Document:

EXECUTION VERSION

 

NOTE AND WARRANT PURCHASE AGREEMENT

 

Dated as of February 9, 2012

 

by and among

 

ASEN 2, CORP.,

(as the “Company”)

 

and

 

AMERICAN STANDARD ENERGY CORP.,

(as the “Guarantor”)

 

and

 

PENTWATER EQUITY OPPORTUNITIES MASTER FUND
LTD.

 

and

 

PWCM MASTER FUND LTD.

(as the “Investor”)

 

    	 

    	 

    

 

TABLE OF CONTENTS

 

	 	 	Page
	 	 	 
	ARTICLE
    I PURCHASE AND SALE OF NOTE	1
	Section 1.1	Purchase and Sale of Note and Warrants	1
	Section 1.2	Closing Date	2
	Section 1.3	Warrant Shares	2
	 	 	 
	ARTICLE
    II REPRESENTATIONS AND WARRANTIES	2
	Section 2.1	Representations and Warranties of the Company	2
	Section 2.2	Representations and Warranties of the Guarantor	10
	Section 2.3	Representations and Warranties and Covenants of the Investor	15
	 	 	 
	ARTICLE
    III COVENANTS	15
	Section 3.1	Compliance with Laws	15
	Section 3.2	Keeping of Records and Books of Account	16
	Section 3.3	Reporting Requirements	16
	Section 3.4	Other Agreements	19
	Section 3.5	Distributions	19
	Section 3.6	Prohibition on Liens	19
	Section 3.7	Prohibition on Indebtedness	20
	Section 3.8	Compliance with Transaction Documents	21
	Section 3.9	Transactions with Affiliates	21
	Section 3.10	No Merger or Sale of Assets; No Formation of Subsidiaries	21
	Section 3.11	Payment of Taxes, Etc.	21
	Section 3.12	Corporate Existence	22
	Section 3.13	No Investments	22
	Section 3.14	Access to Accountants	22
	Section 3.15	Inspection	22
	Section 3.16	Insurance	22
	Section 3.17	Production Report and Lease Operating Statements	23
	Section 3.18	Title Information	24
	Section 3.19	Gas Imbalances, Take-or-Pay or Other Prepayments	24
	Section 3.20	Reservation of Shares	24
	Section 3.21	Marketing of Production	24
	Section 3.22	Environmental Matters	24
	Section 3.23	Material Agreements	25
	Section 3.24	Swap Agreements	25
	Section 3.25	Disclosure of Transactions and Other Material Information	25
	 	 	 
	ARTICLE
    IV CONDITIONS	25
	Section 4.1	Conditions Precedent to the Obligation of the Investor to Close on the Closing Date	25
	Section 4.2	Conditions Precedent to the Obligation of the Investor to Consummate the Subsequent Funding	28

 

    	-i-

    	 

    

 

TABLE OF CONTENTS

(continued)

 

	 	 	Page
	 	 	 
	ARTICLE
    V CERTIFICATE LEGEND	30
	Section 5.1	Legend	30
	 	 	 
	ARTICLE
    VI INDEMNIFICATION	31
	Section 6.1	General Indemnity	31
	 	 	 
	ARTICLE
    VII MISCELLANEOUS	31
	Section 7.1	Fees and Expenses	31
	Section 7.2	Consent to Jurisdiction; Venue	32
	Section 7.3	Entire Agreement; Amendment	32
	Section 7.4	Notices	32
	Section 7.5	Waivers	33
	Section 7.6	Headings	33
	Section 7.7	Successors and Assigns	34
	Section 7.8	No Third Party Beneficiaries	34
	Section 7.9	Indemnity	34
	Section 7.10	Governing Law	35
	Section 7.11	Survival	35
	Section 7.12	Publicity	35
	Section 7.13	Counterparts	36
	Section 7.14	Severability	36
	Section 7.15	Tax Matters	36
	Section 7.16	Registration	38

 

EXHIBITS

 

	Exhibit 1.1A	-	Form of Note
	Exhibit 4.1(q)	-	Form of Registration Rights Agreement

 

SCHEDULES

 

	Schedule 2.1(c)(i)	-	Authorized Capital Stock
	Schedule 2.1(c)(ii)	-	Preemptive or Other Rights
	Schedule 2.1(e)	-	Undisclosed Liabilities
	Schedule 2.1(f)	-	Indebtedness
	Schedule 2.1(g)	-	Liens
	Schedule 2.1(h)	-	Litigation
	Schedule 2.1(n)	-	Transactions with Affiliates
	Schedule 2.1(p)	-	Collective Bargaining and Employment Agreements
	Schedule 2.1(t)	-	Material Agreements
	Schedule 3.17	-	Oil and Gas Properties
	Schedule 3.21	-	Marketing Contracts

 

    	-ii-

    	 

    

 

 

Note and Warrant
PURCHASE AGREEMENT

 

This NOTE AND WARRANT PURCHASE
AGREEMENT, dated as of February 9, 2012 (this “Agreement”), is by and among ASEN 2, CORP., a Delaware corporation
(the “Company”), AMERICAN STANDARD ENERGY CORP., a Delaware corporation (the “Guarantor”),
and PENTWATER EQUITY OPPORTUNITIES MASTER FUND LTD., a Cayman Islands corporation (“Opportunities”) and PWCM
MASTER FUND LTD., a Cayman Islands corporation, (“PWCM” and together with Opportunities, collectively, the “Investor”).

 

The parties hereto agree
as follows:

 

ARTICLE I

 

PURCHASE AND SALE OF
NOTE

 

Section 1.1     Purchase
and Sale of Note and Warrants.

 

(a)          On
the Closing Date (as defined in Section 1.2) (i) the Company shall issue to the Investor a promissory note, substantially in the
form of Exhibit 1.1A attached hereto (the “Note”), which Note shall evidence the advance made by the
Investor to the Company pursuant to this Agreement and (ii) the Guarantor shall issue to the Investor warrants (the “Warrants”)
granting to the Investor the right to purchase Three Million Three Hundred Thirty-Three Thousand Three Hundred Thirty-Three (3,333,333)
shares of fully paid and non-assessable Common Stock (as defined below), at a per share purchase price of Two Dollars and 50/100
($2.50) (the “Exercise Price”).

 

(b)          Upon
satisfaction of the terms and conditions set forth in ARTICLE IV and in reliance on the representations and warranties of the Company
and the Guarantor set forth herein and in the other Transaction Documents (as defined in Section 2.1(b)), the Investor,
severally and not jointly, shall advance to the Company an amount equal to the Investor’s Commitment Percentage of $20,000,000
as described in this Section 1.1, less (i) the original issue discount set forth below and (ii) the amount of fees and expenses
of the Investor the Company is obligated to pay pursuant to Section 7.1. “Commitment Percentage” of the
Investor shall mean the percentage set forth below the Investor’s names on the signature page hereof.

 

(c)          The
first advance pursuant to the Note (the “Initial Funding”) shall be made by the Investor, severally and not
jointly, to the Company on the Closing Date in an amount equal to the result of $10,000,000 less (i) an unconditional non-refundable
original issue discount in an amount equal to $175,000 and (ii) the amount of fees and expenses of the Investor the Company is
obligated to pay pursuant to Section 7.1 on the Closing Date; and the Guarantor shall issue the Warrants to the Investor.

 

    	 

    	 

    

 

(d)          An
additional advance pursuant to the Note (the “Subsequent Funding”) shall be made by the Investor, severally
and not jointly, to the Company on the first date on which the transactions contemplated pursuant to a certain purchase and sale
agreement (the “Purchase Agreement”) to be entered into among the Guarantor, XOG Operating LLC, HNL Royalties
LLC, Geronimo Holding Corporation, Randall Capps and such other Persons (as defined in Section 2.1(d)) that may be parties
thereto, and each of the conditions set forth in Section 4.2 hereof has been fully satisfied or waived by the Investor,
in an amount equal to the result of $10,000,000 less (i) an unconditional non-refundable original issue discount in an amount equal
to $175,000 and (ii) the amount of fees and expenses of the Investor the Company is obligated to pay pursuant to Section 7.1 on
the date the Subsequent Funding is made.

 

(e)          The
aggregate outstanding principal amount of the Note and all accrued and unpaid interest thereon shall be due and payable on the
earlier of February 9, 2015 and the date on which such principal amount is accelerated after the occurrence of an Event of Default
pursuant to the terms of the Note. “Business Day” shall mean any day banking transactions can be conducted in
New York City, New York and does not include any day which is a federal or state holiday in such location.

 

Section 1.2     Closing
Date.

 

The closing under this
Agreement shall take place immediately upon the execution of this Agreement by the parties hereto and the satisfaction of the conditions
contained in Section 4.1 or on such other date as may be agreed upon in writing by the parties hereto (the “Closing Date”).
The Closing Date shall take place at the offices of the Investor, 227 West Monroe Street, Chicago, IL 60606 at 10:00 a.m., New
York time, or at such other time and location as may be agreed upon by the parties hereto.

 

Section 1.3     Warrant
Shares.

 

The Guarantor has authorized
and has initially reserved and covenants to continue to reserve, free of preemptive rights and other similar contractual rights
of stockholders, a number of its authorized but unissued shares of Common Stock necessary to effect the exercise of the Warrants
and any conversion contemplated by the Note in full. Any shares of Common Stock issuable upon exercise of the Warrants (and such
shares when issued) are herein referred to as the “Warrant Shares”. Any shares of Common Stock issuable upon
any Conversion of the Note (and such shares when issued) are herein referred to as the “Note Shares”. The Note,
the Warrants, Warrant Shares and the Note Shares are sometimes collectively referred to herein as the “Securities”.

 

ARTICLE II

 

REPRESENTATIONS AND WARRANTIES

 

Section 2.1     Representations
and Warranties of the Company.

 

The Company hereby represents
and warrants to the Investor, as of the date hereof, as follows:

 

    	2

    	 

    

 

(a)          Organization,
Good Standing and Power. The Company is a corporation duly incorporated, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, and has the requisite corporate power to own, lease and operate its properties and assets
and to conduct its business as it is now being conducted. The Company does not have any direct or indirect Subsidiaries or own
securities of any kind in any other entity. For the purposes of this Agreement, “Subsidiary” shall mean any
corporation or other entity of which at least 50% of the securities or other ownership interest having ordinary voting power (absolutely
or contingently) for the election of directors or other Persons performing similar functions are at the time owned directly or
indirectly by the Company or Guarantor, as applicable. The Company is duly qualified as a foreign corporation, duly incorporated
to do business and is in good standing in every other jurisdiction in which the nature of the business conducted or property owned
by it makes such qualification necessary, except for any jurisdiction(s) (alone or in the aggregate) in which the failure to be
so qualified could not reasonably be expected to have a Material Adverse Effect. For the purposes of this Agreement, “Material
Adverse Effect” means any (a) material adverse effect on (i) the business, operations, properties or financial condition
of the Guarantor and its Subsidiaries (taken as a whole) or (ii) Investor’s liens in the Collateral or the priority of any
such lien and/or (b) condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability
of the Company or the Guarantor to perform any of their respective obligations under this Agreement or any of the other Transaction
Documents.

 

(b)          Authorization;
Enforcement. The Company has the requisite corporate power and authority to enter into and perform (i) this Agreement, (ii)
the Note, (iii) the Security Agreement dated as of the date hereof (as amended, amended and restated, supplemented or otherwise
modified from time to time, the “Security Agreement”) by and between the Company and the Investor, and (iv)
those certain leasehold and deeds of trust dated as of the date hereof (as amended, amended and restated, supplemented or otherwise
modified from time to time, collectively, the “Deeds of Trust”; this Agreement, the Note, the Warrants, the
Security Agreement, the Guaranty dated as of the date hereof (as amended, amended and restated, supplemented or otherwise modified
from time to time, the “Guaranty”) made by the Guarantor in favor of the Investor and the Deeds of Trust, collectively,
the “Transaction Documents” and each individually a “Transaction Document”) by and between
the Company the Investor. The execution, delivery and performance of the Transaction Documents by the Company and the consummation
of the transactions contemplated thereby have been duly and validly authorized by all necessary corporate action, and no further
consent or authorization of the Company or its Board of Directors, stockholders or any other third party is required. When executed
and delivered by the Company, each of the Transaction Documents to which they are a party shall constitute legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating
to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general
application.

 

(c)          Capitalization.
The authorized capital stock and the issued and outstanding shares of capital stock of the Company (the “Common Stock”)
as of the Closing Date is set forth on Schedule 2.1(c)(i) attached hereto. All of the outstanding shares of the Common Stock
and any other outstanding security of the Company have been duly and validly authorized. Except as set forth in the SEC Reports
or on Schedule 2.1(c)(ii) attached hereto, there are no outstanding options, warrants, scrip or call relating to, or securities
or rights convertible into, any shares of capital stock of the Company. The Company is not a party to, and it has no knowledge
of, any agreement or understanding restricting the voting of any shares of the capital stock of the Company. “Person”
means any individual, sole proprietorship, joint venture, partnership, corporation, limited liability company, association, joint-stock
company, unincorporated organization, cooperative, trust, estate, governmental entity or any other entity of any kind or nature
whatsoever. “SEC Reports” means all forms, reports and other documents publicly filed by Guarantor with the
Securities and Exchange Commission via Edgar under the Securities Exchange Act of 1934, as amended.

 

    	3

    	 

    

 

 

(d)          No
Conflicts. The execution and delivery of the Transaction Documents by the Company, and the performance of its obligations thereunder,
do not and will not (i) violate or conflict with any provision of the Company’s Certificate of Incorporation or Bylaws, each
as amended to date, (collectively, the “Organizational Documents”), (ii) conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement,
instrument or obligation to which the Company is a party or by which the Company’s properties or assets are bound, (iii)
result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations) applicable to the Company or by which any property or asset of the Company are bound
or affected, or (iv) create or impose a lien, mortgage, security interest, charge or encumbrance of any nature on any property
or asset of the Company under any agreement or any commitment to which the Company is a party or by which the Company is bound
or by which any of its properties or assets are bound, except, solely in the case of clauses (ii) and (iii), for such violations
as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect (other than violations
with respect to federal and state securities laws). The Company is not required under federal, state, foreign or local law, rule
or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or foreign, in order for it to execute, deliver or perform
any of its obligations under the Transaction Documents to which it is a party or issue the Note in accordance with the terms hereof
(other than any filings to perfect liens or security interests granted to the Investor pursuant to the Transaction Documents and
any filings pursuant to the Guarantor’s disclosure obligations as a public company with the Securities and Exchange Commission).
The business of the Company is not being conducted in violation of any laws, ordinances or regulations of any governmental entity,
except for such violations that could not reasonably be expected to have a Material Adverse Effect.

 

(e)          No
Undisclosed Liabilities, Events or Circumstances. Except as set forth in the SEC Reports or on Schedule 2.1(e) attached
hereto, since September 30, 2011, the Company has not incurred any liabilities, obligations, claims or losses (whether liquidated
or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise), and no event or circumstance has occurred or
exists with respect to the Company or its business, properties, operations or financial condition, other than those incurred in
the ordinary course of the Company’s business or which, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.

 

    	4

    	 

    

 

(f)          Indebtedness.
Schedule 2.1(f) attached hereto sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the
Company, or for which the Company has commitments to incur. For the purposes of this Agreement, “Indebtedness”
shall mean, with respect to any Person, (i) all obligations for borrowed money, (ii) all obligations evidenced by bonds, debentures,
notes, or other similar instruments and all reimbursement or other obligations in respect of bankers acceptances, currency swap
agreements, interest rate hedging agreements (including, without limitation, interest rate and commodity hedging agreements), or
other similar financial products, (iii) all capital lease obligations, (iv) all obligations or liabilities secured by a lien or
encumbrance on any asset of such Person, irrespective of whether such obligation or liability is assumed, (v) all obligations for
the deferred purchase price of assets (other than trade debt and other account payables), (vi) all synthetic leases, (vii) all
obligations with respect to redeemable stock and redemption or repurchase obligations under any capital stock or other equity securities
issued by such Person, (viii) all reimbursement obligations and other liabilities of such Person with respect to surety bonds (whether
bid, performance or otherwise), letters of credit, banker’s acceptances, drafts or similar documents or instruments issued
for such Person’s account, (ix) indebtedness of any partnership or joint venture in which such Person is a general partner
or a joint venturer to the extent such Person is liable therefor as a result of such Person’s ownership interest in such
entity, except to the extent that the terms of such indebtedness expressly provide that such Person is not liable therefor or such
Person has no liability therefor as a matter of law, (x) trade debt and other account payables which remain unpaid more than sixty
(60) days past the due date thereof, and (xi) any obligation guaranteeing or intended to guarantee (whether directly or indirectly
guaranteed, endorsed, co-made, discounted or sold with recourse) any of the foregoing obligations of any other Person.

