Document:

Exhibit 10.2

 

EXECUTION VERSION

 

TWELFTH AMENDMENT TO CREDIT AGREEMENT

 

This TWELFTH AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is dated as of March 22, 2012, among GASCO ENERGY, INC. (“Borrower”), CERTAIN SUBSIDIARIES OF BORROWER, as Guarantors (the “Guarantors”), the LENDERS party hereto (the “Lenders”), and JPMORGAN CHASE BANK, N.A., as Administrative Agent (“Administrative Agent”).  Unless the context otherwise requires or unless otherwise expressly defined herein, capitalized terms used but not defined in this Amendment have the meanings assigned to such terms in the Credit Agreement (as defined below).

 

WITNESSETH:

 

WHEREAS, the Borrower, the Guarantors, the Administrative Agent and the Lenders have entered into that certain Credit Agreement dated as of March 29, 2006 (as the same has been and may hereafter be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”); and

 

WHEREAS, the Borrower, the Guarantors, the Administrative Agent and the Lenders desire to amend the Credit Agreement as provided herein upon the terms and conditions set forth herein.

 

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the Borrower, the Guarantors, the Lenders and the Administrative Agent hereby agree as follows:

 

SECTION 1.                         Amendments to Credit Agreement.  Subject to the satisfaction or waiver in writing of each condition precedent set forth in Section 3 of this Amendment, and in reliance on the representations, warranties, covenants and agreements contained in this Amendment, the Credit Agreement shall be amended in the manner provided in this Section 1 effective as of the date Borrower satisfies the conditions set forth in Section 3 of this Amendment.

 

1.1                               Additional Definitions. The following definitions shall be and they hereby are added to Section 1.01 of the Credit Agreement in appropriate alphabetical order:

 

“Twelfth Amendment Effective Date” means March 22, 2012.

 

“Wapiti Development Agreement” means that certain Development Agreement, dated as of March 22, 2012, among Gasco Production and Wapiti Oil & Gas II, L.L.C.

 

“Wapiti Purchase Agreement” means that certain Purchase and Sale Agreement, dated as of February 23, 2012, among Gasco Production, as seller, and Wapiti Oil & Gas II, L.L.C., as buyer.

 

“Wapiti Sale Conditions” means with respect to the sale of the Wapiti Sale Properties, the collective reference to the following conditions: (a) at the time of and immediately after giving effect to such sale, (i) no Default or Event of

 

TWELFTH AMENDMENT TO CREDIT AGREEMENT

 

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Default shall have occurred and be continuing and (ii) no Borrowing Base Deficiency shall exist, (b) the sale of the Wapiti Sale Properties is consummated on or prior to March 29, 2012, (c) the sale of the Wapiti Sale Properties is consummated pursuant to and in accordance with the Wapiti Sale Transaction Documents without waiver or amendment of any material term or condition thereof not otherwise consented to by the Administrative Agent, (d) the consideration received in respect of the sale of the Wapiti Sale Properties shall be equal to or greater than the fair market value of the Wapiti Sale Properties (as reasonably determined by the board of directors of the Borrower, and if requested by the Administrative Agent or the Required Lenders, the Borrower shall deliver a certificate certifying to that effect), (e) the amount of cash consideration received from such sale shall be greater than or equal to the amount necessary to comply with clause (f) below, (f) on the date the Borrower or any other Credit Party receives the Net Cash Proceeds from the sale of the Wapiti Sale Properties, the Borrower shall use such Net Cash Proceeds to repay all outstanding Loans and accrued and unpaid interest and fees (including attorney’s fees to the extent invoiced prior to the consummation of such sale) owing by the Borrower under the Credit Agreement at such time (it being understood that any Net Cash Proceeds in excess of such amount may be used by the Borrower for general corporate purposes), and (g) upon the consummation of the sale of the Wapiti Sale Properties, the Aggregate Commitment and the Borrowing Base are automatically reduced pursuant to Sections 2.02(e) and 3.05(c), respectively.

 

“Wapiti Sale Effective Date” means the date that each of the Wapiti Sale Conditions have been satisfied and the Administrative Agent has received an officer’s certificate executed by a senior officer of the Borrower certifying that each of the Wapiti Sale Conditions have been satisfied.

 

“Wapiti Sale Properties” means (a) an undivided fifty percent (50%) interest in those certain Oil and Gas Interests and related assets of Gasco Production located in Duchesne and Uintah Counties, Utah and more particularly described as the “Assets” in the Wapiti Purchase Agreement as in effect on the Twelfth Amendment Effective Date and (b) the “Wapiti Non-Producing Interests” as defined in the Wapiti Development Agreement as in effect on the Twelfth Amendment Effective Date.

