Document:

Unassociated Document

    
      Exhibit
        10.37

       

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

    

     

    WARRANT
      TO PURCHASE COMMON STOCK

    OF

    TEKOIL
      & GAS CORPORATION

    

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

     

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

     

    For
      purposes of this Warrant: 

     

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

     

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

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

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

     

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

     

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

     

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

     

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

     

    4. Method
      of Exercise.

     

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

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

       

    

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

     

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

    

    WHERE:

    

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

    

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

    

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

    

    B
      = the
      Exercise Price.

    

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

       

    

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

     

    (c) Issuance
      of Additional Shares of Common Stock.

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

       

    

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

       

    

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    (d) Other
      Actions Affecting the Common Stock.

     

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

     

    
      
        
        

      

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

     

    (e) Miscellaneous.

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

       

    

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

       

    

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

       

    

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

       

    

    14. Participation
      in Future Equity Financings.
      

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

       

    

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

       

    

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

     

    
      	
              To
                the Company: 

            	TEKOIL & GAS CORPORATION
              5036
                Dr. Phillips Blvd.

              Suite
                232

              Orlando,
                FL 32819

              Telephone:
                (407) 996-8506

              Telecopy:
                (407) 996-8507

              Attn:
                Mr. Mark Western

            	 	 

    

    

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

    

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

     

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

     

    

    [SIGNATURE
      PAGE FOLLOWS]

    

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

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

     

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

    

     

     

    
      Signature
        Page to Warrant

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	 	 
	 	HOLDER
	 	 
	 	
              GOLDMAN,
                SACHS & CO.

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

            
	 	 
	 	
              c/o
                Goldman Sachs E & P Capital

              1000
                Louisiana St., Suite 550

              Houston,
                TX 77002

              Attention:
                John Howie

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

            

    

     

     

    
      Signature
        Page to Warrant

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

    

    NOTICE
      OF
      EXERCISE

     

    To:
      TEKOIL & GAS CORPORATION

    

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

     

    Check
      the
      appropriate box for the applicable payment method:

    

    ______ Cash
      Exercise: The aggregate Exercise Price is enclosed.

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

     

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

     

    
      	 	 	 
	Date: ________________________	WARRANTHOLDER:
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              

              Name:
                
                Address:

              

            

    

     

    Name
      in
      which shares should be registered: _____________________

     

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

    EXHIBIT
      B

    

    ASSIGNMENT
      FORM

    

    TO: TEKOIL
      & GAS CORPORATION

    

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

    

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

    

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

     

    
      	 	 	 
	Date: ________________________	By:  	
            
	 	
            	
              

              
                 

              

            
	 	 	 
	 	
              
(Print
              Name of Signatory)
	 	 	 
	 	
              
(Title
              of Signatory) 

    

     

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

     

    Schedule
      I

    

    Options,
      Convertible Securities and Other Rights

    

    The
      Series A Convertible Preferred Stock of the Company.

    

    
      
        
        

      

      
        -18-Unassociated Document

    
      Exhibit
        10.38

    

    
      

      

    

     

    AMENDED
      AND RESTATED OPERATING AGREEMENT

     

    OF

     

    TEKOIL
      AND GAS GULF COAST, LLC

    formerly
      known as MASTERS ACQUISITION CO., LLC

     

    May
      11,
      2007

     

    THE
      MEMBERSHIP INTERESTS CREATED BY THIS OPERATING AGREEMENT ARE NOT INTENDED TO
      CONSTITUTE SECURITIES. TO THE EXTENT THESE MEMBERSHIP INTERESTS ARE CONSTRUED
      TO
      BE SECURITIES, THEN SUCH SECURITIES REPRESENTED BY THIS OPERATING AGREEMENT
      HAVE
      NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR REGISTERED
      NOR QUALIFIED UNDER ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE
      OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, OR
      HYPOTHECATED UNLESS QUALIFIED AND REGISTERED UNDER APPLICABLE STATE AND FEDERAL
      SECURITIES LAWS OR UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE
      COMPANY, SUCH QUALIFICATION AND REGISTRATION IS NOT REQUIRED. ANY TRANSFER
      OF
      ANY SECURITIES REPRESENTED BY THIS OPERATING AGREEMENT IS FURTHER SUBJECT TO
      OTHER RESTRICTIONS, TERMS AND CONDITIONS.

     

    
      

      

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    AMENDED
      AND RESTATED OPERATING AGREEMENT

     

    OF

     

    TEKOIL
      AND GAS GULF COAST, LLC 

    formerly
      known as MASTERS ACQUISITION CO., LLC

     

    In
      accordance with the Delaware Limited Liability Company Act and subject to the
      Certificate of Formation, which was filed on January 17, 2007 with the Delaware
      Secretary of State, the members listed on Exhibit
      A,
      and
      such other persons or entities who from time to time are signatories hereto
      (the
      "Members"),
      adopt
      the following Amended and Restated Operating Agreement (this "Agreement")
      regarding the conduct of the business and affairs of Tekoil and Gas Gulf Coast,
      LLC, a Delaware limited liability company formerly known as Masters Acquisition
      Co., LLC (the "Company").
      

     

    WITNESSETH:

     

    WHEREAS,
      Tekoil & Gas Corporation, a Delaware corporation ("Tekoil"),
      as
      the sole member of the Company, formed the Company as a limited liability
      company named "Masters Acquisition Co., LLC" under the Delaware Limited
      Liability Company Act; 

     

    WHEREAS,
      Tekoil, as the sole member of the Company, adopted an Operating Agreement on
      January 17, 2007 (the "Original
      Agreement"),
      in
      order to set forth the regulations, terms and conditions under which the Company
      would be operated; 

     

    WHEREAS,
      on January 26, 2007, the Company effected a name change, changing the name
      of
      the Company to "Tekoil and Gas Gulf Coast, LLC"; 

     

    WHEREAS,
      effective as of the date hereof, in connection with that certain Credit Facility
      (as defined below), the Company is issuing to Goldman, Sachs & Co.
      ("Goldman")
      a
      Membership Interest (as defined below) having the Membership Percentage (as
      defined below) set forth next to Goldman's name on Exhibit A hereto and is
      admitting Goldman as a member of the Company; and 

     

    WHEREAS,
      the Members now desire to amend and restate the Original Agreement in its
      entirety and set forth herein the regulations, terms, and conditions under
      which
      the Company will be operated by adopting this Agreement. 

     

    NOW,
      THEREFORE, set forth below are the regulations, terms and conditions of the
      operation of the Company.

     

    ARTICLE
      I  -
      DEFINED TERMS; EXHIBITS, ETC.

     

    1.1 Definitions.
      As
      used
      in this Agreement, the following terms shall have the respective meanings
      indicated below:

     

    "Act"
      means
      the Delaware Limited Liability Company Act, as the same may be amended from
      time
      to time.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    "Adjusted
      Capital Account Deficit"
      means,
      with respect to any Member, the deficit balance, if any, in such Member's
      Capital Account as of the end of the relevant Fiscal Year, after giving effect
      to the following adjustments:

     

    (a) Decrease
      such deficit by any amounts which such Member is obligated or deemed obligated
      to restore pursuant to this Agreement or the penultimate sentence of each of
      Regulation Sections 1.704-2(g)(1) and 1.704-2(i)(5). For these purposes, a
      Member is obligated to restore an amount to the Company to the extent (i) the
      Member is unconditionally obligated to restore part or all of its negative
      Capital Account balance in the manner described in Regulation Section
      1.704-1(b)(2)(ii)(b)(3), or (ii) the Member is unconditionally obligated to
      contribute capital to the Company; and

     

    (b) Increase
      such deficit by the items described in Regulation Section
      1.704-1(b)(2)(ii)(d)(4), (5) and (6).

     

    The
      foregoing definition of Adjusted Capital Account Deficit is intended to comply
      with the provisions of Regulation Section 1.704-1(b)(2)(ii)(d) and shall be
      interpreted consistently therewith.

     

    "Affiliate"
      means
      any Person who or which, directly or indirectly, through one or more
      intermediaries, controls or is controlled by, or is under common control with
      an
      entity (the term "control"
      for
      purposes of this definition meaning the ability, whether by ownership of shares
      or other equity interests, by contract or otherwise, to elect a majority of
      the
      directors of a corporation, to select the managing or general partner of a
      partnership, or otherwise to select, or have the power to remove and then
      select, a majority of those Persons exercising governing authority over an
      entity).

     

    "Agreement"
      means
      this Amended and Restated Operating Agreement, as originally executed and as
      amended, modified, supplemented or restated from time to time, as the context
      requires.

     

    "Bankrupt
      Member" means
      any
      Member (a) that (i) makes a general assignment for the benefit of creditors;
      (ii) files a voluntary bankruptcy petition; (iii) becomes the subject of an
      order for relief or is declared insolvent in any federal or state bankruptcy
      or
      insolvency proceedings; (iv) files a petition or answer seeking for the Member
      a
      reorganization, arrangement, composition, readjustment, liquidation,
      dissolution, or similar relief under any law; (v) files an answer or other
      pleading admitting or failing to contest the material allegations of a petition
      filed against the Member in a proceeding of the type described in subclauses
      (i)
      through (iv) of this clause (a); or (vi) seeks, consents to, or acquiesces
      in the appointment of a trustee, receiver, or liquidator of the Member's or
      of
      all or any substantial part of the Member's properties; or (b) against
      which, a proceeding seeking reorganization, arrangement, composition,
      readjustment, liquidation, dissolution, or similar relief under any law has
      been
      commenced and sixty (60) days have expired without dismissal thereof or with
      respect to which, without the Member's consent or acquiescence, a trustee,
      receiver, or liquidator of the Member or of all or any substantial part of
      the
      Member's properties has been appointed and sixty (60) days have expired without
      the appointments having been vacated or stayed, or sixty (60) days have expired
      after the date of expiration of a stay, if the appointment has not previously
      been vacated.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    "Business
      Day"
      means
      any day on which banks are open for business in New York, New York.

     

    "Capital
      Account"
      means,
      with respect to any Member, the separate "book" account which the Company shall
      establish and maintain for each Member in accordance with Section 704(b) of
      the
      Code and Regulation Section 1.704-1(b)(2)(iv) and such other provisions of
      Regulation Section 1.704-1(b) that must be complied with in order for the
      Capital Accounts to be determined in accordance with the provisions of the
      Regulations. In furtherance of the foregoing, the Capital Accounts shall be
      maintained in compliance with Regulation Section 1.704-1(b)(2)(iv), and the
      provisions hereof shall be interpreted and applied in a manner consistent
      therewith. For purposes of computing the Members' Capital Accounts, Simulated
      Depletion Deductions, Simulated Gains and Simulated Losses shall be allocated
      among the Members in the same proportions as they (or their predecessors in
      interest) were allocated the basis of Company oil and gas properties pursuant
      to
      Code Section 613A(c)(7)(D), the Regulations thereunder and Regulations Section
      1.704-1(b)(4)(v). In accordance with Code Section 613A(c)(7)(D), the Regulations
      thereunder and Regulations Section 1.704-1(b)(4)(v), the adjusted basis of
      all
      oil and gas properties shall be allocated among the Members in accordance with
      their respective Membership Percentages.

