Document:

EXHIBIT 10.3

 

EXECUTION COPY

 

WAIVER, CONSENT AND FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

THIS WAIVER, CONSENT AND FOURTH AMENDMENT TO LOAN AND SECURITY
AGREEMENT (this “Amendment”) is
made as of November 16, 2010, by and between HELICOS
BIOSCIENCES CORPORATION a Delaware corporation (the “Borrower”), and GENERAL ELECTRIC CAPITAL
CORPORATION, a Delaware corporation acting in its capacity as agent
(the “Agent”) for the lenders under the Loan
Agreement (as defined below) (the “Lenders”), and
the Lenders.

 

W  I  T  N  E
S  S  E  T  H:

 

WHEREAS, Borrower, Agent and
Lenders are parties to that certain Loan and Security Agreement, dated as of December 31,
2007, as amended by that certain First Amendment to Loan and Security Agreement
and Post-Closing Obligations Letter, dated as of February 14, 2008, as
further amended by that certain Second Amendment to Loan and Security
Agreement, dated as of June 27, 2008, and as further amended by that
certain Waiver and Third Amendment to Loan and Security Agreement, dated as of December 29,
2008 (as the same may be amended, supplemented and modified from time to time,
the “Loan Agreement”; capitalized terms used
herein have the meanings given to them in the Loan Agreement except as
otherwise expressly defined herein), pursuant to which Lenders have agreed to
provide to Borrower certain loans and other extensions of credit in accordance
with the terms and conditions thereof;

 

WHEREAS, Events of Default have
occurred and are continuing under the Loan Agreement as a result of (1) the
Borrower’s failure to make the Scheduled Payment of interest and principal on
the Term Loan due on November 1, 2010 in accordance with Section 8.1(a) of
the Loan Agreement, (2) the Borrower’s failure to appoint a new chief
operating officer and vice president of product research and development in
accordance with Section 8.1(k)(i) of the Loan Agreement, (3) the
Borrower’s failure to pay when due the trade credit and other obligations
described on Schedule 1 attached hereto, which failure constitutes an
Event of Default under Section 8.1(g)(i) of the Loan
Agreement, (4) the Borrower’s breach of its obligations owing to Optikos
Corporation, the Leiden University Medical Center and The Institute of Physical
and Chemical Research in the manner and under the agreements described on Schedule
1, which breaches constitute Events of Default under Sections 8.1(j)(i) and
8.1(j)(ii) of the Loan Agreement, (5) the Borrower’s breach of
clauses (c) and (e) of Section 5.10 of the Loan Agreement
prior to the date hereof as a result of the Borrower’s failure to pay its debts
as such debts become due and the admission in writing by the Borrower of its
inability to pay its debts generally, which breaches constitute Events of
Default under Section 8.1(d) of the Loan Agreement, (6) the
Borrower’s breach of Section 7.2 of the Loan Agreement by the
issuance on September 15, 2009 and December 15, 2009 of warrants
constituting “Indebtedness” pursuant to clause (viii) of the definition
thereof, which breach constitutes an Event of Default under Section 8.1(b) of
the Loan Agreement, and (5) the Borrower’s failure to provide timely
notice in accordance with Section 6.2(b) of the Loan Agreement
of, or make correct representations and warranties pursuant to Section 8.1(d) of
the Loan Agreement regarding, the Events of Default 

 

 

described
in clauses (1) through (6) above (collectively, the Events of Default
described in clauses (1) through (7) above, the “Specified Events
of Default”);

 

WHEREAS,
Borrower has requested that Agent and Lenders waive their rights with respect
to the Specified Events of Default, and Agent and Lenders are willing to grant
such waiver solely in accordance with and subject to the terms and conditions
of this Amendment; and

 

WHEREAS, Borrower has
requested that Agent and Lenders (i) consent to certain transactions as
provided herein and (ii) make certain amendments to the Loan Agreement, in
each case in accordance with, and subject to, the terms and conditions of this
Amendment.

 

NOW, THEREFORE, in consideration of the premises, the
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties do hereby agree as follows:

 

1.             Acknowledgment
of Obligations.  Borrower hereby acknowledges, confirms and
agrees that as of the close of business on November 16, 2010, Borrower is
indebted to the Lenders in respect of the Term Loan in the aggregate principal
amount of $2,255,566.  Borrower hereby
acknowledges, confirms and agrees that all Term Loans made prior to the
Amendment Effective Date (as defined below), together with interest accrued and
accruing thereon, and fees, costs, expenses and other charges owing by Borrower
to Agent and Lenders under the Loan Agreement and the other Debt Documents, are
unconditionally owing by Borrower to Agent and Lenders, without offset, defense
or counterclaim of any kind, nature or description whatsoever except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditor’s rights generally.

 

2.             Waiver.  In reliance upon the representations,
warranties and covenants of the Loan Parties contained in this Amendment, and
subject to the terms and conditions set forth in this Amendment, the Agent and
Lenders hereby waive the Specified Events of Default as of the Amendment
Effective Date.  The waiver set forth in
the immediately preceding sentence relates solely to the Specified Events of
Default, and nothing in this Amendment is intended (or shall be construed) to
constitute a waiver by Agent or Lenders of any other Default or Event of
Default which may now or hereafter exist under the Loan Agreement.

 

3.             Consents.              Subject to the terms and
conditions of this Amendment, including, without limitation, the conditions
precedent to the effectiveness of this Amendment in Section 8
hereof, and notwithstanding anything in the Loan Agreement or any of the other
Debt Documents to the contrary, as of the Amendment Effective Date, Agent and
Lenders hereby consent as follows:

 

(a)   With respect to the Term
Loan, and notwithstanding the provisions of Section 2.3(b) of the
Loan Agreement, the Borrower shall pay to the Agent, for the ratable benefit of
the Lenders, one (1) payment of interest only (payable in arrears) on November 16,
2010 and nine (9) equal consecutive payments of principal and interest
(payable in arrears) on each Scheduled Payment Date commencing on December 1,
2010, each in an amount sufficient to fully amortize the principal and interest
due with respect to the Term Loan over such nine-month period.

 

2

 

(b)   If, as of November 29,
2010, (1) no Event of Default has occurred and is continuing, (2) to
the extent necessary to comply with clause (3) hereof, the Borrower has
received cash proceeds during November, 2010 from the issuance of Subordinated
Debt, and (3) the Borrower has unrestricted balance sheet cash and Cash
Equivalents in one or more deposit or securities accounts subject to an Account
Control Agreement equal to or greater than the aggregate amount of expenses of
the Borrower for the prior period of four weeks (including any pro forma
adjustments thereto reasonably acceptable to Agent and each Lender), then,
notwithstanding the provisions set forth in Section 2(a) above, the
Borrower shall pay to the Agent, for the ratable benefit of the Lenders, one (1) payment
of interest only (payable in arrears) on December 1, 2010 and nine (9) equal
consecutive payments of principal and interest (payable in arrears) on each
Scheduled Payment Date commencing on January 1, 2011, each in an amount
sufficient to fully amortize the principal and interest due with respect to the
Term Loan over such nine-month period.

 

(c)   If Borrower satisfied the
conditions set forth in Section 2(b) above, and if, as of December 27,
2010, (1) no Event of Default has occurred and is continuing, (2) to
the extent necessary to comply with clause (3) hereof, the Borrower has
received cash proceeds during December, 2010 from the issuance of Subordinated
Debt, and (3) the Borrower has unrestricted balance sheet cash and Cash
Equivalents in one or more deposit or securities accounts subject to an Account
Control Agreement equal to or greater than the aggregate amount of expenses of
the Borrower for the prior period of four weeks (including any pro forma
adjustments thereto reasonably acceptable to Agent and each Lender), then,
notwithstanding the provisions set forth in Sections 2(a) and 2(b) above,
the Borrower shall pay to the Agent, for the ratable benefit of the Lenders,
one (1) payment of interest only (payable in arrears) on January 1,
2011 and nine (9) equal consecutive payments of principal and interest
(payable in arrears) on each Scheduled Payment Date commencing on February 1,
2011, each in an amount sufficient to fully amortize the principal and interest
due with respect to the Term Loan over such nine-month period.

 

(d)   If Borrower satisfied the
conditions set forth in Sections 2(b) and 2(c) above, and if, as of January 28,
2011, (1) no Event of Default has occurred and is continuing, (2) to
the extent necessary to comply with clause (3) hereof, the Borrower has
received cash proceeds during January, 2011 from the issuance of Subordinated
Debt, and (3) the Borrower has unrestricted balance sheet cash and Cash
Equivalents in one or more deposit or securities accounts subject to an Account
Control Agreement equal to or greater than the aggregate amount of expenses of
the Borrower for the prior period of four weeks (including any pro forma
adjustments thereto reasonably acceptable to Agent and each Lender), then,
notwithstanding the provisions set forth in Sections 2(a), 2(b) and 2(c) above,
the Borrower shall pay to the Agent, for the ratable benefit of the Lenders,
one (1) payment of interest only (payable in arrears) on February 1,
2011 and nine (9) equal consecutive payments of principal and interest
(payable in arrears) on each Scheduled Payment Date commencing on March 1,
2011, each in an amount sufficient to fully amortize the principal and interest
due with respect to the Term Loan over such nine-month period.

 

3

 

(e)   If Borrower satisfied the
conditions set forth in Sections 2(b), 2(c) and 2(d) above, and if,
as of February 25, 2011, (1) no Event of Default has occurred and is
continuing, (2) to the extent necessary to comply with clause (3) hereof,
the Borrower has received cash proceeds during February, 2011 from the issuance
of Subordinated Debt, and (3) the Borrower has unrestricted balance sheet
cash and Cash Equivalents in one or more deposit or securities accounts subject
to an Account Control Agreement equal to or greater than the aggregate amount
of expenses of the Borrower for the prior period of four weeks (including any
pro forma adjustments thereto reasonably acceptable to Agent and each Lender),
then, notwithstanding the provisions set forth in Sections 2(a), 2(b), 2(c) and
2(d) above, the Borrower shall pay to the Agent, for the ratable benefit
of the Lenders, one (1) payment of interest only (payable in arrears) on March 1,
2011 and nine (9) equal consecutive payments of principal and interest
(payable in arrears) on each Scheduled Payment Date commencing on April 1,
2011, each in an amount sufficient to fully amortize the principal and interest
due with respect to the Term Loan over such nine-month period.

 

(f)    If Borrower satisfied the
conditions set forth in Sections 2(b), 2(c), 2(d) and 2(e) above, and
if, as of March 29, 2011, (1) no Event of Default has occurred and is
continuing, (2) to the extent necessary to comply with clause (3) hereof,
the Borrower has received cash proceeds during March, 2011 from the issuance of
Subordinated Debt, and (3) the Borrower has unrestricted balance sheet
cash and Cash Equivalents in one or more deposit or securities accounts subject
to an Account Control Agreement equal to or greater than the aggregate amount
of expenses of the Borrower for the prior period of four weeks (including any
pro forma adjustments thereto reasonably acceptable to Agent and each Lender),
then, notwithstanding the provisions set forth in Sections 2(a), 2(b), 2(c), 2(d) and
2(e) above, the Borrower shall pay to the Agent, for the ratable benefit
of the Lenders, one (1) payment of interest only (payable in arrears) on April 1,
2011 and nine (9) equal consecutive payments of principal and interest
(payable in arrears) on each Scheduled Payment Date commencing on May 1,
2011, each in an amount sufficient to fully amortize the principal and interest
due with respect to the Term Loan over such nine-month period..

