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Exhibit 10.7
 
GUARANTY
 
This GUARANTY (as amended, restated, supplemented, or otherwise modified and in
effect from time to time, this “Guaranty”) is made as of this 10th day of
September, 2007, jointly and severally, by each of GULF WESTERN PETROLEUM LP, a
Texas limited partnership (“Gulf Western”), WHARTON RESOURCES LLC, a Delaware
limited liability company (“Wharton GP”), WHARTON RESOURCES CORP., a Delaware
corporation (“Wharton LP”; Gulf Western, Wharton GP and Wharton LP, together
with each other person or entity who becomes a party to this Guaranty by
execution of a joinder in the form of Exhibit A attached hereto, is referred to
individually as a “Guarantor” and collectively as the “Guarantors”) in favor of
METAGE FUNDS LIMITED, on its own behalf and in its capacity as collateral agent
(together with its successors and assigns in such capacity, the “Collateral
Agent”) for the benefit of the entities identified on the Schedule of Buyers
attached to the Purchase Agreement defined below, and NCIM LIMITED, (in each
case together with their successors and assigns, the “Buyers”).
 
W I T N E S S E T H:
 
WHEREAS, as of the date hereof, Buyers have made loans and certain other
financial accommodations (collectively, the “Loans”) to GULF WESTERN PETROLEUM
CORPORATION, a Nevada corporation (the “Company”), as evidenced by that certain
senior secured convertible note of even date herewith in an original principal
amount of $3,700,000 (such note, together with any promissory notes or other
securities issued in exchange or substitution therefor or replacement thereof,
and as any of the same may be amended, supplemented, restated or modified and in
effect from time to time, the “Notes”);
 
WHEREAS, the Notes are being acquired by Buyers pursuant to a Securities
Purchase Agreement dated as of even date herewith among the Buyers and the
Company (as the same may be amended, restated, supplemented or otherwise
modified from time to time, the “Purchase Agreement”);
 
WHEREAS, pursuant to a Pledge Agreement of even date herewith (as the same may
be amended, restated, supplemented or otherwise modified and in effect from time
to time, the “Company Pledge Agreement”) by the Company in favor of the
Collateral Agent, the Company has pledged a lien on and security interest in all
of the membership interest in and capital stock as the case may be, of each of
Wharton GP and Wharton LP;
 
WHEREAS, pursuant to a Pledge Agreement of even date herewith (as the same may
be amended, restated, supplemented or otherwise modified and in effect from time
to time, the “Wharton Pledge Agreement”; and together with the Company Pledge
Agreement, the “Pledge Agreements”) by Wharton GP and Wharton LP in favor of the
Collateral Agent, Wharton GP and Wharton LP have pledged a lien on and security
interest in all of the partnership interests in of Gulf Western;
 
WHEREAS, pursuant to a Security Agreement of even date herewith (as the same may
be amended, restated, supplemented or otherwise modified and in effect from time
to time, the “Security Agreement”) by the “Debtors” (as defined therein) in
favor of the Collateral Agent, such Debtors have granted the Collateral Agent,
for its benefit and the benefit of the Buyers, a first priority security
interest in, lien upon and pledge of each of their rights in the Collateral (as
defined in the Security Agreement); and
 
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WHEREAS, the Guarantors are direct or indirect subsidiaries of the Company and,
as such, will derive substantial benefit and advantage from the Loans and other
financial accommodations available to the Company set forth in the Purchase
Agreement, the Notes and the other Transaction Documents, and it will be to each
Guarantor’s direct interest and economic benefit to assist the Company in
procuring said Loans and other financial accommodations from Buyers.
 
NOW, THEREFORE, for and in consideration of the premises and in order to induce
Buyers to make the Loans, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each Guarantor hereby
jointly and severally agrees as follows:
 
1.           Definitions:  Capitalized terms used herein without definition and
defined in the Purchase Agreement are used herein as defined therein.  In
addition, as used herein:
 
 “Bankruptcy Code” shall mean the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. §101, et seq.), as amended and in effect from time to time thereunder.
 
