Unassociated Document


    BONANZA
      OIL & GAS, INC.

    A
      Nevada
      Corporation

     

    $250,000
      SENIOR ASSET BACKED SECURED PROMISSORY NOTE

     

    PRINCIPAL
      AMOUNT DUE DECEMBER 17, 2008

     

    14.0%
      COUPON, PAYABLE QUARTERLY

     

    PRINCIPAL
      AMOUNT OF THIS NOTE: $ 250,000

     

    THESE
      SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
      EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SECURITIES ARE RESTRICTED
      AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED
      UNDER
      THE ACT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION FROM
      SUCH REGISTRATION REQUIREMENTS.

     

    THIS
      NOTE
      AND SECURITY AGREEMENT is issued by BONANZA OIL & GAS, Inc., a Nevada
      corporation (hereinafter called the "Company") and is designed as its 14.0%
      Secured Promissory Note due December 17, 2008 (the "Note"). This Note is one
      of
      an authorized issue of unregistered debt obligations of the Company, which
      are
      collectively secured by the Company's assets set forth in the Security Agreement
      attached hereto as Exhibit "A". The Company has also entered in to concurrently
      herewith the Securities Purchase Agreement attached hereto as Exhibit "B".
      Exhibits A and B, along with this Note, are referred to collectively herein
      as
      the "Loan Documents." This Note matures on December 17, 2008 wit

    interest
      payments due quarterly beginning March
      31,
      2008.

     

    FOR
      VALUE
      RECEIVED, the Company promises to pay to Phoenix Capital Opportunity Fund,
      L.P.
      a limited partnership organized under the laws of the State of Florida, or
      permitted assigns (the "Lender"), the principal sum of TWO HUNDRED FIFTY
      THOUSAND and 00/100 (US $250,000.00) DOLLARS on December 17, 2008 (the "Maturity
      Date") and to pay interest on the principal sum outstanding on a quarterly
      basis
      at the rate of 14.0% per annum, accruing from the date of initial issuance
      (the
      "Quarterly Interest Dates"). If the Maturity Date is not a business day in
      the
      State of Nevada, then such payment shall be made on the next succeeding business
      day. The Company will pay the principal amount and interest due upon this Note
      by cashier's or certified check on the Maturity Date and the Quarterly Interest
      Dates, less any amount required by law to be deducted.

     

    I.THE
      NOTE AGREEMENT

     

    
      	
            	
              1.

            	
              MATURITY.
                This Note shall mature and the outstanding principal balance
                and the
                final
                accrued quarterly interest payment shall be due and payable on the
                17th
                day of
                December
                2008 (the "Maturity Date"). The Company will
                pay the principal amount and
                interest due upon this Note by cashier's or certified check on the
                Maturity Date.

            


    

     

    
      	
            	
              2.

            	
              INTEREST

               

              a.
                The outstanding principal balance of this Note shall bear interest
                at the
                rate of fourteen
                (14.0%) per annum. Interest shall accrue and be calculated on the
                basis of
                a 3 5-d year for the actual days elapsed. Interest payments shall
                be made
                on March 31, 2008 June 30, 2008, September 30, 2008 and at Maturity
                on
                December 17, 2008.

               

              b.
                This Note shall be deemed to be entered into •y the parties within the
                State of Nevada and shall not be subject to any usury law or
                limitation.

            


    

     

     

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

     

    
      	
              3.        

            	
              PREPAYMENT.
                At its option, the Company may prepay all or any portion of the
                outstanding principal balance of this Note at any time or from time
                to
                time without penalty or premium by giving the Lender not less than
                ten
                (10) days advance written notice and paying one hundred percent (100%)
                of
                the principal amount being prepaid plus all accrued and. unpaid interest
                thereon. All principal amounts prepaid shall cease to bear interest
                on the
                date of payment. If the Notes are held by more than one person and
                the
                Company elects to prepay less than all of the outstanding principal
                balance, then the Company shall prepay the same percentage of the
                outstanding principal balance of the Notes held by each such person
                resulting in a pro rata payment to the holders of the
                Notes.

            


    

    
      	
              4.        