 

(g)   In consideration for
consenting to the interest-only payment described in Section 2(a) above,
the Borrower hereby agrees that the Final Payment Fee due with respect to the
Term Loan shall be increased by $50,000. 
Further, (1) if the conditions described in Section 2(d) above
for the deferral of the principal payment for February 1, 2011 are
satisfied, then the Final Payment Fee due with respect to the Term Loan shall
automatically be increased by an additional $50,000, (2) if the conditions
described in Section 2(e) above for the deferral of the principal
payment for March 1, 2011 are satisfied, then the Final Payment Fee due
with respect to the Term Loan shall automatically be increased by an additional
$50,000 and (3) if the conditions described in Section 2(f) above
for the deferral of the principal payment for April 1, 2011 are satisfied,
then the Final Payment Fee due with respect to the Term Loan shall
automatically be increased by an additional $50,000, for a maximum aggregate
increase of the Final Payment Fee by $200,000.

 

4

 

(h)   The Agent and Lenders
consent to (i) the issuance by Borrower to Flagship Ventures (“Flagship”) and Atlas Venture (“Atlas”)
and their respective affiliates (Atlas together with Flagship and certain
affiliates of Atlas and Flagship, being the “Purchasers”)
of subordinated secured Indebtedness in an aggregate amount not to exceed
$4,000,000, pursuant to that certain Subordinated Secured Note Purchase
Agreement dated as of the date hereof by and among the Company and the
Purchasers and (ii) the incurrence of Indebtedness by the Company pursuant
to that certain Risk Premium Payment Agreement dated as of the date hereof by
and among the Company and the Purchasers (such Indebtedness described in
clauses (i) and (ii) above, the “Subordinated Debt”);
provided, however, that (i) such Indebtedness is subordinated to
the Obligations pursuant to a subordination agreement in the form attached
hereto as Exhibit B executed by Agent, Borrower and each Purchaser
(the “Subordination Agreement”) and (ii) such
Indebtedness may be secured by a security interest in all Collateral of the
Borrower, so long as such security interest is subordinated to the security
interest of the Agent in the Collateral pursuant to the Subordination
Agreement.

 

(i)    The Agent and Lenders
consent to (i) the incurrence by Borrower of subordinated secured
Indebtedness pursuant to that certain Letter Fee Agreement Regarding Legal
Services (the “GP Letter Agreement”) dated as of October 22,
2010 by and among the Company and Goodwin Procter LLP (“Goodwin”)
(the “GP Subordinated Debt”); provided,
however, that (i) such Indebtedness is subordinated to the Obligations
pursuant to a subordination agreement in the form attached hereto as Exhibit C
executed by Agent, Borrower and Goodwin (the “GP
Subordination Agreement”) and (ii) such Indebtedness may be
secured by a security interest in the patent infringement lawsuit Helicos
BioSciences Corporation v. Pacific Biosciences of California, Inc., Life
Technologies Corporation, and Illumina, Inc., No. 1:10-cv-00735,
filed in the United States District Court for the District of Delaware (the “Cause of Action”) together with all proceeds thereof
including without limitation the Total Recovery as defined in the GP Letter
Agreement, so long as such security interest in such lawsuit and proceeds
thereof is subordinated to the security interest of the Agent in the Collateral
pursuant to the GP Subordination Agreement.

 

(j)    For each interest-only
payment that Borrower is permitted to make under this Section 2, the
Applicable Term Loan Maturity Date for the Term Loan shall be deemed to be
extended by one (1) month, unless such Term Loan otherwise becomes due and
payable hereunder, whether by acceleration of the Obligations pursuant to Section 8.2
or otherwise.

 

(k)   The Agent and Lenders hereby
further consent and agree that, notwithstanding any provision in the Loan Agreement
to the contrary, the continuation of the failure by the Borrower after the date
hereof to pay obligations and to perform under agreements described in clauses (3) and
(4) of the second “Whereas” clause in this Amendment and as further
described on Schedule 1 hereto, shall not constitute new Events of
Default; provided, however, that any development or occurrence arising
from or otherwise related to such to failure to pay obligations or to perform
under agreements described in clauses (3) and (4) of the second “Whereas”
clause in this Amendment 

 

5

 

that qualifies as an independent Event of Default under the Loan
Agreement (including, without limitation, any involuntary bankruptcy filing or
any judgment described in Section 8.1(f) of the Loan
Agreement) shall constitute a new and independent Event of Default under the
Loan Agreement as of the date of such development or occurrence.

 

(l)    The Agent and Lenders hereby
further consent and agree that, notwithstanding any provision in Section 7.2
of the Loan Agreement to the contrary, the Borrower may incur the Indebtedness
described on Schedule 2 hereto.

 

(m)  The Agent and the Lenders
hereby further consent and agree that, notwithstanding any provisions in Sections
7.6 and 7.8 of the Loan Agreement to the contrary, the Borrower may
enter into and perform its obligations under any management incentive plan (a “Management Incentive Plan”) that is both (1) approved
by the Company’s board of directors and (2) consented to in writing by the
Agent and Lenders in their sole discretion.

 

4.             Amendments
to Loan Agreement.  Subject to the terms and conditions of this
Amendment, including, without limitation, the conditions precedent set forth in
Section 8 hereof, the Loan Agreement is hereby amended as follows:

 

(a)   Section 2.7 of the Loan
Agreement is hereby amended by deleting clause (b) of such section in its
entirety and replacing the following in lieu thereof:

 

“(b)         Final Payment Fee.  Upon all outstanding principal amounts with
respect to any Term Loan being repaid, or being required to be repaid, in full
(whether voluntary, scheduled or mandatory or otherwise), for each Term Loan
Borrower shall pay to Agent, for the ratable accounts of Lenders, a fee equal
to 4.00% of the original principal amount of such Term Loan (the ‘Final Payment
Fee’); provided, however, notwithstanding the foregoing, solely with respect to
the Initial Term Loan, in lieu of the 4.00% fee set forth above, Borrower shall
pay to Agent, for the ratable accounts of Lenders, a fee equal to 2.00% of the
original principal amount of the Initial Term Loan, which fee shall be fully
earned on the Effective Date of (and as such term is defined in) the Third
Amendment, but shall be due and payable on the Applicable Term Loan Maturity
Date for the Subsequent Term Loan.”

 

(b)   Section 3.1 of the Loan
Agreement is hereby amended by deleting the definition of “Collateral”
provided therein and substituting, in lieu thereof, the following new
definition of “Collateral”:

 

All
of such Loan Party’s personal property of every kind and nature (except for up to $250,000 held as
letter of credit cash collateral in account number 1170338428 with RBS
Citizens, National Association) whether now owned or hereafter acquired by, or
arising in favor of, such Loan Party, and regardless of where located,
including, without limitation, all accounts, chattel paper (whether tangible or
electronic), commercial tort claims (including, without limitation, all 

 

6

 

commercial
tort claims relating to the patent infringement lawsuit titled Helicos
BioSciences Corporation v. Pacific Biosciences of California, Inc., Life
Technologies Corporation, and Illumina, Inc., No. 1:10-cv-00735,
filed in the United States District Court for the District of Delaware),
deposit accounts, documents, equipment, financial assets, fixtures, goods,
instruments, investment property (including, without limitation, all securities
accounts), inventory, letter-of-credit rights, letters of credit, securities,
supporting obligations, cash, cash equivalents, any other contract rights
(including, without limitation, rights under any license agreements), or rights
to the payment of money, and general intangibles (including Intellectual
Property, as defined in Section 3.3 below), and all books and
records of such Loan Party relating thereto, and in and against all additions,
attachments, accessories and accessions to such property, all substitutions,
replacements or exchanges therefor, all proceeds, insurance claims, products,
profits and other rights to payments not otherwise included in the foregoing
(with each of the foregoing terms that are defined in the UCC having the
meaning set forth in the UCC).

 

Notwithstanding
the foregoing, the term “Collateral” shall not include any contract, instrument
or chattel paper in which any Loan Party has any right, title or interest if
and to the extent such contract, instrument or chattel paper includes a
provision containing a restriction on assignment such that the creation of a
security interest in the right, title or interest of the Loan Party therein
would be prohibited and would, in and of itself, cause or result in a default
thereunder enabling another person party to such contract, instrument or
chattel paper to enforce any remedy with respect thereto or give another person
the right to terminate, accelerate or otherwise adversely alter the Loan Party’s
rights, title and interest thereunder; provided, however, that the
foregoing exclusion shall not apply if (i) such prohibition has been
waived or such other person has otherwise consented to the creation hereunder
of a security interest in such contract, instrument or chattel paper, or (ii) such
prohibition would be rendered ineffective pursuant to Sections 9-407(a) or
9-408(a) of the UCC, as applicable and as then in effect in any relevant
jurisdiction, or any other applicable law (including the Bankruptcy Code or
principles of equity); provided further that immediately upon the
ineffectiveness, lapse or termination of any such provision, the term “Collateral”
shall include, and the Loan Party shall be deemed to have granted a security
interest in, all its rights, title and interests in and to such contract,
instrument or chattel paper as if such provision had never been in effect; and provided
further that the foregoing exclusion shall in no way be construed so as to
limit, impair or otherwise affect any Lender’s unconditional continuing
security interest in and to all rights, title and interests of such Loan Party
in or to any payment obligations or other rights to receive monies due or to
become due under any such contract, instrument or chattel paper and in any such
monies and other proceeds of such contract, instrument or chattel paper.

 

(c)   Section 3.3 of the Loan
Agreement is hereby amended by deleting the section in its entirety and
replacing the following in lieu thereof:

 

7

 

Section 3.3.  Grant of Intellectual Property Security Interest.  The Collateral shall include all intellectual
property of each Loan Party, which shall be
defined as any and all copyrights, trademarks, tradenames, servicemarks,
patents, inventions, designs, design rights, software and databases, licenses,
trade secrets, customer lists, know-how, and intangible rights of each Loan
Party, any marketing rights of each Loan Party, and any goodwill, applications,
registrations, claims, products, awards, judgments, amendments, renewals,
extensions, improvements and insurance claims related thereto (collectively, “Intellectual
Property”) now or hereafter owned or licensed by a Loan Party,
together with all accessions and additions thereto, proceeds and products thereof
(including, without limitation, any proceeds resulting under insurance
policies).  In order to perfect or
protect Agent’s security interest and other rights in Loan Party’s Intellectual
Property, each Loan Party hereby authorizes Agent to file a patent security
agreement, substantially in the form provided by Agent (“Patent Security
Agreement”) and/or a trademark security agreement, substantially in the
form provided by Agent (“Trademark Security Agreement”) with the United
States Patent and Trademark Office and a copyright security agreement,
substantially in the form provided by Agent (“Copyright Security Agreement”
and together with the Patent Security Agreement and the Trademark Security
Agreement, the “Intellectual Property Security Agreements”) with the
United States Copyright Office as each are applicable and required by Agent.

 

(d)         Section 5.3 of the Loan
Agreement is hereby amended by deleting the second sentence thereof and
replacing such sentence with the following:

 

As
used herein, “Material Agreement” shall mean (i) any agreement or contract
to which such Loan Party is a party and involving the receipt or payment of
amounts in the aggregate exceeding $250,000 per year, (ii) any agreement
or contract to which such Loan Party is a party the termination of which could
reasonably be expected to have a Material Adverse Effect and (iii) any
agreement or contract relating to any Indebtedness of the Loan Parties that is
consented to in the sole discretion of the Agent and Lenders and is
subordinated to the Obligations on terms and conditions acceptable to Agent
(any such subordinated Indebtedness, “Subordinated Indebtedness”).

