EXHIBIT 10.1.6

LIMITED RECOURSE GUARANTY AGREEMENT

(ECEC Shareholders)

THIS LIMITED RECOURSE GUARANTY AGREEMENT (this “Guaranty”), dated as of June 29,
2015, is made by each of the shareholders and security holders of Eagle Crest
Energy Company, a California corporation (“ECEC”), listed on Schedule 1 attached
hereto (each shareholder and security holder, a “Guarantor” and together, the
“Guarantors”), for the benefit of CIL&D, LLC, a Delaware limited liability
company (together with its successors and assigns, “Lender”).

RECITALS

WHEREAS, Eagle Mountain Acquisition LLC, a Delaware limited liability company
(“Borrower”), is a party to that certain Purchase and Sale Agreement dated as of
June 25, 2015 (the “Purchase Agreement”) among Borrower, Lender, Eagle Mountain
LLC, a Delaware limited liability company (“Holdco”), Kaiser Eagle Mountain,
LLC, a Delaware limited liability company (“KEM”), and ECEC, pursuant to which,
among other things, Lender agreed to sell to Borrower 100% of the ownership
interest in KEM;

WHEREAS, as partial payment of the purchase price to Lender under the Purchase
Agreement, Borrower executed and delivered to Lender (i) that certain promissory
note in the initial principal amount of $4,250,000 (the “Senior Note”) and
(ii) that certain promissory note in the initial principal amount of $19,000,000
(the “Junior Note” and together with, the Senior Note, the “Notes”), in each
case of even date herewith in favor of the Lender. The payment obligations under
the Senior Note are sometimes referred to herein as the “Deferred Payment”.
Collectively, the payment obligations under the Notes are sometimes referred to
herein as the “Loan”. Capitalized terms used herein without definition shall
have the meanings ascribed to such terms in the Senior Note;

WHEREAS, as an inducement to Lender to enter into the Purchase Agreement and to
accept the Notes, ECEC executed and delivered that certain Guaranty Agreement
even dated herewith in favor of Lender, guaranteeing certain obligations of
Borrower relating to the Senior Note (the “ECEC Guaranty”);

WHEREAS, as further inducement to Lender to enter into the Purchase Agreement
and to accept the Notes, each Guarantor executed and delivered that certain
Pledge Agreement (the “ECEC Guarantors Pledge Agreement”) even dated herewith in
favor of Lender pursuant to which certain equity interests in ECEC and certain
instruments and other payment obligations payable by ECEC were pledged to the
Lender as security for the satisfaction of the Guaranteed Obligations, as
defined below (in each case, the “Pledged ECEC Collateral”); and

WHEREAS, as the owner of a direct interest in ECEC, each Guarantor will directly
or indirectly benefit from Lender making the Loan to Borrower, and completing
the transactions contemplated in the Purchase Agreement.

NOW, THEREFORE, as further inducement to Lender to enter into the Purchase
Agreement and to accept the Notes, the ECEC Guaranty and the ECEC Guarantors
Pledge Agreement, and for other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, each Guarantor does hereby
agree as follows:

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ARTICLE I - NATURE AND SCOPE OF GUARANTY

Section 1.1 Limited Recourse Guaranty of Obligations.

(a) Each Guarantor hereby irrevocably and unconditionally guarantees to Lender,
severally, but not jointly, the payment and performance of the Guaranteed
Obligations as and when the same shall be due and payable. Guarantor hereby
irrevocably and unconditionally covenants and agrees that it is liable for the
Guaranteed Obligations as a primary obligor. Notwithstanding anything to the
contrary contained herein, in the absence of a Full Recourse Trigger (as defined
below), Lender’s sole recourse against any Guarantor for the payment and
performance of the Guaranteed Obligations shall be foreclosure on such
Guarantor’s ECEC Pledged Collateral pledged under the ECEC Guarantors Pledge
Agreement. For the avoidance of doubt, in the absence of a Full Recourse
Trigger, no Guarantor hereunder shall be personally liable for the performance
or payment of the Deferred Payment or any other obligation or liability of ECEC
under the ECEC Guaranty.

