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AGREEMENT

THIS AGREEMENT (the “Agreement”) is dated October 30, 2008, and is entered into
by and among PANTERA PETROLEUM INC. (“Pantera”), LAKEHILLS PRODUCTION, INC.
(“Lakehills”) and MADOFF ENERGY IV LLC (“Madoff”). Pantera, Lakehills and Madoff
are at times each individually referred to herein as a “Party” and are at times
collectively referred to herein as the “Parties”.

W I T N E S S E T H:

     1. Properties. The Parties desire to enter into a drilling program and
other arrangements relating to the following described properties, rights and
interests (herein collectively called the “Properties”):

     (a) All oil and gas interests owned or to be acquired by Pantera and/or
Lakehills that are associated with wells (including plugged wells) on Section
numbers 74, 77, 78, 80 and 81 (individually, a “Well” and collectively, the
“Wells”) in the West Gomez field (Baker Ranch) located in Pecos County, Texas,
including those more particularly described on Exhibit A-1 attached hereto and
made a part hereof. Such oil and gas interests include all well bores,
equipment, surface interests, mineral leases, royalty interests, production,
drilling locations, mineral interests, and associated contracts and rights on
and/or related thereto (the “Associated Property”). Exhibit A-2 describes
certain Associated Property by Well.

     (b) The acreage associated with the Wells consists of approximately 2,519
developed and undeveloped acres of land (the “Acreage”). The specific Acreage
amount associated with each Well is set forth in Exhibit A-3 attached hereto and
made a part hereof.

     2. Well Programs.

     (a) General. Pantera and Lakehills grant to Madoff the exclusive option to
fund the drilling, re-entry and completion of the Wells (the “Well Program”) in
consideration for Pantera’s and Lakehills’ conveyance of a 100% working interest
in each Well and all Associated Property, on a Well-by-Well basis, as
contemplated in Section 3 below. This exclusive option to fund the Well Program
shall be a restrictive covenant running with the Properties. The estimated cost
associated with the drilling, re-entry and completion of each Well is detailed
under the “AFE” column on Exhibit B attached hereto and made a part hereof
(“Well Cost”). The Well Cost is comprised of an estimate of (i) the reasonable
costs to drill, complete, and equip a Well, (ii) other reasonable costs to
construct pipelines, gathering lines, sales meters, and pipeline
interconnection, and (iii) all other reasonable capital expenses associated with
each Well and the production from each well. Madoff will make funds available
(up to the specified Well Cost) for the drilling, re-entry and completion of the
Initial Well and, should Madoff elect to continue the Well Program as set forth
in Section 2(c) below, each Additional Well. All such funds made available by
Madoff shall be used exclusively to pay for actual, reasonably

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incurred costs and expenses associated with the Well Program and expended in
accordance with a mutually agreed timetable.

     (b) Initial Well. The Well Program is expected to commence with the reentry
of the Section 80 Well (API #42-371-30774) (the “Initial Well”) promptly after
the closing of the transactions contemplated hereunder (the “Closing”). Madoff
will evaluate the performance of the Initial Well after the drilling, re-entry
and completion thereof, at which time Madoff will determine its interest in
continuing the Well Program. Madoff shall provide Pantera with written notice of
its determination within 5 days after receipt of data relating to 30 days
production from the Initial Well. If Madoff elects to terminate its
participation in the Well Program, it shall have no further liability or
obligation under this Agreement or the Well Program.

     (c) Additional Wells. If Madoff elects to continue its participation in the
Well Program, the Well Program shall thereafter consist of the re-entry and
completion of the Section 74, 77, 78, and 81 Wells (collectively, the
“Additional Wells”). The drilling, re-entry and completion of the Additional
Wells will take place in the following order, unless Madoff determines
otherwise: Wells on Sections 74, 81, 78 and 77. Madoff will evaluate the
performance of each Additional Well after the drilling, re-entry and completion
thereof, at which time Madoff will determine its interest in continuing the Well
Program. Madoff shall provide Pantera with written notice of its determination
within 15 days after receipt of data relating to 30 days production from each
Additional Well. If Madoff elects to terminate its participation in the Well
Program with respect to subsequent Additional Wells, it shall have no further
liability or obligation under this Agreement or the Well Program.

     (d) Authority for Expenditure. Lakehills and Pantera shall prepare separate
budgets for the drilling, re-entry and completion, respectively, of each Well in
the Well Program (each, an “Authority for Expenditure” or “AFE”). No fees or
other expenses other than the actual, reasonably incurred costs associated with
the drilling, re-entry and completion of such Well shall be allocated to any
Well and set forth on an AFE. Each AFE shall be subject to the review and
approval of Madoff. Lakehills and/or Pantera shall notify Madoff of the dates
when drilling and completion will begin. Prior to such dates, Madoff shall pay
the applicable amounts set forth in the AFE. Payment of such amounts shall be
made by wire transfer of immediately available funds to a bank account
designated by Pantera for the exclusive purpose of the Well Program (the
“Drilling Program Bank Account”). The Drilling Program Bank Account will be an
interest-bearing account maintained separate and apart from all other accounts
of Lakehills and Pantera and the funds therein will not be commingled with any
of their other funds. Madoff shall be made a signatory on the Drilling Program
Bank Account, receive monthly bank statements relating thereto and, to the
extent practicable, receive online access thereto. If requested by Madoff,
Lakehills shall enter into and it shall cause any of its contractors to enter
into a joint check agreement with Madoff pursuant to which Madoff shall have the
right to make check(s) payable to both Lakehills and such contractor. Any
interest earned on the funds in the account shall be applied to other costs paid
out of such account. Notwithstanding anything otherwise set forth herein or in
any operating agreement, Madoff shall not be obligated to pre-pay any AFEs or
pre-fund the

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Drilling Program Bank Account. In the event that actual drilling costs exceed
the AFE budgets, Madoff shall fund its portion of said overages to the Drilling
Program Bank Account in a similar manner promptly after receipt of acceptable
documentation evidencing such overages. Pantera and Lakehills shall ensure that
none of their officers, directors, managers or employees has a direct or
indirect financial interest in any contractor (each a “Well Program Contractor”)
working on the Well Program. Pantera and Lakehills shall also ensure that none
of their officers, directors, managers or employees directly or indirectly
requests or receives from a Well Program Contractor any commissions, gifts or
compensation of any type or value above that normally encountered in usual and
customary business practices.

     3. Working Interests; Cash Distributions.

     (a) Subject to the special allocation provisions set forth in Section 4(c)
below, the Parties will be entitled to the cash flow attributable to each Well
in accordance with their respective working interest ownership percentages
therein. Upon tie-in of each Well, Madoff will own a 95% working interest in
such Well and Madoff will grant to Lakehills a 5% working interest. Madoff’s
working interest shall remain 95% until such time as Madoff has achieved a 12%
IRR (defined in Section 3(c) below) from its investment in the Well Program.
Thereafter, Madoff will grant to Pantera a 5% working interest and Madoff’s
working interest percentage will be reduced to 90% until such time as Madoff has
achieved a 20% IRR from its investment in the Well Program. Thereafter, Madoff
will grant to Pantera an additional 10% working interest such that Pantera’s
working interest will be 15% and Madoff’s working interest will be reduced to
80% until such time as Madoff has achieved a 25% IRR from its investment in the
Well Program. Thereafter, Madoff will grant to Pantera an additional 6% working
interest such that Pantera’s working interest in such Well will be 21% and
Madoff’s working interest will be reduced to 74% accordingly. In all cases,
Lakehills’ working interest will remain at 5%. Notwithstanding anything herein
to the contrary, in the event that the actual cost for the drilling, re-entry
and completion of a Well exceeds the amount set forth in an AFE, all working
interests assigned by Madoff to Lakehills and/or Pantera hereunder shall be
subject to reduction by the same percentage that the actual cost exceeds the AFE
amount. For example, if the actual cost for the drilling, re-entry and
completion of a Well is 10% above the AFE amount, the working interests assigned
by Madoff hereunder shall all be reduced by 10%.

