Unassociated Document


    
      Exhibit
        10.37

       

      THIS
        WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
        REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
        OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED FOR
        SALE,
        MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT
        TO (A)
        AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE
        STATE SECURITIES LAWS, OR (B) AN EXEMPTION THEREFROM AND, IF REQUESTED BY
        THE
        COMPANY, THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY
        TO THE COMPANY TO THE EFFECT THAT THE TRANSFER IS EXEMPT FROM THE REGISTRATION
        PROVISIONS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
        LAWS.

    

     

    WARRANT
      TO PURCHASE COMMON STOCK

    OF

    TEKOIL
      & GAS CORPORATION


    


    This
      Warrant is issued to Goldman, Sachs & Co., or its registered assigns (the
“Holder”), by TEKOIL & GAS CORPORATION, a Delaware corporation (the
“Company”), on May 11, 2007 (the “Warrant Issue Date”). This Warrant is issued
      pursuant to the terms of a certain Credit and Guaranty Agreement dated of even
      date herewith (the “Credit Agreement”) in connection with a credit facility in
      favor of a subsidiary of the Company provided by an affiliate of the Holder.
      Capitalized terms used herein, but not otherwise defined, shall have the meaning
      ascribed to them in the Credit Agreement.

     

    1. Number
      of Shares Subject to Warrant; Definition of Certain Terms.
      Subject
      to the terms and conditions hereinafter set forth, the Holder is entitled,
      upon
      surrender of this Warrant at the principal office of the Company, to purchase
      from the Company, at a price per share equal to the Exercise Price (as defined
      in Section 2 below), the Warrant Shares. 

     

    For
      purposes of this Warrant: 

     

    (A) “Common
      Stock” shall mean the Company’s common stock, $0.000001 par value, and shall
      include: (i) in case of any reorganization, reclassification,
      consolidation, merger, distribution, securities exchange or sale or conveyance
      of assets, the securities or other property into or for which shares of such
      common stock are converted or exchanged, and (ii) any other securities or
      other property into or for which shares of such common stock may be converted
      or
      exchanged.

     

    (B) “Convertible
      Securities” shall mean evidences of indebtedness, shares of stock, interests or
      other securities (other than Options) that are convertible into or exercisable
      or exchangeable for, with or without payment of additional consideration, Common
      Stock, either immediately or upon a specified date or the happening of a
      specified event.

     

    (C) “Fair
      Market Value” of securities or other property shall mean (i) in the case of
      securities that are traded on a national securities exchange, an amount per
      share equal to the average of the high and low reported sale prices per share
      of
      such securities on the principal national securities exchange on which such
      securities are traded, on each trading day in the seven-day period immediately
      prior to the date as of which Fair Market Value is being determined or (ii)
      in
      the case of all securities or property not covered by clause (i) above, the
      fair
      market value of such securities or other property determined by the Board of
      Directors of the Company in good faith, unless the Holder requests that an
      independent appraisal of such securities or other property be obtained, in
      which
      case the fair market value shall be determined by a qualified, nationally
      recognized, independent appraiser (the “Appraiser) selected by the Company and
      acceptable to the Holder (such approval by the Holder not to be unreasonably
      withheld or delayed) experienced in appraising securities or other property
      similar to that with respect to which the Fair Market Value is to be determined.
      The Company shall make available all information reasonably necessary to allow
      the Appraiser to perform the appraisal and shall instruct the Appraiser to
      use
      commercially reasonable efforts to complete the appraisal and to provide the
      Company and the Holder a written determination of the Fair Market Value within
      twenty (20) days of the date as of which Fair Market Value is to be determined
      hereunder. All fees and expenses of the Appraiser will be borne by the Company;
      provided, however, that if the fair market value of such securities of other
      property as determined by the Appraiser is not more than 10% more or less than
      the fair market value determined by the Company’s Board of Directors, then the
      fees and expenses of the Appraiser will be borne by the Holder (or reimbursed
      to
      the Company by the Holder to the extent previously paid by the
      Company).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (C) “Fully
      Diluted Basis” means that all outstanding Options and Convertible Securities
      have been treated for computation purposes as if they have been exercised,
      converted or exchanged for or into the maximum number of shares of Common Stock
      for which or into which such Options and Convertible Securities may be
      exercised, converted or exchanged as of the time of such
      computation.

     

    (D) “Options”
      shall mean any options, warrants or other rights to subscribe for or to purchase
      Common Stock or Convertible Securities.

     

    (E) “Warrant
      Shares” shall mean 900,000 shares of Common Stock, subject to adjustment as
      described in Section 7 below.

     

    2. Exercise
      Price.
      The per
      share purchase price for the Warrant Shares shall be $0.50 (the “Exercise
      Price”). The Exercise Price shall be subject to adjustment pursuant to Section 7
      hereof.

     

    3. Exercise
      Period.
      Except
      as otherwise provided for herein, this Warrant shall be exercisable, in whole
      or
      in part, at any time and from time to time from and after the date hereof and
      before or on May 11, 2012 (the “Expiration Date”). After the Expiration Date,
      this Warrant shall be void and of no further force and effect, except as
      provided in Section 13 hereof. Whether or not surrendered to the Company by
      the
      Holder, this Warrant shall be deemed canceled upon the expiration
      hereof.

     

    4. Method
      of Exercise.

     

    (a) While
      this Warrant remains outstanding and exercisable in accordance with Section
      3
      hereof, the purchase rights hereby represented may be exercised in whole or
      in
      part, at the election of the Holder, by the tender of the Notice of Exercise
      in
      substantially the form attached hereto as Exhibit
      A
      and the
      surrender of this Warrant at the principal office of the Company and by the
      payment to the Company in cash, by check, cancellation of indebtedness or other
      form of payment acceptable to the Company, of an amount equal to the then
      applicable Exercise Price multiplied by the number of shares of Common Stock
      then being purchased.