            	
              TRANSFER.
                The Lender may offer, sell, transfer, assign, pledge, hypothecate,
                or
                otherwise dispose of or encumber this Note, in person or by duly
                authorized attorney, at the offices of the Company upon surrender
                of this
                Note and on presentation of a duly executed written instrument of
                transfer, together with a written opinion of the Lender's legal counsel,
                reasonably satisfactory to the Company and its legal counsel, to
                the
                effect that this Note may be lawfully offered, sold, transferred,
                assigned, pledged, hypothecated, or otherwise disposed of or encumbered
                without registration and/or qualification under an applicable federal
                and
                state securities laws then in effect or in reliance upon an applicable
                exemption from such registration and/or qualification requirements.
                Thereupon, the Company shall issue a new Note or Notes of the same
                aggregate principal amount and amount and in authorized denominations.
                The
                Company may issue stop transfer to its transfer agent in connection
                with
                such securities laws restrictions. Any offer to sell, sale, transfer,
                assignment, pledge, hypothecation, or other disposition or encumbrance
                of
                this Note, or any interest therein, effected in violation of the
                foregoing
                transfer restrictions, is unlawful and shall not be consummated on
                the
                books and records of the Company or otherwise be recognized as valid
                by
                the Company, and the Company shall not have any liability therefore.
                The
                Company may, in its sole and absolute discretion, require the Lender
                seeking to offer, sell, transfer, assign, pledge, hypothecate, or
                otherwise dispose of or encumber this Note, to indemnify the Company
                for
                any claim or loss resulting from the transfer, and failure to do
                so, shall
                be substantial and good faith justification for the Company to decline
                the
                requested transfer on the books and records of the
                Company.

            


    

    
      	
              5.        

            	
              Representations
                and Warranties of Company. As a material inducement for Lender to
                enter into this Agreement. Company hereby represents and warrants
                to
                Lender as follows:

            


    

    
      	
              a.  

            	
              Company
                is a corporation duly organized, validly existing and in good standing
                under the laws of the State of Nevada and has the power and authority
                to
                carry on its business as is now being
                conducted.

            


    

    
      	
              b.  

            	
              Company
                has all requisite power and authority to enter into this Agreement
                and the
                other Loan Documents contemplated hereby and to assume and perform
                fully
                its obligations hereunder. The execution and delivery by Company
                of this
                Agreement and the other Loan Documents contemplated hereby and the
                performance by Company of its obligations hereunder have been
                duly and validly authorized by all necessary corporate action of
                Company.
                This Agreement and the other Loan Documents contemplated hereby have
                been
                duly executed and delivered by the Company. This Agreement and the
                other
                Loan Documents contemplated hereby constitute valid and binding
                obligations and agreements of Company and are enforceable in accordance
                with their terms.

            


    

    


     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    
      	
              c.  

            	
              The
                execution and delivery of this Agreement and the other Loan Documents
                contemplated hereby and the performance by Company hereunder (i)
                do not
                and will not conflict with or violate any provision of the bylaws
                of
                Company and (ii) do not and will not (A) conflict with or result
                in a
                breach of the terms, conditions or provisions of, (B)
                constitute a default under (C) result in the creation of any
                encumbrance, lien or other restriction of any nature upon the Company's
                assets pursuant to, (D) give any third party the right to modify,
                terminate or accelerate any obligation under, (E) result in a violation
                of, or require any authorization. consent, approval, exemption or
                other
                action by or notice to any third party pursuant to, any agreement,
                instrument, order, judgment, license, permit, decree, law, regulation,
                ordinance or judgment to which any of Company or the Collateral (as
                that
                term is defined in the Security Agreement) or is a patty or is subject
                or
                bound.

            


    

    
      	
              d.  

            	
              No
                filings with, notices to or approvals or consents of any federal,
                state or
                local governmental or regulatory agency or body or any other third
                person
                or entity are required to be obtained by Company in connection with
                the
                consummation of the transactions contemplated by the Loan
                Documents.

            


    

    
      	
              e.  

            	
              Company
                has no material liability or obligation of any nature relating directly
                or
                indirectly to the assets of Company (whether accrued or unaccrued,
                absolute or contingent, known or unknown, due or to become due, liquidated
                or unliquidated or secured or unsecured or otherwise). Company is
                not
                aware of any basis upon which any such liability or obligation may
                he
                asserted against Company or its employees, contractors or affiliates
                or
                otherwise adversely affect the transactions contemplated by the Loan
                Documents.

            


    

     

    
      	
              f.  

