AMENDMENT
      NO. 1
      AND WAIVER

     

    This Amendment
      No. 1 and Waiver (this
      "Agreement")
      dated
      as of July 3,
      2007
      (the "Effective
      Date"),
      is by
      and among Tekoil
      and Gas Gulf Coast, LLC,
      a
      Delaware limited liability company (the "Company"),
      Tekoil
      & Gas Corporation,
      a
      Delaware corporation, as guarantor (the "Guarantor"),
      the
      lenders party to the Credit Agreement described below ("Lenders"),
      J.
      Aron & Company,
      as Lead
      Arranger and as Syndication Agent (in such capacities, "Syndication
      Agent"),
      and
J.
      Aron & Company,
      as
      Administrative Agent for such Lenders (together with its permitted successors
      in
      such capacity, the "Administrative
      Agent").

     

    RECITALS

     

    A.  Reference
      is made to that certain Credit and Guaranty Agreement dated as of May 11,
      2007 among the Company, the Guarantor, the Lenders, the Syndication Agent and
      the Administrative Agent (the "Credit
      Agreement").

     

    B.  Subject
      to the terms and conditions of this Agreement, the Company, the Guarantor,
      the
      Lenders, the Syndication Agent and the Administrative Agent, wish to (i) make
      certain amendments to the Credit Agreement as provided herein and (ii) provide
      a
      waiver for the Waiver Defaults, as defined below.

     

    NOW
      THEREFORE, in consideration of their mutual undertakings, the Company, the
      Guarantor, the Lenders, the Syndication Agent and the Administrative Agent
      hereby agree as follows:

     

    Section
      1.  Definitions
      and Interpretations.
      As used
      in this Agreement, each of the terms defined in the opening paragraph and the
      Recitals above shall have the meanings assigned to such terms therein. Each
      term
      defined in the Credit Agreement and used herein without definition shall have
      the meaning assigned to such term in the Credit Agreement, unless expressly
      provided to the contrary. Article, Section, Schedule, and Exhibit references
      are
      to this Agreement, unless otherwise specified. Paragraph headings have been
      inserted in this Agreement as a matter of convenience for reference only and
      it
      is agreed that such paragraph headings are not a part of this Agreement and
      shall not be used in the interpretation of any provision of this
      Agreement.

     

    Section
      2.  Waiver.
      

     

    (a)  The
      Company hereby acknowledges the existence of the following Events of Default
      (the "Waiver
      Defaults"):
      (i)
      the Company did not furnish the title opinions required by the Credit Agreement
      (the "Post-Closing
      Title Opinions")
      on or
      before June 23, 2007 and (ii) the bonds and/or letters of credit in lieu of
      bonds maintained by Sellers with respect to the Properties for the Railroad
      Commission of Texas ceased to be in full force and effect prior to June 11,
      2007
      without Company first providing all such bonds and/or letters of credit in
      lieu
      of bonds with respect to the Properties.

     

    (b)  Subject
      to the terms and conditions of this Agreement, the Lenders hereby waive the
      Waiver Defaults. The waiver by the Lenders described in this Section 2 is
      contingent upon the satisfaction of the conditions precedent set forth below
      in
      this Agreement and is limited to the Waiver Defaults. Such waiver shall not
      be
      construed to be a consent to or a permanent waiver of any Section covered by
      either of the Waiver Defaults or any other terms, provisions, covenants,
      warranties or agreements contained in the Credit Agreement or in any of the
      other Transaction Documents. The Lenders reserve the right to exercise any
      rights and remedies available to them in connection with any other present
      or
      future defaults with respect to the Credit Agreement or any other provision
      of
      any Transaction Document. The description herein of the Waiver Defaults is
      based
      upon the information available to the Lenders on the date hereof and shall
      not
      be deemed to exclude the existence of any other Events of Default. The failure
      of the Lenders to give notice to any Credit Party of any such other Events
      of
      Default is not intended to be nor shall be a waiver thereof. The Company and
      the
      Guarantor hereby agree and acknowledge that the Lenders require and will require
      strict performance by the Company and the Guarantor of all of their respective
      obligations, agreements and covenants contained in the Credit Agreement and
      the
      other Transaction Documents, as amended hereby, and no inaction or action
      regarding any Event of Default is intended to be or shall be a waiver thereof.
      