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

       

    

    (b) Notwithstanding
      any provisions herein to the contrary, if the Fair Market Value of one share
      of
      Common Stock is greater than the Exercise Price (at the date of calculation
      as
      set forth below), in lieu of exercising this Warrant for payment of the
      aggregate Exercise Price as provided above, the Holder may elect a net issue
      exercise of this Warrant (or portion thereof being exercised) by surrender
      of
      this Warrant at the principal office of the Company together with the duly
      executed Notice of Exercise, in which event the Company shall issue to the
      Holder, without payment of any additional consideration therefore, a number
      of
      shares of Common Stock computed in accordance with the following formula:


     

    X
      = Y ((A
      - B) / A)

    


    WHERE:

    


    X
      = the
      number of shares of Common Stock to be issued to the Holder pursuant to this
      Section 4(b), rounded to the nearest whole number of shares;

    


    Y
      = the
      number of shares of Common Stock with respect to which this Warrant is being
      exercised;

    


    A
      = the
      Fair Market Value of one share of Common Stock (at the date of such
      calculation); and

    


    B
      = the
      Exercise Price.

    


    (c) 
      If this
      Warrant is exercised only in part, the Company shall, upon surrender of this
      Warrant, execute and deliver to the Holder a new Warrant evidencing the rights
      of the Holder to purchase the balance of the Warrant Shares issuable hereunder
      and otherwise identical to this Warrant.

     

    5. Certificates
      for Shares.
      Upon
      the exercise of the purchase rights evidenced by this Warrant, one or more
      certificates for the number of shares of Common Stock so purchased shall be
      issued as soon as practicable thereafter (with appropriate restrictive legends,
      as applicable).

     

    6. Issuance
      of Shares.
      The
      Company hereby covenants that it will, at all times while this Warrant remains
      outstanding, have authorized and duly and validly reserved for issuance a
      sufficient number of shares of Common Stock to provide for the exercise of
      this
      Warrant in full. The Company represents, warrants and covenants that the Warrant
      Shares, when issued pursuant to the exercise of this Warrant, will be duly
      and
      validly issued, fully paid and nonassessable and free from all taxes, liens,
      and
      charges with respect to the issuance thereof. The Company shall not take any
      action that would cause the Exercise Price to be less than the par value of
      the
      Common Stock. The Warrant Shares issued hereunder shall have the same rights
      and
      obligations pertaining to the other shares of Common Stock issued previously
      or
      hereafter by the Company.

     

    7. Adjustment
      of Exercise Price and Number of Shares.
      The
      number of and kind of securities purchasable upon exercise of this Warrant
      and
      the Exercise Price shall be subject to adjustment from time to time as
      follows:

     

    (a) Subdivisions,
      Combinations and Other Issuances.
      If the
      Company shall at any time prior to the exercise in full or expiration of this
      Warrant subdivide its Common Stock, by split-up or otherwise, or combine its
      Common Stock, or issue additional Common Stock as a dividend with respect to
      any
      of its Common Stock, the number of Warrant Shares shall forthwith be
      proportionately increased in the case of a subdivision or stock dividend, or
      proportionately decreased in the case of a combination. Appropriate adjustments
      shall also be made to the Exercise Price, provided that the aggregate Exercise
      Price payable hereunder for the total number of Warrant Shares purchasable
      under
      this Warrant (as adjusted) shall remain the same. Any adjustment under this
      Section
      7(a)
      shall
      become effective at the close of business on the date the subdivision or
      combination becomes effective, or as of the record date of such dividend, or
      in
      the event that no record date is fixed, upon the making of such
      dividend.

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

       

    

    (b) Reclassification,
      Reorganization, Merger, Consolidation, Etc..
      In the
      event of any corporate reclassification, capital reorganization, merger,
      consolidation, sale or conveyance by the Company of all or substantially all
      of
      its assets or property to another person, spin-off or change in the Common
      Stock
      of the Company (other than as a result of a subdivision, combination, or
      dividend provided for in Section
      7(a)
      above),
      then, as a condition of such event, lawful provision shall be made, and duly
      executed documents evidencing the same from the Company or its successor shall
      be delivered to the Holder, so that the Holder shall have the right at any
      time
      prior to the expiration of this Warrant to purchase, at a total price equal
      to
      that payable upon the exercise of this Warrant, the kind and amount of shares
      of
      stock and/or other securities and property receivable in connection with such
      event by a holder of the same number of shares for which this Warrant could
      have
      been exercised immediately prior to such event. In any such case appropriate
      provisions shall be made with respect to the rights and interest of the Holder
      so that the provisions hereof shall thereafter be applicable with respect to
      any
      shares of stock or other securities and property deliverable upon exercise
      hereof, and appropriate adjustments shall be made to the Exercise Price,
      provided that the aggregate exercise price payable hereunder for the total
      number of shares of Common Stock purchasable under this Warrant (as adjusted)
      shall remain the same.

     

    (c) Issuance
      of Additional Shares of Common Stock.