            	
              There
                are no charges, complaints, actions, suits, disputes. investigations,
                arbitrations, demands or other proceedings pending or, to the best
                knowledge of Company, threatened before or by any court, governmental
                agency or instrumentality, arbitrator, person or entity to which
                Company
                is, or is threatened to be, a party or to which. to the best knowledge
                of
                Company, any employee, independent contractor or affiliate of Company
                is
                or is threatened to be a party, or which relate to Company, the business
                of Company, or any of the assets of Company or any other agreement
                related
                hereto. To the best knowledge of Company, there is no basis or grounds
                for
                any of the foregoing. Company is not subject to or bound by any
                injunction, order or decree of any court or governmental or administrative
                agency.

            


    

    
      	
              g.  

            	
              There
                are no existing defaults, events of default, breaches or other
                circumstances, facts or events that with the passage of time or giving
                of
                notice, or both, would constitute a default, event of default or
                breach on
                the part of Company under any agreement of Company or
                otherwise.

            


    

    
      	
              h.  

            	
              Company
                has obtained and maintained all required local, state and federal
                licenses
                and permits necessary to operate Company's business and all such
                licenses
                and permits are in good
                standing and
                Company has no knowledge of any actions, claims or violations that
                are pending that would result in any limitations on or suspension
                or
                termination of such licenses.

            


    

    
      	
              i.

            	
              All
                financial statements and reports relating to the Company provided
                by Company
                or made available or disclosed to Lender and its accountants, attorneys
                and other agents are complete, accurate and fairly present the financial
                position and performance of Company in all material respects for
                the
                periods to which they relate, and there has been no adverse change
                in the
                condition, financial or otherwise, of Company since the last disclosed
                statement.

            


    

    


    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    
      	
              j.

            	
              All
                of the representations and warranties made by Company contained in
                the
                Loan Documents contemplated hereby and all information delivered
                in any
                schedule, attachment, certificate or exhibit hereto are true, correct
                and
                complete on the date of this Agreement, throughout the term of this
                Agreement. Company has not omitted to state to Lender any fact relating
                to
                the Company, which (i) is necessary to make the information given
                by or on
                behalf of Company not misleading, (ii) if disclosed would reasonably
                affect the decision of a person considering making a loan to Company
                or
                (ill) has or which could reasonably be expected to have an adverse
                effect
                upon the Company or the profits, condition (financial or otherwise)
                or
                prospects of the Company's
                business.

            


    

    6.
      Affirmative and negative Covenants:

    
      	
              a.

            	
              Company
                will provide unaudited copies of all quarterly financial statements
                to
                Lender within 45 days after the end of each quarter and audited yearly
                financial statements within 90 days after the end of each
                year.

            


    

    
      	
              b.

            	
              Company
                shall maintain its existence, good standing and qualification to
                do
                business, where required, and comply with all laws, regulations and
                governmental requirements applicable to it or to any of its property,
                business operations and
                transactions.

            


    

    
      	
              c.

            	
              Company
                will notify Lender immediately if it becomes aware of the occurrence
                of
                any event of defaults (as defined herein or in any Loan Document,
                an
                "Event of Default") or of any event that with the giving of notice
                or
                passage of time, or both, could become an Event of
                Default.

            


    

    
      	
              d.

            	
              During
                the term of the Loan Documents, Company agrees for itself and on
                behalf of
                any entity owned or controlled by Company ("Company's Subsidiary")
                not to encumber further nor to further voluntarily grant a lien or
                security interest upon any assets or property of Company or Company's
                Subsidiary (whether real, personal, or intangible) identified
                in
                Exhibit A. Company, for itself and Company's Subsidiary, further
                covenants
                not to suffer or permit the filing of a lien by third parties (including
                but not limited to tax liens and mechanics' or materialman's liens)
                upon
                any of the assets or property of Company or Company's Subsidiary
                (whether
                real, personal, or intangible) identified in Exhibit
                A.

            


    

     

    
      	
              7.

            	
              Events
                of Default: The occurrence of any of the following events, in addition
                to any other Events of Default as defined in any Loan Document, shall
                constitute an "Event of Default"
                hereunder:

            


    

     

    
      	
              a.  

            	
              Any
                provision of this Agreement or the Loan Documents, and any amendments
                thereto, is breached, with any applicable notice having been given
                and
                time to cure expired, or is untrue or misleading in any material
                respect;

            


    

     

    
      	
              b.  