     

    "Capital
      Contribution"
      means,
      with respect to each Member, the amount of money and the initial Gross Asset
      Value of any property (other than money) contributed to the Company by such
      Member from time to time.

     

    "Certificate"
      means
      the
      Certificate of Formation of the Company filed with the Secretary of State of
      the
      State of Delaware, as amended from time to time.  

     

    "Code"
      means
      the Internal Revenue Code of 1986, as amended, or any replacement or successor
      law thereto.

     

    "Company
      Minimum Gain"
      has the
      meaning ascribed to partnership minimum gain in Regulation Sections
      1.704-2(b)(2) and 1.704-2(d), and any Member's share of Company Minimum Gain
      shall be determined in accordance with Regulations Section
      1.704-2(g)(1).

     

    "Credit
      Agreement"
      means
      that certain Credit Agreement dated as of May 11, 2007 among the Company,
      Tekoil,
      the
      other Guarantors (as defined in the Credit Agreement), the Lenders (as defined
      in the Credit Agreement), J. Aron & Company as Lead Arranger and Syndication
      Agent, and J. Aron & Company as Administrative Agent, pursuant to which
      Lenders have agreed to extend the Credit Facility to the Company. 

     

    "Credit
      Facility"
      means
      a
      senior secured credit facility, governed by the Credit Agreement consisting
      of a
      fifty million dollar ($50,000,000.00) term loan.  

     

    "Depreciation"
      means,
      for each Fiscal Year or other period, an amount equal to the depreciation,
      amortization or other cost recovery deduction allowable for federal income
      tax
      purposes with respect to an asset for such year or other period in accordance
      with the depreciation method elected by the Company with respect to such asset,
      except that if the Gross Asset Value of an asset differs from its adjusted
      basis
      for federal income tax purposes at the beginning of such year or other period,
      Depreciation shall be an amount which bears the same ratio to such beginning
      Gross Asset Value as the federal income tax depreciation, amortization or other
      cost recovery deduction allowable for such year or other period bears to such
      beginning adjusted tax basis or as otherwise required under Section
      1.704-1(b)(2)(iv)(g)(3) of the Regulations, or, in the reasonable discretion
      of
      the Managing Member, as otherwise permitted thereunder.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    "Distributable
      Cash"
      means,
      with respect to any Fiscal Year or other applicable period, the excess, if
      any,
      as determined by the Managing Member, of (a) all cash of the Company from
      all sources for such period, including, without limitation, receipts from
      operations, contributions of capital by the Members, proceeds of borrowing
      or
      from the issuance of securities by the Company, deposits and all other Company
      cash sources and all Company cash reserves on hand at the beginning of such
      period over (b) all cash expenses and capital expenditures of the Company
      for such period, all payments of principal and interest on account of Company
      indebtedness (including any loans by any Member) and such cash reserves as
      the
      Managing Member determines in its discretion (or those mandated by law, contract
      or the Company's debt instruments).

     

    "Entity"
      means
      any corporation, partnership (general, limited or other), limited liability
      company, company, trust, business trust, cooperative or
      association.

     

    "Event
      of Bankruptcy" means
      any
      event that causes a Member to be deemed a Bankrupt Member. 

     

    "Fiscal
      Year"
      means
      the twelve-month period ending on December 31 of each year.

     

    "Gross
      Asset Value"
      means,
      with respect to any asset of the Company, the adjusted basis of such asset
      for
      federal income tax purposes, except as follows:

     

    (a) The
      Gross
      Asset Value of any asset contributed by a Member to the Company shall, as of
      the
      date of such contribution and subject to further adjustment as herein provided,
      be the gross fair market value of such asset, as agreed upon by the contributing
      Member and all other Members.

     

    (b) The
      Gross
      Asset Values of all Company assets (including assets contributed to the Company)
      shall be adjusted to equal their respective gross fair market values, as
      reasonably determined by the Managing Member, as of each of the following times:
      (i) the acquisition of an additional Membership Interest by any new or existing
      Member in exchange for more than a de
      minimis
      Capital
      Contribution; (ii) the distribution by the Company to a Member of more than
      a
de
      minimis
      amount
      of Company property or cash in consideration of the redemption, or partial
      redemption, of the Membership Interest of the Member or Members to whom such
      distribution shall be made if, in connection therewith, the Managing Member
      reasonably determines that such adjustment is necessary or appropriate to
      reflect the relative economic interests of the Members in the Company; and
      (iii)
      the liquidation of the Company within the meaning of Regulation Section
      1.704-1(b)(2)(ii)(g).

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (c) The
      Gross
      Asset Value of any Company asset distributed to any Member shall be the gross
      fair market value of such asset on the date of distribution as determined by
      all
      Members.

     

    (d) The
      Gross
      Asset Value of any Company assets shall be increased (or decreased) to reflect
      any adjustments to the adjusted basis of such assets pursuant to Code Section
      734(b) or Code Section 743(b), but only to the extent that such adjustments
      are
      taken into account in determining Capital Accounts pursuant to Regulation
      Section 1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset Values shall
      not be adjusted to the extent the Managing Member determines that an adjustment
      pursuant to subparagraph (b) above is necessary or appropriate in connection
      with a transaction that would otherwise result in an adjustment pursuant to
      this
      subparagraph (d).

     

    If
      the
      Gross Asset Value of an asset has been determined or adjusted pursuant to any
      of
      the foregoing, such Gross Asset Value shall thereafter be adjusted by the
      Depreciation or Simulated Depletion Deductions taken into account with respect
      to such asset for purposes of computing Net Income and Net Losses. 

     

    "Incapacitated"
      shall
      mean the inability, by reason of a reasonably verifiable physical or mental
      disability, of a person to perform such person's assigned duties to the Company,
      on a full-time basis, for a continuous period of 120 days or for an aggregate
      of
      180 days in any 365 day period. 

     

    "Investment"
      shall
      mean (i) with respect to Tekoil, the sum of (A) $27,182,542 plus (B) the
      aggregate amount of all Excess Capital Contributions made by Tekoil pursuant
      to
      Section 3.3(c) and (ii) with respect to Goldman, the sum of (C) $9,060,847
      plus
      (D) the aggregate amount of all Excess Capital Contributions made by Goldman
      pursuant to Section 3.3(c).

     

    "Liquidating
      Trustee"
      means
      such Person as is selected at the time of dissolution by the Managing Member,
      which Person may include an Affiliate of the Managing Member or any Member.
      The
      Liquidating Trustee shall be empowered to give and receive notices, reports
      and
      payments in connection with the dissolution, liquidation and/or winding-up
      of
      the Company and shall hold and exercise such other rights and powers as are
      necessary or required to permit all parties to deal with the Liquidating Trustee
      in connection with the dissolution, liquidation, and/or winding-up of the
      Company.

     

    "Managing
      Member"
      means
      the managing member of the Company as appointed in Section 7.1 of this
      Agreement. 

     

    "Member
      Nonrecourse Debt"
      has the
      meaning ascribed to partner nonrecourse debt in Regulation Section
      1.704-2(b)(4).

     

    "Member
      Nonrecourse Debt Minimum Gain"
      means an
      amount, with respect to each Member Nonrecourse Debt, equal to the Company
      Minimum Gain that would result if such Member Nonrecourse Debt was treated
      as a
      Nonrecourse Liability, determined in accordance with Regulation Sections
      1.704-2(i)(2) and (3).

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    "Member
      Nonrecourse Deductions"
      has the
      meaning ascribed to partner nonrecourse deductions in Regulation Sections
      1.704-2(i)(1) and 1.704-2(i)(2).

     

    "Members"
      means
      the Persons listed on Exhibit
      A
      attached
      hereto and incorporated herein by reference, as the same shall be amended from
      time to time, who have been admitted to the Company in accordance with this
      Agreement and other Persons who become signatories hereto from time to
      time.

     

    "Membership
      Interest"
      means a
      Member's entire interest in the Company, which shall entitle the Member to
      (a)
      an interest in the Net Income, Net Loss, Distributable Cash, and net proceeds
      of
      liquidation of the Company, as set forth herein, (b) any right to vote as set
      forth herein or as required under the Act, and (c) any right to participate
      in
      the management of the Company as set forth herein or as required under the
      Act.
      A Membership Interest is personal property and a Member shall have no interest
      in the specific assets or property of the Company.

     

    "Membership
      Percentage"
      means,
      with respect to each Member, such Member's percentage ownership interest in
      the
      Company set forth on Exhibit
      A
      attached
      hereto, as may be amended or adjusted from time to time in accordance with
      Section 3.3(c).

     

    "Net
      Income"
      or
"Net
      Loss"
      shall
      mean the income or loss for federal income tax purposes determined as of the
      close of the Company's Fiscal Year or as of such other time as may be required
      by this Agreement or the Code, as well as, where the context requires, related
      federal tax items such as tax preferences and credits, appropriately adjusted
      with respect to final determination of any of the foregoing for federal income
      tax purposes, and also adjusted as follows:

     

    (a) Any
      income that is exempt from federal income tax and not otherwise taken into
      account in computing Net Income or Net Loss shall be added to such taxable
      income or loss.

     

    (b) Any
      expenditures described in Section 705(a)(2)(B) of the Code, or treated as
      Section 705(a)(2)(B) expenditures pursuant to Regulation Section
      1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net
      Income or Net Loss shall be subtracted from such taxable income or loss.

     

    (c) In
      lieu
      of depreciation, amortization or other cost recovery deductions taken into
      account in computing such taxable income or loss, there shall be taken into
      account Depreciation for such Fiscal Year or other period.

     

    (d) Gain
      or
      loss during any Fiscal Year on account of the sale, exchange, condemnation
      or
      other disposition of any assets, as determined in accordance with Section 1001
      of the Code (or, where applicable, Section 453 of the Code), appropriately
      adjusted, however, with respect to final determination of the foregoing for
      federal income tax purposes, and also adjusted as follows:

     

    (i) In
      the
      event the Gross Asset Value of any asset is adjusted pursuant to subparagraphs
      (b) or (c) of the definition of Gross Asset Value, the amount of such adjustment
      shall be taken into account as though the same constituted gain or loss from
      the
      disposition of such asset for purposes of computing Net Income or Net Loss
      under
      the provisions of this Agreement.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (ii) Gain
      or
      loss, if any, resulting from any disposition of Company assets with respect
      to
      which gain or loss is recognized for federal income tax purposes shall be
      computed by reference to the Gross Asset Value of the property disposed of,
      notwithstanding that the adjusted tax basis of such property differs from its
      Gross Asset Value.

     

    (e) Notwithstanding
      any other provision of this definition, any items that are specially allocated
      pursuant to Section 4.3 hereof shall not be taken into account in computing
      Net
      Income or Net Loss.

     

    "Nonrecourse
      Deductions"
      has the
      meaning set forth in Regulation Section 1.704-2(b)(1).

     

    "Nonrecourse
      Liability"
      has the
      meaning set forth in Regulation Section 1.704-2(b)(3).