     

    (i) General.
      If, at
      any time after the date of this Warrant, the Company shall issue or sell (or,
      in
      accordance with subsection (c)(ii) of this Section 7, shall be deemed to
      have issued or sold) any shares of Common Stock (other than any issuance for
      which an adjustment is made pursuant to subsection (a), (b) or (d) of this
      Section 7) without consideration or for a consideration per share of Common
      Stock less than the Exercise Price determined immediately before the date of
      such issuance or sale, then, effective immediately upon such issuance or sale
      (or deemed issuance or sale), the Exercise Price shall
      be
      reduced to a price determined in accordance with the following
      formula:

     

    EP2
      =
      EP1
      *
      (A + B)
÷ (A + C).

     

    For
      purposes of the foregoing formula, the following definitions shall apply:


     

    (1) “EP2”
shall
      mean the Exercise Price in effect immediately after such issuance or sale of
      shares of Common Stock;

     

    (2) “EP1”
shall
      mean the Exercise Price in effect immediately prior to such issuance or sale
      of
      shares of Common Stock;

     

    (3) “A”
shall
      mean the number of shares of Common Stock outstanding on a Fully Diluted Basis
      immediately prior to such issuance or sale of shares of Common
      Stock;

     

    (4) “B”
shall
      mean the number of shares of Common Stock that would have been issued (or deemed
      issued) if such shares of Common Stock had been issued (or deemed issued) at
      a
      price per share equal to EP1
      (determined by dividing the aggregate consideration received or deemed received
      by the Company in respect of such issue by EP1);
      and

     

    (5) “C”
shall
      mean the number of shares of Common Stock issued (or deemed issued) in such
      transaction.

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

       

    

    (ii) Issuance
      of Options or Convertible Securities.
      The
      issuance or sale of Options or Convertible Securities shall be deemed, in
      accordance with this subsection (c)(ii), to be the issuance of shares of
      Common Stock.

     

    (1) Issuance
      of Options.
      If the
      Company in any manner issues or grants any Options, then the total maximum
      number of shares of Common Stock issuable upon the exercise of such Options
      (or
      upon conversion or exchange of the total maximum amount of Convertible
      Securities issuable upon the exercise of such Options) shall be deemed, for
      purposes of subsection (c)(i) of this Section 7, to be outstanding and to
      have been issued and sold by the Company on the date of issuance or grant of
      such Options. For purposes of subsection (c)(i) of this Section 7, the
      shares of Common Stock issuable upon exercise of Options or upon conversion
      or
      exchange of Convertible Securities issuable upon exercise of Options for
      Convertible Securities shall be deemed to have been issued and sold at a price
      per share equal to (A) the sum of (x) the total amount, if any,
      received or receivable by the Company as consideration for the issuance or
      granting of such Options plus
      (y) the minimum aggregate amount of additional consideration payable to the
      Company upon the exercise of all such Options plus
      (z) in the case of such Options for Convertible Securities, the minimum
      aggregate amount of additional consideration, if any, payable to the Company
      upon issuance or sale of such Convertible Securities and the conversion or
      exchange thereof divided
      by
      (B) the total maximum number of shares of Common Stock issuable upon
      exercise of such Options or upon the conversion or exchange of all such
      Convertible Securities issuable upon the exercise of such Options.

     

    (2) Issuance
      of Convertible Securities.
      If the
      Company in any manner issues or sells any Convertible Securities, then the
      maximum number of shares of Common Stock issuable upon the conversion or
      exchange of such Convertible Securities shall be deemed, for purposes of
      subsection (c)(i) of this Section 7, to be outstanding and to have been
      issued and sold by the Company on the date of issuance or sale of such
      Convertible Securities. For purposes of subsection (c)(i) of this
      Section 7, the shares of Common Stock issuable upon conversion or exchange
      of Convertible Securities shall be deemed to have been issued and sold at a
      price per share equal to (A) the sum of (x) the total amount received
      or receivable by the Company as consideration for the issuance or sale of such
      Convertible Securities plus
      (y) the minimum aggregate amount of additional consideration, if any,
      payable to the Company upon the conversion or exchange thereof divided
      by
      (B) the total maximum number of shares of Common Stock issuable upon the
      conversion or exchange of all such Convertible Securities.

     

    (3) Superseding
      Adjustment.
      To the
      extent any Warrants have not been exercised, if at any time after any adjustment
      of the Exercise Price shall have been made pursuant to subsection (c)(i) of
      this
      Section 7 as a result of the issuance of Options or Convertible Securities,
      or after any new adjustment of the Exercise Price shall have been made pursuant
      to this paragraph (3) (each of the foregoing, a “previous
      adjustment”):

     

    a. such
      Options or the right of conversion or exchange of such Convertible Securities
      shall expire, or be terminated or surrendered, and all or a portion of such
      Options or the right of conversion or exchange with respect to all or a portion
      of such Convertible Securities, as the case may be, shall not have been
      exercised or treated as having been exercised or otherwise canceled or acquired
      by the Company in connection with any settlement, including any cash settlement,
      of such Options or the rights of conversion or exchange of such Convertible
      Securities;

     

    b. there
      has
      been any change in the number of shares of Common Stock issuable upon the
      exercise of such Options or upon the conversion or exchange of such Convertible
      Securities (including as a result of a change in the number of Convertible
      Securities issuable upon the exercise of such Options or the operation of
      antidilution provisions applicable thereto); or

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

       

    

    c. the
      consideration per share of Common Stock for which shares of Common Stock are
      issuable upon the exercise of such Options or upon the conversion or exchange
      of
      such Convertible Securities shall be changed;

     

    then
      the
      previous adjustment shall be rescinded and annulled and the shares of Common
      Stock which were deemed to have been issued and that gave rise to the previous
      adjustment shall no longer be deemed to have been issued. Thereupon, a
      recomputation shall be made of the adjustment pursuant to this subsection
      (c)(ii), if any, of the Exercise Price as a consequence of such Options or
      Convertible Securities on the basis of:

