GAAP reserves guidance as a change in accounting principle that is inseparable from a change in estimate, and applied the guidance prospectively effective December 31, 2009. See Note 16 for a discussion of the impact of these changes on our reserves.

Funds held in escrow

We have funds held in escrow that are restricted as to withdrawal or usage. The restricted amounts consisted of the following at December 31:

	2009		2008
Escrows from acquisitions	$	—	$	692
Plugging and abandonment escrow		1,672		1,658
	$	1,672	$	2,350

We are entitled to make quarterly withdrawals from the plugging escrow account equal to one-half of the interest earnings for the period and as reimbursement for actual plugging and abandonment expenses incurred on the North Burbank Unit, provided that written documentation has been provided. The balance is not intended to reflect our total future financial obligation for the plugging and abandonment of these wells.

Impairment of long-lived assets

Impairment losses are recorded on property and equipment used in operations and other long lived assets when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. Impairment is measured based on the excess of the carrying amount over the fair value of the asset.

We owned a 66.67% interest in Oklahoma Ethanol LLC, a joint venture to construct and operate an ethanol production plant in Blackwell, Oklahoma. Oklahoma Ethanol LLC retained a financial advisor to arrange project financing to fund construction costs and for related start-up working capital. Because financing did not close by September 15, 2008, the minority owner, Oklahoma Sustainable Energy LLC, is no longer able to participate in the joint venture, and we now own 100% of Oklahoma Ethanol LLC. The City of Blackwell was also unable to obtain financing for the railroad upgrades and storage facilities that would be necessary to support ethanol production. During the third quarter of 2008, we determined that we would be unlikely to obtain equity capital or new project financing for an ethanol plant. We accordingly recorded an impairment charge of $2,900, which was the amount of our investment in the ethanol plant.

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Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

Deferred income taxes

Deferred income taxes are provided for significant carryforwards and temporary differences between the tax basis of an asset or liability and its reported amount in the financial statements that will result in taxable or deductible amounts in future years. Deferred income tax assets or liabilities are determined by applying the presently enacted tax rates and laws. We record a valuation allowance for the amount of net deferred tax assets when, in management’s opinion, it is more likely than not that such assets will not be realized.

If applicable, we would report a liability for tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return, and would recognize interest and penalties related to uncertain tax positions in interest expense. As of December 31, 2009 and 2008, we have not recorded a liability or accrued interest or penalties related to uncertain tax positions.

The tax years 1998 through 2009 remain open to examination for federal income tax purposes and by the other major taxing jurisdictions to which we are subject.

Revenue recognition

Oil revenue is recognized when the product is delivered to the purchaser and natural gas revenue when delivered to the gas purchaser’s sales meter. Well supervision fees and overhead reimbursements from producing properties are recognized as expense reimbursements from outside interest owners when the services are performed. Sales of products or services are recognized at the time of delivery of materials or performance of service.

Gas balancing

In certain instances, the owners of the natural gas produced from a well will select different purchasers for their respective ownership interest in the wells. If one purchaser takes more than its rateable portion of the gas, the owners selling to that purchaser will be required to satisfy the imbalance in the future by cash payments or by allowing the other owners to sell more than their share of production. We recognize gas imbalances on the sales method and, accordingly, have recognized revenue on all production delivered to our purchasers. To the extent future reserves exist to enable the other owners to sell more than their rateable share of gas, no liability is recorded for our obligation for natural gas taken by our purchasers which exceeds our ownership interest of the well’s total production. At December 31, 2009 and 2008, our aggregate imbalance due to under production is approximately 3,024 MMcf and 3,194 MMcf, respectively. As of December 31, 2009, and 2008, our aggregate imbalance due to over production was approximately 1,818 MMcf and 1,840 MMcf, respectively, and a liability for gas imbalances of $1,486 and $1,346, respectively, was included in accounts payable and accrued liabilities.

Derivative transactions

We use derivative instruments to reduce the effect of fluctuations in crude oil and natural gas prices, and we recognize all derivatives as either assets or liabilities measured at fair value. The accounting for changes in the fair value of a derivative depends on the use of the derivative and the resulting designation.

Changes in the fair value of derivatives that are not accounted for as hedges are reported immediately in non-hedge derivative gains (losses) in the statement of operations. Cash flows associated with non-hedge derivatives are reported as investing activities in the statement of cash flows unless the derivatives contain a significant financing element, in which case they are reported as financing activities.

If the derivative qualifies and is designated as a cash flow hedge, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income (loss) until the hedged item is recognized in income. The ineffective portion of a derivative’s change in fair value, as measured using the dollar offset method, is immediately recognized in loss from oil and natural gas hedging activities in the statement of operations. Cash flows associated with hedges are reported as operating activities in the statement of cash flows unless the hedges contain a significant financing element, in which case they are reported as financing activities.

If it is probable the oil or natural gas sales which are hedged will not occur, hedge accounting is discontinued and the gain or loss reported in accumulated other comprehensive income (loss) is immediately reclassified into income. If a derivative which qualified for cash flow hedge accounting ceases to be highly effective, or is liquidated or sold prior to maturity, hedge accounting is discontinued. The gain or loss associated with the discontinued hedges remains in accumulated other comprehensive income (loss) and is reclassified into income as the hedged transactions occur.

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Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

In March 2008, the FASB issued new authoritative guidance regarding “Disclosures about Derivative Instruments and Hedging Activities” which is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. This guidance addresses concerns that the existing disclosure requirements do not provide adequate information about how derivative and hedging activities affect an entity’s financial position, financial performance, and cash flows. Accordingly, it requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. We adopted these disclosure requirements beginning January 1, 2009, and their adoption did not have an impact on our financial position or results of operations.

We offset assets and liabilities for derivative contracts executed with the same counterparty under a master netting arrangement. See Note 4 for additional information regarding our derivative transactions.

Fair value measurements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued new authoritative guidance which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity.

As permitted by the FASB’s one-year deferral, we adopted the new fair value guidance for our financial assets and financial liabilities measured at fair value on January 1, 2008, and we adopted the new guidance for our nonfinancial assets and nonfinancial liabilities measured at fair value on a non-recurring basis on January 1, 2009. With the exception of incorporating the impact of nonperformance risk on derivative instruments, we did not change our method of calculating the fair value of assets or liabilities. The primary impact from adoption was additional disclosures.

Assets and liabilities recorded at fair value in the balance sheet are categorized according to the fair value hierarchy defined by the FASB. The hierarchical levels are based upon the level of judgment associated with the inputs used to measure the fair value of the assets and liabilities. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the asset or liability is categorized based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and may affect the placement of assets and liabilities within the levels of the fair value hierarchy.

Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2 inputs include adjusted quoted prices for similar instruments in active markets, and inputs other than quoted prices that are observable for the asset or liability. Fair value assets and liabilities included in this category are derivatives with fair values based on published forward commodity price curves and other observable inputs. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. Assets carried at fair value and included in this category are certain financial derivatives, additions to our asset retirement obligations, and assets acquired through a non-monetary exchange transaction.

In February 2007, the FASB issued guidance regarding “The Fair Value Option for Financial Assets and Financial Liabilities,” which permits companies to choose to measure certain financial instruments and other items at fair value. Unrealized gains and losses on any items for which we elect the fair value measurement option would be reported in earnings. This guidance was effective for fiscal years beginning after November 15, 2007. We adopted the new guidance on January 1, 2008, and its adoption did not have an impact on our financial position or results of operations as we made no elections to report selected financial assets and liabilities at fair value.

In October 2008, the FASB provided additional guidance regarding “Estimating the Fair Value of a Financial Asset in a Market That Is Not Active.” This guidance clarifies how management’s internal assumptions should be considered in measuring fair value when observable data are not present. In addition, observable market information from an inactive market should be considered to determine fair value, and it is inappropriate to conclude that all market activity represents forced liquidations or distressed sales or to conclude that any transaction price can determine fair value. The use of broker quotes and pricing services should also be considered to assess the relevance of observable and unobservable data. When valuing financial assets and liabilities, significant judgment is required. This guidance was effective upon issuance and has been considered in conjunction with our 2009 and 2008 financial results. There was no material impact on our financial position or results of operations for the years ended December 31, 2009 or 2008.

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Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

In April 2009, the FASB provided additional application guidance regarding “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” requiring “Interim Disclosures about Fair Value of Financial Instruments,” and clarifying “Recognition and Presentation of Other-Than-Temporary Impairments.” This guidance is effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. We adopted this guidance for the period ending March 31, 2009, which resulted in additional disclosures, but did not have an impact on our financial position or results of operations.

In August 2009, the FASB issued new authoritative guidance regarding “Measuring Liabilities at Fair Value,” which is effective for the first reporting period (including interim periods) beginning after issuance. The new guidance provides additional clarification regarding how fair value should be measured when a quoted price in an active market for the identical liability is not available. We adopted the new guidance on October 1, 2009, and its adoption did not have an impact on our financial position or results of operations.

Asset retirement obligations

We record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of oil and natural gas properties. The accretion of the asset retirement obligations is included in depreciation, depletion and amortization on the consolidated statements of operations. Our asset retirement obligations consist of the estimated present value of future costs to plug and abandon or otherwise dispose of our oil and natural gas properties and related facilities. Significant inputs used in determining such obligations include estimates of plugging and abandonment costs, inflation rates, and well life, all of which are Level 3 inputs according to the fair value hierarchy. These estimates may change based upon future inflation rates and changes in statutory remediation rules. See Note 5 for additional information regarding our asset retirement obligations.

Earnings (loss) per share

Basic earnings (loss) per share is computed by dividing net income (loss) attributable to all classes of common shareholders by the weighted average number of shares of all classes of common stock outstanding during the applicable period. Diluted earnings (loss) per share is determined in the same manner as basic earnings (loss) per share except that the number of shares is increased to assume exercise of potentially dilutive securities outstanding during the periods presented. There were no potentially dilutive securities outstanding during the periods presented.

Comprehensive income (loss)

Comprehensive income (loss) consists of net income (loss) and the unrealized gain or loss for the effective portion of derivative instruments classified as cash flow hedges. Comprehensive income (loss) is presented net of income taxes in the accompanying consolidated statements of stockholders’ equity and comprehensive income (loss).

Environmental liabilities

Environmental expenditures that relate to an existing condition caused by past operations and that do not contribute to current or future revenue generation are expensed. Liabilities are accrued when environmental assessments and/or clean-ups are probable, and the costs can be reasonably estimated. As of December 31, 2009 and 2008, we have not accrued for or been fined or cited for any environmental violations which would have a material adverse effect upon our financial position, operating results, or cash flows.

Merger costs and termination fee

On October 9, 2009, we entered into an Agreement and Plan of Reorganization with United Refining Energy Corp. (“United”) under which we would merge with United, a publicly held Special Purpose Acquisition Company, in a reverse merger. The merger was to be accounted for as a reverse recapitalization, whereby we would be the continuing entity for financial reporting purposes and would be deemed, for accounting purposes, to be the acquirer of United. On December 11, 2009, United announced that the merger did not receive the stockholder vote required for approval, and the Agreement and Plan of Reorganization was terminated. As a result, costs of $2,169 associated with the merger were expensed.

On July 14, 2008, we entered into an Agreement and Plan of Merger (“Merger Agreement”) with Edge Petroleum Corporation (“Edge”), whereby Edge would merge with and into our wholly owned subsidiary, Chaparral Exploration, L.L.C. During the fourth quarter of 2008, the parties concluded that it was highly unlikely that all of the closing conditions set forth in the Merger Agreement would be met, and therefore the merger would not be consummated on or prior to December 31, 2008, the date on which either party could, subject to the terms of the Merger Agreement, terminate the Merger Agreement unilaterally. As a result, we and Edge executed a Merger Termination Agreement on December 16, 2008, and costs of $1,400 associated with the merger were expensed.

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Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

On July 14, 2008, we entered into a Stock Purchase Agreement with Magnetar Financial LLC (“Magnetar”), which provided for Magnetar and its affiliates to purchase 1.5 million shares of our Series B convertible preferred stock for an aggregate purchase price of $150,000. On December 16, 2008, we executed a Termination and Settlement Agreement (the “Magnetar Termination Agreement”) with Edge and Magnetar, which terminated the Stock Purchase Agreement. Pursuant to the Magnetar Termination Agreement, Magnetar paid a total of $5,000, of which $1,500 was paid to Edge at our direction to reimburse Edge for certain expenses, and $3,500 was paid to us and recorded as a termination fee.

Discontinued operations

Certain amounts have been reclassified to present the operations of Green Country Supply, Inc. (“GCS”), a wholly owned subsidiary, as discontinued operations. Unless otherwise indicated, information presented in the notes to the financial statements relates only to our continuing operations. See Note 2 for additional information relating to discontinued operations.

Recent accounting pronouncements

In January 2010, the FASB issued new authoritative guidance regarding “Improving Disclosures about Fair Value Measurements and Disclosures” that requires additional disclosure of transfers in and out of Level 1 and 2 measurements and the reasons for the transfers, and a gross presentation of activity within the Level 3 roll forward. The guidance also includes clarifications to existing disclosure requirements on the level of disaggregation and disclosures regarding inputs and valuation techniques. The guidance is effective for the first interim or annual reporting period beginning after December 15, 2009, except for the gross presentation of the Level 3 roll forward information, which is required for annual reporting periods beginning after December 15, 2010 and for interim reporting periods within those years. We will adopt the guidance on January 1, 2010, except for requirements regarding the gross presentation of Level 3 roll forward information, which we will adopt on January 1, 2011. Because this guidance only requires additional disclosures, it is not expected to have a significant impact on our financial statements.

In June 2009, the FASB issued new authoritative guidance regarding the “FASB Accounting Standards Codification,” which became the source of authoritative GAAP for nongovernmental entities effective for financial statements issued for interim and annual periods ending after September 15, 2009. We adopted the new guidance on July 1, 2009. The guidance did not have an impact on our financial position or results of operations, but it did affect the way we reference GAAP in our consolidated financial statements and accounting policies.

In December 2007, the FASB issued new authoritative guidance regarding “Business Combinations” which is effective for acquisitions that occur in an entity’s fiscal year that begins after December 15, 2008. This guidance establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired. This guidance also establishes disclosure requirements that will enable users to evaluate the nature and financial effects of the business combination. We adopted this guidance effective January 1, 2009. The guidance will apply prospectively to future business combinations, and did not have an effect on our reported financial position or results of operations.

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Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

Note 2: Discontinued operations

On April 16, 2007, we acquired all of the outstanding shares of common stock of Green Country Supply, Inc. (“GCS”) for an aggregate cash purchase price of approximately $23,606. The purchase price was paid in cash and financed through our line of credit. GCS provided oilfield supplies, oilfield chemicals, downhole electric submersible pumps and related services to oil and natural gas operators primarily in Oklahoma, Texas, and Wyoming. As a result of the acquisition, GCS became a wholly-owned subsidiary and the results of operations have been included in the consolidated statement of operations since April 16, 2007.

During the second quarter of 2009, we committed to a plan to sell the assets of GCS, and on May 14, 2009, we entered into an agreement to sell the assets of the Electric Submersible Pumps (“ESP”) division of GCS to Global Oilfield Services, Inc. (“Global”) for a cash price of approximately $24,650 after working capital adjustments as provided in the agreement. We paid off notes payable attributed to certain assets sold to Global in the amount of $1,605, and recorded a pre-tax gain associated with the sale of $9,081.

On December 11, 2009, we entered into an agreement with Reef Services, LLC (“Reef”) under which we exchanged the assets of the Chemicals division of GCS for the assets of the Reef Acid Division and cash of $696. The assets received consist primarily of acid trucks and related equipment and have an estimated fair value of approximately $2,950. This transaction is considered a non-monetary exchange accounted for at fair value. We paid off notes payable attributed to certain assets sold to Reef in the amount of $253, and recorded a pre-tax gain associated with the exchange of $1,368.

The operating results of GCS have been reclassified as discontinued operations in the consolidated statements of operations as detailed in the table below.

	Year ended December 31,						April 16, 2007 through December 31,
	2009			2008			2007
Revenues	$	11,142		$	33,821		$	20,611
Operating expenses		(10,983	)		(31,450	)		(18,852	)
Gain on sale		10,449			—			—
Income before income taxes		10,608			2,371			1,759
Income tax provision		3,959			915			641
Income from discontinued operations	$	6,649		$	1,456		$	1,118

There were no assets held for sale or liabilities associated with discontinued operations as of December 31, 2009. At December 31, 2008, the assets and liabilities of GCS are classified as assets held for sale and liabilities associated with discontinued operations, respectively, on our consolidated balance sheet.

87

Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

Note 3: Property and equipment

Major classes of property and equipment consist of the following at December 31:

	2009		2008
Furniture and fixtures	$	1,960	$	1,701
Automobiles and trucks		12,095		12,249
Machinery and equipment		42,522		38,982
Office and computer equipment		7,594		7,464
Building and improvements		21,741		21,453
		85,912		81,849
Less accumulated depreciation and amortization		29,198		20,664
		56,714		61,185
Work in progress		—		9
Land		5,483		5,731
	$	62,197	$	66,925

Property and equipment leased under capital leases, which are included in the above amounts, consist of the following at December 31:

	2009		2008
Office and computer equipment	$	1,926	$	1,926
Machinery and equipment		642		531
		2,568		2,457
Less accumulated depreciation and amortization		1,929		1,756
	$	639	$	701

Note 4: Derivative activities and financial instruments

Derivative activities

Our results of operations, financial condition and capital resources are highly dependent upon the prevailing market prices of, and demand for, oil and natural gas. These commodity prices are subject to wide fluctuations and market uncertainties. To mitigate a portion of this exposure, we enter into commodity price swaps, costless collars, and basis protection swaps. See Note 1 for additional information regarding our accounting policies for derivative transactions and fair value measurements.

For commodity price swaps, we receive a fixed price for the hedged commodity and pay a floating market price to the counterparty. The fixed-price payment and the floating-price payment are netted, resulting in a net amount due to or from the counterparty.

Collars contain a fixed floor price (put) and ceiling price (call). If the market price exceeds the call strike price or falls below the put strike price, we receive the fixed price and pay the market price. If the market price is between the call and the put strike price, no payments are due from either party. Our collars have not been designated as hedges. Therefore, the changes in fair value and settlement of these derivative contracts are recognized as non-hedge derivative gains (losses). This can have a significant impact on our results of operations due to the volatility of the underlying commodity prices.

We use basis protection swaps to reduce basis risk. Basis is the difference between the physical commodity being hedged and the price of the futures contract used for hedging. Basis risk is the risk that an adverse change in the futures market will not be completely offset by an equal and opposite change in the cash price of the commodity being hedged. Basis risk exists in natural gas primarily due to the geographic price differentials between cash market locations and futures contract delivery locations. Natural gas basis protection swaps are arrangements that guarantee a price differential for natural gas from a specified pricing point. We receive a payment from the counterparty if the price differential is greater than the stated terms of the contract and pay the counterparty if the price differential is less than the stated terms of the contract. We do not designate these instruments as hedges; therefore, the changes in fair value and settlement of these derivative contracts are recognized as non-hedge derivative gains (losses).

88

Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

In anticipation of the Calumet acquisition in October 2006, we entered into additional commodity swaps to provide protection against a decline in the price of oil. We do not believe that these instruments qualify as hedges. Therefore, the changes in fair value and settlement of these derivative contracts are recognized as non-hedge derivative gains (losses).

As part of the Calumet acquisition, we assumed the existing Calumet swaps on October 31, 2006 and designated these as cash flow hedges. These derivative positions were recorded at fair value in the purchase price allocation as a liability of $838. Because of this accounting treatment, only cash settlements for changes in fair value subsequent to the acquisition date for the derivative positions assumed result in adjustments to our oil and natural gas revenues upon settlement. For example, if the fair value of the derivative positions assumed does not change, then upon the sale of the underlying production and corresponding settlement of the derivative positions, cash would be paid to the counterparties and there would be no adjustment to oil and natural gas revenues related to the derivative positions. If, however, the actual sales price is different from the price assumed in the original fair value calculation, the difference would be reflected as either a decrease or increase in oil and natural gas revenues, depending upon whether the sales price was higher or lower, respectively, than the price assumed in the original fair value calculation.

The change in fair value of the acquired cash flow hedges from the date of acquisition is recorded as a component of accumulated other comprehensive income (loss). In addition, the hedge instruments are deemed to contain a significant financing element, and all cash flows associated with these positions are reported as a financing activity in the consolidated statement of cash flows for the periods in which settlement occurs. All of these positions were settled as of December 31, 2008.

Our outstanding derivative instruments as of December 31, 2009 are summarized below:

	Oil derivatives
	Swaps			Collars
	Volume MBbl	Weighted average fixed  price to be received		Volume MBbl	Weighted  average range
2010	2,387	$	67.69	240	$	110.00 - $168.55
2011	2,095		68.40	204		110.00 -   152.71
	4,482			444

	Natural gas derivatives						Natural gas  basis protection swaps
	Swaps			Collars
	Volume BBtu	Weighted average fixed price to be received		Volume BBtu	Weighted  average range		Volume BBtu	Weighted average fixed price to be paid
2010	12,900	$	7.39	3,360	$	10.00 - $11.53	16,600	$	0.81
2011	10,800		7.34	—			12,990		0.74
	23,700			3,360			29,590

All derivative financial instruments are recorded on the balance sheet at fair value. The fair value of swaps is generally determined based on the difference between the fixed contract price and the underlying published forward market price. The fair value of collars is determined using an option pricing model which takes into account market volatility, market prices, and contract parameters. Derivative instruments are discounted using a rate that incorporates our nonperformance risk for derivative liabilities, and our counterparties’ credit risk for derivative assets.

Our derivative contracts have been executed with the institutions that are parties to our revolving credit facility, and we believe the credit risks associated with all of these institutions are acceptable. We did not post collateral under any of these contracts as they are secured under our revolving credit facility. Payment on our derivative contracts would be accelerated in the event of a default on our revolving credit facility. The aggregate fair value of our derivative liabilities was $83,713 at December 31, 2009.

89

Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

The estimated fair values of derivative instruments are provided below. The carrying amounts of these instruments are equal to the estimated fair values.

	As of December 31, 2009								As of December 31, 2008
	Assets		Liabilities			Net Value			Assets		Liabilities			Net Value
Derivatives designated as cash flow hedges:
Oil swaps	$	172	$	(54,883	)	$	(54,711	)	$	116,311	$	(5,631	)	$	110,680
Derivatives not designated as hedging instruments:
Natural gas swaps		30,366		(26	)		30,340			14,043		(731	)		13,312
Oil swaps		—		(13,840	)		(13,840	)		2,424		(1,688	)		736
Natural gas collars		14,065		—			14,065			21,682		—			21,682
Oil collars		12,290		—			12,290			57,716		—			57,716
Natural gas basis differential swaps		—		(14,964	)		(14,964	)		2,093		(475	)		1,618
Total non-hedge instruments		56,721		(28,830	)		27,891			97,958		(2,894	)		95,064
Total derivative instruments		56,893		(83,713	)		(26,820	)		214,269		(8,525	)		205,744
Less:
Netting adjustments (1)		32,873		(32,873	)		—			5,137		(5,137	)		—
Current portion asset (liability)		18,226		(20,677	)		(2,451	)		51,412		—			51,412
	$	5,794	$	(30,163	)	$	(24,369	)	$	157,720	$	(3,388	)	$	154,332

(1) Amounts represent the impact of legally enforceable master netting agreements that allow us to net settle positive and negative positions with the same counterparties.

90

Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

Changes in the fair value of effective cash flow hedges are recorded as a component of accumulated other comprehensive income (loss) (“AOCI”), which is later transferred to earnings when the hedged transaction occurs. The ineffective portion is calculated as the difference between the change in fair value of the derivative and the estimated change in cash flows from the item hedged, and is included in gain (loss) from oil and natural gas hedging activities in the consolidated statements of operations. If it is probable the oil or natural gas sales which are hedged will not occur, hedge accounting is discontinued and the gain or loss reported in AOCI is immediately reclassified into income. If a derivative which qualified for cash flow hedge accounting ceases to be highly effective, or is liquidated or sold prior to maturity, hedge accounting is discontinued. The gain or loss associated with the discontinued hedges remains in AOCI and is reclassified into income as the hedged transactions occur.

Gains and losses associated with cash flow hedges are summarized below:

	Year ended December 31,
	2009			2008			2007
Amount of gain (loss) recognized in AOCI (effective portion)
Oil swaps	$	(84,284	)	$	171,095		$	(136,242	)
Natural gas swaps		—			(1,495	)		1,682
Income taxes		32,601			(65,602	)		52,048
	$	(51,683	)	$	103,998		$	(82,512	)
Amount of gain (loss) reclassified from AOCI in income (effective portion)(1)
Oil swaps	$	13,289		$	(76,921	)	$	(25,963	)
Natural gas swaps		7,638			(7,837	)		5,384
Income taxes		(8,095	)		32,784			7,960
	$	12,832		$	(51,974	)	$	(12,619	)
Amount of gain (loss) recognized in income (ineffective portion)(1)
Oil swaps	$	(1,524	)	$	11,520		$	(9,201	)
Natural gas swaps		—			(3,179	)		1,640
	$	(1,524	)	$	8,341		$	(7,561	)

(1) Included in gain (loss) from oil and natural gas hedging activities in the consolidated statements of operations.

During the fourth quarter of 2008, we determined that our natural gas swaps are no longer expected to be highly effective, primarily due to the increased volatility in the basis differentials between the contract price and the indexed price at the point of sale. As a result, we discontinued hedge accounting and applied mark-to-market accounting treatment to all outstanding natural gas swaps. The change in fair value related to these instruments, after hedge accounting was discontinued, is recorded immediately in non-hedge derivative gains (losses) in the consolidated statements of operations. In the past, a portion of the change in fair value would have been deferred through other comprehensive income (loss), and the ineffective portion would have been included in gain (loss) from oil and natural gas hedging activities, which is a component of revenue.

In addition, during the fourth quarter of 2008, we early settled oil and natural gas swaps and collars with original settlement dates from January through June of 2009 for proceeds of $32,589. During the first quarter of 2009, we early settled additional natural gas swaps with original settlement dates from May through October of 2009 for proceeds of $9,522. During the second quarter of 2009, we early settled additional oil swaps and collars with original settlement dates from January 2012 through December 2013 for proceeds of $102,352. Certain swaps that were early settled had previously been accounted for as cash flow hedges. As of December 31, 2009 and 2008, accumulated other comprehensive income included $83,442 and $23,662, respectively, of deferred gains related to discontinued cash flow hedges that will be recognized as a gain from oil and natural gas hedging activities when the hedged production is sold.

91

Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

Gains of $22,153 associated with derivatives for which hedge accounting had previously been discontinued were reclassified into earnings during the year ended December 31, 2009 as the hedged production was sold. There were no gains or losses associated with the discontinuance of hedge accounting treatment during the years ended December 31, 2008 and 2007. Gain (loss) from oil and natural gas hedging activities, which is a component of total revenues in the consolidated statements of operations, is comprised of the following:

	Year ended December 31,
	2009			2008			2007
Oil derivatives
Reclassification adjustment for hedge gains (losses) included in net loss	$	13,289		$	(76,921	)	$	(25,963	)
Gain (loss) on ineffective portion of derivatives qualifying for hedge accounting		(1,524	)		11,520			(9,201	)
Natural gas derivatives
Reclassification adjustment for hedge gains (losses) included in net loss		7,638			(7,837	)		5,384
Gain (loss) on ineffective portion of derivatives qualifying for hedge accounting		—			(3,179	)		1,640
	$	19,403		$	(76,417	)	$	(28,140	)

Based upon market prices at December 31, 2009 and assuming no future change in the market, we expect to reclassify $16,146 of losses in accumulated other comprehensive income to income during the next 12 months when the forecasted transactions actually occur. All forecasted transactions hedged as of December 31, 2009 are expected to be settled by December 2011.

The changes in fair value and settlement of derivative contracts that do not qualify or have not been designated as hedges are recognized as non-hedge derivative gains (losses). All non-hedge derivative contracts outstanding at December 31, 2009 are expected to be settled by December 2011. Non-hedge derivative gains (losses) in the consolidated statements of operations are comprised of the following:

	Year ended December 31,
	2009			2008		2007
Change in fair value of non-qualified commodity price swaps	$	(79,480	)	$	9,077	$	(24,416	)
Change in fair value of non-designated costless collars		(53,044	)		79,398		—
Change in fair value of natural gas basis differential contracts		(16,582	)		1,079		1,385
Receipts from (payments on) settlement of non-qualified commodity price swaps		116,445			20,290		—
Receipts from (payments on) settlement of non-designated costless collars		49,019			11,127		—
Receipts from (payments on) settlement of natural gas basis differential contracts		(5,189	)		5,970		(750	)
	$	11,169		$	126,941	$	(23,781	)

Derivative settlements receivable of $5,977 and $15,315 were included in accounts receivable at December 31, 2009 and 2008, respectively. Derivative settlements payable of $1,739 and $0 were included in accounts payable and accrued liabilities at December 31, 2009 and 2008, respectively.

We have no Level 1 assets or liabilities as of December 31, 2009. Our derivative contracts classified as Level 2 are valued using quotations provided by price index developers such as Platts and Oil Price Information Service. In certain less liquid markets, forward prices are not as readily available. In these circumstances, commodity swaps are valued using internally developed methodologies that consider historical relationships among various commodities that result in management’s best estimate of fair value. These contracts are classified as Level 3. Due to unavailability of observable volatility data input, the fair value measurement of all our collars has been categorized as Level 3.

92

Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

The fair value hierarchy for our financial assets and liabilities is shown by the following table:

	As of December 31, 2009									As of December 31, 2008
	Derivative assets			Derivative liabilities			Net assets (liabilities)			Derivative assets			Derivative liabilities			Net assets (liabilities)
Significant other observable inputs (Level 2)	$	30,538		$	(83,713	)	$	(53,175	)	$	134,666		$	(8,525	)	$	126,141
Significant unobservable inputs (Level 3)		26,355			—			26,355			79,603			—			79,603
Netting adjustments (1)		(32,873	)		32,873			—			(5,137	)		5,137			—
	$	24,020		$	(50,840	)	$	(26,820	)	$	209,132		$	(3,388	)	$	205,744

(1) Amounts represent the impact of master netting agreements that allow us to net settle positive and negative positions with the same counterparty.

Changes in the fair value of net commodity derivatives classified as Level 3 in the fair value hierarchy at December 31 were:

	Year ended December 31,
Net derivative assets (liabilities)	2009			2008
Beginning balance	$	79,603		$	172
Total realized and unrealized gains (losses) included in non-hedge derivative gains (losses)		(3,939	)		92,250
Purchases, issuances, and settlements		(49,309	)		(12,819	)
Ending balance		26,355			79,603
The amount of total gains (losses) for the period included in non-hedge derivative gains (losses) attributable to the change in unrealized gains (losses) relating to assets still held at the reporting date	$	(1,777	)	$	79,498

Fair value of financial instruments

The carrying values of items comprising current assets and current liabilities, other than derivatives, approximate fair values due to the short-term maturities of these instruments. The carrying value for long-term debt at December 31, 2009 and 2008 approximates fair value because substantially all debt carries variable market rates. Based on market prices, at December 31, 2009, the fair value of the 8 ¹ /2% Senior Notes and 8 ⁷ /8% Senior Notes, which were carried at $325,000 and $322,877, respectively, was $281,125 and $281,125, respectively. Based on market prices, at December 31, 2008, the fair value of the 8 ¹ /2% Senior Notes and 8 ⁷ /8% Senior Notes, which were carried at $325,000 and $322,675, respectively, was $73,125 and $73,125, respectively.

Fair value amounts have been estimated using available market information. The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.

93

Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

Concentrations of credit risk

Financial instruments which potentially subject us to concentrations of credit risk consist principally of derivative instruments and accounts receivable. Derivative instruments are exposed to credit risk from counterparties. We do not require collateral or other security to support the derivative instruments subject to credit risk, however, counterparties to our derivative instruments are affiliates of our lenders. At December 31, 2009, we had significant commodity derivative net asset balances with the following counterparties:

Counterparty	Fair Value(1)
Credit Agricole Corporate and Investment Bank	$	14,010
Bank of Oklahoma, N.A		9,659
Other		151
	$	23,820

(1) The fair value does not include the settlements receivable at December 31, 2009.

Accounts receivable are primarily from purchasers of oil and natural gas products, and exploration and production companies who own interests in properties we operate. The industry concentration has the potential to impact our overall exposure to credit risk, either positively or negatively, in that customers may be similarly affected by changes in economic, industry or other conditions.

Sales of oil and natural gas to one purchaser accounted for 26.4% of total oil and natural gas revenues, excluding the effects of hedging activities, during the year ended December 31, 2009. Sales of oil and natural gas to two purchasers accounted for 23.7% and 10.3% of total oil and natural gas revenues, excluding the effects of hedging activities, during the year ended December 31, 2008. Sales of oil and natural gas to two purchasers accounted for 18.1% and 12.0% of total oil and natural gas revenues, excluding the effects of hedging activities, during the year ended December 31, 2007. If we were to lose a purchaser, we believe we could replace it with a substitute purchaser.

Note 5: Asset retirement obligations

The activity incurred in the asset retirement obligation for the years ended December 31, 2009 and 2008 is as follows:

	Year ended December 31,
	2009			2008
Beginning balance	$	33,375		$	30,684
Liabilities incurred in current period		1,322			707
Liabilities settled in current period		(159	)		(728	)
Accretion expense		2,927			2,712
Ending ARO balance		37,465			33,375
Less current portion		300			300
	$	37,165		$	33,075

See Note 1 for additional information regarding our accounting policies for asset retirement obligations and fair value measurements.

94

Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

Note 6: Long-term debt

Long-term debt consists of the following:

	December 31,
	2009		2008
Revolving credit line with banks	$	507,001	$	594,000
Real estate mortgage notes, principal and interest payable monthly, bearing interest at rates ranging from 3.71% to 9.26%, due January 2017 through December 2028; collateralized by real property		13,465		15,246
Installment notes payable, principal and interest payable monthly, bearing interest at rates ranging from 4.50% to 9.25%, due January 2010 through January 2014; collateralized by automobiles, machinery and equipment		8,285		14,142
		528,751		623,388
Less notes payable associated with discontinued operations		—		2,071
Less current maturities		4,405		5,655
	$	524,346	$	615,662

Maturities of long-term debt as of December 31, 2009 are as follows:

2010	$	511,397
2011		3,224
2012		1,772
2013		937
2014		539
2015 and thereafter		10,882
	$	528,751

In October 2006, we entered into a Seventh Restated Credit Agreement, which is scheduled to mature on October 31, 2010, and is collateralized by our oil and natural gas properties. Availability under our credit agreement is subject to a borrowing base which is set by the banks semi-annually on May 1 and November 1 of each year. In addition, the lenders may request a borrowing base redetermination once every six months. As a result of our early settlement of derivatives in the second quarter of 2009, the borrowing base was reduced from $600,000 to $513,001 effective June 8, 2009. The borrowing base was reaffirmed effective November 23, 2009.

On March 23, 2010, we entered into a stock purchase agreement (the “Stock Purchase Agreement”) with CCMP Capital Investors II (AV-2), L.P., CCMP Energy I LTD., and CCMP Capital Investors (Cayman) II, L.P. (collectively, “CCMP”). On April 12, 2010, we sold 475,043 shares of our common stock to CCMP for a purchase price of $325,000. In connection with the closing of the Stock Purchase Agreement, we entered into and closed an Eighth Restated Credit Agreement, which has an initial borrowing base of $450,000, is collateralized by our oil and natural gas properties, and is scheduled to mature on April 12, 2014. We used the proceeds from the sale of common stock to CCMP, along with proceeds available under the Eighth Restated Credit Agreement, to repay the amounts owing under our Seventh Restated Credit Agreement, and those amounts are classified as long-term debt as of December 31, 2009. As of April 14, 2010, we had $275,330 of availability under our Eighth Restated Credit Agreement. See Note 14 for additional information regarding these transactions.

Interest was paid at least every three months during 2009 and 2008. The effective rate of interest on the entire outstanding balance was 6.081% and 5.299% as of December 31, 2009 and 2008, respectively, and was based upon LIBOR. Commitment fees of 0.50% accrue on the unused portion of the borrowing base amount, depending on the utilization percentage, and are included as a component of interest expense.

95

Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

The Credit Agreement has certain negative and affirmative covenants that require, among other things, maintaining a specified current ratio and debt service ratio. The Credit Agreement, as amended effective May 21, 2009, requires us to maintain a Consolidated Senior Total Debt to Consolidated EBITDAX ratio, as defined in our Credit Agreement, of not greater than:

• 2.50 to 1.0 for the four consecutive fiscal quarters ending on March 31, 2009;

• 3.00 to 1.0 for the four consecutive fiscal quarters ending on June 30, 2009, September 30, 2009, December 31, 2009, and March 31, 2010; and

• 2.75 to 1.0 for the four consecutive fiscal quarters ending on June 30, 2010, September 30, 2010, and December 31, 2010.

For purposes of the amended ratio, Consolidated Senior Total Debt consists of all outstanding loans under the Credit Agreement, letters of credit and all obligations under capital leases, minus cash on hand in excess of accounts payable and accrued liabilities that are more than 90 days past the invoice date, as defined in the Fifth Amendment to our Credit Agreement.

The Credit Agreement, as amended, also requires us to limit the aggregate amount of our capital expenditures incurred during the period beginning October 1, 2009 and ending June 30, 2010 to our discretionary cash flows for the period. Discretionary cash flows consist of Consolidated EBITDAX minus interest expense and taxes paid during the period, as defined in the Fifth Amendment to our Credit Agreement.

We believe we were in compliance with all covenants under the Credit Agreement as of December 31, 2009.

The Credit Agreement also specifies events of default, including non-payment, breach of warranty, non-performance of financial covenants, default on other indebtedness, certain adverse judgments, and change of control, among others. In addition, bankruptcy and insolvency events with respect to us or certain of our subsidiaries will result in an automatic acceleration of the indebtedness under the Credit Agreement. An acceleration of our indebtedness under the Credit Agreement could in turn result in an event of default under the indentures for our Senior Notes, which in turn could result in the acceleration of the Senior Notes.

Note 7: Capital leases

Future minimum lease payments under capital leases for property and equipment and the present value of the net minimum lease payments as of December 31, 2009 are as follows:

2010	$	265
2011		134
Total minimum lease payments		399
Less amount representing interest		20
Present value of net minimum lease payments		379
Less current portion		248
	$	131

96

Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

Note 8: Senior Notes

On December 1, 2005, we issued $325,000 of 8.5% Senior Notes due 2015 at a price of 100% of the principal amount. Interest on the notes is payable semi-annually on June 1 and December 1 each year beginning June 1, 2006, and the notes mature on December 1, 2015. On or after December 1, 2010, we may, at our option, redeem the notes at the following redemption prices plus accrued and unpaid interest: 104.25% after December 1, 2010, 102.83% after December 1, 2011, 101.42% after December 1, 2012, and 100% after December 1, 2013 and thereafter.

In connection with the issuance of the 8.5% senior notes, we capitalized $9,251 of costs related to underwriting and other fees that are amortized to interest expense using the effective interest method. Unamortized costs of $6,430 and $7,220 were included in other assets as of December 31, 2009 and 2008, respectively. Amortization of $790, $723, and $660 was charged to interest expense during the years ended December 31, 2009, 2008 and 2007, respectively, related to these costs.

On January 18, 2007, we issued $325,000 of 8.875% senior notes due 2017 at a price of 99.178% of the principal amount. The net proceeds, after underwriting and issuance costs, were used to reduce outstanding indebtedness under our revolving line of credit and for working capital. Interest on the notes is payable semi-annually on February 1 and August 1 each year beginning August 1, 2007, and the notes mature on February 1, 2017. On or after February 1, 2012, we may, at our option, redeem the notes at the following redemption prices plus accrued and unpaid interest: 104.49% after February 1, 2012, 102.96% after February 1, 2013, 101.48% after February 1, 2014, and 100% after February 1, 2015 and thereafter. Prior to February 1, 2012, we may redeem up to 35% of the senior notes with the net proceeds of one or more equity offerings at a redemption price of 108.88%, plus accrued and unpaid interest.

In connection with the issuance of our 8.875% senior notes, we entered into a registration rights agreement with the initial purchasers in which we agreed to file a registration statement with the Securities and Exchange Commission related to an offer to exchange the notes for other freely tradable notes and complete such exchange offer within 270 days of the issue date. In September 2007, we determined that the exchange offer would not be completed within the 270 day period ending October 15, 2007 as required by the registration rights agreement. As a result, we accrued liquidated damages of $339 during the year ended December 31, 2007. On February 29, 2008, we completed the exchange offer, and liquidated damages ceased to accrue as of that date. Total liquidated damages paid in 2008 were $388.

In connection with the issuance of the 8.875% senior notes, we recorded a discount of $2,671 and capitalized $7,316 of issuance costs related to underwriting and other fees that are amortized to interest expense using the effective interest method. Unamortized issuance costs of $5,830 and $6,386 were included in other assets as of December 31, 2009 and 2008, respectively. Accretion of $202, $185, and $161 was charged to interest expense during the years ended December 31, 2009, 2008, and 2007, respectively, related to the discount, and amortization of $556, $500 , and $431 was charged to interest expense during the years ended December 31, 2009, 2008, and 2007, respectively, related to the issuance costs.

The indentures governing the 8.5% senior notes and the 8.875% senior notes contain certain covenants which limit our ability to:

• incur or guarantee additional debt and issue certain types of preferred stock;

• pay dividends on capital stock or redeem, repurchase or retire capital stock or subordinated debt;

• make investments;

• create liens on assets;

• create restrictions on the ability of restricted subsidiaries to pay dividends or make other payments to us;

• transfer or sell assets;

• engage in transactions with affiliates;

• consolidate, merge or transfer all or substantially all assets and the assets of subsidiaries; and

• enter into other lines of business.

97

Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

Chaparral is a holding company and owns no operating assets and has no significant operations independent of its subsidiaries. Our obligations under our outstanding senior notes have been fully and unconditionally guaranteed, on a joint and several basis, by all of our wholly owned subsidiaries except for Oklahoma Ethanol, LLC and Chaparral Biofuels, LLC.

Senior Notes at December 31 consisted of the following:

	2009			2008
8.5% Senior Notes due 2015	$	325,000		$	325,000
8.875% Senior Notes due 2017		325,000			325,000
Discount on Senior Notes due 2017		(2,123	)		(2,325	)
	$	647,877		$	647,675

Note 9: Income taxes

Income tax expense (benefit) consists of the following for the years ended December 31:

	2009			2008			2007
Current tax benefit
Federal tax benefit	$	(22	)	$	(22	)	$	(8	)
State tax benefit		(1	)		(6	)		(8	)
Current tax benefit		(23	)		(28	)		(16	)
Deferred tax benefit
Federal tax benefit		(77,362	)		(30,363	)		(2,901	)
State tax benefit		(12,510	)		(4,910	)		(469	)
Deferred tax benefit		(89,872	)		(35,273	)		(3,370	)
	$	(89,895	)	$	(35,301	)	$	(3,386	)

Income tax expense (benefit) differed from amounts computed by applying the U.S. Federal income tax rate as follows for the years ended December 31:

	2009		2008		2007
Statutory rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal benefit	3.6	%	3.6	%	3.6	%
Statutory depletion	(0.5	)%	(0.5	)%	(0.5	)%
Other	(0.8	)%	0.5	%	(1.7	)%
Effective tax rate	37.3	%	38.6	%	36.4	%

98

Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

Components of the deferred tax assets and liabilities are as follows at December 31:

	2009			2008
Deferred tax assets related to
Derivative instruments	$	10,374		$	—
Inventories		—			49
Asset retirement obligations		5,012			3,837
Accrued expenses, allowance and other		2,627			1,442
Net operating loss carryforwards
Federal		82,399			81,431
State		12,161			15,403
Statutory depletion carryforwards		1,854			1,516
Alternative minimum tax credit carryforwards		308			308
		114,735			103,986
Less: valuation allowance		(5,848	)		(5,848	)
Deferred tax asset		108,887			98,138
Deferred tax liabilities related to
Derivative instruments		—			(79,582	)
Property and equipment		(44,048	)		(80,951	)
Inventories		(627	)		—
Deferred tax liability		(44,675	)		(160,533	)
Net deferred tax asset (liability)		64,212			(62,395	)
Less net current deferred tax asset (liability)		1,790			(19,696	)
Long-term deferred tax asset (liability)	$	62,422		$	(42,699	)

Approximately $948 and $(19,886) of the current deferred tax asset (liability) at December 31, 2009 and 2008, respectively, relates to the short-term derivative instruments. Additionally, approximately $131 and $131 of the current deferred tax asset (liability) relates to asset retirement obligations at December 31, 2009 and 2008, respectively. At December 31, 2009 and 2008, taxes receivable of $21 and $85, respectively, are included in accounts receivable.

We have federal net operating loss carryforwards of approximately $235,426 at December 31, 2009, significant portions of which will begin to expire in 2018 if unused. At December 31, 2009, we have state net operating loss carryforwards of approximately $214,864, which will begin to expire in 2010. At December 31, 2009, approximately $103,334 of the state net operating loss carryforwards have been reduced by a valuation allowance based on our assessment that it is more likely than not that a portion will not be realized. In addition, at December 31, 2009 we had tax percentage depletion carryforwards of approximately $5,297, which are not subject to expiration.

Realization of our deferred tax assets is dependent upon generating sufficient future taxable income. Although realization is not assured, we believe it is more likely than not that the deferred tax asset will be realized. The amount of the deferred tax asset considered realizable, however, could be reduced in the near-term if estimates of future taxable income are reduced.

99

Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

Note 10: Related party transactions

On December 7, 2007, our board of directors approved the sale of Pointe Vista Development, L.L.C., an indirect, wholly owned subsidiary of the Company, to Fischer Investments, L.L.C., an Oklahoma limited liability company controlled by Mark A. Fischer, our Chairman, Chief Executive Officer and President, for $3,158 resulting in a gain on the sale of $591. The sale of this non-core asset was approved by our board of directors in an effort to focus on our core business areas of oil and natural gas production and exploitation.

CHK Holdings, L.L.C., an indirect wholly owned subsidiary of Chesapeake Energy Corporation (“Chesapeake”) owns 31.9% of our outstanding common stock. We participate in ownership of properties operated by Chesapeake, and we received revenues and incurred joint interest billings of: $5,223 and $3,280, respectively, for the year ended December 31, 2009; $9,033 and $3,764, respectively, for the year ended December 31, 2008; and $8,028 and $4,107, respectively, for the year ended December 31, 2007 on these properties. In addition, Chesapeake participates in ownership of properties we operate. We paid revenues and recorded joint interest billings to Chesapeake of: $1,454 and $2,728, respectively, for the year ended December 31, 2009; $2,941 and $3,007, respectively, for the year ended December 31, 2008; and $1,409 and $1,552, respectively, for the year ended December 31, 2007. Amounts receivable from and payable to Chesapeake were $2,506 and $241, respectively, as of December 31, 2009. Amounts receivable from and payable to Chesapeake were $1,914 and $1,188, respectively, as of December 31, 2008.

Note 11: Deferred compensation

Effective January 1, 2004, we implemented a Phantom Unit Plan, which was revised on December 31, 2008 as the Second Amended and Restated Phantom Stock Plan (the “Plan”), to provide deferred compensation to certain key employees (the “Participants”). Phantom stock may be awarded to participants in total up to 2% of the fair market value of the Company. No participant may be granted, in the aggregate, more than 5% of the maximum number of phantom shares available for award. Under the current plan, awards vest on the fifth anniversary of the award date, but may also vest on a pro-rata basis following a participant’s termination of employment with us due to death, disability, retirement or termination by us without cause. Also, phantom stock will vest if a change of control event occurs. Upon vesting, participants are entitled to redeem their phantom stock for cash within 120 days of the vesting date.

The First Amended and Restated Phantom Stock Plan, which was effective January 1, 2007, reduced the vesting period from the seventh anniversary of the award date to the fifth anniversary of the original award date. The reduction in the vesting period was accounted for as a modification to the plan accounted for on a prospective basis. We recorded additional deferred compensation expense of $280, net of $137 capitalized, during the year ended December 31, 2007 as a result of the modification.

Since the phantom stock is a liability award, fair value of the stock is remeasured at the end of each reporting period until settlement. As prescribed by the Plan, fair market value is calculated based on the Company’s total asset value less total liabilities, with both assets and liabilities being adjusted to fair value. The primary adjustment required is the adjustment of oil and natural gas properties from net book value to the discounted and risk adjusted reserve value based on internal reserve reports priced on NYMEX forward strips.

Compensation expense is recognized over the vesting period of the phantom stock and is reflected in lease operating and general and administrative expenses in the consolidated statements of operations. Such expense is calculated net of forfeitures estimated based on our historical and expected turnover rates. Due to a reduction in the fair value of the phantom stock during 2008, we recognized a deferred compensation gain during the year ended December 31, 2008. We recognized deferred compensation expense (gain) as follows for the years ended December 31:

	2009			2008			2007
Deferred compensation cost (gain)	$	1,715		$	(466	)	$	1,246
Less: deferred compensation cost capitalized		(570	)		160			(415	)
Deferred compensation expense (gain)		1,145			(306	)		831

100

Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

A summary of our phantom stock activity for the three years ended December 31, 2009 is presented in the following table:

	Weighted average grant  date fair value		Phantom shares		Vest date fair value		Weighted average amortization period remaining
	($ per share)						(years)
Unvested and outstanding at January 1, 2007	$	8.16	160,038
Granted	$	14.29	47,643
Vested	$	17.56	(77	)	$	1
Forfeited	$	12.99	(6,761	)
Unvested and outstanding at December 31, 2007	$	9.41	200,843				2.15
Granted	$	16.54	31,158
Vested		—	—			—
Forfeited	$	13.29	(12,343	)
Unvested and outstanding at December 31, 2008	$	10.20	219,658				1.49
Granted	$	11.89	40,601
Vested	$	5.38	(80,411	)		811
Forfeited	$	11.75	(4,366	)
Unvested and outstanding at December 31, 2009	$	12.77	175,482				1.90

Payments for phantom shares totaled $809 during 2009. There were no payments for phantom shares in 2008 or 2007. As of December 31, 2009, there were 260 vested units outstanding with a weighted average fair value of $10.08 per share, and an aggregate intrinsic value of $3. Based on an estimated fair value of $24.48 per phantom share as of December 31, 2009, the aggregate intrinsic value of the unvested phantom shares outstanding was $4,296, which includes approximately $1,839 of unrecognized compensation cost that is expected to be recognized over a weighted-average period of 1.90 years. As of December 31, 2009 and 2008, accrued payroll and benefits payable included $1,315 and $789, respectively, for deferred compensation costs vesting within the next twelve months.

Note 12: Retirement benefits

We provide a 401(k) retirement plan for all employees, and we match employee contributions 100%, up to 6% of each employee’s gross wages. At December 31, 2009, 2008, and 2007, there were 563, 691, and 613 employees, respectively, participating in the plan. Our contribution expense was $1,865, $1,883, and $1,720 for the years ended December 31, 2009, 2008 and 2007, respectively.

101

Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

Note 13: Commitments and contingencies

Standby Letters of Credit (“Letters”) available under the revolving credit line are used in lieu of surety bonds with various city, state, and federal agencies and utilities for liabilities relating to the operation of oil and natural gas properties. We had various Letters outstanding totaling $2,855, $2,730, and $1,690 as of December 31, 2009, 2008, and 2007, respectively. Interest on each Letter accrues at the lender’s prime rate (effective rate of 6.081% at December 31, 2009 and 5.299% at December 31, 2008) for all amounts paid by the lenders under the Letters. We paid no interest on the Letters during 2009, 2008, or 2007.

We have entered into operating lease agreements for the use of office space and equipment rental on oil and natural gas properties. Rent expense for the years ended December 31, 2009, 2008, and 2007 was $5,279, $7,116, and $6,766, respectively.

We have open purchase orders for inventory totaling $1,235 at December 31, 2009.

We have long-term contracts to purchase up to all of the CO₂ manufactured at two existing ethanol plants. Under one contract, we own the rights to purchase or otherwise take all of the plant’s CO₂ production, which is an average of approximately four MMcf per day. The contract’s ten-year term will begin upon our first purchase. We are currently purchasing approximately eight to ten MMcf per day of CO₂ under the second contract, and we expect to purchase an average of approximately 15 to 19 MMcf per day over the fifteen-year contract term, which began on May 1, 2009. There were no significant purchases under either of these contracts in 2009, 2008, or 2007. Pricing under both contracts is variable over time and both contracts have renewal language.

We have rights under two additional contracts that require us to purchase CO₂ for EOR projects. Under one of these contracts, we may purchase a variable amount of CO₂, up to 20 MMcf per day. We have historically taken approximately 10 MMcf per day under this contract, and we project we would purchase an average of approximately 16 MMcf per day over the remainder of the initial term of the contract, which expires in February 2011. Purchases under this contract were $836, $892, and $286 during 2009, 2008, and 2007, respectively. The contract automatically renews for an additional ten years unless terminated by the other party in the event we fail to match a higher competing offer for the CO₂, or unless otherwise terminated by us. Under the second of these contracts, we currently purchase an average of approximately six MMcf per day of CO₂ and we have nominated to purchase ten MMcf per day of CO ₂ through 2011. Purchases under this contract, which include transportation charges, were $2,278, $2,283, and $1,484 during 2009, 2008, and 2007, respectively. The contract expires in 2016. We may terminate or permanently reduce our purchase rate under this second additional contract at the end of any calendar year with 13 months notice. Pricing under both of these contracts is dependent on certain variable factors, including the price of oil.

Effective April 15, 2009, we settled our pending lawsuit against John Milton Graves Trust u/t/a 6/11/2004, et al. This case was filed in the District Court of Tulsa County, State of Oklahoma, and related to (i) a post-closing adjustment of the price we paid for Calumet Oil Company (“Calumet”) in 2006 (the “Working Capital Adjustment”) and (ii) a contractual payment related to an election to be made by the sellers of Calumet (collectively, the “Sellers”) under the federal tax code (the “Tax Election”). Pursuant to the settlement agreement, which was based upon net calculations of the receivable and payable, the Sellers paid us $7,100, which amount is intended to settle all claims related to both the Working Capital Adjustment and the Tax Election claims, and we retained $387 contained in an escrow account covering any losses incurred by us for title defects related to our purchase of Calumet. In addition, the parties issued mutual releases, dismissed with prejudice the pending litigation and the claims made therein, and the Sellers will take action to clear the title to certain properties purchased by us in the Calumet acquisition.

As of December 31, 2008, the recorded receivable for the Working Capital Adjustment was $14,406, and was included in other assets on the consolidated balance sheet. As of December 31, 2008, the recorded payable related to the Tax Election was $4,378, and was included in accounts payable and accrued liabilities on the consolidated balance sheet. As a result of the settlement, as of December 31, 2009, the receivable related to the Working Capital Adjustment and the Tax Election payable were eliminated, the escrow cash account was reclassified to operating cash, and we recorded a charge to expense of $2,928 during the year ended December 31, 2009.

In February 2008, loss of well control occurred at the Bowdle 47 No. 2 well in Loving County, Texas. Total costs attributable to the loss of well control were approximately $10,648. Our insurance policy has covered 100% of these costs, with the $627 insurance retention and deductible being payable by us. As of December 31, 2009, we have received insurance proceeds of $10,021, and no further receipts are expected. Insurance proceeds received are recorded as a reduction of oil and natural gas properties on the balance sheet and in the statement of cash flows.

102

Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

During 2007, we entered into change of control severance agreements under which the officers are entitled to receive certain severance benefits. The severance payment will be paid in equal monthly installments over a 24-month period and will be equal to a set multiplier times the sum of (A) the officer’s base salary as in effect immediately prior to his termination date, plus (B) the officer’s target bonus for the full year in which the termination date occurred or, if no target bonus has been established, then the most recent bonus paid.

Various claims and lawsuits, incidental to the ordinary course of business, are pending both for and against us. In the opinion of management, all matters are not expected to have a material effect on our consolidated financial position or consolidated results of operations.

Note 14: Subsequent events

Stock Purchase Agreement

On March 23, 2010, we entered into a stock purchase agreement (the “Stock Purchase Agreement”) with CCMP Capital Investors II (AV-2), L.P., CCMP Energy I LTD., and CCMP Capital Investors (Cayman) II, L.P. (collectively, “CCMP”), pursuant to which CCMP would purchase and we would sell 475,042 shares of our class E common stock, par value $0.01 per share, and one share of class F common stock, par value $0.01 per share, for a purchase price of $325,000. The closing date of the Stock Purchase Agreement (the “Closing Date”) was April 12, 2010.

As a result of the closing of the Stock Purchase Agreement and the stock purchase agreements discussed below, CCMP owns approximately 36% of our total outstanding common stock as of April 12, 2010.

Amended and Restated Certificate of Incorporation. In connection with the execution of the Stock Purchase Agreement, we filed the Amended and Restated Certificate of Incorporation with the Delaware Secretary of State on April 12, 2010. The Amended and Restated Certificate of Incorporation creates seven classes of $0.01 par value per share common stock, classes A through G, with the rights and preferences summarized below. The class A common stock carries standard voting, dividend and liquidation rights. The class B, C and D common stock was issued to our existing stockholders, with a separate class issued to each stockholder. The class E and class F common stock was issued to CCMP. One share of class G common stock was issued to each of our existing stockholders. All shares of class B through G common stock will automatically convert to class A common stock upon consummation of an initial public offering of shares of class A common stock resulting in proceeds to us of at least $250,000, which is underwritten on a firm commitment basis by a nationally recognized investment banking firm, and which results in the initial listing or quotation of the class A common stock on any national securities exchange (a “Qualified IPO”).

Holders of class B, C and D common stock have the right, in aggregate, to designate three of our five directors. Holders of class E common stock have the right to designate the remaining two directors. Holders of each of the class B, C and D common stock have designated a director. All of the initial designees of the class B, C, D and E common stock were approved by the existing board of directors prior to being empanelled.

The class B, E, F and G common stock carry the following additional voting and consent rights:

• So long as the class B holders own 80% or more of the common stock they owned as of the Closing Date, and without such holder’s prior consent, we may neither initiate nor consummate a sale of the Company, whether in the form of a stock sale, asset sale, merger or any other form whatsoever (a “Company Sale”), or a liquidation or dissolution of the Company, on or prior to the sixth anniversary of the Closing Date.

103

Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

• In certain circumstances, we are prohibited from incurring debt, consummating sales or acquisitions of assets, taking certain operational actions or engaging in other specified transactions without the prior consent of the holders of the class E common stock.

• Upon the triggering of a Company Sale or a Demand IPO (each as summarized below) by holders of class E common stock, the voting and other rights related to the class F common stock will permit holders of class E common stock to cause any actions necessary to be taken by our board of directors or stockholders to consummate such Company Sale or Demand IPO.

• Upon the triggering of a Demand IPO by a majority in interest of our existing stockholders, the voting and other rights related to the class G common stock will permit the majority of the holders of class G common stock to cause any actions necessary to be taken by the Company’s board of directors or stockholders to consummate such Demand IPO.

The rights and preferences of a holder of class B, C, D, E, F and G common stock terminate on the earlier of (x) the closing date of a Qualified IPO or (y) the date that such holder and its permitted transferees cease to beneficially own 5% or more of our fully-diluted common stock.

Stockholders Agreement. In connection with the closing of the Stock Purchase Agreement, the Company, CCMP and our existing stockholders executed the Stockholders Agreement on April 12, 2010. The Stockholders Agreement provides for certain general rights and restrictions, including board observer rights, informational rights, general restrictions on transfer of common stock, tag-along rights, preemptive rights, registration rights following a Qualified IPO and, subject to certain limited exceptions, prohibitions on the sale or acquisition of our common stock that would result in a change of control, as such term is defined under the indentures for our 8 ¹/2% senior notes due 2015 and our 8 ⁷/8% senior notes due 2017.

The Stockholders Agreement also provides for the following stockholder-specific rights or restrictions:

• Prior to a Qualified IPO, Altoma Energy GP (“Altoma”) will not vote for the approval of (i) any merger, consolidation, conversion or a Demand IPO, (ii) certain amendments to our organizational documents, (iii) the sale of all or substantially all of our assets, or (iv) a termination of the business of or liquidation or dissolution of the Company, unless Fischer Investments, L.L.C. (“Fischer”) votes for such approval.

• Other than pursuant to the exercise of preemptive rights, CHK Holdings, L.L.C. (“CHK”) may not acquire more than 25% of our outstanding common stock.

• CCMP may sell up to 20% of its common stock owned on the Closing Date without restriction. Prior to a Qualified IPO and except in limited circumstances, CCMP is restricted from making further sales before the fourth anniversary of the Closing Date, and any sales thereafter (but before a Qualified IPO) will be subject to certain rights of first offer provisions set forth in the Stockholders Agreement (the “ROFO provisions”).

• Fischer may sell up to 20% of its common stock owned immediately prior to the Closing Date subject to certain restrictions. Prior to a Qualified IPO and except in limited circumstances, Fischer is restricted from making further sales before the fourth anniversary of the Closing Date, and any sales thereafter (but before a Qualified IPO) will be subject to the ROFO provisions.

• Prior to a Qualified IPO and except in limited circumstances, CHK is restricted from selling its common stock before the 30 month anniversary of the Closing Date, and any sales thereafter (but before a Qualified IPO) will be subject to the ROFO provisions.

• If our common stock is not listed on a national securities exchange after August 15, 2011, Altoma may request to transfer its shares pursuant to a demand registration, but only after Altoma first offers such shares to the Company, and then to CHK, Fischer and CCMP in accordance with the procedures set forth in the Stockholders Agreement.

• At any time after the 18 month anniversary of the Closing Date, either (i) CCMP or (ii ) a majority in interest of our existing stockholders may demand that we engage in a Qualified IPO (a “Demand IPO”), if (a) the price per share to be received by the Company or such party or parties, as the case may be, in such Demand IPO is at least 1.75 times the price per share paid by CCMP for our common stock pursuant to the Stock Purchase Agreement and (b) certain other conditions are met.

• At any time after the four year anniversary of the Closing Date, CCMP may demand a Demand IPO.

104

Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

• At any time after the sixth anniversary of the Closing Date, and so long as a Qualified IPO has not yet occurred, CCMP may demand a Company Sale, subject to a right of first offer to purchase the Company provided to Fischer.

With the exception of registration rights, the rights and preferences of a stockholder under the Stockholders Agreement will generally terminate on the earlier of (x) the closing date of a Qualified IPO or (y) the date that such holder and its permitted transferees cease to beneficially own 5% or more of our fully-diluted common stock.

Amended Bylaws. Our bylaws have been amended to conform to the provisions of the Amended and Restated Certificate of Incorporation.

Other stock purchase agreements

On April 12, 2010, two of the three principal stockholders of the Company, Fischer and Altoma, each executed a stock purchase agreement with CCMP pursuant to which CCMP purchased from such stockholder $10,000 of Company common stock.

Eighth Restated Credit Agreement

On April 12, 2010, we entered into and closed an Eighth Restated Credit Agreement, which has an initial borrowing base of $450,000, is collateralized by our oil and natural gas properties, and is scheduled to mature on April 12, 2014. We used the proceeds from the sale of common stock to CCMP, along with proceeds available under the Eighth Restated Credit Agreement, to repay the amounts owing under our Seventh Restated Credit Agreement.

Availability under the Eighth Restated Credit Agreement will be subject to a borrowing base which will be set by the banks semi-annually on May 1 and November 1 of each year beginning on November 1, 2010. In addition, the lenders may request a borrowing base redetermination once between each scheduled redetermination and in the event of early termination of our derivative contracts. If we issue Additional Permitted Debt, as defined in the Eighth Restated Credit Agreement, the borrowing base will be automatically reduced by an amount equal to 25% of the aggregate stated principal amount of the debt issued. As of April 14, 2010, we had $275,330 of availability under our Eighth Restated Credit Agreement.

Borrowings under the Eighth Restated Credit Agreement will be made, at our option, as either Eurodollar loans or Alternate Base Rate (“ABR”) loans.

Interest on Eurodollar loans is computed at the Adjusted LIBO Rate, defined as the rate applicable to dollar deposits in the London interbank market with a maturity comparable to the interest period (one, two, three or six months, selected by us) times a Statutory Reserve Rate multiplier, as defined in the Eighth Restated Credit Agreement, plus a margin where the margin varies from 2.500% to 3.500% depending on the utilization percentage of the conforming borrowing base. Interest payments on Eurodollar borrowings are due the last day of the interest period, if shorter than three months or every three months.

Interest on ABR loans is computed as the greater of (1) the Prime Rate, as defined in the Eighth Restated Credit Agreement, (2) the Federal Funds Effective Rate, as defined in Eighth Restated Credit Agreement, plus 1/2 of 1%, or (3) the Adjusted LIBO Rate, as defined in Eighth Restated Credit Agreement, plus 1%; plus a margin where the margin varies from 1.625% to 2.625%, depending on the utilization percentage of the borrowing base.

Commitment fees of 0.50% accrue on the unused portion of the borrowing base amount, depending on the utilization percentage, and will be included as a component of interest expense. We have the right to make prepayments of the borrowings at any time without penalty or premium.

The Eighth Restated Credit Agreement contains restrictive covenants that may limit our ability, among other things, to:

• incur additional indebtedness;

• create or incur additional liens on our oil and natural gas properties;

• pay dividends in cash or other property, redeem our capital stock or prepay certain indebtedness;

• make investments in or loans to others;

• change our line of business;

• enter into operating leases;

• merge or consolidate with another person, or lease or sell all or substantially all of our assets;

• sell, farm-out or otherwise transfer property containing proved reserves;

• enter into transactions with affiliates;

• issue preferred stock;

• enter into negative pledge agreements or agreements restricting the ability of our subsidiaries to pay dividends;

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Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

• enter into or terminate certain swap agreements;

• amend our organizational documents; and

• amend, modify or waive under our permitted bond documents (i) any covenants that would make the terms materially more onerous to us or (ii) certain other provisions.

The Eighth Restated Credit Agreement also has certain negative and affirmative covenants that require, among other things, maintaining a Current Ratio, as defined in the Eighth Restated Credit Agreement, of not less than 1.0 to 1.0. The Eighth Restated Credit Agreement also requires us to maintain a Consolidated Total Debt to Consolidated EBITDAX ratio, as defined in the Eighth Restated Credit Agreement, of not greater than:

• 4.50 to 1.0 for the annualized periods commencing on April 1, 2010 and ending on the last day of the fiscal quarter ending on June 30, 2010, September 30, 2010, and December 31, 2010;

• 4.25 to 1.0 for the four consecutive fiscal quarters ending on March 31, 2011, June 30, 2011, and September 30, 2011; and

• 4.00 to 1.0 for the four consecutive fiscal quarters ending on December 31, 2011 and for each period of four consecutive fiscal quarters ending on the last day of such applicable fiscal quarters thereafter.

The Eighth Restated Credit Agreement also specifies events of default, including:

• our failure to pay principal or interest under the Eighth Restated Credit Agreement when due and payable;

• our representations or warranties proving to be incorrect, in any material respect, when made or deemed made;

• our failure to observe or perform certain covenants, conditions or agreements under the Eighth Restated Credit Agreement;

• our failure to make payments on certain other material indebtedness when due and payable;

• the occurrence of any event or condition that requires the redemption or repayment of, or an offer to redeem or repay, certain other material indebtedness prior to its scheduled maturity;

• the commencement of a voluntary or involuntary proceeding seeking liquidation, reorganization or other relief, or the appointment of a receiver, trustee, custodian or other similar official for us or our subsidiaries, and the proceeding or petition continues undismissed for 60 days or an order approving the foregoing is entered;

• our inability, admission or failure generally to pay our debts as they become due;

• the entry of a final, non-appealable judgment for the payment of money in excess of $5.0 million that remains undischarged for a period of 60 consecutive days;

• a Change of Control (as defined in the Eighth Restated Credit Agreement); and

• the occurrence of a default under any permitted bond document, which such default continues unremedied or is not waived prior to the expiration of any applicable grace or cure under any permitted bond document.

If the outstanding borrowings under the Eighth Restated Credit Agreement were to exceed the borrowing base as a result of a redetermination, we would be required to eliminate this excess. Within 10 days after receiving notice of the new borrowing base, we would be required to make an election: (1) to repay a portion of our bank borrowings in the amount of the excess either in a lump sum within 30 days or in equal monthly installments over a six-month period, (2) to submit within 30 days additional oil and natural gas properties we own for consideration in connection with the determination of the borrowing base sufficient to eliminate the excess or (3) to eliminate the excess through a combination of repayments and the submission of additional oil and natural gas properties within 30 days.

Novation and unwinding of derivative contracts

Five of the counterparties to our derivative contracts as of December 31, 2009 are no longer lenders under our Eighth Restated Credit Agreement, which closed on April 12, 2010. As a result, we will novate oil swaps covering a total of 2,175 MBbls from April 2010 through December 2012, natural gas swaps covering a total of 8,180 Bbtu from April 2010 through December 2011, and natural gas basis swaps covering a total of 10,860 Bbtu from April 2010 through December 2011. In addition, we have unwound oil swaps and collars covering a total of 255 MBbls from April 2010 through December 2011 and gas collars covering a total of 1,170 Bbtu from April 2010 through December 2010 for net proceeds of approximately $7,150.

2010 Equity Incentive Plan

We adopted the Chaparral Energy, Inc. 2010 Long-Term Incentive Plan (the “2010 Plan”) on April 12, 2010. The 2010 Plan reserves a total of 86,301 shares of our class A common stock for awards issued under the 2010 Plan. All of our or our affiliates’ employees, officers, directors, and consultants are eligible to participate in the 2010 Plan. On April 12, 2010, our Board of Directors approved initial awards of restricted stock under the 2010 Plan totaling 49,333 shares of our class A common stock. These initial awards will be subject to service and market vesting conditions.

106

Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

Note 15: Oil and natural gas activities

The Company’s oil and natural gas activities are conducted entirely in the United States. Costs incurred in oil and natural gas producing activities are as follows for the years ended December 31:

	2009		2008		2007
Property acquisition costs
Proved properties(1)	$	14,552	$	39,201	$	41,724
Unproved properties		3,781		6,677		8,032
Total acquisition costs		18,333		45,878		49,756
Development costs(2)		127,640		251,690		165,177
Exploration costs		4,942		5,108		15,287
Total	$	150,915	$	302,676	$	230,220

(1) Includes $15,597 of amounts disbursed from escrow related to title defects and other purchase price allocation adjustments on the Calumet Acquisition in 2007.

(2) Includes $3,564 and $16,090 of costs related to the construction of a compressor station and CO₂ pipeline in 2009 and 2008, respectively.

The average depreciation, depletion and amortization rate per equivalent unit of production was $12.12, $12.91, and $11.62 for the years ended December 31, 2009, 2008 and 2007, respectively.

Oil and natural gas properties not subject to amortization consist of the cost of unevaluated leaseholds, seismic costs associated with specific unevaluated properties and work in progress. Of the $19,728 of unproved property costs at December 31, 2009 being excluded from the amortization base, $7,542, $3,563, and $4,053 were incurred in 2009, 2008 and 2007, respectively, and $4,570 was incurred in prior years. These costs are primarily seismic and lease acquisition costs. We expect to complete our evaluation of the properties representing the majority of these costs within the next two to five years.

107

Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

Note 16: Disclosures about oil and natural gas activities (unaudited)

In December 2008, the SEC issued its Modernization of Oil and Gas Reporting, which revises reserves requirements for oil and natural gas companies. In addition, in January 2010, the FASB issued guidance regarding Oil and Gas Reserve Estimation and Disclosures to provide consistency with the new SEC rules. The new guidance amends existing standards to align the reserves calculation and disclosure requirements under GAAP with the requirements in the SEC rules. Please refer to the section entitled Oil and natural gas properties under Note 1 for additional discussion regarding the changes in the requirements.

We adopted the new SEC reserves requirements and GAAP reserves guidance as a change in accounting principle that is inseparable from a change in estimate, and applied the guidance prospectively effective December 31, 2009. The primary impact of adoption was the following changes to our reserves:

• Commodity prices used to estimate proved reserves were the average price based upon the first day of the month for the twelve months ended December 31, 2009, or $61.18 per Bbl of oil and $3.87 per Mcf of natural gas. Under the previous method, commodity prices used to calculate estimated proved reserves at December 31, 2009 would have been the year-end price of $79.36 per Bbl of oil and $5.79 per Mcf of natural gas. We estimate that the lower commodity prices used decreased estimated proved reserves and PV-10 value by approximately 15,900 MBoe and $881,160, respectively.

• As a result of the expanded definition of estimated proved undeveloped reserves that can be recorded, we added proved undeveloped reserves and PV-10 value of approximately 910 MBoe and $10,255, respectively, primarily related to horizontal wells.

• The new guidelines limit the recording of estimated proved undeveloped reserves to those reserves in undrilled locations that are scheduled to be developed within five years, unless specific circumstances justify a longer time. As a result of implementing this change in the guidelines, our proved undeveloped reserves and PV-10 value decreased by approximately 3,820 MBoe and $38,451, respectively.

The estimate of proved reserves and related valuations were based upon the reports of Cawley, Gillespie & Associates, Inc., Ryder Scott Company, L.P., and Lee Keeling & Associates, Inc., each independent petroleum and geological engineers, and our engineering staff. Users of this information should be aware that the process of estimating quantities of “proved” and “proved developed” crude oil and natural gas reserves is very complex, requiring significant subjective decisions in the evaluation of all available geological, engineering and economic data for each reservoir. The data for a given reservoir may also change substantially over time as a result of numerous factors, including additional development activity, evolving production history and continual reassessment of the viability of production under varying economic conditions. Consequently, material revisions to existing reserve estimates occur from time to time.

108

Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

Our oil and natural gas reserves are attributable solely to properties within the United States. A summary of the changes in our quantities of proved oil and natural gas reserves for the three years ended December 31, 2009 are as follows:

	Oil (MBbls)		Natural Gas (MMcf)		Total (MBoe)
Balance at January 1, 2007	88,378		375,311		150,929
Purchase of minerals in place	1,370		10,630		3,142
Sales of minerals in place	—		(423	)	(71	)
Extensions and discoveries	7,139		43,954		14,465
Revisions	(864	)	(23,500	)	(4,781	)
Improved recoveries	6,437		6,801		7,571
Production	(3,356	)	(20,504	)	(6,773	)
Balance at December 31, 2007	99,104		392,269		164,482
Purchase of minerals in place	1,170		7,549		2,428
Sales of minerals in place	(31	)	(854	)	(173	)
Extensions and discoveries	2,444		51,149		10,969
Revisions(1)	(46,784	)	(67,414	)	(58,020	)
Improved recoveries	(847	)	9,462		730
Production	(3,773	)	(19,795	)	(7,072	)
Balance at December 31, 2008	51,283		372,366		113,344
Purchase of minerals in place	595		336		651
Sales of minerals in place	(33	)	(18	)	(36	)
Extensions and discoveries	6,671		49,446		14,912
Revisions(2)	32,328		(87,990	)	17,663
Improved recoveries	2,499		2,874		2,978
Production	(3,874	)	(22,584	)	(7,638	)
Balance at December 31, 2009	89,469		314,430		141,874
Proved developed reserves:
January 1, 2007	57,824		281,958		104,817
December 31, 2007	61,567		269,578		106,497
December 31, 2008	40,382		263,331		84,271
December 31, 2009	55,861		228,006		93,862
Proved undeveloped reserves:
January 1, 2007	30,554		93,353		46,112
December 31, 2007	37,537		122,691		57,985
December 31, 2008	10,901		109,035		29,073
December 31, 2009	33,608		86,424		48,012

(1) The downward revision in our oil and natural gas reserves during 2008 was primarily due to a decrease in price from $96.01 and $6.80, respectively, as of December 31, 2007 to $44.60 and $5.62, respectively as of December 31, 2008.

(2) The upward revision in our oil reserves during 2009 was primarily due to an increase in price from $44.60 as of December 31, 2008 to $61.18 as of December 31, 2009. The downward revision in our natural gas reserves during 2009 was primarily due to a decrease in price from $5.62 as of December 31, 2008 to $3.87 as of December 31, 2009.

The following information was developed using procedures prescribed by GAAP. The standardized measure of discounted future net cash flows should not be viewed as representative of our current value. It and the other information contained in the following tables may be useful for certain comparative purposes, but should not be solely relied upon in evaluating us or our performance.

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Chaparral Energy, Inc. and subsidiaries

Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

We believe that, in reviewing the information that follows, the following factors should be taken into account:

• future costs and sales prices will probably differ from those required to be used in these calculations;

• actual rates of production achieved in future years may vary significantly from the rates of production assumed in the calculations;

• a 10% discount rate may not be reasonable as a measure of the relative risk inherent in realizing future net oil and natural gas revenues; and

• future net revenues may be subject to different rates of income taxation.

For 2009, future cash inflows used in the standardized measure calculation were estimated by applying a twelve-month average price for oil and natural gas, adjusted for location and quality differences, to the estimated future production of year-end proved reserves. Prior to 2009, future cash inflows were estimated by applying the year-end price for oil and natural gas, adjusted for location and quality differences, to the estimated future production of year-end proved reserves. Future cash inflows do not reflect the impact of future production that is subject to open hedge positions (see Note 4, “Derivative activities and financial instruments”). Future cash inflows were reduced by estimated future development, abandonment and production costs based on year-end costs in order to arrive at net cash flows before tax. Future income tax expense has been computed by applying year-end statutory tax rates to aggregate future pre-tax net cash flows reduced by the tax basis of the properties involved and tax carryforwards. GAAP requires the use of a 10% discount rate and prices and costs excluding escalations based upon future conditions.

In general, management does not rely on the following information in making investment and operating decisions. Such decisions are based upon a wide range of factors, including estimates of probable and possible as well as proved reserves and varying price and cost assumptions considered more representative of a range of possible economic conditions that may be anticipated.

The standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves are as follows:

	2009			2008			2007
Future cash flows	$	6,376,198		$	4,198,416		$	11,718,944
Future production costs		(2,561,177	)		(1,841,786	)		(4,600,663	)
Future development and abandonment costs		(734,611	)		(438,360	)		(914,561	)
Future income tax provisions		(792,160	)		(338,416	)		(2,017,915	)
Net future cash flows		2,288,250			1,579,854			4,185,805
Less effect of 10% discount factor		(1,316,886	)		(824,841	)		(2,391,825	)
Standardized measure of discounted future net cash flows	$	971,364		$	755,013		$	1,793,980

Future cash flows as shown above were reported without consideration for the effects of hedging transactions outstanding at each period end. Based on year-end spot prices used in determining future net revenues, if the effects of hedging transactions were included in the computation, then future cash flows would have increased (decreased) by $28,156, $259,793, and ($177,019) in 2009, 2008 and 2007, respectively.

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Notes to consolidated financial statements—(Continued)

(Dollars in thousands, unless otherwise noted)

The changes in the standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves are as follows:

	2009			2008			2007
Beginning of year	$	755,013		$	1,793,980		$	1,082,209
Sale of oil and natural gas produced, net of production costs		(177,891	)		(347,749	)		(235,273	)
Net changes in prices and production costs		369,851			(1,184,385	)		918,714
Extensions and discoveries		126,235			231,614			275,720
Improved recoveries		25,212			15,415			162,841
Changes in future development costs		(253,459)			142,143			(138,791	)
Development costs incurred during the period that reduced future development costs		62,960			181,462			4,978
Revisions of previous quantity estimates		149,494			(1,225,090	)		(83,894	)
Purchases and sales of reserves in place, net		4,956			46,148			44,869
Accretion of discount		88,440			401,154			149,406
Net change in income taxes		(174,544	)		703,123			(462,311	)
Changes in production rates and other		(4,903	)		(2,802	)		75,512
End of year	$	971,364		$	755,013		$	1,793,980

The following prices before field differentials were used in determining future net revenues related to the standardized measure calculation:

	2009		2008		2007
Oil (per Bbl)	$	61.18	$	44.60	$	96.01
Natural gas (per Mcf)	$	3.87	$	5.62	$	6.80

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that material information relating to us, including our consolidated subsidiaries, is made known to the officers who certify our financial reports and to other members of senior management and the board of directors. Based on their evaluation as of the end of the fiscal year ended December 31, 2009, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and are effective to ensure that information required to be disclosed in such reports is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles and includes those policies and procedures that:

• pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions relating to and the dispositions of our assets;

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

• provide reasonable assurance regarding prevention or the timely detection of unauthorized acquisition, or the use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Additionally, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of management, including the principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control—Integrated Framework, management concluded that our internal control over financial reporting was effective as of December 31, 2009.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the three months ended December 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We may make changes in our internal control procedures from time to time in the future.

112

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Executive Officers and Directors

The following table provides information regarding our executive officers and directors. Our board of directors currently consists of five members—Mark A. Fischer, Charles A. Fischer, Jr., Aubrey K. McClendon, Karl Kurz and Christopher Behrens. Mark A. Fischer is a full-time employee. We currently have no Board committees, but will be creating an audit committee and a compensation committee in the second quarter of 2010.

Name	Age	Position
Mark A. Fischer	60	Chairman, Chief Executive Officer and President
Joseph O. Evans	55	Chief Financial Officer and Executive Vice President
Robert W. Kelly II	52	Senior Vice President and General Counsel
Larry E. Gateley	60	Senior Vice President—Reservoir Engineering and Acquisitions
James M. Miller	47	Senior Vice President—Operations and Production Engineering
Charles A. Fischer, Jr.	61	Director
Aubrey K. McClendon	50	Director
Karl Kurz	48	Director
Christopher Behrens	49	Director

Mark A. Fischer, Chairman, Chief Executive Officer, President and Co-Founder, co-founded the Company in 1988 and has served as its President and Chairman of the Board since its inception. Mr. Fischer began his career with Exxon Company USA in 1972 in the Permian Basin of West Texas where he held various positions as production engineer, reservoir engineer, field superintendent and finally supervising production engineer. From 1977 until 1980, Mr. Fischer served as the drilling and production manager for the West Texas and then Mid-Continent Division of TXO Production Corp. Prior to founding Chaparral, he served as division operations manager for Slawson Exploration Company, focusing on the Mid-Continent and Panhandle Divisions. He is a member of the Society of Petroleum Engineers and the American Petroleum Institute. Mr. Fischer served as a director of the API from 1984 to 1986. Mr. Fischer graduated from Texas A&M University with an Honors degree in Aerospace Engineering, and currently serves on the Engineering Advisory Council for Texas A&M University. Mark A. Fischer and Charles A. Fischer, Jr. are brothers. Mr. Fischer is the board designee of the holders of our class B common stock.

Joseph O. Evans, Chief Financial Officer & Executive Vice President, joined the Company in July of 2005 as Chief Financial Officer and served on its board of directors from September 2006 to April 2010. From 1998 to June 2005, Mr. Evans was a consultant and practiced public accounting with the firm of Evans Gaither & Assoc. From 1997 to 1998, he served as Senior Vice President and Financial Advisor, Energy Lending, for First National Bank of Commerce in New Orleans. From 1976 until 1997, Mr. Evans worked in the Oklahoma practice of Deloitte & Touche where he became an Audit Partner. While at Deloitte he was a member of the energy industry group and was responsible for services on numerous SEC filings for clients. Mr. Evans has instructed numerous continuing professional education courses focused on compliance with the Sarbanes-Oxley Act. He is a Certified Public Accountant and an Accredited Petroleum Accountant. Mr. Evans is a graduate of the University of Central Oklahoma with a Bachelor of Science degree in Accounting.

Robert W. Kelly II, Sr. Vice President & General Counsel, joined the Company in 2001 and oversees the legal, land, marketing and environmental functions. Prior to joining the Company, Mr. Kelly worked for Ricks Exploration Inc. as Director of Business Development & Gas Marketing for two years. From 1990 until 1999, he was with EOG Resources Inc. (formerly Enron Oil & Gas Company) initially as Land Manager for its Oklahoma City division and later building their business development department. During 1989 and 1990, Mr. Kelly was a title attorney in his own partnership firm in Oklahoma City. He began his oil and gas career as a Landman with TXO Production Corp. in 1981, subsequently receiving promotions to District Landman by 1988. He is a member of the American Bar Association, the Oklahoma Bar Association, the Oklahoma Independent Producers Association, and several other business and legal associations. Mr. Kelly received a Bachelor of Business Administration (Petroleum Land Management) degree from the University of Oklahoma, and a Juris Doctor from the Oklahoma City University School of Law.

113

Larry E. Gateley, Sr. Vice President—Reservoir Engineering and Acquisitions, joined the Company in 1997 as the Reservoir Engineering and Acquisitions Manager, and is responsible for the Company Reservoir Group, which prepares the Company Annual Reserve Report, the Acquisition Department, the Company EOR Special Projects Group, and the Joint Interests Department. Mr. Gateley has 37 years of diversified management and operational and technical engineering experience. His previous positions include Reservoir/Production/Drilling Engineer for Exxon Company USA, Sr. Petroleum Engineer for J.M. Huber Corp., Chief Drilling Engineer for Post Petroleum Inc., Vice President and Co-Owner of Wood-Gate Engineering Inc., Vice President of Acquisitions for SMR Energy Income Funds, and Acquisitions Manager for Frontier Natural Gas Corporation. Mr. Gateley is a registered Professional Engineer in the states of Oklahoma and Texas. He is a graduate of the University of Oklahoma with a Bachelor of Science degree in Mechanical Engineering.

James M. Miller, Sr. Vice President—Operations & Production Engineering, joined the Company in 1996, as Operations Engineer. Since joining the Company, Mr. Miller has been promoted to positions of increasing responsibility and currently oversees all company production operations and field services. Mr. Miller has gained particular expertise in the area of operating secondary and EOR units. Prior to joining Chaparral, Mr. Miller worked for KEPCO Operating Inc. for one year as a petroleum engineer. From 1987 to 1995, he was employed by Robert A. Mason Production Co., as a petroleum engineer, and later as Vice President of Production. He is a member of the Society of Petroleum Engineers and the American Petroleum Institute. Mr. Miller attended the University of Oklahoma and received a Bachelor of Science degree in Petroleum Engineering.

Charles A. Fischer, Jr., Director and Co-Founder, co-founded the Company in 1988, and has served as a director of the Company since its inception. Mr. Fischer served as the Company’s Chief Administrative Officer and Executive Vice President from July 2005 until his retirement effective July 27, 2007. Mr. Fischer joined the Company full-time in 2000 and served as its Chief Financial Officer and Senior Vice President for five years until assuming the role of Chief Administrative Officer. In 1978 Mr. Fischer founded C.A. Fischer Lumber Co. Ltd., which owns eight retail building supply outlets in western Canada, and is the current President. Mr. Fischer also serves as manager of Altoma Energy GP. Mr. Fischer began his career with Renewable Resources in 1974 as a senior scientist on the Polar Gas Pipeline Project investigating the feasibility of bringing natural gas from the high Arctic to south-central Canada. Mr. Fischer served as director of the Canadian Western Retail Lumberman’s Association for 11 years, was President for six years, and received the 2001 Industry Achievement Award. He graduated from Texas A&M University with a Bachelor of Science degree in Biology and from the University of Wisconsin with a Master of Science degree in Ecology. Mr. Fischer is the board designee of the holders of our class C common stock.

Aubrey K. McClendon, Director, was elected to the Company’s board of directors in April 2010. Mr. McClendon co-founded Chesapeake Energy Corporation (NYSE: CHK) in 1989 and has served as its Chairman of the Board and Chief Executive Officer since that time. From 1982 to 1989, Mr. McClendon was an independent producer of oil and natural gas. Mr. McClendon graduated from Duke University in 1981. Mr. McClendon is the board designee of the holders of our class D common stock.

Karl Kurz, Director, has over 28 years of energy industry experience with a focus on executive management, operations, midstream, marketing, business development, and planning. Mr. Kurz recently joined CCMP Capital Advisors, LLC as a Managing Director and Co-Head of the Energy Group. Previously, Mr. Kurz served as the chief operating officer for Anadarko Petroleum Corporation, one of the world’s largest independent oil and gas exploration and development companies from December 2006 through March 2009. He led a global organization of approximately 3,300 employees with a 2008 capital budget of $5.2 billion. He had responsibility for global exploration and production, marketing, midstream, land, technology, and engineering services. Mr. Kurz joined Anadarko in 2000 as Manager, Energy Marketing. He was promoted to Vice President, Marketing in November 2003, to Senior Vice President, Marketing, and General Manager, U.S. Onshore in May 2005 and to Senior Vice President, North America Operations, Midstream and Marketing in August 2006. Mr. Kurz began his career with ARCO Oil & Gas Company in 1983 and spent seven years in various upstream roles, with a focus on reservoir and production engineering. In 1990, he continued his career with a move into ARCO Oil & Gas Company’s Crude Oil Marketing Department. Mr. Kurz became Manager of Vastar Resources, Inc.’s Crude Oil and NGL Marketing Department in 1995 and was promoted to General Manager of Midstream and Marketing in 1998. Mr. Kurz holds a Bachelor of Science in petroleum engineering from Texas A&M University, graduating Magna Cum Laude in 1983. He is also a graduate of Harvard’s Advanced Management Program in 2008. Mr. Kurz has served on the Board of Directors of Natural Gas Supply Association, the American Petroleum Institute, and the Independent Petroleum Association of America. He also served on the board of Western Gas Partners (WES) from December 2007 through March 2009, and currently serves on the board of SemGroup Corporation. Active in his community, Mr. Kurz serves on the Board of Sam Houston Council of the Boy Scouts of America and Dallas Theological Seminary. Mr. Kurz is one of the two board designees of the holders of our class E common stock.

114

Christopher Behrens, Director, is a Managing Director in the New York office of CCMP Capital Advisors, LLC and a member of the firm’s Investment Committee. He focuses on making investments in the industrial, distribution and energy sectors. Prior to joining CCMP in 1994, he was a Vice President in the Merchant Banking Group of The Chase Manhattan Corporation. Mr. Behrens holds a B.A. from the University of California, Berkeley and an M.A. from Columbia University. Mr. Behrens serves on the board of directors of a number of private companies. Mr. Behrens is one of the two board designees of the holders of our class E common stock.

Board Committees

On April 12, 2010, our Board of Directors established a compensation committee and an audit committee, effective upon the closing of the sale of our common stock to CCMP. All members of the Board of Directors were appointed to both the compensation committee and the audit committee. The Board of Directors has not adopted charters for either committee as of the date of this report and has yet to make a determination of which director will serve as the audit committee financial expert.

Code of Ethics

We have adopted a Code of Business Conduct and Ethics that is applicable to all employees, officers and members of our board of directors. The Code of Business Conduct and Ethics is available on our website at www.chaparralenergy.com.

ITEM 11. EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Overview & Oversight of Compensation Program

Our compensation programs include programs that are designed specifically for (i) our most senior executive officers (“Senior Executives”), which includes the Principal Executive Officer (“PEO”) and the other executive officers named in the Summary Compensation Table (the “Named Executive Officers” or “NEOs”); (ii) employees who are designated as our executives of the Company (“Executives” or “Executive Employees”), which includes the Senior Executives and (iii) a broad base of Company employees. Currently, our PEO and board of directors oversee the compensation programs for the Named Executive Officers, Executives and the broad base of Company employees.

Overview of Compensation Philosophy and Program

In order to recruit and retain the most qualified and competent individuals as Senior Executives, we strive to maintain a compensation program that is competitive in the labor market. The following compensation objectives are considered in setting the compensation programs for our Senior Executives:

• drive and reward performance which supports our core values;

• align the interests of Senior Executives with those of stockholders;

• design competitive total compensation and rewards programs to enhance our ability to attract and retain knowledgeable and experienced Senior Executives; and

• set compensation and incentive levels that reflect mid-range market practices.

Compensation Targets

From time to time, we review compensation data from the Oil & Gas E&P Survey prepared by Effective Compensation, Incorporated (the “Survey Data”) to ensure that our Senior Executive base salary compensation program generally aligns with the median of the Survey Data. The Survey Data is a compilation of compensation and other data from the prior year based upon over 100 exploration and production firms that participated in the survey.

        In determining base salaries for our executive officers, in addition to the Survey Data referenced above, our Board also considers the current level of the executive’s compensation, both internally and relative to other Company officers and current industry and economic factors. The process can best be described as (i) first, looking within our Company at the current salary structure among the executive group to ensure fairness and consistency, (ii) second, evaluating the Company’s performance to ensure that compensation is, in large part, performance-based, (iii) third, looking at general industry conditions, and (iv) fourth, looking at peer group companies to determine if the range of compensation paid to our executives is within the “fairway” of the compensation paid to executives in similarly situated companies.

Compensation Elements and Rationale for Pay Mix Decisions

To reward both short- and long-term performance in our compensation program and in furtherance of our compensation objectives noted above, our executive compensation philosophy includes the following four principles:

(i) Compensation levels should be competitive

We review the Survey Data to ensure that the compensation program is aligned with median levels. We believe that a competitive compensation program will enhance our ability to attract and retain Senior Executives.

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(ii) Compensation should be related to performance

We believe that a significant portion of a Senior Executive’s compensation should be tied to individual performance and to our overall performance measured primarily by growth in reserves, production and net income.

(iii) Variable compensation should represent a portion of a Senior Executive’s total compensation

We intend for a portion of compensation paid to Senior Executives to be variable in order to allow flexibility when our performance and/or industry conditions are not optimum and maintain the ability to reward Senior Executives for our overall growth and retain Senior Executives when industry conditions necessitate. Senior Executives should have the incentive of increasing our profitability and value in order to earn a portion of their compensation package.

(iv) Compensation should balance short- and long-term performance

We seek to structure a balance between achieving strong short-term annual results and ensuring our long-term viability and success. To reinforce the importance of balancing these perspectives, Senior Executives are regularly provided both compensation based on the accomplishment of short-term objectives and incentives for achieving long-term objectives. Beginning in 2004, we began a long-term compensation plan to deliver long-term incentive awards aligned with the interests of stockholders while simultaneously serving as a retention tool to ensure that recipients remain employed while our annual bonus plans are structured to reward the accomplishment of short-term objectives.

Review of Senior Executive Performance

The PEO reviews, on an annual basis, each compensation element of a Senior Executive. In each case, the PEO takes into account the scope of responsibilities and experience, succession potential, strengths and weaknesses, and contribution and performance over the past year and balances these against competitive salary levels. The PEO works daily with the Senior Executives, which allows him to form his assessment of each individual’s performance. The PEO’s performance is assessed by the Board, taking into account the scope of responsibilities and experience, strengths and weaknesses, and contribution and performance over the past year balanced against competitive salary levels.

Components of the Executive Compensation Program

We believe the total compensation and benefits program for Senior Executives should consist of the following:

• base salaries;

• annual bonus plans;

• long-term retention and incentive compensation; and

• health and welfare benefits and retirement.

Base Salaries

For 2009, Senior Executive base salaries were minimally increased from 2008 due to general industry conditions and the economic and industry outlook for 2009. Increases to base salaries in 2009, if any, were driven primarily by general industry conditions and the economic and industry outlook for 2009.

We review the Survey Data annually. The Survey Data and general economic conditions and marketplace compensation trends are evaluated. We usually adjust base salaries for Senior Executives annually. The PEO did not rely solely on predetermined formulas or a limited set of criteria when evaluating the base salaries of the Senior Executives for 2009.

This is in line with our philosophy that Senior Executive compensation should be paid at the competitive median levels based on the Survey Data, and taking current industry and economic factors into consideration. The salaries paid to the PEO and the NEOs during fiscal year 2009 are shown in the Summary Compensation Table in this annual report.

Annual Officers Bonus

We established the Annual Officers Bonus program in September 2006. The Annual Officers Bonus provides Senior Executives with the opportunity to earn cash bonuses based on our achievement of unspecified Company-wide goals as determined by the PEO. The bonus is a component of the compensation program designed to align Senior Executive pay with our annual (short-term) performance.

The 2009 Annual Officers Bonus was structured to provide cash bonuses to Senior Executives competitive to the median levels based on the Survey Data to be consistent with our philosophy that compensation levels should be variable and competitive. The Annual Officers Bonuses awarded to the PEO and the NEO’s are shown in the Summary Compensation Table. The 2009 Annual Officers Bonuses were awarded in March 2010.

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Phantom Plan

The Second Amended and Restated Phantom Stock Plan (“Phantom Plan”) is a deferred compensation plan. The objective of the Phantom Plan is to provide Senior Executives who are not stockholders, Executive Employees and other key employees with long-term incentive and retention award opportunities in a private company that would be competitive with equity incentive plans provided by public companies.

The term “phantom stock” refers to units of value that trace our fair market value, as defined by the Phantom Plan. The phantom stock is not convertible into stock and does not possess any voting rights. Phantom stock will be exchanged for cash upon vesting. Phantom stock may be awarded in total up to 2% of our fair market value, as defined by the Phantom Plan. No participant may be granted, in the aggregate, more than 5% of the maximum number of phantom stock available for award. Generally, phantom stock vests on the fifth anniversary of the award date of the phantom stock, but may also vest on a pro-rata basis following a participant’s termination of employment with us due to death, disability, retirement or termination by the Company without cause.

Also, phantom stock vests if a change of control event occurs as discussed in more detail under the heading “-Potential Payments upon Termination or Change of Control.” Upon vesting, participants are entitled to the value of their phantom units payable in cash immediately, subject to meeting certain requirements under Code Section 409A and the accompanying regulations.

The Phantom Plan was effective January 1, 2004 and was amended and restated a second time effective December 31, 2008. At the creation of the Phantom Plan, the value of the initial and two subsequent annual awards made to Senior Executives was targeted. The value and timing of the awards was derived to provide an estimated pre-determined payout upon vesting of the awards. The payout on vesting of the awards assumed certain Company growth rates were sustained over the vesting period, although no adjustment is made to those awards if we exceed or do not meet those growth rates. We believe that this aligned the Senior Executives’ compensation to stockholder value by providing a proprietary interest in our value. Although no adjustments were made for 2009, the predetermined subsequent annual awards can be adjusted to recognize exemplary performance or increased responsibility consistent with the philosophy of relating individual compensation to performance.

Non-Equity Incentive in Lieu of Phantom Plan Awards or Restricted Stock Awards

In September 2006, concurrent with the creation of the Annual Officers Bonus, we ceased to grant phantom units to our officers under the Phantom Plan. In anticipation of the consummation of an initial public offering, which we were preparing for at that time, our board planned to approve grants of restricted stock to our officers following consummation of our initial public offering. Because that initial public offering was not consummated and subsequent initial public offerings and mergers have also not been consummated, our board approved the payment of cash to our officers in lieu of making grants of restricted stock in a private entity in 2007, 2008, and 2009.

In 2010, we adopted the 2010 Equity Incentive Plan described below, and no further non-equity incentive in lieu of restricted stock awards are expected to be made.

Tax Implications of Executive Compensation

Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) places a limit of $1,000,000 on the amount of compensation that we may deduct in any year with respect to the PEO and the NEOs unless the compensation is performance-based compensation as described in Section 162(m) and the related regulations, as well as pursuant to a plan approved by our stockholders. We may, from time to time, pay compensation to our Senior Executives that may not be deductible, including discretionary bonuses or other types of compensation outside of our plans, such as recruitment, when it is consistent with our overall philosophy.

Although we have generally attempted to structure executive compensation so as to preserve deductibility, we also believe that there are circumstances where our interests are best served by maintaining flexibility in the way compensation is provided, even if it might result in the non-deductibility of certain compensation under the Code.

Although we may deduct equity awards for tax purposes, the accounting rules pursuant to ASC Topic 718, Compensation – Stock Compensation, require that the portion of the tax benefit in excess of the financial compensation cost be recorded to paid-in-capital.

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Health and Welfare and Retirement Benefits

We offer a variety of health and welfare and retirement programs to all eligible employees. The Senior Executives are eligible for the same benefit programs on the same basis as the rest of our employees. The health and welfare programs are intended to protect employees against catastrophic loss and encourage a healthy lifestyle. Our health and welfare programs include medical, pharmacy, dental, life insurance, supplemental insurance policies and a flexible spending plan.

We offer a 401(k) Profit Sharing Plan that is intended to supplement the employee’s personal savings and social security. All employees, including Senior Executives, are generally eligible for the 401(k) plan. Senior Executives participate in the 401(k) plan on the same basis as other employees.

We adopted the 401(k) plan to enable employees to save for retirement through a tax-advantaged combination of employee and Company contributions and to provide employees the opportunity to directly manage their retirement plan assets through a variety of investment options. The 401(k) plan allows eligible employees to elect to contribute from 1% to 60% of their eligible compensation, up to the annual IRS dollar limit. Eligible compensation generally means all wages, salaries and fees for services paid by us. The Company matches at a rate of $1.00 per $1.00 employee contribution for the first 6% of the employee’s salary. Company contributions vest as follows:

Years of Service for Vesting	Percentage
1	33	%
2	33	%
3	34	%

However, regardless of the number of years of service, an employee is fully vested in his 401(k) plan if the employee retires at age 65 or later, attains age 62 and completes 5 years of service, or the employee’s employment is terminated due to death or total and permanent disability. The 401(k) plan provides for different investment options, for which the participant has sole discretion in determining how both the employer and employee contributions are invested. The 401(k) plan does not provide our employees the option to invest directly in our stock. The 401(k) plan offers in-service withdrawals in the form of loans, hardship distributions, after-tax account distributions and age 59.5 distributions.

Indemnification agreements

We have indemnification agreements with Mark A. Fischer, Charles A. Fischer, Jr., Joseph O. Evans and Robert W. Kelly II. These indemnification agreements are intended to permit indemnification to the fullest extent now or hereafter permitted by the General Corporation Law of Delaware. It is possible that the applicable law could change the degree to which indemnification is expressly permitted.

The indemnification agreements cover expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement incurred as a result of the fact that such person, in his capacity as a director or officer, is made or threatened to be made a party to any suit or proceeding. The indemnification agreements will generally cover claims relating to the fact that the indemnified party is or was an officer, director, employee or agent of us or any of our affiliates, or is or was serving at our request in such a position for another entity. The indemnification agreements will also obligate us to promptly advance all reasonable expenses incurred in connection with any claim. The indemnitee is, in turn, obligated to reimburse us for all amounts so advanced if it is later determined that the indemnitee is not entitled to indemnification. The indemnification provided under the indemnification agreements is not exclusive of any other indemnity rights; however, double payment to the indemnitee is prohibited.

We are not obligated to indemnify the indemnitee with respect to claims brought by the indemnitee against:

• us, except for:

• claims regarding the indemnitee’s rights under the indemnification agreement;

• claims to enforce a right to indemnification under any statute or law; and

• counter-claims against us in a proceeding brought by us against the indemnitee; or

• any other person, except for claims approved by our board of directors.

We also maintain director and officer liability insurance for the benefit of each of the above indemnities. These policies include coverage for losses for wrongful acts and omissions and to ensure our performance under the indemnification agreements. Each of the indemnities are named as an insured under such policies and provided with the same rights and benefits as are accorded to the most favorably insured of our directors and officers.

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Compensation After April 12, 2010

Employment Agreements

In connection with the sale of our common stock to CCMP, on April 12, 2010, we entered into employment agreements with each of our NEOs, under the terms of which each will serve in their respective officerial positions. The initial term of the employment agreements are three years, each with an automatic two-year renewal and automatic annual renewals thereafter. The employment agreements provide our NEOs the following compensation arrangements:

Name	Base Salary		Target Annual Bonus (as a % of Base)		Equity Grant (Service  Vesting)(1)		Equity Grant (Market  Vesting)(1)
Mark A. Fischer	$	620,298	100	%	$	1,750,479	$	8,217,747
Joseph O. Evans		345,030	80	%		700,324		3,287,099
Larry E. Gateley		289,380	70	%		700,324		3,287,099
James M. Miller		273,798	70	%		700,324		3,287,099
Robert W. Kelly II		273,798	70	%		700,324		3,287,099

⁽¹⁾ Calculated using an estimated fully diluted price per share on the date of grant of $660.06 per share.

Each NEO will also participate in our welfare benefit plans and fringe benefit, vacation and expense reimbursement policies. Each employment agreement provides for certain payments in the event of an NEO’s termination. The termination payments are discussed below under the heading “—Potential Payments Upon Termination or Change of Control.” Each employment agreement contains certain restrictive covenants that generally prohibit our NEOs from (i) competing against us, (ii) disclosing information that is confidential to us and our subsidiaries and (iii) during the employment term and for each NEO, a period of months equal to the product of 12 times the Severance Multiple of that NEO, as described below, thereafter, from soliciting or hiring our employees and those of our subsidiaries or soliciting our customers.

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2010 Equity Incentive Plan

In connection with the sale of our common stock to CCMP, on April 12, 2010, we adopted the Chaparral Energy, Inc. 2010 Long-Term Incentive Plan (the “2010 Plan”). The 2010 Plan reserves a total of 86,301 shares of our class A common stock for awards issued under the 2010 Plan. If any award is exercised, paid, forfeited, terminated or canceled without the delivery of shares, then the shares covered by such award will be available again for grant under the 2010 Plan. All of our or our affiliates’ employees, officers, directors and consultants are eligible to participate in the 2010 Plan.

Purpose

The 2010 Plan is intended to aid us in recruiting and retaining employees, officers, directors and consultants capable of assuring our future success. We expect that the awards of stock-based compensation under the 2010 Plan and opportunities for stock ownership in the Company will provide incentives to participants to exert their best efforts for our success and also align their interests with those of our stockholders.

Administration

The 2010 Plan is administered by our Compensation Committee. Subject to the terms of the 2010 Plan, the Compensation Committee has the full power and authority to, among other things: (i) designate participants in the 2010 Plan; (ii) determine the type or types of awards to be granted to a participant; (iii) determine the number of shares to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, awards; (iv) determine the terms and conditions of any award; (v) determine whether, to what extent, and under what circumstances awards may be settled or exercised in cash, shares, other securities, other awards or other property, or canceled, forfeited, or suspended and the method or methods by which awards may be settled, exercised, canceled, forfeited, or suspended; (vi) interpret and administer the 2010 Plan or any award agreement issued under the 2010 Plan; (vii) establish, amend, suspend, or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the 2010 Plan; (viii) determine the fair market value of any shares issued under the 2010 Plan; (ix) prescribe the form of each award agreement, which need not be identical for each participant; and (x) make any other determination and take any other action that the Compensation Committee deems necessary or desirable for the administration of the 2010 Plan.

Types of Awards

The 2010 Plan authorizes the following types of awards:

• Stock Options. The grant of either non-qualified or incentive stock options (“ISOs”) to purchase shares of our class A common stock are permitted under the 2010 Plan. ISOs are intended to qualify for favorable tax treatment under the Internal Revenue Code to participants in the 2010 Plan. The stock options will provide for the right to purchase shares of our class A common stock at a specified price and will become exercisable after the grant date under the terms established by the Compensation Committee. In general, the per share option exercise price may not be less than 100% of the fair market value of a share of class A common stock on the grant date. No person owning more than 10% of the total combined voting power of the Company may be granted ISOs unless (i) the option exercise price is at least 110% of the fair market value of a share of class A common stock on the grant date and (ii) the term during which such ISO may be exercised does not exceed five years from the date of grant.

• Restricted Stock. Awards of restricted stock are permitted under the 2010 Plan, subject to any restrictions the Compensation Committee determines to impose, such as satisfaction of performance measures for a performance period, or restrictions on the right to vote or receive dividends.

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• Performance Awards. Performance awards, denominated as a cash amount (e.g., $100 per award unit) at the time of grant are permitted under the 2010 Plan. Performance awards confer on the participant the right to receive payment of such award, in whole or in part, upon the achievement of certain performance objectives during such performance periods as established by the Compensation Committee.

• Bonus Shares. Awards of class A common stock without restrictions are permitted under the 2010 Plan, but such grants may be subject to any terms and conditions the Compensation Committee may determine.

• Phantom Shares. Awards of phantom shares are permitted under the 2010 Plan, upon such terms and conditions as determined by the Compensation Committee. Each phantom share award shall constitute an agreement by us to issue or transfer a specified number of shares or pay an amount of cash equal to a specified number of shares, or a combination thereof to the participant in the future, subject to the fulfillment of performance objectives, if any, during the restricted period as the Compensation Committee may specify at the date of grant.

• Cash Awards. Grants of cash awards, subject to the terms and conditions established by the Compensation Committee, are permitted under the 2010 Plan. If granted, a cash award shall be granted (simultaneously or subsequently) in tandem with another award and shall entitle a participant to receive a specified amount of cash from us upon such other award becoming taxable to the participant, which cash amount may be based on a formula relating to the anticipated taxable income associated with such other award and the payment of the cash award.

• Other Stock-Based Awards. Grants of other types of awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, shares of our class A common stock, subject to the terms and conditions established by the Compensation Committee, are permitted under the 2010 Plan.

Initial Awards Under the 2010 Plan

On April 12, 2010, our Board of Directors approved initial awards of restricted stock under the 2010 Plan totaling 49,333 shares of our class A common stock, which includes awards totaling 39,266 shares to our NEOs. The initial award of restricted stock to our NEOs consisted of a total of 6,896 shares that are subject to service vesting conditions and a total of 32,370 shares that are subject to market vesting conditions.

The table below sets forth the number and dollar value of the initial awards of both the service-vested restricted stock grants and the market-vested restricted stock grants to be made to our NEOs.

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Name	Number  of Service- Vested Shares Granted	Dollar Value of Service- Vested Shares(1)		Number  of Market- Vested Shares Granted	Dollar Value  of Market- Vested Shares(1)		Total Number  of Shares Granted	Total Dollar Value of Shares Granted(1)
Mark A. Fischer	2,652	$	1,750,479	12,450	$	8,217,747	15,102	$	9,968,226
Joseph O. Evans	1,061	$	700,324	4,980	$	3,287,099	6,041	$	3,987,423
Larry E. Gateley	1,061	$	700,324	4,980	$	3,287,099	6,041	$	3,987,423
James M. Miller	1,061	$	700,324	4,980	$	3,287,099	6,041	$	3,987,423
Robert W. Kelly, II	1,061	$	700,324	4,980	$	3,287,099	6,041	$	3,987,423

(1) Calculated using estimated fully diluted price per share on the date of grant of $660.06 per share.

Terms of Service-Vested Restricted Stock Awards

Service-vested restricted stock awards vest with respect to twenty percent (20%) of the shares subject to the award on each of the first, second, third, fourth and fifth anniversaries of the award date, subject to the NEO remaining employed by us as of those dates.

Termination by Company Without Cause or by NEO for Good Reason. If the NEO is terminated by the Company without cause or by the NEO for good reason, then the vesting of the shares scheduled to vest during the period beginning on the date the NEO’s employment was terminated (the “Separation Date”) and ending on the 12-month anniversary of the Separation Date shall accelerate as of the Separation Date. Any shares not vested on the Separation Date will be forfeited as of the Separation Date. “Cause” and “good reason” shall have the same meanings as those terms are defined in any employment agreement then in effect between the NEO and us. See “—Potential Payments Upon Termination or Change in Control—Employment Agreements with Our NEO” for the definitions of “cause” and “good reason.”

Accelerated Vesting Upon Certain Transactions. In the event of a transaction whereby CCMP receives cash in exchange for the sale, transfer or other disposition of its common stock pursuant to (i) a sale of the Company or (ii) an offering of its common stock to the public pursuant to a registration statement filed under the Securities Act of 1933, or any sale of its common stock thereafter (a “Transaction”), the shares held by each NEO who remains employed by us as of the date of such Transaction shall vest with respect to the fraction obtained by dividing (x) the number of shares of common stock sold pursuant to the Transaction, by (y) the 504,276 shares of class E common stock issued to CCMP on April 12, 2010 (the “Vesting Fraction”). Any shares of common stock sold pursuant to an “Excepted transfer” are excluded from both the numerator and the denominator when determining the Vesting Fraction. “Excepted transfer” means the transfer by CCMP and its permitted transferees of up to 20% of the common stock owned by them on or immediately following April 12, 2010. All other shares will remain subject to the normal vesting schedule.

Market-Vested Restricted Stock Awards

Market-vested restricted stock awards vest in the event of a Transaction (i) whereby CCMP’s “net proceeds” from a Transaction yields certain target returns on investment, and (ii) the NEO remains employed by us as of the date of such Transaction. “Net proceeds” means the actual cash proceeds received by CCMP in a Transaction, but excludes the aggregate amount of out-of-pocket expenses incurred by CCMP in connection with such Transaction.

The table below sets forth the return on investment targets that trigger vesting of the market-vested restricted stock grants and the formula for calculating the number of shares of market-vested restricted stock that vest upon CCMP’s receipt of net proceeds in a Transaction that meet one or more of the return on investment targets.

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Return on Investment Target	Shares Vested
200% per share	20% of shares multiplied by the Vesting Fraction
250% per share	20% of shares multiplied by the Vesting Fraction
300% per share	20% of shares multiplied by the Vesting Fraction
350% per share	20% of shares multiplied by the Vesting Fraction
400% per share	20% of shares multiplied by the Vesting Fraction

Any shares of market-vested restricted stock not vested on an NEO’s Separation Date will be forfeited as of the Separation Date.

Our Purchase Option

All service-vested and market-vested restricted stock awards are subject to our right to purchase the shares that have vested under the terms of such awards, which purchase option lapses on the seventh anniversary of the grant date. If the NEO ceases his employment with us for any reason, we shall have the right to purchase the shares of restricted stock awarded to the NEO that have vested. If the NEO’s employment is terminated by us without cause, by the NEO for good reason, as a result of the NEO’s death or by the NEO without good reason, the purchase price for such shares shall be equal to the fair market value of such shares on the Separation Date. If the NEO’s employment is terminated by us for cause, the purchase price for such shares shall be $0.01 per share. In the event of the NEO’s material breach of the terms of any agreement with us that is in effect on or after the NEO’s Separation Date, the purchase price for such shares shall be $0.01 per share.

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Board of Directors Report

The 2009 board of directors has reviewed and discussed the above Compensation Discussion and Analysis with management and, based on such review and discussions, the board of directors recommended that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K.

Mark A. Fischer

Joseph O. Evans

Charles A. Fischer

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of our executive officers have served as members of a compensation committee (or if no committee performs that function, the board of directors) of any other entity that has an executive officer serving as a member of our board of directors. We do not have a compensation committee. Two of the members of our 2009 board of directors are also executive officers and participated in deliberations concerning current executive officer compensation.

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2009 SUMMARY COMPENSATION TABLE

The following table below summarizes the total compensation paid or earned by each of the NEOs for the fiscal year ended December 31, 2009, 2008, and 2007.

