Document:

<PAGE>

EXHIBIT 10.13

                                                             SWEPI LP
                                                                    P.O. BOX 576
                                                              HOUSTON, TX  77001

October 31, 2006

Pacific Energy Resources Limited
Vladimir Katic, Chairman & CEO
1065 West Pier E Street
Long Beach, CA  90802

Wolverine Gas and Oil Corporation
Richard D. Moritz, Vice President - Land
One Riverfront Plaza - 55 Campau NW
Grand Rapids, MI  49503-2616

         RE:      FIRST AMENDMENT TO PARTICIPATION AGREEMENT
                  SECOND TEST WELL OBLIGATION EXTENTION
                  GREEN RIVER BASIN, WYOMING
                  CONTRACT #: C-WY-035-05-100

Gentlemen:

We hereby propose the First Amendment to that certain Participation Agreement
dated August 30, 2005 by and between SWEPI LP ("Shell"), Wolverine Gas and Oil
Corporation ("Wolverine"), and Pacific Energy Resources Limited ("Pacific") for
the Pacific Creek Prospect, located in the Green River Basin, Wyoming. This
amendment will extend the obligation to commence operations for the drilling of
the second Test Well from December 31, 2006, as outlined in Article 5.4 of said
Participation Agreement, to August 1, 2007. This amendment in no way extends or
relieves Pacific from the requirement to commence drilling operations on the
first Test Well by December 31, 2006 nor does it relieve Pacific from any of the
other terms and conditions of the Participation Agreement.

If you concur with this proposed amendment, please sign and return one copy of
this letter to the above address. If you have any questions or concerns please
call me at (281) 544-5667.

Sincerely,

/s/ Spencer Cearley

Spencer Cearley,
Landman

                                   Amendment
                                       1

<page>

Agreed to and accepted this 2nd day of Nov., 2006.

PACIFIC ENERGY RESOURCES LIMITED

By:      /s/ Vladimir Katic
         ------------------------------------

Title:  Chair & CEO

WOLVERINE GAS AND OIL CORPORATION

By:      /s/ Richard D. Moritz
         ------------------------------------

Title: Vice President

                                   Amendment
                                       2<PAGE>

EXHIBIT 10.14

                                 PACIFIC ENERGY

                                February 15, 2007

SWEPI LP
200 North Dairy Ashford
Houston, Texas  77079
Attention:  Mr. Spencer Cearley
            Onshore Land

Wolverine Gas and Oil Corporation
Richard D. Moritz, Vice President - Land
One Riverfront Plaza - 55 Campau NW
Grand Rapids, Michigan  49503-2616

         Re:      Second Amendment to Participation Agreement
                  Modification of Definitions of Earning Depth and Performance
                  Green River Basin, Wyoming
                  Contract #:  C-WY-035-050100

Gentlemen:

         We hereby propose the Second Amendment to that certain Participation
Agreement dated August 30, 2005 by and between SWEPI LP ("Shell"), Wolverine Gas
and Oil Corporation ("Wolverine"), and Pacific Energy Resources Limited
("Pacific") for the Pacific Creek Prospect, located in the Green River Basin,
Wyoming. This Second Amendment will modify and amend certain definitions in the
Participation Agreement as follows:

                  First Well: Pacific Palidin #15-18 "Earning Depth" shall mean
         a minimum vertical depth of thirteen thousand eight hundred fifty
         (13,850) feet beneath the surface.

                  Second Well: Ranger-1 "Earning Depth" shall mean minimum true
         vertical depth of 16,500 feet or a depth sufficient to penetrate the
         base of the Blair Formation, whichever is deeper.

                  "Performance," "Performing," or "Performed" shall mean Pacific
         shall have, pursuant to the terms and conditions of the JOA and this
         Agreement: (i) made the Seismic Payment upon execution of this
         Agreement; and (ii) funded the drilling, testing and completion of the
         Test Wells to the Earning Depth as revised herein.

<page>

         Except as otherwise provided in this Second Amendment, all other terms
and conditions of the Participation Agreement, as amended by the First Amendment
dated October 31, 2006, shall remain in full force and effect.

         If you concur with this proposed Amendment, please sign and return one
copy of this letter to the above address. If you have any questions or comments,
please call me at (562) 628-1531.

                                                     Sincerely,

                                                     /s/ Darren Katic

                                                     Darren Katic
                                                     President

                                       -2-

<page>

Agreed to and accepted this 16th day of Feb., 2007

SWEPI LP

By: /S/ B. D. GRIFFIN
    ----------------------------------------

Title:  Attorney-in-Fact

Wolverine Gas and Oil Corporation

By: /S/ RICHARD D. MORITZ, VICE PRESIDENT
    ----------------------------------------
         Richard D. Moritz

Title:   Vice President

                                      -3-<PAGE>

EXHIBIT 10.15

                          SECURITIES PURCHASE AGREEMENT
                          -----------------------------

                            LAURUS MASTER FUND, LTD.

                           CARNEROS ACQUISITION CORP.

                                GOTLAND OIL, INC.

                                       AND

                              CARNEROS ENERGY, INC.

                               DATED: MAY 31, 2006

<page>
<TABLE>
<S>     <C>

                                TABLE OF CONTENTS
                                -----------------

                                                                                 PAGE
                                                                                 ----

1.       Agreement to Sell and Purchase............................................1

2.       Fees, Warrants and Overriding Royalty Interests...........................2

3.       Closing, Delivery and Payment.............................................3
         3.1      Closing..........................................................3
         3.2      Delivery.........................................................3

4.       Representations and Warranties of the Companies...........................3
         4.1      Organization, Good Standing and Qualification....................3
         4.2      Subsidiaries.....................................................4
         4.3      Capitalization; Voting Rights....................................4
         4.4      Authorization; Binding Obligations...............................6
         4.5      Liabilities......................................................6
         4.6      Agreements; Action...............................................6
         4.7      Obligations to Related Parties...................................7
         4.8      Changes..........................................................8
         4.9      Title to Properties and Assets; Liens, Etc.......................9
         4.10     Intellectual Property............................................9
         4.11     Compliance with Other Instruments...............................10
         4.12     Litigation......................................................10
         4.13     Tax Returns and Payments........................................11
         4.14     Employees.......................................................11
         4.15     Voting Rights...................................................12
         4.16     Compliance with Laws; Permits...................................12
         4.17     Environmental and Safety Laws...................................12
         4.18     Valid Offering..................................................12
         4.19     Full Disclosure.................................................13
         4.20     Insurance.......................................................13
         4.21     Dilution........................................................13
         4.22     Patriot Act.....................................................13
         4.23     ERISA...........................................................14

5.       Representations and Warranties of the Purchaser..........................14
         5.1      No Shorting.....................................................14
         5.2      Requisite Power and Authority...................................14
         5.3      Investment Representations and Covenants........................15
         5.4      Legends.........................................................16

6.       Covenants of the Companies...............................................18
         6.1      Reporting Requirements..........................................18
         6.2      Use of Funds....................................................19

                                       ii

<page>

         6.3      Access to Facilities............................................19
         6.4      Taxes...........................................................19
         6.5      Insurance.......................................................20
         6.6      Intellectual Property...........................................21
         6.7      Properties......................................................21
         6.8      Confidentiality.................................................21
         6.9      Required Approvals..............................................21
         6.10     Opinion.........................................................22
         6.11     Margin Stock....................................................23
         6.12     Financing Right of First Refusal................................23
         6.13     Authorization and Reservation of Shares.........................23
         6.14     Summaries; Reports..............................................24
         6.15     Registration Rights.............................................24

7.       Covenants of the Purchaser...............................................24
         7.1      Confidentiality.................................................24
         7.2      Limitation on Acquisition of Common Stock of any Company........24

8.       Covenants of the Companies and the Purchaser Regarding Indemnification...24
         8.1      Company Indemnification.........................................25
         8.2      Purchaser's Indemnification.....................................25

9.       Miscellaneous............................................................25
         9.1      Governing Law, Jurisdiction and Waiver of Jury Trial............25
         9.2      Severability....................................................27
         9.3      Survival........................................................27
         9.4      Successors......................................................27
         9.5      Entire Agreement; Maximum Interest..............................27
         9.6      Amendment and Waiver............................................27
         9.7      Delays or Omissions.............................................28
         9.8      Notices.........................................................28
         9.9      Attorneys' Fees.................................................29
         9.10     Titles and Subtitles............................................29
         9.11     Facsimile Signatures; Counterparts..............................29
         9.12     Broker's Fees...................................................29
         9.13     Construction....................................................29
         9.14     Joint and Several Obligations...................................30
</TABLE>

                                       ii

<page>

                                LIST OF EXHIBITS

Form of Term Note....................................................Exhibit A
Form of Carneros Warrant...........................................Exhibit B-1
Form of Gotland Warrant............................................Exhibit B-2
Form of Opinion......................................................Exhibit C
Form of Escrow Agreement.............................................Exhibit D

                                LIST OF SCHEDULES

Schedule 4.2          Subsidiaries
Schedule 4.3          Capitalization
Schedule 4.6          Agreements
Schedule 4.7          Obligations to Related Parties
Schedule 4.8(b)       Resignations
Schedule 4.9          Title to Properties and Assets, Liens, Etc.
Schedule 4.11         Compliance with Other Instruments
Schedule 4.12         Litigation
Schedule 4.13         Tax Returns and Payments
Schedule 4.14         Employees
Schedule 4.15         Voting Rights
Schedule 4.17         Environmental
Schedule 6.9          Required Approvals
Schedule 9.12         Brokers

                                      iii

<page>

                          SECURITIES PURCHASE AGREEMENT

         THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of May 31, 2006, by and among CARNEROS ENERGY, INC., a Delaware
corporation ("Carneros"), CARNEROS ACQUISITION CORP., a Delaware corporation
("Holdings"), GOTLAND OIL, INC., a Texas corporation ("Gotland", and
collectively with Carneros and Holdings, the "Companies" and each a "Company"),
and LAURUS MASTER FUND, LTD., a Cayman Islands company (the "Purchaser").