 “Obligations” shall mean (i) all obligations, liabilities and indebtedness of
every nature of the Company from time to time owed or owing to the Buyers and
Collateral Agent, under the Security Documents, the Purchase Agreement, the
Notes, the Loans, the Warrants, the Registration Rights Agreement and the other
Transaction Documents, including, without limitation, the principal amount of
all debts, claims and indebtedness, accrued and unpaid interest and all fees,
taxes, indemnities, costs and expenses, whether primary, secondary, direct,
contingent, fixed or otherwise, heretofore, now and/or from time to time
hereafter owing, due or payable under the Transaction Documents, whether before
or after the filing of a bankruptcy, insolvency or similar proceeding under
applicable federal, state, foreign or other law and whether or not an allowed
claim in any such proceeding, and (ii) all obligations, liabilities and
indebtedness of every nature of the Guarantors from time to time owed or owing
to the Buyers and/or Collateral Agent, including, without limitation, all
obligations, liabilities and indebtedness of every nature of the Guarantors
under or in respect of this Guaranty, the Pledge Agreements, the Security
Agreement, the Purchase Agreement, the Notes, the Loans, the Warrants, the
Registration Rights Agreement, the other Security Documents and the other
Transaction Documents to which they are a party, as the case may be, including,
without limitation, the principal amount of all debts, claims and indebtedness,
accrued and unpaid interest and all fees, taxes, indemnities, costs and
expenses, whether primary, secondary, direct, contingent, fixed or otherwise,
heretofore, now and/or from time to time hereafter owing, due or payable under
the Transaction Documents, whether before or after the filing of a bankruptcy,
insolvency or similar proceeding under applicable federal, state, foreign or
other law and whether or not an allowed claim in any such proceeding.

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2.           Guaranty of Payment.
 
(a)           Each Guarantor, jointly and severally, hereby unconditionally and
irrevocably guaranties the full and prompt payment and performance to Buyers and
Collateral Agent, on behalf of itself and in its capacity as agent for the
benefit of Buyers, when due, upon demand, at maturity or by reason of
acceleration or otherwise and at all times thereafter, of any and all of the
Obligations.
 
(b)           Each Guarantor acknowledges that valuable consideration supports
this Guaranty, including, without limitation, the consideration set forth in the
recitals above, as well as any commitment to lend, extension of credit or other
financial accommodation, whether heretofore or hereafter made by Buyers to the
Company; any extension, renewal or replacement of any of the Obligations; any
forbearance with respect to any of the Obligations or otherwise; any
cancellation of an existing guaranty; any purchase of any of the Company’s
assets by any Buyer or Collateral Agent; or any other valuable consideration.
 
(c)           Each Guarantor agrees that all payments under this Guaranty shall
be made in United States currency and in the same manner as provided for the
Obligations.
 
(d)           Notwithstanding any provision of this Guaranty to the contrary, it
is intended that this Guaranty, and any interests, liens and security interests
granted by Guarantors as security for this Guaranty, not constitute a
“Fraudulent Conveyance” (as defined below) in the event that this Guaranty or
such interest is subject to the Bankruptcy Code or any applicable fraudulent
conveyance or fraudulent transfer law or similar law of any
state.  Consequently, Guarantors, Collateral Agent and Buyers agree that if this
Guaranty, or any such interests, liens or security interests securing this
Guaranty, would, but for the application of this sentence, constitute a
Fraudulent Conveyance, this Guaranty and each such lien and security interest
shall be valid and enforceable only to the maximum extent that would not cause
this Guaranty or such interest, lien or security interest to constitute a
Fraudulent Conveyance, and this Guaranty shall automatically be deemed to have
been amended accordingly at all relevant times.  For purposes hereof,
“Fraudulent Conveyance” means a fraudulent conveyance under Section 548 of the
Bankruptcy Code or a fraudulent conveyance or fraudulent transfer under the
provisions of any applicable fraudulent conveyance or fraudulent transfer law or
similar law of any state, as in effect from time to time.
 
