Unassociated Document


    
      Exhibit
        10.43

       

      MANAGEMENT
        SERVICES AGREEMENT

    

     

    This
      Management Services Agreement (this “Agreement”)
      is
      made effective as of the 11th
      day of
      May, 2007, by and among Tekoil & Gas Corporation, a Delaware corporation
      (“Manager”)
      and
      Tekoil and Gas Gulf Coast, LLC, a Delaware limited liability company
      (“Company”).

     

    WHEREAS,
      Company wishes for Manager to provide management and general and administrative
      support services to Company and Manager wishes to provide such management and
      services to Company as provided herein; and

     

    WHEREAS,
      Manager is an affiliate of the Company.

     

    NOW,
      THEREFORE, in consideration of the mutual covenants of the parties herein it
      is
      agreed as follows:

     

    Section
      1. Definitions.
      Capitalized terms used but not defined herein shall have the meanings given
      them
      in the Credit Agreement described below. The following terms shall have the
      following meaning when used herein:

     

    “Agent”
means
      the Person who, at the time in question, is the “Administrative Agent” under the
      Credit Agreement.

     

    “Credit
      Agreement”
means
      that certain Credit and Guaranty Agreement of even date herewith by and among
      Company, Agent and Lenders, as from time to time amended, supplemented or
      restated.

     

    “JOA”
means
      any joint operating agreement to which any of the Properties is
      subject.

     

    “Lenders”
means
      all Persons who at any time are “Lenders” under the Credit
      Agreement.

     

    “Operating
      Payables”
means
      the following costs and expenses of or attributable to Company for the ownership
      and operation of the Properties: (a) all leasehold operating expenses, capital
      expenditures, and other charges directly for operations on the Properties,
      (b)
      all charges and expenses for gathering, processing and transporting production
      from the Properties to the point of sale, (c) all severance and ad valorem
      taxes
      relating to Company’s interests in the Properties or in the production
      therefrom, (d) all costs and expenses of maintaining in connection with the
      Properties any bonds required by the Transaction Documents, by the terms of
      any
      laws, rules, or regulations or by the terms of any oil, gas or other mineral
      leases and other contracts and agreements forming a part of or pertaining to
      the
      Properties, (e) all delay rentals and royalties payable with respect to the
      Properties, (f) all costs or expenses necessary for the repair or replacement
      of
      the Properties resulting from damages or losses incurred, except those resulting
      from Manager’s gross negligence or willful misconduct, and (g) all costs
      incurred for the plugging and abandonment of any Property.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Properties”
means,
      collectively, those undivided interests in oil and gas properties and interests
      in other real and personal property which are, at the time in question, owned
      by
      Company or any of its Subsidiaries.

     

    “Service
      Fee”
means
      $250,000 for each calendar month (“Subject Month”) beginning June 1, 2007;
      provided that if a “Default” or “Event of Default” (as those terms are defined
      in the senior credit facility of the Company in effect from time to time) exists
      or existed in such Subject Month, then such amount shall be reduced to $125,000
      for such Subject Month.

     

    “Services”
has
      the
      meaning given to such term in Section 2.

     

    “Subordinated
      Liabilities”
has
      the
      meaning given to such term in Section 7.

     

    “Third
      Party Beneficiaries”
has
      the
      meaning given to such term in Section 11.

     

    As
      used
      in this Agreement: the word “or” is not exclusive; the word “including” (in its
      various forms) means “including without limitation”; pronouns in masculine,
      feminine and neuter genders shall be construed to include any other gender;
      and
      words in the singular form shall be construed to include the plural and vice
      versa, unless the context otherwise requires. References herein to any Section,
      Appendix, Schedule or Exhibit shall be to a Section, an Appendix, a Schedule
      or
      an Exhibit, as the case may be, hereof unless otherwise specifically provided.
      This Agreement is the result of negotiations between, and has been reviewed
      by,
      Manager, General Partner and Agent and their respective counsel. Accordingly,
      this Agreement shall be deemed to be the joint product of the parties hereto,
      and no ambiguity shall be construed in favor of or against any party hereto
      or
      beneficiary hereof.