                                    RECITALS

         WHEREAS, the Companies have authorized the sale to the Purchaser of a
Secured Term Note in the aggregate principal amount of Twenty-One Million Two
Hundred Thousand Dollars ($21,200,000) in the form of EXHIBIT A hereto (as
amended, modified and/or supplemented from time to time, the "Note");

         WHEREAS, Carneros wishes to issue to the Purchaser a warrant in the
form of EXHIBIT B-1 hereto (as amended, modified and/or supplemented from time
to time, the "Carneros Warrant") to purchase up to _____ shares of Carneros'
common stock, $____ par value per share (the "Carneros Common Stock");

         WHEREAS, Gotland wishes to issue to the Purchaser a warrant in the form
of EXHIBIT B-2 hereto (as amended, modified and/or supplemented from time to
time, the "Gotland Warrant", and collectively with the Carneros Warrant, the
"Warrants" and each a "Warrant") to purchase up to _____ shares of Gotland's
common stock, $____ par value per share (the "Gotland Common Stock");

         WHEREAS, the Purchaser desires to purchase the Note and the Warrants on
the terms and conditions set forth herein; and

         WHEREAS, the Companies desire to issue and sell the Note, Carneros
desires to issue and sell the Carneros Warrant and Gotland desires to issue and
sell the Gotland Warrant to the Purchaser on the terms and conditions set forth
herein.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises, representations, warranties and covenants hereinafter set forth
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:

         1. AGREEMENT TO SELL AND PURCHASE. Pursuant to the terms and conditions
set forth in this Agreement, on the Closing Date (as defined in Section 3), the
Companies shall sell to the Purchaser, and the Purchaser shall purchase from the
Companies, the Note. The sale of the Note on the Closing Date shall be known as
the "Offering." The Note will mature on the Maturity Date (as defined in the
Note). Collectively, the Note, the Warrants, the Carneros Common Stock issuable
upon exercise of the Carneros Warrant and the Gotland Common Stock issuable upon
exercise of the Gotland Warrant are referred to as the "Securities." All
obligations of the Companies to the Purchaser pursuant to the Note shall be
joint and several.

<page>

         2. FEES, WARRANTS AND OVERRIDING ROYALTY INTERESTS. On the Closing
Date:

                  (a) Carneros will issue and deliver to the Purchaser the
         Carneros Warrant to purchase up to _____ shares of Carneros Common
         Stock (subject to adjustment as set forth therein) in connection with
         the Offering, pursuant to Section 1 hereof. All the representations,
         covenants, warranties, undertakings, and indemnification, and other
         rights made or granted to or for the benefit of the Purchaser by
         Carneros are hereby also made and granted for the benefit of the holder
         of the Carneros Warrant and shares of Carneros Common Stock issuable
         upon exercise of the Carneros Warrant (the "Carneros Warrant Shares").

                  (b) Gotland will issue and deliver to the Purchaser the
         Gotland Warrant to purchase up to _____ shares of Gotland Common Stock
         (subject to adjustment as set forth therein) in connection with the
         Offering, pursuant to Section 1 hereof. All the representations,
         covenants, warranties, undertakings, and indemnification, and other
         rights made or granted to or for the benefit of the Purchaser by
         Gotland are hereby also made and granted for the benefit of the holder
         of the Gotland Warrant and shares of Gotland Common Stock issuable upon
         exercise of the Gotland Warrant (the "Gotland Warrant Shares", and
         collectively with the Carneros Warrant Shares, the "Warrant Shares").

                  (c) In consideration of the Purchaser's entering into this
         Agreement and purchasing the Note from the Companies, the Gotland
         Warrant from Gotland and the Carneros Warrant from Carneros, (i)
         Carneros shall issue to the Purchaser a three percent (3.0%) overriding
         royalty interest (the "Carneros ORRI") in the oil and gas properties of
         Carneros and (ii) Gotland shall issue to the Purchaser a three percent
         (3.0%) overriding royalty interest (the "Gotland ORRI", and
         collectively with the Carneros ORRI, the "ORRI") in the oil and gas
         properties of Gotland. The ORRI shall be irrevocable and shall survive
         the termination of this Agreement and payment in full of the Note.
         Carneros and Gotland shall each execute and deliver all such
         documentation and take such further action as may be required by the
         Purchaser in connection with the issuance of the ORRI to the Purchaser.

                  (d) Subject to the terms of Section 2(e) below, the Companies
         shall jointly and severally pay to Laurus Capital Management, LLC, the
         manager of the Purchaser, a closing payment of $742,000. The foregoing
         fee is referred to herein as the "Closing Payment."

                  (e) The Companies shall jointly and severally reimburse the
         Purchaser for its reasonable expenses (including legal fees and
         expenses) incurred in connection with the preparation and negotiation
         of this Agreement and the Related Agreements (as hereinafter defined),
         and expenses incurred in connection with the Purchaser's due diligence
         review of the Companies and their respective Subsidiaries (as defined
         in Section 4.2) and all related matters. Amounts required to be paid
         under this Section 2(e) will be paid on the Closing Date.

                                       2

<page>

                  (f) The Closing Payment and the expenses referred to in the
         preceding Section 2(e) (net of deposits previously paid by the
         Companies) shall be paid at closing out of funds held pursuant to the
         Escrow Agreement (as defined below) and a disbursement letter (the
         "Disbursement Letter").

         3. CLOSING, DELIVERY AND PAYMENT.

                  3.1 CLOSING. Subject to the terms and conditions herein, the
closing of the transactions contemplated hereby (the "Closing"), shall take
place on the date hereof, at such time or place as the Companies and the
Purchaser may mutually agree (such date is hereinafter referred to as the
"Closing Date").

                  3.2 DELIVERY. Pursuant to the Escrow Agreement, at the Closing
on the Closing Date, the Companies will deliver to the Purchaser, among other
things, the Note, Carneros will deliver to the Purchaser the Carneros Warrant,
Gotland will deliver to the Purchaser the Gotland Warrant and the Purchaser will
deliver to the Companies, among other things, the amounts set forth in the
Disbursement Letter by certified funds or wire transfer. Each Company hereby
acknowledges and agrees that Purchaser's obligation to purchase the Note from
the Companies on the Closing Date shall be contingent upon the satisfaction (or
waiver by the Purchaser in its sole discretion) of the items and matters set
forth in the closing checklist provided by the Purchaser to the Companies on or
prior to the Closing Date and those items and matters set forth in the
conditions of funding letter dated as of the date hereof between Holdings and
the Purchaser.

         4. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES. Each Company hereby
represents and warrants to the Purchaser as follows:

                  4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Such
Company and each of its Subsidiaries is a corporation, partnership or limited
liability company, as the case may be, duly organized, validly existing and in
good standing under the Applicable Laws of its jurisdiction of organization. For
purposes of this Agreement, "Applicable Laws" means all present laws, statutes,
regulations, treaties, judgments and decrees in relation to an entity, and all
requirements, requests, official directives, consents, approvals,
authorizations, guidelines, rules, orders and policies of any governmental or
regulatory authority applicable to the entity in a jurisdiction in which (i) it
is organized or incorporated, (ii) its assets are located, (iii) it conducts
business, and/or (iv) its stock is traded, if applicable. Such Company and each
of its Subsidiaries has the corporate, limited liability company or partnership,
as the case may be, power and authority to own and operate its properties and
assets and, insofar as it is or shall be a party thereto, to (1) execute and
deliver (i) this Agreement, (ii) the Note and the Warrants to be issued in
connection with this Agreement, (iii) the Master Security Agreement dated as of
the date hereof among the Companies, certain Subsidiaries of each Company, if
any, and the Purchaser (as amended, modified and/or supplemented from time to
time, the "Master Security Agreement"), (iv) the Deed of Trust, Security
Agreement, Financing Statement and Assignment of Production dated as of the date

                                       3

<page>

hereof made by Carneros in favor of the Purchaser (as amended, modified and/or
supplemented from time to time, the "Carneros Deed of Trust"), (v) the Deed of
Trust, Security Agreement, Financing Statement and Assignment of Production
dated as of the date hereof made by Gotland in favor of the Purchaser (as
amended, modified and/or supplemented from time to time, the "Gotland Deed of
Trust", and collectively with the Carneros Deed of Trust, the "Deeds of Trust"
and each a "Deed of Trust"), (vi) the Stock Pledge Agreement dated as of the
date hereof between Holdings and the Purchaser (as amended, modified and/or
supplemented from time to time, the "Holdings Stock Pledge Agreement"), (vii)
the Stock Pledge Agreement dated as of the date hereof between Carneros and the
Purchaser (as amended, modified and/or supplemented from time to time, the
"Carneros Stock Pledge Agreement", and collectively with the Holdings Stock
Pledge Agreement, the "Stock Pledge Agreements"), (viii) the Funds Escrow
Agreement dated as of the date hereof among the Companies, Pacific Energy
Resources Ltd. ("Parent"), the Purchaser and the escrow agent referred to
therein, substantially in the form of EXHIBIT D hereto (as amended, modified
and/or supplemented from time to time, the "Escrow Agreement"), (ix) the
Collateral Assignment dated as of the date hereof between Holdings and the
Purchaser, (x) the Assignment of Overriding Royalty Interest dated as of the
date hereof between Carneros and the Purchaser (as amended, modified and/or
supplemented from time to time), (xi) the Assignment of Overriding Royalty
Interest dated as of the date hereof between Gotland and the Purchaser (as
amended, modified and/or supplemented from time to time), and (xii) all other
documents, instruments and agreements entered into in connection with the
transactions contemplated hereby and thereby (the preceding clauses (ii) through
(xii), collectively, the "Related Agreements"); (2) issue and sell the Note; (3)
in the case of Carneros, issue and sell the Carneros Warrant and the Carneros
Warrant Shares; (4) in the case of Gotland, issue and sell the Gotland Warrant
and the Gotland Warrant Shares; and (5) carry out the provisions of this
Agreement and the Related Agreements and to carry on its business as presently
conducted. Such Company and each of its Subsidiaries is duly qualified and is
authorized to do business and is in good standing as a foreign corporation,
partnership or limited liability company, as the case may be, in all
jurisdictions in which the nature or location of its activities and of its
properties (both owned and leased) makes such qualification necessary, except
for those jurisdictions in which failure to do so has not, or could not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the business, assets, liabilities, condition (financial or
otherwise), properties, operations or prospects of such Company and its
Subsidiaries, taken individually and as a whole (a "Material Adverse Effect").

                  4.2 SUBSIDIARIES. Each direct and indirect Subsidiary of each
Company, the direct owner of such Subsidiary and its percentage ownership
thereof, is set forth on Schedule 4.2. For the purpose of this Agreement, a
"Subsidiary" of any person or entity means (i) a corporation or other entity
whose shares of stock or other ownership interests having ordinary voting power
(other than stock or other ownership interests having such power only by reason
of the happening of a contingency) to elect a majority of the directors of such
corporation, or other persons or entities performing similar functions for such
person or entity, are owned, directly or indirectly, by such person or entity or
(ii) a corporation or other entity in which such person or entity owns, directly
or indirectly, more than 50% of the equity interests at such time.

                  4.3 CAPITALIZATION; VOTING RIGHTS.

                                       4

<page>

                  (a) With respect to Holdings, the authorized capital stock as
         of the date hereof consists of 100 shares, of which 100 are shares of
         the common stock of Holdings, par value $1.00 per share, and 100 shares
         of which are issued and outstanding. The authorized, issued and
         outstanding capital stock of each Subsidiary of Holdings is set forth
         on Schedule 4.3.

                  (b) With respect to Carneros, the authorized capital stock as
         of the Closing Date after giving effect to the consummation of the
         transactions contemplated by the Stock Purchase Agreement to be entered
         into by Carneros, Gotland and Holdings (as amended, restated and
         otherwise modified from time to time, the "Stock Purchase Agreement")
         will consist of 88,883 shares, of which 88,883 are shares of Carneros
         Common Stock, par value $.01 per share, and 33,637.716 shares of which
         are issued and outstanding.