 

“Wapiti Sale Transaction Documents” means the collective reference to the Wapiti Purchase Agreement and the Wapiti Development Agreement.

 

1.2                               Amended Definitions. The following definitions in Section 1.01 of the Credit Agreement shall be and they hereby are amended and restated in their respective entireties to read as follows:

 

“Availability Period” means the period from and including the Effective Date to but excluding the earlier of the Wapiti Sale Effective Date and the date of termination of the Aggregate Commitment.

 

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“Maturity Date” means March 29, 2012; provided that if the Wapiti Sale Effective Date has occurred on or prior to March 29, 2012, “Maturity Date” shall mean June 29, 2012.

 

1.3                               Termination and Reduction of the Aggregate Commitment. Section 2.02 of the Credit Agreement shall be and it hereby is amended by adding a new clause (e) to the end thereof to read as follows:

 

(e)                                  Notwithstanding anything to the contrary contained in this Agreement and at the request of the Borrower pursuant to Section 2.02(c), on the Wapiti Sale Effective Date, the Aggregate Commitment then in effect shall automatically be reduced to $25,195.25 and the Commitment of each Lender shall be proportionately reduced based on such Lender’s Applicable Percentage.

 

1.4                               Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. Section 2.05(b) of the Credit Agreement shall be and it hereby is amended and restated in its entirety to read as follows:

 

(b)                                 Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions.  To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit.  If requested by the Issuing Bank, the Borrower also shall submit a letter of credit application on the Issuing Bank’s standard form in connection with any request for a Letter of Credit.  A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the LC Exposure shall not exceed (x) at any time prior to the Wapiti Sale Effective Date, $10,000,000 and (y) from and after the Wapiti Sale Effective Date, $25,195.25 and (ii) the Aggregate Credit Exposure shall not exceed the Aggregate Commitment.  Notwithstanding the foregoing, the Issuing Bank shall not at any time be obligated to issue, amend, renew or extend any Letter of Credit if any Lender is at such time a Defaulting Lender hereunder, unless the Borrower cash collateralizes each Defaulting Lender’s portion of all then outstanding LC Exposure (calculated after giving effect to the issuance, amendment, renewal or extension of such Letter of Credit) with respect to such Letter of Credit in accordance with the procedures set forth in Section 2.05(j).

 

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1.5                               Mandatory and Optional Borrowing Base Reductions. Section 3.05 of the Credit Agreement shall be and it hereby is amended by (a) renumbering clause (c) thereof as clause (d), (b) deleting the reference to Section 3.05(c) located in clause (ii) of the proviso of the new clause (d) and substituting in lieu thereof “Section 3.05(d)” and (c) adding a new clause (c) to Section 3.05 to read as follows:

 

(c) Notwithstanding anything to the contrary contained in this Agreement (including Section 2.02(d)) and at the request of the Borrower pursuant to Section 3.05(d), on the Wapiti Sale Effective Date, the Borrowing Base then in effect shall automatically be reduced to $25,195.25 and shall remain at such amount until termination or expiration of the Aggregate Commitment and payment in full of all Obligations.  For the avoidance of doubt and notwithstanding anything to the contrary contained in this Agreement, each of the Credit Parties, the Administrative Agent and the Lenders hereby acknowledges and agrees that after giving effect to the automatic reduction of the Borrowing Base contained in this Section 3.05(c) on the Wapiti Sale Effective Date, the Lenders shall have no obligation or requirement to further redetermine the Borrowing Base in accordance with the terms of Article III or otherwise.

 

1.6                               Fundamental Changes. Section 7.03(a) of the Credit Agreement shall be and it hereby is amended and restated in its entirety to read as follows:

 

(a)                                 The Borrower will not, nor will it permit any of its Restricted Subsidiaries to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or any substantial part of its assets, or any of its Borrowing Base Properties or any of the Equity Interests of any Restricted Subsidiary (in each case, whether now owned or hereafter acquired), or liquidate or dissolve, except that, the Borrower or any Restricted Subsidiary may sell Hydrocarbons produced from its Oil and Gas Interests in the ordinary course of business and, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing, (i) any Person may merge into the Borrower in a transaction in which the Borrower is the surviving entity, (ii) any Person (other than the Borrower) may merge into any Restricted Subsidiary in a transaction in which the surviving entity is a Restricted Subsidiary, (iii) any Restricted Subsidiary may sell, transfer, lease or otherwise dispose of its assets to the Borrower or to another Restricted Subsidiary, (iv) any Restricted Subsidiary may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lenders, (v) the Borrower or any Restricted Subsidiary may sell, transfer, lease or otherwise dispose of equipment and related items in the ordinary course of business, that are obsolete or no longer necessary in the business of the Borrower or any of its Restricted Subsidiaries or that is being replaced by equipment of comparable value and utility, (vi) subject to Section 2.10(b), the Borrower or any Restricted Subsidiary may sell, transfer, lease, exchange, abandon or otherwise dispose of Borrowing Base Properties with a value not exceeding, in the