(b) Upon the occurrence of any of the following (each a “Full Recourse Trigger”)
the liability of the Guarantors for the Guaranteed Obligations shall no longer
be limited as specified in Section 1.1(a) above, but shall instead be as set
forth herein: (i) should any Guarantor or Guarantors contest or fail to consent
to Lender’s strict foreclosure on any of the ECEC Pledged Collateral in full
satisfaction of the ECEC Guaranty in a manner which materially delays such
strict foreclosure as permitted by law and the ECEC Guarantors Pledge Agreement,
then such Guarantor or Guarantors shall be personally, jointly and severally
liable with only those other Guarantors responsible for this Full Recourse
Trigger, for the Guaranteed Obligations and Costs; (ii) in the event that ECEC,
the Borrower or Holdco commences any voluntary Insolvency Action (as defined
below) (but not an Insolvency Action with respect to any Guarantor) that
prevents or materially delays Lender’s strict foreclosure on any of the ECEC
Pledged Collateral in full satisfaction of the ECEC Guaranty as permitted by law
and the ECEC Guarantors Pledge Agreement, then the Guarantors shall be
personally, jointly and severally liable for the Guaranteed Obligations and
Costs; (iii) should any Guarantor or Guarantors commence any voluntary
Insolvency Action that prevents or materially delays Lender’s strict foreclosure
on any of the ECEC Pledged Collateral in full satisfaction of the ECEC Guaranty
as permitted by law and the ECEC Guarantors Pledge Agreement, then such
Guarantor or Guarantors shall be personally, jointly and severally liable (along
with only those other Guarantors responsible for this Full Recourse Trigger) for
the Guaranteed Obligations and Costs. As used in herein, the term “severally
liable” shall mean that such Guarantor shall be personally liable for payment of
its share of the Deferred Payment based on its pro rata interest in ECEC on a
fully diluted basis. Schedule 1 attached hereto sets forth the pro rata interest
of each Guarantor in ECEC. In the event multiple Guarantors are responsible for
a Full Recourse Trigger, as described above, then each shall be responsible for
their pro rata share of the Deferred Payment relative to each other.

(c) As used herein, the term “Guaranteed Obligations” means the full and timely
payment and performance of all of the obligations and liabilities of ECEC for
which ECEC is liable pursuant to the ECEC Guaranty, including, without
limitation, the payment and performance of all terms, covenants, conditions,
indemnities and agreements of ECEC set forth therein. As used herein, the term
“Costs” means all reasonable, out-of-pocket costs and expenses actually incurred
(including, without limitation, reasonable attorneys’ fees) incurred by Lender
as a direct result of Lender’s enforcement of its rights under this Guaranty,
the ECEC Guaranty or the ECEC Guarantors Pledge Agreement. For the purposes of
this Section 1.1, “Insolvency Action” shall not include any filing made by Third
Party, unaffiliated creditors of ECEC, Borrower, Holdco or their respective
Affiliates solely due to the non-payment of a debt by ECEC. As used herein,
“Affiliate” shall mean with respect to any person or entity, another person or
entity that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such person or
entity, and “Third Party” shall not include an Affiliate of any Guarantor, ECEC,
Borrower or Holdco.

 

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Section 1.2 Nature of Guaranty. This Guaranty is an irrevocable, absolute,
continuing guaranty of payment and performance by the Guarantors, and not a
guaranty of collection. This Guaranty shall continue to be effective with
respect to any Guaranteed Obligations so long as the Senior Note is outstanding
or unless the Guarantors are otherwise released from their obligations under
this Guaranty pursuant to the Loan Documents. Notwithstanding anything to the
contrary contained herein, this Guaranty shall automatically terminate upon the
payment in full of the Senior Note, and the Guarantors shall no longer be
responsible for the Guaranteed Obligations.

Section 1.3 Payment by Guarantor. In accordance with the terms of Section 1.1
hereof, Guarantor shall, immediately upon demand by Lender, pay the amount due
on the Guaranteed Obligations to Lender at Lender’s address as set forth herein
or as otherwise instructed by Lender. Such demand(s) may be made at any time
coincident with or after the time for payment of all or any part of the
Guaranteed Obligations with respect to the same or different Guaranteed
Obligations.

Section 1.4 No Duty to Pursue Others. Lender shall not be required (and
Guarantor hereby waives any rights to require Lender), in order to enforce the
obligations of Guarantor hereunder, first (i) to institute suit or otherwise
exhaust its remedies against Borrower, ECEC or any other persons liable on the
Guaranteed Obligations, or against any other person, (ii) to enforce Lender’s
rights against any collateral given to secure the Guaranteed Obligations,
(iii) to enforce Lender’s rights against any other guarantors of Guaranteed
Obligations, (iv) to join Borrower, ECEC or any other persons liable on the
Guaranteed Obligations in any action seeking to enforce this Guaranty, (v) to
exhaust any available remedies against any collateral given to secure the
Guaranteed Obligations, or (vi) to resort to any other means of obtaining
payment or performance of the Guaranteed Obligations.

Section 1.5 Waivers.