     

    d. treating
      the number of shares of Common Stock, if, any, theretofore actually issued
      or
      issuable pursuant to the previous exercise of such Options or such right of
      conversion or exchange (including Options or rights treated as exercised,
      otherwise cancelled or acquired in connection with any settlement), as having
      been issued on the date or dates of such issuance as determined for purposes
      of
      the previous adjustment and for the total amount of consideration actually
      received and receivable therefor (determined in the manner described in
      Section (c)(ii)(1) or (2), as the case may be);

     

    e. treating
      the maximum number of shares of Common Stock (1) issuable upon the exercise
      (or upon the conversion or exchange of Convertible Securities issuable upon
      the
      exercise) of all Options which then remain outstanding and (2) issuable
      upon the conversion or exchange of all Convertible Securities which then remain
      outstanding, as having been issued; and

     

    f. making
      the computations called for in subsection (c)(i) of this Section 7 on the
      basis of the revised terms of such outstanding Options or Convertible
      Securities, as the case may be, as if they were newly issued at the time of
      such
      revision.

     

    Any
      such
      adjustment of the Exercise Price resulting from such recomputation shall
      supersede the previous adjustment.

     

    (4) No
      Further Adjustments.
      Any
      adjustment of the Exercise Price to be made pursuant to this subsection (c)
      with
      respect to the issuance of (A) any Options (whether for shares of Common
      Stock or Convertible Securities), (B) any Convertible Securities issuable
      upon the exercise of such Options or (C) any shares of Common Stock
      issuable upon the exercise of such Options or the conversion or exchange of
      such
      Convertible Securities shall be made effective upon the issuance of such
      Options. Any adjustment of the Exercise Price to be made pursuant to this
      subsection (c) with respect to the issuance of (x) any Convertible
      Securities (other than Convertible Securities issuable upon the exercise of
      Options) or (y) any shares of Common Stock issuable upon the conversion or
      exchange of such Convertible Securities shall be made effective upon the
      issuance of such Convertible Securities. No further adjustment of the Exercise
      Price shall be made upon the actual issuance of shares of Common Stock or of
      Convertible Securities upon the exercise of such Options or upon the actual
      issuance of shares of Common Stock upon conversion or exchange of such
      Convertible Securities.

     

    (d) Other
      Actions Affecting the Common Stock.

     

    (i) Equitable
      Equivalent.
      If at
      any time or from time to time the Company shall take any action affecting its
      Common Stock, other than any action of a type otherwise described in this
      Section 7 (whether or not such action of a type otherwise described in this
      Section 7 results in an adjustment to this Warrant), then the number of Warrant
      Shares and the Exercise Price shall be adjusted to such extent, if any, and
      in
      such manner and at such time, as the Board of Directors of the Company shall
      in
      good faith determine to be equitable in the circumstances, provided
      that no
      such adjustment
      shall decrease the number of Warrant Shares and provided,
      further,
      that no
      adjustment shall be required for any cash dividends paid out of retained
      earnings.

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

       

    

    (ii) No
      Avoidance.
      The
      Company will not, by amendment of its Certificate of Incorporation or through
      any reorganization, transfer of assets, consolidation, merger, dissolution,
      issue or sale of securities or any other voluntary action, avoid or seek to
      avoid the observance or performance of any of the terms to be observed or
      performed hereunder by the Company. The Company shall at all times in good
      faith
      assist in the carrying out of all the provisions of this Section 7 and in the
      taking of all reasonable action in order to protect the exercise rights of
      the
      Holder against impairment.

     

    (e) Miscellaneous.

     

    (i) Calculation
      of Consideration Received.
      If any
      shares of Common Stock, Options, Convertible Securities or other securities
      of
      the Company are issued or sold or deemed to have been issued or sold for cash,
      then the consideration received therefor shall be deemed to be the net amount
      received or deemed received by the Company therefor. If any shares of Common
      Stock, Options, Convertible Securities or other securities of the Company are
      issued or sold or deemed to have been issued or sold for consideration other
      than cash, then the amount of the consideration other than cash received or
      deemed received by the Company shall be the Fair Market Value of such
      consideration, as of the date of receipt or deemed receipt.

     

    (ii) Treasury
      Stock.
      The
      number of shares of Common Stock outstanding at any given time shall not include
      shares owned or held by or for the account of the Company or any of its
      subsidiaries, and the disposition of any shares of Common Stock so owned or
      held
      shall be considered an issuance of shares of Common Stock.

     

    (iii) Record
      Date.
      If the
      Company takes a record of the holders of shares of Common Stock for the purpose
      of entitling them (A) to receive a dividend or other distribution payable
      in shares of Common Stock, Options or Convertible Securities or (B) to
      subscribe for or purchase shares of Common Stock, Options or Convertible
      Securities, then such record date shall be deemed to be the date of the issuance
      or sale of the shares of Common Stock deemed to have been issued or sold upon
      the declaration of such dividend or the making of such other distribution or
      the
      date of the granting of such right of subscription or purchase, as the case
      may
      be. If the Company shall take any such record of the holders of its shares
      of
      Common Stock and shall, thereafter and before the taking of the action for
      which
      such record was taken, legally abandons its plan to take such action, then
      thereafter no adjustment shall be required by reason of the taking of such
      record and any such adjustment previously made in respect thereof shall be
      rescinded and annulled.