 

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aggregate for the Borrower and its Restricted Subsidiaries taken as a whole, 5% of the Borrowing Base between Scheduled Redeterminations, (vii) with the prior written consent of Required Lenders and subject to Section 2.10(b), the Borrower or any Restricted Subsidiary may sell, transfer, lease, exchange, abandon or otherwise dispose of Borrowing Base Properties not otherwise permitted pursuant to the foregoing clause (vi), (viii) the Borrower may sell the Gathering System Properties, the Salt Water Disposal Properties and the Rocovich Properties and promptly after the consummation of each such sale the Administrative Agent shall deliver to the Borrower documents releasing the Liens of the Lenders on the applicable properties; provided that, with respect to this clause (viii), (A) each such sale is consummated in accordance with an asset purchase or similar agreement in form and substance acceptable to the Administrative Agent, without any waiver or amendment of any material term thereof not otherwise consented to by the Administrative Agent, (B) the gross proceeds received by the Borrower upon consummation of the sale of (I) the Gathering System Properties shall not be less than $18,500,000, (II) the Salt Water Disposal Properties shall not be less than $4,500,000 and (III) the Rocovich Properties shall not be less than $1,250,000, and (C) upon the consummation of the sale of (I) the Gathering System Properties, the Borrower shall cause cash proceeds of such sale in an amount equal to $15,000,000 to be delivered directly to the Administrative Agent, (II) the Salt Water Disposal Properties, the Borrower shall cause cash proceeds of such sale in an amount equal to $2,750,000 to be delivered directly to the Administrative Agent and (III) the Rocovich Properties, the Borrower shall cause cash proceeds of such sale in an amount equal to $1,250,000 to be delivered directly to the Administrative Agent, in each case, for application to the Obligations in accordance with Section 2.10, and (ix) so long as each of the Wapiti Sale Conditions are satisfied, the Borrower may sell the Wapiti Sale Properties.  For purposes of the foregoing clause (vi), the value of any Oil and Gas Interests included in the Borrowing Base Properties shall be the Engineered Value of such Oil and Gas Interests and the value of all other Oil and Gas Interests shall be the value which would be assigned to such Oil and Gas Interests using the same methodology, assumptions and discount rates used to determine the Engineered Value of the Borrowing Base Properties as of the most recent Redetermination.  In addition, for purposes of determining compliance with clause (vi) of this Section with respect to any exchange of Oil and Gas Interests, the value of such exchange shall be the net reduction, if any, in Engineered Value realized or resulting from such exchange.

 

1.7                               Schedules. Schedule 2.01 of the Credit Agreement shall be and it hereby is amended and restated in its entirety and replaced with Schedule 2.01 attached hereto.

 

SECTION 2.                         Departing Lenders and Reallocation of Commitments.  The Lenders have agreed among themselves to reallocate their respective Commitments, and to, among other things, permit Guaranty Bank and Trust Company (the “Departing Lender”) to assign all of its rights and obligations as a Lender under the Credit Agreement to the other Lenders and to no longer be a party to the Credit Agreement.  Each of the Administrative Agent and the Borrower hereby consent to (i) the reallocation of the Commitments and (ii) the Departing Lender’s

 

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assignment of its rights, interests, liabilities and obligations under the Credit Agreement to the other Lenders.  On the date this Amendment becomes effective and after giving effect to such reallocation and assignment of the Aggregate Commitment, the Commitment of the Departing Lender shall terminate and the Commitment of each Lender shall be as set forth on Schedule 2.01 of this Amendment.  Each Lender hereby consents to the Commitments set forth on Schedule 2.01 of this Amendment.  The reallocation of the Aggregate Commitment among the Lenders, including the assignment by the Departing Lender of all of its respective rights, interests, liabilities and obligations under the Credit Agreement to the other Lenders, shall be deemed to have been consummated pursuant to the terms of the Assignment and Assumption attached as Exhibit A to the Credit Agreement as if the Lenders, including the Departing Lender, had executed an Assignment and Assumption with respect to such reallocation; provided that in connection with such reallocation, the Departing Lender shall receive on the date this Amendment becomes effective payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements, accrued interest thereon, accrued fees and all other amounts payable to it under the Credit Agreement and the other Loan Documents.  The Administrative Agent hereby waives the $3,500 processing and recordation fee set forth in Section 11.04(b)(ii)(C) of the Credit Agreement with respect to the assignments and reallocations contemplated by this Section 2.  To the extent requested by any Lender, including the Departing Lender, and in accordance with Section 2.15 of the Credit Agreement, the Borrower shall pay to such Lender, within the time period prescribed by Section 2.15 of the Credit Agreement, any amounts required to be paid by the Borrower under Section 2.15 of the Credit Agreement in the event the payment of any principal of any Eurodollar Loan or the conversion of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto is required in connection with the reallocation contemplated by this Section 2.