            	
              Any
                warranty, representation, or statement made or furnished to Lender
                by
                Company in connection with any of the Loan Documents, is untrue or
                misleading in any material respect;

            


    

    


    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

     

    
      	
              c.  

            	
              Company
                is in default under any provision of any Loan Document and/or any
                amendments thereto, including without limitation if the Company shall
                fail
                to pay on the due date any payment of money, whether as principal,
                interest, late charge, or Enforcement Costs (as defined below), as
                required under this Agreement or any Loan Document, with any applicable
                notice having been given and time to cure
                expired;

            


    

     

    
      	
              d.  

            	
              The
                insolvency of the Company. For purposes hereof, the term "insolvency"
                shall mean: (i) the appointment, by the order of a court of competent
                jurisdiction, of a trustee, receiver, or liquidator of the Company,
                if
                such order shall not be discharged or dismissed within sixty (60)
                days
                after such appointment; (ii) application for, or consent in writing
                to,
                the appointment of a receiver, trustee, or liquidator of all or
                substantially all of tile assets of the Company; (iii) the filing
                of a
                voluntary petition in bankruptcy or the admission in writing of inability
                to pay debts as they become due; (iv) a general assignment for the
                benefit
                of creditors; (v) the filing of a petition or an answer seeking a
                reorganization (other than a reorganization not involving the liabilities
                of the Company) or an arrangement with creditors or taking advantage
                of an
                bankruptcy or insolvency law; (vi) the filing of an answer admitting
                the
                material allegations of a petition filed against the Company in any
                bankruptcy reorganization, or insolvency proceeding; (vii) the insolvency
                of Company; (viii) the Company has suffered a material adverse effect
                in
                the reasonable discretion of the Lender; or (ix) the entering of
                an order,
                judgment, or decree by any court of competent jurisdiction on the
                application of a creditor adjudicating the Company as bankrupt or
                insolvent, or the appointment of a receiver, trustee, or liquidator
                of the
                Company, or of all or substantially all of the assets of the Company,
                if
                such order, judgment or decree continues unstayed and in effect for
                a
                period of sixty (60) days from the date
                entered;

            


    

     

    
      	
               

            	
              e.
                A Change in Control of Company. For purposes hereof, the term "Change
                in
                Control" shall mean an event whereby. Company is acquired, or sells,
                conveys, leases in one transaction all or substantially all of its
                property, or otherwise disposes of all or substantially all of its
                property or business or mergers, consolidates or enters into any
                recapitalization, reclassification, share exchange, conversion or
                other
                business combination or reorganization or acquisition or similar
                transaction with any other entity (other than a wholly-owned subsidiary);
                provided, however, that any such transaction with which the Company
                is the
                surviving entity shall not be a Change in Control unless as a result
                of
                the transaction the stockholders of Company own less than fifty percent
                (50%) of the voting power of the surviving entity after such extraordinary
                transaction or Company or its shareholders effect any other transaction
                or
                series of related transactions in which more than fifty percent (50%)
                of
                the voting power of the Company directly or indirectly beneficially
                owned
                by Company's shareholders of record as of November 15, 2007 is disposed
                of; provided that a merger or sale effected solely for the purpose
                of
                changing the domicile of the Company shall not be deemed a change
                in control
                of
                Company.

            


    

     

    
      	
              f.

            	
              Notwithstanding
                anything herein to the contrary, Company shall have a ten (10)
                day grace period after notice from Lender to cure any non-monetary
default
                hereunder. There shall be no grace period for monetary default and
                no
                notice required by Lender for such default to be immediate and material.
                Time is of the essence
                hereunder.

            


    

    


     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    
      	
              8.        

            	
              Remedies
                Upon Default.

