SUBSIDIARY GUARANTY AGREEMENT
THIS SUBSIDIARY GUARANTY AGREEMENT (this "Subsidiary Guaranty"), dated
as of October 15, 2003, is made by San ▇▇▇▇▇▇▇ Oil & Gas, Ltd., a Nevada
corporation (the "Guarantor") to the Lenders (as set forth in Exhibit A hereto)
under the Debentures (as defined herein) (collectively referred to as the
"Lender") and to ▇▇▇▇ Capital Group, Inc., as the Agent for the Lenders (the
"Agent"). Capitalized terms used but not otherwise defined herein shall have the
meanings ascribed to them in the Loan Agreement (as hereinafter defined)
W I T N E S S E T H:
WHEREAS, Gasco Energy, Inc., a Nevada corporation (the "Company"), and
the Lender have entered into that certain Convertible Loan Agreement dated as of
October 15, 2003 (as from time to time amended, supplemented or otherwise
modified, the "Loan Agreement"); and
WHEREAS, the Guarantor is a wholly-owned subsidiary of the Company and
will benefit from the availability of credit to the Company under the terms and
conditions of the Loan Agreement and the Debentures.
NOW, THEREFORE, to induce the Lender to execute and deliver the Loan
Agreement and perform their obligations thereunder, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. GUARANTY. The Guarantor hereby unconditionally, absolutely, continually and
irrevocably guarantees to the Lender the payment and performance in full of the
Liabilities (as defined below). For all purposes of this Subsidiary Guaranty,
"Liabilities" means:
(a) the Company's prompt payment in full, when due or declared due and at
all such times, of all Obligations and all other amounts, heretofore,
now or at any time or times hereafter owing, arising, due or payable,
whether direct or contingent, joint, several or independent of the
Company to the Lender, including without limitation principal,
interest, premium or fee (including, but not limited to, attorneys'
fees and expenses); and
(b) the Company's prompt, full and faithful performance, observance and
discharge of each and every agreement, undertaking, covenant and
provision to be performed, observed or discharged by the Company under
any instrument, agreement or other document with or in favor of the
Lender.
The Guarantor's obligations to the Lender under this Subsidiary
Guaranty are hereinafter collectively referred to as the "Guarantee
Obligations." The Guarantor agrees that it is directly and primarily liable for
the Guarantee Obligations and that there are no conditions whatsoever to the
effectiveness of this Subsidiary Guaranty or to its obligations to perform the
Guarantee Obligations.
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2. PAYMENT. If the Company shall default in payment or performance of any
Liabilities, whether principal, interest, premium, fee (including, but not
limited to, attorneys' fees and expenses), or otherwise, when and as the same
shall become due, whether according to the terms of the Debentures, the Loan
Agreement or the Loan Documents by acceleration, or otherwise, or upon the
occurrence of any other Event of Default (as defined in the Loan Agreement)
under the Loan Agreement or the Debentures that has not been cured or waived,
then the Guarantor, upon demand thereof by the Lender or its successors or
assigns, will, within three (3) business days of such demand, fully pay to the
Lender an amount equal to all Guarantor's Obligations then due and owing.
3. UNCONDITIONAL OBLIGATIONS. This is a guaranty of payment and not of
collection. The Guarantor's Obligations under this Subsidiary Guaranty shall be
absolute and unconditional irrespective of the validity, legality or
enforceability of the Debentures, and shall not be affected by any action taken
under the Debentures or any other agreement between the Lender and the Company
or any other person, in the exercise of any right or power therein conferred, or
by any failure or omission to enforce any right conferred thereby, or by any
waiver of any covenant or condition therein provided, or by any acceleration of
the maturity of any of the Liabilities, or any transfer or disposition of any
assets of the Company or by any extension or renewal of the Debentures, in whole
or in part, or by any modification, alteration, amendment or addition of or to
the Debentures, or any other agreement between the Lender and the Company or any
other person, or by any other circumstance whatsoever (with or without notice to
or knowledge of the Guarantor) which may or might in any manner or to any extent
vary the risks of the Guarantor, or might otherwise constitute a legal or
equitable discharge of a surety or guarantor; it being the purpose and intent of
the parties hereto that this Subsidiary Guaranty and the Guarantor's Obligations
hereunder shall be absolute and unconditional under any and all circumstances
and shall not be discharged except by payment as herein provided. This
Subsidiary Guaranty shall continue in full force and effect and Lender may
continue to act in reliance thereon notwithstanding the termination or
revocation of any other guaranty of Liability, the death, disability,
incompetence or incapacity of the Guarantor, and shall be binding upon Guarantor
and Guarantor's estate and the personal representatives, heirs and successors
and assigns of Guarantor, who shall, nevertheless, remain liable with respect to
Obligations and any renewals or extensions thereof or liabilities arising out of
same, and the Lender shall have all the rights herein provided for as if no such
event has occurred.