3.           Costs and Expenses. Each Guarantor, jointly and severally, agrees
to pay on demand, all costs and expenses of every kind incurred by any Buyer or
Collateral Agent: (a) in enforcing this Guaranty, (b) in collecting any of the
Obligations from the Company or any Guarantor, (c) in realizing upon or
protecting or preserving any collateral for this Guaranty or for payment of any
of the Obligations, and (d) in connection with any amendment of, modification
to, waiver or forbearance granted under, or enforcement or administration of any
Transaction Document or for any other purpose in connection with any Transaction
Document.  “Costs and expenses” as used in the preceding sentence shall include,
without limitation, reasonable attorneys’ fees incurred by any Buyer or
Collateral Agent in retaining outside counsel at reasonable rates customarily
charged for such matters for advice, suit, appeal, any insolvency or other
proceedings under the Bankruptcy Code or otherwise, or for any purpose specified
in the preceding sentence.

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4.           Nature of Guaranty: Continuing, Absolute and Unconditional.
 
(a)           This Guaranty is and is intended to be a continuing guaranty of
payment of the Obligations, and not of collectibility, and is intended to be
independent of and in addition to any other guaranty, indorsement, collateral or
other agreement held by Buyers or Collateral Agent therefor or with respect
thereto, whether or not furnished by a Guarantor.  None of Buyers and Collateral
Agent shall be required to prosecute collection, enforcement or other remedies
against Company, any other Guarantor or guarantor of the Obligations or any
other person or entity, or to enforce or resort to any of the Collateral or
other rights or remedies pertaining thereto, before calling on a Guarantor for
payment.  The obligations of each Guarantor to repay the Obligations hereunder
shall be unconditional.  Each Guarantor shall defer its right of subrogation
with respect to any payments made by any Guarantor hereunder until repayment of
the Obligations, and until such time hereby waives any benefit of, and any right
to participate in, any security or collateral given to Buyers to secure payment
of the Obligations, and each Guarantor agrees that it will not take any action
to enforce any obligations of the Company to any Guarantor prior to the
Obligations being finally and irrevocably paid in full in cash, provided that,
in the event of the bankruptcy or insolvency of the Company, Collateral Agent,
for the benefit of itself and Buyers, and Buyers shall be entitled
notwithstanding the foregoing, to file in the name of any Guarantor or in its
own name a claim for any and all indebtedness owing to a Guarantor by the
Company (exclusive of this Guaranty), vote such claim and to apply the proceeds
of any such claim to the Obligations.
 
(b)           For the further security of Buyers and without in any way
diminishing the liability of the Guarantors, following the occurrence but only
during the continuation of an Event of Default, all debts and liabilities,
present or future of the Company to the Guarantors and all monies received from
the Company or for its account by the Guarantors in respect thereof shall be
received in trust for Buyers and Collateral Agent and forthwith upon receipt
shall be paid over to Collateral Agent, for its benefit and in its capacity as
collateral agent for the benefit of Buyers, until all of the Obligations have
been paid in full in cash.  This assignment and postponement is independent of
and severable from this Guaranty and shall remain in full effect whether or not
any Guarantor is liable for any amount under this Guaranty.
 
(c)           This Guaranty is absolute and unconditional and shall not be
changed or affected by any representation, oral agreement, act or thing
whatsoever, except as herein provided.  This Guaranty is intended by the
Guarantors to be the final, complete and exclusive expression of the guaranty
agreement between the Guarantors and Buyers.  No modification or amendment of
any provision of this Guaranty shall be effective against any party hereto
unless in writing and signed by a duly authorized officer of such party.
 
(d)           Until irrevocable payment in full of the Obligations, each
Guarantor hereby agrees not to assert or enforce (whether by or in a legal or
equitable proceeding or otherwise) any “claims” (as defined in Section 101(5) of
the Bankruptcy Code), whether arising under any law, ordinance, rule,
regulation, order, policy or other requirement of any domestic or foreign
government or any instrumentality or agency thereof, having jurisdiction over
the conduct of its business or assets or otherwise, to which such Guarantor is
or would at any time be entitled by virtue of its obligations hereunder, any
payment made pursuant hereto or the exercise by any Buyer or Collateral Agent of
its rights with respect to the Collateral, including any such claims to which
such Guarantor may be entitled as a result of any right of subrogation,
exoneration or reimbursement.

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5.           Certain Rights and Obligations.
 
