ex10-7.htm

Exhibit 10.7

    AMENDED
      AND RESTATED PARTICIPATION AGREEMENT

    


    


    This
      Amended and Restated Participation
      Agreement (the “Agreement”) is made and entered into as of this 8th day of
      December, 2006, by and between Ridgelake Energy, Inc., a
      Louisiana corporation, whose mailing address is 3636 N. Causeway Blvd., Suite
      300, Metairie, Louisiana  70002-7216, sometimes hereinafter referred
      to as “Ridgelake,” GulfX, LLC, a Delaware limited liability
      company, whose mailing address is 15 Rheola Street, West Perth, Western
      Australia 6005, Australia, sometimes hereinafter referred to as “GulfX,” and
South Marsh LLC, a Delaware limited liability company, whose
      mailing address is 15 Rheola Street, West Perth, Western Australia 6005,
      Australia, sometimes hereinafter referred to as “South Marsh.”  GulfX
      and South Marsh are sometimes individually referred to herein as a “Participant”
and collectively as the “Participants.”  Ridgelake, GulfX, and South
      Marsh are sometimes individually referred to herein as a “Party” or collectively
      as the “Parties.”

    


    


    WITNESSETH:

    


    WHEREAS,
      Ridgelake and GulfX entered into that certain Participation Agreement, dated
      January 18, 2006 (the “Original GulfX Agreement”), pursuant to which Ridgelake
      granted to GulfX the right to acquire an undivided twenty percent (20%) working
      interest in the oil and gas leases more particularly described in Exhibit A
      attached hereto, which cover the OCS Blocks set forth below (hereinafter jointly
      referred to as the “Leases” or individually as the “Lease”), all subject to the
      terms, conditions, reservations and limitations provided for in the Original
      GulfX Agreement:

    


    
      	
              OCS
                Lease No.:

            	
              OCS
                Area Name/ Block:

            
	
              OCS-G
                26190

            	
              Viosca
                Knoll Block 79 (“VK 79”)

            
	
              OCS-G
                26560

            	
              High
                Island Area, East Addition, South Extension, Block A 307 (“HI
                A-307”)

            
	
              OCS-G
                27078

            	
              Vermilion
                Area, South Addition Block 317 (“VM 317”)

            
	
              OCS-G
                27089

            	
              South
                Marsh Island, South Addition Block 138 (“SMI 138”)

            
	
              OCS-G
                27091

            	
              South
                Marsh Island, South Addition Block 152 (“SMI
                152”)

            


    

    


    WHEREAS,
      pursuant to that certain South Marsh Participation Agreement, dated February
      7,
      2006, between GulfX and South Marsh, GulfX assigned to South Marsh an undivided
      37.5% of GulfX’s rights under the Original GulfX Agreement, insofar and only
      insofar as the Original GulfX Agreement covers the Leases covering SMI 138
      and
      SMI 152 (collectively, the “SMI Leases”), so that, after giving effect to such
      assignment (the “Partial Assignment”), GulfX had the right to acquire an
      undivided 12.5% working interest in the SMI Leases, and South Marsh had the
      right to acquire an undivided 7.5% working interest in the SMI Leases;
      and

    


    WHEREAS,
      pursuant to that certain Participation Agreement, dated September 18, 2006,
      between South Marsh and Ridgelake (the “Original South Marsh Agreement”),
      Ridgelake granted to South Marsh the right to acquire an undivided ten percent
      (10%) working interest in the Leases covering VK 79, HI A 307, and VM 317 (the
      Original GulfX Agreement and the Original South Marsh Agreement are collectively
      referred to herein as the “Original Agreements”); and

    


    WHEREAS,
      GulfX desires to acquire from Ridgelake, and Ridgelake desires to grant to
      GulfX, the right to acquire an additional undivided 3.75% working interest
      in
      the Lease covering SMI 138, and after giving effect to the Original GulfX
      Agreement, the Partial Assignment, and such additional grant, it is the Parties’
intention that GulfX will have the right to acquire, in the aggregate, an
      undivided 16.25% working interest in SMI 138, subject to and in accordance
      with
      the terms hereof; and

    