4. CURRENCY AND FUNDS OF PAYMENT. The Guarantor hereby guarantees that the
Guarantor's Obligations will be paid in lawful currency of the United States of
America and in immediately available funds, regardless of any law, regulation or
decree now or hereafter in effect that might in any manner affect the
Liabilities, or the rights of the Lender with respect thereto as against the
Company, or cause or permit to be invoked any alteration in the time, amount or
manner of payment by the Company of any or all of the Company's Liabilities.
5. EVENTS OF DEFAULT. In the event that
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(a) the Guarantor shall file a petition to take advantage of any
insolvency statute,
(b) the Guarantor shall commence or suffer to exist a proceeding for the
appointment of a receiver, trustee, liquidator or conservator of all
of or substantially all of its property;
(c) the Guarantor shall file a petition or answer seeking reorganization
or arrangement or similar relief under the Federal bankruptcy laws or
any other applicable law or statute of the United States of America or
any state or similar law of any other country;
(d) a court of competent jurisdiction shall enter an order, judgment or
decree appointing a custodian, receiver, trustee, liquidator or
conservator of the Guarantor of all or substantially all of its
properties, or approve a petition filed against the Guarantor seeking
reorganization or arrangement or similar relief under the Federal
bankruptcy laws or any other applicable law or statute of the United
States of America or any state or similar law of any other country, or
if, under the provisions of any other law for the relief or aid of
debtors, a court of competent jurisdiction shall assume custody or
control of the Guarantor of all or substantially all of its properties
and such order, judgment, decree, approval or assumption remains
unstayed or undismissed for a period of thirty (30) days;
(e) there is commenced against the Guarantor any proceeding or petition
seeking reorganization, arrangement or similar relief under the
Federal bankruptcy laws or any other applicable law or statute of the
United States of America or any state, which proceeding or petition
remains unstayed or undismissed for a period of thirty (30) days;
(f) the Company or the Guarantor shall fail to perform any agreement
herein or contained in the Loan Documents, including but not limited
to the Mortgages, and such failure remains uncured or unwaived for a
period of thirty (30) days;
(g) a default occurs in the punctual payment of any sum payable upon any
of the Guarantee Obligations or the Liabilities;
(h) entry of a judgment or issuance of a warrant of attachment or an
injunction against, or against any of the property of the Guarantor;
(i) there shall occur an Event of Default under the Debentures, the Loan
Agreement, or any Loan Document;
(j) any default shall occur in the payment of amounts due hereunder; or
(k) any other default shall occur hereunder which remains uncured or
unwaived for a period of thirty (30) days (each of the foregoing an
"Event of Default" hereunder); then at the Lender's election and
without notice thereof or demand therefor, so long as such Event of
Default shall be continuing, the Guarantee Obligations shall
immediately become due and payable.
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6. SUITS. The Guarantor from time to time shall pay to Lender, within three (3)
business days of demand by the Lender therefor, at the Lender's place of
business set forth in the Debentures, the Guarantee Obligations as they become
or are declared due, and in the event such payment is not so made, the Lender
may proceed to suit against the Guarantor. At the Lender's election, one or more
and successive or concurrent suits may be brought hereon by the Lender against
the Guarantor, whether or not suit has been commenced against the Company, and
whether or not the Lender has taken or failed to take any other action to
collect all or any portion of the Liabilities.
7. SET-OFF AND WAIVER. The Guarantor waives any right to assert against the
Lender as a defense, counterclaim, set-off or cross claim, any defense (legal or
equitable) or other claim which such Guarantor may now or at any time hereafter
have against the Company or the Lender. If at any time hereafter the Lender
employs counsel for advice or other representation to enforce the Guarantee
Obligations that arise out of an Event of Default, then, in any of the foregoing
events, all of the attorneys' fees and disbursements arising from such services
and all expenses, costs and charges in any way or respect arising in connection
therewith or relating thereto shall be paid by the Guarantor to the Lender, on
demand.
