Exhibit 10.25


 




 





AMENDED AND RESTATED TERM LOAN AGREEMENT


 






 


MADISONVILLE MIDSTREAM LLC


 


and


 


BANK OF OKLAHOMA, NATIONAL ASSOCIATION


 






 


December 31, 2008




 





 

















 


TABLE OF
CONTENTS


 


	
  ARTICLE I DEFINITIONS AND REFERENCES

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 1.1.

  	
  Defined Terms

  	
  1

  
	
  Section 1.2.

  	
  Incorporation of Exhibits

  	
  13

  
	
  Section 1.3.

  	
  Amendment of Defined Instruments

  	
  13

  
	
  Section 1.4.

  	
  References and Titles

  	
  13

  
	
  Section 1.5.

  	
  Calculations and Determinations

  	
  13

  
	
   

  	
   

  	
   

  
	
  ARTICLE II The Loan

  	
  14

  
	
   

  	
   

  	
   

  
	
  Section 2.1.

  	
  The Loan

  	
  14

  
	
  Section 2.2.

  	
  The Note; Interest

  	
  14

  
	
  Section 2.3.

  	
  Mandatory Principal Payments

  	
  15

  
	
  Section 2.4.

  	
  Voluntary Prepayinents

  	
  15

  
	
  Section 2.5.

  	
  Termination of Agreement

  	
  15

  
	
  Section 2.6.

  	
  Payments to BOK

  	
  15

  
	
  Section 2.7.

  	
  Use of Proceeds

  	
  16

  
	
   

  	
   

  	
   

  
	
  ARTICLE III Security; Fees; LIBOR Provisions;
  Taxes; Increased Capital

  	
  16

  
	
   

  	
   

  	
   

  
	
  Section 3.1.

  	
  The Security

  	
  16

  
	
  Section 3.2.

  	
  Perfection and Protection of
  Security Interests and Liens

  	
  16

  
	
  Section 3.3.

  	
  Bank Accounts and Offset

  	
  16

  
	
  Section 3.4.

  	
  Fee

  	
  17

  
	
  Section 3.5.

  	
  Special LIBOR Provisions

  	
  17

  
	
  Section 3.6.

  	
  Increased Capital Costs

  	
  18

  
	
  Section 3.7.

  	
  Taxes

  	
  19

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV Conditions Precedent to Loan

  	
  21

  
	
   

  	
   

  	
   

  
	
  Section 4.1.

  	
  Initial Conditions Precedent

  	
  21

  
	
  Section 4.2.

  	
  Additional Conditions Precedent

  	
  22

  
	
   

  	
   

  	
   

  
	
  ARTICLE V Representations and Warranties

  	
  23

  
	
   

  	
   

  	
   

  
	
  Section 5.1.

  	
  Representations and Warranties
  of the Obligated Persons

  	
  23

  
	
  Section 5.2.

  	
  Representations bY BOK

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI Covenants of the Obligated
  Persons

  	
  28

  
	
   

  	
   

  	
   

  
	
  Section 6.1.

  	
  Affirmative Covenants

  	
  28

  
	
  Section 6.2.

  	
  Negative Covenants

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII Events of Default and Remedies

  	
  39

  
	
   

  	
   

  	
   

  
	
  Section 7.1.

  	
  Events of Default

  	
  39

  
	
  Section 7.2.

  	
  Remedies

  	
  42

  
	
  Section 7.3.

  	
  Indemnity

  	
  42

  



 


i

















 


	
  ARTICLE VIII Miscellaneous

  	
  43

  
	
   

  	
   

  	
   

  
	
  Section 8.1.

  	
  Waiver and Amendment

  	
  43

  
	
  Section 8.2.

  	
  Survival of Agreements;
  Cumulative Nature

  	
  44

  
	
  Section 8.3.

  	
  Notices

  	
  44

  
	
  Section 8.4.

  	
  Parties in Interest

  	
  45

  
	
  Section 8.5.

  	
  Governing Law

  	
  45

  
	
  Section 8.6.

  	
  Limitation on Interest

  	
  45

  
	
  Section 8.7.

  	
  Severability

  	
  46

  
	
  Section 8.8.

  	
  Counterparts

  	
  46

  
	
  Section 8.9.

  	
  Conflicts

  	
  46

  
	
  Section 8.10.

  	
  Entire Agreement

  	
  46

  
	
  Section 8.11.

  	
  WAIVER OF JURY TRIAL

  	
  46

  
	
  Section 8.12.

  	
  USA Patriot Act Notice

  	
  46

  
	
  Section 8.13.

  	
  Supersession

  	
  47

  
	
   

  	
   

  	
   

  
	
  EXHIBITS:

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A —
  PROMISSORY NOTE

  	
  A-1

  
	
  EXHIBIT B —
  INTEREST RATE ELECTION

  	
  B-1

  
	
  EXHIBIT C —
  QUARTERLY COMPLIANCE REPORT

  	
  C-1

  



 


ii

















 


AMENDED AND RESTATED TERM LOAN AGREEMENT


 


THIS AMENDED AND RESTATED TERN LOAN AGREEMENT
(this “Agreement”), dated as of December 31, 2008, is by and between
MADISONVILLE MIDSTREAM LLC, a Texas limited liability company (“Borrower”), and
BANK OF OKLAHOMA, NATIONAL ASSOCIATION, a national banking association (“BOK”).


 


RECITALS


 


A.                                   Madisonville Gas
Processors, LP (“MGPLP”) and BOK are parties to a Credit Agreement dated as of February 28,
2006, as heretofore amended (the “Prior Credit Agreement”), setting forth the
terms upon which BOK would make loans to MGPLP and by which such loans would be
governed and repaid.


 


B.                                     In connection with
the purchase by Borrower of certain assets from MGPLP,
Borrower is assuming from MGPLP, pursuant to an Assignment and
Assumption Agreement of even date
herewith, obligations owed by MGPLP to BOK under the Prior Credit
Agreement in the principal amount of $7,697,847.18 (the “Assumed Amount”).


 


C.                                     Borrower and BOK
desire that this Amended and Restated Term Loan Agreement be executed and
delivered in order to amend and restate in their entirety the terms and
provisions of the Prior Credit Agreement, and to provide for the terms upon
which BOK will make an amortizing term loan to Borrower to refinance a portion
of the Assumed Amount and by which such term loan will be governed and repaid.


 


AGREEMENT


 


Now, THEREFORE, in consideration of the
premises and the mutual covenants and agreements contained herein, the parties
hereto agree as follows:


 


ARTICLE I


 


DEFINITIONS
AND REFERENCES


 


Section 1.1.                                   Defined
Terms. As used in this Agreement, each of the following terms shall have
the meaning given it in this Section 1.1 or in the sections and
subsections referred to below:


 


“Adjusted Cash Flow” means, for any
Fiscal Quarter ending after the date hereof: (a) the combined EBITDA of
Borrower and Redwood for such Fiscal Quarter, minus (b) principal and
interest payments made hereunder by Borrower during such Fiscal Quarter, minus (c) the
Capital Expenditure Deduction for such Fiscal Quarter, minus (d) the
G&A Deduction for such Fiscal 


 

















 


Quarter;
provided that the “Adjusted Cash Flow” for the Fiscal Quarter ending December 31,
2008 shall be deemed to be $0.00.


 


“Affiliate” means, as to any Person,
each Person that directly or indirectly (through one or more intermediaries or
otherwise) controls, is controlled by, or is under common control with, that
Person; provided that, for the purposes of this definition, a Person shall be
deemed to control another Person if the controlling Person possesses, directly
or indirectly, the power to direct or control the direction of the management
and policies of such entity, whether through the ownership of capital stock,
partnership or membership interests or other interests therein, by contract or
otherwise, and shall include without limitation any general partner or any
controlling stockholder, controlling member or controlling owner thereof;
provided that, as to Borrower, an “Affiliate” shall be deemed only to include
each Person that is directly or indirectly (through one or more intermediaries
or otherwise) controlled by Borrower.


 


“Agreement” means this Amended and
Restated Term Loan Agreement.


 


“Applicable Environmental Law” means
any law, order, rule or regulation pertaining to health or the environment
(as the same now exist or are hereafter enacted and/or amended), including
without limitation the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986 (as amended, hereinafter called “CERCLA”), the
Resource Conservation and Recovery Act of 1976, as amended by the Used Oil
Recycling Act of 1980, the Solid Waste Disposal Act Amendments of 1980 and the
Hazardous and Solid Waste Amendments of 1984 (as amended, hereinafter called “RCRA”)
and applicable state law.


 


“Assumed Amount” has the meaning given
such term in Recital B above.


 


“Borrower” means Madisonville Midstream
LLC, a Texas limited liability company.


 


“Business Day” means: (a) with
respect to the making, prepaying, repaying or issuance of, or otherwise
relating to, any LIBOR Tranche, any day which is not a Saturday, a Sunday or a
legal holiday on which commercial banks are authorized or required to be closed
in Denver, Colorado, in Tulsa, Oklahoma or in New York, New York and which is
also a day on which dealings are carried on in the London interbank
eurocurrency market, and (b) for all other purposes hereof, any day which
is not a Saturday, a Sunday or a legal holiday on which commercial banks are
authorized or required to be closed in Denver, Colorado or in Tulsa, Oklahoma.


 


2

















 


“Capital Expenditure Deduction” means
the following:


 


(a)                                  for
the first Fiscal Quarter of any Fiscal Year, the lesser of: (1) $175,000,
or (2) the amount of Qualified Capital Expenditures made by Borrower and
Redwood in that Fiscal Quarter;


 


(b)                                 for
the second Fiscal Quarter of any Fiscal Year: (1) the lesser of: (A) $350,000,
or (B) the aggregate amount of Qualified Capital Expenditures made by
Borrower and Redwood in that Fiscal Quarter and the prior Fiscal Quarter; minus
(2) the “Capital Expenditure Deduction” for the prior Fiscal Quarter;


 


(c)                                  for
the third Fiscal Quarter of any Fiscal Year: (1) the lesser of: (A) $525,000,
or (B) the aggregate amount of Qualified Capital Expenditures made by
Borrower and Redwood in that Fiscal Quarter and the prior two Fiscal Quarters;
minus (2) the sum of the “Capital Expenditure Deductions” for the prior
two Fiscal Quarters; and


 


(d)                                 for
the last Fiscal Quarter of any Fiscal Year: (1) the lesser of: (A) $700,000,
or (B) the aggregate amount of Qualified Capital Expenditures made by
Borrower and Redwood in that Fiscal Quarter and the prior three Fiscal
Quarters; minus (2) the sum of the “Capital Expenditure Deductions” for
the prior three Fiscal Quarters;


 


provided that if, for any Fiscal Quarter, the
calculation described above results in a negative number, the “Capital
Expenditure Deduction” for that Fiscal Quarter shall be deemed to be $0.00.


 


“Collateral” means any and all
Property which is or is purported to be covered by or subject to: (1) the
Amended and Restated Mortgage, Deed of Trust, Security Agreement, Assignment,
Financing Statement and Fixture Filing of even date herewith from Borrower for
the benefit of BOK, as the same may hereafter be amended, (2) the Deed of
Trust, Mortgage, Security Agreement, Assignment of Production and Proceeds, Financing
Statement and Fixture Filing of even date herewith from Redwood for the benefit
of BOK, as the same may hereafter be amended, or (3) any other Security
Document hereafter executed and delivered by any Obligated Person to secure any
or all of the Obligations.


 


“Consolidated” means, as to any
Person, the combined financial statements, financial position, financial
condition, net income, assets, liabilities and other financial data of such
Person and of any and all Affiliates of such Person that would be considered
consolidated Affiliates under GAAP.


 


3

















 


“Debt” means, as to any Person, the
sum of the following (without duplication):


 


(a)                                  all obligations of
such Person for borrowed money or evidenced by bonds, debentures, notes or
other similar instruments;


 


(b)                                 all reimbursement
obligations of such Person in respect of draws under letters of credit, bankers’
acceptance, surety or other bonds and similar instruments that have not been
paid or deemed to have been paid within one Business Day after such obligations
arise;


 


(c)                                  all amounts owed by
such Person representing the deferred purchase price of Property or services
(other than liabilities of such Person to trade creditors arising in the
ordinary course of business (including guarantees thereof or instruments
evidencing such liabilities) that are either: (1) not greater than 120
days past the invoice or billing date, or (2) are being contested in good
faith by appropriate proceedings and adequate reserves therefor have been
established under GAAP);


 


(d)                                 all obligations under
capital leases;


 


(e)                                  all Debt (as defined
in the other clauses of this definition) of others secured by a Lien on any
Property of such Person, whether or not such Debt is assumed by such Person;


 


(f)                                    all Debt (as
defined in the other clauses of this definition) of others guaranteed by such
Person or in which such Person otherwise assures a creditor against loss of the
Debt (howsoever such assurance shall be made) to the extent of the lesser of
the amount of such Debt and the maximum stated amount of such guarantee or
assurance against loss;


 


(g)                                 all obligations or
undertakings of such Person to maintain or cause to be maintained the financial
position or covenants of others or to purchase the Debt or Property of others;


 


(h)                                 any Debt of a
partnership for which such Person is liable either by agreement, by operation
of law or by a governmental requirement, but only to the extent of such
liability; and


 


(i)                                     the undischarged
balance of any production payment created by such Person or for the creation of
which such Person directly or indirectly received payment.


 


“Default” means any Event of Default
and any default, event or condition which would, with the giving of any
requisite 


 


4

















 


notice and/or
the passage of time, constitute an Event of Default.


 


“Distribution” means any distribution
payable in cash or property to any member of Borrower, or any purchase,
redemption or retirement of, or other payment with respect to, any
membership interest in Borrower.