 

(e)          Section 6.2 of the Loan
Agreement is hereby amended by deleting the word “and” prior to clause (f) therein,
inserting a comma in lieu thereof, and inserting the following new clause (g) before
the final punctuation therein:

 

and
(g) copies of all statements, reports and notices made available generally
by any Loan Party to any holders of Subordinated Indebtedness, and all notices
sent to any Loan Party by the holders of any Subordinated Indebtedness.

 

(f)            Section 7.6 of the Loan
Agreement is hereby amended by deleting the word “or” prior to clause (d) therein,
inserting a comma in lieu thereof, and inserting the following new clause (e) before
the final punctuation therein:

 

8

 

or
(e) purchase or make any payment on or with respect to any Subordinated
Indebtedness.

 

(g)         Section 8.1(i) is hereby
amended by inserting the following language immediately prior to the final
semicolon therein:

 

,
or any subordination provision set forth in any document evidencing or relating
to the Subordinated Indebtedness shall, in whole or in part, terminate or
otherwise fail or cease to be valid and binding on, or enforceable against, any
agent for or holder of the Subordinated Indebtedness (or such person shall so
state in writing).

 

(h)         The term “Debt Documents”
used in the Loan Agreement shall be deemed to include any subordination
agreement relating to the Subordinated Indebtedness and each of the Patent
Security Agreement, Trademark Security Agreement and Copyright Security
Agreement.

 

5.             Additional
Agreements.  In addition to the Consents and Amendments
referenced above, Borrower, Agent and Lenders further agree to the following:

 

(a)          Mandatory Prepayments.

 

(i)  Immediately
(and in any event within three (3) Business Days) after receipt by
Borrower of any (A) up front license fee, up front royalty payment, legal
settlement, proceeds of any sale, license or other disposition of all or any
part of, or rights in, the Intellectual Property, or (B) any up front
payment from non-research and development funding related partnerships or
collaborations, Borrower shall prepay the Term Loan in an amount equal to
seventy-five percent (75%) of the gross proceeds of each such fee, payment or
proceeds.  This Section 5(a)(i) shall
not be deemed to be a consent to any transactions that is not expressly
permitted in accordance with the terms and conditions of the Loan Agreement.

 

(ii)   Any
mandatory prepayment made pursuant to this Section 5(a) shall be
applied as follows:  first, to pay
all fees, costs, indemnities, reimbursements and expenses then due to Agent and
Lenders under the Debt Documents; second, to pay all accrued interest on
the Term Loan then due to Lenders in accordance with their respective Pro Rata
Shares, until paid in full; and third, to the remaining Scheduled
Payments of principal pursuant to Section 2.3(b) in inverse
order of maturity.  Principal payments
made pursuant to the immediately preceding sentence will not be subject to any
pre-payment premium under the Debt Documents.

 

9

 

(b)         Additional Reporting.

 

Borrower
agrees to submit to Agent and each Lender (i) upon the reasonable request
of the Agent and in any event on the first Business Day of each other week, a
written cash forecast in form and substance reasonably satisfactory to Agent
which compares actual expenditures with budgeted expenditures, and (ii) upon
the reasonable request of the Agent and in any event on the first Business Day
of every month, a written summary and update in form and substance reasonably
satisfactory to Agent and each Lender regarding Borrower’s pursuit of strategic
initiatives.  Borrower’s failure to
deliver, within three (3) Business Days of the specified time for
delivery, either of (i) a biweekly cash forecast or (ii) a monthly
written summary in accordance with this Section 5(b) shall be an
immediate Event of Default under the Loan Agreement.

 

6.             No
Other Consents or Amendments. 
Except for the consents, amendments, and agreements to the Loan
Agreement expressly provided in Sections 3, 4 and 5 above,
the Loan Agreement and the other Debt Documents shall remain unchanged and in
full force and effect in accordance with its terms, and this Amendment shall be
limited precisely and expressly as drafted and shall not be construed as a
consent to the amendment, restatement, modification, supplementation or waiver
of any other terms or provisions of the Loan Agreement or any other Debt
Documents.

 

7.             Representations
and Warranties.  To induce
Agent and Lenders to enter into this Amendment, Borrower hereby warrants,
represents and covenants to and with Agent and Lenders that: (a) after
giving effect to this Amendment, no Default or Event of Default shall have
occurred and be continuing, (b) set forth on Exhibit A is a summary
of all Intellectual Property of the Loan Parties as of the date hereof,
including an indication whether any such Intellectual Property has been
abandoned (such Intellectual Property, the “Abandoned IP”), (c) upon
filing of the Patent Security Agreement, Trademark Security Agreement and
Copyright Security Agreement, as applicable, with the United States Patent and
Trademark Office and the United States Copyright Office, as applicable, and the
filing of appropriate UCC financing statements, all action necessary or
desirable to protect and perfect Agent’s lien on each Loan Party’s Intellectual
Property shall have been duly taken, and (d) after giving effect to this
Amendment, all of the representations and warranties in the Loan Agreement and
each other Debt Document are true and correct in all material respects on and
as of the Amendment Effective Date (except to the extent that any such
representations or warranties expressly referred to a specific prior date, in
which case such representation or warranty shall be true and correct in all
material respects on and as of such date). 
Any breach in any material respect by Borrower of any of its
representations, warranties and covenants contained in this Section 7
shall be an Event of Default under the Loan Agreement.

 

8.             Conditions
Precedent to Effectiveness of this Amendment.  This Amendment shall become effective as of
the date (the “Amendment Effective Date”) upon
which Agent receives each of the following, in each case, in form and substance
satisfactory to Agent:

 

(a)                                  one or more
counterparts of this Amendment duly executed, completed and delivered by Borrower;

 

10

 

(b)                                 evidence that
Borrower has received gross cash proceeds of at least $333,333 from the
issuance on the date hereof of Subordinated Debt;

 

(c)                                  one or more counterparts of the Subordination Agreement,
dated the date hereof, and executed by each of the Purchasers, Agent and
Borrower, and the GP Subordination Agreement, dated as of the date hereof, and
executed by GP, Agent and Borrower;

 

(d)                                 one or more counterparts of a Patent Security Agreement,
Trademark Security Agreement and Copyright Security Agreement, as applicable,
duly executed, completed and delivered by Borrower, to be filed with the
appropriate filing office on the Amendment Effective Date with respect to all
Intellectual Property other than Abandoned IP;

 

(e)                                  evidence
satisfactory to Agent and each Lender that the UCC financing statement filed
against Borrower has been amended to include the Intellectual Property;

 

(f)                                    current UCC
lien, judgment, bankruptcy and tax lien search results, and United States
Patent and Trademark Office search results, demonstrating that there are no
other security interests or liens on the Collateral, other than Permitted
Liens;

 

(g)                                 a Secretary’s
Certificate providing verification of incumbency and attaching the Borrower’s
board resolutions approving the transactions contemplated by this Amendment;

 

(h)                                 evidence
satisfactory to Agent that Borrower shall have paid to Agent’s outside counsel,
Kilpatrick Stockton LLP, the costs and expenses owing to such counsel pursuant
to Section 11(a) below in the amount of $20,000, which payment shall
be made by wire transfer in accordance with the wire transfer instructions set
forth on Exhibit D hereto, and evidence satisfactory to CIT
Healthcare LLC that Borrower shall have paid to CIT Healthcare LLC’s outside
counsel, Waller Lansden Dortch & Davis, LLP, the costs and expenses
owing to such counsel pursuant to Section 11(a) below in the amount
of $14,000, which payment shall be made by wire transfer in accordance with the
wire transfer instructions set forth on Exhibit D hereto; and

 

(i)                                     one or more
counterparts of an amendment to the Warrant of each Lender, in form and
substance satisfactory to Agent and each Lender, which amendment shall effect
the repricing of the Warrants from $4.80 to $0.01.

 

9.             Release.

 

(a)                                  In
consideration of the agreements of Agent and Lenders contained herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Borrower, on behalf of itself and its successors, assigns,
and other legal representatives, hereby absolutely, unconditionally and
irrevocably releases, remises and forever discharges Agent and Lenders and
their successors and assigns, and their present and former shareholders,
affiliates,

 

11

 

subsidiaries,
divisions, predecessors, directors, officers, attorneys, employees and other
representatives (Agent and Lenders and all such other persons being hereinafter
referred to collectively as the “Releasees”
and individually as a “Releasee”),
of and from all demands, actions, causes of action, suits, covenants,
contracts, controversies, agreements, promises, sums of money, accounts, bills,
reckonings, damages and any and all other claims, counterclaims, defenses,
rights of set-off, demands and liabilities whatsoever other than with respect
to claims made to correct manifest errors with respect to the calculation of
amounts owing pursuant to the Loan Agreement (individually, a “Claim” and collectively, “Claims”) of every name and nature, known or
unknown, suspected or unsuspected, both at law and in equity, which Borrower or
any of its successors, assigns, or other legal representatives may now or
hereafter own, hold, have or claim to have against the Releasees or any of them
for, upon, or by reason of any circumstance, action, cause or thing whatsoever
which arises at any time on or prior to the Amendment Effective Date,
including, without limitation, for or on account of, or in relation to, or in
any way in connection with the Loan Agreement or any of the other Debt
Documents or transactions thereunder or related thereto.

 

(b)                                 Borrower
understands, acknowledges and agrees that its release set forth above may be
pleaded as a full and complete defense and may be used as a basis for an
injunction against any action, suit or other proceeding which may be
instituted, prosecuted or attempted in breach of the provisions of such
release.

 

(c)                                  Borrower agrees
that no fact, event, circumstance, evidence or transaction which could now be
asserted or which may hereafter be discovered shall affect in any manner the
final, absolute and unconditional nature of the release set forth above.

 

10.          Covenant not to Sue.  Borrower, on behalf of itself and its
respective successors, assigns, and other legal representatives, hereby
absolutely, unconditionally and irrevocably, covenants and agrees with and in
favor of each Releasee that it will not sue (at law, in equity, in any
regulatory proceeding or otherwise) any Releasee on the basis of any Claim
released, remised and discharged by Borrower pursuant to Section 9
above.  If Borrower or any of its
respective successors, assigns or other legal representatives violates the
foregoing covenant, Borrower, for itself and its successors, assigns and legal
representatives, jointly and severally agrees to pay, in addition to such other
damages as any Releasee may sustain as a result of such violation, all
reasonable attorneys’ fees and costs incurred by any Releasee as a result of
such violation.

 

11.          Provisions of General Application.

 

(a)                                  Costs
and Expenses.  Borrower
absolutely and unconditionally agrees to pay to Agent and each Lender, on
demand by Agent or such Lender at any time and as often as the occasion
therefore may require, whether or not all or any of the transactions
contemplated by this Amendment are consummated: all reasonable fees and
out-of-pocket expenses and disbursements of any counsel to Agent or such Lender
in connection with the preparation, negotiation, execution, or 

 

12

 

delivery
of this Amendment and expenses which shall at any time be incurred or sustained
by Agent or such Lender as a consequence of or in any way in connection with
the preparation, negotiation, execution, or delivery of this Amendment and any
agreements prepared, negotiated, executed or delivered in connection with the
transactions contemplated hereby.