     

    "Person"
      means
      any natural person or Entity.

     

    "Prime
      Rate"
      shall
      mean the fluctuating rate as reported in the Wall
      Street Journal or,
      in
      the event publication of the Wall
      Street Journal is
      terminated, in such successor national financial publication as determined
      by
      the Managing Member. 

     

    "Properties"
      means
      the
      oil and gas properties described on Exhibit
      B
      attached
      hereto and incorporated herein by reference. 

     

    "Regulation"
      or "Regulations"
      means
      the proposed, temporary and final regulations promulgated by the Treasury
      Department pursuant to the Code, as amended from time to time.

     

    "Simulated
      Depletion Deductions"
      means
      the simulated depletion allowance computed by the Company with respect to its
      oil and gas properties pursuant to Regulations Section
      1.704-1(b)(2)(iv)(k)(2).

     

    "Simulated
      Gains"
      or "Simulated
      Losses"
      means,
      respectively, the simulated gains or simulated losses computed by the Company
      with respect to its oil and gas properties pursuant to Regulations Section
      1.704-1(b)(2)(iv)(k)(2).

     

    "Total
      Investments"
      shall
      mean the sum of Tekoil's Investment and Goldman's Investment.

     

    1.2 Other
      Defined Terms. Capitalized
      terms not defined in Section 1.1 shall have the meanings set forth in the other
      sections of this Agreement.

     

    1.3 References.
      References
      to an "Exhibit"
      are,
      unless otherwise specified, to one of the exhibits attached to this Agreement,
      and references to an "Article"
      or a
      "Section"
      are,
      unless otherwise specified, to one of the articles or sections of this
      Agreement. Each Exhibit attached hereto and referred to herein is hereby
      incorporated herein by such reference.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      II  -
      ORGANIZATION

     

    2.1 Organization
      of Company. Effective
      as of January 17, 2007, the date of the filing of the Certificate with the
      Secretary of State of the State of Delaware, the initial Member of the Company
      formed the Company as a limited liability company governed by the terms hereof.
      Except as provided herein or in the Certificate, the rights and obligations
      of
      the Members are as provided under the Act.

     

    2.2 Name.
      The
      name
      of the Company is "TEKOIL AND GAS GULF COAST, LLC". Subject to all applicable
      laws, the business of the Company shall be conducted in the name of the Company
      unless, under the law of some jurisdiction in which the Company does business,
      such business must be conducted under another name or unless the Managing Member
      determines that it is advisable to conduct Company business under another name.
      The Managing Member shall cause to be filed on behalf of the Company such
      limited liability company or assumed or fictitious name certificate or
      certificates or similar instruments as may from time to time be required by
      law.

     

    2.3 Purpose
      and Powers. The
      purpose and business of the Company is to acquire, explore, and develop the
      Properties, and to engage in any and all activities or businesses related or
      incidental thereto as permitted by the Act. The Company shall not engage in
      any
      other activity not incidental to the foregoing.   

     

    2.4  Principal
      Office. The
      location of the Company's principal office 25050 I-45 North, Suite 528, The
      Woodlands, Texas 77380,
      or
      such
      other place as from time to time may be selected by the Managing Member. The
      Managing Member shall promptly notify each of the other Members of any change
      of
      the Company's principal office.

    

    2.5 Registered
      Agent and Registered Office.
      The
      statutory agent for service of process and the registered office of the Company
      in the State of Delaware shall be Corporation Service Company at 2711
      Centerville Road, Suite 400, Wilmington, Delaware 19808, or such other statutory
      agent and registered office as the Managing Member may determine from time
      to
      time. 

     

    2.6 Registered
      Members. The
      Company shall be entitled to recognize the exclusive right of a person
      registered on its books as the owner of Membership Interests to receive
      distributions, and to vote or take other action as such owner, and to hold
      liable for calls and assessments (to the extent permitted hereby) a person
      registered on its books as the owner of Membership Interests, and shall not
      be
      bound to recognize any equitable or other claim to or interest in such
      Membership Interests on the part of any other Person.

     

    2.7 Members.
      The
      Members listed on Exhibit
      A,
      as the
      same may be amended from time to time in accordance herewith, have been admitted
      to the Company as Members. The names and mailing addresses of the Members are
      set forth in Exhibit
      A
      attached
      hereto and incorporated herein by reference. 

     

    2.8 No
      State Law Partnership; Liability to Third Parties. The
      Members intend that the Company not be a partnership (including, without
      limitation, a limited partnership) or joint venture under any state law, and
      that no Member or Managing Member be a partner or joint venturer of any other
      Member, for any purposes other than federal and state tax purposes (for which
      the Members do intend to be taxed as a "partnership"),
      and
      that this Agreement not be construed to suggest otherwise. Except as otherwise
      specifically provided in the Act, no Member shall be liable for the debts,
      obligations or liabilities of the Company, including under a judgment decree
      or
      order of a court and shall not be obligated to make any contributions to the
      Company to restore any negative balances in any Capital Accounts.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    2.9 Scope
      of Members' Authority.
      Unless
      otherwise expressly provided in this Agreement, no Member shall have any
      authority to act for, or assume any obligations or responsibility on behalf
      of
      the Company or any other Member. Nothing contained herein shall constitute
      the
      Members as partners with one another in any matter (other than for federal
      income tax purposes) or render any of them liable for the debts or obligations
      of any other Member.

     

    ARTICLE
      III  -
      CAPITAL CONTRIBUTIONS

     

    3.1 Initial
      Capital Contributions. The
      initial Capital Contributions of the Members named in the preamble to this
      Agreement have been or shall be made on the date of this Agreement in the form
      and amount as set forth on Exhibit A attached hereto. As of the date of this
      Agreement, the initial Capital Account balance of Tekoil shall be equal to
      $15,932,542. Tekoil's initial Capital Account balance shall be increased by
      $7,500,000 upon Tekoil's additional Capital Contribution of $7,500,000 as
      required by the Credit Agreement. As of the date of this Agreement, the initial
      Capital Account balance of Goldman shall be equal to $7,810,847. If the Company
      is liquidated pursuant to Article X prior to the date of Tekoil's additional
      Capital Contribution of $7,500,000 as required by the Credit Agreement, the
      initial Capital Account balance of Goldman shall be equal to
      $5,310,847.

     

    3.2 Withdrawal;
      Return of Capital; Interest. Except
      as
      specifically provided herein, no Member shall be entitled to any distributions
      from the Company or to withdraw any part of such Member's Capital Contribution
      prior to the Company's dissolution and liquidation, or when such withdrawal
      of
      capital is permitted, to demand distribution of property other than money.
      No
      Member shall be entitled to interest on its Capital Contribution. No Member
      shall be obligated to restore any deficit balance in its Capital Account or
      bring its Capital Account into any particular relationship with the
      Capital
      Account
      of any other Member.

     

    3.3 No
      Obligation to Make Additional Capital Contributions; Treatment of Additional
      Capital Contributions by Tekoil. 

     

    (a) Subject
      to Section 7.3 and except as provided in the Credit Agreement, no Member shall
      be required to make any additional Capital Contributions.

     

    (b) In
      the
      event that Tekoil or any of its Affiliates makes additional Capital
      Contributions to the Company (other than the $7,500,000 additional Capital
      Contribution by Tekoil referenced in Section 3.1), twenty five percent (25%)
      of
      any such additional Capital Contributions made by Tekoil or any of its
      Affiliates, up to an aggregate of $5,000,000 of additional Capital Contributions
      made by Tekoil or any of its Affiliates, shall be reallocated from the Capital
      Account of Tekoil to the Capital Account of Goldman as of the date such
      additional Capital Contributions are made.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (c) In
      the
      event that Tekoil proposes to make additional Capital Contributions to the
      Company after the date hereof in excess of $12,500,000 (such amount being the
      aggregate of the $7,500,000 additional Capital Contribution by Tekoil referenced
      in Section 3.1 and the $5,000,000 of additional of Capital Contributions of
      Tekoil referenced in paragraph (b) above) (any such additional Capital
      Contribution being referred to as an "Excess
      Capital Contribution"),
      Goldman shall have the right, in its sole discretion, to make its proportionate
      share of any such Excess Capital Contribution based on its Membership Percentage
      in effect immediately prior to such Excess Capital Contribution. In the event
      that Goldman elects not to make its proportionate share of such Excess Capital
      Contribution, then upon the making of such Excess Capital Contribution by
      Tekoil, the Membership Percentages of Tekoil and Goldman shall be adjusted
      such
      that (i) Tekoil's Membership Percentage shall be an amount, expressed as a
      percentage, equal to (A) Tekoil's Investment divided by (B) Total Investments
      and (ii) Goldman's Membership Percentage shall be an amount, expressed as a
      percentage, equal to (C) Goldman's Investment divided by (D) Total
      Investments.

     

    ARTICLE
      IV  -
      ALLOCATION
      OF NET INCOME AND NET LOSS; ETC.

     

    4.1 Net
      Income and Net Loss.
      After
      giving effect to the special allocations set forth in Section 4.3, Net Income
      and Net Loss for any Fiscal Year or other applicable period shall be allocated
      among the Members in accordance with and in proportion to the Members'
      respective Membership Percentages.

     

    4.2 Limitations
      on Net Loss Allocation.
      Notwithstanding Section 4.1, Net Losses allocated to a Member pursuant to
      Section 4.1 shall not exceed the maximum amount of Net Losses that can be
      allocated without causing a Member to have an Adjusted Capital Account Deficit
      at the end of any Fiscal Year. If any Member would have an Adjusted Capital
      Account Deficit as a consequence of an allocation of Net Losses pursuant to
      Section 4.1, the amount of Net Losses that would be allocated to such Member
      but
      for the application of this Section 4.2 shall be allocated to the other Members
      to the extent that such allocations would not cause such other Members to have
      an Adjusted Capital Account Deficit and allocated among such other Members
      in
      proportion to their positive adjusted Capital Account balances. If none of
      the
      Members can be allocated Net Losses without such allocation causing such Members
      to have an Adjusted Capital Account Deficit, such Net Losses shall be allocated
      as if this Section 4.2 were not in effect. Any allocation of items of income,
      gain, loss, deduction or credit pursuant to this Section 4.2 shall be taken
      into
      account in making subsequent allocations pursuant to Section 4.1, and prior
      to
      any allocation of items in Section 4.1 so that the net amount of any items
      allocated to each Member pursuant to Section 4.1 and this Section 4.2 shall,
      to
      the maximum extent practicable, be equal to the net amount that would have
      been
      allocated to each Member pursuant to the provisions of Section 4.1 if such
      allocations under this Section 4.2 had not occurred.

     

    4.3 Special
      Allocations.

     

    (a)  Company
      Minimum Gain Chargeback.
      Notwithstanding any other provision of this Article IV, if there is a net
      decrease in Company Minimum Gain during any Fiscal Year or other period for
      which allocations are made, prior to any other allocation under this Agreement,
      each Member will be specially allocated items of income and gain relating to
      that period (and, if necessary, subsequent periods) in proportion to, and to
      the
      extent of, an amount equal to such Member's share of the net decrease in Company
      Minimum Gain during such year as determined in accordance with Regulation
      Section 1.704-2(g)(2). The items to be allocated will be determined in
      accordance with Regulation Section 1.704-2(f).

