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RESTRICTED ACCOUNT AND SECURITIES
ACCOUNT CONTROL AGREEMENT
 
(Access Restricted after Instructions)

 
This Restricted Account and Securities Account Control Agreement (this
“Agreement”), dated as of the date specified on the initial signature page of
this Agreement, is entered into by and among Rancher Energy Corporation
(“Company”), GasRock Capital, LLC (“Secured Party”) and Wells Fargo Bank,
National Association (“Bank”), and sets forth the rights of Secured Party and
the obligations of Bank with respect to the deposit accounts of Company at Bank
identified at the end of this Agreement as the Restricted Accounts (each
hereinafter referred to individually as a “Restricted Account” and collectively
as the “Restricted Accounts”) and each securities account of Company at Bank
linked to any Restricted Account by a sweep mechanism, provided that such
securities account either (i) bears an account number identical to the linked
Restricted Account or (ii) is separately identified by number at the end of this
Agreement as a Securities Account (each hereinafter referred to individually as
a “Securities Account” and collectively as “Securities Accounts”). As used in
this Agreement, the term “Restricted Account” also refers to each Eurodollar
Sweep Account or Preferred Option Sweep Account (each hereinafter an “Offshore
Account”) maintained by Company and linked to another Restricted Account by a
sweep mechanism.  Company and Secured Party understand and acknowledge that each
Restricted Account which is an Offshore Account is a subaccount, in the name of
Company, of an offshore U.S. Dollar-denominated deposit account of Bank
maintained with Bank’s Grand Cayman branch, and that any transfer of funds into
or out of the Offshore Account, pursuant to Section 4 of this Agreement or
otherwise, must pass through the domestic Restricted Account to which the
Offshore Account is specifically linked. Each account numerically designated as
a Restricted Account includes, for purposes of this Agreement, and without the
necessity of separately listing subaccount numbers, all subaccounts presently
existing or hereafter established for deposit reporting purposes and integrated
with the numerically designated Restricted Account by a protocol under which
deposits made through the subaccounts are posted only to the numerically
designated Restricted Account.

1.
Secured Party’s Interest in Restricted Accounts and Securities Accounts. Secured
Party represents that it is either (i) a lender who has extended credit to
Company and has been granted a security interest in the Restricted Accounts or
(ii) such a lender and/or the agent for a group of such lenders (the “Lenders”).
Company hereby confirms, and Bank hereby acknowledges, the security interest
granted by Company to Secured Party in all of Company’s right, title and
interest in and to (i) the Restricted Accounts and all funds now or hereafter on
deposit in or payable or withdrawable from the Restricted Accounts (the
“Restricted Account Funds”), and (ii) the Securities Accounts and all financial
assets, security entitlements, investment property, and other property and the
proceeds thereof now or at any time hereafter held in the Securities Accounts
(the “Securities Account Assets”). (As used herein, the terms "investment
property," "financial asset" and "security entitlement" shall have the
respective meanings set forth in the Uniform Commercial Code of the state whose
law governs this Agreement. The parties hereby expressly agree that all
property, including without limitation, cash, certificates of deposit and mutual
funds, at any time held in any of the Securities Accounts is to be treated as a
"financial asset".) Except as specifically provided otherwise in this Agreement,
Company has given Secured Party complete control over the Restricted Accounts,
the Restricted Account Funds, the Securities Accounts, and the Securities
Account Assets, and Company, Secured Party, and Bank hereby agree that Bank will
comply with instructions originated by Secured Party directing disposition of
funds in the Restricted Accounts and Securities Accounts without further consent
of Company. Company and Secured Party desire to enter into this Agreement to
further the arrangements between Secured Party and Company regarding the
Restricted Accounts and the Securities Accounts.