 

(b)                                 Advice
of Counsel.  Each of the
parties represents to each other party hereto that it has discussed this
Amendment with its counsel.

 

(c)                                  Further
Assurances.  The parties
hereto shall execute and deliver such additional documents and take such
additional action as may be necessary or desirable to effectuate the provisions
and purposes of this Amendment.

 

(d)                                 Binding
Effect.  This Amendment shall be binding
upon and inure to the benefit of each of the parties hereto and their
respective successors and assigns.  No
person or entity shall have any rights under this Agreement or any other Debt
Document as a third party beneficiary.

 

(e)                                  Severability.  Any provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment.

 

(f)                                    Governing
Law.  THIS AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD
TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAWS, AND ANY APPLICABLE LAWS
OF THE UNITED STATES OF AMERICA.

 

(g)                                 Counterparts.  This Amendment may be
executed in multiple counterparts, each of which shall be deemed to be an
original and all of which when taken together shall constitute one and the same
instrument.  Delivery of an executed
counterpart of this Amendment by facsimile or electronic mail shall be equally
effective as delivery of an original executed counterpart of this Amendment.

 

[SIGNATURE PAGES TO FOLLOW]

 

13

 

IN WITNESS WHEREOF, the parties hereto have
caused this Waiver, Consent and Fourth Amendment to Loan and Security Agreement
to be duly executed and delivered as of the day and year specified at the
beginning hereof.

 

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  HELICOS
  BIOSCIENCES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Ivan Trifunovich

  
	
   

  	
  Name:

  	
  Ivan
  Trifunovich

  
	
   

  	
  Title:

  	
  Chairman,
  President and Chief Executive Officer

  

 

 

HELICOS
BIOSCIENCES CORPORATION

WAIVER, CONSENT AND FOURTH
AMENDMENT TO LOAN AND SECURITY AGREEMENT

SIGNATURE
PAGE

 

 

	
   

  	
  AGENT:

  
	
   

  	
   

  
	
   

  	
  GENERAL
  ELECTRIC CAPITAL CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Peter Gibson

  
	
   

  	
  Name:

  	
  Peter
  Gibson

  
	
   

  	
  Title:

  	
  Duly
  Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HSPC, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Peter Gibson

  
	
   

  	
  Name:

  	
  Peter
  Gibson

  
	
   

  	
  Title:

  	
  Duly
  Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CIT
  HEALTHCARE LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Alisa Milarelli

  
	
   

  	
  Name:

  	
  Alisa
  Milarelli

  
	
   

  	
  Title:

  	
  Duly
  Authorized Signatory

  

 

HELICOS
BIOSCIENCES CORPORATION

WAIVER, CONSENT AND FOURTH
AMENDMENT TO LOAN AND SECURITY AGREEMENT

SIGNATURE PAGEExhibit 10.1

 

FARMOUT AGREEMENT

 

THIS
AGREEMENT (this “Agreement”) is made, entered into and effective this 23th day
of July 2010 by and between, BLACK RAVEN ENERGY, INC.,
a Nevada corporation (“FARMOR”), and ATLAS RESOURCES, LLC, a Pennsylvania limited liability company
(“FARMEE”).

 

RECITALS

 

A.                                    FARMEE plans to engage in
drilling for hydrocarbons in the area of mutual interest in Phillips and
Sedgwick Counties, Colorado, and Perkins, Chase and Dundy Counties Nebraska, as
further described in Schedule A  (the
“AMI”).

 

B.                                    FARMOR owns the
working interest and the net revenue interest in certain hydrocarbon interests
listed on Schedule B, as the same may be amended from time to time to
reflect FARMOR’s acquisition of other such interests in the AMI (the “Leases”).  The Leases include Drilling Units (as defined
below) for six (6) wells (the “Initial Wells”) identified on Schedule
B-1 (the “Initial Drilling Units”) as to which FARMOR has not commenced
drilling. FARMOR may in the future acquire additional working interests and net
revenue interests in hydrocarbon interests in the AMI. For avoidance of doubt,
the Leases do not include the wells in the AMI that were in production by
FARMOR or had already been drilled and cased before the date of this Agreement.

 

NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, and intending to be bound hereby, the parties
hereby agree as follows:

 

I.                                         DEFINITIONS

 

Terms
used but not otherwise defined herein shall have the following meanings:

 

“AFE”
means an Authority for Expenditure for a Well.

 

“Affiliate”
means, with respect to any person or entity, any other person or entity that
directly or indirectly (through one or more intermediaries or otherwise)
controls, is controlled by, or is under common control with the first person or
entity; provided however, that West Coast Opportunity Fund, LLC and West Coast
Asset Management, Inc. will not be considered an “Affiliate” of FARMOR and
the Partnerships will not be considered an “Affiliate” of FARMEE.

 

“Drilling
Unit” means 40 acres of a Lease around a wellbore, planned or actual, from the
surface to the center of the earth or such depths as to which FARMOR has an
interest.

 

 

“Earning
Well” means a Well which FARMEE has determined to be capable of producing
hydrocarbons in commercial quantities.

 

“Force
Majeure Event” means an event beyond a party’s reasonable control that prevents
such party from performing its obligations hereunder, including natural
disasters, unavailability of materials, conditions arising out of or
attributable to war, rebellion or acts of terrorism, epidemics, strikes, labor
disturbances and lockouts (other than strikes and labor disturbances that
result from violation of agreements with employees, or lockouts that are in
violation of such agreements, by the party claiming such Force Majeure Event,
or its Affiliates).

 

“Initial
Projects” means the 3D Seismic Shoots, Railroad Crossing, Sales Meter Upgrade,
Change Out Compressors and Upgrade Dehydrator at Facility as defined in the
initial Work Plan (as defined below).

 

“Well”
means a well drilled for FARMEE’s account pursuant to this Agreement.

 

II.                                     REPRESENTATIONS

 

A.                                    FARMOR’S Representations and Warranties

 

FARMOR
makes the following representations, warranties and covenants to FARMEE:

 

1.                                       FARMOR is the
present owner of the acreage, working interest and net revenue interest
attributed to each Lease on Schedule B, and warrants its title thereto
against anyone claiming by, from, through or under FARMOR. Such Leases are in
full force and effect in accordance with their terms; there are no defaults by
lessee thereunder; except as set forth on Schedule B, the lessee has no
obligation under any such Lease to drill any well for the production of any
hydrocarbons; all amendments to each such Lease are identified in Schedule B;
and all consents required under such Leases to permit FARMEE to exercise its
rights, contemplated hereby, have been or will be obtained prior to the
assignment thereof to FARMEE, including consents to the assignment of such
Leases.  At the time of assignment
pursuant to Article IV, the Leases will be free and clear of any and all
encumbrances, liens and other interests. Upon request, FARMOR shall furnish
FARMEE copies of all lease and title and other data in FARMOR’s files or its
Affiliates’ files concerning the Leases and the AMI.

 

2.                                       FARMOR has
obtained all governmental and other approvals and permits to drill, complete
and operate the Initial Wells within the Initial Drilling Units and all surface
use rights necessary or 

 

2

 

appropriate
to drill, complete, produce and operate the Initial Wells. FARMOR shall use its
reasonable best efforts to obtain all governmental and other approvals and permits
to drill, complete and operate Wells within the Drilling Units and all surface
use rights necessary or appropriate to drill, complete, produce and operate the
such Wells.  FARMOR has the exclusive
right to drill, complete, produce and operate hydrocarbon wells on the property
covered by each Lease, and FARMOR agrees not to grant, assign or otherwise
transfer to any person, corporation or other entity, except to FARMEE or as
otherwise provided herein, the right to explore for or produce hydrocarbons from
any properties covered by any Lease.

 

3.                                       There are no
claims, demands, actions, suits, governmental inquiries, or proceedings pending
or to FARMOR’s knowledge threatened against FARMOR which would have an adverse
effect upon the consummation of the transactions contemplated by this
Agreement.

 

4.                                       FARMOR and its
Affiliates are not party to any marketing, financial or physical hedge, forward
sale or similar agreement affecting production from the Leases.    Except as set forth on Schedule C,
FARMOR and its Affiliates are not party or subject to any joint operating
agreement or other agreement affecting the Leases.  Except as permitted herein, FARMOR shall not
enter into any such agreement during the term of this Agreement affecting the
Leases or production therefrom without the consent of FARMEE, such consent not
to be unreasonably withheld.

 

5.                                       FARMOR shall
from time to time, but not more frequently than once every six (6) months,
provide to FARMEE a revised Schedule B reflecting all Leases acquired
after the date hereof.

 

6.                                       Prior to the
commencement of drilling on any Drilling Unit subject to assignment hereunder,
FARMOR shall provide FARMEE with a drilling title opinion (prepared by an
attorney reasonably satisfactory to FARMEE) regarding the relevant Drilling
Unit demonstrating that such Drilling Unit is free and clear of all liens and
encumbrances of whatsoever kind and character.

 

7.                                       FARMOR has
provided FARMEE with a copy of the written consent of the holder of the Amended
and Restated Senior Secured Debenture dated as of February 2, 2009 to West
Coast Opportunity Fund, LLC (as amended through the date hereof) to the
transactions contemplated by this Agreement.

 

3

 

B.                                    FARMEE’S Representations and Warranties

 

FARMEE represents and
warrants to FARMOR that there are no claims, demands, actions, suits,
governmental inquiries, or proceedings pending or to FARMEE’s knowledge
threatened against FARMEE which would have an adverse effect upon the
consummation of the transactions contemplated by this Agreement.

 

C.                                    Mutual
Representations and Warranties

 

Each of FARMOR and FARMEE
makes the following representations and warranties to the other:

 

1.                                       It is duly
organized and validly existing under the laws of the jurisdiction where it is
organized.  To the extent required, each
party is qualified to conduct business in the jurisdiction as necessary to
perform this Agreement. It has all requisite corporate or limited liability
company power and authority to enter into this Agreement, to perform its
obligations hereunder, and to consummate the transactions contemplated
hereby.  This Agreement has been duly
executed and delivered by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms.

 

2.                                       The execution,
delivery, and performance of this Agreement by it, the consummation of the
transactions contemplated hereby, and the compliance with the provisions hereof
will not:

 

a.                                       violate any
applicable laws or regulations, judgment, decree or award;

 

b.             contravene its
organizational documents; or

 

c.                                       result in a
violation of a term or provision, or constitute a default or accelerate the
performance of an obligation under any contract or agreement to which it is a
party.

 

D.                                    Timing
of Representations and Warranties

 

The
representations, warranties and covenants made by the parties in this Article II
shall be deemed given as of the date hereof and as of the date of each
assignment under Article IV.

 

4

 

III.           WELLS

 

A.            Development
Obligations

 

FARMEE shall be obligated to
drill and complete or drill, plug and abandon Initial Wells in the Initial
Drilling Units and complete the Initial Projects.

 

B.                                    Development
Rights

 

Subject to Article V,
C, 1 and 3, FARMEE shall have the exclusive right, but not an obligation, to
drill Wells on the Leases in accordance with the Work Plans approved by FARMEE.

 

C.            Well-Site
Fee

 

FARMEE shall pay FARMOR a
well-site fee in the amount of Sixty Thousand Dollars ($60,000) (the “Well-Site
Fee”) for each Well drilled on the Leases, including the Initial Drilling
Units. Upon FARMEE’s approval of an AFE for a Well as provided in Article V,
B, 1, FARMEE shall pay the Well-Site Fee with respect to the Well to FARMOR,
and FARMOR shall simultaneously deliver to FARMEE an executed assignment in
recordable form for the Drilling Unit on which such Well will be located in
accordance with Article IV, B.

