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Form of Conveyance of Net Profits Interest

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Sectors: Energy
Governing Law: Colorado , View Colorado State Laws
Effective Date: January 01, 2008
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Exhibit 10.1 CONVEYANCE OF NET PROFITS INTEREST This instrument is exempt from the requirements of MCL 207.504 and MCL 207.525, and is exempt from transfer tax pursuant to MCL Sections 207.505(g) and (n) and MCL Sections 207.526(g) and (p). This Conveyance of Net Profits Interest and Assignment of Pre-Effective Time Payment (this " Conveyance" ) is made, as of , 2008, from Whiting Oil and Gas Corporation, a Delaware corporation and Equity Oil Company, a Colorado corporation, to The Bank of New York Trust Company, N.A., with offices at 919 Congress Avenue, Suite 500, Austin, Texas 78701, Attention: Mike J. Ulrich, as trustee (the " Trustee" ), acting not in its individual capacity but solely as trustee of the Whiting USA Trust I (the " Trust" ), a statutory trust created under the Delaware Statutory Trust Act as of October 18, 2007 (such Trustee acting as trustee of the Trust, " Grantee" ). Capitalized terms shall have the meaning set forth in Article II below. ARTICLE I
GRANT OF NET PROFITS INTEREST For and in consideration of Ten and No/100 Dollars ($10.00) and other good and valuable consideration (including the issuance by Grantee to Grantor of Trust Units) to Grantor paid by Grantee, the receipt and sufficiency of which are hereby acknowledged by Grantor, Grantor has bargained, sold, granted, conveyed, transferred, assigned, set over, and delivered, and by these presents does hereby bargain, sell, grant, convey, transfer, assign, set over, and deliver unto Grantee, its successors and assigns, effective as of the Effective Time, a net profits interest (the " Net Profits Interest" ) in and to the Subject Leases and the Minerals in and under and produced and saved from the Subject Interests during the Net Profits Period, calculated in accordance with the provisions of Article III below and payable solely out of gross proceeds from the sale of the Subject Minerals produced and saved through the Subject Wells, in an amount equal to the product of the Proceeds Percentage times the Net Profits attributable to the Subject Interests, all as more fully provided hereinbelow. TO HAVE AND TO HOLD the Net Profits Interest, together with all and singular the rights and appurtenances thereto in anywise belonging, unto Grantee, its successors and assigns, subject, however, to the following terms and provisions, to-wit: ARTICLE II
DEFINITIONS As used herein, the following terms shall have the meaning ascribed to them below: " Administrative Hedge Costs" shall mean those costs paid by Grantor to counter-parties under the Existing Hedges or to Persons that provide credit to maintain any Existing Hedge (in each case) after the Effective Time, but excluding any Hedge Settlement Costs. " Affiliate" shall mean with respect to a specified Person, any Person that directly or indirectly controls, is controlled by, or is under common control with, the specified Person. As used in this definition, the term " control" (and the correlative terms " controlling," " controlled by," and " under common control" ) 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 ownership of voting securities, by contract or otherwise. " BOE" shall mean (a) for Oil included in the Subject Minerals, one barrel, (b) for Gas Liquids included in the Subject Minerals, one barrel, and (c) for Gas included in the Subject Minerals, the amount of such hydrocarbons equal to one barrel, determined using the ratio of six Mcf of Gas to one barrel of Oil. " Business Day" shall mean any day that is not a Saturday, Sunday or any other day on which national banking institutions in New York, New York, Denver, Colorado or Wilmington, Delaware are closed as authorized or required by law. " Contingent Debt Regulations" shall have the meaning given such term in Section 8.9(b). " Code" shall mean the Internal Revenue Code of 1986, as amended. " Conveyance" shall mean this Conveyance of Net Profits Interest and Assignment of Pre-Effective Time Payment, as the same may be amended or modified from time to time by one or more instruments executed by both Grantor and Grantee. " Debit Balance" shall have the meaning given such term in Section 3.2(c). " Effective Time" shall mean 12:01 a.m., local time in effect where the Subject Interests are located, on the date of this Conveyance. " Eligible Materials" shall mean Materials for which amounts in respect