 


“EBITDA” means, for any Fiscal
Quarter: (a) net income for that Fiscal Quarter, excluding any and all
deductions for general and administrative expenses, any and all gains and
losses from any mark-to-market of unliquidated commodity hedge contracts, any
and all gains and losses from the sale of capital assets and any other item
properly classified as an “extraordinary item” or the “discontinuance of a
business” in accordance with GAAP, plus (b) the following, to the extent,
and only to the extent, that they have been deducted in computing net income
for that Fiscal Quarter: interest expenses, income taxes, depreciation,
depletion, amortization and other non-cash charges, all determined in accordance
with GAAP.


 


“ERISA” means the Employee Retirement
Income Security Act of 1974, as amended from time to time, together with all rules and
regulations promulgated with respect thereto.


 


“ERISA Plan” means any employee
pension benefit plan subject to Title IV of ERISA maintained by any Obligated
Person or any Affiliate of any Obligated Person with respect to which any
Obligated Person or any Affiliate of any Obligated Person has a fixed or
contingent liability. “Event of Default” has the meaning given such term
in Section 7.1 below.


 


“Excepted Liens” means:


 


(a)                                  Liens for Taxes,
assessments or other governmental charges or levies which are not delinquent or
which are being contested in good faith by appropriate action and for which
adequate reserves have been maintained in accordance with GAAP;


 


(b)                                 Liens incurred or
deposits made in connection with workers’ compensation, unemployment insurance
or other social security, old age pension or public liability obligations which
are not delinquent or which are being contested in good faith by appropriate
actions and for which adequate reserves have been maintained in accordance with
GAAP;


 


(c)                                  statutory landlords’
Liens, operators’, vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’,
suppliers’, workers’, materialmen’s and construction Liens, Liens on pipelines
and pipeline facilities that arise by operation of law or other like Liens
arising by operation of law in the ordinary course of business or incident to
the exploration, development,


 


5

















 


operation and maintenance of the Collateral
each of which is in respect of obligations that are not delinquent or which are
being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP:


 


(d)                                 contractual Liens
under lease agreements or which arise in the ordinary course of business under
operating agreements, joint venture agreements, oil and gas partnership
agreements, oil and gas leases, contracts for the sale, transportation or
exchange of oil and natural gas, overriding royalty agreements, marketing
agreements, processing agreements, net profits agreements, development
agreements, gas balancing or deferred production agreements, injection,
repressuring and recycling agreements, salt water or other disposal agreements,
seismic or other geophysical permits or agreements, and other agreements which
are usual and customary in the oil and gas business and are for claims which
are not delinquent or which are being contested in good faith by appropriate
action and for which adequate reserves have been maintained in accordance with
GAAP; provided that any such Lien referred to in this clause does not
materially impair the use of the Collateral covered by such Lien for the
purposes for which the Madisonville Gas Plants are held by Borrower or the
Madisonville Oil and Gas Reserves are held by Redwood or materially impair the
value of the Collateral subject thereto;


 


(e)                                  easements,
restrictions, zoning restrictions, servitudes, permits, conditions, covenants,
exceptions or reservations in any Property of any Obligated Person for the
purpose of roads, pipelines, transmission lines, transportation lines,
distribution lines for the removal of gas, oil, coal or other minerals or
timber, and other like purposes, or for the joint or common use of real estate,
rights of way, facilities and equipment, and which in the aggregate do not
materially impair the use of such Property for the purposes of which such
Property is held by any Obligated Person or materially impair the value of such
Property subject thereto;


 


(f)                                    Liens arising from
Uniform Commercial Code financing statement filings regarding operating leases
entered into by any Obligated Person in the ordinary course of business
covering only the Property of the Obligated Persons under lease; and


 


(g)                                 any Lien securing
Subordinated Debt, to the extent that BOK has given its prior written consent
to such Lien, which consent shall not be unreasonably withheld;


 


provided, however, that Liens described in
clauses (a) through (d) above shall remain “Excepted Liens” only for
so long as no action to enforce such Lien has been commenced and no intention
to subordinate the first priority Lien granted in favor of BOK is 


 


6

















 


to be hereby implied or expressed by the
permitted existence of such “Excepted Liens.”


 


“Fiscal Quarter” means a three-month
period ending on the last day of March, June, September or December of
any year.


 


“Fiscal Year” means a twelve–month
period ending on December 31 of any year.


 


“G&A Deduction” means the
following:


 


(a)                                  for
the first Fiscal Quarter of any Fiscal Year, the lesser of: (1) $850,000,
or (2) the amount of Qualified G&A Expenses incurred by GeoPetro and its
Consolidated Subsidiaries during that Fiscal Quarter;


 


(b)                                 for
the second Fiscal Quarter of any Fiscal Year: (1) the lesser of: (A) $1,700,000,
or (B) the aggregate amount of Qualified G&A Expenses incurred by
GeoPetro and its Consolidated Subsidiaries during that Fiscal Quarter and the
prior Fiscal Quarter; minus (2) the “G&A Deduction” for the prior
Fiscal Quarter;


 


(c)                                  for
the third Fiscal Quarter of any Fiscal Year: (1) the lesser of: (A) $2,550,000,
or (B) the aggregate amount of Qualified G&A Expenses incurred by
GeoPetro and its Consolidated Subsidiaries during that Fiscal Quarter and the
prior two Fiscal Quarters; minus (2) the sum of the “G&A Deductions”
for the prior two Fiscal Quarters; and


 


(d)                                 for
the last Fiscal Quarter of any Fiscal Year: (1) the lesser of: (A) $3,400,000,
or (B) the aggregate amount of Qualified G&A Expenses incurred by
GeoPetro and its Consolidated Subsidiaries during that Fiscal Quarter and the
prior three Fiscal Quarters; minus (2) the sum of the “G&A
Deductions” for the prior three Fiscal Quarters;


 


provided that if, for any Fiscal Quarter, the
calculation described above results in a negative number, the “G&A
Deduction” for that Fiscal Quarter shall be deemed to be $0.00.


 


“GAAP” means those generally accepted
accounting principles and practices which are recognized as such by the
Financial Accounting Standards Board (or any generally recognized successor)
and which, in the case of Borrower: (a) are applied for all periods in a
consistent manner, and (b) are consistently applied for all periods after
the date hereof so as to properly reflect the financial condition, and the
results of operations and changes in financial position, of Borrower.


 


“GeoPetro” means GeoPetro Resources
Company, a California corporation.


 


7
















 


“GeoPetro
Loans” means the following four loans heretofore made to GeoPetro: (a) from
The Michael Karasik and Cynthia Anne Bolton-Karasik Revocable Trust dated July 22,
1994, evidenced by a promissory note dated December 23, 2008, in the
amount of $200,000, (b) from Article D Trust F/B/O James A. Heller
U/W/O Anne C. Heller, evidenced by a promissory note dated December 24,
2008, in the amount of $200,000, (c) from Article D Trust F/B/O Susan
K. Heller U/W/O Anne C. Heller, evidenced by a promissory note dated December 24,
2008, in the amount of $250,000, and (d) from Susan K. Heller, evidenced
by a promissory note dated December 26, 2008, in the amount of $400,000.


 


“Guarantors”
means Redwood, GeoPetro and any one or more Subsidiaries of Borrower hereafter
required to guaranty the Obligations pursuant to Section 6.1(o) below.


 


“Guaranties”
means the Guaranties executed and delivered by Guarantors to BOK to guaranty
the Obligations.


 


“Initial
Financial Statements” means the annual financial statements of GeoPetro
dated as of December 31, 2007 and the quarterly financial statements of
GeoPetro dated as of September 30, 2008, copies of which have heretofore
been delivered by GeoPetro to BOK.


 


“Interest
Rate Election” means an election delivered by Borrower to BOK from time to
time in the form of Exhibit B attached hereto and made a part hereof.


 


“LIBOR
(Adjusted)” means, with respect to each LIBOR Tranche and the related LIBOR
Interest Period, the rate of interest per annum determined pursuant to the
following formula:


 


	
   

  	
   

  	
  LIBOR (Unadjusted)

  	
   

  	
   

  
	
  LIBOR (Adjusted)

  	
  =

  	
  1.00 - LIBOR Reserve Percentage

  	
   

  	
   

  



 


“LIBOR
Interest Period” means, with respect to each LIBOR Tranche, a time period
of one, two, three or six months, as specified in the Interest Rate Election
submitted by Borrower pursuant to Section 2.3(b) below with respect
thereto, beginning on and including the date specified in such Interest Rate
Election (which must be a Business Day) and ending on (but not including, for
the purpose of computing the number of days in the LIBOR Interest Period) the
date which corresponds numerically to such beginning date one, two, three or
six months thereafter (or if such month has no numerically corresponding date,
on the last Business Day of such month); provided that each LIBOR Interest
Period which would otherwise end on a day which is not a Business Day shall end
on the next succeeding Business Day unless such next succeeding Business Day is
the first Business Day of a calendar month, in which case such LIBOR Interest
Period shall end on the Business Day next preceding such numerically
corresponding day. No LIBOR Interest Period may be elected which would end
after the Maturity Date.


 


8

















 


“LIBOR
Reserve Percentage” means, with respect to any LIBOR Interest Period, the
reserve percentage (expressed as a decimal) equal to the maximum aggregate
reserve requirements (including all basic, emergency, supplemental, marginal
and other reserves and taking into account any transitional adjustments or
other scheduled changes in reserve requirements) specified under regulations
issued from time to time by the Board of Governors of the Federal Reserve
System and then applicable to assets or liabilities consisting of and including
“Eurocurrency Liabilities”, as currently defined in Regulation D of the Board
of Governors of the Federal Reserve System, having a term approximately equal
or comparable to such LIBOR Interest Period.


 


“LIBOR
Tranche” means a portion of the Loan outstanding for a specific LIBOR
Interest Period and bearing interest at a fixed rate based upon LIBOR
(Adjusted).


 


“LIBOR
(Unadjusted)” means, with respect to each LIBOR Tranche and the related
LIBOR Interest Period, the rate of interest per annum determined by BOK from
Telerate page 3750 (or any successor thereto) as of two Business Days
prior to the first day of such LIBOR Interest Period, in accordance with its
customary practices, to be representative of the rates at which deposits of
U.S. dollars are being offered in the London interbank eurocurrency market for
delivery on the first day of such LIBOR Interest Period in an amount equal or
comparable to the amount of such LIBOR Tranche and for a period of time equal
or comparable to the length of such LIBOR Interest Period. LIBOR (Unadjusted),
as determined by BOK with respect to a particular LIBOR Tranche, shall be fixed
at such rate for the duration of the associated LIBOR Interest Period. If BOK
is unable so to determine LIBOR (Unadjusted) for any LIBOR Tranche, or if the associated
LIBOR (Adjusted) would exceed the maximum rate of interest, if any, then
permitted to be charged on the Note under applicable law, Borrower shall be
deemed to have elected to have included in the Prime Rate Portion the portion
of the Loan that would otherwise have been included in such LIBOR Tranche.


 


“Lien”
means, with respect to any property or assets, any right or interest therein of
a creditor to secure Debt owed to him or any other arrangement with such
creditor which provides for the payment of such Debt out of such property or
assets or which allows him to have such Debt satisfied out of such property or
assets prior to the general creditors of any owner thereof, including without
limitation any lien, mortgage, security interest, pledge, deposit, production
payment, rights of a vendor under any title retention or conditional sale
agreement or lease substantially equivalent thereto, or any other charge or
encumbrance for security purposes, whether arising by law or agreement or
otherwise, but excluding any right of offset which arises without agreement in
the ordinary course of business.


 


9

















 


“Loan
Documents” means this Agreement, the Security Documents, the Guaranties,
the Note and all other agreements, certificates, legal opinions and other
documents, instruments and writings heretofore or hereafter delivered in
connection herewith or therewith.


 


“Loan”
has the meaning given such term in Section 2.1 below.


 


“Madisonville
Gas Plants” means any gas plants and related facilities currently located
on the lands covered by the Security Documents, together with any and all other
gas plants and related facilities that may hereafter be located on any of said
lands or any other lands hereafter added to the coverage of the Security
Documents.


 


“Madisonville
Oil and Gas Reserves” means the reserves of oil, gas, other hydrocarbons
and other associated substances in, on, under or otherwise attributable to the
lands covered by the Security Documents, together with any and all other
reserves of oil, gas, other hydrocarbons and other associated substances in,
on, under or otherwise attributable to any other lands hereafter added to the
coverage of the Security Documents.


 


“Maturity
Date” means the earlier of: (a) December 31, 2011, or (b) such
date on which the Loan is due and payable in full by reason of the occurrence
of an Event of Default, as established pursuant to Section 7.1 below.


 


“Note”
means a promissory note in the form of Exhibit A attached hereto and made
a part hereof, duly executed and delivered by Borrower, which promissory note
shall evidence Borrower’s obligation to repay the Loan.


 


“Obligated
Person” means Borrower, any Guarantor or any other Person now or hereafter
liable for repayment of any or all of the Obligations, whether by guaranty or
otherwise.


 


“Obligations”
means all Debt from time to time owing by Borrower to BOK under or pursuant to
any of the Loan Documents. “Obligation” means any part of the Obligations.


 


“Other
Taxes” has the meaning given such term in Section 3.7 below.


 


“Payment
Date” means the last day of each calendar quarter, commencing March 31,
2009.


 


“Person”
means an individual, corporation, partnership, association, joint—stock
company, trust or trustee thereof,


 


10

















 


estate or
executor thereof, limited liability company, unincorporated organization or
joint venture, court or governmental unit or any agency or subdivision thereof,
or any other legally recognizable entity.


 


“Prime Rate”
means the fluctuating interest rate per annum determined from time to time by
BOK Financial Corporation (or any successor thereto), in its sole discretion,
and published as the “BOKF National Prime Rate” (which may not be the lowest
interest rate charged by BOK), adjusted effective as of the effective date of
any change in the “BOKF National Prime Rate” so determined and published by BOK
Financial Corporation (or any successor thereto). The “Prime Rate” is 4.0
percent per annum as of the date hereof.