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (c)  Without
      limitation of the foregoing, any failure to deliver the Post-Closing Title
      Opinions by the date set forth in Section 8.1(s) of the Credit Agreement (as
      amended hereby), or any failure of Company to maintain hereafter all bonds
      and/or letters of credit in lieu of bonds required with respect to the
      Properties for the Railroad Commission of Texas, shall constitute an Event
      of
      Default.

     

    Section
      3.  Amendments
      to the Credit Agreement.
      

     

    (a)  Section
      1.1 of the Credit Agreement is amended by adding the following new terms in
      alphabetical order:

     

    "July
      2007 Uncommitted Loan"
      means
      the $6,752,200 Uncommitted Loan made pursuant to the Amendment No. 1 and Waiver
      dated as of July 3, 2007.

     

    "July
      2007 Uncommitted Loan Maturity Date"
      means,
      with respect to the July 2007 Uncommitted Loan, the earlier of (a) July 3,
      2008,
      and (b) the date that all Loans shall become due and payable in full hereunder,
      whether by acceleration or otherwise.

     

    (b)  Section
      2.1(b) of the Credit Agreement is amended by deleting the reference to "Maturity
      Date" and replacing it with the phrase "July 2007 Uncommitted Loan Maturity
      Date." 

     

    (c)  Section
      2.6(c) of the Credit Agreement is amended by deleting clause (iv) thereof and
      replacing it with the following clause (iv):

     

    (iv)
      at
      maturity, including the July 2007 Uncommitted Loan Maturity Date and the
      Maturity Date, as applicable.

     

    (d)  Section
      2.4 of the Credit Agreement is amended by deleting the second sentence thereof
      and replacing such second sentence with the following two
      sentences:

     

    The
      proceeds of the Loans made after the Closing Date (other than the July 2007
      Uncommitted Loan) shall be applied by Company (a) to implement the Approved
      Plan
      of Development, (b) to make other expenditures from time to time approved by
      Required Lenders, (c) subject to the requirements of Section 6.3, to
      purchase crude oil puts / natural gas floors, and (d) for Company's working
      capital. The proceeds of the July 2007 Uncommitted Loan shall be applied by
      Company (a) to provide as cash collateral to Amegy Bank National Association
      in
      connection with the issuance by such bank of a letter of credit (the
      "Letter
      of Credit")
      in the
      amount of $6,370,000 in favor of the Texas Railroad Commission with respect
      to
      the Properties and (b) to pay related expenses, costs and fees.

     

    
      
         

      

      
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    (e)  Section
      2.11 of the Credit Agreement is hereby deleted in its entirety and replaced
      with
      the following:

     

    2.11 ANCF
      Payment of Principal.
      On each
      Quarterly Payment Date, Company will pay (or prepay) the principal of the Loans,
      without premium or penalty, in an amount equal to 100% of ANCF (or such lesser
      percentage of ANCF, not to be less than 50%, as may be selected by Agent in
      its
      sole discretion) for the immediately preceding Calculation Quarter.
      Such
      amount shall be applied first
      to pay
      (or prepay) the principal of Loans other than the July 2007 Uncommitted Loan
      and
second
      to pay
      (or prepay) the principal of the July 2007 Uncommitted Loan.

     

    (f)  Section
      2.13 of the Credit Agreement is hereby amended by adding the following clause
      (b) in appropriate alphabetical order:

     

    2.13 Mandatory
      Prepayments.
      

     

    (b) In
      the
      event that any cash collateral or other funds held by Amegy Bank National
      Association with respect to the Letter of Credit are returned to Company or
      otherwise released (other than for reimbursement of the issuer for any draws
      under such Letter of Credit or payment of usual and customary fees with respect
      thereto), Company shall immediately prepay outstanding principal amount of
      the
      July 2007 Uncommitted Loan by an amount equal to the amount so released. No
      Make-Whole Amount shall be payable with respect to any such prepayment of the
      July 2007 Uncommitted Loan unless the outstanding principal amount of the Loans
      made pursuant to Section 2.1(a) has been or is prepaid contemporaneously or
      otherwise in connection with such prepayment of the July 2007 Uncommitted
      Loan.

     

    (g)  Section
      5.8 of the Credit Agreement is amended by deleting the 6th
      sentence
      thereof in its entirety and replacing such 6th
      sentence
      with the following:

     

    Company
      agrees to be insured by insurers with a financial strength rating of "A-" or
      better and financial size category of "VII" or better from AM Best, "A-" or
      better by Standard & Poor's or an equivalent rating from a recognized rating
      agency; provided
      that
      Company may be insured by Southern County Mutual Insurance Company as
      Administrative Agent deems reasonable.