     (b) All working interests assigned by Madoff to Lakehills and/or Pantera
hereunder shall be subject to existing royalty burdens and proportionately
reduced based upon the actual working interest then owned by Madoff. For
example, if Madoff only owns a 50% working interest in a Well before any
issuance of interests to Lakehills and/or Pantera, all working interests
assigned by Madoff hereunder shall be 50% of the percentages referenced above.
The working interests assigned to Lakehills and Pantera with respect to a Well
will be subject to forfeiture and assigned back to Madoff if Lakehills or
Pantera (i) is unable or refuses to be the operator for such Well, (ii) is
removed as the operator of such Well for “good cause” (defined below) or (iii)
resigns as the operator of such Well other than for “good reason” (defined
below). “Good cause”

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and “good reason” shall have meanings ascribed to such terms in the Joint
Operating Agreement (defined in Section 9(c)(ii) below)

     (c) For purposes of this Agreement, “IRR” shall mean the Internal Rate of
Return as determined by using the Microsoft Excel Spreadsheet formula for the
XIRR function and will take into account, on the one hand, the actual costs
incurred by Madoff in connection with its investment (including, without
limitation, capital expenditures for land and related equipment) and, on the
other hand, all cash distributions to Madoff from the investment for the same
period. The calculation shall be performed using monthly cash inflows and
monthly cash outflows for the period under analysis. Any cash distributions to
Madoff from the sale of all or any part of the Acreage shall be taken into
consideration for the IRR calculation.

     4. Acquisition of Acreage.

     (a) In conjunction with the Well Program, Pantera and/or Lakehills shall be
entitled to reimbursement for actual costs incurred in connection with the
purchase of the Acreage, land research and title work associated with the
Acreage (“Land Costs”) on a Well-by-Well basis. The Land Costs allocated to each
Well are set forth in Exhibit C attached hereto and made a part hereof.
Simultaneously with payment in full by Madoff of the Land Costs associated with
a particular Well, or upon payment by Madoff of the Success Fee (defined in
Section 4(b) below), Pantera and/or Lakehills shall execute and deliver to
Madoff (i) assignments for the real property, including all mineral leases, and
rights to all land pooled or communitized therewith and all surface rights
associated with such Well in form and substance satisfactory to Madoff and (ii)
assignments conveying all related personalty, including the wellhead equipment,
pumping units, tanks and other equipment relating to the Well and used in
connection with the exploration, development, operation or maintenance thereof
in forms satisfactory to Madoff (collectively, the “Equipment”). All
reimbursement amounts, including the Success Fee (if applicable), shall be paid
in readily available U.S. funds as hereinafter provided.

     (b) As reimbursement for the Land Costs associated with the Initial Well,
Madoff shall pay Lakehills the lesser of $87,190 or $450 per net acre (as
determined by Madoff’s title due diligence) at Closing (the “Closing Payment”)
and (i) Pantera and Lakehills shall simultaneously execute and deliver the
assignments referenced in Section 4(a) above with respect to the Initial Well
and (ii) Pantera shall simultaneously issue to Madoff an unsecured note in the
same amount as the Closing Payment (the “Note”). The Note shall have an annual
interest rate of 5% and accrued interest thereon and the remaining principal
balance thereof shall be payable to Madoff in full on or before April 30, 2009.
If Madoff elects to continue its participation in the Well Program and the
Initial Well is successful (defined in Section 4(d) below), Madoff shall pay to
Lakehills an amount equal to the total net acreage for the Additional Wells (as
determined by Madoff’s title due diligence, which shall continue after the
Closing Date) multiplied by $450, reduced by any amounts previously paid by
Madoff for such net acreage (the “Success Fee”). The Success fee is currently
estimated to be $846,360. Such amount shall be paid to Lakehills within 10 days
after the determination that the Initial Well is successful. If such
determination is not made by November 15, 2008, Madoff will have

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the option, but not the obligation, to pay the Success Fee or a portion thereof
and acquire the real property and the Equipment related to the corresponding
Additional Well(s).

     (c) Madoff will receive 100% of the Initial Well’s operating cash flow
until the aggregate amount of such cash flow received by Madoff exceeds the
principal and interest owed with respect to the Note and, if applicable, the
Success Fee. No cash distributions shall be made or otherwise accrue to Pantera
or Lakehills until all amounts owing with respect to the Note and, if
applicable, the Success Fee have been paid. If Well 80 is deemed successful and
all amounts owing with respect to the Note and, if applicable, the Success Fee
have been paid, Pantera shall thereafter receive 100% of the Initial Well’s
operating cash flow until the aggregate amount of such cash flow received by
Pantera totals $350,000. No cash distributions shall be made or otherwise accrue
to Madoff or Lakehills during this period. Thereafter, Madoff and Pantera will
each receive 50% of the Initial Well’s operating cash flow until each party
receives $175,000 (i.e., an aggregate of $350,000). No cash distributions shall
be made or otherwise accrue to Lakehills during this period. Thereafter, cash
distributions shall be calculated in accordance with the then current working
interest ownership percentages associated with the Initial Well as outlined in
Section 3(a) and Section 3(b) above. The distributions that would otherwise be
payable to Pantera pursuant to the immediately preceding sentence shall be paid
to Madoff until the aggregate of such distributions paid to Madoff totals
$175,000. The first $525,000 of cash flow received by Pantera hereunder shall be
used by Pantera to satisfy its obligations to investors as set forth in the oil
and gas certificates referenced in Schedule 5(g) attached hereto, copies of
which are included as part of Schedule 5(h) attached hereto.

     (d) The Initial Well shall be deemed “successful” if it (i) has a sales
rate and a production rate greater than or equal to 3.0 MMCFE per day based on a
30-day average that utilizes day one as the maximum 24 hour production rate
during the first 30 days of sales, (ii) has a natural gas quality greater than
950 mmBtu, (iii) contains no contaminants that have a materially adverse effect
on the sales price of the gas and (iv) satisfies the gas quality requirements
set forth in Section 5.1 of the General Terms and Conditions of the Gas
Gathering Agreement (defined in Section 9(b)(viii) below)..

     5. Representations of Pantera. Pantera and Lakehills jointly and severally
represent and warrant to Madoff as follows:

     (a) Organization and Qualification. Pantera is a corporation duly
organized, legally existing and in good standing under the laws of the State of
Nevada and is qualified to do business and in good standing in each of the
states in which the Properties are located where the laws of such state would
require a corporation owning the Properties located in such state to so qualify.
Lakehills is a corporation duly organized, legally existing and in good standing
under the laws of the State of Texas and is qualified to do business and in good
standing in each of the states in which its operations are located where the
laws of such state would require a corporation with such operations located in
such state to so qualify.

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     (b) Due Authorization. Each of Pantera and Lakehills has full power and
authority to enter into and perform its obligations under this Agreement and has
taken all proper action to authorize entering into this Agreement and
performance of its obligations hereunder. The execution, delivery and
performance by Pantera and Lakehills of this Agreement has been and the
consummation by Pantera and Lakehills of the transactions contemplated hereby
have been duly and validly authorized and approved by all necessary corporate
action.