(a)           Each Guarantor acknowledges and agrees that Buyers and Collateral
Agent, for its benefit and as collateral agent for the benefit of Buyers, may,
without notice, demand or any reservation of rights against such Guarantor and
without affecting such Guarantor’s obligations hereunder, from time to time:
 
(i)           renew, extend, increase, accelerate or otherwise change the time
for payment of, the terms of or the interest on the Obligations or any part
thereof or grant other indulgences to the Company or others;
 
(ii)         accept from any person or entity and hold collateral for the
payment of the Obligations or any part thereof, and modify, exchange, enforce or
refrain from enforcing, or release, compromise, settle, waive, subordinate or
surrender, with or without consideration, such collateral or any part thereof;
 
(iii)        accept and hold any indorsement or guaranty of payment of the
Obligations or any part thereof, and discharge, release or substitute any such
obligation of any such indorser or guarantor, or discharge, release or
compromise any Guarantor, or any other person or entity who has given any
security interest in any collateral as security for the payment of the
Obligations or any part thereof, or any other person or entity in any way
obligated to pay the Obligations or any part thereof, and enforce or refrain
from enforcing, or compromise or modify, the terms of any obligation of any such
indorser, guarantor, or person or entity;
 
(iv)        dispose of any and all collateral securing the Obligations in any
manner as the Collateral Agent, in its sole discretion, may deem appropriate,
and direct the order or manner of such disposition and the enforcement of any
and all endorsements and guaranties relating to the Obligations or any part
thereof as Collateral Agent in its sole discretion may determine;
 
(v)     determine the manner, amount and time of application of payments and
credits, if any, to be made on all or any part of any component or components of
the Obligations (whether principal, interest, fees, costs, and expenses, or
otherwise), including, without limitation, the application of payments received
from any source to the payment of indebtedness other than the Obligations even
though Buyers might lawfully have elected to apply such payments to the
Obligations to amounts which are not covered by this Guaranty; and
 
(vi)        take advantage or refrain from taking advantage of any security or
accept or make or refrain from accepting or making any compositions or
arrangements when and in such manner as Collateral Agent, in its sole
discretion, may deem appropriate;
 
and generally do or refrain from doing any act or thing which might otherwise,
at law or in equity, release the liability of such Guarantor as a guarantor or
surety in whole or in part, and in no case shall Buyers or Collateral Agent be
responsible or shall any Guarantor be released either in whole or in part for
any act or omission in connection with Buyers or Collateral Agent having sold
any security at less than its value, except as provided under applicable law.

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(b)           Following the occurrence of, but only during the continuation of,
an Event of Default, and upon ten (10) days written demand by Collateral Agent,
each Guarantor, jointly and severally, hereby agrees to pay the Obligations to
the extent hereinafter provided:
 
(i)           without deduction by reason of any setoff, defense (other than
payment) or counterclaim of the Company or any other Guarantor;
 
(ii)         without requiring presentment, protest or notice of nonpayment or
notice of default to any Guarantor, to the Company or to any other person or
entity;
 
(iii)        without demand for payment or proof of such demand or filing of
claims with a court in the event of receivership, bankruptcy or reorganization
of the Company or any other Guarantor;
 
(iv)        without requiring Buyers or Collateral Agent to resort first to the
Company (this being a guaranty of payment and not of collection), to any other
Guarantor, or to any other guaranty or any collateral which Buyers or Collateral
Agent may hold;
 
(v)         without requiring notice of acceptance hereof or assent hereto by
any Buyer or Collateral Agent; and
 
(vi)        without requiring notice that any of the Obligations has been
incurred, extended or continued or of the reliance by any Buyer or Collateral
Agent upon this Guaranty;
 
all of which each Guarantor hereby waives.
 
