Execution Version

 

SECOND AMENDMENT TO LOAN AGREEMENT

THIS SECOND AMENDMENT TO LOAN AGREEMENT (this “Amendment”) is dated as of the
26th day of June, 2009.

RAM ENERGY RESOURCES, INC., a Delaware corporation (the “Borrower”), GUGGENHEIM
CORPORATE FUNDING, LLC, as arranger and administrative agent (the
“Administrative Agent”), WELLS FARGO FOOTHILL, INC., as documentation agent,
WESTLB AG, NEW YORK BRANCH and CIT CAPITAL USA INC., as co-syndication agents,
and the financial institutions from time to time party thereto as lenders (the
“Lenders”), are parties to that certain Loan Agreement dated as of November 29,
2007 (the “Loan Agreement”) and the Borrower, the Administrative Agent and the
undersigned Lenders have agreed to the amendment set forth herein subject to the
terms and conditions set forth herein. Therefore, in consideration of the mutual
agreements and other provisions contained herein, the parties hereto agree as
follows:

 

Paragraph 1.

Amendment.

a.         Definitions. The following definitions are added or amended, as the
case may be, to read as follows:

“Applicable Term Loan B Prepayment Premium” means, as of any date of
determination, during the period of time from and after the Closing Date up to
(but not including) the date that is the first anniversary of the Closing Date,
an amount equal to two percent (2.0%) times the aggregate principal amount of
the Term Loan B prepaid (or required to be prepaid) on such date of
determination.

“Cash Interest” has the meaning set forth in Section 2.6(d).

“EBITDA” means, for any period, the sum, determined (without duplication) for
Borrower and its Subsidiaries, of (i) Consolidated Net Income of Borrower and
its Subsidiaries plus (ii) Interest Expense of Borrower and its Subsidiaries for
such period to the extent deducted in the determination of Consolidated Net
Income of Borrower and its Subsidiaries for such period plus (iii) any
capitalized PIK Interest for such period to the extent deducted in the
determination of Consolidated Net Income of Borrower and its Subsidiaries for
such period plus; (iv) depreciation, amortization, share-based compensation
expenses under the RAM Energy Resources, Inc. 2006 Long Term Incentive Plan, and
other similar non-cash items (with the exception of non-cash charges that
require an accrual or reserve for cash charges for any future period and
normally recurring accruals) to the extent deducted in the determination of
Consolidated Net Income of Borrower and its Subsidiaries for such period plus
(v) all taxes accrued for such period on or measured by income to the extent
deducted in the determination of Consolidated Net Income of Borrower and its
Subsidiaries for such period plus (vi) all unrealized losses (and minus
unrealized gains) related to Hedging Agreements to the extent recognized in the
determination of Consolidated Net Income of Borrower and its Subsidiaries for
such period plus (vii) settlement payments, costs and expenses directly related
to the Sacket Settlement plus (viii) amortized fees, costs and expenses paid by
the Borrower under this Agreement, the Fee Letter and the Second Amendment Fee
Letter.

 

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“Interest Expense” means, for any period, the sum (determined without
duplication) of the aggregate amount of interest expense accruing during such
period on Indebtedness of Borrower and its Subsidiaries on a consolidated basis,
including the interest portion of payments under capitalized leases and any
capitalized interest, but excluding (i) amortization of debt discount and
expense and (ii) capitalized PIK Interest.

“LIBOR Rate” means, for each Interest Period for each LIBOR Rate Loan, the
greater of (i) 1.5% or (ii) the rate per annum determined by Administrative
Agent (rounded upwards, if necessary, to the next 1/16%) by dividing (a) the
Base LIBOR Rate for such Interest Period, by (b) 100% minus the Reserve
Percentage. The LIBOR Rate shall be adjusted on and as of the effective day of
any change in the Reserve Percentage.

“PIK Interest” has the meaning set forth in Section 2.6(d).

“Pricing Grid” means the annualized variable rates set forth below for the
Applicable Margin based upon Borrowing Base Utilization, as follows:

 

Borrowing Base Utilization

Applicable Margin

 

LIBOR Rate Loan

Reference Rate Loan

Less than or equal to 50%

2.25%

2.25%

Greater than 50% but less than or equal to 75%

2.50%

2.50%

Greater than 75% but less than or equal to 90%

2.75%

2.75%

Greater than 90%

3.00%

3.00%

 

provided, however, that the “Applicable Margin” means 3% (a) during the
occurrence and continuance of an Event of Default, and (b) if at any time
Borrower fails to deliver a Reserve Report pursuant to Section 6.2 (b), until
such time as a Reserve Report is delivered.

“Sacket Settlement” means the Court-approved settlement of the class action
litigation styled Sacket v. Great Plains Pipeline Company, District Court of
Woods County, Oklahoma, Case No. CJ-2002-70 as further described on Exhibit B
attached hereto.