    WHEREAS,
      South Marsh desires to acquire from Ridgelake, and Ridgelake desires to grant
      to
      South Marsh, the right to acquire an additional undivided 3.75% working interest
      in the Lease covering SMI 138, and after giving effect to the Partial Assignment
      and such additional grant, it is the Parties’ intention that South Marsh will
      have the right to acquire, in the
      aggregate, an undivided 11.25% working interest in SMI 138, subject to and
      in
      accordance with the terms hereof; and


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


    WHEREAS,
      South Marsh desires to acquire from Ridgelake, and Ridgelake desires to grant
      to
      South Marsh, the right to acquire an additional undivided 7.50% working interest
      in the Lease covering SMI 152, and after giving effect to the Partial Assignment
      and such additional grant, it is the Parties’ intention that South Marsh will
      have the right to acquire, in the aggregate, an undivided 15.00% working
      interest in SMI 152, subject to and in accordance with the terms hereof;
      and

    


    WHEREAS,
      the Parties desire to amend, restate and replace in their entirety the Original
      Agreements in order to reflect (i) the partial assignment by GulfX to South
      Marsh of an interest in the Original GulfX Agreement; and (ii) the rights to
      acquire additional interests in the SMI Leases granted by Ridgelake to the
      Participants.

    


    NOW,
      THEREFORE, for and in consideration of the recitals, covenants and agreements
      contained herein, and for other good and valuable consideration, the Original
      Agreements are hereby amended, restated and replaced in their entirety as
      follows:

     

    ARTICLE
      I

    PRICE

    


    
      	
                
                1.1

            	
              For
                its interest in the Leases, each Participant shall pay its respective
                “Cost Share” (as set forth in the table in Section 1.1.1 below) of (i) all
                direct costs and expenses expended by Ridgelake (through the date
                of
                execution of this Agreement) in the acquisition, maintenance and
                development of the Leases, including, but not limited to, lease bonus
                costs, rentals, title examination fees and expenses, shallow hazard
                survey
                costs, and costs of acquisition and processing seismic data (collectively,
                “Sunk Costs”); (ii) all direct costs and expenses expended by Ridgelake
                (on a Lease-by-Lease basis until such time as Participant earns an
                interest in a Lease) in the maintenance and development of the Leases,
                including, but not limited to, rentals, shallow hazard survey costs,
                and
                the cost of acquisition and processing seismic data (collectively,
“Lease
                Expenses”); and (iii) the cost of conducting the interest earning
                operations on each lease, as specified on Exhibits “B-1” through “B-5”
                attached hereto (hereinafter the
“Operations”).

            


    

    


    
      	
               

            	
              1.1.1

            	
              Participants’
                respective “Cost Shares” and “Earning Shares” in the Leases are as
                follows:

            


    

    


    


    
      	 	
              GulfX

            	
              South
                Marsh

            
	
              Cost
                Share

            	
              Earning
                Share

            	
              Cost
                Share

            	
              Earning
                Share

            
	
              VK
                79

            	
              26.67%

            	
              20.00%

            	
              13.34%

            	
              10.00%

            
	
              HI
                A 307

            	
              26.67%

            	
              20.00%

            	
              13.34%

            	
              10.00%

            
	
              VM
                317

            	
              26.67%

            	
              20.00%

            	
              13.34%

            	
              10.00%

            
	
              SMI
                138

            	
              21.67%

            	
              16.25%

            	
              15.00%

            	
              11.25%

            
	
              SMI
                152

            	
              16.67%

            	
              12.50%

            	
              20.00%

            	
              15.00%

            


    

    


    
      	
               

            	
              1.1.2

            	
              Sunk
                Costs as of December 4, 2006, are enumerated on Exhibit “C” attached
                hereto.  It is acknowledged that the Participants have paid
                their respective Cost Shares of Sunk Costs in accordance with the
                Original
                Agreements and to the extent that Sunk Costs were enumerated on the
                Exhibit “C” attached to the Original
                Agreements.

