SECOND AMENDMENT TO 8% SENIOR SECURED CONVERTIBLE DEBENTURE

This Amendment (“Amendment”), made as of March 19, 2012, by and between Recovery Energy, Inc., a Nevada corporation (the “Company”), and each holder identified on the signature page hereto (the “Holders”), amends those certain 8% Senior Secured Convertible Debentures due February 8, 2014 of the Company, as previously amended December 16, 2011  (“Debentures”).  Terms not otherwise defined herein shall have the meanings ascribed to such terms in the Purchase Agreement (as defined below).

WHEREAS, the Debentures were issued in connection with the Securities Purchase Agreement, dated as of February 2, 2011, between the Company and the Holders (the “Purchase Agreement”);

WHEREAS, the Debentures were amended pursuant to that certain Amendment to 8% Senior Secured Convertible Debenture, dated as of December 16, 2011 (the “First Amendment”);

WHEREAS, the Debentures are secured by certain assets of the Company as set forth in the Debentures, as amended by the First Amendment (the “Original Collateral”);

WHEREAS, the Company wishes to add the property described in Exhibit A hereto as additional collateral to secure the Debentures (the “Additional Collateral” and together with the Original Collateral, the “Collateral”);

WHEREAS, the Company wishes to issue additional Debentures, secured by both the Collateral and a first priority lien in wells (the “Wells”) and all Collateral located within the  spacing unit designated by the state authorities for the applicable Well  (the “Well Liens”), to certain of the Holders or their affiliates (the “New Holders”) in exchange for additional cash consideration (the “New Offering”), pursuant to that certain 8% Senior Secured Convertible Debenture (the “New Debentures”) and that certain Securities Purchase Agreement (the “New Purchase Agreement”) substantially in the forms attached hereto as Exhibits B and C respectively;

WHEREAS, pursuant to Section 5.5 of the Purchase Agreement, waiver or amendment of any provision in the Purchase Agreement requires a written instrument signed by the Company and Holders holding at least 51% in interest of the Debentures then outstanding or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought; and

WHEREAS, pursuant to Section 7(a) of the Debentures, the Company is prohibited from entering into, creating, incurring, assuming or suffering to exist any lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction on the property securing the Debentures unless the holders of at least 67% in principal amount of the then outstanding Debentures shall have otherwise given prior written consent;

 

NOW THEREFORE, in consideration of the premises and mutual covenants and obligations herein set forth and for other good and valuable consideration, the receipt, sufficiency and adequacy of which is hereby acknowledged, accepted and agreed to, the parties hereto, intending to be legally bound, hereby agree as follows:

1.   Consent of Holders.  Each Holder hereby consents to the New Offering for all purposes under the Purchase Agreement and the Debentures, including Section 5.5 of the Purchase Agreement and Section 7(a) of the Debentures.

2.   Grant of Lien on Additional Collateral.  The Company hereby grants Holders a first priority lien in the Additional Collateral as security for the obligations of the Company under the Debentures and the New Debentures, to be reflected in appropriate Security Documents.  The Company agrees to use reasonable best efforts to execute and record such Security Documents with respect to the lien by April 15, 2012.

3.   Release of Lien on Certain Collateral.  The Holders hereby release any right or interest they may have with respect to the property described in Exhibit D hereto (the “Released Collateral”), and further agree that all references in the Debentures, the New Debentures, the Purchase Agreement, the New Purchase Agreement and this Amendment to the Collateral shall not include the Released Collateral.

4.   Agreement to Subordinate Interest in Wells.  Each Holder hereby agrees that upon completion or plugging and  abandonment of each such Well, to the extent the Wells are drilled on the Collateral, the Holders’ security interest in such Well and all Collateral located within the  spacing unit designated by the state authorities for such Well will be subordinated to the Well Lien to be granted to the New Holders, and such Holder hereby consents to the filing of a Subordination Agreement, in substantially the form attached hereto as Exhibit E, to effectuate such subordination, with such Subordination Agreement to be executed by T.R. Winston & Company, LLC as collateral agent.

5.   Amendment of Debentures.  The Debentures are hereby amended to replace Annex B with a new Annex B substantially in the form attached hereto as Exhibit F.

6.   Waiver of Preemptive Rights.  Each Holder hereby waives any and all rights it may have pursuant to Section 5 of the Amendment with respect to the New Offering.

7.   Authority.  Each Holder hereby represents and warrants that it is the true and lawful owner of the Debentures and has full power and authority to enter into this Amendment on the term set forth herein.

 

 

8.   Further Assurances.  Holders shall from time to time execute such additional instruments and documents, take such additional actions, and give such further assurances as are or may be reasonable or necessary to implement this Amendment.

 

9.   Binding Effect.  The terms of this Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns.

10.   Reaffirmation of Debenture Terms.  All terms of the Debentures shall, except as amended hereby, remain in full force and effect, and are hereby ratified and confirmed.

11.   Governing Law.  This Amendment shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard for principles of conflict of laws thereof.

12.   Counterparts.  This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

Recovery Energy, Inc. (the “Debtor”) has sold, executed and delivered a Senior Mortgage to ______________________ (the “Senior Lenders”), dated ___________________, recorded in Book _______, Page _______, Reception No. ____________________, of the records of _____________ County, [STATE] (the “Senior Mortgage”). The Senior Mortgage covers the lands described on Exhibit A, attached hereto (the “Mortgage Property”).

In consideration of the sum of One Dollar ($1.00), and other good and valuable consideration, cash in hand paid, the receipt and sufficiency of which are hereby acknowledged, the Lenders hereby declare and agree as follows:

1.           The Lenders hereby waive, relinquish and subordinate the priority and superiority of the liens, encumbrances and rights of the Subordinated Mortgage in favor of the Senior Mortgage, specifically only in favor of the Senior Mortgage, and only insofar as said Senior Mortgage affects property described in the Subordinated Mortgage.

2.           In the event Lender or any purchaser at a foreclosure sale succeeds to the interest of Debtor in the Mortgage Property by reason of any foreclosure of the Subordinated Mortgage or the acceptance by Lenders of a deed in lieu of foreclosure, it is agreed the Mortgage Property shall remain subject to the Senior Mortgage.  This agreement and subordination shall in no way affect or impair the rights of Lenders or their successors or assigns, to foreclose or sell under the Subordinated Mortgage in any manner prescribed by contract or law, all of the lands, hereditaments and appurtenances and estates described in the Subordinated Mortgage, subject to the rights of the Senior Lenders and their successors and assigns, under the Senior Mortgage.

 
 

3.           The agreement contained herein shall run with the land and shall be binding upon and inure to the benefit of successive owners of the Mortgage Property and lessees under the Senior Mortgage and their respective successors and assigns.

The foregoing instrument was acknowledged before me this _____ day of _________, 2012, by _____________________________, as ________________ of ______________.