                  (c) With respect to Gotland, the authorized capital stock as
         of the Closing Date after giving effect to the consummation of the
         transactions contemplated by the Stock Purchase Agreement consists of
         500,000 shares, of which 500,000 are shares of Gotland Common Stock,
         par value $1.00 per share, and 116,773 shares of which are issued and
         outstanding. The authorized, issued and outstanding capital stock of
         each Subsidiary of Gotland is set forth on Schedule 4.3.

                  (d) Except as disclosed on Schedule 4.3, other than: (i) the
         shares reserved for issuance under any Company's stock option plans;
         and (ii) shares which may be granted pursuant to this Agreement and the
         Related Agreements, as of the Closing Date there will be no (A)
         securities of any Company convertible into, or exchangeable or
         exercisable for, shares of capital stock or other voting securities of
         such Company; and (B) outstanding options, warrants, rights (including
         conversion or preemptive rights and rights of first refusal),
         commitments, proxy or stockholder agreements, arrangements or
         agreements to which any Company is a party or by which it is bound, in
         any case relating to the issued or unissued capital stock of such
         Company or obligating such Company to issue, deliver, sell, purchase,
         redeem, repurchase or acquire, or cause to be issued, delivered, sold,
         purchased, redeemed, repurchased or acquired, shares of capital stock
         or other voting securities of such Company, or obligating such Company
         to grant, extend or enter into any such option, warrant, call, right,
         commitment, arrangement or agreement. Except as disclosed on Schedule
         4.3, neither the offer, issuance or sale of any of the Note or the
         Warrants, or the issuance of any of the Warrant Shares, nor the
         consummation of any transaction contemplated hereby will result in a
         change in the price or number of any securities of any Company
         outstanding, under anti-dilution or other similar provisions contained
         in or affecting any such securities.

                  (e) All issued and outstanding shares of each Company's Common
         Stock: (i) have been duly authorized and validly issued and are fully
         paid and nonassessable; and (ii) were issued in compliance with all
         applicable state and federal laws concerning the issuance of
         securities.

                                       5

<page>

                  (f) The rights, preferences, privileges and restrictions of
         the shares of the each Company's common stock are as stated in such
         Company's Certificate or Articles of Incorporation (such Company's
         "Charter"). The Warrant Shares have been duly and validly reserved for
         issuance. When issued in compliance with the provisions of this
         Agreement and Carneros' Charter, the Carneros Warrant Shares will be
         validly issued, fully paid and nonassessable, and will be free of any
         liens or encumbrances, and when issued in compliance with the
         provisions of this Agreement and Gotland's Charter, the Gotland Warrant
         Shares will be validly issued, fully paid and nonassessable, and will
         be free of any liens or encumbrances; provided, however, that the
         Securities may be subject to restrictions on transfer under state
         and/or federal securities laws as set forth herein or as otherwise
         required by such laws at the time a transfer is proposed.

                  4.4 AUTHORIZATION; BINDING OBLIGATIONS. All corporate,
partnership or limited liability company, as the case may be, action on the part
of each Company and each of its Subsidiaries (including their respective
officers and directors) necessary for the authorization of this Agreement and
the Related Agreements, the performance of all obligations of each Company and
its Subsidiaries hereunder and under the other Related Agreements at the Closing
and, the authorization, sale, issuance and delivery of the Note and the Warrants
has been taken or will be taken prior to the Closing. This Agreement and the
Related Agreements, when executed and delivered and to the extent it is a party
thereto, will be valid and binding obligations of each Company and each of its
Subsidiaries, enforceable against each such person or entity in accordance with
their terms, except:

                  (a) as limited by applicable bankruptcy, insolvency,
         reorganization, moratorium or other laws of general application
         affecting enforcement of creditors' rights; and

                  (b) general principles of equity that restrict the
         availability of equitable or legal remedies.

The sale of the Note is not and will not be subject to any preemptive rights or
rights of first refusal that have not been properly waived or complied with. The
issuance of the Warrants and the subsequent exercise of the Warrants for Warrant
Shares are not and will not be subject to any preemptive rights or rights of
first refusal that have not been properly waived or complied with.

                  4.5 LIABILITIES. Except as set forth in the unaudited balance
sheets of Carneros and Gotland as of March 31, 2006, no Company nor any of its
Subsidiaries has any liabilities, except current liabilities incurred in the
ordinary course of business.

                  4.6 AGREEMENTS; ACTION. Except as set forth on Schedule 4.6
and except for Employee Change of Control Payments (as defined in the Stock
Purchase Agreement) provided for in the Change of Control and Severance Plan
referenced in Schedule 4.23 to the Stock Purchase Agreement:

                  (a) there are no agreements, understandings, instruments,
         contracts, proposed transactions, judgments, orders, writs or decrees
         to which any Company or any of its Subsidiaries is a party or by which
         it is bound which may involve: (i) obligations (contingent or
         otherwise) of, or payments to, any Company or any of its Subsidiaries
         in excess of $100,000 (other than obligations of, or payments to, any
         Company or any of its Subsidiaries arising from purchase or sale
         agreements entered into in the ordinary course of business); or (ii)

                                       6

<page>

         the transfer or license of any patent, copyright, trade secret or other
         proprietary right to or from any Company or any of its Subsidiaries
         (other than licenses arising from the purchase of "off the shelf" or
         other standard products); or (iii) provisions restricting the
         development, manufacture or distribution of any Company's or any of its
         Subsidiaries products or services; or (iv) indemnification by any
         Company or any of its Subsidiaries with respect to infringements of
         proprietary rights.

                  (b) Since March 31, 2006 (the "Balance Sheet Date"), no
         Company nor any of its Subsidiaries has: (i) declared or paid any
         dividends, or authorized or made any distribution upon or with respect
         to any class or series of its capital stock; (ii) incurred any
         indebtedness for money borrowed or any other liabilities (other than
         ordinary course obligations) individually or in the aggregate in excess
         of $100,000; (iii) made any loans or advances to any person or entity
         not in excess, individually or in the aggregate, of $100,000, other
         than ordinary course advances for travel expenses; or (iv) sold,
         exchanged or otherwise disposed of any of its assets or rights, other
         than the sale of its inventory in the ordinary course of business.

                  (c) For the purposes of subsections (a) and (b) above, all
         indebtedness, liabilities, agreements, understandings, instruments,
         contracts and proposed transactions involving the same person or entity
         (including persons or entities any Company or any Subsidiary of such
         Company has reason to believe are affiliated therewith) shall be
         aggregated for the purpose of meeting the individual minimum dollar
         amounts of such subsections.

                  4.7 OBLIGATIONS TO RELATED PARTIES. Except as set forth on
Schedule 4.7, there are no obligations of any Company or any of its Subsidiaries
to officers, directors, stockholders or employees of any Company or any of its
Subsidiaries other than:

                  (a) for payment of salary for services rendered, for bonus
         payments and Change of Control Payments (as defined in the Stock
         Purchase Agreement);

                  (b) reimbursement for reasonable expenses incurred on behalf
         of any Company and its Subsidiaries;

                  (c) for other standard employee benefits made generally
         available to all employees (including stock option agreements
         outstanding under any stock option plan approved by the Board of
         Directors of any Company and each Subsidiary of such Company, as
         applicable); and

                  (d) obligations listed in any Company's and each of its
         Subsidiary's financial statements.

Except as described above or set forth on Schedule 4.7, none of the officers,
directors or, to the best of each Company's knowledge, key employees or
stockholders of any Company or any of its Subsidiaries or any members of their
immediate families, are indebted to any Company or any of its Subsidiaries,
individually or in the aggregate, in excess of $100,000 or have any direct or
indirect ownership interest in any firm or corporation with which any Company or
any of its Subsidiaries is affiliated or with which any Company or any of its

                                       7

<page>

Subsidiaries has a business relationship, or any firm or corporation which
competes with any Company or any of its Subsidiaries, other than passive
investments in publicly traded companies (representing less than one percent
(1%) of such company) which may compete with any Company or any of its
Subsidiaries. Except as described above, no officer, director or stockholder of
any Company or any of its Subsidiaries, or any member of their immediate
families, is, directly or indirectly, interested in any material contract with
any Company or any of its Subsidiaries and no agreements, understandings or
proposed transactions are contemplated between any Company or any of its
Subsidiaries and any such person. Except as set forth on Schedule 4.7, no
Company nor any of its Subsidiaries is a guarantor or indemnitor of any
indebtedness of any other person or entity.

                  4.8 CHANGES. Since the Balance Sheet Date, except as disclosed
in any Schedule to this Agreement or to any of the Related Agreements, there has
not been:

                  (a) any change in the business, assets, liabilities, condition
         (financial or otherwise), properties, operations or prospects of any
         Company or any of its Subsidiaries, which individually or in the
         aggregate has had, or could reasonably be expected to have,
         individually or in the aggregate, a Material Adverse Effect;

                  (b) except as set forth on Schedule 4.8(b) hereto, any
         resignation or termination of any officer, key employee or group of
         employees of any Company or any of its Subsidiaries;

                  (c) any material change, except in the ordinary course of
         business, in the contingent obligations of any Company or any of its
         Subsidiaries by way of guaranty, endorsement, indemnity, warranty or
         otherwise;

                  (d) any damage, destruction or loss, whether or not covered by
         insurance, which has had, or could reasonably be expected to have,
         individually or in the aggregate, a Material Adverse Effect;

                  (e) any waiver by any Company or any of its Subsidiaries of a
         valuable right or of a material debt owed to it;

                  (f) any direct or indirect loans made by any Company or any of
         its Subsidiaries to any stockholder, employee, officer or director of
         any Company or any of its Subsidiaries, other than advances made in the
         ordinary course of business;

                  (g) any material change in any compensation arrangement or
         agreement with any employee, officer, director or stockholder of any
         Company or any of its Subsidiaries;

                  (h) any declaration or payment of any dividend or other
         distribution of the assets of any Company or any of its Subsidiaries;

                  (i) any labor organization activity related to any Company or
         any of its Subsidiaries;

                                       8

<page>

                  (j) any debt, obligation or liability incurred, assumed or
         guaranteed by any Company or any of its Subsidiaries, except those for
         immaterial amounts and for current liabilities incurred in the ordinary
         course of business, and except liabilities for working capital
         purposes, the aggregate amount of which for all companies on a combined
         basis does not exceed $[___________];

                  (k) any sale, assignment or transfer of any patents,
         trademarks, copyrights, trade secrets or other intangible assets owned
         by any Company or any of its Subsidiaries;

                  (l) any change in any material agreement to which any Company
         or any of its Subsidiaries is a party or by which either any Company or
         any of its Subsidiaries is bound which either individually or in the
         aggregate has had, or could reasonably be expected to have,
         individually or in the aggregate, a Material Adverse Effect;

                  (m) any other event or condition of any character that, either
         individually or in the aggregate, has had, or could reasonably be
         expected to have, individually or in the aggregate, a Material Adverse
         Effect; or

                  (n) any arrangement or commitment by any Company or any of its
         Subsidiaries to do any of the acts described in subsection (a) through
         (m) above.

