termination agreement

 

This Termination Agreement (the “Agreement”) dated as of October 18, 2012 is by
and between Hunter Drilling, LLC (“Hunter Drilling”) and First Security Bank as
Indenture Trustee for the Holders of certain Senior Series 2009A Debentures and
Series 2009B Debentures (the “Trustee”).

 

WHEREAS, Hunter Drilling and the Trustee have entered into an Asset Purchase
Agreement dated as of July 19, 2012 with respect to the purchase by Hunter
Drilling of certain assets of O&G Leasing, LLC (“O&G”) and Performance Drilling
Company, LLC (“Performance”) (the “Asset Purchase Agreement”);

 

WHEREAS, Red Mountain Resources, Inc. (“RMR”), the parent company and sole
member of Hunter Drilling, is a party to the Asset Purchase Agreement solely
with respect to the provisions of Sections 2.4(b), 2.4(c) and 7.2 of the Asset
Purchase Agreement;

 

WHEREAS, Hunter Drilling and RMR assert that based on the amount of accrued
administrative obligations in the chapter 11 cases involving O & G and
Performance, in addition to other facts, the closing of the Asset Purchase
Agreement is an impossibility;

 

WHEREAS, the Trustee does not agree with the assertions of Hunter Drilling and
RMR in the immediately preceding recital;

 

WHEREAS, the Trustee asserts that Hunter Drilling and RMR are unable to perform
their respective obligations under the Asset Purchase Agreement based upon,
among other things, information contained in RMR’s Form 10-K filing on September
13, 2012 and RMR’s Form 10-Q filing on October 16, 2012;

 

 

 

 

 

WHEREAS, RMR and Hunter Drilling do not agree with the assertions of the Trustee
in the immediately preceding recital;

 

WHEREAS, Section 2.4(a)(3) of the Asset Purchase Agreement requires Hunter
Drilling to provide, on or before October 23, 2012, evidence reasonably
satisfactory to the Trustee that Hunter Drilling has sufficient conversions of
debentures as required by Sections 2.4(b)(2) and 2.4(c)(2) of the Asset Purchase
Agreement and/or Cash in one or more segregated, restricted accounts for the
Cash required by Sections 2.4(b)(2) and 2.4(c)(2) of the Asset Purchase
Agreement and for the Closing Cash Payment required by Section 2.4(a)(1) of the
Asset Purchase Agreement and the Cash Contribution of Section 2.4(a)(2) of the
Asset Purchase Agreement, less the amount of the Deposit (the “Closing
Obligations”);

 

WHEREAS, the Trustee seeks proof of the ability of RMR and Hunter Drilling to
satisfy the Closing Obligations as a condition to the Trustee’s agreement to
consensually terminate the Asset Purchase Agreement;

 

WHEREAS, Hunter Drilling has provided to the Trustee pursuant to the terms of
the Asset Purchase Agreement a deposit in the amount of $250,000 (the
“Deposit”);

 

WHEREAS, Hunter Drilling, the Trustee and RMR have agreed upon: (i) the form of
evidence to substantiate the ability of RMR and Hunter Drilling to perform the
Closing Obligations; (ii) the terms and conditions for the return of the Deposit
to Hunter Drilling upon termination of the Asset Purchase Agreement; and/or
(iii) the terms and conditions for the retention of the Deposit by the Trustee
if RMR and Hunter Drilling are unable to provide reasonably satisfactory
evidence of their ability to satisfy the Closing Obligations pursuant to Section
2.4(a)(3) of the Asset Purchase Agreement.

 

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NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged by the parties, it is agreed as follows:

 

1.                  Unless otherwise expressly provided to the contrary in this
Agreement, capitalized terms used herein shall have the meaning set forth in the
Asset Purchase Agreement.

 

2.                  On or before October 23, 2012, Hunter Drilling will deliver
to the Trustee the following (the “Hunter Deliverables”):

 

(a)               Certification by counsel to Hunter Drilling of Hunter
Drilling’s delivery into an escrow account, for which counsel to Hunter Drilling
will serve as the escrow agent (the “Escrow Account”),1 Cash in the amount of
$700,000, plus the amounts of any Exchanged Senior Debentures Shortfall and/or
Exchanged Junior Debentures Shortfall as required under sub-paragraphs (b) and
(c) below;

 

(b)              Copies of each Debenture Purchase Agreement, which shall be in
the form substantially attached hereto as Exhibit A, with respect to the
acquisition by RMR of Senior Series 2009A Debentures in an aggregate principal
amount of at least $2,345,000.00 (or such lesser amount if Hunter Drilling has
delivered an additional amount of Cash to the Escrow Account equal to the
Exchanged Senior Debentures Shortfall );

 

 

 

1 The Escrow Account and the service of counsel to Hunter Drilling as escrow
agent shall be subject to the terms of an Escrow Agreement, which will be
executed simultaneously with this Agreement.