     (c) No Violations. The execution, delivery and performance of this
Agreement by Pantera and Lakehills and the consummation by Pantera and Lakehills
of the transactions contemplated hereby will not: (i) violate, conflict with, or
result in a breach or default under any provision of their respective
organizational documents; (ii) violate any statute, ordinance, rule, regulation
or order of any court or of any governmental or regulatory body, agency or
authority applicable to either of them or by which any of their respective
properties or assets may be bound; or (iii) result in a violation or breach by
Pantera or Lakehills of, conflict with, constitute a default by Pantera or
Lakehills (or give rise to any right of termination, cancellation, payment or
acceleration) under, or result in the creation of any Encumbrance (defined
below) upon any of their respective properties or assets under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, Permit (defined in Section 5(p) below), agreement, lease, franchise
agreement or other instrument or obligation to which either of them is a party,
or by which either of them or any of their respective properties or assets may
be bound. For purposes of this Agreement, “Encumbrance” shall mean any liens,
security interests, options, rights of first refusal, easements, mortgages,
charges, debentures, indentures, deeds of trust, rights-of-way, restrictions,
agreements, encroachments, licenses, leases, permits, security agreements, or
any other encumbrances or other restrictions or limitations on the use of real
or personal property or irregularities in title thereto.

     (d) Valid, Binding and Enforceable. This Agreement constitutes (and the
Conveyance (defined in Section 9(b)(i) below) will, when executed and delivered,
constitute) the legal, valid and binding obligation of Pantera and Lakehills,
enforceable in accordance with its terms, except as limited by bankruptcy or
other laws applicable generally to creditor’s rights and as limited by general
equitable principles.

     (e) Litigation. There are no pending claims, suits, actions or other
proceedings in which Pantera or Lakehills is a party (or, to their respective
knowledge, which have been threatened to be instituted against either of them or
the Properties) which affect the Properties (including, without limitation, any
actions challenging or pertaining to their respective title to any of the
Properties), or affecting the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby or the Parties’ performance
of their obligations hereunder.

     (f) Title to the Properties. Pantera and/or Lakehills have good, valid and
defensible title to all of the Properties free and clear of all Encumbrances,
except Permitted Encumbrances (defined below). For purposes of this Agreement,
“Permitted Encumbrances” means (a) royalties, overriding royalties and other
burdens

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as described in Schedule 5(g); (b) liens for taxes for which payment is not due;
(c) Encumbrances of mechanics, materialmen, warehousemen, vendors, and carriers
and any similar Encumbrances arising by operation of law which, in each
instance, arise in the ordinary course for sums not yet due; and (d) easements,
surface leases and rights, plat restrictions, zoning laws, restrictive covenants
and conditions, and building and other land use laws and similar encumbrances,
none of which interferes with the development and operation of the Properties
for the production of hydrocarbons or for the use for which the same are held.

     (g) Royalty Burdens. All of the royalty burdens associated with any of the
Properties and the holders thereof are specifically identified and described in
Schedule 5(g) attached hereto and neither Lakehills, Pantera nor any of their
Affiliates (defined in Section 15(a)(i) below) nor any natural person related by
blood, law or marriage to any other natural person associated with Lakehills,
Pantera or any of their Affiliates has any royalty interest with respect to any
of the Properties. Neither Pantera, Lakehills nor any of their Affiliates has
any other obligation (oral or in writing) to grant any royalty burdens with
respect to the Properties. The rights of the investors referred to in Section
4(c) above are not a lien on any of the Properties being conveyed to Madoff
hereunder and Pantera has not made any representations to the contrary to such
investors.

     (h) Contracts Relating to the Properties. Schedule 5(h) attached hereto
sets forth all contracts, agreements and obligations, which relate to or bind
the Properties or any production therefrom, including without limitation,
farmouts, gathering agreements, sales contracts, participation agreements and
area of mutual interest agreements (collectively, the “Contracts”). Pantera and
Lakehills have previously delivered or made available to Madoff correct and
complete copies of each of the written Contracts and expressly represent and
warrant that there are no oral Contracts. Each Contract is in full force and
effect. Neither Pantera nor Lakehills has breached, nor to their respective
knowledge is there any claim or any legal basis for a claim that Pantera,
Lakehills or any other Person (defined in Section 15(a)(iv) below) has breached,
any of the terms or conditions of any Contract. Neither Pantera nor Lakehills
have given or received from any third party notice of any intent to terminate or
amend any Contract.

     (i) Consents. No consent, approval, authorization or permit of, waiver by
or filing with or notification to, any Person is required for or in connection
with the execution and delivery by Pantera or Lakehills of this Agreement and
the other agreements, documents and instruments executed in connection herewith
to which either of them is a party or for or in connection with the Closing and
performance by Pantera or Lakehills of the terms and conditions contemplated
hereby and thereby.

     (j) Equipment. All of the Equipment associated with any of the Wells and
the Acreage is specifically identified and described in Schedule 5(j) attached
hereto. All of the Wells were drilled and (if completed) completed, operated and
produced within the boundaries of the applicable land or within the limits
otherwise permitted by applicable laws and Permits. Each Well was (and any other
wells on any of the Properties were) plugged in accordance with prudent industry
practices and in compliance with applicable

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laws and there is no well that Pantera or Lakehills (or any of their Affiliates)
is currently obligated by law or Contract to plug and abandon on any of the
Properties.

     (k) Broker’s or Finder’s Fees. Except as provided in Schedule 5(k) attached
hereto, no agent, broker, financial advisor, investment or merchant banker, or
other Person is, or will be, entitled to any fee, commission or broker’s or
finder’s fees from Pantera or Lakehills, or from any Affiliate (defined in
Section 15(a)(i) below) of Pantera or Lakehills, in connection with this
Agreement or any of the transactions contemplated hereby.

     (l) Maintenance of the Properties. The Properties, including without
limitation the Wells and the Equipment, are being (and, to the extent the same
could adversely affect the ownership or operation of the Properties after the
date hereof, have in the past during Pantera’s and Lakehills’ Ownership thereof
been) maintained in a good and workmanlike manner in all material respects, in
accordance with prudent industry standards and in conformity with all applicable
laws and in conformity with all Contracts. All Wells have the appropriate and
necessary infrastructure in place and/or available for the marketing,
transportation and processing of natural gas therefrom.

     (m) Books and Records. All accounts, books, ledgers, operating information,
data and official and other financial records necessary for the operation of the
Properties (the “Books and Records”), during Pantera’s and Lakehills’ ownership
of the Properties, have been fully, properly and accurately kept and are
complete in all material respects, and copies of the Books and Records have been
made available to Madoff for review at Pantera’s or Lakehills’ offices.

     (n) Environmental. (i) With the exception of production of natural gas from
the Wells, neither Pantera nor Lakehills has, and, to the knowledge of Pantera
and Lakehills, no other Person has, generated, used, treated, disposed of,
released or stored Hazardous Materials (defined below) on, or transported
Hazardous Materials in any material quantities to or from, any of the
Properties; (ii) Pantera and Lakehills are in compliance with applicable
environmental laws and the requirements of any permits issued under such
environmental laws with respect to the Properties; and (iii) there are no
pending or threatened claims, suits, demands, investigations, proceedings or
other actions relating to any applicable environmental law with respect to the
Properties, nor is there a reasonable basis for any such actions. None of the
Equipment on the Properties is leaking as of the Closing Date nor to Pantera’s
knowledge have any such leaks occurred. For purposes of this Agreement,
“Hazardous Materials” shall mean all hazardous substances, wastes, materials or
constituents, solid wastes, special wastes, toxic substances, pollutants,
contaminants, radioactive materials, urea formaldehyde, polychlorinated
biphenyls, radon gas and related materials, including, without limitation, any
such materials defined, listed, identified under or described in any applicable
environmental laws.

