Document:

exv4w3

Exhibit 4.3

     Execution Version

     INVESTOR RIGHTS AGREEMENT (the “Agreement”), dated as of June 25, 2010, by and between Gasco
Energy, Inc., a Nevada corporation with headquarters located at 8 Inverness Drive East, Suite 100,
Englewood, Colorado 80112 (the “Company”), and CNH CA Master Account, L.P., a Cayman limited
partnership (“CNH”), and AQR Absolute Return Master Account, L.P., a Cayman limited partnership
(together with CNH, the “Investors”).

     WHEREAS, the Company and each of the Investors are parties to Exchange Agreements, each dated
as of June 22, 2010 (together, the “Exchange Agreements”), pursuant to which, among other things,
on the Closing Date, the Company and each of the Investors shall exchange the aggregate principal
amount of the Company’s 5.50% Convertible Senior Notes due October 5, 2011 (the “2011 Notes”) held
by such Investor for (a) the Company’s 5.50% Convertible Senior Notes due October 5, 2015 (the
“2015 Notes”) and (b) cash equal to any accrued but unpaid interest due with respect to such
Investor’s 2011 Notes up to but not including the Closing Date. Capitalized terms used herein but
not defined herein shall have the meanings given to such terms in each of the Exchange Agreements.

     NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises hereinafter
set forth, the Company and the Investor hereby agree as follows:

     Section 1.1 Initial Investor Nominee.

          (a) Prior to the Closing, either one of the Investors, on behalf of itself and the other
Investor, shall provide to the Company the name of one individual who is not an employee, director,
manager, owner or Affiliate of either of the Investors or otherwise affiliated with either of the
Investors or any of their respective Affiliates to serve as a member of the Board of Directors of
the Company (the “Board of Directors” or “Board”) (an individual meeting such qualifications, an
“Investor Nominee”), which Investor Nominee shall be reviewed promptly by the Nominating Committee
of the Board (the “Nominating Committee”).

          (b) On the Closing Date, the Company shall cause to be elected or appointed to the Board the
Investor Nominee, subject to satisfaction of all legal and national securities exchange governance
requirements regarding service as a director of the Company and, if not already received, the
approval of the Nominating Committee (which approval shall be withheld only if the Nominating
Committee determines in good faith, after consultation with outside legal counsel to the Company,
that its fiduciary duties require it to do so). In the event that the Nominating Committee
determines in good faith, after consultation with outside legal counsel, that its appointment of a
particular Investor Nominee would constitute a breach of its fiduciary duties, or would result in a
violation of applicable legal or national securities exchange governance requirements, then on the
Closing Date the Board shall appoint another Investor Nominee to the Board of Directors (subject in
each case to the provisions of Section 1.1). The Company shall take all actions necessary
to ensure that on the Closing Date the Board shall have at least one vacancy to allow such election
or appointment.

     Section 1.2 Governance Matters. The Company and each of the Investors agree that
during the period (the “Nomination Period”) commencing as of the Closing Date and terminating
automatically upon the date on which the Investors collectively cease to beneficially own 20% or
more of the outstanding shares of the Company’s common stock, par value $0.0001

 

 

per share (the “Common Stock”) (counting all outstanding 2011 Notes, all outstanding 2015
Notes, and all outstanding shares of Preferred Stock as if such notes and Preferred Stock had
converted into Common Stock based on the then applicable conversion rates of such notes and
Preferred Stock, as applicable, without regard to the limitations on conversion of (a) the 2015
Notes set forth in Section 10.04 of the Exchanged Indenture or (b) the Preferred Stock set forth in
Section 6(b) of the Preferred C of D), the Investors shall together be entitled to designate one
Investor Nominee, and the Company shall exercise all authority under applicable Law to cause any
slate of directors presented to stockholders for election to the Board to include such Investor
Nominee.

     Section 1.3 Procedural Matters. The Company and each of the Investors agree that
during the Nomination Period:

          (a) Designation of Slate.

               (i) Any Investor Nominee to be included in a slate of directors pursuant to Section
1.2 shall be designated by either one of the Investors, on behalf of itself and the other
Investor, by prior written notice to the Company, subject to the approval of the Nominating
Committee (which approval shall be withheld only if the Nominating Committee determines in good
faith, after consultation with outside counsel to the Company, that its fiduciary duties require it
to do so) and further subject to applicable legal or national securities exchange governance
requirements regarding service as a director of the Company. In the event that the Nominating
Committee determines in good faith, after consultation with outside legal counsel, that its
inclusion in a slate of directors pursuant to Section 1.2 of a particular Investor Nominee
would constitute a breach of its fiduciary duties or would result in a violation of applicable
legal or national securities exchange governance requirements, then the Board shall include in such
slate another Investor Nominee (subject in each case to this Section 1.3(a)(i)).

               (ii) The Company shall exercise all authority under applicable law to cause the number of
directors which shall constitute the Board to be sufficient to allow the election or appointment of
the Investor Nominee entitled to be nominated to the Board in accordance with Section 1.2.

          (b) Resignations and Replacements. If at any time the Investor Director resigns or is
removed in accordance with applicable law and the Company’s by-laws, a new Investor Director may be
designated by either one of the Investors, on behalf of itself and the other Investor, and
appointed by the Board pursuant to the procedures set forth in this Section 1.3, subject to
the approval of the Nominating Committee (which approval shall be withheld only if the Nominating
Committee determines in good faith, after consultation with outside legal counsel to the Company,
that its fiduciary duties require it to do so) and further subject to applicable legal or national
securities exchange governance requirements regarding service as a director of the Company. In the
event that the Nominating Committee determines in good faith, after consultation with outside legal
counsel, that its appointment of a particular new Investor Director would constitute a breach of
its fiduciary duties or would result in a violation of applicable legal or national securities
exchange governance requirements, then the Board shall appoint another individual designated for
appointment to the Board by either one of the Investors, on behalf of itself and the other Investor
(subject in each case to this Section 1.3(b)).

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          (c) Solicitation and Voting of Shares.

               (i) The Board of Directors shall recommend that its stockholders vote in favor of an Investor
Nominee nominated in accordance with Section 1.2 or Section 1.3(b) and use its
commercially reasonable efforts to solicit from the stockholders of the Company eligible to vote
for the election of directors proxies in favor of the Investor Nominee nominated in accordance
herewith.

               (ii) In any election of directors or at any meeting of the stockholders of the Company called
expressly for the purpose of removing any director(s), each of the Investors shall be present for
purposes of establishing a quorum if such Investor holds shares of Common Stock entitled to vote at
such meeting.

          (d) Director Expenses; Insurance. The Company agrees that the Investor Director shall
be entitled to the same rights, privileges and compensation as the other members of the Board in
their capacity as such, including with respect to insurance coverage and reimbursement for Board
participation and related expenses.

     Section 1.4 Termination of Nomination Period. Either one of the Investors shall
promptly notify the Company upon the occurrence of any event or circumstance (but not later than
five (5) Business Days after the occurrence thereof) that causes the Investors collectively to
cease to beneficially own 20% or more of the outstanding shares of Common Stock (counting all
outstanding 2011 Notes, all outstanding 2015 Notes and all outstanding shares of Preferred Stock as
if such notes and Preferred Stock had converted into Common Stock based on the then applicable
conversion rates of such notes and Preferred Stock, as applicable, without regard to the
limitations on conversion of (a) the 2015 Notes set forth in Section 10.04 of the Exchanged
Indenture or (b) the Preferred Stock set forth in Section 6(b) of the Preferred C of D).

     Section 2.1 Definitions. For purposes of this Agreement:

          (a) “Investor Director” means an Investor Nominee who is elected or appointed to serve
as a member of the Board in accordance with this Agreement.

          (b) “beneficially own,” “beneficially owned,” “beneficial ownership”
and “beneficial owner” with respect to any securities means a holder who is deemed to be
the beneficial owner, or ownership that is deemed to be beneficial ownership, of such securities
under Rule 13d-3 or Rule 13d-5 of the Exchange Act, and shall include such securities beneficially
owned by all other Persons with whom a holder would constitute a “group” within the meaning of
Section 13(d) of the Exchange Act with respect to such securities.

     Section 2.2 Miscellaneous.

          (a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of Nevada, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Nevada or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of Nevada. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT

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TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

          (b) Counterparts. This Agreement and any amendments hereto may be executed in two or
more identical counterparts, all of which shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party and delivered to the other party,
it being understood that all parties need not sign the same counterpart. In the event that any
signature to this Agreement or any amendment hereto is delivered by facsimile transmission or by
e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile or “.pdf” signature page were an original thereof. At the
request of any party each other party shall promptly re-execute an original form of this Agreement
or any amendment hereto and deliver the same to the other party. No party hereto shall raise the
use of a facsimile machine or e-mail delivery of a “.pdf” format data file to deliver a signature
to this Agreement or any amendment hereto or the fact that such signature was transmitted or
communicated through the use of a facsimile machine or e-mail delivery of a “.pdf” format data file
as a defense to the formation or enforceability of a contract, and each party hereto forever waives
any such defense.

          (c) Headings. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.

          (d) Severability. If any provision of this Agreement is prohibited by law or otherwise
determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that
would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of
such provision shall not affect the validity of the remaining provisions of this Agreement so long
as this Agreement as so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or
unenforceability of the provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical realization of the benefits
that would otherwise be conferred upon the parties. The parties will endeavor in good faith
negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid
provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).

          (e) No Third Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and permitted assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.

          (f) No Strict Construction. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.

          (g) Successors and Assigns. This Agreement shall not be assigned by either of the
Investors (including without limitation in connection with a transfer or disposition of such

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Investor’s 2015 Notes, any shares of Preferred Stock or Common Stock issuable upon conversion
thereof) without the prior written consent of the Company.

          (h) Notices. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and will be deemed to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); (iii) one (1) Business Day after deposit with an overnight
courier service, or (iv) if the delivery methods set forth in clauses (i), (ii) and
(iii) above are unavailable, upon the reasonable determination of the party making delivery
of such notice, consent, waiver or other communication, when another method of delivery that is
reasonably likely to result in the delivery of such notice, consent, waiver or other communication
to the party meant to receive the same is used, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications shall be:

If to the Company:

Gasco Energy, Inc.

8 Inverness Drive East, Suite 100

Englewood, CO 80112

Telephone: (303) 483-0044

Facsimile: (303) 483-0011

Attention: President

with copies (for informational purposes only) to:

Vinson & Elkins LLP

666 Fifth Avenue, 26th Floor

New York, NY 10103-0040

Telephone: 212.237.0251

Facsimile: 917.849.5317

Attention: Caroline Blitzer

and to:

Dill, Dill, Carr, Stonbraker & Hutchings, P.C.

455 Sherman Street, Ste. 300

Denver, CO 80203

Telephone: (303) 282-4105

Facsimile: (303) 777-3823

Attention: Faye Matsukage

     If to an Investor, to such Investor’s address and facsimile number set forth on the Schedule
of Investors to each of the Exchange Agreements, with copies to such Investor’s legal
representatives as set forth on such Schedule of Investors, or to such other address and/or
facsimile number and/or to the attention of such other Person as the recipient party has specified
by written notice given to each other party five (5) days prior to the effectiveness of such
change.

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Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or
other communication, (B) mechanically or electronically generated by the sender’s facsimile machine
containing the time, date, recipient facsimile number and an image of the first page of such
transmission, (C) provided by an overnight courier service or (D) given by the recipient of such
notice, consent, waiver or other communication or provided by the method of delivery used if the
delivery methods in clauses (i), (ii) and (iii) above are unavailable,
shall be rebuttable evidence of personal or other service, receipt by facsimile or deposit with an
overnight courier service, or other receipt by another method of delivery used in accordance with
clause (i), (ii), (iii) or (iv) above, respectively.

          (i) This Agreement supersedes all other prior oral or written agreements between the
Investors, the Company, their respective Affiliates and Persons acting on their behalf with respect
to the matters discussed herein, and this Agreement contains the entire understanding of the
parties with respect to the matters covered herein and therein and, except as specifically set
forth herein or therein, neither the Company nor either of the Investors makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may
be amended other than by an instrument in writing signed by the Company and each of the Investors,
and no provision hereof may be waived other than by an instrument in writing signed by the party
against whom enforcement is sought.

[Remainder of Page Intentionally Left Blank]

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     IN WITNESS WHEREOF, the Company and each Investor have caused their respective signature pages
to this Agreement to be duly executed as of the date first written above.

	 	 	 	 	 
	 	COMPANY:

GASCO ENERGY, INC.

 	 
	 	By:  	/s/ W. King Grant
 	 
	 	 	Name:  	W. King Grant 	 
	 	 	Title:  	President and Chief Financial Officer 	 
	 
	 	INVESTORS:

CNH CA MASTER ACCOUNT, L.P.

 	 
	 	By:  	CNH Partners, LLC,
its  Investment Manager
 	 
	 	 	 	 
	 	 	 	 
	 	By:  	                         /s/ Brendan R. Kalb
 	 
	 	 	Name:  	Brendan R. Kalb 	 
	 	 	Title:  	Associate General Counsel
CNH Partners, LLC 	 
	 
	 	AQR ABSOLUTE RETURN MASTER ACCOUNT, L.P.

 	 
	 	By:  	AQR Capital Management, LLC,
its Investment Manager
 	 
	 	 	 	 
	 	 	 	 
	 	By:  	                         /s/ Brendan R. Kalb
 	 
	 	 	Name:  	Brendan R. Kalb 	 
	 	 	Title:  	Associate General Counsel
AQR Capital Management, LLC 	 
	 

[Signature Page to Investor Rights Agreement]exv10w1

Exhibit 10.1

Execution Version

EXCHANGE AGREEMENT

by and among

Gasco Energy, Inc.

and

                                        , Investor

Dated as of June 22, 2010

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 

	1.	 	EXCHANGE OF INVESTOR EXCHANGED 2011 NOTES AND ISSUANCE OF INVESTOR 2015 NOTES	 	 	3	 
	 

	 	(a)
	 	Exchange
	 	 	3	 
	 

	 	(b)
	 	Delivery of Investor 2015 Notes
	 	 	3	 
	 

	 	(c)
	 	Payment of Interest Amount
	 	 	3	 
	 

	 	(d)
	 	Closing Date
	 	 	3	 
	 
	 	 	 	 	 	 	 	 
	2.	 	REPRESENTATIONS; WARRANTIES AND COVENANTS	 	 	3	 
	 

	 	(a)
	 	Investor Representations and Covenants
	 	 	3	 
	 

	 	(b)
	 	Investor and Company Representations Relating to Existing Purchase
Agreement
	 	 	8	 
	 

	 	(c)
	 	Company Representations and Covenants
	 	 	8	 
	 
	 	 	 	 	 	 	 	 
	3.	 	CONDITIONS TO THE COMPANY’S OBLIGATIONS HEREUNDER	 	 	32	 
	 
	 	 	 	 	 	 	 	 
	4.	 	CONDITIONS TO THE INVESTOR’S OBLIGATIONS HEREUNDER	 	 	33	 
	 
	 	 	 	 	 	 	 	 
	5.	 	TERMINATION	 	 	35	 
	 
	 	 	 	 	 	 	 	 
	6.	 	MISCELLANEOUS	 	 	35	 
	 

	 	(a)
	 	Defined Terms in Exchanged Indenture
	 	 	35	 
	 

	 	(b)
	 	Disclosure of Transactions and Other Material Information
	 	 	35	 
	 

	 	(c)
	 	Blue Sky; Form D
	 	 	36	 
	 

	 	(d)
	 	Governing Law; Jurisdiction; Jury Trial
	 	 	37	 
	 

	 	(e)
	 	Closing Sets
	 	 	37	 
	 

	 	(f)
	 	Counterparts
	 	 	37	 
	 

	 	(g)
	 	Headings
	 	 	38	 
	 

	 	(h)
	 	Severability
	 	 	38	 
	 

	 	(i)
	 	No Third Party Beneficiaries
	 	 	38	 
	 

	 	(j)
	 	Further Assurances
	 	 	38	 
	 

	 	(k)
	 	No Strict Construction
	 	 	38	 
	 

	 	(l)
	 	Successors and Assigns
	 	 	38	 
	 

	 	(m)
	 	Notices
	 	 	38	 
	 

	 	(n)
	 	Remedies
	 	 	39	 
	 

	 	(o)
	 	Survival
	 	 	40	 
	 

	 	(p)
	 	Indemnification
	 	 	40	 
	 

	 	(q)
	 	Entire Agreement; Amendments
	 	 	43	 
	 

	 	(r)
	 	Independent Nature of Investor’s Obligations and Rights
	 	 	43	 
	 

	 	(s)
	 	Fees and Expenses
	 	 	43	 
	 

	 	(t)
	 	Interpretive Matters
	 	 	44	 
	 

	 	(u)
	 	Other Definitions
	 	 	44	 

i

 

	 	 	 
	Schedules	 	 
	 
	Schedule 2c(vi)

	 	Subsidiaries
	Schedule 2c(xxvi)

	 	Outstanding Indebtedness; Liens
	Schedule I

	 	Confidentiality Agreement

	 	 	 
	Exhibits	 	 
	 
	 	 
	Exhibit A

	 	Schedule of Investors
	Exhibit B

	 	Preferred C of D
	Exhibit C

	 	Form of Exchanged Indenture
	Exhibit D

	 	Qualified Institutional Buyer Status
	Exhibit E-1

	 	Form of Notice of Nonrecognition Transfer
	Exhibit E-2

	 	Form of Certificate of Non-Foreign Status
	Exhibit E-3

	 	Form of Certification of Non-USRPI Status
	Exhibit F

	 	Form of Investor’s Certificate
	Exhibit G

	 	Form of Secretary’s Certificate
	Exhibit H

	 	Form of Officer’s Certificate

ii

 

EXCHANGE AGREEMENT

          EXCHANGE AGREEMENT (this “Agreement”), dated as of June 22, 2010 (the “Effective Date”), by
and among Gasco Energy, Inc., a Nevada corporation with headquarters located at 8 Inverness Drive
East, Suite 100, Englewood, Colorado 80112 (the “Company”), and _______________(the
“Investor”).

          WHEREAS:

          A. The Company and certain investors (the “Original Investors”) are parties to that certain
Purchase Agreement, dated as of October 14, 2004 (the “Existing Purchase Agreement”), pursuant to
which the Original Investors purchased from the Company 5.50% Convertible Senior Notes due October
5, 2011 (the “2011 Notes”), which are convertible into shares (the “Existing Conversion Shares”) of
the Company’s common stock, par value $0.0001 per share (the “Common Stock”), pursuant to that
certain Indenture dated as of October 20, 2004, by and between the Company and Wells Fargo Bank,
National Association, as trustee (such indenture, as modified by any supplement and amendment
thereto as of the date hereof, the “Existing Indenture”).

          B. The Company and the Investor desire to enter into this Agreement, pursuant to which, among
other things, on the Closing Date (as defined below), (i) the Company and the Investor shall
exchange the aggregate principal amount of the Investor’s 2011 Notes set forth opposite the
Investor’s name in column (3) of the schedule of investors (the “Schedule of Investors”) attached
hereto as Exhibit A (the Investor’s 2011 Notes being exchanged, the “Investor Exchanged
2011 Notes” and, together with the other 2011 Notes being exchanged pursuant to the Other
Agreements (defined below), the “Exchanged 2011 Notes”) for unsecured 5.50% Convertible Senior
Notes due October 5, 2015 (together with any securities issued in exchange or substitution therefor
or replacement thereof, and as any of the same may be amended, supplemented, restated or modified
and in effect from time to time, the “Investor 2015 Notes” and, together with the other unsecured
5.50% Convertible Senior Notes due October 5, 2015 issued pursuant to the Other Agreements and,
together with any securities issued in exchange or substitution therefor or replacement thereof,
and as any of the same may be amended, supplemented, restated or modified and in effect from time
to time, the “2015 Notes”) in an equal aggregate principal amount as is set forth opposite the
Investor’s name in column (5) of the Schedule of Investors, which shall be convertible into (x)
shares of Common Stock (at an initial Conversion Price (as defined in the Exchanged Indenture (as
defined below)) of $0.60), and/or (y) shares of Preferred Stock (as defined in the Exchanged
Indenture) (which shares of Preferred Stock are convertible into shares of Common Stock in
accordance with the Certificate of Designations of Preferred Stock in the form attached hereto as
Exhibit B (the “Preferred C of D”)) (the shares of Preferred Stock issued or issuable upon
conversion of, or as payment on, the Investor 2015 Notes pursuant to the Exchanged Indenture being
collectively referred to herein as the “Investor Preferred Shares;” the Investor Preferred Shares,
together with the shares of Common Stock issued or issuable upon conversion of the Investor 2015
Notes being collectively referred to herein as the “Exchanged Conversion Shares;” and the shares of
Common Stock issued or issuable upon conversion of any of the Investor Preferred Shares pursuant to
the Preferred C of D being collectively referred to as the, “Investor Preferred Conversion
Shares”), in each case pursuant to, and in accordance with the terms of, an Indenture, to be

 

 

entered into by and between the Company and Wells Fargo Bank, National Association, as trustee
(the “Trustee”), in the form attached hereto as Exhibit C (as the same may be amended,
supplemented, restated or modified and in effect from time to time, the “Exchanged Indenture”); and
(ii) the Company shall pay to the Investor an amount of cash, as is set forth opposite the
Investor’s name in column (6) of the Schedule of Investors, equal to any accrued but unpaid
interest due with respect to the Investor Exchanged 2011 Notes as of but not including the Closing
Date (the “Interest Amount”).