 

D.            Ingress and
Egress

 

FARMOR
hereby grants FARMEE such rights of ingress and egress from and to the Leases
and any other property of FARMOR within the AMI as are necessary for and
incidental to the rights and obligations under this Agreement.

 

IV.                                ASSIGNMENT

 

A.                                    Assignment Upon Execution of this Agreement

 

1.                                       Upon the execution of this Agreement, FARMOR shall execute and
deliver to FARMEE an assignment of all of FARMOR’s right, title and interest in
the Lease(s) covering the Initial Drilling Units, but insofar as, and only
insofar as, the Lease(s) covers the lands comprising the Initial Drilling
Units and all depths covered by such Lease(s) in respect of such lands,
together with FARMOR’s right, title and interest in all permits, licenses,
franchises, easements, servitudes and rights-of-way, and other instruments,
contracts and agreements, of every character to the extent they cover or affect
such assigned lands and depths. Such assignment shall be in the form of the
assignment attached hereto as Schedule D.  If FARMEE does not complete any of the
Initial Wells as Earning Wells, FARMEE may quitclaim and release to FARMOR the 

 

5

 

applicable
Initial Drilling Unit, without additional consideration or warranty of title,
and shall receive credit therefor as set forth in Article V, C, 5.

 

2.                                       In
consideration of FARMOR’s agreements hereunder, upon the execution of this Agreement, FARMEE shall pay FARMOR cash
in the amount of One Million Dollars ($1,000,000).

 

3.                                       Upon the
execution of this Agreement, FARMOR and FARMEE shall enter into an agreement
with respect to FARMEE’s use of FARMOR’s midstream facilities (the “Gathering
Agreement”) in the form attached hereto as Schedule E.

 

B.                                    Assignment Upon Delivery of AFE

 

Except as provided in Article IV, A, upon receipt by FARMOR of (i) the
Well-Site Fee for such Well from FARMEE and (ii) an AFE approved by FARMEE
as described in Article V, B, 1, FARMOR shall execute and deliver to
FARMEE an assignment of all of FARMOR’s right, title and interest in the Lease(s) covering
the Drilling Unit established for such Well, but insofar as, and only insofar
as, the Lease(s) covers the lands comprising the relevant Drilling Unit
and all depths covered by such Lease(s) in respect of such lands, together
with FARMOR’s right, title and interest in all permits, licenses, franchises,
easements, servitudes and rights-of-way, and other instruments, contracts and
agreements, of every character to the extent they cover or affect such assigned
lands and depths.  The assignment will
not release FARMOR from any obligation that should have been performed by it or
any liability that may have accrued to it prior to that assignment.  Such assignment shall be in the form of the
assignment attached hereto as Schedule D.  If FARMEE does not complete any such Wells as
Earning Wells, FARMEE may quitclaim and release to FARMOR the applicable
Drilling Unit, without additional consideration or warranty of title, and shall
receive credit therefor as set forth in Article V, C, 5.

 

C.            Lease
Administration

 

At all times during the term
of this Agreement, FARMOR shall be solely responsible for lease administration
of the Leases, including, without limitation, payment of all delay rentals,
minimum royalties, shut-in royalties and other amounts required to be paid
under the Leases and to keep them in full force and effect, and, within twenty
(20) days after the end of each month, FARMOR shall provide evidence of such
payment in such detail as FARMEE may reasonably request and shall provide a
list of Leases subject to expiration within the next sixty (60) days.  FARMOR shall not be entitled to recoup such
delay rentals, minimum royalties 

 

6

 

and/or other amounts as may
be provided in any Lease.  Additionally,
FARMOR shall comply with all other provisions of the Leases and shall use its
reasonable and economic best efforts to otherwise keep them in full force and
effect, with respect to the property.  
Promptly after receipt of any notice, or any document or other writing,
from any lessor of a Lease, any governmental or regulatory authority or agency
or any other person, corporation or authority relating to any such Lease or
Well or any activities conducted on the property subject to the Leases or
relating to any other matter concerning the drilling, completion or operation
of one or more Wells, or the transportation, compression, processing, marketing
or sale of hydrocarbons produced therefrom that may reasonably be expected to
adversely affect the Lease or Well, FARMOR shall provide the FARMEE with such notice,
or document or other writing.

 

FARMOR shall not agree to any amendment or other modification of any
Lease without the prior written consent of FARMEE, such consent not to be
unreasonably withheld.

 

D.            Overriding
Royalty Interest

 

1.                                       FARMOR shall
reserve unto itself, its successors and assigns an overriding royalty interest
on all of the hydrocarbons produced and sold that is attributable to the
assigned Leases equal to an undivided six percent of eight eighths (6% of
8/8ths); provided, that such overriding royalty interest shall be
proportionately reduced to the extent the leasehold interest under the Lease
covers less than a one hundred percent (100%) mineral leasehold interest in the
lands covered thereby, and provided, further, that (unless otherwise agreed in
writing by FARMEE) such overriding royalty interest shall be reduced so that
FARMEE’s net revenue interest in the Lease shall never be less than eighty
percent of eight eighths (80% of 8/8ths), taking into account the existing
burdens along with such overriding royalty interest. Such overriding royalty
interest shall be free and clear of all costs and expenses of drilling and
completion, but shall be burdened by FARMOR’s pro-rata share of
(a) reasonable volume deductions for line loss and fuel usage,
(b) post-production charges incurred by FARMEE for processing, gathering,
transportation, marketing, dehydration, compression, and any other charges
(which may include charges payable to Affiliates of FARMEE) required to deliver
the hydrocarbons for sale, and (c) ad valorem, severance and other similar
taxes.  FARMEE shall use its reasonable
best efforts to pay to FARMOR from funds received from the sale or other
disposition of hydrocarbons produced from the Wells such overriding royalty
interest within forty five (45) days after receipt 

 

7

 

of
such funds, but in any case shall pay FARMOR within sixty (60) days after
receipt of such funds.

 

2.                                       Unless FARMOR
shall elect to take the overriding royalty interest in kind or otherwise
arranges for the sale of the related hydrocarbons, FARMEE shall have exclusive
charge and control of the marketing of all hydrocarbons, shall market FARMOR’s
interest proportionately and shall collect and receive the proceeds of the sale
of all such production. FARMEE shall advise FARMOR of the terms and conditions
of the marketing contracts to sell hydrocarbons from the overriding royalty
interest. Notwithstanding the foregoing sentence, FARMOR shall have the right
to take the overriding royalty interest in kind and, subject to any existing
production sales contracts and upon at least thirty (30) days’ written notice
from FARMOR, FARMEE shall deliver the hydrocarbons to FARMOR at the tanks or
pipeline inlet, as the case may be, where FARMEE delivers the hydrocarbons to
the purchaser thereof; provided, however, that that if FARMOR exercises its
right and privilege to take in kind, such exercise shall be for one hundred
percent (100%) of its overriding royalty share of the production and FARMOR
shall use its best efforts to actually take in kind one hundred percent (100%)
of such overriding royalty, and provided further, that FARMOR shall be
responsible for the payment of all costs and expenses incurred by FARMOR,
FARMEE or otherwise in connection with FARMOR’s receipt in kind and failure, if
any, to take in kind one hundred percent (100%) of such overriding royalty.

 

E.                                      Recording of Assignment

 

Upon
delivery of the assignments, FARMEE agrees to file said instruments of record
in the appropriate county offices and to furnish FARMOR with a copy of the
recorded and/or approved instruments.

 

F.                                      Assignment by FARMEE

 

FARMOR
acknowledges and agrees that FARMEE intends to, and hereby permits FARMEE to,
assign the Leases or portions thereof assigned to it hereunder to investment
partnerships sponsored by FARMEE and its Affiliates (the “Partnerships”) or to
any of its Affiliates, provided that such assignment shall not relieve FARMEE
of its obligations under this Agreement.

 

8

 

V.            DEVELOPMENT OPERATIONS

 

A.            Designation
and Responsibilities

 

1.                                       FARMEE shall
register as the “Operator” of record with respect to the Drilling Unit
operations with the appropriate governing regulatory agency or authority, and
shall comply with all rules and regulations established by such governing
agency or authority to maintain itself in good standing.  Subject to clause 3 of this Article V, A
and the provisions of the applicable Operating Contract (as defined below),
FARMEE hereby designates FARMOR to conduct, as subcontractor for FARMEE, all
drilling, completing, producing and superintendant/maintenance operations for
all Wells and the Initial Projects in accordance with the Work Plan.  FARMOR and FARMEE shall enter into an
operating contract, in substantially the same form as Schedule F (an “Operating
Contract”), with respect to each project, comprising such number of Wells as
they shall agree.

 

FARMOR shall conduct its
activities hereunder as a reasonably prudent contractor, in a good and
workmanlike manner, with due diligence and dispatch, in accordance with good
oilfield practice, and in compliance with applicable laws and regulations.

 

2.                                       FARMEE shall
have access to the Wells and to any information in the possession of FARMOR
pertaining to the Wells, and shall be entitled to inspect and observe
operations of every kind and character upon the property covered by any Lease.
Upon reasonable notice to FARMOR and during normal business hours, FARMEE shall
also have access to, and be entitled to receive copies of, the records and
other documents on file at FARMOR’s or any of its Affiliates’ office relating
to the drilling, completion and operation of the Wells, including all well logs
and production records. In addition, during the drilling and completion of a
Well, such number (as FARMEE or its designated agent may reasonably request) of
copies of drilling reports, logs, completion reports and other data produced in
connection with such activities shall, upon request, be made available and
provided to FARMEE or such agent, as they are produced or promptly thereafter.

 

3.                                       In the event of
a Service Event of Default, as defined below, FARMEE shall have the right to
terminate FARMOR’s duties, obligations and rights to perform the services
provided under this Article V and the Operating Contracts (collectively, “FARMOR’s
Services”), and FARMEE, or its designee, shall have the right to perform such
services as are consistent with its desired or required activities provided for
hereunder, in accordance with the following terms:

 

9

 

Any
of the following shall be an event of default (a “Services Event of Default”)
by FARMOR: (i) FARMOR commits gross negligence or willful misconduct in
connection with any of FARMOR’s Services, or (ii) in respect of FARMOR’s
Services, FARMOR is in breach of, or fails to meet, the standards of operation
set out in this Agreement or any Operating Contract in any material respect, or
FARMOR fails or is unable to perform its obligations under this Agreement
 or any Operating Contract in any material respect, and, in any such case,
FARMOR fails to cure any such breach, failure or inability within thirty (30)
days after written notice thereof is given by FARMEE to FARMOR, or (iii) (x) if,
at any time on or prior to the second anniversary of this Agreement, either Tom
Riley or Bill Hayworth ceases to be employed by FARMOR in the same position
held by him as of the date of this Agreement, with the same duties and responsibilities
as of the date of this Agreement, or (y) if, at any time after the second
anniversary of this Agreement, both Tom Riley and Bill Hayworth cease to be
employed by FARMOR in the same positions held by them, respectively, as of the
date of this Agreement, with the same respective duties and responsibilities as
of the date of this Agreement, or (iv) if FARMOR breaches any financial
covenant under any financing agreement or arrangement to which it or any of its
Affiliates is a party, and such breach is not cured within sixty (60) days
after the occurrence thereof and notice from the lender (if required by the
financing agreement or arrangement), or if the lender or other party under any
such agreement or arrangement accelerates the maturity date of any such
financing as a result of such breach or other default by FARMOR thereunder.