     (o) Insurance. Lakehills maintains, with financially sound and reputable
insurance companies, insurance in such amounts and against such risks as are
customarily maintained by companies engaged in the same or similar business
operating in the same

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or similar locations. A summary of such insurance coverage is set forth on
Schedule 5(o) attached hereto.

     (p) Permits. Lakehills has obtained and is maintaining all material
federal, state and local governmental licenses, permits, franchises, orders,
exemptions, variances, waivers, authorizations, certificates, consents, rights,
privileges and applications therefor (collectively, the “Permits”) that are
necessary or required for the ownership and operation of the Properties as
currently owned and operated. A listing of all such Permits is set forth on
Schedule 5(p) attached hereto. During Pantera’s and Lakehills’ ownership
thereof, the Properties have been operated and maintained in all material
respects in accordance with the conditions and provisions of such Permits, and
no notices of violation of such Permits have been received by Pantera, Lakehills
or their respective Affiliates.

     (q) Payment of Property Costs. All Property Costs (defined below) and other
payments due in connection with the ownership and operation of the Properties,
during Pantera’s and Lakehills’ ownership of the Properties, have been properly
and correctly made by Pantera and/or Lakehills. As used herein, “Property Costs”
means all operating expenses (including, without limitation, costs of insurance
and ad valorem, property, severance, production and similar taxes based upon or
measured by ownership of the Properties or the production therefrom), capital
expenditures incurred in the ownership and operation of the Properties, and
overhead costs charged to the Properties.

     (r) Lease Obligations. Neither Lakehills nor Pantera is in breach under the
terms of any of the mineral leases comprising a part of the Contracts (the
“Leases”) and, to their knowledge, no other party thereto is in breach
thereunder and all of such Leases are in full force and effect and there has not
occurred any event, fact or circumstance which with the lapse of time or the
giving of notice or both, would constitute a breach or default under any Lease
on behalf of them or any other party. Neither Pantera nor Lakehills has received
any claims or demands (whether written or oral) that royalties or other payments
due under any Leases have not been properly and timely paid, or that any
conditions necessary to keep the Leases in force have not been fully performed.
The lease expiration dates for each of the Leases is set forth on Schedule 5(r)
attached hereto.

     (s) Calls on Production; Hedging. No Person has any call upon, option to
purchase, or similar rights with respect to production from the Properties.
There are no hedging contracts or similar contracts currently in place related
to production from the Properties.

     (t) Taxes. Lakehills and Pantera have filed all tax returns required by
applicable laws with respect to their respective interests in the Properties due
on or prior to the Closing Date. Neither Lakehills nor Pantera has received
written notice of any pending claim against it or its interest in any of the
Properties from any applicable taxing authority for assessment of taxes with
respect to the Properties. Lakehills’ and Pantera’s respective interests in the
Properties are not subject to tax partnership recording for federal income tax
purposes.

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     (u) No Untrue Statements. No representation or warranty of Pantera or
Lakehills contained in this Agreement or any statement or information made by or
provided by Pantera or Lakehills contained in any schedule, exhibit,
certificate, written statement, document or instrument, or other information
attached to, delivered or required to be delivered by Pantera or Lakehills
pursuant to this Agreement contains any untrue statement of material fact or
omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading or necessary in order to fully and
fairly provide the information required to be provided in any such document.

     6. Representations of Madoff. Madoff represents and warrants to Pantera and
Lakehills as follows:

     (a) Organization and Qualification. Madoff is a limited liability company
duly organized and legally existing and in good standing under the laws of the
State of Delaware, and is qualified to do business and in good standing in each
of the states where the laws of such state would require a limited liability
company in such state to so qualify.

     (b) Due Authorization. Madoff has full power to enter into and perform its
obligations under this Agreement and has taken all proper action to authorize
entering into this Agreement and performance of its obligations hereunder. The
execution, delivery and performance by Madoff of this Agreement has been and the
consummation by Madoff of the transactions contemplated hereby have been, duly
and validly authorized and approved by all necessary company action of Madoff.

     (c) No Violations. The execution, delivery and performance of this
Agreement by Madoff and the consummation by Madoff of the transactions
contemplated hereby will not: (i) violate, conflict with, or result in a breach
or default under any provision of the certificate of formation or limited
liability company agreement of Madoff; (ii) violate any statute, ordinance,
rule, regulation or order of any court or of any governmental or regulatory
body, agency or authority applicable to Madoff or by which any of its properties
or assets may be bound; or (iii) result in a violation or breach by Madoff of,
conflict with, constitute a default by Madoff (or give rise to any right of
termination, cancellation, payment or acceleration) under, or result in the
creation of any Encumbrance upon any of the properties or assets of Madoff
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, franchise, permit, agreement, lease, franchise agreement or
other instrument or obligation to which Madoff is a party, or by which Madoff or
any of its properties or assets may be bound.

     (d) Valid, Binding and Enforceable. This Agreement constitutes the legal,
valid and binding obligation of Madoff, enforceable in accordance with its
terms, except as limited by bankruptcy or other laws applicable generally to
creditor’s rights and as limited by general equitable principles.

     (e) No Litigation. There are no pending claims, suits, actions, or other
proceedings in which Madoff is a party (or, to Madoff’s knowledge, which have
been

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threatened to be instituted against Madoff) which affect the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.

     (f) Broker’s or Finder’s Fees. No agent, broker, financial advisor,
investment or merchant banker, or other Person is, or will be, entitled to any
fee, commission or broker’s or finder’s fees from Madoff, or from any Affiliate
of Madoff, in connection with this Agreement or any of the transactions
contemplated hereby.

     7. Indemnification.

(a) For purposes of this Agreement:

     (i) “Madoff Indemnified Persons” shall mean Madoff and its Affiliates and
their respective directors, officers, employees, stockholders, members, agents,
consultants, advisors and other representatives (including legal counsel,
accountants and financial advisors).

     (ii) “Damages” shall mean the amount of any actual liability, loss, cost,
expense, claim, award or judgment incurred or suffered by any Indemnified Person
arising out of or resulting from the indemnified matter, whether attributable to
personal injury or death, property damage, contract claims, torts or otherwise
including reasonable fees and expenses of attorneys, consultants, accountants,
or other agents and experts reasonably incident to matters indemnified against,
and the costs of investigation and/or monitoring of such matters, and the costs
of enforcement of the indemnity.

     (iii) “Indemnifying Person” shall mean the Person having an obligation to
indemnify another Person with respect to Damages pursuant to this Agreement.

     (iv) “Indemnified Person” shall mean the Person having the right to be
indemnified with respect to Damages pursuant to this Agreement.

     (v) “Pantera Indemnified Persons” shall mean Pantera and Lakehills and
their respective Affiliates and their respective directors, officers, employees,
stockholders, members, agents, consultants, advisors and other representatives
(including legal counsel, accountants and financial advisors).

     (b) From and after Closing, Pantera and Lakehills shall jointly and
severally indemnify, defend and hold harmless the Madoff Indemnified Persons
against and from all Damages incurred or suffered by any such Indemnified Person
REGARDLESS OF WHETHER SUCH CLAIMS ARISE OUT OF THE NEGLIGENCE (WHETHER SOLE,
JOINT, COMPARATIVE OR CONCURRENT) OF SUCH INDEMNIFIED PERSON caused by, arising
out of or resulting from (i) the ownership, use, or operation of the Properties
before the Closing including, without limitation, any liability associated with
the plugging and abandonment of the Wells, or (ii) any breach of any
representation or warranty made by Pantera and Lakehills contained in Section 5
or in any covenant or other agreement made by Pantera or Lakehills in this
Agreement.