            


    

    
      	
               

            	
              a.
                If an Event of Default shall occur for any reason whatsoever (and
                whether
                such occurrences shall be voluntary or involuntary, or come about
                or be
                effected by operation of law or pursuant to or in compliance with
                any
                judgment, decree, or order of any court, or any order, rule or regulation
                of any administrative or governmental body), or the discovery by
                Lender of
                the occurrence of any Event of Default, Lender shall have all of
                the
                rights and remedies under applicable law and, in addition, without
                limiting the foregoing, the right to (a) cure such defaults, with
                the
                result that all costs and expenses incurred or paid by Lender in
                effecting
                such cure shall bear interest at the highest rate permitted by law,
                and
                shall be payable upon demand; (b) accelerate the maturity of the
                Obligations (as defined in the Security Agreement) and demand the
                immediate payment thereof, and to charge the Default Rate on such
                Obligations without presentment, demand, protest or other notice
                of any
                kind, all of which are expressly waived, and the Lender shall have
                all of
                the rights, powers., and remedies available under the terms of the
                Loan
                Documents and all applicable laws; and (c) if the Note is not paid
                when
                due, whether at maturity or by acceleration, the Company promises
                to pay
                all costs of collection and enforcement, including but not limited
                to, all
                expenses, including reasonable attorneys' fees, paralegals' fees,
                legal
                assistant's fees and costs, including those incurred on the appellate
                level and those incurred in connection with a determination of the
                amount
                of such fees and costs to which the other party is entitled, incurred
                by
                the Lender on account of such collection, whether or not suite is
                filed
                thereon (collectively, the "Enforcement Costs"). "Default Rate" shall
                mean
                24% APR.

            


    

     

    
      	
               

            	
              b
                Company hereby releases, to the extent permitted by applicable law,
                all
                errors and all rights of exemption, appeal, slay of execution,
                inquisition, and other rights to which Lender may otherwise be entitled
                under the laws or the United States of America or of any state or
                possession of the United States of America now in force and which
                may
                hereafter be enacted.

            


    

     

    
      	
              9.        

            	
              Expenses.
                Upon the Closing, Company shall pay all costs and fees referenced
                herein. including without limitation documentary stamps, intangible
                tax,
                filing fees and costs and reasonable professional and attorney's
                fees,
                with all such amounts deducted from loan proceeds at
                Closing.

            


    

     

    
      	
              10.             

            	
              Financing
                Statements. Company hereby consents to tile Lender's filing of any and
                all Uniform Commercial Code financing statements and deeds of trust
                as
                Lender deems necessary to perfect Lender's rights in the Collateral
                (as
                that term is defined in the Security Agreement) pursuant to the terms
                of
                this Agreement or other Loan
                Documents.

            


    

     

    
      	
              11.             

            	
              Company
                Indemnity. Company shall indemnify, defend and hold harmless Lender
                and its members, agents, partners, employees and independent contractors,
                at all times from and after the Closing Date, from and against any
                and all
                claims, actions, damages, liabilities, losses (including consequential
                losses), judgments, penalties, interest, fines, expenses, and/or
                other
                costs (including attorneys' fees and court costs) arising from or
                relating
                to:

            


    

     

    
      	
            	
              a.

            	
              any
                negligent action or omission of Company or any of the Company's employees,
                contractors, agents or any other person acting under Company's supervision
                or control prior to, as of, or following the Closing
                Date;

            


    

    


     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    
      	
              b.  

            	
              any
                inaccuracy or breach of any representation or warranty made by Company
                in
                this Agreement or any other Loan Document, document or instrument
                executed
                or delivered by Company in connection with this Agreement or any
                breach or
                non-performance of any covenant or agreements made by Company in
                this
                Agreement or any other Loan Document, document or instrument executed
                or
                delivered by Company in connection with this
                Agreement;

            


    

    
      	
              c.  

            	
              any
                Loan Document and the payments due
                hereunder;

            


    

    
      	
              d.  

            	
              the
                negligence or willful misconduct of Company, their agents or
                employees;

            


    

    
      	
              e.  

            	
              the
                misapplication or conversion by Company of any insurance proceeds
                paid by
                reason of any loss, damage or destruction to the
                Collateral;

            


    

     

    
      	
              f.  

            	
              any
                state of local documentary stamp taxes, intangible taxes, personal
                property taxes and sales tax, if any, imposed by virtue of the execution
                and acceptance of this Agreement, the Loan Documents, Lender's perfection
                of its security interest in the Collateral, including without limitation
                deeds of trust filed with regard to the Lease Agreements, and the
                transactions contemplated hereby;
                and

            


    

    
      	
              g.  

            	
              The
                Company voluntarily filing for bankruptcy under federal or state
                laws.

            


    

     

    
      	
              12.             