of the cost of such Materials were properly debited to the Net Profits Account. " Existing Hedges" shall mean the Hedges entered into by Grantor with respect to the Subject Minerals prior to the date hereof as described in Exhibit A attached hereto. " Fair Value" shall mean, with respect to any portion of the Net Profits Interest to be released pursuant to Section 5.1 in connection with a sale or release of any Subject Interest, an amount equal to the excess of (i) the proceeds which could reasonably be expected to be obtained from the sale of such portion of the Net Profits Interest to a party which is not an Affiliate of either Grantor or the Trust on an arms' -length negotiated basis, taking into account relevant market conditions and factors existing at the time of any such proposed sale or release, over (ii) Grantee' s proportionate share of any sales costs, commissions and brokerage fees. " Farmout Agreement" shall mean any farmout agreement, participation agreement, exploration agreement, development agreement or any similar agreement. " Gas" shall mean natural gas and other gaseous hydrocarbons or minerals, including helium, but excluding any Gas Liquids. " Gas Liquids" shall mean those natural gas liquids and other liquid hydrocarbons, including ethane, propane, butane and natural gasoline, and mixtures thereof, that are removed

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from a Gas stream by the liquids extraction process of any field facility or gas processing plant and delivered by the facility or plant as natural gas liquids. " Grantee" shall mean Grantee as defined in the first paragraph of this Conveyance, and its successors and assigns; and, unless the context in which used shall otherwise require, such term shall include any successor owner at the time in question of any or all of the Net Profits Interest. " Grantor" shall mean Whiting Oil and Gas Corporation and Equity Oil Company, individually and collectively, and their successors and assigns; and, unless the context in which used shall otherwise require, such term also shall include any successor owner at the time in question of any or all of the Subject Interests. " Hedge" shall mean any commodity hedging transaction pertaining to Minerals, whether in the form of (i) forward sales and options to acquire or dispose of a futures contract solely on an organized commodities exchange, (ii) derivative agreements for a swap, cap, collar or floor of the commodity price, or (iii) similar types of financial transactions classified as " notional principal contracts" pursuant to Treasury Regulation a7 1.988-1(a)(2)(iii)(B)(2). " Hedge Settlement Costs" shall mean any and all payments required to be made by Grantor to the counterparties in connection with the settlement or mark-to-market of trades made under any Existing Hedge and all payments made by Grantor for any early termination of any Existing Hedge. " Hedge Settlement Revenues" shall mean any and all payments received by Grantor from the counterparties in connection with the settlement or mark-to-market of trades made under any Existing Hedge and all payments received by Grantor for any early termination of any Existing Hedge. " Lease" shall mean (i) a lease of one or more Minerals described in Exhibit B attached hereto as to all lands and depths described in such lease (or the applicable part or portion thereof, if limited in depth and/or areal extent in Exhibit B) and any interest therein and any leasehold interest in any other lease of Minerals derived from the pooling or unitization of such lease (or portion thereof, if limited in depth and/or areal extent in Exhibit B) with other leases, together with any interest acquired or maintained by Grantor in any and all extensions of such lease, (ii) any replacement lease taken upon or in anticipation of termination of such lease (if executed and delivered during the term of or within one year after the expiration of the predecessor lease), as to all lands and depths described in the predecessor lease (unless the extended or predecessor lease is specifically limited in depth or areal extent in Exhibit B, in which event only the corresponding portion of such lease shall be considered a renewal or extension or a replacement lease subject to this Conveyance), and (iii) any other Mineral leasehold, royalty, overriding royalty or Mineral fee interest described in Exhibit B attached hereto; and " Leases" shall mean all such Leases and all such renewal and extensions and replacement Leases. " Manufacturing Costs" shall mean the costs of Processing that generate Manufacturing Proceeds received by Grantor.