            


    

     

    Within
      five (5) days after the execution of this Agreement, Ridgelake will present
      to
      the Participants a statement(s) reflecting the Participant’s Cost Share of Sunk
      Costs as of December 4, 2006 (as such costs are shown on Exhibit “C” attached
      hereto) less payments received to date.  GulfX and South Marsh shall
      remit the balance due to Ridgelake within five (5) days of receipt by
      Participant of such statement(s).


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    
      	
               

            	
              1.1.3

            	
              The
                Participants’ respective Cost Shares of Lease Expenses (i.e., the
                respective Cost Shares set forth in the table Section 1.1.1 above)
                shall
                be periodically billed by Ridgelake as they arise and shall be paid
                by
                Participants in the time periods allowed for such payments under
                the Joint
                Operating Agreement referenced in Article III hereinbelow (hereinafter
                the
                “JOA”).

            


    

    


    
      	
               

            	
              1.1.4

            	
              Each
                Participant shall pay its proportionate share (i.e., the
                respective Cost Shares set forth in the table in Section 1.1.1 above)
                of
                the estimated costs to conduct Operations on each lease thirty (30)
                days
                prior to the anticipated commencement date for such Operations, and
                thereafter shall pay its respective Cost Share of all costs and expenses
                for Operations on a Lease-by-Lease basis, until such Participant
                has
                earned an interest in a particular Lease in accordance with the terms
                of
                this Agreement.

            


    

    


    
      	
                
                1.2

            	
              Upon
                execution of this Agreement, each Participant is obligated to pay
                Ridgelake its respective Cost Share of the Sunk Costs and Lease Expenses
                referenced in Article 1.1 above.  Failure to timely remit such
                payments to Ridgelake shall result in the immediate termination of
                this
                Agreement as to such Participant, and such Participant shall forfeit
                any
                and all Sunk Costs and Lease Expenses previously paid to
                Ridgelake.

            


    

    


    
      	
                 1.3

            	
              Participants
                shall have no obligation to participate in any Operations on the
                Leases;
                provided, however, that if a Participant does not participate in
                the
                Operations on a particular Lease, then such Participant shall forfeit
                its
                right to earn an interest in such Lease and shall forfeit all Sunk
                Costs
                and Lease Expenses previously paid on the
                Lease.

            


    

    


    


    ARTICLE
      II

    ADDITIONAL
      CONSIDERATION

    


    (Note:  In
      this Article II, Capitalized terms not otherwise defined herein shall have
      the
      meanings assigned to them in Exhibit “E.”)

     

    
      	
               

            	
              2.1

            	
              As
                additional consideration for its participation in the prospects developed
                by Ridgelake on the Leases, GulfX has procured the issuance to Ridgelake
                and/or its designee(s) of Two Million Five Hundred Thousand (2,500,000)
                Discovery Shares (the “GulfX Discovery Shares”) in GulfX Limited, an
                Australia company (“GulfX Limited”), the terms of which are specified in
                Exhibit “E-1” attached hereto.

            


    

     

    Likewise,
      as additional consideration for its participation in the prospects developed
      by
      Ridgelake on the Leases, South Marsh has procured the issuance to Ridgelake
      and/or its designee(s) of (i) One Million (1,000,000) Discovery Shares (the
      “Entek Discovery Shares”) in Entek Energy Ltd. (“Entek”), the terms of which are
      specified in Exhibit “E-2” attached hereto; and (ii) Three Hundred Thousand
      (300,000) options (the “Options”) in Entek or any successor by name change,
      merger or other corporate action, the terms of which are specified in Exhibit
      “E-3” attached hereto.

    


    The
      GulfX
      Discovery Shares and Entek Discovery Shares are collectively referred to herein
      as the “Discovery Shares.”

    


    The
      Discovery Shares and Options are subject to whatever restrictions that may
      be
      placed upon them under the rules and regulations of the Australian Stock
      Exchange Ltd. (“ASX”).  Each Participant shall use its best efforts to
      ensure that the issuer of the Discovery Shares or Options, as applicable,
      procured by it shall not impose or cause to be imposed restrictions on the
      conversion of such Discovery Shares or the resale of the Shares in addition
      to
      those set forth (i) in this Agreement and the respective Exhibit “E-1,” “E-2,”
or “E-3,” as applicable or (ii) by operation of law under the rules and
      regulations of the ASX.