                  4.9 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. Except as set
forth on Schedule 4.9, each Company and each of its Subsidiaries has good and
valid title to its properties and assets, and good title to its leasehold
interests, in each case subject to no mortgage, pledge, lien, lease, encumbrance
or charge, other than:

                  (a) those resulting from taxes which have not yet become
         delinquent;

                  (b) minor liens and encumbrances which do not materially
         detract from the value of the property subject thereto or materially
         impair the operations of any Company or any of its Subsidiaries, so
         long as in each such case, such liens and encumbrances have no effect
         on the lien priority of the Purchaser in such property; and

                  (c) those that have otherwise arisen in the ordinary course of
         business, so long as they have no effect on the lien priority of the
         Purchaser therein.

All facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by each Company and its Subsidiaries are in good operating
condition and repair and are reasonably fit and usable for the purposes for
which they are being used. Except as set forth on Schedule 4.9, each Company and
its Subsidiaries are in compliance with all material terms of each lease to
which it is a party or is otherwise bound.

                  4.10 INTELLECTUAL PROPERTY.

                  (a) Each Company and each of its Subsidiaries owns or
         possesses sufficient legal rights to all patents, trademarks, service
         marks, trade names, copyrights, trade secrets, licenses, information
         and other proprietary rights and processes necessary for its business
         as now conducted and, to each Company's knowledge, as presently
         proposed to be conducted (the "Intellectual Property"), without any
         known infringement of the rights of others. There are no outstanding

                                       9

<page>

         options, licenses or agreements of any kind relating to the foregoing
         proprietary rights, nor is any Company or any of its Subsidiaries bound
         by or a party to any options, licenses or agreements of any kind with
         respect to the patents, trademarks, service marks, trade names,
         copyrights, trade secrets, licenses, information and other proprietary
         rights and processes of any other person or entity other than such
         licenses or agreements arising from the purchase of "off the shelf" or
         standard products.

                  (b) No Company nor any of its Subsidiaries has received any
         communications alleging that such Company or any of its Subsidiaries
         has violated any of the patents, trademarks, service marks, trade
         names, copyrights or trade secrets or other proprietary rights of any
         other person or entity, nor is any Company or any of its Subsidiaries
         aware of any basis therefor.

                  (c) Neither Company believes it is or will be necessary to
         utilize any inventions, trade secrets or proprietary information of any
         of its employees made prior to their employment by any Company or any
         of its Subsidiaries, except for inventions, trade secrets or
         proprietary information that have been rightfully assigned to such
         Company or any of its Subsidiaries.

                  4.11 COMPLIANCE WITH OTHER INSTRUMENTS. Except as set forth on
Schedule 4.11, no Company nor any of its Subsidiaries is in violation or default
of (x) any term of its Charter or Bylaws, or (y) any provision of any
indebtedness, mortgage, indenture, contract, agreement or instrument to which it
is party or by which it is bound or of any judgment, decree, order or writ,
which violation or default, in the case of this clause (y), has had, or could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. The execution, delivery and performance of and
compliance with this Agreement and the Related Agreements to which it is a
party, and the issuance and sale of the Note by the Companies and the other
Securities by each Company pursuant hereto and thereto, will not, with or
without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term or
provision, or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of any Company or any of its
Subsidiaries or the suspension, revocation, impairment, forfeiture or nonrenewal
of any permit, license, authorization or approval applicable to any Company, its
business or operations or any of its assets or properties.

                  4.12 LITIGATION. Except as set forth on Schedule 4.12 hereto,
there is no action, suit, proceeding or investigation pending or, to any
Company's knowledge, currently threatened against any Company or any of its
Subsidiaries that prevents any Company or any of its Subsidiaries from entering
into this Agreement or the other Related Agreements to which it is a party, or
from consummating the transactions contemplated hereby or thereby, or which has
had, or could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect or any change in the current equity
ownership of any Company or any of its Subsidiaries, nor is any Company aware
that there is any basis to assert any of the foregoing. No Company nor any of
its Subsidiaries is a party to or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by any
Company or any of its Subsidiaries currently pending or which any Company or any
of its Subsidiaries intends to initiate.

                                       10

<page>

                  4.13 TAX RETURNS AND PAYMENTS. Each Company and each of its
Subsidiaries has timely filed all tax returns (federal, state and local)
required to be filed by it. All taxes shown to be due and payable on such
returns, any assessments imposed, and all other taxes due and payable by each
Company or any of its Subsidiaries on or before the Closing, have been paid or
will be paid prior to the time they become delinquent. Except as set forth on
Schedule 4.13, no Company nor any of its Subsidiaries has been advised:

                  (a) that any of its returns, federal, state or other, have
         been or are being audited as of the date hereof; or

                  (b) of any adjustment, deficiency, assessment or court
         decision in respect of its federal, state or other taxes.

No Company has any knowledge of any liability for any tax to be imposed upon its
properties or assets as of the date of this Agreement that is not adequately
provided for.

                  4.14 EMPLOYEES. Except as set forth on Schedule 4.14, neither
Company nor any of its Subsidiaries has any collective bargaining agreements
with any of its employees. There is no labor union organizing activity pending
or, to any Company's knowledge, threatened with respect to any Company or any of
its Subsidiaries. Except as disclosed on Schedule 4.14, neither Company nor any
of its Subsidiaries is a party to or bound by any currently effective employment
contract, deferred compensation arrangement, bonus plan, incentive plan, profit
sharing plan, retirement agreement or other employee compensation plan or
agreement. To each Company's knowledge, no employee of any Company or any of its
Subsidiaries, nor any consultant with whom any Company or any of its
Subsidiaries has contracted, is in violation of any term of any employment
contract, proprietary information agreement or any other agreement relating to
the right of any such individual to be employed by, or to contract with, any
Company or any of its Subsidiaries because of the nature of the business to be
conducted by any Company or any of its Subsidiaries; and to each Company's
knowledge the continued employment by each Company and its Subsidiaries of their
present employees, and the performance of each Company's and its Subsidiaries'
contracts with its independent contractors, will not result in any such
violation. Neither Company nor any of its Subsidiaries is aware that any of its
employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency that would interfere with
their duties to such Company or any of its Subsidiaries. Neither Company nor any
of its Subsidiaries has received any notice alleging that any such violation has
occurred. Except for employees who have a current effective employment agreement
with any Company or any of its Subsidiaries, no employee of any Company or any
of its Subsidiaries has been granted the right to continued employment by any
Company or any of its Subsidiaries or to any material compensation following
termination of employment with any Company or any of its Subsidiaries. Except as
set forth on Schedule 4.14, no Company is aware that any officer, key employee
or group of employees intends to terminate his, her or their employment with any
Company or any of its Subsidiaries, nor does any Company or any of its
Subsidiaries have a present intention to terminate the employment of any
officer, key employee or group of employees.

                                       11

<page>

                  4.15 VOTING RIGHTS. Except as set forth on Schedule 4.15, to
each Company's knowledge, no stockholder of any Company or any of its
Subsidiaries has entered into any agreement with respect to the voting of equity
securities of any Company or any of its Subsidiaries.

                  4.16 COMPLIANCE WITH LAWS; PERMITS. No Company nor any of its
Subsidiaries is in violation of any provision of the Sarbanes Oxley Act of 2002
or any applicable statute, rule, regulation, order or restriction of any
domestic or foreign government or any Applicable Law in respect of the conduct
of its business or the ownership of its properties which has had, or could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. No governmental orders, permissions, consents,
approvals or authorizations are required to be obtained and no registrations or
declarations are required to be filed in connection with the execution and
delivery of this Agreement or any other Related Agreement and the issuance of
any of the Securities, except such as have been duly and validly obtained or
filed, or with respect to any filings that must be made after the Closing, as
will be filed in a timely manner. Each Company and its Subsidiaries or, to the
extent applicable, the operators of the Carneros assets has all material
franchises, permits, licenses and any similar authority necessary for the
conduct of its business as now being conducted by it, the lack of which could,
either individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

                  4.17 ENVIRONMENTAL AND SAFETY LAWS. No Company nor any of its
Subsidiaries is in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and to its
knowledge, no material expenditures are or will be required in order to comply
with any such existing statute, law or regulation. Except as set forth on
Schedule 4.17, no Hazardous Materials (as defined below) are used or have been
used, stored, or disposed of by any Company or any of its Subsidiaries or, to
any Company's knowledge, by any other person or entity on any property owned,
leased or used by any Company or any of its Subsidiaries. For the purposes of
the preceding sentence, "Hazardous Materials" shall mean:

                  (a) materials which are listed or otherwise defined as
         "hazardous" or "toxic" under any applicable local, state, federal
         and/or foreign laws and regulations that govern the existence and/or
         remedy of contamination on property, the protection of the environment
         from contamination, the control of hazardous wastes, or other
         activities involving hazardous substances, including building
         materials; or

                  (b) any petroleum products or nuclear materials.

                  4.18 VALID OFFERING. Assuming the accuracy of the
representations and warranties of the Purchaser contained in this Agreement, the
offer, sale and issuance of the Securities will be exempt from the prospectus
and registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws.

                                       12

<page>

                  4.19 FULL DISCLOSURE. Each Company and each of its
Subsidiaries has provided the Purchaser with all information requested by the
Purchaser in connection with its decision to purchase the Note and the Warrants,
including all information each Company and its Subsidiaries believe is
reasonably necessary to make such investment decision. Neither this Agreement,
the Related Agreements, the exhibits and schedules hereto and thereto nor any
other document delivered by any Company or any of its Subsidiaries to Purchaser
or its attorneys or agents in connection herewith or therewith or with the
transactions contemplated hereby or thereby, contain any untrue statement of a
material fact nor omit to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances in which
they are made, not misleading. Any financial projections and other estimates
provided to the Purchaser by any Company or any of its Subsidiaries were based
on such Company's and its Subsidiaries' experience in the industry and on
assumptions of fact and opinion as to future events which such Company or any of
its Subsidiaries, at the date of the issuance of such projections or estimates,
believed to be reasonable.

                  4.20 INSURANCE. Each Company and each of its Subsidiaries has
general commercial, product liability, fire and casualty insurance policies with
coverages which each Company believes are customary for companies similarly
situated to such Company and its Subsidiaries in the same or similar business.

                  4.21 DILUTION. (a) Carneros specifically acknowledges that its
obligation to issue the shares of Carneros Common Stock upon exercise of the
Carneros Warrant is binding upon Carneros and enforceable regardless of the
dilution such issuance may have on the ownership interests of other shareholders
of Carneros; and (b) Gotland specifically acknowledges that its obligation to
issue the shares of Gotland Common Stock upon exercise of the Gotland Warrant is
binding upon Gotland and enforceable regardless of the dilution such issuance
may have on the ownership interests of other shareholders of Gotland.