          C. The exchange (the “Exchange”) of the Investor Exchanged 2011 Notes for the Investor 2015
Notes is being made in reliance upon the exemption from registration provided by Section 4(2) of
the Securities Act of 1933, as amended (the “Securities Act”) and Regulation D promulgated
thereunder (“Regulation D”).

          D. The Investor 2015 Notes, the Exchanged Conversion Shares and the Investor Preferred
Conversion Shares collectively are referred to herein as the “Securities.”

          E. Concurrently herewith and from time to time after the date hereof, other holders of 2011
Notes (the “Other Investors” and, collectively with the Investor, the “Participating Investors”)
are entering or may enter into agreements identical to this Agreement (collectively, the “Other
Agreements”) (other than proportional changes (collectively, the “Proportionate Changes”) in the
numbers reflecting the different principal amounts of the respective Exchanged 2011 Notes being
exchanged pursuant thereto and other than applicable closing dates for the transactions
contemplated by the Other Agreements with respect to the exchange of up to an aggregate of
$3,500,000 in principal amount of the 2011 Notes) with the Company.

          F. The 2015 Notes shall be senior unsecured obligations of the Company, shall rank on parity
in right of payment with all other existing and permitted future senior unsecured indebtedness of
the Company (including any 2011 Notes that are not exchanged for 2015 Notes), shall rank senior in
right of payment to all future subordinated indebtedness of the Company, and shall be effectively
subordinated in right of payment to all existing and future secured indebtedness of the Company or
other obligations of the Company to the extent of the value of the assets securing such
indebtedness or other obligations; provided that the 2015 Notes shall rank senior to all future
indebtedness of the Company to the extent the future indebtedness is expressly subordinated to the
2015 Notes.

          G. The Participating Investors and their direct and indirect transferees will be entitled to
the benefits of a guaranty to be dated as of the Closing Date by and among the Company, the
Subsidiaries party thereto (as defined below) and the Trustee (as the same may be amended,
supplemented, restated or modified and in effect from time to time, the “Guaranty”).

          H. Contemporaneously with the Closing (as defined below), the Company, CNH CA Master Account,
L.P. and AQR Absolute Return Master Account, L.P. will execute and deliver an Investor Rights
Agreement to be dated as of the Closing Date (as the same may be amended, supplemented, restated or
modified and in effect from time to time, the “Investor Rights Agreement”).

Exchange Agreement, Page 2

 

 

          NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises hereinafter
set forth, the Company and the Investor hereby agree as follows:

	 	1.	 	EXCHANGE OF INVESTOR EXCHANGED 2011 NOTES AND ISSUANCE OF INVESTOR 2015 NOTES

          (a) Exchange. Subject to satisfaction (or waiver) of the conditions set forth in
Sections 3 and 4 of this Agreement, at the closing of the transactions contemplated
by this Agreement (the “Closing”) (i) the Investor shall surrender to the Company, by electronic
delivery to the Depository Trust Company (“DTC”) via Deposit/Withdrawal at Custodian (“DWAC”), the
Investor Exchanged 2011 Notes, free and clear of all liens, encumbrances and security interests
other than restrictions on transfer under applicable federal and state securities laws, (ii) the
Company shall deliver to the Investor the Investor 2015 Notes in the manner set forth in
Section 1(b) of this Agreement and (iii) the Company shall pay the Interest Amount to the
Investor.

          (b) Delivery of Investor 2015 Notes. The Investor 2015 Notes in the aggregate
principal amount set forth opposite the Investor’s name in column (5) of the Schedule of Investors
will be delivered by the Company to the Investor, or the Trustee as custodian for DTC, by causing
DTC to credit the Investor 2015 Notes to the account of the Investor identified on the Schedule of
Investors through the facilities of DTC. The 2015 Notes will be evidenced by one or more global
securities in definitive form (the “Global Debentures”) or by additional definitive securities and
will be registered, in the case of the Global Debentures, in the name of Cede & Co. as nominee of
DTC, and in the other cases, in such names and in such denominations as the Investor shall request
prior to 9:30 a.m., New York time, on the second (2nd) Business Day preceding the Closing Date. If
applicable, the 2015 Notes to be delivered to the Investor shall be made available to the Investor
for inspection and packaging not later than 9:30 a.m., New York time, on the Business Day
immediately preceding the Closing Date.

          (c) Payment of Interest Amount. On the Closing Date, the Company shall pay the
Interest Amount to the Investor, by wire transfer of immediately available funds in accordance with
the Investor’s written wire instructions.

          (d) Closing Date. The date and time of the Closing (the “Closing Date”) shall be
10:00 a.m., New York time, on June 25, 2010, subject to notification of satisfaction (or waiver) of
the conditions to the Closing set forth in Sections 3 and 4 of this Agreement (or
such earlier or later date as is mutually agreed to by the Company and the Investor); provided that
in no event shall the Closing occur at any time other than a time when all closings under all Other
Agreements (other than Other Agreements relating to the exchange of not more than an aggregate of
$3,500,000 principal amount of 2011 Notes) executed on or about the date hereof are occurring
simultaneously. The Closing shall occur on the Closing Date at the offices of Vinson & Elkins LLP,
1001 Fannin Street, Suite 2500, Houston, Texas 77002.

	 	2.	 	REPRESENTATIONS; WARRANTIES AND COVENANTS

          (a) Investor Representations and Covenants. The Investor hereby represents, warrants
and covenants to, and agrees with, the Company as to the Investor 2015 Notes, the

Exchange Agreement, Page 3

 

 

Exchanged Conversion Shares and the Investor Preferred Conversion Shares, if any, as of the
date hereof and as of the Closing Date, that:

     (i) No Public Sale or Distribution. The Investor (A) is acquiring the
Investor 2015 Notes, (B) upon conversion of the Investor 2015 Notes in accordance
with the terms of the Exchanged Indenture, will acquire the Exchanged Conversion
Shares, and (C) upon conversion of the Investor Preferred Shares, if any, in
accordance with the terms of the Preferred C of D, will acquire the Investor
Preferred Conversion Shares, in each case, for its own account and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempt from registration under the
Securities Act; provided, however, that by making the
representations herein, the Investor does not agree to hold any of the Securities
for any minimum period or other specific term and the Investor reserves the right
to dispose of the Securities at any time in accordance with or pursuant to an
effective registration statement or an exemption from registration under the
Securities Act. The Investor is acquiring the Securities hereunder in the
ordinary course of its business. The Investor does not presently have any
agreement or understanding, directly or indirectly, with any Person to distribute
any of the Securities.

     (ii) Investor Status. The Investor is an institutional accredited investor
as that term is defined in Rule 501(a)(1), (2), (3), (7) or (8), of Regulation D
and, unless the Investor is listed in Exhibit D hereto, a “qualified
institutional buyer” within the meaning of Rule 144A under the Securities Act.

     (iii) Reliance on Exemptions. The Investor understands that the Securities
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws,
including Section 4(2) of the Securities Act and Rule 506 of Regulation D, and
that the Company is relying in part upon the truth and accuracy of, and the
Investor’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Investor set forth herein in order to
determine the availability of such exemptions and the eligibility of the Investor
to acquire the Securities.

     (iv) Information. The Investor and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and its Subsidiaries and materials relating to the transactions
contemplated hereby which have been requested by the Investor. The Investor and
its advisors, if any, have been afforded the opportunity to ask questions of the
Company and its Subsidiaries and their respective officers and directors. Neither
such inquiries nor any other due diligence investigations conducted by the
Investor or its advisors, if any, or its representatives shall modify, amend or
affect the Investor’s right to rely on the Company’s representations and
warranties contained herein. The Investor understands that its investment in the
Securities involves a high degree of risk. The Investor has sought such

Exchange Agreement, Page 4

 

 

accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Securities.

     (v) No Governmental Review. The Investor understands that no U.S. federal or
state agency or any other government or governmental agency has passed on or made
any recommendation or endorsement of the Securities or the fairness or suitability
of the investment in the Securities nor have such authorities passed upon or
endorsed the merits of the offering of the Securities.

     (vi) Validity; Enforcement. This Agreement and any other documents or
agreements executed by the Investor in connection with the transactions
contemplated hereunder (the “Investor Transaction Documents”) have been duly and
validly authorized by or on behalf of the Investor and, when executed and
delivered by or on behalf of the Investor in accordance with the terms thereof,
will be validly executed and delivered and (assuming the due authorization,
execution and delivery thereof by the other parties thereto) will constitute the
legal, valid and binding obligations of the Investor, enforceable against the
Investor in accordance with their respective terms, except as such enforceability
may be limited by general principles of equity or by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies.

     (vii) No Conflicts. The execution, delivery and performance by the Investor
of this Agreement and the Investor Transaction Documents and the consummation by
the Investor of the transactions contemplated hereby and thereby will not (A) if
the Investor is a legal entity, result in a violation of the organizational
documents of the Investor; (B) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Investor is a party; or (C)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws) applicable to the Investor; except
in the case of clauses (B) and (C) above, for such conflicts, defaults, rights or
violations which would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the ability of the Investor to
perform its obligations hereunder.

     (viii) Residency. The Investor is a resident of that jurisdiction specified
below its address on the Schedule of Investors.

     (ix) No Transactions in Company Securities. Other than with respect to the
transactions contemplated herein, during the period commencing with the time that
the Investor was first contacted by the Company regarding the Exchange, through
such time as the transactions contemplated by this Agreement are first publicly
announced, neither the Investor nor any Affiliate

Exchange Agreement, Page 5

 

 

of the Investor which (x) had knowledge of the transactions contemplated
hereby, (y) has or shares discretion relating to the Investor’s investments or
trading or information concerning the Investor’s investments and (z) is subject to
the Investor’s review or input concerning such Affiliate’s investments or trading,
has engaged, directly or indirectly, in any Trading Transaction in the securities
of the Company or involving the Company’s securities. For the purpose of this
Agreement, “Trading Transaction” means (A) any hedging or other transaction which
is designed to or could reasonably be expected to lead to or result in, or be
characterized as, a sale, an offer to sell, a purchase, a solicitation of offers
to buy, a disposition of, a loan, a pledge of or a grant of any right with respect
to, any securities of the Company; (B) “short sales” as defined in Rule 200
promulgated under Regulation SHO under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) (whether or not such sale or position is “against the
box”); and (C) all types of direct and indirect stock pledges, forward sale
contracts, options, puts, calls, swaps and similar arrangements (including on a
total return basis), and purchases, sales and other transactions through U.S.
broker dealers, non-U.S. broker dealers or foreign regulated brokers involving
securities of the Company. Notwithstanding the foregoing, if the Investor is a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of the Investor’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of the Investor’s assets, the representations set forth
above shall only apply with respect to (i) the portfolio manager, and the portion
of assets managed by such portfolio manager, with investment authority over the
Investor Exchanged 2011 Notes and the Exchange (the “Securities Division”) and
(ii) any other portfolio managers managing assets other than the assets of the
Securities Division or any Affiliate of the Investor which (x) had or has
knowledge of the transactions contemplated hereby, (y) has or shares discretion
relating to the investments of the Securities Division or trading or information
concerning such investments and (z) is subject to the review or input of the
Securities Division concerning its investments or trading.

     (x) Affiliate Status. The Investor (A) is not and has not been during the
consecutive three month period preceding the date of the Exchange, a director or
officer of the Company or any of its Subsidiaries; (B) did not acquire any of the
Investor Exchanged 2011 Notes, directly or indirectly, in a transaction not
involving any public offering during the past six (6) months from an Affiliate of
the Company; (C)(1) has owned the Investor Exchanged 2011 Notes, both beneficially
and of record, for not less than a period of six (6) months preceding the Closing
Date and full consideration for the Investor Exchanged 2011 Notes was provided at
least six (6) months prior to the Closing Date; or (2) if the Investor was not the
beneficial owner or record owner of the Investor Exchanged 2011 Notes or did not
pay full consideration for the Investor Exchanged 2011 Notes for at least six (6)
months prior to the Closing Date, it has otherwise met the six-month holding
period requirement set forth in Rule 144(d) under the Securities Act; (D) is not
the beneficial

Exchange Agreement, Page 6

 

 

owner or record owner of any securities of the Company other than the
Investor Exchanged 2011 Notes and immediately after giving effect to the Exchange
will not be the beneficial owner or record owner of any securities of the Company
other than the Investor 2015 Notes; and (E) is not party to any voting arrangement
or similar arrangement with respect to any voting securities of the Company.

     (xi) Reasonable Best Efforts. The Investor shall use its reasonable best
efforts to timely satisfy each of the conditions to be satisfied by it as provided
in Section 3 of this Agreement.

     (xii) DWAC Withdrawal/Deposit. The Investor shall, subject to the prior or
concurrent satisfaction or waiver of the conditions set forth in Section 4
hereof, instruct and cause the DTC participant that holds the Investor Exchanged
2011 Notes to deliver the Investor Exchanged 2011 Notes by submitting a DWAC
withdrawal on or prior to Closing in the aggregate amount of the Investor
Exchanged 2011 Notes. The Investor shall, subject to the prior or concurrent
satisfaction or waiver of the conditions set forth in Section 4 hereof, instruct
and cause the DTC participant that holds the Investor Exchanged 2011 Notes to
submit a DWAC deposit on or prior to Closing in the aggregate amount of the
Investor Exchanged 2011 Notes.

     (xiii) Tax Matters. Prior to the Closing, the Investor shall deliver to the
Company either (i) a Notice of Nonrecognition Transfer (substantially in the form
attached as Exhibit E-1), (ii) a Certificate of Non-Foreign Status
(substantially in the form attached as Exhibit E-2), or (iii) a
Certification of Non-USRPI Status (substantially in the form attached as
Exhibit E-3), and Internal Revenue Service Form W-8BEN, Form W-8IMY, Form
W-8ECI or Form W-9, as applicable. The Investor (i) intends that this Agreement
and the Other Agreements adopt a “plan of reorganization,” as defined in Treasury
Regulation Section 1.368—2, that the Exchange shall be treated as pursuant to a
“reorganization” described in Section 368(a) of the Code, and that the 2011 Notes
and the 2015 Notes shall be treated as “securities” within the meaning of Section
354 of the Code, (ii) agrees that the “issue price” for purposes of Section 1273
and 1274 of the Code of each 2015 Note is $680.00 per $1,000 principal amount, and
(iii) covenants not to take any position (whether in audits, tax returns or
otherwise) that is inconsistent with subparagraphs (i) and (ii) of this sentence
unless required to do so by applicable law.

     (xiv) Sale of Securities. The Investor shall not sell, transfer or otherwise
dispose of the Securities except pursuant to an effective registration statement
under the Securities Act covering the Securities or an available exemption from
registration under the Securities Act.

     (xv) No Withholding. The Investor represents and warrants to the Company that
either:

Exchange Agreement, Page 7

 

 

     (1) it is a United States person within the meaning of Section
7701(a)(30) of the Code; or

     (2) it is not a United States person within the meaning of Section
7701(a)(30) of the Code, and with respect to the 2015 Notes, it (or each of
its partners, if the Investor is classified as a partnership for U.S.
federal income tax purposes) is (A) not (x) a bank described in Section
881(c)(3)(A) of the Code or (y) a 10-percent shareholder of the Company
within the meaning of Section 881(c)(3)(B) and Section 871(h)(3)(B) of the
Code after giving effect to the beneficial ownership limitations of the 2015
Notes, Preferred Stock and Common Stock, and (B) eligible for a complete
exemption from withholding of tax with respect to the 2015 Notes under the
“portfolio interest” exemption, as provided for in Sections 871(h) and
881(c) of the Code.

     (xvi) Preferred Stock. The Investor understands, acknowledges and agrees
that the shares of Preferred Stock issuable upon conversion of the Investor 2015
Notes will have no rights (including voting rights) or preferences, other than the
right to convert into shares of Common Stock, such other rights provided in the
Preferred C of D and such rights as are mandatorily provided by the General
Corporation Law of Nevada.

          (b) Investor and Company Representations Relating to Existing Purchase Agreement.

     (i) The Investor represents and warrants to the Company that, on and after
the Closing Date, the Company is under no obligation to comply with the covenants
and obligations set forth in the Existing Purchase Agreement, and the Investor may
not recover for a breach of any such covenant or obligation by the Company that
occurs prior to, on or after the Closing Date.

     (ii) The Company represents and warrants to the Investor that, on and after
the Closing Date, the Investor is under no obligation to comply with the covenants
and obligations set forth in the Existing Purchase Agreement, and the Company may
not recover for a breach of any such covenant or obligation by the Investor that
occurs prior to, on or after the Closing Date.

          (c) Company Representations and Covenants. The Company hereby represents, warrants
and covenants to, and agrees with, the Investor as of the date hereof and as of the Closing Date,
that:

     (i) Acknowledgments. The Company hereby irrevocably and unconditionally
acknowledges, affirms and covenants to the Investor that as of the date of this
Agreement and immediately after giving effect to the transactions contemplated by
this Agreement and the Other Agreements:

     (1) the Investor is not in default under the Existing Purchase
Agreement, the Investor Exchanged 2011 Notes, the Existing Indenture or

Exchange Agreement, Page 8

 

 

any of the agreements, arrangements or understandings entered into or
agreed upon by the Investor in connection with, or otherwise relating to,
the acquisition of the Investor Exchanged 2011 Notes by the Investor
(collectively, the “Existing 2011 Notes Documents”), and has not otherwise
breached any obligations to the Company or any of the Subsidiaries; and

     (2) there are no offsets, counterclaims or defenses to the obligations,
liabilities and indebtedness of every nature of the Company owed under or in
respect of any of the Investor Exchanged 2011 Notes or the Investor 2015
Notes (the “Obligations”), including the liabilities and obligations of the
Company under the Investor Exchanged 2011 Notes or the Investor 2015 Notes
or to the rights, remedies or powers of the Investor in respect of any of
the Obligations, any of the Existing 2011 Notes Documents, the Existing
Indenture or any of the Transaction Documents, as applicable, and the
Company agrees not to, and to cause each of the Subsidiaries not to,
interpose (and each does hereby waive and release) any such defense, set-off
or counterclaim in any action brought by the Investor with respect thereto.

     (ii) Investment Company. The Company is not, and, after giving effect to the
transactions contemplated hereby, including the Exchange, the conversion of the
Investor 2015 Notes into the Exchanged Conversion Shares in the manner
contemplated by the Exchanged Indenture and the conversion of the Investor
Preferred Shares, if any, into the Investor Preferred Conversion Shares in the
manner contemplated by the Preferred C of D, will not be, required to register as
an “investment company” as defined in the Investment Company Act of 1940, as
amended.

     (iii) Securities Act Exemption; No General Solicitation. Assuming that the
Investor’s representations and warranties in Section 2(a) of this
Agreement, and the representations and warranties of the Other Investors in
Section 2(a) of each of the Other Agreements, are true, the Exchange and
each of the Other Exchanges, the conversion of the Investor 2015 Notes into the
Exchanged Conversion Shares and the conversion of the other Exchanged 2011 Notes
into the Other Investor Exchanged Conversion Shares in the manner contemplated by
the Exchanged Indenture and the conversion of the Investor Preferred Shares, if
any, into the Investor Preferred Conversion Shares and the conversion of the Other
Investor Preferred Shares, if any, into the Other Investor Preferred Conversion
Shares in the manner contemplated by the Preferred C of D, are and will be exempt
from the registration requirements of the Securities Act. None of the Company,
any Affiliate of the Company or any Person acting on its or their behalf has used,
or will use, any means of general solicitation or general advertising within the
meaning of Rule 502(c) of Regulation D in connection with the transactions
contemplated hereby or by the Other Agreements, including the Exchange and the
Other Exchanges, the conversion of the Investor 2015 Notes into the Exchanged
Conversion Shares

Exchange Agreement, Page 9

 

 

and the conversion of the other Exchanged 2011 Notes into the Other Investor
Exchanged Conversion Shares in the manner contemplated by the Exchanged Indenture
and the conversion of the Investor Preferred Shares, if any, into the Investor
Preferred Conversion Shares and the conversion of the Other Investor Preferred
Shares, if any, into the Other Investor Preferred Conversion Shares in the manner
contemplated by the Preferred C of D.

     (iv) Exchange Act Reports. Since December 31, 2008, the Company has timely
filed all reports, schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of the Exchange
Act (all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements, notes and schedules thereto being hereinafter
referred to as the “Exchange Act Reports”). The Exchange Act Reports when filed
with the SEC together, where applicable, with any amendments thereto, conformed in
all material respects to the requirements of the Exchange Act and the rules and
regulations of the SEC thereunder, and none of such reports when filed with the
SEC contained an untrue statement of material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading; and any further reports so filed prior to the Closing, when such
reports are filed with the SEC, will conform in all material respects to the
requirements of the Exchange Act and the rules and regulations of the SEC
thereunder and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were made,
not misleading.