Name and Principal Position	Year	Salary ($)		Bonus ($)(1)		Stock Awards ($)	Option Awards ($)	Non-Equity Incentive  Plan Compensation ($)(2)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)			Total ($)
Mark A. Fischer, Chief Executive Officer and President	2009	$	590,760	$	590,760	—	—	$	254,323	—	$	36,102	(3)	$	1,471,945
	2008		531,115		224,180	—	—		224,180	—		34,176	(3)		1,013,651
	2007		457,539		400,000	—	—		400,000	—		24,964	(3)		1,282,503
Joseph O. Evans, Chief Financial Officer and Executive Vice President	2009	$	328,600	$	262,880	—	—	$	119,025	—	$	24,329	(3)	$	734,834
	2008		301,115		107,437	—	—		107,437	—		21,960	(3)		537,949
	2007		264,193		192,000	—	—		192,000	—		16,693	(3)		664,886
Larry E. Gateley, Senior Vice President—Reservoir Engineering and Acquisitions	2009	$	275,600	$	192,920	—	—	$	89,714	—	$	25,609	(3)	$	583,843
	2008		252,462		80,690	—	—		80,690	—		22,831	(3)		436,673
	2007		222,654		144,000	—	—		144,000	—		16,573	(3)		527,227
James M. Miller, Senior Vice President— Operations and Production Engineering	2009	$	260,760	$	182,532	—	—	$	86,273	—	$	17,342	(4)	$	546,907
	2008		239,000		76,595	—	—		76,595	—		16,274	(4)		408,464
	2007		211,346		137,000	—	—		137,000	—		149,899	(4)		635,245
Robert W. Kelly II, Senior Vice President and General Counsel	2009	$	260,760	$	182,532	—	—	$	86,273	—	$	23,292	(3)	$	552,857
	2008		239,000		76,595	—	—		76,595	—		18,777	(3)		410,967
	2007		211,346		137,000	—	—		137,000	—		13,275	(3)		498,621

(1) Bonuses for 2009, 2008, and 2007 were paid on April 13, 2010, March 15, 2009, and April 2, 2008, respectively.

(2) Non-Equity Incentive Plan Compensation payments for 2009, 2008, and 2007 were made on January 4, 2010, January 7, 2009, and January 2, 2008, respectively.

(3) Includes: for Mark A. Fischer $22,000, $20,500 and $17,339 in matching 401(k) contributions, $1,973, $1,300 and $3,050 for the use of a Company vehicle, and $6,831, $6,091 and $1,631 for the use of the Company airplane; for Joseph O. Evans $22,000, $20,500 and $16,257 in matching 401(k) contributions; for Larry E. Gateley $22,000, $20,500 and $15,866 in matching 401(k) contributions; for Robert W. Kelly II $22,000, $17,591 and $13,040 in matching 401(k) contributions in 2009, 2008 and 2007, respectively.

(4) Includes $16,500, $15,500 and $14,525 in matching 401(k) contributions in 2009, 2008, and 2007, respectively, and $135,218 in payments for 2007 pursuant to overriding royalty interests subject to vesting. We granted certain participation interests in the form of overriding royalty interests. Our subsidiary, Chaparral CO₂, L.L.C., has assigned Mr. Miller an overriding royalty interest equal to a total 0.005 net revenue interest in the production from the Northwest Camrick Unit, the Camrick Unit and the North Perryton (George Morrow) Unit, in each case limited to the unitized Upper Morrow Sand formation. Mr. Miller was 100% vested at June 30, 2007.

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2009 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE

The following table shows outstanding phantom stock awards as of December 31, 2009 for each NEO that participates in the Phantom Plan.

	Stock Awards
Name	Number of Shares of Stock That  Have Not Vested(1) (#)	Market Value of Shares or Units of Stock That  Have Not Vested(2) ($)
Joseph O. Evans	3,974	$	97,284
Larry E. Gateley	2,588		63,354
James M. Miller	2,588		63,354
Robert W. Kelly II	2,588		63,354

(1) For Joseph O. Evans, phantom stock vests as follows: 3,554 stock units on July 1, 2010 and 420 stock units on January 1, 2011; for Larry E. Gateley, Robert W. Kelly II and James M. Miller, phantom stock vests as follows: 1,749 stock units on January 1, 2010; and 839 stock units on January 1, 2011. Payments for Larry E. Gateley, Robert W. Kelly II and James M. Miller will be made of approximately $42,816 for the vested stock units in 2010.

(2) The table assumes a market value of $24.48 at December 31, 2009 which is calculated in accordance with the provisions of the Phantom Plan.

2009 STOCK VESTED

The following table shows phantom stock awards that vested during the year ended December 31, 2009 for each NEO that participates in the Phantom Plan.

	Stock Awards
Name	Number of Shares of Stock That  Have Vested (#)	Value Realized on  Vesting(1) ($)
Larry E. Gateley	19,306	$	194,604
James M. Miller	19,306		194,604
Robert W. Kelly II	19,306		194,604

(1) Paid on April 1, 2009.

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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

Employment Agreements with our NEOs

Our employment agreements with our NEOs obligate us to pay certain separation benefits to them in the event of voluntary termination, termination without cause, termination for good reason and termination in the event of disability or death. The term “disability” means the NEO’s incapacity due to physical or mental illness whereby the NEO is substantially unable to perform his duties under the employment agreement (with or without reasonable accommodation, as defined under the Americans With Disabilities Act) for a period of six (6) consecutive months. The term “cause” means termination for one of the following reasons:

• the NEO’s conviction of, or entry by the NEO of a guilty or no contest plea to a felony or crime involving moral turpitude;

• the NEO’s willful commission of an act of fraud or dishonesty resulting in economic or financial injury to us or any affiliate;

• the NEO’s willful failure to substantially perform or gross neglect of his duties, including, but not limited to, the failure to follow any lawful directive of our Chief Executive Officer, within the reasonable scope of the NEO’s duties;

• the NEO’s performance of unapproved acts materially detrimental to us or any affiliate;

• the NEO’s use of narcotics, alcohol, or illicit drugs in a manner that has or may reasonably be expected to have a detrimental effect on his performance of his duties as our employee or on our reputation of the Company or any affiliate;

• the NEO’s commission of a material violation of any of our rules or policies which results in injury to us; or

• the NEO’s material breach of the employment agreement.

In Mr. Fischer’s case, the term “cause” also includes:

• the occurrence or existence of any event constituting “Cause,” with respect to Mr. Fischer under our Second Amended and Restated Certificate of Incorporation, as amended and restated on April 12, 2010; (the “Certificate of Incorporation”);

• a material breach by us of Article 7 of the Certificate of Incorporation caused by specific acts or omissions of Mr. Fischer, provided that we fail to remedy such breach within 90 days after we have knowledge of the initial existence of such breach; or

• a material breach by Fischer Investments, L.L.C. of that certain Stockholders’ Agreement dated April 12, 2010

The term “good reason” means the occurrence, without the written consent of the NEO, of one of the events set forth below:

• a material diminution in the NEO’s authority, duties or responsibilities, combined with a demotion in the NEO’s pay grade ranking;

• the reduction by us of the NEO’s base salary by more than 10% (unless done so for all of our executive officers);

• the requirement that the NEO be based at any office or location that is more than 50 miles from our principal executive offices, except for travel reasonably required in the performance of the NEO’s responsibilities; or

• any other action or inaction that constitutes a material breach by us under the employment agreement.

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The term “change in control” means:

• the consummation of any transaction or series of related transactions involving the sale of our outstanding securities (but excluding a public offering of our capital stock) for securities or other consideration issued or paid or caused to be issued or paid by such other corporation or an affiliate thereof and which results in our shareholders (or their affiliates) immediately prior to such transaction not holding at least a majority of the voting power of the surviving or continuing entity following such transaction; or

• the consummation by us (whether directly involving us or indirectly involving us through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of our assets or (z) the acquisition of assets or stock of another entity, in each case, other than a transaction which results in our voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into our voting securities or the person that, as a result of the transaction, controls, directly or indirectly, us or owns, directly or indirectly, all or substantially all of our assets or otherwise succeeds to our business), directly or indirectly, at least a majority of the combined voting power of the successor entity’s outstanding voting securities immediately after the transaction.

Payments Made Upon Termination Without Cause or by the NEO for Good Reason Not Following a Change in Control

In the event an NEO’s employment is terminated without cause or by the NEO for good reason at any time that is not within two years after the occurrence of a change in control, we will be obligated:

• to pay to the NEO an amount equal to the Severance Multiple, as specified in the NEO’s employment agreement, times the sum of (x) the NEO’s base salary in effect on the date of termination plus (y) the annual bonus granted to the NEO for the fiscal year immediately on or preceding the date of termination, payable in the form of a salary continuation for a period of months equal to the product of 12 times the Severance Multiple;

• subject to certain limitations, to maintain for a period of 18 months following the date of termination, participation by the NEO (and his spouse and/or eligible dependents, as applicable) in our medical, hospitalization, and dental programs maintained for the benefit of our senior executive officers as in effect on the date of termination, at such level and terms and conditions (including, without limitation, contributions required by the NEO for such benefits) as in effect on the date of termination (the “Termination Welfare Benefits”);

• to pay to the NEO any earned but unpaid base salary, annual bonus from prior years, and vacation pay in the form of a lump sum payment; and

• to pay to the NEO any unreimbursed reasonable business expenses incurred by the NEO on our behalf in the form of a lump sum payment.

The following table quantifies amounts that would have been paid pursuant to the employment agreements for each of our NEOs assuming a termination without cause or by the NEO for good reason not following a change in control took place on December 31, 2009, and assuming (i) the employment agreements were in place at that time, and (ii) all accrued compensation and reimbursable expenses had been paid on December 31, 2009.

Name	Base Salary		Annual Bonus		Severance Multiple	Benefits		Total
Mark A. Fischer	$	590,760	$	590,760	2.5	$	13,689	$	2,967,489
Joseph O. Evans		328,600		262,880	2.0		13,689		1,196,649
Larry E. Gateley		275,600		192,920	1.5		13,689		716,469
James M. Miller		260,760		182,532	1.5		13,689		678,627
Robert W. Kelly II		260,760		182,532	1.5		13,672		678,610

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Payments Made Upon Termination Without Cause or by the NEO for Good Reason Following a Change in Control

If at any time within two years after a change in control (“CiC”), the NEO’s employment is terminated without cause or by the NEO for good reason, we will be obligated:

• to pay to the NEO an amount equal to the CiC Severance Multiple, as specified in the NEO’s employment agreement, times the sum of (x) the NEO’s base salary in effect on the date of termination plus (y) the annual bonus granted to the NEO for the fiscal year immediately on or preceding the date of termination, payable in the form of a salary continuation for a period of months equal to the product of 12 times the CiC Multiple, or in the form of a lump sum payment if the CiC occurs as a result of the sale or other disposition of all or substantially all of the Company’s assets;

• subject to certain limitations, to provide the Termination Welfare Benefits;

• to pay to the NEO any earned but unpaid base salary, annual bonus from prior years and vacation pay in the form of a lump sum payment; and

• to pay to the NEO any unreimbursed reasonable business expenses incurred by the NEO on our behalf in the form of a lump sum payment.

The following table quantifies amounts that would have been paid pursuant to the employment agreements for each of our NEOs assuming a termination without cause or by the NEO for good reason following a change in control took place on December 31, 2009, and assuming (i) the employment agreements were in place at that time, and (ii) all accrued compensation and reimbursable expenses had been paid on December 31, 2009.

Name	Base Salary		Annual Bonus		CiC Severance Multiple	Benefits		Total
Mark A. Fischer	$	590,760	$	590,760	3.0	$	13,689	$	3,558,249
Joseph O. Evans		328,600		262,880	2.5		13,689		1,492,389
Larry E. Gateley		275,600		192,920	2.0		13,689		950,729
James M. Miller		260,760		182,532	2.0		13,689		900,273
Robert W. Kelly II		260,760		182,532	2.0		13,672		900,256

Payments Made Upon Termination for Cause or by the NEO Without Good Reason

In the event an NEO is terminated for cause, or the NEO resigns without good reason, we have no further obligations to the NEO other than a lump sum payment of the following amounts:

• any earned but unpaid base salary, annual bonus from prior years and vacation pay; and

• unreimbursed reasonable business expenses incurred by the NEO on our behalf, so long as the NEO was not fired for cause due to his misappropriation of Company funds.

No amounts would have been paid pursuant to the employment agreements for each of our NEOs assuming a termination for cause or by the NEO without good reason took place on December 31, 2009, and assuming (i) the employment agreements were in place at that time, and (ii) all accrued compensation and reimbursable expenses had been paid on December 31, 2009.

Payments Made Upon Death or Disability

In the event of an NEO’s death or disability, we will be obligated to pay to the NEO:

• any earned but unpaid base salary, annual bonus from prior years and vacation pay;

• unreimbursed reasonable business expenses incurred by the NEO on our behalf; and

• a pro rata share of the annual bonus for the fiscal year in which the termination of employment occurs.

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No amounts would have been paid pursuant to the employment agreements for each of our NEOs assuming an event of death or disability took place on December 31, 2009, and assuming (i) the employment agreements were in place at that time, and (ii) all accrued compensation or reimbursable expenses had been paid on December 31, 2009.

Payments of separation benefits may be delayed if (i) the NEO is a “specified employee” within the meaning of Section 409A of the Code (“Section 409A”) as of the date of his separation from service and (ii) the amount of any separation benefits payable to him are subject to Section 409A. In such instance, the separation benefits will not be paid to the NEO until six months after the date of separation from service, or, if earlier, the date of his death.

Phantom Stock Plan Awards

We have granted phantom stock awards to certain NEOs and other key employees.

If a change of control as defined in the Phantom Stock Plan were to occur prior to the NEO’s termination of employment with us, all of the NEO’s then outstanding phantom unit awards granted by us would become fully vested and payable in a lump sum as of such date, subject to meeting certain requirements under Code Section 409A and the accompanying regulations. Under the Phantom Plan, a change in control is deemed to occur if:

• any individual or person (as such term is used in the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, other than an underwriter temporarily holding securities pursuant to an offering of such securities) becomes the beneficial owner (as such term is used in the 1934 Act), directly or indirectly, of our securities representing more than 50% of the combined voting power of our then outstanding securities; or

• we sell, lease, transfer, convey or otherwise dispose of (including by merger or consolidation) in one or a series of related transactions, more than 50% of the total fair market value of all of our assets to an unrelated person; or

• we adopt a plan relating to our liquidation or dissolution.

Phantom stock awards vest on a pro-rata basis following the participant’s termination of employment with the Company due to death, disability, retirement or termination of employment without cause. The pro-rata calculation will be accomplished by dividing the number of years elapsed from the award date to the date of vesting (to a maximum of five years) by five and then multiplying the number of phantom shares in the award by the result. Phantom shares which do not vest hereunder will be forfeited to us and the participant shall have no further rights with regard to the units. A participant is considered disabled if, in the sole determination of the Board, such participant is subject to a physical or mental condition which renders or is expected to render the participant unable to perform his or her usual duties. A participant is considered retired if the participant’s full-time employment with us terminates at or after the date the participant attains the age of 65 years.

The table below quantifies the value of the accelerated vesting of the phantom shares owned by each of our NEOs assuming we underwent a change of control on December 31, 2009 or that on December 31, 2009, we terminated each NEO without cause or their employment was terminated by reason of death, disability, or retirement.

Name	Change of Control		Death, Disability, Retirement,  or Termination Without Cause
Joseph O. Evans	$	97,284	$	86,527
Larry E. Gateley		63,354		59,246
James M. Miller		63,354		59,246
Robert W. Kelly II		63,354		59,246

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Other Payments Made Upon Termination, Retirement, Death or Disability

Certain accelerated vesting provisions will apply to each NEO’s restricted stock awards if the NEO’s employment is terminated without cause or by the NEO for good reason. See “—Compensation Discussion and Analysis—Compensation after April 12, 2010—2010 Equity Incentive Plan.”

Regardless of the manner in which an NEO’s employment is terminated, he is entitled to receive amounts earned during his term of employment, including unused vacation pay and bonuses earned but not yet paid under the Annual Officers Bonus. All amounts earned by our NEOs under the Annual Officers Bonuses will be paid on April 15, 2010.

Additionally, if an NEO is terminated due to death or disability, that NEO will receive benefits under our disability plan or payments under our life insurance plan.

DIRECTOR COMPENSATION

Members of our Board of Directors do not receive compensation for their services as board members. We do, however, reimburse our directors for all reasonable out-of-pocket costs and expenses incurred by them in connection with their service as a director.

COMPENSATION POLICIES AND RISK MANAGEMENT

While our Board strives to create incentives that encourage a level of risk-taking behavior consistent with our business strategy, our compensation policies and practices do not create risks that are reasonably likely to have a material adverse affect on our operations or financial condition.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Principal Stockholders

The following table sets forth information, as of April 14, 2010, with respect to all persons who own of record or are known by us to own beneficially more than 5% of our outstanding common stock, each director, and each of the five most highly compensated executive officers, and by all directors and executive officers as a group.

	Beneficial ownership
Name	Number	Class	% of class		% of total outstanding
Mark A. Fischer(1)(2)(7)	357,882	B	100.0	%	25.5	%
	1	G	33.3	%	*
	15,102	A	30.6	%	*
Altoma Energy G.P.(1)(3)	209,882	C	100.0	%	15.0	%
	1	G	33.3	%	*
Charles A. Fischer, Jr.(1)(4)	209,882	C	100.0	%	15.0	%
	1	G	33.3	%	*
CHK Holdings, L.L.C.(5)	279,999	D	100.0	%	20.0	%
	1	G	33.3	%	*
Aubrey K. McClendon(5)	279,999	D	100.0	%	20.0	%
	1	G	33.3	%	*
CCMP Capital Investors II (AV-2), L.P.(6)	386,750	E	76.7	%	27.6	%
	1	F	100.0	%	*
Chris Behrens(6)	—	—	—		—
Karl Kurz (6)	—	—	—		—
Joseph O. Evans (7)	6,041	A	12.2	%	*
Larry E. Gateley (7)	6,041	A	12.2	%	*
James M. Miller (7)	6,041	A	12.2	%	*
Robert W. Kelly II (7)	6,041	A	12.2	%	*
All Directors and Officers as a group (9 persons—ownership of total outstanding)	887,032	Various			63.3	%

* Less than 1%

(1) The address of the the stockholder is in care of Chaparral Energy, Inc., 701 Cedar Lake Boulevard, Oklahoma City, Oklahoma 73114.

(2) Fischer Investments, L.L.C. is the record owner of these shares of our common stock and is owned 50% by Mark A. Fischer 1994 Trust, for which Mark A. Fischer serves as Trustee, and 50% by Susan L. Fischer 1994 Trust, for which Susan L. Fischer, the spouse of Mark A. Fischer, serves as trustee.

(3) Charles A. Fischer, Jr., one of our directors, is one of Altoma’s four managing general partners and beneficially owns a 23.15% general partner interest (including 0.90% owned by his spouse) in Altoma Energy G.P. The other partners of Altoma Energy G.P. who are each managing general partners and beneficially own in excess of 5% of its general partner interests are: Kenneth H. McCourt—36.75%; Ronald D. Jakimchuck—17.86%; and Gary H. Klassen—12.80%.

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(4) Includes all 209,882 shares owned of record by Altoma Energy G.P. Charles A. Fischer, Jr. serves as one of four managing partners of Altoma Energy G.P. Charles A. Fischer, Jr. owns directly a 22.25% general partner interest and his spouse owns directly a 0.90% general partner interest in Altoma Energy G.P.

(5) The address of CHK Holdings L.L.C. and Aubrey K. McClendon is 6100 North Western Avenue, Oklahoma City, Oklahoma 73118, CHK Holdings is an indirect wholly owned subsidiary of Chesapeake Energy Corporation. Mr. McClendon disclaims beneficial ownership of these securities and this report shall not be deemed an admission that he is the beneficial owner of the shares under the securities laws or for any other purpose.

(6) CCMP Capital Investors II (AV-2), L.P. (“AV-2”), which owns 386,750 shares of Class E common stock and 1 share of Class F common, is part of an affiliated group of our stockholders ultimately controlled by CCMP Capital, LLC (“CCMP Capital”). The affiliated group also includes CCMP Energy I, Ltd. (“CCMP Energy”), which is wholly owned by CCMP Capital Investors II (AV-1), L.P. (“AV-1”) and which owns 58,217 shares of Class E common stock, and CCMP Capital Investors (Cayman) II, L.P. (“CCMP Cayman), which owns 59,309 shares of Class E common stock. We refer to CCMP Cayman, AV-2 and AV-1 as the “CCMP Capital Funds”.

The general partner of the CCMP Capital Funds is CCMP Capital Associates, L.P. (“CCMP Capital Associates”). The general partner of CCMP Capital Associates is CCMP Capital Associates GP, LLC (“CCMP Capital Associates GP”). CCMP Capital Associates GP is wholly-owned by CCMP Capital. CCMP Capital ultimately exercises voting and dispositive power over the shares held directly or indirectly by the CCMP Capital Funds.

Each of Karl Kurz and Christopher Behrens is a Managing Director of CCMP Capital Advisors, LLC, an investment advisor which is wholly owned by CCMP Capital. The address of each of Messrs. Kurz and Behrens, and of each of the CCMP entities described above (other than CCMP Energy and CCMP Cayman) is c/o CCMP Capital, LLC, 245 Park Avenue, New York, NY 10167. The address of CCMP Energy and CCMP Cayman is c/o Walkers SPV Limited, PO Box 908 GT, Walker House, George Town, Grand Cayman, Cayman Islands.

Each of Messrs. Kurz and Behrens disclaims any beneficial ownership of any shares beneficially owned by CCMP Capital and its related entities described above.

(7) Ownership of the class A common stock is pursuant to restricted stock grants under our 2010 Plan. When granted, the class A common stock related to these grants may vote, but remain subject to vesting in accordance with the 2010 Plan.

Securities Presently Authorized for Issuance under Our 2010 Plan

The following table provides information for all equity compensation plans as of April 14, 2010, under which our equity securities were authorized for issuance:

	Number of Securities to be  Issued Upon Exercise of Outstanding Options, Warrants and Rights		Weighted Average Exercise  Price of Outstanding Options, Warrants and Rights			Number of Securities Remaining  Available for Future Issuance Under Equity  Compensation Plans (Excluding Securities Reflected  in Column (a)
Plan Category	(a	)		(b	)	(c)
Equity compensation plans approved by security holders	—			—		—
Equity compensation plans not approved by security holders	—			—		36,968(1)
Total	—		$	—		36,968

(1) This number reflects shares available for issuance under our 2010 plan. In addition, shares related to grants that are terminated, canceled, expire unexercised, or settled in such manner that all or some of the shares are not issued to a participant or are surrendered unvested shall immediately become available for issuance.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Transactions with Related Persons, Promoters and Certain Control Persons

Participation Interests

Historically, we have granted participation interests in the form of overriding royalty interests to a limited number of employees. We have also granted pro rata certain overriding royalty interests to our stockholders or their affiliates, including Mark A. Fischer and Charles A. Fischer, Jr. We believe that the granting of these participation interests to our employees in certain prospects promotes in them a proprietary interest in our exploration efforts for the benefit of us and our stockholders. Aggregate payments on these interests to all persons were $421,002 in 2009. Payments on these interests to Mark A. Fischer were $62,452 in 2009. Payments on these interests to Charles A. Fischer, Jr. were $16,085 in 2009. Payments on these interests to James M. Miller were $138,765 in 2009.

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We do not intend to continue the grant of any additional participation interest to our stockholders, or their affiliates, including Mark A. Fischer or Charles A. Fischer, Jr. We have discontinued the granting of overriding royalty interests under our existing program to other employees effective December 31, 2005, other than certain specified wells that spud prior to April 1, 2006.

Transactions with Chesapeake

In September 2006, Chesapeake acquired a 31.9% beneficial interest in the Company through the sale of common stock. We participate in ownership of properties operated by Chesapeake and received revenues and incurred joint interest billings of $5,223,000 and $3,280,000, respectively for the year ended December 31, 2009 on these properties. In addition, Chesapeake participates in ownership of properties operated by us. During the year ended December 31, 2009, we paid revenues and recorded joint interest billings of $1,454,000 and $2,728,000, respectively to Chesapeake. Amounts receivable from and payable to Chesapeake were $2,506,000 and $241,000, respectively as of December 31, 2009.

Stockholders Agreement

In connection with the closing of the private sale of our common stock to the CCMP entities (“CCMP”), we, CCMP, CHK Holdings, Inc. (“CHK”), Altoma Energy GP (“Altoma”), and Fischer Investments, L.L.C. (“Fischer”) entered into a Stockholders Agreement on the closing date of the above transaction. The Stockholders Agreement provides for certain general rights and restrictions, including board observer rights, informational rights, general restrictions on transfer of common stock, tag-along rights, preemptive rights, registration rights following a Qualified IPO (as defined in the Stockholders Agreement) and, subject to certain limited exceptions, prohibitions on the sale or acquisition of our common stock that would result in a change of control, as such term is defined under our indentures for our 8 1/2% senior notes due 2015 and our 8 7/8% senior notes due 2017.

The Stockholders Agreement also provides for the following stockholder-specific rights or restrictions:

• Prior to a Qualified IPO, Altoma will not vote for the approval of (i) any merger, consolidation, conversion or a Demand IPO (as defined in the Stockholders Agreement), (ii) certain amendments to our organizational documents, (iii) the sale of all or substantially all of our assets, or (iv) a termination of the business of or liquidation or dissolution of the Company, unless Fischer votes for such approval.

• Other than pursuant to the exercise of preemptive rights, CHK may not acquire more than 25% of our outstanding common stock.

• CCMP may sell up to 20% of its common stock owned on the Closing Date (as defined in the Stockholders Agreement) without restriction. Prior to a Qualified IPO and except in limited circumstances, CCMP is restricted from making further sales before the fourth anniversary of the Closing Date, and any sales thereafter (but before a Qualified IPO) will be subject to certain rights of first offer provisions set forth in the Stockholders Agreement (the “ROFO provisions”).

• Fischer may sell up to 20% of its common stock owned immediately prior to the Closing Date subject to certain restrictions. Prior to a Qualified IPO and except in limited circumstances, Fischer is restricted from making further sales before the fourth anniversary of the Closing Date, and any sales thereafter (but before a Qualified IPO) will be subject to the ROFO provisions.

• Prior to a Qualified IPO and except in limited circumstances, CHK is restricted from selling its common stock before the 30 month anniversary of the Closing Date, and any sales thereafter (but before a Qualified IPO) will be subject to the ROFO provisions.

• If our common stock is not listed on a national securities exchange after August 15, 2011, Altoma may request to transfer its shares pursuant to a demand registration, but only after Altoma first offers such shares to the Company, and then to CHK, Fischer and CCMP in accordance with the procedures set forth in the Stockholders Agreement.

• At any time after the 18 month anniversary of the Closing Date, either (i) CCMP or (ii ) a majority in interest of Fischer, Altoma and CHK may demand that we engage in a Qualified IPO if (a) the price per share to be received by the Company or such party or parties, as the case may be, in such Demand IPO is at least 1.75 times the price per share paid by CCMP for our common stock and (b) certain other conditions are met.

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• At any time after the four year anniversary of the Closing Date, CCMP may demand a Demand IPO.

• At any time after the sixth anniversary of the Closing Date, and so long as a Qualified IPO has not yet occurred, CCMP may demand a Company Sale (as defined in the Stockholders Agreement), subject to a right of first offer to purchase the Company provided to Fischer.

With the exception of registration rights, the rights and preferences of a stockholder under the Stockholders Agreement will generally terminate on the earlier of (x) the closing date of a Qualified IPO or (y) the date that such holder and its permitted transferees cease to beneficially own 5% or more of the Company’s fully-diluted common stock.

Review, Approval or Ratification of Transactions with Related Persons

Our board of directors is responsible for approving all related party transactions between us and any officer or director that would potentially require disclosure. The board expects that any transactions in which related persons have a direct or indirect interest will be presented to the board for review and approval but we have no written policy in place at this time.

Director Independence

Our Board uses the independence standards under the New York Stock Exchange (“NYSE”) corporate governance rules for determining whether directors are independent. The Board has determined that Messrs. McClendon, Behrens, Kurz and Chuck Fischer are independent under these NYSE rules for purposes of service on the Board.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Independent Auditor and Fees

Grant Thornton LLP, our independent registered public accounting firm, audited our consolidated financial statements for fiscal 2009. Grant Thornton LLP has billed us and our subsidiaries fees as set forth in the table below for (i) the audits of our 2009 and 2008 annual financial statements, reviews of quarterly financial statements, and review of our filings on Form S-4 and the filings of United Refining Energy Corp. on Schedule 14A and other documents filed with the Securities and Exchange Commission, (ii) assurance and other services reasonably related to the audit or review of our financial statements, and (iii) services related to tax compliance.

	Audit Fees		Audit- Related Fees		Tax Fees(1)
Fiscal 2009(2)	$	504,628	$	24,251	$	10,340
Fiscal 2008(2)	$	397,686	$	24,411	$	21,825

(1) The services comprising “Tax Fees” included tax compliance, planning and advice.

(2) There were no fees billed in 2009 or 2008 that would constitute “All Other Fees.”

Pre-Approved Policies and Procedures

We currently have no board committees. Our board of directors has adopted policies regarding the pre-approval of auditor services. Specifically, the board of directors approves all services provided by the independent public accountants at its March meeting. All additional services must be pre-approved on a case-by-case basis. Our board of directors reviews the actual and budgeted fees for the independent public accountants periodically at regularly scheduled board meetings. All of the services provided by Grant Thornton LLP during fiscal 2009 were approved by the board of directors.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Financial Statements, Schedules and Exhibits

(1) Financial Statements—Chaparral Energy, Inc. and Subsidiaries:

The Financial Statements listed in the Index to Consolidated Financial Statements are filed as part of this report on Form 10-K (see Part II, Item 8-Financial Statements and Supplementary Data).

(2) Financial Statement Schedules

All other consolidated financial statement schedules have been omitted because they are not required, are not applicable, or the required information has been included elsewhere within this Form 10-K.

(3) Exhibits

Exhibit No.	Description
2.1*	Agreement and Plan of Merger among the Company, Chaparral Exploration, L.L.C. and Edge Petroleum Corporation, dated July 14, 2008 (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K (SEC File No. 333-134748), filed on July 15, 2008)
2.2*	Merger Termination Agreement, dated December 16, 2008, among Chaparral Energy, Inc., Chaparral Exploration, L.L.C., and Edge Petroleum Corporation (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (SEC File No. 333-134748), filed on December 17, 2008)
2.3*	Agreement and Plan of Reorganization among the Company, Chaparral Subsidiary, Inc. and United Refining Energy Corp. dated October 9, 2009 (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on October 13, 2009)
3.1	Second Amended and Restated Certificate of Incorporation of Chaparral Energy, Inc. (the “Company”), dated as of April 12, 2010.
3.2	Second Amended and Restated Bylaws of the Company, dated as of April 12, 2010.
4.1*	Form of 8 1/2% Senior Note due 2015 (included in Exhibit 4.2). (Incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-130749), filed on December 29, 2005)
4.2*	Indenture, dated as of December 1, 2005, among the Company, as Issuer, the subsidiaries of the Company party thereto as Guarantors and Wells Fargo Bank, National Association, as Trustee. (Incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-130749), filed on December 29, 2005)
4.3*	First Supplemental Indenture, dated as of August 24, 2006, to Indenture dated as of December 1, 2005 among the Company, as Issuer, the Guarantors named therein and Wells Fargo Bank, National Association, as Trustee. (Incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K (SEC File No. 333-134748), filed on August 28, 2006)
4.4*	Second Supplemental Indenture, dated as of October 31, 2006, to Indenture dated as of December 1, 2005 among the Company, as Issuer, the Guarantors named therein and Wells Fargo Bank, National Association, as Trustee. (Incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K (SEC File No. 333-134748), filed on November 6, 2006)
4.5*	Third Supplemental Indenture, dated as of July 30, 2007 and effective as of April 16, 2007, to Indenture dated as of December 1, 2005 among the Company, as Issuer, the Guarantors named therein and Wells Fargo Bank, National Association, as Trustee. (Incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on Form S-4 (SEC File No. 333-145128), filed on August 3, 2007)

136

Exhibit No.	Description
4.6*	Indenture dated January 18, 2007, among the Company, as Issuer, the subsidiaries of the Company party thereto as Guarantors and Wells Fargo Bank, National Association, as Trustee. (Incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K (SEC File No. 333-134748), filed on January 24, 2007)
4.7*	Form of 8  7/8% Senior Note due 2017 (included in Exhibit 4.6). (Incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K (SEC File No. 333-134748), filed on January 24, 2007)
4.8*	First Supplemental Indenture, dated as of July 30, 2007 and effective as of April 16, 2007, to Indenture dated as of January 18, 2007 among the Company, as Issuer, the Guarantors named therein and Wells Fargo Bank, National Association, as Trustee. (Incorporated by reference to Exhibit 4.8 to the Company’s Registration Statement on Form S-4 (SEC File No. 333-145128), filed on August 3, 2007)
10.1*†	Form of Indemnification Agreements, between the Company and each of the directors and certain executive officers thereof (Incorporated by reference to Exhibit 10.6 to Form S-4 (SEC File No. 333-134748), filed on June 6, 2006)
10.2*†	Form of Assignment of Overriding Royalty Interest to James M. Miller (Incorporated by reference to Exhibit 10.7 to Form S-1 (SEC File No. 333-130749), filed on December 29, 2005)
10.3*†	Phantom Unit Plan (Incorporated by reference to Exhibit 10.8 to Form S-1 (SEC File No. 333-130749), filed on February 14, 2006)
10.4*†	Letter Agreement dated June 14, 2005 re: Conditional Employment Offer with Joseph O. Evans (Incorporated by reference to Exhibit 10.9 to Form S-1 (SEC File No. 333-130749), filed on February 14, 2006)
10.5*	Stockholders’ Agreement, dated as of September 29, 2006, by and among the Company, Chesapeake Energy Corporation, Altoma Energy and Fischer Investments, L.L.C. (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed on November 14, 2006)
10.6*	Seventh Restated Credit Agreement, dated as of October 31, 2006, by and among the Company, Chaparral Energy, L.L.C., in its capacity as Borrower Representative for the Borrowers, JPMorgan Chase Bank, N.A., as Administrative Agent, and each of the Lenders named therein. (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (SEC File No. 333-134748), filed on November 6, 2006)
10.7*	First Amendment to Seventh Restated Credit Agreement, dated as of May 11, 2007, by and among the Company, Chaparral Energy, L.L.C., as Borrower Representative for the Borrowers, JPMorgan Chase Bank, N.A., as Administrative Agent, and the Lenders party thereto. (Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q, filed May 15, 2007)
10.8*	Second Amendment to Seventh Restated Credit Agreement, dated as of July 3, 2007, by and among the Company, Chaparral Energy, L.L.C., as Borrower Representative for the Borrowers, JP Morgan Chase Bank, N.A., as Administrative Agent, and the Lenders party thereto. (Incorporated by reference to Exhibit 10.11 to the Company’s Registration on Form S-l (SEC File No. 333-130749), filed on July 20, 2007)
10.9*	Third Amendment to Seventh Restated Credit Agreement, dated as of May 13, 2008, by and among the Company, Chaparral Energy, L.L.C., as Borrower Representative for the Borrowers, JP Morgan Chase Bank, N.A., as Administrative Agent, and the Lenders party thereto. (Incorporated by reference to Exhibit 10.18 of the Company’s Quarterly Report on Form 10-Q, filed on May 15, 2009)
10.10*	Fourth Amendment to Seventh Restated Credit Agreement, dated as of December 24, 2008, by and among the Company, Chaparral Energy, L.L.C., as Borrower Representative for the Borrowers, JP Morgan Chase Bank, N.A., as Administrative Agent, and the Lenders party thereto. (Incorporated by reference to Exhibit 10.19 of the Company’s Quarterly Report on Form 10-Q, filed on May 15, 2009)

137

Exhibit No.	Description
10.11*	Fifth Amendment to Seventh Restated Credit Agreement, dated as of May 21, 2009, by and among the Company, Chaparral Energy, L.L.C., as Borrower Representative for the Borrowers, JP Morgan Chase Bank, N.A., as Administrative Agent, and the Lenders party thereto. (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (SEC File No. 333-134748), filed on May 26, 2009)
10.12*†	First Amended and Restated Phantom Stock Plan dated January 1, 2007 (Incorporated by reference to Exhibit 10.7 of the Company’s Quarterly Report on Form 10-Q, filed on August 14, 2008)
10.13*	Stock Purchase Agreement, dated as of July 14, 2008, by and between the Company and Magnetar Financial LLC (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (SEC File No. 333-134748), filed on July 15, 2008)
10.14*	Termination and Settlement Agreement, dated December 16, 2008, among Chaparral Energy, Inc., on behalf of itself and Chaparral Exploration, L.L.C., Edge Petroleum Corporation and Magnetar Financial LLC, on behalf of itself and its affiliates (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K (SEC File No. 333-134748), filed on December 17, 2008)
10.15*†	Form of Change of Control Severance Agreement for Corporate Officers, between the Company and certain executive officers thereof (Incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K (SEC File No. 333-134748), filed on March 31, 2008)
10.16*	Stock Purchase Agreement, dated as of March 23, 2010, by and among the Company, CCMP Capital Investors II (AV-2), L.P., CMP Energy I LTD. and CCMP Capital Investors (Cayman) II, L.P. (Incorporated by reference to Exhibit 10.18 to the Company’s Current Report on Form 8-K (SEC File No. 333-134748), filed on March 24, 2010)
10.17	Stockholders’ Agreement, dated as of April 12, 2010, by and among the Company, CHK Holidngs, L.L.C. CCMP Capital Investors II (AV-2), L.P., CMP Energy I LTD., CCMP Capital Investors (Cayman) II, L.P Altoma Energy GP and Fischer Investments, L.L.C.
10.18	Eighth Restated Credit Agreement, dated as of April 12, 2010, by and among the Company, Chaparral Energy, L.L.C., in its capacity as Borrower Representative for the Borrowers, JPMorgan Chase Bank, N.A., as Administrative Agent, and each of the Lenders named therein.
10.19*†	Second Amended and Restated Phantom Stock Plan dated December 31, 2008 (Incorporated by reference to Exhibit 10.22 of the Company’s Quarterly Report on Form 10-Q, filed on November 10, 2009)
10.20†	2010 Equity Incentive Plan dated April 12, 2010
10.21†	Form of Restricted Stock Award Grant Notice and Restricted Stock Agreement (Time Vesting)
10.22†	Form of Restricted Stock Award Grant Notice and Restricted Stock Agreement (Performance Vesting)
10.23†	Employment Agreement, dated as of April 12, 2010, by and among the Company and Mark A. Fischer
10.24†	Employment Agreement, dated as of April 12, 2010, by and among the Company and Joseph O. Evans
10.25†	Employment Agreement, dated as of April 12, 2010, by and among the Company and Larry E. Gateley
10.26†	Employment Agreement, dated as of April 12, 2010, by and among the Company and James M. Miller
10.27†	Employment Agreement, dated as of April 12, 2010, by and among the Company and Robert W. Kelly II
21.1	Subsidiaries of the Company
31.1	Certification by Chief Executive Officer required by Rule 13a-14(a) and 15d-14(a) under the Exchange Act
31.2	Certification by Chief Financial Officer required by Rule 13a-14(a) and 15d-14(a) under the Exchange Act
32.1	Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1	Report of Cawley, Gillespie & Associates, Inc.
99.2	Report of Ryder Scott Company, L.P.

* Incorporated by reference

† Management contract or compensatory plan or arrangement

138

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

CHAPARRAL ENERGY, INC.
By:	/S/    MARK A. FISCHER
Name:	Mark A. Fischer
Title:	President and Chief Executive Officer
By:	/S/    JOSEPH O. EVANS
Name:	Joseph O. Evans
Title:	Chief Financial Officer and Treasurer

Date: April 14, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/S/    MARK A. FISCHER         Mark A. Fischer	President, Chief Executive Officer and Chairman (Principal Executive Officer)	April 14, 2010
/S/    CHARLES A. FISCHER, JR.         Charles A. Fischer, Jr.	Director	April 14, 2010
/S/     AUBREY K. MCCLENDON         Aubrey K. McClendon	Director	April 14, 2010
/S/    KARL KURZ         Karl Kurz	Director	April 14, 2010
/S/    CHRISTOPHER BEHRENS         Christopher Behrens	Director	April 14, 2010

139

EXHIBIT INDEX

Exhibit No.	Description
2.1*	Agreement and Plan of Merger among the Company, Chaparral Exploration, L.L.C. and Edge Petroleum Corporation, dated July 14, 2008 (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K (SEC File No. 333-134748), filed on July 15, 2008)
2.2*	Merger Termination Agreement, dated December 16, 2008, among Chaparral Energy, Inc., Chaparral Exploration, L.L.C., and Edge Petroleum Corporation (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (SEC File No. 333-134748), filed on December 17, 2008)
2.3*	Agreement and Plan of Reorganization among the Company, Chaparral Subsidiary, Inc. and United Refining Energy Corp. dated October 9, 2009 (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on October 13, 2009)
3.1	Second Amended and Restated Certificate of Incorporation of Chaparral Energy, Inc. (the “Company”), dated as of April 12, 2010.
3.2	Second Amended and Restated Bylaws of the Company, dated as of April 12, 2010.
4.1*	Form of 8 1/2% Senior Note due 2015 (included in Exhibit 4.2). (Incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-130749), filed on December 29, 2005)
4.2*	Indenture, dated as of December 1, 2005, among the Company, as Issuer, the subsidiaries of the Company party thereto as Guarantors and Wells Fargo Bank, National Association, as Trustee. (Incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-130749), filed on December 29, 2005)
4.3*	First Supplemental Indenture, dated as of August 24, 2006, to Indenture dated as of December 1, 2005 among the Company, as Issuer, the Guarantors named therein and Wells Fargo Bank, National Association, as Trustee. (Incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K (SEC File No. 333-134748), filed on August 28, 2006)
4.4*	Second Supplemental Indenture, dated as of October 31, 2006, to Indenture dated as of December 1, 2005 among the Company, as Issuer, the Guarantors named therein and Wells Fargo Bank, National Association, as Trustee. (Incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K (SEC File No. 333-134748), filed on November 6, 2006)
4.5*	Third Supplemental Indenture, dated as of July 30, 2007 and effective as of April 16, 2007, to Indenture dated as of December 1, 2005 among the Company, as Issuer, the Guarantors named therein and Wells Fargo Bank, National Association, as Trustee. (Incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on Form S-4 (SEC File No. 333-145128), filed on August 3, 2007)
4.6*	Indenture dated January 18, 2007, among the Company, as Issuer, the subsidiaries of the Company party thereto as Guarantors and Wells Fargo Bank, National Association, as Trustee. (Incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K (SEC File No. 333-134748), filed on January 24, 2007)
4.7*	Form of 8  7/8% Senior Note due 2017 (included in Exhibit 4.6). (Incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K (SEC File No. 333-134748), filed on January 24, 2007)
4.8*	First Supplemental Indenture, dated as of July 30, 2007 and effective as of April 16, 2007, to Indenture dated as of January 18, 2007 among the Company, as Issuer, the Guarantors named therein and Wells Fargo Bank, National Association, as Trustee. (Incorporated by reference to Exhibit 4.8 to the Company’s Registration Statement on Form S-4 (SEC File No. 333-145128), filed on August 3, 2007)

140

Exhibit No.	Description
10.1*†	Form of Indemnification Agreements, between the Company and each of the directors and certain executive officers thereof (Incorporated by reference to Exhibit 10.6 to Form S-4 (SEC File No. 333-134748), filed on June 6, 2006)
10.2*†	Form of Assignment of Overriding Royalty Interest to James M. Miller (Incorporated by reference to Exhibit 10.7 to Form S-1 (SEC File No. 333-130749), filed on December 29, 2005)
10.3*†	Phantom Unit Plan (Incorporated by reference to Exhibit 10.8 to Form S-1 (SEC File No. 333-130749), filed on February 14, 2006)
10.4*†	Letter Agreement dated June 14, 2005 re: Conditional Employment Offer with Joseph O. Evans (Incorporated by reference to Exhibit 10.9 to Form S-1 (SEC File No. 333-130749), filed on February 14, 2006)
10.5*	Stockholders’ Agreement, dated as of September 29, 2006, by and among the Company, Chesapeake Energy Corporation, Altoma Energy and Fischer Investments, L.L.C. (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed on November 14, 2006)
10.6*	Seventh Restated Credit Agreement, dated as of October 31, 2006, by and among the Company, Chaparral Energy, L.L.C., in its capacity as Borrower Representative for the Borrowers, JPMorgan Chase Bank, N.A., as Administrative Agent, and each of the Lenders named therein. (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (SEC File No. 333-134748), filed on November 6, 2006)
10.7*	First Amendment to Seventh Restated Credit Agreement, dated as of May 11, 2007, by and among the Company, Chaparral Energy, L.L.C., as Borrower Representative for the Borrowers, JPMorgan Chase Bank, N.A., as Administrative Agent, and the Lenders party thereto. (Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q, filed May 15, 2007)
10.8*	Second Amendment to Seventh Restated Credit Agreement, dated as of July 3, 2007, by and among the Company, Chaparral Energy, L.L.C., as Borrower Representative for the Borrowers, JP Morgan Chase Bank, N.A., as Administrative Agent, and the Lenders party thereto (Incorporated by reference to Exhibit 10.11 to the Company’s Registration on Form S-l (SEC File No. 333-130749), filed on July 20, 2007)
10.9*	Third Amendment to Seventh Restated Credit Agreement, dated as of May 13, 2008, by and among the Company, Chaparral Energy, L.L.C., as Borrower Representative for the Borrowers, JP Morgan Chase Bank, N.A., as Administrative Agent, and the Lenders party thereto. (Incorporated by reference to Exhibit 10.18 of the Company’s Quarterly Report on Form 10-Q, filed on May 15, 2009)
10.10*	Fourth Amendment to Seventh Restated Credit Agreement, dated as of December 24, 2008, by and among the Company, Chaparral Energy, L.L.C., as Borrower Representative for the Borrowers, JP Morgan Chase Bank, N.A., as Administrative Agent, and the Lenders party thereto. (Incorporated by reference to Exhibit 10.19 of the Company’s Quarterly Report on Form 10-Q, filed on May 15, 2009)
10.11*	Fifth Amendment to Seventh Restated Credit Agreement, dated as of May 21, 2009, by and among the Company, Chaparral Energy, L.L.C., as Borrower Representative for the Borrowers, JP Morgan Chase Bank, N.A., as Administrative Agent, and the Lenders party thereto. (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (SEC File No. 333-134748), filed on May 26, 2009)
10.12*†	First Amended and Restated Phantom Stock Plan dated January 1, 2007 (Incorporated by reference to Exhibit 10.7 of the Company’s Quarterly Report on Form 10-Q, filed on August 14, 2008)

141

Exhibit No.	Description
10.13*	Stock Purchase Agreement, dated as of July 14, 2008, by and between the Company and Magnetar Financial LLC (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (SEC File No. 333-134748), filed on July 15, 2008)
10.14*	Termination and Settlement Agreement, dated December 16, 2008, among Chaparral Energy, Inc., on behalf of itself and Chaparral Exploration, L.L.C., Edge Petroleum Corporation and Magnetar Financial LLC, on behalf of itself and its affiliates (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K (SEC File No. 333-134748), filed on December 17, 2008)
10.15*†	Form of Change of Control Severance Agreement for Corporate Officers, between the Company and certain executive officers thereof (Incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K (SEC File No. 333-134748), filed on March 31, 2008)
10.16*	Stock Purchase Agreement, dated as of March 23, 2010, by and among the Company, CCMP Capital Investors II (AV-2), L.P., CMP Energy I LTD. and CCMP Capital Investors (Cayman) II, L.P. (Incorporated by reference to Exhibit 10.18 to the Company’s Current Report on Form 8-K (SEC File No. 333-134748), filed on March 24, 2010)
10.17	Stockholders’ Agreement, dated as of April 12, 2010, by and among the Company, CHK Holidngs, L.L.C. CCMP Capital Investors II (AV-2), L.P., CMP Energy I LTD., CCMP Capital Investors (Cayman) II, L.P Altoma Energy GP and Fischer Investments, L.L.C.
10.18	Eighth Restated Credit Agreement, dated as of April 12, 2010, by and among the Company, Chaparral Energy, L.L.C., in its capacity as Borrower Representative for the Borrowers, JPMorgan Chase Bank, N.A., as Administrative Agent, and each of the Lenders named therein.
10.19*†	Second Amended and Restated Phantom Stock Plan dated December 31, 2008 (Incorporated by reference to Exhibit 10.22 of the Company’s Quarterly Report on Form 10-Q, filed on November 10, 2009)
10.20†	2010 Equity Incentive Plan dated April 12, 2010
10.21†	Form of Restricted Stock Award Grant Notice and Restricted Stock Agreement (Time Vesting)
10.22†	Form of Restricted Stock Award Grant Notice and Restricted Stock Agreement (Performance Vesting)
10.23†	Employment Agreement, dated as of April 12, 2010, by and among the Company and Mark A. Fischer
10.24†	Employment Agreement, dated as of April 12, 2010, by and among the Company and Joseph O. Evans
10.25†	Employment Agreement, dated as of April 12, 2010, by and among the Company and Larry E. Gateley
10.26†	Employment Agreement, dated as of April 12, 2010, by and among the Company and James M. Miller
10.27†	Employment Agreement, dated as of April 12, 2010, by and among the Company and Robert W. Kelly II
21.1	Subsidiaries of the Company
31.1	Certification by Chief Executive Officer required by Rule 13a-14(a) and 15d-14(a) under the Exchange Act
31.2	Certification by Chief Financial Officer required by Rule 13a-14(a) and 15d-14(a) under the Exchange Act
32.1	Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1	Report of Cawley, Gillespie & Associates, Inc.
99.2	Report of Ryder Scott Company, L.P.

* Incorporated by reference

† Management contract or compensatory plan or arrangement

142

EX-3.1

Exhibit 3.1

SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

OF

CHAPARRAL ENERGY, INC.

Chaparral Energy, Inc. (the “Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (“DGCL”), hereby certifies as follows pursuant to Sections 242 and 245 of the DGCL:

(1) The original Certificate of Incorporation of the Corporation was filed in the Office of the Secretary of State of the State of Delaware (the “Secretary of State”) on September 14, 2005, and was amended and restated on September 26, 2006.

(2) This Second Amended and Restated Certificate of Incorporation (this “Certificate”) was duly adopted in accordance with Sections 242 and 245 of the DGCL. The Board of Directors of the Corporation (the “Board of Directors”) duly adopted resolutions setting forth and declaring advisable this Certificate, and at a special meeting of stockholders, the holders of a majority of the outstanding stock of the Corporation approved this Certificate in accordance with Section 228 of the DGCL.

(3) The Certificate of Incorporation of the Corporation, as amended and restated, is hereby amended and restated to read in its entirety as follows:

ARTICLE 1

The name of the corporation is Chaparral Energy, Inc (hereinafter called the “Corporation”).

ARTICLE 2

The address of the Corporation’s registered office in the State of Delaware is Capitol Services, Inc., 615 S. Dupont Highway, county of Kent, Dover, DE 19901. The name of the registered agent of the corporation at such address is Capitol Services, Inc.

ARTICLE 3

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL, as from time to time amended.

ARTICLE 4

The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is 50,600,004, consisting of as follows:

Class	Par Value Per Share		Number of Authorized Shares
Class A Common	$	0.01	10,000,000
Class B Common	$	0.01	10,000,000
Class C Common	$	0.01	10,000,000
Class D Common	$	0.01	10,000,000
Class E Common	$	0.01	10,000,000
Class F Common	$	0.01	1
Class G Common	$	0.01	3
Preferred	$	0.01	600,000

A. Preferred Stock

(1) The total number of shares of preferred stock that the Corporation shall have authority to issue is 600,000, $0.01 par value per share (the “Preferred Stock”).

(2) Subject to Article 7 of this Certificate, Preferred Stock may be issued from time to time in one or more series and in such amounts as may be determined by the Board of Directors. The voting powers, designations, preferences and relative, participating, optional or other special rights, if any, and the qualifications, limitations or restrictions thereof, if any, of the Preferred Stock of each series shall be such as are fixed by the Board of Directors, authority to do so being hereby expressly granted, and as are stated and expressed in a resolution or resolutions adopted by the Board of Directors providing for the issue of such series of Preferred Stock (herein called the “Directors’ Resolution”). Such Directors’ Resolution may (i) limit the number of shares of such series that may be issued, (ii) provide for a sinking fund for the purchase or redemption of shares of such series and specify the terms and conditions governing the operations of any such fund, (iii) grant voting rights to the holders of shares of such series, (iv) impose conditions or restrictions upon the creation of indebtedness of the Corporation or upon the issuance of additional Preferred Stock or other capital stock ranking on a parity therewith, or prior thereto, with respect to dividends or distribution of assets upon liquidation, (v) impose conditions or restrictions upon the payment of dividends upon, or the making of other distributions to, or the acquisition of, shares ranking junior to the Preferred Stock or to any series thereof with respect to dividends or distributions of assets upon liquidation, (vi) state the time or times, the price or prices or the rate or rates of exchange and other terms, conditions and adjustments upon which shares of any such series may be made convertible into, or exchangeable for, at the option of the holder or the Corporation or upon the occurrence of a specified event, shares of any other class or classes or of any other series of Preferred Stock or any other class or classes of stock or other securities of the Corporation, and (vii) grant such other special rights and impose such qualifications, limitations or restrictions thereon as shall be fixed by the Board of Directors, to the extent not inconsistent with this Article 4 and to the full extent now or hereafter permitted by the laws of the State of Delaware.

(3) Except as expressly provided by law, or except as may be provided in any Directors’ Resolution, the Preferred Stock shall have no right or power to vote on any question or in any proceeding or to be represented at, or to receive notice of, any meeting of stockholders of the Corporation.

(4) Preferred Stock that is redeemed, purchased or retired by the Corporation shall assume the status of authorized but unissued Preferred Stock and may thereafter, subject to the provisions of any Directors’ Resolution providing for the issue of any particular series of Preferred Stock, be reissued in the same manner as authorized but unissued Preferred Stock.

B. Common Stock.

(1) The total number of shares of common stock that the Corporation shall have authority to issue is 50,000,004 of which (i) 10,000,000 shares shall be shares of Class A Common Stock, $0.01 par value per share (the “Class A Common Stock”), (ii) 10,000,000 shares shall be shares of Class B Common Stock, $0.01 par value per share (the “Class B Common Stock”), (iii) 10,000,000 shares shall be shares of Class C Common Stock, $0.01 par value per share (the “Class C Common Stock”), (iv) 10,000,000 shares shall be shares of Class D Common Stock, $0.01 par value per share (the “Class D Common Stock”), (v) 10,000,000 shares shall be shares of Class E Common Stock, $0.01 par value per share (the “Class E Common Stock”), (vi) one share shall be a share of Class F Common Stock, $0.01 par value per share (the “Class F Common Stock”), and (vii) three shares shall be shares of Class G Common Stock, $0.01 par value per share (the “Class G Common Stock”, and together with the Class A Common Stock, the Class B Common Stock, the Class C Common Stock, the Class D Common Stock, the Class E Common Stock and the Class F Common Stock, the “Common Stock”).

(2) Except as contemplated elsewhere in this Certificate, each outstanding share of Common Stock shall entitle the holder thereof to one vote (and not more than one vote) on each matter submitted to a vote of Holders for which such class of Common Stock is entitled to vote.

(3) Except as contemplated elsewhere in this Certificate, the relative powers, preferences and participating, optional or other special rights, and the qualifications, limitations or restrictions of the Common Stock shall be identical in all respects.

(4) Dividends

Subject to the rights of the holders of Preferred Stock of any series that may be issued from time to time, and any other provisions of this Certificate, the Holders shall be entitled to receive such dividends and other distributions in cash, stock of any corporation (other than Common Stock) or property of the Corporation as may be declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefor and shall share equally on a per share basis in all such dividends and other distributions. In the case of dividends or other distributions payable in Common Stock, including distributions pursuant to reclassifications, stock splits or divisions of Common Stock, only shares of Class A Common Stock shall be paid or distributed with respect to Class A Common Stock, only shares of Class B Common Stock shall be paid or distributed with respect to Class B Common Stock, only shares of Class C Common Stock shall be paid or distributed with respect to Class C Common Stock, only shares of Class D Common Stock shall be paid or distributed with respect to Class D Common Stock and only shares of Class E Common Stock shall be paid or distributed with respect to Class E Common Stock. No shares of Class F Common Stock or Class G Common Stock shall be paid or distributed with respect to Class F Common Stock or Class G Common Stock, respectively. The number of shares of Class A Common Stock, Class B Common Stock, Class C Common Stock, Class D Common Stock and Class E Common Stock so distributed on each share shall be equal in number. None of the shares of Class A Common Stock, Class B Common Stock, Class C Common Stock, Class D Common Stock or Class E Common Stock may be reclassified, subdivided or combined unless such reclassification, subdivision or combination occurs simultaneously and in the same proportion for each class.

(5) Voting

a. Except as may be otherwise required by law or by this Certificate, the Holders shall vote together as a single class on every matter coming before any meeting of the stockholders or otherwise to be acted upon by the stockholders, subject to any voting rights which may be granted to Holders of any class or series of Preferred Stock.

b. The Holder of Class F Common Stock shall have the following voting rights:

1. The Holder of Class F Common Stock shall be entitled to vote or consent in writing on all matters submitted to a vote of the stockholders of the Corporation associated with effecting a Company Sale demanded in accordance with Section 8.1 of the Stockholders Agreement or a Demand IPO demanded in accordance with Section 5.1(i)(A) of the Stockholders Agreement, voting together with the other Holders of the Common Stock (and of any other shares of capital stock of the Corporation entitled to vote at a meeting of stockholders) as one class, except in cases where a separate or additional vote or consent of the Holders of any class or series of Capital Stock shall be required by the Certificate or by applicable law, in which case the requirement for any such separate or additional vote or consent shall apply in addition to the single class vote or consent otherwise required by this paragraph. If the Company Sale or Demand IPO referenced above takes the form of a transaction which requires the approval of the Board of Directors and if the Board of Directors is unwilling to approve such transaction, then the number of authorized directorships on the Corporation’s Board of Directors shall be increased by one more than twice the number of the then authorized number of directorships on the Board of Directors, and the voting rights of the Holders of Class F Common Stock shall include the sole right to elect (voting or consenting in writing separately as a class) directors to fill the newly-created directorships created by the increase in the size of the Board of Directors pursuant to this Section B.5(b)1. of Article 4.

2. As of each record date for the determination of the Corporation’s stockholders entitled to vote on the Company Sale demanded in accordance with Section 8.1 of the Stockholders Agreement or matters relating to a Demand IPO demanded in accordance with Section 5.1(i)(A) of the Stockholders Agreement (a “Class F Record Date”), the Class F Common Stock shall have voting rights and powers equal to the number of votes that, together with all other votes entitled to be cast by the Holder of Class F Common Stock on such Class F Record Date, whether by virtue of beneficial ownership of capital stock of the Corporation, proxies, voting trusts or otherwise, entitle the Holder of the share of Class F Common Stock to exercise one vote more than all votes entitled to be cast as of such Class F Record Date by all Holders of any class or series of capital stock of the Corporation other than the Class F Common Stock.

3. When the Class F Common Stock is redeemed, exchanged or otherwise acquired by the Corporation, it shall be retired and canceled and shall upon cancellation be restored to the status of an authorized but unissued share of Class A Common Stock.

c. The Holders of Class G Common Stock shall have the following voting rights:

1. The Holders of Class G Common Stock shall be entitled to vote on all matters submitted to a vote of the stockholders of the Corporation associated with effecting a Demand IPO demanded in accordance with Section 5.1(i)(B) of the Stockholders Agreement, voting together with the other Holders of the Common Stock (and of any other shares of capital stock of the Corporation entitled to vote at a meeting of stockholders) as one class, except in cases where a separate or additional vote or consent of the Holders of any class or series of Capital Stock shall be required by the Certificate or by applicable law, in which case the requirement for any such separate or additional vote or consent shall apply in addition to the single class vote or consent otherwise required by this paragraph. If the Demand IPO referenced above takes the form of a transaction which requires the approval of the Board of Directors and if the Board of Directors is unwilling to approve such transaction, then the number of authorized directorships on the Corporation’s Board of Directors shall be increased by one more than twice the number of the then authorized number of directorships on the Board of Directors, and the voting rights of the Holders of Class G Common Stock shall include the sole right to elect (voting or consenting in writing separately as a class) directors to fill the newly-created directorships created by the increase in the size of the Board of Directors pursuant to this Section B.5(c)1. of Article 4.

2. As of each record date for the determination of the Corporation’s stockholders entitled to vote on matters relating to a Demand IPO demanded in accordance with Section 5.1(i)(B) of the Stockholders Agreement (a “Class G Record Date”), the Class G Common Stock shall have voting rights and powers equal to the number of votes that, together with all other votes entitled to be cast by the Holders of Class G Common Stock on such Class G Record Date, whether by virtue of beneficial ownership of capital stock of the Corporation, proxies, voting trusts or otherwise, entitle the majority of Holders of shares of Class G Common Stock to exercise one vote more than all votes entitled to be cast as of such Class G Record Date by all Holders of any class or series of capital stock of the Corporation other than the Class G Common Stock.

3. When the Class G Common Stock is redeemed, exchanged or otherwise acquired by the Corporation, it shall be retired and canceled and shall upon cancellation be restored to the status of an authorized but unissued share of Class A Common Stock.

d. In addition to any other vote required by law, the affirmative vote of the Holders of at least a majority of the outstanding shares of a class of Common Stock (other than Class A Common Stock), voting as a separate class, shall be required to effect any adverse change in the rights, privileges or preferences of that class of Common Stock. Subject to Article 7 of this Certificate, this provision shall not be applicable to any amendment to this Certificate that establishes or designates one or more series of Preferred Stock under Section A of Article 4.

e. With respect to actions by the Holders upon those matters on which such Holders are entitled to vote as a separate class, such actions may be taken without a stockholders meeting by the written consent of Holders holding the minimum number of shares of Common Stock that would be necessary to authorize or take such action at a stockholder meeting at which all shares of Common Stock entitled to vote were present and voted. Such action shall be effective in accordance with the provisions of the DGCL, without any further action by the Corporation or any Holder. If such action is being taken without the unanimous written consent on the part of all Holders, prompt notice shall be given in accordance with the applicable provisions of the DGCL of the taking of corporate action without a meeting by less than unanimous written consent to those Holders on the record date whose shares were not represented on the written consent.

(6) Reclassification/Conversion

a. (i) Upon the effectiveness of this Certificate pursuant to the DGCL (the “Effective Time”), each share of Existing Common Stock shall be reclassified into one share of a new class of Common Stock as follows:

1. each share of Existing Common Stock held by Fischer at the Effective Time shall be reclassified into one fully paid and non-assessable share of Class B Common Stock;

2. each share of Existing Common Stock held by Altoma at the Effective Time shall be reclassified into one fully paid and non-assessable share of Class C Common Stock; and

3. each share of Existing Common Stock held by Chesapeake at the Effective Time shall be reclassified into one fully paid and non-assessable share of Class D Common Stock.

(ii) Immediately following the reclassifications in Section 4.B(6)a(i) above, one share of the Class B Common Stock held by Fischer, one share of the Class C Common Stock held by Altoma and one share of the Class D Common Stock held by Chesapeake shall be reclassified into one fully paid and non-assessable share of Class G Common Stock.

b. Upon Transfer by a Holder to a Permitted Transferee, each share of Common Stock Transferred shall remain one fully paid and non-assessable share of the same class of Common Stock as was held by such Holder; provided that if such Transfer is not to a Permitted Transferee of such Holder then such share of Common Stock shall be converted at such time, in such manner and upon such terms and conditions as provided herein into one fully paid and non-assessable share of the same class of Common Stock already held by the Transferee, or if such Transferee does not hold any shares of Common Stock, into one fully paid and non-assessable share of Class A Common Stock; provided, however, that in no event shall such transferred shares of Common Stock be converted into shares of Class G Common Stock or Class F Common Stock; provided further that if a Transferee who is not a Permitted Transferee holds more than one class of Common Stock (other than Class F Common Stock or Class G Common Stock), such transferred shares of Common Stock shall be converted ratably among the classes of Common Stock (other than Class F Common Stock or Class G Common Stock) already held by such Transferee. Upon receipt by a Holder of a share of a class of Common Stock other than the class of Common Stock that such Holder holds, such share shall automatically be converted in such manner and upon such terms and conditions as provided herein into one fully paid and non-assessable share of the same class or classes of Common Stock held by such Holder.

c. Each share of Common Stock other than Class A Common Stock shall automatically convert into a share of Class A Common Stock upon the occurrence of a Qualified IPO.

d. Upon automatic conversion of shares of Common Stock under this Section B(6) of Article 4, the Corporation shall reflect such conversion, and the issuance of the applicable class of Common Stock in connection therewith, on its books and records for all purposes even if certificates reflecting such converted shares of Common Stock are not surrendered to the Corporation or its transfer agent. The Corporation will, as soon as practicable after such deposit of a certificate or certificates for Common Stock to be converted in accordance with this Section B(6) of Article 4, issue and deliver at the office of the Corporation or of its transfer agent to the person for whose account such Common Stock was so surrendered, a certificate or certificates representing the number of full shares of Common Stock into which the shares represented by the surrendered certificate are converted. If surrendered certificates representing shares of a class of Common Stock are converted only in part, the Corporation will issue and deliver to the Holder, without charge therefor, a new certificate or certificates representing the aggregate number of the unconverted shares of such class of Common Stock. The failure of the Holder to deliver to the Corporation certificates representing shares of a class of Common Stock converted in accordance with this Section B(6) of Article 4 shall in no way affect the automatic conversion of such shares.

e. The issuance of certificates representing shares of a class of Common Stock upon conversion of shares of another class of Common Stock shall be made without charge for any issue, stamp or other similar tax in respect of such issuance; provided, however, if any such certificate is to be issued in a name other than that of the holder of the share or shares of the class of Common Stock being converted, the person or persons requesting the issuance thereof shall pay to the Corporation the amount of any tax which may be payable in respect of any transfer involved in such issuance or shall establish to the satisfaction of the Corporation that such tax has been paid.

f. Nothing herein shall prevent any Holder and the Corporation from executing an agreement with each other allowing any Holder, at its option, to convert the Common Stock (other than Class A Common Stock) held by it into Class A Common Stock, or converting any Common Stock (other than Class A Common Stock) pursuant to such agreement.

g. The Corporation shall at all times reserve and keep available, solely for the purpose of issuance upon conversion of the outstanding shares of each class of Common Stock, such number of shares of the other classes of Common Stock as shall be issuable upon the conversion of all outstanding shares of Common Stock, provided that nothing contained herein shall be construed to preclude the Corporation from satisfying the obligations in respect of the conversion of the outstanding shares of Common Stock by delivery of shares of Common Stock which are held in the treasury of the Corporation. The Corporation shall take all such corporate and other actions as from time to time may be necessary to ensure that all shares of Common Stock issuable upon conversion of shares of another class of Common Stock upon issue will be duly and validly authorized and issued, fully paid and nonassessable and free of any preemptive or similar rights other than as set forth in the Stockholders Agreement. In order that the Corporation may issue shares of Common Stock upon conversion of another class of Common Stock, the Corporation will endeavor to comply with all applicable federal and state securities laws.

h. Except as otherwise provided herein, all shares of a class of Common Stock, upon conversion into another class of Common Stock, shall retain their designations of the class of Common Stock from which they were converted and shall have the status of authorized and unissued shares of such class of Common Stock; provided, however, that at such time as there are no shares of all classes of Common Stock (other than Class A Common Stock) outstanding, no further shares of such classes shall be reissued, and the Corporation shall thereupon file a certificate of retirement with respect to the shares of such classes.

(7) Except as may otherwise be required by law, the shares of Common Stock shall not have any designations, preferences, limitations or relative rights, other than those specifically set forth in this Certificate.

ARTICLE 5

In furtherance and not in limitation of the powers conferred by law, subject to any limitations contained elsewhere in this Certificate, bylaws of the Corporation may be adopted, amended or repealed by a majority of the Board of Directors of the Corporation, but any bylaws adopted by the Board of Directors may be amended or repealed by the stockholders entitled to vote thereon. Election of directors need not be by written ballot.

ARTICLE 6

A. Generally

Subject to any limitations contained elsewhere in this Certificate (including, but not limited to, the provisions in Sections B(5)b.1. and B(5)c.1. of Article 4), the number of directors shall be fixed from time to time exclusively by resolution adopted by a majority of the directors then in office, but shall consist of not less than five (5) nor more than ten (10) directors, subject, however, to increases above ten (10) members as may be required in order to permit the holders of any series of Preferred Stock issued by the Corporation to elect directors under specified circumstances. Subject to any limitations contained elsewhere in this Certificate (including, but not limited to, the provisions in Sections B(5)b.1. and B(5)c.1. of Article 4), the maximum number of directors may not be increased by the Board of Directors to exceed ten (10) without the affirmative vote of a majority of the members of the entire Board of Directors. Notwithstanding the foregoing of this Article 6(A), at such time that all shares of Common Stock (other than Class A Common Stock) have been converted into shares of Class A Common Stock or are no longer outstanding, the number of directors of the Corporation, other than those who may be elected by the holders of one or more series of Preferred Stock voting separately by class or series, shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of all of the members of the Board of Directors at such time.

B. Board Designees

(1) (i) Subject to the provisions of Section B(3) of this Article 6, the Holders of the Class B Common Stock (the “Class B Holders”) shall be entitled to vote or consent in writing as a separate class for the election of two (2) directors of the Corporation (a director of the Corporation so elected by the Class B Holders, a “Class B Director”). A Class B Director elected pursuant to this Section B(1)(i) shall serve until the next annual meeting of stockholders for the election of directors, or until his or her successor shall be elected and shall qualify, or until his or her right to hold such office terminates pursuant to the provisions of this Section B(1)(i). If and when the Class D Holders exercise their right to elect a director pursuant to Section B(3) of this Article 6, one of the Class B Directors shall submit a resignation from his or her service on the Board of Directors, effective immediately. In the event that a Class B Director resigns from the Board of Directors, then the number of directors that the Class B Holders shall have the right to elect under this Section B(1)(i) shall be one (1), and such resulting vacancy shall be filled by the Class D Holders in accordance with their rights under Section B(3) of this Article 6.

In the event that no Class B Director shall resign pursuant to this Section B(1)(i) by midnight on the tenth (10^th) day following the Class D Holders making an election described herein, then the Class B Holders shall be divested of the foregoing special voting rights and the terms of office of the Class B Directors shall forthwith terminate. Immediately following the divestiture of the Class B Holders’ foregoing special voting rights and the termination of the terms of office of the Class B Directors in accordance with the terms herein, (a) the Class D Holders shall have the right to elect a director to fill one (1) of the resulting vacancies on the Board of Directors in accordance with and subject to their rights under Section B(3) of this Article 6, and (b) the Class B Holders shall be entitled to vote or consent in writing as a separate class for the election of one (1) director of the Corporation (which director shall fill one (1) of the vacancies on the Board of Directors resulting from the first sentence of this paragraph).

If and when the Holders of a majority of the shares of the Class D Common Stock provide written notice to the Corporation that the Class D Holders no longer wish to exercise their right to elect a director pursuant to Section B(3) of this Article 6 (and such failure to exercise such right is not a result of the Class D Holders no longer having the right to elect such director pursuant to Section B(3) of this Article 6), the Class B Holders shall, subject to the subsequent exercise of the Class D Holders of their right to elect a director pursuant to Section B(3) of this Article 6, again be entitled to vote or consent in writing as a separate class for the election of two (2) directors of the Corporation pursuant to the provisions of Section B(1)(i) of this Article 6.

(ii) In addition to the voting rights provided in Section B(1)(i) of this Article 6, so long as the Class B Holders and their Permitted Transferees own of record shares of Class B Common Stock representing at least 80% of the total outstanding shares of Common Stock held by such Class B Holders on April 12, 2010 (calculated prior to any sales of Common Stock contemplated by Section 4.1(b) of the Stockholders Agreement and reflecting the reclassification of Common Stock to various classes of Common Stock as contemplated by Section B(6)a. of Article 4), the Class B Holders shall be entitled to vote or consent in writing as a separate class for the election of any director of the Corporation to fill a vacancy which has resulted from the Class C Holders and/or the Class D Holders, as applicable, no longer having the right to elect such director pursuant to Sections B(2) and (3) of this Article 6. In accordance with the previous sentence, the holders of a majority of the shares of the Class B Common Stock, voting or consenting as a separate class, shall elect a director to fill the resulting vacancy described herein, and any such director elected by the Class B Holders shall also be a Class B Director. A Class B Director elected pursuant to this Section B(1)(ii) shall serve until the next annual meeting of stockholders for the election of directors, or until his or her successor shall be elected and shall qualify, or until his or her right to hold such office terminates pursuant to the provisions of this Section B(1)(ii). If and when the Class B Holders and their Permitted Transferees cease to own of record shares of Class B Common Stock representing at least 80% of the total outstanding shares of Common Stock held by such Class B Holders on April 12, 2010 (calculated prior to any sales of Common Stock contemplated by Section 4.1(b) of the Stockholders Agreement and reflecting the reclassification of Common Stock to various classes of Common Stock as contemplated by Section B(6)a. of Article 4), the Class B Holders shall be divested of the foregoing special voting rights in this Section B(1)(ii). Upon the termination of the foregoing special voting rights for the election of the Class B Director, the term of office of the Class B Director shall forthwith terminate, and the resulting vacancy shall be filled in accordance with the provisions of this Section B of Article 6.

(iii) The voting rights granted by this Section B(1) of Article 6 shall be in addition to any other voting rights granted to the Class B Holders in this Certificate or the DGCL.

(2) So long as the Holders of the Class C Common Stock (the “Class C Holders”) and their Permitted Transferees own of record shares of Class C Common Stock representing at least 50% of the total outstanding shares of Common Stock held by such Class C Holders on April 12, 2010 (calculated prior to any sales of Common Stock contemplated by Section 4.1(c) of the Stockholders Agreement and reflecting the reclassification of Common Stock to various classes of Common Stock as contemplated by Section B(6)a. of Article 4), the Class C Holders shall be entitled to vote or consent in writing as a separate class for the election of one (1) director of the Corporation (the director of the Corporation so elected by the Class C Holders, the “Class C Director”). The Class C Director shall serve until the next annual meeting of stockholders for the election of directors, or until his or her successor shall be elected and shall qualify, or until his or her right to hold such office terminates pursuant to the provisions of this Section B(2). If and when the Class C Holders and their Permitted Transferees cease to own of record shares of Class C Common Stock representing at least 50% of the total outstanding shares of Common Stock held by such Class C Holders on April 12, 2010 (calculated prior to any sales of Common Stock contemplated by Section 4.1(c) of the Stockholders Agreement and reflecting the reclassification of Common Stock to various classes of Common Stock as contemplated by Section B(6)a. of Article 4), the Class C Holders shall be divested of the foregoing special voting rights. Upon the termination of the foregoing special voting rights for the election of the Class C Director, the term of office of the Class C Director shall forthwith terminate, and the resulting vacancy shall be filled in accordance with the provisions of this Section B of Article 6. The voting rights granted by this Section B(2) shall be in addition to any other voting rights granted to the Class C Holders in this Certificate or the DGCL.

(3) Upon written notice to the Corporation by a majority of the shares of the Holders of Class D Common Stock (the “Class D Holders”) indicating such Class D Holders’ desire to exercise their rights to designate a director and so long as the Class D Holders and their Permitted Transferees own of record shares of Class D Common Stock representing at least 50% of the total outstanding shares of Common Stock held by such Class D Holders on April 12, 2010 (calculated after reflecting the reclassification of Common Stock to various classes of Common Stock as contemplated by Section B(6)a. of Article 4), the Class D Holders shall be entitled to vote or consent in writing as a separate class for the election of one (1) director of the Corporation (the director of the Corporation so elected by the Class D Holders, the “Class D Director”). The Class D Director shall serve until the next annual meeting of stockholders for the election of directors, or until his or her successor shall be elected and shall qualify, or until his or her right to hold such office terminates pursuant to the provisions of this Section B(3). If and when the Class D Holders and their Permitted Transferees cease to own of record shares of Class D Common Stock representing at least 50% of the total outstanding shares of Common Stock held by such Class D Holders on April 12, 2010 (calculated after reflecting the reclassification of Common Stock to various classes of Common Stock as contemplated by Section B(6)a. of Article 4), the Class D Holders shall be divested of the foregoing special voting rights. Upon the termination of the foregoing special voting rights for the election of the Class D Director, the term of office of the Class D Director shall forthwith terminate, and the resulting vacancy shall be filled in accordance with the provisions of Section B of this Article 6. The voting rights granted by this Section B(3) shall be in addition to any other voting rights granted to the Class D Holders in this Certificate or the DGCL.

(4) The Holders of the Class E Common Stock (the “Class E Holders”) shall be entitled to vote as a separate class for the election of two (2) directors of the Corporation, (the directors of the Corporation so elected by the Class E Holders, the “Class E Directors”).

(5) Except as set forth in Section B(5)b.1. of Article 4, the Holder of the Class F Common Stock shall not be entitled to vote for the election of directors of the Corporation.

(6) Except as set forth in Section B(5)c.1. of Article 4, the Holders of the Class G Common Stock shall not be entitled to vote for the election of directors of the Corporation.

(7) At such time that the term of a Class B Director, Class D Director or Class C Director shall terminate and, (i) with respect to the Class D Director or Class C Director, the Class B Holders no longer have the right to elect directors to fill the vacancies resulting from the termination of a Class C or Class D Director’s term pursuant to Section B(1) of this Article 6 or (ii) with respect to a Class B Director, the Class D Holders no long have the right to elect a director to fill the vacancy resulting from the termination of a Class B Director’s term pursuant to Sections B(1) and (3) of this Article 6, the vacancies resulting from the termination of such directorships shall be filled by the Holders of a majority of the outstanding shares of Common Stock.

C. Committees

The committees of the Board of Directors shall consist of an executive committee, a compensation committee, an audit committee and such other committees as the Board of Directors may determine (the “Committees”). Initially, each Committee shall be comprised of all of the Class B Director(s), the Class C Director, the Class D Director, if any, and the Class E Directors, and at all times prior to a Qualified IPO, each Committee shall be comprised of at least one of the Class B Directors and one of the Class E Directors. Each Committee shall have such powers and responsibilities as the Board of Directors may from time to time authorize.

D. Quorum

At any meeting having as a purpose the election of directors by the Holders, the presence, in person or by proxy, of the holders of a majority of the voting power of shares of the relevant class or classes of Capital Stock then outstanding shall be required and be sufficient to constitute a quorum of such class or classes for the election of any director by such holders. Each director shall be elected by the vote (or, alternatively, by written consent) required under the DGCL of the holders of such class or classes. At any such meeting or adjournment thereof, (i) the absence of a quorum of such holders of an applicable class or classes of Capital Stock shall not prevent the election of the directors to be elected by the holders of shares other than such class of Capital Stock, and (ii) in the absence of such quorum (either of holders of such class or classes of Capital Stock or of shares other than such class or classes of capital stock, or both), the holders of a majority of the voting power present in person or by proxy, of the class or classes of stock which lack a quorum shall have power to adjourn the meeting for the election of directors which they are entitled to elect, from time to time, without notice other than announcement at the meeting of the time and place of the adjourned meeting, until a quorum is present unless otherwise required by law.

E. Removal and Replacement of Directors

(1) Any Class B Director, Class C Director, Class D Director or Class E Director may be removed from the Board of Directors at any time (i) without Cause, only at the direction of, and with the vote by the holders of a majority of the outstanding shares of such class of Common Stock which elected such director or (ii) for Cause as determined by the holders of a majority of the outstanding shares of Common Stock. If a vacancy is created on the Board of Directors or a Committee as a result of the death, disability, retirement, resignation or removal of any member of the Board of Directors, then subject to the provisions of Section B of Article 6, the Holder(s) of the class of Common Stock that elected such member of the Board of Directors shall have the right to fill such vacancy by a vote of a majority of the shares of such class of Common Stock, which replacement (i) must have a favorable reputation in the business community generally, (ii) must not meet any of the criteria of Rule 262(b) of the Securities Act of 1933, as amended, and (iii) shall not have previously been removed from the Board of Directors for Cause.

(2) To the fullest extent permitted by Applicable Law, for the purposes hereof, “Cause” shall include, but not be limited to, the occurrence or existence of any of the following events: (A) such Person’s having engaged in conduct that is or is reasonably expected to be materially injurious to the Corporation or its subsidiaries; (B) the intentional and material breach of the Stockholders Agreement by the Holder who designated such Person or such Person’s intentional and material breach of this Certificate; (C) such Person’s having been convicted of, or having entered a plea bargain or settlement admitting guilt for, any felony or the Person engaging in fraudulent or criminal activity relating to the scope of such Person’s membership on the Board of Directors (whether or not prosecuted); (D) such Person’s having been the subject of any order, judicial or administrative, obtained or issued by the United States Securities and Exchange Commission for any securities violation involving fraud, including, for example, any such order consented to by such Person in which findings of facts or any legal conclusions establishing liability are neither admitted nor denied; (E) such Person’s material violation of the Corporation’s business conduct policies; (F) with respect to a Person who is also an employee of the Corporation, such Person’s gross negligence or material misconduct in the performance of duties and services required of such Person; (G) such Person’s continuing and repeated failure to perform the duties as requested by the Corporation either as an employee, a director or a member of a Committee; or (H) with respect to a Person who is also an employee of the Corporation, the termination of such Person as an employee for cause pursuant to any employment agreement with the Corporation to which such Person is a party.

F. Additional Matters

Notwithstanding anything to the contrary contained herein, all rights for any Holder set forth in this Article 6 shall terminate and be of no further force and effect on the earlier of (x) the closing date of a Qualified IPO or (y) the date that such Holder and its Permitted Transferees cease to beneficially own 5% or more of the shares of Common Stock outstanding.

ARTICLE 7

A. Additional Rights of Class B Common Stock

Notwithstanding any other provision of this Certificate, so long as Fischer owns at least 80% of the Class B Common Stock owned by Fischer on April 12, 2010 (calculated prior to any sales of Common Stock pursuant to Section 4.1(b) of the Stockholders Agreement), at any time prior to April 12, 2016, and so long as a Qualified IPO has not yet occurred, the Board of Directors shall neither initiate nor consummate a Company Sale, whether in the form of a stock sale, asset sale, merger or any other form whatsoever, or a liquidation or dissolution of the Corporation, without the prior vote or written consent of a majority of the shares of Class B Common Stock outstanding, which consent may be withheld in such Class B Holders’ sole discretion.

B. Additional Rights of Class E Common Stock

In addition to any vote or consent of the Board of Directors or the Holders required by Applicable Law and notwithstanding any other provision of this Certificate, the prior vote or written consent of Holders owning a majority of the shares of the Class E Common Stock (which vote or consent may be given or withheld in the Class E Holders’ sole discretion) shall be required for the Corporation (or, to the extent applicable, any subsidiary of the Corporation) to take any of the following actions, or enter into any arrangement or contract to do any of the following actions:

(1)(A) incur, create, assume, guarantee or otherwise become liable with respect to any Indebtedness in excess of one hundred million dollars ($100,000,000) in the aggregate in any 12-month period over the aggregate principal amount of Indebtedness existing at the start of such 12-month period, or (B) enter into or materially amend any contract, agreement, commitment or arrangement to effect any of the transactions prohibited by this clause (1);

(2)(A) refinance, refund, substitute or renew Indebtedness in excess of one hundred million dollars ($100,000,000) in the aggregate in any 12-month period (other than the roll-over of the Corporation’s Existing Credit Facility under substantially similar terms, it being understood that any new credit facility into which the Existing Credit Facility is rolled-over shall have a borrowing base that will authorize borrowings thereunder based upon similar criteria and metrics as are contained in the Existing Credit Facility), or (B) enter into or materially amend any contract, agreement, commitment or arrangement to effect any of the transactions prohibited by this clause (2);

(3) take any action which increases the authorized number of shares of the Common Stock or any other classes of Capital Stock;

(4) issue or exchange equity securities or equity linked securities other than to management of the Corporation pursuant to equity incentive plans approved by the Class E Holders;

(5) engage, retain, pay or agree to pay the fees or expenses of any third party consultant or advisor other than in the ordinary course of business;

(6) enter into any contract or other agreement or arrangement (or series of related contracts, agreements or arrangements) involving anticipated receipts or expenditures or otherwise having a total value over the term of such contract, agreement or arrangement (without any present value discount) greater than a material amount of money, except for those contracts or other agreements or arrangements entered into by the Corporation or any Subsidiary in the ordinary course of business;

(7) declare, set aside or pay any dividend or distribution (whether in cash, stock or property) or capital return in respect of Capital Stock or redeem, purchase or otherwise acquire any shares of Capital Stock (other than repurchases of Capital Stock from employees pursuant to the terms of any agreement entered into by the Corporation or any Subsidiary after the date hereof, provided that such agreement has been approved by a majority in ownership of the other Principal Investors);

(8) make, alter, amend or repeal the certificate of incorporation, articles of incorporation, bylaws, partnership agreement, limited liability company agreement, operating agreement, membership agreement or other constituent documents of the Corporation or any Subsidiary;

(9)(A) except pursuant to a sale permitted by Section B(19) of this Article 7, sell the Corporation or any Subsidiary, or (B) expect pursuant to an acquisition permitted by Section B(17) of this Article 7, merge, consolidate or effect any other business combination of the Corporation or any Subsidiary with or into any other Person or a statutory share exchange between the Corporation or any Subsidiary and any other Person; provided, however, that any Reverse Merger shall require the prior vote or written consent of Holders owning a majority of the Class E Common Stock;

(10) take any action to increase or decrease the number of persons constituting the Board of Directors or any Subsidiary, except as provided herein;

(11) liquidate, dissolve, reorganize or recapitalize the Corporation or any Subsidiary;

(12) file any petition by or on behalf of the Corporation or any Subsidiary seeking relief, or consenting to the institution of any proceeding against the Corporation or any Subsidiary seeking to adjudicate it as bankrupt or insolvent, under the law relating to bankruptcy, insolvency or reorganization or relief of debtors;

(13) engage in any business other than the Business;

(14) enter into any transaction with an Affiliate which meets the requirements of disclosure under Item 404 of Regulation S-K (other than transactions with Chesapeake or its Affiliates in the ordinary course of business);

(15) approve or amend the consolidated annual operating and capital budget of the Corporation (the “Annual Budget”) providing for capital expenditures in excess of 100% of discretionary cash flow or spend in excess of 100% of discretionary cash flow in any fiscal year except for (i) acquisitions permitted by Section B(17) of this Article 7, and (ii) expenditures reflected in the Corporation’s 2010 Annual Budget attached as Exhibit C to the Stockholders Agreement; provided that such Annual Budget be prepared in a form and with customary information substantially similar to the 2010 Annual Budget attached as Exhibit C to the Stockholders Agreement with at least the same level of description and information as set forth therein;

(16) enter into any transaction or take any action that, with respect to any capital expenditure category in the Annual Budget, causes the Corporation and its Subsidiaries to exceed the Annual Budget for that particular category by the amount that is 10% of that year’s aggregate Annual Budget, provided that the Corporation shall promptly notify CCMP of any changes to the capital expenditure categories set forth on Exhibit C to the Stockholders Agreement regardless of the monetary amounts of such changes;

(17)(A) in any 12-month period beginning on the date of the Stockholders Agreement, make any acquisition in any one or series of transactions, by purchase of securities or assets or otherwise, of any Person, business or other enterprise, or any assets, for an amount in excess of one hundred million dollars ($100,000,000) in the aggregate in any 12-month period, or (B) the making of any investment (exclusive of amounts on deposit with banks or lending institutions and short term investments of excess cash) in any Person (or group of related Persons) in excess of one hundred million dollars ($100,000,000) in the aggregate in any one transaction or series of transactions (whether by way of exchange, purchase, capital contribution or otherwise);

(18) sell, divest, transfer, convey or encumber (except as required by the Existing Credit Facility) in any one transaction or a series of transactions of any division or other business enterprise, or any assets, of the Corporation or any Subsidiary for an amount in excess of one hundred million dollars ($100,000,000) in any 12-month period (other than the sale of inventory and other assets in the ordinary course of business);

(19) sell equity interests of a Subsidiary to any party other than (A) the Corporation or a wholly-owned Subsidiary of the Corporation, or (B) in an amount less than or equal to twenty five million dollars ($25,000,000) of value in the aggregate;

(20)(A) elect, appoint, remove (except for cause) or otherwise terminate any member of senior management (meaning officers with titles of Senior Vice President or more senior) or materially change the duties or compensation of any such member, or (B) enter into, amend, terminate or waive any material provision under any employment, severance, consulting or other agreement with any member of senior management; and

(21) except as otherwise contemplated in this Section B of Article 7, enter into any contract, agreement, arrangement or commitment to do, or authorize, approve, ratify or confirm, or delegate the power to act on behalf of the Corporation or any Subsidiary or the Board of Directors in respect of, any of the foregoing.

C. Additional Matters

Notwithstanding anything to the contrary contained herein, all rights for any Holder set forth in this Article 7 shall terminate and be of no further force and effect on the earlier of (x) the closing date of a Qualified IPO or (y) the date that such Holder and its Permitted Transferees cease to beneficially own 5% or more of the shares of Common Stock outstanding.

ARTICLE 8

To the fullest extent permitted by law, a director of the Corporation shall not be personally liable either to the Corporation or to any stockholder for monetary damages for breach of fiduciary duty as a director, except (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for any matter in respect of which such director shall be liable under Section 174 of the DGCL or any amendment thereto or successor provision thereof, or (iv) for any transaction from which the director derived an improper personal benefit. Neither amendment nor repeal of this Article 8 nor the adoption of any provision of this Certificate inconsistent with this Article 8 shall eliminate or reduce the effect of this Article 8 in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article 8, would accrue or arise, prior to such amendment, repeal or adoption of any inconsistent provision. If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.

ARTICLE 9

To the maximum extent permitted by Delaware law in effect from time to time, the Corporation shall indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, shall pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (a) any individual who is a present or former director or officer of the Corporation and who is made a party to the proceeding by reason of his service in that capacity or (b) any individual who, while a director of the Corporation and at the request of the Corporation, serves or has served another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or any other enterprise as a director, officer, partner or trustee of such corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or other enterprise and who is made a party to the proceeding by reason of his service in that capacity against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them, unless it is established that (i) the act or omission of the director or officer was material to the matter giving rise to the proceeding and (A) was committed in bad faith or (B) was the result of active and deliberate dishonesty, (ii) the director or officer actually received an improper personal benefit, or (iii) in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. The Corporation may, with the approval of its Board of Directors, provide such indemnification and advance for expenses to a person who served a predecessor of the Corporation in any of the capacities described in (a) or (b) above and to any employee or agent of the Corporation or a predecessor of the Corporation. The Corporation shall, as a condition to advancing expenses to a director or officer, obtain a written undertaking by or on behalf of such director or officer to repay the amount paid or reimbursed by the Corporation if it shall ultimately be determined that such persons are not entitled to be indemnified by the Corporation under Delaware law or any applicable contract.

Notwithstanding any provision of this Certificate, the bylaws of the Corporation, or other organizational document of the Corporation or any of its Subsidiaries, or contract to which the Corporation or any of its Subsidiaries is a party, to the contrary, the Corporation and each of its Subsidiaries acknowledges and agrees that, to the fullest extent permitted by law, (i) the Corporation and its Subsidiaries are, and shall at all times be, the indemnitors of first resort with respect to any and all matters for which advancement of expenses and indemnification are provided by the Corporation or its Subsidiaries to or on behalf of any Persons designated by either the Class D Holders or the Class E Holders to serve as a Class D Director or Class E Director, as applicable (each such Person, an “Indemnitee”), and (ii) the obligations of the Corporation and its Subsidiaries to each Indemnitee are primary, and any obligations of any Class D Holder, Class E Holder or any Affiliate thereof to provide advancement of expenses or indemnification for any losses, claims, damages or liabilities incurred by any Indemnitee and for which the Corporation or any of its Subsidiaries has agreed (or is otherwise obligated) to indemnify Indemnitee are secondary.

Neither the amendment nor repeal of this Article 9, nor the adoption or amendment of any other provision of the Certificate inconsistent with this Article 9 shall eliminate or reduce the effect of this Article 9 in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article 9, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.

The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether of not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article 9 or otherwise.

ARTICLE 10

Except as otherwise provided in the second sentence of this Article 10, to the fullest extent permitted by law (i) no Holder and no stockholder, member, manager, partner or Affiliate of any Holder shall have any duty to communicate or present an investment or business opportunity or prospective economic advantage to the Corporation or any of its Subsidiaries in which the Corporation or one of its Subsidiaries may, but for the provisions of this Article 10, have an interest or expectancy (“Corporate Opportunity”), and (ii) no Holder, stockholder, member, manager, partner or Affiliate of any Holder (even if also a director of the Corporation) will be deemed to have breached any fiduciary or other duty or obligation to the Corporation or any other Holder by reason of the fact that any such Person pursues or acquires a Corporate Opportunity for itself or its Affiliates or directs, sells, assigns or transfers such Corporate Opportunity to another Person or does not communicate information regarding such Corporate Opportunity to the Corporation. The Corporation, on behalf of itself and its Subsidiaries, and each Holder renounce any interest in a Corporate Opportunity and any expectancy that a Corporate Opportunity will be offered to the Corporation or such Holder to the fullest extent permitted by Section 122(17) of the DGCL; provided that the Corporation does not renounce any interest or expectancy it may have in any Corporate Opportunity that is offered to an officer of the Corporation whether or not such individual is also a director or officer of a Holder, if such opportunity is expressly offered to such Person in his or her capacity as an officer of the Corporation and the Parties recognize that the Corporation reserves such rights; provided further that if a Class E Director has information that is regarding or may result in a Corporate Opportunity and has a conflict concerning such Corporate Opportunity, such Class E Director must (i) recuse himself or herself from any Corporation discussions or deliberations regarding the Corporate Opportunity and (ii) refrain from taking, directly or indirectly, any intentional action that materially and adversely affects or is reasonably expected to materially and adversely affect the Corporation’s interest in or expectancy regarding the Corporate Opportunity. For the avoidance of doubt, nothing in this Article 10 shall affect or restrict the rights of a Holder to exercise its rights under Article 7 hereof. Nothing in this Article 10 shall limit or otherwise prejudice any contractual rights the Corporation may have or obtain against any Holder or any stockholder, director, officer, member, manager, partner or Affiliate of any Holder.

ARTICLE 11

Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation.

ARTICLE 12

The Corporation is to have perpetual existence.

ARTICLE 13

A. Headings

The headings of the various subdivisions in this Certificate are for convenience of reference only and shall not affect the interpretation of any of the provisions of this Certificate.

B. Certain Definitions

For purposes of this Certificate:

(1) “Affiliate” means, with respect to any Person, any Person controlling, controlled by, or under common control with such Person. For the purposes of this definition, “control” means the possession of the power to direct or cause the direction of management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

(2) “Altoma” means Altoma Energy GP, an Oklahoma general partnership.

(3) “Applicable Law” means all applicable provisions of (i) constitutions, treaties, statutes, laws (including the common law), rules, regulations, ordinances, codes or orders of any Governmental Authority, (ii) any consents or approvals of any Governmental Authority, (iii) any orders, decisions, injunctions, judgments, awards, or decrees of, or agreements with, any Governmental Entity, or (iv) any listing requirements of a national securities exchange.

(4) “Business” means (i) the business of acquiring, exploring, exploiting, developing, producing, operating and disposing of interests in oil, natural gas, liquid natural gas and other hydrocarbon and mineral properties or products produced in association with any of the foregoing; (ii) the business of gathering, marketing, distributing, treating, processing, storing, refining, selling and transporting of any production from such interests or properties and products produced in association therewith and the marketing of oil, natural gas, other hydrocarbons and minerals obtained from unrelated Persons; (iii) any business relating to oil field sales and service; and (iv) any business or activity relating to, arising from, or necessary, appropriate or incidental to the activities described in the foregoing clauses (i) through (iii) of this definition (including, without limitation, the acquisition, development and operation of CO₂ producing properties, the acquisition or construction and operation of CO₂ pipelines and transportation or sales of CO ₂, and the ownership and operation of ethanol plants, a by-product of which is the production of CO₂, as related to the activities described in the foregoing clauses (i) and (ii)).

(5) “Business Day” means any day other than a day on which banks in the State of Oklahoma or New York are authorized by law to close.

(6) “Capital Stock” means any and all shares of stock, interests, participations or other equivalents (however designated) of capital stock of the Corporation, any and all equivalent ownership interests in a Person (other than a corporation), and any and all warrants, options or other rights to purchase or acquire any of the foregoing.

(7) “CCMP” means CCMP Capital Investors II (AV-2), L.P., a Delaware limited partnership, CCMP Energy I LTD., a Cayman limited company, and CCMP Capital Investors (Cayman) II, L.P., a Cayman limited partnership.

(8) “Chesapeake” means CHK Holdings, L.L.C., an Oklahoma limited liability company.

(9) “Company Sale” shall have the meaning set forth in the Stockholders Agreement.

(10) “Demand IPO” shall have the meaning set forth in the Stockholders Agreement.

(11) “Existing Common Stock” means the Corporation’s common stock, par value $0.01 per share, outstanding immediately prior to the effectiveness of this Certificate with the Delaware Secretary of State.

(12) “Existing Credit Facility” means that certain revolving credit facility dated April 12, 2010, by and among the Corporation in its capacity as Borrower Representative for the Borrowers, JPMorgan Chase Bank, N.A., as Administrative Agent, and each of the Lenders named therein, as amended, restated, modified, renewed, refunded, replaced, or refinanced in accordance with Section B(2) of Article 7 of this Certificate or as otherwise consented to by the Holders of Class E Common Stock.

(13) “Fischer” means Fischer Investments, L.L.C., an Oklahoma limited liability company.

(14) “Governmental Authority” means any governmental or regulatory authority, agency or court.

(15) “Holder” means any Person owning of record on the books of the Corporation shares of Common Stock.

(16) “Indebtedness” means, with respect to any Person, without duplication, any of the following liabilities, whether secured (with or without limited recourse) or unsecured: (i) all liabilities for borrowed money; (ii) all liabilities evidenced by bonds, debentures, notes or other similar instruments or under financing or capital leases; (iii) all liabilities for guarantees of another Person in respect of liabilities of the type set forth in clauses (i) and (ii); (iv) all reimbursement obligations under letters of credit (including standby and commercial); and (v) all liabilities for accrued but unpaid interest expense and unpaid penalties, fees, charges and prepayment premiums that are payable, in each case, with respect to any of the obligations of a type described in clauses (i) through (iv) above.

(17) “Indemnitee” shall have the meaning set forth in Article 9.

(18) “Permitted Transferee” shall have the meaning set forth in the Stockholders Agreement.

(19) “Person” means a natural person, a corporation, a limited liability company, a partnership, an association, a trust or any other entity or organization, including a Governmental Authority.

(20) “Principal Investors” shall have the meaning set forth in the Stockholders Agreement.

(21) “Qualified IPO” means a consummated initial public offering of shares of Common Stock resulting in proceeds to the Corporation of at least two hundred fifty million dollars ($250,000,000), which is underwritten on a firm commitment basis by a nationally-recognized investment banking firm, and which results in the initial listing or quotation of the Common Stock on any national securities exchange.

(22) “Reverse Merger” means any direct or indirect merger between the Corporation and any public company (other than a cash-out merger where the Corporation is the surviving entity).

(23) “Stockholders Agreement” means that certain Stockholders Agreement dated April 12, 2010, between the Corporation, CCMP, Fischer, Altoma, Chesapeake and each other Holder who may duly and properly become bound by the terms thereof, as amended or modified in accordance with the terms thereof.

(24) “Subsidiary” means (i) any corporation or other entity a majority of the capital stock or other equity securities of which having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions is at the time owned, directly or indirectly, with power to vote, by the Corporation or any direct or indirect Subsidiary of the Corporation, (ii) any limited liability company in which the Corporation or any direct or indirect Subsidiary is the sole managing member or (iii) any partnership in which the Corporation or any direct or indirect Subsidiary is a general partner.

(25) “Transfer,” including the correlative terms “Transferring” or “Transferred,” means any direct or indirect transfer, assignment, sale, gift, pledge, hypothecation or other encumbrance, or any other disposition (whether voluntary or involuntary or by operation of law), of shares of Common Stock (or any interest (pecuniary or otherwise) therein or right thereto), including, without limitation, derivative or similar transactions or arrangements whereby a portion or all of the economic interest in, or risk of loss or opportunity for gain with respect to, shares of Common Stock is transferred or shifted to another Person.

I, THE UNDERSIGNED, hereunto set my hand this 12th day of April, 2010.

/s/ Mark A. Fischer

Mark A. Fischer

Chief Executive Officer and President

EX-3.2

Exhibit 3.2

AMENDED AND RESTATED

BYLAWS

OF

CHAPARRAL ENERGY, INC.

(AS OF APRIL 12, 2010)

PREAMBLE

These Amended and Restated Bylaws (“Bylaws”) are subject to, and governed by, the General Corporation Law of the State of Delaware (“DGCL”) and the Second Amended and Restated Certificate of Incorporation of Chaparral Energy, Inc. (the “Corporation”), as amended (the “Certificate of Incorporation”, such term to include the resolutions of the Board of Directors of the Corporation creating any series of preferred stock, par value $0.01 per share, of the Corporation (the “Preferred Stock”)). In the event of a direct conflict between the provisions of these Bylaws and the mandatory provisions of the DGCL or the provisions of the Certificate of Incorporation, such provisions of the DGCL and the Certificate of Incorporation, as the case may be, will be controlling.

ARTICLE I

Offices and Records

Section 1.1 Registered Office and Agent. The registered office and registered agent of the Corporation shall be as designated from time to time by the appropriate filing by the Corporation in the office of the Secretary of State of the State of Delaware.

Section 1.2 Other Offices. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors of the Corporation (the “Board of Directors”) may from time to time determine or as the business of the Corporation may require.

Section 1.3 Books and Records. The books and records of the Corporation may be kept at the Corporation’s principal office in Oklahoma City, Oklahoma or at such other locations within or outside the State of Delaware as may from time to time be designated by the Board of Directors.

ARTICLE II

Meetings of Stockholders

Section 2.1 Annual Meetings.

(a) An annual meeting of the Corporation’s stockholders (the “Stockholders”) shall be held each calendar year for the purposes of (i) electing directors as provided in Article III and (ii) transacting such other business as may properly be brought before the meeting. Each annual meeting shall be held on such date (no later than 13 months after the date of the last annual meeting of Stockholders) and at such time as shall be designated by the Board of Directors and stated in the notice or waivers of notice of such meeting.

Section 2.2 Special Meetings. Special meetings of the Stockholders, for any purpose or purposes, may be called at any time by the Chairman of the Board (if any) or the Chief Executive Officer and shall be called by the Secretary within ten (10) days after the written request, or by resolution adopted by the affirmative vote, of a majority of the total number of directors then in office, which request or resolution shall fix the date, time and place, and state the purpose or purposes, of the proposed meeting. Except as provided by applicable law, these Bylaws or the Certificate of Incorporation, Stockholders shall not be entitled to call a special meeting of Stockholders or to require the Board of Directors or any officer to call such a meeting or to propose business at such a meeting. Business transacted at any special meeting of Stockholders shall be limited to the purposes stated in the notice or waivers of notice of such meeting.

Section 2.3 Place of Meetings. The Board of Directors may designate the place of meeting (either within or without the State of Delaware) for any meeting of Stockholders. If no designation is made by the Board of Directors, the place of meeting shall be held at the principal executive office of the Corporation. In addition, the Board of Directors may determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communications as authorized by these Bylaws.

Section 2.4 Notice of Meetings.

(a) Written notice of each meeting of Stockholders shall be delivered to each Stockholder of record entitled to vote thereat, which notice shall (i) state the place, if any, date and time of the meeting, the means of remote communications, if any, by which Stockholders and proxy holders may be deemed to be present in person and vote at any such meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, and (ii) be given not less than 10 nor more than 60 days before the date of the meeting.

(b) Each notice of a meeting of Stockholders shall be given as provided in Section 9.1, except that if no address appears on the Corporation’s books or stock transfer records with respect to any Stockholder, notice to such Stockholder shall be deemed to have been given if sent by first-class mail or telecommunication to the Corporation’s principal executive office or if published at least once in a newspaper of general circulation in the county where such principal executive office is located.

(c) If any notice addressed to a Stockholder at the address of such Stockholder appearing on the books of the Corporation is returned to the Corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the Stockholder at such address, all further notices to such Stockholder at such address shall be deemed to have been duly given without further mailing if the same shall be available to such Stockholder upon written demand of such Stockholder at the principal executive office of the Corporation for a period of one year from the date of the giving of such notice.

(d) Any previously scheduled meeting of the Stockholders may be postponed by resolution of the Board of Directors upon public notice given prior to the time previously scheduled for such meeting.

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Section 2.5 Voting List. At least 10 days before each meeting of Stockholders, the Secretary or other officer or agent of the Corporation who has charge of the Corporation’s stock ledger shall prepare a complete list of the Stockholders entitled to vote at such meeting, arranged in alphabetical order and showing, with respect to each Stockholder, his address and the number of shares registered in his name. Such list shall be open to the examination of any Stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the corporation. If the list is made available on an electronic network, then the company may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to held at a place, the list shall be produced and kept at the time of the meeting during the whole time thereof, and may be inspected by any Stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any Stockholder during the whole time of the meeting on a reasonable accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. The stock ledger of the Corporation shall be the only evidence as to who are the Stockholders entitled to examine any list required by this Section 2.5 or to vote in person or by proxy at any meeting of Stockholders.

Section 2.6 Quorum and Adjournment. The holders of a majority of the voting power of the outstanding shares of the Corporation entitled to vote generally on matters other than the election of directors (the “Voting Stock”), present in person or represented by proxy, shall constitute a quorum at any meeting of Stockholders, except as otherwise provided by applicable law, the Certificate of Incorporation or these Bylaws. If a quorum is present at any meeting of Stockholders, such quorum shall not be broken by the withdrawal of enough Stockholders to leave less than a quorum and the Stockholders may continue to transact business until adjournment, provided that any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum. If a quorum shall not be present at any meeting of Stockholders, the holders of a majority of the Voting Stock represented at such meeting or, if no Stockholder entitled to vote is present at such meeting, any officer of the Corporation may adjourn such meeting from time to time until a quorum shall be present. Notwithstanding anything in these Bylaws to the contrary, the chairman of any meeting of Stockholders shall have the right, acting in his sole discretion, to adjourn such meeting from time to time. Quorums for the voting on the election of directors shall be determined pursuant to the Certificate of Incorporation.

Section 2.7 Adjourned Meetings. When a meeting of Stockholders is adjourned to another time or place, unless otherwise provided by these Bylaws, notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed present in person and vote at such adjourned meeting, are announced at the meeting at which the adjournment is taken; provided, however, if an adjournment is for more than 30 days or if after an adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Stockholder entitled to vote thereat. At any adjourned meeting at which a quorum shall be present in person or by proxy, the Stockholders entitled to vote thereat may transact any business which might have been transacted at the meeting as originally noticed.

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Section 2.8 Voting.

(a) Election of directors at all meetings of Stockholders shall be by written ballot, unless otherwise provided in the Certificate of Incorporation; if authorized by the Board of Directors, such requirement of a written ballot shall be satisfied by a ballot submitted by electronic transmission, provided that any such electronic transmission must either set forth or be submitted with information from which it can be determined that electronic transmission was authorized by the stockholder or proxy holder. Except as otherwise provided in the Certificate of Incorporation, directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Except as otherwise provided by applicable law, the Certificate of Incorporation or these Bylaws, all matters other than the election of directors submitted to the Stockholders at any meeting shall be decided by the vote of the holders of a majority of the Voting Stock present in person or represented by proxy and entitled to vote on the subject matter. Except as otherwise provided in the Certificate of Incorporation or by applicable law, (i) no Stockholder shall have any right of cumulative voting and (ii) each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of Stockholders.

(b) Shares standing in the name of another corporation (whether domestic or foreign) may be voted by such officer, agent or proxy as the bylaws of such corporation may prescribe or, in the absence of such provision, as the board of directors of such corporation may determine. Shares standing in the name of a deceased person may be voted by the executor, personal representative or administrator of such deceased person, either in person or by proxy. Shares standing in the name of a guardianship, conservatorship or trust may be voted by the appropriate fiduciary, either in person or by proxy, but no fiduciary shall be entitled to vote shares held in such fiduciary capacity without a transfer of such shares into the name of such fiduciary. Shares standing in the name of a receiver may be voted by such receiver. A Stockholder whose shares are pledged shall be entitled to vote such shares, unless in the transfer by the pledgor on the books of the Corporation he has expressly empowered the pledgee to vote thereon, in which case only the pledgee (or his proxy) may represent the stock and vote thereon.

(c) If shares or other securities having voting power stand of record in the name of two or more persons (whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise) or if two or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect:

(i) if only one votes, his act binds all;

(ii) if more than one votes, the act of the majority so voting binds all; and

(iii) if more than one votes but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionately or any person voting the shares, or a beneficiary, (if any) may apply to the Delaware Court of Chancery or such other court as may have jurisdiction to appoint an additional person to act with the person so voting the shares, which shall then be voted as determined by a majority such persons and the person so appointed by the court.

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If the instrument so filed shows that any such tenancy is held in unequal interests, a majority or even-split for the purpose of the paragraph (c) shall be a majority or even-split in interest.

Section 2.9 Proxies.

(a) At any meeting of Stockholders, each Stockholder having the right to vote thereat may be represented and vote either in person or by proxy executed in writing by such Stockholder or by his duly authorized attorney-in-fact. Each such proxy shall be filed with the Secretary of the Corporation at or before the beginning of each meeting at which such proxy is to be voted. Unless otherwise provided therein, no proxy shall be valid after three years from the date of its execution. Each proxy shall be revocable unless expressly provided therein to be irrevocable and coupled with an interest sufficient in law to support an irrevocable power or unless otherwise made irrevocable by applicable law.

(b) A proxy shall be deemed signed if the Stockholder’s name is placed on the proxy (whether by manual signature, telegraphic transmission or otherwise) by the Stockholder or his attorney-in-fact. In the event any proxy shall designate two or more persons to act as proxies, a majority of such persons present at the meeting (or, if only one shall be present, then that one) shall have and may exercise all the powers conferred by the proxy upon all the persons so designated unless the proxy shall otherwise provide.

(c) Except as otherwise provided by applicable law, by the Certificate of Incorporation or by these Bylaws, the Board of Directors may, in advance of any meeting of Stockholders, prescribe additional regulations concerning the manner of execution and filing of proxies (and the validation of same) which may be voted at such meeting.

Section 2.10 Record Date. For the purpose of determining the Stockholders entitled to notice of or to vote at any meeting of Stockholders (or any adjournment thereof) or to receive payment of any dividend or other distribution or allotment of any rights or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted by the Board of Directors or be more than 60 nor less than 10 days prior to the date of such meeting nor more than 60 days prior to any other action. If no record date is fixed, (i) the record date for determining Stockholders entitled to notice of or to vote at a meeting of Stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held and (ii) the record date for determining Stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of Stockholders of record entitled to notice of or to vote at a meeting of Stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

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Section 2.11 Conduct of Meetings; Agenda.

(a) Meetings of the Stockholders shall be presided over by the officer of the Corporation whose duties under these Bylaws require him to do so; provided, however, if no such officer of the Corporation shall be present at any meeting of Stockholders, such meeting shall be presided over by a chairman to be chosen by a majority of the Stockholders entitled to vote at the meeting who are present in person or by proxy. At each meeting of Stockholders, the officer of the Corporation whose duties under these Bylaws require him to do so shall act as secretary of the meeting; provided, however, if no such officer of the Corporation shall be present at any meeting of Stockholders, the chairman of such meeting shall appoint a secretary. The order of business at each meeting of Stockholders shall be as determined by the chairman of the meeting, including such regulation of the manner of voting and the conduct of discussion as seems to him in order.

(b) The Board of Directors may, in advance of any meeting of Stockholders, adopt an agenda for such meeting, adherence to which the chairman of the meeting may enforce.

Section 2.12 Inspectors of Election; Opening and Closing of Polls.

(a) Before any meeting of Stockholders, the Board of Directors may, and if required by law shall, appoint one or more persons to act as inspectors of election at such meeting or any adjournment thereof. If any person appointed as inspector fails to appear or fails or refuses to act, the chairman of the meeting may, and if required by law or requested by any Stockholder entitled to vote or his proxy shall, appoint a substitute inspector. If no inspectors are appointed by the Board of Directors, the chairman of the meeting may, and if required by law or requested by any Stockholder entitled to vote or his proxy shall, appoint one or more inspectors at the meeting. Notwithstanding the foregoing, inspectors shall be appointed consistent with the mandatory provisions of Section 231 of the DGCL.

(b) Inspectors may include individuals who serve the Corporation in other capacities (including as officers, employees, agents or representatives); provided, however, that no director or candidate for the office of director shall act as an inspector. Inspectors need not be Stockholders.

(c) The inspectors shall (i) determine the number of shares of capital stock of the Corporation outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum and the validity and effect of proxies and (ii) receive votes or ballots, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes and ballots, determine the results and do such acts as are proper to conduct the election or vote with fairness to all Stockholders. On request of the chairman of the meeting, the inspectors shall make a report in writing of any challenge, request or matter determined by them and shall execute a certificate of any fact found by them. The inspectors shall have such other duties as may be prescribed by Section 231 of the DGCL.

(d) The chairman of the meeting may, and if required by the DGCL shall, fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the Stockholders will vote at the meeting.

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Section 2.13 Procedures for Bringing Business before Annual Meetings.

(a) Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at an annual meeting of Stockholders except in accordance with the procedures hereinafter set forth in this Section 2.13; provided, however, that nothing in this Section 2.13 shall be deemed to preclude discussion by any Stockholder of any business properly brought before any annual meeting of Stockholders in accordance with such procedures.

(b) At any annual meeting of Stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business (other than business relating to any nomination of directors, which is governed by Section 3.5) must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (ii) otherwise properly brought before the meeting by or at the direction of the Chairman of the Meeting or Board of Directors (or any duly authorized committee thereof) or (iii) otherwise properly brought before the meeting by a Stockholder of record entitled to vote in the election of directors generally, in compliance with the provisions of this Section 2.13 and a proper subject to be brought before such meeting. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a Stockholder (other than business relating to any nomination of directors, which is governed by Section 3.5), the Stockholder must have given timely notice thereof in writing to the Secretary. To be timely, a Stockholder’s notice must be delivered to or mailed and received at the principal executive office of the Corporation not less than the close of business on the date 120 days nor more than 180 days prior to the first anniversary of the date of the preceding year’s annual meeting; provided, however, that if no annual meeting was held in the previous year or the date of the annual meeting of Stockholders has been changed by more than 30 calendar days from the date contemplated at the time of the previous year’s proxy statement, the notice must be received by the Corporation not later than the close of business on the later of 120 days and not sooner than 180 days prior to the first anniversary of the date of the preceding year’s annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Corporation. Any meeting of Stockholders which is adjourned and will reconvene within 30 days after the meeting date as originally noticed shall, for purposes of any Stockholder’s notice contemplated by this paragraph (b), be deemed to be a continuation of the original meeting, and no business may be brought before such adjourned meeting by any Stockholder unless timely notice of such business was given to the Secretary of the Corporation for the meeting as originally noticed. In no event shall the public disclosure of an adjournment of an annual meeting of stockholders constitute a new time period for the giving of a stockholder’s notice as described above.