    


    
      	
               

            	
              2.2

            	
              Each
                Discovery Share and each Option shall be convertible into one Share
                as set
                forth in the respective Exhibit “E-1,” “E-2,” or “E-3,” as
                applicable.  If, following the date of this Agreement, an issuer
                of Discovery Shares or Options elects to undertake a consolidation
                of share capital, then any Discovery Shares or Options issued to
                Ridgelake
                or its designee(s) shall be subject to consolidation at the same
                ratio;
                provided, however, that Ridgelake shall not suffer, as the result
                of any
                such consolidation, a dilution in the value of the Discovery Shares,
                in
                the value of the Options, or in the value of Shares to be issued
                upon
                conversion of the Options or Discovery Shares, as
                applicable.

            


    

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    
      	
               

            	
              2.3

            	
              Each
                Participant represents and warrants that at an Extraordinary General
                Meeting (“EGM”) of the issuer of the Discovery Shares or Options procured
                by such Participant, such issuer’s shareholders approved corporate
                resolutions necessary to, among others, (i) change the nature of
                the
                issuer’s business direction to that of an oil and gas company, (ii) as to
                issuers of Discovery Shares, amend the issuer’s constitution to create the
                class of shares entitled “Discovery Shares” with terms and conditions as
                set forth herein and in Exhibit E-1 or E-2, as applicable, (iii)
                authorize
                the issuer’s Board of Directors to issue Options and/or Discovery Shares
                to Ridgelake (300,000 Options, 2,500,000 Discovery Shares in the
                case of
                the GulfX Discovery Shares, and 1,000,000 Discovery Shares in the
                case of
                the Entek Discovery Shares) and, (iv) authorize its Board of Directors
                to
                authorize Shares necessary to accommodate conversion of the Options
                and/or
                Discovery Shares, as applicable, and (v) authorize a consolidation
                of
                capital of the issuer.

            


    

    


    
      	
               

            	
              2.4

            	
              Authorization
                and Issuance.  Each Participant shall use its best efforts
                to ensure that upon issuance, the Options, Discovery Shares and the
                Shares
                procured by such Participant will have been duly authorized by the
                Board
                of Directors and shareholders of the issuer thereof and, when issued
                in
                accordance with the terms of this Agreement, will be fully paid,
                non-assessable and validly issued.

            


    

    


    
      	
               

            	
              2.5

            	
              Authority
                of Participants.  Each Participant represents that it has
                full power, authority and legal capacity to execute, deliver and
                perform
                this Agreement, and that all corporate action necessary for such
                Participant’s execution of this Agreement and its consummation of the
                transactions contemplated by this Agreement will have been duly and
                effectively taken upon execution.

            


    

    


    
      	
               

            	
              2.6

            	
              Compliance
                with Applicable Laws; Permits.  Each Participant shall use
                its best efforts to ensure that the issuer of the Options and/or
                Discovery
                Shares procured by it will comply in all material respects with the
                Australian Corporations Act and all applicable laws, rules and regulations
                enforced or promulgated by the ASX and the Australian Securities
                and
                Investments Commission (collectively, the “Regulator”).  To the
                knowledge of each Participant, the issuer of the Options and/or Discovery
                Shares procured by it has not received any written notice, nor does
                it
                have knowledge that any investigation or review by any governmental
                entity
                or Regulator with respect to the Shares or any of its assets is pending
                or
                threatened or that any such investigation or review is
                contemplated.  To the knowledge of each Participant, none of the
                reports, documents or materials filed with or furnished to the Regulator
                or any governmental authority by the issuer of the Options and/or
                Discovery Shares procured by such Participant, with respect to the
                Discovery Shares, the Shares, or the business and operations of such
                issuer, contains any untrue statement of a material fact or omits
                any
                statement of a material fact necessary to make the statements therein
                not
                misleading.  Each Participant shall use its best efforts to
                ensure that the issuer of the Options and/or Discovery Shares procured
                by
                such Participant discloses, to the extent required by applicable
                law or
                the rules and regulations of the Regulator, the terms and conditions
                of
                this Agreement and the terms and conditions of the issuance of the
                Options
                and/or the Discovery Shares, including the right to convert Options
                and/or
                Discovery Shares into Shares and the terms of such
                conversion.