     (v) Organization and Qualification. The Company has been duly incorporated
and is validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with corporate power and authority to own its
properties and conduct its business as described in the Exchange Act Reports, and
has been duly qualified as a foreign corporation for the transaction of business
and is in good standing under the laws of each other jurisdiction in which it owns
or leases properties, or conducts any business, so as to require such
qualification, other than where the failure to be so qualified or in good standing
in such other jurisdiction would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.

     (vi) Subsidiaries. Schedule 2(c)(vi) sets forth a list of the
Subsidiaries and the jurisdiction in which each is organized or incorporated and
sets forth the percentage of the outstanding Capital Stock of each Subsidiary that
is held by the Company. Other than with respect to the entities listed on
Schedule 2(c)(vi), the Company does not directly or indirectly own any
security or beneficial interest in any other Person (including through joint
venture or partnership agreements). Each of the Subsidiaries has been duly
incorporated or organized and is validly existing as a corporation or other
business entity in good standing under the laws of its jurisdiction of
incorporation or

Exchange Agreement, Page 10

 

 

organization, with power and authority (corporate and other) to own its
properties and conduct its business, and has been duly qualified as a foreign
corporation or other business entity for the transaction of business and is in
good standing under the laws of each other jurisdiction in which it owns or leases
properties or conducts any business, so as to require such qualification, other
than where the failure to be so qualified or in good standing in such other
jurisdiction would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect; and all of the outstanding shares of Capital
Stock (or other equity interests in the case of non-corporate subsidiaries) of
each Subsidiary have been duly authorized and validly issued, are fully paid and
non assessable, and are owned by the Company, directly or indirectly, free and
clear of all liens, encumbrances, security interests and claims, except for (1)
such liens, encumbrances, security interests and claims relating to the pledge of
Capital Stock (or other equity interests in the case of non-corporate
subsidiaries) of the Subsidiaries pursuant to the Company’s revolving credit
agreement dated as of March 29, 2006 (“Credit Agreement”) with JPMorgan Chase
Bank, N.A., as administrative agent for the lenders thereto, and (2) such Liens as
are listed on Schedule 2(c)(vi) hereto.

     (vii) Equity Capitalization.

     (1) The Company has, as of the date hereof, duly authorized capital
stock consisting of 305,000,000 shares of all classes of stock, of which (A)
300,000,000 shares are Common Stock, of which as of the date hereof, (i)
107,695,197 shares are issued and outstanding, (ii) 73,700 shares are held
in treasury, (iii) 11,973,297 shares are issuable upon exercise of
outstanding options and (iv) 1,399,293 and 341,450 shares are reserved for
issuance under the Company’s stock option plan and restricted stock plan,
respectively (as of December 31, 2009, and as of December 31 of each
succeeding year, the number of shares of common stock issuable under the
Company’s stock option plan automatically increases so that the total number
of shares of Common Stock issuable under such plan is equal to 10% of the
total number of shares of Common Stock outstanding on such date), and (B)
5,000,000 shares are Preferred Stock, par value $0.001 per share, of which
as of the date hereof, 20,000 have been designated as Series B Convertible
Preferred Stock, and none of which are issued and outstanding;

     (2) All of the shares of Common Stock outstanding on the date hereof
have been duly authorized and are validly issued, fully paid and
non-assessable; and

     (3) Except as set forth in the Exchange Act Reports: (A) there are no
outstanding options to purchase, or any rights or warrants to subscribe for,
or any securities or obligations convertible into, or any contracts or
commitments to issue or sell, any shares of Common Stock, any shares of
Capital Stock of any Subsidiary, or any such warrants,

Exchange Agreement, Page 11

 

 

convertible securities or obligations, except pursuant to this
Agreement, the Other Agreements, the Exchanged Indenture and the Preferred C
of D; and (B) there are no contracts, commitments, agreements, arrangements,
understandings or undertakings of any kind to which the Company is a party,
or by which it is bound, granting to any Person the right to require either
the Company to file a registration statement under the Securities Act with
respect to any securities of the Company or requiring the Company to include
such securities with the Securities registered pursuant to any registration
statement.

     (viii) Authorization of Exchanged Indenture. The Company has all requisite
corporate power and authority to execute, deliver and perform its obligations
under the Exchanged Indenture, subject, solely for purposes of the issuance of an
aggregate number of shares of Common Stock issuable upon conversion of the 2015
Notes and upon conversion of any Preferred Stock issued or issuable upon
conversion of, or as payment on, the 2015 Notes in excess of the Exchange Cap (as
defined in the Exchanged Indenture), to the Shareholder Approval (as defined in
the Exchanged Indenture). The Exchanged Indenture has been duly and validly
authorized by the Company, and upon its execution and delivery (assuming due
authorization, execution and delivery by the Trustee), will constitute the valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and
other laws relating to or affecting creditors’ rights generally, by general
equitable principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law) and by an implied covenant of good faith and fair
dealing.

     (ix) Issuance of 2015 Notes. The Company has all requisite corporate power
and authority to execute, issue, sell and perform its obligations under the
Investor 2015 Notes, subject, solely for purposes of the issuance of an aggregate
number of shares of Common Stock issuable upon conversion of the 2015 Notes and
upon conversion of any Preferred Stock issued or issuable upon conversion of, or
as payment on, the 2015 Notes in excess of the Exchange Cap, to the Shareholder
Approval. The Investor 2015 Notes have been duly authorized by the Company and,
when duly executed by the Company in accordance with the terms of the Exchanged
Indenture, assuming due authentication of the Investor 2015 Notes by the Trustee,
upon delivery to the Investor against payment therefore in accordance with the
terms hereof, will be validly issued and delivered and will constitute valid and
binding obligations of the Company entitled to the benefits of the Exchanged
Indenture, enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium, and other laws relating to or affecting
creditors’ rights generally, by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law) and
by an implied covenant of good faith and fair dealing.

Exchange Agreement, Page 12

 

 

     (x) Issuance of Exchanged Conversion Shares. The Company has all requisite
corporate power and authority to reserve for issuance and to issue and deliver the
Exchanged Conversion Shares issuable upon conversion of, or as payment on, the
Investor 2015 Notes, the Other Investor Exchanged Conversion Shares issuable upon
conversion, or as payment on, of the other 2015 Notes, the Investor Preferred
Conversion Shares issuable upon conversion of the Investor Preferred Shares, if
any, and the Other Investor Preferred Conversion Shares issuable upon conversion
of the Other Investor Preferred Shares, if any, subject, solely for purposes of
the issuance of an aggregate number of shares of Common Stock issuable upon
conversion of on, the 2015 Notes, and upon conversion of any Preferred Stock
issued or issuable upon conversion of, or as payment on, the 2015 Notes in excess
of the Exchange Cap, to the Shareholder Approval. The Preferred C of D has been
duly and validly authorized, approved and adopted by the Company’s Board of
Directors in accordance with Nevada law, prior to the Closing will have been filed
with, and accepted by, the Secretary of State of the State of Nevada, has not and
prior to the Closing will not have been amended or otherwise modified, and is in
full force and effect. The Exchanged Conversion Shares and the Investor Preferred
Conversion Shares have been duly and validly authorized by the Company and when
issued upon conversion of the Investor 2015 Notes in accordance with the terms of
the Exchanged Indenture and upon conversion of the Investor Preferred Shares in
accordance with the terms of the Preferred C of D, respectively, will be validly
issued, fully paid and non-assessable (in the case of the Investor Preferred
Shares, entitled to the benefits of the Preferred C of D), free of any liens,
encumbrances or restrictions on transfers (other than liens, encumbrances and
restrictions on transfer created or imposed by the Investor or pursuant to federal
or state securities laws), and neither the issuance of the Exchanged Conversion
Shares nor the issuance of any Investor Preferred Conversion Shares will be
subject to any preemptive or similar rights.

     (xi) Authorization of this Agreement. The Company has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement. This Agreement has been duly and validly authorized,
executed and delivered by the Company, and (assuming due authorization, execution
and delivery by the Investor) constitutes the valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium, and other laws relating to or affecting
creditors’ rights generally, by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law) and
by an implied covenant of good faith and fair dealing.

     (xii) Authorization of Other Transaction Documents. Each of the Company and
the Subsidiaries (as applicable) has all requisite corporate or other
organizational power and authority to execute, deliver and perform its obligations
under the Guaranty and each of the other Transaction Documents to

Exchange Agreement, Page 13

 

 

which it is a party or by which it is bound (excluding this Agreement, the
Exchanged Indenture and the Investor 2015 Notes). Each of the Transaction
Documents (excluding this Agreement, the Exchanged Indenture and the Investor 2015
Notes) has been duly and validly authorized by the Company and each of the
Subsidiaries party thereto, and upon its execution and delivery (assuming due
authorization, execution and delivery by the other parties thereto), will
constitute the valid and binding agreement of the Company and such Subsidiaries,
enforceable against the Company and such Subsidiaries in accordance with its
terms, except as such enforceability may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium, and other laws relating to or
affecting creditors’ rights generally, by general equitable principles (regardless
of whether such enforceability is considered in a proceeding in equity or at law)
and by an implied covenant of good faith and fair dealing. Other than the
Required Approvals (as defined below) and, subject, solely for purposes of the
issuance of an aggregate number of shares of Common Stock issuable upon conversion
of the 2015 Notes and upon conversion of any Preferred Stock issued or issuable
upon conversion of, or as payment on, the 2015 Notes in excess of the Exchange
Cap, the Shareholder Approval, no consent, authorization or approval is required
of the Company, any of the Subsidiaries or any of their respective boards of
directors, members, managers, shareholders, other equityholders or holders of
beneficial interests, as applicable, under the Company’s Articles of Incorporation
as in effect as of the date this representation is made, including any
certificates of designations thereunder then in effect (the “Articles of
Incorporation”), the Bylaws of the Company (the “Bylaws”), any similar
organizational documents of any of the Subsidiaries, applicable law or the rules
of the NYSE Amex LLC (the “Principal Market”).

     (xiii) No Conflicts. Subject to obtaining the Required Approvals and, solely
for purposes of the issuance of an aggregate number of shares of Common Stock
issuable upon conversion of the 2015 Notes and upon conversion of any Preferred
Stock issued or issuable upon conversion of, or as payment on, the 2015 Notes in
excess of the Exchange Cap, to the Shareholder Approval, the issue and sale of the
Investor 2015 Notes and the other 2015 Notes, the issuance by the Company of the
Exchanged Conversion Shares upon conversion of the Investor 2015 Notes and of the
Other Investor Exchanged Conversion Shares upon conversion of the other 2015 Notes
and the issuance by the Company of the Preferred Conversion Shares upon conversion
of the Investor Preferred Shares, if any, and of the Other Investor Preferred
Conversion Shares upon conversion of the Other Investor Preferred Shares, if any,
and the execution, delivery and performance by each of the Company and the
Subsidiaries (as applicable) of all their respective obligations under, the
Investor 2015 Notes, the Exchanged Indenture, the Guaranty, the Preferred C of D,
this Agreement and each of the other Transaction Documents, and the consummation
of the transactions herein and therein contemplated, will not conflict with or
result in a breach of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any Lien

Exchange Agreement, Page 14

 

 

upon any property or assets of the Company or any of the Subsidiaries under,
any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of the Subsidiaries is a party or by which
the Company or any of the Subsidiaries is bound or to which any of the property or
assets of the Company or any of the Subsidiaries is subject, nor will any such
action result in any violation of the provisions of the Articles of Incorporation
or the Bylaws or similar organizational documents of any of the Subsidiaries or
any applicable law or statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company, the Subsidiaries
or any of their respective properties (provided, however, that no representation
is made pursuant to this Section 2(c)(xiii) with respect to the
registration requirements and anti-fraud provisions of federal and state
securities laws).

     (xiv) Consents. No consent, approval, authorization, order, license,
registration or qualification of or with any court or governmental agency or body
is required for the issue and sale of the Investor 2015 Notes or the other 2015
Notes or the issuance by the Company of the Exchanged Conversion Shares upon
conversion of the Investor 2015 Notes or of the Other Investor Exchanged
Conversion Shares upon conversion of the other 2015 Notes or the issuance by the
Company of the Investor Preferred Conversion Shares upon conversion of the
Investor Preferred Shares, if any, or of the Other Investor Preferred Conversion
Shares upon conversion of the Other Investor Preferred Shares or the execution,
delivery and performance by the Company and the Subsidiaries of all their
respective obligations under the 2015 Notes, the Exchanged Indenture, the
Guaranty, the Preferred C of D, this Agreement and each of the other Transaction
Documents and the consummation of the transactions herein and therein
contemplated, except (i) such consents, approvals, authorizations, orders,
licenses, registrations or qualifications as may be required under state
securities or blue sky laws in connection with the resale of the Securities by the
Investor, (ii) such consents, approvals, authorizations or waivers as may be
required (and which have been obtained on or prior to the date hereof) under the
Company’s Credit Agreement, (iii) the filing of the Preferred C of D with the
Secretary of State of the State of Nevada (clauses (i), (ii) and (iii)
collectively, the “Required Approvals”), and (iv) solely for purposes of the
issuance of an aggregate number of shares of Common Stock issuable upon conversion
of the 2015 Notes and upon conversion of any Preferred Stock issued or issuable
upon conversion of, or as payment on, the 2015 Notes in excess of the Exchange
Cap, the Shareholder Approval. Except as described in the Exchange Act Reports,
the Company is not in violation of the requirements of the Principal Market and
has no knowledge of any facts that could reasonably be expected to lead to
delisting or suspension of the Common Stock in the foreseeable future.

     (xv) No Integration Offerings. None of the Company, any of its “affiliates”
(as defined in Rule 501(b) of Regulation D) or any Person acting on behalf of the
Company or such affiliate has sold, offered for sale or solicited

Exchange Agreement, Page 15

 

 

offers to buy or otherwise negotiated in respect of, or will sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of, any “security”
(as defined in the Securities Act) that would be integrated with the transactions
contemplated hereby and by the Other Agreements, including the Exchange and the
Other Exchanges, the conversion of the Investor 2015 Notes into the Exchanged
Conversion Shares and of the other 2015 Notes into the Other Investor Exchanged
Conversion Shares as contemplated by the Exchanged Indenture and the conversion of
the Investor Preferred Shares, if any, into the Investor Preferred Conversion
Shares and of the Other Investor Preferred Shares, if any, into the Other Investor
Preferred Conversion Shares as contemplated by the Preferred C of D, for purposes
of the Securities Act or the shareholder approval requirements of the Principal
Market, or that would require the registration under the Securities Act of any of
the Securities. The Company will take all action that is appropriate or necessary
to assure that its offerings of other securities will not be integrated with any
of the transactions contemplated hereby and by the Other Agreements for purposes
of the Securities Act or the shareholder approval requirements of the Principal
Market.

     (xvi) Financial Statements. The consolidated financial statements, and the
related notes thereto, of the Company included in the Exchange Act Reports present
fairly, in all material respects, the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates indicated and the
results of their operations and the changes in their consolidated cash flows for
the periods specified (subject, in the case of unaudited statements, to normal
year-end audit adjustments); and said financial statements have been prepared in
conformity with GAAP (as defined herein) and practices applied on a consistent
basis (except (i) as may be otherwise indicated in such financial statements or
the notes thereto, or (ii) in the case of unaudited interim statements, to the
extent they may exclude footnotes or may be condensed or summary statements).

     (xvii) Accountants. KPMG LLP, who has certified certain financial statements
of the Company included in the Exchange Act Reports, are independent registered
public accountants as required under the Securities Act.

     (xviii) Title. The Company and the Subsidiaries have good and indefeasible
title or, with respect to oil and gas properties, defensible title to all real
property and good and marketable title to all personal property owned by them
which is material to the business of the Company and the Subsidiaries, in each
case free and clear of all Liens except as are described in the Exchange Act
Reports or Permitted Liens (as defined in the Exchanged Indenture); and any real
property and buildings held under lease by the Company and the Subsidiaries are
held by them under valid and subsisting leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and the Subsidiaries, in each case except as
described in or contemplated by the

Exchange Agreement, Page 16

 

 

Exchange Act Reports or where such invalidity or unenforceability would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

     (xix) Regulatory Permits. The Company and each of the Subsidiaries have all
licenses, franchises, permits, authorizations, approvals and orders of and from
all governmental and regulatory officials and bodies that are necessary to own or
lease and operate their properties and conduct their businesses in the manner
described in the Exchange Act Reports and that are material in relation to the
business of the Company and the Subsidiaries, taken as a whole.

     (xx) Legal Proceedings. Except as described in the Exchange Act Reports,
there are no legal or governmental investigations, actions, suits or proceedings
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any of the Subsidiaries or any of their respective properties or to
which the Company or any of the Subsidiaries is or may be a party or to which any
property of the Company or any of the Subsidiaries is or may be the subject which,
if determined adversely to the Company or any of the Subsidiaries, would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; the aggregate of all pending legal and governmental proceedings
that are not described in the Exchange Act Reports to which the Company or any of
the Subsidiaries is a party or which affect any of their respective properties and
in which there is a reasonable possibility of an adverse decision, including
ordinary routine litigation incidental to the business of the Company or of the
Subsidiaries, would not reasonably be expected to have a Material Adverse Effect;
and, to the best of Company’s knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others.

     (xxi) Employee Relations.

     (1) No labor disputes exist with employees of the Company or of any
Subsidiaries which would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect; and

     (2) The Company and the Subsidiaries are in compliance with all
presently applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended, including the regulations and published
interpretations thereunder (“ERISA”), except where the failure to be in such
compliance would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect; no “reportable event” (as
defined in ERISA) has occurred with respect to any “pension plan” (as
defined in ERISA) for which the Company or any of the Subsidiaries would
have any liability, except where such liability would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect;
except for matters that would not, individually or in the

Exchange Agreement, Page 17

 

 

aggregate, reasonably be expected to have a Material Adverse Effect,
neither the Company nor any of the Subsidiaries has incurred or expects to
incur liability under (a) Title IV of ERISA with respect to termination of,
or withdrawal from, any “pension plan” or (b) Section 412 or 4971 of the
Code, including the regulations and published interpretations thereunder;
and each “pension plan” for which the Company and each of the Subsidiaries
would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would reasonably be
expected cause the loss of such qualification; and no “prohibited
transaction” (as defined in Section 406 of ERISA or Section 4975 of Code or
“accumulated funding deficiency” (as defined in Section 302 of ERISA) has
occurred.

     (xxii) Taxes. The Company and the Subsidiaries have filed all federal,
state, local and foreign tax returns which have been required to be filed and have
paid all taxes required to have been paid by them and all assessments received by
them or any of them to the extent that such taxes have become due and are not
being contested in good faith by appropriate proceedings for which the Company and
the Subsidiaries maintain adequate reserves in accordance with GAAP, except where
the failure to do so would not reasonably be expected to have a Material Adverse
Effect; and, except as disclosed in the Exchange Act Reports, to the best of the
Company’s knowledge, there is no tax deficiency which has been or would reasonably
be expected to be asserted or threatened against the Company or any Subsidiary.
The Company (i) intends that this Agreement and the Other Agreements adopt a “plan
of reorganization,” as defined in Treasury Regulation Section 1.368—2, that the
Exchange and the Other Exchanges shall be treated as pursuant to a
“reorganization” described in Section 368(a) of the Code, and that the 2011 Notes
and the 2015 Notes shall be treated as “securities” within the meaning of Section
354 of the Code, (ii) agrees that the “issue price” for purposes of Sections 1273
and 1274 of the Code of each 2015 Note is $680.00 per $1,000 principal amount, and
(iii) covenants not to take any position (whether in audits, tax returns or
otherwise) that is inconsistent with subparagraphs (i) and (ii) of this sentence
unless required to do so by applicable law. Based on the Investor’s
representations in Section 2(a)(xv)(2) of this Agreement, the Company will
not withhold U.S. federal withholding tax on payments made on the 2015 Notes under
the portfolio interest exemption provided for in the Code; provided, however, that
if (i) the Internal Revenue Service challenges the applicability of such exemption
with respect to any such payments, or to payments made under similar circumstances
or to similarly situated investors, or (ii) the Company reasonably determines that
withholding is required based on a change in law (or interpretation thereof) after
the date of this Agreement, including any change in the Code or Treasury
regulations issued thereunder, published guidance, or any administrative rulings
or judicial decisions issued after the date of this Agreement, the Company shall
withhold all amounts

Exchange Agreement, Page 18

 

 

required to be withheld from such payments assuming the portfolio interest
exemption is inapplicable to such payments.