     

    (iv) Notice;
      Adjustment Rules.
      Whenever the Exercise Price and the number of Warrant Shares shall be adjusted
      as provided in this Section 7, the Company shall provide to the Holder a
      statement, signed by a duly elected executive officer of the Company, describing
      in detail the facts requiring such adjustment and setting forth a calculation
      of
      the Exercise Price and the number of Warrant Shares applicable to this Warrant
      after giving effect to such adjustment. All calculations under this Section
      7
      shall be made to the nearest one hundredth of a cent ($.0001) or to the nearest
      full share of Common Stock, as the case may be. Adjustments pursuant to this
      Section 7 shall apply to successive events or transactions of the types covered
      hereby. Notwithstanding any other provision of this Section 7, no adjustment
      shall be made to the number of Warrant Shares or to the Exercise Price if such
      adjustment represents less than one percent (1%) of the number of Warrant Shares
      or less than one percent (1%) of the Exercise Price immediately prior to such
      adjustment, but any lesser adjustment shall be carried forward and shall be
      made
      at the time and together with the next subsequent adjustment which together
      with
      any adjustments so carried forward shall amount to one percent (1%) or more
      of
      the number of Warrant Shares or the Exercise Price.

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

       

    

    (v) Certain
      Adjustments.
      The
      Company may make such reductions in the Exercise Price or increases in the
      number of Warrant Shares, in addition to those adjustments required by this
      Section 7, as it in its sole discretion shall determine to be advisable in
      order
      that any consolidation or subdivision of shares of Common Stock, or any issuance
      wholly for cash of any shares of Common Stock, or any issuance wholly for cash
      of Options or Convertible Securities, or any dividend, or any issuance of
      Options hereafter made by the Company to the holders of its shares of Common
      Stock shall not be taxable to such holders.

     

    (vi) Excluded
      Issuances.
      Notwithstanding any other provision of this Section 7, no adjustment shall
      be
      made pursuant to subsection (c) or (d) of this Section 7, nor shall Section
      14 apply, in respect of (i) the issuance from time to time of shares of
      Common Stock upon the exercise of this Warrant, (ii) securities issued upon
      exercise, conversion or exchange of any Options, Convertible Securities or
      other
      rights, warrants, commitments or claims, provided that the foregoing are issued
      and outstanding on the date hereof, are listed on Schedule I hereto and
      have not been amended, modified or restated after the date hereof, (iii) any
      issuance of shares of restricted stock or options to purchase shares of Common
      Stock to employees, officers or directors of the Company pursuant to a stock
      option plan or other employee benefit arrangement approved by the Board of
      Directors of the Company, in good faith, or (iv) any issuance of Common Stock
      or
      Common Stock equivalent to licensors, customers, lessors, consultants,
      suppliers, lenders or vendors of the Company in connection with a bona fide
      transaction of the Company approved by the Board of Directors; provided,
      however, that the aggregate number of shares issued pursuant to
      clauses (iii) and (iv) (including, without limitation, shares subject to
      such options or Common Stock equivalents), does not exceed an aggregate of
      15%
      of the shares of Common Stock outstanding on a fully diluted basis (subject
      to
      adjustment in the event of stock splits, combinations or similar occurrences
      after the date hereof).

     

    8. Notice
      of Certain Actions.
      In the
      event that the Company (or its Board of Directors):

     

    (a) shall
      authorize issuance to all holders of shares of Common Stock of rights or
      warrants to subscribe for or purchase any equity interest in the Company or
      of
      any Options or Convertible Securities; or

     

    (b) shall
      authorize any distribution to holders of shares of Common Stock or any equity
      interest in the Company, whether in the form of cash, property, assets,
      evidences of indebtedness, or other consideration; or

     

    (c) becomes
      a
      party to any consolidation or merger for which approval of any equity owners
      of
      the Company will be required, or to a conveyance or transfer of the properties
      and assets of the Company substantially as an entirety, or of any capital
      reorganization or reclassification or change of the shares of Common Stock
      or
      any equity interests of the Company; or

     

    (d) commences
      a voluntary or involuntary dissolution, liquidation or winding up;
      or

     

    (e) takes
      any
      other action that would require an adjustment pursuant to Section
      7;

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

       

    

    then
      the
      Company shall provide a written notice to the Holder stating (i) the date
      as of which the holders of record of shares of Common Stock or other equity
      interests of the Company to be entitled to receive any such rights, equity
      or
      distribution are to be determined, (ii) if applicable, the material terms
      of any such consolidation or merger and the expected effective date thereof,
      or
      (iii) if applicable, the material terms of any such conveyance, transfer,
      dissolution, liquidation or winding up, the date it is expected to become
      effective, and the date as of which it is expected that holders of record will
      be entitled to exchange their shares of Common Stock or other equity interests
      of the Company for securities or other property, if any, deliverable upon such
      reclassification, conveyance, transfer, dissolution, liquidation, or winding
      up.
      Such notice shall be given not later than twenty business days prior to the
      effective date (or the applicable record date, if earlier) of such event. The
      failure to give the notice required by this Section 8 or any defect therein
      shall not affect the legality or validity of any distribution, right, warrant,
      consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
      up, or the vote upon any action.

     

    9. Merger
      or Consolidation of the Company.
      The
      Company will not merge or consolidate with or into any other entity unless
      the
      successor entity expressly assumes, by supplemental agreement reasonably
      satisfactory in form and substance to each Holder, the due and punctual
      performance and observance of each and every covenant and condition of this
      Warrant to be performed and observed by the Company.