(c)           Each Guarantor’s obligation hereunder shall not be affected by any
of the following, all of which such Guarantor hereby waives:
 
(i)          any failure to perfect or continue the perfection of any security
interest in or other lien on any collateral securing payment of any of the
Obligations or any Guarantor’s obligation hereunder;
 
(ii)         the invalidity, unenforceability, propriety of manner of
enforcement of, or loss or change in priority of any document or any such
security interest or other lien or other guaranty of the Obligations;
 
(iii)        any failure to protect, preserve or insure any such collateral;
 
(iv)        failure of a Guarantor to receive notice of any intended disposition
of such collateral;

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(v)         any defense arising by reason of the cessation from any cause
whatsoever of liability of the Company including, without limitation, any
failure, or omission by any Buyer or Collateral Agent in enforcing its claims
against the Company;
 
(vi)        any release, settlement or compromise of any obligation of the
Company, any other Guarantor or any other guarantor of the Obligations;
 
(vii)       the invalidity or unenforceability of any of the Obligations;
 
(viii)      any change of ownership of the Company, any other Guarantor or any
other guarantor of the Obligations or the insolvency, bankruptcy or any other
change in the legal status of the Company, any other Guarantor or any other
guarantor of the Obligations;
 
(ix)         any change in, or the imposition of, any law, decree, regulation or
other governmental act which does or might impair, delay or in any way affect
the validity, enforceability or the payment when due of the Obligations;
 
(x)          the existence of any claim, setoff or other rights which the
Guarantor, Company, any other Guarantor or guarantor of the Obligations or any
other person or entity may have at any time against any Buyer, Collateral Agent
or the Company in connection herewith or any unrelated transaction;
 
(xi)         any Buyer’s or Collateral Agent’s election in any case instituted
under chapter 11 of the Bankruptcy Code, of the application of section
1111(b)(2) of the Bankruptcy Code;
 
(xii)        any use of cash collateral, or grant of a security interest by the
Company, as debtor in possession, under sections 363 or 364 of the Bankruptcy
Code;
 
(xiii)       the disallowance of all or any portion of any of any Buyer’s or
Collateral Agent’s claims for repayment of the Obligations under sections 502 or
506 of the Bankruptcy Code; or
 
(xiv)      any other fact or circumstance which might otherwise constitute
grounds at law or equity for the discharge or release of a Guarantor from its
obligations hereunder, all whether or not such Guarantor shall have had notice
or knowledge of any act or omission referred to in the foregoing clauses (i)
through (xiii) of this Section 5(c).
 
6.           Representations and Warranties. Each Guarantor further represents
and warrants to Buyers and Collateral Agent that: (a) such Guarantor is a
corporation or other entity duly incorporated or organized, as applicable,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or formation, as applicable, and has full power, authority and
legal right to own its property and assets and to transact the business in which
it is engaged; (b) such Guarantor has full power, authority and legal right to
execute and deliver, and to perform its obligations under, this Guaranty, and
has taken all necessary action to authorize the guarantee hereunder on the terms
and conditions of this Guaranty and to authorize the execution, delivery and
performance of this Guaranty; (c) this Guaranty has been duly executed and
delivered by such Guarantor and constitutes a legal, valid and binding
obligation of such Guarantor enforceable against such Guarantor in accordance
with its terms, except to the extent that such enforceability is subject to
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance and
moratorium laws and other laws of general application affecting enforcement of
creditors’ rights generally, or the availability of equitable remedies, which
are subject to the discretion of the court before which an action may be
brought; and (d) the execution, delivery and performance by each Guarantor of
this Guaranty do not require any action by or in respect of, or filing with, any
governmental body, agency or official and do not violate, conflict with or cause
a breach or a default under any provision of applicable law or regulation or of
the organizational documents of any Guarantor or of any agreement, judgment,
injunction, order, decree or other instrument binding upon it.

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7.           Negative Covenants. Each Guarantor covenants with Buyers and
Collateral Agent that such Guarantor shall not grant any security interest in or
permit any lien, claim or encumbrance upon any of its assets in favor of any
person or entity other than liens and security interests in favor of Buyers and
Collateral Agent and Permitted Liens.
 