(c) Each notice given by a Stockholder as contemplated by paragraph (b) above other than a proposed nomination of any person for election or reelection as a director (which is addressed in Section 3.5) shall set forth, as to each matter the Stockholder proposes to bring before the annual meeting: (i) the nature of the proposed business with reasonable particularity, including the exact text of any proposal to be presented for adoption and any supporting statement, which proposal and supporting statement shall not in the aggregate exceed 500 words, and his reasons for conducting such business at the annual meeting; (ii) any material interest of the Stockholder in such business; (iii) the name, principal occupation and record address of the Stockholder; (iv) the class and number of shares of the Corporation which are held of record or beneficially owned by the Stockholder; (v) the dates upon which the Stockholder acquired such shares of stock and documentary support for any claims of beneficial ownership; and (vi) such other matters as may be required by the Certificate of Incorporation.

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(d) The foregoing right of a Stockholder to propose business for consideration at an annual meeting of Stockholders shall be subject to such conditions, restrictions and limitations as may be imposed by the Certificate of Incorporation. Nothing in this Section 2.13 shall entitle any Stockholder to propose business for consideration at any special meeting of Stockholders.

(e) The chairman of any meeting of Stockholders shall determine whether business has been properly brought before the meeting and, if the facts so warrant, may refuse to transact any business at such meeting which has not been properly brought before the meeting.

(f) Notwithstanding any other provision of these Bylaws, the Corporation shall be under no obligation to include any Stockholder proposal in its proxy statement or otherwise present any such proposal to Stockholders at a meeting of Stockholders if the Board of Directors reasonably believes that the proponents thereof have not complied with Sections 13 and 14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder, and the Corporation shall not be required to include in its proxy statement to Stockholders any Stockholder proposal not required to be included in its proxy statement to Stockholders in accordance with the Exchange Act and such rules or regulations.

(g) Nothing in this Section 2.13 shall be deemed to affect any rights of Stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 of the Exchange Act.

(h) Reference is made to the Certificate of Incorporation and Section 3.5 for procedures relating to the nomination of any person for election or reelection as a director of the Corporation.

Section 2.14 Action by Written Consent. Unless otherwise provided by law or the Certificate of Incorporation, any action required or permitted to be taken by the Stockholders may be taken without prior notice and an actual meeting if a consent in writing setting forth the action so taken shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Except as provided above, no action shall be taken by the Stockholders by written consent. Prompt notice of the taking of any corporate action without a meeting by less than unanimous written consent shall be given to those Stockholders who have not consented in writing.

ARTICLE III

Board of Directors — Powers, Number, Nominations,

Resignations, Removal, Vacancies and Compensation

Section 3.1 Management. The business and affairs of the Corporation shall be managed by and under the direction of the Board of Directors. In addition to the powers and authorities expressly conferred upon the Board of Directors by these Bylaws, the Board of

Directors may exercise all the powers of the Corporation and do all such lawful acts and things as are not by law, by the Certificate of Incorporation or by these Bylaws directed or required to be exercised or done by the Stockholders.

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Section 3.2 Number. Subject to any limitations in the Certificate of Incorporation (including, but not limited to, the provisions of Sections B(5)b.1. and B(5)c.1. of Article 4 of the Certificate of Incorporation), the number of directors shall be fixed from time to time exclusively by resolution adopted by a majority of the directors then in office, but shall consist of not less than five (5) nor more than ten (10) directors, subject, however, to increases above ten (10) members as may be required in order to permit the holders of any series of Preferred Stock to elect directors under specified circumstances. Subject to any limitations in the Certificate of Incorporation (including, but not limited to, the provisions of Sections B(5)b.1. and B(5)c.1. of Article 4 of the Certificate of Incorporation), the maximum number of directors may not be increased by the Board of Directors to exceed ten (10) without the affirmative vote of a majority of the members of the entire Board of Directors. Notwithstanding the foregoing provisions of this Section 3.2, at such time that all shares of the Corporation’s common stock, par value $0.01 per share (the “Common Stock”) (other than class A common stock) have been converted into shares of class A common stock as contemplated by the Certificate of Incorporation or are not longer outstanding, the number of directors of the Corporation, other than those who may be elected by the holders of one or more series of Preferred Stock issued by the Corporation voting separately by class or series, shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of all of the members of the Board of Directors at such time.

Section 3.3 Qualification. A director need not be Stockholder or resident of the State of Delaware. Each director must have attained twenty-one (21) years of age.

Section 3.4 Election; Term of Office.

(a) Subject to Sections 3.8 and 3.9 of these Bylaws, each director elected at an annual meeting of Stockholders to succeed a director whose term is expiring shall hold office until the next annual meeting of Stockholders after his election or until his successor is elected and qualified or until his earlier death, resignation or removal. Notwithstanding anything in these Bylaws to the contrary, whenever the holders of any one or more classes or series of Common Stock or Preferred Stock issued by the Corporation shall have the right, voting, separately by class or series, to elect directors at an annual meeting or the election, term or office, filling of vacancies and other features of such directorships shall be governed by the Certificate of Incorporation applicable thereto.

(b) Directors shall be elected by Stockholders only as set forth in the Certificate of Incorporation.

(c) No decrease in the number of directors constituting the number of directors then in office shall have the effect of shortening the term of any incumbent director.

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Section 3.5 Nominations.

(a) Notwithstanding anything in these Bylaws to the contrary, only persons who are nominated in accordance with the procedures hereinafter set forth in this Section 3.5 shall be eligible for election as directors of the Corporation.

(b) Nominations of persons for election to the Board of Directors at a meeting of Stockholders may be made only as set forth in the Certificate of Incorporation.

(c) Each notice given by a Stockholder as contemplated by paragraph (b) above shall set forth the following information, in addition to any other information or matters required by the Certificate of Incorporation:

(i) as to each person whom a Stockholder proposes to nominate for election or re-election as a director in accordance with the Certificate of Incorporation, (A) the exact name of such person, (B) such person’s age, principal occupation, business address and telephone number and residence address and telephone number, (C) the number of shares (if any) of each class of stock of the Corporation owned directly or indirectly by such person and (D) all other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors pursuant to Regulation 14A under the Exchange Act or any successor regulation thereto (including such person’s notarized written acceptance of such nomination, consent to being named in the proxy statement as a nominee and statement of intention to serve as a director if elected);

(ii) as to the Stockholder giving the notice, (A) his name and address, as they appear on the Corporation’s books, (B) his principal occupation, business address and telephone number and residence address and telephone number, (C) the class and number of shares of the Corporation which are held of record or beneficially owned by him and (D) the dates upon which he acquired such shares of stock and documentary support for any claims of beneficial ownership; and

(iii) a description of all arrangements or understandings between the Stockholder giving the notice and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by such Stockholder.

At the request of the Board of Directors, any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in a Stockholder’s notice of nomination which pertains to the nominee.

(d) The foregoing right of a Stockholder to nominate a person for election or reelection to the Board of Directors shall be subject to such conditions, restrictions and limitations as may be imposed by the Certificate of Incorporation.

(e) Nothing in this Section 3.5 shall be deemed to affect any rights of Stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 of the Exchange Act.

Section 3.6 Resignations. Any director may resign at any time by giving written notice to the Board of Directors or the Secretary. Such resignation shall take effect at the date of receipt of such notice or at any later time specified therein. Acceptance of such resignation shall not be necessary to make it effective. When one or more directors shall resign from the Board of Directors, effective at a future date, such vacancy or vacancies shall be filled pursuant to Section 3.8 of these Bylaws, to take effect when such resignation or resignations shall become effective, and each Director so chosen shall hold office for the unexpired portion of the term of the Director whose place shall be vacated and until his successor shall have been duly elected and qualified.

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Section 3.7 Removal. Any director may be removed from the Board of Directors or from any committee thereof at any time (i) with or without Cause (as defined in the Certificate of Incorporation), only at the direction of, and with the vote by the holders of a majority of the outstanding shares of such class of Common Stock which elected such director, or (ii) for Cause as determined by the holders of a majority of the outstanding shares of Common Stock.

Section 3.8 Vacancies.

(a) If a vacancy is created on the Board of Directors or a committee thereof as a result of the death, disability, retirement, resignation or removal of any member of the Board of Directors, then a replacement shall be designated in accordance with the Certificate of Incorporation. If there are no directors then in office, an election of directors may be held in the manner provided by applicable law.

(b) Any newly-created directorship resulting from any increase in the number of directors constituting the total number of directors which the Corporation would have if there were no vacancies may be filled by a majority of the directors then in office (though less than a quorum), or by the sole remaining director. Each director so appointed shall hold office until his successor is elected and qualified or until his earlier death, resignation or removal.

(c) Except as expressly provided in these Bylaws or the Certificate of Incorporation or as otherwise provided by law, Stockholders shall not have any right to fill vacancies on the Board of Directors, including newly-created directorships.

(d) If, as a result of a disaster or emergency (as determined in good faith by the then remaining directors), it becomes impossible to ascertain whether or not vacancies exist on the Board of Directors and a person is or persons are elected by the directors, who in good faith believe themselves to be a majority of the remaining directors, or the sole remaining director, to fill a vacancy or vacancies that such remaining directors in good faith believe exists, then the acts of such person or persons who are so elected as directors shall be valid and binding upon the Corporation and the Stockholders, although it may subsequently develop that at the time of the election (i) there was in fact no vacancy or vacancies existing on the Board of Directors or (ii) the directors, or the sole remaining director, who so elected such person or persons did not in fact constitute a majority of the remaining directors.

Section 3.9 Subject to Rights of Holders of Preferred Stock. Notwithstanding the foregoing provisions of this Article III, if the resolutions of the Board of Directors creating any series of Preferred Stock entitle the holders of such Preferred Stock, voting separately by series, to elect additional directors under specified circumstances, then all provisions of such resolutions relating to the nomination, election, term of office, removal, filling of vacancies and other features of such directorships shall, as to such directorships, govern and control over any conflicting provisions of this Article III.

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Section 3.10 Compensation. Except as set forth in the Stockholders’ Agreement (as defined in the Certificate of Incorporation), the Board of Directors shall have the authority to fix, and from time to time to change, the compensation of directors. Each director shall be entitled to reimbursement from the Corporation for his reasonable expenses incurred in attending meetings of the Board of Directors (or any committee thereof) and meetings of the Stockholders. Nothing contained in these Bylaws shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending such meetings.

ARTICLE IV

Board of Directors — Meetings and Actions

Section 4.1 Place of Meetings. The directors may hold their meetings and have one or more offices, and keep the books of the Corporation, in such place or places, within or without the State of Delaware, as the Board of Directors may from time to time determine.

Section 4.2 Regular Meetings. Regular meetings of the Board of Directors may be held at such time and place, within or without the State of Delaware, as shall from time to time be determined by the Board of Directors. Except as otherwise provided by applicable law, any business may be transacted at any regular meeting of the Board of Directors.

Section 4.3 Special Meetings. Special meetings of the Board of Directors shall be called by the Secretary at the request of the Chairman of the Board (if any) or the Chief Executive Officer on not less than two (2) business days’ notice to each director, specifying the time, place and purpose of the meeting. Special meetings shall be called by the Secretary on like notice at the written request of any two directors, which request shall state the purpose of the meeting.

Section 4.4 Quorum; Voting.

(a) At all meetings of the Board of Directors, a majority of the total number of directors then in office shall be necessary and sufficient to constitute a quorum for the transaction of business. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time (without notice other than announcement at the meeting) until a quorum shall be present. A meeting of the Board of Directors at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors; provided, however, that no action of the remaining directors shall constitute the act of the Board of Directors unless the action is approved by at least a majority of the required quorum for the meeting or such greater number of directors as shall be required by applicable law, by the Certificate of Incorporation or by these Bylaws.

(b) The act of a majority of the directors present at any meeting of the Board of Directors at which there is a quorum shall be the act of the Board of Directors unless by express provision of law, the Certificate of Incorporation or these Bylaws a different vote is required, in which case such express provision shall govern and control.

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Section 4.5 Conduct of Meetings. At meetings of the Board of Directors, business shall be transacted in such order as shall be determined by the chairman of the meeting unless the Board of Directors shall otherwise determine the order of business. The Board of Directors shall keep regular minutes of its proceedings which shall be placed in the minute book of the Corporation.

Section 4.6 Presumption of Assent. A director who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to such action unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as secretary of the meeting before the adjournment thereof or shall forward any dissent by certified or registered mail to the Secretary immediately after the adjournment of the meeting. Such right to dissent shall not apply to any director who voted in favor of such action.

Section 4.7 Action Without Meeting. Unless otherwise provided in the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all directors consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board of Directors. Such filing shall be in proper form if the minutes are maintained in paper and shall be in electronic form if the minutes are maintained in electronic form.

Section 4.8 Telephonic Meetings. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board of Directors may participate in a meeting of the Board of Directors by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting.

ARTICLE V

Committees of the Board of Directors

Section 5.1 Executive Committee.

(a) The Board of Directors may, by resolution adopted by the affirmative vote of a majority of the number of directors then in office, designate an Executive Committee which, during the intervals between meetings of the Board of Directors and subject to Section 5.11, shall have and may exercise, in such manner as it shall deem to be in the best interests of the Corporation, all of the powers of the Board of Directors in the management or direction of the business and affairs of the Corporation, except as reserved to the Board of Directors or as delegated by the Board of Directors to another committee of the Board of Directors or as may be prohibited by law. The Executive Committee shall consist of not less than two directors (the exact number to be determined from time to time by the affirmative vote of a majority of the Board of Directors) but in any event must have one member designated by holders of the class B common stock of the Corporation and one member designated by holders of the class E common stock of the Corporation. None of the members of the Executive Committee need be an officer of the Corporation.

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(b) Meetings of the Executive Committee may be called at any time by the Chairman of the Board (if any) or the Chief Executive Officer on not less than one day’s notice to each member given verbally or in writing, which notice shall specify the time, place and purpose of the meeting.

Section 5.2 Other Committees. The Board of Directors may, by resolution adopted by a majority of the number of directors then in office, establish additional standing or special committees of the Board of Directors, each of which shall consist of two or more directors (the exact number to be determined from time to time by the affirmative vote of a majority of the Board of Directors) but in any event must include one member designated by holders of the class B common stock of the Corporation and one member designated by holders of the class E common stock of the Corporation, and, subject to Section 5.11, shall have such powers and functions as may be delegated to it by the Board of Directors. No member of any such additional committee need be an officer of the Corporation. The committees may include an audit committee, a compensation committee and a nominating and corporate governance committee meeting the requirements of applicable law or the applicable listing standards of any securities exchange on which securities of the Company are then listed or included for quotation, including any transition rules that may apply.

Section 5.3 Subcommittees. Unless otherwise provided in the Certificate of Incorporation or the resolution of the board of directors designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.

Section 5.4 Term. Each member of a committee of the Board of Directors shall serve as such until the earliest of (i) his death, (ii) the expiration of his term as a director, (iii) his resignation as a member of such committee or as a director and (iv) his removal as a member of such committee or as a director.

Section 5.5 Committee Changes; Removal. The Board of Directors shall have the power at any time to fill vacancies in, to change the membership of and to abolish any committee of the Board of Directors except those committees required under the rules of the Securities and Exchange Commission and the New York Stock Exchange, if applicable; provided, however, that no such action shall be taken in respect of the Executive Committee unless approved by a majority of the number of directors then in office; provided, further that in no event can the membership of any committee be changed to remove a member appointed by the class B common stock and the class E common stock if, after such removal, there would be no members appointed by the class B common stock or class E common stock, as applicable, remaining on such committee.

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Section 5.6 Rules and Procedures.

(a) The Board of Directors may designate one member of each committee as chairman of such committee; provided, however, that, except as provided in the following sentence, no person shall be designated as chairman of the Executive Committee unless approved by a majority of the number of directors then in office. If a chairman is not so designated for any committee, the members thereof shall designate a chairman.

(b) Each committee shall adopt its own rules (not inconsistent with these Bylaws or with any specific direction as to the conduct of its affairs as shall have been given by the Board of Directors) governing the time, place and method of holding its meetings and the conduct of its proceedings and shall meet as provided by such rules.

(c) If a committee is comprised of an odd number of members, a quorum shall consist of a majority of that number. If a committee is comprised of an even number of members, a quorum shall consist of one-half of that number. If a committee is comprised of two members, a quorum shall consist of both members. If a quorum is not present at a meeting of any committee, a majority of the members present may adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum is present. The act of a majority of the members present at any meeting at which a quorum is in attendance shall be the act of a committee, unless the act of a greater number is required by law, the Certificate of Incorporation, these Bylaws or the committee’s rules as adopted in Section 5.7(b).

(d) Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when requested.

(e) Unless otherwise provided by these Bylaws or by the rules adopted by any committee, notice of the time and place of each meeting of such committee shall be given to each member of such committee as provided in these Bylaws with respect to notices of special meetings of the Board of Directors.

Section 5.7 Presumption of Assent. A member of a committee of the Board of Directors who is present at a meeting of such committee at which action on any corporate matter is taken shall be presumed to have assented to such action unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as secretary of the meeting before the adjournment thereof or shall forward any dissent by certified or registered mail to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action.

Section 5.8 Action Without Meeting. Unless otherwise provided in the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of a committee of the Board of Directors may be taken without a meeting if all members of such committee consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the committee. Such filing shall be in proper form if the minutes are maintained in paper and shall be in electronic form if the minutes are maintained in electronic form.

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Section 5.9 Telephonic Meetings. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of any committee of the Board of Directors may participate in a meeting of such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting.

Section 5.10 Resignations. Any committee member may resign at any time by giving written notice to the Board of Directors or the Secretary. Such resignation shall take effect at the date of receipt of such notice or at any later time specified therein. Acceptance of such resignation shall not be necessary to make it effective.

Section 5.11 Limitations on Authority. Unless otherwise provided in the Certificate of Incorporation, no committee of the Board of Directors shall have the power or authority to (i) authorize an amendment to the Certificate of Incorporation, (ii) adopt an agreement of merger or consolidation, recommend to the Stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, (iii) recommend to the Stockholders a dissolution of the Corporation or a revocation of a dissolution, (iv) amend these Bylaws, (v) declare a dividend or other distribution on, or authorize the issuance, purchase or redemption of, securities of the Corporation, (vi) elect any officer of the Corporation or (vii) approve any material transaction between the Corporation and one or more of its directors, officers or employees or between the Corporation and any corporation, partnership, association or other organization in which one or more of its directors, officers or employees are directors or officers or have a financial interest; provided, however, that, subject to the Certificate of Incorporation, the Executive Committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of Preferred Stock adopted by the Board of Directors as provided in the Certificate of Incorporation, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes of stock of the Corporation or fix the number of shares of any series of stock or authorize the decrease or increase of the shares of any such series.

ARTICLE VI

Officers

Section 6.1 Number; Titles; Qualification; Term of Office.

(a) The officers of the Corporation shall be a Chief Executive Officer, a President, a Secretary and a Treasurer. The Board of Directors from time to time may also elect such other officers (including, without limitation, a Chairman of the Board and one or more Vice Presidents) as the Board of Directors deems appropriate or necessary. Each officer shall hold office until his successor shall have been duly elected and shall have been qualified or until his earlier death, resignation or removal. Any two or more offices may be held by the same person, but no officer shall execute any instrument in more than one capacity if such instrument is required by law or any act of the Corporation to be executed or countersigned by two or more officers. None of the officers need be a Stockholder or a resident of the State of Delaware. No officer (other than the Chairman of the Board, if any) need be a director.

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(b) The Board of Directors may delegate to the Chairman of the Board (if any) and/or the Chief Executive Officer the power to appoint one or more employees of the Corporation as divisional or departmental vice presidents and fix their duties as such appointees. However, no such divisional or departmental vice presidents shall be considered an officer of the Corporation, the officers of the Corporation being limited to those officers elected by the Board of Directors.

Section 6.2 Election. At the first meeting of the Board of Directors after each annual meeting of Stockholders at which a quorum shall be present, the Board of Directors shall elect the officers of the Corporation.

Section 6.3 Removal. Any officer may be removed, either with or without cause, by the Board of Directors; provided, however, that (i) the Chairman of the Board (if any) and the Chief Executive Officer may be removed only by the affirmative vote of a majority of the Board of Directors or as contemplated by any applicable employment agreement, and (ii) the removal of any officer shall be without prejudice to the contract rights, if any, of such officer. Election or appointment of an officer shall not of itself create contract rights.

Section 6.4 Resignations. Any officer may resign at any time by giving written notice to the Board of Directors, the Chairman of the Board (if any) or the Chief Executive Officer. Any such resignation shall take effect on receipt of such notice or at any later time specified therein. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Any such resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party.

Section 6.5 Vacancies. If a vacancy shall occur in any office because of death, resignation, removal, disqualification or any other cause, the Board of Directors may elect or appoint a successor to fill such vacancy for the remainder of the term; provided that no officer removed for Cause may be elected or appointed as an officer of the Company.

Section 6.6 Salaries. The salaries of all officers of the Corporation shall be fixed by the Board of Directors or pursuant to its direction, and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the Corporation.

Section 6.7 Chairman of the Board. The Chairman of the Board (if any) shall have all powers and shall perform all duties incident to the office of Chairman of the Board and such other powers and duties as may be prescribed by the Board of Directors or these Bylaws. The Chairman of the Board, if present, shall preside at all meetings of the Board of Directors and of the Stockholders. During the time of any vacancy in the office of Chief Executive Officer or in the event of the absence or disability of the Chief Executive Officer, the Chairman of the Board shall have the duties and powers of the Chief Executive Officer unless otherwise determined by the Board of Directors. In no event shall any third party having dealings with the Corporation be bound to inquire as to any facts required by the terms of this Section 6.7 for the exercise by the Chairman of the Board of the powers of the Chief Executive Officer.

Section 6.8 Chief Executive Officer.

(a) The Chief Executive Officer shall be the chief executive officer of the Corporation and, subject to the supervision, direction and control of the Board of Directors, shall have general supervision, direction and control of the business and officers of the Corporation with all such powers as may be reasonably incident to such responsibilities. He shall have the general powers and duties of management usually vested in the chief executive officer of a corporation.

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(b) During the time of any vacancy in the office of the Chairman of the Board or in the event of the absence or disability of the Chairman of the Board, the Chief Executive Officer shall have the duties and powers of the Chairman of the Board unless otherwise determined by the Board of Directors. During the time of any vacancy in the office of President or in the event of the absence or disability of the President, the Chief Executive Officer shall have the duties and powers of the President unless otherwise determined by the Board of Directors. In no event shall any third party having any dealings with the Corporation be bound to inquire as to any facts required by the terms of this Section 6.8 for the exercise by the Chief Executive Officer of the powers of the Chairman of the Board or the President.

Section 6.9 President. (a) The President shall be the chief operating officer of the Corporation and, subject to the supervision, direction and control of the Chief Executive Officer and the Board of Directors, shall manage the day-to-day operations of the Corporation. He shall have the general powers and duties of management usually vested in the chief operating officer of a corporation and such other powers and duties as may be assigned to him by the Board of Directors, the Chief Executive Officer or these Bylaws.

(b) During the time of any vacancy in the offices of the Chairman of the Board and Chief Executive Officer or in the event of the absence or disability of the Chairman of the Board and the Chief Executive Officer, the President shall have the duties and powers of the Chief Executive Officer unless otherwise determined by the Board of Directors. In no event shall any third party having any dealings with the Corporation be bound to inquire as to any facts required by the terms of this Section 6.9 for the exercise by the President of the powers the Chief Executive Officer.

Section 6.10 Vice Presidents. In the absence or disability of the President, the Vice Presidents, if any, in order of their rank as fixed by the Board of Directors, or if not ranked, the Vice President designated by the President, shall perform all the duties of the President as chief operating officer of the Corporation, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the President as chief operating officer of the Corporation. In no event shall any third party having dealings with the Corporation be bound to inquire as to any facts required by the terms of this Section 6.10 for the exercise by any Vice President of the powers of the President as chief operating officer of the Corporation. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be assigned to them by the Board of Directors, the Chief Executive Officer or the President.

Section 6.11 Treasurer. The Treasurer shall (i) have custody of the Corporation’s funds and securities, (ii) keep full and accurate account of receipts and disbursements, (iii) deposit all monies and valuable effects in the name and to the credit of the Corporation in such depository or depositories as may be designated by the Board of Directors and (iv) perform such other duties as may be prescribed by the Board of Directors or the Chief Executive Officer.

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Section 6.12 Assistant Treasurers. Each Assistant Treasurer shall have such powers and duties as may be assigned to him by the Board of Directors, the Chief Executive Officer or the President. In case of the absence or disability of the Treasurer, the Assistant Treasurer designated by the President (or, in the absence of such designation, the Treasurer) shall perform the duties and exercise the powers of the Treasurer during the period of such absence or disability. In no event shall any third party having dealings with the Corporation be bound to inquire as to any facts required by the terms of this Section 6.12 for the exercise by any Assistant Treasurer of the powers of the Treasurer under these Bylaws.

Section 6.13 Secretary. (a) The Secretary shall keep or cause to be kept, at the principal office of the Corporation or such other place as the Board of Directors may order, a book of minutes of all meetings and actions of the Board of Directors, committees of the Board of Directors and Stockholders, with the time and place of holding, whether regular or special, and, if special, how authorized, the notice thereof given, the names of those present at meetings of the Board of Directors and committees thereof, the number of shares of Common Stock or Preferred Stock present or represented at Stockholders’ meetings and the proceedings thereof.

(b) The Secretary shall keep, or cause to be kept, at the principal office of the Corporation or at the office of the Corporation’s transfer agent or registrar, a share register, or a duplicate share register, showing the names of all Stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same and the number and date of cancellation of every certificate surrendered for cancellation.

(c) The Secretary shall give, or cause to be given, notice of all meetings of the Stockholders and of the Board of Directors required by these Bylaws or by law to be given, and he shall keep the seal of the Corporation, if one be adopted, in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors, the Chairman of the Board (if any), the Chief Executive Officer, the President or these Bylaws.

(d) The Secretary may affix the seal of the Corporation, if one be adopted, to contracts of the Corporation.

Section 6.14 Assistant Secretaries. Each Assistant Secretary shall have such powers and duties as may be assigned to him by the Board of Directors, the Chairman of the Board (if any), the Chief Executive Officer or the President. In case of the absence or disability of the Secretary, the Assistant Secretary designated by the President (or, in the absence of such designation, the Secretary) shall perform the duties and exercise the powers of the Secretary during the period of such absence or disability. In no event shall any third party having dealings with the Corporation be bound to inquire as to any facts required by the terms of this Section 6.14 for the exercise by any Assistant Secretary of the powers of the Secretary under these Bylaws.

ARTICLE VII

Stock

Section 7.1 Certificates. Certificates for shares of Common Stock and Preferred Stock shall be in such form as shall be approved by the Board of Directors, except that a certificate shall not be in bearer form. The certificates shall be signed (i) by the Chairman of the Board (if any), the President or a Vice President and (ii) by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer.

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Section 7.2 Signatures on Certificates. Any or all of the signatures on the certificates may be a facsimile and the seal of the Corporation (or a facsimile thereof), if one has been adopted, may be affixed thereto. In case any officer, transfer agent or registrar who has signed, or whose facsimile signature has been placed upon, a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

Section 7.3 Legends. The Board of Directors shall have the power and authority to provide that certificates representing shares of stock of the Corporation bear such legends and statements (including, without limitation, statements relating to the powers, designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions of the shares represented by such certificates) as the Board of Directors deems appropriate in connection with the requirements of federal or state securities laws or other applicable laws.

Section 7.4 Lost, Stolen or Destroyed Certificates. The Board of Directors, the Secretary and the Treasurer each may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, in each case upon the making of an affidavit of that fact by the owner of such certificate, or his legal representative. When authorizing such issue of a new certificate or certificates, the Board of Directors, the Secretary or the Treasurer, as the case may be, may, in its or his discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as the Board of Directors, the Secretary or the Treasurer, as the case may be, shall require and/or to furnish the Corporation a bond in such form and substance and with such surety as the Board of Directors, the Secretary or the Treasurer, as the case may be, may direct as indemnity against any claim, or expense resulting from any claim, that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

Section 7.5 Transfers of Shares. Shares of stock of the Corporation shall be transferable only on the books of the Corporation by the holders thereof in person or by their duly authorized attorneys or legal representatives. Upon surrender to the Corporation, or the transfer agent of the Corporation, of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, the Corporation or its transfer agent shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon the Corporation’s books.

Section 7.6 Registered Stockholders. The Corporation shall be entitled to treat the holder of record of any share of Common Stock or Preferred Stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim or interest in such share on the part of any other person, whether or not the Corporation shall have express or other notice thereof, except as expressly provided by the laws of the State of Delaware.

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Section 7.7 Regulations. The Board of Directors shall have the power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer and registration or the replacement of certificates for shares of Common Stock or Preferred Stock, provided that such rules and regulations are consistent with the Certificate of Incorporation and Stockholders’ Agreement. The Board of Directors may (i) appoint and remove transfer agents and registrars of transfers and (ii) require all stock certificates to bear the signature of any such transfer agent and/or any such registrar of transfers.

Section 7.8 Stock Options, Warrants, etc. Unless otherwise expressly prohibited in the resolutions of the Board of Directors creating any class or series of preferred stock of the Corporation, the Board of Directors shall have the power and authority to create and issue (whether or not in connection with the issue and sale of any stock or other securities of the Corporation) warrants, rights or options entitling the holders thereof to purchase from the Corporation any shares of capital stock of the Corporation of any class or series or any other securities of the Corporation for such consideration and to such persons, firms or corporations as the Board of Directors, in its sole discretion, may determine, setting aside from the authorized but unissued stock of the Corporation the requisite number of shares for issuance upon the exercise of such warrants, rights or options. Such warrants, rights and options shall be evidenced by one or more instruments approved by the Board of Directors. The Board of Directors shall be empowered to set the exercise price, duration, time for exercise and other terms of such warrants, rights and operations; provided, however, that the consideration to be received for any shares of capital stock subject thereto shall not be less than the par value thereof.

Section 7.9 Authority upon Liquidation or Dissolution. Subject to applicable law and the provisions of the Certificate of Incorporation, any vote or votes authorizing liquidation of the Corporation or proceeding for its dissolution may provide, subject to (i) any agreements among and between Stockholders, (ii) the rights of creditors and (iii) rights expressly provided for particular classes or series of stock, for the distribution pro rata among the Stockholders of the Corporation of assets of the Corporation, wholly or in part in kind, whether such assets be in cash or other property, and may authorize the Board of Directors of the Corporation to determine the value of the different assets of the Corporation for the purpose of such liquidation and may divide, or authorize the Board of Directors of the Corporation to divide, such assets or any part thereof among the Stockholders of the Corporation in such manner that every Stockholder will receive a proportionate amount in value (determined as aforesaid) of cash or property of the Corporation upon such liquidation or dissolution even though each Stockholder may not receive a strictly proportionate part of each such asset.

ARTICLE VIII

Indemnification

Section 8.1 Third Party Actions. To the maximum extent permitted by Delaware law in effect from time to time, the Corporation shall indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, shall pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (a) any individual who is a present or

former director or officer of the Corporation and who is made a party to the proceeding by reason of his service in that capacity or (b) any individual who, while a director of the Corporation and at the request of the Corporation, serves or has served another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or any other enterprise as a director, officer, partner or trustee of such corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or other enterprise and who is made a party to the proceeding by reason of his service in that capacity against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them, unless it is established that (i) the act or omission of the director or officer was material to the matter giving rise to the proceeding and (A) was committed in bad faith or (B) was the result of active and deliberate dishonesty, (ii) the director or officer actually received an improper personal benefit, or (iii) in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. The Corporation may, with the approval of the Board of Directors, provide such indemnification and advance for expenses to a person who served a predecessor of the Corporation in any of the capacities described in (a) or (b) above and to any employee or agent of the Corporation or a predecessor of the Corporation. The Corporation shall, as a condition to advancing expenses to a director or officer, obtain a written undertaking by or on behalf of such director or officer to repay the amount paid or reimbursed by the Corporation if it shall ultimately be determined that such persons are not entitled to be indemnified by the Corporation under Delaware law or any applicable contract.

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Notwithstanding any provision of these Bylaws, the Certificate of Incorporation, or other organizational document of the Corporation or any of its subsidiaries, or contract to which the Corporation or any of its subsidiaries is a party, to the contrary, the Corporation and each of its subsidiaries acknowledges and agrees that (i) the Corporation and its subsidiaries are, and shall at all times be, the indemnitors of first resort with respect to any and all matters for which advancement of expenses and indemnification are provided by the Corporation or its subsidiaries to or on behalf of any persons designated by either the holders of the class D common stock or the class E common stock to serve as a director of the Corporation (each such Person, an “Indemnitee”), and (ii) the obligations of the Corporation and its subsidiaries to each Indemnitee are primary, and any obligations of any holder of class D common stock or class E common stock or any affiliate thereof to provide advancement of expenses or indemnification for any losses, claims, damages or liabilities incurred by any Indemnitee and for which the Corporation or any of its subsidiaries has agreed (or is otherwise obligated) to indemnify Indemnitee are secondary.

The Corporation and each of its subsidiaries hereby unconditionally and irrevocably waives, relinquishes and releases (and covenants and agrees not to exercise, and to cause each of its affiliates not to exercise), any claims or rights that it or any of its affiliates may now have or hereafter acquire against any holder of class D common stock or class E common stock or affiliate thereof that arise from or relate to the existence, payment, performance or enforcement obligation of the Corporation, such subsidiary or their respective affiliates to any Indemnitee, including any right of subrogation, reimbursement, exoneration, contribution or indemnification, whether such right to claim, take or receive from any holder of class D common stock or class E common stock or any affiliate thereof, directly or indirectly, in cash or other property or by set-off or in any other manner, any payment or security or other credit support on account of such claim, remedy or right.

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Section 8.2 Actions By or in the Right of the Corporation. The Corporation (i) shall, to the maximum extent permitted from time to time under the laws of the State of Delaware, indemnify every person who is or was a party or who is or was threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Corporation or any of its direct or indirect subsidiaries or is or was serving at the request of the Corporation or any of its direct or indirect subsidiaries as a director, officer or fiduciary of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, and (ii) may, to the maximum extent permitted from time to time under the laws of the State of Delaware, indemnify every person who is or was a party or who is or was threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was an employee or agent of the Corporation or any of its direct or indirect subsidiaries or is or was serving at the request of the Corporation or any of its direct or indirect subsidiaries as an employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including counsel fees) actually and reasonably incurred by such person in connection with the defense or settlement or such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation; provided, however, that no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnification.

Section 8.3 Determination. Any indemnification under Sections 8.1 and 8.2 (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the present or former director, officer, employee or agent is proper in the circumstances because the person has met the applicable standard of conduct set forth in Sections 8.1 and 8.2. Such determination shall be made, with respect to a person who is a director or officer at the time of such determination, (1) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) by a committee if such director is designated by majority vote of such directors, even though less than a quorum, or (3) if there are no such directors, or is such directors so direct, by independent legal counsel in a written opinion, or (4) by the stockholders.

Section 8.4 Expenses. Expenses incurred by a director or officer of the Corporation or any of its direct or indirect subsidiaries in defending a civil or criminal action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article VIII. Such expenses incurred by other employees and agents of the Corporation and other persons eligible for indemnification under this Article VIII may be paid upon such terms and conditions, if any, as the Board of Directors deems appropriate.

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Section 8.5 Non-exclusivity. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any provision of law, the Certificate of Incorporation, the certificate of incorporation or bylaws or other governing documents of any direct or indirect subsidiary of the Corporation, under any agreement, vote of stockholders or disinterested directors or under any policy or policies of insurance maintained by the Corporation on behalf of any person or otherwise, both as to action in his official capacity and as to action in another capacity while holding any of the positions or having any of the relationships referred to in this Article VIII.

Section 8.6 Enforceability. The provisions of this Article VIII (i) are for the benefit of, and may be enforced directly by, each director or officer of the Corporation the same as if set forth in their entirety in a written instrument executed and delivered by the Corporation and such director or officer and (ii) constitute a continuing offer to all present and future directors and officers of the Corporation. The Corporation, by its adoption of these Bylaws, (A) acknowledges and agrees that each present and future director and officer of the Corporation has relied upon and will continue to rely upon the provisions of this Article VIII in becoming, and serving as, a director or officer of the Corporation or, if requested by the Corporation, a director, officer or fiduciary or the like of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, (B) waives reliance upon, and all notices of acceptance of, such provisions by such directors and officers and (C) acknowledges and agrees that no present or future director or officer of the Corporation shall be prejudiced in his right to enforce directly the provisions of this Article VIII in accordance with their terms by any act or failure to act on the part of the Corporation.

Section 8.7 Insurance. The Board of Directors may authorize the Corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article VIII.

Section 8.8 Survival. The provisions of this Article VIII shall continue as to any person who has ceased to be a director or officer of the Corporation and shall inure to the benefit of the estate, executors, administrators, heirs, legatees and devisees of any person entitled to indemnification under this Article VIII.

Section 8.9 Amendment. No amendment, modification or repeal of this Article VIII or any provision hereof shall in any manner terminate, reduce or impair the right of any past, present or future director or officer of the Corporation to be indemnified by the Corporation, nor the obligation of the Corporation to indemnify any such director or officer, under and in accordance with the provisions of this Article VIII as in effect immediately prior to such amendment, modification or repeal with respect to claims arising, in whole or in part, from a state of facts extant on the date of, or relating to matters occurring prior to, such amendment, modification or repeal, regardless of when such claims may arise or be asserted.

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Section 8.10 Definitions. For purposes of this Article VIII, (i) reference to any person shall include the estate, executors, personal representatives, administrators, heirs, legatees and devisees of such person, (ii) “employee benefit plan” and “fiduciary” shall be deemed to include, but not be limited to, the meaning set forth, respectively, in sections 3(3) and 21(A) of the Employee Retirement Income Security Act of 1974, as amended, (iii) references to the judgments, fines and amounts paid or owed in settlement or rendered or levied shall be deemed to encompass and include excise taxes required to be paid pursuant to applicable law in respect of any transaction involving an employee benefit plan and (iv) references to the Corporation shall be deemed to include any predecessor corporation or entity and any constituent corporation or entity absorbed in a merger, consolidation or other reorganization of or by the Corporation which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees, agents and fiduciaries so that any person who was a director, officer, employee, agent or fiduciary of such predecessor or constituent corporation or entity, or served at the request of such predecessor or constituent corporation or entity as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the Corporation as such person would have with respect to such predecessor or constituent corporation or entity if its separate existence had continued.

ARTICLE IX

Notices and Waivers

Section 9.1 Methods of Giving Notices. Whenever, by applicable law, the Certificate of Incorporation or these Bylaws, notice is required to be given to any Stockholder, any director or any member of a committee of the Board of Directors and no provision is made as to how such notice shall be given, personal notice shall not be required and such notice may be given (i) in writing, by mail, postage prepaid, addressed to such Stockholder, director or committee member at his address as it appears on the books or (in the case of a Stockholder) the stock transfer records of the Corporation or (ii) by any other method permitted by law (including, but not limited to, overnight courier service or “electronic transmission” as defined under and in accordance with Section 232 of the DGCL). Any notice required or permitted to be given by mail shall be deemed to be delivered and given five (5) business days after the same is deposited in the United States mail as aforesaid. Any notice required or permitted to be given by overnight courier service shall be deemed to be delivered and given five (5) business days after delivery to such service with all charges prepaid and addressed as aforesaid. Any notice required or permitted to be given by electronic transmission shall be deemed to be delivered and given: (1) if by facsimile telecommunication, when directed to a number at which the Stockholder has consented to receive notice; (2) if by electronic mail, when directed to an electronic mail address at which the Stockholder has consented to receive notice; (3) if by posting on an electronic network together with separate notice to the Stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and (4) if by any other form of electronic transmission, when directed to the Stockholder.

Section 9.2 Waiver of Notice. Whenever any notice is required to be given to any Stockholder, director or member of a committee of the Board of Directors by applicable law, the Certificate of Incorporation or these Bylaws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be equivalent to the giving of such notice. Attendance of a Stockholder (whether in person or by proxy), director or committee member at a meeting shall constitute a waiver of notice of such meeting, except where such person attends for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

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ARTICLE X

Miscellaneous Provisions

Section 10.1 Dividends. Subject to applicable law and the provisions of the Certificate of Incorporation, dividends may be declared by the Board of Directors at any meeting and may be paid in cash, in property or in shares of the Corporation’s capital stock. Any such declaration shall be at the discretion of the Board of Directors. A director shall be fully protected in relying in good faith upon the books of account of the Corporation or statements prepared by any of its officers as to the value and amount of the assets, liabilities or net profits of the Corporation or any other facts pertinent to the existence and amount of surplus or other funds from which dividends might properly be declared.

Section 10.2 Reserves. There may be created by the Board of Directors, out of funds of the Corporation legally available therefor, such reserve or reserves as the Board of Directors from time to time, in its absolute discretion, considers proper to provide for contingencies, to equalize dividends or to repair or maintain any property of the Corporation, or for such other purpose as the Board of Directors shall consider beneficial to the Corporation, and the Board of Directors may thereafter modify or abolish any such reserve in its absolute discretion.

Section 10.3 Signatory Authority on Accounts. All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the Corporation shall be signed by such officer or officers or by such employees or agents of the Corporation as may be designated from time to time by the Board of Directors.

Section 10.4 Corporate Contracts and Instruments. Subject always to the specific directions of the Board of Directors, the Chairman of the Board (if any), the President, any Vice President, the Secretary or the Treasurer may enter into contracts and execute instruments in the name and on behalf of the Corporation. The Board of Directors and, subject to the specific directions of the Board of Directors, the Chairman of the Board (if any) or the President may authorize one or more officers, employees or agents of the Corporation to enter into any contract or execute any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances.

Section 10.5 Attestation. With respect to any deed, deed of trust, mortgage or other instrument executed by the Corporation through its duly authorized officer or officers, the attestation to such execution by the Secretary or an Assistant Secretary of the Corporation shall not be necessary to constitute such deed, deed of trust, mortgage or other instrument a valid and binding obligation of the Corporation unless the resolutions, if any, of the Board of Directors authorizing such execution expressly state that such attestation is necessary.

Section 10.6 Securities of Other Corporations. Subject always to the specific directions of the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the President or any Vice President of the Corporation shall have the power and authority to transfer, endorse for transfer, vote, consent or take any other action with respect to any securities of another issuer which may be held or owned by the Corporation and to make, execute and deliver any waiver, proxy or consent with respect to any such securities.

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Section 10.7 Fiscal Year. The fiscal year of the Corporation shall be January 1 through December 31, unless otherwise fixed by the Board of Directors.

Section 10.8 Seal. The seal of the Corporation shall be such as from time to time may be approved by the Board of Directors.

Section 10.9 Invalid Provisions. If any part of these Bylaws shall be invalid or inoperative for any reason, the remaining parts, so far as is possible and reasonable, shall remain valid and operative.

Section 10.10 Headings. The headings used in these Bylaws have been inserted for administrative convenience only and shall not limit or otherwise affect any of the provisions of these Bylaws.

Section 10.11 References/Gender/Number. Whenever in these Bylaws the singular number is used, the same shall include the plural where appropriate. Words of any gender used in these Bylaws shall include the other gender where appropriate. In these Bylaws, unless a contrary intention appears, all references to Articles and Sections shall be deemed to be references to the Articles and Sections of these Bylaws.

Section 10.12 Amendments. These Bylaws may be altered, amended or repealed or new bylaws may be adopted by the affirmative vote of a majority of the directors then in office; provided, however, that no such action shall be taken at any special meeting of the Board of Directors unless notice of such action is contained in the notice of such special meeting. These Bylaws may not be altered, amended or rescinded, nor may new bylaws be adopted, by the Stockholders except by the affirmative vote of the holders of a majority of all outstanding Voting Stock, voting together as a single class and including the consent of the holders of the class E common stock. Each alteration, amendment or repeal of these Bylaws shall be subject in all respects to Section 8.8.

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EX-10.17

Exhibit 10.17

STOCKHOLDERS’ AGREEMENT

This STOCKHOLDERS’ AGREEMENT (this “Agreement”), is entered into as of April 12, 2010, by and among Chaparral Energy, Inc., a Delaware corporation (the “Company”), CCMP Capital Investors II (AV-2), L.P., a Delaware limited partnership (“CCMP AV-2”), CCMP Energy I LTD., a Cayman limited company (“CCMP Cayman I”), and CCMP Capital Investors (Cayman) II, L.P., a Cayman limited partnership (“CCMP Cayman II;” and together with CCMP AV-2 and CCMP Cayman I, “CCMP”), Fischer Investments, L.L.C., an Oklahoma limited liability company (“Fischer”), Altoma Energy, an Oklahoma general partnership (“Altoma”), CHK Holdings, L.L.C., an Oklahoma limited liability company (“Chesapeake”), and each other holder of record of Common Stock (as defined below) who may hereafter duly and properly become bound by the terms hereof as required by Section 10.4, each Person named above and each Person that hereafter may become a party hereto as contemplated hereby being referred to individually as a “Party” and collectively as the “Parties”.

RECITALS

WHEREAS, Fischer, Altoma and Chesapeake each own Common Stock of the Company and are parties to that certain Stockholders Agreement dated September 29, 2006 (the “Existing Stockholders Agreement”).

WHEREAS, CCMP is acquiring Common Stock from the Company on the date hereof.

WHEREAS, the Company, Fischer, Altoma and Chesapeake desire to terminate the Existing Stockholders Agreement and enter into this Agreement with CCMP.

NOW, THEREFORE, in consideration of the forgoing and the mutual covenants and obligations hereinafter set forth, and other good and valuable consideration, the receipt and accuracy of which are hereby acknowledged, the Parties hereto, intending to be legally bound, hereby agree as follows:

ARTICLE 1.

DEFINITIONS

1.1 Definitions. In addition to the terms defined elsewhere herein, the following terms shall have the meanings set forth below:

“Affiliate” means, with respect to any Person, any Person controlling, controlled by, or under common control with such Person. For the purposes of this definition, “control” means the possession of the power to direct or cause the direction of management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

“Agreement” has the meaning specified in the preamble hereto.

“Altoma” has the meaning specified in the preamble hereto.

“Altoma Parties” means Altoma and its Permitted Transferees, collectively.

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“Applicable Law” means all applicable provisions of (i) constitutions, treaties, statutes, laws (including the common law), rules, regulations, ordinances, codes or orders of any Governmental Entity, (ii) any consents or approvals of any Governmental Entity, (iii) any orders, decisions, injunctions, judgments, awards, or decrees of, or agreements with, any Governmental Entity, or (iv) any listing requirements of a national securities exchange.

“Applicable Percentage” means with respect to each Party, a percentage equal to a fraction, the numerator of which is equal to the aggregate number of shares of Fully-Diluted Common Stock requested to be included in the Piggyback Registration by such party and the denominator of which is equal to the number of shares of Fully-Diluted Common Stock requested to be included in the Piggyback Registration by all such Parties.

“Beneficial” ownership or “beneficially” owned, with respect to any shares of Common Stock, shall have the same meaning as in Rule 13d-3 under the Exchange Act.

“Board of Directors” means the board of directors of the Company or any committee or other body acting on behalf of, and possessing the rights as may be delegated by, the board of directors of the Company.

“Bona Fide Offer” means any bona fide offer to acquire shares of Common Stock (whether in the form of a purchase of shares of Common Stock, merger, business combination, recapitalization or otherwise) made by a Person which has the demonstrable financial ability to consummate such a transaction.

“Business” means (1) the business of acquiring, exploring, exploiting, developing, producing, operating and disposing of interests in oil, natural gas, liquid natural gas and other hydrocarbon and mineral properties or products produced in association with any of the foregoing; (2) the business of gathering, marketing, distributing, treating, processing, storing, refining, selling and transporting of any production from such interests or properties and products produced in association therewith and the marketing of oil, natural gas, other hydrocarbons and minerals obtained from unrelated Persons; (3) any business relating to oil field sales and service; and (4) any business or activity relating to, arising from, or necessary, appropriate or incidental to the activities described in the foregoing clauses (1) through (3) of this definition (including, without limitation, the acquisition, development and operation of CO₂ producing properties, the acquisition or construction and operation of CO₂ pipelines and transportation or sales of CO ₂, and the ownership and operation of ethanol plants, a by-product of which is the production of CO₂, as related to the activities described in the foregoing clauses (1) and (2)).

“Business Day” means any day other than a day on which banks in the State of Oklahoma or New York are authorized by law to close.

“Capital Stock” means any and all shares of stock, interests, participations or other equivalents (however designated) of capital stock of the Company, any and all equivalent ownership interests in a Person (other than a corporation), and any and all warrants, options or other rights to purchase or acquire any of the foregoing, including, without limitation, any Common Stock Equivalents.

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“CCMP” has the meaning specified in the preamble hereto.

“Chesapeake” has the meaning specified in the preamble hereto.

“Commission” means the United States Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

“Common Stock” means the shares of common stock, par value US $0.01 per share, of the Company, or any successor interests thereto by merger or conversion, and any Common Stock Equivalents, including, for the avoidance of doubt, the Company’s class A common stock, class B common stock, class C common stock, class D common stock, class E common stock, class F common stock and class G common stock.

“Common Stock Equivalents” means (without duplication with any other shares of Common Stock or Common Stock Equivalents) rights, warrants, options, convertible securities, or exchangeable securities or indebtedness, or other rights, exercisable for or convertible or exchangeable into, directly or indirectly, shares of Common Stock or securities convertible or exchangeable into shares of Common Stock, whether at the time of issuance or upon the passage of time or the occurrence of some future event.

“Company Sale” has the meaning specified in Section 8.1.

“Company Sale Auction” has the meaning specified in Section 8.1.

“Confidential Information” has the meaning specified in Section 10.7.

“Demand IPO” has the meaning specified in Section 5.1.

“Demand Period” has the meaning specified in Section 6.1(a).

“Demand Registration” has the meaning specified in Section 6.1(a).

“Demand Request” has the meaning specified in Section 6.1(a).

“Drag Transaction” has the meaning specified in Section 4.5(a).

“Drag-Along Notice” has the meaning specified in Section 4.5(d).

“Drag-Along Seller” has the meaning specified in Section 4.5(a).

“Dragged Party” has the meaning specified in Section 4.5(a).

“Effective Date” means the date of this Agreement.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

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“Existing Credit Facility” means that certain revolving credit facility dated April 12, 2010, by and among the Company in its capacity as Borrower Representative for the Borrowers, JPMorgan Chase Bank, N.A., as Administrative Agent, and each of the Lenders named therein, as amended, restated, modified, renewed, refunded, replaced, or refinanced in accordance with Section B(2) of Article 7 of the Company’s certificate of incorporation or as otherwise consented to by the holders of class E common stock.

“Existing Stockholders Agreement” has the meaning specified in the Recitals.

“Fair Market Value” shall mean:

(i) Before a Qualified IPO, the value of shares of Common Stock of the Company held by any Person as determined, whenever the terms and provisions hereof call for a determination of the “Fair Market Value” of such shares (a “Subject Interest”), in good faith by a majority of the disinterested members of the Board of Directors to be, as of any applicable date, the fair market value of such Subject Interests.

(ii) After a Qualified IPO, the value of a Subject Interest as determined by the weighted average of the daily Trading Prices of such Subject Interest for the twenty (20) consecutive Trading Days prior to the date in question. “Trading Price” shall mean with respect to the Subject Interest: (A) the sale prices on such day on the principal stock exchange on which such security is then listed or admitted to trading, (B) if such security is not listed or admitted to trading on any such exchange, the average of the trading prices of such security in the over-the-counter market on such day as reported by the National Association of Securities Dealers Automated Quotation System, (C) if such firm is not engaged in the business of reporting such prices, as reported by a similarly generally accepted reporting service or (D) if no such service is available, in such manner as furnished by any New York Stock Exchange member firm selected from time to time by the Board of Directors for that purpose. “Trading Day” shall mean with respect to the Subject Interest: (A) if the applicable security is listed or admitted for trading on the New York Stock Exchange or other national or international securities exchange, a day on which the New York Stock Exchange or such other national or international securities exchange is open for business, (B) if the applicable security is quoted on the National Market System of the NASDAQ, a day on which trades may be made on such National Market System or (C) if the applicable security is not otherwise listed, admitted for trading or quoted, any Business Day.

“Fischer” has the meaning specified in the preamble hereto.

“Fischer Gift” has the meaning specified in the definition of Permitted Transferee.

“Fischer Offer” has the meaning specified in Section 8.2.

“Fischer Offer Deadline” has the meaning specified in Section 8.2.

“Fischer Parties” means Fischer and its Permitted Transferees, including without limitation its members, Mark A. Fischer, Trustee of the Mark A. Fischer 1994 Trust and Susan L. Fischer, Trustee of the Susan L. Fischer 1994 Trust, in their capacities as trustees.

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“Fully-Diluted Common Stock” means, at any time, the then outstanding shares of Common Stock of the Company plus (without duplication) all shares of Common Stock issuable, whether at such time or upon the passage of time or the occurrence of future events, upon the exercise (including, with respect to all outstanding options, the “cashless-broker” exercise, if available, through procedures approved by the Company), conversion or exchange of all then-outstanding Common Stock Equivalents.

“GAAP” means generally accepted accounting principles as applied in the United States of America.

“Governmental Entity” means any federal, state, local or foreign court, legislative, executive or regulatory authority or agency.

“Group” means any Person and Affiliate(s) of that Person acting in concert for the purpose of acquiring, holding or disposing of equity interests in the Company in other than a public offering of such equity interests.

“Holder” means any Person owning of record on the books of the Company shares of Common Stock of the Company.

“Indebtedness” means, with respect to any Person, without duplication, any of the following liabilities, whether secured (with or without limited recourse) or unsecured: (i) all liabilities for borrowed money; (ii) all liabilities evidenced by bonds, debentures, notes or other similar instruments or under financing or capital leases; (iii) all liabilities for guarantees of another Person in respect of liabilities of the type set forth in clauses (i) and (ii); (iv) all reimbursement obligations under letters of credit (including standby and commercial); and (v) all liabilities for accrued but unpaid interest expense and unpaid penalties, fees, charges and prepayment premiums that are payable, in each case, with respect to any of the obligations of a type described in clauses (i) through (iv) above.

“Information” has the meaning specified in Section 3.1.

“Managing Underwriter” has the meaning specified in Section 6.8.

“New Issuance Closing Date” has the meaning specified in Section 4.10.

“New Issuance Notice” has the meaning specified in Section 4.10.

“New Security” has the meaning specified in Section 4.10.

“Notice” has the meaning specified in Section 10.6.

“Observer” has the meaning specified in Section 3.1.

“Other Party” means any Person who becomes a party to this Agreement other than the Company, the Principal Investors, their respective Affiliates and their respective Permitted Transferees.

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“Other Permitted Transferee” means in the case of any Other Party, (i) any corporation, partnership, trust or other entity which is controlled by the applicable Other Party, (ii) upon the death of an Other Party, such Other Party’s heirs, executors, administrators, testamentary trustees, legatees or beneficiaries (collectively, “Associates”), and (iii) a voting trustee for one or more of the respective subsidiaries or Associates under the terms of a voting trust, provided, that at such time as such Other Party no longer satisfies the definition of Other Permitted Transferee, then any Transfer to such Other Party Transferee shall be treated as a Prohibited Transfer. In the event that any such Other Permitted Transferee shall cease to qualify as an Other Permitted Transferee after such Transfer, such Transferring Other Party shall cause such Other Permitted Transferee to transfer to such Other Party or another Other Permitted Transferee of such Other Party all Common Stock owned by such Other Permitted Transferee immediately prior to the time such Other Permitted Transferee would cease to be an Other Permitted Transferee of such Other Party.

“Party” or “Parties” has the meaning specified in the preamble hereto.

“Permitted Transferee” is defined only with respect to the Principal Investors, and means respectively for each (i) any corporation, limited liability company, partnership, trust or other entity which controls, is controlled by or is under common control with, the applicable Principal Investor, (ii) a voting trustee for any Principal Investor, as the case may be, under the terms of a voting trust, or (iii) any owner, including limited partners and members of CCMP, provided, that at such time as such Permitted Transferee no longer satisfies the definition of Permitted Transferee, then any Transfer to such Party shall be treated as a Prohibited Transfer. In the event that any Permitted Transferee ceases to be a Permitted Transferee of the Transferring Party, such Transferring Party shall cause such Permitted Transferee to Transfer to such Transferring Party or another Permitted Transferee all Common Stock owned by such Permitted Transferee immediately prior to the time such Permitted Transferee would cease to be a Permitted Transferee of such Principal Investor. Permitted Transferee also includes with respect to Fischer the children of Mark Fischer (including any trust established for the benefit of Mark Fischer’s children) with respect to the gift of up to an aggregate of 2,300 shares of Common Stock (such transfer the “Fischer Gift”).

“Person” means any natural person, corporation, limited liability company, limited partnership, general partnership, joint stock company, joint venture, association, company, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, and any government or agency or political subdivision thereof.

“Piggyback Registration” has the meaning specified in Section 6.2.

“Piggyback Securities” has the meaning specified in Section 6.9.

“Preemptive Right Beneficiary” has the meaning specified in Section 4.10.

“Principal Investor Group” means, with respect to any Principal Investor, such Principal Investor and its Affiliates.

“Principal Investors” means CCMP, Fischer, Altoma and Chesapeake.

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“Prohibited Transfer” has the meaning specified in Section 4.6.

“Promissory Note” has the meaning specified in Section 4.3(b).

“Proportionate Percentage” has the meaning specified in Section 4.10.

“Proposed Price” has the meaning specified in Section 4.10.

“Public Offering” means an offering of Common Stock pursuant to a registration statement filed in accordance with the Securities Act.

“Public Offering Event” means the first date after which the Company has completed one or more Public Offerings as a result of which at least twenty percent (20%) of the outstanding Common Stock (after giving effect to such offerings) is publicly traded.

“Qualified IPO” means a consummated initial public offering of shares of Common Stock resulting in proceeds to the Company of at least two hundred fifty million dollars ($250,000,000), which is underwritten on a firm commitment basis by a nationally-recognized investment banking firm, and which results in the initial listing or quotation of the Common Stock on any national securities exchange.

“Registrable Securities” means the Common Stock and any shares of Common Stock that are issuable upon the exercise of any right, including pursuant to any option, warrant or security convertible into shares of Common Stock or similar right and any other securities issued or issuable with respect to such shares of Common Stock by way of a stock dividend or stock split or in connection with a combination of stock, recapitalization, merger, consolidation or reorganization; provided, that any Registrable Security will cease to be a Registrable Security when (i) a registration statement covering such Registrable Security has been declared effective by the Commission and all of such Registrable Securities have been disposed of pursuant to such effective registration statement, (ii) it is sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) under the Securities Act are met or it is eligible for sale under Rule 144 without respect to any volume limitations, unless the Company fails, upon request of the Holder accompanied by an opinion of counsel to the Holder, reasonably acceptable to the Company, to the effect that the Registrable Securities are eligible for resale under Rule 144 without respect to any volume limitations, to remove all restrictive legends on certificates representing such Registrable Security in connection with an anticipated Transfer of such Common Stock that is otherwise permitted by this Agreement or (iii) (A) it has been otherwise Transferred, (B) the Company has delivered a new certificate or other evidence of ownership for it not bearing any restrictive legend, other than the legend required pursuant to Section 10.5 of this Agreement, if applicable, and (C) it may be resold without registration under the Securities Act.

“Registration Expenses” has the meaning specified in Section 7.2.

“Required Filing Date” has the meaning specified in Section 6.1(d).

“Restriction” has the meaning specified in Section 10.5(b).

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“ROFO Notice” has the meaning specified in Section 4.9(a).

“ROFO Notice Price” has the meaning specified in Section 4.9(a).

“ROFO Notice Terms” has the meaning specified in Section 4.9(a).

“ROFO Offer Deadline” has the meaning specified in Section 4.9(b).

“ROFO Offer Notice” has the meaning specified in Section 4.9(a).

“ROFO Parties” has the meaning specified in Section 4.9(a).

“ROFO Seller” has the meaning specified in Section 4.9(a).

“ROFO Shares” has the meaning specified in Section 4.9(a).

“Sale Notice” has the meaning specified in Section 8.1.

“Securities Act” means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

“Selling Holder” means a holder of Registrable Securities who is selling Registrable Securities pursuant to a registration statement under the Securities Act.

“Stock Purchase Agreement” means the Stock Purchase Agreement dated as of March 23, 2010, by and among the Company and CCMP.

“Stockholder Group Member” has the meaning specified in Section 3.1.

“Subject Purchasers” has the meaning specified in Section 4.10(a).

“Subsidiary” means (i) any corporation or other entity a majority of the capital stock or other equity securities of which having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions is at the time owned, directly or indirectly, with power to vote, by the Company or any direct or indirect Subsidiary of the Company, (ii) any limited liability company in which the Company or any direct or indirect Subsidiary is the sole managing member or (iii) any partnership in which the Company or any direct or indirect Subsidiary is a general partner.

“Suspension Period” has the meaning specified in Section 7.3.

“Tag-Along Notice” has the meaning specified in Section 4.4(a).

“Tag-Along Participants” has the meaning specified in Section 4.4(a).

“Tag-Along Percentage” has the meaning specified in Section 4.4(a).

“Tag-Along Securities” has the meaning specified in Section 4.4(a).

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“Tag-Along Seller” has the meaning specified in Section 4.4(a).

“Transfer,” including the correlative terms “Transferring” or “Transferred,” means any direct or indirect transfer, assignment, sale, gift, pledge, hypothecation or other encumbrance, or any other disposition (whether voluntary or involuntary or by operation of law), of shares of Common Stock (or any interest (pecuniary or otherwise) therein or right thereto), including, without limitation, derivative or similar transactions or arrangements whereby a portion or all of the economic interest in, or risk of loss or opportunity for gain with respect to, shares of Common Stock is transferred or shifted to another Person. For clarification purposes, any transfer of ownership of any Principal Investor shall be deemed a Transfer of such Principal Investor’s Common Stock.

“Transferee” means any Person to whom any Holder or any Transferee thereof Transfers Common Stock in accordance with the terms hereof.

“Underwriter” means a securities dealer that purchases any shares of Common Stock as principal and not as part of such dealer’s market-making activities.

“Violation” has the meaning specified in Section 6.4.

“Voting Securities” means, at any time, shares of any class of Common Stock, which are then entitled to vote generally in the election of directors.

1.2 References; Gender; Number; Certain Phrases. References to this “Agreement” shall mean this Stockholders’ Agreement, including all amendments, modifications and supplements and any exhibits or schedules to any of the foregoing, and shall refer to the Agreement as the same may be in effect at the time such reference becomes operative. All references in this Agreement to an “Article,” “Section,” “Exhibit” or “Schedule” are to an Article, Section, Exhibit or Schedule of this Agreement, unless the context requires otherwise. Unless the context requires otherwise, the words “this Agreement,” “hereof,” “hereunder,” “herein,” “hereby” or words of similar import refer to this Agreement as a whole and not to a particular Article, Section, subsection, clause or other subdivision hereof. Whenever the context requires, the words used herein include the masculine, feminine and neuter gender, and the singular and the plural. The words “include,” “includes” and “including” shall mean “include, without limitation,” “includes, without limitation” and “including, without limitation,” respectively. All references herein to “dollars” or “$” refer to currency of the United States of America. Any accounting term used in this Agreement shall have, unless otherwise specifically provided herein, the meaning customarily given in accordance with GAAP.

ARTICLE 2.

REPRESENTATIONS AND WARRANTIES

2.1 Each of CCMP, Fischer, Altoma, Chesapeake, and each other Party (other than the Company) that is not a natural person (as to itself only), hereby represents and warrants to the Company and the other Parties that:

(a) it is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, formation or organization, as the case may be, with full power and authority under its certificate of incorporation and/or other organizational document(s) to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby, and the execution, delivery and performance by it of this Agreement and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary action;

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(b) this Agreement has been duly and validly executed and delivered by it and, upon the Effective Date, constitutes the binding obligation enforceable against it in accordance with its terms, except to the extent that enforcement may be limited by or subject to any bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect relating to creditors’ rights generally, to general principles of equity (including a court’s discretionary authority with respect to granting specific performance) and to mandatory provisions of public policy; and

(c) the execution, delivery and performance by it of this Agreement and the consummation by it of the transactions contemplated hereby will not, with or without the giving of notice or the lapse of time, or both, (i) violate any provision of law, statute, rule or regulation to which it is subject, (ii) violate any order, judgment, or decree applicable to it or (iii) conflict with, or result in a breach or default under, any term or condition of its certificate of incorporation, by-laws or such other comparable organizational and governing document(s), as the case may be, or any agreement or other instrument to which it is a party or by which it is bound.

2.2 Each Party who is a natural person hereby represents and warrants (as to himself or herself only) to the Company and the other Parties that:

(a) he (or she) has full power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby, and the execution, delivery and performance by him (or her) of this Agreement and the consummation by him (or her) of the transactions contemplated hereby have been duly authorized by all necessary action;

(b) this Agreement has been duly and validly executed and delivered by him (or her) and, upon the Effective Date, constitutes the binding obligation thereof enforceable against him (or her) in accordance with its terms, except to the extent that enforcement may be limited by or subject to any bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect relating to creditors’ rights generally, to general principles of equity (including a court’s discretionary authority with respect to granting specific performance) and to mandatory provisions of public policy; and

(c) the execution, delivery and performance by him (or her) of this Agreement and the consummation by him (or her) of the transactions contemplated hereby will not, with or without the giving of notice or the lapse of time, or both, (i) violate any provision of law, statute, rule or regulation to which he (or she) is subject, (ii) violate any order, judgment or decree applicable to him (or her) or (iii) conflict with, or result in a breach or default under, any term or condition of any agreement or other instrument to which he (or she) is a party or by which he (or she) is bound.

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2.3 The Company hereby represents and warrants to each other Party that:

(a) it is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware with full corporate power and authority under its certificate of incorporation and other organizational documents to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby, and the execution, delivery and performance by it of this Agreement and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary action;

(b) this Agreement has been duly and validly executed and delivered by the Company and, upon the Effective Date, constitutes the binding obligation thereof enforceable against the Company in accordance with its terms, except to the extent that enforcement may be limited by or subject to any bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect relating to creditors’ rights generally, to general principles of equity (including a court’s discretionary authority with respect to granting specific performance) and to mandatory provisions of public policy; and

(c) the execution, delivery and, upon the Effective Date, performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby will not, with or without the giving of notice or the lapse of time, or both, (i) violate any provision of law, statute, rule or regulation to which the Company is subject, (ii) violate any order, judgment or decree applicable to the Company or (iii) conflict with, or result in a breach or default under, any term or condition of its certificate of incorporation, bylaws or such other comparable organizational and governing document(s), as the case may be, or any agreement or other instrument to which the Company is a party or by which it is bound.

ARTICLE 3.

GOVERNANCE, STANDSTILLS AND OTHER MATTERS

3.1 Board Observer. The Company shall permit a representative of each of CCMP, Fischer, Altoma and Chesapeake (each, an “Observer”) to attend all meetings of the Board of Directors and all committees thereof (whether in person, telephonic or other) in a non-voting, observer capacity and shall provide to each Observer the right to receive all notices, reports and other communications sent to directors, at the same time they are transmitted to directors. The Observers may be excluded from any meeting or portion thereof and need not be provided such materials if a majority of the Board of Directors reasonably believes that the Observers’ attendance at such meeting or access to such information would: (i) adversely affect attorney-client privilege between the Company and its counsel; (ii) represent confidential or proprietary business information that could be misused by CCMP, Fischer, Altoma and/or Chesapeake, as the case may be; or (iii) involve a conflict of interest between the Company and CCMP, Fischer, Altoma and/or Chesapeake, as the case may be. Each of CCMP, Fischer, Altoma, Chesapeake and their respective officers, directors, employees or agents (any of the foregoing, a “Stockholder Group Member”) agrees and acknowledges that it and its Observer will be bound by the confidentiality provisions of Section 10.7 of this Agreement. The Company acknowledges that each of CCMP, Fischer, Altoma and Chesapeake and the Observers may have, from time to time, information (“Information”) that may be of interest to the Company regarding a wide variety of matters including, by way of example only, current and future investments and transactions with respect to other Persons that may be competitive with the Company. Each of the Company and the Parties agrees that CCMP, Fischer, Altoma and Chesapeake and the Observers shall have no duty to disclose any Information to the Company or permit the Company to participate in any investments based on any Information, or to otherwise take advantage of any opportunity that may be of interest to the Company if it were aware of such Information, and hereby waives, to the maximum extent permitted by law, any claim based on the corporate opportunity doctrine or otherwise or that could require CCMP, Fischer, Altoma and Chesapeake or the Observers to disclose any such Information to the Company or offer any opportunity relating thereto to the Company; provided, that this provision shall not apply to Fischer so long as Mark Fischer is an officer of the Company.

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3.2 Director Compensation. Members of the Board of Directors who are Existing Stockholder Designees or CCMP Designees shall not receive compensation for their services as board members. The Company will cause each director serving on the Board of Directors, any Committees or any Subsidiary board to be reimbursed for all reasonable out-of-pocket costs and expenses incurred by him or her in connection with such service.

3.3 Voting Agreement of Altoma. Prior to a Qualified IPO, Altoma agrees that it shall not vote for the approval of (i) any merger, consolidation, conversion or a Demand IPO, (ii) an increase in the authorized number of the Company’s Common Stock, or the amendment of the Company’s certificate of incorporation to designate any new series of preferred stock for which stockholder approval is required, (iii) the sale of all or substantially all of the Company assets, or (iv) a termination of the Business of or liquidation or dissolution of the Company, unless Fischer votes for such approval.

3.4 Standstill Agreements.

(a) Other than in connection with the exercise of its rights pursuant to Section 4.10, or any other transaction approved by the Board of Directors (which must include the approval of the board designees of the Company’s class E common stock), Chesapeake agrees that it and its Affiliates will not, without the approval of the Board of Directors including the board designees of the Company’s class E common stock, acquire or publicly announce any intention to acquire shares of Common Stock to the extent Chesapeake and its Affiliates would hold of record, beneficially own, or otherwise control the voting with respect to, in excess of 25.0% of the then-outstanding shares of Common Stock after giving effect to such acquisition.

(b) Prior to the maturity of the Company’s 8  ¹/2% senior notes due 2015, each Holder agrees that it and its Affiliates will not Transfer or acquire shares of Common Stock in an amount that would cause a “Change of Control” (as such term is defined in the Company’s Indenture dated as of December 1, 2005 by and among the Company, as Issuer, the Guarantors named therein and Wells Fargo Bank, National Association, as Trustee) to occur after giving effect to such Transfer or acquisition. Any Transfer or acquisition of Common Stock in violation of this Section 3.4(b) will be null and void, and of no legal force or effect. Notwithstanding the foregoing, (i) the Holders may transfer their shares of Common Stock pursuant to Section 4.5 and (ii) CCMP shall be permitted to Transfer its shares or acquire shares of Common Stock pursuant to Section 4.3, Section 4.9 and Article 8, so long as with respect to an acquisition of shares of Common Stock pursuant to Section 4.3 or Section 4.9 only that would cause a “Change of Control” as defined above, the Company is able to refinance its 8  ¹/2% senior notes due 2015 on terms not materially less favorable than the terms of the 8  ¹/2% senior notes due 2015 and not on terms materially less favorable to similarly situated companies with similar credit ratings.

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(c) Prior to the maturity of the Company’s 8  ⁷/8% senior notes due 2017, each Holder agrees that it and its Affiliates will not Transfer or acquire shares of Common Stock in an amount that would cause a “Change of Control” (as such term is defined in the Company’s Indenture dated as of January 18, 2007 by and among the Company, as Issuer, the Guarantors named therein and Wells Fargo Bank, National Association, as Trustee) to occur after giving effect to such Transfer or acquisition. Any Transfer or acquisition of Common Stock in violation of this Section 3.4(c) will be null and void, and of no legal force or effect. Notwithstanding the foregoing, (i) the Holders may transfer their shares of Common Stock pursuant to Section 4.5 and (ii) CCMP shall be permitted to Transfer its shares or acquire shares of Common Stock pursuant to Section 4.3, Section 4.9 and Article 8, so long as with respect to an acquisition of shares of Common Stock pursuant to Section 4.3 or Section 4.9 only that would cause a “Change of Control” as defined above, the Company is able to refinance its 8  ⁷/8% senior notes due 2017 on terms not materially less favorable than the terms of the 8  ⁷/8% senior notes due 2017 and not on terms materially less favorable to similarly situated companies with similar credit ratings.

3.5 Termination of Rights. Notwithstanding anything to the contrary contained herein, all rights for any Party set forth in this Article 3 shall terminate and be of no further force and effect on the earlier of (x) the closing date of a Qualified IPO or (y) the date that such Party and its Permitted Transferees cease to beneficially own 5% or more of the Company’s Fully-Diluted Common Stock.

3.6 Financial Statements.

(a) Whether or not the Company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company will prepare and deliver to the Principal Investors, without any cost to such Principal Investors and within the time periods specified by the Exchange Act with respect to a non-accelerated filer (or such earlier date as the Company is required by the Exchange Act to file such documents), audited consolidated balance sheet of the Company as of the end of each fiscal year of the Company and the related audited consolidated statement of operations, changes in stockholders’ equity and cash flows of the Company for such fiscal year (or similar statements if such statements change as the result of changes in GAAP), together with the notes related thereto. Such financial statements shall be accompanied by a report of the Company’s independent accountants to the effect that such financial statements have been prepared in conformity with GAAP applied on a basis consistent with prior years (except as otherwise specified in such report) and that the audit of such financial statements has been performed in accordance with GAAP. The filing of the financial statements with the Commission shall satisfy the foregoing obligations.

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(b) Whether or not the Company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company will prepare and deliver to the Principal Investors, without any cost to such Principal Investors and within the time periods specified by the Exchange Act with respect to a non-accelerated filer (or such earlier date as the Company is required by the Exchange Act to file such documents), unaudited consolidated balance sheet of the Company as of the end of each fiscal quarter of the Company (other than the 4^th quarter of any calendar year) and the related unaudited consolidated statement of operations, changes in stockholders’ equity and cash flows of the Company for such fiscal quarter and for the fiscal year to date (or similar statements if such statements change as the result of changes in GAAP), in each case setting forth in comparative form the corresponding figures for the preceding fiscal quarter and for the fiscal quarter of the prior fiscal year corresponding to the fiscal quarter just completed. The filing of the financial statements with the Commission shall satisfy the foregoing obligations.

(c) The Company will prepare and within forty-five (45) days following each calendar month deliver to the Principal Investors, without any cost to such Principal Investors, monthly financial statements prepared in a form and with customary information substantially similar to the monthly financials attached hereto as Exhibit A with at least the same level of description and information as set forth therein.

3.7 Waiver of Claims.

The Company and each of its Subsidiaries hereby unconditionally and irrevocably waives, relinquishes and releases (and covenants and agrees not to exercise, and to cause each of its Affiliates not to exercise), any claims or rights that it or any of its Affiliates may now have or hereafter acquire against any holder of class D Common Stock, any holder of class E Common Stock or Affiliate thereof that arise from or relate to the existence, payment, performance or enforcement obligation of the Company, such Subsidiary or their respective Affiliates to any Indemnitee (as defined in the Company’s Second Amended and Restated Certificate of Incorporation, incorporated as amended) including any right of subrogation, reimbursement, exoneration, contribution or indemnification, whether such right to claim, take or receive from any holder of class D Common Stock or any Affiliate thereof, directly or indirectly, in cash or other property or by set-off or in any other manner, any payment or security or other credit support on account of such claim, remedy or right.

ARTICLE 4.

TRANSFER OF SECURITIES

4.1 General Restrictions on Transfer of Common Stock.

(a) Each Holder (other than CCMP and its Permitted Transferees) agrees that, until the occurrence of a Qualified IPO, it will not, directly or indirectly, Transfer any shares of Common Stock now owned or hereafter acquired by such party (or any interest therein) to any other Person, except as expressly permitted by this Agreement. CCMP and its Permitted Transferees agree that, except with respect to twenty percent (20%) of the Common Stock owned by them (calculated immediately subsequent to the closing contemplated by the Stock Purchase Agreement), which may be Transferred by CCMP and its Permitted Transferees at any time so long as the requirements of Transfer set forth in the proviso in Section 4.2(a) are met, they will not Transfer any shares of Common Stock now owned or hereafter acquired by them (or any interest therein) to any other Person, except as expressly permitted by this Agreement. In addition, notwithstanding the provisions of this Article 4, Fischer may not Transfer (other than to Permitted Transferees) more than 20% of the shares of Common Stock owned by Fischer as of the date of this Agreement (calculated prior to any sales pursuant to Section 4.1(b)). Notwithstanding the foregoing, the limitation of this Section 4.1 on each of CCMP and Fischer may, at any time, be waived by the express written waiver of the other.

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(b) Notwithstanding the foregoing, but subject to the limitations contained in the penultimate sentence of Section 4.1(a), Fischer may sell up to an aggregate of twenty-five million dollars ($25,000,000) of Common Stock in one or a combination of the following transactions: (i) up to ten million dollars ($10,000,000) of Common Stock to CCMP on the date hereof at the same price per share paid by CCMP for the Common Stock pursuant to the Stock Purchase Agreement; (ii) after eighteen (18) months following the Effective Date and so long as a Qualified IPO has not yet occurred, up to fifteen million dollars ($15,000,000) of Common Stock in a private offering, provided, however, that if Fischer elects to sell Common Stock pursuant to this Section 4.1(b)(ii), Fischer must first offer to sell to each of CCMP and Chesapeake their pro rata portion of all such Common Stock to be sold pursuant to this Section 4.1(b)(ii) and Fischer shall have all of the obligations of a ROFO Seller and the offer pursuant to this Section 4.1(b)(ii) shall be governed by the procedures set forth in Section 4.9, solely with respect to CCMP and Chesapeake; and (iii) in connection with a Qualified IPO, the Company shall use its reasonable efforts to permit the sale of up to twenty-five million dollars ($25,000,000) of Common Stock, less the amount sold in Sections 4.1(b)(i) and (ii) above, if any.

(c) Notwithstanding the foregoing, Altoma may sell up to ten million dollars ($10,000,000) of Common Stock to CCMP on the date hereof at the same price per share of Common Stock paid by CCMP for the Common Stock pursuant to the Stock Purchase Agreement.

4.2 Permitted Transferees.

(a) Notwithstanding anything in this Agreement to the contrary (other than Section 4.8), any Principal Investor or any Permitted Transferee thereof may, without the consent of the Company or any of the Parties and without compliance with Sections 4.1, 4.4, 4.5 or 4.9, at any time Transfer any or all of its shares of Common Stock to one or more Permitted Transferees, provided that (i) the Transfer to such Person is not in violation of applicable U.S. federal or state securities laws, or other similar laws, and (ii) such Permitted Transferee(s) shall execute and deliver to the Company a written acknowledgement, in form and substance satisfactory to the Company, stating that such Permitted Transferee(s) agrees to be bound by the terms of this Agreement (on the same terms as such Transferring Person).

(b) Notwithstanding anything in this Agreement to the contrary (but subject to Section 4.8), any Other Party may, without the consent of the Company or any of the Parties and without compliance with Sections 4.1, 4.4, 4.5, or 4.9 at any time Transfer any or all of its shares of Common Stock to one or more Other Permitted Transferees, provided that (i) the Transfer to such Person is not in violation of applicable U.S. federal or state securities laws, or other similar laws, (ii) such Permitted Transferee(s) shall execute and deliver to the Company a written acknowledgement, in form and substance satisfactory to the Company, stating that such Permitted Transferee(s) agrees to be bound by the terms of this Agreement (on the same terms as such Other Party), and (iii) if any such Other Permitted Transferee shall cease to qualify as an Other Permitted Transferee after such Transfer, such Transferring Other Party shall cause such Other Permitted Transferee to transfer to such Other Party or another Other Permitted Transferee of such Other Party all Common Stock owned by such Other Permitted Transferee immediately prior to the time such Other Permitted Transferee would cease to be an Other Permitted Transferee of such Other Party.

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(c) Notwithstanding anything in this Agreement to the contrary, upon the death of any Party who is a natural person, the Transfer of any or all of such Party’s shares of Common Stock to one or more of such Party’s legatees, heirs or trustees of a testamentary trust, or to an executor or administrator of the estate of such deceased Party incident to guardianship or probate proceedings involving such estate shall not require the consent of the Company or any of the Parties and shall not be subject to compliance with Sections 4.1, 4.4, 4.5 or 4.9 so long as (i) such Person(s) shall execute and deliver to the Company a written acknowledgement, in form and substance satisfactory to the Company, stating that such Person(s) agrees to be bound by the terms of this Agreement (on the same terms as such Other Party), and (ii) the Transfer to such Person(s) is not in violation of Applicable Law.

4.3 Altoma Shares.

(a) After August 15, 2011, if the Common Stock of the Company is not listed on a national securities exchange or quoted on the Nasdaq National Market (or successor quotation system or exchange), the Altoma Parties will have the right, from time to time and in one or more transactions, to Transfer to any Person its Common Stock pursuant to a Demand Request as set forth in Section 6.1(b). However, notwithstanding Altoma’s right to a Demand Request set forth in Section 6.1(b), prior to making such Demand Request, each of the Altoma Parties agrees to offer its shares of Common Stock to be Transferred first to the Company (who may elect to purchase any or all of the offered shares) for purchase at Fair Market Value. Such offer by the Altoma Parties shall be in writing and delivered to the Company, CCMP, Fischer and Chesapeake. In the event the Company elects to purchase less than all of Altoma’s shares of Common Stock offered for Transfer, the remaining shares will be offered to CCMP, Fischer and Chesapeake pro rata based on percentage ownership of the Common Stock (who collectively may elect to purchase any or all of the remaining offered shares) at Fair Market Value. Should any of CCMP, Chesapeake or Fischer elect to purchase less than their pro rata share of the Common Stock, the other Parties may elect to purchase more than their pro rata share up to the full balance of offered shares remaining. The Company shall give written notice of its election to purchase such offered shares within twenty (20) Business Days after receipt of the Altoma Parties offer and CCMP, Fischer and Chesapeake shall give written notice of their respective elections by the earlier of (i) twenty (20) Business Days following the written notice of election by the Company or (ii) forty (40) Business Days after the Altoma Parties’ original offer notice. In the event that the Company, CCMP or Fischer exercise the option to purchase the shares of Common Stock offered by the Altoma Parties pursuant to this Section, each of the Altoma Parties agrees to finance up to 66  ²/3% of the purchase price payable by the Company or Fischer under substantially the same terms and conditions as specified under Section 4.3(b) of this Agreement, provided, that the amount permitted to be financed by the Company will be reduced by the amount of funds that are (i) reasonably available to the Company and may be used to purchase Altoma’s Common Stock without violation of the Existing Credit Facility or other document evidencing Indebtedness, and (ii) are not reasonably necessary for the ongoing operations or budgeted capital expenditures in the foreseeable future following the date of the Altoma offer. If the Company, CCMP, Fischer and Chesapeake (i) provide notice of their intent not to purchase any of such offered shares, (ii) do not provide notice of their intent to purchase on or before forty (40) Business Days after the date of receipt of the Altoma Parties original offer notice, or (iii) fail to consummate a purchase of 100% of the shares offered by the Altoma Parties in accordance with this Section 4.3(a), each of the Altoma Parties will have the right, but not the obligation, for 120 days thereafter to: (1) Transfer in an offering the amount of Common Stock offered less the amount of shares of Common Stock Transferred to the Company and/or CCMP, the Fischer Parties and Chesapeake pursuant to the offering in this Section 4.3(a), to any person at a price equal to or greater than the price at which it was offered to the Company, CCMP, Fischer and Chesapeake, or if such proposed sale price is less than that offered to the Company, CCMP, Fischer and Chesapeake, to provide the Company, CCMP, Fischer and Chesapeake a right to purchase the remaining shares at the lower price (by complying again with the provisions of this Section 4.3(a)) before selling to another person, or (2) effect a Demand Request in accordance with Section 6.1(b), wherein each of the Altoma Parties agrees to offer for Transfer in such registration statement all of the Common Stock which has not been purchased pursuant to the offering in this Section 4.3(a). Transfers of shares of Common Stock by the Altoma Parties pursuant to this Section 4.3 shall not be subject to the provisions of Sections 4.1(a), 4.4 or 4.9. Notwithstanding anything in this Agreement to the contrary, the Company’s ability to participate in purchases of Common Stock under this Section 4.3 is subject to the approval of the holders of the Company’s class E common stock as set forth in the Company’s certificate of incorporation.

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(b) Any deferred portion of the purchase price pursuant to Section 4.3(a) above payable by the Company or Fischer shall be evidenced by a promissory note (“Promissory Note”) of the purchaser containing the following terms:

(i) The Promissory Note shall bear interest at a fixed annual percentage rate equal to the prime rate in effect by JP Morgan Chase Bank, N.A. on the date of the Closing, may be prepaid at any time without penalty (any principal prepayment shall be applied against the next maturing installment of principal), shall provide for acceleration upon default, penalty interest, notice and opportunity to cure upon default, and such other standard and customary terms as the parties may agree. Except during any period in which the payments due under the Promissory Note are tolled pursuant to Section 4.3(b)(iii), the Promissory Note shall require equal semi-annual payments of principal plus accrued interest over a term of two (2) years. The first such payment shall be due on the first semi-annual anniversary of the closing of the sale pursuant to Section 4.3(a), and subsequent payments shall be due consecutively on the subsequent semi-annual anniversaries of such date until the second anniversary date at which time the unpaid balance of the Promissory Note plus accrued interest shall be due and payable.

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(ii) The payment of the Promissory Note shall be secured at any time and from time to time by that number of shares of Common Stock which equals one hundred fifty percent (150%) of the value of the unpaid principal amount remaining under the Promissory Note at such time, not to exceed in any case more than the original number of shares of Common Stock repurchased by the Company or purchased by Fischer. For purposes of this Section 4.3(b)(ii), the value of the shares of Common Stock held as security for the payment of the Promissory Note shall be their Fair Market Value. At any time and from time to time, the purchaser shall be entitled to a release of collateral to the extent that the value of the Common Stock held by the holder of the Promissory Note exceeds the unpaid principal amount remaining under the Promissory Note by more than fifty percent (50%). Upon request by the purchaser for such release, the holder of the Promissory Note shall exchange the stock certificate held as collateral for a new stock certificate which reflects the release of shares pursuant to this provision. In addition to the release of collateral described above, the purchaser shall have the right, at any time and from time to time, to substitute certificates of deposit issued by any state or national bank as security for the purchaser’s obligations. The shares of Common Stock shall be released in such amount so that the sum of the face value of the certificate of deposit and one hundred fifty percent (150%) of the Fair Market Value of the shares of Common Stock retained by the holder of the Promissory Note as of the end of the most recent fiscal quarter for the Company for which financial statements are available equals the unpaid principal amount remaining under the Promissory Note. So long as the purchaser is not in default under the Promissory Note, the purchaser shall be entitled to receive all interest earned on such substituted collateral.

(iii) Any Promissory Note issued by the Company pursuant to this Section 4.3(b) shall provide that it is payable only out of “surplus” (as described in §154 of the Delaware General Corporation Law), and shall further provide that, in the event the Company shall not, at the time set for any payment, have available an adequate surplus from which to make such payment, or any portion thereof, the Company shall not make such payment, or such portion thereof, as the case may be, and the date for payment, or such portion thereof, shall be tolled, with interest accruing thereon until such surplus is available. The provisions of this Agreement regarding the Company’s issuance and payment of Promissory Notes only from surplus shall not be construed to impose on the Company any obligation to create or generate any surplus of any type whatsoever. However, each year the Company shall not declare any cash or stock dividend or voluntarily cause any other charge to be made against surplus if the result thereof would be to cause surplus to fall below the level needed to make any payment(s) on a Promissory Note(s) which is payable during such year period or whose payment has been and is, at the time of such dividend or charge, tolled pursuant to this Section 4.3(b)(iii). In the event the payment of any installment on any Promissory Note is tolled for a period of more than six (6) months, such Promissory Note shall be in default, and the holder of such Promissory Note may, upon notice of default by the holder and failure of the payee to make such payment within 30 days after the date such notice is received, declare the principal and all interest accrued thereon to be due and payable and may foreclose on any shares of Common Stock or other collateral which shall be the security therefor.

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(c) Notwithstanding the foregoing, if the exercise by CCMP of its rights under this Section 4.3 would cause a “Change of Control” as defined in Section 3.4(b) or Section 3.4(c), the period of time to consummate the transactions contemplated by this Section 4.3 can be delayed for up to 90 days to effect a refinancing of the Company’s outstanding 8  ¹/2% senior notes due 2015 and the Company’s outstanding 8 7/8% senior notes due 2017 as contemplated by Section 3.4(b) and Section 3.4(c).

4.4 Tag-Along Rights.

(a) Prior to a Qualified IPO, in the event of a proposed Transfer by a Holder (a “Tag-Along Seller”) of more than 5% of the outstanding shares of Common Stock in one or a series of related transactions for value in a Bona Fide Offer other than (w) Transfers made pursuant to Section 4.1(a) by CCMP, and Transfers pursuant to Section 4.1(b), Section 4.1(c) or Section 4.3, (x) to a Permitted Transferee or Other Permitted Transferee, (y) in connection with a Qualified IPO, or (z) any transaction in which all of the Parties agree to participate, the Holders other than the Tag-Along Seller (the “Tag-Along Participants”) shall have the right to participate on the same terms and conditions and for the same consideration per share of Common Stock as the Tag-Along Seller in the Transfer in the manner set forth in this Section 4.4. Prior to any such Transfer, the Tag-Along Seller shall deliver to the Company prompt written notice (the “Tag-Along Notice”), which the Company will forward to the Tag-Along Participants within five (5) days of receipt thereof, which notice shall state (i) the name of the proposed Transferee, (ii) the number of shares of Common Stock proposed to be Transferred (the “Tag-Along Securities”) and the percentage (the “Tag-Along Percentage”) that such number of shares constitute of the total number of shares of Common Stock owned by such Tag-Along Seller, (iii) the proposed purchase price therefore, including a description of any non-cash consideration sufficiently detailed to permit the determination of the Fair Market Value thereof, and (iv) the other material terms and conditions of the proposed Transfer, including the proposed Transfer date (which date may not be less than twenty (20) days after delivery to the Tag-Along Participants of the Tag-Along Notice). Such notice shall be accompanied by a written offer from the proposed Transferee to purchase the Tag-Along Securities, which offer may be conditioned upon the consummation of the sale by the Tag-Along Seller, or the most recent drafts of the purchase and sale documentation between the Tag-Along Seller and the Transferee which shall make provision for the participation of the Tag-Along Participants in such sale consistent with this Section 4.4. A Tag-Along Seller may only Transfer its shares of Common Stock under this Section 4.4 if it has satisfied the provisions of Section 4.1(b), Section 4.5 and Section 4.9, as applicable, with respect to such proposed Transfer.

(b) Each Tag-Along Participant may elect to participate in the proposed Transfer to the proposed Transferee identified in the Tag-Along Notice by giving written notice to the Company and to the Tag-Along Seller within the fifteen (15) day period after the delivery of the Tag-Along Notice to such Tag-Along Participant, which notice shall state that such Tag-Along Participant elects to exercise its rights of tag-along under this Section 4.4 and shall state the maximum number of shares sought to be Transferred (which number may not exceed the product of (i) all shares of Common Stock owned by such Tag-Along Participant, multiplied by (ii) the Tag-Along Percentage). Each Tag-Along Participant shall be deemed to have waived its right of tag-along with respect to the Tag-Along Securities hereunder if it fails to give notice within the prescribed time period. The proposed Transferee of Tag-Along Securities will not be obligated to purchase a number of shares of Common Stock exceeding that set forth in the Tag-Along Notice, and in the event such Transferee elects to purchase less than all of the additional shares of Common Stock sought to be Transferred by the Tag-Along Participants, the number of shares of Common Stock to be Transferred by the Tag-Along Seller and each such Tag-Along Participant shall be reduced so that each such Holder is entitled to sell its pro rata portion (based on percentage ownership of Common Stock) of the number of shares of Common Stock the proposed Transferee elects to purchase (which in no event may be less than the number of Tag-Along Securities set forth in the Tag-Along Notice).

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(c) Each Tag-Along Participant, if it is exercising its tag-along rights hereunder, shall deliver to the Tag-Along Seller at the closing of the Transfer of the Tag-Along Seller’s Tag-Along Securities to the Transferee certificates representing the Tag-Along Securities to be Transferred by such Holder, duly endorsed for transfer or accompanied by stock powers duly executed, in either case executed in blank or in favor of the applicable purchaser against payment of the aggregate purchase price therefor by wire transfer of immediately available funds. Each Party participating in a sale pursuant to this Section 4.4 shall receive consideration in the same form and per share amount after deduction of such Party’s proportionate share of the related expenses. Each Party participating in a sale pursuant to this Section 4.4 shall agree to make or agree to the same customary representations, covenants, indemnities and agreements as the Tag-Along Seller so long as they are made severally and not jointly and the liabilities thereunder are borne on a pro rata basis based on the consideration to be received by each Party; provided, that any general indemnity given by the Tag-Along Seller, applicable to liabilities not specific to the Tag-Along Seller, to the Transferee in connection with such sale shall be apportioned among the Parties participating in a sale pursuant to this Section 4.4 according to the consideration received by each such Party and shall not exceed such Party’s net proceeds from the sale; provided, further, that any representation relating specifically to a Party and/or its ownership of Common Stock to be Transferred shall be made only by that Party. The fees and expenses incurred in connection with a sale under this Section 4.4 and for the benefit of all Parties (it being understood that costs incurred by or on behalf of a Party for his, her or its sole benefit will not be considered to be for the benefit of all Parties), to the extent not paid or reimbursed by the Company or the Transferee or acquiring Person, shall be shared by all the Parties on a pro rata basis, based on the consideration received by each Party in respect of its Common Stock to be Transferred; provided that no Party shall be obligated to make any out-of-pocket expenditure prior to the consummation of the transaction consummated pursuant to this Section 4.4 (excluding de minimis expenditures). The proposed Transfer date may be extended beyond the date described in the Tag-Along Notice to the extent necessary to obtain required approvals of Governmental Entities and other required approvals and the Company and the Parties shall use their respective commercially reasonable efforts to obtain such approvals.

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(d) If the Tag-Along Seller sells or otherwise Transfers to the Transferee any of its shares of Common Stock in breach of this Section 4.4, then each Tag-Along Participant shall have the right to sell to each Tag-Along Seller, and each Tag-Along Seller undertakes to purchase from each Tag-Along Participant, the number of shares of Common Stock that such Tag-Along Participant would have had the right to sell to the Transferee pursuant to this Section 4.4, for a per share amount and form of consideration and upon the terms and conditions on which the Transferee purchased such shares of Common Stock from the Tag-Along Seller, but without any indemnity being granted by any Tag-Along Participant to the Tag-Along Seller; provided that nothing contained in this Section 4.4(d) shall preclude any Party from seeking alternative remedies against any such Tag-Along Seller as a result of its breach of this Section 4.4.

4.5 Drag Along Right.

(a) Prior to a Qualified IPO, (i) So long as Fischer owns at least 80% of the shares of Common Stock owned by Fischer as of the date of this Agreement (calculated prior to any sales pursuant to Section 4.1(b) and treating the shares of Common Stock Transferred pursuant to the Fischer Gift as being owned by Fischer), if both CCMP and Fischer propose to Transfer all of their Common Stock, representing more than 50% of the aggregate Voting Securities of the Company, or (ii) if Fischer does not own at least 80% of the shares of Common Stock that Fischer owns as of the date of this Agreement (calculated prior to any sales pursuant to Section 4.1(b) and treating the shares of Common Stock Transferred pursuant to the Fischer Gift as being owned by Fischer), if CCMP (so long as CCMP beneficially owns 5% or more of the Company’s Fully-Diluted Common Stock) by itself or along with any other Holders propose to Transfer all of their Common Stock, representing more than 50% of the aggregate Voting Securities of the Company (the “Drag Transaction”), then if requested by the Holder(s) Transferring such Common Stock (the “Drag-Along Seller(s)”), each other Holder (each, a “Dragged Party”) shall (i) be required to sell all of the Common Stock held by it of the same class or series as any of the Common Stock to be Transferred (or then convertible into any such class or series) in the Drag Transaction, and (ii) vote for, consent to, raise no objections to and take all actions reasonably required, necessary or desirable in connection with, such Drag Transaction.

(b) The consideration to be received by a Dragged Party shall be the same form and amount of consideration per share to be received by the Drag-Along Seller(s), and the terms and conditions of such sale shall be the same as those upon which the Drag-Along Seller(s) sells its Common Stock. In connection with the Drag Transaction, each Dragged Party will agree to make or agree to the same customary representations, covenants, indemnities and agreements as the Drag-Along Seller(s) so long as they are made severally and not jointly and the liabilities thereunder are borne on a pro rata basis based on the consideration to be received by each Holder; provided, that (i) any general indemnity given by the Drag-Along Seller(s), applicable to liabilities not specific to the Drag-Along Seller(s), to the purchaser in connection with such sale shall be apportioned among the Dragged Parties according to the consideration received by each Dragged Party and shall not exceed such Dragged Party’s net proceeds from the sale, (ii) that any representation relating specifically to a Dragged Party and/or its Common Stock shall be made only by that Dragged Party, and (iii) in no event shall any Holder be obligated to agree to any non-competition covenant or other similar agreement as a condition of participating in such Transfer.

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(c) The fees and expenses incurred in connection with a sale under this Section 4.5 and for the benefit of all Holders (it being understood that costs incurred by or on behalf of a Holder for his, her or its sole benefit will not be considered to be for the benefit of all Holders), to the extent not paid or reimbursed by the Company or the Transferee or acquiring Person, shall be shared by all the Holders on a pro rata basis, based on the consideration received by each Holder in respect of its Common Stock; provided that no Holder shall be obligated to make any out-of-pocket expenditure prior to the consummation of the transaction consummated pursuant to Section 4.5 (excluding de minimis expenditures).

(d) The Drag-Along Seller(s) shall provide written notice (the “Drag-Along Notice”) to each other Dragged Party of any proposed Drag Transaction as soon as practicable following its exercise of the rights provided in Section 4.5(a). The Drag-Along Notice shall set forth the consideration to be paid by the purchaser for the securities, the identity of the purchaser and the material terms of the Drag Transaction.

(e) If any holders of Common Stock of any class are given an option as to the form and amount of consideration to be received in the Drag Transaction, all holders of Common Stock of such class shall be given the same option.

(f) Upon the consummation of the Drag Transaction and delivery by any Dragged Party of the duly endorsed certificate or certificates representing the Common Stock held by such Dragged Party to be sold together with a stock power duly executed in blank, the acquiring Person shall remit directly to such Dragged Party, by wire transfer of immediately available funds, the consideration for the securities sold pursuant thereto.

4.6 Prohibited Transfers. Except as specifically set forth in Section 4.4(b), any purported Transfer of shares of Common Stock by a Party that is not permitted by the provisions of Article 4, or which is in violation of such provisions, shall be void and of no force and effect whatsoever (each, a “Prohibited Transfer”).

4.7 Certain Events Not Deemed Transfers. In no event shall any of the following constitute a transfer of shares of Common Stock for purposes of Sections 4.1, 4.3, 4.4, 4.5 or 4.9 or be subject to the terms hereof: (i) an exchange, reclassification or other conversion of shares of Common Stock into any cash, securities or other property pursuant to a merger, consolidation or recapitalization of the Company or any Subsidiary with, or a sale or transfer by the Company or any Subsidiary of all or substantially all its assets to, any Person; or (ii) an exercise or conversion of Common Stock into shares of Common Stock in accordance with the terms thereof.

4.8 Transfers Subject to Compliance with Securities Act and Other Applicable Law. No shares of Common Stock may be Transferred by a Party (other than pursuant to an effective registration statement under the Securities Act) unless such Party first delivers to the Company an opinion of counsel, which opinion of counsel shall be reasonably satisfactory to the Company, to the effect that such Transfer is not required to be registered under the Securities Act and any other Applicable Law.

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4.9 Right of First Offer.

(a) Prior to a Qualified IPO, subject to and excluding (w) any Transfers by CCMP pursuant to Section 4.1(a), (x) Transfers by Fischer pursuant to Section 4.1(b), (y) Transfers by Altoma pursuant to Section 4.1(c), and (z) any Transfers made pursuant to (i) an offering of equity securities registered under the Securities Act, (ii) Section 4.2, (iii) Section 4.3, (iv) Section 4.5 pursuant to a sale in which the Drag-Along Sellers are exercising drag-along rights, and (v) Section 4.7, in the event that (A) subsequent to thirty (30) months after the Effective Time, Chesapeake or any of its Permitted Transferees, or (B) subsequent to four (4) years after the Effective Date in the event CCMP or Fischer or any of their Permitted Transferees (such Person referenced in subsections (A) and (B), the “ROFO Seller”) desires to Transfer shares of Common Stock owned by it to any Person, such ROFO Seller shall notify in writing (the “ROFO Notice”) the Holders other than the ROFO Seller (the “ROFO Parties”) and the Company, of: (A) its desire to Transfer such shares of Common Stock, (B) the number of shares proposed to be Transferred (the “ROFO Shares”) and (C) the price at which the ROFO Seller is willing to sell the ROFO Shares (the “ROFO Notice Price”), and (D) other terms of such proposed sale (the “ROFO Notice Terms”). The ROFO Seller(s) will negotiate in good faith for a period of not less than 21 days after the date of the ROFO Notice with any ROFO Parties who express an interest in acquiring the ROFO Shares. The ROFO Parties shall be entitled, but not required, within 21 days after the delivery date of the ROFO Notice, to deliver a cash offer notice (an “ROFO Offer Notice”) to the ROFO Seller of their offer for all, or any portion, of the ROFO Shares set forth in the ROFO Notice. If any ROFO Offer Notice is accepted by the ROFO Seller, each ROFO Party timely delivering a ROFO Offer Notice shall have the right to acquire a pro rata number of ROFO Shares based on the relative number of shares of Common Stock then owned by all of the ROFO Parties timely delivering a ROFO Offer Notice.

(b) Unless the ROFO Seller and the ROFO Parties otherwise agree, in the event ROFO Offer Notices at least equal to the ROFO Notice Price are not delivered to the ROFO Seller on or prior to the date 21 days after the delivery date of the ROFO Notice (the “ROFO Offer Deadline”), the offer shall be deemed rejected with respect to such ROFO Shares so offered, and, at any time within 120 days after the ROFO Offer Deadline, the ROFO Seller shall be entitled to sell any ROFO Shares not Transferred pursuant to the ROFO Offer Notices on terms no more favorable than that ROFO Notice Terms and for a cash price equal to or greater than the ROFO Notice Price. After the expiration of such 120-day period, if the ROFO Seller has not sold, the ROFO Seller may not Transfer the ROFO Shares without complying again with the provisions of this Section 4.9.

(c) To the extent ROFO Offer Notices are delivered and are accepted or deemed accepted by the ROFO Seller, the closing for the Transfer of the ROFO Shares shall be consummated at 9:00 a.m. Oklahoma City time on the date 30 days following the ROFO Offer Deadline, at the Company’s principal executive offices, or at such other time, date and place as mutually agreed by the ROFO Seller and the ROFO Parties. At the closing, the purchase price shall be paid in the form of a cashier’s check or by wire transfer in same day funds, and the ROFO Seller shall deliver stock certificates representing the ROFO Shares so purchased, accompanied by duly executed stock powers, free and clear of all liens, encumbrances and adverse claims (other than encumbrances as set forth in this Agreement), and such other instruments or documents as are deemed necessary by the Company for the proper Transfer of the ROFO Shares so Transferred on the books of the Company. The Company, the ROFO Seller, and the ROFO Parties shall cooperate in good faith in obtaining all necessary governmental and third-party consents, approvals or waivers required for the closing. The closing may be delayed, to the extent required, until the next succeeding day following the expiration of any required waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the obtaining of any necessary government approvals.

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(d) Notwithstanding the foregoing, if the exercise by CCMP of its rights under this Section 4.9 would cause a “Change of Control” as defined in Section 3.4(b) or Section 3.4(c), the period of time to consummate the transactions contemplated by this Section 4.9 can be delayed for up to 90 days to effect a refinancing of the Company’s outstanding 8  ¹/2% senior notes due 2015 and the Company’s outstanding 8  ⁷/8% senior notes due 2017 as contemplated by Section 3.4(b) and Section 3.4(c).

4.10 Preemptive Rights.

(a) If, prior to the consummation of, a Qualified IPO, the Company or any Subsidiary wishes to issue and sell any shares of Common Stock or any security convertible into or exchangeable for Common Stock (a “New Security”) to any Person or Persons (collectively, the “Subject Purchasers”) other than (A) in a Public Offering pursuant to a Demand IPO, in connection with a Qualified IPO or in connection with or following a Public Offering Event, (B) an issuance to directors, officers, employees and consultants of the Company and its Subsidiaries of restricted Common Stock and/or stock options exercisable for shares of Common Stock pursuant to any equity incentive plan of the Company or any Subsidiary approved by CCMP, as well as the issuance of Common Stock upon the exercise of such options (it being understood that the proviso in this clause (B) shall not apply to, or include, options assumed in connection with any transaction described in the following clause (C)); or (C) the issuance of any equity security in connection with (1) any arms-length merger, consolidation, share exchange or similar transaction of the Company or any Subsidiary with any other Person or (2) the arms-length strategic acquisition by the Company or any of its Subsidiary of the capital stock (or other equity interests) or assets of any other Person, then the Company shall also offer such New Securities to the Principal Investor Group and its Permitted Transferees by sending written notice (the “New Issuance Notice”) to such Principal Investor Group and Permitted Transferees (“Preemptive Right Beneficiary”) at least fifteen (15) days prior to the issuance and sale of the New Securities. The New Issuance Notice shall state (a) the number of shares, notes or other securities, as applicable, of New Securities proposed to be issued and sold and the terms of such New Securities, (b) the proposed purchase price per share, note or other security, as applicable, of the New Securities that the Company is willing to accept (the “Proposed Price”) and the terms and conditions of the purchase of such New Securities, (c) the proposed date on which the New Securities will be sold (the “New Issuance Closing Date”), and (d) each Holder’s Proportionate Percentage. For purposes hereof, each Preemptive Right Beneficiary’s “Proportionate Percentage” means, with respect to any Preemptive Right Beneficiary, the percentage of the New Securities allocated to such Preemptive Right Beneficiary to be determined by dividing (a) the total number of shares of Fully-Diluted Common Stock owned by such Preemptive Right Beneficiary (excluding shares issuable upon exercise of employee stock options), by (b) the total number of shares of Fully-Diluted Common Stock owned by all Preemptive Right Beneficiaries (excluding shares issuable upon exercise of employee stock options).

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ARTICLE 5.

INITIAL PUBLIC OFFERING

5.1 Demand IPO. Notwithstanding anything in this Agreement to the contrary, at any time (i) following the date that is eighteen (18) months after the Effective Date, either (A) CCMP or (B) a majority in interest of the Principal Investors (excluding CCMP), voting as a single class, shall have the right, by delivery of a written notice to the Company, to demand that the Company engage in a Qualified IPO (a “Demand IPO”), if the price per share to be received by the Company or such Party or Parties, as the case may be, in such Demand IPO is at least 1.75 times the price per share paid by CCMP for the Common Stock pursuant to the Stock Purchase Agreement (as such price paid per share by CCMP is appropriately adjusted to reflect any stock splits, stock dividends or other similar recapitalizations), or (ii) following the date that is four (4) years after the Effective Date, CCMP shall have the right, by delivery of a written notice to the Company, to demand a Demand IPO. Upon delivery of such notice, the Company, the Principal Investors and any Permitted Transferees of any of the foregoing shall cooperate and use their respective reasonable best efforts to facilitate the consummation of the Demand IPO, including, but not limited to, taking, facilitating or observing the actions and obligations specified in Article 7. The Board of Directors shall have the right to appoint investment banking and legal advisors to assist the Company with the actions required under this Article 5, such investment banking and legal advisors to be reasonably acceptable to CCMP.

ARTICLE 6.

REGISTRATION RIGHTS; PIGGYBACK REGISTRATION

6.1 Demand Registration Rights.

(a) At any time after a Qualified IPO (the “Demand Period”), each of the Principal Investors may on up to three (3) occasions make a written request of the Company (a “Demand Request”) for registration under the Securities Act (a “Demand Registration”) of Registrable Securities held by such Party or Parties, as the case may be, provided that such Registrable Securities shall have proposed offering proceeds for such offering that equal or exceed the lesser of (i) the remaining shares of Common Stock owned by such Principal Investor and (ii) US $50 million (or US $10 million in the event the Company is able to register such Registrable Securities on Form S-3).

(b) In addition to the Demand Requests pursuant to Section 6.1(a), either Altoma or Chesapeake may make one (1) request for registration under the Securities Act of the Common Stock held by them at any time after the date that is eighteen (18) months after the Effective Date and prior to the date that notice relating to a Demand IPO has been given as provided in Section 5.1, a registration statement for a Qualified IPO has been filed or a Qualified IPO has been consummated, provided that (i) such Registrable Securities shall have proposed offering proceeds for such offering that equals or exceeds the price paid by CCMP for the Common Stock pursuant to the Stock Purchase Agreement (as such price paid per share by CCMP is appropriately adjusted to reflect any stock splits, stock dividends or other similar recapitalizations), (ii) the offering to be undertaken by either Altoma or Chesapeake does not involve a primary offering of Common Stock by the Company, and (iii) the corporate governance rights of CCMP, including without limitation, those contained in this Agreement and the Company’s certificate of incorporation, shall survive such offering. The respective rights of Altoma or Chesapeake set forth in this Section 6.1(b) shall terminate and be of no further force and effect if the Board of Directors of the Company recommends a transaction that would result in a Qualified IPO occurring prior to August 15, 2011, and such party votes against the proposed transaction. For the avoidance of doubt, the obligations of the Company pursuant to this Section 6.1(b) shall be limited to the registration of the Registrable Securities pursuant to a registration statement effective with the Commission only, and the Company shall have no obligation to list or market such Registrable Securities hereunder.

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(c) The Company may defer the filing (but not the preparation) of a registration statement required by this Section 6.1 until a date not later than 60 days after the Required Filing Date (as defined below) if (i) at the time the Company receives the Demand Request, the Company or its Subsidiaries are engaged in confidential negotiations, other confidential business activities or is otherwise in possession of material non-public information, disclosure of which would be required in such registration statement (but would not be required if such registration statement were not filed), and the Board of Directors of the Company determines in good faith that such disclosure would be materially detrimental to the Company and its stockholders, (ii) an investment banking firm advises the Company that effecting such registration would materially and adversely affect an offering of securities of the Company, or (iii) prior to receiving the Demand Request, the Board of Directors had determined to effect a registered underwritten public offering of the Company’s equity securities for the Company’s account and the Company had taken substantial steps (including, but not limited to, selecting (subject to the terms of this Agreement) and entering into a letter of intent with the Managing Underwriter for such offering) and is proceeding with reasonable diligence to effect such offering. A deferral of the filing of a registration statement pursuant to this Section 6.1(c) shall be lifted, and the requested registration statement shall be filed forthwith, if: in the case of a deferral pursuant to clause (i) of the preceding sentence, the negotiations or other activities are disclosed or terminated; in the case of a deferral pursuant to clause (ii) of the preceding sentence, such investment banking firm advises the Company that effecting such registration would no longer materially and adversely affect an offering of securities of the Company; or, in the case of a deferral pursuant to clause (iii) of the preceding sentence, the proposed registration for the Company’s account is abandoned. In order to defer the filing of a registration statement pursuant to this subsection (c), the Company shall promptly, upon determining to seek such deferral, deliver to a requesting holder a certificate signed by the president or chief executive officer of the Company stating that the Company is deferring such filing pursuant to this Section 6.1(c) and the basis therefor in reasonable detail. Within twenty (20) days after receiving such certificate, the requesting holder for which registration was previously requested may withdraw such request by giving notice to the Company; if withdrawn, the Demand Request shall be deemed not to have been made for all purposes of this Agreement. Notwithstanding the foregoing, the Company may not defer the filing of a registration statement pursuant to this Section 6.1(c) more than twice every 12 months.

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(d) Each Demand Request shall specify the number of shares of Registrable Securities proposed to be sold. Subject to this Section 6.1(d), the Company shall use its commercially reasonable efforts to file the Demand Registration within 60 days after receiving a Demand Request (the “Required Filing Date”) and shall use all commercially reasonable efforts to cause the same to be declared effective by the Commission as promptly as practicable after such filing, provided that the Company need effect only one Demand Registration at any time in accordance with this Section 6.1. The Company shall pay all of its fees, costs and expenses, other than underwriting discounts and commissions, related to any such Demand Registration; provided, however, if the Demand Registration is subsequently withdrawn by the Party or Parties initiating the Demand Registration, the Party or Parties may decide either (i) to pay pro rata any expenses of such registration and retain their rights to such Demand Registration or (ii) to elect to have the Company bear such expenses (in which event such Demand Registration shall count as one of such Party’s demands for Demand Registration).

(e) Notwithstanding anything to the contrary contained in this Agreement, the Company shall not be required to register any Person’s Registrable Securities pursuant to a Demand Registration unless such Person accepts the terms of the underwriting agreement, if any, between the Company and the Underwriter.

6.2 Piggyback Registration. Subject to the provisions of this Agreement, if the Company proposes to file a registration statement under the Securities Act with respect to an offering of any equity securities by the Company for its own account or for the account of any of its equity holders, including a registration statement filed pursuant to Section 6.1, (other than a registration statement on Form S-4 or Form S-8 (or such corresponding forms adopted by the Commission for use by foreign issuers), or any substitute form that may be adopted by the Commission, or any registration statement filed in connection with an exchange offer or offering of securities solely to the Company’s existing security holders), then the Company shall give written notice of such proposed filing to the Principal Investors as soon as practicable (but in no event less than 30 days before the anticipated effective date of such registration statement), and such notice shall offer each such Party and its Permitted Transferees the opportunity to register the Applicable Percentage of the Registrable Securities held by each such Party and its Permitted Transferees (a “Piggyback Registration”). Subject to the limitations in Sections 6.3, 6.4, 6.5, 6.6 and 6.9 hereof, the Company shall include in each such Piggyback Registration all Registrable Securities requested to be included in the registration for such offering. Each such holder of Registrable Securities shall be permitted to withdraw all or part of such holder’s Registrable Securities from a Piggyback Registration at any time prior to the effective date thereof.

6.3 Obligations of the Company. Whenever required under this Article 6 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

(a) Prepare and file with the Commission a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to be declared effective, and keep such registration statement effective for up to 120 days; provided, however, that if Holders of Registrable Securities holding shares having an aggregate value in excess of ten million dollars ($10,000,000) request that such registration statement be filed on Form S-3 under Rule 415 on a continuous basis and such filing is permitted under applicable Commission rules, the Company shall keep such registration statement effective until all such Registrable Securities are sold thereunder and/or cease to be Registrable Securities, or for two years if earlier, provided that the aggregate value of shares registered under such registration statement also exceeds ten million dollars ($10,000,000).

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(b) Prepare and file with the Commission 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 Securities Act with respect to the disposition of all securities covered by such registration statement for up to 120 days, or such longer period in connection with a Rule 415 offering described in Section 6.3(a) above.

(c) Furnish to the Parties such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them.