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     (c) From and after Closing, Madoff shall indemnify, defend, and hold
harmless the Pantera Indemnified Persons against and from all Damages incurred
or suffered by any such Indemnified Person REGARDLESS OF WHETHER SUCH CLAIMS
ARISE OUT OF THE NEGLIGENCE (WHETHER SOLE, JOINT, COMPARATIVE OR CONCURRENT) OF
SUCH INDEMNIFIED PERSON caused by, arising out of or resulting from any breach
of (i) any representation or warranty made by Madoff contained in Section 6 or
(ii) any covenant or other agreement made by Madoff in this Agreement.

     (d) The indemnity to which each Party is entitled under this Agreement
shall be for the benefit of and extend to such Indemnified Persons affiliated
with such Party as described above in this Agreement. Any claim for indemnity
under this Agreement by any such Indemnified Person (other than a Party) must be
brought and administered by the applicable Party to this Agreement. No
Indemnified Person other than a Party shall have any rights against any Party
under the terms of this Section 7 or otherwise under this Agreement except as
may be exercised on its behalf by a Party, pursuant to this Section 7(d). Each
Party may elect to exercise or not exercise indemnification rights under this
Section on behalf of the other Indemnified Persons affiliated with it in its
sole discretion and shall have no liability to any such other Indemnified Person
for any action or inaction under this Agreement.

     8. Indemnification Actions. All claims for indemnification under Section 7
shall be asserted and resolved as follows:

     (a) To make claim for indemnification under Section 7, an Indemnified
Person shall notify the Indemnifying Person of its claim, including the basis
under this Agreement for its claim (the “Claim Notice”). If the claim for
indemnification is based upon a claim by a third party against the Indemnified
Person (a “Claim”), the Indemnified Person shall provide its Claim Notice
promptly after the Indemnified Person has actual knowledge of the Claim and
shall enclose a copy of all papers (if any) served with respect to the Claim;
provided that the failure of any Indemnified Person to give notice of a Claim as
provided in this Section 8(a) shall not relieve the Indemnifying Person of its
obligations under Section 7 except to the extent (and only to the extent of any
incremental Damages incurred) such failure results in insufficient time being
available to permit the Indemnifying Person to effectively defend against the
Claim or otherwise materially prejudices the Indemnifying Person’s ability to
defend against the Claim.

     (b) In the case of a claim for indemnification based upon a Claim, the
Indemnifying Person shall have 15 days from its receipt of the Claim Notice to
notify the Indemnified Person whether or not it agrees to indemnify and defend
the Indemnified Person against such Claim under this Section 8. The Indemnified
Person is authorized, prior to and during such 15 day period, to file any
motion, answer, or other pleading that it shall reasonably deem necessary or
appropriate to protect its interests or those of the Indemnifying Person.

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     (c) If the Indemnifying Person agrees to indemnify the Indemnified Person,
the Indemnifying Person shall have the right and obligation to diligently
defend, at its sole cost and expense, the Claim. The Indemnifying Person shall
have control of such defense and proceedings except to the extent the
Indemnified Person reasonably believes that there might be a conflict of
interest between such Indemnified Person and the Indemnifying Person in
connection with such Claim, in which case the Indemnified Person shall be
entitled to maintain separate counsel at the Indemnifying Person’s expense and
the Indemnified Person shall have full control of such defense and proceedings.
The Indemnified Person may participate in, but not control, at its sole cost and
expense, any defense or settlement of any Claim controlled by the Indemnifying
Person pursuant to this Section 8. An Indemnifying Person shall not, without the
written consent of the Indemnified Person, settle any Claim or consent to the
entry of any judgment with respect thereto that (i) does not result in a final
resolution of the Indemnified Person’s liability with respect to the Claim
(including, in the case of a settlement, an unconditional written release of the
Indemnified Person from all liability in respect of such Claim) or (ii) may
adversely affect the Indemnified Person or any of its Affiliates or any of their
assets (other than as a result of money damages covered by the indemnity).

     (d) If the Indemnifying Person does not agree to indemnify the Indemnified
Person within the 15 day period specified in Section 8(b), fails to give notice
to the Indemnified Person within such 15 day period regarding its election, or
if the Indemnifying Person agrees to indemnify, but fails to diligently defend
or settle the Claim, then the Indemnified Person shall have the right to defend
against the Claim (at the sole cost and expense of the Indemnifying Person, if
the Indemnified Person is entitled to indemnification hereunder), with counsel
of the Indemnified Person’s choosing.

     (e) In the case of a claim for indemnification not based upon a Claim, the
Indemnifying Person shall have 15 days from its receipt of the Claim Notice to
(i) cure the Damages complained of; (ii) agree to indemnify the Indemnified
Person for such Damages; or (iii) dispute the claim for such Damages. If such
Indemnifying Person does not respond to such Claim Notice within such 15 day
period, such Person will be conclusively deemed obligated to provide such
indemnification hereunder.

     (f) The indemnities in Section 7 relating to breaches of representations
and warranties shall terminate as of the termination date, if any, of each
respective representation or warranty that is subject to indemnification, except
(in each case) as to matters for which a specific written claim for indemnity
has been delivered to the Indemnifying Person on or before such termination date
which shall not be time limited.

     9. Closing.

     (a) Conditions to Closing. The Closing Payment will be paid by Madoff, and
the Closing shall occur, once Madoff has determined in good faith that the
Properties are free and clear from any and all existing, threatened, and
potential Encumbrances other than Permitted Encumbrances.

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     (b) Actions At Closing. The Closing shall take place on the date hereof and
at a mutually agreed time and place. At the Closing:

     (i) Delivery of Conveyance. Upon the execution hereof, Pantera and/or
Lakehills shall execute, acknowledge and deliver to Madoff a conveyance of the
Initial Well, the related Equipment and Acreage and associated interests and
rights (the “Conveyance”), in the form attached hereto as Exhibit D and made a
part hereof.

     (ii) Federal, State and other Conveyance Forms. Pantera and/or Lakehills
shall execute (and, where required, acknowledge) and deliver to Madoff forms of
conveyance or assignment as required by the applicable authorities for transfers
of interests in any state, federal or Indian leases included in the relevant
Properties and, if requested by Madoff, such other forms of conveyance, in form
acceptable to both Parties.

     (iii) Letters in Lieu. Pantera and/or Lakehills shall, if requested by
Madoff, execute and deliver to Madoff letters in lieu of transfer orders (or
similar documentation), in form acceptable to both Parties.

     (iv) Turn Over Possession. Pantera and/or Lakehills shall, to the extent
they can do so, turn over possession of the Initial Well to Madoff, subject to
the terms of the Joint Operating Agreement.

     (v) Payment to Lakehills. Madoff shall deliver to Lakehills, by wire
transfer of immediately available funds to an account designated by Lakehills in
a bank located in the United States, an amount equal to the Closing Payment.

     (vi) Delivery of the Note by Pantera. Pantera shall execute and deliver to
Madoff the Note.

     (vii) Non Foreign Status Affidavit. If Madoff so requests, Pantera and
Lakehills will execute and deliver to Madoff an affidavit or other certification
(as permitted by the Internal Revenue Code of 1986, as amended (the “Code”))
that each is not a “foreign person” within the meaning of Section 1445 (or
similar provisions) of the Code (i.e., each of Pantera and Lakehills is not a
non-resident alien, foreign corporation, foreign partnership, foreign trust or
foreign estate as those terms are defined in the Code and regulations
promulgated thereunder).