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2.
Access to Restricted Accounts and Securities Accounts. Secured Party hereby
agrees and directs Bank as of the date hereof that until Bank receives, and has
had a reasonable opportunity to act upon, written instructions from Secured
Party directing that Company no longer have access to any Restricted Account
Funds or Securities Account Assets (the “Instructions”), Company will be allowed
access to the Restricted Account Funds, and access to the Securities Account
Assets through redemption of Securities Account Assets and transfer of the
proceeds of such redemption in each case to the applicable Restricted Account.
After Bank receives the Instructions, (a) Company will no longer be allowed
access to the Restricted Account Funds or Securities Account Assets, and (b)
Secured Party will have the exclusive right to direct the disposition of all
Restricted Account Funds and Securities Account Assets; and Bank agrees to
transfer the Restricted Account Funds and Securities Account Assets to Secured
Party in accordance with the provisions of Section 4 below, subject to the
conditions set forth in this Agreement. Company agrees that the Restricted
Account Funds and Securities Account Assets should be paid and/or delivered to
Secured Party after Bank receives the Instructions, and hereby irrevocably
authorizes Bank to comply with the Instructions even if Company objects in any
way to the Instructions.

3.
Balance Reports. Bank agrees, at the telephone request of Secured Party on any
day on which Bank is open to conduct its regular banking business other than a
Saturday, Sunday or public holiday (a “Business Day”), to make available to
Secured Party a report (“Balance Report”) showing the available balance in the
Restricted Accounts and Securities Accounts as of the beginning of such Business
Day, either on-line or by facsimile transmission, at Bank’s option. Company
expressly consents to this transmission of information.

4.
Transfers to Secured Party. Bank agrees that on each Business Day after it
receives the Instructions it will transfer to the Secured Party’s account
specified at the end of this Agreement with the bank specified at the end of
this Agreement or (if no account is so specified) to such account as Secured
Party specifies in the Instructions (in either case, the “Secured Party
Account”) the full amount of the available balance in the Restricted Accounts at
the beginning of such Business Day, including all Restricted Account Funds and
Securities Account Assets in all Offshore Accounts or Securities Accounts linked
to the Restricted Accounts. Bank will use the Fedwire system to make each funds
transfer unless for any reason the Fedwire system is unavailable, in which case
Bank will determine the funds transfer system to be used in making each funds
transfer and the means by which each transfer will be made. Bank, Secured Party
and Company each agree that Bank will, without further consent of Company,
comply with (i) instructions given to Bank by Secured Party directing
disposition of funds in the Restricted Accounts, and (ii) entitlement orders
originated by Secured Party directing dispostion of Securities Account Assets in
the Securities Accounts, subject otherwise to the terms of this Agreement and
Bank’s standard policies, procedures and documentation in effect from time to
time governing the type of disposition requested. Except as otherwise required
by law, Bank will not agree with any third party to comply with instructions or
entitlement orders originated by such third party for disposition of funds in
any of the Restricted Accounts or Securities Account Assets in any of the
Securities Accounts.

5.
Returned Items. Secured Party and Company understand and agree that the face
amount (“Returned Item Amount”) of each Returned Item will be paid by Bank
debiting the Restricted Account into which such Returned Item was originally
deposited, without prior notice to Secured Party or Company. As used in this
Agreement, the term “Returned Item” means (i) any item deposited to a Restricted
Account and returned unpaid, whether for insufficient funds or for any other
reason, and without regard to the timeliness of such return or the occurrence or
timeliness of any drawee’s notice of non-payment; (ii) any item subject to a
claim against Bank of breach of transfer or presentment warranty under the
Uniform Commercial Code (as adopted in the applicable state) or Regulation CC
(12 C.F.R. §229), as in effect from time to time; (iii) any automated clearing
house (“ACH”) entry credited to a Restricted Account and returned unpaid or
subject to an adjustment entry under applicable clearing house rules, whether
for insufficient funds or for any other reason, and without regard to the
timeliness of such return or adjustment; (iv) any credit to a Restricted Account
from a merchant card transaction, against which a contractual demand for
chargeback has been made; and (v) any credit to a Restricted Account made in
error. Company agrees to pay all Returned Item Amounts immediately on demand,
without setoff or counterclaim, to the extent there are not sufficient funds in
the applicable Restricted Account to cover the Returned Item Amounts on the day
they are to be debited from the Restricted Account. Secured Party agrees to pay
all Returned Item Amounts within thirty (30) calendar days after demand, without
setoff or counterclaim, to the extent that (i) the Returned Item Amounts are not
paid in full by Company within fifteen (15) calendar days after demand on
Company by Bank, and (ii) Secured Party has received proceeds from the
corresponding Returned Items.