 

(g)          Title
to Collateral. The Company has good and valid title to all of the Collateral (as defined in the Security Agreement and Deed
of Trust), free and clear of any mortgages, pledges, charges, liens, security interests or other encumbrances, except for Permitted
Encumbrances (as defined in Section 3.6). The leases with respect to the Oil and Gas Properties are valid and subsisting and in
full force and effect. Pursuant to, and upon execution, delivery and the filing of Deeds of Trust in the appropriate jurisdictions,
the Investor shall have a perfected, first-priority security interest in the Collateral. With respect to the leases of the Oil
and Gas Properties, “good and valid title” means such title that will enable the title holder to receive from each
of such Oil and Gas Properties at least the “Net Revenue Interest” for the wells associated with each of such Oil and
Gas Properties, without reduction, suspension, or termination throughout the productive life of the wells, except for any reduction,
suspension, or termination: (i) caused by orders of the appropriate regulatory agency having jurisdiction over an Oil and Gas Property
that are promulgated after the Closing Date and that concern pooling, unitization, communitization, or spacing matters affecting
an Oil and Gas Property; or (ii) otherwise set out in Schedule 2.1(g). “Good and valid title” also means title that
will obligate the title holder to bear no greater “Working Interest” than the Working Interest for each of the wells
as being associated with each of such Oil and Gas Properties, without increase throughout the productive life of the wells, except
for any increase: (i) that also results in the Net Revenue Interest associated with the well being proportionately increased; (ii)
caused by contribution requirements provided for under provisions similar to those contained in Article VI of the A.A.P.L. Form
610-89 Model Form Operating Agreement; (iii) caused by orders of the appropriate regulatory agency having jurisdiction over
an Oil and Gas Property that are promulgated after the Closing Date and that concern pooling, unitization, communitization, or
spacing matters affecting a particular Oil and Gas Property; or (iv) otherwise set forth in Schedule 2.1(g).

 

    	5

    	 

    

 

(h)          Actions
Pending. There is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or other proceeding
pending or, to the knowledge of the Company, threatened against the Company which questions the validity of this Agreement or any
of the other Transaction Documents or any of the transactions contemplated hereby or thereby or any action taken or to be taken
pursuant hereto or thereto. Except as set forth on Schedule 2.1(h) attached hereto, there is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending or, to the knowledge of the Company, threatened
against or involving the Company or any of its properties or assets, which individually or in the aggregate, would reasonably be
expected, if adversely determined, to have a Material Adverse Effect. There are no outstanding orders, judgments, injunctions,
awards or decrees of any court, arbitrator or governmental or regulatory body against the Company that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.

 

(i)          Compliance
with Law. The business of the Company has been and is presently being conducted in accordance with all applicable federal,
state and local governmental laws, rules, regulations and ordinances, except such that, individually or in the aggregate, the noncompliance
therewith could not reasonably be expected to have a Material Adverse Effect. The Company has all franchises, permits, licenses,
consents and other governmental or regulatory authorizations and approvals necessary for the conduct of its business as now being
conducted by it unless the failure to possess such franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

(j)          Taxes.
The Company has timely and accurately prepared and filed (taking into account any extensions of time to file) all federal, state
and other tax returns required by law to be filed by (or with respect to) it and all such tax returns were correct and complete
in all material respects, has paid or made provisions for the payment of all material taxes shown to be due and all additional
assessments, except those which are being contested in good faith by appropriate proceedings diligently conducted and for which
adequate reserves have been provided in accordance with GAAP, and adequate provisions have been and are reflected in the financial
statements of the Company for all current taxes and other charges to which the Company is subject and which are not currently due
and payable. None of the federal income tax returns of the Company have been audited by the Internal Revenue Service. The Company
has no knowledge of any additional assessments, adjustments or contingent tax liability (whether federal or state) of any nature
whatsoever, whether pending or threatened against the Company for any period, nor of any basis for any such assessment, adjustment
or contingency.

 

(k)          Disclosure.
Neither this Agreement (including the Schedules attached hereto) nor any other documents, certificates or instruments furnished
to the Investor by or on behalf of the Company in connection with the transactions contemplated by this Agreement and the other
Transaction Documents, taken together as a whole, contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made herein or therein, in the light of the circumstances under which they were made
herein or therein, not misleading. There is no material fact known to the Company that has had or could reasonably be likely to
have a Material Adverse Effect and that has not been fully disclosed herein or in such other documents, certificates and statements
furnished to the Investor for use in connection with the transactions contemplated hereby and by the other Transaction Documents.

 

    	6

    	 

    

 

(l)          Environmental
Compliance. Except as could not reasonably be expected to have a Material Adverse Effect, the Company has obtained all approvals,
authorization, certificates, consents, licenses, orders and permits or other similar authorizations of all Governmental Authorities,
or from any other Person, that are required under any Environmental Laws. “Environmental Laws” shall mean all
Governmental Requirements relating to health, safety, the environment, the preservation or reclamation of natural resources, including,
without limitation, all requirements pertaining to reporting, licensing, permitting, controlling, investigating or remediating
emissions, discharges, releases or threatened releases of hazardous substances, chemical substances, pollutants, contaminants or
toxic substances, materials or wastes, whether solid, liquid or gaseous in nature, into the air, surface water, groundwater or
land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances, material or wastes, whether solid, liquid or gaseous
in nature, further including without limitation, the Oil Pollution Act of 1990, as amended, the Clean Air Act, as amended, the
Comprehensive Environmental, Response, Compensation, and Liability Act of 1980, as amended, the Federal Water Pollution Control
Act, as amended, the Occupational Safety and Health Act of 1970, as amended, the Resource Conservation and Recovery Act of 1976,
as amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as amended, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Law, as amended, and other environmental conservation
or protection Governmental Requirements. The Company makes no representations or warranties with respect to Environmental Laws
in this Agreement or in any other Transaction Document other than those representations and warranties contained in this Section
2.1(l) Except as could not reasonably be expected to have a Material Adverse Effect, the Company has all necessary governmental
approvals required under all Environmental Laws as necessary for the Company’s business. The Company is also in compliance
with all other limitations, restrictions, conditions, standards, requirements, schedules and timetables required or imposed under
all Environmental Laws except where noncompliance could not reasonably be expected to have a Material Adverse Effect. Except for
such instances that could not reasonably be expected to have a Material Adverse Effect, to the Company’s knowledge, there
are no present events, conditions, circumstances, incidents, actions or omissions relating to or in any way affecting the Company
that violate or could reasonably be expected to violate any Environmental Law after the Closing Date or that may give rise to any
environmental liability, or otherwise form the basis of any material claim, action, demand, suit, proceeding, hearing, study or
investigation (i) under any Environmental Law, or (ii) based on or related to the manufacture, processing, distribution, use, treatment,
storage (including without limitation underground storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any hazardous substance. Except for such instances that could reasonably be expected to have a
Material Adverse Effect, the Company has not received any written notice asserting an alleged liability or obligation under any
applicable Environmental Laws with respect to the investigation, remediation, abatement, removal, or monitoring of any hazardous
materials at, under, or released or threatened to be released from any real properties offsite the Company’s properties and,
to the Company’s knowledge, there are no conditions or circumstances that could reasonably be expected to result in the receipt
of such written notice. “Governmental Authority” means the government of the United States of America, any other
nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body,
court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or
functions of or pertaining to government.

 

    	7

    	 

    

 

(m)          Books
and Records. The records and documents of the Company accurately reflect in all material respects the information relating
to the business of the Company, the location and collection of its assets, and the nature of all transactions giving rise to the
obligations or accounts receivable of the Company. The Company maintains a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP
and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.

 

(n)          Transactions
with Affiliates. Except as set forth on Schedule 2.1(n) attached hereto, as of the Closing Date there are no loans,
leases, agreements, contracts, royalty agreements, management contracts or arrangements or other continuing transactions between
(a) the Company or any of its customers or suppliers on the one hand, and (b) on the other hand, any Affiliate. “Affiliate”
means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified. For the avoidance of doubt and notwithstanding any characterization
in any rule promulgated in accordance with GAAP or by any Governmental Authority, for purposes of the Transaction Documents only,
neither (x) Macquarie Bank Limited nor any of its Affiliates, nor (y) the Investor nor any of its Affiliates, nor (z) any
member of the XOG Group (nor any of their respective Affiliates if the only connection to the Company is through its affiliation
with the XOG Group) will be deemed to be an Affiliate of the Company. “XOG Group” means any one or more of the following
Persons: XOG Operating, LLC; Geronimo Holding Corporation, Geronimo Holdings LLC, HNL Royalties LLC and CLW South Texas 2008 LP.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management
or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. For the purposes of this
definition, and without limiting the generality of the foregoing, any Person that owns directly or indirectly 10% or more of the
Equity Interests having ordinary voting power for the election of the directors or other governing body of a Person (other than
as a limited partner of such other Person) will be deemed to “control” such other Person. “Controlling”
and “Controlled” have meanings correlative thereto.

 

(o)          Securities
Act of 1933. The Company has complied and will comply with all applicable federal and state securities laws in connection with
the offer and issuance of the Note. Neither the Company nor anyone acting on its behalf, directly or indirectly, has or will sell,
offer to sell or solicit offers to buy the Note or similar securities to, or solicit offers with respect thereto from, or enter
into any negotiations relating thereto with, any Person, or has taken or will take any action so as to bring the issuance and sale
of the Note under the registration provisions of the Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (collectively, the “Securities Act”), and applicable state securities laws, and neither the Company
nor any of its Affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the Note.

 

    	8

    	 

    

 

(p)          Employees.
The does not have any collective bargaining arrangements or agreements covering any of its employees. Except as set forth on Schedule
2.1(p) attached hereto, the Company does not have any employment contract, agreement regarding proprietary information, non-competition
agreement, non-solicitation agreement, confidentiality agreement, or any other similar contract or restrictive covenant, relating
to the right of any officer, employee or consultant to be employed or engaged by the Company. No officer, consultant or key employee
of the Company whose termination, either individually or in the aggregate, could be reasonably expected to have a Material Adverse
Effect, has since the Closing Date, terminated or, to the knowledge of the Company, has any present intention of terminating his
or her employment or engagement with the Company.

 

(q)          Investment
Company Act Status. The Company is not an “investment company” or a company “controlled” by an “investment
company,” within the meaning of the Investment Company Act of 1940, as amended.

 

(r)          No
Integrated Offering. Neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf, has directly
or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would
cause the offering of the Securities pursuant to this Agreement to be integrated with prior offerings by the Company for purposes
of the Securities Act which would prevent the Company from selling the Note pursuant to Regulation D and Rule 506 thereof under
the Securities Act, or any applicable exchange-related stockholder approval provisions, nor will the Company or any of its Affiliates
take any action or steps that would cause the offering of the Securities to be integrated with other offerings.

 

(s)          Foreign
Asset Control Regulations, etc. The issuance of the Note to the Investor will not violate the Trading with the Enemy Act, as
amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter
V, as amended) or any enabling legislation or executive order relating thereto. The Company (i) is not a Person described
or designated in the Specially Designated Nationals and Blocked Persons List of the Office of Foreign Assets Control or in Section
1 of the Anti-Terrorism Order and (ii) does not engage in any dealings or transactions with any such Person. The Company is
in compliance, in all material respects, with the USA Patriot Act Title III of 107 Public Law 56 (October 26, 2001) and with other
statutes and all orders, rules and regulations of the United States government and its various executive departments, agencies
and 150 offices, related to the subject matter thereof, including Executive Order 13224 effective September 24, 2001.

 

    	9

    	 

    

 

(t)          Material
Agreements. Set forth on Schedule 2.1(t) hereto is a complete and correct list of all material agreements (other than
the Transaction Documents and all oil and gas leases with respect to the Oil and Gas Properties) and other instruments maintained
as of the date of this Agreement by the Company setting forth each counterparty thereto relating to the purchase, transportation
by pipeline, gas processing, marketing, development, sale and supply of Hydrocarbons, farmout arrangements, joint operating agreements,
contract operating agreements or other material contracts to which the Company is a party on or after the Closing Date or by which
its Properties is bound on or after the Closing Date, in each case for which breach, nonperformance, cancellation or failure to
renew could reasonably be expected to have a Material Adverse Effect (together with the oil and gas leases with respect to the
Oil and Gas Properties, collectively, the “Material Agreements”) and copies of such documents have been provided
to Investor. All such agreements are in full force and effect and the Company is not in default thereunder, nor is there any uncured
default by any Affiliate predecessor in interest to the Company or, to the Company’s knowledge, by any predecessor in interest
to the Company (other than an Affiliate predecessor) or counterparty thereto, nor has the Company altered any material item of
such agreements since the Closing Date without the prior written consent of the Investor.

 

(u)          Solvency.
The Company has the ability to meet its liabilities as they mature and does not intend to incur and does not believe that it will
incur debts beyond its ability to pay such debts as they become due.

 

Section 2.2     Representations
and Warranties of the Guarantor.

 

The Guarantor hereby represents
and warrants to the Investor, as of the date hereof, as follows:

 

(a)          Organization,
Good Standing and Power. The Guarantor is a corporation, duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the requisite corporate power to own, lease and operate its properties and
assets and to conduct its business as it is now being conducted. The Guarantor is duly qualified as a foreign corporation, duly
incorporated to do business and is in good standing in every other jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except for any jurisdiction(s) (alone or in the aggregate) in which the
failure to be so qualified could not reasonably be expected to have a Material Adverse Effect.

 

(b)          Authorization;
Enforcement. The Guarantor has the requisite corporate power and authority to enter into and perform this Agreement and the
other Transaction Documents to which it is a party. The execution, delivery and performance by the Guarantor of the Transaction
Documents to which it is a party and the consummation of the transactions contemplated thereby have been duly and validly authorized
by all necessary corporate action, and no further consent or authorization of the Guarantor or its Board of Directors, stockholders
or any other third party is required. When executed and delivered by the Guarantor, each of the Transaction Documents to which
it is a party shall constitute legal, valid and binding obligations of the Guarantor, enforceable against the Guarantor in accordance
with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and
remedies or by other equitable principles of general application.

 

(c)          Capitalization.
The authorized Common Stock of the Guarantor as of the Closing Date is set forth on Schedule 2.1(c)(i) attached hereto.
All of the outstanding shares of the Common Stock and any other outstanding security of the Guarantor have been duly and validly
authorized. Except as disclosed in the SEC Reports or set forth on Schedule 2.1(c)(ii) attached hereto, there are no outstanding
options, warrants, scrip or call relating to, or securities or rights convertible into, any shares of capital stock of the Guarantor.
The Guarantor is not a party to, and it has no knowledge of, any agreement or understanding restricting the voting of any shares
of the capital stock of the Guarantor.

 

    	10

    	 

    

 

(d)          No
Conflicts. The execution and delivery by the Guarantor of the Transaction Documents to which it is a party, and the performance
of its obligations thereunder, do not and will not (i) violate or conflict with any provision of the Guarantor’s Organizational
Documents, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Guarantor is a party or by which
the Guarantor’s properties or assets are bound, (iii) result in a violation of any federal, state, local or foreign statute,
rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Guarantor
or by which any property or asset of the Guarantor are bound or affected, or (iv) create or impose a lien, mortgage, security interest,
charge or encumbrance of any nature on any property or asset of the Guarantor under any agreement or any commitment to which the
Guarantor is a party or by which the Guarantor is bound or by which any of its properties or assets are bound, except, solely in
the case of clauses (ii) and (iii), for such violations as could not reasonably be expected, individually or in the aggregate,
have a Material Adverse Effect (other than violations with respect to federal and state securities laws). The Guarantor is not
required under federal, state, foreign or local law, rule or regulation to obtain any consent, authorization or order of, or make
any filing or registration with, any court or governmental department, commission, board, bureau, agency or instrumentality, domestic
or foreign, in order for it to execute, deliver or perform any of its obligations under the Transaction Documents to which it is
a party or issue the Warrants in accordance with the terms hereof. The business of the Guarantor is not being conducted in violation
of any laws, ordinances or regulations of any governmental entity, except for such violations that could not reasonably be expected
to have a Material Adverse Effect.

 

(e)          Financial
Statements. As of their respective dates, the financial statements of the Guarantor and its consolidated Subsidiaries that
have been or will hereafter be furnished by the Company to the Investor have been or will be prepared in accordance with generally
accepted accounting principles in the United States (“GAAP”) applied on a consistent basis during the periods
involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be condensed or summary statements), and fairly present
in all material respects the financial position of the Guarantor and its consolidated Subsidiaries as of the dates thereof and
the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments).

 

(f)          Solvency.
The Guarantor and the Company, taken as a whole, have the ability to meet their liabilities as they mature and do not intend to
incur and do not believe that they will incur debts beyond their ability to pay such debts as they become due.