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (b)  Member
      Nonrecourse Debt Minimum Gain Chargeback.
      Notwithstanding any other provision of this Article IV, if there is a net
      decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member
      Nonrecourse Debt, each Member who has a share of the Member Nonrecourse Debt
      Minimum Gain attributable to such Member Nonrecourse Debt, determined in
      accordance with Regulation Section 1.704-2(i)(5), shall be specially allocated
      items of income and gain for such Fiscal Year (and, if necessary, subsequent
      Fiscal Years) in an amount equal to such Member's share of the net decrease
      in
      Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse
      Debt, determined in accordance with Regulation Section
      1.704-2(i)(4).

     

    (c)  Qualified
      Income Offset.
      A
      Member who unexpectedly receives any adjustment, allocation or distribution
      described in Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6) will be
      specially allocated items of income and gain in an amount and manner sufficient
      to eliminate, to the extent required by the Regulations, the Adjusted Capital
      Account Deficit of the Member as quickly as possible.

     

    (d)  Gross
      Income Allocations.
      Each
      Member who has an Adjusted Capital Account Deficit at the end of any Fiscal
      Year
      will be specially allocated, as quickly as possible, items of gross income
      and
      gain in the amount of such deficit.

     

    (e)  Nonrecourse
      Deductions.
      Nonrecourse Deductions for any Fiscal Year or other period for which allocations
      are made will be allocated to the Members among the Members in proportion to
      their respective Membership Percentages.

     

    (f)  Member
      Nonrecourse Deductions.
      Notwithstanding anything to the contrary in this Agreement, any Member
      Nonrecourse Deductions for any Fiscal Year or other period for which allocations
      are made will be allocated to the Member who bears the economic risk of loss
      with respect to the Member Nonrecourse Debt to which the Member Nonrecourse
      Deductions are attributable in accordance with Regulation Section
      1.704-2(i).

     

    (g)  Code
      Section 754 Adjustments.
      To the
      extent an adjustment to the adjusted tax basis of any Company asset under Code
      Sections 734(b) or 743(b) is required to be taken into account in determining
      Capital Accounts under Regulation Section 1.704-1(b)(2)(iv)(m), the amount
      of
      the adjustment to the Capital Accounts will be treated as an item of gain (if
      the adjustment increases the basis of the asset) or loss (if the adjustment
      decreases the basis), and the gain or loss will be specially allocated to the
      Members in a manner consistent with the manner in which their Capital Accounts
      are required to be adjusted under Regulation Section
      1.704-1(b)(2)(iv)(m).

     

    (h)  Curative
      Allocations.
      The
      allocations set forth in Sections 4.3(a), 4.3(b), 4.3(c), 4.3(d), 4.3(e),
      4.3(f), 4.3(g) and 4.2 (the "Regulatory Allocations") are intended to comply
      with certain requirements of the Regulations. It is the intent of the Members
      that, to the extent possible, all Regulatory Allocations shall be offset either
      with other Regulatory Allocations or with special allocations of other items
      of
      Company income, gain, loss or deduction pursuant to this Section 4.3(h).
      Therefore, notwithstanding any other provision of this Article IV (other than
      the Regulatory Allocations), the Managing Member shall make such offsetting
      special allocations of Company income, gain, loss or deduction in whatever
      manner it determines reasonably appropriate so that, after such offsetting
      allocations are made, each Member's Capital Account balance is, to the extent
      possible, equal to the Capital Account balance such Member would have had if
      the
      Regulatory Allocations were not part of this Agreement and all Company items
      were allocated pursuant to Section 4.1.

     

    
      
        
        

      

      
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    4.4 Tax
      Allocations. Except
      as
      otherwise provided in this Section 4.4, each item of income, gain, loss and
      deduction of the Company for federal income tax purposes shall be allocated
      among the Members in the same manner as such items are allocated for book
      purposes under this Article IV. In accordance with Code Section 704(c) and
      the
      Regulations thereunder, income, gain, loss, and deduction with respect to any
      property contributed to the capital of the Company shall, solely for tax
      purposes, be allocated among the Members so as to take account of any variation
      between the adjusted basis of such property to the Company for federal income
      tax purposes and its initial Gross Asset Value in accordance with the one of
      the
      methods under Regulation Section 1.704-3 as determined by the Members. Any
      recapture of depreciation pursuant to Sections 1245 or 1250 of the Code shall
      be
      allocated to the Members which realized the benefit of the deductions
      attributable to such recapture.

     

    4.5 Effect
      on Allocations of New Members or Assignees. In
      the
      event that new Members are admitted to the Company or persons become assignees
      on other than the first day of any Fiscal Year, Net Income and Net Loss for
      such
      Fiscal Year shall be allocated among the Members and assignees in accordance
      with Code Section 706, using any convention permitted by law and selected
      by the Members.

     

    ARTICLE
      V -
      DISTRIBUTIONS

     

    5.1 Distributions. 
      Except
      as otherwise provided in Article
      X,
      Distributable Cash, if any, shall be distributed only in the following order
      of
      priority:

     

    (a) Tax
      Distributions.
      Except
      as and to the extent prohibited by applicable law or by the Credit Agreement
      or
      other contractual restriction binding upon the Company, within sixty (60) days
      after the close of each Fiscal Year, the Managing Member shall cause the Company
      to distribute cash to the Members, such that each Member has received cumulative
      cash distributions from the Company (taking into account all current and prior
      distributions pursuant to Sections 5.1(a) and 5.1(b)) equal to such Member's
      share of the cumulative Net Income (net of prior allocations of Net Losses)
      allocated to such Member pursuant to Section 4.1 (through the end of the prior
      Fiscal Year) multiplied by forty percent (40%). Any distributions received
      by a
      Member pursuant to this Section 5.1(a) shall be taken into account for purposes
      of determining subsequent distributions pursuant to Section 5.1(b) such that
      each Member shall have received an amount of distributions pursuant to this
      Agreement equal to that which such Member would have received since the date
      of
      this Agreement assuming distributions had been made solely pursuant to Section
      5.1(b).

     

    
      
        
        

      

      
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    (b)
      Remaining
      Distributable Cash. After
      the
      Managing Member shall have made the distributions set forth in Section 5.1(a),
      the Managing Member shall, at such times and from time to time as the Managing
      Member determines and except as and to the extent prohibited by applicable
      law
      or by the Credit Agreement or other contractual restriction binding upon the
      Company, distribute any remaining Distributable Cash to the Members in
      accordance with their respective Membership Percentages.

     

    5.2 Withholding.
      Any
      amount that the Company is required to withhold and deposit with any
      governmental authority with respect to any federal, state, local or foreign
      tax
      liability of a Member, including any withholding pursuant to Sections 1441,
      1442, 1445 or 1446 or any other applicable sections of the Code, shall be
      treated as an amount distributed to such Member and shall reduce, dollar for
      dollar, any distribution that would otherwise be made to such Member pursuant
      to
      this Agreement for that or any subsequent period. To the extent any amount
      so
      withheld exceeds the cash otherwise distributable to such Member, such expense
      shall be deemed a loan to the Member bearing interest at the Prime Rate, payable
      out of any future distributions, and if not earlier repaid upon termination
      of
      the Company or the sale or other disposition of any of such Member's Membership
      Interest.

     

    ARTICLE
      VI -
      ACCOUNTING AND ADMINISTRATIVE MATTERS

     

    6.1 Books
      and Records. The
      Company will maintain true, complete and correct books of account of the
      Company, in accordance with such methodology, consistently applied, as
      determined by the Managing Member. The books of account shall contain
      particulars of all monies, goods, assets (including, but not limited to, real,
      personal, and intangible) or effects belonging to or owing to or by the Company,
      or paid, received, sold or purchased in the course of the Company's business,
      and all of such other transactions, matters and things relating to the business
      of the Company as are usually entered in books of accounts kept by persons
      engaged in a business of a like kind and character. In addition, the Company
      shall keep all records required to be kept pursuant to the Act. A Member shall,
      upon prior written notice and during normal business hours, have access to
      the
      information described in Section 18-305 of the Act, for the purpose of
      inspecting or, at the expense of such Member, copying the same. Any Member
      reviewing the books and records of the Company pursuant to the preceding
      sentence shall do so in a manner which does not unduly interfere with the
      conduct of the business of the Company.

     

    6.2 Reports. The
      Company will furnish the following statements and reports to each of the Members
      at the Company's expense:

     

    (a) Within
      ninety (90) days after the close of each Fiscal Year, a Schedule K-1 or such
      other form as shall be necessary to advise all Members relative to their
      investment in the Company for federal, state, local, provincial, territorial
      and
      foreign income tax reporting purposes, prepared by an independent certified
      public accounting firm appointed by the Company and approved by Goldman (such
      approval not to be unreasonably withheld). Such Schedule K-1 or other form
      shall
      be furnished to each Person who was a Member during such Fiscal
      Year.

     

    
      
        
        

      

      
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    (b) As
      soon
      as available, and in any event within ninety (90) days after the end of each
      Fiscal Year (commencing with the fiscal year ending December 31, 2007), complete
      consolidated financial statements of the company together with all notes
      thereto, prepared in reasonable detail in accordance with generally accepted
      accounting principles, together with an unqualified opinion, based on an audit
      using generally accepted auditing standards, by independent certified public
      accountants selected by the Company and acceptable to Goldman, stating that
      such
      consolidated financial statements have been so prepared. These financial
      statements shall contain a consolidated balance sheet as of the end of such
      Fiscal Year and consolidated statements of earnings, of cash flows, and of
      changes in owners' equity for such Fiscal Year, each setting forth in
      comparative form the corresponding figures for the preceding Fiscal
      Year.

     

    (c) As
      soon
      as available, and in any event within thirty (30) days after the end of
      each fiscal quarter of the Company, the Company's consolidated balance sheet
      as
      of the end of such fiscal quarter and consolidated statements of earnings and
      cash flows for the period from the beginning of the then current Fiscal Year
      to
      the end of such fiscal quarter, all in reasonable detail and prepared in
      accordance with generally accepted accounting principles, subject to changes
      resulting from normal year-end adjustments.

     

    (d) Promptly
      upon their becoming available, copies of all financial statements, reports,
      notices and proxy statements sent by Tekoil to its stockholders and all
      registration statements, periodic reports and other statements and schedules
      filed by Tekoil with any securities exchange, the Securities and Exchange
      Commission or any similar governmental authority.

     

    (e) If,
      as a
      result of any change in accounting principles and policies from those used
      in
      the preparation of the Company's audited consolidated financial statements
      as of
      the immediately preceding fiscal year, the consolidated financial statements
      of
      the Company and its subsidiaries delivered pursuant to Section 6.2(b) or
      6.2(c) will differ in any material respect from the consolidated financial
      statements that would have been delivered pursuant to such subsections had
      no
      such change in accounting principles and policies been made, then, together
      with
      the first delivery of such financial statements after such change, one or more
      statements of reconciliation for such changes in form and substance satisfactory
      to Goldman.