            


    

    


    
      	
               

            	
              2.7

            	
              Advice
                of Changes.  Each Participant shall use its best efforts to
                ensure that the issuer of the Options and/or Discovery Shares procured
                by
                it shall as promptly as possible advise Ridgelake in writing of any
                change
                or event having a material adverse effect, or that such Participant
                or
                such issuer believes would or would be reasonably likely to cause
                or
                constitute a material breach of any representations, warranties or
                covenants of such Participant contained
                herein.

            


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    
      	
               

            	
              2.8

            	
              Agreement
                Valid and Binding.  Each Participant represents and warrants
                that this Agreement has been duly executed and delivered by such
                Participant and this Agreement is the legal, valid and binding obligation
                of such Participant, enforceable against such Participant in accordance
                with its terms, except as enforcement thereof may be limited by laws
                affecting the enforcement of creditors’ rights.  Neither the
                execution and delivery by such Participant of this Agreement, nor
                the
                consummation by such Participant of the transactions contemplated
                hereby,
                nor the compliance by such Participant with or fulfillment by such
                Participant of the terms and provisions hereof will (i) with or without
                the giving of notice or lapse of time or both, conflict with or result
                in
                a breach or violation of, or default under, or permit the acceleration
                of
                any obligation under any provision of any agreement or other instrument
                or
                restriction of any kind to which such Participant is a party or by
                which
                such Participant is otherwise bound or affected, or (ii) violate
                any
                judgment, order, writ, injunction, decree, statute, rule or regulation
                applicable to such Participant, except in the case of the preceding
                clauses, for those conflicts, breaches, violations, defaults or
                accelerations that would not, individually or in the aggregate, have,
                or
                be reasonably likely to have, a material adverse effect on the ability
                of
                such Participant to perform its obligations under this Agreement
                or to
                consummate the transactions contemplated by this
                Agreement.

            


    

    


    
      	
               

            	
              2.9

            	
              Consents.  Each
                Participant shall use its best efforts to ensure that the issuer
                of the
                Options and/or Discovery Shares procured by it provides all consents,
                approvals, waivers, orders, authorizations, registrations, declarations
                or
                filings with, or notices to, the Regulator and any governmental entity,
                other regulator or other third party required for the issuance of
                the
                Options, the Discovery Shares and the Shares or the execution and
                delivery
                of this Agreement.

            


    

    


    
      	
                 
                2.10

            	
              No
                Misrepresentations.  Each Participant represents and
                warrants that the warranties, representations and covenants made
                in this
                Agreement by such Participant do not contain any untrue statement
                of
                material fact or omit to state any material fact required to be stated
                herein or necessary to make the statements herein, in the context
                in which
                they were made, not misleading.

            


    

     

    ARTICLE
      III

    INTEREST
      EARNED

    


    
      	
                 
                3.1

            	
              If
                a Participant participates in and pays its respective Cost Share
                (as set
                forth in the table in Section 1.1.1 above) of all Operations relevant
                to a
                particular Lease, delivers appropriate Options and/or Discovery Shares
                to
                Ridgelake and/or its designee(s) in accordance with Article II above
                and
                if such Participant has paid its respective Cost Share of all Sunk
                Costs
                and Lease Expenses relevant to the Leases, then such Participant
                shall
                earn an undivided working interest in the Lease upon which such Operations
                have been conducted equal to its respective “Earning Share,” as set forth
                in the table in Section 1.1.1
                above.

            


    

     

            
      3.1.1              
It is understood that any working interest earned by a Participant shall be
      subject to and shall bear its proportionate share (i.e., its respective
      Earning Share) of all burdens that attach to each Lease, including, but not
      limited to, lessor’s royalty and overriding royalties that are applicable to
      each Lease as of the effective date of this Agreement.  (To the best
      of Ridgelake’s knowledge, each Lease is burdened with a 16 2/3% Royalty to
      Lessor and Overriding Royalties as follows:  Viosca Knoll Block 79 –
4%; High Island Block A 307 – 4%; Vermilion Block 317 – 3 1/3%; South Marsh
      Island Block 138 – 3 1/3%; and South Marsh Island Block 152 – 3
      1/3%.)