(a) Guarantor agrees to the provisions of the Loan Documents and hereby waives
notice of (i) acceptance of this Guaranty, (ii) any amendment, modification,
replacement or extension of any Loan Document, (iii) the execution and delivery
by Borrower, ECEC and/or Lender of any other agreements, promissory notes or
other documents arising under the Loan Documents, (iv) the occurrence of any
breach by Borrower or ECEC or any Event of Default, (v) Lender’s transfer,
participation, componentization or other disposition of the Guaranteed
Obligations, or any part thereof, (vi) sale or foreclosure (or posting or
advertising therefor) of any collateral for the Guaranteed Obligations,
(vii) nonpayment or nonperformance, protest, notice of protest, notice of
dishonor, proof of non-payment or default by Borrower or ECEC, (viii) intent to
accelerate or acceleration, or (ix) any other action taken or omitted by Lender
and any and all demands and notices of every kind in connection with this
Guaranty, the Loan Documents, and any documents or agreements evidencing,
securing or relating to any of the Guaranteed Obligations and any other
obligations hereby guaranteed. Guarantor also waives notice of or proof of
reliance by Lender upon this Guaranty.

(b) Guarantor specifically agrees that Guarantor shall not be released from
liability hereunder by any action taken by Lender including, without limitation,
a nonjudicial sale under the Loan Documents, that would afford Borrower a
defense based on California’s anti–deficiency laws, in general, and Cal. Code of
Civ. Proc. Section 580d, in specific. Without limiting the foregoing, Guarantor
expressly understands, acknowledges and agrees as follows: (X) In the event of a
nonjudicial foreclosure (through the exercise of the power of sale under the
Loan Documents): (i) Borrower or ECEC would not be liable for any deficiency on
the Notes under Cal. Code of Civ. Proc. Section 580d, (ii) Guarantor’s
subrogation rights against Borrower or ECEC would thereby be destroyed,
Guarantor would be solely

 

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liable for any deficiency to Lender (without recourse against Borrower or ECEC),
and (iii) Guarantor would thereby be deprived of the anti–deficiency protections
of said Section 580d; (Y) Were it not for Guarantor’s knowing and intentional
waivers contained herein, the destruction of Guarantor’s subrogation rights and
anti–deficiency protections would afford Guarantor a defense to an action
against Guarantor hereunder; and (Z) Notwithstanding the foregoing, Guarantor
expressly waives any such defense to any action against Guarantor hereunder
following a nonjudicial foreclosure sale or in any other circumstance under
which Guarantor’s subrogation rights against Borrower or ECEC have been
destroyed.

(c) Guarantor hereby fully and completely waives, releases and relinquishes any
statute of limitations affecting any of Guarantor’s liability hereunder or the
enforcement thereof, including without limitation, any right, defense or benefit
under Cal. Code of Civ. Proc. Section 337.

(d) Guarantor expressly waives any defense or benefits arising out of any
federal or state bankruptcy, insolvency, or debtor relief laws, including
without limitation, under Section 364 or 1111(b)(2) of the United States
Bankruptcy Code.

(e) Guarantor expressly waives any and all benefits, rights and/or defenses
based on principals of suretyship and/or guaranty, including without limitation,
those benefits, rights and/or defenses which might otherwise be available to
Guarantor under Cal. Civ. Code Sections 2787 to 2855, inclusive, and 2899, 2953
and 3433, and Guarantor agrees that its obligations shall not be affected by any
circumstances which constitute a legal or equitable discharge of a guarantor or
surety.

(f) Guarantor expressly waives any and all benefits, rights and/or defenses
which might otherwise be available to Guarantor under Cal. Code of Civ. Proc.
Sections 580a, 580b, 580d and 726. In specific, but not by way of limitation,
Guarantor expressly waives any and all fair value rights under Cal. Code of Civ.
Proc. Section 580a as set forth in Bank of Southern California v. Dombrow, 39
Cal.App.4th 1457, 46 Cal.Rptr.2d 656 (4th Dist., Div. 1, 1995) (decertified).

(g) Guarantor acknowledges that Guarantor has been made aware of the provisions
of Cal. Civ. Code Section 2856, has read and understands the provisions of that
statute, has been advised by its counsel as to the scope, purpose and effect of
that statute, and based thereon, and without limiting the foregoing waivers,
Guarantor agrees to waive all suretyship rights and defenses described in Cal.
Civ. Code Sections 2856(a) through (d). Without limiting any other waivers
herein, Guarantor hereby gives the following waiver pursuant to Section 2856(d)
of the Cal. Civ. Code:

“Guarantor waives all rights and defenses arising out of an election of remedies
by the creditor, even though that election or remedies, such as a nonjudicial
foreclosure with respect to security for a guaranteed obligation, has destroyed
the guarantor’s rights of subrogation and reimbursement against the principal by
the operation of Section 580d of the Code of Civil Procedure or otherwise.”