8. WAIVER; SUBROGATION.
(a) The Guarantor hereby waives notice of the following events or
occurrences:
(i) the Lender's acceptance of this Subsidiary Guaranty;
(ii) the Lender heretofore, now or from time to time hereafter
loaning monies or giving or extending credit to or for the benefit of
the Company, whether pursuant to the Debentures or any amendments,
modifications, or supplements thereto, or replacements or extensions
thereof;
(iii) the Lender or the Company heretofore, now or at any time
hereafter, obtaining, amending, substituting for, releasing, waiving
or modifying the Debentures, the Loan Agreement or the Loan Documents;
(iv) presentment, demand, notices of default, non-payment,
partial payment, notice of dishonor, suit, protest or taking other
action by the Lender;
(v) the Lender heretofore, now or at any time hereafter granting
to the Company (or any other party liable to the Lender on account of
the Liabilities) any indulgence or extensions of time of payment of
the Liabilities;
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(vi) any agreement among any of holders of the Debentures
relating to this Subsidiary Guarantee or any other matter; and
(vi) the Lender heretofore, now or at any time hereafter
accepting from the Company or any other person, any partial payment or
payments on account of the Liabilities or any collateral securing the
payment thereof or the Lender settling, subordinating, compromising,
discharging or releasing the same.
The Guarantor agrees that the Lender may heretofore, now or at any time
hereafter do any or all of the foregoing in such manner, upon such terms
and at such times as the Lender, in its sole and absolute discretion, deems
advisable, without in any way or respect impairing, affecting, reducing or
releasing such Guarantor from the Guarantee Obligations, and the Guarantor
hereby consents to each and all of the foregoing events or occurrences.
(b) The Guarantor hereby agrees that payment or performance by such
Guarantor of the Guarantee Obligations under this Subsidiary Guaranty may
be enforced by the Lender upon demand by the Lender to such Guarantor
without the Lender being required, the Guarantor expressly waiving any
right it may have to require the Lender, to prosecute collection or seek to
enforce or resort to any remedies against the Company, IT BEING EXPRESSLY
UNDERSTOOD, ACKNOWLEDGED AND AGREED TO BY THE GUARANTOR THAT DEMAND UNDER
THIS SUBSIDIARY GUARANTY MAY BE MADE BY THE LENDER, AND THE PROVISIONS
HEREOF ENFORCED BY THE LENDER, EFFECTIVE AS OF THE FIRST DATE ANY EVENT OF
DEFAULT OCCURS AND IS CONTINUING UNDER THE DEBENTURES. The Guarantee
Obligations shall in no way be impaired, affected, reduced, or released by
reason of the Lender's failure or delay to do, take or enforce any of the
acts, actions or things described in this Subsidiary Guaranty including,
without limiting the generality of the foregoing, those acts, actions and
things described in this Section 8.
(c) The Guarantor further agrees with respect to this Subsidiary
Guaranty that such Guarantor shall have no right of subrogation,
reimbursement or indemnity until such time as all of the Liabilities have
been fully, finally and indefeasibly paid in full.
9. EFFECTIVENESS; ENFORCEABILITY. This Subsidiary Guaranty shall be effective as
of the date hereof, and shall continue in full force and effect until the
Liabilities have been fully, finally and indefeasibly paid in full. This
Subsidiary Guaranty shall be binding upon and inure to the benefit of the
Guarantor and the Lender and their respective successors and assigns.
Notwithstanding the foregoing, Guarantor may not, without the prior written
consent of the Lender, assign any rights, powers, duties or obligations
hereunder. Any claim or claims that the Lender may at any time hereafter have
against the Guarantor under this Subsidiary Guaranty may be asserted by the
Lender by written notice directed to the Guarantor at the address specified
herein.
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10. AGENT FOR LENDER. Guarantor recognizes and agrees that pursuant to Section
11.03 of the Loan Agreement, Lender has designated and appointed Agent as agent
for Lender under the Loan Agreement and under this Subsidiary Guaranty with full
power to act for and on behalf of Lender, and each of them, and to exercise all
of the rights and privileges of Lender, and each of them, under this Subsidiary
Guaranty and under each of the Loan Agreements. Guarantor has reviewed the
provisions of the Loan Agreement and each of the Loan Documents, including, but
not limited to the provisions of Section 11.03 of the Loan Agreement and agrees
that any notice from or agreement of Agent taken in the capacity as the agent of
Lender, shall be binding upon and constitute the act of the Lender, or any of
them and that in acting as agent of Lender, Agent has not assumed nor shall
there be implied any obligation toward or relationship of agency or trust with
Guarantor or the Company or any of their respective affiliates. In exercising
any rights or engaging in any transaction contemplated hereunder, Agent shall
not be obligated to provide Guarantor with evidence of its authority to act as
the agent of Lender, or any of them, unless Lender, acting on its own behalf,
shall have previously provided Guarantor with evidence that acting in accordance
with its rights, Lender, or any of them, have revoked Agent's agency capacity
with regard to its affairs.
