Document:

Exhibit
4.5

    

    THIS
WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") NOR
UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED OR
OTHERWISE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAW HAS BECOME EFFECTIVE WITH RESPECT THERETO, OR
(2)RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL TO THE COMPANY TO THE EFFECT
THAT REGISTRATION UNDER THE ACT OR APPLICABLE STATE SECURITIES LAW IS NOT
REQUIRED IN CONNECTION WITH THE PROPOSED TRANSFER.

    

    Void
after 5:00 p.m. Central Standard Time, on ____________  ___,
20__

    Warrant
to Purchase ____________Shares of Common Stock.

    

    FORM OF
WARRANT TO PURCHASE COMMON STOCK

    OF

    SPECTRASCIENCE, INC.

    

    This is
to Certify That, FOR VALUE RECEIVED, _____________________("Holder") is entitled
to purchase, subject to the provisions of this Warrant, from SpectraScience,
Inc., a Minnesota corporation ("Company"), _______________fully paid, validly
issued and nonassessable shares of Common Stock, $0.01 par value per share, of
the Company ("Common Stock") at an initial price of $0.30 per share at any time
or from time to time during the period from the date hereof to 5:00 p.m. Central
Standard Time, on _____________ __, 20__. The number of shares of Common Stock
to be received upon the exercise of this Warrant and the price to be paid for
each share of Common Stock may be adjusted from time to time as hereinafter set
forth. The exercise price and the number of shares issuable upon exercise of the
Warrants will be proportionately adjusted for stock splits, stock dividends,
recapitalizations and similar transactions. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price".

    

    
      
        
           

        

        
          1

          
            

          

        

        
           

        

      

    

    

    
      	
               
      

            	
              (a)

            	
              EXERCISE
      OF WARRANT.

            

    

    

    (1)           This
Warrant may be exercised in whole or in part at any time or from time to time on
or after the date hereof and until 5:00 p.m. Central Standard Time on
___________ __, 20__; provided, however, that if either such day is a day on
which banking institutions in the State of California are authorized by law to
close, then on the next succeeding day which shall not be such a day. This
Warrant may be exercised by presentation and surrender hereof to the Company at
its principal office with the Purchase Form annexed hereto duly executed and
accompanied by payment of the Exercise Price for the number of Warrant Shares
specified in such form. The Exercise Price may be paid in cash or in Common
Stock of the Company (cashless exercise). As soon as practicable after each such
exercise of the warrants, but not later than seven (7) days from the date of
such exercise, the Company shall issue and deliver to the Holder a certificate
or certificate for the Warrant Shares issuable upon such exercise, registered in
the name of the Holder or its designee. If this Warrant should be exercised in
part only, the Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the rights of the Holder thereof to
purchase the balance of the Warrant Shares purchasable thereunder. Upon receipt
by the Company of this Warrant at its office in proper form for exercise, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
the Company shall then be closed or that certificates representing such shares
of Common Stock shall not then be physically delivered to the
Holder.

    

    
      	
               
      

            	
              (b)

            	
              RESERVATION
      OF SHARES. The Company shall at all times reserve for issuance and/or
      delivery upon exercise of this Warrant such number of shares of its Common
      Stock as shall be required for issuance and delivery upon exercise of the
      Warrants.

            

    

    

    
      	
               
      

            	
              (c)

            	
              FRACTIONAL
      SHARES. No fractional shares or scrip representing fractional shares shall
      be issued upon the exercise of this Warrant. With respect to any fraction
      of a share called for upon any exercise hereof, the Company shall pay to
      the Holder an amount in cash equal to such fraction multiplied by the
      current market value of a share, determined as
  follows:

            

    

    

    (1)           If
the Common Stock (or the common stock of the Company that would be exchanged or
admitted to unlisted trading privileges on such exchange or listed for trading
on the NASDAQ system, the current market value shall be the last reported sale
price of the Common Stock on such exchange or system on the last business day
prior to the date of exercise of this Warrant or if no such sale is made on such
day, the average closing bid and asked prices for such day on such exchange or
system; or