(h) As provided in Cal. Civ. Code Section 2856(c), Guarantor makes the following
waivers of specific rights afforded under California law:

“The guarantor waives all rights and defenses that the guarantor may have
because the debtor’s debt is secured by real property. This means, among other
things:

(1) The creditor may collect from the guarantor without first foreclosing on any
real or personal property collateral pledged by the debtor.

 

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(2) If the creditor forecloses on any real property collateral pledged by the
debtor:

(A) The amount of the debt may be reduced only by the price for which that
collateral is sold at the foreclosure sale, even if the collateral is worth more
than the sale price.

(B) The creditor may collect from the guarantor even if the creditor, by
foreclosing on the real property collateral, has destroyed any right the
guarantor may have to collect from the debtor.

This is an unconditional and irrevocable waiver of any rights and defenses the
guarantor may have because the debtor’s debt is secured by real property. These
rights and defenses include, but are not limited to, any rights or defenses
based on Sections 580a, 580b, 580d, or 726 of the Code of Civil Procedure.”

(i) Guarantor acknowledges that it has relied on the advice of its own counsel
in making this Guaranty and has reviewed the waivers of rights contained herein
with its counsel. Guarantor further acknowledges that it understands and accepts
as a necessary part of this Guaranty the waivers of rights set forth above,
after reviewing the extent and effect of the waivers in this Guaranty with its
counsel.

Section 1.6 Payment of Expenses. If Guarantor fails to timely perform any
provisions of this Guaranty, Guarantor shall, immediately upon demand by Lender,
pay Lender any and all reasonable, out-of-pocket costs and expenses (including
court costs and reasonable attorneys’ fees) incurred by Lender in the
enforcement hereof or the preservation of Lender’s rights hereunder. The
covenant contained in this Section 1.6 shall survive the payment and performance
of the Guaranteed Obligations.

Section 1.7 Effect of Bankruptcy. If pursuant to any Insolvency Action (defined
below) concerning Borrower, ECEC or Guarantor, Lender must rescind, restore or
return any payment or any part thereof received by Lender in satisfaction (in
full or in part) of the Guaranteed Obligations, as set forth herein, any prior
release or discharge from the terms of this Guaranty given to Guarantor by
Lender shall be without effect, and this Guaranty shall remain in full force and
effect. As used herein, “Insolvency Action” shall mean if Borrower, ECEC or
Guarantor (i) makes an assignment for the benefit of creditors, (ii) has a
receiver, liquidator or trustee appointed for it, (iii) is adjudicated as
bankrupt or insolvent, or if any petition for bankruptcy, reorganization or
arrangement pursuant to federal bankruptcy law or any similar federal or state
law shall be filed by or against, consented to, solicited by, or acquiesced in
by it, or (iv) has any proceeding for its insolvency, dissolution or liquidation
instituted against.

Section 1.8 Waiver of Subrogation, Reimbursement and Contribution.
Notwithstanding anything to the contrary contained in this Guaranty, Guarantor
hereby unconditionally and irrevocably waives, releases and abrogates any and
all rights it may now or hereafter have under any agreement, at law or in equity
(including, without limitation, any law subrogating Guarantor to the rights of
Lender), to assert any claim against or seek contribution, indemnification or
any other form of reimbursement from Borrower, ECEC or any other party liable
for payment or performance of any or all of the Guaranteed Obligations for any
payment made by Guarantor under or in connection with this Guaranty or otherwise
until the Deferred Payment is paid in full.

Section 1.9 Reinstatement of Guaranty in Certain Circumstances. Guarantor agrees
that, if any or all of a payment made by or on behalf of Borrower of any
Guaranteed Obligation is returned by any person at any time for any reason
during the period one (1) year from the date of such payment,

 

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including pursuant to any settlement, order (whether or not final) of a court of
competent jurisdiction, applicable law or because of acts or omissions of
Borrower (other than by reason of the full and indefeasible payment of the
Guaranteed Obligations), the Guaranteed Obligations will not be deemed to have
been satisfied to the extent of the returned payment and the obligations of
Guarantor hereunder will be deemed to be reinstated automatically and to
continue in full force and effect. If ECEC ceases to be liable to Lender for any
of the Borrower’s obligations under the Senior Note (other than by reason of the
full and indefeasible payment of the Borrower’s obligations under the Senior
Note, cancellation or termination of the Borrower’s obligations under the Senior
Note), then any prior release or discharge from this Guaranty will be without
effect and this Guaranty and the obligations of Guarantor hereunder will be
automatically reinstated and continue in full force and effect.

