CONTINENTAL RESOURCES INC (Form: S-1/A, Received: 04/14/2006 13:41:58)

Index to Financial Statements

As filed with the Securities and Exchange Commission on April 14, 2006

Registration No. 333-132257

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Continental Resources, Inc.

(Exact name of registrant as specified in charter)

Oklahoma

1311

73-0767549

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification Number)

302 N. Independence

Enid, Oklahoma 73701

(580) 233-8955

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices )

Mark E. Monroe

President and Chief Operating Officer

302 N. Independence

Enid, Oklahoma 73701

(580) 233-8955

(Address, including zip code, and telephone number, including area code, of agent for service)

With a copy to:

David P. Oelman

Vinson & Elkins L.L.P.

1001 Fannin, Suite 2300

Houston, Texas 77002-6760

(713) 758-2222

Winthrop B. Conrad, Jr.

Davis Polk & Wardwell

450 Lexington Avenue

New York, New York 10017

(212) 450-4000

Approximate date of commencement of proposed sale to the public: As soon as practicable on or after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

Index to Financial Statements

The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities nor does it seek an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to completion, dated April 14, 2006

PROSPECTUS

LOGO

Continental Resources, Inc.

Common Stock

This is our initial public offering of common stock. The selling shareholder identified in this prospectus is offering shares of our common stock. We will not receive any proceeds from the sale of the shares by the selling shareholder. The estimated initial public offering price is between $ and $ per share.

Prior to this offering, there has been no public market for our common stock. We have applied for listing of our common stock on the New York Stock Exchange under the symbol “CXP.”

Investing in our common stock involves a high degree of risk. See “ Risk factors ” beginning on page 12.


	Per share	Total

Initial public offering price	$	$

Underwriting discount	$	$

Proceeds to selling shareholder(1)	$	$

(1)

Expenses, other than underwriting discounts, associated with the offering will be paid by us.

The selling shareholder has granted the underwriters an option for a period of 30 days to purchase up to additional shares of common stock to cover overallotments, if any. If such option is exercised in full, the total underwriting discount will be $ and the total proceeds to the selling shareholder will be $ .

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares of common stock to investors on , 2006.


JPMorgan			Merrill Lynch & Co.

Citigroup

	UBS Investment Bank

		Petrie Parkman & Co.

			Raymond James

, 2006

Index to Financial Statements

[Map of Continental Resources, Inc.’s areas of operations, including proved reserves per region, fourth quarter 2005 production, acreage and scheduled drilling locations.]

Index to Financial Statements

Table of Contents


		Page

Cautionary Statement Regarding Forward-Looking Statements		ii

Industry and Market Data		iii

Prospectus Summary		1

Risk Factors		12

Use of Proceeds		23

Dividend Policy		23

Capitalization		24

Dilution		25

Selected Historical and Pro Forma Consolidated Financial Information		26

Management’s Discussion and Analysis of Financial Condition and Results of Operations		30

Business and Properties		47

Management		65

Selling Shareholder and Security Ownership of Certain Beneficial Owners and Management		74

Certain Relationships and Related Party Transactions		76

Description of Capital Stock		80

Shares Eligible for Future Sale		86

Material U.S. Federal Tax Consequences for Non-U.S. Holders of Our Common Stock		88

Underwriting		91

Legal Matters		95

Experts		95

Where You Can Find More Information		95

Index to Audited Historical Consolidated Financial Statements		F-1

Glossary of Oil and Natural Gas Terms		A-1

Summary Report of Ryder Scott Company, L.P .		B-1

Index to Financial Statements

Cautionary Statement Regarding Forward-Looking Statements

This prospectus contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. All statements, other than statements of historical fact included in this prospectus, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this prospectus, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words.

Forward-looking statements may include statements about our:

•

business strategy;

•

reserves;

•

technology;

•

financial strategy;

•

oil and natural gas realized prices;

•

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

•

the amount, nature and timing of capital expenditures;

•

drilling of wells;

•

competition and government regulations;

•

marketing of oil and natural gas;

•

exploitation or property acquisitions;

•

costs of exploiting and developing our properties and conducting other operations;

•

general economic conditions;

•

uncertainty regarding our future operating results; and

•

plans, objectives, expectations and intentions contained in this prospectus that are not historical.

All forward-looking statements speak only as of the date of this prospectus. You should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this prospectus are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. We disclose important factors that could cause our actual results to differ materially from our expectations under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this prospectus. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

Index to Financial Statements

Industry and Market Data

The market data and certain other statistical information used throughout this prospectus are based on independent industry publications, government publications or other published independent sources. Some data are also based on our good faith estimates. Although we believe these third-party sources are reliable, we have not independently verified the information and cannot guarantee its accuracy and completeness.

iii

Index to Financial Statements

Prospectus Summary

This summary highlights information contained elsewhere in this prospectus. You should read this entire prospectus carefully, including “Risk Factors” and our historical consolidated financial statements and the notes to those historical consolidated financial statements included elsewhere in this prospectus. Unless the context otherwise requires, references in this prospectus to “Continental Resources,” “we,” “us,” “our,” “ours” or “company” refer to Continental Resources, Inc. and its subsidiaries.

We have provided definitions for the oil and natural gas terms used in this prospectus in the “Glossary of Oil and Natural Gas Terms” beginning on page A-1 of this prospectus. Unless otherwise indicated, the information contained in this prospectus assumes that the underwriters do not exercise their overallotment option to purchase additional shares.

Our Business

We are an independent oil and natural gas exploration and production company with operations in the Rocky Mountain, Mid-Continent and Gulf Coast regions of the United States. We focus our exploration activities in large new or developing plays that provide us the opportunity to acquire undeveloped acreage positions for future drilling operations. We have been successful in targeting large repeatable resource plays where horizontal drilling, advanced fracture stimulation and enhanced recovery technologies provide the means to economically develop and produce oil and natural gas reserves from unconventional formations. As a result of these efforts, we have grown substantially through the drillbit, adding 86.2 MMBoe of proved oil and natural gas reserves through extensions and discoveries from January 1, 2001 through December 31, 2005 compared to 4.7 MMBoe added through proved reserve purchases during that same period.

As of December 31, 2005, our estimated proved reserves were 116.7 MMBoe, with a PV-10 of $2.2 billion. PV-10 is a non-GAAP financial measure. However, our PV-10 and our standardized measure of discounted future net cash flows are equivalent because we are a subchapter S-corporation. In connection with the closing of this offering, we will convert to a subchapter C-corporation. The pro forma standardized measure of discounted future net cash flows is presented in Note 14 to our consolidated financial statements included elsewhere in this prospectus. Estimated proved developed reserves were 80.3 MMBoe, or 69% of our total estimated proved reserves. Crude oil comprised 85% of our total estimated proved reserves. At December 31, 2005, we had 1,233 scheduled drilling locations on the 1,523,000 gross (961,000 net) acres that we held. For the year ended December 31, 2005, we generated revenues of $375.8 million and operating cash flows of $265.3 million.

Index to Financial Statements

The following table summarizes our total estimated proved reserves, PV-10 and net producing wells as of December 31, 2005, average daily production for the three months then ended and the reserve-to-production ratio in our principal regions. Our reserve estimates as of December 31, 2005 are based primarily on a reserve report prepared by Ryder Scott Company, L.P., our independent reserve engineers. In preparing its report, Ryder Scott Company, L.P. evaluated properties representing approximately 83% of our PV-10. Our technical staff evaluated properties representing the remaining 17% of our PV-10.


	At December 31, 2005					Average daily production— Fourth quarter 2005 (Boe per day)	Percent of total	Annualized reserve/ production index(1)
	Proved reserves (MBoe)	Percent of total	PV-10 (in millions)		Net producing wells		Percent of total	Annualized reserve/ production index(1)

Rocky Mountain:
Red River units	67,711	58%	$	1,215	187	9,792	44%	18.9
Bakken field	24,041	21%		505	34	5,999	27%	11.0
Other	9,065	8%		137	230	1,694	8%	14.7
Mid-Continent	15,472	13%		328	630	3,715	17%	11.4
Gulf Coast	376	—		19	23	973	4%	1.1

Total	116,665	100%	$	2,204	1,104	22,173	100%	14.4

(1)

The Annualized Reserve/Production Index is the number of years proved reserves would last assuming current production continued at the same rate. This index is calculated by dividing annualized fourth quarter 2005 production into the proved reserve quantity at December 31, 2005.

The following table provides additional information regarding our key development areas:


	At December 31, 2005					2006 Budget
	Developed acres		Undeveloped acres		Scheduled drilling locations(1)	Wells planned for drilling	Capital expenditures (in millions)
	Gross	Net	Gross	Net	Scheduled drilling locations(1)	Wells planned for drilling	Capital expenditures (in millions)

Rocky Mountain:
Red River units	144,176	128,047	—	—	135	41	$	84
Bakken field	52,421	38,971	588,081	356,426	918	54		96
Other	45,720	36,153	358,649	208,612	71	34		40
Mid-Continent	152,734	99,279	115,746	73,582	96	70		64
Gulf Coast	41,842	11,890	23,598	7,873	13	13		17

Total	436,893	314,340	1,086,074	646,493	1,233	212	$	301

(1)

Scheduled drilling locations represent total gross locations specifically identified and scheduled by management as an estimate of our future multi-year drilling activities on existing acreage. Of the total locations shown in the table, 256 are classified as PUDs. As of April 10, 2006, we have commenced drilling of 49 locations shown in the table, including 30 PUD locations. Scheduled drilling locations include 37 potential drilling sites in our New Albany Shale, Lewis Shale, Floyd Shale and Woodford Shale projects. While we own 168,000 gross (72,000 net) undeveloped acres in these projects, we have not sufficiently evaluated the opportunities on our acreage at this date to schedule further locations. Our actual drilling activities may change depending on oil and natural gas prices, the availability of capital, costs, drilling results, regulatory approvals and other factors. See “Risk Factors—Risks Relating to the Oil and Natural Gas Industry and Our Business.”

Index to Financial Statements

Our Business Strategy

Our goal is to increase shareholder value by finding and developing crude oil and natural gas reserves at costs that provide an attractive rate of return on our investment. The principal elements of our business strategy are:

Growth Through Drilling . Substantially all of our annual capital expenditures are invested in drilling projects and acreage and seismic acquisitions.

Acquire Significant Acreage Positions in New or Developing Plays . Our technical staff is focused on identifying and testing new unconventional oil and natural gas resource plays where significant reserves could be developed if commercial production rates can be achieved through advanced drilling, fracture stimulation and enhanced recovery techniques.

Our Business Strengths

We have a number of strengths that we believe will help us successfully execute our strategies:

Large Drilling and Acreage Inventory . Our large number of identified drilling locations in all of our areas of operations provide for a multi-year drilling inventory.

Horizontal Drilling and Enhanced Recovery Experience . In 1992, we drilled our initial horizontal well, and we have drilled over 300 horizontal wells since that time. We also have substantial experience with enhanced recovery methods and currently serve as the operator of 39 waterflood units and eight high-pressure air injection units.

Control Operations Over a Substantial Portion of our Assets and Investments . As of December 31, 2005, we operated properties comprising 97% of our PV-10. By controlling operations, we are able to more effectively manage the cost and timing of exploration and development of our properties.

Experienced Management Team . Our senior management team has extensive expertise in the oil and gas industry. Our eight senior officers have an average of 25 years of oil and gas industry experience.

Strong Financial Position . As of April 13, 2006, after giving effect to borrowings made to pay the $60.0 cash dividend to our shareholders, we had outstanding borrowings under our credit facility of approximately $199.5 million. We believe that our planned exploration and development activities will be funded substantially from our operating cash flows.

Index to Financial Statements

Recent Events

Payment of Cash Dividend . On April 13, 2006, we paid a cash dividend of approximately $60.0 million to our shareholders for tax purposes and, subject to forfeiture, to holders of unvested restricted stock. In connection with the completion of this offering, we will convert from a subchapter S-corporation to a subchapter C-corporation, and we do not anticipate paying any additional cash dividends on our common stock in the foreseeable future.

NYMEX and Related Oil Price Differential . The difference between the calendar month average of the NYMEX crude oil prices and our realized crude oil prices has increased in the Rocky Mountain region during the first quarter 2006. For the year ended December 31, 2005, the average company-wide difference was $5.24 per Bbl. The company-wide differences for January, February and March 2006 are estimated to be approximately $8, $11 and $16 per Bbl, respectively. Factors affecting the difference include higher oil imports and production in the region, lower demand by local refineries due to downtime for maintenance and reduced seasonal demand for gasoline and downstream transportation capacity constraints. We are unable to predict when, or if, the difference will revert back to historical levels. For the three months ended March 31, 2006, our average realized oil and natural gas prices were $ and $ , respectively.

Oil Storage; Production Curtailment . Due to downstream transportation constraints in the Rocky Mountain region, one of our oil purchasers was unable to accept delivery of a portion of our March 2006 sales volumes. As a result, we stored approximately 3,000 net Bbls of oil per day of production in Guernsey, Wyoming. We plan to sell the stored oil within the next 60 days. As a result of the same market disruption, we shut in wells in the Red River units representing approximately 1,700 net Bbls of oil per day. For the month of April 2006, we expect our wells in the region to be on production for the full month and expect to be able to market all of the production. For the three months ended March 31, 2006, our oil and natural gas production volumes were MBbls and MMcf, respectively.

Acquisition of Banner Pipeline Company . For the year ended December 31, 2005, oil sales to Banner Pipeline Company, L.L.C., which was wholly owned by our principal shareholder, accounted for approximately 19% of our total oil and gas sales. In February 2006, we decided to market the majority of our crude oil in the Rocky Mountain region directly or through a wholly owned subsidiary rather than through an affiliate, and, as Banner has existing contacts and relationships with crude oil purchasers, we decided to purchase Banner. On March 30, 2006, we acquired Banner for approximately $8.8 million, the book value of working capital, principally cash, accounts receivable, crude oil inventory and accounts payable.

Risk Factors

Investing in our common stock involves risks that include the speculative nature of oil and natural gas exploration, competition, volatile oil and natural gas prices and other material factors. You should read carefully the section entitled “Risk Factors” beginning on page 12 for an explanation of these risks before investing in our common stock. In particular, the following considerations may offset our business strengths or have a negative effect on our business strategy as well as on activities on our properties, which could cause a decrease in the price of our common stock and result in a loss of all or a portion of your investment:

•

A substantial or extended decline in oil and natural gas prices may adversely affect our business, financial condition or results of operations and our ability to meet our capital expenditure obligations and financial commitments.

•

Drilling for and producing oil and natural gas are high risk activities with many uncertainties that could adversely affect our business, financial condition or results of operations.

Index to Financial Statements

•

Reserve estimates depend on many assumptions that may turn out to be inaccurate. Any material inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves.

•

The results of enhanced recovery methods are uncertain.

•

Our development and exploitation projects require substantial capital expenditures. We may be unable to obtain needed capital or financing on satisfactory terms, which could lead to a decline in our oil and natural gas reserves.

•

If oil and natural gas prices decrease, we may be required to take write-downs of the carrying values of our oil and natural gas properties.

•

A substantial portion of our producing properties are located in the Rocky Mountains, making us vulnerable to risks associated with operating in one major geographic area.

•

Unless we replace our oil and natural gas reserves, our reserves and production will decline, which would adversely affect our cash flows and results of operations.

•

The unavailability or high cost of additional drilling rigs, equipment, supplies, personnel and oilfield services could adversely affect our ability to execute our exploration and development plans within our budget and on a timely basis.

•

We may incur substantial losses and be subject to substantial liability claims as a result of our oil and natural gas operations; we may not be insured for, or our insurance may be inadequate to protect us against, these risks.

•

The inability of our significant customers to meet their obligations to us may adversely affect our financial results.

•

Following this offering, our Chairman and Chief Executive Officer will own approximately % of our outstanding common stock, giving him influence and control in corporate transactions and other matters.

For a discussion of other considerations that could negatively affect us, including risks related to this offering and our common stock, see “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.”

Corporate History and Information

Continental Resources, Inc. is incorporated under the laws of the State of Oklahoma. We were originally formed in 1967 to explore, develop and produce oil and natural gas properties in Oklahoma. Through 1993, our activities and growth remained focused primarily in Oklahoma. In 1993, we expanded our activity into the Rocky Mountain and Gulf Coast regions. Through drilling success and strategic acquisitions, approximately 87% of our estimated proved reserves as of December 31, 2005 are located in the Rocky Mountain region.

We are currently a subchapter S-corporation under the rules and regulations of the Internal Revenue Service. However, upon the consummation of this offering, we will have more shareholders than the IRS rules and regulations governing S-corporations allow, and, therefore, we will convert automatically from a subchapter S-corporation to a subchapter C-corporation. In connection with this conversion, we will record a charge to earnings estimated to be approximately $117 million as of December 31, 2005 to recognize deferred taxes.

In addition, prior to the consummation of this offering, we will effect an 11 for 1 stock split of our shares in the form of a stock dividend.

Our principal executive offices are located at 302 N. Independence, Enid, Oklahoma 73701, and our telephone number at that address is (580) 233-8955.

Index to Financial Statements

The Offering

Common Stock Offered:

By the selling shareholder: shares

Overallotment option granted by the selling shareholder: shares

Common stock to be owned by the selling shareholder after the offering: shares (or shares if the underwriters’ overallotment option is exercised in full)

Common stock to be outstanding after the offering: 158,058,109 shares

Use of Proceeds:

We will not receive any proceeds from the sale of the shares of common stock by the selling shareholder. See “Use of Proceeds.”

Dividend Policy:

We do not anticipate paying any cash dividends on our common stock. See “Dividend Policy.”

Proposed New York Stock Exchange Symbol:

CXP

Other Information About This Prospectus:

Unless specifically stated otherwise, the information in this prospectus:

•

is adjusted to reflect an 11 for 1 stock split of our shares of common stock to be effected in the form of a stock dividend prior to the consummation of this offering;

•

assumes no exercise of the underwriters’ overallotment option to purchase additional shares; and

•

assumes an initial public offering price of $ , which is the mid-point of the range set forth on the front cover of this prospectus.

Index to Financial Statements

Summary Historical and Pro Forma Consolidated Financial Data

This section presents our summary historical and pro forma consolidated financial data. The summary historical consolidated financial data presented below is not intended to replace our historical consolidated financial statements.

The following historical consolidated financial data, as it relates to each of the fiscal years ended December 31, 2001 through 2005, has been derived from our annual historical consolidated financial statements. You should read the following summary historical consolidated financial data in connection with “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited historical consolidated financial statements and related notes included elsewhere in this prospectus. The summary historical consolidated results are not necessarily indicative of results to be expected in future periods.

The summary pro forma financial data reflect the tax effects of our conversion concurrent with the closing of this offering from a subchapter S-corporation to a subchapter C-corporation.

The share and per share information presented below does not give effect to the 11 for 1 stock split to be effected in the form of a stock dividend prior to the closing of this offering:


	Year ended December 31,
	2001			2002			2003			2004		2005
	(in thousands, except per share amounts)
Statement of operations data:
Revenues:
Oil and natural gas sales	$	112,170		$	108,752		$	138,948		$	181,435	$	361,833
Crude oil marketing and trading(1)		245,872			152,092			169,547			226,664		—
Oil and natural gas service operations		6,047			5,739			9,114			10,811		13,931

Total revenues		364,089			266,583			317,609			418,910		375,764

Operating costs and expenses:
Production expense		31,859			32,299			40,821			43,754		52,754
Production tax		8,385			7,729			10,251			12,297		16,031
Exploration expense		15,863			10,229			17,221			12,633		5,231
Crude oil marketing and trading(1)		245,003			152,718			166,731			227,210		—
Oil and gas service operations		2,820			3,485			5,641			6,466		7,977
Depreciation, depletion, amortization and accretion		25,659			29,010			40,256			38,627		49,802
Property impairments		10,113			25,686			8,975			11,747		6,930
General and administrative(2)		6,199			8,668			9,604			12,400		31,266
(Gain) loss on sale		(3,423	)		(223	)		(589	)		150		(3,026	)

Total operating costs and expenses	$	342,478		$	269,601		$	298,911		$	365,284	$	166,965

Index to Financial Statements


	Year ended December 31,
	2001			2002			2003			2004			2005
	(in thousands, except per share amounts)
Income (loss) from operations	$	21,611		$	(3,018	)	$	18,698		$	53,626		$	208,799

Other income (expense)
Interest expense		(15,324	)		(18,216	)		(19,761	)		(23,617	)		(14,220	)
Loss on redemption on bonds		—			—			—			(4,083	)		—
Other		645			912			295			890			867

Total other income (expense)		(14,679	)		(17,304	)		(19,466	)		(26,810	)		(13,353	)

Income (loss) from continuing operations before income taxes		6,932			(20,322	)		(768	)		26,816			195,446
Provision for income taxes(3)		—			—			—			—			1,139

Income (loss) from continuing operations		6,932			(20,322	)		(768	)		26,816			194,307
Discontinued operations(4)		4,735			290			946			1,680			—
Loss on sale of discontinued operations(4)		—			—			—			(632	)		—

Income (loss) before cumulative effect of change in accounting principle		11,667			(20,032	)		178			27,864			194,307
Cumulative effect of change in accounting principle(5)		—			—			2,162			—			—

Net income (loss)	$	11,667		$	(20,032	)	$	2,340		$	27,864		$	194,307

Basic earnings (loss) per share:
From continuing operations	$	0.48		$	(1.41	)	$	(0.05	)	$	1.87		$	13.52
From discontinued operations(4)		0.33			0.02			0.06			0.11			—
Loss on sale of discontinued operations(4)		—			—			—			(0.04	)		—

Before cumulative effect of change in accounting principle		0.81			(1.39	)		0.01			1.94			13.52
Cumulative effect of change in accounting principle		—			—			0.15			—			—

Net income (loss) per share	$	0.81		$	(1.39	)	$	0.16		$	1.94		$	13.52

Shares used in basic earnings (loss) per share		14,369			14,369			14,369			14,369			14,369

Diluted earnings (loss) per share:
From continuing operations	$	0.48		$	(1.41	)	$	(0.05	)	$	1.85		$	13.42
From discontinued operations(4)		0.33			0.02			0.06			0.12			—
Loss on sale of discontinued operations(4)		—			—			—			(0.04	)		—

Before cumulative effect of change in accounting principle		0.81			(1.39	)		0.01			1.93			13.42
Cumulative effect of accounting change		—			—			0.15			—			—

Net income (loss) per share	$	0.81		$	(1.39	)	$	0.16		$	1.93		$	13.42

Shares used in diluted earnings (loss) per share		14,393			14,369			14,369			14,476			14,482

Index to Financial Statements


	Year ended December 31,
	2001			2002			2003			2004			2005
	(in thousands, except per share amounts)

Pro forma C-corporation data:
Income (loss) from continuing operations before income taxes	$	6,932		$	(20,322	)	$	(768	)	$	26,816		$	195,446
Pro forma provision (benefit) for income taxes attributable to operations		2,634			(7,722	)		(292	)		10,190			74,269

Pro forma income (loss) from operations after tax		4,298			(12,600	)		(476	)		16,626			121,177
Discontinued operations net of tax(4)		2,936			180			587			1,042			—
Loss on sale of discontinued operations(4)		—			—			—			(392	)		—
Cumulative effect of change in accounting principal net of tax		—			—			1,340			—			—

Pro forma net income (loss)	$	7,234		$	(12,420	)	$	1,451		$	17,276		$	121,177

Pro forma net income (loss) per basic share	$	0.50		$	(0.86	)	$	0.10		$	1.20		$	8.43
Pro forma net income (loss) per diluted share		0.50			(0.86	)		0.10			1.19			8.37

Other financial data:
Cash dividends per share	$	—		$	—		$	—		$	1.04		$	0.14
EBITDAX (6)		78,626			63,288			88,750			116,498			285,344
Net cash provided by operations		63,413			46,997			65,246			93,854			265,265
Net cash used in investing		(106,384	)		(113,295	)		(108,791	)		(72,992	)		(133,716	)
Net cash provided by (used in) financing		43,045			61,593			43,302			(7,245	)		(141,467	)
Capital expenditures		111,023			113,447			114,145			94,307			144,800

Balance sheet data (at period end):
Cash and cash equivalents	$	7,225		$	2,520		$	2,277		$	15,894		$	6,014
Property and equipment, net		317,331			367,903			439,432			434,339			509,393
Total assets		354,485			406,677			484,988			504,951			600,234
Long-term debt, including current maturities		183,395			247,105			290,920			290,522			143,000
Shareholders’ equity		135,113			115,081			116,932			130,385			324,730

(1)

Crude oil marketing and trading captions consist of our marketing activities under which crude oil production was sold at the wellhead and transported to a local hub where we purchased the barrels back to exchange at Cushing, Oklahoma in order to minimize pricing differentials with the NYMEX oil futures contract. We adopted Emerging Issues Task Force (EITF) 04-13 on January 1, 2005, which allowed certain purchase and sales transactions with the same counterparty to be combined and accounted for as a single transaction under the guidance of Accounting Principles Board Opinion No. 29. In 2005, we netted $39.8 million of crude oil marketing and trading revenues and $39.7 million of crude oil marketing and trading expenses under oil and natural gas sales. Prior to the adoption of EITF 04-13, we presented crude oil marketing and trading revenues and expenses gross under the guidance provided by EITF 99-19, “Reporting Revenues Gross as a Principal and/or Net as an Agent.” Effective March 2005, we ceased marketing our crude oil production under these arrangements. Thereafter, we have sold our crude oil at the wellhead. Certain of these sales have been to our affiliates, as described under “Certain relationships and related party transactions.”

(2)

We have included stock-based compensation of $0.0 million, $0.2 million, $0.2 million, $2.0 million and $13.8 million in general and administrative expenses for the years ended December 31, 2001, 2002, 2003, 2004 and 2005. Our stock based compensation plan requires us to purchase vested shares at the employee’s request based on an internally calculated fair-market value of our stock. Amounts noted herein represent the increase in our liability associated with our purchase obligation. The fair market valuation is based on the book value of our shareholders’ equity adjusted for our PV-10 as of each calendar quarter. Our requirement to purchase vested shares will be eliminated once we begin reporting under Section 12 of the Securities Exchange Act of 1934, as amended.

(3)

Properties owned by us at May 31, 1997, the date we converted into a subchapter S-corporation from a subchapter C-corporation, may be subject to federal taxation if sold for an amount in excess of the difference between the conversion date fair market value and the then tax basis for the sold assets. During 2005, we incurred federal taxes due to the sale of assets acquired prior to May 31, 1997.

(4)

In July 2004, we sold all of the outstanding stock in Continental Gas, Inc., a wholly owned subsidiary, to our shareholders. The Continental Gas, Inc. assets included seven gas gathering systems and three gas-processing plants. These assets represented our entire gas gathering, marketing and processing segment. We have accounted for these operations as discontinued operations.

Index to Financial Statements

(5)

We adopted Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations” and recorded the cumulative effect of the change in accounting principle on January 1, 2003.

(6)

EBITDAX represents earnings before interest expense, income taxes (when applicable), depreciation, depletion, amortization and accretion, property impairments, exploration expense and non-cash compensation expense. EBITDAX is not a measure of net income or cash flow as determined by generally accepted accounting principles (GAAP). EBITDAX should not be considered as an alternative to, or more meaningful than, net income or cash flow as determined in accordance with GAAP or as an indicator of a company’s operating performance or liquidity. Certain items excluded from EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of EBITDAX. Our computations of EBITDAX may not be comparable to other similarly titled measures of other companies. We believe that EBITDAX is a widely followed measure of operating performance and may also be used by investors to measure our ability to meet future debt service requirements, if any. Our credit facility requires that we maintain a total debt to EBITDA ratio of no greater than 3.75 to 1 on a rolling four-quarter basis. Our credit facility defines EBITDA consistently with the definition of EBITDAX utilized and presented by us. At December 31, 2005, this ratio was approximately 0.5 to 1. The following table represents a reconciliation of our net income (loss) to EBITDAX:


	Year ended December 31,
	2001		2002			2003		2004		2005
	(in thousands)
Net income (loss)	$	11,667	$	(20,032	)	$	2,340	$	27,864	$	194,307
Interest expense		15,324		18,216			19,761		23,617		14,220
Provision for income taxes		—		—			—		—		1,139
Depreciation, depletion, amortization and accretion		25,659		29,010			40,256		38,627		49,802
Property impairments		10,113		25,686			8,975		11,747		6,930
Exploration expense		15,863		10,229			17,221		12,633		5,231
Equity compensation		—		179			197		2,010		13,715

EBITDAX	$	78,626	$	63,288		$	88,750	$	116,498	$	285,344

Index to Financial Statements

Summary Reserve, Production and Operating Data

The following table presents summary data with respect to our estimated net proved oil and natural gas reserves as of the dates indicated. Our reserve estimates as of December 31, 2003, 2004 and 2005 are based primarily on reserve reports prepared by Ryder Scott Company, L.P., our independent reserve engineers. In preparing its reports, Ryder Scott Company, L.P. evaluated properties representing approximately 83% of our PV-10 as of the end of each period. Our technical staff evaluated our remaining properties. A copy of Ryder Scott Company, L.P.’s summary report as of December 31, 2005 is included in this prospectus beginning on page B-1. All calculations of estimated net proved reserves have been made in accordance with the rules and regulations of the Securities and Exchange Commission, or the SEC. For additional information regarding our reserves, see “Business and Properties—Proved Reserves.”


	As of December 31,
	2003		2004		2005

Proved reserves:
Oil (MBbls)		73,000		80,602		98,645
Natural gas (MMcf)		67,096		60,620		108,118
Oil equivalent (MBoe)		84,183		90,705		116,665
Proved developed reserves percentage		55%		83%		69%
PV-10 (in millions)(1)	$	815	$	1,114	$	2,204
Estimated reserve life (in years)		16.0		17.6		16.2

Costs incurred (in thousands):
Property acquisition costs	$	8,683	$	12,456	$	16,763
Exploration costs		11,981		30,867		9,289
Development costs		75,396		53,036		117,837

Total	$	96,060	$	96,359	$	143,889

(1)

PV-10 is a non-GAAP financial measure. However, our PV-10 and our standardized measure of discounted future net cash flows (the most directly comparable measure calculated and presented in accordance with GAAP) are equivalent because we are a subchapter S-corporation. In connection with the closing of this offering, we will convert to a subchapter C-corporation. The pro forma standardized measure of discounted future net cash flows is presented in Note 14 to our consolidated financial statements included elsewhere in this prospectus.

The following table sets forth summary data with respect to our production results, average sales prices and production costs on a historical basis for the periods presented:


	Year ended December 31,
	2003		2004		2005

Net production volumes:
Oil (MBbls)		3,463		3,688		5,708
Natural gas (MMcf)		10,751		8,794		9,006
Oil equivalents (MBoe)		5,255		5,154		7,209
Average prices:
Oil, without hedges ($/Bbl)	$	28.88	$	38.85	$	52.45
Oil, with hedges ($/Bbl)		25.98		37.12		52.45
Natural gas ($/Mcf)		4.55		5.06		6.93
Oil equivalents, without hedges ($/Bbl)		28.35		36.45		50.19
Oil equivalents, with hedges ($/Bbl)		26.44		35.20		50.19
Costs and expenses:
Production expense ($/Boe)	$	7.77	$	8.49	$	7.32
Production tax ($/Boe)		1.95		2.39		2.22
General and administrative ($/Boe)		1.83		2.41		4.34
DD&A expense ($/Boe)		7.10		7.02		6.50

Index to Financial Statements

Risk Factors

You should carefully consider each of the risks described below, together with all of the other information contained in this prospectus, before deciding to invest in shares of our common stock. If any of the following risks develop into actual events, our business, financial condition or results of operations could be materially adversely affected, the trading price of your shares could decline and you may lose all or part of your investment.

Risks Relating to the Oil and Natural Gas Industry and Our Business

The price we receive for our oil and natural gas production heavily influences our revenue, profitability, access to capital and future rate of growth. Oil and natural gas are commodities and, therefore, their prices are subject to wide fluctuations in response to relatively minor changes in supply and demand. Historically, the markets for oil and natural gas have been volatile. These markets will likely continue to be volatile in the future. The prices we receive for our production, and the levels of our production, depend on numerous factors beyond our control. These factors include the following:

•

changes in global supply and demand for oil and natural gas;

•

the actions of the Organization of Petroleum Exporting Countries, or OPEC;

•

the price and quantity of imports of foreign oil and natural gas;

•

political conditions in or affecting other oil-producing and natural gas-producing countries, including the current conflicts in the Middle East and conditions in South America and Russia;

•

the level of global oil and natural gas exploration and production;

•

the level of global oil and natural gas inventories;

•

weather conditions;

•

technological advances affecting energy consumption; and

•

the price and availability of alternative fuels.

Lower oil and natural gas prices may also reduce the amount of oil and natural gas that we can produce economically. Substantial decreases in oil and natural gas prices would render uneconomic a significant portion of our exploitation projects. This may result in our having to make significant downward adjustments to our estimated proved reserves. As a result, a substantial or extended decline in oil or natural gas prices may materially and adversely affect our future business, financial condition, results of operations, liquidity or ability to finance planned capital expenditures.

Drilling for and producing oil and natural gas are high risk activities with many uncertainties that could adversely affect our business, financial condition or results of operations.

Our future financial condition and results of operations will depend on the success of our exploitation, exploration, development and production activities. Our oil and natural gas exploration and production activities are subject to numerous risks beyond our control, including the risk that drilling will not result in commercially viable oil or natural gas production. Our decisions to purchase, explore, develop or otherwise exploit prospects or

Index to Financial Statements

properties will depend in part on the evaluation of data obtained through geophysical and geological analyses, production data and engineering studies, the results of which are often inconclusive or subject to varying interpretations. For a discussion of the uncertainty involved in these processes, see “—Reserve estimates depend on many assumptions that may turn out to be inaccurate. Any material inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves.” Our cost of drilling, completing and operating wells is often uncertain before drilling commences. Overruns in budgeted expenditures are common risks that can make a particular project uneconomical. Further, many factors may curtail, delay or cancel drilling, including the following:

•

delays imposed by or resulting from compliance with regulatory requirements;

•

pressure or irregularities in geological formations;

•

shortages of or delays in obtaining equipment and qualified personnel;

•

equipment failures or accidents;

•

adverse weather conditions, such as hurricanes and tropical storms;

•

reductions in oil and natural gas prices;

•

title problems; and

•

limitations in the market for oil and natural gas.

The process of estimating oil and natural gas reserves is complex. It requires interpretations of available technical data and many assumptions, including assumptions relating to economic factors. Any significant inaccuracies in these interpretations or assumptions could materially affect the estimated quantities and present value of reserves shown in this prospectus. See “Business and Properties—Proved Reserves” for information about our oil and natural gas reserves.

In order to prepare our estimates, we must project production rates and timing of development expenditures. We must also analyze available geological, geophysical, production and engineering data. The extent, quality and reliability of this data can vary. The process also requires economic assumptions about matters such as oil and natural gas prices, drilling and operating expenses, capital expenditures, taxes and availability of funds.

Actual future production, oil and natural gas prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable oil and natural gas reserves most likely will vary from our estimates. Any significant variance could materially affect the estimated quantities and present value of reserves shown in this prospectus. In addition, we may adjust estimates of proved reserves to reflect production history, results of exploration and development, prevailing oil and natural gas prices and other factors, many of which are beyond our control.

For example, our initial well in the Bakken Field was completed in August 2003. As of December 31, 2005, we had 10.8 MMBoe of proved producing reserves assigned to 62 producing wells and 13.2 MMBoe of proved undeveloped reserves assigned to 60 undrilled locations. The Bakken Field contained 21% of our total proved reserves and 36% of our total proved undeveloped reserves as of December 31, 2005. Due to the limited production history of our wells in the Bakken Field, the estimates of future production associated with such properties may be subject to greater variance to actual production than would be the case with properties having a longer production history.

Index to Financial Statements

You should not assume that the present value of future net revenues from our proved reserves referred to in this prospectus is the current market value of our estimated oil and natural gas reserves. In accordance with SEC requirements, we generally base the estimated discounted future net cash flows from our proved reserves on prices and costs on the date of the estimate. Actual future prices and costs may differ materially from those used in the present value estimate. If oil prices decline by $1.00 per Bbl, then our PV-10 as of December 31, 2005 would decrease from $2,204 million to $2,156 million. If natural gas prices decline by $0.10 per Mcf, then our PV-10 as of December 31, 2005 would decrease from $2,204 million to $2,199 million.

Our use of enhanced recovery methods creates uncertainties that could adversely affect our results of operations and financial condition.

We inject water and high-pressure air into formations on some of our properties to increase the production of oil and natural gas. The additional production and reserves attributable to the use of these enhanced recovery methods are inherently difficult to predict. If our enhanced recovery programs do not allow for the extraction of oil and natural gas in the manner or to the extent that we anticipate, our future results of operations and financial condition could be materially adversely affected.

The oil and natural gas industry is capital intensive. We make and expect to continue to make substantial capital expenditures in our business for the development, exploitation, production and acquisition of oil and natural gas reserves. To date, these capital expenditures have been financed with cash generated by operations and through borrowings from banks and from our principal shareholder. We intend to finance our future capital expenditures primarily through cash flow from operations and through borrowings under our revolving credit facility; however, our financing needs may require us to alter or increase our capitalization substantially through the issuance of debt or equity securities. The issuance of additional debt will require that a portion of our cash flow from operations be used for the payment of interest and principal on our debt, thereby reducing our ability to use cash flow to fund working capital, capital expenditures and acquisitions. The issuance of additional equity securities could have a dilutive effect on the value of your common stock.

Our cash flow from operations and access to capital are subject to a number of variables, including:

•

our proved reserves;

•

the level of oil and natural gas we are able to produce from existing wells;

•

the prices at which our oil and natural gas are sold; and

•

our ability to acquire, locate and produce new reserves.

If our revenues or the borrowing base under our credit facility decrease as a result of lower oil or natural gas prices, operating difficulties, declines in reserves or for any other reason, we may have limited ability to obtain the capital necessary to sustain our operations at current levels. If additional capital is needed, we may not be able to obtain debt or equity financing. If cash generated by operations or cash available under our revolving credit facility is not sufficient to meet our capital requirements, the failure to obtain additional financing could result in a curtailment of our operations relating to development of our prospects, which in turn could lead to a decline in our oil and natural gas reserves, and could adversely affect our business, financial condition and results of operations.

Index to Financial Statements

If oil and natural gas prices decrease, we may be required to take write-downs of the carrying values of our oil and natural gas properties.

Accounting rules require that we review periodically the carrying value of our oil and natural gas properties for possible impairment. Based on specific market factors and circumstances at the time of prospective impairment reviews, and the continuing evaluation of development plans, production data, economics and other factors, we may be required to write down the carrying value of our oil and natural gas properties. A write-down constitutes a non-cash charge to earnings. We may incur impairment charges in the future, which could have a material adverse effect on our results of operations for the periods in which such charges are taken.

A substantial portion of our producing properties are located in the Rocky Mountain region, making us vulnerable to risks associated with operating in one major geographic area.

Our producing properties are geographically concentrated in the Rocky Mountain region. In particular, a substantial portion of our proved reserves are located in the Red River units and in the Bakken field. At December 31, 2005, the Red River units and the Bakken field represented approximately 55% and 23% of our PV-10, respectively. As a result of this concentration, we may be disproportionately exposed to the impact of regional supply and demand factors, delays or interruptions of production from these wells caused by significant governmental regulation, transportation capacity constraints, curtailment of production or interruption of transportation of oil produced from the wells in these areas.

Unless we replace our oil and natural gas reserves, our reserves and production will decline, which would adversely affect our cash flows and results of operations.

Unless we conduct successful development, exploitation and exploration activities or acquire properties containing proved reserves, our proved reserves will decline as those reserves are produced. Producing oil and natural gas reservoirs generally are characterized by declining production rates that vary depending upon reservoir characteristics and other factors. Our future oil and natural gas reserves and production, and therefore our cash flow and results of operations, are highly dependent on our success in efficiently developing and exploiting our current reserves and economically finding or acquiring additional recoverable reserves. We may not be able to develop, exploit, find or acquire sufficient additional reserves to replace our current and future production.

Shortages or the high cost of drilling rigs, equipment, supplies, personnel or oilfield services could delay or adversely affect our development and exploration operations, which could have a material adverse effect on our business, financial condition or results of operations.

We are not insured against all risks. Losses and liabilities arising from uninsured and underinsured events could materially and adversely affect our business, financial condition or results of operations. Our oil and natural gas exploration and production activities are subject to all of the operating risks associated with drilling for and producing oil and natural gas, including the possibility of:

•

environmental hazards, such as uncontrollable flows of oil, natural gas, brine, well fluids, toxic gas or other pollution into the environment, including groundwater and shoreline contamination;

Index to Financial Statements

•

abnormally pressured formations;

•

mechanical difficulties, such as stuck oilfield drilling and service tools and casing collapse;

•

fires, explosions and ruptures of pipelines in connection with our high-pressure air injection operations;

•

personal injuries and death; and

•

natural disasters.

Any of these risks could adversely affect our ability to conduct operations or result in substantial losses to our company as a result of:

•

injury or loss of life;

•

damage to and destruction of property, natural resources and equipment;

•

pollution and other environmental damage;

•

regulatory investigations and penalties;

•

suspension of our operations; and

•

repair and remediation costs.

We may elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the risks presented. In addition, pollution and environmental risks generally are not fully insurable. The occurrence of an event that is not fully covered by insurance could have a material adverse effect on our business, financial condition and results of operations.

Prospects that we decide to drill may not yield oil or natural gas in commercially viable quantities.

Prospects that we decide to drill that do not yield oil or natural gas in commercially viable quantities will adversely affect our result of operations and financial condition. In this prospectus, we describe some of our current prospects and our plans to explore those prospects. Our prospects are in various stages of evaluation, ranging from a prospect which is ready to drill to a prospect that will require substantial additional seismic data processing and interpretation. There is no way to predict in advance of drilling and testing whether any particular prospect will yield oil or natural gas in sufficient quantities to recover drilling or completion costs or to be economically viable. The use of seismic data and other technologies and the study of producing fields in the same area will not enable us to know conclusively prior to drilling whether oil or natural gas will be present or, if present, whether oil or natural gas will be present in commercial quantities. We cannot assure you that the analogies we draw from available data from other wells, more fully explored prospects or producing fields will be applicable to our drilling prospects.

Our identified drilling locations are scheduled out over several years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their drilling.

Our management has specifically identified and scheduled drilling locations as an estimation of our future multi-year drilling activities on our existing acreage. As of December 31, 2005, we had identified and scheduled 1,233 gross drilling locations. These scheduled drilling locations represent a significant part of our growth strategy. Our ability to drill and develop these locations depends on a number of uncertainties, including oil and natural gas prices, the availability of capital, costs, drilling results, regulatory approvals and other factors. Because of these uncertainties, we do not know if the numerous potential drilling locations we have identified will ever be drilled or if we will be able to produce oil or natural gas from these or any other potential drilling locations. In addition,

Index to Financial Statements

unless production is established within the spacing units covering the undeveloped acres on which some of the locations are identified, the leases for such acreage will expire. As of December 31, 2005, we had 93,922, 123,214 and 160,891 net acres expiring in 2006, 2007 and 2008, respectively. As such, our actual drilling activities may materially differ from those presently identified, which could adversely affect our business.

Market conditions or operational impediments may hinder our access to oil and natural gas markets or delay our production.

Market conditions or the unavailability of satisfactory oil and natural gas transportation arrangements may hinder our access to oil and natural gas markets or delay our production. The availability of a ready market for our oil and natural gas production depends on a number of factors, including the demand for and supply of oil and natural gas and the proximity of reserves to pipelines and terminal facilities. Our ability to market our production depends in substantial part on the availability and capacity of gathering systems, pipelines and processing facilities owned and operated by third parties. Our failure to obtain such services on acceptable terms could materially harm our business. We may be required to shut in wells due to lack of a market or inadequacy or unavailability of crude oil or natural gas pipeline or gathering system capacity. If that were to occur, then we would be unable to realize revenue from those wells until production arrangements were made to deliver to market.

We have been an early entrant into new or emerging plays; as a result, our drilling results in these areas are uncertain, and the value of our undeveloped acreage will decline if drilling results are unsuccessful.

While our costs to acquire undeveloped acreage in new or emerging plays have generally been less than those of later entrants into a developing play, our drilling results in these areas are more uncertain than drilling results in areas that are developed and producing. Since new or emerging plays have limited or no production history, we are unable to use past drilling results in those areas to help predict our future drilling results. As a result, our cost of drilling, completing and operating wells in these areas may be higher than initially expected, and the value of our undeveloped acreage will decline if drilling results are unsuccessful.

We are subject to complex federal, state, local, provincial and other laws and regulations that could adversely affect the cost, manner or feasibility of conducting our operations.

Our oil and natural gas exploration, production and transportation operations are subject to complex and stringent laws and regulations. In order to conduct our operations in compliance with these laws and regulations, we must obtain and maintain numerous permits, approvals and certificates from various federal, state, local and provincial governmental authorities. We may incur substantial costs in order to maintain compliance with these existing laws and regulations. In addition, our costs of compliance may increase if existing laws and regulations are revised or reinterpreted, or if new laws and regulations become applicable to our operations. Such costs could have a material adverse effect on our business, financial condition and results of operations.

Our business is subject to federal, state, local and provincial laws and regulations as interpreted and enforced by governmental authorities possessing jurisdiction over various aspects of the exploration for, and the production and transportation of, oil and natural gas. Failure to comply with such laws and regulations, as interpreted and enforced, could have a material adverse effect on our business, financial condition and results of operations. See “Business and Properties—Environmental, Health and Safety Regulation” and “Business and Properties—Regulation of the Oil and Natural Gas Industry” for a description of the laws and regulations that affect us.

Our operations expose us to significant costs and liabilities with respect to environmental and operational safety matters.

We may incur significant costs and liabilities as a result of environmental, health and safety requirements applicable to our oil and natural gas exploration, production and transportation activities. These costs and

Index to Financial Statements

liabilities could arise under a wide range of federal, state, local and provincial laws and regulations relating to protection of the environment, health and safety, including regulations and enforcement policies that have tended to become increasingly strict over time. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, imposition of cleanup and site restoration costs and liens, and, to a lesser extent, issuance of injunctions to limit or cease operations. In addition, claims for damages to persons or property, including natural resources, may result from the environmental, health and safety impacts of our operations.

Strict, joint and several liability may be imposed under certain environmental laws, which could cause us to become liable for the conduct of others or for consequences of our own actions that were in compliance with all applicable laws at the time those actions were taken. New laws, regulations or enforcement policies could be more stringent and impose unforeseen liabilities or significantly increase compliance costs. If we were not able to recover the resulting costs through insurance or increased revenues, our business, financial condition or results of operations could be adversely affected. See “Business and Properties—Environmental, Health and Safety Regulation” for more information.

Competition in the oil and natural gas industry is intense, making it more difficult for us to acquire properties, market oil and natural gas and secure trained personnel.

We operate in a highly competitive environment for acquiring properties, marketing oil and natural gas and securing trained personnel. Many of our competitors possess and employ financial, technical and personnel resources substantially greater than ours, which can be particularly important in the areas in which we operate. Those companies may be able to pay more for productive oil and natural gas properties and exploratory prospects and to evaluate, bid for and purchase a greater number of properties and prospects than our financial or personnel resources permit. In addition, those companies may be able to offer better compensation packages to attract and retain qualified personnel than we are able to offer. The cost to attract and retain qualified personnel has increased over the past two years due to competition and may increase substantially in the future. Our ability to acquire additional prospects and to find and develop reserves in the future will depend on our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. Also, there is substantial competition for capital available for investment in the oil and natural gas industry. We may not be able to compete successfully in the future in acquiring prospective reserves, developing reserves, marketing hydrocarbons, attracting and retaining quality personnel and raising additional capital. Our failure to acquire properties, market oil and natural gas and secure trained personnel and increased compensation for trained personnel could have a material adverse effect on our business.

The loss of senior management or technical personnel could adversely affect operations.

To a large extent, we depend on the services of our senior management and technical personnel. The loss of the services of our senior management or technical personnel, including Harold G. Hamm, our Chairman and Chief Executive Officer, could have a material adverse effect on our operations. We do not maintain, nor do we plan to obtain, any insurance against the loss of any of these individuals.

Terrorist attacks aimed at our energy operations could adversely affect our business.

The continued threat of terrorism and the impact of military and other government action has led and may lead to further increased volatility in prices for oil and natural gas and could affect these commodity markets or financial markets used by us. In addition, the U.S. government has issued warnings that energy assets may be a future target of terrorist organizations. These developments have subjected our oil and natural gas operations to increased risks. Any future terrorist attack on our facilities, those of our customers and, in some cases, those of other energy companies, could have a material adverse effect on our business.

Index to Financial Statements

Seasonal weather conditions and lease stipulations adversely affect our ability to conduct drilling activities in some of the areas where we operate.

Oil and natural gas operations in the Rocky Mountains are adversely affected by seasonal weather conditions and lease stipulations designed to protect various wildlife. In certain areas, including parts of Montana, North Dakota, South Dakota, Utah and Wyoming, drilling and other oil and natural gas activities can only be conducted during the spring and summer months. This limits our ability to operate in those areas and can intensify competition during those months for drilling rigs, oilfield equipment, services, supplies and qualified personnel, which may lead to periodic shortages. These constraints and the resulting shortages or high costs could delay our operations and materially increase our operating and capital costs.

Our credit facility contains certain covenants that may inhibit our ability to make certain investments, incur additional indebtedness and engage in certain other transactions, which could adversely affect our ability to meet our future goals.

Our credit facility includes certain covenants that, among other things, restrict:

•

our investments, loans and advances and the paying of dividends and other restricted payments;

•

our incurrence of additional indebtedness;

•

the granting of liens, other than liens created pursuant to the credit facility and certain permitted liens;

•

mergers, consolidations and sales of all or substantial part of our business or properties;

•

the hedging, forward sale or swap of our production of crude oil or natural gas or other commodities;

•

the sale of assets; and

•

our capital expenditures.

Our credit facility requires us to maintain certain financial ratios, such as leverage ratios. All of these restrictive covenants may restrict our ability to expand or pursue our business strategies. Our ability to comply with these and other provisions of our credit facility may be impacted by changes in economic or business conditions, results of operations or events beyond our control. The breach of any of these covenants could result in a default under our credit facility, in which case, depending on the actions taken by the lenders thereunder or their successors or assignees, such lenders could elect to declare all amounts borrowed under our credit facility, together with accrued interest, to be due and payable. If we were unable to repay such borrowings or interest, our lenders could proceed against their collateral. If the indebtedness under our credit facility were to be accelerated, our assets may not be sufficient to repay in full such indebtedness.

The inability of our significant customers to meet their obligations to us may adversely affect our financial results.

We are subject to credit risk due to concentration of our crude oil and natural gas receivables with several significant customers. The three largest purchasers of our oil and natural gas in 2005 accounted for 31% , 19% and 10% of our total oil and natural gas sales revenues. We do not require our customers to post collateral. The inability of our significant customers to meet their obligations to us may adversely affect our financial results.

Risks Relating to the Offering and Our Common Stock

The initial public offering price of our common stock may not be indicative of the market price of our common stock after this offering. In addition, our stock price may be volatile.

Prior to this offering, there has been no public market for our common stock. An active market for our common stock may not develop or may not be sustained after this offering. The initial public offering price of

Index to Financial Statements

our common stock was determined by negotiations between us and representatives of the underwriters, based on numerous factors which we discuss in the “Underwriting” section of this prospectus. This price may not be indicative of the market price for our common stock after this initial public offering. The market price of our common stock could be subject to significant fluctuations after this offering, and may decline below the initial public offering price. You may not be able to resell your shares at or above the initial public offering price. The following factors could affect our stock price:

•

our operating and financial performance and prospects;

•

quarterly variations in the rate of growth of our financial indicators, such as net income per share, net income and revenues;

•

changes in revenue or earnings estimates or publication of reports by equity research analysts;

•

speculation in the press or investment community;

•

sales of our common stock by us, Harold G. Hamm or other shareholders, or the perception that such sales may occur;

•

general market conditions, including fluctuations in commodity prices; and

•

domestic and international economic, legal and regulatory factors unrelated to our performance.

The stock markets in general have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock.

As of the closing of this offering, Harold G. Hamm, our Chairman and Chief Executive Officer, will beneficially own shares of our outstanding common stock, representing approximately % of our outstanding common stock. As a result, Mr. Hamm will continue to be our controlling shareholder and will continue to be able to control the election of our directors, determine our corporate and management policies and determine, without the consent of our other shareholders, the outcome of certain corporate transactions or other matters submitted to our shareholders for approval, including potential mergers or acquisitions, asset sales and other significant corporate transactions. As controlling shareholder, Mr. Hamm could cause, delay or prevent a change of control of our company. The interests of Mr. Hamm may not coincide with the interests of other holders of our common stock.

Several affiliated companies controlled by Mr. Hamm provide oilfield, gathering and processing, marketing and other services to us. We expect these transactions will continue in the future and may result in conflicts of interest between Mr. Hamm’s affiliated companies and us. We can provide no assurance that any such conflicts will be resolved in our favor.

Purchasers of common stock in this offering will experience immediate and substantial dilution of $ per share.

Based on an assumed initial public offering price of $ per share, purchasers of our common stock in this offering will experience an immediate and substantial dilution of $ per share in the pro forma as adjusted net tangible book value per share of common stock from the initial public offering price, and our pro forma as adjusted net tangible book value as of December 31, 2005 after giving effect to this offering would be $2.05 per share. See “Dilution” for a complete description of the calculation of net tangible book value.

Index to Financial Statements

The requirements of being a public company, including compliance with the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act, may strain our resources, increase our costs and distract management; and we may be unable to comply with these requirements in a timely or cost-effective manner.

As a public company with listed equity securities, we will need to comply with new laws, regulations and requirements, certain corporate governance provisions of the Sarbanes-Oxley Act of 2002, related regulations of the SEC and the requirements of the New York Stock Exchange (NYSE) with which we are not required to comply as a private company. Complying with these statutes, regulations and requirements will occupy a significant amount of time of our board of directors and management and will increase our costs and expenses. We will need to:

•

institute a more comprehensive compliance function;

•

design, establish, evaluate and maintain a system of internal controls over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board;

•

comply with rules promulgated by the NYSE;

•

prepare and distribute periodic public reports in compliance with our obligations under the federal securities laws;

•

establish new internal policies, such as those relating to disclosure controls and procedures and insider trading;

•

involve and retain to a greater degree outside counsel and accountants in the above activities; and

•

establish an investor relations function.

In addition, we also expect that being a public company subject to these rules and regulations will require us to accept less director and officer liability insurance coverage than we desire or to incur substantial costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee, and qualified executive officers. As a result, compliance with the requirements of the Sarbanes-Oxley Act could have a material adverse effect on our business.

Failure by us to achieve and maintain effective internal control over financial reporting in accordance with the rules of the SEC could harm our business and operating results and/or result in a loss of investor confidence in our financial reports, which could have a material adverse effect on our business and stock price.

We are in the process of evaluating our internal controls systems to allow management to report on, and our independent auditors to audit, our internal controls over financial reporting. We will be performing the system and process evaluation and testing (and any necessary remediation) required to comply with the management certification and auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002. We will be required to comply with Section 404 for the year ending December 31, 2007. However, we cannot be certain as to the timing of completion of our evaluation, testing and remediation actions or the impact of the same on our operations. Furthermore, upon completion of this process, we may identify control deficiencies of varying degrees of severity under applicable SEC and Public Company Accounting Oversight Board rules and regulations that remain unremediated. As a public company, we will be required to report, among other things, control deficiencies that constitute a “material weakness” or changes in internal controls that, or that are reasonably likely to, materially affect internal controls over financial reporting. A “material weakness” is a significant deficiency or combination of significant deficiencies that results in more than a remote likelihood that

Index to Financial Statements

a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected. If we fail to implement the requirements of Section 404 in a timely manner, we might be subject to sanctions or investigation by regulatory authorities such as the SEC. In addition, failure to comply with Section 404 or the report by us of a material weakness may cause investors to lose confidence in our consolidated financial statements, and our stock price may be adversely affected as a result. If we fail to remedy any material weakness, our consolidated financial statements may be inaccurate, we may face restricted access to the capital markets and our stock price may be adversely affected.

We have no plans to pay dividends on our common stock, and therefore, you may not receive funds without selling your shares.

While we paid a cash dividend of approximately $60.0 million to our shareholders for tax purposes and, subject to forfeiture, to holders of unvested restricted stock in April 2006, we do not anticipate paying any additional cash dividends on our common stock in the foreseeable future. We currently intend to retain future earnings, if any, to finance the expansion of our business. Our future dividend policy is within the discretion of our board of directors and will depend upon various factors, including our business, financial condition, results of operations, capital requirements and investment opportunities. In addition, our credit facility prohibits us from paying dividends other than for tax purposes.

We are a “controlled company” within the meaning of NYSE rules and, as a result, we will qualify for, and may rely on, exemptions from certain corporate governance requirements.

Because Harold G. Hamm will beneficially own in excess of 50% of our outstanding shares of common stock after the completion of this offering, he will be able to control the composition of our board of directors and direct our management and policies. We also will be deemed to be a “controlled company” under the rules of the NYSE. Under these rules, we are not required to comply with certain corporate governance requirements of the NYSE, including:

•

the requirement that a majority of our board of directors consist of independent directors;

•

the requirement that we have a nominating/corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

•

the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

Following this offering, we may utilize some or all of these exemptions. Accordingly, you may not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of the NYSE. Mr. Hamm’s significant ownership interest could adversely affect investors’ perceptions of our corporate governance.

Provisions in our organizational documents and under Oklahoma law could delay or prevent a change in control of our company, which could adversely affect the price of our common stock.

We are an Oklahoma corporation. The existence of some provisions in our organizational documents, which we will amend and restate prior to the closing of this offering, and under Oklahoma law could delay or prevent a change in control of our company, which could adversely affect the price of our common stock. The provisions in our amended and restated certificate of incorporation and bylaws that could delay or prevent an unsolicited change in control of our company include a staggered board of directors, board authority to issue preferred stock and advance notice provisions for director nominations or business to be considered at a shareholder meeting. See “Description of Capital Stock—Anti-Takeover Effects of Provisions of Our Certificate of Incorporation and Bylaws and of Oklahoma Law.”

Index to Financial Statements

Use of Proceeds

We will not receive any proceeds from the sale of the shares of common stock by the selling shareholder. We estimate that the selling shareholder will receive net proceeds of approximately $ million from the sale of the shares of our common stock in this offering based upon the assumed initial public offering price of $ per share, after deducting underwriting discounts. We will pay all expenses relating to the selling shareholder’s sale of common stock in this offering, other than underwriting discounts. If the underwriters’ overallotment option to purchase additional shares is exercised in full, we estimate that the selling shareholder’s net proceeds will be approximately $ million.

Dividend Policy

Our credit facility prohibits us from paying dividends other than for tax purposes. As permitted by our credit facility, we paid a cash dividend of approximately $60.0 million to our shareholders for tax purposes and, subject to forfeiture, to holders of unvested restricted stock in April 2006. In connection with the completion of this offering, we will convert from a subchapter S-corporation to a subchapter C-corporation, and we do not anticipate paying any additional cash dividends on our common stock in the foreseeable future. We currently intend to retain future earnings, if any, to finance the expansion of our business. Our future dividend policy is within the discretion of our board of directors and will depend upon various factors, including our results of operations, financial condition, capital requirements and investment opportunities.

Index to Financial Statements

Capitalization

The following table shows our capitalization as of December 31, 2005:

•

on a historical basis; and

•

on a pro forma basis to reflect our conversion, concurrent with the closing of this offering, from a subchapter S-corporation to a subchapter C-corporation, reclassification of equity compensation accruals, the effect of an 11 for 1 stock split to be effected as a stock dividend prior to the consummation of this offering and other transactions for which pro forma presentation is necessary in conjunction with this offering.

We derived this table from, and it should be read in conjunction with and is qualified in its entirety by reference to, the historical consolidated financial statements and the accompanying notes included elsewhere in this prospectus. You should read this information in conjunction with these consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”


	As of December 31, 2005
	Historical		Pro forma
	(in thousands)
Cash and cash equivalents	$	6,014	$	6,014

Long-term debt, including current maturities(1)		143,000		143,000

Shareholders’ equity:
Common stock, $.01 par value; 20,000,000 shares historical, 500,000,000 shares pro forma authorized, 14,458,966 shares historical, 159,048,626 pro forma issued and outstanding(3)		144		1,590
Additional paid-in capital(3)(4)		27,087		151,312
Retained earnings(1)(2)(4)		297,461		65,140
Accumulated other comprehensive loss, net of taxes		38		38

Total shareholders’ equity		324,730		218,080

Total capitalization	$	467,730	$	361,080

(1)

We paid a cash dividend of approximately $60.0 million to our shareholders for tax purposes and, subject to forfeiture, to holders of unvested restricted stock in April 2006. The payment of this dividend has not been included in retained earnings or long-term debt.

(2)

Reflects a pro forma adjustment to recognize compensation expense for the increment between the fair market value at which compensation expense was recorded and the initial public offering price of $ , the midpoint of the range set forth on the cover page of this prospectus.

(3)

Reflects reclassification of $1,446 from additional paid-in capital to common stock in order to adjust for the 11 for 1 stock split to be effected as a stock dividend in connection with the consummation of this offering.

(4)

Pro forma adjustments reflect reclassification of the liability for equity compensation to additional paid-in capital, compensation expense as described in (2) above, expensing offering costs, a charge to operations to recognize deferred taxes upon our conversion from a non-taxable subchapter S-corporation to a taxable subchapter C-corporation, the reclassification described in (3) above, and reclassification of undistributed earnings generated during the period of time we were organized as a subchapter S-corporation to additional paid-in capital in connection with our conversion to a subchapter C-corporation.

The following table reconciles historical additional paid-in capital and retained earnings to the pro forma amounts:


	Additional Paid-In Capital			Retained Earnings
	(in thousands)
Historical	$	27,087		$	297,461
Reclassification of liability for equity compensation		12,186
Compensation expense
Offering costs					(1,350	)
Deferred taxes on C-corporation conversion					(117,486	)
Reclassification as described in (3) above		(1,446	)
Reclassification of undistributed earnings		113,485			(113,485	)

Pro forma	$	151,312		$	65,140

Index to Financial Statements

Dilution

Dilution is the amount by which the offering price paid by purchasers of common stock sold in this offering will exceed the net tangible book value per share of common stock after the offering. On a pro forma basis as of December 31, 2005, after giving effect to estimated offering expenses, our net tangible book value was $323.4 million, or $2.05 per share of common stock. Purchasers of common stock in this offering will experience substantial and immediate dilution in net tangible book value per share of common stock for financial accounting purposes, as illustrated in the following table:


Assumed initial public offering price per share				$
Net tangible book value per share as of December 31, 2005	$	2.06
Decrease per share attributable to the offering	$	(0.01	)
Pro forma net tangible book value per share after the offering					2.05
Dilution in pro forma as adjusted net tangible book value per share to new investors				$

The following table sets forth, as of , 2006, the number of shares of common stock and the total consideration and average price per share paid by existing shareholders and by the new investors before deducting offering expenses:

Shares acquired

Total consideration

Average
price paid

per share

Number

Percent

Amount

Percent

Existing shareholders

158,058,109

27,231,000

0.17

New investors

Total

Index to Financial Statements

Selected Historical and Pro Forma

Consolidated Financial Information

This section presents our selected historical and pro forma consolidated financial data. The selected historical consolidated financial data presented below is not intended to replace our historical consolidated financial statements.

The following historical consolidated financial data, as it relates to each of the fiscal years ended December 31, 2001 through 2005, has been derived from our annual historical consolidated financial statements. You should read the following selected historical consolidated financial data in connection with “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited historical consolidated financial statements and related notes included elsewhere in this prospectus. The selected historical consolidated results are not necessarily indicative of results to be expected in future periods.

The selected pro forma financial data reflect the tax effects of our conversion concurrent with the closing of this offering from a subchapter S-corporation to a subchapter C-corporation.

The share and per share information presented below does not give effect to the 11 for 1 stock split to be effected in the form of a stock dividend prior to the closing of this offering:


	Year ended December 31,
	2001			2002			2003			2004		2005
	(in thousands, except per share amounts)
Statement of operations data:
Revenues:
Oil and natural gas sales	$	112,170		$	108,752		$	138,948		$	181,435	$	361,833
Crude oil marketing and trading(1)		245,872			152,092			169,547			226,664		—
Oil and natural gas service operations		6,047			5,739			9,114			10,811		13,931

Total revenues		364,089			266,583			317,609			418,910		375,764

Operating costs and expenses:
Production expense		31,859			32,299			40,821			43,754		52,754
Production tax		8,385			7,729			10,251			12,297		16,031
Exploration expense		15,863			10,229			17,221			12,633		5,231
Crude oil marketing and trading(1)		245,003			152,718			166,731			227,210		—
Oil and gas service operations		2,820			3,485			5,641			6,466		7,977
Depreciation, depletion, amortization and accretion		25,659			29,010			40,256			38,627		49,802
Property impairments		10,113			25,686			8,975			11,747		6,930
General and administrative(2)		6,199			8,668			9,604			12,400		31,266
(Gain) loss on sale		(3,423	)		(223	)		(589	)		150		(3,026	)

Total operating costs and expenses	$	342,478		$	269,601		$	298,911		$	365,284	$	166,965

Index to Financial Statements


	Year ended December 31,
	2001			2002			2003			2004			2005
	(in thousands, except per share amounts)
Income (loss) from operations	$	21,611		$	(3,018	)	$	18,698		$	53,626		$	208,799

Other income (expense)
Interest expense		(15,324	)		(18,216	)		(19,761	)		(23,617	)		(14,220	)
Loss on redemption on bonds		—			—			—			(4,083	)		—
Other		645			912			295			890			867

Total other income (expense)		(14,679	)		(17,304	)		(19,466	)		(26,810	)		(13,353	)

Income (loss) from continuing operations before income taxes		6,932			(20,322	)		(768	)		26,816			195,446
Provision for income taxes(3)		—			—			—			—			1,139

Income (loss) from continuing operations		6,932			(20,322	)		(768	)		26,816			194,307
Discontinued operations(4)		4,735			290			946			1,680			—
Loss on sale of discontinued operations(4)		—			—			—			(632	)		—

Income (loss) before cumulative effect of change in accounting principle		11,667			(20,032	)		178			27,864			194,307
Cumulative effect of change in accounting principle(5)		—			—			2,162			—			—

Net income (loss)	$	11,667		$	(20,032	)	$	2,340		$	27,864		$	194,307

Basic earnings (loss) per share:
From continuing operations	$	0.48		$	(1.41	)	$	(0.05	)	$	1.87		$	13.52
From discontinued operations(4)		0.33			0.02			0.06			0.11			—
Loss on sale of discontinued operations(4)		—			—			—			(0.04	)		—

Before cumulative effect of change in accounting principle		0.81			(1.39	)		0.01			1.94			13.52
Cumulative effect of change in accounting principle		—			—			0.15			—			—

Net income (loss) per share	$	0.81		$	(1.39	)	$	0.16		$	1.94		$	13.52

Shares used in basic earnings (loss) per share		14,369			14,369			14,369			14,369			14,369

Diluted earnings (loss) per share:
From continuing operations	$	0.48		$	(1.41	)	$	(0.05	)	$	1.85		$	13.42
From discontinued operations(4)		0.33			0.02			0.06			0.12			—
Loss on sale of discontinued operations(4)		—			—			—			(0.04	)		—

Before cumulative effect of change in accounting principle		0.81			(1.39	)		0.01			1.93			13.42
Cumulative effect of accounting change		—			—			0.15			—			—

Net income (loss) per share	$	0.81		$	(1.39	)	$	0.16		$	1.93		$	13.42

Shares used in diluted earnings (loss) per share		14,393			14,369			14,369			14,476			14,482

Index to Financial Statements


	Year ended December 31,
	2001			2002			2003			2004			2005
	(in thousands, except per share amounts)

Pro forma C-corporation data:
Income (loss) from continuing operations before income taxes	$	6,932		$	(20,322	)	$	(768	)	$	26,816		$	195,446
Pro forma provision (benefit) for income taxes attributable to operations		2,634			(7,722	)		(292	)		10,190			74,269

Pro forma income (loss) from operations after tax		4,298			(12,600	)		(476	)		16,626			121,177
Discontinued operations net of tax(4)		2,936			180			587			1,042			—
Loss on sale of discontinued operations(4)		—			—			—			(392	)		—
Cumulative effect of change in accounting principal net of tax		—			—			1,340			—			—

Pro forma net income (loss)	$	7,234		$	(12,420	)	$	1,451		$	17,276		$	121,177

Pro forma net income (loss) per basic share	$	0.50		$	(0.86	)	$	0.10		$	1.20		$	8.43
Pro forma net income (loss) per diluted share		0.50			(0.86	)		0.10			1.19			8.37

Other financial data:
Cash dividends per share:	$	—		$	—		$	—		$	1.04		$	0.14
EBITDAX (6)		78,626			63,288			88,750			116,498			285,344
Net cash provided by operations		63,413			46,997			65,246			93,854			265,265
Net cash used in investing		(106,384	)		(113,295	)		(108,791	)		(72,992	)		(133,716	)
Net cash provided by (used in) financing		43,045			61,593			43,302			(7,245	)		(141,467	)
Capital expenditures		111,023			113,447			114,145			94,307			144,800

Balance sheet data (at period end):
Cash and cash equivalents	$	7,225		$	2,520		$	2,277		$	15,894		$	6,014
Property and equipment, net		317,331			367,903			439,432			434,339			509,393
Total assets		354,485			406,677			484,988			504,951			600,234
Long-term debt, including current maturities		183,395			247,105			290,920			290,522			143,000
Shareholders’ equity		135,113			115,081			116,932			130,385			324,730

(1)

(2)

(3)

(4)

(5)

Index to Financial Statements

(6)


	Year ended December 31,
	2001		2002			2003		2004		2005
	(in thousands)
Net income (loss)	$	11,667	$	(20,032	)	$	2,340	$	27,864	$	194,307
Interest expense		15,324		18,216			19,761		23,617		14,220
Provision for income taxes		—		—			—		—		1,139
Depreciation, depletion, amortization and accretion		25,659		29,010			40,256		38,627		49,802
Property impairments		10,113		25,686			8,975		11,747		6,930
Exploration expense		15,863		10,229			17,221		12,633		5,231
Equity compensation		—		179			197		2,010		13,715

EBITDAX	$	78,626	$	63,288		$	88,750	$	116,498	$	285,344

Index to Financial Statements

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

The following discussion should be read in conjunction with our historical consolidated financial statements and notes, as well as the selected historical consolidated financial data included elsewhere in this prospectus.

Overview

We are engaged in oil and natural gas exploration and exploitation activities in the Rocky Mountain, Mid-Continent and Gulf Coast regions of the United States. Crude oil comprised 85% of our 116.7 MMBoe of estimated proved reserves as of December 31, 2005 and 79% of our 7,209 MBoe of production for the year then ended. We seek to operate wells in which we own an interest, and we operated wells that accounted for 97% of our PV-10 and 1,213 of our 1,434 gross wells as of December 31, 2005. By controlling operations, we are able to more effectively manage the cost and timing of exploration and development of our properties, including the drilling and fracture stimulation methods used.

Our business strategy has focused on reserve and production growth through exploration and development. For the three-year period ended December 31, 2005, we added 55,385 MBoe of proved reserves through extensions and discoveries, compared to 426 MBoe added through purchases. During this period, our production increased from 5,255 MBoe in 2003 to 7,209 MBoe in 2005. An aspect of our business strategy has been to acquire large undeveloped acreage positions in new or developing locations. As of December 31, 2005, we held approximately 1,086,000 gross (646,000 net) undeveloped acres, including 356,000 net acres in the Bakken field in Montana and North Dakota and 72,000 net acres in the New Albany Shale, Lewis Shale, Floyd Shale and Woodford Shale projects. As an early entrant in new or emerging plays, our costs to acquire undeveloped acreage have generally been less than those of later entrants into a developing play. As an example of the cost advantage of entering a play early, our per acre costs for our lease acquisitions in the North Dakota Bakken field during 2003 and 2004 were approximately 80% lower than the per acre costs paid by third parties and by us in the federal and state lease auctions for acreage near our holdings in that area during 2005. However, as an early entrant, we are exposed to the risk that the value of our undeveloped acreage is diminished by unsuccessful drilling results.

How We Evaluate Our Operations

We use a variety of financial and operational measures to assess our performance. Among these measures are the following:

(1)

Volumes of oil and natural gas produced;

(2)

Oil and natural gas prices realized;

(3)

Volumetric operating and administrative costs; and

(4)

EBITDAX.

Index to Financial Statements

Volumes of Oil and Natural Gas Produced

For our operated properties in the Red River units and the Bakken field, we receive daily production estimates that enable us to monitor our production on a current basis. We believe the timeliness of this information and the control we exert as an operator enables us to respond promptly to production difficulties. Over the past three years our equivalent production volumes have increased 37% or 1,954 MBoe due primarily to a 65% increase in oil production. The following table presents our production volumes for each of the three years ended December 31, 2005:


				Three-year period
	2003	2004	2005	Volume increase (decrease)		Percent increase (decrease)
MBbls	3,463	3,688	5,708	2,245		65%
MMcf	10,751	8,794	9,006	(1,745	)	(16%	)

MBoe	5,255	5,154	7,209	1,954		37%

The increase in our production has been the result of a favorable response to enhanced recovery efforts in our Red River units coupled with exploration and development within our other producing areas, primarily the Montana Bakken field.

Oil and Natural Gas Prices Realized

We market our oil and natural gas production to a variety of purchasers based on regional pricing. A significant portion of our oil and natural gas production has been marketed to affiliates as discussed under “Certain Relationships and Related Party Transactions.”

The following table presents the NYMEX oil and natural gas prices, our realized oil and natural gas prices, inclusive and exclusive of the effects of hedging, and the differences for each of the three years ended December 31, 2005. The NYMEX oil price was determined each month as the calendar month average of the prompt NYMEX crude oil futures contract price and, the NYMEX natural gas price, as the average of the last three trading days of the prompt NYMEX natural gas futures contract price. The NYMEX natural gas futures contract price is quoted on an MMBtu basis. For purposes of comparison, in the table below the NYMEX natural gas price was converted to an Mcf basis at a one-to-one conversion:


	2003		2004		2005
NYMEX oil price ($/Bbl)	$	31.08	$	41.95	$	57.69
Realized oil price before hedging ($/Bbl)		28.88		38.85		52.45

Difference	$	2.20	$	3.10	$	5.24
NYMEX natural gas price ($/Mcf)		5.33		6.10		8.54
Realized natural gas price ($/Mcf)		4.55		5.06		6.93

Difference	$	0.78	$	1.04	$	1.61

The differences are subject to variability due to quality and location pricing fluctuations caused by localized supply and demand fundamentals and transportation availability. The estimated differences between the NYMEX oil price and our realized oil price for January, February and March 2006 were approximately $8, $11 and $16 per Bbl, respectively. Factors affecting the difference include higher oil imports and production in the Rocky Mountain region, lower demand by local Rocky Mountain refineries due to downtime for maintenance and reduced seasonal demand for gasoline and downstream transportation capacity constraints. We are unable to predict when, or if, the difference will revert back to historical levels.

Index to Financial Statements

Our revenues and net income are sensitive to oil and natural gas prices. A $1.00 per Bbl change in realized oil prices would change our reported 2005 revenues and net income by approximately $5.7 million and $5.4 million, respectively. Similarly, a $0.10 per Mcf change in realized natural gas prices would change our reported 2005 revenues and net income by approximately $901,000 and $852,000, respectively.

For the years ended December 31, 2003 and 2004, we realized oil hedging losses of $10.1 million and $6.4 million, respectively. As a result of our limited bank borrowings and strong operational cash flows, we did not enter into any hedges for our 2005 production, and we do not currently have plans to hedge any of our 2006 production.

Volumetric Operating and Administrative Costs

Two other measures that we monitor and analyze are production expense per Boe produced and general and administrative expense per Boe produced. We believe these are important measures because they are indicators of operating cost efficiency.

The following table presents our production expense and general and administrative expense, inclusive of stock-based compensation, per Boe produced for each of the three years ended December 31, 2005:


	2003		2004		2005
Production expense ($/Boe)	$	7.77	$	8.49	$	7.32
General and administrative expense ($/Boe)		1.83		2.41		4.34

Our per unit production expense increased during 2003 and 2004 in connection with our enhanced recovery project in the Red River units which initially lowered volumes and increased production expense. Our per unit production expense is now declining as we are experiencing higher production volumes due to continued drilling and higher production in conjunction with the completion of the enhanced recovery program. Generally as production increases, we will see increased production expense due to additional well costs, such as lifting and workover costs, and additional personnel costs although these costs may be lower on a volumetric basis due to higher production. The increase in our per unit general and administrative expense was primarily due to higher compensation expense. The largest component of the increase was equity compensation, which contributed $0.2 million, $2.0 million and $13.7 million during the years ended December 31, 2003, 2004 and 2005. The increases in equity compensation were attributable to additional equity grants and a higher per share valuation resulting from annual increases in our PV-10. We compete with other companies for personnel, particularly in the operational and technical (engineering and geologic) aspects of our business. To remain competitive, we compare the compensation we pay our employees to that of our competitors through surveys, employee feedback and other means. We have experienced higher compensation expense due to competitive pressures, normal merit increases and incentive compensation. Our incentive compensation has increased due to improving operating results. During 2004, we recorded incentive compensation of $413,000 compared to $4.0 million in 2005.

Index to Financial Statements

EBITDAX

We calculate and define EBITDAX as net income before interest expense, income taxes (when applicable), depreciation, depletion, amortization and accretion, property impairments, exploration expense and non-cash compensation expense. EBITDAX is used as a financial measure by our management team and by other users of our consolidated financial statements such as our commercial bank lenders, investors, research analysts and other to assess:

•

Our operating performance and return on capital in comparison to other independent exploration and production companies, without regard to financial or capital structure;

•

The financial performance of our assets and valuation of the entity without regard to financing methods, capital structure or historical cost basis; and

•

Our ability to generate cash sufficient to pay interest costs and support our indebtedness.

The following table presents our EBITDAX for each of the three years ended December 31, 2005 (in thousands):


	2003		2004		2005
EBITDAX	$	88,750	$	116,498	$	285,344

EBITDAX is a financial measure that is reported to our lenders each calendar quarter. Our credit facility requires that our total debt to EBITDA ratio be no greater that 3.75 to 1 on a rolling four quarter basis. This ratio was 0.5 to 1 at December 31, 2005. Our credit facility defines EBITDA consistently with the definition of EBITDAX utilized and presented by us. EBITDAX is not and should not be considered as an alternative to net income, operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP. For a reconciliation of our consolidated net income (loss) to EBITDAX, see footnote (6) to “Summary Historical and Pro Forma Consolidated Financial Data.”

Recent Events

Index to Financial Statements

River units representing approximately 1,700 net Bbls of oil per day. For the month of April 2006, we expect our wells in the region to be on production for the full month and expect to be able to market all of the production. For the three months ended March 31, 2006, our oil and natural gas production volumes were MBbls and MMcf, respectively.

Results of Operations

The following tables present selected financial and operating information for each of the three years ended December 31, 2005:


	Year ended December 31,
	2003			2004			2005
	(in thousands, except price data)
Oil and natural gas sales	$	138,948		$	181,435		$	361,833
Total revenues(1)		317,609			418,910			375,764
Operating costs and expenses(1)		298,911			365,284			166,965
Other income (expense)		(19,466	)		(26,810	)		(13,353	)

Income (loss) from continuing operations before income taxes		(768	)		26,816			195,446
Provision for income taxes		—			—			(1,139	)

Income (loss) from continuing operations		(768	)		26,816			194,307
Discontinued operations		946			1,680			—
Loss on sale of discontinued operations		—			(632	)		—
Cumulative effect of a change in accounting principle		2,162			—			—

Net income	$	2,340		$	27,864		$	194,307

Production volumes:
Oil (MBbl)		3,463			3,688			5,708
Natural gas (MMcf)		10,751			8,794			9,006
Oil equivalents (MBoe)		5,255			5,154			7,209

Average prices:
Oil, without hedges ($/Bbl)	$	28.88		$	38.85		$	52.45
Oil, with hedges ($/Bbl)		25.98			37.12			52.45
Natural gas ($/Mcf)		4.55			5.06			6.93
Oil equivalents, without hedges ($/Boe)		28.35			36.45			50.19
Oil equivalents, with hedges ($/Boe)		26.44			35.20			50.19

(1)

Revenues for 2003 and 2004 include $169,547,000 and $226,664,000, respectively, for crude oil marketing and trading and operating expenses include $166,731,000 and $227,210,000, respectively, for crude oil marketing and trading.

Index to Financial Statements

Year Ended December 31, 2004 Compared to Year Ended December 31, 2005

Revenues

Oil and Natural Gas Sales. We generally market our production at the wellhead. Oil and natural gas sales increased $180.4 million or 99% to $361.8 million in 2005. The increase was attributable to higher production volumes and higher oil and natural gas prices. During 2004, our average wellhead oil price was $38.85 per Bbl and our wellhead natural gas price was $5.06 per Mcf, compared to $52.45 per Bbl for oil and $6.93 per Mcf for natural gas during 2005. The increases in our wellhead prices were due to general industry price escalations in our producing regions. Our oil sales in 2004 were reduced by a $6.4 million loss in our hedging activities. We did not hedge our production during 2005. The following tables reflect our production by product and region for the periods presented:


	Year ended December 31,				Percent increase
	2004		2005
	Volume	Percent	Volume	Percent
Oil (MBbl)	3,688	72%	5,708	79%	55%
Natural Gas (MMcf)	8,794	28%	9,006	21%	2%

Total (MBoe)	5,154	100%	7,209	100%	40%


	Year ended December 31,				Percent increase (decrease)
	2004		2005
	MBoe	Percent	MBoe	Percent
Rocky Mountain	3,279	64%	5,410	75%	65%
Mid-Continent	1,461	28%	1,361	19%	(7)%
Gulf Coast	414	8%	438	6%	6%

Total MBoe	5,154	100%	7,209	100%	40%

Production increases in our Bakken field and Red River units in the Rocky Mountain region of 1,226 MBoe and 1,051 MBoe, respectively, accounted for the growth in production for 2005. We commenced drilling our initial well in the Bakken field in May 2003 and completed it as a producing well in August 2003. Our well count in the Bakken field rose from 25 gross (14.5 net) wells at December 31, 2004 to 60 gross (34.2 net) wells at December 31, 2005. Favorable response to the enhanced recovery program was the primary factor in the production growth in the Red River units.

Crude Oil Marketing and Trading. During 2004 and the first three months of 2005, we purchased barrels back from certain of our wellhead purchasers downstream of the initial sales point to exchange at the Cushing, Oklahoma hub in order to minimize pricing differentials with the NYMEX oil futures contract. In 2005, revenues of $39.8 million and expenses of $39.7 million pertaining to these marketing activities were netted as provided by Emerging Issues Task Force (EITF) 04-13, which we adopted as of January 1, 2005. We presented these purchase and sale activities gross in the 2004 income statement as crude oil marketing and trading revenues of $226.7 million and crude oil marketing and trading expenses of $227.2 million under the guidance provided by EITF 99-19, “Reporting Revenues Gross as a Principal and/or Net as an Agent.” We ceased marketing our production in this manner in March 2005 and now generally market our production at the wellhead.

Oil and Natural Gas Service Operations. Our oil and natural gas service operations consist primarily of sales of high-pressure air and the treatment and sale of lower quality crude oil (reclaimed oil). We initiated the sale of high-pressure air from our Red River units to a third party in 2004, and recorded revenues of $2.0 million and $3.0 million during 2004 and 2005, respectively. Higher prices for reclaimed oil sold from our central

Index to Financial Statements

treating unit in 2005 increased oil and natural gas service operations revenues by $2.2 million to $8.8 million. Associated oil and natural gas service operations expenses increased $2.0 million from 2004 compared to 2005 due principally to an increase in the costs of purchasing and treating oil for resale.

Operating Costs and Expenses

Production Expense and Tax. Our production expense increased $9.0 million or 21%. This increase was primarily due to production expense associated with the 80 gross (45.4 net) productive wells drilled during 2005, industry inflation and higher energy costs in the Red River units. On a unit of production basis, production expense fell from $8.49 per Boe in 2004 to $7.32 per Boe in 2005.

Energy costs in the Red River units increased $3.0 million in 2004 to $9.9 million in 2005. The increased energy costs were mainly due to higher electrical costs, resulting from higher production volumes, to run compressors for the high-pressure air injection and other enhanced recovery operations in the field. Workovers in this field also increased from $0.2 million in 2004 to $1.8 million in 2005.

Production tax increased $3.7 million or 30% in 2005 compared to the 99% increase in oil and gas sales. As a percentage of oil and natural gas revenues, production tax was 4.4% in 2005 compared to 6.8% in 2004. Production taxes are based on the wellhead values of production and vary by state. Additionally, some states offer exemptions or reduced production tax rates for wells that produce less than a certain quantity of oil or gas and to encourage certain activities, such as horizontal drilling and enhanced recovery projects. In the state of Montana, a horizontal well qualifies for a 0.5% production tax rate on oil and natural gas sales for the first 18 months of production. Thereafter, the production tax rate is 9.0%. All of the wells we drilled in the Montana Bakken field qualified for the reduced production tax rate.

Our oil and natural gas revenues from the Montana Bakken field increased to approximately $93.3 million in 2005 from $19.1 million in the prior year. The addition of approximately $74.2 million in oil and gas revenues at a 0.5% production tax rate was the principal reason production tax increased 30% compared to the 99% increase in oil and gas sales.

On a unit of production basis, production expense and production tax were as follows:


	2004		2005		Percent decrease
Production expense ($/Boe)	$	8.49	$	7.32	(14)%
Production tax ($/Boe)		2.39		2.22	(7)%

Production expense and tax ($/Boe)	$	10.88	$	9.54	(12)%

Exploration Expense. Exploration expense decreased from 2004 to 2005 as a result of a reduction primarily in our dry hole expense from $9.5 million in 2004 to $1.4 million in 2005. The higher dry hole expense during 2004 was primarily attributable to dry holes in the Gulf Coast region with a higher per well cost.

Depreciation, Depletion, Amortization and Accretion. The depreciation, depletion and amortization (DD&A) rate per Boe decreased from $7.02 per Boe in 2004 to $6.50 per Boe in 2005. The reduction in the DD&A rate per Boe was mainly due to the addition of 32,427 MBoe of proved reserves during 2005. The amount of DD&A attributable to oil and gas properties increased by $10.6 million in 2005 due to increased production volumes. Accretion expense associated with our asset retirement obligations was $1.0 million and $1.6 million in 2004 and 2005, respectively.

Property Impairments. We evaluate our properties on a field-by-field basis, as may be necessary, when facts and circumstances such as downward reserve revisions or lower oil and natural gas prices indicate that their carrying amounts may not be recoverable. We recorded a $6.2 million impairment in 2004 compared to a $2.5

Index to Financial Statements

million impairment in 2005 on producing properties. The decrease from 2004 to 2005 was due to higher impairment charges on Gulf Coast region properties during 2004. We also evaluate our undeveloped leasehold cost and adjust the acreage valuation quarterly based on our assessment of the potential for the acreage to be developed and the market value of the acreage. Undeveloped leasehold cost is expensed over the life of the lease or transferred to the associated producing properties. Individually significant non-producing properties are periodically assessed for impairment of value and a loss is recognized if necessary. During 2004 we impaired $5.5 million of undeveloped leasehold cost compared to $4.4 million during 2005.

General and Administrative. The majority of the increase in general and administrative expense for 2005 was the result of higher wages and bonuses paid to our employees. The number of employees increased from 275 at year-end 2004 to 286 at year-end 2005, which, combined with salary adjustments and cash bonus increases, increased payroll and other employee-related expenses by $5.3 million during 2005. On a volumetric basis, our general and administrative expense, including equity compensation of $2.0 million and $13.7 million, respectively, was $2.41 per Boe and $4.34 per Boe for the years ended December 31, 2004 and 2005, respectively.

We have granted stock options and restricted stock to our employees. The terms of the grants require that, while we are a private company, we are required to purchase vested options and restricted stock at each employee’s request at a per share amount derived from our shareholders’ equity value adjusted quarterly for our PV-10. The obligation to purchase the options is eliminated in the event we become a reporting company under Section 12 of the Exchange Act. Equity compensation expense increased from $2.0 million in 2004 to $13.7 million in 2005 primarily due to additional equity grants and a higher per share valuation resulting from the increase in our PV-10.

Interest Expense. Interest expense declined from $23.6 million in 2004 to $14.2 million in 2005. The decline in interest expense was attributable to a lower average bank indebtedness during 2005. At December 31, 2004, we had $230.0 million outstanding on our bank credit facility with an effective interest rate of 4.36% compared to $143.0 million outstanding at December 31, 2005, with an effective interest rate of 6.08%. We incurred $6.8 million and $9.3 million in interest on our credit facility in 2004 and 2005, respectively. On November 22, 2004, we signed a note with our principal shareholder for $50.0 million due March 31, 2008. The annual rate of interest was 6.00% and interest payments were due on the last day of each calendar quarter beginning December 31, 2004. We paid $308,000 and $2.9 million in interest in 2004 and 2005, respectively on this note to our principal shareholder. In December 2005, we paid the note in full to our principal shareholder. During November 2004 we utilized available borrowing capacity under our credit facility to redeem $119.5 million of our outstanding Senior Subordinated 10.25% Notes and paid a premium of $4.1 million due on the early redemption of the Notes. Total interest expense on the Senior Subordinated Notes during 2004 was $11.4 million.

Provision for Income Taxes. We recognized income tax expense of $1.1 million during 2005 in connection with the sale of assets acquired prior to our conversion to a subchapter S-corporation from a subchapter C-corporation on May 31, 1997. These assets had “Built in gains,” as defined by Section 1374 of the Internal Revenue Code, which resulted in a taxable event for us.

Discontinued Operations. In July 2004, we completed the sale of all of the outstanding stock in Continental Gas Inc. (CGI) to our shareholders for $22.6 million in cash. The sales price was representative of the fair value of the net assets based on an appraisal by an independent third party who also provided us with an opinion of the fairness from a financial point of view, of the sale of CGI to the shareholders. The CGI assets included seven natural gas gathering systems and three natural gas-processing plants. These assets represented our entire natural gas gathering, marketing and processing segment and have been classified as discontinued operations for all periods presented.

Index to Financial Statements

Year Ended December 31, 2003 Compared to Year Ended December 31, 2004

Revenues

Oil and Natural Gas Sales. The increase in oil and natural gas revenues from $138.9 million in 2003 to $181.4 million in 2004 was primarily attributable to higher oil and natural gas prices and reduced oil hedging losses in 2004. Oil and natural gas volumes decreased 101 MBoe from 5,255 MBoe in 2003 to 5,154 in 2004. The decrease in volumes in 2004 was mainly due to the decrease in natural gas volumes of 1,957 MMcf primarily from the Gulf Coast region. Oil and natural gas wellhead prices were $8.10 per Boe higher in 2004 compared to 2003, which offset the lower natural gas sales volumes for 2004.

The following tables present our production by product and region for the years shown:


	Year ended December 31,				Percent increase (decrease)
	2003		2004
	Volume	Percent	Volume	Percent
Oil (MBbl)	3,463	66%	3,688	72%	6%
Natural gas (MMcf)	10,751	34%	8,794	28%	(18)%

Total (MBoe)	5,255	100%	5,154	100%	(2)%


	Year ended December 31,				Percent increase (decrease)
	2003		2004
	MBoe	Percent	MBoe	Percent
Rocky Mountain	2,918	55%	3,279	64%	12%
Mid-Continent	1,659	32%	1,461	28%	(12)%
Gulf Coast	678	13%	414	8%	(39)%

Total MBoe	5,255	100%	5,154	100%	(2)%

Compared to 2003, the 2004 oil sales were higher due mainly to increased prices and slightly increased volumes. Oil production was 66% of our total produced volume for 2003, compared to 72% in 2004. The increase in oil production in 2004 was the result of response to the enhanced recovery program in the Red River units.

During 2003 and 2004, we utilized fixed-priced contracts and zero-cost collars to reduce exposure to unfavorable changes in oil and natural gas prices that are subject to significant and often volatile fluctuation. Under the fixed price contracts we received the fixed price stated in the contract. Under the zero-cost collars, if the market price of crude oil exceeded the ceiling strike price, we received the ceiling strike price and, if the market price fell below the floor strike price, we received the floor strike price. If the market price was between the floor strike price and the ceiling strike price, we received market price. Oil hedging losses of $10.1 million and $6.4 million were reported as a reduction in oil and gas revenues for the years ended December 31, 2003 and 2004, respectively.

Crude Oil Marketing and Trading. During 2003 and 2004, we purchased barrels back from certain of our wellhead purchasers downstream of the initial sales point to exchange at the Cushing, Oklahoma hub in order to minimize pricing differentials with the NYMEX oil futures contract. We presented these purchase and sale activities gross in the 2003 and 2004 income statements as crude oil marketing and trading revenues of $169.5 million, including a trading gain of approximately $1.5 million associated with derivatives, and $226.7 million, respectively, and crude oil marketing and trading expenses of $166.7 million and $227.2 million, respectively, under the guidance provided by EITF 99-19, “Reporting Revenues Gross as a Principal and/or Net as an Agent.” Crude oil marketing and trading amounts increased between 2003 and 2004 due to higher volumes and commodity prices.

Index to Financial Statements

Oil and Natural Gas Service Operations. We initiated the sale of high-pressure air to a third party in 2004, which increased our oil and natural gas service operations revenues $2.0 million from 2003 to 2004.

Oil and natural gas service operations expense increased from 2003 to 2004 due to an additional 30 MBbls of oil treated at our central treating unit along with higher oil prices, which increased the costs of purchasing and treating oil for resale.

Operating Costs and Expenses

Production Expense and Tax. Production expense increased from $40.8 million in 2003 to $43.8 million in 2004. The $3.0 million increase was principally the result of increased energy costs in the Red River units of $3.8 million partially offset by a decrease in contract labor and outside operated well expense of $1.4 million. The commencement, during 2003, of High Pressure Air Injection (HPAI) in the Red River units contributed to the increase in energy costs.

Our production tax increased from 2003 compared to 2004 due to the increase in oil and natural gas prices and increased oil volumes in 2004. Production taxes are based on the wellhead values of production and vary across different regions. On a unit of production basis, production expense and production tax were as follows:


	Year ended December 31,				Percent increase
	2003		2004		Percent increase

Production expense ($/Boe)	$	7.77	$	8.49	9%
Production tax ($/Boe)		1.95		2.39	23%

Production expense and tax ($/Boe)	$	9.72	$	10.88	12%

Exploration Expense. Exploration expenses decreased by $4.6 million from $17.2 million in 2003 to $12.6 million in 2004. This decrease was attributable to lower dry hole expense and seismic costs in 2004.

Depreciation, Depletion, Amortization and Accretion. Depreciation, depletion and amortization (DD&A) of oil and gas properties decreased by $1.1 million to $36.2 million during 2004 as a result of lower production and a lower rate per Boe. The DD&A rate per Boe decreased from $7.10 per Boe in 2003 to $7.02 per Boe in 2004. Accretion expense associated with our asset retirement obligations was $1.2 million and $1.0 million in 2003 and 2004, respectively. Depreciation of other assets decreased by $0.3 million to $1.4 million in 2004.