 


“Prime Rate
Portion” means the portion of the Loan bearing interest based upon the
Prime Rate.


 


“Prior
Credit Agreement” has the meaning given such term in Recital A above.


 


“Property”
means any interest in any kind of property or asset, whether real, personal or
mixed, tangible or intangible, including without limitation cash, securities,
accounts and contract rights.


 


“Qualified
Capital Expenditures” means, for any Fiscal Quarter, capital expenditures
incurred by Borrower or Redwood in the ordinary course of their respective
businesses during such Fiscal Quarter, to the extent and only to the extent
that such capital expenditures are incurred on or in respect of any of the
Madisonville Gas Plants or any of the Madisonville Oil and Gas Reserves or any
associated properties and assets.


 


“Qualified
G&A Expenses” means, for any Fiscal Quarter, general and administrative
expenses incurred by GeoPetro or any of its Consolidated Affiliates in the
ordinary course of their respective businesses during such Fiscal Quarter.


 


“Redwood”
means Redwood Energy Production, L.P., a Texas limited partnership.


 


“Release
Date” means the earlier of the following two dates: (a) the date on
which the Obligations have been paid and performed in full and the Security
Documents have been released of record, or (b) the date on which the liens
of the Security Documents have been foreclosed or a deed in lieu of such
foreclosure has become fully effective and has been recorded.


 


“Rodessa/Sligo
Interval” means the stratigraphic equivalent of those sands, zones and
horizons occurring below the


 


11

















 


surface of the
earth encountered between the depths of 11,427 feet and 12,378 (electric log
measurements) in the Ruby Magness Well No. 1 located in the Amy Boatwright
Survey, A-7, Madison County, Texas.


 


“Security
Documents” means all security agreements, deeds of trust, mortgages,
chattel mortgages, pledges, guaranties, financing statements, continuation
statements, extension agreements and other agreements or instruments now,
heretofore, or hereafter delivered by any or all of the Obligated Persons or
any other person to BOK in connection with this Agreement, the Prior Credit
Agreement or any transaction contemplated hereby or thereby, to secure or guaranty
the payment of any part of the Obligations or the performance of any other
duties and obligations of any or all of the Obligated Persons under the Loan
Documents, whenever made or delivered.


 


“Subordinated
Debt” means any indebtedness, Debt or other obligations of any Obligated
Person, in such amounts as may be reasonably acceptable to BOK, to the extent
that the rights of the holders thereof to enforce the indebtedness, Debt and
other obligations of such Obligated Person thereunder have been subordinated to
the rights of BOK hereunder or in connection herewith by subordination
agreements executed by the holders of the Subordinated Debt and satisfactory in
form and substance to BOK, specifically including the GeoPetro Loans, to the
extent that the holders of such loans have executed and delivered subordination
agreements in form and substance satisfactory to BOK.


 


“Subsidiary”
means any corporation, limited liability company, partnership or other entity,
at least 80 percent of the equity ownership of which is held by Borrower.


 


“Supplemental
Payment Amount” means, for any Payment Date: (a) 50 percent of the
Adjusted Cash Flow for the Fiscal Quarter prior to the Fiscal Quarter in which
such Payment Date occurs, plus (b) 30 percent of the net proceeds (after
deduction of reasonable costs and expenses incurred in connection therewith) of
any debt or equity financing issued by GeoPetro or any of its Consolidated
Affiliates during the Fiscal Quarter in which such Payment Date occurs, other
than any such net proceeds that are reserved for use on or in respect of the
Madisonville Gas Plants or the Madisonville Oil and Gas Reserves and associated
gathering systems, acid gas disposal lines and other assets.


 


“Tangible
Net Worth” means, at any time, as to any Person: (a) the equity in
such Person owned by the shareholders, partners, members or other owners of
such Person, determined in accordance with GAAP, less (b) goodwill and any
and all other


 


12

















 


intangible
assets of such Person, determined on a Consolidated basis in accordance with
GAAP.


 


“Taxes”
means any and all present or future taxes, levies, imposts, duties, deductions,
charges or withholdings imposed by any governmental authority.


 


Section 1.2.            Incorporation of Exhibits.
All Exhibits attached to this Agreement are a part hereof for all purposes.


 


Section 1.3.            Amendment of Defined Instruments.
Unless the context otherwise requires or unless otherwise provided herein, the
terms defined in this Agreement which refer to a particular agreement,
instrument or document also refer to and include all renewals, extensions and
modifications of such agreement, instrument or document, provided that nothing
contained in this section shall be construed to authorize any such renewal,
extension or modification.


 


Section 1.4.            References and Titles. All
references in this Agreement to Exhibits, Schedules, articles, sections,
subsections and other subdivisions refer to the Exhibits, Schedules, articles,
sections, subsections and other subdivisions of this Agreement unless expressly
provided otherwise. Titles appearing at the beginning of any subdivisions are
for convenience only and do not constitute any part of such subdivisions and
shall be disregarded in construing the language contained in such subdivisions.
The words “this Agreement”, “this instrument”, “herein”, “hereof”, “hereby”,
“hereunder” and words of similar import refer to this Agreement as a whole and
not to any particular subdivision unless expressly so limited. The phrases “this
section” and “this subsection” and similar phrases refer only to the sections
or subsections hereof in which such phrases occur. The word “or” has the
inclusive meaning frequently identified by the phrase “and/or”. Pronouns in
masculine, feminine and neuter genders shall be construed to include any other
gender, and words in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires.


 


Section 1.5.            Calculations and Determinations.
All interest accruing under the Loan Documents shall be calculated on the basis
of actual days elapsed (including the first day but excluding the last) and a
year of (a) in the case of the Prime Rate Portion, 360 days, and (b) in
the case of any LIBOR Tranche, 365 days. Unless otherwise expressly provided
herein or unless BOK otherwise consents, all financial statements and reports
furnished to BOK hereunder shall be prepared and all financial computations and
determinations pursuant hereto shall be made in a manner consistent with the
accounting system used in the preparation of the Initial Financial Statements
of GeoPetro or with another accounting system agreed to in writing by BOK.


 


13

















 


ARTICLE II


 


The Loan


 


Section 2.1.                                The
Loan. (a) Subject to the other terms and conditions of this Agreement,
BOK agrees to refinance, as of the date hereof, the unpaid balance of the
Assumed Amount as an amortizing term loan (the “Loan”) to Borrower on or about
the date hereof in the amount of $6,697,847.18. The above-described refinancing
shall be the sole advance on the Loan, and Borrower shall not have the right to
reborrow any amounts borrowed and repaid hereunder.


 


(b)           BOK shall not have any
obligation to: (1) issue a LIBOR Tranche as to which the LIBOR Interest
Period does not expire prior to the Maturity Date, (2) issue a LIBOR
Tranche at any time when three or more prior LIBOR Tranches remain outstanding,
or (3) issue a LIBOR Tranche in an amount less than $500,000 or in an
amount that is not an integral multiple of $100,000.


 


Section 2.2.                                The
Note; Interest. (a) Borrower’s obligation to repay the Loan, with
interest thereon, shall be evidenced by the Note. In the event any provision
contained in the Note conflicts with a provision contained in this Agreement,
the provisions of this Agreement shall control.


 


(b)           At any time and from
time to time hereafter, if Borrower desires to include in a LIBOR Tranche all
or any portion of the Loan which is not already included in a LIBOR Tranche for
the relevant time period, Borrower shall deliver an Interest Rate Election to
BOK at least three Business Days prior to the first day of the requested LIBOR
Interest Period, specifying the dollar amount it desires to have included in
the LIBOR Tranche, the first day of the requested LIBOR Interest Period and the
duration of the requested LIBOR Interest Period. Any portion of the Loan that
is not included in a LIBOR Tranche shall be included in the Prime Rate Portion.


 


(c)           (1) Except as
otherwise provided in (3) below, interest on each LIBOR Tranche shall
accrue at a fixed annual rate equal to the greater of: (A) LIBOR
(Adjusted) with respect to such LIBOR Tranche plus five and one-half
percentage points per annum, or (B) four and one–half percent per annum.
(2) Except as otherwise provided in (3) below, interest on the
Prime Rate Portion shall accrue at a fluctuating annual rate equal to the
greater of: (A) the Prime Rate plus four percentage points per annum, or (B) four
and one-half percent per annum. (3) From and after the occurrence, and
during the continuance, of any Event of Default hereunder, interest on
overdue principal


 


14

















 


and (to the
extent permitted under applicable law) overdue interest, whether caused by
acceleration of maturity or otherwise, shall accrue, from the date of
occurrence of the Event of Default until the date the Event of Default is
cured, at a fluctuating annual rate equal to the Prime Rate plus five
percentage points per annum.


 


(d)           Interest accrued on the
Prime Rate Portion shall be due and payable on each Payment Date. Interest
accrued on each LIBOR Tranche shall be due and payable on the last day of the
LIBOR Interest Period for such LIBOR Tranche (and, in the ease of any LIBOR
Tranche having a LIBOR Interest Period in excess of three months, on the
three-month anniversary of the first day of such LIBOR Interest Period).


 


(e)           Any then-outstanding
interest on the Loan shall be due and payable not later than the Maturity Date.


 


Section 2.3.                               Mandatory
Principal Payments. (a) On each Payment Date, Borrower shall make a
principal payment to BOK in the amount of $150,000.


 


(b)           In addition to the
regularly scheduled quarterly principal payments due and payable by Borrower to
BOK as set forth in Section 2.3(a) above, an additional quarterly
principal payment in the amount of the applicable Supplemental Payment Amount
shall be due and payable on each Payment Date.


 


(c)           The outstanding
principal balance of the Loan, together with all unpaid fees and expenses
relating thereto, shall be due and payable not later than the Maturity
Date.


 


Section 2.4.                               Voluntary
Prepayinents. Borrower shall have the right to prepay the Loan at any time,
in whole or in part, without penalty or premium (except as otherwise described
in Sections 3.4 and 3.5 below).


 


Section 2.5.                               Termination
of Agreement. Borrower shall have the right at any time, upon not less than
three Business Days’ prior written notice to BOK, to terminate this Agreement.
Upon any termination of this Agreement, Borrower shall, at the time of such
termination, prepay the Loan in full, including without limitation all
principal, interest, fees, costs and expenses payable hereunder or in
connection herewith. Any such prepayment shall be without penalty or premium
(except as otherwise described in Sections 3.4 and 3.5 below).


 


Section 2.6.                               Payments
to BOK. Borrower will pay to BOK each payment which Borrower owes under the
Loan Documents not later than 12:00 noon, Denver, Colorado time, on the due date,
in lawful money of the United States of America and in immediately available
funds. Any payment received after such time will be


 


15

















 


deemed to have
been made on the next following Business Day. Except as otherwise provided in
this Agreement as to LIBOR Tranches, should any such payment become due and
payable on a day other than a Business Day, the maturity of such payment shall
be extended to the next succeeding Business Day, and, in the case of a payment
of principal or past due interest, interest shall accrue and be due and payable
thereon for the period of such extension. Each payment under a Loan Document
shall be due and payable at the place provided therein or, if no specific place
of payment is provided, shall be due and payable at the place of payment of the
Note.


 


Section 2.7.                                   Use
of Proceeds. In no event shall the proceeds of the Loan be used directly or
indirectly for the purpose, whether immediate, incidental or ultimate, of
purchasing, acquiring or carrying any “margin stock” (as such term is defined
in Regulation U promulgated by the Board of Governors of the Federal Reserve
System> or to extend credit to others directly or indirectly for the purpose
of purchasing or carrying any such margin stock or margin securities. Borrower
represents and warrants to BOK that Borrower is not engaged principally, or as
one of its important activities, in the business of extending credit to others
for the purpose of purchasing or carrying such margin stock. The proceeds of
the Loan shall be used solely for the refinancing of $6,697,847.18 of the
Assumed Amount.


 


ARTICLE III


 


Security; Fees; LIBOR Provisions; Taxes; Increased Capital


 


Section 3.1.                                   The
Security. The Obligations will be secured on a pari passu basis by
any and all Security Documents executed and delivered contemporaneously with
the execution and delivery of this Agreement and any additional Security
Documents hereafter delivered by any Obligated Person and accepted by BOK.


 


Section 3.2.                                   Perfection
and Protection of Security Interests and Liens. Borrower will from time to
time deliver to BOK any amendments, financing statements, continuation
statements, extension agreements and other documents, properly completed and
executed (and acknowledged when required) by Borrower in form and substance
reasonably satisfactory to BOK, which BOK may reasonably request for the
purpose of perfecting, confirming or protecting BOK’s Liens and other rights in
the Collateral.


 


Section 3.3.                                   Bank
Accounts and Offset. To secure the repayment of the Obligations, Borrower
hereby grants to BOK a security interest, a lien, and a right of offset, each
of which shall be upon and against: (a) any and all moneys, securities or
other property (and the proceeds therefrom) of Borrower now or


 


16

















 


hereafter held
or received by or in transit to BOK from or for the account of Borrower,
whether for safekeeping, custody, pledge, transmission, collection or
otherwise, (b) any and all deposits (general or special, time or demand,
provisional or final) of Borrower with BOK, and (c) any other credits and
claims of Borrower at any time existing against BOK., including without
limitation claims under certificates of deposit. Upon the occurrence of any
Event of Default, BOK is hereby authorized to foreclose upon, offset,
appropriate, and apply, at any time and from time to time, without notice to
Borrower, any and all items hereinabove referred to against the Obligations
(whether or not such Obligations are then due and payable).


 


Section 3.4.                                 Fee.
Borrower shall pay to BOK, at the time that the Loan is repaid in full
hereunder, a loan origination fee in the amount of: (a) $60,000 if the
Loan is repaid in full on or before December 31, 2009, (b) $120,000
if the Loan is repaid in full after December 31, 2009, but on or before December 31,
2010, or (c) $180,000 if the Loan is repaid in full after December 31,
2010.