 

b.

Provisions.

(i)        Section 2.2(b). Section 2.2(b) of the Loan Agreement is amended to
read as follows:

“(b)      Scheduled and Interim Redeterminations. The Borrowing Base shall be
redetermined semi-annually in accordance with Section 2.2(c)(i) (a “Scheduled
Redetermination”), and, subject to Section 2.2(d), such redetermined Borrowing
Base shall become effective and applicable to Borrower, Administrative Agent,
the Issuing Lender and the Lenders on April 1 and October 1 of each year or
otherwise as provided in Section 2.2(d)(i). In addition, Borrower may, by
notifying the Administrative Agent thereof, and the Administrative Agent may, at
the direction of the Required Revolver Lenders, by notifying Borrower thereof,
one time during any 12 month period, each elect to cause the Borrowing Base to
be redetermined between Scheduled Redeterminations (an “Interim
Redetermination”) in accordance with Section 2.2(c). 

(ii)       Section 2.4(c)(ii)(E). Section 2.4(c)(ii)(E) of the Loan Agreement is
amended to read as follows:

 

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“(E)     Immediately, if and to the extent that the Term Loan B exceeds the Term
Loan B Commitment, because of the capitalization of PIK Interest under
Section 2.6(e) or for any other reason.”

(iii)      Section 2.6(d). Section 2.6(d) of the Loan Agreement is amended to
read as follows:

“(d)      Interest Rate on the Term Loan B. Except as provided in clause (c)
above, the Term Loan B shall bear interest (“Cash Interest”) on the average
Daily Balance thereof as follows: (i) if the relevant Obligation is a LIBOR Rate
Loan, at a per annum rate equal to the sum of (A) eight and one-half percent
(8.5%), plus (B) the LIBOR Rate; and (ii) otherwise, at a per annum rate equal
to the sum of (A) eight and one-half percent (8.5%), plus (B) the Reference Rate
(provided that interest shall not accrue on unpaid interest on the Term Loan B
prior to the date payment of such interest is due). The Term Loan B shall also,
in addition to Cash Interest, bear interest (“PIK Interest”) on the average
Daily Balance at a per annum rate equal to two and three-quarters percent
(2.75%).”

(iv)      Section 2.6(e). Section 2.6(e) of the Loan Agreement is amended by
adding the following immediately before the period at the end of the first
sentence thereof:

“; provided further that payment of PIK Interest may be deferred at the option
of the Borrower (which option shall be deemed exercised on a monthly basis
unless Borrower specifically notifies Administrative Agent to the contrary at
least two (2) Business Days prior to the first day of any month), in which case
on the first day of each month, the unpaid amount of PIK Interest will be
capitalized and added to the principal of the Term Loan B, as if advanced as a
Term Loan B term loan on such day”.

(v)       Section 7.4(c). Section 7.4(c) of the Loan Agreement is amended by
replacing “$5,000,000”, with “$10,000,000.”

(vi)      Section 7.18(c) and (d). Section 7.18(c) and (d) of the Loan Agreement
are amended to read as follows:

“(c)      Maximum Leverage. As of the end of any fiscal quarter of the Borrower,
a ratio of Total Debt to EBITDA for the four fiscal quarters then ended of equal
to or less than:

 

As Tested on:

Maximum Level

The last day of each March, June, September and December, starting with June 30,
2009 and ending on June 30, 2011

4.75:1.00

September 30, 2011 and thereafter

4.00:1.00

 

As of the end of any fiscal quarter of Borrower, a ratio of Revolving Advances
to EBITDA for the four fiscal quarters then ended of equal to or less than:

 

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As Tested on:

Maximum Level

The last day of each March, June, September and December, starting with June 30,
2009 and ending on June 30, 2011.

2.75:1.00

 

(d)       Asset Coverage Ratio. A ratio of NYMEX Value to Total Debt, tested as
of each Redetermination Date and at any time between such dates that the
Borrowing Base Entities acquire or dispose of Oil and Gas Properties with an
aggregate NYMEX Value equal to or greater than $1,000,000, of more than:

 

As Tested on:

Minimum Level

Prior to July 1, 2011

1.50:1.00

July 1, 2011 and thereafter

1.75:1.00

 

For purposes of testing compliance with the Asset Coverage Ratio, NYMEX Value
shall be determined based on the NYMEX Price utilized in the then most recent
Reserve Report provided by Borrower to the Administrative Agent.

 

Paragraph 2.    Effectiveness.This Amendment shall become effective (i) as of
the date set forth in the first paragraph hereof (the “Amendment Effective
Date”) with respect to all of the amendments set forth herein other than the
amendments to Sections 7.18(c) and (d), and (ii) as of June 30, 2009 with
respect to the amendments to Sections 7.18(c) and (d), but in either case
subject to the satisfaction or waiver in writing of the following conditions
precedent:

c.         the Administrative Agent shall have received a counterpart of this
Amendment executed by the Borrower, the Administrative Agent, and the Required
Lenders.