(d) Use its reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or “blue sky” laws of such jurisdictions in the United States as shall be reasonably requested by the Parties, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions.

(e) 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 of such offering.

(f) Notify each Party covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities 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, such obligation to continue for 120 days, or such longer period in connection with a Rule 415 offering described in Section 6.3(a) above.

(g) Except for registrations pursuant to Section 6.1(b), use its reasonable efforts to cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which the same securities issued by the Company are then listed.

(h) Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereto and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.

(i) Except for registrations pursuant to Section 6.1(b), use its reasonable efforts to furnish, at the request of any Party requesting registration of Registrable Securities pursuant to this Article 6, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Article 6, if such securities are being sold through Underwriters, or, if such securities are not being sold through Underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to Underwriters in an underwritten public offering, addressed to the Underwriters, if any, and to the Party or Parties requesting registration of Registrable Securities 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, if any, and to the Parties requesting registration of Registrable Securities.

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6.4 Indemnification. In the event any Registrable Securities are included in a registration statement under this Article 6:

(a) To the extent permitted by law, the Company will indemnify and hold harmless each Party, each of its officers, directors, partners, legal counsel, accountants, and any underwriter (as defined in the Securities Act) for such Party and each Person, if any, who controls such Party or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) 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, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law; and the Company will pay to each such Party, each of its officers, directors, partners, legal counsel, accountants, and any underwriter or controlling person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this Section 6.4(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable to any Party, each of its officers, directors, partners, legal counsel, accountants, and any underwriter or controlling Person for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Party, underwriter or controlling Person.

(b) To the extent permitted by law, each selling Party will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each Person, if any, who controls the Company within the meaning of the Securities Act, legal counsel for the Company, accountants for the Company, any underwriter, any other Party selling securities in such registration statement and any controlling Person of any such underwriter or other Party, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing Persons may become subject, under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Party expressly for use in connection with such registration; and each such Party will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this Section 6.4(b), in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this Section 6.4(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Party, which consent shall not be unreasonably withheld; provided, that in no event shall any indemnity under this Section 6.4(b) exceed the net proceeds from the offering received by such Party, except in the case of willful fraud by such Party.

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(c) Promptly after receipt by an indemnified party under this Section 6.4 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 6.4, deliver to the indemnifying party a written notice of the commencement thereof 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 noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the reasonable fees and expenses to be paid by the indemnifying party, if 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 such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 6.4, but the omission so 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 6.4.

(d) If the indemnification provided for in Section 6.4 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense 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 statements or omissions that resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations; provided, that in no event shall any contribution by a Party under this Section 6.4(d) exceed the net proceeds from the offering received by such Party, except in the case of willful fraud by such Party. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.

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(e) 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 with respect to the Company and the Parties.

(f) The obligations of the Company and Parties under Section 6.4 shall survive the completion of any offering of Registrable Securities in a registration statement under this Article 6, and otherwise.

6.5 Reports Under Exchange Act. With a view to making available to the Parties the benefits of Rule 144 promulgated under the Securities Act and any other rule or regulation of the Commission that may at any time permit a Party to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to:

(a) make and keep public information available, as those terms are understood and defined in Commission Rule 144, at all times after 90 days after the effective date of the first registration statement filed by the Company for the offering of its securities to the general public so long as the Company remains subject to the periodic reporting requirements under Sections 13 or 15(d) of the Exchange Act;

(b) take such action, including the voluntary registration of its Common Stock under Section 12 of the Exchange Act, as is necessary to enable the Parties, if requested pursuant to a Demand Registration, to utilize Form S-3 for the sale of their Registrable Securities, such action to be taken as soon as practicable after the end of the fiscal year in which the first registration statement filed by the Company for the offering of its securities to the general public is declared effective;

(c) file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and

(d) furnish to any Party, so long as the Party owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of Commission Rule 144 (at any time after 90 days after the effective date of the first registration statement filed by the Company), the Securities Act and the Exchange Act (at any time after it has become 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 Party of any rule or regulation of the Commission which permits the selling of any such securities without registration or pursuant to such form.

6.6 No Assignment of Demand Rights. The rights to cause the Company to register Registrable Securities pursuant to Section 6.1 may not be assigned to third parties except to a Permitted Transferee controlled by CCMP, Fischer, Altoma or Chesapeake.

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6.7 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not enter into any agreement with any holder or prospective holder of any securities of the Company which would grant such holder or prospective holder registration rights that are more favorable than the registration rights of the Principal Investors.

6.8 Selection of Underwriters. The Board of Directors shall have the right to designate the book-running managing Underwriter(s) (the “Managing Underwriter(s)”) with respect to any Piggyback Registration or Demand Registration, or with respect to any other underwritten public offering of Registrable Securities or other securities of the Company and shall select such additional Underwriters to be used in connection with the offering, if any, provided that, with respect to any Piggyback Registration or Demand Registration triggered by CCMP or in which CCMP is a participant, such Managing Underwriter designation shall be reasonably acceptable to CCMP. The Board of Directors shall also have the right to select one or more co-managers for each such offering if the Board of Directors, in their sole discretion, shall determine that any be necessary, and the underwriting fees related to any such offering shall be allocated among any such co-managers in such proportions as the Board of Directors shall determine. In the event of any such offering, the Managing Underwriter(s), the Company and any selling stockholders will enter into an agreement appropriate to the circumstances, containing provisions for, among other things, compensation, indemnification, contribution, and representations and warranties, which are usual and customary for similar agreements entered into by the Managing Underwriter(s) or other investment bankers of national standing acting in similar transactions.

6.9 Underwriters’ Cut-Backs. The Company shall use all commercially reasonable efforts to cause the Managing Underwriter or any other managing Underwriter of a proposed underwritten offering (including an offering pursuant to a Demand Registration), as the case may be, to permit the Registrable Securities requested to be included in the registration statement for such offering under Section 6.2 or pursuant to other piggyback registration rights, if any, granted by the Company (“Piggyback Securities”) to be included on the same terms and conditions as any similar securities included therein. Notwithstanding the foregoing, the Company shall not be required to include any Party’s Piggyback Securities in such offering unless such Party accepts the terms of the underwriting agreement between the Company and the Managing Underwriter (or other managing Underwriter) or Underwriters, and otherwise complies with the provisions of Section 6.10 below. If the Managing Underwriter or Underwriters of a proposed underwritten offering advise the Company in writing that in its or their opinion the total amount of securities, including Piggyback Securities, to be included in such offering is sufficiently large to potentially impede or interfere with the offering, then in such event the securities to be included in such offering shall be allocated first to the Company and then, to the extent that any additional securities can, in the opinion of such managing Underwriter or Underwriters, be sold without any such potential to impede or interfere with the offering, pro rata among the holders of Registrable Securities on the basis of the number of Registrable Securities requested to be included in such registration by each such holder.

6.10 Participation. No Party may participate in any underwritten registration under this Article 6 unless such Party (i) agrees to sell such Party’s Registrable Securities on the basis provided in any underwriting arrangements approved by the Person entitled hereunder to approve such arrangements, (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and this Agreement and (iii) if requested by another Person participating in such underwritten registration, agrees that all securities convertible or exchangeable into shares of Common Stock that are included in such underwritten registration shall be so converted or exchanged on or prior to the consummation thereof.

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6.11 Lock-Up Letters. Each holder of Registrable Securities (whether or not such Registrable Securities are included in a registration statement pursuant hereto) agrees to execute a written agreement not to effect any public sale or distribution of the issue being registered or of any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 under the Securities Act, during the 14 days prior to, and during the 180-day period (or shorter period permitted by the Managing Underwriter, if applicable) beginning on, the effective date of a registration statement filed pursuant hereto except as part of such registration if and to the extent requested by the Company, in the case of a non-underwritten public offering, or if and to the extent requested by the Managing Underwriter or Underwriters, as the case may be, in the case of an underwritten public offering.

ARTICLE 7.

REGISTRATION PROCEDURES

7.1 Procedures.

(a) The Company may require each Selling Holder to promptly furnish in writing to the Company such information regarding the distribution of the Registrable Securities as it may from time to time reasonably request and such other information as may be legally required in connection with any registration. Notwithstanding anything herein to the contrary, the Company shall have the right to exclude from any offering the Registrable Securities of any Selling Holder who does not comply with the provisions of the immediately preceding sentence.

(b) Each Selling Holder agrees that, upon receipt of any notice from the Company of the happening of any event that makes any statement made in a registration statement or related prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect, or that requires the making of any changes in such registration statement, prospectus or documents so that, in the case of the registration statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the prospectus, it will not contain any untrue statement of a material fact or omit to state any 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, (i) such Selling Holder will forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Selling Holder’s receipt of the copies of a supplemented or amended prospectus contemplated by the description in this sentence and (ii) if so directed by the Company, such Selling Holder will deliver to the Company all copies, other than permanent file copies, then in such Selling Holder’s possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. In the event the Company shall give such notice, the Company shall extend the period during which such registration statement shall be maintained effective by the number of days during the period from and including the date of the giving of notice pursuant to this sentence to the date when the Company shall make available to the Selling Holders of Registrable Securities covered by such registration statement a prospectus supplemented or amended to conform with the requirements of this sentence.

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7.2 Registration Expenses. In connection with any registration statement required to be filed hereunder, the Company shall pay the following registration expenses (the “Registration Expenses”): (i) all registration and filing fees (including, without limitation, with respect to filings to be made with the Financial Industry Regulatory Authority), (ii) fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), (iii) printing expenses, (iv) internal expenses of the Company (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), (v) the fees and expenses incurred in connection with the listing on a securities exchange or inter-dealer or similar quotation system of the Registrable Securities if the Company shall choose to list such Registrable Securities (other than for registrations pursuant to Section 6.1(b)), (vi) fees and disbursements of counsel for the Company and customary fees and expenses for independent certified public accountants retained by the Company, (vii) the reasonable fees and expenses of one counsel for the Selling Holders (collectively), (viii) the fees and expenses of any special experts retained by the Company in connection with such registration, and (ix) fees and expenses of any “qualified independent underwriter” or other independent appraiser participating in an offering pursuant to Rule 2720(c) of the Financial Industry Regulatory Authority. The Company shall not have any obligation to pay any underwriting fees, discounts, or commissions attributable to the sale of Registrable Securities or, except as provided by clause (ii) or (vii) above, any out-of-pocket expenses of the Selling Holders (or the agents who manage their accounts).

7.3 Suspension Periods. In the event the Company has filed a registration statement that has been declared effective by the Commission (including a registration statement on Form S-3 under Rule 415 that provides for periodic resales by a Selling Holder), the Company may provide notice to the Parties hereto that the Company has elected to require the suspension of the sale by the Parties of Registrable Securities (including securities registered under any such effective registration statement) (a “Suspension Period”):

(a) for the lock-up period relating to any underwritten public offering of Company securities or any private placement of Company securities made pursuant to Rule 144A; and

(b) for a period of up to 90 days if the Company is engaged in confidential negotiations, other confidential business activities or is otherwise in possession of material non-public information, disclosure of which would be required in such registration statement (but would not be required if such registration were not filed), and the Board of Directors of the Company determines in good faith that such disclosure would be materially detrimental to the Company and its stockholders; provided, however, that the Company may not cause a Suspension Period to occur more than twice every 12 months.

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ARTICLE 8.

COMPANY SALE

8.1 Sale Option. Notwithstanding any other provision of this Agreement, and subject to Section 8.2, at any time subsequent to the sixth anniversary of the date hereof, and so long as a Qualified IPO has not yet occurred, CCMP shall have the option to compel the Company to initiate and consummate a sale of all or substantially all of the equity interests in or assets of the Company (a “Company Sale”) pursuant to an auction process (the “Company Sale Auction”), by the delivery to the Board of Directors of the Company and each of the Principal Investors of a written notice to that effect (a “Sale Notice”). The sale of the Company may take the form of a stock sale, asset sale, merger or any other form whatsoever, to be determined by CCMP in its sole discretion, and each Holder shall be permitted to participate in the Company Sale Auction. For the avoidance of doubt, in any sale pursuant to this Section 8.1, each Holder shall receive the same consideration per share of Capital Stock as each other Holder and the terms and conditions of such sale shall be the same for each Holder.

8.2 Fischer Offer.

(a) In the event CCMP initiates a Company Sale, CCMP shall send a copy of the Sale Notice to Fischer, upon receipt of which Fischer shall have thirty (30) days (the “Fischer Offer Deadline”) to negotiate with CCMP and deliver an unconditional, fully financed offer to purchase for cash all of the equity interests in or assets of the Company proposed to be sold in the Company Sale (the “Fischer Offer”), which Fischer Offer shall include terms and conditions customary for such a transaction. If CCMP, in its sole discretion, deems the Fischer Offer acceptable, the closing for the Company Sale shall be consummated at 9:00 a.m. Oklahoma City time on the date 30 days following the Fischer Offer Deadline, at the Company’s principal executive offices, or at such other time, date and place as mutually agreed by Fischer, the Company and CCMP. At the closing, the purchase price set forth in the Fischer Offer and accepted by CCMP shall be paid in the form of a cashier’s check or by wire transfer in same day funds, and the Company shall deliver stock certificates representing all Common Stock so purchased, accompanied by duly executed stock powers, free and clear of all liens, encumbrances and adverse claims (other than encumbrances as set forth in this Agreement), and such other instruments or documents as are deemed necessary by Fischer for the proper Transfer of such Common Stock so transferred. In the event that the Fischer Offer is accepted by CCMP, each of Altoma and Chesapeake may, in its sole discretion, elect to (i) sell the Common Stock beneficially owned by it to Fischer in accordance with the Fischer Offer, or (ii) retain its Common Stock, with such Principal Investor being deemed excluded from and not a party to the Fischer Offer. The Company, Fischer and CCMP shall cooperate in good faith in obtaining all necessary governmental and third-party consents, approvals or waivers required for the closing. The closing may be delayed, to the extent required, until the next succeeding day following the expiration of any required waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the obtaining of any necessary government approvals.

(b) If, (i) CCMP, in its sole discretion, deems the price or terms of the Fischer Offer to be inadequate, or (ii) CCMP did not receive the Fischer Offer prior to the Fischer Offer Deadline (in which case the offer to Fischer to purchase the Company shall be deemed rejected), CCMP and the Company shall be entitled to pursue the Company Sale pursuant on terms no more favorable to CCMP than those offered by Fischer in the Fischer Offer.

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8.3 Advisors. In connection with a Company Sale, CCMP shall have the power to appoint investment banking and legal advisors to assist the Company with the sale, such investment banking and legal advisors to be reasonably acceptable to the Company.

8.4 Reasonable Efforts. The Principal Investors shall take all reasonable actions, including, without limitation, agreeing to tender their Capital Stock in a tender offer or agreeing to sell their Capital Stock in a stock purchase, as may be necessary to effect such a transaction.

ARTICLE 9.

TERMINATION

9.1 Termination. This Agreement shall terminate upon the earlier of (i) the dissolution, liquidation or winding-up of the Company or (ii) December 31, 2025. A Person who ceases to hold any shares of Common Stock and who ceases to beneficially own any shares of Common Stock shall cease to be a Party and shall have no further rights or obligations under this Agreement other than with respect to Section 10.7.

ARTICLE 10.

MISCELLANEOUS

10.1 Amendment. This Agreement may be amended, and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if any such amendment, action or omission to act, has been approved by Holders holding in excess of 50% of the then-outstanding Voting Securities of the Holders including CCMP, provided that this Agreement may not be amended in a manner adversely affecting the rights or obligations of any Holder which does not adversely affect the rights or obligations of all similarly situated Holders in the same manner without the consent of such Holder. The failure of any Party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such Party thereafter to enforce each and every provision of this Agreement in accordance with its terms. Any Holder may waive (in writing) the benefit of any provision of this Agreement with respect to itself for any purpose. Any such waiver shall constitute a waiver only with respect to the specific matter described in such writing and shall in no way impair the rights of the Holder granting such waiver in any other respect or at any other time.

10.2 Specific Performance. The Parties and the Company recognize that the obligations imposed on them in this Agreement are special, unique, and of extraordinary character, and that in the event of breach by any party, damages will be an insufficient remedy; consequently, it is agreed that the Parties and the Company may have specific performance and injunctive relief (in addition to damages) as a remedy for the enforcement hereof, without proving damages.

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10.3 Assignment. Except as otherwise expressly provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the Parties and the Company. No such assignment shall relieve the assignor from any liability hereunder. Any purported assignment made in violation of this Agreement shall be void and of no force and effect.

10.4 Stock Subject to this Agreement. All shares of Common Stock now owned or hereafter acquired by any of the Parties shall be subject to, and entitled to the benefits of, the terms of this Agreement. The Company shall cause any transferee or recipient of an original issuance of any shares of Common Stock, other than such transferee or recipient in a Qualified IPO, any other public offering or as an employee pursuant to an employee benefit plan other than Affiliates of Fischer, to become a Party and be bound as if an original Party hereto and to execute an Adoption Agreement substantially in the form attached hereto as Exhibit B.

10.5 Legends.

(a) Each certificate for shares of Common Stock held by any Person a party hereto shall bear (i) a legend to the effect that such shares have not been registered under the Securities Act or any state securities laws and (ii) a legend in substantially the following form:

THIS SECURITY IS SUBJECT TO CERTAIN VOTING AGREEMENTS, RESTRICTIONS ON TRANSFER, AND OTHER TERMS AND CONDITIONS SET FORTH IN THE STOCKHOLDERS’ AGREEMENT, DATED AS OF APRIL 12, 2010, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.

(b) The restrictions on transfer of shares of Common Stock set forth in such legends (each, a “Restriction”) shall cease and terminate as to any particular share of Common Stock when, in the opinion of counsel to a Holder, which opinion and counsel are reasonably satisfactory to the Company and which opinion shall be delivered to the Company in writing, either or both of such Restrictions are no longer required. Whenever any such Restriction shall cease and terminate as to any share of Common Stock, the Holder thereof shall be entitled to receive from the Company, without expense to such Holder, new certificate(s) not bearing a legend or legends, as the case may be, stating such Restriction(s).

10.6 Notices. Any and all notices, designations, consents, offers, acceptances or other communications provided for herein (each a “Notice”) shall be given in writing by (i) reputable overnight courier, (ii) registered letter or (iii) telecopy with receipt confirmed, which shall be addressed or sent to the respective addresses as follows (or such other address as the Company or any Party may specify to the Company and all other Parties by Notice):

The Company:

Chaparral Energy, Inc.

701 Cedar Lake Boulevard

Oklahoma City, Oklahoma 73114

Attn: Mark A. Fischer

Phone: (405) 478-8770

Fax: (405) 478-2906

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with a copy (which will not constitute notice for purposes of this Agreement) to:

McAfee & Taft

Tenth Floor

Two Leadership Square

211 North Robinson

Oklahoma City, OK 73102

Attention: David J. Ketelsleger

Phone: (405) 552-2236

Fax: (405) 235-0439

CCMP:

CCMP Capital Advisors, LLC

245 Park Avenue, 16th Floor

New York, NY 10167

Attn: A. Joe Delgado

Phone: (212) 600-9632

Fax: (917) 464-8726

with a copy (which will not constitute notice for purposes of this Agreement) to:

Latham & Watkins LLC

717 Texas Ave., 16th Floor

Houston, Texas 77002

Attn: Michael E. Dillard

Phone: (713) 546-5400

Fax: (713) 546-5401

Altoma:

Altoma Energy GP

701 Cedar Lake Boulevard

Oklahoma City, Oklahoma 73114

Attn: Charles A. Fischer, Jr.

Phone: (405) 478-8770

Fax: (405) 478-2906

with a copy (which will not constitute notice for purposes of this Agreement) to:

Mock, Schwabe, Waldo, Elder, Reeves & Bryant LLC

Two Leadership Square, 14th Floor

211 North Robinson

Oklahoma City, Oklahoma 73102

Attn: Randall Mock

Phone: 405-235-5588

Fax: 405-235-0333

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Fischer

Fischer Investments, L.L.C.

701 Cedar Lake Boulevard

Oklahoma City, Oklahoma 73114

Attn: Mark A. Fischer

Phone: (405) 478-8770

Fax: (405) 478-2906

with a copy (which will not constitute notice for purposes of this Agreement) to:

Mock, Schwabe, Waldo, Elder, Reeves & Bryant LLC

Two Leadership Square, 14th Floor

211 North Robinson

Oklahoma City, Oklahoma 73102

Attn: Randall Mock

Phone: 405-235-5588

Fax: 405-235-0333

Chesapeake:

Chesapeake Energy Corporation

6100 North Western Avenue

Oklahoma City, OK 73118

Attention: Mr. Marcus C. Rowland

Phone: (405) 935-9232

Facsimile: (405) 849-9232

with a copy (which will not constitute notice for purposes of this Agreement) to:

Commercial Law Group, P.C.

5520 North Francis

Oklahoma City, Oklahoma 73118

Attention: Mr. Ray Lees

Phone: (405) 254-5725

Facsimile: (405) 232-5533

All other Holders

At the address set forth immediately below their respective signatures on the signature pages hereto or to any adoption agreement.

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All Notices shall be deemed effective and received (i) if given by telecopy, when such telecopy is transmitted to the telecopy number specified above and receipt thereof is confirmed; (ii) if given by overnight courier, on the Business Day immediately following the day on which such Notice is delivered to a reputable overnight courier service; or (iii) if given in person or by registered letter, when such Notice is delivered at the address specified above. No Party shall be entitled to receive a Notice hereunder (or a copy of a Notice delivered to the Company) if, at the time such Notice is to be sent, such Party (including its Affiliates and the employees of such Party and its Affiliates) no longer owns any shares of Common Stock.

10.7 Confidentiality. The Parties shall, and shall cause their respective officers, directors, employees and agents and the respective subsidiaries and Affiliates of the Parties and their respective officers, directors, employees and agents to, hold confidential and not use in any manner detrimental to the Company or any of its Subsidiaries all information they may have or obtain concerning the Company or any of its Subsidiaries and their respective assets, business, operations or prospects (“Confidential Information”); provided, however, that the foregoing shall not apply to (i) information that is or becomes generally available to the public other than as a result of a disclosure by a Party or any of its employees, agents, accountants, legal counsel or other representatives, (ii) information that is or becomes available to a Party or any of its employees, agents, accountants, legal counsel or other representatives on a nonconfidential basis prior to its disclosure by the Company or its employees, agents, accountants, legal counsel or other representatives, and (iii) information that is required to be disclosed by a Party or any of its employees, agents, accountants, legal counsel or other representatives as a result of any applicable law, rule or regulation of any governmental authority or stock exchange, or (iv) information developed independently by a Party or its officers, directors, employees, agents or representatives without use of the Confidential Information disclosed by the Company. If any Party desires to sell shares of Common Stock and in connection with such potential sale desires to disclose information regarding the Company to the potential purchaser in such sale which it is not permitted to disclose pursuant to the preceding sentence, such Party shall notify the Company of such Party’s desire to disclose such information and shall identify the potential purchaser in such notification. The Company may require any such potential purchaser of shares of Common Stock to enter into a confidentiality agreement with respect to Confidential Information on customary terms used in confidentiality agreements in connection with corporate acquisitions.

10.8 Counterparts. This Agreement may be executed in two or more counterparts and each counterpart shall be deemed to be an original and all such counterparts together shall constitute one and the same agreement of the parties hereto.

10.9 Section Headings. Headings contained in this Agreement are inserted only as a matter of convenience and in no way define, limit or extend the scope or intent of this Agreement or any provisions hereof

10.10 Choice of Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to choice of law rules.

10.11 Entire Agreement; Termination. This Agreement contains the entire understanding of the parties hereto respecting the subject matter hereof and supersedes all prior agreements, discussions and understandings with respect thereto, including the Existing Stockholders Agreement. The Existing Stockholders Agreement is hereby terminated effective as of the date hereof and is of no further force or effect.

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10.12 Cumulative Rights. The rights of the Parties and the Company under this Agreement are cumulative and in addition to all similar and other rights of the parties under other agreements.

10.13 Severability. If any term, provision, covenant, or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

10.14 Submission to Jurisdiction.

(a) Any legal action or proceeding with respect to this Agreement, the shares of Common Stock or any document related thereto shall be brought solely in the courts of the State of Delaware or of the United States of America for Delaware, and, by execution and delivery of this Agreement, the Company and each Party hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The parties hereto hereby irrevocably waive any objection, including, without limitation, any objection to the laying of venue or based on the grounds of forum non conveniens, which any of them may now or hereafter have to the bringing of any such action or proceeding in such respective jurisdictions.

(b) The Company and each Party irrevocably consent to the service of process of any of the aforesaid courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the Company or such Party, respectively, at its address provided herein.

(c) Nothing contained in this Section 10.14 shall affect the right of any party hereto to serve process in any other manner permitted by law.

10.15 Waiver of Jury Trial. Each of the Parties hereto waives any right it may have to trial by jury in respect of any litigation based on, or arising out of, under or in connection with this Agreement, any shares of Common Stock or any course of conduct, course of dealing, verbal or written statement or action of any Party hereto.

SIGNATURES CONTAINED ON SUCCEEDING PAGES

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IN WITNESS WHEREOF, the Parties hereto have executed this Stockholders’ Agreement as of the date first above written, and shall become effective as of (and subject to the occurrence of) the Effective Date.

CHAPARRAL ENERGY, INC.
By:	/s/ Mark Fischer
	Name:	Mark Fischer
	Title:	President and Chief Executive Officer
FISCHER INVESTMENTS, L.L.C.
By:	/s/ Mark Fischer
	Name:	Mark Fischer
	Title:	Manager
ALTOMA ENERGY GP
By:	/s/ Charles Fischer
	Name:	Charles Fischer
	Title:	Managing Partner
CHK HOLDINGS, L.L.C.
By:	/s/ Marcus C. Rowland
	Name:	Marcus C Rowland
	Title:	Executive Vice President and Chief Financial Officer
CCMP CAPITAL INVESTORS II (AV-2), L.P.
By:	CCMP Capital Associates, L.P., its general partner
By:	CCMP Capital Associates GP, LLC, its general partner
By:	/s/ Christopher C Behrens
	Name:	Christopher C Behrens
	Title:	Managing Director
CCMP ENERGY I LTD.
By:	/s/ Christopher C Behrens
	Name:	Christopher C Behrens
	Title:	Managing Director

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CCMP CAPITAL INVESTORS (CAYMAN) II, L.P.
By:	CCMP Capital Associates, L.P., general partner
By:	CCMP Capital Associates GP, LLC, general partner
By:	/s/ Christopher C Behrens
	Name:	Christopher C Behrens
	Title:	Managing Director

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EX-10.18

Exhibit 10.18

EIGHTH RESTATED CREDIT AGREEMENT

DATED AS OF

APRIL 12, 2010

AMONG

CHAPARRAL ENERGY, INC.,

AS PARENT AND GUARANTOR,

CHAPARRAL ENERGY, L.L.C.,

NORAM PETROLEUM, L.L.C.,

CHAPARRAL RESOURCES, L.L.C.,

CHAPARRAL CO₂, L.L.C.,

CEI ACQUISITION, L.L.C.,

CEI PIPELINE, L.L.C.,

CHAPARRAL REAL ESTATE, L.L.C.,

GREEN COUNTRY SUPPLY, INC.,

CHAPARRAL EXPLORATION, L.L.C.,

AND

ROADRUNNER DRILLING, L.L.C.

AS BORROWERS,

JPMORGAN CHASE BANK, N.A.,

AS ADMINISTRATIVE AGENT,

CAPITAL ONE, NATIONAL ASSOCIATION,

ROYAL BANK OF CANADA,

AND

UBS AG, STAMFORD BRANCH,

AS CO-SYNDICATION AGENTS,

CREDIT AGRICOLE CORPORATE AND INVESTMENT BANK,

SOCIÉTÉ GÉNÉRALE

AND

WELLS FARGO BANK, N.A.,

AS CO-DOCUMENTATION AGENTS

AND

THE LENDERS PARTY HERETO

J.P. MORGAN SECURITIES INC.

AS LEAD ARRANGER AND SOLE BOOK RUNNER

TABLE OF CONTENTS

		Page No.
	ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01	Terms Defined Above	2
Section 1.02	Certain Defined Terms	2
Section 1.03	Types of Loans and Borrowings	29
Section 1.04	Terms Generally; Rules of Construction	29
Section 1.05	Accounting Terms and Determinations; GAAP	30
	ARTICLE II THE CREDITS
Section 2.01	Commitments	30
Section 2.02	Loans and Borrowings	30
Section 2.03	Requests for Borrowings	32
Section 2.04	Interest Elections	33
Section 2.05	Funding of Borrowings	34
Section 2.06	Changes in the Aggregate Maximum Credit Amounts	35
Section 2.07	Borrowing Base	37
Section 2.08	Letters of Credit	40
Section 2.09	Reliance on Notices; Appointment of Borrower Representative	45
	ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES
Section 3.01	Repayment of Loans	46
Section 3.02	Interest	46
Section 3.03	Alternate Rate of Interest	47
Section 3.04	Prepayments	47
Section 3.05	Fees	49
Section 3.06	Joint and Several Liability; Rights of Contribution	50
	ARTICLE IV PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS.
Section 4.01	Payments Generally; Pro Rata Treatment; Sharing of Set-offs	52
Section 4.02	Presumption of Payment by the Borrowers	53
Section 4.03	Certain Deductions by the Administrative Agent	54
Section 4.04	Disposition of Proceeds	54
	ARTICLE V INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY
Section 5.01	Increased Costs	54

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Section 5.02	Break Funding Payments	55
Section 5.03	Taxes	56
Section 5.04	Mitigation Obligations	57
Section 5.05	Illegality	58
Section 5.06	Defaulting Lenders	59
	ARTICLE VI CONDITIONS PRECEDENT
Section 6.01	Effective Date; Initial Loans	60
Section 6.02	Each Credit Event	63
	ARTICLE VII REPRESENTATIONS AND WARRANTIES
Section 7.01	Organization; Powers	64
Section 7.02	Authority; Enforceability	65
Section 7.03	Approvals; No Conflicts	65
Section 7.04	Financial Condition; No Material Adverse Change	65
Section 7.05	Litigation	66
Section 7.06	Environmental Matters	66
Section 7.07	Compliance with the Laws and Agreements; No Defaults	67
Section 7.08	Investment Company Act	67
Section 7.09	Taxes	67
Section 7.10	ERISA	68
Section 7.11	Disclosure; No Material Misstatements	69
Section 7.12	Insurance	70
Section 7.13	Restriction on Liens	70
Section 7.14	Subsidiaries	70
Section 7.15	Location of Business and Offices	70
Section 7.16	Properties; Titles, Etc	70
Section 7.17	Maintenance of Properties	71
Section 7.18	Gas Imbalances, Prepayments	72
Section 7.19	Marketing of Production	72
Section 7.20	Swap Agreements	72
Section 7.21	Use of Loans and Letters of Credit	72
Section 7.22	Solvency	73
Section 7.23	Private Placement Documents	73
	ARTICLE VIII AFFIRMATIVE COVENANTS
Section 8.01	Financial Statements; Other Information	73
Section 8.02	Notices of Material Events	76
Section 8.03	Existence; Conduct of Business	77
Section 8.04	Payment of Obligations	77
Section 8.05	Performance of Obligations under Loan Documents	77
Section 8.06	Operation and Maintenance of Properties	77

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Section 8.07	Insurance	78
Section 8.08	Books and Records; Inspection Rights	78
Section 8.09	Compliance with Laws	78
Section 8.10	Environmental Matters	79
Section 8.11	Further Assurances	80
Section 8.12	Reserve Reports	80
Section 8.13	Title Information	82
Section 8.14	Collateral; Additional Collateral; Guarantees; Additional Subsidiaries	83
Section 8.15	ERISA Compliance	84
Section 8.16	Commodity Price Risk Management Policy	85
Section 8.17	Unrestricted Subsidiaries	85
	ARTICLE IX NEGATIVE COVENANTS
Section 9.01	Financial Covenants	85
Section 9.02	Debt	86
Section 9.03	Liens	88
Section 9.04	Restricted Payments	89
Section 9.05	Investments, Loans and Advances	89
Section 9.06	Nature of Business	91
Section 9.07	Limitation on Operating Leases	91
Section 9.08	Proceeds of Notes/Loans	91
Section 9.09	ERISA Compliance	91
Section 9.10	Sale or Discount of Receivables	93
Section 9.11	Mergers, Etc	93
Section 9.12	Sale of Oil and Gas Properties; Termination of Swap Agreements	93
Section 9.13	Environmental Matters	94
Section 9.14	Transactions with Affiliates	94
Section 9.15	Subsidiaries	94
Section 9.16	Indebtedness and Preferred Stock	94
Section 9.17	Negative Pledge Agreements; Dividend Restrictions	94
Section 9.18	Swap Agreements	95
Section 9.19	Permitted Bond Documents	96
Section 9.20	Amendments to Organizational Documents	96
Section 9.21	Change in Fiscal Periods	96
Section 9.22	Limitation on Accounting Changes	96
	ARTICLE X EVENTS OF DEFAULT; REMEDIES
Section 10.01	Events of Default	96
Section 10.02	Remedies	99
	ARTICLE XI THE AGENTS
Section 11.01	Appointment; Powers	99

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Section 11.02	Duties and Obligations of Administrative Agent	100
Section 11.03	Action by Administrative Agent	100
Section 11.04	Reliance by Administrative Agent	101
Section 11.05	Subagents	101
Section 11.06	Resignation of Agents	101
Section 11.07	Agents as Lenders	102
Section 11.08	No Reliance	102
Section 11.09	Authority to Release Collateral, Liens and Borrowers	102
Section 11.10	The Arranger and Agents	103
Section 11.11	Filing of Proofs of Claim	103
Section 11.12	Execution of Documents	103
	ARTICLE XII MISCELLANEOUS
Section 12.01	Notices	104
Section 12.02	Waivers; Amendments	105
Section 12.03	Expenses, Indemnity; Damage Waiver	106
Section 12.04	Successors and Assigns	108
Section 12.05	Survival; Revival; Reinstatement	111
Section 12.06	Counterparts; Integration; Effectiveness	111
Section 12.07	Severability	112
Section 12.08	Right of Setoff	112
Section 12.09	Governing Law; Jurisdiction; Consent to Service of Process	112
Section 12.10	Headings	113
Section 12.11	Confidentiality	113
Section 12.12	Exculpation Provisions	114
Section 12.13	No Third Party Beneficiaries	115
Section 12.14	Collateral Matters; Swap Agreements	115
Section 12.15	USA Patriot Act Notice	115
Section 12.16	True-Up Loans	115
Section 12.17	Restatement; Existing Credit Agreement	115

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ANNEXES, EXHIBITS AND SCHEDULES

Annex I	List of Maximum Credit Amounts
Annex II	Existing Letters of Credit
Exhibit A	Form of Note
Exhibit B	Form of Borrowing Request
Exhibit C	Form of Interest Election Request
Exhibit D	Form of Compliance Certificate
Exhibit E	Form of Assignment and Assumption
Exhibit F	Form of Parent Pledge Agreement
Exhibit G	Form of Borrower Pledge Agreement
Exhibit H	Form of Guaranty Agreement
Exhibit I	Form of Certificate of Effectiveness
Exhibit J	Form of Maximum Credit Amount Increase Certificate
Exhibit K	Form of Additional Lender Certificate
Exhibit L	Form of Joinder Agreement
Schedule 7.05	Litigation
Schedule 7.12	Insurance
Schedule 7.14	Subsidiaries
Schedule 7.15	Organizational Information
Schedule 7.16	Properties
Schedule 7.18	Gas Imbalances
Schedule 7.19	Marketing Contracts
Schedule 7.20	Swap Agreements
Schedule 9.05	Investments

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This EIGHTH RESTATED CREDIT AGREEMENT, dated as of April 12, 2010, is among CHAPARRAL ENERGY, INC., a Delaware corporation (“Parent”), CHAPARRAL ENERGY, L.L.C., an Oklahoma limited liability company (“Chaparral”), NORAM PETROLEUM, L.L.C., an Oklahoma limited liability company (“NorAm”), CHAPARRAL RESOURCES, L.L.C., an Oklahoma limited liability company (“Resources”), CHAPARRAL CO₂ , L.L.C., an Oklahoma limited liability company (“Chaparral CO₂”), CEI ACQUISITION, L.L.C., a Delaware limited liability company (“CEI Acquisition”), CEI PIPELINE, L.L.C., a Texas limited liability company (“Pipeline”), CHAPARRAL REAL ESTATE, L.L.C., an Oklahoma limited liability company (“Real Estate”), GREEN COUNTRY SUPPLY, INC., an Oklahoma corporation (“Green Country”), CHAPARRAL EXPLORATION, L.L.C., a Delaware limited liability company (“Exploration”), and ROADRUNNER DRILLING, L.L.C., an Oklahoma limited liability company (“Roadrunner” and, together with Chaparral, NorAm, Resources, Chaparral CO₂, CEI Acquisition, Pipeline, Real Estate, Green Country, Exploration, and each Restricted Subsidiary now or hereafter acquired that becomes a Borrower hereunder pursuant to Section 8.14(c), collectively, “Borrowers” and each individually, a “Borrower”), each of the Lenders from time to time party hereto, JPMORGAN CHASE BANK, N.A. (in its individual capacity, “JPMorgan”), as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the “Administrative Agent”), Capital One, National Association, Royal Bank of Canada and UBS AG, Stamford Branch, as co-syndication agents (in such capacity, the “Syndication Agents”) and Credit Agricole Corporate And Investment Bank, Société Générale and Wells Fargo Bank, N.A., as co-documentation agents (in such capacity, the “Documentation Agents”).

R E C I T A L S

A. The Borrowers (other than Green Country, Exploration and Roadrunner), the Administrative Agent and the financial institutions named and defined therein as Lenders (the “Existing Lenders”) are borrowers under that certain Seventh Restated Credit Agreement dated as of October 31, 2006 (as amended, modified or supplemented prior to the date hereof, the “Existing Credit Agreement”), pursuant to which the Existing Lenders provided certain loans and extensions of credit to the Borrowers (all Debt arising pursuant to the Existing Credit Agreement is referred to herein as the “Existing Indebtedness”). The Existing Indebtedness is guaranteed by Green Country and Roadrunner.

B. The parties hereto desire to amend and restate the Existing Credit Agreement in the form of this Agreement, and to appoint JPMorgan Chase Bank, N.A. as Administrative Agent hereunder, and the Borrowers desire to obtain Borrowings (i) to refinance the Existing Indebtedness, and (ii) for other purposes permitted hereunder.

C. After giving effect to the Closing Transactions and the amendment and restatement of the Existing Credit Agreement pursuant to the terms hereof, the Commitment of each Lender hereunder will be as set forth on Annex I.

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D. NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and subject to the satisfaction of each condition precedent contained in Section 6.01 hereof, the parties hereto agree that the Existing Credit Agreement is hereby amended, renewed, extended and restated in its entirety on (and subject to) the terms and conditions set forth herein. It is the intention of the parties hereto that this Agreement supersedes and replaces the Existing Credit Agreement in its entirety; provided, that, (a) such amendment and restatement shall operate to renew, amend, modify and extend certain of the rights and obligations of the Borrowers under the Existing Credit Agreement, the other Existing Loan Documents and as provided herein, but shall not act as a novation thereof, and (b) the Liens securing the Obligations under and as defined in the Existing Credit Agreement and the liabilities and obligations of Parent, the Borrowers and their Restricted Subsidiaries under the Existing Credit Agreement and the Loan Documents (as therein defined and referred to herein as the “Existing Loan Documents”) shall not be extinguished but shall be carried forward and shall secure such obligations and liabilities as amended, renewed, extended and restated hereby. The parties hereto ratify and confirm each of the Existing Loan Documents entered into prior to the Effective Date (but excluding the Existing Credit Agreement) and agree that such Existing Loan Documents continue to be legal, valid, binding and enforceable in accordance with their terms (except to the extent amended, restated and superseded in their entirety in connection with the transactions contemplated hereby), however, for all matters arising prior to the Effective Date (including the accrual and payment of interest and fees, and matters relating to indemnification and compliance with financial covenants), the terms of the Existing Credit Agreement (as unmodified by this Agreement) shall control and are hereby ratified and confirmed. Parent and the Borrowers, jointly and severally, represent and warrant that, as of the Effective Date, there are no claims or offsets against, or defenses or counterclaims to, their obligations (or the obligations of any Restricted Subsidiary) under the Existing Credit Agreement or any of the other Existing Loan Documents. The parties hereto further agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING MATTERS

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

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

“2005 Indenture” means that certain Indenture dated as of December 1, 2005 among Parent, the guarantors party thereto and Wells Fargo Bank, National Association, as trustee.

“2007 Indenture” means that certain Indenture dated as of January 18, 2007 among Parent, the guarantors party thereto and Wells Fargo Bank, National Association, as trustee.

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

“Additional Lender” has the meaning assigned to such term in Section 2.06(c)(i).

“Additional Lender Certificate” has the meaning assigned to such term in Section 2.06(c)(ii)(F).

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“Additional Permitted Debt” means unsecured senior and unsecured subordinated Debt of Parent and/or any other Credit Party issued or incurred after the date hereof so long as, in each case, (a) such Debt bears no greater than a market interest rate as of the time of its issuance or incurrence, (b) such Debt does not mature or require any scheduled principal payments of the principal amount thereof prior to the date that is no less than 5 years from the date such Debt is issued or incurred, (c) no indenture or other agreement governing such Debt contains (i) maintenance financial covenants or (ii) covenants or events of default that are more restrictive on Parent or any of its Restricted Subsidiaries than those contained in this Agreement are on Parent and its Restricted Subsidiaries, and (d) after giving effect to the issuance or incurrence of such Debt on a pro forma basis, Borrower shall be in compliance with all covenants set forth in Section 9.01 as of the last day of the applicable period covered by the certificate most recently delivered pursuant to Section 8.01(c) (for purposes of Section 9.01, as if such Debt, and all other Additional Permitted Debt issued or incurred since the first day of such applicable period, had been issued or incurred on the first day of such applicable period).

“Additional Permitted Debt Documents” means, collectively, unsecured senior and unsecured subordinated notes, all guarantees of any such notes, the indentures for each series or issue of any such notes and all other agreements, documents or instruments executed and delivered by any Person in connection with, or pursuant to, the issuance of Additional Permitted Debt.

“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next  ¹/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.

“Administrative Agent” has the meaning given in the introductory paragraph.

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

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

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

“Agents” means, collectively, the Administrative Agent, the Syndication Agents, the Documentation Agents and any other agent appointed hereunder from time to time, and “Agent” shall mean any of them, as the context requires.

“Aggregate Maximum Credit Amount” at any time shall equal the sum of the Maximum Credit Amounts, as the same may be increased, reduced or terminated pursuant to Section 2.06. On the Effective Date, the Aggregate Maximum Credit Amount of the Lenders is $450,000,000.

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

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“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus one-half of one percent (0.5%) and (c) the Adjusted LIBO Rate with respect to Interest Periods of one month on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus one percent (1%), provided that, for the avoidance of doubt, the Adjusted LIBO Rate for any day shall be calculated using the rate appearing on Reuters Screen LIBOR01 Page (or on any successor or substitute page, or any successor to or substitute for such page, providing rate quotations comparable to those currently provided on such page, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m. London time on such day. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate shall be effective from and including the effective date of such change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate, respectively.

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

“Annualized Consolidated EBITDAX” means, for each Rolling Period ending on or prior to December 31, 2010, actual Consolidated EBITDAX for such Rolling Period multiplied by a factor determined for such Rolling Period in accordance with the table below:

Rolling Period Ending	Factor
June 30, 2010	4
September 30, 2010	2
December 31, 2010	1.333

“Applicable Margin” means, for any day, with respect to any ABR Loan or Eurodollar Loan, or with respect to the Commitment Fee Rate, as the case may be, the rate per annum set forth in the Borrowing Base Utilization Grid below based upon the Borrowing Base Utilization Percentage then in effect (provided, however, that for the six month period following the Effective Date, in no event shall the margins for any ABR Loan or Eurodollar Loan, or the Commitment Fee Rate, as applicable, be less than the margins, or Commitment Fee Rate, as applicable, set forth under Category 3 in the table below):

Category	1	2	3	4	5
Borrowing Base Utilization Percentage	<25%	³25% <50%	³50% <75%	³75% <90%	³90%
Eurodollar Loans	2.500%	2.750%	3.000%	3.250%	3.500%
ABR Loans	1.625%	1.875%	2.125%	2.375%	2.625%
Commitment Fee Rate	0.500%	0.500%	0.500%	0.500%	0.500%

Each change in the Applicable Margin shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change.

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“Applicable Percentage” means, with respect to any Lender, the percentage of the Aggregate Maximum Credit Amount represented by such Lender’s Maximum Credit Amount as such percentage is set forth on Annex I; provided, that in the case of Section 5.06 when a Defaulting Lender shall exist, “Applicable Percentage” shall mean the percentage of the Aggregate Maximum Credit Amount (disregarding any Defaulting Lender’s Maximum Credit Amount) represented by such Lender’s Maximum Credit Amount and shall be subject to further reallocation in accordance with Section 5.06(c).

“Approved Counterparty” means (a) any Lender or any Affiliate of a Lender, or (b) any other Person whose long term senior unsecured debt rating at the time of entry into the applicable Swap Agreement is A-/A3 by S&P or Moody’s (or their equivalent) or higher.

“Approved Fund” means (a) a CLO and (b) with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

“Approved Petroleum Engineer” means an independent petroleum engineer proposed by the Borrowers and reasonably acceptable to the Administrative Agent.

“Arranger” means J.P. Morgan Securities Inc., in its capacity as lead arranger and sole book runner hereunder.

“ASC” means the Financial Accounting Standards Board Accounting Standards Codification, as in effect from time to time.

“Assessment Rate” means, for any day, the annual assessment rate in effect on such day that is payable by a member of the Bank Insurance Fund classified as “well-capitalized” and within supervisory subgroup “B” (or a comparable successor risk classification) within the meaning of 12 C.F.R. Part 327 (or any successor provision) to the Federal Deposit Insurance Corporation for insurance by such Corporation of time deposits made in dollars at the offices of such member in the United States of America; provided that if, as a result of any change in any law, rule or regulation, it is no longer possible to determine the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual rate as shall be reasonably determined by the Administrative Agent to be representative of the cost of such insurance to the Lenders.

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

“Automatic Debt Issuance Redetermination” means any redetermination of the Borrowing Base under and pursuant to Section 2.07(d).

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

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“Banking Services” means each and any of the following bank services provided to any Credit Party by any Banking Services Provider: (a) commercial credit cards, (b) stored value cards and (c) treasury management services (including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate depository network services).

“Banking Services Provider” means any Lender or any Affiliate of a Lender providing Banking Services to any Credit Party.

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

“Borrower” and “Borrowers” have the meanings given in the introductory paragraph.

“Borrower Pledge Agreement” means an agreement executed by a Borrower and being substantially in the form of Exhibit G, pursuant to which such Borrower pledges to the Administrative Agent, for the ratable benefit of the Secured Parties, all of the issued and outstanding Equity Interests owned by such Borrower of each existing or hereafter acquired Restricted Subsidiary to secure the Indebtedness.

“Borrower Representative” means Chaparral in its capacity as Borrower Representative pursuant to the provisions of Section 2.09.

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

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

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

“Borrowing Request” means a request by the Borrowers (or Borrower Representative) for a Borrowing in accordance with Section 2.03.

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

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

“Casualty Event” means any loss, casualty or other insured damage to, or any nationalization, taking under power of eminent domain or by condemnation or similar proceeding of, any Property of any Credit Party having a fair market value in excess of $5,000,000.

“CCMP” means CCMP Capital Advisors, LLC, a Delaware limited liability company.

“CCMP Parties” means CCMP, CCMP Capital Investors II (AV-2), L.P., CCMP Energy I LTD, CCMP Capital Investors (Cayman) II, L.P. and any other Person that is Controlled by CCMP.

“CEI Acquisition” has the meaning given in the introductory paragraph.

“Certificate of Effectiveness” means a Certificate of Effectiveness in the form of Exhibit I hereto to be executed by Borrower Representative pursuant to Section 6.01.

“Change in Control” means (a) the failure of Parent to own, directly or indirectly, 100% of the Equity Interests of each Borrower, (b) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the date hereof), other than the Designated Equityholders, of Equity Interests representing more than 35% of the aggregate ordinary voting power for the election of directors or other comparable governing body of Parent represented by the issued and outstanding Equity Interests of Parent, (c) the occupation of a majority of the seats (other than vacant seats) on the board of directors (or comparable authority) of Parent or any Borrower by Persons who were neither (i) nominated by the board of directors (or comparable authority) of Parent or any such Borrower nor (ii) appointed by directors so nominated, (d) a “change in control” or “change of control” (or similar event) as defined in any Permitted Bond Document, but only to the extent the occurrence of any such event gives rise to an obligation of Parent or any other Credit Party to redeem, repay, or repurchase, or otherwise offer to redeem, repay or repurchase, all or any portion of the Permitted Bond Debt, or (e) any Equity Interests in any Credit Party (other than Parent) shall be directly owned by any Person other than a Credit Party.

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

“Chaparral” has the meaning given in the introductory paragraph.

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“Chaparral Biofuels” means Chaparral Biofuels, L.L.C., an Oklahoma limited liability company and the parent holding company of Oklahoma Ethanol.

“Chaparral CO₂” has the meaning given in the introductory paragraph.

“CLO” means any entity (whether a corporation, partnership, limited liability company, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or an Affiliate of such Lender.

“Closing Transactions” means the transactions to occur on the Effective Date, including, without limitation: (a) the refinancing in full of all Existing Indebtedness, with the (i) proceeds of a Borrowing under this Agreement and (ii) proceeds of the Private Placement or (iii) Credit Parties’ cash on hand, (b) the closing and consummation of the Private Placement in accordance with the terms, and for the consideration, set forth in the Private Placement Documents, and (c) the payment of all fees and expenses of the Administrative Agent and its Affiliates in connection with the credit facility provided herein.

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

“Collateral” means, collectively, Property which is pledged to secure Indebtedness pursuant to one or more Security Instruments.

“Commitment” means, with respect to each Lender, the commitment of such Lender to make Loans and to acquire participations in Letters of Credit hereunder, expressed as an amount representing the maximum aggregate amount of such Lender’s Credit Exposure hereunder, as such commitment may be (a) modified from time to time pursuant to Section 2.06 and (b) modified from time to time pursuant to assignments by or to such Lender pursuant to Section 12.04(b), and “Commitments” means the aggregate amount of the Commitments of all the Lenders. The amount representing each Lender’s Commitment shall at any time be the lesser of (i) such Lender’s Maximum Credit Amount and (ii) such Lender’s Applicable Percentage of the then effective Borrowing Base (without giving effect to any adjustment of such Lender’s Applicable Percentage pursuant to Section 5.06 hereof).

“Commitment Fee Rate” has the meaning, or is otherwise described as, set forth in the definition of “Applicable Margin”.

“Consolidated Current Assets” means with respect to Parent and the Consolidated Restricted Subsidiaries, as of any date of determination, the sum of (a) the current assets of Parent and the Consolidated Restricted Subsidiaries at such time determined in accordance with GAAP, plus (b) the current unused availability of the total Commitments of all of the Lenders (but only to the extent that the Borrowers are permitted to borrow such amount under the terms of this Agreement including, without limitation, Section 6.02 hereof), minus (c) non-cash current value of assets under ASC Topic 815 and ASC Topic 410.

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“Consolidated Current Liabilities” means with respect to Parent and the Consolidated Restricted Subsidiaries, as of any date of determination, the sum of the current obligations of Parent and the Consolidated Restricted Subsidiaries at such time determined in accordance with GAAP, excluding therefrom (i) current maturities due on the Loan, and (ii) non-cash current obligations and liabilities under ASC Topic 815 and ASC Topic 410.

“Consolidated EBITDAX” means with respect to Parent and the Consolidated Restricted Subsidiaries for any applicable period: (a) Consolidated Net Income of Parent and the Consolidated Restricted Subsidiaries for such period, plus, to the extent deducted in the calculation of Consolidated Net Income, (b) the sum of (i) income or material franchise Taxes paid or accrued; (ii) Consolidated Net Interest Expense; (iii) amortization, depletion and depreciation expense; (iv) any non-cash losses or charges on any Swap Agreement, including those resulting from the requirements of ASC Topic 815, for that period; (v) other non-cash charges (excluding accruals for cash expenses made in the ordinary course of business), including, without limitation, non-cash employee compensation; and (vi) costs and expenses associated with, and attributable to, oil and gas capital expenditures that are expensed rather than capitalized; less, to the extent included in the calculation of Consolidated Net Income, (c) the sum of (i) the income of any Person (other than Wholly-Owned Subsidiaries of such Person) unless such income is received by such Person in a cash distribution; (ii) gains or losses from sales or other dispositions of assets (other than Hydrocarbons produced in the normal course of business); (iii) any non-cash gains on any Swap Agreement, including those resulting from the requirements of ASC Topic 815, for that period; (iv) any cash proceeds received from the termination or other monetization of any Swap Agreement (including, as applicable, any trade confirmations made pursuant thereto) with a scheduled maturity date more than 12 months following the date of such termination or other monetization, and (v) extraordinary or non-recurring gains, but not net of extraordinary or non-recurring “cash” losses. Notwithstanding anything to the contrary contained herein, all calculations of Consolidated EBITDAX shall be (A) in all respects, acceptable to, and approved by, the Administrative Agent, (B) for any applicable period of determination during which a Credit Party has consummated an acquisition or disposition (to the extent permitted hereunder) of Properties, calculated and determined on a pro forma basis as if such acquisition or disposition was consummated on the first day of such applicable period, and (C) calculated, determined and adjusted for any applicable period to exclude any income, loss or other adjustments with respect to Unrestricted Subsidiaries determined in accordance with GAAP, except income received pursuant to a cash distribution shall be included in the calculation of Consolidated EBITDAX.

“Consolidated Net Debt” means, with respect to Parent and the Consolidated Restricted Subsidiaries at any time, (a) the Total Debt of Parent and the Consolidated Restricted Subsidiaries determined on a consolidated basis at such time minus (b) Excess Cash at the time of calculation.

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“Consolidated Net Income” means with respect to Parent and the Consolidated Restricted Subsidiaries, for any period, the aggregate of the net income (or loss) of Parent and the Consolidated Restricted Subsidiaries after allowances for taxes for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from such net income (to the extent otherwise included therein) the following: (a) the net income of any Person in which Parent or any Consolidated Restricted Subsidiary has an interest, which interest does not cause the net income of such other Person to be consolidated with the net income of Parent and the Consolidated Restricted Subsidiaries in accordance with GAAP, except to the extent of the amount of dividends or distributions actually paid in cash during such period by such other Person to Parent or to a Consolidated Restricted Subsidiary, as the case may be; (b) the net income (but not loss) during such period of any Consolidated Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions or transfers or loans by that Consolidated Restricted 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 Restricted Subsidiary or is otherwise restricted or prohibited, in each case determined in accordance with GAAP; (c) the net income (or loss) of any Person acquired in a pooling-of-interests transaction for any period prior to the date of such transaction; (d) any extraordinary gains or losses (excluding capital gains or losses) during such period; (e) the cumulative effect of a change in accounting principles; and (f) any gains or losses attributable to writeups or writedowns of assets.

“Consolidated Net Interest Expense” means, with respect to Parent and the Consolidated Restricted Subsidiaries for any period, the remainder of the following for such period: (a) interest expense minus (b) interest income.

“Consolidated Restricted Subsidiaries” means any Restricted Subsidiaries that are Consolidated Subsidiaries.

“Consolidated Subsidiaries” means each Subsidiary of Parent (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 Parent in accordance with GAAP.

“Consolidated Total Debt” means, at any date, all Debt of Parent and the Consolidated Restricted Subsidiaries determined on a consolidated basis excluding (a) non-cash obligations under ASC Topic 815 and (b) accounts payable and accrued expenses, liabilities or other obligations to pay the deferred purchase price of Property or services, from time to time incurred in the ordinary course of business, which are not greater than ninety (90) days past the date of invoice or delinquent unless such accounts payable, expenses, liabilities or other obligations are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP.

“Consolidated Unrestricted Subsidiaries” means any Unrestricted Subsidiaries that are Consolidated Subsidiaries.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. For the purposes of this definition, and without limiting the generality of the foregoing, any Person that owns directly or indirectly 20% or more of the Equity Interests having ordinary voting power for the election of the directors or other governing body of a Person (other than as a limited partner of such other Person) will be deemed to “control” such other Person. “Controlling” and “Controlled” have meanings correlative thereto.

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

“Credit Parties” means, collectively, Parent, each Borrower and each Restricted Subsidiary, and “Credit Party” means any one of the foregoing.

“Current Ratio” means the ratio of (i) Consolidated Current Assets to (ii) Consolidated Current Liabilities.

“Dated Assets” has the meaning assigned to such term in Section 3.06.

“Dated Liabilities” has the meaning assigned to such term in Section 3.06.

“Debt” means, for any Person, the sum of the following (without duplication): (a) all obligations of such Person for borrowed money or evidenced by bonds, bankers’ acceptances, debentures, notes or other similar instruments; (b) all obligations of such Person (whether contingent or otherwise) in respect of letters of credit, surety or other bonds and similar instruments; (c) all accounts payable and all accrued expenses, liabilities or other obligations of such Person to pay the deferred purchase price of Property or services; (d) all obligations under Capital Leases; (e) all obligations under Synthetic Leases; (f) all Debt (as defined in the other clauses of this definition) of others secured by a Lien on any Property of such Person, whether or not such Debt is assumed by such Person; (g) all Debt (as defined in the other clauses of this definition) of others guaranteed by such Person or in which such Person otherwise assures a creditor against loss of the Debt (howsoever such assurance shall be made) to the extent of the lesser of the amount of such Debt and the maximum stated amount of such guarantee or assurance against loss; (h) all obligations or undertakings of such Person to maintain or cause to be maintained the financial position or covenants of others or to purchase the Debt or Property of others; (i) all obligations to deliver commodities, goods or services, including, without limitation, Hydrocarbons, in consideration of one or more advance payments, other than gas balancing arrangements in the ordinary course of business; (j) all obligations to pay for goods or services whether or not such goods or services are actually received or utilized by such Person; (k) any Debt of a partnership for which such Person is liable either by agreement, by operation of law or by a Governmental Requirement but only to the extent of such liability; (l) Disqualified Capital Stock; (m) the undischarged balance of any production payment created by such Person or for the creation of which such Person directly or indirectly received payment and (n) all obligations under or with respect to Swap Agreements to the extent required to be reflected on a balance sheet of such Person. The Debt of any Person shall include all obligations of such Person of the character described above to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is not included as a liability of such Person under GAAP.

“Debt Issuance Date” means any date on which a Credit Party issues or incurs any Additional Permitted Debt.

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

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“Defaulting Lender” means any Lender, as reasonably determined by the Administrative Agent, that has (a) failed to fund any portion of its Loans or participations in Letters of Credit within three Business Days of the date required to be funded by it hereunder, (b) notified the Borrowers, the Administrative Agent, the Issuing Bank or any Lender in writing that it does not intend to comply with any of its funding obligations under this Agreement or has made a public statement to the effect that it does not intend to comply with its funding obligations under this Agreement or generally under other agreements in which it commits to extend credit, (c) otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within three Business Days of the date when due, unless the subject of a good faith dispute, or (d) (i) become or is insolvent or has a parent company that has become or is insolvent or (ii) become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment or has a parent company that has become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment.; provided, that a Lender shall not become a Defaulting Lender solely as the result of the acquisition or maintenance of an ownership interest in such Lender or Person controlling such Lender or the exercise of control over a Lender or Person controlling such Lender by a Governmental Authority or an instrumentality thereof.

“Default Rate” means a rate per annum equal to two percent (2%) plus the rate applicable to ABR Loans at such time as provided in Section 3.02(a), but in no event to exceed the Highest Lawful Rate.

“Designated Equityholders” means, collectively, Fischer Investments, LLC, Altoma Energy, GP, and the CCMP Parties.

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

“Documentation Agents” has the meaning given in the introductory paragraph.

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

“Domestic Subsidiary” means any Subsidiary that is organized under the laws of the United States of America or any state thereof or the District of Columbia.

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“Effective Date” means the date on which the conditions specified in Section 6.01 are satisfied (or waived in accordance with Section 12.02), and the Borrower Representative has executed and delivered the Certificate of Effectiveness, which date is set forth in the Certificate of Effectiveness.

“Election Notice” has the meaning assigned to such term in Section 3.04(c)(ii).

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

“Environmental Laws” means any and all Governmental Requirements pertaining in any way to health, safety, the environment or the preservation or reclamation of natural resources, in effect in any and all jurisdictions in which any Credit Party is conducting or at any time has conducted business, or where any Property of any Credit Party is located, including without limitation, the Oil Pollution Act of 1990 (“OPA”), as amended, the Clean Air Act, as amended, the Comprehensive Environmental, Response, Compensation, and Liability Act of 1980 (“CERCLA”), as amended, the Federal Water Pollution Control Act, as amended, the Occupational Safety and Health Act of 1970, as amended, the Resource Conservation and Recovery Act of 1976 (“RCRA”), as amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended, and other environmental conservation or protection Governmental Requirements. 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, the terms “solid waste” and “disposal” (or “disposed”) have the meanings specified in RCRA and the term “oil and gas waste” shall have the meaning specified in Section 91.1011 of the Texas Natural Resources Code (“Section 91.1011”); provided, however, that (a) in the event either OPA, CERCLA, RCRA or Section 91.1011 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 (b) to the extent the laws of the state or other jurisdiction in which any Property of any Credit Party is located establish a meaning for “oil,” “hazardous substance,” “release,” “solid waste,” “disposal” or “oil and gas waste” which is broader than that specified in either OPA, CERCLA, RCRA or Section 91.1011, such broader meaning shall apply.

“Equipment and Fixture Financing Debt” means Debt of the Credit Parties incurred to finance the acquisition, construction or improvement of any fixed or capital assets (whether or not constituting purchase money Debt), including equipment, motor vehicles, obligations under Capital Leases and any Debt assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, and extensions, renewals and replacements of any such Debt; provided that: (a) any such extensions, renewals and replacements do not increase the outstanding principal amount thereof, (b) in each case the acquired assets are reasonably related to the businesses of the Credit Parties engaged in on the date hereof, and (c) such Debt is incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement.

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

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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statutes, and all regulations and guidances promulgated thereunder.

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

“ERISA Event” means (a) a “Reportable Event” described in section 4043 of ERISA or the regulations issued thereunder (other than a Reportable Event as to which the provisions of 30 days notice to the PBGC is expressly waived under applicable regulations), (b) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived, (c) the failure to make by its due date a required installment under Section 412(m) of the Code with respect to any Plan or the failure to make any required contribution to a Multiemployer Plan, (d) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan, (e) the incurrence by Borrower, a Subsidiary or any of its ERISA Affiliates of any material liability under Title IV of ERISA with respect to the termination of any Plan, (f) the withdrawal of a Credit Party 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, (g) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under section 4041 of ERISA, (h) the institution of proceedings to terminate a Plan by the PBGC, (i) pursuant to Section 4042 of ERISA, (i) the incurrence by Borrower, a Subsidiary or any of its ERISA Affiliates of any material liability with respect to the withdrawal from any Plan or Multiemployer Plan, (j) the receipt by the Borrower, a Subsidiary or its ERISA Affiliates of any notice, concerning the imposition of a material Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA, (k) the “substantial cessation of operations” within the meaning of Section 4062(e) of ERISA with respect to a Plan, (l) 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, (m) the making of any amendment to any Plan which could result in the imposition of a lien or the posting of a bond or other security, or (n) the occurrence of a nonexempt prohibited transaction (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could reasonably be expected to result in material liability to any Company.

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

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

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“Excepted Liens” means: (a) Liens for Taxes, assessments or other governmental charges or levies which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (b) Liens in connection with workers’ compensation, unemployment insurance or other social security, old age pension or public liability obligations which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (c) statutory landlord’s liens, operators’, vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’, workers’, materialmen’s, construction or other like Liens arising by operation of law in the ordinary course of business or incident to the exploration, development, operation and maintenance of Oil and Gas Properties each of which is in respect of obligations that are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (d) contractual Liens that arise in the ordinary course of business under operating agreements, joint venture agreements, oil and gas partnership agreements, oil and gas leases, farm-out agreements, division orders, contracts for the sale, transportation or exchange of oil and natural gas, unitization and pooling declarations and agreements, area of mutual interest agreements, overriding royalty agreements, marketing agreements, processing agreements, net profits agreements, development agreements, gas balancing or deferred production agreements, injection, repressuring and recycling agreements, salt water or other disposal agreements, seismic or other geophysical permits or agreements, and other agreements which are usual and customary in the oil and gas business and are for claims which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP, provided that any such Lien referred to in this clause does not materially impair the use of the Property covered by such Lien for the purposes for which such Property is held by any Credit Party or materially impair the value of such Property subject thereto; (e) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies and burdening only deposit accounts or other funds maintained with a creditor depository institution, provided that no such deposit account is a dedicated cash collateral account or is subject to restrictions against access by the depositor in excess of those set forth by regulations promulgated by the Board and no such deposit account is intended by any Credit Party to provide collateral to the depository institution; (f) easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations in any Property of any Credit Party 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, which in the aggregate do not materially impair the use of such Property for the purposes of which such Property is held by any Credit Party or materially impair the value of such Property subject thereto; (g) Liens on cash or securities pledged to secure performance of tenders, surety and appeal bonds, government contracts, performance and return of money bonds, bids, trade contracts, leases, statutory obligations, regulatory obligations and other obligations of a like nature incurred in the ordinary course of business; (h) judgment and attachment Liens not giving rise to an Event of Default, provided that any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceeding may be initiated shall not have expired and no action to enforce such Lien has been commenced; (i) Liens arising from Uniform Commercial Code financing statement filings made solely as a precautionary measure regarding operating leases entered into by any Credit Party in the ordinary course of business covering only the Property under lease; and (j) Liens incurred pursuant to the Security Instruments or otherwise created in favor of the any Secured Party pursuant to the Loan Documents; provided, further that Liens described in clauses (a) through (e) shall remain “Excepted Liens” only for so long as no action to enforce such Lien has been commenced and no intention to subordinate the first priority Lien granted in favor of the Administrative Agent and the Lenders is to be hereby implied or expressed by the permitted existence of such Excepted Liens.

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“Excess Cash” means the amount, if any, that (a) the sum of (i) Parent’s and the Consolidated Restricted Subsidiaries’ cash on hand plus (ii) the aggregate amount of Parent’s and the Consolidated Restricted Subsidiaries’ Investments of the types described in clauses (c), (d), (e) and (f) of Section 9.05 exceeds (b) the aggregate amount of the Credit Parties’ accounts payable and accrued expenses, liabilities or other obligations to pay the deferred purchase price of Property or services that are greater than ninety (90) days past the date of invoice unless such accounts payable, expenses, liabilities or other obligations are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP.

“Excluded Taxes” means, with respect to any Agent, any Lender, any Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of any Credit Party hereunder or under any other Loan Document, (a) income or franchise taxes imposed on (or measured by) its income or net income by the United States of America or such other jurisdiction under the laws of which such recipient is organized, or is or should be qualified to do business, or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which any Credit Party is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by any Borrower under Section 5.04(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender’s failure to comply with Section 5.03(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts with respect to such withholding tax pursuant to Section 5.03(a) or Section 5.03(c).

“Existing Credit Agreement” has the meaning given in the recitals.

“Existing Indebtedness” has the meaning given in the recitals.

“Existing Lenders” has the meaning given in the recitals.

“Existing Letters of Credit” ” means letters of credit, if any, issued under the Existing Credit Agreement, outstanding as of the Closing Date and listed on Annex II hereto.

“Existing Loan Documents” has the meaning given in the recitals.

“Existing Swap Agreement” means any Swap Agreement listed on Schedule 7.20 hereto that was entered into between a Credit Party and a Person that was a “Lender” under the Existing Credit Agreement but is not a Lender hereunder.

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“Exploration” has the meaning given in the introductory paragraph.

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

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

“Financial Statements” means, collectively, (i) the audited consolidated balance sheet and statements of income, stockholders’ equity and cash flows of Parent as of and for the fiscal year ended December 31, 2008, (ii) the unaudited drafts of the following financial statements as posted to IntraLinks by the Administrative Agent on March 23, 2010: consolidated balance sheet and statements of income, stockholders’ equity and cash flows of Parent as of and for the fiscal year ended December 31, 2009.

“First Redetermination Date” means the date that the first redetermination of the Borrowing Base becomes effective pursuant to Section 2.07(e).

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

“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

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

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

“Governmental Requirement” means any applicable law, statute, code, ordinance, order, determination, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization or other directive or requirement, whether now or hereafter in effect, including, without limitation, Environmental Laws, energy regulations and occupational, safety and health standards or controls, of any Governmental Authority.

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“Green Country” has the meaning given in the introductory paragraph.

“Guarantors” means Parent and any Person that delivers a Guaranty Agreement pursuant to Section 8.14(c).

“Guaranty Agreement” means an agreement executed by a Guarantor and being substantially in the form of Exhibit H, pursuant to which such Guarantor unconditionally guarantees payment of the Indebtedness, as the same may be amended, modified or supplemented from time to time.

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

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

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

“Indebtedness” means any and all amounts owing or to be owing by any Credit Party: (a) to any Agent, any Issuing Bank or any Lender under any Loan Document including, without limitation, all interest on any of the Loans (including any interest that accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of any Credit Party (or would accrue but for the operation of applicable bankruptcy or insolvency laws), whether or not such interest is allowed or allowable as a claim in any such case, proceeding or other action); (b) to any Secured Swap Provider under any Swap Agreement including any Swap Agreement in existence prior to the date hereof, but excluding any additional transactions or confirmations entered into (i) after such Secured Swap Provider ceases to be a Lender or an Affiliate of a Lender or (ii) after assignment by a Secured Swap Provider to another Secured Swap Provider that is not a Lender or an Affiliate of a Lender; (c) to any Banking Services Provider for Banking Services; and (d) all renewals, extensions and/or rearrangements of any of the above whether such Person (or in the case of its Affiliate, the Person affiliated therewith) remains a Lender hereunder.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Initial Reserve Report” means, collectively, (a) that certain reserve report which was prepared by Cawley, Gillespie & Associates, evaluating the Oil and Gas Properties of the Borrowers dated as of January 14, 2010 and prepared as of December 31, 2009, and (b) that certain reserve report which was prepared by Ryder Scott, evaluating the Oil and Gas Properties of the Borrowers dated as of January 15, 2010 and prepared as of December 31, 2009, true and correct copies of which have been delivered to the Administrative Agent.

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

“Interest Payment Date” means (a) with respect to any ABR Loan, the last day of each March, June, September and December and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period.

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

“Interim Redetermination” means any redetermination of the Borrowing Base under Section 2.07(b)(ii) or Section 2.07(b)(iii).

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

“Investment” means, for any Person: (a) the acquisition (whether for cash, Property, services or securities or otherwise) of Equity Interests of any other Person or any agreement to make any such acquisition (including, without limitation, any “short sale” or any sale of any securities at a time when such securities are not owned by the Person entering into such short sale) or any capital contribution to any other Person; (b) the making of any deposit with, or advance, loan or capital contribution to, assumption of Debt of, purchase or other acquisition of any other Debt or equity participation or interest in, or other extension of credit to, any other Person (including the purchase of Property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such Property to such Person); or (c) the entering into of any guarantee of, or other contingent obligation (including the deposit of any Equity Interests to be sold, and including the issuance of a letter of credit for the account of such Person) with respect to, Debt or other liability of any other Person and (without duplication) any amount committed to be advanced, lent or extended to such other Person.

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“Issuing Bank” means JPMorgan and each Lender that agrees to act as an issuer of Letters of Credit hereunder at the request of the Administrative Agent, in each case, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.08(i). Any Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

“Joinder Agreement” means a joinder agreement, in the form of Exhibit L, or any other form approved by the Administrative Agent, pursuant to which a Restricted Subsidiary hereafter created or acquired becomes a Borrower hereunder.

“JPMorgan” has the meaning given in the introductory paragraph.

“LC Commitment” at any time means $40,000,000.

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

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

“Lenders” means the Persons listed on Annex I, any Person that shall have become a party hereto pursuant to an Assignment and Assumption, and any Person that shall have become a party hereto as an Additional Lender pursuant to Section 2.06(c), other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption.

“Letter of Credit” means, collectively, any letter of credit issued pursuant to this Agreement and any Existing Letters of Credit.

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

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period the rate appearing on Reuters Screen LIBOR01 Page (or on any successor or substitute page, or any successor to or substitute for such page, providing rate quotations comparable to those currently provided on such page, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then such rate for the purposes of calculating the “LIBO Rate” with respect to such Eurodollar Borrowing for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.

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

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

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

“Majority Lenders” means, at any time while no Loans or LC Exposure is outstanding, Lenders having more than fifty percent (50%) of the Aggregate Maximum Credit Amounts; and at any time while any Loans or LC Exposure is outstanding, Lenders holding more than fifty percent (50%) of the outstanding aggregate principal amount of the Loans or participation interests in such Letters of Credit (without regard to any sale by a Lender of a participation in any Loan under Section 12.04(c)); provided, that the determination of Majority Lenders shall be subject to Section 5.06(b).

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

“Material Indebtedness” means Debt (other than the Loans and Letters of Credit), or obligations in respect of one or more Swap Agreements, of any one or more of the Credit Parties in an aggregate principal amount exceeding $10,000,000. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of any Credit Party in respect of any Swap Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that such Credit Party would be required to pay if such Swap Agreement (including, as applicable, any trade confirmations made pursuant thereto) were terminated at such time.

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“Maturity Date” means April 12, 2014.

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

“Maximum Credit Amount Increase Certificate” has the meaning assigned to such term in Section 2.06(c)(ii)(E).

“Monthly Date” means the last Business Day of each calendar month.

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

“Mortgages” means all mortgages, deeds of trust and similar documents, instruments and agreements (and all amendments, modifications and supplements thereof) creating, evidencing, perfecting or otherwise establishing the Liens on Collateral to secure payment of the Indebtedness or any part thereof. All Mortgages shall be in form and substance satisfactory to the Administrative Agent in its sole discretion.

“Multiemployer Plan” means a Plan which is a multiemployer plan as defined in section 3(37) or 4001 (a)(3) of ERISA.

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

“NorAm” has the meaning given in the introductory paragraph.

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

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

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“Oklahoma Ethanol” means Oklahoma Ethanol LLC, an Oklahoma limited liability company.

“Optional Swap Unwind Redetermination” has the meaning assigned to such term in Section 2.07(b)(iv)

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

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

“Parent” means Chaparral Energy, Inc., a Delaware corporation.

“Parent Pledge Agreement” means an agreement executed by Parent and being substantially in the form of Exhibit F, pursuant to which Parent pledges to the Administrative Agent, for the ratable benefit of the Secured Parties, all of the issued and outstanding Equity Interests owned by Parent of each Borrower to secure the Indebtedness.

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

“Patriot Act” has the meaning set forth in Section 12.15.

“PBGC” means the Pension Benefit Guaranty Corporation, or any successor thereto.

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“Permitted 2005 Bond Debt” means Debt of Parent resulting from the issuance by Parent of senior unsecured notes in an aggregate outstanding principal amount of $325,000,000, and which Debt (a) has a coupon or interest rate of eight and one-half percent (8.5%) per annum, (b) shall not mature sooner than the date which is one year following the earlier of (i) the Maturity Date, and (ii) the date on which there are no Loans, LC Exposure or other obligations hereunder outstanding and all of the Commitments are terminated, (c) is not secured by any Properties of the Credit Parties, (d) does not provide for or otherwise require any amortization prior to scheduled maturity, and (e) is evidenced and governed by the 2005 Indenture and related documentation containing customary terms and conditions, including, without limitation, covenants and events of default, for senior unsecured notes or senior subordinated notes of like tenor and amount, each of which shall be satisfactory to the Administrative Agent in its sole reasonable discretion.

“Permitted 2005 Bond Documents” means, collectively, the 2005 Indenture, senior unsecured notes, all guarantees of any such notes, and all other agreements, documents or instruments executed and delivered by any Person in connection with, or pursuant to, the issuance of Permitted 2005 Bond Debt.

“Permitted 2007 Bond Debt” means Debt of Parent resulting from the issuance by Parent of senior unsecured notes in an aggregate outstanding principal amount of $325,000,000, and which Debt (a) has a coupon or interest rate of eight and seven-eighths percent (8.875%) per annum, (b) shall not mature sooner than the date which is one year following the earlier of (i) the Maturity Date, and (ii) the date on which there are no Loans, LC Exposure or other obligations hereunder outstanding and all of the Commitments are terminated, (c) is not secured by any Properties of the Credit Parties, (d) does not provide for or otherwise require any amortization prior to scheduled maturity, and (e) is evidenced and governed by the 2007 Indenture and related documentation containing customary terms and conditions, including, without limitation, covenants and events of default, for senior unsecured notes or senior subordinated notes of like tenor and amount, each of which shall be satisfactory to the Administrative Agent in its sole reasonable discretion.

“Permitted 2007 Bond Documents” means, collectively, the 2007 Indenture, senior unsecured notes, all guarantees of any such notes, and all other agreements, documents or instruments executed and delivered by any Person in connection with, or pursuant to, the issuance of the Permitted 2007 Bond Debt.

“Permitted Bond Debt” means, collectively, the Permitted 2005 Bond Debt, the Permitted 2007 Bond Debt and Additional Permitted Debt, if any.

“Permitted Bond Documents” means, collectively, the Permitted 2005 Bond Documents, the Permitted 2007 Bond Documents and the Additional Permitted Debt Documents, if any.

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

“Pipeline” has the meaning given in the introductory paragraph.

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

“Pledge Agreement” means any Parent Pledge Agreement or Borrower Pledge Agreement, and “Pledge Agreements” means all of such Pledge Agreements.

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

“Private Placement” means, collectively, (a) the issuance by Parent on the Effective Date of common stock in Parent which results in Parent’s receipt of aggregate gross proceeds at least $300,000,000 and (b) the contribution of the net proceeds from such issuance by Parent to Chaparral as a capital contribution.

“Private Placement Documents” means all agreements, certificates, documents or instruments executed by Parent or Chaparral in connection with the Private Placement.

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

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

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

“Real Estate” has the meaning given in the introductory paragraph.

“Recognized Value” means, with respect to all Oil and Gas Properties of the Borrowers constituting proved reserves, the discounted present value of the estimated net cash flow to be realized from the production of Hydrocarbons from all such Oil and Gas Properties which the Administrative Agent attributes to such Oil and Gas Properties for the purposes of the most recent redetermination of the Borrowing Base (or for purposes of determining the initial Borrowing Base in the event no such redetermination has occurred).

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

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“Redetermination Date” means, with respect to any Scheduled Redetermination, any Interim Redetermination, any Optional Swap Unwind Redetermination, or any Automatic Debt Issuance Redetermination, the date that the redetermined Borrowing Base related thereto becomes effective pursuant to Section 2.07(e).

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

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

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

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

“Required Lenders” means, at any time while no Loans or LC Exposure is outstanding, Lenders having at least sixty-six and two-thirds percent (66  ²/3%) of the Aggregate Maximum Credit Amounts; and at any time while any Loans or LC Exposure is outstanding, Lenders holding at least sixty-six and two-thirds percent (66  ²/3%) of the outstanding aggregate principal amount of the Loans or participation interests in such Letters of Credit (without regard to any sale by a Lender of a participation in any Loan under Section 12.04(c)); provided, that the determination of Required Lenders shall be subject to Section 5.06(b).

“Reserve Report” means a report, in form and substance reasonably satisfactory to the Administrative Agent, setting forth, as of each December 31st and June 30th (and such other date in the event of an Interim Redetermination or Optional Swap Unwind Redetermination) the oil and gas reserves attributable to the proved Oil and Gas Properties of the Credit Parties (or as for Interim Redeterminations or Optional Swap Unwind Redeterminations, the proved Oil and Gas Properties of the Credit Parties acquired since the last redetermination of the Borrowing Base), 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. Until superseded, the Initial Reserve Report shall be considered the Reserve Report.

“Resources” has the meaning given in the introductory paragraph.

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

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

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“Restricted Subsidiary” means any Subsidiary of Parent that is not an Unrestricted Subsidiary.

“Review Period” has the meaning assigned to such term in Section 2.07(c)(iii).

“Roadrunner” has the meaning given in the introductory paragraph.

“Rolling Period” means (a) for the fiscal quarters ending on June 30, 2010, September 30, 2010 and December 31, 2010, the period commencing on April 1, 2010 and ending on the last day of the applicable fiscal quarter, and (b) thereafter, any period of four (4) consecutive fiscal quarters ending on the last day of such applicable fiscal quarter.

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

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

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

“Secured Parties” means the Agents, Lenders, Issuing Bank, Secured Swap Providers and Banking Services Providers and “Secured Party” means any one of the foregoing.

“Secured Swap Provider” means any (a) “Secured Swap Provider” as defined in the Existing Credit Agreement which is a counterparty to an Existing Swap Agreement, (b) Person that is a party to a Swap Agreement with a Credit Party that entered into such Swap Agreement before or while such Person was a Lender or an Affiliate of a Lender, whether or not such Person at any time ceases to be a Lender or an Affiliate of a Lender, as the case may be, or (c) assignee of any Person described in clauses (a) or (b) above so long as such assignee is an Approved Counterparty.

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

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

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

“Subject Borrower” has the meaning set forth in Section 3.06(b).

“Subsidiary” means: (a) any Person of which at least a majority of the outstanding Equity Interests having by the terms thereof ordinary voting power to elect a majority of the board of directors, managers or other governing body of such Person (irrespective of whether or not at the time Equity Interests of any other class or classes of such Person 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 Parent, a Borrower or one or more of their Subsidiaries or by Parent, a Borrower and one or more of their Subsidiaries and (b) any partnership of which a Credit Party is a general partner. Unless otherwise indicated herein, each reference to the term “Subsidiary” shall mean a direct or indirect Subsidiary of Parent.

“Substantial Portion” means, with respect to the Property of any Credit Party, Property which represents more than 10% of the consolidated assets of such Person, or Property which is responsible for more than 10% of the consolidated net sales or of the consolidated net income of such Person, in each case, as would be shown in the consolidated financial statements of such Person as at the beginning of the twelve-month period ending with the month in which such determination is made (or if financial statements have not been delivered hereunder for that month which begins the twelve-month period, then the financial statements delivered hereunder for the quarter ending immediately prior to that month).

“Supermajority Lenders” means, at any time while no Loans or LC Exposure is outstanding, Lenders having at least eighty percent (80%) of the Aggregate Maximum Credit Amounts; and at any time while any Loans or LC Exposure is outstanding, Lenders holding at least eighty percent (80%) of the outstanding aggregate principal amount of the Loans or participation interests in such Letters of Credit (without regard to any sale by a Lender of a participation in any Loan under Section 12.04(c)); provided, that the determination of Required Lenders shall be subject to Section 5.06(b).

“Swap Agreement” means any agreement with respect to any swap, cap, floor, collar, forward, future or derivative transaction or option or similar agreement, whether exchange traded, “over-the-counter” or otherwise, involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions and any transaction confirmations entered into under any of the foregoing.

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“Syndication Agents” has the meaning given in the introductory paragraph.

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

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

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

“Transactions” means, with respect to the Credit Parties, the execution, delivery and performance by the Credit Parties of this Agreement, each other Loan Document to which it is a party, the borrowing of the Loans (if applicable), the use of the proceeds thereof (if applicable), the guaranteeing of the Indebtedness (if applicable), the issuance of Letters of Credit hereunder, and the grant of Liens by the Credit Parties on Mortgaged Properties pursuant to the Security Instruments.

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

“Unrestricted Subsidiary” means (a) as of the date hereof, Chaparral Biofuels and Oklahoma Ethanol and (b) any Subsidiary which Parent or the Borrowers has designated in writing to the Administrative Agent to be an Unrestricted Subsidiary at the time such Subsidiary is created or acquired pursuant to Section 8.14(d).

“Wholly-Owned Subsidiary” means any Subsidiary of which all of the outstanding Equity Interests (other than any directors’ qualifying shares mandated by applicable law), on a fully-diluted basis, are owned by Parent and/or another Borrower.

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

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

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Section 1.05 Accounting Terms and Determinations; GAAP. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all financial statements and certificates and reports as to financial matters required to be furnished to the Agents or the Lenders hereunder shall be prepared, in accordance with GAAP, applied on a basis consistent with the Financial Statements except for changes in which Parent’s independent certified public accountants concur and which are disclosed to Administrative Agent on the next date on which financial statements are required to be delivered to the Lenders pursuant to Section 8.01(a); provided that, unless Parent, the Borrowers and the Majority Lenders shall otherwise agree in writing, no such change shall modify or affect the manner in which compliance with the covenants contained herein is computed such that all such computations shall be conducted utilizing financial information presented consistently with prior periods.

ARTICLE II

THE CREDITS

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

Section 2.02 Loans and Borrowings.

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

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

(c) Minimum Amounts; Limitation on Number of Borrowings. At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $3,000,000. At the time that each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $500,000 and not less than $1,000,000; provided that an ABR Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Commitments of all of the Lenders or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.08(e). Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of five (5) Eurodollar Borrowings outstanding. Notwithstanding any other provision of this Agreement, the Borrowers shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.

(d) Notes. The Loans made by the Lenders shall be evidenced by a promissory note, executed and delivered by the Borrowers, payable to the order of each Lender in substantially the form of Exhibit A, dated, in the case of (i) any Lender party hereto as of the date of this Agreement, as of the date of this Agreement, or (ii) any Lender that becomes a party hereto pursuant to an Assignment and Assumption, as of the effective date of the Assignment and Assumption, or (iii) any Lender that becomes a party hereto in connection with an increase in the Aggregate Maximum Credit Amount pursuant to Section 2.06(c), as of the effective date of such increase, payable to the order of such Lender in a principal amount equal to its Maximum Credit Amount as in effect on such date, and otherwise duly completed. If any Lender’s Maximum Credit Amount increases or decreases for any reason (whether pursuant to Section 2.06(c), Section 12.04(b) or otherwise) or if any Restricted Subsidiary hereafter becomes a Borrower pursuant to Section 8.14(c), the Borrowers shall deliver or cause to be delivered on the effective date of such increase or decrease (or the effective date of such Restricted Subsidiary becoming a Borrower, if applicable), a new Note payable to the order of such Lender (or all Lenders in the case of a joinder of a new Borrower) in a principal amount equal to its Maximum Credit Amount after giving effect to such increase or decrease (if applicable), and otherwise duly completed, and each such Lender receiving a new Note agrees to promptly thereafter return the previously issued Note held by such Lender marked canceled or otherwise similarly defaced. The date, amount, Type, interest rate and, if applicable, Interest Period of each Loan made by each Lender, and all payments made on account of the principal thereof, shall be recorded by such Lender on its books for its Note, and, prior to any transfer, may be endorsed by such Lender on a schedule attached to such Note or any continuation thereof or on any separate record maintained by such Lender. Failure to make any such notation or to attach a schedule shall not affect any Lender’s or any Borrower’s rights or obligations in respect of such Loans or affect the validity of such transfer by any Lender of its Note.

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

(i) the aggregate amount of the requested Borrowing;

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

(iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; provided that all Borrowings on the Effective Date shall be ABR Borrowings;

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

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

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

If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrowers shall be deemed to have selected an Interest Period of one month’s duration. Each Borrowing Request shall constitute a representation that the amount of the requested Borrowing shall not cause the total Credit Exposures of all of the Lenders to exceed the total Commitments of all of the Lenders (i.e., the lesser of the Aggregate Maximum Credit Amounts and the then effective Borrowing Base). Promptly following receipt of a Borrowing Request in accordance with this Section 2.03, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.

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Section 2.04 Interest Elections.

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

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

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

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

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

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

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

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

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

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

Section 2.05 Funding of Borrowings.

(a) Funding by Lenders. Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 1:00 p.m., Chicago, Illinois time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Borrowers by promptly crediting the amounts so received, in like funds, to an account of the Borrower Representative maintained with the Administrative Agent and designated by the Borrower Representative in the applicable Borrowing Request; provided that ABR Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.08(e) shall be remitted by the Administrative Agent to the Issuing Bank that made such LC Disbursement.

(b) Presumption of Funding by the Lenders. Unless the Administrative Agent shall have received notice from a Lender prior to the proposed time of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.05(a) and may, in reliance upon such assumption, make available to the Borrowers a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrowers severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrowers to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the Borrowers, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing.

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Section 2.06 Changes in the Aggregate Maximum Credit Amounts.

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

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

(i) The Borrowers may at any time terminate, or from time to time reduce, the Aggregate Maximum Credit Amounts; provided that (A) each reduction of the Aggregate Maximum Credit Amounts shall be in an amount that is an integral multiple of $10,000,000, (B) the Borrowers shall not terminate or reduce the Aggregate Maximum Credit Amounts if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 3.04(c), the total Credit Exposures of all of the Lenders would exceed the total Commitments of all of the Lenders, and (C) the Borrowers shall not reduce the Aggregate Maximum Credit Amounts to any amount less than $100,000,000 (other than in connection with a termination of the entire Aggregate Maximum Credit Amount).

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

(c) Optional Increase in Aggregate Maximum Credit Amount.

(i) Subject to the conditions set forth in Section 2.06(c)(ii), the Borrowers may increase the Aggregate Maximum Credit Amount then in effect with the prior written consent of the Administrative Agent by increasing the Maximum Credit Amount of a Lender or by causing a Person that at such time is not a Lender to become a Lender (an “Additional Lender”). Notwithstanding anything to the contrary contained in this Agreement, in no case shall an Additional Lender be a Borrower or an Affiliate of a Borrower.

(ii) Any increase in the Aggregate Maximum Credit Amount shall be subject to the following additional conditions:

(A) such increase shall not be less than $10,000,000 unless the Administrative Agent otherwise consents, and no such increase shall be permitted if after giving effect thereto the aggregate amount of all such increases exceeds $100,000,000 or the Aggregate Maximum Credit Agreement exceeds $550,000,000;

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(B) no Default shall have occurred and be continuing on the effective date of such increase;

(C) on the effective date of such increase, no Eurodollar Borrowings shall be outstanding or if any Eurodollar Borrowings are outstanding, then the effective date of such increase shall be the last day of the Interest Period in respect of such Eurodollar Borrowings unless the Borrowers pay compensation required by Section 5.02;

(D) no Lender’s Maximum Credit Amount may be increased without the consent of such Lender;

(E) if the Borrowers elect to increase the Aggregate Maximum Credit Amount by increasing the Maximum Credit Amount of a Lender, the Borrower Representative (on behalf of the Borrowers) and such Lender shall execute and deliver to the Administrative Agent a certificate substantially in the form of Exhibit J (a “Maximum Credit Amount Increase Certificate”); and

(F) if the Borrowers elect to increase the Aggregate Maximum Credit Amount by causing an Additional Lender to become a party to this Agreement, then the Borrower Representative (on behalf of the Borrowers) and such Additional Lender shall execute and deliver to the Administrative Agent a certificate substantially in the form of Exhibit K (an “Additional Lender Certificate”), together with an Administrative Questionnaire and a processing and recordation fee of $3,500, and the Borrowers shall (1) if requested by the Additional Lender, deliver a Note payable to the order of such Additional Lender in a principal amount equal to its Maximum Credit Amount, and otherwise duly completed and (2) pay any applicable fees as may have been agreed to between the Borrowers, the Additional Lender and/or the Administrative Agent.

(iii) Subject to acceptance and recording thereof pursuant to Section 2.06(c)(iv), from and after the effective date specified in the Maximum Credit Amount Increase Certificate or the Additional Lender Certificate (or if any Eurodollar Borrowings are outstanding, then the last day of the Interest Period in respect of such Eurodollar Borrowings, unless the Borrowers have paid compensation required by Section 5.02): (A) the amount of the Aggregate Maximum Credit Amount shall be increased as set forth therein, and (B) in the case of an Additional Lender Certificate, any Additional Lender party thereto shall become a party to this Agreement and have the rights and obligations of a Lender under this Agreement and the other Loan Documents. In addition, the Lender or the Additional Lender, as applicable, shall purchase a pro rata portion of the outstanding Loans (and participation interests in Letters of Credit) of each of the other Lenders (and such Lenders hereby agree to sell and to take all such further action to effectuate such sale) such that each Lender (including any Additional Lender, if applicable) shall hold its Applicable Percentage of the outstanding Loans (and participation interests) after giving effect to the increase in the Aggregate Maximum Credit Amount.

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(iv) Upon its receipt of a duly completed Maximum Credit Amount Increase Certificate or an Additional Lender Certificate, executed by the Borrower Representative (on behalf of the Borrowers) and the Lender or by the Borrower Representative (on behalf of the Borrowers) and the Additional Lender party thereto, as applicable, the processing and recording fee referred to in Section 2.06(c)(ii), the Administrative Questionnaire referred to in Section 2.06(c)(ii), if applicable, and the written consent of the Administrative Agent to such increase required by Section 2.06(c)(i), the Administrative Agent shall accept such Maximum Credit Amount Increase Certificate or Additional Lender Certificate and record the information contained therein in the Register required to be maintained by the Administrative Agent pursuant to Section 12.04(b)(iv). No increase in the Aggregate Maximum Credit Amount shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this Section 2.06(c)(iv).

Section 2.07 Borrowing Base.

(a) Initial Borrowing Base. For the period from and including the Effective Date to but excluding the First Redetermination Date, the amount of the Borrowing Base shall be $450,000,000. The amount of the Borrowing Base shall remain at $450,000,000 until the First Redetermination Date in accordance with the procedures set forth in this Section 2.07. Notwithstanding the foregoing, the Borrowing Base may be subject to further adjustments from time to time pursuant to Section 8.13(c).

(b) Scheduled, Interim and Optional Swap Unwind Redeterminations.

(i) The Borrowing Base shall be redetermined semi-annually in accordance with this Section 2.07 (a “Scheduled Redetermination”), and, subject to Section 2.07(e), such redetermined Borrowing Base shall become effective and applicable to the Borrower, the Agents, each Issuing Bank and the Lenders on May 1st (or such date promptly thereafter as reasonably practicable based on the engineering and other information available to the Lenders) and November 1st (or such date promptly thereafter as reasonably practicable based on the engineering and other information available to the Lenders) of each year, commencing November 1, 2010.

(ii) The Administrative Agent may, or at the direction of the Required Lenders shall, by notifying the Borrowers (or the Borrower Representative) thereof, one time between Scheduled Redeterminations, elect to cause the Borrowing Base to be redetermined between Scheduled Redeterminations in accordance with this Section 2.07.

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(iii) The Borrowers may, not more than one time between Scheduled Redeterminations, elect to have the Borrowing Base redetermined in accordance with this Section 2.07.

(iv) The Administrative Agent may elect to cause the Borrowing Base to be redetermined at such times set forth in Section 9.12 in connection with terminations of Swap Agreements (including, as applicable, any trade confirmations made pursuant thereto) in respect of commodities (an “Optional Swap Unwind Redetermination”).

(c) Scheduled, Interim and Optional Swap Unwind Redetermination Procedure.

(i) Each Scheduled Redetermination, each Interim Redetermination and each Optional Swap Unwind Redetermination shall be effectuated as follows: upon receipt by the Administrative Agent of (A) the Reserve Report and the certificate required to be delivered by the Borrowers (or Borrower Representative), in the case of a Scheduled Redetermination, pursuant to Section 8.12(a) and (c), and, in the case of an Interim Redetermination or an Optional Swap Unwind Redetermination, pursuant to Section 8.12(b) and (c), and (B) such other reports, data and supplemental information, including, without limitation, the information provided pursuant to Section 8.12(c), as may, from time to time, be reasonably requested by the Administrative Agent or the Required Lenders (the Reserve Report, such certificate and such other reports, data and supplemental information being the “Engineering Reports”), the Administrative Agent shall evaluate the information contained in the Engineering Reports and shall, in good faith, propose a new Borrowing Base (the “Proposed Borrowing Base”) based upon such information and such other information (including, without limitation, the status of title information with respect to the proved Oil and Gas Properties as described in the Engineering Reports, the existence of any other Debt, the Borrowers’ other assets, liabilities, fixed charges, cash flow, business, properties, prospects, management and ownership, hedged and unhedged exposure to price, price and production scenarios, interest rate and operating cost changes) as the Administrative Agent deems appropriate in its sole discretion and consistent with its normal oil and gas lending criteria as it exists at the particular time. In no event shall the Proposed Borrowing Base exceed the Aggregate Maximum Credit Amount.

(ii) The Administrative Agent shall notify the Borrowers (or Borrower Representative) and the Lenders of the Proposed Borrowing Base (the “Proposed Borrowing Base Notice”) after the Administrative Agent has received complete Engineering Reports from the Borrowers and has had a reasonable opportunity to determine the Proposed Borrowing Base in accordance with Section 2.07(c)(i).

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(iii) Any Proposed Borrowing Base that would increase the Borrowing Base then in effect must be approved by all of the Lenders as provided in this Section 2.07(c)(iii); and any Proposed Borrowing Base that would decrease or maintain the Borrowing Base then in effect must be approved by the Required Lenders as provided in this Section 2.07(c)(iii). Upon receipt of the Proposed Borrowing Base Notice, each Lender shall have fifteen (15) days (or such longer period as determined by the Administrative Agent in its sole discretion) (“Review Period”) to agree with the Proposed Borrowing Base or disagree with the Proposed Borrowing Base, by proposing an alternate Borrowing Base (an “Alternate Borrowing Base”). If at the end of such Review Period, any Lender has not communicated its approval or disapproval in writing to the Administrative Agent, such silence shall be deemed to be a disapproval of the Proposed Borrowing Base. If, at the end of such Review Period, all of the Lenders, in the case of a Proposed Borrowing Base or Alternate Borrowing Base that would increase the Borrowing Base then in effect, or the Required Lenders, in the case of a Proposed Borrowing Base or Alternate Borrowing Base that would decrease or maintain the Borrowing Base then in effect, have approved, as aforesaid, then the Proposed Borrowing Base or Alternate Borrowing Base, as applicable, shall become the new Borrowing Base effective on the date specified in Section 2.07(e). If, however, at the end of such Review Period, all of the Lenders or the Required Lenders, as applicable, have not approved, as aforesaid, then the Administrative Agent shall (A) notify the Borrowers (or Borrower Representative) of the Proposed Borrowing Base or Alternate Borrowing Base, as applicable, and which Lenders have not approved of the Proposed Borrowing Base or Alternate Borrowing Base and (B) poll the Lenders to ascertain the highest Borrowing Base then acceptable to a number of Lenders sufficient to constitute the Required Lenders for purposes of this Section 2.07 and, so long as such amount does not increase the Borrowing Base then in effect, such amount shall become the new Borrowing Base, effective on the date specified in Section 2.07(e). In no event shall the new approved Borrowing Base exceed the Aggregate Maximum Credit Amount.

(d) Automatic Debt Issuance Redeterminations. In addition to the other redeterminations of the Borrowing Base provided for herein, and notwithstanding anything to the contrary contained herein, the Borrowing Base shall automatically reduce on any Debt Issuance Date by an amount equal to twenty-five percent (25%) of the aggregate stated principal amount of any Additional Permitted Debt issued or incurred by the Credit Parties on such Debt Issuance Date. For the purposes of this Section 2.07(d), if any such Additional Permitted Debt is issued at a discount or otherwise sold for less than “par”, the reduction shall be calculated based upon the stated principal amount without reference to such discount.

(e) Effectiveness of a Redetermined Borrowing Base. After a redetermined Borrowing Base is approved by all of the Lenders or the Required Lenders, or otherwise automatically adjusted, as applicable, pursuant to Section 2.07(c)(iii) or Section 2.07(d), the Administrative Agent shall notify the Borrowers (or Borrower Representative) and the Lenders of the amount of the redetermined Borrowing Base (the “New Borrowing Base Notice”), and such amount shall become the new Borrowing Base, effective and applicable to the Borrowers, the Agents, each Issuing Bank and the Lenders:

(i) in the case of a Scheduled Redetermination, (A) if the Administrative Agent shall have received the Engineering Reports required to be delivered by the Borrowers pursuant to Section 8.12(a) and (c) in a timely and complete manner, then on the May 1st (or such date promptly thereafter as reasonably practicable) or November 1^st (or such date promptly thereafter as reasonably practicable), as applicable, following (or as set forth in) such notice, or (B) if the Administrative Agent shall not have received the Engineering Reports required to be delivered by the Borrowers pursuant to Section 8.12(a) and (c) in a timely and complete manner, then on the Business Day next succeeding delivery of such notice;

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(ii) in the case of an Interim Redetermination, or an Optional Swap Unwind Redetermination, on the Business Day next succeeding delivery of such notice;

(iii) in the case of an Automatic Debt Issuance Redetermination, on the applicable Debt Issuance Date.

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

Section 2.08 Letters of Credit.

(a) General. Subject to the terms and conditions set forth herein, the Borrowers (or Borrower Representative) may request any Issuing Bank to issue Letters of Credit in dollars for its own account or for the account of any Borrower, in a form reasonably acceptable to the Administrative Agent and such Issuing Bank, at any time and from time to time during the Availability Period. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrowers (or Borrower Representative) to, or entered into by the Borrowers (or Borrower Representative) with, an Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control. No Issuing Bank shall be under any obligation to issue a Letter of Credit if the issuance of such Letter of Credit would violate one or more policies of such Issuing Bank or any Governmental Requirement.

(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. The Existing Letters of Credit shall be deemed to have been issued hereunder as of the Effective Date. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrowers (or Borrower Representative) shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to any Issuing Bank and the Administrative Agent (not less than three (3) Business Days in advance of the requested date of issuance, amendment, renewal or extension) a notice: (i) requesting the issuance of a Letter of Credit or identifying the outstanding Letter of Credit issued by such Issuing Bank to be amended, renewed or extended; (ii) specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day); (iii) specifying the date on which such Letter of Credit is to expire (which shall comply with Section 2.08(c)); (iv) specifying the amount of such Letter of Credit; (v) specifying the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit; and (vi) specifying the amount of the then effective Borrowing Base, the current total Credit Exposures of all of the Lenders (without regard to the requested Letter of Credit or the requested amendment, renewal or extension of an outstanding Letter of Credit) and the pro forma total Credit Exposures of all of the Lenders (giving effect to the requested Letter of Credit or the requested amendment, renewal or extension of an outstanding Letter of Credit). If requested by any Issuing Bank, the Borrowers (or Borrower Representative) shall submit a letter of credit application on such Issuing Bank’s standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and with respect to each notice provided by the Borrowers (or Borrower Representative) above and any issuance, amendment, renewal or extension of each Letter of Credit, the Borrowers shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (A) the LC Exposure shall not exceed the LC Commitment and (B) the total Credit Exposures of all of the Lenders shall not exceed the total Commitments of all of the Lenders (i.e. the lesser of the Aggregate Maximum Credit Amounts and the then effective Borrowing Base).

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

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

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

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(f) Obligations Absolute. The Borrowers’ obligation to reimburse LC Disbursements as provided in Section 2.08(e) shall be joint and several, absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit, any Letter of Credit Agreement or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by any Issuing Bank under a Letter of Credit issued by such Issuing Bank against presentation of a draft or other document that does not comply with the terms of such Letter of Credit or any Letter of Credit Agreement, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.08(f), constitute a legal or equitable discharge of, or provide a right of setoff against, any Borrower’s obligations hereunder. Neither the Administrative Agent, the Lenders nor any Issuing Bank, nor any of their Related Parties shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of any Issuing Bank; provided that the foregoing shall not be construed to excuse any Issuing Bank from liability to the Borrowers to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrowers to the extent permitted by applicable law) suffered by the Borrowers that are caused by such Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of any Issuing Bank (as finally determined by a court of competent jurisdiction), such Issuing Bank shall be deemed to have exercised all requisite care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank that issued such Letter of Credit may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

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

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

(i) Replacement of an Issuing Bank. Any Issuing Bank may be replaced or resign at any time by written agreement among the Borrowers (or Borrower Representative), the Administrative Agent, such resigning or replaced Issuing Bank and, in the case of a replacement, the successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such resignation or replacement of an Issuing Bank. At the time any such resignation or replacement shall become effective, the Borrowers shall pay all unpaid fees accrued for the account of the resigning or replaced Issuing Bank pursuant to Section 3.05(b). In the case of the replacement of an Issuing Bank, from and after the effective date of such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of the replaced Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the resignation or replacement of an Issuing Bank hereunder, the resigning or replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such resignation or replacement, but shall not be required to issue additional Letters of Credit.

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(j) Cash Collateralization. If (i) any Event of Default shall occur and be continuing and the Borrowers (or Borrower Representative) receive notice from the Administrative Agent or the Majority Lenders demanding the deposit of cash collateral pursuant to this Section 2.08(j), (ii) the Borrowers are required to pay to the Administrative Agent the excess attributable to an LC Exposure in connection with any prepayment pursuant to Section 3.04(c), or (iii) the Borrowers are required to cash collateralize a Defaulting Lender’s LC Exposure pursuant to Section 5.06(c)(ii), then the Borrowers shall deposit, in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash equal to, (x) in the case of an Event of Default, the LC Exposure, (y) in the case of a payment required by Section 3.04(c), the amount of such excess as provided in Section 3.04(c), as of such date plus any accrued and unpaid interest thereon and (z) in the case of a payment required by Section 5.06(c)(ii), the amount of such Defaulting Lender’s LC Exposure; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to any Credit Party described in Section 10.01(g) or Section 10.01(h). The Borrowers hereby grant to the Administrative Agent, for the benefit of each Issuing Bank and the Lenders, an exclusive first priority and continuing perfected security interest in and Lien on such account and all cash, checks, drafts, certificates and instruments, if any, from time to time deposited or held in such account, all deposits or wire transfers made thereto, any and all investments purchased with funds deposited in such account, all interest, dividends, cash, instruments, financial assets and other Property from time to time received, receivable or otherwise payable in respect of, or in exchange for, any or all of the foregoing, and all proceeds, products, accessions, rents, profits, income and benefits therefrom, and any substitutions and replacements therefor. The Borrowers’ joint and several obligation to deposit amounts pursuant to this Section 2.08(j) shall be absolute and unconditional, without regard to whether any beneficiary of any such Letter of Credit has attempted to draw down all or a portion of such amount under the terms of a Letter of Credit, and, to the fullest extent permitted by applicable law, shall not be subject to any defense or be affected by a right of set-off, counterclaim or recoupment which any Credit Party may now or hereafter have against any such beneficiary, any Issuing Bank, the Administrative Agent, the Lenders or any other Person for any reason whatsoever. Such deposit shall be held as collateral securing the payment and performance of the Credit Parties’ obligations under this Agreement and the other Loan Documents in a “securities account” (within the meaning of Article 8 of the Uniform Commercial Code in effect from time to time in the State of New York, the “UCC”) over which the Administrative Agent shall have “control” (within the meaning of the UCC). Notwithstanding the foregoing, the Borrowers (or Borrower Representative) may direct the Administrative Agent and the “securities intermediary” (within the meaning of the UCC) to invest amounts credited to the securities account, at the Borrowers’ risk and expense, in Investments described in Section 9.05(c) through (f). Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse, on a pro rata basis, each Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrowers for the LC Exposure at such time or, if the maturity of the Loans has been accelerated, be applied to satisfy other obligations of the Credit Parties under this Agreement or the other Loan Documents. If the Borrowers are required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, and the Borrowers are not otherwise required to pay to the Administrative Agent the excess attributable to an LC Exposure in connection with any prepayment pursuant to Section 3.04(c), then such amount (to the extent not applied as aforesaid), which shall include interest or profits, if any, on investments that may accumulate in such account as provided hereinabove, shall be returned to the Borrowers within three Business Days after all Events of Default have been cured or waived. If the Borrowers are required to provide an amount of cash collateral hereunder as a result of the existence of a Defaulting Lender having LC Exposure, and the Borrowers are not otherwise required to provide cash collateral for any other purpose hereunder, then such amount of cash collateral provided, which shall include interest or profits, if any, on investments that may accumulate in such account as provided hereinabove, shall be returned to the Borrowers within three Business Days after the first date on which such Defaulting Lender’s LC Exposure no longer exists or on which such Defaulting Lender ceases to be a Defaulting Lender.

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Section 2.09 Reliance on Notices; Appointment of Borrower Representative. The Administrative Agent shall be entitled to rely upon, and shall be fully protected in relying upon, any Borrowing Request, Interest Election Request, request for Letter of Credit or similar notice believed by the Administrative Agent to be genuine. The Administrative Agent may assume that each Person executing and delivering any notice in accordance herewith was duly authorized, unless the responsible individual acting thereon for the Administrative Agent has actual knowledge to the contrary. Parent and each Borrower hereby designates Chaparral as its representative and agent on its behalf for the purposes of issuing Borrowing Requests, Interest Election Requests, receiving and disbursing proceeds of the Loans to the appropriate Borrower, selecting interest rate options, requesting Letters of Credit, giving and receiving all other notices and consents hereunder or under any of the other Loan Documents, executing and delivering to the Administrative Agent and the Lenders the Loan Documents and all related agreements, certificates, documents or instruments as shall be necessary or appropriate to effect the purposes of the Loan Documents, and taking all other actions (including in respect of compliance with covenants) on behalf of any Credit Party under the Loan Documents. Borrower Representative hereby accepts such appointment. The Administrative Agent and the Lenders, and their respective officers, directors, agents or employees, shall not be liable to the Borrower Representative or any Borrower for any action taken or omitted to be taken by the Borrower Representative or the Borrowers pursuant to this Section 2.09. The Administrative Agent and each Lender may regard any notice or other communication pursuant to any Loan Document from Borrower Representative as a notice or communication from all Credit Parties, and may give any notice or communication required or permitted to be given to any Credit Party hereunder to Borrower Representative on behalf of such Credit Party. Parent and each Borrower agree that each notice, election, representation and warranty, covenant, agreement and undertaking made on its behalf by Borrower Representative shall be deemed for all purposes to have been made by such Credit Party and shall be binding upon and enforceable against such Credit Party to the same extent as if the same had been made directly by such Credit Party. Each Borrower shall immediately notify the Borrower Representative of the occurrence of any Default and stating that such notice is a “notice of default.” In the event that the Borrower Representative receives such a notice, the Borrower Representative shall give prompt notice thereof to the Administrative Agent and the Lenders. Any notice provided to the Borrower Representative hereunder shall constitute notice to each Borrower on the date received by the Borrower Representative. Upon the prior written consent of the Administrative Agent, the Borrower Representative may resign at any time, such resignation to be effective upon the appointment of a successor Borrower Representative. The Administrative Agent shall give prompt written notice of such resignation to the Lenders.

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ARTICLE III

PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

Section 3.01 Repayment of Loans. The Borrowers hereby unconditionally, jointly and severally, promise to pay to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Loan on the Termination Date.

Section 3.02 Interest.

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

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

(c) Post-Default Rate. Notwithstanding the foregoing, during the occurrence and continuation of any Default, the Majority Lenders may, at their option, by notice to the Borrower Representative (which notice may be revoked at the option of the Majority Lenders notwithstanding any provision of Section 12.02 requiring the consent of “each Lender affected thereby” for reductions in interest rates), declare that all Loans and all interest in respect of Loans, fees or other amounts outstanding hereunder shall bear interest at the Default Rate. Notwithstanding the foregoing, if (i) any principal of or interest on any Loan or any fee or other amount payable by the Borrowers hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to the Default Rate or (ii) any Event of Default occurs under Section 10.01(g) or Section 10.01(h), all Loans and all interest, fees or other amounts outstanding hereunder shall bear interest at the Default Rate.

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

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(e) Interest Rate Computations. All interest hereunder shall be computed on the basis of a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year), except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error, and be binding upon the parties hereto.

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

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

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

then the Administrative Agent shall give notice thereof to the Borrowers (or Borrower Representative) and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrowers (or Borrower Representative) and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective, and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing (without giving effect to clause (c) of the definition of “Alternate Base Rate” contained herein).

Section 3.04 Prepayments.

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

(b) Notice and Terms of Optional Prepayment. The Borrowers (or Borrower Representative) shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 12:00 noon, Chicago, Illinois time, three Business Days before the date of prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not later than 12:00 noon, Chicago, Illinois time, on the Business Day of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid. Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 3.02.

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(c) Mandatory Prepayments.

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

(ii) Upon any redetermination of or adjustment to the amount of the Borrowing Base in accordance with Section 2.07 (other than Section 2.07(d)) or Section 8.13(c), if the total Credit Exposures of all of the Lenders exceeds the redetermined or adjusted Borrowing Base, then the Borrowers (or Borrower Representative) shall, within 10 days following receipt of the New Borrowing Base Notice in accordance with Section 2.07(e) or the date the adjustment occurs, provide written notice (the “Election Notice”) to the Administrative Agent stating the action which the Borrowers propose to take to remedy such excess, and the Borrowers shall thereafter, at their option, either (A) within 30 days following the delivery of the Election Notice, prepay the Borrowings in an aggregate principal amount equal to such excess, (B) eliminate such excess by making six (6) consecutive mandatory prepayments of principal on the Loan, each of which shall be in the amount of  ¹/6th of the amount of such excess, commencing on the first Monthly Date following the delivery of the Election Notice, and continuing on each Monthly Date thereafter, (C) within 30 days following the delivery of the Election Notice, submit (and pledge as Collateral) additional Oil and Gas Properties owned by the Borrowers for consideration in connection with the determination of the Borrowing Base which the Administrative Agent and the Lenders deem sufficient in their sole discretion to eliminate such excess, or (D) within 30 days following the delivery of the Election Notice, eliminate such excess through a combination of prepayments and submission of additional Oil and Gas Properties as set forth in subclauses (A) and (C) above. If any excess remains after prepaying all of the Borrowings as a result of an LC Exposure, then the Borrowers shall pay to the Administrative Agent on behalf of the Lenders an amount equal to such excess to be held as cash collateral as provided in Section 2.08(j). The Borrowers shall be jointly and severally obligated to deposit such cash collateral amount within five (5) Business Days following its receipt of the New Borrowing Base Notice in accordance with Section 2.07(e) or the date the adjustment occurs; provided that all payments required to be made pursuant to this Section 3.04(c)(ii) must be made on or prior to the Termination Date.

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

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

(v) Subject to Section 4.03, each prepayment of Borrowings pursuant to this Section 3.04(c) shall be applied ratably to the Loans included in the prepaid Borrowings. Prepayments pursuant to this Section 3.04(c) shall be accompanied by accrued interest to the extent required by Section 3.02.

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

Section 3.05 Fees.