 


Section 3.5.                                 Special
LIBOR Provisions. (a) If BOK shall reasonably determine (which determination
shall, upon notice thereof to Borrower and absent clear error, be conclusive
and binding upon Borrower and BOK) that the introduction of or any change in or
in the interpretation of any law makes it unlawful, or any central bank or
other governmental authority having jurisdiction asserts that it is unlawful,
for BOK to fund, continue or maintain any LIBOR Tranche, the obligation of BOK
to fund, continue or maintain any such LIBOR Tranche shall, upon such
determination, forthwith be suspended until BOK shall notify Borrower that the
circumstances causing such suspension no longer exist, and all LIBOR Tranches
shall automatically be converted into the Prime Rate Portion at the end of the
then-current LIBOR Interest Periods with respect thereto or sooner, if required
by such law or assertion.


 


(b)                                 If
BOK shall reasonably determine that:


 


(1)           U.S. Dollar deposits in the relevant
amount and for the relevant LIBOR Interest Period are not available to BOK in
its relevant market; or


 


(2)           By reason of circumstances affecting
BOK’s relevant market, adequate means do not exist for ascertaining the
interest rate applicable hereunder to LIBOR Tranches;


 


then, upon
notice from BOK to Borrower, the obligation of BOK to include any portion of
the Loan in a LIBOR Tranche shall forthwith be suspended until BOK shall notify
Borrower that the circumstances causing such suspension no longer exist.


 


17
















 


(c)                                 Borrower
agrees to reimburse BOK for any increase in the cost to BOK of, or any
reduction in the amount of any sum receivable by BOK in respect of, funding,
continuing or maintaining (or of its obligation to fund, continue or maintain)
any LIBOR Tranche; provided that the foregoing shall not apply to increases
resulting from general increases in interest rates or general increases in BOK’s
administrative expenses or overhead costs. BOK shall promptly notify Borrower
in writing of the occurrence of any such event, such notice to state, in
reasonable detail, the reasons therefor and the additional amount required
fully to compensate BOK for such increased cost or reduced amount. Such
additional amount shall be due and payable by Borrower to BOK within fifteen
days of Borrower’s receipt of such notice, and such notice shall, in the
absence of clear error, be conclusive and binding on Borrower.


 


(d)                                In
the event BOK shall incur any loss or expense (including any loss or expense
incurred by reason of the liquidation or reemployment of deposits or other
funds acquired by BOK to fund, continue or maintain any portion of the
principal amount of any LIBOR Tranche) as a result of:


 


(1)           Any conversion, repayment or
prepayment (whether voluntary or mandatory) of the principal amount of any
LIBOR Tranche on a date other than the scheduled last day of the LIBOR Interest
Period applicable thereto; or


 


(2)           Any requested LIBOR Tranche not being
funded as a LIBOR Tranche in accordance with the provisions of this Agreement or
the Interest Rate Election therefor;


 


then, upon the
written notice by BOK to Borrower, Borrower shall, within fifteen days of
receipt thereof, pay BOK such amount as will (in the reasonable determination
of BOK) reimburse BOK for such loss or expense. Such written notice (which
shall include calculations in reasonable detail) shall, in the absence of clear
error, be conclusive and binding upon Borrower.


 


Section 3.6.                                 Increased Capital Costs. If any change in, or the introduction,
adoption, effectiveness, interpretation, reinterpretation or phase—in of, any
law or regulation, directive, guideline, decision or request (whether or not
having the force of law) of any court, central bank, regulator or other
governmental authority affects or would affect the amount of capital required
or expected to be maintained by BOK or any Person controlling BOK, and BOK
reasonably determines that the rate of return on its or such controlling Person’s
capital as a consequence of the Loan is reduced to a level below that which BOK
or such controlling Person could have achieved but for the occurrence of any
such circumstance, then, in any such case upon notice from time to time by BOK
to Borrower, Borrower hereby agrees to pay to BOK, within fifteen days of the
effective date 


 


18

















 


of such notice, such additional amount (as
may be reasonably determined by BOK) sufficient to compensate BOK or such
controlling Person for such reduction in rate of return. A statement to
Borrower by BOK as to any such additional amount or amounts (including
calculations thereof in reasonable detail) shall, in the absence of clear
error, be conclusive and binding upon Borrower.


 


Section 3.7.            Taxes.  (a) Except to the extent otherwise
provided in this Agreement, any and all payments to or for the benefit of BOK
or by Borrower hereunder or under any other Loan Documents shall be made free
and clear of and without deduction, setoff or counterclaim of any kind
whatsoever and in such amounts as may be necessary in order that all such
payments, after deduction for or on account of any present or future
taxes, levies, imposts, deductions, charges or withholdings imposed by
the United States of America or any political subdivision thereof arising
from or relating to BOK’s Loan made under this Agreement and all
liabilities with respect thereto (excluding taxes imposed on or measured
by the income or capital (including in this exclusion taxes imposed in
lieu thereof, franchise taxes and minimum taxes) of BOK by any
jurisdiction or any political subdivision or taxing authority thereof or
therein as a result of a connection between BOK and such jurisdiction or
political subdivision, other than a connection resulting solely from executing,
delivering or performing its obligations or receiving a payment under, or
enforcing, this Agreement or the Note, or any branch profits taxes imposed by
the United States or any similar tax imposed by any other jurisdiction in
which BOK is located), shall be not less than the amounts otherwise specified
to be paid under this Agreement and the other Loan Documents. If Borrower
shall be required by law to withhold or deduct any Taxes imposed
by the United States or any political subdivision thereof from or
in respect of any sum payable hereunder or under any other Loan Document
to BOK: (1) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 3.7), BOK receives an amount
equal to the sum it would have received had no such deductions been made;
or (2) (A) Borrower shall make such deduction and (B) Borrower
shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law. If
Borrower shall make any payment under this Section 3.7 to or for
the benefit of BOK with respect to Taxes and if BOK shall claim
any credit or deduction for such Taxes against any other taxes payable by
BOK to any taxing jurisdiction in the United States, then BOK shall pay to
Borrower an amount equal to the amount by which such other taxes are actually
reduced; provided that the aggregate amount payable by BOK pursuant to this
sentence shall not exceed the aggregate amount previously paid by Borrower
with respect to such Taxes. In addition, Borrower agrees to pay any
present or future stamp, recording or documentary taxes and any


 


19

















 


other excise
or property taxes, charges or similar levies that arise under the laws of the
United States of America or the State of Colorado from any payment made
hereunder or under any other Loan Document or from the execution or delivery or
otherwise with respect to this Agreement or any other Loan Document (hereinafter
referred to as “Other Taxes”).


 


(b)           Borrower shall
indemnify BOK for the full amount of Taxes and Other Taxes (including any Taxes
or Other Taxes imposed by any jurisdiction on amounts payable under this Section 3.7)
arising from the execution, delivery or performance of its obligations or from
receiving a payment hereunder, or enforcing this Agreement or any Loan
Document, paid by BOK or any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted; provided that Borrower shall
not be obligated to indemnify BOK for any penalties, interest or expenses
relating to Taxes or Other Taxes arising from the indeinnitee’s gross
negligence, willful misconduct or unexcused breach of this Agreement. BOK
agrees to give notice to Borrower of the assertion of any claim against BOK
relating to such Taxes or Other Taxes as promptly as is practicable, and in no
event later than 120 days after the principal Person of BOK responsible for
administering this Agreement has actual knowledge of such claim; provided, that
BOK’s failure to notify Borrower within such 120—day period of such assertion
shall not relieve Borrower of its obligation under this Section 3.7 with
respect to claims arising 120 days prior to the time that Borrower receives
notices from the indemnitee as provided herein. Payments by Borrower pursuant
to this indemnification shall be made within 30 days from the date BOK makes
written demand therefor, which demand shall be accompanied by a certificate
describing in reasonable detail the basis and calculation thereof and
certifying further that the method used to calculate such amount is fair and
reasonable. BOK agrees to repay to Borrower any refund (including that portion
of any interest that was included as part of such refund with respect to Taxes
or Other Taxes paid by Borrower pursuant to this Section 3.7) received by
BOK for Taxes or Other Taxes that were paid by Borrower pursuant to this Section 3.7
and to contest, with the cooperation and at the expense of Borrower, any such
Taxes or Other Taxes which BOK or Borrower reasonably believes not to have been
properly assessed.


 


(c)           Within 30 days after
the date of any payment of Taxes or Other Taxes by Borrower, Borrower shall
furnish to BOK the original or certified copy of a receipt evidencing payment
thereof (or if such receipt is not available, any other proof of payment
satisfactory to BOK).


 


(d)           The obligations of
Borrower under this Section 3.7 shall survive the termination of this
Agreement and the repayment of the Obligations.


 


20

















 


ARTICLE
IV


 


Conditions
Precedent to Loan


 


Section 4.1.            Initial Conditions Precedent.
BOK shall have no obligation to make the Loan unless BOK shall have received
all of the following at its office in Denver, Colorado, duly executed and
delivered and in form, substance and date satisfactory to BOK (subject to
waiver by BOK):


 


(a)                                 The
Note.


 


(b)                                An
“Omnibus Certificate” of an officer or manager of Borrower and of each
Guarantor, each of which shall contain the names and signatures of the officers
or managers of Borrower or such Guarantor authorized to execute Loan Documents
and which shall certify to the truth, correctness and completeness of the
following exhibits attached thereto: (1) a copy of the articles of
incorporation, articles of organization, partnership certificate or other
organizational document of Borrower or such Guarantor and all amendments
thereto, (2) a copy of the bylaws, operating agreement, partnership
agreement or other governing document of Borrower and all amendments
thereto, and (3) a copy of the resolutions of the Board of Directors,
managers, members, partners or other owners of Borrower or such Guarantor
authorizing this Agreement and the transactions contemplated hereby.


 


(c)                                 A
“Compliance Certificate” of an officer or manager of Borrower in which such
person certifies to the satisfaction of the conditions set out in subsections
(a), (b), and (c) of Section 4.2 below.


 


(d)                                The
Security Documents.


 


(e)                                 Such
title opinions, supplemental title opinions, UCC searches and other title
information concerning Borrower’s and Redwood’s title to the Collateral or any
portions thereof as may be satisfactory to BOK.


 


(f)                                   Evidence
satisfactory to BOK that the Collateral has been and continues to be operated
in a reasonable and prudent manner without giving 


 


21

















 


rise to
any liabilities or obligations under any Applicable Environmental Law.


 


(g)                                Complete
information concerning Borrower’s purchase of the Maclisonville Gas Plants and
related assets from MGPLP, including without limitation a copy of the
applicable purchase and sale agreement, and evidence satisfactory to BOK that
all prior liens, security interests and other encumbrances burdening such
plants and assets will be terminated as of the funding of the Loan.


 


(h)                                Evidence
satisfactory to BOK that Borrower or Redwood has entered into agreements with
oil and gas lessors concerning the sharing of costs relating to the
Madisonville Gas Plants.


 


(i)                                    A
payment in the amount of $1,000,000 in guaranteed funds to reduce the unpaid
balance of the Assumed Amount to $6,697,847.18.


 


(j)                                    Any
and all other Loan Documents.


 


Section 4.2.            Additional Conditions Precedent.
BOK shall have no obligation to make the Loan unless the following conditions
precedent have been satisfied:


 


(a)                                 All
representations and warranties made by any Obligated Person in any Loan
Document shall be true and correct in all material respects on and as of the
date of the Loan (or, if any representation or warranty is stated to have
been made only as of a specific date, then as of such specific date).


 


(b)                                No
Default shall exist as of the date of the Loan.


 


(c)                                 Each
Obligated Person shall have performed and complied with all agreements and
conditions herein required to be performed or complied with by it on or prior
to the date of the Loan.


 


(d)                                The
making of the Loan shall not be prohibited by any law or any regulation or
order of any court or governmental agency or authority and shall not subject
80K to any penalty or other onerous condition under or pursuant to any such
law, regulation or order.


 


22

















 


ARTICLE
V


 


Representations
and Warranties


 


Section 5.1.            Representations and Warranties of
the Obligated Persons. To induce BOK to enter into this Agreement and to
make the Loan, each of Borrower and, by their limited ratification hereof and
joinder herein, GeoPetro and Redwood represents and warrants to BOK (which
representations and warranties shall survive the delivery of the Note and shall
be deemed to be continuing representations and warranties until repayment in
full of the Loan; provided that each such Obligated Person, including Borrower,
shall be deemed to make such representations and warranties to the extent
that they relate to such Obligated Person and not to the extent that
they relate to the other Obligated Persons) that:


 


(a)                                 No
Default. Borrower is not in default in any material respect in the
performance of any of the covenants and agreements contained herein.
No event has occurred and is continuing which constitutes a Default.


 


(b)                                Organization
and Good Standing. Borrower is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of
Texas, having all powers required to carry on its business and enter into and
carry out the transactions contemplated hereby. Redwood is a limited partnership
duly organized, validly existing and in good standing under the laws of the
State of Texas, having all powers required to carry on its business and enter
into and carry out the transactions contemplated hereby. GeoPetro is a
corporation duly organized, validly existing and in good standing under the
laws of the State of California, having all powers required to carry on its
business and enter into and carry out the transactions contemplated hereby.
Each Obligated Person is duly qualified, in good standing, and authorized
to do business in all other jurisdictions wherein the character of the
properties owned or held by it or the nature of the business transacted by
it makes such qualification necessary, except where the failure to be so
qualified would not reasonably be expected to have a material adverse effect on
any Obligated Person.


 


(c)                                 Authorization.
Each Obligated Person has duly taken all action necessary to authorize the


 


23

















 


execution and
delivery by it of the Loan Documents and to authorize the consummation of the
transactions contemplated thereby and the performance of its obligations
thereunder.