 

SECTION 3.                         Conditions. The amendments to the Credit Agreement contained in Section 1 of this Amendment shall be effective upon the satisfaction of each of the conditions set forth in this Section 3.

 

3.1                               Execution and Delivery. Each Credit Party, the Lenders and the Administrative Agent shall have executed and delivered this Amendment and any other required document, all in form and substance satisfactory to Administrative Agent.

 

3.2                               No Default.  No Default shall have occurred and be continuing or shall result from the effectiveness of this Amendment.

 

3.3                               Departing Lender. The Borrower shall have paid to the Administrative Agent, for the benefit of the Departing Lender, all accrued and unpaid interest and other fees (including, without limitation, any amounts required to be paid by the Borrower under Section 2.15 of the Credit Agreement) due and payable to the Departing Lender under the Credit Agreement and the other Loan Documents.

 

3.4                               Other Documents.  The Administrative Agent shall have received such other instruments and documents incidental and appropriate to the transaction provided for herein as the Administrative Agent or its special counsel may reasonably request prior to the date hereof, and all such documents shall be in form and substance reasonably satisfactory to the Administrative Agent.

 

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SECTION 4.                         Representations and Warranties of the Credit Parties.  To induce the Lenders to enter into this Amendment, each Credit Party hereby represents and warrants to the Administrative Agent and the Lenders as follows:

 

4.1                               Reaffirmation of Representations and Warranties/Further Assurances.  After giving effect to the amendments herein, each representation and warranty of such Credit Party contained in the Credit Agreement or in any other Loan Document is true and correct in all material respects on the date hereof (except to the extent such representations and warranties relate solely to an earlier date, in which case, such representations and warranties are true and correct as of such earlier date).

 

4.2                               Corporate Authority; No Conflicts.  The execution, delivery and performance by such Credit Party of this Amendment and all documents, instruments and agreements contemplated herein are within such Credit Party’s corporate or other organizational powers, have been duly authorized by all necessary action, require no action by or in respect of, or filing with, any court or agency of government and do not violate or constitute a default under any provision of any applicable law or other agreements binding upon such Credit Party or result in the creation or imposition of any Lien upon any of the assets of such Credit Party except for Liens permitted under Section 7.02 of the Credit Agreement.

 

4.3                               Enforceability.  This Amendment constitutes the valid and binding obligation of such Credit Party enforceable in accordance with its terms, except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditor’s rights generally, and (ii) the availability of equitable remedies may be limited by equitable principles of general application.

 

4.4                               No Default.  As of the date hereof, both before and immediately after giving effect to this Amendment, no Default has occurred and is continuing.

 

SECTION 5.                         Miscellaneous.

 

5.1                               Reaffirmation of Loan Documents and Liens.  Any and all of the terms and provisions of the Credit Agreement and the Loan Documents shall, except as amended and modified hereby, remain in full force and effect and are hereby in all respects ratified and confirmed by each Credit Party.  Each Credit Party hereby agrees that the amendments and modifications herein contained shall in no manner affect or impair the liabilities, duties and obligations of any Credit Party under the Credit Agreement and the other Loan Documents or the Liens securing the payment and performance thereof.

 

5.2                               Parties in Interest.  All of the terms and provisions of this Amendment shall bind and inure to the benefit of the parties hereto and their respective successors and assigns.

 

5.3                               Legal Expenses.  Each Credit Party hereby agrees to pay all reasonable fees and expenses of special counsel to the Administrative Agent incurred by the Administrative Agent in connection with the preparation, negotiation and execution of this Amendment and all related documents.

 

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5.4                               Counterparts.  This Amendment may be executed in one or more counterparts and by different parties hereto in separate counterparts each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document.  Delivery of photocopies of the signature pages to this Amendment by facsimile or electronic mail shall be effective as delivery of manually executed counterparts of this Amendment.

 

5.5                               Complete Agreement.  THIS AMENDMENT, THE CREDIT AGREEMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

5.6                               Headings.  The headings, captions and arrangements used in this Amendment are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of this Amendment, nor affect the meaning thereof.

 

5.7                               Governing Law. This Amendment shall be construed in accordance with and governed by the law of the State of Texas.

 

[Signature pages follow]

 

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IN WITNESS WHEREOF, the parties have caused this Twelfth Amendment to Credit Agreement to be duly executed as of the date first above written.