     

    10. No
      Shareholder Rights.
      Prior
      to exercise of this Warrant, the Holder shall not be entitled to any rights
      of a
      shareholder with respect to the shares of Common Stock issuable upon exercise
      of
      this Warrant, including (without limitation) the right to vote such shares
      of
      Common Stock, receive dividends or other distributions thereon, exercise
      preemptive rights or be notified of shareholder meetings, and such Holder shall
      not, by reason of being the Holder, be entitled to any notice or other
      communication concerning the business or affairs of the Company. However,
      nothing in this Section 10 shall limit the right of the Holder or its affiliates
      to be provided the notices required under this Warrant or the Credit
      Agreement.

     

    11. Compliance
      With Securities Act; Transferability of Warrant or Shares.

     

    (a) Compliance
      With Securities Act.
      The
      Holder, by acceptance hereof, agrees that this Warrant, and the shares of Common
      Stock issuable upon exercise of this Warrant, are being acquired for investment
      and that such Holder will not offer, sell or otherwise dispose of this Warrant,
      or any shares of Common Stock issuable upon exercise of this Warrant, except
      under circumstances which will not result in a violation of the Securities
      Act,
      or any applicable state securities laws. This Warrant and all shares of Common
      Stock issued upon exercise of this Warrant (unless registered under the
      Securities Act and any applicable state securities laws) shall be stamped or
      imprinted with a legend in substantially the following form:

     

    “THESE
      SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
      (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE
      SOLD, OFFERED FOR SALE, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE
      TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
      SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR AN EXEMPTION
      THEREFROM, AND, IF REQUESTED BY THE COMPANY, THE COMPANY HAS RECEIVED AN OPINION
      OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THAT EFFECT. THIS WARRANT
      HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR
      RESALE.”

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

       

    

    (b) Transferability.
      Subject
      to compliance with applicable federal and state securities laws and subject
      to
      Section 14(h) hereof, this Warrant and all rights hereunder are transferable
      in
      whole or in part by the Holder to any person or entity upon written notice
      to
      the Company. The transfer shall be recorded on the books of the Company upon
      the
      surrender of this Warrant, properly endorsed for transfer by delivery of an
      Assignment Form in substantially the form attached hereto as Exhibit B,
      to the
      Company at the address set forth in Section 17 hereof, and the payment to
      the Company of all transfer taxes and other governmental charges imposed on
      such
      transfer. In the event of a partial or complete transfer, the Company shall
      issue to the Holders one or more appropriate new warrants that are identical
      to
      this Warrant except as to the number of shares of Common Stock issuable upon
      exercise thereof (if such transfer is a partial transfer) and except that any
      such warrant issued to a Holder other than Goldman, Sachs & Co. shall not
      include Section 14 hereof or any references thereto.

     

    12. Restricted
      Securities.
      The
      Holder understands that this Warrant and the shares of Common Stock issuable
      upon exercise of this Warrant, will not be registered at the time of their
      issuance under the Securities Act for the reason that the sale provided for
      herein and in the Credit Agreement is exempt pursuant to Section 4(2) of the
      Securities Act based on the representations of the Holder set forth herein.
      The
      Holder represents that it has such knowledge and experience in financial and
      business matters as to be capable of evaluating the merits and risks of its
      investment and has the ability to suffer the total loss of the investment.
      The
      Holder further represents that it has had the opportunity to ask questions
      of
      and receive answers from the Company concerning the terms and conditions of
      this
      Warrant and the business of the Company, and to obtain additional information
      to
      such Holder’s satisfaction. The Holder further represents that it is an
“accredited investor” within the meaning of Regulation D under the Securities
      Act, as presently in effect. The Holder further represents that this Warrant
      is
      being acquired for the account of the Holder for investment only and not with
      a
      present view to, or with any present intention of, a distribution or resale
      thereof, in whole or in part, or the grant of any participation therein, other
      than pursuant to the terms of a certain Registration Rights Agreement of even
      date herewith between Holder and the Company (the “Registration Rights
      Agreement”) relating to the shares of Common Stock issuable upon exercise of
      this Warrant.

     

    13. Representations
      and Warranties of the Company.
      The
      Company represents and warrants to the Holder that, as of the Warrant Issue
      Date:

     

    (a) The
      authorized capital stock of the Company consists of (i) 200,000,000 shares
      of
      Common Stock, par value $0.000001 per share and (ii) 20,000,000 shares of
      preferred stock, par value $0.00000001 per share.

     

    (b) The
      issued and outstanding shares of capital stock of the Company consist of (i)
      38,546,175 shares of Common Stock and (ii) 2,892,000 shares of Series A
      Convertible Preferred Stock; no shares of capital stock of the Company are
      held
      as treasury shares.

     

    (c) Except
      as
      set forth on Schedule I hereto, there are no outstanding Options, Convertible
      Securities or other rights, options, warrants, commitments, claims, contracts,
      understandings or arrangements pursuant to which the Company may be required
      to
      issue any additional shares of Common Stock or any Options or Convertible
      Securities at a price per share of Common Stock less than the Exercise
      Price.

     

    The
      foregoing representations and warranties shall survive the exercise of this
      Warrant.

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

       

    

    14. Participation
      in Future Equity Financings.
      

     

    (a) Until
      the
      last to occur of the Maturity Date or the date the Loans are repaid in full,
      in
      the event that the Company proposes to engage in any financing transaction
      involving the issuance of equity securities of the Company (an “Equity Financing
      Transaction”), then Goldman, Sachs & Co. or one or more of its Affiliates
      shall be entitled to participate in such Equity Financing Transaction in
      accordance with the following provisions of this Section 14.