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

(b) Letter of Credit Fees. The Borrowers jointly and severally agree to pay (i) to the Administrative Agent for the account of each Lender a participation fee with respect to its participations in Letters of Credit, which shall equal a percentage (being the same Applicable Margin used to determine the interest rate applicable to Eurodollar Loans) of the average daily amount of such Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the date of this Agreement to but excluding the later of the date on which such Lender’s Commitment terminates and the date on which such Lender ceases to have any LC Exposure, provided that in no event shall such fee be less than $300 during any quarter, (ii) to each Issuing Bank, for its own account, a fronting fee equal to 0.125% per annum of the average daily amount of such Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the date of this Agreement to but excluding the later of the date of termination of the Commitments and the date on which there ceases to be any LC Exposure, provided that in no event shall such fee be less than $300 during any quarter, and (iii) to each Issuing Bank, for its own account, its standard and customary fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit issued by such Issuing Bank or processing of drawings thereunder. Participation fees and fronting fees with respect to any Letter of Credit accrued through and including the last day of March, June, September and December of each year shall be payable on the third Business Day following such last day, commencing on the first such date to occur after the date of this Agreement; provided that all such fees shall be payable on the Termination Date and any such fees accruing after the Termination Date shall be payable on demand. Any other fees payable to an Issuing Bank pursuant to this Section 3.05(b) shall be payable within 10 days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days, unless such computation would exceed the Highest Lawful Rate, in which case interest shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

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(c) Administrative Agent Fees. The Borrowers jointly and severally agree to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between or among the Borrowers and the Administrative Agent, including the fees set forth in any separate fee letter.

Section 3.06 Joint and Several Liability; Rights of Contribution.

(a) Each Borrower states and acknowledges that: (i) pursuant to this Agreement, the Borrowers desire to utilize their borrowing potential on a combined basis to the same extent possible if they were merged into a single corporate entity; (ii) each Borrower has determined that it will benefit specifically and materially from the advances of credit contemplated by this Agreement; (iii) it is both a condition precedent to the obligations of the Administrative Agent and the Lenders hereunder and a desire of each Borrower that each Borrower execute and deliver to the Administrative Agent and the Lenders this Agreement; and (iv) each Borrower has requested and bargained for the structure and terms of and security for the Borrowings contemplated by this Agreement.

(b) Each Borrower hereby irrevocably and unconditionally: (i) agrees that it is jointly and severally liable to the Administrative Agent and the Lenders for the full and prompt payment and performance of the obligations of each Borrower under this Agreement that may specify that a particular Borrower is responsible for a given payment or performance; (ii) agrees to fully and promptly perform all of its obligations hereunder with respect to each advance of credit hereunder as if such advance had been made directly to it; and (iii) agrees as a primary obligation to indemnify the Administrative Agent and each Lender, on demand, for and against any loss incurred by the Administrative Agent or any Lender as a result of any of the obligations of any Borrower (the “Subject Borrower”) being or becoming void, voidable, unenforceable or ineffective for any reason whatsoever, whether or not known to the Subject Borrower or any Person, the amount of such loss being the amount which the Administrative Agent or the Lenders (or any of them) would otherwise have been entitled to recover from the Borrowers.

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(c) It is the intent of each Borrower that the indebtedness, obligations and liabilities hereunder of no one of them be subject to challenge on any basis related to any federal or state law dealing with fraudulent conveyances or any other law related to transfers for less than fair or reasonably equivalent value. Accordingly, as of the date hereof, the liability of each Borrower under this Section 3.06 together with all of its other liabilities to all Persons as of the date hereof and as of any other date on which a transfer is deemed to occur by virtue of this Agreement, calculated in amounts sufficient to pay its probable net liabilities on its existing indebtedness as the same become absolute and matured (“Dated Liabilities”) is and is to be, less than the amount of the aggregate of a fair valuation of its property as of such corresponding date (“Dated Assets”). To this end, each Borrower under this Section 3.06 (i) grants to and recognizes in each other Borrower ratably, rights of subrogation and contribution in the amount, if any, by which the Dated Assets of such Borrower, but for the aggregate of subrogation and contribution in its favor recognized herein, would exceed the Dated Liabilities of such Borrower, and (ii) acknowledges receipt of and recognizes its right to subrogation and contribution ratably from the other Borrowers in the amount, if any, by which the Dated Liabilities of such Borrower, but for the aggregate of subrogation and contribution in its favor recognized herein, would exceed the Dated Assets of such Borrower under this Section 3.06. In recognizing the value of the Dated Assets and the Dated Liabilities, it is understood that each Borrower will recognize, to at least the same extent of its aggregate recognition of liabilities hereunder, its rights to subrogation and contribution hereunder. It is a material objective of this Section 3.06 that each Borrower recognizes rights to subrogation and contribution rather than be deemed to be insolvent (or in contemplation thereof) by reason of an arbitrary interpretation of its joint and several obligations hereunder.

(d) Each Borrower agrees and acknowledges that the present structure of the credit facilities detailed in this Agreement is based in part upon the financial and other information presently known to the Administrative Agent and the Lenders regarding each Borrower, the corporate or other organizational structure of each Borrower, and the present financial condition of each Borrower. Upon or after the occurrence of an Event of Default and so long as it is continuing, each Borrower hereby agrees that the Majority Lenders shall have (in addition to any other right provided for in the Loan Documents) the right, in their sole credit judgment, to require that any or all of the following changes be made to these credit facilities: (i) restrict loans and advances between the Borrowers, and (ii) establish such other procedures (in consultation with the Borrowers) as shall be reasonably deemed by the Majority Lenders to be useful in tracking where Loans are made under this Agreement and the source of payments received by the Lenders on such Loans.

(e) Each Borrower waives any right to require the Administrative Agent or any Lender to proceed against any other Person, exhaust any Collateral or security for the Indebtedness, or to have any other Borrower or Credit Party joined with such Borrower in any suit arising out of the Indebtedness, this Agreement or any other Loan Document, or pursue any other remedy in the Administrative Agent’s or any Lender’s power. Each Borrower further waives any and all notice of acceptance of this Agreement and of the creation, modification, rearrangement, renewal or extension for any period of any of the Indebtedness from time to time. Each Borrower further waives any defense arising by reason of any disability or other defense, other than the defense of payment, of any other Borrower or Credit Party or by reason of the cessation from any cause whatsoever of the liability of any other Borrower or Credit Party. Until all of the Indebtedness shall have been paid in full, no Borrower shall have any right to subrogation and each Borrower waives the right to enforce any remedy which the Administrative Agent or any Lender has or may hereafter have against any other Borrower or Credit Party, and waives any benefit of and any right to participate in any other security whatsoever now or hereafter held by the Administrative Agent. Each Borrower authorizes the Administrative Agent and each Lender, without notice or demand and without any reservation of rights against such Borrower and without affecting such Borrower’s liability hereunder or on the Indebtedness, from time to time to (i) take or hold any other Property of any type from any other Person as security for the Indebtedness, and exchange, enforce, waive and release any or all of such other Property; (ii) renew, extend for any period, accelerate, modify, compromise, settle or release any of the obligations of any other Borrower or Credit Party in respect to any or all of the Indebtedness or other security for the Indebtedness; (iii) waive, enforce, modify, amend or supplement any of the provisions of any Loan Document with any Person other than such Borrower; and (iv) release or substitute any other Borrower or Credit Party.

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ARTICLE IV

PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS.

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

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

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

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

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

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Section 4.03 Certain Deductions by the Administrative Agent. If any Lender shall fail to make any payment required to be made by it hereunder then the Administrative Agent may, in its sole discretion (notwithstanding any contrary provision hereof), for so long as such failure exists (i) apply any amounts thereafter received by the Administrative Agent for the account of such Lender and for the benefit of the Administrative Agent or the Issuing Bank to satisfy such Lender’s obligations hereunder until all such unsatisfied obligations are fully paid, and/or (ii) hold any such amounts in a segregated account as cash collateral for, and application to, any future funding obligations of such Lender hereunder; in the case of each of (i) and (ii) above, in any order as determined by the Administrative Agent in its sole discretion.

Section 4.04 Disposition of Proceeds. The Security Instruments contain an assignment by the Credit Parties (as applicable) unto and in favor of the Administrative Agent for the benefit of the Secured Parties of all of each Credit Party’s, as applicable, interest in and to production and all proceeds attributable thereto that may be produced from or allocated to the Collateral or, with respect to the Pledge Agreements, proceeds attributable to the pledge of Equity Interests thereunder. The Security Instruments further provide in general for the application of such proceeds to the satisfaction of the Indebtedness and other obligations described therein and secured thereby. Notwithstanding the assignment contained in such Security Instruments, until the occurrence of an Event of Default, (a) the Administrative Agent and the Lenders agree that they will neither notify the purchaser or purchasers of such production nor take any other action to cause such proceeds attributable to such production to be remitted to the Administrative Agent or the Lenders, but the Lenders will instead permit such proceeds to be paid to the Borrowers and (b) the Lenders hereby authorize the Administrative Agent to take such actions as may be necessary to cause such proceeds attributable to production to be paid to the Borrowers.

ARTICLE V

INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY

Section 5.01 Increased Costs.

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

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

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

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Lender (whether of principal, interest or otherwise), then the Borrowers will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.

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

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

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

Section 5.02 Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan into an ABR Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Eurodollar Loan on the date specified in any notice delivered pursuant hereto, or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrowers (or Borrower Representative) pursuant to Section 5.04(b), then, in any such event, the Borrowers shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section 5.02 and reasonably detailed calculations therefor shall be delivered to the Borrowers (or Borrower Representative) and shall be conclusive absent manifest error. The Borrowers shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.

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Section 5.03 Taxes.

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

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

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

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(d) Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or Other Taxes by a Credit Party to a Governmental Authority, the Borrowers (or Borrower Representative) shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

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

(f) Tax Refunds. If an Agent or a Lender determines, in its reasonable discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrowers or with respect to which the Borrowers have paid additional amounts pursuant to this Section 5.03, it shall pay over such refund to the Borrowers (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrowers under this Section 5.03 with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of such Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, that the Borrowers, upon the request of such Agent or such Lender, jointly and severally agree to repay the amount paid over to the Borrowers (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to such Agent or such Lender in the event such Agent or such Lender is required to repay such refund to such Governmental Authority. This Section 5.03 shall not be construed to require any Agent or any Lender to make available its tax returns (or any other information relating to its taxes which it deems confidential) to any Borrower or any other Person.

Section 5.04 Mitigation Obligations.

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

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(b) Replacement of Lenders. If (i) any Lender advises the Administrative Agent that the Adjusted LIBO Rate or LIBO Rate, as applicable, will not adequately and fairly reflect the cost to such Lender of making or maintaining its Loans pursuant to Section 3.03, (ii) any Lender requests compensation under Section 5.01, (iii) any Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 5.03, (iv) it becomes unlawful for any Lender to honor its obligation to make or maintain Eurodollar Loans pursuant to Section 5.05, (v) any Lender becomes a Defaulting Lender, (vi) any Lender has not approved an increase in the Borrowing Base proposed by the Administrative Agent pursuant to Section 2.07(c)(iii), or (vii) in addition to the foregoing, in connection with any consent to or approval of any proposed amendment, waiver, consent or release with respect to any Loan Document that requires the consent of each Lender or the consent of each Lender affected thereby, the consent of the Supermajority Lenders shall have been obtained but any Lender has not so consented to or approved such proposed amendment, waiver, consent or release, then the Borrowers may, at their sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 12.04(b)), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (1) if a Lender is removed as a Lender hereunder, the Borrowers have paid such Lender all amounts due and owing under this Agreement and the other Loan Documents, including, without limitation, all principal, accrued interest, fees and breakage costs, (2) in the case of a required assignment of interest, the Borrowers shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (3) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrowers (in the case of all other amounts) and (4) in the case of any such assignment resulting from a claim for compensation under Section 5.01 or payments required to be made pursuant to Section 5.03, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrowers to require such assignment and delegation cease to apply.

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

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Section 5.06 Defaulting Lenders. Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:

(a) fees shall cease to accrue on the unfunded portion of the Commitment of such Defaulting Lender pursuant to Section 3.05(a);

(b) the Maximum Credit Amount and Credit Exposure of such Defaulting Lender shall not be included in determining whether Majority Lenders or the Required Lenders, as applicable, have taken or may take any action hereunder (including any consent to any amendment or waiver pursuant to Section 12.02);

(c) if any LC Exposure exists at the time a Lender becomes a Defaulting Lender then:

(i) all or any part of such LC Exposure shall be reallocated among the non-Defaulting Lenders in accordance with their respective Applicable Percentages but only to the extent (x) the sum of all non-Defaulting Lenders’ Credit Exposure does not exceed the total of all non-Defaulting Lenders’ Commitments and (y) the conditions set forth in Section 6.02 are satisfied at such time;

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

(iii) if the Borrowers cash collateralize any portion of such Defaulting Lender’s LC Exposure pursuant to this Section 5.06(c), the Borrowers shall not be required to pay any fees to such Defaulting Lender pursuant to Section 3.05(b) with respect to such Defaulting Lender’s LC Exposure during the period such Defaulting Lender’s LC Exposure is cash collateralized;

(iv) if the LC Exposure of the non-Defaulting Lenders is reallocated pursuant to this Section 5.06(c), then the fees payable to the Lenders pursuant to Section 3.05(a) and Section 3.05(b) shall be adjusted in accordance with such non-Defaulting Lenders’ Applicable Percentages; and

(v) if any Defaulting Lender’s LC Exposure is neither cash collateralized nor reallocated pursuant to this Section 5.06(c), then, without prejudice to any rights or remedies of the Issuing Bank or any Lender hereunder, all commitment fees that otherwise would have been payable to such Defaulting Lender (solely with respect to the portion of such Defaulting Lender’s Commitment that was utilized by such LC Exposure) under Section 3.05(a) and letter of credit fees payable under Section 3.05(b) with respect to such Defaulting Lender’s LC Exposure shall be payable to the Issuing Bank until such LC Exposure is cash collateralized or reallocated; and

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(d) so long as any Lender is a Defaulting Lender, the Issuing Bank shall not be required to issue, amend or increase any Letter of Credit, unless it is satisfied that the related exposure will be 100% covered by the Commitments of the non-Defaulting Lenders and/or cash collateral will be provided by the Borrowers in accordance with Section 5.06(c), and participating interests in any such newly issued or increased Letter of Credit shall be allocated among non-Defaulting Lenders in a manner consistent with Section 5.06(c)(i) (and Defaulting Lenders shall not participate therein).

In the event that the Administrative Agent agrees that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then the LC Exposure of the Lenders shall be readjusted to reflect the inclusion of such Lender’s Commitment and on such date such Lender shall purchase at par such of the Loans of the other Lenders as the Administrative shall determine may be necessary in order for such Lender to hold such Loans in accordance with its Applicable Percentage.

ARTICLE VI

CONDITIONS PRECEDENT

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

(a) The Administrative Agent, the Arranger and the Lenders shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all reasonable out-of-pocket expenses required to be reimbursed or paid by the Borrowers hereunder.

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

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(c) The Administrative Agent shall have received certificates of the appropriate State agencies with respect to the existence, qualification and good standing of the Credit Parties, which certificates shall be dated as of a recent date prior to the Effective Date.

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

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

(f) The Administrative Agent shall have received from each party thereto duly executed counterparts (in such number as may be requested by the Administrative Agent) of the applicable Security Instruments, together with (i) such UCC financing statements (duly authorized) as the Administrative Agent may request to perfect (or continue perfection of) the Liens granted pursuant to such Security Instruments, and (ii) certificates evidencing one hundred percent (100%) of the issued and outstanding Equity Interests of each Borrower, of every class (all such certificates, if any, shall be duly endorsed or accompanied by duly executed blank stock powers). In connection with the execution and delivery of the Security Instruments, the Administrative Agent shall be reasonably satisfied that the Security Instruments create first priority, perfected Liens (subject only to Excepted Liens of the type described in clauses (a) to (d), (f) and (i) of the definition thereof, but subject to the provisos at the end of such definition) on at least 80% of the total Recognized Value of the proved Oil and Gas Properties evaluated for purposes of establishing the initial Borrowing Base.

(g) The Administrative Agent shall have received the Financial Statements. The Administrative Agent acknowledges receipt of the Financial Statements.

(h) The Administrative Agent shall have received opinions of special counsel to the Borrowers and Parent, and, as applicable and necessary (as determined by the Administrative Agent in its sole reasonable discretion), opinions of local counsel, in each case, in a form reasonably acceptable to the Administrative Agent and its counsel.

(i) The Administrative Agent shall have received a certificate from the Borrowers’ insurance agent(s) summarizing the insurance coverage of the Borrowers and evidencing that the Borrowers are carrying insurance in accordance with Section 7.12.

(j) The Administrative Agent and/or its counsel shall have received title information as they may reasonably require setting forth the status of title to at least 80% of the total Recognized Value of the proved Oil and Gas Properties evaluated in the Initial Reserve Report. The Administrative Agent acknowledges that it has received the required title information set forth in the immediately preceding sentence.

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(k) The Administrative Agent shall be reasonably satisfied with the environmental condition of the Oil and Gas Properties of the Credit Parties. The Administrative Agent acknowledges that it is reasonably satisfied with the environmental condition of the Oil and Gas Properties of the Credit Parties.

(l) The Administrative Agent shall have received the Initial Reserve Report accompanied by a certificate covering the matters described in Section 8.12(c). The Administrative Agent acknowledges receipt of the Initial Reserve Report.

(m) The Administrative Agent shall have received appropriate UCC search certificates reflecting no prior Liens encumbering the Properties of the Credit Parties in each jurisdiction requested by the Administrative Agent, other than Liens permitted by Section 9.03.

(n) The Administrative Agent shall have received, and satisfactorily completed its review of, a commodity price risk management policy of the Credit Parties. The Administrative Agent shall have received evidence reasonably satisfactory to it that such commodity price risk management policy shall have been implemented. The Administrative Agent acknowledges that it has received and is satisfied with its review of the Credit Parties’ commodity price risk management policy.

(o) In addition to the other Closing Transactions which shall have occurred and been consummated, the Private Placement shall have occurred and been consummated, or shall be occurring contemporaneously with the consummation of the financing provided for herein, in accordance with all Governmental Requirements and on the terms set forth in the Private Placement Documents, and the Administrative Agent shall have received a copy of each material Private Placement Document, together with a certificate of a Responsible Officer of Borrower Representative certifying that such copies are accurate and complete and represent the complete understanding and agreement of the parties with respect to the subject matter thereof. No provision of any such Private Placement Document shall have been waived, amended, supplemented or otherwise modified in any material respect without approval of the Administrative Agent. Parent shall have received (or shall receive contemporaneously with the consummation of the other Closing Transactions) aggregate gross proceeds of $300,000,000 from the Private Placement and contributed (or shall contribute contemporaneously with the consummation of the other Closing Transactions) all net proceeds thereof to Chaparral as a capital contribution.

(p) All approvals of Governmental Authorities and third parties necessary in connection with the Private Placement, the financing contemplated by this Agreement and the continuing operations of the Credit Parties (including shareholder approvals, if any) shall have been obtained on terms satisfactory to the Administrative Agent and shall be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority that would restrain, prevent or otherwise impose adverse conditions on the Private Placement or any of the Closing Transactions contemplated in this Agreement.

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(q) The capitalization structure and equity ownership of each Credit Party after giving effect to the Closing Transactions, including, without limitation, the Private Placement, shall be satisfactory to the Administrative Agent in all respects.

(r) The Administrative Agent shall have received, and satisfactorily completed its review of, all due diligence information regarding the Credit Parties as it shall have requested including, without limitation, (i) information regarding litigation, tax matters, accounting matters, insurance matters, labor matters, pension liabilities (actual or contingent), real estate leases, material contracts, debt agreements, property ownership and contingent liabilities of Parent, the Borrowers and their Restricted Subsidiaries, and (ii) financial information of Parent, the Borrowers and their Restricted Subsidiaries including, without limitation, pro forma projections in form and substance satisfactory to the Administrative Agent.

(s) After giving effect to the consummation of the Closing Transactions, the amount by which the total Commitments of all of the Lenders exceed the total Credit Exposures of all of the Lenders shall not be less than $250,000,000.

(t) The Administrative Agent shall have received such other documents as the Administrative Agent or its special counsel may reasonably request.

All documents executed or submitted pursuant to this Section 6.01 by and on behalf of Parent, the Borrowers or any of their Restricted Subsidiaries shall be in form and substance satisfactory to the Administrative Agent and its counsel. The obligations of the Lenders to make Loans and of the Issuing Bank to issue a Letter of Credit hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived in accordance with Section 12.02(b)) at or prior to 2:00 p.m., Chicago, Illinois time, on April 12, 2010. Upon satisfaction of each of the conditions set forth in this Section 6.01, Borrower Representative shall execute and deliver the Certificate of Effectiveness. Upon the satisfaction of each of the conditions set forth in this Section 6.01 and the execution and delivery of the Certificate of Effectiveness, the Existing Credit Agreement shall automatically and completely be amended and restated on the terms set forth herein without necessity of any other action of the part of any Lender, the Administrative Agent or any Credit Party. Until the satisfaction of each of the conditions set forth in this Section 6.01 and the execution and delivery of the Certificate of Effectiveness, the Existing Credit Agreement shall remain in full force and effect in accordance with its terms.

Without limiting the generality of the provisions of Section 11.04, for purposes of determining compliance with the conditions specified in this Section 6.01, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required under this Section 6.01 to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the Effective Date specifying its objection thereto.

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

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

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

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

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

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

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

ARTICLE VII

REPRESENTATIONS AND WARRANTIES

Parent and the Borrowers jointly and severally represent and warrant to the Lenders (which, with respect to representations and warranties made on the Effective Date, are deemed made after giving effect to the Closing Transactions) that:

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

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

Section 7.03 Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority or any other third Person (including shareholders, members or any class of directors, whether interested or disinterested, of any Credit Party or any other Person), nor is any such consent, approval, registration, filing or other action necessary for the validity or enforceability of any Loan Document or the consummation of the transactions contemplated thereby, except such as have been obtained or made and are in full force and effect other than (i) the recording and filing of the Security Instruments as required by this Agreement and (ii) those third party approvals or consents which, if not made or obtained, would not cause a Default hereunder, could not reasonably be expected to have a Material Adverse Effect or do not have an adverse effect on the enforceability of the Loan Documents, (b) will not violate any applicable law or regulation or the charter, regulations, by-laws or other organizational documents of any Credit Party or any other Person or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon any Credit Party or any other Person or its Properties (including, without limitation, any Permitted Bond Document), or give rise to a right thereunder to require any payment to be made by such Credit Party or such other Person and (d) will not result in the creation or imposition of any Lien on any Property of any Credit Party or any other Person (other than the Liens created by the Loan Documents).

Section 7.04 Financial Condition; No Material Adverse Change.

(a) Parent has heretofore furnished to the Lenders the Financial Statements. The Financial Statements present fairly, in all material respects, the financial position and results of operations and cash flows of Parent, and its Consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP.

(b) Since the date of the audited Financial Statements, (i) there has been no event, development or circumstance that has had or could reasonably be expected to have a Material Adverse Effect and (ii) the business of the Credit Parties has been conducted only in the ordinary course consistent with past business practices.

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(c) Except as set forth on Schedule 7.20, in the Financial Statements or in a certificate delivered pursuant to Section 8.01(d), neither Parent, any Borrower nor any Restricted Subsidiary has any material Debt (including Disqualified Capital Stock) or any contingent liabilities, off-balance sheet liabilities or partnerships, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments.

Section 7.05 Litigation.

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

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

Section 7.06 Environmental Matters. Except as could not reasonably be expected to have a Material Adverse Effect (or with respect to (c), (d) and (e) below, where the failure to take such actions could not be reasonably expected to have a Material Adverse Effect):

(a) neither any Property of any Credit Party nor the operations conducted thereon violate any order or requirement of any court or Governmental Authority or any Environmental Laws.

(b) no Property of any Credit Party nor the operations currently conducted thereon or, to the knowledge of Parent or any 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, exemptions, approvals or similar authorizations, if any, required to be obtained or filed in connection with the operation or use of any and all Property of each Credit Party, including, without limitation, past or present treatment, storage, disposal or release of a hazardous substance, oil and gas waste or solid waste into the environment, have been duly obtained or filed, and each Credit Party is in compliance with the terms and conditions of all such notices, permits, licenses and similar authorizations.

(d) to the knowledge of Parent or any Borrower, all hazardous substances, solid waste and oil and gas waste, if any, generated at any and all Property of any Credit Party have in the past 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 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.

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(e) each Credit Party has taken all steps reasonably necessary to determine and has determined that no material oil, hazardous substances, solid waste or oil and gas waste, have been disposed of or otherwise released and there has been no threatened release of any oil, hazardous substances, solid waste or oil and gas waste on or to any Property of any Credit Party 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 each Credit Party currently satisfies all design, operation, and equipment requirements imposed by OPA, and no Credit Party has any reason to believe that such Property, to the extent subject to OPA, will not be able to maintain compliance with OPA requirements during the term of this Agreement.

(g) no Credit Party has any known contingent liability or Remedial Work in connection with any release or threatened release of any oil, hazardous substance, solid waste or oil and gas waste into the environment.

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

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

(b) No Credit Party is in default nor has any event or circumstance occurred which, but for the expiration of any applicable grace period or the giving of notice, or both, would constitute a default or would require a Credit Party to Redeem or make any offer to Redeem under any indenture, note, credit agreement or instrument pursuant to which any Material Indebtedness is outstanding or by which any Credit Party or any of their Properties is bound.

(c) No Default has occurred and is continuing.

Section 7.08 Investment Company Act. No Credit Party is an “investment company” or a company “controlled” by an “investment company,” within the meaning of, or subject to regulation under, the Investment Company Act of 1940, as amended.

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

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Section 7.10 ERISA.

(a) Each Credit Party and each ERISA Affiliate have complied in all material respects with ERISA and, where applicable, the Code regarding each Plan.

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

(c) Each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service or an application for such letter is currently being processed by the Internal Revenue Service with respect thereto and, to the best knowledge of Borrower, a Restricted Subsidiary, and its ERISA Affiliates, nothing has occurred which would prevent, or cause the loss of, such qualification, or if no determination letter has been received or an event has occurred resulting in the loss of such qualification, such failure or loss of qualification shall not be reasonably expected to result in material liability.

(d) Except as could not reasonably be expected to result in liability in excess of $5,000,000, no act, omission or transaction has occurred which could result in imposition on any Credit Party or any ERISA Affiliate (whether directly or indirectly) of (i) either a civil penalty assessed pursuant to subsections (c), (i) or (l) of section 502 of ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary duty liability damages under section 409 of ERISA.

(e) No liability to the PBGC (other than for the payment of current premiums which are not past due) by any Credit Party or any ERISA Affiliate has been or is expected by any Credit Party or any ERISA Affiliate to be incurred with respect to any Plan.

(f) No ERISA Event with respect to any Plan has occurred or is reasonably expected to occur.

(g) Full payment when due has been made of all amounts which any Credit Party or any ERISA Affiliate is required under the terms of each Plan or applicable law to have paid as contributions to such Plan as of the date hereof, and no accumulated funding deficiency (as defined in section 302 of ERISA and section 412 of the Code), whether or not waived, exists with respect to any Plan.

(h) 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 Parent’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. The term “actuarial present value of the benefit liabilities” shall have the meaning specified in section 4041 of ERISA.

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

(j) Neither any Credit Party nor any ERISA Affiliate sponsors, maintains or contributes to, or has at any time in the six-year period preceding the date hereof sponsored, maintained or contributed to, any Multiemployer Plan.

(k) Neither any Credit Party nor 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 7.11 Disclosure; No Material Misstatements. Parent and the Borrowers have disclosed to the Administrative Agent and the Lenders all agreements, instruments and corporate or other restrictions to which Parent, any Borrower or any of their Restricted Subsidiaries is subject, and all other matters known to them, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Taken as a whole, none of the other reports, financial statements, certificates or other information furnished by or on behalf of Parent, any Borrower or any Restricted Subsidiary to the Administrative Agent or any Lender or any of their Affiliates in connection with the negotiation of this Agreement or any other Loan Document or delivered hereunder or under any other Loan Document (as modified or supplemented by other information so furnished) contain material misstatements of fact or omit to state material facts necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, prospect information, geological and geophysical data and engineering projections, Parent and the Borrowers jointly and severally represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. To the knowledge of Parent and the Borrowers, there is no fact peculiar to Parent, any Borrower or any Restricted Subsidiary which could reasonably be expected to have a Material Adverse Effect or in the future is reasonably likely to have a Material Adverse Effect and which has not been set forth in this Agreement or the Loan Documents or the other documents, certificates and statements furnished to the Administrative Agent or the Lenders by or on behalf of Parent, any Borrower or any Restricted Subsidiary prior to, or on, the date hereof in connection with the transactions contemplated hereby. There are no statements or conclusions known to Parent or any Borrower in any Reserve Report which are based upon or include misleading information or fail to take into account material information regarding the matters reported therein, it being understood that projections concerning volumes attributable to the Oil and Gas Properties and production and cost estimates contained in each Reserve Report are necessarily based upon professional opinions, estimates and projections and that the Credit Parties do not warrant that such opinions, estimates and projections will ultimately prove to have been accurate.

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Section 7.12 Insurance. Parent and the Borrowers have, and have caused all their Restricted Subsidiaries to have, (a) all insurance policies sufficient for the compliance by each of them with all material Governmental Requirements and all material agreements and (b) insurance coverage in at least amounts and against such risk (including, without limitation, public liability) that are usually insured against by companies similarly situated and engaged in the same or a similar business for the assets and operations of the Credit Parties. The Administrative Agent and the Lenders have been named as additional insureds in respect of such liability insurance policies and the Administrative Agent has been named as loss payee with respect to Property loss insurance. All premiums in respect of such insurance policies, to the extent then due and payable, have been paid. Schedule 7.12 sets forth a description of all insurance maintained by or on behalf of Parent and the Borrowers as of the Effective Date.

Section 7.13 Restriction on Liens. Neither Parent, any Borrower nor any of their Restricted Subsidiaries is a party to any material agreement or arrangement, or subject to any order, judgment, writ or decree, which either restricts or purports to restrict its ability to grant Liens to the Administrative Agent and the Lenders on or in respect of their Properties to secure the Indebtedness and the Loan Documents.

Section 7.14 Subsidiaries. Schedule 7.14 sets forth, as of the date hereof, all of the Persons in which Parent directly or indirectly owns any Equity Interests and the authorized, issued and outstanding Equity Interests of each such Person including the names and beneficial owners of such Equity Interests. Parent has no Restricted Subsidiaries that are not Borrowers, each Restricted Subsidiary is a Wholly-Owned Subsidiary, and Parent does not have any Foreign Subsidiaries.

Section 7.15 Location of Business and Offices. The jurisdiction of organization, name as listed in the public records of its jurisdiction of organization, organizational identification number in its jurisdiction of organization, and the location of its principal place of business of Parent and each other Person listed on Schedule 7.14 is stated on Schedule 7.15 (or as set forth in a notice delivered pursuant to Section 8.01(j)).

Section 7.16 Properties; Titles, Etc.

(a) Except as disclosed in Schedule 7.16, each Credit Party has good and defensible title in all material respects to the proved Oil and Gas Properties evaluated in the most recently delivered Reserve Report (excluding, to the extent this representation and warranty is deemed to be made after the Effective Date, any such Oil and Gas Properties sold or transferred in compliance with Section 9.12) and good title in all material respects to all its personal Properties, in each case, free and clear of all Liens except Liens permitted by Section 9.03. After giving full effect to the Excepted Liens, a Credit Party specified as the owner owns the net interests in production attributable to the Hydrocarbon Interests as reflected in the most recently delivered Reserve Report, and the ownership of such Properties shall not in any material respect obligate such Credit Party to bear the costs and expenses relating to the maintenance, development and operations of each such Property in an amount in excess of the working interest of each Property set forth in the most recently delivered Reserve Report that is not offset by a corresponding proportionate increase in such Credit Party’s net revenue interest in such Property.

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

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

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

(e) Each Credit Party owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual Property material to its business, and the use thereof by such Credit Party does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. The Credit Parties either own or have valid licenses or other rights to use all databases, geological data, geophysical data, engineering data, seismic data, maps, interpretations and other technical information used in their businesses as presently conducted, subject to the limitations contained in the agreements governing the use of the same, which limitations are customary for companies engaged in the business of the exploration and production of Hydrocarbons, with such exceptions as could not reasonably be expected to have a Material Adverse Effect.

Section 7.17 Maintenance of Properties. Except for such acts or failures to act as could not be reasonably expected to have a Material Adverse Effect, the Oil and Gas Properties (and Properties unitized therewith) have been maintained, operated and developed in a good and workmanlike manner and in conformity with all Government Requirements and in conformity with the provisions of all leases, subleases or other contracts comprising a part of the Hydrocarbon Interests and other contracts and agreements forming a part of the Oil and Gas Properties. Specifically in connection with the foregoing, except for those as could not be reasonably expected to have a Material Adverse Effect, (a) 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) and (b) to the knowledge of Parent and the Borrowers, none of the wells comprising a part of the Oil and Gas Properties (or Properties unitized therewith) is deviated from the vertical more than the maximum permitted by Government Requirements, and such wells are, in fact, bottomed under and are producing from, and the well bores are wholly within, the Oil and Gas Properties (or in the case of wells located on Properties unitized therewith, such unitized Properties). All pipelines, wells, gas processing plants, platforms and other material improvements, fixtures and equipment owned in whole or in part by the Credit Parties that are necessary to conduct normal operations are being maintained in a state adequate to conduct normal operations, and with respect to such of the foregoing that are operated by any Credit Party, in a manner consistent with any such Credit Party’s past practices (other than those the failure of which to maintain in accordance with this Section 7.17 could not reasonably be expect to have a Material Adverse Effect).

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Section 7.18 Gas Imbalances, Prepayments. As of the date hereof, except as set forth on Schedule 7.18 or on the most recent certificate delivered pursuant to Section 8.12(c), on a net basis there are no gas imbalances, take or pay or other prepayments which would require any Credit Party to deliver Hydrocarbons produced from the Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor exceeding 50 mmcf equivalent in the aggregate.

Section 7.19 Marketing of Production. Except for contracts listed and in effect on the date hereof on Schedule 7.19, and thereafter either disclosed in writing to the Administrative Agent or included in the most recently delivered Reserve Report (with respect to all of which contracts Parent and the Borrowers jointly and severally represent that they or their Restricted Subsidiaries are receiving a price for all production sold thereunder which is computed substantially in accordance with the terms of the relevant contract and are not having deliveries curtailed substantially below the subject Property’s delivery capacity), no material agreements exist which are not cancelable on 60 days notice or less without penalty or detriment for the sale of production from the Credit Parties’ Hydrocarbons (including, without limitation, calls on or other rights to purchase, production, whether or not the same are currently being exercised) that (a) pertain to the sale of production at a fixed price and (b) have a maturity or expiry date of longer than six (6) months from the date hereof.

Section 7.20 Swap Agreements. Schedule 7.20, as of the date hereof after giving effect to the Closing Transactions and the unwinding of any Swap Agreements that may be occurring contemporaneously with the Closing Transactions, and after the date hereof, each report required to be delivered by the Borrowers pursuant to Section 8.01(d), sets forth, a true and complete list of all Swap Agreements of each Credit Party (including, without limitation, all Existing Swap Agreements), the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark to market value thereof (as calculated within the prior ten (10) Business Days or, with respect to Schedule 7.20 on the date hereof, as calculated on or about March 31, 2010), all credit support agreements relating thereto (including any margin required or supplied) and the counterparty to each such agreement.

Section 7.21 Use of Loans and Letters of Credit. The proceeds of the Loans and the Letters of Credit shall be used to refinance Existing Indebtedness, to pay fees and expenses incurred in connection with the consummation of the Closing Transactions, to provide working capital for exploration and production, and for general corporate purposes of the Borrowers, including but not limited to the drilling, operating and acquisition of exploration and production properties or any other payments, in each case, to the extent permitted under this Agreement. No Credit Party is 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 T, U or X of the Board). No part of the proceeds of any Loan or Letter of Credit will be used for any purpose which violates the provisions of Regulations T, U or X of the Board.

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Section 7.22 Solvency. Before and after giving effect to the transactions contemplated hereby, (a) the aggregate assets, at a fair valuation, of the Credit Parties, taken as a whole, will exceed the aggregate Debt of the Credit Parties on a consolidated basis, as the Debt becomes absolute and matures, (b) each of the Credit Parties will not have incurred or intended to incur, and will not believe that it will incur, Debt beyond its ability to pay such Debt as such Debt becomes absolute and matures and (c) each of the Credit Parties will not have (and will have no reason to believe that it will have thereafter) unreasonably small capital for the conduct of its business.

Section 7.23 Private Placement Documents. The Borrowers have provided to the Administrative Agent and the Lenders a true and correct copy of the material Private Placement Documents. No rights or obligations of any party to any of the Private Placement Documents have been waived and no Credit Party that is a party to any of the Private Placement Documents is in default of its obligations or in breach of any representations or warranties made by it thereunder. Each of the Private Placement Documents is a valid, binding and enforceable obligation of each Credit Party that is a party thereto in accordance with its terms and is in full force and effect. To the knowledge of Parent or any Borrower, (a) no party to any of the Private Placement Documents is in default of its obligations or in breach of any representations or warranties made by it thereunder, and (b) each of the Private Placement Documents is a valid, binding and enforceable obligation of each party thereto in accordance with its terms.

ARTICLE VIII

AFFIRMATIVE COVENANTS

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

Section 8.01 Financial Statements; Other Information. Parent and the Borrowers (or Borrower Representative) will furnish to the Administrative Agent and each Lender (it being understood and agreed that the financial statements referred to in clauses (a) and (b) below may be furnished by Parent and the Borrowers by filing such financial statements with the SEC so long as such financial statements are made publicly available by the SEC):

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

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(b) Quarterly Financial Statements. As soon as available, but in any event in accordance with then applicable law and not later than 45 days after the end of each fiscal quarter of each fiscal year of Parent, commencing with the fiscal quarter ending March 31, 2010, Parent’s consolidated balance sheet and related statements of operations, stockholders’ equity, cash flows and volume of production and sales attributable to production as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by a Financial Officer of Borrower Representative as presenting fairly in all material respects the financial condition and results of operations of Parent and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes.

(c) Certificate of Financial Officer — Compliance. Concurrently with any delivery of financial statements under Section 8.01(a) or Section 8.01(b), a certificate of a Financial Officer of Borrower Representative in substantially the form of Exhibit D hereto (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with Section 8.13(b) and Section 9.01 (provided, that, notwithstanding the foregoing, calculations of both the Consolidated Total Debt to Consolidated EBITDAX ratio and the Consolidated Net Debt to Consolidated EBITDAX ratio shall be included in each such certificate regardless of whether such ratio is being tested at such time), and (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of the audited Financial Statements and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate.

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

(e) Certificate of Insurer – Insurance Coverage. Concurrently with any delivery of Parent’s audited annual financial statements under Section 8.01(a), a certificate of insurance coverage from Borrowers’ insurance agent(s) with respect to the insurance required by Section 8.07, in form and substance reasonably satisfactory to the Administrative Agent, and, if requested by the Administrative Agent or any Lender in writing, all copies of applicable policies.

(f) Notice of SEC and Other Filings; Reports to Shareholders. Promptly after the same are filed or become publicly available, as applicable, (i) written notice of the filing of any periodic and other reports, proxy statements and other materials filed by any Credit Party with the SEC (other than Forms 10-Q and 10-K) and (ii) copies of materials distributed by Parent or any Borrower to its shareholders or equityholders generally.

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

(h) Notice of Sales of Oil and Gas Properties. In the event any Credit Party intends to sell, transfer, assign or otherwise dispose of any Oil and Gas Properties that have a fair market value in excess of $5,000,000 or any Equity Interests in any Restricted Subsidiary of Parent or any Borrower that have a fair market value in excess of $5,000,000, or terminate or otherwise unwind any Swap Agreement in respect of commodities (including, as applicable, any trade confirmations made pursuant thereto), in accordance with Section 9.12(e), prior written notice of such disposition, the price thereof and the anticipated date of closing.

(i) Notice of Casualty Events. Prompt written notice, and in any event within five Business Days, of the occurrence of any Casualty Event or the commencement of any action or proceeding that could reasonably be expected to result in a Casualty Event.

(j) Information Regarding Borrowers and Guarantors. Prompt written notice (and in any event within ten (10) Business Days prior thereto) of any change (i) in any Credit Party’s corporate or organizational name or in any trade name used to identify such Person in the conduct of its business or in the ownership of its Properties, (ii) in the location of any Credit Party’s chief executive office or principal place of business, (iii) in any Credit Party’s identity or corporate or organizational structure or in the jurisdiction in which such Person is incorporated or formed, (iv) in any Credit Party’s jurisdiction of organization or such Person’s organizational identification number in such jurisdiction of organization, and (v) in any Credit Party’s federal taxpayer identification number. Each Credit Party agrees not to effect or permit any change referred to in the immediately preceding sentence unless all filings have been made under the UCC or otherwise that are required for the Administrative Agent to continue at all times following such change to have a valid, legal and perfected first priority security interest (subject to Liens permitted under Section 9.03 that had priority as of the initial grant of such security interest) in the Collateral.

(k) Notices of Certain Changes. Promptly, but in any event within five (5) Business Days after the execution thereof, copies of any amendment, modification or supplement to the certificate or articles of organization, regulations, any preferred stock designation or any other organic document of any Credit Party.

(l) Permitted Bond Debt. Promptly, but in any event within two (2) Business Days after such delivery or receipt, copies of any financial or other report or notice delivered to, or received from, any holder of any Permitted Bond Debt (or the notes evidencing same), which report or notice has not been delivered to Lenders hereunder.

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(m) Certificate of Financial Officer – Consolidating Information. If, at any time, all of the Consolidated Subsidiaries of Parent are not Consolidated Restricted Subsidiaries, then concurrently with any delivery of financial statements under Section 8.01(a) or Section 8.01(b), a certificate of a Financial Officer setting forth consolidating spreadsheets that show all Consolidated Unrestricted Subsidiaries and the eliminating entries, in such form as would be presentable to the auditors of Parent; provided, that, no such certificate shall be required when both (i) (A) the aggregate net income of all Unrestricted Subsidiaries for the fiscal period covered by the financial statements delivered under Section 8.01(a) is less than $1,000,000, or (B) the aggregate net income of all Unrestricted Subsidiaries for the fiscal period covered by the financial statements delivered under Section 8.01(b) is less than $250,000, as applicable, and (ii) the aggregate liabilities of all Unrestricted Subsidiaries as of the last date of the fiscal period covered by the applicable financial statements is less than $10,000,000.

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

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

(a) the occurrence of any Default and/or any non-compliance with Section 8.13(b);

(b) the filing or commencement of, or the threat in writing of, any action, suit, proceeding, investigation or arbitration by or before any arbitrator or Governmental Authority against Parent, any Borrower or any Affiliate thereof not previously disclosed in writing to the Lenders or any material adverse development in any action, suit, proceeding, investigation or arbitration previously disclosed to the Lenders that, if adversely determined, could reasonably be expected to result in liability in excess of $5,000,000, after taking into account the application of proceeds from insurance coverage;

(c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of any Credit Party in an aggregate amount exceeding $5,000,000, after taking into account the application of proceeds from insurance coverage; and

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

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

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Section 8.03 Existence; Conduct of Business. Parent and each Borrower will, and will cause each other Credit Party to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of its business and maintain, if necessary, its qualification to do business in each other jurisdiction in which its Oil and Gas Properties are located or the ownership of its Properties requires such qualification, except where the failure to so qualify could not reasonably be expected to have a Material Adverse Effect; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 9.11.

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

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

Section 8.06 Operation and Maintenance of Properties. Except, in each case, where the failure to comply could not reasonably be expected to have a Material Adverse Effect, Parent and each Borrower, at its own expense, will, and will cause each other Credit Party to:

(a) operate its Oil and Gas Properties and other material Properties or cause such Oil and Gas Properties and other material Properties to be operated in a careful and efficient manner in accordance with the practices of the industry and in compliance with all applicable contracts and agreements and in compliance with all Governmental Requirements, including, without limitation, applicable pro ration requirements and Environmental Laws, and all applicable laws, rules and regulations of every other Governmental Authority from time to time constituted to regulate the development and operation of its Oil and Gas Properties and the production and sale of Hydrocarbons and other minerals therefrom.

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

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

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

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

(f) to the extent a Credit Party is not the operator of any Property, the Credit Parties shall not be obligated to directly perform any undertakings contemplated by the covenants and agreements contained in this Section 8.06 which are performable only by such operators and are beyond the control of the Credit Parties, but shall be obligated to seek to enforce such operators’ contractual obligations to maintain, develop and operate the Properties subject to such operating agreements, and Parent and the Borrowers shall, and shall cause the other Credit Parties to, use reasonable efforts to cause the operator to comply with this Section 8.06.

Section 8.07 Insurance. Parent and each Borrower will, and will cause each other Credit Party to, maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations. The loss payable clauses or provisions in said insurance policy or policies insuring any of the Collateral for the Loans shall be endorsed in favor of and made payable to the Administrative Agent as its interests may appear and such policies shall name the Administrative Agent and the Lenders as “additional insureds” and provide that the insurer will endeavor to give at least 30 days prior notice of any cancellation to the Administrative Agent. As of the Effective Date, the character, coverage, amount and insurers of Parent’s and the Borrowers’ insurance policies set forth on Schedule 7.12 hereto are satisfactory to and approved by the Administrative Agent and the Lenders.

Section 8.08 Books and Records; Inspection Rights. Parent and each Borrower will, and will cause each other Credit Party to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. Parent and each Borrower will, and will cause each other Credit Party to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its Properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times during normal business hours and as often as reasonably requested on an individual and aggregate basis.

Section 8.09 Compliance with Laws. Parent and each Borrower will, and will cause each other Credit Party to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its Property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. To the extent a Credit Party is not the operator of any Property, the Credit Parties shall not be obligated to directly perform any undertakings contemplated by the covenants and agreements contained in this Section 8.09 which are performable only by such operators and are beyond the control of the Credit Parties, but shall be obligated to seek to enforce such operators’ contractual obligations to maintain, develop and operate the Properties subject to such operating agreements, and Parent and the Borrowers shall, and shall cause the other Credit Parties to, use reasonable efforts to cause the operator to comply with this Section 8.09.

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Section 8.10 Environmental Matters.

(a) Parent and each Borrower shall at its sole expense: (i) comply, and shall cause its Properties and operations and each other Credit Party and each other Credit Party’s Properties and operations to comply, with all applicable Environmental Laws, the breach of which could be reasonably expected to have a Material Adverse Effect; (ii) not dispose of or otherwise release, and shall cause each other Credit Party not to dispose of or otherwise release, any oil, oil and gas waste, hazardous substance, or solid waste on, under, about or from any of such Credit Party’s Properties or any other Property to the extent caused by such Credit Party’s operations except in compliance with applicable Environmental Laws, the disposal or release of which could reasonably be expected to have a Material Adverse Effect; (iii) timely obtain or file, and shall cause each Credit Party to timely obtain or file, all notices, permits, licenses, exemptions, approvals, registrations or other authorizations, if any, required under applicable Environmental Laws to be obtained or filed in connection with the operation or use of such Credit Party’s Properties, which failure to obtain or file could reasonably be expected to have a Material Adverse Effect; (iv) promptly commence and diligently prosecute to completion, and shall cause each Restricted Subsidiary to promptly commence and diligently prosecute to completion, any assessment, evaluation, investigation, monitoring, containment, cleanup, removal, repair, restoration, remediation or other remedial obligations (collectively, the “Remedial Work”) in the event any Remedial Work is required or reasonably necessary under applicable Environmental Laws because of or in connection with the actual or suspected past, present or future disposal or other release of any oil, oil and gas waste, hazardous substance or solid waste on, under, about or from any of such Credit Party’s Properties, which failure to commence and diligently prosecute to completion could reasonably be expected to have a Material Adverse Effect; and (v) establish and implement, and shall cause each other Credit Party to establish and implement, such procedures as may be necessary to continuously determine and assure that such Credit Party’s obligations under this Section 8.10(a) are timely and fully satisfied, which failure to establish and implement could reasonably be expected to have a Material Adverse Effect

(b) The Borrowers (or Borrower Representative) will promptly, but in no event later than five Business Days of the occurrence of a triggering event, notify the Administrative Agent in writing of any threatened action, investigation or inquiry by any Governmental Authority or any threatened demand or lawsuit by any landowner or other third party against any Credit Party or their Properties of which any Credit Party has knowledge in connection with any applicable Environmental Laws (excluding routine testing and corrective action) if Parent and the Borrowers reasonably anticipate that such action will result in liability (whether individually or in the aggregate) in excess of $5,000,000, not fully covered by insurance, subject to normal deductibles.

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(c) Parent and each Borrower will, and will cause each other Credit Party to, undertake reasonable environmental audits and tests upon reasonable request by the Administrative Agent no more than once per year in the absence of any Event of Default (or as otherwise required to be obtained by the Administrative Agent or the Lenders by any Governmental Authority), in connection with any future acquisitions of Oil and Gas Properties or other Properties.

(d) To the extent a Credit Party is not the operator of any Property, the Credit Parties shall not be obligated to directly perform any undertakings contemplated by the covenants and agreements contained in this Section 8.10 which are performable only by such operators and are beyond the control of the Credit Parties, but shall be obligated to seek to enforce such operators’ contractual obligations to maintain, develop and operate the Properties subject to such operating agreements, and Parent and the Borrowers shall, and shall cause the other Credit Parties to, use reasonable efforts to cause the operator to comply with this Section 8.10.

Section 8.11 Further Assurances.

(a) Parent and each Borrower at its expense will, and will cause each other Credit Party to, promptly execute and deliver to the Administrative Agent all such other documents, agreements and instruments reasonably requested by the Administrative Agent to comply with, cure any defects or accomplish the conditions precedent, covenants and agreements of Parent, any Borrower or any Restricted Subsidiary, as the case may be, in the Loan Documents, including the Notes, or to further evidence and more fully describe the Property intended as security for the Indebtedness, or to correct any omissions in this Agreement or the Security Instruments, or to state more fully the obligations secured therein, or to perfect, protect or preserve any Liens created pursuant to this Agreement or any of the Security Instruments or the priority thereof, or to make any recordings, file any notices or obtain any consents, all as may be reasonably necessary or appropriate, in the sole discretion of the Administrative Agent, in connection therewith.

(b) Parent and the Borrowers hereby authorize the Administrative Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of any Credit Party where permitted by law. A carbon, photographic or other reproduction of the Security Instruments or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.

Section 8.12 Reserve Reports.

(a) On or before April 1st and October 1st of each year, commencing October 1, 2010, the Borrowers shall furnish to the Administrative Agent and the Lenders a Reserve Report. The Reserve Report as of December 31st (to be furnished by April 1^st of the following year) of each year shall be prepared by (i) one or more Approved Petroleum Engineers with respect to not less than eighty percent (80%) of the Recognized Value of the Borrowers’ proved Oil and Gas Properties, and (ii) the chief engineer of the Borrowers with respect to the remaining twenty percent (20%) (or such lesser percentage as may not be covered pursuant to clause (i) above) of the Recognized Value of the Borrowers’ proved Oil and Gas Properties, and the June 30^th Reserve Report (to be furnished by October 1st) of each year shall be prepared by or under the supervision of the chief engineer of the Borrowers. In each case, the chief engineer of the Borrowers shall certify that such Reserve Report is based on information that was prepared in good faith based upon assumptions believed to be reasonable at the time and to have been prepared in accordance with the procedures used in the immediately preceding Reserve Report.

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(b) In the event of an Interim Redetermination or an Optional Swap Unwind Redetermination, the Borrowers shall furnish to the Administrative Agent and the Lenders a Reserve Report prepared by or under the supervision of the chief engineer of the Borrowers who shall certify such Reserve Report to be based on information that was prepared in good faith based upon assumptions believed to be reasonable at the time and to have been prepared in accordance with the procedures used in the immediately preceding Reserve Report except that the Properties covered by such report may, in the discretion of the Borrowers, be limited to the proved Oil and Gas Properties acquired since the last redetermination of the Borrowing Base (provided, that, in connection with any Interim Redetermination requested by the Administrative Agent pursuant to Section 2.07(b)(ii) (or any Optional Swap Unwind Redetermination requested by the Administrative Agent pursuant to Section 2.07(b)(iv), the Reserve Report shall cover such additional Oil and Gas Properties of the Borrowers as the Required Lenders may reasonably request). For any Interim Redetermination requested by the Administrative Agent or the Borrowers pursuant to Section 2.07(b)(ii) or Section 2.07(b)(iii) or for any Optional Swap Unwind Redetermination requested by the Administrative Agent pursuant to Section 2.07(b)(iv), the Borrowers shall provide such Reserve Report with an “as of” date as required by the Administrative Agent as soon as possible, but in any event no later than forty-five (45) days following the receipt of such request. Each Reserve Report prepared by the chief engineer of the Borrowers and delivered to the Administrative Agent hereunder shall be accompanied by a reconciliation to the most recently delivered Reserve Report prepared by one or more Approved Petroleum Engineers.

(c) With the delivery of each Reserve Report, the Borrowers shall provide to the Administrative Agent and the Lenders a certificate from a Responsible Officer of Borrower Representative certifying that to his knowledge, after reasonable investigation, in all material respects: (i) the information contained in the Reserve Report and any other information delivered in connection therewith is based on information that was prepared in good faith based upon assumptions believed to be reasonable at the time, (ii) the Credit Parties own good and defensible title to the proved Oil and Gas Properties evaluated in such Reserve Report and such Properties are free of all Liens except for Liens permitted by Section 9.03, (iii) except as set forth on an exhibit to the certificate, on a net basis there are no gas imbalances, take or pay or other prepayments in excess of the volume specified in Section 7.18 with respect to its Oil and Gas Properties evaluated in such Reserve Report which would require any Credit Party to deliver Hydrocarbons either generally or produced from such Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor, (iv) none of their proved Oil and Gas Properties have been sold since the date of the last Borrowing Base determination except as set forth on an exhibit to the certificate, which certificate shall list all of its proved Oil and Gas Properties sold and in such detail as reasonably required by the Administrative Agent, (v) attached to the certificate is a list of all marketing agreements entered into subsequent to the later of the date hereof or the most recently delivered Reserve Report which the Borrowers could reasonably be expected to have been obligated to list on Schedule 7.19 had such agreement been in effect on the date hereof and (vi) attached thereto is a schedule of the proved Oil and Gas Properties evaluated by such Reserve Report that are Mortgaged Properties and demonstrating the percentage of the Borrowing Base that the value of such Mortgaged Properties represent.

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Section 8.13 Title Information.

(a) As of the Effective Date, the Administrative Agent or its counsel shall have received satisfactory title information on at least 80% of the total Recognized Value of the proved Oil and Gas Properties evaluated in the Initial Reserve Report. Additionally, on or before the delivery to the Administrative Agent and the Lenders of each Reserve Report required by Section 8.12(a), the Borrowers will deliver title information in form and substance acceptable to the Administrative Agent covering enough of the proved Oil and Gas Properties evaluated by such Reserve Report that were not included in the immediately preceding Reserve Report, so that the Administrative Agent shall have received together with title information previously delivered, satisfactory title information on at least 80% of the total Recognized Value of the proved Oil and Gas Properties evaluated by such Reserve Report.

(b) If the Borrowers have provided title information for additional Properties under Section 8.13(a), the Borrowers shall, within 90 days of notice from the Administrative Agent that title defects or exceptions exist with respect to such additional Properties, either (i) cure any such title defects or exceptions (including defects or exceptions as to priority) which are not permitted by Section 9.03 raised by such information, (ii) substitute acceptable Mortgaged Properties with no title defects or exceptions except for Excepted Liens (other than Excepted Liens described in clauses (e), (g) and (h) of such definition) having an equivalent value or (iii) deliver title information in form and substance acceptable to the Administrative Agent so that they shall have received, together with title information previously delivered, satisfactory title information on at least 80% of the total Recognized Value of the proved Oil and Gas Properties evaluated by such Reserve Report.

(c) If the Borrowers are unable to cure any title defect requested to be cured within the 90-day period or the Borrowers do not comply with the requirements to provide acceptable title information covering 80% of the total Recognized Value of the proved Oil and Gas Properties evaluated in the most recent Reserve Report, such default shall not be a Default, but instead the Administrative Agent and/or the Required Lenders shall have the right to exercise the following remedy in their sole discretion from time to time, and any failure to so exercise this remedy at any time shall not be a waiver as to future exercise of the remedy by any Agent or the Lenders. To the extent that the Administrative Agent or the Required Lenders are not satisfied with title to any Collateral after the 90-day period has elapsed, such unacceptable Collateral shall not count towards the 80% requirement, and the Administrative Agent may send a notice to the Borrowers (or Borrower Representative) and the Lenders that the then outstanding Borrowing Base shall be reduced by an amount as determined by the Required Lenders to cause the Borrowers to be in compliance with the requirement to provide acceptable title information on 80% of the total Recognized Value of the proved Oil and Gas Properties. This new Borrowing Base shall become effective immediately after receipt of such notice.

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Section 8.14 Collateral; Additional Collateral; Guarantees; Additional Subsidiaries.

(a) Subject to the provisions of Section 8.14(b), the Indebtedness shall, at all times, be secured by first and prior Liens (subject only to Excepted Liens) covering and encumbering (i) not less than 80% of the total Recognized Value of the proved Oil and Gas Properties evaluated in the most recently completed Reserve Report (including the Initial Reserve Report), and (ii) all of the issued and outstanding Equity Interests owned by Parent, each Borrower and each Subsidiary of each Borrower and each Subsidiary, as applicable.

(b) On the Effective Date, the Borrowers shall deliver to the Administrative Agent for the ratable benefit of each Secured Party, Mortgages and amendments to mortgages, each in form and substance acceptable to the Administrative Agent and duly executed by the Borrowers, as applicable, together with (i) such other assignments, conveyances, amendments, agreements and other writings (each duly authorized and executed) as the Administrative Agent shall deem necessary or appropriate to grant, evidence and perfect first and prior Liens (subject only to Excepted Liens of the type described in clauses (a) to (d), (f) and (i) of the definition thereof, but subject to the provisos at the end of such definition) on at least 80% of the total Recognized Value of the proved Oil and Gas Properties evaluated in the Initial Reserve Report; and (ii) such opinions of counsel as the Administrative Agent shall deem necessary or appropriate with respect to the form, sufficiency and other matters regarding such Mortgages and amendments to mortgages as the Administrative Agent shall reasonably request. Further, in connection with each redetermination of the Borrowing Base, the Borrowers shall review the Reserve Report and the list of current Mortgaged Properties (as described in Section 8.12(c)(vi)) to ascertain whether the Mortgaged Properties represent at least 80% of the total Recognized Value of the proved Oil and Gas Properties evaluated in the most recently completed Reserve Report after giving effect to exploration and production activities, acquisitions, dispositions and production. In the event that the Mortgaged Properties do not represent at least 80% of such total Recognized Value, then Parent and the Borrowers shall, and shall cause the other Credit Parties to, grant to the Administrative Agent as security for the Indebtedness a first-priority Lien interest (subject only to Excepted Liens of the type described in clauses (a) to (d), (f) and (i) of the definition thereof, but subject to the provisos at the end of such definition) on additional proved Oil and Gas Properties not already subject to a Lien of the Security Instruments such that after giving effect thereto, the Mortgaged Properties will represent at least 80% of such total Recognized Value. All such Liens will be created and perfected by and in accordance with the provisions of mortgages, deeds of trust, security agreements and financing statements or other Security Instruments, all in form and substance satisfactory to the Administrative Agent and in sufficient executed (and acknowledged where necessary or appropriate) counterparts for recording purposes.

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(c) The Indebtedness shall be fully guaranteed by Parent pursuant to the Guaranty Agreement, and Parent and the Borrowers shall cause any Restricted Subsidiary hereafter created or acquired (to the extent permitted hereunder) to become a Borrower hereunder by executing and delivering to Administrative Agent a Joinder Agreement. In connection with the foregoing, Parent and the Borrowers shall, or shall cause such hereafter created or acquired Restricted Subsidiary to, (i) execute and deliver a Joinder Agreement executed by such hereafter created or acquired Restricted Subsidiary, (ii) pledge all of the Equity Interests of such hereafter created or acquired Restricted Subsidiary (including, without limitation, delivery of original stock certificates or other certificates evidencing the Equity Interests of such hereafter created or acquired Restricted Subsidiary, together with an appropriate undated stock powers for each certificate duly executed in blank by the registered owner thereof) and (iii) execute and deliver such other additional closing documents, certificates and legal opinions as shall reasonably be requested by the Administrative Agent, including, documentation or other evidence reasonably requested by the Administrative Agent to comply with the Administrative Agent’s and the other Secured Parties’ “know your customer” and anti-money laundering rules and regulations. Parent and Borrowers shall cause any Person (other than any Credit Party or any Restricted Subsidiary hereafter created or acquired) that guarantees the obligations with respect to Permitted Bond Debt to execute and deliver to the Administrative Agent a Guaranty Agreement.

(d) Unless designated as an Unrestricted Subsidiary in accordance with this paragraph, any Person that becomes a Subsidiary of Parent or any of its Restricted Subsidiaries shall be classified as a Restricted Subsidiary. Parent or the Borrowers may designate by written notification thereof to the Administrative Agent, any newly created or newly acquired Subsidiary, as an Unrestricted Subsidiary at the time such Subsidiary is created or acquired if (i) prior, and after giving effect, to such designation, no Default exists and total Credit Exposures of all of the Lenders do exceed the Borrowing Base and (ii) such designation is deemed to be an Investment in an Unrestricted Subsidiary in an amount equal to the fair market value as of the date of such designation of the applicable Credit Party’s direct and indirect ownership interest in such Subsidiary and such Investment would be permitted to be made at the time of such designation under Section 9.05. No Restricted Subsidiary may be redesignated as an Unrestricted Subsidiary.

(e) If Parent or the Borrowers desire to designate any Unrestricted Subsidiary to be a Subsidiary after the date hereof, Parent and the Borrowers shall cause such Person to comply with Section 8.14(c), at which time such Subsidiary shall cease to be an “Unrestricted Subsidiary” and shall become a “Subsidiary” for purposes of this Agreement and the other Loan Documents without any amendment, modification or other supplement to any of the foregoing.

Section 8.15 ERISA Compliance. Except as could not reasonably be expected to result in liability to Parent, the Borrowers and their Subsidiaries of more than $5,000,000 individually or in the aggregate (after taking into account the application of proceeds from insurance coverage), Parent and the Borrowers will promptly furnish and will cause the other Credit Parties and any ERISA Affiliate to promptly furnish to the Administrative Agent (i) 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) promptly 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 the President or the principal Financial Officer, the Subsidiary or the ERISA Affiliate, as the case may be, specifying the nature thereof, what action Parent, the Borrowers, the other Credit Party 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) promptly 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) except as could not reasonably be expected to result in liability to Parent, the Borrowers and the other Credit Parties of more than $5,000,000 individually or in the aggregate (after taking into account the application of proceeds from insurance coverage), Parent and each Borrower will, and will cause each other Credit Party and ERISA Affiliate to, (A) 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 (B) 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.

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Section 8.16 Commodity Price Risk Management Policy. The Credit Parties shall maintain a commodity price risk management policy, which policy shall be reasonably acceptable to the Administrative Agent.

Section 8.17 Unrestricted Subsidiaries. The Credit Parties:

(a) will cause the management, business and affairs of each of the Borrowers and their Restricted Subsidiaries to be conducted in such a manner (including, without limitation, by keeping separate books of account, furnishing separate financial statements of Unrestricted Subsidiaries to creditors and potential creditors thereof (to the extent required hereunder) and by not permitting Properties of the Credit Parties to be commingled) so that each Unrestricted Subsidiary that is a corporation will be treated as a corporate entity separate and distinct from the Credit Parties.

(b) will not permit any Unrestricted Subsidiary to hold any Equity Interest in, or any Debt of, any Borrower or any Restricted Subsidiary.

ARTICLE IX

NEGATIVE COVENANTS

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

Section 9.01 Financial Covenants.

(a) Current Ratio. Commencing with the fiscal quarter ending June 30, 2010, Parent will not permit, as of the last day of any fiscal quarter, the Current Ratio to be less than 1.0 to 1.0.

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(b) Consolidated Total Debt to Consolidated EBITDAX. Commencing with the fiscal quarter ending June 30, 2010, Parent will not permit, as of the last day of any fiscal quarter, to the extent any Borrowings are outstanding on such day, the ratio of Consolidated Total Debt (on such date) to Consolidated EBITDAX (for each Rolling Period ending on such date) or Annualized Consolidated EBITDAX for such Rolling Period in the case of Rolling Periods ending on or prior to December 31, 2010 to be greater than (i) 4.50 to 1.0 for the Rolling Periods ending on June 30, 2010, September 30, 2010, and December 31, 2010 (ii) 4.25 to 1.0 for the Rolling Periods ending on March 31, 2011, June 30, 2011 and September 30, 2011 and (iii) 4.00 to 1.0 for the Rolling Period ending on December 31, 2011 and for each Rolling Period thereafter.

(c) Consolidated Net Debt to Consolidated EBITDAX. Commencing with the fiscal quarter ending June 30, 2010, Parent will not permit, as of the last day of any fiscal quarter, to the extent no Borrowings are outstanding on such day, the ratio of Consolidated Net Debt (on such date) to Consolidated EBITDAX (for each Rolling Period ending on such date) or Annualized Consolidated EBITDAX for such Rolling Period in the case of Rolling Periods ending on or prior to December 31, 2010 to be greater than (i) 4.50 to 1.0 for the Rolling Periods ending on June 30, 2010, September 30, 2010, and December 31, 2010 (ii) 4.25 to 1.0 for the Rolling Periods ending on March 31, 2011, June 30, 2011 and September 30, 2011 and (iii) 4.00 to 1.0 for the Rolling Period ending on December 31, 2011 and for each Rolling Period thereafter.

Section 9.02 Debt. Parent and the Borrowers will not, and will not permit any other Credit Party to, incur, create, assume or suffer to exist any Debt, except:

(a) the Notes and the other Indebtedness.

(b) Debt of the Credit Parties that is both (i) existing on the date hereof that is reflected in the Financial Statements and (ii) not of a type permitted under clauses (a) through (l) of this Section; provided that the principal amount of such Debt may not be increased.

(c) accounts payable and accrued expenses, liabilities or other obligations to pay the deferred purchase price of Property or services, from time to time incurred in the ordinary course of business, of which no more than $5,000,000 (in the aggregate) are greater than ninety (90) days past the date of invoice or delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP.

(d) Debt associated with worker’s compensation claims, performance, bid, surety or similar bonds or surety obligations required by Governmental Requirements or third parties in connection with the operation of the Oil and Gas Properties.

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(e) intercompany Debt between any Borrower and any other Borrower so long as the Equity Interests of each such Borrower have been pledged pursuant to a Pledge Agreement; provided that such Debt is not held, assigned, transferred, negotiated or pledged to any Person other than a Borrower for which the Equity Interests of such Borrower have been pledged pursuant to a Pledge Agreement, and, provided further, that any such Debt owed by a Borrower shall be subordinated to the Indebtedness (and each Borrower hereby agrees that if an Event of Default shall have occurred and be continuing, such Borrower will not permit any other Borrower to repay and such Borrower will not accept payment from any other Borrower of, such indebtedness permitted under this clause (d) or any part thereof without the prior written consent of Lenders).

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

(g) Permitted 2005 Bond Debt and Permitted 2007 Bond Debt, in each case, issued on or prior to January 18, 2007 and guarantee obligations of any Credit Party in respect thereof; provided, that such guarantee obligations are on terms and conditions satisfactory to the Administrative Agent in its sole discretion.

(h) Additional Permitted Debt and guarantee obligations of any Credit Party in respect thereof; provided, that (i) such guarantee obligations are on terms and conditions satisfactory to the Administrative Agent in its sole discretion, (ii) the aggregate principal amount of Additional Permitted Debt incurred during the term of this Agreement shall not exceed $300,000,000 and (iii) upon the issuance or incurrence of any Additional Permitted Debt, after giving effect to any Automatic Debt Issuance Redetermination required under Section 2.07(d) and any mandatory prepayment required under Section 3.04(c)(iii), the total Credit Exposures of all of the Lenders does not exceed the Borrowing Base.

(i) Taxes, assessments or other governmental charges which are not yet due or are being contested in good faith in accordance with Section 8.04(a).

(j) Debt (other than in connection with a loan or lending transaction) incurred in the ordinary course of business for drilling, completing, leasing and reworking oil, gas and CO₂ wells or the treatment, distribution, transportation or sale of production therefrom; provided, however, such Debt shall not be deemed to refer to or include any long term debt.

(k) Debt of Real Estate obtained for purposes of (i) building expansion and the refinancing of existing Debt related to real estate at 701 Cedar Lake Blvd., Oklahoma City, Oklahoma, and (ii) acquisitions of property for field offices, limited to no more than $17,250,000, in the aggregate, secured by real estate (and specifically no Oil and Gas Properties or other Collateral of the Lenders or Administrative Agent shall be provided by any Credit Party to secure such Debt of Real Estate), and guarantee obligations (on terms and conditions satisfactory to the Administrative Agent in its sole discretion) of any Credit Party in respect thereof; provided, however, such Debt is subject to Administrative Agent’s prior written approval of the terms and conditions of any lease of such real estate and the final terms and conditions of the commitment of the lender involved in the acquisition and/or expansion of such real estate.

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(l) Indebtedness which represents an extension, refinancing, or renewal of any of the foregoing; provided that, (i) the principal amount of such Debt is not increased (other than by the costs, fees, and expenses and by accrued and unpaid interest paid in connection with any such extension, refinancing or renewal), (ii) the interest rate of such Debt is not increased (except that extensions, refinancings or renewals of Permitted 2005 Bond Debt and/or Permitted 2007 Bond Debt, in each case, issued on or prior to January 18, 2007 may increase the interest rate applicable to such Permitted Bond Debt on the date hereof by no more than three percent (3%) per annum), (iii) any Liens securing such Debt are not extended to any additional property of any Credit Party, (iv) no Credit Party that is not originally obligated with respect to repayment of such Debt is required to become obligated with respect thereto, (v) such extension, refinancing or renewal does not result in a shortening of the average weighted maturity of the Debt so extended, refinanced or renewed (and, with respect to Permitted Bond Debt, such extension, refinancing or renewal does not result in any principal amount owing in respect of Permitted Bond Debt becoming due earlier than the date that is 180 days following the Maturity Date), (vi) the terms of any such extension, refinancing, or renewal are not materially less favorable to the obligor thereunder, taken as a whole, than the original terms of such Debt and (vii) if the Debt that is refinanced, renewed, or extended was subordinated in right of payment to the Indebtedness, then the terms and conditions of the refinancing, renewal, or extension Debt must include subordination terms and conditions that are at least as favorable to the Administrative Agent and the Lenders as those that were applicable to the refinanced, renewed, or extended Debt.

(m) liabilities on any Swap Agreement permitted hereunder, including those resulting from the requirements of, or compliance with, ASC Topic 815 and ASC Topic 410.

(n) other Debt including, without limitation, Equipment and Fixture Financing Debt not to exceed $40,000,000 in the aggregate at any one time outstanding.

Section 9.03 Liens. Parent and the Borrowers will not, and will not permit any other Credit Party to, create, incur, assume or permit to exist any Lien on any of its Properties (now owned or hereafter acquired), except:

(a) Liens securing any Indebtedness.

(b) Excepted Liens.

(c) Liens on real estate (but specifically no Oil and Gas Properties or other Collateral of the Lenders or the Administrative Agent) securing the Debt described in Section 9.02(k).

(d) Liens (i) on Property other than Oil and Gas Properties and other Collateral not otherwise permitted by the foregoing clauses of this Section 9.03 and (ii) on fixed or capital assets or motor vehicles acquired, constructed or improved by any Credit Party so long as (A) such security interests secure Equipment and Fixture Financing Debt, (B) the Debt secured thereby does not exceed 100% of the cost of acquiring, constructing or improving such fixed or capital assets or motor vehicles and (C) such security interests shall not apply to any other property or assets of such Credit Party or any other Credit Party; provided that the aggregate principal or face amount of all Debt secured under this Section 9.03(d) shall not exceed $30,000,000.

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Section 9.04 Restricted Payments. Parent and the Borrowers will not, and will not permit any other Credit Party to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, return any capital to its stockholders, make any prepayment of Debt described in clause (a) of the definition of “Debt” (other than permitted prepayments of Loans outstanding under this Agreement), or make any distribution of its Property to its Equity Interest holders, except, provided (i) no Default or Event of Default exists or would exist after giving effect to such distribution, prepayment or repurchase and (ii) total Credit Exposures of all of the Lenders do not exceed the Borrowing Base on the date any such distribution is declared or paid or prepayment or repurchase is made, (a) Restricted Subsidiaries may declare and pay dividends ratably with respect to their Equity Interests, (b) the Borrowers may make prepayments of Debt for borrowed money in an aggregate principal amount not to exceed $10,000,000 during any calendar year, (c) Parent may declare and pay dividends with respect to its common stock payable solely in additional shares of its common stock, and (d) so long as, after giving effect to such repurchase, the amount by which the total Commitments of all of the Lenders exceeds the total Credit Exposures of all of the Lenders is not less than twenty-five percent (25%) of the Borrowing Base then in effect, Parent may repurchase Equity Interests issued by it to any CCMP Party as part of the Private Placement in an aggregate principal amount not to exceed $10,000,000 during the term of this Agreement.

Section 9.05 Investments, Loans and Advances. Parent and the Borrowers will not, and will not permit any other Credit Party to, make or permit to remain outstanding any Investments in or to any Person, except that the foregoing restriction shall not apply to:

(a) Investments made on or prior to the Effective Date which are disclosed to the Lenders in Schedule 9.05 or reflected in the Financial Statements; provided that no Credit Party may make any capital contributions or other additional investments or other payments to or in or for the benefit of any of such Investments pursuant to this clause (a).

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

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

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

(e) deposits maturing within one year from the date of creation thereof with, including certificates of deposit issued by, (i) any Lender or (ii) any office located in the United States of any other bank or trust company which is organized under the laws of the United States or any state thereof, has capital, surplus and undivided profits aggregating at least $100,000,000 (as of the date of such bank or trust company’s most recent financial reports) and has a short term deposit rating of no lower than A2 or P2, as such rating is set forth from time to time, by S&P or Moody’s, respectively or, in the case of any Foreign Subsidiary, a bank organized in a jurisdiction in which the Foreign Subsidiary conducts operations having assets in excess of $500,000,000 (or its equivalent in another currency).

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

(g) Investments made by any Borrower in or to any other Borrower so long as the Equity Interests of such other Borrower have been pledged pursuant to a Pledge Agreement.

(h) subject to the limits in Section 9.06, Investments in direct ownership interests by the Borrowers in additional Oil and Gas Properties, gas gathering, processing and transportation systems and all other assets contemplated by the permitted business of the Borrowers, including, without limitation, the ownership, development and transportation of CO ₂ supplies, located within the geographic boundaries of the United States of America including the outer continental shelf thereof.

(i) entry by the Borrowers into operating agreements, working interests, royalty interests, mineral leases, processing agreements, farm-out agreements, contracts for the sale, transportation or exchange of oil, natural gas and CO₂, unitization agreements, pooling arrangements, area of mutual interest agreements, production sharing agreements or other similar or customary agreements, transactions, properties, interests or arrangements, and Investments and expenditures of the Borrowers in connection therewith or pursuant thereto, in each case made or entered into in the ordinary course of the oil and gas business, excluding, however, Investments in other Persons; provided, however, that none of the foregoing shall involve the incurrence of any Debt not permitted by Section 9.02.

(j) repurchase agreements of (i) any Lender or (ii) a commercial bank in the United States and Canada if the commercial paper of such bank or of the bank holding company of which such bank is a wholly owned subsidiary is rated in the highest rating categories of S&P, Moody’s, or any other rating agency satisfactory to the Majority Lenders, that are fully secured by securities described in Section 9.05(c).

(k) Investments, limited to an amount not in excess of $4,500,000 (which is in addition to the amount permitted by Section 9.02(k) borrowed for construction) to expand the current office building located in Oklahoma City, Oklahoma for use by the Borrowers; provided, however, such Investment is subject to the Administrative Agent’s prior written approval of the terms and conditions of a lease of such real estate and the final terms and conditions of the commitment of the lender involved in the acquisition and/or expansion of such real estate.

(l) Investments arising from the endorsement of financial instruments in the ordinary course of business.

(m) Investments made after the date hereof, not to exceed $5,000,000 (valued at cost at the time such Investment is made, without giving effect to any write-downs, write-offs or appreciation with respect to such Investments) in the aggregate, made by Chaparral in Chaparral Biofuels to enable Chaparral Biofuels to make Investments in Oklahoma Ethanol.

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(n) Investments consisting of guarantees of Permitted Bond Debt (or any Debt which represents an extension, refinancing or renewal of such Permitted Bond Debt which is permitted under this Agreement) by any Credit Party.

(o) other Investments, loans or advances not to exceed $30,000,000 (valued at cost at the time such Investment is made, without giving effect to any write-downs, write-offs or appreciation with respect to such Investments) in the aggregate at any time.

Section 9.06 Nature of Business. Parent and the Borrowers will not, and will not permit any other Credit Party to, allow any material change to be made in the character of its business as carried on as of the date hereof and no hereafter created or acquired Restricted Subsidiary which becomes a Borrower hereunder pursuant to Section 8.14(c) shall engage in any business that is not reasonably related to the character of the Credit Parties’ business on the date hereof as an oil and gas exploration and production company.

Section 9.07 Limitation on Operating Leases. Parent and the Borrowers will not, and will not permit any other Credit Party to, create, incur, assume or suffer to exist any obligation for the payment of rent or hire of Property of any kind whatsoever (real or personal but excluding Capital Leases and leases of Hydrocarbon Interests), under leases or lease agreements which would cause the aggregate amount of all payments made by the Credit Parties pursuant to all such leases or lease agreements, including, without limitation, any residual payments at the end of any lease, to exceed $15,000,000 in the aggregate during any fiscal year; provided, however, that, the foregoing restriction shall not apply to oil, gas and mineral leases, CO₂ leases or supply agreements, or permits or similar agreements entered into in the ordinary course of business or orders of any Governmental Authority adjudicating the rights or pooling the interests of the owners of oil and gas properties or lease agreements in effect as of the date hereof.

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

Section 9.09 ERISA Compliance. Except as could not reasonably be expected to result in liability to any Credit Party of more than $5,000,000 individually or in the aggregate, Parent and the Borrowers will not, and will not permit any other Credit Party to, at any time:

(a) engage in, or permit any ERISA Affiliate to engage in, any transaction in connection with which any Credit Party or any ERISA Affiliate could be subjected to either a civil penalty assessed pursuant to subsections (c), (i) or (l) of section 502 of ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code, if either of which would have a Material Adverse Effect.

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(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 any Credit Party or any ERISA Affiliate to the PBGC.

(c) 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, any Credit Party or any ERISA Affiliate is required to pay as contributions thereto if such failure could reasonably be expected to have a Material Adverse Effect.

(d) permit to exist, or allow any ERISA Affiliate to permit to exist, any accumulated funding deficiency within the meaning of section 302 of ERISA or section 412 of the Code, whether or not waived, with respect to any Plan which exceeds $1,000,000.

(e) permit, or allow any ERISA Affiliate to permit, the actuarial present value of the benefit liabilities under any Plan maintained by any Credit Party 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. 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 a Credit Party or with respect to any ERISA Affiliate of any Credit Party 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, (i) any Multiemployer Plan, or (ii) 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 by any amount in excess of $1,000,000.

(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.

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

(j) amend, or permit any ERISA Affiliate to amend, a Plan resulting in a material increase in current liability such that a Borrower, a Subsidiary or any ERISA Affiliate is required to provide security to such Plan under section 401(a)(29) of the Code.

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Section 9.10 Sale or Discount of Receivables. Neither Parent, any Borrower nor any other Credit Party will discount or sell (with or without recourse) to any other Person that is not a Credit Party any of its notes receivable or accounts receivable, except for receivables obtained by any Credit Party out of the ordinary course of business or the settlement of joint interest billing accounts in the ordinary course of business or discounts granted to settle collection of accounts receivable or the sale of defaulted accounts or the entering into of a contingency fee arrangement with any Person relating to the collection of accounts receivable arising in the ordinary course of business in connection with the compromise or collection thereof and not in connection with any financing transaction.

Section 9.11 Mergers, Etc. Neither Parent, any Borrower nor any other Credit Party will 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 to any other Person (any such transaction, a “consolidation”); provided that any Borrower may participate in a consolidation with any other Borrower; provided further that any Restricted Subsidiary may participate in a consolidation with a Borrower (provided that a Borrower shall be the continuing or surviving Person) or any other Restricted Subsidiary that is a Domestic Subsidiary (provided that if one of such parties to the consolidation is a Foreign Subsidiary, such Domestic Subsidiary shall be the continuing or surviving Person) and if one of such Restricted Subsidiaries is a Wholly-Owned Subsidiary, then the continuing or surviving Person shall be a Wholly-Owned Subsidiary; provided further that, so long as no Default or Event of Default then exists or would otherwise result therefrom, any Borrower may merge with another Person if such Borrower is the continuing or surviving Person in such merger; provided further that, so long as no Default or Event of Default then exists or would otherwise result therefrom, Parent may merge with another Person if Parent is the continuing or surviving Person in such merger. For the purposes of this Section, a Person shall be deemed to be the continuing or surviving Person following a merger or consolidation only if (a) such Person is designated as the continuing or surviving Person on any applicable certificates evidencing such consolidation or merger that are filed with any Governmental Authority and (b) such Person is considered to be the continuing or surviving Person for all other purposes including, without limitation, for purposes of GAAP.

Section 9.12 Sale of Oil and Gas Properties; Termination of Swap Agreements. Parent and the Borrowers will not, and will not permit any other Credit Party to, sell, assign, farm-out, convey or otherwise dispose of or transfer any Oil and Gas Property (or Equity Interests in any Person owning Oil and Gas Properties) or to terminate any Swap Agreement in respect of commodities (including, as applicable, any trade confirmations made pursuant thereto) except for (a) the sale, lease, transfer or other disposition of any Oil and Gas Properties from one Borrower to another Borrower; provided that all documents required under Section 8.14 in connection with such transfer are delivered to the Administrative Agent on the date of such transfer; (b) the sale of Hydrocarbons and other Property in the ordinary course of business; (c) farmouts, sales or other dispositions of undeveloped acreage and assignments in connection with such transactions; (d) the sale or transfer of equipment in the ordinary course of business or that is no longer necessary for the business of such Credit Party or is replaced by equipment of at least comparable value and use; and (e) provided no Default or Event of Default exists, and provided further the total Credit Exposures of all of the Lenders does not exceed the Borrowing Base at the time of such sale or disposition of any Oil and Gas Property or the termination of any Swap Agreement in respect of commodities (including, as applicable, any trade confirmations made pursuant thereto), the sale or other disposition of any Oil and Gas Property or the termination of any Swap Agreements in respect of commodities (including, as applicable, any trade confirmations made pursuant thereto); provided that (i) the aggregate value (which, for purposes hereof, shall mean the value the Administrative Agent attributes to such Oil and Gas Property or Swap Agreement (including, as applicable, any trade confirmations made pursuant thereto) for purposes of the most recent redetermination of the Borrowing Base) of such Properties sold or disposed of pursuant to this clause (e) in any period between Scheduled Redeterminations shall not exceed five percent (5%) of the Borrowing Base then in effect and (ii) upon any termination of any Swap Agreement (including, as applicable, any trade confirmations made pursuant thereto), Administrative Agent may, by notifying the Borrowers (or the Borrower Representative thereof), elect to cause the Borrowing Base to be redetermined between Scheduled Redeterminations and any such redetermination shall not be considered an Interim Redetermination.

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Section 9.13 Environmental Matters. Parent and the Borrowers will not, and will not permit any other Credit Party 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 Work under any applicable 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 could reasonably be expected to have a Material Adverse Effect.

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

Section 9.15 Subsidiaries. Parent and the Borrowers will not, and will not permit any other Credit Party to, create or acquire any Subsidiary unless the Borrowers (or Borrower Representative) give prior written notice to the Administrative Agent of such creation or acquisition and the Credit Parties comply with Section 8.14(c) or Section 8.14(d), as applicable. Parent and the Borrowers will not, and will not permit any other Credit Party to, sell, assign or otherwise dispose of any Equity Interests in any Restricted Subsidiary. Neither Parent, any Borrower nor any other Credit Party shall have any Foreign Subsidiaries.

Section 9.16 Indebtedness and Preferred Stock. Parent and the Borrowers will not, and will not permit any other Credit Party to, (a) issue preferred stock or create, incur or assume any Debt, except for Debt permitted under Section 9.02, or (b) without limiting the foregoing, incur or assume any contractual liability or obligation for, or with respect to, any Debt of any Unrestricted Subsidiary.

Section 9.17 Negative Pledge Agreements; Dividend Restrictions. Parent and the Borrowers will not, and will not permit any other Credit Party to, create, incur, assume or suffer to exist any contract, agreement or understanding which in any way prohibits or restricts the granting, conveying, creation or imposition of any Lien on any of its Property in favor of the Administrative Agent and the Lenders or restricts any Restricted Subsidiary from paying dividends or making distributions to any Borrower or any Guarantor, or which requires the consent of or notice to other Persons in connection therewith; provided, however, that the preceding restrictions will not apply to encumbrances or restrictions otherwise permitted or arising under or by reason of (a) the provisions in this Agreement or the Security Instruments, (b) any leases or licenses or similar contracts as they affect any Property or Lien subject to a lease or license, or (c) any restriction with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the direct or indirect sale or disposition of all or substantially all the equity or Property of such Restricted Subsidiary (or the Property that is subject to such restriction) pending the closing of such sale or disposition.

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Section 9.18 Swap Agreements. Parent and the Borrowers will not, and will not permit any other Credit Party to, enter into any Swap Agreements with any Person other than (a) Swap Agreements in respect of commodities (i) with an Approved Counterparty and (ii) which shall not, in any case, have a tenor of greater than five and one-half (5.5) years and the notional volumes for which (when aggregated with other commodity Swap Agreements then in effect other than basis differential swaps on volumes already hedged pursuant to other Swap Agreements) do not exceed, as of the date such Swap Agreement is executed (1) 85% of the reasonably anticipated projected production from proved, developed, producing Oil and Gas Properties (as set forth in the most recent Reserve Report delivered to the Administrative Agent hereunder, as such report may be supplemented from time to time by the Credit Parties delivering to the Administrative Agent updated well projections and other information reflecting the drilling activity, acquisitions and other results of operations since the effective date of such Reserve Report) for each month during the initial three (3) year period during which such Swap Agreement is in effect for each of crude oil and natural gas, calculated separately, and (2) 80% of the reasonably anticipated projected production from proved, developed, producing Oil and Gas Properties (as set forth in the most recent Reserve Report delivered to the Administrative Agent hereunder, as such report may be supplemented from time to time by the Credit Parties delivering to the Administrative Agent updated well projections and other information reflecting the drilling activity, acquisitions and other results of operations since the effective date of such Reserve Report) for each month during the remaining period during which such Swap Agreement is in effect for each of crude oil and natural gas, calculated separately, and (b) Swap Agreements in respect of interest rates with an Approved Counterparty, the notional amounts of which (when aggregated with all other Swap Agreements of the Credit Parties’ then in effect in respect of interest rates) do not exceed 100% of the then outstanding principal amount of the Credit Parties’ Debt for borrowed money, and which Swap Agreements shall not, in any case, have a tenor of greater than five (5) years. In no event shall any Swap Agreement to which any Credit Party is a party contain any requirement, agreement or covenant for any Credit Party to post cash or other collateral or margin (including in the form of a letter of credit) to secure their obligations under such Swap Agreement or to cover market exposures. Further, Parent and the Borrowers will not, and will not permit any other Credit Party to, terminate any Swap Agreement in respect of commodities (including, as applicable, any trade confirmations made pursuant thereto), now existing or hereafter arising, without the prior written consent of the Required Lenders except to the extent such terminations are permitted by Section 9.12.

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Section 9.19 Permitted Bond Documents. Parent and the Borrowers will not, and will not permit any other Credit Party to:

(a) amend, modify or waive any covenant in any of the Permitted Bond Documents if the effect of such amendment, modification or waiver would be to make the terms of any such Permitted Bond Document materially more onerous to any Credit Party.

(b) amend, modify or waive any provision of any Permitted Bond Document if the effect of such amendment, modification or waiver (i) subjects a Credit Party to any additional material obligation, (ii) increases the principal of any Permitted Bond Debt or increases the rate of interest on any note evidencing (A) Permitted 2005 Bond Debt to a rate in excess of 8.5%, (B) Permitted 2007 Bond Debt to a rate in excess of 8.875%, or (C) Additional Permitted Debt to a rate in excess of the rate in effect upon the issuance of such Additional Permitted Debt, (iii) accelerates the date fixed for any payment of principal or interest on any note evidencing any Permitted Bond Debt to a date sooner than the date which is one year following the earlier of (A) the Maturity Date, and (B) the date on which there are no Loans, LC Exposure or other obligations hereunder outstanding and all of the Commitments are terminated, or (iv) would change the percentage of holders of such notes evidencing any Permitted Bond Debt required for any such amendment, modification or waiver from the percentage required on the date of issuance of any such notes evidencing any Permitted Bond Debt.

Section 9.20 Amendments to Organizational Documents. Parent and the Borrowers will not, and will not permit any other Credit Party to, enter into or permit any modification of, or waive any material right or obligation of any Person under their respective certificate or articles of organization, certificate of limited partnership, certificate or articles of incorporation, bylaws, regulations, operating agreement, partnership agreement or other organizational documents other than amendments, modifications and waivers which will not, individually or in the aggregate, have a Material Adverse Effect.

Section 9.21 Change in Fiscal Periods. Parent shall not permit Parent’s fiscal year to end on any date other than December 31.

Section 9.22 Limitation on Accounting Changes. Parent and the Borrowers will not, and will not permit any other Credit Party to, cease to use the GAAP accounting method for preparation of all financial statements required to be delivered hereunder and for all financial calculations required hereunder.

ARTICLE X

EVENTS OF DEFAULT; REMEDIES

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

(a) the Borrowers (or, as applicable, any other Credit Party) shall fail to (i) pay any principal of any Loan or any interest on any Loan or any reimbursement obligation in respect of any LC Disbursement or any fee or any other amount payable under any Loan Document, when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof, by acceleration or otherwise, or (ii) observe, perform or otherwise comply with any covenant, condition or agreement contained in Section 8.01(a) or Section 8.01(b), and, in each case, such failure shall continue unremedied for a period of five (5) days.

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

(c) Parent, any Borrower or any other Credit Party shall fail to observe or perform any covenant, condition or agreement contained in Section 3.04(c)(ii), Section 6.01, Section 8.01 (other than Section 8.01(a), Section 8.01(b) or Section 8.01(e)), Section 8.02, Section 8.03, Section 8.07 or in Article IX.

(d) Parent, any Borrower, or any other Credit Party shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in Section 10.01(a), Section 10.01(b) or Section 10.01(c)) or any other Loan Document, and such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent to the Borrowers (or Borrower Representative) (which notice will be given at the request of any Lender).

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

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

(g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of Parent, any Borrower or any other Credit Party or its debts, or of a Substantial Portion of its Property, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Parent, any Borrower or any other Credit Party or for a Substantial Portion of its Property, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered.

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(h) Parent, any Borrower or any other Credit Party shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in Section 10.01(g), (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Parent, any Borrower or any other Credit Party or for a Substantial Portion of its Property, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing.

(i) Parent, any Borrower or any other Credit Party shall become unable, admit in writing its inability, or fail generally to pay its debts as they become due.

(j) one or more final, non-appealable judgments for the payment of money in an aggregate amount in excess of $5,000,000 (to the extent not covered by independent third party insurance provided by insurers of the highest claims paying rating or financial strength as to which the insurer does not dispute coverage and is not subject to an insolvency proceeding) shall be rendered against Parent, any Borrower, any other Credit Party or any combination thereof and the same shall remain undischarged for a period of 60 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of Parent, any Borrower or any other Credit Party to enforce any such judgment.

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

(l) an ERISA Event shall have occurred that, in the opinion of the Majority Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in liability of Parent, the Borrowers and the other Credit Parties in an aggregate amount exceeding $5,000,000.

(m) a Change in Control shall occur.

(n) in addition to, and not in limitation of, the provisions contained in clause (f) above, the occurrence of a default under any Permitted Bond Document, which such default shall continue unremedied or is not waived prior to the expiration of any applicable period of grace or cure under any Permitted Bond Document.

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Section 10.02 Remedies.

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

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

(c) All proceeds realized from the liquidation or other disposition of Collateral or otherwise received after maturity of the Loans or the Notes, whether by acceleration or otherwise, shall be applied: first, to reimbursement of expenses and indemnities provided for in this Agreement and the Security Instruments; second, to accrued interest on the Loans; third, to fees; fourth, pro rata to (i) principal outstanding on the Loans, (ii) Indebtedness referred to in clause (b) of the definition of Indebtedness, and (iii) serve as cash collateral to be held by the Administrative Agent to secure the LC Exposure; fifth, to any other Indebtedness; and any excess shall be paid to the Borrowers or as otherwise required by any Governmental Requirement.

ARTICLE XI

THE AGENTS

Section 11.01 Appointment; Powers. Each of the Lenders and each Issuing Bank hereby irrevocably (subject to Section 11.06) appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof and the other Loan Documents, together with such actions and powers as are reasonably incidental thereto.

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Section 11.02 Duties and Obligations of Administrative Agent. The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, the Administrative Agent (a) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) shall not have any duty to take any discretionary action or exercise any discretionary powers, except as provided in Section 11.03, and (c) except as expressly set forth herein, shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to any Credit Party that is communicated to or obtained by the bank serving as an Agent or any of its Affiliates in any capacity. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to it by Parent, a Borrower or a Lender, and shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or under any other Loan Document or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or in any other Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, (v) the satisfaction of any condition set forth in Article VI or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to it or as to those conditions precedent specifically required to be to its satisfaction, (vi) the existence, value, perfection or priority of any collateral security or the financial or other condition of the Credit Parties or any other obligor or guarantor, or (vii) any failure by any Credit Party or any other Person (other than itself) to perform any of its obligations hereunder or under any other Loan Document or the performance or observance of any covenants, agreements or other terms or conditions set forth herein or therein.

Section 11.03 Action by Administrative Agent. The Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that it is required to exercise in writing as directed by the Majority Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 12.02) and in all cases it shall be fully justified in failing or refusing to act hereunder or under any other Loan Documents unless it shall (a) receive written instructions from the Majority Lenders or the Lenders, as applicable (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 12.02) specifying the action to be taken and (b) be indemnified to its satisfaction by the Lenders against any and all liability and expenses which may be incurred by it by reason of taking or continuing to take any such action. The instructions as aforesaid and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. If a Default has occurred and is continuing, then the Administrative Agent shall take such action with respect to such Default as shall be directed by the requisite Lenders in the written instructions (with indemnities) described in this Section 11.03, provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interests of the Lenders. In no event, however, shall the Administrative Agent be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to this Agreement, the Loan Documents or applicable law. If a Default has occurred and is continuing, the Arranger shall not have any obligation to perform any act in respect thereof. No Agent shall be liable for any action taken or not taken by it with the consent or at the request of the Majority Lenders or the Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 12.02), and otherwise no Agent shall be liable for any action taken or not taken by it hereunder or under any other Loan Document or under any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith INCLUDING ITS OWN ORDINARY NEGLIGENCE, except for its own gross negligence or willful misconduct.

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Section 11.04 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon and each of the Credit Parties, the Lenders and each Issuing Bank hereby waives the right to dispute the Administrative Agent’s record of such statement, except in the case of gross negligence or willful misconduct by such Agent. The Administrative Agent may consult with legal counsel (who may be counsel for the Credit Parties), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. The Agents may deem and treat the payee of any Note as the holder thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof permitted hereunder shall have been filed with the Administrative Agent.

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

Section 11.06 Resignation of Agents. Subject to the appointment and acceptance of a successor Agent as provided in this Section 11.06, any Agent may resign at any time by notifying the Lenders, each Issuing Bank and the Borrowers (or Borrower Representative). Upon any such resignation, the Majority Lenders shall have the right, in consultation with and upon the approval of the Borrowers (so long as no Event of Default has occurred and is continuing), which approval shall not be unreasonably withheld, to appoint a successor. If no successor shall have been so appointed by the Majority Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders and each Issuing Bank, appoint a successor Agent which shall be a bank or commercial lender with an office in the United States of America, or an Affiliate of any such bank or commercial lender. Upon the acceptance of its appointment as Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrowers to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrowers and such successor. After the Agent’s resignation hereunder, the provisions of this Article XI and Section 12.03 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Agent.

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

Section 11.08 No Reliance. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent, any other Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and each other Loan Document to which it is a party. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent, any other Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document, any related agreement or any document furnished hereunder or thereunder. The Agents shall not be required to keep themselves informed as to the performance or observance by any Credit Party of this Agreement, the Loan Documents or any other document referred to or provided for herein or to inspect the Properties or books of the Credit Parties. Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Administrative Agent hereunder, neither the Agents nor the Arranger shall have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition or business of any Credit Party (or any of its Affiliates) which may come into the possession of such Agent or any of its Affiliates. In this regard, each Lender acknowledges that Vinson & Elkins L.L.P. is acting in this transaction as special counsel to the Administrative Agent only, except to the extent otherwise expressly stated in any legal opinion or any Loan Document. Each other party hereto will consult with its own legal counsel to the extent that it deems necessary in connection with the Loan Documents and the matters contemplated therein.

Section 11.09 Authority to Release Collateral, Liens and Borrowers. Each Lender and each Issuing Bank hereby authorizes the Administrative Agent to release (a) any Collateral that is permitted to be sold or released pursuant to the terms of the Loan Documents and (b) any Borrower from its obligations hereunder and under the Loan Documents to the extent all of the Equity Interests issued by such Borrower were sold in compliance with the Loan Documents. Each Lender and each Issuing Bank hereby authorizes the Administrative Agent to execute and deliver to the Borrowers (or Borrower Representative), at the Borrowers’ sole cost and expense, any and all releases of Liens, termination statements, assignments or other documents reasonably requested by the Borrowers in connection with any sale or other disposition of Property to the extent such sale or other disposition is permitted (or not prohibited) by the terms of Section 9.12 or is otherwise authorized by the terms of the Loan Documents.

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Section 11.10 The Arranger and Agents. Neither the Arranger, any Syndication Agent, nor any Documentation Agent shall have any duties, responsibilities or liabilities under this Agreement and the other Loan Documents other than their duties, responsibilities and liabilities in their capacity as Lenders hereunder.

Section 11.11 Filing of Proofs of Claim. In case of any Default or Event of Default under Section 10.01(f), Section 10.01(g) or Section 10.01(h), the Administrative Agent (regardless of whether the principal of any Loan or LC Exposure shall then be due and payable and regardless of whether the Administrative Agent has made any demand on any Credit Party) shall be entitled and empowered, by intervention in such proceeding or otherwise:

(a) to (i) file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, LC Exposure and all other Indebtedness that is owing and unpaid and (ii) file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders, the Administrative Agent under Section 3.05 and Section 12.03) allowed in such judicial proceeding; and

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

Each Lender hereby authorizes any custodian, receiver, assignee, trustee, conservator, sequestrator or other similar official in any such judicial proceeding: (i) to make such payments to the Administrative Agent; and (ii) if the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Section 3.05 and Section 12.03. Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Indebtedness or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding. Each Lender retains its right to file and prove a claim separately.

Section 11.12 Execution of Documents. Each Lender hereby empowers and authorizes the Administrative Agent to execute and deliver to Parent and the Borrowers (or Borrower Representative) on their behalf the Security Instruments and all related agreements, documents or instruments as shall be necessary or appropriate to effect the purposes of the Security Instruments. Each Lender (by their signature hereto, or otherwise by their acceptance of the benefits of the Security Instruments) hereby agrees to be bound by the terms of the Security Instruments (including the amendments and restatements of the Existing Loan Documents) and consents to the rights, powers, remedies, indemnities and exculpations given to the Administrative Agent thereunder and the other terms and provisions thereof. In the event of any inconsistency between this Agreement and the terms of any other Loan Document, this Agreement shall control.

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ARTICLE XII

MISCELLANEOUS

Section 12.01 Notices.

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

(i) if to Parent or the Borrowers (or Borrower Representative), to them or it, c/o Chaparral Energy, L.L.C., 701 Cedar Lake Blvd., Oklahoma City, Oklahoma 73114, Attention: Mark A. Fischer (Telecopy No. (405) 425-8410); with a copy to Chaparral Energy, L.L.C., 701 Cedar Lake Blvd., Oklahoma City, Oklahoma 73114, Attention: Robert W. Kelly II (Telecopy No. (405) 425-8872);

(ii) if to the Administrative Agent, to it at JPMorgan Chase Bank, N.A., 2200 Ross Avenue, 3rd Floor, Mail Code TX1-2911, Dallas, Texas 75201, Attention: Kimberly A. Bourgeois (Telecopy No. (214) 290-2332); with a copy to: JPMorgan Chase Bank, N.A., 10 South Dearborn, 19^thFloor, IL1-0010, Chicago, Illinois 60603-2003, Attention: Leonida G. Mischke (Telecopy No. (312) 385-7096); and

(iii) if to any other Lender, in its capacity as such, or any other Lender in its capacity as an Issuing Bank, to it at its address (or telecopy number) set forth in its Administrative Questionnaire.

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

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

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Section 12.02 Waivers; Amendments.

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

(b) Neither this Agreement nor any provision hereof nor any Security Instrument nor any provision thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by Parent, the Borrowers (or Borrower Representative) and the Majority Lenders or by Parent, the Borrowers (or Borrower Representative) and the Administrative Agent with the consent of the Majority Lenders; provided that no such agreement shall (i) increase the Commitment or the Maximum Credit Amount of any Lender without the written consent of such Lender, (ii) increase the Borrowing Base without the written consent of each Lender, or modify Section 2.07 or Section 3.04(c)(ii) without the consent of each Lender, (iii) decrease or reaffirm the Borrowing Base without the written consent of the Required Lenders, (iv) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, or reduce any other Indebtedness hereunder or under any other Loan Document, without the written consent of each Lender affected thereby, (v) postpone the scheduled date of payment of the principal amount of any Loan or LC Disbursement, or any interest thereon, or any fees payable hereunder, or any other Indebtedness hereunder or under any other Loan Document, or reduce the amount of, waive or excuse any such payment, or postpone or extend the Termination Date without the written consent of each Lender affected thereby, (vi) change Section 4.01(b) or Section 4.01(c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (vii) waive or amend Section 8.14 or change the definition of the terms “Domestic Subsidiary”, “Foreign Subsidiary”, “Subsidiary”, or “Unrestricted Subsidiary” without the written consent of each Lender, (viii) release any Guarantor, release any of the Collateral (other than as provided in Section 11.09), or reduce the percentages set forth in Section 8.14(b) to less than the percentages set forth therein as of the date hereof, without the written consent of each Lender, (ix) change any of the provisions of Section 10.02(c), this Section 12.02(b) or the definition of “Majority Lenders” or “Required Lenders” or any other provision hereof (including, without limitation, the last sentence of Section 9.18 hereof) specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or under any other Loan Documents or make any determination or grant any consent hereunder or any other Loan Documents, without the written consent of each Lender, (x) amend Section 5.06 without the written consent of the Administrative Agent, the Issuing Bank and the Majority Lenders, (xi) waive or amend Section 9.12 or Section 9.18 in a manner that would alter the extent to which the Credit Parties may terminate or otherwise unwind Swap Agreements in respect of commodities (including, as applicable, any trade confirmations made pursuant thereto) without the written consent of the Required Lenders, (xii) change Section 12.04(a) in a manner that would permit any Credit Party to assign or otherwise transfer any of its rights or obligations hereunder, without the written consent of each Lender, or (xiii) change clause (b) of the definition of Indebtedness, the definition of “Secured Swap Provider” or “Secured Parties”, Section 12.14, the description of the obligations secured or guaranteed by the Security Instruments, the priority of payments set forth in Section 10.02(c), or any provisions of this Section 12.02(b) without the written consent of each Lender or Secured Swap Provider adversely affected thereby, provided that the addition of a new secured obligation shall not be deemed to adversely affect any other secured party; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of any Agent or any Issuing Bank hereunder or under any other Loan Document without the prior written consent of such Agent or such Issuing Bank, as the case may be. Notwithstanding the foregoing, any supplement to Schedule 7.14 (Subsidiaries) shall be effective simply by delivering to the Administrative Agent a supplemental schedule clearly marked as such and, upon receipt, the Administrative Agent will promptly deliver a copy thereof to the Lenders.

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Section 12.03 Expenses, Indemnity; Damage Waiver.

(a) The Borrowers shall (and are jointly and severally obligated to) pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and their Affiliates, including, without limitation, the reasonable fees, charges and disbursements of counsel, in connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration (both before and after the execution hereof and including advice of counsel to the Administrative Agent as to the rights and duties of the Administrative Agent and the Lenders with respect thereto) of this Agreement and the other Loan Documents and any amendments, modifications or waivers of or consents related to the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all costs, expenses, Taxes, assessments and other charges incurred by any Agent or any Lender in connection with any filing, registration, recording or perfection of any security interest contemplated by this Agreement or any Security Instrument or any other document referred to therein, and (iii) all out-of-pocket expenses incurred by any Agent, any Issuing Bank or any Lender, including the fees, charges and disbursements of any counsel for any Agent, any Issuing Bank or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement or any other Loan Document, including its rights under this Section 12.03, or in connection with the Loans made or Letters of Credit issued hereunder, including, without limitation, all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.

(b) PARENT AND THE BORROWERS SHALL (AND ARE JOINTLY AND SEVERALLY OBLIGATED TO) INDEMNIFY THE ARRANGER, EACH AGENT, EACH ISSUING BANK AND EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON BEING CALLED AN “INDEMNITEE”) AGAINST, AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND RELATED EXPENSES, INCLUDING THE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY THE PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii) THE FAILURE OF ANY CREDIT PARTY TO COMPLY WITH THE TERMS OF ANY LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (iii) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OR COVENANT OF ANY CREDIT PARTY SET FORTH IN ANY OF THE LOAN DOCUMENTS OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN CONNECTION THEREWITH, (iv) ANY LOAN OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS THEREFROM, INCLUDING, WITHOUT LIMITATION, (A) ANY REFUSAL BY ANY ISSUING BANK TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT ISSUED BY SUCH ISSUING BANK IF THE DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH THE TERMS OF SUCH LETTER OF CREDIT, OR (B) THE PAYMENT OF A DRAWING UNDER ANY LETTER OF CREDIT NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR OTHER IMPROPER PRESENTATION OF THE DOCUMENTS PRESENTED IN CONNECTION THEREWITH, (v) THE OPERATIONS OF THE BUSINESS OF THE CREDIT PARTIES BY THE CREDIT PARTIES, (vi) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (vii) ANY ENVIRONMENTAL LAW APPLICABLE TO ANY CREDIT PARTY OR ANY OF THEIR PROPERTIES, INCLUDING WITHOUT LIMITATION, THE PRESENCE, GENERATION, STORAGE, RELEASE, THREATENED RELEASE, USE, TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL OR TREATMENT OF OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (viii) THE BREACH OR NON-COMPLIANCE BY ANY CREDIT PARTY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO ANY CREDIT PARTY, (ix) THE PAST OWNERSHIP BY ANY CREDIT PARTY OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT LIABILITY, (x) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT, DISPOSAL, GENERATION, THREATENED RELEASE, TRANSPORT, ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT FOR DISPOSAL OF OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY ANY CREDIT PARTY OR ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY ANY CREDIT PARTY, (xi) ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO ANY CREDIT PARTY, (xii) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS, OR (xiii) ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES (A) ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE, (B) RELATE TO CLAIMS BETWEEN OR AMONG ANY OF THE LENDERS, THE AGENT, ARRANGER OR ANY OF THEIR SHAREHOLDERS, PARTNERS OR MEMBERS OR (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 SHALL HAVE OBTAINED POSSESSION OF SUCH PROPERTY (WHETHER BY FORECLOSURE OR DEED IN LIEU OF FORECLOSURE, AS MORTGAGEE-IN-POSSESSION OR OTHERWISE).

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

(d) To the extent permitted by applicable law, no Credit Party shall assert, and each Credit Party hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.

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(e) All amounts due under this Section 12.03 shall be payable promptly after written demand therefor.

(f) Notwithstanding any other provisions of this Section 12.03, 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 Credit Parties to file a registration statement with the SEC or to qualify the Loans under the “Blue Sky” laws of any state.

Section 12.04 Successors and Assigns.

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

(b) (i) Subject to the conditions set forth in Section 12.04(b)(ii), any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld or delayed) of: (A) the Borrowers (or Borrower Representative), provided that no consent of the Borrowers (or Borrower Representative) shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if an Event of Default has occurred and is continuing, any other assignee; and (B) the Administrative Agent and any Issuing Bank, provided that no such consent shall be required for an assignment to an assignee that is a Lender immediately prior to giving effect to such assignment.

(ii) Assignments shall be subject to the following additional conditions: (A) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender’s Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000, and the Commitments of any assigning Lender remaining a party hereto after giving effect to the assignment shall be at least $5,000,000, unless, in each case, the Borrowers (or Borrower Representative) and the Administrative Agent otherwise consents, provided that no such consent of the Borrowers (or Borrower Representative) shall be required if an Event of Default has occurred and is continuing; (B) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement; (C) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500; (D) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire and shall deliver notice of the Assignment and Assumption to the Borrowers (or Borrower Representative); (E) in the case of an assignment to a CLO, the assigning Lender shall retain the sole right to approve any amendment, modification or waiver of any provision of this Agreement, provided that the Assignment and Assumption between such Lender and such CLO may provide that such Lender will not, without the consent of such CLO, agree to any amendment, modification or waiver described in the first proviso to Section 12.02 that affects such CLO; and (F) notwithstanding anything to the contrary contained in this Agreement, in no case may a Lender assign all or a portion of its rights and obligations under this Agreement to a Borrower or to any Affiliate of a Borrower.

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

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

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

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(c) (i) Any Lender may, without the consent of Parent, the Borrowers, the Administrative Agent or any Issuing Bank, sell participations to one or more banks or other entities (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (A) such Lender’s obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (C) Parent, the Borrowers, the Administrative Agent, each Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and (D) notwithstanding anything to the contrary contained in this Agreement, in no case may a Lender sell a participation in all or a portion of its rights and obligations under this Agreement to a Borrower or to any Affiliate of a Borrower. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the proviso to Section 12.02 that affects such Participant. In addition such agreement must provide that the Participant be bound by the provisions of Section 12.03. Subject to Section 12.04(c)(ii), Parent and the Borrowers agree that each Participant shall be entitled to the benefits of Section 5.01, Section 5.02 and Section 5.03 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 12.04(b). To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 12.08 as though it were a Lender, provided such Participant agrees to be subject to Section 4.01(c) as though it were a Lender.

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

(d) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank or any central bank having jurisdiction over such Lender, and this Section 12.04(d) shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

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Section 12.05 Survival; Revival; Reinstatement.

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

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

Section 12.06 Counterparts; Integration; Effectiveness.

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

(b) This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Arranger and the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and thereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof and thereof. This Agreement and the other Loan Documents represent the final agreement among the parties hereto and thereto and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties.

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

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

Section 12.08 Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations (of whatsoever kind, including, without limitations obligations under Swap Agreements) at any time owing by such Lender or Affiliate to or for the credit or the account of any Credit Party against any of and all the obligations of any Credit Party owed to such Lender now or hereafter existing under this Agreement or any other Loan Document, irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations may be unmatured. The rights of each Lender under this Section 12.08 are in addition to other rights and remedies (including other rights of setoff) which such Lender or its Affiliates may have.

Section 12.09 Governing Law; Jurisdiction; Consent to Service of Process.

(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

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

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(c) EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT THE ADDRESS SPECIFIED IN SECTION 12.01 OR SUCH OTHER ADDRESS AS IS SPECIFIED PURSUANT TO SECTION 12.01 (OR ITS ASSIGNMENT AND ASSUMPTION), SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF A PARTY OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANOTHER PARTY IN ANY OTHER JURISDICTION.

(d) EACH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (ii) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (iii) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iv) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.09.

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

Section 12.11 Confidentiality. Each of the Agents, each Issuing Bank and each Lender agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority or self-regulatory body, including, without limitation, Federal Reserve Bank or any bank having jurisdiction over such Lender, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement or any other Loan Document, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section 12.11, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any Swap Agreement relating to any Credit Party and its obligations, (g) with the consent of the Borrowers (or Borrower Representative), (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section 12.11 or (ii) becomes available to any Agent, any Issuing Bank or any Lender on a nonconfidential basis from a source other than a Credit Party, or (i) to any nationally recognized rating agency that requires access to information about a Lender’s investment portfolio in connection with ratings issued with respect to such Lender. For the purposes of this Section 12.11, “Information” means all information received from any Credit Party relating to any Credit Party and their businesses, other than any such information that is available to the Administrative Agent, any Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by a Credit Party. Notwithstanding anything herein to the contrary, any party hereto (and each employee, representative or other agent of such party) may disclose without limitation of any kind, any information with respect to the “tax treatment” and “tax structure” (in each case, within the meaning of Treasury Regulation Section 1.6011-4) of the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are provided to that party relating to such tax treatment or tax structure; provided that with respect to any document or similar item that in either case contains information concerning the tax treatment or tax structure of the transactions, as well as other information, this sentence shall only apply to such portions of the document or similar item that relate to the tax treatment or tax structure of the transactions contemplated hereby.

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Section 12.12 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS AND CONDITIONS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY LEGAL COUNSEL (INTERNAL OR OTHERWISE) 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 (INTERNAL OR OTHERWISE) 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 MAY RESULT, SUBJECT TO THE TERMS HEREOF AND THEREOF AND APPLICABLE LAW, 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.”

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Section 12.13 No Third Party Beneficiaries. This Agreement, the other Loan Documents, and the agreement of the Lenders to make Loans and each Issuing Bank to issue, amend, renew or extend Letters of Credit hereunder are solely for the benefit of Parent and the Borrowers, and no other Person (including, without limitation, any Subsidiary of any Borrower, any obligor, contractor, subcontractor, supplier or materialsman) shall have any rights, claims, remedies or privileges hereunder or under any other Loan Document against the Administrative Agent, any other Agent, any Issuing Bank or any Lender for any reason whatsoever. There are no third party beneficiaries.

Section 12.14 Collateral Matters; Swap Agreements. Except as set forth in Section 12.02(b)(xiii) no Lender or any Affiliate of a Lender shall have any voting rights under any Loan Document as a result of the existence of obligations owed to it under any Swap Agreements or in connection with any Banking Services.

Section 12.15 USA Patriot Act Notice. Each Lender hereby notifies Parent and each Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is required to obtain, verify and record information that identifies Parent and each Borrower, which information includes the name and address of Parent and each Borrower and other information that will allow such Lender to identify Parent and each Borrower in accordance with the Patriot Act.

Section 12.16 True-Up Loans. Upon the effectiveness of this Agreement, (a) each Lender who holds Loans in an aggregate amount less than its Applicable Percentage (after giving effect to this amendment and restatement) of all Loans shall advance new Loans which shall be disbursed to the Administrative Agent and used to repay Loans outstanding to each Lender who holds Loans in an aggregate amount greater than its Applicable Percentage of all Loans, (b) each Lender’s participation in each Letter of Credit shall be automatically adjusted to equal its Applicable Percentage (after giving effect to this amendment and restatement), and (c) such other adjustments shall be made as the Administrative Agent shall specify so that each Lender’s Credit Exposure equals its Applicable Percentage (after giving effect to this amendment and restatement) of the total Credit Exposures of all of the Lenders. The loans and/or adjustments described in this paragraph are referred to herein as the “True-Up Loans”.