8.           Termination. This Guaranty shall terminate when all Indebtedness
under the Notes shall be finally and irrevocably paid in full in cash or
converted pursuant to the terms thereof.  Thereafter, but subject to the
following, Collateral Agent, on its behalf and as agent for Buyers, shall take
such action and execute such documents as the Guarantors may reasonably request
(and at the Guarantors’ cost and expense) in order to evidence the termination
of this Guaranty.  Each Guarantor further agrees that, to the extent that the
Company makes a payment or payments to Buyers or Collateral Agent on the
Obligations, or Buyers or Collateral Agent receive any proceeds of collateral
securing the Obligations or any other payments with respect to the Obligations,
which payment or receipt of proceeds or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be returned or repaid to the Company, its estate, trustee, receiver, debtor in
possession or any other person or entity, including, without limitation, the
Guarantors, under any insolvency or bankruptcy law, state or federal law, common
law or equitable cause, then to the extent of such payment, return or repayment,
the obligation or part thereof which has been paid, reduced or satisfied by such
amount shall be reinstated and continued in full force and effect as of the date
when such initial payment, reduction or satisfaction occurred, and this Guaranty
shall continue in full force notwithstanding any contrary action which may have
been taken by any Buyer or Collateral Agent in reliance upon such payment, and
any such contrary action so taken shall be without prejudice to any Buyer’s or
Collateral Agent’s rights under this Guaranty and shall be deemed to have been
conditioned upon such payment having become final and irrevocable.
 
9.           Guaranty of Performance. Each Guarantor also guaranties the full,
prompt and unconditional performance of all obligations and agreements of every
kind owed or hereafter to be owed by the Company to Buyers and Collateral Agent
under the Purchase Agreement, Registration Rights Agreement, the Warrants,
Security Documents and the Notes.  Every provision for the benefit of Buyers and
Collateral Agent contained in this Guaranty shall apply to the guaranty of
performance given in this Section 9.
 
10.         Assumption of Liens and Obligations. To the extent that a Guarantor
has received or shall hereafter receive distributions or transfers from the
Company of property or cash that are subject, at the time of such receipt, to
liens and security interests in favor of Buyers and/or the Collateral Agent in
accordance with the Notes, the Security Agreement or any other Security
Document, such Guarantor hereby expressly agrees that (i) it shall hold such
assets subject to such liens and security interests, and (ii) it shall be liable
for the payment of the Obligations secured thereby.  Each Guarantor’s
obligations under this Section 10 shall be in addition to its obligations as set
forth in other Sections of this Guaranty and not in substitution therefor or in
lieu thereof.
 
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11.         Miscellaneous.
 
(a)           The terms “Company” and “Guarantor” as used in this Guaranty shall
include: (i) any successor association, partnership, limited liability company
or corporation to which all or substantially all of the business or assets of
the Company or such Guarantor shall have been transferred and (ii) any other
association, partnership, limited liability company, corporation or entity into
or with which the Company or such Guarantor shall have been merged,
consolidated, reorganized, or absorbed.
 
(b)           Without limiting any other right of any Buyer or Collateral Agent,
whenever any Buyer or Collateral Agent has the right to declare upon the
continuation of an Event of Default any of the Obligations to be immediately due
and payable (whether or not such Obligations have been so declared), Collateral
Agent, on its behalf and in its capacity as agent for the benefit of Buyers, at
its sole election with prior written notice to the undersigned may appropriate
and set off against the Obligations upon the continuation of an Event of
Default:
 
(i)           any and all indebtedness or other moneys due or to become due to
any Guarantor by any Buyer or Collateral Agent in any capacity; and
 
(ii)           any credits or other property belonging to any Guarantor
(including all account balances, whether provisional or final and whether or not
collected or available) at any time held by or coming into the possession of any
Buyer or Collateral Agent, or any affiliate of any Buyer or Collateral Agent,
whether for deposit or otherwise;
 
and the applicable Buyer or Collateral Agent shall be deemed to have exercised
such right of set off immediately at the time of such election even though any
charge therefor is made or entered on such Buyer’s or Collateral Agent’s records
subsequent thereto.  Collateral Agent agrees to notify such Guarantor in a
reasonably practicable time of any such set-off; however, failure to so notify
such Guarantor shall not affect the validity of any set-off.
 
(c)           Each Guarantor’s obligation hereunder is to pay the Obligations in
full in cash when due according to the Notes, the Security Documents and the
other agreements, documents and instruments governing the Obligations to the
extent provided herein, and shall not be affected by any stay or extension of
time for payment by the Company or any other Guarantor resulting from any
proceeding under the Bankruptcy Code or any similar law.
 