 

If
a Services Event of Default occurs, FARMEE shall have the right to terminate
FARMOR’s Services under this Agreement and terminate any or all of the
Operating Contracts effective on the date which is ninety (90) days following
the giving of written notice thereof by FARMEE to FARMOR, unless FARMEE selects
a successor to perform FARMOR’s Services and such successor assumes FARMOR’s
Services at an earlier date, then FARMOR’s termination or removal with respect
to FARMOR’s Services shall be effective on such earlier date. Upon the
termination of FARMOR’s Services, FARMOR shall submit to FARMEE a final
accounting of its operations hereunder and transfer all the records, reports, books,
data and other material(s) related to the performance of FARMOR’s Services
that are in the possession of FARMOR and its Affiliates as promptly as
possible.  All special tools, supplies,
spare parts, equipment, consumables, and any other items furnished or
maintained under this Agreement (the costs of which have been reimbursed by
FARMEE to FARMOR) shall

 

10

 

remain
the property of FARMEE without additional charge.  To the extent permitted by the relevant third
parties, FARMOR shall assign to FARMEE, and FARMEE shall assume and become
liable for, any contracts or obligations (including subcontracts) that FARMOR
may have undertaken with third parties that are not Affiliates of FARMOR in
connection with FARMOR’s Services and in accordance with this Agreement, and
FARMOR shall execute all documents and take all other reasonable steps required
by FARMEE which may be required to assign to and vest in FARMEE all rights,
benefits, interests and title in connection with such contracts or
obligations.  Effective as of the
termination of FARMOR’s Services, FARMOR shall terminate any contracts or
obligations (including subcontracts) that FARMOR may have undertaken with
Affiliates of FARMOR in connection with FARMOR’s Services.  FARMOR will cooperate with FARMEE and any
successor contractor to cause an orderly transition of operations to the
successor contractor.

 

B.            Development
and Operating Costs

 

1.                                       At least
forty-five (45) days, but not more than sixty (60) days, prior to the spud date
of a Well, FARMOR shall provide FARMEE an AFE therefor.  Each AFE shall include all costs necessary to
drill and complete the applicable Well (including a line item for overhead of
not more than $15,000 for each of the first 220 Wells and $10,000 per Well
thereafter) and shall be prepared in accordance with the charging procedures
provided for in the applicable Operating Contract.  FARMEE shall approve or reject an AFE within
fifteen (15) days of its receipt.  The
AFEs for the Initial Drilling Units and the Initial Projects are attached as Schedule
G.  FARMEE shall pay its pro rata
share, under the relevant Lease and related documents, of the costs set forth
in each approved AFE as provided in the applicable Operating Agreement.

 

2.                                       FARMOR shall be
entitled to receive payment from FARMEE for direct costs incurred by the FARMOR
for the services of FARMOR pursuant to the applicable Operating Contract.  Such charges shall be invoiced on a monthly
basis, and FARMEE shall make such payments as are consistent with this
Agreement within thirty (30) days after receipt of such invoice.

 

3.                                       If FARMEE fails
to timely make payments under this Article V, B or Article IV, D, and
such failure shall remain uncured for thirty (30) days, FARMEE shall be
obligated to pay FARMOR interest on such amount equal to the greater of twelve
percent (12%) per annum or the prime interest rate as published in the Wall
Street 

 

11

 

Journal.

 

C.            Work
Plan

 

1.                                       No later than January 15
and July 15 of each year, beginning January 15, 2011, FARMEE shall
provide FARMOR with written notice setting forth the number of wells it proposes
to drill for the following six-month period beginning May 1 and November 1,
respectively (a “Drill Proposal”).  If a
Drill Proposal proposes less than sixty (60) Wells, FARMOR shall have the right
to drill for its own account, during the relevant period, that number of wells
equal to the difference between sixty (60) wells and the number of Wells set
forth in the Drill Proposal  FARMOR may
engage third parties in development operations, farmout arrangements or other
similar activities with respect to any such well.

 

2.                                       No later than February 15
and August 15 of each year, FARMOR shall provide FARMEE a development
plan, in a form substantially similar to Schedule H, for the following
six-month period beginning May 1 and November 1, respectively, for
the number of Wells set forth in the Drill Proposal (a “Work Plan”), which
shall include the following:

 

a.                                       well names,
locations and target formations

 

b.                                      permit numbers,
if available

 

c.                                       proposed spud
dates, frac dates and turn into line dates

 

In
addition, FARMOR shall provide FARMEE a proposed monthly budget, including
estimated production from Wells, and a form of AFE expected for the Work Plan,
in substantially the same forms as Schedule I.  The initial Work Plan covering the period
from the date hereof through April 30, 2011 is attached as Schedule J.

 

3.                                       Within fifteen
(15) days of receipt of the Work Plan, FARMEE shall approve or request changes
thereto.  Within fifteen (15) days of
receipt of written notice of FARMEE’s requested changes, if any, FARMOR shall
provide FARMEE with a revised Work Plan.   
In the event the parties do not agree on all the terms of the revised
Work Plan, the last version proposed by FARMEE, with such changes therein
approved by FARMEE, shall govern and be carried out by FARMOR.  In the event FARMEE determines not to drill
at least sixty (60) Wells in the course of any six-month period, FARMEE shall
provide FARMOR with written notice at least 

 

12

 

forty
five (45) days prior to the date indicated in the Work Plan for the
commencement of drilling on the affected Well(s) and FARMOR shall have the
right to drill for its own account, during the relevant period, that number of
wells equal to the difference between sixty (60) wells and the number of Wells
to be drilled for FARMEE. FARMOR may engage third parties in development
operations, farmout arrangements or other similar activities with respect to
any such well.

 

4.                                       No later than
the fifteenth (15th) day of each
month, FARMOR shall provide FARMEE with a report for the previous month’s
development operations, which shall include a reconciliation of spud dates,
frac dates, turn into line dates, budget and production to the relevant Work
Plan.

 

5.                                       The following
shall apply to any Well (a “Deep Well”) planned for drilling in any zone below
the Niobrara formation within the AMI (a “Deep Zone”):

 

a.                                       If any Work
Plan approved by FARMEE provides for a Deep Well, and FARMEE requires
additional acreage within the AMI beyond the size of the shallow Well Drilling
Unit in order to drill the Deep Well (a “Deep Well Drilling Unit”), then:

 

(x)            FARMOR may elect to
participate in such Deep Well Drilling Unit, pro-rata, based on the amount of
acreage contributed to the Deep Well Drilling Unit by FARMOR, and if FARMOR so
elects, then:

 

(A)          FARMOR shall subject such
acreage to a “joint operation” consistent with Article VI of the AAPL
Model Form Joint Operating Agreement and shall pay its pro-rata share of
costs; and

 

(B)           no Work-Site Fee or site
fees of any kind shall be payable by FARMEE to FARMOR;

 

OR,

 

(y)                                     FARMOR may elect not to
participate, and if FARMOR so elects, then:

 

13

 

(A)          FARMOR shall
assign to FARMEE all of its working interest and other rights to such
additional acreage, together with all depths, as is needed to complete the Deep
Well Drilling Unit;

 

(B)           FARMOR shall not be required
to pay any part of the development cost for such Deep Well;

 

(C)           FARMOR shall receive a site
fee equal to the amount obtained when multiplying its pro-rata share of such
additional acreage contributed by it to FARMEE by $60,000; and

 

(D)          FARMOR shall receive an
overriding royalty interest in all hydrocarbons produced and sold that are
attributable to the Deep Well Drilling Unit equal to the amount obtained when
multiplying its pro-rata share of such additional acreage contributed by it to
such drilling unit times 6%, but subject to the same reductions and burdens set
forth in Article IV, D, 1 for the overriding royalty interest described
therein.

 

b.                                      If FARMOR is
entitled to drill wells in the AMI for its own account pursuant to Article V,
C and desires to drill a Deep Well, and in order to drill such Deep Well FARMOR
requires some of the acreage previously assigned to FARMEE pursuant to the
terms of this Agreement, and FARMEE has determined in its sole discretion that
it does not wish to develop, for its own account, the portion of the acreage
required by FARMOR, then:

 

(x)            FARMEE may
elect to participate in such Deep Well Drilling Unit, pro-rata, based on amount
of acreage contributed to the Deep Well Drilling Unit by FARMEE, and if FARMEE
so elects, then:

 

(A)          FARMEE shall
subject such acreage to a “joint operation” consistent with Article VI of
the AAPL Model Form Joint

 

14

 

Operating Agreement and shall pay its pro-rata share of costs; and

 

(B)           no Work-Site
Fee or site fees  of any kind shall be
payable by FARMOR to FARMEE;

 

OR,

 

(y)        FARMEE may elect not to participate, and if FARMEE
so elects, then:

 

(A)         FARMEE shall assign to FARMOR all of its working
interest and other rights to such additional acreage, but only to the extent of
the Deep Zone, as is needed to complete the Deep Well Drilling Unit;

 

(B)           FARMEE shall not be required
to pay any part of the development cost for such Deep Well;

 

(C)           FARMEE shall receive a site
fee equal to the amount obtained when multiplying its pro-rata share of such
additional acreage contributed by it to FARMOR by $60,000; and

 

(D)                                   FARMEE shall receive an
overriding royalty interest in all hydrocarbons produced and sold that are
attributable to the Deep Well Drilling Unit equal to the amount obtained when
multiplying its pro-rata share of such additional acreage contributed by it to
such drilling unit times 6%, but subject to the same reductions and burdens set
forth in Article IV, D, 1 for the overriding royalty interest described
therein;

 

provided
however, that the number of wells that FARMOR drills for its own account,
including Deep Wells pursuant to this Article V, C, 5, shall not exceed in
the aggregate the number of wells it is permitted to drill for its own account
pursuant to Article V, C, 3.

 

15

 

D.            AMI

 

1.                                       All Leases held
by FARMOR as of the date hereof, and all Leases acquired by FARMOR after the
date hereof on acreage within the AMI that is undeveloped as of the date of
acquisition by FARMOR, shall be included in the AMI.  The AMI shall remain in effect for a period
commencing on the date hereof and continuing until the termination of this
Agreement.  Except as specifically
permitted herein, FARMOR shall not engage in development operations, farmout
arrangements or other similar activities for the account of any person other
than FARMEE within the AMI.

 

2.                                       In the event
FARMEE identifies a prospective leasehold interest within the AMI, it shall
promptly notify FARMOR in writing. 
FARMOR shall elect whether or not to acquire such leasehold interest,
and pay the acquisition and associated costs therefor, within the time period
set forth in such notice.  If FARMOR
acquires the leasehold interest, it will be subject to the provisions of this
Agreement.  If FARMOR does not elect to
acquire the leasehold interest, FARMEE may acquire it for its own account and
it shall not be subject to the provisions of this Agreement.

 

3.                                       Notwithstanding
the foregoing, if, after the date hereof, (A) either of FARMOR or FARMEE,
or any of their respective Affiliates, acquires any acreage in the AMI (i) directly
or indirectly as a result of a consolidation, amalgamation, merger or other
business combination, or through the acquisition of stock or equity interests
or (ii) by acquiring all or substantially all of the assets of a third
party unaffiliated with FARMOR or FARMEE, as the case may be, and any of their
respective Affiliates or (B) FARMOR or FARMEE is acquired by an
unaffiliated third party (“Acquirer”) in a transaction similar to those
described in clause (A) and the Acquirer held acreage in the AMI prior to
such transaction (each of the transactions described in clauses (A) and
(B), an “Business Transaction”), then such acreage acquired in a Business
Transaction described in clause (A), and the acreage held by the Acquirer prior
to a Business Transaction described in clause (B), shall not be deemed included
in the AMI and not subject to the terms hereof.

