Document:

rim_8k-ex1003.htm

    Exhibit
      10.3

     

    ANNEX
      V

    TO

    BRIDGE
      LOAN AGREEMENT

    

    

    SECURITY
      INTEREST AGREEMENT

    

    SECURITY
      INTEREST
      AGREEMENT ("Security Interest Agreement"), dated as of July 26, 2007,
      by and among the persons set forth on Schedule 1 (each a “Secured Party” and
      collectively, the “Secured Parties”), RIM SEMICONDUCTOR COMPANY, a Utah
      corporation with headquarters located at 305 NE 102nd Ave., Suite 105, Portland,
      OR 97220 (the “Company” or the “Debtor”), and KRIEGER & PRAGER, LLP, as
      agent for the Secured Parties (the “Agent”).

    

    RECITALS

    

    A.           Reference
      is made to (i) that certain Bridge Loan Agreement of even date herewith (the
      “Bridge Loan Agreement”) to which the Debtor and each of the Secured Parties are
      parties, and (ii) the Transaction Agreements, including, without limitation,
      the
      Notes.  Capitalized terms not otherwise defined herein shall have the
      meanings ascribed to them in the Bridge Loan Agreement or other relevant
      Transaction Agreements.

    

    B.           Pursuant
      to the Notes, the Debtor has certain obligations to each of the Secured Parties
      (all such obligations, the “Obligations”).

    

    C.           In
      order to induce each of the Secured Parties to execute and deliver the
      Transaction Agreements and to make the advances to the Debtor contemplated
      thereby, and as contemplated by the Bridge Loan Agreement and the Notes, the
      Debtor has agreed to grant to each of the Secured Parties a security interest
      in
      the Collateral (as defined below) to secure the due and punctual fulfillment
      of
      the Obligations.  Each of the Secured Parties is willing to enter into
      the Bridge Loan Agreement and the other Transaction Agreements only upon
      receiving the Debtor’s execution of this Security Interest
      Agreement.

    

    NOW,
      THEREFORE, in consideration of the
      premises, the mutual covenants and conditions contained herein, and for other
      good and valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, the parties hereto hereby agree as follows:

    

    1.           Grant
      of Security Interest.

    

    (a)           In
      order to secure the due and punctual fulfillment of the Obligations, the Debtor
      hereby grants, conveys, transfers and assigns to the Secured Parties (and to
      each of them based on their respective Allocable Shares, as defined below)
      a
      continuing security interest in the Collateral.

    

    
      
        
        

      

      
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    (b)           For
      purposes of this Agreement, the following terms shall have the meanings
      indicated:

    

    “COLLATERAL”
      is all right, title and interest of Debtor in and to all of the following,
      whether now owned or (except as with respect to Intellectual Property and
      general intangibles referred to below) hereafter acquired and wherever located:
      All assets of the Debtor, including, but not limited to: all personal and
      fixture property of every kind and nature, including without limitation all
      goods (including inventory, equipment and any accessions thereto), instruments
      (including promissory notes), documents, accounts (including accounts
      receivable), chattel paper (whether tangible or electronic), deposit accounts,
      letter-of-credit rights (whether or not the letter of credit is evidenced by
      a
      writing), commercial tort claims, securities and all other investment property,
      supporting obligations, any other contract rights or rights to the payment
      of
      money, insurance claims and proceeds, and all general intangibles now owned
      (including all payment intangibles); all Equipment; all Intellectual Property;
      and any and all claims, rights and interests in any of the above, and all
      guaranties and security for any of the above, and all substitutions and
      replacements for, additions, accessions, attachments, accessories, and
      improvements to, and proceeds (including proceeds of any insurance policies,
      proceeds of proceeds and claims against third parties) of, any and all of the
      above, and all Debtor’s books relating to any and all of the above and includes,
      without limiting the generality of the above, the assets listed in Exhibit
      B.

    

    “CODE”
is
      the Uniform Commercial Code, in effect in the State of Delaware as in effect
      from time to time.

    

    “COPYRIGHTS”
      are all copyrights, copyright rights, applications or registrations and like
      protections in each work or authorship or derivative work, whether published
      or
      not (whether or not it is a trade secret) now or later existing, created,
      acquired or held.

    

    “EQUIPMENT”
      has the meaning set forth in the Code and includes all present and future
      machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools,
      parts and attachments in which Debtor has any interest.

    

    “INTELLECTUAL
      PROPERTY” is all present (a) Copyrights, (b) trade secret rights, including all
      rights to unpatented inventions and know-how, and confidential information;
      (c)
      mask work or similar rights available for the protection of semiconductor chips;
      (d) Patents; (e) Trademarks; (f) computer software and computer software
      products; (g) designs and design rights; (h) technology; (i) all claims for
      damages by way of past, present and future infringement of any of the rights
      included above; (j) all licenses or other rights to use any property or rights
      of a type described above.

    

    “PATENTS”
      are patents, patent applications and like protections, including improvements,
      divisions, continuations, renewals, reissues, extensions and
      continuations-in-part of the same.

    

    
      
        
        

      

      
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    “TRADEMARKS”
      are trademarks, servicemarks, trade styles, and trade names, whether or not
      any
      of the foregoing are registered, and all applications to register and
      registrations of the same and like protections, and the entire goodwill of
      the
      business of Debtor connected with and symbolized by any such
      trademarks.

    

    (b)
      The
      security interests granted pursuant to this Section (the "Security Interests")
      are granted as security only and shall not subject any of the Secured Parties
      to, or transfer or in any way affect or modify, any obligation or liability
      of
      the Debtor under any of the Collateral or any transaction which gave rise
      thereto.

    

    (c)
      The
      term “Allocable Share” means, with respect to each Secured Party (if there is
      more than one Secured Party), as of the relevant date, the fraction equal to
      (i)
      the outstanding principal of the Notes then held by such Secured Party, divided
      by (ii) the aggregate outstanding principal of the Notes then held by all
      Secured Parties.

    

    Section
      2. Filing; Further Assurances.

    

    (a)
      The
      Debtor will, at its expense, cause to be searched the public records with
      respect to the Collateral and will execute, deliver, file and record (in such
      manner and form as each of the Secured Parties may reasonably require), or
      permit each of the Secured Parties to file and record, as its attorney in fact
      for such purpose, any financing statement, any carbon, photographic or other
      reproduction of a financing statement or this Security Interest Agreement (which
      shall be sufficient as a financing statement hereunder), any specific
      assignments or other paper that may be reasonably necessary or desirable, or
      that the Secured  Parties may reasonably request, in order to create,
      preserve, perfect or validate any Security Interest or to enable each of the
      Secured Parties to exercise and enforce its rights hereunder with respect to
      any
      of the Collateral.

    

    (b)
      Each
      Secured Party has designated an Agent as provided in the Section titled “Agent”
below.  Among other things, such Agent shall be agent of each such
      Secured Party for execution of and identification on any financing statement
      or
      similar instrument referring to or describing the Collateral.

    

    (c)
      If
      Debtor does not comply with Section 2(a) hereof in a prompt manner, the Agent
      is
      authorized to execute and file any and all financing statements desired to
      be
      filed by the relevant Secured Party to reflect the security interest in the
      Collateral in any and all jurisdictions.  For such purposes, the
      Debtor irrevocably appoints the Agent (acting by Samuel M. Krieger and Ronald
      Nussbaum, or either one of them), with full power of substitution to execute
      and
      file such financing statements naming the Debtor as debtor thereon.

    

    
      
        
        

      

      
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    Section
      3. Representations and Warranties of Debtor. The Debtor hereby
      represents and warrants to each Secured Party (a) that, except for the Permitted
      Liens as defined in set forth in Exhibit A attached hereto, the Debtor is,
      or to
      the extent that certain of the Collateral is to be acquired after the date
      hereof, will be, the owner of the Collateral free from any adverse lien,
      security interest or encumbrance; and (b) that except for such financing
      statements as may be described on Exhibit A attached hereto and made a part
      hereof, no financing statement covering the Collateral is on file in any public
      office, other than the financing statements filed pursuant to this Security
      Agreement.

    

    Section
      4. Covenants of Debtor. The Debtor hereby covenants and agrees with
      each Secured Party that the Debtor (a) will, at the  Debtor's sole
      cost and expense, defend the Collateral against all claims and demands of all
      persons at any time claiming any interest therein junior to the Secured Party's
      interest; (b) will provide the Secured Party with prompt written notice of
      (i)
      any change in the chief executive officer of the Debtor or the office where
      the
      Debtor maintains its books and records pertaining to the Collateral; (ii) the
      movement or location  of all or a material part of the Collateral to
      or at any address other than as set forth in said Exhibit B; and (iii) any
      facts
      which constitute a Debtor Event of Default (as such term is defined below),
      or
      which, with the giving of notice and/or the passage of time,
      could  or  would constitute a Debtor Event of Default,
      pursuant to the Section titled “Debtor Events of Default” below; (c) will
      promptly pay any and all taxes, assessments and governmental charges upon the
      Collateral prior to the date penalties are attached thereto, except to the
      extent that such taxes, assessments and charges shall be contested in good
      faith
      by the Debtor; (d) will immediately notify the Secured Party of any event
      causing a substantial loss or diminution in the value of all or any material
      part of the Collateral and the amount or an estimate of the amount of such
      loss
      or diminution; (e) will not sell or offer to sell or otherwise assign, transfer
      or dispose of the Collateral or any interest therein, without the prior written
      consent of the Secured Party, except in the ordinary course of business; (f)
      will keep the Collateral free from any adverse lien, security interest or
      encumbrance (except for encumbrances specified in Exhibit
      A  attached  hereto) and in good order and repair,
      reasonable wear and tear excepted, and will not waste or destroy the Collateral
      or any part thereof; and (g) will not use the Collateral in material violation
      of any statute or ordinance the violation of which could materially and
      adversely affect the Debtor's business.

    

    Section
      5. Records Relating To Collateral. The Debtor will keep its records
      concerning the Collateral at its offices designated in the caption of this
      Security Interest Agreement or at such other place or places of business of
      which the Secured Party shall have been notified in writing no less than ten
      (10) days prior thereto. The Debtor will hold and preserve such records and
      chattel paper and will permit representatives of the Secured Party at any time
      during normal business hours upon reasonable notice to examine and inspect
      the
      Collateral and to make abstracts from such records and chattel paper, and will
      furnish to the Secured Party such information and reports regarding the
      Collateral as the Secured Party may from time to time reasonably
      request.

    

    Section
      6. General Authority. From and during the term of any Debtor Event of
      Default, the Debtor hereby appoints the Secured Party the Debtor's lawful
      attorney, with full power of substitution, in the name of the Debtor, for the
      sole use and benefit of the Secured Party, but at the Debtor's expense, to
      exercise, all or any of the following powers with respect to all or any of
      the
      Collateral:

    

    
      
        
        

      

      
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    (a)
      to
      demand, sue for, collect, receive and give acquittance for any and all monies
      due or to become due;

    

    (b)
      to
      receive, take, endorse, assign and deliver all checks, notes, drafts, documents
      and other negotiable and non- negotiable instruments and chattel paper taken
      or
      received by the Secured Party;

    

    (c)
      to
      settle, compromise, prosecute or defend any action or proceeding with respect
      thereto;

    

    (d)
      to
      sell, transfer, assign or otherwise deal in or with the same or  the
      proceeds thereof or the related goods securing the Collateral, as fully and
      effectually as if the Secured Party were the sole and absolute owner
      thereof;

    

    (e)
      to
      extend the time of payment of any or all thereof and to make any allowance
      and
      other adjustments with reference thereto; and

    

    (f)
      to
      discharge any taxes, liens, security interests or other encumbrances at any
      time
      placed thereon;

    

    provided,
      however, that the Secured Party shall give the Debtor not less than ten (10)
      business days prior written notice of the time and place of any sale or other
      intended disposition of any of the Collateral.