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" Manufacturing Proceeds" shall mean the excess, if any, of (i) proceeds received by Grantor from the sale of Subject Minerals that are the result of any Processing over (ii) the part of such proceeds that represents the Payment Value of such Subject Minerals before any Processing. " Materials" shall mean materials, supplies, equipment and other personal property or fixtures located on or used in connection with the Subject Interests. " Mcf" shall mean one thousand cubic feet. " Minerals" shall mean Oil, Gas and Gas Liquids. " MMBOE" shall mean one million BOE. " Money Market Interest Rate" shall mean the lesser of (a) the rate of interest per annum publicly announced from time to time in the Midwest edition of the Wall Street Journal as the " money market" interest rate on an annual yield basis, but if such rate is not available, then such similar rate as reported by a nationally recognized financial news source or (b) the maximum rate of interest permitted under applicable law. " Net Profits" shall have the meaning given such term in Section 3.2(b). " Net Profits Account" shall mean the account maintained in accordance with the provisions of Section 3.1. " Net Profits Interest" shall have the meaning given such term in Article I. " Net Profits Period" shall mean the period from and after the Effective Time until and including the Termination Date. " Oil" shall mean crude oil, condensate and other liquid hydrocarbons recovered by field equipment or facilities, excluding Gas Liquids. " Payment Period" shall mean a calendar quarter, provided that for purposes of the Net Profits Interest the first Payment Period shall mean the period from and after the Effective Time until June 30, 2008, and the last Payment Period shall mean any portion of the calendar quarter during which the Termination Date occurs from the beginning of such calendar quarter until and including the Termination Date, and provided further that for purposes of the Pre-Effective Time Payment the first Payment Period shall mean the period from and after January 1, 2008 until March 31, 2008 and the second Payment Period shall mean the period from and after April 1, 2008 through, but excluding, the Effective Time. " Payment Value" of any Subject Minerals shall mean: (a) With respect to Oil and Gas Liquids, (i) the highest price available to Grantor for such Oil and Gas Liquids at the Lease on the date of delivery pursuant to a bona fide offer, posted price or other generally available marketing arrangement from or with a non-Affiliate purchaser, or (ii) if no such offer, posted price or arrangement is available, the fair market value

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of such Oil and/or Gas Liquids, on the date of delivery at the Lease, determined in accordance with generally accepted and usual industry practices; (b) With respect to Gas, (i) the price specified in any Production Sales Contract for the sale of such Gas or (ii) if such Gas cannot be sold pursuant to a Production Sales Contract, (A) the average of the three highest prices (adjusted for all material differences in quality) being paid at the time of production for Gas produced from the same field in sales between non-affiliated Persons (or, if there are not three such prices within such field, within a 50-mile radius of such field) but, for any Gas subject to price restrictions established, prescribed or otherwise imposed by any governmental authority having jurisdiction over the sale of such Gas, no more than the highest price permitted for such category or type of Gas after all applicable adjustments (including without limitation tax reimbursement, dehydration, compression and gathering allowances, inflation and other permitted escalations), or (B) if subsection (b)(ii)(A) above is not applicable, the fair market value of such Gas, on the date of delivery, at the Lease, determined in accordance with generally accepted and usual industry practices. " Permitted Encumbrances" shall mean the following whether now existing or hereinafter created but only insofar as they cover, describe or relate to the Subject Interests or the lands described in any Lease: (a) the terms, conditions, restrictions, exceptions, reservations, limitations and other matters contained in the agreements, instruments and documents that create or reserve to Grantor its interests in any of the Leases, including any Prior Reversionary Interest; provided, however, that none of the foregoing shall operate to reduce Grantor' s " Net Revenue Interest" for any well to below the " Net Revenue Interest" set forth on Exhibit C for such well or increase the " Working Interest" of Grantor for any well above that " Working Interest" set forth on Exhibit C for such well (unless there is a proportionate increase in Grantor' s corresponding " Net Revenue Interest" for such well); (b) any (i) undetermined or inchoate liens or charges constituting or securing the payment of expenses that were incurred incidental to maintenance, development, production or operation of the Leases or for the purpose of developing, producing or