     (xxiii) Absence of Certain Changes. Except as disclosed in the Exchange Act
Reports, since December 31, 2009, there has been no material adverse change and no
material adverse development in the business, assets, properties, operations,
condition (financial or otherwise) or results of operations of the Company and the
Subsidiaries, taken as a whole. Except as disclosed in the Exchange Act Reports
or pursuant to the Transaction Documents, since December 31, 2009, (A) there has
not been any change in the Capital Stock (including any stock dividend, stock
split, stock combination or similar transaction) or long-term debt of the Company
or any of its Subsidiaries, or any issuance of any options, warrants, convertible
securities or rights to purchase Capital Stock of the Company or any of the
Subsidiaries; (B) the Company has not declared or paid any dividends or made any
distribution of any kind with respect to its Capital Stock; and (C) neither the
Company nor any of the Subsidiaries has entered into any transaction or agreement
(whether or not in the ordinary course of business) material to the Company and
the Subsidiaries, taken as a whole.

     (xxiv) Conduct of Business. Except as set forth in the Exchange Act Reports,
neither the Company nor any of the Subsidiaries (A) is in violation of its
organizational documents, including any certificate of designation, preferences or
rights of any outstanding series of preferred stock, (B) is in default, and no
event has occurred that, with notice or lapse of time or both, would constitute
such a default, under any indenture, mortgage, deed of trust, loan agreement,
license or other agreement or instrument to which it is a party or by which it is
bound or to which any of its properties or assets is subject or (C) is in
violation of any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over it or its property or assets
or has failed to obtain or maintain any license, permit, certificate, franchise or
other governmental authorization or permit necessary to the ownership of its
property or to the conduct of its business, except in the case of clauses (B) and
(C), to the extent any such conflict, breach, violation or default would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Except as disclosed in the Exchange Act Reports, during the two
(2) years prior to the date hereof, (i) the Common Stock has been designated for
quotation on the Principal Market, (ii) trading in the Common Stock has not been
suspended by the SEC or the Principal Market and (iii) the Company has received no
communication, written or oral, from the SEC or the Principal Market regarding the
suspension or delisting of the Common Stock from the Principal Market.

     (xxv) Environmental Laws. Each of the Company and the Subsidiaries is in
compliance with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health or the environment or
imposing liability or standards of conduct concerning any

Exchange Agreement, Page 19

 

 

Hazardous Material (collectively, “Environmental Laws”), except where such
non-compliance with Environmental Laws would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The term
“Hazardous Material” means (A) any “hazardous substance” as defined by the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, (B) any “hazardous waste” as defined by the Resource Conservation and
Recovery Act, as amended, (C) any petroleum or petroleum product, (D) any
polychlorinated biphenyl and (E) any pollutant or contaminant or hazardous,
dangerous or toxic chemical, material, waste or substance regulated under or
within the meaning of any other Environmental Law.

     (xxvi) Outstanding Indebtedness; Liens. Except as set forth on the Most
Recent Balance Sheet, on Schedule 2(c)(xxvi) or as disclosed in the
Exchange Act Reports, (A) neither the Company nor any of the Subsidiaries has any
outstanding Indebtedness, and (B) there are no Liens on any of the assets of the
Company or the Subsidiaries other than Permitted Liens.

     (xxvii) Financial Advisors. The Company acknowledges that it has engaged
each of Lazard Frères & Co. LLC and CoveView Advisors LLC as financial advisors in
connection with transactions contemplated hereby and by the other Transaction
Documents (the “Advisors”). Other than the Advisors, the Company has not engaged
any placement agent, financial advisor or other agent in connection with the
transactions contemplated hereby or by any of the other Transaction Documents.
The Company shall pay, and hold the Investor harmless against, any liability, loss
or expense (including reasonable attorneys’ fees and out-of-pocket expenses)
arising in connection with, or otherwise relating to, any claim by or on behalf of
the Advisors or any other placement agent, financial advisor or other agent with
respect to any such engagement.

     (xxviii) Manipulation of Price. The Company has not, and to its knowledge no
one acting on its behalf has, directly or indirectly, (A) taken any action
designed to or that has constituted or that would reasonably be expected to cause
or result in the stabilization or manipulation of the price of any security of the
Company in connection with the offering of the Securities, or (B) other than
actions taken by the Advisors, sold, bid for, purchased, or paid any compensation
for soliciting purchases of, the 2015 Notes.

     (xxix) Internal Accounting and Disclosure Controls. Each of the Company and
the Subsidiaries (1) maintains a system of internal control over financial
reporting as defined in Rule 13a-15 under the Exchange Act and a system of
internal accounting controls sufficient to provide reasonable assurance that (A)
transactions are executed in accordance with management’s general or specific
authorization; (B) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting principles
and to maintain accountability for its assets and liabilities; (C) access to
assets or incurrence of liabilities is permitted only in accordance with
management’s general or specific authorization; and (D) the

Exchange Agreement, Page 20

 

 

recorded accountability for its assets and liabilities is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences, and (2) maintains a system of “disclosure controls and
procedures” (as such term is defined in Rule 13a-14(c) under the Exchange Act).

     (xxx) Transfer Taxes. On or after the Closing Date, all stock transfer and
other similar taxes (which, for the avoidance of doubt, does not include income or
similar taxes) which are required to be paid in connection with transactions
contemplated hereby, including the Exchange, the conversion of the Investor 2015
Notes into the Exchanged Conversion Shares in the manner contemplated by the
Exchanged Indenture and the conversion of the Investor Preferred Shares, if any,
into the Investor Preferred Conversion Shares, will be, or will have been, fully
paid or provided for by the Company, and all laws imposing such taxes will be or
will have been complied with in all material respects.

     (xxxi) Intellectual Property. Each of the Company and the Subsidiaries owns
or possesses the right to use the patents, patent licenses, trademarks, service
marks, trade names, copyrights and know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information, systems or
procedures) (collectively, the “Intellectual Property”) reasonably necessary to
carry on the business conducted by each as conducted on the date hereof, except to
the extent that the failure to own or possess the right to use such Intellectual
Property would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect; and, except as disclosed in the Exchange Act
Reports, neither the Company nor any Subsidiary has received any notice of
infringement of or conflict with asserted rights of others with respect to any
Intellectual Property, except for notices the content of which if accurate would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

     (xxxii) Application of Takeover Protections; Rights Agreement. No control
share acquisition, business combination, poison pill (including distribution under
a rights agreement) or other similar anti-takeover provision under the Articles of
Incorporation or any certificates of designations or the laws of the State of
Nevada is, nor shall become, applicable to the Investor as a result of the
transactions contemplated by this Agreement or the other Transaction Documents,
including the Company’s issuance of the Securities and the Investor’s ownership of
the Securities. Except for the beneficial ownership limitations in the Exchanged
Indenture and the Preferred C of D, the Company does not presently have a
shareholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Common Stock or a change in control of the Company.

     (xxxiii) Dilutive Effect. The Company understands and acknowledges that the
number of (1) Exchanged Conversion Shares issuable upon conversion of the Investor
2015 Notes, and (2) Investor Preferred

Exchange Agreement, Page 21

 

 

Conversion Shares issuable upon conversion of the Investor Preferred Shares,
will increase in certain circumstances. Any dilutive effect that the issuance of
(a) the Exchanged Conversion Shares issuable upon conversion of the Investor 2015
Notes in accordance with this Agreement and the Exchanged Indenture or (b) the
Investor Preferred Conversion Shares issuable upon conversion of the Investor
Preferred Shares, if any, in accordance with the Preferred C of D, may have on the
ownership interests of other shareholders of the Company shall have no effect on
the Company’s obligation to issue the Exchanged Conversion Shares upon conversion
of the Investor 2015 Notes in accordance with this Agreement and the Exchanged
Indenture or the Investor Preferred Conversion Shares upon conversion of the
Investor Preferred Shares in accordance with the Preferred C of D.

     (xxxiv) Acknowledgment Regarding Investor’s Exchange of Securities and
Trading Activities. The Company acknowledges and agrees that the Investor is
acting solely in the capacity of an arm’s length investor with respect to this
Agreement and the Investor Transaction Documents and the transactions contemplated
hereby and thereby and that no Participating Investor is, immediately after giving
effect to the Exchange and the transactions contemplated thereby, (1) an officer
or director of the Company or any of the Subsidiaries or (2) assuming or relying
upon the accuracy or correctness of the representations and warranties given by
each Participating Investor under Section 2(a)(x) of this Agreement and
the Other Agreements, an Affiliate of the Company or any of its Subsidiaries. The
Company further acknowledges that the Investor is not acting as a financial
advisor or fiduciary of the Company or any of the Subsidiaries (or in any similar
capacity) with respect to this Agreement, the Exchanged Indenture, the 2015 Notes
or any of the other Transaction Documents or the transactions contemplated hereby
or thereby, and any advice given by the Investor or any of its representatives or
agents in connection with the Transaction Documents or the transactions
contemplated hereby or thereby is merely incidental to the Investor’s purchase of
the Securities. The Company further represents to the Investor that the Company’s
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives. Except as provided
in Section 2(a)(ix), the Investor has not been asked by the Company or any
of the Subsidiaries to agree, nor has the Investor agreed, to desist from
purchasing or selling, long and/or short, securities of the Company or
“derivative” securities based on securities issued by the Company, or to hold any
of the Investor 2015 Notes, the Exchanged Conversion Shares or the Investor
Preferred Conversion Shares for any specified term. Such aforementioned
activities do not constitute a breach of any of the Transaction Documents, subject
to the Investor’s compliance with applicable securities laws.

     (xxxv) Disclosure. Other than such information set forth in the 8-K Filing
(as defined below), the Company confirms that neither it nor any other Person
acting on its behalf has provided the Investor or its agents or counsel

Exchange Agreement, Page 22

 

 

with any information that constitutes or could reasonably be expected to
constitute material, non-public information. The Company understands and confirms
that the Investor will rely on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided to the
Investor regarding the Company and the Subsidiaries, their business and the
transactions contemplated hereby, including the Exhibits and Schedules to this
Agreement, furnished by or on behalf of the Company, taken on the whole, is true
and correct in all material respects and does not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred or information exists
with respect to the Company or any of the Subsidiaries or either of their
respective businesses, properties, prospects, operations, results of operations or
financial conditions, which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed.

     (xxxvi) Reasonable Best Efforts. The Company shall use its reasonable best
efforts to timely satisfy each of the conditions provided in Sections 3
and 4 of this Agreement.

     (xxxvii) No Event of Default. As of the date hereof, there is not any
continuing Default or Event of Default under any of the Exchanged 2011 Notes or
the Existing Indenture. After giving effect to the terms of this Agreement and
the Other Agreements, no Default or Event of Default (each as defined in the
Exchanged Indenture) shall have occurred and be continuing as of the date this
representation is made.

     (xxxviii) Holding Period. For the purposes of Rule 144(d) under the
Securities Act, the Company acknowledges that (A) the holding period of the 2011
Notes may be tacked onto the holding period of the 2015 Notes, the shares of
Common Stock and Preferred Stock issued or issuable upon conversion of the 2015
Notes, and the shares of Common Stock issued or issuable upon conversion of any
shares of Preferred Stock issued or issuable upon conversion of any of the 2015
Notes, (B) the holding period of the 2015 Notes may be tacked onto the holding
period of the shares of Common Stock and Preferred Stock issued or issuable upon
conversion of the 2015 Notes, and the shares of Common Stock issued or issuable
upon conversion of any shares of Preferred Stock issued or issuable upon
conversion of, or as payment on, any of the 2015 Notes, and (C) the holding period
of the shares of Preferred Stock issued or issuable upon conversion of, or as
payment on, any of the 2015 Notes may be tacked onto the holding period of the
shares of Common Stock issued or issuable upon conversion of any such shares of
Preferred Stock and the Company agrees not to take any position contrary to this
Section 2(c)(xxxviii).

     (xxxix) Fees and Expenses. Whether or not the transactions contemplated
herein are consummated or this Agreement is terminated, the

Exchange Agreement, Page 23

 

 

Company shall pay or cause to be paid all costs and expenses incident to the
performance of its obligations hereunder, including all fees, costs and expenses
(1) incident to the preparation, issuance, execution, authentication and delivery
of the Securities, including any expenses of the Trustee, (2) incurred in
connection with the registration or qualification and determination of eligibility
for investment of the Securities under the laws of such jurisdictions as the
Investor may reasonably designate, (3) related to any filing with the Financial
Industry Regulatory Authority (FINRA) and (4) in connection with satisfying its
obligations under Section 2(c)(xxxv); provided however, it being
understood that, except as expressly set forth in this Section 2(c)(xxxix)
and Section 6(s), the Company shall have no obligation to pay any costs
and expenses of any of the Participating Investors.

     (xl) 2011 Notes Remaining Outstanding. Immediately following the Exchange,
not more than $5 million in aggregate principal amount of the 2011 Notes will
remain outstanding.

     (xli) Most Favored Nation. None of the terms offered to any of the
Participating Investors with respect to any amendment, settlement or waiver (each
a “Settlement Document”) relating to the terms, conditions and transactions
contemplated hereby, is or shall be more favorable to such Person than those of
the Investor and, if the foregoing representation, warranty, covenant and
agreement has been breached, then this Agreement shall be, without any further
action by the Investor or the Company, deemed amended and modified in an
economically and legally equivalent manner such that the Investor shall receive
the benefit of the more favorable terms contained in such Settlement Document.
The Other Agreements are, and shall be, identical to this Agreement other than for
the Proportionate Changes and other than applicable closing dates for the
transactions contemplated by the Other Agreements with respect to the exchange of
up to an aggregate of $3,500,000 in principal amount of the 2011 Notes.
Notwithstanding the foregoing, the Investor acknowledges that, pursuant to the
Investor Rights Agreement, the Company has agreed that certain Participating
Investors will have the right to nominate one member of the Company’s Board of
Directors, upon terms and conditions set forth in the Investor Rights Agreement.

     (xlii) Additional Debentures; Variable Securities. From the date hereof
until the first day following the Closing Date on which no 2015 Notes are
outstanding, the Company will not issue any 2015 Notes other than to the
Participating Investors as contemplated hereby and by the Other Agreements and the
Company shall not issue any other securities that would cause a breach or default
under the 2015 Notes or the Exchanged Indenture. From the date hereof until the
first day following the Closing Date on which no 2015 Notes are outstanding, the
Company shall not, in any manner, issue or sell any rights, warrants or options to
subscribe for or purchase Common Stock or that are directly or indirectly
convertible into or exchangeable or exercisable for Common Stock at a price which
varies or may vary with the market price of the

Exchange Agreement, Page 24

 

 

Common Stock, including by way of one or more reset(s) to any fixed price
unless the conversion, exchange or exercise price of any such security cannot be
less than the then applicable Conversion Price with respect to the Common Stock
into which any 2015 Notes are convertible provided, however, that solely for
purposes of clarification, the parties hereto acknowledge and agree that the
foregoing shall not apply to the participation by any employee, officer or
director of the Company or any of the Subsidiaries in any Approved Share Plan (as
defined below) but shall apply to any other issuance of securities pursuant to any
such Approved Share Plan; provided further, that the reference in this sentence to
the issuance or sale of any rights, warrants or options is not intended to
restrict the Company from entering into an agreement for the sale of securities
where the fixed price relating to such security is determined at the closing of
the applicable transaction and such closing is to occur after the Company enters
into such agreement.

     (xliii) Regulation M. The Company will not take any action prohibited by
Regulation M under the Exchange Act, in connection with the distribution of the
Securities contemplated hereby.

     (xliv) No Resale. The Company will not, and will use its reasonable best
efforts to not permit any of its Affiliates, without the prior written consent of
the Participating Investors holding a majority of the aggregate principal amount
of outstanding 2015 Notes, to resell any of the Securities which constitute
“restricted securities” under Rule 144 under the Securities Act (“Rule 144”) that
have been reacquired by any of them, except for Securities purchased by the
Company or any of its Affiliates and resold in a transaction registered under the
Securities Act.

     (xlv) Book Entry Transfer. The Company agrees to comply with all the terms
and conditions of all agreements set forth in the representation letters of the
Company to DTC, in each case relating to the approval of the 2015 Notes and the
shares of Common Stock and Preferred Stock issuable upon conversion of the 2015
Notes by DTC for “book entry” transfer.

     (xlvi) Stop Orders. The Company will advise the Investor, within one
Business Day after it receives notice of issuance by the SEC, any state securities
commission or any other regulatory authority of any stop order or of any order
preventing or suspending any offering of any securities of the Company, or of the
suspension of the qualification of the Common Stock for offering or sale in any
jurisdiction, or the initiation of any proceeding for any such purpose.

     (xlvii) Additional Issuances of Securities.

     (1) For purposes of this Section 2(c)(xlvii), the following
definitions shall apply.

Exchange Agreement, Page 25

 

 

          (A) “Convertible Securities” means any Capital Stock or securities
(other than Options) convertible into or exercisable or exchangeable for
shares of Common Stock.

          (B) “Options” means any rights, warrants or options to subscribe for or
purchase shares of Common Stock or Convertible Securities.

          (C) “Common Stock Equivalents” means, collectively, Options and
Convertible Securities.

          (D) “Subsequent Placement” means the offer, sale, grant of any option
to purchase, or other disposition by the Company of any of its or the
Subsidiaries’ Capital Stock or Capital Stock equivalents, including any
debt, preferred stock or other instrument or security that is, at any time
during its life and under any circumstances, convertible into or
exchangeable or exercisable for shares of Common Stock or Common Stock
Equivalents.

     (2) The Company will not, directly or indirectly, effect any Subsequent
Placement during the period commencing with the date of this Agreement and
ending on the eighteenth (18th) month anniversary of the Closing Date (the
“Participation Period”), unless the Company shall have first complied with
this Section 2(c)(xlvii)(2).

          (A) In the event the Company desires to effect any Subsequent Placement
during the Participation Period, the Company shall deliver to each
Participating Investor, provided that such Participating Investor, together
with its Affiliates, holds 2015 Notes issued to such Participating Investor
at, contemporaneously with or from time to time after, the Closing, in each
case pursuant to this Agreement or an Other Agreement, in an aggregate
principal amount representing at least thirty five percent (35%) of the
principal amount of the 2015 Notes issued to such Participating Investor at,
contemporaneously with or from time to time after, the Closing, in each case
pursuant to this Agreement or an Other Agreement (the “Minimum Securities”),
an initial written notice regarding a potential Subsequent Placement that
does not contain any material non-public information with respect to the
Company or any of the Subsidiaries (other than the possibility of a
Subsequent Placement, to the extent information regarding such potential
Subsequent Placement is material) (an “Initial Notice”), and, if within
three Business Days after receipt of such Initial Notice such Participating
Investor agrees in writing (together with a representation that such
Participating Investor, together with its Affiliates, holds the Minimum
Securities) to accept material non-public information regarding such
potential Subsequent Placement and execute and deliver a confidentiality
agreement in the form attached hereto as Schedule I, the Company
shall deliver to such Participating Investor an

 Exchange Agreement, Page 26

 

 

irrevocable written notice (the “Offer Notice”) of any proposed or
intended issuance or sale or exchange (the “Offer”) of the securities being
offered (the “Offered Securities”) in a Subsequent Placement, which Offer
Notice shall (i) identify and describe the Offered Securities; (ii) describe
the price and other terms upon which they are to be issued, sold or
exchanged, and the number or amount of the Offered Securities to be issued,
sold or exchanged; and (iii) offer to issue and sell to or exchange with
such Participating Investors in the aggregate up to thirty five percent
(35%) of the Offered Securities, allocated pro rata among such Participating
Investors based on the Participating Investors’ relative Participation
Amounts (any Participating Investor’s pro rata portion thereof, including
the pro rata portion of the Investor, being referred to as such
Participating Investor’s “Basic Amount”). If any Participating Investors
subscribe for less than their Basic Amount, then the Company shall give the
Participating Investors who subscribed for their Basic Amount written notice
of such excess Offered Securities (a “Supplemental Offer Notice”) and allow
each Participating Investor who elected to purchase its Basic Amount the
opportunity to purchase the excess Offered Securities (the
“Undersubscription Amount”). Notwithstanding anything herein to the
contrary, if a Participating Investor has delivered a written notice to the
Chief Executive Officer or Chief Financial Officer of the Company (an
“Information Notice”) that it does not desire to receive any Initial Notices
or Offer Notices pursuant to this Section 2(c)(xlvii)(2)(A), or
otherwise receive information regarding any potential Subsequent Placements,
then, after the Company’s actual receipt (notwithstanding the provisions for
deemed receipt in Section 6(m)) of such Information Notice, the Company
shall not be obligated pursuant to this Section 2(c)(xlvii)(2)(A)
to, and the Company shall not, deliver to such Participating Investor any
Initial Notices or Offer Notices, or any other non-public information with
respect to any Subsequent Placement, unless and until the Company has
actually received (notwithstanding the provisions for deemed receipt in
Section 6(m)) from such Participating Investor a subsequent notice revoking
its Information Notice (a “Revocation Notice”). Accordingly, in the event a
Participating Investor delivers to the Company an Information Notice, during
the period commencing with the date on which such Information Notice has
been received by the Company and ending on the date on which a Revocation
Notice revoking such Information Notice is received by the Company, such
Participating Investor shall not have any rights pursuant to this
Section 2(c)(xlvii)(2) to participate in a Subsequent Placement.