 


(d)                                No
Conflicts or Consents. The execution and delivery by the various Obligated
Persons of the Loan Documents to which each is a party, the performance by each
of its obligations under such Loan Documents, and the consummation of the
transactions contemplated by the various Loan Documents, do not and will not: (1) conflict
with any provision of: (A) any domestic or foreign law, statute, rule or
regulation, (B) the governing documents of any Obligated Person, or (C) any
agreement, judgment, license, order or permit applicable to or binding upon
any Obligated Person, except, in each case, where such conflict would
not reasonably be expected to have a material adverse effect on
any Obligated Person, (2) result in the acceleration of any Debt owed
by any Obligated Person, or (3) result in or require the creation of any
Lien upon any assets or properties of any Obligated Person except as expressly
contemplated by the Loan Documents. Except as expressly contemplated by the
Loan Documents, no consent, approval, authorization or order of, and no
notice to or filing with, any court or governmental authority or third party is
required in connection with the execution, delivery or performance by any
Obligated Person of any Loan Document or to consummate any transactions
contemplated by the Loan Documents.


 


(e)                                 Enforceable
Obligations. This Agreement is, and the other Loan Documents when duly
executed and delivered will be, legal and binding obligations of each Obligated
Person which is a party hereto or thereto, enforceable in accordance with their
respective terms, except as limited by bankruptcy, insolvency or similar laws of
general application relating to the enforcement of creditors’ rights and
as limited by general equitable principles.


 


(f)                                   Initial
Financial Statements. The Initial Financial Statements fairly present
GeoPetro’s Consolidated financial position at the dates thereof in all material
respects. Since the dates of the Initial Financial Statements, no material
adverse change has occurred in


 


24

















 


GeoPetro’s
Consolidated financial condition or business.


 


(g)                                Other
Obligations. Except for the GeoPetro Loans, no Obligated Person has
any outstanding Debt of any kind (including contingent obligations, tax
assessments, and unusual forward or long-term commitments) which is not
shown in the Initial Financial Statements or which has not been previously
disclosed in writing to BOK.


 


(h)                                Full
Disclosure. No certificate, statement or other information delivered
herewith or heretofore by any Obligated Person to BOK in connection with the
negotiation of this Agreement or in connection with any transaction
contemplated hereby contains any untrue statement of a material fact or
omits to state any material fact known to any Obligated Person necessary to
make the statements contained herein or therein not misleading in any material
respect as of the date made or deemed made (it being recognized by BOK that
projections and estimates as to future events are not to be viewed as facts and
that the actual results during the period or periods covered by any such
projections and estimates from projected or estimated results. At the date of
this Agreement no Obligated Person is aware of any material fact that has
not been disclosed to BOK in writing which could materially and adversely
affect any Obligated Person’s properties, businesses or condition (financial or
otherwise).


 


(i)                                    Litigation.
Except as disclosed in the Initial Financial Statements or as otherwise
previously disclosed in writing by any Obligated Person to BOK: (1) there
are no actions, suits or legal, equitable, arbitrative or administrative
proceedings pending, or to the knowledge of any Obligated Person threatened in
writing, against any Obligated Person before any federal, state, municipal or
other court, department, commission, body, board, bureau, agency, or
instrumentality, domestic or foreign, which would reasonably be expected
to materially and adversely affect any Obligated Person, any Affiliate of any
Obligated Person, any Obligated Person’s ownership or use of any of its assets
or properties, its business or financial


 


25

















 


condition or
prospects, or the right or ability of any Obligated Person to enter into the
Loan Documents or perform its obligations thereunder and (2) there are no
outstanding judgments, injunctions, writs, rulings or orders by any
such governmental entity against any Obligated Person which have or may
have any such effect.


 


(j)                                    Title
to Properties. To the best of the Obligated Persons’ knowledge, the
Obligated Persons have good and defensible title to the Collateral, free and
clear of all liens, encumbrances and defects of title, except for covenants,
restrictions, rights, easements, liens, encumbrances and minor irregularities
in title which do not materially interfere with the occupation, use and
enjoyment of such Collateral in the normal course of business as presently
conducted or materially impair the value thereof for such business. The
Obligated Persons enjoy peaceful and undisturbed possession under all material
leases under which they operate, and all such leases are valid and
subsisting, with no material default existing thereunder.


 


(k)                                 Place
of Business. The chief executive office and principal place of
business of each Obligated Person are located at the address of Borrower
set out in Section 8.3 below.


 


(l)                                    Taxes.
All tax returns required to be filed by any Obligated Person in any
jurisdiction prior to the date hereof have been filed; all taxes,
assessments, fees and other governmental charges upon any Obligated Person or
upon any of their respective properties, income or franchises, which are due
and payable have been paid, or adequate reserves have been provided for payment
thereof.


 


(m)                              Use
of Proceeds. No Obligated Person is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U or X
of the Board of Governors of the Federal Reserve System), and no part of
the proceeds of the Loan will be used to purchase or carry any such
margin stock or to extend credit to any Person for the purpose of
purchasing or carrying any such margin stock. Neither any Obligated Person nor
any Person acting on any such Person’s


 


26

















 


behalf has
taken or will take any action which might cause this Agreement or the Note or
the application of the proceeds of the Loan to violate either of said
Regulations U or X or any other regulation of the Board of Governors of
the Federal Reserve System or to violate the Securities Exchange Act of
1934, in each case as now in effect or as the same may hereafter be in effect.


 


(n)                                Environmental
Matters. As of the date of this Agreement, neither any Obligated Person nor
any property of any such Person, including without limitation any of the
Collateral, is in violation, in any material respect, of any Applicable
Environmental Law, assuming disclosure to the applicable governmental
authorities of all relevant facts, conditions and circumstances pertaining
thereto. There is no existing, pending or, to the best knowledge
of any Obligated Person, threatened in writing investigation or inquiry by
any governmental authority in connection with any Obligated Person or any
property of any Obligated Person under any Applicable Environmental Law. Each
Obligated Person has taken all reasonable steps necessary to determine that no
hazardous substances or solid wastes have been disposed of or otherwise
released on or to any of the Collateral or any other property of any Obligated Person.
No Obligated Person has caused or permitted the disposal or other
release of any hazardous substance or solid waste (as defined in any
Applicable Environmental Law) on or to any of the Collateral or any
other property of any Obligated Person, except in accordance with all
Applicable Environmental Laws.


 


(o)                                ERISA
Liabilities. No Obligated Person has any currently existing ERISA Plan or
any other obligations governed by ERISA, except for a 401(k) plan now or
hereafter maintained by any Obligated Person.


 


(p)                                Investment
Company Act Not Applicable. No Obligated Person is an “investment company”
or a person “controlled” by an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.


 


27
















 


Section 5.2.            Representations by
BOK. BOK hereby represents that it will acquire the Note for its own
account in the ordinary course of its commercial banking business;
however, the disposition of BOK’s property shall at all times be and
remain within its control and this section does not prohibit BOK’s sale of the
Note or of any participation in the Note to any bank, financial institution,
investor or other purchaser.


 


ARTICLE VI


 


Covenants of the Obligated Persons


 


Section 6.1.            Affirmative
Covenants. Each of Borrower and, by their limited ratification hereof
and joinder herein, GeoPetro and Redwood warrants, covenants and agrees
(provided that each such Obligated Person, including Borrower, shall be deemed
to make such warranties, covenants and agreements to the extent that they
relate to such Obligated Person and not to the extent that they relate to the
other Obligated Persons) that, until the full and final payment of
the Obligations (other than inchoate indemnification obligations) and the
termination of this Agreement, unless BOK has previously agreed otherwise in
writing:


 


(a)                                  Payment
and Performance. Each Obligated Person will pay all amounts due under the
Loan Documents in accordance with the terms thereof and will in all
material respects observe, perform and comply with every covenant, term and
condition express or implied in the Loan Documents.


 


(b)                                 Books,
Financial Statements and Records. GeoPetro will at all times maintain
full and accurate books of account and records, will maintain a standard system
of accounting in accordance with GAAP in all material respects (except for the
absence of footnotes and subject to year-end adjustments) and will furnish the
following statements and reports to BOK at Borrower’s or GeoPetro’s expense:


 


(1)                                  As
soon as available, and in any event within 90 days after the end of each
Fiscal Year, commencing with the Fiscal Year ending December 31,
2008, complete audited Consolidated and consolidating financial statements of
GeoPetro, Redwood and Borrower, prepared by Hein & Associates, LP
or another independent certified public accountant chosen by


 


28

















 


GeoPetro and
reasonably acceptable to BOK, in reasonable detail and in
accordance with GAAP. These financial statements shall contain at least a
balance sheet as of the end of such Fiscal Year and statements of
earnings and cash flow, setting forth in comparative form, where
applicable, the corresponding figures for the preceding Fiscal Year;


 


(2)                                  As
soon as available and in any event within 60 days, after the end of each
Fiscal Quarter (except the last Fiscal Quarter of each Fiscal Year),
commencing with the Fiscal Quarter ending March 31, 2009, unaudited
Consolidated and consolidating financial statements of GeoPetro, Redwood and
Borrower for such Fiscal Quarter and for the then—current Fiscal Year, prepared
by GeoPetro in reasonable detail and in accordance with GAAP (not including
option expensing or footnotes, and subject to year—end adjustments) and
containing at least a balance sheet, statements of earnings and cash flow and a
reconciliation of GeoPetro’s, Redwood’s and Borrower’s equity, setting
forth in comparative form the corresponding figures for the
preceding Fiscal Year;


 


(3)                                  At
the time of submission of the financial statements described in (1) and
(2) above, a report in the form of Exhibit C attached hereto and
made a part hereof, signed by the president, chief financial officer or other
senior executive of GeoPetro: (A) attesting to the authenticity
of such financial statements, (B) stating that he has read this Agreement
and the Security Documents, (C) stating that after reviewing the
financial statements described above he has concluded that there did
not exist any condition or event as of the date of such financial
statements or at the time of his report which constituted an Event of Default
or a Default, or, if he did conclude that such condition or event
existed, specifying the nature and period of


 


29

















 


existence of
any such condition or event, and (D) showing the calculation of, and
each Obligated Person’s compliance or non-compliance with, all of the
financial covenants contained herein;


 


(4)                                  Not
later than five days prior to each Payment Date, a report showing Borrower’s
calculation of the Supplemental Payment Amount payable on such Payment Date,
with full details as to the method of such calculation and any backup
information requested by BOK, which report may subsequently be amended as
necessary;


 


(5)                                  By
May 1 of each year, commencing May 1, 2009, a copy of the engineering
report and economic evaluation of each Obligated Person’s properties
prepared as of the preceding December 31 for SEC purposes;


 


(6)                                  Not
later than 25 days after the end of each calendar month, commencing with
the calendar month ending December 31, 2008: (A) a report describing
the hedging positions, if any, of GeoPetro and its Consolidated Affiliates as
of the end of such calendar month, including without limitation a description
of the commodity hedged, the derivative type, the volume, the strike
price, the tenor and the counterparty, and, if GeoPetro or any of
its Consolidated Affiliates had any outstanding hedging positions as
of the end of such calendar month, indicating their compliance or
non—compliance with Section 6.2(1) below; (B) during the time
period that any of the Madisonville Gas Plants are being modified, a progress
report on such modifications, including without limitation a description
of the tasks completed, the schedule for completion of the remaining
tasks, the estimated date of final completion of modifications of the plants,
descriptions of the costs incurred during that month and the
cumulative costs incurred to date, an estimate of the costs required
for completion of the modifications and such other matters as BOK may
reasonably request for inclusion; and (C) a report showing, separately for
each of the


 


30

















 


Madisonville
Gas Plants in which natural gas was processed or treated during such
calendar month, the average inlet volume for such plant for such calendar
month; and


 


(7)                                  As
soon as available, and in any event within 60 days after the end of each
Fiscal Quarter, commencing with the Fiscal Quarter ending December 31,
2008, a report describing, for each calendar month during such Fiscal
Quarter, the gross volume of production and sales attributable to
production (and the prices at which such sales were made and
the revenues derived from such sales) for each such calendar month from
the Collateral, and describing the related ad valorem, severance and production
taxes and lease operating expenses attributable thereto and incurred for
each such calendar month.


 


(c)           Other Information
and Inspections. Borrower will furnish to BOK any information which BOK may
from time to time reasonably request concerning any covenant, provision or
condition of the Loan Documents or any matter in connection with Borrower’s
business and operations. Borrower will permit representatives appointed by BOK,
including independent accountants, agents, attorneys, appraisers and any other
persons, to visit and inspect, at their sole risk (and, except during the
continuance of an Event of Default, at their cost and expense), any of Borrower’s
property, including its books of account, other books and records, and any
facilities or other business assets, and to make extra copies therefrom and
photocopies and photographs thereof, and to write down and record any
information such representatives obtain, and Borrower shall permit BOK or its
representatives to investigate and verify the accuracy of the information
furnished to BOK in connection with the Loan Documents and to discuss all
such matters with its officers, managers, employees and representatives. BOK
agrees that the information disclosed to it pursuant to this Section 6.1(c) and
Section 6.1(b) above shall be considered confidential information and
subject to usual nondisclosure restrictions as protective as BOK would use
regarding its own confidential information.