Section 1.10 Borrower; ECEC. The term “Borrower” as used herein shall include
any new or successor corporation, association, partnership (general or limited),
limited liability company, joint venture, trust or other individual or
organization formed as a result of any merger, reorganization, sale, transfer,
assignment, devise, gift or bequest of or by Borrower or any interest in
Borrower or the Deferred Payment. The term “ECEC” as used herein shall include
any new or successor corporation, association, partnership (general or limited),
limited liability company, joint venture, trust or other individual or
organization formed as a result of any merger, reorganization, sale, transfer,
assignment, devise, gift or bequest of or by ECEC or any interest in ECEC, the
Deferred Payment or the ECEC Guaranty.

ARTICLE II - EVENTS AND CIRCUMSTANCES NOT

REDUCING OR DISCHARGING GUARANTOR’S OBLIGATIONS

Section 2.1 Events and Circumstances Not Reducing or Discharging Guarantor’s
Obligations. Guarantor hereby consents and agrees to each of the following and
agrees that Guarantor’s obligations hereunder shall not be released, diminished,
impaired, reduced or adversely affected in any way by any of the following, and
waives any common law, equitable, statutory or other rights (including, without
limitation, rights to notice) which Guarantor might have in connection with any
of the following:

(a) Modifications, Releases, Etc. Any renewal, extension, increase, reduction,
modification, alteration or rearrangement of all or any part of the Guaranteed
Obligations, any Loan Document, or any other document or agreement between
Borrower, ECEC and Lender or any other parties pertaining to the Guaranteed
Obligations.

(b) Condition of Borrower, ECEC or Guarantor. The existence of an Insolvency
Action concerning Borrower, ECEC, Guarantor or any other party liable for the
payment or performance of all or part of the Guaranteed Obligations, or any
dissolution of Borrower, ECEC or Guarantor or any sale, lease or transfer of any
or all of the assets of Borrower, ECEC or Guarantor, or any changes in the
shareholders, partners or members of Borrower, ECEC or Guarantor, or any merger,
consolidation, or reorganization of Borrower, ECEC or Guarantor into or with any
other person.

(c) Invalidity, Unenforceability, Offset, Etc. The invalidity, illegality or
unenforceability of all or any part of the Guaranteed Obligations or any Loan
Document, or of any other document or agreement executed in connection with the
Guaranteed Obligations for any reason whatsoever, including, without limitation,
the fact that (i) the Guaranteed Obligations or any part thereof exceeds the
amount permitted by law, (ii) the act of creating the Guaranteed Obligations or
any part thereof is ultra vires, (iii) the officers or representatives executing
the Loan Documents or otherwise creating the Guaranteed Obligations acted in
excess of their authority, (iv) the Guaranteed Obligations violate applicable
usury laws, (v) Borrower or ECEC has valid defenses (except the defense of
payment or performance of the applicable Guaranteed Obligations), claims or
offsets (whether at law, in equity or by agreement) which render the Guaranteed
Obligations wholly or partially uncollectible from Borrower

 

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or ECEC, and whether such defense, claim, or right of offset arises in
connection with the Guaranteed Obligations, the transactions creating same, or
otherwise (including any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount nor in
other respects more burdensome than that of the principal and any defense of the
statute of limitations in any action hereunder or in any action for the
collection or performance of any obligations hereby guaranteed), (vi) the
creation, performance or repayment of the Guaranteed Obligations (or the
execution, delivery and performance of any document or instrument representing
part of the Guaranteed Obligations, or executed in connection with the
Guaranteed Obligations, or given to secure the repayment or performance of the
Guaranteed Obligations) is illegal, uncollectible or unenforceable, (vii) any
Loan Document has been forged, or is not genuine or authentic, it being agreed
that Guarantor shall remain liable hereunder regardless of whether Borrower,
ECEC or any other person be found not liable on the Guaranteed Obligations or
any part thereof for any reason, or (viii) any collateral, security, security
interest or lien contemplated or intended to be given, created or granted as
security for the repayment or performance of the Guaranteed Obligations, or any
part thereof, shall not be properly perfected or created, or shall prove to be
unenforceable or subordinate to any other security interest or lien, it being
acknowledged and agreed by Guarantor that Guarantor is not entering into this
Guaranty in reliance on, or in contemplation of the benefits of, the validity,
enforceability, collectability or value of any of the collateral for the
Guaranteed Obligations.

(d) Care and Diligence. The failure of Lender or any other party to exercise
diligence or reasonable care (other than willful malfeasance) in the
preservation, protection, enforcement, sale or other handling or treatment of
all or any part of any collateral, property or security, including, without
limitation, any neglect, delay, omission, failure or refusal of Lender (i) to
take or prosecute any action for the collection of any of the Guaranteed
Obligations, (ii) to foreclose, or initiate any action to foreclose, or, once
commenced, prosecute to completion any action to foreclose upon any security
therefor, or (iii) to take or prosecute any action in connection with any
instrument or agreement evidencing or securing all or any part of the Guaranteed
Obligations.