            	
              Waiver.
                The Company hereby waives diligence, presentment, protest, notice
                of
                protest, notice of dishonor, and notice of nonpayment of this Note,
                and
                specifically consents to and waives notice of any renewal or extension
                of
                this Note. The Company hereby waives the benefits of the statute
                of
                limitations to the maximum extent allowed by Law. No delay by the
                Lender
                in exercising any power or privilege hereunder, nor the single or
                partial
                exercise of any power or privilege hereunder, shall preclude any
                other or
                further exercise thereof, or the exercise of any other power or privilege
                hereunder.

            


    

     

    
      	
              13.             

            	
              Amendment.
                This Note may be waived, changed, modified, or amended only with
                the
                written consent of both the Company and the
                Lender.

            


    

     

    
      	
              14.             

            	
              Security
                Interest. The amounts due and payable in the ordinary course of
                performance under the terms of this Note and such amounts due and
                payable
                as the result of any acceleration by Lender or default by the Company
                shall be secured solely by the Company's real and personal property
                listed
                in the itemization and documentation package set forth in Exhibit "A".
                Prepayment by the Company of any portion of the principal and accrued
                interest pursuant to the terms of this Note shall not reduce or otherwise
                impair the security interest of the Lender in all of the real and
                personal
                property described in Exhibit "A", except that complete repayment
                of all
                outstanding principal and interest shall release and redeem to the
                Company
                all interest in the real and personal property securing the debt.
                The
                Lender shall be entitled, at its discretion, to file with the State
                and/or
                county recorders office form UCC-1 financing statements with respect
                to
                the security interests herein contemplated. The Lender shall he entitled
                to and the Company shall file with the State and/or county recorders
                office liens on the real property interests and/or mortgages, as
                appropriate, with respect to the real property collateral set forth
                in
                Exhibit "A". The Company shall provide all necessary assistance to
                Lender
                and execute all documents required by Lender to prepare and file
                the form
                UCC-1 financing statements, real property liens and mortgages, as
                appropriate. Prior to the filing contemplated herein, the Company
                agrees
                not to sell, transfer, assign or encumber any of the .property listed
                in
                Exhibit "A", except in the ordinary course of business for the purpose
                of
                conducting the same. The cost of such filings shall be borne by the
                Company.

            


    

    


     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    
      	
              15.

            	
              Investment
                Bankers. The Company acknowledges that Viewpoint Securities, LLC
                is the
                Company's investment banker and shall receive a 5.0% cash commission
                on
                this Note

            


    

     

    II.
      GENERAL PROVISIONS

     

    
      	
               

            	
              1.
                Notices. Any notice herein required or permitted
                to be given shall be in writing and shall be deemed effectively given:
                (a)
                upon personal delivery to the party notified, (b) when sent by confirmed
                telex or facsimile if sent during normal business hours of the recipient,
                if not, then on the next business day, (c) three days after having
                been
                sent by registered or certified mail, return receipt requested, postage
                prepaid, or (d) one day after deposit with a nationally recognized
                overnight courier, specifying next day delivery, with written verification
                of receipt. The addresses for such communication shall
                be:

            


    

     

    


    
      	
              If
                to the Company:

               

            	
              Bonanza
                Oil & Gas, Inc.

              Attn:
                Bill Wiseman, President

              1901
                Post Oak Drive, Suite 402

              Houston,
                TX 77027 Tel: (713) 333-5805 Fax: (713)
                333-5928

            


    

    


    
      If
        to the
        Lender:

    

     

    
      	
              2.        

            	
              Assignment.
                This agreement is binding upon and inures to the benefit
                of
                the parties hereto and their respective heirs, successors and permitted
                assigns. The rights granted the Lender under this Agreement may be
                assigned to any purchaser or substantially all or the Securities
                (or the
                rights thereto) from the Lender or any other assignee of the Lender.
                In
                the event of a transfer of the rights granted under this Agreement,
                Lender
                agrees that the Company may require that the transferee to comply
                with
                reasonable conditions as determined in the discretion of the Company
                but
                in no case shall the obligations of the Company be relieved of its
                obligations to repay principal and accrued
                interest.

            


    

     

    
      	
              3.        

            	
              Counterparts/Facsimile.
                This Agreement may be executed in two or more counterparts,
                each of which shall constitute an original, but all of which, when
                together shall constitute but one and the same instrument, and shall
                become effective when one or more counterparts have been signed by
                each
                party hereto and delivered to the other party. In lieu of the original,
                a
                facsimile transmission or copy of the original shall be as effective
                and
                enforceable as the original.