 

    	11

    	 

    

 

(g)          Issuance
of Securities. The Warrants have been duly authorized by all necessary corporate action and, when paid for or issued in accordance
with the terms hereof, the Warrants shall be validly issued and outstanding, free and clear of all liens, encumbrances and rights
of refusal of any kind.  When the Warrant Shares are issued and paid for in accordance with the terms of the Warrants and
as set forth in the Certificate of Incorporation, such shares will be duly authorized by all necessary corporate action and validly
issued and outstanding, fully paid and nonassessable, free and clear of all liens, encumbrances and rights of refusal of any kind
and the holders shall be entitled to all rights accorded to a holder of Common Stock. 

 

(h)          Dilutive
Effect. The Guarantor understands and acknowledges that its obligation to issue the Warrant Shares upon the conversion of any
Note in accordance with this Agreement is absolute and unconditional regardless of the dilutive effect that such issuance may have
on the ownership interest of other stockholders of the Guarantor.

 

(i)          No
Material Adverse Change. Since September 30, 2011, the Guarantor and its Subsidiaries (taken as a whole) have not experienced
or suffered any Material Adverse Effect.

 

(j)          Securities
Act of 1933. The Guarantor has complied and will comply with all applicable federal and state securities laws in connection
with the offer and issuance of the Warrants and Warrant Shares. Neither the Guarantor nor anyone acting on its behalf, directly
or indirectly, has or will sell, offer to sell or solicit offers to buy the Warrants or Warrant Shares or similar securities to,
or solicit offers with respect thereto from, or enter into any negotiations relating thereto with, any Person, or has taken or
will take any action so as to bring the issuance and sale of the Warrants or Warrant Shares under the registration provisions of
the Securities Act and applicable state securities laws, and neither the Guarantor nor any of its Affiliates, nor any Person acting
on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation
D under the Securities Act) in connection with the offer or sale of the Warrants and Warrant Shares.

 

(k)          No
Undisclosed Liabilities, Events or Circumstances. Except as set forth in the SEC Reports or on Schedule 2.1(e) attached
hereto, since September 30, 2011, the Guarantor has not incurred any liabilities, obligations, claims or losses (whether liquidated
or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise), and no event or circumstance has occurred or
exists with respect to the Guarantor or its business, properties, operations or financial condition, other than those incurred
in the ordinary course of the Guarantor’s business or which, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect.

 

(l)          Indebtedness.
Schedule 2.1(f) attached hereto sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the
Guarantor, or for which the Guarantor has commitments to incur.

 

(m)          Actions
Pending. There is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or other proceeding
pending or, to the knowledge of the Guarantor, threatened against the Guarantor which questions the validity of this Agreement
or any of the other Transaction Documents or any of the transactions contemplated hereby or thereby or any action taken or to be
taken pursuant hereto or thereto. Except as set forth on Schedule 2.1(h) attached hereto, there is no action, suit, claim,
investigation, arbitration, alternate dispute resolution proceeding or other proceeding pending or, to the knowledge of the Guarantor,
threatened against or involving the Guarantor or any of its properties or assets, which individually or in the aggregate, would
reasonably be expected, if adversely determined, to have a Material Adverse Effect. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against the Guarantor that, individually
or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

    	12

    	 

    

 

(n)          Compliance
with Law. The business of the Guarantor has been and is presently being conducted in accordance with all applicable federal,
state and local governmental laws, rules, regulations and ordinances, except such that, individually or in the aggregate, the noncompliance
therewith could not reasonably be expected to have a Material Adverse Effect. The Guarantor has all franchises, permits, licenses,
consents and other governmental or regulatory authorizations and approvals necessary for the conduct of its business as now being
conducted by it unless the failure to possess such franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

(o)          Taxes.
The Guarantor has timely and accurately prepared and filed (taking into account any extensions of time to file) all federal, state
and other tax returns required by law to be filed by (or with respect to) it and all such tax returns were correct and complete
in all material respects, has paid or made provisions for the payment of all material taxes shown to be due and all additional
assessments, except those which are being contested in good faith by appropriate proceedings diligently conducted and for which
adequate reserves have been provided in accordance with GAAP, and adequate provisions have been and are reflected in the financial
statements of the Guarantor for all current taxes and other charges to which the Guarantor is subject and which are not currently
due and payable. None of the federal income tax returns of the Guarantor have been audited by the Internal Revenue Service. The
Guarantor has no knowledge of any additional assessments, adjustments or contingent tax liability (whether federal or state) of
any nature whatsoever, whether pending or threatened against the Guarantor for any period, nor of any basis for any such assessment,
adjustment or contingency.

 

(p)          Disclosure.
Neither this Agreement (including the Schedules attached hereto) nor any other documents, certificates or instruments furnished
to the Investor by or on behalf of the Guarantor in connection with the transactions contemplated by this Agreement and the other
Transaction Documents, taken together as a whole, contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made herein or therein, in the light of the circumstances under which they were made
herein or therein, not misleading. There is no material fact known to the Guarantor that has had or could reasonably be likely
to have a Material Adverse Effect and that has not been fully disclosed herein or in such other documents, certificates and statements
furnished to the Investor for use in connection with the transactions contemplated hereby and by the other Transaction Documents.

 

(q)          Books
and Records. The records and documents of the Guarantor accurately reflect in all material respects the information relating
to the business of the Guarantor, the location and collection of its assets, and the nature of all transactions giving rise to
the obligations or accounts receivable of the Guarantor. The Guarantor maintains a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization,
and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.

 

    	13

    	 

    

 

(r)          Transactions
with Affiliates. Except as set forth on Schedule 2.1(n) attached hereto, as of the Closing Date there are no loans,
leases, agreements, contracts, royalty agreements, management contracts or arrangements or other continuing transactions between
(a) the Guarantor or any of its customers or suppliers on the one hand, and (b) on the other hand, any Affiliate. For the avoidance
of doubt and notwithstanding any characterization in any rule promulgated in accordance with GAAP or by any Governmental Authority,
for purposes of the Transaction Documents only, neither (x) Macquarie Bank Limited nor any of its Affiliates, nor (y) the Investor
nor any of its Affiliates, nor (z) any member of the XOG Group (nor any of their respective Affiliates if the only connection to
the Guarantor is through its affiliation with the XOG Group) will be deemed to be an Affiliate of the Guarantor.

 

(s)          Employees.
The does not have any collective bargaining arrangements or agreements covering any of its employees. Except as set forth on Schedule
2.1(p) attached hereto, the Guarantor does not have any employment contract, agreement regarding proprietary information, non-competition
agreement, non-solicitation agreement, confidentiality agreement, or any other similar contract or restrictive covenant, relating
to the right of any officer, employee or consultant to be employed or engaged by the Guarantor. No officer, consultant or key employee
of the Guarantor whose termination, either individually or in the aggregate, could be reasonably expected to have a Material Adverse
Effect, has since the Closing Date, terminated or, to the knowledge of the Guarantor, has any present intention of terminating
his or her employment or engagement with the Guarantor.

 

(t)          Investment
Company Act Status. The Guarantor is not an “investment company” or a company “controlled” by an “investment
company,” within the meaning of the Investment Company Act of 1940, as amended.

 

(u)          No
Integrated Offering. Neither the Guarantor, nor any of its Affiliates, nor any Person acting on its or their behalf, has directly
or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would
cause the offering of the Securities pursuant to this Agreement to be integrated with prior offerings by the Guarantor for purposes
of the Securities Act which would prevent the Guarantor from selling the Note pursuant to Regulation D and Rule 506 thereof under
the Securities Act, or any applicable exchange-related stockholder approval provisions, nor will the Guarantor or any of its Affiliates
take any action or steps that would cause the offering of the Securities to be integrated with other offerings.

 

(v)         Foreign
Asset Control Regulations, etc. The issuance of the Warrant to the Investor will not violate the Trading with the Enemy Act,
as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter
V, as amended) or any enabling legislation or executive order relating thereto. Neither the Company nor the Guarantor (i) is a
Person described or designated in the Specially Designated Nationals and Blocked Persons List of the Office of Foreign Assets Control
or in Section 1 of the Anti-Terrorism Order or (ii) engages in any dealings or transactions with any such Person. The Company and
the Guarantor are in compliance, in all material respects, with the USA Patriot Act Title III of 107 Public Law 56 (October 26,
2001) and with other statutes and all orders, rules and regulations of the United States government and its various executive departments,
agencies and 150 offices, related to the subject matter thereof, including Executive Order 13224 effective September 24, 2001.

 

    	14

    	 

    

 

Section 2.3      Representations
and Warranties and Covenants of the Investor.

 

The Investor hereby represents
and warrants to the Company and the Guarantor as of the Closing Date that the Investor is purchasing the Securities solely for
its own account and not with a view to or for sale in connection with distribution. The Investor does not have a present intention
to sell the Securities, nor a present arrangement (whether or not legally binding) or intention to effect any distribution of the
Securities to or through any Person; provided, however, that by making the representations herein, the Investor does
not agree to hold the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at
any time in accordance with federal and state securities laws applicable to such disposition. The Investor further represents and
warrants to the Company and the Guarantor as of the Closing Date that (i) the Investor has such knowledge and experience in financial
and business matters that the Investor is capable of evaluating the merits and risks of the proposed investment in the Note; (ii)
the Investor understands that the Securities may not be sold, transferred or otherwise disposed of by it without registration under
the Securities Act and any applicable state securities laws, or an exemption therefrom, and that in the absence of an effective
registration statement covering the Securities or an available exemption from registration, the Investor may be required to hold
the Securities indefinitely; and (iii) the Investor is an “accredited investor” within the meaning of Regulation D
promulgated under the Securities Act. The Investor acknowledges that the Company and the Guarantor are issuing the Securities in
reliance upon the representations and warranties of the Investor set forth in this Section 2.3.

 

ARTICLE III

 

COVENANTS

 

The Company and the Guarantor
covenant with the Investor as set forth in this ARTICLE III, which covenants are for the benefit of the Investor and its assignees.
Unless otherwise set forth in the covenants in this ARTICLE III, such covenants shall survive until the Note is paid in full.

 

Section 3.1      Compliance
with Laws.

 

The Company and the Guarantor
shall comply with all applicable laws, rules, regulations and orders of any Governmental Authority, including without limitation,
all securities law, rules and regulations and timely make all filings required by any such laws, rules and regulations, except
in such instances where the failure to comply could not reasonably be expected to have a Material Adverse Effect.

 

    	15

    	 

    

 

Section 3.2      Keeping
of Records and Books of Account.

 

The Company and the Guarantor
shall keep adequate records and books of account, in which complete entries will be made in accordance with GAAP consistently applied,
reflecting all financial transactions of the Company and the Guarantor, and in which, for each fiscal year, all proper reserves
for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall
be made. Upon request of the Investor, the Company and the Guarantor shall furnish to the Investor any and all books and records
or any other information reasonably requested by the Investor relating to the business and to the financial condition to the Company
and the Guarantor.

 

Section 3.3      Reporting
Requirements.

 

The Company shall furnish
the following to the Investor until payment in full in cash of all amounts due under any Transaction Document (other than the Warrants)
and the termination of this Agreement and the other Transaction Documents (other than the Warrants):

 

(a)          Quarterly
Financial Statements. As soon as available and in any event within fifty (50) days after the end of each quarter of each fiscal
year of the Guarantor, the consolidated and consolidating balance sheet of the Company and its consolidated Subsidiaries and of
the Guarantor and its consolidated Subsidiaries, in each case, as adjusted in conformity with GAAP, as at the end of such period
and the related consolidated and consolidating statements of income, shareholder’s or member’s (as applicable), equity
and cash flow for such quarter of such fiscal year of the Guarantor and for the period from the beginning of the then current fiscal
year of the Guarantor to the end of such quarter of such fiscal year of the Company.

 

(b)          Annual
Financial Statements. As soon as available and in any event within one hundred twenty (120) days after the end of each fiscal
year of the Guarantor:

 

(i)          the
audited consolidated and consolidating balance sheet of the Guarantor and its consolidated Subsidiaries as at the end of such year
and the related consolidated and consolidating statements of income, shareholder’s or member’s (as applicable) equity
and cash flow for such fiscal year of the Guarantor; and

 

(ii)         a
report with respect to the financial statements from a firm of independent certified public accountants selected by the Guarantor,
which report shall be unqualified as to going concern and scope of audit of the Guarantor and its consolidated Subsidiaries and
shall state that (a) such financial statements present fairly the financial position of the Guarantor and its consolidated
Subsidiaries as at the dates indicated and the results of its operations and cash flow for the periods indicated in conformity
with GAAP applied on a basis consistent with prior years, and (b) the examination by such accountants in connection with such
financial statements has been made in accordance with generally accepted auditing standards;

 

    	16

    	 

    

 

(c)          Compliance
Certificate. With the delivery of each set of financial statements under Section 3.3(a) and Section 3.3(b), a
certificate executed by the chief executive officer or the chief financial officer or controller of the Guarantor (an “Authorized
Officer”) (i) certifying whether, to the Authorized Officer’s knowledge, a Default or an Event of Default has occurred
and, if so, describing in reasonable detail the circumstances thereof and any actions taken or proposed to be taken to cure such
Default or Event of Default, and (ii) in connection with financial statements delivered under Section 3.3(a), certifying
that the financial statements present fairly in all material respects, subject only to normal year-end adjustments, the financial
position and results of operations of the Guarantor and its Subsidiaries in accordance with GAAP and absent any footnotes (other
than those required to explain financial data).

 

(d)          Accountants’
Certification and Reports. In connection with each annual, interim or special audit or review of the financial statements or
financial controls of the Guarantor or any of its Subsidiaries made by its independent public accountants (including the audit
made in connection with the financial statements required to be delivered under Section 3.3(b)), promptly upon receipt thereof
copies of all reports submitted to the Guarantor by its independent public accountants in connection with each such annual, interim
or special audit or review, including the comment letter submitted by such accountants to management or any member or committee
of the board of directors (or similar body) of the Guarantor or any of its Subsidiaries in connection with such annual, interim
or special audit or review.

 

(e)          Reserve
Reports; AFEs. The Company shall, at its sole expense, cause an engineering reserve report relating to the Oil and Gas Properties
(the “Reserve Report”) to be prepared with respect to each calendar year and delivered to the Investor on the
first Business Day of each April 1, beginning on April 1, 2012. Each Reserve Report will evaluate the projected recoverable reserves
attributable to the Company’s working interests and net revenue interests in the Oil and Gas Properties. The Reserve Report
will separately report on PDP Reserves, PDNP Reserves and PUD Reserves, and will be prepared in accordance with the requirements
of Rule 4-10 of Regulation SX of the Securities and Exchange Commission.

 

(f)          Government
Notices. Promptly after receipt, copies of all notices, requests, subpoenas, inquiries or other writings received from any
governmental agency concerning the violation of any material Environmental Laws, the violation or alleged violation of the Fair
Labor Standards Act or the payment or non-payment of any taxes including any tax audit, in each case, with respect to the Company
or the Guarantor. “Hazardous Material” means any substance regulated or as to which liability might arise under
any applicable Environmental Law and including without limitation: (a) any chemical, compound, material, product, byproduct, substance
or waste defined as or included in the definition or meaning of “hazardous substance,” “hazardous material,”
“hazardous waste,” “solid waste,” “toxic waste,” “extremely hazardous substance,”
“toxic substance,” “contaminant,” “pollutant,” or words of similar meaning or import found
in any applicable Environmental Law; (b) hydrocarbons, petroleum products, petroleum substances, natural gas, oil, oil and gas
waste, crude oil, and any components, fractions, or derivatives thereof; and (c) radioactive materials, explosives, asbestos or
asbestos containing materials, polychlorinated biphenyls, radon, infectious or medical wastes.

 

(g)          Notification
of Events of Default, etc.

 

(i)          Promptly,
but in no event later than the fifth Business Day following the day any officer of the Company or the Guarantor obtains knowledge
of any of the following events or conditions, a written notice, including a certificate signed by the chief executive officer or
president of the Company or the Guarantor, specifying the nature and period of existence of such condition or event and what action
the Company or the Guarantor, as applicable, has taken, is taking, and proposes to take, with respect thereto:

 

    	17

    	 

    

 

 

(a)          any
condition, circumstance or event that constitutes an Event of Default or a Default;

 

(b)          any
default or breach by the Company or the Guarantor of the performance, observance or fulfillment of any of the obligations, duties,
covenants or conditions contained in any contractual obligation of the Company or the Guarantor, or the occurrence of any condition
or event that would allow the other party to any such contractual obligations to terminate or cancel such contract, or the receipt
by the Company or the Guarantor of any notice from any such counterparty under any such contractual obligation claiming that any
such default or condition or event has occurred, in any such case with respect to any contract of the Company or the Guarantor
the termination or cancellation of which, or non-renewal of which on substantially similar terms, could reasonably be expected
to have a Material Adverse Effect;

 

(c)          any
condition, circumstance or event which has had or could reasonably be expected to have a Material Adverse Effect; or

 

(d)          the
resignation or termination of the chief financial officer or the controller of the Company or the Guarantor (or any officer(s)
or employee(s) of the Company or the Guarantor performing the duties and functions commonly performed by a chief financial officer
and a controller) or the head(s) of operations and sales of the Company, or if any such person shall leave his or her office for
whatever reason or ceases to exercise the rights and duties of such office.