Property Impairments. We evaluate, as may be necessary due to downward reserve revisions or lower oil and natural gas prices, our properties for impairment. We recorded a $3.8 million impairment in 2003 and a $6.2 million impairment primarily associated with our Gulf Coast properties in 2004.

We also evaluate our undeveloped leasehold cost and adjust the acreage valuation quarterly based on our assessment of the potential for the acreage to be developed and the market value of the acreage. Undeveloped leasehold cost is expensed over the life of the lease or transferred to the associated producing properties. Individually significant non-producing properties are periodically assessed for impairment of value and a loss is recognized if necessary. During 2003 we impaired $5.2 million of undeveloped leasehold cost compared to $5.5 million during 2004.

General and Administrative. The majority of the increase in general and administrative expense of $2.8 million to $12.4 million was the result of higher wages and other employee-related expenses of $2.4 million. Our general and administrative expense, including equity compensation of $0.2 million and $2.0 million, respectively, was $1.83 per Boe and $2.41 per Boe for the years ended December 31, 2003 and 2004, respectively.

During 2003 and 2004 we granted stock options to our employees. As permitted by SFAS No. 123, we have elected to follow the intrinsic value method promulgated under APB Opinion 25. The terms of the grants require

Index to Financial Statements

that, while we are a private company, we are required to purchase vested options at each employee’s request at a per share amount derived from our shareholders’ equity value adjusted quarterly for our PV-10. The obligation to purchase the options is eliminated in the event we become a reporting company under Section 12 of the Exchange Act. Equity compensation expense increased from 2003 compared to 2004 as a result of an increase in the fair market value of our shares due to higher shareholders’ equity and greater PV-10.

Interest Expense. The increase in interest expense from 2003 compared to 2004 was the result of higher average interest rates. At December 31, 2003 and 2004, our long term debt, including the current portion and capital leases, was $290.9 million and $290.5 million, respectively. At December 31, 2003, we had $132.9 million outstanding debt on our bank credit facility with an effective interest rate of 3.75% compared to $230.0 million outstanding debt at December 31, 2004, with an effective interest rate of 4.36%. We incurred $4.9 million and $6.8 million in interest on our bank credit facility in 2003 and 2004, respectively. On November 22, 2004, we signed a note with our principal shareholder for $50.0 million due March 31, 2008. The annual rate of interest was 6.00% and interest payments were due the last day of each calendar quarter beginning December 31, 2004. We paid $308,000 in interest to our principal shareholder in 2004. We redeemed $119.5 million of our outstanding Senior Subordinated 10.25% Notes during November 2004 and paid a premium of $4.1 million due on the early redemption of these notes. Total interest expense on these notes was $13.0 million and $11.4 million during 2003 and 2004, respectively.

Discontinued Operations. In July 2004, we completed the sale of all of the outstanding stock in CGI to our shareholders for $22.6 million in cash. The sales price was representative of the fair value of the net assets based on an appraisal by an independent third party who also provided us with an opinion of the fairness from a financial point of view, of the sale of CGI to the shareholders. The CGI assets included seven natural gas gathering systems and three natural gas-processing plants. These assets represented our entire natural gas gathering, marketing and processing segment and have been classified as discontinued operations for all periods presented.

Liquidity and Capital Resources

Our primary sources of liquidity have been cash flows generated from operating activities and financing provided by our bank credit facility and principal shareholder. In January 2005, our principal shareholder contributed $2.0 million of the previously loaned amount to us. We paid the $48.0 million outstanding balance due on our note with our principal shareholder in December 2005. We believe that funds from operating cash flows and the bank credit facility should be sufficient to meet our cash requirements for the foreseeable future. On April 13, 2006, we paid a cash dividend of approximately $60.0 million to our existing shareholders and, subject to forfeiture, to holders of unvested restricted stock.

Cash Flow from Operating Activities

Our net cash provided by operating activities was $65.2 million, $93.9 million and $265.3 million for the years ended December 31, 2003, 2004 and 2005, respectively. At December 31, 2005, we had cash and cash equivalents of $6.0 million and available borrowing capacity on our credit facility of $107.0 million. The increase in operating cash flows in 2005 was principally due to increased production and higher oil and natural gas prices. Additionally, hedging losses were $10.1 million and $6.4 million in 2003 and 2004, respectively. There were no hedges in place during 2005.

Cash Flow from Investing Activities

During the years ended December 31, 2003, 2004 and 2005, we invested $114.1 million, $94.3 million, and $144.8 million, respectively, in our capital program, inclusive of dry hole and seismic costs. The increase in our capital program was due to the implementation of enhanced recovery in our Red River units and additional exploration and development drilling.

Index to Financial Statements

Cash Flow from Financing Activities

Net cash provided by (used in) financing activities was $43.3 million for 2003, ($7.2) million for 2004, and ($141.5) million for 2005. In 2004, cash used in financing activities was primarily attributable to the repurchase of our Senior Subordinated Notes. In 2005, cash used in financing activities was primarily attributable to the repayment of long-term debt. Our long-term debt, including the current portion and capital leases, was $290.9 million, $290.5 million and $143.0 million at December 31, 2003, 2004 and 2005, respectively.

Credit Facility

We had $143.0 million outstanding under our bank credit facility at December 31, 2005 and $199.5 million outstanding under our bank credit facility at April 13, 2006, which includes borrowings made to pay the $60.0 million cash dividend to our shareholders. The credit facility was amended on April 12, 2006. The amended facility matures on April 12, 2011, and borrowings under our credit facility bear interest, payable quarterly, at (a) a rate per annum equal to the London Interbank Offered Rate for one, two, three or six months as offered by the lead bank plus an applicable margin ranging from 100 to 175 basis points or (b) the lead bank’s reference rate. The amended credit facility has a note amount of $750 million, a borrowing base of $500 million, subject to semi-annual redetermination, and a commitment level of $300 million. The terms of the amended facility allow us to determine the commitment level at any level up to the borrowing base.

The amended credit facility contains restrictive covenants that may limit our ability to, among other things, incur additional indebtedness, sell assets, make loans to others, make investments, enter into mergers, change material contracts, incur liens and engage in certain other transactions without the prior consent of the lenders. The facility also requires us to maintain certain ratios as defined and further described in our credit facility: a Current Ratio of not less than 1.0 to 1.0, a Total Funded Debt to EBITDA of no greater than 3.75 to 1.0. These covenants were also included in our previous credit facility. As of December 31, 2005, we were in compliance with all covenants.

Future Capital Expenditures and Commitments

We evaluate opportunities to purchase or sell oil and natural gas properties in the marketplace and could participate as a buyer or seller of properties at various times. We seek acquisitions that utilize our technical expertise or offer opportunities to expand our existing core areas.

Expenditures for exploration and development of oil and natural gas properties are the primary use of our capital resources. We anticipate investing approximately $302 million for capital and exploration expenditures in 2006 as follows (in millions):


	Amount
Exploration and development drilling	$	237
Capital facilities		27
Workover / recompletion		16
Land costs		16
Seismic		5
Vehicles, computers & other equipment		1

	$	302

Our budgeted capital expenditures are expected to increase approximately 109% over the $145 million invested during 2005. We plan to invest approximately $150 million in development drilling. In the Red River units, we plan to invest approximately $67 million to drill infill wells and extend horizontal laterals on existing wells to increase production and sweep efficiency of the enhanced recovery projects. Most of the remaining

Index to Financial Statements

development drilling budget is expected to be invested in the drilling of development wells in the Montana Bakken field. We have budgeted approximately $87 million for exploratory drilling with approximately $28 million allocated to drilling exploratory wells in the North Dakota Bakken field.

Although we cannot provide any assurance, assuming successful implementation of our strategy, including the future development of our proved reserves and realization of our cash flows as anticipated, we believe that our remaining cash balance and cash flows from operations will be sufficient to satisfy our 2006 capital budget. The actual amount and timing of our capital expenditures may differ materially from our estimates as a result of, among other things, actual drilling results, the availability of drilling rigs and other services and equipment, and regulatory, technological and competitive developments.

Shareholder Distribution

The terms of our credit facility restrict our ability to pay dividends. However, because we are an S Corporation for federal income tax purposes, we are permitted to pay dividends to our shareholders in an amount sufficient to pay the taxes on the taxable income passed through to the shareholders. In 2004, we made a distribution of $14.9 million to our shareholders and in 2005 we made a $2.0 million distribution to our shareholders. On April 13, 2006, we paid a cash dividend of approximately $60.0 million to our shareholders and, subject to forfeiture, to holders of unvested restricted stock. In connection with the completion of this offering, we will convert from a subchapter S-corporation to a subchapter C-corporation, and we do not anticipate paying any additional cash dividends on our common stock in the foreseeable future.

Hedging

We account for derivative instruments in accordance with SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities.” The specific accounting treatment for changes in the market value of the derivative instruments used in hedging activities is determined based on the designation of the derivative instruments as a cash flow or fair value hedge and effectiveness of the derivative instruments.

We have utilized fixed-price contracts and zero-cost collars to reduce exposure to unfavorable changes in oil and natural gas prices that are subject to significant and often volatile fluctuation. Under the fixed price physical delivery contracts we received the fixed price stated in the contract. Under the zero-cost collars, if the market price of crude oil was less than the ceiling strike price and greater than the floor strike price, we received market price. If the market price of crude oil exceeded the ceiling strike price or fell below the floor strike price, we received the applicable collar strike price.

We did not hedge any of our oil or natural gas production during 2005 and have not entered into any such hedges from January 1, 2006 through the date of this filing. We do not currently have plans to hedge any of our 2006 production. We recognized hedging losses of $10.1 million and $6.4 million during 2003 and 2004, respectively.

Index to Financial Statements

Obligations and Commitments

We have the following contractual obligations and commitments as of December 31, 2005:


	Payments due by period
	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years

	(in thousands)
Bank credit facility(1)	$	143,000	$	—	$	143,000	$	—	$	—
Operating lease obligations(2)		15,944		5,239		10,683		22		—
Asset retirement obligations(3)		34,353		2,120		2,798		494		28,941

Total contractual cash obligations	$	193,297	$	7,359	$	156,481	$	516	$	28,941

(1)

Payments on the bank credit facility listed in the table exclude interest.

(2)

Operating leases consist of compressors utilized in field operations, vehicles and office equipment.

(3)

Amounts represent expected asset retirements by period.

Critical Accounting Policies and Practices

Our historical consolidated financial statements and notes to our historical consolidated financial statements contain information that is pertinent to our management’s discussion and analysis of financial condition and results of operations. Preparation of financial statements in conformity with accounting principles generally accepted in the United States requires that our management make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. However, the accounting principles used by us generally do not change our reported cash flows or liquidity. Interpretation of the existing rules must be done and judgments made on how the specifics of a given rule apply to us.

In management’s opinion, the more significant reporting areas impacted by management’s judgments and estimates are revenue recognition, the choice of accounting method for oil and natural gas activities, oil and natural gas reserve estimation, asset retirement obligations and impairment of assets. Management’s judgments and estimates in these areas are based on information available from both internal and external sources, including engineers, geologists and historical experience in similar matters. Actual results could differ from the estimates, as additional information becomes known.

Revenue Recognition

We derive substantially all of our revenues from the sale of oil and natural gas. Oil and gas revenues are recorded in the month the product is delivered to the purchaser and title transfers. We generally receive payment from one to three months after the sale has occurred. Each month we estimate the volumes sold and the price at which they were sold to record revenue. Variances between estimated revenue and actual amounts are recorded in the month payment is received.

Successful Efforts Method of Accounting

We utilize the successful efforts method of accounting for our oil and natural gas exploration and development activities. Exploration expenses, including geological and geophysical costs, rentals and exploratory dry holes, are charged against income as incurred. Costs of successful wells and related production equipment and developmental dry holes are capitalized and amortized on an individual property basis using the unit-of-production method as oil and natural gas is produced. This accounting method may yield significantly different results than the full cost method of accounting.

Depreciation, depletion and amortization, or DD&A, of capitalized drilling and development costs of oil and natural gas properties are generally computed using the unit of production method on an individual property or

Index to Financial Statements

unit basis based on total estimated proved developed oil and natural gas reserves. Amortization of producing leasehold is based on the unit-of-production method using total estimated proved reserves. In arriving at rates under the unit-of-production method, the quantities of recoverable oil and natural gas are established based on estimates made by our geologists and engineers and independent engineers. Service properties, equipment and other assets are depreciated using the straight-line method over estimated useful lives of 5 to 40 years. Upon sale or retirement of depreciable or depletable property, the cost and related accumulated DD&A are eliminated from the accounts and the resulting gain or loss is recognized.

Non-producing properties consist of undeveloped leasehold costs and costs associated with the purchase of certain proved undeveloped reserves. Undeveloped leasehold cost is expensed over the life of the lease or transferred to the associated producing properties. Individually significant non-producing properties are periodically assessed for impairment of value.

Oil and Natural Gas Reserves and Standardized Measure of Future Cash Flows

Our independent engineers and technical staff prepare the estimates of our oil and natural gas reserves and associated future net cash flows. Current accounting guidance allows only proved oil and natural gas reserves to be included in our financial statement disclosures. The SEC has defined proved reserves as the estimated quantities of crude oil and natural gas which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Even though our independent engineers and technical staff are knowledgeable and follow authoritative guidelines for estimating reserves, they must make a number of subjective assumptions based on professional judgments in developing the reserve estimates. Reserve estimates are updated at least annually and consider recent production levels and other technical information about each field. Periodic revisions to the estimated reserves and future cash flows may be necessary as a result of a number of factors, including reservoir performance, new drilling, oil and natural gas prices, cost changes, technological advances, new geological or geophysical data, or other economic factors. We cannot predict the amounts or timing of future reserve revisions. If such revisions are significant, they could significantly alter future DD&A and result in impairment of assets that may be material.

Asset Retirement Obligations

In June 2001, the FASB issued SFAS No. 143, which applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and the normal operation of a long-lived asset. The primary impact of this standard on us relates to oil and natural gas wells on which we have a legal obligation to plug and abandon. SFAS No. 143 requires us to 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 the related long-lived asset. The determination of the fair value of the liability requires us to make numerous judgments and estimates, including judgments and estimates related to the future salvage value of well equipment, future costs to plug and abandon wells, future inflation rates and estimated lives of the related assets.

Impairment of Assets

All of our long-lived assets are monitored for potential impairment when circumstances indicate that the carrying value of an asset may be greater than its future net cash flows, including cash flows from risk adjusted proved reserves. The evaluations involve a significant amount of judgment since the results are based on estimated future events, such as future sales prices for oil and natural gas, future costs to produce these products, estimates of future oil and natural gas reserves to be recovered and the timing thereof, the economic and regulatory climates and other factors. The need to test a field for impairment may result from significant declines in sales prices or downward revisions to oil and natural gas reserves. Any assets held for sale are reviewed for

Index to Financial Statements

impairment when we approve the plan to sell. Estimates of anticipated sales prices are highly judgmental and subject to material revision in future periods. Because of the uncertainty inherent in these factors, we cannot predict when or if future impairment charges will be recorded.

Off-Balance Sheet Arrangements

Currently, we do not have any off-balance sheet arrangements.

Recent Accounting Pronouncements

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123(R), “Share-Based Payment”, which is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation.” SFAS No. 123(R) supersedes APB 25 and amends SFAS No. 95, “Statement of Cash Flows.” Generally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, be recognized in the consolidated financial statements based on their estimated fair values. Pro forma disclosures are no longer an alternative.

We will adopt SFAS 123(R) effective January 1, 2006. So long as we are not a reporting company under Section 12 of the Exchange Act, we have an obligation, and accrue a liability for the amount required, to purchase shares acquired through the exercise of stock options and vested restricted shares at a formula price set forth in the award agreements. As a result of this offering, we will no longer have this purchase obligation, and our equity compensation expense will be based on the valuation methodologies contained in SFAS 123(R).

On June 1, 2005, the FASB issued SFAS Statement No. 154, “Accounting Changes and Error Corrections” (SFAS No. 154), which will require entities that voluntarily make a change in accounting principle to apply that change retrospectively to prior periods’ financial statements, unless this would be impracticable. SFAS No. 154 supersedes Accounting Principles Board Opinion No. 20, “Accounting Changes” (APB 20), which previously required that most voluntary changes in accounting principle be recognized by including in the current period’s net income the cumulative effect of changing to the new accounting principle. SFAS No. 154 also makes a distinction between “retrospective application” of an accounting principle and the “restatement” of financial statements to reflect the correction of an error.

Another significant change in practice under SFAS No. 154 will be that if an entity changes its method of depreciation, amortization, or depletion for long-lived, non-financial assets, the change must be accounted for as a change in accounting estimate. Under APB 20, such a change would have been reported as a change in accounting principle. SFAS No. 154 applies to accounting changes and error corrections that are made in fiscal years beginning after December 15, 2005. Management has not completed its assessment of the impact of SFAS No. 154, but does not anticipate any material impact from implementation of this accounting standard.

In April 2005, the FASB issued Staff Position No. FAS 19-1, “Accounting for Suspended Well Costs”, or FSP. The FSP amended paragraphs 31-34 of SFAS No. 19, to allow continued capitalization of exploratory well costs beyond one year from the completion of drilling under circumstances where the well has found a sufficient quantity of reserves to justify its completion as a producing well and the enterprise is making sufficient progress assessing the reserves and the economic and operating viability of the project. The guidance in the FSP was effective for the first reporting period beginning after April 4, 2005. We adopted the new requirements accordingly and do not have any capitalized exploratory well costs beyond one year from the completion of drilling.

Index to Financial Statements

Inflation

Historically, general inflationary trends have not had a material effect on our operating results. However, we have experienced inflationary pressure on technical staff compensation and the cost of oilfield services and equipment due to the increase in drilling activity and competitive pressures resulting from higher oil and natural gas prices in recent years.

Quantitative and Qualitative Disclosures About Market Risk

We are exposed to a variety of market risks including credit risk, commodity price risk and interest rate risk. We address these risks through a program of risk management including the use of derivative instruments.

Credit Risk . We monitor our risk of loss due to non-performance by counterparties of their contractual obligations. Our principal exposure to credit risk is through the sale of our oil and natural gas production, which we market to energy marketing companies, refineries and affiliates, as described under “Certain relationships and related party transactions.” We monitor our exposure to these counterparties primarily by reviewing credit ratings, financial statements and payment history. We extend credit terms based on our evaluation of each counterparty’s credit worthiness. Although we have not generally required our counterparties to provide collateral to support trade receivables owed to us, we routinely require prepayment of working interest holders’ proportionate share of drilling costs. For such prepayments, a liability is recorded and subsequently reduced as the associated work is performed. In this manner, we reduce credit risk.

Commodity Price Risk . We are exposed to market risk as the prices of crude oil and natural gas are subject to fluctuations resulting from changes in supply and demand. To partially reduce price risk caused by these market fluctuations, we have hedged in the past, and may hedge in the future, through the utilization of derivatives, including zero-cost collars and fixed price contracts, a portion of our production. We had no hedging contracts in place at December 31, 2004 or during 2005 and do not currently plan to hedge any of our 2006 production.

Interest Rate Risk . Our exposure to changes in interest rates relates primarily to long-term debt obligations. We manage our interest rate exposure by limiting our variable-rate debt to a certain percentage of total capitalization and by monitoring the effects of market changes in interest rates. We may utilize interest rate derivatives to alter interest rate exposure in an attempt to reduce interest rate expense related to existing debt issues. Interest rate derivatives are used solely to modify interest rate exposure and not to modify the overall leverage of the debt portfolio. We are exposed to changes in interest rates as a result of our credit facility. We had total indebtedness of $199.5 million outstanding under our facility at April 13, 2006. The impact of a 1% increase in interest rates on this amount of debt would result in increased interest expense of approximately $2.0 million and a corresponding decrease in net income. The fair value of long-term debt is estimated based on quoted market prices and management’s estimate of current rates available for similar issues. The following table itemizes our long-term debt maturities and the weighted-average interest rates by maturity date:


	2006		2007		2008		2009		2010		2011			Total
	(in thousands)
Variable rate debt:
Credit facility:
Principal amount	$	—	$	—	$	—	$	—	$	—	$	199,500		$	199,500
Weighted-average interest rate												6.43	%		6.43	%

Index to Financial Statements

Business and Properties

Our Business

PV-10 is a non-GAAP financial measure. However, our PV-10 and our standardized measure of discounted future net cash flows are equivalent because we are a subchapter S-corporation. In connection with the closing of this offering, we will convert to a subchapter C-corporation. The pro forma standardized measure of discounted future net cash flows is presented in Note 14 to our consolidated financial statements included elsewhere in this prospectus. As of December 31, 2005, our estimated proved reserves were 116.7 MMBoe, with a PV-10 of $2.2 billion. Estimated proved developed reserves were 80.3 MMBoe, or 69% of our total estimated proved reserves. Crude oil comprised 85% of our total estimated proved reserves. At December 31, 2005, we had 1,233 scheduled drilling locations on the 1,523,000 gross (961,000 net) acres that we held. For the year ended December 31, 2005, we generated revenues of $375.8 million and operating cash flows of $265.3 million.


	At December 31, 2005					Average daily production— Fourth quarter 2005 (Boe per day)	Percent of total	Annualized reserve/ production index(1)
	Proved reserves (MBoe)	Percent of total	PV-10 (in millions)		Net producing wells		Percent of total	Annualized reserve/ production index(1)

Rocky Mountain:
Red River units	67,711	58%	$	1,215	187	9,792	44%	18.9
Bakken field	24,041	21%		505	34	5,999	27%	11.0
Other	9,065	8%		137	230	1,694	8%	14.7
Mid-Continent	15,472	13%		328	630	3,715	17%	11.4
Gulf Coast	376	—		19	23	973	4%	1.1

Total	116,665	100%	$	2,204	1,104	22,173	100%	14.4

(1)

Index to Financial Statements

The following table provides additional information regarding our key development areas:


	At December 31, 2005					2006 Budget
	Developed acres		Undeveloped acres		Scheduled drilling locations(1)	Wells planned for drilling	Capital expenditures (in millions)
	Gross	Net	Gross	Net	Scheduled drilling locations(1)	Wells planned for drilling	Capital expenditures (in millions)

Rocky Mountain:
Red River units	144,176	128,047	—	—	135	41	$	84
Bakken field	52,421	38,971	588,081	356,426	918	54		96
Other	45,720	36,153	358,649	208,612	71	34		40
Mid-Continent	152,734	99,279	115,746	73,582	96	70		64
Gulf Coast	41,842	11,890	23,598	7,873	13	13		17

Total	436,893	314,340	1,086,074	646,493	1,233	212	$	301

(1)

Our Business Strategy

Growth Through Low-Cost Drilling . Substantially all of our annual capital expenditures are invested in drilling projects and acreage and seismic acquisitions. From January 1, 2001 through December 31, 2005, proved oil and natural gas reserve additions through extensions and discoveries were 86.2 MMBoe compared to 4.7 MMBoe of proved reserve purchases.

Internally Generate Prospects . Our technical staff has internally generated substantially all of the opportunities for the investment of our capital. Because we have been an early entrant in new or emerging plays, our costs to acquire undeveloped acreage have generally been less than those of later entrants into a developing play. As an example of the cost advantage of entering a play early, our per acre costs for our lease acquisitions in the North Dakota Bakken field during 2003 and 2004 were approximately 80% lower than the per acre costs paid by third parties and by us in the federal and state lease auctions for acreage near our holdings in that area during 2005.

Focus on Unconventional Oil and Natural Gas Resource Plays . Our experience with horizontal drilling, advanced fracture stimulation and enhanced recovery technologies allows us to commercially develop unconventional oil and natural gas resource plays, such as the Red River B dolomite and Bakken Shale formations. Production rates in the Red River units also have been increased through the use of enhanced recovery technology. Our production from the Red River units and the Bakken field comprised approximately 71% of our total oil and natural gas production during the three months ended December 31, 2005.

Acquire Significant Acreage Positions in New or Developing Plays . In addition to the 395,000 net acres held in the Montana and North Dakota Bakken field, we held 145,000 net acres in other oil and natural gas shale plays as of December 31, 2005. Our technical staff is focused on identifying and testing new unconventional oil and natural gas resource plays where significant reserves could be developed if commercial production rates can be achieved through advanced drilling, fracture stimulation and enhanced recovery techniques.

Index to Financial Statements

Our Business Strengths

We have a number of strengths that we believe will help us successfully execute our strategies:

Large Drilling and Acreage Inventory . Within the Bakken field, we owned approximately 356,000 net undeveloped acres and had identified over 900 drilling locations as of December 31, 2005. We plan to allocate almost one-third of our current year capital expenditure budget towards developing our Bakken acreage position. Our large number of identified drilling locations provide for a multi-year drilling inventory.

Within other unconventional plays such as the Lewis Shale in Wyoming, the Woodford Shale in Oklahoma, the New Albany Shale in Kentucky and Indiana and the Floyd Shale in Mississippi, we owned approximately 72,000 net undeveloped acres as of December 31, 2005. Within another resource play, the Pierre Shale in North Dakota and Montana, we have 56,000 net acres held by deeper production.

Additionally, at December 31, 2005, we owned approximately 218,000 net undeveloped acres in other projects, including 36,000 net undeveloped acres in Roosevelt County, Montana on which we are planning a 38-square mile 3-D seismic shoot in 2006, 31,000 net undeveloped acres in the Big Horn Basin in Wyoming on which we plan to drill four wells in 2006, 29,000 net undeveloped acres in Bowman County, North Dakota on which we plan to drill a horizontal Red River B well in 2006 and 12,000 net undeveloped acres in Saskatchewan, Canada on which we plan to drill a horizontal Red River C well in 2006.

Within the Red River units, we plan to drill 131 horizontal wells and 61 horizontal extensions of existing wellbores over the next two to three years in order to increase the density of both producing and injection wellbores. We believe these operations will increase production and sweep efficiency. Production in the Red River units, as projected by our proved reserve report for the year ended December 31, 2005, is expected to peak in 2009 at approximately 19,000 net Boe per day. During the three months ended December 31, 2005, production in the Red River units averaged approximately 9,792 net Boe per day.

Horizontal Drilling and Enhanced Recovery Experience . In 1992, we drilled our initial horizontal well, and we have drilled over 300 horizontal wells since that time, which represented more than one-half of our total wells drilled during that period. We also have substantial experience with enhanced recovery methods and currently serve as the operator of 39 waterflood units. Additionally, we operate eight high pressure air injection floods in the United States.

Control Operations Over a Substantial Portion of Our Assets and Investments . As of December 31, 2005, we operated properties comprising 97% of our PV-10. By controlling operations, we are able to more effectively manage the cost and timing of exploration and development of our properties, including the drilling and fracture stimulation methods used.

Experienced Management Team . Our senior management team has extensive expertise in the oil and gas industry. Our Chief Executive Officer, Harold G. Hamm, began his career in the oil and gas industry in 1967. Our eight senior officers have an average of 25 years of oil and gas industry experience. Additionally, our technical staff, which includes 21 petroleum engineers, 14 geoscientists and seven landmen, has an average of more than 19 years experience in the industry.

Strong Financial Position . As of December 31, 2005, we had outstanding borrowings under our credit facility of approximately $143.0 million. We believe that our planned exploration and development activities will be funded substantially from our operating cash flows. As a result of our limited borrowings under our credit facility and strong operational cash flows, we did not enter into any oil or natural gas price hedges for our 2005 production, and we do not currently have plans to hedge any of our 2006 production.

Index to Financial Statements

Conversion to Subchapter C-Corporation

We are currently a subchapter S-corporation under the rules and regulations of the Internal Revenue Service. However, upon the consummation of this offering, we will have more shareholders than the IRS rules and regulations governing S-corporations allow, and therefore, we will convert automatically from a subchapter S-corporation to a subchapter C-corporation. In connection with this conversion, we will record a charge to earnings estimated to be approximately $117 million as of December 31, 2005 to recognize deferred taxes.

Proved Reserves

The following table sets forth our estimated proved oil and natural gas reserves, the PV-10 and standardized measure of discounted future net cash flows as of December 31, 2005 by reserve category. PV-10 is a non-GAAP financial measure. However, our PV-10 and our standardized measure of discounted future net cash flows are equivalent because we are a subchapter S-corporation. In connection with the closing of this offering, we will convert to a subchapter C-corporation. The pro forma standardized measure of discounted future net cash flows is presented in Note 14 to our consolidated financial statements included elsewhere in this prospectus. Ryder Scott Company, L.P., our independent petroleum engineers, evaluated properties representing approximately 83% of our PV-10, and our technical staff evaluated the remaining properties. Oil and natural gas prices in effect at December 31, 2005, $61.04 per Bbl and $11.23 per MMBtu adjusted for location and quality by field, were used in the computation of future net cash flows.


	Oil (MBbls)	Gas (MMcf)	Total (MBoe)	PV-10 (in millions)
Proved developed producing	68,019	54,168	77,047	$	1,547
Proved developed non-producing	3,240	89	3,255		44
Proved undeveloped	27,386	53,861	36,363		613

Total proved	98,645	108,118	116,665	$	2,204
Standardized measure of discounted future net cash flows(1)				$	2,204

(1)

The standardized measure of discounted future net cash flows is computed by applying year-end prices, costs and a discount factor of 10 percent to net proved reserves. As of December 31, 2005, Continental Resources was structured as a subchapter S-corporation. Accordingly, no provision for federal or state corporate income taxes has been provided because taxable income is passed through to our shareholders.

The following table sets forth our estimated proved reserves, percent of total proved reserves that are proved developed and PV-10 as of December 31, 2005 by region:


	Oil (MBbls)	Gas (MMcf)	Total (MBoe)	% Proved developed	PV-10 (in millions)
Rocky Mountain:
Red River units	61,881	34,980	67,711	75%	$	1,215
Bakken field	22,262	10,671	24,041	45%		505
Other	8,468	3,587	9,065	64%		137
Mid-Continent	5,955	57,098	15,472	82%		328
Gulf Coast	79	1,782	376	100%		19

Total	98,645	108,118	116,665	69%	$	2,204

Index to Financial Statements

Production and Price History

The following table sets forth summary information concerning our production results, average sales prices and production costs for the years ended December 31, 2003, 2004 and 2005:


	Year ended December 31,
	2003		2004		2005

Net production volumes:
Oil (MBbls)		3,463		3,688		5,708
Natural gas (MMcf)		10,751		8,794		9,006
Oil equivalents (MBoe)		5,255		5,154		7,209
Average prices:
Oil, without hedges ($/Bbl)	$	28.88	$	38.85	$	52.45
Oil, with hedges ($/Bbl)		25.98		37.12		52.45
Natural gas ($/Mcf)		4.55		5.06		6.93
Oil equivalents, without hedges ($/Boe)		28.35		36.45		50.19
Oil equivalents, with hedges ($/Boe)		26.44		35.20		50.19
Costs and expenses:
Production expense ($/Boe)	$	7.77	$	8.49	$	7.32
Production tax ($/Boe)		1.95		2.39		2.22
General and administrative ($/Boe)		1.83		2.41		4.34
DD&A expense ($/Boe)		7.10		7.02		6.50

The following table sets forth information regarding our average daily production during the fourth quarter of 2005:


	Average daily production—Fourth quarter 2005
	Bbls	Mcf	Boe
Rocky Mountain
Red River units	9,561	1,388	9,792
Bakken field	5,486	3,077	5,999
Other	1,433	1,567	1,694
Mid-Continent	1,511	13,222	3,715
Gulf Coast	91	5,293	973

Total	18,082	24,547	22,173

Index to Financial Statements

Productive Wells

The following table presents the total gross and net productive wells by region and by oil or gas completion as of December 31, 2005:


	Oil wells		Natural gas wells		Total wells
	Gross	Net	Gross	Net	Gross	Net
Rocky Mountain:
Red River units	199	187	—	—	199	187
Bakken field	60	34	—	—	60	34
Other	262	230	—	—	262	230
Mid-Continent	664	514	209	116	873	630
Gulf Coast	7	5	33	18	40	23

Total	1,192	970	242	134	1,434	1,104

Gross wells are the number of wells in which a working interest is owned and net wells are the total of our fractional working interests owned in gross wells. As of December 31, 2005, we owned interests in no wells containing multiple completions.

Developed and Undeveloped Acreage

The following table presents the total gross and net developed and undeveloped acreage by region as of December 31, 2005:


	Developed acres		Undeveloped acres		Total acres
	Gross	Net	Gross	Net	Gross	Net
Rocky Mountain:
Red River units	144,176	128,047	—	—	144,176	128,047
Bakken field	52,421	38,971	588,081	356,426	640,502	395,397
Other	45,720	36,153	358,649	208,612	404,369	244,765
Mid-Continent	152,734	99,279	115,746	73,582	268,480	172,861
Gulf Coast	41,842	11,890	23,598	7,873	65,440	19,763

Total	436,893	314,340	1,086,074	646,493	1,522,967	960,833

The following table sets forth the number of gross and net undeveloped acres as of December 31, 2005 that will expire over the next three years by region unless production is established within the spacing units covering the acreage prior to the expiration dates:


	2006		2007		2008
	Gross	Net	Gross	Net	Gross	Net
Rocky Mountain:
Red River units	—	—	—	—	—	—
Bakken field	19,778	11,897	108,311	68,395	200,966	113,166
Other	89,913	59,710	72,339	46,106	43,600	30,141
Mid-Continent	28,710	19,911	10,581	7,563	23,888	14,519
Gulf Coast	3,407	2,404	1,636	1,150	15,319	3,065

Total	141,808	93,922	192,867	123,214	283,773	160,891

Index to Financial Statements

Drilling Activity

During the three years ended December 31, 2005, we drilled exploratory and development wells as set forth in the table below:


	2003		2004		2005
	Gross	Net	Gross	Net	Gross	Net
Exploratory wells:
Oil	6	4.1	12	5.6	13	5.9
Gas	7	3.5	5	0.9	2	1.3
Dry	7	5.5	17	10.5	11	6.9

Total exploratory wells	20	13.1	34	17.0	26	14.1
Development wells:
Oil	11	6.9	14	8.3	50	30.6
Gas	14	9.6	13	5.7	15	7.6
Dry	4	3.7	4	2.6	3	3.0

Total development wells	29	20.2	31	16.6	68	41.2

Total wells	49	33.3	65	33.6	94	55.3

As of December 31, 2005, there were 20 gross (10.6 net) development wells and 5 gross (3.0 net) exploratory wells in the process of drilling. As of April 10, 2006, 19 gross (9.8 net) wells of the development wells in process as of December 31, 2005, were completed as producers and the remaining development well was in the process of completion. As of April 10, 2006, 2 gross (1.1 net) wells of the exploratory wells in process as of December 31, 2005 were completed as producers, 1 gross (1 net) well was completed as a dry hole and the remaining exploratory wells were in the process of completion.

Summary of Oil and Natural Gas Properties and Projects

Rocky Mountain Region

Our properties in the Rocky Mountain region represented 84% of our PV-10 as of December 31, 2005. During the three months then ended, our average production from such properties was 16,480 net Bbls of oil and 6,032 net Mcf of natural gas per day. Our principal producing properties in this region are in the Red River units, the Bakken field and the Big Horn Basin. Additionally, we have prospective acreage for the Lewis Shale in southern Wyoming and the Pierre Shale in western North Dakota, other unconventional resource plays in the Rocky Mountain Region.

Red River Units

Our Red River units represented 65% of our PV-10 in the Rocky Mountain Region as of December 31, 2005 and 56% of our average daily Rocky Mountain Region equivalent production for the three months then ended. The eight units comprising the Red River units are located along the Cedar Hills Anticline in North Dakota, South Dakota and Montana and produce oil and natural gas from the Red River “B” formation, a thin, continuous, dolomite formation at depths of 8,000 to 9,500 feet. Our Red River units comprise a portion of the Cedar Hills field, listed by the Energy Information Administration in 2004 as the 23rd largest field in the United States ranked by liquids proved reserves.

Cedar Hills Units . The Cedar Hills North unit (CHNU) is located in Bowman and Slope Counties, North Dakota. We drilled the initial horizontal well in the CHNU, the Ponderosa 1-15, in April 1995. As of December 31, 2005, we had drilled 146 horizontal wells within this 49,700-acre unit, with 78 producing wellbores and the remainder serving as injection wellbores. We operate and own a 98% working interest in the CHNU.

Index to Financial Statements

The Cedar Hills West unit (CHWU), in Fallon County, Montana, is contiguous to the northern portion of CHNU. As of December 31, 2005, this 7,800-acre unit contained ten horizontal producing wells and four HPAI wells. We operate and own a 100% working interest in the CHWU.

In January 2003, we commenced enhanced recovery in the two Cedar Hills units, with HPAI used throughout most of the area and water injected generally along the boundary of the CHNU. Under HPAI, compressed air injected into a reservoir oxidizes residual oil and produces flue gases (primarily carbon dioxide and nitrogen) that mobilize and sweep the crude oil into producing wellbores. In response to the HPAI and water injection, production from the Cedar Hills units increased to 7,054 net Bbls per day in December 2005 from 2,185 Bbls per day in November 2003. As of December 31, 2005, the average density in the Cedar Hill units was approximately one producing wellbore each 653 acres. We currently plan to drill 111 new horizontal wellbores and 26 horizontal extensions of existing wellbores in the Cedar Hills units during the next two to three years, increasing the density of both the producing and injection wellbores. We believe this operation will increase production and sweep efficiency. Production in the two units, as projected by our proved reserves report for the year ended December 31, 2005, is expected to peak in 2009 at approximately 15,800 net Boe per day. In 2006, we plan to invest approximately $42 million drilling in the Cedar Hills units.

On November 8, 2005, we entered into a contract with Hiland Partners, LP (“Hiland”) for the processing and treatment of gas produced from the CHNU and CHWU. Under the terms of the contract we agree to deliver low pressure gas to Hiland for compression, treatment and processing at a facility to be constructed by Hiland. Nitrogen and carbon dioxide must be removed from the gas production associated with the increasing oil production from CHNU and CHWU for the gas production to be marketable. Under the terms of the contract, we pay $0.60 per Mcf in gathering and treating fees, and 50% of the electrical costs attributable to compression and plant operation and receive 50% of the proceeds from residue gas and plant product sales. After we deliver 36 Bcf of gas, the $0.60 per Mcf gathering and treating fee is eliminated. If the average composite volume of carbon dioxide is less than 10%, we pay an additional $0.10 per Mcf treating fee, otherwise the treating fee is $0.20 per Mcf. We currently plan to invest approximately $6 million during 2006 to construct gas gathering from each well to central tank battery delivery points. The plant is currently expected to be operational during the fourth quarter of 2006.

Medicine Pole Hills Units . The Medicine Pole Hills units (MPHU) are approximately five miles east of the southern portion of the CHNU. We acquired the Medicine Pole Hills unit in 1995. At that time, the 9,600-acre unit consisted of 18 vertical producing wellbores and four injection wellbores under HPAI producing 525 net Bbls of oil per day. We have since drilled 30 horizontal wellbores extending production to the west with the formation of the 15,000-acre Medicine Pole Hills West unit and to the south, with the 11,500-acre Medicine Pole Hills South unit. All three units are under HPAI. We operate and own an average 77% working interest in the three units. Production from the units averaged 905 net Bbls of oil and 470 net Mcf of natural gas per day in December 2005. We currently plan to drill 20 new horizontal wellbores and seven horizontal extensions of existing wellbores during the next two years, increasing the density of both producing and injection wellbores. We believe these operations will increase production and sweep efficiency. In 2006, we plan to invest approximately $14 million for drilling in MPHU.

Buffalo Red River Units . The three contiguous Buffalo Red River units (Buffalo, West Buffalo and South Buffalo) are located in Harding County, South Dakota, approximately 21 miles south of the MPHU. When we purchased the units in 1995, there were 73 vertical producing wellbores and 38 injection wellbores under HPAI producing approximately 1,906 net Bbls of oil per day. We operate and own an average working interest of 95% in the 32,900 acres comprising the three units. During 2005, we re-entered 11 existing vertical wells and drilled horizontal laterals to increase production and sweep efficiency. Production for the month of December 2005 was 1,499 net Bbls of oil per day compared to an average of 1,162 net Bbls of oil per day for the first half of 2005.

Index to Financial Statements

We currently plan to drill 28 horizontal extensions of existing wellbores in the Buffalo Red River units over the next two years. We believe these operations will increase production and sweep efficiency. In 2006, we plan to invest $11 million for drilling in the Buffalo Red River units.

Bakken Field

Our properties within the Bakken field in Montana and North Dakota represented 27% of our PV-10 in the Rocky Mountain Region as of December 31, 2005 and 34% of our average daily Rocky Mountain Region equivalent production for the three months then ended. The Bakken formation is widespread and relatively uniform in development throughout the Montana and North Dakota portions of the Williston Basin. The Bakken formation consists of three lithologic members—the upper shale, middle member and locally a lower shale. The shales are highly organic, thermally mature and overpressured and act as both a source and reservoir for the oil. The middle member is also productive locally and varies in composition from a silty dolomite, to shalely limestone or sand across the Williston Basin. Horizontal drilling and advanced fracture stimulation technologies have enabled commercial recovery from this historically non-commercial reservoir. Generally, the Bakken formation is drilled horizontally on 1,280-acre units to vertical depths ranging from 9,000 to 10,500 feet with opposing horizontal laterals each extending approximately 4,500 feet, for a total drilled footage of approximately 18,000 to 21,000 feet. The wells are typically fracture stimulated to maximize recovery and economic returns.

Richland County, Montana . Commercial production data available on wells completed after February 2001 in the Bakken formation by various operators in Richland County, Montana report 277 productive wells with cumulative production as of October 2005 of 24 MMBbls of oil and 13 Bcf of natural gas. Daily production from these wells for the month of September 2005 was approximately 48 MBbls of oil and 29 MMcf of natural gas.

Our initial well in the Richland County, Montana portion of the Bakken field, the Goss #34-26 completed in August 2003, has produced approximately 177,100 gross Bbls of oil and 91,500 gross Mcf of natural gas as of December 2005 and averaged 112 gross Bbls of oil and 128 gross Mcf of natural gas per day during the month of December 2005. Cumulative production from the 42 operated wells drilled by us in Richland County was 3.8 gross MMBbls of oil and 1.6 gross Bcf of natural gas through December 31, 2005, with an average rate of 9,920 gross Bbls and 5,248 gross Mcf per day for the month of December 2005. Our average daily rate from operated and non-operated wells in this field (32 net wells) was approximately 5,400 net Bbls of oil and 3,150 net Mcf of natural gas during the month of December 2005. Substantially all of our wells have been horizontally drilled on 1,280-acre units within the middle dolomite member, which is well developed under our leasehold in Richland County.

As of December 31, 2005, we held 129,000 gross (101,000 net) undeveloped acres in the Richland County, Montana portion of the Bakken field with 60 proved undeveloped and 138 additional scheduled drilling locations. We currently have four operated drilling rigs in this part of the field and plan to invest $58 million in the drilling of 35 horizontal Bakken wells in Montana during 2006.

North Dakota Bakken . Encouraged by the results in Richland County, Montana, operators have begun drilling horizontal wells in the Bakken formation in North Dakota. Since this play is in the early stages of development, results are limited but encouraging. As of February 21, 2006, production data had been reported to the North Dakota Oil and Gas Commission on 24 horizontal North Dakota Bakken wells completed during 2004 and 2005. The initial production rates on the 24 wells ranged up to 585 Boe per day and averaged 267 Boe per day per well. Cumulative and daily production from the 24 wells as of December 31, 2005 was 531 MBoe and 2,191 Boe, respectively.

As in Richland County, Montana, the upper Bakken shale in western North Dakota is highly organic, thermally mature and over-pressured. Within our North Dakota acreage, the formation is found at vertical depths

Index to Financial Statements

ranging from 8,500 to 11,000 feet. In North Dakota, the Bakken formation gross interval ranges up to 130 feet compared to about 30 feet in Richland County, Montana. Similarly, the upper Bakken shale thickness ranges up to 20 feet in North Dakota compared to about 7 feet in Richland County, Montana. The middle dolomite member of the Bakken formation in the southern portion of our North Dakota acreage is similar to that present in the Richland County, Montana producing area. Moving north on our acreage, the middle dolomite member increases in thickness but diminishes in reservoir quality. We believe the loss of quality of the middle member is offset by the increasing thickness of the upper and lower shales as one moves north and the strategic position of our acreage along the axis of the Nesson anticline.

In March 2004, we served as contract operator on a well completed in the Bakken formation near the northern border of our acreage. We drilled a 4,376-foot single horizontal lateral within the middle dolomite member of the Bakken Shale in an abandoned dry hole. The well has produced approximately 38,000 gross Boe through December 31, 2005 and is estimated to ultimately produce approximately 213,000 gross Boe. The well, initially owned by our principal shareholder and his family, was acquired by us in August 2005.

In October 2004, we completed a well in the Bakken formation on the extreme southeastern edge of our North Dakota acreage in a well originally planned as a shallower Lodgepole formation test. This well is over 120 miles south of our initial test. The well was unsuccessful in the Lodgepole formation and was deepened to test the Bakken formation at this location. The middle dolomite member significantly thins along the southern edge of our acreage and, in this test well, the middle member was essentially not present. The well has produced about 12,000 gross Boe through December 31, 2005 from a single 6,199-foot horizontal lateral and is estimated ultimately to produce approximately 26,000 gross Boe.

In 2005, we participated with a small working interest in two non-operated Bakken formation tests in North Dakota. One is expected to ultimately produce about 50,000 gross Boe and the other, 230,000 gross Boe.

As of December 31, 2005, we held 459,000 gross (256,000 net) undeveloped acres in contiguous counties in North Dakota across the state border from the Richland County, Montana drilling activity. During 2006, we plan to invest approximately $28 million in the drilling of 19 horizontal Bakken wells on our acreage in North Dakota.

Big Horn Basin and Other

Our wells within the Big Horn Basin in northern Wyoming and other areas within the Rocky Mountain region represented 8% of our PV-10 in the Rocky Mountain Region as of December 31, 2005 and 10% of our average daily Rocky Mountain Region equivalent production for the three months then ended. During the three months ended December 31, 2005, we produced an average of 1,433 net Bbls of oil and 1,567 net Mcf of natural gas per day from our 262 gross (230 net) wells in the Big Horn Basin and other areas within the Rocky Mountain region. Our principal property in the Big Horn Basin, the Worland field, produces primarily from the Phosphoria formation. We have 44 additional proved undeveloped drilling locations in the Worland field. During 2006, we plan to invest approximately $17 million in the drilling of 16 wells in the Worland field and four Tensleep formation wells elsewhere in the Big Horn Basin.

Lewis Shale Project

As of December 31, 2005, we owned approximately 109,000 gross (28,000 net) undeveloped acres in the Washakie Basin in Carbon and Sweetwater Counties, Wyoming. Our objective is the Lewis Shale, a shale formation up to 1,500 feet thick with thin interbedded and discontinuous siltstones and sandstones. Underlying our acreage, the Lewis Shale is over-pressured and gas charged with the potential to develop into an economic unconventional gas resource play. Previous drilling in the area has encountered gas from the thick, fractured shale, but only the thin, isolated sands within the shale have been produced. As of October 2005, the Triton field, located in the center of our acreage block, has produced a total of 6.5 Bcf of natural gas from 5 wells with up to

Index to Financial Statements

40 feet of perforations in thin sands within the Lewis Shale. We plan to produce the entire Lewis Shale sequence with the expectation that ultimate recoveries per well will be greater than previous results.

In December 2005, we participated with a 40% working interest in our initial well in this project. Significant gas shows were encountered while drilling in the Lewis Shale and several overlying uphole zones. The well is currently being tested. During 2006, we plan to invest approximately $13 million in the drilling of eight Lewis Shale wells.

Pierre Shale Project

We have shallow natural gas reserve potential from the Pierre Shale formation within the 57,500 gross (56,000 net) acres held by production within our Cedar Hills units. The Pierre Shale is a sand/shale sequence that produces biogenic gas from vertical depths of 1,200 to 2,000 feet. Our acreage is approximately one mile east of a unit where 26 wells have been completed in the Pierre Shale formation from September 2003 through October 2005. Daily production from the 26 wells in October 2005 was approximately 2,500 Mcf of natural gas. In 2006, we plan to invest $1 million to drill four Pierre Shale wells on our acreage.

Mid-Continent Region

Our properties in the Mid-Continent Region represented 15% of our PV-10 as of December 31, 2005. During the three months ended December 31, 2005, our average production from such properties was 1,511 net Bbls of oil and 13,222 net Mcf of natural gas per day. Our principal producing properties in this region are located in the Anadarko Shelf of western Oklahoma and the Illinois Basin. We have also acquired acreage in three unconventional resource plays: the Woodford Shale, New Albany Shale and Floyd Shale.

Anadarko Shelf

Our properties within the Anadarko Basin represent 74% of our PV-10 in the Mid-Continent Region as of December 31, 2005 and 72% of our average daily Mid-Continent Region equivalent production for the three months then ended. Our wells within the Anadarko Basin produce from a variety of sands and carbonates in both stratigraphic and structural traps. In 2006, we plan to invest approximately $24 million in the drilling of 28 wells in the Anadarko Basin.

Illinois Basin

Our properties within the Illinois Basin represent 26% of the PV-10 in the Mid-Continent Region as of December 31, 2005 and 28% of our average daily Mid-Continent Region equivalent production for the three months then ended. Our wells within the Illinois Basin produce primarily crude oil from units comprised of shallow sand formations under water injection. In 2006, we plan to invest approximately $8 million in the drilling of 30 wells in the Illinois Basin.

Woodford Shale Project

We owned approximately 10,000 gross (5,000 net) undeveloped acres in Coal, Hughes and Pittsburg Counties, Oklahoma as of December 31, 2005. Our drilling objective is the 100 to 175-foot thick Woodford Shale at vertical depths of 6,000 to 12,500 feet. We believe horizontal drilling, combined with advanced fracture stimulation technology, may provide the means for commercial development of this organic rich, gas-bearing shale. This play is in the early stages of development and data is limited. However, we are encouraged by recent drilling results. We commenced drilling operations on our initial horizontal Woodford Shale test on February 10, 2006 and released the rig on March 29, 2006. On April 10, 2006, we were waiting for completion equipment. At that time, nine horizontal wells had been completed in the Woodford Shale near our acreage with initial production rates of up to 5,000 Mcf of natural gas per day, and nine rigs were drilling horizontal wells in the

Index to Financial Statements

Woodford Shale in close proximity to our acreage. During 2006, we plan to complete a 19-square mile 3D seismic shoot over our acreage to identify prospective drilling locations and anticipate investing approximately $5 million in the drilling of eight Woodford Shale wells.

New Albany Shale Project

We owned approximately 36,000 gross (31,000 net) undeveloped acres in Kentucky and Indiana as of December 31, 2005. Our drilling objective is the New Albany Shale, an organically rich, gas-bearing Devonian age shale equivalent to the prolific Antrim Shale in Michigan. The New Albany Shale averages 100 feet thick under our acreage and is found at vertical depths of 1,500 to 4,500 feet. We believe the potential exists for the New Albany Shale to be an economic unconventional natural gas resource play. In December 2005, we completed our initial horizontal well in the New Albany Shale as an uncommercial producer. We plan to use the core and production data from this well and drilling results of other operators in the play to develop our future drilling plans.

Floyd Shale Project

We owned approximately 13,000 gross (8,000 net) undeveloped acres in Monroe County, Mississippi as of December 31, 2005. Our drilling objective is the Floyd Shale, a Mississippian age, organically rich shale found throughout the Black Warrior Basin in Mississippi and Alabama. Natural gas is encountered while this shale is being drilled, and the formation may prove to be an economic unconventional natural gas resource play. Few wells have attempted to produce this shale in the Basin. The Floyd Shale ranges from 25 to 80 feet thick under our acreage and is found at vertical depths of 2,000 to 4,000 feet. In December 2005, we re-entered two vertical wells and fracture stimulated the Floyd Shale formation. The resulting production rates were uneconomic. We plan to continue to evaluate our acreage for future drilling opportunities and monitor industry activity in this area.

Gulf Coast Region

During the three months ended December 31, 2005, our average production from our Gulf Coast properties was 91 net Bbls of oil and 5,293 net Mcf of natural gas per day. Principally as a result of two successful recompletions in January 2006, production in the region increased to 416 net Bbls of oil and 6,708 Mcf of natural gas per day during January 2006. Our principal producing properties in this region are located in South Texas and Louisiana. In 2006, we plan to invest approximately $14 million in the drilling of 13 wells in the Texas and Louisiana Gulf Coast.

Marketing and Major Customers

We principally sell our oil and natural gas production to end users, marketers and other purchasers that have access to nearby pipeline facilities. In areas where there is no practical access to pipelines, oil is transported by truck to storage facilities. Our marketing of oil and natural gas can be affected by factors beyond our control, the effects of which cannot be accurately predicted. For a description of some of these factors, see “Risk factors—Market conditions or operational impediments may hinder our access to oil and natural gas markets or delay our production.”

For the year ended December 31, 2005, oil sales to Plains Marketing, L.P., Banner and Nexen Marketing U.S.A. Inc. accounted for approximately 31%, 19% and 10%, respectively, of our total oil and gas sales. Banner was an affiliate of ours as described under “Certain Relationships and Related Party Transactions.” In February 2006, we decided to market the majority of our crude oil in the Rocky Mountain region directly or through a wholly owned subsidiary rather than through an affiliate, and, as Banner has existing contacts and relationships with crude oil purchasers, we decided to purchase Banner. On March 30, 2006, we acquired Banner for approximately $8.8 million, the book value of working capital, principally cash, accounts receivable, crude oil

Index to Financial Statements

inventory and accounts payable. We believe that the loss of any of these purchasers would not have a material adverse effect on our operations, as there are a number of alternative crude oil purchasers in our producing regions.

Title to Properties

As is customary in the oil and gas industry, we initially conduct only a cursory review of the title to our properties on which we do not have proved reserves. Prior to the commencement of drilling operations on those properties, we conduct a thorough title examination and perform curative work with respect to significant defects. To the extent title opinions or other investigations reflect title defects on those properties, we are typically responsible for curing any title defects at our expense. We generally will not commence drilling operations on a property until we have cured any material title defects on such property. We have obtained title opinions on substantially all of our producing properties and believe that we have satisfactory title to our producing properties in accordance with standards generally accepted in the oil and gas industry. Prior to completing an acquisition of producing oil and natural gas leases, we perform title reviews on the most significant leases and, depending on the materiality of properties, we may obtain a title opinion or review previously obtained title opinions. Our oil and natural gas properties are subject to customary royalty and other interests, liens to secure borrowings under our credit facility, liens for current taxes and other burdens which we believe do not materially interfere with the use or affect our carrying value of the properties.

Competition

We operate in a highly competitive environment for acquiring properties, marketing oil and natural gas and securing trained personnel. Our competitors vary within the regions in which we operate, and some of our competitors may possess and employ financial, technical and personnel resources substantially greater than ours, which can be particularly important in the areas in which we operate. Those companies may be able to pay more for productive oil and natural gas properties and exploratory prospects and to evaluate, bid for and purchase a greater number of properties and prospects than our financial or personnel resources permit. In addition, shortages or the high cost of drilling rigs could delay or adversely affect our development and exploration operations. Our ability to acquire additional prospects and to find and develop reserves in the future will depend on our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. Also, there is substantial competition for capital available for investment in the oil and natural gas industry.

Regulation of the Oil and Natural Gas Industry

Regulation of Transportation of Oil

Sales of crude oil, condensate and natural gas liquids are not currently regulated and are made at negotiated prices. Nevertheless, Congress could reenact price controls in the future.

Our sales of crude oil are affected by the availability, terms and cost of transportation. The transportation of oil in common carrier pipelines is also subject to rate regulation. The Federal Energy Regulatory Commission, or the FERC, regulates interstate oil pipeline transportation rates under the Interstate Commerce Act. In general, interstate oil pipeline rates must be cost-based, although settlement rates agreed to by all shippers are permitted and market-based rates may be permitted in certain circumstances. Effective January 1, 1995, the FERC implemented regulations establishing an indexing system (based on inflation) for transportation rates for oil that allowed for an increase or decrease in the cost of transporting oil to the purchaser. A review of these regulations by the FERC in 2000 was successfully challenged on appeal by an association of oil pipelines. On remand, the FERC in February 2003 increased the index slightly, effective July 2001. Intrastate oil pipeline transportation

Index to Financial Statements

rates are subject to regulation by state regulatory commissions. The basis for intrastate oil pipeline regulation, and the degree of regulatory oversight and scrutiny given to intrastate oil pipeline rates, varies from state to state. Insofar as effective interstate and intrastate rates are equally applicable to all comparable shippers, we believe that the regulation of oil transportation rates will not affect our operations in any way that is of material difference from those of our competitors.

Further, interstate and intrastate common carrier oil pipelines must provide service on a non-discriminatory basis. Under this open access standard, common carriers must offer service to all similarly situated shippers requesting service on the same terms and under the same rates. When oil pipelines operate at full capacity, access is governed by prorationing provisions set forth in the pipelines’ published tariffs. Accordingly, we believe that access to oil pipeline transportation services generally will be available to us to the same extent as to our competitors.

Regulation of Transportation and Sale of Natural Gas

Historically, the transportation and sale for resale of natural gas in interstate commerce have been regulated pursuant to the Natural Gas Act of 1938, the Natural Gas Policy Act of 1978 and regulations issued under those Acts by the FERC. In the past, the federal government has regulated the prices at which natural gas could be sold. While sales by producers of natural gas can currently be made at uncontrolled market prices, Congress could reenact price controls in the future. Deregulation of wellhead natural gas sales began with the enactment of the Natural Gas Policy Act. In 1989, Congress enacted the Natural Gas Wellhead Decontrol Act which removed all Natural Gas Act and Natural Gas Policy Act price and non-price controls affecting wellhead sales of natural gas effective January 1, 1993.

FERC 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. Since 1985, the FERC has endeavored to make natural gas transportation more accessible to natural gas buyers and sellers on an open and non-discriminatory basis. The FERC has stated that open access policies are necessary to improve the competitive structure of the interstate natural gas pipeline industry and to create a regulatory framework that will put natural gas sellers into more direct contractual relations with natural gas buyers by, among other things, unbundling the sale of natural gas from the sale of transportation and storage services. Beginning in 1992, the FERC issued Order No. 636 and a series of related orders to implement its open access policies. As a result of the Order No. 636 program, the marketing and pricing of natural gas have been significantly altered. The interstate pipelines’ traditional role as wholesalers of natural gas has been eliminated and replaced by a structure under which pipelines provide transportation and storage service on an open access basis to others who buy and sell natural gas. Although the FERC’s orders do not directly regulate natural gas producers, they are intended to foster increased competition within all phases of the natural gas industry.

In 2000, the FERC issued Order No. 637 and subsequent orders, which imposed a number of additional reforms designed to enhance competition in natural gas markets. Among other things, Order No. 637 effected changes in FERC regulations relating to scheduling procedures, capacity segmentation, penalties, rights of first refusal and information reporting. Most pipelines’ tariff filings to implement the requirements of Order No. 637 have been accepted by the FERC and placed into effect.

We cannot accurately predict whether the FERC’s actions will achieve the goal of increasing competition in markets in which our natural gas is sold. Additional proposals and proceedings that might affect the natural gas industry are pending before the FERC and the courts. The natural gas industry historically has been very heavily regulated. Therefore, we cannot provide any assurance that the less stringent regulatory approach recently established by the FERC will continue. However, we do not believe that any action taken will affect us in a way that materially differs from the way it affects other natural gas producers.

Index to Financial Statements

Gathering service, which occurs upstream of jurisdictional transmission services, is regulated by the states onshore and in state waters. Although its policy is still in flux, FERC has reclassified certain jurisdictional transmission facilities as non-jurisdictional gathering facilities, which has the tendency to increase our costs of getting gas to point of sale locations.

Intrastate natural gas transportation is also subject to regulation by state regulatory agencies. The basis for intrastate regulation of natural gas transportation and the degree of regulatory oversight and scrutiny given to intrastate natural gas pipeline rates and services varies from state to state. Insofar as such regulation within a particular state will generally affect all intrastate natural gas shippers within the state on a comparable basis, we believe that the regulation of similarly situated intrastate natural gas transportation in any states in which we operate and ship natural gas on an intrastate basis will not affect our operations in any way that is of material difference from those of our competitors. Like the regulation of interstate transportation rates, the regulation of intrastate transportation rates affects the marketing of natural gas that we produce, as well as the revenues we receive for sales of our natural gas.

Regulation of Production

The production of oil and natural gas is subject to regulation under a wide range of local, state and federal statutes, rules, orders and regulations. Federal, state and local statutes and regulations require permits for drilling operations, drilling bonds and reports concerning operations. All of the states in which we own and operate properties have regulations governing conservation matters, including provisions for the unitization or pooling of oil and natural gas properties, the establishment of maximum allowable rates of production from oil and natural gas wells, the regulation of well spacing, and plugging and abandonment of wells. The effect of these regulations is to limit the amount of oil and natural gas that we can produce from our wells and to limit the number of wells or the locations at which we can drill, although we can apply for exceptions to such regulations or to have reductions in well spacing. 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.

The failure to comply with these rules and regulations can result in substantial penalties. Our competitors in the oil and natural gas industry are subject to the same regulatory requirements and restrictions that affect our operations.

Environmental, Health and Safety Regulation

General . Our operations are subject to stringent and complex federal, state, local and provincial laws and regulations governing environmental protection, health and safety, including the discharge of materials into the environment. These laws and regulations may, among other things:

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require the acquisition of various permits before drilling commences;

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

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

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require remedial measures to mitigate pollution from former and ongoing operations, such as requirements to close pits and plug abandoned wells.

These laws 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 gas industry increases the cost of doing business in the industry and consequently affects profitability. Additionally, Congress and federal and state

Index to Financial Statements

agencies frequently revise environmental, health and safety laws and regulations, and any changes that result in more stringent and costly waste handling, disposal and cleanup requirements for the oil and gas industry could have a significant impact on our operating costs.

The following is a summary of some of the existing environmental, health and safety laws and regulations to which our business operations are subject.

Waste Handling . The Resource Conservation and Recovery Act, or RCRA, and comparable state statutes, regulate the generation, transportation, treatment, storage, disposal and cleanup of hazardous and non-hazardous wastes. Under the auspices of the federal Environmental Protection Agency, or EPA, the 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 or natural gas are currently regulated under RCRA’s non-hazardous waste provisions. However, it is possible that certain oil and natural gas exploration and production wastes now classified as non-hazardous could be classified as hazardous wastes in the future. Any such change could result in an increase in our costs to manage and dispose of wastes, which could have a material adverse effect on our results of operations and financial position.

Comprehensive Environmental Response, Compensation and Liability Act . The Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, also known as the Superfund law, imposes joint and several liability, without regard to fault or legality of conduct, in connection with the release of a hazardous substance into the environment. Persons potentially liable under CERCLA include the current or former owner or operator of the site where the release occurred and anyone who disposed or arranged for the disposal of a hazardous substance to the site where the release occurred. Under CERCLA, such persons may be subject to joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment, damages to natural resources and the costs of certain health studies. In addition, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment.

We currently own, lease or operate and have formerly owned, leased or operated numerous properties that have been used for oil and natural gas exploitation and production for many years. Although we believe that we have utilized operating and waste disposal practices that were standard in the industry at the time, hazardous substances may have been released on, at or under the properties owned, leased or operated by us, or on, at or under other locations, including off-site locations, where such substances have been taken for disposal. In addition, some of our properties have been operated by third parties or by previous owners or operators whose handling, treatment and disposal of hazardous substances were not under our control. These properties and the substances disposed or released on, at or under them may be subject to CERCLA, RCRA and analogous state laws. Pursuant to such laws, we have in the past performed remediation of spills and releases resulting from our operations. In certain circumstances, 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. In addition, federal and state trustees can also seek substantial compensation for damages to natural resources resulting from spills or releases.

Water Discharges . The Federal Water Pollution Control Act, or the Clean Water Act, and analogous state laws, impose restrictions and strict controls with respect to the discharge of pollutants, including oil and other substances generated by our operations, into waters of the United States or state waters. Under these laws, the discharge of pollutants into regulated waters is prohibited except in accordance with the terms of a permit issued by the EPA or an analogous state agency. Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with discharge permits or other requirements of the Clean Water Act and analogous state laws and regulations.

Index to Financial Statements

The Safe Drinking Water Act, or SDWA, and analogous state laws impose requirements relating to our underground injection activities. Under these laws, the EPA and state environmental agencies have adopted regulations relating to permitting, testing, monitoring, record-keeping and reporting of injection well activities, as well as prohibitions against the migration of injected fluids into underground sources of drinking water. We currently own and operate a number of injection wells, used primarily for re-injection of produced waters, that are subject to SDWA requirements. In September 2004, we were notified by EPA Region 8 that it was initiating an administrative enforcement action under the SDWA based on our alleged failure to comply with certain requirements relating to four injection wells on the Fort Peck Indian Reservation in Valley County, Montana. The EPA initially proposed to impose a penalty of $134,600, but we have negotiated a proposed settlement with the EPA for $57,500. It is possible that there may be other instances of non-compliance with SDWA requirements from time to time in connection with our operations.

Air Emissions . 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, EPA and certain states in which we operate have developed and continue 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 analogous state laws and regulations. We are currently working with the South Dakota Department of Environment and Natural Resources in connection with certain alleged violations relating to nonpermitted emissions of volatile organic compounds from our facilities in Harding County, South Dakota and expect to incur approximately $4.3 million in capital expenditures in connection with such efforts. We are currently negotiating the terms of a settlement agreement to resolve these alleged violations, and the terms of the settlement currently under discussion with the agency could result in the imposition of a fine slightly in excess of $100,000 or the performance of a supplemental environmental project in the amount of $200,000.

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 certain gases, generally referred to as greenhouse gases, that are suspected of contributing to global warming. The United States is not currently a participant in the Protocol, and Congress has not acted upon recent proposed legislation directed at reducing greenhouse gas emissions. However, 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. At this time, it is not possible to accurately estimate how potential future laws or regulations addressing greenhouse gas emissions would impact our business.

National Environmental Policy Act . Oil and natural gas exploration and production activities on federal lands are subject to the National Environmental Policy Act, or NEPA. NEPA requires federal agencies, including the Department of Interior, to evaluate major agency actions that have the potential to significantly impact the environment. In the course of such evaluations, an agency will prepare an Environmental Assessment that assesses 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.

Health, Safety and Disclosure Regulation . We are subject to the requirements of the federal Occupational Safety and Health Act, or OSHA, and comparable state statutes. The OSHA hazard communication standard, the

Index to Financial Statements

Emergency Planning and Community Right to Know Act and similar state statutes require that we organize and/or disclose information about hazardous materials stored, used or produced in our operations.

We have incurred in the past, and expect to incur in the future, capital and other expenditures related to environmental compliance. Such expenditures, however, are included within our overall capital and operating budgets and are not separately accounted for. Although we believe that our continued compliance with existing requirements will not have a material adverse impact on our financial condition and results of operations, we cannot assure you that the passage of more stringent laws or regulations in the future will not have an negative impact on our financial position or results of operations.

Employees

As of December 31, 2005, we employed 286 people, including 161 employees in drilling and production, 43 in financial and accounting, 25 in land, 17 in exploration, 15 in reservoir engineering, 15 in administrative and 10 in information technology. Our future success will depend partially on our ability to attract, retain and motivate qualified personnel. We are not a party to any collective bargaining agreements and have not experienced any strikes or work stoppages. We consider our relations with our employees to be satisfactory. From time to time we utilize the services of independent contractors to perform various field and other services.

Legal Proceedings

We are not a party to any material pending legal proceedings, other than ordinary course litigation incidental to our business. While the ultimate outcome and impact of any proceeding cannot be predicted with certainty, our management believes that the resolution of any proceeding will not have a material adverse effect on our financial condition or results of operations.

Index to Financial Statements

Management

Executive Officers and Directors

The following table sets forth names, ages and titles of our executive officers and directors:


Name	Age	Title

Harold G. Hamm(1)(4)	60	Chairman, Chief Executive Officer and Director

Mark E. Monroe(3)	51	President, Chief Operating Officer and Director

John D. Hart	38	Vice President, Chief Financial Officer and Treasurer

Jeffrey B. Hume	54	Senior Vice President—Resource and Business Development

Tom E. Luttrell	48	Senior Vice President—Land

Gerald B. Smith	51	Senior Vice President—Drilling and Production

Jack H. Stark(3)	51	Senior Vice President—Exploration and Director

Richard H. Straeter	47	President—Continental Resources of Illinois, Inc.

Robert J. Grant(2)(5)	67	Director

George S. Littell(4)	61	Director

Lon McCain(1)(2)(3)	58	Director

H. R. Sanders, Jr.(1)(2)(5)	73	Director

(1)

Member of the compensation committee.

(2)

Member of the audit committee.

(3)

Term expires in 2006.

(4)

Term expires in 2007.

(5)

Term expires in 2008.

Harold G. Hamm has served as Chief Executive Officer and a director since our inception in 1967 and currently serves as Chairman of the board of directors. He serves as Chairman of the board of directors of the general partner of Hiland Partners LP, one of our affiliates and a NASDAQ publicly traded midstream master limited partnership, and as a director of Complete Production Services, Inc., an oil and gas service company that has recently filed a registration statement with the SEC in connection with its proposed initial public offering. Mr. Hamm serves as Chairman of the Oklahoma Independent Petroleum Association and serves on the Board of the Oklahoma Energy Explorers. He was President of the National Stripper Well Association and founder and Chairman of Save Domestic Oil, Inc.

Mark E. Monroe became President and Chief Operating Officer in October 2005 and has served as a board member since November 2001. He was Chief Executive Officer and President of Louis Dreyfus Natural Gas Corp. prior to its merger with Dominion Resources, Inc. in October 2001. Prior to the formation of Louis Dreyfus Natural Gas Corp. in 1990, he was Chief Financial Officer of Bogert Oil Company. He has served as Chairman of the Oklahoma Independent Petroleum Association, served on the Domestic Petroleum Council and the National Petroleum Council and on the boards of the Independent Petroleum Association of America, the Oklahoma Energy Explorers and the Petroleum Club of Oklahoma City. For two years prior to his election as President and Chief Operating Officer, he served as a board member of Unit Corporation, a NYSE publicly traded onshore drilling and oil and gas exploration and production company. Mr. Monroe is a Certified Public Accountant and received his Bachelor of Business Administration degree from the University of Texas at Austin.

Index to Financial Statements

John D. Hart became Vice President, Chief Financial Officer and Treasurer in November 2005. Mr. Hart has fourteen years of experience in public accounting, most recently as Senior Audit Manager with Ernst & Young LLP in Oklahoma City, Oklahoma. He is a member of the American Institute of Certified Public Accountants and the Oklahoma Society of Certified Public Accountants. Mr. Hart graduated from Oklahoma State University with a Masters of Science in Accounting in 1991.

Jeffrey B. Hume became our Senior Vice President of Resource and Business Development in October 2005. He was previously elected as Senior Vice President of Resource Development in July 2002 and served as Vice President of Drilling Operations from 1996 to 2002. Prior to joining us in May 1983 as Vice President of Engineering and Operations, Mr. Hume held various engineering positions with Sun Oil Company, Monsanto Company and FCD Oil Corporation. Mr. Hume is a Registered Professional Engineer and member of the Society of Petroleum Engineers, Oklahoma Independent Petroleum Association and the Oklahoma and National Professional Engineering Societies. Mr. Hume graduated from Oklahoma State University with a Bachelor of Science degree in Petroleum Engineering Technology in 1975.

Tom E. Luttrell joined us as Senior Landman in April 1991 and was promoted to Senior Vice President—Land in February 1997. Prior to joining us, Mr. Luttrell was a Senior Landman for Alexander Energy Corp. and Pacific Enterprises Oil Corp. Mr. Luttrell is currently Chairman of the Northern Alliance of Independent Producers and a member of the Oklahoma Independent Petroleum Association legislative affairs committee. He is also a member of the Oklahoma Energy Explorers, American Association of Petroleum Landmen and several regional landman associations. Mr. Luttrell graduated from East Central Oklahoma State University in 1980 with a Bachelor of Business Administration.

Gerald B. Smith became Senior Vice President—Drilling and Production in August 2003. Prior to joining us, Mr. Smith held various positions with Anadarko Petroleum Corporation for over 26 years, including Manager, Operations for Anadarko’s Mid-Continent Division from 1997 to 2003. Mr. Smith is a Registered Professional Engineer. Mr. Smith graduated from the University of Missouri-Rolla with a Bachelor of Science degree in Petroleum Engineering.

Jack H. Stark became Senior Vice President—Exploration and a director in May 1998. Prior to joining us as Vice President of Exploration in June 1992, he was the exploration manager for the Western Mid-Continent Region for Pacific Enterprises. From 1978 to 1988, he held various staff and middle management positions with Cities Service Co. and TXO Production Corp. He is a member of the American Association of Petroleum Geologists, Oklahoma Independent Petroleum Association, Rocky Mountain Association of Geologists, Houston Geological Society and Oklahoma Geological Society. Mr. Stark holds a Masters degree in Geology from Colorado State University.

Richard H. Straeter became President of Continental Resources of Illinois, Inc (“CRII”) in April 2002. Prior to joining CRII, Mr. Straeter was employed by Barger Engineering, Inc. for 18 years as an engineering consultant and Vice President. He is a Registered Professional Engineer in Indiana, Illinois, Kentucky and Tennessee. Mr. Straeter is a past Chairman of the Illinois Basin Society of Petroleum Engineers and serves as a member of the National Petroleum Council, the Illinois Oil & Gas Association Board and the Ohio, Indiana, Kentucky and Michigan Oil and Gas Associations. Mr. Straeter earned his Bachelor of Science degree in Petroleum Engineering in 1983 and a Professional Engineering Degree (Honorary Masters) in 2004 from the University of Missouri-Rolla.

Robert J. Grant has been a director since January 2006. He was an audit partner of Deloitte & Touche LLP and a predecessor firm from 1969 to 2000. He served as partner in charge of the Dallas, Texas office audit department for ten years and a member of the firm’s audit management group for twelve years. He has been a member of the Independent Petroleum Association of America, the American Petroleum Institute and the Texas

Index to Financial Statements

Independent Producers and Royalty Owners Association and currently is a member of the American Institute of Certified Public Accountants and the Texas Society of Certified Public Accountant. Mr. Grant graduated from the University of Detroit with a MBA and BA in accounting.

George S. Littell has been a director since November 2004. He is a partner in the firm of Groppe, Long & Littell, a petroleum consulting firm. Prior to joining the firm in 1975, he held various positions in the natural gas, refining, supply and distribution and gas liquids departments of Mobil Oil Corporation. Mr. Littell received a Bronze Star for his service as an officer in the US Army, Vietnam in 1968-1969. He is a member of the International Association for Energy Economics, an Eagle Scout and a director of the Sam Houston Area Council for the Boy Scouts of America. Mr. Littell graduated from Yale University in 1966 and earned an MBA degree from New York University and a law degree from La Salle Extension University.

Lon McCain has been a director since February 2006. He was Vice President, Treasurer and Chief Financial Officer of Westport Resources Corporation, a publicly traded exploration and production company, from 2001 until the sale of Westport to Kerr McGee Corporation in 2004. From 1992 until joining Westport in 2001, Mr. McCain was Senior Vice President and Principal of Petrie Parkman & Co., an investment banking firm specializing in the oil and gas industry. From 1978 until joining Petrie Parkman, Mr. McCain held senior financial management positions with Presidio Oil Company, Petro-Lewis Corporation and Ceres Capital. He has also been an Adjunct Professor of Finance at the University of Denver since 1982. Mr. McCain currently serves on the board of Crimson Exploration, Inc., a domestic exploration and production company traded on the OTC Bulletin Board, and TransZap, Inc., a privately held provider of accounting software. Mr. McCain received a Bachelor of Business Administration and a Masters of Business Administration/Finance from the University of Denver.

H. R. Sanders, Jr . has been a director since November 2001. He served as a board member of Devon Energy Corporation from 1981 through 2000. In addition, he held the position of Executive Vice President for Devon Energy from 1981 until his retirement in 1997. From 1970 to 1981, Mr. Sanders was a Senior Vice President for Republic Bank of Dallas, N.A. with direct responsibility for independent oil, gas and mining loans. Mr. Sanders is a former member of the Independent Petroleum Association of America, Texas Independent Producers and Royalty Owners Association and Oklahoma Independent Petroleum Association, and a former director of Triton Energy Corporation. He currently serves on the board of Toreador Resources Corporation, a NASDAQ publicly traded oil and gas company with principal operations in France, Romania and Turkey.

Governance Matters

Our board of directors currently consists of seven members. Our directors are divided into three classes serving staggered three-year terms. Class I, Class II and Class III directors will serve until our annual meetings of shareholders in 2006, 2007 and 2008, respectively. At each annual meeting of shareholders, directors will be elected to succeed the class of directors whose terms have expired. This classification of our board of directors could have the effect of increasing the length of time necessary to change the composition of a majority of the board of directors. In general, at least two annual meetings of shareholders will be necessary for shareholders to effect a change in a majority of the members of the board of directors.

After the closing of this offering, we will be a “controlled company” within the meaning of the listing standards of the NYSE. Consequently, we will not be required to comply with certain of the NYSE’s listed company requirements, such as the requirement to have a majority of “independent” directors on our board or the requirement to have compensation and governance committees comprised entirely of independent directors. However, we will still be required to have an independent audit committee under the NYSE’s listed company requirements and will still be subject to SEC rules and regulations governing audit committees. As such, we will be required to have an audit committee consisting of “independent” directors as defined under the listing

Index to Financial Statements

standards of the NYSE and under SEC rules and regulations. In addition, at least one member of the audit committee of our board of directors must meet the definition of an “audit committee financial expert” as defined under the SEC rules and regulations.

Board Committees

Our board of directors currently has an audit committee and a compensation committee. Our board may establish other committees from time to time to facilitate our management. Our full board will be responsible for overseeing director nomination and other governance functions.

Audit Committee . The principal functions of the audit committee are to assist the board in monitoring the integrity of our consolidated financial statements, the independent auditor’s qualifications and independence, the performance of our independent auditors and our compliance with legal and regulatory requirements. The audit committee will have the sole authority to retain and terminate our independent auditors and to approve the compensation paid to our independent auditors. The audit committee also will be responsible for overseeing our internal audit function. The audit committee currently consists of Messrs. Grant, McCain and Sanders, with Mr. Grant acting as the Chairman. Messrs. Grant, McCain and Sanders are “independent” under the listing standards of the NYSE and under SEC rules and regulations.

Compensation Committee . The principal functions of the compensation committee are to determine awards to employees of stock or other equity compensation, establish performance criteria for and evaluate the performance of the chief executive officer and approve compensation of all senior executives and directors. The compensation committee is currently comprised of Messrs. Hamm, McCain and Sanders, with Mr. Sanders acting as the Chairman.

Compensation Committee Interlocks and Insider Participation

None of our executive officers has served as a member 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.

Director Compensation

Directors who are not employees of us are paid an annual retainer of $25,000 and $1,500 for each regular board of directors meeting attended. The Chairman of the Audit Committee is paid an additional annual retainer of $5,000, each Chairman of the other committees is paid an annual retainer of $2,500 and committee members other than the Chairman are paid an additional retainer of $1,000. A fee of $750 is paid for each special board meeting and $500 for each committee meeting attended.

Non-management directors are also annually granted restricted stock with an approximate market value of $40,000 to vest over one year. In January 2006, 3,300 shares of restricted stock were granted each to Messrs. Grant, Littell and Sanders. In February 2006, 3,300 shares of restricted stock were granted to Mr. McCain.

During 2005, we paid Mr. Monroe $22,250 for his service on our board of directors prior to his election as President and Chief Operating Officer.

Index to Financial Statements

Executive Officer Compensation

Summary Compensation Table

The following table sets forth the compensation of our Chief Executive Officer and each of our other four most highly compensated executive officers serving as of December 31, 2005 for the year ended December 31, 2005. We refer to these five individuals collectively as the named executive officers.


			Annual compensation						Long-term compensation
Name	Title	Year	Salary		Bonus		Other Annual Compen- sation(1)		Restricted Stock Awards(2)		Number of Securities Underlying Options	All Other Compen- sation(3)
Harold G. Hamm	Chairman and Chief Executive Officer	2005	$	350,000	$	200,000	$	46,300	$	2,948,400		$	10,500

Jeffrey B. Hume	Senior Vice President— Resource and Business Development	2005	$	197,538	$	136,250			$	442,260		$	9,877

Tom E. Luttrell	Senior Vice President—Land	2005	$	165,154	$	111,916					165,000	$	8,258

Gerald B. Smith	Senior Vice President—Drilling and Production	2005	$	233,846	$	136,974						$	10,500

Jack H. Stark	Senior Vice President— Exploration	2005	$	214,231	$	139,708			$	442,260		$	10,500

(1)

Other annual compensation includes the aggregate incremental cost of personal benefits which exceeds the lesser of (i) $50,000 or (ii) 10% of the total amount of annual salary and bonus for any named executive officer. The amount includes for Mr. Hamm $30,200 for the personal use of company aircraft and $16,100 for the personal use of company cars.

(2)

The restricted stock awards issued to Messrs. Hamm, Hume and Stark of 220,000 shares, 33,000 shares and 33,000 shares, respectively, vest ratably over three years. The value of these shares has been determined based on the fair market value methodology set forth in the award agreements based on the book value of our shareholders’ equity adjusted for quarter-end reserve valuations.

(3)

All other compensation represents the contributions made by us under our 401(k) Plan.

Stock Options Granted During 2005

The following table sets forth information regarding stock options granted to the named executive officers in the year ended December 31, 2005:


	Individual grants					Potential realizable value at assumed annual rates of stock price appreciation for option term
Name	Number of securities underlying options(1)	% of Total options granted to employees in fiscal year	Exercise price(2)		Expiration date	0%($)	5%($)		10%($)
Tom E. Luttrell	165,000	60.0%	$	5.71	5/1/2015	—	$	592,607	$	1,501,784

(1)

On May 1, 2005, we granted Mr. Luttrell an option to acquire 165,000 shares of our common stock. The option vests ratably over three years or immediately upon a “change in control” and expires after ten years from the date of grant but may expire earlier upon termination of employment.

(2)

The exercise price reflects the fair market value of our common stock on the date of grant.

Index to Financial Statements

Stock Options Held at December 31, 2005

The following table sets forth certain information regarding stock options that the named executive officers held at December 31, 2005. None of the named officers exercised stock options during 2005.


	Shares of common stock covered by unexercised options(1)		Value of in-the-money unexercised options(2)
Name	Exercisable	Unexercisable	Exercisable	Unexercisable
Jeffrey B. Hume	352,000	—
Tom E. Luttrell	88,000	187,000
Gerald B. Smith	73,337	146,663
Jack H. Stark	440,000	—

(1)

Options vest ratably over three years or upon a “change in control.” All options expire ten years from the date of grant, but also may expire earlier upon termination of employment.

(2)

Values are calculated by multiplying the number of shares of common stock issuable upon the exercise of the options by the difference between the assumed initial public offering price of $ and the per share option exercise price.

Indemnification Agreements

All of our directors and officers have entered into customary indemnification agreements with us, pursuant to which we have agreed to indemnify our directors and officers to the fullest extent permitted by law.

Employee Benefit Plans

2005 Long-Term Incentive Plan

General. In October 2005 and as amended in April 2006, our board of directors and shareholders adopted and approved the Continental Resources, Inc. 2005 Long-Term Incentive Plan (the “2005 Plan”). The purpose of the 2005 Plan is to provide our directors and our employees, advisors and consultants additional incentives that are designed to motivate them to put forth maximum effort toward the success and growth of the company and to enable the company and our affiliates to attract and retain experienced individuals. The 2005 Plan provides for the granting of incentive stock options intended to qualify under Section 422 of the Code, options that do not constitute incentive stock options, restricted stock awards, stock appreciation rights, performance units and performance bonuses.

Administration . Our board of directors has appointed the compensation committee thereof to administer the 2005 Plan. In general, the compensation committee is authorized to select the recipients of awards, establish the terms and conditions of those awards, accelerate the vesting, exercise or payment of an award or the performance period of an award, and determine to what extent a performance bonus may be deferred. In connection with the adoption of the 2005 Plan, our board of directors terminated our 2000 Stock Option Plan, described below.

Shares Subject to the 2005 Plan and Award Limits . The number of shares of our common stock that may be issued under the 2005 Plan may not exceed 5,500,000, subject to adjustment as described below. Shares of common stock that are attributable to awards that have expired, terminated or been canceled or forfeited, or have otherwise terminated without the issuance of an award, are available for issuance or use in connection with future awards. The maximum number of shares of common stock that may be subject to options and stock appreciation rights granted under the 2005 Plan to any one individual during any calendar year may not exceed 220,000 shares. The maximum number of shares of common stock that may be subject to restricted stock awards and performance unit awards granted under the 2005 Plan to any one individual during any calendar year may not exceed 220,000 shares. The maximum amount of compensation that may be paid under all performance bonuses under the 2005 Plan granted to any one individual during any calendar year may not exceed $1,000,000.

Index to Financial Statements

Options . The price at which a share of common stock may be purchased upon exercise of an option granted under the 2005 Plan, whether the option is an incentive stock option or an option that does not constitute an incentive stock option, will be determined by our board of directors or, with respect to awards granted to employees and consultants, the compensation committee, but the purchase price will not be less than the fair market value of a share of common stock on the date the option is granted. Options may be granted independently or in tandem with stock appreciation rights.

Stock Appreciation Rights. Our board of directors may grant stock appreciation rights independently of or in tandem with options to purchase common stock. A stock appreciation right allows the holder to receive, upon exercise of the right, an amount equal to the difference between the fair market value of the shares of our common stock on the exercise date and the exercise price stated in the award. The exercise price of a stock appreciation right can never be less than the fair market value of our common stock on the day of the award. The amount to be received upon exercise of a stock appreciation right will be paid in shares of our common stock.

Restricted Stock. Shares of common stock that are the subject of a restricted stock award under the 2005 Plan will be subject to restrictions on disposition by the holder of such award and an obligation of such holder to forfeit and surrender the shares to us under certain circumstances (the “forfeiture restrictions”). The forfeiture restrictions will be determined by our board of directors or the compensation committee, as applicable, and may provide that the forfeiture restrictions will lapse upon (a) continuous employment with, or in the case of an award granted to a director or consultant, service to, us or our affiliates, for a specified period of time, (b) the attainment of one or more operational, financial and/or stock performance criteria (the “performance criteria”) established by the board of directors or the compensation committee, as applicable, that are based on (1) reserve additions or replacements, (2) finding and development costs, (3) production volume, (4) production costs, (5) earnings (including net income or earnings before interest, taxes, depreciation and amortization (“EBITDA”)), (6) earnings per share, (7) cash flow, (8) operating income, (9) general and administrative expenses, (10) debt to equity ratio, (11) debt to cash flow ratio, (12) debt to EBITDA ratio, (13) EBITDA to interest ratio, (14) return on assets, (15) return on equity, (16) return on invested capital, (17) profit returns/margins, (18) stock price appreciation, (19) total shareholder return, and (20) relative stock price performance, or (c) a combination of any of the foregoing. In addition to acceleration of restricted stock awards upon a change of control of the company, our board of directors or compensation committee, as applicable, may provide that an award accelerates upon an eligible employee’s retirement on or after his attainment of age 62, death or disability. Our board of directors may provide that a restricted stock award granted to a director or consultant will accelerate upon his resignation.

Performance Units. A performance unit award under the 2005 Plan is an award of a monetary unit that may be earned based on performance during a performance period of one year or more. At the time of the grant of a performance unit award, our board of directors or the compensation committee, as applicable, will establish the target, maximum and minimum value of each performance unit, the applicable performance criteria, and time period over which the performance will be measured. Payment of a performance unit award may be in cash or shares of common stock, as determined in the sole discretion of our board of directors.

Performance Bonuses. A performance bonus under the 2005 Plan is an award that provides for a payment that may be earned based on a performance during a period of one year or more. At the time of the grant of a performance bonus under the 2005 plan, our board of directors or the compensation committee, as applicable, will establish the amount that may be earned as a performance bonus under the award and the applicable performance criteria. Payment of a performance bonus award may be in cash or shares of common stock, as determined in the sole discretion of our board of directors or compensation committee, as applicable.

Change of Control. All awards under the 2005 Plan become fully vested, fully earned and exercisable upon the occurrence of a change of control of the company, as defined in the 2005 Plan.

Index to Financial Statements

Amendment and Termination of the 2005 Plan and Awards. The maximum term of any award under the 2005 Plan is 10 years. No awards under the 2005 Plan may be granted after 10 years from its effective date (October 3, 2005). The 2005 Plan will remain in effect until all awards granted under the 2005 Plan have been settled. Our board of directors, in its discretion, may terminate the 2005 Plan at any time with respect to any shares of our common stock for which awards have not been granted. Our board of directors may amend the 2005 Plan in any manner, but any amendment to increase the maximum aggregate number of shares that may be issued under the 2005 Plan (except by operation of the 2005 Plan’s adjustment provision), materially modify the class of individuals eligible to receive awards under the 2005 Plan, or materially increase the benefits to participants under the 2005 Plan requires the approval of our shareholders. No change in any award previously granted under the 2005 Plan may be made which would impair the rights of the holder of such award without the consent of the holder. Our board of directors is prohibited from canceling, reissuing or modifying an award under the 2005 Plan if such action will have the effect of repricing the award.

Adjustments. The maximum numbers of shares of common stock that may be issued under the 2005 Plan, and the number of shares subject to any award that has been granted under the 2005 Plan, are subject to adjustment to reflect stock dividends, stock splits, recapitalizations and similar changes in our capital structure. Under the 2005 Plan, we will not make such adjustments unless they would cause at least a 1% increase or decrease in the number of shares subject to any award available under the 2005 Plan.

2000 Stock Option Plan

General. In October 2000, our board of directors and shareholders adopted and approved the Continental Resources, Inc. 2000 Stock Option Plan (the “2000 Plan”). In connection with the adoption of the 2005 Plan, our board of directors terminated the 2000 Plan, except with respect to unexercised options outstanding under the 2000 Plan. The purpose of the 2000 Plan was to provide our directors and employees and employees of our affiliates additional incentives that are designed to motivate them to put forth maximum effort toward the success and growth of the company and to enable us and our affiliates to attract and retain experienced individuals. The 2000 Plan provided for the granting of incentive stock options intended to qualify under Section 422 of the Code and options that do not constitute incentive stock options.

Administration. In February 2006, our board of directors authorized the compensation committee to administer the 2000 Plan for the purposes of awards granted to our employees and employees of our affiliates and consultants. In general, our compensation committee is authorized to select the recipients of options, establish the options’ terms and conditions, and accelerate such options when to do so would be in the best interest of the company.

Options Granted Under the 2000 Plan. Up to 11,220,000 shares of common stock were originally made available for issuance under the 2000 plan, subject to adjustment as described below. Prior to the termination of the 2000 Plan, options to purchase a total of 2,387,000 shares of common stock were issued. Our board of directors determined the price at which a share of common stock may be purchased upon exercise of an option granted under the 2000 Plan at the time of the grant. In the case of an option that does not constitute an incentive stock option, the exercise price could not be less than 50% of the fair market value of the common stock on the date the option was granted. In the case of an incentive stock option, the exercise price could not be less than 100% of the fair market value of the common stock on the date the option was granted. At the time of the grant of any option or at any time thereafter up until the time of any dividend payment by us, our board of directors could choose to include as part of such award the right to receive dividends or dividend equivalents with respect to such award. The compensation committee has discretion to accelerate the vesting of an option upon the death, disability or termination of the grantee’s service to the company under special circumstances (as determined by the compensation committee).

Index to Financial Statements

Merger, Dissolution, Change of Control, Death of Harold G. Hamm. If we merge, sell substantially all of our assets or dissolve or liquidate and provision is not made in such transaction for the surviving, resulting or acquiring corporation to assume or substitute our outstanding options, such options will automatically vest and become fully exercisable prior to such transaction. If we undergo a change of control (as defined under the 2000 Plan) or Mr. Hamm dies at a time when 35% or more of the total voting power of our voting stock is beneficially owned by Mr. Hamm (individually and as trustee of his revocable inter vivos trust established in April 1984), then all outstanding options will automatically fully vest.

Amendment and Termination of the 2000 Plan and Awards. The maximum term of any award under the 2000 Plan is 10 years. No change in any option previously granted under the 2000 Plan may be made that would adverse to the holder of such option without the consent of the holder.

Adjustments. The number of shares subject to any award that has been granted under the 2000 Plan is subject to adjustment to reflect stock dividends, stock splits, recapitalizations and similar changes in our capital structure. Under the 2000 Plan, we will not make such adjustments unless they would cause at least a 1% increase or decrease in the number of shares subject to any option granted under the 2000 Plan.

Employment Agreement

We have entered into an employment agreement with Mark E. Monroe, our President and Chief Operating Officer. The agreement provides for a minimum annual salary of $450,000 during each of the years ended October 2, 2006, 2007 and 2008. In the event we terminate the employment without cause or Mr. Monroe resigns for good reason, we will pay him a severance benefit in an amount equal to two times his average salary and bonus and will accelerate the vesting of his restricted stock.

The agreement provides for a long-term incentive bonus payable if Mr. Monroe remains continuously employed by the company through the term of the agreement. The long-term incentive bonus will also be payable if we terminate Mr. Monroe’s employment without cause, Mr. Monroe terminates his employment for good reason or his employment is terminated as a result of death or disability. The long-term incentive bonus is determined by multiplying 193,875 by the excess of $30.91 over the fair market value of our common stock as of October 2, 2008 or on the termination date, as applicable.

Events that would allow Mr. Monroe to resign for good reason include (1) the assignment of duties inconsistent with the employee’s position and (2) the requirement of the employee to be based at an location outside of the greater Enid, Oklahoma, metropolitan area.

On October 3, 2005, we granted Mr. Monroe 193,875 shares of restricted stock, which vest ratably over a three-year period.

Index to Financial Statements

Selling Shareholder and Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information regarding the beneficial ownership of our common stock prior to and as of the closing of this offering by:

•

the selling shareholder and each other person who will beneficially own more than 5% of our common stock then outstanding;

•

each of our named executive officers;

•

each of our directors; and

•

all of our directors and executive officers as a group.

All information with respect to beneficial ownership has been furnished by the respective directors, officers or 5% or more shareholders, as the case may be. The information in the following table gives effect to our 11 for 1 stock split to be effected in the form of a stock dividend prior to the consummation of this offering:


	Shares beneficially owned prior to offering					Shares offered hereby	Shares beneficially owned after offering
	Voting common stock		Non-voting common stock(1)			Shares offered hereby	Shares beneficially owned after offering
Name of Beneficial Owner	Number	% of class	Number		% of class	Number	Number		%
Harold G. Hamm(2)(3)(4)	7,170,526	90.7%	136,460,082	(5)	90.6%				%
Harold Hamm DST Trust(3)	439,406	5.6%	8,348,681		5.5%	–	8,348,681		%
Harold Hamm HJ Trust(4)	292,974	3.7%	5,566,440		3.7%	–	5,566,440		%
Mark E. Monroe	–	–	193,875	(6)	*	–	193,875	(6)	%
Jeffrey B. Hume	–	–	385,000	(7)	*	–	385,000	(7)	%
Tom E. Luttrell	–	–	143,000	(8)	*	–	143,000	(8)	%
Gerald B. Smith	–	–	73,337	(8)	*	–	73,337	(8)	%
Jack H. Stark	–	–	473,000	(9)	*	–	473,000	(9)	%
Robert J. Grant	–	–	3,300	(10)	*	–	3,300	(10)	%
George S. Littell	–	–	3,300	(11)	*	–	3,300	(11)	%
Lon McCain	–	–	3,300	(12)	*	–	3,300	(12)	%
H. R. Sanders, Jr.	–	–	3,300	(11)	*	–	3,300	(11)	%
All directors and executive officers as a group (12 persons)	7,170,526	90.7%	137,778,157	(13)	91.5%				%

Less than 1%.