11. REPRESENTATIONS AND WARRANTIES. The Guarantor hereby makes the following
representations and warranties to the Lender:
(a) the Guarantor is duly authorized to execute, deliver and perform this
Subsidiary Guaranty;
(b) this Subsidiary Guaranty is legal, valid, binding and enforceable
against such Guarantor in accordance with its terms except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles;
(c) such Guarantor's execution, delivery and performance of this
Subsidiary Guaranty does not violate or constitute a breach of any
agreement to which such Guarantor is a party, or any applicable laws;
(d) Guarantor makes each of the representations and warranties contained
in Article III of the Loan Agreement as if set forth in their entirety
herein with respect and reference to the Guarantor and this Subsidiary
Guaranty; and
(e) no representation or warranty made by the Guarantor in this Subsidiary
Guaranty, the Loan Agreement or any Transaction Document nor in any
document, written information, financial statement, certificate,
schedule or exhibit prepared and furnished or to be prepared and
furnished by Guarantor in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of
a material fact, or omits or will omit to state a material fact
necessary to make the statements or facts contained herein or therein
not misleading in light of the circumstances under which they were
furnished.
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12. NEGATIVE COVENANTS. The Guarantor agrees that until the Debentures, together
with interest and all other Obligations of the Company or the Guarantor to the
Lender (whether under the Loan Agreement, the Loan Documents, or otherwise) are
paid in full, the Guarantor shall not, without the prior written consent of the
Lender:
(a) Create, incur, assume or suffer to exist any lien upon or defect
in title to or restriction upon the use of any of the property or assets of
the Guarantor of any character, whether owned at the date hereof or
hereafter acquired, or hold or acquire any property or assets of any
character under conditional sales, finance lease or other title retention
agreements, except for Permitted Liens and liens in favor of the Lender.
(b) Create, incur, assume or suffer to exist, contingently or
otherwise, any indebtedness, except for Permitted Indebtedness and
indebtedness to the Lender.
(c) Make or have any Investments not permitted by Section 6.03 of the
Loan Agreement.
(d) Make any prepayment of indebtedness that is prohibited by the Loan
Agreement.
(e) Enter into any agreement which prohibits or limits the ability of
the Guarantor to create, incur, assume or suffer to exist any lien, upon
any of its property, assets or revenues, whether now owned or hereafter
acquired.
(f) Change the address of its principal place of business without
giving 30 days' prior written notice to the Lender.
13. AFFIRMATIVE COVENANTS. The Guarantor covenants and agrees that, until the
Debentures together with interest and all other Liabilities of the Company and
the Obligations of the Guarantor to the Lender under the Loan Agreement, the
Debentures and the Loan Documents are otherwise paid in full:
(a) Comply with all statutes and governmental regulations if
noncompliance therewith would have a Material Adverse Effect on the
Guarantor and pay all taxes, assessments, governmental charges, claims for
labor, supplies, rent and any other obligation which, if unpaid, might
become a lien against any of its properties, except any of the foregoing
being contested in good faith by appropriate proceedings diligently
conducted and against which adequate reserves have been established;
(b) It will allow any representative of the Lender to visit and
inspect the books of account and other records and files of the Guarantor,
to make copies thereof and to discuss the affairs, business, finances and
accounts of the Company and the Guarantor with its employees, all during
normal business hours and as often as the Lender may reasonably request;
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(c) It will duly comply with all the terms and covenants contained
herein and in each of the instruments and documents given to the Lender in
connection with or pursuant to this Subsidiary Guaranty, the Loan
Agreement, the Debentures and the other Loan Documents, all at the times
and places and in the manner set forth herein or therein;
(d) It will keep all properties of the Guarantor, whether real,
personal or mixed, free and clear of all liens, other than the Permitted
Liens and liens created by the Loan Documents.;
(e)
(i) It will keep all of its insurable properties adequately
insured at all times with responsible insurance carriers against loss
or damage by fire and other hazards as are customarily insured against
by similar businesses owning such properties similarly situated and
(ii) maintain general public liability insurance at all times
with responsible insurance carriers against liability on account of
damage to persons and property such insurance policies to be in form
reasonably satisfactory to the Lender;
(f) It will keep or cause to be kept, true books of record and account
in which full, true an correct entries shall be made of all of its dealings
and transactions in accordance with customary business practices; and
(f) Upon the Guarantor obtaining knowledge of any litigation or other
proceedings being instituted against the Guarantor, any of the Company or
any subsidiary of the Company, or any attachment, levy, execution or other
process being instituted against any assets of the Guarantor or the Company
or any subsidiary, in an aggregate amount in respect of all such
proceedings and processes greater than $50,000 not otherwise covered by
insurance, it will promptly deliver to the Lender written notice thereof
stating the nature and status of such litigation, dispute, proceeding,
levy, execution or other process.