    


    
      	
                 
                3.2

            	
              Each
                Participant may earn its respective Earning Share in each Lease that
                is
                subject to this Agreement on a Lease-by-Lease basis.  However,
                subject to and without waiver of the right to audit and dispute costs
                and
                expenses, should a Participant not timely pay all of its Cost Share
                of all
                costs and expenses of Operations on a Lease, then, if such Participant
                fails to pay such costs and expenses within ten (10) days after receiving
                a notice of default from Ridgelake, such Participant shall forfeit
                its
                right to earn a working
                interest in the particular Lease and will have no right to a refund
                of any
                money previously paid to Ridgelake relevant to the particular
                Lease.

            


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      IV

    OPERATOR

    


    
      	
               

            	
              4.1

            	
                 Ridgelake
                shall be designated Operator for all wells drilled pursuant to the
                terms
                of this Agreement and shall conduct and direct all operations on
                the
                Leases, as permitted and required pursuant to the terms of this Agreement
                and the JOA attached hereto as Exhibit
“D”.

            


    

    


    
      	
               

            	
              4.2

            	
                 Notwithstanding
                the terms of the JOA, the timing and order of Operations shall be
                at
                Ridgelake’s sole discretion, until such time as a Participant has earned a
                working interest in a particular Lease.  Once a Participant has
                earned a working interest in a Lease, then, insofar and only insofar
                as
                said Lease is concerned, the terms of the JOA shall be applicable
                to a
                proposal by such Participant relevant to the drilling of wells or
                other
                operations on the Lease.

            


    

    


    
      	
                      
                4.2.1

            	
              It
                is the intention of the Parties that a well shall be spudded on each
                Lease
                prior to the first day of the beginning of the last year of the primary
                term of each Lease.  However, it is understood and agreed that
                for various reasons a well may not be spudded on each Lease as
                anticipated.  If a well is not so spudded on a particular Lease
                before the first day of the beginning of the last year of the primary
                term
                for a particular Lease, then it is understood and agreed that a
                Participant in such Lease may submit a proposal to Ridgelake for
                the
                drilling of a well on the particular Lease in accordance with the
                terms of
                the JOA attached hereto.  If Ridgelake agrees to participate in
                the well proposed by such Participant, then the well shall be drilled
                in
                accordance with the terms of this Agreement and the Participants
                must
                complete the interest earning operations in order to earn an interest
                in
                the Lease.  However, if Ridgelake does not agree to proceed with
                the well, then a Participant in the Lease may proceed to drill the
                well
                under the terms of the JOA attached hereto and, if the said well
                is
                completed by the Participant, then the Participants in such well
                shall
                earn their respective working interests in the Lease (as set forth
                in
                Section 3.1 above) and any penalties under the JOA shall be applicable
                to
                Ridgelake’s interest in the well.  (It is recognized that other
                parties may be participating in a particular Lease under agreements
                that
                are similar to this Agreement.  Accordingly, any penalty
                applicable to Ridgelake’s interest will be proportionately allocated to
                those parties who have agreed to participate in the
                well.)

            


    

    


    
      	
                      
                4.2.2

            	
              If
                no well is spudded on a particular Lease before expiration of the
                Lease,
                this Agreement shall no longer be applicable to the
                Lease.  However, it is understood and agreed that all money paid
                to Ridgelake under the terms of this Agreement shall be retained
                by
                Ridgelake and that there shall be no refund of any money to
                Participants.

            


    

    


    
      	
               

            	
              4.3

            	
                 Operator
                shall conduct all Operations in a good an workmanlike manner, but
                shall
                have no liability as Operator for losses sustained or liabilities
                incurred, except as may result from gross negligence or willful
                misconduct.

            


    

    


    
      	
               

            	
              4.4

            	
                  The
                number of employees used by Operator in conducting operations hereunder,
                their selection, the hours of labor, and the compensation for services
                performed, shall be determined by Operator, or its subcontractors,
                and all
                employees shall be the employees of Operator or its
                subcontractor.