(c) Additional Agreements.

     (i) Transfer of Files. In addition to the rights set forth in the “Access
to Contract Area and Records” section set forth in the Joint Operating
Agreement, following Closing Pantera and/or Lakehills will preserve at their
respective offices all of the lease files, abstracts and title opinions,
division order files, production records, well files, accounting records (but
not including general financial accounting or tax accounting records which do
not particularly relate to the Properties), and other similar files and records
which relate to the Properties.

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Pantera and Lakehills will allow Madoff access (including, without limitation,
the right to make copies at Madoff’s expense) to such files at all reasonable
times. Neither Pantera nor Lakehills shall dispose of such files without the
prior written consent of Madoff after providing Madoff with an opportunity to
receive delivery of such files.

     (ii) Operational Transition. In light of the agreement among the Parties
that Lakehills shall remain as operator of the Properties, upon the execution
hereof, the Parties are entering into that certain operating agreement in the
form as attached hereto as Exhibit E and made a part hereof (the “Joint
Operating Agreement”) and to the extent Lakehills so operates the Properties
after Closing, its obligations to Madoff and Pantera with respect thereto shall
be as set forth in the Joint Operating Agreement. Madoff’s right to remove
Lakehills as operator of the Properties shall be governed by the terms of the
Joint Operating Agreement.

     (iii) Due Diligence. The Parties acknowledge that Madoff shall not have
completed its due diligence with respect to the Additional Wells prior to the
Closing Date. Madoff shall have the right to continue its due diligence after
the Closing Date and Pantera and Lakehills agree to use commercially reasonable
efforts to facilitate Madoff’s continued due diligence.

     (iv) Participation Agreement. Pantera, Lakehills and Madoff shall enter
into a Participation Agreement that includes a right of first refusal on behalf
of Madoff to participate in additional lease/land acquisition(s) and all
drilling thereon on the terms set forth herein (the “Participation Agreement”),
and an area of interest under the Participation Agreement that encompasses the
Acreage and surrounding area as described in Exhibit F attached hereto and made
a part hereof.

     (v) Lease Ratification. In the event that any of the Acreage is not held by
production or is otherwise not capable of being assigned by Pantera and/or
Lakehills to Madoff as contemplated hereunder, Pantera and Lakehills (in
consultation with Madoff) shall use their best efforts to negotiate and obtain a
ratification or renewal of the existing lease(s) on commercially reasonable
terms to enable the affected acreage to be so assigned to Madoff.

     (vi) Drilling Schedule. If Madoff elects to continue participation in the
Well Program pursuant to Section 2(c) above, the Additional Wells shall be
drilled, re-entered and completed in accordance with the drill schedule set
forth in Exhibit G attached hereto and made a part hereof. If all of the
Additional Wells are not re-entered and completed by January 7, 2010, Lakehills
will forfeit the Success Fee applicable to the Additional Wells not so completed
(as set forth on Exhibit C) and immediately pay such amount to Madoff. Such
amount payable to Madoff shall also include any amounts that Madoff previously
paid for any of the acreage associated with the Additional Wells not so
completed.

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     (vii) Lease Acquisitions. Madoff will make available up to $175,000 for the
acquisition of acreage associated with the Section 81 Well. All such acreage and
the acquisition thereof shall be subject to Madoff approval after Madoff has had
the opportunity to conduct due diligence with respect thereto.

     (viii) Gas Gathering Agreement. Madoff hereby ratifies the Gas Gathering
and Treating Agreement dated April 9, 2008 (the “Gas Gathering Agreement”)
between Lakehills and WGR Asset Holding Company LLC (“WGR”) and agrees to the
terms of the Gas Gathering Agreement with such changes as Madoff, Lakehills and
WGR may negotiate in good faith after the Closing. Lakehills represents that it
has made the [“Take in Kind”] [“WGR Purchase”] election as set forth in Section
4(c) of the Gas Gathering Agreement. Lakehills shall take all actions necessary
to ensure the each of the Wells will be included within the terms and conditions
of the Gas Gathering Agreement.

     10. Assumption of Liabilities and Obligations. Subject to (a) the
continuing obligations and responsibilities of (i) Lakehills as operator of the
Properties under the Joint Operating Agreement, and (ii) Lakehills and Pantera
as working interest owners and (b) Pantera’s and Lakehills’ indemnity
obligations and other obligations hereunder, Madoff shall, as of the Closing
Date, agree (and, upon the delivery to Madoff of the Conveyance, shall be deemed
to have agreed) to assume, and to timely pay and perform, its proportionate
share (based on working interest ownership) of all duties, obligations and
liabilities relating to the ownership and/or operation of the Properties
conveyed to Madoff (including, without limitation, those arising under the
Contracts), but only to the extent the same accrued or otherwise arose after the
Closing Date.

     11. Commissions. As to any commissions or the like not set forth on
Schedule 5(k) attached hereto, each Party agrees to indemnify, defend and hold
the other Parties (and their respective Affiliates, and the respective officers,
directors, employees, attorneys, contractors and agents of such parties)
harmless from and against any and all claims, actions, causes of action,
liabilities, damages, losses, costs or expenses (including, without limitation,
court costs and reasonable attorneys fees) of any kind or character arising out
of or resulting from any agreement, arrangement or understanding alleged to have
been made by, or on behalf of, such Party with any broker or finder in
connection with this Agreement or the transactions contemplated hereby.

     12. Notices. All notices and other communications required under this
Agreement shall (unless otherwise specifically provided herein) be in writing
and be delivered personally, by recognized commercial courier or delivery
service which provides a receipt, by telecopier (with receipt acknowledged), or
by registered or certified mail (postage prepaid), at the following addresses:

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If to Madoff: Madoff Energy IV LLC   885 Third Avenue, 19th Floor   New York,
New York 10022   Tel: 212-230-2444   Fax No.: 212-901-2120   Attention: Andrew
Madoff     If to Pantera: Pantera Petroleum Inc.   111 Congress Avenue   Suite
400   Austin, Texas 78701   Tel: 512-391-3868   Fax No.: 512-391-3869  
Attention: Chris Metcalf     If to Lakehills: Lakehills Production, Inc.   3267
Bee Cave Drive   Suite 107, PMB #512   Austin, Texas 78746   Tel: 512-306-8620  
Fax No.: 512-306-8621   Attention: Tom Stratton

and shall be considered delivered on the date of receipt. Each Party may specify
as its proper address any other post office address within the continental
limits of the United States by giving notice to the other Parties, in the manner
provided in this Section, at least ten (10) days prior to the effective date of
such change of address.

     13. Survival of Provisions. All representations and warranties made herein
by the Parties shall be continuing and shall survive the Closing and the
delivery of the Conveyance for a period of two (2) years after the termination
of all drilling operations arising out of or in connection with this Agreement.
The obligations of the Parties under Section 9 (to the extent the same are, by
mutual agreement, not performed at Closing) and Sections 7, 8, 10, 11, 12, 13,
14 and 15 shall (subject to any limitations set forth therein) survive the
Closing and the delivery of the Conveyance until the expiration of any
applicable statute of limitations.

     14. Restrictions on Transfer.

     (a) Transfer. No Transfer by Pantera or Lakehills of their respective
interests in any of the Properties (collectively, the “Interests”) shall be
permitted unless it is made in compliance with the terms and conditions hereof.
For purposes of this Section 14, the term “Transfer” means: sell, transfer,
convey, assign, distribute or otherwise dispose of the asset or property in
question; provided, however, that the term Transfer shall not include any
pledge, charge, grant of a security interest or other encumbrance incurred in
connection with a bank financing. The term Transfer also includes any change in
the Person(s) of which Pantera or Lakehills is a direct or indirect subsidiary
or that otherwise

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control (defined in Section 15(a) below) either such entity whether by merger,
equity interest sale or otherwise.