processing Minerals therefrom or therein, and (ii) materialman' s, mechanics' , repairman' s, employees' , contractors' , operators' or other similar liens or charges for liquidated amounts, in each case arising in the ordinary course of business that Grantor has agreed to pay or is contesting in good faith in the ordinary course of business; (c) any liens for taxes and assessments not yet delinquent or, if delinquent, that are being contested in good faith by Grantor in the ordinary course of business; (d) any liens or security interests created by law or reserved in any Lease for the payment of royalty, bonus or rental, or created to secure compliance with the terms of the agreements, instruments and documents that create or reserve to Grantor its interests in the Leases;

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(e) any obligations or duties affecting the Leases to any municipality or public authority with respect to any franchise, grant, license or permit, and all applicable laws, rules, regulations and orders of any governmental authority; (f) any (i) easements, rights-of-way, servitudes, permits, surface leases and other rights in respect of surface operations, pipelines, grazing, hunting, lodging, canals, ditches, reservoirs or the like, and (ii) easements for streets, alleys, highways, pipelines, telephone lines, power lines, railways and other similar rights-of-way, on, over or in respect of the lands described in the Leases, provided that, in the case of clauses (i) and (ii), such easements, rights-of-way, servitudes, permits, surface leases and other rights do not materially impair the value of the Net Profits Interest; (g) all lessors' royalties, overriding royalties, net profits interests, carried interests, production payments, reversionary interests and other burdens on or deductions from the proceeds of production created or in existence as of the Effective Time; provided, however, that none of the foregoing shall operate to reduce Grantor' s " Net Revenue Interest" for any well to below the " Net Revenue Interest" set forth on Exhibit C for such well or increase the " Working Interest" of Grantor for any well above that " Working Interest" set forth on Exhibit C for such well (unless there is a proportionate increase in Grantor' s corresponding " Net Revenue Interest" for such well); (h) preferential rights to purchase or similar agreements and required third party consents to assignments or similar agreements; (i) all rights to consent by, required notices to, filings with, or other actions by any governmental authority in connection with the sale or conveyance of the Leases or interests therein; (j) production sales contracts; division orders; contracts for sale, purchase, exchange, refining or processing of Minerals; unitization and pooling designations, declarations, orders and agreements; operating agreements; agreements for development; area of mutual interest agreements; gas balancing or deferred production agreements; processing agreements; plant agreements; pipeline, gathering and transportation agreements; injection, repressuring and recycling agreements; salt water or other disposal agreements; seismic or geophysical permits or agreements; and any and all other agreements entered into by Grantor or its Affiliates in connection with the exploration or development of the Leases or the extraction, processing or marketing of production therefrom or to which any of the Leases were subject when acquired by Grantor or its Affiliates; provided, however, that none of the foregoing shall operate to reduce Grantor' s " Net Revenue Interest" for any well to below the " Net Revenue Interest" set forth on Exhibit C for such well or increase the " Working Interest" of Grantor for any well above that " Working Interest" set forth on Exhibit C for such well (unless there is a proportionate increase in Grantor' s corresponding " Net Revenue Interest" for such well); and (k) conventional rights of reassignment that obligate Grantor to reassign all or part of a property to a third party if Grantor intends to release or abandon such property;

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" Person" shall mean any individual, partnership, limited liability company, corporation, trust, unincorporated association, governmental agency, subdivision, instrumentality, or other entity or association. " Possible Refundable Amounts" shall have the meaning set forth in Section 3.1(a)(v). " Pre-Effective Time Payment" shall have the meaning given such term in Article VIII. " Prior Reversionary Interest" shall mean any contract, agreement, Farmout Agreement, lease, deed, conveyance or operating agreement that exists as of the Effective Time or that burdened the Subject Interests at the time such Subject Interests were acquired by Grantor, that by the terms thereof requires a Person to convey a part of the Subject Interests to another Person or to permanently cease production of any Subject Well, including obligations arising pursuant to any operating agreements, Leases, coal leases, and other similar agreements or instruments affecting the Subject