     

    (f) By
      March
      1 and September 1 of each year, beginning September 1, 2007, an
      Engineering Report (as defined in the Credit Agreement) prepared as of the
      preceding January 1 or July 1, respectively, concerning the
      Properties. Each Engineering Report prepared as of any January 1 must be
      prepared or audited by the Independent Engineer (as defined in the Credit
      Agreement or another independent petroleum engineer selected by the Company
      and
      approved by Goldman in its sole discretion); each Engineering Report prepared
      as
      of any July 1 may, at the Company's option, be prepared by the Company's
      in-house engineering staff or prepared or audited by the Independent Engineer.
      In addition, Goldman may (at its expense) request additional Engineering Reports
      from time to time prepared by the Independent Engineer. 

     

    (g) Within
      thirty (30) days after the end of each calendar month, a report in detail
      acceptable to Goldman with respect to the Properties during such
      month:

     

    (i) describing
      by well and field the net quantities of oil, gas, natural gas liquids, and
      water
      produced (and the quantities of water injected) during such month;

     

    
      
        
        

      

      
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    (ii) describing
      by well and field the quantities of oil, gas and natural gas liquids sold during
      such month out of production from the Properties and calculating the average
      sales prices of such oil, natural gas, and natural gas liquids;

     

    (iii) specifying
      any leasehold operating expenses, overhead charges, gathering costs,
      transportation costs, and other costs with respect to the Properties of the
      kind
      chargeable as direct charges or overhead under an Onshore COPAS Accounting
      Procedure for Joint Operations (1984 form published by the Council of Petroleum
      Accountants Societies);

     

    (iv) setting
      forth the amount of Direct Taxes (as defined in the Credti Agreement) on the
      Properties during such month and the amount of royalties paid with respect
      to
      the Properties during such month;

     

    (v) describing
      all activities carried out during such month in furtherance of the Company's
      development plan, all other capital expenditures during such month, and all
      projections of capital expenditures projected to be made on any of the
      Properties; and

     

    (vi) describing
      all workover work and drilling during such month including the cost and status
      of each well drilled or worked over during such month, test reports for each
      well tested during such month, reports on prices and volumes received for such
      month, reports for each well completed during such month, and accompanying
      authorizations for expenditures.

     

    (h) As
      soon
      as available, and in any event within thirty (30) days after the end of each
      fiscal quarter of the Company, a report describing aggregate volume of
      production and sales attributable to production during such fiscal quarter
      from
      the Properties and describing the related severance taxes, leasehold operating
      expenses and capital costs attributable thereto and incurred during such fiscal
      quarter.

     

    (i) As
      soon
      as practicable and in any event by the last day of each fiscal year, a report
      in
      form and substance satisfactory to Goldman outlining all material insurance
      coverage maintained as of the date of such report by the Company and its
      subsidiaries and all material insurance coverage planned to be maintained by
      the
      Company and its subsidiaries in the immediately succeeding Fiscal
      Year.

     

    (j) Promptly,
      and in any event within ten (10) Business Days (i) after any Material Contract
      (as defined in the Credit Agreement) of the Company or any of its subsidiaries
      is terminated or amended in a manner that is materially adverse to the Company
      or such subsidiary, as the case may be, or (ii) any new Material Contract is
      entered into, a written statement describing such event, with copies of such
      material amendments or new contracts, delivered to Goldman (to the extent such
      delivery is permitted by the terms of any such Material Contract, provided,
      no
      such prohibition on delivery shall be effective if it were bargained for by
      the
      Company or its applicable subsidiary with the intent of avoiding compliance
      with
      this Section (j)), and an explanation of any actions being taken with
      respect thereto.

     

    
      
        
        

      

      
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    6.3 Tax
      Matters Partner. The
      Managing Member shall be the "Tax Matters Partner," as such term is defined
      in
      Section 6231(a)(7) of the Code. The Tax Matters Partner shall take such action
      as may be reasonably necessary to cause each other Member to become a notice
      partner within the meaning of Code Section 6231(a)(8). The Tax Matters Partner
      shall inform each other Member of all significant matters that may come to
      its
      attention in its capacity as Tax Matters Partner by giving notice thereof on
      or
      before the fifth day after becoming aware thereof and, within that time, shall
      forward to each other Member copies of all significant written communications
      it
      may receive in that capacity. The Tax Matters Partner shall not enter into
      any
      extension of the period of limitations for making assessments on behalf of
      the
      Members without first obtaining the consent of all Members. The Tax Matters
      Partner shall not bind any Member to a settlement agreement without obtaining
      the consent of such Member. Any Member that enters into a settlement agreement
      with respect to any Company item (within the meaning of Code Section 6231(a)(3))
      shall notify the other Members of such settlement agreement and its terms within
      30 days from the date of the settlement.

     

    6.4 Tax
      Elections. The
      Managing Member shall make the following elections on the appropriate tax
      returns of the Company:

     

    (a) To
      adopt
      the calendar year as the Company's tax year;

     

    (b) To
      adopt
      the accrual method of accounting;

     

    (c) Upon
      request of any Member, an election under Code Section 754;

     

    (d) To
      deduct
      expenses incurred in organizing the Company ratably over a sixty month period
      as
      provided in Code Section 709;

     

    (e) To
      expense intangible drilling and development costs; and

     

    (f) Any
      other
      election that the Managing Member deems appropriate and in the best interests
      of
      the Members after obtaining approval of the Members.

     

    Neither
      the Company nor any Member may make an election for the Company to be excluded
      from the application of the provisions of subchapter K of Chapter 1 of subtitle
      A of the Code or any similar provision of applicable law.

     

    ARTICLE
      VII -
      MANAGEMENT
      OF COMPANY
      AND VOTING BY MEMBERS

     

    7.1 The
      Managing
      Member

     

    (a)  Managing
      Member.
      Except
      as specifically provided in this Agreement, the management and control of the
      Company shall be vested exclusively in Tekoil, as the Managing Member. The
      Managing Member shall be responsible for the establishment of operating
      procedures respecting the business affairs of the Company and overseeing or
      delegating the day-to-day operation of the Company's business. Except as
      specifically provided in this Agreement, the Managing Member shall have the
      power and authority to take any actions not prohibited under the Act or which
      are otherwise conferred or permitted by law, which the Managing Member
      determines, in its reasonable discretion, are necessary, proper, advisable
      or
      convenient to the discharge of its duties under this Agreement or applicable
      law
      to conduct the business and affairs of the Company, including, but not limited
      to, any decision to sell, mortgage, lease or otherwise transfer any assets
      of
      the Company, which shall be binding on the Company without the necessity of
      any
      further action. Except as specifically provided in this Agreement, the Managing
      Member shall have the right, power and authority to perform any and all other
      acts or activities customary or incident to the management of the Company's
      business on behalf of the Company.

     

    
      
        
        

      

      
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    (b) Delegation
      of Powers.
      The
      Managing Member may delegate its powers, but not its responsibilities, to any
      Member or to any other Person.

     

    7.2 Resignation/Removal
      of Managing Member. The
      Managing Member may resign at any time by giving written notice to the Members
      (the "Resignation Notice"). The resignation of the Managing Member shall take
      effect thirty (30) days after the Resignation Notice is given or at such earlier
      time as accepted by the Members; and, unless otherwise specified therein, the
      acceptance of such resignation shall not be necessary to make it effective.
      The
      Managing Member may be removed, with or without cause, upon the affirmative
      vote
      of all of the Members. If no one
      is
      serving as Managing Member for any reason, then a new Managing Member shall
      be
      elected
      by the affirmative vote of all of the Members. The resignation of the Managing
      Member shall not affect the Managing Member's rights as a Member, if any, and
      shall not constitute the Managing
      Member's withdrawal as a Member.   

     

    7.3 Actions
      Requiring Member Approval. Notwithstanding
      anything in this Agreement to the contrary, no action shall be taken, sum
      expended, decision made or obligation incurred with respect to a matter within
      the scope of any of the major decisions enumerated below (the "Major
      Decisions"),
      unless such a Major Decision has been approved by unanimous consent of the
      Members of the Company. The Major Decisions are:

     

    (a) Amending,
      modifying, waiving or repealing any provisions of this Agreement or the
      Certificate, except as otherwise contemplated in this Agreement;

     

    (b) Engaging,
      directly or indirectly through subsidiaries, in any business or activity other
      than as specified in Section 2.3;

     

    (c) Requiring
      additional Capital Contributions of the Members, except as expressly provided
      in
      the Credit Agreement with respect to Tekoil (provided that this clause (c)
      shall
      not be interpreted to prohibit additional Capital Contributions by Tekoil and
      Goldman in accordance with Sections 3.3(b) and 3.3(c));

     

    (d) Reorganizing
      the Company or causing the Company to merge or consolidate with or into another
      Entity or acquiring, directly or indirectly through subsidiaries, another Entity
      or all or substantially all the assets of another Entity, or selling all or
      substantially all of the assets of the Company or its subsidiaries;

     

    (e) Selling,
      transferring, leasing, disposing of or abandoning any of the properties and
      assets of the Company or its subsidiaries (exclusive of properties, materials,
      supplies, equipment or other items of personal property disposed of in the
      ordinary course of business, which do not have a value of more than $2,000,000
      individually or in the aggregate and are not otherwise material to the business
      of the Company) or farmout any assets or properties which are material to the
      business of the Company and its subsidiaries;

     

    
      
        
        

      

      
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    (f) Compromising
      or settling any lawsuit, administrative matter or other dispute where the amount
      the Company or any of its subsidiaries may recover or might be obligated to
      pay,
      as applicable, is in excess of $2,000,000 or to repairing or replacing property
      or assets damaged or destroyed as a result of an accident or other occurrence
      when the Company's or its subsidiaries' share of the costs of repair or
      replacement (either individually or in the aggregate) is in excess of
      $2,000,000;

     

    (g) Causing
      the Company or any of its subsidiaries to enter into any material contract
      or
      agreement, which for the purpose of this Agreement shall mean any contract,
      agreement, or series of contracts or agreements that would obligate the Company
      or any of its subsidiaries to expend (or transfer assets with a value of)
      $2,000,000 or more, or which cannot be terminated by the Company or its
      subsidiaries without penalty upon notice of 60 days or less;

     

    (h) Admitting
      a Person as a Member of the Company, except as a substituted Member in
      accordance with Section 9.1 hereof;

     

    (i) Dissolving
      or liquidating the Company or commencing a voluntary bankruptcy by the Company,
      or consenting to the appointment of a receiver, liquidator, assignee, custodian,
      or trustee for the purposes of winding up the affairs of the
      Company;

     

    (j) Engaging,
      directly or indirectly through subsidiaries, in any transaction or arrangement
      with any Member or any Affiliate of any Member except as expressly contemplated
      hereby or by the Credit Agreement;

     

    (k) Directly
      or indirectly through subsidiaries, borrowing money, incurring any indebtedness
      or assuming or guaranteeing any indebtedness of any other Person, other than
      normal trade accounts payable and lease obligations in the normal course of
      business, or granting consensual liens on the Properties; provided, however,
      that the Managing Member is hereby authorized to secure financing for the
      Company pursuant to the terms of the Credit Agreement and other indebtedness
      expressly permitted in the Credit Agreement and any other documents related
      to
      the Credit Facility, and to grant a mortgage, lien or liens on the Company's
      property to secure the Credit Facility; and

     

    (l) Materially
      modifying, changing or amending any agreement or arrangement which is the
      subject of the matters referred to in this Section 7.3. 