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6.
Settlement Items. Secured Party and Company understand and agree that the face
amount (“Settlement Item Amount”) of each Settlement Item will be paid by Bank
debiting the applicable Restricted Account, without prior notice to Secured
Party or Company. As used in this Agreement, the term “Settlement Item” means
(i) each check or other payment order drawn on or payable against any controlled
disbursement account or other deposit account at any time linked to a Restricted
Account by a zero balance account connection (each a “Linked Account”), which
Bank cashes or exchanges for a cashier’s check or official check over its
counters in the ordinary course of business prior to receiving the Instructions
and having had a reasonable opportunity to act on them, and which is presented
for settlement against the Restricted Account (after having been presented
against the Linked Account) after Bank receives the Instructions, (ii) each
check or other payment order drawn on or payable against a Restricted Account,
which, on the Business Day Bank receives the Instructions, Bank cashes or
exchanges for a cashier’s check or official check over its counters in the
ordinary course of business after Bank’s cutoff time for posting, (iii) each ACH
credit entry initiated by Bank, as originating depository financial institution,
on behalf of Company, as originator, prior to Bank having received the
Instructions and having had a reasonable opportunity to act on them, which ACH
credit entry settles after Bank receives the Instructions, and (iv) any other
payment order drawn on or payable against a Restricted Account, which Bank has
paid or funded prior to receiving the Instructions and having had a reasonable
opportunity to act on them, and which is first presented for settlement against
the Restricted Account in the ordinary course of business after Bank receives
the Instructions and has transferred Account Funds to Secured Party under
Section 4 of this Agreement. Company agrees to pay all Settlement Item Amounts
immediately on demand, without setoff or counterclaim, to the extent there are
not sufficient funds in the applicable Restricted Account to cover the
Settlement Item Amounts on the day they are to be debited from the Restricted
Account. Secured Party agrees to pay all Settlement Item Amounts within thirty
(30) calendar days after demand, without setoff or counterclaim, to the extent
that (i) the Settlement Item Amounts are not paid in full by Company within
fifteen (15) calendar days after demand on Company by Bank, and (ii) Secured
Party has received Account Funds under Section 4 of this Agreement.

7.
Bank Fees. Company agrees to pay all Bank’s fees and charges for the maintenance
and administration of the Restricted Accounts and Securities Accounts and for
the treasury management and other account services provided with respect to the
Restricted Accounts and Securities Accounts (collectively “Bank Fees”),
including, but not limited to, the fees for (a) the Balance Reports provided on
the Restricted Accounts and Securities Accounts, (b) the funds transfer services
received with respect to the Restricted Accounts, (c) Returned Items, (d) funds
advanced to cover overdrafts in the Restricted Accounts (but without Bank being
in any way obligated to make any such advances), and (e) duplicate bank
statements on the Restricted Accounts. The Bank Fees will be paid by Bank
debiting one or more of the Restricted Accounts on the Business Day that the
Bank Fees are due, without notice to Secured Party or Company. If there are not
sufficient funds in the Restricted Accounts to cover fully the Bank Fees on the
Business Day they are debited from the Restricted Accounts, such shortfall or
the amount of such Bank Fees will be paid by Company sending Bank a check in the
amount of such shortfall or such Bank Fees, without setoff or counterclaim,
within fifteen (15) calendar days after demand of Bank. After Bank receives the
Instructions, to the extent Secured Party has received proceeds from the
Restricted Accounts, Secured Party agrees to pay the Bank Fees within thirty
(30) calendar days after demand, without setoff or counterclaim, to the extent
such Bank Fees are not paid in full by Company by check within fifteen (15)
calendar days after demand on Company by Bank.