    

    (2)           
If the Common Stock is not so listed or admitted to unlisted trading privileges,
the current market value shall be the mean of the last reported bid and asked
prices reported by the National Quotation Bureau, Inc. on the last business day
prior to the date of the exercise of this Warrant; or

    

    (3)           
If the Common Stock is not so listed or admitted to unlisted trading privileges
and bid and asked prices are not so reported, the current market value shall be
an amount, not less than the book value thereof as at the end of the most recent
fiscal year of the Company ending prior to the date of the exercise of the
Warrant, determined in such reasonable manner as may be prescribed by the Board
of Directors of the Company.

    

    
      	
               
      

            	
              (d)

            	
              EXCHANGE,
      TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is exchangeable,
      without expense, at the option of the Holder, upon presentation and
      surrender hereof to the Company for other warrants of different
      denominations entitling the holder thereof to purchase in the aggregate
      the same number of shares of Common Stock purchasable hereunder. Upon
      surrender of this Warrant to the Company at its principal office with the
      Assignment Form annexed hereto duly executed and funds sufficient to pay
      any transfer tax, the Company shall, without charge, execute and deliver a
      new Warrant in the name of the assignee named in such instrument of
      assignment and this Warrant shall promptly be cancelled. This Warrant may
      be divided or combined with other warrants which carry the same rights
      upon presentation hereof at the principal office of the Company together
      with a written notice specifying the names and denominations in which new
      Warrants are to be issued and signed by the Holder hereof. The term
      "Warrant" as used herein includes any Warrants into which this Warrant may
      be divided or exchanged. Upon receipt by the Company of evidence
      satisfactory to it of the loss, theft, destruction or mutilation of this
      Warrant, and (in the case of loss, theft or destruction) of reasonably
      satisfactory indemnification, and upon surrender and cancellation of this
      Warrant, if mutilated, the Company will execute and deliver a new Warrant
      of like tenor and date. Any such new Warrant executed and delivered shall
      constitute an additional contractual obligation on the part of the
      Company, whether or not this Warrant so lost, stolen, destroyed, or
      mutilated shall be at any time enforceable by
  anyone.

            

    

    

    
      
        
           

        

        
          2

          
            

          

        

        
           

        

      

    

    

    
      	
               
      

            	
              (e)

            	
              RIGHTS
      OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any
      rights of a shareholder in the Company, either at law or equity, and the
      rights of the Holder are limited to those expressed in the Warrant and are
      not enforceable against the Company except to the extent set forth
      herein.

            

    

    

    
      	
               
      

            	
              (f)

            	
              ANTI-DILUTION
      PROVISIONS. The Exercise Price in effect at any time and the number and
      kind of securities purchasable upon the exercise of the Warrants shall be
      subject to adjustment from time to time upon the happening of certain
      events as follows:

            

    

    

    
      	
               
      

            	
              (1)

            	
              In
      case the Company shall (i) declare a dividend or make a distribution on
      its outstanding shares of Common Stock in shares of Common Stock, (ii)
      subdivide or reclassify its outstanding shares of Common Stock into a
      greater number of shares, or (iii) combine or reclassify its outstanding
      shares of Common Stock into a smaller number of shares, the Exercise Price
      in effect at the time of the record date for such dividend or distribution
      or of the effective date of such subdivision, combination or
      reclassification shall be adjusted so that the Exercise Price shall be
      proportionately increased (as in the case of (iii), above) or decreased
      (as in the case of (i) or (ii), above). Such adjustment shall be made
      successively whenever any event listed above shall
  occur.

            

    

    

    
      	
               
      

            	
              (2)

            	
              Whenever
      the Exercise Price payable upon exercise of each Warrant is adjusted
      pursuant to Subsections (1) above, the number of Shares purchasable upon
      exercise of this Warrant shall simultaneously be adjusted by multiplying
      the number of Shares initially issuable upon exercise of this Warrant by
      the Exercise Price in effect on the date hereof and dividing the product
      so obtained by the Exercise Price, as
adjusted.