(d)           No course of dealing between the Company or any Guarantor and
Buyers or Collateral Agent and no act, delay or omission by Buyers or Collateral
Agent in exercising any right or remedy hereunder or with respect to any of the
Obligations shall operate as a waiver thereof or of any other right or remedy,
and no single or partial exercise thereof shall preclude any other or further
exercise thereof or the exercise of any other right or remedy.  Any Buyer or
Collateral Agent may remedy any default by the Company under any agreement with
the Company or with respect to any of the Obligations in any reasonable manner
without waiving the default remedied and without waiving any other prior or
subsequent default by the Company.  All rights and remedies of Buyers and
Collateral Agent hereunder are cumulative.

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(e)           This Guaranty shall inure to the benefit of each Buyer and
Collateral Agent, and each such entity’s successors and assigns.
 
(f)           Captions of the sections of this Guaranty are solely for the
convenience of the parties hereto, and are not an aid in the interpretation of
this Guaranty and do not constitute part of the agreement of the parties set
forth herein.
 
(g)           If any provision of this Guaranty is unenforceable in whole or in
part for any reason, the remaining provisions shall continue to be effective.
 
(h)           All questions concerning the construction, validity, enforcement
and interpretation of this Guaranty shall be governed by the internal laws of
the State of New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of New York.  Each Guarantor hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the City
of New York (Borough of Manhattan), New York, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit,
action or proceeding is improper.  Each Guarantor hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
 
(i)           Notices.  All notices, approvals, requests, demands and other
communications hereunder shall be delivered or made in the manner set forth in,
and shall be effective in accordance with the terms of, the Purchase Agreement
or, in the case of communications to the Collateral Agent, directed to the
notice address set forth in the Security Agreement; provided, that any
communication shall be effective as to any Guarantor if made or sent to the
Company in accordance with the foregoing.
 
12.         WAIVERS.
 
(a)           EACH GUARANTOR WAIVES THE BENEFIT OF ALL VALUATION, APPRAISAL AND
EXEMPTION LAWS.
 
(b)           UPON THE OCCURRENCE BUT ONLY DURING THE CONTINUATION OF AN EVENT
OF DEFAULT, EACH GUARANTOR HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY
KIND PRIOR TO THE EXERCISE BY ANY BUYER OR COLLATERAL AGENT, ON ITS BEHALF AND
IN ITS CAPACITY AS AGENT FOR THE BENEFIT OF BUYERS, OF ITS RIGHTS TO REPOSSESS
THE COLLATERAL WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE
COLLATERAL WITHOUT PRIOR NOTICE OR HEARING.  EACH GUARANTOR ACKNOWLEDGES THAT IT
HAS BEEN ADVISED BY COUNSEL OF ITS CHOICE WITH RESPECT TO THIS TRANSACTION AND
THIS GUARANTY.

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(c)           EACH GUARANTOR, BUYERS AND COLLATERAL AGENT WAIVES ITS RIGHTS TO A
TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR
RELATED TO THIS GUARANTY, OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY BUYER OR
COLLATERAL AGENT.  EACH GUARANTOR, BUYERS AND COLLATERAL AGENTS AGREES THAT ANY
SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A
JURY.  WITHOUT LIMITING THE FOREGOING, EACH GUARANTOR, BUYERS AND COLLATERAL
AGENTS FURTHER AGREES THAT ITS RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION
OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS,
IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS
GUARANTY OR ANY PROVISION HEREOF.  THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY.
 
13.         Collateral Agent.  The terms and provisions of Section 5.12 of the
Security Agreement which set forth the appointment of the Collateral Agent and
the indemnifications to which the Collateral Agent is entitled are hereby
incorporated by reference herein as if fully set forth therein.
 
14.         Payments Free of Taxes.
 
(a)           Definitions.  In this Section 14:
 
(i)             “Excluded Taxes” means, with respect to the Collateral Agent or
the Buyers, or any other recipient of any payment to be made by or on account of
any obligations of any Guarantor under this Guaranty, or under any other
Security Document, income or franchise taxes imposed on (or measured by) its net
income by the United States of America or such other jurisdiction under the laws
of which such recipient is organized or in which its principal office is
located.
 