     

    Section
      2. Management
      Services.
      During
      the term hereof, Manager shall (i) advise and consult with Company
      regarding all aspects of Company’s development, operations and expansion,
      (ii) provide management expertise and consulting services for the
      development and implementation of operational and financial plans of Company
      and
      for strategic planning and decisions of Company, and (iii) provide
      administrative support services to Company as needed for the daily operations
      of
      the business of Company (collectively, the “Services”), including the following
      specific Services:

     

    (a) Overhead
      Services.
      Manager
      will provide, at its own cost, all general and administrative overhead services
      and other general and administrative services reasonably required by
      Company.

     

    (b) Reports
      and Information.
      Manager
      will provide, at its own cost, all assistance (both from Manager’s own staff and
      from outside accountants, engineers, attorneys, consultants and other service
      providers) required by Company in order to furnish to the Agent the reports
      and
      other information required to be furnished by Company under the Transaction
      Documents, including with respect to (i) the audit of the Company’s financial
      statements, (ii) environmental compliance, audit or reporting, (iii) land and
      title issues (including, without limitation, title opinions, title reports
      and
      curative matters), (iv) preparation of the Company’s tax returns and any audits
      or other responses or actions required in connection with such tax returns,
      (v)
      regulatory issues, including compliance matters, and (vi) engineering analysis
      and reporting;

     

    
      
        
        

      

      
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    (c) Funds
      in Trust.
      To the
      extent ever received by Manager, Manager will handle, account for, and pay
      over
      to Company all proceeds of production from the Properties, all other proceeds
      of
      the Properties, and all other funds in any way accruing to the Properties or
      otherwise belonging to Company, all in accordance with the requirements of
      the
      Transaction Documents. Pending such payments, Manager will hold all such funds
      in trust for Company and Lender and will keep such funds separate from Manager’s
      own funds.

     

    (d) Lease
      and Land Administration.
      Manager
      will administer all leases and division orders, and maintain all land, lease
      and
      other related records, and provide associated services;

     

    (e) Marketing.
      Manager
      will provide marketing, gas control, and contract administration services
      necessary to sell the hydrocarbons produced from the Properties;

     

    (f) Accounting.
      Manager
      will perform all revenue and joint interest accounting functions attributable
      to
      the Properties, including but not limited to:

     

    (i) royalty
      and other lease payments,

     

    (ii) payment
      of accounts payable,

     

    (iii) collection
      of accounts receivable,

     

    (iv) computation
      and payment of severance and other taxes based on production,

     

    (v) gas
      balancing, and

     

    (vi) general
      ledger and financial reporting activities.

     

    (g) Operations.
      To the
      extent any Properties are not subject to a JOA, or are subject to a JOA under
      which Company is named as operator, Manager will provide all operation functions
      attributable to the Properties that would be provided by a reasonable and
      prudent operator.

     

    (h) Information
      and Data Systems.
      Manager
      will provide computer use and/or facilities necessary to manage and operate
      the
      Properties and maintain the records of Company, and will provide applicable
      data
      services and licenses.

     

    (i) Tax
      Returns.
      Manager
      will prepare or cause to be prepared all federal, state and local tax returns
      required of Company.

     

    (j) Operating
      Payables.
      Manager
      will pay the Operating Payables using Company’s funds and in accordance with the
      requirements of the Credit Agreement.

     

    (k) Budgets
      & Forecasts.
      Manager
      will establish operating and capital budgets and forecasts for Company and
      monitor the receipts, income and expenditures of Company.

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    (l) Compliance.
      Manager
      will use reasonable efforts to take all actions, and file all reports and
      notices, to cause Company’s operations to be in compliance with all applicable
      laws, rules and regulations. Manager will monitor the compliance by Company
      with
      covenants required by Company’s lenders.

     

    (m) Insurance.
      Manager
      will arrange for insurance policies as required under the Credit
      Agreement.

     

    (n) Accounting.
      Manager
      will maintain or cause to be maintained a general ledger with respect to
      Company’s business and attendant accounting matters.

     

    (o) Outside
      Professionals.
      Manager
      will manage and supervise the outside accountants, attorneys and financial
      consultants of Company and coordinate the annual audit of Company’s books and
      records and any capital raising efforts of Company.

     

    Section
      3. Performance
      and Authority.
      

     

    (a) Standard
      of Care.
      Manager
      shall provide the Services in a timely and current manner, consistent with
      management and administrative practices that it would provide for itself in
      the
      performance of services similar to the Services.

