Native American Energy Group, Inc. (“NAGP”)
High Capital Funding, LLC (“HCF”)
November 8, 2011
Loan Terms Agreement

1.  
In the event NAGP does not receive funding of at least $450,000 between
Monday,  November 7, 2011 and Friday,  November 25, 2011 from one or more of the
following sources, HCF will provide Secured Loans to NAGP to make up the
shortfall:

a.    
Closing of the remaining $200,000 of the  $750,000 bridge loan financing
pursuant to the Financing Agreement dated as of July 25, 2011 by and
among  NAGP, HCF as Lead Investor and David A. Rapaport as the Escrow Agent, and
the Investors signatory thereto (“the Bridge Loan Financing”) for Bridge Units
of  NAGP, each Bridge Unit comprised of a $25,000 Bridge Note and 50,000 shares
of the Company’s common stock at a price of $25,000 per Bridge Unit;

b.    
Factoring and/or receivables financing of sales of oil to Shell Oil.  NAGP will
cooperate fully in arranging the factoring/receivables financing of the Shell
Oil Receivables and shall execute all documents needed to do so.  HCF and NAGP
shall use their respective best efforts to secure a receivables lender not
affiliated with HCF by Wednesday November 16, 2011.  However, if such an
arrangement is not concluded by Wednesday, November 16, 2011, NAGP and HCF shall
enter into a secured receivables financing agreement.

c.    
Private sales of NAGP common stock, and convertible securities, with proceeds to
NAGP of not less than $0.50 per common share, and any warrants with a strike
price of not less than $0.50 for each common share.

d.    
Any other fundings approved for this purpose in writing by NAGP and HCF.

In no way is HCF guaranteeing financing by any third parties; HCF is merely
acting as an investor should sufficient third party financing not be available.

2.  
The funds are to be received by NAGP on approximately the following schedule:

 

 
a. 
Mon Nov 7, 2011
$ 60,000
         
b. 
Fri Nov 11, 2011
$ 90,000
         
c. 
Fri Nov 18, 2011
up to $150,000 as requested by NAGP
         
d. 
Fri Nov 25, 2011
up to $150,000 as requested by NAGP

 
3.  
HCF shall lend NAGP $371,000 on one or more secured notes (the “Secured
Loans”).  The new Secured Loans shall be secured with the same collateral as the
Bridge Notes, and shall be subordinate only to such Bridge Notes.  The Secured
Loans shall bear interest at the rate of 6.25% per year, and shall mature on
February 29, 2012.  The Secured Loans shall be prepaid at the final closing of
any equity and/or debt financing of at least $3,000,000 which occurs after
November 30, 2011; provided, however, that any remaining outstanding Bridge
Notes shall be repaid prior to the repayment of any of HCF’s Secured Loans.

 
 
 

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4.  
The principal and interest of the $351,000 of NAGP unsecured demand loans to HCF
shall be repaid on or before Tuesday, November 15, 2011.

5.             a.
NAGP has represented to HCF, that subject to NAGP’s timely receipt of funding
pursuant to 2.a. and 2.b. above, commencing no later than Friday, November 11,
2011, each of the Sandvick 1-11and Wright 5-35 wells will be producing not less
than 60 bbls a day of oil per each 24 hour period.  For purposes of the
preceding sentence, “producing” means that the pumpjack is operating
continuously as scheduled and fluids are being pumped from the well to the
heater treater as scheduled, resulting in saleable oil having flowed into the
oil tanks, which will be collected by Shell Oil from time to time.

b.    
On or before 6PM EDT on Thursday, November 17, 2011 NAGP shall deliver to HCF
the written certification (Certification) of its CEO and CFO/COO to the
following:

i.     
The total oil production for each of the Sandvick  and the Wright wells from
Friday, November 11, 2011 through Thursday November 17, 2011, specifying the
number of bbls of oil produced by each well per day during that time period
(Measurement Period);

ii.    
The total number of hours per day that the pumpjack on each well was
operating  during the Measurement Period; and for any periods a pumpjack was not
operating, the reason therefor, and corrective action taken or to be taken, if
necessary.