          (B) To accept an Offer, in whole or in part, such Participating
Investor must deliver a written notice (the “Notice of Acceptance”) to the
Company prior to the end of the fifth (5th) Business Day after such
Participating Investor’s receipt of the Offer Notice or the end of the fifth
(5th) Business Day after such Participating Investor’s receipt of any
Supplemental Offer Notice, as applicable (such periods, in

Exchange Agreement, Page 27

 

 

the aggregate, the “Offer Period”), setting forth the portion of such
Participating Investor’s Basic Amount that such Participating Investor
elects to purchase and, if such Participating Investor shall elect to
purchase all of its Basic Amount, the Undersubscription Amount, if any, that
such Participating Investor elects to purchase; provided, however, that if
the Undersubscription Amount subscribed for exceeds the difference between
the total of all the Basic Amounts permitted to be subscribed for and the
Basic Amounts subscribed for (the “Available Undersubscription Amount”),
then each Participating Investor that has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion of
the Available Undersubscription Amount as the Basic Amount of such
Participating Investor bears to the total Basic Amounts of all Participating
Investors that have subscribed for Undersubscription Amounts, subject to
rounding by the Company to the extent it deems reasonably necessary. The
Basic Amounts and the Undersubscription Amounts that the Participating
Investors are entitled to purchase shall be, in the aggregate, the
“Subscribed Securities” (subject to adjustment pursuant to Section
2(c)(xlvii)(2)(D) of this Agreement). Notwithstanding the foregoing, if
the Company desires to modify or amend the terms and conditions of the Offer
prior to the expiration of the Offer Period, the Company may deliver to the
Participating Investors a new Offer Notice and the Offer Period with respect
to such Offer Notice shall expire on the fifth (5th) Business Day after such
Participating Investor’s receipt of such new Offer Notice.

          (C) The Company shall have forty-five (45) Business Days from the
expiration of the Offer Period above (i) to offer, issue, sell or exchange
all or a portion of the Offered Securities, less the Subscribed Securities
(the “Subsequent Placement Securities”), pursuant to a definitive
agreement(s) (the “Subsequent Placement Agreement”), but only upon terms and
conditions (including unit prices and interest rates) that are not more
favorable to the acquiring Person or Persons or less favorable to the
Company than those set forth in the Offer Notice, (ii) if and to the extent
the Subsequent Placement and the execution of any Subsequent Placement
Agreement constitutes material information with respect to the Company, to
file with the SEC a Current Report on Form 8-K in the time period required
under the Exchange Act, which shall contain all such information and
exhibits thereto as are required by the Exchange Act, and to issue any press
release the Company may choose to issue regarding such transaction and (iii)
if the Form 8-K described in Section 2(c)(xlvii)(2)(C)(ii) above is
not filed, to confirm in writing to the Investor that neither the Company,
nor any of the Subsidiaries nor any of their respective officers, directors,
employees or agents has provided the Investor or its agents or counsel with
any information that constitutes material, non-public information.

Exchange Agreement, Page 28

 

 

          (D) In the event the Company shall determine to issue, sell or exchange
less than all of the Subsequent Placement Securities (any such sale to be in the manner and on the terms specified in Section
2(c)(xlvii)(2)(C) above), then the Company shall, not less than two (2)
Business Days prior to the consummation of such issuance, sale or exchange,
so notify each Participating Investor, and each Participating Investor may,
at its sole option and in its sole discretion at any time prior to the
consummation of such issuance, sale or exchange, notify the Company of its
election to reduce the number or amount of the Offered Securities specified
in its Notice of Acceptance to an amount that shall be not less than the
number or amount of the Offered Securities that such Participating Investor
elected to purchase pursuant to Section 2(c)(xlvii)(2)(B) above
multiplied by a fraction, (i) the numerator of which shall be the number or
amount of Subsequent Placement Securities the Company actually determined to
issue, sell or exchange, plus the number or amount of Subscribed Securities
to be issued or sold pursuant to Section 2(c)(xlvii)(2)(C) above
(prior to any reduction pursuant to this Section 2(c)(xlvii)(2)(D)),
and (ii) the denominator of which shall be the original amount of the
Offered Securities. In the event that the Investor so elects to reduce the
number or amount of Offered Securities specified in its Notice of
Acceptance, such reduced number shall thereafter constitute such
Participating Investor’s Subscribed Securities.

          (E) Upon the closing of the issuance, sale or exchange of all or less
than all of the Subsequent Placement Securities, each Participating Investor
shall acquire from the Company, and the Company shall issue to each
Participating Investor, such Participating Investor’s Subscribed Securities.
The purchase by each Participating Investor of any Offered Securities is
subject in all cases to the preparation, execution and delivery by the
Company and such Participating Investor of a purchase agreement relating to
such Offered Securities reasonably satisfactory in form and substance to
such Participating Investor and its advisors.

          (F) Notwithstanding anything to the contrary contained herein, if the
Company does not consummate the closing of the Subsequent Placement within
forty-five (45) Business Days of the expiration of the Offer Period, then
the offer to, and any acceptance by, the Participating Investors pursuant to
this Section 2(c)(xlvii) shall be deemed null and void, and the
Company shall not issue or sell any of the Offered Securities until such
securities have again been offered to the Participating Investors in
accordance with Section 2(c)(xlvii)(2)(A) above. Further, if the
Company shall determine to issue, sell or

Exchange Agreement, Page 29

 

 

exchange less than all of the
Subsequent Placement Securities pursuant to Section
2(c)(xlvii)(2)(D) above, then until such securities have again been
offered to the Participating Investors in accordance with Section
2(c)(xlvii)(2)(A) above, the Company shall not issue, sell or exchange
any of the Offered Securities that it so determined not to issue, sell or
exchange, or any of the Subscribed Securities that any Participating
Investor determined not to purchase pursuant to Section
2(c)(xlvii)(2)(D) above and Section
2(c)(xlvii) of each of the Other Agreements. Notwithstanding
anything to the contrary in this Section 2(c)(xlvii) and unless
otherwise agreed to by the Participating Investors, not later than the
forty-fifth (45th) Business Day following delivery to the Participating
Investors of the Offer Notice, the Company shall either (i) confirm in
writing to the Participating Investors that the Subsequent Placement has
been abandoned, (ii) make such public disclosures as are required such that
the Participating Investors will not be in possession of material non-public
information relating to such Subsequent Placement or (iii) confirm in
writing that neither the Company, nor any of the Subsidiaries nor any of
their respective officers, directors, employees or agents has provided the
Participating Investors or their agents or counsel with any information that
constitutes material, non-public information. If by the forty-fifth (45th)
Business Day following delivery of an Offer Notice no public disclosure
regarding the Subsequent Placement has been made, and no notice regarding
the abandonment of such transaction has been received by the Participating
Investors, then such Subsequent Placement shall be, and shall be deemed to
have been, abandoned and the Participating Investors shall not be deemed to
be in possession of any material, non-public information with respect to the
Company, and the Company shall not issue or sell any of the Offered
Securities until such securities have again been offered to the
Participating Investors in accordance with Section 2(c)(xlvii)(2)(A)
above. The Company shall not be permitted to deliver more than one Initial
Notice or Offer Notice to the Participating Investors in any ninety (90) day
period.

          (G) The Company and the Participating Investors agree that, if any
Participating Investor elects to participate in an Offer, neither the
Subsequent Placement Agreement with respect to such Offer nor any other
transaction documents related thereto (collectively, the “Subsequent
Placement Documents”) shall include any term or provisions not otherwise
required by law requiring any Participating Investor to agree to any
restrictions in trading as to any securities of the Company owned by such
Participating Investor prior to such Subsequent Placement.

     The restrictions contained in this Section 2(c)(xlvii)(2) shall not apply in
connection with (1) any Subsequent Placement during the six-month period immediately following the
Closing Date if such Subsequent Placement (a) would be integrated with the Exchange for purposes of
the Securities Act or any applicable shareholder approval provisions, including under the rules and
regulations of the Principal Market or any exchange or automated quotation system on which any of
the securities of the Company are listed or designated, and (b) does not involve more than
$2,500,000 of the Company’s securities, or (2) the offer, sale, grant of any option to purchase or
other disposition of any Excluded Securities. As used herein, (x) “Excluded Securities” means any
Capital Stock or Capital Stock equivalents of the Company or any of the Subsidiaries issued

Exchange Agreement, Page 30

 

 

or issuable: (A) in connection with any Approved Share Plan; (B) in connection with any stock split,
stock dividend, recapitalization or similar transaction by the Company for which adjustment is made
pursuant the Existing Indenture or the Exchanged Indenture; (C) upon conversion of the 2011 Notes,
the 2015 Notes or the Preferred Stock; (D) in the transactions
contemplated by this Agreement or any Other Agreement; (E) pursuant to a bona fide firm
commitment underwritten public offering with a nationally recognized underwriter; (F) in connection
with mergers, acquisitions, strategic business partnerships or joint ventures, in each case with
non-Affiliated third parties and otherwise on an arm’s-length basis, the primary purpose of which,
in the reasonable judgment of the Company’s Board of Directors, is not to raise additional capital;
and (G) upon conversion of any Options or Convertible Securities which are outstanding on the day
immediately preceding the date of this Agreement as described in Section 2(c)(vii) hereof,
provided that the terms of such Options or Convertible Securities are not amended, modified or
changed on or after the Closing Date; and (y) “Approved Share Plan” means any employee benefit plan
which has been approved by the Company’s Board of Directors and shareholders of the Company,
pursuant to which the Company’s securities may be issued to any employee, officer or director for
services provided to the Company.

     (xlviii) Public Information.

     (1) At any time during the period commencing on the Closing Date and
ending at such time that all of the Securities can be sold either pursuant
to a registration statement, or if a registration statement is not available
for the resale of all of the Securities, may be sold without the requirement
for the Company to be in compliance with Rule 144(c)(1) and otherwise
without restriction or limitation pursuant to Rule 144 other than any
restrictions on sale imposed to the extent that the holder is an affiliate
of the Company, if the Company shall fail for any reason to satisfy the
current public information requirement under Rule 144(c) (a “Public
Information Failure”) then, the Company agrees to pay to each such holder,
as liquidated damages and not as a penalty, an amount in cash equal to
three-fourths of one percent (0.75%) of the sum of the aggregate principal
amount of Investor 2015 Notes then held by such holder, the aggregate stated
value of the Investor Preferred Shares then held by such holder, and the
value of any shares of Common Stock then held by such holder that were
issued upon conversion of the Investor 2015 Notes and/or Investor Preferred
Shares determined based on the price at which they were acquired upon
conversion (subject to adjustment for subsequent stock splits, stock
dividends, stock combinations and similar events), on every thirtieth day
(pro rated for periods totaling less than thirty days) thereafter until the
earlier of (i) the date such Public Information Failure is cured and (ii)
such time that such public information is no longer required pursuant to
Rule 144. The liquidated damages payments to which a holder shall be
entitled pursuant to this Section 2(c)(xlviii) are referred to
herein as “Public Information Failure Payments.” Public Information Failure
Payments shall be paid on the earlier of (a) the last day of the calendar
month during which such Public Information Failure Payments are incurred and
(b) the third (3rd) Business Day after the event or failure

Exchange Agreement, Page 31

 

 

giving rise to
the Public Information Failure Payments is cured. In the event the Company
fails to make Public Information Failure Payments in a timely manner, such
Public Information Failure Payments shall bear interest at the rate of to
three-fourths of one percent (0.75%) per month
(prorated for partial months) until paid in full. The rate of accrual
of the Public Information Failure Payments with respect to any period shall
not exceed the rate provided for in this Section 2(c)(xlviii)(1)
notwithstanding the occurrence of multiple concurrent Public Information
Failures.

     (2) Notwithstanding the foregoing, the parties agree that the sole
damages payable for a Public Information Failure with respect to which
liquidated damages are expressly provided shall be such liquidated damages.
The parties hereto agree that the liquidated damages provided for in this
Section 2(c)(xlviii) constitute a reasonable estimate of the damages
that may be incurred by any such holder by reason of a Public Information
Failure in accordance with the provisions hereof.

	 	3.	 	CONDITIONS TO THE COMPANY’S OBLIGATIONS HEREUNDER

     The obligations of the Company to the Investor hereunder are subject to the satisfaction of
each of the following conditions, provided that these conditions are for the Company’s sole benefit
and may be waived by the Company at any time in its sole discretion by providing the Investor with
prior written notice thereof:

          (a) The Investor shall have duly executed and delivered to the Company this Agreement and each
of the Investor Transaction Documents.

          (b) The Investor shall have delivered to the Company (in accordance with the method set forth
in the next sentence), pursuant to the Existing Indenture and this Agreement, the Investor
Exchanged 2011 Notes being exchanged at the Closing, free and clear of all Liens other than
restrictions on transfer under applicable federal and state securities laws. The Investor
Exchanged 2011 Notes shall have been delivered by the DTC participant that holds the Investor
Exchanged 2011 Notes by submitting a DWAC withdrawal in the aggregate amount of the Investor
Exchanged 2011 Notes.

               The DTC participant that holds the Investor Exchanged 2011 Notes shall have submitted a DWAC
deposit in the aggregate amount of the Investor Exchanged 2011 Notes.

          (c) The representations and warranties of the Investor set forth herein shall be true and
correct in all respects as of the date when made and as of the Closing Date as though made at that
time (except for representations and warranties that speak as of a specific date, which shall be
true and correct as of such specified date only), and the Investor shall have performed, satisfied
and complied in all material respects with the covenants, agreements and conditions required by
this Agreement and the other Transaction Documents to be performed, satisfied or complied with by
the Investor at or prior to the Closing Date. The Company shall have received a certificate,
executed by an authorized representative of the Investor, dated as of the Closing Date, to the
foregoing effect in the form attached hereto as Exhibit F.

Exchange Agreement, Page 32

 

 

          (d) The Investor shall have delivered to the Company either (i) a Notice of
Nonrecognition Transfer (substantially in the form attached as Exhibit E-1), (ii) a
Certificate of Non-Foreign Status (substantially in the form attached as Exhibit E-2), or
(iii) a Certification of Non-USRPI Status (substantially in the form attached as Exhibit
E-3).

          (e) The Investor shall have delivered to the Company either Internal Revenue Service Form
W-8BEN, Form W-8IMY, Form W-8ECI or Form W-9, as applicable.

     4. CONDITIONS TO THE INVESTOR’S OBLIGATIONS HEREUNDER The obligations of the Investor to the
Company hereunder are subject to the satisfaction of each of the following conditions, provided
that these conditions are for the Investor’s sole benefit and may be waived by the Investor at any
time in its sole discretion by providing the Company with prior written notice thereof:

          (a) The Company shall have duly executed and delivered to the Investor this Agreement and each
of the other Transaction Documents (excluding the Other Agreements and the 2015 Notes (which 2015
Notes shall have been delivered to the Trustee)).

          (b) The Company shall have duly executed and delivered to the Trustee the Exchanged Indenture
and the Investor 2015 Notes at the Closing in accordance with Section 1(b) of this
Agreement.

          (c) The Trustee shall have executed and delivered the Exchanged Indenture, and the Investor
shall have received a copy thereof, duly executed and delivered by the Trustee and the Company.

          (d) The Trustee shall have executed and authenticated the Investor 2015 Notes.

          (e) The Company shall have delivered the Interest Amount to the Investor by wire transfer, in
U.S. dollars and immediately available funds, in accordance with wire instructions delivered by the
Investor to the Company on or prior to the Closing Date.

          (f) Other Investors holding at least $60,000,000 in aggregate principal amount of Exchanged
2011 Notes (including the aggregate principal amount of the Investor Exchanged 2011 Notes) shall
have (i) executed and delivered to the Company the Other Agreements with respect to such Other
Exchanges, (ii) satisfied or waived all conditions to the closings contemplated by such Other
Agreements and (iii) surrendered to the Company such Exchanged 2011 Notes being exchanged pursuant
to such Other Agreements, and the transactions contemplated by such Other Agreements, including the
exchange of such Exchanged 2011 Notes held by such Other Investors for the 2015 Notes of the Other
Investors shall be consummated contemporaneously with the Closing.

          (g) The Company shall have filed the Preferred C of D with the Secretary of State of the State of
Nevada and delivered to the Investor a copy of the Preferred C of D certified by the Secretary of
State of the State of Nevada.

 Exchange Agreement, Page 33

 

          (h) The Investor shall have received (i) the opinion of Vinson & Elkins LLP, counsel to
the Company, dated as of the Closing Date, in substantially the form agreed to on the date hereof
and (ii) the opinion of Dill Dill Carr Stonbraker & Hutchings, PC, counsel to the Company, dated as
of the Closing Date, in substantially the form agreed to on the date hereof.

          (i) The Company shall have delivered to the Investor a certificate in the form attached hereto
as Exhibit G, executed by the Secretary of the Company and dated as of the Closing Date, as
to (i) the resolutions relating to this Agreement and the transactions contemplated hereby, as
adopted by the Company’s Board of Directors, (ii) the Articles of Incorporation and (iii) the
Bylaws, in the case of clause (ii) and (iii), each as in effect at the Closing.

          (j) The representations and warranties of the Company set forth herein shall be true and
correct in all respects as of the date when made and as of the Closing Date as though made at that
time (except for representations and warranties that speak as of a specific date, which shall be
true and correct as of such specified date only) and the Company shall have performed, satisfied
and complied in all material respects with the covenants, agreements and conditions required by
this Agreement and the Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. The Investor shall have received a certificate, executed
by the Chief Executive Officer or Chief Financial Officer of the Company, dated as of the Closing
Date, to the foregoing effect in the form attached hereto as Exhibit H.

          (k) The Company shall have obtained all governmental, regulatory or third party consents and
approvals, if any, necessary for the transactions contemplated hereby (other than the Required
Approvals described in clause (i) of the definition of Required Approvals and, solely for purposes
of the issuance of an aggregate number of shares of Common Stock issuable upon conversion of the
2015 Notes, upon conversion of any Preferred Stock issued or issuable upon conversion of, or as
payment on, the 2015 Notes in excess of the Exchange Cap, the Shareholder Approval), and all such
consents and approvals shall be in full force and effect.

          (l) The Common Stock (1) shall be designated for quotation or listed on the Principal Market
and (2) shall not have been suspended, as of the Closing Date, by the SEC or the Principal Market
from trading on the Principal Market nor, except as set forth in the Company’s filings with the
SEC, shall suspension by the SEC or the Principal Market have been threatened, as of the Closing
Date, either (A) in writing by the SEC or the Principal Market or (B) by the Company’s failing to
maintain the minimum listing maintenance requirements of the Principal Market.

          (m) Each Other Investor shall have delivered to the Company (i) a Notice of Nonrecognition
Transfer (substantially in the form attached as Exhibit E-1), (ii) a Certificate of
Non-Foreign Status (substantially in the form attached as Exhibit E-2), or (iii) a
Certification of Non-USRPI Status (substantially in the form attached as Exhibit E-3).

          (n) The Company shall have delivered to the Investor such other documents relating to the
Exchange as the Investor or its counsel may reasonably request.

 Exchange Agreement, Page 34

 

     5. TERMINATION

          (a) In the event the Closing does not occur by the third Business Day after the Effective
Date, or such other date as is mutually agreed to by the Company, the Investor and each other
Participating Investor who executed an Other Agreement on the date of this Agreement, due to the
Company’s or the Investor’s failure to satisfy the conditions set forth in Sections 3 or
4 (and the non-breaching party’s failure to waive such unsatisfied condition(s)), the
non-breaching party shall have the option to terminate this Agreement with respect to such
breaching party at the close of business on such date without liability of any party to any other
party; provided, however, if this Agreement is terminated pursuant to this Section 5, the
Company shall remain obligated to pay (i) the reasonable legal fees of Katten Muchin Rosenman, LLP,
as counsel to each of CNH CA Master Account, L.P. and AQR Absolute Return Master Account, L.P.,
(ii) up to $20,000 in reasonable legal fees of Schulte Roth & Zabel LLP, as counsel to Kings Road
Holdings XIII Ltd, and (iii) up to $20,000 in reasonable legal fees of Akin Gump Strauss Hauer &
Feld LLP, as counsel to QVT Associates GP LLC, in each case in accordance with Section
6(s). Any such termination of this Agreement shall not affect the effectiveness of the
Existing Purchase Agreement, the Investor Exchanged 2011 Notes, the Existing Indenture or any other
Existing 2011 Notes Documents, each of which shall continue in full force and effect in accordance
with its terms.

     6. MISCELLANEOUS

          (a) Defined Terms in Exchanged Indenture. For purposes of this Agreement, all
references to defined terms as defined in the Exchanged Indenture are only to the Exchanged
Indenture in the form attached hereto as Exhibit C.