(e) Preference. Any payment by Borrower or ECEC to Lender is held to constitute
a preference under bankruptcy laws or for any reason Lender is required to
refund or remit any such payment or amount to Borrower, ECEC or any other
person.

(f) Other Actions Taken or Not Taken. Any other action taken or not taken with
respect to the Loan Documents, the Guaranteed Obligations, or the security and
collateral therefor, whether or not such action or inaction prejudices Guarantor
or increases the likelihood that Guarantor will be required to pay the
Guaranteed Obligations pursuant to the terms hereof.

ARTICLE III - REPRESENTATIONS AND WARRANTIES

Section 3.1 Representations and Warranties. To induce Lender to enter into the
Notes and the Loan Documents and to make the Loan, Guarantor represents and
warrants to Lender that: (a) Guarantor will receive a direct or indirect benefit
from the making of the Loan to Borrower and the making of the ECEC Guaranty to
Lender in connection therewith; (b) Guarantor is familiar with, and has
independently reviewed books and records regarding, the financial condition of
Borrower and ECEC and any and all collateral intended to be given as security
for the payment of the Deferred Payment; (c) after giving effect to this
Guaranty, Guarantor is and will remain solvent; (d) the execution, delivery and
performance by Guarantor of this Guaranty and the consummation of the
transactions contemplated hereunder do not and will not contravene or conflict
with any law, statute or regulation to which Guarantor is subject, or constitute
a default (or which with notice, or lapse of time, or both, would constitute a
default) under, or result in the breach of, any indenture, mortgage, charge,
lien, or any contract or agreement to which Guarantor is a party or which may be
applicable to Guarantor; (e) no

 

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approval, authorization, order, license or consent of, or registration or filing
with, any governmental authority or other person, and no approval, authorization
or consent of any other person is required in connection with this Agreement;
(f) there are no actions, suits or proceedings at law or in equity by or before
any governmental authority or other agency now pending and served or, to
Guarantor’s knowledge, threatened, involving or concerning Guarantor, (g) this
Guaranty is a legal, valid and binding obligation of Guarantor, and is
enforceable in accordance with its terms, except as may be limited by principles
of equity, bankruptcy, insolvency or other laws of general application relating
to the enforcement of creditors’ rights, and (h) the individual executing this
Guaranty has been duly authorized by the all necessary corporate, company, trust
or individual actions and consents, as applicable.

Section 3.2 Additional Provisions. Without limiting anything set forth in
Section 3.1 above, Guarantor hereby represents, warrants, covenants and agrees
as follows:

(a) Guarantor (i) maintains its principal place of business (or residence
address for any Guarantor who is an individual) at the address set forth in
Schedule 1 attached hereto and (ii) has the requisite power to execute and
deliver, and perform its obligations under, this Guaranty and any other Loan
Document to which it is a party. To the extent Guarantor is a legal entity,
Guarantor is duly organized, validly existing and in good standing as the legal
entity set forth in Schedule 1 attached hereto under the laws of the
jurisdiction of its incorporation or organization as set forth in Schedule 1
attached hereto.

(b) The execution and delivery by Guarantor of this Guaranty and any other Loan
Document to which it is a party, and Guarantor’s performance of its obligations
thereunder (i) will not violate any provision of any applicable legal
requirements, and (ii) will not be in conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under, or result
in the creation or imposition of any lien of any nature whatsoever upon any of
the property or assets of Guarantor pursuant to, any indenture or agreement or
instrument. This Guaranty and the other Loan Documents to which Guarantor is a
party have been duly executed and delivered by Guarantor.

ARTICLE IV - SUBORDINATION OF CERTAIN INDEBTEDNESS

Section 4.1 Subordination of All Guarantor Claims. As used herein, the term
“Guarantor Claims” shall mean any and all debts and liabilities of ECEC or
Borrower owed to Guarantor, whether now existing or hereafter incurred,
including, without limitation, (i) all rights and claims of Guarantor against
Borrower or ECEC (arising as a result of subrogation or otherwise) as a result
of Guarantor’s payment of all or any portion of the Guaranteed Obligations, or
(ii) any claim arising out of or related to the Purchase Agreement. During the
continuance of an Event of Default under Senior Note or a default by ECEC under
the ECEC Guaranty, without limiting the provisions of Sections 1.8 or 1.9,
Guarantor hereby subordinates its rights to receive any payment from Borrower or
ECEC on account of any Guarantor Claims to the full payment of the Deferred
Payment payable to Lender. Following the occurrence of an Event of Default under
the Senior Note or a default by ECEC under the ECEC Guaranty, Guarantor shall
not demand, receive or collect, directly or indirectly, from Borrower, ECEC or
any other party, and shall not claim any offset or other reduction of
Guarantor’s obligations hereunder because of, any amount pursuant to or in
satisfaction of the Guarantor Claims until the Deferred Payment is paid in full.