     

    7.4 Member
      Meetings. An
      annual
      meeting of the Members shall be held, with notice, in April of each year or
      with
      notice on such other date selected by the Managing Member, for the purposes
      of
      discussing any business that may come before the annual meeting. The Managing
      Member may call special meetings of the Members for any reason the Managing
      Member may deem necessary. Member meetings shall be chaired by the Managing
      Member.

     

    7.5 Quorum
      and Voting.
      Members
      owning all of the Membership Percentages of the Company shall constitute a
      quorum if present in person or by proxy. Except as provided elsewhere in this
      Agreement (including in Section 7.3), for any act for which the vote of the
      membership is taken, the vote of Members holding at least fifty percent (51%)
      of
      the Membership Percentages shall be the act of the Company. For actions on
      which
      the Members will vote, no action may be taken at a meeting of the Members unless
      a quorum is present.

     

    
      
        
        

      

      
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    7.6 Proxies.
      At
      any
      meeting of the Members, a Member may vote by proxy executed in writing by the
      Member or by his, her or its duly authorized attorney in fact. Such proxy shall
      be filed with the Company before or at the time of the meeting. Unless otherwise
      provided therein, a proxy shall not be valid more than three (3) years after
      the
      date of its execution, unless the proxy provides for a longer
      period.

     

    7.7 Waiver
      of Notice. Whenever
      written notice is required to be given to the Member, a written waiver thereof
      signed by the Member entitled to such notice (whether, in the case of notice
      of
      a meeting, the written waiver thereof is signed before or after the meeting)
      shall be in all respects tantamount to notice. Attendance of a Member at a
      meeting of the Member shall constitute a waiver of notice of such meeting,
      except where a Member attends a meeting for the express purpose of objection
      to
      the transaction of any business on the grounds that the meeting is not lawfully
      called or convened.

     

    7.8 Telephonic
      Meetings. Any
      meetings of the Members may be held, or any Member may participate in any
      meeting of the Members, by use of a conference telephone or similar
      communications equipment by means of which all persons participating in the
      meeting can hear each other and communicate with each other.

     

    7.9 Compensation;
      Reimbursement of Expenses. Except
      as
      determined by the Managing Member, neither the Managing Member nor any Member
      shall receive compensation for their services to the Company in such capacity.
      The Company shall reimburse the Managing Member for all reasonable costs and
      expenses incurred by it in or related to the performance of its duties to the
      Company.

     

    7.10 No
      Authority of Individual Member. Except
      as
      set forth in this Article VII, or otherwise in this Agreement, no Member,
      acting individually, nor any of their respective Affiliates, has the power
      or
      authority to bind the Company, or any other Member or to authorize any action
      to
      be taken by the Company, or to act as agent for the Company or any other Member,
      unless that power or authority has been specifically delegated or authorized
      by
      action of the Members.

     

    7.11 Presumption
      of Assent. A
      Member
      who is present at a meeting of the Members shall be conclusively presumed to
      have assented to any action taken unless his, her or its dissent shall be
      expressed at such meeting and entered in the minutes of the
      meeting.

     

    7.12 Decision
      of Members by Written Consent. Any
      action to be made by the Members may be taken without a meeting if a consent
      in
      writing, setting forth the action so taken, is signed by the Members owning
      the
      Membership Percentages otherwise required for taking such action. 

     

    7.13 Related
      Party Transactions. Subject
      to Section 7.3, the Members acknowledge that the Company may engage in
      transactions with Members or their Affiliates. With
      respect to contracts which the Company enters into with an Affiliate of a
      Member, in the event the non-affiliated Member reasonably determines that the
      Affiliate has defaulted
      under the terms of the contract at issue, such non-affiliated Member shall
      have
      the right, on behalf of the Company, to declare a default under such contract
      and to pursue any and all remedies which the Company may have at law or in
      equity, including all remedies available under the contract, without the consent
      or approval of the other Member. The acts of the non-affiliated Member with
      respect to any of the foregoing shall be deemed to be the acts of the Company.
      

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      VIII -
      LIMITATION ON LIABILITY AND INDEMNIFICATION

     

    8.1 Exculpation
      of Liability. No
      Managing Member or Member (each, an "Exculpated
      Party"),
      shall
      be liable, in damages or otherwise, to the Company or to any of the Members
      for
      any act or omission by any such Exculpated Party pursuant to the authority
      granted by this Agreement, unless such act or omission results from fraud,
      gross
      negligence, or willful misconduct. The Company may indemnify, defend and hold
      harmless each Exculpated Party from and against any and all claims or
      liabilities of any nature whatsoever, including reasonable attorneys' fees,
      arising out of or in connection with any action taken or omitted by an
      Exculpated Party pursuant to the authority granted by this Agreement or
      otherwise, except where attributable to the fraud, gross negligence, or willful
      misconduct of such Exculpated Party. Each Exculpated Party shall be entitled
      to
      rely on the advice of counsel, public accountants or other independent experts
      experienced in the manner at issue, and any act or omission of such Exculpated
      Party pursuant to such advice shall in no event subject such Exculpated Party
      to
      liability to the Company or any Member.

     

    8.2 Liability
      of Exculpated Parties and Members.

     

    (a)  In
      carrying out their respective powers and duties hereunder, each Exculpated
      Party
      (as defined in Section 8.1 above) shall exercise its best efforts and shall
      not
      be liable to the Company or to any Member for any actions taken or omitted
      to be
      taken in good faith and reasonably believed to be in the best interest of the
      Company or for errors of judgment made in good faith.

     

    (b)  In
      no
      event shall a Member who ceases to be a Member be liable for or on account
      of
      obligations or liabilities of the Company incurred subsequent to its ceasing
      to
      be a Member.

     

    8.3 Indemnification
      of Managing Member. In
      any
      pending or completed action, suit, or proceeding to which the Managing Member
      or
      any Member is or was a party by reason of the fact that such Managing Member
      or
      Member is or was the Managing Member or Member, the Company shall hold harmless
      and indemnify such Managing Member or Member from and against any and all
      losses, harm, liabilities, damages, costs, and expenses (including, but not
      limited to, attorneys' fees, judgments, and amounts paid in settlement) incurred
      by such Managing Member or Member in connection with such action, suit, or
      proceeding if such Managing Member or Member determined in good faith, that
      the
      course of conduct which caused the loss or liability was in the best interests
      of the Company, and provided that such Managing Member's or Member's conduct
      does not constitute gross negligence, willful misconduct, or breach of fiduciary
      duty to the Company or the Members.

     

    
      
        
        

      

      
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    8.4 Advancement
      of Legal Costs and Expenses.
      The
      Company shall advance Company funds to the Managing Member or Member for legal
      expenses and other costs incurred as a result of any legal action if the
      following conditions are satisfied: (a) the legal action relates to acts or
      omissions with respect to the performance of duties or services on behalf of
      the
      Company; (b) the legal action is initiated by a third party who is not a Member,
      or the legal action is initiated by a Member and a court of competent
      jurisdiction specifically approves such advancement; and (c) the Managing Member
      or Member undertakes to repay the advanced funds, together with interest at
      the
      Prime Rate plus one percent (1%), to the Company in cases in which the Members
      determine that the Managing Member or Member should not be indemnified under
      this Article VIII.

     

    8.5 Provisions
      Not Exclusive. The
      exculpation of liability and indemnification provided by this Article VIII
      shall
      not be deemed exclusive of any other limitation on liability or rights to which
      those seeking indemnification may be entitled under any statute, agreement,
      vote
      of Members or otherwise. 

     

    8.6 Insurance. The
      Company may purchase insurance to insure against the liabilities contemplated
      by
      this Article VIII. 

     

    8.7 Reliance
      by Managing Member.
      In
      discharging its duties, the Managing Member, when acting in good faith, may
      rely
      upon information, opinions, reports, or statements, including financial
      statements and other financial data, in each case presented or prepared by
      (a)
      one or more officers of the Company whom the Managing Member reasonably believes
      to be reliable and competent in the matters presented, (b) counsel, public
      accountants, or other persons as to matters that the Managing Member believes
      to
      be within that person's professional or expert competence, or (c) a committee
      of
      Members upon which the Managing Member does not serve, duly designated according
      to law, as to matters within its designated authority, if the Managing Member
      reasonably believes that the committee is competent. 

     

    ARTICLE
      IX -
      RESTRICTION
      ON TRANSFERS; RIGHT OF FIRST REFUSAL

     

    9.1 Transfer
      of
      Membership Interests.

     

    (a) Except
      as
      otherwise set forth in this Article IX, Tekoil may not assign, sell, transfer,
      pledge or encumber ("Transfer") its Membership Interest or any portion thereof
      except (i) with the written approval of all of the other Members or (ii) in
      a
      bona fide sale of its entire Membership Interest to a Person or Persons who
      are
      not Affiliates of Tekoil and that complies with Section 9.2. Except as otherwise
      set forth in this IX, the Membership Interest of each Member other than Tekoil
      shall be freely Transferable without the approval of any Member.

     

    (b) Unless
      an
      assignee becomes a substituted Member in accordance with the provisions set
      forth below, such assignee shall not be entitled to any of the rights granted
      to
      a Member hereunder, other than the right to receive allocations of income,
      gain,
      loss, deduction, credit and similar items and distributions to which the
      assignor would otherwise be entitled, to the extent such items are
      assigned.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    (c) An
      assignee of the Membership Interest of a Member, or any portion thereof, shall
      become a substituted Member entitled to all of the rights of a Member with
      respect to such Membership Interest if, and only if, (i) the assignor gives
      the assignee such right, (ii) in the case of a Transfer by Tekoil, such
      Transfer is made in accordance with the first sentence of Section 9.1(a), and
      (iii) the assignee executes and delivers such instruments, in form and
      substance satisfactory to the Managing Member, as the Managing Member may deem
      necessary or desirable in its sole and absolute discretion to effect such
      substitution and to confirm the agreement of the assignee to be bound by all
      of
      the terms and provisions of this Agreement. Upon the satisfaction of such
      requirements, such assignee shall be concurrently (or as of such later date
      as
      shall be provided for in any applicable written instruments furnished to the
      Managing Member) admitted as a substituted Member of the Company.

     

    (d) The
      Company shall be entitled to treat the record owner of any Membership Interest
      as the absolute owner thereof in all respects and shall incur no liability
      for
      distributions of cash or other property made to such owner until such time
      as a
      written assignment of such interest that complies with the terms of this
      Agreement has been received by the Managing Member.