 

(ii)         With
respect to any AFE that the failure of the Company to pay would result in a material diminution in the value of the related Oil
and Gas Property, promptly, but in no event later than the fifth Business Day prior to the expiration of any grace period with
respect to event of default that would arise from such failure to pay, a written notice from the Company or the Guarantor stating
the reasons for such failure. The Investor may, but shall not be obligated to, pay any such AFE if the Company or the Guarantor
does not pay such AFE prior to the expiration of the related grace period and any amount so paid by the Investor shall be (A) added
to the principal amount due and payable pursuant to the terms of the Note and (B) paid by the Company to the Investor within
five (5) days of the date of payment by the Investor; provided, that the Investor may not pay any AFE that (A) is being
contested by the Company in good faith by appropriate proceedings diligently conducted or (B) relates to an Oil and Gas Property
that the Company has indicated in such written notice that it intends to sell, prior to the expiration of such applicable grace
period);

 

(h)          Locations.
At least ten (10) Business Days advance written notice of any change in the Company’s or the Guarantor’s addresses
or of any new location for their respective books and records or where any Collateral has been or purports to be created and/or
granted pursuant to any Transaction Documents.

 

    	18

    	 

    

 

(i)          Litigation.
Within five (5) Business Days after the Company obtains knowledge of (i) the institution of any action, suit, proceeding,
governmental investigation or arbitration that seeks to prohibit or impose any material restriction on the Company’s business
as it presently conducts it or the Oil and Gas Properties not previously disclosed by the Company to the Investor in writing and
in an amount in excess of $1,000,000 or (2) any material development in any action, suit, proceeding, governmental investigation
or arbitration at any time pending against or affecting the Company or the Guarantor or any property of the Company that could
reasonably be expected to have a Material Adverse Effect, the Company will give written notice thereof to the Investor and provide
such other information as may be reasonably available to the Company or the Guarantor to enable the Investor and its counsel to
evaluate such matter.

 

Section 3.4           Other
Agreements.

 

The Company and the Guarantor
shall not enter into any agreement the terms of which would restrict or impair the right or ability of the Company or the Guarantor
to perform of their respective obligations under any Transaction Document.

 

Section 3.5           Distributions.

 

Neither the Company nor
the Guarantor shall (i) declare or pay any dividends or make any distributions (by reduction of capital or otherwise) to any holder(s)
of Common Stock or other Equity Interests of the Company or the Guarantor (or security convertible into or exercisable for Common
Stock or other Equity Interests) or set aside or otherwise deposit or invest any sums for such purpose; provided, that the
Company shall be permitted to declare and pay cash dividends or distributions to the Guarantor (a) with the proceeds of the Initial
Funding and the Subsequent Funding, (b) for general and administrative expenses in an amount not to exceed $2,500,000 in any calendar
year, (c) in such amounts to enable the Guarantor to make regularly scheduled payments on account of the Indebtedness of the Guarantor
due and payable under any promissory notes made by the Guarantor pursuant to the Purchase Agreement, provided, such payments
are expressly permitted under the XOG Subordination Agreement (as defined in Section 4.2(c) ), and (d) in such amount as the
Company shall determine, provided that simultaneously with the payment of such dividend or distribution to the Guarantor, the Company
pays to the Investor a like amount to be applied as a prepayment of the outstanding principal amount of the Note, or (ii) redeem,
retire, defease, purchase or otherwise acquire for value, directly or indirectly, any Common Stock or other equity security of
the Company or the Guarantor or set aside or otherwise deposit or invest any sums for such purpose.

 

    	19

    	 

    

 

Section 3.6           Prohibition
on Liens.

 

The Company shall not enter
into, create, incur, assume, suffer or permit to exist any lien, security interest, mortgage, pledge, charge, claim or other encumbrance
of any kind (collectively, “Liens”) on or with respect to the Collateral or any interest therein or any income
or profits therefrom, or file or permit the filing of, or permit to remain in effect any financing statement or other similar notice
of any Lien with respect to such assets, other than Permitted Encumbrances. “Permitted Encumbrances” means the
individual and collective reference to the following: (i) Liens for taxes, assessments and other governmental charges or levies
not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good faith and by appropriate
proceedings for which adequate reserves have been established in accordance with GAAP; (ii) Liens imposed by law which were incurred
in the ordinary course of the Company’s business, such as carriers’, warehousemen’s and mechanics’ Liens,
statutory landlords’ Liens, operators' Liens, and other similar Liens arising in the ordinary course of the Company’s
business, and which (x) do not individually or in the aggregate materially detract from the value of such property or assets or
materially impair the use thereof in the operation of the business of the Company or (y) are being contested in good faith by appropriate
proceedings, which proceedings have the effect of preventing for the foreseeable future the forfeiture or sale of the property
or asset subject to such Lien; (iii) the Liens set forth in Schedule 2.1(g) attached hereto in effect on the date
hereof and any renewals or extensions thereof; (iv) pledges or deposits in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other social security legislation, other than any Liens imposed by ERISA; (v)
deposits to secure the performance of bids, trade contracts and leases, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature incurred in the ordinary course of business; (vi) easements, rights of way, servitudes,
permits, surface leases, and other rights of third parties in respect of surface operations on, or development of, the Oil and
Gas Properties, (vii) lessor’s royalties, overriding royalties, reversionary interests, and similar burdens that do
not operate to reduce the Net Revenue Interest of the Company in any of the Oil and Gas Properties to less than the amount set
forth in the applicable lease with respect to the Oil and Gas Properties; (viii) the consents and rights described in the leases
withinsofar as such consents and rights do not operate to increase the Working Interest of the Company or decrease the Net Revenue
Interest of the Company, as set forth on Schedule 2.1(g)  for any of the applicable Properties; (ix) Liens securing
Indebtedness permitted under Section 3.6(iii) so long as (A) such Liens do not at any time encumber any property other than
the property financed by such Indebtedness and (B) the Indebtedness secured thereby does not exceed the cost or fair market value,
whichever is lower, of the property being acquired on the date of acquisition; and (x) the Liens of the Investor set forth in the
Transaction Documents.

 

Section 3.7           Prohibition
on Indebtedness.

 

The Company shall not enter
into, create, incur, assume, suffer, become or be liable for in any manner with respect to, or permit to exist, any Indebtedness,
or guarantee, assume, endorse or otherwise become responsible for (directly or indirectly), any Indebtedness, performance, obligations
or dividends of any other Person, other than (i) Indebtedness existing on the date hereof and disclosed in Schedule 2.1(f) to
this Agreement and any refinancings, refundings, renewals or extensions thereof, (ii) Indebtedness in favor of the Investor evidenced
by the Note, (iii) Indebtedness of the kind described in clause (i), (ii), (ix) or (xi) of the defined term “Indebtedness”,
in an amount not to exceed $1,000,000 in the aggregate, fully subordinated to the Indebtedness in favor of the Investor evidenced
by the Note pursuant to a subordination agreement the terms and conditions of which shall be acceptable to the Investor in its
reasonable discretion, (iv) Indebtedness secured by a Permitted Encumbrance, (v) letters of credit, worker’s compensation
claims, surety bonds and performance bonds incurred in the ordinary course of business, and (vi) endorsements of negotiable instruments
for collection in the ordinary course of business.

 

Section 3.8           Compliance
with Transaction Documents.

 

Each of the Company and
the Guarantor shall comply with their respective obligations under the Transaction Documents to which each is a party.

  

    	20

    	 

    

 

Section 3.9           Transactions
with Affiliates.

 

Neither the Company nor
the Guarantor shall, directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale or exchange
of property or the rendering of any service) with any Affiliate or with any officer, director or employee of the Company or the
Guarantor, except for (a) any sale or contribution by the Guarantor of oil and gas properties to American Standard Energy, Corp.,
a Nevada corporation and Subsidiary of the Guarantor (“American Standard”), (b) any distribution of oil and
gas properties by American Standard to the Guarantor (c) any distribution of oil and gas properties by the Guarantor to the Company
and (d) transactions in the ordinary course of business and pursuant to the reasonable requirements of the businesses of the Company
or the Guarantor, as applicable, and upon fair and reasonable terms and which are no less favorable to the Company or the Guarantor,
as applicable, than they would obtain in a comparable arm’s length transaction with an unaffiliated Person.

 

Section 3.10         No
Merger or Sale of Assets; No Formation of Subsidiaries.

 

The Company shall not,
directly or indirectly,

 

(a)          merge
into or with or consolidate with any other Person or permit any other Person to merge into or with or consolidate with it other
than an Affiliate, but only so long as the Company shall be the survivor of such consolidation or merger; provided that
the Company and the Guarantor shall not merge into or with or consolidate with each other.

 

(b)          sell,
issue, assign, lease, license, transfer, abandon or otherwise dispose of any or all of the Collateral, other than (i) inventory
in the ordinary course of business, (ii) dispositions of obsolete or worn out assets and (iii) dispositions of assets not otherwise
permitted under this Section 3.10(b)

so long as the aggregate book value of such assets does not exceed
$250,000 during any fiscal year,

 

(c)          alter
its organizational structure or effect a change of entity (except as expressly permitted in this Agreement or in a manner that
is not adverse to the interests of the Investor),

 

(d)          wind
up, liquidate or, subject to the proviso in Section 3.12, dissolve, or

 

(e)          agree
to do any of the foregoing.

 

    	21

    	 

    

 

Section 3.11         Payment
of Taxes, Etc.

 

The Company and the Guarantor
shall promptly pay and discharge, or cause to be paid and discharged, when due and payable, all lawful taxes, assessments and governmental
charges or levies imposed upon the income, profits, property or business of the Company; provided, however, that
any such tax, assessment, charge or levy need not be paid if the validity thereof shall currently be contested in good faith by
appropriate proceedings and if the Company shall have set aside on its books adequate reserves with respect thereto in accordance
with GAAP.

  

Section 3.12         Corporate
Existence.

 

Each of the Company and
the Guarantor shall maintain in full force and effect its corporate existence, rights and franchises and all licenses and other
rights to use property owned or possessed by it and reasonably deemed to be necessary to the conduct of its business.

 

Section 3.13         No
Investments.

 

The Company shall not make
or suffer to exist any Investments or commitments therefor, other than Investments made in the ordinary course of business. “Investment”
means, with respect to any Person, (i) all investments (by capital contribution or otherwise) in any other Person, (ii) any extension
of credit, loan or advance, or (iii) any purchase or repurchase of stock or other ownership interest, Indebtedness or all or a
substantial part of the assets or property of any Person, bonds, notes, debentures or other securities, or otherwise, and whether
existing on the date of this Agreement or thereafter made.

 

Section 3.14         Access
to Accountants.

 

The Guarantor hereby irrevocably
authorizes and requests and instructs all accountants and auditors employed by the Guarantor or any of its Subsidiaries at any
time to exhibit and deliver to the Investor upon the Investor’s request copies of any of the financial statements, trial
balances or other accounting records or reports of any sort of the Guarantor or any of its Subsidiaries in the accountant’s
or auditor’s possession, and to disclose to the Investor any information such accountants or auditors may have concerning
the financial status and business operations of the Guarantor or any of its Subsidiaries, in either case so long as the Guarantor
is notified concurrently of the Investor's request.

 

Section 3.15         Inspection.

 

The Company and the Guarantor,
upon reasonable notice, shall permit the Investor and its duly authorized representatives or agents to visit during normal business
hours the Company’s or the Guarantor’s properties and inspect any of their respective assets or books and records,
to examine and make copies of their respective books and records and to discuss their respective affairs, finances, technology
and accounts with, and to be advised as to the same by, their respective officers and employees at such reasonable times and intervals
as Investor may designate, provided that if an Event of Default has not occurred or is not continuing, neither the Investor
nor its representative shall made more than two (2) such visits or inspections in any calendar year.

 

Section 3.16         Insurance.

 

The Company shall have
(i) all insurance policies sufficient for the compliance by each of them with all material Governmental Requirements applicable
to the Company or its business and (ii) insurance coverage in at least amounts and against such risk (including, without limitation,
public liability) that are usually insured against by companies similarly situated and engaged in the same or a similar business
for the assets and operations of the Company. The Company shall deliver (or cause to be delivered) copies of all such policies
to the Investor with an endorsement naming the Investor as a lender loss payee (under a satisfactory lender loss payable endorsement)
or additional insured, as appropriate. Each policy of insurance or endorsement shall contain a clause requiring the insurer to
give not less than 30 days prior written notice to the Investor in the event of cancellation of the policy for any reason whatsoever.
“Governmental Requirement” means any law, statute, code, ordinance, order, determination, rule, regulation,
judgment, decree, injunction, franchise, permit, certificate, license, rules of common law, authorization or other directive or
requirement, whether now or hereinafter in effect, of any Governmental Authority.

 

    	22

    	 

    
 

Section 3.17         Production
Report and Lease Operating Statements.

 

On the date that is the
later of (x) thirty (30) days after the end of each fiscal quarter (unless for gas, then within sixty (60) days after the end of
each fiscal quarter) and (y) two (2) days after the Guarantor’s filing thereof with the SEC, unless the Investor shall have
notified the Company that it does not wish to receive the following, the Company shall deliver to Investor (i) a report setting
forth, for each calendar month during the then current fiscal year to date, the 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 Company’s Oil and Gas Properties, and setting forth the related ad valorem, severance and production taxes and lease
operating expenses attributable thereto and incurred for each such calendar month, and internet access to the Company’s real
time reports of sales of production, and (ii) a statement from the “first purchaser” setting forth the volumes of hydrocarbons
sold, the price received and Company’s share of the proceeds. For the purposes of this Agreement, “Oil and Gas Properties”
means (a) all rights, titles, interests and estates now or hereafter acquired directly or indirectly through ownership in other
entities or otherwise in and to oil and gas leases, oil, gas and mineral leases, or other liquid or gaseous hydrocarbon leases,
mineral fee interests, overriding royalty and royalty interests, net profit interests and production payment interests, including
any reserved or residual interests of whatever nature (the “Hydrocarbon Interests”); (b) any interest in any
kind of property or asset, whether real, personal or mixed, or tangible or intangible, including, without limitation, cash, securities,
accounts and contract rights (the “Properties”) now or hereafter pooled or unitized with Hydrocarbon Interests;
(c) all presently existing or future unitization, pooling agreements and declarations of pooled units and the units created thereby
(including without limitation all units created under orders, regulations and rules of any Governmental Authority) which may affect
all or any portion of the Hydrocarbon Interests; (d) all operating agreements, contracts and other agreements, including production
sharing contracts and agreements, which relate to any of the Hydrocarbon Interests or the production, sale, purchase, exchange
or processing of oil, gas, casing head gas, drip gasoline, natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous
hydrocarbons and all products refined or separated therefrom (“Hydrocarbons”) from or attributable to such Hydrocarbon
Interests; (e) all Hydrocarbons in and under and which may be produced and saved or attributable to the Hydrocarbon Interests,
including all oil in tanks, and all rents, issues, profits, proceeds, products, revenues and other incomes from or attributable
to the Hydrocarbon Interests; (f) all tenements, hereditaments, appurtenances and Properties in any manner appertaining, belonging,
affixed or incidental to the Hydrocarbon Interests and (g) all Properties, rights, titles, interests and estates described or referred
to above, including any and all Property, real or personal, now owned or hereinafter acquired and situated upon, used, held for
use or useful in connection with the operating, working or development of any of such Hydrocarbon Interests or Property and including
any and all oil wells, gas wells, injection wells, disposal wells or other wells, buildings, structures, fuel separators, liquid
extraction plants, plant compressors, pumps, pumping units, field gathering systems, tanks and tank batteries, fixtures, valves,
fittings, machinery and parts, engines, boilers, meters, apparatus, equipment, appliances, tools, implements, cables, wires, towers,
casing, tubing and rods, surface leases, rights-of-way, easements and servitudes together with all additions, substitutions, replacements,
accessions and attachments to any and all of the foregoing; provided, however, that all of the foregoing shall relate
only to the properties described on Schedule 3.17 of this Agreement to the extent of the Company’s interest therein after
giving effect to that certain Assignment of Oil and Gas Leases and Bill of Sale dated as of the Closing Date between the Guarantor,
as assignor, and the Company, as assignee.