            

    

    

    
      	
               
      

            	
              (3)

            	
              No
      adjustment in the Exercise Price shall be required unless such adjustment
      would require an increase or decrease of at least two cents ($0.02) in
      such price; provided, however, that any adjustments which by reason of
      this Subsection (5) are not required to be made shall be carried forward
      and taken into account in and subsequent adjustment required to be made
      hereunder. All calculations under this Section (f) shall be made to the
      nearest cent or to the nearest one-hundredth of a share, as the case may
      be. Anything in this Section (f) to the contrary notwithstanding, the
      Company shall be entitled, but shall not be required, to make such changes
      in the Exercise Price, in addition to those required by this Section (f),
      as it shall determine, in its sole discretion, to be advisable in order
      that any dividend or distribution in shares of Common Stock, or any
      subdivision, reclassification or combination of Common Stock, hereafter
      made by the Company shall not result in any Federal income tax liability
      to the holders of Common Stock or securities convertible into Common or
      Common Stock (including Warrants).

            

    

    

    
      	
               
      

            	
              (4)

            	
              Whenever
      the Exercise Price is adjusted, as herein provided, the Company shall
      promptly but no later than 20 days after any request for such an
      adjustment by the Holder, cause a notice setting forth the adjusted
      Exercise Price and adjusted number of Shares issuable upon exercise of
      each Warrant, and, if requested, information describing the transactions
      giving rise to such adjustments, to be mailed to the Holder at his last
      address appearing in the Warrant Register, and shall cause a certified
      copy thereof to be mailed to its transfer agent, if any. The Company may
      retain a firm of independent certified public accountants selected by the
      Board of Directors (who may be the regular accountants employed by the
      Company) to make any computation required by this Section (t), and a
      certificate signed by such firm shall be conclusive evidence of the
      correctness of such adjustment.

            

    

    

    
      
        
           

        

        
          3

          
            

          

        

        
           

        

      

    

     

    
      	
               
      

            	
              (5)

            	
              In
      the event that at any time, as a result of an adjustment made pursuant to
      Subsection (1) above, the Holder of this Warrant thereafter shall become
      entitled to receive any shares of the Company, other than Common Stock,
      thereafter the number of such other shares so receivable upon exercise of
      this Warrant shall be subject to adjustment from time to time in a manner
      and on terms as nearly equivalent as practicable to the provisions with
      respect to the Common Stock contained in Subsections (1) to (4), inclusive
      above.

            

    

     

    
      	
               
      

            	
              (6)

            	
              Irrespective
      of any adjustments in the Exercise Price or the number or kind of shares
      purchasable upon exercise of this Warrant, Warrants theretofore or
      thereafter issued may continue to express the same price and number and
      kind of shares as are stated in the similar Warrants initially issuable
      pursuant to this Agreement.

            

    

    

    
      	
               
      

            	
              (g)

            	
              OFFICER'S
      CERTIFICATE. Whenever the Exercise Price shall be adjusted as required by
      the provisions of the foregoing Section, the Company shall forthwith file
      in the custody of its Secretary or an Assistant Secretary at its principal
      office an officer's certificate showing the adjusted Exercise Price
      determined as herein provided, setting forth in reasonable detail the
      facts requiring such adjustment, including a statement of the number of
      additional shares of Common Stock, if any, and such other facts as shall
      be necessary to show the reason for and the manner of computing such
      adjustment. Each such officer's certificate shall be made available at all
      reasonable times for inspection by the Holder or any holder of a Warrant
      executed and delivered pursuant to Section (a) and the Company shall,
      forthwith after each such adjustment, mail a copy by certified mail of
      such certificate to the Holder or any such
  holder.