 

d.

the payment of the fees set forth in the fee letter dated the date hereof.

 

e.

the payment of any fees of counsel to the Administrative Agent previously
invoiced.

f.         the execution and delivery of the Consent, Waiver, Release and
Reaffirmation by each Guarantor substantially in the form attached as Exhibit A
hereto.

Paragraph 3.    Governing Law; Miscellaneous. Unless otherwise defined in this
Amendment, capitalized terms used herein shall have the meaning set forth in the
Loan Agreement. This Amendment (a) shall be governed by, and construed in
accordance with, the internal laws of the State of New York; (b) may be executed
in any number of counterparts with the same effect as if all signatories had
signed the same document, and all of those counterparts must be construed
together to constitute the same document, and (c) may be validly executed by
facsimile or other electronic transmission.

Paragraph 4.    Reaffirmation of Representations and Warranties; Additional
Representations and Warranties. Borrower, to induce Lenders to enter into this
Amendment, hereby reaffirms, as of the date hereof (or as such earlier date as
expressly set forth herein), its representations and warranties contained in
Section 5 of the Loan Agreement and in all other documents executed pursuant
thereto, and represents and warrants as follows:

 

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g.         The execution and delivery of this Amendment and the performance by
Borrower of its obligations under this Amendment are within Borrower’s power,
have been duly authorized by all necessary corporate action, have received all
necessary governmental approval (if any shall be required), and do not and will
not contravene or conflict with (i) any Legal Requirements or (ii) any agreement
binding upon Borrower or affecting any of the Collateral; and

h.         This Amendment represents the legal, valid and binding obligations of
Borrower enforceable in accordance with its terms subject as to enforcement only
to bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors’ rights generally.

i.          The Guarantors listed in the Consent, Waiver, Release and
Reaffirmation include each Subsidiary of the Borrowers.

Paragraph 5.    Ratification of Liens and Security Interests. Borrower hereby
acknowledges and ratifies the existence and priority of the Liens granted by
Borrower in favor of lender in and to the Collateral and represents, warrants
and covenants that such liens and security interests are valid, existing and in
full force and effect.

Paragraph 6.    Miscellaneous. This Amendment supersedes all prior agreements
(written or oral) between Borrower and Lenders with regard to the subject
matters hereof. This Amendment is a Loan Document. Except as affected by this
Amendment, the Loan Documents are unchanged and continue in full force and
effect. However, in the event of any inconsistency between the terms of the Loan
Agreement as amended by this Amendment and any other Loan Document, the terms of
the Loan Agreement will control and the other document will be deemed to be
amended to conform to the terms of the Loan Agreement. All references to the
Loan Agreement will refer to the Loan Agreement as amended by this Amendment.
Borrower agrees that all Loan Documents to which it is a party (whether as an
original signatory or by assumption of the Obligations) remain in full force and
effect and continue to evidence its legal, valid and binding obligations
enforceable in accordance with their terms (as the same are affected by this
Amendment or are amended in connection with this Amendment). Borrower releases
each Lender executing this Amendment (collectively, the “Executing Lenders”)
from any liability for actions or failures to act in connection with any of the
Loan Documents prior to the date of this Amendment. Any course of dealing among
the Borrower or any Lender or any other Person will not be deemed to have
altered or amended the Loan Agreement or any Lenders’ right to enforce the Loan
Agreement as written. This Amendment will be binding upon and insure to the
benefit of each of the undersigned and their respective successors and permitted
assigns.

Paragraph 7.    Waiver and Release. In consideration of the amendments herein
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, Borrower hereby waives, remises, releases, and forever
discharges each Executing Lender, its predecessors and its successors, assigns,
affiliates, shareholders, directors, officers, accountants, attorneys,
employees, agents, representatives, and servants (collectively, the “Released
Parties”) of, from and against any and all claims, actions, causes of action,
suits, proceedings, contracts, judgments, damages, accounts, reckonings,
executions, and liabilities whatsoever of every name and nature, whether known
or unknown, whether or not well founded in fact or in law, and whether in law,
at equity, or otherwise, which the undersigned ever had or now has for or by
reason of any matter, cause, or anything whatsoever to this date relating to or
arising out of the loans, or any of them, or any of the Loan Documents,
including without limitation any actual or alleged act or omission of any of the
Released Parties with respect to the Loans, or any of them, or any of the Loan
Documents, or any security interests, liens, or collateral in connection
therewith, or the enforcement of any of such Lender’s rights or remedies
thereunder. The terms of this waiver and release shall survive the termination
of this Agreement, the Loans, or the Loan Documents and shall remain in full
force and effect after the termination of this Agreement

 

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Paragraph 8.    ENTIRE AGREEMENT. This Amendment represents the final agreement
among the parties about the subject matter of this Amendment and may not be
contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of the parties. There are no unwritten oral agreements between the
parties relating to this subject matter.