 

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(c)              Copies of each Debenture Purchase Agreement, which shall be in
the form substantially attached hereto as Exhibit A, with respect to the
acquisition by RMR of Series 2009B Debentures in an aggregate principal amount
of at least $1,050,000 (or such lesser amount if Hunter Drilling has deposited
an additional amount of Cash to the Escrow Account equal to the Exchanged Junior
Debentures Shortfall); and

 

(d)              RMR’s filing with the Securities and Exchange Commission
(“SEC”) of a Form 8-K reflecting its acquisition of the Senior Series 2009A
Debentures and the Series 2009B Debentures as required by sub-paragraphs (b) and
(c) above.

 

3.                  In the event RMR and Hunter Drilling deliver the Hunter
Deliverables on or before October 23, 2012, then: (a) the Trustee will deem the
Closing Obligations satisfied; (b) the Asset Purchase Agreement will be deemed
terminated pursuant to Section 6.1(a) of the Asset Purchase Agreement; and (c)
the Trustee will cause the return of the Deposit by wire transfer of immediately
available funds to an account designated by counsel to Hunter Drilling within
two (2) business days of the delivery to the Trustee of the Hunter Deliverables.

 

4.                  In the event RMR and Hunter Drilling fail to deliver the
Hunter Deliverables on or before October 23, 2012, then: (a) the Asset Purchase
Agreement will be deemed terminated pursuant to Section 6.1(c)(iv) of the Asset
Purchase Agreement; and (b) the Trustee will retain the Deposit pursuant to
Sections 2.4(e)(5) and 6.2 of the Asset Purchase Agreement.

 

5.                  Upon the termination of the Asset Purchase Agreement in
accordance with the terms of this Agreement, the Trustee, Hunter Drilling and
RMR (the “Parties”) shall have no further obligations whatsoever under the Asset
Purchase Agreement, and the Asset Purchase Agreement shall be deemed to be of no
further force and effect. In addition, upon the termination of the Asset
Purchase Agreement:

 

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(a)               Hunter Drilling and RMR hereby fully, finally, and completely
remise, release, acquit and forever discharge the Trustee and all managers,
members, shareholders, affiliates, directors, officers, agents, employees,
attorneys, representatives of the Trustee, and all present and former members of
the Debenture Holders Steering Committee, of and from all claims, known or
unknown, arising from or in connection with the Asset Purchase Agreement, the
Plan of Reorganization, the Auction, the acquisition by RMR of any of the Series
2009 Debentures, the chapter 11 proceedings of O&G and Performance, and all
claims arising from or relating to any alleged bad faith, breach of fiduciary
duty, breach of good faith and fair dealing, anticipatory breach of the Asset
Purchase Agreement, or violation of any statute or regulation arising from or in
connection with any of the foregoing.

 

(b)              The Trustee hereby fully, finally, and completely remises,
releases, acquits and forever discharges Hunter Drilling and RMR and all
managers, members, shareholders, affiliates, directors, officers, agents,
employees, attorneys and representatives of Hunter Drilling and RMR of and from
all claims, known or unknown, arising from or in connection with the Asset
Purchase Agreement, the Plan of Reorganization, the Auction, the acquisition by
RMR of any of the Series 2009 Debentures, the chapter 11 proceedings of O&G and
Performance, and all claims arising from or relating to any alleged bad faith,
breach of fiduciary duty, breach of good faith and fair dealing, anticipatory
breach of the Asset Purchase Agreement, or violation of any statute or
regulation arising from or in connection with any of the foregoing.

 

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6.                  This Agreement may be executed by the Parties in one or more
counterparts, each of which shall be deemed an original instrument but all of
which together shall constitute one and the same instrument. A facsimile
transmission of a signed copy of this Agreement shall be effective as a valid
and binding agreement between the Parties.

 

7.                  This Agreement shall be governed by the laws of the State of
Mississippi without regard to rules concerning conflicts of laws.

 

8.                  Any claim or proceeding brought, arising out of or related
to this Agreement shall be brought in the United States Bankruptcy Court for the
Southern District of Mississippi, Jackson Division (the “Bankruptcy Court”), and
the Bankruptcy Court shall retain jurisdiction to determine any and all such
claims or proceedings. The Parties waive, to the fullest extent permitted by
applicable law, any objection which they may now or hereafter have to the
bringing of any such claim or proceeding in the Bankruptcy Court.

 

 

Signatures on the following page.

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.

 

HUNTER DRILLING, LLC

 

By: /s/ Alan W. Barksdale

Alan W. Barksdale

President

 

RED MOUNTAIN RESOURCES, INC.

 

By: /s/ Alan W. Barksdale

Alan W. Barksdale

President & CEO

 

FIRST SECURITY BANK,
as Indenture Trustee

 

By:/s/ Frank Faust

 

Name: Frank Faust

 

Title:SVP

 

 

 

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