            


    

     

    
      	
              4.

            	
              Remedies.
                The remedies provided in this Agreement are cumulative
                and
                not exclusive of any remedies provided by law. If any term, provision,
                covenant or restriction of this Agreement is held by a court of competent
                jurisdiction to be invalid, illegal, void or unenforceable, the remainder
                of the terms, provisions, covenants and restrictions set forth herein
                shall remain in full force and effect and shall in no way be affected,
                impaired or invalidated, and the parties hereto shall use their best
                efforts to find and employ an alternative means to achieve the same
                or
                substantially the same result as that contemplated by such term,
                provision, covenant or restriction. It is hereby stipulated and declared
                to be the intention of the parties that they would have executed
                the
                remaining terms, provisions, covenants and restrictions without including
                any of such that may be hereafter declared invalid, illegal, void
                or
                unenforceable.

            


    

    
      	
              5.         

            	
              Headings.
                The headings in this Agreement are for reference purposes
                only and shall not affect in any way the meaning or interpretation
                of this
                Agreement.

            


    

     

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    
      	
              6.         

            	
              Governing
                Law. This Agreement shall be governed by and construed in
                accordance

            


    

    with
      the
      laws of the State of Nevada applicable to contracts made in Nevada by persons
      domiciled in Nevada and without regard to its principles of conflicts of
      laws.

    
      	
              7.        

            	
              Severability.
                If any provision of this Agreement shall for any reason
                be
                held invalid or unenforceable, such invalidity or unenforceability
                shall
                not affect any other provision hereof and this Agreement shall be
                construed as if such invalid or unenforceable provision had never
                been
                contained herein.

            


    

    
      	
              8.         

            	
              Capitalized
                Terms. All capitalized terms not otherwise defined herein
                shall have the

            


    

    meaning
      assigned to them in the Purchase Agreement.

     

    
      	
              9.
                

            	
              Waiver
                of Jury Trial. COMPANY HEREBY KNOWINGLY., VOLUNTARILY AND
                INTENTIONALY WAIVE ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
                OF
                ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THE LOAN
                DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREIN. FURTHER, THE COMPANY
                HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF THE LENDER NOR
                THE
                LENDER'S COUNSEL HAS REPRESENTED, EXPRESSLY OR OTHERWISE THAT THE
                LENDER
                WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS
                WAIVER OF
                RIGHT TO JURY TRIAL PROVISION. FINALLY, THE COMPANY ACKNOWLEDGES
                THAT THE
                LENDER HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, INTER ALI,
                THE
                PROVISIONS OF THIS SECTION.

            


    

     

    IN
      WITNESS WHEREOF, The parties hereto have set their hand and seal to
      this Agreement as of the day and year first set forth above.

     

     

    "COMPANY
      "

    
      	 	 	 	 	 
	
              By;
                /s/ Bill
                Wiseman

            	 	 	
               

            	 
	
              Bill
                Wiseman,
                President
                and CEO

            	 	 	
               

            	 
	Bonanza
              Oil & Gas, Inc.	 	 	 	 
	
              A
                Nevada
                Corporation

            	 	 	
               

            	 


    

     

    "LENDER"

    
      
        	 	 	 	 	 
	
                By;
                  /s/ David M.
                  Rosemberg

              	 	 	
                 

              	 
	
                David
                  M.
                  Rosemberg, Managing
                  Director
                  

              	 	 	
                 

              	 
	 	 	 	 	 


      

    

    
       

      
        
          
            	 	 	 	 	 
	
                    By;
                      /s/ Lee Meier
                      

                  	 	 	
                     

                  	 
	
                    Lee
                      Meier,
                      Managing Director 

                  	 	 	
                     

                  	 
	 	 	 	 	 
	
                     

                  	 	 	
                     

                  	 


          

        

        
          



          
            
               

            

            
              9

              
                

              

            

            
               

            

          

        

      

       

    

     

    Exhibit
      A

     

    The
      Plantation Assets, which consist of a22.5% pre-payout (15% post-payout) interest
      in oil and gas wells in Gonzales County, Texas. The Company will receive 15.75%
      of the net revenues from the wells until it has recovered its $750,000 cost
      at
      which time the payout net revenue interest will drop to 10.5% of net
      revenues.

     

     

    10