  

    	23

    	 

    

 

Section 3.18         Title
Information.

 

Upon request of the Investor
(at its sole discretion), the Company will deliver or caused to be delivered title information in form and substance reasonably
acceptable to the Investor covering Oil and Gas Properties now owned or hereafter acquired.

 

Section 3.19         Gas
Imbalances, Take-or-Pay or Other Prepayments.

 

The Company shall not allow
gas imbalances, take-or-pay or other prepayments with respect to the Oil and Gas Properties of the Company that would require the
Company to deliver Hydrocarbons at some future time without then or thereafter receiving full payment therefor.

 

Section 3.20         Reservation
of Shares.

 

So long as the Warrants
remain outstanding, the Guarantor shall take all action necessary to at all times have authorized and reserved for the purpose
of issuance, the aggregate number of shares of Common Stock needed to provide for the issuance of the Warrant Shares.

 

Section 3.21         Marketing
of Production.

 

The Company shall not sell
or otherwise dispose of any material portion of the Hydrocarbon production allocable to the Oil and Gas Properties except pursuant
to Hydrocarbon marketing and sale contracts that are (a) identified on Schedule 3.21 and in effect on the date of this Agreement,
(b) approved by the Investor in its reasonable discretion, (c) between the Company and any Person that is not an Affiliate (whether
or not in writing) that are cancelable, without penalty, on 30 days notice or less, or (d) marketing arrangements over which the
Company exercises no direct control and to which it is subject pursuant to an operating agreement. The Company is receiving a price
for all Hydrocarbon production sold that is computed substantially in accordance with the terms of the relevant contract, and deliveries
are not being curtailed substantially below the subject Oil and Gas Property’s delivery capacity.

 

Section 3.22         Environmental
Matters.

 

To the extent the Company
has the contractual or legal right, the Company will not cause or permit any of its Oil and Gas Properties to be in violation of,
or do anything or permit anything to be done which will subject any such Oil and Gas Properties to a release or threatened release
of Hazardous Materials, assuming disclosure to the applicable Governmental Authority of all relevant facts, conditions and circumstances,
if any, pertaining to such Property where such violations, release or threatened release, exposure, or remedial work could reasonably
be expected to have a Material Adverse Effect.

 

    	24

    	 

    
 

Section 3.23         Material
Agreements.

 

The Company will not enter
into or amend or otherwise modify any Material Agreement (a) that involves an individual commitment from such Person of more than
$100,000 in the aggregate in any twelve (12) month period and (b) the subject of which is an Oil and Gas Property in which the
Company has a majority interest.

 

Section 3.24         Swap
Agreements.

 

The Company will not enter
into any agreement with respect to any swap, forward, future or derivative transaction, option or similar agreement or physical
delivery contract, whether exchange traded, “over-the-counter” or otherwise, involving, or settled by reference to,
one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices
or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions
with any Person, except in the ordinary course of business and not for speculative purposes.

 

Section 3.25         Disclosure
of Transactions and Other Material Information.

 

The Guarantor shall file
a Current Report on Form 8-K within the time required by the 1934 Act describing all the material terms of the transactions contemplated
by the Transaction Documents in the form required by the 1934 Act and attaching all the material Transaction Documents (including,
without limitation, this Agreement, the form of the Warrants and the form of the Registration Rights Agreement) (including all
attachments, the “8-K Filing”). With the filing of the 8-K Filing, the Company shall have disclosed all material,
non-public information (if any) provided to the Investor by the Company or the Guarantor or any of their respective officers, directors
or employees in connection with the transactions contemplated by the Transaction Documents.

 

ARTICLE IV

CONDITIONS

 

Section 4.1           Conditions
Precedent to the Obligation of the Investor to Close on the Closing Date.

 

The obligation hereunder
of the Investor to consummate the transactions contemplated by this Agreement is subject to the satisfaction or waiver, on or before
the Closing Date, of each of the conditions set forth below.

 

(a)          Notes
and Transaction Documents. The Company shall have delivered to the Investor the Note, and the Company and the Guarantor shall
have duly executed and delivered the other Transaction Documents to the Investor, and the Investor shall have received such title
information as the Investor may require, reasonably satisfactory to the Investor, setting forth the status of title to the Company’s’
interest in any Oil and Gas Property owned by Company.

 

    	25

    	 

    
 

(b)          Secretary’s
Certificate. The Company and the Guarantor shall have delivered to the Investor secretary’s certificates, dated as of
the Closing Date, as to (i) the resolutions approving the transactions contemplated hereby and by the Transaction Documents, (ii)
the Organizational Documents of the Company and the Guarantor, each as in effect at the Closing Date, (iii) the authority and incumbency
of the officers of the Company and the Guarantor executing the Transaction Documents and any other documents required to be executed
or delivered in connection therewith and (iv) certificates of the appropriate governmental agencies with respect to the existence,
qualification and good standing of the Company and the Guarantor.

 

(c)          Officer’s
Certificate. The Company and the Guarantor shall have delivered to the Investor a certificate signed by an executive officer
on behalf of the Company and the Guarantor, respectively, dated the Closing Date, confirming the accuracy of the Company’s
and the Guarantor’s representations and warranties as of such date and no Default or Event of Default has occurred or will
occur on the Closing Date after giving effect to the transactions contemplated by the Transaction Documents.

 

(d)          Due
Diligence. The Company and the Guarantor shall have permitted the Investor to make such inspections as the Investor deems reasonably
appropriate and the Investor is satisfied, in its reasonable discretion, with the results thereof.

 

(e)          Payment
of Investor’s Expenses. The Company shall have paid the fees and expenses described in Section 7.1 of this Agreement
to the extent invoiced prior to or on the Closing Date.

 

(f)          Searches.
The Investor shall have received UCC, real estate tax, judgment and litigation searches against the Company and the Guarantor in
those offices and jurisdictions as the Investor shall reasonably request which shall show that no financing statement, liens, mortgages,
deeds of trust or assignments or other filings have been filed or remain in effect against the Company and the Guarantor or any
Collateral except for Permitted Encumbrances and financing statements, assignments or other filings with respect to which the secured
party or existing lender (other than Macquarie Bank Limited with respect to any assets not constituting Collateral) (i) has
delivered to the Investor termination statements or other documentation evidencing the termination of its Liens and security interests
in the Collateral, or (ii) has agreed in writing to release or terminate its Lien and security interest in the Collateral
upon receipt of proceeds of the advance on the Closing Date.

 

(g)          UCC
Financing Statements; Deeds of Trust. On or prior to the Closing Date, the Company shall have authorized the filing by the
Investor of all UCC financing statements and all Deeds of Trust, each in form and substance reasonably satisfactory to the Investor,
at the appropriate offices to create a valid and perfected security interest in the Collateral and in the Oil and Gas Properties.

 

    	26

    	 

    
 

(h)          Consents.
The Company and the Guarantor shall have obtained all consents, approvals, or waivers from all Governmental Authorities, third
parties and their respective security holders necessary (i) for the execution, delivery and performance of this Agreement and the
Transaction Documents and the transactions contemplated hereby and thereby and (ii) to not trigger any preemptive rights, rights
of first refusal, put or call rights or obligations, anti-dilution rights or similar rights that any holder of the Company’s
or the Guarantor’s securities may have with respect to the execution, delivery and performance of this Agreement and each
of the Transaction Documents and all transactions contemplated hereby and thereby.

 

(i)          Insurance.
The Investor shall have received a certificate of insurance coverage for the Company (or other evidence of insurance coverage
acceptable to the Investor) showing that the Company is carrying insurance in accordance with Section 3.16.

 

(j)          Operating
Agreements. The Investor shall have received copies of the operating agreements for the Oil and Gas Properties that are part
of the Collateral.

 

(k)          Environmental
Condition. The Investor shall have received all available reports in the Company’s possession and written notices concerning
the environmental condition of the Oil and Gas Properties that are part of the Collateral available to the Company and shall be
satisfied with the environmental condition thereof (it being understood that the Company is not being required to deliver any new
or updated environmental reports as a condition to close on the Closing Date).

 

(l)          Subordination
Agreement. The Investor shall have received a subordination agreement dated as of the Closing Date among the Investor, the
Company and Macquarie Bank Limited, in form and substance reasonably satisfactory to the Investor.

 

(m)          Opinions
of Counsel. The Investor shall have received opinions of counsel to the Company and the Guarantor, dated the Closing Date,
reasonably acceptable to counsel to the Investor.

 

(n)          No
Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by any court or Governmental Authority of competent jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the other Transaction Documents.

 

(o)          No
Proceedings or Litigation. No action, suit or proceeding before any arbitrator or any Governmental Authority shall have been
commenced, and no investigation by any Governmental Authority shall have been threatened in writing, against the Company or that
are part of the Collateral, or any of the officers, directors or Affiliates of the Company or that are part of the Collateral seeking
to restrain, prevent or change the transactions contemplated by this Agreement or the other Transaction Documents, or seeking damages
in connection with such transactions.

 

(p)          Material
Adverse Effect. No Material Adverse Effect shall have occurred since December 31, 2011.

 

    	27

    	 

    
 

(q)          Registration
Rights Agreement. At the Closing, the Investor and the Guarantor shall execute and deliver a Registration Rights Agreement,
in the form attached hereto as Exhibit 4.1(q) (the “Registration Rights Agreement”), pursuant to which the Guarantor
has agreed to provide certain registration rights with respect to the Registrable Securities (as defined in the Registration Rights
Agreement), under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws.

 

(r)          Title.
The Company will deliver or cause to be delivered title information in form and substance acceptable to the Investor, in the Investor’s
sole discretion, covering Oil and Gas Properties located in La Salle County, Texas and Frio County, Texas.

 

(s)          Warrant
Documents. The Guarantor will deliver to the Investor (i) a Modification Agreement, dated as of February 9, 2012 among the
Guarantor and the parties identified as “Holders” on the signature page thereto, (ii) the Warrant to Purchase Common
Stock dated February 9, 2012 issued by the Guarantor to the Investor and (iii) the Series C Warrant to Purchase Common Stock dated
February 9, 2012 issued by the Guarantor to the Investor, each of which shall be in form and substance reasonably satisfactory
to the Investor.

 

(t)          Miscellaneous.
All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the Note and the
other Transaction Documents shall be satisfactory in form and substance to the Investor and its counsel.

 

Section 4.2           Conditions
Precedent to the Obligation of the Investor to Consummate the Subsequent Funding.

 

The obligation hereunder of the Investor to
make the Subsequent Funding is subject to the satisfaction or waiver, on or before the date of such Subsequent Funding, of (i)
each of the conditions set forthbelow on the date of the proposed Subsequent Funding.

 

(a)          Payment
of Investor’s Expenses. The Company shall have paid the fees and expenses described in Section 7.1 of this
Agreement to the extent invoiced prior to the date on which the Subsequent Funding is requested.

 

(b)          No
Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by any court or Governmental Authority of competent jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the other Transaction Documents.

 

(c)          XOG
Subordination Agreement. The Investor shall have received a subordination agreement dated as of the date of the Subsequent
Funding among the Investor, the Company and Geronimo Holdings Corporation, in form and substance reasonably satisfactory to the
Investor (the “XOG Subordination Agreement”).

 

(d)          No
Proceedings or Litigation. No action, suit or proceeding before any arbitrator or any Governmental Authority shall have been
commenced, and no investigation by any Governmental Authority shall have been threatened in writing, against the Company or that
are part of the Collateral, or any of the officers, directors or Affiliates of the Company or that are part of the Collateral seeking
to restrain, prevent or change the transactions contemplated by this Agreement or the other Transaction Documents, or seeking damages
in connection with such transactions.

 

    	28

    	 

    
 

(e)          Material
Adverse Effect. No Material Adverse Effect shall have occurred since December 31, 2011.

 

(f)          Searches.
The Investor shall have received UCC, real estate, tax, judgment and litigation searches against the Company in those offices and
jurisdictions as the Investor shall reasonably request which shall show that no financing statement, liens, mortgages, deeds of
trust or assignments or other filings have been filed or remain in effect against the Company or any Collateral except for Permitted
Encumbrances and financing statements, assignments or other filings with respect to which the secured party or existing lender
(other than Macquarie Bank Limited with respect to any assets not constituting Collateral) (i) has delivered to the Investor
termination statements or other documentation evidencing the termination of its Liens and security interests in the Collateral,
or (ii) has agreed in writing to release or terminate its Lien and security interest in the Collateral upon receipt of proceeds
of the Subsequent Funding.

 

(g)          Consents.
The Company and the Guarantor shall have obtained all consents, approvals, or waivers from all Governmental Authorities, third
parties and their respective security holders necessary for the execution, delivery and performance of any additional Transactions
Documents required to be delivered in connection with the Subsequent Funding.

 

(h)          UCC
Financing Statements; Deeds of Trust. The Company shall have authorized the filing by the Investor of all UCC financing statements
and all Deeds of Trust, each in form and substance reasonably satisfactory to the Investor, at the appropriate offices to create
a valid and perfected security interest in the Collateral and in the Oil and Gas Properties that were not a part of the Collateral
on the date of the Initial Funding.

 

(i)          Operating
Agreements. The Investor shall have received copies of the operating agreements for the Oil and Gas Properties which were not
a part of the Collateral on the date of the Initial Funding.

 

(j)          Environmental
Condition. The Investor shall have received all available reports in the Company’s possession and written notices concerning
the environmental condition of the Oil and Gas Properties that were not a part of the Collateral on the date of the Initial Funding
available to the Company and shall be satisfied with the environmental condition thereof (it being understood that the Company
is not being required to deliver any new or updated environmental reports as a condition to the Subsequent Funding).

 

(k)          Opinions
of Counsel. The Investor shall have received opinions of counsel to the Company as to the form of Deed of Trust for each jurisdiction
other than Texas.

 

(l)          Title.
The Company will deliver or cause to be delivered title information in form and substance acceptable to Investor, in Investor’s
sole discretion, covering all Oil and Gas Properties other than those located in La Salle County, Texas and Frio County, Texas.

 

(m)          Miscellaneous.
All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the Note and the
other Transaction Documents shall be satisfactory in form and substance to the Investor and its counsel.

 

    	29

    	 

    
 

ARTICLE V

CERTIFICATE LEGEND

 

Section 5.1           Legend.

 

The Note shall be stamped
or otherwise imprinted with a legend substantially in the following form (in addition to any legend required by applicable state
securities or “blue sky” laws):

 

THIS PROMISSORY NOTE (THE “NOTE”)
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES
LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR UNLESS ASEN 2, CORP. SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION OF THE NOTE UNDER THE
SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

 

THIS PROMISSORY NOTE WAS ISSUED WITH
ORIGINAL ISSUE DISCOUNT (“OID”). BEGINNING NO LATER THAN 10 DAYS AFTER THE FUNDING DATE, AN INVESTOR MAY, UPON REQUEST,
OBTAIN FROM THE COMPANY THE PROMISSORY NOTE’S ISSUE PRICE, ISSUE DATE, AMOUNT OF OID AND YIELD TO MATURITY BY CONTACTING
THE CHIEF FINANCIAL OFFICER OF THE COMPANY, AT 4800 N. SCOTTSDALE ROAD, STE. 1400, SCOTTSDALE, ARIZONA 85251.

 

The Warrant shall be stamped
or otherwise imprinted with a legend substantially in the following form (in addition to any legend required by applicable state
securities or “blue sky” laws):

 

THIS
WARRANT (THE “WARRANT”) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER
THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR UNLESS ASEN 2, CORP. SHALL HAVE RECEIVED AN OPINION OF COUNSEL
THAT REGISTRATION OF THE WARRANT UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

 

    	30

    	 

    
 

ARTICLE VI

INDEMNIFICATION

 

Section 6.1           General
Indemnity.

 

In addition to the payment
of expenses pursuant to Section 7.1 , whether or not the transactions contemplated hereby shall be consummated, the
Company and the Guarantor jointly and severally agree to indemnify, pay and hold the Investor, and its assignees and Affiliates
and their respective officers, directors, employees, agents, consultants, auditors, Persons engaged by it to evaluate or monitor
the Collateral, and attorneys of any of them (collectively called the “Indemnities”) harmless from and against
any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for such Indemnitees in connection
with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be
designated a party thereto) that may be imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to
or arising out of this Agreement or the other Transaction Documents, the consummation of the transactions contemplated by this
Agreement and the other Transaction Documents, the statements contained in any term sheet delivered by the Investor, the Investor’s
agreement to make any advance hereunder, the use or intended use of the proceeds of any advance or the exercise of any right or
remedy hereunder or under the other Transaction Documents (the “Indemnified Liabilities”); provided that
the Company shall have no obligation to an Indemnitee hereunder with respect to Indemnified Liabilities directly arising from the
gross negligence or willful misconduct of that Indemnitee, as determined by a court of competent jurisdiction by a final and nonappealable
judgment.