     

    (h)  Section
      8.1(s) of the Credit Agreement is hereby deleted in its entirety and replaced
      with the following:

     

    
      
         

      

      
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    (s) Borrower
      shall fail to (i) furnish, on or before July 23, 2007, title opinions, in form
      and substance reasonably satisfactory to Administrative Agent, covering Texas
      State Lease MF030085 (State Tract 5-8A), Texas State Lease MF062790 (State
      Tract
      343), and any lease pooled or unitized therewith, specifically addressing,
      without limitation, the interests of Borrower in and to the following wells
      and
      non-producing reserves: (a) State Tract 5-8A #02, (b) State Tract 5-8A #01,
      State Tract 5-8 #01(BP01), State Tract 5-8A #01(BP02), State Tract 343#014,
      State Tract 343 #009, State Tract 343 #018 (BP01), State Tract 343 #014 (BP03),
      or (ii) comply with all reasonable requirements made by Administrative Agent
      pursuant to such title opinions; or

     

    (j) Section
      8.1 of the Credit Agreement is amended by adding the following clause (t) in
      appropriate alphabetical order:

     

    (t) Any
      drawing shall be made or requested under the Letter of Credit.

     

    Section
      4.  July
      2007 Loan.
      Subject
      to the terms and conditions of this Agreement, the Credit Agreement and the
      other Transaction Documents, the Lenders and the Company hereby agree that
      as of
      the Effective Date the Lenders have agreed to provide Uncommitted Loans pursuant
      to Section 2.1(b) of the Credit Agreement in an aggregate amount equal to
      $6,752,200. Such Uncommitted Loan shall be made in a single advance on the
      Effective Date. In addition to the Funding Notice required by Section 2.2 of
      the
      Credit Agreement, the Company shall deliver all such information in connection
      with such Uncommitted Loan as the Administrative Agent may reasonably request.
      The Uncommitted Loan of each Lender shall constitute a "Loan" as provided in
      the
      Credit Agreement. The determination of the Lenders to provide Uncommitted Loans
      in the amount set forth above was discretionary as provided in Section 2.1(b)
      of
      the Credit Agreement, and the Company acknowledges that the Lenders are not
      required to provide any Loans.

     

    Section
      5.  Additional
      Agreement of the Parties.
      In
      order to avoid including the July 2007 Uncommitted Loan and the Letter of Credit
      obtained therewith on a duplicative basis in calculating the financial covenants
      set forth in the Credit Agreement, and in order to make certain conforming
      changes in connection therewith, the parties hereto agree and acknowledge the
      following: (i) solely for the purpose of calculating the Debt to EBITDA ratio
      in
      Section 6.11 and determining the PDP Collateral Coverage Ratio and the Proved
      Collateral Coverage ratio in Section 6.12, "Indebtedness" shall not include
      the
      amount of the Company's Liabilities with respect to the Letter of Credit, (ii)
      solely for the purpose of calculating the Current Ratio in Section 6.10,
      "Consolidated Current Liabilities" shall not include the amount of the Company's
      Liabilities with respect to the Letter of Credit, and (iii) solely for the
      purpose of calculating the Current Ratio in Section 6.10, "Consolidated Current
      Assets" shall not include the amount of the cash collateral held by the issuing
      bank with respect to the Letter of Credit.

     

    Section
      6.  Representations
      and Warranties.
      

     

    (a)  The
      Guarantor represents and warrants that (i) after giving effect to this
      Agreement, the representations and warranties set forth in the Credit Agreement
      and the representations and warranties contained in the other Transaction
      Documents to which the Guarantor is a party are true and correct in all material
      respects on and as of the Effective Date as if made on and as of such date;
      (ii)
      other than the Waiver Defaults, no Default or Event of Default has occurred
      and
      is continuing; (iii) the execution, delivery and performance of this Agreement
      and the other documents, instruments, certificates and agreements required
      to be
      delivered by this Agreement ("Other
      Documents")
      and to
      which the Guarantor is a party are within the corporate power and authority
      of
      the Guarantor and have been duly authorized by appropriate corporate action
      and
      proceedings; (iv) this Agreement and the Other Documents to which the Guarantor
      is a party constitute legal, valid, and binding obligations of the Guarantor
      enforceable in accordance with their respective terms, except as limited by
      applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws
      affecting the rights of creditors generally and general principles of equity;
      (v) there are no governmental or other third party consents, licenses and
      approvals required in connection with the execution, delivery, performance,
      validity and enforceability of this Agreement or any of the Other Documents
      to
      which the Guarantor is a party; and (vi) the Liens under the Security Documents
      are valid and subsisting and secure the Company's and the Guarantor's
      obligations under the Transaction Documents.