     

    (b) Independent
      Contractor Relationship.
      With
      respect to its performance of the Services, Manager is an independent
      contractor, with the authority to control, oversee and direct the performance
      of
      the details of the Services.

     

    (c) No
      Joint Venture or Partnership.
      This
      Agreement is not intended to and shall not be construed as creating a joint
      venture, partnership, agency or other association within the meaning of the
      common law or under the laws of any state.

     

    Section
      4. Compensation.
      For the
      Services provided hereunder by Manager to Company, Company shall pay to Manager
      the Service Fee, payable in advance on the first day of each Subject Month.
      In
      addition, Company agrees to reimburse Manager for any Operating Payables that
      may be paid with funds of Manager rather than funds of Company. The foregoing
      Service Fee and reimbursements shall be the only amounts payable by Company
      to
      Manager pursuant to this Agreement.

     

    Section
      5. Term.
      The
      respective rights, duties, and obligations of the parties hereunder shall
      commence on the effective date hereof and (a) shall continue initially
      until the earlier to occur of (i) the fourth anniversary of the effective date
      hereof, and (ii) the date the Obligations have been paid in full in cash and
      the
      Credit Agreement obligations have been terminated (other than those obligations
      which expressly survive termination), and (b) shall be renewed and shall
      continue automatically thereafter for additional one (1) year terms on such
      fourth anniversary and on each subsequent anniversary of the effective date
      hereof; provided that either party hereto may, once the Credit Agreement has
      been terminated, terminate this Agreement by giving written notice of
      termination to the other party at least thirty (30) days prior to the date
      such
      termination is to be effective. In addition, upon the occurrence and during
      the
      continuance of an “Event of Default” under the Credit Agreement, Agent may, in
      its discretion, elect to terminate this Agreement at any time, and in such
      event
      (x) Company’s only payment obligations to Manager will be for Services rendered
      prior to the date of such termination and reimbursement of any Operating
      Payables paid by the Manager on behalf of the Company, and (y) Manager will
      have
      no right or obligation hereunder to perform Services after the date of such
      termination. Finally, notwithstanding the foregoing, if the Company defaults
      on
      its required payment of the Services Fees or otherwise fails to reimburse the
      Manager for any Operating Payables paid by the Manager on the Company’s behalf,
      the Manager may elect to terminate this Agreement, such termination to be
      effective upon 30 days’ notice to the Company (it being understood that the
      Company shall still be liable to the Manager for any such unpaid Service Fees
      or
      other amounts accrued prior to termination).

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    Section
      6. Covenants
      Relating to Company & Performance.
      

     

    (a) Manager
      agrees to cause the Services to be performed as and when required by this
      Agreement and to provide all funds, personnel and assistance necessary or
      appropriate to cause such performance (it being understood, however, that in
      no
      event shall the Manager be required to provide funds for, or otherwise pay
      for,
      any Operating Payables), without any charge to Company in addition to the
      Service Fee.

     

    (b) Manager
      hereby agrees not to take any action that would prevent or delay Company from
      performing its obligations under the Transaction Documents.

     

    Section
      7. Subordination.
      As used
      herein, “Subordinated Liabilities” means any and all Liabilities (as defined in
      the Credit Agreement), other than the Service Fee and the reimbursements of
      Operating Payables described in Section 4, that are at any time owed by Company
      to Manager. Manager hereby subordinates and makes inferior to the Obligations
      (as defined in the Credit Agreement) any and all Subordinated Liabilities which
      now or at any time hereafter may be owed to it by Company. Manager agrees
      that:

     

    (a) it
      will
      never permit Company to pay any Subordinated Liabilities or any part thereof
      or
      accept payment from Company of any Subordinated Liabilities or any part thereof
      without the prior written consent of Agent, and

     

    (b) it
      will
      never accept or retain any Distributions (as defined in the Credit Agreement)
      except as permitted under the Credit Agreement or accept any other payments
      from
      Company other than the Service Fee and reimbursements of Operating Payables
      described in Section 4.

     

    If
      Manager receives any such payment or any such Distribution without the prior
      written consent of Agent, the amount so paid shall be held in trust for the
      benefit of Lenders, shall be segregated from the other funds of Manager and
      shall forthwith be paid over to Agent. Manager hereby further subordinates
      and
      makes inferior to the liens and security interests from time to time granted
      under the Transaction Documents any liens or security interests in favor of
      Manager which burden or encumber any of the Properties or assets of Company,
      and
      each agrees that it will, immediately upon request from Agent, release any
      such
      lien or security interest.