     (b) Notice of Desired Transfer. Prior to any Transfer of all or any portion
of the Interests, Pantera or Lakehills, as the case may be (the “Transferring
Party”), shall promptly notify Madoff in writing of its desire to make such
Transfer and the cash price or other consideration it desires to receive in
connection with such Transfer (the “Desired Price”). If the Desired Price
includes consideration other than cash, the cash equivalent value of the
non-cash consideration shall be mutually determined by Madoff and the
Transferring Party in good faith. If the Transferring Party and Madoff cannot
agree on such value, such determination shall be made by a mutually acceptable
appraiser whose cost shall be shared equally by Madoff and the Transferring
Party. The Transferring Party and Madoff shall negotiate in good faith to
determine if Madoff desires to acquire the Transferring Party’s Interests being
offered for sale at the Desired Price.

     (c) Exercise of Desired Transfer. At any time within 30 days after receipt
of the Transferring Party’s notice, Madoff may elect to purchase all of the
Interest proposed to be transferred at the Desired Price or a portion of such
Interest at a proportionately equivalent price by providing written notice
thereof to the Transferring Party. Payment of the purchase price for the
Interest shall be made by wire transfer of immediately available funds in
accordance with the terms and conditions of the relevant documentation
evidencing the proposed transaction.

     (d) Right to Transfer. If Madoff elects not to purchase the Interest as
provided herein at the Desired Price, then the Transferring Party may Transfer
the Interest to an acceptable transferee party (as described in Section 14(g)
below) at a price that is no less than the Desired Price, provided that such
Transfer is consummated within one hundred eighty (180) days after Madoff
notified the Transferring Party of its election not to purchase the Interest,
and subject to Madoff’s right of first refusal described in Section 14(e) below.
If Madoff elects not to purchase the Interest as provided herein and the
Interest is not Transferred to the proposed transferee within such period, a new
notice shall be given to Madoff, and Madoff shall again be offered the right to
purchase the Interest (as provided in Section 14(b) above) before the Interest
may again be offered to an acceptable transferee party.

     (e) Right of First Refusal. Before all or any portion of the Transferring
Party’s Interests may be Transferred to a third party, Madoff shall have a right
of first refusal to purchase the Interests on the following terms and
conditions:

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     (i) The Transferring Party shall deliver to Madoff a written notice (the
“Notice”) stating (1) the name of each proposed purchaser or other transferee
(“Proposed Transferee”), (2) the specific Interest to be transferred to each
Proposed Transferee, (3) the bona fide cash price or other consideration for
which the Transferring Party proposes to transfer the Interest (the “Offered
Price”), and (4) the material terms and conditions of the proposed transfer (the
“Offer Terms”).

     (ii) The Transferring Party shall offer the Interest to Madoff at the
Offered Price and on the Offer Terms.

     (iii) At any time within 15 days after receipt of the Notice, Madoff may,
by giving written notice to the Transferring Party (“Notice of Exercise”), elect
to purchase all or part of the Interest proposed to be transferred to any one or
more of the Proposed Transferees, at the purchase price and on the terms
determined in accordance with clause (iv) below.

     (iv) The purchase price (“Purchase Price”) for the Interest purchased by
Madoff under this Section 14(e) shall be the Offered Price, and the terms and
conditions of the transfer shall be identical in all material respects to the
Offer Terms (the “Terms”). If the Offered Price includes consideration other
than cash, the cash equivalent value of the non-cash consideration shall be
determined as provided in Section 14(b) above. Payment of the Purchase Price
shall be made by wire transfer of immediately available funds, within thirty
(30) days after delivery of the Notice of Exercise to the Transferring Party.

     (f) Conditions to Transfer. If Madoff elects not to purchase the Interest
as provided herein and the Transferring Party Transfers the Interest to a third
party, the Transferring Party shall make no representations or warranties that
are attributable to Madoff and shall not enter into any restrictions or
conditions that are binding on Madoff. The transferee must acknowledge and agree
and the Transfer shall be subject to Madoff’s exclusive option to fund the
re-entry and completion of the Wells on the Acreage. The transferee must
covenant not to sue any Madoff Indemnified Person for any claim, loss or damage
arising directly or indirectly out of the transferee’s acquisition of all or any
portion of the Interests. The transferee’s sole remedy and cause of action shall
be against the Transferring Party. The transferee must grant a release of any
and all claims against all Madoff Indemnified Persons. The Transferring Party
shall indemnify, defend and hold harmless the Madoff Indemnified Persons from
and against any claim, loss or damage arising directly or indirectly out of its
Transfer of any Interests. The transferee must agree in writing that the
provisions and restrictions of this Section 14 shall continue to apply to the
Interests in the hands of such transferee if it elects to subsequently Transfer
the acquired Interests.

     (g) Acceptable Transferee Parties. No portion of the Transferring Party’s
Interests may be directly or indirectly sold or transferred in connection with a
public offering or private placement of such interests that requires the
preparation of an offering memorandum or similar document. All such Transfers
must take place in the form of a

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private sale to sophisticated persons with experience in the oil and gas
industry. All Transfers must be funded by the transferee as principal and not
directly or indirectly with any partners or external funds (other than bank
financing).

     15. Miscellaneous Matters.

(a) Additional Definitions. For purposes of this Agreement:

     (i) “Affiliate” means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person.

     (ii) “Business Day” means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of New York or the State of
Texas or is a day on which banking institutions located in either such state are
authorized or required by law or other governmental action to close.

     (iii) “control” (including, with correlative meanings, the terms
“controlling,” “controlled by” and “under common control with”), as applied to
any Person, means the possession, directly or indirectly, of the power (through
the ownership of voting securities or by contract or otherwise) (i) to vote 10%
or more of the securities having ordinary voting power for the election of
directors of such Person or (ii) to direct or cause the direction of the
management and policies of that Person.

     (iv) “day” means any calendar day.

     (v) “Person” means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, joint ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities

     (b) Further Assurances. After the Closing, each Party shall, at the request
of the other Party, execute and deliver, and shall otherwise cause to be
executed and delivered, from time to time, such further instruments, notices,
division orders, transfer orders and other documents, and do such other and
further acts and things, as may be reasonably necessary or appropriate to more
fully and effectively grant, convey and assign the Properties to Madoff or
otherwise to confirm or carry out the provisions of this Agreement.

     (c) Dispute Resolution.

     (i) Any dispute, controversy or claim (“Dispute”) arising out of, relating
to or in connection with this Agreement, including any question regarding its
existence, validity or termination, or regarding a breach hereof which cannot be
resolved by good faith discussions among the Parties within 30 days (or such
longer period as may be agreed by the Parties) shall be referred by any Party
to,

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and shall be finally settled by, arbitration under and in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (the
“Rules”). A Dispute shall be deemed arisen when either Party notifies the other
in writing to that effect.

     (ii) The place of arbitration shall be Houston, Texas, and the award shall
be deemed to have been made there. The arbitration tribunal shall consist of one
arbitrator appointed in accordance with the Rules. Arbitration shall be in
English. The arbitrator shall have at least (10) years of experience in the oil
and gas industry as an attorney or other relevant professional. The decision of
the arbitrator shall include a statement of reasons for such decision, the award
shall be final and binding on the Parties, and judgment thereon may be entered
in any court having jurisdiction for its enforcement. In connection with such
enforcement, the Parties will submit to the non-exclusive jurisdiction of the
courts of Texas, waive any objections to venue in such courts and, to the extent
necessary to accomplish the foregoing, enter into such agreements as are
necessary to appoint an agent for the service of process in connection with such
an enforcement action.