(ii)            “Governmental Authority” means the government of the United
States of America or any other nation, or any political subdivision thereof,
whether state or local, or any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government over the Company or any of its Subsidiaries, or any of
their respective properties, assets or undertakings.
 
(iii)           “Indemnified Taxes” means Taxes other than Excluded Taxes.

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(iv)           “Taxes” means any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any Governmental
Authority.
 
(b)           Any and all payments by or on account of any obligation of any of
the Guarantors under this Guaranty or any other Security Document shall be made
without any set-off, counterclaim or deduction and free and clear of and without
deduction for any Indemnified Taxes; provided that if any Guarantor shall be
required to deduct any Indemnified Taxes from such payments, then (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 14(b)), the Collateral Agent or Buyers, as applicable, receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) such Guarantor shall make such deductions and (iii) such Guarantor shall
pay the full amount deducted to the relevant Governmental Authority in
accordance with applicable law.
 
(c)           Indemnification by the Guarantors. Each Guarantor shall indemnify
the Collateral Agent and the Buyers, within ten (10) days after written demand
therefor, for the full amount of any Indemnified Taxes paid by the Collateral
Agent or Buyers, as applicable, on or with respect to any payment by or on
account of any obligation of such Guarantor under this Guaranty and the other
Security Documents (including Indemnified Taxes or imposed or asserted on or
attributable to amounts payable under this Section 14) and any penalties,
interest and reasonable expenses arising therefrom or with respect thereto,
whether or not such Indemnified Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority.  A certificate of the
Collateral Agent or any Buyer as to the amount of such payment or liability
under this Section 14 shall be delivered to such Guarantor and shall be
conclusive absent manifest error.
 
15.         Counterparts. This Guaranty may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to each other party; provided that a facsimile, .pdf or similar
electronically transmitted signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if the
signature were an original signature.
 
[Remainder of page intentionally left blank; signature page follows]

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IN WITNESS WHEREOF, Guarantors have executed this Guaranty as of the date first
written above.
 

 
GUARANTORS:   
           
Wharton Resources LLC,  
   
a Delaware limited liability company  
             
By:
  /s/  Donald L. Sytsma 
   
Name:
  Donald L. Sytsma 
   
Title:
  CFO 
                       
Wharton Resources Corp.,  
   
a Delaware corporation  
             
By:
  /s/  Donald L. Sytsma 
   
Name:
  Donald L. Sytsma 
   
Title:
  CFO 
                       
Gulf Western Petroleum LP,  
   
a Texas limited partnership  
             
By:
Wharton Resources, LLC, 
     
a Delaware limited liability company, 
     
its general partner 
                         
By:
  /s/ Donald L. Sytsma
     
Name:
  Donald L. Sytsma
     
Title:
  CFO
 

 
 
 
Signature Page to Guaranty
 

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EXHIBIT A

Form of Joinder
Joinder to Guaranty

The undersigned, [__________] a [__________], hereby joins in the execution of
that certain Guaranty dated as of September 10, 2007 (the “Guaranty”), by each
of GULF WESTERN PETROLEUM LP, a Texas limited partnership, WHARTON RESOURCES
LLC, a Delaware limited liability company, WHARTON RESOURCES CORP., a Delaware
corporation, and each other person or entity that becomes a Guarantor thereunder
after the date and pursuant to the terms thereof, to and in favor of Metage
Funds Limited, and NCIM Limited.  By executing this Joinder, the undersigned
hereby agrees that effective as of the date hereof, it is a Guarantor thereunder
with the same force and effect as if originally named therein as a
Guarantor.  The undersigned agrees to be bound by all of the terms and
provisions of the Guaranty and represents and warrants that the representations
and warranties set forth in Section 6 of the Guaranty are, with respect to the
undersigned, true and correct as of the date hereof.  Effective as of the date
hereof, each reference to a Guarantor in the Guaranty shall be deemed to include
the undersigned.
 
In Witness Whereof, the undersigned has executed this Joinder this ___ day of
_________, 200_.
 

     

Guaranty
 
 

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