            

    

    

    
      	
               
      

            	
              (h)

            	
              NOTICES
      TO WARRANT HOLDERS. So long as this Warrant shall be outstanding, (i) if
      the Company shall pay any dividend or make any distribution upon the
      Common Stock  or (ii) if the Company shall offer to the holders
      of Common Stock for subscription or purchase by them any share of any
      class or any other rights or (iii) if any capital reorganization of the
      Company, reclassification of the capital stock of the Company,
      consolidation or merger of the Company with or into another corporation,
      sale, lease or transfer of all or substantially all of the property and
      assets of the Company to another corporation, or voluntary or involuntary
      dissolution, liquidation or winding up of the Company shall be effected,
      then in any such case, the Company shall cause to be mailed by certified
      mail to the Holder, at least fifteen days prior to the date specified in
      (x) or (y) below, as the case may be, a notice containing a brief
      description of the proposed action and stating the date on which (x) a
      record is to be taken for the purpose of such dividend, distribution or
      rights, or (y) such reclassification, reorganization, consolidation,
      merger, conveyance, lease, dissolution, liquidation or winding up is to
      take place and the date, if any is to be fixed, as of which the holders of
      Common Stock or other securities shall receive cash or other property
      deliverable upon such reclassification, reorganization, consolidation,
      merger, conveyance, dissolution, liquidation or winding
  up.

            

    

    

    
      	
               
      

            	
              (i)

            	
              RECLASSIFICATION,
      REORGANIZATION OR MERGER. In case of any reclassification,
      capital reorganization or other change of outstanding shares of Common
      Stock of the Company, or in case of any consolidation or merger of the
      Company with or into another corporation (other than a merger with a
      subsidiary in which merger the Company is the continuing corporation and
      which does not result in any reclassification, capital reorganization or
      other change of outstanding shares of Common Stock of the class issuable
      upon exercise of this Warrant) or in case of any sale, lease or conveyance
      to another corporation of the property of the Company as an entirety, the
      Company shall, as a condition precedent to such transaction, cause
      effective provisions to be made so that the Holder shall have the right
      thereafter by exercising this Warrant at any time prior to the expiration
      of the Warrant, to purchase the kind and amount of shares of stock and
      other securities and property receivable upon such reclassification,
      capital reorganization and other change, consolidation, merger, sale or
      conveyance by a holder of the number of shares of Common Stock which might
      have been purchased upon exercise of this Warrant immediately prior to
      such reclassification, change, consolidation, merger, sale or conveyance.
      Any such provision shall include provision for adjustments which shall be
      as nearly equivalent as may be practicable to the adjustments provided for
      in this Warrant. The foregoing provisions of this Section (i) shall
      similarly apply to successive reclassifications, capital reorganizations
      and changes of shares of Common Stock and to successive consolidations,
      mergers, sales or conveyances. In the event that in connection with any
      such capital reorganization or reclassification, consolidation, merger,
      sale or conveyance, additional shares of Common Stock shall be issued in
      exchange, conversion, substitution or payment, in whole or in part, for a
      security of the Company other than Common Stock, any such issue shall be
      treated as an issue of Common Stock covered by the provisions of
      Subsection (1) of Section (f)
hereof.

            

    

    

    
      
        
           

        

        
          4

          
            

          

        

        
           

        

      

    

    

    
      	
               
      

            	
              (k)

            	
              RESTRICTIVE
      LEGEND. Each Warrant Share, when issued, shall include a legend in
      substantially the following form:

            

    

     

    
      	
               
      

            	
              THESE
      SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
      "ACT") NOR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD,
      ASSIGNED OR OTHERWISE TRANSFERRED UNTIL A (1) REGISTRATION STATEMENT UNDER
      THE ACT AND ANY APPLICABLE STATE SECURITIES LAW HAS BECOME EFFECTIVE WITH
      RESPECT THERETO, OR (2) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL TO
      THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE ACT OR APPLICABLE
      STATE SECURITIES LAW IS NOT REQUIRED IN CONNECTION WITH THE PROPOSED
      TRANSFER.