 

[Signature Pages Follow]

 

IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed
and delivered by their proper and duly authorized officers as of the day and
year first above written.

BORROWER:

RAM ENERGY RESOURCES, INC.,

a Delaware corporation

By:  /s/ G. Les Austin

Name:  G. Les Austin

Title:  Senior Vice President and Chief Financial Officer

 

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ADMINISTRATIVE AGENT:

GUGGENHEIM CORPORATE FUNDING LLC,

a Delaware limited liability company, as Administrative Agent for the Lenders

By:  /s/ W.R. Hagner

Name:  Bill Hagner

Title:  Managing Director

 

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WELLS FARGO FOOTHILL, INC.

a California corporation, as Documentation Agent and a Lender

 

By:  /s/ Gary Forlenza

Name:  Gary Forlenza

Title:  Vice President

 

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WESTLB AG, NEW YORK BRANCH

as Co-Syndication Agent and a Lender

 

By:  /s/ Ian Schottlander

Name:  Ian Schottlander

Title:  Managing Director

By:  /s/ Horst Kleinecke

Name:  Horst Kleinecke

Title:  Executive Director

 

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CIT MIDDLE MARKET LOAN TRUST III

By:  CIT Asset Management, as authorized signatory

 

By:  /s/ David M. Harnisch

Name:  David M. Harnisch

Title:  Managing Director

 

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CAPITAL ONE, N.A.

 

By:  /s/ Peter Shen

Name:  Peter Shen

Title:  Assistant Vice President

Capital One Bank, N.A.

 

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AIM FLOATING RATE FUND

By: INVESCO Senior Secured Management, Inc.

As Sub-Adviser

 

By:  /s/ Thomas Ewald

Name:  Thomas Ewald

Title:  Authorized Signatory

 

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MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY

BILL & MELINDA GATES FOUNDATION TRUST

C.M. LIFE INSURANCE COMPANY

By:  Babson Capital Management LLC as Investment Adviser

 

By:  /s/ Geoffrey Takacs

Name:  Geoffrey Takacs

Title:  Director

 

BABSON MID-MARKET CLO LTD. 2007-II

BABSON CREDIT STRATEGIS CLO, LTD.

ARTUS LOAN FUND 2007-I, LTD.

By:  Babson Capital Management LLC as Collateral

Manager

 

By:  /s/ Geoffrey Takacs

Name:  Geoffrey Takacs

Title:  Director

 

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BLT 2009-1 LTD.

By: INVESCOSenior Secured Management, Inc.

As Collateral Manager

 

By:  /s/ Thomas Ewald

Name:  Thomas Ewald

Title:  Authorized Signatory

 

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DK ACQUISITION PARTNERS, L.P.

By: M.H. Davidson & Co., its General Partner

 

By:  /s/ Avi Friedman

Name:  Avi Friedman

Title:  General Partner

 

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GRAND CENTRAL ASSET TRUST, CAMERON I SERIES

 

By:  /s/ Adam Kaiser

Name:  Adam Kaiser

Title:  Attorney-in-Fact

 

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KOTONAH V, LTD.

By: INVESCO Senior Secured Management, Inc. as Investment Manager

 

By:  /s/ Thomas Ewald

Name:  Thomas Ewald

Title:  Authorized Signatory

 

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LIBERTY HARBOR MASTER FUND I, L.P.

By: Goldman Sachs Asset Management, LP, its investment manager

 

By:  /s/ Sandra Stulberger

Name:  Sandra L. Stulberger

Title:  Authorized Signatory

 

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MIDLAND NATIONAL LIFE INSURANCE COMPANY (Annuity)

By: Guggenheim Partners Asset Management, Inc.

 

By:  /s/ Michael Damaso

Name:  Michael Damaso

Title:  Senior Managing Director

 

MIDLAND NATIONAL LIFE INSURANCE COMPANY (Main)

By: Guggenheim Partners Asset Management, Inc.

 

By:  /s/ Michael Damaso

Name:  Michael Damaso

Title:  Senior Managing Director

 

NORTH AMERICAN COMPANY FOR LIFE AND HEALTH INSURANCE (Annuity)

By: Guggenheim Partners Asset Management, Inc.