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8.
Account Documentation. Secured Party and Company agree that, except as
specifically provided in this Agreement, the Restricted Accounts and Securities
Accounts will be subject to, and Bank’s operation of the Restricted Accounts and
Securities Accounts will be in accordance with, the terms and provisions of (i)
Bank’s Commercial Account Agreement or other deposit account agreement governing
the Restricted Accounts and (ii) Bank’s Acceptance of Services, Master Agreement
for Treasury Management Services, and applicable sweep option Service
Description or securities account agreement governing the Offshore Accounts and
Securities Accounts (collectively, the “Account Documentation”).

9.
Bank Statements. After Bank receives the Instructions, Bank will, upon receiving
a written request from Secured Party, send to Secured Party by United States
mail, at the address indicated for Secured Party after its signature to this
Agreement, duplicate copies of all bank statements on the Restricted Accounts
and Securities Accounts which are sent to Company. Company and/or Secured Party
will have thirty (30) calendar days after receipt of a bank statement to notify
Bank of an error in such statement. Bank’s liability for such errors is limited
as provided in the “Limitation of Liability” section of this Agreement.

10.
Partial Subordination of Bank’s Rights. Bank hereby subordinates to the security
interest of Secured Party in the Restricted Accounts and Securities Accounts (i)
any security interest which Bank may have or acquire in the Restricted Accounts
or Securities Accounts, and (ii) any right which Bank may have or acquire to set
off or otherwise apply any Restricted Account Funds or Securities Account Assets
against the payment of any indebtedness from time to time owing to Bank from
Company, except for debits to the Restricted Accounts permitted under this
Agreement for the payment of Returned Item Amounts, Settlement Item Amounts or
Bank Fees.

11.
Bankruptcy Notice; Effect of Filing. If Bank at any time receives notice of the
commencement of a bankruptcy case or other insolvency or liquidation proceeding
by or against Company (a “Bankruptcy Notice”), Bank will continue to comply with
its obligations under this Agreement, except to the extent that any action
required of Bank under this Agreement is prohibited under applicable bankruptcy
laws or regulations or is stayed pursuant to the automatic stay imposed under
the United States Bankruptcy Code or by order of any court or agency. With
respect to any obligation of Secured Party hereunder which requires prior demand
upon Company, the commencement of a bankruptcy case or other insolvency or
liquidation proceeding by or against Company shall automatically eliminate the
necessity of such demand upon Company by Bank, and shall immediately entitle
Bank to make demand on Secured Party with the same effect as if demand had been
made upon Company and the time for Company’s performance had expired.

12.
Legal Process, Legal Notices and Court Orders. Bank will comply with any legal
process, legal notice or court order it receives if Bank determines in its sole
discretion that the legal process, legal notice or court order is legally
binding on it.

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13.
Indemnification for Following Instructions. Secured Party and Company each agree
that, notwithstanding any other provision of this Agreement, Bank will not be
liable to Secured Party or Company for any losses, liabilities, damages, claims
(including, but not limited to, third party claims), demands, obligations,
actions, suits, judgments, penalties, costs or expenses, including, but not
limited to, attorneys’ fees, (collectively, “Losses and Liabilities”) suffered
or incurred by Secured Party or Company as a result of or in connection with,
(a) Bank complying with any binding legal process, legal notice or court order
referred to in Section 12 of this Agreement, (b) Bank following any instruction
or request of Secured Party, or (c) Bank complying with its obligations under
this Agreement. Company will indemnify Bank against any Losses and Liabilities
Bank may suffer or incur as a result of or in connection with any of the
circumstances referred to in clauses (a) through (c) of this Section 13. To the
extent not paid by Company within fifteen (15) calendar days after demand, and
to the extent Secured Party has received proceeds from the Restricted Accounts,
Secured Party will indemnify Bank against any Losses and Liabilities Bank may
suffer or incur as a result of or in connection with any of the circumstances
referred to in clause (b) of this Section 13.