Section 12.17 Restatement; Existing Credit Agreement. The parties hereto agree that this Agreement is a restatement of, and an extension of and amendment to, the Existing Credit Agreement. This Agreement does not in any way constitute a novation of the Existing Credit Agreement, but is an amendment and restatement of same.

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

PARENT:	CHAPARRAL ENERGY, INC., a Delaware corporation
	By:	/s/ Mark A. Fischer
		Mark A. Fischer, Chief Executive Officer and President
BORROWERS:	CHAPARRAL ENERGY, L.L.C., an Oklahoma limited liability company, as a Borrower and as Borrower Representative
	By:	/s/ Mark A. Fischer
		Mark A. Fischer, Manager
	NORAM PETROLEUM, L.L.C., an Oklahoma limited liability company
	By:	/s/ Mark A. Fischer
		Mark A. Fischer, Manager
	CHAPARRAL RESOURCES, L.L.C., an Oklahoma limited liability company
	By:	/s/ Mark A. Fischer
		Mark A. Fischer, Manager
	CHAPARRAL CO2, L.L.C., an Oklahoma limited liability company
	By:	/s/ Mark A. Fischer
		Mark A. Fischer, Manager

SIGNATURE PAGE

CHAPARRAL ENERGY, L.L.C.

EIGHTH RESTATED CREDIT AGREEMENT

CEI ACQUISITION, L.L.C., a Delaware limited liability company
By:	/s/ Mark A. Fischer
	Mark A. Fischer, Manager
CEI PIPELINE, L.L.C., a Texas limited liability company
By:	/s/ Mark A. Fischer
	Mark A. Fischer, Manager
CHAPARRAL REAL ESTATE, L.L.C., an Oklahoma limited liability company
By:	/s/ Mark A. Fischer
	Mark A. Fischer, Manager
GREEN COUNTRY SUPPLY, INC., an Oklahoma corporation
By:	/s/ Mark A. Fischer
	Mark A. Fischer, Chief Executive Officer and President
CHAPARRAL EXPLORATION, L.L.C., a Delaware limited liability company
By:	/s/ Mark A. Fischer
	Mark A. Fischer, Manager

SIGNATURE PAGE

CHAPARRAL ENERGY, L.L.C.

EIGHTH RESTATED CREDIT AGREEMENT

ROADRUNNER DRILLING, L.L.C., an Oklahoma limited liability company
By:	/s/ Mark A. Fischer
	Mark A. Fischer, Manager

SIGNATURE PAGE

CHAPARRAL ENERGY, L.L.C.

EIGHTH RESTATED CREDIT AGREEMENT

ADMINISTRATIVE AGENT/LENDER:	JPMORGAN CHASE BANK, N.A., as Administrative Agent and a Lender
	By:	/s/ Kimberly A. Bourgeois
		Kimberly A. Bourgeois,
		Senior Vice President

SIGNATURE PAGE

CHAPARRAL ENERGY, L.L.C.

EIGHTH RESTATED CREDIT AGREEMENT

CO-SYNDICATION AGENT/LENDER:	CAPITAL ONE, NATIONAL ASSOCIATION, as Co-Syndication Agent and a Lender
	By:	/s/ Scott Joyce
	Name:	Scott Joyce
	Title:	Senior Vice President

SIGNATURE PAGE

CHAPARRAL ENERGY, L.L.C.

EIGHTH RESTATED CREDIT AGREEMENT

CO-SYNDICATION AGENT/LENDER:	ROYAL BANK OF CANADA, as Co-Syndication Agent and a Lender
	By:	/s/ Don J. McKinnerney
	Name:	Don J. McKinnerney
	Title:	Authorized Signatory

SIGNATURE PAGE

CHAPARRAL ENERGY, L.L.C.

EIGHTH RESTATED CREDIT AGREEMENT

CO-SYNDICATION AGENT:	UBS SECURITIES LLC, as Co-Syndication Agent
	By:	/s/ Mary E. Evans
	Name:	Mary E. Evans
	Title:	Attorney in Fact
	By:	/s/ Michael Cerniglia
	Name:	Michael Cerniglia
	Title:	Director
LENDER:	UBS LOAN FINANCE LLC, as a Lender
	By:	/s/ Mary E. Evans
	Name:	Mary E. Evans
	Title:	Associate Director
	By:	/s/ Michael Cerniglia
	Name:	Michael Cerniglia
	Title:	Director

SIGNATURE PAGE

CHAPARRAL ENERGY, L.L.C.

EIGHTH RESTATED CREDIT AGREEMENT

CO-DOCUMENTATION AGENT/LENDER:	CREDIT AGRICOLE CORPORATE AND INVESTMENT BANK, as Co-Documentation Agent and a Lender
	By:	/s/ Mark Roche
	Name:	Mark Roche
	Title:	Managing Director
	By:	/s/ Sharada Manne
	Name:	Sharada Manne
	Title:	Director

SIGNATURE PAGE

CHAPARRAL ENERGY, L.L.C.

EIGHTH RESTATED CREDIT AGREEMENT

CO-DOCUMENTATION AGENT/LENDER:	SOCIÉTÉ GÉNÉRALE, as Co-Documentation Agent and a Lender
	By:	/s/ Cameron Null
	Name:	Cameron Null
	Title:	Vice President

SIGNATURE PAGE

CHAPARRAL ENERGY, L.L.C.

EIGHTH RESTATED CREDIT AGREEMENT

CO-DOCUMENTATION AGENT/LENDER:	WELLS FARGO BANK, N.A., as Co-Documentation Agent and a Lender
	By:	/s/ J. Alan Alexander
	Name:	J. Alan Alexander
	Title:	SVP

SIGNATURE PAGE

CHAPARRAL ENERGY, L.L.C.

EIGHTH RESTATED CREDIT AGREEMENT

LENDER:	THE BANK OF NOVA SCOTIA, as a Lender
	By:	/s/ John Frazell
	Name:	John Frazell
	Title:	Director

SIGNATURE PAGE

CHAPARRAL ENERGY, L.L.C.

EIGHTH RESTATED CREDIT AGREEMENT

LENDER:	THE ROYAL BANK OF SCOTLAND plc, as a Lender
	By:	/s/ Karen Weich
	Name:	Karen Weich
	Title:	Vice President

SIGNATURE PAGE

CHAPARRAL ENERGY, L.L.C.

EIGHTH RESTATED CREDIT AGREEMENT

LENDER:	COMERICA BANK, as a Lender
	By:	/s/ John S. Lesikar
	Name:	John S. Lesikar
	Title:	Corporate Banking Officer

SIGNATURE PAGE

CHAPARRAL ENERGY, L.L.C.

EIGHTH RESTATED CREDIT AGREEMENT

LENDER:	NATIXIS, as a Lender
	By:	/s/ Donovan C. Broussard
	Name:	Donovan C. Broussard
	Title:	Managing Director
	By:	/s/ Louis. P Laville, III
	Name:	Louis. P Laville, III
	Title:	Managing Director

SIGNATURE PAGE

CHAPARRAL ENERGY, L.L.C.

EIGHTH RESTATED CREDIT AGREEMENT

LENDER:	ALLIED IRISH BANKS, p.l.c., as a Lender
	By:	/s/ Mark Connelly
	Name:	Mark Connelly
	Title:	Senior Vice President
	By:	/s/ James Giordano
	Name:	James Giordano
	Title:	Assistant Vice President

SIGNATURE PAGE

CHAPARRAL ENERGY, L.L.C.

EIGHTH RESTATED CREDIT AGREEMENT

LENDER:	AMEGY BANK NATIONAL ASSOCIATION, as a Lender
	By:	/s/ John G. Murray
	Name:	John G. Murray
	Title:	Senior Vice President

SIGNATURE PAGE

CHAPARRAL ENERGY, L.L.C.

EIGHTH RESTATED CREDIT AGREEMENT

LENDER:	COMPASS BANK (as successor in interest to Guaranty Bank), as a Lender
	By:	/s/ Christopher S. Parada
	Name:	Christopher S. Parada
	Title:	Senior Vice President

SIGNATURE PAGE

CHAPARRAL ENERGY, L.L.C.

EIGHTH RESTATED CREDIT AGREEMENT

LENDER:	CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as a Lender
	By:	/s/ Bill O’Daly
	Name:	Bill O’Daly
	Title:	Director
	By:	/s/ Mikhail Faybusovich
	Name:	Mikhail Faybusovich
	Title:	Vice President

SIGNATURE PAGE

CHAPARRAL ENERGY, L.L.C.

EIGHTH RESTATED CREDIT AGREEMENT

LENDER:	ING CAPITAL LLC, as a Lender
	By:	/s/ Juli Bieser
	Name:	Juli Bieser
	Title:	Director

SIGNATURE PAGE

CHAPARRAL ENERGY, L.L.C.

EIGHTH RESTATED CREDIT AGREEMENT

LENDER:	KEYBANK NATIONAL ASSOCIATION as a Lender
	By:	/s/ Todd Coker
	Name:	Todd Coker
	Title:	Vice President

SIGNATURE PAGE

CHAPARRAL ENERGY, L.L.C.

EIGHTH RESTATED CREDIT AGREEMENT

LENDER:	UNION BANK, N.A., as a Lender
	By:	/s/ Whitney Randolph
	Name:	Whitney Randolph
	Title:	Vice President

SIGNATURE PAGE

CHAPARRAL ENERGY, L.L.C.

EIGHTH RESTATED CREDIT AGREEMENT

LENDER:	U.S. BANK NATIONAL ASSOCIATION, as a Lender
	By:	/s/ Bruce E. Hernandez
	Name:	Bruce E. Hernandez
	Title:	Vice President

SIGNATURE PAGE

CHAPARRAL ENERGY, L.L.C.

EIGHTH RESTATED CREDIT AGREEMENT

EX-10.20

Exhibit 10.20

CHAPARRAL ENERGY, INC.

2010 EQUITY INCENTIVE PLAN

SECTION 1. Purpose of the Plan.

The Chaparral Energy, Inc. 2010 Equity Incentive Plan (the “Plan”) is intended to promote the interests of Chaparral Energy, Inc., a Delaware corporation (the “Company”) and its successors, by encouraging officers, employees, directors and consultants of the Company and its Affiliates to acquire or increase their equity interest in the Company and to provide a means whereby they may develop a sense of proprietorship and personal involvement in the development and financial success of the Company, and to encourage them to remain with and devote their best efforts to the business of the Company thereby advancing the interests of the Company and its stockholders. The Plan is also contemplated to enhance the ability of the Company and its Affiliates to attract and retain the services of individuals who are essential for the growth and profitability of the Company.

SECTION 2. Definitions.

As used in the Plan, the following terms shall have the meanings set forth below:

“Affiliate” shall mean (i) any entity in which the Company, directly or indirectly, owns 50% or more of the combined voting power, as determined by the Committee, (ii) any “parent corporation” of the Company (as defined in Section 424(e) of the Code) and (iii) any “subsidiary corporation” of any such parent (as defined in Section 424(f) of the Code) thereof.

“Award” shall mean any Option, Restricted Stock, Performance Award, Phantom Shares, Bonus Shares, Other Stock-Based Award or Cash Award.

“Award Agreement” shall mean any written or electronic agreement, contract, or other instrument or document evidencing any Award, which may, but need not, be executed or acknowledged by a Participant.

“Board” shall mean the Board of Directors of the Company.

“Bonus Shares” shall mean an award of Shares granted pursuant to Section 6(d) of the Plan.

“Cash Award” shall mean an award payable in cash granted pursuant to Section 6(f) of the Plan.

“CCMP” shall mean the Purchasers (as such term is defined in that certain Stock Purchase Agreement by and among the Company and CCMP Capital Investors II (AV-2), L.P., a Delaware limited partnership, CCMP Energy I LTD., a Cayman limited company, and CCMP Capital Investors (Cayman) II, L.P., a Cayman limited partnership, dated as of March 23, 2010).

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations thereunder.

“Committee” shall mean the Compensation Committee of the Board or, if none, the Board.

“Common Stock” shall mean the Class A common stock of the Company, $0.01 par value.

“Company” shall mean Chaparral Energy, Inc., a Delaware corporation.

“Consultant” shall mean any consultant or adviser, other than a Director or an Employee, if: (i) the consultant or adviser renders bona fide services to the Company or an Affiliate; (ii) the services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities; and (iii) the consultant or adviser is a natural person.

“Covered Person” shall mean a “covered employee” as defined in Section 162(m)(3) of the Code and the regulations or guidance issued by the Internal Revenue Service thereunder, including Notice 2007-49.

“Director” shall mean a member of the Board.

“Employee” shall mean any employee of the Company or an Affiliate.

“Equity Restructuring” shall mean a non-reciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that affects the shares of Common Stock (or other securities of the Company) or the share price of Common Stock (or other securities) and causes a change in the per share value of the Common Stock underlying outstanding Awards granted under the Plan.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

“Fair Market Value” shall mean, as of any date, the value of a Share determined as follows:

(i) If the Common Stock is listed on any established stock exchange or a national market system, its Fair Market Value shall be the closing sales price for a share of such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for such date, or if no bids or sales were reported for such date, then the closing sales price (or the closing bid, if no sales were reported) on the trading date immediately prior to such date during which a bid or sale occurred, in each case, as reported in The Wall Street Journal or such other source as the Committee deems reliable;

(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high bid and low asked prices for a share of the Common Stock on such date, or if no closing bid and asked prices were reported for such date, the date immediately prior to such date during which closing bid and asked prices were quoted for such Common Stock, in each case, as reported in The Wall Street Journal or such other source as the Committee deems reliable; or

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(iii) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Committee.

“Option” shall mean an option granted under Section 6(a) of the Plan. Options granted under the Plan may constitute either (i) an “incentive stock option” which means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and which is designated as an incentive stock option by the Committee, or (ii) a “nonqualified stock option” which means an Option (or portion thereof) that is not designated as an incentive stock option by the Committee, or which is designated as an incentive stock option by the Committee but fails to qualify as an incentive stock option within the meaning of Section 422 of the Code.

“Other Stock-Based Award” shall mean an award granted pursuant to Section 6(g) of the Plan that is not otherwise specifically provided for, the value of which is based in whole or in part upon the value of a Share.

“Participant” shall mean any Director, Employee or Consultant granted an Award under the Plan.

“Performance Award” shall mean any right granted under Section 6(c) of the Plan.

“Performance Objectives” means the objectives, if any, established annually by the Committee that are to be achieved with respect to an Award granted under this Plan, which may be described (i) in terms of Company-wide objectives, (ii) in terms of objectives that are related to performance of a region, division, district, subsidiary, department or function within the Company or a subsidiary in which the Participant receiving the Award is employed or (iii) in individual or other terms, and which will relate to the period of time determined by the Committee. The Performance Objectives intended to qualify under Section 162(m) of the Code shall be with respect to one or more of the following: (i) net earnings; (ii) operating income; (iii) earnings before interest and taxes (“EBIT”); (iv) earnings before interest, taxes, depreciation, and amortization expenses (“EBITDA”); (v) earnings before taxes and unusual or nonrecurring items; (vi) net income before interest, income and franchise taxes, depreciation and amortization expenses, and any unusual or non-recurring non-cash expenses or income (“Company EBITDA”); (vii) revenue; (viii) return on investment; (ix) return on equity; (x) return on total capital; (xi) return on assets; (xii) total stockholder return; (xiii) return on capital employed in the business; (xiv) stock price performance; (xv) earnings per share growth; (xvi) cash flows; (xvii) proved oil and gas reserves; (xviii) oil and gas production; and (xix) expenses. Which objectives to use with respect to an Award, the weighting of the objectives if more than one is used, and whether the objective is to be measured against a Company-established budget or target, an index or a peer group of companies, shall be determined by the Committee in its discretion at the time of grant of the Award. A Performance Objective need not be based on an increase or a positive result under a particular business criterion and may include, for example, maintaining the status quo or limiting economic losses.

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“Person” shall mean individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, government or political subdivision thereof or other entity.

“Phantom Shares” shall mean an Award of the right to receive Shares issued at the end of a Restricted Period which is granted pursuant to Section 6(e) of the Plan.

“Plan” shall mean the plan described in Section 1 of the Plan and set forth in this document, as amended from time to time.

“Restricted Period” shall mean the period established by the Committee with respect to an Award during which the Award either remains subject to forfeiture or is not exercisable by the Participant.

“Restricted Stock” shall mean any Share, prior to the lapse of restrictions thereon, granted under Sections 6(b) of the Plan.

“Rule 16b-3” shall mean Rule 16b-3 promulgated by the SEC under the Exchange Act, or any successor rule or regulation thereto as in effect from time to time.

“SEC” shall mean the Securities and Exchange Commission, or any successor thereto.

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

“Share” shall mean a share of Common Stock, as adjusted in accordance with Section 8 of the Plan.

“Stockholders’ Agreement” shall mean that certain Stockholders’ Agreement dated as of April 12, 2010, by and among the Company, CCMP, Fischer Investments, L.L.C., an Oklahoma limited liability company, Altoma Energy, an Oklahoma general partnership, and CHK Holdings, L.L.C., an Oklahoma limited liability company.

SECTION 3. Administration.

Subject to Section 11 of the Plan:

(a) General. The Plan shall be administered by the Committee. A majority of the members of the Committee shall constitute a quorum, and the acts of a majority of the members of the Committee who are present at any meeting thereof at which a quorum is present, or the acts unanimously approved by the members of the Committee in writing, shall be the acts of the Committee. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan.

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(b) Committee Authority. Subject to the terms of the Plan and applicable law, and in addition to other express powers and authorizations conferred on the Committee by the Plan, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to a Participant; (iii) determine the number of Shares to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, Awards; (iv) determine the terms and conditions of any Award (such terms and conditions include, but are not limited to, the exercise price, the time or times when Awards may vest or be exercised (which may be based on Performance Objectives), the duration of any Restricted Period, any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Award or the Common Stock relating thereto, based in each case on such factors as the Committee, in its sole discretion, shall determine); (v) determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, Shares, other securities, other Awards or other property, or canceled, forfeited, or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi) interpret and administer the Plan or any Award Agreement; (vii) establish, amend, suspend, or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; (viii) determine the Fair Market Value; (ix) prescribe the form of each Award Agreement, which need not be identical for each Participant; and (x) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. No member of the Committee shall vote or act upon any matter relating solely to himself and grants of Awards to members of the Committee must be ratified by the Board. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive, and binding upon all Persons, including the Company, any Affiliate, any Participant, any holder or beneficiary of any Award, any stockholder and any Employee.

(c) Delegation. The Committee may delegate to the Chief Executive Officer and to other senior officers of the Company its duties under the Plan pursuant to such conditions or limitations as the Committee may establish, except the Committee may not delegate to any person the authority to grant Awards to, or take other action with respect to, Participants who are subject to Section 16 of the Exchange Act.

(d) Indemnification. No member of the Board or Committee or officer of the Company to whom the Committee has delegated authority shall be liable for any action or determination made in good faith with respect to the Plan or any Award granted hereunder and the members of the Board and Committee and its designees shall be entitled to indemnification and reimbursement by the Company and its Affiliates in respect of any claim, loss, damage or expense (including legal fees) arising therefrom to the full extent permitted by law.

SECTION 4. Shares Available for Awards.

(a) Shares Available. Subject to adjustment as provided in Section 8, the aggregate number of Shares with respect to which Awards may be granted under the Plan shall be up to 86,301 Shares. If any Award is exercised, paid, forfeited, terminated or canceled without the delivery of Shares to the Participant, then the Shares covered by such Award, to the extent of such payment, exercise, forfeiture, termination or cancellation, shall again be Shares with respect to which Awards may be granted. Shares which are delivered by the Participant or withheld by the Company upon the exercise of an Award under the Plan, in payment of the exercise price thereof or tax withholding thereon, may again be optioned, granted or awarded hereunder, subject to the limitations of this Section 4. Shares of Restricted Stock which are repurchased by the Company at their original purchase price shall become available for future grant under the Plan. Notwithstanding the provisions of this Section 4, no Shares may again be optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to qualify as an incentive stock option under Section 422 of the Code. Awards will not reduce the number of Shares that may be issued pursuant to the Plan if the settlement of the Award will not require the issuance of Shares, as, for example, an Other Stock-Based Award that can be satisfied only by the payment of cash.

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(b) Sources of Shares Deliverable Under Awards. Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares or of treasury Shares and shall be fully paid and nonassessable.

SECTION 5. Eligibility.

Any Employee, Director or Consultant shall be eligible to be designated a Participant and receive an Award under the Plan.

SECTION 6. Awards.

(a) Options. Subject to the provisions of the Plan, the Committee shall have the authority to determine the Participants to whom Options shall be granted, the number of Shares to be covered by each Option, the exercise price therefor and the conditions and limitations applicable to the exercise of the Option, including the following terms and conditions and such additional terms and conditions, as the Committee shall determine, that are not inconsistent with the provisions of the Plan, which shall be set forth in an applicable Award Agreement.

(i) Exercise Price & Grant Date. Except as provided in Section 8, the exercise price per Share for the Shares to be issued upon exercise of an Option shall be no less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant. Notwithstanding the foregoing, an Option may be granted with a per Share exercise price other than as described in the preceding sentence if such Option is granted as an assumption of or in substitution for another option in connection with a merger or other corporate transaction. The grant date shall not be earlier than the date on which the Committee approves such grant.

(ii) Time and Method of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole or in part (which may include the achievement of one or more Performance Objectives), and the method or methods by which, and the form or forms, in which payment of the exercise price with respect thereto may be made or deemed to have been made (which may include, without limitation, (A) cash, (B) check acceptable to the Company, (C) with the consent of the Committee, surrendered Shares then issuable upon exercise of the Option having a Fair Market Value on the date of exercise equal to the aggregate exercise price of the Option or exercised portion thereof which are held for the period required to avoid a charge to the Company’s reported financial earnings and owned free and clear of any liens, claims, encumbrances or security interests, outstanding Awards, a “cashless” or “cashless-broker” exercise (through procedures approved by the Committee and the Company), (D) with the consent of the Committee, other securities or other property, notes approved by the Committee, or (E) with the consent of the Committee, any combination thereof, having a Fair Market Value on the exercise date equal to the relevant exercise price); provided, however, in order to exercise an Option, the Person or Persons entitled to exercise the Option shall deliver to the Company payment in full for the Shares being purchased and, unless other arrangements have been made with, or procedures have been established and approved by, the Committee for a cashless or cashless-broker exercise less any required withholding taxes.

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(iii) Incentive Stock Options. The aggregate number of Shares with respect to incentive stock options that may be granted under the Plan shall be up to 86,301 Shares. The terms of any Option granted under the Plan intended to be an incentive stock option shall comply in all respects with the provisions of Section 422 of the Code, or any successor provision, and any regulations promulgated thereunder. Incentive stock options may be granted only to employees of the Company and its “parent corporation” or “subsidiary corporation”, within the meaning of Section 424(e) or 424(f) of the Code, respectively. To the extent the aggregate Fair Market Value of the Shares (determined as of the date of grant) exercisable for the first time during any calendar year (under all plans of the Company and its parent and subsidiary corporations) exceeds $100,000, such Shares in excess of $100,000 shall be classified as nonqualified stock options. No Option that is an incentive stock option shall be exercisable after the expiration of 10 years from its date of grant. Notwithstanding anything herein to the contrary, in no event shall any person owning stock possessing more than 10% of the total combined voting power of the Company and its Affiliates be granted an incentive stock option hereunder unless (1) the Option exercise price shall be at least 110% of the Fair Market Value of the Shares subject to such Option at the time the Option is granted and (2) the term during which such Option is exercisable does not exceed five years from its date of grant.

(b) Restricted Stock. Subject to the provisions of the Plan, the Committee shall have the authority to determine the Participants to whom Restricted Stock shall be granted, the number of Shares of Restricted Stock to be granted to each Participant, the duration of the Restricted Period during which, and the conditions, including Performance Objectives, if any, under which if not achieved, the Restricted Stock may be forfeited to the Company, and the other terms and conditions of such Awards, which shall be set forth in an applicable Award Agreement.

(i) Dividends. Dividends paid on Restricted Stock may be paid directly to the Participant, may be subject to risk of forfeiture and/or transfer restrictions during any period established by the Committee or sequestered and held in a bookkeeping cash account (with or without interest) or reinvested in additional shares of Common Stock, which account or shares may be subject to the same restrictions as the underlying Award or such other restrictions, all as determined by the Committee in its discretion.

(ii) Registration. Any Restricted Stock may be evidenced in such manner as the Committee shall deem appropriate, including, without limitation, book-entry registration or issuance of a stock certificate or certificates. In the event any stock certificate is issued in respect of Restricted Stock granted under the Plan, such certificate shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock.

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(iii) Forfeiture and Restrictions Lapse. Except as otherwise determined by the Committee or the terms of the Award Agreement, upon termination of a Participant’s employment (as determined under criteria established by the Committee) for any reason during the applicable Restricted Period, all Restricted Stock shall be forfeited by the Participant and reacquired by the Company. Unrestricted Shares, evidenced in such manner as the Committee shall deem appropriate, shall be issued to the holder of Restricted Stock promptly after the applicable restrictions have lapsed or otherwise been satisfied, subject to the terms of the Award Agreement.

(iv) Transfer Restrictions. During the Restricted Period, Restricted Stock will be subject to the limitations on transfer as provided in Section 6(h)(i).

(v) Repurchase Right. Unless the Committee determines otherwise, the Award Agreement shall grant the Company the right to repurchase Shares acquired upon the lapse of the restrictions applicable to the Restricted Stock upon the Participant’s termination of service as an Employee, Director or Consultant for any reason. Subject to Section 9(m), the purchase price for Shares repurchased by the Company pursuant to such repurchase right and the rate at which such repurchase right shall lapse shall be determined by the Committee in its sole discretion, and shall be set forth in the Award Agreement.

(c) Performance Awards. The Committee shall have the authority to determine the Participants who shall receive a Performance Award, which shall be denominated as a cash amount (e.g., $100 per award unit) at the time of grant and confer on the Participant the right to receive payment of such Award, in whole or in part, upon the achievement of such Performance Objectives during such performance periods as the Committee shall establish with respect to the Award.

(i) Terms and Conditions. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the Performance Objectives to be achieved during any performance period, the length of any performance period, the amount of any Performance Award and the amount of any payment or transfer to be made pursuant to any Performance Award. In the case of any Performance Award granted to a Covered Person in any calendar year, Performance Objectives shall be designed to be objective and shall otherwise meet the requirements of Section 162(m) of the Code and regulations issued thereunder (including Treasury Regulation Section 1.162-27 and any successor regulation thereto), including the requirement that the level or levels of performance targeted by the Committee are such that the achievement of Performance Objectives is “substantially uncertain” at the time of grant. In addition, achievement of Performance Objectives in respect of Performance Awards shall be measured over a performance period of not less than six (6) months and not more than one year, as specified by the Committee. Performance Objectives in the case of any Performance Award granted to a Covered Person shall be established not later than ninety (90) days after the beginning of any performance period applicable to such Performance Award, or at such other date as may be required or permitted for “performance-based compensation” under Section 162(m) of the Code. Subject to Section 8, the Committee shall not exercise discretion to increase any amount payable in respect of a Performance Award which is intended to comply with Section 162(m) of the Code.

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(ii) Payment of Performance Awards. Performance Awards, to the extent earned, shall be paid (in cash and/or in Shares, in the sole discretion of the Committee) in a lump sum following the close of the performance period. Except as may otherwise be required under Section 409A of the Code, payment described in the immediately preceding sentence shall be made no later than the date that is 2 ¹/2 months after the end of the year in which the Performance Award is earned and vested under the Plan, and such payment shall not be subject to any election by the Participant to defer the payment to a later period. To the extent that settlement is to be made in Shares, the amount payable under a Performance Award shall be divided by the Fair Market Value per Share of Common Stock on the determination date and a stock certificate evidencing the resulting shares of Common Stock (to the nearest full share) shall be delivered to the Participant, or his personal representative, and the value of any fractional shares will be paid in cash.

(d) Bonus Shares. The Committee shall have the authority, in its discretion, to grant Bonus Shares to Participants upon such terms and conditions as set forth in an applicable Award Agreement. Each Bonus Share shall constitute a transfer of an unrestricted Share to the Participant, without other payment therefor, as additional compensation for the Participant’s services to the Company.

(e) Phantom Shares. The Committee shall have the authority to grant Awards of Phantom Shares to Participants upon such terms and conditions as the Committee may determine as set forth in an applicable Award Agreement.

(i) Terms and Conditions. Each Phantom Share Award shall constitute an agreement by the Company to issue or transfer a specified number of Shares or pay an amount of cash equal to a specified number of Shares, or a combination thereof to the Participant in the future, subject to the fulfillment during the Restricted Period of such conditions, including Performance Objectives, if any, as the Committee may specify at the date of grant. During the Restricted Period, the Participant shall not have any right to transfer any rights under the subject Award, shall not have any rights of ownership in the Phantom Shares and shall not have any right to vote such shares.

(f) Cash Awards. The Committee shall have the authority to determine the Participants to whom Cash Awards shall be granted, the amount, and the terms or conditions, if any, as additional compensation for the Participant’s services to the Company or its Affiliates. If granted, a Cash Award shall be granted (simultaneously or subsequently) in tandem with another Award and shall entitle a Participant to receive a specified amount of cash from the Company upon such other Award becoming taxable to the Participant, which cash amount may be based on a formula relating to the anticipated taxable income associated with such other Award and the payment of the Cash Award.

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(g) Other Stock-Based Awards. The Committee may also grant to Participants an Other Stock-Based Award, which shall consist of a right which is an Award denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares as is deemed by the Committee to be consistent with the purposes of the Plan. Subject to the terms of the Plan, including the Performance Objectives, if any, applicable to such Award, the Committee shall determine the terms and conditions of any such Other Stock-Based Award as set forth in an applicable Award Agreement.

(h) General.

(i) Limits on Transfer of Awards.

(A) Except as provided in (C) below, each Award, and each right under any Award, shall be exercisable as specified in the terms of the Award Agreement only by the Participant during the Participant’s lifetime, or by the person to whom the Participant’s rights shall pass by will or the laws of descent and distribution.

(B) Except as provided in (C) below, no Award and no right under any such Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant otherwise than by will or by the laws of descent and distribution (or, in the case of Restricted Stock, to the Company, except as otherwise determined by the Committee as set forth in an applicable Award Agreement). Any such attempted or purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void, ineffective and unenforceable against the Company or any Affiliate, and shall give no right to the purported transferee, and shall at the sole discretion of the Committee result in the forfeiture of the Award with respect to the Award involved in such attempted or perpetual transfer or encumbrance.

(C) Notwithstanding anything in the Plan to the contrary, to the extent specifically provided by the Committee with respect to a grant, (1) a nonqualified stock option may be transferred to immediate family members or related family trusts, or similar entities on such terms and conditions as the Committee may establish, and (2) an Award other than an Incentive Stock Option may be transferred pursuant to a qualified domestic relations order described in Section 414(p) of the Code.

(D) Awards may be subject to such other limits on transfer as set forth in the Stockholders’ Agreement.

(ii) Term of Awards. Subject to the terms of the Plan, the term of each Award shall be for such period as may be determined by the Committee; provided, that in no event shall the term of any Award exceed a period of 10 years from the date of its grant.

(iii) Share Certificates. All certificates for Shares or other securities of the Company delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the SEC, any stock exchange upon which such Shares or other securities are then listed, and any applicable federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

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(iv) Consideration for Grants. Awards may be granted for no cash consideration or for such consideration as the Committee determines including, without limitation, such minimal cash consideration as may be required by applicable law.

(v) Delivery of Shares or other Securities upon Payment by Participant of Consideration. No Shares or other securities shall be delivered pursuant to any Award until payment in full of any amount required to be paid pursuant to the Plan or the applicable Award Agreement is received by the Company.

(vi) Section 409A Considerations. To the extent that the Committee determines that any Award granted under the Plan is subject to Section 409A of the Code, the Award Agreement shall incorporate the terms and conditions required by Section 409A of the Code. To the extent applicable, the Plan and the Award Agreement evidencing such Award shall be interpreted in accordance with Section 409A of the Code and the Department of Treasury regulations and other interpretive guidance issued thereunder. Notwithstanding any provision of the Plan to the contrary, in the event that the Committee determines that any Award may be subject to Section 409A of the Code and related Department of Treasury regulations and other interpretive guidance issued thereunder, the Committee may adopt such amendments to the Plan and the Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Committee determines are necessary or appropriate to (a) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury regulations and other interpretive guidance thereunder and thereby avoid the application of any penalty taxes under such Section.

SECTION 7. Amendment and Termination.

Subject to Section 11, except to the extent prohibited by applicable law and unless otherwise expressly provided in an Award Agreement or in the Plan:

(a) Amendments to the Plan. Except as required by applicable law or the rules of the principal securities exchange or market on which the shares are traded and subject to Section 7(b) below, the Board may amend, alter, suspend, discontinue, or terminate the Plan without the consent of any stockholder, Participant, other holder or beneficiary of an Award, or other Person. Provided, however, no amendment to the Plan shall be made without the approval of the shareholders given within twelve months before or after action by the Board, that would increase the total number of shares available for award under the Plan or extend the term of the Plan (except by operation of Section 8 of the Plan). Termination of the Plan shall not affect the Committee’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.

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(b) Amendments to Awards. Subject to Section 7(c) below, the Committee may waive any conditions or rights under, amend any terms of, or alter any Award theretofore granted, provided no change, other than pursuant to Section 8, in any Award shall reduce the benefit to Participant without the consent of such Participant. In no event shall the Committee, if not the Board, take action without the approval of the Board that constitutes a “repricing” of an Option for financial accounting purposes, and any Board-approved repricing shall be inoperative and ineffective unless and until approved by the stockholders.

(c) Unilateral Amendments. The Committee, in its sole discretion and without the consent of the Participant, may amend (i) any stock-based Award to reflect (1) a change in corporate capitalization, such as a stock split or dividend, (2) a corporate transaction, such as a corporate merger, a corporate consolidation, any corporate separation (including a spinoff or other distribution of stock or property by a corporation), any corporate reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code), (3) any partial or complete corporate liquidation, or (4) a change in accounting rules required by the Financial Accounting Standards Board and (ii) any Award that is not intended to meet the requirements of the performance based compensation exception to Section 162(m) of the Code, to reflect a significant event that the Committee, in its sole discretion, believes to be appropriate to reflect the original intent in the grant of the Award.

(d) Stockholder Approval. The Board shall obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with applicable laws.

SECTION 8. Adjustments upon Changes in Capitalization, Merger or Asset Sale.

In all cases, subject to Section 11:

(a) In the event that the Committee determines that other than an Equity Restructuring any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), reorganization, merger, consolidation, combination, repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event, in the Committee’s sole discretion, affects the Common Stock such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended by the Company to be made available under the Plan or with respect to any Award, then the Committee shall, in such manner as it may deem equitable, adjust any or all of:

(i) the number and kind of shares of Common Stock (or other securities or property) with respect to which Awards may be granted or awarded (including, but not limited to, adjustments of the limitations in Section 4 hereof on the maximum number and kind of shares which may be issued);

(ii) the number and kind of shares of Common Stock (or other securities or property) subject to outstanding Awards; and

(iii) the grant or exercise price with respect to any Award.

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(b) In the event of any transaction or event described in Section 8(a) hereof, the Committee, in its sole discretion, and on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Participant’s request, is hereby authorized to take any one or more of the following actions whenever the Committee determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended by the Company to be made available under the Plan or with respect to any Award granted or issued under the Plan or to facilitate such transaction or event:

(i) To provide for either the purchase of any such Award for an amount of cash equal to the amount that could have been obtained upon the exercise of such Award or realization of the Participant’s rights had such Award been currently exercisable or payable or fully vested or the replacement of such Award with other rights or property selected by the Committee in its sole discretion;

(ii) To provide that such Award shall be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in the Plan or the provisions of such Award;

(iii) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices;

(iv) To make adjustments in the number and type of shares of Common Stock (or other securities or property) subject to outstanding Awards, and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Awards or Awards which may be granted in the future; and/or

(v) To provide that immediately upon the consummation of such event, such Award shall not be exercisable and shall terminate; provided, that for a specified period of time prior to such event, such Award shall be exercisable as to all Shares covered thereby, and the restrictions imposed under an Award Agreement upon some or all Shares may be terminated and, in the case of Restricted Stock, some or all shares of such Restricted Stock may cease to be subject to repurchase, notwithstanding anything to the contrary in the Plan or the provisions of such Award Agreement.

(c) In connection with the occurrence of any Equity Restructuring, and notwithstanding anything to the contrary in Section 8(a) and 8(b) hereof:

(i) The number and type of securities subject to each outstanding Award and the exercise price or grant price thereof, if applicable, will be proportionately adjusted. The adjustments provided under this Section 8(c)(i) shall be nondiscretionary and shall be final and binding on the affected Participant and the Company.

(ii) The Committee shall make such proportionate adjustments, if any, as the Committee in its discretion may deem appropriate to reflect such Equity Restructuring with respect to the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Section 4 hereof).

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(d) Subject to Section 4 hereof, the Committee may, in its sole discretion, include such further provisions and limitations in any Award Agreement or certificate, as it may deem equitable and in the best interests of the Company.

(e) The existence of the Plan, any Award Agreement and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Company or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

SECTION 9. General Provisions.

(a) No Rights to Awards. No director, Employee, Consultant or other Person shall have any claim to be granted any Award. There is no obligation for uniformity of treatment of Participants or holders or beneficiaries of Awards, and the terms and conditions of Awards need not be the same with respect to each recipient.

(b) Withholding. The Company or any Affiliate is authorized to withhold from any Award, from any payment due or transfer made under any Award or under the Plan or from any compensation or other amount owing to a Participant the amount (in cash, Shares, other securities, Shares that would otherwise be issued pursuant to such Award, other Awards or other property) of any applicable taxes payable in respect of an Award, its exercise, the lapse of restrictions thereon, or any payment or transfer under an Award or under the Plan and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. In addition, the Committee may provide, in an Award Agreement, that the Participant shall have the right to direct the Company to satisfy the Company’s tax withholding obligation through the “constructive” tender of already-owned Shares or the withholding of Shares otherwise to be acquired upon the exercise or payment of such Award.

(c) No Right to Employment or other Service Relationship. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ or service of the Company or any Affiliate. Further, the Company or an Affiliate may at any time dismiss a Participant from employment or other service relationship at any time, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement.

(d) Governing Law. The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall be governed by and construed in accordance with the laws of the State of Delaware and applicable federal law.

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(e) Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect.

(f) Other Laws. The Committee may refuse to issue or transfer any Shares or other consideration under an Award if, acting in its sole discretion, it determines that the issuance of transfer or such Shares or such other consideration might violate any applicable law or regulation or entitle the Company to recover the same under Section 16(b) of the Exchange Act, and any payment tendered to the Company by a Participant, other holder or beneficiary in connection with the exercise of such Award shall be promptly refunded to the relevant Participant, holder or beneficiary.

(g) Unfunded Plan. Neither the Plan nor the Award shall create or be construed to create a trust or separate fund or funds. Neither the Plan nor any Award shall establish any kind of a fiduciary relationship between the Company or any Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any general unsecured creditor of the Company or any Affiliate.

(h) No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated.

(i) Shareholder Agreements. The Committee may condition the grant, exercise or payment of any Award upon such person entering into a stockholders’ agreement or repurchase agreement in such form as approved from time to time by the Board.

(j) Gender, Tense and Headings. Whenever the context requires, words of the masculine gender used herein shall include the feminine and neuter and words used in the singular shall include the plural. Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.

(k) No Guarantee of Tax Consequences. None of the Board, the Company nor the Committee makes any commitment or guarantee that any federal, state or local tax treatment will apply or be available to any person participating or eligible to participate hereunder.

(l) Section 162(m) Special Transition Rule. Should any class of Common Stock be registered under Section 12(g) of the Exchange Act, the Plan is intended to qualify for the transition relief provided under Treasury Regulation §1.162-27(f). Accordingly, all compensation realized by Participants in connection with Awards granted under the Plan within the reliance period described therein is intended to be exempt from the limitation on tax deductibility under Section 162(m) of the Code. For purposes of the Plan, the reliance period will expire on the earlier of (i) the expiration of the Plan, (ii) a “material modification” of the Plan (within the meaning of Treasury Regulation §1.162-27(h)(1)(iii)), (iii) the issuance of all Common Stock that has been allocated under the Plan, or (iv) the first meeting of stockholders of the Company at which non-employee Directors are to be elected that occurs after the close of the third calendar year following the calendar year in which the Common Stock is first registered under Section 12(g) of the Exchange Act.

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(m) Repurchase Provisions. The Committee in its sole discretion may provide that the Company may repurchase Shares acquired upon exercise of an Award upon the occurrence of certain specified events, including, without limitation, a Participant’s termination of service as an Employee, Director or Consultant, divorce, bankruptcy or insolvency; provided, however, that any such repurchase right shall be set forth in the applicable Award Agreement or in another agreement referred to in such agreement.

(n) Reservation of Shares. The Company, during the term of the Plan, shall at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

(o) Investment Intent. The Company may require a Participant, as a condition of exercising or acquiring Shares under any Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Award; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring the Shares subject to the Award for the Participant’s own account and not with any present intention of selling or otherwise distributing the Shares. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (A) the issuance of the Shares upon the exercise or acquisition of stock under the applicable Award has been registered under a then currently effective registration statement under the Securities Act or (B) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the stock.

SECTION 10. Effective Date of the Plan.

The Plan shall become effective upon its initial adoption by the Board and shall continue in effect until it is terminated under Section 11. The Plan will be submitted for the approval of the Company’s stockholders within twelve months after the date of the Board’s initial adoption of the Plan. Awards may be granted prior to such stockholder approval, provided that such Awards shall not be exercisable, shall not vest and the restrictions thereon shall not lapse prior to the time when the Plan is approved by the stockholders, and provided further that if such approval has not been obtained at the end of said twelve-month period, all Awards previously granted under the Plan shall thereupon be canceled and become null and void.

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SECTION 11. CCMP Consent.

Notwithstanding any provision herein to the contrary:

(a) The Plan may not be materially amended, materially altered, suspended or terminated without the prior written consent of CCMP;

(b) No Award granted under the Plan may be materially amended, materially altered or terminated without the prior written consent of CCMP;

(c) Neither the Board nor the Committee may take any action under Section 7 or Section 8 hereof, or make any other determination or designation under the Plan or any Award granted thereunder without the prior written consent of CCMP;

(d) Neither the Board nor the Committee may take any action under Section 3 with respect to senior executive officers without the prior written consent of CCMP; and

(e) CCMP shall be an intended third party beneficiary of, and shall have standing to enforce the terms of, this Section 11 as if it were a party hereto.

SECTION 12. Term of the Plan.

No Award shall be granted under the Plan after the 10th anniversary of the earlier of the date this Plan is adopted by the Board or the date the Plan is approved by the stockholders of the Company. However, unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award granted prior to such termination, and the authority of the Board or the Committee to amend, alter, adjust, suspend, discontinue, or terminate any such Award or to waive any conditions or rights under such Award, shall extend beyond such termination date.

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EX-10.21

Exhibit 10.21

CHAPARRAL ENERGY, INC.

2010 EQUITY INCENTIVE PLAN

RESTRICTED STOCK AWARD GRANT NOTICE AND

RESTRICTED STOCK AGREEMENT

(TIME VESTING)

Pursuant to its 2010 Equity Incentive Plan (the “Plan”), Chaparral Energy, Inc., a Delaware corporation (the “Company”), hereby grants to the individual listed below (“Participant”) a Restricted Stock Award (the “Restricted Stock Award”) representing the right to receive the number of restricted shares of the Company’s Common Stock set forth below (the “Shares”). This Restricted Stock Award is subject to all of the terms and conditions set forth herein, in the Plan, in the certain Restricted Stock Agreement attached hereto as Exhibit A (the “Restricted Stock Agreement”), and in the Stockholders’ Agreement (as defined below), each of which is incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Restricted Stock Award Grant Notice (the “Grant Notice”) and the Restricted Stock Agreement.

Participant:
Date of Grant:
Vesting Start Date:	[Initial Closing Date]
Total Number of Shares of Restricted Stock:		shares
Vesting Schedule:	The Restricted Stock Award shall vest with respect to twenty percent (20%) of the Shares subject hereto on each of the first, second, third, fourth and fifth anniversaries of the Vesting Start Date, subject to Participant’s continued employment by the Company through each such vesting date. In addition, this Award may be subject to post-termination or accelerated vesting under certain circumstances to the extent set forth in Sections 2(e)(i) and (iii) of the Restricted Stock Award Agreement attached hereto, respectively. For purposes of this Grant Notice: “CCMP” shall mean, collectively, CCMP Capital Investors II (AV-2), L.P., a Delaware limited partnership, CCMP Energy I LTD., a Cayman limited company, and CCMP Capital Investors (Cayman) II, L.P., a Cayman limited partnership.

“Stockholders’ Agreement” shall mean that certain Stockholders’ Agreement dated as of April 12, 2010, by and among the Company, CCMP, Fischer Investments, L.L.C., an Oklahoma limited liability company, Altoma Energy, an Oklahoma general partnership, and CHK Holdings, L.L.C., an Oklahoma limited liability company.

By his or her signature and the Company’s signature below, Participant agrees to be bound by the terms and conditions of the Plan, the Restricted Stock Agreement and this Grant Notice. Participant has reviewed the Restricted Stock Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands the provisions of this Grant Notice, the Restricted Stock Agreement and the Plan. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Plan, this Grant Notice or the Restricted Stock Agreement. If Participant is married, his or her spouse has signed the Consent of Spouse attached to this Grant Notice as Exhibit D.

CHAPARRAL, INC.:	PARTICIPANT:
By:	By:
Print Name:	Print Name:
Title:	Title:
Address:	Address:

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EXHIBIT A

TO RESTRICTED STOCK AWARD GRANT NOTICE

RESTRICTED STOCK AGREEMENT

(TIME VESTING)

Pursuant to the Restricted Stock Award Grant Notice (the “Grant Notice”) to which this Restricted Stock Agreement (this “Agreement”) is attached, Chaparral Energy, Inc., a Delaware corporation (the “Company”) has granted to Participant (as defined in the Grant Notice) the number of shares of Restricted Stock under the Chaparral Energy, Inc., Inc. 2010 Equity Incentive Plan (the “Plan”) indicated in the Grant Notice.

1. General.

(a) Defined Terms. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan and the Grant Notice.

(b) Incorporation of Terms of Plan. The Shares are subject to the terms and conditions of the Plan, which is incorporated herein by reference.

2. Grant of Restricted Stock.

(a) Grant of Restricted Stock. In consideration of Participant’s agreement to remain in the employ of the Company or its Affiliates, and for other good and valuable consideration, effective as of the Date of Grant set forth in the Grant Notice (the “Grant Date”), the Company irrevocably grants to Participant the Shares, upon the terms and conditions set forth in the Plan and this Agreement.

(b) Issuance of Shares. The issuance of the Shares under this Agreement shall occur at the principal office of the Company simultaneously with the execution of this Agreement by the parties or on such other date as the Company and Participant shall agree (the “Issuance Date”). Subject to the provisions of Section 3 below, on the Issuance Date, the Company shall issue the Shares (which shall be issued in Participant’s name).

(c) Conditions to Issuance of Stock Certificates. The Shares, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. Such Shares shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any Shares prior to fulfillment of all of the following conditions:

(i) The completion of any registration or other qualification of such shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Committee shall, in its absolute discretion, deem legally necessary or advisable; and

(ii) The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its absolute discretion, determine to be necessary or advisable; and

(iii) The receipt by the Company of full payment for such Shares, including payment of all amounts which, under federal, state or local tax law, the Company (or other employer corporation) is required to withhold upon issuance of such Shares. The Participant may elect to have the Company withhold shares of the Company’s Common Stock otherwise issuable under the Restricted Stock Award (or allow the return of shares of the Company’s Common Stock) having a Fair Market Value equal to the sums required to be withheld. Notwithstanding any other provision of the Plan or this Agreement, the number of shares of the Company’s Common Stock which may be withheld with respect to the issuance, vesting or payment of the Shares in order to satisfy Participant’s federal and state income and payroll tax liabilities with respect to the issuance, vesting or payment of the Shares shall be limited to the number of shares of the Company’s Common Stock which have a Fair Market Value on the date of withholding equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for federal and state tax income and payroll tax purposes that are applicable to such supplemental taxable income.

(d) Consideration to the Company. In consideration of the issuance of the Shares by the Company, Participant agrees to render faithful and efficient services to the Company or any Affiliate. Nothing in the Plan or this Agreement shall confer upon Participant any right to (i) continue in the employ of the Company or any Affiliate or shall interfere with or restrict in any way the rights of the Company and its Affiliates, which are hereby expressly reserved, to discharge Participant, if Participant is an Employee, or (ii) continue to provide services to the Company or any Affiliate or shall interfere with or restrict in any way the rights of the Company or its Affiliates, which are hereby expressly reserved, to terminate the services of Participant, if Participant is a Consultant, at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between the Company and Participant.

(e) Vesting and Forfeiture.

(i) Forfeiture of Shares. Any Shares which are not vested as of the date Participant ceases to be a Service Provider (the “Separation Date”) shall thereupon be forfeited immediately and without any further action by the Company; provided, however, that, subject to Participant’s execution and non-revocation of a general release of claims in a form determined by the Company, if Participant’s service relationship terminates due to a termination by the Company without Cause or by Participant for Good Reason (each as defined below), then the vesting of any Shares which are not vested as of the Separation Date but which are scheduled to vest under the Vesting Schedule during the period beginning on the Separation Date and ending on the twelve-month anniversary of the Separation Date shall accelerate as of the Separation Date. Any Shares which are not vested as of the Separation Date shall be forfeited as of the Separation Date without any further action by the Company.

(ii) Vesting. Subject to Section 2(e)(i), the Shares shall vest in accordance with the vesting schedule set forth on the Grant Notice.

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(iii) Acceleration of Vesting. In the event of a Transaction, and provided that Participant remains employed by the Company on the date of such Transaction, the Shares shall vest with respect to the fraction (with Shares rounded up) obtained by dividing (x) the number of shares of Class E Common Stock sold, transferred or disposed pursuant to such Transaction, by (y) the Aggregate Class E Shares, provided, however, that any shares of Class E Common Stock which are transferred pursuant an Excepted Transfer shall be excluded from the foregoing calculation by adjusting the numerator, (x), and the denominator, (y), accordingly. Any Shares that do not vest in accordance with the foregoing shall remain subject to the normal vesting schedule set forth in the Grant Notice.

(iv) For purposes of this Agreement:

(A) “Aggregate Class E Shares” shall mean 504,276 shares of Class E Common Stock acquired by CCMP pursuant to the Stock Purchase Agreements (as defined below), as may be adjusted pursuant to Section 2(e)(iii).

(B) “Class E Common Stock” shall mean the Class E common stock, par value $0.01 per share, of the Company.

(C) “Excepted Transfer” means, as set forth in the exception to the second sentence of Section 4.1(a) (General Restrictions on Transfer of Common Stock) of the Stockholders’ Agreement, the “Transfer” at any time by CCMP and its “Permitted Transferees” of up to twenty percent (20%) of the “Common Stock” (each as defined in the Stockholders’ Agreement) owned by them (calculated immediately subsequent to the closing contemplated by the Stock Purchase Agreement) so long as the requirements of Transfer set forth in the proviso in Section 4.2(a) of the Stockholders’ Agreement are met.

(D) “Sale of the Company” means and includes each of the following:

(1) The consummation of any transaction or series of related transactions involving the sale of the Company’s outstanding securities (but excluding a public offering of the Company’s capital stock) for securities or other consideration issued or paid or caused to be issued or paid by such other corporation or an affiliate thereof and which result in this Company’s shareholders (or their affiliates) immediately prior to such transaction not holding at least a majority of the voting power of the surviving or continuing entity following such transaction; or

(2) The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets or (z) the acquisition of assets or stock of another entity, in each case, other than a transaction which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting

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securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction.

(E) “Stock Purchase Agreements” means, together, (i) that certain Stock Purchase Agreement, entered into as of March 23, 2010, by and among the Company and CCMP, (ii) that certain Stock Purchase Agreement entered into as of March 23, 2010, by and among Fischer Investments, L.L.C., an Oklahoma limited liability company, and CCMP, and (iii) the Stock Purchase Agreement entered into as of March 23, 2010, by and among Altoma Energy, an Oklahoma general partnership, and CCMP.

(F) “Transaction” means the consummation of a transaction whereby CCMP receives cash in exchange for the sale, transfer or other disposition of Class E Common Stock pursuant to either (i) a Sale of the Company, or (ii) an offering of such stock to the general public pursuant to a registration statement filed under the Securities Act of 1933, as amended, or any sale of such stock thereafter.

3. Purchase Option.

(a) All of the Shares subject to this Agreement shall be subject to the Company’s right to purchase the Shares (the “Purchase Option”), which Purchase Option shall lapse upon the seventh (7th) anniversary of the Grant Date. Until the Purchase Option lapses the Shares shall be referred to herein as “Unreleased Shares.”

(b) If Participant ceases to be a Service Provider for any reason, specified below, the Company or its assignee shall have the right and option to purchase from Participant (or Participant’s personal representative, as the case may be) the Participant’s vested Unreleased Shares as follows:

(i) To the extent vested as of the Separation Date, if a Participant ceases to be a Service Provider by reason of a termination of the Participant’s employment by the Company without Cause, by Participant for or without Good Reason, as a result of Participant’s death, at a purchase price equal to the Fair Market Value of such Shares as of the date of such termination;

(ii) To the extent vested as of the Separation Date, if a Participant ceases to be a Service Provider by reason of a termination of the Participant’s employment by the Company for Cause, at a purchase price equal to $0.01 per Share as of the date of such termination; and

(iii) Notwithstanding the foregoing, in the event of Participant’s material breach of the terms of any agreement with the Company that is in effect on or after Participant’s Separation Date, including Section 8 hereof if applicable, at a purchase price equal to $0.01 per Share as of the date of such breach, to the extent vested as of the date of such breach.

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(c) The Company may exercise its Purchase Option by delivering, personally or by registered mail, to Participant (or his or her transferee or legal representative, as the case may be), within six (6) months of the Separation Date, a notice in writing indicating the Company’s intention to exercise the Purchase Option and setting forth a date for closing not later than thirty (30) days from the mailing of such notice. The closing shall take place at the Company’s office. At the closing, the holder of the certificates for the vested Unreleased Shares being transferred shall deliver the stock certificate or certificates evidencing the vested Unreleased Shares, and the Company shall deliver the purchase price therefor.

(d) At its option, the Company may elect to make payment for the vested Unreleased Shares to a bank selected by the Company. The Company shall avail itself of this option by a notice in writing to Participant stating the name and address of the bank, date of closing, and waiving the closing at the Company’s office.

(e) Should any provision of the Purchase Option be determined by a court of law to be ineffective or unenforceable, the Company reserves the right to delay exercise of such Purchase Option until such time as it becomes effective and enforceable; provided, however, that in any such event, the Company reserves the right to assign its right to purchase Shares hereunder to a Principal Investor (as such term is defined in the Stockholders’ Agreement).

(f) For purposes of this agreement:

(i) “Cause” shall mean “Cause” as defined in any employment agreement then in effect between the Participant and the Company or if not defined therein or, if there shall be no such agreement, “Cause” shall mean the occurrence of any one or more of the following events: (A) Participant’s conviction of, or entry by Participant of a guilty or no contest plea to a felony or crime involving moral turpitude; (B) Participant’s willful commission of an act of fraud or dishonesty resulting in economic or financial injury to the Company or any affiliate; (C) Participant’s willful failure to substantially perform or gross neglect of Participant’s duties, including, but not limited to, the failure to follow any lawful directive of the CEO, within the reasonable scope of Participant’s duties; (D) Participant’s performance of acts materially detrimental to the Company or any affiliate, unless otherwise approved in advance by the Board or Directors of the Company or the Compensation Committee thereunder; (E) Participant’s use of narcotics, alcohol, or illicit drugs in a manner that has or may reasonably be expected to have a detrimental effect on Executive’s performance of his duties as an employee of the Company or on the reputation of the Company or any affiliate; (F) Participant’s commission of a material violation of any rule or policy sponsored by the Company which results in injury to the Company; or (G) Participant’s material breach of any of the covenants set forth in Section 8 hereof.

(ii) “Good Reason” shall mean “Good Reason” as defined in any employment agreement then in effect between the Participant and the Company or if not defined therein or, if there shall be no such agreement, “Good Reason” shall mean the occurrence without the written consent of Participant, of one of the following events: (A) a material diminution in Participant’s authority, duties or responsibilities combined with a demotion in Participant’s pay grade ranking; (B) the reduction by the Company of Participant’s base salary by more than ten percent (10%) (unless done so for all executive officers of the Company); or (C) the requirement that Participant be based at any office or location that is more than 50 miles from Participant’s principal place of employment, except for travel reasonably required in the performance of Participant’s responsibilities.

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Notwithstanding the foregoing, Participant will not be deemed to have terminated Participant’s employment for Good Reason unless (I) Participant provides written notice to the Company of the existence of one of the conditions described above within ninety (90) days after Participant has knowledge of the initial existence of the condition, (II) the Company fails to remedy the condition so identified within thirty (30) days after receipt of such notice (if capable of correction), (III) Participant provides a notice of termination to the Company within thirty (30) days of the expiration of the Company’s period to remedy the condition, and (IV) Participant terminates employment within ninety (90) days after Participant provides written notice to the Company of the existence of the condition referred to in clause (I).

(iii) “Service Provider” shall mean any Employee, Consultant or Director.

4. Transferability of the Shares; Escrow.

(a) Participant hereby authorizes and directs the Secretary of the Company, or such other person designated by the Company from time to time, to transfer the Unreleased Shares as to which the Purchase Option has been exercised from Participant to the Company.

(b) To insure the availability for delivery of Participant’s Unreleased Shares upon purchase by the Company pursuant to the Purchase Option under Section 3, Participant hereby appoints the Secretary, or any other person designated by the Company from time to time as escrow agent, as its attorney-in-fact to sell, assign and transfer unto the Company, such Unreleased Shares, if any, purchased by the Company pursuant to the Purchase Option and shall, upon execution of this Agreement, deliver and deposit with the Secretary of the Company, or such other person designated by the Company from time to time, the share certificate(s) representing the Unreleased Shares, together with the stock assignment duly endorsed in blank, attached hereto as Exhibit B. The Unreleased Shares and stock assignment shall be held by the Secretary, or such other person designated by the Company from time to time, in escrow, pursuant to the Joint Escrow Instructions of the Company and Participant attached as Exhibit C hereto, until the Company exercises its Purchase Option as provided in Section 3 or until such time as the Purchase Option no longer is in effect. As a further condition to the Company’s obligations under this Agreement, the spouse of Participant, if any, shall execute and deliver to the Company the Consent of Spouse attached hereto as Exhibit D. The escrow agent shall promptly deliver to Participant the certificate or certificates representing such Shares in the escrow agent’s possession belonging to Participant, and the escrow agent shall be discharged of all further obligations hereunder; provided, however, that the escrow agent shall nevertheless retain such certificate or certificates as escrow agent if so required pursuant to other restrictions imposed pursuant to this Agreement.

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(c) The Company, or its designee, shall not be liable for any act it may do or omit to do with respect to holding the Shares in escrow and while acting in good faith and in the exercise of its judgment.

(d) Transfer or sale of the Shares is subject to restrictions on transfer imposed by Section 5 of this Agreement and any applicable state and federal securities laws. Any transferee shall hold such Shares subject to all of the provisions hereof and shall acknowledge the same by signing a copy of this Agreement. Any transfer or attempted transfer of any of the Shares not in accordance with the terms of this Agreement shall be void and the Company may enforce the terms of this Agreement by stop transfer instructions or similar actions by the Company and its agents or designees.

5. Participant’s Right to Transfer Shares. Except as provided in Article 4 of the Stockholders’ Agreement, Participant shall not be permitted to sell, pledge, assign, hypothecate, transfer, or otherwise disposed of any Shares.

6. Other Restrictions. The Shares held by Participant shall be subject to such other restrictions as set forth in the Stockholders’ Agreement, including, without limitation, preemptive rights, transfer restrictions, and drag-along rights. The Restricted Stock Award shall be conditioned on Participant’s consent to such restrictions as set forth in the Stockholders’ Agreement.

7. Ownership, Duties. This Agreement shall not affect in any way the ownership, rights or duties of Participant, except as specifically provided herein.

8. Confidential Information; Non-Solicitation; Non-Competition.¹ Unless otherwise provided in any existing employment agreement between Participant and the Company, Participant shall be subject to the following obligations:

(a) Nondisclosure of Confidential Information. Participant acknowledges that it is the policy of the Company to maintain as secret and confidential (i) all valuable and unique information, (ii) other information heretofore or hereafter acquired by the Company, or any affiliated entity and deemed by it to be confidential, and (iii) information developed or used by the Company or any affiliated entity relating to the business, operations, employees and customers of the Company or any affiliated entity including, but not limited to, any employee information (all such information described in clauses (i), (ii) and (iii) above, other than information which is known to the public or becomes known to the public through no fault of Participant, is hereinafter referred to as “Confidential Information”). The parties recognize that the services to be performed by Participant are special and unique and that by reason of his employment by the Company after the date hereof, Participant has acquired and will acquire Confidential Information. Participant recognizes that all such Confidential Information is the property of the Company. Accordingly, at any time during or after the term of the Participant’s employment by the Company (such term of employment by the Company, the “Term”), Participant shall not, except in the proper performance of his duties, directly or indirectly, without the prior written consent of the Company, disclose to any Person other than the Company, whether or not such Person is a competitor of the Company, and shall use his best efforts to prevent the publication or disclosure of any Confidential Information obtained by, or which has come to the knowledge of, Participant prior or subsequent to the date hereof. Notwithstanding the foregoing, Participant may disclose to other Persons, as part of his occupation, information with respect to the Company or any affiliated entity, which (i) is of a type generally not considered by standards of the oil and natural gas industry to be proprietary, or (ii) is otherwise consented to in writing by the Company.

¹ Covenants (confidentiality, non-solicitation and non-competition) remain subject to review by Oklahoma counsel. Discuss the extent to which any of the changes proposed by the Company are necessary so that the covenants are enforceable under Oklahoma law.

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(b) Non-Solicitation. Participant shall not, during the Term or for the six (6)-month period following the Separation Date (the “Covered Period”), either personally or by or through his/her agent or by letters, circulars or advertisements and whether for himself/herself or on behalf of any other person or entity, hire, solicit or seek to hire any employee or consultant of the Company or any affiliated entity, or in any other manner attempt, directly or indirectly, to persuade any such employee or consultant to discontinue his/her status of employment or consultancy with the Company or any affiliated entity or to become hired in any business or activities likely to be competitive with the Company’s or an affiliated entity’s business. Additionally, during the Covered Period, Participant shall not, for himself/herself or on behalf of any person or entity, directly or indirectly, solicit, divert or attempt to solicit or divert any customer of the Company or any affiliated entity for the purpose of causing such customer to reduce or refrain from doing any business with the Company or any affiliated entity. Participant further agrees that, during the Covered Period, he/she will not, directly or indirectly, request or advise any customers of the Company or an affiliated entity to withdraw, curtail or cancel their business with the Company or any affiliated entity. For purposes of this Agreement, a “customer” of the Company or any affiliated entity shall mean each customer of the Company or an affiliated entity who held a deposit account or otherwise transacted business with the Company or an affiliated entity at any time within the twelve (12) months preceding the Separation Date. Nothing contained in this Agreement is intended to prohibit general advertising or solicitation not specifically directed at any or all of the Company’s or an affiliated entity’s customers or employees.

(c) Non-Competition.

(i) As part of the consideration for the compensation and benefits to be paid to Participant hereunder, to protect the trade secrets and Confidential Information of the Company and its customers and clients that have been and will be entrusted to Participant, the business goodwill of the Company and its subsidiaries that will be developed in and through Participant and the business opportunities that will be disclosed or entrusted to Participant by the Company and its subsidiaries, and as an additional incentive for the Company to enter into this Agreement, during the Covered Period, Participant shall not directly or indirectly, individually or on behalf of any other person or entity, manage, participate in, work for, consult with, render services for, or take an interest in (as an owner, stockholder, partner or lender) any Competitor in an area of Competing Business.

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(ii) For purposes of Section 8(c)(i):

(A) “Competitor” means any business, company or individual which is in, or is actively seeking to be in the Competing Business.

(B) “Competing Business” means the acquisition, exploration, exploitation, development, production and/or operation of oil and gas properties.

(iii) Participant acknowledges that each of the covenants of Section 8(c)(i) are in addition to, and shall not be construed as a limitation upon, any other covenant provided in Section 8. Participant agrees that the scope of prohibited activities, and time duration of each of the covenants set forth in Section 8(c)(i) are reasonable in nature and are no broader than are necessary to maintain the confidentiality and the goodwill of the Company’s proprietary and Confidential Information, plans and services and to protect the other legitimate business interests of the Company, including without limitation the goodwill developed by Participant with the Company’s customers, suppliers, licensees and business relations. It is also the intent of the Company and Participant that such covenants be construed and enforced in accordance with the changing activities, business and locations of the Company throughout the term of this covenant, whether before or after the Separation Date. Participant agrees not to challenge the enforceability, scope or reasonableness of the covenants in Section 8(c)(i). The covenants in Section 8(c)(i) are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, duration set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed.

(iv) If, during any portion of the Covered Period, Participant is not in compliance with the terms of Section 8(c)(i), the Company shall be entitled to, among other remedies, compliance by Participant with the terms of Section 8(c)(i) for an additional period of time (i.e., in addition to the Covered Period) that shall equal the period(s) over which such noncompliance occurred.

(v) Nothing in this Section 8(c) shall prohibit: (A) direct or indirect ownership of publicly traded securities which are issued by a Competitor involved in or conducting a Competing Business, provided that Participant, directly or indirectly, does not own more than 5% of the outstanding equity or voting securities of such Competitor; (B) ownership of royalty interests where Participant owns the surface of the land covered by the royalty interest and the ownership of the royalty interest is incidental to the ownership of such surface estate, provided that any such surface estate does not adjoin, or is not near to, any property ownership interest held directly or indirectly by the Company; (C) direct or indirect ownership of royalty interests or overriding royalty interests owned prior to the date hereof; or (D) direct or indirect ownership of working interests or other interests in oil and gas owned prior to the date hereof and disclosed by Participant to the Company in writing. It is the intent of the Company that during the term of this Agreement Participant is not acquiring additional oil and gas interests, directly or indirectly.

9. Adjustment for Stock Split. All references to the number of Shares in this Agreement shall be appropriately adjusted to reflect any stock split, stock dividend or other change in the Shares which may be made by the Company after the date of this Agreement.

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10. Notices. Notices required hereunder shall be given in person or by registered mail to the address of Participant shown on the records of the Company, and to the Company at its principal executive office.

11. Survival of Terms. This Agreement shall apply to and bind Participant and the Company and their respective permitted assignees and transferees, heirs, legatees, executors, administrators and legal successors.

12. Section 83(b) Election for Shares. Participant hereby acknowledges that he or she has been informed that, with respect to the transfer of the Shares to Participant, that unless an election is filed by Participant with the Internal Revenue Service and, if necessary, the proper state taxing authorities, within thirty (30) days of the transfer of the Shares, electing pursuant to Section 83(b) of the Code (and similar state tax provisions if applicable) to be taxed currently on the Fair Market Value of the Shares on the date of transfer, there will be a recognition of taxable income to Participant, measured by the Fair Market Value of the Shares, at the time the Shares vest. Participant represents that Participant has consulted any tax consultant(s) Participant deems advisable in connection with the transfer of the Shares or the filing of the Election under Section 83(b) of the Code and similar tax provisions.

PARTICIPANT ACKNOWLEDGES THAT IT IS PARTICIPANT’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF PARTICIPANT REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON PARTICIPANT’S BEHALF.

13. Representations. Participant has reviewed with his or her own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement and the Stockholders’ Agreement. Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Participant understands that Participant (and not the Company) shall be responsible for his or her own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement and the Stockholders’ Agreement.

14. Restrictive Legends and Stop-Transfer Orders.

(a) Any share certificate(s) evidencing the Shares issued hereunder shall be endorsed with the following legends and any other legends that may be required by state or federal securities laws:

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF PURCHASE IN FAVOR OF [                    ], INC. (THE “COMPANY”) AND MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF A RESTRICTED STOCK AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT.

(b) Participant agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

(c) The Company shall not be required: (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement, or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.

15. Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

16. Conformity to Securities Laws. Participant acknowledges that the Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Shares are to be issued, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. Participant shall not transfer in any manner the Shares issued pursuant to this Agreement, without regard to whether such Shares are no longer subject to the Purchase Option, unless (i) the transfer is pursuant to an effective registration statement under the Securities Act, or the rules and regulations in effect thereunder or (ii) counsel for the Company shall have reasonably concluded that no such registration is required because of the availability of an exemption from registration under the Securities Act.

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17. Market Standoff Agreement. Participant hereby agrees that if so requested by the Company or any representative of the underwriters (the “Managing Underwriter”) in connection with any registration of the offering of any securities of the Company under the Securities Act, Participant shall not sell or otherwise transfer any Shares or other securities of the Company during the 180-day period (or such longer period as may be requested in writing by the Managing Underwriter and agreed to in writing by the Company) (the “Market Standoff Period”) following the effective date of a registration statement of the Company filed under the Securities Act; provided, however, that such restriction shall apply only to the first registration statement of the Company to become effective under the Securities Act that includes securities to be sold on behalf of the Company to the public in an underwritten public offering under the Securities Act. The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Standoff Period and these restrictions shall be binding on any transferee of such Shares. Notwithstanding the foregoing, the 180-day period may be extended for up to such number of additional days as is deemed necessary by the Company or the Managing Underwriter to continue coverage by research analysts in accordance with NASD Rule 2711 or any successor rule.

18. Further Instruments. Participant hereby agrees to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.

19. Governing Law; Severability. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware excluding that body of law pertaining to conflicts of law. Should any provision of this Agreement be determined by a court of law to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable.

(Signature Page Follows)

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Participant represents that he or she has read this Agreement and is familiar with its terms and provisions. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board or other administrator of the Plan upon any questions arising under this Agreement.

IN WITNESS WHEREOF, this Agreement is deemed made as of the date first set forth above.

CHAPARRAL ENERGY, INC.

By:

Name:

Title:

PARTICIPANT

By:

Name:

Address:

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EXHIBIT B

ASSIGNMENT SEPARATE FROM CERTIFICATE

(TIME VESTING)

FOR VALUE RECEIVED I,                                 , hereby sell, assign and transfer unto                                                               (                    ) shares of the Common Stock of Chaparral Energy, Inc. registered in my name on the books of said corporation represented by Certificate No.          herewith and do hereby irrevocably constitute and appoint                                                               to transfer the said stock on the books of the within named corporation with full power of substitution in the premises.

This Assignment Separate from Certificate may be used only in accordance with the Restricted Stock Agreement between Chaparral Energy, Inc. and the undersigned dated                         ,         .

Dated:                         ,             

Signature:

INSTRUCTIONS: Please do not fill in any blanks other than the signature line. The purpose of this assignment is to enable the Company to exercise the Purchase Option, as set forth in the Restricted Stock Agreement, without requiring additional signatures on the part of Participant.

EXHIBIT C

JOINT ESCROW INSTRUCTIONS

(TIME VESTING)

                    ,         

Secretary

[                    ], Inc.

[                    ]

[                             ]

As Escrow Agent for both [                    ], Inc. (the “Company”) and the undersigned recipient of stock of the Company (the “Participant”), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of that certain Restricted Stock Agreement (“Agreement”) between the Company and the undersigned, in accordance with the following instructions:

1. In the event the Company or any entitled parties (referred to collectively for convenience herein as the “Company”) exercises the Company’s Purchase Option set forth in the Agreement, the Company shall give to Participant and you a written notice specifying the number of shares of stock to be transferred and the time for a closing hereunder at the principal office of the Company. Participant and the Company hereby irrevocably authorize and direct you to close the transaction contemplated by such notice in accordance with the terms of said notice.

2. At the closing, you are directed (a) to date the stock assignments necessary for the transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver the same, together with the certificate evidencing the shares of stock to be transferred, to the Company or its assignee, against the simultaneous delivery to you of the purchase price (by cash, a check, or a combination thereof) for the number of shares of stock being purchased pursuant to the exercise of the Company’s Purchase Option.

3. Participant irrevocably authorizes the Company to deposit with you any certificates evidencing shares of stock to be held by you hereunder and any additions and substitutions to said shares as defined in the Agreement. Participant does hereby irrevocably constitute and appoint you as Participant’s attorney-in-fact and agent for the term of this escrow to execute, with respect to such securities, all documents necessary or appropriate to make such securities negotiable and to complete any transaction herein contemplated, including but not limited to the filing with any applicable state blue sky authority of any required applications for consent to, or notice of transfer of, the securities. Subject to the provisions of this paragraph 3 and to the terms of the Agreement, Participant shall exercise all rights and privileges of a stockholder of the Company while the stock is held by you.

4. Upon written request of Participant, but no more than once per calendar year, unless the Company’s Purchase Option has been exercised, you will deliver to Participant a certificate or certificates representing the number of shares of stock as are not then subject to the Company’s Purchase Option. Within one hundred twenty (120) days after Participant ceases to be a Service Provider, you will deliver to Participant a certificate or certificates representing the aggregate number of shares held or issued pursuant to the Agreement and not purchased by the Company or any other entitled parties pursuant to exercise of the Company’s Purchase Option.

5. If at the time of termination of this escrow you should have in your possession any documents, securities, or other property belonging to Participant, you shall deliver all of the same to Participant and shall be discharged of all further obligations hereunder.

6. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto.

7. You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for Participant while acting in good faith, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith.

8. You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.

9. You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder.

10. You shall not be liable for the expiration of any rights under any applicable state, federal or local statute of limitations or similar statute or regulation with respect to these Joint Escrow Instructions or any documents deposited with you.

11. You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor.

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12. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be an officer or agent of the Company or if you shall resign by written notice to each party. In the event of any such termination, the Company shall appoint a successor Escrow Agent.

13. If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.

14. It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder, you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities until such disputes shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.

15. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties thereunto entitled at such addresses as a party may designate by written notice to each of the other parties hereto.

16. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Agreement.

17. This instrument shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns.

18. These Joint Escrow Instructions shall be governed by, and construed and enforced in accordance with, the laws of the State of [Delaware], excluding that body of law pertaining to conflicts of law.

(Signature Page Follows)

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IN WITNESS WHEREOF, these Joint Escrow Instructions shall be effective as of the date first set forth above.

CHAPARRAL ENERGY, INC.
By:
Name:
Title:
PARTICIPANT
By:
Name:
Address:
ESCROW AGENT
By:
Name:
Title:	Secretary of the Company

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EXHIBIT D

CONSENT OF SPOUSE

(TIME VESTING)

I,                                         , spouse of                                         , have read and approve the Restricted Stock Agreement dated                         ,             , between my spouse and Chaparral Energy, Inc. In consideration of granting to my spouse the restricted shares of Chaparral Energy, Inc. set forth in the Restricted Stock Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of any rights under the Agreement and agree to be bound by the provisions of the Restricted Stock Agreement insofar as I may have any rights in said Restricted Stock Agreement or any shares issued pursuant thereto under the community property laws or similar laws relating to marital property in effect in the state of our residence as of the date of the signing of the foregoing Restricted Stock Agreement.

Dated:                             ,             

Signature of Spouse

EX-10.22

Exhibit 10.22

CHAPARRAL ENERGY, INC.

2010 EQUITY INCENTIVE PLAN

RESTRICTED STOCK AWARD GRANT NOTICE AND

RESTRICTED STOCK AGREEMENT

(PERFORMANCE-VESTING)

Pursuant to its 2010 Equity Incentive Plan (the “Plan”), Chaparral Energy, Inc., a Delaware corporation (the “Company”), hereby grants to the individual listed below (“Participant”) a Restricted Stock Award (the “Restricted Stock Award”) representing the right to receive the number of restricted shares of the Company’s Common Stock set forth below (the “Shares”). This Restricted Stock Award is subject to all of the terms and conditions set forth herein, in the Plan, in the certain Restricted Stock Agreement attached hereto as Exhibit A (the “Restricted Stock Agreement”), and in the Stockholders’ Agreement (as defined below), each of which is incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Restricted Stock Award Grant Notice (the “Grant Notice”) and the Restricted Stock Agreement.

Participant:
Date of Grant:
Vesting Start Date:
Total Number of Shares of Restricted Stock:			shares
Vesting Schedule:	The Restricted Stock Award shall vest with respect to the Shares subject hereto according to the following schedule in the event of a Transaction whereby (i) CCMP’s receipt of Net Proceeds yield the applicable return on investment, and (ii) Participant remains employed by the Company through the date of such Transaction:
	(i)	If CCMP’s receipt of Net Proceeds yield a return of at least 200% per share of Class E Common Stock sold by CCMP: 20% of the Shares multiplied by the quotient obtained by dividing (x) the number of shares of Class E Common Stock sold, transferred, or disposed pursuant to such Transaction, by (y) the Aggregate Class E Shares, shall vest;

(ii)	If CCMP’s receipt of Net Proceeds yield a return of at least 250% per share of Class E Common Stock sold by CCMP: 20% of the Shares multiplied by the quotient obtained by dividing (x) the number of shares of Class E Common Stock sold pursuant to such Transaction, by (y) the Aggregate Class E Shares, shall vest;
(iii)	If CCMP’s receipt of Net Proceeds yield a return of at least 300% per share of Class E Common Stock sold by CCMP: 20% of the Shares multiplied by the quotient obtained by dividing (x) the number of shares of Class E Common Stock sold pursuant to such Transaction, by (y) the Aggregate Class E Shares, shall vest;
(iv)	If CCMP’s receipt of Net Proceeds yield a return of at least 350% per share of Class E Common Stock sold by CCMP: 20% of the Shares multiplied by the quotient obtained by dividing (x) the number of shares of Class E Common Stock sold pursuant to such Transaction, by (y) the Aggregate Class E Shares, shall vest; and
(v)	If CCMP’s receipt of Net Proceeds yield a return of at least 400% per share of Class E Common Stock sold by CCMP: 20% of the Shares multiplied by the quotient obtained by dividing (x) the number of shares of Class E Common Stock sold pursuant to such Transaction, by (y) the Aggregate Class E Shares, shall vest;
provided, however, that with respect to any of the foregoing calculations, any shares of Class E Common Stock which are transferred pursuant an Excepted Transfer shall be excluded from such foregoing calculation by adjusting the dividend, (x), and the divisor, (y), accordingly. In addition, this Award may be subject to post-termination vesting under certain circumstances to the extent set forth in Section 2(e)(i) of the Restricted Stock Award Agreement attached hereto. For purposes of this Grant Notice: “Aggregate Class E Shares” shall mean 504,276 shares of Class E Common Stock acquired by CCMP pursuant to the Stock Purchase Agreements (as defined below), as may be adjusted pursuant to the proviso to the Vesting Schedule, above.

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“CCMP” shall mean, collectively, CCMP Capital Investors II (AV-2), L.P., a Delaware limited partnership, CCMP Energy I LTD., a Cayman limited company, and CCMP Capital Investors (Cayman) II, L.P., a Cayman limited partnership.

“Class E Common Stock” shall mean the Class E common stock, par value $0.01 per share, of the Company.

“Excepted Transfer” means, as set forth in the exception to the second sentence of Section 4.1(a) (General Restrictions on Transfer of Common Stock) of the Stockholders’ Agreement, the “Transfer” at any time by CCMP and its “Permitted Transferees” of up to twenty percent (20%) of the “Common Stock” (each as defined in the Stockholders’ Agreement) owned by them (calculated immediately subsequent to the closing contemplated by the Stock Purchase Agreement) so long as the requirements of Transfer set forth in the proviso in Section 4.2(a) of the Stockholders’ Agreement are met.

“Net Proceeds” shall mean, with respect to a Transaction, the actual cash proceeds received by CCMP in a Transaction, but excluding any Tax Distributions or the aggregate amount of any out-of-pocket expenses incurred by CCMP in connection with such Transaction;

“Sale of the Company” means and includes each of the following:

(i) The consummation of any transaction or series of related transactions involving the sale of the Company’s outstanding securities (but excluding a public offering of the Company’s capital stock) for securities or other consideration issued or paid or caused to be issued or paid by such other corporation or an affiliate thereof and which result in this Company’s shareholders (or their affiliates) immediately prior to such transaction not holding at least a majority of the voting power of the surviving or continuing entity following such transaction; or

(ii) The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets or (z) the acquisition of assets or stock of another entity, in each case, other than a transaction which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction.

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“Stock Purchase Agreements” means, together, (i) that certain Stock Purchase Agreement, entered into as of March 23, 2010, by and among the Company and CCMP, (ii) that certain Stock Purchase Agreement entered into as of March 23, 2010, by and among Fischer Investments, L.L.C., an Oklahoma limited liability company, and CCMP, and (iii) the Stock Purchase Agreement entered into as of March 23, 2010, by and among Altoma Energy, an Oklahoma general partnership, and CCMP. “Stockholders’ Agreement” shall mean that certain Stockholders’ Agreement dated as of April 12, 2010, by and among the Company, CCMP, Fischer Investments, L.L.C., an Oklahoma limited liability company, Altoma Energy, an Oklahoma general partnership, and CHK Holdings, L.L.C., an Oklahoma limited liability company. “Tax Distributions” shall mean any distributions received by CCMP from the Company for purposes of satisfying any federal, state, or local tax liability in connection with a Transaction. “Transaction” means the consummation of a transaction whereby CCMP receives cash in exchange for the sale, transfer or other disposition of Class E Common Stock pursuant to either (i) a Sale of the Company, or (ii) an offering of such stock to the general public pursuant to a registration statement filed under the Securities Act of 1933, as amended, or any sale of such stock thereafter.

Vesting Example

For illustrative purposes only, assume the following: Participant is granted a Restricted Stock Award of 1,000 Shares. In 2012, CCMP engages in a Transaction whereby it sells 50% of its Aggregate Shares which yields a return on investment of 220%. In 2018, CCMP engages in a Transaction whereby it sells the remaining 50% of its Aggregate Shares which yields a return on investment of 300%. At the time of the Transaction in 2012, Participant vests with respect to 100 Shares (which represents 20% (total of 20% vesting based on a return on investment of 220%) of 1,000 Shares, multiplied by the quotient obtained by dividing 252,138 shares of Class E Common Stock sold, by the total of 504,276 Aggregate Shares). A total of 900 Shares remain unvested.

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At the time of the Transaction in 2018, Participant vests with respect to 300 Shares (which represents an additional 60% (cumulative total of 20%, 20%, and 20% vesting based on a return on investment of 300%) of 1,000 Shares, multiplied by the quotient obtained by dividing 252,138 shares of Class E Common Stock sold, by the total of 504,276 Aggregate Shares). A total of 600 Shares will no longer be eligible to vest (because no Aggregate Shares remain) and will be cancelled.

Participant will have vested in a total of 400 Shares.

By his or her signature and the Company’s signature below, Participant agrees to be bound by the terms and conditions of the Plan, the Restricted Stock Agreement and this Grant Notice. Participant has reviewed the Restricted Stock Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands the provisions of this Grant Notice, the Restricted Stock Agreement and the Plan. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Plan, this Grant Notice or the Restricted Stock Agreement. If Participant is married, his or her spouse has signed the Consent of Spouse attached to this Grant Notice as Exhibit D.

CHAPARRAL, INC.:	PARTICIPANT:
By:	By:
Print Name:	Print Name:
Title:	Title:
Address:	Address:

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EXHIBIT A

TO RESTRICTED STOCK AWARD GRANT NOTICE

RESTRICTED STOCK AGREEMENT

(PERFORMANCE VESTING)

Pursuant to the Restricted Stock Award Grant Notice (the “Grant Notice”) to which this Restricted Stock Agreement (this “Agreement”) is attached, Chaparral Energy, Inc., a Delaware corporation (the “Company”) has granted to Participant (as defined in the Grant Notice) the number of shares of Restricted Stock under the Chaparral Energy, Inc., Inc. 2010 Equity Incentive Plan (the “Plan”) indicated in the Grant Notice.

1. General.

(a) Defined Terms. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan and the Grant Notice.

(b) Incorporation of Terms of Plan. The Shares are subject to the terms and conditions of the Plan, which is incorporated herein by reference.

2. Grant of Restricted Stock.

(a) Grant of Restricted Stock. In consideration of Participant’s agreement to remain in the employ of the Company or its Affiliates, and for other good and valuable consideration, effective as of the Date of Grant set forth in the Grant Notice (the “Grant Date”), the Company irrevocably grants to Participant the Shares, upon the terms and conditions set forth in the Plan and this Agreement.

(b) Issuance of Shares. The issuance of the Shares under this Agreement shall occur at the principal office of the Company simultaneously with the execution of this Agreement by the parties or on such other date as the Company and Participant shall agree (the “Issuance Date”). Subject to the provisions of Section 3 below, on the Issuance Date, the Company shall issue the Shares (which shall be issued in Participant’s name).

(c) Conditions to Issuance of Stock Certificates. The Shares, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. Such Shares shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any Shares prior to fulfillment of all of the following conditions:

(i) The completion of any registration or other qualification of such shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Committee shall, in its absolute discretion, deem legally necessary or advisable; and

(ii) The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its absolute discretion, determine to be necessary or advisable; and

(iii) The receipt by the Company of full payment for such Shares, including payment of all amounts which, under federal, state or local tax law, the Company (or other employer corporation) is required to withhold upon issuance of such Shares. The Participant may elect to have the Company withhold shares of the Company’s Common Stock otherwise issuable under the Restricted Stock Award (or allow the return of shares of the Company’s Common Stock) having a Fair Market Value equal to the sums required to be withheld. Notwithstanding any other provision of the Plan or this Agreement, the number of shares of the Company’s Common Stock which may be withheld with respect to the issuance, vesting or payment of the Shares in order to satisfy Participant’s federal and state income and payroll tax liabilities with respect to the issuance, vesting or payment of the Shares shall be limited to the number of shares of the Company’s Common Stock which have a Fair Market Value on the date of withholding equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for federal and state tax income and payroll tax purposes that are applicable to such supplemental taxable income.

(d) Consideration to the Company. In consideration of the issuance of the Shares by the Company, Participant agrees to render faithful and efficient services to the Company or any Affiliate. Nothing in the Plan or this Agreement shall confer upon Participant any right to (i) continue in the employ of the Company or any Affiliate or shall interfere with or restrict in any way the rights of the Company and its Affiliates, which are hereby expressly reserved, to discharge Participant, if Participant is an Employee, or (ii) continue to provide services to the Company or any Affiliate or shall interfere with or restrict in any way the rights of the Company or its Affiliates, which are hereby expressly reserved, to terminate the services of Participant, if Participant is a Consultant, at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between the Company and Participant.

(e) Vesting and Forfeiture.

(i) Forfeiture of Shares. Any Shares which are not vested as of the date Participant ceases to be a Service Provider (the “Separation Date”) shall thereupon be forfeited immediately and without any further action by the Company; provided, however, that, if Participant’s employment is terminated by the Company without Cause (as defined below) and a Sale of the Company occurs at any time within six (6) months after the Separation Date, then any Shares which are not vested as of the Separation Date but which would have otherwise vested pursuant to the Vesting Schedule had Participant remained employed by the Company through the date of such Sale of the Company shall become vested as of the date of such Sale of the Company.

(ii) Vesting. Subject to Section 2(e)(i), the Shares shall vest in accordance with the vesting schedule set forth on the Grant Notice.

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3. Purchase Option.

(a) All of the Shares subject to this Agreement shall be subject to the Company’s right to purchase the Shares (the “Purchase Option”), which Purchase Option shall lapse upon the seventh (7th) anniversary of the Grant Date. Until the Purchase Option lapses the Shares shall be referred to herein as “Unreleased Shares.”

(b) If Participant ceases to be a Service Provider for any reason, specified below, the Company or its assignee shall have the right and option to purchase from Participant (or Participant’s personal representative, as the case may be) the Participant’s vested Unreleased Shares as follows:

(i) To the extent vested as of the Separation Date, if a Participant ceases to be a Service Provider by reason of a termination of the Participant’s employment by the Company without Cause, by Participant for or without Good Reason, as a result of Participant’s death, at a purchase price equal to the Fair Market Value of such Shares as of the date of such termination;

(ii) To the extent vested as of the Separation Date, if a Participant ceases to be a Service Provider by reason of a termination of the Participant’s employment by the Company for Cause, at a purchase price equal to $0.01 per Share as of the date of such termination; and

(iii) Notwithstanding the foregoing, in the event of Participant’s material breach of the terms of any agreement with the Company that is in effect on or after Participant’s Separation Date, including Section 8 hereof if applicable, at a purchase price equal to $0.01 per Share as of the date of such breach, to the extent vested as of the date of such breach.

(c) The Company may exercise its Purchase Option by delivering, personally or by registered mail, to Participant (or his or her transferee or legal representative, as the case may be), within six (6) months of the Separation Date, a notice in writing indicating the Company’s intention to exercise the Purchase Option and setting forth a date for closing not later than thirty (30) days from the mailing of such notice. The closing shall take place at the Company’s office. At the closing, the holder of the certificates for the vested Unreleased Shares being transferred shall deliver the stock certificate or certificates evidencing the vested Unreleased Shares, and the Company shall deliver the purchase price therefor.

(d) At its option, the Company may elect to make payment for the vested Unreleased Shares to a bank selected by the Company. The Company shall avail itself of this option by a notice in writing to Participant stating the name and address of the bank, date of closing, and waiving the closing at the Company’s office.

(e) Should any provision of the Purchase Option be determined by a court of law to be ineffective or unenforceable, the Company reserves the right to delay exercise of such Purchase Option until such time as it becomes effective and enforceable; provided, however, that in any such event, the Company reserves the right to assign its right to purchase Shares hereunder to a Principal Investor (as such term is defined in the Stockholders’ Agreement).

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(f) For purposes of this agreement:

(i) “Cause” shall mean “Cause” as defined in any employment agreement then in effect between the Participant and the Company or if not defined therein or, if there shall be no such agreement, “Cause” shall mean the occurrence of any one or more of the following events: (A) Participant’s conviction of, or entry by Participant of a guilty or no contest plea to a felony or crime involving moral turpitude; (B) Participant’s willful commission of an act of fraud or dishonesty resulting in economic or financial injury to the Company or any affiliate; (C) Participant’s willful failure to substantially perform or gross neglect of Participant’s duties, including, but not limited to, the failure to follow any lawful directive of the CEO, within the reasonable scope of Participant’s duties; (D) Participant’s performance of acts materially detrimental to the Company or any affiliate, unless otherwise approved in advance by the Board or Directors of the Company or the Compensation Committee thereunder; (E) Participant’s use of narcotics, alcohol, or illicit drugs in a manner that has or may reasonably be expected to have a detrimental effect on Executive’s performance of his duties as an employee of the Company or on the reputation of the Company or any affiliate; (F) Participant’s commission of a material violation of any rule or policy sponsored by the Company which results in injury to the Company; or (G) Participant’s material breach of any of the covenants set forth in Section 8 hereof.

(ii) “Good Reason” shall mean “Good Reason” as defined in any employment agreement then in effect between the Participant and the Company or if not defined therein or, if there shall be no such agreement, “Good Reason” shall mean the occurrence without the written consent of Participant, of one of the following events: (A) a material diminution in Participant’s authority, duties or responsibilities combined with a demotion in Participant’s pay grade ranking; (B) the reduction by the Company of Participant’s base salary by more than ten percent (10%) (unless done so for all executive officers of the Company); or (C) the requirement that Participant be based at any office or location that is more than 50 miles from Participant’s principal place of employment, except for travel reasonably required in the performance of Participant’s responsibilities.

Notwithstanding the foregoing, Participant will not be deemed to have terminated Participant’s employment for Good Reason unless (I) Participant provides written notice to the Company of the existence of one of the conditions described above within ninety (90) days after Participant has knowledge of the initial existence of the condition, (II) the Company fails to remedy the condition so identified within thirty (30) days after receipt of such notice (if capable of correction), (III) Participant provides a notice of termination to the Company within thirty (30) days of the expiration of the Company’s period to remedy the condition, and (IV) Participant terminates employment within ninety (90) days after Participant provides written notice to the Company of the existence of the condition referred to in clause (I).

(iii) “Service Provider” shall mean any Employee, Consultant or Director.

4. Transferability of the Shares; Escrow.

(a) Participant hereby authorizes and directs the Secretary of the Company, or such other person designated by the Company from time to time, to transfer the Unreleased Shares as to which the Purchase Option has been exercised from Participant to the Company.

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(b) To insure the availability for delivery of Participant’s Unreleased Shares upon purchase by the Company pursuant to the Purchase Option under Section 3, Participant hereby appoints the Secretary, or any other person designated by the Company from time to time as escrow agent, as its attorney-in-fact to sell, assign and transfer unto the Company, such Unreleased Shares, if any, purchased by the Company pursuant to the Purchase Option and shall, upon execution of this Agreement, deliver and deposit with the Secretary of the Company, or such other person designated by the Company from time to time, the share certificate(s) representing the Unreleased Shares, together with the stock assignment duly endorsed in blank, attached hereto as Exhibit B. The Unreleased Shares and stock assignment shall be held by the Secretary, or such other person designated by the Company from time to time, in escrow, pursuant to the Joint Escrow Instructions of the Company and Participant attached as Exhibit C hereto, until the Company exercises its Purchase Option as provided in Section 3 or until such time as the Purchase Option no longer is in effect. As a further condition to the Company’s obligations under this Agreement, the spouse of Participant, if any, shall execute and deliver to the Company the Consent of Spouse attached hereto as Exhibit D. The escrow agent shall promptly deliver to Participant the certificate or certificates representing such Shares in the escrow agent’s possession belonging to Participant, and the escrow agent shall be discharged of all further obligations hereunder; provided, however, that the escrow agent shall nevertheless retain such certificate or certificates as escrow agent if so required pursuant to other restrictions imposed pursuant to this Agreement.

(c) The Company, or its designee, shall not be liable for any act it may do or omit to do with respect to holding the Shares in escrow and while acting in good faith and in the exercise of its judgment.

(d) Transfer or sale of the Shares is subject to restrictions on transfer imposed by Section 5 of this Agreement and any applicable state and federal securities laws. Any transferee shall hold such Shares subject to all of the provisions hereof and shall acknowledge the same by signing a copy of this Agreement. Any transfer or attempted transfer of any of the Shares not in accordance with the terms of this Agreement shall be void and the Company may enforce the terms of this Agreement by stop transfer instructions or similar actions by the Company and its agents or designees.

5. Participant’s Right to Transfer Shares. Except as provided in Article 4 of the Stockholders’ Agreement, Participant shall not be permitted to sell, pledge, assign, hypothecate, transfer, or otherwise disposed of any Shares.

6. Other Restrictions. The Shares held by Participant shall be subject to such other restrictions as set forth in the Stockholders’ Agreement, including, without limitation, preemptive rights, transfer restrictions, and drag-along rights. The Restricted Stock Award shall be conditioned on Participant’s consent to such restrictions as set forth in the Stockholders’ Agreement.

7. Ownership, Duties. This Agreement shall not affect in any way the ownership, rights or duties of Participant, except as specifically provided herein.

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8. Confidential Information; Non-Solicitation; Non-Competition. ¹ Unless otherwise provided in any existing employment agreement between Participant and the Company, Participant shall be subject to the following obligations:

(a) Nondisclosure of Confidential Information. Participant acknowledges that it is the policy of the Company to maintain as secret and confidential (i) all valuable and unique information, (ii) other information heretofore or hereafter acquired by the Company, or any affiliated entity and deemed by it to be confidential, and (iii) information developed or used by the Company or any affiliated entity relating to the business, operations, employees and customers of the Company or any affiliated entity including, but not limited to, any employee information (all such information described in clauses (i), (ii) and (iii) above, other than information which is known to the public or becomes known to the public through no fault of Participant, is hereinafter referred to as “Confidential Information”). The parties recognize that the services to be performed by Participant are special and unique and that by reason of his employment by the Company after the date hereof, Participant has acquired and will acquire Confidential Information. Participant recognizes that all such Confidential Information is the property of the Company. Accordingly, at any time during or after the term of the Participant’s employment by the Company (such term of employment by the Company, the “Term”), Participant shall not, except in the proper performance of his duties, directly or indirectly, without the prior written consent of the Company, disclose to any Person other than the Company, whether or not such Person is a competitor of the Company, and shall use his best efforts to prevent the publication or disclosure of any Confidential Information obtained by, or which has come to the knowledge of, Participant prior or subsequent to the date hereof. Notwithstanding the foregoing, Participant may disclose to other Persons, as part of his occupation, information with respect to the Company or any affiliated entity, which (i) is of a type generally not considered by standards of the oil and natural gas industry to be proprietary, or (ii) is otherwise consented to in writing by the Company.

(b) Non-Solicitation. Participant shall not, during the Term or for the six (6)-month period following the Separation Date (the “Covered Period”), either personally or by or through his/her agent or by letters, circulars or advertisements and whether for himself/herself or on behalf of any other person or entity, hire, solicit or seek to hire any employee or consultant of the Company or any affiliated entity, or in any other manner attempt, directly or indirectly, to persuade any such employee or consultant to discontinue his/her status of employment or consultancy with the Company or any affiliated entity or to become hired in any business or activities likely to be competitive with the Company’s or an affiliated entity’s business. Additionally, during the Covered Period, Participant shall not, for himself/herself or on behalf of any person or entity, directly or indirectly, solicit, divert or attempt to solicit or divert any customer of the Company or any affiliated entity for the purpose of causing such customer to reduce or refrain from doing any business with the Company or any affiliated entity. Participant further agrees that, during the Covered Period, he/she will not, directly or indirectly, request or advise any customers of the Company or an affiliated entity to withdraw, curtail or cancel their business with the Company or any affiliated entity. For purposes of this Agreement, a “customer” of the Company or any affiliated entity shall mean each customer of the Company or an affiliated entity who held a deposit account or otherwise transacted business with the Company or an affiliated entity at any time within the twelve (12) months preceding the Separation Date. Nothing contained in this Agreement is intended to prohibit general advertising or solicitation not specifically directed at any or all of the Company’s or an affiliated entity’s customers or employees.

¹ Covenants (confidentiality, non-solicitation and non-competition) remain subject to review by Oklahoma counsel. Discuss the extent to which any of the changes proposed by the Company are necessary so that the covenants are enforceable under Oklahoma law.

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(c) Non-Competition.

(i) As part of the consideration for the compensation and benefits to be paid to Participant hereunder, to protect the trade secrets and Confidential Information of the Company and its customers and clients that have been and will be entrusted to Participant, the business goodwill of the Company and its subsidiaries that will be developed in and through Participant and the business opportunities that will be disclosed or entrusted to Participant by the Company and its subsidiaries, and as an additional incentive for the Company to enter into this Agreement, during the Covered Period, Participant shall not directly or indirectly, individually or on behalf of any other person or entity, manage, participate in, work for, consult with, render services for, or take an interest in (as an owner, stockholder, partner or lender) any Competitor in an area of Competing Business.

(ii) For purposes of Section 8(c)(i):

(A) “Competitor” means any business, company or individual which is in, or is actively seeking to be in the Competing Business.

(B) “Competing Business” means the acquisition, exploration, exploitation, development, production and/or operation of oil and gas properties.

(iii) Participant acknowledges that each of the covenants of Section 8(c)(i) are in addition to, and shall not be construed as a limitation upon, any other covenant provided in Section 8. Participant agrees that the scope of prohibited activities, and time duration of each of the covenants set forth in Section 8(c)(i) are reasonable in nature and are no broader than are necessary to maintain the confidentiality and the goodwill of the Company’s proprietary and Confidential Information, plans and services and to protect the other legitimate business interests of the Company, including without limitation the goodwill developed by Participant with the Company’s customers, suppliers, licensees and business relations. It is also the intent of the Company and Participant that such covenants be construed and enforced in accordance with the changing activities, business and locations of the Company throughout the term of this covenant, whether before or after the Separation Date. Participant agrees not to challenge the enforceability, scope or reasonableness of the covenants in Section 8(c)(i). The covenants in Section 8(c)(i) are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, duration set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed.

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(iv) If, during any portion of the Covered Period, Participant is not in compliance with the terms of Section 8(c)(i), the Company shall be entitled to, among other remedies, compliance by Participant with the terms of Section 8(c)(i) for an additional period of time (i.e., in addition to the Covered Period) that shall equal the period(s) over which such noncompliance occurred.

(v) Nothing in this Section 8(c) shall prohibit: (A) direct or indirect ownership of publicly traded securities which are issued by a Competitor involved in or conducting a Competing Business, provided that Participant, directly or indirectly, does not own more than 5% of the outstanding equity or voting securities of such Competitor; (B) ownership of royalty interests where Participant owns the surface of the land covered by the royalty interest and the ownership of the royalty interest is incidental to the ownership of such surface estate, provided that any such surface estate does not adjoin, or is not near to, any property ownership interest held directly or indirectly by the Company; (C) direct or indirect ownership of royalty interests or overriding royalty interests owned prior to the date hereof; or (D) direct or indirect ownership of working interests or other interests in oil and gas owned prior to the date hereof and disclosed by Participant to the Company in writing. It is the intent of the Company that during the term of this Agreement Participant is not acquiring additional oil and gas interests, directly or indirectly.

9. Adjustment for Stock Split. All references to the number of Shares in this Agreement shall be appropriately adjusted to reflect any stock split, stock dividend or other change in the Shares which may be made by the Company after the date of this Agreement.

10. Notices. Notices required hereunder shall be given in person or by registered mail to the address of Participant shown on the records of the Company, and to the Company at its principal executive office.

11. Survival of Terms. This Agreement shall apply to and bind Participant and the Company and their respective permitted assignees and transferees, heirs, legatees, executors, administrators and legal successors.

12. Section 83(b) Election for Shares. Participant hereby acknowledges that he or she has been informed that, with respect to the transfer of the Shares to Participant, that unless an election is filed by Participant with the Internal Revenue Service and, if necessary, the proper state taxing authorities, within thirty (30) days of the transfer of the Shares, electing pursuant to Section 83(b) of the Code (and similar state tax provisions if applicable) to be taxed currently on the Fair Market Value of the Shares on the date of transfer, there will be a recognition of taxable income to Participant, measured by the Fair Market Value of the Shares, at the time the Shares vest. Participant represents that Participant has consulted any tax consultant(s) Participant deems advisable in connection with the transfer of the Shares or the filing of the Election under Section 83(b) of the Code and similar tax provisions.

PARTICIPANT ACKNOWLEDGES THAT IT IS PARTICIPANT’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF PARTICIPANT REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON PARTICIPANT’S BEHALF.

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13. Representations. Participant has reviewed with his or her own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement and the Stockholders’ Agreement. Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Participant understands that Participant (and not the Company) shall be responsible for his or her own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement and the Stockholders’ Agreement.

14. Restrictive Legends and Stop-Transfer Orders.

(a) Any share certificate(s) evidencing the Shares issued hereunder shall be endorsed with the following legends and any other legends that may be required by state or federal securities laws:

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF PURCHASE IN FAVOR OF [            ], INC. (THE “COMPANY”) AND MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF A RESTRICTED STOCK AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT.

(b) Participant agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

(c) The Company shall not be required: (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement, or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.

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15. Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

16. Conformity to Securities Laws. Participant acknowledges that the Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Shares are to be issued, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. Participant shall not transfer in any manner the Shares issued pursuant to this Agreement, without regard to whether such Shares are no longer subject to the Purchase Option, unless (i) the transfer is pursuant to an effective registration statement under the Securities Act, or the rules and regulations in effect thereunder or (ii) counsel for the Company shall have reasonably concluded that no such registration is required because of the availability of an exemption from registration under the Securities Act.

17. Market Standoff Agreement. Participant hereby agrees that if so requested by the Company or any representative of the underwriters (the “Managing Underwriter”) in connection with any registration of the offering of any securities of the Company under the Securities Act, Participant shall not sell or otherwise transfer any Shares or other securities of the Company during the 180-day period (or such longer period as may be requested in writing by the Managing Underwriter and agreed to in writing by the Company) (the “Market Standoff Period”) following the effective date of a registration statement of the Company filed under the Securities Act; provided, however, that such restriction shall apply only to the first registration statement of the Company to become effective under the Securities Act that includes securities to be sold on behalf of the Company to the public in an underwritten public offering under the Securities Act. The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Standoff Period and these restrictions shall be binding on any transferee of such Shares. Notwithstanding the foregoing, the 180-day period may be extended for up to such number of additional days as is deemed necessary by the Company or the Managing Underwriter to continue coverage by research analysts in accordance with NASD Rule 2711 or any successor rule.

18. Further Instruments. Participant hereby agrees to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.

19. Governing Law; Severability. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware excluding that body of law pertaining to conflicts of law. Should any provision of this Agreement be determined by a court of law to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable.

(Signature Page Follows)

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Participant represents that he or she has read this Agreement and is familiar with its terms and provisions. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board or other administrator of the Plan upon any questions arising under this Agreement.

IN WITNESS WHEREOF, this Agreement is deemed made as of the date first set forth above.

CHAPARRAL, INC.

By:

Name:

Title:

PARTICIPANT

By:

Name:

Address:

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EXHIBIT B

ASSIGNMENT SEPARATE FROM CERTIFICATE

(PERFORMANCE VESTING)

FOR VALUE RECEIVED I,             , hereby sell, assign and transfer unto                                                                   (            ) shares of the Common Stock of Chaparral Energy, Inc. registered in my name on the books of said corporation represented by Certificate No.              herewith and do hereby irrevocably constitute and appoint                                          to transfer the said stock on the books of the within named corporation with full power of substitution in the premises.

This Assignment Separate from Certificate may be used only in accordance with the Restricted Stock Agreement between Chaparral Energy, Inc. and the undersigned dated             ,             .

Dated:             ,             

Signature:

INSTRUCTIONS: Please do not fill in any blanks other than the signature line. The purpose of this assignment is to enable the Company to exercise the Purchase Option, as set forth in the Restricted Stock Agreement, without requiring additional signatures on the part of Participant.

EXHIBIT C

JOINT ESCROW INSTRUCTIONS

(PERFORMANCE VESTING)

                    ,             

Secretary

[                ], Inc.

[                ]

[                         ]

As Escrow Agent for both [            ], Inc. (the “Company”) and the undersigned recipient of stock of the Company (the “Participant”), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of that certain Restricted Stock Agreement (“Agreement”) between the Company and the undersigned, in accordance with the following instructions:

1. In the event the Company or any entitled parties (referred to collectively for convenience herein as the “Company”) exercises the Company’s Purchase Option set forth in the Agreement, the Company shall give to Participant and you a written notice specifying the number of shares of stock to be transferred and the time for a closing hereunder at the principal office of the Company. Participant and the Company hereby irrevocably authorize and direct you to close the transaction contemplated by such notice in accordance with the terms of said notice.

2. At the closing, you are directed (a) to date the stock assignments necessary for the transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver the same, together with the certificate evidencing the shares of stock to be transferred, to the Company or its assignee, against the simultaneous delivery to you of the purchase price (by cash, a check, or a combination thereof) for the number of shares of stock being purchased pursuant to the exercise of the Company’s Purchase Option.

3. Participant irrevocably authorizes the Company to deposit with you any certificates evidencing shares of stock to be held by you hereunder and any additions and substitutions to said shares as defined in the Agreement. Participant does hereby irrevocably constitute and appoint you as Participant’s attorney-in-fact and agent for the term of this escrow to execute, with respect to such securities, all documents necessary or appropriate to make such securities negotiable and to complete any transaction herein contemplated, including but not limited to the filing with any applicable state blue sky authority of any required applications for consent to, or notice of transfer of, the securities. Subject to the provisions of this paragraph 3 and to the terms of the Agreement, Participant shall exercise all rights and privileges of a stockholder of the Company while the stock is held by you.

4. Upon written request of Participant, but no more than once per calendar year, unless the Company’s Purchase Option has been exercised, you will deliver to Participant a certificate or certificates representing the number of shares of stock as are not then subject to the Company’s Purchase Option. Within one hundred twenty (120) days after Participant ceases to be a Service Provider, you will deliver to Participant a certificate or certificates representing the aggregate number of shares held or issued pursuant to the Agreement and not purchased by the Company or any other entitled parties pursuant to exercise of the Company’s Purchase Option.

5. If at the time of termination of this escrow you should have in your possession any documents, securities, or other property belonging to Participant, you shall deliver all of the same to Participant and shall be discharged of all further obligations hereunder.

6. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto.

7. You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for Participant while acting in good faith, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith.

8. You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.

9. You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder.

10. You shall not be liable for the expiration of any rights under any applicable state, federal or local statute of limitations or similar statute or regulation with respect to these Joint Escrow Instructions or any documents deposited with you.

11. You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor.

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12. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be an officer or agent of the Company or if you shall resign by written notice to each party. In the event of any such termination, the Company shall appoint a successor Escrow Agent.

13. If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.

14. It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder, you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities until such disputes shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.

15. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties thereunto entitled at such addresses as a party may designate by written notice to each of the other parties hereto.

16. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Agreement.

17. This instrument shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns.

18. These Joint Escrow Instructions shall be governed by, and construed and enforced in accordance with, the laws of the State of [Delaware], excluding that body of law pertaining to conflicts of law.

(Signature Page Follows)

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IN WITNESS WHEREOF, these Joint Escrow Instructions shall be effective as of the date first set forth above.

CHAPARRAL ENERGY, INC.

By:

Name:

Title:

PARTICIPANT

By:

Name:

Address:

ESCROW AGENT
By:
Name:
Title:	Secretary of the Company

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EXHIBIT D

CONSENT OF SPOUSE

(PERFORMANCE VESTING)

I,                     , spouse of                     , have read and approve the Restricted Stock Agreement dated             ,             , between my spouse and Chaparral Energy, Inc. In consideration of granting to my spouse the restricted shares of Chaparral Energy, Inc. set forth in the Restricted Stock Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of any rights under the Agreement and agree to be bound by the provisions of the Restricted Stock Agreement insofar as I may have any rights in said Restricted Stock Agreement or any shares issued pursuant thereto under the community property laws or similar laws relating to marital property in effect in the state of our residence as of the date of the signing of the foregoing Restricted Stock Agreement.

Dated:                     ,             

Signature of Spouse

EX-10.23

Exhibit 10.23

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of the 12th day of April, 2010, is entered into by and between CHAPARRAL ENERGY, INC., a Delaware corporation (the “Company”), CHAPARRAL ENERGY, LLC (the “Employer”) and Mark A. Fischer (“Executive”).

IN CONSIDERATION of the premises and the mutual covenants set forth below, and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

WHEREAS, the Company desires to retain Executive as its employee and believes it is necessary to enter into this Agreement to provide the proper incentive to Executive; and

WHEREAS, the Company and Executive previously entered into that certain Change of Control Severance Agreement dated as of July 1, 2007, and amended as of December 31, 2008 (the “Change of Control Severance Agreement”), and the parties hereto acknowledge and agree that the Change of Control Severance Agreement, and all of Executive’s rights and interest therein and thereunder, are hereby cancelled and terminated upon the effectiveness of this Agreement, in consideration of the parties hereto entering into this Agreement.

1. Term. Subject to the provisions for earlier termination hereinafter provided, Executive’s employment with the Company under this Agreement shall be for a term (the “Term”) commencing upon April 12, 2010 (the “Effective Date”) and ending on the third-year anniversary of the Effective Date; provided, however, that commencing on the date that is the third anniversary of the Effective Date, the Term shall be automatically extended so as to terminate on the second anniversary of such date, and the Term shall be automatically extended so as to terminate on each anniversary thereafter (each such anniversary referred to as a “Renewal Date”). Notwithstanding the foregoing, if at least ninety (90) days prior to any Renewal Date, the Company gives Executive written notice that the Term will not be so extended, this Agreement will continue for the remainder of the then current Term and automatically expire upon its completion. The Term may be sooner terminated under Section 5 of this Agreement.

2. Position and Duties. During the Term, Executive will serve as President and Chief Executive Officer of the Company (the “CEO”) and will report directly to the Board of Directors of the Company (the “Board”). Executive shall devote Executive’s best efforts and full business time and attention to perform all services reasonably required to fully execute the duties and responsibilities associated with the Company, its subsidiaries and its affiliates as directed by the Board. Notwithstanding the above, Executive will be permitted, to the extent such activities do not interfere with the performance by Executive of his duties and responsibilities under this Agreement or violate this Agreement, to (i) manage Executive’s personal, financial and legal affairs, and (ii) serve on industry, civic or charitable boards or committees. Executive agrees to observe and comply with the rules and policies of the Company, as in effect from time to time, including, without limitation, any rules and policies relating to Executive obligations to the Company upon a termination of employment.

3. Place of Performance. During the Term, Executive’s place of employment will be the Company’s principal executive offices in Oklahoma City, Oklahoma (the “Principal Location”), except for travel to other locations as may be necessary to fulfill Executive’s duties and responsibilities hereunder.

4. Compensation and Related Matters.

(a) Base Salary. During the Term, the Company will pay Executive a base salary of not less than $620,298 per year (“Base Salary”), in accordance with the Company’s customary payroll practices. Executive’s Base Salary may be increased, but not decreased unless the base salaries for all executive officers of the Company are decreased, pursuant to annual review by the Compensation Committee (the “Compensation Committee”) of the Board in its discretion. In the event that Executive’s Base Salary is increased, the increased amount will then constitute the Base Salary for all purposes of this Agreement.

(b) Annual Bonus Incentives. In addition to the Base Salary, Executive shall be eligible to participate in and earn an annual cash bonus under any annual incentive plan established by the Board so long as the terms of any such plan allow participation by the executive officers of the Company (“Annual Bonus”). The target Annual Bonus for Executive shall be equal to 100% of Executive’s current Base Salary, but the actual Annual Bonus shall be determined by the Compensation Committee, in consultation with the CEO, in accordance with the terms of such plan, in effect at that time, if any. The terms for the payment of any Annual Bonus shall be determined by the Compensation Committee, in consultation with the CEO, in accordance with the terms of such plan in effect at that time, if any.

(c) Equity Grant. Subject to adoption by the Board and approval by Company’s shareholders of the Company’s 2010 Equity Incentive Plan (the “Plan”), the Company shall grant to Executive shares of restricted stock (the “Restricted Stock”) under the Plan, consisting of 2,652 time-vesting shares (the “Time-Vested Restricted Stock”) and 12,450 performance-vesting shares (the “Performance-Vested Restricted Stock”). Consistent with the foregoing, the terms and conditions of the Time-Vested Restricted Stock shall be set forth in an award agreement (the “Time-Vested Restricted Stock Agreement”) substantially in the form attached hereto as Exhibit A, and the terms and conditions of the Performance-Vested Restricted Stock shall be set forth in an award agreement (the “Performance-Vested Restricted Stock Agreement” and, together with the Time-Vested Restricted Stock Agreement, the “Restricted Stock Agreements”) substantially in the form attached hereto as Exhibit B, which together shall evidence the grant of the Restricted Stock. Subject to this Section 4(c), the Time-Vested Restricted Stock and the Performance-Vested Restricted Stock shall be governed in all respects by the terms of the Plan and the applicable Restricted Stock Agreement.