                  4.22 PATRIOT ACT. Each Company certifies that, to the best of
its knowledge, neither it nor any of its Subsidiaries has been designated, nor
is or shall be owned or controlled, by a "suspected terrorist" as defined in
Executive Order 13224. Each Company hereby acknowledges that the Purchaser seeks
to comply with all applicable laws concerning money laundering and related
activities. In furtherance of those efforts, each Company hereby represents,
warrants and covenants that: (i) none of the cash or property that any Company
or any of its Subsidiaries will pay or will contribute to the Purchaser has been
or shall be derived from, or related to, any activity that is deemed criminal
under United States law; and (ii) no contribution or payment by any Company or
any of its Subsidiaries to the Purchaser, to the extent that they are within any
Company's and/or its Subsidiaries' control shall cause the Purchaser to be in
violation of the United States Bank Secrecy Act, the United States International
Money Laundering Control Act of 1986 or the United States International Money
Laundering Abatement and Anti-Terrorist Financing Act of 2001. Each Company
shall promptly notify the Purchaser if any of these representations, warranties
or covenants ceases to be true and accurate regarding any Company or any of its
Subsidiaries. Each Company shall provide the Purchaser all additional
information regarding any Company or any of its Subsidiaries that the Purchaser

                                       13

<page>

deems necessary or convenient to ensure compliance with all applicable laws
concerning money laundering and similar activities. Each Company understands and
agrees that if at any time it is discovered that any of the foregoing
representations, warranties or covenants are incorrect, or if otherwise required
by Applicable Law or regulation related to money laundering or similar
activities, the Purchaser may undertake appropriate actions to ensure compliance
with Applicable Law or regulation, including but not limited to segregation
and/or redemption of the Purchaser's investment in any Company. Each Company
further understands that the Purchaser may release confidential information
about any Company and its Subsidiaries and, if applicable, any underlying
beneficial owners, to proper authorities if the Purchaser, in its sole
discretion, determines that it is in the best interests of the Purchaser in
light of any Applicable Law including the relevant rules and regulations under
the laws set forth in subsection (ii) above.

                  4.23 ERISA. Based upon the Employee Retirement Income Security
Act of 1974 ("ERISA"), and the regulations and published interpretations
thereunder: (i) no Company nor any of its Subsidiaries has engaged in any
Prohibited Transactions (as defined in Section 406 of ERISA and Section 4975 of
the Internal Revenue Code of 1986, as amended (the "CODE")); (ii) each Company
and each of its Subsidiaries has met all applicable minimum funding requirements
under Section 302 of ERISA in respect of its plans; (iii) no Company nor any of
its Subsidiaries has any knowledge of any event or occurrence which would cause
the Pension Benefit Guaranty Corporation to institute proceedings under Title IV
of ERISA to terminate any employee benefit plan(s); (iv) no Company nor any of
its Subsidiaries has any fiduciary responsibility for investments with respect
to any plan existing for the benefit of persons other than such Company's or
such Subsidiary's employees; and (v) neither such Company nor any of its
Subsidiaries has withdrawn, completely or partially, from any multi-employer
pension plan so as to incur liability under the Multiemployer Pension Plan
Amendments Act of 1980.

         5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
hereby represents and warrants to the Companies as follows (such representations
and warranties do not lessen or obviate the representations and warranties of
the Companies set forth in this Agreement):

                  5.1 NO SHORTING. Neither the Purchaser nor any of its
affiliates or investment partners has caused, nor will cause, any person or
entity to directly engage in "short sales" of any Company's common stock as long
as the Note or the Warrants shall be outstanding.

                  5.2 REQUISITE POWER AND AUTHORITY. The Purchaser has all
necessary power and authority under all applicable provisions of law to execute
and deliver this Agreement and the Related Agreements and to carry out their
provisions. All corporate action on the Purchaser's part required for the lawful
execution and delivery of this Agreement and the Related Agreements have been or
will be effectively taken prior to the Closing. Upon their execution and
delivery, this Agreement and the Related Agreements will be valid and binding
obligations of the Purchaser, enforceable in accordance with their terms,
except:

                  (a) as limited by applicable bankruptcy, insolvency,
         reorganization, moratorium or other laws of general application
         affecting enforcement of creditors' rights; and

                  (b) as limited by general principles of equity that restrict
         the availability of equitable and legal remedies.

                                       14

<page>

         5.3 INVESTMENT REPRESENTATIONS AND COVENANTS.

                  (a) The Purchaser is resident in the jurisdiction of the
         Cayman Islands.

                  (b) The Purchaser is acquiring the Securities for investment
         only and not with a view to resale or distribution in violation of any
         securities laws.

                  (c) The Purchaser is not a party to, and is not acting in
         concert with a person who is party to: (A) an agreement to transfer the
         Purchaser's legal or beneficial interest in the Securities; or (B) an
         agreement to grant a participating interest in the Securities.

                  (d) As the Securities purchased hereunder are subject to
         resale restrictions under the Securities Act, the Purchaser shall
         comply with all securities laws concerning any resale of the Securities
         purchased hereunder and shall consult with his, her or its own legal
         advisors with respect to such compliance; the Purchaser acknowledges
         that the Securities may only be resold pursuant to Regulation S under
         the Securities Act, pursuant to registration under the Securities Act,
         or pursuant to another available exemption from registration; and that
         each Company is obligated by this Agreement to refuse to register any
         transfers not made in accordance with the foregoing.

                  (e) If required by applicable securities laws, the Purchaser
         will execute, deliver, file and otherwise assist each Company in filing
         such reports, undertakings and other documents with respect to the
         issuance of the Securities as may be required.

                  (f) The Purchaser is purchasing the Securities as principal
         for its own account and not as a nominee or agent.

                  (g) The Purchaser is an accredited investor within the meaning
         of Regulation D under the Securities Act.

                  (h) The Purchaser understands that the Securities are being
         offered and sold pursuant to an exemption from registration contained
         in the Securities Act based in part upon the Purchaser's
         representations contained in this Agreement, including, without
         limitation, that the Purchaser is an "accredited investor" within the
         meaning of Regulation D under the Securities Act.

                  (i) The Purchaser confirms that it has received or has had
         full access to all the information it considers necessary or
         appropriate to make an informed investment decision with respect to the
         Note and the Warrants to be purchased by it under this Agreement and
         the Warrant Shares acquired by it upon the exercise of the Warrants.
         The Purchaser further confirms that it has had an opportunity to ask
         questions and receive answers from each Company regarding such
         Company's and its Subsidiaries' business, management and financial
         affairs and the terms and conditions of the Offering, the Note, the
         Warrants and the Securities and to obtain additional information (to
         the extent such Company possessed such information or could acquire it
         without unreasonable effort or expense) necessary to verify any
         information furnished to the Purchaser or to which the Purchaser had
         access.

                                       15

<page>

                  (j) The Purchaser understands that the Securities have not
         been and will not be registered under the Securities Act or any
         applicable state securities laws and that the sale contemplated hereby
         is being made in reliance on an exemption from registration therefrom.

                  (k) The Purchaser acknowledges that the Purchaser has not
         purchased the Securities as a result of any general solicitation or
         general advertising (as those terms are used in Regulation D),
         including advertisements, articles, notices or other communications
         published in any newspaper, magazine or similar media, or broadcast
         over radio, television or other forms of telecommunication, including
         electronic display (such as the Internet), or any seminar or meeting
         whose attendees have been invited by general solicitation or general
         advertising.

                  (l) The Purchaser has substantial experience in evaluating and
         investing in private placement transactions of securities in companies
         similar to each Company so that it is capable of evaluating the merits
         and risks of its investment in each Company and has the capacity to
         protect its own interests. The Purchaser must bear the economic risk of
         this investment until the Securities are sold.

                  (m) By reason of its, or of its management's business and
         financial experience, the Purchaser has the capacity to evaluate the
         merits and risks of its investment in the Note, the Warrants and the
         Securities and to protect its own interests in connection with the
         transactions contemplated in this Agreement and the Related Agreements.

                  (n) The Purchaser has not entered into any agreement which
         would entitle any person to a claim against any Company for a brokerage
         commission, finder's fee or any like payment in respect of the issuance
         of the Securities.

                  (o) The Purchaser is not a "U.S. person" as that term is
         defined in Rule 902 of Regulation S under the Securities Act, nor is
         the Purchaser acquiring the Securities for the account or benefit of
         any U.S. person, and at the time of the purchase of the Securities, the
         Purchaser is outside of the United States.

         5.4 LEGENDS.

                  (a) Each Carneros Warrant shall bear substantially the
         following legend:

                  "THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
                  THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
                  OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
                  THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
                  THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
                  HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
                  STATEMENT AS TO THIS WARRANT OR THE UNDERLYING SHARES OF
                  COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES
                  LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
                  CARNEROS ENERGY, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."

                                       16

<page>

                  (b) Each Gotland Warrant shall bear substantially the
         following legend:

                  "THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
                  THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
                  OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
                  THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
                  THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
                  HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
                  STATEMENT AS TO THIS WARRANT OR THE UNDERLYING SHARES OF
                  COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES
                  LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
                  GOTLAND OIL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."

                  (c) The Carneros Warrant Shares, if not issued by the Deposit
         Withdrawal Agent Commission system, shall bear a legend which shall be
         in substantially the following form until such shares are covered by an
         effective registration statement filed with the Securities and Exchange
         Commission:

                  "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
                  REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
                  ANY APPLICABLE STATE SECURITIES LAWS. THESE SHARES MAY NOT BE
                  SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
                  OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES
                  ACT AND APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL
                  REASONABLY SATISFACTORY TO CARNEROS ENERGY, INC. THAT SUCH
                  REGISTRATION IS NOT REQUIRED."

                  (d) The Gotland Warrant Shares, if not issued by the Deposit
         Withdrawal Agent Commission system, shall bear a legend which shall be
         in substantially the following form until such shares are covered by an
         effective registration statement filed with the Securities and Exchange
         Commission:

                  "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
                  REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
                  ANY APPLICABLE STATE SECURITIES LAWS. THESE SHARES MAY NOT BE
                  SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
                  OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES
                  ACT AND APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL
                  REASONABLY SATISFACTORY TO GOTLAND OIL, INC. THAT SUCH
                  REGISTRATION IS NOT REQUIRED."