 

By:  /s/ Michael Damaso

Name:  Michael Damaso

Title:  Senior Managing Director

 

NORTH AMERICAN COMPANY FOR LIFE AND HEALTH INSURANCE (Main)

 

By:  /s/ Michael Damaso

Name:  Michael Damaso

Title:  Senior Managing Director

 

NZC OPPORTUNITIES LLC

By: Guggenheim Investment Management, LLC as its Collateral Manager

 

By:  /s/ Michael Damaso

Name:  Michael Damaso

Title:  Senior Managing Director

 

ORPHEUS FUNDING LLC

By: Guggenheim Investment Management, LLC as its Manager

 

By:  /s/ Michael Damaso

Name:  Michael Damaso

Title:  Senior Managing Director

 

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NUVEEN FLOATING RATE INCOME OPPORTUNITY FUND

By: Symphony Asset Management, LLC

 

By:  /s/ James Kim

Name:  James Kim

Title:  Associate Portfolio Manager

 

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PRESIDENT & FELLOWS OF HARVARD COLLEGE (Ref. Harvard Special Situations Account)

By: Whippoorwill Associates, Inc.

Its Agent and Authorized Signatory

 

By:  /s/ Steven K. Gendal

Name:  Steven K. Gendal

Title:  Principal

 

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SATELLITE SENIOR INCOME FUND II, LLC

By: Satellite Asset Management, L.P., Its Investment Advisor

 

By:  /s/ Simon Raykher

Name:  Simon Raykher

Title:  General Counsel and Principal

 

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SERENGETI LOXODON OVERSEAS I LTD.

By: Serengeti Asset Management LP, as Collateral Manager

 

By:  /s/ Alexander Lemond

Name:  Alexander Lemond

Title:   Director

 

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SERENGETI LOXODON ONSHORE I LTD.

By: Serengeti Asset Management LP, as Collateral Manager

 

By:  /s/ Alexander Lemond

Name:  Alexander Lemond

Title:  Director

 

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SOLAR CAPITAL

 

By:  /s/ David Mait

Name:  David Mait

Title:  Authorized Signatory

 

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SYMPHONY CLO II

By: Symphony Asset Management, LLC

 

By:  /s/ James Kim

Name:  James Kim

Title:  Associate Portfolio Manager

 

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SYMPHONY CLO III

By: Symphony Asset Management, LLC

 

By:  /s/ James Kim

Name:  James Kim

Title:  Associate Portfolio Manager

 

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SYMPHONY CLO V

By: Symphony Asset Management, LLC

 

By:  /s/ James Kim

Name:  James Kim

Title:  Associate Portfolio Manager

 

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SYMPHONY CLO VI

By: Symphony Asset Management, LLC

 

By:  /s/ James Kim

Name:  James Kim

Title:  Associate Portfolio Manager

 

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VENTURE VII CDO LIMITED

By its investment advisor,

MJX Asset Management LLC

 

By:  /s/ John J. Wagner

Name:  John J. Wagner

Title:  Managing Director

 

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VENTURE VIII CDO LIMITED

By its investment advisor,

MJX Asset Management LLC

 

By:  /s/ John J. Wagner

Name:  John J. Wagner

Title:  Managing Director

 

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VENTURE IX CDO LIMITED

By its investment advisor,

MJX Asset Management LLC

 

By:  /s/ John J. Wagner

Name:  John J. Wagner

Title:  Managing Director

 

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WELLPOINT, INC.

By: Whippoorwill Associates, Inc.

Its Agent and Authorized Signatory

 

By:  /s/ Steven K. Gendal

Name:  Steven K. Gendal

Title:  Principal

 

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WHIPPOORWILL ASSOCIATES, INC. PROFIT SHARING PLAN

By: Whippoorwill Associates, Inc.

Its Agent and Authorized Signatory

 

By:  /s/ Steven K. Gendal

Name:  Steven K. Gendal

Title:  Principal

 

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WHIPPOORWILL DISTRESSED OPPORTUNITY FUND, L.P.

By: Whippoorwill Associates, Inc.

Its Agent and Authorized Signatory

 

By:  /s/ Steven K. Gendal

Name:  Steven K. Gendal

Title:  Principal

 

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WHIPPOORWILL OFFSHORE DISTRESSED OPPORTUNITY FUND, LTD.

By: Whippoorwill Associates, Inc.

Its Agent and Authorized Signatory

 

By:  /s/ Steven K. Gendal

Name:  Steven K. Gendal

Title:  Principal

 

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EXHIBIT A

 

CONSENT, WAIVER, RELEASE AND REAFFIRMATION

 