(1)

All shares of non-voting common stock will become voting shares of common stock after the consummation of this offering.

(2)

Mr. Hamm holds his shares through the Revocable Inter Vivos Trust of Harold G. Hamm, for which Mr. Hamm is both the trustee and sole beneficiary. The address of the Revocable Inter Vivos Trust of Harold G. Hamm is 302 N. Independence, Enid, Oklahoma 73701.

(3)

The Harold Hamm DST Trust is a trust established for the benefit of children of Harold G. Hamm. Mr. Hamm is neither the trustee nor the beneficiary of the Harold Hamm DST Trust. Mr. Hamm disclaims beneficial ownership of the shares of our common stock owned by the Harold Hamm DST Trust, and none of these shares are shown as being beneficially owned by Mr. Hamm in the table above. Mr. Bert Mackie is the trustee of the Harold Hamm DST Trust, and his address is c/o Security National Bank, 201 West Broadway, Enid, Oklahoma 73702-1272.

(4)

The Harold Hamm HJ Trust is a trust established for the benefit of children of Harold G. Hamm. Mr. Hamm is neither the trustee nor the beneficiary of the Harold Hamm HJ Trust. Mr. Hamm disclaims beneficial ownership of the shares of our common stock owned by the Harold Hamm HJ Trust, and none of these shares are shown as being beneficially owned by Mr. Hamm in the table above. Mr. Bert Mackie is the trustee of the Harold Hamm HJ Trust, and his address is c/o Security National Bank, 201 West Broadway, Enid, Oklahoma 73702-1272.

(5)

Includes 220,000 shares of restricted stock granted on October 5, 2005, which vest ratably over a period of three years.

(6)

Includes 193,875 shares of restricted stock granted on October 3, 2005, which vest ratably over a period of three years.

(7)

Includes 33,000 shares of restricted stock granted on October 5, 2005, which vest ratably over a period of three years, and options to purchase 352,000 shares of our common stock exercisable within 60 days of the date of this prospectus.

(8)

Represents shares of non-voting common stock issuable upon the exercise of options to purchase our common stock exercisable within 60 days of the date of this prospectus.

(9)

Includes 33,000 shares of restricted stock granted on October 5, 2005, which vest ratably over a period of three years, and options to purchase 440,000 shares of our common stock exercisable within 60 days of the date of this prospectus.

Index to Financial Statements

(10)

Represents shares of restricted stock granted on January 18, 2006, which vest after a period of one year.

(11)

Represents shares of restricted stock granted on January 2, 2006, which vest after a period of one year.

(12)

Represents shares of restricted stock granted on February 28, 2006, which vest after a period of one year.

(13)

Includes 537,075 shares of restricted stock and options to purchase up to 1,045,000 shares of our non-voting common stock exercisable within 60 days of the date of this prospectus.

Index to Financial Statements

Certain Relationships and Related Party Transactions

Crude Oil Sales

During the year ended December 31 2005, we sold approximately 1.3 MMBbls of oil from properties located in North Dakota and Montana to Banner for $67.6 million. Our principal shareholder and his family trusts owned 100% of the common stock of Banner. Our sales to Banner were based on market prices and considered to be on terms equivalent to arms length transactions. In February 2006, we decided to market the majority of our crude oil in the Rocky Mountain region directly or through a wholly owned subsidiary rather than through an affiliate, and, as Banner has existing contacts and relationships with crude oil purchasers, we decided to purchase Banner. On March 30, 2006, we acquired Banner for approximately $8.8 million, the book value of working capital, principally cash, accounts receivable, crude oil inventory and accounts payable.

During the years ended December 31, 2003, 2004 and 2005, we sold approximately 165 MBbls of oil from properties located in Wyoming to Independent Trading & Transportation Company I, L.L.C. or a subsidiary thereof (“ITT”) for $3.9 million, 351 MBls for $10.8 million and 263 MBbls for $11.0 million, respectively. Our principal shareholder and his family own 100% of the common stock of ITT. Effective February 2005, we ceased selling oil to ITT.

We operated crude oil gathering lines in North Dakota and Wyoming on behalf of ITT for which they paid us approximately $185,000, $236,000 and $344,000 during the year ended December 31, 2003, 2004 and 2005, respectively. We paid ITT approximately $320,000, $398,000 and $692,000 for crude oil gathering services in North Dakota during the years ended December 31, 2003, 2004 and 2005, respectively. We believe that our transactions with ITT have been on terms equivalent to arm’s-length transactions.

Natural Gas Sales

During the years ended December 31, 2003, 2004 and 2005, we sold approximately 808 MMcf of natural gas for $880,000, 2,394 MMcf for $8.2 million and 4,733 MMcf for $30.3 million, respectively, to affiliated natural gas gathering and processing companies owned by our principal shareholder and previous executive officers. Additionally, we purchased approximately $707,000, $2.6 million and $10.5 million of reclaimed oil and residue fuel gas from such companies during the years ended December 31, 2003, 2004 and 2005, respectively. The affiliated natural gas gathering and processing companies were combined into Hiland Partners, LP (“Hiland”), a publicly traded midstream master limited partnership, in October 2004. Our principal shareholder and family trusts own the majority of the total outstanding units of Hiland, controls its general partner and serves on its board of directors. Our sales to and purchases from Hiland are based on market prices and considered to be on terms equivalent to arm’s-length transactions. We are generally prohibited, under the terms of an agreement with Hiland, from engaging in the gathering, treating, processing and transportation of natural gas in North America and buying or selling any assets related to the forgoing businesses until February 15, 2010.

On November 8, 2005, we entered into a contract with Hiland for the processing and treatment of gas produced from the CHNU and CHWU. Under the terms of the contract, we agree to deliver low pressure gas to Hiland for compression, treatment and processing at a facility to be constructed by Hiland. Nitrogen and carbon dioxide must be removed from the gas production associated with the increasing oil production from CHNU and CHWU for the gas production to be marketable. Under the terms of the contract, we pay $0.60 per Mcf in gathering and treating fees, and 50% of the electrical costs attributable to compression and plant operation and receive 50% of the proceeds from residue gas and plant product sales. After we deliver 36 Bcf of gas, the $0.60 per Mcf gathering and treating fee is eliminated. If the average composite volume of carbon dioxide is less than 10%, we pay an additional $0.10 per Mcf treating fee, otherwise the treating fee is $0.20 per Mcf. We currently

Index to Financial Statements

plan to invest approximately $6 million during 2006 to construct gas gathering from each well to central tank battery delivery points. The plant is currently expected to be operational during the fourth quarter of 2006. The terms of our contract with Hiland were determined following arm’s-length negotiations between our representatives and representatives of Hiland. We believe the terms contained in this agreement are comparable to those we would receive from an unaffiliated third party.

Oilfield Services

During the years ended December 31, 2003, 2004 and 2005, we paid approximately $13.6 million, $14.5 million and $20.4 million, respectively, to affiliated service companies for oilfield services such as saltwater hauling and workover rigs. A portion of such amount was billed to other interest owners. Prior to October 2004, our principal shareholder owned a majority of the common stock of the affiliated service companies. After such date, the assets of the affiliated service companies were conveyed to Complete Production Services, Inc. (“Complete”). Our principal shareholder serves on the board of directors of Complete and trusts formed by him currently own approximately 7% of the stock of Complete. We believe that our transactions with the affiliated service companies have been on terms no less favorable to us than we could have achieved with an unaffiliated party.

Pursuant to a strategic customer relationship agreement with Complete, we agree to use commercially reasonable efforts to provide the service companies a first right to provide services or supplies required in our operations so long as such services or supplies can be provided on a timely basis and at competitive market prices. The service companies agree to use commercially reasonable efforts to provide us with requested supplies and services ahead of and before any such supplies and services would otherwise be provided to any other customer who is not then being provided supplies and services pursuant to a binding agreement. The strategic customer relationship agreement can be terminated by either party on or after October 2009.

During the years ended December 31, 2004 and 2005, we incurred costs of approximately $1.2 million and $3.1 million, respectively, for daywork drilling rig services provided by United Drilling Co. (“United”). A portion of such amounts was billed to other interest owners. United provided daywork drilling rig services for four wells in 2004 and for eight wells in 2005. Our principal shareholder owns 100% of the common stock of United. We believe that our transactions with United have been on terms no less favorable to us than we could have achieved with an unaffiliated party.

We signed a Compression Services Agreement effective as of January 28, 2005 with Hiland covering the Cedar Hills North and South Medicine Pole Hills Units whereby Hiland agrees to provide to us on a monthly basis the quantities of compressed air and pressurized water that we request. We have agreed to provide, at no cost to Hiland, all fuel, whether gas or electric, and water, in the quantities necessary for Hiland to provide such services. The term of the contract is for four years from the effective date at a cost of approximately $402,000 per month. In 2003 and 2004, we were responsible for operating and maintaining the compression equipment and paid Hiland and a predecessor affiliated gas gathering and processing company $3.8 million in each year for rental of the compression equipment. The annual cost of renting the compression equipment was compared against proposals submitted by third parties and the compression equipment rental terms are considered to be no less favorable than we could have achieved with an unaffiliated party. The incremental annual cost of approximately $1 million being paid under the new contract represented our estimate of the annual wages and overhead associated with our eleven employees that operated the compression equipment and the annual cost of maintaining the compression equipment. Under the new agreement, Hiland is responsible for operating and maintaining the compression equipment. We did not seek bids from third parties for the operation and maintenance of the compression equipment.

Index to Financial Statements

We also signed a Compression Services Agreement effective as of January 28, 2005 with Hiland Partners, GP, LLC (“Hiland GP”) covering the Medicine Pole Hills Unit and West Medicine Pole Hills Unit whereby Hiland GP agrees to provide compression services. Hiland GP is the general partner of Hiland and our principal shareholder and family trusts own the majority of Hiland GP. We have agreed to provide, at no cost to Hiland GP, all fuel, whether gas or electric, for compression services only, in the quantities necessary for Hiland GP to provide such services. The term is for one year from effective date and automatically renews for additional one-month terms unless terminated by either party upon 15 days’ notice. During the year ended December 31, 2005, we paid $372,000 to Hiland GP in reimbursement of actual costs incurred by Hiland GP in providing the services. Because amounts paid are the actual costs incurred by Hiland GP for the services provided by them, we believe the terms of this agreement are more favorable than the terms we would receive from an unaffiliated party.

During the years ended December 31, 2003, 2004 and 2005, we paid approximately $669,000, $445,000 and $596,000, respectively, for roustabout services to a company owned by a family member of the principal shareholder. During the years ended December 31, 2004 and 2005, we paid approximately $379,000 and $222,000, respectively, to Water Tech LLC, a company majority owned by our principal shareholder, for reclaimed oil and contract labor. We believe that our transactions with these affiliated service companies have been on terms no less favorable to us than we could have achieved with an unaffiliated party.

Sales to Shareholders

In July 2004, we sold all of the outstanding stock in our wholly owned subsidiary Continental Gas Inc. (“CGI”) to our shareholders for $22.6 million. The sales price was representative of the fair value of the net assets based on an appraisal by an independent third party who also provided us with an opinion of the fairness from a financial point of view of the sale of CGI to the shareholders. These assets represented our entire gas gathering, marketing and processing segment.

Commercial Property Transactions

We lease approximately 67,000 square feet of office space from a company owned by our principal shareholder. Rents under these leases totaled approximately $505,000, $506,000 and $556,000 during the years ended December 31, 2003, 2004 and 2005, respectively. The current leases covering this space expire at the end of February 2007 and provide for a total annual rent of $646,000. We believe that our office leases are on terms no less favorable to us than we could have achieved with an unaffiliated party. In December 2005, we paid $253,000 to our principal shareholder to acquire an office building and triplex in Baker, Montana, for which we had previously paid $2,300 per month to lease.

Royalty and Common Ownership

Minerals Acquisitions, LLC (“Minerals”), wholly owned by our principal shareholder and his wife, owns royalty interests in the Cedar Hills North Unit operated by us. During the years ended 2003, 2004 and 2005, we paid net oil and gas royalties of approximately $40,000, $67,000 and $155,000, respectively, to Minerals. Effective December 1, 2005 the royalty interests were transferred to the Revocable InterVivos Trust of Harold G. Hamm. Minerals also owns 100% of Jolette Oil (USA) LLC (“Jolette”), a company formed to acquire undeveloped acreage in the North Dakota Bakken area. In August 2005, we purchased all the assets of Jolette at their book value of $4.5 million. These assets consisted of undeveloped acreage and one producing well in the North Dakota Bakken area.

Wheatland Oil Co. (“Wheatland”) is owned 75% by our principal shareholder and 25% by another executive officer. Wheatland participates in several of our oil and gas properties with interests ranging between 5% and

Index to Financial Statements

10% of our interest. During the years ended 2003, 2004 and 2005, we paid net oil and gas revenues of approximately $0.7 million, $1.7 million, and $5.4 million, respectively and billed costs of approximately $1.1 million, $1.4 million and $4.2 million, respectively to Wheatland.

Registration Rights Agreement

In connection with the closing of this offering, we will enter into a registration rights agreement with our principal shareholder and the two trusts established for the benefit of Mr. Hamm’s children pursuant to which we will grant to our principal shareholder and the trusts certain demand and “piggyback” registration rights.

Under the registration rights agreement, our principal shareholder and the trusts will each have the right to require us to file a registration statement for the public sale of all of the shares of common stock owned by him or it any time after six months following the date the SEC declares the registration statement of which this prospectus forms a part effective. In addition, if we sell any shares of our common stock in a registered underwritten offering, each of our principal shareholder and the trusts will have the right to include his or its shares in that offering. The underwriters of any such offering will have the right to limit the number of shares to be included in such sale.

We will pay all expenses relating to any demand or piggyback registration, except for underwriters’ or brokers’ commission or discounts. The securities covered by the registration rights agreement will no longer be registrable under the registration rights agreement if they have been sold to the public either pursuant to a registration statement or under Rule 144 promulgated under the Securities Act.

Shareholder Note

On November 22, 2004, we entered into a subordinated note with our principal shareholder for $50.0 million at an annual rate of 6.00% interest. During the years ended December 31, 2004 and 2005, we paid approximately $308,000 and $2.9 million in interest on the note, respectively. During 2005, our principal shareholder forgave $2.0 million of the principal amount of the note. The outstanding balance was paid by us in full in December 2005.

After the completion of this offering, the ongoing related party transactions described above and any future additional related party transactions will be reviewed by our audit committee on a regular basis.

Index to Financial Statements

Description of Capital Stock

Prior to the closing of this offering, Continental Resources, Inc. will amend and restate its certificate of incorporation and bylaws to increase its authorized capital stock, provide for an 11 for 1 stock split in the form of a stock dividend and add certain other provisions as described below. We will effect the stock split prior to the closing of this offering. The information in this section describes our amended and restated certificate of incorporation and bylaws that will be in effect following the closing of this offering and assumes that the stock split has taken place.

The following summary of the capital stock and amended and restated certificate of incorporation and bylaws of Continental Resources, Inc. does not purport to be complete and is qualified in its entirety by reference to the provisions of applicable law and to our amended and restated certificate of incorporation and bylaws, forms of which are filed as exhibits to the registration statement of which this prospectus is a part.

The authorized capital stock of Continental Resources, Inc. will consist of 500,000,000 shares of common stock, $.01 par value per share, and 25,000,000 shares of preferred stock, $.01 par value per share.

Common Stock

We currently have 7,902,906 shares of voting common stock and 150,155,203 shares of non-voting common stock outstanding. After this offering, we will have 158,058,109 shares of common stock outstanding, all of which will be voting common stock.

Holders of our common stock will be entitled to one vote for each share held on all matters submitted to a vote of shareholders and do not have cumulative voting rights. Accordingly, holders of a majority of the shares of our common stock entitled to vote in any election of directors may elect all of the directors standing for election.

Holders of our common stock are entitled to receive proportionately any dividends if and when such dividends are declared by our board of directors, subject to any preferential dividend rights of outstanding preferred stock. Upon the liquidation, dissolution or winding up of our company, the holders of our common stock are entitled to receive ratably our net assets available after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock. Holders of our common stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future.

We have applied for listing the shares of common stock sold in this offering on the NYSE under the symbol “CXP.”

Preferred Stock

Under the terms of our amended and restated certificate of incorporation, our board of directors will be authorized to designate and issue shares of preferred stock in one or more series without shareholder approval. Our board of directors has discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock. It is not possible to state the actual effect of the issuance of any shares of preferred stock upon the rights of holders of the common stock until the board of directors determines the specific rights of the holders of the preferred stock. However, these effects might include:

•

restricting dividends on the common stock;

•

diluting the voting power of the common stock;

Index to Financial Statements

•

impairing the liquidation rights of the common stock; and

•

delaying or preventing a change in control of our company.

We have no present plans to issue any shares of preferred stock.

Limitations on Liability and Indemnification of Officers and Directors

Our amended and restated certificate of incorporation will provide that none of our directors shall be personally liable to us or our shareholders for monetary damages for breach of fiduciary duty as a director, except liability for:

•

any breach of the director’s duty of loyalty to us or our shareholders;

•

acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

•

the payment of unlawful dividends and certain other actions prohibited by the Oklahoma General Corporation Act (the “OGCA”); and

•

any transaction from which the director derived any improper personal benefit.

The effect of this provision of our certificate of incorporation will be to eliminate our right and the rights of our shareholders to recover monetary damages against a director for breach of the director’s fiduciary duty of care, including breaches resulting from negligent or grossly negligent behavior, except in the situations described above. This provision will not limit or eliminate our rights or the rights of any shareholder to seek non-monetary relief, such as an injunction or rescission in the event of a breach of a director’s duty of care.

Our amended and restated bylaws also will provide that we will indemnify officers and directors against losses that they may incur in investigations and legal proceedings resulting from their services to us.

Our amended and restated bylaws also will provide that:

•

we will be required to indemnify our directors and officers to the fullest extent permitted by Oklahoma law;

•

we may indemnify our other employees and agents to the extent that we indemnify our officers and directors, unless otherwise required by law, our certificate of incorporation, our bylaws or agreements to which we are a party; and

•

we will be required to advance expenses, as incurred, to our directors and officers in connection with a legal proceeding to the fullest extent permitted by law.

We also have entered into indemnification agreements with each of our current directors and officers to give them additional contractual assurances regarding the scope of the indemnification set forth in our certificate of incorporation and bylaws and to provide additional procedural protections. See “Management—Indemnification Agreements” for a description of such agreements. At present, there is no material pending litigation or proceeding involving any of our directors, officers or employees for which indemnification from us is sought. We are not aware of any threatened litigation that may result in claims for indemnification from us.

We are currently in the process of obtaining liability insurance for our directors and officers that will be effective upon the consummation of this offering.

Index to Financial Statements

Anti-takeover Effects of Provisions of Our Certificate of Incorporation and Bylaws and of Oklahoma Law

Our amended and restated certificate of incorporation and bylaws will contain the following additional provisions, some of which are intended to enhance the likelihood of continuity and stability in the composition of our board of directors and in the policies formulated by our board of directors. In addition, some provisions of the OGCA, if applicable to us, may hinder or delay an attempted takeover without prior approval of our board of directors.

Provisions of our amended and restated certificate of incorporation and bylaws and of the OGCA could discourage attempts to acquire us or remove incumbent management. These provisions could, therefore, prevent shareholders from receiving a premium over the market price for the shares of common stock they hold.

Classified Board . Our amended and restated certificate of incorporation and bylaws will provide that our board of directors be divided into three classes of directors, with the classes to be as nearly equal in number as possible. As a result, approximately one-third of our board of directors will be elected each year. The classification of directors will have the effect of making it more difficult for shareholders to change the composition of our board. Our amended and restated certificate of incorporation and bylaws also will provide that the number of directors will be fixed from time to time exclusively pursuant to a resolution adopted by the board.

Filling Board of Directors Vacancies; Removal . Our amended and restated certificate of incorporation will provide that vacancies and newly created directorships resulting from any increase in the authorized number of directors or any vacancies resulting from death, resignation, retirement, disqualification, removal from office or other cause, may be filled by the affirmative vote of a majority of our directors then in office, though less than a quorum. Each director will hold office until his or her successor is elected and qualified, or until the director’s earlier death, resignation, retirement or removal from office. Any director may resign at any time upon written notice to us.

Our amended and restated certificate of incorporation and bylaws will provide that, for so long as Harold G. Hamm, our Chairman, Chief Executive Officer and principal shareholder, and his affiliates own 50% or more of our outstanding shares of common stock, directors may be removed, with or without cause, by the affirmative vote of the holders of a majority of our outstanding shares of common stock. However, from and after the date on which Mr. Hamm and his affiliates cease to own 50% or more of our outstanding shares of common stock, directors may be removed only for cause by affirmative vote of the holders of a majority of our outstanding shares of common stock.

Shareholder Action by Written Consent . Our amended and restated certificate of incorporation will provide that, for so long as Mr. Hamm and his affiliates own 50% or more of our outstanding shares of capital stock entitled to vote in the election of directors, any action required or permitted to be taken by our shareholders may be taken at a duly called meeting of shareholders or by the written consent of shareholders owning the minimum number of shares required to approve the action. However, from and after the date on which Mr. Hamm and his affiliates cease to own 50% or more of our outstanding shares of common stock, shareholders will not be permitted to act by written consent.

Call of Special Meetings . Our amended and restated certificate of incorporation and bylaws will provide that special meetings of our shareholders may be called at any time by the board of directors acting pursuant to a resolution adopted by the board and may not be called by the shareholders.

Index to Financial Statements

Advance Notice Requirements for Shareholder Proposals and Director Nominations . Our amended and restated bylaws will provide that shareholders seeking to bring business before or to nominate candidates for election as directors at an annual meeting of shareholders must provide timely notice of their proposal in writing to the corporate secretary. With respect to the nomination of directors, to be timely, a shareholder’s notice must be delivered to or mailed and received at our principal executive offices (i) with respect to an election of directors to be held at an annual meeting of shareholders, not later than 90 days nor more than 120 days prior to the anniversary date of the proxy statement for the immediately preceding annual meeting of shareholders of the company and (ii) with respect to an election of directors to be held at a special meeting of shareholders, not earlier than 90 days prior to such special meeting and not later than the close of business on the later of the seventieth day prior to such special meeting or the tenth day following the day on which public announcement of the date of the special meeting is first made. With respect to other business to be brought before an annual meeting of shareholders, to be timely, a shareholder’s notice must be delivered to or mailed and received at our principal executive offices not later than 90 days nor more than 120 days prior to the anniversary date of the proxy statement for the immediately preceding annual meeting of shareholders of the company. Our amended and restated bylaws also will specify requirements as to the form and content of a shareholder’s notice. These provisions may preclude shareholders from bringing matters before an annual meeting of shareholders or from making nominations for directors at an annual meeting of shareholders or may discourage or defer a potential acquirer from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempting to obtain control of us.

No Cumulative Voting . The OGCA provides that shareholders are not entitled to the right to cumulate votes in the election of directors unless our certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation will not expressly provide for cumulative voting. Under cumulative voting, a minority shareholder holding a sufficient percentage of a class of shares may be able to ensure the election of one or more directors.

Authorized but Unissued Shares . Our amended and restated certificate of incorporation will provide that the authorized but unissued shares of common stock and preferred stock are available for future issuance without shareholder approval, subject to various limitations imposed by the New York Stock Exchange. These additional shares may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued shares of common stock and preferred stock could make it more difficult or discourage an attempt to obtain control of our company by means of a proxy contest, tender offer, merger or otherwise.

Certificate of Incorporation and Bylaws . Pursuant to the OGCA, our amended and restated certificate of incorporation may not be adopted, repealed or amended, in whole or in part, without the approval of the holders of at least a majority of the outstanding shares of our capital stock. In addition, after such time as Mr. Hamm and his affiliates cease to own 50% or more of our outstanding shares of capital stock entitled to vote in the election of directors, the provision of our certificate of incorporation relating to the classification of our board of directors may not be repealed or amended without the approval of the holders of at least 80% of the outstanding shares of our capital stock entitled to vote in the election of directors.

Our amended and restated certificate of incorporation will permit our board of directors to adopt, amend and repeal our bylaws. Our amended and restated bylaws will provide that our bylaws can be amended by either our board of directors or, as long as Mr. Hamm and his affiliates own 50% or more of our outstanding shares of capital stock entitled to vote in the election of directors, the affirmative vote of the holders of at least a majority of the outstanding shares of our capital stock entitled to vote in the election of directors.

Oklahoma Business Combination Statute . Under the terms of our amended and restated certificate of incorporation and as permitted under the OCGA, we will elect not to be subject to Section 1090.3 of the OGCA,

Index to Financial Statements

Oklahoma’s anti-takeover law. In general this section prevents an “interested shareholder” from engaging in a “business combination” with us for three years following the date the person became an interested shareholder, unless:

•

prior to the date the person became an interested shareholder, our board of directors approved the transaction in which the interested shareholder became an interested shareholder or approved the business combination;

•

upon consummation of the transaction that resulted in the interested shareholder becoming an interested shareholder, the interested shareholder owns stock having at least 85% of all voting power at the time the transaction commenced, excluding stock held by our directors who are also officers and stock held by certain employee stock plans; or

•

on or subsequent to the date of the transaction in which the person became an interested shareholder, the business combination is approved by our board of directors and authorized at a meeting of shareholders by the affirmative vote of the holders of two-thirds of all voting power not attributable to shares owned by the interested shareholder.

An “interested shareholder” is defined, generally, as any person that owns stock having 15% or more of all of our voting power, any person that is an affiliate or associate of us and owned stock having 15% or more of all of our voting power at any time within the three-year period prior to the time of determination of interested shareholder status, and any affiliate or associate of such person.

A “business combination” includes:

•

any merger or consolidation involving us and an interested shareholder;

•

any sale, lease, exchange, mortgage, pledge, transfer or other disposition to or with an interested shareholder of 10% or more of our assets;

•

subject to certain exceptions, any transaction that results in the issuance or transfer by us of any of our stock to an interested shareholder;

•

any transaction involving us that has the effect of increasing the proportionate share of the stock of any class or series or voting power owned by the interested shareholder;

•

the receipt by an interested shareholder of any loans, guarantees, pledges or other financial benefits provided by or through us; or

•

any share acquisition by the interested shareholder pursuant to Section 1090.1 of the OGCA.

Because we will opt out of the Oklahoma anti-takeover law, any interested shareholder could pursue a business combination transaction that is not approved by our board of directors.

Oklahoma Control Share Statute . Under the terms of our amended and restated certificate of incorporation and as permitted under the OGCA, we will elect not to be subject to Sections 1145 through 1155 of the OGCA, Oklahoma’s control share acquisition statute. In general, Section 1145 of the OGCA defines “control shares” as our issued and outstanding shares that, in the absence of the Oklahoma control share statute, would have voting power, when added to all of our other shares that are owned, directly or beneficially, by an acquiring person or over which the acquiring person has the ability to exercise voting power, that would entitle the acquiring person, immediately after the acquisition of the shares to exercise, or direct the exercise of, such voting power in the election of directors within any of the following ranges of voting power:

•

one-fifth (1/5) or more but less than one-third (1/3) of all voting power;

Index to Financial Statements

•

one-third (1/3) or more but less than a majority of all voting power; or

•

a majority of all voting power.

A “control share acquisition” means the acquisition by any person of ownership of, or the power to direct the exercise of voting power with respect to, “control shares.” After a control share acquisition occurs, the acquiring person is subject to limitations on the ability to vote such control shares. Specifically, Section 1149 of the OGCA provides that under most control share acquisition scenarios, “the voting power of control shares having voting power of one-fifth (1/5) or more of all voting power is reduced to zero unless the shareholders of the issuing public corporation approve a resolution . . . according the shares the same voting rights as they had before they became control shares.” Section 1153 of the OGCA provides the procedures for obtaining shareholder consent of a resolution of an “acquiring person” to determine the voting rights to be accorded the shares acquired or to be acquired in the control share acquisition.

Because we will opt out of the Oklahoma control share statute, any shareholder holding control shares will have the right to vote his or its shares in full in the election of directors.

Registration Rights

In connection with the closing of this offering, we will enter into a registration rights agreement with our principal shareholder and the two trusts established for the benefit of Mr. Hamm’s children covering all of the shares of common stock owned by our principal shareholder and the trusts after the closing of this offering. For a description of the registration rights agreement, see “Certain Relationships and Related Party Transactions—Registration Rights Agreement.”

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company.

Index to Financial Statements

Shares Eligible for Future Sale

General

Prior to this offering, there has been no public market for our common stock. Sales of substantial amounts of common stock in the open market, including shares issued upon exercise of outstanding options, or the perception that those sales could occur, could adversely affect prevailing market prices and could impair our ability to raise capital in the future through the sale of our equity securities.

Upon completion of the offering, we will have outstanding 158,058,109 shares of our common stock, 1,005,092 shares of unvested restricted stock and outstanding options to purchase 1,672,000 shares of our common stock. All of the shares sold in the offering, or the shares if the underwriters exercise their overallotment option to purchase additional shares in full, will be freely tradable without restriction under the Securities Act, except for any shares purchased by one of our “affiliates,” as that term is defined under Rule 144 under the Securities Act. All of the shares outstanding other than the shares sold in this offering (a total of shares, or shares if the underwriters exercise their overallotment option to purchase additional shares in full) will be “restricted securities” within the meaning of Rule 144 under the Securities Act and may not be sold other than through registration under the Securities Act or pursuant to an exemption from registration, subject to the restrictions on transfer contained in the lock-up agreements described below and in “Underwriting.”

Persons who may be deemed affiliates generally include individuals or entities that control, are controlled by or are under common control with us and may include our officers, directors and significant shareholders.

Lock-up Agreements

In connection with this offering, we, Harold G. Hamm, the Harold Hamm DST Trust and the Harold Hamm HJ Trust have agreed that, during the period beginning from the date of this prospectus and continuing to and including the date 180 days after the date of this prospectus, neither we nor any of them will, directly or indirectly, offer, sell, offer to sell, contract to sell or otherwise dispose of any shares of our common stock without the prior written consent of J.P. Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, with limited exceptions as described under “Underwriting.” We have been informed by J.P. Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated that they have no present intention to consent to the release of the lock-up restrictions described above. This lock-up will not apply to approximately 2,457,092 unvested shares of restricted stock that are currently held by our employees or issuable upon the exercise of options outstanding under our long-term incentive plan, up to an additional 100,000 shares covered by grants that we are permitted to award under our existing long-term incentive plan during the 180-day lock-up period and any shares of common stock purchased by our directors, officers, employees and other persons pursuant to the directed share program. We have directed the underwriters to reserve up to 1.5 million shares of common stock for sale to such persons at the initial public offering price through the directed share program. See “Underwriting” for a description of these lock-up arrangements. Upon the expiration of these lock-up agreements, shares, or shares if the underwriters exercise their overallotment option to purchase additional shares in full, will be eligible for sale in the public market under Rule 144 of the Securities Act, subject to volume limitations and other restrictions contained in Rule 144.

Index to Financial Statements

Rule 144

In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person, or persons whose shares are aggregated, who has beneficially owned restricted shares for at least one year, including the holding period of any prior owner (other than an affiliate of ours) would be entitled to sell within any three-month period a number of shares that does not exceed the greater of:

•

1% of the number of shares of common stock then outstanding; or

•

the average weekly reported trading volume of the common stock on the NYSE during the four calendar weeks preceding the filing of a Form 144 with respect to the sale.

Sales under Rule 144 also are subject to manner of sale provisions and notice requirements and to the availability of current public information about us.

Rule 144(k)

Under Rule 144(k), a person who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale and who has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner (other than an affiliate of ours) is entitled to sell those shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.

Registration Rights

In connection with the closing of this offering, we will enter into a registration rights agreement with our principal shareholder and the two trusts established for the benefit of Mr. Hamm’s children covering all of the shares of common stock owned by our principal shareholder and the trusts after the closing of this offering. For a description of the registration rights agreement, see “Certain Relationships and Related Party Transactions—Registration Rights Agreement.”

Index to Financial Statements

Material U.S. Federal Tax Consequences

for Non-U.S. Holders of Our Common Stock

The following is a general discussion of the material U.S. federal income and estate tax consequences to non-U.S. Holders with respect to the acquisition, ownership and disposition of our common stock. In general, a “Non-U.S. Holder” for purposes of this discussion is any beneficial owner of our common stock other than the following:

•

an individual citizen or resident of the U.S., including an alien individual who is a lawful permanent resident of the U.S. or meets the “substantial presence” test under section 7701(b)(3) of the Internal Revenue Code of 1986, as amended (the “Code”);

•

a corporation (or an entity treated as a corporation) created or organized in the U.S. or under the laws of the U.S., any state thereof, or the District of Columbia;

•

a partnership (or an entity treated as a partnership);

•

an estate, the income of which is subject to U.S. federal income tax regardless of its source; or

•

a trust, if a U.S. court can exercise primary supervision over the administration of the trust and one or more U.S. persons can control all substantial decisions of the trust, or certain other trusts that have a valid election to be treated as a U.S. person pursuant to the applicable Treasury Regulations.

This discussion is based on current provisions of the Code, final, temporary and proposed Treasury Regulations, judicial opinions, published positions of the Internal Revenue Service, or IRS, and all other applicable administrative and judicial authorities, all of which are subject to change, possibly with retroactive effect. This discussion does not address all aspects of U.S. federal income and estate taxation or any aspects of state, local, or non-U.S. taxation, nor does it consider any specific facts or circumstances that may apply to particular Non-U.S. Holders that may be subject to special treatment under the U.S. federal income tax laws including, but not limited to, insurance companies, real estate investment trusts, regulated investment companies, persons holding our common stock as part of a hedging or conversion transaction or a straddle or other risk-reduction transaction, tax-exempt organizations, pass-through entities, banks or financial institutions, brokers, dealers in securities, and U.S. expatriates. If a partnership or other entity treated as a partnership for U.S. federal income tax purposes is a beneficial owner of our common stock, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. This discussion assumes that the Non-U.S. Holder will hold our common stock as a capital asset, which generally is property held for investment.

Prospective investors are urged to consult their tax advisors regarding the U.S. federal, state and local, and non-U.S. income and other tax considerations of acquiring, holding and disposing of shares of common stock.

Dividends

In general, dividends paid to a Non-U.S. Holder (to the extent paid out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles) will be subject to U.S. withholding tax at a rate equal to 30% of the gross amount of the dividend, or a lower rate prescribed by an applicable income tax treaty, unless the dividends are effectively connected with a trade or business carried on by the Non-U.S. Holder within the U.S. Under applicable Treasury regulations, a Non-U.S. Holder will be required to satisfy certain certification requirements, generally on IRS Form W-8BEN, or any successor form, directly or through an intermediary, in order to claim a reduced rate of withholding under an applicable income tax treaty. If tax is withheld in an amount in excess of the amount applicable under an income tax treaty, a refund of the excess amount may generally be obtained by filing an appropriate claim for refund with the IRS.

Index to Financial Statements

Dividends that are effectively connected with a U.S. trade or business (and, where an income tax treaty applies, are attributable to a U.S. permanent establishment of the Non-U.S. Holder) generally will not be subject to U.S. withholding tax if the Non-U.S. Holder files the properly completed required forms, including IRS Form W-8ECI, or any successor form, with the payor of the dividend, but instead generally will be subject to U.S. federal income tax on a net income basis in the same manner as if the Non-U.S. Holder were a resident of the U.S. A corporate Non-U.S. Holder that receives effectively connected dividends may be subject to an additional branch profits tax at a rate of 30%, or a lower rate prescribed by an applicable income tax treaty, on its “effectively connected earnings and profits,” subject to adjustments.

Gain on Sale or Other Disposition of Common Stock

In general, a Non-U.S. Holder will not be subject to U.S. federal income tax on any gain realized upon the sale or other taxable disposition of the Non-U.S Holder’s shares of common stock unless:

•

the gain is effectively connected with a trade or business carried on by the Non-U.S. Holder within the U.S. (and, where an income tax treaty applies, is attributable to a U.S. permanent establishment of the Non-U.S. Holder), in which case the branch profits tax discussed above may also apply if the Non-U.S. Holder is a corporation;

•

the Non-U.S. Holder is an individual who holds shares of common stock as capital assets and is present in the U.S. for 183 days or more in the taxable year of disposition and certain other conditions are met; or

•

we are or have been a “U.S. real property holding corporation” for U.S. federal income tax purposes during specified periods.

A Non-U.S. Holder described in the first and third bullet points above will be subject to tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates. A Non-U.S. Holder described in the second bullet point above will be subject to a 30% tax on the gain derived from the sale, which may be offset by U.S. source capital losses.

Because of the oil and natural gas properties and other real property assets we own, we may be a “U.S. real property holding corporation.” The determination of whether we are a “U.S. real property holding corporation” is fact specific and depends on the composition of our assets. Generally, a corporation is a U.S. real property holding corporation if the fair market value of its U.S. real property interests, as defined in the Internal Revenue Code and applicable regulations, equals or exceeds 50% of the aggregate fair market value of its worldwide real property interests and its other assets used or held for use in a trade or business. If we are, have been, or become, a U.S. real property holding corporation, and our common stock is regularly traded on an established securities market, a Non-U.S. Holder who (actually or constructively) holds or held (at anytime during the shorter of the five year period preceding the date of dispositions or the holder’s holding period) more than five percent of our common stock would be subject to U.S. federal income tax on a disposition of our common stock, but other Non-U.S. Holders generally would not be. If our common stock is not so traded, all Non-U.S. Holders would be subject to U.S. federal income tax on disposition of our common stock.

You are encouraged to consult your own tax advisor regarding our possible status as a “U.S. real property holding corporation” and its possible consequences in your particular circumstances.

Information Reporting and Backup Withholding

Generally, we must report annually to the IRS the amount of dividends paid, the name and address of the recipient, and the amount, if any, of tax withheld. A similar report is sent to the recipient. These information reporting requirements apply even if withholding was not required because the dividends were effectively

Index to Financial Statements

connected dividends or withholding was reduced by an applicable income tax treaty. Under income tax treaties or other agreements, the IRS may make its reports available to tax authorities in the recipient’s country of residence.

Dividends paid to a Non-U.S. Holder that is not an exempt recipient generally will be subject to backup withholding, currently at a rate of 28% of the gross proceeds, unless a Non-U.S. Holder certifies as to its foreign status, which certification may be made on IRS Form W-8BEN.

Proceeds from the disposition of common stock by a Non-U.S. Holder effected by or through a U.S. office of a broker will be subject to information reporting and backup withholding, currently at a rate of 28% of the gross proceeds, unless the Non-U.S. Holder certifies to the payor under penalties of perjury as to, among other things, its address and status as a Non-U.S. Holder or otherwise establishes an exemption. Generally, U.S. information reporting and backup withholding will not apply to a payment of disposition proceeds if the transaction is effected outside the U.S. by or through a non-U.S. office. However, if the broker is, for U.S. federal income tax purposes, a U.S. person, a controlled foreign corporation, a foreign person who derives 50% or more of its gross income for specified periods from the conduct of a U.S. trade or business, specified U.S. branches of foreign banks or insurance companies or a foreign partnership with various connections to the U.S., information reporting, but not backup withholding, will apply unless:

•

the broker has documentary evidence in its files that the holder is a Non-U.S Holder and certain other conditions are met; or

•

the holder otherwise establishes an exemption.

Backup withholding is not an additional tax. Rather, the amount of tax withheld is applied as a credit to the U.S. federal income tax liability of persons subject to backup withholding. If backup withholding results in an overpayment of U.S. federal income taxes, a refund may be obtained, provided the required documents are timely filed with the IRS.

Estate Tax

Our common stock owned or treated as owned by an individual who is not a citizen or resident of the U.S. (as specifically defined for U.S. federal estate tax purposes) at the time of death will be includible in the individual’s gross estate for U.S. federal estate tax purposes, unless an applicable estate tax treaty provides otherwise.

Index to Financial Statements

Underwriting

The selling shareholder is offering the shares of common stock described in this prospectus through a number of underwriters. J.P. Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated are acting as joint book-running managers of the offering and as representatives of the underwriters. We and the selling shareholder have entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement, the selling shareholder has agreed to sell to the underwriters, and each underwriter has severally agreed to purchase, at the public offering price less the underwriting discount set forth on the cover page of this prospectus, the number of shares of common stock listed next to its name in the following table:


Name		Number of shares
J.P. Morgan Securities Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Citigroup Global Markets Inc.
UBS Securities LLC
Petrie Parkman & Co., Inc.
Raymond James & Associates, Inc.

Total

The underwriters are committed to purchase all the shares of common stock offered by the selling shareholder if they purchase any shares. The underwriting agreement provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may be increased or the offering may be terminated. The underwriting agreement also provides that the obligations of the underwriters are subject to certain conditions precedent, including the absence of any material adverse change in our business and the receipt of certain certificates, opinions and letters from us, the selling shareholder, our counsel and our independent auditors.

The underwriters propose to offer the shares of common stock directly to the public at the initial public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $ per share. Any such dealers may resell shares to certain other brokers or dealers at a discount of up to $ per share from the initial public offering price. After the initial public offering of the shares, the offering price and other selling terms may be changed by the underwriters. Sales of shares made outside of the United States may be made by affiliates of the underwriters. The representatives have advised us and the selling shareholder that the underwriters do not intend to confirm discretionary sales in excess of 5% of the shares of common stock offered in this offering.

The underwriters have an option to buy up to additional shares of common stock from the selling shareholder to cover sales of shares by the underwriters which exceed the number of shares specified in the table above. The underwriters have 30 days from the date of this prospectus to exercise this overallotment option. If any shares are purchased with this overallotment option, the underwriters will purchase shares in approximately the same proportion as shown in the table above. If any additional shares of common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares are being offered.

Index to Financial Statements

The underwriting fee is equal to the public offering price per share of common stock less the amount paid by the underwriters to the selling shareholder per share of common stock. The underwriting fee is $ per share. The following table shows the per share and total underwriting discount to be paid to the underwriters assuming both no exercise and full exercise of the underwriters’ overallotment option to purchase additional shares:


	Without overallotment exercise	With full overallotment exercise
Per share	$	$
Total	$	$

We estimate that the total expenses of this offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding the underwriting discount, will be approximately $1,350,000, all of which will be paid by us.

We have directed the underwriters to reserve up to 1.5 million shares of common stock for sale to our directors, officers, employees and other persons at the initial public offering price through a directed share program. The number of shares of common stock available for sale to the general public in the public offering will be reduced to the extent these persons purchase any reserved shares. Any shares not so purchased will be offered by the underwriters to the general public on the same basis as other shares offered hereby.

A prospectus in electronic format may be made available on the web sites maintained by one or more underwriters, or selling group members, if any, participating in the offering. Other than the prospectus in electronic format, the information on such web sites is not part of this prospectus. The underwriters may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters and selling group members that may make Internet distributions on the same basis as other allocations.

We, Harold G. Hamm, the Harold Hamm DST Trust and the Harold Hamm HJ Trust have agreed that, without the prior written consent of J.P. Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, neither we nor any of them will, with limited exceptions as described below, during the period ending 180 days after the date of this prospectus,

•

offer, pledge, announce the intention to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of our common stock (including, without limitation, common stock which may be deemed to be beneficially owned by such directors, officers and shareholders in accordance with the rules and regulations of the SEC and securities which may be issued upon exercise of a stock option or warrant) or any securities convertible into or exercisable or exchangeable for common stock; or

•

request or demand that we file a registration statement related to the common stock; or

•

enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the common stock,

whether any such transaction described above is to be settled by delivery of common stock or such other securities, in cash or otherwise. Notwithstanding the foregoing, we will be able to grant awards under our existing long-term incentive plan covering up to 100,000 shares of our common stock during the lock-up period. These shares will not be subject to the lock-up restrictions described above.

In the event that (1) during the last 17 days of the 180-day restricted period, we issue an earnings release or material news or a material event relating to our company occurs; or (2) prior to the expiration of the 180-day

Index to Financial Statements

restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period, the restrictions described above shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.

We have been informed by J.P. Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated that they have no present intention to consent to the release of the lock-up restrictions described above.

We and the selling shareholder have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act of 1933.

We have applied for listing of our common stock on the New York Stock Exchange under the symbol “CXP.”

In connection with this offering, the underwriters may engage in stabilizing transactions, which involves making bids for, purchasing and selling shares of common stock in the open market for the purpose of preventing or retarding a decline in the market price of the common stock while this offering is in progress. These stabilizing transactions may include making short sales of the common stock, which involves the sale by the underwriters of a greater number of shares of common stock than they are required to purchase in this offering, and purchasing shares of common stock on the open market to cover positions created by short sales. Short sales may be “covered” shorts, which are short positions in an amount not greater than the underwriters’ overallotment option referred to above, or may be “naked” shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their overallotment option, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares through the overallotment option. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect investors who purchase in this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position.

The underwriters have advised us that, pursuant to Regulation M under the Securities Exchange Act of 1934, they may also engage in other activities that stabilize, maintain or otherwise affect the price of the common stock, including the imposition of penalty bids. This means that if the representatives of the underwriters purchase common stock in the open market in stabilizing transactions or to cover short sales, the representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discount received by them.

These activities may have the effect of raising or maintaining the market price of the common stock or preventing or retarding a decline in the market price of the common stock, and, as a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common stock. If the underwriters commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on the New York Stock Exchange, in the over-the-counter market or otherwise.

Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiations between the selling shareholder and the representatives of the underwriters. In determining the initial public offering price, the selling shareholder and the representatives of the underwriters expect to consider a number of factors including:

•

the information set forth in this prospectus and otherwise available to the representatives;

Index to Financial Statements

•

our prospects and the history and prospects for the industry in which we compete;

•

an assessment of our management;

•

our prospects for future earnings;

•

the general condition of the securities markets at the time of this offering; and

•

the recent market prices of, and demand for, publicly traded common stock of generally comparable companies.

None of the underwriters, our company or the selling shareholder can assure investors that an active trading market will develop for our shares of common stock, or that the shares will trade in the public market at or above the initial public offering price.

Certain of the underwriters and their affiliates have provided in the past to us and our affiliates and may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future.

Index to Financial Statements

Legal Matters

The validity of the shares of common stock offered by this prospectus will be passed upon for us by Crowe & Dunlevy, A Professional Corporation, Oklahoma City, Oklahoma. Certain other legal matters will be passed upon for us by Vinson & Elkins L.L.P., Houston, Texas. Certain legal matters with respect to the offering will be passed upon for the underwriters by Davis Polk & Wardwell, New York, New York. Vinson & Elkins L.L.P. and Davis Polk & Wardwell will rely upon Crowe & Dunlevy, A Professional Corporation as to all matters of Oklahoma law.

Experts

The consolidated financial statements of Continental Resources, Inc. and subsidiaries as of December 31, 2004 and 2005 and for the years then ended, included in this prospectus and elsewhere in the registration statement have been audited by Grant Thornton LLP, independent registered public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in accounting and auditing.

Ernst & Young LLP, independent registered public accounting firm, has audited our consolidated statements of income, shareholders’ equity, and cash flows for the year ended December 31, 2003, as set forth in their report. We have included such financial statements in the prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP’s report, given on their authority as experts in accounting and auditing.

Where You Can Find More Information

We have filed with the SEC under the Securities Act a registration statement on Form S-1 with respect to the common stock offered by this prospectus. This prospectus, which constitutes part of the registration statement, does not contain all the information set forth in the registration statement or the exhibits and schedules which are part of the registration statement, portions of which are omitted as permitted by the rules and regulations of the SEC. Statements made in this prospectus regarding the contents of any contract or other document are summaries of the material terms of the contract or document. With respect to each contract or document filed as an exhibit to the registration statement, reference is made to the corresponding exhibit. For further information pertaining to us and the common stock offered by this prospectus, reference is made to the registration statement, including the exhibits and schedules thereto, copies of which may be inspected without charge at the public reference facilities of the SEC at 100 F. Street, N.E., Washington, D.C. 20549. Copies of all or any portion of the registration statement may be obtained from the SEC at prescribed rates. Information on the public reference facilities may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a web site that contains reports, proxy and information statements and other information that is filed through the SEC’s EDGAR System. The web site can be accessed at http://www.sec.gov.

Index to Financial Statements

Index to Audited Historical Consolidated Financial Statements


		Page

Continental Resources, Inc. Audited Historical Consolidated Financial Statements:

Reports of Independent Registered Public Accounting Firms		F-2

Consolidated Balance Sheets as of December 31, 2004 and 2005		F-4

Consolidated Statements of Income For the Years Ended December 31, 2003, 2004 and 2005		F-5

Consolidated Statements of Shareholders’ Equity For the Years Ended December 31, 2003, 2004 and 2005		F-6

Consolidated Statements of Cash Flows For the Years Ended December 31, 2003, 2004 and 2005		F-7

Notes to Consolidated Financial Statements		F-8

F-1

Index to Financial Statements

Report of Independent Registered Public Accounting Firm

Board of Directors

Continental Resources, Inc.

We have audited the accompanying consolidated balance sheets of Continental Resources, Inc. and Subsidiary as of December 31, 2004 and 2005, and the related consolidated statements of income, shareholders’ equity and cash flows for the years then ended. 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 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 audit 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 Continental Resources, Inc. and Subsidiary as of December 31, 2004 and 2005, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Oklahoma City, Oklahoma

March 6, 2006

F-2

Index to Financial Statements

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Continental Resources, Inc.

We have audited the accompanying consolidated statements of income, shareholders’ equity, and cash flows of Continental Resources, Inc. and subsidiary for the year ended December 31, 2003. 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 audit.

We conducted our audit 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. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit 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, and evaluating the overall financial statement presentation.

In our opinion, the financial statements of Continental Resources, Inc. and subsidiary referred to above present fairly, in all material respects, the consolidated results of their operations and their cash flows for the year ended December 31, 2003, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, effective January 1, 2003, the Company adopted Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations.

/s/ Ernst & Young LLP

Oklahoma City, Oklahoma

March 25, 2004,

except for the first and third paragraphs of Note 12, as to which the date is

March 6, 2006

F-3

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Consolidated Balance Sheets


	December 31,
	Historical				Pro forma
	2004		2005		2005
					(unaudited)
	(In thousands, except par values and share data)
Assets

Current assets:
Cash and cash equivalents	$	15,894	$	6,014	$	6,014
Receivables:
Oil and gas sales		21,917		20,509		20,509
Affiliated parties		8,045		42,112		42,112
Joint interest and other, net		8,191		14,726		14,726
Inventories		5,592		4,826		4,826
Prepaid expenses		1,031		660		660
Assets held for sale		6,374		—		—

Total current assets		67,044		88,847		88,847
Net property and equipment, based on successful efforts method of accounting		434,339		509,393		509,393
Debt issuance costs, net		3,568		1,994		1,994

Total assets	$	504,951	$	600,234	$	600,234

Liabilities and shareholders’ equity

Current liabilities:
Accounts payable trade	$	21,170	$	33,598	$	33,598
Accounts payable to affiliated parties		3,343		3,121		3,121
Dividend payable		—		—		60,000
Accrued liabilities		12,541		28,795		28,795
Revenues and royalties payable		12,622		31,655		31,655
Current portion of long-term debt and capital leases		3,348		—		—
Liabilities related to assets held for sale		1,695		—		—
Current portion of asset retirement obligation		559		2,120		2,120

Total current liabilities		55,278		99,289		159,289
Long-term debt, net of current portion		230,019		143,000		143,000
Due to shareholder		50,000		—		—
Other noncurrent liabilities:
Capital leases		7,155		—		—
Asset retirement obligation, net of current portion		31,938		32,233		32,233
Other noncurrent liabilities		176		982		982

Total other noncurrent liabilities		39,269		33,215		33,215
Commitments and contingencies (Note 10)
Shareholders’ equity:
Preferred stock, $0.01 par value: 1,000,000 shares authorized; no shares issued and outstanding		—		—		—
Common stock, $.01 par value; 20,000,000 shares authorized, 14,368,919 shares issued and outstanding at December 31, 2004; 14,458,966 shares issued and outstanding at December 31, 2005		144		144		144
Additional paid-in-capital		25,087		27,087		199,408
Retained earnings		105,154		297,461		65,140
Accumulated other comprehensive income		—		38		38

Total shareholders’ equity		130,385		324,730		264,730

Total liabilities and shareholders’ equity	$	504,951	$	600,234	$	600,234

See Note 1 relating to pro forma information.

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

F-4

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Consolidated Statements of Income

For the Years Ended December 31, 2003, 2004 and 2005


	December 31,
	2003			2004			2005
	(In thousands, except share data)
Revenues:
Oil and natural gas sales	$	134,196		$	162,419		$	252,947
Oil and natural gas sales to affiliates		4,752			19,016			108,886
Crude oil marketing and trading		169,547			226,664			—
Oil and natural gas service operations		9,114			10,811			13,931

Total revenues		317,609			418,910			375,764

Operating costs and expenses:
Production expense		32,716			36,801			39,709
Production expense to affiliates		8,105			6,953			13,045
Production tax		10,251			12,297			16,031
Exploration expense		17,221			12,633			5,231
Crude oil marketing and trading		166,731			227,210			—
Oil and gas service operations		5,641			6,466			7,977
Depreciation, depletion, amortization and accretion		40,256			38,627			49,802
Property impairments		8,975			11,747			6,930
General and administrative		9,604			12,400			31,266
(Gain) loss on sale		(589	)		150			(3,026	)

Total operating costs and expenses		298,911			365,284			166,965

Income from operations		18,698			53,626			208,799
Other income (expense):
Interest expense		(19,251	)		(23,309	)		(11,326	)
Interest expense to affiliates		(510	)		(308	)		(2,894	)
Loss on redemption of bonds		—			(4,083	)		—
Other		295			890			867

		(19,466	)		(26,810	)		(13,353	)

Income (loss) from continuing operations before income taxes		(768	)		26,816			195,446
Provision for income taxes		—			—			1,139

Income (loss) from continuing operations		(768	)		26,816			194,307
Discontinued operations		946			1,680			—
Loss on sale of discontinued operations		—			(632	)		—

Income before cumulative effect of change in accounting principle		178			27,864			194,307
Cumulative effect of change in accounting principle		2,162			—			—

Net income	$	2,340		$	27,864		$	194,307

Basic:
Income from continuing operations per share	$	(0.05	)	$	1.87		$	13.52
Net income per share		0.16			1.94			13.52
Diluted:
Income from continuing operations per share		(0.05	)		1.85			13.42
Net income per share		0.16			1.93			13.42
Cash dividends per share		—			1.04			0.14
Pro forma C-corporation data: (unaudited)
Income (loss) from continuing operations before income taxes	$	(768	)	$	26,816		$	195,446
Pro forma provision (benefit) for income taxes attributable to operations		(292	)		10,190			74,269

Pro forma income (loss) from continuing operations after tax		(476	)		16,626			121,177
Discontinued operations net of tax		587			1,042			—
Loss on sale of discontinued operations		—			(392	)		—
Cumulative effect of change in accounting principle net of tax		1,340			—			—

Pro forma net income	$	1,451		$	17,276		$	121,177

Pro forma net income per basic share	$	0.10		$	1.20		$	8.43
Pro forma net income per diluted share		0.10			1.19			8.37

See Note 1 relating to pro forma information.

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

F-5

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Consolidated Statements of Shareholders’ Equity


	Shares outstanding	Common stock		Additional paid-in capital		Retained earnings			Accumu- lated other compre- hensive income			Total shareholders’ equity
	(In thousands, except share data)
Balance, December 31, 2002	14,368,919	$	144	$	25,087	$	89,850		$	—		$	115,081
Comprehensive income:
Net income	—		—		—		2,340			—			2,340
Change in fair value of derivative contracts	—		—		—		—			(489	)		(489	)

Total comprehensive income													1,851

Balance, December 31, 2003	14,368,919		144		25,087		92,190			(489	)		116,932
Comprehensive income:
Net income	—		—		—		27,864			—			27,864
Change in fair value of derivative contracts	—		—		—		—			(5,907	)		(5,907	)
Reclassification of loss on settled contracts	—		—		—		—			6,396			6,396

Net change in fair value of derivative contracts	—		—		—								489

Total comprehensive income													28,353
Dividends paid	—		—		—		(14,900	)		—			(14,900	)

Balance, December 31, 2004	14,368,919		144		25,087		105,154			—			130,385
Comprehensive income:
Net income	—		—		—		194,307			—			194,307
Other comprehensive income	—		—		—		—			38			38

Total comprehensive income													194,345
Issuance of restricted stock	90,047		—		—		—			—			—
Capital contribution	—		—		2,000		—			—			2,000
Dividends paid	—		—		—		(2,000	)		—			(2,000	)

Balance, December 31, 2005	14,458,966	$	144	$	27,087	$	297,461		$	38		$	324,730

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

F-6

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Consolidated Statements of Cash Flows


	Year ended December 31,
	2003			2004			2005
	(In thousands)

Cash flows from operating activities:
Net income	$	2,340		$	27,864		$	194,307
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization		42,473			38,987			48,206
Accretion of asset retirement obligation		1,151			1,036			1,596
Impairment of properties		8,975			11,747			6,930
Change in derivative fair value		(1,455	)		—			—
Amortization of debt issuance costs		1,633			4,789			1,662
(Gain) loss on sale of assets		(239	)		1,566			(3,026	)
Loss on redemption of bonds		—			4,083			—
Cumulative effect of change in accounting principle		(2,162	)		—			—
Dry hole costs		13,566			9,489			1,432
Equity compensation		197			2,010			13,715
Changes in assets and liabilities:
Accounts receivable		(9,972	)		(15,133	)		(39,194	)
Inventories		1,341			(280	)		766
Prepaid expenses		115			(695	)		371
Accounts payable		1,285			7,129			12,205
Revenues and royalties payable		2,951			4,372			19,033
Accrued liabilities and other		3,007			(2,901	)		6,456
Other noncurrent assets		—			(221	)		—
Other noncurrent liabilities		40			12			806

Net cash provided by operating activities		65,246			93,854			265,265

Cash flows from investing activities:
Exploration and development		(95,880	)		(88,361	)		(140,591	)
Purchase of other property and equipment		(18,085	)		(5,190	)		(1,942	)
Purchase of oil and gas properties		(180	)		(756	)		(2,267	)
Proceeds from sale of assets		5,354			389			11,084
Net cash acquired on disposition of subsidiary		—			20,926			—

Net cash used in investing activities		(108,791	)		(72,992	)		(133,716	)

Cash flows from financing activities:
Line of credit borrowings and other		49,405			147,100			25,000
Repayment of senior subordinated notes		—			(131,233	)		—
Repayment of shareholder note		—			—			(48,000	)
Repayment of line of credit and other		(5,590	)		(4,562	)		(112,464	)
Payment of stock-based compensation		—			—			(3,915	)
Dividends to shareholders		—			(14,900	)		(2,000	)
Debt issuance costs		(513	)		(3,650	)		(88	)

Net cash provided by (used in) financing activities		43,302			(7,245	)		(141,467	)
Effect of exchange rate changes on cash and cash equivalents		—			—			38

Net change in cash and cash equivalents		(243	)		13,617			(9,880	)
Cash and cash equivalents at beginning of year		2,520			2,277			15,894

Cash and cash equivalents at end of year	$	2,277		$	15,894		$	6,014

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

F-7

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Notes to Consolidated Financial Statements

1. Organization and Summary of Significant Accounting Policies

Description of Company

Continental Resources, Inc. (Continental or the Company) was incorporated in Oklahoma on November 16, 1967, as Shelly Dean Oil Company. On September 23, 1976, the name was changed to Hamm Production Company. In January 1987, the Company acquired all of the assets and assumed the debt of Continental Trend Resources, Inc. and affiliated entities J.S. Aviation and Wheatland Oil Co. were merged into Hamm Production Company, and the corporate name was changed to Continental Trend Resources, Inc. In 1991, the Company’s name was changed to Continental Resources, Inc. Effective June 1, 1997, the Company converted to an S-corporation under subchapter S of the Internal Revenue Code.

On July 21, 2004, the Company completed the sale of all of the outstanding stock of its subsidiary Continental Gas, Inc. (CGI) to the Company’s shareholders, for $22.6 million in cash. The sales price was representative of the fair value of the net assets based on an appraisal by an independent third party who also provided the Company with an opinion of the fairness from a financial point of view of the sale of CGI to the shareholders. The CGI assets included seven gas gathering systems and three gas-processing plants. (Note 12) Discontinued operations in the consolidated financial statements represent the operations of CGI. (Note 12)

Continental has one wholly owned subsidiary, Continental Resources of Illinois, Inc. (CRII). CRII was incorporated in June 2001 for the purpose of acquiring the assets of Farrar Oil Company and Har-Ken Oil Company.

Continental’s principal business is oil and natural gas exploration, development and production. The Company has interests in approximately 1,434 wells and serves as the operator of 1,213 of these wells. The Company’s operations are primarily in the Rocky Mountain, the Mid-Continent and the Gulf Coast regions of the United States.

Basis of presentation

All significant inter-company accounts and transactions have been eliminated in the consolidated financial statements. Certain reclassifications have been made to prior year amounts to conform to current year presentation.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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 those estimates. Of the estimates and assumptions that affect reported results, the estimate of the Company’s oil and natural gas reserves, which is used to compute depreciation, depletion, amortization and impairment on producing oil and gas properties, is the most significant.

Revenue recognition

Oil and natural gas sales result from undivided interests held by the Company in oil and natural gas properties. Sales of oil and natural gas produced from oil and natural gas operations are recognized when the product is delivered to the purchaser and title transfers to the purchaser. The Company uses the sales method of accounting for natural gas imbalances in those circumstances where it has under-produced or over-produced its

F-8

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(continued)

ownership percentage in a property. Under this method, a receivable or liability is recognized only to the extent that an imbalance cannot be recouped from the reserves in the underlying properties. The Company’s aggregate imbalance positions at December 31, 2004 and 2005 were not material. Charges for gathering and transportation are included in production expenses.

During 2004 and the first three months of 2005, we purchased barrels of oil back from certain of our wellhead purchasers downstream of the initial sales point to exchange at the Cushing, Oklahoma hub in order to minimize pricing differentials with the NYMEX oil futures contract. In 2005, revenues of $39.8 million and expenses of $39.7 million pertaining to these marketing activities were netted as provided by Emerging Issues Task Force (EITF) 04-13, which we adopted as of January 2005. We presented this purchase and sale activity gross in the 2003 and 2004 income statement as crude oil marketing and trading revenues of $169.5 million and $226.7 million and crude oil marketing and trading expenses of $166.7 million and $227.2 million under the guidance provided by EITF 99-19, “Reporting Revenues Gross as a Principal and/or Net as an Agent.” We ceased marketing our production in this manner in March 2005 and now generally market our production at the wellhead.

Cash and cash equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company maintains its cash and cash equivalents in accounts that may not be federally insured. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk.

At December 31, 2004 and 2005, the Company’s cash included approximately $481,000 and $301,000, respectively, in a Canadian bank, which was converted to US dollars using the exchange rates in effect at December 31, 2004 and 2005.

Accounts receivable

The Company operates exclusively in oil and natural gas exploration and production related activities. Oil and natural gas sales and joint interest receivables are generally unsecured. Accounts receivable are due within 30 days and considered delinquent after 60 days. The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time accounts are past due, the Company’s loss history, and the customer or working interest owner’s ability to pay. The Company writes off specific accounts when they become uncollectible and any payments subsequently received on these receivables are credited to the allowance for doubtful accounts. The following table presents the allowance for doubtful accounts at December 31, 2003, 2004 and 2005 and changes in the allowance for these years:


	Balance at beginning of period		Additions charged to costs and expenses		Deductions			Balance at end of period
Year ended December 31, 2003	$	544,417	$	—	$	(314,445	)	$	229,972
Year ended December 31, 2004		229,972		23,000		—			252,972
Year ended December 31, 2005		252,972		59,378		(140,899	)		171,451

F-9

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(continued)

Concentration of credit risk

We are subject to credit risk due to concentration of our crude oil and natural gas receivables with several significant customers. The three largest purchasers of the Company’s oil and gas production accounted for 53%, 56% and 60% of total oil and natural gas sales revenues for 2003, 2004 and 2005, respectively. These purchasers constituted all purchasers with oil and natural gas sales in excess of 10% of total oil and natural gas sales. The Company does not require collateral. While the Company believes its recorded receivables will be collected, in the event of default the Company would follow normal collection procedures. The Company does not believe the loss of any single purchaser would materially impact its operating results, as oil and natural gas are fungible products with well-established markets and numerous purchasers.

Debt issuance costs

Costs incurred in connection with the issuance of long-term debt are capitalized and amortized over the term of the related debt. The Company had capitalized costs of $3.6 million and $2.0 million relating to the issuance of our long-term debt at December 31, 2004 and 2005, respectively. During the three years ended December 31, 2005, the Company recognized associated amortization expense of $1.6 million, $4.8 million and $1.7 million, respectively.

Inventories

Inventories are stated at the lower of average cost or market. Inventory consists primarily of tubular goods and production equipment, which totaled approximately $3.3 million and $4.8 million at December 31, 2004 and 2005, respectively. Inventory included $2.2 million of crude oil inventory at December 31, 2004, which was sold during 2005.

Property and equipment

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

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


Property and Equipment		Useful Lives in Years
Furniture and fixtures		10
Automobiles		5
Machinery and equipment		10-20
Office and computer equipment		5
Building and improvements		10-40

Oil and gas properties

The Company uses the successful efforts method of accounting for oil and gas properties whereby costs to acquire mineral interests in oil and gas properties, drill and equip exploratory wells that find proved reserves and to drill and equip development wells are capitalized. Geological and geophysical costs, seismic costs, lease rentals and costs associated with unsuccessful exploratory wells are expensed as incurred. Maintenance and repairs are

F-10

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(continued)

expensed as incurred, except that the cost of replacements or renewals that expand capacity or improve production are capitalized. As of December 31, 2004 and 2005, property and equipment included $21.1 million and $21.9 million, respectively, of asset retirement costs.

The Company reports capitalized exploratory drilling costs on the balance sheet according to Statement of Financial Accounting Standards (SFAS) No. 19, “Financial Accounting and Reporting by Oil and Gas Producing Companies” (SFAS No. 19). On a monthly basis, the Company capitalizes the costs of drilling exploratory wells pending determination of whether the well has found proved reserves. The Company capitalizes costs associated with the acquisition or construction of support equipment and facilities with the drilling and development costs to which they relate. If the well has proved reserves, the capitalized costs become part of well equipment and facilities; however, if proved reserves are not found, the capitalized costs associated with the well are expensed, net of any salvage value. Total capitalized exploratory drilling costs, as of December 31, 2004 and 2005, pending the determination of proved reserves were $3.2 million and $1.9 million, respectively. None of these costs were suspended beyond one year.

Production expenses are those costs incurred by the Company to operate and maintain its oil and natural gas properties and associated equipment and facilities. Production expenses include labor costs to operate the Company’s properties, repairs and maintenance, and materials and supplies utilized in the Company’s operations.

In 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143, “Accounting for Asset Retirement Obligations” (SFAS No. 143) which requires entities to 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 the related long-lived asset. Subsequently, the asset retirement costs are charged to expense using a systematic and rational method and the liability is accreted to the expected abandonment amount over the asset’s life. The Company adopted SFAS No. 143 on January 1, 2003 and recorded a $2.2 million cumulative effect adjustment associated with the adoption. The adoption of SFAS No. 143 resulted in a net increase to Property and Equipment and Asset Retirement Obligations of approximately $27.8 million and $25.6 million, respectively.

The Company’s primary asset retirement obligations relate to future plugging and abandonment expenses on its oil and natural gas properties and related facilities disposal. The following table summarizes the changes in the Company’s future abandonment liability from January 1, 2004 through December 31, 2005 (in thousands):


	2004			2005
Asset Retirement Obligation liability at January 1,	$	26,608		$	34,192
Asset Retirement Obligation accretion expense		1,036			1,596
Plus: Revisions		6,726			—
Additions for new assets		516			1,031
Less: Plugging costs and sold assets		(694	)		(2,466	)

Asset Retirement Obligation liability at December 31,	$	34,192		$	34,353

The 2004 asset retirement obligation includes approximately $1.7 million, which is included in current liabilities related to assets held for sale. These related properties were sold in 2005 and are reflected as held for sale at December 31, 2004.

The Company considered the impact of FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” and determined that it did not have a material effect on the Company’s results of operations or financial condition.

F-11

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(continued)

Depreciation, depletion, amortization, accretion and impairment

Depreciation, depletion, and amortization (DD&A) of capitalized drilling and development costs, including related support equipment and facilities, of producing oil and gas properties are computed using the units of production method on an individual property or unit basis based on total estimated proved developed oil and gas reserves. Amortization of producing leasehold is based on the unit-of-production method using total estimated proved reserves. In arriving at rates under the unit-of-production method, the quantities of recoverable oil and natural gas are established based on estimates made by the Company’s geologists, engineers and independent reserve engineers. Upon sale or retirement of properties, the cost and related accumulated DD&A are eliminated from the accounts and the resulting gain or loss is recognized. Unit of production rates are revised whenever there is an indication of a need, but at least twice annually in conjunction with our semi-annual and annual reserve reports. Revisions are accounted for prospectively as changes in accounting estimates.

Non-producing properties consist of undeveloped leasehold costs and costs associated with the purchase of certain proved undeveloped reserves. Individually significant non-producing properties are periodically assessed for impairment of value and a loss is recognized at the time of impairment by providing an impairment allowance. Other non-producing properties are amortized on a composite method based on the Company’s estimated experience of successful drilling and the average holding period. Impairment of non-producing properties was $5.2 million, $5.5 million, and $4.4 million for 2003, 2004, and 2005, respectively.

In accordance with the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the Company recognizes impairment expenses for developed oil and gas properties and other long-lived assets when indicators of impairment are present and the undiscounted cash flows from proved and risk adjusted probable reserves are not sufficient to recover the assets’ carrying amount. The impairment loss is measured by comparing the fair value of the asset to its carrying amount. Fair values are based on discounted future cash flows. The Company’s oil and gas properties are reviewed for indicators of impairment on a field-by-field basis, resulting in the recognition of impairment provisions of $3.8 million, $6.2 million, and $2.5 million respectively, for 2003, 2004 and 2005. The majority of the impairment recognized in these years relates to fields comprised of a small number of properties or single wells on which the Company does not expect sufficient future net cash flows to recover its carrying cost.

The costs of retired, sold, or abandoned properties that constitute part of an amortization base are charged or credited, net of proceeds received, to the accumulated depletion, depreciation, and amortization reserve. Gains or losses from the disposal of other properties are recognized in the current period. Effective July 1, 2005, the Company adopted SFAS No. 153, “Exchanges of Nonmonetary Assets, an Amendment of APB Opinion No. 29” (SFAS No. 153), for the exchanges of nonmonetary assets occurring after the implementation date. Prior to implementing SFAS No. 153, the Company generally did not recognize gains on nonmonetary exchanges involving oil and gas properties. According to the provisions of SFAS No. 153, all nonmonetary asset exchanges that have commercial substance, as defined, will be measured at fair value with gain or loss recognized in earnings. Values of historical nonmonetary asset exchanges have not been material.

Assets held for sale

In November 2004, the Company classified certain properties located in Montana as held for sale. The sale of these properties closed in April 2005 for $11.3 million. The Company recorded an associated gain of $6.2 million. The sale included 45 wells and associated reserves of 935,000 barrels of oil at April 1, 2005, the effective date of the transaction. These assets and associated liabilities are shown as held for sale in the 2004 consolidated financial statements.

F-12

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(continued)

Income taxes

Effective June 1, 1997, the Company converted to an S-corporation under Subchapter S of the Internal Revenue Code. As a result, income taxes attributable to federal and state taxable income of the Company after May 31, 1997, if any, are payable by the shareholders of the Company. Certain properties held by the Company at the time of the conversion may be subject to federal taxation on the excess of the S-corporation conversion date fair market value over the asset’s then taxable basis if sold within 10 years of the conversion to an S-corporation. These taxes are payable by the Company. In 2005, the Company has recorded federal income tax expense of $1.1 million attributable to such gains on sales of properties according to section 1374 of the Internal Revenue Code.

Pro forma information (unaudited)

Pro forma adjustments are reflected on the consolidated balance sheets to adjust for the payment of a $60.0 million dividend on April 13, 2006 to existing shareholders and to reflect the reclassification of undistributed earnings between retained earnings and additional paid-in capital in connection with the Company’s conversion from an S-corporation to a C-corporation as if the conversion had occurred on December 31, 2005.

Pro forma adjustments are reflected on the consolidated statements of income to provide for income taxes in accordance with SFAS No. 109 as if the Company had been a C-corporation for all periods presented. For unaudited pro forma income tax calculations, deferred tax assets and liabilities were recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities were measured using enacted tax rates expected to apply to taxable income in the years in which the Company expects to recover or settle those temporary differences. A statutory Federal tax rate of 35% and effective state tax rate of 3.0% (net of Federal income tax effects) were used for the pro forma enacted tax rate for all periods. The pro forma tax effects are based upon currently available information. Management believes that these assumptions provide a reasonable basis for representing the pro forma tax effects.

Comprehensive income

The Company classifies other comprehensive income items by their nature in the consolidated financial statements and displays the accumulated balance of other comprehensive income separately in the shareholders’ equity section of the balance sheet. Accumulated other comprehensive income at December 31, 2005 consists of foreign currency translation.

F-13

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(continued)

Earnings per common share

Basic earnings per common share is computed by dividing net income by the weighted-average number of shares outstanding for the period. Diluted earnings per share reflects the potential dilution of restricted stock awards and dilutive stock options, which are calculated using the treasury stock method as if these options were exercised. The following tables set forth earnings per share and the computation of shares used in the basic and diluted earning per share computations for the years ended December 31, 2003, 2004 and 2005:


	2003			2004			2005

Basic income (loss) per share:
From continuing operations	$	(0.05	)	$	1.87		$	13.52
From discontinued operations		0.06			0.11			—
Loss on sale of discontinued operations		—			(0.04	)		—

Before cumulative effect of change in accounting principle		0.01			1.94			13.52
Cumulative effect of change in accounting principle		0.15			—			—

Net income per share	$	0.16		$	1.94		$	13.52


Diluted income (loss) per share:
From continuing operations	$	(0.05	)	$	1.85		$	13.42
From discontinued operations		0.06			0.12			—
Loss on sale of discontinued operations		—			(0.04	)		—

Before cumulative effect of change in accounting principle		0.01			1.93			13.42
Cumulative effect of change in accounting principle		0.15			—			—

Net income per share	$	0.16		$	1.93		$	13.42


	2003 Shares	2004 Shares	2005 Shares
Shares used in basic earnings per share	14,368,919	14,368,919	14,368,919

Effect of dilutive securities:
Restricted stock	—	—	14,554
Employee stock options	—	107,347	98,892

Shares used in diluted earnings per share	14,368,919	14,476,266	14,482,365

Accounting for derivatives

The Company had no open hedges at December 31, 2004 or 2005. Previously, the Company periodically utilized derivative contracts to hedge the commodity price risk associated with specifically identified purchase or sales contracts, oil and gas production or operational needs. The Company accounted for its non-trading derivative activities under the guidance provided by SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, as amended, and recognized all of its derivative instruments as assets or liabilities in the balance sheet at fair value with such amounts classified as current or long-term based on their anticipated settlement. The accounting for the changes in fair value of a derivative depends on the intended use of the derivative and resulting designation.

F-14

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(continued)

Fair value of financial instruments

The Company’s financial instruments consist primarily of cash, trade receivables, trade payables and bank debt. The carrying value of cash, trade receivables and trade payables are considered to be representative of their respective fair values, due to the short maturity of these instruments.

The fair value of long-term debt approximates its carrying value based on the borrowing rates currently available to the Company for bank loans with similar terms and maturities. The estimated fair value of long-term debt is $280.0 million and $143.0 million at December 31, 2004 and 2005, respectively.

Equity compensation

The Company accounts for restricted stock in accordance with SFAS No. 123 “Accounting for Stock-Based Compensation” (SFAS 123). The Company accounts for employee stock option grants under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” using the intrinsic method, as permitted by SFAS 123. The terms of the restricted stock grants and stock option grants require that, while the Company is a private company, it is required to purchase the vested restricted stock and stock acquired from stock option exercises at each employee’s request based upon the purchase price set forth in each award agreement. Additionally, the Company has the right to purchase vested restricted stock and stock acquired from stock option exercises at the same price. The Company measures compensation cost for the awards based upon the purchase price as determined by a formula specified in the respective compensation plans discussed in Note 9. The amounts subject to the purchase are reflected on the accompanying consolidated balance sheet as a liability of $2.4 million and $12.2 million as of December 31, 2004 and 2005, respectively. The Company’s associated compensation expense, as included in general and administrative expense, was $197,000, $2.0 million and $13.7 million during 2003, 2004 and 2005, respectively.

Recent accounting pronouncements

In December 16, 2004, the FASB issued SFAS 123 (R), Share-Based Payment, a revision of SFAS 123, and APB Opinion 25, “Accounting for Stock Issued to Employees”. SFAS 123(R) requires that the cost of share-based payment transactions (including those with employees and non-employees) be recognized in the financial statements. SFAS 123 (R) applies to all share-based payment transactions in which an entity acquires goods or services by issuing (or offering to issue) its shares, share options or other equity instruments (except for those held by ESOP) or by incurring liabilities (1) in amounts based on the price of the entity’s shares or other equity instruments or (2) that require (or may require) settlement by the issuance of an entity’s share or other equity instruments. SFAS 123 (R) is effective for the Company in the first annual reporting period after December 15, 2005. The Company will implement SFAS 123(R) on January 1, 2006 using the modified prospective application. The adoption of SFAS 123 (R) is not expected to have a material effect on the Company’s consolidated financial statements.

On June 1, 2005, the FASB issued FASB Statement No. 154, “Accounting Changes and Error Corrections” (SFAS No. 154), which will require entities that voluntarily make a change in accounting principle to apply that change retrospectively to prior periods’ financial statements, unless this would be impracticable. SFAS No. 154 supersedes Accounting Principles Board Opinion No. 20, “Accounting Changes” (APB 20), which previously required that most voluntary changes in accounting principle be recognized by including in the current period’s net income the cumulative effect of changing to the new accounting principle. SFAS No. 154 also makes a distinction between “retrospective application” of an accounting principle and the “restatement” of financial statements reflects the correction of an error.

F-15

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(continued)

In April 2005, the FASB issued Staff Position No. FAS 19-1, “Accounting for Suspended Well Costs”. FSP 19-1 amended paragraphs 31-34 of SFAS No. 19, to allow continued capitalization of exploratory well costs beyond one year from the completion of drilling under circumstances where the well has found a sufficient quantity of reserves to justify its completion as a producing well and the enterprise is making sufficient progress assessing the reserves and the economic and operating viability of the project. The guidance in FSP 19-1 was effective for the first reporting period beginning after April 4, 2005. The Company adopted the new requirements and does not have any capitalized exploratory well costs beyond one year from the completion of drilling.

2. Hedging Contracts

The Company has utilized fixed-price contracts and zero-cost collars in the past to reduce exposure to unfavorable changes in oil and gas prices that are subject to significant and often volatile fluctuation. Under the fixed price delivery contracts the Company received the fixed price stated in the contract. Under the zero-cost collars, if the market price of crude oil exceeded the ceiling strike price or fell below the floor strike price, then the Company received the applicable collar strike price. If the market price was between the floor strike price and the ceiling strike price, the Company received market price.

The Company was not a party to any open hedge contracts at December 31, 2004 or 2005. Charges in the amounts of $10.1 million and $6.4 million for hedging activities are reported as a reduction in oil and gas sales in the income statement for the years ended December 31, 2003 and 2004, respectively.

At December 31, 2003, the Company had a crude oil derivative contract in place, which was being marked to market under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, with changes in fair value being recorded in earnings as such contract did not qualify for special hedge accounting. At December 31, 2003, we recorded a net gain of $1.5 million in crude oil marketing and trading revenue in connection with this contract.

The Company recognized no significant amounts due to hedge ineffectiveness in any year presented.

3. Long-term Debt

The Company had the following long-term debt outstanding as of the dates shown (in thousands):


	December 31,
	2004		2005
Credit facility due March 31, 2007	$	230,000	$	143,000
Subordinated note due to shareholder March 31, 2008		50,000		—
Vehicle credit agreements		31		—

Outstanding debt		280,031		143,000
Less current portion		12		—

Total long-term debt	$	280,019	$	143,000

F-16

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(continued)

On November 22, 2004, the Company executed a Fifth Amended and Restated Credit Agreement in which a group of lenders agreed to provide a $400.0 million senior secured revolving credit facility with a commitment of $250.0 million as of December 31, 2005. Borrowings under the credit facility are secured by liens on substantially all oil and gas properties and associated assets of the Company.

On March 23, 2005, the Company executed the First Amendment to the Credit Agreement and revised the pricing grid, which lowered the Utilization Percentage and the LIBOR margins. On December 7, 2005, the Company executed the Second Amendment to the Credit Agreement in order to terminate certain covenants including a requirement to hedge certain quantities of our production under various conditions.

Borrowings under the credit facility currently bear interest, payable quarterly, at

•

A rate per annum equal to the London Interbank Offered Rate (LIBOR) for one, two, three or six months, as elected by the Company, plus a margin ranging from 125 to 200 basis points, or

•

At the lead banks reference rate plus an applicable margin ranging from 25 to 50 basis points.

The Company has $107.0 million available under the credit facility at December 31, 2005 and incurred approximately $245,000 in commitment fees during 2005. These fees are 0.375% of the daily average excess of the commitment amount over the outstanding credit balance. Fees are payable five business days after the end of each quarter. The Company paid approximately $2.0 million in debt issuance fees for the new credit facility, which was capitalized and is being amortized on a straight-line basis over the life of the credit facility. The credit facility matures on March 31, 2007. The Company’s weighted average interest rate was 6.08% at December 31, 2005. The Company’s credit facility contains certain financial and certain information reporting covenants. As of December 31, 2005, the Company was in compliance with all covenants.

The Company redeemed $119.5 million of Senior Subordinated 10.25% Notes during November 2004 and paid a premium of $4.1 million due to early redemption of the notes.

On November 22, 2004, the Company signed a note with its principal shareholder for $50.0 million. The annual rate of interest was 6.00% and interest payments were due the last day of each calendar quarter beginning December 31, 2004. The maturity date of the note was March 31, 2008. A subordination agreement was executed making the $50.0 million note to the Company subordinate to the Credit Agreement discussed above. In January 2005, the principal shareholder contributed $2.0 million of the previously loaned amount to the Company. The $2.0 million contribution is reflected in additional paid in capital. The Company paid the outstanding balance of $48.0 million in December 2005.

At December 31, 2005, the Company had $0.9 million of outstanding letters of credit that expire during 2006 and a $1.0 million outstanding letter of credit that expires during 2007.

F-17

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(continued)

4. Cash Flow Information

Net cash provided by operating activities reflects cash payments for interest follows (in thousands):


	2003		2004		2005
Interest paid	$	20,386	$	29,313	$	14,598

Noncash investing and financing activities are as follows (in thousands):


	2003		2004		2005
Capital contribution—note payable forgiven by shareholder	$	—	$	—	$	2,000
Cancellation of capital leases		—		—		10,058

Effective January 1, 2003, the Company adopted SFAS No. 143 and recorded the asset retirement obligations as follows (in thousands):


	2003
Increase in property and equipment	$	27,798
Increase in asset retirement obligation		(25,636	)

Cumulative effect of accounting change	$	2,162

5. Property, Plant, and Equipment

Property, plant and equipment includes the following at December 31, 2004 and 2005 (in thousands):


	2004			2005
Proved oil and gas properties	$	645,752		$	753,841
Unproved oil and gas properties		22,803			32,785
Service properties, equipment and other		19,102			19,790

Total property and equipment		687,657			806,416
Accumulated depreciation, depletion and amortization		(253,318	)		(297,023	)

Net property and equipment	$	434,339		$	509,393

6. Accrued Liabilities

Accrued liabilities includes the following at December 31, 2004 and 2005 (in thousands):


	2004		2005
Equity compensation	$	2,387	$	12,186
Production taxes and income taxes		4,581		9,417
Drilling cost advances from third parties		2,998		2,295
Interest		1,030		652
Other		1,545		4,245

Total accrued liabilities	$	12,541	$	28,795

F-18

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(continued)

7. Lease Commitments

The Company leases office space under operating leases from the principal shareholder (See Note 11).

The Company had a capital lease arrangement to lease compressors in place at December 31, 2004 from a related party. The assets related to these capital leases totaled $16.8 million at December 31, 2004, with accumulated depreciation of $3.5 million at December 31, 2004. Subsequent to December 31, 2004, the capital lease contract was cancelled and the Company executed an operating lease effective January 28, 2005. The Company pays approximately $400,000 per month under the operating lease. The term of the operating lease is through January 28, 2009.

Lease expense associated with the Company’s operating leases for the years ended December 31, 2003, 2004 and 2005, was $627,000, $725,000 and $5.3 million, respectively. At December 31, 2005, including leases renewed and entered into subsequent to December 31, 2005, the minimum future rental commitments under operating leases having non-cancelable lease terms in excess of one year, including leases from related parties, are as follows (in thousands):


Year	Leases with Related Parties		Leases with Non-Related Parties		Total Amount
2006	$	4,919	$	320	$	5,239
2007		4,819		305		5,124
2008		4,819		247		5,066
2009		402		91		493
2010				22		22

Total obligations	$	14,959	$	985	$	15,944

8. Shareholders’ Equity

On December 8, 2004, the Company’s Amended and Restated Certificate of Incorporation was amended to convert 1,000,000 shares of common stock to voting common stock, par value $.01 per share, and 19,000,000 shares of common stock to non-voting common stock, par value $.01 per share. Each share of common stock, par value $.01 per share, outstanding was converted and reclassified into 5% voting common stock and 95% non-voting stock. At December 31, 2004 and 2005, there were 718,446 voting shares and 13,650,473 and 13,740,520 of non-voting shares, respectively.

The Company paid a dividend of $60.0 million on April 13, 2006 to existing shareholders and, subject to forfeiture, to holders of unvested restricted stock.

9. Stock Compensation

The Company has outstanding options and/or shares of restricted stock issued under two incentive plans, the Continental Resources, Inc. 2000 Stock Option Plan (2000 Plan), which was terminated November 10, 2005, and the Continental Resources, Inc. 2005 Long-Term Incentive Plan (2005 Plan).

F-19

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(continued)

Effective October 1, 2000, the Company adopted the 2000 Plan and granted options to eligible employees. These options were either Incentive Stock Options, Nonqualified Stock Options, or a combination of both. The granted stock options vest over a five-year period at the rate of 20% each year for the Incentive Stock Options and over a three year period at the rate of 33 ¹ / 3 % for the Nonqualified Stock Options, both commencing on the first anniversary of the grant date. The maximum number of shares covered consisted of 1,020,000 shares of the Company’s common stock, par value $.01 per share. As of December 31, 2005, options covering 65,000 shares had been exercised. On November 10, 2005, the 2000 Plan was terminated and 152,000 shares of common stock previously granted, par value $0.01 per share, remained reserved for unexercised stock options previously granted under the 2000 Plan.

The Company’s stock option grants are as follows:


	Number of options outstanding		Weighted average exercise price		Number of options exercisable	Weighted average exercise price
Outstanding December 31, 2002	172,000		$	10.79	72,002	$	10.50
Granted	—				—		—
Exercised	—				—		—
Canceled	—				—		—

Outstanding December 31, 2003	172,000			10.79	114,933		10.34
Granted	20,000			43.62	—		—
Exercised	(25,000	)		12.60	—		—
Canceled	—			—	—		—

Outstanding December 31, 2004	167,000			14.45	118,866		10.39
Granted	25,000			62.82	—		—
Exercised	(40,000	)		10.50	—		—
Canceled	—			—	—		—

Outstanding December 31, 2005	152,000		$	23.44	109,667	$	12.59

The recorded liability associated with the exercise of options during 2004 and 2005 was settled in cash. Shares of common stock were never issued and the Company’s outstanding common stock did not change as a result of the options exercise.

The following table summarizes information about stock options outstanding at December 31, 2005:


Options Outstanding					Options Exercisable
Range of Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable	Weighted- Average Exercise Price
$7.00 - $7.77	57,000	5.53 years	$	7.38	53,000	$	7.35
$14.00	50,000	4.75 years		14.00	50,000		14.00
$43.62	20,000	8.58 years		43.62	6,667		43.62
$62.82	25,000	9.33 years		62.82	—		—

	152,000		$	23.44	109,667	$	12.59

F-20

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(continued)

On October 3, 2005, the Company adopted the 2005 Plan and reserved a maximum of 500,000 shares of non-voting common stock that may be issued pursuant to the 2005 Plan. As of December 31, 2005, the Company had outstanding 90,047 shares of restricted stock granted to directors, officers and key employees under the plan. All grants were made on or after October 3, 2005. Restricted stock is awarded in the name of the recipient and except for the right of disposal, constitutes issued and outstanding shares of the Company’s common stock for all corporate purposes during the period of restriction including the right to receive dividends, subject to forfeiture. Restricted stock grants vest ratably over a three-year period.

Pursuant to the award agreements the Company has the right to purchase vested restricted shares and shares acquired by option exercise in the event of termination of employment and grantees have the right to require the Company to purchase vested restricted shares and shares acquired by option exercise, each at a price determined by adjusting net book value for the present value of proved reserves discounted at 10%. All grants of stock options and restricted stock were issued at the then estimated fair market value of the Company’s stock determined according to the plans. In accordance with the plans, the Company calculates the per share value quarterly based on shareholders’ equity adjusted for the excess of period end PV-10 oil and gas reserve valuation over the book value of oil and gas properties. Compensation expense is recognized over the vesting period and was $197,000, $2.0 million and $13.7 million for the years ended December 31, 2003, 2004, and 2005, respectively.

10. Commitments and Contingencies

The Company maintains a defined contribution retirement plan for its employees and makes discretionary contributions to the plan based on a percentage of eligible employees compensation, excluding bonuses. During 2003, 2004 and 2005, contributions to the plan were 5% of eligible employees’ compensation, excluding bonuses. Expense for the years ended December 31, 2003, 2004 and 2005, was $404,000, $431,000 and $663,000, respectively.

The Company and other affiliated companies participate in a self-insurance pool (the “Pool”) covering health and workers’ compensation claims made by employees up to the first $100,000 and $250,000, respectively, per claim. Any amounts paid above these are reinsured through third-party providers. Allocations between the Company and other affiliated companies are based on estimated costs per employee of the Pool.

Property and general liability insurance is maintained through third-party providers with a $100,000 deductible on each policy. In combination with excess liability coverage the Company has insurance up to $35 million in place. The Company had no pending claims at December 31, 2005.

The Company is involved in various legal proceedings in the normal course of business, none of which, in the opinion of management, will have a material adverse effect on the financial position or results of operations of the Company. As of December 31, 2005, the Company has provided a reserve of $520,000 for various matters none of which are believed to be individually significant.

Due to the nature of the oil and gas business, the Company is exposed to possible environmental risks. The Company is not aware of any material environmental issues or claims.

11. Related Party Transactions

The Company markets a portion of its oil and natural gas to various affiliates. During the years ended December 31, 2003, 2004, and 2005, these sales were approximately $4.8 million, $19.0 million, and $108.9

F-21

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(continued)

million. The Company also contracts for field services such as compression and drilling rig services and purchases residue fuel gas and reclaimed oil from certain affiliates. Production expense to these affiliates was $8.1 million, $7.0 million and $13.0 million for the years ended December 31, 2003, 2004 and 2005, respectively. The total amount paid to these companies, a portion of which was billed to other interest owners, was approximately $18.4 million, $23.4 million and $38.6 million during the years ended December 31, 2003, 2004 and 2005, respectively. At December 31, 2004 and 2005, approximately $8.0 million and $42.1 million was due from affiliates and approximately $3.3 million and $3.1 million was due to affiliates.

Affiliates of the Company, owned by the Company’s principal shareholder and in one instance by an officer of the Company, also own working and royalty interests in wells operated by the Company. We paid revenues, including royalties, of approximately $0.7 million, $1.8 million, and $5.6 million and billed expenses of $1.1 million, $1.4 million, and $4.2 million during the years ended December 31, 2003, 2004, and 2005 to these affiliates and this officer.

As described in Note 12, the assets of CGI were sold to shareholders during 2004. During July 2005, the Company acquired oil and gas assets from the Company’s principal shareholder for $4.5 million.

The Company leases office space under operating leases from the principal shareholder. Rents paid associated with these leases totaled approximately $505,000, $506,000 and $556,000 for the years ended December 31, 2003, 2004 and 2005, respectively. The term of these leases is through February 2007 at an annual rate of $646,000.

On November 22, 2004, the Company entered into a subordinated note with the principal shareholder, which required the Company to make quarterly interest payments beginning December 31, 2004. Interest paid during 2004 and 2005 was $308,000 and $2.9 million, respectively. During 2005, the principal shareholder forgave $2.0 million of this note and a contribution to paid-in capital was recorded. The outstanding balance of $48.0 million was paid on December 27, 2005. (Note 3)

12. Discontinued Operations

In July 2004, the Company completed the sale of all of the outstanding stock in CGI to the Company’s shareholders for $22.6 million in cash. The sales price was representative of the fair value of the net assets based on an appraisal by an independent third party who also provided the Company with an opinion of the fairness from a financial point of view, of the sale of CGI to the Company’s shareholders. The CGI assets included seven gas gathering systems and three gas-processing plants. These assets represented the entire gas gathering, marketing and processing segment of the Company and have been classified as discontinued operations for all periods presented.

F-22

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(continued)

The assets and liabilities of CGI as of July 21, 2004, included within the related discontinued operations are as follows (in thousands):


Cash	$	1,681
Accounts receivable		9,592
Inventories		153
Prepaid expenses		4

Total current assets of discontinued operations		11,430
Property and equipment, net		38,894
Other noncurrent assets		225
Total noncurrent assets of discontinued operations		39,119

Total assets	$	50,549

Accounts Payable	$	10,566
Current portion of long-term debt		2,429
Accrued expense and other current liabilities		92

Total current liabilities of discontinued operations		13,087
Long-term debt, net of current portion		13,357
Other noncurrent liabilities		377

Total noncurrent liabilities of discontinued operations		13,734
Shareholders’ equity		23,728

Total liabilities and shareholders’ equity	$	50,549

The results of operations of CGI prior to its disposition are included within income from discontinued operations in the following periods (in thousands):


	December 31,
	2003		2004
Revenues	$	76,018	$	50,956
Income from discontinued operations		946		1,680

13. Oil and Gas Property Information

The following table sets forth the Company’s results of operations from oil and natural gas producing activities for the years ended December 31, 2003, 2004 and 2005 (in thousands):


	December 31,
	2003			2004			2005
Oil and gas sales	$	138,948		$	181,435		$	361,833
Production expense and tax		(51,072	)		(56,051	)		(68,785	)
Exploration expense		(17,221	)		(12,633	)		(5,231	)
Accretion of asset retirement obligation		(1,137	)		(1,029	)		(1,596	)
Depreciation, depletion and amortization		(37,329	)		(36,193	)		(46,829	)
Property impairments		(8,975	)		(11,747	)		(6,930	)

Results from oil and gas producing activities	$	23,214		$	63,782		$	232,462

F-23

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(continued)

Costs incurred in oil and gas activities

Costs incurred, both capitalized and expensed, in connection with the Company’s oil and gas acquisition, exploration and development activities for the three years ended December 31, 2003, 2004 and 2005 are shown below (in thousands).