          (b) Disclosure of Transactions and Other Material Information. On or before 8:30
a.m., New York City time, on the first (1st) Business Day following the Closing Date, the Company
shall file a Current Report on Form 8-K describing the terms of the transactions contemplated
hereby in the form required by the Exchange Act and attaching the material Transaction Documents
that have not previously been filed with the SEC by the Company (including the form of this
Agreement and the Other Agreements, the form of the Exchanged Indenture and the form of the 2015
Notes) as exhibits to such filing (including all attachments, the “8-K Filing”). The Company
represents, warrants and covenants to the Investor that, from and after the filing of the 8-K
Filing with the SEC, the Investor (except as set forth in this Section 6(b) or as expressly
permitted by Section 2(c)(xlvii)) shall not be in possession of any material, non-public
information received from the Company, any of its Subsidiaries or any of its respective officers,
directors, employees or agents, that is not disclosed in the 8-K Filing. Except as expressly
permitted by Section 2(c)(xlvii), the Company shall not, and shall cause each of the
Subsidiaries and its and each of their respective officers, directors, employees and agents, not
to, provide the Investor with any material, non-public information regarding the Company or any of
the Subsidiaries from and after the 8-K Filing with the SEC without the express written consent of
the Investor. In the event of a breach of the foregoing covenant by the Company, any of the
Subsidiaries, or any of its or their respective officers, directors, employees and agents, in
addition to any other remedy provided herein or in the Transaction Documents, the Investor shall
have the right to make a public disclosure in the form of a press release, public advertisement or
otherwise, of such material nonpublic information without the prior approval by the Company,

 Exchange Agreement, Page 35

 

the Subsidiaries, or any of its or their respective officers, directors, employees or agents;
provided, however, that the Investor may only exercise this right if the Investor
provides the Company with written notice at least 24 hours in advance of the Investor’s disclosure,
thereby providing the Company with the opportunity to make the disclosure itself. The Investor
shall not have any liability to the Company, any of the Subsidiaries or any of its or their
respective officers, directors, employees, shareholders or agents for any such disclosure.
Notwithstanding anything to the contrary herein, in the event that the Company believes that a
notice or communication to the Investor contains material, nonpublic information relating to the
Company or any of the Subsidiaries, the Company shall so indicate to the Investor contemporaneously
with delivery of such notice or communication, and such indication shall provide the Investor the
means to refuse to receive such notice or communication; and in the absence of any such indication,
the holders of the Securities shall be allowed to presume that all matters relating to such notice
or communication do not constitute material, nonpublic information relating to the Company or any
of the Subsidiaries. Upon receipt or delivery by the Company or any of the Subsidiaries of any
notice in accordance with the terms of the Transaction Documents, unless the Company has in good
faith determined that the matters relating to such notice do not constitute material, nonpublic
information relating to the Company or the Subsidiaries, the Company shall within one Business Day
after any such receipt or delivery publicly disclose such material, nonpublic information. Subject
to the foregoing, the Company shall not, and shall cause each of the Subsidiaries and its and their
respective officers, directors, employees and Affiliates not to, and the Investor shall not, and
shall cause each of its officers, directors, employees and Affiliates not to, issue any press
releases or any other public statements with respect to, or otherwise publicly disclose, the
transactions contemplated hereby; provided, however, that the Company shall be entitled, without
the prior approval of the Investor, to make any press release or other public disclosure with
respect to such transactions (A) in substantial conformity with the 8-K Filing and
contemporaneously with, or subsequent to, the filing thereof with the SEC and (B) as is required by
applicable law and regulations including the rules and regulations of the Principal Market
(provided that in the case of clause (A) the Investor shall be consulted by the Company in
connection with any such press release or other public disclosure prior to its release). Without
the prior written consent of the Investor, neither the Company nor any of the Subsidiaries nor any
of their representative officers, directors, employees or Affiliates shall disclose the name of the
Investor in any filing, announcement, release or otherwise, unless such disclosure is required by
law, regulation or the Principal Market. Notwithstanding anything herein to the contrary, the
Company shall not, and shall cause each of the Subsidiaries and its and their respective officers,
directors, employees and Affiliates not to, and the Investor shall not, and shall cause its
officers, directors, employees and Affiliates not to, issue any press releases or any other public
statements with respect to, or otherwise publicly disclose, the transactions contemplated hereby
prior to the Closing Date unless required by applicable laws and regulations or by the Principal
Market.

          (c) Blue Sky; Form D. The Company agrees to timely file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to the Investor promptly
after such filing. The Company shall, on or before the Closing Date, take such action as the
Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify
the Securities for, sale to the Investor at the Closing pursuant to this Agreement under applicable
securities or “Blue Sky” laws of the states of the United States. The Company shall make all
filings and reports relating to the offer and sale of the Securities required under applicable
securities or “Blue Sky” laws of the states of the United States following the Closing

 Exchange Agreement, Page 36

 

Date; provided that the Company shall not be required to file a general consent to service of
process in any jurisdiction or to qualify as a foreign corporation in any jurisdiction in which is
not so qualified.

          (d) Governing Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of New York. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts
sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such court, that such suit,
action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by mailing a copy thereof
to such party at the address for such notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any manner
permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

          (e) Closing Sets. As soon as is reasonably practicable after the Closing Date, the
Company agrees to deliver, or cause to be delivered, to the Investor executed copies of this
Agreement and any other document required to be delivered to any party pursuant to Sections
3, 4 or 6 of this Agreement or pursuant to any Other Agreement.

          (f) Counterparts. This Agreement and any amendments hereto may be executed in two or
more identical counterparts, all of which shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party and delivered to the other party,
it being understood that all parties need not sign the same counterpart. In the event that any
signature to this Agreement or any amendment hereto is delivered by facsimile transmission or by
e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile or “.pdf” signature page were an original thereof. At the
request of any party each other party shall promptly re-execute an original form of this Agreement
or any amendment hereto and deliver the same to the other party. No party hereto shall raise the
use of a facsimile machine or e-mail delivery of a “.pdf” format data file to deliver a signature
to this Agreement or any amendment hereto or the fact that such signature was transmitted or
communicated through the use of a facsimile machine or e-mail delivery of a “.pdf” format data file
as a defense to the formation or enforceability of a contract, and each party hereto forever waives
any such defense.

 Exchange Agreement, Page 37

 

          (g) Headings. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.

          (h) Severability. If any provision of this Agreement is prohibited by law or
otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the
provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to
apply to the broadest extent that it would be valid and enforceable, and the invalidity or
unenforceability of such provision shall not affect the validity of the remaining provisions of
this Agreement so long as this Agreement as so modified continues to express, without material
change, the original intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not substantially
impair the respective expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties. The parties will
endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable
provision(s) with a valid provision(s), the effect of which comes as close as possible to that of
the prohibited, invalid or unenforceable provision(s).

          (i) No Third Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and, to the extent provided
in Section 6(p) hereof, each Indemnified Person, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.

          (j) Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may reasonably request in
order to carry out the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.

          (k) No Strict Construction. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.

          (l) Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and permitted assigns, including any
purchasers of the Securities. Except after the Closing in connection with the occurrence of an
event set forth in clause (ii) of the definition of “Change of Control” under the Exchanged
Indenture, the Company may not assign this Agreement or any rights or obligations hereunder without
the prior written consent of the Investor. The Investor may not assign this Agreement or any of
its rights or obligations hereunder without the prior written consent of the Company. Any
assignment or transfer in violation of this Section 6(l) shall be void.

          (m) Notices. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and will be deemed to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); (iii) one (1) Business Day after deposit with an overnight
courier service, or (iv) if the delivery methods set forth in (i), (ii) and (iii) above are

 Exchange Agreement, Page 38

 

unavailable, upon the reasonable determination of the party making delivery of such notice,
consent, waiver or other communication, when another method of delivery that is reasonably likely
to result in the delivery of such notice, consent, waiver or other communication to the party meant
to receive the same is used, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:

          If to the Company:

Gasco Energy, Inc.

8 Inverness Drive East, Suite 100

Englewood, CO 80112

Telephone: (303) 483-0044

Facsimile: (303) 483-0011

Attention: President

          with a copy (for informational purposes only) to:

Vinson & Elkins LLP

666 Fifth Avenue, 26th Floor

New York, NY 10103-0040

Telephone: 212.237.0251

Facsimile: 917.849.5317

Attention: Caroline Blitzer

          If to an Investor, to its address and facsimile number set forth on the Schedule of Investors,
with copies to the Investor’s legal representatives as set forth on the Schedule of Investors, or
to such other address and/or facsimile number and/or to the attention of such other Person as the
recipient party has specified by written notice given to each other party five (5) days prior to
the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or electronically generated
by the sender’s facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission, (C) provided by an overnight courier service or (D)
given by the recipient of such notice, consent, waiver or other communication or provided by the
method of delivery used if the delivery methods in (i), (ii) and (iii) above are unavailable, shall
be rebuttable evidence of personal or other service, receipt by facsimile or deposit with an
overnight courier service, or other receipt by another method of delivery used in accordance with
clause (i), (ii), (iii) or (iv) above, respectively.

          (n) Remedies. Any Person having any rights under any provision of this Agreement
shall be entitled to enforce such rights specifically (without posting a bond or other security),
to recover damages by reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law. Furthermore, the Company recognizes that in the event that it fails
to perform, observe, or discharge any or all of its obligations under this Agreement, any remedy at
law may prove to be inadequate relief to the Investor. The Company therefore agrees that the
Investor shall be entitled to seek temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages and without posting a bond or other security.

 Exchange Agreement, Page 39

 

          (o) Survival. The representations and warranties of the Company and the Investor
contained in Section 2 of this Agreement and the agreements and covenants set forth in
Sections 2 and 6 of this Agreement shall survive the Closing and delivery and
conversion of the Securities, as applicable.

          (p) Indemnification.

     (i) In consideration of the Investor’s execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to
all of the Company’s other obligations under the Transaction Documents, the
Company shall defend, protect, indemnify and hold harmless the Investor and all of
its shareholders, partners, members, managers, other equityholders, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons’ agents or other representatives (including those retained in connection
with the transactions contemplated by this Agreement) (each an “Investor
Indemnitee” and, collectively, the “Investor Indemnitees”), as incurred, from and
against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Investor Indemnitee is a party to the action for
which indemnification hereunder is sought), and including reasonable attorneys’
fees and disbursements (the “Investor Indemnified Liabilities”), incurred by any
Investor Indemnitee as a result of, or arising out of, or relating to (i) any
failure of any representation or warranty made by the Company in the Transaction
Documents or any other certificate, instrument or document contemplated hereby or
thereby to be true and correct as of the date hereof or as of the Closing Date
(except to the extent any such representation or warranty speaks to an earlier
date, in which case, any failure of such representation or warranty to be true and
correct as of such earlier date); (ii) any breach of any covenant, agreement or
obligation of the Company contained in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby; or (iii) any
cause of action, suit or claim brought or made against an Investor Indemnitee by a
third party (including for these purposes a derivative action brought on behalf of
the Company) and arising out of or resulting from (x) the execution, delivery,
performance or enforcement of the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby, (y) any disclosure made by
the Investor pursuant to Section 6(b) of this Agreement, or (z) the status
of the Investor or holder of the Securities as an investor in the Company pursuant
to the transactions contemplated by the Transaction Documents. To the extent that
the foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of
each of the Investor Indemnified Liabilities which is permissible under applicable
law.

     (ii) The Investor agrees to indemnify and hold harmless the Company, its
directors, its officers and each Person who controls the Company within the
meaning of Section 15 of the Securities Act and Section 20 of the

 Exchange Agreement, Page 40

 

Exchange Act (each a “Company Indemnitee” and, collectively, the “Company
Indemnitees”) from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith, and including reasonable attorneys’ fees and disbursements
(the “Company Indemnified Liabilities”), incurred by any Company Indemnitee as a
result of, or arising out of, or relating to (i) any breach of the agreements or
covenants of the Investor set forth in the last sentence of Section
2(a)(xiii) of this Agreement or (ii) any failure of any representation or
warranty made by the Investor in Section 2(a)(xv) of this Agreement or in
a certificate delivered by the Investor substantially in the form of Exhibit
E-3 to be true and correct as of the date hereof or as of the Closing Date.
To the extent that the foregoing undertaking by the Investor may be unenforceable
for any reason, the Investor shall make the maximum contribution to the payment
and satisfaction of each of the Company Indemnified Liabilities which is
permissible under applicable law. Notwithstanding anything herein to the
contrary, the Investor shall not be required or have any obligation to indemnify
the Company Indemnitees, or make any contribution to the payment and satisfaction
of the Company Indemnified Liabilities, under this Section 6(p) in an
aggregate amount in excess of the principal amount of the Investor 2015 Notes
issued to the Investor under this Agreement less any other amounts that the
Investor has been required to pay with respect to any Company Indemnified
Liabilities.

     (iii) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to Section
6(p)(i) or Section 6(p)(ii) hereof, such Person (an “Indemnified
Person”) shall promptly notify the Person against whom such indemnity may be
sought (the “Indemnifying Person”) in writing, and the Indemnifying Person, upon
request of the Indemnified Person, shall retain counsel reasonably satisfactory to
the Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding and shall pay the fees and
expenses of such counsel related to such proceeding. The failure to deliver
written notice to the Indemnifying Person within a reasonable time of the
commencement of any such action shall not relieve such Indemnifying Person of any
liability to any Indemnified Person under this Section 6(p), except to the
extent that the Indemnifying Person is prejudiced in its ability to defend such
action; provided that, in any event, the omission so to deliver written notice to
the Indemnifying Person shall not relieve the Indemnifying Person of any liability
that it may have to any Indemnified Person otherwise than under this Section
6(p). In any such proceeding, any Indemnified Person shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person unless (A) the Indemnifying Person and the
Indemnified Person shall have mutually agreed to the contrary, (B) the
Indemnifying Person has failed within a reasonable time to retain counsel
reasonably satisfactory to the Indemnified Person or (C) the named parties in any
such proceeding (including

 Exchange Agreement, Page 41

 

any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of
both parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the Indemnifying Person
shall not, in connection with any one proceeding or related proceeding in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all Indemnified Persons, and that all such
fees and expenses shall be reimbursed as they are incurred. Any such separate
firm for the Investor and its shareholders, partners, members, managers, other
equity holders, officers, directors, employees and direct or indirect investors
and any of the foregoing Persons’ agents or other representatives shall be
designated in writing by the Investor, and any such separate firm for the Company,
its directors, its officers and such control persons of the Company shall be
designated in writing by the Company. The Indemnifying Person shall not be liable
for any settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff, the
Indemnifying Person agrees to indemnify any Indemnified Person from and against
any loss or liability by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an Indemnified Person shall have requested
an Indemnifying Person to reimburse the Indemnified Person for fees and expenses
of counsel as contemplated by the third sentence of this Section
6(p)(iii), the Indemnifying Person agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (X) such
settlement is entered into more than 30 days after receipt by such Indemnifying
Person of the aforesaid request and (Y) such Indemnifying Person shall not have
reimbursed the Indemnified Person in accordance with such request prior to the
date of such settlement. No Indemnifying Person shall, without the prior written
consent of the Indemnified Person, effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could have
been a party and indemnity could have been sought hereunder by such Indemnified
Person, unless such settlement includes an unconditional release of such
Indemnified Person from all liability on claims that are the subject matter of
such proceeding on terms reasonably satisfactory to such Indemnified Person.

     (iv) The remedies provided for in this Section 6(p) are not exclusive
and shall not limit any rights or remedies which may otherwise be available to any
Indemnified Person at law or in equity.

     (v) The indemnity and contribution agreements contained in this Section
6(p) and the representations and warranties of the Company and the Investor,
respectively, set forth in this Agreement shall remain operative and in full force
and effect regardless of (A) any termination of this Agreement, (B) any
investigation made by or on behalf of the Investor or any Person controlling the
Investor or by or on behalf of the Company, its officers or directors or any other
Person controlling the Company and (C) acceptance of and payment for any of the
Securities.

 Exchange Agreement, Page 42

 

          (q) Entire Agreement; Amendments. This Agreement supersedes all other prior oral or
written agreements between the Investor, the Company, their respective Affiliates and Persons
acting on their behalf with respect to the matters discussed herein, and this Agreement, the
Investor 2015 Notes and the other Transaction Documents contain the entire understanding of the
parties with respect to the matters covered herein and therein and, except as specifically set
forth herein or therein, neither the Company nor the Investor makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this Agreement may be
amended other than by an instrument in writing signed by the Company and the Investor, and no
provision hereof may be waived other than by an instrument in writing signed by the party against
whom enforcement is sought; provided, however, notwithstanding any provision herein to the
contrary, at any time after the Closing Date, this Agreement shall be automatically amended,
without any action of or consent by the Investor, to conform the terms of this Agreement to the
terms of the Other Agreements upon their amendment by parties thereto holding in the aggregate at
least a majority of the then outstanding aggregate principal amount of the 2015 Notes. The Company
shall promptly provide written notice to the Investor of any such amendment. No consideration
shall be offered or paid to any Person to amend or consent to a waiver or modification of any
provision of this Agreement or the Other Agreements unless the same consideration also is offered
to all of the parties to this Agreement and the Other Agreements. Following the Closing Date,
neither the Company nor the Investor shall have any obligations to the other, nor shall the Company
or the Investor have any rights against the other, under the Existing Purchase Agreement, the
Existing Indenture, the Investor Exchanged 2011 Notes or any of the other Existing 2011 Notes
Documents.

          (r) Independent Nature of Investor’s Obligations and Rights. The obligations of the
Investor under this Agreement or any other Transaction Document are several and not joint with the
obligations of any Other Investor, and the Investor shall not be responsible in any way for the
performance of the obligations of any Other Investor under any Transaction Document. Nothing
contained herein or in any other Transaction Document, and no action taken by the Investor pursuant
hereto or by any Other Investor pursuant to any Other Agreement, shall be deemed to constitute the
Investor and the Other Investors as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Investor and the Other Investors are in any way
acting in concert or as a group with respect to such obligations or the transactions contemplated
by this Agreement or any other Transaction Document and the Company acknowledges that the
Participating Investors are not acting in concert or as a group with respect to such obligations or
the transactions contemplated by this Agreement or any other Transaction Document. The Company and
the Investor confirm that the Investor has independently participated in the negotiation of the
transactions contemplated hereby with the advice of its own counsel and advisors. The Investor
shall be entitled to independently protect and enforce its rights, including the rights arising out
of this Agreement or out of any other Transaction Document, and it shall not be necessary for any
Other Investor to be joined as an additional party in any proceeding for such purpose.

          (s) Fees and Expenses. Each party shall be responsible for its own fees and expenses
incurred in connection with this Agreement. The Company shall be responsible for the payment of
any placement agent’s fees, financial advisory fees, or broker’s commissions (other than for
Persons engaged by the Investor or its Affiliates) relating to or arising out of the transactions
contemplated hereby. Notwithstanding the foregoing, the Company shall pay on the

 Exchange Agreement, Page 43

 

earlier of the Closing Date and the first (1st) Business Day following any termination of this
Agreement pursuant to Section 5 hereof, (1) the reasonable legal fees of Katten Muchin
Rosenman LLP, as counsel to each of CNH CA Master Account, L.P. and AQR Absolute Return Master
Account, L.P., (2) up to $20,000 in reasonable legal fees of Schulte Roth & Zabel LLP, as counsel
to Kings Road Holdings XIII Ltd, and (3) up to $20,000 in reasonable legal fees of Akin Gump
Strauss Hauer & Feld LLP, as counsel to QVT Associates GP LLC, in each case relating to the
transactions contemplated hereby and by the other Transaction Documents.

          (t) Interpretive Matters. Unless the context otherwise requires, (i) all references
to Sections, Schedules, Appendices or Exhibits are to Sections, Schedules, Appendices or Exhibits
contained in or attached to this Agreement, (b) each accounting term not otherwise defined in this
Agreement has the meaning assigned to it in accordance with GAAP, (c) words in the singular or
plural include the singular and plural and pronouns stated in either the masculine, the feminine or
neuter gender shall include the masculine, feminine and neuter, (d) the words “hereof,” “herein”
and words of similar effect shall reference this Agreement in its entirety, and (e) the use of the
word “including” in this Agreement shall be by way of example rather than limitation.

          (u) Other Definitions. The terms that follow, when used in this Agreement, shall have
the meanings indicated.

          “Affiliate” unless otherwise indicated shall have the meaning ascribed to it in Rule 144.

          “Business Day” shall mean any day other than Saturday, Sunday or other day on which commercial
banks in the City of New York are authorized or required by law to remain closed.

          “Capital Stock” of any corporation means any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or interests in (however designated)
stock issued by that corporation.

          “Code” means the U.S. Internal Revenue Code of 1986, as amended.

          “GAAP” means generally accepted accounting principles in the United States of America as in
effect from time to time.