 
c.
If the Certification, provided timely to HCF, states that either or both of the
Sandvick and Wright wells has been in full and continuous non-interrupted
production (excluding scheduled or unscheduled well maintenance) during the
Measurement Period and either or both has produced an average of at least 50
bbls of oil per day per well during the Measurement Period, then HCF shall be
required to provide the funding as per 2.c. above, as requested.

 
d.
On or before 6PM EST on Thursday, November 24, 2011 NAGP shall deliver to HCF
the written certification (Second Certification) of its CEO and CFO/COO to the
following:

i.     
The total oil production for each of the Sandvick  and the Wright wells from
Friday, November 18, 2011 through Thursday November 24, 2011, specifying the
number of bbls of oil produced by each well per day during that time period
(Second Measurement Period);

 
 
 

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ii.    
The total number of hours per day that the pumpjack on each well was
operating  during the Second Measurement Period; and for any periods a pumpjack
was not operating, the reason therefor, and corrective action taken or to be
taken, if necessary.

e.    
If the Second Certification, provided timely to HCF, states that both the
Sandvick and Wright wells have been in full and continuous non-interrupted
production (excluding scheduled or unscheduled well maintenance) during the
Second Measurement Period, and have produced an average of at least 50 bbls of
oil per day per well during the Second Measurement Period then HCF shall be
required to provide the funding set forth in 2.d. above, as requested.

f.     
In the event that either or both of the milestones set forth in 5.c. or 5.e.
have not been satisfied by November 17, 2011 or November 24, 2011, respectively,
then HCF may in its sole discretion, but is not required to, provide the
fundings in whole or in part in accordance with 2.c. and/or 2.d. above.

 
g.
In the event that either or both of the milestones set forth in 5.c. or 5.e.
have not been satisfied by November 17, 2011 or November 24, 2011, respectively,
then NAGP shall be required to deliver to HCF, within 24 hours of a written
request therefor, a schedule of the specific work, and the cost therefor, and
equipment and the cost therefor, required to place the Sandvick, or the Wright
wells, or both of them into continuous full production.

 
h.
In an effort to get the Sandvick and/or Wright wells into continuous full
production, HCF may, in its sole discretion, provide funding to NAGP, and/ or
may pay directly for equipment and service providers as necessary, such amounts
to be evidenced by additional Secured Loan notes.

6.  
In consideration of HCF’s funding commitment set forth in 2. above, NAGP shall
issue and deliver to HCF, in lieu of equity kicker shares (as provided for in
the Bridge Loan Financing), five year cashless exercise warrants to purchase
shares of NAGP common stock at par value, the exercise terms of which shall
restrict HCF from being the beneficial owner of more than 9.95 % of NAGP common
stock immediately following any warrant exercise.  Each warrant shall be deemed
to have a value for tax purposes of $0.10.

a.  
HCF shall receive 371,000 warrants in consideration of the $371,000 of Secured
Loans being made in accordance with 3. above;

 
 

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b.    
HCF shall receive one warrant for each $1.00 of additional Secured Loans made
pursuant to this commitment (not including any receivables financing or
factoring of NAGP Shell Oil receivables); provided that if the milestones set
forth in 5.c. or 5.e. above are not satisfied, HCF shall receive two warrants
for each $1.00 of additional Secured Loans which it elects to make pursuant to
this Loan Terms Agreement.