	2003			2004		2005
Property acquisition costs:
Proved	$	180		$	756	$	2,267
Unproved		8,503			11,700		14,496

Total property acquisition costs		8,683			12,456		16,763
Exploration costs		11,981			30,867		9,289
Development costs		75,396			53,036		117,837

Total	$	96,060	(1)	$	96,359	$	143,889

(1)

Excludes $15,528 of cumulative asset retirement cost recorded to adopt the provisions of SFAS No. 143 on January 1, 2003.

Exploration costs above include asset retirement costs of $123,000, $244,000 and $305,000 and development costs above include asset retirement costs of $553,000, $6,998,000 and $726,000 for the years 2003, 2004 and 2005, respectively.

Aggregate capitalized costs

Aggregate capitalized costs relating to the Company’s oil and gas producing activities, and related accumulated depreciation, depletion and amortization, as of December 31, 2004 and 2005 are as follows (in thousands):


	2004			2005
Proved oil and gas properties	$	645,752		$	753,841
Unproved oil and gas properties		22,803			32,785

Total		668,555			786,626
Less-accumulated DD&A		(240,030	)		(283,036	)

Net capitalized costs	$	428,525		$	503,590

Under the successful efforts method of accounting, the costs of drilling an exploratory well are capitalized pending determination of whether proved reserves can be attributed to the discovery. When initial drilling operations are complete, management determines whether the well has discovered oil and gas reserves and, if so, whether those reserves can be classified as proved. Often, the determination of whether proved reserves can be recorded under strict Securities and Exchange Commission (SEC) guidelines cannot be made when drilling is completed. In those situations where management believes that commercial hydrocarbons have not been discovered, the exploratory drilling costs are reflected in the Consolidated Income Statement as dry hole costs (a component of exploration expense). Where sufficient hydrocarbons have been discovered to justify further exploration or appraisal activities, exploratory drilling costs are deferred on the Consolidated Balance Sheet pending the outcome of those activities.

At the end of each quarter, operating and financial management review the status of all deferred exploratory drilling costs in light of ongoing exploration activities—in particular, whether the company is making sufficient

F-24

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(continued)

progress in its ongoing exploration and appraisal efforts. If management determines that future appraisal drilling or development activities are not likely to occur in the future, any associated exploratory well costs are expensed in that period.

The following table presents the amount of capitalized exploratory drilling costs pending evaluation at December 31 for each of the last three years and changes in those amounts during the years then ended (in thousands):


	2003			2004			2005
Balance, January 1	$	4,807		$	814		$	3,237
Additions to capitalized exploratory well costs pending determination of proved reserves		11,858			30,024			8,984
Reclassification to proved oil and gas properties based on the determination of proved reserves		(2,285	)		(18,112	)		(8,915	)
Capitalized exploratory well costs charged to expense		(13,566	)		(9,489	)		(1,432	)

Balance, December 31	$	814		$	3,237		$	1,874

14. Supplemental Oil and Gas Information (Unaudited)

The following table shows estimates of proved reserves prepared by the Company’s technical staff and independent external reserve engineers in accordance with SEC definitions. Ryder Scott Company prepared reserve estimates for properties comprising 83% of our standardized measure of discounted future net cash flows as of December 31, 2003, 2004 and 2005. Remaining reserve estimates were prepared by our technical staff. Substantially all reserves stated here are located in the United States of America.

Proved reserves are estimated quantities of crude oil and natural gas which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.

There are numerous uncertainties inherent in estimating quantities of proved oil and natural gas reserves. Oil and natural gas reserve engineering is a subjective process of estimating underground accumulations of oil and natural gas that cannot be precisely measured, and estimates of engineers other than the Company’s might differ materially from the estimates set forth herein. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Results of drilling, testing and production subsequent to the date of the estimate may justify revision of such estimate. Accordingly, reserve estimates are often different from the quantities of oil and gas that are ultimately recovered.

F-25

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(continued)

Gas imbalance receivables and liabilities for each of the three years ended December 31, 2003, 2004 and 2005, were not material and have not been included in the reserve estimates.


	Natural Gas (MMcf)		Crude Oil (MBbls)
Proved reserves as of December 31, 2002	69,947		63,281
Revisions of previous estimates	(2,634	)	647
Extensions, discoveries and other additions	12,567		12,853
Production	(10,751	)	(3,463	)
Sale of minerals in place	(2,033	)	(318	)
Purchase of minerals in place	—		—

Proved reserves as of December 31, 2003	67,096		73,000
Revisions of previous estimates	1,257		3,172
Extensions, discoveries and other additions	554		7,918
Production	(8,794	)	(3,688	)
Sale of minerals in place	—		—
Purchase of minerals in place	507		200

Proved reserves as of December 31, 2004	60,620		80,602
Revisions of previous estimates	1,431		1,653
Extensions, discoveries and other additions	54,823		23,290
Production	(9,006	)	(5,708	)
Sale of minerals in place	—		(1,292	)
Purchase of minerals in place	250		100

Proved reserves as of December 31, 2005	108,118		98,645

Proved oil and gas reserves

The following reserve information sets forth the estimated quantities of proved developed and proved undeveloped oil and natural gas reserves of the Company as of December 31, 2003, 2004 and 2005:


Proved Developed Reserves	Natural Gas (MMcf)	Crude Oil (MBbls)	Oil Equivalent (MBoe)
December 31, 2003	63,327	36,106	46,661
December 31, 2004	56,733	65,594	75,050
December 31, 2005	54,257	71,259	80,302

Proved Undeveloped Reserves	Natural Gas (MMcf)	Crude Oil (MBbls)	Oil Equivalent (MBoe)
December 31, 2003	3,769	36,894	37,522
December 31, 2004	3,887	15,008	15,656
December 31, 2005	53,861	27,386	36,363

Proved developed reserves are proved reserves expected to be recovered through existing wells with existing equipment and operating methods. Proved undeveloped reserves are proved reserves that require incremental capital expenditures to recover. Natural gas is converted to barrels of oil equivalent using a conversion factor of six thousand cubic feet per barrel.

F-26

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(continued)

Standardized measure of discounted future net cash flows relating to proved oil and gas reserves

The standardized measure of discounted future net cash flows presented in the following table was computed using year-end prices and costs and a 10% discount factor. However, the Company cautions that actual future net cash flows may vary considerably from these estimates. Although the Company’s estimates of total proved reserves, development costs and production rates were based on the best available information, the development and production of the oil and gas reserves may not occur in the periods assumed. Actual prices realized, costs incurred and production quantities may vary significantly from those used. Therefore, such estimated future net cash flows computations should not be considered to represent the Company’s estimate of the expected revenues or the current value of existing proved reserves.


	2003			2004			2005
	(in thousands)
Historical
Future cash inflows	$	2,666,290		$	3,562,595		$	6,332,258
Future production costs		(1,016,316	)		(1,280,180	)		(1,808,654	)
Future development and abandonment costs		(64,978	)		(113,390	)		(434,249	)

Future net cash flows		1,584,996			2,169,025			4,089,355
10% annual discount for estimated timing of cash flows		(769,772	)		(1,054,705	)		(1,884,980	)

Standardized measure of discounted future net cash flows	$	815,224		$	1,114,320		$	2,204,375
Pro forma for income tax
Future cash inflows	$	2,666,290		$	3,562,595		$	6,332,258
Future production costs		(1,016,316	)		(1,280,180	)		(1,808,654	)
Future development and abandonment costs		(64,978	)		(113,390	)		(434,249	)
Future income taxes		(602,298	)		(824,229	)		(1,553,955	)

Future net cash flows pro forma for income taxes		982,698			1,344,796			2,535,400
10% annual discount for estimated timing of cash flows		(477,259	)		(653,817	)		(1,168,687	)

Standardized measure of discounted future net cash flows	$	505,439		$	690,979		$	1,366,713

The year-end weighted average oil price utilized in the computation of future cash inflows was $30.49, $40.46, and $55.87 per barrel at December 31, 2003, 2004 and 2005, respectively. The year-end weighted average natural gas price utilized in the computation of future cash inflows was $4.64, $4.97, and $7.60 per Mcf at December 31, 2003, 2004 and 2005, respectively. Future cash flows are reduced by estimated future costs to develop and to produce the proved reserves, as well as certain abandonment costs based on year-end cost estimates assuming continuation of existing economic conditions.

F-27

Index to Financial Statements

Continental Resources, Inc. and Subsidiary

Notes to Consolidated Financial Statements—(continued)

Income taxes were not computed at December 31, 2003, 2004 or 2005, as the Company elected S-corporation status effective June 1, 1997. The changes in the aggregate standardized measure of discounted future net cash flows attributable to the Company’s proved oil and gas reserves are presented below for each of the past three years (in thousands):


	2003			2004			2005
Standardized measure of discounted future net cash flows at the beginning of the year	$	633,397		$	815,224		$	1,114,320
Extensions, discoveries and improved recovery, less related costs		142,663			108,634			566,858
Revisions of previous quantity estimates		1,998			57,525			43,338
Changes in estimated future development and abandonment costs		(49,035	)		(44,323	)		(317,286	)
Purchase (sales) of minerals in place		(4,823	)		1,311			(8,714	)
Net changes in prices and production costs		54,132			210,323			870,255
Accretion of discount		63,340			81,522			111,432
Sales of oil and gas produced, net of production costs		(91,677	)		(125,850	)		(287,817	)
Development costs incurred during the period		46,290			12,604			48,894
Change in timing of estimated future production, and other		18,939			(2,650	)		63,095

Net Change		181,827			299,096			1,090,055
Standardized measure of discounted future net cash flows at the end of the year	$	815,224		$	1,114,320		$	2,204,375

15. Subsequent Event (Unaudited)

Concurrent with a proposed initial public offering, the Company will convert from a subchapter S-corporation to a subchapter C-corporation. In connection with this conversion, a charge to earnings estimated to be approximately $117 million as of December 31, 2005 will be recorded to recognize deferred taxes.

F-28

Index to Financial Statements

Glossary of Oil and Natural Gas Terms

The terms defined in this section are used throughout this prospectus:

“ Bbl .” One stock tank barrel, of 42 U.S. gallons liquid volume, used herein in reference to crude oil, condensate or natural gas liquids.

“ Bcf .” One billion cubic feet of natural gas.

“Boe .” Barrels of oil equivalent, with six thousand cubic feet of natural gas being equivalent to one barrel of oil.

“ British thermal unit .” 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.

“ Completion .” The process of treating a drilled well followed by the installation of permanent equipment for the production of natural gas or oil, or in the case of a dry hole, the reporting of abandonment to the appropriate agency.

“ Developed acreage.” The number of acres that are allocated or assignable to productive wells or wells capable of production.

“ Development well.” A well drilled within the proved area of a natural gas or oil reservoir to the depth of a stratigraphic horizon known to be productive.

“ Dry hole.” A well found to be incapable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production exceed production expenses and taxes.

“ Enhanced recovery .” The recovery of oil and natural gas through the injection of liquids or gases into the reservoir, supplementing its natural energy. Enhanced recovery methods are often applied when production slows due to depletion of the natural pressure.

“ Environmental Assessment (EA).” An environmental assessment, a study that can be required pursuant to federal law to assess the potential direct, indirect and cumulative impacts of a project.

“ Environmental Impact Statement (EIS).” An environmental impact statement, a more detailed study that can be required pursuant to federal law of the potential direct, indirect and cumulative impacts of a project that may be made available for public review and comment.

“ Exploratory well.” A well drilled to find and produce natural gas or oil reserves not classified as proved, to find a new reservoir in a field previously found to be productive of natural gas or oil in another reservoir or to extend a known reservoir.

“ 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.

“ Formation .” A layer of rock which has distinct characteristics that differ from nearby rock.

“ 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.

A-1

Index to Financial Statements

“ 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.

“ MBbl .” One thousand barrels of crude oil, condensate or natural gas liquids.

“ Mcf .” One thousand cubic feet of natural gas.

“ MMBbl .” One million barrels of crude oil, condensate or natural gas liquids.

“ MMBoe .” One million Boe.

“ 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 a specified tract. An owner who has 50% interest in 100 acres owns 50 net acres.

“Overpressured.” A subsurface formation that exerts an abnormally high formation pressure on a wellbore drilled into it.

“ PUD.” Proved undeveloped.

“ PV-10 .” When used with respect to oil and natural gas reserves, PV-10 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, using prices and costs in effect at the determination date, 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 SEC. PV-10 is a non-GAAP financial measure. However, our PV-10 and our standardized measure of discounted future net cash flows (the most directly comparable measure calculated and presented in accordance with GAAP) are equivalent because we are a subchapter S-corporation until the closing date of this offering.

“ Primary recovery .” The period of production in which oil moves from its reservoir through the wellbore under naturally occurring reservoir pressure.

“ Productive well.” A well that is found to be capable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of the production exceed production expenses and taxes.

“ Proved developed reserves.” Reserves that can be expected to be recovered through existing wells with existing equipment and operating methods.

“ Proved reserves.” The estimated quantities of oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be commercially recoverable in future years from known reservoirs under existing economic and operating conditions.

“Proved undeveloped reserves (PUD).” Proved 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.

“ Recompletion. ” The process of re-entering an existing wellbore that is either producing or not producing and completing new reservoirs in an attempt to establish or increase existing production.

“Reservoir.” A porous and permeable underground formation containing a natural accumulation of producible natural gas and/or oil that is confined by impermeable rock or water barriers and is separate from other reservoirs.

“ 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.

A-2

Index to Financial Statements

“ 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.

“ 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 an enhanced recovery process.

“ Wellbore .” The hole drilled by the bit that is equipped for oil or 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, gas, or other minerals. The working interest owners bear the exploration, development, and operating costs on either a cash, penalty, or carried basis.

A-3

Index to Financial Statements

LOGO

January 16, 2006

Continental Resources, Inc.

302 North Independence

Enid, Oklahoma 73702

Gentlemen:

At your request we have prepared an estimate of the proved reserves and future production and income attributable to certain leasehold interests of Continental Resources, Inc. as of December 31, 2005. The properties evaluated by Ryder Scott Company, L. P. (Ryder Scott) were selected by Continental Resources, and account for approximately 82.8 percent of the future net income discounted at 10 percent attributable to the proved reserves as of December 31, 2005. The income data have been estimated using the Securities and Exchange Commission (“SEC”) guidelines for future cost and price parameters.

The estimated reserve quantities and future income quantities presented in this report are related to hydrocarbon prices. December 31, 2005 hydrocarbon prices were used in the preparation of this report; however, actual future prices may vary significantly from December 31, 2005 prices due to a combination of economic and political forces. Therefore, quantities of reserves actually recovered and quantities of income actually received may differ significantly from the estimated quantities presented in this report. The results are summarized as follows:

SEC PARAMETERS

Estimated Proved Net Reserve and Income Data

Certain Leasehold Interests of

Continental Resources, Inc.

As of December 31, 2005


	Net Oil** M Barrels	Net Gas** MMCF	Future Net** Income M$		Discounted** FNI @ 10%M$
Evaluated by Ryder Scott	87,506	56,036	$	3,348,180	$	1,824,387
Evaluated by Continental Resources	11,139	52,082	$	741,176	$	379,988

Total Proved Reserves	98,645	108,118	$	4,089,356	$	2,204,375

Ryder Scott has not reviewed the reserves and cashflow projections for those properties evaluated by Continental Resources, Inc. Ryder Scott has included these values at the request of Continental Resources, Inc. and expresses no opinion as to the reasonableness of these values.

From TRC Consultants’: PhdWin Decline Analysis

Liquid hydrocarbons are expressed in standard 1000 barrels. All gas volumes are sales gas expressed in millions of cubic feet (MMCF) at the official temperature and pressure bases of the areas where the gas reserves are located. No attempt has been made to quantify or otherwise account for any accumulated gas production imbalances that may exist.

Reserves Included in This Report

The proved reserves included herein conform to the definition as set forth in the Securities and Exchange Commission’s Regulation S-X Part 210.4-10 (a) as clarified by subsequent Commission Staff Accounting Bulletins.

B-1

Index to Financial Statements

Estimates of Reserves

In general, the reserves included herein were estimated by performance methods or the volumetric method; however, other methods were used in certain cases where characteristics of the data indicated such other methods were more appropriate in our opinion. The reserves estimated by the performance method utilized extrapolations of various historical data in those cases where such data were definitive. Reserves were estimated by the volumetric method in those cases where there were inadequate historical performance data to establish a definitive trend or where the use of production performance data as a basis for the reserve estimates was considered to be inappropriate.

The reserves included in this report are 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. Moreover, estimates of reserves may increase or decrease as a result of future operations.

Projection Rates

Initial production rates are based on the current producing rates for those reservoirs now on production. Test data and other related information was used to estimate the anticipated initial production rates for those wells or locations, which are not currently producing. If no production decline trend has been established, future production rates were held constant, or adjusted for the effects of curtailment where appropriate, until a decline in ability to produce was anticipated. The future anticipated 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 projected to commence at an anticipated date of delivery, which was furnished by Continental Resources, Inc.

The future production rates from reservoirs 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, which are not currently producing, may start producing earlier or later than anticipated in our estimates of their future production rates.

Hydrocarbon Prices

Continental Resources, Inc. has utilized hydrocarbon prices in effect at December 30, 2005, the crude oil price was $61.04 per barrel and the spot gas price was $11.23 per MMBTU. Product prices, which were actually used for each property, reflect adjustment from the above stated prices for gravity, quality, local conditions, and/or distance from market. These prices were held constant to depletion of the properties. In accordance with Securities and Exchange Commission guidelines, changes in hydrocarbon prices subsequent to December 31, 2005 were not considered in this report. Ryder Scott has not performed a detailed study of the product prices and makes no warranty for the product prices utilized in this report.

Costs

Continental Resources, Inc supplied operating costs for the leases and wells in this report. When applicable, the operating costs include a portion of general and administrative costs allocated directly to the leases and wells under terms of operating agreements. Development costs were furnished by Continental Resources, Inc. and are based on authorizations for expenditure for the proposed work or actual costs for similar projects. The current operating and development costs were held constant throughout the life of the properties. Continental Resources, Inc. has used an estimate of zero abandonment costs after salvage value for all properties in this report. Ryder Scott has not performed a detailed study of the operating and development costs and makes no warranty for the costs utilized in this report.

B-2

Index to Financial Statements

General

Ryder Scott Company performed the reserve analysis and generated the projection of future production presented in this report. However, at the request of Continental Resources, Inc., the economic analyses were performed using TRC Consultants’ PhdWin Decline Analysis. Ryder Scott Company, L. P. has made every attempt to confirm that the values used for scheduling production were correct. However, the internal calculations of this program were accepted without verification. In addition, Ryder Scott Company has accepted the ownership interests; costs and prices supplied by Continental Resources, Inc. as correct and have not attempted to verify those values. Ryder Scott Company has not attempted to verify the accuracy of the economic output from TRC Consultants’ PhdWin Decline Analysis.

As prepared by Continental Resources, Inc., the tables presented in this report are generated by TRC Consultants’ PhdWin Decline Analysis and are located behind the “Appendix” tab. The summary report contains individual tables of estimated production and income by year beginning January 1, 2006 by reserve category for the properties evaluated by Ryder Scott. These tables are located behind the tab titled “Grand Summary Projections”. A one-line summary of net reserves and income data for each of the subject properties is presented behind the tab titled “One-Line Summaries”. A one-line summary of reserves and income data ranked by BTAX cashflow discounted at 10 percent is behind the “Property Ranking” tab.

While it may reasonably be anticipated that the prices received by Continental Resources, Inc. for the sale of its production may be higher or lower than the prices used in this evaluation as described above, and the operating costs relating to such production may also increase above existing levels, such increases or decreases in prices and costs were, in accordance with rules adopted by the SEC, omitted from consideration in making this evaluation.

The reserve estimates presented herein are based upon a detailed study of the top valued properties in which Continental Resources, Inc. owns an interest; however, we have not made any field examination of the properties. Continental Resources, Inc. 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. The production data, ownership interests, prices, costs and other factual information furnished to Ryder Scott Company, L. P. by Continental Resources, Inc. in connection with this investigation were accepted without independent verification.

Neither Ryder Scott Company, L. P., nor any of its employees has any interest in the subject properties and neither the employment to make this study nor the compensation is contingent on our estimates of reserves and future income for the subject properties.

This report was prepared for the exclusive use of Continental Resources, Inc. The data, work papers and maps 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.

Gary Krieger, P.E.
Senior Vice President

B-3

Index to Financial Statements

LOGO

Continental Resources, Inc.

Common Stock

PROSPECTUS


JPMorgan

Merrill Lynch & Co.

Citigroup

UBS Investment Bank

Petrie Parkman & Co.

Raymond James

, 2006

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. The selling shareholder is offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock.

No action is being taken in any jurisdiction outside the United States to permit a public offering of the common stock or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus applicable to that jurisdiction.

Until , 2006, all dealers that buy, sell or trade in our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

Index to Financial Statements

Part II

Information Not Required in Prospectus

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses to be paid by us in connection with the sale of the shares of common stock being registered hereby. All amounts are estimates except for the SEC registration fee, the NASD filing fee and the NYSE listing fee.


Securities and Exchange Commission registration fee	$	61,525
NASD filing fee		58,000
NYSE listing fee		250,000
Accounting fees and expenses		250,000
Legal fees and expenses		500,000
Printing and engraving expenses		225,475
Transfer agent and registrar fees and expenses		5,000

Total	$	1,350,000

Item 14. Indemnification of Directors and Officers

Continental Resources, Inc. (the “Registrant”) is incorporated in Oklahoma. Section 1031 of the Oklahoma General Corporation Act (the “OGCA”) authorizes a court to award, or a corporation’s board of directors to grant, indemnity under certain circumstances to directors, officers employees or agents in connection with actions, suits or proceedings, by reason of the fact that the person is or was a director, officer, employee or agent, against expenses and liabilities incurred in such actions, suits or proceedings so long as they acted in good faith and in a manner the person reasonable believed to be in, or not opposed to, the best interests of the company, and with respect to any criminal action if they had no reasonable cause to believe their conduct was unlawful. With respect to suits by or in the right of such corporation, however, indemnification is generally limited to attorneys’ fees and other expenses and is not available if such person is adjudged to be liable to such corporation unless the court determines that indemnification is appropriate.

In connection with the closing of the offering, the Registrant will amend and restate its certificate of incorporation and bylaws. As permitted by the OGCA, the Registrant’s amended and restated certificate of incorporation will include a provision that eliminates the personal liability of its directors to the Registrant or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability:

•

for any breach of the director’s duty of loyalty to it or its shareholders;

•

for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;

•

under section 1053 of the OGCA regarding unlawful dividends and stock purchases; or

•

for any transaction for which the director derived an improper personal benefit.

As permitted by the OGCA, the Registrant’s amended and restated certificate of incorporation will provide that the Registrant is required to indemnify its directors and officers to the fullest extent permitted by the OGCA.

II-1

Index to Financial Statements

As permitted by Oklahoma law, the Registrant’s amended and restated bylaws will provide that:

•

the Registrant may indemnify its other employees and agents, subject to very limited exceptions;

•

the Registrant is required to advance expenses (including without limitation, attorneys’ fees), as incurred, to its directors and officers in connection with a legal proceeding, subject to very limited exceptions; and

•

the rights conferred in the Registrant’s bylaws are not exclusive.

The indemnification provisions in the Registrant’s amended and restated certificate of incorporation may be sufficiently broad to permit indemnification of its directors and officers for liabilities arising under the Securities Act.

Under Oklahoma law, corporations also have the power to purchase and maintain insurance for directors, officers, employees and agents.

Prior to the closing of the offering, it is contemplated that the Registrant and its subsidiaries will obtain liability insurance policies which indemnify their directors and officers against loss arising from claims by reason of their legal liability for acts as such directors and officers, subject to limitations and conditions as set forth in the policies.

The Registrant has entered into written indemnification agreements with all of its directors and executive officers (including each of its named executive officers). These indemnification agreements are intended to permit indemnification to the fullest extent permitted by the OGCA. 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 or her capacity as a director or officer, is made or threatened to be made a party to any suit or proceeding. The indemnification agreements generally cover claims relating to the fact that the indemnified party is or was an officer, director, employee or agent of the Registrant or any of its affiliates, or is or was serving at the Registrant’s request in such a position for another entity. The indemnification agreements also obligate the Registrant to promptly advance all reasonable expenses incurred in connection with any claim. The indemnitee is, in turn, obligated to reimburse the Registrant 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.

The Registrant will not be obligated to indemnify the indemnitee with respect to claims brought by the indemnitee against it without prior approval of a majority of the Registrant’s board of directors, except for claims brought by the Indemnitee to enforce his or her rights under the indemnification agreement.

Under the underwriting agreement that the Registrant will enter into in connection with the offering, the underwriters will be obligated, under certain circumstances, to indemnify directors and officers of the registrant against certain liabilities, including liabilities under the Securities Act. Reference is made to the form of underwriting agreement filed as Exhibit 1.1 hereto.

The foregoing discussion of the Registrant’s amended and restated certificate of incorporation and bylaws and Oklahoma law is not intended to be exhaustive and is qualified in its entirety by such certificate of incorporation, bylaws or law.

II-2

Index to Financial Statements

Item 15. Recent Sales of Unregistered Securities

During the past three years, the Registrant has issued unregistered securities to a limited number of persons, as described below. None of these transactions involved any underwriters or public offerings, and the Registrant believes that each of these transactions was exempt from registration requirements pursuant to Rule 701 of the Securities Act. The recipients of these securities represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the share certificates and instruments issued in these transactions.

During the year ended December 31, 2005, the Registrant issued options to purchase an aggregate of 275,000 shares of its common stock to certain of its executive officers under the Continental Resources, Inc. 2000 Stock Option Plan. During the year ended December 31, 2004, the Registrant issued options to purchase an aggregate of 220,000 shares of its common stock to certain of its executive officers under the Continental Resources, Inc. 2000 Stock Option Plan. The Registrant issued no options to purchase shares of its common stock under the Continental Resources, Inc. 2000 Stock Option Plan in 2003.

During the year ended December 31, 2005, the Registrant also issued 990,517 shares of its restricted stock to certain of its executive officers and employees under the Continental Resources, Inc. 2005 Long-Term Incentive Plan.

Item 16. Exhibits and Financial Statement Schedules

(a)

The following exhibits are filed herewith:


Number		Exhibit

1.1	**	Form of Underwriting Agreement.

3.1	*	Form of Third Amended and Restated Certificate of Incorporation of Continental Resources, Inc.

3.2	*	Form of Second Amended and Restated Bylaws of Continental Resources, Inc.

4.1	*	Specimen Common Stock Certificate.

4.2	*	Form of Registration Rights Agreement by and among Continental Resources, Inc., the Revocable Inter Vivos Trust of Harold G. Hamm, the Harold Hamm DST Trust and the Harold Hamm HJ Trust.

5.1	**	Opinion of Crowe & Dunlevy, A Professional Corporation.

10.1	*	Sixth Amended and Restated Credit Agreement among Union Bank of California, N.A., Guaranty Bank, FSB, Fortis Capital Corp., The Royal Bank of Scotland plc, other financial institutions and banks and Continental Resources, Inc. dated April 12, 2006.

10.2		Omnibus Agreement among Continental Resources, Inc., Hiland Partners, LLC, Harold Hamm, Hiland Partners GP, LLC, Continental Gas Holdings, Inc. and Hiland Partners, LP effective as of the closing of Hiland Partners, LP’s initial public offering of common units (incorporated by reference to Exhibit 10.10 to the Annual Report on Form 10-K of Hiland Partners, LP filed on March 30, 2005, Commission File No. 000-51120).

10.3		Compression Services Agreement among Hiland Partners, LP and Continental Resources, Inc. effective as of January 28, 2005 (incorporated by reference to Exhibit 10.3 to the Annual Report on Form 10-K of Hiland Partners, LP filed on March 30, 2005, Commission File No. 000-51120).

10.4		Gas Purchase Contract between Continental Resources, Inc. and Hiland Partners, LP dated November 8, 2005 (incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-1 of Hiland Partners, LP filed on December 10, 2004, Commission File No. 333-119908).

II-3

Index to Financial Statements


Number		Exhibit

10.5		Strategic Customer Relationship Agreement among Complete Energy Services, Inc., CES Mid-Continent Hamm, Inc. and Continental Resources, Inc. dated October 14, 2004 (incorporated by reference to Exhibit 10.12 to the Registration Statement on Form S-1 of Complete Production Services, Inc. filed on November 15, 2005, Commission File No. 333-128750).

10.6	*	Continental Resources, Inc. 2000 Stock Option Plan.

10.7	*	First Amendment to Continental Resources, Inc. 2000 Stock Option Plan.

10.8	*	Form of Incentive Stock Option Agreement.

10.9	*	Amended and Restated Continental Resources, Inc. 2005 Long-Term Incentive Plan effective as of April 3, 2006.

10.10	*	Form of Restricted Stock Award Agreement.

10.11	*	Amended and Restated Employment Agreement between Continental Resources, Inc. and Mark E. Monroe dated April 3, 2006.

10.12	*	Form of Indemnification Agreement between Continental Resources, Inc. and each of the directors and executive officers thereof.

10.13	*	Membership Interest Assignment Agreement by and between Continental Resources, Inc., the Harold Hamm Revocable Inter Vivos Trust, the Harold Hamm HJ Trust and the Harold Hamm DST Trust dated March 30, 2006.

21.1	*	Subsidiaries of Continental Resources, Inc.

23.1	*	Consent of Grant Thornton LLP.

23.2	*	Consent of Ernst & Young LLP.

23.3	*	Consent of Ryder Scott Company, L.P.

23.4	**	Consent of Crowe & Dunlevy, A Professional Corporation (included in Exhibit 5.1).

23.5	*	Consent of Vinson & Elkins L.L.P.

24.1	***	Power of Attorney.

Filed herewith.

To be filed by amendment.

***

Previously filed.

II-4

Index to Financial Statements

Item 17. Undertakings

The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in Item 14 above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered hereunder, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1)

For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective; and

(2)

For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bona fide offering thereof.

II-5

Index to Financial Statements

Signatures

Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in Enid, Oklahoma, on this 13 ^th day of April, 2006.


CONTINENTAL RESOURCES, INC.

By:		/s/ Mark E. Monroe
Name:		Mark E. Monroe
Title:		President and Chief Operating Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 1 to Registration Statement on Form S-1 has been signed by the following persons in the capacities and on the dates indicated.


Signature	Title	Date
* Harold G. Hamm	Chairman, Chief Executive Officer and Director (principal executive officer)	April 13, 2006

/s/ Mark E. Monroe Mark E. Monroe	President, Chief Operating Officer and Director	April 13, 2006

* John D. Hart	Vice President, Chief Financial Officer and Treasurer (principal financial and accounting officer)	April 13, 2006

* Jack H. Stark	Senior Vice President—Exploration and Director	April 13, 2006

* Robert J. Grant	Director	April 13, 2006

* George S. Littell	Director	April 13, 2006

* Lon McCain	Director	April 13, 2006

* H. R. Sanders, Jr.	Director	April 13, 2006



*By:		/s/ Mark E. Monroe
		Mark E. Monroe Attorney-in-Fact

II-6

Index to Financial Statements

Exhibit Index


Number		Exhibit

1.1	**	Form of Underwriting Agreement.

3.1	*	Form of Third Amended and Restated Certificate of Incorporation of Continental Resources, Inc.

3.2	*	Form of Second Amended and Restated Bylaws of Continental Resources, Inc.

4.1	*	Specimen Common Stock Certificate.

4.2	*	Form of Registration Rights Agreement by and among Continental Resources, Inc., the Revocable Inter Vivos Trust of Harold G. Hamm, the Harold Hamm DST Trust and the Harold Hamm HJ Trust.

5.1	**	Opinion of Crowe & Dunlevy, A Professional Corporation.

10.1	*	Sixth Amended and Restated Credit Agreement among Union Bank of California, N.A., Guaranty Bank, FSB, Fortis Capital Corp., The Royal Bank of Scotland plc, other financial institutions and banks and Continental Resources, Inc. dated April 12, 2006.

10.2		Omnibus Agreement among Continental Resources, Inc., Hiland Partners, LLC, Harold Hamm, Hiland Partners GP, LLC, Continental Gas Holdings, Inc. and Hiland Partners, LP effective as of the closing of Hiland Partners, LP’s initial public offering of common units (incorporated by reference to Exhibit 10.10 to the Annual Report on Form 10-K of Hiland Partners, LP filed on March 30, 2005, Commission File No. 000-51120).

10.3		Compression Services Agreement among Hiland Partners, LP and Continental Resources, Inc. effective as of January 28, 2005 (incorporated by reference to Exhibit 10.3 to the Annual Report on Form 10-K of Hiland Partners, LP filed on March 30, 2005, Commission File No. 000-51120).

10.4		Gas Purchase Contract between Continental Resources, Inc. and Hiland Partners, LP dated November 8, 2005 (incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-1 of Hiland Partners, LP filed on December 10, 2004, Commission File No. 333-119908).

10.5		Strategic Customer Relationship Agreement among Complete Energy Services, Inc., CES Mid-Continent Hamm, Inc. and Continental Resources, Inc. dated October 14, 2004 (incorporated by reference to Exhibit 10.12 to the Registration Statement on Form S-1 of Complete Production Services, Inc. filed on November 15, 2005, Commission File No. 333-128750).

10.6	*	Continental Resources, Inc. 2000 Stock Option Plan.

10.7	*	First Amendment to Continental Resources, Inc. 2000 Stock Option Plan.

10.8	*	Form of Incentive Stock Option Agreement.

10.9	*	Amended and Restated Continental Resources, Inc. 2005 Long-Term Incentive Plan effective as of April 3, 2006.

10.10	*	Form of Restricted Stock Award Agreement.

10.11	*	Amended and Restated Employment Agreement between Continental Resources, Inc. and Mark E. Monroe dated April 3, 2006.

10.12	*	Form of Indemnification Agreement between Continental Resources, Inc. and each of the directors and executive officers thereof.

10.13	*	Membership Interest Assignment Agreement by and between Continental Resources, Inc., the Harold Hamm Revocable Inter Vivos Trust, the Harold Hamm HJ Trust and the Harold Hamm DST Trust dated March 30, 2006.

II-7

Index to Financial Statements


Number		Exhibit

21.1	*	Subsidiaries of Continental Resources, Inc.

23.1	*	Consent of Grant Thornton LLP.

23.2	*	Consent of Ernst & Young LLP.

23.3	*	Consent of Ryder Scott Company, L.P.

23.4	**	Consent of Crowe & Dunlevy, A Professional Corporation (included in Exhibit 5.1).

23.5	*	Consent of Vinson & Elkins L.L.P.

24.1	***	Power of Attorney.

Filed herewith.

To be filed by amendment.

***

Previously filed.

II-8

EXHIBIT 3.1

FORM OF

THIRD AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

CONTINENTAL RESOURCES, INC.

We, Mark E. Monroe and Donald P. Fischbach, do hereby certify that we are the President and Secretary, respectively, of Continental Resources, Inc., a corporation organized and existing under the laws of the State of Oklahoma (the “ Corporation ”), and do hereby further certify as follows:

1. The name of the Corporation is Continental Resources, Inc.

2. The name under which the Corporation was originally incorporated was Shelly Dean Oil Company. The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Oklahoma on November 16, 1967, with amendments thereto filed on September 23, 1976, June 30, 1980, January 30, 1987, June 25, 1987, June 21, 1991, October 1, 1991 and May 6, 1993 (as amended, the “ Original Certificate ”).

3. The Original Certificate was amended and restated by the Amended and Restated Certificate of Incorporation filed with the Secretary of State of the State of Oklahoma on July 16, 1998 (the “ Restated Certificate ”).

4. The Restated Certificate was amended and restated by the Amended and Restated Certificate of Incorporation filed with the Secretary of State of the State of Oklahoma on January 8, 2001, with amendments filed thereto on July 20, 2001 and December 22, 2004 (as amended, the “ Second Restated Certificate ”).

5. This Third Amended and Restated Certificate of Incorporation was duly adopted in accordance with the provisions of Sections 1077 and 1080 of the Oklahoma General Corporation Act (the “ Act ”) by resolution of the Board of Directors of the Corporation (the “ Board ”) and by written consent of the holders of not less than a majority of the outstanding stock of the Corporation entitled to vote thereon, and written notice of the corporate action has been given to the shareholders of the Corporation, if any, who have not so consented in writing, all in accordance with the provisions of the Act.

6. The text of the Second Restated Certificate is hereby amended and restated to read in its entirety as follows:

ARTICLE ONE: The name of the Corporation is Continental Resources, Inc.

ARTICLE TWO: The address of the registered office of the Corporation in the State of Oklahoma is 302 North Independence, in the City of Enid, County of Garfield. The name of the Corporation’s registered agent at such address is Donald P. Fischbach.

ARTICLE THREE: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the Act.

ARTICLE FOUR: The total number of shares of all classes of stock which the Corporation shall have authority to issue is 525,000,000 shares, consisting of 500,000,000 shares of Common Stock, par value one cent ($.01) per share (the “ Common Stock ”), and 25,000,000 shares designated as Preferred Stock, par value one cent ($.01) per share (the “ Preferred Stock ”).

Section 1. Preferred Stock . The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized (i) to provide by resolution or resolutions from time to time for the issuance of shares of Preferred Stock in one or more series, (ii) to establish from time to time the number of shares to be included in each such series, (iii) (to the extent not expressly provided for herein) to fix the designations, preferences and relative, participating, optional or other special rights of the shares of each such series and the qualifications, limitations or restrictions, if any, thereof, by filing one or more certificates pursuant to the Act (hereinafter, referred to as a “ Preferred Stock Designation ”) and (iv) to increase or decrease the number of shares of any such series to the extent permitted by the Act and the Preferred Stock Designation (but not below the number of shares thereof then outstanding). The authority of the Board of Directors with respect to each series shall include, but not be limited to, determination of the following:

(a) The designation of the series, which may be by distinguishing the number, letter or title of such series.

(b) The number of shares of the series.

(c) Whether dividends, if any, shall be paid in cash or in capital stock or other securities, whether such dividends shall be cumulative (and, if so, from which date or dates for each such series) or noncumulative, the preference or relation which such dividends, if any, shall bear to the dividends payable on any other class or classes or any other series of capital stock, and the dividend rate, if any, of the series.

(d) Conditions and dates upon which dividends, if any, shall be payable.

(e) The redemption rights and redemption price or prices, if any, for shares of the series.

(f) The terms and amount of any sinking fund provided for the purchase or redemption of shares of the series.

(g) The amounts payable on and the preferences, if any, of shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.

(h) Whether the shares of the series shall be convertible into or exchangeable for shares of any other class or series of capital stock, or any other security, of the Corporation or any other corporation and, if so, the specification of such other class or series or such other security, the conversion or exchange price or prices or rate or rates,

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any adjustments thereof, the date or dates at which such shares shall be convertible or exchangeable and all other terms and conditions upon which such conversion or exchange may be made.

(i) Restrictions on the issuance of shares of the same series or of any other class or series.

(j) The voting rights, if any, of the holders of shares of the series, whether as a class or otherwise, with respect to the election of directors or otherwise.

(k) The price or other consideration for which shares of the series shall be issued and, if deemed desirable, the stated value or other valuation of the shares constituting such series.

(l) Any other relative rights, preferences and limitations of that series.

Section 2. Common Stock .

(a) General . All shares of Common Stock shall be identical and will entitle holders thereof to the same rights and privileges, except as otherwise provided herein. Subject to the prior rights and preferences, if any, applicable to shares of the Preferred Stock or any series thereof, the holders of shares of Common Stock shall be entitled to receive such dividends (payable in cash, stock, or otherwise) as may be declared thereon by the Board of Directors at any time and from time to time out of any funds of the Corporation legally available therefore.

(b) Voting Rights .

(i) Each registered holder of Common Stock shall be entitled to one vote for each share of Common Stock held by such holder.

(ii) Except as otherwise provided by law, each registered holder of Common Stock shall be entitled to vote for the election of directors of the Corporation as provided for in Section 2 of Article Five of this Third Amended and Restated Certificate of Incorporation and shall be entitled to vote on all other matters submitted to a vote of shareholders of the Corporation.

(d) Liquidation . In the event of any voluntary or involuntary liquidation, dissolution, or winding-up of the Corporation, after distribution in full of the preferential amounts, if any, to be distributed to the holders of shares of Preferred Stock or any series thereof, the holders of shares of Common Stock shall be entitled to receive all of the remaining assets of the Corporation available for distribution to its shareholders, ratably in proportion to the number of shares of Common Stock held by them. A liquidation, dissolution, or

- 3 -

winding-up of the Corporation, as such terms are used in this paragraph (d), shall not be deemed to be occasioned by or to include any consolidation or merger of the Corporation with or into any other corporation or corporations or other entity or a sale, lease, exchange, or conveyance of all or a part of the assets of the Corporation.

(e) Conversion . Upon the effectiveness of this Third Amended and Restated Certificate of Incorporation, each issued and outstanding share of voting common stock, par value $.01 per share, of the Corporation, shall automatically be reclassified, changed and converted into shares of Common Stock, and each issued and outstanding share of non-voting common stock, par value $.01 per share, of the Corporation, shall automatically be reclassified, changed and converted into shares of Common Stock.

ARTICLE FIVE: Directors . The Board of Directors of the Corporation shall consist of such number of directors as may be determined from time to time by the Board of Directors in its sole discretion in accordance with Article III of the Bylaws of the Corporation and shall be subject to the following provisions:

Section 1. Classification . The directors shall be divided into three classes as nearly equal in size as is practicable. The Board of Directors shall by resolution designate the Class I, Class II and Class III directors, whose terms shall expire at the annual meetings of shareholders in 2007, 2008 and 2009, respectively. At each annual shareholders’ meeting after the adoption of this Third Amended and Restated Certificate of Incorporation, directors to replace those of a class whose terms expire at such annual meeting shall be elected to hold office until the third succeeding annual meeting of shareholders and until their respective successors shall have been duly elected and qualified. If the number of directors is hereafter changed, any newly created directorships or decrease in directorships shall be so apportioned among the classes as to make all classes as nearly equal in number as is practicable.

Section 2. Election . Holders of Common Stock shall elect all directors of the Corporation (other than directors, if any, which holders of any series of Preferred Stock are entitled to elect pursuant to the provisions of the Preferred Stock Designation establishing such series). Advance notice of shareholder nominations for the election of directors and of business to be brought by shareholders before any meeting of the shareholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation.

Section 3. Written Ballot . The election of directors need not be by written ballot except as may otherwise be provided in the Bylaws.

Section 4. Cumulative Voting . Cumulative voting for the election of directors is not allowed.

Section 5. Removal . Subject to the rights of the holders of any series of Preferred Stock to remove directors under specified circumstances, up to and until the Trigger Date, any director may be removed, with or without cause, by the affirmative vote of the holders of at least a majority of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single

- 4 -

class. Subject to the rights of the holders of any series of Preferred Stock to remove directors under specified circumstances, upon and after the Trigger Date, (i) no director may be removed without cause and (ii) the affirmative vote of the holders of at least a majority of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to remove any director or the entire Board of Directors for cause.

Section 6. Shareholder Meetings . Special meetings of shareholders of the Corporation may be called only by the Chairman of the Board or the President or by the Board of Directors acting pursuant to a resolution adopted by a majority of the Board of Directors.

Section 7. Definitions . For purposes of this Article Five, Article Six, Article Seven and Article Fourteen:

(a) “ Affiliate ” shall have the meaning ascribed to such terms in Rule l2b-2 under the Securities Exchange Act of 1934, as amended, as in effect on the date of the effectiveness of this Third Amended and Restated Certificate of Incorporation.

(b) “ controlled by ” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.

(c) “ Controlled Affiliate ” shall mean, with respect to any Person, one or more of such Person’s Affiliates that is directly or indirectly controlled by such Person.

(d) “ Person” means any individual, firm, corporation, partnership, limited partnership, limited liability partnership, business trust, limited liability company, unincorporated association, or joint venture or other entity, and shall include any successor (by merger or otherwise) of such entity.

(e) “ Trigger Date ” shall mean such time as Harold G. Hamm and his Controlled Affiliates cease to own shares of capital stock of the Corporation representing fifty percent (50%) or more of the voting power of all of the then-outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors.

ARTICLE SIX: Bylaws . The Board of Directors shall have the power to adopt, amend or repeal the Bylaws of the Corporation. Any adoption, amendment or repeal of the Bylaws of the Corporation by the Board of Directors shall require the approval of a majority of the Board of Directors. Up to and until the Trigger Date, the Bylaws of the Corporation may also be adopted, amended or repealed by the affirmative vote of the holders of at least a majority of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class. Upon and after the Trigger Date, the shareholders of the Corporation shall not have the power to adopt, amend or repeal the Bylaws of the Corporation.

ARTICLE SEVEN: Action Without a Meeting . Up to and until the Trigger Date, any action

- 5 -

required or permitted to be taken by the shareholders of the Corporation may be effected by any consent in writing by such shareholders. Upon and after the Trigger Date, any action required or permitted to be taken by the shareholders of the Corporation must be effected at a duly called annual or special meeting of shareholders of the Corporation and may not be effected by any consent in writing by such shareholders.

ARTICLE EIGHT: Vacancies . Subject to the rights of the holders of any series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall, unless otherwise required by law or by resolution of the Board of Directors, be filled by the affirmative vote of a majority of the directors then in office, though less than a quorum (and not by shareholders), and directors so chosen shall hold office for a term expiring at the annual meeting of shareholders applicable to the class to which the newly elected director is assigned and until such director’s successor shall have been duly elected and qualified. No decrease in the authorized number of directors shall shorten the term of any incumbent director.

ARTICLE NINE: Liability of Directors . No director of the Corporation shall be liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its shareholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 1053 of the Act, or (iv) for any transaction from which the director derived an improper personal benefit. If the Act is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended Act. Any repeal or modification of this Article Nine by the shareholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such repeal or modification.

ARTICLE TEN: Indemnification . The Corporation shall indemnify, to the fullest extent permitted by the laws of the State of Oklahoma as from time to time in effect, each director and officer of the Corporation, and may indemnify each employee and agent of the Corporation, and all other persons whom the Corporation is authorized to indemnify under the provisions of the Act.

ARTICLE ELEVEN: Business Combinations with Interested Shareholders . The Corporation elects not to be governed by Section 1090.3 of the Act.

ARTICLE TWELVE: Control Shares . The Corporation elects not to be governed by Sections 1145 through 1155 of the Act.

ARTICLE THIRTEEN: No Shareholder Liability for Corporation Debt . Except upon the affirmative vote of shareholders holding all the issued and outstanding shares of Common Stock, no amendment to this Certificate of Incorporation may be adopted by the Corporation which would impose personal liability for the debts of the Corporation on the shareholders of the Corporation or which would amend, alter, repeal or adopt any provision inconsistent with this Article Thirteen.

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ARTICLE FOURTEEN: Amendment . The Corporation shall have the right, subject to any express provisions or restrictions contained in this Third Amended and Restated Certificate of Incorporation or the Bylaws of the Corporation, from time to time, to amend this Third Amended and Restated Certificate of Incorporation or any provision hereof in any manner now or hereafter provided by law; and all rights and powers of any kind conferred upon a director or shareholder of the Corporation by this Third Amended and Restated Certificate of Incorporation or any amendment hereof are subject to such right of the Corporation; provided, however , that upon and after the Trigger Date, the affirmative vote of the holders of at least eighty percent (80%) of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend or repeal Section 1 of Article Five hereof.

- 7 -

IN WITNESS WHEREOF, this Third Amended and Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of the Second Restated Certificate, and which has been duly adopted in accordance with Sections 1077 and 1080 of the Oklahoma General Corporation Act, has been executed by its duly authorized officer this day of , 2006.


CONTINENTAL RESOURCES, INC.

By:
		Mark E. Monroe
		President and Chief Operating Officer

ATTEST:

Donald P. Fischbach

Secretary

- 8 -

EXHIBIT 3.2

FORM OF

SECOND AMENDED AND RESTATED

BYLAWS

CONTINENTAL RESOURCES, INC.

An Oklahoma Corporation

Date of Adoption:

, 2006

TABLE OF CONTENTS


ARTICLE I
OFFICES
Section 1.	Registered Office	1
Section 2.	Other Offices	1

ARTICLE II
MEETINGS OF SHAREHOLDERS

Section 1.	Voting Rights	1
Section 2.	Meetings of Shareholders	1
Section 3.	Annual Meetings	1
Section 4.	Notice of Annual Meeting	1
Section 5.	Special Meetings	1
Section 6.	Notice of Special Meetings	2
Section 7.	Shareholder List	2
Section 8.	Nomination of Directors	2
Section 9.	Business to be Brought Before a Meeting of Shareholders	3
Section 10.	Adjournment of Meetings	4
Section 11.	Quorum	4
Section 12.	Proxies	4
Section 13.	Voting; Elections; Inspectors	5
Section 14.	Conduct of Meetings	5
Section 15.	Treasury Stock	5

ARTICLE III
DIRECTORS

Section 1.	Power; Number; Term of Office	6
Section 2.	Place of Meetings; Order of Business	6
Section 3.	First Meeting	6
Section 4.	Regular Meetings	6
Section 5.	Special Meetings	6
Section 6.	Quorum; Voting	7
Section 7.	Telephonic and Other Participation	7
Section 8.	Action Without a Meeting	7
Section 9.	Expenses	7
Section 10.	Removal of Officers	7

ARTICLE IV
COMMITTEES

Section 1.	Designation; Powers	7
Section 2.	Procedure; Meetings; Quorum	8
Section 3.	Substitution and Removal of Members; Vacancies	8


ARTICLE V
OFFICERS

Section 1.	General	8
Section 2.	Salaries of Officers	8
Section 3.	Term of Office	8
Section 4.	Chairman and Vice Chairman	8
Section 5.	Chief Executive Officer	9
Section 6.	Chief Operating Officer	9
Section 7.	President	9
Section 8.	Vice President	9
Section 9.	Secretary	10
Section 10.	Chief Financial Officer	10
Section 11.	Assistant Secretary	10
Section 12.	Action with Respect to Securities of Other Corporations	10
Section 13.	Delegation	10

ARTICLE VI
CERTIFICATES OF STOCK, TRANSFERS OF STOCK
CLOSING OF TRANSFER BOOKS AND
REGISTERED SHAREHOLDERS

Section 1.	Certificates of Stock	11
Section 2.	Transfer of Shares	11
Section 3.	Ownership of Shares	11
Section 4.	Regulations Regarding Certificates	12
Section 5.	Lost or Destroyed Certificates	12

ARTICLE VII
NOTICES

Section 1.	Type and Method of Notice	12
Section 2.	Waiver of Notice	12

ARTICLE VIII
GENERAL PROVISIONS

Section 1.	Funds for Dividends	12
Section 2.	Financial Instruments	12
Section 3.	Fiscal Year	12
Section 4.	Corporate Seal	13
Section 5.	Facsimile Signatures	13
Section 6.	Reliance upon Books, Reports and Records	13
Section 7.	Application of Bylaws	13

ARTICLE IX
INDEMNIFICATION OF OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS

Section 1.	Indemnity Other Than for Actions by the Corporation	13


Section 2.	Indemnity for Actions by the Corporation	14
Section 3.	Success on the Merits	14
Section 4.	Procedure	14
Section 5.	Expenses	14
Section 6.	Non-Exclusive	14
Section 7.	Insurance	15
Section 8.	Permissive Indemnification of Employees and Agents	15
Section 9.	Severability	15

ARTICLE X
AMENDMENTS

Section 1.	General	15

iii

SECOND AMENDED AND RESTATED BYLAWS

CONTINENTAL RESOURCES, INC.

Incorporated under the laws of the State of Oklahoma

ARTICLE I

OFFICES

Section 1. Registered Office . The registered office of Continental Resources, Inc. (the “Corporation”) shall be the registered office named in the Corporation’s Third Amended and Restated Certificate of Incorporation, as may be amended or restated from time to time, on file with the Oklahoma Secretary of State (the “Certificate of Incorporation”), or such other office as may be designated from time to time by the Board of Directors in the manner provided by law.

Section 2. Other Offices . The Corporation may also have offices at such other places both within and out of the State of Oklahoma as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE II

MEETINGS OF SHAREHOLDERS

Section 1. Voting Rights . With respect to voting powers, except as otherwise required by law, the voting rights of all shares are as set forth in the Certificate of Incorporation.

Section 2. Meetings of Shareholders . Meetings of shareholders for any purpose may be held at such time and place, within or without the State of Oklahoma, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof.

Section 3. Annual Meetings . An annual meeting of the shareholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, on such date, and at such time as the Board of Directors shall each year fix, which date shall be within thirteen (13) months of the last annual meeting of shareholders.

Section 4. Notice of Annual Meeting . Written notice of the annual meeting, stating the place, date and hour of such meeting, shall be given to each shareholder entitled to vote thereat not less than ten (10) days nor more than sixty (60) days before the date of the meeting unless otherwise required by law.

Section 5. Special Meetings . Special meetings of shareholders of the Corporation may be called only by the Chairman of the Board or the President or by the Board of Directors acting pursuant to a resolution adopted by a majority of the Board of Directors. The Board of Directors may postpone or reschedule any previously scheduled special meeting.

Section 6. Notice of Special Meetings . Written notice of a special meeting of shareholders, stating the place, date, hour, and the purpose or purposes thereof, shall be given to each shareholder entitled to vote thereat, not less than ten (10) days nor more than sixty (60) days before the date fixed for the meeting unless otherwise required by law. Business transacted at any special meeting of the shareholders shall be limited to the purposes stated in the notice.

Section 7. Shareholder List . The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of shareholders, a complete list of the shareholders entitled to vote at the meeting, arranged in alphabetical order, showing the address of and the number of shares registered in the name of each shareholder. Such list shall be open to the examination of any shareholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the election, at the principal place of business of the Corporation. The list shall be produced and kept at the time and place of the meeting during the whole time thereof, and subject to the inspection of any shareholder who may be present. The list also may be made available electronically to the shareholders, provided that the information required to gain access to such list is provided with the notice of the meeting to the shareholders.

Section 8. Nomination of Directors . Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors, except as otherwise provided in Article Eight of the Certificate of Incorporation. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of shareholders (a) by or at the direction of the Board of Directors, or (b) by any shareholder of the Corporation who is a shareholder of record at the time of giving of notice provided for in this Section 8, who shall be entitled to vote for the election of directors at the meeting and who complies with the notice procedures set forth in this Section 8. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a shareholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Corporation (i) with respect to an election of directors to be held at the annual meeting of the shareholders of the Corporation, not later than ninety (90) days or more than one hundred twenty (120) days prior to the anniversary date of the proxy statement for the immediately preceding annual meeting of shareholders of the Corporation, provided, however , that if the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year’s annual meeting, to be timely, a shareholder’s notice must be so delivered not later than the close of business on the later of the ninetieth day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made, and (ii) with respect to a special meeting of shareholders called for the purpose of electing one or more directors to the Board of Directors, not earlier than the ninetieth day prior to such special meeting and not later than the close of business on the later of the seventieth day prior to such special meeting or the tenth day following the day on which public announcement of the date of the special meeting is first made. Such shareholder’s notice to the Secretary shall set forth (a) as to each person whom the shareholder proposes to nominate for election or re-election as a director, all information relating to the person that is required to be disclosed in solicitations for proxies for election of directors, or is otherwise required, pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including the written consent of

such person to be named in the proxy statement as a nominee and to serve as a director if elected), and (b) as to the shareholder giving the notice (i) the name and address, as they appear on the Corporation’s books, of such shareholder, and (ii) the class and number of shares of capital stock of the Corporation that are beneficially owned by the shareholder. At the request of any officer of the Corporation, any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Corporation the information required to be set forth in a shareholder’s notice of nomination that pertains to the nominee.

In the event that a person is validly designated as nominee to the Board and shall thereafter become unable or unwilling to stand for election to the Board of Directors, the Board of Directors or the shareholder who proposed such nominee, as the case may be, may designate a substitute nominee.

Except as otherwise provided in Article Eight of the Certificate of Incorporation, no person shall be eligible to serve as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 8. The chairman of the meeting of shareholders shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the Bylaws, and if the chairman should so determine, the chairman shall so declare to the meeting and the defective nomination shall be disregarded.

Notwithstanding the foregoing provisions of this Section 8, a shareholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section 8.

Section 9. Business to be Brought Before a Meeting of Shareholders . To be properly brought before a meeting of shareholders, business must be either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before an annual meeting by a shareholder of the Corporation who is a shareholder of record at the time of giving of notice provided for in this Section 9, who shall be entitled to vote at such annual meeting and who complies with the notice procedures set forth in this Section 9. Only such business shall be conducted at a special meeting of shareholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting pursuant to Section 6 of this Article II. Nominations of persons for election to the Board of Directors may be made at a special meeting of shareholders at which directors are to be elected pursuant to the Corporation’s notice of meeting in accordance with Section 8 of this Article II. In addition to any other applicable requirements, for business to be brought before an annual meeting by a shareholder of the Corporation, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not later than ninety (90) days or more than one hundred twenty (120) days prior to the anniversary date of the proxy statement for the immediately preceding annual meeting of shareholders of the Corporation, provided, however , that if the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year’s annual meeting, to be timely, a shareholder’s notice must be so delivered not later than the close of business on the later of the ninetieth day prior to such annual meeting or

the tenth day following the day on which public announcement of the date of such meeting is first made. A shareholder’s notice to the Secretary shall set forth as to each matter (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the Corporation’s books, of the shareholder proposing such business, (iii) the acquisition date, the class and the number of shares of voting stock of the Corporation which are owned beneficially by the shareholder, (iv) any material interest of the shareholder in such business, and (v) a representation that the shareholder intends to appear in person or by proxy at the annual meeting to bring the proposed business before the meeting.

Section 10. Adjournment of Meetings . The chairman of any meeting of shareholders or the holders of a majority of the outstanding shares entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting; provided, however, that if the date of any adjourned meeting is more than thirty (30) days after the date of which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, written notice of the place, date and hour of the adjourned meeting shall be given in conformity herewith. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted at the meeting as originally noticed.

Section 11. Quorum . The holders of a majority of the shares of stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by law or by the Certificate of Incorporation. Where a separate vote by a class or classes or series is required, a majority of the outstanding shares of such class or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to the vote on that matter. If a quorum shall fail to attend any meeting, the chairman of the meeting may adjourn to another place, if any, date or time.

Section 12. Proxies . Each shareholder entitled to vote at a meeting of shareholders may authorize another person or persons to act for him by proxy. Proxies for use at any meeting of shareholders shall be filed with the Secretary, or such other officer as the Board of Directors may from time to time determine by resolution, before or at the time of the meeting. All proxies shall be received and taken charge of and all ballots shall be received and canvassed by the secretary of the meeting, who shall decide all questions touching upon the qualification of voters, the validity of the proxies, and the acceptance or rejection of votes, unless an inspector or inspectors shall have been appointed by the chairman of the meeting, in which event such inspector or inspectors shall decide all such questions.

No proxy shall be valid after three (3) years from its date, unless the proxy provides for a longer period. 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.

Should a proxy designate two or more persons to act as proxies, unless such instrument shall provide to the contrary, a majority of such persons present at any meeting at which their powers thereunder are to be exercised shall have and may exercise all the powers of voting thereby conferred, or if only one be present, then such powers may be exercised by that one; or,

if an even number attend and a majority do not agree on any particular issue, each proxy so attending shall be entitled to exercise such powers in respect of such portion of the shares as is equal to the reciprocal of the fraction equal to the number of proxies representing such shares divided by the total number of shares represented by such proxies.

Section 13. Voting; Elections; Inspectors . Unless otherwise required by law or provided in the Certificate of Incorporation, each shareholder shall on each matter submitted to a vote at a meeting of shareholders have one vote for each share of the stock entitled to vote which is registered in his name on the record date for the meeting. For the purposes hereof, each election to fill a directorship shall constitute a separate matter. Shares registered in the name of another entity, domestic or foreign, may be voted by such officer, agent or proxy as the organizational documents of such entity may determine. Shares registered in the name of a deceased person may be voted by the executor or administrator of such person’s estate, either in person or by proxy.

All voting, except as required by the Certificate of Incorporation or where otherwise required by law, may be by a voice vote; provided, however , upon request of the chairman of the meeting or upon demand therefor by shareholders holding a majority of the issued and outstanding stock present in person or by proxy at any meeting a stock vote shall be taken. Every stock vote shall be taken by written ballots, each of which shall state the name of the shareholder or proxy voting and such other information as may be required under the procedure established for the meeting. All elections of directors shall be by written ballots, unless otherwise provided in the Certificate of Incorporation.

At any meeting at which a vote is taken by written ballots, the chairman of the meeting may appoint one or more inspectors, each of whom shall subscribe an oath or affirmation to execute faithfully the duties of inspector at such meeting with strict impartiality and according to the best of such inspector’s ability. Such inspector shall receive the written ballots, count the votes, and make and sign a certificate of the result thereof. The chairman of the meeting may appoint any person to serve as inspector, except no candidate for the office of director shall be appointed as an inspector.

Unless otherwise provided in the Certificate of Incorporation, cumulative voting for the election of directors shall be prohibited.

Section 14. Conduct of Meetings . The meetings of the shareholders shall be presided over by the Chairman of the Board or such other officer of the Corporation as designated by the Chairman of the Board or the Board of Directors. The Secretary of the Corporation, if present, shall act as secretary of such meetings, or, if the Secretary is not present, such other officer of the Corporation as designated by the Board of Directors or the chairman of the meeting shall so act.

The chairman of any meeting of shareholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem to the chairman in order.

Section 15. Treasury Stock . The Corporation shall not vote, directly or indirectly, shares of its own stock owned by it and such shares shall not be counted for quorum purposes. Nothing in this Section 15 shall be construed as limiting the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity.

ARTICLE III

DIRECTORS

Section 1. Power; Number; Term of Office . The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, and subject to the restrictions imposed by law or the Certificate of Incorporation, the Board of Directors may exercise all of the powers of the Corporation.

The number of directors which shall constitute the Board of Directors shall be at least three (3) and not more than fifteen (15). Subject to the limits specified in this Section 1, the number of directors shall be determined from time to time by resolution of the Board of Directors. The directors shall be elected at the annual meeting of shareholders.

The term of office of directors shall be as set forth in the Certificate of Incorporation.

Section 2. Place of Meetings; Order of Business . The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Oklahoma. At all meetings of the Board of Directors business shall be transacted in such order as shall from time to time be determined by the Chairman of the Board, or in the Chairman of the Board’s absence by the Chief Executive Officer (should the Chief Executive Officer be a director), or in the Chief Executive Officer’s absence by the President (should the President be a director), or in the President’s absence by such officer of the Corporation as designated by the Board of Directors, or by a majority of the Board of Directors.

Section 3. First Meeting . Each newly elected Board of Directors may hold its first meeting for the purpose of organization and the transaction of business, if a quorum is present, immediately after and at the same place as the annual meeting of the shareholders. Notice of such meeting shall not be required. At the first meeting of the Board of Directors in each year at which a quorum shall be present, held next after the annual meeting of shareholders, the Board of Directors shall elect the officers of the Corporation.

Section 4. Regular Meetings . Regular meetings of the Board of Directors shall be held at such times and places as shall be designated from time to time by the Chairman of the Board or, in the absence of the Chairman of the Board, by the Chief Executive Officer (should the Chief Executive Officer be a director), or in the Chief Executive Officer’s absence, by the President (should the President be a director), or in the President’s absence, by such officer of the Corporation as designated by the Board of Directors, or by a majority of the Board of Directors. Five (5) days’ notice of all regular meetings shall be given, and such notice shall state the place, date and hour of such meeting.

Section 5. Special Meetings . Special meetings of the Board may be called by the Chairman of the Board or the President on at least forty-eight (48) hours’ notice to each director stating the place, date and hour of such meeting and the business to be transacted thereat. Special meetings shall be called by the Chairman of the Board, the President or Secretary in like manner and on like notice on the written request of two (2) directors unless the Corporation has

at that time less than three (3) directors, in which latter event the request of only one (1) director shall be required. Meetings may be held at any time without notice if all the directors are present or if those not present waive notice of the meeting in writing.

Section 6. Quorum; Voting . At all meetings of the Board, a majority of the directors shall constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meetings at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by law or by the Certificate of Incorporation. 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.

Section 7. Telephonic and Other Participation . Members of the Board of Directors, or of any committee thereof, may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment that enables all persons participating in the meeting to hear each other. Such participation shall constitute presence in person at such meeting.

Section 8. Action Without a Meeting . Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if a written consent of such action is signed by, or an electronic transmission containing consent to such action is received from, all members of the Board or of such committee as the case may be. Such written or electronic consent shall be filed with the minutes of proceedings of the Board or committee.

Section 9. Expenses . The directors may be paid their expenses, if any, of attendance of such meeting of the Board of Directors and may be paid for attendance at such meeting of the Board of Directors and/or a stated fee as director. No such payment 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 committee meetings, and the chairman of any special or standing committee may be allowed additional compensation for serving in such capacity. All amounts to be paid under this Section 9 shall be subject to the approval of the Board of Directors.

Section 10. Removal of Officers . The Board of Directors at any time may, by affirmative vote of a majority of the members of the Board then in office, remove any officer elected or appointed by the Board of Directors for cause or without cause.

ARTICLE IV

COMMITTEES

Section 1. Designation; Powers . The Board of Directors may, by resolution passed by a majority of the Board of Directors, designate one or more committees, including, if they shall so determine, an executive committee, with each such committee to consist of one or more of the directors of the Corporation. Except as otherwise provided by the Certificate of Incorporation or applicable law, any such designated committee shall have and may exercise such of the powers and authority of the Board of Directors in the management of the business

and affairs of the Corporation as may be provided in such resolution. Any such designated committee may authorize the seal of the Corporation to be affixed to all papers which may require it. In addition to the above, such committee or committees shall have such other powers and limitations of authority as may be determined from time to time by the Board of Directors.

Section 2. Procedure; Meetings; Quorum . Any committee designated pursuant to this Article IV shall keep regular minutes of its actions and proceedings in a book provided for that purpose and report the same to the Board of Directors at its meeting next succeeding such action, shall fix its own rules or procedures, and shall meet at such times and at such place or places as may be provided by such rules, or by such committee or the Board of Directors. Should a committee fail to fix its own rules, the provisions of these Bylaws, pertaining to the calling of meetings and conduct of business by the Board of Directors, shall apply as nearly as may be possible. At every meeting of any such committee, a quorum shall be present if a majority of all the members of the committee are present. The affirmative vote of a majority of the members present at a meeting at which there is a quorum shall be necessary for the adoption by it of any resolution.

Section 3. Substitution and Removal of Members; Vacancies . The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member. The Board of Directors shall have the power at any time to remove any member(s) of a committee and to appoint other directors in lieu of the person(s) so removed and shall also have the power to fill vacancies in a committee.

ARTICLE V

OFFICERS

Section 1. General . The officers of the Corporation shall be chosen by the Board of Directors and shall, at a minimum, consist of a Chief Executive Officer and a Secretary. The Board of Directors may also choose additional officers, including a Chief Operating Officer, a President, a Chief Financial Officer, one or more Vice Presidents who may be classified by their specific function, a Secretary and one or more Assistant Secretaries. Two or more offices may be held by the same person, except the offices of President and Secretary.

Section 2. Salaries of Officers . The salaries of all officers and agents of the Corporation shall be fixed by the Board of Directors or a committee thereof.

Section 3. Term of Office . The officers of the Corporation shall hold office until their successors are chosen or until their earlier resignation or removal. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors.

Section 4. Chairman and Vice Chairman . The Chairman, or, in the absence of the Chairman, a Vice Chairman of the Board of Directors, if chosen, shall preside at all meetings of the Board of Directors and shareholders, and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

Section 5. Chief Executive Officer . The Board of Directors shall select a Chief Executive Officer of the Corporation, who will serve as an officer of the Corporation. The Chief Executive Officer shall (i) have overall supervision of the business of the Corporation and shall direct the affairs and policies of the Corporation, subject to any direction which may be given by the Board of Directors; (ii) shall have authority to designate the duties and powers of the officers and delegate special powers and duties to specified officers, so long as such designation shall not be inconsistent with the laws of the State of Oklahoma, these Bylaws or actions of the Board of Directors, and (iii) in general have all other powers and shall perform all other duties incident to the chief executive officer of a corporation and such other powers and duties as may be prescribed by the Board of Directors from time to time. The Chief Executive Officer shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing expressly delegated by the Board of Directors to some other officer or agent of the Corporation.

Section 6. Chief Operating Officer . The Board of Directors may select a Chief Operating Officer, who will serve as an officer of the Corporation. The Chief Operating Officer, if one is selected, need not hold any other office or title. The Chief Operating Officer, if one is selected, shall have supervision of the day-to-day business of the Corporation and shall direct the day-to-day affairs and policies of the Corporation subject to any directions which may be given by the Board of Directors and the Chief Executive Officer. The Chief Operating Officer shall have authority to designate the duties and powers of the officers and delegate special powers and duties to specified officers, so long as such designation shall not be inconsistent with the laws of the State of Oklahoma, these Bylaws or actions of the Board of Directors or the Chief Executive Officer, and shall in general have all other powers and shall perform all other duties incident to the Chief Operating Officer of a corporation and such other powers and duties as may be prescribed by the Board of Directors and the Chief Executive Officer from time to time.

Section 7. President . The Board of Directors may select a President, who will serve as an officer of the Corporation. The President, if one is selected, need not hold any other office or title. In the absence of the Chief Executive Officer, the President shall be the chief executive officer of the Corporation. The President shall have general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors, are carried into effect. If the Board of Directors does not designate the Chief Operating Officer of the Corporation, the President shall serve as the Chief Operating Officer of the Corporation. The President shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation.

Section 8. Vice President . The Vice President, or if there shall be more than one, the Vice Presidents in the order determined by the Board of Directors, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President and shall perform such other duties and have such other powers as the Board of Directors may from time

to time prescribe. The Board of Directors may designate one or more Vice Presidents as Executive Vice President, Senior Vice President or such other designation as the Board of Directors may select.

Section 9. Secretary . The Secretary shall attend the meetings of the Board of Directors and all meetings of the shareholders and record all the proceedings of the meetings of the Corporation and the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the shareholders and regular and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or Chief Executive Officer, under whose supervision the Secretary shall be. Additionally, the Secretary shall have custody of the corporate seal of the Corporation, and the Secretary or an Assistant Secretary, shall have the authority to affix the same on any instrument requiring it, and when so affixed, it may be attested by the Secretary’s signature or by the signature of such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by such other officer’s signature.

Section 10. Chief Financial Officer . The Board of Directors may select a Chief Financial Officer, who will be an officer of the Corporation. The Chief Financial Officer, if one is selected, need not hold any other officer title. The Chief Financial Officer, if one is selected, shall have general authority to supervise the financial and accounting affairs of the Corporation, subject to the authority of the Chairman, Chief Executive Officer and the President and Chief Operating Officer, and such other duties and powers as the Board of Directors or one of such officers prescribes.

Section 11. Assistant Secretary . The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors from time to time prescribe.

Section 12. Action with Respect to Securities of Other Corporations . Unless otherwise directed by the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the President or such other officer as designated by the Board of Directors, together with the Secretary or any Assistant Secretary appointed by the Board of Directors shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of security holders of or with respect to any action of security holders of any other corporation in which this Corporation may hold securities and otherwise to exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other corporation.

Section 13. Delegation . For any reason that the Board of Directors may deem sufficient, the Board of Directors may, except where otherwise provided by statute, delegate the powers or duties of any officer to any other person, and may authorize any officer to delegate specified duties of such office to any other person. Any such delegation or authorization by the Board shall be effected from time to time by resolution of the Board of Directors.

ARTICLE VI

CERTIFICATES OF STOCK, TRANSFERS OF STOCK

CLOSING OF TRANSFER BOOKS AND

REGISTERED SHAREHOLDERS

Section 1. Certificates of Stock . The Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of its capital stock shall be uncertificated shares. The certificates for shares of the capital stock of the Corporation shall be in such form, not inconsistent with that required by law and the Certificate of Incorporation, as shall be approved by the Board of Directors. Every holder of capital stock represented by certificates shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman of the Board, the Chief Executive Officer, President, a Vice President or such other officer as designated by the Board of Directors and the Secretary or an Assistant Secretary of the Corporation representing the number of shares (and, if the capital stock of the Corporation shall be divided into classes or series, certifying the class and series of such shares) owned by such shareholder which are registered in certified form; provided, however , that any of or all the signatures on the certificate may be facsimile. The stock record books and the blank stock certificate books shall be kept by the Secretary or at the office of such transfer agent or transfer agents as the Board of Directors may from time to time determine. In case any officer, transfer agent or registrar who shall have signed or whose facsimile signature or signatures shall have been placed upon any such certificate or certificates shall have ceased to be such officer, transfer agent or registrar before such certificate is issued by the Corporation, such certificate may nevertheless be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The stock certificates shall be consecutively numbered and shall be entered in the books of the Corporation as they are issued and shall exhibit the holder’s name and number of shares.

Section 2. Transfer of Shares . In respect of certificated shares of capital stock, such shares of capital 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 and cancellation of certificates for a like number of shares. Upon surrender to the Corporation or a transfer agent of the Corporation of such certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. In respect of uncertificated shares of capital stock, such shares of capital 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 the compliance with such rules and procedures as may be proscribed by the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the President or such other officer as designated by the Board of Directors.

Section 3. Ownership of Shares . The Corporation shall be entitled to treat the holder of record of any share or shares of capital stock of the Corporation as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the state of incorporation of the Corporation.

Section 4. Regulations Regarding Certificates . 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 capital stock of the Corporation.

Section 5. Lost or Destroyed Certificates . The Board of Directors may determine the conditions upon which the Corporation may issue a new certificate for shares of capital stock in place of a certificate theretofore issued by it which is alleged to have been lost, stolen or destroyed and may require the owner of such certificate or such owner’s legal representative to give bond, with surety sufficient to indemnify the Corporation and each transfer agent and registrar against any and all losses or claims which may arise by reason of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate in the place of the one so lost, stolen or destroyed.

ARTICLE VII

NOTICES

Section 1. Type and Method of Notice . Notices of meetings for directors and shareholders shall be in writing and delivered personally or mailed or delivered by such other means as permitted by law to the directors or shareholders at their addresses appearing on the books of the Corporation. Notice by mail shall be deemed to be given at the time when the same shall be deposited in the United States mail, postage prepaid. Notice of meetings of directors may be given by personal delivery or overnight delivery or by electronic transmission, including electronic mail, telegram or facsimile transmission. Notices to directors shall be deemed to have been given when received.

Section 2. Waiver of Notice . Whenever any notice is required to be given under the provisions of law or of the Certificate of Incorporation or by these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to notice.

ARTICLE VIII

GENERAL PROVISIONS

Section 1. Funds for Dividends . There may be set apart out of any of the funds of the Corporation available for dividends such amounts as the Board of Directors deems proper as a reserve or reserves for working capital, depreciation, losses in value, or for any other proper corporate purpose, and the Board of Directors may increase, decrease or abolish any such reserve in the manner in which it was created.

Section 2. Financial Instruments . All checks and demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.

Section 3. Fiscal Year . The fiscal year of the Corporation shall be as fixed by the Board of Directors.

Section 4. Corporate Seal . The Board of Directors may provide a suitable seal, containing the name of the Corporation, which seal shall be in the charge of the Secretary. If and when so directed by the Board of Directors or a committee thereof, duplicates of the seal may be kept and used by the Treasurer or by the Assistant Secretary or Assistant Treasurer. The seal may be used by causing it, or a facsimile thereof, to be impressed or affixed or in any other manner reproduced.

Section 5. Facsimile Signatures . In addition to the provisions for the use of facsimile signatures elsewhere specifically authorized in these Bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors.

Section 6. Reliance upon Books, Reports and Records . A member of the Board of Directors, or a member of any committee designated by the Board of Directors, in the performance of such member’s duties, shall be protected in relying in good faith upon the records of the Corporation and upon information, opinions, reports or statements presented to the Corporation by any of the Corporation’s officers or employees or committees of the Board of Directors, or by any other person as to matters the member reasonably believes are within the officer’s, employee’s, committee’s or other person’s competence and who have been selected with reasonable care by or on behalf of the Corporation.

Section 7. Application of Bylaws . In the event that any provisions of these Bylaws is or may be in conflict with any law of the United States, of the state of incorporation of the Corporation or of any other governmental body or power having jurisdiction over the Corporation, or over the subject matter to which such provision of these Bylaws applies, or may apply, such provision of these Bylaws shall be inoperative to the extent only that the operation thereof unavoidably conflicts with such law or provision, and shall in all other respects be in full force and effect.

ARTICLE IX

INDEMNIFICATION OF OFFICERS, DIRECTORS,

EMPLOYEES AND AGENTS

Section 1. Indemnity Other Than for Actions by the Corporation . The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

Section 2. Indemnity for Actions by the Corporation . The Corporation shall indemnify any person who was or is a party or is 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 he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of 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 the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper.

Section 3. Success on the Merits . To the extent that a director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 1 or 2 of this Article IX, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection therewith.

Section 4. Procedure . Any indemnification under Sections 1 or 2 of this Article IX (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 director or officer is proper in the circumstances because he has met the applicable standard of conduct set forth therein. Such determination shall be made (a) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (b) if such quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the shareholders.

Section 5. Expenses . Expenses incurred by an officer or director 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 IX.

Section 6. Non-Exclusive . The indemnification and advancement of expenses provided by, or granted pursuant to, this Article IX, unless otherwise provided by or granted pursuant to this Article IX, shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any statute, these Bylaws, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person.

Section 7. Insurance . By action of the Board of Directors, notwithstanding any interest of the directors in the action, the Corporation may purchase and maintain insurance, in such amounts as the Board of Directors deems appropriate, on behalf of any person who is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer 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 or would be required to indemnify him against such liability under the provisions of this Article IX or of the Oklahoma General Corporation Act.

Section 8. Permissive Indemnification of Employees and Agents . The Board of Directors may, but shall not be required to, provide indemnification as provided herein to a person who is not an officer or director of the Corporation who is or was serving as an employee or agent of the Corporation or to any person who is or was serving at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise.

Section 9. Severability . Each Section and part thereof of this Article IX shall be considered severable; and if, for any reason, any Section or part thereof is determined to be invalid and contrary to, or in conflict with, any existing or future provision of the Oklahoma General Corporation Act or any other law of the State of Oklahoma by a court having valid jurisdiction, such determination shall not impair the operation of, or have any other effect upon, the other Sections of this Article IX or the other parts of the Section in question as may remain otherwise intelligible, and such other Section or parts shall continue to be given full force and effect and such invalid paragraphs or parts shall be deemed not to be a part of these Bylaws.

ARTICLE X

AMENDMENTS

Section 1. General . In accordance with Article Six of the Certificate of Incorporation, these Bylaws may be amended and repealed, or new Bylaws may be adopted, by the shareholders or by the Board of Directors at any annual or special meeting of the shareholders or of the Board of Directors if notice of such amendment, repeal, or adoption of new Bylaws is contained in the notice of such meeting.

EXHIBIT 4.1


INCORPORATED UNDER THE LAWS OF THE STATE OF OKLAHOMA		CLASS A COMMON STOCK PAR VALUE $.01

THIS CERTIFICATE IS TRANSFERABLE IN [ ]		CUSIP

		SEE REVERSE FOR CERTAIN DEFINITIONS

C ONTINENTAL R ESOURCES , I NC .

INCORPORATED UNDER THE LAWS OF THE STATE OF OKLAHOMA

This certifies that

is the owner of

FULLY PAID AND NONASSESSABLE SHARES OF CONTINENTAL RESOURCES, INC. transferable only on the books of the corporation by the holder hereof in person or by duly authorized attorney upon surrender of this certificate properly endorsed. This certificate is not valid until countersigned and registered by the transfer agent and the registrar.

IN WITNESS WHEREOF, the said Corporation has caused the facsimile signatures of its duly authorized officers to be hereunto affixed.

CERTIFICATE OF STOCK

DATED:



	By:
Secretary		Chief Executive Officer

The Corporation has the power to issue different classes and series of stock. The Corporation will furnish without charge to each shareholder who so requests a statement of the powers, designations, preferences, and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations, or restrictions of the preferences or rights.

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations. Additional abbreviations may also be used though not on the list.


TEN COM	—	as tenants in common	UNIF GIFT MIN ACT - ____________________	Custodian ____________________
			(Cust.)	(Minor)

TEN ENT	—	as tenants by the entireties	under Uniform Gifts to Minors Act ________________________________________________ (State)

JT TEN	—	as joint tenants with right of survivorship and not as tenants in common	Under Uniform Gifts to Minors Act	_____________________________ (State)

For value received, the undersigned hereby sells, assigns and transfers unto

___________________________

(PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)

__________________________________________

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)

Shares represented by the within Certificate, and hereby irrevocably constitutes and appoints Attorney to transfer the said shares on the books of the within-named Corporation with full power of substitution in the premises.


Dated


SIGNATURE(S) GUARANTEED:

By

THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.

EXHIBIT 4.2

FORM OF

REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”), dated as of , 2006, by and among Continental Resources, Inc., an Oklahoma corporation (the “ Company ”), and the Revocable Inter Vivos Trust of Harold G. Hamm, the Harold Hamm DST Trust and the Harold Hamm HJ Trust (together, the “ Principal Shareholders ”).

WHEREAS, together, the Principal Shareholders currently own 100% of the outstanding voting common stock of the Company.

WHEREAS, in connection with, and in consideration of, the transactions contemplated by the Company’s Registration Statement on Form S-1 (File No. 333-132257) initially filed with the SEC (as hereinafter defined) on March 7, 2006, the Principal Shareholders have requested, and the Company has agreed to provide, registration rights with respect to the Registrable Securities (as hereinafter defined), as set forth in this Agreement.

NOW, THEREFORE, for and in consideration of the mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:

Section 1. Definitions . As used in this Agreement, the following terms shall have the following meanings:

“ Common Stock ” shall mean the common stock, par value $.01 per share, of the Company.

“ Demand Notice ” shall have the meaning set forth in Section 3 hereof.

“ Demand Registration ” shall have the meaning set forth in Section 3 hereof.

“ Demanding Qualified Holders ” shall mean, with respect to any Demand Registration, the Qualified Holders delivering the relevant Demand Notice.

“ Effectiveness Period ” shall mean, with respect to any Shelf Registration Statement, the period from the date the Shelf Registration Statement is declared effective by the SEC until the earlier of:

(i) the sale of all of the Registrable Securities covered by such Shelf Registration Statement pursuant to such Shelf Registration Statement or pursuant to Rule 144 under the Securities Act or any similar provision then in effect; or

(ii) the time at which all of the Registrable Securities covered by the Shelf Registration Statement and not held by affiliates of the Company (as defined in Rule 144 under the Securities Act) are, in the opinion of counsel for the Company, eligible for sale pursuant to Rule 144(k) (or any successor or analogous rule) under the Securities Act.

“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

“ Initial Public Offering ” shall mean the first underwritten registered public offering of equity securities of the Company pursuant to a registration statement that has been declared effective under the Securities Act.

“ Losses ” shall have the meaning set forth in Section 8 hereof.

“ Person ” shall mean an individual, partnership, corporation, limited partnership, limited liability company, foreign limited liability company, trust, estate, corporation, custodian, trustee-executor, administrator, nominee or entity in a representative capacity.

“ Piggyback Notice ” shall have the meaning set forth in Section 4 hereof.

“ Piggyback Registration ” shall have the meaning as set forth in Section 4 hereof.

“ Proceeding ” shall mean an action, claim, suit, arbitration or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

“ Prospectus ” shall mean the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective Registration Statement in reliance upon Rules 430A, ,430B or 430C promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

“ Qualified Holder ” shall mean each of the Principal Shareholders and any other Person who becomes a Qualified Holder pursuant to Section 12(c), but only to the extent such Person continues to hold Registrable Securities.

“ Registrable Securities ” shall mean, subject to the next succeeding sentence, the shares of Common Stock held by the Principal Shareholders on the date of this Agreement, including any shares of Common Stock issued or distributed by way of dividend, stock split or other distribution in respect of such shares. As to any particular Registrable Securities, once issued, such securities shall cease to be Registrable Securities when (i) they are sold pursuant to an effective Registration Statement under the Securities Act, (ii) they are sold pursuant to Rule 144 (or any similar provision then in force under the Securities Act) and the transferee thereof does not receive “restricted securities” as defined in Rule 144, (iii) they shall have ceased to be outstanding, (iv) they have been sold in a private transaction in which the transferor’s rights under this Agreement are not assigned to the transferee of the securities, or (v) they become eligible for resale pursuant to Rule 144(k) (or any similar rule then in effect under the Securities Act). No Registrable Securities may be registered under more than one Registration Statement at any one time.

“ Registration Statement ” shall mean any registration statement of the Company under the Securities Act which permits the public offering of any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

“ Rule 144 ” shall mean Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.

“ SEC ” shall mean the Securities and Exchange Commission or any successor agency having jurisdiction under the Securities Act.

“ Securities Act ” shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated by the SEC thereunder.

“ Shelf Registration Statement ” shall mean a “shelf” Registration Statement pursuant to Rule 415 of the Securities Act.

“ Suspension Notice ” shall have the meaning set forth in Section 6(b).

“ underwritten registration or underwritten offering ” shall mean a registration in which securities of the Company are sold to an underwriter for reoffering to the public.

Section 2. Holders of Registrable Securities . A Person is deemed to be a holder of Registrable Securities whenever such Person owns Registrable Securities or holds an option, warrant or other right to purchase, or a security convertible into, Registrable Securities, whether or not such acquisition or conversion has actually been effected.

Section 3. Demand Registration .

(a) Requests for Registration . Commencing 180 days after an Initial Public Offering, a Qualified Holder shall have the right by delivering a written notice to the Company (the “ Demand Notice ”) to require the Company to register, pursuant to the terms of this Agreement under and in accordance with the provisions of the Securities Act, the number of Registrable Securities requested to be so registered pursuant to the terms of this Agreement (a “ Demand Registration ”). Following receipt of a Demand Notice for a Demand Registration, the Company shall use its reasonable best efforts to file a Registration Statement as promptly as practicable, but not later than 30 days, after such Demand Notice, and shall use its reasonable best efforts to cause such Registration Statement to be declared effective under the Securities Act as promptly as practicable after the filing thereof.

Each Principal Shareholder shall be entitled to a maximum of one Demand Registration, which, if such Demand Registration has not been exercised, may be transferred to any of such Principal Shareholder’s successors or assigns who becomes a Qualified Holder pursuant to Section 12(c); provided , however , that no such succession or assignment shall have the effect of increasing the number of Demand Registrations to be performed by the Company for the benefit of the shares held by such Principal Shareholder. Notwithstanding any other

provisions of this Section 3, in no event shall more than one Demand Registration occur during any six-month period (measured from the effective date of the Registration Statement to the date of the next Demand Notice) or within 120 days after the effective date of a Registration Statement filed by the Company; provided that no Demand Registration may be prohibited for such 120-day period more often than once in a 12-month period.

No Demand Registration shall be deemed to have occurred for purposes of this Section 3(a) if the Registration Statement relating thereto does not become effective or is not maintained effective for the period required pursuant to this Section 3(a), in which case the Demanding Qualified Holders shall be entitled to an additional Demand Registration in lieu thereof.

Within ten (10) days after receipt by the Company of a Demand Notice, the Company shall give written notice (the “ Notice ”) of such Demand Notice to all holders of Registrable Securities and shall, subject to the provisions of Section 3(b) hereof, include in such registration all Registrable Securities with respect to which the Company received written requests for inclusion therein within ten (10) days after such Notice is given by the Company to such holders.

All requests made pursuant to this Section 3 will specify the amount of Registrable Securities to be registered and the intended methods of disposition thereof.

The Company shall be required to maintain the effectiveness of the Registration Statement with respect to any Demand Registration for a period of at least 180 days after the effective date thereof or such shorter period in which all Registrable Securities included in such Registration Statement have actually been sold; provided , however , that such period shall be extended for a period of time equal to the period the holders of Registrable Securities refrain from selling any securities included in such registration at the request of an underwriter of the Company or the Company pursuant to this Agreement.

(b) Priority on Demand Registration . If any of the Registrable Securities registered pursuant to a Demand Registration are to be sold in a firm commitment underwritten offering, and the managing underwriter or underwriters advise the holders of such securities in writing that in its view the total amount of securities proposed to be sold in such offering is such as to adversely affect the success of such offering (including, without limitation, securities proposed to be included by other holders of securities entitled to include securities in the Registration Statement pursuant to incidental or piggyback registration rights), then the amount of securities to be offered (i) for the account of Demanding Qualified Holders and (ii) for the account of all such other Persons (other than the Demanding Qualified Holders) shall be reduced to the extent necessary to reduce the total amount of securities to be included in such offering to the amount recommended by such managing underwriter or underwriters by first reducing, or eliminating if necessary, all securities of the Company requested to be included by such other Persons and then, if necessary, reducing the Registrable Securities requested to be included by the Demanding Qualified Holders, pro rata among such members on the basis of the percentage of the Registrable Securities requested to be included in such Registration Statement by such members. In connection with any Demand Registration to which the provisions of this subsection (b) apply, no securities other than Registrable Securities shall be covered by such

Demand Registration except as provided in subsection 3(d)(ii) hereof, and such registration shall not reduce the number of available registrations with respect to the Qualified Holders under this Section 3 in the event that the Registration Statement excludes more than 25% of the aggregate number of Registrable Securities that the Demanding Qualified Holders requested be included.

(c) Postponement of Demand Registration . The Company shall be entitled to postpone (but not more than once in any twelve month period), for a reasonable period of time not in excess of 90 days, the filing of a Registration Statement if the Company delivers to the Demanding Qualified Holders a certificate signed by both the principal executive officer and the principal financial officer of the Company certifying that, in the good faith judgment of the Board of Directors of the Company, such registration and offering would reasonably be expected to materially adversely affect or materially interfere with any bona fide material financing of the Company or any material transaction under consideration by the Company or would require disclosure of information that has not been disclosed to the public, the premature disclosure of which would materially adversely affect the Company. Such certificate shall contain a statement of the reasons for such postponement and an approximation of the anticipated delay. The Persons receiving such certificate shall keep the information contained in such certificate confidential subject to the same terms set forth in Section 6(q). If the Company shall so postpone the filing of a Registration Statement, the Demanding Qualified Holders shall have the right to withdraw the request for registration by giving written notice to the Company within 20 days of the anticipated termination date of the postponement period, as provided in the certificate delivered thereto, and in the event of such withdrawal, such request shall not be counted for purposes of the number of Demand Registrations to which the Demanding Qualified Holder is entitled pursuant to the terms of this Agreement.

(d) Registration of Other Securities . Whenever the Company shall effect a Demand Registration pursuant to this Section 3 in connection with an underwritten offering, no securities other than Registrable Securities shall be included among the securities covered by such Demand Registration unless (i) the managing underwriter of such offering shall have advised each holder of Registrable Securities requesting such registration in writing that it believes that the inclusion of such other securities would not adversely affect such offering or (ii) the inclusion of such other securities is approved by the affirmative vote of the holders of at least a majority of the Registrable Securities included in such Demand Registration by the Demanding Qualified Holders.

Section 4. Piggyback Registration .

(a) Right to Piggyback . If, at any time after an Initial Public Offering, the Company proposes to file a registration statement under the Securities Act with respect to an offering of Common Stock (other than a registration statement (i) on Form S-4, Form F-4, Form S-8 or any successor forms thereto or (ii) filed solely in connection with an exchange offer or any employee benefit or dividend reinvestment plan), whether or not for its own account, then, each such time, the Company shall give prompt written notice of such proposed filing at least fifteen (15) days before the anticipated filing date (the “ Piggyback Notice ”) to all of the holders of Registrable Securities. The Piggyback Notice shall offer such holders the opportunity to include in such registration statement the number of Registrable Securities as each such holder may request (a “ Piggyback Registration ”). Subject to Section 4(b) hereof, the Company shall

include in each such Piggyback Registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within ten (10) days after notice has been given to the applicable holder. The eligible holders of Registrable Securities shall be permitted to withdraw all or part of the Registrable Securities from a Piggyback Registration at any time prior to the effective date of such Piggyback Registration. The Company shall not be required to maintain the effectiveness of the Registration Statement for a Piggyback Registration beyond the earlier to occur of (i) 120 days after the effective date thereof and (ii) consummation of the distribution by the holders of the Registrable Securities included in such Registration Statement.

(b) Priority on Piggyback Registrations . The Company shall use reasonable efforts to cause the managing underwriter or underwriters of a proposed underwritten offering to permit holders of Registrable Securities requested to be included in the registration for such offering to include all such Registrable Securities on the same terms and conditions as any other shares of capital stock, if any, of the Company included therein. Notwithstanding the foregoing, if the managing underwriter or underwriters of such underwritten offering have informed the Company in writing that it is their good faith opinion that the total amount of securities that such holders, the Company and any other Persons having rights to participate in such registration, intend to include in such offering is such as to adversely affect the success of such offering, then the amount of securities to be offered (i) for the account of holders of Registrable Securities and (ii) for the account of all such other Persons (other than the Company and holders of Registrable Securities) shall be reduced to the extent necessary to reduce the total amount of securities to be included in such offering to the amount recommended by such managing underwriter or underwriters by first reducing, or eliminating if necessary, all securities of the Company requested to be included by such other Persons (other than the Company and holders of Registrable Securities) and then, if necessary, reducing the securities requested to be included by the holders of Registrable Securities requesting such registration pro rata among such holders on the basis of the percentage of the Registrable Securities requested to be included in such Registration Statement by such holders.

Section 5. Restrictions on Public Sale by Holders of Registrable Securities . Each holder of Registrable Securities agrees, in connection with the Initial Public Offering and any underwritten offering made pursuant to a Registration Statement filed pursuant to Section 3 or Section 4 hereof (whether or not such holder elected to include Registrable Securities in such Registration Statement), if requested (pursuant to a written notice) by the managing underwriter or underwriters in an underwritten offering, not to effect any public sale or distribution of any of the Company’s securities (except as part of such underwritten offering), including a sale pursuant to Rule 144, or to give any Demand Notice during the period commencing on the date of the request (which shall be no earlier than 14 days prior to the expected “pricing” of such offering) and continuing for not more than 90 days (with respect to any underwritten public offering made prior to the second anniversary of the Initial Public Offering and thereafter 60 days rather than 90) after the date of the Prospectus pursuant to which such public offering shall be made or such lesser period as is required by the managing underwriter, provided , however , that all officers and directors of the Company must be subject to similar restrictions.