    

    The
      exercise by the Secured Party or by the Agent of or failure to so exercise
      any
      authority granted herein shall in no manner affect Debtor's liability to the
      Secured Party, and provided, further, that the Secured Party and the Agent
      shall
      be under no obligation or duty to exercise any of the powers hereby conferred
      upon them and they shall be without liability for any act or failure to act
      in
      connection with the collection of, or the preservation of, any rights under
      any
      of the Collateral.

    

    Section
      7. Debtor Events of Default.

    

    (a)The
      Debtor shall be in default under this Security Agreement upon the occurrence
      of
      an Event of Default (as defined in the Note) by the
      Debtor (a "Debtor Event of Default").

    

    
      
        
        

      

      
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    (b)The
      Debtor hereby irrevocably agrees that, upon the occurrence of a Debtor Event
      of
      Default, the Debtor shall be deemed to have consented to an immediate conveyance
      and transfer to the Secured Party of the copyrights and all other rights the
      Debtor may have in the software included in the Collateral, including, but
      not
      necessarily limited to, the software identified in Schedule B attached hereto.
      In furtherance of the foregoing, and not in limitation thereof, the Debtor
      will,
      upon the occurrence of a Debtor Event of Default, deliver to the Secured Party
      copies of the source code of the relevant software, with accompanying written
      assignment of the software to the Secured Party.  Without limiting the
      foregoing, such source code and assignment shall be in form sufficient to enable
      the Secured Party to register the software in Secured Party’s name with the
      Copyright Register. The Debtor hereby agrees to take all steps necessary or
      appropriate, as requested by the Secured Party, to effectuate and reflect such
      conveyance and transfer or assignment to Secured Party.  In all
      events, such conveyance, transfer or assignment shall be deemed to vest title
      in
      such software in the Secured Party.

    

    (c)
      In
      furtherance of the foregoing and not in limitation thereof, the Debtor
      acknowledges and agrees that the Secured Party may, upon the occurrence of
      a
      Debtor Event of Default, seek the immediate entry of a preliminary injunction
      prohibiting the Debtor’s use of such software in any shape, way or manner,
      including, but not necessarily limited to, through the sale of products that
      use
      any of such software, and the Debtor hereby irrevocably agrees that it will
      not
      contest an application seeking entry of a preliminary injunction and that it
      will accept the entry of such injunction.

    

    Section
      8. Remedies Upon Debtor Event of Default. If any Debtor Event of
      Default shall have occurred, then in addition to the provisions of Section
      7
      hereof, the Secured Party may exercise all the rights and remedies of a secured
      party under the Code. The Secured Party may require the Debtor to assemble
      all
      or any part of the Collateral and make it available to the Secured Party at
      a
      place to be designated by the Secured Party which is reasonably convenient.
      The
      Secured Party shall give the Debtor ten (10) business days prior written notice
      of the Secured Party's intention to make any public or private sale or sale
      at a
      broker's board or on a securities exchange of the Collateral. At any such sale
      the Collateral may be sold in one lot as an entirety or in separate parcels,
      as
      the Secured Party, in its sole discretion, may determine. The Secured Party
      shall not be obligated to make any such sale pursuant to any such
      notice.  The Secured Party may, without notice or publication, adjourn
      any public or private sale or cause the same to be adjourned from time to time
      by announcement at the time and place fixed for the sale, and such sale may
      be
      made at any time or place to which the same may be adjourned.  The
      Secured Party, instead of exercising the power of sale herein conferred upon
      it,
      may proceed by a suit or suits at law or in equity to foreclose the Security
      Interests and sell the Collateral, or any portion thereof, under a judgment
      or
      decree of a court or courts of competent jurisdiction.

    

    Section
      9. Application of Collateral and Proceeds.  The proceeds of
      any sale of, or other realization upon, all or any part of the Collateral shall
      be applied in the following order of priorities: (a) first, to pay the
      reasonable expenses of such sale or other realization, including, without
      limitation, reasonable attorneys' fees, and all expenses, liabilities and
      advances reasonably incurred or made by the Secured Party in connection
      therewith, and any other unreimbursed expenses for which the Secured Party
      is to
      be reimbursed pursuant to the Section titled “Expenses; Secured Party's
      Lien”  below; (b) second, to the payment of the Obligations in such
      order of priority as the Secured Party, in its sole discretion, shall
      determine;  and (c) finally, to pay to the Debtor, or its successors
      or assigns, or as a court of competent jurisdiction may direct, any surplus
      then
      remaining from such proceeds.

    

    
      
        
        

      

      
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    Section
      10. Expenses; Secured Party's Lien.  If any Debtor Event of
      Default shall have occurred, the Debtor will forthwith upon demand pay to the
      Secured Party: (a) the amount which the Secured Party may have been required
      to
      pay to free any of the Collateral from any lien thereon; and (b) the amount
      of
      any and all reasonable out-of-pocket expenses, including, without limitation,
      the reasonable fees and disbursements of its counsel, and of any agents not
      regularly in its employ,  which the Secured Party may incur in
      connection with the collection, sale or other disposition of any of the
      Collateral.

    

    Section
      11. Termination of Security Interests; Release of
      Collateral.  Upon the payment, performance or other satisfaction
      in full of all the Obligations, the Security Interests shall terminate and
      all
      rights to the Collateral shall revert to the Debtor. Upon any such termination
      of the Security Interests or release of Collateral, the Secured Party will,
      at
      the Debtor's expense, to the extent permitted by law, execute and deliver to
      the
      Debtor such documents as the Debtor shall reasonably request to evidence the
      termination of the Security Interests or the release of such Collateral, as
      the
      case may be.

    

    Section
      12. Notices.  All notices, demands, requests, consents,
      approvals, and other communications required or permitted hereunder shall be
      in
      writing and, unless otherwise specified herein, shall be (a) personally served,
      (b) deposited in the mail, registered or certified, return receipt requested,
      postage prepaid, (c) delivered by reputable air courier service with charges
      prepaid, or (d) transmitted by hand delivery, telegram, or facsimile, addressed
      as set forth below or to such other address as such party shall have specified
      most recently by written notice given in accordance herewith. Any notice or
      other communication required or permitted to be given hereunder shall be deemed
      effective (i) upon hand delivery or delivery by facsimile, with accurate
      confirmation generated by the transmitting facsimile machine, at the address
      or
      number designated below (if delivered on a business day during normal business
      hours where such notice is to be received), or the first business day following
      such delivery (if delivered other than on a business day during normal business
      hours where such notice is to be received) or (ii) on the second business day
      following the date of mailing by express courier service or on the fifth
      business day after deposited in the mail, in each case, fully prepaid, addressed
      to such address, or upon actual receipt of such mailing, whichever shall first
      occur. The addresses for such communications shall be for (i) the Debtor as
      provided in the Bridge Loan Agreement for notices  to the Company,
      (ii) for each Secured Party as provided in the Bridge Loan Agreement for notices
      to the Lender and (iii) for the Agent as provided in the Bridge Loan Agreement
      for notices to the Escrow Agent.  Any party hereto may from time to
      time change its address or facsimile number for notices under this Section
      in
      the manner contemplated by the Bridge Loan Agreement.

    

    
      
        
        

      

      
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    Section
      13.  Agent.

    

    (a)
      Anything in the other provisions of this Security Interest Agreement to the
      contrary notwithstanding, the Secured Party may designate another entity to
      act
      as agent (the “Agent”) for the Secured Party with respect to any one or more of
      the rights of Secured Party hereunder, including, but not necessarily limited
      to, the right to hold the security interest and/or be named as secured party
      (as
      agent for the Secured Party) in any filed financing statement and to take action
      in the name and stead of the Secured Party hereunder.  Such
      designation may be made with or without power of substitution,  Such
      designation shall remain in effect until canceled by the Secured Party, as
      provided herein; provided, however, that such cancellation shall not affect
      the
      validity of any action theretofore taken by such agent pursuant to this Security
      Interest Agreement.  The Debtor acknowledges and agrees to honor such
      designation and acknowledges that the Agent is acting as the agent of the
      Secured Party and not as a principal.

    

    (b)
      Each
      Secured Party hereby confirms that the Secured Party has designated Krieger
      & Prager, LLP (acting by Samuel M. Krieger and Ronald Nussbaum, or either
      one of them), as its initial Agent, with full right of
      substitution.

    

    (c)
      If
      there is more than one Secured Party, the Agent shall act as agent for all
      Secured Parties.  Any revocation of the authority of the Agent or the
      designation of an alternate Agent shall be done only by Secured Parties who
      represent a Majority in Interest of the Holders (as defined below) at that
      time;
      provided that at all times all Secured Parties shall be represented by one
      and
      the same Agent.  The term “Majority in Interest of the Holders” means,
      as of the relevant date, one or more Secured Parties whose respective
      outstanding principal amounts of the Notes held by each of them, as of such
      date, aggregate more than fifty percent (50%) of the aggregate outstanding
      principal amounts of the outstanding Notes held by all Secured Parties on that
      date.

    

    (d)
      Reference is made to the provisions of Sections 2 through 15, inclusive, of
      the
      Joint Escrow Instructions.  All such provisions are incorporated
      herein by reference, as if set forth herein in full, except that, for such
      purposes, the references therein to (i) the “Escrow Agent” shall be deemed to be
      references to the “Agent” under this Security Interest Agreement, (ii) the
“Company” shall be deemed to be references to the Debtor under this Security
      Interest Agreement, and (iii) the “Lender” shall be deemed to be references to
      the relevant Secured Party under this Security Interest Agreement.

    

    Section
      14.  Miscellaneous.

    

    
      
        
        

      

      
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    (a)
      No
      failure on the part of the Secured Party to exercise, and no delay in
      exercising, and no course of dealing with respect to, any right, power or remedy
      under this Security Interest Agreement shall operate as a waiver thereof; nor
      shall any single or partial exercise by the Secured Party of any right, power
      or
      remedy under this Security Interest Agreement preclude the exercise, in whole
      or
      in part, of any other right, power or remedy. The remedies in this Security
      Interest Agreement are cumulative and are not exclusive of any other remedies
      provided by law. Neither this Security Interest Agreement nor any provision
      hereof may be changed, waived, discharged or terminated orally but only by
      a
      statement in writing signed by the party against which enforcement of the
      change, waiver, discharge or termination is sought.

    

    (b)
      The
      execution and delivery by Debtor of this Security Interest Agreement and all
      documents delivered in connection herewith have been duly and validly authorized
      by all necessary corporate action of Debtor and this Agreement and all documents
      delivered in connection herewith have been duly and validly executed and
      delivered by Debtor.  The execution and delivery by Debtor of this
      Security Interest Agreement and all documents delivered in connection herewith
      will not result in a breach or default of or under the Certificate of
      Incorporation, By-laws or any agreement, contract or indenture of
      Debtor.  This Security Interest Agreement and all documents delivered
      in connection therewith are legal, valid and binding obligations of Debtor
      enforceable against Debtor in accordance with their terms.

    

    (c)
      In
      the event that any action is taken by Debtor or Secured Party in connection
      with
      the this Security Interest Agreement, or any related document or matter, the
      losing party in such legal action, in addition to such other damages as he
      or it
      may be required to pay, shall pay reasonable attorneys’ fees to the prevailing
      party.

    

    Section
      15.Separability. If any provision hereof shall prove invalid or
      unenforceable in any jurisdiction whose laws shall be deemed applicable, the
      other provisions hereof shall remain in full force and effect in such
      jurisdiction and shall be liberally construed in favor of the Secured
      Party.

    

    Section
      16.  Governing Law.