          “Indebtedness” of a Person means, without duplication, (a) all obligations of such Person for
borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such
Person upon which interest charges are customarily paid, (d) all obligations of such Person under
conditional sale or other title retention agreements relating to property acquired by such Person,
(e) all obligations of such Person in respect of the deferred purchase price of property or
services (excluding current accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the Indebtedness secured thereby has been assumed, (g) all guarantees by
such Person of Indebtedness of others, (h) all capital lease

 Exchange Agreement, Page 44

 

obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an
account party in respect of letters of credit and letters of guaranty and (j) all obligations,
contingent or otherwise, of such Person in respect of bankers’ acceptances. The Indebtedness of any
Person shall include the Indebtedness of any other entity (including any partnership in which such
Person is a general partner) to the extent such Person is liable therefor as a result of such
Person’s ownership interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.

          “Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge,
hypothecation, encumbrance, charge or security interest in, on or of such asset, whether or not
filed, recorded or otherwise perfected under applicable law, including any option or other
agreement to sell or give a security interest in any such asset, (b) the interest of a vendor or a
lessor under any conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the foregoing) relating to
such asset, and (c) in the case of securities, any purchase option, call or similar right of a
third party with respect to such securities.

          “Material Adverse Effect” means a material adverse effect on (i) the operations, business
assets, property assets, condition (financial or otherwise), shareholders’ equity or results of
operations of the Company and the Subsidiaries, taken as a whole or (ii) the performance of the
Company of its obligations under this Agreement, the Exchanged Indenture, the Investor 2015 Notes
and the other Transaction Documents or the consummation of any of the transactions contemplated
hereby or thereby.

          “Most Recent Balance Sheet” means the Company’s consolidated balance sheet as of March 31,
2010, as included in the Company’s Quarterly Report on Form 10-Q for the period then ended, as
filed with the SEC on May 4, 2010.

          “Other Exchanges” means the exchange by the Other Investors and the Company of the Exchanged
2011 Notes for the 2015 Notes pursuant to the Other Agreements.

          “Other Investor Exchanged Conversion Shares” means, collectively, the (i) shares of Common
Stock, and (ii) shares of Preferred Stock, in each case issued and issuable upon conversion of the
2015 Notes other than the Investor 2015 Notes, all pursuant to, and in accordance with the terms
and conditions of, the Exchanged Indenture.

          “Other Investor Preferred Conversion Shares” means, collectively, the shares of Common Stock
issued and issuable upon conversion of the Other Investor Preferred Shares, in each case pursuant
to, and in accordance with the terms and conditions of, the Preferred C of D.

          “Other Investor Preferred Shares” means the shares of Preferred Stock issued and issuable upon
conversion of, or as payment on, the 2015 Notes other than the Investor 2015 Notes, pursuant to,
and in accordance with the terms and conditions of, the Exchanged Indenture.

          “Participation Amount” of any Participating Investor means, the principal amount of the 2015
Notes issued to such Participating Investor at, or contemporaneously with, the Closing, as
contemplated hereby or by any of the Other Agreements, as applicable; or, if the

 Exchange Agreement, Page 45

 

Company has consented to an assignment pursuant to Section 6(l), the principal amount
held by the Participating Investor (or transferee, as applicable) immediately after such
assignment.

          “Permitted Lien” means (i) Liens permitted under the Credit Agreement (other than Section
7.02(h) thereof), as in effect on the date of the Exchanged Indenture, without amendment or
modification thereafter, (ii) Liens securing Indebtedness permitted under the Credit Agreement
(other than pursuant to Section 7.01(j) thereof), as in effect on the date of the Exchanged
Indenture, without amendment or modification thereafter, and additional reserve base loans from a
commercial bank on customary terms, provided such Liens do not extend to any assets that would not
otherwise be permitted to secure Indebtedness under the Credit Agreement and (iii) Liens on Oil &
Gas Interests (as defined in the Credit Agreement, as in effect on the date of the Exchanged
Indenture, without amendment or modification thereafter) to secure Indebtedness permitted under the
Credit Agreement (other than pursuant to Section 7.01(j) thereof), as in effect on the date of the
Exchanged Indenture, without amendment or modification thereafter, and additional reserve base
loans from a commercial bank on customary terms.

          “Person” means any individual, corporation, limited liability company, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization, or government or any
agency or political subdivision thereof.

          “SEC” means the Securities and Exchange Commission.

          “Subsidiary” means (i) a corporation, a majority of whose Capital Stock with voting power,
under ordinary circumstances, to elect directors is, at the date of determination, directly or
indirectly owned by the Company, by one or more Subsidiaries of the Company or by the Company and
one or more Subsidiaries of the Company, (ii) a partnership in which the Company or a Subsidiary of
the Company holds a majority interest in the equity capital or profits of such partnership, or
(iii) any other person (other than a corporation) in which the Company, a Subsidiary of the Company
or the Company and one or more Subsidiaries of the Company, directly or indirectly, at the date of
determination, has (x) at least a majority ownership interest or (y) the power to elect or direct
the election of a majority of the directors or other governing body of such person.

          “Transaction Documents” means each of this Agreement, the 2015 Notes, the Exchanged Indenture,
the Preferred C of D, the Guaranty, the Investor Rights Agreement, each of the Other Agreements and
each of the other agreements or instruments to which the Company or any of the Subsidiaries is a
party or by which it is bound and which is entered into by the parties hereto or thereto in
connection with the transactions contemplated hereby and thereby.

[Signature Page Follows]

 Exchange Agreement, Page 46

 

          IN WITNESS WHEREOF, the Company and the Investor have caused their respective signature page
to this Exchange Agreement to be duly executed as of the date first written above.

	 	 	 	 	 
	 	COMPANY:

GASCO ENERGY, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	W. King Grant 	 
	 	 	Title:  	President and Chief Financial
Officer 	 
	 

SIGNATURE PAGE TO EXCHANGE AGREEMENT

 

 

          IN WITNESS WHEREOF, the Company and the Investor have caused their respective signature
page to this Exchange Agreement to be duly executed as of the date first written above.

	 	 	 	 	 
	 	INVESTOR:

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

SIGNATURE PAGE TO EXCHANGE AGREEMENT

	 	 	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 

 

 

Exhibit A

Schedule of Investors

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Aggregate	 	 	 	 	 	 	 	 	 	 	 	 	 	Investor Broker Account Information
	 	 	 	 	Principal	 	 	 	Aggregate	 	 	 	 	 	 	 	(including Name, DTC Participant
	 	 	 	 	Amount of	 	CUSIP	 	Principal	 	 	 	 	 	Legal Representative’s	 	Number, and Address, Email Address,
	 	 	Address, Email Address,	 	Exchanged	 	Number of	 	Amount of	 	 	 	 	 	Address, Email Address,	 	Telephone and Facsimile Number of
	 	 	Telephone Number and	 	2011	 	Exchanged	 	2015	 	Interest	 	Telephone Number and	 	DTC Participant that holds the
	Investor	 	Facsimile Number	 	Notes	 	2011 Notes	 	Notes	 	Amount*	 	Facsimile Number	 	Investor’s Exchanged 2011 Notes)
	(1)	 	(2)	 	(3)	 	(4)	 	(5)	 	(6)	 	(7)	 	(8)
	 
	Kings Road Holdings XIII Ltd

	 	Ogier Fiduciary Services

89 Nexus Way

Camana Bay

Grand Cayman KY1-9007
	 	 	3,000,000	 	 	367220AA8
	 	 	3,000,000	 	 	$	36,666.67	 	 	Michael T. Adams,

General Counsel — North America

Polygon Investment Partners LP

399 Park Avenue 22nd floor

New York, NY 10022

Direct + 1 212 359 7355

Mobile (917) 443-6663

Fax + 1 212 359 7301

Email: madams@polygoninv.com

	 	UBS Securities LLC

1285 Avenue of the Americas

New York, NY 10019

DTC: 0642

Contact: David Madden

David.Madden@ubs.com

212 713-9837
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Kings Road Holdings XIII Ltd

	 	Ogier Fiduciary Services

89 Nexus Way

Camana Bay

Grand Cayman KY1-9007
	 	 	11,250,000	 	 	367220AB6
	 	 	11,250,000	 	 	$	137,500.00	 	 	Michael T. Adams,

General Counsel — North America 

Polygon Investment Partners LP

399 Park Avenue 22nd floor

New York, NY 10022

Direct + 1 212 359 7355

Mobile (917) 443-6663

Fax + 1 212 359 7301

Email: madams@polygoninv.com
	 	UBS Securities LLC

1285 Avenue of the Americas

New York, NY 10019

DTC: 0642

Contact: David Madden

David.Madden@ubs.com

212 713-9837

A-1

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Aggregate	 	 	 	 	 	 	 	 	 	 	 	 	 	Investor Broker Account Information
	 	 	 	 	Principal	 	 	 	Aggregate	 	 	 	 	 	 	 	(including Name, DTC Participant
	 	 	 	 	Amount of	 	CUSIP	 	Principal	 	 	 	 	 	Legal Representative’s	 	Number, and Address, Email Address,
	 	 	Address, Email Address,	 	Exchanged	 	Number of	 	Amount of	 	 	 	 	 	Address, Email Address,	 	Telephone and Facsimile Number of
	 	 	Telephone Number and	 	2011	 	Exchanged	 	2015	 	Interest	 	Telephone Number and	 	DTC Participant that holds the
	Investor	 	Facsimile Number	 	Notes	 	2011 Notes	 	Notes	 	Amount*	 	Facsimile Number	 	Investor’s Exchanged 2011 Notes)
	(1)	 	(2)	 	(3)	 	(4)	 	(5)	 	(6)	 	(7)	 	(8)
	 
	CNH CA Master Account, L.P.

	 	c/o CNH Partners, LLC

2 Greenwich Plaza, 1st Floor

Greenwich, CT 06830

(203) 742-3004

(203) 742-3074 (fax)

earinsburg@cnhpartners.com
	 	 	5,000,000	 	 	367220AB6
	 	 	5,000,000	 	 	$	61,111.11	 	 	Katten Muchin Rosenman LLP

525 W. Monroe Street Chicago, IL 60661-3693

Attn: Mark Wood

p / (312) 902-5493 
f / (312) 577-8858
	 	Bear DTC 352

Acct: 102-32030

DB DTC 573

Acct: 106-02524
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	AQR Absolute Return Master Account, L.P.

	 	c/o AQR Capital Management, LLC

2 Greenwich Plaza, 1st Floor

Greenwich, CT 06830

(203) 742-3004

(203) 742-3074 (fax)

earinsburg@cnhpartners.com
	 	 	28,600,000	 	 	367220AB6
	 	 	28,600,000	 	 	$	349,555.56	 	 	Katten Muchin Rosenman LLP

525 W. Monroe Street Chicago, IL 60661-3693

Attn: Mark Wood

p / (312) 902-5493 
f / (312) 577-8858
	 	Bear DTC 352

Acct: 102-35834

DB DTC 573

Acct: 106-02544
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Sacramento Park LLC

	 	c/o QVT Associates GP LLC

1177 Avenue of the Americas, 9th Floor

New York, NY 10036

 Attn: Tracy Fu tracy.fu@qvt.com

212 705-8800

212 705-8820
	 	 	11,401,000	 	 	367220AB6
	 	 	11,401,000	 	 	$	139,345.56	 	 	c/o QVT Associates GP LLC 1177 Avenue of the Americas, 9th Floor

New York, NY 10036

Attn: Michael Gat legalnotices@qvt.com

212 705-8800

212 705-8820
	 	Duetsche Bank Securities Inc.

F/A/O: QVT Financial LP

60 Wall Street, 13th Floor

New York, NY 10005

Phn.: 212-250-2285 
Fax: 646-502-4363

Email: qvt_usteam@list.db.com

DBSI A/C# 106-95957

Tax ID # 13-2730828

DTC #573

Agent Bank # 94178

Institution # 94178

A-2

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Aggregate	 	 	 	 	 	 	 	 	 	 	 	 	 	Investor Broker Account Information
	 	 	 	 	Principal	 	 	 	Aggregate	 	 	 	 	 	 	 	(including Name, DTC Participant
	 	 	 	 	Amount of	 	CUSIP	 	Principal	 	 	 	 	 	Legal Representative’s	 	Number, and Address, Email Address,
	 	 	Address, Email Address,	 	Exchanged	 	Number of	 	Amount of	 	 	 	 	 	Address, Email Address,	 	Telephone and Facsimile Number of
	 	 	Telephone Number and	 	2011	 	Exchanged	 	2015	 	Interest	 	Telephone Number and	 	DTC Participant that holds the
	Investor	 	Facsimile Number	 	Notes	 	2011 Notes	 	Notes	 	Amount*	 	Facsimile Number	 	Investor’s Exchanged 2011 Notes)
	(1)	 	(2)	 	(3)	 	(4)	 	(5)	 	(6)	 	(7)	 	(8)
	QVT Associates II LP

	 	c/o QVT Associates GP LLC

1177 Avenue of the Americas, 9th Floor

New York, NY 10036

Attn: Tracy Fu tracy.fu@qvt.com

212 705-8800

212 705-8820
	 	 	2,214,000	 	 	367220AB6
	 	 	2,214,000	 	 	$	27,060.00	 	 	c/o QVT Associates GP LLC 1177 Avenue of the Americas, 9th Floor

New York, NY 10036

Attn: Michael Gat legalnotices@qvt.com 

212 705-8800

212 705-8820
	 	Duetsche Bank Securities Inc.

F/A/O: QVT Financial LP

60 Wall Street, 13th Floor

New York, NY 10005

Phn.: 212-250-2285 
Fax: 646-502-4363

Email: qvt_usteam@list.db.com

DBSI A/C# 106-95957

Tax ID # 13-2730828

DTC #573

Agent Bank # 94178

Institution # 94178
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Quintessence Associates LP

	 	c/o QVT Associates GP LLC

1177 Avenue of the Americas, 9th Floor

New York, NY 10036

Attn: Tracy Fu tracy.fu@qvt.com

212 705-8800

212 705-8820
	 	 	187,000	 	 	367220AB6
	 	 	187,000	 	 	$	2,285.56	 	 	c/o QVT Associates GP LLC 1177 Avenue of the Americas, 9th Floor

New York, NY 10036

Attn: Michael Gat legalnotices@qvt.com 

212 705-8800

212 705-8820
	 	Duetsche Bank Securities Inc.
F/A/O: QVT Financial LP
60 Wall Street, 13th Floor
New York, NY 10005

Phn.: 212-250-2285 
Fax: 646-502-4363
Email: qvt_usteam@list.db.com 

DBSI A/C# 106-95957

Tax ID # 13-2730828

DTC #573

Agent Bank # 94178

Institution # 94178

A-3

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Aggregate	 	 	 	 	 	 	 	 	 	 	 	 	 	Investor Broker Account Information
	 	 	 	 	Principal	 	 	 	Aggregate	 	 	 	 	 	 	 	(including Name, DTC Participant
	 	 	 	 	Amount of	 	CUSIP	 	Principal	 	 	 	 	 	Legal Representative’s	 	Number, and Address, Email Address,
	 	 	Address, Email Address,	 	Exchanged	 	Number of	 	Amount of	 	 	 	 	 	Address, Email Address,	 	Telephone and Facsimile Number of
	 	 	Telephone Number and	 	2011	 	Exchanged	 	2015	 	Interest	 	Telephone Number and	 	DTC Participant that holds the
	Investor	 	Facsimile Number	 	Notes	 	2011 Notes	 	Notes	 	Amount*	 	Facsimile Number	 	Investor’s Exchanged 2011 Notes)
	(1)	 	(2)	 	(3)	 	(4)	 	(5)	 	(6)	 	(7)	 	(8)
	Ball Corporation Master Pension Trust

	 	Navy Yard Corporate Center, Three Crescent Drive

Suite 400, Philadelphia, PA 19112, E-mail

lmashaw@penncapital.com phone 1-215-302-1538 and

fax 1-215-468-1498
	 	 	405,000	 	 	367220AB6
	 	 	405,000	 	 	$	4,950.00	 	 	Navy Yard Corporate Center, Three Crescent Drive Suite 400, Philadelphia,

PA 19112, j.livewell@penncapital.com, 
phone 1-215-302-1532 and 
fax
1-215-468-1498
	 	Mellon/ Boston Safe Deposit DTC#954, BNY Mellon

Center, AIM 151-0510, 500 Grant Street, Pittsburgh, PA

15258, E-mail TQ7ASGMailbox@bnymellon.com, 
phone
1-412-236-1243 and 
fax 1-412-690-8772
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Penn Distressed Fund, L.P.

	 	Navy Yard Corporate Center, Three Crescent Drive

Suite 400, Philadelphia, PA 19112, E-mail

lmashaw@penncapital.com phone 1-215-302-1538 and

fax 1-215-468-1498
	 	 	595,000	 	 	367220AB6
	 	 	595,000	 	 	$	7,272.22	 	 	Navy Yard Corporate Center, Three Crescent Drive Suite 400, Philadelphia,

PA 19112, j.livewell@penncapital.com, 
phone 1-215-302-1532 
and fax
1-215-468-1498
	 	Jefferies DTC#019, Silver Leaf Partners, 420 Lexington

Ave, Suite 2225, New York, NY 10170, E-mail

ops@silverleafpartners.com, 
phone 1-212-920-8381 and

fax 1-212-202-7534
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Capital Structure Opportunities Fund, L.P.

	 	Navy Yard Corporate Center, Three Crescent Drive

Suite 400, Philadelphia, PA 19112, E-mail

lmashaw@penncapital.com phone 1-215-302-1538 and
fax 1-215-468-1498
	 	 	325,000	 	 	367220AB6
	 	 	325,000	 	 	$	3,972.22	 	 	Navy Yard Corporate Center, Three Crescent Drive Suite 400, Philadelphia,

PA 19112, j.livewell@penncapital.com, phone 1-215-302-1532 and fax

1-215-468-1498
	 	Credit Suisse DTC#0355
Eleven Madison Avenue, 3rd Floor, New York,
NY 10010-3629 E-mail suzanne.nangle@credit
—suisse.com phone 1-212-325-3485 and 
fax
1-212-743-1375
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Oppenheimer Capital Structure Opportunities Master Fund, Ltd.

	 	Navy Yard Corporate Center, Three Crescent Drive

Suite 400, Philadelphia, PA 19112, E-mail

lmashaw@penncapital.com phone 1-215-302-1538 and
fax 1-215-468-1498
	 	 	555,000	 	 	367220AB6
	 	 	555,000	 	 	$	6,783.33	 	 	Navy Yard Corporate Center, Three Crescent Drive Suite 400, Philadelphia,

PA 19112, j.livewell@penncapital.com, phone 1-215-302-1532 
and fax
1-215-468-1498
	 	Morgan Stanley DTC#050, Morgan Stanley/Prime Brokerage,
1221 Ave of the Americas, 4th Floor, New
York, NY 10020, E-mail
Michael.arrington@morganstanley.com phone
1-212-762-7534 and fax 1-212-507-8810

A-4

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Aggregate	 	 	 	 	 	 	 	 	 	 	 	 	 	Investor Broker Account Information
	 	 	 	 	Principal	 	 	 	Aggregate	 	 	 	 	 	 	 	(including Name, DTC Participant
	 	 	 	 	Amount of	 	CUSIP	 	Principal	 	 	 	 	 	Legal Representative’s	 	Number, and Address, Email Address,
	 	 	Address, Email Address,	 	Exchanged	 	Number of	 	Amount of	 	 	 	 	 	Address, Email Address,	 	Telephone and Facsimile Number of
	 	 	Telephone Number and	 	2011	 	Exchanged	 	2015	 	Interest	 	Telephone Number and	 	DTC Participant that holds the
	Investor	 	Facsimile Number	 	Notes	 	2011 Notes	 	Notes	 	Amount*	 	Facsimile Number	 	Investor’s Exchanged 2011 Notes)
	(1)	 	(2)	 	(3)	 	(4)	 	(5)	 	(6)	 	(7)	 	(8)
	Kellogg Capital Markets LLC

	 	55 Broadway

New York NY 10006 

dpohl@kellogggroup.com 
T 212-607-5036 

F 212-308-5690
	 	 	1,000,000	 	 	367220AA8
	 	 	1,000,000	 	 	$	12,222.22	 	 	Nicholas Cappelleri

55 Broadway 4th Fl

New York, NY 10006

ncappelleri@kellogggroup.com
T 212-607-5061

F 212-380-5665
	 	DTC#501

Goldman Sachs Execution & Clearing

30 Hudson St

Jersey City NJ 07302

Attn:Gianina Arturo

gianina.arturo@gs.com

T 212-357-5986

F 212-256-4524

 

			
	*	 	Assuming Closing Date of June 25, 2010 (a per diem rate of 0.0153%).

			
	NOTE:	 	Column (1) Name of each Investor exchanging notes and executing an Exchange Agreement.
Columns (3) and (4) The exchanged 2011 Notes may be under two different CUSIPs. If exchanging
Notes under both CUSIPs, please list the amount being exchanged under each CUSIP on separate lines.