Section 4.2 Claims in Bankruptcy. In the event of an Insolvency Action involving
Guarantor as debtor, Lender shall have the right to prove its claim in any such
proceeding so as to establish its rights hereunder and receive directly from the
receiver, trustee or other court custodian dividends and payments which would
otherwise be payable pursuant to or in satisfaction of Guarantor Claims.
Guarantor hereby assigns any and all such dividends and payments to Lender.

 

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Section 4.3 Payments Held in Trust. If, notwithstanding anything to the contrary
contained in this Guaranty, Guarantor should receive any funds, payment, claim
or distribution which is prohibited hereunder, Guarantor covenants and agrees to
hold in trust for Lender an amount equal to the amount of all funds, payments,
claims or distributions so received, and Guarantor acknowledges and agrees that
it shall have absolutely no dominion over the amount of such funds, payments,
claims or distributions so received, except to pay them promptly to Lender, and
Guarantor hereby covenants and agrees promptly to pay the same to Lender.

Section 4.4 Liens Subordinate; Standstill. Guarantor acknowledges and agrees
that until the Deferred Payment is paid in full or Guarantor has otherwise been
released from the Guaranteed Obligations pursuant to the terms of the Loan
Documents, any liens, security interests, judgment liens, charges or other
encumbrances upon the assets of Borrower or ECEC securing payment of the
Guarantor Claims shall be and remain inferior and subordinate to any liens,
security interests, judgment liens, charges or other encumbrances upon the
assets of Borrower or ECEC securing payment or performance of the Guaranteed
Obligations, regardless of whether such encumbrances in favor of Guarantor or
Lender presently exist or are hereafter created or attach. Until the Deferred
Payment is paid in full, Guarantor shall not (i) exercise or enforce any
creditor’s right it may have against Borrower or ECEC, or (ii) foreclose,
repossess, sequester or otherwise take steps or institute any action or
proceedings (judicial or otherwise, including, without limitation, the
commencement of, or joinder in, any liquidation, bankruptcy, rearrangement,
debtor’s relief or insolvency proceeding) to enforce any liens, mortgages, deeds
of trust, security interests, collateral rights, judgments or other encumbrances
on assets of Borrower or ECEC held by Guarantor.

ARTICLE V - MISCELLANEOUS

Section 5.1 Waiver. No failure to exercise, and no delay in exercising, on the
part of Lender, any right hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right. The rights of Lender hereunder shall
be in addition to all other rights provided by law. No notice or demand given in
any case shall constitute a waiver of the right to take other action in the
same, similar or other instances without such notice or demand.

Section 5.2 Notices. All notices, consents, approvals, demands and requests
required or permitted hereunder shall be given in writing and shall be effective
for all purposes if hand delivered or sent by (a) hand delivery, with proof of
attempted delivery, (b) certified or registered United States mail, postage
prepaid, (c) expedited prepaid delivery service, either commercial or United
States Postal Service, with proof of attempted delivery, or (d) by telecopier
(with answerback acknowledged) provided that such telecopied notice must also be
delivered by one of the means set forth in (a), (b) or (c) above, addressed to
the parties as follows:

 

If to Lender: CIL&D, LLC 337 N. Vineyard Ave., 4th Floor Ontario, CA 91764
Attention: Richard E. Stoddard Facsimile No.: 909.944.6605 with a copy to:
CIL&D, LLC 337 N. Vineyard Ave., 4th Floor Ontario, CA 91764 Attention: Terry
Cook Facsimile No.: 909.944.6605

 

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and with a copy to: Bryan Cave LLP 88 Wood Street London EC2V 7AJ England
Attention: Carol Osborne Facsimile No.: 44 20 3207 1881 If to Guarantor: At the
address for Guarantor set forth in Schedule 1 with a copy to: Eagle Crest Energy
Company 3000 Ocean Park Blvd, Suite 1020 Santa Monica, CA 90405 Attention: J.
Douglas Divine Facsimile: 310.450.9494 with a copy to: Latham & Watkins LLP 355
S. Grand Ave Los Angeles, CA 90071-1560 Attention: Kevin Ehrhart Facsimile:
213.891.8763 and with a copy to: Wexford Capital LP 411 West Putnam Ave.
Grenwich, CT 06830 Attention: Antony Lundy Email: tlundy@wexford.com Attention:
Arthur Amron Email: aamron@wexford.com Facsimile: 203.863.7312

A party receiving a notice which does not comply with the technical requirements
for notice under this Section 5.2 may elect to waive any deficiencies and treat
the notice as having been properly given. A notice shall be deemed to have been
given: (a) in the case of hand delivery, at the time of delivery; (b) in the
case of registered or certified mail, when delivered or the first attempted
delivery on a business day; (c) in the case of expedited prepaid delivery upon
the first attempted delivery on a business day; or (d) in the case of
telecopier, upon receipt of answerback confirmation, provided that such
telecopied notice was also delivered as required in this Section 5.2.