Section 6. Registration Procedures . If and whenever the Company is required to use its reasonable best efforts to effect the registration of any Registrable Securities under the

Securities Act as provided in Section 3 and Section 4 hereof, the Company shall effect such registration to permit the sale of such Registrable Securities in accordance with the intended method or methods of disposition thereof, and pursuant thereto the Company shall cooperate in the sale of the securities and shall, as expeditiously as possible:

(a) Prepare and file with the SEC a Registration Statement or Registration Statements on such form which shall be available for the sale of the Registrable Securities by the holders thereof in accordance with the intended method or methods of distribution thereof, and use its reasonable best efforts to cause such Registration Statement to become effective and to remain effective as provided herein; provided , however , that before filing a Registration Statement or Prospectus or any amendments or supplements thereto (including documents that would be incorporated or deemed to be incorporated therein by reference), the Company shall furnish or otherwise make available to the holders of the Registrable Securities covered by such Registration Statement, their counsel and the managing underwriters, if any, copies of all such documents proposed to be filed. The Company shall not file any such Registration Statement or Prospectus or any amendments or supplements thereto (including such documents that, upon filing, would be incorporated or deemed to be incorporated by reference therein) with respect to a Demand Registration to which the holders of a majority of the Registrable Securities covered by such Registration Statement, their counsel, or the managing underwriters, if any, shall reasonably object, in writing, on a timely basis, unless, in the opinion of the Company, such filing is necessary to comply with applicable law.

(b) If such Registration Statement is a Shelf Registration Statement:

(i) Subject to any notice by the Company in accordance with this Section 6(b) of the existence of any fact or event of the kind described in Section 6(d)(vi), use its reasonable best efforts to keep the Shelf Registration Statement continuously effective during the Effectiveness Period; upon the occurrence of any event that would cause the Shelf Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of the Registrable Securities covered thereby during the Effectiveness Period, the Company shall file promptly an appropriate amendment to the Shelf Registration Statement, a supplement to the Prospectus or a report filed with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, in the case of clause (A) of this Section 6(b)(i), correcting any such misstatement or omission, and, in the case of either clause (A) or (B) of this Section 6(b)(i), use its reasonable best efforts to cause such amendment to be declared effective and the Shelf Registration Statement and the related Prospectus to become usable for their intended purposes as soon as practicable thereafter.

(ii) Notwithstanding Section 6(b)(i) hereof, the Company may suspend the effectiveness of the Shelf Registration Statement (each such period, a “ Suspension Period ”):

(A) if a majority of the Company’s board of directors, in good faith, determines that (1) the offer or sale of any shares of Common Stock would materially impede, delay or interfere with any proposed financing,

offer or sale of securities, acquisition, merger, tender offer, business combination, corporate reorganization, consolidation or other significant transaction involving the Company, (2) after the advice of counsel, the sale of the shares of Common Stock covered by the Shelf Registration Statement would require disclosure of non-public material information not otherwise required to be disclosed under applicable law, and (3) either (x) the Company has a bona fide business purpose for preserving the confidentiality of the proposed transaction, (y) disclosure would have a material adverse effect on the Company or the Company’s ability to consummate the proposed transaction, or (z) the proposed transaction renders the Company unable to comply with requirements of the SEC; or

(B) if a majority of the Company’s board of directors, in good faith, determines that the Company is required by law, rule or regulation to supplement the Shelf Registration Statement or file a post-effective amendment to the Shelf Registration Statement in order to incorporate information into the Shelf Registration Statement for the purpose of (1) including in the Shelf Registration Statement any Prospectus required under Section 10(a)(3) of the Securities Act, (2) reflecting in the Prospectus included in the Shelf Registration Statement any facts or events arising after the effective date of the Shelf Registration Statement (or the most recent post-effective amendment) that, individually or in the aggregate, represents a fundamental change in the information set forth in the Prospectus, or (3) including in the Prospectus included in the Shelf Registration Statement any material information with respect to the plan of distribution not disclosed in the Shelf Registration Statement or any material change to such information.

Upon the occurrence of any event described in clauses (A) and (B) of this Section 6(b)(ii), the Company shall give notice to each Demanding Qualified Holder with respect to such Shelf Registration Statement that the availability of the Shelf Registration is suspended and, upon actual receipt of any such notice, each such Demanding Qualified Holder agrees not to sell any Registrable Securities pursuant to the Shelf Registration Statement until such Demanding Qualified Holder’s receipt of copies of the supplemented or amended Prospectus provided for this Section 6(b). The Suspension Period shall not exceed 60 days in any 90-day period (except as a result of a review of any post-effective amendment by the SEC prior to declaring any post-effective amendment to the Shelf Registration Statement effective provided the Company has used its reasonable best efforts to cause such post-effective amendment to be declared effective); provided , that Suspension Periods shall not exceed an aggregate of 120 days in any 12-month period. The Company shall not be required to specify in the written notice to the Qualified Holders the nature of the event giving rise to the Suspension Period.

(c) Prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement continuously effective during the period provided herein with respect to the

disposition of all securities covered by such Registration Statement; and cause the related Prospectus to be supplemented by any Prospectus supplement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of the securities covered by such Registration Statement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act.

(d) Notify each selling holder of Registrable Securities, its counsel and the managing underwriters, if any, promptly, and (if requested by any such Person) confirm such notice in writing (which notice pursuant to clauses (ii) through (v) below shall be accompanied by an instruction to suspend the use of the Prospectus until the Company shall have remedied the basis for such suspension if the effectiveness of a Shelf Registration Statement has been suspended pursuant to Section 6(b)), (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the SEC or any other Federal or state governmental authority for amendments or supplements to a Registration Statement or related Prospectus or for additional information, (iii) of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) if at any time the representations and warranties of the Company contained in any agreement (including any underwriting agreement) contemplated by Section 6(p) below cease to be true and correct, (v) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, and (vi) of the happening of any event that makes any statement made in such 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 necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

(e) Use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement, or the lifting of any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction.

(f) If requested by the managing underwriters, if any, or the holders of a majority of the then outstanding Registrable Securities being sold in connection with an underwritten offering, promptly include in a Prospectus supplement or post-effective amendment such information as the managing underwriters, if any, and such holders may reasonably request in order to permit the intended method of distribution of such securities and make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Company has received such request; provided , however , that the Company shall not be required to take any actions under this Section 6(f) that are not, in the opinion of counsel for the Company, in compliance with applicable law.

(g) Furnish to each selling holder of Registrable Securities, its counsel and each managing underwriter, if any, without charge, at least one conformed copy of the Registration Statement, the Prospectus and Prospectus supplements, if applicable, and each post-effective amendment thereto, including financial statements (but excluding schedules, all documents incorporated or deemed to be incorporated therein by reference, and all exhibits, unless requested in writing by such holder, counsel or underwriter).

(h) Deliver to each selling holder of Registrable Securities, its counsel, and the underwriters, if any, without charge, as many copies of the Prospectus or Prospectuses (including each form of Prospectus) and each amendment or supplement thereto as such Persons may reasonably request in connection with the distribution of the Registrable Securities; and the Company, subject to the last paragraph of this Section 6, hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling holders of Registrable Securities and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any such amendment or supplement thereto.

(i) Prior to any public offering of Registrable Securities, use its reasonable best efforts to register or qualify or cooperate with the selling holders of Registrable Securities, the underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or “Blue Sky” laws of such jurisdictions within the United States or Canada as any seller or underwriter reasonably requests in writing and to keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and to take any other action that may be necessary or advisable to enable such holders of Registrable Securities to consummate the disposition of such Registrable Securities in such jurisdiction; provided , however , that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject.

(j) Cooperate with the selling holders of Registrable Securities and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates (not bearing any legends) representing Registrable Securities to be sold after receiving written representations from each holder of such Registrable Securities that the Registrable Securities represented by the certificates so delivered by such holder will be transferred in accordance with the Registration Statement, and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters, if any, or holders may request at least two (2) business days prior to any sale of Registrable Securities in a firm commitment public offering, but in any other such sale, within ten (10) business days prior to having to issue the securities.

(k) Use its reasonable best efforts to cause the Registrable Securities covered by the Registration Statement to be registered with or exempted from registration or qualification or approved by such other governmental agencies or authorities within the United States or Canada, except as may be required solely as a consequence of the nature of such selling holder’s business, in which case the Company will cooperate in all reasonable respects with the filing of

such Registration Statement and the granting of such approvals, as may be necessary to enable the seller or sellers thereof or the underwriters, if any, to consummate the disposition of such Registrable Securities.

(l) Upon the occurrence of any event contemplated by Section 6(d)(vi) above, prepare a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

(m) Prior to the effective date of the Registration Statement relating to the Registrable Securities, provide a CUSIP number for the Registrable Securities.

(n) Provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such Registration Statement from and after a date not later than the effective date of such Registration Statement.

(o) Use its reasonable best efforts to cause all shares of Registrable Securities covered by such Registration Statement to be authorized to be listed on the New York Stock Exchange or listed on another national securities exchange or quoted on the Nasdaq National Market if shares of the particular class of Registrable Securities are at that time listed on such exchange or quoted on the Nasdaq National Market, as the case may be.

(p) Enter into such agreements (including an underwriting agreement in form, scope and substance as is customary in underwritten offerings) and take all such other actions reasonably requested by the holders of a majority of the Registrable Securities being sold in connection therewith (including those reasonably requested by the managing underwriters, if any) to expedite or facilitate the disposition of such Registrable Securities, and in such connection, whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration, (i) make such representations and warranties to the holders of such Registrable Securities and the underwriters, if any, with respect to the business of the Company and its subsidiaries, and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings, and, if true, confirm the same if and when requested, (ii) use its reasonable best efforts to furnish to the selling holders of such Registrable Securities opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if any, and counsels to the selling holders of the Registrable Securities), addressed to each selling holder of Registrable Securities and each of the underwriters, if any, covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such counsel and underwriters, (iii) use its reasonable best efforts to obtain “cold comfort” letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company

or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement) who have certified the financial statements included in such Registration Statement, addressed to each selling holder of Registrable Securities (unless such accountants shall be prohibited from so addressing such letters by applicable standards of the accounting profession) and each of the underwriters, if any, such letters to be in customary form and covering matters of the type customarily covered in “cold comfort” letters in connection with underwritten offerings, (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures substantially to the effect set forth in Section 8 hereof with respect to all parties to be indemnified pursuant to said Section and (v) deliver such documents and certificates as may be reasonably requested by the holders of a majority of the Registrable Securities being sold, their counsel and the managing underwriters, if any, to evidence the continued validity of the representations and warranties made pursuant to clause (i) of this Section 6(p) and to evidence compliance with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company. The above shall be done at each closing under such underwriting or similar agreement, or as and to the extent required thereunder.

(q) Make available for inspection by a representative of the selling holders of Registrable Securities, any underwriter participating in any such disposition of Registrable Securities, if any, and any attorneys or accountants retained by such selling holders or underwriter, at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and cause the officers, directors and employees of the Company and its subsidiaries to supply all information in each case reasonably requested by any such representative, underwriter, attorney or accountant in connection with such Registration Statement; provided , however , that any information that is not generally publicly available at the time of delivery of such information shall be kept confidential by such Persons unless (i) disclosure of such information is required by court or administrative order, (ii) disclosure of such information, in the opinion of counsel to such Person, is required by law, or (iii) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard by such Person. In the case of a proposed disclosure pursuant to (i) or (ii) above, such Person shall be required to give the Company written notice of the proposed disclosure prior to such disclosure and, if requested by the Company, assist the Company in seeking to prevent or limit the proposed disclosure. Without limiting the foregoing, no such information shall be used by such Person as the basis for any market transactions in securities of the Company or its subsidiaries in violation of law.

(r) Comply with all applicable rules and regulations of the SEC and make available to its security holders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder, or any similar rule promulgated under the Securities Act, no later than forty-five (45) days after the end of any twelve (12) month period (or ninety (90) days after the end of any twelve (12) month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Securities are sold to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company after the effective date of a Registration Statement, which statements shall cover one of said twelve (12) month periods.

(s) Cause its officers to use their reasonable best efforts to support the marketing of the Registrable Securities covered by the Registration Statement (including, without limitation, participation in “road shows”) taking into account the Company’s business needs.

The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish to the Company in writing such information required in connection with such registration regarding such seller and the distribution of such Registrable Securities as the Company may, from time to time, reasonably request in writing and the Company may exclude from such registration the Registrable Securities of any seller who unreasonably fails to furnish such information within a reasonable time after receiving such request.

Each holder of Registrable Securities agrees if such holder has Registrable Securities covered by such Registration Statement that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 6(d)(ii), 6(d)(iii), 6(d)(v) or 6(d)(vi) hereof, such holder will forthwith discontinue disposition of such Registrable Securities covered by such Registration Statement or Prospectus until such holder’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(k) hereof, or until it is advised in writing by the Company that the use of the applicable Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus; provided , however that the Company shall extend the time periods under Section 3 with respect to the length of time that the effectiveness of a Registration Statement must be maintained by the amount of time the holder is required to discontinue disposition of such securities.

Section 7. Registration Expenses . All reasonable fees and expenses incident to the performance of or compliance with this Agreement by the Company (including, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with the National Association of Securities Dealers, Inc. and (B) of compliance with securities or Blue Sky laws, including, without limitation, any fees and disbursements of counsel for the underwriters in connection with Blue Sky qualifications of the Registrable Securities pursuant to Section 6(i)), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities in a form eligible for deposit with The Depository Trust Company and of printing Prospectuses if the printing of Prospectuses is requested by the managing underwriters, if any, or by the holders of a majority of the Registrable Securities included in any Registration Statement), (iii) messenger, telephone and delivery expenses of the Company, (iv) fees and disbursements of counsel for the Company, (v) expenses of the Company incurred in connection with any road show, (vi) fees and disbursements of all independent certified public accountants referred to in Section 6(p)(iii) hereof (including, without limitation, the expenses of any “cold comfort” letters required by this Agreement) and any other persons, including special experts retained by the Company, and (vii) fees and disbursements of one counsel for the Qualified Holders whose Registrable Securities are included in a Registration Statement, which counsel shall be selected by the holders of a majority of the Registrable Securities held by the Qualified Holders included in such Registration Statement) shall be borne by the Company whether or not any Registration Statement is filed or becomes effective. In addition, the Company shall pay its internal expenses

(including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange on which similar securities issued by the Company are then listed and rating agency fees and the fees and expenses of any Person, including special experts, retained by the Company.

The Company shall not be required to pay (i) fees and disbursements of any counsel retained by any holder of Registrable Securities or by any underwriter (except as set forth in clauses 7(i)(B) and 7(vii)), (ii) any underwriter’s fees (including discounts, commissions or fees of underwriters, selling brokers, dealer managers or similar securities industry professionals) relating to the distribution of the Registrable Securities, or (iii) any other expenses of the holders of Registrable Securities not specifically required to be paid by the Company pursuant to the first paragraph of this Section 7.

Section 8. Indemnification .

(a) Indemnification by the Company . The Company shall, without limitation as to time, indemnify and hold harmless, to the fullest extent permitted by law, each holder of Registrable Securities whose Registrable Securities are covered by a Registration Statement or Prospectus, the officers, directors, partners, members, managers, stockholders, accountants, attorneys, agents and employees of each of them, each Person who controls each such holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, partners, members, managers, stockholders, accountants, attorneys, agents and employees of each such controlling person, each underwriter, if any, and each Person who controls (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) such underwriter, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, costs of preparation and reasonable attorneys’ fees and any legal or other fees or expenses incurred by such party in connection with any investigation or Proceeding), expenses, judgments, fines, penalties, charges and amounts paid in settlement (collectively, “ Losses ”), as incurred, arising out of or based upon any untrue statement of a material fact contained in any Prospectus, Prospectus supplement, offering circular, or other document (including any related Registration Statement, notification, or the like) incident to any such registration, qualification, or compliance, or based on any omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Company of the Securities Act or any rule or regulation thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification, or compliance, and will reimburse each such holder, each of its officers, directors, partners, members, managers, stockholders, accountants, attorneys, agents and employees and each person controlling such holder, each such underwriter, and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating and defending or settling any such claim, loss, damage, liability, or action, provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability, or expense arises out of or is based on any untrue statement or omission by such holder or underwriter, but only to the extent, that such untrue statement or omission is made in such Registration Statement, Prospectus, Prospectus supplement, offering circular, or other document in reliance upon and in conformity with written information furnished to the Company by such holder. It is agreed that the

indemnity agreement contained in this Section 8(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).

(b) Indemnification by Holder of Registrable Securities . In connection with any Registration Statement in which a holder of Registrable Securities is participating, such holder of Registrable Securities shall furnish to the Company in writing such information as the Company reasonably requests for use in connection with any Registration Statement or Prospectus and agrees to indemnify, to the fullest extent permitted by law, severally and not jointly, the Company, its directors, officers, accountants, attorneys, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, partners, members, managers, stockholders, accountants, attorneys, agents or employees of such controlling persons, and each underwriter, if any, and each person who controls such underwriter (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), from and against all Losses arising out of or based on any untrue statement of a material fact contained in any such Registration Statement, Prospectus, Prospectus supplement, offering circular, or other document, or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and such directors, officers, partners, members, managers, stockholders, accountants, attorneys, employees, agents, persons, underwriters, or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability, or action, in each case to the extent, but only to the extent, that such untrue statement or omission is made in such Registration Statement, Prospectus, Prospectus supplement, offering circular, or other document in reliance upon and in conformity with written information furnished to the Company by such holder specifically for use in connection with the preparation of such Registration Statement, Prospectus, Prospectus supplement, offering circular or other document; provided , however , that the obligations of such holder hereunder shall not apply to amounts paid in settlement of any such claims, losses, damages, or liabilities (or actions in respect thereof) if such settlement is effected without the consent of such holder (which consent shall not be unreasonably withheld); and provided, further, that the liability of each selling holder of Registrable Securities hereunder shall be limited to the net proceeds received by such selling holder from the sale of Registrable Securities covered by such Registration Statement. In addition, insofar as the foregoing indemnity relates to any such untrue statement or omission made in the preliminary Prospectus but eliminated or remedied in the amended Prospectus on file with the SEC at the time the Registration Statement becomes effective or in the final Prospectus filed pursuant to applicable rules of the SEC or in any supplement or addendum thereto and such new Prospectus is delivered to the underwriter, the indemnity agreement herein shall not inure to the benefit of such underwriter, any controlling person of such underwriter and their respective Representatives, if a copy of the final Prospectus filed pursuant to such rules, together with all supplements and addenda thereto was not furnished to the Person asserting the loss, liability, claim or damage at or prior to the time such furnishing is required by the Securities Act.

(c) Conduct of Indemnification Proceedings . If any Person shall be entitled to indemnity hereunder (an “ indemnified party ”), such indemnified party shall give prompt notice to the party from which such indemnity is sought (the “ indemnifying party ”) of any claim or of the commencement of any Proceeding with respect to which such indemnified party seeks

indemnification or contribution pursuant hereto; provided , however , that the delay or failure to so notify the indemnifying party shall not relieve the indemnifying party from any obligation or liability except to the extent that the indemnifying party has been prejudiced by such delay or failure. The indemnifying party shall have the right, exercisable by giving written notice to an indemnified party promptly after the receipt of written notice from such indemnified party of such claim or Proceeding, to, unless in the indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, assume, at the indemnifying party’s expense, the defense of any such claim or Proceeding, with counsel reasonably satisfactory to such indemnified party; provided , however , that an indemnified party shall have the right to employ separate counsel in any such claim or Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless: (i) the indemnifying party agrees to pay such fees and expenses; or (ii) the indemnifying party fails promptly to assume the defense of such claim or Proceeding or fails to employ counsel reasonably satisfactory to such indemnified party; in which case the indemnified party shall have the right to employ counsel and to assume the defense of such claim or proceeding; provided , however , that the indemnifying party shall not, in connection with any one such claim or Proceeding or separate but substantially similar or related claims or Proceedings in the same jurisdiction, arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one firm of attorneys (together with appropriate local counsel) at any time for all of the indemnified parties, or for fees and expenses that are not reasonable. Whether or not such defense is assumed by the indemnifying party, such indemnified party will not be subject to any liability for any settlement made without its consent (but such consent will not be unreasonably withheld). The indemnifying party shall not consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release, in form and substance reasonably satisfactory to the indemnified party, from all liability in respect of such claim or litigation for which such indemnified party would be entitled to indemnification hereunder.

(d) Contribution . If the indemnification provided for in this Section 8 is unavailable to an indemnified party in respect of any Losses (other than in accordance with its terms), then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such indemnifying party, on the one hand, and indemnified party, on the other hand, shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been taken by, or relates to information supplied by, such indemnifying party or indemnified party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent any such action, statement or omission.

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the

immediately preceding paragraph. Notwithstanding the provisions of this Section 8(d), an indemnifying party that is a selling holder of Registrable Securities shall not be required to contribute any amount in excess of the amount by which the net proceeds from the sale of the Registrable Securities sold by such indemnifying party exceeds the amount of any damages that such indemnifying party has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

(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.

Section 9. Rule 144 . After an Initial Public Offering, the Company shall file the reports required to be filed by it under the Securities Act and the Exchange Act, and will take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitations of the exemption provided by Rule 144. Upon the request of any holder of Registrable Securities, the Company shall deliver to such holder a written statement as to whether it has complied with such requirements.

Section 10. Underwritten Registrations . If any Demand Registration is an underwritten offering, the Company shall have the right to select the investment banker or investment bankers and managers to administer the offering, subject to approval by the holders of a majority of the Registrable Securities covered by such Demand Registration, not to be unreasonably withheld. The Company shall have the right to select the investment banker or investment bankers and managers to administer any Piggyback Registration.

No Person may participate in any underwritten registration hereunder unless such Person (i) agrees to sell the Registrable Securities it desires to have covered by the Demand Registration on the basis provided in any underwriting arrangements in customary form and (ii) completes and executes all questionnaires, powers of attorney, custody agreements, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements, provided that such Person shall not be required to make any representations or warranties other than those related to title and ownership of shares and as to the accuracy and completeness of statements made in a Registration Statement, Prospectus, offering circular, or other document in reliance upon and in conformity with written information furnished to the Company or the managing underwriter by such Person.

Section 11. Limitation on Subsequent Registration Rights . The Company represents and warrants that it has not granted to any Person the right to request or require the Company to register any securities issued by the Company. From and after the date of this Agreement, the Company shall not, without the prior written consent of the holders of at least a majority of the then outstanding Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company giving such holder or prospective holder any registration rights the terms of which would reduce the amount of Registrable Securities the holders can include in any registration filed pursuant to Section 3 or Section 4 hereof, unless such rights are subordinate to those of the holders of Registrable Securities.

Section 12. Miscellaneous .

(a) Amendments and Waivers . The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of holders of at least a majority of the then outstanding Registrable Securities; provided , however , that in no event shall the obligations of any holder of Registrable Securities be materially increased or the rights of any holder of Registrable Securities be adversely affected (without similarly adversely affecting the rights of all holders of Registrable Securities), except upon the written consent of such holder. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of holders of Registrable Securities whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other holders of Registrable Securities may be given by holders of at least a majority of the Registrable Securities being sold by such holders pursuant to such Registration Statement.

(b) Notices . All notices required to be given hereunder shall be in writing and shall be deemed to be duly given if personally delivered, telecopied and confirmed, or mailed by certified mail, return receipt requested, or overnight delivery service with proof of receipt maintained, at the following address (or any other address that any such party may designate by written notice to the other parties):

if to the Company:

Mark E. Monroe

President and Chief Operating Officer

302 N. Independence

Enid, Oklahoma 73701

Fax: (580) 242-4703

and a copy to:

David P. Oelman

Vinson & Elkins L.L.P.

2300 First City Tower

1001 Fannin Street

Houston, Texas 77002

Fax: (713) 615-5861

If to any holder of Registrable Securities, at such Person’s address as set forth on the records of the Company. Any such notice shall, if delivered personally, be deemed received upon delivery; shall, if delivered by telecopy, be deemed received on the first business day following confirmation; shall, if delivered by overnight delivery service, be deemed received the first business day after being sent; and shall, if delivered by mail, be deemed received upon the earlier of actual receipt thereof or five business days after the date of deposit in the United States mail.

(c) Successors and Assigns; Status . This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including subsequent holders of Registrable Securities; provided , however , that such successor or assign shall not be entitled to such rights unless the successor or assign shall have executed and delivered to the Company an Addendum Agreement substantially in the form of Exhibit A hereto promptly following the acquisition of such Registrable Securities, in which event such successor or assign shall be deemed a Qualified Holder for purposes of this Agreement. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any Person other than the parties hereto and their respective permitted successors and assigns any legal or equitable right, remedy or claim under, in or in respect of this Agreement or any provision herein contained.

(d) Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

(e) Headings . The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

(f) Governing Law . This agreement shall be governed by and construed in accordance with the laws of the State of Oklahoma.

(g) Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

(h) Entire Agreement . This Agreement is intended by the parties as a final expression of their agreement, and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein, with respect to the registration rights granted by the Company with respect to Registrable Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

(i) Securities Held by the Company or its subsidiaries . Whenever the consent or approval of holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or its subsidiaries shall not be counted in determining whether such consent or approval was given by the holders of such required percentage.

(j) Termination . This Agreement shall terminate when no Registrable Securities remain outstanding; provided that Sections 7 and 8 shall survive any termination hereof.

(k) Specific Performance . The parties hereto recognize and agree that money damages may be insufficient to compensate the holders of any Registrable Securities for breaches by the Company of the terms hereof and, consequently, that the equitable remedy of specific performance of the terms hereof will be available in the event of any such breach.

[signature pages follow]

IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights Agreement to be duly executed as of the date first above written.


COMPANY:

CONTINENTAL RESOURCES, INC.

By:
		Mark E. Monroe
		President & Chief Operating Officer

PRINCIPAL SHAREHOLDERS:

REVOCABLE INTER VIVOS TRUST OF HAROLD G. HAMM

By:
		Harold G. Hamm
		Trustee

HAROLD HAMM DST TRUST

By:
		Bert Mackie
		Trustee

HAROLD HAMM HJ TRUST

By:
		Bert Mackie
		Trustee

Signature Page to Registration Rigths Agreement

EXHIBIT A

ADDENDUM AGREEMENT

This Addendum Agreement is made this day of , 20 , by and between (the “ New Shareholder ”) and Continental Resources, Inc. (the “ Company ”), pursuant to a Registration Rights Agreement dated as of , 2006 (the “ Agreement ”), by and among the Company and the Principal Shareholders. Capitalized terms used but not otherwise defined herein shall have the meanings given to such terms in the Agreement.

WITNESSETH:

WHEREAS, the New Shareholder has acquired Registrable Securities directly or indirectly from a Qualified Holder; and

WHEREAS, the Agreement requires that all persons desiring registration rights must enter into an Addendum Agreement binding the New Shareholder to the Agreement to the same extent as if it were an original party thereto;

NOW, THEREFORE, in consideration of the mutual promises of the parties, the New Shareholder acknowledges that it has received and read the Agreement and that the New Shareholder shall be bound by, and shall have the benefit of, all of the terms and conditions set out in the Agreement to the same extent as if it were an original party to the Agreement and shall be deemed to be a Qualified Holder thereunder.

New Shareholder

Address:

Exhibit A-1

AGREED TO on behalf of the Company pursuant to Section 12(c) of the Agreement.


CONTINENTAL RESOURCES, INC.

By:
Name:
Title:

EXHIBIT 10.1

$750,000,000

SIXTH AMENDED AND RESTATED CREDIT AGREEMENT

Among

CONTINENTAL RESOURCES, INC.

as Borrower,

THE LENDERS PARTY HERETO FROM TIME TO TIME

as Lenders,

and

UNION BANK OF CALIFORNIA, N.A.

as Administrative Agent and as Issuing Lender

April 12, 2006

UNION BANK OF CALIFORNIA, N.A.

as Sole Book Runner and Lead Arranger

Guaranty Bank, FSB, as Documentation Agent,

Fortis Capital Corp., as Syndication Agent, and

The Royal Bank of Scotland plc, as Co-Agent

TABLE OF CONTENTS


		Page

ARTICLE I	DEFINITIONS AND ACCOUNTING TERMS	2

Section 1.01	Certain Defined Terms	2

Section 1.02	Accounting Terms; Changes in GAAP	20

Section 1.03	Types	21

Section 1.04	Miscellaneous	21

ARTICLE II	CREDIT FACILITIES	21

Section 2.01	Commitments	21

Section 2.02	Borrowing Base; Release of Collateral; Present Value	22

Section 2.03	Method of Borrowing	26

Section 2.04	Commitments	29

Section 2.05	Prepayment of Advances	30

Section 2.06	Repayment of Advances	32

Section 2.07	Letters of Credit	32

Section 2.08	Fees	36

Section 2.09	Interest	37

Section 2.10	Payments and Computations	38

Section 2.11	Sharing of Payments, Etc	39

Section 2.12	Breakage Costs	40

Section 2.13	Increased Costs	40

Section 2.14	Taxes	41

Section 2.15	Mitigation Obligations; Replacement of Lenders	43

Section 2.16	Extension of Maturity Date	44

ARTICLE III	CONDITIONS PRECEDENT	46

Section 3.01	Conditions Precedent to Effectiveness	46

Section 3.02	Conditions Precedent to All Borrowings	48

ARTICLE IV	REPRESENTATIONS AND WARRANTIES	49

Section 4.01	Existence; Subsidiaries	49

Section 4.02	Power	49

Section 4.03	Authorization and Approvals	50

Section 4.04	Enforceable Obligations	50


Section 4.05	Financial Statements	50

Section 4.06	True and Complete Disclosure	51

Section 4.07	Litigation; Compliance with Laws	51

Section 4.08	Use of Proceeds	51

Section 4.09	Investment Company Act	52

Section 4.10	Federal Power Act	52

Section 4.11	Taxes	52

Section 4.12	Pension Plans	52

Section 4.13	Condition of Property; Casualties	53

Section 4.14	No Burdensome Restrictions; No Defaults	53

Section 4.15	Environmental Condition	54

Section 4.16	Permits, Licenses, Etc	54

Section 4.17	Gas Contracts	54

Section 4.18	Liens; Titles, Leases, Etc	55

Section 4.19	Solvency and Insurance	55

Section 4.20	Hedging Agreements	55

Section 4.21	Material Agreements	55

ARTICLE V	AFFIRMATIVE COVENANTS	56

Section 5.01	Compliance with Laws, Etc	56

Section 5.02	Maintenance of Insurance	56

Section 5.03	Preservation of Corporate Existence, Etc	57

Section 5.04	Payment of Taxes, Etc	57

Section 5.05	Visitation Rights	57

Section 5.06	Reporting Requirements	57

Section 5.07	Maintenance of Property	61

Section 5.08	[Reserved]	61

Section 5.09	Use of Proceeds	61

Section 5.10	Title	62

Section 5.11	Further Assurances; Cure of Title Defects

Section 5.12	Notice Regarding Early Termination of Hedge Contracts

ARTICLE VI	NEGATIVE COVENANTS	63

Section 6.01	Liens, Etc	63

Section 6.02	Debts, Guaranties, and Other Obligations	64


Section 6.03	Agreements Restricting Liens and Distributions	65

Section 6.04	Merger or Consolidation; Asset Sales	66

Section 6.05	Restricted Payments	66

Section 6.06	Investments	66

Section 6.07	Affiliate Transactions	67

Section 6.08	Compliance with ERISA	67

Section 6.09	[Reserved]	68

Section 6.10	Change of Business	68

Section 6.11	Organizational Documents, Name Change	68

Section 6.12	Use of Proceeds; Letters of Credit	68

Section 6.13	Gas Imbalances, Take-or-Pay or Other Prepayments	69

Section 6.14	Limitation on Speculative Hedging	69

Section 6.15	Additional Subsidiaries	69

Section 6.16	Account Payables	69

Section 6.17	Leverage Ratio	70

Section 6.18	Working Capital Ratio	70

Section 6.19	Property Value Ratio	70

ARTICLE VII	EVENTS OF DEFAULT; REMEDIES	70

Section 7.01	Events of Default	70

Section 7.02	Optional Acceleration of Maturity	72

Section 7.03	Automatic Acceleration of Maturity	73

Section 7.04	Right of Set-off	73

Section 7.05	Non-exclusivity of Remedies	74

Section 7.06	Application of Proceeds	74

ARTICLE VIII	THE ADMINISTRATIVE AGENT AND THE ISSUING LENDER	74

Section 8.01	Appointment and Authority	74

Section 8.02	Rights as a Lender	74

Section 8.03	Exculpatory Provisions	75

Section 8.04	Administrative Agent’s Reliance, Etc	76

Section 8.05	Delegation of Duties	76

Section 8.06	Lender Credit Decision	76

Section 8.07	Indemnification	76

Section 8.08	Successor Administrative Agent and Issuing Lender	77

iii


Section 8.09	Collateral Matters	78

Section 8.10	No Other Duties, etc	79

ARTICLE IX	MISCELLANEOUS	79

Section 9.01	Amendments, Etc	79

Section 9.02	Notices; Effectiveness; Electronic Communication	79

Section 9.03	Expenses; Indemnity; Damage Waiver	80

Section 9.04	No Waiver; Remedies	82

Section 9.05	Lender Assignments and Participations	82

Section 9.06	Survival of Representations, Etc	84

Section 9.07	Counterparts; Integration; Effectiveness	84

Section 9.08	Successors and Assigns Generally	85

Section 9.09	Electronic Execution of Assignments	85

Section 9.10	Treatment of Certain Information; Confidentiality	85

Section 9.11	Business Loans	86

Section 9.12	Usury Not Intended	86

Section 9.13	Payments Set Aside	87

Section 9.14	Governing Law; Submission to Jurisdiction	87

Section 9.15	USA Patriot Act	88

Section 9.16	Restatement	88

Section 9.17	WAIVER OF JURY TRIAL	89

Section 9.18	ORAL AGREEMENTS	89

EXHIBITS:

Exhibit A	- Form of Assignment and Assumption
Exhibit B	- Form of Compliance Certificate
Exhibit C	- Form of Guaranty
Exhibit D	- Form of Mortgage
Exhibit E	- Form of Note
Exhibit F	- Form of Notice of Borrowing
Exhibit G	- Form of Notice of Conversion or Continuation
Exhibit H	- Form of Pledge Agreement
Exhibit I	- Form of Security Agreement
Exhibit J	- Form of Transfer Letters
Exhibit K	- Form of Borrower’s Counsel Opinion


SCHEDULES:

Schedule I	-	Pricing Information
Schedule II	-	Notice Information and Commitments
Schedule 4.01	-	Existing Subsidiaries
Schedule 4.05	-	Existing Debt
Schedule 4.15	-	Environmental Condition
Schedule 4.20	-	Existing Hedging Agreements
Schedule 4.21	-	Material Agreements

SIXTH AMENDED AND RESTATED CREDIT AGREEMENT

This Sixth Amended and Restated Credit Agreement dated as of April 12, 2006 is among CONTINENTAL RESOURCES, INC. , an Oklahoma corporation (“Borrower”), the Lenders (as defined below), and Union Bank of California, N.A., as Administrative Agent and as Issuing Lender (as each such terms are defined below).

RECITALS

A. The Borrower, the Administrative Agent, the Issuing Lender, and certain of the Lenders are parties to that certain Fifth Amended and Restated Credit Agreement dated as of November 22, 2004 among the Borrower, Union Bank of California, N.A. as the LC Issuer, Lead Arranger, Fronting Bank and Administrative Agent (each as defined therein; and in such capacity as Administrative Agent, the “ Existing Administrative Agent ”), Guaranty Bank, FSB, as Co-Arranger and Collateral Agent (each as defined therein; and in such capacity as Collateral Agent, the “ Existing Collateral Agent ”), Fortis Capital Corp., as Co-Arranger and Syndication Agent (each as defined therein), The Royal Bank of Scotland plc, as Co-Agent (as defined therein), and the lenders party thereto from time to time (the “ Existing Lenders ”), as heretofore amended (as so amended, the “ Existing Agreement ”).

B. In order to secure the full and punctual payment and performance of the obligations under the Existing Agreement, the Borrower and the Guarantors (as defined in the Existing Agreement) have executed and delivered mortgages, deeds of trust, collateral assignments, security agreements, pledge agreements and financing statements in favor of the Existing Collateral Agent (or in favor of any predecessors in such capacity) (collectively, the “ Existing Security Documents ”) granting mortgage liens and continuing security interest in and to the collateral described in such Existing Security Documents.

C. The Borrower, the Administrative Agent, the Issuing Lender, and certain of the Existing Lenders together with the other Lenders party hereto desire to (i) amend and restate (but not extinguish) the Existing Agreement in its entirety as hereinafter set forth through the execution of this Agreement and (ii) have the obligations of the Borrower hereunder continue to be secured by the liens and security interests created under the Existing Security Documents, as such liens and security interests have been assigned by the Existing Collateral Agent to the Administrative Agent under that certain Assignment of Liens dated as of April 12, 2006 among the Existing Collateral Agent, Administrative Agent, the Borrower and the other Obligors party thereto (the “ Assignment ”).

D. It is the intention of the parties hereto that this Agreement is an amendment and restatement of the Existing Agreement, and is not a novation of the Existing Agreement.

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the Borrower, the Administrative Agent, the Issuing Lender, and the Lenders, (i) do hereby agree that the Existing Agreement is amended and restated (but not substituted or extinguished) in its entirety as set forth herein, and (ii) do hereby further agree as follows:

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ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

Section 1.01 Certain Defined Terms . As used in this Agreement, the terms defined above shall have the meanings set forth therein and the following terms shall have the following meanings (unless otherwise indicated, such meanings to be equally applicable to both the singular and plural forms of the terms defined):

“ Acceptable Security Interest ” in any Property means a Lien which (a) exists in favor of the Administrative Agent for the benefit of the Administrative Agent, the Issuing Lender, the Lenders, and any Swap Counterparty, (b) is superior to all Liens or rights of any other Person in the Property encumbered thereby (other than Permitted Subject Liens), (c) secures the Obligations, and (d) is perfected and enforceable.

“ Acquisition ” means the purchase by the Borrower or any of its Subsidiaries of any business, including the purchase of associated assets or operations or Equity Interest of a Person.

“ Additional Covenant Period ” has the meaning set forth in Section 2.02(a)(ii).

“ Adjusted Reference Rate ” means, for any day, the fluctuating rate per annum of interest equal to the greater of (a) the Reference Rate in effect on such day and (b) the Federal Funds Rate in effect on such day plus ¹ / 2 of 1%.

“ Administrative Agent ” means Union Bank of California, N.A., in its capacity as agent pursuant to Article VIII, and any successor agent pursuant to Section 8.08.

“ Administrative Questionnaire ” means an Administrative Questionnaire in a form supplied by the Administrative Agent or such other form provided by a Lender and acceptable to the Administrative Agent.

“ Advance ” means an advance by a Lender to the Borrower pursuant to Section 2.01(a) as part of a Borrowing and refers to a Reference Rate Advance or a Eurodollar Rate Advance.

“ 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.

“ Agreement ” means this Sixth Amended and Restated Credit Agreement, as it may hereafter be amended, modified or supplemented from time to time in accordance with Section 9.20.

“ Applicable Margin ” means:

(a) with respect to any Advance, (i) during such times as any Event of Default exists, 3.00% per annum plus the rate per annum set forth in the Pricing Grid for the relevant Type of such Advance based on the relevant Utilization Level applicable from time to time, and (ii) at all other times, the rate per annum set forth in the Pricing Grid for the relevant Type of such Advance based on the relevant Utilization Level applicable from time to time;

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(b) with respect to the Letter of Credit fees required under Section 2.08(b), the per annum rate for Letter of Credit fees set forth in the Pricing Grid based on the relevant Utilization Level applicable from time to time; and

(c) with respect to the unused Commitment fees required under 2.08(a), the per annum rate set forth for Commitment fees in the Pricing Grid based on the relevant Utilization Level applicable from time to time.

The Applicable Margin shall, if applicable, change as of any change in the Utilization Level, and, in the case of outstanding Advances, when and as any such Event of Default commences or terminates.

“ Approved Fund ” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

“ Assignment and Assumption ” means an assignment and assumption entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit A or any other form approved by the Administrative Agent.

“ Availability ” means, with respect to a Lender at any time, the lesser of (a) such Lender’s Commitment at such time, and (b) if the Borrowing Base is in effect at such time pursuant to Section 2.02, such Lender’s Pro Rata Share of such Borrowing Base; minus , in each case, the sum of (i) the aggregate outstanding principal amount of all Advances owed to such Lender at such time plus (ii) such Lender’s Pro Rata Share of the aggregate Letter of Credit Exposure at such time.

“ BB Period ” has the meaning set forth in Section 2.02(a)(i).

“ Borrowing ” means, subject to Section 2.03(c)(ii), a borrowing consisting of simultaneous Advances of the same Type and made by each Lender pursuant to Section 2.03(a) or Section 2.07(d), continued by each Lender pursuant to Section 2.03(b), or Converted by each Lender to Advances of a different Type pursuant to Section 2.03(b).

“ Borrowing Base ” means at any time, the Dollar amount determined in accordance with Section 2.02 on account of Proven Reserves attributable to Oil and Gas Properties of the Borrower and its Subsidiaries described in the most recent Independent Engineering Report or Internal Engineering Report, as applicable, delivered to the Administrative Agent and the Lenders pursuant to Section 2.02.

“ Business Day ” means a day of the year on which banks are not required or authorized to close in Dallas, Texas and Los Angeles, California, and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on by banks in the London interbank market.

“ Capital Leases ” means, as applied to any Person, any lease of any Property by such Person as lessee which would, in accordance with GAAP, be required to be classified and accounted for as a capital lease on the balance sheet of such Person.

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“ Cash Collateral Account ” means a special interest bearing cash collateral account pledged by the Borrower to the Issuing Lender containing cash deposited pursuant to Sections 2.05(b), 7.02(b), or 7.03(b) to be maintained with the Issuing Lender in accordance with Section 2.07(g)(i) and bear interest or be invested in the Issuing Lender’s reasonable discretion.

“ CERCLA ” means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, state and local analogs, and all rules and regulations and requirements thereunder in each case as now or hereafter in effect.

“ Change of Control ” means any of the following events: (a) any “person” or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) other than Harold G. Hamm, has become, directly or indirectly, the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to have “beneficial ownership” of all such shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time, by way of merger, consolidation or otherwise) of 40% or more of the common stock of Borrower on a fully-diluted basis, after giving effect to the conversion and exercise of all outstanding warrants, options and other securities of the Borrower (whether or not such securities are then currently convertible or exercisable), or (b) during any period of two consecutive calendar quarters, individuals who at the beginning of such period were members of the Borrower’s board of directors cease for any reason to constitute a majority of the directors of the Borrower then in office unless (i) such new directors were elected by a majority of the directors of the Borrower who constituted the board of directors of the Borrower at the beginning of such period (or by directors so elected) or by the stockholders pursuant to the nomination of the existing directors, or (ii) the reason for such directors failing to constitute a majority is a result of retirement by directors due to age, death or disability.

“ Change in Law ” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any new law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority.

“ Code ” means the Internal Revenue Code of 1986, as amended, and any successor statute.

“ Collateral ” means (a) all “Collateral”, “Pledged Collateral” and “Mortgaged Properties” (as defined in each of the Mortgages, the Security Agreements, and the Pledge Agreement, as applicable) or similar terms used in the Security Instruments, and (b) all amounts contained in the Borrower’s and its Subsidiaries’ bank accounts with any Lender.

“ Commitment ” means, for any Lender, the amount set opposite such Lender’s name on the attached Schedule II as its Commitment, or if such Lender has entered into any Assignment and Assumption, the amount set forth for such Lender as its Commitment in the Register maintained by the Administrative Agent pursuant to Section 9.05(b), in either case, as such amount may be reduced, increased or terminated pursuant to Section 2.04 or Article VII or otherwise under this Agreement.

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“ Commitment Termination Date ” means the earlier of (a) the Maturity Date, as such date may have been extended pursuant to Section 2.16 and (b) the earlier termination in whole of the Commitments pursuant to Section 2.04 or Article VII.

“ Compliance Certificate ” means a compliance certificate in the form of the attached Exhibit B signed by a Responsible Officer of the Borrower.

“ Control ” means the possession, directly or indirectly, of the power to (a) vote 15% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managing general partners or other equivalent governing body; or (b) 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. “ Controlling ” and “ Controlled ” have meanings correlative thereto.

“ Controlled Group ” means all members of a controlled group of corporations and all businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Code.

“ Convert ,” “ Conversion ,” and “ Converted ” each refers to a conversion of Advances of one Type into Advances of another Type pursuant to Section 2.03(b).

“ Credit Extension ” means (a) an Advance made by any Lender or (b) the issuance, increase or extension of any Letter of Credit by the Issuing Lender.

“ Debt ” for any Person, means without duplication:

(a) indebtedness of such Person for borrowed money;

(b) obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;

(c) obligations of such Person to pay the deferred purchase price of Property or services (including obligations that are non-recourse to the credit of such Person but are secured by the assets of such Person);

(d) obligations of such Person as lessee under Capital Leases or in respect of synthetic leases;

(e) obligations of such Person under reimbursement agreements and other agreements relating to the issuance of letters of credit or acceptance financing;

(f) obligations of such Person under any Hedge Contract; provided that , for purposes of this Agreement, the “principal amount” of the obligations in respect of Hedging Contracts at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that would be required to be paid if such Hedging Contracts were terminated at such time;

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(g) obligations of such Person owing in respect of mandatorily redeemable preferred stock or other preferred equity interest of such Person;

(h) obligations of such Person owing in connection with any volumetric or production prepayments;

(i) other obligations which (i) would under GAAP be shown on such Person’s balance sheet as a liability and (ii) are payable more than one year from the date of creation thereof (other than reserves for taxes and reserves for contingent obligations);

(j) obligations of such Person under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) of such Person to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (a) through (i) above;

(k) indebtedness or obligations of others of the kinds referred to in clauses (a) through (j) secured by any Lien on or in respect of any Property of such Person; and

(l) all liabilities of such Person in respect of unfunded vested benefits under any Plan;

provided, however, that the “Debt” of any Person shall not include (i) Debt that is incurred by such Person on ordinary trade terms to vendors, suppliers, or other Persons providing goods and services for use by such Person in the ordinary course of its business, unless and until such Debt is outstanding more than 90 days past the original invoice or billing date thereof, (ii) income taxes payable that are not overdue, or (iii) asset retirement obligations under SFAS 143.

“ Default ” means (a) an Event of Default or (b) any event or condition which with notice or lapse of time or both would become an Event of Default.

“ Dollars ” and “ $ ” means lawful money of the United States of America.

“ EBITDAX ” means with respect to the Borrower and its consolidated Subsidiaries, for any period, without duplication, the sum of (a) consolidated Net Income for such period plus (b) to the extent deducted in determining consolidated Net Income, Interest Expense, income taxes, exploration expenses, depreciation, amortization, depletion and other non-cash charges (including (i) any provision for the reduction in the carrying value of assets recorded in accordance with GAAP and including non-cash charges resulting from the requirements of SFAS 133 or 143, (ii) property impairment, and (iii) non-cash compensation expenses) for such period minus (c) all non-cash items of income which were included in determining such consolidated Net Income, including non-cash income resulting from the requirements of SFAS 133 or 143.

“ Effective Date ” means April 12, 2006.

“ Eligible Assignee ” means (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund, and (d) any other Person (other than a natural person) approved by (i) the Administrative Agent and the Issuing Lender, and (ii) unless an Event of Default has occurred and is continuing, the Borrower (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, “Eligible Assignee” shall not include the Borrower or any of the Borrower’s Affiliates or Subsidiaries.

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“ Engineering Report ” means either an Independent Engineering Report or an Internal Engineering Report.

“ Environment ” or “ Environmental ” shall have the meanings set forth in 42 U.S.C. Section 9601(8) (1988).

“ Environmental Claim ” means any third party (including governmental agencies and employees) action, lawsuit, claim, demand, regulatory action or proceeding, order, decree, consent agreement or notice of potential or actual responsibility or violation (including claims or proceedings under the Occupational Safety and Health Acts or similar laws or requirements relating to health or safety of employees) which seeks to impose liability under any Environmental Law.

“ Environmental Law ” means, as to the Borrower or its Subsidiaries, all Legal Requirements or common law theories applicable to the Borrower or its Subsidiaries arising from, relating to, or in connection with the Environment, health, or safety, including CERCLA, relating to (a) pollution, contamination, injury, destruction, loss, protection, cleanup, reclamation or restoration of the air, surface water, groundwater, land surface or subsurface strata, or other natural resources; (b) solid, gaseous or liquid waste generation, treatment, processing, recycling, reclamation, cleanup, storage, disposal or transportation; (c) exposure to pollutants, contaminants, hazardous, or toxic substances, materials or wastes; (d) the safety or health of employees; or (e) the manufacture, processing, handling, transportation, distribution in commerce, use, storage or disposal of hazardous, or toxic substances, materials or wastes.

“ Environmental Permit ” means any permit, license, order, approval, registration or other authorization under Environmental Law.

“ Equity Interest ” means, with respect to any Person, any shares, interests, participation, or other equivalents (however designated) of corporate stock, membership interests or partnership interests (or any other ownership interests) of such Person.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ Eurocurrency Liabilities ” has the meaning assigned to that term in Regulation D of the Federal Reserve Board (or any successor), as in effect from time to time.

“ Eurodollar Rate ” means, for the Interest Period for each Eurodollar Rate Advance comprising the same Borrowing, the interest rate per annum (rounded upward to the nearest whole multiple of 1/100 of 1% per annum) set forth on the applicable Telerate Page as the London Interbank Offered Rate, for deposits in Dollars at 11:00 a.m. (London, England time) two Business Days before the first day of such Interest Period and for a period equal to such Interest Period; provided , that, if no such quotation appears on the applicable Telerate Page, the Eurodollar Rate shall be an interest rate per annum equal to the rate per annum at which deposits in Dollars are offered by the principal office of Union Bank of California, N.A. in

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London, England to prime banks in the London interbank market at 11:00 a.m. (London, England time) two Business Days before the first day of such Interest Period in an amount substantially equal to the Eurodollar Rate Advance to be maintained by the Lender that is the Administrative Agent in respect of such Borrowing and for a period equal to such Interest Period.

“ Eurodollar Rate Advance ” means an Advance which bears interest as provided in Section 2.09(b).

“ Eurodollar Rate Reserve Percentage ” of any Lender for the Interest Period for any Eurodollar Rate Advance means the reserve percentage applicable during such Interest Period (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) under regulations issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement (including any emergency, supplemental, or other marginal reserve requirement) for such Lender with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period.

“ Event of Default ” has the meaning specified in Section 7.01.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Excluded Taxes ” means, with respect to the Administrative Agent, any Lender, the Issuing Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized 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 the Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.15), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new lending office) or is attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 2.14(e) and Section 2.14(f), 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 from the Borrower with respect to such withholding tax pursuant to Section 2.14(a).

“ Existing Letters of Credit ” means the letters of credit issued and outstanding under the Existing Agreement.

“ Expiration Date ” means, with respect to any Letter of Credit, the date on which such Letter of Credit will expire or terminate in accordance with its terms.

“ Federal Funds Rate ” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as

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published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for any such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

“ Federal Reserve Board ” means the Board of Governors of the Federal Reserve System or any of its successors.

“ Fee Letter ” means that certain fee letter dated as of April 12, 2006 between the Borrower and Union Bank of California, N.A.

“ Financial Statements ” means the audited consolidated and consolidating balance sheet of the Borrower as of December 31, 2005 and the related audited consolidated and consolidating statements of income, cash flow, and retained earnings of the Borrower, and including the certification of the independent certified public accountants preparing such statements and footnotes to any of the foregoing, all prepared in accordance with GAAP, the copies of which have been delivered to the Administrative Agent and the Lenders.

“ Foreign Lender ” means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes. 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.

“ Fund ” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

“ Funded Debt ” of any Person means (a) Debt of such Person as described in clauses (a), (b), (d), and (e) of the definition of “Debt” in this Section 1.01 and (b) Debt of such Person as described in clauses (j) and (k) of the definition of “Debt” in this Section 1.01 but only with respect to the indebtedness referred to in clauses (a), (b), (d), and (e) of such definition; provided that, for purposes of this definition, Debt described in clause (e) of the definition of “Debt” shall not constitute “Funded Debt” if such Debt, at the time of determination, is contingent.

“ GAAP ” means United States generally accepted accounting principles as in effect from time to time, applied on a basis consistent with the requirements of Section 1.02.

“ Governmental Authority ” means the government of the United States of America or any other nation, or of 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 (including any supra-national bodies such as the European Union or the European Central Bank).

“ Guarantor ” means each existing or future Subsidiary of the Borrower.

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“ Guaranty ” means a Guaranty in substantially the form of the attached Exhibit C and executed by a Guarantor; and “ Guaranties ” shall mean all such guaranties collectively.

“ Hazardous Substance ” means the substances identified as such pursuant to CERCLA and those regulated under any other Environmental Law, including pollutants, contaminants, petroleum, petroleum products, radionuclides, radioactive materials, and medical and infectious waste.

“ Hazardous Waste ” means the substances regulated as such pursuant to any Environmental Law.

“ Hedge Contract ” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

“ Hydrocarbon Hedge Agreement ” means a Hedge Contract which is intended to reduce or eliminate the risk of fluctuations in the price of Hydrocarbons.

“ Hydrocarbons ” means oil, gas, coal seam gas, casinghead gas, drip gasoline, natural gasoline, condensate, distillate, and all other liquid and gaseous hydrocarbons produced or to be produced in conjunction therewith from a well bore and all products, by-products, and other substances derived therefrom or the processing thereof, and all other minerals and substances produced in conjunction with such substances, including sulfur, geothermal steam, water, carbon dioxide, helium, and any and all minerals, ores, or substances of value and the products and proceeds therefrom.

“ Indemnified Taxes ” means Taxes other than Excluded Taxes.

“ Independent Engineer ” means Ryder Scott Company LP or any other engineering firm acceptable to the Administrative Agent.

“ Independent Engineering Report ” means a report, in form and substance satisfactory to the Administrative Agent and each of the Lenders, prepared by an Independent Engineer, addressed to the Administrative Agent and the Lenders with respect to the Oil and Gas Properties owned by the Borrower or its Subsidiaries (or to be acquired by the Borrower or any of its Subsidiaries, as applicable) which are or are to be included in the Borrowing Base, which report

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shall (a) specify the location, quantity, and type of the estimated Proven Reserves attributable to such Oil and Gas Properties, (b) contain a projection of the rate of production of such Oil and Gas Properties, (c) contain an estimate of the net operating revenues to be derived from the production and sale of Hydrocarbons from such Proven Reserves, (d) take into account any “over-produced” status under gas balancing arrangements, (e) if the Borrower is not then a public company required to file reports with the SEC, contain such other information as is customarily obtained from and provided in such reports or is otherwise reasonably requested by the Administrative Agent or any Lender, and (f) if the Borrower is then a public company required to file reports with the SEC, be prepared in accordance and contain the information required by the standards applicable to the reporting of Proven Reserves in reports filed or to be filed with the SEC.

“ Index Debt ” means the Borrower’s long-term, unsecured, senior, non-credit enhanced debt.

“ Interest Expense ” means, for the Borrower and its consolidated Subsidiaries for any period, total interest, letter of credit fees, and other fees and expenses accrued in connection with any Debt during such period (whether expensed in such period or capitalized), including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing, imputed interest under Capital Leases, fees owed with respect to the Obligations, and net costs under Hedge Contracts, all as determined in conformity with GAAP.

“ Interest Hedge Agreement ” means a Hedge Contract between the Borrower and one or more financial institutions providing for the exchange of nominal interest obligations between the Borrower and such financial institution or the cap of the interest rate on any Debt of the Borrower.

“ Interest Period ” means, for each Eurodollar Rate Advance comprising part of the same Borrowing, the period commencing on the date of such Eurodollar Rate Advance or the date of the Conversion of any Reference Rate Advance into a Eurodollar Rate Advance and ending on the last day of the period selected by the Borrower pursuant to the provisions below and Section 2.03 and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below and Section 2.03. The duration of each such Interest Period shall be one, two, three, or if available, six months, in each case as the Borrower may select, upon notice received by the Administrative Agent not later than 10:00 a.m. (Los Angeles, California time) on the third Business Day prior to the first day of such Interest Period; provided , however , that:

(a) the Borrower may not select any Interest Period which ends after the Commitment Termination Date;

(b) Interest Periods commencing on the same date for Advances comprising part of the same Borrowing shall be of the same duration;

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(c) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day; provided, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and

(d) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month in which it would have ended if there were a numerically corresponding day in such calendar month.

“ Internal Engineering Report ” means a report, in form and substance satisfactory to the Administrative Agent and each Lender, prepared by the Borrower and certified by a Responsible Officer of the Borrower, addressed to the Administrative Agent and the Lenders with respect to the Oil and Gas Properties owned by the Borrower or any of its Subsidiaries (or to be acquired by the Borrower or any of its Subsidiaries, as applicable) which are or are to be included in the Borrowing Base, which report shall (a) specify the location, quantity, and type of the estimated Proven Reserves attributable to such Oil and Gas Properties, (b) contain a projection of the rate of production of such Oil and Gas Properties, (c) contain an estimate of the net operating revenues to be derived from the production and sale of Hydrocarbons from such Proven Reserves, (d) take into account any “over-produced” status under gas balancing arrangements, (e) if the Borrower is not then a public company required to file reports with the SEC, contain such other information as is customarily obtained from and provided in such reports or is otherwise reasonably requested by the Administrative Agent or any Lender, and (f) if the Borrower is then a public company required to file reports with the SEC, be prepared in accordance and contain the information required by the standards applicable to the reporting of Proven Reserves in reports filed or to be filed with the SEC.

“ Investments ” means any investment (including the making of an Acquisition), made directly or indirectly, in any Person, whether by acquisition of shares of capital stock, indebtedness or other obligations or securities or by loan, advance, capital contribution or otherwise and whether made in cash, by the transfer of property, or by any other means.

“ Issuing Lender ” means Union Bank of California, N.A., and any successor issuing bank pursuant to Section 8.08.

“ Leases ” means all oil and gas leases, oil, gas and mineral leases, oil, gas and casinghead gas leases or any other instruments, agreements, or conveyances under and pursuant to which the owner thereof has or obtains the right to enter upon lands and explore for, drill, and develop such lands for the production of Hydrocarbons.

“ Legal Requirement ” means, as to any Person, any law, statute, ordinance, decree, requirement, order, judgment, rule, regulation (or official interpretation of any of the foregoing) of, and the terms of any license or permit issued by, any Governmental Authority, including Regulations D, T, U, and X, which is applicable to such Person.

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“ Lender Parties ” means Lenders, the Issuing Lender, and the Administrative Agent.

“ Lenders ” means the lenders having a Commitment or if such Commitments have been terminated, lenders that are owed Advances or that hold a participation in the Letter of Credit Obligations.

“ Lending Office ” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent.

“ Letter of Credit ” means, individually, any standby letter of credit issued by the Issuing Lender for the account of an Obligor which is subject to this Agreement.

“ Letter of Credit Application ” means the Issuing Lender’s standard form letter of credit application for standby letters of credit that has been executed by the Borrower and accepted by the Issuing Lender in connection with the issuance of a Letter of Credit.

“ Letter of Credit Documents ” means all Letters of Credit, Letter of Credit Applications, and agreements, documents, and instruments entered into in connection with or relating thereto.

“ Letter of Credit Exposure ” means, at any time, the sum of (a) the aggregate undrawn maximum face amount of all Letters of Credit at such time plus (b) the aggregate unpaid amount of all Reimbursement Obligations at such time.

“ Letter of Credit Obligations ” means any obligations of the Borrower under this Agreement in connection with the Letters of Credit, including the Reimbursement Obligations.

“ Lien ” means any mortgage, lien, pledge, assignment, charge, deed of trust, security interest, hypothecation, preference, deposit arrangement or encumbrance (or other type of arrangement having the practical effect of the foregoing) to secure or provide for the payment of any obligation of any Person, whether arising by contract, operation of law, or otherwise (including the interest of a vendor or lessor under any conditional sale agreement, synthetic lease, Capital Lease, or other title retention agreement).

“ Liquid Investments ” means:

(e) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States maturing within 180 days from the date of any acquisition thereof;

(f) (i) negotiable or nonnegotiable certificates of deposit, time deposits, or other similar banking arrangements maturing within 180 days from the date of acquisition thereof or which may be liquidated for the full amount thereof without penalty or premium (“bank debt securities”), issued by (A) any Lender (or any Affiliate of any Lender), or (B) any other bank or trust company so long as such certificate of deposit is pledged to secure the Borrower’s or any Subsidiaries’ ordinary course of business bonding requirements, or any other bank or trust company which has combined capital and surplus and undivided profit of not less

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than $500,000,000.00, if at the time of deposit or purchase, such bank debt securities are rated at least the third highest credit rating given by either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc., and (ii) commercial paper issued by (A) any Lender (or any Affiliate of any Lender) or (B) any other Person if at the time of purchase such commercial paper is rated at the highest or the second highest credit rating given by either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc., or upon the discontinuance of both of such services, such other nationally recognized rating service or services, as the case may be, as shall be selected by the Borrower with the consent of the Required Lenders;

(g) deposits in money market funds investing exclusively in investments described in clauses (a) and (b) above;

(h) repurchase agreements relating to investments described in clauses (a) and (b) above with a market value at least equal to the consideration paid in connection therewith, with any Person who regularly engages in the business of entering into repurchase agreements and has a combined capital and surplus and undivided profit of not less than $500,000,000.00, if at the time of entering into such agreement the debt securities of such Person are rated at the highest or the second highest credit rating given by either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc.; and

(i) such other instruments (within the meaning of Article 9 of the Texas Business and Commerce Code) or investment property as the Borrower may request and the Administrative Agent may approve in writing.

“ Loan Documents ” means this Agreement, the Notes, the Letter of Credit Documents, the Guaranties, the Security Instruments, any Hedge Contract with a Swap Counterparty, and each other agreement, instrument, or document executed by the Borrower, any Guarantor, or any of the Borrower’s or a Guarantor’s Subsidiaries or any of their officers at any time in connection with this Agreement.

“ Material Adverse Change ” means any change in the business, property, condition (financial or otherwise) or results of operations, or reasonably foreseeable prospects of Borrower and the Guarantors, considered as a whole, which has a Material Adverse Effect, excluding any change in prevailing economic or business conditions that are applicable, generally, to companies engaged in the domestic oil and gas exploration and production business in the continental United States, including fluctuations in oil and gas prices.

“ Material Adverse Effect ” means (a) a material adverse change in the business, assets (including the Oil and Gas Properties of the Borrower, any Guarantor or any of their respective Subsidiaries), condition (financial or otherwise), results of operations or reasonably foreseeable prospects of the Borrower, any Guarantor or any of their respective Subsidiaries since December 31, 2005, considered as a whole; (b) a material adverse change on the validity or enforceability of this Agreement or any of the other Loan Documents; or (c) a material adverse effect on the Borrower’s, or any Guarantor’s or any Subsidiary’s ability to perform its obligations under this Agreement, any Note, any Guaranty, or any other Loan Document.

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“ Maturity Date ” means April 12, 2011, as such date may be extended from time to time pursuant to Section 2.16.

“ Maximum Rate ” means the maximum nonusurious interest rate under applicable law (determined under such laws after giving effect to any items which are required by such laws to be construed as interest in making such determination, including if required by such laws, certain fees and other costs).

“ Moody’s ” means Moody’s Investors Service, Inc. and any successor thereto.

“ Mortgages ” means, collectively, each of the mortgages and deeds of trust constituting Existing Security Documents and each of the other mortgages and deeds of trust executed by any one or more of the Obligors in favor of the Administrative Agent for the ratable benefit of the Lender Parties and the Swap Counterparties in substantially the form of the attached Exhibit D or such other form as may be requested by the Administrative Agent, together with any assumptions or assignments of the obligations thereunder by the Borrower, any Guarantor or any of their respective Subsidiaries, and “ Mortgages ” shall mean all of such Mortgages collectively.

“ Multiemployer Plan ” means a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA.

“ Net Income ” means, for any period and with respect to any Person, the net income for such period for such Person after taxes as determined in accordance with GAAP, excluding however, (a) extraordinary items, including (i) any net non-cash gain or loss during such period arising from the sale, exchange, retirement or other disposition of capital assets (such term to include all fixed assets and all securities) other than in the ordinary course of business, and (ii) any write-up or write-down of assets and (b) the cumulative effect of any change in GAAP.

“ Note ” means a promissory note of the Borrower payable to the order of any Lender, in substantially the form of the attached Exhibit E, evidencing indebtedness of the Borrower to such Lender resulting from Advances owing to such Lender.

“ Notice of Borrowing ” means a notice of borrowing in the form of the attached Exhibit F signed by a Responsible Officer of the Borrower.

“ Notice of Conversion or Continuation ” means a notice of conversion or continuation in the form of the attached Exhibit G signed by a Responsible Officer of the Borrower.

“ Obligations ” means (a) all principal, interest, fees, reimbursements, indemnifications, and other amounts payable by any Obligor to any Lender Party under the Loan Documents, including the Letter of Credit Obligations, and (b) all obligations of any Obligor owing to any Swap Counterparty under any Hedge Contract.

“ Obligors ” means, collectively, the Borrower and the Guarantors.

“ Offering ” means the secondary offering of Equity Interests in the Borrower to be made pursuant to the Form S-1 Registration Statement filed by the Borrower with the SEC on March 7, 2006.

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“ Oil and Gas Properties ” means fee mineral interests, term mineral interests, Leases, subleases, farm-outs, royalties, overriding royalties, net profit interests, carried interests, production payments and similar mineral interests, and all unsevered and unextracted Hydrocarbons in, under, or attributable to such oil and gas Properties and interests.

“ Overnight Rate ” means, for any day, the greater of (a) the Federal Funds Rate and (b) an overnight rate determined by the Administrative Agent or the Issuing Lender, as the case may be, in accordance with banking industry rules on interbank compensation.

“ Other Taxes ” means 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 under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

“ Participant ” has the meaning assigned to such term in clause (c) of Section 9.05.

“ PBGC ” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.

“ Permit ” means any approval, certificate of occupancy, consent, waiver, exemption, variance, franchise, order, permit, authorization, right or license of or from any Governmental Authority, including an Environmental Permit.

“ Permitted Liens ” means the Liens permitted to exist pursuant to Section 6.01.

“ Permitted Subject Liens ” means all Permitted Liens other than the Liens permitted under paragraph (j) or (l) of Section 6.01.

“ Person ” (whether or not capitalized) means an individual, partnership, corporation (including a business trust), joint stock company, limited liability company, limited liability partnership, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof or any trustee, receiver, custodian or similar official.

“ Plan ” means an employee benefit plan (other than a Multiemployer Plan) maintained for employees of the Borrower or any member of the Controlled Group and covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code.

“ Pledge Agreement ” means the Pledge Agreement in substantially the form of the attached Exhibit H, executed by one or more of the Obligors.

“ Present Value ” means, as of any date of determination, the calculation of the present value (using the average of the discount rates then customarily utilized by the Administrative Agent for reserve valuation purposes, which, on the Effective Date, is a 9% discount rate) of the projected future net revenues attributable to the Present Value Production utilizing the price assumptions used by the Administrative Agent in evaluating its oil and gas loans generally, adjusted to give effect to applicable commodity prices (or caps or floors) under Hedge Contracts permitted hereunder and covering such production; provided that, the portion of Present Value attributed to Proven Reserves which are not then categorized as “producing” shall not exceed 30% of the resulting total Present Value.

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“ Present Value Production” means, at any time of determination, the projected production of oil or gas (measured by volume unit or BTU equivalent, not sales price) from properties and interests owned by any Obligor which are located in or offshore of the United States and Canada attributable to Proven Reserves, as such production is projected in the most recent Engineering Report delivered pursuant to Section 5.06(c), after deducting projected production from any properties or interests sold or under contract for sale that had been included in such report and after adding projected production from any properties or interests that had not been reflected in such report but that are reflected in a separate or supplemental report which is satisfactory to the Administrative Agent.

“ Pricing Grid ” means the pricing information set forth on Schedule I.

“ Property ” of any Person means any property or assets (whether real, personal, or mixed, tangible or intangible) of such Person.

“ Proven Reserves ” means, at any particular time, the estimated quantities of Hydrocarbons which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs attributable to Oil and Gas Properties of the Borrower and its Subsidiaries under then existing economic and operating conditions (i.e., prices and costs as of the date the estimate is made).

“ Pro Rata Share ” means, at any time and as to any Lender, the ratio (expressed as a percentage) of such Lender’s Commitment at such time to the aggregate Commitments at such time, or if the Commitments have been terminated or expired, the Pro Rata Share shall be determined based upon the Commitments most recently in effect, giving effect to any assignments.

“ Reference Rate ” means a fluctuating interest rate per annum as shall be in effect from time to time equal to the rate of interest publicly announced by Union Bank of California, N.A., as its reference rate, whether or not the Borrower has notice thereof.

“ Reference Rate Advance ” means an Advance which bears interest as provided in Section 2.09(a).

“ Register ” has the meaning set forth in paragraph (b) of Section 9.05.

“ Regulations D, T, U, and X ” mean Regulations D, T, U, and X of the Federal Reserve Board, as the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof.

“ Reimbursement Obligations ” means all of the obligations of the Borrower to reimburse the Issuing Lender for amounts paid by the Issuing Lender under Letters of Credit as established by the Letter of Credit Applications and Section 2.07(d)(i).

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“ Reinstatement Date ” means any date when (A) the rating for the Index Debt by S&P is less favorable than BBB- or (B) the rating for the Index Debt by Moody’s is less favorable than Baa3 or (C) neither S&P nor Moody’s maintains a rating for Index Debt.

“ Related Parties ” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents and advisors of such Person and of such Person’s Affiliates.

“ Release ” shall have the meaning set forth in CERCLA or under any other Environmental Law.

“ Release Date ” has the meaning set forth in Section 2.02(f).

“ Release Period ” means the period of time from and after the Release Date and prior to the Reinstatement Date, if any.

“ Required Lenders ” means, as of the date of determination, Lenders holding more than 50% of the aggregate Commitments, or if the Commitments have been terminated or expired, more than 50% of the outstanding principal amount of the Advances and Letter of Credit Exposure (with the aggregate amount of each Lender’s risk participation and funded participation in Letter of Credit Obligations being deemed to be “held” by such Lender for purposes of this definition).

“ Response ” shall have the meaning set forth in CERCLA or under any other Environmental Law.

“ Responsible Officer ” means (a) with respect to any Person that is a corporation, such Person’s Chief Executive Officer, President, Chief Financial Officer, Chief Operating Officer or Vice President, (b) with respect to any Person that is a limited liability company, a manager or a Responsible Officer of such Person’s managing member or manager, or if applicable, such Person’s Chief Executive Officer, President, Chief Financial Officer, Chief Operating Officer or Vice President, and (c) with respect to any Person that is a general partnership or a limited liability partnership, the Responsible Officer of such Person’s general partner or partners.

“ Restricted Payment ” means, with respect to any Person, (a) any direct or indirect dividend or distribution (whether in cash, securities or other Property) or any direct or indirect payment of any kind or character (whether in cash, securities or other Property) in consideration for or otherwise in connection with any retirement, purchase, redemption or other acquisition of any Equity Interest of such Person, or any options, warrants or rights to purchase or acquire any such Equity Interest of such Person or (b) principal or interest payments (in cash, Property or otherwise) on, or redemptions of, subordinated debt of such Person; provided, that, the term “Restricted Payment” shall not include (i) any dividend or distribution payable solely in Equity Interests of the Borrower or warrants, options or other rights to purchase such Equity Interests, or (ii) any surrender or redemption of Equity Interests in the Borrower in connection with the exercise of rights under any employee benefit plans.

“ S&P ” means Standard & Poor’s Ratings Services and any successor thereto.

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“ SEC ” means the U.S. Securities and Exchange Commission, or any successor to its functions.

“ Security Agreement ” means the Security Agreement in substantially the form of the attached Exhibit I, executed by the Obligors.

“ Security Instruments ” means, collectively: (a) the Mortgages, (b) the Transfer Letters, (c) the Pledge Agreement, (d) the Security Agreement, (e) each other agreement, instrument or document executed at any time in connection with the Pledge Agreement, the Security Agreement, or the Mortgages, (f) each agreement, instrument or document executed in connection with the Cash Collateral Account, and (g) each other agreement, instrument or document executed at any time in connection with securing the Obligations, including the Existing Security Documents.

“ Solvent ” means, with respect to any Person as of the date of any determination, that on such date (a) the fair value of the Property of such Person (both at fair valuation and at present fair saleable value) is greater than the total liabilities, including contingent liabilities, of such Person, (b) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations, and other commitments as they mature in the normal course of business, (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature, and (e) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s Property would constitute unreasonably small capital after giving due consideration to current and anticipated future capital requirements and current and anticipated future business conduct and the prevailing practice in the industry in which such Person is engaged. In computing the amount of contingent liabilities at any time, such liabilities shall be computed at the amount which, in light of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“ Subsidiary ” of a Person means any corporation or other entity of which more than 50% of the outstanding Equity Interests having ordinary voting power under ordinary circumstances to elect a majority of the board of directors or similar governing body of such corporation or other entity (irrespective of whether at such time Equity Interests of any other class or classes of such corporation or other entity shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more Subsidiaries of such Person or by one or more Subsidiaries of such Person. Unless otherwise indicated herein, each reference to the term “Subsidiary” shall mean a Subsidiary of the Borrower.

“ Super-Majority Lenders ” means, as of the date of determination, Lenders holding at least 75% of the aggregate Commitments, or if the Commitments have been terminated or expired, the outstanding principal amount of the Advances and Letter of Credit Exposure (with the aggregate amount of each Lender’s risk participation and funded participation in Letter of Credit Obligations being deemed to be “held” by such Lender for purposes of this definition).

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“ Swap Counterparty ” means any Lender (or Affiliate of a Lender) that is party to any Hedge Contract with the Borrower or any of its Subsidiaries.

“ Taxes ” means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“ Termination Event ” means (a) a Reportable Event described in Section 4043 of ERISA and the regulations issued thereunder (other than a Reportable Event not subject to the provision for 30-day notice to the PBGC under such regulations), (b) the withdrawal of the Borrower or any of its Affiliates from a Plan during a plan year in which it was a “substantial employer” as defined in Section 4001(a)(2) of ERISA, (c) 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, (d) the institution of proceedings to terminate a Plan by the PBGC, or (e) any other event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan.

“ Transfer Letters ” means, collectively, the letters in lieu of transfer orders in substantially the form of the attached Exhibit J and executed by any Obligor executing a Mortgage.

“ Type ” has the meaning set forth in Section 1.03.

“ Utilization Level ” means the applicable category (being Level I, Level II, Level III or Level IV) of pricing criteria contained in the Pricing Grid, which is based, at any time of its determination, on the percentage obtained by dividing (a) the outstanding principal amount of the Advances and the Letter of Credit Exposure at such time by (ii) the Borrowing Base in effect at such time. Solely for purposes of this definition and notwithstanding anything to the contrary contained herein, the Borrowing Base, as determined and redetermined pursuant to Section 2.02 below, shall be deemed to be in effect regardless of whether a BB Period is in effect.

Section 1.02 Accounting Terms; Changes in GAAP . Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lenders hereunder shall (unless otherwise disclosed to the Lenders in writing at the time of delivery thereof) be prepared, in accordance with GAAP applied on a basis consistent with those used in the preparation of the latest financial statements furnished to the Lenders hereunder (which prior to the delivery of the first financial statements under Section 5.06, shall mean the Financial Statements). All calculations made for the purposes of determining compliance with this Agreement shall (except as otherwise expressly provided herein) be made by application of GAAP applied on a basis consistent with that used in the preparation of the annual or quarterly financial statements furnished to the Lenders pursuant to Section 5.06 most recently delivered prior to or concurrently with such calculations (or, prior to the delivery of the first financial statements under Section 5.06, used in the preparation of the Financial Statements). In addition, all calculations and defined accounting terms used herein shall, unless expressly provided otherwise, when referring to any Person, where applicable, refer to such Person on a consolidated basis and mean such Person and its consolidated Subsidiaries.

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Section 1.03 Types . The “Type”, when used in respect of any Advance or Borrowing, refers to whether the Advance or the Borrowing consisting of simultaneous Advances is a Eurodollar Rate Advance or a Reference Rate Advance.

Section 1.04 Miscellaneous . With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

(a) 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, (i) any definition of or reference to any agreement, instrument or other document 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 or in any other Loan Document), (ii) any reference to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “ herein ,” “ hereof ” and “ hereunder ,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “ asset ” and “ property ” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

(b) In the computation of periods of time from a specified date to a later specified date, the word “ from ” means “ from and including ;” the words “ to ” and “ until ” each mean “ to but excluding ;” and the word “ through ” means “ to and including .”

(c) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

ARTICLE II

CREDIT FACILITIES

Section 2.01 Commitments .

(a) Advances . Each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make Advances to the Borrower from time to time on any Business Day during the period from the Effective Date until the Commitment Termination Date in an amount for each Lender not to exceed such Lender’s Availability. Each Borrowing shall be in an aggregate amount not less than $2,500,000 and in integral multiples of $2,500,000 in excess

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thereof and shall consist of Advances of the same Type made on the same day by the Lenders ratably according to their respective Commitments. Within the limits of each Lender’s Availability, and subject to the terms of this Agreement, the Borrower may from time to time borrow, prepay, and reborrow Advances.

(b) Outstanding Loans under Existing Agreement . The parties hereto acknowledge and agree that, effective as of the Effective Date, all outstanding Loans (as defined in the Existing Agreement) shall be automatically deemed to be Advances outstanding under this Agreement. The Lenders hereby agree to take any and all such reasonable actions as may be requested by the Administrative Agent in order to ensure that, as of the Effective Date, such outstanding Advances are held by the Lenders in accordance with their Pro Rata Shares as of the Effective Date, after giving effect to this Agreement.

(c) Notes . The indebtedness of the Borrower to each Lender resulting from the Advances owing to such Lender shall be evidenced by a Note of the Borrower payable to the order of such Lender.

Section 2.02 Borrowing Base; Release of Collateral; Present Value . The initial Borrowing Base in effect as of the date of this Agreement has been set by the Administrative Agent and the Lenders and acknowledged by the Borrower as $500,000,000 and the initial Present Value in effect as of the date of this Agreement has been set by the Administrative Agent and acknowledged by the Borrower and the Lenders as $1,000,000,000. The amount of such initial Borrowing Base and such initial Present Value shall remain in effect until it is redetermined pursuant to this Section 2.02. The Borrowing Base shall be determined in accordance with the standards set forth in Section 2.02(e) and is subject to periodic redetermination pursuant to Sections 2.02(b) and 2.02(c). The Borrower may elect not to have the Borrowing Base in effect as provided and subject to the conditions in Section 2.02(a). The Present Value shall be determined in accordance with the standards set forth in Section 2.02(e) and as set forth in Section 2.02(d).

(a) Effective Periods for Borrowing Base .

(i) Availability will be subject to the Borrowing Base, and the Borrowing Base will be mandatorily in effect at any time, when (A) the rating for the Index Debt by S&P is equal to or less favorable than BB or (B) the rating for the Index Debt by Moody’s is equal to or less favorable than Ba2 or (C) neither S&P nor Moody’s maintains a rating for Index Debt; provided that , if, other than as a result of action taken or omitted to be taken by the Borrower, a rating for the Index Debt shall be maintained by only one of S&P and Moody’s, the Borrowing Base will be in effect at any time that such rating is equal to or less than the applicable rating specified under clause (A) or (B) above. Additionally, the Borrowing Base may be in effect and Availability shall be subject to the Borrowing Base if the Borrower so elects pursuant to clauses (a)(ii) and (a)(iv) below. Any such period when the Borrowing Base is either mandatorily in effect pursuant to this clause (i) or optionally in effect pursuant to clauses (a)(ii) and (a)(iv) below is referred to herein as a “ BB Period ”.

(ii) If the rating for the Index Debt by S&P is greater than BB and the rating for the Index Debt by Moody’s is greater than Ba2 (or, if a rating for the Index Debt shall

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be maintained by only one of S&P and Moody’s (other than as a result of action taken or omitted to be taken by the Borrower), the rating for the Index Debt is greater than the applicable rating specified in this clause (ii)), then, subject to the limitations set forth in clause (iii) and clause (iv) below and from time to time, the Borrower may elect one of the following two options: (A) Availability shall be subject to the Borrowing Base and the Borrowing Base will be in effect and (B) Availability shall be governed without reference to the Borrowing Base and the Borrowing Base will not be in effect (any such optional period when the Borrowing Base is not in effect being the “ Additional Covenant Period ”).

(iii) To elect to convert to an Additional Covenant Period from a BB Period, the Borrower must provide written notice of such election to the Administrative Agent and the Lenders at least 30 days prior to the effective date of such election. Once the Borrower has elected to commence an Additional Covenant Period, such Additional Covenant Period shall remain in effect until the earliest of (A) a BB Period is elected by the Borrower pursuant to clause (iv) below and such Borrowing Base is made effective pursuant to Section 2.02(b), (B) a BB Period is in effect pursuant to clause (a)(i) or (a)(ii) above, and (C) the automatic conversion into a BB Period as provided in the last sentence of clause (a)(iv) below.

(iv) To elect to convert to a BB Period from an Additional Covenant Period, the Borrower must provide written notice of such election and the effective date of such election to the Administrative Agent and the Lenders within 5 days after the Borrower is notified of the redetermined Borrowing Base and Present Value pursuant to Section 2.02(b)(i) and (ii). If the Borrower makes such election, then a BB Period shall be in effect from the effective date of such election until the Borrower elects to commence an Additional Covenant Period pursuant to clause (iii) above. Further, if at any time during an Additional Covenant Period the Borrower would be in breach of Section 6.19 as a result of a redetermination of the Present Value, the Borrower shall be deemed to have elected to convert immediately from an Additional Covenant Period to a BB Period, and no Default or Event of Default shall be deemed to have occurred or arisen hereunder solely by virtue of the Borrower’s failure to be in compliance with Section 6.19.

(b) Semi-Annual Redetermination of Borrowing Base .

(i) The Borrower shall deliver to the Administrative Agent and each of the Lenders on or before each March 31 ^st (or April 30 ^th in the event the Borrower is not then a public company required to file reports with the SEC) beginning March 31, 2007 (or April 30, 2007, if applicable), an Independent Engineering Report dated effective as of the immediately preceding December 31, and such other information as may be reasonably requested by any Lender with respect to the Oil and Gas Properties included or to be included in the Borrowing Base. Upon receipt of such information, the Administrative Agent shall, in the normal course of business (but in any event within 45 days after receipt of such information), make a determination of the Borrowing Base, which shall become effective upon approval by the Super-Majority Lenders (or all of the Lenders if the Borrowing Base is to be increased) and subsequent written notification from the Administrative Agent to the Borrower, and which, subject to the other provisions of this Agreement, shall be the basis on which the Borrowing Base shall thereafter be calculated until the effective date of the next redetermination of the Borrowing Base as set forth in this Section 2.02.

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(ii) The Borrower shall deliver to the Administrative Agent and each Lender on or before each September 30 ^th (or October 31 ^st in the event the Borrower is not then a public company required to file reports with the SEC), beginning September 30, 2006 (or October 31, 2006, if applicable) an Internal Engineering Report dated effective as of the immediately preceding June 30 and such other information as may be reasonably requested by the Administrative Agent or any Lender with respect to the Oil and Gas Properties included or to be included in the Borrowing Base. Upon receipt of such information, the Administrative Agent shall, in the normal course of business (but in any event with 45 days after receipt of such information), make a determination of the Borrowing Base, which shall become effective upon approval by the Super-Majority Lenders (or all of the Lenders if the Borrowing Base is to be increased) and subsequent written notification from the Administrative Agent to the Borrower, and which, subject to the other provisions of this Agreement, shall be the basis on which the Borrowing Base shall thereafter be calculated until the effective date of the next redetermination of the Borrowing Base as set forth in this Section 2.02.

(iii) In the event that the Borrower does not furnish to the Administrative Agent and the Lenders the Independent Engineering Report, Internal Engineering Report or other information specified in clauses (i) and (ii) above by the date specified therein, the Administrative Agent and the Lenders may nonetheless redetermine the Borrowing Base from time-to-time thereafter in their sole discretion until the Administrative Agent and the Lenders receive the relevant Independent Engineering Report, Internal Engineering Report, or other information, as applicable, whereupon the Administrative Agent and the Lenders shall redetermine the Borrowing Base as otherwise specified in this Section 2.02.

(iv) Each delivery of an Engineering Report by the Borrower to the Administrative Agent and the Lenders shall constitute a representation and warranty by the Borrower to the Administrative Agent and the Lenders that (A) the Borrower and its Subsidiaries, as applicable, own the Oil and Gas Properties specified therein free and clear of any Liens (except Permitted Liens), and (B) on and as of the date of such Engineering Report each Oil and Gas Property described as “proved developed” therein was developed for oil and gas, and the wells pertaining to such Oil and Gas Properties that are described therein as producing wells (“Wells”), were each producing oil and gas in paying quantities, except for Wells that were utilized as water or gas injection wells or as water disposal wells.

(c) Interim Redetermination of Borrowing Base . At all times during a BB Period, in addition to the Borrowing Base redeterminations provided for in Section 2.02(b), the Administrative Agent and the Lenders may, either in their sole discretion or at the request of the Borrower and based on such information as the Administrative Agent and the Lenders deem relevant (but in accordance with Section 2.02(e)), make additional redeterminations of the Borrowing Base during any six-month period between scheduled redeterminations; provided that, neither the Administrative Agent and the Lenders nor the Borrower shall be permitted to request more than one such unscheduled redetermination during any six-month period between scheduled redeterminations, unless the redetermination is requested in connection with or as a result of an Acquisition or the acquisition of Oil and Gas Properties having a value in excess of 5% of the Present Value then in effect. Additionally, the Administrative Agent and the Lenders may request an additional redetermination in connection with any sale or proposed sale of Oil and Gas Properties of the Borrower or any of its Subsidiaries, which together with all such sales

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made since the most recent redetermination of the Borrowing Base, have a market value of equal to or greater than 5% of the Present Value then in effect to the extent any such sale is otherwise permitted by this Agreement. The party requesting the redetermination shall give the other party at least 10 days’ prior written notice that a redetermination of the Borrowing Base pursuant to this paragraph (c) is to be performed. In connection with any redetermination of the Borrowing Base under this Section 2.02(c), the Borrower shall provide the Administrative Agent and the Lenders with such information regarding the Borrower and its Subsidiaries’ business (including its Oil and Gas Properties, the Proven Reserves, and production relating thereto) as the Administrative Agent or any Lender may request, including an updated Independent Engineering Report. Upon receipt of such information, the Administrative Agent shall, in the normal course of business (but in any event within 45 days after receipt of such information), make a determination of the Borrowing Base, which shall become effective upon approval by the Super-Majority Lenders (or all of the Lenders if the Borrowing Base is to be increased). The Administrative Agent shall promptly notify the Borrower in writing of each redetermination of the Borrowing Base pursuant to this Section 2.02(c) and the amount of the Borrowing Base as so redetermined.

(d) Calculation of Present Value . Concurrent with the semi-annual redeterminations of the Borrowing Base pursuant to Section 2.02(b)(i) or Section 2.02(b)(ii) above, the Administrative Agent shall make a redetermination of the Present Value. The Administrative Agent shall give notice of such Present Value and the effective date of such redetermination, together with the relevant pricing assumptions used by the Administrative Agent in making such redetermination, to the Lenders and to the Borrower concurrently with the notice of the redetermined Borrowing Base pursuant to Section 2.02(b)(i) or Section 2.02(b)(ii).

(e) Standards for Redetermination . Each redetermination of the Borrowing Base and the Present Value by the Administrative Agent and, if applicable, the Lenders pursuant to this Section 2.02 shall be made (i) in the sole discretion of the Administrative Agent and, if applicable, the Lenders (but in accordance with the other provisions of this Section 2.02(e)), (ii) in accordance with the Administrative Agent’s and the Lenders’ customary internal standards and practices for valuing and redetermining the value of Oil and Gas Properties in connection with reserve based oil and gas loan transactions, (iii) in conjunction with the most recent Independent Engineering Report or Internal Engineering Report, as applicable, or other information received by the Administrative Agent and the Lenders relating to the Proven Reserves of the Borrower and its Subsidiaries, and (iv) based upon the estimated value of the Proven Reserves owned by the Borrower and its Subsidiaries as determined by the Administrative Agent and the Lenders and which are subject to an Acceptable Security Interest to the extent required under this Agreement. In valuing and redetermining the Borrowing Base, the Administrative Agent and the Lenders may also consider the business, financial condition, and Debt obligations of the Borrower and its Subsidiaries and such other factors as the Administrative Agent and the Lenders customarily deem appropriate. In that regard, the Borrower acknowledges that the determination of the Borrowing Base contains an equity cushion (market value in excess of loan value), which is essential for the adequate protection of the Administrative Agent and the Lenders. At all times after the Administrative Agent has given the Borrower notification of a redetermination of the Borrowing Base or Present Value under this Section 2.02, (A) the Borrowing Base shall be equal to the redetermined amount (or such lesser amount designated by the Borrower and disclosed in writing to the Administrative Agent and the Lenders within 5 days

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after receiving notification of the redetermined Borrowing Base from the Administrative Agent) until the Borrowing Base is subsequently redetermined in accordance with this Section 2.02, and (B) the Present Value shall be equal to the redetermined amount until it is subsequently predetermined in accordance with this Section 2.02.

(f) Release of Oil and Gas Properties as Collateral . At the sole cost of the Borrower, all of the Collateral consisting of the Oil and Gas Properties (but excluding cash collateral to the extent applicable) shall be released by the Administrative Agent promptly following the written request of the Borrower made to the Administrative Agent so long as all of the following conditions are satisfied on the date of such actual release (the date of the actual release being the “ Release Date ”): (i) the ratings of the Index Debt shall be maintained by S&P at BBB- or better and the ratings of the Index Debt shall be maintained by Moody’s at Baa3 or better (or, if a rating for the Index Debt shall be maintained by only one of S&P and Moody’s (other than as a result of action taken or omitted to be taken by the Borrower), the rating for the Index Debt is equal to or greater than the applicable rating specified in this clause (i)); (ii) all Liens securing any Hedge Contract (other than Hedge Contracts with Swap Counterparties which are secured by the Collateral) and encumbering any Oil and Gas Properties of any Obligor shall have been released, and all covenants and agreements relating to any Hedge Contracts that require or could require Liens to secure obligations thereunder have been released and discharged; and (iii) no Default or Event of Default shall have occurred and be continuing. Notwithstanding the foregoing, if a Reinstatement Date occurs, the Borrower and its Subsidiaries shall cause the Administrative Agent to have an Acceptable Security Interest in Oil and Gas Properties of the Borrower and its Subsidiaries representing 90% of the present value of such Oil and Gas Properties as determined by the most recently delivered Engineering Report.

Section 2.03 Method of Borrowing .

(a) Notice . Each Borrowing shall be made pursuant to a Notice of Borrowing given by telecopier, specifying the information required therein (or by telephone notice promptly confirmed in writing by a Notice of Borrowing given by telecopier), given not later than 10:00 a.m. (Los Angeles, California time) (i) on the third Business Day before the date of the proposed Borrowing, in the case of a Borrowing comprised of Eurodollar Rate Advances or (ii) on the Business Day of the proposed Borrowing, in the case of a Borrowing comprised of Reference Rate Advances, by the Borrower to the Administrative Agent, which shall in turn give to each Lender prompt notice of such proposed Borrowing by telecopier. In the case of a proposed Borrowing comprised of Eurodollar Rate Advances, the Administrative Agent shall promptly notify each applicable Lender of the applicable interest rate under Section 2.09(b). Each applicable Lender shall, before Noon (Los Angeles, California time) on the date of such Borrowing, make available for the account of its Lending Office to the Administrative Agent at its address referred to in Section 9.02, or such other location as the Administrative Agent may specify by notice to the applicable Lenders, in same day funds, in the case of a Borrowing, such Lender’s Pro Rata Share of such Borrowing. After the Administrative Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent shall make such funds available to the Borrower at its account with the Administrative Agent.

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(b) Conversions and Continuations . The Borrower may elect to Convert or continue any Borrowing under this Section 2.03(b) by delivering an irrevocable Notice of Conversion or Continuation to the Administrative Agent at the Administrative Agent’s office no later than 10:00 a.m. (Los Angeles, California time) (i) on the date which is at least three Business Days in advance of the proposed Conversion or continuation date in the case of a Conversion to or a continuation of a Borrowing comprised of Eurodollar Rate Advances and (ii) on the Business Day of the proposed Conversion, in the case of a Conversion to a Borrowing comprised of Reference Rate Advances. Each such Notice of Conversion or Continuation shall be in writing or by telecopier confirmed immediately in writing specifying the information required therein. Promptly after receipt of a Notice of Conversion or Continuation under this Section, the Administrative Agent shall provide each applicable Lender with a copy thereof and, in the case of a Conversion to or a continuation of a Borrowing comprised of Eurodollar Rate Advances, notify each applicable Lender of the applicable interest rate under Section 2.09(b).

(i) at no time shall there be more than twelve Interest Periods applicable to outstanding Eurodollar Rate Advances and the Borrower may not select Eurodollar Rate Advances for any Borrowing at any time that an Event of Default has occurred and is continuing;

(ii) if any Lender shall, at least one Business Day before the date of any requested Borrowing, Conversion, or continuation, notify the Administrative Agent that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or that any central bank or other Governmental Authority asserts that it is unlawful, for such Lender or its Lending Office for Eurodollar Rate Advances to perform its obligations under this Agreement to make Eurodollar Rate Advances or to fund or maintain Eurodollar Rate Advances, the right of the Borrower to select Eurodollar Rate Advances from such Lender shall be suspended until such Lender shall notify the Administrative Agent that the circumstances causing such suspension no longer exist, and the Advance made by such Lender in respect of such Borrowing, Conversion, or continuation shall be a Reference Rate Advance;

(iii) if the Administrative Agent is unable to determine the Eurodollar Rate for Eurodollar Rate Advances comprising any requested Borrowing, the right of the Borrower to select Eurodollar Rate Advances for such Borrowing or for any subsequent Borrowing shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist, and each Advance comprising such Borrowing shall be a Reference Rate Advance;

(iv) if the Required Lenders shall, at least one Business Day before the date of any requested Borrowing, notify the Administrative Agent that the Eurodollar Rate for Eurodollar Rate Advances comprising such Borrowing will not adequately reflect the cost to such Lenders of making or funding their respective Eurodollar Rate Advances, as the case may be, for such Borrowing, the right of the Borrower to select Eurodollar Rate Advances for such Borrowing or for any subsequent Borrowing shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist, and each Advance comprising such Borrowing shall be a Reference Rate Advance; and

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(v) if the Borrower shall fail to select the duration or continuation of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of “Interest Period” in Section 1.01 and paragraph (b) of this Section 2.03, the Administrative Agent shall forthwith so notify the Borrower and the applicable Lenders and such Advances shall be made available to the Borrower on the date of such Borrowing as Reference Rate Advances or, if an existing Borrowing, Convert into Reference Rate Advances.

(d) Notices Irrevocable . Each Notice of Borrowing and Notice of Conversion or Continuation shall be irrevocable and binding on the Borrower. In the case of any Borrowing for which the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall, and does hereby, indemnify each Lender against any loss, out-of-pocket cost, or expense incurred by such Lender as a result of any failure by the Borrower to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III including any loss, cost, or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such failure, is not made on such date.

(e) Funding by Lenders; Administrative Agent’s Reliance . Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing of Eurodollar Rate Advances, or prior to Noon (Los Angeles, California time on the date of any Borrowing of Reference Advances, 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 in accordance with and at the time required in Section 2.03(a) and may, in reliance upon such assumption, make available to the Borrower 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 Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount in same day funds with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (A) in the case of a payment to be made by such Lender, the Overnight Rate and (B) in the case of a payment to be made by the Borrower, the interest rate applicable to the requested Borrowing. If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period. If such Lender pays its share of the applicable Borrowing to the Administrative Agent, then the amount so paid shall constitute such Lender’s Advance included in such Borrowing. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent. A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this subsection (e) shall be conclusive, absent manifest error.

