As of October 16, 2009

Teton Energy Corporation
600 17th Street, Suite 1600 North
Denver, Colorado  80202
Attention: Jonathan Bloomfield
 
Re:
Third Amendment to Second Amended and Restated Credit Agreement and Forbearance
Agreement (as amended, the “Third Amendment”) dated effective as of August 26,
2009, among Teton Energy Corporation, a Delaware corporation (“Borrower”), the
financial institutions party thereto as lenders (“Lenders”), and JPMorgan Chase
Bank, N.A., as Administrative Agent (“Administrative Agent”).  Unless otherwise
defined herein, all terms used herein which are defined in the Third Agreement
shall have the meaning assigned to such terms in the Third Amendment.

 
Ladies and Gentlemen:
 
Borrower has advised Administrative Agent and Lenders that it desires to amend
certain terms of the Third Amendment.  In consideration of the mutual covenants
and agreements contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged and confessed, the
parties hereto hereby agree as follows:
 
1. 
Amendments.  In reliance on the representations, warranties, covenants and
agreements contained in this letter agreement, and subject to the satisfaction
of the conditions precedent set forth in Section 3 hereof:

 
(a)            Section 2.1 of the Third Amendment is hereby amended effective as
of the date hereof by replacing each reference to “October 16, 2009” with
“November 6, 2009”; and
 
(b)           The Lenders hereby agree that the Borrower’s financial statements
for the quarter ended September 30, 2009 shall be due to the Administrative
Agent and each Lender not later than November 30, 2009, notwithstanding the
terms of Section 8.01(b) of the Credit Agreement.
 
2.
Representations and Warranties.  To induce Lenders and Administrative Agent to
enter into this letter agreement, Borrower hereby represents and warrants to
Lenders and Administrative Agent as follows:

 
(a)           Reaffirm Existing Representations and Warranties.  Except for the
representation and warranties made in Sections 7.04(b) and 7.22, each
representation and warranty of Borrower and its Subsidiaries contained in the
Credit Agreement is true and correct on the date hereof  and will be true and
correct after giving effect to this letter agreement (other than breaches which
result from the Specified Defaults).
 
(b)           Due Authorization; No Conflict.  The execution, delivery and
performance by Borrower of this letter agreement are within Borrower’s corporate
powers, have been duly authorized by all necessary action, require no action by
or in respect of, or filing with, any governmental body, agency or official and
do not violate or constitute a default under any provision of applicable law or
any material agreement binding upon Borrower or any of its Subsidiaries or
result in the creation or imposition of any Lien upon any of the assets of
Borrower or any of its Subsidiaries.
 
 
 

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Teton Energy Corporation
As of October 16, 2009
Page 2
 
 
(c)           Validity and Enforceability.  This letter agreement constitutes
the valid and binding obligation of Borrower enforceable in accordance with its
terms, except as (a) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditor’s rights generally, and (b) the
availability of equitable remedies may be limited by equitable principles of
general application.
 
(d)           No Default or Event of Default.  No Default or Event of Default
has occurred which is continuing, other than the Specified Defaults.
 
(e)           No Defense.  Borrower acknowledges that Borrower has no defense to
(i) Borrower’s obligation to pay any amount payable under any Loan Document when
due, or (ii) the validity, enforceability or binding effect against Borrower of
the Credit Agreement or any of the other Loan Documents or any Liens intended to
be created thereby.
 
2.           3.           Conditions Precedent.  The amendments contained in
Section 1 hereof shall be effective as of the date when the following conditions
precedent have been satisfied:
 
3.                                (a)           No Default.  No Default or Event
of Default shall have occurred which is continuing, other than the Specified
Defaults.
 
4.                                (b)           Documents.  Administrative Agent
shall have been provided with executed counterparts of this letter agreement and
such other documents, instruments and agreements, and Borrower and each of its
Subsidiaries shall have taken such actions, as the Administrative Agent may
reasonably require in connection with this letter agreement and the transactions
contemplated hereby.
 
5.           4.           Miscellaneous.  (a) Borrower hereby agrees to pay on
demand all reasonable fees and expenses incurred by the Administrative Agent
(including, without limitation, reasonable fees and expenses of counsel to the
Administrative Agent) in connection with the preparation, negotiation and
execution of this letter agreement and all related documents, (b) this letter
agreement may be executed in counterparts, and all parties need not execute the
same counterpart; however, no party shall be bound by this letter agreement
until a counterpart hereof has been executed by Borrower and Lenders; facsimiles
or other electronic transmission (e.g., pdf) shall be effective as originals,
(c) THIS LETTER AGREEMENT REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES
REGARDING THE MATTERS SET FORTH HEREIN AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES, (d) this letter agreement
constitutes a “Loan Document” under and as defined in Section 1.02 of the Credit
Agreement, and (e) this letter agreement shall be governed by, and construed in
accordance with, the laws of the State of Texas.
 
 
 

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Teton Energy Corporation
As of October 16, 2009
Page 3
 
 
Please evidence your agreement to each of the provisions of this letter
agreement by executing a counterpart hereof where indicated and returning an
executed counterpart to Valinda B. Wolfert, counsel for Administrative Agent,
via facsimile number (214) 999-7843 or via e-mail to vwolfert@velaw.com.
 
 [Signature Pages Follow]
 
 
 

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        TETON ENERGY CORPORATION,
as Borrower              
 
By:
         Dominic J. Bazile II,       President and Chief Operating Officer      
   

Each of the undersigned (i) consent and agree to this letter agreement and each
of the terms and provisions contained herein, and (ii) agree that the Loan
Documents to which it is a party shall remain in full force and effect and shall
continue to be the legal, valid and binding obligation of such Person,
enforceable against it in accordance with its terms.
 

  ACKNOWLEDGED AND AGREED TO BY:        
TETON NORTH AMERICA LLC,
as Guarantor
             
 
By:
        Dominic J. Bazile II,      
President and Chief Operating Officer
         

 

        TETON PICEANCE LLC,
as Guarantor              
 
By:
        Dominic J. Bazile II,       President and Chief Operating Officer      
   

 

        TETON DJ LLC,
as Guarantor              
 
By:
        Dominic J. Bazile II,       President and Chief Operating Officer      
   

 
 
 
[Signature Page to Letter Agreement – Teton Energy Corporation]

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        TETON WILLISTON LLC,
as Guarantor              
 
By:
        Dominic J. Bazile II,       President and Chief Operating Officer      
   

 

        TETON BIG HORN LLC,
as Guarantor              
 
By:
        Dominic J. Bazile II,       President and Chief Operating Officer      
   

 

        TETON DJCO LLC,
as Guarantor              
 
By:
        Dominic J. Bazile II,       President and Chief Operating Officer      
   

 
 
 
[Signature Page to Letter Agreement – Teton Energy Corporation]

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        JPMORGAN CHASE BANK, N.A.,
as Administrative Agent and a Lender              
 
By:
        John Runger,      
Managing Director
         

 
 
 
[Signature Page to Letter Agreement – Teton Energy Corporation]

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        ROYAL BANK OF CANADA,
as Syndication Agent and a Lender              
 
By:
      Name:        Title: 
 
         

 
 
 
[Signature Page to Letter Agreement – Teton Energy Corporation]

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        GUARANTY BANK AND TRUST COMPANY,
as a Lender              
 
By:
      Name:        Title: 
 
         

 
 
 
[Signature Page to Letter Agreement – Teton Energy Corporation]

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        U.S. BANK NATIONAL ASSOCIATION,
as a Lender              
 
By:
      Name:        Title: 
 
         

 
 
 
[Signature Page to Letter Agreement – Teton Energy Corporation]

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