 

	
 
    	
BORROWER:
    
	
 
    	
 
    
	
 
    	
GASCO   ENERGY, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Peggy Herald
    
	
 
    	
 
    	
Name:
    	
Peggy   Herald
    
	
 
    	
 
    	
Title:
    	
Vice   President & Treasurer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
GUARANTORS:
    
	
 
    	
 
    	
 
    
	
 
    	
GASCO   PRODUCTION COMPANY
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Peggy Herald
    
	
 
    	
 
    	
Name:
    	
Peggy   Herald
    
	
 
    	
 
    	
Title:
    	
Vice   President & Treasurer
    
	
 
    	
 
    	
 
    
	
 
    	
RIVERBEND   GAS GATHERING, LLC
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Gasco   Energy, Inc.
    
	
 
    	
 
    	
Its   Managing Member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Peggy Herald
    
	
 
    	
 
    	
Name:
    	
Peggy   Herald
    
	
 
    	
 
    	
Title:
    	
Vice   President & Treasurer
    
	
 
    	
 
    	
 
    
	
 
    	
MYTON   OILFIELD RENTALS, LLC
    
	
 
    	
 
    	
 
    
	
 
    	
By:   
    	
Gasco   Energy, Inc.
    
	
 
    	
 
    	
Its   Managing Member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Peggy Herald
    
	
 
    	
 
    	
Name:
    	
Peggy   Herald
    
	
 
    	
 
    	
Title:
    	
Vice   President & Treasurer
    

 

SIGNATURE PAGE

 

 

	
 
    	
JPMORGAN   CHASE BANK, N.A.,
    
	
 
    	
as   a Lender and as Administrative Agent,
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/    Geraldine King
    
	
 
    	
Name:   
    	
Geraldine   King
    
	
 
    	
Title:   
    	
Special   Credit Senior Asset Manager
    
				

 

SIGNATURE PAGE

 

 

	
 
    	
The   undersigned Departing Lender hereby acknowledges and agrees that, from and   after the Twelfth Amendment Effective Date, it is no longer a party to the   Credit Agreement.
    
	
 
    	
 
    
	
 
    	
GUARANTY   BANK AND TRUST COMPANY, as a Departing Lender (and solely with   respect to Section 2 of this Amendment)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/    Gail J Nofsinger
    
	
 
    	
Name:   
    	
Gail   J Nofsinger
    
	
 
    	
Title:   
    	
President
    
				

 

SIGNATURE PAGE

 

 

SCHEDULE 2.01

Applicable Percentages and Commitments

 

	
Lender
    	
 
    	
Title
    	
 
    	
Applicable
   Percentage
    	
 
    	
Commitment(1)
    	
 
    	
Commitment(2)
    	
 
    
	
JPMorgan Chase Bank, N.A. 
    	
 
    	
Administrative   Agent and a Lender
    	
 
    	
100.00
    	
%
    	
$
    	
13,000,000.00
    	
 
    	
$
    	
25,195.25
    	
 
    
	
TOTAL
    	
 
    	
 
    	
 
    	
100.00
    	
%
    	
$
    	
13,000,000.00
    	
 
    	
$
    	
25,195.25
    	
 
    

 

(1)         As of the Twelfth Amendment Effective Date, as such amount may be (a) reduced from time to time pursuant to Section 2.02 of the Credit Agreement, (b) reduced or increased from time to time as a result of changes in the Borrowing Base pursuant to Article III of the Credit Agreement, or (c) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 11.04 of the Credit Agreement.

 

(2)         As of the date the Wapiti Sale Conditions are satisfied and the Aggregate Commitment and Borrowing Base are reduced pursuant to Sections 2.02(e) and 3.05(c) of the Credit Agreement, respectively, as such amount may be (a) reduced from time to time pursuant to Section 2.02 of the Credit Agreement, or (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 11.04 of the Credit Agreement.EXHIBIT 10.35

 

GASCO ENERGY, INC.
 STOCK APPRECIATION RIGHT AGREEMENT

 

	
To:                          
    	
Grant Date:  February 28, 2012
    	
Grant Price: $0.30
    	
Number of Shares: 200,000
    

 

THIS  STOCK APPRECIATION RIGHT AGREEMENT (the “Agreement”) is made as of February 28, 2012 between Gasco Energy, Inc., a Nevada corporation (the “Company”), and                                (the “Director”).  Neither his Agreement nor the award granted hereby is subject to or granted pursuant to the GASCO ENERGY, INC. 2011 LONG TERM INCENTIVE PLAN.