(d) Welfare, Pension and Incentive Benefit. During the Term, Executive (and Executive’s spouse and/or eligible dependents to the extent provided in the applicable plans and programs) will be eligible to participate in and be covered under all the welfare benefit plans or programs maintained by the Company or Employer for the benefit of its senior executive officers pursuant to the terms of such plans and programs including, without limitation, all medical, life, hospitalization, dental, disability, accidental death and dismemberment and travel accident insurance plans and programs. In addition, during the Term, Executive will be eligible to participate in all pension, retirement, savings and other employee benefit plans and programs maintained from time to time by the Company or Employer for the benefit of its senior executive officers.

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(e) Vacation. Executive shall be entitled to paid vacation in accordance with the Employer’s vacation policy during the Term. Executive may use his vacation in a reasonable manner based upon the business needs of the Company.

(f) Fringe Benefits. During the Term, the Company will provide Executive with such other fringe benefits as commensurate with Executive’s position, including, but not limited to:

(i) Automobile. Executive shall be entitled to the use of a Company-owned automobile commensurate with his position as President and Chief Executive Officer of the Company (the make, model, cost and frequency of replacement of which shall be subject to approval by the Board), and reimbursement by the Company for all reasonable expenses related to the use and operation of such automobile; provided, however, that, all costs and expenses associated with Executive’s personal use of such automobile will be deemed to be imputed income to Executive and Executive shall be solely responsible for any income tax liability with respect thereto.

(ii) Use of Airplane. The Executive shall be entitled to the use of a Company-owned airplane (the make, model, cost and frequency of replacement of which shall be subject to approval by the Board); provided, however, that all costs and expenses associated with Executive’s personal use of such airplane will be deemed to be imputed income to Executive and Executive will be solely responsible for any income tax liability with respect thereto.

(iii) Annual Physical Examination. During the Term, the Company shall reimburse Executive up to a maximum of $500 per year for an annual, comprehensive physical examination at any medical facility of Executive’s choice located in the Continental United States, including related diagnostic and screening tests, examinations, procedures and laboratory work.

(g) Expenses. Executive will be entitled to receive prompt reimbursement for all reasonable business expenses incurred by Executive in accordance with the Company’s and Employer’s expense reimbursement policy during the Term. All payments under this Section 4(g) shall be paid to Executive on or before the last day of Executive’s taxable year following the taxable year in which Executive incurred such expenses.

5. Termination of Employment. Executive’s employment under this Agreement may be terminated during the Term under the following circumstances:

(a) Death. Executive’s employment under this Agreement will terminate upon his death.

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(b) Disability. Upon Executive’s Disability, Executive will receive a Notice of Termination (as defined in Section 6(a)) from the Company. If Executive does not return to the substantial performance of his duties on a full-time basis within thirty (30) days of such Notice of Termination, the Company has the right to terminate Executive’s employment under this Agreement for Disability, and such termination will not be a breach of this Agreement by the Company. For purposes of this Agreement, “Disability” means Executive’s incapacity due to physical or mental illness whereby Executive is substantially unable to perform his duties under this Agreement (with or without reasonable accommodation, as defined under the Americans With Disabilities Act) for a period of six (6) consecutive months.

(c) Cause. The Company has the right to terminate Executive’s employment for Cause by providing Executive with a Notice of Termination, and such termination will not be a breach of this Agreement by the Company. For purposes of this Agreement, “Cause” means the occurrence of any one or more of the following events: (i) Executive’s conviction of, or entry by Executive of a guilty or no contest plea to a felony or crime involving moral turpitude; (ii) Executive’s willful commission of an act of fraud or dishonesty resulting in economic or financial injury to the Company or any affiliate; (iii) Executive’s willful failure to substantially perform or gross neglect of Executive’s duties, including, but not limited to, the failure to follow any lawful directive of the Board, within the reasonable scope of Executive’s duties; (iv) Executive’s performance of acts materially detrimental to the Company or any affiliate, unless otherwise approved in advance by the Board or the Compensation Committee; (v) Executive’s use of narcotics, alcohol, or illicit drugs in a manner that has or may reasonably be expected to have a detrimental effect on Executive’s performance of his duties as an employee of the Company or on the reputation of the Company or any affiliate; (vi) Executive’s commission of a material violation of any rule or policy sponsored by the Company which results in injury to the Company; (vii) Executive’s material breach of this Agreement, including, but not limited to, Executive’s material breach of the covenants set forth in Section 9 hereof; (viii) the occurrence or existence of any event constituting “Cause,” with respect to Executive, under Article 6 of that certain Second Amended and Restated Certificate of Incorporation of Chaparral Energy, Inc., as amended and restated on April 12, 2010; (the “Certificate of Incorporation”); (ix) a material breach by the Company of Article 7 of the Certificate of Incorporation caused by specific acts or omissions of Executive, provided that the Company fails to remedy such breach within ninety (90) days after the Company has knowledge of the initial existence of such breach; or (x) a material breach by Fischer Investments, L.L.C., an Oklahoma limited liability company (“Fischer”), of that certain Stockholders’ Agreement, entered into April 12, 2010, by and among the Company, CCMP Capital Investors II (AV-2), L.P., a Delaware limited partnership, CCMP Energy I LTD., a Cayman limited company, CCMP Capital Investors (Cayman) II, L.P., Fischer, Altoma Energy, an Oklahoma general partnership, and CHK Holdings, L.L.C., an Oklahoma limited liability company. Notwithstanding the foregoing, Executive shall only be terminated for cause under this Section 5(c) if such decision is approved by a majority vote of the Board in accordance with the Company’s bylaws.

(d) Good Reason. Executive may terminate Executive’s employment with the Company for “Good Reason,” and such termination will not be a breach of this Agreement by Executive. For purposes of this Agreement, “Good Reason” shall mean the occurrence without the written consent of Executive, of one of the events set forth below:

(i) a material diminution in Executive’s authority, duties or responsibilities combined with a demotion in Executive’s pay grade ranking;

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(ii) the reduction by the Company of Executive’s Base Salary by more than ten percent (10%) (unless done so for all executive officers of the Company);

(iii) the requirement that Executive be based at any office or location that is more than 50 miles from the Principal Location, except for travel reasonably required in the performance of Executive’s responsibilities; or

(iv) any other action or inaction that constitutes a material breach by the Company of this Agreement such as the failure of any successor to the Company to assume this Agreement pursuant to Section 14.

Notwithstanding the foregoing, Executive will not be deemed to have terminated for Good Reason unless (A) Executive provides written notice to the Company of the existence of one of the conditions described above within ninety (90) days after Executive has knowledge of the initial existence of the condition, (B) the Company fails to remedy the condition so identified within thirty (30) days after receipt of such notice (if capable of correction), (C) Executive provides a Notice of Termination to the Company within thirty (30) days of the expiration of the Company’s period to remedy the condition, and (D) Executive terminates employment within ninety (90) days after Executive provides written notice to the Company of the existence of the condition referred to in clause (A).

(e) Without Cause. The Company has the right to terminate Executive’s employment under this Agreement without Cause by providing Executive with a Notice of Termination.

(f) Without Good Reason. Executive may voluntarily terminate employment with the Company without Good Reason at any time by providing the Company with a Notice of Termination.

6. Termination Procedure.

(a) Notice of Termination. Any termination of Executive’s employment by the Company or by Executive during the Term (other than termination pursuant to Section 5(a)) will be communicated by Notice of Termination to the other party in accordance with Section 15. For purposes of this Agreement, a “Notice of Termination” means a written notice which indicates the specific termination provision in this Agreement relied upon and sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment.

(b) Date of Termination. “Date of Termination” shall mean (i) if Executive’s employment is terminated by his death, the date of his death, (ii) if Executive’s employment is terminated due to Disability pursuant to Section 5(b), thirty (30) days after Notice of Termination (provided that Executive has not returned to the substantial performance of his duties on a full-time basis during such thirty (30) day period), (iii) if Executive’s employment is terminated for Good Reason pursuant to Section 5(d), the date on which a Notice of Termination provided in accordance with such Section is given or any later date (within thirty (30) days after the giving of such Notice of Termination) set forth in such Notice of Termination, (iv) if Executive’s employment is terminated voluntarily by Executive without Good Reason pursuant to Section 5(f), thirty (30) days after Notice of Termination, or (v) if Executive’s employment is terminated for any other reason, the date on which a Notice of Termination is given or any later date (within thirty (30) days after the giving of such Notice of Termination) set forth in such Notice of Termination.

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7. Obligations of the Company Upon Termination. In the event Executive’s employment under this Agreement terminates during the Term and such termination constitutes a “separation from service” from the Company (within the meaning of Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (the “Code”), and Treasury Regulation Section 1.409A-1(h)) (“Separation from Service”), the Company will provide Executive with the payments and benefits set forth below.

(a) Termination by Company Without Cause or by Executive for Good Reason Not Following Change in Control. If Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason at any time that is not within two (2) years after the occurrence of a “Change in Control” (as defined below):

(i) The Company will pay to Executive in a single lump sum payment within thirty (30) days after the Date of Termination, the aggregate amount of (A) any earned but unpaid Base Salary, (B) any Annual Bonus required to be paid to Executive pursuant to Section 4(b) for any fiscal year of the Company that ends on or before the Date of Termination to the extent not previously paid, (C) accrued but unpaid vacation pay through the Date of Termination, and (D) reasonable business expenses incurred but unpaid through the Date of Termination (together, the “Accrued Obligations”);

(ii) Subject to Sections 7(f) and 10 below, the Company will pay to Executive an amount equal to 2.5 (the “Severance Multiple”) times the sum of (x) Executive’s Base Salary in effect on the Date of Termination plus (y) the Annual Bonus granted to Executive for the fiscal year of the Company immediately on or preceding the Date of Termination, payable in the form of a salary continuation for a period of months equal to the product of 12 times the Severance Multiple; provided, however, that the first such payment shall not be made until the Company’s first payroll date occurring on or after the 30th day following the Date of Termination (the “First Payroll Date”) and any amounts that would otherwise have been paid pursuant to this Section 7(a)(ii) prior to the First Payroll Date shall instead be paid on the First Payroll Date. Each payment under this Section 7(a)(ii) shall be treated as a separate payment for purposes of Section 409A of the Code.

(iii) Subject to Sections 7(f) and 10 below, the Company will maintain in full force and effect, for the continued benefit of Executive (and Executive’s spouse and/or eligible dependents, as applicable) for a period of eighteen (18) months following the Date of Termination, participation by Executive (and Executive’s spouse and/or eligible dependents, as applicable) in the medical, hospitalization, and dental programs maintained by the Company for the benefit of its senior executive officers as in effect on the Date of Termination, at such level and terms and conditions (including, without limitation, contributions required by Executive for such benefits) as in effect on the Date of Termination; provided, if Executive (or his spouse) is eligible for Medicare or a similar type of governmental medical benefit, such benefit shall be the primary provider before Company medical benefits are provided. However, if Executive becomes reemployed with another employer and is eligible to receive medical, hospitalization and dental benefits under another employer–provided plan, the medical, hospitalization and dental benefits described herein shall be secondary to those provided under such other plan during the applicable period. If any plan pursuant to which such benefits are provided is not, or ceases prior to the expiration of the period of continuation coverage to be, exempt from the application of Section 409A of the Code under Treasury Regulation Section 1.409A-1(a)(5), then an amount equal to each remaining premium payment shall thereafter be paid to Executive as currently taxable compensation in substantially equal monthly installments over the continuation coverage period (or the remaining portion thereof).

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(iv) For purposes of this Agreement, “Change in Control” shall mean:

(A) The consummation of any transaction or series of related transactions involving the sale of the Company’s outstanding securities (but excluding a public offering of the Company’s capital stock) for securities or other consideration issued or paid or caused to be issued or paid by such other corporation or an affiliate thereof and which result in this Company’s shareholders (or their affiliates) immediately prior to such transaction not holding at least a majority of the voting power of the surviving or continuing entity following such transaction; or

(B) The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets or (z) the acquisition of assets or stock of another entity, in each case, other than a transaction which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction.

(b) Termination by Company Without Cause or by Executive for Good Reason Following Change in Control. If at any time within two (2) years after a Change in Control, Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason, then Executive shall be entitled to the payments and benefits provided in Section 7(a) hereof, subject to the terms and conditions thereof (including, without limitation, the requirement that a condition to Executive’s right to receive the amounts provided for thereunder is that Executive execute, deliver and not revoke the Release as set forth in Section 10 below), except that for purposes of this Section 7(b), the Severance Multiple shall equal 3; provided, however, that if such Change of Control occurs as a result of the sale or other disposition of all or substantially all of the Company’s assets, then the severance payment described in Section 7(a)(ii) hereof shall be payable in the form of a lump sum within sixty (60) days of the Date of Termination.

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(c) Termination by Company for Cause or by Executive Without Good Reason. If Executive’s employment is terminated by the Company for Cause or by Executive without Good Reason, the Company will pay Executive within thirty (30) days after the Date of Termination the Accrued Obligations; provided, however, the amounts described in Section 7(a)(i)(D) shall not be paid to Executive if Executive’s employment was terminated by the Company for Cause due to Executive’s misappropriation of Company funds.

(d) Disability. During any period that Executive fails to perform Executive’s duties under this Agreement as a result of incapacity due to physical or mental illness, Executive will continue to receive his full Base Salary set forth in Section 4(a) until his employment is terminated pursuant to Section 5(b). If Executive’s employment is terminated due to Disability pursuant to Section 5(b), subject to Sections 7(f) and 10 below, the Company will pay Executive within thirty (30) days after the Date of Termination the Accrued Obligations, plus a pro rata share of the Annual Bonus for the fiscal year of the Company in which the Date of Termination occurs.

(e) Death. If Executive’s employment is terminated by death, the Company will pay to Executive’s beneficiary, or personal or legal representatives or estate, as the case may be, within thirty (30) days after the Date of Termination the Accrued Obligations, plus a pro rata share of the Annual Bonus for the fiscal year of the Company in which the Date of Termination occurs.

(f) Six-Month Delay. Notwithstanding anything to the contrary in this Agreement, no compensation or benefits, including without limitation any severance payments or benefits payable under Section 7 hereof, shall be paid to Executive during the six (6)-month period following Executive’s Separation from Service if the Company determines that paying such amounts at the time or times indicated in this Agreement would be a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code. If the payment of any such amounts is delayed as a result of the previous sentence, then on the first business day following the end of such six (6)-month period (or such earlier date upon which such amount can be paid under Section 409A of the Code without resulting in a prohibited distribution, including as a result of Executive’s death), the Company shall pay Executive a lump-sum amount equal to the cumulative amount that would have otherwise been payable to Executive during such period.

8. Mitigation. Executive will not be required to mitigate amounts payable under this Agreement by seeking other employment or otherwise, and there will be no offset against amounts due Executive under this Agreement on account of subsequent employment except as specifically provided herein.

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9. Confidential Information; Non-Solicitation; Non-Competition.

(a) Nondisclosure of Confidential Information. Executive acknowledges that it is the policy of the Company to maintain as secret and confidential (i) all valuable and unique information, (ii) other information heretofore or hereafter acquired by the Company, or any affiliated entity and deemed by it to be confidential, and (iii) information developed or used by the Company or any affiliated entity relating to the business, operations, employees and customers of the Company or any affiliated entity including, but not limited to, any employee information (all such information described in clauses (i), (ii) and (iii) above, other than information which is known to the public or becomes known to the public through no fault of Executive, is hereinafter referred to as “Confidential Information”). The parties recognize that the services to be performed by Executive pursuant to this Agreement are special and unique and that by reason of his employment by the Company after the date hereof, Executive has acquired and will acquire Confidential Information. Executive recognizes that all such Confidential Information is the property of the Company. Accordingly, at any time during or after the Term, Executive shall not, except in the proper performance of his duties under this Agreement, directly or indirectly, without the prior written consent of the Company, disclose to any Person other than the Company, whether or not such Person is a competitor of the Company, and shall use his best efforts to prevent the publication or disclosure of any Confidential Information obtained by, or which has come to the knowledge of, Executive prior or subsequent to the date hereof. Notwithstanding the foregoing, Executive may disclose to other Persons, as part of his occupation, information with respect to the Company or any affiliated entity, which (i) is of a type generally not considered by standards of the oil and natural gas industry to be proprietary, or (ii) is otherwise consented to in writing by the Company.

(b) Non-Solicitation. Executive shall not, during the Term or for the period of months equal to the product of 12 times the Severance Multiple following the Date of Termination (the “Covered Period”), either personally or by or through his/her agent or by letters, circulars or advertisements and whether for himself/herself or on behalf of any other person or entity, hire, solicit or seek to hire any employee or consultant of the Company or any affiliated entity, or in any other manner attempt, directly or indirectly, to persuade any such employee or consultant to discontinue his/her status of employment or consultancy with the Company or any affiliated entity or to become hired in any business or activities likely to be competitive with the Company’s or an affiliated entity’s business. Additionally, during the Covered Period, Executive shall not, for himself/herself or on behalf of any person or entity, directly or indirectly, solicit, divert or attempt to solicit or divert any customer of the Company or any affiliated entity for the purpose of causing such customer to reduce or refrain from doing any business with the Company or any affiliated entity. Executive further agrees that, during the Covered Period, he/she will not, directly or indirectly, request or advise any customers of the Company or an affiliated entity to withdraw, curtail or cancel their business with the Company or any affiliated entity. For purposes of this Agreement, a “customer” of the Company or any affiliated entity shall mean those customers of the Company or an affiliated entity who held a deposit account or otherwise transacted business with the Company or an affiliated entity at any time within the twelve (12) months preceding termination of Executive’s employment. Nothing contained in this Agreement is intended to prohibit general advertising or solicitation not specifically directed at any or all of the Company’s or an affiliated entity’s customers or employees.

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(c) Non-Competition.

(i) As part of the consideration for the compensation and benefits to be paid to Executive hereunder, to protect the trade secrets and Confidential Information of the Company and its customers and clients that have been and will be entrusted to Executive, the business goodwill of the Company and its subsidiaries that will be developed in and through Executive and the business opportunities that will be disclosed or entrusted to Executive by the Company and its subsidiaries, and as an additional incentive for the Company to enter into this Agreement, during the Covered Period, Executive shall not directly or indirectly, individually or on behalf of any other person or entity, manage, participate in, work for, consult with, render services for, or take an interest in (as an owner, stockholder, partner or lender) any Competitor in an area of Competing Business.

(ii) For purposes of Section 9(c)(i):

(A) “Competitor” means any business, company or individual which is in, or is actively seeking to be in the Competing Business.

(B) “Competing Business” means the acquisition, exploration, exploitation, development, production and/or operation of oil and gas properties.

(iii) Executive acknowledges that each of the covenants of Section 9(c)(i) are in addition to, and shall not be construed as a limitation upon, any other covenant provided in Section 9. Executive agrees that the scope of prohibited activities and time duration of each of the covenants set forth in Section 9(c)(i) are reasonable in nature and are no broader than are necessary to maintain the confidentiality and the goodwill of the Company’s proprietary and Confidential Information, plans and services and to protect the other legitimate business interests of the Company, including without limitation the goodwill developed by Executive with the Company’s customers, suppliers, licensees and business relations. It is also the intent of the Company and Executive that such covenants be construed and enforced in accordance with the changing activities, business and locations of the Company throughout the term of this covenant, whether before or after the Date of Termination. Executive agrees not to challenge the enforceability, scope or reasonableness of the covenants in Section 9(c)(i). The covenants in Section 9(c)(i) are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope or duration set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed.

(iv) If, during any portion of the Covered Period, Executive is not in compliance with the terms of Section 9(c)(i), the Company shall be entitled to, among other remedies, compliance by Executive with the terms of Section 9(c)(i) for an additional period of time (i.e., in addition to the Covered Period) that shall equal the period(s) over which such noncompliance occurred.

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(v) Nothing in this Section 9(c) shall prohibit: (A) direct or indirect ownership of publicly traded securities which are issued by a Competitor involved in or conducting a Competing Business, provided that Executive, directly or indirectly, does not own more than 5% of the outstanding equity or voting securities of such Competitor; (B) ownership of royalty interests where Executive owns the surface of the land covered by the royalty interest and the ownership of the royalty interest is incidental to the ownership of such surface estate, provided that any such surface estate does not adjoin, or is not near to, any property ownership interest held directly or indirectly by the Company; (C) direct or indirect ownership of royalty interests or overriding royalty interests owned prior to the Effective Date; or (D) direct or indirect ownership of working interests or other interests in oil and gas owned prior to the Effective Date and disclosed by Executive to the Company in writing. It is the intent of the Company that during the Term of this Agreement Executive is not acquiring additional oil and gas interests, directly or indirectly.

(d) Obligations of Executive Upon Termination. Upon termination of Executive’s employment for any reason, Executive shall return to the Company all documents and copies, including hard and electronic copies, of documents in his possession relating to any Confidential Information including, but not limited to, internal and external business forms, manuals, correspondence, notes and computer programs, and Executive shall not make or retain any copy or extract of any of the foregoing. In addition, Executive shall resign from all positions held with the Company or any affiliated entities.

(e) Remedies. Executive acknowledges and understands that Sections 9(a), (b), (c) and (d) and the other provisions of this Agreement are of a special and unique nature, the loss of which cannot be adequately compensated for in damages by an action at law, and that the breach or threatened breach of the provisions of this Agreement would cause the Company irreparable harm. In the event of a breach or threatened breach by Executive of the provisions of this Agreement, the Company shall be entitled to an injunction restraining him from such breach. Nothing contained in this Agreement shall be construed as prohibiting the Company from pursuing, or limiting the Company’s ability to pursue, any other remedies available for any breach or threatened breach of this Agreement by Executive. The provision of Section 12 hereof relating to arbitration of disputes shall not be applicable to the Company to the extent it seeks an injunction in any court to restrain Executive from violating Sections 9(a), (b), (c) and (d) hereof.

(f) Continuing Operation. Except as specifically provided in this Section 9, the termination of Executive’s employment or of this Agreement will have no effect on the continuing operation of this Section 9.

(g) Additional Related Agreements. Executive agrees to sign and to abide by the provisions of any additional agreements, policies or requirements of the Company which are reasonable and related to the subject of this Section 9 which are in writing and are developed by the Company in the ordinary course of business.

10. Release. Notwithstanding any other provisions of this Agreement, it shall be a condition to Executive’s right to receive the amounts provided for in Section 7(a), 7(b) or 7(d) of this Agreement, that Executive will execute and deliver to the Company a release of claims in substantially the form attached hereto as Exhibit C (the “Release”) within twenty-one (21) days following the Date of Termination and that Executive not revoke such release within seven (7) days thereafter. The form of the Release may be modified as needed to reflect changes in the applicable law or regulations that are needed to provide a legally enforceable and binding Release to all parties at the time of execution.

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11. Indemnification and Insurance. Executive shall be indemnified and held harmless by the Company during the term of this Agreement and following any termination of this Agreement for any reason whatsoever in the same manner as would any other key management employee of the Company with respect to acts or omissions occurring prior to (a) the termination of this Agreement or (b) the termination of employment of Executive. In addition, during the term of this Agreement and for a period of six years following the termination of this Agreement for any reason whatsoever, Executive shall be covered by a Company held liability insurance policy, covering acts or omissions occurring prior to (i) the termination of this Agreement or (ii) the termination of employment of Executive.

12. Arbitration; Legal Fees and Expenses. The parties agree that Executive’s employment and this Agreement relate to interstate commerce, and that any disputes, claims or controversies between Executive and the Company which may arise out of or relate to Executive’s employment relationship or this Agreement shall be settled by arbitration. This agreement to arbitrate shall survive the termination of this Agreement. Any arbitration shall be in accordance with the Rules of the American Arbitration Association and undertaken pursuant to the Federal Arbitration Act. Arbitration will be held in Oklahoma City, Oklahoma unless the parties mutually agree on another location. The decision of the arbitrator(s) will be enforceable in any court of competent jurisdiction. The parties agree that punitive, liquidated or indirect damages shall not be awarded by the arbitrator(s) unless such damages would have been awarded by a court of competent jurisdiction. Nothing in this agreement to arbitrate, however, shall preclude the Company from obtaining injunctive relief from a court of competent jurisdiction prohibiting any ongoing breaches by Executive of this Agreement including, without limitation, violations of Section 9. If any contest or dispute arises between the Company and Executive regarding any provision of this Agreement, the arbitrator may award to the prevailing party, the reasonable attorney fees, costs and expenses incurred by the prevailing party in connection with such contest or dispute.

13. Maximum Payments by the Company.

(a) It is the objective of this Agreement to maximize Executive’s Net After-Tax Benefit (as defined herein) if payments or benefits provided under this Agreement are subject to excise tax under Section 4999 of the Code. Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit by the Company or otherwise to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, including, by example and not by way of limitation, acceleration by the Company or otherwise of the date of vesting or payment or rate of payment under any plan, program, arrangement or agreement of the Company (all such payments and benefits, including the payments and benefits under Section 7 hereof, being hereinafter referred to as the “Total Payments”), would be subject (in whole or in part) to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the cash severance payments shall first be reduced, and the non-cash severance payments shall thereafter be reduced, to the extent necessary so that no portion of the Total Payments shall be subject to the Excise Tax, but only if (i) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments), is greater than or equal to (ii) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which Executive would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments).

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(b) The Total Payments shall be reduced by the Company in the following order: (i) reduction of any cash severance payments otherwise payable to Executive that are exempt from Section 409A of the Code, (ii) reduction of any other cash payments or benefits otherwise payable to Executive that are exempt from Section 409A of the Code, but excluding any payments attributable to the acceleration of vesting or payments with respect to any equity award with respect to the Company’s common stock that is exempt from Section 409A of the Code, (iii) reduction of any other payments or benefits otherwise payable to Executive on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payments attributable to the acceleration of vesting and payments with respect to any equity award with respect to the Company’s common stock that are exempt from Section 409A of the Code, and (iv) reduction of any payments attributable to the acceleration of vesting or payments with respect to any other equity award with respect to the Company’s common stock that are exempt from Section 409A of the Code.

(c) For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the written opinion of independent auditors of nationally recognized standing (“Independent Advisors”) selected by the Company, does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the opinion of Independent Advisors, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the “base amount” (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Independent Advisors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. The costs of obtaining such determination shall be borne by the Company.

14. Agreement Binding on Successors.

(a) Company’s Successors. No rights or obligations of the Company under this Agreement may be assigned or transferred except that the Company will require any successor (whether direct or indirect, by purchase, merger, reorganization, sale, transfer of stock, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no succession had taken place. As used in this Agreement, “Company” means the Company as herein defined, and any successor to its or the Company’s business and/or assets (by merger, purchase or otherwise) which executes and delivers the agreement provided for in this Section 14 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

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(b) Executive’s Successors. No rights or obligations of Executive under this Agreement may be assigned or transferred by Executive other than his rights to payments or benefits under this Agreement, which may be transferred only by will or the laws of descent and distribution. Upon Executive’s death, this Agreement and all rights of Executive under this Agreement shall inure to the benefit of and be enforceable by Executive’s beneficiary, or personal or legal representatives, or estate, to the extent any such person succeeds to Executive’s interests under this Agreement. In the event of Executive’s death or a judicial determination of his incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to his estate or other legal representative(s). If Executive should die following his Date of Termination while any amounts would still be payable to him under this Agreement if he had continued to live, unless otherwise provided, all such amounts shall be paid in accordance with the terms of this Agreement to his beneficiary or personal or legal representatives or estate.

15. Notice. For the purposes of this Agreement, notices, demands and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered either personally or by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows:

If to Executive:

At his last known address

evidenced on the Company’s

payroll records.

If to the Company:

Chaparral Energy, Inc.

701 Cedar Lake Boulevard

Oklahoma City, OK 73114

or to such other address as any party may have furnished to the other in writing in accordance with this Agreement, except that notices of change of address shall be effective only upon receipt.

16. Section 409A.

(a) To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretative guidance issued thereunder, including without limitation any such regulations or other such guidance that may be issued after the Effective Date (“Section 409A”). Notwithstanding any provision of this Agreement to the contrary, in the event that following the Effective Date, the Company determines in good faith that any compensation or benefits payable under this Agreement may not be either exempt from or compliant with Section 409A, the Company shall adopt such amendments to this Agreement or adopt other policies or procedures (including amendments, policies and procedures with retroactive effective), or take any other commercially reasonable actions necessary or appropriate to (i) preserve the intended tax treatment of the compensation and benefits payable hereunder, to preserve the economic benefits of such compensation and benefits, and/or to avoid less favorable accounting or tax consequences for the Company and/or (ii) to exempt the compensation and benefits payable hereunder from Section 409A or to comply with the requirements of Section 409A and thereby avoid the application of penalty taxes thereunder; provided, however, that this Section 17(a) does not, and shall not be construed so as to, create any obligation on the part of the Company to adopt any such amendments, policies or procedures or to take any other such actions or to indemnify Executive for any failure to do so.

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(b) Notwithstanding anything herein to the contrary, Executive acknowledges and agrees that in the event that any tax is imposed under Section 409A in respect to any compensation or benefits payable to Executive, whether under this Agreement or otherwise, then (i) the payment of such tax shall be solely Executive’s responsibility, (ii) neither the Company, its affiliates nor any of their respective past or present directors, officers, employees or agents shall have any liability for any such tax and (iii) Executive shall indemnify and hold harmless, to the greatest extent permitted under law, each of the foregoing from and against any claims or liabilities that may arise in respect of any such tax.

(c) To the extent that any of the rights or potential rights to future payments under the Change of Control Severance Agreement constitute “nonqualified deferred compensation” (within the meaning of Section 409A), if any, the termination of such rights is undertaken in accordance with and as permitted under Internal Revenue Code Treasury Regulation § 1.409A-3(j)(ix)(B).

17. Withholding. All payments hereunder will be subject to any required withholding of federal, state and local taxes pursuant to any applicable law or regulation

18. Miscellaneous. No provisions of this Agreement may be amended, modified, or waived unless agreed to in writing and signed by Executive and by a duly authorized officer of the Company. No waiver by either party of any breach by the other party of any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. The respective rights and obligations of the parties under this Agreement shall survive Executive’s termination of employment and the termination of this Agreement to the extent necessary for the intended preservation of such rights and obligations. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Oklahoma without regard to its conflicts of law principles.

19. Validity. The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, which will remain in full force and effect.

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20. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument.

21. Section Headings. The section headings in this Agreement are for convenience of reference only, and they form no part of this Agreement and will not affect its interpretation.

22. Entire Agreement. Except as provided elsewhere herein and except for the other documents and agreements contemplated in accordance herewith, this Agreement sets forth the entire agreement of the parties with respect to its subject matter and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party to this Agreement with respect to such subject matter, including, without limitation the Change of Control Severance Agreement.

23. Further Assurances. The parties hereby agree, without further consideration, to execute and deliver such other instruments or to take such other action as may reasonably be required to effectuate the terms and provisions of this Agreement.

*    *    *    *

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IN WITNESS WHEREOF, the parties have executed this Agreement effective the date first above written.

CHAPARRAL ENERGY, INC.
By:	/s/ Joseph O. Evans
	Joseph O. Evans
	Chief Financial Officer and Treasurer
	“COMPANY”
/s/ Mark A. Fischer
Mark A. Fischer
“EXECUTIVE”

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EXHIBIT A

TIME-VESTED RESTRICTED STOCK AGREEMENT

A-1

EXHIBIT B

PERFORMANCE-VESTED RESTRICTED STOCK AGREEMENT

B-1

EXHIBIT C

GENERAL RELEASE

NOTICE. Various laws, including Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Pregnancy Discrimination Act of 1978, the Equal Pay Act, the Civil Rights Act of 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Americans With Disabilities Act, the Employee Retirement Income Security Act and the Veterans Reemployment Rights Act (all as amended from time to time), prohibit employment discrimination based on sex, race, color, national origin, religion, age, disability, eligibility for covered employee benefits and veteran status. You may also have rights under laws such as the Older Worker Benefit Protection Act of 1990, the Worker Adjustment and Retraining Act of 1988, the Fair Labor Standards Act, the Family and Medical Leave Act, the Occupational Health and Safety Act and other federal, state and/or municipal statutes, orders or regulations pertaining to labor, employment and/or employee benefits. These laws are enforced through the United States Department of Labor and its agencies, including the Equal Employment Opportunity Commission (EEOC), and various state and municipal labor departments, fair employment boards, human rights commissions and similar agencies.

This General Release is being provided to you in connection with the Employment Agreement between you and Chaparral Energy, Inc., dated April 12, 2010 (the “Agreement”). The federal Older Worker Benefit Protection Act requires that you have at least twenty-one (21) days, if you want it, to consider whether you wish to sign a release such as this one in connection with a special, individualized severance package. You have until the close of business twenty-one (21) days from the date you receive this General Release to make your decision. You may not sign this General Release until, at the earliest, your official date of separation from employment.

BEFORE EXECUTING THIS GENERAL RELEASE YOU SHOULD REVIEW THESE DOCUMENTS CAREFULLY AND CONSULT WITH YOUR ATTORNEY.

You may revoke this General Release within seven (7) days after you sign it and it shall not become effective or enforceable until that revocation period has expired. If you do not accept the severance package and sign and return this General Release, or if you exercise your right to revoke the General Release after signing it, you will not be eligible for the special, individualized severance package. Any revocation must be in writing and must be received by Chaparral Energy, Inc., 701 Cedar Lake Boulevard, Oklahoma City, OK 73114, within the seven-day period following your execution of this General Release.

C-1

GENERAL RELEASE

In consideration of the special, individualized severance package offered to me by Chaparral Energy, Inc. and the separation benefits I will receive as reflected in the Employment Agreement between me and Chaparral Energy, Inc. dated April 12, 2010 (the “Agreement”), I hereby release and discharge Chaparral Energy, Inc. and its predecessors, successors, affiliates, parent, subsidiaries and partners and each of those entities’ employees, officers, directors and agents (hereafter collectively referred to as the “Company”) from all claims, liabilities, demands, and causes of action, known or unknown, fixed or contingent, which I may have or claim to have against the Company either as a result of my past employment with the Company and/or the severance of that relationship and/or otherwise, and hereby waive any and all rights I may have with respect to and promise not to file a lawsuit to assert any such claims.

This General Release includes, but is not limited to, claims arising under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Pregnancy Discrimination Act of 1978, the Equal Pay Act, the Civil Rights Act of 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Americans With Disabilities Act, the Employee Retirement Income Security Act or 1974 and the Veterans Reemployment Rights Act (all as amended from time to time). This General Release also includes, but is not limited to, any rights I may have under the Older Workers Benefit Protection Act of 1990, the Worker Adjustment and Retraining Act of 1988, the Fair Labor Standards Act, the Family and Medical Leave Act, the Occupational Health and Safety Act and any other federal, state and/or municipal statutes, orders or regulations pertaining to labor, employment and/or employee benefits. This General Release also applies to any claims or rights I may have growing out of any legal or equitable restrictions on the Company’s rights not to continue an employment relationship with its employees, including any express or implied employment contracts, and to any claims I may have against the Company for fraudulent inducement or misrepresentation, defamation, wrongful termination or other retaliation claims in connection with workers’ compensation or alleged “whistleblower” status or on any other basis whatsoever.

It is specifically agreed, however, that this General Release does not have any effect on any rights or claims I may have against the Company which arise after the date I execute this General Release or on any vested rights I may have under any of the Company’s qualified or non-qualified benefit plans or arrangements as of or after my last day of employment with the Company, or on any of the Company’s obligations under the Agreement or as otherwise required under the Consolidated Omnibus Budget and Reconciliation Act of 1985 (COBRA).

I have carefully reviewed and fully understand all the provisions of the Agreement and General Release, including the foregoing Notice. I have not relied on any representation or statement, oral or written, by the Company or any of its representatives, which is not set forth in those documents.

C-2

The Agreement and this General Release, including the foregoing Notice, set forth the entire agreement between me and the Company with respect to this subject. I understand that my receipt and retention of the separation benefits covered by the Agreement are contingent not only on my execution of this General Release, but also on my continued compliance with my obligations under the Agreement that survive and continue in effect in accordance with the respective terms thereof, notwithstanding any termination of employment, including, without limitation, Section 9 thereof. I acknowledge that the Company gave me twenty-one (21) days to consider whether I wish to accept or reject the separation benefits I am eligible to receive under the Agreement in exchange for this General Release. I also acknowledge that the Company advised me to seek independent legal advice as to these matters, if I chose to do so. I hereby represent and state that I have taken such actions and obtained such information and independent legal or other advice, if any, that I believed were necessary for me to fully understand the effects and consequences of the Agreement and General Release prior to signing those documents.

Dated this          day of                     ,         .

C-3

EX-10.24

Exhibit 10.24

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of the 12th day of April, 2010, is entered into by and between CHAPARRAL ENERGY, INC., a Delaware corporation (the “Company”), CHAPARRAL ENERGY, LLC (the “Employer”) and Joseph O. Evans (“Executive”).

IN CONSIDERATION of the premises and the mutual covenants set forth below, and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

WHEREAS, the Company desires to retain Executive as its employee and believes it is necessary to enter into this Agreement to provide the proper incentive to Executive; and

WHEREAS, the Company and Executive previously entered into that certain Change of Control Severance Agreement dated as of July 1, 2007, and amended as of December 31, 2008 (the “Change of Control Severance Agreement”), and the parties hereto acknowledge and agree that the Change of Control Severance Agreement, and all of Executive’s rights and interest therein and thereunder, are hereby cancelled and terminated upon the effectiveness of this Agreement, in consideration of the parties hereto entering into this Agreement.

1. Term. Subject to the provisions for earlier termination hereinafter provided, Executive’s employment with the Company under this Agreement shall be for a term (the “Term”) commencing upon April 12, 2010 (the “Effective Date”) and ending on the third-year anniversary of the Effective Date; provided, however, that commencing on the date that is the third anniversary of the Effective Date, the Term shall be automatically extended so as to terminate on the second anniversary of such date, and the Term shall be automatically extended so as to terminate on each anniversary thereafter (each such anniversary referred to as a “Renewal Date”). Notwithstanding the foregoing, if at least ninety (90) days prior to any Renewal Date, the Company gives Executive written notice that the Term will not be so extended, this Agreement will continue for the remainder of the then current Term and automatically expire upon its completion. The Term may be sooner terminated under Section 5 of this Agreement.

2. Position and Duties. During the Term, Executive will serve as Executive Vice President-Chief Financial Officer of the Company and will report directly to the Chief Executive Officer of the Company (the “CEO”). Executive shall devote Executive’s best efforts and full business time and attention to perform all services reasonably required to fully execute the duties and responsibilities associated with the Company, its subsidiaries and its affiliates as directed by the CEO. Notwithstanding the above, Executive will be permitted, to the extent such activities do not interfere with the performance by Executive of his duties and responsibilities under this Agreement or violate this Agreement, to (i) manage Executive’s personal, financial and legal affairs, and (ii) serve on industry, civic or charitable boards or committees. Executive agrees to observe and comply with the rules and policies of the Company, as in effect from time to time, including, without limitation, any rules and policies relating to Executive obligations to the Company upon a termination of employment.

3. Place of Performance. During the Term, Executive’s place of employment will be the Company’s principal executive offices in Oklahoma City, Oklahoma (the “Principal Location”), except for travel to other locations as may be necessary to fulfill Executive’s duties and responsibilities hereunder.

4. Compensation and Related Matters.

(a) Base Salary. During the Term, the Company will pay Executive a base salary of not less than $345,030 per year (“Base Salary”), in accordance with the Company’s customary payroll practices. Executive’s Base Salary may be increased, but not decreased unless the base salaries for all executive officers of the Company are decreased, pursuant to annual review by the Compensation Committee (the “Compensation Committee”) of the Board of Directors of the Company (the “Board”) in its discretion. In the event that Executive’s Base Salary is increased, the increased amount will then constitute the Base Salary for all purposes of this Agreement.

(b) Annual Bonus Incentives. In addition to the Base Salary, Executive shall be eligible to participate in and earn an annual cash bonus under any annual incentive plan established by the Board so long as the terms of any such plan allow participation by the executive officers of the Company (“Annual Bonus”). The target Annual Bonus for Executive shall be equal to 80% of Executive’s current Base Salary, but the actual Annual Bonus shall be determined by the Compensation Committee, in consultation with the CEO, in accordance with the terms of such plan, in effect at that time, if any. The terms for the payment of any Annual Bonus shall be determined by the Compensation Committee, in consultation with the CEO, in accordance with the terms of such plan in effect at that time, if any.

(c) Equity Grant. Subject to adoption by the Board and approval by Company’s shareholders of the Company’s 2010 Equity Incentive Plan (the “Plan”), the Company shall grant to Executive shares of restricted stock (the “Restricted Stock”) under the Plan, consisting of 1,061 time-vesting shares (the “Time-Vested Restricted Stock”) and 4,980 performance-vesting shares (the “Performance-Vested Restricted Stock”). Consistent with the foregoing, the terms and conditions of the Time-Vested Restricted Stock shall be set forth in an award agreement (the “Time-Vested Restricted Stock Agreement”) substantially in the form attached hereto as Exhibit A, and the terms and conditions of the Performance-Vested Restricted Stock shall be set forth in an award agreement (the “Performance-Vested Restricted Stock Agreement” and, together with the Time-Vested Restricted Stock Agreement, the “Restricted Stock Agreements”) substantially in the form attached hereto as Exhibit B, which together shall evidence the grant of the Restricted Stock. Subject to this Section 4(c), the Time-Vested Restricted Stock and the Performance-Vested Restricted Stock shall be governed in all respects by the terms of the Plan and the applicable Restricted Stock Agreement.

(d) Welfare, Pension and Incentive Benefit. During the Term, Executive (and Executive’s spouse and/or eligible dependents to the extent provided in the applicable plans and programs) will be eligible to participate in and be covered under all the welfare benefit plans or programs maintained by the Company or Employer for the benefit of its senior executive officers pursuant to the terms of such plans and programs including, without limitation, all medical, life, hospitalization, dental, disability, accidental death and dismemberment and travel accident insurance plans and programs. In addition, during the Term, Executive will be eligible to participate in all pension, retirement, savings and other employee benefit plans and programs maintained from time to time by the Company or Employer for the benefit of its senior executive officers.

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(e) Vacation. Executive shall be entitled to paid vacation in accordance with the Employer’s vacation policy during the Term. Executive may use his vacation in a reasonable manner based upon the business needs of the Company.

(f) Fringe Benefits. During the Term, the Company will provide Executive with such other fringe benefits as commensurate with Executive’s position.

(g) Expenses. Executive will be entitled to receive prompt reimbursement for all reasonable business expenses incurred by Executive in accordance with the Company’s and Employer’s expense reimbursement policy during the Term. All payments under this Section 4(g) shall be paid to Executive on or before the last day of Executive’s taxable year following the taxable year in which Executive incurred such expenses.

5. Termination of Employment. Executive’s employment under this Agreement may be terminated during the Term under the following circumstances:

(a) Death. Executive’s employment under this Agreement will terminate upon his death.

(b) Disability. Upon Executive’s Disability, Executive will receive a Notice of Termination (as defined in Section 6(a)) from the Company. If Executive does not return to the substantial performance of his duties on a full-time basis within thirty (30) days of such Notice of Termination, the Company has the right to terminate Executive’s employment under this Agreement for Disability, and such termination will not be a breach of this Agreement by the Company. For purposes of this Agreement, “Disability” means Executive’s incapacity due to physical or mental illness whereby Executive is substantially unable to perform his duties under this Agreement (with or without reasonable accommodation, as defined under the Americans With Disabilities Act) for a period of six (6) consecutive months.

(c) Cause. The Company has the right to terminate Executive’s employment for Cause by providing Executive with a Notice of Termination, and such termination will not be a breach of this Agreement by the Company. For purposes of this Agreement, “Cause” means the occurrence of any one or more of the following events: (i) Executive’s conviction of, or entry by Executive of a guilty or no contest plea to a felony or crime involving moral turpitude; (ii) Executive’s willful commission of an act of fraud or dishonesty resulting in economic or financial injury to the Company or any affiliate; (iii) Executive’s willful failure to substantially perform or gross neglect of Executive’s duties, including, but not limited to, the failure to follow any lawful directive of the CEO, within the reasonable scope of Executive’s duties; (iv) Executive’s performance of acts materially detrimental to the Company or any affiliate, unless otherwise approved in advance by the Board or the Compensation Committee; (v) Executive’s use of narcotics, alcohol, or illicit drugs in a manner that has or may reasonably be expected to have a detrimental effect on Executive’s performance of his duties as an employee of the Company or on the reputation of the Company or any affiliate; (vi) Executive’s commission of a material violation of any rule or policy sponsored by the Company which results in injury to the Company; or (vii) Executive’s material breach of this Agreement, including, but not limited to, Executive’s material breach of the covenants set forth in Section 9 hereof.

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(d) Good Reason. Executive may terminate Executive’s employment with the Company for “Good Reason,” and such termination will not be a breach of this Agreement by Executive. For purposes of this Agreement, “Good Reason” shall mean the occurrence without the written consent of Executive, of one of the events set forth below:

(i) a material diminution in Executive’s authority, duties or responsibilities combined with a demotion in Executive’s pay grade ranking;

(ii) the reduction by the Company of Executive’s Base Salary by more than ten percent (10%) (unless done so for all executive officers of the Company);

(iii) the requirement that Executive be based at any office or location that is more than 50 miles from the Principal Location, except for travel reasonably required in the performance of Executive’s responsibilities; or

(iv) any other action or inaction that constitutes a material breach by the Company of this Agreement such as the failure of any successor to the Company to assume this Agreement pursuant to Section 14.

Notwithstanding the foregoing, Executive will not be deemed to have terminated for Good Reason unless (A) Executive provides written notice to the Company of the existence of one of the conditions described above within ninety (90) days after Executive has knowledge of the initial existence of the condition, (B) the Company fails to remedy the condition so identified within thirty (30) days after receipt of such notice (if capable of correction), (C) Executive provides a Notice of Termination to the Company within thirty (30) days of the expiration of the Company’s period to remedy the condition, and (D) Executive terminates employment within ninety (90) days after Executive provides written notice to the Company of the existence of the condition referred to in clause (A).

(e) Without Cause. The Company has the right to terminate Executive’s employment under this Agreement without Cause by providing Executive with a Notice of Termination.

(f) Without Good Reason. Executive may voluntarily terminate employment with the Company without Good Reason at any time by providing the Company with a Notice of Termination.

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6. Termination Procedure.

(a) Notice of Termination. Any termination of Executive’s employment by the Company or by Executive during the Term (other than termination pursuant to Section 5(a)) will be communicated by Notice of Termination to the other party in accordance with Section 15. For purposes of this Agreement, a “Notice of Termination” means a written notice which indicates the specific termination provision in this Agreement relied upon and sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment.

(b) Date of Termination. “Date of Termination” shall mean (i) if Executive’s employment is terminated by his death, the date of his death, (ii) if Executive’s employment is terminated due to Disability pursuant to Section 5(b), thirty (30) days after Notice of Termination (provided that Executive has not returned to the substantial performance of his duties on a full-time basis during such thirty (30) day period), (iii) if Executive’s employment is terminated for Good Reason pursuant to Section 5(d), the date on which a Notice of Termination provided in accordance with such Section is given or any later date (within thirty (30) days after the giving of such Notice of Termination) set forth in such Notice of Termination, (iv) if Executive’s employment is terminated voluntarily by Executive without Good Reason pursuant to Section 5(f), thirty (30) days after Notice of Termination, or (v) if Executive’s employment is terminated for any other reason, the date on which a Notice of Termination is given or any later date (within thirty (30) days after the giving of such Notice of Termination) set forth in such Notice of Termination.

7. Obligations of the Company Upon Termination. In the event Executive’s employment under this Agreement terminates during the Term and such termination constitutes a “separation from service” from the Company (within the meaning of Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (the “Code”), and Treasury Regulation Section 1.409A-1(h)) (“Separation from Service”), the Company will provide Executive with the payments and benefits set forth below.

(a) Termination by Company Without Cause or by Executive for Good Reason Not Following Change in Control. If Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason at any time that is not within two (2) years after the occurrence of a “Change in Control” (as defined below):

(i) The Company will pay to Executive in a single lump sum payment within thirty (30) days after the Date of Termination, the aggregate amount of (A) any earned but unpaid Base Salary, (B) any Annual Bonus required to be paid to Executive pursuant to Section 4(b) for any fiscal year of the Company that ends on or before the Date of Termination to the extent not previously paid, (C) accrued but unpaid vacation pay through the Date of Termination, and (D) reasonable business expenses incurred but unpaid through the Date of Termination (together, the “Accrued Obligations”);

(ii) Subject to Sections 7(f) and 10 below, the Company will pay to Executive an amount equal to 2 (the “Severance Multiple”) times the sum of (x) Executive’s Base Salary in effect on the Date of Termination plus (y) the Annual Bonus granted to Executive for the fiscal year of the Company immediately on or preceding the Date of Termination, payable in the form of a salary continuation for a period of months equal to the product of 12 times the Severance Multiple; provided, however, that the first such payment shall not be made until the Company’s first payroll date occurring on or after the 30th day following the Date of Termination (the “First Payroll Date”) and any amounts that would otherwise have been paid pursuant to this Section 7(a)(ii) prior to the First Payroll Date shall instead be paid on the First Payroll Date. Each payment under this Section 7(a)(ii) shall be treated as a separate payment for purposes of Section 409A of the Code.

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(iii) Subject to Sections 7(f) and 10 below, the Company will maintain in full force and effect, for the continued benefit of Executive (and Executive’s spouse and/or eligible dependents, as applicable) for a period of eighteen (18) months following the Date of Termination, participation by Executive (and Executive’s spouse and/or eligible dependents, as applicable) in the medical, hospitalization, and dental programs maintained by the Company for the benefit of its senior executive officers as in effect on the Date of Termination, at such level and terms and conditions (including, without limitation, contributions required by Executive for such benefits) as in effect on the Date of Termination; provided, if Executive (or his spouse) is eligible for Medicare or a similar type of governmental medical benefit, such benefit shall be the primary provider before Company medical benefits are provided. However, if Executive becomes reemployed with another employer and is eligible to receive medical, hospitalization and dental benefits under another employer–provided plan, the medical, hospitalization and dental benefits described herein shall be secondary to those provided under such other plan during the applicable period. If any plan pursuant to which such benefits are provided is not, or ceases prior to the expiration of the period of continuation coverage to be, exempt from the application of Section 409A of the Code under Treasury Regulation Section 1.409A-1(a)(5), then an amount equal to each remaining premium payment shall thereafter be paid to Executive as currently taxable compensation in substantially equal monthly installments over the continuation coverage period (or the remaining portion thereof).

(iv) For purposes of this Agreement, “Change in Control” shall mean:

(A) The consummation of any transaction or series of related transactions involving the sale of the Company’s outstanding securities (but excluding a public offering of the Company’s capital stock) for securities or other consideration issued or paid or caused to be issued or paid by such other corporation or an affiliate thereof and which result in this Company’s shareholders (or their affiliates) immediately prior to such transaction not holding at least a majority of the voting power of the surviving or continuing entity following such transaction; or

(B) The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets or (z) the acquisition of assets or stock of another entity, in each case, other than a transaction which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction.

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(b) Termination by Company Without Cause or by Executive for Good Reason Following Change in Control. If at any time within two (2) years after a Change in Control, Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason, then Executive shall be entitled to the payments and benefits provided in Section 7(a) hereof, subject to the terms and conditions thereof (including, without limitation, the requirement that a condition to Executive’s right to receive the amounts provided for thereunder is that Executive execute, deliver and not revoke the Release as set forth in Section 10 below), except that for purposes of this Section 7(b), the Severance Multiple shall equal 2.5; provided, however, that if such Change of Control occurs as a result of the sale or other disposition of all or substantially all of the Company’s assets, then the severance payment described in Section 7(a)(ii) hereof shall be payable in the form of a lump sum within sixty (60) days of the Date of Termination.

(c) Termination by Company for Cause or by Executive Without Good Reason. If Executive’s employment is terminated by the Company for Cause or by Executive without Good Reason, the Company will pay Executive within thirty (30) days after the Date of Termination the Accrued Obligations; provided, however, the amounts described in Section 7(a)(i)(D) shall not be paid to Executive if Executive’s employment was terminated by the Company for Cause due to Executive’s misappropriation of Company funds.

(d) Disability. During any period that Executive fails to perform Executive’s duties under this Agreement as a result of incapacity due to physical or mental illness, Executive will continue to receive his full Base Salary set forth in Section 4(a) until his employment is terminated pursuant to Section 5(b). If Executive’s employment is terminated due to Disability pursuant to Section 5(b), subject to Sections 7(f) and 10 below, the Company will pay Executive within thirty (30) days after the Date of Termination the Accrued Obligations, plus a pro rata share of the Annual Bonus for the fiscal year of the Company in which the Date of Termination occurs.

(e) Death. If Executive’s employment is terminated by death, the Company will pay to Executive’s beneficiary, or personal or legal representatives or estate, as the case may be, within thirty (30) days after the Date of Termination the Accrued Obligations, plus a pro rata share of the Annual Bonus for the fiscal year of the Company in which the Date of Termination occurs.

(f) Six-Month Delay. Notwithstanding anything to the contrary in this Agreement, no compensation or benefits, including without limitation any severance payments or benefits payable under Section 7 hereof, shall be paid to Executive during the six (6)-month period following Executive’s Separation from Service if the Company determines that paying such amounts at the time or times indicated in this Agreement would be a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code. If the payment of any such amounts is delayed as a result of the previous sentence, then on the first business day following the end of such six (6)-month period (or such earlier date upon which such amount can be paid under Section 409A of the Code without resulting in a prohibited distribution, including as a result of Executive’s death), the Company shall pay Executive a lump-sum amount equal to the cumulative amount that would have otherwise been payable to Executive during such period.

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8. Mitigation. Executive will not be required to mitigate amounts payable under this Agreement by seeking other employment or otherwise, and there will be no offset against amounts due Executive under this Agreement on account of subsequent employment except as specifically provided herein.

9. Confidential Information; Non-Solicitation; Non-Competition.

(a) Nondisclosure of Confidential Information. Executive acknowledges that it is the policy of the Company to maintain as secret and confidential (i) all valuable and unique information, (ii) other information heretofore or hereafter acquired by the Company, or any affiliated entity and deemed by it to be confidential, and (iii) information developed or used by the Company or any affiliated entity relating to the business, operations, employees and customers of the Company or any affiliated entity including, but not limited to, any employee information (all such information described in clauses (i), (ii) and (iii) above, other than information which is known to the public or becomes known to the public through no fault of Executive, is hereinafter referred to as “Confidential Information”). The parties recognize that the services to be performed by Executive pursuant to this Agreement are special and unique and that by reason of his employment by the Company after the date hereof, Executive has acquired and will acquire Confidential Information. Executive recognizes that all such Confidential Information is the property of the Company. Accordingly, at any time during or after the Term, Executive shall not, except in the proper performance of his duties under this Agreement, directly or indirectly, without the prior written consent of the Company, disclose to any Person other than the Company, whether or not such Person is a competitor of the Company, and shall use his best efforts to prevent the publication or disclosure of any Confidential Information obtained by, or which has come to the knowledge of, Executive prior or subsequent to the date hereof. Notwithstanding the foregoing, Executive may disclose to other Persons, as part of his occupation, information with respect to the Company or any affiliated entity, which (i) is of a type generally not considered by standards of the oil and natural gas industry to be proprietary, or (ii) is otherwise consented to in writing by the Company.

(b) Non-Solicitation. Executive shall not, during the Term or for the period of months equal to the product of 12 times the Severance Multiple following the Date of Termination (the “Covered Period”), either personally or by or through his/her agent or by letters, circulars or advertisements and whether for himself/herself or on behalf of any other person or entity, hire, solicit or seek to hire any employee or consultant of the Company or any affiliated entity, or in any other manner attempt, directly or indirectly, to persuade any such employee or consultant to discontinue his/her status of employment or consultancy with the Company or any affiliated entity or to become hired in any business or activities likely to be competitive with the Company’s or an affiliated entity’s business. Additionally, during the Covered Period, Executive shall not, for himself/herself or on behalf of any person or entity, directly or indirectly, solicit, divert or attempt to solicit or divert any customer of the Company or any affiliated entity for the purpose of causing such customer to reduce or refrain from doing any business with the Company or any affiliated entity. Executive further agrees that, during the Covered Period, he/she will not, directly or indirectly, request or advise any customers of the Company or an affiliated entity to withdraw, curtail or cancel their business with the Company or any affiliated entity. For purposes of this Agreement, a “customer” of the Company or any affiliated entity shall mean those customers of the Company or an affiliated entity who held a deposit account or otherwise transacted business with the Company or an affiliated entity at any time within the twelve (12) months preceding termination of Executive’s employment. Nothing contained in this Agreement is intended to prohibit general advertising or solicitation not specifically directed at any or all of the Company’s or an affiliated entity’s customers or employees.

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(c) Non-Competition.

(i) As part of the consideration for the compensation and benefits to be paid to Executive hereunder, to protect the trade secrets and Confidential Information of the Company and its customers and clients that have been and will be entrusted to Executive, the business goodwill of the Company and its subsidiaries that will be developed in and through Executive and the business opportunities that will be disclosed or entrusted to Executive by the Company and its subsidiaries, and as an additional incentive for the Company to enter into this Agreement, during the Covered Period, Executive shall not directly or indirectly, individually or on behalf of any other person or entity, manage, participate in, work for, consult with, render services for, or take an interest in (as an owner, stockholder, partner or lender) any Competitor in an area of Competing Business.

(ii) For purposes of Section 9(c)(i):

(A) “Competitor” means any business, company or individual which is in, or is actively seeking to be in the Competing Business.

(B) “Competing Business” means the acquisition, exploration, exploitation, development, production and/or operation of oil and gas properties.

(iii) Executive acknowledges that each of the covenants of Section 9(c)(i) are in addition to, and shall not be construed as a limitation upon, any other covenant provided in Section 9. Executive agrees that the scope of prohibited activities and time duration of each of the covenants set forth in Section 9(c)(i) are reasonable in nature and are no broader than are necessary to maintain the confidentiality and the goodwill of the Company’s proprietary and Confidential Information, plans and services and to protect the other legitimate business interests of the Company, including without limitation the goodwill developed by Executive with the Company’s customers, suppliers, licensees and business relations. It is also the intent of the Company and Executive that such covenants be construed and enforced in accordance with the changing activities, business and locations of the Company throughout the term of this covenant, whether before or after the Date of Termination. Executive agrees not to challenge the enforceability, scope or reasonableness of the covenants in Section 9(c)(i). The covenants in Section 9(c)(i) are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope or duration set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed.

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(iv) If, during any portion of the Covered Period, Executive is not in compliance with the terms of Section 9(c)(i), the Company shall be entitled to, among other remedies, compliance by Executive with the terms of Section 9(c)(i) for an additional period of time (i.e., in addition to the Covered Period) that shall equal the period(s) over which such noncompliance occurred.

(v) Nothing in this Section 9(c) shall prohibit: (A) direct or indirect ownership of publicly traded securities which are issued by a Competitor involved in or conducting a Competing Business, provided that Executive, directly or indirectly, does not own more than 5% of the outstanding equity or voting securities of such Competitor; (B) ownership of royalty interests where Executive owns the surface of the land covered by the royalty interest and the ownership of the royalty interest is incidental to the ownership of such surface estate, provided that any such surface estate does not adjoin, or is not near to, any property ownership interest held directly or indirectly by the Company; (C) direct or indirect ownership of royalty interests or overriding royalty interests owned prior to the Effective Date; or (D) direct or indirect ownership of working interests or other interests in oil and gas owned prior to the Effective Date and disclosed by Executive to the Company in writing. It is the intent of the Company that during the Term of this Agreement Executive is not acquiring additional oil and gas interests, directly or indirectly.

(d) Obligations of Executive Upon Termination. Upon termination of Executive’s employment for any reason, Executive shall return to the Company all documents and copies, including hard and electronic copies, of documents in his possession relating to any Confidential Information including, but not limited to, internal and external business forms, manuals, correspondence, notes and computer programs, and Executive shall not make or retain any copy or extract of any of the foregoing. In addition, Executive shall resign from all positions held with the Company or any affiliated entities.

(e) Remedies. Executive acknowledges and understands that Sections 9(a), (b), (c) and (d) and the other provisions of this Agreement are of a special and unique nature, the loss of which cannot be adequately compensated for in damages by an action at law, and that the breach or threatened breach of the provisions of this Agreement would cause the Company irreparable harm. In the event of a breach or threatened breach by Executive of the provisions of this Agreement, the Company shall be entitled to an injunction restraining him from such breach. Nothing contained in this Agreement shall be construed as prohibiting the Company from pursuing, or limiting the Company’s ability to pursue, any other remedies available for any breach or threatened breach of this Agreement by Executive. The provision of Section 12 hereof relating to arbitration of disputes shall not be applicable to the Company to the extent it seeks an injunction in any court to restrain Executive from violating Sections 9(a), (b), (c) and (d) hereof.

(f) Continuing Operation. Except as specifically provided in this Section 9, the termination of Executive’s employment or of this Agreement will have no effect on the continuing operation of this Section 9.

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(g) Additional Related Agreements. Executive agrees to sign and to abide by the provisions of any additional agreements, policies or requirements of the Company which are reasonable and related to the subject of this Section 9 which are in writing and are developed by the Company in the ordinary course of business.

10. Release. Notwithstanding any other provisions of this Agreement, it shall be a condition to Executive’s right to receive the amounts provided for in Section 7(a), 7(b) or 7(d) of this Agreement, that Executive will execute and deliver to the Company a release of claims in substantially the form attached hereto as Exhibit C (the “Release”) within twenty-one (21) days following the Date of Termination and that Executive not revoke such release within seven (7) days thereafter. The form of the Release may be modified as needed to reflect changes in the applicable law or regulations that are needed to provide a legally enforceable and binding Release to all parties at the time of execution.

11. Indemnification and Insurance. Executive shall be indemnified and held harmless by the Company during the term of this Agreement and following any termination of this Agreement for any reason whatsoever in the same manner as would any other key management employee of the Company with respect to acts or omissions occurring prior to (a) the termination of this Agreement or (b) the termination of employment of Executive. In addition, during the term of this Agreement and for a period of six years following the termination of this Agreement for any reason whatsoever, Executive shall be covered by a Company held liability insurance policy, covering acts or omissions occurring prior to (i) the termination of this Agreement or (ii) the termination of employment of Executive.

12. Arbitration; Legal Fees and Expenses. The parties agree that Executive’s employment and this Agreement relate to interstate commerce, and that any disputes, claims or controversies between Executive and the Company which may arise out of or relate to Executive’s employment relationship or this Agreement shall be settled by arbitration. This agreement to arbitrate shall survive the termination of this Agreement. Any arbitration shall be in accordance with the Rules of the American Arbitration Association and undertaken pursuant to the Federal Arbitration Act. Arbitration will be held in Oklahoma City, Oklahoma unless the parties mutually agree on another location. The decision of the arbitrator(s) will be enforceable in any court of competent jurisdiction. The parties agree that punitive, liquidated or indirect damages shall not be awarded by the arbitrator(s) unless such damages would have been awarded by a court of competent jurisdiction. Nothing in this agreement to arbitrate, however, shall preclude the Company from obtaining injunctive relief from a court of competent jurisdiction prohibiting any ongoing breaches by Executive of this Agreement including, without limitation, violations of Section 9. If any contest or dispute arises between the Company and Executive regarding any provision of this Agreement, the arbitrator may award to the prevailing party, the reasonable attorney fees, costs and expenses incurred by the prevailing party in connection with such contest or dispute.

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13. Maximum Payments by the Company.

(a) It is the objective of this Agreement to maximize Executive’s Net After-Tax Benefit (as defined herein) if payments or benefits provided under this Agreement are subject to excise tax under Section 4999 of the Code. Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit by the Company or otherwise to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, including, by example and not by way of limitation, acceleration by the Company or otherwise of the date of vesting or payment or rate of payment under any plan, program, arrangement or agreement of the Company (all such payments and benefits, including the payments and benefits under Section 7 hereof, being hereinafter referred to as the “Total Payments”), would be subject (in whole or in part) to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the cash severance payments shall first be reduced, and the non-cash severance payments shall thereafter be reduced, to the extent necessary so that no portion of the Total Payments shall be subject to the Excise Tax, but only if (i) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments), is greater than or equal to (ii) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which Executive would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments).

(b) The Total Payments shall be reduced by the Company in the following order: (i) reduction of any cash severance payments otherwise payable to Executive that are exempt from Section 409A of the Code, (ii) reduction of any other cash payments or benefits otherwise payable to Executive that are exempt from Section 409A of the Code, but excluding any payments attributable to the acceleration of vesting or payments with respect to any equity award with respect to the Company’s common stock that is exempt from Section 409A of the Code, (iii) reduction of any other payments or benefits otherwise payable to Executive on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payments attributable to the acceleration of vesting and payments with respect to any equity award with respect to the Company’s common stock that are exempt from Section 409A of the Code, and (iv) reduction of any payments attributable to the acceleration of vesting or payments with respect to any other equity award with respect to the Company’s common stock that are exempt from Section 409A of the Code.

(c) For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the written opinion of independent auditors of nationally recognized standing (“Independent Advisors”) selected by the Company, does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the opinion of Independent Advisors, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the “base amount” (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Independent Advisors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. The costs of obtaining such determination shall be borne by the Company.

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14. Agreement Binding on Successors.

(a) Company’s Successors. No rights or obligations of the Company under this Agreement may be assigned or transferred except that the Company will require any successor (whether direct or indirect, by purchase, merger, reorganization, sale, transfer of stock, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no succession had taken place. As used in this Agreement, “Company” means the Company as herein defined, and any successor to its or the Company’s business and/or assets (by merger, purchase or otherwise) which executes and delivers the agreement provided for in this Section 14 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

(b) Executive’s Successors. No rights or obligations of Executive under this Agreement may be assigned or transferred by Executive other than his rights to payments or benefits under this Agreement, which may be transferred only by will or the laws of descent and distribution. Upon Executive’s death, this Agreement and all rights of Executive under this Agreement shall inure to the benefit of and be enforceable by Executive’s beneficiary, or personal or legal representatives, or estate, to the extent any such person succeeds to Executive’s interests under this Agreement. In the event of Executive’s death or a judicial determination of his incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to his estate or other legal representative(s). If Executive should die following his Date of Termination while any amounts would still be payable to him under this Agreement if he had continued to live, unless otherwise provided, all such amounts shall be paid in accordance with the terms of this Agreement to his beneficiary or personal or legal representatives or estate.

15. Notice. For the purposes of this Agreement, notices, demands and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered either personally or by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows:

If to Executive:

At his last known address

evidenced on the Company’s

payroll records.

If to the Company:

Chaparral Energy, Inc.

701 Cedar Lake Boulevard

Oklahoma City, OK 73114

or to such other address as any party may have furnished to the other in writing in accordance with this Agreement, except that notices of change of address shall be effective only upon receipt.

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16. Section 409A.

(a) To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretative guidance issued thereunder, including without limitation any such regulations or other such guidance that may be issued after the Effective Date (“Section 409A”). Notwithstanding any provision of this Agreement to the contrary, in the event that following the Effective Date, the Company determines in good faith that any compensation or benefits payable under this Agreement may not be either exempt from or compliant with Section 409A, the Company shall adopt such amendments to this Agreement or adopt other policies or procedures (including amendments, policies and procedures with retroactive effective), or take any other commercially reasonable actions necessary or appropriate to (i) preserve the intended tax treatment of the compensation and benefits payable hereunder, to preserve the economic benefits of such compensation and benefits, and/or to avoid less favorable accounting or tax consequences for the Company and/or (ii) to exempt the compensation and benefits payable hereunder from Section 409A or to comply with the requirements of Section 409A and thereby avoid the application of penalty taxes thereunder; provided, however, that this Section 17(a) does not, and shall not be construed so as to, create any obligation on the part of the Company to adopt any such amendments, policies or procedures or to take any other such actions or to indemnify Executive for any failure to do so.

(b) Notwithstanding anything herein to the contrary, Executive acknowledges and agrees that in the event that any tax is imposed under Section 409A in respect to any compensation or benefits payable to Executive, whether under this Agreement or otherwise, then (i) the payment of such tax shall be solely Executive’s responsibility, (ii) neither the Company, its affiliates nor any of their respective past or present directors, officers, employees or agents shall have any liability for any such tax and (iii) Executive shall indemnify and hold harmless, to the greatest extent permitted under law, each of the foregoing from and against any claims or liabilities that may arise in respect of any such tax.

(c) To the extent that any of the rights or potential rights to future payments under the Change of Control Severance Agreement constitute “nonqualified deferred compensation” (within the meaning of Section 409A), if any, the termination of such rights is undertaken in accordance with and as permitted under Internal Revenue Code Treasury Regulation § 1.409A-3(j)(ix)(B).

17. Withholding. All payments hereunder will be subject to any required withholding of federal, state and local taxes pursuant to any applicable law or regulation

18. Miscellaneous. No provisions of this Agreement may be amended, modified, or waived unless agreed to in writing and signed by Executive and by a duly authorized officer of the Company. No waiver by either party of any breach by the other party of any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. The respective rights and obligations of the parties under this Agreement shall survive Executive’s termination of employment and the termination of this Agreement to the extent necessary for the intended preservation of such rights and obligations. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Oklahoma without regard to its conflicts of law principles.

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19. Validity. The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, which will remain in full force and effect.

20. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument.

21. Section Headings. The section headings in this Agreement are for convenience of reference only, and they form no part of this Agreement and will not affect its interpretation.

22. Entire Agreement. Except as provided elsewhere herein and except for the other documents and agreements contemplated in accordance herewith, this Agreement sets forth the entire agreement of the parties with respect to its subject matter and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party to this Agreement with respect to such subject matter, including, without limitation the Change of Control Severance Agreement.

23. Further Assurances. The parties hereby agree, without further consideration, to execute and deliver such other instruments or to take such other action as may reasonably be required to effectuate the terms and provisions of this Agreement.

*    *    *    *

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IN WITNESS WHEREOF, the parties have executed this Agreement effective the date first above written.

CHAPARRAL ENERGY, INC.
By:	/s/ Mark A. Fischer
	Mark A. Fischer
	President & Chief Executive Officer
	“COMPANY”
/s/ Joseph O. Evans
Joseph O. Evans
“EXECUTIVE”

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EXHIBIT A

TIME-VESTED RESTRICTED STOCK AGREEMENT

A-1

EXHIBIT B

PERFORMANCE-VESTED RESTRICTED STOCK AGREEMENT

B-1

EXHIBIT C

GENERAL RELEASE

NOTICE. Various laws, including Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Pregnancy Discrimination Act of 1978, the Equal Pay Act, the Civil Rights Act of 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Americans With Disabilities Act, the Employee Retirement Income Security Act and the Veterans Reemployment Rights Act (all as amended from time to time), prohibit employment discrimination based on sex, race, color, national origin, religion, age, disability, eligibility for covered employee benefits and veteran status. You may also have rights under laws such as the Older Worker Benefit Protection Act of 1990, the Worker Adjustment and Retraining Act of 1988, the Fair Labor Standards Act, the Family and Medical Leave Act, the Occupational Health and Safety Act and other federal, state and/or municipal statutes, orders or regulations pertaining to labor, employment and/or employee benefits. These laws are enforced through the United States Department of Labor and its agencies, including the Equal Employment Opportunity Commission (EEOC), and various state and municipal labor departments, fair employment boards, human rights commissions and similar agencies.

This General Release is being provided to you in connection with the Employment Agreement between you and Chaparral Energy, Inc., dated April 12, 2010 (the “Agreement”). The federal Older Worker Benefit Protection Act requires that you have at least twenty-one (21) days, if you want it, to consider whether you wish to sign a release such as this one in connection with a special, individualized severance package. You have until the close of business twenty-one (21) days from the date you receive this General Release to make your decision. You may not sign this General Release until, at the earliest, your official date of separation from employment.

BEFORE EXECUTING THIS GENERAL RELEASE YOU SHOULD REVIEW THESE DOCUMENTS CAREFULLY AND CONSULT WITH YOUR ATTORNEY.

You may revoke this General Release within seven (7) days after you sign it and it shall not become effective or enforceable until that revocation period has expired. If you do not accept the severance package and sign and return this General Release, or if you exercise your right to revoke the General Release after signing it, you will not be eligible for the special, individualized severance package. Any revocation must be in writing and must be received by Chaparral Energy, Inc., 701 Cedar Lake Boulevard, Oklahoma City, OK 73114, within the seven-day period following your execution of this General Release.

C-1

GENERAL RELEASE

In consideration of the special, individualized severance package offered to me by Chaparral Energy, Inc. and the separation benefits I will receive as reflected in the Employment Agreement between me and Chaparral Energy, Inc. dated April 12, 2010 (the “Agreement”), I hereby release and discharge Chaparral Energy, Inc. and its predecessors, successors, affiliates, parent, subsidiaries and partners and each of those entities’ employees, officers, directors and agents (hereafter collectively referred to as the “Company”) from all claims, liabilities, demands, and causes of action, known or unknown, fixed or contingent, which I may have or claim to have against the Company either as a result of my past employment with the Company and/or the severance of that relationship and/or otherwise, and hereby waive any and all rights I may have with respect to and promise not to file a lawsuit to assert any such claims.

This General Release includes, but is not limited to, claims arising under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Pregnancy Discrimination Act of 1978, the Equal Pay Act, the Civil Rights Act of 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Americans With Disabilities Act, the Employee Retirement Income Security Act or 1974 and the Veterans Reemployment Rights Act (all as amended from time to time). This General Release also includes, but is not limited to, any rights I may have under the Older Workers Benefit Protection Act of 1990, the Worker Adjustment and Retraining Act of 1988, the Fair Labor Standards Act, the Family and Medical Leave Act, the Occupational Health and Safety Act and any other federal, state and/or municipal statutes, orders or regulations pertaining to labor, employment and/or employee benefits. This General Release also applies to any claims or rights I may have growing out of any legal or equitable restrictions on the Company’s rights not to continue an employment relationship with its employees, including any express or implied employment contracts, and to any claims I may have against the Company for fraudulent inducement or misrepresentation, defamation, wrongful termination or other retaliation claims in connection with workers’ compensation or alleged “whistleblower” status or on any other basis whatsoever.

It is specifically agreed, however, that this General Release does not have any effect on any rights or claims I may have against the Company which arise after the date I execute this General Release or on any vested rights I may have under any of the Company’s qualified or non-qualified benefit plans or arrangements as of or after my last day of employment with the Company, or on any of the Company’s obligations under the Agreement or as otherwise required under the Consolidated Omnibus Budget and Reconciliation Act of 1985 (COBRA).

I have carefully reviewed and fully understand all the provisions of the Agreement and General Release, including the foregoing Notice. I have not relied on any representation or statement, oral or written, by the Company or any of its representatives, which is not set forth in those documents.

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The Agreement and this General Release, including the foregoing Notice, set forth the entire agreement between me and the Company with respect to this subject. I understand that my receipt and retention of the separation benefits covered by the Agreement are contingent not only on my execution of this General Release, but also on my continued compliance with my obligations under the Agreement that survive and continue in effect in accordance with the respective terms thereof, notwithstanding any termination of employment, including, without limitation, Section 9 thereof. I acknowledge that the Company gave me twenty-one (21) days to consider whether I wish to accept or reject the separation benefits I am eligible to receive under the Agreement in exchange for this General Release. I also acknowledge that the Company advised me to seek independent legal advice as to these matters, if I chose to do so. I hereby represent and state that I have taken such actions and obtained such information and independent legal or other advice, if any, that I believed were necessary for me to fully understand the effects and consequences of the Agreement and General Release prior to signing those documents.

Dated this          day of                     ,         .

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EX-10.25

Exhibit 10.25

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of the 12th day of April, 2010, is entered into by and between CHAPARRAL ENERGY, INC., a Delaware corporation (the “Company”), CHAPARRAL ENERGY, LLC (the “Employer”) and Larry E. Gateley (“Executive”).

IN CONSIDERATION of the premises and the mutual covenants set forth below, and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

WHEREAS, the Company desires to retain Executive as its employee and believes it is necessary to enter into this Agreement to provide the proper incentive to Executive; and

WHEREAS, the Company and Executive previously entered into that certain Change of Control Severance Agreement dated as of July 1, 2007, and amended as of December 31, 2008 (the “Change of Control Severance Agreement”), and the parties hereto acknowledge and agree that the Change of Control Severance Agreement, and all of Executive’s rights and interest therein and thereunder, are hereby cancelled and terminated upon the effectiveness of this Agreement, in consideration of the parties hereto entering into this Agreement.

1. Term. Subject to the provisions for earlier termination hereinafter provided, Executive’s employment with the Company under this Agreement shall be for a term (the “Term”) commencing upon April 12, 2010 (the “Effective Date”) and ending on the third-year anniversary of the Effective Date; provided, however, that commencing on the date that is the third anniversary of the Effective Date, the Term shall be automatically extended so as to terminate on the second anniversary of such date, and the Term shall be automatically extended so as to terminate on each anniversary thereafter (each such anniversary referred to as a “Renewal Date”). Notwithstanding the foregoing, if at least ninety (90) days prior to any Renewal Date, the Company gives Executive written notice that the Term will not be so extended, this Agreement will continue for the remainder of the then current Term and automatically expire upon its completion. The Term may be sooner terminated under Section 5 of this Agreement.

2. Position and Duties. During the Term, Executive will serve as Senior Vice President-Reservoir Engineering and Acquisitions of the Company and will report directly to the Chief Executive Officer of the Company (the “CEO”). Executive shall devote Executive’s best efforts and full business time and attention to perform all services reasonably required to fully execute the duties and responsibilities associated with the Company, its subsidiaries and its affiliates as directed by the CEO. Notwithstanding the above, Executive will be permitted, to the extent such activities do not interfere with the performance by Executive of his duties and responsibilities under this Agreement or violate this Agreement, to (i) manage Executive’s personal, financial and legal affairs, and (ii) serve on industry, civic or charitable boards or committees. Executive agrees to observe and comply with the rules and policies of the Company, as in effect from time to time, including, without limitation, any rules and policies relating to Executive obligations to the Company upon a termination of employment.

3. Place of Performance. During the Term, Executive’s place of employment will be the Company’s principal executive offices in Oklahoma City, Oklahoma (the “Principal Location”), except for travel to other locations as may be necessary to fulfill Executive’s duties and responsibilities hereunder.

4. Compensation and Related Matters.

(a) Base Salary. During the Term, the Company will pay Executive a base salary of not less than $289,380 per year (“Base Salary”), in accordance with the Company’s customary payroll practices. Executive’s Base Salary may be increased, but not decreased unless the base salaries for all executive officers of the Company are decreased, pursuant to annual review by the Compensation Committee (the “Compensation Committee”) of the Board of Directors of the Company (the “Board”) in its discretion. In the event that Executive’s Base Salary is increased, the increased amount will then constitute the Base Salary for all purposes of this Agreement.

(b) Annual Bonus Incentives. In addition to the Base Salary, Executive shall be eligible to participate in and earn an annual cash bonus under any annual incentive plan established by the Board so long as the terms of any such plan allow participation by the executive officers of the Company (“Annual Bonus”). The target Annual Bonus for Executive shall be equal to 70% of Executive’s current Base Salary, but the actual Annual Bonus shall be determined by the Compensation Committee, in consultation with the CEO, in accordance with the terms of such plan, in effect at that time, if any. The terms for the payment of any Annual Bonus shall be determined by the Compensation Committee, in consultation with the CEO, in accordance with the terms of such plan in effect at that time, if any.

(c) Equity Grant. Subject to adoption by the Board and approval by Company’s shareholders of the Company’s 2010 Equity Incentive Plan (the “Plan”), the Company shall grant to Executive shares of restricted stock (the “Restricted Stock”) under the Plan, consisting of 1,061 time-vesting shares (the “Time-Vested Restricted Stock”) and 4,980 performance-vesting shares (the “Performance-Vested Restricted Stock”). Consistent with the foregoing, the terms and conditions of the Time-Vested Restricted Stock shall be set forth in an award agreement (the “Time-Vested Restricted Stock Agreement”) substantially in the form attached hereto as Exhibit A, and the terms and conditions of the Performance-Vested Restricted Stock shall be set forth in an award agreement (the “Performance-Vested Restricted Stock Agreement” and, together with the Time-Vested Restricted Stock Agreement, the “Restricted Stock Agreements”) substantially in the form attached hereto as Exhibit B, which together shall evidence the grant of the Restricted Stock. Subject to this Section 4(c), the Time-Vested Restricted Stock and the Performance-Vested Restricted Stock shall be governed in all respects by the terms of the Plan and the applicable Restricted Stock Agreement.

(d) Welfare, Pension and Incentive Benefit. During the Term, Executive (and Executive’s spouse and/or eligible dependents to the extent provided in the applicable plans and programs) will be eligible to participate in and be covered under all the welfare benefit plans or programs maintained by the Company or Employer for the benefit of its senior executive officers pursuant to the terms of such plans and programs including, without limitation, all medical, life, hospitalization, dental, disability, accidental death and dismemberment and travel accident insurance plans and programs. In addition, during the Term, Executive will be eligible to participate in all pension, retirement, savings and other employee benefit plans and programs maintained from time to time by the Company or Employer for the benefit of its senior executive officers.

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(e) Vacation. Executive shall be entitled to paid vacation in accordance with the Employer’s vacation policy during the Term. Executive may use his vacation in a reasonable manner based upon the business needs of the Company.

(f) Fringe Benefits. During the Term, the Company will provide Executive with such other fringe benefits as commensurate with Executive’s position.

(g) Expenses. Executive will be entitled to receive prompt reimbursement for all reasonable business expenses incurred by Executive in accordance with the Company’s and Employer’s expense reimbursement policy during the Term. All payments under this Section 4(g) shall be paid to Executive on or before the last day of Executive’s taxable year following the taxable year in which Executive incurred such expenses.

5. Termination of Employment. Executive’s employment under this Agreement may be terminated during the Term under the following circumstances:

(a) Death. Executive’s employment under this Agreement will terminate upon his death.

(b) Disability. Upon Executive’s Disability, Executive will receive a Notice of Termination (as defined in Section 6(a)) from the Company. If Executive does not return to the substantial performance of his duties on a full-time basis within thirty (30) days of such Notice of Termination, the Company has the right to terminate Executive’s employment under this Agreement for Disability, and such termination will not be a breach of this Agreement by the Company. For purposes of this Agreement, “Disability” means Executive’s incapacity due to physical or mental illness whereby Executive is substantially unable to perform his duties under this Agreement (with or without reasonable accommodation, as defined under the Americans With Disabilities Act) for a period of six (6) consecutive months.

(c) Cause. The Company has the right to terminate Executive’s employment for Cause by providing Executive with a Notice of Termination, and such termination will not be a breach of this Agreement by the Company. For purposes of this Agreement, “Cause” means the occurrence of any one or more of the following events: (i) Executive’s conviction of, or entry by Executive of a guilty or no contest plea to a felony or crime involving moral turpitude; (ii) Executive’s willful commission of an act of fraud or dishonesty resulting in economic or financial injury to the Company or any affiliate; (iii) Executive’s willful failure to substantially perform or gross neglect of Executive’s duties, including, but not limited to, the failure to follow any lawful directive of the CEO, within the reasonable scope of Executive’s duties; (iv) Executive’s performance of acts materially detrimental to the Company or any affiliate, unless otherwise approved in advance by the Board or the Compensation Committee; (v) Executive’s use of narcotics, alcohol, or illicit drugs in a manner that has or may reasonably be expected to have a detrimental effect on Executive’s performance of his duties as an employee of the Company or on the reputation of the Company or any affiliate; (vi) Executive’s commission of a material violation of any rule or policy sponsored by the Company which results in injury to the Company; or (vii) Executive’s material breach of this Agreement, including, but not limited to, Executive’s material breach of the covenants set forth in Section 9 hereof.

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(d) Good Reason. Executive may terminate Executive’s employment with the Company for “Good Reason,” and such termination will not be a breach of this Agreement by Executive. For purposes of this Agreement, “Good Reason” shall mean the occurrence without the written consent of Executive, of one of the events set forth below:

(i) a material diminution in Executive’s authority, duties or responsibilities combined with a demotion in Executive’s pay grade ranking;

(ii) the reduction by the Company of Executive’s Base Salary by more than ten percent (10%) (unless done so for all executive officers of the Company);

(iii) the requirement that Executive be based at any office or location that is more than 50 miles from the Principal Location, except for travel reasonably required in the performance of Executive’s responsibilities; or

(iv) any other action or inaction that constitutes a material breach by the Company of this Agreement such as the failure of any successor to the Company to assume this Agreement pursuant to Section 14.

Notwithstanding the foregoing, Executive will not be deemed to have terminated for Good Reason unless (A) Executive provides written notice to the Company of the existence of one of the conditions described above within ninety (90) days after Executive has knowledge of the initial existence of the condition, (B) the Company fails to remedy the condition so identified within thirty (30) days after receipt of such notice (if capable of correction), (C) Executive provides a Notice of Termination to the Company within thirty (30) days of the expiration of the Company’s period to remedy the condition, and (D) Executive terminates employment within ninety (90) days after Executive provides written notice to the Company of the existence of the condition referred to in clause (A).

(e) Without Cause. The Company has the right to terminate Executive’s employment under this Agreement without Cause by providing Executive with a Notice of Termination.

(f) Without Good Reason. Executive may voluntarily terminate employment with the Company without Good Reason at any time by providing the Company with a Notice of Termination.

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6. Termination Procedure.

(a) Notice of Termination. Any termination of Executive’s employment by the Company or by Executive during the Term (other than termination pursuant to Section 5(a)) will be communicated by Notice of Termination to the other party in accordance with Section 15. For purposes of this Agreement, a “Notice of Termination” means a written notice which indicates the specific termination provision in this Agreement relied upon and sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment.

(b) Date of Termination. “Date of Termination” shall mean (i) if Executive’s employment is terminated by his death, the date of his death, (ii) if Executive’s employment is terminated due to Disability pursuant to Section 5(b), thirty (30) days after Notice of Termination (provided that Executive has not returned to the substantial performance of his duties on a full-time basis during such thirty (30) day period), (iii) if Executive’s employment is terminated for Good Reason pursuant to Section 5(d), the date on which a Notice of Termination provided in accordance with such Section is given or any later date (within thirty (30) days after the giving of such Notice of Termination) set forth in such Notice of Termination, (iv) if Executive’s employment is terminated voluntarily by Executive without Good Reason pursuant to Section 5(f), thirty (30) days after Notice of Termination, or (v) if Executive’s employment is terminated for any other reason, the date on which a Notice of Termination is given or any later date (within thirty (30) days after the giving of such Notice of Termination) set forth in such Notice of Termination.

7. Obligations of the Company Upon Termination. In the event Executive’s employment under this Agreement terminates during the Term and such termination constitutes a “separation from service” from the Company (within the meaning of Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (the “Code”), and Treasury Regulation Section 1.409A-1(h)) (“Separation from Service”), the Company will provide Executive with the payments and benefits set forth below.

(a) Termination by Company Without Cause or by Executive for Good Reason Not Following Change in Control. If Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason at any time that is not within two (2) years after the occurrence of a “Change in Control” (as defined below):

(i) The Company will pay to Executive in a single lump sum payment within thirty (30) days after the Date of Termination, the aggregate amount of (A) any earned but unpaid Base Salary, (B) any Annual Bonus required to be paid to Executive pursuant to Section 4(b) for any fiscal year of the Company that ends on or before the Date of Termination to the extent not previously paid, (C) accrued but unpaid vacation pay through the Date of Termination, and (D) reasonable business expenses incurred but unpaid through the Date of Termination (together, the “Accrued Obligations”);

(ii) Subject to Sections 7(f) and 10 below, the Company will pay to Executive an amount equal to 1.5 (the “Severance Multiple”) times the sum of (x) Executive’s Base Salary in effect on the Date of Termination plus (y) the Annual Bonus granted to Executive for the fiscal year of the Company immediately on or preceding the Date of Termination, payable in the form of a salary continuation for a period of months equal to the product of 12 times the Severance Multiple; provided, however, that the first such payment shall not be made until the Company’s first payroll date occurring on or after the 30th day following the Date of Termination (the “First Payroll Date”) and any amounts that would otherwise have been paid pursuant to this Section 7(a)(ii) prior to the First Payroll Date shall instead be paid on the First Payroll Date. Each payment under this Section 7(a)(ii) shall be treated as a separate payment for purposes of Section 409A of the Code.

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(iii) Subject to Sections 7(f) and 10 below, the Company will maintain in full force and effect, for the continued benefit of Executive (and Executive’s spouse and/or eligible dependents, as applicable) for a period of eighteen (18) months following the Date of Termination, participation by Executive (and Executive’s spouse and/or eligible dependents, as applicable) in the medical, hospitalization, and dental programs maintained by the Company for the benefit of its senior executive officers as in effect on the Date of Termination, at such level and terms and conditions (including, without limitation, contributions required by Executive for such benefits) as in effect on the Date of Termination; provided, if Executive (or his spouse) is eligible for Medicare or a similar type of governmental medical benefit, such benefit shall be the primary provider before Company medical benefits are provided. However, if Executive becomes reemployed with another employer and is eligible to receive medical, hospitalization and dental benefits under another employer–provided plan, the medical, hospitalization and dental benefits described herein shall be secondary to those provided under such other plan during the applicable period. If any plan pursuant to which such benefits are provided is not, or ceases prior to the expiration of the period of continuation coverage to be, exempt from the application of Section 409A of the Code under Treasury Regulation Section 1.409A-1(a)(5), then an amount equal to each remaining premium payment shall thereafter be paid to Executive as currently taxable compensation in substantially equal monthly installments over the continuation coverage period (or the remaining portion thereof).

(iv) For purposes of this Agreement, “Change in Control” shall mean:

(A) The consummation of any transaction or series of related transactions involving the sale of the Company’s outstanding securities (but excluding a public offering of the Company’s capital stock) for securities or other consideration issued or paid or caused to be issued or paid by such other corporation or an affiliate thereof and which result in this Company’s shareholders (or their affiliates) immediately prior to such transaction not holding at least a majority of the voting power of the surviving or continuing entity following such transaction; or

(B) The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets or (z) the acquisition of assets or stock of another entity, in each case, other than a transaction which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction.

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(b) Termination by Company Without Cause or by Executive for Good Reason Following Change in Control. If at any time within two (2) years after a Change in Control, Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason, then Executive shall be entitled to the payments and benefits provided in Section 7(a) hereof, subject to the terms and conditions thereof (including, without limitation, the requirement that a condition to Executive’s right to receive the amounts provided for thereunder is that Executive execute, deliver and not revoke the Release as set forth in Section 10 below), except that for purposes of this Section 7(b), the Severance Multiple shall equal 2; provided, however, that if such Change of Control occurs as a result of the sale or other disposition of all or substantially all of the Company’s assets, then the severance payment described in Section 7(a)(ii) hereof shall be payable in the form of a lump sum within sixty (60) days of the Date of Termination.

(c) Termination by Company for Cause or by Executive Without Good Reason. If Executive’s employment is terminated by the Company for Cause or by Executive without Good Reason, the Company will pay Executive within thirty (30) days after the Date of Termination the Accrued Obligations; provided, however, the amounts described in Section 7(a)(i)(D) shall not be paid to Executive if Executive’s employment was terminated by the Company for Cause due to Executive’s misappropriation of Company funds.

(d) Disability. During any period that Executive fails to perform Executive’s duties under this Agreement as a result of incapacity due to physical or mental illness, Executive will continue to receive his full Base Salary set forth in Section 4(a) until his employment is terminated pursuant to Section 5(b). If Executive’s employment is terminated due to Disability pursuant to Section 5(b), subject to Sections 7(f) and 10 below, the Company will pay Executive within thirty (30) days after the Date of Termination the Accrued Obligations, plus a pro rata share of the Annual Bonus for the fiscal year of the Company in which the Date of Termination occurs.

(e) Death. If Executive’s employment is terminated by death, the Company will pay to Executive’s beneficiary, or personal or legal representatives or estate, as the case may be, within thirty (30) days after the Date of Termination the Accrued Obligations, plus a pro rata share of the Annual Bonus for the fiscal year of the Company in which the Date of Termination occurs.

(f) Six-Month Delay. Notwithstanding anything to the contrary in this Agreement, no compensation or benefits, including without limitation any severance payments or benefits payable under Section 7 hereof, shall be paid to Executive during the six (6)-month period following Executive’s Separation from Service if the Company determines that paying such amounts at the time or times indicated in this Agreement would be a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code. If the payment of any such amounts is delayed as a result of the previous sentence, then on the first business day following the end of such six (6)-month period (or such earlier date upon which such amount can be paid under Section 409A of the Code without resulting in a prohibited distribution, including as a result of Executive’s death), the Company shall pay Executive a lump-sum amount equal to the cumulative amount that would have otherwise been payable to Executive during such period.

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8. Mitigation. Executive will not be required to mitigate amounts payable under this Agreement by seeking other employment or otherwise, and there will be no offset against amounts due Executive under this Agreement on account of subsequent employment except as specifically provided herein.

9. Confidential Information; Non-Solicitation; Non-Competition.

(a) Nondisclosure of Confidential Information. Executive acknowledges that it is the policy of the Company to maintain as secret and confidential (i) all valuable and unique information, (ii) other information heretofore or hereafter acquired by the Company, or any affiliated entity and deemed by it to be confidential, and (iii) information developed or used by the Company or any affiliated entity relating to the business, operations, employees and customers of the Company or any affiliated entity including, but not limited to, any employee information (all such information described in clauses (i), (ii) and (iii) above, other than information which is known to the public or becomes known to the public through no fault of Executive, is hereinafter referred to as “Confidential Information”). The parties recognize that the services to be performed by Executive pursuant to this Agreement are special and unique and that by reason of his employment by the Company after the date hereof, Executive has acquired and will acquire Confidential Information. Executive recognizes that all such Confidential Information is the property of the Company. Accordingly, at any time during or after the Term, Executive shall not, except in the proper performance of his duties under this Agreement, directly or indirectly, without the prior written consent of the Company, disclose to any Person other than the Company, whether or not such Person is a competitor of the Company, and shall use his best efforts to prevent the publication or disclosure of any Confidential Information obtained by, or which has come to the knowledge of, Executive prior or subsequent to the date hereof. Notwithstanding the foregoing, Executive may disclose to other Persons, as part of his occupation, information with respect to the Company or any affiliated entity, which (i) is of a type generally not considered by standards of the oil and natural gas industry to be proprietary, or (ii) is otherwise consented to in writing by the Company.

(b) Non-Solicitation. Executive shall not, during the Term or for the period of months equal to the product of 12 times the Severance Multiple following the Date of Termination (the “Covered Period”), either personally or by or through his/her agent or by letters, circulars or advertisements and whether for himself/herself or on behalf of any other person or entity, hire, solicit or seek to hire any employee or consultant of the Company or any affiliated entity, or in any other manner attempt, directly or indirectly, to persuade any such employee or consultant to discontinue his/her status of employment or consultancy with the Company or any affiliated entity or to become hired in any business or activities likely to be competitive with the Company’s or an affiliated entity’s business. Additionally, during the Covered Period, Executive shall not, for himself/herself or on behalf of any person or entity, directly or indirectly, solicit, divert or attempt to solicit or divert any customer of the Company or any affiliated entity for the purpose of causing such customer to reduce or refrain from doing any business with the Company or any affiliated entity. Executive further agrees that, during the Covered Period, he/she will not, directly or indirectly, request or advise any customers of the Company or an affiliated entity to withdraw, curtail or cancel their business with the Company or any affiliated entity. For purposes of this Agreement, a “customer” of the Company or any affiliated entity shall mean those customers of the Company or an affiliated entity who held a deposit account or otherwise transacted business with the Company or an affiliated entity at any time within the twelve (12) months preceding termination of Executive’s employment. Nothing contained in this Agreement is intended to prohibit general advertising or solicitation not specifically directed at any or all of the Company’s or an affiliated entity’s customers or employees.

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(c) Non-Competition.

(i) As part of the consideration for the compensation and benefits to be paid to Executive hereunder, to protect the trade secrets and Confidential Information of the Company and its customers and clients that have been and will be entrusted to Executive, the business goodwill of the Company and its subsidiaries that will be developed in and through Executive and the business opportunities that will be disclosed or entrusted to Executive by the Company and its subsidiaries, and as an additional incentive for the Company to enter into this Agreement, during the Covered Period, Executive shall not directly or indirectly, individually or on behalf of any other person or entity, manage, participate in, work for, consult with, render services for, or take an interest in (as an owner, stockholder, partner or lender) any Competitor in an area of Competing Business.

(ii) For purposes of Section 9(c)(i):

(A) “Competitor” means any business, company or individual which is in, or is actively seeking to be in the Competing Business.

(B) “Competing Business” means the acquisition, exploration, exploitation, development, production and/or operation of oil and gas properties.

(iii) Executive acknowledges that each of the covenants of Section 9(c)(i) are in addition to, and shall not be construed as a limitation upon, any other covenant provided in Section 9. Executive agrees that the scope of prohibited activities and time duration of each of the covenants set forth in Section 9(c)(i) are reasonable in nature and are no broader than are necessary to maintain the confidentiality and the goodwill of the Company’s proprietary and Confidential Information, plans and services and to protect the other legitimate business interests of the Company, including without limitation the goodwill developed by Executive with the Company’s customers, suppliers, licensees and business relations. It is also the intent of the Company and Executive that such covenants be construed and enforced in accordance with the changing activities, business and locations of the Company throughout the term of this covenant, whether before or after the Date of Termination. Executive agrees not to challenge the enforceability, scope or reasonableness of the covenants in Section 9(c)(i). The covenants in Section 9(c)(i) are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope or duration set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed.

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(iv) If, during any portion of the Covered Period, Executive is not in compliance with the terms of Section 9(c)(i), the Company shall be entitled to, among other remedies, compliance by Executive with the terms of Section 9(c)(i) for an additional period of time (i.e., in addition to the Covered Period) that shall equal the period(s) over which such noncompliance occurred.

(v) Nothing in this Section 9(c) shall prohibit: (A) direct or indirect ownership of publicly traded securities which are issued by a Competitor involved in or conducting a Competing Business, provided that Executive, directly or indirectly, does not own more than 5% of the outstanding equity or voting securities of such Competitor; (B) ownership of royalty interests where Executive owns the surface of the land covered by the royalty interest and the ownership of the royalty interest is incidental to the ownership of such surface estate, provided that any such surface estate does not adjoin, or is not near to, any property ownership interest held directly or indirectly by the Company; (C) direct or indirect ownership of royalty interests or overriding royalty interests owned prior to the Effective Date; or (D) direct or indirect ownership of working interests or other interests in oil and gas owned prior to the Effective Date and disclosed by Executive to the Company in writing. It is the intent of the Company that during the Term of this Agreement Executive is not acquiring additional oil and gas interests, directly or indirectly.

(d) Obligations of Executive Upon Termination. Upon termination of Executive’s employment for any reason, Executive shall return to the Company all documents and copies, including hard and electronic copies, of documents in his possession relating to any Confidential Information including, but not limited to, internal and external business forms, manuals, correspondence, notes and computer programs, and Executive shall not make or retain any copy or extract of any of the foregoing. In addition, Executive shall resign from all positions held with the Company or any affiliated entities.

(e) Remedies. Executive acknowledges and understands that Sections 9(a), (b), (c) and (d) and the other provisions of this Agreement are of a special and unique nature, the loss of which cannot be adequately compensated for in damages by an action at law, and that the breach or threatened breach of the provisions of this Agreement would cause the Company irreparable harm. In the event of a breach or threatened breach by Executive of the provisions of this Agreement, the Company shall be entitled to an injunction restraining him from such breach. Nothing contained in this Agreement shall be construed as prohibiting the Company from pursuing, or limiting the Company’s ability to pursue, any other remedies available for any breach or threatened breach of this Agreement by Executive. The provision of Section 12 hereof relating to arbitration of disputes shall not be applicable to the Company to the extent it seeks an injunction in any court to restrain Executive from violating Sections 9(a), (b), (c) and (d) hereof.

(f) Continuing Operation. Except as specifically provided in this Section 9, the termination of Executive’s employment or of this Agreement will have no effect on the continuing operation of this Section 9.

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(g) Additional Related Agreements. Executive agrees to sign and to abide by the provisions of any additional agreements, policies or requirements of the Company which are reasonable and related to the subject of this Section 9 which are in writing and are developed by the Company in the ordinary course of business.

10. Release. Notwithstanding any other provisions of this Agreement, it shall be a condition to Executive’s right to receive the amounts provided for in Section 7(a), 7(b) or 7(d) of this Agreement, that Executive will execute and deliver to the Company a release of claims in substantially the form attached hereto as Exhibit C (the “Release”) within twenty-one (21) days following the Date of Termination and that Executive not revoke such release within seven (7) days thereafter. The form of the Release may be modified as needed to reflect changes in the applicable law or regulations that are needed to provide a legally enforceable and binding Release to all parties at the time of execution.

11. Indemnification and Insurance. Executive shall be indemnified and held harmless by the Company during the term of this Agreement and following any termination of this Agreement for any reason whatsoever in the same manner as would any other key management employee of the Company with respect to acts or omissions occurring prior to (a) the termination of this Agreement or (b) the termination of employment of Executive. In addition, during the term of this Agreement and for a period of six years following the termination of this Agreement for any reason whatsoever, Executive shall be covered by a Company held liability insurance policy, covering acts or omissions occurring prior to (i) the termination of this Agreement or (ii) the termination of employment of Executive.

12. Arbitration; Legal Fees and Expenses. The parties agree that Executive’s employment and this Agreement relate to interstate commerce, and that any disputes, claims or controversies between Executive and the Company which may arise out of or relate to Executive’s employment relationship or this Agreement shall be settled by arbitration. This agreement to arbitrate shall survive the termination of this Agreement. Any arbitration shall be in accordance with the Rules of the American Arbitration Association and undertaken pursuant to the Federal Arbitration Act. Arbitration will be held in Oklahoma City, Oklahoma unless the parties mutually agree on another location. The decision of the arbitrator(s) will be enforceable in any court of competent jurisdiction. The parties agree that punitive, liquidated or indirect damages shall not be awarded by the arbitrator(s) unless such damages would have been awarded by a court of competent jurisdiction. Nothing in this agreement to arbitrate, however, shall preclude the Company from obtaining injunctive relief from a court of competent jurisdiction prohibiting any ongoing breaches by Executive of this Agreement including, without limitation, violations of Section 9. If any contest or dispute arises between the Company and Executive regarding any provision of this Agreement, the arbitrator may award to the prevailing party, the reasonable attorney fees, costs and expenses incurred by the prevailing party in connection with such contest or dispute.

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13. Maximum Payments by the Company.

(a) It is the objective of this Agreement to maximize Executive’s Net After-Tax Benefit (as defined herein) if payments or benefits provided under this Agreement are subject to excise tax under Section 4999 of the Code. Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit by the Company or otherwise to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, including, by example and not by way of limitation, acceleration by the Company or otherwise of the date of vesting or payment or rate of payment under any plan, program, arrangement or agreement of the Company (all such payments and benefits, including the payments and benefits under Section 7 hereof, being hereinafter referred to as the “Total Payments”), would be subject (in whole or in part) to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the cash severance payments shall first be reduced, and the non-cash severance payments shall thereafter be reduced, to the extent necessary so that no portion of the Total Payments shall be subject to the Excise Tax, but only if (i) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments), is greater than or equal to (ii) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which Executive would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments).

(b) The Total Payments shall be reduced by the Company in the following order: (i) reduction of any cash severance payments otherwise payable to Executive that are exempt from Section 409A of the Code, (ii) reduction of any other cash payments or benefits otherwise payable to Executive that are exempt from Section 409A of the Code, but excluding any payments attributable to the acceleration of vesting or payments with respect to any equity award with respect to the Company’s common stock that is exempt from Section 409A of the Code, (iii) reduction of any other payments or benefits otherwise payable to Executive on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payments attributable to the acceleration of vesting and payments with respect to any equity award with respect to the Company’s common stock that are exempt from Section 409A of the Code, and (iv) reduction of any payments attributable to the acceleration of vesting or payments with respect to any other equity award with respect to the Company’s common stock that are exempt from Section 409A of the Code.

(c) For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the written opinion of independent auditors of nationally recognized standing (“Independent Advisors”) selected by the Company, does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the opinion of Independent Advisors, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the “base amount” (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Independent Advisors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. The costs of obtaining such determination shall be borne by the Company.

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14. Agreement Binding on Successors.

(a) Company’s Successors. No rights or obligations of the Company under this Agreement may be assigned or transferred except that the Company will require any successor (whether direct or indirect, by purchase, merger, reorganization, sale, transfer of stock, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no succession had taken place. As used in this Agreement, “Company” means the Company as herein defined, and any successor to its or the Company’s business and/or assets (by merger, purchase or otherwise) which executes and delivers the agreement provided for in this Section 14 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

(b) Executive’s Successors. No rights or obligations of Executive under this Agreement may be assigned or transferred by Executive other than his rights to payments or benefits under this Agreement, which may be transferred only by will or the laws of descent and distribution. Upon Executive’s death, this Agreement and all rights of Executive under this Agreement shall inure to the benefit of and be enforceable by Executive’s beneficiary, or personal or legal representatives, or estate, to the extent any such person succeeds to Executive’s interests under this Agreement. In the event of Executive’s death or a judicial determination of his incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to his estate or other legal representative(s). If Executive should die following his Date of Termination while any amounts would still be payable to him under this Agreement if he had continued to live, unless otherwise provided, all such amounts shall be paid in accordance with the terms of this Agreement to his beneficiary or personal or legal representatives or estate.

15. Notice. For the purposes of this Agreement, notices, demands and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered either personally or by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows:

If to Executive:

At his last known address

evidenced on the Company’s

payroll records.

If to the Company:

Chaparral Energy, Inc.

701 Cedar Lake Boulevard

Oklahoma City, OK 73114

or to such other address as any party may have furnished to the other in writing in accordance with this Agreement, except that notices of change of address shall be effective only upon receipt.

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16. Section 409A.

(a) To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretative guidance issued thereunder, including without limitation any such regulations or other such guidance that may be issued after the Effective Date (“Section 409A”). Notwithstanding any provision of this Agreement to the contrary, in the event that following the Effective Date, the Company determines in good faith that any compensation or benefits payable under this Agreement may not be either exempt from or compliant with Section 409A, the Company shall adopt such amendments to this Agreement or adopt other policies or procedures (including amendments, policies and procedures with retroactive effective), or take any other commercially reasonable actions necessary or appropriate to (i) preserve the intended tax treatment of the compensation and benefits payable hereunder, to preserve the economic benefits of such compensation and benefits, and/or to avoid less favorable accounting or tax consequences for the Company and/or (ii) to exempt the compensation and benefits payable hereunder from Section 409A or to comply with the requirements of Section 409A and thereby avoid the application of penalty taxes thereunder; provided, however, that this Section 17(a) does not, and shall not be construed so as to, create any obligation on the part of the Company to adopt any such amendments, policies or procedures or to take any other such actions or to indemnify Executive for any failure to do so.

(b) Notwithstanding anything herein to the contrary, Executive acknowledges and agrees that in the event that any tax is imposed under Section 409A in respect to any compensation or benefits payable to Executive, whether under this Agreement or otherwise, then (i) the payment of such tax shall be solely Executive’s responsibility, (ii) neither the Company, its affiliates nor any of their respective past or present directors, officers, employees or agents shall have any liability for any such tax and (iii) Executive shall indemnify and hold harmless, to the greatest extent permitted under law, each of the foregoing from and against any claims or liabilities that may arise in respect of any such tax.

(c) To the extent that any of the rights or potential rights to future payments under the Change of Control Severance Agreement constitute “nonqualified deferred compensation” (within the meaning of Section 409A), if any, the termination of such rights is undertaken in accordance with and as permitted under Internal Revenue Code Treasury Regulation § 1.409A-3(j)(ix)(B).

17. Withholding. All payments hereunder will be subject to any required withholding of federal, state and local taxes pursuant to any applicable law or regulation

18. Miscellaneous. No provisions of this Agreement may be amended, modified, or waived unless agreed to in writing and signed by Executive and by a duly authorized officer of the Company. No waiver by either party of any breach by the other party of any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. The respective rights and obligations of the parties under this Agreement shall survive Executive’s termination of employment and the termination of this Agreement to the extent necessary for the intended preservation of such rights and obligations. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Oklahoma without regard to its conflicts of law principles.

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19. Validity. The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, which will remain in full force and effect.

20. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument.

21. Section Headings. The section headings in this Agreement are for convenience of reference only, and they form no part of this Agreement and will not affect its interpretation.

22. Entire Agreement. Except as provided elsewhere herein and except for the other documents and agreements contemplated in accordance herewith, this Agreement sets forth the entire agreement of the parties with respect to its subject matter and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party to this Agreement with respect to such subject matter, including, without limitation the Change of Control Severance Agreement.

23. Further Assurances. The parties hereby agree, without further consideration, to execute and deliver such other instruments or to take such other action as may reasonably be required to effectuate the terms and provisions of this Agreement.

*    *    *    *

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IN WITNESS WHEREOF, the parties have executed this Agreement effective the date first above written.

CHAPARRAL ENERGY, INC.
By:	/s/ Mark A. Fischer
	Mark A. Fischer
	President & Chief Executive Officer
	“COMPANY”

/s/ Larry E. Gateley

Larry E. Gateley

“EXECUTIVE”

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EXHIBIT A

TIME-VESTED RESTRICTED STOCK AGREEMENT

A-1

EXHIBIT B

PERFORMANCE-VESTED RESTRICTED STOCK AGREEMENT

B-1

EXHIBIT C

GENERAL RELEASE

NOTICE. Various laws, including Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Pregnancy Discrimination Act of 1978, the Equal Pay Act, the Civil Rights Act of 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Americans With Disabilities Act, the Employee Retirement Income Security Act and the Veterans Reemployment Rights Act (all as amended from time to time), prohibit employment discrimination based on sex, race, color, national origin, religion, age, disability, eligibility for covered employee benefits and veteran status. You may also have rights under laws such as the Older Worker Benefit Protection Act of 1990, the Worker Adjustment and Retraining Act of 1988, the Fair Labor Standards Act, the Family and Medical Leave Act, the Occupational Health and Safety Act and other federal, state and/or municipal statutes, orders or regulations pertaining to labor, employment and/or employee benefits. These laws are enforced through the United States Department of Labor and its agencies, including the Equal Employment Opportunity Commission (EEOC), and various state and municipal labor departments, fair employment boards, human rights commissions and similar agencies.

This General Release is being provided to you in connection with the Employment Agreement between you and Chaparral Energy, Inc., dated April 12, 2010 (the “Agreement”). The federal Older Worker Benefit Protection Act requires that you have at least twenty-one (21) days, if you want it, to consider whether you wish to sign a release such as this one in connection with a special, individualized severance package. You have until the close of business twenty-one (21) days from the date you receive this General Release to make your decision. You may not sign this General Release until, at the earliest, your official date of separation from employment.

BEFORE EXECUTING THIS GENERAL RELEASE YOU SHOULD REVIEW THESE DOCUMENTS CAREFULLY AND CONSULT WITH YOUR ATTORNEY.

You may revoke this General Release within seven (7) days after you sign it and it shall not become effective or enforceable until that revocation period has expired. If you do not accept the severance package and sign and return this General Release, or if you exercise your right to revoke the General Release after signing it, you will not be eligible for the special, individualized severance package. Any revocation must be in writing and must be received by Chaparral Energy, Inc., 701 Cedar Lake Boulevard, Oklahoma City, OK 73114, within the seven-day period following your execution of this General Release.

C-1

GENERAL RELEASE

In consideration of the special, individualized severance package offered to me by Chaparral Energy, Inc. and the separation benefits I will receive as reflected in the Employment Agreement between me and Chaparral Energy, Inc. dated April 12, 2010 (the “Agreement”), I hereby release and discharge Chaparral Energy, Inc. and its predecessors, successors, affiliates, parent, subsidiaries and partners and each of those entities’ employees, officers, directors and agents (hereafter collectively referred to as the “Company”) from all claims, liabilities, demands, and causes of action, known or unknown, fixed or contingent, which I may have or claim to have against the Company either as a result of my past employment with the Company and/or the severance of that relationship and/or otherwise, and hereby waive any and all rights I may have with respect to and promise not to file a lawsuit to assert any such claims.

This General Release includes, but is not limited to, claims arising under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Pregnancy Discrimination Act of 1978, the Equal Pay Act, the Civil Rights Act of 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Americans With Disabilities Act, the Employee Retirement Income Security Act or 1974 and the Veterans Reemployment Rights Act (all as amended from time to time). This General Release also includes, but is not limited to, any rights I may have under the Older Workers Benefit Protection Act of 1990, the Worker Adjustment and Retraining Act of 1988, the Fair Labor Standards Act, the Family and Medical Leave Act, the Occupational Health and Safety Act and any other federal, state and/or municipal statutes, orders or regulations pertaining to labor, employment and/or employee benefits. This General Release also applies to any claims or rights I may have growing out of any legal or equitable restrictions on the Company’s rights not to continue an employment relationship with its employees, including any express or implied employment contracts, and to any claims I may have against the Company for fraudulent inducement or misrepresentation, defamation, wrongful termination or other retaliation claims in connection with workers’ compensation or alleged “whistleblower” status or on any other basis whatsoever.

It is specifically agreed, however, that this General Release does not have any effect on any rights or claims I may have against the Company which arise after the date I execute this General Release or on any vested rights I may have under any of the Company’s qualified or non-qualified benefit plans or arrangements as of or after my last day of employment with the Company, or on any of the Company’s obligations under the Agreement or as otherwise required under the Consolidated Omnibus Budget and Reconciliation Act of 1985 (COBRA).

I have carefully reviewed and fully understand all the provisions of the Agreement and General Release, including the foregoing Notice. I have not relied on any representation or statement, oral or written, by the Company or any of its representatives, which is not set forth in those documents.

C-2

The Agreement and this General Release, including the foregoing Notice, set forth the entire agreement between me and the Company with respect to this subject. I understand that my receipt and retention of the separation benefits covered by the Agreement are contingent not only on my execution of this General Release, but also on my continued compliance with my obligations under the Agreement that survive and continue in effect in accordance with the respective terms thereof, notwithstanding any termination of employment, including, without limitation, Section 9 thereof. I acknowledge that the Company gave me twenty-one (21) days to consider whether I wish to accept or reject the separation benefits I am eligible to receive under the Agreement in exchange for this General Release. I also acknowledge that the Company advised me to seek independent legal advice as to these matters, if I chose to do so. I hereby represent and state that I have taken such actions and obtained such information and independent legal or other advice, if any, that I believed were necessary for me to fully understand the effects and consequences of the Agreement and General Release prior to signing those documents.

Dated this          day of                     ,         .

C-3

EX-10.26

Exhibit 10.26

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of the 12th day of April, 2010, is entered into by and between CHAPARRAL ENERGY, INC., a Delaware corporation (the “Company”), CHAPARRAL ENERGY, LLC (the “Employer”) and James M. Miller (“Executive”).