14. EXPENSES. The Guarantor agrees to be liable for the payment of all fees and
expenses, including attorney's fees and expenses, incurred by the Lender in
connection with the enforcement of this Subsidiary Guaranty.
15. REINSTATEMENT. The Guarantor agrees that this Subsidiary Guaranty shall
continue to be effective or be reinstated, as the case may be, at any time
payment received by the Lender under the Debentures or this Subsidiary Guaranty
is rescinded or must be restored for any reason. The execution and delivery
hereafter to Lender by Guarantor of a new instrument of guaranty shall not
terminate, supersede or cancel this instrument, unless expressly provided
therein, and all rights and remedies of Lender hereunder or under any instrument
of guaranty hereafter executed and delivered to Lender by Guarantor shall be
cumulative and may be exercised singly or concurrently.
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16. COUNTERPARTS. This Subsidiary Guaranty may be executed in any number of
counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall constitute one and
the same instrument.
17. RELIANCE. The Guarantor represents and warrants to Lender that:
(a) such Guarantor has adequate means to obtain from the Company, on a
continuing basis, information concerning the Company's financial
condition and affairs and has full and complete access to Company's
books and records;
(b) such Guarantor is not relying on the Lender, its agents or other
representatives, to provide such information, now or in the future;
(c) such Guarantor is executing this Subsidiary Guaranty freely and
deliberately, and understands the obligations and financial risk
undertaken by providing this Subsidiary Guaranty;
(d) such Guarantor has relied solely on the Guarantor's own independent
investigation, appraisal and analysis of the Company's financial
condition and affairs in deciding to provide this Subsidiary Guaranty
and is fully aware of the same; and
(e) such Guarantor has not depended or relied on the Lender, its agents or
other representatives, for any information whatsoever concerning the
Company's financial condition and affairs or other matters material to
such Guarantor's decision to provide this Subsidiary Guaranty or for
any counseling, guidance, or special consideration or any promise
therefor with respect to such decision. The Guarantor agrees that the
Lender has no duty or responsibility whatsoever, now or in the future,
to provide to the Guarantor any information concerning the Company's
financial condition and affairs, other than as expressly provided
herein, and that, if such Guarantor receives any such information from
the Lender, its agents or other representatives, such Guarantor will
independently verify the information and will not rely on the Lender,
its agents or other representatives, with respect to such information.
18. COMPLETE AGREEMENT. This Subsidiary Guaranty and the other Loan Documents
embody the whole agreement of the parties with respect to the subject matter in
the Loan Documents and may not be modified unless in writing and signed by
Lender and no course of dealing between Guarantor and Lender shall be effective
to change or modify or to discharge in whole or in part this Subsidiary
Guaranty. No Waiver of any right or power of Lender or consent by it shall be
valid unless in writing signed by an authorized officer.
19. TERMINATION. This Subsidiary Guaranty and all obligations of the Guarantor
hereunder shall terminate without delivery of any instrument or performance of
any act by any party on the date when all of the Liabilities have been fully,
finally and indefeasibly paid in full.
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20. GOVERNING LAW. THIS SUBSIDIARY GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACTS
EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.
21. NOTICES. Any notice hereunder shall be in writing, and shall be delivered by
overnight courier service or by certified mail, postage prepaid, return receipt
requested, addressed as follows: If to the Guarantor:
Pannonian Energy, Inc.14 ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy simultaneously transmitted by like means to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
2300First City Tower
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (713)-758 -2158
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Lender, to all of the addresses set forth under the
Lenders' names on the execution page to the Loan Agreement, with a copy, which
shall not constitute notice, simultaneously transmitted by like means to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇.▇.▇. Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Notices sent by overnight courier service shall be deemed delivered on the next
business day, and notices sent by certified mail, postage prepaid, return
receipt requested, shall be deemed delivered two business days after the date of
mailing thereof.
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IN WITNESS WHEREOF, the parties have duly executed this Subsidiary
Guaranty on the day and year first written above.
GUARANTOR:
SAN ▇▇▇▇▇▇▇ OIL & GAS, LTD.
By:________________________________
Name:
Title:
LENDER:
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
By:__________________________________________
Name:
Title:
BFSUS SPECIAL OPPORTUNITIES TRUST PLC
By:__________________________________________
Name:
Title:
RENAISSANCE US GROWTH & INCOME TRUST PLC
By: __________________________________________
Name:
Title:
AGENT:
▇▇▇▇ CAPITAL GROUP, INC.
By:__________________________________________
Name:
Title:
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