                                       17

<page>

         6. COVENANTS OF THE COMPANIES. Each Company covenants and agrees with
the Purchaser as follows:

                  6.1 REPORTING REQUIREMENTS. Such Company will deliver, or
cause to be delivered, to the Purchaser each of the following, which shall be in
form and detail acceptable to the Purchaser:

                  (a) As soon as available, and in any event within one hundred
         twenty (120) days after the end of each fiscal year of Parent, Parent's
         audited financial statements with a report of independent certified
         public accountants of recognized standing selected by Parent and
         acceptable to the Purchaser (the "Accountants"), which annual financial
         statements shall be without qualification and shall include Parent's
         balance sheet as at the end of such fiscal year and the related
         statements of Parent's income, retained earnings and cash flows for the
         fiscal year then ended, prepared on a consolidating and consolidated
         basis to include Parent and each Company, all in reasonable detail and
         prepared in accordance with GAAP, together with (i) if and when
         available, copies of any management letters prepared by the
         Accountants; and (ii) a certificate of Parent's President, Chief
         Executive Officer or Chief Financial Officer stating that such
         financial statements have been prepared in accordance with GAAP and
         whether or not such officer has knowledge of the occurrence of any
         Event of Default (as defined in the Note) and, if so, stating in
         reasonable detail the facts with respect thereto;

                  (b) As soon as available and in any event within sixty (60)
         days after the end of each fiscal quarter of Parent, an
         unaudited/internal balance sheet and statements of income, retained
         earnings and cash flows of Parent as at the end of and for such quarter
         and for the year to date period then ended, prepared on a consolidating
         and consolidated basis to include Parent and each Company, in
         reasonable detail and stating in comparative form the figures for the
         corresponding date and periods in the previous year, all prepared in
         accordance with GAAP, but without footnotes and subject to year-end
         adjustments and accompanied by a certificate of Parent's President,
         Chief Executive Officer or Chief Financial Officer, stating (i) that
         such financial statements have been prepared in accordance with GAAP,
         subject to year-end audit adjustments, and (ii) whether or not such
         officer has knowledge of the occurrence of any Event of Default (as
         defined in the Note) not theretofore reported and remedied and, if so,
         stating in reasonable detail the facts with respect thereto;

                  (c) As soon as available and in any event within fifteen (15)
         days after the end of each calendar month, an unaudited/internal
         balance sheet and statements of income, retained earnings and cash
         flows of Parent as at the end of and for such month and for the year to
         date period then ended, prepared on a consolidating and consolidated
         basis to include Parent, each Company, each Subsidiary of each Company

                                       18

<page>

         and each of their respective affiliates, in reasonable detail and
         stating in comparative form the figures for the corresponding date and
         periods in the previous year, all prepared in accordance with GAAP, but
         without footnotes and subject to year-end adjustments and accompanied
         by a certificate of Parent's President, Chief Executive Officer or
         Chief Financial Officer, stating (i) that such financial statements
         have been prepared in accordance with GAAP, subject to year-end audit
         adjustments, and (ii) whether or not such officer has knowledge of the
         occurrence of any Event of Default (as defined in the Note) not
         theretofore reported and remedied and, if so, stating in reasonable
         detail the facts with respect thereto; and

                  (d) Such Company shall deliver, or cause the applicable
         Subsidiary of such Company to deliver, such other information as the
         Purchaser shall reasonably request.

                  6.2 USE OF FUNDS. The Companies shall use the proceeds of the
sale of the Note and the Warrants solely for the following: (a) $20,375,000 for
the purpose of acquiring the oil and gas properties described in the Stock
Purchase Agreement, (b) $742,000 to fund the Closing Payment and (c) $125,000 to
fund the Purchaser's legal and due diligence expenses, plus such other amounts
as may be payable by the Companies to the Purchaser under the terms of the
Proposal Letter provided by the Purchaser to Carneros in connection with the
transactions contemplated hereby.

                  6.3 ACCESS TO FACILITIES. Each Company and each of its
Subsidiaries will permit any representatives designated by the Purchaser (or any
successor of the Purchaser), upon reasonable notice and during normal business
hours, at such person's expense and accompanied by a representative of such
Company or any Subsidiary (provided that no such prior notice shall be required
to be given and no such representative of such Company or any Subsidiary shall
be required to accompany the Purchaser in the event the Purchaser believes such
access is necessary to preserve or protect the Collateral (as defined in the
Master Security Agreement) or following the occurrence and during the
continuance of an Event of Default (as defined in the Note)), to:

                  (a) visit and inspect any of the properties of such Company or
         any of its Subsidiaries;

                  (b) examine the corporate and financial records of such
         Company or any of its Subsidiaries (unless such examination is not
         permitted by Applicable Law or by contract) and make copies thereof or
         extracts therefrom; and

                  (c) discuss the affairs, finances and accounts of such Company
         or any of its Subsidiaries with the directors, officers and independent
         accountants of such Company or any of its Subsidiaries.

Notwithstanding the foregoing, no Company nor any of its Subsidiaries will
provide any material, non-public information to the Purchaser unless the
Purchaser signs a confidentiality agreement and otherwise complies with
applicable federal securities laws.

                  6.4 TAXES. Each Company and each of its Subsidiaries will
promptly pay and discharge, or cause to be paid and discharged, when due and
payable, all taxes, assessments and governmental charges or levies imposed upon
the income, profits, property or business of such Company and its Subsidiaries;
provided, however, that any such tax, assessment, charge or levy need not be

                                       19

<page>

paid currently if (i) the validity thereof shall currently and diligently be
contested in good faith by appropriate proceedings, (ii) such tax, assessment,
charge or levy shall have no effect on the lien priority of the Purchaser in any
property of such Company or any of its Subsidiaries and (iii) if such Company
and/or such Subsidiary shall have set aside on its books adequate reserves with
respect thereto in accordance with GAAP; and provided, further, that such
Company and its Subsidiaries will pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefor.

                  6.5 INSURANCE. Each Company and its Subsidiaries will keep its
assets which are of an insurable character insured by financially sound and
reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in similar business similarly situated
as such Company and its Subsidiaries; and such Company and its Subsidiaries will
maintain, with financially sound and reputable insurers, insurance against other
hazards and risks and liability to persons and property to the extent and in the
manner which such Company reasonably believes is customary for companies in
similar business similarly situated as such Company and its Subsidiaries and to
the extent available on commercially reasonable terms. Each Company, and each of
its Subsidiaries, will jointly and severally bear the full risk of loss from any
loss of any nature whatsoever with respect to the assets pledged to the
Purchaser as security for their respective obligations hereunder and under the
Related Agreements. At each Company's and each of its Subsidiaries' joint and
several cost and expense in amounts and with carriers reasonably acceptable to
the Purchaser, each Company and each of its Subsidiaries shall (i) keep all its
insurable properties and properties in which it has an interest insured against
the hazards of fire, flood, sprinkler leakage, those hazards covered by extended
coverage insurance and such other hazards, and for such amounts, as is customary
in the case of companies engaged in businesses similar to such Company's or the
respective Subsidiary's including business interruption insurance; (ii) maintain
a bond in such amounts as is customary in the case of companies engaged in
businesses similar to such Company's or the respective Subsidiary's insuring
against larceny, embezzlement or other criminal misappropriation of insured's
officers and employees who may either singly or jointly with others at any time
have access to the assets or funds of such Company or any of its Subsidiaries
either directly or through governmental authority to draw upon such funds or to
direct generally the disposition of such assets; (iii) maintain public and
product liability insurance against claims for personal injury, death or
property damage suffered by others; (iv) maintain all such worker's compensation
or similar insurance as may be required under the laws of any state or
jurisdiction in which such Company or the respective Subsidiary is engaged in
business; and (v) furnish the Purchaser with (x) copies of all policies and
evidence of the maintenance of such policies at least thirty (30) days before
any expiration date, (y) excepting such Company's workers' compensation policy,
endorsements to such policies naming the Purchaser as "co-insured" or
"additional insured" and appropriate loss payable endorsements in form and
substance satisfactory to the Purchaser, naming the Purchaser as loss payee, and
(z) evidence that as to the Purchaser the insurance coverage shall not be
impaired or invalidated by any act or neglect of such Company or any Subsidiary
and the insurer will provide the Purchaser with at least thirty (30) days notice
prior to cancellation. Each Company and each of its Subsidiaries shall instruct
the insurance carriers that in the event of any loss thereunder, the carriers
shall make payment for such loss to such Company and/or the Subsidiary and the

                                       20

<page>

Purchaser jointly. In the event that as of the date of receipt of each loss
recovery upon any such insurance, the Purchaser has not declared an event of
default with respect to this Agreement or any of the Related Agreements, then
such Company and/or such Subsidiary shall be permitted to direct the application
of such loss recovery proceeds toward investment in property, plant and
equipment that would comprise "Collateral" secured by the Purchaser's security
interest pursuant to the Master Security Agreement or such other security
agreement as shall be required by the Purchaser, with any surplus funds to be
applied toward payment of the obligations of each Company to the Purchaser. In
the event that the Purchaser has properly declared an event of default with
respect to this Agreement or any of the Related Agreements, then all loss
recoveries received by the Purchaser upon any such insurance thereafter may be
applied to the obligations of each Company hereunder and under the Related
Agreements, in such order as the Purchaser may determine. Any surplus (following
satisfaction of each Company's obligations to the Purchaser) shall be paid by
the Purchaser to the Companies or applied as may be otherwise required by law.
Any deficiency thereon shall be jointly and severally paid by each Company and
its Subsidiaries, as applicable, to the Purchaser, on demand.

                  6.6 INTELLECTUAL PROPERTY. Each Company and each of its
Subsidiaries shall maintain in full force and effect its existence, rights and
franchises and all licenses and other rights to use Intellectual Property owned
or possessed by it and reasonably deemed to be necessary to the conduct of its
business.

                  6.7 PROPERTIES. Each Company and each of its Subsidiaries will
keep its properties in good repair, working order and condition, reasonable wear
and tear excepted, and from time to time make all needful and proper repairs,
renewals, replacements, additions and improvements thereto; and each Company and
each of its Subsidiaries will at all times comply with each provision of all
leases to which it is a party or under which it occupies property if the breach
of such provision could, either individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

                  6.8 CONFIDENTIALITY. No Company will, nor will it permit any
of its Subsidiaries to, disclose, and will not include in any public
announcement, the name of the Purchaser, unless expressly agreed to by the
Purchaser or unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement. Notwithstanding the
foregoing, each Company may disclose the Purchaser's identity and the terms of
this Agreement to its current and prospective debt and equity financing sources.