    

    
      
        
        

      

      
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    (a)
      This
      Security Interest Agreement shall be governed by and construed in accordance
      with the laws of the State of Delaware for contracts to be wholly performed
      in
      such state and without giving effect to the principles thereof regarding the
      conflict of laws.  Each of the parties consents to the exclusive
      jurisdiction of the federal courts whose districts encompass any part of the
      City of Wilmington or  (except with respect to issues relating to the
      copyright in and to the software, as contemplated by Section 7 hereof, which
      shall exclusively be in the aforesaid federal courts) or of the state courts
      of
      the State of Delaware sitting in the City of Wilmington in connection with
      any
      dispute arising under this Security Interest Agreement and hereby waives, to
      the
      maximum extent permitted by law, any objection, including any objection based
      on
forum non coveniens, to the bringing of any such proceeding in such
      jurisdictions or to any claim that such venue of the suit, action or proceeding
      is improper. To the extent determined by such court, the Debtor shall reimburse
      the Secured Party for any reasonable legal fees and disbursements incurred
      by
      the Secured Party in enforcement of or protection of any of its rights under
      this Security Interest Agreement.  Nothing in this Section shall
      affect or limit any right to serve process in any other manner permitted by
      law.

    

    (b)
      The
      Debtor and the Secured Party acknowledge and agree that irreparable damage
      would
      occur in the event that any of the provisions of this Security Interest
      Agreement were not performed in accordance with their specific terms or were
      otherwise breached. It is accordingly agreed that the parties shall be entitled
      to an injunction or injunctions to prevent or cure breaches of the provisions
      of
      this Security Interest Agreement and to enforce specifically the terms and
      provisions hereof, this being in addition to any other remedy to which any
      of
      them may be entitled by law or equity.

    

    Section
      16. Jury Trial Waiver.  The Debtor and the Secured Party
      hereby waive a trial by jury in any action, proceeding or counterclaim brought
      by either of the parties hereto against the other in respect of any matter
      arising out of or in connection with the Note or this Security Interest
      Agreement.

    

    Section
      17. Assignment.  Except in connection with the transfer of
      all of the rights of a Secured Party under the Transaction Agreements, a Secured
      Party shall not assign or transfer its security interest granted hereunder,
      and,
      further, upon the occurrence of a permitted transfer of a Secured Party’s
      security interest in the Collateral, the transferee shall be vested with all
      of
      the rights and powers of the assigning Secured Party hereunder with respect
      to
      the Collateral.

    

    [Balance
      of page intentionally left blank]

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    Section
      18. Waiver.  The Debtor waives any right that it may have
      to require Secured Party to proceed against any other person, or proceed against
      or exhaust any other security, or pursue any other remedy Secured Party may
      have.

    

    IN
      WITNESS WHEREOF, the Parties have executed this Security Interest Agreement
      as
      of the day, month and year first above written.

    

    SECURED
      PARTIES:

    

    
      	
              DOUBLE
                U MASTER FUND LP

            	
              PROFESSIONAL
                OFFSHORE OPPORTUNITY FUND LTD.

            

      	 	 

      	 	 

      	By:/s/[illegible]  	By:/s/Marc
              K. Swickle

    

    

    DEBTOR:

    RIM
      SEMICONDUCTOR COMPANY

     

    By:/s/Ray
      Willenberg,
      Jr.                                                                

    Chairman

     

    AGENT:

    KRIEGER
      & PRAGER, LLP

     

    By:/s/Ronald
      Nussbaum                                                                

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    SCHEDULE
      1

    

    The
      Secured Parties are:

    

    
      	
              Name

            	
              Address

            
	
              Double
                U Master Fund LP

            	
              Harbour
                House, Waterfront Drive

              Road
                Town, Tortola, BVI

            
	
              Professional
                Offshore Opportunity Fund Ltd.

               

            	
              1400
                Old Country Road, Suite 206

              Westbury,
                NY 11590

            

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

    

    EXCEPTIONS
      TO REPRESENTATIONS

    

    

    1.
      Certain encumbrances and liens, including (i) mechanics’, materialmen’s, and
      similar liens, (ii) liens for taxes not yet due and payable or for taxes that
      the taxpayer is contesting in good faith through appropriate proceedings, (iii)
      purchase money liens and liens securing rental payments under capital lease
      and
      similar arrangements, and other liens arising in the ordinary course of business
      and not incurred in connection with the borrowing of money.

    

    2.
      Security interest (“Existing Senior Security Interest”) in the Collateral
      granted to Double U Master Fund LP (“Existing Senior Secured Party”) pursuant to
      Security Interest Agreement, dated as of March 26, 2007, between Debtor and
      Existing Senior Secured Party to secure, among other things, payment in full
      of
      the Specified Note (as defined in Annex VII to the Bridge Loan
      Agreement).  The Bridge Loan Agreement and the Transaction Agreements
      contemplate that the Specified Note will be paid in full on the Closing Date
      out
      of the  Escrow Funds, at which time the Existing Senior Secured Party
      will release the Existing Senior Security Interest.

    

    

    All
      of the above exceptions to representations on this Exhibit A shall be
      collectively referred to and defined as the “Permitted Liens” and individually
      as a “Permitted Lien”.

    

    

    

    

    

    
      
        
        

      

      
        Exhibit
          A-1

        
          

        

      

      
        
        

      

    

    EXHIBIT
      B

    ADDITIONAL
      INFORMATION RE COLLATERAL, ETC.

    

     

    The
      Collateral includes without limitation Debtor’s right, title and interest in and
      to the following:

     

    United
      States Trademarks/Service Marks:

    

    
      	
              Mark:

            	
              Application
                No./

              Registration
                No.:

            	
              Filing
                Date:

            
	 	 	 
	
              IPSL

            	
              78/844,821

            	
              03/23/2006

            
	 	 	 
	
              CUPRIA

            	
              78/956,366

            	
              08/21/2006

            

    

    

    

    
      	
              United
                States Patents:

               

            	 	 
	
              Title
                of Case

               

            	
              Patent
                No./

              Publication
                No.:

            	
              Filing
                Date:

               

            
	 	 	 
	
              TIMING
                RECOVERY WITH

              MINIMUM
                JITTER MOVEMENT

            	
               

              6,138,244

            	
               

              09/30/1998

            
	 	 	 
	
              TURBO
                TRELLIS-CODED

              MODULATION

            	
               

              6,671,327

            	
               

              05/01/2000

            
	 	 	 
	
              METHOD
                AND APPARATUS FOR

              CONNECTING
                BROADBAND VOICE AND

              DATA
                SIGNALS TO TELEPHONE SYSTEMS

            	
               

              6,674,845

            	
               

              06/21/2001

            
	 	 	 
	
              PRECURSOR
                DECISION FEEDBACK

              EQUALIZER
                (PDFE)

            	
               

              6,697,423

            	
               

              10/10/2000

            
	 	 	 
	
              PARALLEL
                TURBO TRELLIS-CODED

              MODULATION

            	
               

              6,757,859

            	
               

              05/01/2000

            

    

    

    
      
        
        

      

      
        Exhibit
          B-1

        
          

        

      

      
        
        

      

    

    
      	 	 	 
	
              DMT
                BIT ALLOCATION WITH

              IMPERFECT
                TEQ

            	
               

              6,999,507

            	
               

              12/20/2000

            
	 	 	 
	
              SOFT-DECISION
                DECODING OF

              CONVOLUTIONALLY
                ENCODED

              CODEWORD

            	
               

               

              6,999,531

            	
               

               

              02/26/2001

            
	 	 	 
	
              METHOD
                AND SYSTEM FOR PERFORMING

              A
                FAST-FOURIER TRANSFORM

            	
               

              7,024,443

            	
               

              11/08/2002

            
	 	 	 
	
              METHOD
                AND APPARATUS FOR

              CONNECTING
                BROADBAND VOICE AND

              DATA
                SIGNALS TO TELEPHONE SYSTEMS

            	
               

               

              7,106,855

            	
               

               

              04/12/2001

            
	 	 	 
	
              FLEXIBLE
                BIT SELECTION USING TURBO

              TRELLIS-CODED
                MODULATION

            	
               

              2002/0136320

            	
               

              03/18/2002

            
	 	 	 
	
              DMT
                PEAK REDUCTION WITHOUT

              AFFECTING
                TRANSMISSION SIGNAL

            	
               

              2002/0159550

            	
               

              03/01/2002

            
	 	 	 
	
              FAST
                FOURIER TRANSFORM SIGNAL

              PROCESSING

            	
               

              2003/0145026

            	
               

              01/30/2003

            
	 	 	 
	
              METHOD
                OF REDUCING PEAK-TO-

              AVERAGE
                RATIO IN MULTI-CARRIER COMMUNICATIONS SYSTEMS

            	
               

               

              2005/0141410

            	
               

               

              10/29/2004

            
	 	 	 
	
              METHOD
                OF INCREASING CHANNEL

              CAPACITY
                OF FFT AND IFFT ENGINES

            	
               

              2005/0152409

            	
               

              10/29/2004

            
	 	 	 
	
              COMMUNICATING
                DATA USING

              WIDEBAND
                COMMUNICATIONS

            	
               

              2004/258168

            	
               

              08/30/2002

            
	 	 	 
	
              COMMUNICATING
                DATA USING

              WIDEBAND
                COMMUNICATIONS

            	
               

              2005/063479

            	
               

              08/30/2002

            

    

    

    
Exhibit
      B-2exv10w11

 

EXHIBIT 10.11

Execution Version

PARTICIPATION AGREEMENT

     This Participation Agreement is entered into effective as of the 25th day of July, 2007, by
and between GASCO PRODUCTION COMPANY, a Delaware corporation (“GASCO”), and NFR UINTA BASIN LLC, a
Delaware limited liability company (“NFR”). GASCO and NFR are hereinafter collectively referred to
as the “Parties” and individually as a “Party”.

WITNESSETH:

     WHEREAS, GASCO has acquired Oil and Gas Interests and intends to explore for and develop oil
and gas reserves through the drilling of exploratory wells during the Program Term;

     WHEREAS, GASCO desires to offer to NFR and NFR desires to acquire from GASCO the rights to
earn an ownership interest in the Oil and Gas Interests and Program Wells in exchange for certain
cash consideration to be paid by NFR to GASCO and NFR’s commitment to participate in the costs of
drilling of the Program Wells, on and subject to the terms and conditions hereinafter set forth.

     NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements set forth
herein, the Parties hereby agree as follows:

ARTICLE 1.

DEFINITIONS

     1.1 The terms GASCO and NFR, Party and Parties shall have the meanings ascribed to those terms
in the preamble and recitals of this Agreement set forth above.

     1.2 In addition, as used in this Agreement:

     Actual Well Costs has the meaning ascribed to that term in Section 3.2(d).

     Affiliate means, when used with respect to any party, any other Person (a) which
directly or indirectly through one or more intermediaries controls, or is controlled by, or is
under common control with, such party, or (b) which beneficially owns or holds more than 50% of any
class of voting stock (or in the case of a Person which is not a corporation, more than 50% of any
class of equity interest) of such party, or (c) more than 50% of any class of whose voting stock
(or in the case of a Person which is not a corporation, more than 50% of any class of whose equity
interest) is beneficially owned or held by such party and its Affiliates. The term “control”
(including the terms “controlled by” and “under common control with”) means the possession,
directly or indirectly, of the power to direct or cause the direction of the management or policies
of a Person, whether through the ownership of voting stock or any equity interest, by contract or
otherwise.

     AFE means an Authority for Expenditure in the form customarily used in the oil and gas
industry setting forth the estimated costs of drilling, testing, logging, Completing, Recompleting,
Reworking, Plugging Back, an oil or gas well or the estimated costs of another operation in
respect of an oil or gas well.

 

     Agreement means this Participation Agreement, as amended from time to time, in
accordance with the terms hereof.

     Assignment means an Assignment, Bill of Sale and Conveyance in the form and substance
of Exhibit C attached hereto.