     

    (e) In
      the
      event that any Member other than Tekoil desires to Transfer all or any part
      of
      its Membership Interest, other than in a Transfer pursuant to Section 9.2,
      such
      Member shall provide written notice to Tekoil that it intends to Transfer such
      Membership Interest. Until the expiration of 30 days after the giving of such
      notice, such transferring Member shall not Transfer its Membership Interest
      to
      any Person other than Tekoil and shall not solicit offers from or engage in
      negotiations with any Person other than Tekoil with respect to the Transfer
      of
      its Membership Interest. Tekoil shall have the right during such 30-day period
      to make a written proposal to the transferring Member with respect to the
      purchase by Tekoil of the Membership Interest to be Transferred. If Tekoil
      makes
      any such proposal, the transferring Member shall notify Tekoil in writing
      whether it accepts or declines such proposal, which the transferring Member
      may
      do in its sole discretion. If the transferring Member accepts such proposal,
      then Tekoil and the transferring Member shall cooperate in good faith to
      complete the purchase of the Membership Interest by Tekoil as soon as
      practicable and in any event within 30 days after the acceptance of such
      proposal by the transferring Member. If the transferring Member declines such
      proposal or if it accepts the proposal and such purchase is not completed within
      30 days after such acceptance notwithstanding the good faith cooperation of
      the
      transferring Member, then the transferring Member shall have 90 days from the
      date it declines such offer or the date on which such 30-day period expires,
      as
      applicable, to complete the Transfer of its Membership Interest to any Person,
      subject to the other provisions of this Section 9.1. In the event the
      transferring Member has not completed the Transfer within such 90-day period,
      any proposed Transfer of such Member's Membership Interest shall again be
      subject to this paragraph (e).

     

    (f) No
      Transfer of any Membership Interest shall be made if counsel for the Company
      shall be of the opinion that (i) such Transfer would be in violation of any
      federal, state or foreign law, or would cause the original issuance of the
      Membership Interests by the Company to be in violation of such laws or (ii)
      such
      Transfer would result in the Company being treated as a corporation for tax
      purposes.

    
       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

         

      

    

    (g) Any
      assignment, sale, exchange or other transfer in contravention of any of the
      provisions of this Section 9.1
      shall be
      void and of no force or effect, and shall not bind or be recognized by the
      Company.

     

    9.2 Tag-Along
      Right.

     

    (a) In
      the
      event that Tekoil proposes to sell all of its Membership Interest (such proposed
      transfer, a "Tag-Along
      Sale"),
      (i)
      Tekoil shall provide each other Member notice of the terms and conditions of
      such proposed sale (the "Tag-Along
      Notice")
      and
      offer each other Member the opportunity to participate in such sale in
      accordance with this Section
      9.2
      and
      (ii) each other Member may elect, at its option, to participate in the
      proposed sale in accordance with this Section 9.2
      (each
      such electing Member, a "Tagging
      Member").
      

     

    (b) The
      Tag-Along Notice shall identify the consideration for which the transfer is
      proposed to be made, and all other material terms and conditions of the
      Tag-Along Sale, including the form of the proposed agreement, if
      any.

     

    (c) From
      the
      date of its receipt of the Tag-Along Notice, each Tagging Member shall have
      the
      right (a "Tag-Along
      Right"),
      exercisable by notice (the "Tag-Along
      Response Notice")
      given
      to Tekoil within ten Business Days after its receipt of the Tag-Along Notice
      (the "Tag-Along
      Notice Period"),
      to
      request that Tekoil include in the proposed transfer the Membership Interest
      held by such Tagging Member.

     

    (d) Each
      Tag-Along Response Notice shall include wire transfer instructions for payment
      of the purchase price for the Membership Interest to be sold in such Tag-Along
      Sale. Each Tagging Member that exercises its Tag-Along Rights hereunder shall
      deliver to Tekoil, with its Tag-Along Response Notice, a limited
      power-of-attorney authorizing Tekoil to transfer its Membership Interests on
      the
      terms set forth in the Tag-Along Notice and all other documents required to
      be
      executed in connection with such Tag-Along Sale. Delivery of the Tag-Along
      Response Notice with such limited power-of-attorney shall constitute an
      irrevocable acceptance of the terms of the Tag-Along Sale by such Tagging
      Member.

     

    (e) If,
      at
      the end of a 90-day period after delivery of the Tag-Along Response Notice
      (which 90-day period shall be extended if any of the transactions contemplated
      by the Tag-Along Sale are subject to regulatory approval until the expiration
      of
      five Business Days after all such approvals have been received, but in no event
      later than 120 days following receipt by Tekoil of the Tag-Along Response
      Notice), Tekoil has not completed the transfer of its Membership Interest on
      substantially the same terms and conditions set forth in the Tag-Along Notice,
      Tekoil shall (i) return to each Tagging Member the limited power-of-attorney
      (and all copies thereof) that such Tagging Member executed and any other
      documents in the possession of Tekoil executed by the Tagging Members in
      connection with the proposed Tag-Along Sale, and (ii) not conduct any transfer
      of its Membership Interest without again complying with this Section
      9.2.

     

    (f) Concurrently
      with the consummation of the Tag-Along Sale, Tekoil shall (i) notify the Tagging
      Members thereof, (ii) remit to the Tagging Members the total consideration
      for
      the Membership Interests of the Tagging Members transferred pursuant thereto,
      and (iii) promptly after the consummation of the Tag-Along Sale, furnish such
      other evidence of the completion and the date of completion of such transfer
      and
      the terms thereof as may be reasonably requested by the Tagging
      Members.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    (g) If
      at the
      termination of the Tag-Along Notice Period any other Member shall not have
      elected to participate in the Tag-Along Sale, such Member shall be deemed to
      have waived its rights under this Section
      9.2
      with
      respect to the transfer of its Membership Interest pursuant to such Tag-Along
      Sale.

     

    (h) Notwithstanding
      anything contained in this Section
      9.2,
      there
      shall be no liability on the part of Tekoil to the Tagging Members if the
      transfer of the Membership Interests pursuant to this Section
      9.2
      is not
      consummated for whatever reason. Whether to effect a transfer of Membership
      Interests by Tekoil is in the sole and absolute discretion of
      Tekoil.

     

    (i) Notwithstanding
      anything contained in this Section
      9.2,
      the
      rights and obligations of the other Members to participate in a Tag-Along Sale
      are subject to the following conditions:

     

    (i) subject
      to the allocation provisions set forth in Section
      10.4,
      upon
      the consummation of such Tag-Along Sale, all of the Members participating
      therein will receive the same form of consideration and shall be subject to
      all
      of the same other terms and conditions of such sale (and no such terms and
      conditions shall be less favorable to the Tagging Members than to Tekoil) in
      a
      manner proportionate to their relative Membership Interests being sold;
      and

     

    (ii) no
      Member
      participating therein shall be obligated to pay any expenses incurred in
      connection with any unconsummated Tag-Along Sale, and each such Member shall
      be
      obligated to pay only its pro rata share (based on the relative Membership
      Percentage transferred) of expenses incurred in connection with a consummated
      Tag-Along Sale to the extent such expenses are incurred for the benefit of
      all
      such Members and are not otherwise paid by the Company or another person.

     

    9.3 Death,
      Incapacity, Bankruptcy or Insolvency
      of a Member; Purchase Option.

     

    (a) If
      a
      Member dies or becomes Incapacitated, or becomes a Bankrupt Member, the
      remaining Member or Members (the "Remaining
      Members")
      shall
      forthwith become vested with the exclusive right and option, to be exercised
      in
      writing to such Bankrupt, deceased or Incapacitated Member, for a period of
      ninety (90) days after the Remaining Members have received (i) written notice
      from the Bankrupt Member of the occurrence of any Event of Bankruptcy (which
      notice shall be delivered within three (3) Business Days after such occurrence),
      or (ii) notice of the death or incapacity of a Member, to elect to purchase
      the
      Membership Interest of the Bankrupt, deceased or Incapacitated Member at a
      purchase price determined in accordance with subsection (c) of this Section
      9.3.
      In the event that more than one Remaining Member desires to exercise the option
      to purchase the Membership Interest of the Bankrupt, deceased or Incapacitated
      Member, such option shall be exercised by all such Remaining Members in
      proportion to their relative Membership Percentages. 

     

    (b) A
      Bankrupt, deceased or Incapacitated Member (or its legal representative) whose
      entire Membership Interest is to be purchased and succeeded to by the Remaining
      Members pursuant to this Section 9.3 shall, within ten (10) days after receipt
      of notice from the Remaining Members of their intent to purchase the entire
      Membership Interest of the Bankrupt, deceased or Incapacitated Member, execute
      and deliver such deeds, bills of sale and other instruments as shall reasonably
      be requested by such Remaining Members to effect the conveyance and transfer
      of
      the entire right, title and interest of such Bankrupt, deceased or Incapacitated
      Member in the Company, and shall, to the extent requested by the Remaining
      Members, cooperate to effect a smooth and efficient continuation of the Company
      affairs. If the Bankrupt Member (or its legal representative) or the legal
      representative of the deceased or Incapacitated Member disputes the right of
      the
      Remaining Members to purchase and succeed to the Bankrupt, deceased or
      Incapacitated Member's entire Membership Interest in the Company, such Bankrupt
      Member (and its legal representative) or the legal representative of the
      deceased or Incapacitated Member, as the case may be, shall nevertheless execute
      instruments and cooperate with the Remaining Members pursuant to the immediately
      preceding sentence, without, however, being deemed to have waived his, her
      or
      its rights to damages if the Remaining Members shall have purchased and
      succeeded to the Membership Interest of the Bankrupt, deceased or Incapacitated
      Member under this Section 9.3 without having the right to do so.

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    (c) Upon
      compliance by the Bankrupt Member or the legal representative of a deceased
      or
      Incapacitated Member with the provisions of the immediately preceding subsection
      (b) of this Section 9.3, the Remaining Members succeeding to the entire
      Membership Interest of the Bankrupt, deceased or Incapacitated Member, as the
      case may be, in the Company shall pay to such Member or his/her legal
      representative the "Fair
      Value"
      thereof
      (such value to be determined as of the date the Remaining Members serve notice
      on the Bankrupt Member or the legal representative of the deceased or
      Incapacitated Member of their intent to purchase such Member's interest) within
      ninety (90) days thereafter. The Fair Value of the Company and of the Membership
      Interest of the Bankrupt, deceased or incapacitated Member therein shall be
      determined pursuant to paragraph (d) below.

     

    (d) In
      the
      event the Fair Value of the Company, and of the Bankrupt, deceased or
      Incapacitated Member's Membership Interest therein, is to be determined pursuant
      to this Section 9.3 or any other provision of this Agreement or the Act,
      "Fair
      Value"
      shall
      be determined by agreement of the Bankrupt Member (or its legal representative)
      or the legal representative of the deceased or Incapacitated Member, as the
      case
      may be, and the Remaining Members, or, if agreement cannot be reached, by the
      median appraisal of three (3) independent appraisers, one to be chosen by the
      Bankrupt Member (or its legal representative) or by the legal representative
      of
      the deceased or Incapacitated Member, as the case may be, one to be chosen
      by
      the Remaining Members, and one to be chosen by agreement of the other two
      independent appraisers (or by an arbitrator if the appraisers cannot agree)
      in
      advance of any appraisal.