Each of the undersigned is a “Guarantor” as defined therein under the Loan
Agreement among RAM Energy Resources, Inc., the lenders party thereto (“Lenders”
and Guggenheim Corporate Funding, LLC, as administrative agent for such Lenders
(“Administrative Agent”) and hereby (i) acknowledges receipt of a copy of the
Second amendment to Loan Agreement among the Borrower, the Lenders party thereto
(the “Executing Lenders”), and the Administrative Agent (the “Amendment”); (ii)
consents to Borrowers’ execution and delivery of the Amendment; (iii) agrees to
be bound by the Amendment; (iv) reaffirms that each of the other Loan Documents
that it is a party to including but not limited to the Secured Continuing
Guaranty dated November 29, 2007, continue to remain in full force and effect,
each as modified by the Amendment.; (v) waives any right under law or equity as
a guarantor or surety to object to the increased obligations of Borrower arising
out of the Amendment, and (vi) hereby waives, remises, releases, and forever
discharges each Executing Lender, its predecessors and its successors, assigns,
affiliates, shareholders, directors, officers, accountants, attorneys,
employees, agents, representatives, and servants (collectively, the “Released
Parties”) of, from and against any and all claims, actions, causes of action,
suits, proceedings, contracts, judgments, damages, accounts, reckonings,
executions, and liabilities whatsoever of every name and nature, whether known
or unknown, whether or not well founded in fact or in law, and whether in law,
at equity, or otherwise, which the undersigned ever had or now has for or by
reason of any matter, cause, or anything whatsoever to this date relating to or
arising out of the Loans, or any of them, or any of the Loan Documents,
including without limitation any actual or alleged act or omission of any of the
Released Parties with respect to the Loans, or any of them, or any of the Loan
Documents, or any security interests, liens, or collateral in connection
therewith, or the enforcement of any of the Executing Lender’s rights or
remedies thereunder. The terms of this waiver and release shall survive the
termination of this Agreement, the Loans, or the Loan Documents and shall remain
in full force and effect after the termination of this Agreement.

 

[Signature Page follows]

 

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IN WITNESS WHEREOF, each Guarantor has caused this Consent, Waiver, Release and
Reaffirmation to be duly executed as of the date first written above.

 

GUARANTORS:

 

/s/ Larry E. Lee          

Larry E. Lee, President and CEO of, and

on behalf of, the following entities:

 

RAM OPERATING COMPANY, INC.,

a Delaware corporation

 

RAM ENERGY HOLDINGS (LA), INC.,

a Delaware corporation

 

RAM ENERGY RESOURCES (LAFOURCHE), INC.,

a Louisiana corporation

 

RAM ENERGY LOUISIANA, LLC,

a Delaware limited liability company

 

 

By:

RAM Energy Resources (Lafourche), Inc.,

 

a Louisiana corporation,

 

its Sole Member and Manager

 

RAM ENERGY RESOURCES (WV), INC.,

a Delaware corporation

 

PONTOTOC PRODUCTION COMPANY,

INC., a Texas corporation

 

RAM ENERGY, INC.,

a Delaware corporation

 

RLP GULF STATES, L.L.C.,

an Oklahoma limited liability company

 

 

By:

Ram Energy, Inc., a Delaware corporation,

 

its Sole Member and Manager

 

WG OPERATING, INC.,

a Texas corporation

 

RWG ENERGY, INC.,

a Delaware corporation

 

WG PIPELINE, LLC,

a Texas limited liability company

 

By:

RWG Energy, Inc., a Delaware corporation,

             its Sole Member and Manager

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EXHIBIT B

 

RAM ENERGY RESOURCES, INC.

MEMORANDUM

 

TO:

The “Lenders” under Loan Agreement dated November 29, 2007, by and among RAM
Energy Resources, Inc., as Borrower, the Lenders, and Guggenheim Corporate
Funding, LLC, as the Arranger and Administrative Agent for the Lenders (the
“Loan Agreement”)

 

FROM:

RAM Energy Resources, Inc.

 

DATE:

May 7, 2009

 

RE:

Sacket Class Action Lawsuit

______________________________________________________________________________

 

This Memorandum provides information concerning the history and disposition of,
and the financial accounting treatment of transactions associated with the
settlement of, the class action lawsuit styled Sacket v. Great Plains Pipeline
Company, et al., District Court of Woods County, Oklahoma, Case No. CJ-2002-70
(the “Lawsuit”).

 

On February 24, 1998, RAM Energy, Inc. (“RAM Energy”) acquired Carlton Resources
Corporation (“Carlton”) in a $43.0 million stock transaction. Carlton’s
principal operating subsidiary, Magic Circle Energy Corporation (“Magic
Circle”), directly and through its affiliates, owned oil and gas producing
properties in Oklahoma, Texas, Kansas and elsewhere in the Mid-Continent region,
including a 200-mile multi-phase (natural gas, crude oil and saltwater) pipeline
system located in Alfalfa, Logan and Woods Counties, Oklahoma (the “System” or
“Carmen System”). The Carmen System had been constructed in the late 1970’s to
facilitate the development of oil and natural gas reserves in the rural and
seasonally almost unreachable portions of Woods and Alfalfa Counties. Magic
Circle took the lead in acquiring leases and drilling wells in the area, which
soon developed into a highly competitive play with many active operators. The
Carmen System purchased natural gas and crude oil at the wellhead (both from
Magic Circle and the other, unaffiliated producers in the field), gathered the
production to a central point where the gas was lightly processed then resold to
Oklahoma Natural Gas Company, the state’s largest natural gas utility, and the
oil was accumulated for pipeline delivery to Conoco and other oil purchasers in
the area. The System also disposed of produced water by gathering the saltwater
to a central point and disposing of same into a System-owned saltwater disposal
well. The System was operated as a typical mid-stream purchaser and reseller,
earning the same kinds of margins typically earned by other mid-stream companies
across Oklahoma, Texas and elsewhere at the time. The fact that the System also
purchased from unaffiliated producers and operators in the area and that over
time, several other systems ventured into the area and competed for the same
supplies of oil and gas, appeared to validate the reasonableness of the prices
paid by the System at the wellhead and the margins earned on System operations.