     Blackhawk Formation means the formation generally know as the “Blackhawk”, one
reference to which is the stratigraphic equivalent of that certain geological interval, the top of
which is indicated at a depth of 11,700 feet below a kelly bushing elevation of 4,989 feet in the
Gasco Desert Spring State 33-36-9-18 well, located in the NW/4 of the SE/4 of Section 36, Township
9S, Range 18E, Uintah County, Utah.

     Cash Call means a statement or invoice setting forth a Party’s share of costs of a
certain operation.

     Commenced Program Wells means the following Program Wells (a) Uteland State
12-2-10-18, (b) DSF 21-1-10-18, (c) Federal 32-30-9-19, (d) Federal 12-1-10-18, (e) Federal
12-30-9-19. (f) Federal 32-20-9-19, (g) Sheep Wash. Fed. 14-25-9-18, (h) Federal 14-17-9-19, (i)
Federal 12-19-9-19, (j) Sheep Wash. Fed. 34-25-9-18 and (k) Federal 34-19-9-19.

     Completion or Complete shall have the meaning ascribed to those terms in the JOA.

     Completion Costs means with respect to a Program Well, all costs and expenses relating
to the completion and equipping for production of such Program Well, including costs and expenses
of design, rig, stimulation, frac, labor, material services and equipment, and all costs and
expenses of plugging and abandoning such Program Well, including surface restoration and
reclamation in accordance with applicable Laws and contractual obligations.

     Costs to Casing Point means with respect to a Program Well, (a) all costs and expenses
related to drilling such Program Well until the point in time when the Operator provides a notice
under Article VI C. Option No.2 of the JOA (or would be required to provide such notice if Option
No.2 was selected under the applicable JOA), including all costs and expenses of title examination,
permitting, unitization, survey, surface preparation and location, rig mobilization and
de-mobilization, labor, services, materials and equipment, logging, testing and coring, and (b) if
such well will not be or is not completed as a well capable of producing in paying quantities, all
costs and expenses of plugging and abandoning such Program Well, including surface restoration and
reclamation in accordance with applicable Laws and contractual obligations.

     Drag-Along Interest has the meaning ascribed to that term in Section 8.2.

     Drag-Along Notice has the meaning ascribed to that term in Section 8.2.

     Effective Date means July 25, 2007.

     Estimated Well Costs has the meaning ascribed to that term in Section 3.2(d).

2

 

     Existing Burdens mean any royalties, overriding royalties, payments from or out of
production or the proceeds thereof and other burdens on production affecting all or any portion of
any Oil and Gas Interest at the time it was or is acquired by GASCO, including without limitations,
the interest of BREK Petroleum Inc. as reflected in Exhibit A to the JOA attached hereto as
Schedule 5.1.

     First Purchase Offer has the meaning ascribed to that term in Section 8.3.

     First Purchase Notice has the meaning ascribed to that term in Section 8.3.

     Force Majeure Event has the meaning ascribed to that term in Section 12.1.

     Governmental Authority means (a) the United States of America, (b) any state, county,
municipality or other governmental subdivision within the United States of America, and (c) any
court or any governmental department, commission, board, bureau, agency or other instrumentality of
the United States of America or of any state, county, municipality or other governmental
subdivision with the United States of America.

     Green River Formation the formation generally know as the “Green River Formation”, one
reference to which is the stratigraphic equivalent of that certain geological interval, the top of
which is indicated at a depth of 1,515 feet below a kelly bushing elevation of 5,002 feet in the
Gasco Federal 14-31-9-19 well, located in the SW/4 of the SW/4 of Section 31, Township 9S, Range
19E, Uintah County, Utah.

     JOA means the relevant existing third party operating agreement to which GASCO is a
party covering a part of the Program Area or, if no such agreement exists, the Joint Operating
Agreement between GASCO and NFR covering the Program Area attached hereto as Schedule 5.1.

     Laws means all applicable statutes, laws, ordinances, regulations, rules, rulings,
orders, decrees or other official acts of any Governmental Authority.

     LOEs means, with respect to a Program Well or a Proration Unit, all lease operating
and production expenses relating thereto and chargeable by the Operator under the terms of the
applicable JOA (including the direct and indirect charges billed under the COPAS).

     Mancos Formation means the formation generally know as the “Mancos”, one reference to
which is the stratigraphic equivalent of that certain geological interval, the top of which is
indicated at a depth of 12,530 feet below a kelly bushing elevation of 4,989 feet in the Gasco
Desert Spring State 33-36-9-18 well, located in the NW/4 of the SE/4 of Section 36, Township 9S,
Range 18E, Uintah County, Utah.

     Mesaverde Formation means the formation generally know as the “Mesaverde”, one
reference to which is the stratigraphic equivalent of that certain geological interval, the top of
which is indicated at a depth of 8,928 feet below a kelly bushing elevation of 4,989 feet in the
Gasco Desert Spring State 33-36-9-18 well, located in the NW/4 of the SE/4 of Section 36,
Township 9S, Range 18E, Uintah County, Utah.

3

 

     Net Production Proceeds means with respect to a Commenced Program Well, the proceeds
from the sale or other disposition at the wellhead of oil and/or gas produced and saved from such
Program Well received by GASCO and attributable to the Program Interest less (i) amounts paid in
respect of Existing Burdens, (ii) any applicable severance or other production taxes paid by GASCO
in respect thereof, and (iii) any LOEs attributable to such production.

     Non-Liquid Consideration has the meaning ascribed to that term in Section 8.4.

     Non-Selling Party has the meaning ascribed to that term in Section 8.2.

     Notice Period has the meaning ascribed to that term in Section 8.2.

     Objective Depth has the meaning ascribed to that term in Section 2.1.

     Objective Horizons means any of the Wasatch Formation, the Mesaverde Formation or the
Blackhawk Formation.

     Oil and Gas Interests means all fee interests, oil, gas and mineral leasehold
interests, royalty interests, mineral interests, farm-ins, farmouts, contracts, mineral development
agreements and all other interests or rights in land or minerals, of every kind and nature covering
lands located within Program Area.

     Operator has the meaning ascribed to that term in the relevant JOA.

     Overpayment Amount has the meaning ascribed to that term in Section 3.2(f).

     Permitted Transferee means in respect of Party, an Affiliate of such Party.

     Person means any individual, firm, corporation, partnership, joint venture, trust,
unincorporated organization, Governmental Authority, or other entity or organization.

     Plugging Back has the meaning ascribed to that term in the relevant JOA. (Derivative
terms such as “plug back” shall have the same meaning).

     Program Area means all of the lands described in Exhibit A attached hereto, excluding,
however, the Green River Formation.

     Program Interest means all right, title and interest of GASCO in an Oil and Gas
Interest or a Program Well prior to the delivery of an Assignment of such Oil and Gas Interest or
Program Well to NFR under this Agreement, including any increase in such interest resulting form
the application of non-consent or other similar provisions of the applicable JOA.

     Program Term has the meaning ascribed to that term in Section 7.1.

     Program Wells means (a) the thirty (30) exploratory wells listed in Exhibit B that
have been, are being, or will be drilled on the Program Area or a well substituted for any of such
wells in accordance with the provisions of Section 2.2, and (b) any other wells which the Parties
have agreed to drill under the terms of this Agreement.

4

 

     Proration Unit means an area comprising of (a) forty (40) surface acres in the form of
a square with the relevant well located, as nearly as practicable, in the center thereof, and (b)
all depths from the surface of the earth to deepest depth drilled in the relevant well, excluding
however, the Green River Formation.

     Recompletion or Recomplete have the meaning ascribed to that term in the relevant JOA.
(Derivative terms such a recompleting shall have the same meaning).

     Recompletion, Reworking or Plugging Back Costs means with respect to a Program Well,
all costs and expenses relating to the Recompletion, Rework or Plugging Back of a Program Well,
including costs and expenses of design, rig, stimulation, frac, labor, materials, services and
equipment.

     Rework has the meaning ascribed to that term in the relevant JOA. (Derivative terms
such a reworking shall have the same meaning).

     Sale Interest has the meaning ascribed to that term in Section 8.2.

     Sale Property has the meaning ascribed to that term in Section 8.2.

     Selling Party has the meaning ascribed to that term in Section 8.2.

     Tag-Along Interest has the meaning ascribed to that term in Section 8.2.

     Tag-Along Notice has the meaning ascribed to that term in Section 8.2.

     Tag-Along Offer has the meaning ascribed to that term in Section 8.2.

     Third Party Transferee has the meaning ascribed to that term in Section 8.2.

     Transfer or Transferred means to transfer, sell, assign, pledge, hypothecate, give,
create a security interest in or lien on, place in trust (voting or otherwise), assign or in any
other way encumber or dispose of, directly or indirectly and whether or not by operation of law or
for value.

     Transfer Notice has the meaning ascribed to that term in Section 8.2.

     Wasatch Formation means the formation generally know as the “Wasatch”, one reference
to which is the stratigraphic equivalent of that certain geological interval, the top of which is
indicated at a depth of 5,140 feet below a kelly bushing elevation of 4989 feet in the Gasco Desert
Spring State 33-36-9-18 well, located in the NW/4 of the SE/4 of Section 36, Township 9S, Range
18E, Uintah County, Utah.

     Well Fee has the meaning ascribed to that term in Section 3.2(d).

     Working Interest Share means with respect to NFR, sixty seven percent (67%) of the
applicable Program Interest and with respect to GASCO, thirty three percent (33%) of the applicable
Program Interest.

5

 

ARTICLE 2.

INITIAL CONSIDERATION; COMMITMENT TO PARTICIPATE

IN PROGRAM WELLS

     2.1 Commitment to Drill and Complete Program Wells. During the Program Term, the Parties
agree to drill and pay for their respective Working Interest Share of (a) the Costs to Casing Point
of the Program Wells, (b) if GASCO elects to participate in the Completion of a Program Well, the
Completion Costs of such Program Well, and (c) if GASCO elects to participate in the Recompletion,
Rework or Plugging Back of a Program Well, the Recompletion, Reworking or Plugging Back Costs of
such Program Well. Each Program Well shall be drilled initially to a depth sufficient to test the
deepest formation specified as a target formation for such Program Well in Exhibit B (with respect
to such Program Well, its “Objective Depth”). If under an applicable JOA, GASCO elects not to
participate in the Completion of a Program Well, or the Recompletion, Reworking or Plugging Back of
such Program Well, and NFR elects to participate, GASCO shall be deemed a Non-Consenting Party
under such JOA and NFR shall be deemed a Consenting Party under such JOA, in each case, solely with
respect to such operation.

     2.2 Substitution of Program Wells. If GASCO determines in its
reasonable judgment that a Program Well cannot be drilled at the location identified in Exhibit B
because of title issues, permitting issues, location, geological, operational or safety concerns or
other reasons that would cause a reasonable prudent operator to not drill at such location, GASCO
shall notify NFR in writing of such reason and propose a substitute location for such Program Well,
which can be on the lands covered by the same Oil and Gas Interest or another Oil and Gas Interest.
The new proposed well location shall become a Program Well in lieu of the Program Well for which
it is a substitute, unless the Parties agree otherwise; provided, however, that GASCO may during
the Program Term only designate an aggregate of five (5) new Program Well locations. If a Program
Well is drilled but abandoned prior to reaching its Objective Depth, and is not otherwise completed
as a well capable of production in paying quantities at a shallower depth (other than the Excluded
Formation), the Parties may mutually agree to redrill or sidetrack such well at a location on the
same Oil and Gas Interest or at a new location within the Program Area and such new well shall be a
Program Well in lieu of the Program Well for which it is a substitute.

     2.3 Certain Limitations. The Parties agree that unless mutually agreed in writing (i) no
Program Well will be drilled to produce from the Mancos Formation, (ii) the target objectives of
the Program Wells will be to explore and test one or more zones of one or more of the Wasatch
Formation, the Mesaverde Formation, and the Blackhawk Formation, and (iii) NFR will not earn any
interests in the Green River Formation.