Section 5.3 Governing Law; Submission to Jurisdiction.

(a) This Guaranty shall be interpreted and enforced according to the laws of the
State of California (without giving effect to rules regarding conflict of laws).

(b) Guarantor hereby consents and submits to the exclusive jurisdiction and
venue of any state or federal court sitting in the State of California with
respect to any legal action or proceeding arising with respect to this Guaranty
and waives all objections which it may have to such jurisdiction and venue.

Section 5.4 Severability. Wherever possible, each provision of this Guaranty
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this

 

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Guaranty shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Guaranty.

Section 5.5 Modification; Waiver in Writing. No modification, amendment,
extension, discharge, termination (except as provided in Section 1.3, above) or
waiver of any provision of this Guaranty, nor consent to any departure by
Guarantor therefrom, shall in any event be effective unless the same shall
(i) be in a writing signed by the party against whom enforcement is sought, and
(ii) specifically refer to this Agreement. Any such modification, amendment,
extension, discharge, termination or waiver shall be effective only in the
specific instance, and for the purpose, for which given. Except as otherwise
expressly provided herein, no notice to, or demand on Guarantor, shall entitle
Guarantor to any other or future notice or demand in the same, similar or other
circumstances.

Section 5.6 Number and Gender. All references to sections and exhibits are to
sections and exhibits in or to this Guaranty unless otherwise specified. Unless
otherwise specified, the words “hereof,” “herein” and “hereunder” and words of
similar import when used in this Guaranty shall refer to this Guaranty as a
whole and not to any particular provision, article, section or other subdivision
of this Guaranty. Unless otherwise specified, all meanings attributed to defined
terms herein shall be equally applicable to both the singular and plural forms
of the terms so defined. Whenever the context may require, any pronouns used
herein shall include the corresponding masculine, feminine or neuter forms, and
the singular form of nouns and pronouns shall include the plural and vice versa.

Section 5.7 Headings, Etc. The headings and captions of various paragraphs of
this Guaranty are for the convenience of reference only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.

Section 5.8 Counterparts. This Guaranty may be executed in several counterparts,
each of which counterparts shall be deemed an original instrument and all of
which together shall constitute a single Guaranty. The failure of any party
hereto to execute this Guaranty, or any counterpart hereof, shall not relieve
the other signatories from their obligations hereunder.

Section 5.9 Rights and Remedies. If Guarantor becomes liable for any
indebtedness owing by Borrower or ECEC to Lender, by endorsement or otherwise,
other than pursuant to this Guaranty, such liability shall not be in any manner
impaired or affected hereby, and the rights of Lender hereunder shall be
cumulative of any and all other rights that Lender may ever have against
Guarantor. The exercise by Lender of any right or remedy hereunder or under any
other instrument, or at law or in equity, shall not preclude the concurrent or
subsequent exercise of any other right or remedy. No failure or delay on the
part of Lender in exercising any right, power or remedy hereunder shall operate
as a waiver of the exercise of the same or any other right at any other time;
nor shall any single or partial exercise of any such right, power or remedy
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy hereunder.

Section 5.10 Entire Agreement. This Guaranty and the other Loan Documents embody
the final, entire agreement of Guarantor and Lender with respect to the
Guarantor’s guaranty of the Guaranteed Obligations and supersedes any and all
prior commitments, agreements, representations, and understandings, whether
written or oral, relating to the subject matter hereof. This Guaranty is
intended by Guarantor and Lender as a final and complete expression of the terms
of the Guaranty, and no course of dealing between Guarantor and Lender, no
course of performance, no trade practices, and no evidence of prior,
contemporaneous or subsequent oral agreements or discussions or other extrinsic
evidence of any nature shall be used to contradict, vary, supplement or modify
any term of this Guaranty. There are no oral agreements between Guarantor and
Lender.

Section 5.11 Recitals. Each of the Recitals set forth at the beginning of this
Guaranty are true and correct and are incorporated herein by reference.

[Signatures begin on the following page]

 

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IN WITNESS WHEREOF, the undersigned have executed this Guaranty all as of the
day and year first above written.

[SIGNATURE PAGE FOR EACH SHAREHOLDER GUARANTOR NOT ATTACHED FOR FILING.]

 

Eagle Crest Energy Company Shareholders Guaranty