            


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    ARTICLE
      V

    EXPENDITURES
      AND LIABILITY OF PARTIES

    


    
      	
               

            	
              5.1

            	
              The
                duties, obligations and liabilities of the Parties shall be several,
                not
                joint or collective.  Each Party shall be solely responsible for
                its own obligations and for all expenses incurred by it in connection
                with
                this Agreement (including without limitation fees and expenses of
                its own
                counsel and consultants), and shall be liable only for its proportionate
                share of the costs of drilling and operating the well or wells pursuant
                to
                the terms of this Agreement.  It is not the intention of the
                Parties to create, nor shall this Agreement be construed as creating,
                an
                association or trust, or to impose a partnership duty, obligation,
                or
                liability with regard to any one or more of the Parties
                hereto.  However, notwithstanding any provisions herein that the
                rights and liabilities are several and not joint or collective, or
                that
                this Agreement and the Operations hereunder shall not constitute
                a
                partnership, each Party elects not to be excluded from the application
                of
                Subchapter K, Chapter 1, Subtitle A, Internal Revenue Code of 1986,
                as
                amended, and similar provisions of applicable state laws.  The
                tax partnership shall be governed by Exhibit “F” attached to the JOA that
                is attached as Exhibit “D”.

            


    

    


    
      	
               

            	
              5.2

            	
              All
                costs and expenses hereunder, and the accounting with respect thereto,
                shall be in accordance with the Accounting Procedure that is attached
                to
                the JOA; provided however, should any conflict exist between the
                provisions in the body of this Agreement and the said Accounting
                Procedure, the provisions in the body of this Agreement shall
                prevail.

            


    

    


    
      	
                      
                5.2.1

            	
              Ridgelake
                shall keep an accurate record of the joint account hereunder, showing
                expenses incurred and charges and credits made and returns made and
                received.  Such records shall be available at all reasonable
                times for examination by a Participant or its authorized representatives,
                as provided in the JOA.

            


    

    


    
      	
               

            	
              5.3

            	
              Ridgelake
                shall pay or cause to be paid all rentals, and minimum royalty payments
                which may be required under the terms of the Leases; provided, however,
                it
                is understood and agreed that Ridgelake shall have no liability to
                Participants for losses sustained or liabilities incurred for failure
                to
                so properly pay rents and/or minimum royalties or to otherwise maintain
                such Leases.

            


    

    


    ARTICLE
      VI

    MISCELLANEOUS
      PROVISIONS

    


    
      	
               

            	
              6.1

            	
              This
                Agreement shall inure to the benefit of and be binding upon the successors
                and assigns of the Parties; provided, however, it is understood and
                agreed
                that no Participant may sell, assign, transfer or otherwise dispose
                of its
                rights hereunder except as expressly provided in this
                Agreement.

            


    

    


    
      	
               

            	
              6.2

            	
              The
                delay or failure on the part of any Party hereto to insist, in any
                one
                instance or more, upon the strict performance of any of the terms
                or
                conditions of this Agreement, or to exercise any right or privilege
                herein
                conferred shall not be construed as a waiver of any such terms,
                conditions, rights or privileges but the same shall continue and
                remain in
                full force and effect.  In addition, no waiver of any of the
                provisions of this Agreement shall be deemed or shall constitute
                a waiver
                of any other provision hereof (whether or not similar), nor shall
                such
                waiver constitute a continuing waiver unless otherwise expressly
                provided.

            


    

    


    
      	
               

            	
              6.3

            	
              SHOULD
                A PARTICIPANT EARN A WORKING INTEREST IN ANY LEASE PURSUANT TO THE
                TERMS
                OF THIS AGREEMENT, THE INTEREST EARNED BY PARTICIPANT IN SUCH LEASE
                SHALL
                BE ASSIGNED BY RIDGELAKE TO PARTICIPANT AS IS, AND RIDGELAKE MAKES
                NO
                WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN FACT OR BY LAW,
                WITH
                RESPECT TO TITLE, CONDITION, FITNESS FOR PURPOSE OR OTHERWISE, EXCEPT
                THAT
                RIDGELAKE SHALL WARRANT ITS TITLE TO THE LEASES AGAINST ANYONE ASSERTING
                AN ADVERSE CLAIM AGAINST THE INTEREST
                CONVEYED WHICH IS CREATED BY, THROUGH OR UNDER RIDGELAKE, BUT NOT
                OTHERWISE.