(f) Lender Obligations Several . The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its

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obligation, if any, to make its Advance on the date of such Borrowing. No Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing.

Section 2.04 Commitments .

(a) Reductions . The Borrower shall have the right, upon at least three Business Days’ irrevocable notice to the Administrative Agent, to terminate in whole or reduce ratably in part the unused portion of the Commitments taking into account the aggregate outstanding Advances and the aggregate Letter of Credit Exposure; provided that , each partial reduction shall be in the aggregate amount of $2,500,000 or in integral multiples of $2,500,000 in excess thereof. Any reduction and termination of the Commitments pursuant to this Section 2.04 shall be applied ratably to each Lender’s Commitment and shall be permanent, with no obligation of the Lenders to reinstate such Commitments, subject however to Borrower’s right to subsequently request increases in the aggregate Commitments in accordance with Section 2.04(b)(i).

(b) Increases .

(i) Request for Increase . Provided there exists no Default, upon notice to the Administrative Agent (which shall promptly notify the Lenders), the Borrower may from time to time, request an increase in the aggregate Commitments; provided that (i) any such request for an increase shall be in a minimum amount of $2,500,000, and (ii) the aggregate Commitments, after giving effect to each such increase, shall not exceed $750,000,000. At the time of sending such notice, the Borrower (in consultation with the Administrative Agent) shall specify the time period within which each Lender is requested to respond (which shall in no event be less than ten Business Days from the date of delivery of such notice to the Lenders).

(ii) Lender Elections to Increase . Each Lender shall notify the Administrative Agent in writing within such time period whether or not it agrees to increase its Commitment and, if so, whether by an amount equal to, greater than, or less than its Pro Rata Share of such requested increase. Any Lender not responding within such time period shall be deemed to have declined to increase its Commitment.

(iii) Notification by Administrative Agent; Additional Lenders . The Administrative Agent shall notify the Borrower and each Lender of the Lenders’ responses to each request made hereunder. To achieve the full amount of a requested increase and subject to the approval of the Administrative Agent and the Issuing Lender (which approvals shall not be unreasonably withheld), the Borrower may also invite additional Eligible Assignees to become Lenders pursuant to a joinder agreement in form and substance satisfactory to the Administrative Agent and its counsel.

(iv) Effective Date and Allocations . If the aggregate Commitments are increased in accordance with this Section, the Administrative Agent and the Borrower shall determine the effective date (the “ Increase Effective Date ”) and the final allocation of such increase. The Administrative Agent shall promptly notify the Borrower and the Lenders of the final allocation of such increase and the Increase Effective Date.

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(v) Conditions to Effectiveness of Increase . As a condition precedent to such increase, the Borrower shall deliver to the Administrative Agent a certificate of the Borrower dated as of the Increase Effective Date (in sufficient copies for each Lender) signed by a Responsible Officer of the Borrower (i) certifying and attaching the resolutions adopted by the Borrower approving or consenting to such increase, and (ii) in the case of the Borrower, certifying that, before and after giving effect to such increase, (A) the representations and warranties contained in Article IV and the other Loan Documents are true and correct on and as of the Increase Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and except that for purposes of this Section 2.04(b), the representations and warranties contained in Section 4.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 5.06, and (B) no Default exists. The Borrower shall prepay any Advances outstanding on the Increase Effective Date (and pay any additional amounts required pursuant to Section 2.12) to the extent necessary to keep the outstanding Advances ratable with any revised Pro Rata Shares arising from any nonratable increase in the Commitments under this Section.

(vi) Conflicting Provisions . This Section shall supersede any provisions in Sections 2.11 or 9.01 to the contrary.

Section 2.05 Prepayment of Advances .

(a) Optional . The Borrower may prepay the Advances, after giving by 10:00 a.m. (Los Angeles, California time): (i) in the case of Eurodollar Rate Advances, at least three Business Days’ or (ii) in the case of Reference Rate Advances, same Business Day’s, irrevocable prior written notice to the Administrative Agent stating the proposed date and aggregate principal amount of such prepayment. If any such notice is given, the Borrower shall prepay the Advances in whole or ratably in part in an aggregate principal amount equal to the amount specified in such notice, together with accrued interest to the date of such prepayment on the principal amount prepaid and amounts, if any, required to be paid pursuant to Section 2.12 as a result of such prepayment being made on such date; provided , however, that each partial prepayment with respect to: (A) any amounts prepaid in respect of Eurodollar Rate Advances shall be applied to Eurodollar Rate Advances comprising part of the same Borrowing; and (B) any prepayments of Advances shall be made in minimum amounts of $5,000,000 and in integral multiples of $2,500,000 in excess thereof. Full prepayments of any Borrowing are permitted without restriction of amounts.

(b) Mandatory . If a BB Period is not in effect for any reason and the aggregate outstanding amount of the Advances plus the Letter of Credit Exposure ever exceeds the aggregate Commitments, the Borrower shall after receipt of written notice from the Administrative Agent regarding such deficiency, repay Advances or, if the Advances have been repaid in full, make deposits into the Cash Collateral Account to provide cash collateral for the Letter of Credit Exposure, such that such deficiency is cured within ten days from receipt of such notice.

(c) Borrowing Base Deficiency . If a BB Period is in effect and the aggregate outstanding amount of the Advances plus the Letter of Credit Exposure ever exceeds the lesser

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of (i) the Borrowing Base, and (ii) the aggregate Commitments, the Borrower shall after receipt written notice from the Administrative Agent regarding such deficiency, deliver to the Administrative Agent within ten days of receipt of such notice from the Administrative Agent, a written response indicating which of the following actions (or combination thereof) the Borrower intends to take to remedy such deficiency (and the failure of the Borrower to deliver such election notice or the Borrower to perform the action chosen to remedy such deficiency shall constitute an Event of Default):

(i) prepay Advances to the extent of the deficiency set forth in such notice or, if the Advances have been repaid in full, make deposits into the Cash Collateral Account to cause the amount held in such account to equal the Letter of Credit Exposure, such that the deficiency is cured within 30 days after the date such deficiency notice is received by the Borrower Representative from the Administrative Agent; or

(ii) pledge as Collateral for the Obligations additional Oil and Gas Properties acceptable to the Administrative Agent and each of Lenders such that the deficiency is cured within 30 days after the date such deficiency notice is received by the Borrower from the Administrative Agent.

(d) Reduction of Commitments . On the date of each reduction of the aggregate Commitments pursuant to Section 2.04, the Borrower agrees to make a prepayment in respect of the outstanding amount of the Advances to the extent, if any, that the aggregate unpaid principal amount of all Advances plus the Letter of Credit Exposure exceeds the lesser of (i) the aggregate Commitments, as so reduced, and (ii) if the Borrowing Base is in effect at such time, the Borrowing Base.

(e) Illegality . If any Lender shall notify the Administrative Agent and the Borrower that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or that any central bank or other Governmental Authority asserts that it is unlawful for such Lender or its Lending Office for Eurodollar Rate Advances to perform its obligations under this Agreement to maintain any Eurodollar Rate Advances of such Lender then outstanding hereunder, (i) the Borrower shall, no later than 10:00 a.m. (Los Angeles, California time) (A) if not prohibited by law, on the last day of the Interest Period for each outstanding Eurodollar Rate Advance made by such Lender or (B) if required by such notice, on the second Business Day following its receipt of such notice, prepay all of the Eurodollar Rate Advances made by such Lender then outstanding, (ii) such Lender shall simultaneously make a Reference Rate Advance to the Borrower on such date in an amount equal to the aggregate principal amount of the Eurodollar Rate Advances prepaid to such Lender, and (iii) the right of the Borrower to select Eurodollar Rate Advances from such Lender for any subsequent Borrowing shall be suspended until such Lender shall notify the Administrative Agent that the circumstances causing such suspension no longer exist.

(f) Interest and Costs; No Additional Right; Ratable Prepayment . The Borrower shall have no right to prepay any principal amount of any Advance except as provided in this Section 2.05, and all notices given pursuant to this Section 2.05 shall be irrevocable and binding upon the Borrower. Each payment of any Advance pursuant to this Section 2.05 shall be made in a manner such that all Advances comprising part of the same Borrowing are paid in

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whole or ratably in part. Each prepayment pursuant to this Section 2.05 shall be accompanied by accrued interest on the amount prepaid to the date of such prepayment and amounts, if any, required to be paid pursuant to Section 2.12 as a result of such prepayment being made on such date. Each prepayment under Section 2.05(b) or (c) shall be applied to the Advances as determined by the Administrative Agent and agreed to by the Lenders in their sole discretion.

Section 2.06 Repayment of Advances . The Borrower shall repay to the Administrative Agent for the ratable benefit of the Lenders the outstanding principal amount of each Advance, together with any accrued interest thereon, on the Maturity Date or such earlier date pursuant to Section 7.02 or Section 7.03.

Section 2.07 Letters of Credit .

(a) Commitment . From time to time from the Effective Date until 30 days prior to the Commitment Termination Date, at the request of the Borrower, the Issuing Lender shall, on the terms and conditions hereinafter set forth, issue, increase, or extend the Expiration Date of, Letters of Credit for the account of any Obligor on any Business Day. No Letter of Credit will be issued, increased, or extended:

(i) if such issuance, increase, or extension would cause the Letter of Credit Exposure to exceed the lesser of (A) $75,000,000 and (B) the aggregate Availability;

(ii) if such issuance, increase, or extension would cause the Letter of Credit Exposure related to Letters of Credit issued, or deemed to be issued hereunder, that are automatically renewed annually pursuant to the terms thereof, to exceed the lesser of (A) $37,500,000 and (B) the aggregate Availability;

(iii) if such Letter of Credit has an Expiration Date later than the earlier of (A) eighteen months after the date of issuance thereof (or, if extendable beyond such period, unless such Letter of Credit is cancelable upon at least 30 days’ notice given by the Issuing Lender to the beneficiary of such Letter of Credit) and (B) 20 days prior to the Maturity Date;

(iv) unless such Letter of Credit Documents are in form and substance acceptable to the Issuing Lender in its sole discretion;

(v) unless such Letter of Credit is a standby letter of credit not supporting the repayment of indebtedness for borrowed money of any Person;

(vi) unless the Borrower has delivered to the Issuing Lender a completed and executed Letter of Credit Application; and

(vii) unless such Letter of Credit is governed by (1) the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, or (2) the International Standby Practices (ISP98), International Chamber of Commerce Publication No. 590, in either case, including any subsequent revisions thereof approved by a Congress of the International Chamber of Commerce and adhered to by the Issuing Lender.

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If the terms of any Letter of Credit Application referred to in the foregoing clause (vi) conflicts with the terms of this Agreement, the terms of this Agreement shall control.

(b) Participations . Upon the date of the issuance or increase of a Letter of Credit, the Issuing Lender shall be deemed to have sold to each other Lender and each other Lender shall have been deemed to have purchased from the Issuing Lender a participation in the related Letter of Credit Obligations equal to such Lender’s Pro Rata Share at such date and such sale and purchase shall otherwise be in accordance with the terms of this Agreement. The Issuing Lender shall promptly notify each such participant Lender by telephone, or telecopy of each Letter of Credit issued, increased, or extended or converted and the actual dollar amount of such Lender’s participation in such Letter of Credit.

(c) Issuing . Each Letter of Credit shall be issued, increased, or extended pursuant to a Letter of Credit Application (or by telephone notice promptly confirmed in writing by a Letter of Credit Application), given not later than 10:00 a.m. (Los Angeles, California time) on the fifth Business Day before the date of the proposed issuance, increase, or extension of the Letter of Credit, and the Issuing Lender shall give to each other Lender prompt notice thereof by telephone, or telecopy. Each Letter of Credit Application shall be delivered by facsimile or by mail specifying the information required therein; provided , that, if such Letter of Credit Application is delivered by facsimile, the Borrower shall follow such facsimile with an original by mail. After the Issuing Lender’s receipt of such Letter of Credit Application (by facsimile or by mail) and upon fulfillment of the applicable conditions set forth in Article III, the Issuing Lender shall issue, increase, or extend such Letter of Credit for the account of the applicable Obligor. Each Letter of Credit Application shall be irrevocable and binding on the Borrower.

(d) Reimbursement .

(i) The Borrower hereby agrees to pay on demand to the Issuing Lender (A) an amount equal to any amount paid by the Issuing Lender under any Letter of Credit, and (B) interest at a rate per annum equal to the rate applicable to Reference Rate Advances on such amount paid by the Issuing Lender under such Letter of Credit for each day from the date such amount is paid by the Issuing Lender until such amount is reimbursed by the Borrower or paid pursuant to a deemed Advance as provided below in this clause (i). In the event the Issuing Lender makes a payment pursuant to a request for draw presented under a Letter of Credit and such payment is not promptly reimbursed by the Borrower upon demand, the Issuing Lender shall give the Administrative Agent notice of the Borrower’s failure to make such reimbursement and the Administrative Agent shall promptly notify each Lender of the amount necessary to reimburse the Issuing Lender. Upon such notice from the Administrative Agent, each Lender shall promptly reimburse the Issuing Lender for such Lender’s Pro Rata Share of such amount, and such reimbursement shall be deemed for all purposes of this Agreement to be an Advance to the Borrower transferred at the Borrower’s request to the Issuing Lender. If such reimbursement is not made by any Lender to the Issuing Lender on the same day on which the Administrative Agent notifies such Lender to make reimbursement to the Issuing Lender hereunder, such Lender shall pay interest on its Pro Rata Share thereof to the Issuing Lender at a rate per annum equal to the Overnight Rate. The Borrower hereby unconditionally and irrevocably authorizes, empowers, and directs the Administrative Agent and the Lenders to record and otherwise treat such reimbursements to the Issuing Lender as Reference Rate Advances under a Borrowing made hereunder at the request of the Borrower to reimburse the Issuing Lender which have been transferred to the Issuing Lender at the Borrower’s request.

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(ii) Each Lender’s obligation to make Advances or to purchase and fund risk participations in Letters of Credit pursuant to this Section 2.07(d) shall be absolute and unconditional and shall not be affected by any circumstance, including (a) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the Issuing Lender, the Borrower, or any other Person for any reason whatsoever, (b) the occurrence or continuance of a Default, or (c) any other occurrence, event or condition, whether or not similar to any of the foregoing. No such funding of risk participations shall relieve or otherwise impair the obligation of the Borrower to pay the Reimbursement Obligations together with interest as provided herein. Nothing herein is intended to release the Borrower’s obligations under any Letter of Credit Application, but only to provide an additional method of payment therefor. The making of any Borrowing under this Section 2.07(d) shall not constitute a cure or waiver of any Default or Event of Default caused by a Borrower’s failure to comply with the provisions of this Agreement or the Letter of Credit Application other than the payment Default or Event of Default which is satisfied by the application of the amounts deemed advanced hereunder and which is deemed not to have occurred upon application of such amounts.

(e) Obligations Unconditional . The obligations of the Borrower under this Agreement in respect of each Letter of Credit shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following circumstances:

(i) any lack of validity or enforceability of any Letter of Credit Documents;

(ii) any amendment or waiver of, or any consent to or departure from, any Letter of Credit Documents;

(iii) the existence of any claim, set-off, defense, or other right which the Borrower may have at any time against any beneficiary or transferee of such Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), the Issuing Lender, or any other person or entity, whether in connection with this Agreement, the transactions contemplated in this Agreement or in any Letter of Credit Documents, or any unrelated transaction;

(iv) any statement or any other document presented under such Letter of Credit proving to be forged, fraudulent, invalid, or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;

(v) payment by the Issuing Lender under such Letter of Credit against presentation of a draft or certificate which does not comply with the terms of such Letter of Credit; or

(vi) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing;

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provided , however , that nothing contained in this paragraph (e) shall be deemed to constitute a waiver of any remedies of the Borrower in connection with the Letters of Credit or the Borrower’s rights under Section 2.07(f).

(f) Liability of Issuing Lender . The Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither the Issuing Lender nor any of its Related Parties shall be liable or responsible for:

(i) the use which may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith;

(ii) the validity, sufficiency, or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent, or forged;

(iii) payment by the Issuing Lender against presentation of documents which do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the relevant Letter of Credit; or

(iv) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit (INCLUDING THE ISSUING LENDER’S OWN NEGLIGENCE) ,

except that the Borrower shall have a claim against the Issuing Lender, and the Issuing Lender shall be liable to the Borrower, to the extent of any direct, as opposed to consequential, damages suffered by the Borrower which the Borrower proves were caused by the Issuing Lender’s willful misconduct or gross negligence in determining whether documents presented under a Letter of Credit comply with the terms of such Letter of Credit. In furtherance and not in limitation of the foregoing, the Issuing Lender may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary.

(g) Cash Collateral Account .

(i) If the Borrower is required to deposit funds in the Cash Collateral Account pursuant to the terms herein, then the Borrower and the Issuing Lender shall establish the Cash Collateral Account and the Borrower shall execute any documents and agreements, including the Issuing Lender’s standard form assignment of deposit accounts, that the Issuing Lender requests in connection therewith to establish such Cash Collateral Account and grant the Issuing Lender a first priority security interest in such accounts and the funds therein. The Borrower hereby pledges to the Issuing Lender and grants the Issuing Lender a security interest in the Cash Collateral Account, whenever established, all funds held in such accounts from time to time, and all proceeds thereof as security for the payment of the Obligations.

(ii) So long as no Default or Event of Default exists, (A) the Issuing Lender may apply the funds held in the Cash Collateral Account only to the reimbursement of any Letter of Credit Obligations, and (B) the Issuing Lender shall release to the Borrower at the

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Borrower’s written request any funds held in the Cash Collateral Account in an amount up to but not exceeding the excess, if any (immediately prior to the release of any such funds), of the total amount of funds held in the Cash Collateral Account over the Letter of Credit Exposure. During the existence of any Default, the Issuing Lender may apply any funds held in the Cash Collateral Account to the Obligations in any order determined by the Issuing Lender, regardless of any Letter of Credit Exposure that may remain outstanding. The Issuing Lender may in its sole discretion at any time release to the Borrower any funds held in the Cash Collateral Account.

(iii) The Issuing Lender shall exercise reasonable care in the custody and preservation of any funds held in the Cash Collateral Account and shall be deemed to have exercised such care if such funds are accorded treatment substantially equivalent to that which the Issuing Lender accords its own Property, it being understood that the Issuing Lender shall not have any responsibility for taking any necessary steps to preserve rights against any parties with respect to any such funds.

(h) Letters of Credit Issued for Subsidiaries . Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, a Subsidiary of the Borrower, the Borrower shall be obligated to reimburse the Issuing Lender hereunder for any and all drawings under such Letter of Credit issued hereunder by the Issuing Lender. The Borrower hereby acknowledges that the issuance of Letters of Credit for the account of its Subsidiaries inures to the benefit of the Borrower, and that the Borrower’s business derives substantial benefits from the businesses of such Subsidiaries.

(i) Existing Letters of Credit . The Issuing Lender, the Lenders and the Borrower agree that effective as of the Effective Date, the Existing Letters of Credit shall be deemed to have been issued and maintained under, and to be governed by the terms and conditions of, this Agreement.

Section 2.08 Fees .

(a) Commitment Fee . The Borrower agrees to pay to the Administrative Agent, for the account of each Lender having a Commitment, a commitment fee at a per annum rate equal to the Applicable Margin on the daily Availability of such Lender from the date of this Agreement until the Commitment Termination Date. The commitment fees shall be due and payable quarterly in arrears on the last day of each March, June, September, and December commencing on June 30, 2006, and continuing thereafter through and including the Commitment Termination Date.

(b) Letter of Credit Fees .

(i) The Borrower agrees to pay (A) to the Administrative Agent for the pro rata benefit of the Lenders a per annum letter of credit fee for each Letter of Credit issued hereunder in an amount equal to the greater of (1) the Applicable Margin on the face amount of such Letter of Credit for the period such Letter of Credit is outstanding and (2) $500.00 and (B) to the Issuing Lender, a fronting fee on each Letter of Credit equal to such rates as agreed to between the Issuing Lender and the Borrower under the Fee Letter. Each such fee shall be computed on a quarterly basis in arrears and be due and payable on the last day of each March, June, September, and December commencing June 30, 2006.

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(ii) The Borrower also agrees to pay to the Issuing Lender such other usual and customary fees associated with any transfers, amendments, drawings, negotiations or reissuances of any Letters of Credit.

Section 2.09 Interest . The Borrower shall pay interest on the unpaid principal amount of each Advance made by each Lender from the date of such Advance until such principal amount shall be paid in full:

(a) Reference Rate Advances . If such Advance is a Reference Rate Advance, a rate per annum equal at all times to the Adjusted Reference Rate in effect from time to time plus the Applicable Margin in effect from time to time, payable quarterly in arrears on the last day of each March, June, September, and December and on the date such Reference Rate Advance shall be paid in full.

(b) Eurodollar Rate Advances . If such Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during the Interest Period for such Advance to the Eurodollar Rate for such Interest Period plus the Applicable Margin in effect from time to time, payable on the last day of such Interest Period, and in the case of six-month Interest Periods, on the day which occurs during such Interest Period three months from the first day of such Interest Period.

(c) Additional Interest on Eurodollar Rate Advances . The Borrower shall pay to each Lender, so long as any such Lender shall be required under regulations of the Federal Reserve Board to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, additional interest on the unpaid principal amount of each Eurodollar Rate Advance of such Lender, from the effective date of such Advance until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (i) the Eurodollar Rate for the Interest Period for such Advance from (ii) the rate obtained by dividing such Eurodollar Rate by a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage of such Lender for such Interest Period, payable on each date on which interest is payable on such Advance. Such additional interest payable to any Lender shall be determined by such Lender and notified to the Borrower through the Administrative Agent (such notice to include the calculation of such additional interest, which calculation shall be conclusive in the absence of manifest error).

(d) Usury Recapture .

(i) If, with respect to any Lender, the effective rate of interest contracted for under the Loan Documents, including the stated rates of interest and fees contracted for hereunder and any other amounts contracted for under the Loan Documents which are deemed to be interest, at any time exceeds the Maximum Rate, then the outstanding principal amount of the loans made by such Lender hereunder shall bear interest at a rate which would

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make the effective rate of interest for such Lender under the Loan Documents equal the Maximum Rate until the difference between the amounts which would have been due at the stated rates and the amounts which were due at the Maximum Rate (the “Lost Interest”) has been recaptured by such Lender.

(ii) If, when the loans made hereunder are repaid in full, the Lost Interest has not been fully recaptured by such Lender pursuant to the preceding paragraph, then, to the extent permitted by law, for the loans made hereunder by such Lender the interest rates charged under Section 2.09 hereunder shall be retroactively increased such that the effective rate of interest under the Loan Documents was at the Maximum Rate since the effectiveness of this Agreement to the extent necessary to recapture the Lost Interest not recaptured pursuant to the preceding sentence and, to the extent allowed by law, the Borrower shall pay to such Lender the amount of the Lost Interest remaining to be recaptured by such Lender.

(iii) NOTWITHSTANDING THE FOREGOING OR ANY OTHER TERM IN THIS AGREEMENT AND THE LOAN DOCUMENTS TO THE CONTRARY, IT IS THE INTENTION OF EACH LENDER AND THE BORROWER TO CONFORM STRICTLY TO ANY APPLICABLE USURY LAWS. ACCORDINGLY, IF ANY LENDER CONTRACTS FOR, CHARGES, OR RECEIVES ANY CONSIDERATION WHICH CONSTITUTES INTEREST IN EXCESS OF THE MAXIMUM RATE, THEN ANY SUCH EXCESS SHALL BE CANCELED AUTOMATICALLY AND, IF PREVIOUSLY PAID, SHALL AT SUCH LENDER’S OPTION BE APPLIED TO THE OUTSTANDING AMOUNT OF THE LOANS MADE HEREUNDER BY SUCH LENDER OR BE REFUNDED TO THE BORROWER .

Section 2.10 Payments and Computations .

(a) Payment Procedures . The Borrower shall make each payment under this Agreement and under the Notes not later than 10:00 a.m. (Los Angeles, California time) on the day when due in Dollars to the Administrative Agent at the location referred to in the Notes (or such other location as the Administrative Agent shall designate in writing to the Borrower) in same day funds without deduction, setoff, or counterclaim of any kind. The Administrative Agent shall promptly thereafter cause to be distributed like funds relating to the payment of principal, interest or fees ratably (other than amounts payable solely to the Administrative Agent, the Issuing Lender, or a specific Lender pursuant to Section 2.08(c), 2.09(c), 2.12, 2.13, 2.14, 8.07, or 9.03, but after taking into account payments effected pursuant to Section 2.11) in accordance with each Lender’s Pro Rata Share to the Lenders for the account of their respective Lending Offices, and like funds relating to the payment of any other amount payable to any Lender or the Issuing Lender to such Lender for the account of its Lending Office, in each case to be applied in accordance with the terms of this Agreement.

(b) Computations . All computations of interest based on the Reference Rate and of fees (other than Letter of Credit fees) shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurodollar Rate, Overnight Rate, and the Federal Funds Rate and Letter of Credit fees shall be made by the Administrative Agent, on the basis of a year of 360 days, in each case for the actual number of days (including the first day, but excluding the last day) occurring in the period for which such interest or fees are payable. Each determination by the Administrative Agent of an interest rate or fee shall be conclusive and binding for all purposes, absent manifest error.

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(c) Non-Business Day Payments . Whenever any payment shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fees, as the case may be; provided , however, that if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day.

(d) Administrative Agent Reliance . Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the applicable Lenders or the Issuing Lender hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Lender, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the applicable Lenders or the Issuing Lender, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Lender, in same day funds 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 Overnight Rate. A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this subsection (d) shall be conclusive, absent manifest error.

Section 2.11 Sharing of Payments, Etc . If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Advances or other obligations hereunder resulting in such Lender’s receiving payment of a proportion of the aggregate amount of its Advances and accrued interest thereon or other such obligations greater than its pro rata share thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Advances and such other obligations of the other Lenders, or make such other adjustments as shall be equitable, 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 Advances and other amounts owing them, 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 paragraph shall not be construed to apply to (x) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Advances or participations in Letter of Credit Obligations to any assignee or participant, other than to the Borrower or any Subsidiary thereof (as to which the provisions of this paragraph shall apply).

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The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

Section 2.12 Breakage Costs . If (a) any payment of principal of any Eurodollar Rate Advance is made other than on the last day of the Interest Period for such Advance, whether as a result of any payment pursuant to Section 2.05, the acceleration of the maturity of the Notes pursuant to Article VII, or otherwise, or (b) the Borrower fails to make a principal or interest payment with respect to any Eurodollar Rate Advance on the date such payment is due and payable, the Borrower shall, within 10 days of any written demand sent by any Lender to the Borrower through the Administrative Agent, pay to the Administrative Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, out-of-pocket costs or expenses which it may reasonably incur as a result of such payment or nonpayment, including any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance.

Section 2.13 Increased Costs .

(a) Generally . If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement contemplated by Section 2.09(c)) or the Issuing Lender;

(ii) subject any Lender Party to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit, any Eurodollar Rate Advance made by it, or change the basis of taxation of payments to such Lender Party in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 2.14 and the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender Party); or

(iii) impose on any Lender Party or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Rate Advances made by such Lender Party, or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender Party of making or maintaining any Eurodollar Rate Advance (or of maintaining its obligation to make any such Advance), or to increase the cost to such Lender Party of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by Lender Party hereunder (whether of principal, interest or any other amount) then, upon request of such Lender Party, the Borrower will pay to such Lender Party, such additional amount or amounts as will compensate such Lender Party for such additional costs incurred or reduction suffered.

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(b) Capital Adequacy . If any Lender or the Issuing Lender determines that any Change in Law affecting such Lender or the Issuing Lender or any lending office of such Lender or such Lender’s or the Issuing Lender’s holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or the Issuing Lender’s capital or on the capital of such Lender’s or the Issuing Lender’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Advances made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Lender, to a level below that which such Lender or the Issuing Lender or such Lender’s or the Issuing Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the Issuing Lender’s policies and the policies of such Lender’s or the Issuing Lender’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such US Lender or the Issuing Lender, such additional amount or amounts as will compensate such Lender or the Issuing Lender or such Lender’s or the Issuing Lender’s holding company for any such reduction suffered.

(c) Certificates for Reimbursement . A certificate of a Lender Party setting forth the amount or amounts necessary to compensate such Lender Party or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section and delivered to the Borrower shall be conclusive absent manifest error. The Borrower shall pay such Lender Party the amount shown as due on any such certificate within 10 days after receipt thereof.

(d) Delay in Requests . Failure or delay on the part of any Lender Party to demand compensation pursuant to this Section shall not constitute a waiver of such Lender Party’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender Party pursuant to this Section for any increased costs incurred or reductions suffered more than nine months prior to the date that such Lender Party notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender Party’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).

Section 2.14 Taxes .

(a) Payments Free of Taxes . Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes, provided that if the Borrower shall be required by applicable law to deduct any Indemnified Taxes (including any 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) the Lender Party receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

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(b) Payment of Other Taxes by the Borrower . Without limiting the provisions of paragraph (a) above, the Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(c) Indemnification by the Borrower . The Borrower shall, and does hereby, indemnify each Lender Party, within 10 days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by such Lender Party 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 as to the amount of such payment or liability delivered to the Borrower by a Lender or the Issuing Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Lender, shall be conclusive absent manifest error .

(d) Evidence of Payments . As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower 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) Status of Lenders . Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.

(f) Tax Forms . Without limiting the generality of the foregoing, in the event that the Borrower is resident for tax purposes in the United States of America, any Foreign Lender shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:

(i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States of America is a party,

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(ii) duly completed copies of Internal Revenue Service Form W-8ECI,

(iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code and (y) duly completed copies of Internal Revenue Service Form W-8BEN, or

(iv) any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower to determine the withholding or deduction required to be made.

(g) Treatment of Certain Refunds . If any Lender Party determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section, it shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of such Lender Party, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrower, upon the request of such Lender Party, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to such Lender Party in the event such Lender Party is required to repay such refund to such Governmental Authority. This paragraph shall not be construed to require any Lender Party to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person.

Section 2.15 Mitigation Obligations; Replacement of Lenders .

(a) Designation of a Different Lending Office . If any Lender requests compensation under Section 2.13, or requires the Borrower to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.14, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Advances 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 2.13 or 2.14, 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 Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. A Lender shall not be required to make any such delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such delegation cease to apply.

(b) Replacement of Lenders . If (i) any Lender requests compensation under Section 2.13, (ii) the Borrower is required to pay any additional amount to any Lender or any

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Governmental Authority for the account of any Lender pursuant to Section 2.14, (iii) any Lender defaults in its obligation to fund Advances hereunder, or (iv) any Lender is a Non Extending Lender pursuant to Section 2.16 (in any such case, the “ Subject Lender ”), then the Borrower may, at its sole expense and effort, upon notice to such Subject Lender and the Administrative Agent, require such Subject Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 9.05), all of its interests, rights and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that :

(i) the Borrower shall have paid to the Administrative Agent the assignment fee specified in Section 9.05;

(ii) such Subject Lender shall have received payment of an amount equal to the outstanding principal of its Advances and participations in Letter of Credit Obligations, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 2.12) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);

(iii) in the case of any such assignment resulting from a claim for compensation under Section 2.13 or payments required to be made pursuant to Section 2.14, such assignment will result in a reduction in such compensation or payments thereafter;

(iv) such assignment does not conflict with applicable law; and

(v) a Subject Lender shall not be required to make any such assignment if, prior thereto, as a result of a waiver by such Subject Lender or otherwise, the circumstances entitling the Borrower to require such assignment cease to apply.

Section 2.16 Extension of Maturity Date .

(a) Requests for Extension . The Borrower may, by notice to the Administrative Agent (who shall promptly notify the Lenders) given no earlier than 18 months and no later than 15 months prior to the Maturity Date then in effect hereunder (the “ Existing Maturity Date ”), request that each Lender extend such Lender’s Maturity Date for an additional one year period from the Existing Maturity Date; provided that, the Borrower may request only two such extensions under this Agreement. Each date on which the Borrower gives notice of a request to extend the Existing Maturity Date is referred to in this Section 2.16 as a “ Notice Date .”

(b) Lender Elections to Extend . Each Lender, acting in its sole and individual discretion, shall, by notice to the Administrative Agent given not later than 45 days following the Notice Date, advise the Administrative Agent whether or not such Lender agrees to such extension and each Lender that determines not to so extend its Maturity Date (a “ Non Extending Lender ”) shall notify the Administrative Agent of such fact promptly after such determination (but in any event no later 45 days following the Notice Date) and any Lender that does not so advise the Administrative Agent on or before 45 days following the Notice Date shall be deemed to be a Non Extending Lender. The election of any Lender to agree to such extension shall not obligate any other Lender to so agree.

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(c) Notification by Administrative Agent . The Administrative Agent shall notify the Borrower of each Lender’s determination under this Section no later than the date 60 days following the Notice Date (or, if such date is not a Business Day, on the next preceding Business Day).

(d) Additional Commitment Lenders . The Borrower shall have the right to replace each Non Extending Lender with, and add as “Lenders” under this Agreement in place thereof, one or more Eligible Assignees (each, an “ Additional Commitment Lender ”) as provided in Section 2.15(b), each of which Additional Commitment Lenders shall have entered into an Assignment and Assumption pursuant to which such Additional Commitment Lender shall, effective as of the Business Day occurring 12 months prior to the Existing Maturity Date (or such other earlier effective date if agreed to by the Borrower, Additional Commitment Lender and applicable Non Extending Lender or such later effective date if agreed to by the Borrower and the Additional Commitment Lender), undertake a Commitment (and, if any such Additional Commitment Lender is already a Lender, its Commitment shall be in addition to such Lender’s Commitment hereunder on such date).

(e) Minimum Extension Requirement . If (and only if) the total of the Commitments of the Lenders that have agreed so to extend their Maturity Date and the additional Commitments of the Additional Commitment Lenders shall be more than 50% of the aggregate amount of the Commitments in effect on the Notice Date, then, effective as of the Business Day occurring 12 months prior to the Existing Maturity Date, the Maturity Date of each Extending Lender and of each Additional Commitment Lender shall be extended to the date falling one year after the Existing Maturity Date (except that, if such date is not a Business Day, such Maturity Date as so extended shall be the next preceding Business Day) and each Additional Commitment Lender shall thereupon become a “Lender” for all purposes of this Agreement.

(f) Conditions to Effectiveness of Extensions . Notwithstanding the foregoing, the extension of the Maturity Date pursuant to this Section shall not be effective with respect to any Lender unless:

(i) no Default or Event of Default shall have occurred and be continuing on the date of such extension and after giving effect thereto;

(ii) the representations and warranties contained in this Agreement are true and correct on and as of the date of such extension and after giving effect thereto, as though made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date); and

(iii) on the applicable effective date of the Assignment and Assumption described in Section 2.16(d) for each Non-Extending Lender, the Borrower shall prepay any Advances outstanding on such date (and pay any additional amounts required pursuant to Section 2.13) to the extent necessary to keep outstanding Advances ratable with any revised Pro Rata Shares of the respective Lenders effective as of such date.

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(g) Conflicting Provisions . This Section shall supersede any provisions in Section 2.11 or 9.01 to the contrary.

ARTICLE III

CONDITIONS PRECEDENT

Section 3.01 Conditions Precedent to Effectiveness . The Existing Agreement shall be amended and restated in its entirety as set forth herein upon the occurrence of the following conditions precedent:

(a) Documentation . The Administrative Agent shall have received the following duly executed by all the parties thereto, in form and substance satisfactory to the Administrative Agent, the Issuing Lender and the Lenders, and, where applicable, in sufficient copies for each Lender:

(i) this Agreement, a Note to each Lender in an amount equal to such Lender’s Commitment, the Guaranties, the Pledge Agreement, the Security Agreement, and Mortgages encumbering 90% of the present value of the Obligor’s Proven Reserves and Oil and Gas Properties in connection therewith (as set forth in the Independent Engineering Report dated effective as of December 31, 2005), and each of the other Loan Documents, and all attached exhibits and schedules;

(ii) a favorable opinion of counsel to Obligors dated as of the Effective Date and substantially in the form of the attached Exhibit K covering the matters discussed in such Exhibit and such other matters as any Lender through the Administrative Agent may reasonably request;

(iii) copies, certified as of the Effective Date by a Responsible Officer or secretary or assistant secretary of the Borrower of (A) the resolutions of the Board of Directors of the Borrower approving the Loan Documents to which the Borrower is a party, (B) the bylaws and the certificate of incorporation of the Borrower, and (C) all other documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement, the Notes, and the other Loan Documents;

(iv) certificates of a Responsible Officer or secretary or assistant secretary of the Borrower certifying, as of the Effective Date, the names and true signatures of the officers of the Borrower authorized to sign this Agreement, the Notes, Notices of Borrowing, Notices of Conversion or Continuation, and the other Loan Documents to which the Borrower is a party;

(v) copies, certified as of the Effective Date by a Responsible Officer or the secretary or an assistant secretary of each Guarantor of (A) the resolutions of the Board of Directors (or other applicable governing body) of such Guarantor approving the Loan Documents to which it is a party, (B) the articles or certificate (as applicable) of incorporation (or organization) and bylaws of such Guarantor, and (C) all other documents evidencing other necessary corporate action and governmental approvals, if any, with respect to the Guaranty, the Security Instruments, and the other Loan Documents to which such Guarantor is a party;

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(vi) a certificate of the secretary or an assistant secretary of each Guarantor certifying the names and true signatures of officers of such Guarantor authorized to sign the Guaranty, Security Instruments and the other Loan Documents to which such Guarantor is a party;

(vii) a certificate dated as of the Effective Date from a Responsible Officer of the Borrower stating that (A) all representations and warranties of the Borrower set forth in this Agreement are true and correct in all material respects; (B) no Default has occurred and is continuing; and (C) the conditions in this Section 3.01 have been met;

(viii) appropriate UCC-1 and UCC-3, as applicable, Financing Statements and amendments to Financing Statements covering the Collateral for filing with the appropriate authorities and any other documents, agreements or instruments necessary to create an Acceptable Security Interest in such Collateral;

(ix) insurance certificates naming the Administrative Agent loss payee or additional insured, as applicable, and evidencing insurance which meets the requirements of this Agreement and the Security Instruments, and which is otherwise satisfactory to the Administrative Agent;

(x) stock certificates required in connection with the Pledge Agreement and stock powers executed in blank for each such stock certificate;

(xi) the Independent Engineering Report dated effective as of December 31, 2005; and

(xii) such other documents, governmental certificates, agreements and lien searches as the Administrative Agent may reasonably request.

(b) Payment of Fees . On the Effective Date, the Borrower shall have paid the fees required by Section 2.08(c) and all costs and expenses that have been invoiced and are payable pursuant to Section 9.03.

(c) Delivery of Financial Statements . The Administrative Agent and the Lenders shall have received true and correct copies of (i) the Financial Statements and (ii) such other financial information as the Administrative Agent may reasonably request.

(d) Security Instruments . The Administrative Agent shall have received all appropriate evidence required by the Administrative Agent and the Lenders in their sole discretion necessary to determine that the Administrative Agent (for its benefit and the benefit of the Lenders) shall have an Acceptable Security Interest in the Collateral (which shall include 90% of the present value of the Obligor’s Proven Reserves and Oil and Gas Properties in connection therewith (as set forth in the Independent Engineering Report dated effective as of December 31, 2005)) and that all actions or filings necessary to protect, preserve and validly perfect such Liens have been made, taken or obtained, as the case may be, and are in full force and effect.

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(e) Title . The Administrative Agent shall be satisfied in its sole discretion with the title to the Oil and Gas Properties to be included in the Borrowing Base and covered by the Mortgages, and shall have received title opinions or other title reports satisfactory to the Administrative Agent covering at least 70% of the present value of the Obligor’s Proven Reserves and Oil and Gas Properties in connection therewith (as set forth in the Independent Engineering Report dated effective as of December 31, 2005).

(f) Environmental . The Administrative Agent shall be satisfied with the condition of the Oil and Gas Properties with respect to the Borrower’s compliance with Environmental Laws.

(g) No Default . No Default shall have occurred and be continuing.

(h) Representations and Warranties . The representations and warranties contained in Article IV and in each other Loan Document shall be true and correct in all material respects.

(i) Material Adverse Effect . No event or circumstance that could cause a Material Adverse Effect shall have occurred.

(j) No Proceeding or Litigation; No Injunctive Relief . No action, suit, investigation or other proceeding (including the enactment or promulgation of a statute or rule) by or before any arbitrator or any Governmental Authority shall be threatened or pending and no preliminary or permanent injunction or order by a state or federal court shall have been entered (i) in connection with this Agreement or any transaction contemplated hereby or (ii) which, in any case, in the judgment of the Administrative Agent, could reasonably be expected to result in a Material Adverse Effect.

(k) Consents, Licenses, Approvals, etc . The Administrative Agent shall have received true copies (certified to be such by the Borrower or other appropriate party) of all consents, licenses and approvals required in accordance with applicable law, or in accordance with any document, agreement, instrument or arrangement to which any Obligor is a party, in connection with the execution, delivery, performance, validity and enforceability of this Agreement and the other Loan Documents. In addition, each Obligor shall have all such material consents, licenses and approvals required in connection with the continued operation of such Obligor and such approvals 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 which would restrain, prevent or otherwise impose adverse conditions on this Agreement and the actions contemplated hereby.

(l) Material Contracts . The Borrower shall have delivered to the Administrative Agent copies of all material contracts, agreements or instruments listed on the attached Schedule 4.21.

Section 3.02 Conditions Precedent to All Borrowings . The obligation of each Lender to make an Advance on the occasion of each Borrowing and of the Issuing Lender to issue, increase, or extend any Letter of Credit shall be subject to the further conditions precedent that

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on the date of such Borrowing or the date of the issuance, increase, or extension of such Letter of Credit:

(a) the following statements shall be true (and each of the giving of the applicable Notice of Borrowing, Notice of Conversion or Continuation, or Letter of Credit Application and the acceptance by the Borrower of the proceeds of such Borrowing or the issuance, increase, or extension of such Letter of Credit shall constitute a representation and warranty by the Borrower that on the date of such Borrowing or on the date of such issuance, increase, or extension of such Letter of Credit, as applicable, such statements are true):

(i) the representations and warranties contained in Article IV of this Agreement and the representations and warranties contained in the Security Instruments, the Guaranties, and each of the other Loan Documents are true and correct in all material respects on and as of the date of such Borrowing or the date of the issuance, increase, or extension of such Letter of Credit, before and after giving effect to such Borrowing or to the issuance, increase, or extension of such Letter of Credit and to the application of the proceeds from such Borrowing, as though made on and as of such date; and

(ii) no Default has occurred and is continuing or would result from such Borrowing or from the application of the proceeds therefrom, or would result from the issuance, increase, or extension of such Letter of Credit; and

(b) the Administrative Agent shall have received such other approvals, opinions, or documents reasonably deemed necessary or desirable by any Lender as a result of circumstances occurring after the Effective Date, as any Lender through the Administrative Agent may reasonably request.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants as follows:

Section 4.01 Existence; Subsidiaries . The Borrower is a corporation duly organized and validly existing under the laws of Oklahoma and in good standing and qualified to do business in each jurisdiction where its ownership or lease of Property or conduct of its business requires such qualification. Each Subsidiary of the Borrower is duly organized, validly existing, and in good standing under the laws of its jurisdiction of formation and in good standing and qualified to do business in each jurisdiction where its ownership or lease of Property or conduct of its business requires such qualification. As of the Effective Date, the Borrower has no Subsidiaries other than those listed on Schedule 4.01.

Section 4.02 Power . The execution, delivery, and performance by the Borrower of this Agreement, the Notes, and the other Loan Documents to which it is a party and by the Guarantors of the Guaranties and the other Loan Documents to which they are a party and the consummation of the transactions contemplated hereby and thereby (a) are within the Borrower’s and such Guarantors’ governing powers, (b) have been duly authorized by all necessary governing action, (c) do not contravene (i) the Borrower’s or any Guarantor’s certificate or articles of incorporation, bylaws, limited liability company agreement, or other similar

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governance documents or (ii) any law or any contractual restriction binding on or affecting the Borrower or any Guarantor, and (d) will not result in or require the creation or imposition of any Lien prohibited by this Agreement. At the time of each Advance and the issuance, extension or increase of a Letter of Credit, such Advance and such Letter of Credit, and the use of the proceeds of such Advance and such Letter of Credit, will be within the Borrower’s governing powers, will have been duly authorized by all necessary corporate action, will not contravene (i) the Borrower’s limited liability company agreement or other organizational documents or (ii) any law or any contractual restriction binding on or affecting the Borrower and will not result in or require the creation or imposition of any Lien prohibited by this Agreement.

Section 4.03 Authorization and Approvals . No consent, order, authorization, or approval or other action by, and no notice to or filing with, any Governmental Authority or any other Person is required for the due execution, delivery, and performance by the Borrower of this Agreement, the Notes, or the other Loan Documents to which the Borrower is a party or by each Guarantor of its Guaranty or the other Loan Documents to which it is a party or the consummation of the transactions contemplated thereby. At the time of each Borrowing and each issuance, increase or extension of a Letter of Credit, no authorization or approval or other action by, and no notice to or filing with, any Governmental Authority will be required for such Borrowing or such issuance, increase or extension of such Letter of Credit or the use of the proceeds of such Borrowing or such Letter of Credit.

Section 4.04 Enforceable Obligations . This Agreement, the Notes, and the other Loan Documents to which the Borrower is a party have been duly executed and delivered by the Borrower and the Guaranties and the other Loan Documents to which each Guarantor is a party have been duly executed and delivered by such Guarantors. Each Loan Document is the legal, valid, and binding obligation of the Borrower and any Guarantor which is a party to it enforceable against the Borrower and each such Guarantor in accordance with its terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium, or similar law affecting creditors’ rights generally and by general principles of equity.

Section 4.05 Financial Statements .

(a) The Borrower has delivered to the Administrative Agent and the Lenders copies of the Financial Statements, and the Financial Statements are accurate and complete in all material respects and present fairly the financial condition of Borrower for their period in accordance with GAAP. As of the date of the Financial Statements, there were no material contingent obligations, liabilities for taxes, unusual forward or long-term commitments, or unrealized or anticipated losses of the Borrower, except as disclosed therein and adequate reserves for such items have been made in accordance with GAAP.

(b) All projections, estimates, and pro forma financial information furnished by the Borrower were prepared on the basis of assumptions, data, information, tests, or conditions believed to be reasonable at the time such projections, estimates, and pro forma financial information were furnished.

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(c) Since the date of the Financial Statements, no event or circumstance that could cause a Material Adverse Change has occurred.

(d) As of the Effective Date, the Obligors have no Debt other than the Debt listed on Schedule 4.05.

Section 4.06 True and Complete Disclosure . All factual information (excluding estimates) heretofore or contemporaneously furnished by or on behalf of the Borrower or any of the Guarantors in writing to any Lender or the Administrative Agent for purposes of or in connection with this Agreement, any other Loan Document or any transaction contemplated hereby or thereby is, and all other such factual information hereafter furnished by or on behalf of the Borrower and the Guarantors in writing to the Administrative Agent or any of the Lenders shall be, true and accurate in all material respects on the date as of which such information is dated or certified and does not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements contained therein not misleading at such time. All projections, estimates, and pro forma financial information furnished by the Borrower were prepared on the basis of assumptions, data, information, tests, or conditions believed to be reasonable at the time such projections, estimates, and pro forma financial information were furnished.

Section 4.07 Litigation; Compliance with Laws .

(a) There is no pending or, to the best knowledge of the Borrower, threatened action, suit, or legal equitable, arbitrative or administrative proceeding affecting the Borrower or any of the Guarantors before any court, Governmental Authority or arbitrator which, if adversely determined, could reasonably be expected to cause a Material Adverse Effect or which purports to affect the legality, validity, binding effect or enforceability of this Agreement, any Note, or any other Loan Document. Additionally, there is no pending or, to the best knowledge of the Borrower, threatened action, suit, or legal equitable, arbitrative or administrative proceeding instituted against the Borrower or any of the Guarantors which seeks to adjudicate the Borrower or any of the Guarantors as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or for any substantial part of its Property.

(b) The Borrower and its Subsidiaries have complied in all material respects with all material statutes, rules, regulations, orders and restrictions of any Governmental Authority having jurisdiction over the conduct of their respective businesses or the ownership of their respective Property.

Section 4.08 Use of Proceeds . The proceeds of the Advances will be used by the Borrower for the purposes described in Section 5.09. The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U). No proceeds of any Advance will be used to purchase or carry any margin stock in violation of Regulation T, U or X.

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Section 4.09 Investment Company Act . Neither the Borrower nor any of the Guarantors is an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

Section 4.10 Federal Power Act . Neither the Administrative Agent nor any of the Lenders, solely by virtue of the execution, delivery and performance of, and the consummation of the transactions contemplated by, the Loan Documents shall be or become subject to regulation (a) under the Federal Power Act, as amended, (b) as a “public utility” or “public service corporation” or the equivalent under the applicable law of any state, or (c) under the applicable laws of any state relating to public utilities or public service corporations.

Section 4.11 Taxes .

(a) Reports and Payments . All Returns (as defined below in clause (c) of this Section 4.11) required to be filed by or on behalf of the Borrower, the Guarantors, or any member of the Controlled Group (hereafter collectively called the “Tax Group”) have been duly filed on a timely basis or appropriate extensions have been obtained and such Returns are and will be true, complete and correct, except where the failure to so file would not be reasonably expected to cause a Material Adverse Effect; and all Taxes shown to be payable on the Returns or on subsequent assessments with respect thereto will have been paid in full on a timely basis, and no other Taxes will be payable by the Tax Group with respect to items or periods covered by such Returns, except in each case to the extent of (i) reserves reflected in the Financial Statements or (ii) taxes that are being contested in good faith. The reserves for accrued Taxes reflected in the financial statements delivered to the Lenders under this Agreement are adequate in the aggregate for the payment of all unpaid Taxes, whether or not disputed, for the period ended as of the date thereof and for any period prior thereto, and for which the Tax Group may be liable in its own right, as withholding agent or as a transferee of the assets of, or successor to, any Person, except for such Taxes or reserves therefor, the failure to pay or provide for which does not and would not reasonably be expected to cause a Material Adverse Effect.

(b) Taxes Definition . “Taxes” in this Section 4.11 shall mean all taxes, charges, fees, levies, or other assessments imposed by any federal, state, local, or foreign taxing authority, including income, gross receipts, excise, real or personal property, sales, occupation, use, service, leasing, environmental, value added, transfer, payroll, and franchise taxes (and including any interest, penalties, or additions to tax attributable to or imposed on or with respect to any such assessment).

(c) Returns Definition . “Returns” in this Section 4.11 shall mean any federal, state, local, or foreign report, estimate, declaration of estimated Tax, information statement or return relating to, or required to be filed in connection with, any Taxes, including any information return or report with respect to backup withholding or other payments of third parties.

Section 4.12 Pension Plans . All Plans are in compliance in all material respects with all applicable provisions of ERISA. No Termination Event has occurred with respect to any Plan, and each Plan has complied with and been administered in all material respects in accordance with applicable provisions of ERISA and the Code. No “accumulated funding deficiency” (as

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defined in Section 302 of ERISA) has occurred and there has been no excise tax imposed under Section 4971 of the Code. No Reportable Event has occurred with respect to any Multiemployer Plan, and each Multiemployer Plan has complied with and been administered in all material respects in accordance with applicable provisions of ERISA and the Code. The present value of all benefits vested under each Plan (based on the assumptions used to fund such Plan) did not, as of the last annual valuation date applicable thereto, exceed the value of the assets of such Plan allocable to such vested benefits. Neither the Borrower nor any member of the Controlled Group has had a complete or partial withdrawal from any Multiemployer Plan for which there is any withdrawal liability. As of the most recent valuation date applicable thereto, neither the Borrower nor any member of the Controlled Group would become subject to any liability under ERISA if the Borrower or any member of the Controlled Group has received notice that any Multiemployer Plan is insolvent or in reorganization. Based upon GAAP existing as of the date of this Agreement and current factual circumstances, the Borrower has no reason to believe that the annual cost during the term of this Agreement to the Borrower or any member of the Controlled Group for post-retirement benefits to be provided to the current and former employees of the Borrower or any member of the Controlled Group under Plans that are welfare benefit plans (as defined in Section 3(1) of ERISA) could, in the aggregate, reasonably be expected to cause a Material Adverse Effect.

Section 4.13 Condition of Property; Casualties . Each of the Borrower and the Guarantors has good and marketable title to all of its Properties as is customary in the oil and gas industry in all material respects, free and clear of all Liens except for Permitted Liens. The material Properties used or to be used in the continuing operations of the Borrower and each of the Guarantors are in good repair, working order and condition, ordinary wear and tear excepted. Since the date of the Financial Statements, neither the business nor the material Properties of the Borrower and each of the Guarantors, taken as a whole, has been materially and adversely affected as a result of any fire, explosion, earthquake, flood, drought, windstorm, accident, strike or other labor disturbance, embargo, requisition or taking of Property or cancellation of contracts, Permits, or concessions by a Governmental Authority, riot, activities of armed forces, or acts of God or of any public enemy (whether or not covered by insurance).

Section 4.14 No Burdensome Restrictions; No Defaults .

(a) No Obligor is a party to any indenture, loan, or credit agreement or any lease or other agreement or instrument or subject to any charter or corporate restriction or provision of applicable law that could reasonably be expected to cause a Material Adverse Effect or governmental regulation that could reasonably be expected to cause a Material Adverse Change. No Obligor is in default under or with respect to any contract, agreement, lease, or other instrument to which any Obligor is a party and which could reasonably be expected to cause a Material Adverse Effect or under any agreement in connection with any Debt. No Obligor has received any notice of default under any material contract, agreement, lease, or other instrument to which any Obligor is a party.

(b) No Default has occurred and is continuing.

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Section 4.15 Environmental Condition .

(a) Permits, Etc . Except as set forth on Schedule 4.15, The Borrower and the Guarantors (i) have obtained all Environmental Permits necessary for the ownership and operation of their respective Properties and the conduct of their respective businesses; (ii) have at all times been and are in material compliance with all terms and conditions of such Permits and with all other material requirements of applicable Environmental Laws; (iii) have not received notice of any material violation or alleged violation of any Environmental Law or Permit; and (iv) are not subject to any actual or contingent Environmental Claim, which could reasonably be expected to cause a Material Adverse Effect.

(b) Certain Liabilities . To the Borrower’s actual knowledge, except as set forth on Schedule 4.15, none of the present or previously owned or operated Property of the Borrower or any Guarantor or of any of their former Subsidiaries, wherever located: (i) has been placed on or proposed to be placed on the National Priorities List, the Comprehensive Environmental Response Compensation Liability Information System list, or their state or local analogs, or have been otherwise investigated, designated, listed, or identified as a potential site for removal, remediation, cleanup, closure, restoration, reclamation, or other response activity under any Environmental Laws; (ii) is subject to a Lien, arising under or in connection with any Environmental Laws, that attaches to any revenues or to any Property owned or operated by the Borrower or any Guarantor or any of their respective Subsidiaries, wherever located, which could reasonably be expected to cause a Material Adverse Effect; or (iii) has been the site of any Release of Hazardous Substances or Hazardous Wastes from present or past operations which has caused at the site or at any third-party site any condition that has resulted in or could reasonably be expected to result in the need for Response that would cause a Material Adverse Effect.

(c) Certain Actions . Without limiting the foregoing: (i) all necessary notices have been properly filed, and no further action is required under current Environmental Law as to each Response or other restoration or remedial project undertaken by the Borrower or the Guarantors or any of their former Subsidiaries on any of their presently or formerly owned or operated Property and (ii) the present and, to the Borrower’s best knowledge, future liability, if any, of the Borrower and the Guarantors which could reasonably be expected to arise in connection with requirements under Environmental Laws will not result in a Material Adverse Effect.

Section 4.16 Permits, Licenses, Etc . The Borrower and the Guarantors possess all authorizations, Permits, licenses, patents, patent rights or licenses, trademarks, trademark rights, trade name rights and copyrights which are material to the conduct of their business. No Person is in violation in any material respect of the terms under which it possesses such intellectual property or the right to use such intellectual property. The Borrower and the Guarantors manage and operate their business in all material respects in accordance with all applicable Legal Requirements and good industry practices.

Section 4.17 Gas Contracts . Neither the Borrower nor any of the Guarantors, as of the Effective Date: (a) is obligated in any material respect by virtue of any prepayment made under any contract containing a “take-or-pay” or “prepayment” provision or under any similar agreement to deliver hydrocarbons produced from or allocated to any of the Borrower’s and its Subsidiaries’ Oil and Gas Properties at some future date without receiving full payment therefor

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at the time of delivery, or (b) except as has been disclosed to the Administrative Agent, has produced gas, in any material amount, subject to, and none of the Borrower’s and the Guarantors’ Oil and Gas Properties is subject to, balancing rights of third parties or subject to balancing duties under governmental requirements other than imbalances which (i) occur in the ordinary course of business and (ii) do not exceed 3% of the value of the Proven Reserves of the Borrower and its Subsidiaries.

Section 4.18 Liens; Titles, Leases, Etc . None of the Property of the Borrower or any of the Guarantors is subject to any Lien other than Permitted Liens. On the Effective Date, all governmental actions and all other filings, recordings, registrations, third party consents and other actions which are necessary to create the Liens provided for in the Security Instruments will have been made, obtained and taken in all relevant jurisdictions. All leases and agreements for the conduct of business of the Borrower and the Guarantors are valid and subsisting, in full force and effect and there exists no default or event of default or circumstance which with the giving of notice or lapse of time or both would give rise to a default under any such leases or agreements which could reasonably be expected to cause a Material Adverse Effect. Neither the Borrower nor any of the Guarantors is a party to any agreement or arrangement (other than this Agreement and the Security Instruments), or subject to any order, judgment, writ or decree, which either restricts or purports to restrict its ability to grant Liens to secure the Obligations against their respective assets or Properties.

Section 4.19 Solvency and Insurance . Before and after giving effect to the deemed making of the initial Advances hereunder, the Borrower and each of its Subsidiaries is Solvent. Additionally, each of the Borrower and its Subsidiaries carry insurance required under Section 5.02.

Section 4.20 Hedging Agreements . Schedule 4.20 sets forth, as of the Effective Date, a true and complete list of all Interest Hedge Agreements, Hydrocarbon Hedge Agreements, and any other Hedge Contract of the Borrower and each Guarantor, the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark to market value thereof, all credit support agreements relating thereto (including any margin required or supplied), and the counterparty to each such agreement.

Section 4.21 Material Agreements . Schedule 4.21 sets forth a complete and correct list of all material agreements, leases, indentures, purchase agreements, obligations in respect of letters of credit, guarantees, joint venture agreements, and other instruments in effect or to be in effect as of the Effective Date (other than the agreements set forth in Schedule 4.20 and the leases and agreements listed in any Exhibit to a Mortgage) providing for, evidencing, securing or otherwise relating to any Debt of the Borrower or any of the Guarantors, and all obligations of the Borrower or any of the Guarantors to issuers of surety or appeal bonds issued for account of the Borrower or any such Guarantor, and such list correctly sets forth the names of the debtor or lessee and creditor or lessor with respect to the Debt or lease obligations outstanding or to be outstanding and the Property subject to any Lien securing such Debt or lease obligation. Schedule 4.21 also sets forth a list of the Persons disbursing proceeds of production to any Obligor from such Obligor’s Oil and Gas Properties during the month of March, 2006 and such list is complete and accurate in all material respects.

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ARTICLE V

AFFIRMATIVE COVENANTS

So long as any Note or any amount under any Loan Document shall remain unpaid, any Letter of Credit shall remain outstanding, or any Lender shall have any Commitment hereunder, the Borrower agrees, unless the Required Lenders shall otherwise consent in writing, to comply with the following covenants:

Section 5.01 Compliance with Laws, Etc . The Borrower shall comply, and cause each of its Subsidiaries to comply, in all material respects with all Legal Requirements. Without limiting the generality and coverage of the foregoing, the Borrower shall comply, and shall cause each of its Subsidiaries to comply, in all material respects, with all Environmental Laws and all laws, regulations, or directives with respect to equal employment opportunity and employee safety in all jurisdictions in which the Borrower, or any of its Subsidiaries do business; provided , however, that this Section 5.01 shall not prevent the Borrower or any of its Subsidiaries from, in good faith and with reasonable diligence, contesting the validity or application of any such laws or regulations by appropriate legal proceedings. Without limitation of the foregoing, the Borrower shall, and shall cause each of its Subsidiaries to, (a) maintain and possess all authorizations, Permits, licenses, trademarks, trade names, rights and copyrights which are necessary to the conduct of its business and (b) obtain, as soon as practicable, all consents or approvals required from any states of the United States (or other Governmental Authorities) necessary to grant the Administrative Agent an Acceptable Security Interest in the Borrower’s and its Subsidiaries’ Oil and Gas Properties (to the extent Liens are required to be granted hereunder).

Section 5.02 Maintenance of Insurance .

(a) The Borrower shall, and shall cause each of its Subsidiaries to, procure and maintain or shall cause to be procured and maintained continuously in effect policies of insurance in form and amounts and issued by financially sound and reputable insurers covering such casualties, risks, perils, liabilities and other hazards customarily maintained by prudent oil and gas operators in the industry, and, if the Borrower or any Subsidiary is engaged in other energy related activities, then also covering such casualties, risks, perils, liabilities and other hazards customarily maintained by prudent Persons engaged in such energy related activities. In addition, the Borrower shall, and shall cause each of its Subsidiaries to, comply with all requirements regarding insurance contained in the Security Instruments.

(b) All certified copies of policies or certificates thereof, and endorsements and renewals thereof shall be delivered to and retained by the Administrative Agent. All policies of insurance shall either have attached thereto a Lender’s loss payable endorsement for the benefit of the Administrative Agent, as loss payee in form reasonably satisfactory to the Administrative Agent or shall name the Administrative Agent as an additional insured, as applicable. The Borrower shall furnish the Administrative Agent with a certificate of insurance or a certified copy of all policies of insurance required. All policies or certificates of insurance shall set forth the coverage, the limits of liability, the name of the carrier, the policy number, and the period of coverage. In addition, all policies of insurance required under the terms hereof shall contain an endorsement or agreement by the insurer that any loss shall be payable in

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accordance with the terms of such policy notwithstanding any act of negligence of the Borrower, or a Subsidiary or any party holding under the Borrower or a Subsidiary which might otherwise result in a forfeiture of the insurance and the further agreement of the insurer waiving all rights of setoff, counterclaim or deductions against the Borrower and its Subsidiaries. All such policies shall contain a provision that notwithstanding any contrary agreements between the Borrower, its Subsidiaries, and the applicable insurance company, such policies will not be canceled, allowed to lapse without renewal, surrendered or amended (which provision shall include any reduction in the scope or limits of coverage) without at least 30 days’ prior written notice to the Administrative Agent. In the event that, notwithstanding the “lender’s loss payable endorsement” requirement of this Section 5.02, the proceeds of any insurance policy described above are paid to the Borrower or Subsidiaries and any Obligations are outstanding, the Borrower shall deliver such proceeds to the Administrative Agent immediately upon receipt.

Section 5.03 Preservation of Corporate Existence, Etc . The Borrower shall preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, its corporate or limited liability company, as applicable, existence, rights, franchises, and privileges in the jurisdiction of its incorporation or organization, as applicable, and qualify and remain qualified, and cause each such Subsidiary to qualify and remain qualified, as a foreign entity in each jurisdiction in which qualification is necessary or desirable in view of its business and operations or the ownership of its Properties, and, in each case, where failure to qualify or preserve and maintain its rights and franchises could reasonably be expected to cause a Material Adverse Effect.

Section 5.04 Payment of Taxes, Etc . The Borrower shall pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, (a) all taxes, assessments, and governmental charges or levies imposed upon it or upon its income or profits or Property that are material in amount, prior to the date on which penalties attach thereto and (b) all lawful claims that are material in amount which, if unpaid, might by law become a Lien upon its Property; provided , however, that neither the Borrower nor any such Subsidiary shall be required to pay or discharge any such tax, assessment, charge, levy, or claim which is being contested in good faith and by appropriate proceedings, and with respect to which reserves in conformity with GAAP have been provided.

Section 5.05 Visitation Rights . At any reasonable time and from time to time, upon reasonable notice, the Borrower shall, and shall cause its Subsidiaries to, permit the Administrative Agent and any Lender or any of their respective agents or representatives thereof, to (a) examine and make copies of and abstracts from the records and books of account of, and visit and inspect at their reasonable discretion the Properties of, the Borrower and any such Subsidiary, and (b) discuss the affairs, finances and accounts of the Borrower and any such Subsidiary with any of their respective officers or directors; provided that, the Borrower and its Subsidiaries may deny access to any of its field facilities to any agent or representative who fails to agree to, or fails to abide by, the safety rules and requirements established by the Borrower.

Section 5.06 Reporting Requirements . The Borrower shall furnish to the Administrative Agent and each Lender:

(a) Annual Financials . (i) As soon as available and in any event not later than 90 days (or 120 days in the event the Borrower is not then a public company required to file

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reports with the SEC), after the end of each fiscal year of the Borrower and its consolidated Subsidiaries, if any: (A) a copy of the annual audit report for such year for the Borrower and such consolidated Subsidiaries, including therein the Borrower’s and such consolidated Subsidiaries’ balance sheets as of the end of such fiscal year and the Borrower’s and such consolidated Subsidiaries’ statements of income, cash flows, and retained earnings, in each case certified by independent certified public accountants of national standing reasonably acceptable to the Administrative Agent and including any management letters delivered by such accountants to the Borrower or any Subsidiary in connection with such audit, and (B) a Compliance Certificate executed by a Responsible Officer of the Borrower; and (ii) a copy of the unaudited annual consolidating financial statements of each of its Subsidiaries, if any, including therein such Subsidiary’s balance sheet and statements of income, cash flows, and retained earnings for such fiscal year;

(b) Quarterly Financials . As soon as available and in any event not later than 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower and its consolidated Subsidiaries, if any: (i) the unaudited balance sheet and the unaudited statements of income, cash flows, and retained earnings of each such Person for the period commencing at the end of the previous year and ending with the end of such fiscal quarter, all in reasonable detail and duly certified with respect to such consolidated statements (subject to the absence of footnotes and to year-end audit adjustments) by a Responsible Officer of the Borrower as having been prepared in accordance with GAAP; and (ii) a Compliance Certificate executed by a Responsible Officer of the Borrower;

(i) At all times during the term of this Agreement, regardless of whether a BB Period is in effect, as soon as available but in any event on or before March 31 ^st (or April 30 ^th , in the event the Borrower is not then a public company required to file reports with the SEC), of each year, commencing with March 31, 2007 (or April 30, 2007, if applicable), an Independent Engineering Report dated effective as of the immediately preceding December 31 ^st ;

(ii) At all times during the term of this Agreement, regardless of whether a BB Period is in effect, as soon as available but in any event on or before September 30 ^th (or October 31 ^st , in the event the Borrower is not then a public company required to file reports with the SEC), of each year an Internal Engineering Report dated effective as of the immediately preceding June 30;

(iii) Such other information as may be reasonably requested by the Administrative Agent or any Lender with respect to the Borrower’s and its Subsidiaries’ Oil and Gas Properties;

(d) At all times during the term of this Agreement, regardless of whether a BB Period is in effect, with the delivery of each Engineering Report, a certificate from a Responsible Officer of the Borrower certifying that, to his best knowledge and in all material respects: (i) the information contained in the Engineering Report and any other information delivered in connection therewith is true and correct, (ii) the Borrower or its Subsidiary, as applicable, owns

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good and defensible title to the Oil and Gas Properties evaluated in such Engineering Report, and such Properties are free of all Liens except for Permitted Liens, (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 with respect to its Oil and Gas Properties evaluated in such Engineering Report which would require the Borrower or any of its Subsidiaries to deliver Hydrocarbons produced from such Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor other than imbalances which (1) occur in the ordinary course of business and (2) do not exceed 3% of the value of the Proven Reserves of the Borrower and its Subsidiaries, (iv) none of the Oil and Gas Properties considered for the Borrowing Base 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 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 its Oil and Gas Properties added to and deleted from the immediately prior Engineering Report and a list showing any change in working interest or net revenue interest in its Oil and Gas Properties occurring and the reason for such change, and (vi) at all times other than during a Release Period, attached to the certificate is a list of all Persons disbursing proceeds of production to any Obligor from such Obligor’s Oil and Gas Properties constituting Collateral; and

(e) Production Reports . At all times other than during the Release Period and only upon request by the Administrative Agent, for a calendar quarter, a report setting forth (i) the production and associated lease operating statements for the Oil and Gas Properties of the Borrower and its Subsidiaries in form and substance reasonably satisfactory to the Administrative Agent, together with a certificate signed by a Responsible Officer of the Borrower as to the truth and accuracy of such analyses in all material respects; (ii) any changes to any producing reservoir, production equipment, or producing well from the report delivered for the preceding fiscal quarter, which changes could cause a Material Adverse Change, (iii) any sales of the Borrower’s or any Subsidiaries’ Oil and Gas Properties since the delivery of the report for the preceding fiscal quarter; and (iv) the identity and address of Persons then disbursing proceeds to the Obligors with respect to Oil and Gas Properties constituting Collateral;

(f) Defaults . As soon as possible and in any event within five days after (i) the occurrence of any Default or (ii) the occurrence of any default under any instrument or document evidencing Debt of the Borrower or any Subsidiary, in each case known to any officer of the Borrower or any of its Subsidiaries which is continuing on the date of such statement, a statement of a Responsible Officer of the Borrower setting forth the details of such Default or default, as applicable, and the actions which the Borrower or such Subsidiary has taken and proposes to take with respect thereto;

(g) Termination Events . As soon as possible and in any event (i) within 30 days after (A) the Borrower, any Guarantor or any of their respective Subsidiaries knows or has reason to know that any Termination Event described in clause (a) of the definition of Termination Event with respect to any Plan has occurred, or (B) the Borrower acquires knowledge that any other member of the Controlled Group knows that any Termination Event described in clause (a) of the definition of Termination Event with respect to any Plan has occurred, and (ii) within 10 days after (A) the Borrower, any Guarantor or any of their respective Subsidiaries knows or has reason to know that any other Termination Event with respect to any

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Plan has occurred, or (B) the Borrower acquires knowledge that any other Affiliate of the Borrower knows that any other Termination Event with respect to any Plan has occurred, a statement of a Responsible Officer of the Borrower describing such Termination Event and the action, if any, which the Borrower or such Affiliate proposes to take with respect thereto;

(h) Termination of Plans . Promptly and in any event within two Business Days after (i) receipt thereof by the Borrower, any Guarantor or any of their respective Subsidiaries from the PBGC, or (ii) the Borrower acquires knowledge of any other Controlled Group member’s receipt thereof from the PBGC, copies of each notice received by the Borrower or any such member of the Controlled Group of the PBGC’s intention to terminate any Plan or to have a trustee appointed to administer any Plan;

(i) Other ERISA Notices . Promptly and in any event within five Business Days after (i) receipt thereof by the Borrower, any Guarantor or any of their respective Subsidiaries from a Multiemployer Plan sponsor, or (ii) the Borrower acquires knowledge of any other Controlled Group member’s receipt thereof from a Multiemployer Plan sponsor, a copy of each notice received by the Borrower or any member of the Controlled Group concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA;

(j) Environmental Notices . Promptly upon the receipt thereof by the Borrower or any of its Subsidiaries, a copy of any form of request, notice, summons or citation received from the Environmental Protection Agency, or any other Governmental Authority, concerning (i) violations or alleged violations of Environmental Laws, which seeks to impose liability therefor and could cause a Material Adverse Effect, (ii) any action or omission on the part of the Borrower or any of its Subsidiaries or any of their former Subsidiaries in connection with Hazardous Waste or Hazardous Substances which could reasonably result in the imposition of liability therefor that could cause a Material Adverse Effect, including any information request related to, or notice of, potential responsibility under CERCLA, or (iii) concerning the filing of a Lien upon, against or in connection with the Borrower or any of its Subsidiaries or their former Subsidiaries, or any of their leased or owned Property, wherever located;

(k) Other Governmental Notices . Promptly and in any event within ten Business Days after receipt thereof by the Borrower or any of its Subsidiaries, a copy of any notice, summons, citation, or proceeding seeking to modify in any respect, revoke, or suspend any material contract, license, permit or agreement with any Governmental Authority, if such modification, revocation or suspension could reasonably be expected to result in a Material Adverse Effect.

(l) Material Changes . Prompt written notice of any condition or event of which the Borrower has knowledge, which condition or event has resulted or may reasonably be expected to result in (i) a Material Adverse Change or (ii) a breach of or noncompliance with any material term, condition, or covenant of any material contract to which the Borrower or any of its Subsidiaries is a party or by which they or their Properties may be bound;

(m) Disputes, Etc . Prompt written notice of (i) any claims, legal or arbitration proceedings, proceedings before any Governmental Authority, or disputes, or to the knowledge of the Borrower threatened, or affecting the Borrower, or any of its Subsidiaries which, if

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adversely determined, could reasonably be expected to cause a Material Adverse Effect, or any material labor controversy of which the Borrower or any of its Subsidiaries has knowledge resulting in or reasonably considered to be likely to result in a strike against the Borrower or any of its Subsidiaries and (ii) any claim, judgment, Lien or other encumbrance (other than a Permitted Lien) affecting any Property of the Borrower or any of its Subsidiaries if the value of the claim, judgment, Lien, or other encumbrance affecting such Property shall exceed $10,000,000.

(n) Other Accounting Reports . Promptly upon receipt thereof, a copy of each other report or letter submitted to the Borrower or any of its Subsidiaries by independent accountants in connection with any annual, interim or special audit made by them of the books of the Borrower or any of its Subsidiaries, and a copy of any response by the Borrower or any of its Subsidiaries, or the Board of Directors (or other applicable governing body) of the Borrower or any of its Subsidiaries, to such letter or report;

(o) Notices Under Other Loan Agreements . Promptly after the furnishing thereof, copies of any statement, report or notice furnished to any Person pursuant to the terms of any indenture, loan or credit or other similar agreement, other than this Agreement and not otherwise required to be furnished to the Lenders pursuant to any other provision of this Section 5.06;

(p) Securities Law Filings . Promptly after the sending or filing thereof, copies of all proxy material, reports and other information which the Borrower or any of its Subsidiaries files with the SEC or which the Borrower sends to all of its shareholders; and

(q) Other Information . Such other information respecting the business or Properties, or the condition or operations, financial or otherwise, of the Borrower or any of its Subsidiaries, as any Lender through the Administrative Agent may from time to time reasonably request; the Administrative Agent agrees to provide the Lenders with copies of any material notices and information delivered solely to the Administrative Agent pursuant to the terms of this Agreement.

Section 5.07 Maintenance of Property . Subject to Section 6.04, the Borrower shall, and shall cause each of its Subsidiaries to, maintain their owned, leased, or operated Property in good condition and repair, ordinary wear and tear excepted; and shall abstain, and cause each of its Subsidiaries to abstain from, knowingly or willfully permitting the commission of waste or other injury, destruction, or loss of natural resources, or the occurrence of pollution, contamination, or any other condition in, on or about the owned or operated Property involving the Environment that could reasonably be expected to result in Response activities and that could reasonably be expected to cause a Material Adverse Effect.

Section 5.08 [Reserved] .

Section 5.09 Use of Proceeds . The Borrower shall use the proceeds of the Advances and Letters of Credit to fund the acquisition, exploration, development, operation, reworking, and production of Oil and Gas Properties, for the issuance of letters of credit to support operations and for other general corporate purposes.

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Section 5.10 Title . At all times other than during the Release Period, the Borrower shall, from time to time upon the reasonable request of the Administrative Agent, take such actions and execute and deliver such documents and instruments as the Administrative Agent shall require to ensure that the Administrative Agent shall, at all times, have received satisfactory title opinions (including, if requested, supplemental or new title opinions addressed to it) or other title evidence reflecting that the Obligors have good and defensible title to Oil and Gas Properties constituting at least 70% of the present value of the Obligors’ Oil and Gas Properties, as determined by the most recently delivered Engineering Report, and which title opinions or other title evidence shall be in form and substance acceptable to the Administrative Agent in its sole discretion.

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ARTICLE VI

NEGATIVE COVENANTS

So long as any Note or any amount under any Loan Document shall remain unpaid, any Letter of Credit shall remain outstanding, or any Lender shall have any Commitment, the Borrower agrees, unless the Required Lenders otherwise consent in writing, to comply with the following covenants.

Section 6.01 Liens, Etc . The Borrower shall not create, assume, incur, or suffer to exist, or permit any of its Subsidiaries to create, assume, incur, or suffer to exist, any Lien on or in respect of any of its Property whether now owned or hereafter acquired, or assign any right to receive income, except that the Borrower and its Subsidiaries may create, incur, assume, or suffer to exist:

(a) Liens securing the Obligations;

(b) Liens securing Debt permitted under Section 6.02(f) provided, that, the Debt secured by such Liens (i) was incurred solely for the purpose of financing the acquisition of such equipment, and does not exceed the aggregate purchase price of such equipment and the obligations incidental thereto, (ii) is secured only by such equipment and not by any other assets of the Borrower and its Subsidiaries, and (iii) is not increased in amount;

(c) Liens for taxes, assessments, or other governmental charges or levies not yet due or that (provided foreclosure, sale, or other similar proceedings shall not have been initiated) are being contested in good faith by appropriate proceedings, and such reserve as may be required by GAAP shall have been made therefor;

(d) Liens in favor of vendors, carriers, warehousemen, repairmen, mechanics, workmen, materialmen, construction, or similar Liens arising by operation of law in the ordinary course of business in respect of obligations that are not yet due or that are being contested in good faith by appropriate proceedings, provided , that, such reserve as may be required by GAAP shall have been made therefor;

(e) Liens to operators and non-operators under joint operating agreements arising in the ordinary course of the business of the Borrower or the relevant Subsidiary to secure amounts owing, which amounts are not yet due or are being contested in good faith by appropriate proceedings, if such reserve as may be required by GAAP shall have been made therefor;

(f) royalties, overriding royalties, net profits interests, production payments, reversionary interests, calls on production, preferential purchase rights and other burdens on or deductions from the proceeds of production, that do not secure Funded Debt and that are taken into account in computing the net revenue interests and working interests of the Borrower or any of its Subsidiaries warranted in the Security Instruments;

(g) Liens arising in the ordinary course of business out of pledges or deposits under workers’ compensation laws, unemployment insurance, old age pensions or other social security or retirement benefits, or similar legislation or to secure public or statutory obligations of the Borrower;

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(h) Liens arising under operating agreements, unitization and pooling agreements and orders, farmout agreements, gas balancing agreements and other agreements, in each case that are customary in the oil, gas and mineral production business and that are entered into in the ordinary course of business that are taken into account in computing the net revenue interests and working interests of the Borrower or any of its Subsidiaries warranted in the Security Instruments, to the extent that any such Lien referred to in this clause does not materially impair the use of the Property covered by such Lien for the purposes for which such Property is held by the Borrower or any Subsidiary or materially impair the value of such Property subject thereto;

(i) easements, rights-of-way, restrictions, and other similar encumbrances, and minor defects in the chain of title that are customarily accepted in the oil and gas financing industry, none of which interfere with the ordinary conduct of the business of Borrower or any Subsidiary or materially detract from the value or use of the Property to which they apply; and

(j) Liens described in Schedule 4.05.

(k) Liens securing surety or other bonds permitted by Section 6.02(c); and

(l) Liens not otherwise permitted in this Section 6.01; provided, that, (i) the Debt secured by such Liens is permitted under Section 6.02 (other than clause (g) thereof), (ii) the aggregate amount of such Debt shall not exceed 5% of the Present Value then in effect, and (iii) at all times other than during the Release Period, no such Lien encumbers Collateral.

Section 6.02 Debts, Guaranties, and Other Obligations . The Borrower shall not, and shall not permit any of its Subsidiaries to, create, assume, suffer to exist, or in any manner become or be liable in respect of, any Debt except:

(a) Debt of the Borrower and its Subsidiaries under the Loan Documents;

(b) Debt listed on Schedule 4.05; provided , that, the amount of such Debt may not be increased other than as permitted under the terms of this Agreement;

(c) Debt in the form of obligations for the deferred purchase price of Property or services incurred in the ordinary course of business which are not yet due and payable or are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been established;

(d) Debt under Hydrocarbon Hedge Agreements or Interest Hedge Agreements which are not prohibited by the terms of Section 6.14;

(e) Debt consisting of sureties or bonds provided to any Governmental Authority or other Person and assuring payment of contingent liabilities of the Borrower in connection with the operation of the Oil and Gas Properties, including with respect to plugging, facility removal and abandonment of its Oil and Gas Properties and removal, disposal or injection of salt water or other fluids;

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(f) Debt under purchase money obligations or capital lease obligations in respect of equipment which are nonrecourse to the Borrower and to any Subsidiary, provided that (i) with respect to lease obligations, the aggregate rental payments thereunder and under any capital leases included in Schedule 4.05 shall not exceed $5,000,000 in any 12-month period and (ii) the aggregate liabilities, in accordance with GAAP, in respect of capital leases and purchase money obligations (including the capital leases and purchase money obligations included in Schedule 4.05), shall not exceed $25,000,000;

(g) Debt evidenced by senior or subordinated notes issued by the Borrower which may be guaranteed by the other Obligors; provided that, (i) such Debt is not secured by any Lien, (ii) no principal amount of such Debt matures earlier than two (2) years after the Maturity Date that is in effect at the time such Debt is issued, (iii) at the time of the issuance of such Debt and after giving effect thereto, no Default or Event of Default shall exist or would occur, (iv) the agreement or indenture governing such Debt shall have covenants and restrictions that are no more restrictive than those set forth in this Agreement and the other Loan Documents, (v) the agreement or indenture governing such Debt shall not have any restriction on the ability of the Borrower or any of its Subsidiaries to guarantee the Obligations or pledge assets as collateral security for the Obligations, (vi) at the time of the issuance of such Debt and after giving effect thereto (A) the ratings of the Index Debt shall be maintained by S&P at BB- or better and the ratings of the Index Debt shall be maintained by Moody’s at Ba3 or better (or, if a rating for the Index Debt shall be maintained by only one of S&P and Moody’s (other than as a result of action taken or omitted to be taken by the Borrower), the rating for the Index Debt is equal to or better than the applicable rating specified in this clause (A)), and (B) other than in connection with the first issuance of such Debt, each of Moody’s and S&P maintains its rating applicable to the Index Debt equal to or more favorable than its most favorable rating of the Index Debt during the 180 days preceding the issuance of such Debt (or, if a rating for the Index Debt shall be maintained by only one of S&P and Moody’s, such rating for the Index Debt is equal to or more favorable than its most favorable rating of the Index Debt during the 180 days preceding the issuance of such Debt), and (vii) the Borrower shall have delivered to the Administrative Agent a certificate in reasonable detail reflecting compliance with each of the foregoing requirements of this Section 6.2(g), including calculations with supporting detail regarding the financial covenants under Sections 6.17, 6.18 and 6.19 (if otherwise applicable) of this Agreement, together with such other evidence of compliance with the foregoing requirements of this Section 6.2(g) as the Administrative Agent may reasonably request; and

(h) Debt not otherwise permitted under this Section 6.02, provided , that (i) such Debt is not secured by any Lien, and (ii) the aggregate of amount of such Debt plus the aggregate amount of Debt permitted under Section 6.02(b) shall not to exceed 5% of the Present Value in effect at any time.

Section 6.03 Agreements Restricting Liens and Distributions . The Borrower shall not, nor shall it permit any of its Subsidiaries to, create, incur, assume or permit to exist any contract, agreement or understanding (other than this Agreement and the Security Instruments) which in any way prohibits or restricts the granting, conveying, creation or imposition of any Lien on any

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of its Property, whether now owned or hereafter acquired, to secure the Obligations or restricts any Subsidiary from paying dividends to the Borrower, or which requires the consent of or notice to other Persons in connection therewith.

Section 6.04 Merger or Consolidation; Asset Sales . The Borrower shall not, nor shall it permit any of its Subsidiaries to (a) merge or consolidate with or into any other Person other than the merger of a Guarantor with and into the Borrower or another Guarantor (or a Subsidiary that will, concurrent with such merger, become a Guarantor); or (b) sell, lease, transfer, assign, farm-out, convey, or otherwise dispose of any of its Property (including any working interest, overriding royalty interest, production payments, net profits interest, royalty interest, or mineral fee interest) other than: (i) the sale of Hydrocarbons in the ordinary course of business, (ii) the sale or transfer of equipment that is (A) obsolete, worn out, depleted or uneconomic and disposed of in the ordinary course of business, (B) no longer necessary for the business of such Person or (C) contemporaneously replaced by equipment of at least comparable use and value, and (iii) the sale or transfer of Oil and Gas Properties which is not otherwise permitted under this Section 6.04(b) and which sale or transfer, together with all other sales and transfers of Oil and Gas Properties made since the immediately preceding January 1 ^st , does not exceed 5% of the Present Value in effect at the time such sale or transfer is made; provided, that, such sale or transfer shall be made in arm’s length transactions and for fair market value.

Section 6.05 Restricted Payments . The Borrower shall not, nor shall it permit any of its Subsidiaries to, make any Restricted Payments except that:

(a) the Subsidiaries of the Borrower may make Restricted Payments to the Borrower; and

(b) the Borrower may make Restricted Payments to its Equity Interest holders; provided that (i) the Borrower shall be in compliance with Section 6.17, Section 6.18, and Section 6.19 as of the most recent fiscal quarter end, (ii) the Borrower shall be in pro forma compliance with the Sections 6.17, 6.18, and 6.19 after giving effect to such Restricted Payment and the Borrower shall have delivered to the Administrative Agent a certificate in reasonable detail reflecting such pro forma compliance, and (iii) no Default or Event of Default shall have occurred or be continuing (both before and after giving effect to the applicable Restricted Payment).

Section 6.06 Investments . The Borrower shall not, nor shall it permit any of its Subsidiaries to, (i) make or permit to exist any Investments or (ii) make any significant acquisitions of any Property, except:

(a) Liquid Investments;

(b) Ownership of existing Subsidiaries and creation or acquisition of any additional Subsidiaries in compliance with Section 6.15.; and

(c) Investments in partnerships, joint ventures, corporations or other entities engaged in activities in or related to the Borrower’s or any Subsidiary’s business in an aggregate amount not in excess of 5% of the Present Value as most recently determined at the time of the Investment;

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(d) acquisition of Oil and Gas Properties and related equipment;

(e) acquisition of equipment used or useful in the exploration and production or marketing of oil and gas, including, but not limited to, oil and gas drilling rigs, gathering systems, pipelines, compression equipment and other facilities in an aggregate amount not in excess of 5% of Present Value as most recently determined at the time of the acquisition; and

(f) capital expenditures incurred in the ordinary course of business.

Section 6.07 Affiliate Transactions . The Borrower shall not, nor shall it permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of transactions (including the purchase, sale, lease or exchange of Property, the making of any investment, the giving of any guaranty, the assumption of any obligation or the rendering of any service) with any of their Affiliates unless such transaction or series of transactions is on terms no less favorable to the Borrower or the Subsidiary, as applicable, than those that could be obtained in a comparable arm’s length transaction with a Person that is not such an Affiliate.

Section 6.08 Compliance with ERISA . The Borrower shall not, nor shall it permit any of its Subsidiaries to, directly or indirectly, (a) engage in, or permit any Subsidiary or ERISA Affiliate to engage in, any transaction in connection with which the Borrower, any Subsidiary or any ERISA Affiliate could be subjected to either a civil penalty assessed pursuant to section 502(c), (i) or (l) of ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code; (b) terminate, or permit any Subsidiary or ERISA Affiliate to terminate, any Plan in a manner, or take any other action with respect to any Plan, which could result in any liability to the Borrower, any Subsidiary or any ERISA Affiliate to the PBGC; (c) fail to make, or permit any Subsidiary or ERISA Affiliate to fail to make, full payment when due of all amounts which, under the provisions of any Plan, agreement relating thereto or applicable law, the Borrower, a Subsidiary or any ERISA Affiliate is required to pay as contributions thereto; (d) permit to exist, or allow any Subsidiary or 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; (e) permit, or allow any Subsidiary or ERISA Affiliate to permit, the actuarial present value of the benefit liabilities (as “actuarial present value of the benefit liabilities” shall have the meaning specified in section 4041 of ERISA) under any Plan maintained by the Borrower, any Subsidiary 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; (f) contribute to or assume an obligation to contribute to, or permit any Subsidiary or ERISA Affiliate to contribute to or assume an obligation to contribute to, any Multiemployer Plan; (g) acquire, or permit any Subsidiary or ERISA Affiliate to acquire, an interest in any Person that causes such Person to become an ERISA Affiliate with respect to the Borrower, any Subsidiary or any ERISA Affiliate if such Person sponsors, maintains or contributes to, or at any time in the six-year period preceding such acquisition has sponsored, maintained, or contributed to, (1) any Multiemployer Plan, or (2) any other Plan that is subject to Title IV of ERISA under which the actuarial present value of the benefit liabilities under such Plan exceeds the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities; (h) incur, or permit any Subsidiary or ERISA Affiliate to incur, a liability to or on account of a Plan under section 515, 4062, 4063, 4064, 4201 or 4204 of

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ERISA; (i) contribute to or assume an obligation to contribute to, or permit any Subsidiary or 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 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 Subsidiary or ERISA Affiliate to amend, a Plan resulting in an increase in current liability such that the Borrower, any Subsidiary or any ERISA Affiliate is required to provide security to such Plan under section 401(a)(29) of the Code; or (k) permit to exist any occurrence of any Reportable Event (as defined in Title IV of ERISA), or any other event or condition, which presents a material (in the opinion of the Required Lenders) risk of such a termination by the PBGC of any Plan.

Section 6.09 [ Reserved ].

Section 6.10 Change of Business . The Borrower shall not, nor shall it permit any of its Subsidiaries to, make any material change in the character of its business as an independent oil and gas exploration and production company, nor will the Borrower or any Subsidiary operate or carry on business in any jurisdiction other than the United States; provided that this Section 6.10 shall not prohibit the Borrower and its Subsidiaries from engaging in other energy-related activities, including owning and operating gathering systems, pipelines, LNG facilities, and drilling rigs.

Section 6.11 Organizational Documents, Name Change . The Borrower shall not, nor shall it permit any of its Subsidiaries to, amend, supplement, modify or restate its articles or certificate of incorporation, bylaws, limited liability company agreement, or other equivalent organizational documents or amend its name or change its jurisdiction of incorporation, organization or formation, in any case, without prior written notice to, and prior consent of, the Administrative Agent. Notwithstanding the foregoing, the Borrower may amend, supplement, modify or restate its articles of incorporation and bylaws in connection with the Offering provided that (a) the Borrower shall deliver a certified, true and complete copy of such amended, supplemented, modified or restated articles of incorporation and bylaws to the Administrative Agent immediately upon the completion of the Offering, (b) such amendment, supplement, modification or restatement could not reasonably be expected to be materially adverse to any Lender Party, and (c) the Borrower shall have, at its expense, executed and delivered to the Administrative Agent all such documents, agreements and instruments to perfect, protect or preserve any Liens created pursuant to any of the Security Instruments, or to make any recordings, to file any notices or obtain any consents, all as may be necessary or appropriate in connection therewith or to enable the Administrative Agent to exercise and enforce its rights and remedies with respect to any Collateral.

Section 6.12 Use of Proceeds; Letters of Credit . The Borrower will not permit the proceeds of any Advance or Letters of Credit to be used for any purpose other than those permitted by Section 5.09. The Borrower will not engage in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U). Neither the Borrower nor any Person acting on behalf of the Borrower has taken or shall take, nor permit any of the Borrower’s Subsidiaries to take any action which might cause any of the Loan Documents to violate Regulation T, U or X or any other regulation of the Board of

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Governors of the Federal Reserve System or to violate Section 7 of the Exchange Act or any rule or regulation thereunder, in each case as now in effect or as the same may hereinafter be in effect, including the use of the proceeds of any Advance or Letters of Credit to purchase or carry any margin stock in violation of Regulation T, U or X.

Section 6.13 Gas Imbalances, Take-or-Pay or Other Prepayments . The Borrower shall not, nor shall it permit any of its Subsidiaries to, allow gas imbalances, take-or-pay or other prepayments with respect to the Oil and Gas Properties of the Borrower or any Subsidiary which would require the Borrower or any Subsidiary to deliver their respective Hydrocarbons produced on a monthly basis from such Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor other than imbalances which (a) occur in the ordinary course of business and (b) do not exceed 3% of the value of the Proven Reserves of the Borrower and its Subsidiaries

Section 6.14 Limitation on Speculative Hedging . The Borrower shall not, nor shall it permit any of its Subsidiaries to, (a) purchase, assume, or hold a speculative position in any commodities market or futures market or enter into any Hedge Contract for speculative purposes, as determined at the time such Hedge Contract is entered into, or (b) be party to or otherwise enter into any Hydrocarbon Hedge Agreement which (i) is entered into for reasons other than as a part of its normal business operations as a risk management strategy and/or hedge against changes resulting from market conditions related to the Borrower’s operations, (ii) covers notional volumes in excess of 80% of the anticipated production volumes attributable to Proven Reserves of the Borrower and its Subsidiaries which are categorized as “proved, developed and producing” during the period such hedge arrangement is in effect, (iii) is longer than three years in duration, or (iv) is with a counterparty or has a guarantor of the obligation of the counterparty who (unless such counterparty is a Lender Party or one of its Affiliates) at the time the contract is made does not have long-term obligations rated BBB or Baa2 or better, respectively, by either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc., or is an investment grade-rated industry participant.

Section 6.15 Additional Subsidiaries . The Borrower shall not, nor shall it permit any of its Subsidiaries to, create or acquire any additional Subsidiaries without (a) prior written notice to the Administrative Agent, (b) such new Subsidiary executing and delivering to the Administrative Agent, at its request, joinders or supplements to the Guaranty, the Pledge Agreement, and the Security Agreement, a Mortgage, and such other Security Instruments as the Administrative Agent or the Required Lenders may reasonably request, (c) the equity holder of such Subsidiary executing and delivering to the Administrative Agent a joinder or supplement to the Pledge Agreement pledging 100% of the Equity Interest owned by such equity holder of such Subsidiary along with the certificates pledged thereby, if any, and appropriately executed stock powers in blank, if applicable, and (d) the delivery by the Borrower and such Subsidiary of any certificates, opinions of counsel, title opinions or other documents as the Administrative Agent may reasonably request relating to such Subsidiary.

Section 6.16 Account Payables . The Borrower shall not, nor shall it permit any of its Subsidiaries to, allow the weighted average maturity of all its trade or other account payables to exceed 75 days.

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Section 6.17 Leverage Ratio . The Borrower shall not permit, as of the end of any fiscal quarter, the ratio of (a) all Funded Debt of the Borrower and its Subsidiaries as of such fiscal quarter end to (b) the consolidated EBITDAX of the Borrower and its Subsidiaries for the four-fiscal quarter period then ended, to be greater than 3.75 to 1.00.