 


(d)           Notice of Material
Events. Borrower will promptly notify BOK: (1) of any material adverse
change in the financial condition of Borrower, (2) of the occurrence of
any Default, (3) of the acceleration of the maturity of any Debt owed by
Borrower or of any default by Borrower under any indenture, mortgage,
agreement, contract or other instrument to which


 


31

















 


Borrower is a party or by which
Borrower or any of Borrower’s properties is bound, (4) of any uninsured
claim of $250,000 or more asserted against Borrower or any of its properties, (5) of
the filing of any suit or proceeding against Borrower (or the occurrence of any
material development in any such suit or proceeding) in which an adverse decision
would reasonably be expected to have a material adverse effect upon Borrower’s
financial condition, business or operations (or could result in a judgment not
covered by insurance of $250,000 or more against Borrower), (6) of the
adoption by Borrower of any ERISA Plan, (7) of the merger or consolidation
of Borrower with any other business entity, (8) of the sale, transfer,
lease, exchange or disposal by Borrower of any material assets or properties or
any proved oil or gas reserves with a value in excess of $250,000, except sales
of already—severed hydrocarbons and other products in the ordinary course of
Borrower’s business, and (9) of the occurrence of any of the following: a
material adverse change in the financial condition of any Guarantor, a default
by any Guarantor with respect to any material indebtedness owed by such
Guarantor to any Person or the filing by any Guarantor of any petition for
bankruptcy protection. Upon the occurrence of any of the foregoing,
Borrower will take all necessary or appropriate steps to remedy promptly any
such material adverse change, Default, or default, to protect against any such
adverse claim, to defend any such suit or proceeding, and to resolve all
controversies on account of any of the foregoing. Borrower will also notify BOK
in writing at least twenty Business Days prior to the date that Borrower
changes its name or the location of its chief executive office or principal
place of business or the place where it keeps its books and records concerning
the Collateral, furnishing with such notice any necessary financing statement
amendments or requesting BOK and its counsel to prepare the same.


 


(e)           Maintenance of
Existence and Qualifications. Each Obligated Person will maintain and
preserve its existence and its rights and franchises in full force and effect
and will qualify to do business in all states or jurisdictions where required
by applicable law, except where the failure so to qualify will not have any
material adverse effect on any Obligated Person.


 


(f)            Maintenance of
Properties. Each Obligated Person will in all material respects maintain,
preserve, protect and keep all property used or useful in the conduct of its
business in accordance with the standards of a reasonable and prudent operator.


 


(g)           Payment of Trade
Debt, Taxes, etc. Each Obligated Person will: (1) timely file all
required tax returns; (2) timely pay all taxes, assessnents, and other
governmental charges or levies imposed upon it or upon its income, profits or
property; (3) pay all Debt owed by it on ordinary trade terms to vendors, 


 


32

















 


suppliers and other Persons
providing goods and services used by it in the ordinary course of its business;
and (4) maintain appropriate accruals and reserves for all of the
foregoing Debt in accordance with its present system of accounting. Each
Obligated Person will pay and discharge in all material respects, when due, all
other Debt, taxes or assessments now or hereafter owed by it. Each Obligated
Person may, however, delay paying or discharging any such Debt so long as it is
in good faith contesting the validity thereof by appropriate proceedings and
has set aside on its books adequate reserves therefor.


 


(h)           Insurance. Each
Obligated Person will maintain with financially sound and reputable insurance
companies, insurance with respect to its business, operations and properties in
at least such amounts and against at least such risks as are usually insured
against in the same general area by companies of established repute engaged in
the same or a similar business.


 


(i)            Payment of Expenses.
Borrower will promptly (and in any event within 30 days after any invoice or
other statement or notice) pay all reasonable costs and expenses incurred by or
on behalf of BOK (including reasonable attorneys’ fees) in connection with: (1) the
preparation, execution and delivery of this Agreement and the other Loan
Documents (including without limitation any and all future amendments or
supplements thereto or restatements thereof), and any and all consents, waivers
or other documents or instruments relating thereto, (2) the filing,
recording, refiling and re-recording of any Security Documents and any other
documents or instruments or further assurances required to be filed or recorded
or refiled or re—recorded by the terms of any Loan Document, (3) the
examination of Borrower’s or Redwood’s title to the Collateral, and (4) the
enforcement, after the occurrence of a Default or an Event of Default, of the
Loan Documents.


 


(j)            Performance on
Borrower’s Behalf. If any Obligated Person fails to pay any taxes,
insurance premiums or other amounts it is required to pay under any Loan
Document, BOK may pay the same. Such Obligated Person shall immediately
reimburse BOK for any such payments, and each amount paid shall constitute a
part of the Obligations, shall be secured by the Security Documents and shall
bear interest at the rate described in Section 2.2(c)(3) above, from
the date such amount is paid by BOK until the date such amount is repaid to
BOK.


 


(k)           Compliance with
Agreements and Law. Each Obligated Person will perform all material
obligations it is required to perform under the terms of each indenture,
mortgage, deed of trust, security agreement, lease, franchise, agreement,
contract or other instrument or obligation to which it is a party or by which
it or any of its properties is bound in such a way that they result in no
material adverse effect upon the Collateral or


 


33

















 


such Obligated Person’s ability
to perform its obligations under the Loan Documents. Each Obligated Person will
in all material respects conduct its business and affairs in compliance with
all laws, regulations, and orders applicable thereto (including those relating
to pollution and other environmental matters).


 


(l)            Certifications of
Compliance. Each Obligated Person will furnish to BOK at Borrower’s expense
all certifications which BOK from time to time reasonably requests, as to the
accuracy and validity of or compliance with all representations, warranties and
covenants made by any Obligated Person in the Loan Documents, the satisfaction
of all conditions contained therein, and all other matters pertaining thereto.


 


(m)          Additional Security
Documents. Promptly after a request therefor by BOK at any time and from
time to time, Borrower and Redwood will execute and deliver to BOK such
additional Security Documents and/or amendments to existing Security Documents
as BOK may deem necessary or appropriate in order to grant to BOK a perfected
lien on and security interest in any or all gas plants and oil and/or gas
interests owned by Borrower or Redwood. ]


 


(n)           Environmental
Matters. Each Obligated Person will promptly notify BOK in writing of any
material existing, pending or threatened investigation or inquiry by any
governmental authority in connection with any Applicable Environmental Law of
which such Obligated Person becomes aware. Each Obligated Person will take all
reasonable steps necessary to ensure that no hazardous substances or solid
wastes will be disposed of or otherwise released on or to any of the property
owned by such Obligated Person in violation of any Applicable Environmental
Law. Each Obligated Person will keep all of its property in all material respects
free of any hazardous substance or solid waste (other than hazardous substances
and solid wastes normally used or generated in the ordinary course of operation
of such Obligated Person’s facilities and that are properly stored, maintained
and disposed of in accordance with Applicable Environmental Laws) and will
remove the same (or if removal is prohibited by law, take, at its sole expense,
whatever actions are required by law) in accordance with Applicable
Environmental Laws. Upon BOK’s request, at any time and from time to time
during the term of this Agreement (but no more often than once per calendar
year in the absence of the occurrence and continuance of an Event of Default),
Borrower and Redwood will provide to BOK, at Borrower’s sole expense, an
inspection or audit, to be conducted by an engineering or consulting firm
approved by BOK, of the properties owned or operated by Borrower and/or Redwood
indicating the compliance by Borrower and Redwood in all material respects with
all Applicable Environmental Laws.


 


34

















 


(o)           Subsidiaries. If
any Obligated Person hereafter owns, acquires or creates any domestic Affiliate
that would qualify as a Subsidiary of such Obligated Person, such Obligated
Person shall give prompt notice of such condition to BOK and, if so requested
by 80K at any time thereafter, shall promptly cause such Subsidiary to: (1) guaranty
the payment and performance of the Obligations in full pursuant to a guaranty
satisfactory in form and substance to BOK, and (2) grant a first-priority
mortgage, pledge, hypothecation or grant of a security interest to BOK in form
and substance satisfactory to 80K, covering any or all of the property or
assets of such Subsidiary requested by BOK to be covered thereby.


 


Section 6.2.            Negative Covenants.
Each of Borrower and, by their limited ratification hereof and joinder herein,
GeoPetro and Redwood warrants, covenants and agrees (provided that each such
Obligated Person, including Borrower, shall be deemed to make such
warranties, covenants and agreements to the extent that they relate to such
Obligated Person and not to the extent that they relate to the other Obligated
Persons) that, until the full and final payment of the Obligations (other than
inchoate indemnification obligations) and the termination of this Agreement,
unless BOK has previously agreed otherwise in writing:


 


(a)           Tangible Net Worth.
The Tangible Net Worth of GeoPetro will not, at any time after the date hereof,
be less than $35,000,000.


 


(b)           Limitation on Liens.
No Obligated Person will create, assume or permit to exist any mortgage, deed
of trust, pledge, encumbrance, lien or charge of any kind (including any
security interest in or vendor’s lien on property purchased under conditional
sales or other title retention agreements and including any lease intended as
security or in the nature of a title retention agreement) upon any of the
Collateral, whether now owned or hereafter acquired, except:


 


(1)                                  Liens
securing the payment of the Obligations;


 


(2)                                  Excepted
Liens;


 


(3)                                  Liens
securing Debt under capital leases but only on the Property and
improvements and accessions thereof and proceeds thereof acquired or under
lease; provided that such Liens are created within 180 days of
construction, acquisition or lease of such Property;


 


35

















 


(4)                                  Liens
(other than Liens under ERISA or Environmental Laws) on Property of any Person
that becomes a Subsidiary of Borrower after the effective date of
this Agreement; provided that (A) such Liens are in existence at
the time such Person becomes a Subsidiary of Borrower and were not created
in anticipation thereof and (B) no such Liens shall extend to or
cover any Property of such Person other than such Property; and


 


(5)                                  purchase—money
security interests granted by such Obligated Person on
office equipment, vehicles and other personal property acquired by such
Obligated Person in the ordinary course of business; provided that
the aggregate amount secured by all such security interests outstanding at any
one time shall not exceed $250,000.


 


(c)           Additional Debt.
No Obligated Person will create, incur, assume or permit to exist Debt of
such Obligated Person except: (1) the Loan and the Note and the
Guaranties of the Loan, (2) trade debt owed to suppliers, pumpers,
mechanics, materialmen and others furnishing goods or services to such
Obligated Person in the ordinary course of such Obligated Person’s
business, (3) Debt incurred in the ordinary course of such Obligated Person’s
business in connection with commodity-price hedging transactions and
gas-balancing contracts, (4) Subordinated Debt, and (5) Debt of
the types permitted to be secured by the security interests described in Section 6.2(b)(3) above;
provided that the amount of such Debt does not exceed the limits set forth in
said Section, (6) Debt under capital leases not to exceed $250,000
in the aggregate for all Obligated Persons, (7) Debt
associated with workers’ compensation claims, performance,
bid, surety or similar bonds or surety obligations required by
governmental requirements or third parties in connection with the operation of
the Madisonville Gas Plants, (8) intercompany Debt owed to another
Obligated Person, (9) Debt secured by Liens permitted by Section 6.2(b)(4) above,
(10) endorsements of negotiable instruments for collection in the
ordinary course of business, and (11) Debt outstanding under one or
more unsecured short—term money market credit facilities the principal
amount of which does not exceed $250,000 in the aggregate for all Obligated
Persons.


 


(d)           Limitation on Sales
of Property. No Obligated Person will sell, transfer, lease, exchange,
alienate or dispose of any of the Collateral except as follows (and the
following exceptions shall be subject to any limitations


 


36

















 


contained in the Security
Documents); provided that the parties understand and agree that,
notwithstanding any of the exceptions set forth below, any sale, transfer,
lease, exchange, alienation or other disposition of any of the
Madisonville Oil and Gas Reserves or any equipment, fixtures, facilities or
other Property included in or in any way relating to any or all of the
Madisonville Gas Plants shall require the specific prior written consent of BOK
(which shall not be unreasonably withheld) and, unless specifically disclaimed
by BOK in writing, the application of any and all proceeds derived therefrom to
the repayment of the Loan:


 


(1)                                  oilfield
equipment, service and supply assets sold in the ordinary course of business
and which is replaced by similar equipment of equal or greater value;


 


(2)                                  non-producing
oil or gas properties sold in the ordinary course of business;


 


(3)                                  oil,
natural gas and other hydrocarbon inventory (including oil, natural gas
and other hydrocarbons sold as produced) which is sold in the ordinary
course of business; and


 


(4)                                  as
to the Madisonville Oil and Gas Reserves attributable to horizons not
within the Rodessa/Sligo Interval, with the prior written consent of BOK,
which will not be unreasonably withheld, Redwood may enter into one or
more bona fide, arms-length farmout or other exploration agreements, project
financing arrangements (whether involving debt or equity) or other
transactions with unaffiliated third parties in order to arrange for the
testing of any such other horizons for the possible production of oil, gas or
other hydrocarbons, in which case, in order to permit any such transaction,
BOK agrees to partially release from the applicable Security Documents all
horizons not within the Rodessa/Sligo Interval (provided that, in connection
with any such transaction, to the extent that any gas produced therefrom
requires further processing or treatment of the types performed at the
Madisonville Gas Plants, Redwood shall require that such


 


37

















 


gas be
processed and/or treated at the Madisonville Gas Plants), but reserving from
any such partial release any and all rights to, or used or useful in
connection with production from, the Rodessa/Sligo Interval.


 


(e)           Limitation on Credit
Extensions. No Obligated Person will extend credit, make advances or make
loans other than normal and prudent extensions of credit to customers
buying goods and services in the ordinary course of business, which
extensions shall not be for longer periods than those extended by similar
businesses operated in a normal and prudent manner.


 


(f)            Fiscal Year. No
Obligated Person will change its fiscal year.


 


(g)           Amendment of
Contracts. No Obligated Person will amend or permit any amendment to (to
the extent that such Obligated Person has the power to prevent such amendment)
any contract which would reasonably be expected to release, qualify, limit,
make contingent or otherwise have any material adverse effect upon, the rights
and benefits of BOK under or acquired pursuant to any of the Security
Documents.


 


(h)           Limitation on
Guaranties. No Obligated Person will assume, guaranty, endorse or be or
become secondarily liable for any Debt which is the primary obligation of any
other Person, except: (1) the Guaranties, and (2) guaranties by
GeoPetro of other obligations of any Obligated Person.


 


(i)            ERISA. Neither
any Obligated Person nor any of their respective Affiliates will maintain or
adopt any pension, profit—sharing or other plan under which any such Obligated
Person will incur any obligation governed by ERISA.