A-5

 

Exhibit B

Preferred C of D

The executed Preferred C of D is filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K
filed with the Securities and Exchange Commission on June 28, 2010

B-1

 

Exhibit C

Form of Exchanged Indenture

The executed Exchanged Indenture is filed as Exhibit 4.1 to the Company’s Current Report on Form
8-K filed with the Securities and Exchange Commission on June 28, 2010

C-1

 

Exhibit D

Investor Status

Sacramento Park LLC

Quintessence Associates LP

Ball Corporation Master Pension Trust

Penn Distressed Fund, L.P.

Capital Structure Opportunities Fund, L.P.

Oppenheimer Capital Structure Opportunities Master Fund, Ltd.

D-1

 

Exhibit E-1

FORM OF NOTICE OF NONRECOGNITION TRANSFER

NOTICE OF NONRECOGNITION TRANSFER

(A) This “Notice” constitutes a Notice of Nonrecognition Transfer pursuant to the requirements of
U.S. Treasury Regulation § 1.1445-2(d)(2).

(B) The following information concerns the transferor submitting this notice (the “Transferor”):

     Name:

     Office address:

     Taxpayer identification number:

(C) The Transferor is not required to recognize any gain or loss with respect to the transfer to
which this Notice pertains.

(D) The transfer to which this Notice pertains is the exchange of Gasco Energy Inc. 5.50%
convertible senior notes due 2011 for a like principal amount of Gasco Energy Inc. new 5.50%
convertible senior notes due 2015 (the “New Notes,” and such exchange the “Exchange”).

(E) No gain or loss is to be recognized because the Exchange is a recapitalization under section
368(a)(1)(E) of the Internal Revenue Code of 1986, as amended (the “Code”). Section 897(e)(1) of
the Code and Temp. Treas. Reg. § 1.897-6T provide, generally, that any nonrecognition provision
shall apply to a transfer by a foreign person of a U.S. real property interest on which gain is
realized only to the extent that the transferred U.S. real property interest is exchanged for a
U.S. real property interest which, immediately following the exchange, would be subject to U.S.
taxation upon its disposition (see also Temp. Treas. Reg. §1.897-5T(d)(1)), and the transferor
complies with the filing requirements of paragraph (d)(1)(iii) of §1.897-5T. The New Notes to be
received by the Transferor in the Exchange constitute a U.S. real property interest with respect to
which, immediately following the Exchange, the Transferor would be subject to U.S. taxation upon
their disposition. The Transferor will comply with the filing requirements of Temp. Treas. Reg.
§1.897-5T(d)(1)(iii).

Under penalties of perjury, I certify to the best of my knowledge and belief on behalf of the
Transferor that this Notice is true, correct and complete, and I further declare that I have
authority to sign this document on behalf of the Transferor.

			
	 
	Date:                                         
	 	 Name:                                         

E-1-1

 

Exhibit E-2

FORM OF CERTIFICATION OF NON-FOREIGN STATUS

CERTIFICATION OF NON-FOREIGN STATUS

(Entity Transferor)

     Section 1445 of the Internal Revenue Code provides that a transferee of a United States real
property interest must withhold tax if the transferor is a foreign person. For U.S. tax purposes
(including section 1445), the owner of a disregarded entity (which has legal title to a United
States real property interest under local law), and not the disregarded entity, is treated as the
transferor of the property. To inform the transferee that withholding of tax is not required upon
the disposition of a United States real property interest by                                          (the
“Transferor”), the undersigned hereby certifies the following on behalf of the Transferor:

     1. The Transferor is not a foreign corporation, foreign partnership, foreign trust, or foreign
estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations);

     2. The Transferor is not a disregarded entity as defined in Treas. Reg. § 1.1445-2(b)(2)(iii);

     3. The Transferor’s U.S. employer identification number is                     ; and

     4. The Transferor’s office address is:

                                                                      

                                                                      

                                                                      

     The Transferor understands that this certification may be disclosed to the Internal Revenue
Service by the transferee and that any false statement contained herein could be punished by fine,
imprisonment, or both.

     Under penalties of perjury I declare that I have examined this certification and to the best
of my knowledge and belief it is true, correct and complete, and I further declare that I have
authority to sign this document on behalf of the Transferor.

                                                                 

Signature

Printed Name:                                         

Title:                                                         

Date:                                                         

E-2-1

 

Exhibit E-3

FORM OF NON-USRPI STATUS

CERTIFICATION OF NON-USRPI STATUS

June      , 2010

     Section 1445 of the Internal Revenue Code provides that a transferee of a United States real
property interest must withhold tax if the transferor is a foreign person. In connection with the
Exchange Agreement, the undersigned hereby certifies the following on behalf of                                         
(the “Transferor”):

     1. The Transferor owns $                                         principal amount of Gasco Energy Inc. 5.50% Convertible
Senior Notes due 2011 (the “Old Notes”);

     2. The last date on which the Transferor acquired Old Notes was                      (the “Latest
Acquisition Date”);

     3. As of the Latest Acquisition Date, the fair market value of Old Notes owned by the
Transferor did not exceed $                                         [insert 5% of market cap of the class of stock to which
Old Notes were convertible, of the Company on the Latest Acquisition Date]; and

     4. As a result of the facts certified above, the Old Notes owned by Transferor do not
constitute “U.S. real property interests” within the meaning of section 897 of the Internal Revenue
Code.

     The Transferor understands that this certification may be disclosed to the Internal Revenue
Service by the transferee.

     Under penalties of perjury I declare that I have examined this certification and to the best
of my knowledge and belief it is true, correct and complete, and I further declare that I have
authority to sign this document on behalf of the Transferor.

	 	 	 	 	 
	 	[TRANSFEROR]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

E-3-1

 

	 	 	 	 	 

Exhibit F

FORM OF INVESTOR’S CERTIFICATE

INVESTOR’S CERTIFICATE

June      , 2010

     The undersigned, an authorized representative of                                                             , a                                         
(the “Investor”), pursuant to Section 3(c) of the Exchange Agreement, dated as of June 22, 2010
(the “Exchange Agreement”), by and between the Investor and Gasco Energy, Inc., a Nevada
Corporation (the “Company”), hereby represents, warrants and certifies to the Company as follows
(capitalized terms used but not otherwise defined herein shall have the meanings set forth in the
Exchange Agreement):

	 	1.	 	The representations and warranties of the Investor set forth in the Exchange
Agreement are true and correct in all respects as of the date when made and as of the
date hereof as though made on the date hereof (except for representations and
warranties that speak as of a specific date, which are true and correct as of such
specified date only).
	 
	 	2.	 	The Investor has performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by the Exchange Agreement and
the other Transaction Documents to be performed, satisfied or complied with by the
Investor at or prior to the date hereof.

[Signature Page Follows]

F-1

 

     IN WITNESS WHEREOF, the undersigned has executed this certificate as of the date first written
above.

	 	 	 	 	 
	 	 	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

F-2

 

Exhibit G

FORM OF SECRETARY’S CERTIFICATE

GASCO ENERGY, INC.

SECRETARY’S CERTIFICATE

June [•], 2010

     The undersigned hereby certifies that she is the duly elected, qualified and acting Corporate
Secretary of Gasco Energy, Inc., a Nevada corporation (the “Company”), and that, as such, she is
authorized to execute and deliver this certificate in the name of and on behalf of the Company
pursuant to Section 4(i) of each of the Exchange Agreements, each dated as of June 22, 2010 (the
“Exchange Agreements”), by and between the Company and the applicable investor listed on the
Schedule of Investors attached thereto (collectively, the “Investors”), and further certifies in
her official capacity, in the name of and on behalf of the Company, the items set forth below.
Capitalized terms used but not otherwise defined herein shall have the meanings set forth in each
of the Exchange Agreements.

	 	1.	 	Attached hereto as Exhibit A are true, correct and complete copies of
the resolutions duly adopted by the Board of Directors of the Company (the “Board”) at
meetings of the Board held on March 24, 2010, and pursuant to written consents of the
Board, or committees of the Board, dated June [•], 2010. Except as set forth therein,
such resolutions have not in any way been amended, modified, revoked or rescinded, have
been in full force and effect since their adoption to and including the date hereof and
are in full force and effect as of the date hereof.
	 
	 	2.	 	Attached hereto as Exhibit B is a true, correct and complete copy of
the Amended and Restated Articles of Incorporation of the Company, together with any
and all amendments thereto, including the Preferred C of D (collectively, the “Articles
of Incorporation”), and the Articles of Incorporation are in full force and effect as
of the date hereof.
	 
	 	3.	 	Attached hereto as Exhibit C is a true, correct and complete copy of
the Second Amended and Restated Bylaws of the Company dated April 8, 2009 (the
“Bylaws”). No action to amend, modify or repeal the Bylaws has been authorized or
approved by the Board or the stockholders of the Company, the Bylaws have not been
amended, modified or repealed since the date thereof, and the Bylaws are in full force
and effect as of the date hereof.
	 
	 	4.	 	Each person listed below has been duly elected or appointed to the position(s)
indicated opposite his name and is duly authorized to sign each of the Exchange
Agreements and each of the Transaction Documents on behalf of the Company, and the
signatures of such persons appearing below and on such documents are their genuine
signatures.

G-1

 

	 	 	 	 	 
	Name	 	Title	 	Signature
	 
	 	 	 	 
	W. King Grant

	 	President, Chief Financial Officer and Assistant Corporate Secretary	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Charles B. Crowell

	 	Director and Chief Executive Officer	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Camille Gerard

	 	Corporate Secretary	 	 
	 

	 	 	 	 

[Signature Page Follows]

G-2

 

     IN WITNESS WHEREOF, the undersigned has hereunto set her hand as of this _____ day of June,
2010.

	 	 	 	 	 
	 	 	 
	 	 	 
	 	Name:  	Camille Gerard 	 
	 	Title:  	Corporate Secretary 	 
	 

     I, W. King Grant, hereby certify that Camille Gerard is the duly elected, qualified and acting
Corporate Secretary and that the signature set forth above is her true signature.

	 	 	 	 	 
	 	 	 
	 	 	 
	 	Name:  	W. King Grant 	 
	 	Title:  	President and Chief Financial Officer 	 
	 

[Signature Page to Secretary’s Certificate]

G-3

 

Exhibit A

Resolutions Adopted by the Board of Directors of Gasco Energy, Inc.

[Exhibit A to Secretary’s Certificate]

G-4

 

Exhibit B

Amended and Restated Articles of Incorporation of Gasco Energy, Inc.

[Exhibit B to Secretary’s Certificate]

G-5

 

Exhibit C

Second Amended and Restated Bylaws of Gasco Energy, Inc.

[Exhibit C to Secretary’s Certificate]

G-6

 

Exhibit H

FORM OF OFFICER’S CERTIFICATE

GASCO ENERGY, INC.

OFFICER’S CERTIFICATE

June [•], 2010

     The undersigned, the President and Chief Financial Officer of Gasco Energy, Inc., a Nevada
corporation (the “Company”), pursuant to Section 4(j) of each of the Exchange Agreements, each
dated as of June 22, 2010, by and between the Company and the applicable investor party thereto
(collectively, the “Investors”) identified on the Schedule of Investors attached thereto
(collectively, the “Exchange Agreements”), hereby represents, warrants and certifies to each of the
Investors as follows (capitalized terms used but not otherwise defined herein shall have the
meanings set forth in each of the Exchange Agreements):

	 	1.	 	The representations and warranties of the Company set forth in the Exchange
Agreements are true and correct in all respects as of the date when made and as of the
date hereof as though made on the date hereof (except for representations and
warranties that speak as of a specific date, which are true and correct as of such
specified date only).
	 
	 	2.	 	The Company has performed, satisfied and complied in all material respects with
the covenants, agreements and conditions required by the Exchange Agreements and the
Transaction Documents to be performed, satisfied or complied with by the Company at or
prior to the date hereof.

[Signature Page Follows]

H-1

 

     IN WITNESS WHEREOF, the undersigned has executed this certificate as of the date first written
above.

	 	 	 	 	 
	 	GASCO ENERGY, INC

 	 
	 	By:  	 	 
	 	 	Name:  	W. King Grant 	 
	 	 	Title:  	President and Chief Financial Officer 	 

H-2

 

	 	 	 	 	 

Schedule 2(c)(vi)

Subsidiaries

	 	 	 	 	 	 	 
	 	 	Jurisdiction of	 	% Capital Stock Owned by
	Name	 	Formation	 	the Company
	Gasco Production Company

	 	Delaware
	 	 	100	%
	Myton Oilfield Rentals, LLC

	 	Nevada
	 	 	100	%
	Riverbend Gas Gathering, LLC

	 	Nevada
	 	 	100	%

Schedule 2(c)(vi)-1

 

Schedule 2(c)(xxvi)

Outstanding Indebtedness; Liens

	1.	 	Indebtedness incurred to finance insurance premiums, as follows:

	 	a.	 	Flatiron Capital corporate property insurance policy

Schedule 2(c)(xxvi)-1

 

Schedule I

Form of Confidentiality Agreement

Confidentiality Agreement

[•], 201[•]

Gasco Energy, Inc.

8 Inverness Drive East

Suite 100

Englewood, Co 80112

Ladies and Gentlemen:

     Pursuant to Section 2(c)(xlvii) of that certain Exchange Agreement, dated as of June [•],
2010, by and between Gasco Energy, Inc. (the “Company”) and you (“RECIPIENT”),
RECIPIENT previously received an initial written notice from the Company regarding a potential
Subsequent Placement (as such term is defined in the Exchange Agreement) by the Company, and, in
response thereto, RECIPIENT expressed an interest in participating in such Subsequent Placement. In
furtherance of RECIPIENT’S analysis of the Subsequent Placement, RECIPIENT understands that the
Company is prepared to make available to RECIPIENT certain material non-public, confidential
information, documents and other materials relating directly to the Subsequent Placement to the
Subsequent Placement, including information as to the proposed terms and conditions, timing and
status thereof (the information, documents and other materials directly relating to the Subsequent
Private Placement so provided to RECIPIENT, together with any notes, analyses or studies prepared
by RECIPIENT that incorporate such information, and information relating to the fact that the
Company is contemplating the Subsequent Placement, the “Evaluation Material”).

     RECIPIENT agrees to accept such Evaluation Material and further agrees that RECIPIENT will use
the Evaluation Material solely for evaluating the Subsequent Placement and that the Evaluation
Material will be kept confidential by RECIPIENT; provided, however, that any Evaluation Material
which (a) was independently developed by RECIPIENT without any reference to the Evaluation Material
or (b) was in RECIPIENT’s possession prior to the date of this Agreement (other than information
relating to the Subsequent Placement) or (c) is or becomes part of the public domain through no
breach by RECIPIENT of this Agreement, shall not be subject to the restrictions contained in this
Agreement. RECIPIENT may disclose any Evaluation Materials (i) only to those of its directors,
officers, employees, agents or advisors who need to know such information for purposes of
evaluating and considering participation in the Subsequent Placement (“Representatives”),
it being understood that they shall be informed by RECIPIENT of the confidential nature of such
Evaluation Material and that RECIPIENT shall obtain assurances from them that they will keep such
Evaluation Material confidential to

Schedule I-1

 

the same extent as described herein; and (ii) to the extent required by law or requested by any
governmental agency or regulator having jurisdiction over RECIPIENT or to defend or prosecute a
claim brought against or by RECIPIENT. RECIPIENT shall be responsible for any breach of this
Agreement by its Representatives.

     Without the prior written consent of the Company, RECIPIENT shall not, and shall cause its
Representatives not to, disclose to any person, unless permitted to do so by Company, (i) the fact
that Evaluation Material has been made available to RECIPIENT and its Representatives, (ii) the
fact that any discussions or negotiations are taking place concerning the Subsequent Placement,
(iii) any of the proposed terms, proposed conditions or other facts with respect to the Subsequent
Placement, including the status thereof or (iv) the existence, terms or conditions of this
Agreement. Notwithstanding anything to the contrary contained in this paragraph, RECIPIENT may
make such disclosures if it is advised by counsel that such disclosure is required under applicable
law or the rules of any national securities exchange; provided that prior to making any such
disclosure, RECIPIENT shall use reasonable efforts to consult with the Company to provide the
Company with the opportunity to review and comment upon the form and content of such disclosure.

     In the event that RECIPIENT or any of its Representatives is requested or required by law to
disclose any of the Evaluation Material, it is agreed that to the extent permitted by law RECIPIENT
and any such Representative will provide the Company with prompt notice of such event so that the
Company may seek a protective order or other appropriate remedy or waive compliance with the
applicable provisions of this Agreement by RECIPIENT or such Representative. In the event the
Company determines to seek such protective order or other remedy, at the Company’s sole cost and
expense, RECIPIENT and any such Representative will use reasonable efforts to cooperate with the
Company in seeking such protective order or other remedy. In the event that such protective order
or other remedy is not obtained and disclosure of Evaluation Material is required, or the Company
grants a waiver hereunder, RECIPIENT or such Representative as the case may be, (i) may, without
liability hereunder, furnish that portion (and only that portion) of the Evaluation Material which,
in the opinion of counsel to RECIPIENT or such Representative, as the case may be, it is legally
required to disclose and (ii) will use reasonable efforts to have confidential treatment accorded
any Evaluation Material so furnished.

     RECIPIENT understands and hereby acknowledges that it is aware (and that its Representatives
who are apprised of this Agreement, the Subsequent Placement or the Evaluation Materials have been
or will be advised by the RECIPIENT) that the United States securities laws impose restrictions on
the purchase and sale of securities of the Company by persons who possess certain material
nonpublic information relating to the Company and on such persons’ communicating such information
to other persons under circumstances in which it is reasonably foreseeable that such other persons
are likely to purchase or sell such securities.

     Upon the Company’s written request, all copies of the Evaluation Material (except for that
portion of the Evaluation Material that consists of notes, analyses or studies prepared by
RECIPIENT or its Representatives) will be promptly destroyed or returned to the Company at the
Company’s request, and that portion of the Evaluation Material consisting of notes, analyses or
studies prepared by RECIPIENT or its Representatives may either be destroyed by

Schedule I-2

 

RECIPIENT, such destruction to be confirmed to the Company in writing upon written request, or
retained subject to the terms of this Agreement. Notwithstanding the foregoing, RECIPIENT may keep
a reasonable number of archived copies of any Evaluation Material and related information only as
may be necessary for legal/regulatory purposes which will be held in confidence in a manner
consistent with the terms of this Agreement.

     RECIPIENT acknowledges that all proprietary and intellectual property rights in and to the
Evaluation Material shall remain the sole property of the Company, and nothing in this Agreement
shall be construed in any way to grant to the RECIPIENT or to any of its Representative any express
or implied option, license or other right, title or interest in or to any Evaluation Material, or
to any intellectual property rights embodied in such Evaluation Material.

     RECIPIENT understands and acknowledges that neither the Company nor any of its representatives
or affiliates makes any representation or warranty, express or implied, that the Subsequent
Placement will be entered into or consummated on the terms and conditions set forth in the
Evaluation Material (other than definitive documentation with respect to the Subsequent Placement),
if at all. Neither the Company nor any of its affiliates shall have any liability to RECIPIENT or
any other person, including, without limitation, RECIPIENT’s Representatives, resulting from the
use of, or reliance on, Evaluation Material by RECIPIENT or any of its Representatives except to
the extent provided in the Exchange Agreement or in the definitive documentation for the Subsequent
Placement.

     The Company hereby covenants and agrees to promptly notify RECIPIENT (and if the Subsequent
Private Placement has previously been publicly disclosed, to make prompt public disclosure) of any
suspension, abandonment or termination of the Subsequent Private Placement or the Company’s
consideration thereof, and to make prompt public disclosure of the Company’s entry into a
definitive agreement with respect to, or consummation of, the Subsequent Private Placement or
similar transaction.

     It is understood and agreed that no failure or delay by the Company in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise of any other right,
power or privilege hereunder. RECIPIENT agrees that money damages would not be a sufficient remedy
for any breach of this Agreement by RECIPIENT or its Representatives and that in addition to all
other remedies the Company shall be entitled to seek equitable relief, including injunction, for
any breach of the provisions of this Agreement.

     As of the date hereof, this Agreement and the Exchange Agreement embody the entire
understanding and agreement between the parties with respect to the Evaluation Material and
supersede any prior understandings and agreements relating thereto.

     If any term or provision of this Agreement or any application hereof shall be invalid and
unenforceable, the remainder of this Agreement and any other application of such term or provision
shall not be affected thereby.

Schedule I-3

 

     This Agreement may be modified or waived only by an instrument signed by each the Company and
RECIPIENT. This Agreement may not be assigned by any party hereto without the express prior
written consent of the other party hereto.

     This Agreement shall expire on the date which is six months from the date of this Agreement.

     This Agreement shall be governed by and construed in accordance with the laws of the State of
New York, without giving effect to its conflicts of laws principles or rules.

[signature page follows]

Schedule I-4

 

	 	 	 	 	 
	 	Very truly yours,

[•], as the RECIPIENT,

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

Accepted and agreed as of

the date first written above:

	 	 	 	 	 
	Gasco Energy, Inc.

 	 	 
	By:  	 	 	 
	 	Name:  	 	 	 
	 	Title:  	 	 	 
	 

Signature Page to Confidentiality Agreement

Schedule I-5

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