 

E.             3-D
SEISMIC

 

Prior
to conducting a 3-D seismic acquisition in the AMI, FARMOR shall submit to
FARMEE in writing a plan and budget for such 3-D seismic acquisition (a “3-D
Seismic Plan”).  Within forty-five (45)
days of receipt of a 3-D Seismic Plan, FARMEE shall provide written notice to 

 

16

 

FARMOR of its approval or
rejection of such 3-D Seismic Plan.  If
FARMEE approves the 3-D Seismic Plan, FARMEE shall make the 3-D seismic
acquisition in its name or, if possible without incurring any additional costs,
in the joint names of both FARMOR and FARMEE, and FARMEE shall pay the costs
thereof.  In the event FARMEE rejects a
3-D Seismic Plan and subsequently desires to drill Well(s) on any acreage
covered in the 3-D Seismic Plan, FARMEE shall reimburse FARMOR for the costs of
the 3-D seismic acquisition pro rata, based on the number of well locations
identified in the 3-D seismic, for each Well FARMEE desires to drill, plus
interest, accruing from the date of FARMOR’s payment for the 3-D seismic, at
the rate of ten percent (10%) per annum, compounded.  The parties shall use their best efforts to
share the 3-D seismic with each other.

 

VI.           ADDITIONAL PROVISIONS

 

A.                                    Relationship of Parties

 

This Agreement is not intended to create, and shall not be construed to
create, a relationship of partnership or an association for profit between or
among the parties hereto. If, for Federal income tax purposes, this Agreement
and the operations hereunder are regarded as a partnership, each party hereby
affected elects to be excluded from the application of all of the provisions of
Subchapter K, Chapter 1, Subtitle A, of the Internal Revenue Code of 1986 as
permitted and authorized by Section 761 of the Code and the regulations
promulgated thereunder. If any present or future income tax laws of the state
or states in which any of the Leases is located or any future income tax laws
of the United States contain provisions similar to those in Subchapter K,
Chapter 1, Subtitle A, of the Internal Revenue Code of 1986 under which an
election similar to that provided by Section 761 of the Code is permitted,
each party hereby affected shall make such election as may be permitted or
required by such laws.

 

B.                                    Insurance

 

For
as long as this Agreement is in effect, FARMOR shall maintain in effect at its
sole cost and expense the following minimum types and amounts (whether primary
or a combination of primary and excess, as applicable) of insurance coverage
with insurance companies reasonably satisfactory to FARMEE:

 

1.                                       Workers’
Compensation insurance including Occupational Disease, that is in compliance
with all Workers’ Compensation laws that apply.

 

2.                                       Employer’s
Liability Insurance with a limit of not less than One 

 

17

 

Million
Dollars ($1,000,000) per accident.

 

3.                                       Commercial
General Liability Insurance, including contractual liability insuring the
indemnity agreement, if any, set forth in this Agreement, with limits of not
less than One Million ($1,000,000) applicable to bodily injury, sickness or
death and property damage in any one occurrence, and Two Million Dollars
($2,000,000) in the aggregate.

 

4.                                       Business
Automobile Liability Insurance, covering owned, non-owned, hired and all
vehicles used by FARMOR with limits of not less than One Million Dollars
($1,000,000) applicable to bodily injury, sickness or death of any one person,
and property damage in any one occurrence.

 

5.                                       Other than with
respect to the coverages described in Article VI, B, 1 and 2, all policies
shall be endorsed to provide that FARMEE is an additional insured under such
policy and that underwriters and insurance companies of FARMOR shall not have
any right of subrogation against FARMEE or its Affiliates, subsidiaries,
agents, employees, officers, directors, invitees, co-owners, lessors, servants,
contractors, sub-contractors, insurers, and underwriters.

 

6.                                       Upon request,
FARMOR shall furnish Certificates of Insurance to FARMEE, showing to FARMEE’s
satisfaction that the required insurance coverages are in full force and
effect.

 

7.                                       To the extent
reasonably practical, FARMOR shall require (a) all contractors and
sub-contractors to obtain and keep in force similar insurance coverage and,
upon request, furnish FARMEE acceptable evidence of such insurance and (b) all
policies of FARMOR’s contractors and sub-contractors shall be endorsed to
provide a waiver of subrogation as set forth above.

 

8.                                       THE LIABILITY OF FARMOR UNDER THE PROVISIONS OF THIS AGREEMENT, WHEREBY FARMOR  AGREES OR UNDERTAKES TO DEFEND, INDEMNIFY,
PROTECT AND HOLD FARMEE HARMLESS, SHALL NOT BE LIMITED TO OR BY THE INSURANCE
REQUIRED OF FARMOR HEREUNDER.

 

9.                                       Any coverage
provided FARMEE by FARMOR’s insurance under this Agreement is primary insurance
and shall not be considered contributory insurance with any insurance policies
of FARMEE.

 

10.                                 No portion of FARMOR’s costs
of all the foregoing insurances 

 

18

 

shall
be chargeable to FARMEE.

 

FARMEE
shall maintain, at its sole cost and expense, insurance coverage for its own
Wells, including, but not limited to property and general liability insurance.

 

C.                                    Compliance with Laws and Lease Obligations

 

FARMOR
agrees that it will conduct all of its operations in material compliance with
all the terms, provisions, and covenants, express or implied, of the Lease(s) upon
which any Well is located, and in material compliance with all applicable
Local, State and Federal laws, rules, regulations, and orders.  At any time after the date hereof, FARMOR
agrees to perform any remedial activities necessary or proper to restore the
surface or subsurface of the Leases or to assume and bear any monetary
responsibility for any surface or subsurface (including groundwater) damages in
lieu of or in addition to any such remedial activities which may be required by
any Lease or other contract pertinent hereto, or as may be required by any
applicable law or regulation of any Federal, State or local governmental body
so as to place the Leases in a condition as near as practicable to its
condition as of the date hereof or, with respect to Leases acquired by FARMOR
after the date hereof, the date of acquisition; provided, however, FARMOR shall
not be obligated by the terms of this Agreement to perform remedial activities
except with respect to damages directly caused by its operations, including,
but not limited to, production, transportation, drilling, work-over,
remediation, hauling and related activities on the Leases.

 

D.                                    Liens and Encumbrances

 

FARMOR
agrees that it will keep the Leases that are subject to an assignment hereunder
free and clear of all liens and encumbrances of whatsoever kind and character,
including liens for labor performed and material furnished, AND AGREES TO INDEMNIFY AND SAVE FARMEE HARMLESS FROM
ALL CLAIMS, DEMANDS, LOSSES, DAMAGES, AND LIABILITY ARISING OUT OF OR RESULTING
FROM ANY SUCH LIENS AND ENCUMBRANCES.

 

E.                                      Claims and Lawsuits

 

FARMOR  AGREES TO
INDEMNIFY, DEFEND, AND HOLD FARMEE HARMLESS FROM AND AGAINST ALL CLAIMS,
DEMANDS, LOSSES, DAMAGES, OR LIABILITY (INCLUDING REASONABLE ATTORNEY’S FEES)
ARISING OUT OF OR DIRECTLY RELATED TO (i) FARMOR’S
PRIOR OPERATIONS, OCCUPATION, OWNERSHIP OF THE LEASES, (ii) FARMOR’S

 

19

 

FUTURE OPERATIONS, OCCUPATION, OWNERSHIP
OF THE LEASES NOT ASSIGNED TO FARMEE HEREUNDER AND THE DEEP WELLS FARMOR DRILLS
FOR ITS OWN ACCOUNT, OR (iii) FARMOR’S FAILURE TO PERFORM HEREUNDER.

 

FARMEE  AGREES TO
INDEMNIFY, DEFEND, AND HOLD FARMOR HARMLESS FROM AND AGAINST ALL CLAIMS,
DEMANDS, LOSSES, DAMAGES, OR LIABILITY (INCLUDING REASONABLE ATTORNEY’S FEES)
ARISING OUT OF OR DIRECTLY RELATED TO (i) FARMEE’S  OPERATIONS OCCUPATION,
OWNERSHIP OF THE LEASES AFTER AND DURING THEIR ASSIGNMENT TO FARMEE HEREUNDER
(EXCEPT TO THE EXTENT FARMOR IS REQUIRED TO INDEMNIFY FARMEE PURSUANT TO THE
OPERATING AGREEMENTS) AND THE DEEP WELLS FARMEE DRILLS FOR ITS OWN ACCOUNT, OR (ii) FARMEE’S
FAILURE TO PERFORM HEREUNDER.

 

F.                                      Notices

 

All
notices authorized or required hereunder, unless otherwise specifically
provided, shall be given in writing by mail, postage or charges prepaid, or by
telecopy or electronic mail and confirmed in writing and addressed to the party
to whom the notice is given at the address listed below.

 

If to FARMOR:                     Black Raven
Energy, Inc.

Attn: William F. Hayworth

1125 Seventeenth Street, Suite 2300

Denver, CO 80202

Phone:  (303) 308-1330

Fax: (303) 308-1590

E-mail: bhayworth@blackravenenergy.com

 

If to FARMEE:                      Atlas Resources, LLC

Attn:  Jeffrey
C. Simmons

1550
Coraopolis Heights Road

Moon
Township, PA  15108

Telephone:  (412) 262-2830

Fax:  (412) 262-2820

Email:
jsimmons@atlasenergy.com

 

G.            Modifications

 

This
Agreement shall not be modified, altered or waived except by prior written
consent of the parties. This Agreement shall be binding upon the successors and
permitted assigns of the parties hereto and shall be deemed

 

20

 

a
covenant running with the Leases. 
Neither party may assign its rights or obligations hereunder without the
prior consent of the other party, not to be unreasonably withheld, except as
provided herein and except that FARMEE may assign its rights and obligations
hereunder to any wholly-owned subsidiary of its parent, Atlas Energy, Inc.;
provided, however, that any such assignment shall not relieve FARMEE of its
obligations hereunder.

 

H.                                    Governing Law

 

This
Agreement and any arbitration or dispute resolution conducted pursuant hereto
shall be construed in accordance with, and governed by, the laws of the State
of New York.  Notwithstanding the
foregoing, the Law of the state in which any real property interest covered or
created by or granted under this Agreement is located shall govern the
following: (i) whether this Agreement creates an interest in real property
for security purposes or otherwise; (ii) the nature and attributes of any
interest in real property that is covered or created by or granted under this
Agreement; and (iii) the manner and effect of recording or failing to
record memoranda of this Agreement or evidence of any action or transaction
that occurs under this Agreement and that results in the creation or transfer
of any interest in real property.

 

I.              Counterparts

 

This Agreement may be executed in one or more
counterparts and by facsimile or other electronic transmission, which when
taken together shall constitute a single, original document.

 

J.             Memorandum

 

FARMOR
agrees that FARMEE may file in local land records relevant to the Leases and
the AMI memoranda of this Agreement.  At
the request of FARMEE, FARMOR shall execute
and deliver each memoranda and such further documents and instruments and shall
take such other actions as may be reasonably required or appropriate in respect
of the foregoing.