Interests. " Proceeds Percentage" shall mean ninety percent (90%). " Processing" or " Processed" shall mean to manufacture, fractionate or refine Subject Minerals, but such terms do not mean or include activities involving the use of normal lease or well equipment (such as dehydrators, gas treating facilities, mechanical separators, heater-treaters, lease compression facilities, injection or recycling equipment, tank batteries, field gathering systems, pipelines and equipment and so forth) to treat or condition Minerals or other normal operations on any of the Subject Interests. " Production Period Prior to Effective Time" shall mean the period commencing on and including January 1, 2008 through, but excluding, the day of the Effective Time. " Production Sales Contracts" shall mean all contracts, agreements and arrangements for the sale or disposition of Minerals. " Quarterly Record Date" shall mean the 50 th day following the close of each Payment Period. The first Quarterly Record Date shall be May 20, 2008. " Subject Interests" shall mean each kind and character of right, title, claim, or interest (collectively the " rights" ), that Grantor has or owns in the Leases and the Subject Wells whether such right be under or by virtue of a lease, a unitization or pooling order or agreement, an operating agreement, a division order, or a transfer order or be under or by virtue of any other type of claim or title, legal or equitable, recorded or unrecorded, all as such rights shall be (a) enlarged or diminished by virtue of the provisions of Section 4.2, and (b) enlarged by the discharge of any payments out of production or by the removal of any charges or encumbrances to which any of such rights are subject at the Effective Time ( provided that such removal is pursuant to the express terms of the instrument that created such charge or encumbrance) and any and all renewals and extensions of the right occurring within one year after the expiration of such rights. " Subject Leases" shall mean each kind and character of right, title, claim, or interest (collectively the " rights" ), that Grantor has or owns in the Leases whether such right be under or

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by virtue of a lease, a unitization or pooling order or agreement, an operating agreement, a division order, or a transfer order or be under or by virtue of any other type of claim or title, legal or equitable, recorded or unrecorded, all as such rights shall be (a) enlarged or diminished by virtue of the provisions of Section 4.2, and (b) enlarged by the discharge of any payments out of production or by the removal of any charges or encumbrances to which any of such rights are subject at the Effective Time ( provided that such removal is pursuant to the express terms of the instrument that created such charge or encumbrance) and any and all renewals and extensions of the right occurring within one year after the expiration of such rights. " Subject Minerals" shall mean all Minerals in and under and that may be produced, saved, and sold from, and are attributable to, the Subject Interests from and after the Effective Time, after deducting the appropriate share of all royalties and any overriding royalties, production payments and other similar charges (except the Net Profits Interest) burdening the Subject Interests at the Effective Time, provided that, (a) there shall not be included in the Subject Minerals (i) any Minerals attributable to non-consent operations conducted with respect to the Subject Interests (or any portion thereof) as to which Grantor shall be a non-consenting party as of the Effective Time that are dedicated to the recoupment or reimbursement of costs and expenses of the consenting party or parties by the terms of the relevant operating agreement, unit agreement, contract for development, or other instrument providing for such non-consent operations (including any interest, penalty or other amounts related thereto), or (ii) any Minerals unavoidably lost in production or used by Grantor for production operations (including without limitation, fuel, secondary or tertiary recovery) conducted solely for the purpose of producing Subject Minerals from the Subject Interests, and (b) there shall be included in the Subject Minerals any Minerals attributable to non-consent operations conducted with respect to the Subject Interests (or any portion thereof) as to which Grantor shall be a non-consenting party as of the Effective Time that are produced, saved, and sold from, and are attributable to the Subject Interests after the Effective Time from and after the recoupment or reimbursement of costs and expenses (including any interest, penalty or other amounts related thereto) of the consenting party or parties by the terms of the relevant operating agreement, unit agreement, contract agreement, contract development, or other instruments providing for such non-consent operations. " Subject Well" shall mean each well (whether now existing or hereinafter drilled) on the Leases in respect of which Grantor owns any interest or is entitled to any of the Minerals production or the proceeds