14.
No Representations or Warranties of Bank. Bank agrees to perform its obligations
under this Agreement in a manner consistent with the quality provided when Bank
performs similar services for its own account. However, Bank will not be
responsible for the errors, acts or omissions of others, such as communications
carriers, correspondents or clearinghouses through which Bank may perform its
obligations under this Agreement or receive or transmit information in
performing its obligations under this Agreement. Secured Party and Company also
understand that Bank will not be responsible for any loss, liability or delay
caused by wars, failures in communications networks, labor disputes, legal
constraints, fires, power surges or failures, earthquakes, civil disturbances or
other events beyond Bank’s control. BANK MAKES NO EXPRESS OR IMPLIED
REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE SERVICE OTHER THAN THOSE
EXPRESSLY SET FORTH IN THIS AGREEMENT.

15.
Limitation of Liability. Bank will not be responsible for any Losses and
Liabilities due to any cause other than its own negligence or breach of this
Agreement, in which case its liability to Secured Party and Company shall,
unless otherwise provided by any law which cannot be varied by contract, be
limited to direct money damages in an amount not to exceed ten (10) times all
the Bank Fees charged or incurred during the calendar month immediately
preceding the calendar month in which such Losses and Liabilities occurred (or,
if no Bank Fees were charged or incurred in the preceding month, the Bank Fees
charged or incurred in the month in which the Losses and Liabilities occurred).
Company will indemnify Bank against all Losses and Liabilities suffered or
incurred by Bank as a result of third party claims; provided, however, that to
the extent such Losses and Liabilities are directly caused by Bank’s negligence
or breach of this Agreement such indemnity will only apply to those Losses and
Liabilities which exceed the liability limitation specified in the preceding
sentence. The limitation of Bank’s liability and the indemnification by Company
set out above will not be applicable to the extent any Losses and Liabilities of
any party to this Agreement are directly caused by Bank’s gross negligence or
willful misconduct. IN NO EVENT WILL BANK BE LIABLE FOR ANY SPECIAL,
CONSEQUENTIAL, INCIDENTAL, INDIRECT OR PUNITIVE DAMAGES, WHETHER ANY CLAIM IS
BASED ON CONTRACT OR TORT, WHETHER THE LIKELIHOOD OF SUCH DAMAGES WAS KNOWN TO
BANK AND REGARDLESS OF THE FORM OF THE CLAIM OR ACTION, INCLUDING, BUT NOT
LIMITED TO, ANY CLAIM OR ACTION ALLEGING GROSS NEGLIGENCE, WILLFUL MISCONDUCT,
FAILURE TO EXERCISE REASONABLE CARE OR FAILURE TO ACT IN GOOD FAITH. Any action
against Bank by Company or Secured Party under or related to this Agreement must
be brought within twelve (12) months after the cause of action accrues.

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16.
Termination. This Agreement and the Service may be terminated by Secured Party
or Bank at any time by either of them giving thirty (30) calendar days prior
written notice of such termination to the other parties to this Agreement at
their contact addresses specified after their signatures to this Agreement;
provided, however, that this Agreement and the Service may be terminated
immediately upon written notice (i) from Bank to Company and Secured Party
should Company or Secured Party fail to make any payment when due to Bank from
Company or Secured Party under the terms of this Agreement, or (ii) from Secured
Party to Bank upon termination or release of Secured Party’s security interest
in the Restricted Accounts and Securities Accounts. Company’s and Secured
Party’s obligation to report errors in funds transfers and bank statements and
to pay Returned Items Amounts, Settlement Item Amounts, and Bank Fees, as well
as the indemnifications made, and the limitations on the liability of Bank
accepted, by Company and Secured Party under this Agreement will continue after
the termination of this Agreement and/or the closure of the Restricted Accounts
and/or Securities Accounts with respect to all the circumstances to which they
are applicable existing or occurring before such termination or closure, and any
liability of any party to this Agreement, as determined under the provisions of
this Agreement, with respect to acts or omissions of such party prior to such
termination or closure will also survive such termination or closure. Upon any
termination of this Agreement and the Service or closure of the Restricted
Accounts all available balances in the Restricted Accounts (including proceeds
from redemption of all Securities Account Assets) on the date of such
termination or closure will be transferred to Secured Party as requested by
Secured Party in writing to Bank.

17.
Modifications, Amendments, and Waivers. This Agreement may not be modified or
amended, or any provision thereof waived, except in a writing signed by all the
parties to this Agreement.