 

K.            Term

 

1.                                       The term of
this Agreement shall continue until the tenth (10th) anniversary hereof, unless earlier terminated by (a) mutual
written agreement of the parties, (b) by either party immediately upon the
commencement of case or proceeding against the other party under any
bankruptcy, reorganization, insolvency or similar law of any jurisdiction, (c) by
FARMEE pursuant to Article VI, K, 2 below, or (d) by FARMOR pursuant
to Article VI, K, 3 below.  The 

 

21

 

provisions
of Article VI, D, E, L, N and P and the last sentence of Article VI,
K, 3 shall survive termination of this Agreement.

 

2.                                       Subject to Article VI, O, FARMEE may
terminate this Agreement upon thirty (30) days’ prior written notice to FARMOR
upon (i) material breach of any representation or warranty by FARMOR set
forth herein, (ii) gross negligence or willful misconduct of FARMOR in the
performance of its obligations hereunder, or (iii) material default by
FARMOR in the performance or observation of any covenant or obligation
hereunder which default remains uncured for a period of thirty (30) days after
written notice thereof is given to FARMOR by FARMEE.

 

3.                                       Subject to Article VI, O, FARMOR may
terminate this Agreement upon thirty (30) days’ prior written notice to FARMEE
upon:

 

a.                                       Material default by FARMEE in the
performance or observation of any covenant or obligation hereunder which
default remains uncured for a period of thirty (30) days after written notice
thereof is given to FARMEE by FARMOR;

 

b.                                      Failure of FARMEE to make payments in
accordance with Article V, B or any other material payment required by
FARMEE under this Agreement for sixty (60) consecutive days; or

 

c.                                       Failure (other than by reason of FARMOR’s
failure to perform a Work Plan) by FARMEE to drill at least the cumulative
number of Wells set forth below by the date set forth opposite such cumulative
number of Wells:

 

	
  Cumulative No. of Wells

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
  120

  	
   

  	
  September 30,
  2011

  
	
  160

  	
   

  	
  March 31,
  2012

  
	
  240

  	
   

  	
  March 31,
  2013

  
	
  320

  	
   

  	
  March 31,
  2014

  
	
  400

  	
   

  	
  March 31,
  2015

  
	
  480

  	
   

  	
  March 31,
  2016

  
	
  540

  	
   

  	
  March 31,
  2017

  
	
  600

  	
   

  	
  March 31,
  2018

  

 

d.                                      Failure by
FARMEE to propose any Wells in the Drill Proposal to be delivered to FARMEE by January 15,
2011 in accordance with Article V, D, 1.

 

22

 

e.                                       If FARMOR
terminates this Agreement pursuant to this Article VI, K, 3, FARMOR shall,
at FARMEE’s request, continue to provide FARMOR’s Services for up to ninety
(90) days after the effective date of the termination, or such shorter period
as FARMEE selects a successor provider and such provider assumes provision of
FARMOR’s Services.

 

L.            Dispute Resolution

 

All
controversies, disputes or claims between FARMOR and FARMEE and their
subsidiaries, Affiliates, shareholders, officers, directors, agents and
employees relating to this Agreement or the transactions contemplated hereby
(each, a “Dispute”) shall be submitted to Judicial Arbitration and Mediation
Services (“JAMS”) for mediation. The parties will cooperate with JAMS and with
one another in selecting a mediator from JAMS panel of neutrals, and in
promptly scheduling the mediation proceedings. The parties covenant that they
will participate in the mediation in good faith, and that they will share
equally in its costs. All offers, promises, conduct and statements, whether
oral or written, made in the course of the mediation by any of the parties,
their agents, employees, experts and attorneys, and by the mediator or any JAMS
employee, are confidential, privileged and inadmissible for any purpose,
including impeachment, in any arbitration or other proceeding involving the
parties, provided that evidence that is otherwise admissible or discoverable
shall not be rendered inadmissible or non-discoverable as a result of its use
in the mediation. If the dispute is not resolved within thirty (30) days from
the date of the submission of the dispute to mediation (or such later date as
the parties may mutually agree in writing), the administration of the
arbitration shall proceed forthwith. The mediation may continue, if the parties
so agree, after the appointment of the arbitrators. Unless otherwise agreed by
the parties, the mediator shall be disqualified from serving as arbitrator in
the case. The pendency of a mediation shall not preclude a party from seeking
provisional remedies in aid of the arbitration from a court of appropriate
jurisdiction, and the parties agree not to defend against any application for provisional
relief on the ground that a mediation is pending.

 

Following
the mandatory mediation procedures all Disputes will be submitted for binding
arbitration to the New York, New York office of JAMS on demand of either party.
Unless otherwise agreed between the parties, such arbitration proceedings will
be conducted in New York, New York, and shall be heard by one arbitrator in
accordance with the then current Commercial Arbitration Rules of JAMS, who
shall be required to deliver to the parties a written opinion with respect to
his or her award.  The award of the arbitrator shall be conclusive and
binding on all parties hereto, and judgment upon the award may be entered in
any court of 

 

23

 

competent
jurisdiction.  Each party waives the right to contest the validity or
enforceability of such award, except as allowed under the Federal Arbitration
Act.  The parties to the arbitration shall equally share the costs of the
arbitration proceeding; provided that each party shall bear its own attorneys’
fees and other professional fees; and provided further that, if the arbitrator
shall determine that a party’s position in arbitration is frivolous, that party
shall bear all costs of the arbitration proceeding, including the other party’s
attorneys’ fees.

 

M.           Acknowledgement

 

Each
provision of this Agreement shall be construed as though both parties
participated equally in the drafting of the same.  Consequently, the parties acknowledge and
agree that any rule of construction that a document is to be construed
against the drafting party shall not be applicable to this Agreement. EACH OF THE PARTIES HERETO SPECIFICALLY ACKNOWLEDGES
AND AGREES (A) THAT IT HAS THE DUTY TO READ THIS AGREEMENT AND THAT IT IS
CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS HEREOF, (B) THAT IT HAS IN
FACT READ THIS AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND
KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS AGREEMENT, (C) THAT
IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT PROVIDE FOR THE
ASSUMPTION BY ONE PARTY OF, AND/OR RELEASE OF THE OTHER PARTY FROM, CERTAIN
LIABILITIES ATTRIBUTABLE TO THIS TRANSACTION OR THE PREMISES COVERED HEREBY
THAT SUCH PARTY WOULD OTHERWISE BE RESPONSIBLE FOR UNDER THE LAW. EACH PARTY
HERETO FURTHER AGREES THAT IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY
OF ANY OF SUCH PROVISIONS OF THIS AGREEMENT ON THE BASIS THAT THE PARTY HAD NO
NOTICE OR KNOWLEDGE OF SUCH PROVISIONS OR THAT SUCH PROVISIONS ARE NOT “CONSPICUOUS”.

 

N.            Integral Part/Direct
Relationship of Ancillary Agreements

 

FARMOR
and FARMEE agree that each and every agreement (and any amendment thereto)
benefiting FARMEE, including without limitation, the Leases, the Gathering
Agreement and the Operating Contracts, ancillary to this Agreement and related
to the Leases and/or preparation of the hydrocarbons for sale, through and
including the sale of said hydrocarbons by FARMEE and/or its representatives
into sales line, shall be deemed an integral part of and directly related to this
Agreement.

 

24

 

O.                                   Force Majeure

 

If
by reason of a Force Majeure Event either party is rendered unable, wholly or
in part, to carry out its obligations under this Agreement, and if such party
gives notice and the details of such Force Majeure in writing or by facsimile
to the other party within a reasonable time after the occurrence of the cause
relied on, the party giving such notice, so far as and to the extent that its
performance is affected by such Force Majeure Event and during the continuance
of its inability to perform as a result of such Force Majeure Event, shall not
be liable hereunder, including with respect to the obligations set forth in Article VI,
K; provided, however, that the party claiming such Force Majeure Event shall
cause such Force Majeure Event to be remedied with all reasonable dispatch.

 

P.            Confidentiality

 

Certain
terms of this Agreement and of the information that the parties have shared or
will share with each other pursuant hereto is confidential or proprietary and
has not been publicly disclosed (the “Information”).  The Information, except as permitted herein,
will not be disclosed without the prior written consent of both parties, such
consent not to be unreasonably withheld. 
Disclosure of such Information may cause irreparable harm to one or both
parties.  Accordingly, each party
represents that it has not, and agrees that it will not, and will inform its
directors, officers, agents, advisors and Affiliates not to, disclose to any
third party any Information or confirm any statement made by third parties
regarding Information unless the other party has provided its prior written
consent to such disclosure. Notwithstanding anything to the contrary herein, Information
shall not include information that:  (i) is
in the public domain; (ii) is previously known or independently developed
by a party; or (iii) is acquired by a party from any third party having a
right to disclose such information. Notwithstanding anything to the contrary
herein each party may disclose Information (x) to the extent such
disclosure is required, as reasonably determined by the disclosing party, by
applicable federal or state securities law or regulations or by the rules of
any stock exchange upon which shares of the disclosing party or any of its
Affiliates (which, for the purposes of this provision, shall include the
Partnerships with respect to FARMEE) are registered or are in the process of
being registered, which rules require the disclosure to be made; provided,
however, that the disclosing party, in consultation with the other party, shall
make a confidential treatment request to the appropriate regulatory authority;
and (y) to its partners, shareholders, investors, lenders, potential
investors (including potential investors in the Partnerships), potential
lenders, directors, officers, employees, agents or representatives, including
attorneys, accountants and consultants, in each case under circumstances 

 

25

 

in
which the disclosing party takes reasonable steps to maintain the
confidentiality of the Information.

 

Q.            Publicity

 

Neither
FARMOR nor FARMEE, nor any of their respective Affiliates (which, for the
purposes of this provision, shall include West Coast Opportunity Fund, LLC and
West Coast Management, Inc., in the case of FARMOR) shall issue any press
release or similar public announcement pertaining to this Agreement or the
transactions contemplated hereby without the consulting with the other party
prior to making any such issuance.

 

 

[Remainder of page intentionally left blank; signatures appear on
following page]

 

26

 

IN
WITNESS WHEREOF, and intending to be legally bound, the parties have caused
this Agreement to be executed by their duly authorized representatives as of
the date first shown above.

 

 

	
  FARMOR:

  	
   

  
	
   

  	
   

  
	
  BLACK RAVEN ENERGY, INC.

  	
   

  
	
   

  	
   

  
	
  By:
  

  	
  /s/
  William F. Hayworth

  	
  _

  
	
   

  	
   

  	
   

  
	
  Name (printed): 

  	
  William F. Hayworth

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:
  

  	
  President

  	
   

  
	
   

  	
   

  
	
  FARMEE:

  	
   

  
	
   

  	
   

  
	
  ATLAS RESOURCES, LLC

  	
   

  
	
  By:

  	
  AIC, LLC, its sole member

  
	
   

  	
  By:

  	
  Atlas Energy Operating Company, LLC, its sole member

  
	
   

  	
   

  	
  By:

  	
  Atlas Energy Resources, LLC, its sole member

  
	
   

  	
   

  
	
  By:
  

  	
  /s/
  Daniel Herz

  	
   

  
	
   

  	
   

  	
   

  
	
  Name (printed): 

  	
  Daniel Herz

  	
   

  
	
   

  	
   

  	
   

  
	
  Title: 

  	
  Senior Vice President

  	
   

  
								

 

27

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