 

In consideration of the Director’s service as a member of the Board of Directors of the Company (the “Board”) and the mutual agreements and other matters set forth herein, the Company and the Director hereby agree as follows:

 

1.                                      Stock Appreciation Right Award.  The Company hereby grants to the Director (the “Award”), effective as of February 28, 2012 (the “Date of Grant”), stock appreciation rights (the “Stock Appreciation Rights”) related to 200,000 shares of the Company’s Common Stock, par value $.0001 per share (the “Stock”).  The Stock Appreciation Rights shall provide to the Director the right to receive a lump sum cash payment equal to the value of the product of (a) the excess of (i) the lesser of (A) the Fair Market Value of one share of Stock on the Date of Exercise or (B) $2.00, over (ii) $0.30, which is an amount greater than closing price of a share of Stock on the Date of Grant (the “Grant Price”), multiplied by (b) the number of shares as to which this Award has been exercised (the “Appreciation Amount”).

 

2.                                      Vesting and Forfeiture of Stock Appreciation Rights.

 

(a)                                 Vesting.  The Stock Appreciation Rights will be “Unvested Rights” until such time as they become “Vested Rights” pursuant to this Section 2.   Subject to the earlier forfeiture of the Stock Appreciation Rights pursuant to Section 2(b), the Stock Appreciation Rights will become Vested Rights on the earlier to occur of (i) January 31, 2013, (ii) the date immediately prior to a Change in Control, or (iii) the death or disability, as determined by the Compensation Committee of the Board (the “Committee”) in its sole discretion (a “Disability”), of the Director.

 

(b)                                 Termination of Directorship and Forfeiture.  In the event the Director ceases to be a member of the Board for any reason other than death or Disability, all Unvested Rights shall immediately terminate and be forfeited.

 

3.                                      Settlement of Stock Appreciation Rights.

 

(a)                                 Exercise and Settlement.  The Vested Rights will automatically be exercised upon the earlier to occur of (i) February 1, 2013, or (ii) a Change in Control (the “Date of Exercise”).  Any Vested Rights exercised pursuant to the preceding sentence shall be settled

 

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by the Company through payment of the Appreciation Amount in a lump sum cash payment within the period of 10 Business Days beginning on the date of exercise of the Vested Rights.

 

(b)                                 Procedures.  Exercise and settlement of Vested Rights shall be subject to and pursuant to rules and procedures established by the Committee in its sole discretion.

 

4.                                      Transferability.  This Agreement and the Stock Appreciation Rights granted hereunder will not be transferable or assignable by the Director other than by will or the laws of descent and distribution or written approval of the Committee (which approval may be withheld for any or no reason).  Any purported or attempted transfer or assignment without prior written approval shall be void and of no effect.

 

5.                                      Information Confidential.  As partial consideration for the granting of the Stock Appreciation Rights hereunder, the Director hereby agrees with the Company that the Director will keep confidential all information and knowledge that the Director has relating to the terms and conditions of this Agreement; provided, however, that such information may be disclosed as required by law and may be given in confidence to the Director’s spouse, tax and financial advisors, or to a financial institution to the extent that such information is necessary to secure a loan.  In the event any breach of this promise comes to the attention of the Company, it shall take into consideration that breach in determining whether to recommend the grant of any future similar award to the Director, as a factor militating against the advisability of granting any such future award to the Director.

 

6.                                      No Right to Continued Service.  This Agreement shall not be construed to confer upon the Director any right to continue as a director of the Company.  Any question as to whether and when there has been a termination of the Director’s service on the Board, and the cause of such termination, shall be determined by the Committee, and its determination shall be final and binding.

 

7.                                      Administration.  The Committee shall have sole and complete discretion with respect to the interpretation and administration of this Award and Agreement and decisions of a majority of the Committee with respect thereto and this Agreement shall be final and binding upon the Director and the Company.

 

8.                                      Unfunded Arrangement and Section 409A.  This Agreement shall not give a Director any security or other interest in any assets of the Company; rather the Director’s right to the Award is that of a general unsecured creditor of the Company.  Neither this Agreement nor the Stock Appreciation Rights granted hereunder are intended to provide for the “deferral of compensation” within the meaning of the Nonqualified Deferred Compensation Rules.

 

9.                                      No Liability for Good Faith Determinations.  The Company, the Committee and the members of the Board shall not be liable for any act, omission or determination taken or made in good faith with respect to this Agreement or the Stock Appreciation Rights granted hereunder.

 

10.                               No Guarantee of Interests.  The Company, the Committee and the members of the Board do not guarantee the Stock from loss or depreciation.

 

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11.                               Company Records.  Records of the Company regarding the Director’s period of service, termination of directorship and the reason therefor, leaves of absence, and other matters shall be conclusive for all purposes hereunder, unless determined by the Company to be incorrect.

 

12.                               Company Action.  Any action required of the Company shall be by resolution of its Board or the Committee or by a person authorized to act by resolution of the Board or the Committee.