 


(j)            Distributions. (1) No
Obligated Person will make any Distribution during the time period from the
date of this Agreement through December 31, 2009, except that Borrower or
any Guarantor may make Distributions to any Guarantors. (2) No Obligated
Person will make any Distribution after December 31, 2009 if, immediately
before any such Distribution, immediately after any such Distribution or as of
the end of the Fiscal Quarter in which any such Distribution is to occur, a
Default shall have occurred and shall be continuing hereunder or any Obligated
Person shall be out of compliance with any of its covenants, including without
limitation any of its financial covenants, contained in this Agreement or any
of the other Loan Documents, except that Borrower or any Guarantor may make
Distributions to any Guarantor.


 


38
















 


(k)                                  Reorganizations;
Combinations. No Obligated Person will change its name or the nature of its
business, reorganize, liquidate, dissolve or enter into any merger or other
combination.


 


(l)                                     Hedging
Transactions. No Obligated Person will at any time: (1) speculate on
oil, natural gas or other commodity prices in the derivatives market; or (2) enter
into or be or become a party to any one or more hedging transactions with
respect to its oil and gas production, except for hedging transactions covering
times not more than three years from the date of this Agreement in amounts not
in excess of 80 percent of the volume of such Obligated Person’s proved,
developed, producing reserves (timed in accordance with the expected production
rates of such reserves), according to the then most recent engineering report
submitted pursuant to Section 6.1(b) above.


 


(m)                               Environmental
Matters. Except to the extent that the failure to comply could not
reasonably be expected to have a material adverse effect, no Obligated Person will
cause or permit such Obligated Person, any of the Collateral or any other
property of such Obligated Person to be in violation in any material respect of
any Applicable Environmental Law, assuming disclosure to the applicable
governmental authorities of all relevant facts, conditions and circumstances
pertaining thereto. Except to the extent that the failure to comply
could not reasonably be expected to have a material adverse effect, no
Obligated Person will cause or permit the disposal or other release of any
hazardous substance or solid waste (as defined in any Applicable Environmental
Law) on or to any of the Collateral or any other property of such Obligated
Person.


 


ARTICLE VII


 


Events of
Default and Remedies


 


Section 7.1.                                   Events
of Default. Each of the following events that shall not have been cured
within any applicable cure period or waived in writing by BOK constitutes an
Event of Default under this Agreement:


 


(a)                                  Borrower
fails to pay in accordance with the terms of this Agreement: (1) any principal
or interest payment on the date that such sum is due and payable; or (2) any
fee, cost, expense, charge or other amount due and payable under any Loan
Document (other than principal or interest on any Obligation) within five
Business Days of the date that such sum is stated to be due and payable; or


 


39

















 


(b)                                 Any
Obligated Person fails to duly observe, perform or comply with any covenant,
agreement, condition or provision of any Loan Document; provided that, except
with respect to: (1) any such covenant, agreement, condition or provision
which may constitute an Event of Default under one or more of the other
subsections of this Section 7.1, or (2) any covenant, agreement,
condition or provision contained in any of Sections 2.2, 2.3, 3.4, 3.5, 3.6,
3.7, 6.1(i) or 6.2 above, such Obligated Person shall have a 30–day grace
period to cure such failure, commencing on the earlier of the date such
Obligated Person receives notification thereof from BOK or the date that a
senior executive officer of such Obligated Person becomes aware of such
failure;


 


(c)                                  Any
representation or warranty previously, presently or hereafter made in writing
by or on behalf of any Obligated Person in connection with any Loan Document
shall prove to have been false or incorrect in any material respect on any date
on or as of which made; or


 


(d)                                 Any
Obligated Person:


 


(1)                               suffers
the entry against it of a judgment, decree or order for relief by a court
of competent jurisdiction in an involuntary proceeding commenced under
any applicable bankruptcy, insolvency or other similar law of any
jurisdiction now or hereafter in effect, including the federal
Bankruptcy Code, as from time to time amended, or has any such proceeding
commenced against it which remains undismissed for a period of 60 days; or


 


(2)                               suffers
the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official for a substantial part of
its assets or for any part of the Collateral in a proceeding brought against or
initiated by it, and such appointment is neither made ineffective nor
discharged within 60 days after the making thereof, or such appointment is
consented to, requested by, or acquiesced to by it; or


 


(3)                               commences
a voluntary case under any applicable bankruptcy, insolvency or similar law now
or hereafter in effect, including the federal Bankruptcy Code, as from time to
time amended; or applies


 


40

















 


for or consents to the entry of an order
for relief in an involuntary case under any such law or to the appointment of
or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator or other similar official of any substantial part of
its assets or any part of the Collateral; or makes a general assignment for the
benefit of creditors; or fails generally to pay (or admits in writing its
inability to pay) its debts as such debts become due; or takes action
in furtherance of any of the foregoing; or


 


(4)                                  suffers
the entry against it of a final judgment for the payment of money in excess of
$250,000 (not covered by insurance), unless the same is discharged within
30 days after the date of entry thereof or an appeal or appropriate proceeding
for review thereof is taken within such period and a stay of
execution pending such appeal is obtained; or


 


(5)                                  suffers
the entry of an order issued by any court or tribunal taking, seizing or
apprehending all or any substantial part of its property or any part of the
Collateral and bringing the same into the custody of such Court or
tribunal, and such order is not stayed or released within thirty days
after the entry thereof; or


 


(e)                                  Any Guaranty ceases
to be in full force and effect and applicable to any and all of the Obligations
covered thereby in accordance with its terms (or any Guarantor takes that
position), whether by operation of law, revocation or attempted revocation or
otherwise; or


 


(f)                                    Any default,
including the expiration of any applicable period of grace, occurs with respect
to any other indebtedness owed by Borrower or any Guarantor to any Person which
results in acceleration or the exercise of judicial or non—judicial remedial
action.


 


Upon the
occurrence of an Event of Default described in subsection (d) (1), (d) (2) or
(d) (3) of this section, all of the Obligations shall thereupon be
immediately due and payable, without presentment, demand, protest, notice of


 


41

















 


protest,
declaration or notice of acceleration or intention to accelerate, or any other
notice or declaration of any kind, all of which are hereby expressly waived by
Borrower. During the continuance of any other Event of Default, BOK at any time
and from time to time (unless all Events of Default have theretofore been
remedied) may declare any or all of the Obligations immediately due and
payable, and all such Obligations shall thereupon be immediately due and
payable.


 


Section 7.2.                                   Remedies.
If any Event of Default shall occur, BOK may protect and enforce its rights
under the Loan Documents by any appropriate proceedings, including proceedings
for specific performance of any covenant or agreement contained in any Loan
Document and the acceleration of all or any portion of the unpaid balance of
the Loan, and BOK may enforce the payment of any Obligations due or enforce any
other legal or equitable right. All rights, remedies and powers conferred upon
BOK under the Loan Documents shall be deemed cumulative and not exclusive of
any other rights, remedies or powers available under the Loan Documents or at
law or in equity.


 


Section 7.3.                                   Indemnity.
Borrower hereby agrees to indemnify, defend and hold harmless BOK and its
successors and assigns and the respective agents, affiliates, officers,
directors and employees of BOK and its successors and assigns from and against
any and all claims, losses, demands, actions, causes of action and liabilities
whatsoever of any third party (including without limitation reasonable
attorneys’ fees and expenses and costs and expenses reasonably incurred in
investigating, preparing or defending against any litigation or claim, action,
suit, proceeding or demand of any kind or character) arising out of or
resulting from: (a) the Loan Documents (including without limitation the
enforcement thereof), except to the extent such claims, losses and liabilities
are proximately caused by BOK’s gross negligence, bad faith or willful
misconduct, (b) any violation on or prior to the Release Date of any
Applicable Environmental Law, (c) any act, omission, event or circumstance
existing or occurring on or prior to the Release Date (including without
limitation the presence on the Collateral or release from the Collateral of
hazardous substances or solid wastes disposed of or otherwise released, resulting
from or in connection with the ownership, construction, occupancy, operation,
use and/or maintenance of the Collateral, regardless of whether the act,
omission, event or circumstance constituted a violation of any Applicable
Environmental Law at the time of its existence of occurrence, and (d) any
and all claims or proceedings (whether brought by a private party or
governmental agencies) for bodily injury, property damage, abatement or
remediation, environmental damage or impairment or any other injury or damage
resulting from or relating to any hazardous or toxic 


 


42

















 


substance, solid waste or
contaminated material located upon or migrating into, from or through any of
the Collateral (whether or not the release of such materials was caused by
Borrower, a tenant or subtenant or a prior owner, tenant or subtenant on the
Collateral and whether or not the alleged liability is attributable to the
handling, storage, generation, transportation, removal or disposal of such
substance, waste or material or the mere presence of such substance, waste or
material on the Collateral), for which BOK may have liability due to the making
of the Loan, the granting of the Security Documents, the exercise of BOK’s
rights under the Loan Documents or otherwise. WITHOUT LIMITATION, IT IS
THE INTENTION OF BORROWER, AND BORROWER AGREES, THAT THE FOREGOING
INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PARTY WITH RESPECT TO CLAIMS,
DEMANDS, LIABILITIES, LOSSES, DAMAGES, CAUSES OF ACTION, JUDGMENTS, PENALTIES,
COSTS AND EXPENSES (INCLUDING WITHOUT LIMITATION REASONABLE ATTORNEYS’ FEES)
WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF
SUCH (AND/OR ANY OTHER) INDEMNIFIED PARTY. However, such indemnities shall not
apply to any particular indemnified party (but shall apply to the other
indemnified parties) to the extent the subject of the indemnification is caused
by or arises out of the gross negligence, bad faith or willful misconduct of
such particular indemnified party. The foregoing indemnities shall not
terminate upon the Release Date or upon the release, foreclosure or other
termination of the Security Documents, but will survive the Release Date,
foreclosure of the Security Documents or conveyances in lieu of foreclosure,
and the repayment of the Loan and the discharge and release of the Security
Documents and the other documents evidencing and/or securing the Loan.


 


ARTICLE VIII


 


Miscellaneous


 


Section 8.1.                                   Waiver
and Amendment. No failure or delay by BOK in exercising any right, power or
remedy which it may have under any of the Loan Documents shall operate as a
waiver thereof or of any other right, power or remedy, nor shall any single or
partial exercise by BOK of any such right, power or remedy preclude any other
or further exercise thereof or of any other right, power or remedy. No waiver
of any provision of any Loan Document and no consent to any departure therefrom
shall ever be effective unless it is in writing and signed by BOK, and then
such waiver or consent shall be effective only in the specific instances and
for the purposes for which given and to the extent specified in such writing.
No notice to or demand on any Obligated Person shall in any case of itself
entitle any Obligated Person to any other or further notice or demand in
similar or other circumstances. No modification or amendment of or
supplement to this


 


43

















 


Agreement or
the other Loan Documents shall be valid or effective unless the same is in
writing and signed by the party against whom it is sought to be enforced.


 


Section 8.2.                                   Survival
of Agreements; Cumulative Nature. All of the Obligated Persons’ various
representations, warranties, covenants and agreements in the Loan
Documents shall survive the execution and delivery of this Agreement and the
other Loan Documents and the performance hereof and thereof, including without
limitation the making or granting of the Loan and the delivery of the Note and
the other Loan Documents, and shall further survive until all of the
Obligations are paid in full to BOK and all of BOK’s obligations to Borrower
are terminated. All statements and agreements contained in any certificate or
other instrument delivered to BOK under any Loan Document shall be deemed
representations and warranties by Borrower to BOK and/or agreements and
covenants of Borrower under this Agreement. The representations, warranties,
and covenants made by the Obligated Persons in the Loan Documents, and the
rights, powers, and privileges granted to BOK in the Loan Documents, are
cumulative, and no Loan Document shall be construed in the context of another
to diminish, nullify, or otherwise reduce the benefit to BOK of any such
representation, warranty, covenant, right, power or privilege. In particular
and without limitation, no exception set out in this Agreement to any
representation, warranty or covenant herein contained shall apply to any
similar representation, warranty or covenant contained in any other Loan
Document, and each such similar representation, warranty or covenant shall be
subject only to those exceptions which are expressly made applicable to it by
the terms of the various Loan Documents.


 


Section 8.3.                                   Notices.
All notices, requests, consents, demands and other communications required or
permitted under any Loan Document shall be in writing and, unless otherwise
specifically provided in such Loan Document, shall be deemed sufficiently given
or furnished if delivered by personal delivery, by expedited delivery service with
proof of delivery, or by registered or certified United States mail, return
receipt requested, postage prepaid, at the addresses specified below (unless
changed by similar notice in writing given by the particular Person whose
address is to be changed). Any such notice or communication shall be deemed to
have been given upon receipt:


 


	
  Borrower’s address:

  	
  One Maritime Plaza, Suite 700

  
	
   

  	
  San Francisco, California 94111

  
	
   

  	
  Attention: Stuart J. Doshi

  
	
   

  	
   

  
	
  BOK’s address:

  	
  1675 Broadway, Suite 1650

  
	
   

  	
  Denver, Colorado 80202

  
	
   

  	
  Attention: Michael M. Logan

  



 


44

















 


Section 8.4.                                   Parties
in Interest. All grants, covenants and agreements contained in the Loan
Documents shall bind and inure to the benefit of the parties thereto and their
respective successors and assigns; provided, however, that no Obligated Person
may assign or transfer any of its rights or delegate any of its duties or
obligations under any Loan Document without the prior consent of BOK.


 


Section 8.5.                                   Governing
Law. The Loan Documents shall be deemed contracts and instruments made
under the laws of the State of Colorado and shall be construed and enforced in
accordance with and governed by the laws of the State of Colorado and the laws
of the United States of America, except (a) to the extent that the law of
another jurisdiction is expressly elected in a Loan Document, and (b) with
respect to specific Liens, or the perfection thereof, evidenced by Security
Documents covering real or personal property which by the laws applicable
thereto are required to be construed under the laws of another jurisdiction.
Borrower hereby irrevocably submits itself to the non-exclusive jurisdiction of
the state and federal courts of the State of Colorado.