18.
Notices. All notices from one party to another shall be in writing, or be made
by a tele-communications device capable of creating a written record, shall be
delivered to Company, Secured Party and/or Bank at their contact addresses
specified after their signatures to this Agreement, or any other address of any
party notified to the other parties in writing, and shall be effective upon
receipt. Any notice sent by a party to this Agreement to another party shall
also be sent to all other parties to this Agreement. Bank is authorized by
Company and Secured Party to act on any instructions or notices received by Bank
if (a) such instructions or notices purport to be made in the name of Secured
Party, (b) Bank reasonably believes that they are so made, and (c) they do not
conflict with the terms of this Agreement as such terms may be amended from time
to time, unless such conflicting instructions or notices are supported by a
court order.

19.
Successors and Assigns. Neither Company nor Secured Party may assign or transfer
its rights or obligations under this Agreement to any person or entity without
the prior written consent of Bank, which consent will not be unreasonably
withheld or delayed. Bank may not assign or transfer its rights or obligations
under this Agreement to any person or entity without the prior written consent
of Secured Party, which consent will not be unreasonably withheld or delayed;
provided, however, that no such consent will be required if such assignment or
transfer takes place as part of a merger, acquisition or corporate
reorganization affecting Bank.

20.
Governing Law. Company and Secured Party understand that Bank’s provision of the
Service under this Agreement is subject to federal laws and regulations. To the
extent that such federal laws and regulations are not applicable this Agreement
shall be governed by and be construed in accordance with the laws of the state
of Texas, without regard to conflict of laws principles.

21.
Severability. To the extent that this Agreement or the Service to be provided
under this Agreement are inconsistent with, or prohibited or unenforceable
under, any applicable law or regulation, they will be deemed ineffective only to
the extent of such prohibition or unenforceability and be deemed modified and
applied in a manner consistent with such law or regulation. Any provision of
this Agreement which is deemed unenforceable or invalid in any jurisdiction
shall not affect the enforceability or validity of the remaining provisions of
this Agreement or the same provision in any other jurisdiction.

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22.
Counterparts. This Agreement may be executed in any number of counterparts each
of which shall be an original with the same effect as if the signatures thereto
and hereto were upon the same instrument.

23.
Entire Agreement. This Agreement, together with the Account Documentation,
contains the entire and only agreement among all the parties to this Agreement
and between Bank and Company, and Bank and Secured Party, with respect to (a)
the Service, (b) the interest of Secured Party and the Lenders in the Restricted
Accounts and Restricted Account Funds, (c) the interest of Secured Party and the
Lenders in the Securities Accounts and Securities Account Assets, and (c) Bank’s
obligations to Secured Party and the Lenders in connection with the Restricted
Accounts and Securities Accounts.

[SIGNATURE PAGE FOLLOWS]

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This Agreement has been signed by the duly authorized officers or
representatives of Company, Secured Party and Bank on the date specified below.

Date: October 16, 2007
 
Restricted Account Number(s):
4121341861
Securities Account Number(s):
4121341861
Secured Party Account Number:
371880
Bank of Secured Party Account:
Amegy Bank of Texas, ABA #113012258

RANCHER ENERGY CORPORATION
 
GASROCK CAPITAL, LLC
By: /s/ John Works
 
By: /s/ Marshall Lynn Bass
Name: John Works
 
Name: Marshall Lynn Bass
Title: President & Chief Executive Officer
 
Title: Principal

Address for Notices:
 
Address for Notices:
999 18th Street, Suite 3400
 
1301 McKinney, Suite 2800
Denver, Colorado 80202
 
Houston, Texas 77010
Attention: John Works, President/CEO
 
Attention: Marshall Lynn Bass, Principal

WELLS FARGO BANK, NATIONAL
ASSOCIATION
   
By: /s/ Tim Green
   
Name: Tim Green
   
Title: Relationship Manager
   

Address for Notices:
   
1700 Lincoln Street, 6th Floor
   
Denver, Colorado 80203
   
Attention: Tim Green, Relationship Manager
   

 
 
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