 

13.                               Severability.  If any provision of this Agreement is held to be illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions hereof, but such provision shall be fully severable and this Agreement shall be construed and enforced as if the illegal or invalid provision had never been included herein.

 

14.                               Notices and Waiver.  All notices made with respect to this Agreement must be in writing and personally delivered or sent by mail and shall be deemed to be delivered on the date on which it is actually received by the person to whom it is properly addressed.  A notice shall be effective when actually received by the Company in writing and in conformance with this Agreement. Any person entitled to notice hereunder may waive such notice.

 

15.                               Successors.  This Agreement shall be binding upon the Director, the Director’s legal representatives, heirs, legatees and distributees, and upon the Company, its successors and assigns.

 

16.                               Headings.  The titles and headings of Sections are included for convenience of reference only and are not to be considered in construction of the provisions hereof.

 

17.                               Governing Law.  All questions arising with respect to the provisions of this Agreement shall be determined by application of the laws of the State of Colorado without regard to choice of law provisions thereunder, except to the extent Colorado law is preempted by federal law.

 

18.                               Word Usage.  Words used in the masculine shall apply to the feminine where applicable, and wherever the context of this Agreement dictates, the plural shall be read as the singular and the singular as the plural.

 

19.                               Amendment.  This Agreement may be amended by the Committee or the Board; provided, however, that no amendment may decrease Director’s rights inherent in this Agreement prior to such amendment without Director’s express written consent.  Notwithstanding the provisions of this Section 19, this Agreement may be amended by the Committee, without the consent of the Director, to the extent necessary to comply with applicable laws and regulations and to conform the provisions of this Agreement to any changes thereto or to settle or make any adjustment or change to the Award pursuant to Section 20.

 

20.                               Changes in Capitalization and Corporate Transactions.  In no event will any action taken by the Committee pursuant to this Section 20 result in the creation of deferred compensation within the meaning of the Nonqualified Deferred Compensation Rules.

 

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(a)                                 Existence of Award.  The existence of this Award shall not affect in any way the right or power of the Board or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of debt or equity securities ahead of or affecting Stock or the rights thereof, the dissolution or liquidation of the Company or any sale, lease, exchange or other disposition of all or any part of its assets or business or any other corporate act or proceeding.

 

(b)                                 Subdivision or Consolidation of Shares of Stock.  The terms of this Award shall be subject to adjustment from time to time, in accordance with the following provisions:

 

(i)                                     If at any time, or from time to time, the Company shall subdivide as a whole (by reclassification, by a Stock split, by the issuance of a distribution on Stock payable in Stock, or otherwise) or in the event the Company distributes an extraordinary cash dividend the number of shares of Stock then outstanding into a greater number of shares of Stock, then, as appropriate, (A)  the number of shares of Stock (or other kind of shares or securities) subject to this Award shall be increased proportionately, and (B) the Grant Price (including the exercise price) shall be reduced proportionately, without materially changing the aggregate Grant Price.

 

(ii)                                  If at any time, or from time to time, the Company shall consolidate as a whole (by reclassification, by reverse Stock split, or otherwise) the number of shares of Stock then outstanding into a lesser number of shares of Stock, (A)  the number of shares of Stock (or other kind of shares or securities) subject to this Award shall be decreased proportionately, and (B) the Grant Price subject to this Award shall be increased proportionately, without materially changing the aggregate Grant Price.

 

(c)                                  Corporate Recapitalization.  If the Company recapitalizes, reclassifies its capital stock, or otherwise changes its capital structure (a “recapitalization”) without the occurrence of a Change in Control, the number and class of shares of Stock covered by this Award shall thereafter cover the number and class of shares of stock and securities to which the Director would have been entitled pursuant to the terms of the recapitalization if, immediately prior to the recapitalization, the holder had been the holder of record of the number of shares of Stock then covered by this Award.

 

(d)                                 Additional Issuances.  Except as hereinbefore expressly provided, the issuance by the Company of shares of stock of any class or securities convertible into shares of stock of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Stock subject to this Award or the Grant Price.

 

(e)                                  Committee Discretion.  Adjustments under this Section 20 shall be made by the Committee, and its determination as to what adjustments shall be made and the extent thereof shall be final, binding, and conclusive.  No fractional interest in a share of Stock shall be made available under this Agreement on account of any such adjustments.

 

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(f)                                   Impact of Corporate Events on Award Generally.  In the event of changes in the outstanding Stock by reason of a recapitalization, reorganization, merger, consolidation, combination, exchange or other relevant change in capitalization occurring after the Date of the Grant and not otherwise provided for by this Section 20, this Award and the Agreement shall be subject to adjustment by the Committee at its discretion, and may include, but not be limited to, adjustments as to the number of shares of Stock subject to this Award, the Grant Price, accelerated vesting (in full or in part) of this Award, conversion of this Award into awards denominated in the securities or other interests of any successor Person, or the accelerated cash settlement of this Award in exchange for the cancellation thereof.