                  6.9 REQUIRED APPROVALS. Except as set forth on SCHEDULE 6.9,
no Company, without the prior written consent of the Purchaser, shall, nor shall
it permit any of its Subsidiaries to:

                  (a) (i) directly or indirectly declare or pay any dividends,
         other than dividends paid by Carneros to Holdings on the Closing Date
         for the sole purpose of funding a portion of the purchase price
         required to consummate the transactions contemplated by the Stock
         Purchase Agreement, (ii) issue any preferred stock that is mandatorily
         redeemable prior to the one year anniversary of the Maturity Date (as
         defined in the Note) or (iii) redeem any of its preferred stock or
         other equity interests;

                                       21

<page>

                  (b) liquidate, dissolve or effect a material reorganization
         (it being understood that in no event shall any Company or any of its
         Subsidiaries dissolve, liquidate or merge with any other person or
         entity (unless, in the case of such a merger, any Company or, in the
         case of merger not involving any Company, such Subsidiary, as
         applicable, is the surviving entity));

                  (c) become subject to (including, without limitation, by way
         of amendment to or modification of) any agreement or instrument which
         by its terms would (under any circumstances) restrict any Company's or
         any of its Subsidiaries, right to perform the provisions of this
         Agreement, any Related Agreement or any of the agreements contemplated
         hereby or thereby;

                  (d) materially alter or change the scope of the business of
         any Company and its Subsidiaries taken as a whole;

                  (e) (i) create, incur, assume or suffer to exist any
         indebtedness (exclusive of trade debt and debt incurred to finance the
         purchase of equipment (not in excess of five percent (5%) of the fair
         market value of any Company's and its Subsidiaries' assets)) whether
         secured or unsecured other than (x) any Company's obligations owed to
         the Purchaser, (y) indebtedness set forth on Schedule 6.9 attached
         hereto and made a part hereof and any refinancings or replacements
         thereof on terms no less favorable to the Purchaser than the
         indebtedness being refinanced or replaced, and (z) any indebtedness
         incurred in connection with the purchase of assets (other than
         equipment) in the ordinary course of business, or any refinancings or
         replacements thereof on terms no less favorable to the Purchaser than
         the indebtedness being refinanced or replaced, so long as any lien
         relating thereto shall only encumber the fixed assets so purchased and
         no other assets of any Company or any of its Subsidiaries; (ii) cancel
         any indebtedness owing to it in excess of $50,000 in the aggregate
         during any 12 month period; (iii) assume, guarantee, endorse or
         otherwise become directly or contingently liable in connection with any
         obligations of any other person or entity, except the endorsement of
         negotiable instruments by any Company or any Subsidiary thereof for
         deposit or collection or similar transactions in the ordinary course of
         business or guarantees of indebtedness otherwise permitted to be
         outstanding pursuant to this clause (e); and/or

                  (f) create or acquire any Subsidiary after the date hereof
         unless (i) such Subsidiary is a wholly-owned Subsidiary of any Company
         and (ii) such Subsidiary becomes a party to the Master Security
         Agreement, a Stock Pledge Agreement and the Subsidiary Guaranty (either
         by executing a counterpart thereof or an assumption or joinder
         agreement in respect thereof) and, to the extent required by the
         Purchaser, satisfies each condition of this Agreement and the Related
         Agreements as if such Subsidiary were a Subsidiary on the Closing Date.

                  6.10 OPINION. On the Closing Date, each Company will deliver
to the Purchaser an opinion acceptable to the Purchaser from such Company's
external legal counsel in the form of EXHIBIT C hereto. Each Company will
provide, at each Company's joint and several expense, such other legal opinions
in the future as are deemed reasonably necessary by the Purchaser (and
acceptable to the Purchaser) in connection with the exercise of any Warrant.

                                       22

<page>

                  6.11 MARGIN STOCK. No Company will permit any of the proceeds
of the Note or any Warrant to be used directly or indirectly to "purchase" or
"carry" "margin stock" or to repay indebtedness incurred to "purchase" or
"carry" "margin stock" within the respective meanings of each of the quoted
terms under Regulation U of the Board of Governors of the Federal Reserve System
as now and from time to time hereafter in effect.

                  6.12 FINANCING RIGHT OF FIRST REFUSAL.

                  (a) Until such time as all indebtedness and/or monetary
         obligations owing to the Purchaser in connection with the transactions
         contemplated by this Agreement or any Related Agreement have been
         indefeasibly paid in full, each Company hereby grants to the Purchaser
         a right of first refusal to provide any Additional Financing (as
         defined below) to be issued by such Company and/or any of its
         Subsidiaries, subject to the following terms and conditions. From and
         after the date hereof, prior to the incurrence of any additional
         indebtedness and/or the sale or issuance of any equity interests of any
         Company or any of its Subsidiaries (an "Additional Financing"), the
         applicable Company and/or any Subsidiary of such Company, as the case
         may be, shall notify the Purchaser of its intention to enter into such
         Additional Financing. In connection therewith, the applicable Company
         and/or the applicable Subsidiary thereof shall submit a fully executed
         term sheet (a "Proposed Term Sheet") to the Purchaser setting forth the
         terms, conditions and pricing of any such Additional Financing (such
         financing to be negotiated on "arm's length" terms and the terms
         thereof to be negotiated in good faith) proposed to be entered into by
         the applicable Company and/or such Subsidiary. The Purchaser shall have
         the right, but not the obligation, to deliver its own proposed term
         sheet (the "Purchaser Term Sheet") setting forth the terms and
         conditions upon which the Purchaser would be willing to provide such
         Additional Financing to the applicable Company and/or such Subsidiary.
         The Purchaser Term Sheet shall contain terms no less favorable to the
         applicable Company and/or such Subsidiary than those outlined in
         Proposed Term Sheet. The Purchaser shall deliver such Purchaser Term
         Sheet within ten calendar days of receipt of each such Proposed Term
         Sheet. If the provisions of the Purchaser Term Sheet are at least as
         favorable to the applicable Company and/or such Subsidiary, as the case
         may be, as the provisions of the Proposed Term Sheet, the applicable
         Company and/or such Subsidiary shall enter into and consummate the
         Additional Financing transaction outlined in the Purchaser Term Sheet.

                  (b) No Company will, nor will it permit its Subsidiaries to,
         agree, directly or indirectly, to any restriction with any person or
         entity which limits the ability of the Purchaser to consummate an
         Additional Financing with any Company or any of its Subsidiaries.

                  6.13 AUTHORIZATION AND RESERVATION OF SHARES. (a) Carneros
shall at all times have authorized and reserved a sufficient number of shares of
Carneros Common Stock to provide for the exercise of the Carneros Warrant; (b)
Gotland shall at all times have authorized and reserved a sufficient number of
shares of Gotland Common Stock to provide for the exercise of the Gotland
Warrant.

                                       23

<page>

                  6.14 SUMMARIES; REPORTS. Each of Carneros and Gotland shall
deliver to the Purchaser, between the 22nd and last day of each month, summaries
of its lease operating expenses and production relating to its oil and gas
properties as and for the immediately preceding month. Each of Carneros and
Gotland shall deliver to the Purchaser, between the 22nd and last day of each
month, or at such other time as the Purchaser shall request, an economic reserve
report with respect to each of Carneros and Gotland prepared by a registered
professional engineer acceptable to the Purchaser.

                  6.15 REGISTRATION RIGHTS. Not later than ten (10) business
days prior to Carneros' and/or Gotland's, as applicable, completion, if ever, of
an initial public offering of its securities or the publicly trading of
Carneros' and/or Gotland's, as applicable, securities (i.e. through a reverse
merger or otherwise), Carneros and Gotland, as applicable, shall execute in
favor of Laurus a Registration Rights Agreement containing, without limitation,
piggyback registration rights provisions reasonably satisfactory to Laurus, in
form and substance reasonably satisfactory to Laurus, with respect to the shares
underlying the Carneros Warrant or Gotland Warrant, as applicable, the
provisions of which shall be deemed incorporated herein by reference to the
extent necessary to effectuate the purpose and intent of this provision. The
provisions of this Section 6.15 shall not be subject to any cure or grace period
as may be applicable thereto under any Related Agreement.

         7. COVENANTS OF THE PURCHASER. The Purchaser covenants and agrees with
the Companies as follows:

                  7.1 CONFIDENTIALITY. The Purchaser will not disclose, and will
not include in any public announcement, the name of any Company, unless
expressly agreed to by such Company or unless and until such disclosure is
required by Applicable Law or applicable regulation, and then only to the extent
of such requirement.

                  7.2 LIMITATION ON ACQUISITION OF COMMON STOCK OF ANY COMPANY.
Notwithstanding anything to the contrary contained in this Agreement, any
Related Agreement or any document, instrument or agreement entered into in
connection with any other transactions between the Purchaser and any Company,
the Purchaser may not acquire stock in any Company (including, without
limitation, pursuant to a contract to purchase, by exercising an option or
warrant, by converting any other security or instrument, by acquiring or
exercising any other right to acquire, shares of stock or other security
convertible into shares of stock in any Company, or otherwise, and such
contracts, options, warrants, conversion or other rights shall not be
enforceable or exercisable) to the extent such stock acquisition would cause any
interest (including any original issue discount) payable by any Company to the
Purchaser not to qualify as "portfolio interest" within the meaning of Section
881(c)(2) of the Code, by reason of Section 881(c)(3) of the Code, taking into
account the constructive ownership rules under Section 871(h)(3)(C) of the Code
(the "Stock Acquisition Limitation"). The Stock Acquisition Limitation shall
automatically become null and void without any notice to any Company upon the
existence of an Event of Default (as defined in the Note).

         8. COVENANTS OF THE COMPANIES AND THE PURCHASER REGARDING
INDEMNIFICATION.

                                       24

<page>

                  8.1 COMPANY INDEMNIFICATION. Each Company agrees to indemnify,
hold harmless, reimburse and defend, on a joint and several basis, the
Purchaser, each of the Purchaser's officers, directors, agents, affiliates,
control persons, and principal shareholders, against all claims, costs,
expenses, liabilities, obligations, losses or damages (including reasonable
legal fees) of any nature, incurred by or imposed upon the Purchaser which
result, arise out of or are based upon: (i) any misrepresentation by any Company
or any of its Subsidiaries or breach of any warranty by any Company or any of
its Subsidiaries in this Agreement, any other Related Agreement or in any
exhibits or schedules attached hereto or thereto; or (ii) any breach or default
in performance by any Company or any of its Subsidiaries of any covenant or
undertaking to be performed by any Company or any of its Subsidiaries hereunder,
under any other Related Agreement or any other agreement entered into by any
Company and/or any of its Subsidiaries and the Purchaser relating hereto or
thereto; or (iii) (a) the violation of any local, state or federal law, rule or
regulation pertaining to environmental regulation, contamination or cleanup
(collectively, "Environmental Laws"), including without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. ss.9601 et seq. and 40 CFR ss.302.1 et seq.), the Resource Conservation
and Recovery Act of 1976 (42 U.S.C. ss.6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. ss.1251 et seq., and 40 CFR ss.116.1 et seq.),
the Hazardous Materials Transportation Act (49 U.S.C. ss.1801 et seq.) and the
regulations promulgated pursuant to said laws, all as amended and relating to or
affecting any Company and/or any Subsidiary of any Company and any Company's
and/or any Company's Subsidiary's properties, whether or not caused by or within
the control of the Purchaser and/or (b) the presence, release or threat of
release of any Hazardous Materials (including, without limitation, asbestos,
polychlorinated biphenyls, petroleum products, flammable explosives, radioactive
materials, infectious substances or raw materials which include hazardous
constituents) on, in, under or affecting all or any portion of any property of
any Company and/or any Subsidiary of any Company or any surrounding areas,
regardless of whether or not caused by or within the control of the Purchaser.