ARTICLE 3.

CASH CALLS AND PAYMENTS

     3.1 Payments for Program Wells Already Commenced. Contemporaneously with the execution of
this Agreement, NFR shall pay to GASCO, by wire transfer of immediately available funds in
accordance with the instructions set forth in Schedule 3.1, the amount set forth in Schedule 3.1
representing (a) the sum of (i) NFR’s Working Interest Share of all Costs to Casing Point of the
Commenced Program Wells incurred by GASCO prior to the Effective Date and the balance of any such
costs to be incurred after the Effective Date pursuant to the existing AFEs for such Program Wells,
(ii) NFR’s Working Interest Share of all Completion Costs of all

6

 

Commenced Program Wells incurred
by GASCO prior to the Effective Date and the balance of any such costs to be incurred after the
Effective Date pursuant to the existing AFEs for such Completions, and (iii) the Well Fee for each
Commenced Program Well, less (b) the Net Production Proceeds attributable to any such Commenced
Program Well received by GASCO prior to the Effective Date.

     3.2 Cash Calls and Payments for Program Wells Commenced After Effective Date.

     (a) Costs to Casing Point. At least fifteen (15) days but not more than thirty
(30) days prior to spudding a Program Well after the Effective Date, GASCO shall furnish to
NFR an AFE for the Costs to Casing Point of such Program Well and a Cash Call in the amount
of NFR’s Working Interest Share of such AFE. Not later than fifteen (15) business days
after receipt of the AFE and Cash Call, NFR shall pay to GASCO, by wire transfer of
immediately available funds in accordance with the instructions set forth in Schedule 3.1,
the amount of such Cash Call.

     (b) Completion Costs. After preparation of a completion design for a Program
Well to be Completed, GASCO shall furnish to NFR an AFE for the Completion Costs of such
Program Well and a Cash Call in the amount of NFR’s Working Interest Share of such AFE. Not
later than fifteen (15) business days after receipt of the AFE and Cash Call, NFR shall pay
to GASCO, by wire transfer of immediately available funds in accordance with the
instructions set forth in Schedule 3.1, the amount of such Cash Call.

     (c) Recompletion, Reworking or Plugging Back Costs. After preparation of a
design for the Recompletion, Rework or Plugging Back of a Program Well to be Recompleted,
Reworked and/or Plugged Back, GASCO shall furnish to NFR an AFE for the Recompletion,
Reworking or Plugging Back Costs of such Program Well and a Cash Call in the amount of NFR’s
Working Interest Share of such AFE. Not later than fifteen (15) days after receipt of the
AFE and Cash Call, NFR shall pay to GASCO, by wire transfer of immediately available funds
in accordance with the instructions set forth in Schedule 3.1, the amount of such Cash Call.

     (d) Well Fee. In partial consideration for the rights granted by GASCO to NFR
and the other obligations of GASCO under this Agreement, NFR shall pay to GASCO a fee per
Program Well equal to NFR’s Working Interest Share in such Program
Well times $100,000 (the “Well Fee”). The Well Fee shall be payable by NFR to GASCO
along with and at the same time as the Cash Call for the Costs to Casing Point of each
Program Well is due.

     (e) LOEs. NFR shall pay to GASCO LOEs attributable to NFR’s Working Interest
Share in accordance with the terms of the applicable JOA, subject however to Section 3.1(g).

     (f) Reconciliations for Underpayments, Overruns and Credits. On or before one
hundred and twenty (120) days following the date of initial production from each Program
Well (or the date of initial production after a Recompletion, Reworking or Plugging Back, as
applicable) (or with respect to a Commenced Program Well that is

7

 

already producing, 120 days
following the Effective Date), GASCO shall provide to NFR a statement reconciling the actual
Costs to Casing Point, Completion Costs and Recompletion, Reworking or Plugging Back Costs
(“Actual Well Costs”) for such Program Well with the costs invoiced and paid by NFR in
respect of such Program Well pursuant to the provisions of Section 3.1, or this Section
3.2(a), (b) and (c). If the Actual Well Costs exceed the Estimated Well Costs, GASCO shall
along with such statement provide to NFR an invoice for the amount of such excess and NFR
shall pay such amount to GASCO within thirty (30) days from the date of receipt of such
invoice. If the Actual Well Costs are less than the Estimated Well Costs, NFR shall be
entitled to a refund in the amount by which the Estimated Well Costs exceed the Actual Well
Costs (the “Overpayment Amount”), such refund to be provided concurrently with the
reconciliation statement referred to above. If GASCO receives an invoice or a reimbursement
relating to Costs to Casing Point, Completion Costs and Recompletion, Reworking or Plugging
Back Costs after the expiration of the 120 day period referenced in this Section 3.2(f), the
Parties shall account for such invoice or reimbursement, by invoicing or crediting, as
applicable, in the same manner as provided in connection with excess Actual Well Costs and
Overpayment Amounts.

     (g) Disposal of Producer Water. It is intended that water produced from the
Program Wells will be disposed of in the evaporation pit owned and operated by GASCO or its
Affiliates, located Section 36, Township 9 South, Range 18 East, Uintah County, Utah or any
other evaporation pit subsequently constructed by GASCO or its Affiliates for disposal or
water produced from the Program Wells. Contemporaneously with the execution of this
Agreement, NFR shall pay to GASCO the cash sum of $750,000 and in consideration thereof, NFR
shall receive a credit of an amount equal to its Working Interest Share times $2.00 per
barrel against the fee that is charged for the disposal of water produced from the Program
Wells into such evaporation pits. The obligation of GASCO to dispose of water produced from
the Program Wells in such evaporation pits shall be suspended during an event of Force
Majeure or if GASCO is not authorized to do so by applicable laws or regulations, and during
such period of time, NFR shall pay its Working Interest Share of water disposal fees
applicable to other disposal facilities without credit.

ARTICLE 4.

EARNING AND ASSIGNMENT OF OWNERSHIP INTEREST

     4.1 Assignment of Interest in Completed Commenced Wells. Contemporaneously with the
execution of this Agreement and payment by NFR of the amounts set forth in Section 3.1, GASCO shall
execute, acknowledge and deliver to NFR an Assignment conveying to NFR the NFR Working Interest
Share in and to (a) the Oil and Gas Interests covering the lands on which each Commenced Program
Well that has previously been drilled to any one of the Objective Horizons insofar only as such Oil
and Gas Interests cover the Proration Unit for such Commenced Program Well, limited to the
subsurface depths from the top of the Wasatch Formation to one hundred feet (100’) below the total
depth drilled in such Commenced Program Well, (b) each such Commenced Program Well, limited to the
subsurface depths from the top of the Wasatch Formation to one hundred feet (100’) below total the
depth drilled in such Commenced Program Well, and to the extent appurtenant thereto, the personal
property and

8

 

equipment installed or acquired in connection with drilling, completing or equipping
such Commenced Program Well for production, and (c) all the oil, gas and other minerals
attributable to the NFR Working Interest Share produced from each such Commenced Program Well,
except to the extent an accounting therefor has already been made pursuant to Section 3.1.

     4.2 Assignment of Interest in other Program Wells. Not later than thirty (30) days after a
Program Well (other than a Program Well for which an Assignment has been delivered pursuant to
Section 4.1) has been drilled to any one of the Objective Horizons, GASCO shall execute,
acknowledge and deliver to NFR an Assignment conveying to NFR the NFR Working Interest Share in and
to the Oil and Gas Interests covering the lands on which the Program Well is located insofar only
as such Oil and Gas Interests cover the Proration Unit for such Program Well, limited to the
subsurface depths from the top of the Wasatch Formation to one hundred feet (100’) below the total
depth drilled in such Program Well, each such Program Well, limited to the subsurface depths from
the top of the Wasatch Formation to one hundred feet (100’) below the total depth drilled in such
Program Well, and to the extent appurtenant thereto, the personal property and equipment installed
or acquired in connection with drilling, completing or equipping such Program Well for production.

     4.3 Certain Reservation and Limitations. The Assignments shall except and reserve to GASCO
all of GASCO’s right, title and interest in and to (a) any Oil and Gas Interests insofar as same
cover the depths from the surface of the earth to the top of the Wasatch Formation, (b) any Oil and
Gas Interests that cover lands outside of any Proration Unit for any Commenced Program Well or
Program Well, (c) the gathering system, evaporator pit and other field equipment currently owned or
leased by or subsequently acquired or leased by GASCO, that was not installed pursuant to an AFE
for a Program Well. The Assignments shall be made and accepted subject to, and NFR shall assume
from and after the date the Oil and Gas Interest was acquired by GASCO, a share of the obligations
under the Oil and Gas Interest and of the Existing Burdens, in each case insofar as they relate to
the Proration Unit and in proportion to the NFR Working Interest Share. The NFR Working Interest
share shall be subject to proportionate reduction as set forth in the Assignments. The
Assignments, subject to Section 4.4, shall be without representation, warranty, covenant of title
or otherwise, expressed, implied or statutory, except that GASCO shall warrant title to the Oil and
Gas Interests assigned as to lawful claims asserted by, through and under GASCO but not otherwise.

     4.4 Marketable Title GASCO represents and warrants that it has good and
marketable title to the Oil and Gas Interests covered by this Agreement, provided that such
warranty terminates with respect to each well when a drillsite title opinion issued by an
independent and reputable title attorney, subject to such title objections customarily waived by
prudent operators, crediting GASCO (and/or GASCO and NFR) with not less than the represented net
revenue interest and not more than the working interest without a corresponding increase in the net
revenue interest is delivered to NFR. For purposes hereof, good and marketable title shall mean
such ownership that entitles GASCO to receive not less than the net revenue interest set forth on
Exhibit A-1 attached hereto or more than the working interest set forth on Exhibit A-1 without a
corresponding increase in the net revenue interest.

9

 

ARTICLE 5.

OPERATIONS

     5.1 Drilling, Completion, Recompletion, Rework and Plugging Back of Program Wells.
Elections. GASCO shall use reasonable efforts to cause all of the Program Wells to be drilled
to their respective Objective Depth in accordance with the terms of this Agreement and the relevant
JOA. The decision whether to attempt a Completion, Recompletion, Rework or Plugging Back of a
Program Well shall be made by GASCO acting as a reasonable operator/ after consultation with NFR,
and if GASCO so elects, GASCO shall use reasonable efforts to cause such operation to be conducted
in accordance the terms of this Agreement and the relevant JOA. If under a relevant JOA, GASCO
elects not to participate in the conduct of a Completion, Recompletion, Rework or Plugging Back of
a Program Well, NFR shall have the right to participate in such Completion, Recompletion, Rework or
Plugging Back proposals, and GASCO shall be deemed a Non-Consenting Party under such JOA and NFR
shall be deemed a Consenting Party under such JOA, in each case, solely with respect to such
operation. The Parties agree that, subject to any extension due to any Force Majeure Event, it is
the intention of the Parties to use reasonable efforts to drill all of the Program Wells within
twelve (12) months of the Effective Date.

     5.2 Application of JOA; Conflicts. All operations conducted with respect to any Program
Well shall be governed by and conducted in accordance with the provisions of this Agreement and the
applicable JOA. In the event of any conflict or discrepancy between the terms of this Agreement and
a JOA, the terms and provisions of this Agreement shall control and prevail.

     5.3 Applicable Laws . All operations hereunder and on the Program Area shall be conducted in accordance with all valid
and applicable Laws.

     5.4 Sale and Purchase of NFR’s Production. Subject to Section 3.2(e), all gas, gas liquids
and/or gas condensate attributable to the NFR Working Interest Share shall be sold and purchased
pursuant to and in accordance with the terms and provisions of the Gas Purchase and Sale Agreement
attached as Exhibit H to the JOA attached hereto as Schedule 5.1.