 

ARTICLE VII

MISCELLANEOUS

 

Section 7.1           Fees
and Expenses.

 

All invoiced costs and
expenses including reasonable attorneys’ fees (including the allocated costs of in house counsel), advisor fees, investment
banker fees and other disbursements incurred by Investor, (a) in all efforts made to enforce payment or effect collection owing
under this Agreement or any other Transaction Document, or (b) in connection with the entering into, modification, amendment, administration
and enforcement of this Agreement or any consents or waivers hereunder and all related agreements, documents and instruments, or
(c) in instituting, maintaining, preserving, enforcing and foreclosing on Investor’s security interest in or Lien on any
of the Collateral, or maintaining, preserving or enforcing any of Investor’s rights hereunder and under all related agreements,
documents and instruments, whether through judicial proceedings or otherwise, or (d) in defending or prosecuting any actions or
proceedings arising out of or relating to Investor’s transactions with the Company or the Guarantor; provided, that
advisor fees and investment banker fees shall be payable only in connection with the entering into this Agreement and shall not
exceed $90,000 in the aggregate.

 

    	31

    	 

    
 

Section 7.2           Consent
to Jurisdiction; Venue.

 

Subject to the last sentence
of this Section 7.10 , any judicial proceeding brought by or against any party with respect to this Agreement, the other Transaction
Documents or any related agreement may be brought in any court of competent jurisdiction in the State of New York, and, by execution
and delivery of this Agreement, each party to this Agreement accepts for itself and in connection with its properties, generally
and unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement. Each party to this Agreement waives personal service of any and all process
upon it and consents that all such service of process may be made by registered mail (return receipt requested) at its address
set forth in Section 7.4 and service so made shall be deemed completed five (5) days after the same shall have been so deposited
in the mails of the United States of America. Nothing herein shall affect the right to serve process in any manner permitted by
law or shall limit the right of the Investor to bring proceedings against the Company or the Guarantor in the courts of any other
jurisdiction. Each party to this Agreement hereby waives any objection to jurisdiction and venue of any action instituted hereunder
and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. Each party to this
Agreement hereby waives the right to remove any judicial proceeding brought against it in any state court to any federal court.
Any judicial proceeding by any party to this Agreement involving, directly or indirectly, any matter or claim in any way arising
out of, related to or connected with this Agreement or any related agreement, shall be brought only in a federal or state court
located in the County of New York, State of New York.

 

Section 7.3           Entire
Agreement; Amendment.

 

This Agreement and the
Transaction Documents contain the entire understanding and agreement of the parties with respect to the matters covered hereby
and, except as specifically set forth herein or in the other Transaction Documents, neither the Company nor the Investor makes
any representation, warranty, covenant or undertaking with respect to such matters, and they supersede all prior understandings
and agreements with respect to said subject matter, all of which are merged herein. No provision of this Agreement may be waived
or amended other than by a written instrument signed by the Company and the Investor. Any amendment or waiver effected in accordance
with this Section 7.3 shall be binding upon the Investor (and its successors and assigns) and the Company (and its successors
and assigns).

 

Section 7.4           Notices.

 

Any notice, demand, request,
waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand
delivery by telecopy or facsimile at the address or number designated below (if delivered on a Business Day during normal business
hours where such notice is to be received), or the first Business Day following such delivery (if delivered other than on a Business
Day during normal business hours where such notice is to be received) or (b) on the second Business Day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:

 

    	32

    	 

    
 

	If to the Company or the Guarantor:	
        ASEN 2, Corp.

        4800 N. Scottsdale Road, Ste. 1400

        Scottsdale, Arizona 85251

        Tel: (480) 371-1929

        Fax: (480) 990-2732

        Attention: Scott Mahoney

	 	 
	with copies to:	
        Blank Rome LLP

        The Chrysler Building

        405
        Lexington Avenue

        New York, New York 10174

        Tel: (212) 885-5000

        Fax: (212) 885-5001

        Attention: Kristina L. Trauger

	 	 
	If to the Investor:	
        Pentwater Equity Opportunities Master Fund Ltd.

        PWCM Master Fund Ltd.

        c/o Pentwater Capital Management, LP

        227 West Monroe Street

        Chicago, IL 60606

        Tel: (312) 589-6410

        Fax: (312) 589-6497

        Attention: Aaron Switz

	 	 
	with copies to:	
        Patton Boggs LLP

        2000 McKinney Avenue, Suite 1700

        Dallas, TX 75201

        Tel: (214) 758-3505

        Fax: (214) 758-1550

        Attention: Anthony J. Herrera

 

Any party hereto may from
time to time change its address for notices by giving written notice of such changed address to the other party hereto.

 

Section 7.5           Waivers.

 

No waiver by either party
of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver
in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party
to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.

 

Section 7.6           Headings.

 

The article, section and
subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other
purpose and shall not be deemed to limit or affect any of the provisions hereof.

 

    	33

    	 

    
 

Section 7.7           Successors
and Assigns.

 

This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and assigns. After the Closing Date, the assignment by
a party to this Agreement of any rights hereunder shall not affect the obligations of such party under this Agreement. The Investor
may assign the Note and its rights under this Agreement and the other Transaction Documents and any other rights hereto and thereto
with the prior consent of the Company; provided that the consent of the Company shall not be required if (a) an Event of Default
has occurred and is continuing or (b) the assignee in connection with such proposed assignment is an Affiliate of the Investor.
Neither the Company nor the Guarantor may assign its rights and obligations under this Agreement or any other Transaction Document
without the prior written consent of the Investor, which consent may be withheld by the Investor in its sole discretion.

 

Section 7.8           No
Third Party Beneficiaries.

 

This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor
may any provision hereof be enforced by, any other Person.

 

Section 7.9           Indemnity.

 

(a)          The
Company and the Guarantor shall indemnify Investor and each of its respective officers, directors, Affiliates, attorneys, employees
and agents from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements of any kind or nature whatsoever (including fees and disbursements of counsel) which may be imposed
on, incurred by, or asserted against Investor in any claim, litigation, proceeding or investigation instituted or conducted by
any Person with respect to any aspect of, or any transaction contemplated by, or referred to in, or any matter related to, this
Agreement or the other Transaction Documents, whether or not Investor is a party thereto, except to the extent that any of the
foregoing arises out of the willful misconduct or gross negligence of the party being indemnified (as determined by a court of
competent jurisdiction in a final and non-appealable judgment). Without limiting the generality of the foregoing, this indemnity
shall extend to any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements
of any kind or nature whatsoever (including the fees described in Section 7.1) asserted against or incurred by any of the
indemnitees described above in this Section 7.9 by any Person under any Environmental Laws or similar laws by reason of
Company’s, Guarantor’s or any other Person’s failure to comply with laws applicable to solid or hazardous waste
materials. Additionally, if any taxes (other than Excluded Taxes) shall be payable by the Investor,
the Company or the Guarantor on account of the execution or delivery of this Agreement, or the execution, delivery, issuance or
recording of any of the other Transaction Documents, by reason of any applicable law now or hereafter in effect, the Company or
the Guarantor will pay (or will promptly reimburse Investor for payment of) all such taxes, including interest and penalties thereon,
and will indemnify and hold the indemnitees described above in this Section 7.9 harmless from and against all liability
in connection therewith

 

    	34

    	 

    
 

(b)          “Excluded
Taxes” shall mean, with respect to any Investor: (i) Taxes (as defined below) measured by net or gross income (including
branch profits taxes), back-up withholding taxes and franchise or similar taxes imposed in lieu of income taxes, in each case imposed
on any Investor as a result of a present or former connection between such Investor and the jurisdiction of the governmental body
imposing such Tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely
from any Investor having executed, delivered or performed its obligations or received a payment under, or enforced any of this
Agreement or any related documents); (ii) Taxes to the extent that the Investor was subject to such Taxes on the date that such
Investor became a party to this Agreement or designates a new lending office; (iii) Taxes that are attributable to the failure
(other than as a result of a change in any legal requirement) by any Investor to deliver the documentation required to be delivered
pursuant to Section 7.15 hereof; and (iv) any Taxes imposed on amounts payable to an Investor as a result of such Investor’s
failure to comply with FATCA (as defined below) so as to establish a complete exemption from withholding thereunder.

 

(c)          “Code”
shall mean the Internal Revenue Code of 1986, as amended.

 

(d)          “FATCA”
shall mean Sections 1471 through 1474 of the Code, as of the date of this Agreement and any current or future regulations or official
interpretations thereof.

 

(e)          “Taxes”
shall mean all present or future taxes, (including, without limitation, any intangibles taxes, stamp taxes, recording taxes and
franchises taxes, except to the extent measured in whole or part by net income), levies, imposts, deductions, charges or withholdings
and all liabilities (including interest and penalties) with respect thereto.

 

Section 7.10         Governing
Law.

 

THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY OF THE CONFLICTS
OF LAW PRINCIPLES WHICH WOULD RESULT IN THE APPLICATION OF THE SUBSTANTIVE LAW OF ANOTHER JURISDICTION. THIS AGREEMENT SHALL NOT
BE INTERPRETED OR CONSTRUED WITH ANY PRESUMPTION AGAINST THE PARTY CAUSING THIS AGREEMENT TO BE DRAFTED.

 

Section 7.11         Survival.

 

The
representations, and warranties of the Company and the Investor shall survive the execution and
delivery hereof and the Closing Date; the agreements and covenants set forth in ARTICLE I, ARTICLE III, ARTICLE V, ARTICLE
VIand ARTICLE VIIof this Agreement shall survive the execution and delivery hereof and Closing Date.

 

Section 7.12         Publicity.

 

The Company agrees that
it will not disclose, and will not include in any public announcement, the name of the Investor without the consent of the Investor,
which consent shall not be unreasonably withheld or delayed, or unless and until such disclosure is required by law, rule or applicable
regulation and then only to the extent of such requirement.

 

    	35

    	 

    
 

Section 7.13         Counterparts.

 

This Agreement may be executed
in any number of counterparts, all of which taken together shall constitute one and the same instrument and shall become effective
when counterparts have been signed by each party and delivered to the other parties hereto, it being understood that all parties
need not sign the same counterpart. Delivery of an executed counterpart of a signature page to this Agreement, any amendments,
waivers, consents or supplements, or to any other Transaction Document by facsimile or by email delivery of a copy of such an executed
counterpart in PDF format shall be as effective as delivery of a manually executed counterpart thereof.

 

Section 7.14         Severability.

 

The provisions of this
Agreement are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the
provisions or part of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of
this Agreement and this Agreement shall be reformed and construed as if such invalid or illegal or unenforceable provision, or
part of such provision, had never been contained herein, so that such provisions would be valid, legal and enforceable to the maximum
extent possible.

 

Section 7.15         Tax
Matters.

 

(a)          Except
as provided herein or otherwise required by law, any and all payments by the Company or Guarantor (each a Transaction Party and
collectively, the “Transaction Parties”) hereunder or under any other Transaction Document shall be made free
and clear of and without deduction for any and all present or future Taxes (other than Excluded Taxes, including Excluded Taxes
with respect to any transferee or assignee thereof (each a “Transferee”)). If any Transaction Party shall be
required to deduct any such Taxes from or in respect of any sum payable hereunder to any Investor or any Transferee, (i) the sum
payable shall be increased by the amount (an "additional amount") necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section 7.15) such Investor or such Transferee shall receive
an amount equal to the sum it would have received had no such deductions been made, (ii) such Transaction Party shall make such
deductions, (iii) such Transaction Party shall pay the full amount deducted to the relevant Governmental Authority in accordance
with applicable law and (iv) such Transaction Party shall send such Investor or such Transferee an official receipt (or, if an
official receipt is not available, such other evidence of payment as shall be satisfactory to such Investor or such Transferee)
evidencing payment of the amount so deducted or withheld.

 

(b)          Each
Investor shall deliver to the Company two (2) duly completed appropriate valid Withholding Certificates (as defined under §1.1441-1(c)(16)
of the Income Tax Regulations and any successor provisions thereto (“Regulations”)) certifying its status (i.e.,
United States person or foreign person) and, if appropriate, making a claim of reduced, or exemption from, United States withholding
tax on the basis of an income tax treaty or an exemption provided by the Code. The term “Withholding Certificate” means
a Form W-9; a Form W-8BEN; a Form W-8ECI; a Form W-8IMY and the related statements and certifications as required under §1.1441-1(e)(2)
and/or (3) of the Regulations; a statement described in Section 1.871-14(c)(2)(v) of the Regulations; or any other certificates
under the Code or Regulations that certify or establish the status of a payee or beneficial owner as a United States or foreign
person and/or as eligible for reductions in, or exemptions from, any applicable withholding tax.

 

    	36

    	 

    
 

(c)          Each
Investor required to deliver to Company a valid Withholding Certificate pursuant to Section 7.15(a) shall deliver such valid Withholding
Certificate as follows: (i) each Investor which is a party hereto on the Closing Date shall deliver such valid Withholding Certificate
at least five (5) Business Days prior to the first date on which any interest or fees are payable by Company hereunder for the
account of such Investor; and (ii) each Investor shall deliver such valid Withholding Certificate at least five (5) Business Days
before the effective date of such assignment or participation. Each Investor which so delivers a valid Withholding Certificate
further undertakes to deliver to Company two (2) additional copies of such Withholding Certificate (or a successor form) on or
before the date that such Withholding Certificate expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent Withholding Certificate so delivered by it, and such amendments thereto or extensions or renewals thereof
as may be reasonably requested by Company.

 

Notwithstanding any other provision of this
Section 7.15, an Investor shall not be required to deliver any form pursuant to this Section 7.15 that such Investor is not legally
able to deliver.

 

(d)          Notwithstanding
the submission of a Withholding Certificate claiming a reduced rate of or exemption from U.S. withholding tax required under Section
7.15(b), Company shall be entitled to withhold United States federal income taxes at the full 30% withholding rate under Section
871 or 881 of the Code, as applicable (or any other rate set forth in any successor provision thereto which may apply to such payment),
if in its reasonable judgment it is required to do so under the due diligence requirements imposed upon a withholding agent under
Section 1.1441-7(b) of the Regulations.

 

(e)          If
a payment made to an Investor under this Agreement would be subject to United States federal withholding tax imposed by FATCA if
Investor were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b)
or 1472(b) of the Code, as applicable), Investor shall deliver to Company at the time or times prescribed by law and at such time
or times reasonably requested by Company, such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i)
of the Code) and such additional documentation reasonably requested by Company as may be necessary for Company to comply with its
obligations under FATCA, to determine that Investor has or has not complied with its obligations under FATCA and, as necessary,
to determine the amount to deduct and withhold from such payment. Solely for purposes of this Section 7.15(d), “FATCA”
shall include any amendments made to FATCA after the date of this Agreement.

 

    	37

    	 

    
 

(f)          The
Investor or Transferee will use its commercially reasonable efforts to obtain in a timely fashion any refund, deduction or credit
of any Taxes paid or reimbursed by any Transaction Party pursuant to this Section 7.15.  If any Investor or Transferee determines
in its sole discretion, exercised in good faith, that it has received a benefit in the nature of a refund, deduction or credit
(including a refund in the form of a deduction from or credit against Taxes that are otherwise payable by such Investor or Transferee)
of any Taxes with respect to which the Transaction Party has made a payment under this Section 7.15, such Investor or Transferee
will notify and reimburse the Transaction Party (promptly after such Investor or Transferee reasonably determines that such refund,
deduction or credit has become final) to the extent of the benefit of such refund, deduction or credit, including any interest
paid by the relevant Governmental Authority, net of all out-of-pocket expenses of such Investor or Transferee; provided, that any
Transaction Party, upon the request of such Investor or Transferee agrees to repay the amount paid over to the Transaction Party
(plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to such Investor or Transferee in
the event such Investor or Transferee is required to repay such refund to such Governmental Authority. Nothing in this Section
7.15 shall require any Investor or Transferee to disclose any confidential information to a Transaction Party (including, without
limitation, its Tax returns).

 

Section 7.16         Registration

 

The Company shall maintain,
or cause to be maintained, at its payment office, a copy of each Assignment and Acceptance delivered to and accepted by it and
a register (the "Register") for the recordation of the names and addresses of the Investors and the principal
amount of the advances (and stated interest thereon) (the "Registered Advances"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error. The Company and the Investor shall treat each Person whose
name is recorded in the Register as an Investor hereunder for all purposes of this Agreement, including, without limitation, the
right to receive payments of principal and interest hereunder, notwithstanding notice to the contrary. A Registered Advance (and
the registered note, if any, evidencing the same) may be assigned or sold in whole or in part only by registration of such assignment
or sale on the Register (and each registered note shall expressly so provide). Any assignment or sale of all or part of such Registered
Advance (and the registered note, if any, evidencing the same) may be effected only by registration of such assignment or sale
on the Register.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

  

    	38

    	 

    

 

IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first
above written.