Section 6.18 Working Capital Ratio . The Borrower shall not permit, as of the end of any fiscal quarter, the ratio of (a) its consolidated current assets to (b) its consolidated current liabilities, to be less than 1.00 to 1.00. For purposes of this calculation (i) “current assets” shall include, as of the date of calculation, the aggregate Availability but shall exclude, as of the date of calculation (A) any cash deposited with or at the request of a counterparty to any Hedge Contract and (B) any assets representing a valuation account arising from the application of SFAS 133 and 143, and (ii) “current liabilities” shall exclude, as of the date of calculation, (A) the current portion of long-term Debt existing under this Agreement and (B) any liabilities representing a valuation account arising from the application of SFAS 133 and 143. During the one-year period prior to the Maturity Date, the outstanding Advances shall nevertheless be considered long-term Debt for purposes of this Section 6.18.

Section 6.19 Property Value Ratio . Subject to the last sentence of this Section 6.19, at all times during an Additional Covenant Period, the Borrower shall not permit the ratio of (a) the Present Value as of the most recent determination thereof to (b) all Funded Debt of the Borrower and its Subsidiaries at such time, to be less than 1.75 to 1.00. This Section 6.19 shall apply during any Additional Covenant Period but shall not apply during any BB Period or Release Period.

ARTICLE VII

EVENTS OF DEFAULT; REMEDIES

Section 7.01 Events of Default . The occurrence of any of the following events shall constitute an “Event of Default” under any Loan Document:

(a) Payment . The Borrower shall fail (i) to pay when due any principal, (ii) to pay within one (1) Business Day after the same becomes due, any Reimbursement Obligation (unless a deemed Borrowing is made pursuant to Section 2.07(d)), (iii) to pay within three (3) days after the same becomes due, any interest or fees due hereunder, under the Notes or any other Loan Document, or (iv) to pay within five (5) Business Days after the same becomes due, any reimbursements, indemnifications, or other amounts (other than those covered under clause (i), (ii) or (iii) above) payable hereunder, under the Notes, or under any other Loan Document;

(b) Representation and Warranties . Any representation or warranty made or deemed to be made (i) by any Obligor (or any officer thereof) in this Agreement or in any other Loan Document, or (ii) by any Obligor (or any officer thereof) in connection with this Agreement or any other Loan Document, shall prove to have been incorrect in any material respect when made or deemed to be made;

(c) Covenant Breaches . Any Obligor shall fail to (i) perform or observe any covenant contained in Section 5.02(a), Section 5.06(e), or Article VI or (ii) fail to perform or observe any other term or covenant set forth in this Agreement or in any other Loan Document which is not covered by clause (i) above or any other provision of this Section 7.01, if such failure shall remain unremedied for 30 days after the occurrence of such breach or failure;

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(d) Cross-Defaults . (i) Any Obligor shall fail to pay any principal of or premium or interest on its Debt which is outstanding in a principal amount of at least $25,000,000 individually or when aggregated with all such Debt of any Obligor so in default (but excluding Debt evidenced by the Notes) when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; (ii) any other event shall occur or condition shall exist under any agreement or instrument relating to Debt which is outstanding in a principal amount of at least $25,000,000 individually or when aggregated with all such Debt of any Obligor so in default, and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt; or (iii) any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof;

(e) Insolvency . The Borrower, any Guarantor or any of their respective Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower, any Guarantor or any of their respective Subsidiaries, seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or for any substantial part of its Property and, in the case of any such proceeding instituted against the Borrower, any such Subsidiary or any such Guarantor either such proceeding shall remain undismissed for a period of 60 days or any of the actions sought in such proceeding shall occur; or the Borrower, any of its Subsidiaries, or any Guarantor shall take any company action to authorize any of the actions set forth above in this paragraph (e);

(f) Judgments . Any judgment or order for the payment of money in excess of $25,000,000 shall be rendered against the Borrower, any Guarantor or any of their respective Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect;

(g) Termination Events . Any Termination Event with respect to a Plan shall have occurred, and, 30 days after notice thereof shall have been given to the Borrower by the Administrative Agent, (i) such Termination Event shall not have been corrected and (ii) the then present value of such Plan’s vested benefits exceeds the then current value of assets accumulated in such Plan by more than the amount of $10,000,000 (or in the case of a Termination Event involving the withdrawal of a “substantial employer” (as defined in Section 4001(a)(2) of ERISA), the withdrawing employer’s proportionate share of such excess shall exceed such amount);

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(h) Plan Withdrawals . The Borrower or any member of the Controlled Group as employer under a Multiemployer Plan shall have made a complete or partial withdrawal from such Multiemployer Plan and the plan sponsor of such Multiemployer Plan shall have notified such withdrawing employer that such employer has incurred a withdrawal liability in an annual amount exceeding $10,000,000;

(i) Change in Control . The Borrower shall have discontinued its usual business or a Change in Control shall have occurred;

(j) Borrowing Base . Any failure to cure any Borrowing Base deficiency in accordance with Section 2.05;

(k) Loan Documents . Any provision of any Loan Document shall for any reason cease to be valid and binding on any Obligor party thereto or any Obligor shall so state in writing;

(l) Security Instruments . If during any period other than the Release Period, (i) as a result of action taken or omitted to be taken by any Obligor, the Administrative Agent shall fail to have an Acceptable Security Interest in any portion of the Collateral, (ii) other than as a result of action taken or omitted to be taken by any Obligor, the Administrative Agent shall fail to have an Acceptable Security Interest in any portion of the Collateral and such failure is not remedied within 5 days after notice thereof to the Borrower from the Administrative Agent, or (iii) any Obligor shall contest the validity or enforceability of any Security Instrument;

(m) Material Adverse Change . An event resulting in a Material Adverse Change shall have occurred.

Section 7.02 Optional Acceleration of Maturity . If any Event of Default (other than an Event of Default pursuant to paragraph (e) of Section 7.01) shall have occurred and be continuing, then, and in any such event,

(a) the Administrative Agent (i) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare the obligation of each Lender and the Issuing Lender to make extensions of credit hereunder, including making Advances and issuing, increasing or extending Letters of Credit, to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, declare all principal, interest, fees, reimbursements, indemnifications, and all other amounts payable under this Agreement, the Notes, and the other Loan Documents to be forthwith due and payable, whereupon all such amounts shall become and be forthwith due and payable in full, without notice of intent to demand, demand, presentment for payment, notice of nonpayment, protest, notice of protest, grace, notice of dishonor, notice of intent to accelerate, notice of acceleration, and all other notices, all of which are hereby expressly waived by the Borrower;

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(b) the Borrower shall, on demand of the Administrative Agent at the request or with the consent of the Required Lenders, deposit with the Administrative Agent into the Cash Collateral Account an amount of cash equal to the Letter of Credit Exposure as security for the Obligations; and

(c) the Administrative Agent shall at the request of, or may with the consent of, the Required Lenders proceed to enforce its rights and remedies under the Security Instruments, the Guaranties, and any other Loan Document for the ratable benefit of itself, the Issuing Lender and the Lenders by appropriate proceedings.

Section 7.03 Automatic Acceleration of Maturity . If any Event of Default pursuant to paragraph (e) of Section 7.01 shall occur,

(a) (i) the obligation of each Lender and the Issuing Lender to make extensions of credit hereunder, including making Advances and issuing, increasing or extending Letters of Credit, shall terminate, and (ii) all principal, interest, fees, reimbursements, indemnifications, and all other amounts payable under this Agreement, the Notes, and the other Loan Documents shall become and be forthwith due and payable in full, without notice of intent to demand, demand, presentment for payment, notice of nonpayment, protest, notice of protest, grace, notice of dishonor, notice of intent to accelerate, notice of acceleration, and all other notices, all of which are hereby expressly waived by the Borrower;

(b) the Borrower shall deposit with the Administrative Agent into the Cash Collateral Account an amount of cash equal to the outstanding Letter of Credit Exposure as security for the Obligations; and

Section 7.04 Right of Set-off . If an Event of Default shall have occurred and be continuing, each Lender Party and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender Party or any such Affiliate to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement or any other Loan Document to such Lender Party, irrespective of whether or not such Lender Party shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower may be contingent or unmatured or are owed to a branch or office of such Lender Party different from the branch or office holding such deposit or obligated on such indebtedness. The rights of each Lender Party and its Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender Party or its Affiliates may have. Each Lender Party agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.

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Section 7.05 Non-exclusivity of Remedies . No remedy conferred upon any Lender Party is intended to be exclusive of any other remedy, and each remedy shall be cumulative of all other remedies existing by contract, at law, in equity, by statute or otherwise.

Section 7.06 Application of Proceeds . From and during the continuance of any Event of Default, any monies or Property actually received by the Administrative Agent pursuant to this Agreement or any other Loan Document, the exercise of any rights or remedies under any Security Instrument or any other agreement with the Borrower, any Guarantor or any of their respective Subsidiaries which secures any of the Obligations, shall be applied in the following order:

(a) First, to the payment of all amounts, including costs and expenses incurred in connection with the collection of such proceeds and the payment of any part of the Obligations, due to the Administrative Agent under any of the expense reimbursement or indemnity provisions of this Agreement or any other Loan Document, any Security Instrument or other collateral documents, and any applicable law;

(b) Second, ratably, according to the then unpaid amounts thereof, without preference or priority of any kind among them, to the payment of the Obligations then due and payable, including Obligations with respect to Letters of Credit, but not including any obligations of the Borrower or its Subsidiaries owing to any Swap Counterparty under any Hedge Contract;

(c) Third, ratably, according to the then unpaid amounts thereof, without preference or priority of any kind among them, to the payment of all obligations of the Borrower or its Subsidiaries owing to any Swap Counterparty under any Hedge Contract, if any, then due and payable; and

(d) Fourth, the remainder, if any, to the Borrower or its Subsidiaries, or its respective successors or assigns, or such other Person as may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.

ARTICLE VIII

THE ADMINISTRATIVE AGENT AND THE ISSUING LENDER

Section 8.01 Appointment and Authority . Each of the Lenders and the Issuing Lender hereby irrevocably appoints Union Bank of California, N.A. to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents 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 or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article are solely for the benefit of the Administrative Agent, the Lenders and the Issuing Lender, and neither the Borrower nor any Guarantor shall have rights as a third party beneficiary of any of such provisions.

Section 8.02 Rights as a Lender . The Person serving as the Administrative 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 the Administrative Agent and the term “Lender”

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or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.

Section 8.03 Exculpatory Provisions . Neither the Administrative Agent nor any of its Related Parties shall be liable for any action taken or omitted to be taken (INCLUDING THE ADMINISTRATIVE AGENT’S OWN NEGLIGENCE) by it or them under or in connection with this Agreement or the other Loan Documents, except for its or their own gross negligence or willful misconduct. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other 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 discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law; and

(c) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.

The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 9.01, Section 7.02 and Section 7.03) or (ii) in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Administrative Agent by the Borrower, a Lender or the Issuing Lender.

The Administrative Agent 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 thereunder 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 therein or the occurrence of any Default, (iv) the validity, enforceability,

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effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article III or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

Section 8.04 Administrative Agent’s Reliance, Etc . 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 (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated 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 have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of an Advance, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the Issuing Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender or the Issuing Lender unless the Administrative Agent shall have received notice to the contrary from such Lender or the Issuing Lender prior to the making of such Advance or the issuance of such Letter of Credit. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), 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.

Section 8.05 Delegation of Duties . The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Administrative 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 8.06 Lender Credit Decision . Each Lender and the Issuing Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender and the Issuing Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties 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 or any related agreement or any document furnished hereunder or thereunder.

Section 8.07 Indemnification . THE LENDERS SEVERALLY AGREE TO INDEMNIFY THE ADMINISTRATIVE AGENT AND THE ISSUING LENDER AND EACH OF THEIR RESPECTIVE RELATED PARTIES (TO THE EXTENT NOT REIMBURSED BY THE BORROWER), ACCORDING TO THEIR RESPECTIVE PRO RATA SHARES FROM

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AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THE ADMINISTRATIVE AGENT AND THE ISSUING LENDER IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY ACTION TAKEN OR OMITTED BY THE ADMINISTRATIVE AGENT OR THE ISSUING LENDER UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT ( INCLUDING THE ADMINISTRATIVE AGENT’S AND THE ISSUING LENDER’S OWN NEGLIGENCE ), AND INCLUDING ENVIRONMENTAL LIABILITIES, PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO PERSON SEEKING INDEMNIFICATION, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES (X) ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PERSON SEEKING INDEMNIFICATION. WITHOUT LIMITATION OF THE FOREGOING, EACH LENDER AGREES TO REIMBURSE THE ADMINISTRATIVE AGENT AND THE ISSUING LENDER PROMPTLY UPON DEMAND FOR ITS RATABLE SHARE OF ANY OUT-OF-POCKET EXPENSES (INCLUDING COUNSEL FEES) INCURRED BY THE ADMINISTRATIVE AGENT IN CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT, OR ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS, OR OTHERWISE) OF, OR LEGAL ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, TO THE EXTENT THAT THE ADMINISTRATIVE AGENT OR THE ISSUING LENDER IS NOT REIMBURSED FOR SUCH BY THE BORROWER.

Section 8.08 Successor Administrative Agent and Issuing Lender . The Administrative Agent and the Issuing Lender may at any time give notice of its resignation to the other Lender Parties and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor Administrative Agent and Issuing Lender. If no such successor shall have been so appointed and shall have accepted such appointment within 30 days after the retiring Administrative Agent or Issuing Lender gives notice of its resignation, then the retiring Administrative Agent or Issuing Lender, as applicable, may on behalf of the Lenders and Issuing Lenders, appoint a successor agent or issuing lender meeting the qualifications set forth above provided that if the retiring Administrative Agent or Issuing Lender shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (a) the retiring Administrative Agent or Issuing Lender, as applicable, shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that (i) in the case of any collateral security held by the Administrative Agent on behalf of the Lenders or the Issuing Lender under any of the Loan Documents, the retiring Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed and (ii) the retiring Issuing Lender shall remain the Issuing Lender with respect to any Letters of Credit outstanding on the effective date of its resignation and the provisions affecting the Issuing Lender with respect to such Letters of Credit shall inure to the benefit of the retiring Issuing Lender until the termination of all such

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Letters of Credit), and (b) all payments, communications and determinations provided to be made by, to or through the retiring Administrative Agent or Issuing Lender, as applicable, shall instead be made by or to each applicable Lender, until such time as the Required Lenders appoint a successor Administrative Agent or Issuing Lender as provided for above in this paragraph. Upon the acceptance of a successor’s appointment as Administrative Agent or Issuing Lender hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent or Issuing Lender, as applicable, and the retiring Administrative Agent or Issuing Lender, as applicable, shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this paragraph). The fees payable by the Borrower to a successor Administrative Agent or Issuing Lender, as applicable shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring Administrative Agent’s or Issuing Lender’s resignation hereunder and under the other Loan Documents, the provisions of this Article and Sections 9.03(a), (b), and (c), Section 8.07, and Section 2.07(f) shall continue in effect for the benefit of such retiring Administrative Agent and Issuing Lender, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent or Issuing Lender, as applicable, was acting as Administrative Agent or Issuing Lender.

Section 8.09 Collateral Matters .

(a) The Administrative Agent is authorized on behalf of the Lenders, without the necessity of any notice to or further consent from the Lenders, from time to time, to take any actions with respect to any Collateral or Security Instruments which may be necessary to perfect and maintain Acceptable Security Interests in and Liens upon the Collateral granted pursuant to the Security Instruments. The Administrative Agent is further authorized on behalf of the Lenders, without the necessity of any notice to or further consent from the Lenders, from time to time, to take any action (other than enforcement actions requiring the consent of, or request by, the Required Lenders as set forth in Section 7.02 or Section 7.03 above) in exigent circumstances as may be reasonably necessary to preserve any rights or privileges of the Lenders under the Loan Documents or applicable law.

(b) Each Lender irrevocably authorizes the Administrative Agent to release any Lien granted to or held by the Administrative Agent upon any Collateral: (i) upon termination of the Commitments, termination or expiration of all Letters of Credit, and payment in full of all Obligations payable under this Agreement and under any other Loan Document; (ii) constituting Property sold or to be sold or disposed of as part of or in connection with any disposition permitted under this Agreement or the other Loan Documents; (iii) constituting Property in which the Borrower or any Subsidiary owned no interest at the time the Lien was granted or at any time thereafter; (iv) constituting Property leased to the Borrower or any Subsidiary under a lease which has expired or has been terminated in a transaction permitted under this Agreement or is about to expire and which has not been, and is not intended by the Borrower or such Subsidiary to be, renewed or extended; (v) as required under Section 2.02(e); or (vi) if approved, authorized or ratified in writing by the applicable Required Lenders or all the Lenders, as the case may be, as required by Section 9.01. Upon the request of the Administrative Agent at any time, the Lenders will confirm in writing the Administrative Agent’s authority to release particular types or items of Collateral pursuant to this Section 8.09(b).

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Section 8.10 No Other Duties, etc . Anything herein to the contrary notwithstanding, none of the Sole Book Runner, Arranger, Syndication Agent, Co-Agent, and Documentation Agent listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent, a Lender or an Issuing Lender hereunder.

ARTICLE IX

MISCELLANEOUS

Section 9.01 Amendments, Etc . No amendment or waiver of any provision of this Agreement, the Notes, or any other Loan Document, nor consent to any departure by the Borrower or any Subsidiary therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders and the Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided , however, that:

(a) no amendment, waiver, or consent shall, unless in writing and signed by all the Lenders, do any of the following: (i) waive any of the conditions specified in Section 3.01, (ii) increase the Borrowing Base or the aggregate Commitments, other than pursuant to Section 2.04(b), (iii) reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder or under any other Loan Document, (iv) postpone any date fixed for any fees or other amounts (other than principal and interest thereon) payable hereunder or extend the Maturity Date or the Commitment Termination Date, (v) change the percentage of Lenders which shall be required for the Lenders or any of them to take any action hereunder or under any other Loan Document, (vi) amend Section 2.11 or this Section 9.01, (vii) amend the definition of “Required Lenders” or the definition of “Super-Majority Lenders” (viii) release any Guarantor from its obligations under any Guaranty, (ix) amend Section 6.04(a), or (x) release any Collateral securing the Obligations, except for releases of Collateral as permitted by this Agreement; and

(b) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent or the Issuing Lender in addition to the Lenders required above to take such action, affect the rights or duties of the Administrative Agent or the Issuing Lender, as the case may be, under this Agreement or any other Loan Document.

Section 9.02 Notices; Effectiveness; Electronic Communication .

(a) Notices Generally . Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in paragraph (b) below), 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 telecopier as follows: (i) if to the Borrower, to it at its address set forth in Schedule II, (ii) if to the Administrative Agent, to it at its address set forth in Schedule II, (iii) if to the Issuing Lender, to it at its address set forth in Schedule II; and (iv) if to a Lender, to it at

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its address (or telecopier number) set forth in its Administrative Questionnaire. Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient). Notices delivered through electronic communications to the extent provided in paragraph (b) below, shall be effective as provided in said paragraph (b).

(b) Electronic Communications . Notices and other communications to the Lenders and the Issuing Lender hereunder may be delivered or furnished by electronic communication (including e mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or the Issuing Lender pursuant to Article II if such Lender or the Issuing Lender, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication.

Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

(c) Change of Address, Etc . Any party hereto may change its address or telecopier number for notices and other communications hereunder by notice to the other parties hereto.

Section 9.03 Expenses; Indemnity; Damage Waiver .

(a) Costs and Expenses . The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates (including the reasonable fees, charges and disbursements of counsel for the Administrative Agent), in connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Lender in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out-of-pocket expenses incurred by any Lender Party (including the fees, charges and disbursements of any counsel for any Lender Party), in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with the Advances made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Advances or Letters of Credit.

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(b) Indemnification by the Borrower . THE BORROWER SHALL, AND DOES HEREBY INDEMNIFY, THE ADMINISTRATIVE AGENT (AND ANY SUB-AGENT THEREOF), EACH LENDER AND THE ISSUING 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 ANY INDEMNITEE OR ASSERTED AGAINST ANY INDEMNITEE BY ANY THIRD PARTY OR BY THE BORROWER OR ANY GUARANTOR ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF (I) THE EXECUTION OR DELIVERY OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY THE PARTIES HERETO OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER, THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, OR, IN THE CASE OF THE ADMINISTRATIVE AGENT (AND ANY SUB-AGENT THEREOF) AND ITS RELATED PARTIES ONLY, THE ADMINISTRATION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, (II) ANY LOAN OR LETTER OF CREDIT OR THE USE OR PROPOSED USE OF THE PROCEEDS THEREFROM (INCLUDING ANY REFUSAL BY THE ISSUING LENDER TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF THE DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH THE TERMS OF SUCH LETTER OF CREDIT), (III) ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES, OR ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS SUBSIDIARIES, OR (IV) ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY, WHETHER BROUGHT BY A THIRD PARTY OR BY THE BORROWER OR ANY GUARANTOR, AND REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO , IN ALL CASES, WHETHER OR NOT CAUSED BY OR ARISING, IN WHOLE OR IN PART, OUT OF THE COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE OF THE INDEMNITEE ; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES (X) 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 OR (Y) RESULT FROM A CLAIM BROUGHT BY THE BORROWER OR ANY GUARANTOR AGAINST AN INDEMNITEE FOR BREACH IN BAD FAITH OF SUCH INDEMNITEE’S OBLIGATIONS HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT, IF THE BORROWER OR SUCH GUARANTOR HAS OBTAINED A FINAL AND NONAPPEALABLE JUDGMENT IN ITS FAVOR ON SUCH CLAIM AS DETERMINED BY A COURT OF COMPETENT JURISDICTION.

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(c) Waiver of Consequential Damages, Etc . To the fullest extent permitted by applicable law, the Borrower shall not assert, and 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, the transactions contemplated hereby or thereby, any Advance or Letter of Credit or the use of the proceeds thereof. No Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.

(d) Payments . All amounts due under this Section shall be payable not later than ten Business Days after demand therefor.

(e) Survival . The agreements in this Section shall survive the resignation of the Administrative Agent and the Issuing Lender, the replacement of any Lender, the termination of the Commitments, the termination or expiration of all Letters of Credit, and the repayment, satisfaction or discharge of all of the other Obligations.

Section 9.04 No Waiver; Remedies . No failure on the part of any Lender, the Administrative Agent, or the Issuing Lender to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

Section 9.05 Lender Assignments and Participations .

(a) Assignments by Lenders . Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Advances at the time owing to it); provided that

(i) except in the case of an assignment of the entire remaining amount of the assigning Lender’s applicable Commitments and the Advances under such Commitment at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Commitment (which for this purpose includes Advances outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Advances 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 or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date) shall not be less than $5,000,000, unless the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consent (each such consent not to be unreasonably withheld or delayed);

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(ii) 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 with respect to the applicable Commitment assigned;

(iii) any assignment of a Commitment must be approved by the Administrative Agent and the Issuing Lender unless the Person that is the proposed assignee is itself a Lender with a Commitment (whether or not the proposed assignee would otherwise qualify as an Eligible Assignee); and

(iv) 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 and the Eligible Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

Subject to acceptance and recording thereof by the Administrative Agent pursuant to paragraph (b) of this Section, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement 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 Sections 2.12, 2.13, 2.14(b), 9.03(a), 9.03(b), and 9.03(c) with respect to facts and circumstances occurring prior to the effective date of such assignment. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph 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 paragraph (c) of this Section.

(b) Register . The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at one of its offices in Los Angeles, California or Dallas, Texas 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 Commitments of, and principal amounts of the Advances 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 Borrower and the Lender Parties 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 the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

(c) Participations . Any Lender may at any time, without the consent of, or notice to, any Borrower or the Administrative Agent, sell participations to any Person (other than a natural person or the Borrower or any Affiliate or Subsidiaries thereof) (each, a “ Participant ”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitments and/or the Advances owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower and the Lender Parties shall continue to deal solely and directly with such Lender Party in connection with such Lender Party’s rights and obligations under this Agreement.

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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 clauses (a) or (b) of Sections 9.01 that affects such Participant. Subject to paragraph (d) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.12, 2.13 and 2.14 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (a) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 7.04 as though it were a Lender, provided such Participant agrees to be subject to Section 2.11 as though it were a Lender.

(d) Limitations upon Participant Rights . A Participant shall not be entitled to receive any greater payment under Sections 2.13 and 2.14 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 Borrower’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 2.14 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.14(e) and Section 2.14(f) as though it were a Lender.

(e) Certain Pledges . 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; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto

Section 9.06 Survival of Representations, Etc . All representations and warranties contained in this Agreement or made in writing by or on behalf of the Borrower in connection herewith shall survive the execution and delivery of this Agreement and the Loan Documents, the making of the Advances and any investigation made by or on behalf of the Lenders, none of which investigations shall diminish any Lender’s right to rely on such representations and warranties. All obligations of the Borrower provided for in Sections 2.12, 2.13, 2.14(c), and 9.03 and all of the obligations of the Lenders in Section 8.07 shall survive any termination of this Agreement and repayment in full of the Obligations.

Section 9.07 Counterparts; Integration; Effectiveness . This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents, and any separate letter agreements with respect to fees payable to the Administrative Agent, constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 3.01, this Agreement shall become effective when it shall have been executed by the

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Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. 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 9.08 Successors and Assigns Generally . 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, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender Party and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of Section 9.05(a), (ii) by way of participation in accordance with the provisions of Section 9.05(c) or (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 9.05(e) (and any other attempted assignment or transfer by any party hereto shall be null and void). 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, Participants to the extent provided in Section 9.05(c) and, to the extent expressly contemplated hereby, the Related Parties of the Administrative Agent and each Lender) any legal or equitable right, remedy or claim under or by reason of this Agreement.

Section 9.09 Electronic Execution of Assignments . The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

Section 9.10 Treatment of Certain Information; Confidentiality. Each of the Administrative Agent, the Lenders and the Issuing Lender agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates’ respective partners, directors, officers, employees, agents, advisors and other representatives (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 purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any 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, 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 or derivative transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this

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Section or (y) becomes available to the Administrative Agent, any Lender, the Issuing Lender or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower.

For purposes of this Section, “ Information ” means all information received from the Borrower or any of its Subsidiaries relating to the Borrower or any of its Subsidiaries or any of their respective businesses. Notwithstanding the foregoing, the following will not constitute Information for purposes of this Agreement: (a) information that is or becomes generally available to the public other than as a result of a disclosure by any party hereto in violation of this Agreement, (b) information that is available to any Lender Party on a nonconfidential basis prior to being furnished by the Borrower or any of its Subsidiaries, (c) information that becomes available to any Lender Party on a nonconfidential basis from a source other than the Borrower or any of its Subsidiaries if such source was not, to such Lender Party’s knowledge, subject to any prohibition against transmitting the information to such Lender Party, or (d) information internally developed by any Lender Party without reliance on any Information. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

Section 9.11 Business Loans . The Borrower warrants and represents that the Loans evidenced by the Notes are and shall be for business, commercial, investment, or other similar purposes and not primarily for personal, family, household, or agricultural use, as such terms are used in Chapter One (“Chapter One”) of the Texas Credit Code. At all such times, if any, as Chapter One shall establish a Maximum Rate, the Maximum Rate shall be the “indicated rate ceiling” (as such term is defined in Chapter One) from time to time in effect.

Section 9.12 Usury Not Intended . It is the intent of the Borrower and each Lender in the execution and performance of this Agreement and the other Loan Documents to contract in strict compliance with applicable usury laws, including conflicts of law concepts, governing the Advances of each Lender including such applicable laws of the State of Texas, the United States from time to time in effect, and any other jurisdiction whose laws may be mandatorily applicable to such Lender notwithstanding the other provisions of this Agreement. In furtherance thereof, the Lenders and the Borrower stipulate and agree that none of the terms and provisions contained in this Agreement or the other Loan Documents shall ever be construed to create a contract to pay, as consideration for the use, forbearance or detention of money, interest at a rate in excess of the Maximum Rate and that for purposes of this Agreement and all other Loan Documents, “interest” shall include the aggregate of all charges which constitute interest under such laws that are contracted for, charged or received under this Agreement or any other Loan Document; and in the event that, notwithstanding the foregoing, under any circumstances the aggregate amounts taken, reserved, charged, received or paid on the Obligations, include amounts which by applicable law are deemed interest which would exceed the Maximum Rate, then such excess shall be deemed to be a mistake and each Lender receiving same shall credit the same on the principal Obligations owing to such Lender (or if all such Obligations shall have been paid in full, refund said excess to the Borrower). In the event that the maturity of the Obligations are accelerated by reason of any election of the holder thereof resulting from any Event of Default under this Agreement or otherwise, or in the event of any required or permitted prepayment, then

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such consideration that constitutes interest may never include more than the Maximum Rate, and excess interest, if any, provided for in this Agreement or otherwise shall be canceled automatically as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited on the applicable Obligations (or, if the applicable Obligations shall have been paid in full, refunded to the Borrower of such interest). In determining whether or not the interest paid or payable under any specific contingencies exceeds the Maximum Rate, the Borrower and the Lenders shall to the maximum extent permitted under applicable law amortize, prorate, allocate and spread in equal parts during the period of the full stated term of the Obligations all amounts considered to be interest under applicable law at any time contracted for, charged, received or reserved in connection with the Obligations. The provisions of this Section shall control over all other provisions of this Agreement or the other Loan Documents which may be in apparent conflict herewith.

Section 9.13 Payments Set Aside . To the extent that any payment by or on behalf of the Borrower is made to any Lender Party, or any Lender Party exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by any Lender Party in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any bankruptcy, insolvency, reorganization, moratorium, or similar law affecting creditors’ rights generally or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender and the Issuing Lender severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the applicable Overnight Rate from time to time in effect, in the applicable currency of such recovery or payment. The obligations of the Lenders and the Issuing Lender under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.

Section 9.14 Governing Law; Submission to Jurisdiction .

(a) Governing Law . This Agreement, the Notes and the other Loan Documents (unless otherwise expressly provided therein) shall be governed by, and construed and enforced in accordance with, the laws of the State of Texas. Without limiting the intent of the parties set forth above, (a) Chapter 346 of the Texas Finance Code, as amended (relating to revolving loans and revolving tri-party accounts (formerly Tex. Rev. Civ. Stat. Ann. Art. 5069, Ch. 15)), shall not apply to this Agreement, the Notes, or the transactions contemplated hereby and (b) to the extent that any Lender may be subject to Texas law limiting the amount of interest payable for its account, such Lender shall utilize the indicated (weekly) rate ceiling from time to time in effect. Each Letter of Credit shall be governed by either the Uniform Customs and Practice for Documentary Credits, International Chamber of Commerce Publication No. 500 (1993 version) or the International Standby Practices (ISP98), International Chamber of Commerce Publication No. 590 (and any subsequent revisions thereof approved by a Congress of the International Chamber of Commerce and adhered to by the Issuing Lender).

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(b) Submission to Jurisdiction . The Borrower irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any Federal or Texas state court sitting in Dallas County, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Texas State court or, to the fullest extent permitted by applicable law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or in any other Loan Document shall affect any right that Lender Party may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or any Guarantor or its properties in the courts of any jurisdiction.

(c) Waiver of Venue . The Borrower irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

Section 9.15 USA Patriot Act . Each Lender that is subject to the Act (as hereinafter defined) and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the 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 “Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Borrower in accordance with the Act.

Section 9.16 Restatement . This Agreement amends and restates the Existing Agreement in its entirety. The Borrower hereby agrees that (a) the Debt outstanding under the Existing Agreement and the Loan Documents (as defined in the Existing Agreement; together with the Existing Agreement, the “ Existing Credit Documents ”) and all accrued and unpaid interest thereon and (b) all accrued and unpaid fees under the Existing Credit Documents shall be deemed to be outstanding under and governed by this Agreement. The Borrower hereby acknowledges, warrants, represents and agrees that this Agreement is not intended to be, and shall not be deemed or construed to be, a novation or release of the Existing Credit Documents. Each Lender that is an Existing Lender hereby waives any requirements for notice of prepayment, minimum amounts of prepayments of the loans thereunder, ratable reductions of the commitments of Lenders under the Existing Credit Documents and ratable payments on account of the principal or interest of any loan under the Existing Credit Documents to the extent that any such prepayment, reductions or payments are required to ensure that, upon the effectiveness of this Agreement, the loans of the Lenders shall be outstanding on a ratable basis in accordance with their respective Pro Rata Share. Each Lender hereby authorizes Administrative Agent and Borrower to request Borrowings from Lenders, to make prepayment of the loans under the Existing Credit Documents and to reduce the commitments under the Existing Credit Documents

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among Lenders in order to ensure that, upon the effectiveness of this Agreement, the loans of Lenders shall be outstanding on a ratable basis in accordance with their respective Pro Rata Share.

Section 9.17 WAIVER OF JURY TRIAL . EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

Section 9.18 ORAL AGREEMENTS . THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS, AS DEFINED IN THIS AGREEMENT, REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

[Remainder of this page intentionally left blank. Signature page follows.]

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EXECUTED as of the date first above written.


BORROWER:

CONTINENTAL RESOURCES, INC.

By:		/s/ John Hart
		John Hart
		Vice President and Chief Financial Officer

ADMINISTRATIVE AGENT, ISSUING LENDER, AND LENDERS

UNION BANK OF CALIFORNIA, N.A., as Administrative Agent, Issuing Lender and a Lender

By:		/s/ Carl Stutzman
		Carl Stutzman, Senior Vice President

Signature page to Sixth Amended and Restated Credit Agreement

(Continental Resources, Inc.)


GUARANTY BANK, FSB

By:		/s/ Christopher S. Parade
Name:		Christopher S. Parade
Title:		Senior Vice President

Signature page to Sixth Amended and Restated Credit Agreement

(Continental Resources, Inc.)


FORTIS CAPITAL CORP.

By:		/s/ Kathleen de Lathauwer
Name:		Kathleen de Lathauwer
Title:		Senior Vice President

By:		/s/ John W. Benton
Name:		John W. Benton
Title:		President

Signature page to Sixth Amended and Restated Credit Agreement

(Continental Resources, Inc.)


THE ROYAL BANK OF SCOTLAND plc

By:		/s/ Scott L. Joyce
Name:		Scott L. Joyce
Title:		Vice President

Signature page to Sixth Amended and Restated Credit Agreement

(Continental Resources, Inc.)


U.S. BANK NATIONAL ASSOCIATION

By:		/s/ Justin M. Alexander
Name:		Justin M. Alexander
Title:		Vice President

Signature page to Sixth Amended and Restated Credit Agreement

(Continental Resources, Inc.)


BANK OF SCOTLAND, a Scottish Banking Corporation acting through its New York Branch

By:		/s/ Karen Weich
Name:		Karen Weich
Title:		Assistant Vice President

Signature page to Sixth Amended and Restated Credit Agreement

(Continental Resources, Inc.)


NATEXIS BANQUES POPULAIRES

By:		/s/ Donovan C. Broussard
Name:		Donovan C. Broussard
Title:		Vice President & Group Manager

By:		/s/ Louis P. Laville, III
Name:		Louis P. Laville, III
Title:		Vice President & Group Manager

Signature page to Sixth Amended and Restated Credit Agreement

(Continental Resources, Inc.)


STERLING BANK

By:		/s/ David W. Phillips
Name:		David W. Phillips
Title:		Senior Vice President

Signature page to Sixth Amended and Restated Credit Agreement

(Continental Resources, Inc.)


HIBERNIA NATIONAL BANK

By:		/s/ Corwin Dupree
Name:		Corwin Dupree
Title:		Vice-President

Signature page to Sixth Amended and Restated Credit Agreement

(Continental Resources, Inc.)


TEXAS CAPITAL BANK, N.A.

By:		/s/ John G. Murray
Name:		John G. Murray
Title:		Senior Vice President

Signature page to Sixth Amended and Restated Credit Agreement

(Continental Resources, Inc.)

SCHEDULE I

Applicable Margins

PRICING GRID


Utilization Level		Eurodollar Rate Advances		Reference Rate Advances		Letter of Credit Fee		Commitment Fee
Level I	Equal to or greater than 90%	1.75	%	0.00	%	1.75	%	0.375	%
Level II	Less than 90% but equal to or greater than 75%	1.50	%	0.00	%	1.50	%	0.300	%
Level III	Less than 75% but equal to or greater than 50%	1.25	%	0.00	%	1.25	%	0.250	%
Level IV	Less than 50%	1.00	%	0.00	%	1.00	%	0.200	%

SCHEDULE II

NOTICE INFORMATION AND COMMITMENTS

Each of the commitments to lend set forth herein is governed by the terms of the Credit Agreement which provides for, among other things, borrowing base limitations which may restrict the Borrower’s ability to request (and the Lenders’ obligation to provide) Credit Extensions to a maximum amount which is less than the commitments set forth in this Schedule II.

Administrative Agent/Issuing Lender:

Union Bank of California, N.A.

Lincoln Plaza

500 N. Akard Street, Suite 4200

Dallas, Texas 75201

Attention: Mr. Randall Osterberg

Facsimile: 214-922-4209

Borrower:

Continental Resources, Inc.

302 N. Independence

Enid, Oklahoma 73701

Attention: John Hart

Facsimile: 580-548-5253


Lenders:	Commitments
Union Bank of California, N.A.	$	55,000,000.00
Guaranty Bank, FSB	$	55,000,000.00
Fortis Capital Corp.	$	50,000,000.00
The Royal Bank of Scotland plc	$	50,000,000.00
U.S. Bank National Association	$	20,000,000.00
Bank of Scotland	$	20,000,000.00
Natexis Banques Populaires	$	20,000,000.00
Sterling Bank	$	15,000,000.00
Hibernia National Bank	$	10,000,000.00
Texas Capital Bank, N.A.	$	5,000,000.00
Total:	$	300,000,000.00

EXHIBIT 10.6

C ONTINENTAL R ESOURCES , I NC .

2000 S TOCK O PTION P LAN

EXHIBIT 10.6

ARTICLE I

Purpose

Section 1.01 Purpose . This Stock Option Plan (the “Plan”) is established by Continental Resources, Inc. (the “Company”) to create incentives which are designed to motivate its directors, officers and employees to exert maximum effort toward the success and growth of the Company and to enable the Company to attract and retain experienced individuals who by their position, ability and diligence are able to make important contributions to the Company’s success. Toward these objectives, the Plan provides for the granting of options to Participants on the terms and subject to the conditions set forth in the Plan.

Section 1.02 Establishment. The Plan is effective as of October 1, 2000 and will terminate on September 30, 2010; provided, however, that the plan shall continue in effect until all matters relating to exercise of options and the administration of the Plan have been settled.

Section 1.03 Shares Subject to the Plan . Subject to Articles IV, VII and IX of this Plan, shares of stock covered by options shall consist of 1,020,000 shares of the Company’s common stock, par value $.01 per share (“Common Stock”).

Section 1.04 Shareholder Approval. The Plan shall be approved by the holders of a majority of the outstanding shares of Common Stock, present, or represented, and entitled to vote at a meeting called for such purposes, which approval must occur within the period ending twelve months after the date the Plan is adopted by the Board. Pending such approval by the shareholders, options may be granted to Participants, but no options may be exercised or paid prior to receipt of shareholder approval. In the event shareholder approval is not obtained within such twelve-month period, all options shall be void.

ARTICLE II

Definitions

As used herein, the terms “Common Stock,” “Company,” “Participant” and “Plan” shall have the meanings set forth above. In addition, the following definitions shall be applicable:

“Affiliate” means as applied to any Persona, any other Person directly or indirectly controlling, controlled by or under common control with, such Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities, any contract or otherwise.

“ Affiliated Entity ” means any partnership or limited liability company, a majority of the partnership or other similar interest thereof which is owned or controlled, directly or indirectly, by the Company or one or more of its Subsidiaries or Affiliated Entities or a combination thereof. For purposes hereof, the Company, a Subsidiary or an Affiliated Entity shall be deemed to have a majority ownership interest in a partnership or limited liability company if the Company, such Subsidiary or Affiliated Entity shall be allocated a majority of partnership or limited liability company gains or losses or shall be or control a managing director or a general partner of such partnership or limited liability company.

“ Board ” means the Board of Directors of the Company.

“ Capital Stock ” means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) or the equity of such Person, including, without limitation, all common stock issued by such Person.

“ Change of Control ” means: (1) any “person” or “group,” within the meaning of Section 13(d) of 14(d)(2) of the Exchange Act, becomes the ultimate “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of

more than 35% of the total voting power of the Voting Stock of the Company on a fully diluted basis and such ownership represents a greater percentage of the total voting power of the Voting Stock of the Company, on a fully diluted basis, than is held by the Controlling Stockholders and their Affiliates on such date; (2) individuals who on October 1, 2000 constituted the Board of Directors, together with any new directors whose election by the Board of Directors or whose nomination for election by the Company’s stockholders was approved by a vote of at least a majority of the members of the Board of Directors then in office who either were members of the Board of Directors on October 1, 2000 or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the members of the Board of Directors then in office; (3) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the combined assets of the Company and its Subsidiaries, taken as a whole, to any Person other than a wholly owned Subsidiary or the Controlling Stockholders or any Affiliate thereof; or (4) the adoption of a plan of liquidation or dissolution of the Company.

“ Code ” means the Internal Revenue Code of 1986, as amended. Reference to any Section of the Code shall be deemed to include any amendments or successor provisions to such Section and any regulations under such Section.

“ Committee ” means the compensation committee of the Board, or such other committee designated by the Board, authorized to administer the Plan and shall consist of not less than two members of the Board; provided, that if no compensation committee or other committee has been so designated by the Board, the Board shall serve as the Committee.

“ Controlling Stockholders ” means Harold Hamm, individually and as trustee of the Revocable Inter Vivos Trust of Harold Hamm under a trust agreement dated April 23, 1984, as amended.

“ Date of Grant ” means the date on which the granting of an option is authorized by the Committee or such later date as may be specified by the Committee in such authorization.

“ Disability ” shall have the meaning set forth in Section 22(e)(3) of the Code.

“ Director ” means any person who is a member of the Board.

“ Eligible Employee ” means any employee of the Company, a Subsidiary or an Affiliated Entity.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Fair Market Value ” means (A) during such time as the Common Stock is listed on a national securities exchange or the NASDAQ/National Market System, the closing price of the Common Stock on such securities exchange or the NASDAQ/National Market System on the day for which such value is to be determined, or if no sale of the Common Stock shall have occurred on any such securities exchange or the NASDAQ/National Market System that day, on the next preceding day on which there was a sale of such Common Stock or (B) during any such time as the Common Stock is not listed upon a national securities exchange or the NASDAQ/National Market System, the mean between dealer “bid” and “ask” prices of the Common Stock in the over-the-counter market on the day for which such value is to be determined, as reported by the National Association of Securities Dealers, Inc. or (C) during any such time as the Common Stock cannot be valued pursuant to (A) or (B) above, the fair market value shall be as determined by the Board considering all relevant information including, by example and not by limitation, the services of an independent appraiser.

“ Incentive Stock Option ” means an Option within the meaning of Section 422 of the Code.

“ Nonqualified Stock Option ” means an Option which is not an Incentive Stock Option.

“ Option ” means, individually or collectively, any Option granted under the Plan to a Participant by the Committee pursuant to such terms, conditions, restrictions, and/or limitations, if any, as the Committee may establish by the Option Agreement or otherwise.

“ Option Agreement ” means any written instrument that establishes the terms, conditions, restrictions, and/or limitations applicable to an Option in addition to those established by this Plan and by the Committee’s exercise of its administrative powers.

“ Participant ” means a Director or an Eligible Employee to whom an Option has been granted by the Committee under the Plan.

“ Person ” means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, estate, unincorporated organization or governmental or any agency or political subdivision thereof or any other entity.

“ Plan ” means this Continental Resources, Inc. 2000 Stock Incentive Plan.

“ Subsidiary ” shall have the same meaning set forth in Section 424 of the Code.

“ Voting Stock ” means, with respect to any Person, Capital Stock of any class or kind having the power to vote for the election of directors, managers or other voting members of the governing body of such Person.

ARTICLE III

Administration

Section 3.01 Administration by Committee. The Committee shall administer the Plan. The Committee shall hold meetings at such times and places as it may determine. A majority of the Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present or acts reduced to or approved in writing by a majority of the members of the Committee shall be the valid acts of the Committee.

Section

3.02 Powers of the Committee .

Subject to the provisions of the Plan, the Committee shall have exclusive power to:

(a) Select the Participants to be granted Options.

(b) Determine the time or times when Options will be granted.

(c) Determine the number of shares of Common Stock subject to the Options, all the terms, conditions (including performance requirements), restrictions and/or limitations, if any, of an Option, including the time and conditions of exercise or vesting, and the terms of any Option Agreement, which may include the waiver or amendment of prior terms and conditions or acceleration or early vesting or payment of an Option under certain circumstances determined by the Committee.

(d) Determine whether Options will be granted singly or in combination.

(e) Accelerate the vesting, exercise or payment of an Option or the performance period of an Option when such action or actions would be in the best interest of the Company.

(f) Take any and all other action it deems necessary or advisable for the proper operation or administration of the Plan.

Section 3.03 Committee to Make Rules and Interpret Plan. The Committee in its sole discretion shall have the authority, subject to the provisions of the Plan, to establish, adopt, or revise such rules and regulations and to make all such determinations relating to the Plan as it may deem necessary or advisable for the administration of the Plan. The Committee’s interpretation of the Plan or any Options granted pursuant thereto and all decisions and determinations by the Committee with respect to the Plan shall be final, binding, and conclusive on all parties.

ARTICLE IV

Grant of Options

Section 4.01 Committee to Grant Options. The Committee may, from time to time, grant Options to one or more Participants, provided, however, that:

(a) Subject to Article VII, the aggregate number of shares of Common Stock made subject to the Options granted to any Participant in any fiscal year of the Company may not exceed 400,000 shares.

(b) Any shares of Common Stock reserved for issuance upon the exercise of outstanding Options which outstanding Options terminate by expiration, forfeiture, cancellation or otherwise without the issuance of shares of Common Stock shall be available again for grant under the Plan.

(c) Common Stock delivered by the Company upon exercise of any Option may be authorized and unissued Common Stock or Common Stock held in the treasury of the Company.

(d) The Committee shall, in its sole discretion, determine the manner in which fractional shares arising under this Plan shall be treated.

(e) Separate certificates representing Common Stock to be delivered to a Participant upon the exercise of any Option will be issued to such Participant.

ARTICLE V

Eligibility

Subject to the provisions of the Plan, the Committee shall, from time to time, select from its directors and Eligible Employees those to whom Options shall be granted and shall determine the type or types of Options to be granted and shall establish in the related Option Agreements the terms, conditions, restrictions and/or limitations, if any, applicable to the Options in addition to those set forth in the Plan and the administrative rules and regulations issued by the Committee.

ARTICLE VI

Stock Options

Section 6.01 Grant of Options. The Committee may, from time to time, subject to the provisions of the Plan and such other terms and conditions as it may determine, grant Options to directors and Eligible Employees. These Options may be Incentive Stock Options or Nonqualified Stock Options, or a combination of both. Each grant of an Option shall be evidenced by an Option Agreement executed by the Company and the Participant, and shall contain such terms and conditions and be in such form as the Committee may from time to time approve subject to the requirements of Section 6.02.

Section

6.02 Conditions of Options. Each Option so granted shall be subject to the following conditions:

(a) Exercise Price. As limited by Section 6.02(e) below, each Option shall state the exercise price which shall be set by the Committee at the Date of Grant; provided, however, no Nonqualified Stock Option shall be granted at an exercise price which is less than 50% of the Fair Market Value of the Common Stock on the Date of Grant.

(b) Form of Payment. The exercise price of an Option may be paid (i) in cash or by check, bank draft or money order payable to the order of the Company; (ii) by delivering shares of Common Stock or other equity securities of the Company having a Fair Market Value on the date of payment equal to the amount of the exercise price, but only to the extent such exercise of an Option would not result in an accounting charge with respect to the

shares used to pay the exercise price unless otherwise determined by the Committee; or (iii) a combination of the foregoing. In addition to the foregoing, subject to the discretion of the Committee, any Option granted under the Plan may be exercised by a broker-dealer acting on behalf of a Participant if (A) the broker-dealer has received from the Participant or the Company a notice evidencing the exercise of such Option and instructions signed by the Participant requesting the Company to deliver the shares of Common Stock subject to such Option to the broker-dealer on behalf of the Participant and specifying the account into which such shares should be deposited, (B) adequate provision has been made with respect to the payment of any withholding taxes due upon such exercise or, in the case of an Incentive Stock Option, upon the premature disposition of such shares and (C) the broker-dealer and the Participant have otherwise complied with Section 220.3(e)(4) of Regulation T, 12 CFR, Part 220 and any successor rules and regulations applicable to such exercise.

(c) Exercise of Options. Options granted under the Plan shall be exercisable, in whole or in such installments and at such times, and shall expire at such time, as shall be provided by the Committee in the Option Agreement. Exercise of an Option shall be by written notice stating the election to exercise in the form and manner determined by the Committee. Every share of Common Stock acquired through the exercise of an Option shall be deemed to be fully paid at the time of exercise and payment of the exercise price.

(d) Other Terms and Conditions. Among other conditions that may be imposed by the Committee, if deemed appropriate, are those relating to (i) the period or periods and the conditions of exercisability of any Option; (ii) the minimum periods during which Participants must be employed by the Company, its Subsidiaries, or an Affiliated Entity or must hold Options before they may be exercised; (iii) the minimum periods during which shares acquired upon the exercise of Options must be held before sale or transfer shall be permitted; (iv) conditions under which Options or shares may be subject to forfeiture; (v) the frequency of exercise or the minimum or maximum number of shares that may be acquired at any one time and (vi) the achievement by the Company of specified performance criteria.

(e) Special Restrictions Relating to Incentive Stock Options. Options issued in the form of Incentive Stock Options shall not be granted to individuals who are not Eligible Employees of the Company or a Subsidiary and shall, in addition to being subject to all applicable terms, conditions, restrictions and/or limitations established by the Committee, comply with the requirements of Section 422 of the Code (or any successor Section thereto), including, without limitation, the requirement that the exercise price of an Incentive Stock Option not be less than 100% of the Fair Market Value of the Common Stock on the Date of Grant, the requirement that each Incentive Stock Option, unless sooner exercised, terminated or cancelled, expire no later than 10 years from its Date of Grant, and the requirement that the aggregate Fair Market Value (determined on the Date of Grant) of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year (under this Plan or any other plan of the Company, its parent or any Subsidiary) not exceed $100,000. Incentive Stock Options which are in excess of the applicable $100,000 limitation will be automatically recharacterized as Nonqualified Stock Options as provided under Section 6.03 of this Plan. No Incentive Stock Options shall be granted to any Eligible Employee if, immediately before the grant of an Incentive Stock Option, such Eligible Employee owns more than 10% of the total combined voting power of all classes of stock of the Company or its Subsidiaries (as determined in accordance with the stock attribution rules contained in Sections 422 and 424(d) of the Code). Provided, the preceding sentence shall not apply if, at the time the Incentive Stock Option is granted, the exercise price is at least 110% of the Fair Market Value of the Common Stock subject to the Incentive Stock Option, and such Incentive Stock Option by its terms is exercisable no more than five years from the date such Incentive Stock Option is granted.

(f) Shareholder Rights. No Participant shall have a right as a shareholder with respect to any share of Common Stock subject to an Option prior to purchase of such shares of Common Stock by exercise of the Option.

Section 6.03 Options Not Qualifying as Incentive Stock Options. With respect to all or any portion of any Option granted under this Plan not qualifying as an “incentive stock option” under Section 422 of the Code, such Option shall be considered as a Nonqualified Stock Option granted under this Plan for all purposes. Further, this Plan and any Incentive Stock Options granted hereunder shall be deemed to have incorporated by reference all the provisions and requirements of Section 422 of the Code (and the Treasury Regulations issued thereunder) which are required to provide that all Incentive Stock Options granted hereunder shall be “incentive stock options” described in Section 422 of the Code. Further, in the event that the Committee grants Incentive Stock Options under this Plan

to a Participant, and, in the event that the applicable limitation contained in Section 6.02(e) herein is exceeded, then, such Incentive Stock Options in excess of such limitation shall be treated as Nonqualified Stock Options under this Plan subject to the terms and provisions of the applicable Award Agreement, except to the extent modified to reflect recharacterization of the Incentive Stock Options as Nonqualified Stock Options.

ARTICLE VII

Stock Adjustments

In the event that the shares of Common Stock, as presently constituted, shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation (whether by reason of merger, consolidation, recapitalization, reclassification, stock split, combination of shares or otherwise), or if the number of such shares of Common Stock shall be increased through the payment of a stock dividend, or a dividend on the shares of Common Stock or rights or warrants to purchase securities of the Company shall be made, then there shall be substituted for or added to each share available under and subject to the Plan as provided in Section 1.03 hereof, and each share theretofore appropriated or thereafter subject or which may become subject to Options or Restricted Stock Options under the Plan, the number and kind of shares of stock or other securities into which each outstanding share of Common Stock shall be so changed or for which each such share shall be exchanged or to which each such share shall be entitled, as the case may be, on a fair and equivalent basis in accordance with the applicable provisions of Section 424 of the Code; provided, however, with respect to Options, in no such event will such adjustment result in a modification of any Option as defined in Section 424(h) of the Code. In the event there shall be any other change in the number or kind of the outstanding shares of Common Stock, or any stock or other securities into which the Common Stock shall have been changed or for which it shall have been exchanged, then if the Committee shall, in its sole discretion, determine that such change equitably requires an adjustment in the shares available under and subject to the Plan, or in any Option theretofore granted or which may be granted under the Plan, such adjustments shall be made in accordance with such determination, except that no adjustment of the number of shares of Common Stock available under the Plan or to which any Option relates that would otherwise be required shall be made unless and until such adjustment either by itself or with other adjustments not previously made would require an increase or decrease of at least 1% in the number of shares of Common Stock available under the Plan or to which any Option relates immediately prior to the making of such adjustment (the “Minimum Adjustment”). Any adjustment representing a change of less than such minimum amount shall be carried forward and made as soon as such adjustment together with other adjustments required by this Article VII and not previously made would result in a Minimum Adjustment. Notwithstanding the foregoing, any adjustment required by this Article VII which otherwise would not result in a Minimum Adjustment shall be made with respect to shares of Common Stock relating to any Option immediately prior to exercise, payment or settlement of such Option.

No fractional shares of Common Stock or units of other securities shall be issued pursuant to any such adjustment, and any fractions resulting from any such adjustment shall be eliminated in each case by rounding downward to the nearest whole share.

ARTICLE VIII

General

Section 8.01 Amendment or Termination of Plan. The Board may suspend or terminate the Plan at any time. In addition, the Board may, from time to time, amend the Plan in any manner, but may not without shareholder approval adopt any amendment which would increase the aggregate number of shares of Common Stock available under the Plan (except by operation of Article VII), provided, that any amendment to the Plan shall require approval of the shareholders if, in the opinion of counsel to the Company, such approval is required by any Federal or state law or any regulations or rules promulgated thereunder.

Section 8.02 Dividends and Dividend Equivalents. The Committee may choose, at the time of the grant of any Option or any time thereafter up to the time of payment of such Option, to include as part of such Award an entitlement to receive dividends or dividend equivalents subject to such terms, conditions, restrictions, and/or

limitations, if any, as the Committee may establish. Dividends and dividend equivalents granted hereunder shall be paid in such form and manner (i.e., lump sum or installments), and at such time as the Committee shall determine. All dividends or dividend equivalents which are not paid currently may, at the Committee’s discretion, accrue interest or be reinvested into additional shares of Common Stock.

Section 8.03 Acceleration of Otherwise Unexercisable Options on Death, Disability or Other Special Circumstances. The Committee, in its sole discretion, may permit (i) a Participant who terminates employment due to a Disability, (ii) the personal representative of a deceased Participant, or (iii) any other Participant who terminates employment upon the occurrence of special circumstances (as determined by the Committee) to purchase all or any part of the shares subject to any unvested Option on the date of the Participant’s Disability, death, or as the Committee otherwise so determines. With respect to Options which have already vested at the date of such termination or the vesting of which is accelerated by the Committee in accordance with the foregoing provision, the Participant or the personal representative of a deceased Participant shall automatically have the right to exercise such vested Options within three months of such date of termination of employment or one year in the case of a Participant suffering a Disability or three years in the case of a deceased Participant.

Section 8.04 Limited Transferability. The Committee may, in its discretion, authorize all or a portion of the Nonqualified Stock Options to be granted under this Plan to be on terms which permit transfer by the Participant to (i) the ex-spouse of the Participant pursuant to the terms of a domestic relations order, (ii) the spouse, children or grandchildren of the Participant (“Immediate Family Members”), (iii) a trust or trusts for the exclusive benefit of such Immediate Family Members, or (iv) a partnership in which such Immediate Family Members are the only partners. In addition (x) there may be no consideration for any such transfer, (y) the Option Agreement pursuant to which such Nonqualified Stock Options are granted must be approved by the Committee, and must expressly provide for transferability in a manner consistent with this paragraph, and (z) subsequent transfers of transferred Nonqualified Stock Options shall be prohibited except as set forth below in this Section 8.04. Following transfer, any such Nonqualified Stock Options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of Section 8.03 hereof the term “Participant” shall be deemed to refer to the transferee. The events of termination of employment of Section 8.03 hereof shall continue to be applied with respect to the original Participant, following which the Options shall be exercisable by the transferee only to the extent, and for the periods specified in Section 8.03 hereof. No transfer pursuant to this paragraph 9.04 shall be effective to bind the Company unless the Company shall have been furnished with written notice of such transfer together with such other documents regarding the transfer as the Committee shall request. In addition, Options shall be transferable by will or the laws of descent and distribution; however, no such transfer of an Option by the Participant shall be effective to bind the Company unless the Company shall have been furnished with written notice of such transfer and an authenticated copy of the will and/or such other evidence as the Committee may deem necessary to establish the validity of the transfer and the acceptance by the transferee of the terms and conditions of such Option.

Section 8.05 Withholding Taxes . A Participant must pay the amount of taxes required by law upon the exercise or payment of an Option (i) in cash, (ii) by delivering to the Company shares of Common Stock having a Fair Market Value on the date of payment equal to the amount of such required withholding taxes, or (iii) a combination of the foregoing. However, any payment made by Participant pursuant to either of the foregoing clauses (ii) or (iii) shall not be permitted if it would result in an accounting charge with respect to such shares used to pay such taxes unless otherwise approved by the Committee.

Section 8.06 Amendments to Option Agreement. The Committee may at any time unilaterally amend the terms of any Option Agreement, whether or not presently exercisable, earned, paid or vested, to the extent it deems appropriate, including by example and not by limitation, the acceleration of vesting of Options; provided, however, that any such amendment which is adverse to the Participant shall require the Participant’s consent.

Section 8.07 Securities Laws. The Company shall have no obligation to issue or deliver certificates representing shares of Common Stock subject to Options if such issuance or delivery would violate any federal or state securities or other laws or prior to:

(a) the obtaining of any approval from, or satisfaction of any waiting period or other condition imposed by, any governmental agency which the Committee shall, in its sole discretion, determine to be necessary or advisable; and

(b) the completion of any registration or other qualification of such shares under any state or Federal law or ruling of any governmental body which the Committee shall, in its sole discretion, determine to be necessary or advisable.

Section 8.08 Right to Continued Employment. Participation in the Plan shall not give any Director any right to remain a Director of the Company or any Eligible Employee any right to remain in the employ of the Company, any Subsidiary or any Affiliated Entity. The adoption of this Plan shall not be deemed to give any Director, Eligible Employee or any other individual any right to be selected as a Participant or to be granted an Option.

Section 8.09 Reliance on Reports. Each member of the Committee and each member of the Board shall be fully justified in relying or acting in good faith upon any report made by the independent public accountants of the Company and its Subsidiaries and upon any other information furnished in connection with the Plan by any person or persons other than himself. In no event shall any person who is or shall have been a member of the Committee or of the Board be liable for any determination made or other action taken or any omission to act in reliance upon any such report or information or for any action taken, including the furnishing of information, or failure to act, if in good faith.

Section

8.10 Construction. Masculine pronouns and other words of masculine gender shall refer to both men and women.

Section 8.11 Governing Law. The Plan shall be governed by and construed in accordance with the laws of the State of Oklahoma except as superseded by applicable Federal law.

ARTICLE IX

Acceleration of Options upon Certain Events

Section 9.1 Merger, Disoolution, etc . If the Company shall, pursuant to action by the Board, at any time propose to dissolve or liquidate or merge into, consolidate with, or sell or otherwise transfer all or substantially all of its assets to another corporation (“Transaction”) and provision is not made pursuant to the terms of such Transaction for the assumption by the surviving, resulting or acquiring corporation of outstanding Options under the Plan, or for the substitution of new options therefor, the Committee shall cause written notice of the proposed Transaction to be given to each Participant no less than forty days prior to the anticipated effective date of the proposed Transaction, and his Option shall become 100% vested and, prior to a date specified in such notice, which shall be not more than ten days prior to the anticipated effective date of the proposed Transaction, each Participant shall have the right to exercise his Option to purchase any or all of the Common Stock then subject to such Option. Each Participant, by so notifying the Company in writing, may, in exercising his Option, condition such exercise upon, and provide that such exercise shall become effective at the time of, but immediately prior to, the consummation of the Transaction, in which event such Participant need not make payment for the Common Stock to be purchased upon exercise of such Option until five days after written notice by the Company to such Participant that the Transaction has been consummated. If the Transaction is consummated, each Option, to the extent not previously exercised prior to the date specified in the foregoing notice, shall terminate on the effective date of such consummation. If the Transaction is abandoned, (i) any Common Stock not purchased upon exercise of such Option shall continue to be available for purchase in accordance with the other provisions of the Plan and (ii) to the extent that any Option not exercised prior to such abandonment shall have vested solely by operation of this Article IX, such vesting shall be deemed annulled, and the vesting schedule set forth in the Participant’s Option Agreement shall be reinstituted, as of the date of such abandonment.

Section 9.2 Change of Control or Death of Harold Hamm . Promptly following the first to occur of (a) a Change of Control of the Company, or (b) the death of Harold Hamm if, immediately prior to the time of his death, the Controlling Stockholders were the “beneficial owners,” as defined in Rule 3d-3 under the Exchange Act, of more than 35% of the total voting power of the Voting Stock of the Company, on a fully diluted basis, the Committee shall cause written notice of such event to be given to each Participant and his or her outstanding Options shall become 100% vested and thereafter each Participant shall have the right to exercise all or any of his or her Options to purchase Capital Stock then subject to his or her Options.

EXHIBIT 10.7

FIRST AMENDMENT

CONTINENTAL RESOURCES, INC.

2000 STOCK OPTION PLAN

Pursuant to the authority granted to the undersigned upon the approval by the shareholders and the Board of Directors of Continental Resources, Inc., the Continental Resources, Inc. 2000 Stock Option Plan (the “Plan”), is hereby amended as follows:

Section 1.03 of the Plan is hereby amended by deleting the first sentence and substituting therefore the following:

“Subject to Articles IV, VII and IX of this Plan, shares of stock covered by options shall consist of 1,020,000 shares of the Company’s Non-Voting Common Stock, par value $.01 per share (“Common Stock”).”

Except as otherwise provided in this First Amendment, the Plan is hereby ratified and confirmed in all respects. The effective date of this First Amendment shall be December 8, 2004.

Executed this 8th day of December, 2004.

EXHIBIT 10.8

INCENTIVE STOCK OPTION AGREEMENT

UNDER 2000 CONTINENTAL RESOURCES, INC.

STOCK OPTION PLAN

THIS INCENTIVE STOCK OPTION AGREEMENT (the “Option Agreement”), made as of the grant date set forth on the cover page of this Option Agreement (the “Cover Page”) at Enid, Oklahoma by and between the participant named on the Cover Page (the “Participant”) and CONTINENTAL RESOURCES, INC. (the “Company”):

W I T N E S S E T H:

WHEREAS, the Participant is an employee of the Company or a Subsidiary of the Company and it is important to the Company that the Participant be encouraged to remain in the employ of the Company; and

WHEREAS, in recognition of such facts, the Company desires to provide to the Participant an opportunity to purchase non voting shares of the common stock of the Company, as hereinafter provided, pursuant to the “Continental Resources, Inc. 2000 Stock Option Plan” (the “Plan”), a copy of which has been provided to the Participant; and

WHEREAS, any capitalized terms used but not defined herein have the same meanings given them in the Plan.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for good and valuable consideration, the Participant and the Company hereby agree as follows:

Section 1. Grant of ISO Option. The Company hereby grants to the Participant an incentive stock option (the “ISO Option”) intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), to purchase all or any part of the number of shares of its non voting common stock, par value $.01 (the “Stock”) set forth on the Cover Page, under and subject to the terms and conditions of this Option Agreement and the Plan which is incorporated herein by reference and made a part hereof for all purposes. The purchase price for each share to be purchased hereunder shall be the option price set forth on the Cover Page (the “ISO Price”).

Section 2. Times of Exercise of ISO Option. After, and only after, the conditions of Section 9 hereof have been satisfied and the Company’s shareholders have approved the Plan in accordance with the provisions of Section 1.04 of the Plan, the Participant shall be eligible to exercise the ISO Option pursuant to the vesting schedule set forth on the Cover Page (the “Vesting Schedule”). If the Participant’s employment with the Company (or with any Subsidiary) remains full-time and continuous at all times prior to any of the exercise dates specified on the Cover Page (the “Exercise Dates”), then the Participant shall be entitled, subject to the applicable provisions of the Plan and this Option Agreement having been satisfied, to exercise on or after the applicable Exercise Date, on a cumulative basis, the number of ISO Options determined by multiplying the aggregate number of shares of Stock subject to the ISO Option set forth on the Cover Page by the designated percentage set forth on the Cover Page.

Section 3. Term of ISO Option. Subject to earlier termination as hereafter provided, the ISO Option shall expire at the close of business on the expiration date set forth on the Cover Page and may not be exercised after such expiration date; provided, however, in no event shall the term of the ISO Option be longer that ten years from the Date of Grant. At all times during the period commencing with the date the ISO Option is granted to the Participant and ending on the earlier of the expiration of the ISO Option or the date which is three months prior to the date the ISO Option is exercised by the Participant, the Participant must be an employee of either (i) the Company, (ii) a Subsidiary of the Company, or (iii) a corporation or a parent or a Subsidiary of such corporation issuing or assuming an ISO Option in a transaction to which Section 424(a) of the Code applies.

Section 4. Nontransferability of ISO Option. Except as otherwise herein provided, the ISO Option shall not be transferable otherwise than by will or the laws of descent and distribution, and the ISO Option may be exercised, during the lifetime of the Participant, only by the Participant. More particularly (but without limiting the generality of the foregoing), the ISO Option may not be assigned, transferred (except as provided above), pledged or hypothecated in any way, shall not be assignable by operation of law and shall not be subject to execution, attachment, or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the ISO Option contrary to the provisions hereof shall be null and void and without effect.

Section 5. Employment . So long as the Participant shall continue to be a full-time and continuous employee of the Company or a Subsidiary of the Company, the ISO Option shall not be affected by any change of duties or position. Nothing in the Plan or in this Option Agreement shall confer upon the Participant any right to continue in the employ of the Company or Subsidiary of the Company, or interfere in any way with the right of the Company or a Subsidiary of the Company to terminate the Participant’s employment at any time.

Section 6. Special Rules With Respect to ISO Options. With respect to the ISO Option granted hereunder, the following special rules shall apply:

(a) Annual Limitation on Exercise of ISO Options. Except as provided in Section 8 herein, in no event during any calendar year will the aggregate Fair Market Value, determined as of the time the ISO Option is granted, of the Stock for which the Participant may first have the right to exercise under the ISO Option and any other “incentive stock options” granted under all plans qualified under Section 422 of the Code which are sponsored by the Company or a Subsidiary of the Company exceed $100,000.

(b) Acceleration of Otherwise Unexercisable ISO Options on Death, Disability or Other Special Circumstances. The Committee, in its sole discretion, may permit (i) a Participant who terminates employment due to a Disability, (ii) the personal representative of a deceased Participant, or (iii) any other Participant who terminates employment upon the occurrence of special circumstances (as determined by the Committee) to purchase all or any all or any part of the shares subject to the ISO Option for which the applicable Exercise Date(s) has not yet occurred on the date of the Participant’s death, termination of his employment due to a Disability, or as the Committee otherwise so determines. With respect to shares subject to the ISO Option for which the applicable Exercise Dates have occurred or for which the Committee has permitted purchase in accordance with the foregoing provision, the Participants, or the representative of a deceased Participant, shall automatically have the right to purchase such shares within three months of such date of termination of employment, one year in the case of a Participant suffering a Disability or three years in the case of a deceased Participant.

Section 7. Method of Exercising ISO Option.

(a) Procedures for Exercise. The manner of exercising the ISO Option herein granted shall be by written notice to the Secretary of the Company at the time the ISO Option, or part thereof, is to be exercised, and in any event prior to the expiration of the ISO Option. Such notice shall state the election to exercise the ISO Option, the number of shares of Stock to be purchased upon exercise, the form of payment to be used, and shall be signed by the person so exercising the ISO Option.

(b) Form of Payment. Payment in full for shares of Stock purchased under this Option Agreement shall accompany the Participant’s notice of exercise, together with payment for any applicable withholding taxes. Payment shall be made (i) in cash or by check, draft or money order payable to the order of the Company; (ii) by delivering Stock or other equity securities of the Company having a Fair Market Value on the date of payment equal to the amount of the Option Price, but only to the extent such exercise of an ISO Option would not result in an accounting charge with respect to the shares used to pay the exercise price unless otherwise determined by the Committee; or (iii) a combination thereof. In addition to the foregoing procedure which may be available for the exercise of the ISO Option, after the date on which the Company’s stock is listed on a national securities exchange or the NASDAQ/National Market System or quoted on the over-the-counter market by the National Association of Securities Dealers, the Participant may deliver to the Company a notice of exercise which includes an irrevocable instruction to the Company to deliver the stock certificate representing the shares of Stock being purchased, issued in the name of the Participant, to a broker approved by the Company and authorized to trade in the common stock of the Company. Upon receipt of such notice, the Company shall acknowledge receipt of the executed notice of exercise and forward this notice to the broker. Upon receipt of the copy of the notice which has been acknowledged by the Company, and without waiting for issuance of the actual stock certificate with respect to the exercise of the ISO Option, the broker may sell the Stock or any portion thereof. The broker shall deliver directly to the Company that portion of the sales proceeds sufficient to cover the ISO Price and withholding taxes, if any. For all purposes of effecting the exercise of the ISO Option, the date on which the Participant gives the notice of exercise to the Company, together with payment for the shares of Stock being purchased and any applicable withholding taxes, shall be the “date of exercise.” If a notice of exercise and payment are delivered at different times, the date of exercise shall be the date the Company first has in its possession both the notice and full payment as provided herein.

(c) Further Information. In the event the ISO Option is exercised, pursuant to the foregoing provisions of this Section 7, by any person other that the Participant due to the death of the Participant, such notice shall also be accompanied by appropriate proof of the right of such person to exercise the ISO Option. The notice so required shall be given by personal

delivery to the Secretary of the Company or by registered or certified mail, addressed to the Company at 302 North Independence, 3 ^rd Floor, Post Office Box 1032, Enid, Oklahoma 73702, and it shall be deemed to have been given when it is so personally delivered or when it is deposited in the United States mail in an envelope addressed to the Company, as aforesaid, properly stamped for delivery as a registered or certified letter.

Section 8. Acceleration of ISO Option Upon Corporate Event. If the Company shall, pursuant to action by its Board, at any time propose to dissolve or liquidate or merge into, consolidate with, or sell or otherwise transfer all or substantially all of its assets to another corporation and provision is not made pursuant to the terms of such transaction for the assumption by the surviving, resulting or acquiring corporation of outstanding ISO Options under this Option Agreement, or for the substitution of new options therefore, the Committee shall cause written notice of the proposed transaction to be given to the Participant not less that forty days prior to the anticipated effective date of the proposed transaction, and the ISO Option shall become 100% vested and, prior to a date specified in such notice, which shall be not more than ten days prior to the anticipated effective date of the proposed transaction, the Participant shall have the right to exercise the ISO Option to purchase any or all of the Stock then subject to the ISO Option. The Participant, by so notifying the Company in writing, may, in exercising the ISO Option, condition such exercise upon, and provide that such exercise shall become effective at the time of, but immediately prior to, the consummation of the transaction, in which event the Participant need not make payment for the Stock to be purchased upon exercise of the ISO Option until five days after written notice by the Company to the Participant that the transaction has been consummated. If the transaction is consummated, the ISO Option, to the extent not previously exercised prior to the date specified in the foregoing notice, shall terminate on the effective date of such consummation. If the transaction is abandoned, (i) any Stock not purchased upon exercise of the ISO Option shall continue to be available for purchase in accordance with the other provisions of the Plan and this Option Agreement and (ii) to the extent that any portion of the ISO Option not exercised prior to such abandonment shall have vested solely by operation of this Section 8, such vesting shall be deemed annulled, and the Vesting Schedule set forth on the Cover Page shall be reinstituted, as of the date of such abandonment.

Section 9. Change of Control; Death of Harold Hamm. Promptly following the first to occur of (a) a Change of Control of the Company, or (b) the death of Harold Hamm if, immediately prior to the time of his death, the Controlling Stockholders were the “beneficial owners,” as defined in Rule 3d-3 under the Exchange Act, or more than 35% of the total voting power of the Voting Stock of the Company, on a fully diluted basis, the Committee shall cause written notice of such event to be given to each Participant and his or her outstanding Options shall become 100% vested and thereafter each Participant shall have the right to exercise all or any of his or her Options to purchase Capital Stock then subject to his or her Options.

Section 10. Securities Law Restrictions. The ISO Option shall be exercised and Stock issued only upon compliance with the Securities Act of 1933, as amended (the “Act”), and any other applicable securities law, or pursuant to an exemption therefrom. If deemed necessary by the Company to comply with the Act or any applicable laws or regulations relating to the sale of securities, the Participant, at the time of exercise and as a condition imposed by the Company, shall represent, warrant and agree that the shares of Stock subject to the ISO Option are being purchased for investment and not with any present intention to resell the same and without a view to distribution, and the Participant shall, upon the request of the Company, execute and deliver to the Company an agreement to such effect. The Participant acknowledges that any stock certificate representing Stock purchased under such circumstances will be issued with a restricted securities legend.

Section 11. Disqualifying Disposition of Stock . If the Participant shall make a disposition (within the meaning of Section 424(c) of the Code and the rules and regulations thereunder) of any shares of Stock covered by the ISO Option within one year after the date of exercise of the ISO Option or within two years after the Date of Grant of the ISO Option, then in either such event the Participant shall promptly notify the Company, by delivery of written notice to the Secretary of the Company, of (i) the date of such disposition, (ii) the number of shares of Stock covered by the ISO Option which were disposed of and (iii) the price at which such shares of Stock were disposed of or the amount of any other consideration received on such disposition. The Company may make such provision as it may deem appropriate for the withholding of any required federal, state or local taxes that it determines it may be obligated to withhold or pay in connection with the exercise of the ISO Option or the disposition of shares of Stock acquired upon exercise of the ISO Option.

Section 12. Right of Company to Repurchase Stock .

(a) Right to Repurchase. In the event that the Participant exercises the ISO Option, any shares of Stock which are issued to the Participant will be subject to the right of the Company to repurchase (the “Repurchase Right”) the Stock at its Fair Market Value as determined by the Company in accordance with the terms of this Option Agreement upon such Participant’s termination of employment

(whether voluntary or involuntary), and such right, unless sooner terminated as provided in Subsection (c) below, to repurchase shall continue for a period of two years following such termination of employment and upon such terms and conditions as the Company deems appropriate or will be subject to a Stock Purchase Agreement in the form which is applicable to the other shareholders of the Company.

(b) Right to Pledge or Transfer Stock . After the exercise of the ISO Option, the Participant shall not be permitted to (i) pledge all or any portion of the Stock as security for the debt or obligation of the Participant or (ii) transfer any Stock without prior written consent of the Company (collectively the “Pledge/Transfer Restriction”).

Section 13. Obligation of Company to Repurchase Stock .

(a) Obligation to Repurchase . In the event that the Participant exercises the ISO Option, and if the Company is not a “reporting company” under Section 12 of the Exchange Act, the Participant may elect to require the Company to purchase from the Participant any and all shares of Stock which are or have been issued to the Participant upon the exercise of Options pursuant to this Option Agreement and which are beneficially owned by the Participant as of the date of such election (the “Election Date”), upon the following terms:

(i) The purchase price to be paid by the Company for the Stock to be repurchased pursuant to this Section 13 (the “Affected Stock”) shall be the greater of (A) the Fair Market Value of the Affected Stock as of the Election Date, and (B) the “Estimated Value of the Affected Stock” as of the Election Date. As used herein, the term “Estimated Value of the Affected Stock” shall be determined with reference to the consolidated balance sheet of the Company as of the last day of the calendar quarter next preceding the Election Date (the “Balance Sheet”). The total assets reflected on the Balance Sheet shall be adjusted to include the present value (discounted at an annual rate of 10%) of the Company’s oil and gas reserves as of the date of the Balance Sheet, determined in accordance with Section 4-10 of Regulation S-X promulgated by the Securities and Exchange Commission and Statement of Financial Accounting Standard No. 69 entitled “Disclosures About Oil and Gas Producing Activities” promulgated by the Financial Accounting Standards Board. The book value net worth of the Company as of the Balance Sheet date, adjusted as provided above, shall be divided by the total number of shares of Stock outstanding as of the Balance Sheet date. The resulting per share value of the Common Stock shall be multiplied by 66 2/3% and the resulting sum shall them be multiplied by the number of shares of Affected Stock and the resulting sum shall be the Estimated Value of the Affected Stock.

(ii) The purchase price shall be determined by the Company within forty-five (45) days next following the Election Day. Within five (5) calendar days next following the determination of the purchase price, the Company shall provide to the Participant a written report reflecting the Company’s calculation of the purchase price in reasonable detail. The Participant shall have five (5) calendar days in which to deliver to the Company its objection to the Company’s determination of the purchase price. Any such objection shall be in writing and shall state the basis for such objection. If no such objection is timely made, the Company’s determination of the purchase price shall be filed.

In the event of a timely objection, and within ten (10) days following delivery of such objection to the Company, the determination of the purchase price shall be submitted to a panel consisting of three persons, one appointed by the Company, one appointed by the Participant, and the third selected by the other two. The Company and the Participant shall provide written notice of each other of the name of the person appointed to the panel. If either the Company or the Participant fail to timely appoint its member of the panel, the other party may do so. The determination of the purchase price by a majority of the members of the panel shall be final and binding on the parties.

(iii) The closing of the Company’s purchase of the Affected Stock shall occur at the offices of the Company on a business day which is not more than seven (7) calendar days following the final determination of the purchase price. At the closing, the Participant shall deliver the Affected Stock by appropriate assignment against payment of the purchase price.

Section 14. Restrictive Legend. Each certificate representing the Stock shall contain on its face, in addition to any other legend, the following legend in order to give notice of this restriction to any purchaser or transferee of Stock:

“THE SHARES OF COMMON STOCK OF CONTINENTAL RESOURCES, INC. (“COMPANY”) REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND THE RIGHT OF THE COMPANY TO REPURCHASE THE STOCK IN ACCORDANCE WITH THE TERMS OF THAT CERTAIN INCENTIVE STOCK OPTION AGREEMENT (“AGREEMENT”) DATED OCTOBER 1, 2000 WHICH RELATES TO THE CONTINENTAL RESOURCES, INC. 2000 STOCK OPTION PLAN. CERTAIN TRANSFERS OF THE COMPANY STOCK MAY BE INVALIDATED IF SUCH TRANSFERS ARE NOT MADE IN ACCORDANCE WITH THE TERMS OF THE AGREEMENT. ANY PURCHASER OR TRANSFEREE OF THE SHARES OF COMPANY COMMON STOCK REPRESENTED BY THIS CERTIFICATE SHOULD OBTAIN A COPY OF THE AGREEMENT AND INSURE THAT THE PROPOSED PURCHASE OR TRANSFER DOES NOT VIOLATE THE AGREEMENT.”

Section 15. Notices. All notices or other communications relating to the Plan and this Option Agreement as it relates to the Participant shall be in writing and shall be delivered personally or mailed (U.S. mail) by the Company to the Participant at the then current address as maintained by the Company or such other address as the Participant may advice the Company in writing.

IN WITNESS WHEREOF, the parties have executed this Incentive Stock Option Agreement as of the day and year first above written.


CONTINENTAL RESOURCES, INC., an Oklahoma Corporation

By		/s/ Harold G. Hamm
		Harold Hamm, President

EXHIBIT 10.9

CONTINENTAL RESOURCES, INC.

2005 LONG-TERM INCENTIVE PLAN

As Amended and Restated as of April 3, 2006

ARTICLE I

PURPOSE

SECTION 1.1 Purpose . This Continental Resources, Inc. 2005 Long-Term Incentive Plan (the “Plan”) is established by Continental Resources, Inc., an Oklahoma corporation (the “Company”) to create incentives which are designed to motivate Participants to put forth maximum effort toward the success and growth of the Company and to enable the Company to attract and retain experienced individuals who by their position, ability and diligence are able to make important contributions to the Company’s success. Toward these objectives, the Plan provides for the grant of Options, Restricted Stock Awards, Bonus Stock Awards, SARs, Performance Units and Performance Bonuses to Eligible Employees and the grant of Nonqualified Stock Options, Restricted Stock Awards, Bonus Stock Awards, SARs and Performance Units to Consultants and Eligible Directors, subject to the conditions set forth in the Plan and as such capitalized terms are defined below.

SECTION 1.2 Establishment . The Plan was originally effective as of October 3, 2005. This amendment and restatement of the Plan is effective April 3, 2006 (the “Restatement Effective Date”). The Plan is effective until October 2, 2015, unless earlier terminated pursuant to the provisions Section 11.1. Notwithstanding any termination of the Plan, the Plan shall continue in effect until all matters relating to the payment and administration of outstanding Awards have been settled.

This amendment and restatement of the Plan is subject to the approval by the holders of shares of the Company’s outstanding voting common stock representing a majority of the voting power of the outstanding shares of voting common stock, which approval must occur within the period ending twelve months after the Restatement Effective Date. Pending such approval by the shareholders, Awards under the Plan, as amended and restated, may be granted, but no such Awards may be exercised prior to receipt of shareholder approval. In the event shareholder approval is not obtained within a twelve-month period, all Awards granted under the Plan, on or after the Restatement Effective Date shall be void. Notwithstanding anything to the contrary herein, Awards granted under the Plan prior to the Restatement Effective Date shall be governed by the terms of the Plan as in effect on the Awards’ respective Dates of Grant.

SECTION 1.3 Shares Subject to the Plan . Subject to the limitations set forth in the Plan, Awards may be made under this Plan for a total of 500,000 shares of the Company’s non-voting common stock, par value $.01 per share (the “Common Stock”). A maximum of 500,000 shares of Common Stock of the total authorized under this Section 1.3 may be granted as Incentive Stock Options. The limitations of this Section 1.3 shall be subject to the adjustment provisions of Article X.

ARTICLE II

DEFINITIONS

SECTION 2.1 “Account” means the recordkeeping account established by the Company to which will be credited an Award of Performance Units to a Participant.

SECTION 2.2 “Affiliated Entity” means any corporation, partnership, limited liability company or other form of legal entity in which a majority of the partnership or other similar interest thereof is owned or controlled, directly or indirectly, by the Company or one or more of its Subsidiaries or Affiliated Entities or a combination thereof. For purposes hereof, the Company, a Subsidiary or an Affiliated Entity shall be deemed to have a majority ownership interest in a partnership or limited liability company if the Company, such Subsidiary or Affiliated Entity shall be allocated a majority of partnership or limited liability company gains or losses or shall be or control a managing director or a general partner of such partnership or limited liability company.

SECTION 2.3 “Award” means, individually or collectively, any Option, Restricted Stock Award, SAR, Performance Unit or Performance Bonus granted under the Plan to an Eligible Employee by the Committee or any Nonqualified Stock Option, Performance Unit, SAR or Restricted Stock Award granted under the Plan to a Consultant or an Eligible Director by the Board pursuant to such terms, conditions, restrictions, and/or limitations, if any, as the Committee may establish by the Award Agreement or otherwise.

SECTION 2.4 “Award Agreement” means any written instrument that establishes the terms, conditions, restrictions, and/or limitations applicable to an Award in addition to those established by this Plan and by the Committee’s exercise of its administrative powers.

SECTION 2.5 “Board” means the Board of Directors of the Company.

SECTION 2.6 “Bonus Stock Award” means an Award granted under Section 6.3.

SECTION 2.7 “Change of Control Event” means each of the following:

(i) Any transaction in which shares of voting securities of the Company representing more than 50% of the total combined voting power of all outstanding voting securities of the Company are issued by the Company, or sold or transferred by the shareholders of the Company as a result of which those persons and entities who beneficially owned voting securities of the Company representing more than 50% of the total combined voting power of all outstanding voting securities of the Company immediately prior to such transaction cease to beneficially own voting securities of the Company representing more than 50% of the total combined voting power of all outstanding voting securities of the Company immediately after such transaction;

(ii) The merger or consolidation of the Company with or into another entity as a result of which those persons and entities who beneficially owned voting securities of the Company representing more than 50% of the total combined voting power of all outstanding voting securities of the Company immediately prior to such merger or consolidation cease to

beneficially own voting securities of the Company representing more than 50% of the total combined voting power of all outstanding voting securities of the surviving corporation or resulting entity immediately after such merger of consolidation; or

(iii) The sale of all or substantially all of the Company’s assets to an entity of which those persons and entities who beneficially owned voting securities of the Company representing more than 50% of the total combined voting power of all outstanding voting securities of the Company immediately prior to such asset sale do not beneficially own voting securities of the purchasing entity representing more than 50% of the total combined voting power of all outstanding voting securities of the purchasing entity immediately after such asset sale.

SECTION 2.8 “Code” means the Internal Revenue Code of 1986, as amended. References in the Plan to any Section of the Code shall be deemed to include any amendments or successor provisions to such Section and any regulations under such Section.

SECTION 2.9 “Committee” means the Compensation Committee of the Board, provided, however, that with respect to powers to grant and establish the terms of Awards to Eligible Directors’ and all other powers that are reserved to the Board under Section 2.3, references to “Committee” shall be deemed to be references to Board.

SECTION 2.10 “Common Stock” means the non-voting common stock, par value $.01 per share, of the Company, and after substitution, such other stock as shall be substituted therefore as provided in Article X.

SECTION 2.11 “Consultant” means any person who is engaged by the Company, a Subsidiary or an Affiliated Entity to render consulting or advisory services.

SECTION 2.12 “Date of Grant” means the date on which the grant of an Award is authorized by the Committee or such later date as may be specified by the Committee in such authorization.

SECTION 2.13 “Disability” means the Participant is unable to continue employment by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months. For purposes of this Plan, the determination of Disability shall be made in the sole and absolute discretion of the Committee.

SECTION 2.14 “Eligible Employee” means any employee of the Company, a Subsidiary, or an Affiliated Entity as approved by the Committee.

SECTION 2.15 “Eligible Director” means any member of the Board who is not an employee of the Company, a Subsidiary or an Affiliated Entity.

SECTION 2.16 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

SECTION 2.17 “Fair Market Value” means (A) during such time as the Common Stock is registered under Section 12 of the Exchange Act, the closing price of the Common Stock as reported by an established stock exchange or automated quotation system on the day for which such value is to be determined, or, if no sale of the Common Stock shall have been made on any such stock exchange or automated quotation system that day, on the next preceding day on which there was a sale of such Common Stock, or (B) during any such time as the Common Stock is not listed upon an established stock exchange or automated quotation system, the mean between dealer “bid” and “ask” prices of the Common Stock in the over-the-counter market on the day for which such value is to be determined, as reported by the National Association of Securities Dealers, Inc., or (C) during any such time as the Common Stock cannot be valued pursuant to (A) or (B) above, the fair market value shall be as determined by the Committee in a manner that complies with Section 409A of the Code, considering all relevant information including, by example and not by limitation, the services of an independent appraiser.

SECTION 2.18 “Incentive Stock Option” means an Option within the meaning of Section 422 of the Code.

SECTION 2.19 “Nonqualified Stock Option” means an Option which is not an Incentive Stock Option.

SECTION 2.20 “Option” means an Award granted under Article V of the Plan and includes both Nonqualified Stock Options and Incentive Stock Options to purchase shares of Common Stock.

SECTION 2.21 “Participant” means an Eligible Employee, a Consultant or an Eligible Director to whom an Award has been granted under the Plan.

SECTION 2.22 “Performance Bonus” means the cash bonus which may be granted to Eligible Employees under Article IX of the Plan.

SECTION 2.23 “Performance Units” means those monetary units that may be granted to Eligible Employees, Consultants or Eligible Directors pursuant to Article VIII hereof.

SECTION 2.24 “Plan” means this Continental Resources, Inc. 2005 Long-Term Incentive Plan.

SECTION 2.25 “Restricted Stock Award” means an Award granted to an Eligible Employee, Consultant or Eligible Director under Article VI of the Plan.

SECTION 2.26 “Retirement” means the termination of an Eligible Employee’s employment with the Company, a Subsidiary or an Affiliated Entity on or after attaining age 62.

SECTION 2.27 “SAR” means a stock appreciation right granted to an Eligible Employee, Consultant or Eligible Director under Article VII of the Plan.

SECTION 2.28 “Subsidiary” shall have the same meaning set forth in Section 424 of the Code.

ARTICLE III

ADMINISTRATION

SECTION 3.1 Administrati on of the Plan . The Board shall have the power and authority to administer the Plan and may delegate such authority to a Committee comprised of members of the Board. The Board has, by resolution, appointed the Committee to administer the Plan and has delegated its powers described under this Section 3.1 for purposes of Awards granted to Eligible Employees and Consultants. Pursuant to Section 3.2, the Committee shall also be authorized to administer Awards granted by the Board to Eligible Directors.

Subject to the provisions of the Plan and except as provided otherwise in Section 3.3, the Committee shall have exclusive power to:

(a) Select Eligible Employees and Consultants to participate in the Plan;

(b) Determine the time or times when Awards will be made to Eligible Employees and Consultants;

(c) Determine the form of an Award, whether an Incentive Stock Option, Nonqualified Stock Option, Restricted Stock Award, SAR, Performance Unit, or Performance Bonus, the number of shares of Common Stock or Performance Units subject to the Award, the amount and all the terms, conditions (including performance requirements), restrictions and/or limitations, if any, of an Award, including the time and conditions of exercise or vesting, and the terms of any Award Agreement, which may include the waiver or amendment of prior terms and conditions or acceleration or early vesting or payment of an Award under certain circumstances determined by the Committee;

(d) Determine whether Awards will be granted singly or in combination;

(e) Accelerate the vesting, exercise or payment of an Award or the performance period of an Award;

(f) Determine whether and to what extent a Performance Bonus may be deferred, either automatically or at the election of the Participant or the Committee;

(g) Take any and all other action it deems necessary or advisable for the proper operation or administration of the Plan.

SECTION 3.2 Grants to Eligible Directors. The Board shall have the exclusive power to select Eligible Directors to participate in the Plan and to determine the number of Nonqualified Stock Options, Performance Units, SARs, shares of Restricted Stock or shares of Bonus Stock awarded to Eligible Directors selected for participation and the terms of such Awards. Committee shall administer all other aspects of the Awards made to Eligible Directors. For purposes of the Plan, references to the “Committee” shall be deemed to be references to the Board with respect to the powers reserved exclusively to the Board pursuant to this Section.

SECTION 3.3 Committee to Make Rules and Interpret Plan. The Committee in its sole discretion shall have the authority, subject to the provisions of the Plan, to establish, adopt, or revise such rules and regulations and to make all such determinations relating to the Plan, as it may deem necessary or advisable for the administration of the Plan. The Committee’s interpretation of the Plan or any Awards and all decisions and determinations by the Board with respect to the Plan shall be final, binding, and conclusive on all parties.

SECTION 3.4 Section 162(m) Provisions. The Company intends for the Plan and the Awards made hereunder to qualify for the exception from Section 162(m) of the Code for “qualified performance based compensation” if it is determined by the Committee that such qualification is necessary for an Award. Accordingly, the Committee shall make determinations as to performance targets and all other applicable provisions of the Plan as necessary in order for the Plan and Awards made thereunder to satisfy the requirements of Section 162(m) of the Code. Further, as to any Award for which it is determined that such qualification is necessary, the grant of such Award shall be determined and such Award shall be administered by a committee of, and appointed by, the Board that shall be comprised solely of two or more outside Directors (within the meaning of the term “outside directors” as used in Section 162(m) of the Code and applicable interpretive authority thereunder and within the meaning of the term “Non-Employee Director” as defined in Rule 16b-3).

ARTICLE IV

GRANT OF AWARDS

SECTION 4.1 Grant of Awards. Awards granted under this Plan shall be subject to the following conditions:

(a) Subject to Article X, the aggregate number of shares of Common Stock made subject to the grant of Options and/or SARs to any Eligible Employee in any calendar year may not exceed 20,000 shares, subject to the adjustment provisions of Article X.

(b) Subject to Article X, the aggregate number of shares of Common Stock made subject to the grant of Restricted Stock Awards and Performance Unit Awards to any Eligible Employee in any calendar year may not exceed 20,000, subject to the adjustment provisions of Article X.

(c) The maximum amount made subject to the grant of Performance Bonuses to any Eligible Employee in any calendar year may not exceed $1,000,000.

(d) Shares of Common Stock shall be deemed to have been issued under the Plan only to the extent actually issued and delivered pursuant to an Award. Any shares of Common Stock related to Awards that terminate by expiration, forfeiture, cancellation or otherwise without the issuance of shares of Common Stock or are exchanged in the Board’s discretion for Awards not involving shares of Common Stock, shall be available again for grant under the Plan and shall not be counted against the shares of Common Stock authorized under Section 1.3. In addition, shares of Common Stock issued under the Plan and forfeited back to the Plan, shares of Common Stock surrendered in payment of the exercise price or purchase price of an Award, and shares of Common Stock withheld for payment of applicable employment taxes and/or withholding obligations associated with an Award shall again be available for the grant of an Award under the Plan.

(e) Common Stock delivered by the Company in payment of an Award authorized under Articles V and VI of the Plan may be authorized and unissued shares of Common Stock or shares of Common Stock held in the treasury of the Company.

(f) The Committee shall, in its sole discretion, determine the manner in which fractional shares arising under this Plan shall be treated.

(g) Separate certificates or a book-entry registration representing shares of Common Stock shall be delivered to a Participant upon the exercise of any Option.

(h) The Committee and Board, as applicable, shall be prohibited from canceling, reissuing or modifying Awards if such action will have the effect of repricing the Participant’s Award.

(i) The maximum term of any Award shall be ten years.

ARTICLE V

STOCK OPTIONS

SECTION 5.1 Grant of Options. The Committee may, from time to time, subject to the provisions of the Plan and such other terms and conditions as it may determine, grant Options to Eligible Employees. These Options may be Incentive Stock Options or Nonqualified Stock Options, or a combination of both. The Committee may, subject to the provisions of the Plan and such other terms and conditions as it may determine, grant Nonqualified Stock Options to Eligible Directors and Consultants. Each grant of an Option shall be evidenced by an Award Agreement executed by the Company and the Participant, and shall contain such terms and conditions and be in such form as the Committee may from time to time approve, subject to the requirements of Section 5.2.

SECTION 5.2 Conditions of Options. Each Option so granted shall be subject to the following conditions:

(a) Exercise Price . As limited by Section 5.2(e) below, each Option shall state the exercise price which shall be set by the Committee at the Date of Grant; provided, however, no Option shall be granted at an exercise price which is less than the Fair Market Value of the Common Stock on the Date of Grant.