            

    

     

    The Company will not, by amendment of
its charter or through reorganization, consolidation, merger, dissolution, sale
of assets or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the Holder of this Warrant against impairment.

    

    Dated:  ____________  __,
2009

    

    
      
        	 
      	
                SPECTRASCIENCE,
      INC.

              
	 
      	 
      
	
                Attest:

              	
                        

              
	 
      	
                By:

              
	
                James
      Hitchin

              	
                James
      Hitchin

              
	
                Title:
      Chairman and CEO

              	
                Title:  Secretary

              

      

    

     

    
      
        
           

        

        
          5

          
            

          

        

        
           

        

      

    

    

    PURCHASE
FORM

    

    Dated  _____________
20__

    

    The
undersigned hereby irrevocably elects to exercise the within Warrant to the
extent of Purchasing ________ shares of Common Stock and hereby makes payment of
______________ in payment of the actual exercise price thereof.

    

    ___________________

    

    INSTRUCTIONS FOR
REGISTRATION OF STOCK

    

    Name
___________________________________________________________________________

    

    (Please
typewrite or print in block letters)

    

    Address
___________________________________________________________________________

    

    Signature
__________________________________________________________________________

    

    ________________________

    

    
      
        
           

        

        
          6

          
            

          

        

        
           

        

      

    

    

    ASSIGNMENT
FORM

    

    FOR VALUE
RECEIVED, _____________________________________ hereby sells, assigns and
transfers unto

    

    Name
_____________________________________________________________________________

    

    (Please
typewrite or print in block letters)

    

    Address
___________________________________________________________________________

    the right
to purchase Common Stock represented by this Warrant to the extent of _________
shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint ______________ Attorney, to transfer the same on the
books of the Company with full power of substitution in the
premises.

    

    Date
_________, 20___

    

    Signature
_______________________

    

    
      
        
           

        

        
          7AUGUST 2009 WAIVER AND
AMENDMENT AGREEMENT

     

    THIS
AUGUST 2009 WAIVER AND AMENDMENT AGREEMENT (this “Agreement”) is made as of
August 14, 2009, among South Texas Oil Company, a Nevada corporation (the “Company”), the Subsidiaries
(as defined in the Purchase Agreements (as defined below)), Longview Marquis
Master Fund, L.P., a British Virgin Islands limited partnership (“Marquis”), and Summerview
Marquis Fund, L.P., a Delaware limited partnership (“Summerview” and, together with
Marquis, the “Buyers”).

     

    WITNESSETH:

     

    WHEREAS,
the Company, Marquis and The Longview Fund, L.P., a California limited
partnership (“Longview”
and, together with Marquis, the “April Buyers”), entered into
that certain Securities Purchase Agreement, dated as of April 1, 2008 (as has
been or may be amended, supplemented, restated or modified and in effect from
time to time, the “April
Purchase Agreement”),
pursuant to which (i) the Company issued to Longview senior secured notes in an
aggregate original principal amount of $23,908,013.11, none of which remains
outstanding as of the date hereof, (ii) the Company issued to Marquis senior
secured notes in an aggregate original principal amount of $8,469,337.71 (such
senior secured notes, together with any promissory notes or other securities
issued in exchange or substitution therefor or replacement thereof, and as any
of the same have been or may be amended, supplemented, restated or otherwise
modified and in effect from time to time, the “Marquis April Notes”), and (iii) the
Warrants (as defined in the April Purchase Agreement) were amended and
restated;

     

    WHEREAS,
the Company and Marquis entered into a Securities Purchase Agreement, dated as
of September 18, 2008 (as has been or may be amended, restated, supplemented or
otherwise modified and in effect from time to time, the “Bridge Purchase Agreement”
and, together with the April Purchase Agreement, the “Purchase Agreements”),
pursuant to which the Company sold, and Marquis purchased, a senior secured note
in the original principal amount of $7,000,000 (such senior secured note,
together with any promissory notes or other securities issued in exchange or
substitution therefor or replacement thereof, and as any of the same have been
or may be amended, supplemented, restated or otherwise modified and in effect
from time to time, the “Marquis Bridge Notes” and, together
with the Marquis April Notes, the “Marquis Initial
Notes”);