     

    Section
      8. Notices.
      Any
      notice which may be given hereunder shall be ineffective unless in writing
      and
      either delivered by registered or certified mail with return receipt requested
      to the addresses set out below or delivered by hand with written acknowledgment
      of receipt. The addresses for notice are as follows:

     

    
      	 For Company:	 	  Tekoil
              and Gas Gulf Coast, LLC
	 	 	 25050 I-45 North, Suite
              525
	 	 	 The
              Woodlands, Texas 77380
	 	 	 Attention:
              Mark S. Western
	 	 	 Telecopier: (281)
              364-8007


    

    
       

      
        
          
          

        

        
          -5-

          
            

          

        

        
          
          

        

      

       

    

    Any
      such
      address may be changed at any time by written notice in accordance herewith.
      Each notice hereunder shall be deemed to have been given when delivered in
      person or by courier service and signed for against receipt thereof, or three
      business days after depositing it in the United States mail with postage prepaid
      and properly addressed.

     

    Section
      9. Construction.
      This
      Agreement shall be construed and interpreted in accordance with the laws of
      the
      State of Texas. Captions herein are inserted for convenience only and shall
      have
      no effect upon interpretation. Whenever the context requires, the singular
      shall
      include the plural and vice versa and the masculine or neuter shall include
      the
      masculine, neuter, or feminine.

     

    Section
      10. Assigns.
      This
      Agreement shall be binding upon and shall inure to the benefit of the parties
      hereto and their respective successors and permitted assigns; provided that
      (a)
      Company may not assign its rights hereunder without the written consent of
      Manager, and (b) Manager may not assign its rights and obligations hereunder
      without the written consent of Company and the Third Party Beneficiaries (as
      defined below).

     

    Section
      11. Express
      Beneficiaries. Manager agrees that Agent, each Lender, and each Lender
      Counterparty (collectively, the “Third Party Beneficiaries”) (i) is an express
      and intended third party beneficiary of the covenants and agreements made in
      this Agreement by Manager (which benefits are immediate and not incidental),
      and
      (ii) has acted in reliance upon its status as a third party beneficiary as
      set
      forth above (including entering into the loan documents to which it is a
      party).

     

    Section
      12. Amendment.
      No
      amendment of any provision of this Agreement shall be effective unless it is
      in
      writing and signed by all parties hereto and the Third Party Beneficiaries,
      and
      no waiver of any provision of this Agreement, and no consent to any departure
      by
      any party hereto therefrom, shall be effective unless it is in writing and
      signed by the other parties hereto and the Third Party Beneficiaries, and then
      such waiver or consent shall be effective only in the specific instance and
      for
      the specific purpose for which given.

     

    Section
      13. Entire
      Agreement.
      This
      Agreement sets forth the entire agreement of the parties with respect to the
      subject matter hereof and any prior agreements, written or oral, relating
      thereto are hereby superseded.

     

    Section
      14. Counterparts,
      Facsimile, Electronic Transmission.
      This
      Agreement may be executed in any number of counterparts, all of which shall
      constitute one and the same instrument, and any party hereto may execute this
      Agreement by signing and delivering one or more counterparts. This Agreement
      may
      be executed by facsimile signature or by electronic transmission and all such
      signatures shall be effective as originals.

     

    
      [Remainder
        of page intentionally left blank.]

    

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

    
IN
      WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
      first above written.

     

    
      	 	 	 
	 	MANAGER:
	 	 
	 	
              TEKOIL
                & GAS CORPORATION,
                a
                Delaware corporation

            
	 
 	 
 	 
 
	 	By:  	/s/ Mark
              Western
	 	
              
Name:
              Mark Western
	 	Title:
              CEO and Chairman of the Board of
              Directors


    

     

    
      
        	 	 	 
	 	COMPANY:
	 	 
	 	Tekoil
                and Gas
                Gulf Coast, LLC, a Delaware limited liability company
	 	 	 
	 	By: 	Tekoil & Gas Corporation, its Managing
                Member
	 	
                 

                 

              	
              
	 	By:  	/s/
                Mark
                Western
	 	
                
Name:
                Mark Western
	 	Title:
                CEO and
                Chairman of the Board of
                Directors


      

Signature
      Page to Management Services Agreement