     5.5 Expansion of Program. The Parties currently intend to extend their participation in the
drilling of exploratory wells to additional wells and agree to enter into good faith discussions
with respect to the possibility of expanding such participation to wells in addition to the Program
Wells.

     5.6 Agreement not to Compete. NFR agrees that, for one (1) year after termination of this
Agreement, it shall not acquire, either directly or indirectly, any Oil and Gas Interests covering
lands located within the Program Area, or any interest therein. In the event NFR does acquire any
such Oil and Gas Interest, it shall notify GASCO in writing and GASCO shall have the option to
acquire such Oil and Gas Interest from NFR for the same cost and/or consideration actually paid by
NFR in its acquisition of such Oil and Gas Interest or interest therein.

10

 

ARTICLE 6.

WELL INFORMATION AND DATA

     6.1 Seismic, Geologic and Engineering Information. Each Party shall furnish to the other
Party, copies of all geologic and geophysical data (excluding seismic data), engineering reserve
reports, electric and other logs pertaining to the Program Wells owned by or under the control of
the disclosing Party (whether currently owned or subsequently acquired), which the disclosing Party
may disclose without violating any contractual or other restriction and without the incurrence of a
fee. Subject to applicable contractual restrictions, GASCO shall make copies of any seismic
information covering the Program Area owned by or under its control (whether currently owned or
subsequently acquired) available for review by NFR at the offices of GASCO during normal business
hours. Subject to applicable contractual restrictions, NFR shall make copies of any seismic
information covering the Program Area owned by or under its control (whether currently owned or
subsequently acquired) available for review by GASCO at the offices of NFR during normal business
hours. Each Party shall also have access to all cores, cuttings, and other geological, geophysical
well and production data and maps secured from, or prepared in connection with, operations on a
Program Well. Notwithstanding any provision in this Agreement to the contrary, either Party may
sell, trade, assign, transfer or otherwise deal with any of the geological, geophysical, seismic
and other data it currently owns or controls or subsequently acquires in any manner it determines,
subject however, to the provisions of Section 6.3 with respect to any such information it acquires
from the other Party and provided that electric and other logs run in the
Program Wells, all cores, cuttings, and other geological, geophysical well and production data and
maps secured from, or prepared in connection with, operations on a Program Well will be kept
confidential during the term of this Agreement. NFR shall have the right to work all relevant data
contained on GASCO’s workstations in the offices of GASCO.

     6.2 Title Information. Upon request, each Party shall furnish the other Party with any
title opinions and other title information in the disclosing Party’s possession or control (subject
to any applicable confidentiality restrictions) relating to any Program Well and the Oil and Gas
Interests covering the Proration Unit associated therewith.

     6.3 Confidentiality. All information and data provided by a Party to the other Party shall
be provided without any covenant, representation or warranty by the disclosing Party. Each Party
agrees to hold all of the information provided to it under this Agreement confidential and not to
disclose such information. Notwithstanding the foregoing, a Party may disclose such information to
its shareholders, members, general and limited partners, providers of financing, a potential
purchaser of a Party’s interest and such Party’s advisors and consultants, provided each of such
persons agrees to keep confidential and not disclose such information. The foregoing obligations
of confidentiality and non-disclosure shall not apply to information that is (a) already known to
the receiving party at the time of disclosure, (b) known to the industry or the public at the time
of the disclosure to the receiving Party or subsequently becomes known to the industry or the
public through no fault of the receiving Party, (c) rightfully obtained by the receiving Party from
a third Person who is, at the time such information is received by the receiving Party, under no
obligation to the disclosing Party to hold the same in confidence. Notwithstanding the foregoing, a
Party may disclose information that based on the advice of counsel, it is required or compelled to
disclose by Law, or by rule or regulation of any securities exchange on which the

11

 

disclosing Party
or any Affiliate of the disclosing Party is listed or the terms of any of the Oil and Gas
Interests.

ARTICLE 7.

PROGRAM TERM AND TERMINATION

     7.1 Initial Term. This Agreement will be effective upon its execution by the Parties for a
term commencing as of the Effective Date and, unless terminated earlier pursuant to the provisions
of this Article 7 or by mutual agreement of the Parties, terminating as to a Program Well and its
relevant Proration Unit on the termination of the JOA covering such Program Well (the “Program
Term”).

     7.2 Termination by GASCO. GASCO may terminate this Agreement upon ten (10) days’ written
notice (except as otherwise provided below) to NFR upon the occurrence of any of the following:

     (a) the attempted or actual assignment or transfer of the rights or obligations of NFR
under this Agreement, other than as provided herein;

     (b) the breach of any representation or warranty made by NFR in this Agreement which
has a material adverse effect;

     (c) the dissolution, bankruptcy, or insolvency of NFR;

     (d) NFR’s failure to perform and/or cure, as applicable, any of its material
obligations under this Agreement within sixty (60) days after receipt of written notice from
GASCO regarding such failure;

     (e) any act or omission by NFR in violation of this Agreement, and the continuation of
such violation following sixty (60) days’ written notice from GASCO, if such act or omission
has primarily caused a material detriment to GASCO;

     (f) the occurrence and continuation of a Force Majeure Event affecting NFR hereunder
that renders NFR unable to perform any material obligation hereunder for a period in excess
of ninety (90) consecutive days or one hundred and eighty (180) days in the aggregate.

     7.3 Termination by NFR. NFR may terminate this Agreement upon ten (10) days’ written notice
(except as otherwise provided below) to GASCO upon the occurrence of any of the following:

     (a) the attempted or actual assignment or transfer of the rights or obligations of
GASCO under this Agreement, other than as provided herein;

     (b) the dissolution, bankruptcy, or insolvency of GASCO;

12

 

     (c) the breach, and the continuation of such breach following sixty (60) days’ written
notice from NFR, of any representation or warranty made by GASCO in this Agreement which has
a material adverse effect;

     (d) any act or omission by GASCO in violation of this Agreement, and the continuation
of such violation following sixty (60) days’ written notice from NFR, if such act or
omission has primarily caused a material detriment to NFR;

     (e) GASCO’s failure to perform and/or cure, as applicable, any of its material
obligations under this Agreement within sixty (60) days after receipt of written notice from
NFR regarding such failure.

     (f) the occurrence and continuation of a Force Majeure Event affecting GASCO hereunder
that renders GASCO unable to perform any material obligation hereunder for a period in
excess of ninety (90) consecutive days or one hundred and eighty (180) days in the aggregate

     7.4 Effect of Termination. No termination under this Article 7 shall release any of the
Parties from any obligations arising hereunder prior to such termination. The exercise of the right
of a Party to terminate this Agreement, as provided in this Agreement, does not preclude such Party
from exercising other remedies that are provided in this Agreement or are available at law or in
equity; provided, however, that no Party shall have a right to terminate, revoke or treat this
Agreement as repudiated other than in accordance with the provisions of this Agreement. Except as
otherwise set forth in this Agreement, remedies are cumulative, and the exercise of, or failure to
exercise, one or more of them by a Party shall not, to the extent provided by law, limit or
preclude the exercise of, or constitute a waiver of, other remedies by such Party.

ARTICLE 8.

TRANSFERS

     8.1 Transfers. Neither Party may Transfer less than all of its interest in this Agreement,
or in any Proration Unit that is subject to this Agreement without the prior written consent of the
other Party, which may be withheld for any reason or no reason. Except in accordance with the
following provisions of this Section 8.1, neither Party may Transfer all of its interest in this
Agreement or in the Proration Units without the prior written consent of the other Party.
Notwithstanding the foregoing, a Party may Transfer all, but not less than all, of its interest in
this Agreement or any Proration Unit to a Permitted Transferee, provided such assignment shall not
release the Transferring Party from any of its obligations under this Agreement or the JOA, and
provided further that if such Permitted Transferee ceases to be a Permitted Transferee, the
interest transferred must be Transferred to another Permitted Transferee of the original
Transferring Party, or to the original Transferring Party. Any permitted Transfer of a Parties’
rights hereunder to any Person shall be made expressly subject to all of the terms, provisions,
covenants, obligations, indemnities, representations, warranties and conditions of this Agreement
and the JOA. The foregoing restrictions shall not apply to the Transfer of the equity interests in
a Party or any change of control resulting from such transfer of equity interests.

13

 

     8.2 Drag-Along and Tag-Along Rights.

     (a) Transfer Notice. In the event that any Party, including any of its Permitted
Transferees (together with such Permitted Transferees, the “Selling Party”), proposes to
Transfer any portion (a “Sale Interest”) of its interest in this Agreement or in any Oil and
Gas Interest, Program Well or other asset subject to this Agreement (a “Sale Property”) to a
Person (a “Third Party Transferee”) that is not a Permitted Transferee of the Selling Party,
the Selling Party shall give the other Party (the “Non-Selling Party”) written notice (the
“Transfer Notice”) of such Transfer, specifying in reasonable detail the identity of the
proposed Third Party Transferee and the consideration and other terms and conditions of the
proposed Transfer (and, if available, provide a copy of the form of the proposed agreement).

     (b) Drag-Along Notice. If the Transfer Notice also includes notice of the intention of
the Selling Party to cause the other Party to participate in such Transfer (a “Drag-Along
Notice”), then the Non-Selling Party agrees that, unless, within 30 days after receipt of
the Transfer Notice (the “Notice Period”), it elects to Acquire the Sale Interest pursuant
to Section 8.3, it shall be obligated to Transfer to the Third Party Transferee, on the same
terms and conditions as the Selling Party, a portion of the Non-Selling Party’s interest in
the Sale Property (a “Drag-Along Interest”) equal to the ratio that the Sale Interest bears
to the entire interest of the Selling Party in the Sale Property.

     (c) Tag-Along Offer and Tag-Along Notice. If the Transfer Notice does not include a
Drag-Along Notice, the Non-Selling Party may, unless it elects within the Notice Period to
Acquire the Sale Interest pursuant to Section 8.3, treat the Transfer Notice as an offer by
the Selling Party (a “Tag-Along Offer”) to Transfer to the Third Party Transferee, on the
same terms and conditions as the Selling Party, a portion of the Non-Selling Party’s
interest in the Sale Property (a “Tag-Along Interest”) equal to the ratio that the Sale
Interest bears to the entire interest of the Selling Party in the Sale Property; provided,
however, that, unless earlier accepted by the Non-Selling Party’s delivery of written notice
of such acceptance to the Selling Party (a “Tag-Along Notice”), such Tag-Along Offer shall
expire (and any rights the Non-Selling Party may have with respect to such Tag-Along Offer
shall be waived) at the termination of the Notice Period.

     (d) Wire Instructions and Limited Power of Attorney. If the Non-Selling Party either
(i) gives the Selling Party a Tag-Along Notice or (ii) after having received from the
Selling Party a Drag-Along Notice, does not elect within the Notice Period to purchase the
Sale Interest pursuant to Section 8.3, the Non-Selling Party shall, either as part of its
Tag-Along Notice, if any, or promptly after the expiration of the Notice Period, as the case
may be, deliver to the Selling Party (A) wire transfer instructions for payment of the
purchase price for the Drag-Along Interest or the Tag-Along Interest, as the case may be, to
be sold in such Transfer, (B) a limited power of attorney authorizing the Selling Party to
Transfer the Drag-Along Interest or the Tag-Along Interest, as the case may be, to the Third
Party Transferee on the price and terms set forth in the Transfer Notice and (C) all other
documents required to be executed in connection with such Transfer. Delivery of a Tag-Along
Notice with such limited power of attorney shall constitute an irrevocable acceptance of the
Tag-Along Offer by the Non-Selling Party. If the Non-Selling Party

14

 

delivers to the Selling
Party a Tag-Along Notice, the Selling Party shall, to the extent necessary, reduce the Sale
Interest it otherwise would have included in such proposed Transfer so as to permit the
Non-Selling Party to include in the Transfer a Tag-Along Interest that it is entitled to
include pursuant to this Section 8.2.