 

	 	COMPANY:
	 	 
	 	ASEN 2, CORP.
	 	 
	 	By:	/s/ Scott Feldhacker
	 	 	Scott Feldhacker
	 	 	Chief Executive Officer
	 	 
	 	GUARANTOR:
	 	 
	 	AMERICAN STANDARD ENERGY CORP.
	 	 
	 	By:	/s/ Scott Feldhacker
	 	 	Scott Feldhacker
	 	 	Chief Executive Officer
	 	 
	 	INVESTOR:
	 	 
	 	PENTWATER EQUITY OPPORTUNITES MASTER FUND LTD.
	 	 
	 	By:	/s/ David Zirin
	 	 	David Zirin
	 	 	Director
	 	 
	 	Commitment Percentage: 45%
	 	 
	 	PWCM MASTER FUND LTD.
	 	 
	 	By:	/s/ David Zirin
	 	 	David Zirin
	 	 	Director
	 	 
	 	Commitment Percentage: 55%

 

[SIGNATURE PAGE TO NOTE AND WARRANT PURCHASE
AGREEMENT]EXECUTION VERSION

 

THIS SECURED CONVERTIBLE PROMISSORY NOTE
(THIS “NOTE”) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT
AND UNDER APPLICABLE STATE SECURITIES LAWS OR UNLESS AMERICAN STANDARD ENERGY CORP. AND ASEN 2, CORP. SHALL HAVE RECEIVED AN OPINION
OF COUNSEL THAT REGISTRATION OF THIS NOTE UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS
IS NOT REQUIRED.

 

THIS PROMISSORY NOTE WAS ISSUED WITH ORIGINAL
ISSUE DISCOUNT (“OID”). BEGINNING NO LATER THAN 10 DAYS AFTER THE FUNDING DATE, AN INVESTOR MAY, UPON REQUEST, OBTAIN
FROM THE COMPANY THE PROMISSORY NOTE’S ISSUE PRICE, ISSUE DATE, AMOUNT OF OID AND YIELD TO MATURITY BY CONTACTING THE CHIEF
FINANCIAL OFFICER OF THE COMPANY, AT 4800 N. SCOTTSDALE ROAD, STE. 1400, SCOTTSDALE, ARIZONA 85251.

 

SECURED CONVERTIBLE PROMISSORY NOTE

 

	Dated:  February 9, 2012	$20,000,000

 

For value received, ASEN
2, CORP., a Delaware corporation (the “Company”), hereby promises to pay to PENTWATER EQUITY OPPORTUNITIES MASTER
FUND LTD., a Cayman Islands corporation (“Opportunities”) and PWCM MASTER FUND LTD., a Cayman Islands corporation,
(“PWCM”), each with an address at 227 West Monroe Street, Chicago IL 60606 (together with their respective successors,
representatives, and assigns, Opportunities together with PWCM, collectively, the “Investor”), in accordance
with each of Opportunities’ and PWCM’s respective Commitment Percentage (as defined in the Purchase Agreement referred
to below) and the terms hereinafter provided, the aggregate unpaid principal amount of the advances made by the Investor to the
Company under the Note and Warrant Purchase Agreement dated as of February 9, 2012 (as amended, amended and restated, supplemented
or otherwise modified from time to time, the “Purchase Agreement”), by and among the Company,
American Standard Energy Corp., a Delaware corporation (the “Guarantor”) and the Investor, together with
interest and all other obligations outstanding hereunder.

 

All
payments under or pursuant to this Secured Convertible Promissory Note (this “Note”) shall be made either (i)
in United States Dollars in immediately available funds to the Investor at the address of the Investor first set forth above
or at such other place as the Investor may designate from time to time in writing to the Company or by wire transfer of funds to
the Investor’s account, instructions for which are attached hereto as Exhibit A or (ii) pursuant to Section 1.7 below.
The outstanding principal balance of this Note (the “Principal Amount”) shall be due and payable on the
earlier of (i) February 9, 2015 and (ii) the date all obligations and indebtedness hereunder are accelerated in accordance with
Section 2.2 (the “Maturity Date”).

 

    	 

    	 

    
 

ARTICLE I

TERMS
OF NOTE

 

Section 1.1           Purchase
Agreement. This Note has been executed and delivered pursuant to the Purchase Agreement. Capitalized
terms used and not otherwise defined herein shall have the meanings set forth for such terms in the Purchase Agreement.

 

Section 1.2           Interest.

 

(a)          Prior
to December 9, 2012, interest on the outstanding principal amount of this Note shall accrue, in arrears, at a rate of eleven percent
(11%) per annum and shall be payable as follows:

 

(i)          interest
at the rate of nine percent (9%) per annum shall be payable on the first Business Day of each month, commencing on March 1, 2012;
and

 

(ii)         interest
at the rate of two percent (2%) per annum shall be shall be capitalized and added to the then unpaid principal amount of this Note
monthly in arrears on the first Business Day of each month, commencing on March 1, 2012.

 

(b)          On
and after December 9, 2012, interest on the outstanding principal amount of this Note shall accrue, in arrears, at a rate of sixteen
percent (16%) per annum and shall be payable as follows:

 

(i)          interest
at the rate of eleven percent (11%) per annum shall be payable on the first Business Day of each month, commencing on December
1, 2012 and on the Maturity Date; and

 

(ii)         interest
at the rate of five percent (5%) per annum shall be capitalized and added to the then unpaid principal amount of this Note monthly
in arrears on the first Business Day of each month, commencing on December 1, 2012.

 

(c)          Upon
the occurrence and during the continuance of an Event of Default (as defined in Section 2.1), the Company will pay, in lieu of
the interest rate described in Section 1.2(a)(i) or Section 1.2(b)(i), as applicable, default rate interest to the Investor, payable
on demand, at a rate equal to the lesser of (i) the rate of interest described in Section 1.2(a)(i) or Section 1.2(b)(i), as applicable,
plus two percent (2%) and (ii) the maximum applicable legal rate per annum.

 

(d)          All
interest shall be computed on the basis of a 360-day year for the actual number of days elapsed in the period during which it accrues
on the outstanding principal balance of this Note and on all other amounts due under this Note.

 

    	2

    	 

    

 

(e)          This
Note is expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration or otherwise, shall
the interest and other charges paid or agreed to be paid by the Company for the use, forbearance or detention of money hereunder
exceed the maximum rate permissible under applicable law which a court of competent jurisdiction shall, in a final determination,
deem applicable hereto. If, due to any circumstance whatsoever, fulfillment of any provision hereof, at the time performance of
such provision shall be due, shall exceed any such limit, then, the obligation to be so fulfilled shall be reduced to such lawful
limit, and, any interest or any other charges of any kind received which might be deemed to be interest under applicable law in
excess of the maximum lawful rate, then such excess shall be applied in accordance with the Purchase Agreement. The terms and provisions
of this subsection (e) shall control to the extent any other provision of this Note or any Transaction Document is inconsistent
herewith.

 

Section 1.3           Payment
of Principal; Prepayment. The outstanding principal balance plus all outstanding interest and all other amounts due and owing
hereunder shall be paid in full on the Maturity Date. Any amount of principal repaid hereunder may not be reborrowed. The Company
may prepay all or any portion of the principal amount of this Note in an amount equal to the sum of (i) 100% of the amount of such
principal prepayment, (ii) all outstanding interest on the prepaid portion and all other amounts due and owing hereunder, and (iii)
if such prepayment shall occur after December 31, 2012, an amount equal to 6% of the amount of such principal prepayment. Any prepayment
shall be made upon not less than five (5) Business Days prior written notice to the Investor.

 

Section 1.4           Security
Documents. The obligations of the Company hereunder are secured by a continuing security interest in the Collateral.

 

Section 1.5           Payment
on Non-Business Days. Whenever any payment to be made shall be due on a day which is not a Business Day, such payment shall
be due on the next succeeding Business Day and such next succeeding day shall be included in the calculation of the amount of accrued
interest payable on such date.

 

Section 1.6           Replacement.
Upon receipt of a duly executed written statement from the Investor with respect to the loss, theft or destruction of this Note
(or any replacement hereof) and a customary indemnity, or, in the case of a mutilation of this Note, upon surrender and cancellation
of such Note, the Company shall issue a new Note, of like tenor and amount, in lieu of such lost, stolen, destroyed or mutilated
Note.

 

Section 1.7           Conversion
Option.

 

(a)          At
any time after February 9, 2013, the Principal Amount and all accrued unpaid interest thereon (the “Conversion Amount”)
shall be convertible (in whole or in part), at the option of the Investor (the “Conversion”), into such number
of duly authorized, validly issued fully paid and non-assessable shares of Common Stock of the Guarantor (the “Conversion
Shares”) as is determined by dividing (x) an amount equal to that portion of Conversion Amount that the Investor elects
to convert by (y) $9.00 (the “Conversion Price”). The Investor shall deliver to the Guarantor a written notice
of conversion (the “Conversion Notice”), in the form attached hereto as Exhibit B, stating the portion of the
Conversion Amount to be converted and the date of such Conversion (the “Conversion Date”), which shall be no
earlier than the 15th Business Day following the date on which the Guarantor receives the Conversion Notice. With respect
to partial conversions of the Conversion Amount, the Investor and the Guarantor shall keep written records of the amount of the
Conversion Amount converted on of each Conversion Date.

 

    	3

    	 

    

 

(b)          Not
later than three (3) Business Days after any Conversion Date, the Guarantor or its designated transfer agent, as applicable, shall
issue and deliver to the Investor a certificate or certificates representing the number of shares of Common Stock being acquired
upon the conversion of the Conversion Amount (the “Delivery Date”). Such certificate or certificates representing
the shares of Common Stock being acquired upon the related conversion will bear a restrictive legend as set forth in Section 3.7(d)
herein. If in the case of any Conversion Notice such certificate or certificates are not delivered to or as directed by the Investor
by the Delivery Date, the Investor shall be entitled by written notice to the Guarantor at any time on or before its receipt of
such certificate or certificates thereafter, to rescind such conversion, whereupon the Company and the Investor shall each be restored
to their respective positions immediately prior to the delivery of such notice of revocation.

 

(c)          Acknowledgment
of Registration. The Investor acknowledges that the Note and any shares of the Guarantor issued upon conversion of the Note
are “restricted securities” and have not been registered under the Securities Act or any applicable state securities
law.

 

(d)          Adjustments.
The Conversion Price and number of Conversion Shares issuable upon conversion of this Note are subject to adjustment from time
to time as set forth below.

 

(i)          Stock
Dividends and Splits. If the Guarantor, at any time on or after the date hereof, (i) pays a stock dividend on one or more classes
of its then outstanding shares of Common Stock or otherwise makes a distribution on any class of capital stock that is payable
in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes
of its then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock
split or otherwise) one or more classes of its then outstanding shares of Common Stock into a smaller number of shares, then in
each such case the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common
Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding
immediately after such event.  Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately
after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment
pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision
or combination. If any event requiring an adjustment under this paragraph occurs during the period that a Conversion Price is calculated
hereunder, then the calculation of such Conversion Price shall be adjusted appropriately to reflect such event.

 

(ii)         Number
of Conversion Shares. Simultaneously with any adjustment to the Conversion Price pursuant to paragraph (i) of this Section
1.7(d), the number of Conversion Shares that may be purchased upon exercise of this Note shall be increased or decreased proportionately,
so that after such adjustment the aggregate Conversion Price payable hereunder for the adjusted number of Conversion Shares shall
be the same as the aggregate Conversion Price in effect immediately prior to such adjustment (without regard to any limitations
on exercise contained herein).

 

    	4

    	 

    

 

(iii)        Reorganization
and Reclassification; Merger or Asset Sale. In the event the Guarantor shall at any time or from time to time (i) effect a
reorganization, (ii) consolidate with or merge into any other person (other than a merger or reorganization involving only
a change in the state of incorporation of the Guarantor), or (iii) transfer all or substantially all of its properties or assets
to any other person under any plan or arrangement contemplating the dissolution of the Guarantor, then, in each such case, the
Investor of any Note shall thereafter be entitled to purchase pursuant to such Note (in lieu of the number of Conversion Shares
which such Investor would have been entitled to acquire immediately prior to such reorganization or reclassification, consolidation,
merger or asset sale or on the effective date of such dissolution) the shares of stock of any class or classes or other securities
or property to which the holder of such number of shares of Common Stock would have been entitled at the time of such reorganization
or reclassification, at an aggregate Conversion Price equal to that which would have been payable if such number of shares of Common
Stock had been purchased immediately prior to such reorganization or reclassification, consolidation, merger, asset sale or dissolution,
and appropriate provision (as determined by resolution of the Board of Directors of the Guarantor with the approval of the Investor)
shall be made with respect to the rights and interest thereafter of the Note (including adjustment provisions) shall thereafter
be applicable, as nearly as reasonably practicable, in relation to such stock or other securities or property.

 

(iv)        Calculations.
All calculations under this Section 1.7(d) shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as
applicable.

 

(e)          Effect
of Conversion. Upon full conversion of this Note, the Company and Guarantor will be forever released from all of its obligations
and liabilities under this Note, other than its obligation to deliver Conversion Shares as provided herein.

 

Section 1.8           Mandatory
Prepayments. Promptly, but in any event not more than two (2) Business Days after the receipt by the Company of any cash proceeds
of any sale, assignment, lease, license, transfer or other disposition of any or all of the Oil and Gas Properties, the Company
shall prepay the Note in an aggregate amount equal to such cash proceeds, after deducting therefrom any attorneys’ fees,
accountants’ fees, investment banking fees and other customary fees and expenses, in each case incurred in connection with
such sale, assignment, lease, license, transfer or other disposition, and amounts required to be applied to the repayment of Indebtedness
with respect to such Oil and Gas Properties expressly permitted under the Purchase Agreement; provided, however,
that, if an Event of Default does not exist at the time of the receipt of such cash proceeds, such cash proceeds shall not be required
to be so applied to the extent that the Company has delivered an officer’s certificate to the Investor promptly following
the receipt of such cash proceeds stating that such cash proceeds shall be used to fund the acquisition of other oil and gas properties
or other property used or usable in the business of the Company within 180 days following the date of the receipt of such cash
proceeds.  Any such oil and gas properties or other property so acquired shall become part of the Collateral and the Company
shall execute and deliver to the Investor such agreements, documents and instruments in connection therewith as the Investor may
reasonably request. If all or any portion of such cash proceeds are not so used within 180 days after the date of the receipt of
such cash proceeds, such remaining portion shall be applied in accordance with the Purchase Agreement and this Note on the first
Business Day of the next calendar month immediately following such 180th day.

 

    	5

    	 

    

 

ARTICLE
II

EVENTS
OF DEFAULT; REMEDIES

 

Section 2.1           Events
of Default. The occurrence of any of the following events shall be an “Event of Default” under this Note:

 

(a)          any
failure to make any payment of (i) the principal amount under this Note or the Purchase Agreement as and when the same shall be
due and payable (whether on the Maturity Date or by acceleration or otherwise), or (ii) interest or any other monetary obligation
under this Note or the Purchase Agreement by the 2nd Business Day after the same shall be due and payable (whether on
the Maturity Date or by acceleration or otherwise); or

 

(b)          the
Company or the Guarantor shall fail to observe, perform or comply with (i) any condition, covenant, undertaking or agreement contained
in Sections 3.1, 3.2, 3.3(f), 3.3(j), 3.8, 3.11, 3.12, 3.16, 3.22 and 3.24 of the Purchase Agreement, which failure is not cured
within thirty (30) days, or (ii) any other condition, covenant, undertaking or agreement contained in this Note or any Transaction
Document; or after the earlier of (A) the first day that the Company becomes aware of such failure or (B) the first day that the
Investor informs the Company of such failure.