IN CONSIDERATION of the premises and the mutual covenants set forth below, and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

WHEREAS, the Company desires to retain Executive as its employee and believes it is necessary to enter into this Agreement to provide the proper incentive to Executive; and

WHEREAS, the Company and Executive previously entered into that certain Change of Control Severance Agreement dated as of July 1, 2007, and amended as of December 31, 2008 (the “Change of Control Severance Agreement”), and the parties hereto acknowledge and agree that the Change of Control Severance Agreement, and all of Executive’s rights and interest therein and thereunder, are hereby cancelled and terminated upon the effectiveness of this Agreement, in consideration of the parties hereto entering into this Agreement.

1. Term. Subject to the provisions for earlier termination hereinafter provided, Executive’s employment with the Company under this Agreement shall be for a term (the “Term”) commencing upon April 12, 2010 (the “Effective Date”) and ending on the third-year anniversary of the Effective Date; provided, however, that commencing on the date that is the third anniversary of the Effective Date, the Term shall be automatically extended so as to terminate on the second anniversary of such date, and the Term shall be automatically extended so as to terminate on each anniversary thereafter (each such anniversary referred to as a “Renewal Date”). Notwithstanding the foregoing, if at least ninety (90) days prior to any Renewal Date, the Company gives Executive written notice that the Term will not be so extended, this Agreement will continue for the remainder of the then current Term and automatically expire upon its completion. The Term may be sooner terminated under Section 5 of this Agreement.

2. Position and Duties. During the Term, Executive will serve as Senior Vice President-Operations and Production Engineering of the Company and will report directly to the Chief Executive Officer of the Company (the “CEO”). Executive shall devote Executive’s best efforts and full business time and attention to perform all services reasonably required to fully execute the duties and responsibilities associated with the Company, its subsidiaries and its affiliates as directed by the CEO. Notwithstanding the above, Executive will be permitted, to the extent such activities do not interfere with the performance by Executive of his duties and responsibilities under this Agreement or violate this Agreement, to (i) manage Executive’s personal, financial and legal affairs, and (ii) serve on industry, civic or charitable boards or committees. Executive agrees to observe and comply with the rules and policies of the Company, as in effect from time to time, including, without limitation, any rules and policies relating to Executive obligations to the Company upon a termination of employment.

3. Place of Performance. During the Term, Executive’s place of employment will be the Company’s principal executive offices in Oklahoma City, Oklahoma (the “Principal Location”), except for travel to other locations as may be necessary to fulfill Executive’s duties and responsibilities hereunder.

4. Compensation and Related Matters.

(a) Base Salary. During the Term, the Company will pay Executive a base salary of not less than $273,798 per year (“Base Salary”), in accordance with the Company’s customary payroll practices. Executive’s Base Salary may be increased, but not decreased unless the base salaries for all executive officers of the Company are decreased, pursuant to annual review by the Compensation Committee (the “Compensation Committee”) of the Board of Directors of the Company (the “Board”) in its discretion. In the event that Executive’s Base Salary is increased, the increased amount will then constitute the Base Salary for all purposes of this Agreement.

(b) Annual Bonus Incentives. In addition to the Base Salary, Executive shall be eligible to participate in and earn an annual cash bonus under any annual incentive plan established by the Board so long as the terms of any such plan allow participation by the executive officers of the Company (“Annual Bonus”). The target Annual Bonus for Executive shall be equal to 70% of Executive’s current Base Salary, but the actual Annual Bonus shall be determined by the Compensation Committee, in consultation with the CEO, in accordance with the terms of such plan, in effect at that time, if any. The terms for the payment of any Annual Bonus shall be determined by the Compensation Committee, in consultation with the CEO, in accordance with the terms of such plan in effect at that time, if any.

(c) Equity Grant. Subject to adoption by the Board and approval by Company’s shareholders of the Company’s 2010 Equity Incentive Plan (the “Plan”), the Company shall grant to Executive shares of restricted stock (the “Restricted Stock”) under the Plan, consisting of 1,061 time-vesting shares (the “Time-Vested Restricted Stock”) and 4,980 performance-vesting shares (the “Performance-Vested Restricted Stock”). Consistent with the foregoing, the terms and conditions of the Time-Vested Restricted Stock shall be set forth in an award agreement (the “Time-Vested Restricted Stock Agreement”) substantially in the form attached hereto as Exhibit A, and the terms and conditions of the Performance-Vested Restricted Stock shall be set forth in an award agreement (the “Performance-Vested Restricted Stock Agreement” and, together with the Time-Vested Restricted Stock Agreement, the “Restricted Stock Agreements”) substantially in the form attached hereto as Exhibit B, which together shall evidence the grant of the Restricted Stock. Subject to this Section 4(c), the Time-Vested Restricted Stock and the Performance-Vested Restricted Stock shall be governed in all respects by the terms of the Plan and the applicable Restricted Stock Agreement.

(d) Welfare, Pension and Incentive Benefit. During the Term, Executive (and Executive’s spouse and/or eligible dependents to the extent provided in the applicable plans and programs) will be eligible to participate in and be covered under all the welfare benefit plans or programs maintained by the Company or Employer for the benefit of its senior executive officers pursuant to the terms of such plans and programs including, without limitation, all medical, life, hospitalization, dental, disability, accidental death and dismemberment and travel accident insurance plans and programs. In addition, during the Term, Executive will be eligible to participate in all pension, retirement, savings and other employee benefit plans and programs maintained from time to time by the Company or Employer for the benefit of its senior executive officers.

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(e) Vacation. Executive shall be entitled to paid vacation in accordance with the Employer’s vacation policy during the Term. Executive may use his vacation in a reasonable manner based upon the business needs of the Company.

(f) Fringe Benefits. During the Term, the Company will provide Executive with such other fringe benefits as commensurate with Executive’s position.

(g) Expenses. Executive will be entitled to receive prompt reimbursement for all reasonable business expenses incurred by Executive in accordance with the Company’s and Employer’s expense reimbursement policy during the Term. All payments under this Section 4(g) shall be paid to Executive on or before the last day of Executive’s taxable year following the taxable year in which Executive incurred such expenses.

5. Termination of Employment. Executive’s employment under this Agreement may be terminated during the Term under the following circumstances:

(a) Death. Executive’s employment under this Agreement will terminate upon his death.

(b) Disability. Upon Executive’s Disability, Executive will receive a Notice of Termination (as defined in Section 6(a)) from the Company. If Executive does not return to the substantial performance of his duties on a full-time basis within thirty (30) days of such Notice of Termination, the Company has the right to terminate Executive’s employment under this Agreement for Disability, and such termination will not be a breach of this Agreement by the Company. For purposes of this Agreement, “Disability” means Executive’s incapacity due to physical or mental illness whereby Executive is substantially unable to perform his duties under this Agreement (with or without reasonable accommodation, as defined under the Americans With Disabilities Act) for a period of six (6) consecutive months.

(c) Cause. The Company has the right to terminate Executive’s employment for Cause by providing Executive with a Notice of Termination, and such termination will not be a breach of this Agreement by the Company. For purposes of this Agreement, “Cause” means the occurrence of any one or more of the following events: (i) Executive’s conviction of, or entry by Executive of a guilty or no contest plea to a felony or crime involving moral turpitude; (ii) Executive’s willful commission of an act of fraud or dishonesty resulting in economic or financial injury to the Company or any affiliate; (iii) Executive’s willful failure to substantially perform or gross neglect of Executive’s duties, including, but not limited to, the failure to follow any lawful directive of the CEO, within the reasonable scope of Executive’s duties; (iv) Executive’s performance of acts materially detrimental to the Company or any affiliate, unless otherwise approved in advance by the Board or the Compensation Committee; (v) Executive’s use of narcotics, alcohol, or illicit drugs in a manner that has or may reasonably be expected to have a detrimental effect on Executive’s performance of his duties as an employee of the Company or on the reputation of the Company or any affiliate; (vi) Executive’s commission of a material violation of any rule or policy sponsored by the Company which results in injury to the Company; or (vii) Executive’s material breach of this Agreement, including, but not limited to, Executive’s material breach of the covenants set forth in Section 9 hereof.

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(d) Good Reason. Executive may terminate Executive’s employment with the Company for “Good Reason,” and such termination will not be a breach of this Agreement by Executive. For purposes of this Agreement, “Good Reason” shall mean the occurrence without the written consent of Executive, of one of the events set forth below:

(i) a material diminution in Executive’s authority, duties or responsibilities combined with a demotion in Executive’s pay grade ranking;

(ii) the reduction by the Company of Executive’s Base Salary by more than ten percent (10%) (unless done so for all executive officers of the Company);

(iii) the requirement that Executive be based at any office or location that is more than 50 miles from the Principal Location, except for travel reasonably required in the performance of Executive’s responsibilities; or

(iv) any other action or inaction that constitutes a material breach by the Company of this Agreement such as the failure of any successor to the Company to assume this Agreement pursuant to Section 14.

Notwithstanding the foregoing, Executive will not be deemed to have terminated for Good Reason unless (A) Executive provides written notice to the Company of the existence of one of the conditions described above within ninety (90) days after Executive has knowledge of the initial existence of the condition, (B) the Company fails to remedy the condition so identified within thirty (30) days after receipt of such notice (if capable of correction), (C) Executive provides a Notice of Termination to the Company within thirty (30) days of the expiration of the Company’s period to remedy the condition, and (D) Executive terminates employment within ninety (90) days after Executive provides written notice to the Company of the existence of the condition referred to in clause (A).

(e) Without Cause. The Company has the right to terminate Executive’s employment under this Agreement without Cause by providing Executive with a Notice of Termination.

(f) Without Good Reason. Executive may voluntarily terminate employment with the Company without Good Reason at any time by providing the Company with a Notice of Termination.

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6. Termination Procedure.

(a) Notice of Termination. Any termination of Executive’s employment by the Company or by Executive during the Term (other than termination pursuant to Section 5(a)) will be communicated by Notice of Termination to the other party in accordance with Section 15. For purposes of this Agreement, a “Notice of Termination” means a written notice which indicates the specific termination provision in this Agreement relied upon and sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment.

(b) Date of Termination. “Date of Termination” shall mean (i) if Executive’s employment is terminated by his death, the date of his death, (ii) if Executive’s employment is terminated due to Disability pursuant to Section 5(b), thirty (30) days after Notice of Termination (provided that Executive has not returned to the substantial performance of his duties on a full-time basis during such thirty (30) day period), (iii) if Executive’s employment is terminated for Good Reason pursuant to Section 5(d), the date on which a Notice of Termination provided in accordance with such Section is given or any later date (within thirty (30) days after the giving of such Notice of Termination) set forth in such Notice of Termination, (iv) if Executive’s employment is terminated voluntarily by Executive without Good Reason pursuant to Section 5(f), thirty (30) days after Notice of Termination, or (v) if Executive’s employment is terminated for any other reason, the date on which a Notice of Termination is given or any later date (within thirty (30) days after the giving of such Notice of Termination) set forth in such Notice of Termination.

7. Obligations of the Company Upon Termination. In the event Executive’s employment under this Agreement terminates during the Term and such termination constitutes a “separation from service” from the Company (within the meaning of Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (the “Code”), and Treasury Regulation Section 1.409A-1(h)) (“Separation from Service”), the Company will provide Executive with the payments and benefits set forth below.

(a) Termination by Company Without Cause or by Executive for Good Reason Not Following Change in Control. If Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason at any time that is not within two (2) years after the occurrence of a “Change in Control” (as defined below):

(i) The Company will pay to Executive in a single lump sum payment within thirty (30) days after the Date of Termination, the aggregate amount of (A) any earned but unpaid Base Salary, (B) any Annual Bonus required to be paid to Executive pursuant to Section 4(b) for any fiscal year of the Company that ends on or before the Date of Termination to the extent not previously paid, (C) accrued but unpaid vacation pay through the Date of Termination, and (D) reasonable business expenses incurred but unpaid through the Date of Termination (together, the “Accrued Obligations”);

(ii) Subject to Sections 7(f) and 10 below, the Company will pay to Executive an amount equal to 1.5 (the “Severance Multiple”) times the sum of (x) Executive’s Base Salary in effect on the Date of Termination plus (y) the Annual Bonus granted to Executive for the fiscal year of the Company immediately on or preceding the Date of Termination, payable in the form of a salary continuation for a period of months equal to the product of 12 times the Severance Multiple; provided, however, that the first such payment shall not be made until the Company’s first payroll date occurring on or after the 30th day following the Date of Termination (the “First Payroll Date”) and any amounts that would otherwise have been paid pursuant to this Section 7(a)(ii) prior to the First Payroll Date shall instead be paid on the First Payroll Date. Each payment under this Section 7(a)(ii) shall be treated as a separate payment for purposes of Section 409A of the Code.

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(iii) Subject to Sections 7(f) and 10 below, the Company will maintain in full force and effect, for the continued benefit of Executive (and Executive’s spouse and/or eligible dependents, as applicable) for a period of eighteen (18) months following the Date of Termination, participation by Executive (and Executive’s spouse and/or eligible dependents, as applicable) in the medical, hospitalization, and dental programs maintained by the Company for the benefit of its senior executive officers as in effect on the Date of Termination, at such level and terms and conditions (including, without limitation, contributions required by Executive for such benefits) as in effect on the Date of Termination; provided, if Executive (or his spouse) is eligible for Medicare or a similar type of governmental medical benefit, such benefit shall be the primary provider before Company medical benefits are provided. However, if Executive becomes reemployed with another employer and is eligible to receive medical, hospitalization and dental benefits under another employer–provided plan, the medical, hospitalization and dental benefits described herein shall be secondary to those provided under such other plan during the applicable period. If any plan pursuant to which such benefits are provided is not, or ceases prior to the expiration of the period of continuation coverage to be, exempt from the application of Section 409A of the Code under Treasury Regulation Section 1.409A-1(a)(5), then an amount equal to each remaining premium payment shall thereafter be paid to Executive as currently taxable compensation in substantially equal monthly installments over the continuation coverage period (or the remaining portion thereof).

(iv) For purposes of this Agreement, “Change in Control” shall mean:

(A) The consummation of any transaction or series of related transactions involving the sale of the Company’s outstanding securities (but excluding a public offering of the Company’s capital stock) for securities or other consideration issued or paid or caused to be issued or paid by such other corporation or an affiliate thereof and which result in this Company’s shareholders (or their affiliates) immediately prior to such transaction not holding at least a majority of the voting power of the surviving or continuing entity following such transaction; or

(B) The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets or (z) the acquisition of assets or stock of another entity, in each case, other than a transaction which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction.

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(b) Termination by Company Without Cause or by Executive for Good Reason Following Change in Control. If at any time within two (2) years after a Change in Control, Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason, then Executive shall be entitled to the payments and benefits provided in Section 7(a) hereof, subject to the terms and conditions thereof (including, without limitation, the requirement that a condition to Executive’s right to receive the amounts provided for thereunder is that Executive execute, deliver and not revoke the Release as set forth in Section 10 below), except that for purposes of this Section 7(b), the Severance Multiple shall equal 2; provided, however, that if such Change of Control occurs as a result of the sale or other disposition of all or substantially all of the Company’s assets, then the severance payment described in Section 7(a)(ii) hereof shall be payable in the form of a lump sum within sixty (60) days of the Date of Termination.

(c) Termination by Company for Cause or by Executive Without Good Reason. If Executive’s employment is terminated by the Company for Cause or by Executive without Good Reason, the Company will pay Executive within thirty (30) days after the Date of Termination the Accrued Obligations; provided, however, the amounts described in Section 7(a)(i)(D) shall not be paid to Executive if Executive’s employment was terminated by the Company for Cause due to Executive’s misappropriation of Company funds.

(d) Disability. During any period that Executive fails to perform Executive’s duties under this Agreement as a result of incapacity due to physical or mental illness, Executive will continue to receive his full Base Salary set forth in Section 4(a) until his employment is terminated pursuant to Section 5(b). If Executive’s employment is terminated due to Disability pursuant to Section 5(b), subject to Sections 7(f) and 10 below, the Company will pay Executive within thirty (30) days after the Date of Termination the Accrued Obligations, plus a pro rata share of the Annual Bonus for the fiscal year of the Company in which the Date of Termination occurs.

(e) Death. If Executive’s employment is terminated by death, the Company will pay to Executive’s beneficiary, or personal or legal representatives or estate, as the case may be, within thirty (30) days after the Date of Termination the Accrued Obligations, plus a pro rata share of the Annual Bonus for the fiscal year of the Company in which the Date of Termination occurs.

(f) Six-Month Delay. Notwithstanding anything to the contrary in this Agreement, no compensation or benefits, including without limitation any severance payments or benefits payable under Section 7 hereof, shall be paid to Executive during the six (6)-month period following Executive’s Separation from Service if the Company determines that paying such amounts at the time or times indicated in this Agreement would be a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code. If the payment of any such amounts is delayed as a result of the previous sentence, then on the first business day following the end of such six (6)-month period (or such earlier date upon which such amount can be paid under Section 409A of the Code without resulting in a prohibited distribution, including as a result of Executive’s death), the Company shall pay Executive a lump-sum amount equal to the cumulative amount that would have otherwise been payable to Executive during such period.

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8. Mitigation. Executive will not be required to mitigate amounts payable under this Agreement by seeking other employment or otherwise, and there will be no offset against amounts due Executive under this Agreement on account of subsequent employment except as specifically provided herein.

9. Confidential Information; Non-Solicitation; Non-Competition.

(a) Nondisclosure of Confidential Information. Executive acknowledges that it is the policy of the Company to maintain as secret and confidential (i) all valuable and unique information, (ii) other information heretofore or hereafter acquired by the Company, or any affiliated entity and deemed by it to be confidential, and (iii) information developed or used by the Company or any affiliated entity relating to the business, operations, employees and customers of the Company or any affiliated entity including, but not limited to, any employee information (all such information described in clauses (i), (ii) and (iii) above, other than information which is known to the public or becomes known to the public through no fault of Executive, is hereinafter referred to as “Confidential Information”). The parties recognize that the services to be performed by Executive pursuant to this Agreement are special and unique and that by reason of his employment by the Company after the date hereof, Executive has acquired and will acquire Confidential Information. Executive recognizes that all such Confidential Information is the property of the Company. Accordingly, at any time during or after the Term, Executive shall not, except in the proper performance of his duties under this Agreement, directly or indirectly, without the prior written consent of the Company, disclose to any Person other than the Company, whether or not such Person is a competitor of the Company, and shall use his best efforts to prevent the publication or disclosure of any Confidential Information obtained by, or which has come to the knowledge of, Executive prior or subsequent to the date hereof. Notwithstanding the foregoing, Executive may disclose to other Persons, as part of his occupation, information with respect to the Company or any affiliated entity, which (i) is of a type generally not considered by standards of the oil and natural gas industry to be proprietary, or (ii) is otherwise consented to in writing by the Company.

(b) Non-Solicitation. Executive shall not, during the Term or for the period of months equal to the product of 12 times the Severance Multiple following the Date of Termination (the “Covered Period”), either personally or by or through his/her agent or by letters, circulars or advertisements and whether for himself/herself or on behalf of any other person or entity, hire, solicit or seek to hire any employee or consultant of the Company or any affiliated entity, or in any other manner attempt, directly or indirectly, to persuade any such employee or consultant to discontinue his/her status of employment or consultancy with the Company or any affiliated entity or to become hired in any business or activities likely to be competitive with the Company’s or an affiliated entity’s business. Additionally, during the Covered Period, Executive shall not, for himself/herself or on behalf of any person or entity, directly or indirectly, solicit, divert or attempt to solicit or divert any customer of the Company or any affiliated entity for the purpose of causing such customer to reduce or refrain from doing any business with the Company or any affiliated entity. Executive further agrees that, during the Covered Period, he/she will not, directly or indirectly, request or advise any customers of the Company or an affiliated entity to withdraw, curtail or cancel their business with the Company or any affiliated entity. For purposes of this Agreement, a “customer” of the Company or any affiliated entity shall mean those customers of the Company or an affiliated entity who held a deposit account or otherwise transacted business with the Company or an affiliated entity at any time within the twelve (12) months preceding termination of Executive’s employment. Nothing contained in this Agreement is intended to prohibit general advertising or solicitation not specifically directed at any or all of the Company’s or an affiliated entity’s customers or employees.

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(c) Non-Competition.

(i) As part of the consideration for the compensation and benefits to be paid to Executive hereunder, to protect the trade secrets and Confidential Information of the Company and its customers and clients that have been and will be entrusted to Executive, the business goodwill of the Company and its subsidiaries that will be developed in and through Executive and the business opportunities that will be disclosed or entrusted to Executive by the Company and its subsidiaries, and as an additional incentive for the Company to enter into this Agreement, during the Covered Period, Executive shall not directly or indirectly, individually or on behalf of any other person or entity, manage, participate in, work for, consult with, render services for, or take an interest in (as an owner, stockholder, partner or lender) any Competitor in an area of Competing Business.

(ii) For purposes of Section 9(c)(i):

(A) “Competitor” means any business, company or individual which is in, or is actively seeking to be in the Competing Business.

(B) “Competing Business” means the acquisition, exploration, exploitation, development, production and/or operation of oil and gas properties.

(iii) Executive acknowledges that each of the covenants of Section 9(c)(i) are in addition to, and shall not be construed as a limitation upon, any other covenant provided in Section 9. Executive agrees that the scope of prohibited activities and time duration of each of the covenants set forth in Section 9(c)(i) are reasonable in nature and are no broader than are necessary to maintain the confidentiality and the goodwill of the Company’s proprietary and Confidential Information, plans and services and to protect the other legitimate business interests of the Company, including without limitation the goodwill developed by Executive with the Company’s customers, suppliers, licensees and business relations. It is also the intent of the Company and Executive that such covenants be construed and enforced in accordance with the changing activities, business and locations of the Company throughout the term of this covenant, whether before or after the Date of Termination. Executive agrees not to challenge the enforceability, scope or reasonableness of the covenants in Section 9(c)(i). The covenants in Section 9(c)(i) are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope or duration set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed.

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(iv) If, during any portion of the Covered Period, Executive is not in compliance with the terms of Section 9(c)(i), the Company shall be entitled to, among other remedies, compliance by Executive with the terms of Section 9(c)(i) for an additional period of time (i.e., in addition to the Covered Period) that shall equal the period(s) over which such noncompliance occurred.

(v) Nothing in this Section 9(c) shall prohibit: (A) direct or indirect ownership of publicly traded securities which are issued by a Competitor involved in or conducting a Competing Business, provided that Executive, directly or indirectly, does not own more than 5% of the outstanding equity or voting securities of such Competitor; (B) ownership of royalty interests where Executive owns the surface of the land covered by the royalty interest and the ownership of the royalty interest is incidental to the ownership of such surface estate, provided that any such surface estate does not adjoin, or is not near to, any property ownership interest held directly or indirectly by the Company; (C) direct or indirect ownership of royalty interests or overriding royalty interests owned prior to the Effective Date; or (D) direct or indirect ownership of working interests or other interests in oil and gas owned prior to the Effective Date and disclosed by Executive to the Company in writing. It is the intent of the Company that during the Term of this Agreement Executive is not acquiring additional oil and gas interests, directly or indirectly.

(d) Obligations of Executive Upon Termination. Upon termination of Executive’s employment for any reason, Executive shall return to the Company all documents and copies, including hard and electronic copies, of documents in his possession relating to any Confidential Information including, but not limited to, internal and external business forms, manuals, correspondence, notes and computer programs, and Executive shall not make or retain any copy or extract of any of the foregoing. In addition, Executive shall resign from all positions held with the Company or any affiliated entities.

(e) Remedies. Executive acknowledges and understands that Sections 9(a), (b), (c) and (d) and the other provisions of this Agreement are of a special and unique nature, the loss of which cannot be adequately compensated for in damages by an action at law, and that the breach or threatened breach of the provisions of this Agreement would cause the Company irreparable harm. In the event of a breach or threatened breach by Executive of the provisions of this Agreement, the Company shall be entitled to an injunction restraining him from such breach. Nothing contained in this Agreement shall be construed as prohibiting the Company from pursuing, or limiting the Company’s ability to pursue, any other remedies available for any breach or threatened breach of this Agreement by Executive. The provision of Section 12 hereof relating to arbitration of disputes shall not be applicable to the Company to the extent it seeks an injunction in any court to restrain Executive from violating Sections 9(a), (b), (c) and (d) hereof.

(f) Continuing Operation. Except as specifically provided in this Section 9, the termination of Executive’s employment or of this Agreement will have no effect on the continuing operation of this Section 9.

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(g) Additional Related Agreements. Executive agrees to sign and to abide by the provisions of any additional agreements, policies or requirements of the Company which are reasonable and related to the subject of this Section 9 which are in writing and are developed by the Company in the ordinary course of business.

10. Release. Notwithstanding any other provisions of this Agreement, it shall be a condition to Executive’s right to receive the amounts provided for in Section 7(a), 7(b) or 7(d) of this Agreement, that Executive will execute and deliver to the Company a release of claims in substantially the form attached hereto as Exhibit C (the “Release”) within twenty-one (21) days following the Date of Termination and that Executive not revoke such release within seven (7) days thereafter. The form of the Release may be modified as needed to reflect changes in the applicable law or regulations that are needed to provide a legally enforceable and binding Release to all parties at the time of execution.

11. Indemnification and Insurance. Executive shall be indemnified and held harmless by the Company during the term of this Agreement and following any termination of this Agreement for any reason whatsoever in the same manner as would any other key management employee of the Company with respect to acts or omissions occurring prior to (a) the termination of this Agreement or (b) the termination of employment of Executive. In addition, during the term of this Agreement and for a period of six years following the termination of this Agreement for any reason whatsoever, Executive shall be covered by a Company held liability insurance policy, covering acts or omissions occurring prior to (i) the termination of this Agreement or (ii) the termination of employment of Executive.

12. Arbitration; Legal Fees and Expenses. The parties agree that Executive’s employment and this Agreement relate to interstate commerce, and that any disputes, claims or controversies between Executive and the Company which may arise out of or relate to Executive’s employment relationship or this Agreement shall be settled by arbitration. This agreement to arbitrate shall survive the termination of this Agreement. Any arbitration shall be in accordance with the Rules of the American Arbitration Association and undertaken pursuant to the Federal Arbitration Act. Arbitration will be held in Oklahoma City, Oklahoma unless the parties mutually agree on another location. The decision of the arbitrator(s) will be enforceable in any court of competent jurisdiction. The parties agree that punitive, liquidated or indirect damages shall not be awarded by the arbitrator(s) unless such damages would have been awarded by a court of competent jurisdiction. Nothing in this agreement to arbitrate, however, shall preclude the Company from obtaining injunctive relief from a court of competent jurisdiction prohibiting any ongoing breaches by Executive of this Agreement including, without limitation, violations of Section 9. If any contest or dispute arises between the Company and Executive regarding any provision of this Agreement, the arbitrator may award to the prevailing party, the reasonable attorney fees, costs and expenses incurred by the prevailing party in connection with such contest or dispute.

13. Maximum Payments by the Company.

(a) It is the objective of this Agreement to maximize Executive’s Net After-Tax Benefit (as defined herein) if payments or benefits provided under this Agreement are subject to excise tax under Section 4999 of the Code. Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit by the Company or otherwise to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, including, by example and not by way of limitation, acceleration by the Company or otherwise of the date of vesting or payment or rate of payment under any plan, program, arrangement or agreement of the Company (all such payments and benefits, including the payments and benefits under Section 7 hereof, being hereinafter referred to as the “Total Payments”), would be subject (in whole or in part) to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the cash severance payments shall first be reduced, and the non-cash severance payments shall thereafter be reduced, to the extent necessary so that no portion of the Total Payments shall be subject to the Excise Tax, but only if (i) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments), is greater than or equal to (ii) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which Executive would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments).

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(b) The Total Payments shall be reduced by the Company in the following order: (i) reduction of any cash severance payments otherwise payable to Executive that are exempt from Section 409A of the Code, (ii) reduction of any other cash payments or benefits otherwise payable to Executive that are exempt from Section 409A of the Code, but excluding any payments attributable to the acceleration of vesting or payments with respect to any equity award with respect to the Company’s common stock that is exempt from Section 409A of the Code, (iii) reduction of any other payments or benefits otherwise payable to Executive on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payments attributable to the acceleration of vesting and payments with respect to any equity award with respect to the Company’s common stock that are exempt from Section 409A of the Code, and (iv) reduction of any payments attributable to the acceleration of vesting or payments with respect to any other equity award with respect to the Company’s common stock that are exempt from Section 409A of the Code.

(c) For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the written opinion of independent auditors of nationally recognized standing (“Independent Advisors”) selected by the Company, does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the opinion of Independent Advisors, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the “base amount” (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Independent Advisors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. The costs of obtaining such determination shall be borne by the Company.

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14. Agreement Binding on Successors.

(a) Company’s Successors. No rights or obligations of the Company under this Agreement may be assigned or transferred except that the Company will require any successor (whether direct or indirect, by purchase, merger, reorganization, sale, transfer of stock, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no succession had taken place. As used in this Agreement, “Company” means the Company as herein defined, and any successor to its or the Company’s business and/or assets (by merger, purchase or otherwise) which executes and delivers the agreement provided for in this Section 14 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

(b) Executive’s Successors. No rights or obligations of Executive under this Agreement may be assigned or transferred by Executive other than his rights to payments or benefits under this Agreement, which may be transferred only by will or the laws of descent and distribution. Upon Executive’s death, this Agreement and all rights of Executive under this Agreement shall inure to the benefit of and be enforceable by Executive’s beneficiary, or personal or legal representatives, or estate, to the extent any such person succeeds to Executive’s interests under this Agreement. In the event of Executive’s death or a judicial determination of his incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to his estate or other legal representative(s). If Executive should die following his Date of Termination while any amounts would still be payable to him under this Agreement if he had continued to live, unless otherwise provided, all such amounts shall be paid in accordance with the terms of this Agreement to his beneficiary or personal or legal representatives or estate.

15. Notice. For the purposes of this Agreement, notices, demands and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered either personally or by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows:

If to Executive:

At his last known address

evidenced on the Company’s

payroll records.

If to the Company:

Chaparral Energy, Inc.

701 Cedar Lake Boulevard

Oklahoma City, OK 73114

or to such other address as any party may have furnished to the other in writing in accordance with this Agreement, except that notices of change of address shall be effective only upon receipt.

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16. Section 409A.

(a) To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretative guidance issued thereunder, including without limitation any such regulations or other such guidance that may be issued after the Effective Date (“Section 409A”). Notwithstanding any provision of this Agreement to the contrary, in the event that following the Effective Date, the Company determines in good faith that any compensation or benefits payable under this Agreement may not be either exempt from or compliant with Section 409A, the Company shall adopt such amendments to this Agreement or adopt other policies or procedures (including amendments, policies and procedures with retroactive effective), or take any other commercially reasonable actions necessary or appropriate to (i) preserve the intended tax treatment of the compensation and benefits payable hereunder, to preserve the economic benefits of such compensation and benefits, and/or to avoid less favorable accounting or tax consequences for the Company and/or (ii) to exempt the compensation and benefits payable hereunder from Section 409A or to comply with the requirements of Section 409A and thereby avoid the application of penalty taxes thereunder; provided, however, that this Section 17(a) does not, and shall not be construed so as to, create any obligation on the part of the Company to adopt any such amendments, policies or procedures or to take any other such actions or to indemnify Executive for any failure to do so.

(b) Notwithstanding anything herein to the contrary, Executive acknowledges and agrees that in the event that any tax is imposed under Section 409A in respect to any compensation or benefits payable to Executive, whether under this Agreement or otherwise, then (i) the payment of such tax shall be solely Executive’s responsibility, (ii) neither the Company, its affiliates nor any of their respective past or present directors, officers, employees or agents shall have any liability for any such tax and (iii) Executive shall indemnify and hold harmless, to the greatest extent permitted under law, each of the foregoing from and against any claims or liabilities that may arise in respect of any such tax.

(c) To the extent that any of the rights or potential rights to future payments under the Change of Control Severance Agreement constitute “nonqualified deferred compensation” (within the meaning of Section 409A), if any, the termination of such rights is undertaken in accordance with and as permitted under Internal Revenue Code Treasury Regulation § 1.409A-3(j)(ix)(B).

17. Withholding. All payments hereunder will be subject to any required withholding of federal, state and local taxes pursuant to any applicable law or regulation

18. Miscellaneous. No provisions of this Agreement may be amended, modified, or waived unless agreed to in writing and signed by Executive and by a duly authorized officer of the Company. No waiver by either party of any breach by the other party of any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. The respective rights and obligations of the parties under this Agreement shall survive Executive’s termination of employment and the termination of this Agreement to the extent necessary for the intended preservation of such rights and obligations. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Oklahoma without regard to its conflicts of law principles.

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19. Validity. The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, which will remain in full force and effect.

20. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument.

21. Section Headings. The section headings in this Agreement are for convenience of reference only, and they form no part of this Agreement and will not affect its interpretation.

22. Entire Agreement. Except as provided elsewhere herein and except for the other documents and agreements contemplated in accordance herewith, this Agreement sets forth the entire agreement of the parties with respect to its subject matter and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party to this Agreement with respect to such subject matter, including, without limitation the Change of Control Severance Agreement.

23. Further Assurances. The parties hereby agree, without further consideration, to execute and deliver such other instruments or to take such other action as may reasonably be required to effectuate the terms and provisions of this Agreement.

*    *    *    *

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IN WITNESS WHEREOF, the parties have executed this Agreement effective the date first above written.

CHAPARRAL ENERGY, INC.
By:	/s/ Mark A. Fischer
	Mark A. Fischer
	President & Chief Executive Officer
	“COMPANY”
/s/ James M. Miller
James M. Miller
“EXECUTIVE”

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EXHIBIT A

TIME-VESTED RESTRICTED STOCK AGREEMENT

A-1

EXHIBIT B

PERFORMANCE-VESTED RESTRICTED STOCK AGREEMENT

B-1

EXHIBIT C

GENERAL RELEASE

NOTICE. Various laws, including Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Pregnancy Discrimination Act of 1978, the Equal Pay Act, the Civil Rights Act of 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Americans With Disabilities Act, the Employee Retirement Income Security Act and the Veterans Reemployment Rights Act (all as amended from time to time), prohibit employment discrimination based on sex, race, color, national origin, religion, age, disability, eligibility for covered employee benefits and veteran status. You may also have rights under laws such as the Older Worker Benefit Protection Act of 1990, the Worker Adjustment and Retraining Act of 1988, the Fair Labor Standards Act, the Family and Medical Leave Act, the Occupational Health and Safety Act and other federal, state and/or municipal statutes, orders or regulations pertaining to labor, employment and/or employee benefits. These laws are enforced through the United States Department of Labor and its agencies, including the Equal Employment Opportunity Commission (EEOC), and various state and municipal labor departments, fair employment boards, human rights commissions and similar agencies.

This General Release is being provided to you in connection with the Employment Agreement between you and Chaparral Energy, Inc., dated April 12, 2010 (the “Agreement”). The federal Older Worker Benefit Protection Act requires that you have at least twenty-one (21) days, if you want it, to consider whether you wish to sign a release such as this one in connection with a special, individualized severance package. You have until the close of business twenty-one (21) days from the date you receive this General Release to make your decision. You may not sign this General Release until, at the earliest, your official date of separation from employment.

BEFORE EXECUTING THIS GENERAL RELEASE YOU SHOULD REVIEW THESE DOCUMENTS CAREFULLY AND CONSULT WITH YOUR ATTORNEY.

You may revoke this General Release within seven (7) days after you sign it and it shall not become effective or enforceable until that revocation period has expired. If you do not accept the severance package and sign and return this General Release, or if you exercise your right to revoke the General Release after signing it, you will not be eligible for the special, individualized severance package. Any revocation must be in writing and must be received by Chaparral Energy, Inc., 701 Cedar Lake Boulevard, Oklahoma City, OK 73114, within the seven-day period following your execution of this General Release.

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GENERAL RELEASE

In consideration of the special, individualized severance package offered to me by Chaparral Energy, Inc. and the separation benefits I will receive as reflected in the Employment Agreement between me and Chaparral Energy, Inc. dated April 12, 2010 (the “Agreement”), I hereby release and discharge Chaparral Energy, Inc. and its predecessors, successors, affiliates, parent, subsidiaries and partners and each of those entities’ employees, officers, directors and agents (hereafter collectively referred to as the “Company”) from all claims, liabilities, demands, and causes of action, known or unknown, fixed or contingent, which I may have or claim to have against the Company either as a result of my past employment with the Company and/or the severance of that relationship and/or otherwise, and hereby waive any and all rights I may have with respect to and promise not to file a lawsuit to assert any such claims.

This General Release includes, but is not limited to, claims arising under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Pregnancy Discrimination Act of 1978, the Equal Pay Act, the Civil Rights Act of 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Americans With Disabilities Act, the Employee Retirement Income Security Act or 1974 and the Veterans Reemployment Rights Act (all as amended from time to time). This General Release also includes, but is not limited to, any rights I may have under the Older Workers Benefit Protection Act of 1990, the Worker Adjustment and Retraining Act of 1988, the Fair Labor Standards Act, the Family and Medical Leave Act, the Occupational Health and Safety Act and any other federal, state and/or municipal statutes, orders or regulations pertaining to labor, employment and/or employee benefits. This General Release also applies to any claims or rights I may have growing out of any legal or equitable restrictions on the Company’s rights not to continue an employment relationship with its employees, including any express or implied employment contracts, and to any claims I may have against the Company for fraudulent inducement or misrepresentation, defamation, wrongful termination or other retaliation claims in connection with workers’ compensation or alleged “whistleblower” status or on any other basis whatsoever.

It is specifically agreed, however, that this General Release does not have any effect on any rights or claims I may have against the Company which arise after the date I execute this General Release or on any vested rights I may have under any of the Company’s qualified or non-qualified benefit plans or arrangements as of or after my last day of employment with the Company, or on any of the Company’s obligations under the Agreement or as otherwise required under the Consolidated Omnibus Budget and Reconciliation Act of 1985 (COBRA).

I have carefully reviewed and fully understand all the provisions of the Agreement and General Release, including the foregoing Notice. I have not relied on any representation or statement, oral or written, by the Company or any of its representatives, which is not set forth in those documents.

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The Agreement and this General Release, including the foregoing Notice, set forth the entire agreement between me and the Company with respect to this subject. I understand that my receipt and retention of the separation benefits covered by the Agreement are contingent not only on my execution of this General Release, but also on my continued compliance with my obligations under the Agreement that survive and continue in effect in accordance with the respective terms thereof, notwithstanding any termination of employment, including, without limitation, Section 9 thereof. I acknowledge that the Company gave me twenty-one (21) days to consider whether I wish to accept or reject the separation benefits I am eligible to receive under the Agreement in exchange for this General Release. I also acknowledge that the Company advised me to seek independent legal advice as to these matters, if I chose to do so. I hereby represent and state that I have taken such actions and obtained such information and independent legal or other advice, if any, that I believed were necessary for me to fully understand the effects and consequences of the Agreement and General Release prior to signing those documents.

Dated this      day of                     ,             .

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EX-10.27

Exhibit 10.27

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of the 12th day of April, 2010, is entered into by and between CHAPARRAL ENERGY, INC., a Delaware corporation (the “Company”), CHAPARRAL ENERGY, LLC (the “Employer”) and Robert W. Kelly II (“Executive”).

IN CONSIDERATION of the premises and the mutual covenants set forth below, and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

WHEREAS, the Company desires to retain Executive as its employee and believes it is necessary to enter into this Agreement to provide the proper incentive to Executive; and

WHEREAS, the Company and Executive previously entered into that certain Change of Control Severance Agreement dated as of July 1, 2007, and amended as of December 31, 2008 (the “Change of Control Severance Agreement”), and the parties hereto acknowledge and agree that the Change of Control Severance Agreement, and all of Executive’s rights and interest therein and thereunder, are hereby cancelled and terminated upon the effectiveness of this Agreement, in consideration of the parties hereto entering into this Agreement.

1. Term. Subject to the provisions for earlier termination hereinafter provided, Executive’s employment with the Company under this Agreement shall be for a term (the “Term”) commencing upon April 12, 2010 (the “Effective Date”) and ending on the third-year anniversary of the Effective Date; provided, however, that commencing on the date that is the third anniversary of the Effective Date, the Term shall be automatically extended so as to terminate on the second anniversary of such date, and the Term shall be automatically extended so as to terminate on each anniversary thereafter (each such anniversary referred to as a “Renewal Date”). Notwithstanding the foregoing, if at least ninety (90) days prior to any Renewal Date, the Company gives Executive written notice that the Term will not be so extended, this Agreement will continue for the remainder of the then current Term and automatically expire upon its completion. The Term may be sooner terminated under Section 5 of this Agreement.

2. Position and Duties. During the Term, Executive will serve as Senior Vice President-General Counsel of the Company and will report directly to the Chief Executive Officer of the Company (the “CEO”). Executive shall devote Executive’s best efforts and full business time and attention to perform all services reasonably required to fully execute the duties and responsibilities associated with the Company, its subsidiaries and its affiliates as directed by the CEO. Notwithstanding the above, Executive will be permitted, to the extent such activities do not interfere with the performance by Executive of his duties and responsibilities under this Agreement or violate this Agreement, to (i) manage Executive’s personal, financial and legal affairs, and (ii) serve on industry, civic or charitable boards or committees. Executive agrees to observe and comply with the rules and policies of the Company, as in effect from time to time, including, without limitation, any rules and policies relating to Executive obligations to the Company upon a termination of employment.

3. Place of Performance. During the Term, Executive’s place of employment will be the Company’s principal executive offices in Oklahoma City, Oklahoma (the “Principal Location”), except for travel to other locations as may be necessary to fulfill Executive’s duties and responsibilities hereunder.

4. Compensation and Related Matters.

(a) Base Salary. During the Term, the Company will pay Executive a base salary of not less than $273,798 per year (“Base Salary”), in accordance with the Company’s customary payroll practices. Executive’s Base Salary may be increased, but not decreased unless the base salaries for all executive officers of the Company are decreased, pursuant to annual review by the Compensation Committee (the “Compensation Committee”) of the Board of Directors of the Company (the “Board”) in its discretion. In the event that Executive’s Base Salary is increased, the increased amount will then constitute the Base Salary for all purposes of this Agreement.

(b) Annual Bonus Incentives. In addition to the Base Salary, Executive shall be eligible to participate in and earn an annual cash bonus under any annual incentive plan established by the Board so long as the terms of any such plan allow participation by the executive officers of the Company (“Annual Bonus”). The target Annual Bonus for Executive shall be equal to 70% of Executive’s current Base Salary, but the actual Annual Bonus shall be determined by the Compensation Committee, in consultation with the CEO, in accordance with the terms of such plan, in effect at that time, if any. The terms for the payment of any Annual Bonus shall be determined by the Compensation Committee, in consultation with the CEO, in accordance with the terms of such plan in effect at that time, if any.

(c) Equity Grant. Subject to adoption by the Board and approval by Company’s shareholders of the Company’s 2010 Equity Incentive Plan (the “Plan”), the Company shall grant to Executive shares of restricted stock (the “Restricted Stock”) under the Plan, consisting of 1,061 time-vesting shares (the “Time-Vested Restricted Stock”) and 4,980 performance-vesting shares (the “Performance-Vested Restricted Stock”). Consistent with the foregoing, the terms and conditions of the Time-Vested Restricted Stock shall be set forth in an award agreement (the “Time-Vested Restricted Stock Agreement”) substantially in the form attached hereto as Exhibit A, and the terms and conditions of the Performance-Vested Restricted Stock shall be set forth in an award agreement (the “Performance-Vested Restricted Stock Agreement” and, together with the Time-Vested Restricted Stock Agreement, the “Restricted Stock Agreements”) substantially in the form attached hereto as Exhibit B, which together shall evidence the grant of the Restricted Stock. Subject to this Section 4(c), the Time-Vested Restricted Stock and the Performance-Vested Restricted Stock shall be governed in all respects by the terms of the Plan and the applicable Restricted Stock Agreement.

(d) Welfare, Pension and Incentive Benefit. During the Term, Executive (and Executive’s spouse and/or eligible dependents to the extent provided in the applicable plans and programs) will be eligible to participate in and be covered under all the welfare benefit plans or programs maintained by the Company or Employer for the benefit of its senior executive officers pursuant to the terms of such plans and programs including, without limitation, all medical, life, hospitalization, dental, disability, accidental death and dismemberment and travel accident insurance plans and programs. In addition, during the Term, Executive will be eligible to participate in all pension, retirement, savings and other employee benefit plans and programs maintained from time to time by the Company or Employer for the benefit of its senior executive officers.

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(e) Vacation. Executive shall be entitled to paid vacation in accordance with the Employer’s vacation policy during the Term. Executive may use his vacation in a reasonable manner based upon the business needs of the Company.

(f) Fringe Benefits. During the Term, the Company will provide Executive with such other fringe benefits as commensurate with Executive’s position.

(g) Expenses. Executive will be entitled to receive prompt reimbursement for all reasonable business expenses incurred by Executive in accordance with the Company’s and Employer’s expense reimbursement policy during the Term. All payments under this Section 4(g) shall be paid to Executive on or before the last day of Executive’s taxable year following the taxable year in which Executive incurred such expenses.

5. Termination of Employment. Executive’s employment under this Agreement may be terminated during the Term under the following circumstances:

(a) Death. Executive’s employment under this Agreement will terminate upon his death.

(b) Disability. Upon Executive’s Disability, Executive will receive a Notice of Termination (as defined in Section 6(a)) from the Company. If Executive does not return to the substantial performance of his duties on a full-time basis within thirty (30) days of such Notice of Termination, the Company has the right to terminate Executive’s employment under this Agreement for Disability, and such termination will not be a breach of this Agreement by the Company. For purposes of this Agreement, “Disability” means Executive’s incapacity due to physical or mental illness whereby Executive is substantially unable to perform his duties under this Agreement (with or without reasonable accommodation, as defined under the Americans With Disabilities Act) for a period of six (6) consecutive months.

(c) Cause. The Company has the right to terminate Executive’s employment for Cause by providing Executive with a Notice of Termination, and such termination will not be a breach of this Agreement by the Company. For purposes of this Agreement, “Cause” means the occurrence of any one or more of the following events: (i) Executive’s conviction of, or entry by Executive of a guilty or no contest plea to a felony or crime involving moral turpitude; (ii) Executive’s willful commission of an act of fraud or dishonesty resulting in economic or financial injury to the Company or any affiliate; (iii) Executive’s willful failure to substantially perform or gross neglect of Executive’s duties, including, but not limited to, the failure to follow any lawful directive of the CEO, within the reasonable scope of Executive’s duties; (iv) Executive’s performance of acts materially detrimental to the Company or any affiliate, unless otherwise approved in advance by the Board or the Compensation Committee; (v) Executive’s use of narcotics, alcohol, or illicit drugs in a manner that has or may reasonably be expected to have a detrimental effect on Executive’s performance of his duties as an employee of the Company or on the reputation of the Company or any affiliate; (vi) Executive’s commission of a material violation of any rule or policy sponsored by the Company which results in injury to the Company; or (vii) Executive’s material breach of this Agreement, including, but not limited to, Executive’s material breach of the covenants set forth in Section 9 hereof.

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(d) Good Reason. Executive may terminate Executive’s employment with the Company for “Good Reason,” and such termination will not be a breach of this Agreement by Executive. For purposes of this Agreement, “Good Reason” shall mean the occurrence without the written consent of Executive, of one of the events set forth below:

(i) a material diminution in Executive’s authority, duties or responsibilities combined with a demotion in Executive’s pay grade ranking;

(ii) the reduction by the Company of Executive’s Base Salary by more than ten percent (10%) (unless done so for all executive officers of the Company);

(iii) the requirement that Executive be based at any office or location that is more than 50 miles from the Principal Location, except for travel reasonably required in the performance of Executive’s responsibilities; or

(iv) any other action or inaction that constitutes a material breach by the Company of this Agreement such as the failure of any successor to the Company to assume this Agreement pursuant to Section 14.

Notwithstanding the foregoing, Executive will not be deemed to have terminated for Good Reason unless (A) Executive provides written notice to the Company of the existence of one of the conditions described above within ninety (90) days after Executive has knowledge of the initial existence of the condition, (B) the Company fails to remedy the condition so identified within thirty (30) days after receipt of such notice (if capable of correction), (C) Executive provides a Notice of Termination to the Company within thirty (30) days of the expiration of the Company’s period to remedy the condition, and (D) Executive terminates employment within ninety (90) days after Executive provides written notice to the Company of the existence of the condition referred to in clause (A).

(e) Without Cause. The Company has the right to terminate Executive’s employment under this Agreement without Cause by providing Executive with a Notice of Termination.

(f) Without Good Reason. Executive may voluntarily terminate employment with the Company without Good Reason at any time by providing the Company with a Notice of Termination.

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6. Termination Procedure.

(a) Notice of Termination. Any termination of Executive’s employment by the Company or by Executive during the Term (other than termination pursuant to Section 5(a)) will be communicated by Notice of Termination to the other party in accordance with Section 15. For purposes of this Agreement, a “Notice of Termination” means a written notice which indicates the specific termination provision in this Agreement relied upon and sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment.

(b) Date of Termination. “Date of Termination” shall mean (i) if Executive’s employment is terminated by his death, the date of his death, (ii) if Executive’s employment is terminated due to Disability pursuant to Section 5(b), thirty (30) days after Notice of Termination (provided that Executive has not returned to the substantial performance of his duties on a full-time basis during such thirty (30) day period), (iii) if Executive’s employment is terminated for Good Reason pursuant to Section 5(d), the date on which a Notice of Termination provided in accordance with such Section is given or any later date (within thirty (30) days after the giving of such Notice of Termination) set forth in such Notice of Termination, (iv) if Executive’s employment is terminated voluntarily by Executive without Good Reason pursuant to Section 5(f), thirty (30) days after Notice of Termination, or (v) if Executive’s employment is terminated for any other reason, the date on which a Notice of Termination is given or any later date (within thirty (30) days after the giving of such Notice of Termination) set forth in such Notice of Termination.

7. Obligations of the Company Upon Termination. In the event Executive’s employment under this Agreement terminates during the Term and such termination constitutes a “separation from service” from the Company (within the meaning of Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (the “Code”), and Treasury Regulation Section 1.409A-1(h)) (“Separation from Service”), the Company will provide Executive with the payments and benefits set forth below.

(a) Termination by Company Without Cause or by Executive for Good Reason Not Following Change in Control. If Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason at any time that is not within two (2) years after the occurrence of a “Change in Control” (as defined below):

(i) The Company will pay to Executive in a single lump sum payment within thirty (30) days after the Date of Termination, the aggregate amount of (A) any earned but unpaid Base Salary, (B) any Annual Bonus required to be paid to Executive pursuant to Section 4(b) for any fiscal year of the Company that ends on or before the Date of Termination to the extent not previously paid, (C) accrued but unpaid vacation pay through the Date of Termination, and (D) reasonable business expenses incurred but unpaid through the Date of Termination (together, the “Accrued Obligations”);

(ii) Subject to Sections 7(f) and 10 below, the Company will pay to Executive an amount equal to 1.5 (the “Severance Multiple”) times the sum of (x) Executive’s Base Salary in effect on the Date of Termination plus (y) the Annual Bonus granted to Executive for the fiscal year of the Company immediately on or preceding the Date of Termination, payable in the form of a salary continuation for a period of months equal to the product of 12 times the Severance Multiple; provided, however, that the first such payment shall not be made until the Company’s first payroll date occurring on or after the 30th day following the Date of Termination (the “First Payroll Date”) and any amounts that would otherwise have been paid pursuant to this Section 7(a)(ii) prior to the First Payroll Date shall instead be paid on the First Payroll Date. Each payment under this Section 7(a)(ii) shall be treated as a separate payment for purposes of Section 409A of the Code.

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(iii) Subject to Sections 7(f) and 10 below, the Company will maintain in full force and effect, for the continued benefit of Executive (and Executive’s spouse and/or eligible dependents, as applicable) for a period of eighteen (18) months following the Date of Termination, participation by Executive (and Executive’s spouse and/or eligible dependents, as applicable) in the medical, hospitalization, and dental programs maintained by the Company for the benefit of its senior executive officers as in effect on the Date of Termination, at such level and terms and conditions (including, without limitation, contributions required by Executive for such benefits) as in effect on the Date of Termination; provided, if Executive (or his spouse) is eligible for Medicare or a similar type of governmental medical benefit, such benefit shall be the primary provider before Company medical benefits are provided. However, if Executive becomes reemployed with another employer and is eligible to receive medical, hospitalization and dental benefits under another employer–provided plan, the medical, hospitalization and dental benefits described herein shall be secondary to those provided under such other plan during the applicable period. If any plan pursuant to which such benefits are provided is not, or ceases prior to the expiration of the period of continuation coverage to be, exempt from the application of Section 409A of the Code under Treasury Regulation Section 1.409A-1(a)(5), then an amount equal to each remaining premium payment shall thereafter be paid to Executive as currently taxable compensation in substantially equal monthly installments over the continuation coverage period (or the remaining portion thereof).

(iv) For purposes of this Agreement, “Change in Control” shall mean:

(A) The consummation of any transaction or series of related transactions involving the sale of the Company’s outstanding securities (but excluding a public offering of the Company’s capital stock) for securities or other consideration issued or paid or caused to be issued or paid by such other corporation or an affiliate thereof and which result in this Company’s shareholders (or their affiliates) immediately prior to such transaction not holding at least a majority of the voting power of the surviving or continuing entity following such transaction; or

(B) The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets or (z) the acquisition of assets or stock of another entity, in each case, other than a transaction which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction.

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(b) Termination by Company Without Cause or by Executive for Good Reason Following Change in Control. If at any time within two (2) years after a Change in Control, Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason, then Executive shall be entitled to the payments and benefits provided in Section 7(a) hereof, subject to the terms and conditions thereof (including, without limitation, the requirement that a condition to Executive’s right to receive the amounts provided for thereunder is that Executive execute, deliver and not revoke the Release as set forth in Section 10 below), except that for purposes of this Section 7(b), the Severance Multiple shall equal 2; provided, however, that if such Change of Control occurs as a result of the sale or other disposition of all or substantially all of the Company’s assets, then the severance payment described in Section 7(a)(ii) hereof shall be payable in the form of a lump sum within sixty (60) days of the Date of Termination.

(c) Termination by Company for Cause or by Executive Without Good Reason. If Executive’s employment is terminated by the Company for Cause or by Executive without Good Reason, the Company will pay Executive within thirty (30) days after the Date of Termination the Accrued Obligations; provided, however, the amounts described in Section 7(a)(i)(D) shall not be paid to Executive if Executive’s employment was terminated by the Company for Cause due to Executive’s misappropriation of Company funds.

(d) Disability. During any period that Executive fails to perform Executive’s duties under this Agreement as a result of incapacity due to physical or mental illness, Executive will continue to receive his full Base Salary set forth in Section 4(a) until his employment is terminated pursuant to Section 5(b). If Executive’s employment is terminated due to Disability pursuant to Section 5(b), subject to Sections 7(f) and 10 below, the Company will pay Executive within thirty (30) days after the Date of Termination the Accrued Obligations, plus a pro rata share of the Annual Bonus for the fiscal year of the Company in which the Date of Termination occurs.

(e) Death. If Executive’s employment is terminated by death, the Company will pay to Executive’s beneficiary, or personal or legal representatives or estate, as the case may be, within thirty (30) days after the Date of Termination the Accrued Obligations, plus a pro rata share of the Annual Bonus for the fiscal year of the Company in which the Date of Termination occurs.

(f) Six-Month Delay. Notwithstanding anything to the contrary in this Agreement, no compensation or benefits, including without limitation any severance payments or benefits payable under Section 7 hereof, shall be paid to Executive during the six (6)-month period following Executive’s Separation from Service if the Company determines that paying such amounts at the time or times indicated in this Agreement would be a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code. If the payment of any such amounts is delayed as a result of the previous sentence, then on the first business day following the end of such six (6)-month period (or such earlier date upon which such amount can be paid under Section 409A of the Code without resulting in a prohibited distribution, including as a result of Executive’s death), the Company shall pay Executive a lump-sum amount equal to the cumulative amount that would have otherwise been payable to Executive during such period.

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8. Mitigation. Executive will not be required to mitigate amounts payable under this Agreement by seeking other employment or otherwise, and there will be no offset against amounts due Executive under this Agreement on account of subsequent employment except as specifically provided herein.

9. Confidential Information; Non-Solicitation; Non-Competition.

(a) Nondisclosure of Confidential Information. Executive acknowledges that it is the policy of the Company to maintain as secret and confidential (i) all valuable and unique information, (ii) other information heretofore or hereafter acquired by the Company, or any affiliated entity and deemed by it to be confidential, and (iii) information developed or used by the Company or any affiliated entity relating to the business, operations, employees and customers of the Company or any affiliated entity including, but not limited to, any employee information (all such information described in clauses (i), (ii) and (iii) above, other than information which is known to the public or becomes known to the public through no fault of Executive, is hereinafter referred to as “Confidential Information”). The parties recognize that the services to be performed by Executive pursuant to this Agreement are special and unique and that by reason of his employment by the Company after the date hereof, Executive has acquired and will acquire Confidential Information. Executive recognizes that all such Confidential Information is the property of the Company. Accordingly, at any time during or after the Term, Executive shall not, except in the proper performance of his duties under this Agreement, directly or indirectly, without the prior written consent of the Company, disclose to any Person other than the Company, whether or not such Person is a competitor of the Company, and shall use his best efforts to prevent the publication or disclosure of any Confidential Information obtained by, or which has come to the knowledge of, Executive prior or subsequent to the date hereof. Notwithstanding the foregoing, Executive may disclose to other Persons, as part of his occupation, information with respect to the Company or any affiliated entity, which (i) is of a type generally not considered by standards of the oil and natural gas industry to be proprietary, or (ii) is otherwise consented to in writing by the Company.

(b) Non-Solicitation. Executive shall not, during the Term or for the period of months equal to the product of 12 times the Severance Multiple following the Date of Termination (the “Covered Period”), either personally or by or through his/her agent or by letters, circulars or advertisements and whether for himself/herself or on behalf of any other person or entity, hire, solicit or seek to hire any employee or consultant of the Company or any affiliated entity, or in any other manner attempt, directly or indirectly, to persuade any such employee or consultant to discontinue his/her status of employment or consultancy with the Company or any affiliated entity or to become hired in any business or activities likely to be competitive with the Company’s or an affiliated entity’s business. Additionally, during the Covered Period, Executive shall not, for himself/herself or on behalf of any person or entity, directly or indirectly, solicit, divert or attempt to solicit or divert any customer of the Company or any affiliated entity for the purpose of causing such customer to reduce or refrain from doing any business with the Company or any affiliated entity. Executive further agrees that, during the Covered Period, he/she will not, directly or indirectly, request or advise any customers of the Company or an affiliated entity to withdraw, curtail or cancel their business with the Company or any affiliated entity. For purposes of this Agreement, a “customer” of the Company or any affiliated entity shall mean those customers of the Company or an affiliated entity who held a deposit account or otherwise transacted business with the Company or an affiliated entity at any time within the twelve (12) months preceding termination of Executive’s employment. Nothing contained in this Agreement is intended to prohibit general advertising or solicitation not specifically directed at any or all of the Company’s or an affiliated entity’s customers or employees.

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(c) Non-Competition.

(i) As part of the consideration for the compensation and benefits to be paid to Executive hereunder, to protect the trade secrets and Confidential Information of the Company and its customers and clients that have been and will be entrusted to Executive, the business goodwill of the Company and its subsidiaries that will be developed in and through Executive and the business opportunities that will be disclosed or entrusted to Executive by the Company and its subsidiaries, and as an additional incentive for the Company to enter into this Agreement, during the Covered Period, Executive shall not directly or indirectly, individually or on behalf of any other person or entity, manage, participate in, work for, consult with, render services for, or take an interest in (as an owner, stockholder, partner or lender) any Competitor in an area of Competing Business.

(ii) For purposes of Section 9(c)(i):

(A) “Competitor” means any business, company or individual which is in, or is actively seeking to be in the Competing Business.

(B) “Competing Business” means the acquisition, exploration, exploitation, development, production and/or operation of oil and gas properties.

(iii) Executive acknowledges that each of the covenants of Section 9(c)(i) are in addition to, and shall not be construed as a limitation upon, any other covenant provided in Section 9. Executive agrees that the scope of prohibited activities and time duration of each of the covenants set forth in Section 9(c)(i) are reasonable in nature and are no broader than are necessary to maintain the confidentiality and the goodwill of the Company’s proprietary and Confidential Information, plans and services and to protect the other legitimate business interests of the Company, including without limitation the goodwill developed by Executive with the Company’s customers, suppliers, licensees and business relations. It is also the intent of the Company and Executive that such covenants be construed and enforced in accordance with the changing activities, business and locations of the Company throughout the term of this covenant, whether before or after the Date of Termination. Executive agrees not to challenge the enforceability, scope or reasonableness of the covenants in Section 9(c)(i). The covenants in Section 9(c)(i) are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope or duration set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed.

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(iv) If, during any portion of the Covered Period, Executive is not in compliance with the terms of Section 9(c)(i), the Company shall be entitled to, among other remedies, compliance by Executive with the terms of Section 9(c)(i) for an additional period of time (i.e., in addition to the Covered Period) that shall equal the period(s) over which such noncompliance occurred.

(v) Nothing in this Section 9(c) shall prohibit: (A) direct or indirect ownership of publicly traded securities which are issued by a Competitor involved in or conducting a Competing Business, provided that Executive, directly or indirectly, does not own more than 5% of the outstanding equity or voting securities of such Competitor; (B) ownership of royalty interests where Executive owns the surface of the land covered by the royalty interest and the ownership of the royalty interest is incidental to the ownership of such surface estate, provided that any such surface estate does not adjoin, or is not near to, any property ownership interest held directly or indirectly by the Company; (C) direct or indirect ownership of royalty interests or overriding royalty interests owned prior to the Effective Date; or (D) direct or indirect ownership of working interests or other interests in oil and gas owned prior to the Effective Date and disclosed by Executive to the Company in writing. It is the intent of the Company that during the Term of this Agreement Executive is not acquiring additional oil and gas interests, directly or indirectly.

(d) Obligations of Executive Upon Termination. Upon termination of Executive’s employment for any reason, Executive shall return to the Company all documents and copies, including hard and electronic copies, of documents in his possession relating to any Confidential Information including, but not limited to, internal and external business forms, manuals, correspondence, notes and computer programs, and Executive shall not make or retain any copy or extract of any of the foregoing. In addition, Executive shall resign from all positions held with the Company or any affiliated entities.

(e) Remedies. Executive acknowledges and understands that Sections 9(a), (b), (c) and (d) and the other provisions of this Agreement are of a special and unique nature, the loss of which cannot be adequately compensated for in damages by an action at law, and that the breach or threatened breach of the provisions of this Agreement would cause the Company irreparable harm. In the event of a breach or threatened breach by Executive of the provisions of this Agreement, the Company shall be entitled to an injunction restraining him from such breach. Nothing contained in this Agreement shall be construed as prohibiting the Company from pursuing, or limiting the Company’s ability to pursue, any other remedies available for any breach or threatened breach of this Agreement by Executive. The provision of Section 12 hereof relating to arbitration of disputes shall not be applicable to the Company to the extent it seeks an injunction in any court to restrain Executive from violating Sections 9(a), (b), (c) and (d) hereof.

(f) Continuing Operation. Except as specifically provided in this Section 9, the termination of Executive’s employment or of this Agreement will have no effect on the continuing operation of this Section 9.

10

(g) Additional Related Agreements. Executive agrees to sign and to abide by the provisions of any additional agreements, policies or requirements of the Company which are reasonable and related to the subject of this Section 9 which are in writing and are developed by the Company in the ordinary course of business.

10. Release. Notwithstanding any other provisions of this Agreement, it shall be a condition to Executive’s right to receive the amounts provided for in Section 7(a), 7(b) or 7(d) of this Agreement, that Executive will execute and deliver to the Company a release of claims in substantially the form attached hereto as Exhibit C (the “Release”) within twenty-one (21) days following the Date of Termination and that Executive not revoke such release within seven (7) days thereafter. The form of the Release may be modified as needed to reflect changes in the applicable law or regulations that are needed to provide a legally enforceable and binding Release to all parties at the time of execution.

11. Indemnification and Insurance. Executive shall be indemnified and held harmless by the Company during the term of this Agreement and following any termination of this Agreement for any reason whatsoever in the same manner as would any other key management employee of the Company with respect to acts or omissions occurring prior to (a) the termination of this Agreement or (b) the termination of employment of Executive. In addition, during the term of this Agreement and for a period of six years following the termination of this Agreement for any reason whatsoever, Executive shall be covered by a Company held liability insurance policy, covering acts or omissions occurring prior to (i) the termination of this Agreement or (ii) the termination of employment of Executive.

12. Arbitration; Legal Fees and Expenses. The parties agree that Executive’s employment and this Agreement relate to interstate commerce, and that any disputes, claims or controversies between Executive and the Company which may arise out of or relate to Executive’s employment relationship or this Agreement shall be settled by arbitration. This agreement to arbitrate shall survive the termination of this Agreement. Any arbitration shall be in accordance with the Rules of the American Arbitration Association and undertaken pursuant to the Federal Arbitration Act. Arbitration will be held in Oklahoma City, Oklahoma unless the parties mutually agree on another location. The decision of the arbitrator(s) will be enforceable in any court of competent jurisdiction. The parties agree that punitive, liquidated or indirect damages shall not be awarded by the arbitrator(s) unless such damages would have been awarded by a court of competent jurisdiction. Nothing in this agreement to arbitrate, however, shall preclude the Company from obtaining injunctive relief from a court of competent jurisdiction prohibiting any ongoing breaches by Executive of this Agreement including, without limitation, violations of Section 9. If any contest or dispute arises between the Company and Executive regarding any provision of this Agreement, the arbitrator may award to the prevailing party, the reasonable attorney fees, costs and expenses incurred by the prevailing party in connection with such contest or dispute.

13. Maximum Payments by the Company.

(a) It is the objective of this Agreement to maximize Executive’s Net After-Tax Benefit (as defined herein) if payments or benefits provided under this Agreement are subject to excise tax under Section 4999 of the Code. Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit by the Company or otherwise to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, including, by example and not by way of limitation, acceleration by the Company or otherwise of the date of vesting or payment or rate of payment under any plan, program, arrangement or agreement of the Company (all such payments and benefits, including the payments and benefits under Section 7 hereof, being hereinafter referred to as the “Total Payments”), would be subject (in whole or in part) to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the cash severance payments shall first be reduced, and the non-cash severance payments shall thereafter be reduced, to the extent necessary so that no portion of the Total Payments shall be subject to the Excise Tax, but only if (i) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments), is greater than or equal to (ii) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which Executive would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments).

11

(b) The Total Payments shall be reduced by the Company in the following order: (i) reduction of any cash severance payments otherwise payable to Executive that are exempt from Section 409A of the Code, (ii) reduction of any other cash payments or benefits otherwise payable to Executive that are exempt from Section 409A of the Code, but excluding any payments attributable to the acceleration of vesting or payments with respect to any equity award with respect to the Company’s common stock that is exempt from Section 409A of the Code, (iii) reduction of any other payments or benefits otherwise payable to Executive on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payments attributable to the acceleration of vesting and payments with respect to any equity award with respect to the Company’s common stock that are exempt from Section 409A of the Code, and (iv) reduction of any payments attributable to the acceleration of vesting or payments with respect to any other equity award with respect to the Company’s common stock that are exempt from Section 409A of the Code.

(c) For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the written opinion of independent auditors of nationally recognized standing (“Independent Advisors”) selected by the Company, does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the opinion of Independent Advisors, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the “base amount” (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Independent Advisors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. The costs of obtaining such determination shall be borne by the Company.

12

14. Agreement Binding on Successors.

(a) Company’s Successors. No rights or obligations of the Company under this Agreement may be assigned or transferred except that the Company will require any successor (whether direct or indirect, by purchase, merger, reorganization, sale, transfer of stock, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no succession had taken place. As used in this Agreement, “Company” means the Company as herein defined, and any successor to its or the Company’s business and/or assets (by merger, purchase or otherwise) which executes and delivers the agreement provided for in this Section 14 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

(b) Executive’s Successors. No rights or obligations of Executive under this Agreement may be assigned or transferred by Executive other than his rights to payments or benefits under this Agreement, which may be transferred only by will or the laws of descent and distribution. Upon Executive’s death, this Agreement and all rights of Executive under this Agreement shall inure to the benefit of and be enforceable by Executive’s beneficiary, or personal or legal representatives, or estate, to the extent any such person succeeds to Executive’s interests under this Agreement. In the event of Executive’s death or a judicial determination of his incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to his estate or other legal representative(s). If Executive should die following his Date of Termination while any amounts would still be payable to him under this Agreement if he had continued to live, unless otherwise provided, all such amounts shall be paid in accordance with the terms of this Agreement to his beneficiary or personal or legal representatives or estate.

15. Notice. For the purposes of this Agreement, notices, demands and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered either personally or by United States certified or registered mail, return receipt requested, postage prepaid, addressed as follows:

If to Executive:

At his last known address

evidenced on the Company’s

payroll records.

If to the Company:

Chaparral Energy, Inc.

701 Cedar Lake Boulevard

Oklahoma City, OK 73114

or to such other address as any party may have furnished to the other in writing in accordance with this Agreement, except that notices of change of address shall be effective only upon receipt.

13

16. Section 409A.

(a) To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretative guidance issued thereunder, including without limitation any such regulations or other such guidance that may be issued after the Effective Date (“Section 409A”). Notwithstanding any provision of this Agreement to the contrary, in the event that following the Effective Date, the Company determines in good faith that any compensation or benefits payable under this Agreement may not be either exempt from or compliant with Section 409A, the Company shall adopt such amendments to this Agreement or adopt other policies or procedures (including amendments, policies and procedures with retroactive effective), or take any other commercially reasonable actions necessary or appropriate to (i) preserve the intended tax treatment of the compensation and benefits payable hereunder, to preserve the economic benefits of such compensation and benefits, and/or to avoid less favorable accounting or tax consequences for the Company and/or (ii) to exempt the compensation and benefits payable hereunder from Section 409A or to comply with the requirements of Section 409A and thereby avoid the application of penalty taxes thereunder; provided, however, that this Section 17(a) does not, and shall not be construed so as to, create any obligation on the part of the Company to adopt any such amendments, policies or procedures or to take any other such actions or to indemnify Executive for any failure to do so.

(b) Notwithstanding anything herein to the contrary, Executive acknowledges and agrees that in the event that any tax is imposed under Section 409A in respect to any compensation or benefits payable to Executive, whether under this Agreement or otherwise, then (i) the payment of such tax shall be solely Executive’s responsibility, (ii) neither the Company, its affiliates nor any of their respective past or present directors, officers, employees or agents shall have any liability for any such tax and (iii) Executive shall indemnify and hold harmless, to the greatest extent permitted under law, each of the foregoing from and against any claims or liabilities that may arise in respect of any such tax.

(c) To the extent that any of the rights or potential rights to future payments under the Change of Control Severance Agreement constitute “nonqualified deferred compensation” (within the meaning of Section 409A), if any, the termination of such rights is undertaken in accordance with and as permitted under Internal Revenue Code Treasury Regulation § 1.409A-3(j)(ix)(B).

17. Withholding. All payments hereunder will be subject to any required withholding of federal, state and local taxes pursuant to any applicable law or regulation

18. Miscellaneous. No provisions of this Agreement may be amended, modified, or waived unless agreed to in writing and signed by Executive and by a duly authorized officer of the Company. No waiver by either party of any breach by the other party of any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. The respective rights and obligations of the parties under this Agreement shall survive Executive’s termination of employment and the termination of this Agreement to the extent necessary for the intended preservation of such rights and obligations. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Oklahoma without regard to its conflicts of law principles.

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19. Validity. The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, which will remain in full force and effect.

20. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument.

21. Section Headings. The section headings in this Agreement are for convenience of reference only, and they form no part of this Agreement and will not affect its interpretation.

22. Entire Agreement. Except as provided elsewhere herein and except for the other documents and agreements contemplated in accordance herewith, this Agreement sets forth the entire agreement of the parties with respect to its subject matter and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party to this Agreement with respect to such subject matter, including, without limitation the Change of Control Severance Agreement.

23. Further Assurances. The parties hereby agree, without further consideration, to execute and deliver such other instruments or to take such other action as may reasonably be required to effectuate the terms and provisions of this Agreement.

*    *    *    *

15

IN WITNESS WHEREOF, the parties have executed this Agreement effective the date first above written.

CHAPARRAL ENERGY, INC.
By:	/s/ Mark A. Fischer
	Mark A. Fischer
	President & Chief Executive Officer
	“COMPANY”
/s/ Robert W. Kelly II
Robert W. Kelly II
“EXECUTIVE”

16

EXHIBIT A

TIME-VESTED RESTRICTED STOCK AGREEMENT

A-1

EXHIBIT B

PERFORMANCE-VESTED RESTRICTED STOCK AGREEMENT

B-1

EXHIBIT C

GENERAL RELEASE

NOTICE. Various laws, including Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Pregnancy Discrimination Act of 1978, the Equal Pay Act, the Civil Rights Act of 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Americans With Disabilities Act, the Employee Retirement Income Security Act and the Veterans Reemployment Rights Act (all as amended from time to time), prohibit employment discrimination based on sex, race, color, national origin, religion, age, disability, eligibility for covered employee benefits and veteran status. You may also have rights under laws such as the Older Worker Benefit Protection Act of 1990, the Worker Adjustment and Retraining Act of 1988, the Fair Labor Standards Act, the Family and Medical Leave Act, the Occupational Health and Safety Act and other federal, state and/or municipal statutes, orders or regulations pertaining to labor, employment and/or employee benefits. These laws are enforced through the United States Department of Labor and its agencies, including the Equal Employment Opportunity Commission (EEOC), and various state and municipal labor departments, fair employment boards, human rights commissions and similar agencies.

This General Release is being provided to you in connection with the Employment Agreement between you and Chaparral Energy, Inc., dated April 12, 2010 (the “Agreement”). The federal Older Worker Benefit Protection Act requires that you have at least twenty-one (21) days, if you want it, to consider whether you wish to sign a release such as this one in connection with a special, individualized severance package. You have until the close of business twenty-one (21) days from the date you receive this General Release to make your decision. You may not sign this General Release until, at the earliest, your official date of separation from employment.

BEFORE EXECUTING THIS GENERAL RELEASE YOU SHOULD REVIEW THESE DOCUMENTS CAREFULLY AND CONSULT WITH YOUR ATTORNEY.

You may revoke this General Release within seven (7) days after you sign it and it shall not become effective or enforceable until that revocation period has expired. If you do not accept the severance package and sign and return this General Release, or if you exercise your right to revoke the General Release after signing it, you will not be eligible for the special, individualized severance package. Any revocation must be in writing and must be received by Chaparral Energy, Inc., 701 Cedar Lake Boulevard, Oklahoma City, OK 73114, within the seven-day period following your execution of this General Release.

C-1

GENERAL RELEASE

In consideration of the special, individualized severance package offered to me by Chaparral Energy, Inc. and the separation benefits I will receive as reflected in the Employment Agreement between me and Chaparral Energy, Inc. dated April 12, 2010 (the “Agreement”), I hereby release and discharge Chaparral Energy, Inc. and its predecessors, successors, affiliates, parent, subsidiaries and partners and each of those entities’ employees, officers, directors and agents (hereafter collectively referred to as the “Company”) from all claims, liabilities, demands, and causes of action, known or unknown, fixed or contingent, which I may have or claim to have against the Company either as a result of my past employment with the Company and/or the severance of that relationship and/or otherwise, and hereby waive any and all rights I may have with respect to and promise not to file a lawsuit to assert any such claims.

This General Release includes, but is not limited to, claims arising under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Pregnancy Discrimination Act of 1978, the Equal Pay Act, the Civil Rights Act of 1991, the Age Discrimination in Employment Act, the Rehabilitation Act of 1973, the Americans With Disabilities Act, the Employee Retirement Income Security Act or 1974 and the Veterans Reemployment Rights Act (all as amended from time to time). This General Release also includes, but is not limited to, any rights I may have under the Older Workers Benefit Protection Act of 1990, the Worker Adjustment and Retraining Act of 1988, the Fair Labor Standards Act, the Family and Medical Leave Act, the Occupational Health and Safety Act and any other federal, state and/or municipal statutes, orders or regulations pertaining to labor, employment and/or employee benefits. This General Release also applies to any claims or rights I may have growing out of any legal or equitable restrictions on the Company’s rights not to continue an employment relationship with its employees, including any express or implied employment contracts, and to any claims I may have against the Company for fraudulent inducement or misrepresentation, defamation, wrongful termination or other retaliation claims in connection with workers’ compensation or alleged “whistleblower” status or on any other basis whatsoever.

It is specifically agreed, however, that this General Release does not have any effect on any rights or claims I may have against the Company which arise after the date I execute this General Release or on any vested rights I may have under any of the Company’s qualified or non-qualified benefit plans or arrangements as of or after my last day of employment with the Company, or on any of the Company’s obligations under the Agreement or as otherwise required under the Consolidated Omnibus Budget and Reconciliation Act of 1985 (COBRA).

I have carefully reviewed and fully understand all the provisions of the Agreement and General Release, including the foregoing Notice. I have not relied on any representation or statement, oral or written, by the Company or any of its representatives, which is not set forth in those documents.

C-2

The Agreement and this General Release, including the foregoing Notice, set forth the entire agreement between me and the Company with respect to this subject. I understand that my receipt and retention of the separation benefits covered by the Agreement are contingent not only on my execution of this General Release, but also on my continued compliance with my obligations under the Agreement that survive and continue in effect in accordance with the respective terms thereof, notwithstanding any termination of employment, including, without limitation, Section 9 thereof. I acknowledge that the Company gave me twenty-one (21) days to consider whether I wish to accept or reject the separation benefits I am eligible to receive under the Agreement in exchange for this General Release. I also acknowledge that the Company advised me to seek independent legal advice as to these matters, if I chose to do so. I hereby represent and state that I have taken such actions and obtained such information and independent legal or other advice, if any, that I believed were necessary for me to fully understand the effects and consequences of the Agreement and General Release prior to signing those documents.

Dated this      day of                     ,             .

C-3

EX-21.1

Exhibit 21.1

SUBSIDIARIES OF CHAPARRAL ENERGY, INC

Name of Subsidiary	Jurisdiction of Formation	Effective Ownership
Chaparral Resources, L.L.C.	Oklahoma	Chaparral Energy, Inc. – 100%
Chaparral Real Estate, L.L.C.	Oklahoma	Chaparral Energy, Inc. – 100%
Chaparral CO2, L.L.C.	Oklahoma	Chaparral Energy, Inc. – 100%
NorAm Petroleum, L.L.C.	Oklahoma	Chaparral Energy, Inc. – 100%
CEI Pipeline, L.L.C.	Texas	Chaparral Energy, Inc. – 100%
Chaparral Energy, L.L.C.	Oklahoma	Chaparral Energy, Inc. – 100%
CEI Acquisition, L.L.C.	Delaware	Chaparral Energy, L.L.C. – 100%
Green Country Supply, Inc.	Oklahoma	Chaparral Energy, Inc. – 100%
Chaparral Biofuels, L.L.C.	Oklahoma	Chaparral Energy, Inc. – 100%
Oklahoma Ethanol L.L.C.	Oklahoma	Chaparral Biofuels, L.L.C. – 100%
Chaparral Exploration, L.L.C.	Delaware	Chaparral Energy, Inc. – 100%
Roadrunner Drilling, L.L.C.	Oklahoma	Chaparral Resources, L.L.C. – 100%

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Mark A. Fischer, Chief Executive Officer of Chaparral Energy Inc., certify that:

1. I have reviewed this annual report on Form 10-K of Chaparral Energy Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: April 14, 2010	/s/ MARK A. FISCHER
	Mark A. Fischer Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Joseph O. Evans, Chief Financial Officer of Chaparral Energy Inc., certify that:

1. I have reviewed this annual report on Form 10-K of Chaparral Energy Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: April 14, 2010	/s/ JOSEPH O. EVANS
	Joseph O. Evans Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF PERIODIC REPORT

I, Mark A. Fischer, Chief Executive Officer of Chaparral Energy Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to the best of my knowledge:

(1) the Annual Report on Form 10-K of the Company for the period ended December 31, 2009 (the “Report”) fully complies with the requirements of Section 13 (a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 14, 2010	/s/ MARK A. FISCHER
	Mark A. Fischer Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION OF PERIODIC REPORT

I, Joseph O. Evans, Chief Financial Officer of Chaparral Energy Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that, to the best of my knowledge:

(1) the Annual Report on Form 10-K of the Company for the year ended December 31, 2009 (the “Report”) fully complies with the requirements of Section 13 (a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 14, 2010	/s/ JOSEPH O. EVANS
	Joseph O. Evans Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99.1

Exhibit 99.1

Cawley, Gillespie & Associates, Inc.

PETROLEUM CONSULTANTS

AUSTIN OFFICE:	MAIN OFFICE:	HOUSTON OFFICE:
9601 AMBERGLEN BLVD., SUITE 117	306 WEST 7TH STREET, SUITE 302	1000 LOUISIANA, SUITE 625
AUSTIN, TEXAS 78729	FORT WORTH, TEXAS 76102-4987	HOUSTON, TEXAS 77002-5008
(512) 249-7000	(817) 336-2461	(713) 651-9944
FAX (512) 233-2618	FAX (817) 877-3728	FAX (713) 651-9980

January 15, 2010

Mr. Mark Fischer, President

Chaparral Energy, Inc.

701 Cedar Lake Blvd.

Oklahoma City, Oklahoma 73114

Re:	Evaluation Summary – SEC Pricing Case
	Chaparral Energy, Inc. Interests
	Total Proved Reserves
	Certain Oil and Gas Assets – Various States
	As of December 31, 2009

Dear Mr. Fischer:

As requested, we are submitting estimates of total proved reserves and forecasts of economics attributable to the Chaparral Energy, Inc. (“Chaparral”) interests in certain oil and gas properties located in various states. Cawley, Gillespie & Associates, Inc. (“CG&A”) evaluated the “major” properties, with detailed tabular results presented in this report. Chaparral evaluated the “minor” properties, with a summary report being presented in page 2 of this report letter. Below are the composite results of all properties followed by the summary of CG&A-evaluated “major” properties and the adjusted Chaparral-evaluated “minor” properties:

		Proved Developed Producing	Proved Developed Non-Producing (Shut In)	Proved Developed Non-Producing (Behind Pipe)	Proved Undeveloped	Total Proved
Net Reserves
Oil	- Mbbl	29,381.6	2,052.3	2,955.7	17,573.1	51,962.7
Gas	- MMcf	183,014.1	9,349.4	35,219.7	86,427.4	314,010.6
Revenue
Oil	- M$	1,721,140.1	121,595.0	171,872.6	1,023,382.4	3,037,990.1
Gas	- M$	638,043.9	32,957.7	119,882.5	324,920.6	1,115,804.9
Severance and Ad Valorem Taxes	- M$	187,957.9	11,826.8	24,304.3	101,485.6	325,574.6
Operating Expenses	- M$	930,252.3	59,158.1	61,951.9	126,774.9	1,178,137.3
Other Deductions	- M$	7,670.0	0.0	1,265.2	0.0	8,935.2
Investments	- M$	0.0	11,607.2	24,679.6	355,776.7	392,063.6
Net Operating Income (BFIT)	- M$	1,233,304.0	71,960.6	179,554.1	764,265.7	2,249,084.3
Discounted @ 10%	- M$	643,771.5	28,407.1	67,564.9	279,051.9	1,018,795.3

Mr. Mark Fischer

Chaparral Energy, Inc. Interests

January 15, 2010

Page 2

CG&A’s independent reserve estimates for the “major” properties comprising the top 75 percent of Chaparral’s net proved reserves (as estimated by Chaparral) are presented in the following table:

		Proved Developed Producing	Proved Developed Non-Producing (Shut In)	Proved Developed Non-Producing (Behind Pipe)	Proved Undeveloped	Total Proved
Net Reserves
Oil	- Mbbl	25,619.7	1,566.8	2,085.0	11,495.1	40,766.5
Gas	- MMcf	109,243.8	4,732.4	14,467.3	42,676.2	171,119.7
Revenue
Oil	- M$	1,499,097.5	93,502.1	120,520.4	670,951.8	2,384,071.8
Gas	- M$	383,869.4	16,938.1	47,889.0	156,438.5	605,135.1
Severance and Ad Valorem Taxes	- M$	148,703.7	8,175.4	14,049.0	62,481.6	233,409.7
Operating Expenses	- M$	713,787.8	44,652.7	30,499.0	66,412.6	855,352.1
Other Deductions	- M$	7,306.2	0.0	1,049.3	0.0	8,355.5
Investments	- M$	0.0	6,274.8	10,783.9	205,234.3	222,293.1
Net Operating Income (BFIT)	- M$	1,013,169.4	51,337.3	112,028.2	493,261.6	1,669,796.5
Discounted @ 10%	- M$	521,129.9	20,607.1	47,582.3	188,713.6	778,032.8

The results of Chaparral’s reserve study of the “minor” properties comprising the remaining 25 percent of Chaparral’s net proved reserves (as estimated by Chaparral) are presented below. The results were adjusted by applying a scaling factor derived from the ratio of CG&A’s independent estimated reserves and economics for the “major” properties versus Chaparral’s reserves and economics from their analysis of the “major” properties.

		Proved Developed Producing	Proved Developed Non-Producing (Shut In)	Proved Developed Non-Producing (Behind Pipe)	Proved Undeveloped	Total Proved
Net Reserves
Oil	- Mbbl	3,761.9	485.5	870.7	6,078.1	11,196.2
Gas	- MMcf	73,770.3	4,617.0	20,752.5	43,751.2	142,890.9
Revenue
Oil	- M$	222,042.6	28,092.9	51,352.2	352,430.6	653,918.4
Gas	- M$	254,174.6	16,019.6	71,993.5	168,482.2	510,669.8
Severance and Ad Valorem Taxes	- M$	39,254.2	3,651.4	10,255.3	39,004.0	92,164.9
Operating Expenses	- M$	216,464.5	14,505.4	31,453.0	60,362.3	322,785.3
Other Deductions	- M$	363.8	0.0	215.9	0.0	579.7
Investments	- M$	0.0	5,332.4	13,895.7	150,542.4	169,770.5
Net Operating Income (BFIT)	- M$	220,134.6	20,623.3	67,525.8	271,004.0	579,287.8
Discounted @ 10%	- M$	122,641.6	7,799.9	19,982.6	90,338.3	240,762.5

The discounted cash flow values shown above in the previous three tables should not be construed to represent an estimate of the fair market value by Cawley, Gillespie & Associates, Inc.

Mr. Mark Fischer

Chaparral Energy, Inc. Interests

January 15, 2010

Page 3

Presentation

The accompanying tabulations present the results of our evaluation. The report is divided into two main sections: Major Properties and Minor Properties. The Major Properties section is further divided into five reserve sections: Total Proved, Proved Developed Producing (“PDP”), Proved Developed Non-Producing Shut In (“PDNP-SI”), Proved Developed Non-Producing Behind Pipe (“PDNP-BP”) and Proved Undeveloped (“PUD”) reserves. Within each reserve category section is a Table I and Table II. The Table I presents composite reserve estimates and economic forecasts for the particular reserve category. Following each Table I is a Table II “oneline” summary that presents estimates of ultimate recovery, gross and net reserves, ownership, net revenue, taxes, expenses, investments, net income, and discounted cash flow for the individual properties that make up the corresponding Table I. In the PDP section, the Table II is followed by sequentially numbered tables that represent the tabular details of reserves and economics for each property listed in Table II. The Minor Properties section consists of summary tables for PDP, PDNP-SI, PDNP-BP and PUD. For a more detailed explanation of the report layout please refer to the Table of Contents following this letter. The data presented in the individual tables are explained in page 1 of the Appendix. The methods employed in estimating reserves are described in page 2 of the Appendix.

Hydrocarbon Pricing

As requested, adjustments were applied to the Chaparral furnished initial oil and gas prices of $61.18 per bbl and $3.87 per MMBtu, respectively as quoted on December 31, 2009. Prices were not escalated. Oil and gas price differentials were forecast on a per property basis. Gas price differentials include adjustments for heating value, gas shrinkage, transportation and basis differential.

Expenses and Taxes

Lease operating costs and investments were forecast on a per property basis as furnished by your office and were not escalated. Per well operating expenditures were applied against a projected well-count as provided by your office. Severance tax values were applied at normal state percentages of oil and gas revenue. Ad Valorem tax rates were forecast as provided by your office.

Miscellaneous

An on-site field inspection of the properties has not been performed nor has the mechanical operation or condition of the wells and their related facilities been examined, nor have the wells been tested by Cawley, Gillespie & Associates, Inc. Possible environmental liability related to the properties has not been investigated nor considered.

The proved reserve classifications used herein conform to the criteria of the Securities and Exchange Commission as defined in pages 3-4 of the Appendix. The reserves and economics are predicated on regulatory agency classifications, rules, policies, laws, taxes and royalties in effect on the effective date, except as noted herein. The possible effects of changes in legislation or other Federal or State restrictive actions have not been considered. All reserve estimates represent our best judgment based on data available at the time of preparation, and assumptions as to future economic and regulatory conditions. It should be realized that the reserves actually recovered, the revenue derived therefrom and the actual cost incurred could be more or less than the estimated amounts.

The reserve estimates and forecasts were based upon interpretations of data furnished by your office and available from our files. Production data, ownership information, price differentials, expenses, projected well count, investments and tax rates were furnished by your office and were accepted as furnished. To some extent, information from public records was used to check and/or supplement these data. The basic engineering and geological data were utilized subject to third party reservations and qualifications. Nothing has come to our attention, however, that would cause us to believe that we are not justified in relying on such data.

Mr. Mark Fischer

Chaparral Energy, Inc. Interests

January 15, 2010

Page 4

This report was prepared for the exclusive use of Chaparral Energy, Inc. Third parties should not rely on it without the written consent of the above and Cawley, Gillespie & Associates, Inc. Our work papers and related data are available for inspection and review by authorized, interested parties.

Yours very truly,

Cawley, Gillespie & Associates, Inc.

Texas Registered Engineering Firm F-693

EX-99.2

Exhibit 99.2

CHAPARRAL ENERGY, L.L.C.

Estimated

Future Reserves and Income

Attributable to Certain

Leasehold Interests

SEC Parameters

As of

December 31, 2009

/s/ Michael F. Stell

Michael F. Stell, P.E.

TBPE License No. 56416

Managing Senior Vice President

RYDER SCOTT COMPANY, L.P.

TBPE Firm License No. F-1580

[SEAL]

	TBPE REGISTERED ENGINEERING FIRM F-1580
	1100 LOUISIANA    SUITE 3800	HOUSTON, TEXAS 77002-5218	TELEPHONE (713) 651-9191

January 15, 2010

Chaparral Energy, L.L.C.

701 Cedar Lake Boulevard

Oklahoma City, Oklahoma 73114

Gentlemen:

At your request, we have prepared an estimate of the proved reserves, future production, and income attributable to certain leasehold interests of Chaparral Energy, L.L.C. (Chaparral) as of December 31, 2009. The subject properties are located in the states of Texas and Oklahoma. The reserves and income data were estimated based on the definitions and disclosure guidelines contained in the United States Securities and Exchange Commission Title 17, Code of Federal Regulations, Modernization of Oil and Gas Reporting, Final Rule released January 14, 2009 in the Federal Register (SEC regulations). The results of our third party study, completed on January 15, 2010, are presented herein.

The estimated reserves and future net income amounts presented in this report, as of December 31, 2009 are related to hydrocarbon prices. The hydrocarbon prices used in the preparation of this report are based on the average prices during the 12-month period prior to the ending date of the period covered in this report, determined as unweighted arithmetic averages of the prices in effect on the first-day-of-the-month for each month within such period, unless prices were defined by contractual arrangements as required by the SEC regulations. Actual future prices may vary significantly from the prices required by SEC regulations; therefore, volumes of reserves actually recovered and the amounts of income actually received may differ significantly from the estimated quantities presented in this report. The results of this study are summarized below.

SEC PARAMETERS

Estimated Net Reserves and Income Data

Certain Leasehold Interests of

Chaparral Energy, L.L.C.

As of December 31, 2009

	Proved
	Developed						Total Proved
	Producing		Non-Producing		Undeveloped
Net Remaining Reserves
Oil/Condensate – Barrels		11,411,583		10,060,010		16,034,446		37,506,039
Gas – MMCF		135		287		0		422
Income Data ($)
Future Gross Revenue	$	620,300,500	$	559,752,438	$	890,655,562	$	2,070,708,500
Deductions		323,782,781		295,862,781		582,271,938		1,201,917,500
Future Net Income (FNI)	$	296,517,719	$	263,889,657	$	308,383,624	$	868,791,000
Discounted FNI @ 10%	$	169,635,281	$	84,267,437	$	50,842,844	$	304,745,562

1200, 530 8TH AVENUE, S.W. CALGARY, ALBERTA T2P 3S8          TEL (403) 262-2799  FAX (403) 262-2790

621 17TH STREET, SUITE 1550 DENVER, COLORADO 80293-1501 TEL (303) 623-9147   FAX (303) 623-4258

Chaparral Energy, L.L.C.

January 15, 2010

Page 2

Liquid hydrocarbons are expressed in standard 42 gallon barrels. All gas volumes are reported on an as sold basis expressed in millions of cubic feet (MMCF) at the official temperature and pressure bases of the areas in which the gas reserves are located.

The estimates of the reserves, future production, and income attributable to properties in this report were prepared using the economic software package Aries for Windows, a copyrighted program of Landmark Graphics. The program was used solely at the request of Chaparral. Ryder Scott has found this program to be generally acceptable, but notes that certain summaries and calculations may vary due to rounding and may not exactly match the sum of the properties being summarized. Furthermore, one line economic summaries may vary slightly from the more detailed cash flow projections of the same properties, also due to rounding. The rounding differences are not material.

The future gross revenue is after the deduction of production taxes. The deductions comprise the normal direct costs of operating the wells, ad valorem taxes, recompletion costs, development costs, CO₂ purchase costs, and certain abandonment costs net of salvage. The future net income is before the deduction of state and federal income taxes and general administrative overhead, and has not been adjusted for outstanding loans that may exist nor does it include any adjustment for cash on hand or undistributed income. Liquid hydrocarbon reserves account for approximately 99.9 percent and gas reserves account for the remaining 0.1 percent of total future gross revenue from proved reserves.

The discounted future net income shown above was calculated using a discount rate of 10 percent per annum compounded monthly. Future net income was discounted at four other discount rates which were also compounded monthly. These results are shown in summary form as follows.

	Discounted Future Net Income As of December 31, 2009
Discount Rate Percent	Total         Proved
5	$489,494,031
15	$203,573,766
20	$143,587,281
25	$105,914,336

The results shown above are presented for your information and should not be construed as our estimate of fair market value.

Reserves Included in This Report

The proved reserves included herein conform to the definition as set forth in the Securities and Exchange Commission’s Regulations Part 210.4-10 (a). An abridged version of the SEC reserves definitions from 210.4-10(a) entitled “Petroleum Reserves Definitions” is included as an attachment to this report.

The various reserve status categories are defined under the attachment entitled “Petroleum Reserves Definitions” in this report. The developed non-producing reserves included herein consist of the shut-in and behind pipe categories.

RYDER SCOTT COMPANY    PETROLEUM CONSULTANTS

Chaparral Energy, L.L.C.

January 15, 2010

Page 3

While it may reasonably be anticipated that the future prices received for the sale of production and the operating costs and other costs relating to such production may also increase or decrease from existing levels, such changes were, in accordance with rules adopted by the SEC, omitted from consideration in making this evaluation.

Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward. Moreover, estimates of reserves may increase or decrease as a result of future operations, effects of regulation by governmental agencies or geopolitical risks. As a result, the estimates of oil and gas reserves have an intrinsic uncertainty. The reserves included in this report are therefore estimates only and should not be construed as being exact quantities. They may or may not be actually recovered, and if recovered, the revenues therefrom and the actual costs related thereto could be more or less than the estimated amounts.

The estimates of reserves presented herein were based upon a detailed study of the properties in which Chaparral owns an interest; however, we have not made any field examination of the properties. No consideration was given in this report to potential environmental liabilities that may exist nor were any costs included for potential liability to restore and clean up damages, if any, caused by past operating practices.

Estimates of Reserves

In general, the reserves included herein were estimated by performance methods or analogy to successful testing by a pilot project, or the operation of an installed program in the same reservoir and field. Proved producing reserves were mainly determined by performance methods while shut-in and undeveloped reserves were determined by analogy methods. Furthermore, essentially all of the reserves included herein are produced through application of improved recovery techniques (CO₂ or polymer injection).

North Burbank was estimated to have approximately 70 percent of the net reserves for the fields covered in this report as of December 31, 2009. The major work activity that Chaparral plans to complete at North Burbank is to restore numerous idle wells that were previously uneconomic to repair, drilling infill wells, and to expand the polymer flood to additional areas of the field. From the information provided by Chaparral, prior to 2005, polymer flooding has been attempted at North Burbank three times. Chaparral provided RSC with the well by well production for one of these areas in what it refers to as Block A, where polymer flooding began in 1980. The results from this pilot were used to assess the results for future polymer projects. When going into a new area Chaparral has included costs for drilling of additional producers, drilling of additional injectors, and restoring of injector wells. For the report the build-up associated with the drilling of producers, drilling of injectors, and restoring of injector wells, was not separately accessed. Since 2005 the operator of North Burbank has injected Polymer in what Chaparral refers to as Area 57. From the data provided, production appears to still be rising in the area.

Proved undeveloped and non-producing tertiary reserves in the Camrick Area are supported by a successful pilot program (phase 1) which was installed in a portion of the Camrick Unit in 2001. The pilot program area represents 27 percent of the surface area of the Camrick Unit and 35 percent of the reservoir volume (acre-feet) of the total Camrick Unit. The Camrick Area includes the NW Camrick Unit, the North Perryton Unit, and the Camrick Unit which are all part of one contiguous and continuous reservoir known as the Upper Morrow sand. The successful pilot project demonstrates that the reservoir can be successfully flooded with a miscible CO₂ process. The CO₂ flood injection pilot program has stimulated production in the pilot area from 91 BOPE in 2001 to 1,000 BOPD in late 2009.

RYDER SCOTT COMPANY    PETROLEUM CONSULTANTS

Chaparral Energy, L.L.C.

January 15, 2010

Page 4

Proved developed non-producing tertiary reserves outside the pilot area are estimated with a lower recovery factor than the pilot area (12% versus 14.5% OOIP). Proved reserves in these projects have been reduced to reflect wells that were abandoned after waterflood operations by prior operators before CO₂ flooding became a viable option. These wells usually were plugged as a result of mechanical issues. Individual well reserves are based on the acre-feet for the well location as a fraction of the total acre-feet in the phase or unit area. These well locations’ reserves economics are sensitive to the oil price used in the reserve analysis and vary accordingly. We have been assured by Chaparral that a sufficient quantity of CO₂ is available from the fertilizer plant that is the source to fully implement these injection projects.

To estimate economically recoverable oil and gas reserves and related future net cash flows, we consider many factors and assumptions including, but not limited to, the use of reservoir parameters derived from geological, geophysical and engineering data which cannot be measured directly, economic criteria based on current costs and SEC pricing requirements, and forecasts of future production rates. Under the SEC regulations 210.4-10(a)(22)(v) and (26), proved reserves must be demonstrated to be economically producible based on existing economic conditions including the prices and costs at which economic producibility from a reservoir is to be determined as of the effective date of the report. Chaparral has informed us that they have furnished us all of the accounts, records, geological and engineering data, and reports and other data required for this investigation. In preparing our forecast of future production and income, we have relied upon data furnished by Chaparral with respect to property interests owned, production and well tests from examined wells, normal direct costs of operating the wells or leases, other costs such as transportation and/or processing fees, ad valorem and production taxes, recompletion and development costs, abandonment costs after salvage, product prices based on the SEC regulations, geological structural and isochore maps, well logs, core analyses, and pressure measurements. Ryder Scott reviewed such factual data for its reasonableness; however, we have not conducted an independent verification of the data supplied by Chaparral.

Future Production Rates

Our forecasts of future production rates are based on historical performance from wells now on production. Test data and other related information were used to estimate the anticipated initial production rates for those wells or locations that are not currently producing. If no production decline trend has been established, future production rates were held constant until a decline in ability to produce was anticipated. An estimated rate of decline was then applied to depletion of the reserves. If a decline trend has been established, this trend was used as the basis for estimating future production rates. For reserves not yet on production, sales were estimated to commence at an anticipated date furnished by Chaparral.

The future production rates from wells now on production may be more or less than estimated because of changes in market demand or allowables set by regulatory bodies. Wells or locations that are not currently producing may start producing earlier or later than anticipated in our estimates.

Hydrocarbon Prices

As previously stated, the hydrocarbon prices used herein are based on the average prices during the 12-month period prior to the ending date of the period covered in this report, determined as the unweighted arithmetic averages of the prices in effect on the first-day-of-the-month for each month within such period, unless prices were defined by contractual arrangements. For hydrocarbon products sold under contract, the contract prices including fixed and determinable escalations, exclusive of inflation adjustments, were used until expiration of the contract. Upon contract expiration, the prices were adjusted to the 12-month unweighted arithmetic average as previously described.

RYDER SCOTT COMPANY    PETROLEUM CONSULTANTS

Chaparral Energy, L.L.C.

January 15, 2010

Page 5

The effects of derivative instruments designated as price hedges of oil and gas quantities are not reflected in our individual property evaluations.

Costs

Operating costs for the leases and wells in this report are based on information provided by Chaparral and include only those costs directly applicable to the leases or wells. The operating costs include a portion of general and administrative costs allocated directly to the leases and wells. When applicable for operated properties, the operating costs include an appropriate level of corporate general administrative and overhead costs. The operating costs for non-operated properties include the COPAS overhead costs that are allocated directly to the leases and wells under terms of operating agreements. No deduction was made for loan repayments, interest expenses, or exploration and development prepayments that were not charged directly to the leases or wells.

Development costs were furnished to us by Chaparral and are based on authorizations for expenditure for the proposed work or actual costs for similar projects. The purchase cost of CO₂ is also included into the development cost. At the request of Chaparral, their estimate of zero abandonment costs after salvage value for onshore properties was used in this report. Ryder Scott has not performed a detailed study of the abandonment costs or the salvage value and makes no warranty for Chaparral’s estimate.

Because of the direct relationship between volumes of proved undeveloped reserves and development plans, we include in the proved undeveloped category only reserves assigned to undeveloped locations that we have been assured will definitely be drilled and reserves assigned to the undeveloped portions of secondary or tertiary projects which we have been assured will definitely be developed. Chaparral has assured us of their intent and ability to proceed with the development activities included in this report, and that they are not aware of any legal, regulatory or political obstacles that would significantly alter their plans.

Current costs used by Chaparral were held constant throughout the life of the properties.

Standards of Independence and Professional Qualification

Ryder Scott is an independent petroleum engineering consulting firm that has been providing petroleum consulting services throughout the world for over seventy years. Ryder Scott is employee owned and maintains offices in Houston, Texas; Denver, Colorado; and Calgary, Alberta, Canada. We have over eighty engineers and geoscientists on our permanent staff. By virtue of the size of our firm and the large number of clients for which we provide services, no single client or job represents a material portion of our annual revenue. We do not serve as officers or directors of any publicly traded oil and gas company and are separate and independent from the operating and investment decision-making process of our clients. This allows us to bring the highest level of independence and objectivity to each engagement for our services.

Ryder Scott actively participates in industry related professional societies and organizes an annual public forum focused on the subject of reserves evaluations and SEC regulations. Many of our staff have authored or co-authored technical papers on the subject of reserves related topics. We encourage our staff to maintain and enhance their professional skills by actively participating in ongoing continuing education.

RYDER SCOTT COMPANY    PETROLEUM CONSULTANTS

Chaparral Energy, L.L.C.

January 15, 2010

Page 6

Ryder Scott requires that staff engineers and geoscientists have received professional accreditation, and are maintaining in good standing, a registered or certified professional engineer’s license or a registered or certified professional geoscientist’s license, or the equivalent thereof, from an appropriate governmental authority or a recognized self-regulating professional organization prior to becoming an officer of the Company.

We are independent petroleum engineers with respect to Chaparral. Neither we nor any of any of our employees have any interest in the subject properties and neither the employment to do this work nor the compensation is contingent on our estimates of reserves for the properties which were reviewed.

The professional qualifications of the undersigned, the technical person primarily responsible for auditing the reserves information discussed in this report, are included as an attachment to this letter.

Terms of Usage

This report was prepared for the exclusive use and sole benefit of Chaparral Energy, L.L.C. and may not be put to other use without our prior written consent for such use. The data and work papers used in the preparation of this report are available for examination by authorized parties in our offices. Please contact us if we can be of further service.

Very truly yours,

RYDER SCOTT COMPANY, L.P.

TBPE Firm Registration No. F-1580

/s/ Michael F. Stell

Michael F. Stell, P.E.

TBPE License No. 56416                 [SEAL]

Managing Senior Vice President

MFS/sm

RYDER SCOTT COMPANY    PETROLEUM CONSULTANTS

Professional Qualifications of Primary Technical Person

The conclusions presented in this report are the result of technical analysis conducted by teams of geoscientists and engineers from Ryder Scott Company, L.P. Mr. Michael F. Stell was the primary technical person responsible for overseeing the estimate of the reserves, future production and income.

Mr. Stell, an employee of Ryder Scott Company L.P. (Ryder Scott) since 1992, is a Managing Senior Vice President and also serves as an Engineering Group Leader responsible for coordinating and supervising staff and consulting engineers of the company in ongoing reservoir evaluation studies worldwide. Before joining Ryder Scott, Mr. Stell served in a number of engineering positions with Shell Oil Company and Landmark Concurrent Solutions. For more information regarding Mr. Stell’s geographic and job specific experience, please refer to the Ryder Scott Company website at http://www.ryderscott.com/Experience/Employees.php.

Mr. Stell earned a Bachelor of Science degree in Chemical Engineering from Purdue University in 1979 and a Master of Science Degree in Chemical Engineering from the University of California, Berkeley, in 1981. He is a registered Professional Engineer in the State of Texas. He is also a member of the Society of Petroleum Engineers and the Society of Petroleum Evaluation Engineers.

In addition to gaining experience and competency through prior work experience, the Texas Board of Professional Engineers requires a minimum of 15 hours of continuing education annually, including at least one hour in the area of professional ethics, which Mr. Stell fulfills. As part of his 2009 continuing education hours, Mr. Stell attended an internally presented 13 hours of formalized training as well as a day-long public forum relating to the definitions and disclosure guidelines contained in the United States Securities and Exchange Commission Title 17, Code of Federal Regulations, Modernization of Oil and Gas Reporting, Final Rule released January 14, 2009 in the Federal Register. Mr. Stell attended an additional 15 hours of formalized in-house training as well as an additional five hours of formalized external training during 2009 covering such topics as the SPE/WPC/AAPG/SPEE Petroleum Resources Management System, reservoir engineering, geoscience and petroleum economics evaluation methods, procedures and software and ethics for consultants.

Based on his educational background, professional training and almost 30 years of practical experience in the estimation and evaluation of petroleum reserves, Mr. Stell has attained the professional qualifications for a Reserves Estimator and Reserves Auditor set forth in Article III of the “Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information” promulgated by the Society of Petroleum Engineers as of February 19, 2007.

RYDER SCOTT COMPANY    PETROLEUM CONSULTANTS

PETROLEUM RESERVES DEFINITIONS

As Adapted From:

RULE 4-10(a) of REGULATION S-X PART 210

UNITED STATES SECURITIES AND EXCHANGE COMMISSION (SEC)

PREAMBLE

On January 14, 2009, the United States Securities and Exchange Commission (“the Commission”) published the “Modernization of Oil and Gas Reporting; Final Rule” in the Federal Register of National Archives and Records Administration (NARA). The “Modernization of Oil and Gas Reporting; Final Rule” includes revisions and additions to the definition section in Rule 4-10 of Regulation S-X, revisions and additions to the oil and gas reporting requirements in Regulation S-K, and amends and codifies Industry Guide 2 in Regulation S-K. The “Modernization of Oil and Gas Reporting; Final Rule”, including all references to Regulation S-X and Regulation S-K, shall be referred to herein collectively as the “SEC Regulations”. The SEC Regulations take effect with all filings made with the United States Securities and Exchange Commission as of December 31, 2009, or after January 1, 2010. Reference should be made to the full text under Title 17, Code of Federal Regulations, Regulation S-X Part 210, Rule 4-10 (a) for the complete definitions, as the following definitions, descriptions and explanations rely wholly or in part on excerpts from the original document (direct passages excerpted from the aforementioned SEC document are denoted in italics herein).

Reserves are those quantities of petroleum which are anticipated to be commercially recovered from known accumulations from a given date forward under defined conditions. All reserve estimates involve some degree of uncertainty. The uncertainty depends chiefly on the amount of reliable geologic and engineering data available at the time of the estimate and the interpretation of these data. The relative degree of uncertainty may be conveyed by placing reserves into one of two principal classifications, either proved or unproved. Unproved reserves are less certain to be recovered than proved reserves and may be further sub-classified as probable and possible reserves to denote progressively increasing uncertainty in their recoverability. Under the SEC Regulations as of December 31, 2009, or after January 1, 2010, a company may optionally disclose estimated quantities of probable or possible oil and gas reserves in documents publicly filed with the Commission. The SEC Regulations continue to prohibit disclosure of estimates of oil and gas resources other than reserves and any estimated values of such resources in any document publicly filed with the Commission unless such information is required to be disclosed in the document by foreign or state law as noted in §229.102 (5).

Reserves estimates will generally be revised as additional geologic or engineering data become available or as economic conditions change.

Reserves may be attributed to either natural energy or improved recovery methods. Improved recovery methods include all methods for supplementing natural energy or altering natural forces in the reservoir to increase ultimate recovery. Examples of such methods are pressure maintenance, cycling, waterflooding, thermal methods, chemical flooding, and the use of miscible and immiscible displacement fluids. Other improved recovery methods may be developed in the future as petroleum technology continues to evolve.

RYDER SCOTT COMPANY    PETROLEUM CONSULTANTS

PETROLEUM RESERVES DEFINITIONS

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RESERVES (SEC DEFINITIONS)

Securities and Exchange Commission Regulation S-X §229.4-10(a) (26) defines reserves as follows:

Reserves. Reserves are estimated remaining quantities of oil and gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and gas or related substances to market, and all permits and financing required to implement the project.

Note to paragraph (a)(26): Reserves should not be assigned to adjacent reservoirs isolated by major, potentially sealing, faults until those reservoirs are penetrated and evaluated as economically producible. Reserves should not be assigned to areas that are clearly separated from a known accumulation by a non-productive reservoir (i.e., absence of reservoir, structurally low reservoir, or negative test results). Such areas may contain prospective resources (i.e., potentially recoverable resources from undiscovered accumulations).

PROVED RESERVES (SEC DEFINITIONS)

Securities and Exchange Commission Regulation S-X §229.4-10(a) (22) defines proved oil and gas reserves as follows:

Proved oil and gas reserves. Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.

(i) The area of the reservoir considered as proved includes:

(A) The area identified by drilling and limited by fluid contacts, if any, and

(B) Adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with it and to contain economically producible oil or gas on the basis of available geoscience and engineering data.

(ii) In the absence of data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons (LKH) as seen in a well penetration unless geoscience, engineering, or performance data and reliable technology establishes a lower contact with reasonable certainty.

(iii) Where direct observation from well penetrations has defined a highest known oil (HKO) elevation and the potential exists for an associated gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geoscience, engineering, or performance data and reliable technology establish the higher contact with reasonable certainty.

RYDER SCOTT COMPANY     PETROLEUM CONSULTANTS

RESERVES DEFINITIONS

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(iv) Reserves which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved classification when:

(A) Successful testing by a pilot project in an area of the reservoir with properties no more favorable than in the reservoir as a whole, the operation of an installed program in the reservoir or an analogous reservoir, or other evidence using reliable technology establishes the reasonable certainty of the engineering analysis on which the project or program was based; and

(B) The project has been approved for development by all necessary parties and entities, including governmental entities.

(v) Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price shall be the average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions.

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RYDER SCOTT COMPANY    PETROLEUM CONSULTANTS

RESERVES STATUS DEFINITIONS AND GUIDELINES

As Adapted From:

RULE 4-10(a) of REGULATION S-X PART 210

UNITED STATES SECURITIES AND EXCHANGE COMMISSION (SEC)

and

PETROLEUM RESOURCES MANAGEMENT SYSTEM (SPE-PRMS)

Sponsored and Approved by:

SOCIETY OF PETROLEUM ENGINEERS (SPE),

WORLD PETROLEUM COUNCIL (WPC)

AMERICAN ASSOCIATION OF PETROLEUM GEOLOGISTS (AAPG)

SOCIETY OF PETROLEUM EVALUATION ENGINEERS (SPEE)

Reserves status categories define the development and producing status of wells and reservoirs.

DEVELOPED RESERVES (SEC DEFINITIONS)

Securities and Exchange Commission Regulation S-X §229.4-10(a) (6) defines developed oil and gas reserves as follows:

Developed oil and gas reserves are reserves of any category that can be expected to be recovered:

(i) Through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and

(ii) Through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.

Developed Producing (SPE-PRMS Definitions)

While not a requirement for disclosure under the SEC regulations, developed oil and gas reserves may be further sub-classified according to the guidance contained in the SPE-PRMS as Producing or Non-Producing.

Developed Producing Reserves

Developed Producing Reserves are expected to be recovered from completion intervals that are open and producing at the time of the estimate.

Improved recovery reserves are considered producing only after the improved recovery project is in operation.

Developed Non-Producing

Developed Non-Producing Reserves include shut-in and behind-pipe reserves.

RYDER SCOTT COMPANY    PETROLEUM CONSULTANTS

RESERVES STATUS DEFINITIONS AND GUIDELINES

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Shut-In

Shut-in Reserves are expected to be recovered from:

(1) completion intervals which are open at the time of the estimate but which have not yet started producing;

(2) wells which were shut-in for market conditions or pipeline connections; or

(3) wells not capable of production for mechanical reasons.

Behind-Pipe

Behind-pipe Reserves are expected to be recovered from zones in existing wells which will require additional completion work or future re-completion prior to start of production.

In all cases, production can be initiated or restored with relatively low expenditure compared to the cost of drilling a new well.

UNDEVELOPED RESERVES (SEC DEFINITIONS)

Securities and Exchange Commission Regulation S-X §229.4-10(a) (31) defines undeveloped oil and gas reserves as follows:

Undeveloped oil and gas reserves are reserves of any category that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion.

(i) Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances.

(ii) Undrilled locations can be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances, justify a longer time.

(iii) Under no circumstances shall estimates for undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir, as defined in paragraph (a)(2) of this section, or by other evidence using reliable technology establishing reasonable certainty.

RYDER SCOTT COMPANY    PETROLEUM CONSULTANTS