            


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
               

            	
              6.4

            	
              This
                Agreement and all instruments executed in accordance with it shall
                be
                governed by and interpreted in accordance with the laws of the State
                of
                Louisiana, without regard to conflict of law rules that would direct
                application of the laws of another jurisdiction, except to the extent
                that
                it is mandatory that the laws of some other jurisdiction, where the
                Leases
                are located, shall apply.

            


    

    


    
      	
               

            	
              6.5

            	
              This
                Agreement, including all exhibits and schedules attached hereto and
                made a
                part hereof constitutes the entire agreement between the Parties
                with
                respect to the subject matter hereof and supersedes all prior agreements,
                understandings, negotiations and discussions.  Without limiting
                the generality of the foregoing, as between GulfX and South Marsh,
                this
                Agreement specifically supersedes and replaces the South Marsh
                Participation Agreement, which, effective as of the date hereof,
                shall be
                of no further force or effect.  No supplement, amendment,
                alteration, modification, waiver or termination of this Agreement
                shall be
                binding unless executed in writing by the Parties
                hereto.

            


    

    


    
      	
               

            	
              6.6

            	
              Any
                notice provided or permitted to be given under this Agreement shall
                be in
                writing, and may be served by personal delivery, facsimile transmission,
                or be depositing same in the mail, addressed to the Party to be notified,
                postage paid.  Notices served in any manner shall be deemed to
                have been given and received only if and when actually received by
                the
                addressee (except that notice given by telecopier shall be deemed
                given
                and received, other than during normal business hours, as of the
                opening
                of business on the next business day).  For purposes of notice,
                the addresses of the parties shall be as
                follows:

            


    

    


    Ridgelake
      Energy, Inc.

    3636
      North Causeway Blvd., Suite 300

    Metairie,
      LA 70002

    Attention:
      Mr. William M. Hines

    Facsimile
      No.: (504) 831-3746

    


    GulfX,
      LLC

    15
      Rheola
      Street

    West
      Perth

    6005
      Western Australia, Australia

    Attention:
      Mr. Paul Garner

    Facsimile
      No.: _____________

    


    South
      Marsh LLC

    15
      Rheola
      Street

    West
      Perth

    6005
      Western Australia, Australia

    Attention:
      Mr. Paul Garner

    Facsimile
      No.: _____________

    


    


    Each
      Party shall have the right, upon giving ten (10) days’ prior notice to the other
      in the manner hereinabove provided, to change its address for the purposes
      of
      notice.

    


    
      	
               

            	
              6.7

            	
              Each
                Participant shall pay for all documentary, filing and recording fees
                required with the filing and recording of any assignment or other
                conveyance it may earn pursuant to this
                Agreement.

            


    

    


    
      	
               

            	
              6.8

            	
              If
                any term or other provision of this Agreement is invalid, illegal
                or
                incapable of being enforced under any rule of law, all other conditions
                and provisions of this Agreement shall nevertheless remain in full
                force
                and effect so long as the economic or legal substance of the transactions
                contemplated hereby are not affected in a materially adverse manner
                with
                respect to any Party.

            


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


       6.9           Except
      as expressly provided herein, this Agreement is not intended to create, nor
      shall it be construed to create, any rights in any third party under doctrines
      concerning third party beneficiaries.

    


    IN
      WITNESS WHEREOF, the parties have executed this Agreement as of the day and
      year
      first set forth above.

    


    


    RIDGELAKE
      ENERGY, INC.

    


    


    By:
/s/
      William M.
      Hines

    Vice
      President

    


    


    GULFX,
      LLC

    


    


    By:
/s/
      Paul
      Garner

    Paul
      Garner

    Vice
      President

    


    


    SOUTH
      MARSH LLC

    


    


    By:
/s/
      Paul
      Garner

    Paul
      Garner

    Vice
      President