 

(c)          any
representation or warranty made by the Company or the Guarantor in any Transaction Document shall prove to have been false or incorrect
in any material respect on the date as of which made or deemed made, except for representations and warranties that speak as of
a particular date, which shall be true and correct in all material respects as of such date (except that the materiality qualifiers
above shall not be applicable to any representations and warranties that already are qualified or modified by materiality or Material
Adverse Effect in the text thereof); or

 

(d)          the
Company or the Guarantor (i) shall fail to make any payment when due under the terms of any Indebtedness for borrowed money to
be paid by such Person and such failure shall continue beyond any period of grace provided with respect thereto, or (ii) shall
default in the observance or performance of any other agreement, term or condition contained in any agreement (related to Indebtedness
or otherwise), and the effect of such failure or default as set forth in clause (i) or (ii), is to cause, or permit the holder
or holders thereof, or any counterparty to an agreement relating to Indebtedness, to cause Indebtedness, or amounts due thereunder,
in an aggregate amount of $500,000 or more to become due prior to its stated date of maturity or the date such amount would otherwise
have been due notwithstanding such default; or

 

    	6

    	 

    

 

(e)          
the Company or the Guarantor shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part of its property or assets, (ii) make a general assignment
for the benefit of its creditors, (iii) commence a voluntary case under the United States Bankruptcy Code (as now or hereafter
in effect) or under the comparable laws of any jurisdiction (foreign or domestic), (iv) file a petition seeking to take advantage
of any bankruptcy, insolvency, moratorium, reorganization or other similar law affecting the enforcement of creditors’ rights
generally, (v) acquiesce in writing to any petition filed against it in an involuntary case under United States Bankruptcy Code
(as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic), (vi) issue a notice of
bankruptcy or winding down of its operations or issue a press release regarding same, or (vii) take any action under the laws of
any jurisdiction (foreign or domestic) analogous to any of the foregoing; or

 

(f)          a
proceeding or case shall be commenced in respect of the Company or the Guarantor, without its application or consent, in any court
of competent jurisdiction, seeking (i) the liquidation, reorganization, moratorium, dissolution, winding up, or composition or
readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of the Company or the
Guarantor, or of all or any substantial part of the Company or the Guarantor, or any of the Company’s or the Guarantor’s
assets or (iii) similar relief in respect of the Company and the Guarantor under any law providing for the relief of debtors, and
such proceeding or case described in clause (i), (ii) or (iii) shall continue undismissed, or unstayed and in effect, for a period
of ninety (90) days or any order for relief shall be entered in an involuntary case under United States Bankruptcy Code (as now
or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic) against the Company or the Guarantor,
or action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing shall be taken with respect
to the Company or the Guarantor, and shall continue undismissed, or unstayed and in effect for a period of sixty (60) days; or

 

(g)          a
judgment or judgments in the aggregate amount exceeding $500,000 is/are entered against the Company or the Guarantor and not dismissed
or discharged within thirty (30) days following the entry thereof; or

 

(h)          (i)
the Guarantor shall cease to own a majority of the Equity Interests of the Company, or (ii) Scott Feldhacker, Richard MacQueen
or Scott Mahoney shall cease to be actively involved in the management of the Company and a replacement reasonably acceptable to
the Investor is not identified to the Investor within ninety (90) days thereafter and is not employed by the Company within an
additional thirty (30) days after such identification; or

 

(i)          a
Material Adverse Effect occurs; or

 

(j)          the
Guarantor and the Company, taken as a whole, shall cease to actively conduct its business operations for a period of seven (7)
consecutive Business Days; or

 

(k)          any
material portion of the Collateral is seized by any governmental authority; or

 

(l)          Liens,
levies, attachments, executions or assessments (or any of them) are issued with respect to, attaches to or filed or recorded with
respect to or otherwise imposed upon all or any part of the Collateral (other than with respect to Collateral, Permitted Encumbrances)
and such Lien, levy or assessment is not stayed, vacated, paid or discharged within thirty (30) days; or

 

    	7

    	 

    

 

(m)          any
order, judgment or decree is entered against the Company or the Guarantor decreeing the dissolution or split up of such Person,
or, except as permitted in the Purchase Agreement, the Company or the Guarantor voluntarily commences a liquidation, dissolution
or ceases to operate its business; or

 

(n)          any
of the Transaction Documents or any of the Securities for any reason ceases to be in full force and effect (except pursuant to
the express terms thereof or due solely to any act or omission by the Investor) or is declared to be null and void, or the Company
or the Guarantor denies that it has any further liability under any Transaction Documents or any of the Securities to which it
is party, or gives notice to such effect; or

 

(o)          the
Investor does not have or ceases to have a valid and perfected first priority security interest in the Collateral (subject only
to Permitted Encumbrances); or

 

(p)          the
loss, suspension or revocation of, or failure to renew, any license or permit now held or hereafter acquired by the Company, if
such license or permit is not obtained or reinstated within thirty (30) days, unless such loss, suspension, revocation or failure
to renew could not reasonably be expected to have a Material Adverse Effect; or

 

(q)          there
is filed against the Company, the Guarantor or any of their respective officers or directors any civil or criminal action, suit
or proceeding under any federal or state racketeering statute (including, without limitation, the Racketeer Influenced and Corrupt
Organization Act of 1970), or any civil or criminal action, suit or proceeding under any other applicable law that could result
in the confiscation or forfeiture of any material portion of the Collateral or other assets of such Person, and such action, suit
or proceeding is not dismissed within one hundred twenty (120) days.

 

Section 2.2           Remedies
Upon An Event of Default. If an Event of Default shall have occurred and shall be continuing, the Investor may at any time
at its option (a) declare the entire unpaid principal balance of this Note, together with all interest accrued hereon, plus all
fees and expenses, due and payable, and thereupon, the same shall be accelerated and so due and payable, without presentment, demand,
protest, or notice, all of which are hereby expressly unconditionally and irrevocably waived by the Company; provided, however,
that upon the occurrence of an Event of Default described in Section 2.1(e) or Section 2.1(f), the outstanding principal balance
and accrued interest hereunder, plus all fees and expenses, shall be immediately and automatically due and payable, and/or (b) exercise
or otherwise enforce any one or more of the Investor’s rights, powers, privileges, remedies and interests under this Note,
the Purchase Agreement, the Security Agreement, the Guaranty, the Deeds of Trust or other Transaction Document or applicable law.
No course of delay on the part of the Investor shall operate as a waiver thereof or otherwise prejudice the right of the Investor.
No remedy conferred hereby shall be exclusive of any other remedy referred to herein or now or hereafter available at law, in equity,
by statute or otherwise. Upon the occurrence and during the continuance of an Event of Default, all amounts payable under this
Note and the other Transaction Documents shall bear interest at the default rate set forth in Section 1.2(b).

 

    	8

    	 

    

 

ARTICLE
III

MISCELLANEOUS

 

Section 3.1           Notices.
Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and
shall be effective (a) upon hand delivery, telecopy or facsimile at the address or number designated in the Purchase Agreement
(if delivered on a Business Day during normal business hours where such notice is to be received), or the first Business Day following
such delivery (if delivered other than on a Business Day during normal business hours where such notice is to be received) or (b)
on the second Business Day following the date of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur.

 

Section 3.2           Governing
Law. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO ANY OF THE CONFLICTS OF LAW PRINCIPLES WHICH WOULD RESULT IN THE APPLICATION OF THE SUBSTANTIVE LAW OF ANOTHER JURISDICTION.
THIS NOTE SHALL NOT BE INTERPRETED OR CONSTRUED WITH ANY PRESUMPTION AGAINST THE PARTY CAUSING THIS NOTE TO BE DRAFTED.

 

Section 3.3           Headings.
Article and section headings in this Note are included herein for purposes of convenience of reference only and shall not constitute
a part of this Note for any other purpose.

 

Section 3.4           Remedies,
Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative
and in addition to all other remedies available under this Note, at law or in equity (including, without limitation, a decree of
specific performance and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of compliance with the
provisions giving rise to such remedy and nothing herein shall limit the Investor’s right to pursue actual damages for any
failure by the Company to comply with the terms of this Note. Amounts set forth or provided for herein with respect to payments
and the like (and the computation thereof) shall be the amounts to be received by the Investor and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that
a breach by it of its obligations hereunder will cause irreparable and material harm to the Investor and that the remedy at law
for any such breach may be inadequate. Therefore the Company agrees that, in the event of any such breach or threatened breach,
the Investor shall be entitled, in addition to all other available rights and remedies, at law or in equity, to seek and obtain
such equitable relief, including but not limited to an injunction restraining any such breach or threatened breach, without the
necessity of showing economic loss and without any bond or other security being required.

 

    	9

    	 

    

 

Section 3.5           Enforcement
Expenses. All invoiced costs and expenses including reasonable attorneys’ fees (including the allocated costs of in house
counsel) and other disbursements incurred by Investor, (a) in all efforts made to enforce payment or effect collection owing under
this Note, or (b) in connection with the entering into, modification, amendment, administration and enforcement of this Note or
any consents or waivers hereunder and all related agreements, documents and instruments, or (c) in instituting, maintaining, preserving,
enforcing and foreclosing on Investor’s security interest in or Lien on any of the Collateral, or maintaining, preserving
or enforcing any of Investor’s rights hereunder and under all related agreements, documents and instruments, whether through
judicial proceedings or otherwise, or (d) in defending or prosecuting any actions or proceedings arising out of or relating to
Investor’s transactions with the Company or the Guarantor; provided, that advisor fees and investment banker fees
shall be payable (without duplication of those advisor fees and investment banker fees payable pursuant to Section 7.1 of the Purchase
Agreement) in connection with the entering into this Note and shall not exceed $90,000 in the aggregate.

 

Section 3.6           Amendments.
This Note may not be modified or amended in any manner except in writing executed by the Company and the Investor.

 

Section 3.7           Compliance
with Securities Laws.

 

(a)          The
Investor acknowledges that this Note is being acquired solely for the Investor’s own account and not as a nominee for any
other party, and for investment, and that the Investor shall not offer, sell or otherwise dispose of this Note except in accordance
with applicable law.

 

(b)          The
Investor confirms and acknowledges that it has not paid and will not pay, give or receive any commission or other remuneration
directly or indirectly in connection with any Conversion made pursuant to this Note.

 

(c)          The
Investor is an “accredited investor” (as defined in Rule 501 of Regulation D under the Securities Act), and the Investor
has such experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in
this Note. The Investor is not required to be registered as a broker-dealer under Section 15 of the Exchange Act and it is not
a broker-dealer. The Investor acknowledges that an investment in this Note is speculative and involves a high degree of risk.

 

(d)          Legend
on Conversion Shares. There shall appear on the certificate or certificates evidencing any shares issued pursuant hereto a
legend to the following effect:

 

THIS SECURITY HAS NOT BEEN REGISTERED
WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION OR WITH THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933 (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM REGISTRATION PURSUANT TO SECTION 4(2) AND/OR REGULATION D OF THE SECURITIES ACT, OR IN A TRANSACTION NOT SUBJECT
TO THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
AMERICAN STANDARD ENERGY CORP. AND ASEN 2, CORP. MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO AMERICAN
STANDARD ENERGY CORP., AND ASEN 2, CORP. OR OTHER SUCH INFORMATION AS THEY MAY REASONABLY REQUIRE, TO CONFIRM THAT ANY PROPOSED
TRANSFER OR RESALE IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE LAWS.

 

    	10

    	 

    

 

Section 3.8           Consent
to Jurisdiction.

 

(a)          Subject
to the last sentence of this Section 3.8, any judicial proceeding brought by or against any party with respect to this Note, the
other Transaction Documents or any related agreement may be brought in any court of competent jurisdiction in the State of New
York, and, by execution and delivery of this Note, each party to this Note accepts for itself and in connection with its properties,
generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Note. Each party to this Note waives personal service of any and all process
upon it and consents that all such service of process may be made by registered mail (return receipt requested) at its address
set forth in Section 3.1 and service so made shall be deemed completed five (5) days after the same shall have been so deposited
in the mails of the United States of America. Nothing herein shall affect the right to serve process in any manner permitted by
law or shall limit the right of the Investor to bring proceedings against any party to this Note in the courts of any other jurisdiction.
Each party to this Note hereby waives any objection to jurisdiction and venue of any action instituted hereunder and shall not
assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. Each party to this Note hereby waives
the right to remove any judicial proceeding brought against it in any state court to any federal court. Any judicial proceeding
by any party to this Note involving, directly or indirectly, any matter or claim in any way arising out of, related to or connected
with this Note or any related agreement, shall be brought only in a federal or state court located in the County of New York, State
of New York.

 

Section 3.9           Successors
and Assigns. This Note shall be binding upon and inure to the benefit of the parties and their successors and assigns. After
the Closing Date, the assignment by a party to this Note of any rights hereunder shall not affect the obligations of such party
under this Note. The Investor may assign the Note and its rights under this Note and any other rights hereto and thereto with the
prior consent of the Company; provided that the consent of the Company shall not be required if (a) an Event of Default has occurred
and is continuing or (b) the assignee in connection with such proposed assignment is an Affiliate of the Investor. The Company
may not assign its rights and obligations under this Note or any other Transaction Document without the prior written consent of
the Investor, which consent may be withheld by the Investor in its sole discretion.

 

Section 3.10         Binding
Effect. This Note shall be binding upon, inure to the benefit of and be enforceable by the Company, the Investor and their
respective successors and permitted assigns. The Company shall not delegate or transfer this Note or any obligations or undertakings
contained in this Note.

 

    	11

    	 

    

 

Section 3.11         Failure
or Indulgence Not Waiver. No failure or delay on the part of the Investor in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege.

 

Section 3.12         No
Stockholder Rights. Nothing contained in this Note shall be construed as conferring upon the Investor the right to vote or
to receive dividends or to consent or receive notice as a stockholder in respect of any meeting of shareholders or any rights whatsoever
as a stockholder of the Guarantor, unless and to the extent converted in accordance with the terms hereof.

 

Section 3.13         Company
Waivers; Dispute Resolution.

 

(a)          Except
as otherwise specifically provided herein, the Company and all others that may become liable for all or any part of the obligations
evidenced by this Note, hereby waive presentment, demand, notice of nonpayment, protest and all other demands and notices in connection
with the delivery, acceptance, performance and enforcement of this Note, and do hereby consent to any number of renewals of extensions
of the time or payment hereof and agree that any such renewals or extensions may be made without notice to any such Persons and
without affecting their liability herein and do further consent to the release of any Person liable hereon, all without affecting
the liability of the other Persons liable for the payment of this Note.

 

(b)          No
delay or omission on the part of the Investor in exercising its rights under this Note, or course of conduct relating hereto, shall
operate as a waiver of such rights or any other right of the Investor, nor shall any waiver by the Investor of any such right or
rights on any one occasion be deemed a waiver of the same right or rights on any future occasion.

 

[Signature appears on following page]

 

    	12

    	 

    

 

IN WITNESS WHEREOF, the Company has caused
this Note to be duly executed by its duly authorized officer as of the date first above indicated.

 

	 	ASEN 2, CORP.
	 	 
	 	By:	  /s/ Scott Feldhacker
	 	 	Scott Feldhacker
	 	 	Chief Executive Officer

 

Acknowledged and agreed

as of the date first set forth above,

only with respect to Section 1.7:

 

	AMERICAN STANDARD ENERGY CORP.,
	a Delaware corporation
	 
	By:	  /s/ Scott Feldhacker	 
	 	Scott Feldhacker	 
	 	Chief Executive Officer	 

 

[SIGNATURE PAGE TO
PROMISSORY NOTE]

 

    	 

    	 

    

 

EXHIBIT A

 

WIRE INSTRUCTIONS

 

Wire instructions for Pentwater Equity Opportunities Master Fund
Ltd.

 

	Account Number	 	 
	 	 	 
	Account Name	 	 
	 	 	 
	Receiving Bank Name:	 	 
	 	 	 
	Receiving Bank ABA Number:	 	 
	 	 	 
	Attention:	 	 
	 	 	 
	Reference:	 	 

 

Wire instructions for PWCM Master Fund Ltd.

 

	Account Number	 	 
	 	 	 
	Account Name	 	 
	 	 	 
	Receiving Bank Name:	 	 
	 	 	 
	Receiving Bank ABA Number:	 	 
	 	 	 
	Attention:	 	 
	 	 	 
	Reference:	 	 

 

    	 

    	 

    

 

EXHIBIT B

 

CONVERSION NOTICE

 

TO: AMERICAN STANDARD ENERGY CORP.

 

The undersigned hereby irrevocably elects to exercise its rights
to convert $______________ of the amount due under the attached Note into _______________ shares of the Common Stock, par value
$.001 per share, of American Standard Energy Corp., a Delaware corporation in accordance with the provisions of Section 1.7 of
the Note. Please issue a certificate in the name of the undersigned for the Common Stock in accordance with the instructions given
below. In the event that this conversion is exercised with respect to less than all principal outstanding under the Note, please
also issue a Note of like tenor for the remaining outstanding principal balance.

 

The undersigned represents that the representations set forth in
Section 2.3 of the Purchase Agreement are true and correct as of the date of this Conversion Notice.

 

	 	Investor:
	 	 
	 	By:	 	 
	 	Name:
	 	Title:

 

Dated: ____________________

 

Instructions for registration of shares:

 

Name to be registered: _____________________________

 

Tax Identification Number of Investor_____________________

 

Address of Investor

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00199-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00199-of-00352.parquet"}]]