     

    (b) Except
      in
      the circumstances contemplated by paragraph (d) below, at least 30 Business
      Days
      prior to the consummation of an Equity Financing Transaction, the Company shall
      provide written notice (the “Financing Notice”) to Goldman, Sachs & Co. of
      the proposed Equity Financing Transaction, which notice shall specify all
      material terms of such proposed Equity Financing Transaction that are then
      available and shall include copies of any and all documents, whether in draft
      or
      final form, relating to such Equity Financing Transaction that are then
      available. Thereafter, the Company shall provide to Goldman, Sachs & Co., as
      soon as practicable after it becomes available, any and all additional or
      changed information regarding the terms of the Equity Financing Transaction
      and
      any additional or changed draft or final documentation relating to the Equity
      Financing Transaction.

     

    (c) Goldman,
      Sachs & Co. or one or more of its Affiliates shall, to the extent Goldman,
      Sachs & Co. or such Affiliate determines that it may participate in such
      financing in accordance with applicable Laws and internal policies, have the
      right, exercisable by written notice (the “Participation Notice”) to the Company
      given within 10 Business Days after the giving of the Financing Notice, to
      participate in the Equity Financing Transaction described in the Financing
      Notice by purchasing up to 25% of the equity securities of the Company being
      sold in such Equity Financing Transaction on the same terms as the other
      purchasers of equity securities of the Company in such Equity Financing
      Transaction. Such Participation Notice shall specify the percentage of the
      equity securities to be sold that Goldman, Sachs & Co. or such Affiliate
      desires to purchase, subject to the immediately preceding sentence. In the
      event
      that none of Goldman, Sachs & Co. and its Affiliates gives a Participation
      Notice prior to the expiration of such 10 Business Day period, no such Person
      shall have any right to participate in the Equity Financing Transaction
      described in the Financing Notice.

     

    (d) In
      the
      event that the Company’s Board of Directors or any of its authorized executive
      officers determines in good faith that it is not practicable to deliver the
      Financing Notice at least 30 Business Days in advance of the consummation of
      an
      Equity Financing Transaction, then the Company need not provide the Financing
      Notice at such time, but instead shall provide the Financing Notice as soon
      as
      practicable and in any event no later than the first Business Day after the
      consummation of the Equity Financing Transaction. In such event, Goldman, Sachs
      & Co. or one or more of its Affiliates shall have the rights specified in
      paragraph (c) to participate in the Equity Financing Transaction described
      in
      the Financing Notice, provided that if the Participation Notice is given after
      the consummation of such Equity Financing Transaction and within 10 Business
      Days after the giving of the Financing Notice, Goldman, Sachs & Co. or its
      Affiliates shall have the right to purchase equity securities of the Company
      of
      the same type as those sold in the Equity Financing Transaction and on the
      same
      terms in an amount up to 33% of the number of such securities sold in the Equity
      Financing Transaction.

     

    (e) Following
      the giving of a Participation Notice, the Company shall promptly provide to
      Goldman, Sachs & Co. or its applicable Affiliate any and all information and
      documents reasonably requested by Goldman, Sachs & Co. or such Affiliate in
      connection with its participation in such Equity Financing Transaction and
      its
      due diligence review of the Company in connection therewith.

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

       

    

    (f) Notwithstanding
      the giving by Goldman, Sachs & Co. or any of its Affiliates of a
      Participation Notice, the obligation of Goldman, Sachs & Co. or any such
      Affiliate to participate in any Equity Financing Transaction shall be subject
      to
      the satisfactory completion of due diligence by Goldman, Sachs & Co. or such
      Affiliate and to the execution and delivery of final documentation with respect
      to such Equity Financing Transaction in such forms and containing such terms
      as
      are satisfactory to Goldman, Sachs & Co. or such Affiliate in its sole
      discretion; provided, however, that if the Company complies with its obligations
      under paragraph (e) above, Goldman, Sachs & Co. or such Affiliate shall
      complete its due diligence no later than the fortieth Business Day after the
      giving of the Financing Notice. The Company shall not be prohibited from
      proceeding with the completion of an Equity Financing Transaction (provided
      that
      the Financing Notice has been or will be given in accordance with paragraph
      (b)
      or (d) above) if Goldman, Sachs & Co. or such Affiliate has not completed
      its due diligence at the time the Company proposes to complete such Equity
      Financing Transaction, but Goldman, Sachs & Co., subject to the forty-day
      period referred to above, shall thereafter be entitled to participate in such
      Equity Financing Transaction in accordance with the last sentence of paragraph
      (d) above.

     

    (g) Any
      failure of Goldman, Sachs & Co. or its Affiliates to give a Participation
      Notice with respect to or otherwise participate in any Equity Financing
      Transaction shall not affect the right of Goldman, Sachs & Co. and its
      Affiliates to participate in any other Equity Financing Transaction in
      accordance with this Section 14. Nothing in this Section 14 shall be deemed
      to
      obligate Goldman, Sachs & Co. or any of its Affiliates to provide or arrange
      any financing for or purchase any securities of the Company or to participate
      in
      any Equity Financing Transaction

     

    (h) Notwithstanding
      anything herein to the contrary, the rights of Goldman, Sachs & Co. and its
      Affiliates under this Section 14 shall not be transferable to any Person,
      including any transferee of all or a portion of this Warrant. In the event
      that
      this Warrant is exercised in full or transferred in its entirety by Goldman,
      Sachs & Co. prior to the expiration of the rights set forth in this Section
      14, the Company and Goldman, Sachs & Co. shall enter into a separate
      agreement setting forth the rights and obligations specified in this Section
      14.

     

    15. Successors
      and Assigns.
      The
      terms and provisions of this Warrant shall inure to the benefit of, and be
      binding upon, the Company and the Holders hereof and their respective successors
      and assigns.