 

21.                               Limitation of Liability.  The Committee and each member thereof shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any officer or employee of the Company or any of its Subsidiaries, the Company’s legal counsel, independent auditors, consultants or any other agents assisting in the administration of this Award or Agreement.  Members of the Committee and any officer or employee of the Company or any of its Subsidiaries acting at the direction or on behalf of the Committee shall not be personally liable for any action or determination taken or made in good faith with respect to this Award or Agreement, and shall, to the fullest extent permitted by law, be indemnified and held harmless by the Company with respect to any such action or determination.

 

22.                               Exemptions from Section 16(b) Liability.  It is the intent of the Company that the grant of this Award to or other transaction by the Director contemplated by this Award shall be exempt from Section 16 of the Exchange Act pursuant to an applicable exemption (except for transactions acknowledged in writing to be non-exempt by the Director).  Accordingly, if any provision of this Agreement does not comply with the requirements of Rule 16b-3 as then applicable to any such transaction, such provision shall be construed or deemed amended to the extent necessary to conform to the applicable requirements of Rule 16b-3 so that the Director shall avoid liability under Section 16(b) of the Exchange Act.

 

23.                               Defined Terms.  Terms used in this Agreement and not otherwise defined shall have the following meanings:

 

(a)                                 “Change in Control” means the occurrence of any of the following events:

 

(i)                                     The consummation of an agreement to acquire or a tender offer for beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act by any Person, of 50% or more of either (x) the then outstanding shares of Stock (the “Outstanding Stock”) or (y) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change in Control:  (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company or (D) any acquisition by any entity pursuant to a transaction that complies with clauses (A), (B) and (C) of paragraph (iii) below;

 

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(ii)                                  Individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Board;

 

(iii)                               Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or an acquisition of assets of another entity (a “Business Combination”), in each case, unless, following such Business Combination, (A) the Outstanding Stock and Outstanding Company Voting Securities immediately prior to such Business Combination represent or are converted into or exchanged for securities which represent or are convertible into more than 50% of, respectively, the then outstanding shares of common stock or common equity interests and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors or other governing body, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company, or all or substantially all of the Company’s assets either directly or through one or more subsidiaries), (B) no Person (excluding any employee benefit plan (or related trust) of the Company or the entity resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock or common equity interests of the entity resulting from such Business Combination or the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors or other governing body of such entity to the extent that such ownership results solely from ownership of the Company that existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors or similar governing body of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or

 

(iv)                              A complete liquidation or dissolution of the Company.

 

(b)                                 “Date of Exercise” has the meaning set forth in Section 3(a).

 

(c)                                  “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, including rules thereunder and successor provisions and rules thereto.

 

(d)                                 “Fair Market Value” means, as of any specified valuation date (other than the Date of Grant) the volume weighted average price (“VWAP”) of the Stock over the period of five business days preceding the specified valuation date. VWAP will be calculated at the direction of the Committee and its determination of the VWAP will be final and binding; provided, however, it is the intention of the Company that Fair Market Value be calculated in a manner such that the Award will not provide for the “deferral of compensation” within the meaning of the Nonqualified Deferred Compensation Rules.

 

(e)                                  “Incumbent Board” means the portion of the Board constituted of the individuals who are members of the Board as of the Effective Date and any other individual who becomes a director of the Company after the Effective Date and whose election or appointment by the Board or nomination for election by the Company’s stockholders was approved by a vote

 

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of at least a majority of the directors then comprising the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Incumbent Board.

 

(f)                                   “Nonqualified Deferred Compensation Rules” means the limitations or requirements of Section 409A of the Code and the guidance and regulations promulgated thereunder.

 

(g)                                  “Person” means any person or entity of any nature whatsoever, specifically including an individual, a firm, a company, a corporation, a partnership, a limited liability company, a trust or other entity; a Person, together with that Person’s Affiliates and Associates (as those terms are defined in Rule 12b-2 under the Exchange Act, provided that “registrant” as used in Rule 12b-2 shall mean the Company), and any Persons acting as a partnership, limited partnership, joint venture, association, syndicate or other group (whether or not formally organized), or otherwise acting jointly or in concert or in a coordinated or consciously parallel manner (whether or not pursuant to any express agreement), for the purpose of acquiring, holding, voting or disposing of securities of the Company with such Person, shall be deemed a single “Person.”

 

(h)                                 “Subsidiary” means with respect to the Company, any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by the Company.

 

[Remainder of Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer effective as of the Date of Grant.

 

 

	
 
    	
GASCO   ENERGY, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
DIRECTOR
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    

 

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