 


Section 8.6.                                   Limitation
on Interest. BOK and the Obligated Persons intend to contract in strict
compliance with applicable usury law from time to time in effect. In
furtherance thereof such persons stipulate and agree that none of the terms and
provisions contained in the Loan Documents shall ever be construed to create a
contract to pay, for the use, forbearance or detention of money, interest in
excess of the maximum amount of interest permitted to be charged by applicable
law from time to time in effect. Neither any Obligated Person nor any present
or future guarantors, endorsers, or other Persons hereafter becoming liable for
payment of any Obligation shall ever be liable for unearned interest thereon or
shall ever be required to pay interest thereon in excess of the maximum amount
that may be lawfully charged under applicable law from time to time in effect,
and the provisions of this section shall control over all other provisions of
the Loan Documents which may be in conflict or apparent conflict herewith. BOK
expressly disavows any intention to charge or collect excessive unearned
interest or finance charges in the event the maturity of any Obligation is
accelerated. If: (a) the maturity of any Obligation is accelerated for any
reason, (b) any Obligation is prepaid and as a result any amounts held to
constitute interest are determined to be in excess of the legal maximum, or (c) BOK
or any other holder of any or all of the Obligations shall otherwise collect
moneys which are determined to constitute interest which would otherwise
increase the interest on any or all of the Obligations to an amount in excess
of that permitted to be charged by applicable law then in effect, then


 


45

















 


all such sums determined to
constitute interest in excess of such legal limit shall, without penalty, be
promptly applied to reduce the then outstanding principal of the related
Obligations or, at BOK’s option, promptly returned to Borrower or the other
payor thereof upon such determination.


 


Section 8.7.                                               Severability.
If any term or provision of any Loan Document shall be determined to be illegal
or unenforceable all other terms and provisions of the Loan Documents shall
nevertheless remain effective and shall be enforced to the fullest extent
permitted by applicable law.


 


Section 8.8.                                   Counterparts.
This Agreement may be separately executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to constitute one and the same Agreement. Delivery of
this Agreement and the other documents to be delivered in connection herewith
by any party may be effected, without limitation, by faxing a signed
counterpart of any such document to BOK (any party that effects delivery in
such manner hereby agreeing to transmit promptly to each of the other parties
an actual signed counterpart).


 


Section 8.9.                                   Conflicts.
To the extent of any irreconcilable conflicts between the provisions of this
Agreement and the provisions of any of the Loan Documents, the provisions of
this Agreement shall prevail.


 


Section 8.10.                             Entire
Agreement. This Agreement, the Note, the Security Documents and the other
Loan Documents from time to time executed in connection herewith state the
entire agreement between the parties with respect to the subject matter hereof.


 


Section 8.11.                             WAIVER
OF JURY TRIAL. EACH OF BORROWER AND BOK HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION: (A) ARISING UNDER
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR (B) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF
THEM IN RESPECT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. EACH OF BORROWER
AND BOK HEREBY AGREES THAT THE OTHER MAY FILE A COPY OF THIS AGREEMENT WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHTS TO TRIAL BY JURY.


 


Section 8.12.                             USA
Patriot Act Notice. BOK hereby notifies Borrower that, pursuant to the
requirements of the USA Patriot Act (Title III of Pub. L. 107-56, signed into
law October 26, 2001 (the “Act”)), BOK is required to obtain, verify and
record information that identifies Borrower and other information that will
allow BOK to identify Borrower in accordance with the Act.


 


46
















 


Section 8.13.          Supersession. At the time of
the funding of the Loan, the terms and provisions of this Agreement and
the Note shall supersede in their entirety the terms and provisions of the
Prior Credit Agreement and the “Note” (as defined in the Prior Credit
Agreement).


 


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


 


	
   

  	
  MADISONVILLE MIDSTREAM LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stuart J. Doshi

  
	
   

  	
   

  	
  Stuart J. Doshi,

  
	
   

  	
   

  	
  President and Chief

  
	
   

  	
   

  	
  Executive
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  BANK OF OKLAHOMA, NATIONAL

  
	
   

  	
   

  	
  ASSOCIATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael M. Logan

  
	
   

  	
   

  	
  Michael M. Logan,

  
	
   

  	
   

  	
  Senior Vice President

  
				



 


LIMITED RATIFICATION AND
JOINDER


 


Each of the undersigned
Obligated Persons hereby executes and delivers this Limited Ratification and
Joinder for the limited purpose of making the representations, warranties,
covenants and agreements contained in Sections 5.1, 6.1 and 6.2 above, to the
extent that such representations, warranties, covenants and agreements relate
to such Obligated Person and not to the extent that they relate to the other
Obligated Persons.


 


	
   

  	
  REDWOOD ENERGY PRODUCTION,
  LP.

  
	
   

  	
  By:

  	
  Redwood Energy Company,

  
	
   

  	
   

  	
  its
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Stuart J. Doshi

  
	
   

  	
   

  	
   

  	
  Stuart J. Doshi,

  
	
   

  	
   

  	
   

  	
  President and Chief

  
	
   

  	
   

  	
   

  	
  Executive
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  GEOPETRO RESOURCES COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stuart J. Doshi

  
	
   

  	
   

  	
  Stuart J. Doshi,

  
	
   

  	
   

  	
  Chairman, President and

  
	
   

  	
   

  	
  Chief Executive Officer

  
					



 


47

















 


EXHIBIT A


 


PROMISSORY NOTE


 


	
  $6,697,847.18

  	
   

  	
  December 31, 2008

  
	
   

  	
   

  	
  Denver, Colorado

  



 


FOR VALUE RECEIVED,
MADISONVILLE MIDSTREAM LLC, a Texas limited liability company (“Borrower”),
promises to pay to the order of BANK OF OKLAHOMA, NATIONAL ASSOCIATION (“Payee”),
the principal sum of $6,697,847.18, together with interest on the outstanding
unpaid balance of such principal amount at the rates provided below.


 


This Note is issued pursuant
to, and is subject to the terms and provisions of, the Amended and Restated
Term Loan Agreement dated as of December 31, 2008, between Borrower and
Payee, as now in effect or as the same may hereafter be amended, restated,
extended, renewed or otherwise modified (the “Term Loan Agreement”). Except as
otherwise defined herein, terms defined in the Term Loan Agreement shall
have the same meanings when used herein.


 


The outstanding principal
amount of this Note shall be due and payable as provided in the Term Loan
Agreement. Any then-unpaid principal balance of the Loan evidenced by this Note
shall be due and payable on the Maturity Date (unless due and payable sooner pursuant
to the terms of the Term Loan Agreement). Outstanding principal shall bear
interest at the rates provided in the Term Loan Agreement.


 


Interest shall accrue daily
on the unpaid principal balance of this Note, shall be due and payable at such
times as may be provided in the Term Loan Agreement and at the maturity of this
Note, and shall be calculated on the basis of a year of (a) in the case of
the Prime Rate Portion, 360 days, and (b) in the case of any LIBOR
Tranche, 365 days, and the actual number of days elapsed.


 


All payments of principal
and interest hereon shall be made at Payee’s offices at Bank of Oklahoma Tower,
One Williams Center, Tulsa, Oklahoma 74192 (or at such other place as Payee
shall have designated to Borrower in writing) on the date due in immediately
available funds and without set–off or counterclaim or deduction of any kind.
All payments received hereunder shall be applied first to costs of collection,
second to accrued interest as of the date of payment and third to the outstanding
principal balance of this Note, in accordance with the terms of the Term Loan
Agreement.


 


Notwithstanding anything to
the contrary contained in this Note, upon the occurrence and during the
continuance of any


 


A-1

















 


Event of Default, overdue
principal, and (to the extent permitted under applicable law) overdue interest,
whether caused by acceleration of maturity or otherwise, shall bear interest at
a fluctuating rate, adjustable the day of any change in such rate, equal to
five percentage points in excess of the Prime Rate, until paid, and shall be
due and payable monthly or, at the option of the holder hereof, on demand.


 


This Note is secured by, and
the holder of this Note is entitled to the benefits of, the Security Documents.
Reference is made to the Security Documents for a description of the
property covered thereby and the rights, remedies and obligations of the holder
hereof in respect thereto.


 


Subject to the expiration of
any applicable period of grace provided for in the Term Loan Agreement, in the
event of: (a) any default in any payment of the principal of or interest
on this Note when due and payable, or (b) any other Event of Default (as
defined in the Term Loan Agreement), then the whole principal sum of this Note
plus accrued interest and all other obligations of Borrower to holder, direct
or indirect, absolute or contingent, now existing or hereafter arising, shall,
at the option of Payee, become immediately due and payable, and any or all of
the rights and remedies provided herein and in the Term Loan Agreement and the
Security Documents, as they may be amended, modified or supplemented from time
to time may be exercised by Payee.


 


If Borrower fails to pay any
amount due under this Note and Payee has to take any action to collect the
amount due or to exercise its rights under the Security Documents, including
without limitation retaining attorneys for collection of this Note, or if any
suit or proceeding is brought for the recovery of all or any part of or for
protection of the indebtedness or to foreclose the Security Documents or to
enforce Payee’s rights under the Security Documents, then Borrower agrees to
pay on demand all reasonable costs and expenses of any such action to collect,
suit or proceeding, or any appeal of any such suit or proceeding, incurred by
Payee, including without limitation the reasonable fees and disbursements of
Payee’s attorneys and their professional staff.


 


Borrower waives presentment,
notice of dishonor and protest, and assents to any extension of time with
respect to any payment due under this Note, to any substitution or release of
collateral and to the addition or release of any party, except as provided in
the Term Loan Agreement. No waiver of any payment or other right under this
Note shall operate as a waiver of any other payment or right.


 


If any provision in this
Note shall be held invalid, illegal or unenforceable in any jurisdiction, the
validity,


 


A-2

















 


legality or enforceability
of any defective provisions shall not be in any way affected or impaired in any
other jurisdiction.


 


No delay or failure of the
holder of this Note in the exercise of any right or remedy provided for
hereunder shall be deemed a waiver of such right by the holder hereof, and no
exercise of any right or remedy shall be deemed a waiver of any other right or
remedy that the holder may have.


 


All notices given hereunder
shall be given as provided in the Term Loan Agreement.


 


At the option of the holder
hereof, an action may be brought to enforce this Note in the District Court in
and for the City and County of Denver, State of Colorado, in the United States
District Court for the District of Colorado or in any other court in which venue
and jurisdiction are proper. Borrower and all signers or endorsers hereof
consent to venue and jurisdiction in the District Court in and for the City and
County of Denver, State of Colorado and in the United States District Court for
the District of Colorado and to service of process under Sections 13-1-124(1)(a) and
13–1–125, Colorado Revised Statutes (2002), as amended, in any action commenced
to enforce this Note.


 


This Note is to be governed
by and construed according to the laws of the State of Colorado.


 


	
   

  	
  MADISONVILLE MIDSTREAM LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   ,

  
	
   

  	
   

  	
   

  	
   

  
					



 


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EXHIBIT B


 


INTEREST RATE ELECTION


 


                  ,       


 


Bank of Oklahoma, National Association


1675 Broadway, Suite 1650


Denver, Colorado 80202


Attention: Michael M. Logan


 


Gentlemen:


 


1.     This
Interest Rate Election is delivered to you pursuant to Article II of the
Amended and Restated Term Loan Agreement dated as of December 31, 2008
(the “Term Loan Agreement”), between Madisonville Midstream LLC and Bank of
Oklahoma, National Association. Except as otherwise defined herein, terms
defined in the Term Loan Agreement shall have the same meanings when used
herein.


 


2.     Borrower
hereby requests a LIBOR Tranche as follows:


 


(a)           Dollar Amount:


 


(b)           First Day of LIBOR Interest Period:


 


(c)           Duration (month(s)):


 


	
   

  	
  MADISONVILLE MIDSTREAM LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   ,

  
	
   

  	
   

  	
   

  	
   

  
					



 


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EXHIBIT C


 


QUARTERLY COMPLIANCE REPORT


 


                  ,       


 


Bank of Oklahoma, National Association


1675 Broadway, Suite 1650


Denver, Colorado 80202


Attention: Michael M. Logan


 


Gentlemen:


 


1.     This
Compliance Report is delivered to you pursuant to Section 6.1(b) (3) of
the Amended and Restated Term Loan Agreement dated as of December 31, 2008
(the “Term Loan Agreement”), between Madisonville Midstream LLC and Bank of
Oklahoma, National Association. Except as otherwise defined herein, terms
defined in the Term Loan Agreement shall have the same meanings when used herein.


 


2.     The
undersigned is the                                     
of Borrower.


 


3.     Enclosed
herewith are true and complete copies of the financial statements of Borrower
for the Fiscal Quarter/Year ended                           ,
20    (the “Financia1 Statements”).


 


4.     The
undersigned has read the Term Loan Agreement and the Security Documents.


 


5.     After
reviewing the Financial Statements, the undersigned has concluded as follows:


 


·                  As of the date
of the Financial Statements and as of the date hereof, there did not exist any
condition or event which constituted an Event of Default or a Default; or


 


·                  As of the date
of the Financial Statements or as of the date hereof, there did exist a
condition or an event which constituted an Event of Default or a Default, and
the following is a description of the nature and period of existence of any
such condition or event:


 


 


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6.
 The following computation shows the
compliance or non–compliance, as of                     ,
20  , with the financial test referred to below:


 


	
  Tangible Net Worth:

  	
   

  	
   

  	
   

  
	
  Actual

  	
   

  	
   

  	
   

  
	
  Owners’ Equity in GeoPetro:

  	
   

  	
  $

  	
   

  	
   

  
	
  Intangible Assets of GeoPetro: 

  	
  –

  	
  $

  	
   

  	
   

  
	
  Difference:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Minimum Per Agreement:

  	
   

  	
  $

  	
  35,000,000

  	
   

  



 


	
   

  	
   

  
	
   

  	
  Signed:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  



 


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