     

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

    (b)  The
      Company represents and warrants that: (i) after giving effect to this Agreement,
      the representations and warranties contained in the Credit Agreement and the
      representations and warranties contained in the other Transaction Documents
      to
      which the Company is a party are true and correct in all material respects
      on
      and as of the Effective Date as if made on and as of such date; (i) other than
      the Waiver Defaults, no Default or Event of Default has occurred and is
      continuing; (ii) the execution, delivery and performance of this Agreement
      and
      the Other Documents to which the Company is a party are within the limited
      liability company power and authority of the Company and have been duly
      authorized by appropriate limited liability company action and proceedings;
      (iv)
      this Agreement and the Other Documents to which the Company is a party
      constitute legal, valid, and binding obligations of the Company enforceable
      in
      accordance with their respective terms, except as limited by applicable
      bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting
      the rights of creditors generally and general principles of equity; (v) there
      are no governmental or other third party consents, licenses and approvals
      required in connection with the execution, delivery, performance, validity
      and
      enforceability of this Agreement or any of the Other Documents to which the
      Company is a party; and (vi) the Liens under the Security Documents are valid
      and subsisting and secure Company's obligations under the Transaction
      Documents.

     

    Section
      7.  Conditions
      to Effectiveness.
      This
      Agreement shall become effective and enforceable against the parties hereto,
      the
      Credit Agreement shall be amended as provided herein, upon the occurrence of
      the
      following conditions precedent on or before the Effective Date:

     

    (a)  Agreement.
      The
      Administrative Agent shall have received multiple original counterparts of
      this
      Agreement duly and validly executed and delivered by duly authorized officers
      of
      the Company, the Guarantor, the Administrative Agent, and the
      Lenders;

     

    (b)  Cash
      Collateral Agreement.
      The
      Company shall have executed a cash collateral agreement with Amegy Bank National
      Association ("Amegy")
      and
      the Company, Amegy, and the Administrative Agent shall have executed a letter
      agreement in connection therewith (i) providing, in the case of the letter
      agreement, that any funds returned to Company or otherwise released by Amegy
      (other than for reimbursement of Amegy for any draws under such Letter of Credit
      or payment of usual and customary fees with respect thereto) shall be paid
      directly to the Administrative Agent and (ii) in the case of both such
      agreements, otherwise on terms acceptable to the Administrative
      Agent.

     

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

    (c)  Closing
      Documents List.
      The
      Administrative Agent shall have received, and shall be satisfied in its sole
      discretion with, the other items listed on the Closing Documents List attached
      hereto as Exhibit
      A
      (other
      than any items noted as being deliverable post-closing).

     

    (d)  No
      Default; Representations.
      Other
      than the Waiver Defaults, no Default or Event of Default shall have occurred
      and
      be continuing as of the Effective Date. The representations and warranties
      in
      this Agreement, and in the Credit Agreement, shall be true and correct in all
      material respects.

     

    (e)  Fees.
      The
      Company shall have paid (i) a waiver and amendment fee equal to $334,425,
      (ii) a funding fee of $47,775, and (ii) all fees and expenses of the
      Administrative Agent's outside legal counsel and other consultants pursuant
      to
      all invoices presented for payment on or prior to the Effective
      Date.

     

    Section
      8.  Effect
      on Transaction Documents; Acknowledgments.
      

     

    (a)  The
      Company and the Guarantor each acknowledges that on the date hereof all
      Obligations are payable without defense, offset, counterclaim or
      recoupment.

     

    (b)  Except
      as
      set forth in Section 2 above, the Lenders and Administrative Agent hereby
      expressly reserve all of their respective rights, remedies, and claims under
      the
      Transaction Documents. Nothing in this Agreement shall constitute a waiver
      or
      relinquishment of (i) any Default or Event of Default under any of the
      Transaction Documents other than as expressly set forth in Section 2 above,
      (ii)
      any of the agreements, terms or conditions contained in any of the Transaction
      Documents, (iii) any rights or remedies of the Lenders or Administrative Agent
      with respect to the Transaction Documents, or (iv) the rights of Lenders and
      Administrative Agent to collect the full amounts owing to it under the
      Transaction Documents.