     

    ARTICLE
      X -
      DISSOLUTION AND TERMINATION

     

    10.1 Dissolution.
      The
      Company shall continue in effect until dissolved upon the first to occur of
      the
      following:

     

    (a)  The
      unanimous vote of Members;

     

    
      
        
        

      

      
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    (b)  The
      entry
      of a decree of judicial dissolution of the Company under Section 18-802 of
      the
      Act or such other event requiring dissolution under the Act; or

     

    (c)  The
      sale
      or other disposition of all or substantially all of the Company's assets and
      the
      collection of all amounts derived from any such disposition, including all
      amounts payable to the Company under any promissory notes or other evidence
      of
      indebtedness derived by the Company from any such disposition unless the Members
      agree, in writing, within ninety (90) days of such sale or disposition, to
      continue the Company. 

     

    10.2 Accounting.
      Upon
      the
      dissolution of the Company, a proper accounting shall be made of the assets
      and
      liabilities of the Company and the Capital Account of each Member as of the
      date
      of dissolution and of the items of Net Income and Net Loss from the date of
      the
      last previous accounting to the date of dissolution. The Liquidating Trustee
      shall cause
      financial statements (consisting of a balance sheet, statement of operations,
      statement of Members' equity and statement of cash flows) of the Company to
      be
      prepared in accordance with such methodology consistent with the books and
      records of the Company,
      presenting such accounting to be prepared and certified.

     

    10.3 Liquidating
      Trustee.

     

    (a)  Upon
      the
      dissolution of the Company, the affairs of the Company shall be wound up and
      terminated and the Members shall continue to share Net Income, Net Loss,
      Distributable Cash and other items of the Company during the winding-up period
      in accordance with the provisions of Articles IV and V hereof. The winding-up
      of
      the affairs of the Company and the distribution of its assets shall be conducted
      exclusively by the Liquidating Trustee, who is hereby authorized to do all
      acts
      authorized by law for these purposes. The Liquidating Trustee, in carrying
      out
      such winding up and distribution, shall have full power and authority to sell,
      assign, transfer and encumber all or any of the Company assets.

     

    (b)  Upon
      the
      completion of the winding up of the Company and the distribution of all Company
      assets, the Company shall terminate and the Liquidating Trustee shall have
      the
      authority to execute and record any and all other documents required to
      effectuate the termination of the Company.

     

    (c)  The
      Liquidating Trustee shall be indemnified and held harmless by the Company from
      and against any and all claims, liabilities, costs, damages and causes of action
      of any nature whatsoever arising out of or incidental to the Liquidating
      Trustee's taking of or failure to take any action authorized under, or within
      the scope of, this Agreement; provided,
      however,
      that
      the Liquidating Trustee shall not be entitled to indemnification
      for:

     

    (i) Matters
      entirely unrelated to the Liquidating Trustee's actions under the provisions
      of
      this Agreement; or 

     

    (ii) Fraud,
      willful misconduct, self-dealing or criminal activity.

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    10.4 Liquidating
      Distribution. In
      the
      event of the dissolution of the Company for any reason, the assets of the
      Company shall be liquidated for distribution in the following rank and
      order:

     

    (a)  First,
      to
      the payment and discharge of all the debts and liabilities in the order of
      priority as provided by the Act;

     

    (b)  Second,
      to the establishment of any necessary reserves to provide for contingent
      liabilities, if any; 

     

    (c) Third,
      to
      the payment of loans to the Company by the Members, if any, in the order of
      priority provided under this Agreement or by law; and

     

    (d) Fourth,
      to the Members in proportion to their positive Capital Account balances after
      giving effect to the allocations set forth in Article IV hereof, treating any
      distribution of property as a sale thereof at fair market value.

     

    Such
      distributions shall be made on or before a date (the "Final
      Liquidation Date")
      no
      later than the later to occur of (i) the last day of the taxable year of the
      Company in which the liquidation of the Company occurs and (ii) ninety (90)
      days
      after such liquidation. If the Liquidating Trustee, in its discretion,
      determines that the distributions will not be timely made, it may distribute
      all
      of the assets and liabilities of the Company in trust with the Liquidating
      Trustee, or such other Person as may be selected by the Liquidating Trustee
      acting as trustee; the purpose of the trust is to allow the Company to comply
      with the timing requirements under Regulation Section 1.704-1(b). The trustees
      of said trust shall distribute the former Company assets (however constituted,
      enhanced or otherwise) as promptly as such trustee deems proper and in the
      same
      manner as directed in this Section (without regard to this sentence or the
      preceding two sentences) and otherwise as required hereunder. The trust shall
      be
      terminated as soon as possible after the trust property is distributed to the
      beneficiaries thereof.

     

    10.5 Distributions
      in Kind. Company
      property distributed in kind shall be transferred and conveyed to the
      distributees as tenants in common subject to any liabilities attached thereto
      so
      as to vest in them undivided interests in the whole of such property in
      proportion to their respective rights to share in the proceeds of the sale
      of
      such property in accordance
      with this Article.

     

    ARTICLE
      XI -
      MISCELLANEOUS

     

    11.1 Authority
      to Amend. Except
      as
      provided herein, this Agreement may be amended only by a writing approved by
      all
      of
      the Members. The Managing Member shall notify all Members in writing of the
      substance of any such amendment, furnish a copy of the amendment and state
      the
      effective date of the amendment. 

     

    11.2 Further
      Assurances. Each
      Member agrees to execute, acknowledge, deliver, file, record and publish such
      further certificates, amendments to certificates, instruments and documents,
      and
      do such other acts and things as may be required by law, or as may be required
      to carry out the intent and purposes of this Agreement.

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    11.3 Notices.
      All
      notices, demands, consents, approvals, requests, offers or other communications
      which any of the parties to this Agreement may desire or shall be required
      to be
      given hereunder shall be in writing and shall be given (a) by registered or
      certified mail, return receipt requested, or (b) delivery, signed receipt
      required, via nationally recognized overnight delivery service, the cost and
      expense of such delivery to be borne by the sending party. All notices shall
      be
      addressed to the recipient at the address set forth on Exhibit
      A
      hereto
      unless such address is subsequently changed by giving to the other parties
      at
      least ten (10) days written notice thereof. Any notice sent in compliance with
      the above provisions shall be deemed delivered and received, except for
      electronic communications, on the third (3rd)
      Business Day next succeeding the day on which it was sent, or, if sooner, on
      the
      actual date received, and, in the case of electronic communications, only on
      the
      date the sending party receives acknowledgment of receipt of such
      notice.

     

    11.4 Governing
      Law. This
      Agreement shall be construed according to and governed by the laws of the State
      of Delaware, but without regard to Delaware choice of law rules. 

     

    11.5 Captions.
      All
      articles and section headings or captions contained in this Agreement are
      inserted only as a matter of convenience and for reference and in no way define,
      limit, extend or describe the scope of this Agreement or the intent of any
      provision hereof.

     

    11.6 Pronouns.
      As
      used
      herein, all pronouns shall include the masculine, feminine, neuter, singular
      and
      plural thereof wherever the context and facts require such
      construction.

     

    11.7 Successors
      and Assigns. This
      Agreement shall be binding upon the parties hereto and their respective
      executors, administrators, legal representatives, heirs, successors and assigns,
      and shall inure to the benefit of the parties hereto, and, except as otherwise
      herein expressly provided, their respective executors, administrators, legal
      representatives, successors and assigns.

     

    11.8 Extension
      not a Waiver. No
      delay
      or omission in the exercise of any power, remedy or right herein provided or
      otherwise available to a party or to the Company shall impair or affect the
      right of such Member or the Company thereafter to exercise the same. Any
      extension of time or other indulgences granted to a Member hereunder shall
      not
      otherwise alter or affect any power, remedy or right of any other Member or
      of
      the Company or of the obligations of the Member to whom such extension or
      indulgence is granted.

     

    11.9 Severability.
      If
      any
      provision of this Agreement or application to any party or circumstances shall
      be determined by any court of competent jurisdiction to be invalid or
      unenforceable to any extent, the remainder of this Agreement or the application
      of such provision to such Person or circumstances, other than as to which it
      is
      so determined invalid or unenforceable, shall not be affected thereby, and
      each
      provision shall be valid and shall be enforced to the fullest extent permitted
      by law.

     

    11.10 Entire
      Agreement. This
      Agreement, and the exhibits hereto, contain the entire understanding and
      agreement of the parties hereto relating to the subject matter hereof and all
      prior agreements relative hereto which are not contained herein.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    11.11 Counterparts.
      This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed an original, and all of which, when taken together, shall be deemed
      one
      agreement, but no counterpart shall be binding unless an identical counterpart
      shall have been executed and delivered by each of the other parties
      hereto.

     

    11.12 No
      Third Party Beneficiary. The
      provisions of this Agreement shall be solely for the benefit of the parties
      hereto and their respective successors and assigns. 

     

    [SIGNATURE
      PAGE FOLLOWS] 

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      the
      parties hereto have caused this Agreement to be duly executed as of the 11th
      day
      of May, 2007.

    
      	 	 	 
	 	MEMBERS: 
	 	 
	 	
              TEKOIL
                & GAS CORPORATION 

            
	 
 	 
 	 
 
	
            	By:  	/s/
              Mark
              Western
	 	
              

              Mark
                Western, CEO and 

              Chairman
                of the
                Board of Directors

            

    

    
 

    
      Signature
        Page to Amended and Restated Operating Agreement

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

    

     

    
      	 	 	 
	 	GOLDMAN,
              SACHS & CO.
	 
 	 
 	 
 
	
            	By:  	/s/
              Milton R. Millman
	 	
              

              Name: 
                Milton R. Millman III

              Title:   
                Authorized Signatory

            

    

     

    

    Signature
      Page to Amended and Restated Operating Agreement

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      A

     

    TO

     

    AMENDED
      AND RESTATED OPERATING AGREEMENT
      OF

     

    TEKOIL
      AND GAS GULF COAST, LLC

     

    
      	
              Name
                and Address of Member

            	 	
              Initial
                Capital Contribution

            	 	
              Membership
                Percentage

            	 
	
              Tekoil
                & Gas Corporation 

              25050
                I-45 North, Suite 528

              The
                Woodlands, Texas 77380

            	 	
              $

            	
              15,932,542

            	 	 	
              75

            	
              %

            
	 	 	 	 	 	 	 	 
	
              Goldman,
                Sachs & Co.

              c/o
                Goldman, Sachs E & P Capital

              1000
                Louisiana St., Suite 550

              Houston,
                Texas 77002

            	 	
              $

            	
              7,810,847

            	 	 	
              25

            	
              %

            

    

    

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

    EXHIBIT
      B

     

    TO

     

    AMENDED
      AND RESTATED OPERATING AGREEMENT OF

     

    TEKOIL
      AND GAS GULF COAST, LLC

     

    Description
      of Property 

     

    
      
         

      

      
        33

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