     (iii) The costs of the arbitration proceedings shall be borne according to
the arbitration award. However, each Party to the Dispute shall bear its own
costs, including costs regarding its own witnesses, expert witnesses,
translators and attorneys, as well as such expert witnesses, translators and
attorneys’ fees, regardless of which Party prevails.

     (d) Parties Bear Own Expenses. Each Party shall bear and pay all expenses
(including, without limitation, legal fees) incurred by it in connection with
the transactions contemplated by this Agreement.

     (e) Transfer Taxes. No sales, transfer or similar tax will be collected at
Closing from Madoff in connection with this transaction. If, however, this
transaction is later deemed to be subject to sales, transfer or similar tax, for
any reason, Madoff agrees to be solely responsible, and shall indemnify and hold
the Pantera Indemnified Persons harmless, for any and all sales, transfer or
other similar taxes (including related penalty, interest or legal costs) due by
virtue of this transaction on the Properties transferred pursuant hereto and the
Madoff shall remit such taxes at that time. Notwithstanding the foregoing,
nothing herein shall be interpreted as causing Madoff to have any liability for
any sale, use or income tax attributable to the Properties and to any tax
period, or portion thereof, prior to the Closing Date. The Parties agree to
cooperate with each other in demonstrating that the requirements for exemptions
from such taxes have been met. The Party that is required by applicable law to
make the filings, reports, or returns with respect to any of the above taxes
shall do so, and the other Parties shall cooperate with respect thereto as
necessary.

     (f) Ad Valorem Taxes. Lakehills and Pantera shall be responsible for all ad
valorem taxes assessed prior to the Closing Date and (i) associated with
production from the Wells and (ii) relating to the Equipment and Acreage. Madoff
shall be responsible for

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all ad valorem taxes associated with production from the Wells on or after the
Closing Date.

     (g) Correspondence. After the Closing Date, Pantera and Lakehills shall
promptly forward to Madoff all mail and other communication addressed to Pantera
or Lakehills and received by either of them that relate directly or indirectly
to the Properties.

     (h) Payments. If a Party makes a payment for or on behalf of another Party
with respect to any expense, cost or other item for which the other Party is
responsible hereunder or otherwise, the other Party shall reimburse the Party
making the payment promptly within 10 Business Days after receipt of evidence of
such payment.

     (i) Insurance. For the avoidance of doubt, from and after the Closing Date,
Pantera and Lakehills shall include Madoff as an additional insured on all
insurance policies relating to the Properties as required pursuant to the Joint
Operating Agreement.

     (j) Entire Agreement. This Agreement, the Participation Agreement and the
Joint Operating Agreement contain the entire understanding of the Parties with
respect to the subject matter hereof and supersede all prior agreements,
understandings, negotiations, and discussions among the parties with respect to
such subject matter. In the event of a conflict between the provisions of this
Agreement and the Joint Operating Agreement, the provisions of this Agreement
shall be controlling.

     (k) Amendments, Waivers. This Agreement may be amended, modified,
supplemented, restated or discharged (and provisions hereof may be waived) only
by an instrument in writing signed by the Party against whom enforcement of the
amendment, modification, supplement, restatement or discharge (or waiver) is
sought.

     (l) Choice of Law. Without regard to principles of conflicts of law, this
Agreement, including any arbitration contemplated in Section 15(c), shall be
construed and enforced in accordance with and governed by the laws of the State
of Texas applicable to contracts made and to be performed entirely within such
state and the laws of the United States of America.

     (m) Headings, Time of Essence, etc. The descriptive headings contained in
this Agreement are for convenience only and shall not control or affect the
meaning or construction of any provision of this Agreement. Within this
Agreement words of any gender shall be held and construed to cover any other
gender, and words in the singular shall be held and construed to cover the
plural, unless the context otherwise requires. Time is of the essence in this
Agreement.

     (n) Successors and Assigns. Subject to the limitation on assignment
contained in the following sentence, the Agreement shall be binding on and inure
to the benefit of the Parties and their respective successors and assigns. Prior
to Closing, no Party shall have the right to assign its rights under this
Agreement, without the prior written consent of the other Parties first having
been obtained. Notwithstanding the foregoing, Madoff may assign its rights and
obligations under this Agreement to an Affiliate of Madoff without the other
Parties’ prior written consent.

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     (o) Counterpart Execution. This Agreement may be executed in counterparts,
all of which are identical and all of which constitute one and the same
instrument. It shall not be necessary for any of the Parties to sign the same
counterpart.

     (p) No Third Party Beneficiary Rights. This Agreement is not intended to
and shall not be construed to give any Person other than the Parties and their
respective successors and permitted assigns any interest or rights (including,
without limitation, any third party beneficiary rights) with respect to or in
connection with any agreement or provision contained herein or contemplated
hereby.

     (q) Publicity. Except as otherwise required by applicable laws or
regulations, no Party shall issue any press release or make any other public
statement, in each case relating to or connected with or arising out of this
Agreement or the matters contemplated hereby, without obtaining the prior
written approval of the other Parties hereto to the contents and the manner of
presentation and publication thereof.

     (r) Severability. If any provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transaction contemplated
hereby is not affected in any manner adverse to any Party. Upon such
determination that any provision is invalid, illegal or incapable of being
enforced, the Parties shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the Parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled.

     (s) Termination of Pantera/Lakehills Agreement. Pantera and Lakehills agree
that the letter agreement dated August 11, 2008 between Pantera and Lakehills,
relating to certain of the Properties, a copy of which is attached hereto as
Exhibit H, is hereby terminated effective as of the date hereof and shall be of
no further force or effect. Neither Pantera nor Lakehills shall have any further
obligation or liability thereunder.

     (t) Not to be Construed Against the Drafter. Each Party acknowledges that
it has read this Agreement, has had the opportunity to review it with an
attorney of its choice, and has agreed to all of its terms. Under these
circumstances, the Parties agree that the rule of construction that a contract
be construed against the drafter shall not be applied in interpreting this
Agreement.

     (u) Conspicuousness. Each Party acknowledges and agrees that the provisions
of this Agreement that are printed in all capital letter and/or in bold face
type are conspicuous.

[SIGNATURE PAGE FOLLOWS.]

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IN WITNESS WHEREOF, this Agreement is executed by the Parties on the Closing
Date.

MADOFF ENERGY IV LLC                     By: /s/ Andrew Madoff   Name: Andrew
Madoff   Title: CEO               PANTERA PETROLEUM INC.                     By:
/s/ Chris Metcalf   Name: Chris Metcalf   Title: President and CEO              
LAKEHILLS PRODUCTION, INC.                     By: /s/ Tom Stratton   Name: Tom
Stratton   Title: President  

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LIST OF SCHEDULES AND EXHIBITS

Exhibits

Exhibit A-1 Wells Exhibit A-2 Associated Property Exhibit A-3 Acreage
Description Exhibit B Well Cost Exhibit C Land Costs Exhibit D Conveyance Form
Exhibit E Joint Operating Agreement Exhibit F Participation Agreement Acreage
Exhibit G Drill Schedule Exhibit H Pantera/Lakehills Agreement

Schedules

Schedule 5(g) Royalty Burdens Schedule 5(h) Contracts Relating to the Properties
Schedule 5(j) Equipment Schedule 5(k) Broker’s or Finder’s Fees of Pantera and
Lakehills Schedule 5(o) Insurance Schedule 5(p) Permits Schedule 5(r) Lease
Expirations

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