     (e) 90-Day Closing Period. If the Selling Party has not completed the Transfer of its
Sale Interest to a Third Party Transferee on substantially the same terms and conditions as
set forth in the Transfer Notice either (i) within 90 days after the Selling Party’s receipt
by delivery of the Tag-Along Notice or (ii), if the Transfer Notice included a Drag-Along
Notice and the Non-Selling Party has not elected within the Notice Period to purchase the
Sale Interest pursuant to Section 8.3, within 90 days after the expiration of the Notice
Period, as the case may be (which 90-day period, in each of (i) and (ii) above, shall be
extended, if any of the transactions contemplated by the
Transfer Notice are subject to regulatory approval, until the expiration of five
Business Days after all such approvals have been received, but in no event by more than 30
days), the Selling Party shall (X) return to the Non-Selling Party the limited power of
attorney (and all copies thereof) that such Non-Selling Party executed and any other
documents in the possession of the Selling Party executed by the Non-Selling Party in
connection with the proposed Transfer, and (Y) not conduct any Transfer of its Sale Interest
without again complying with this Section 8.2.

     (f) Closing Obligations. Concurrently with the consummation of any Transfer pursuant to
this Section 8.2, the Selling Party shall (i) notify the Non-Selling Party thereof, (ii)
remit to the Non-Selling Party the total consideration for the Non-Selling Party’s
Drag-Along Interest or Tag-Along Interest, as the case may be, Transferred pursuant thereto,
and (iii) promptly after the consummation of such Transfer, furnish such other evidence of
the completion of such Transfer, the date of such completion and the terms thereof as may be
reasonably requested by the Non-Selling Party.

     (g) No Liability if No Transfer. Notwithstanding anything contained in this Section
8.2, there shall be no liability on the part of the Selling Party to the Non-Selling Party
if the Transfer of the Sale Interest pursuant to this Section 8.2 is not consummated for
whatever reason. Whether to effect a Transfer of the Sale Interest is in the sole and
absolute discretion of the Selling Party, provided, however, that if such a Transfer is
consummated, any Drag-Along Interest or Tag-Along Interest, as the case may be, must be
disposed of along with the Sale Interest pursuant to this Section 8.2.

     (h) Conditions to the Parties’ Rights and Obligations. Notwithstanding anything
contained in this Section 8.2, the rights and obligations of the Parties with respect to
participation in a Transfer pursuant to this Section 8.2 are subject to the following
conditions:

	 	(i)	 	upon the consummation of such Transfer, the
Non-Selling Party participating therein shall receive the same form of
consideration as the Selling Party, and the amount of such
consideration shall bear the same ratio to the amount of consideration
received by the Selling Party as the ratio of the Drag-Along Interest
or the Tag-Along Interest, as the case

15

 

	 	 	 	may be, to the Sale Interest,
and, except for such consideration, no Party shall receive any payments
of any nature whatsoever from the transferee in connection with or
arising from the Transfer; and
	 	(ii)	 	no Party participating therein shall be
obligated to pay any expenses incurred by the other Party in connection
with any unconsummated Transfer pursuant to this Section 8.2, and each
such Party shall be obligated to pay only its pro rata share (based on
the ratio of the Drag-Along Interest or the Tag-Along Interest, as the
case may be, to the Sale Interest) of expenses incurred in connection
with a consummated Transfer pursuant to this Section 8.2 to the extent
such expenses are incurred for the benefit of all such Parties.

     8.3 First Purchase Rights.

     (a) If the Non-Selling Party receives a Transfer Notice, as provided in Section 8.2, it
shall be entitled to treat the Transfer Notice as an offer by the Selling Party (a “First
Purchase Offer”) to Acquire the Sale Interest on the same terms and conditions, including
the amount and form of consideration, as set forth in the Transfer Notice; provided,
however, that, unless earlier accepted by the Non-Selling Party’s delivery of written notice
of such acceptance to the Selling Party (a “First Purchase Notice”), such First Purchase
Offer shall expire (and any rights the Non-Selling Party may have with respect to such First
Purchase Offer shall be waived) at the termination of the Notice Period.

     (b) If, other than as a result of a breach or default by the Selling Party, the
Non-Selling Party has not completed the Acquisition of the Sale Interest on substantially
the same terms and conditions as set forth in the Transfer Notice within 90 days after the
Selling Party’s receipt by delivery of the First Purchase Notice (which 90-day period shall
be extended, if any of the transactions contemplated by the Transfer Notice are subject to
regulatory approval, until the expiration of five Business Days after all such approvals
have been received, but in no event by more than 30 days), the Non-Selling Party’s right to
Acquire the Sale Interest shall cease and the Selling Party shall thereafter have no
obligations with respect to such proposed Acquisition.

     (c) If the Non-Selling Party gives the Selling Party a First Purchase Notice, the
Selling Party shall, promptly after the receipt of such First Purchase Notice, deliver to
the Non-Selling Party (i) wire transfer instructions for payment of the purchase price for
the Sale Interest to be Acquired by the Non-Selling Party and (ii) all other documents
required to be executed in connection with such Transfer.

     (d) Concurrently with the consummation of any Acquisition pursuant to this Section 8.3,
the Non-Selling Party shall remit to the Selling Party the total consideration for the Sale
Interest Acquired pursuant thereto.

     8.4 Valuation of Non-Liquid Consideration. If the terms of a proposed Transfer include
consideration other than cash or stocks, equities, bonds, debts or other instruments that

16

 

are listed and traded publicly on a recognized exchange (such other consideration referred to as
“Non-Liquid Consideration”) and the Selling Party and Non-Selling Party do not agree on the value
of such Non-Liquid Consideration, the question of the value of such Non-Liquid Consideration shall
be referred to and determined by an independent firm of investment bankers of national recognized
standing as the Parties agree.

ARTICLE 9.

RELATIONSHIP OF PARTIES

     9.1 Independent Owners. The Parties expressly do not intend to create, and no provision
hereof shall be construed as creating a partnership, joint venture, mining partnership,
corporation, association or other relationship whereby any Party shall ever be held liable for the
acts, either by omission or commission, of the other. Each Party shall be individually responsible
for its own obligations as set out in this Agreement and in the JOA, and neither party shall be a
fiduciary of the other under this Agreement.

     9.2 Third Parties. Nothing in this Agreement (express or implied) is intended or shall be
construed to confer upon any person or entity not a Party any right, remedy or claim under, or by
reason of, this Agreement.

     9.3 Several Obligations. All obligations of the Parties shall be several and not joint and
several, and all rights of the Parties shall be separate and independent.

ARTICLE 10.

NOTICES

     10.1 Notices. Except as otherwise expressly provided herein, all notices or information
required pursuant to this Agreement shall be in writing, and shall be given or served by registered
mail, facsimile or by delivering the same to the relevant Party’s address personally or by courier
or other delivery service. Notice given in the manner herein described shall be effective, from
and after receipt of such notice by the addressee. In the event the addressee refuses delivery of
any such notice, then such notice shall be deemed received on the date of such refusal to accept
delivery. The addresses of the Parties for notice purposes are as set forth below their respective
signatures. Any Party may, by written notice delivered to the other Party in accordance with this Section 10.1,
change the address to which notices are to be delivered to it thereafter.

ARTICLE 11.

GOVERNING LAW; DISPUTE RESOLUTION

     11.1 Governing Law. This Agreement and any dispute relating thereto shall be governed and
interpreted by and construed in accordance with the laws of the State of New York, without giving
effect to any New York choice of law principles that might indicate the applicability of the laws
of any other jurisdiction.

     11.2 Jurisdiction; Venue, Waiver of Jury Trial. EACH PARTY CONSENTS TO PERSONAL
JURISDICTION IN ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT IN ANY COURT,
FEDERAL OR STATE, WITHIN NEW

17

 

YORK COUNTY OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK HAVING SUBJECT MATTER JURISDICTION AND, WITH RESPECT TO ANY SUCH CLAIM, EACH
PARTY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY CLAIM, OR ANY OBJECTION, THAT
SUCH PARTY MAY NOW OR HEREAFTER HAVE, THAT VENUE OR JURISDICTION IS NOT PROPER WITH RESPECT TO ANY
SUCH LEGAL ACTION, SUIT OR PROCEEDING BROUGHT IN SUCH COURT IN NEW YORK COUNTY OR THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, INCLUDING ANY CLAIM THAT SUCH LEGAL ACTION,
SUIT OR PROCEEDING BROUGHT IN SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, AND ANY CLAIM
THAT SUCH PARTY IS NOT SUBJECT TO PERSONAL JURISDICTION OR SERVICE OF PROCESS IN SUCH FORUM.

     EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.

ARTICLE 12.

FORCE MAJEURE

     12.1 Definition. As used herein, “Force Majeure Events” shall mean causes or events
that are beyond the reasonable control of, and without the fault or gross negligence of, the Party
claiming such Force Majeure Event, including acts of God, unusually severe actions of the elements
such as floods, hurricanes, or tornadoes, sabotage, terrorism, war, riots or public disorders,
strikes or other labor disputes (not caused by the Party claiming a Force Majeure Event failing to
comply with a collective bargaining agreement), and actions or failures to act of any Governmental
Authority (including expropriation and requisition), which by exercise of due diligence such Party
could not reasonably have been expected to avoid, but only to the extent that (i) by exercise of
due diligence such Party has been unable to overcome such cause or event and (ii) such cause or event
prevents or delays performance of any obligation imposed on the Party claiming such Force Majeure
Event (other than an obligation to pay money). “Force Majeure Event” shall not include: (a) causes
or events affecting the performance of third-party suppliers of goods or services except to the
extent caused by an event that otherwise is a Force Majeure Event under this definition, (b)
changes in market conditions that affect the price of natural gas, gas liquids, gas condensate, oil
or other hydrocarbons or minerals or (c) any obligations of either Party to make payments
hereunder.

     12.2 Procedures. The Party claiming relief as a result of a Force Majeure Event shall give
the other Party written notice within twenty-four (24) hours of becoming aware of the occurrence of
such Force Majeure Event, or as soon thereafter as is reasonably practicable, describing the
particulars of the Force Majeure Event, and shall use reasonable efforts to remedy its inability to
perform hereunder as soon as possible. If the Force Majeure Event (including the effects thereof)
continues for five (5) Business Days, the affected Party shall report to the other Party the status
of its efforts to resume performance under this Agreement and the estimated date thereof. If the
affected Party was not able to resume performance prior to or at the time of such report, then when
the affected Party is again able to perform, it shall provide written notice to the

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other Party of
its ability to resume performance hereunder. If the affected Party fails to give timely notice of a
Force Majeure Event under this Section 12.2, such Party shall be excused for its non-performance
hereunder only for the period after having given notice of such Force Majeure Event to the other
Party.

     12.3 Effect. Any obligation(s) of a Party under this Agreement will be temporarily
suspended during any period such Party is unable to perform such obligation(s) by reason of the
occurrence of a Force Majeure Event, but only to the extent of such inability to perform; provided,
however, that:

     (a) the suspension of performance shall be of no greater scope and of no longer
duration than is required by the Force Majeure Event;

     (b) no obligations under this Agreement which shall have arisen before the occurrence
of the Force Majeure Event shall be excused as a result of such Force Majeure Event; and

     (c) the Party claiming the occurrence of the Force Majeure Event will bear the burden
of proof with respect to evidencing the existence of such Force Majeure Event.

ARTICLE 13.