     

    16. Amendments
      and Waivers.
      Any
      term of this Warrant may be amended and the observance of any term of this
      Warrant may be waived (either generally or in a particular instance and either
      retroactively or prospectively), with the written consent of the Company and
      the
      Holder.

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

       

    

    17. Notices.
      All
      notices required under this Warrant shall be deemed to have been given or made
      for all purposes (i) upon personal delivery, (ii) upon confirmation receipt
      that
      the communication was successfully sent to the applicable number if sent by
      facsimile, (iii) one day after being sent, when sent by professional overnight
      courier service, or (iv) three business days after posting when sent by
      registered or certified mail. Notices to the Company shall be sent to the
      address of the Company set forth below (or at such other place as the Company
      shall notify the Holder hereof in writing) and notices to the Holder shall
      be
      sent to the address of the Holder set forth below (or at such other place as
      the
      Holder shall notify the Company hereof in writing):

     

    
      	
              To
                the Company: 

            	TEKOIL & GAS CORPORATION
              5036
                Dr. Phillips Blvd.

              Suite
                232

              Orlando,
                FL 32819

              Telephone:
                (407) 996-8506

              Telecopy:
                (407) 996-8507

              Attn:
                Mr. Mark Western

            	 	 


    

    


    To
      the
      Holder as provided on the signature page of this Warrant.

    


    18. Captions.
      The
      section and subsection headings of this Warrant are inserted for convenience
      only and shall not constitute a part of this Warrant in construing or
      interpreting any provision hereof.

     

    19. Governing
      Law.
      This
      Warrant shall be governed by the laws of the State of Delaware, without regard
      to the choice or conflict of laws principles thereof.

     

    


    [SIGNATURE
      PAGE FOLLOWS]

    


    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the undersigned have caused this Warrant to be duly executed
      as
      of the date first set forth above.

     

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


    

     

     

    
      Signature
        Page to Warrant


    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	 	 
	 	HOLDER
	 	 
	 	
              GOLDMAN,
                SACHS & CO.

            
	 
 	 
 	 
 
	
            	By:  	/s/ Milton
              R. Millman
	 	Name:   	
              
Milton
              R. Millman III
	 	Title:	Authorized Signatory
	 	 	 
	 	
              Holder’s
                address for its principal place of business is
                as follows:

            
	 	 
	 	
              c/o
                Goldman Sachs E & P Capital

              1000
                Louisiana St., Suite 550

              Houston,
                TX 77002

              Attention:
                John Howie

            
	 	 
	 	
              Holder’s
                address for notice purposes (if different than above):

            


    

     

     

    
      Signature
        Page to Warrant

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

    


    NOTICE
      OF
      EXERCISE

     

    To:
      TEKOIL & GAS CORPORATION

    


    The
      undersigned hereby elects to purchase __________
      shares of Common Stock (as defined in the attached Warrant) of TEKOIL & GAS
      CORPORATION, pursuant to the terms of the attached Warrant.

     

    Check
      the
      appropriate box for the applicable payment method:

    


    ______ Cash
      Exercise: The aggregate Exercise Price is enclosed.

    ______ Net
      Issue
      Exercise. In lieu of cash payment of the aggregate Exercise Price,
      the attached Warrant is being exercised in accordance with
      Section 4(b) thereof. 

     

    The
      Holder represents that it has such knowledge and experience in financial and
      business matters as to be capable of evaluating the merits and risks of its
      investment, and has the ability to suffer the total loss of the investment.
      The
      Holder further represents that it has had the opportunity to ask questions
      of
      and receive answers from the Company concerning the terms and conditions of
      the
      Warrant and the business of the Company, and to obtain additional information
      to
      such Holder’s satisfaction. The Holder further represents that it is an
“accredited investor” within the meaning of Regulation D under the Securities
      Act, as presently in effect. The undersigned hereby represents and warrants
      that
      the undersigned is acquiring such shares for its own account for investment
      purposes only, and not for resale or with a present view to distribution of
      such
      shares or any part thereof in violation of the Securities Act.

     

    
      	 	 	 
	Date: ________________________	WARRANTHOLDER:
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              

              Name:
                
                Address:

              

            


    

     

    Name
      in
      which shares should be registered: _____________________

     

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    


    EXHIBIT
      B

    


    ASSIGNMENT
      FORM

    


    TO: TEKOIL
      & GAS CORPORATION


    


    The
      undersigned hereby assigns and transfers unto _____________________________
      of
      ______________________________________________ (Please typewrite or print in
      block letters) the right to purchase ____________ shares of Common Stock (as
      defined in the Warrant) of TEKOIL & GAS CORPORATION subject to the Warrant,
      dated as of _____________________________, by and between TEKOIL & GAS
      CORPORATION and the undersigned (the “Warrant”).

    


    This
      assignment complies with the provisions of Section 11 of the Warrant and is
      accompanied by funds sufficient to pay all applicable transfer
      taxes.

    


    In
      addition, the undersigned and/or its assignee will provide such evidence as
      is
      reasonably requested by TEKOIL & GAS CORPORATION, to evidence compliance
      with applicable securities laws as contemplated by Sections 11 and 12 of the
      Warrant.

     

    
      	 	 	 
	Date: ________________________	By:  	
            
	 	
            	
              

              
                 

              

            
	 	 	 
	 	
              
(Print
              Name of Signatory)
	 	 	 
	 	
              
(Title
              of Signatory) 


    

     

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

     

    Schedule
      I

    


    Options,
      Convertible Securities and Other Rights

    


    The
      Series A Convertible Preferred Stock of the Company.

    


    
      
        
        

      

      
        -18-