                  8.2 PURCHASER'S INDEMNIFICATION. The Purchaser agrees to
indemnify, hold harmless, reimburse and defend each Company and each of such
Company's officers, directors, agents, affiliates, control persons and principal
shareholders, at all times against any claims, costs, expenses, liabilities,
obligations, losses or damages (including reasonable legal fees) of any nature,
incurred by or imposed upon such Company which result, arise out of or are based
upon: (i) any misrepresentation by the Purchaser or breach of any warranty by
the Purchaser in this Agreement or in any exhibits or schedules attached hereto
or any Related Agreement; or (ii) any breach or default in performance by the
Purchaser of any covenant or undertaking to be performed by the Purchaser
hereunder, or any other agreement entered into by such Company and the Purchaser
relating hereto.

         9. MISCELLANEOUS.

                  9.1 GOVERNING LAW, JURISDICTION AND WAIVER OF JURY TRIAL.

                  (a) THIS AGREEMENT AND THE OTHER RELATED AGREEMENTS SHALL BE
         GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
         THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
         SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

                                       25

<page>

                  (b) EACH COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR
         FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK
         SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
         DISPUTES BETWEEN SUCH COMPANY, ON THE ONE HAND, AND THE PURCHASER, ON
         THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF THE RELATED
         AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT
         OR ANY OF THE OTHER RELATED AGREEMENTS; PROVIDED, THAT THE PURCHASER
         AND EACH COMPANY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY
         HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK,
         STATE OF NEW YORK; AND FURTHER PROVIDED, THAT, NOTHING IN THIS
         AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE THE PURCHASER FROM
         BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO
         COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL (AS DEFINED IN
         THE MASTER SECURITY AGREEMENT) OR ANY OTHER SECURITY FOR THE
         OBLIGATIONS (AS DEFINED IN THE MASTER SECURITY AGREEMENT), OR TO
         ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE PURCHASER. EACH
         COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION
         IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH COMPANY
         HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF
         PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. EACH
         COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND
         OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE
         OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED
         OR CERTIFIED MAIL ADDRESSED TO SUCH COMPANY AT THE ADDRESS SET FORTH IN
         SECTION 9.8 AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE
         EARLIER OF SUCH COMPANY'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS
         AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.

                  (c) THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A
         JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST
         COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION,
         THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
         SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN
         CONTRACT, TORT, OR OTHERWISE BETWEEN THE PURCHASER AND/OR ANY COMPANY
         ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
         RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
         AGREEMENT, ANY OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED
         HERETO OR THERETO.

                                       26

<page>

                  9.2 SEVERABILITY. Wherever possible each provision of this
Agreement and the Related Agreements shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this
Agreement or any Related Agreement shall be prohibited by or invalid or illegal
under applicable law such provision shall be ineffective to the extent of such
prohibition or invalidity or illegality, without invalidating the remainder of
such provision or the remaining provisions thereof which shall not in any way be
affected or impaired thereby.

                  9.3 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchaser or
any Company and the closing of the transactions contemplated hereby to the
extent provided therein. All statements as to factual matters contained in any
certificate or other instrument delivered by or on behalf of any Company
pursuant hereto in connection with the transactions contemplated hereby shall be
deemed to be representations and warranties by such Company hereunder solely as
of the date of such certificate or instrument. All indemnities set forth herein
shall survive the execution, delivery and termination of this Agreement and the
Note and the making and repayment of the obligations arising hereunder, under
the Note and under the other Related Agreements.

                  9.4 SUCCESSORS. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, heirs, executors and administrators of the parties hereto and shall
inure to the benefit of and be enforceable by each person or entity which shall
be a holder of the Securities from time to time, other than the holders of
common stock which has been sold by the Purchaser pursuant to Rule 144 or Rule
904 under the Securities Act or other resale restriction provisions of
applicable securities laws. The Purchaser shall not be permitted to assign its
rights hereunder or under any Related Agreement to a competitor of any Company
unless an Event of Default (as defined in the Note) has occurred and is
continuing.

                  9.5 ENTIRE AGREEMENT; MAXIMUM INTEREST. This Agreement, the
Related Agreements, the exhibits and schedules hereto and thereto and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and no
party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein and therein. Nothing contained in this Agreement, any Related
Agreement or in any document referred to herein or delivered in connection
herewith shall be deemed to establish or require the payment of a rate of
interest or other charges in excess of the maximum rate permitted by applicable
law. In the event that the rate of interest or dividends required to be paid or
other charges hereunder exceed the maximum rate permitted by such law, any
payments in excess of such maximum made by any Company shall be credited against
amounts owed by such Company to the Purchaser and thus refunded to such Company.

                  9.6 AMENDMENT AND WAIVER.

                  (a) This Agreement may be amended or modified only upon the
         written consent of the Companies and the Purchaser.

                                       27

<page>

                  (b) The obligations of each Company and the rights of the
         Purchaser under this Agreement may be waived only with the written
         consent of the Purchaser.

                  (c) The obligations of the Purchaser and the rights of the
         Companies under this Agreement may be waived only with the written
         consent of the Companies.

                  9.7 DELAYS OR OMISSIONS. It is agreed that no delay or
omission to exercise any right, power or remedy accruing to any party, upon any
breach, default or noncompliance by another party under this Agreement or the
Related Agreements, shall impair any such right, power or remedy, nor shall it
be construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of or in any similar breach, default or noncompliance
thereafter occurring. All remedies, either under this Agreement or the Related
Agreements, by law or otherwise afforded to any party, shall be cumulative and
not alternative.

                  9.8 NOTICES. All notices required or permitted hereunder shall
be in writing and shall be deemed effectively given:

                  (a) upon personal delivery to the party to be notified;

                  (b) when sent by confirmed facsimile if sent during normal
         business hours of the recipient, if not, then on the next business day;

                  (c) three (3) business days after having been sent by
         registered or certified mail, return receipt requested, postage
         prepaid; or

                  (d) one (1) day after deposit with a nationally recognized
         overnight courier, specifying next day delivery, with written
         verification of receipt.

All communications shall be sent as follows:

IF TO ANY COMPANY, TO:                 c/o Carneros Acquisition Corp.
                                       1065 West Pier E Street
                                       Long Beach, CA  90802-1015
                                       Attention: Darren Katic, President
                                       Facsimile: 310-937-3583

                                       WITH A COPY TO:

                                       Rutan & Tucker, LLP
                                       611 Anton Blvd., 14th Floor
                                       Costa Mesa, CA  92626
                                       Attention: Gregg Amber, Esq.
                                       Facsimile: 714-546-9035

IF TO THE PURCHASER, TO:               Laurus Master Fund, Ltd.
                                       c/o M&C Corporate Services Limited
                                       P.O.  Box 309 GT
                                       Ugland House
                                       George Town
                                       South Church Street
                                       Grand Cayman, Cayman Islands
                                       Facsimile: 345-949-8080

                                       28

<page>

                                       WITH A COPY TO:

                                       John E.  Tucker, Esq.
                                       825 Third Avenue 14th Floor
                                       New York, New York 10022
                                       Facsimile: 212-541-4434

                                       AND TO:

                                       Scott J. Giordano, Esq.
                                       Loeb & Loeb LLP
                                       345 Park Avenue
                                       New York, New York 10154
                                       Facsimile: 212-407-4990

or at such other address as any Company or the Purchaser may designate by
written notice to the other parties hereto given in accordance herewith.

                  9.9 ATTORNEYS' FEES. In the event that any suit or action is
instituted to enforce any provision in this Agreement or any Related Agreement,
the prevailing party in such dispute shall be entitled to recover from the
losing party all fees, costs and expenses of enforcing any right of such
prevailing party under or with respect to this Agreement and/or such Related
Agreement, including, without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.

                  9.10 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.

                  9.11 FACSIMILE SIGNATURES; COUNTERPARTS. This Agreement may be
executed by facsimile signatures and in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
agreement.

                  9.12 BROKER'S FEES. Except as set forth on Schedule 9.12
hereof, each party hereto represents and warrants that no agent, broker,
investment banker, person or firm acting on behalf of or under the authority of
such party hereto is or will be entitled to any broker's or finder's fee or any
other commission directly or indirectly in connection with the transactions
contemplated herein. Each party hereto further agrees to indemnify each other
party for any claims, losses or expenses incurred by such other party as a
result of the representation in this Section 9.12 being untrue.

                  9.13 CONSTRUCTION. Each party acknowledges that its legal
counsel participated in the preparation of this Agreement and the Related
Agreements and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied

                                       29

<page>

in the interpretation of this Agreement or any Related Agreement to favor any
party against the other.

                  9.14 JOINT AND SEVERAL OBLIGATIONS.

                  (a) All obligations and liabilities of each Company to the
         Purchaser (the "Obligations") shall be joint and several, and such
         obligations and liabilities on the part of the Companies shall in no
         way be affected by any extensions, renewals and forbearance granted by
         the Purchaser to any Company, failure of the Purchaser to give any
         Company any notice, any failure of the Purchaser to pursue to preserve
         its rights against any Company, the release by the Purchaser of any
         collateral now or thereafter acquired from any Company, and such
         agreement by any Company to pay upon any notice issued pursuant thereto
         is unconditional and unaffected by prior recourse by the Purchaser to
         any Company or any collateral for such Obligations or the lack thereof.

                  (b) Each Company expressly waives any and all rights of
         subrogation, reimbursement, indemnity, exoneration, contribution or any
         other claim which such Company may now or hereafter have against the
         other or other person or entity directly or contingently liable for the
         Obligations, or against or with respect to any other's property
         (including, without limitation, any property which is collateral for
         the Obligations), arising from the existence or performance of this
         Agreement, until all Obligations have been indefeasibly paid in full
         and this Agreement has been irrevocably terminated.

                  (c) Each Company represents and warrants to the Purchaser that
         (i) Companies have one or more common shareholders, directors and
         officers, (ii) the businesses and corporate activities of Companies are
         closely related to, and substantially benefit, the business and
         corporate activities of Companies, (iii) the financial and other
         operations of Companies are performed on a combined basis as if
         Companies constituted a consolidated corporate group and (iv) Companies
         will receive a substantial economic benefit from entering into this
         Agreement and will receive a substantial economic benefit from all
         amounts advanced by the Purchaser to each Company in connection with
         the transactions contemplated hereby, in each case, whether or not such
         amount is used directly by any Company.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

                                       30

<page>

         IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.

COMPANIES:                                 PURCHASER:

CARNEROS ENERGY, INC.                      LAURUS MASTER FUND, LTD.

By: *                                      By: /S/ Eugene Grin
   ------------------------                    ---------------------------
Name:                                      Name: Eugene Grin
   ------------------------                    ---------------------------

Title:                                     Title: Director
     ----------------------                      -------------------------

CARNEROS ACQUISITION CORP.

By: /S/ Darren Katic
   ------------------------

Name: Darren Katic
    -----------------------

Title: President
     ----------------------

GOTLAND OIL, INC.

By: *
   -----------------------
Name:
   -----------------------

Title:
     ---------------------

* See Joinder and Amendment Agreement dated as of June 29, 2006 among the
Companies and the Purchaser pursuant to which Gotland and Carneros join the
Securities Purchase Agreement as companies.

                                       31

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00136-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00136-of-00352.parquet"}], [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00136-of-00352.parquet"}]]