(b) Form of Payment . The exercise price of an Option may be paid (i) in cash or by check, bank draft or money order payable to the order of the Company; (ii) by delivering shares of Common Stock having a Fair Market Value on the date of payment equal to the amount of the exercise price, but only to the extent such exercise of an Option would not result in an adverse accounting charge to the Company for financial accounting purposes with respect to the shares used to pay the exercise price unless otherwise determined by the Board; or (iii) a combination of the foregoing. In addition to the foregoing, the Committee may permit an Option granted under the Plan to be exercised by a broker-dealer acting on behalf of a Participant through procedures approved by the Committee.

(c) Exercise of Options . Options granted under the Plan shall be exercisable, in whole or in such installments and at such times, and shall expire at such time, as shall be provided by the Committee in the Award Agreement. Exercise of an Option shall be by written notice to the Secretary of the Company at least two business days in advance of such exercise stating the election to exercise in the form and manner determined by the Committee. Every share of Common Stock acquired through the exercise of an Option shall be deemed to be fully paid at the time of exercise and payment of the exercise price.

(d) Other Terms and Conditions . Among other conditions that may be imposed by the Committee, if deemed appropriate, are those relating to (i) the period or periods and the conditions of exercisability of any Option; (ii) the minimum periods during which Participants must be employed by the Company, its Subsidiaries, or an Affiliated Entity, or must hold Options before they may be exercised; (iii) the minimum periods during which shares acquired upon exercise must be held before sale or transfer shall be permitted; (iv) conditions under which such Options or shares may be subject to forfeiture; (v) the frequency of exercise or the minimum or maximum number of shares that may be acquired at any one time; (vi) the achievement by the Company of specified performance criteria; and (vii) non-compete and protection of business matters.

(e) Special Restrictions Relating to Incentive Stock Options . Options issued in the form of Incentive Stock Options shall only be granted to Eligible Employees of the Company or any parent or subsidiary corporation (as defined in Section 424 of the Code). To the extent that the aggregate fair market value (determined at the time the respective Incentive Stock Option is granted) of stock with respect to which Incentive Stock Options are exercisable for the first time by an individual during any calendar year under all incentive stock option plans of the Company and its parent and subsidiary corporations exceeds $100,000, such Incentive Stock Options shall be treated as Nonqualified Stock Options. The Committee shall determine, in accordance with applicable provisions of the Code, Treasury Regulations and other administrative pronouncements, which of a Participant’s Incentive Stock Options will not constitute Incentive Stock Options because of such limitation and shall notify the Participant of such determination as soon as practicable after such determination. No Incentive Stock Option shall be granted to an individual if, at the time the Option is granted, such individual owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of its parent or subsidiary corporation, within the meaning of Section 422(b)(6) of the Code, unless (i) at the time such Option is granted the option price is at least 110% of the Fair Market Value of the Common Stock subject to the Option and (ii) such Option by its terms is not exercisable after the expiration of five years from the date of grant. Except as otherwise provided in Sections 421 or 422 of the Code, an Incentive Stock Option shall not be transferable otherwise than by will or the laws of descent and distribution, and shall be exercisable during the Participant’s lifetime only by such Participant or the Participant’s guardian or legal representative.

(f) Application of Funds . The proceeds received by the Company from the sale of Common Stock pursuant to Options will be used for general corporate purposes.

(g) Shareholder Rights . No Participant shall have a right as a shareholder with respect to any share of Common Stock subject to an Option prior to purchase of such shares of Common Stock by exercise of the Option.

(h) Options and Rights in Substitution for Options Granted by Other Employers . Options and SARs may be granted under the Plan from time to time in substitution for options and such rights held by individuals providing services to corporations or other entities who become Eligible Employees, Consultants, or Eligible Directors as a result of a merger or consolidation or other business transaction with the Company or any Affiliated Entity.

ARTICLE VI

RESTRICTED STOCK AND BONUS STOCK AWARDS

SECTION 6.1 Grant of Restricted Stock and Bonus Stock Awards. The Committee may, from time to time, subject to the provisions of the Plan and such other terms and conditions as it may determine, grant a Restricted Stock Award and/or Bonus Stock Awards to Eligible Employees, Consultants or Eligible Directors. Restricted Stock Awards and Bonus Stock Awards shall be awarded in such number and at such times during the term of the Plan as the Committee shall determine. Each Restricted Stock Award and Bonus Stock Award shall be subject to an Award Agreement setting forth the terms of such Award and may be evidenced in such manner as the Committee deems appropriate, including, without limitation, a book-entry registration or issuance of a stock certificate or certificates.

SECTION 6.2 Conditions of Restricted Stock Awards. The grant of a Restricted Stock Award shall be subject to the following:

(a) Restriction Period . Restricted Stock Awards granted to an Eligible Employee shall require the holder to remain in the employment of the Company, a Subsidiary, or an Affiliated Entity for a prescribed period. The purchase price, if any, for shares of Common Stock issued in connection with a Restricted Stock Award shall be determined by the Committee, in its sole discretion. Restricted Stock Awards granted to Consultants or Eligible Directors shall require the holder to provide continued services to the Company a Subsidiary or Affiliated Entity for a period of time. These employment and service requirements are collectively referred to as a “Restriction Period”. The Committee shall determine the Restriction Period or Periods which shall apply to the shares of Common Stock covered by each Restricted Stock Award or portion thereof. In addition to any time vesting conditions determined by the Committee, Restricted Stock Awards may be subject to the achievement by the Company of specified performance criteria based upon the Company’s achievement of all or a portion of the operational, financial or stock performance criteria set forth on Exhibit A annexed hereto, as may from time to time be specified by the Committee. At the end of the Restriction Period, assuming the fulfillment of any other specified vesting conditions, such restrictions as have been imposed by the Committee shall lapse with respect to the shares of Common Stock covered by the Restricted Stock Award or portion thereof. In addition to acceleration of vesting upon the occurrence of a Change of Control Event as provided in Section 11.5, the Committee may, in its discretion, accelerate the vesting of a Restricted Stock Award in the case of the death, Disability or Retirement of the Participant who is an Eligible Employee or resignation of a Participant who is a Consultant or an Eligible Director. Notwithstanding the preceding provisions of this Section 6.2(a), the

Committee may not take any action described in this Section 6.2(a) with respect to a Restricted Stock Award that has been granted to a “covered employee” (within the meaning of Treasury Regulation Section 1.162-27(c)(2)) if such Award has been designed to meet the exception for performance-based compensation under Section 162(m) of the Code.

(b) Restrictions . The holder of a Restricted Stock Award may not sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of the shares of Common Stock represented by the Restricted Stock Award during the applicable Restriction Period. The Committee shall impose such other restrictions and conditions on any shares of Common Stock covered by a Restricted Stock Award as it may deem advisable including, without limitation, restrictions under applicable Federal or state securities laws, and may legend the certificates representing Restricted Stock to give appropriate notice of such restrictions.

(c) Rights as Shareholders . The Committee may, in its discretion, grant to the holder of a Restricted Stock Award all or any of the rights of a shareholder with respect to the shares, including, but not by way of limitation, the right to receive dividends. If any dividends or other distributions are paid in shares of Common Stock, all such shares shall be subject to the same restrictions on transferability as the shares of Restricted Stock with respect to which they were paid.

SECTION 6.3 Conditions of Bonus Stock Awards . Each Bonus Stock Award granted to a Participant shall constitute a transfer of unrestricted shares of Common Stock on such terms and conditions as the Committee shall determine. Bonus Stock Awards shall be made in shares of Common Stock and need not be subject to performance criteria or objectives or to forfeiture. The purchase price, if any, for shares of Common Stock issued in connection with a Bonus Stock Award shall be determined by the Committee in its sole discretion.

ARTICLE VII

STOCK APPRECIATION RIGHTS

SECTION 7.1 Grant of SARs. The Committee may from time to time, in its sole discretion, subject to the provisions of the Plan and subject to other terms and conditions as the Committee may determine, grant a SAR to any Eligible Employee, Consultant or Eligible Director. SARs may be granted in tandem with an Option, in which event, the Participant has the right to elect to exercise either the SAR or the Option. Upon the Participant’s election to exercise one of these Awards, the other tandem Award is automatically terminated. SARs may also be granted as an independent Award separate from an Option. Each grant of a SAR shall be evidenced by an Award Agreement executed by the Company and the Participant and shall contain such terms and conditions and be in such form as the Committee may from time to time approve, subject to the requirements of the Plan. The exercise price of the SAR shall not be less than the Fair Market Value of a share of Common Stock on the Date of Grant of the SAR.

SECTION 7.2 Exercise and Payment. SARs granted under the Plan shall be exercisable in whole or in installments and at such times as shall be provided by the Committee in the Award Agreement. Exercise of a SAR shall be by written notice to the Chief Financial Officer of the Company at least two business days in advance of such exercise. The amount payable with respect to each SAR shall be equal in value to the excess, if any, of the Fair Market

Value of a share of Common Stock on the exercise date over the exercise price of the SAR. Payment of amounts attributable to a SAR shall be made in shares of Common Stock and the timing of such payment shall be specified in the Award Agreement with respect to each SAR.

SECTION 7.3 Restrictions. In the event a SAR is granted in tandem with an Incentive Stock Option, the Committee shall subject the SAR to restrictions necessary to ensure satisfaction of the requirements under Section 422 of the Code. In the case of a SAR granted in tandem with an Incentive Stock Option to an Eligible Employee who owns more than 10% of the combined voting power of the Company or its Subsidiaries on the date of such grant, the amount payable with respect to each SAR shall be equal in value to the applicable percentage of the excess, if any, of the Fair Market Value of a share of Common Stock on the exercise date over the exercise price of the SAR, which exercise price shall not be less than 110% of the Fair Market Value of a share of Common Stock on the date the SAR is granted.

ARTICLE VIII

PERFORMANCE UNITS

SECTION 8.1 Grant of Awards. The Committee may, from time to time, subject to the provisions of the Plan and such other terms and conditions as it may determine, grant Performance Units to Eligible Employees, Consultants and Eligible Directors. Each Award of Performance Units shall be evidenced by an Award Agreement executed by the Company and the Participant, and shall contain such terms and conditions and be in such form as the Committee may from time to time approve, subject to the requirements of Section 8.2.

SECTION 8.2 Conditions of Awards. Each Award of Performance Units shall be subject to the following conditions:

(a) Establishment of Award Terms . Each Award shall state the target, maximum and minimum value of each Performance Unit payable upon the achievement of performance goals.

(b) Achievement of Performance Goals . The Committee shall establish performance targets for each Award for a period of no less than a year based upon some or all of the operational, financial or performance criteria listed in Exhibit A attached. The performance target may be based upon future performance of the Company or any Affiliated Entity, division, or department thereof during the performance period. The Committee shall establish the performance targets applicable to performance either (i) prior to the beginning of the performance period or (ii) within 90 days after the beginning of the performance period if the outcome of the performance targets is substantially uncertain at the time such targets are established, but not later than the date that 25% of the performance period has elapsed; provided such measures may be made subject to adjustment for specified significant extraordinary items or events. The performance measures may be absolute, relative to one or more other companies, or relative to one or more indexes. The Committee shall also establish such other terms and conditions as it deems appropriate to such Award. The Award may be paid out in cash or Common Stock as determined in the sole discretion of the Committee.

ARTICLE IX

PERFORMANCE BONUS

SECTION 9.1 Grant of Performance Bonus . The Committee may from time to time, subject to the provisions of the Plan and such other terms and conditions as the Committee may determine, grant a Performance Bonus to certain Eligible Employees selected for participation. The Committee will determine the amount that may be earned as a Performance Bonus in any period of one year or more upon the achievement of a performance target established by the Committee. The Committee shall select the applicable performance target(s) for each period in which a Performance Bonus is awarded. The performance target shall be based upon all or some of the operational, financial or performance criteria more specifically listed in Exhibit A attached.

SECTION 9.2 Payment of Performance Bonus. In order for any Participant to be entitled to payment of a Performance Bonus, the applicable performance target(s) established by the Committee must first be obtained or exceeded. Payment of a Performance Bonus shall be made within 60 days of the Committee’s certification that the performance target(s) has been achieved unless the Participant has previously elected to defer payment pursuant to a nonqualified deferred compensation plan adopted by the Company. Payment of a Performance Bonus may be made in either cash or Common Stock as determined in the sole discretion of the Committee.

ARTICLE X

RECAPITALIZATION OR REORGANIZATION

SECTION 10.1 No Effect on Right or Power . The existence of the Plan and the Awards granted hereunder shall not affect in any way the right or power of the Board or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s or any Affiliated Entity’s capital structure or its business, any merger or consolidation of the Company or any Affiliated Entity, any issue of debt or equity securities ahead of or affecting Common Stock or the rights thereof, the dissolution or liquidation of the Company or any Affiliated Entity or any sale, lease, exchange or other disposition of all or any part of its assets or business or any other corporate act or proceeding.

SECTION 10.2 Subdivision or Consolidation of Shares; Stock Dividends . The shares with respect to which Awards may be granted are shares of Common Stock as presently constituted, but if, and whenever, prior to the expiration of an Award theretofore granted, the Company shall effect a subdivision or consolidation of shares of Common Stock or the payment of a stock dividend on Common Stock without receipt of consideration by the Company, the number of shares of Common Stock with respect to which such Award may thereafter be exercised or satisfied, as applicable (i) in the event of an increase in the number of outstanding shares shall be proportionately increased, and the purchase price per share shall be proportionately reduced, and (ii) in the event of a reduction in the number of outstanding shares shall be proportionately reduced, and the purchase price per share shall be proportionately increased. Any fractional share resulting from such adjustment shall be rounded up to the next whole share.

SECTION 10.3 Recapitalizations and Corporate Changes . If the Company recapitalizes, reclassifies its capital stock, or otherwise changes its capital structure (a “recapitalization”), the number and class of shares of Common Stock covered by an Award theretofore granted shall be adjusted so that such Award shall thereafter cover the number and class of shares of stock and securities to which the Participant would have been entitled pursuant to the terms of the recapitalization if, immediately prior to the recapitalization, the Participant had been the holder of record of the number of shares of Common Stock then covered by such Award. If (i) the Company shall not be the surviving entity in any merger or consolidation (or survives only as a subsidiary of an entity), (ii) the Company sells, leases or exchanges or agrees to sell, lease or exchange all or substantially all of its assets to any other person or entity, (iii) the Company is to be dissolved and liquidated, or (iv) any other Change of Control Event occurs, no later than (x) 10 days after the approval by the stockholders of the Company of a merger, consolidation, reorganization, sale, lease or exchange of assets or dissolution or (y) 30 days after a Change of Control Event of the type described in clause (i) of the definition of “Change of Control Event,” the Committee, acting in its sole discretion without the consent or approval of any Participant, shall effect one or more of the following alternatives, which alternatives may vary among individual Participants and which may vary among Options held by any individual Participant: (1) accelerate the time at which Options then outstanding may be exercised so that such Options may be exercised in full for a limited period of time on or before a specified date (before or after such Change of Control Event) fixed by the Committee, after which specified date all unexercised Options and all rights of Participants thereunder shall terminate, (2) require the mandatory surrender to the Company by all or selected Participants of some or all of the outstanding Options held by such Participants (irrespective of whether such Options are then exercisable under the provisions of the Plan) as of a date, before or after such Change of Control Event, specified by the Committee, in which event the Committee shall thereupon cancel such Options and the Company shall pay (or cause to be paid) to each Participant an amount of cash per share equal to the excess, if any, of the “Change of Control Value” (as calculated pursuant to Section 10.4 below) of the shares subject to such Option over the exercise price(s) under such Options for such shares, or (3) make such adjustments to Options then outstanding as the Committee deems appropriate to reflect such Change of Control Event (provided, however, that the Committee may determine in its sole discretion that no adjustment is necessary to Options then outstanding), including, without limitation, adjusting an Option to provide that the number and class of shares of Common Stock covered by such Option shall be adjusted so that such Option shall thereafter cover securities of the surviving or acquiring corporation or other property (including, without limitation, cash), as determined by the Committee in its sole discretion.

SECTION 10.4 Change of Control Value . For purposes of Section 10.3 above, the “Change of Control Value” shall equal the amount determined in clause (i), (ii) or (iii), whichever is applicable, as follows: (i) the per share price offered to stockholders of the Company in any merger, consolidation, sale of assets or dissolution transaction referred to in Section 10.3, (ii) the price per share offered to stockholders of the Company in any tender offer or exchange offer whereby a Change of Control Event takes place, or (iii) if such Change of Control Event occurs other than pursuant to a tender or exchange offer, the fair market value per share of the shares into which such Options being surrendered are exercisable, as determined by the Committee as of the date determined by the Committee to be the date of cancellation and surrender of such Options. In the event that the consideration offered to stockholders of the Company in any transaction described in this Section 10.4 or Section 10.3 consists of anything other than cash, the Committee shall determine the fair cash equivalent of the portion of the consideration offered that is other than cash.

SECTION 10.5 Other Changes in the Common Stock . In the event of changes in the outstanding Common Stock by reason of recapitalizations, reorganizations, mergers, consolidations, combinations, split-ups, split-offs, spin-offs, exchanges or other relevant changes in capitalization or distributions to the holders of Common Stock occurring after the date of the grant of any Award and not otherwise provided for by this Article X, such Award and any agreement evidencing such Award shall be subject to adjustment by the Committee at its sole discretion as to the number and price of shares of Common Stock or other consideration subject to such Award. In the event of any such change in the outstanding Common Stock or distribution to the holders of Common Stock, or upon the occurrence of any other event described in this Article X, the aggregate maximum number of shares available under the Plan, the aggregate maximum number of shares that may be issued under the Plan through Incentive Stock Options, Options generally, SARs, Restricted Stock Awards and Performance Unit Awards, and the maximum number of shares that may be subject to Awards granted to any one individual may be appropriately adjusted to the extent, if any, determined by the Committee, whose determination shall be conclusive. Notwithstanding the foregoing, except as otherwise provided by the Committee, upon the occurrence of a Change of Control Event, the Committee, acting in its sole discretion without the consent or approval of any Participant, may require the mandatory surrender to the Company by all or selected Participants of some or all of the outstanding Performance Bonus Awards and Performance Unit Awards as of a date, before or after such Change of Control Event, specified by the Committee, in which event the Committee shall thereupon cancel such Performance Bonus Awards and Performance Unit Awards and the Company shall pay (or cause to be paid) to each Participant an amount of cash equal to the maximum value (which maximum value may be determined, if applicable and in the discretion of the Committee, based on the then Fair Market Value of the Common Stock) of such Performance Bonus Award or Performance Unit Award which, in the event the applicable performance or vesting period set forth in such Performance Bonus Award or Performance Unit Award has not been completed, shall be multiplied by a fraction, the numerator of which is the number of days during the period beginning on the first day of the applicable performance or vesting period and ending on the date of the surrender, and the denominator of which is the aggregate number of days in the applicable performance or vesting period.

SECTION 10.6 Stockholder Action . Any adjustment provided for in the above Subparagraphs shall be subject to any required stockholder action.

SECTION 10.7 No Adjustments Unless Otherwise Provided . Except as hereinbefore expressly provided, the issuance by the Company of shares of stock of any class or securities convertible into shares of stock of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Common Stock subject to Awards theretofore granted or the purchase price per share, if applicable. No fractional shares of Common Stock or units of other securities shall be issued pursuant to any such adjustment, and any fractions resulting from any such adjustment shall be eliminated in each case by rounding downward to the nearest whole share.

ARTICLE XI

GENERAL

SECTION 11.1 Amendment or Termination of Plan. The Board may alter, suspend or terminate the Plan at any time. In addition, the Board may, from time to time, amend the Plan in any manner, but may not without shareholder approval adopt any amendment which would (i) increase the aggregate number of shares of Common Stock available under the Plan (except by operation of Article X), (ii) materially modify the requirements as to eligibility for participation in the Plan, or (iii) materially increase the benefits to Participants provided by the Plan.

SECTION 11.2 Termination of Employment; Termination of Service.

(a) If an Eligible Employee’s employment with the Company, a Subsidiary or an Affiliated Entity terminates as a result of death, Disability or Retirement, the Eligible Employee (or personal representative in the case of death) shall be entitled to purchase all or any part of the shares subject to any vested Option for a period of up to three months from such date of termination (one year in the case of death or Disability in lieu of the three-month period). If an Eligible Employee’s employment terminates for any other reason, the Eligible Employee shall be entitled to purchase all or any part of the shares subject to any vested Option for a period of up to three months from such date of termination. In no event shall any Option be exercisable past the term of the Option. The Committee may, in its sole discretion, accelerate the vesting of unvested Options in the event of termination of employment of any Participant.

(b) In the event a Consultant ceases to provide services to the Company or an Eligible Director terminates service as a director of the Company, the unvested portion of any Award shall be forfeited unless otherwise accelerated pursuant to the terms of the Eligible Director’s Award Agreement or by the Committee. The Consultant or Eligible Director shall have a period of one year following the date he ceases to provide consulting services or ceases to be a director, as applicable, to exercise any Nonqualified Stock Options which are otherwise exercisable on his date of termination of service.

SECTION 11.3 Limited Transferability - Options. The Committee may, in its discretion, authorize all or a portion of the Nonqualified Stock Options granted under this Plan to be on terms which permit transfer by the Participant to (i) the ex-spouse of the Participant pursuant to the terms of a domestic relations order, (ii) the spouse, children or grandchildren of the Participant (“Immediate Family Members”), (iii) a trust or trusts for the exclusive benefit of such Immediate Family Members, or (iv) a partnership or limited liability company in which such Immediate Family Members are the only partners or members. In addition there may be no consideration for any such transfer. The Award Agreement pursuant to which such Nonqualified Stock Options are granted expressly provide for transferability in a manner consistent with this paragraph. Subsequent transfers of transferred Nonqualified Stock Options shall be prohibited except as set forth below in this Section 11.3. Following transfer, any such Nonqualified Stock Options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of Section 11.2 hereof the term

“Participant” shall be deemed to refer to the transferee. The events of termination of employment of Section 11.2 hereof shall continue to be applied with respect to the original Participant, following which the Nonqualified Stock Options shall be exercisable by the transferee only to the extent, and for the periods specified in Section 11.2 hereof. No transfer pursuant to this Section 11.3 shall be effective to bind the Company unless the Company shall have been furnished with written notice of such transfer together with such other documents regarding the transfer as the Committee shall request. With the exception of a transfer in compliance with the foregoing provisions of this Section 11.3, all other types of Awards authorized under this Plan shall be transferable only by will or the laws of descent and distribution; however, no such transfer shall be effective to bind the Company unless the Committee has been furnished with written notice of such transfer and an authenticated copy of the will and/or such other evidence as the Committee may deem necessary to establish the validity of the transfer and the acceptance by the transferee of the terms and conditions of such Award.

SECTION 11.4 Withholding Taxes. Unless otherwise paid by the Participant, the Company, its Subsidiaries or any of its Affiliated Entities shall be entitled to deduct from any payment under the Plan, regardless of the form of such payment, the amount of all applicable income and employment taxes required by law to be withheld with respect to such payment or may require the Participant to pay to it such tax prior to and as a condition of the making of such payment. In accordance with any applicable administrative guidelines it establishes, the Committee may allow a Participant to pay the amount of taxes required by law to be withheld from an Award by (i) directing the Company to withhold from any payment of the Award a number of shares of Common Stock having a Fair Market Value on the date of payment equal to the amount of the required withholding taxes or (ii) delivering to the Company previously owned shares of Common Stock having a Fair Market Value on the date of payment equal to the amount of the required withholding taxes. However, any payment made by the Participant pursuant to either of the foregoing clauses (i) or (ii) shall not be permitted if it would result in an adverse accounting charge with respect to such shares used to pay such taxes unless otherwise approved by the Committee.

SECTION 11.5 Change of Control. Notwithstanding any other provision in this Plan to the contrary, Awards granted under the Plan to any Eligible Employee, Consultant or Eligible Director shall be immediately vested, fully earned and exercisable upon the occurrence of a Change of Control Event.

SECTION 11.6 Amendments to Awards. Subject to the limitations of Article IV, such as the prohibition on repricing of Options, the Committee may at any time unilaterally amend the terms of any Award Agreement, whether or not presently exercisable or vested, to the extent it deems appropriate. However, amendments that would impair the rights of a Participant with respect to an Award theretofore granted shall require the Participant’s consent.

SECTION 11.7 Regulatory Approval and Listings. At such time following approval by the shareholders of the Company of the restatement of the Plan as provided in Section 1.2 of the Plan as the Company becomes subject to the reporting requirements of Section 12 of the Exchange Act, or earlier, in the sole discretion of the Committee, the Company shall use its best efforts to file with the Securities and Exchange Commission and keep continuously effective, a Registration Statement on Form S-8 with respect to shares of Common Stock subject to Awards

hereunder. Notwithstanding anything contained in this Plan to the contrary, the Company shall have no obligation to issue shares of Common Stock under this Plan prior to the obtaining of any approval from, or satisfaction of any waiting period or other condition imposed by, any governmental agency which the Committee shall, in its sole discretion, determine to be necessary or advisable. In addition, and notwithstanding anything contained in this Plan to the contrary, at such time as the Company is subject to the reporting requirements of Section 12 of the Exchange Act, the Company shall have no obligation to issue shares of Common Stock under this Plan prior to:

(a) the admission of such shares to listing on the stock exchange on which the Common Stock may be listed; and

SECTION 11.8 Right to Continued Employment. Participation in the Plan shall not give any Eligible Employee any right to remain in the employ of the Company, any Subsidiary, or any Affiliated Entity. The Company or, in the case of employment with a Subsidiary or an Affiliated Entity, the Subsidiary or Affiliated Entity reserves the right to terminate any Eligible Employee at any time. Further, the adoption of this Plan shall not be deemed to give any Eligible Employee or any other individual any right to be selected as a Participant or to be granted an Award.

SECTION 11.9 Reliance on Reports. Each member of the Board and each member of the Committee shall be fully justified in relying or acting in good faith upon any report made by the independent public accountants of the Company and its Subsidiaries and upon any other information furnished in connection with the Plan by any person or persons other than himself or herself. In no event shall any person who is or shall have been a member of the Board or the Committee be liable for any determination made or other action taken or any omission to act in reliance upon any such report or information or for any action taken, including the furnishing of information, or failure to act, if in good faith.

SECTION 11.10 Construction. Masculine pronouns and other words of masculine gender shall refer to both men and women. The titles and headings of the Sections in the Plan are for the convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

SECTION 11.11 Governing Law. The Plan shall be governed by and construed in accordance with the laws of the State of Oklahoma except as superseded by applicable Federal law.

SECTION 11.12 Other Laws. The Board may refuse to issue or transfer any shares of Common Stock or other consideration under an Award if, acting in its sole discretion, it determines that the issuance or transfer of 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.

SECTION 11.13 No Trust or Fund Created. Neither the Plan nor an Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company and a Participant or any other person. To the extent that a Participant acquires the right to receive payments from the Company pursuant to an Award, such right shall be no greater than the right of any general unsecured creditor of the Company.

EXHIBIT A

Continental Resources, Inc.

2005 Long-Term Incentive Plan

Performance Criteria

Operational Criteria may include:

•

Reserve additions/replacements

•

Finding & development costs

•

Production volume

•

Production Costs

Financial Criteria may include:

•

Earnings

•

Net income,

•

Earnings before interest, taxes, depreciation and amortization (“EBITDA”), or

•

Earnings per share

•

Cash flow

•

Operating income

•

General and Administrative Expenses

•

Debt to equity ratio

•

Debt to cash flow

•

Debt to EBITDA

•

EBITDA to Interest

•

Return on Assets

•

Return on Equity

•

Return on Invested Capital

•

Profit returns/margins

Stock Performance Criteria may include:

•

Stock price appreciation

•

Total stockholder return

•

Relative stock price performance

EXHIBIT 10.10

RESTRICTED STOCK AWARD AGREEMENT

UNDER THE CONTINENTAL RESOURCES, INC.

2005 LONG-TERM INCENTIVE PLAN

THIS RESTRICTED STOCK AWARD AGREEMENT (the “Award Agreement”), entered into as of by and between (the “Participant”) and CONTINENTAL RESOURCES, INC. (the “Company”):

W I T N E S S E T H:

WHEREAS, the Participant is an employee of the Company, and it is important to the Company that the Participant be encouraged to remain in its employ; and

WHEREAS, in recognition of such facts, the Company desires to provide to the Participant an opportunity to acquire shares of the Common Stock of the Company, as hereinafter provided, pursuant to “Continental Resources, Inc. 2005 Long-Term Incentive Plan, as Amended and Restated as of April 3, 2006” (the “Plan”), a copy of which has been provided to the Participant; and

WHEREAS, any capitalized terms used but not defined herein have the same meanings given them in the Plan.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for good and valuable consideration, the Participant and the Company hereby agree as follows:

Section 1. Grant of Award. The Company hereby grants to the Participant an award (the “Award”) of ( ) shares of Common Stock, under and subject to the terms and conditions of this Award Agreement and the Plan which is incorporated herein by reference and made a part hereof for all purposes.

Section 2. Stock Held by Company. The Company shall hold a certificate or certificates registered in the name of the Participant representing total number of shares of Common Stock represented by the Award. All shares of Common Stock under the Award held by the Company pursuant to this Award Agreement shall constitute issued and outstanding shares of common stock of the Company for all corporate purposes, and the Participant shall receive all cash dividends thereon (subject to vesting restrictions as described in Section 3) provided that the right to receive such dividends shall terminate with respect to shares of Common Stock which are forfeited under this Award Agreement. If shares of Common Stock vest in the Participant in accordance with this Award Agreement, the Company shall deliver to the Participant a certificate representing such vested shares of Common Stock. As a condition precedent to issuing a certificate representing the shares of Common Stock under this Award, the Company may require the Participant to deliver to the Company a duly executed irrevocable stock power (in blank) covering such shares represented by the certificate.

Section 3. Vesting of Award. If the Participant’s employment with the Company, a Subsidiary or an Affiliated Entity remains full-time and continuous at all times prior to any of the vesting dates specified below (the “Vesting Dates”), the Participant shall be entitled, subject to the applicable provisions of the Plan and this Award Agreement having been satisfied, to receive on or after the applicable Vesting Date, on a cumulative basis, the number of shares of Common Stock determined by multiplying the aggregate number of shares of Common Stock subject to the Award by the designated percentage set forth as follows:


Percent Vested		Vesting Date
%		______
%		______

Such vesting percentages shall also be applicable to any dividends that may become payable on the shares of Common Stock that are subject to this Award Agreement. If the Participant terminates employment prior to the applicable Vesting Date, the unvested portion of such Award (including shares of Common Stock represented thereby and any dividends payable thereon) shall be forfeited and neither the Participant nor any other person shall have any interest therein in any manner whatsoever unless Participant’s vesting in the Award is accelerated pursuant to Section 6. Dividends, if any, that are payable with respect to the shares of Common Stock under this Award Agreement shall be paid to the Participant on the date that is no later than two and one-half months following the end of the calendar year in which the Award under this Award Agreement vests, and then only with respect to the percentage of such dividends as to which the Award was then vested, with the remaining portions of such dividends, if any, to be paid within two and one-half months after the end of the calendar year in which such portions respectively become vested.

Section 4. Nontransferability of Award. With respect to the Award and the unvested shares of Common Stock held by the Company, the Award and the shares of unvested Common Stock may not be sold, assigned, transferred (except as provided above), pledged or hypothecated in any way, shall not be assignable by operation of law and shall not be subject to execution, attachment, or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the unvested shares contrary to the provisions hereof shall be null and void and without effect. All shares of Common Stock which are distributed to the Participant as provided under this Award Agreement may not be subsequently transferred except as provided herein.

Section 5. Employment. So long as the Participant shall continue to be a full-time and continuous employee of the Company, a Subsidiary or an Affiliated Entity, the Award shall not be affected by any change of duties or position. Nothing in the Plan or in this Award Agreement shall confer upon the Participant any right to continue in the employ of the Company, a Subsidiary or an Affiliated Entity, or interfere in any way with the right of the Company, a Subsidiary or an Affiliated Entity to terminate the Participant’s employment at any time.

Section 6. Acceleration of Award Upon Change of Control. Upon the occurrence of a Change of Control, the Award shall become 100% vested and the Participant shall have the right to receive any or all of the Common Stock then subject to the Award.

Section 7. Securities Law Restrictions. The Award shall be vested and Common Stock issued only upon compliance with the Securities Act of 1933, as amended (the “Securities Act”), and any other applicable securities law, or pursuant to an exemption therefrom. If deemed necessary by the Company to comply with the Securities Act or any applicable laws or regulations relating to the sale of securities, the Participant, at the time of vesting and as a condition imposed by the Company, shall represent, warrant and agree that the shares of Common Stock subject to the Award are being purchased for investment and not with any present intention to resell the same and without a view to distribution, and the Participant shall, upon the request of the Company, execute and deliver to the Company an agreement to such effect. The Participant acknowledges that any stock certificate representing Common Stock purchased under such circumstances will be issued with a restricted securities legend.

Section 8. Withholding of Taxes. The Company may make such provision as it may deem appropriate for the withholding of any applicable federal, state or local taxes that it determines it may be obligated to withhold or pay in connection with the vesting of the Award or the disposition of shares of Common Stock acquired upon vesting of the Award. A Participant may pay the amount of taxes required by law upon the payment of an Award (i) in cash, (ii) by delivering to the Company shares of Common Stock having a Fair Market Value on the date of payment equal to the amount of such required withholding taxes, or (iii) by directing the Company to withhold from the shares of Common Stock to be delivered to the Participant upon payment of the Award shares of Common Stock having a Fair Market Value on the date of payment equal to the amount of such required withholding taxes.

Section 9. Restrictions.

(a) Right to Repurchase . At any time that the Company is not a “reporting company” under Section 12 of the Exchange Act, the Company will have the right to repurchase (the “Repurchase Right”) all shares of Common Stock which are issued to Participant under this Award Agreement and which have become vested in accordance with Section 3 of this Award Agreement upon Participant’s termination of employment for any reason, whether voluntary or involuntary, or by resignation, removal, death or disability or otherwise. The Company’s right to repurchase shall remain in effect during the term of Participant’s employment by the Company and shall continue for a

period of two years following termination of Participant’s employment by the Company. If the Company elects to purchase any Common Stock pursuant to this Section 9(a), it shall give written notice of its election to do so (the “Election Notice”) to the Participant. If the Company shall become a “reporting company” prior to giving an Election Notice, the Company’s Repurchase Right shall lapse. If the Company shall become a “reporting company” after giving an Election Notice and prior to the consummation of the repurchase which is the subject of such Election Notice, the Company’s Repurchase Right shall continue in full force and effect.

(b) Obligation to Repurchase . At any time that the Company is not a “reporting company” under Section 12 of the Exchange Act, the Participant, by written notice to the Company (a “Notice to Purchase”), may elect to require the Company to purchase from the Participant any and all shares of Common Stock which have become vested in accordance with Section 3 of this Award Agreement and which are beneficially owned by the Participant as of the date of such Notice to Purchase. If the Company shall become a “reporting company” after a Notice to Purchase is given and prior to the consummation of the repurchase which is the subject of such Notice to Purchase, the Company’s repurchase obligation shall continue in full force and effect.

(c) Procedure for Repurchase . The purchase price to be paid by the Company for the Common Stock to be repurchased pursuant to Section 9(a) or Section 9(b) above (the “Affected Stock”) shall be the Fair Market Value of the Affected Stock as of the last day of the calendar quarter next preceding the Election Notice or the Notice to Purchase, as the case may be. The purchase price shall be determined by the Company within forty-five (45) days next following the Election Notice or the Notice to Purchase, as the case may be. Within five (5) calendar days next following the determination of the purchase price, the Company shall provide to the Participant a written report reflecting the Company’s calculation of the purchase price in reasonable detail. The Participant shall have five (5) calendar days in which to deliver to the Company the Participant’s objection to the Company’s determination of the purchase price. Any such objection shall be in writing and shall state the basis for such objection. If no such objection is timely made, the Company’s determination of the purchase price shall be final. In the event of a timely objection, and within ten (10) days following delivery of such objection to the Company, the determination of the purchase price shall be submitted to a panel consisting of three persons, one appointed by the Company, one appointed by the Participant, and the third selected by the other two. The Company and the Participant shall provide written notice to each other of the name of the person appointed to the panel. If either the Company or the Participant fails to timely appoint its member of the panel, the other party may do so. The determination of the purchase price by a majority of members of the panel shall be final and binding on the parties. The closing of the Company’s purchase of the Affected Stock shall occur at the offices of the Company on a business day which is not more than seven (7) calendar days following the final determination of the purchase price. At the closing, the Participant shall deliver the Affected Stock by appropriate assignment against payment of the purchase price.

(d) Stockholders’ Agreements . The receipt of the vested shares of Common Stock after the applicable Vesting Date shall be conditioned upon Participant’s agreement to be bound by agreements and restrictions applicable to other shareholders of the Company.

(e) Restrictive Legend . Each certificate representing the Common Stock shall contain on its face, in addition to any other legend, the following legend in order to give notice of this restriction to any purchaser or transferee of Common Stock:

“THE SHARES OF COMMON STOCK OF CONTINENTAL RESOURCES, INC. (“COMPANY”) REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND THE RIGHT OF THE COMPANY TO REPURCHASE THE COMMON STOCK IN ACCORDANCE WITH THE TERMS OF THAT CERTAIN RESTRICTED STOCK AWARD AGREEMENT (“AWARD AGREEMENT”) DATED WHICH RELATES TO THE CONTINENTAL RESOURCES, INC. 2005 LONG-TERM INCENTIVE PLAN. CERTAIN TRANSFERS OF THE COMPANY COMMON STOCK MAY BE INVALIDATED IF SUCH TRANSFERS ARE NOT MADE IN ACCORDANCE WITH THE TERMS OF THE AWARD AGREEMENT. ANY PURCHASER OR TRANSFEREE OF THE SHARES OF COMPANY COMMON STOCK REPRESENTED BY THIS CERTIFICATE SHOULD OBTAIN A COPY OF THE AWARD AGREEMENT AND INSURE THAT THE PROPOSED PURCHASE OR TRANSFER DOES NOT VIOLATE THE AWARD AGREEMENT.”

Section 10. Notices. All notices or other communications relating to the Plan and this Award Agreement as it relates to the Participant shall be in writing and shall be delivered personally or mailed (U.S. Mail) by the Company to the Participant at the then current address as maintained by the Company or such other address as the Participant may advise the Company in writing.

IN WITNESS WHEREOF, the parties have executed this Award Agreement as of the day and year first above written.


CONTINENTAL RESOURCES, INC., an Oklahoma corporation

By:



		“COMPANY”




		“PARTICIPANT”

EXHIBIT 10.11

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”), dated as of the 3 ^rd day of April, 2006, by and between CONTINENTAL RESOURCES, INC., an Oklahoma corporation (the “Company”) and Mark Monroe (“Executive”).

WHEREAS, the Company and Executive entered into an Employment Agreement effective October 3, 2005 (the “Original Employment Agreement”); and

WHEREAS, the Company and Executive desire to amend and restate the Original Employment Agreement in certain respects.

IN CONSIDERATION of the premises and the mutual covenants set forth below, the parties hereby agree that the Original Employment Agreement be and hereby is amended and restated as follows:

1. Employment . Executive shall be employed by the Company as Chief Operating Officer and President of the Company, on the terms and conditions set forth in this Agreement. The parties contemplate that Executive will be considered for the position of Chief Executive Officer of the Company.

2. Term . The period of employment of Executive by the Company under this Agreement (the “Employment Period”) commenced on October 3, 2005 (the “Commencement Date”) and will continue through October 2, 2008 (the “Expiration Date”). The Employment Period may be sooner terminated under Section 6 of this Agreement.

3. Position and Duties . Executive will have those powers and duties normally associated with the position of Chief Operating Officer and President, will devote substantially all of his working time, attention and energies (other than absences due to illness or vacation) to the performance of his duties for the Company. Notwithstanding the above, Executive will be permitted, to the extent such activities do not unreasonably interfere with the performance by Executive of his duties and responsibilities under this Agreement or violate Sections 10(a), (b) or (c) of this Agreement, to (i) manage Executive’s personal, financial and legal affairs, (ii) serve on civic or charitable boards or committees; and (iii) serve on boards or committees of other entities not in conflict or competition with the Company.

4. Place of Performance . Executive acknowledges and agrees that the principal place of employment of Executive will be the Company’s principal executive offices in Enid, Oklahoma. In consideration of Executive’s relocation to Enid, Oklahoma, the Company has provided Executive with a cash payment of $35,000 as reimbursement for all costs associated with his relocation to Enid, Oklahoma (“Relocation Expenses”). Executive agrees to repay the Relocation Expenses to the Company, if Executive voluntarily terminates his employment with the Company other than for Good Reason within one (1) year of the Commencement Date.

5. Compensation and Related Matters .

(a) Base Salary . During the Employment Period, the Company will pay Executive a base salary at the rate of not less than Four Hundred Fifty Thousand Dollars ($450,000) per year (“Base Salary”), in approximately equal installments, in accordance with the Company’s customary payroll practices. Executive’s Base Salary may be increased, but not decreased, pursuant to annual review by the Board. Such increased Base Salary will then constitute the Base Salary for all purposes of this Agreement.

(b) Annual Incentive Bonus . The Board may establish annual bonus target amounts (the “Annual Bonus”) and performance goals for the Executive during each calendar year of the Employment Period. The target bonus for the each calendar year shall be up to 100% of Base Salary for such year, the first such bonus, if any, to be prorated for Executive’s actual period of employment during the first calendar year. To the extent Executive achieves the targets established by the Board with respect to an Annual Bonus or as otherwise determined in the Board’s discretion, such Annual Bonus shall be paid no later than two and one-half months after the date upon which the Board determines that Executive is entitled to receive such Annual Bonus.

(c) Welfare, Pension and Incentive Benefit Plans. During the Employment Period, Executive (and his spouse and/or dependents to the extent provided in the applicable plans and programs) will be entitled to participate in and be covered under all the welfare benefit plans or programs maintained by the Company 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 Employment Period, 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 for the benefit of its senior executive officers.

(d) Restricted Stock Award. Subject to and consistent with the terms and provisions of its 2005 Long Term Incentive Plan (the “Stock Plan”), the Company has granted Executive a three (3) year restricted stock award for 17,625 shares of the Company’s Non-Voting Common Stock (the “Common Stock”), to vest at 33 1/3% per annum beginning on October 3, 2006. The restricted stock award is subject to a Restricted Stock Award Agreement dated October 3, 2006, by and between the Company and Executive, which is being amended and restated contemporaneously with this Agreement.

(e) Automobile . The Company will provide to Executive during the Employment Period an automobile the make and model of which will be mutually agreed upon by the Company and Executive. Executive shall maintain adequate records so that the Company may determine the allocation between business and personal use of the automobile for federal income tax purposes. To the extent that Executive utilizes the automobile for personal use, the Company will treat such usage as additional compensation that will be reported in Executive’s W-2.

(f) Vacation . Executive shall be entitled to at least fifteen (15) days of paid vacation for each calendar year during the Employment Period. Executive may use his vacation in a reasonable manner based on the business needs of the Company.

(g) Long Term Incentive Bonus . Executive shall be entitled receive a long term incentive bonus (the “Long Term Bonus”) in an amount described below if (1) Executive remains continuously employed by the Company, or any Subsidiary or Affiliate (as such terms are defined in the Stock Plan) through the Expiration Date, or (2) any of the following events occur prior to the Expiration Date: (a) Executive’s employment is terminated by the Company without Cause, (b) Executive terminates his employment with the Company for Good Reason, or (c) Executive’s employment with the Company terminates by reason of Executive’s death or Disability prior to the Expiration Date. Executive shall not be entitled to any portion of the Long Term Bonus unless and until one of the conditions described in the preceding sentence has occurred. In the event that the Long Term Bonus becomes payable because Executive satisfied the condition described in clause (1) of the preceding sentence, the Long Term Bonus shall be an amount (the “Expiration Long Term Bonus Amount”) equal to 17,625 (the “Share Number”) multiplied by the excess of $340 (the “Target Price”) over the Fair Market Value (as defined in the Stock Plan) of the Common Stock, as determined on the Expiration Date. In the event that the Long Term Bonus becomes payable based on Executives termination of employment under any of the conditions described in clause (2) of the preceding sentence, the Long Term Bonus shall be an amount (the “Termination Long Term Bonus Amount”) equal to the Share Number multiplied by the excess of the Target Price over the Fair Market Value of the Common Stock on the date of the termination Executive’s employment with the Company. For purposes of this paragraph, reference to the Company shall include its Subsidiaries and Affiliates. In the event that the Common Stock is subdivided or consolidated, without receipt of consideration by the Company (including, without limitation in connection with an initial public offering of the Common Stock), (i) in the event of an increase in the number of outstanding shares, the Share Number shall be proportionately increased and the Target Price shall be proportionately reduced, and (ii) in the event of a reduction in the number of outstanding shares, the Share Number shall be proportionately reduced and the Target Price shall be proportionately increased, as if (A) the Share Number were a number of shares subject to a Restricted Stock Award Agreement under the Stock Plan and the Target Price were the exercise price of an Option granted under the Stock Plan, and (B) the adjustment mechanism of Section 10.2 of the Stock Plan were applicable to the Long Term Bonus for which Executive is eligible under this Agreement.

6. Termination . Executive’s employment under this Agreement may be terminated during the Employment Period under the following circumstances:

(a) Death . Executive’s employment under this Agreement will terminate upon his death.

(b) Disability . If, as a result of Executive’s incapacity due to physical or mental illness, 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 an entire period of six (6) consecutive months, and within thirty (30) days after a Notice of Termination (as defined in Section 7(a)) is given after such six (6) month period, Executive does not return to the substantial performance of his duties on a full-time basis, 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.

(c) Cause . The Company has the right to terminate Executive’s employment for Cause, and such termination will not be a breach of this Agreement by the Company. “Cause” means termination of employment for one of the following reasons: (i) the conviction of the Executive by a federal or state court of competent jurisdiction of a felony which relates to the Executive’s employment at the Company; (ii) an act or acts of dishonesty taken by the Executive and intended to result in substantial personal enrichment of the Executive at the expense of the Company; or (iii) the Executive’s willful failure to follow a direct, reasonable and lawful written directive from his supervisor or the Board of Directors (the “Board”), within the reasonable scope of the Executive’s duties, which failure is not cured to the satisfaction of the Board within thirty (30) days. Further, for purposes of this Subsection (c):

(1) No act or omission by the Executive shall be deemed “willful” unless done, or omitted by the Executive in bad faith and without reasonable belief that the Executive’s action or omission was in the best interest of the Company.

(2) The Executive shall not be deemed to have been terminated for Cause unless and until the Company delivers to the Executive a copy of the resolution duly adopted by the affirmative vote of not less than three-fourths (3/4ths) of the entire membership of the Board of Directors of the Company, at a meeting of the Board of Directors called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive’s counsel, to be heard before the Board of Directors), finding that in the good faith opinion of the Board of Directors, the Executive was guilty of conduct set forth in clauses (i), (ii), or (iii) above and specifying the particulars thereof in detail.

(d) Good Reason . Executive may terminate his employment for “Good Reason” by providing Notice of Termination to the Company within one hundred and twenty (120) days after Executive has actual knowledge of the occurrence, without the written consent of Executive, of one of the events set forth below, and such termination will not be a breach of this Agreement:

(1) the assignment to the Executive of any duties inconsistent in any respect with the Executive’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities;

(2) the reduction of the rate of the Executive’s Base Salary below the amount specified in Section 5(a) other than as a part of compensation reduction program which applies equally to all executives at the Vice President and above levels;

(3) the Company requiring the Executive to be based at any office or location outside of the greater Enid, Oklahoma, metropolitan area or outside the metropolitan area where the Executive is regularly employed at the date of this Agreement except for travel reasonably required in the performance of the Executive’s responsibilities; provided, transfer of the Executive from any location to Enid, Oklahoma shall not be a violation of this Section 6(d)(3); or

(4) any failure by the Company to comply with and satisfy Section 12 herein.

(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, and such termination will not in and of itself be a breach of this Agreement.

(f) Voluntary Termination . The Executive may voluntarily terminate employment with the Company at any time, and if such termination is not for Good Reason, then, the Executive shall be only entitled to compensation and benefits as described in Section 8(b) hereof.

7. Termination Procedure .

(a) Notice of Termination . Any termination of Executive’s employment by the Company or by Executive during the Employment Period (other than termination pursuant to Section 6(a)) will be communicated by written Notice of Termination to the other party in accordance with Section 16. 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 6(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), or (iii) 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.

8. Compensation Upon Termination or During Disability . In the event of Executive’s Disability or termination of his employment under this Agreement during the Employment Period, the Company will provide Executive with the payments and benefits set forth below. The Executive agrees that the Company has the right to deduct any amounts owed by the Executive to the Company for any reason, including, without limitation, due to the Executive’s misappropriation of Company funds, from the payments set forth in this Section 8.

(a) Termination By the Company without Cause or By Executive for Good Reason . If Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason:

(i) the Company will pay to Executive in a single lump sum payment (A) his Base Salary and accrued but unused vacation pay through the Date of Termination, (B) the product obtained by multiplying the Executive’s Average Annual Compensation by two (2) (the “Severance Amount”), and (C) the Termination Long Term Bonus Amount. For purposes of this Agreement, Average Annual Compensation is the average of the Executive’s annualized compensation, base salary and bonus, paid under this Agreement for the two year period of employment (or if employed less than two years, then the period of employment) immediately preceding the Date of Termination. Such payments will be made as soon as practicable following the Date of Termination; provided, however, that in the event of a termination of Executive’s employment by Executive for Good Reason, if required to avoid the application of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), the Company shall delay payment to Executive of the Severance Amount and the Termination Long Term Bonus Amount until the date that is six months following Executive’s “separation from service” (within the meaning of Section 409A);

(ii) the Company shall maintain in full force and effect, for the continued benefit of Executive (and his spouse and/or his dependents, as applicable) for a period of eighteen (18) months following the Date of Termination the medical, hospitalization, and dental programs, in which Executive (and his spouse and/or his dependents, as applicable) participated immediately prior to the Date of Termination at the level in effect and upon substantially the same terms and conditions (including without limitation contributions required by Executive for such benefits) as existed immediately prior to the Date of Termination; provided, if the Executive (or his/her 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. If Executive (or his spouse and/or his dependents) cannot continue to participate in the Company programs providing such benefits, the Company shall arrange to provide Executive (and his spouse and/or his dependents, as applicable) with the economic equivalent of such benefits which they otherwise would have been entitled to receive under such plans and programs (“Continued Benefits”). 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;

(iii) the Company will reimburse Executive, pursuant to the Company’s policy, for reasonable business expenses incurred, but not paid, prior to the Date of Termination; and

(iv) Executive will be entitled to any other rights, compensation and/or benefits as may be due to Executive following such termination to which he is otherwise entitled in accordance with the terms and provisions of any plans or programs of the Company.

(b) Termination by the 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:

(i) the Company will pay Executive his Base Salary and his accrued but unused vacation pay (to the extent required by law or the Company’s vacation policy) through the Date of Termination, as soon as practicable following the Date of Termination;

(ii) the Company will reimburse Executive, pursuant to the Company’s policy, for reasonable business expenses incurred, but not paid, prior to the Date of Termination, unless such termination resulted from a misappropriation of Company funds; and

(iii) Executive will be entitled to any other rights, compensation and/or benefits as may be due to Executive following termination to which he is otherwise entitled in accordance with the terms and provisions of any plans or programs of the Company.

(c) Disability . During any period that Executive fails to perform his duties under this Agreement as a result of incapacity due to physical or mental illness (“Disability Period”), Executive will continue to receive his full Base Salary set forth in Section 5(a) until his employment is terminated pursuant to Section 6(b). In the event Executive’s employment is terminated for Disability pursuant to Section 6(b):

(i) the Company will (A) pay to Executive his Base Salary and accrued but unused vacation pay through the Date of Termination and the Termination Long Term Bonus Amount as soon as practicable following the Date of Termination, and (B) provide Executive with disability benefits pursuant to the terms of the Company’s disability programs and/or practices;

(ii) the Company will reimburse Executive, pursuant to the Company’s policy, for reasonable business expenses incurred, but not paid, prior to the Date of Termination; and

(iii) Executive will be entitled to any other rights, compensation and/or benefits as may be due to Executive following such termination to which he is otherwise entitled in accordance with the terms and provisions of any plans or programs of the Company.

(d) Death . If Executive’s employment is terminated by his death, the Company will pay in a lump sum to Executive’s beneficiary, legal representatives or estate, as the case may be, Executive’s Base Salary, accrued but unused vacation pay, the Termination Long Term Bonus Amount, and unreimbursed business expenses and amounts due under any plans, programs or arrangements of the Company through the Date of Termination.

9. 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.

10. Confidential Information; Company Property; Non-Solicitation .

(a) Access to Information . The Company will, during the time that the Executive is employed by the Company, (a) disclose or entrust to the Executive, or provide the Executive access to, or place the Executive in a position to create or develop trade secrets or confidential information belonging to the Company and/or its affiliated entities (the “Related Parties”), (b) place the Executive in a position to develop business goodwill belonging to the Related Parties or (c) disclose or entrust to the Executive business opportunities to be developed for the Related Parties.

(b) Disclosure to and Property of the Related Parties . All information, trade secrets, designs, ideas, concepts, improvements, product developments, discoveries, techniques, patterns, processes, manuals, methods, know-how, contracts, sales proposals, cost information, pricing policies, business plans, and market research and data, and inventions, whether patentable or not, that are conceived, made, developed or acquired by Executive, individually or in conjunction with other employees or agents, during the term and in the scope of his employment that relate to the Related Parties’ business, products or services (including, without limitation, all such information relating to corporate opportunities, research, financial and sales data, pricing terms, evaluations, opinions, interpretations, acquisition prospects, the identity of customers or their requirements, the identity of key contacts within the customer’s organizations or within the organization of acquisition prospects, or exploration, production, marketing and merchandising techniques, prospective names and marks) and all writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, inventions and other similar forms of expression (collectively, “Confidential Information”) shall be disclosed to the Company, and are and shall be the sole and exclusive property of the applicable Related Parties. Executive agrees to perform all actions reasonably requested by the Related Parties to establish and confirm such exclusive ownership. “Confidential Information” does not, however, include any information that, at the time of disclosure by the Company, is available to the public other than as a result of any act of the Executive.

(c) No Unauthorized Use or Disclosure . The Confidential Information is vital to the success of the Related Parties’ business and the Related Parties derive independent economic value from such information not being generally available or known to the public. Executive agrees that he will preserve and protect the confidentiality of all Confidential Information and work product of the Related Parties, and will not, at any time during or after the termination of the Executive’s employment with the Company, make any unauthorized disclosure of, and shall not remove from Company premises, and will use his best efforts to prevent the removal from Company premises of, Confidential Information or work product of the Related Parties, or make any use thereof, in each case, except in the carrying out of Executive’s responsibilities hereunder. Executive shall have no obligation hereunder to keep confidential any Confidential Information if and to the extent disclosure thereof is specifically required by law; provided, however, that in the event disclosure is required by applicable law and Executive is making such disclosure, Executive

shall provide the Company with prompt notice of such requirement, and shall use his commercially reasonable efforts to give such notice prior to making any disclosure, so that the Company may seek an appropriate protective order.

(d) Ownership by the Company . If, during Executive’s employment by the Company, Executive creates any original work of authorship fixed in any tangible medium of expression which is the subject matter of copyright (such as videotapes, written presentations on acquisitions, computer programs, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to the business, products, or services of the Related Parties, whether such work is created solely by Executive or jointly with others (whether during business hours or otherwise and whether on the Related Parties’ premises or otherwise), Executive shall disclose such work to the Company. The Company shall be deemed the author of such work if the work is prepared by Executive in the scope of Executive’s employment; or, if the work is not prepared by Executive within the scope of Executive’s employment but is specially ordered by any of the Related Parties as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and the Related Parties shall be the author of the work. If such work is neither prepared by Executive within the scope of Executive’s employment nor a work specially ordered and is deemed to be a work made for hire, then Executive hereby agrees to assign, and by these presents does assign, to the Company all of Executive’s worldwide rights, titles, and interests in and to such work and all rights of copyright therein.

(e) Assistance by Executive . During the period of Executive’s employment by the Company, Executive shall assist the Company and its nominee, at any time, in the protection of the Related Parties’ U.S. and worldwide right, title and interest in and to Confidential Information and the execution of all formal assignment documents requested by the Company or its nominee and the execution of all lawful oaths and applications for patents and registration of copyright in the United States and any foreign countries. After Executive’s employment with the Company terminates, at the request and cost of the Related Parties, Executive shall reasonably assist the Company and its nominee, at reasonable times and for reasonable periods, in the protection of the Related Parties’ U.S. and worldwide right, title and interest in and to Confidential Information and the execution of all formal assignment documents requested by the Company or its nominee and the execution of all lawful oaths and applications for patents and registration of copyright in the United States and any foreign countries, all as may be requested by the Related Parties from time to time.

(f) Non-Solicitation . Executive shall not, during the Employment Period or the period Executive receives payments under Section 8(a) (the “Covered Period”), either personally or by or through his agent or by letters, circulars or advertisements and whether for himself or on behalf of any other person, seek to persuade any employee of the Company or any affiliated entity or any Person who was an employee of the Company or any affiliated entity during the six (6) month period prior to the commencement of the Covered Period, to discontinue his or her status or employment with the Company or such affiliated entity or to become employed in a business or activities likely to be competitive with the Company or any affiliated entity. Additionally, Executive shall not, for himself or on behalf of any person, directly or indirectly, solicit, divert or attempt to solicit or divert any customer of the Company or any affiliated entity (who was a customer of the Company or any affiliated entity on the Termination Date) for so long as the customer remains a customer of the Company or such affiliated entity during the term of this Agreement and the Covered Period.

(g) Obligations of Executive Upon Termination . Upon termination of this Agreement for any reason, Executive shall return to the Company all documents and 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, in the event Executive’s employment is terminated for Cause, Executive shall resign from all offices and positions held with the Company.

(h) Remedies . Executive acknowledges and understands that this Section 10 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 and other Related Parties 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 provisions of this Agreement 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, or to require Executive to comply with, the provisions of this Section 10.

(i) Continuing Operation . Except as specifically provided in this Section 10, the termination of Executive’s employment or of this Agreement will have no effect on the continuing operation of this Section 10.

(j) Additional Related Agreements . Executive agrees to sign and to abide by the provisions of any additional agreements, policies or requirements of the Company related to the subject of this Section 10.

11. Release . Executive agrees, if his employment is terminated under circumstances entitling him to payments under Section 8(a) of this Agreement, that in consideration for the payments described in Section 8(a), he will execute a General Release in substantially the form of Exhibit A attached hereto, through which Executive releases the Company from any and all claims as may relate to or arise out of his employment relationship (excluding claims for plan benefits that Executive may have under any “employee pension plan” as described in Section 3(3) of ERISA or any claims under this Agreement). The form of the Release shall be modified as and to the extent needed to reflect changes in the applicable law or regulations if required to provide a legally enforceable and binding release to the Company at the time of its execution.

12. 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 three years following the termination of this Agreement for any reason whatsoever, Executive shall be covered by a Company-held directors and officers liability insurance policy covering acts or omissions occurring prior to (a) the termination of this Agreement or (b) the termination of employment of Executive.

13. Arbitration; Legal Fees and Expenses . The parties agree that Executive’s employment and this Agreement relate to interstate commerce, and that, subject to Section 10(h), any disputes, claims or controversies between Executive and the Company which may arise out of or relate to the 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 conducted by a single arbitrator in accordance with the National Rules for Resolution of Employment Disputes 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 arbitrator shall render a reasoned opinion with respect to his decision. The parties agree that the arbitrator shall be bound to apply the provisions of applicable substantive law to any dispute under this Agreement and that punitive, liquidated or indirect damages shall not be awarded by the arbitrator. If the arbitrator is called upon to review a decision of the Company with respect to whether it had cause to terminate the Executive for Cause, the standard of review applicable to such a decision shall be the “abuse of discretion” standard of review that applies under Oklahoma law to the decision of a trustee or under federal law that governs the decisions of an employee benefit plan fiduciary under the Employee Retirement Income Security Act of 1974. Executive and the Company agree that the decision of the arbitrator will be final and binding on both parties. Any court having jurisdiction may enter a judgment upon the award rendered by the arbitrator. Nothing in this Section 13, however, shall preclude the Company from obtaining injunctive relief from a court of competent jurisdiction prohibiting any on-going breaches by Executive of this Agreement including, without limitation, violations of Section 10. If any contest or dispute arises between the Company and Executive regarding any provision of this Agreement, the Company will reimburse Executive for all legal fees and expenses reasonably incurred by Executive in connection with such contest or dispute. Such reimbursement will be made as soon as practicable following the final, non-appealable resolution of such contest or dispute to the extent the Company receives reasonable written evidence of such fees and expenses.

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 hereinbefore defined and any successor to its 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 beneficiaries, personal or legal representatives, or estate, to the extent any such person succeeds to Executive’s interests under this Agreement. Executive will be entitled to select and change a beneficiary or beneficiaries to receive any benefit or compensation payable under this Agreement following Executive’s death by giving the Company written notice thereof in a form acceptable to the Company. 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 beneficiary(ies), 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, all such amounts unless otherwise provided shall be paid in accordance with the terms of this Agreement to such person or persons so appointed in writing by Executive, or otherwise to his legal representatives or estate.

15. Maximum Payments by the Company . It is the objective of this Agreement to maximize Executive’s Net After-Tax Benefit (as defined below) if payments or benefits provided under this Agreement or any other Agreement between Executive and the Company or any of its affiliated entities are subject to excise tax under Section 4999 of the Code. Therefore, in the event it is determined that any payment or benefit to be provided by the Company or any of its affiliated entities 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 or any of its affiliated entities, would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Company shall first make a calculation under which such payments or benefits provided to Executive under this Agreement or otherwise are reduced to the extent necessary so that no portion thereof shall be subject to the excise tax imposed by Section 4999 of the Code (the “4999 Limit”). The Company shall then compare (x) Executive’s Net After-Tax Benefit assuming application of the 4999 Limit with (y) Executive’s Net After-Tax Benefit without the application of the 4999 Limit and Executive shall be entitled to the greater of (x) and (y). “Net After-Tax Benefit” shall mean the sum of (i) all payments and benefits which Executive receives or is then entitled to receive from the Company and any of its affiliated entities, less (ii) the amount of federal income taxes payable with respect to the payments and benefits described in (i) above calculated at the maximum marginal income tax rate for each year in which such payments and benefits shall be paid or provided to Executive (based upon the rate for such year as set forth in the Code at the time of the first payment of the foregoing), less (iii) the amount of excise taxes imposed with respect to the payments and benefits described in (i) above by Section 4999 of the Code. The determination of whether a payment or benefit

constitutes an excess parachute payment shall be made by tax counsel selected by the Company and reasonably acceptable to Executive. The costs of obtaining any such determination shall be borne by the Company.

16. 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:

Continental Resources, Inc.

302 North Independence

Enid, OK 73702

Attention: Harold Hamm, Chairman of the Board

or to such other address as any party may have furnished to the others in writing in accordance with this Agreement, except that notices of change of address shall be effective only upon receipt.

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.

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, 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 of such subject matter.

IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written.


CONTINENTAL RESOURCES, INC., an Oklahoma corporation

By:		/s/ Harold G. Hamm
		Harold Hamm, Chairman of the Board
		and Chief Executive Officer

		“COMPANY”

/s/ Mark E. Monroe
Mark Monroe

		“EXECUTIVE”

EXHIBIT A

GENERAL RELEASE

1. This General Release (the “General Release”) is being provided to you in connection with the Amended and Restated Employment Agreement between you and Continental Resources, Inc. dated as of March __, 2006 (the “Employment 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 IT CAREFULLY AND CONSULT WITH YOUR ATTORNEY.

2. 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 Continental Resources, Inc., Attention: Harold Hamm, Chairman of the Board and Chief Executive Officer, 302 North Independence, Enid, Oklahoma 73702, within the seven-day period following your execution of this General Release.

3. In consideration of the special, individualized severance package offered to me by Continental Resources, Inc. and the separation benefits I will receive as reflected in the Employment Agreement, I hereby release and discharge Continental Resources, Inc. and its predecessors, successors, affiliates, parent, subsidiaries and partners and each of those entities’ respective employees, officers, directors, agents, representatives and employee benefit plans (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, except as provided in paragraph 5 below.

4. 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 of 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.

5. It is specifically agreed, however, that this General Release does not have any effect on (a) any rights or claims I may have against the Company which arise after the date I execute this General Release, (b) any vested rights to plan benefits that 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, (c) my right to enforce the Company’s obligations under the Employment Agreement or (d) my right to continuation of group health plan coverage for myself and my dependents who are qualified beneficiaries, to the extent required under the Consolidated Omnibus Budget and Reconciliation Act of 1985 (COBRA).

6. I have carefully reviewed and fully understand all the provisions of the Employment Agreement and General Release. 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 herein. I have had adequate opportunity to consult with my attorney concerning this General Release.

7. The Employment Agreement and this General Release, set forth the entire agreement between me and the Company with respect to the subject of such agreements. I understand that my receipt and retention of the separation benefits covered by the Employment Agreement are contingent not only on my execution of this General Release, but also on my continued compliance with my other obligations under the Employment Agreement. 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 Employment 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 Employment Agreement and General Release prior to signing those documents.

Dated this day of , 200 .

Mark Monroe


STATE OF OKLAHOMA		§
COUNTY OF		§

Subscribed and sworn to before me, this day of , 200 .

NOTARY PUBLIC in and for the State of

My Commission Expires:

EXHIBIT 10.12

INDEMNIFICATION AGREEMENT

THIS AGREEMENT is effective February 28, 2006, between Continental Resources, Inc. (the “Corporation”), and the undersigned director or officer of the Corporation (“Indemnitee”).

WHEREAS, the Corporation has adopted the Amended and Restated Certificate of Incorporation (the “Charter”) and the Amended and Restated Bylaws (the “Bylaws”) providing for indemnification of the Corporation’s directors and officers to the maximum extent authorized by the Oklahoma General Corporation Law (the “State Statute”); and

WHEREAS, such Charter, Bylaws and State Statute contemplate that contracts and insurance policies may be entered into with respect to indemnification of directors and officers; and

WHEREAS, there are questions concerning the adequacy and reliability of the protection which might be afforded to directors and officers from acquisition of policies of Directors and Officers Liability Insurance (“D&O Insurance”), covering certain liabilities which might be incurred by directors and officers in the performance of their services to the Corporation; and

WHEREAS, it is reasonable, prudent and necessary for the Corporation to obligate itself contractually to indemnify Indemnitee so that he will serve or continue to serve the Corporation free from undue concern that he will not be adequately protected; and

WHEREAS, Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Corporation on condition that he be so indemnified;

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Corporation and Indemnitee do hereby covenant and agree as follows:

1.1 Definitions. As used in this Agreement:

1.1.1 The term “Proceeding” shall include any threatened, pending or completed action, suit, inquiry or proceeding, whether brought by or in the right of the Corporation or otherwise and whether of a civil, criminal, administrative, arbitrative or investigative nature, in which Indemnitee is or will be involved as a party, as a witness or otherwise, by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Corporation, by reason of any action taken by him or of any inaction on his part while acting as a director, officer, employee or agent or by reason of the fact that he is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, limited liability company or other enterprise; in each case whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification or reimbursement can be provided under this Agreement; provided that any such action, suit or proceeding which is brought by Indemnitee against that Corporation or directors or officers of the Corporation, other than an action brought by Indemnitee to enforce his rights under this Agreement, shall not be deemed a Proceeding without prior approval by a majority of the Board of Directors of the Corporation.

1.1.2 The term “Expenses” shall include, without limitation, any judgments, fines and penalties against Indemnitee in connection with a Proceeding; amounts paid by Indemnitee in settlement of a Proceeding; and all attorneys’ fees and disbursements, accountants’ fees, private investigation fees and disbursements, retainers, court costs, transcript costs, fees of experts, fees and expenses of witnesses, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements, or expenses, reasonably incurred by or for Indemnitee in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in a Proceeding or establishing Indemnitee’s right of entitlement to indemnification for any of the foregoing.

1.1.3 References to “other enterprise” shall include employee benefit plans; references to “Fines” shall include any excise tax assessed with respect to any employee benefit plan; references to “serving at the request of the Corporation” shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interest of the Corporation” as referred to in this Agreement.

1.1.4 The term “substantiating documentation” shall mean copies of bills or invoices for costs incurred by or for Indemnitee, or copies of court or agency orders or decrees or settlement agreements, as the case may be, accompanied by a sworn statement from Indemnitee that such bills, invoices, court or agency orders or decrees or settlement agreements, represent costs or liabilities meeting the definition of “Expenses” herein.

1.1.5 The terms “he” and “his” have been used for convenience and mean “she” and “her” if Indemnitee is a female.

1.2 Indemnity of Director or Officer. The Corporation hereby agrees to hold harmless and indemnify Indemnitee against Expenses to the fullest extent authorized or permitted by law (including the applicable provisions of the State Statute). The phrase “to the fullest extent permitted by law” shall include, but not be limited to (i) to the fullest extent permitted by any provision of the State Statute that authorizes or permits additional indemnification by agreement, or the corresponding provision of any amendment to or replacement of the State Statute and (ii) to the fullest extent authorized or permitted by any amendments to or replacements of the State Statute adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers and directors. Any amendment, alteration or repeal of the State Statute that adversely affects any right of Indemnitee shall be prospective only and shall not limit or eliminate any such right with respect to any proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place prior to such amendment or repeal.

1.3 Additional Indemnity. The Corporation hereby further agrees to hold harmless and indemnify Indemnitee against Expenses incurred by reason of the fact that Indemnitee 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, limited liability company or other enterprise, including, without limitation, any predecessor, subsidiary or affiliated entity of the Corporation, but only if Indemnitee acted in good faith and, in the case of conduct in his official capacity, in a manner he reasonably believed to be in the best interests of the Corporation and, in all other cases, not opposed to the best interests of the Corporation. Additionally, in the case of a criminal proceeding, Indemnitee must have had no reasonable cause to believe that his conduct was unlawful. The termination of any Proceeding by judgment, order of the court, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and with respect to any criminal proceeding, that such person had reasonable cause to believe that his conduct was unlawful.

1.4 Choice of Counsel. If Indemnitee is not an officer of the Corporation, he, together with the other directors who are not officers of the Corporation (the “Outside Directors”), shall be entitled to employ, and be reimbursed for the fees and disbursements of, counsel separate from that chosen by Indemnitees who are officers of the Corporation. The principal counsel for Outside Directors (“Principal Counsel”) shall be determined by majority vote of the Outside Directors, and the Principal Counsel for the Indemnitees who are not Outside Directors (“Separate Counsel”) shall be determined by majority vote of such Indemnitees. The obligation of the Corporation to reimburse Indemnitee for the fees and disbursements of counsel hereunder shall not extend to the fees and disbursements of any counsel employed by Indemnitee other than Principal Counsel or Separate Counsel, as the case may be, unless, in the opinion of other counsel for Indemnitee, concurred in by Principal Counsel or Separate Counsel, as the case may be, Indemnitee may have defenses available to him that are in addition to or different from those of the other Indemnitees such that there is a substantial possibility that Principal Counsel or Separate Counsel, as the case may be, will have a conflict of interest in representing Indemnitee.

1.5 Advances of Expenses. Expenses (other than judgments, penalties, fines and settlements) incurred by Indemnitee shall be paid by the Corporation, in advance of the final disposition of the Proceeding, within 10 days after receipt of Indemnitee’s written request accompanied by substantiating documentation and Indemnitee’s written affirmation that he has met the standard of conduct for indemnification and a written undertaking to repay such amount to the extent it is ultimately determined that indemnitee is not entitled to indemnification. No objections based on or involving the question whether such charges meet the definition of “Expenses,” including any question regarding the reasonableness of such Expenses, shall be grounds for failure to advance to such Indemnitee, or to reimburse such Indemnitee for, the amount claimed within such 10-day period, and the undertaking of Indemnitee set forth in Section 7 hereof to repay any such amount to the extent it is ultimately determined that Indemnitee is not entitled to indemnification shall be deemed to include an undertaking to repay any such amounts determined not to have met such definition.

1.6 Right of Indemnitee to Indemnification Upon Application; Procedure Upon Application. Any indemnification under this Agreement, other than pursuant to Section 5 hereof, shall be made no later than 45 days after receipt by the Corporation of the written request of Indemnitee, accompanied by substantiating documentation, unless a determination is made within said 45-day period by (1) the Board of Directors by a majority vote of a quorum consisting of directors who are not or were not parties to such Proceeding, (2) by a committee of

the Board of Directors designated by majority vote of the Board of Directors, even though less than a quorum, (3) if there are no such directors, or if such directors so direct, independent legal counsel in a written opinion or (4) by the stockholders, that Indemnitee has not met the relevant standards for indemnification set forth in Section 3 hereof.

The right to indemnification or advances as provided by this Agreement shall be enforceable by Indemnitee in any court of competent jurisdiction. The burden of proving that indemnification is not appropriate shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, committee thereof, independent legal counsel or stockholders) to have made a determination prior to the commencement of such action that indemnification is proper in the circumstances because Indemnitee has met the applicable standards of conduct, nor an actual determination by the Corporation (including its Board of Directors, committee thereof, independent legal counsel or stockholders) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

1.7 Undertaking by Indemnitee. Indemnitee hereby undertakes to repay to the Corporation any advances of Expenses pursuant to Section 5 hereof to the extent that it is ultimately determined that Indemnitee is not entitled to indemnification.

1.8 Indemnification Hereunder Not Exclusive. The indemnification and advancement of expenses provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may be entitled under the Certificate, the Bylaws, the State Statute, D&O Insurance, any agreement, or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office; provided, however, that this Agreement supersedes all prior written indemnification agreements between the Corporation (or any predecessor thereof) and Indemnitee with respect to the subject matter hereof. However, Indemnitee shall reimburse the Corporation for amounts paid to him pursuant to such other rights to the extent such payments duplicate any payments received pursuant to this Agreement.

1.9 Continuation of Indemnity. All agreements and obligations of the Corporation contained herein shall continue during the period Indemnitee is a director or officer 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, limited liability company or other enterprise) and shall continue thereafter so long as Indemnitee shall be subject to any possible Proceeding.

1.10 Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Corporation for some or a portion of Expenses, but not, however, for the total amount thereof, the Corporation shall nevertheless indemnify Indemnitee for the portion of such Expenses to which Indemnitee is entitled.

1.11 Settlement of Claims. The Corporation shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any Proceeding effected without the Corporation’s written consent. The Corporation shall not settle any Proceeding in any manner which would impose any penalty or limitation on Indemnitee without Indemnitee’s written consent. Neither the Corporation nor Indemnitee will unreasonably withhold their

consent to any proposed settlement. The Corporation shall not be liable to indemnify Indemnitee under this Agreement with regard to any judicial award if the Corporation was not given a reasonable and timely opportunity, at its expense, to participate in the defense of such action.

1.12 Enforcement.

1.12.1 The Corporation expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on the Corporation hereby in order to induce Indemnitee to serve as a director or officer of the Corporation, and acknowledges that Indemnitee is relying upon this Agreement in continuing as a director or officer.

1.12.2 In the event Indemnitee is required to bring any action or other proceeding to enforce rights or to collect moneys due under this Agreement and is successful in such action, the Corporation shall reimburse Indemnitee for all of Indemnitee’s Expenses in bringing and pursuing such action.

1.13 Governing Law; Binding Effect; Amendment and Termination.

1.13.1 This Agreement shall be interpreted and enforced in accordance with the laws of the State of Delaware.

1.13.2 This Agreement shall be binding upon the Corporation, its successors and assigns, and shall inure to the benefit of Indemnitee, his heirs, personal representatives and assigns and to the benefit of the Corporation, its successors and assigns.

1.13.3 No amendment, modification, termination or cancellation of this Agreement shall be effective unless in writing signed by the Corporation and Indemnitee.

Severability. If any provision of this Agreement shall be held to be invalid, illegal or unenforceable (a) the validity, legality and enforceability of the remaining provisions of this Agreement shall not be in any way affected or impaired thereby, and (b) to the fullest extent possible, the provisions of this Agreement shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. Each section of this Agreement is a separate and independent portion of this Agreement. If the indemnification to which Indemnitee is entitled as respects any aspect of any claim varies between two or more sections of this Agreement, that section providing the most comprehensive indemnification shall apply.

Notice. Notice to the Corporation shall be directed to Don Fischbach General Counsel, 302 N. Independence, Enid, Oklahoma 73702. Notice to Indemnitee shall be directed to the address set forth under his signature hereto. The foregoing addresses may be changed from time to time by the addressee upon notice to the other parties.

Notice shall be deemed received three days after the date postmarked if sent by prepaid mail, properly addressed.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written.


CORPORATION

By:
Name:		Harold G. Hamm
Title:		Chairman and CEO

INDEMNITEE



Name:
Address:

Schedule

Indemnification agreements substantially identical to the Form of Indemnification Agreement in all material respects, except the indemnitees thereto, were executed with the following persons as indemnitees:

Harold G. Hamm

Mark E. Monroe

John D. Hart

Jeffrey B. Hume

Tom E. Luttrell

Jack H. Stark

Richard H. Straeter

Gene Carlson

Jayson Potts

Robert J. Grant

George S. Littell

Lon McCain

H.R. Sanders, Jr.

Don Fischbach

Randy Rogers

EXHIBIT 10.13

MEMBERSHIP INTEREST ASSIGNMENT AGREEMENT

This Membership Interest Assignment Agreement (“ Assignment ”) is entered into this 30th day of March, 2006 (“ Execution Date ”), but to be effective as between the parties as of January 1, 2006 (“ Effective Date ”), by and between Continental Resources, Inc., an Oklahoma corporation (“ Buyer ”), and the Harold Hamm Revocable Inter-Vivos Trust dated April 23, 1984, Harold Hamm, Trustee; the Harold Hamm HJ Trust, Bert Mackie, Trustee; and the Harold Hamm DST Trust, Bert Mackie, Trustee (individually, the “ Seller ” and collectively, the “ Sellers ”), the record and beneficial owners of all of the issued and outstanding membership interest (the “ Interests ”) of Banner Pipeline Company, LLC, an Oklahoma limited liability company (the “Company”), and Harold Hamm, a lender to the Company and the Seller’s (“ Lender ”) with reference to the following circumstances:

A. Sellers own the Interests, which comprises all of the issued and outstanding membership interests of the Company;

B. Sellers desire to sell the Interests to Buyer and Buyer desires to purchase the Interests from Sellers; and

C. Immediately prior to the transactions contemplated by this Assignment, the Company has transferred and assigned to Banner Transportation Company, LLC (“ Newco ”) all of its assets and liabilities relating to the gas gathering system under construction in Richland County, Montana (“ Gathering Assets ”), leaving Company with only the assets and liabilities related to its crude oil marketing business.

In consideration of the premises and the mutual promises contained herein, the parties agree as follows:

1. Assignment and Loan Repayment . As of the Effective Date, Sellers hereby assign and transfer to Buyer, in exchange for the aggregate payment of $5,272,513.94 (the “ Purchase Price ”), receipt of which is hereby acknowledged, all of Sellers’ right, title and interest in the Interests. The Purchase Price is calculated as follows:

•

the total members capital of the Company as of the Effective Date ($10,483,658.60),

•

less the distribution of the Gathering Assets, ($4,043,905.01),

•

less the amount due from Newco (on behalf of Sellers) to Company for Gathering Assets costs incurred by the Company between the Effective Date and the Execution Date ($1,167,239.65).

•

Net Purchase Price; $5,272,513.94

The amount of the Purchase Price for each Seller shall be equal to a percentage of the Purchase Price equal to their Percentage ownership of the Company as set forth on the signature page. Each Seller hereby authorizes the Buyer to pay the Purchase Price to Lender to reimburse him for prior advances made to each Seller to fund the Sellers’ capital contributions (or a portion thereof). In addition, Buyer shall, on behalf of the Company, simultaneously pay to Lender $3,500,000, plus any accrued interest ($50,054.79), representing the amount of a loan from

Lender to the Company and Lender hereby acknowledges receipt of such amount and agrees that the Company shall have no further liability with respect to such loan.

Total proceeds paid to Lender and Sellers are equal to the Purchase Price ($5,272,513.94) plus loan proceeds ($3,550, 054.79) or $8,822,568.73.

2. Representations and Warranties of Sellers . Each Seller hereby represents and warrants to Buyer that:

2.1 No Violation or Conflict by Seller; Consents . The execution, delivery and performance of this Assignment do not and will not (a) conflict with or violate any law, judgment, order or decree binding on such Seller or (b) constitute a violation or breach of any contract or agreement to which such Seller is a party or by which it is bound. No notice to, filing or registration with, or authorization, consent or approval of, any person is necessary or is required to be made or obtained by such Seller in connection with the execution, delivery and performance by such Seller of this Assignment.

2.2 Title to Interests . Seller owns of record and beneficially good, valid and marketable title to the Interests set forth opposite its name on the signature page, and Buyer will have title to the Interests free and clear of any and all mortgages, liens, encumbrances, charges, claims, restrictions, pledges, security interests or impositions, good and valid title to the Interests, free and clear of all mortgages, liens, encumbrances, charges, claims, restrictions, pledges, security interests or impositions.

2.3 Organization and Authority of the Company . The Company is duly organized, validly existing and in good standing under the laws of the State of Oklahoma. The Company has full power to carry on its business as it is now being conducted and to own, operate and hold under lease its assets and properties as, and in the places where, such properties and assets now are owned, operated or held. The Company is duly qualified as a foreign entity to do business, and is in good standing, in each jurisdiction where the failure to be so qualified would have a material adverse effect.

2.4 Capitalization . The Interests represents all of the issued and outstanding membership interests of the Company and were not issued in violation of any preemptive or other right. There are no options, warrants or other rights to subscribe for or purchase any membership interest of the Company or securities convertible into or exchangeable for, or which otherwise confer on the holder any right to acquire, any membership interest of the Company, nor is the Company or any Seller committed to issue any such option, warrant or other right.

2.5 No Violation or Conflict by the Company; Consents . The execution, delivery and performance of this Assignment do not and will not (a) conflict with or violate any law, judgment, order or decree binding on the Company or the Articles of Organization or Operating Agreement of the Company or (b) constitute a violation or breach of any contract, or result in any party having the right to cancel, terminate, modify or exercise any option under any of the contracts to which the Company is a party or otherwise bound. No notice to, filing or registration with, or authorization, consent or approval of,

any person is necessary or is required to be made or obtained by the Company in connection with the consummation of the transactions contemplated in this Assignment.

2.6 Marketing Activities . The Company has, prior to the Effective Date, purchased crude oil from the Buyer and resold it to unrelated third parties.

3. Representations and Warranties of Buyer . Buyer hereby represents and warrants to Sellers that:

3.1 Organization . Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Oklahoma and has full power to enter into this Assignment and to perform its obligations hereunder.

3.2 Authorization . The execution, delivery and performance by Buyer of this Assignment, and of all of the documents and instruments required hereby from Buyer, are within the power of Buyer and have been duly authorized by all necessary action of Buyer.

3.3 No Violation or Conflict by Buyer . The execution, delivery and performance of this Assignment by Buyer do not and will not (a) conflict with or violate any law, judgment, order or decree binding on Buyer or the Certificate of Incorporation or Bylaws of Buyer or (b) constitute a violation or breach of any contract or agreement to which Buyer is a party or by which it is bound. No notice to, filing or registration with, or authorization, consent or approval of, any person is necessary or is required to be made or obtained by Buyer in connection with the execution and delivery and performance by Buyer of this Assignment.

4. Indemnities And Additional Covenants

4.1 Sellers’ Indemnity .

(a) Each Seller hereby, jointly and severably, indemnifies and holds Buyer, the Company and their respective affiliates (collectively, the “ Indemnified Parties ”) harmless from and against, and agrees to defend promptly the Indemnified Parties from and reimburse the Indemnified Parties for, any and all losses, damages, costs, expenses, liabilities, obligations and claims of any kind, including, without limitation, any tax cost or reduction in any loss (as computed for tax purposes) and reasonable attorneys’ fees and other legal costs and expenses (hereinafter referred to collectively as “ Losses ”), that any Indemnified Party may at any time suffer or incur, or become subject to, as a result of or in connection with: (i) any breach or inaccuracy of any of the representations and warranties made by such Seller in this Assignment; and (ii) claims by third parties (including governmental authorities) relating to any and all liabilities, whether absolute or contingent, accrued or unaccrued, asserted or unasserted, known or unknown, or otherwise, related to the operation and ownership of the Company prior to the Effective Date and not reflected on the Pro Forma Balance Sheet, including, without limitation, any Loss resulting from the transfer of the Gathering Assets.

(b) The amounts for which Sellers shall be liable under Section 4.1(a) shall be net of any insurance proceeds received by any Indemnified Party in connection with the facts giving rise to the right of indemnification.

(c) In the event a claim against any Indemnified Party arises that is covered by the indemnity provisions of Section 4.1(a) , notice shall be given promptly by such Indemnified Party to Seller; provided , however , that the failure to give notice as required by this Section 4.1(c) shall not result in a waiver of any right to indemnification hereunder except to the extent that Sellers’ ability to defend against the event with respect to which indemnification is sought is materially adversely affected by the failure of the Indemnified Party to give such notice promptly. Provided that one or more Sellers admits in writing to the party seeking indemnification that such claim is covered by the indemnity provisions of Section 4.1(a) hereof, such Seller(s) shall have the right to contest and defend by all appropriate legal proceedings such claim and to control all settlements (unless the party seeking indemnification agrees to assume the cost of settlement and to forgo such indemnity) and to select lead counsel to defend any and all such claims at the sole cost and expense of such Seller(s); provided , however , that Sellers shall not be entitled to assume the defense of any such claim if such claim (i) involves any governmental authority, (ii) seeks injunctive relief, (iii) involves a class action, (iv) involves allegations of criminal activities or (v) involves allegations of violations of The Racketeer Influenced and Corrupt Organizations Act of 1970, as amended (“ RICO ”), any domestic or foreign federal or state securities laws or regulations or any domestic or foreign federal or state antitrust laws; and provided , further , however , that Sellers may not effect any settlement that could result in any cost, expense or liability to, or have any adverse effect upon, any Indemnified Party unless such party consents in writing to such settlement and Sellers agree to indemnify such party therefor. The party seeking indemnification may select counsel to participate in any defense, in which event such counsel shall be at the sole cost and expense of such party. In connection with any such claim, action or proceeding, the parties shall cooperate with each other and provide each other with access to relevant books and records in their possession.

4.2 Buyer’s Indemnity .

(a) Buyer hereby indemnifies and holds Sellers harmless from and against, and agrees to defend promptly Sellers from and reimburse Sellers for, any and all Losses that Sellers may at any time suffer or incur, or become subject to, as a result of or in connection with: (i) any breach or inaccuracy of any of the representations and warranties made by Buyer in this Assignment; and (ii) claims by third parties (including governmental authorities) against Sellers relating to the operation and ownership of the Company by Buyer from and after the Effective Date.

(b) The amounts for which Buyer shall be liable under Section 4.2(a) shall be net of any insurance proceeds received by Sellers in connection with the facts giving rise to the right of indemnification.

(c) In the event a claim against any Seller arises that is covered by the indemnity provisions of Section 4.2(a) , notice shall be given promptly by such Seller to Buyer; provided , however , that the failure to give notice as required by this Section 4.2(c) shall not result in a waiver of any right to indemnification hereunder except to the extent that Buyer’s ability to defend against the event with respect to which indemnification is sought is materially adversely affected by the failure of Seller to give such notice promptly. Provided that Buyer admits in writing to Sellers that such claim is covered by the indemnity provisions of Section 4.2(a) hereof, Buyer shall have the right to contest and defend by all appropriate legal proceedings such claim and to control all settlements (unless one or more Sellers agrees to assume the cost of settlement and to forgo such indemnity) and to select lead counsel to defend any and all such claims at the sole cost and expense of Buyer; provided , however , that Buyer shall not be entitled to assume the defense of any such claim if such claim (i) involves any governmental authority, (ii) seeks injunctive relief, (iii) involves a class action, (iv) involves allegations of criminal activities or (v) involves allegations of violations of RICO, any domestic or foreign federal or state securities laws or regulations or any domestic or foreign federal or state antitrust laws; and provided , further , however , that Buyer may not effect any settlement that could result in any cost, expense or liability to, or have any adverse effect upon, any Seller unless such Seller consents in writing to such settlement and Buyer agrees to indemnify such Seller therefor. Sellers may select one counsel to participate in any defense, in which event Sellers’ counsel shall be at the sole cost and expense of Sellers. In connection with any such claim, action or proceeding, the parties shall cooperate with each other and provide each other with access to relevant books and records in their possession.

4.3 Cooperation With Respect to Tax Matters . Sellers agree to cooperate with Buyer, and Buyer agrees to cooperate with Sellers, to the extent necessary in connection with the filing, pursuant to any provision of the Internal Revenue Code or regulations thereunder, of any information return or other document relating to Buyer’s acquisition of the Company and any final tax returns of Company for periods prior to the Effective Date. In addition, Sellers agree to cooperate with Buyer and the Company in connection with any examination, administrative or judicial proceeding, or deficiency or refund claim or litigation relating to any taxes or tax returns of the Company for any period ending on or before or including the Effective Date.

4.4 Records . Buyer shall cause the Company to preserve and keep, free of charge, all original books, papers and records of the Company that are in the possession of the Company at the Effective Date in accordance with Buyer’s corporate document retention policy. Buyer agrees to permit any Seller and its attorneys, accountants, agents and designees access to such books, papers and records from and after the Execution Date for all reasonable purposes. Any such examination shall be at the expense of such Seller,

shall be performed at the place where such books, papers and records are regularly maintained and shall not interfere unreasonably with Buyer’s or the Company’s normal business activities.

4.5 Litigation Support . In the event and for so long as Buyer, the Company or any Seller are actively contesting or defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand in connection with (a) any transactions contemplated by this Assignment, or (b) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act or transaction involving the Company, each of the other parties will cooperate with it and its counsel in the contest or defense, make available their personnel and provide such testimony and access to their books and records as shall be necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending party (subject to the indemnification provisions of this Article 4 ).

4.6 Further Assurances . In case at any time after the Execution Date any further action is necessary or desirable to carry out the purposes of this Assignment, each of the parties to this Assignment will take, without additional consideration, such further action (including the execution and delivery of such further instruments and documents) as any other party reasonably may request.

5. Miscellaneous .

5.1 Entire Assignment; Amendment . This Assignment constitutes the entire agreement between the parties pertaining to the subject matter hereof, and supersede all prior and contemporaneous agreements, understandings, negotiations and discussions of the parties, whether oral or written, and there are no warranties, representations or other agreements between the parties in connection with the subject matter hereof, except as specifically set forth herein or therein. No amendment, supplement, modification, waiver or termination of this Assignment shall be binding unless executed in writing by the party to be bound thereby. No waiver of any of the provisions of this Assignment shall be deemed or shall constitute a waiver of any other provision of this Assignment, whether or not similar, nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

5.2 Notices . All communications, notices and disclosures required or permitted by this Assignment shall be in writing and shall be deemed to have been given when delivered personally or by messenger or by overnight delivery service, or when received by registered or certified United States mail, postage prepaid, return receipt requested, or when received via telecopy or other electronic transmission, in all cases addressed to the person for whom it is intended at his address set forth below or to such other address as a party shall have designated by notice in writing to the other party in the manner provided by this Section 5.2 :




If to Buyer:		Continental Resources, Inc. 302 North Independence Enid, OK 73702




		Attention: Mark Monroe Facsimile: (580) 242-4703




If to any Seller:		Bert Mackie c/o Stan Brownlee P.O. Box 1032 Enid, OK 73702 Facsimile: 580-242-4703

5.3 Counterparts . This Assignment may be executed in several counterparts and with facsimile signatures, each of which shall be deemed an original, but such counterparts shall together constitute but one and the same Assignment.

5.4 Specific Performance . The parties hereto agree that irreparable damage would occur in the event any of the provisions of this Assignment were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity.

5.5 Severability . If any term or other provision of this Assignment is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Assignment shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to either party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Assignment so as to effect the original intent of the parties as closely as possible in an acceptable manner, to the end that the transactions contemplated hereby are fulfilled to the extent possible.

(Signatures follow.)

Executed as of the Execution Date.


“BUYER” CONTINENTAL RESOURCES, INC.

By:		/s/ Mark E. Monroe
		Mark E. Monroe President and Chief Operating Officer


“SELLERS” HAROLD HAMM REVOCABLE INTER-VIVOS TRUST

By:		/s/ Harold Hamm
		Harold Hamm, Trustee
Percentage Ownership: 2%


HAROLD HAMM HJ TRUST

By:		/s/ Bert Mackie
		Bert Mackie, Trustee
Percentage Ownership: 49%


HAROLD HAMM DST TRUST

By:		/s/ Bert Mackie
		Bert Mackie, Trustee
Percentage Ownership: 49%


“LENDER”

/s/ Harold Hamm
Harold Hamm

EXHIBIT 21.1

SUBSIDIARIES OF CONTINENTAL RESOURCES, INC.

Continental Resources of Illinois, Inc., an Oklahoma corporation

Banner Pipeline Company, L.L.C., an Oklahoma limited liability company

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated March 6, 2006, accompanying the consolidated financial statements of Continental Resources, Inc. contained in Amendment No. 1 to the Registration Statement on Form S-1 (File No. 333-132257) and Prospectus. We consent to the use of the aforementioned report in the Registration Statement and Prospectus and to the use of our name as it appears under the caption “Experts”.

/s/ GRANT THORNTON LLP

Oklahoma City, Oklahoma

April 12, 2006

EXHIBIT 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the reference to our firm under the caption “Experts” and to the use of our report dated March 25, 2004, except for the first and third paragraphs of Note 12, as to which the date is March 6, 2006, with respect to the consolidated statements of income, shareholders’ equity, and cash flows of Continental Resources, Inc. and subsidiary included in Amendment No. 1 to the Registration Statement (Form S-1 No. 333-132257) and related Prospectus of Continental Resources, Inc. for the registration of shares of its common stock.

/s/ Ernst & Young LLP

Oklahoma City, Oklahoma

April 12, 2006

EXHIBIT 23.3

CONSENT OF INDEPENDENT PETROLEUM ENGINEERS

The undersigned hereby consents to the references to our firm in the form and context in which they appear in this Amendment No. 1 to the Registration Statement on Form S-1 of Continental Resources, Inc. and the related prospectus that is a part thereof. We hereby further consent to the use in such Registration Statement and prospectus of information contained in our report setting forth the estimates of revenues from Continental Resources, Inc.’s oil and gas reserves as of December 31, 2005.

We further consent to the reference to this firm under heading “EXPERTS”.


Very truly yours,

/s/ Ryder Scott Company, L.P.
Ryder Scott Company, L.P.

Denver, Colorado

April 12, 2006

EXHIBIT 23.5

CONSENT OF VINSON & ELKINS L.L.P.

We hereby consent to the reference to our firm under the heading “Legal matters” in this Registration Statement on Form S-1 of Continental Resources, Inc. and the prospectus forming a part thereof.

VINSON & ELKINS L.L.P.

/s/ Vinson & Elkins L.L.P.

Houston, Texas

April 13, 2006