 

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In the mid-1990s, lawsuits started springing up across Oklahoma and other
producing states seeking damages against oil and gas lessees for charging
royalty owners (by deducting from “value” for royalty payment purposes) for
their share of post-production costs (compression, dehydration, gathering,
treating) incurred by the lessees in connection with the handling and marketing
of oil and natural gas. Over the next few years, Oklahoma case law on the
subject took a decidedly populist turn, with our Supreme Court handing down
decision after decision undermining what the industry believed to be well
established principles regarding the calculation and payment of royalties. In
connection with these changes, and as the result of a poorly understood case
from the 1980s involving a sale of production to an affiliated entity, plaintiff
lawyers and judges soon became intently focused on related party transactions,
such as the arrangement between Magic Circle, as lessee and operator of leases
connected to the Carmen System, and its wholly-owned subsidiary, Carmen Field
Limited Partnership (“CFLP”), which owned and operated the Carmen System. At
least partially due to a particularly punitive decision rendered by the District
Court of Texas County, Oklahoma in early 2001, (a class action verdict in which
the defendant owner of an affiliate gathering system was assessed damages of
approximately $75 million, including almost $19 million in punitive damages), in
late 2001 RAM sold all of its (i.e., Magic Circle’s) wells and properties in the
Carmen Field area (along with other properties) to a subsidiary of Chesapeake
Energy. Immediately after the sale, CFLP was dissolved and liquidated, the
Carmen System was assigned to its parent, Magic Circle, and Magic Circle changed
its corporate name to Great Plains Pipeline Company (“Great Plains”).

 

Shortly thereafter, on April 18, 2002, Glen D. Sacket (“Sacket”), a royalty
owner under three of the leases formerly owned by Magic Circle, filed the
Lawsuit as a class action on behalf of himself and all other royalty owners
under leases held by any of the defendants (which included RAM and its
affiliates and Chesapeake and its affiliates, based on an unrelated transaction
going back to 1993) on which there were wells connected to the System. Wells
Fargo Bank, N.A. was also included as a defendant in the Lawsuit, solely because
it had been the lead secured creditor in the Magic Circle bankruptcy in the
mid-1980s and had participated in the drafting of the finally approved Plan of
Reorganization which had “blessed” the wellhead sale transactions to CFLP.
Although the defendant lessees had always paid royalties to the lessors under
their respective leases based on the prices received at the wellhead from CFLP,
as owner and operator of the System, the plaintiff claimed that additional
royalties were due all members of the putative class because CFLP had resold the
oil and gas purchased at the wellhead for an amount in excess of the price upon
which royalty payments to the members of the putative class were based and paid
no royalties on natural gas liquids extracted from the gas at plants downstream
of the System. In other words, the plaintiff alleged that because of the
affiliate relationship, the Court should disregard the Carmen System in its
entirety and require that royalty payments for all natural gas, natural gas
liquids and crude oil delivered at the wellhead be based on the ultimate resale
price to the first unaffiliated purchaser. The plaintiff also claimed that
because the “deductions” taken by the lessees in accounting for royalties were
not reflected on the royalty payment check stubs, such omission constituted
constructive fraud and therefore the statute of limitations never ran on any of
the claims – in other words, the class claims would go back to the late 1970s
and underpayments would accrue interest at Oklahoma’s punitive “late payment”
statute at the rate of 12% per annum, compounded quarterly. In addition, the
petition included an unspecified claim for punitive damages.

 

 

 

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RAM, together with Magic Circle and its subsidiaries, and the other defendants
in the Lawsuit, believed that fair and proper accounting was made to the royalty
owners for production from the subject leases, filed answers disputing the
claims and were prepared to defend on multiple grounds, all of which were
believed to have considerable merit. RAM also believed that the case should not
be certified as a class action and determined to contest that issue vigorously.
In the meantime, in August 2003, RAM (Great Plains) sold the Carmen System in
its entirety to Continental Gas, Inc, which eventually rolled the System into
its Highland MLP.