7.              a.
NAGP represents and warrants that it has not issued any shares of common stock
for less than $0.50 per share, other than in connection with the Bridge Loans,
from July 25, 2011 to November 8, 2011.  Subject to Sections 7(b) and 7(c)
below, NAGP shall not issue any shares, convertible securities, or warrants for
a purchase price or strike price of less than $0.50 per share of common stock
for a period commencing on November 8, 2011 and terminating on November 22,
2011.  However, should NAGP find it necessary to issue any shares, convertible
securities, or warrants with a purchase price or a strike price of less than
$0.50 per share of common stock, then the holders of NAGP common stock who have
received such common stock as either: (i) part of Bridge Units pursuant to the
Bridge Loan Financing; or (ii) HCF in accordance with the warrants issued
pursuant to this Loan Terms Agreement; and (iii) the purchasers of units of
preferred stock and common stock pursuant to the Intended Equity Financing
described in Subsection 7.b.ii below , shall be entitled to receive, without
further payment, that number of additional common shares, and in the case of HCF
under this Loan Terms Agreement, warrants (the “Dilution Shares”) that will
result in their common stock ownership (including upon exercise of any warrants)
representing the same percentage ownership of NAGP that existed immediately
prior to the sale of shares of common stock or instruments convertible into
common stock at less than $0.50 per share, or the sale of any warrants with a
strike price of less than $0.50 per share.

 
b.
The termination of the provisions of Section 7(a) (the “Anti-Dilution
Provisions”) shall be extended automatically upon the achievement of the
following milestones:

i.     
Upon the closing of an aggregate of $750,000 of the Bridge Loan Financing by
November 22, 2011, of which $550,000 has been closed on as of the date of this
Loan Terms Agreement, the termination of the Anti-Dilution Provisions shall be
extended to January 13, 2012;

ii.    
Upon the receipt by NAGP by January 13, 2012 of at least $1,500,000 in an equity
financing of at least $3,000,000 which occurs after November 15, 2011 (the
“Intended Equity Financing”), the termination of the Anti-Dilution Provisions
shall be extended to February 15, 2012; and

iii.   
Upon the receipt by NAGP by February 15, 2012 of at least $3,000,000 in
aggregate in the Intended Equity Financing, the termination of the Anti-Dilution
Provisions shall be extended to October 31, 2012.

 
c.
Notwithstanding Section 7(a), NAGP may issue or reserve for issuance shares,
convertible securities, or warrants for a purchase price or strike price of less
than $0.50 per share of common stock (i) to employees, directors and consultants
of NAGP and its affiliates pursuant to the 2011 Equity Incentive Plan adopted by
the NAGP’s Board of Directors (the “Board”) effective June 6, 2011; (ii) to
employees, directors, and consultants of NAGP and its affiliates pursuant to any
other stock purchase or stock option plans or agreements, or other incentive
stock arrangements, approved by the Board and HCF; (iii) as a result of stock
splits, stock dividends, or similar transactions; (iv) upon the conversion of
any of the Company’s presently outstanding Series A Convertible Preferred stock;
(v) in any transaction in which the exemption from the Anti-Dilution Provisions
is approved by HCF; (vi) as contemplated in Sections 1 and 5 of this Loan Terms
Agreement; and (vii) issued to plaintiffs in connection with the settlement of
Steven Freifeld, et al. v. Native American Energy Group, Inc., et al., (Index
No. 005503-2010) in order to extend the deadline for the release of  shares
being held in escrow pursuant to the confidential conditional settlement
agreement between the parties to such litigation or to otherwise settle such
litigation.

 
 
 

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Both parties agree to execute such Further Documents as necessary or desirable
to carry out the intent of the above terms.  In the event there is a conflict
between such Further Documents and this Loan Terms Agreement, the provisions of
this Loan Terms Agreement shall govern.

IN WITNESS WHEREOF, the parties hereto have duly executed this Loan Terms
Agreement as of the date set forth below by each signature.

Native American Energy Group, Inc.

By:
/s/ Joseph G. D’Arrigo
 
Date:
11-11-11    
Joseph G. D’Arrigo, CEO
                     
/s/ Raj Nanvaan
 
Date:
11-11-11    
Raj Nanvaan, CFO & COO
                                High Capital Funding, LLC                      
         
By:
 /s/ Frank E. Hart
 
Date:
11-11-11    
Frank E. Hart, President
         
Profit Concepts, Ltd,. Manager
       

 
 
 

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