     

    (c)  The
      Company, the Guarantor, the Lenders and Administrative Agent, each hereby
      adopts, ratifies, and confirms the Credit Agreement, as amended hereby, and
      acknowledges and agrees that the Credit Agreement, as amended hereby, and the
      other Transaction Documents are and remain in full force and effect, and the
      Company and the Guarantor each acknowledges and agrees that its liabilities
      under the Credit Agreement and the other Transaction Documents are not impaired
      in any respect by this Agreement.

     

    (d)  From
      and
      after the Effective Date, all references to the Credit Agreement and the
      Transaction Documents shall mean such Credit Agreement and such Transaction
      Documents as amended by this Agreement.

     

    (e)  This
      Agreement and each of the Other Documents is a Transaction Document for the
      purposes of the provisions of the other Transaction Documents. Without limiting
      the foregoing, any breach of representations, warranties, and covenants under
      this Agreement shall be a Default or Event of Default, as applicable, under
      the
      Credit Agreement.

     

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

    Section
      9.  Reaffirmation
      of the Guaranty.
      The
      Guarantor hereby ratifies, confirms, and acknowledges that its obligations
      under
      the Guaranty are in full force and effect and that the Guarantor continues
      to
      unconditionally and irrevocably guarantee the full and punctual payment, when
      due, whether at stated maturity or earlier by acceleration or otherwise, all
      of
      the Guaranteed Obligations as such Guaranteed Obligations have been increased
      and amended by this Agreement. The Guarantor hereby acknowledges that its
      execution and delivery of this Agreement does not indicate or establish an
      approval or consent requirement by the Guarantor under the Credit Agreement
      in
      connection with the execution and delivery of amendments to the Credit
      Agreement, the Notes or any of the other Loan Documents.

     

    Section
      10.  Miscellaneous.
      

     

    (a)  Counterparts.
      This
      Agreement may be signed in any number of counterparts, each of which shall
      be an
      original and all of which, taken together, constitute a single instrument.
      This
      Agreement may be executed by facsimile signature and all such signatures shall
      be effective as originals.

     

    (b)  Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties hereto
      and their respective successors and assigns permitted pursuant to the Credit
      Agreement.

     

    (c)  Invalidity.
      In the
      event that any one or more of the provisions contained in this Agreement shall
      for any reason be held invalid, illegal or unenforceable in any respect, such
      invalidity, illegality or unenforceability shall not affect any other provision
      of this Agreement.

     

    (d)  Governing
      Law.
      THIS
      AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
      GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS
      OF
      THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES
      THEREOF.

     

    THIS
      AGREEMENT, THE CREDIT AGREEMENT AS AMENDED BY THIS AGREEMENT, THE NOTES, AND
      THE
      OTHER TRANSACTION DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE
      PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY
      PRIOR
      AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.

     

    THERE
      ARE NO UNWRITTEN
      ORAL AGREEMENTS AMONG THE PARTIES.

     

    [Remainder
      of this page intentionally left blank. Signature pages to follow.]

     

     

    
      
         

      

      
        -7-

        
          

        

      

      
         

      

    


    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
      by
      their respective officers thereunto duly authorized, as of the date first above
      written.

     

    
      	 	 	 
	 	COMPANY
	 	 
	 	TEKOIL AND GAS GULF COAST, LLC
	 	 
	 	By: Tekoil & Gas Corporation, its Managing
              Member
	 
 	 
 	 
 
	 	 	 
	 	By:  	/s/ Mark
              Western
	 	
              
Mark
              Western
	 	CEO
              and
              Chairman of the Board of Directors


    

     

    
      	 	 	 
	 	 
	 	GUARANTOR
	 	 
	 	TEKOIL & GAS CORPORATION
	 
 	 
 	 
 
	 	 	 
	 	By:  	/s/ Mark
              Western
	 	
              
Mark
              Western
	 	CEO
              and
              Chairman of the Board of Directors




    
      	 	 	 
	 	 
	 	
              J.
                ARON & COMPANY,

              as
                Lead Arranger, Syndication Agent,

              Administrative
                Agent and a Lender

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Authorized
              Signatory


    

     

     

    
      
         

      

      
        
          Signature
            Page to Amendment No. 1 and Waiver

        

        
          

        

      

      
         

      

    

    EXHIBIT
      A 

    TO
      AMENDMENT NO. 1 AND WAIVER

    


    [CLOSING
      DOCUMENT LIST]

    


     

     

     

     

    
      
         

      

      
        
          Exhibit
            A
            to Amendment No. 1 and Waiver

          -1-