 

On May 8, 2006, RAM Energy closed its merger with Tremisis Energy Acquisition
Corporation (“Tremisis”), which subsequently changed its corporate name to RAM
Energy Resources, Inc. (the “Company”). In connection with the RAM
Energy/Tremisis merger, the former stockholders of RAM Energy deposited in
escrow 3,200,000 shares of the Company common stock received by them as part of
the merger consideration to secure potential indemnity obligations to the
Company under the merger agreement, including losses incurred as a result of the
Lawsuit. No claims were made against the escrow prior to its scheduled
expiration on June 30, 2007, but all of the shares remained in escrow following
such date pending final resolution of the Lawsuit.

 

Between the filing of the Lawsuit and 2006, Oklahoma case law continued to
deteriorate with respect to post-production costs and affiliate transaction.
Over time, numerous motions were made and heard in the Lawsuit, but it soon
became painfully clear that the Court (sitting in Woods County) was favorably
disposed to the plaintiff’s case. On April 6, 2005, three years after the
Lawsuit was filed, the plaintiffs filed a motion for class certification, which
the defendants strongly resisted. The Court received evidence and heard
arguments of counsel on the motion during a five day hearing in June and August,
2006, and on January 11, 2007, entered an order certifying a class substantially
as requested by plaintiff. The defendants appealed the class certification order
to the Oklahoma Supreme Court.

 

On October 16, 2007, the Company executed a merger agreement providing for the
acquisition of Ascent Energy Inc., and in connection with the November 29, 2007
closing of that transaction, executed the Loan Agreement as an assumption,
ratification and amendment of the Third Amended and Restated Credit Agreement
dated as of April 3, 2006, by and among RAM Energy and several of the current
Lenders.

 

On June 20, 2008, the Oklahoma Court of Civil Appeals entered its order
affirming the decision of the Woods County District Court certifying the
plaintiff class. On July 10, 2008, the Company defendants, together with the
other defendants in the case, filed petitions for a writ of certiorari with the
Oklahoma Supreme Court, requesting that the Court review the case and reverse
the decision of the Court of Appeals and the trial Court. Shortly after filing
the petition for certiorari, the defendants initiated settlement discussions
with the plaintiff class representative and class counsel. At the time
settlement negotiations were commenced, the value of the RAM shares held in
escrow exceeded $15 million.

 

 

 

--------------------------------------------------------------------------------

On September 18, 2008, RAM Energy and its subsidiaries, together with the other
defendants in the lawsuit, entered into a settlement agreement with the
plaintiff, individually and as representative of the putative class, pursuant to
which the defendants agreed to pay an aggregate $25.0 million in settlement of
the lawsuit. RAM Energy and its subsidiaries agreed to pay $16.0 million of the
settlement amount, Chesapeake $7.5 million and Wells Fargo $1.5 million. On
October 14, 2008, the trial court preliminarily approved the settlement and
ordered that a fairness hearing be held to receive evidence and consider any
objections to the settlement by members of the putative class. Upon preliminary
approval by the Court, the entire settlement amount was deposited in escrow by
the defendants pending final approval of the settlement following the fairness
hearing. At September 30, 2008, RAM recorded a contingent liability of $16.0
million for its share of the settlement amount and a contingent receivable of
$9.2 million in other current assets representing the value of the 3.2 million
escrowed shares, based on the September 30 closing price of $2.89 per share. The
Company also recorded a charge to other expense of $6.8 million for the
difference between the contingent liability and the contingent receivable
amounts. On the December 31 financial statements, the contingent receivable was
reduced to $2.8 million due to a decline in the stock price to $.88 per share,
and the contingent liability increased to $13.2 million.

 

On March 5, 2009, following a hearing at which the Court received evidence
concerning the fairness of the proposed settlement to the plaintiff class, the
Court entered an order approving the settlement and the related plan of
allocation and distribution of the settlement fund. The judgment became final on
April 6, 2009, and the settlement was implemented by the commencement of
distributions from the settlement fund. Accordingly, in its March 31, 2009
financial statements, the Company recorded an additional charge to other expense
of $.4 million to take into account the further reduction of the stock price
from $.88 per share at year end to $.74 per share when the settlement was
finally implemented.

 

On April 7, 2009, the Company made a claim against the Ascent escrow for all of
the escrowed shares. Also on April 7, 2009, the former stockholders of RAM
Energy notified the escrow agent that they would substitute cash, at a fair
market value of $.74 per share (determined pursuant to the terms of the escrow
agreement), for a total of 316,190 shares of their Company common stock held in
escrow.

 

On April 8, 2009, the escrow agent initiated the transfer to the Company, in
satisfaction of the indemnification obligation of the former RAM Energy
stockholders, of a total of 2,883,810 shares of Company common stock (to be held
as treasury shares) and $233,980 in cash, less the fees and expenses of the
escrow agent. These transactions concluded the settlement and closed the escrow.

 

These entries conclude the financial accounting treatment of the Lawsuit and the
settlement and no additional charges will be incurred or recorded.