REPRESENTATIONS AND WARRANTIES

     13.1 NFR’s Representations and Warranties. NFR represents and warrants as
follows: (a) Due Formation. NFR (i) is a limited liability company duly formed, and
validly existing under the laws of Delaware, (ii) has the requisite power and authority to
own its properties and carry on its business as now being conducted and currently proposed
to be conducted and to execute, deliver and perform its obligations under this Agreement,
and (iii) is qualified to do business in every jurisdiction in which failure so to qualify
would be reasonably likely to have a material adverse effect on the business, operations or
conditions (financial or otherwise) of NFR.

     (b) Authorization; Enforceability. NFR has taken all action necessary to
authorize it to execute, deliver and perform under this Agreement. This Agreement
constitutes a legal, valid and binding obligation of NFR enforceable in accordance with its
terms, subject to bankruptcy, reorganization, moratorium or other similar laws affecting the
enforcement of the rights of creditors generally and subject to general principles of
equity.

     (c) No Conflict. The execution, delivery and performance by NFR of this
Agreement does not and will not (i) violate in any material respect any legal requirements
applicable to NFR, (ii) result in any material breach of NFR’s constituent documents or
(iii) conflict with, violate or result in a breach of or constitute a default under any
agreement or instrument to which NFR or any of its properties or assets are bound or result
in the imposition or creation of any lien or security interest in or with respect to any of
NFR’s property or assets.

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     (d) No Authorization. No authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or regulatory body (other than those
which have been obtained) is required for the due execution, delivery and performance by NFR
of this Agreement.

     (e) No Violation of Securities Laws. NFR has entered into this Agreement for
its own account and shall acquire any Oil and Gas Interests hereunder for its own accounts
and not with the intent to make a distribution hereof within the meaning of Securities Act
of 1933 and the rules and regulations pertaining to it or distribution thereof in violation
of any applicable securities laws.

     (f) Litigation. NFR is not a party to any legal, administrative, arbitration,
or other proceeding, nor, to NFR’s knowledge, is any such proceeding threatened, which, if
decided adversely to NFR, would materially and adversely affect NFR’s ability to perform
under this Agreement.

     (g) Solvency. As of the date hereof, NFR is financially solvent, able to pay
its debts as they mature, and possessed of sufficient working capital to complete its
obligations under this Agreement. NFR is not in default under any mortgage, loan agreement,
deed of trust, indenture or other agreement evidencing indebtedness to which it is a party
or by which it is bound.

     13.2 GASCO’s Representations and Warranties. GASCO represents and warrants as follows:

     (a) Due Formation. GASCO (i) is a corporation duly formed, and validly existing
under the laws of Delaware, (ii) has the requisite power and authority to own its properties
and carry on its business as now being conducted and currently proposed to be conducted and
to execute, deliver and perform its obligations under this Agreement, and (iii) is qualified
to do business in every jurisdiction in which failure so to qualify would be reasonably
likely to have a material adverse effect on the business, operations or conditions
(financial or otherwise) of GASCO.

     (b) Authorization; Enforceability. GASCO has taken all action necessary to
authorize it to execute, deliver and perform under this Agreement. This Agreement
constitutes a legal, valid and binding obligation of GASCO enforceable in accordance with
its terms, subject to bankruptcy, reorganization, moratorium or other similar laws affecting
the enforcement of the rights of creditors generally and subject to general principles of
equity.

     (c) No Conflict. The execution, delivery and performance by GASCO of this
Agreement does not and will not (i) violate in any material respect any legal requirements
applicable to GASCO, (ii) result in any material breach of GASCO’s constituent documents or
(iii) conflict with, violate or result in a breach of or constitute a default under any
agreement or instrument to which GASCO or any of its properties or assets are bound or
result in the imposition or creation of any lien or security interest in or with respect to
any of GASCO’s property or assets.

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     (d) No Authorization. No authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or regulatory body (other than those
which have been obtained) is required for the due execution, delivery and performance by
GASCO of this Agreement.

     (e) Litigation. GASCO is not a party to any legal, administrative, arbitration,
or other proceeding, nor, to GASCO’s knowledge, is any such proceeding threatened, which, if
decided adversely to GASCO, would materially and adversely affect GASCO’s ability to perform
under this Agreement.

     (f) Solvency. As of the date hereof, GASCO is financially solvent, able to pay
its debts as they mature and possessed of sufficient working capital to complete its
obligations under this Agreement. GASCO is not in default under any mortgage, loan
agreement, deed of trust, indenture or other agreement evidencing indebtedness to which it
is a party or by which it is bound.

     (g) Taxes. All ad valorem, property, production, severance, excise and similar
taxes and assessments based on or measured by the ownership of the Oil and Gas Interests, or
the production or removal of hydrocarbons or the receipt of proceeds therefrom, that have
become due and payable have been properly paid, except for any that are being contested in
good faith in the ordinary course of business.

     (h) Compliance with Laws. To the actual knowledge of the senior officers of
GASCO, the Oil and Gas Interests have been owned or operated in material compliance
with all statutes, laws, rules, regulations, licenses, permits, ordinance and orders
applicable to the Oil and Gas Interests, the failure of which would have a material adverse
effect on any of the Oil and Gas Interests insofar as same cover the Proration Units. GASCO
has neither received, nor does any senior officer of GASCO have actual Knowledge of, any
material violation of any statute, law, rule, regulation, license, permit, ordinance order
or judgment of any federal, state or local governmental department, agency or court,
applicable to the Oil and Gas Interests that remains uncured and that would have a material
adverse effect on any of the Oil and Gas Interests insofar as same cover the Proration
Units.

     (i) Permits. With respect to the Oil and Gas Interests, to the actual
knowledge of the senior officers of GASCO, GASCO has obtained all material regulatory or
governmental permits, licenses, approvals and consents necessary for operation of the Oil
and Gas Interests as currently used or operated.

     (j) Preferential Rights. The transactions contemplated hereby will not trigger
any preferential right or agreement that would permit any person or entity to purchase or
acquire any of the Oil and Gas Interests.

     (k) Consents. The transactions contemplated hereby are not subject to a
required consent, approval or authorization of, or notifications to, any person or entity
(excluding any of the foregoing customarily obtained after the transaction closes) that if

21

 

not obtained would result in the termination of GASCO’s title to any of the Oil and Gas
Interests.

     (l) Right to Production. Except as set forth in the [Conoco Contract], no
person or entity has any call upon, right to purchase, option to purchase or similar rights
with respect to any portion of NFR’s share of the future production of hydrocarbons from the
Oil and Gas Interests.

     (m) Liens. Except for inchoate liens for obligations not yet due and payable,
the Oil and Gas Interests are free and clear of all liens and encumbrances, except any that
are being contested in good faith in the ordinary course of business.

ARTICLE 14.

MISCELLANEOUS MATTERS

     14.1 No Waiver. Any of the terms, provisions, covenants, representations, warranties or
conditions hereof may be waived only by a written instrument executed by the Party waiving
compliance. Except as otherwise expressly provided in this Agreement, the failure of any Party at
any time or times to require performance of any provision hereof shall in no manner affect such
Party’s right to enforce the same.

     14.2 Successors and Assigns . Subject to Article 8, all the terms, provisions, covenants, obligations, indemnities,
representations, warranties and conditions of this Agreement shall be binding upon and inure to the
benefit of and be enforceable by the Parties and their respective Permitted Transferees.

     14.3 Indemnity for Brokers. Each Party agrees to defend, indemnify, save, and hold
harmless the other Party from and against any and all claims, demands, causes of action, and
damages to third Persons claiming under a Party for brokerage, commission, finders, or other fees
relative to this Agreement, or the transactions contemplated hereby, together with any court costs,
attorney’s fees or other costs or expenses arising therefrom.

     14.4 Invalidity. The invalidity or unenforceability of any particular provision of this
Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in
all respects as if such invalid or unenforceable provisions were omitted so long as the economic
and legal substance of the transaction contemplated hereby are not affected in any material adverse
manner to any Party.

     14.5 Counterparts. This Agreement may be executed in a number of counterparts, each of
which shall be deemed an original and all of which shall constitute one and the same Agreement. It
shall not be necessary that the Parties execute a single counterpart hereof, and this Agreement
shall be effective when each Party has executed a counterpart hereof (whether or not the other
Party has executed the same counterpart).

     14.6 Captions. The subject captions and headings of the articles, sections and subsections
of this Agreement are included solely for purposes of convenience and reference only, and shall not
be deemed to explain, modify, limit, amplify or aid in the meaning, construction or interpretation
of any of the provisions of this Agreement.

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     14.7 Further Assurances. Each Party shall from time to time do and perform such further
acts and execute and deliver such further instruments, assignments and documents as may be required
or reasonably requested by the Parties to carry out and effect the intentions and purposes of this
Agreement.

     14.8 Entire Agreement. This Agreement and the relevant JOAs constitute the entire
agreement between the Parties with respect to the subject matter hereof and supersede all previous
agreements, negotiations, discussion or understandings between the Parties, whether written or
oral.

     14.9 Rule of Construction. This Agreement has been freely and fairly negotiated among the Parties. If an ambiguity
or question of intent or interpretation arises, this Agreement will be construed as if drafted
jointly by the Parties and no presumption or burden of proof will arise favoring or disfavoring any
Party because of the authorship of any provision of this Agreement. Any reference to any Law will
be deemed to refer to such Law as amended and all rules and regulations promulgated thereunder,
unless the context requires otherwise. The words “include,” “includes,” and “including” will be
deemed to be followed by “without limitation.” Pronouns in masculine, feminine, and neuter genders
will be construed to include any other gender, and words in the singular form will be construed to
include the plural and vice versa, unless the context otherwise requires. The words “this
Agreement,” “herein,” “hereof,” “hereby,” “hereunder,” and words of similar import refer to this
Agreement as a whole and not to any particular subdivision unless expressly so limited. Time is of
the essence in the performance of this Agreement. Exhibits and Schedules are incorporated into and
shall constitute part of this Agreement.

     14.10 Public Announcements. The Parties shall
consult with one another with regard to all publicity and other releases concerning this Agreement
and, except as required by applicable law or the applicable rules or regulations of any
governmental body or stock exchange, no Party shall issue any publicity or other press release
concerning this Agreement without the prior consent of the other Party, which consent will not be
unreasonably withheld.

     14.11 Transfer Taxes. All transfer, documentary, sales, use, registration, value added and
similar taxes which may be imposed or incurred in connection with the execution of this Agreement
or the delivery of any Assignment, if any, shall be borne and paid by NFR.

     14.12 Expenses. Except as otherwise provided in Section 14.11, each Party shall bear and
pay its own expenses incurred by it in connection with the negotiation, execution and delivery of
this Agreement and any JOA.

     14.13 Amendment. This Agreement and a JOA may be amended or modified only by written
agreement executed by each Party.

     14.14 Execution in Writing. A facsimile, telex, or similar transmission by a Member or
Manager, or a photographic, photostatic, facsimile or similar reproduction of a writing executed by
a Member or Manager, shall be treated as an execution in writing for purposes of this Agreement.

[SIGNATURE PAGE TO FOLLOW]

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     IN WITNESS HEREOF, the undersigned Parties have executed this Agreement on the date first
hereinabove set forth but effective as of the Effective Date.

	 	 	 	 	 	 	 	 	 
	GASCO PRODUCTION COMPANY	 	NFR UINTA BASIN LLC	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Michael K. Decker
	 	By:
	 	/s/ David Sambrooks	 	 
	 	 	
 
	 	 	 	
 
	 	 
	Name: Michael K. Decker	 	Name: David Sambrooks	 	 
	Title: Executive Vice President	 	Title: President	 	 
	and Chief Operating Officer	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	ADDRESSES OF PARTIES:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	8 Inverness Drive East	 	1415 Louisiana	 	 
	Suite 100	 	Suite 1600	 	 
	Englewood, CO 80112	 	Houston, TX 77002	 	 
	Attention: King Grant	 	Attention: David Sambrooks	 	 
	Fax: 203-319-1911	 	Fax: 713-224-0771	 	 

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