therefrom (whether directly or indirectly by virtue of the effect of any farmout or farmin provisions or other provisions). " Termination Date" shall mean the day on which the total volume of the Subject Minerals produced, saved and sold from and after the Effective Time equals a volume of (a) 9.1147 MMBOE less (b) the total volume of the Subject Minerals produced, saved and sold during the Production Period Prior to the Effective Time and less (c) the aggregate volume of proved reserves attributable to the Subject Interests that are Transferred by Grantor pursuant to Section 5.1 hereof (with the volume of proved reserves attributable to any individual Subject Interest so Transferred determined solely by reference to the quantity of reserves attributable to such Subject Interest that are expected to be produced during the term of the Net Profits Interest in the most recent reserve report prepared by an independent reserve engineer in accordance with the methodology specified in the rules and regulations of the Securities and Exchange

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Commission, provided that, in the event an independent reserve engineer has not prepared a reserve report satisfying the foregoing requirements within twelve (12) months prior to the date of the Transfer of such Subject Interest, no volume of proved reserves for such Subject Interest shall be included in such aggregate volume pursuant to this clause (c)). " Transfer" including its syntactical variants, shall mean any assignment, sale, transfer, conveyance, or disposition of any property; provided , however, " Transfer" as used herein does not include the granting of a security interest, pledge, or mortgage in Grantor' s interest in any property, including the Subject Interests or the Subject Minerals. " Trust Units" shall have the meaning ascribed to such term in the Trust Agreement. " Trust Agreement" shall mean the Amended and Restated Trust Agreement of Whiting USA Trust I, dated of even date herewith, by and among Grantor, Grantee and Wilmington Trust Company, a banking corporation organized under the laws of the State of Delaware. ARTICLE III
ESTABLISHMENT OF NET PROFITS ACCOUNT 3.1 Net Profits Account . Grantor shall establish and maintain true and correct books and records in order to determine the credits and debits to a Net Profits Account to be maintained by Grantor at all times during the Net Profits Period, in accordance with the terms of this Conveyance and prudent and accepted accounting practices. For purposes of this Section 3.1: (a) The Net Profits Account shall be credited with an amount equal to the sum, from and after the Effective Time with respect to each Payment Period, of the gross proceeds (determined before calculating the Net Profits) received by Grantor from the sale of all Subject Minerals; provided , however, that: (i) Subject to the following provisions of this Section 3.1(a), gross proceeds shall include all consideration received, directly or indirectly, for Transfers of Subject Minerals as, if and when produced, including without limitation advance payments and payments under take or pay and similar provisions of Production Sales Contracts when credited against the price for delivery of production; (ii) if any proceeds are withheld from Grantor for any reason (other than at the request of Grantor), such proceeds shall not be considered to be gross proceeds until such proceeds are actually received by Grantor; (iii) if Grantor becomes an underproduced party under any Gas balancing or similar arrangement affecting the Subject Interests, then the Net Profits Account shall not be credited with any amounts for any Gas attributable to the Subject Interests that is deemed to be stored for Grantor' s account under the terms of such Gas balancing arrangement, and if Grantor becomes an overproduced party under any Gas balancing or similar arrangement affecting the Subject Interests, then the Net Profits Account shall not be credited with any amount for any Gas taken by an underproduced party as " make-up" Gas that would otherwise be attributable to the Subject Interests. The Net Profits Account shall be credited with amounts

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received by Grantor (1) for any " make up" Gas taken by Grantor as a result of its position as an underproduced party under any Gas balancing or similar arrangement affecting the Subject Interests, (2) as a balancing of accounts under a Gas balancing or other similar arrangement affecting the Subject Interests either as an interim balancing or at the depletion of the reservoir, and (3) for any Gas taken by Grantor attributable to the Subject Interests in excess of its entitlement share of such Gas; (iv) if Grantor shall be a party as to any non-consent operations conducted with respect to all or any of the Subject Interests from and after the Effective Time, all gross proceeds to be credited to the Net Profits Account with respect thereto shall be governed by Section 4.3; (v) if a controversy or possible controversy exists (whether by reas
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