     

    WHEREAS,
the Purchase Agreements, as applicable, reflect amendments set forth in that
certain June 2008 Amendment Agreement, dated as of June 18, 2008, among the
Company and the April Buyers, that certain June 2008 Amendment to Senior Notes
and Purchase Agreement, dated as of June 30, 2008 (the “Second June 2008 Amendment”),
among the Company and the April Buyers, and that certain September 2008 Waiver
and Amendment, dated as of September 19, 2008 (the “September 2008 Amendment”),
among the Company and the April Buyers;

     

    WHEREAS,
pursuant to a Waiver, dated as of May 14, 2009, Marquis agreed to waive the
requirement of the Company to comply with Section 6(t)(i) (Financial Covenant)
of the April Purchase Agreement with respect to the Daily Barrel Average (as
defined in the Purchase Agreements) for the calendar quarter ending March 31,
2009, on the terms and subject to the conditions set forth herein;

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    WHEREAS,
pursuant to a Waiver, dated as of May 14, 2009, Marquis agreed to waive the
requirement of the Company to comply with Section 6(t)(i) (Financial Covenant)
of the Bridge Purchase Agreement with respect to the Daily Barrel Average for
the calendar quarter ending March 31, 2009, on the terms and subject to the
conditions set forth herein, including the Company’s delivery to Marquis of a
fee in the amount of $75,000 (the “First Quarter Waiver Payment
Amount”) within 30 days of the date thereof (the “First Quarter Waiver
Payment”);

     

    WHEREAS,
pursuant to that certain Assignment and Assumption Agreement, dated as of May
29, 2009, Marquis transferred to Summerview, among other things, a portion of
the Marquis April Notes in the principal amount of $2,252,994.73 (the “Summerview Transferred April
Notes”), a portion of the Warrants representing the right to acquire
62,841 shares of common stock (“Common Stock”) of the Company
(the “Summerview Transferred
Warrants”), a portion of the Marquis Bridge Notes in the principal amount
of $1,759,556.47 (the “Summerview Transferred Bridge
Notes”), including all of Marquis’s right, title and interest, legal and
equitable, therein and thereto (which includes all of Marquis’s rights under the
transferred portions of the Marquis Initial Notes with respect to the First
Quarter Waiver Payment), and all of Marquis’s rights and obligations under the
Purchase Agreements and the other Transaction Documents (as defined in the
Purchase Agreements) with respect to the Summerview Transferred Aprils Notes,
the Summerview Transferred Warrants and the Summerview Transferred Bridge Notes,
with the remainder of the Marquis April Notes in the principal amount of
$6,710,038.53 (the “Marquis
Remaining April Notes” and, together with the Summerview Transferred
April Notes, the “April
Notes”), the remainder of the Warrants representing the right to acquire
187,159 shares of Common Stock (the “Marquis Remaining Warrants”),
the remainder of the Marquis Bridge Notes in the principal amount of
$5,240,433.53 (the “Marquis
Remaining Bridge Notes” and, together with the Summerview Transferred
Bridge Notes, the “Bridge Notes;” the Bridge Notes and
the April Notes being collectively referred to herein as the “Notes”), and all of Marquis’s
rights and obligations under the Purchase Agreements and the other Transaction
Documents with respect to the Marquis Remaining April Notes, the Marquis
Remaining Warrants and the Marquis Remaining Bridge Notes, continuing to be held
by Marquis;

     

    WHEREAS,
the Notes, as applicable, reflect amendments set forth in the Second June 2008
Amendment, the September 2008 Amendment, that certain June 2009 Waiver and
Amendment Agreement, dated as of June 10, 2009, among the Company and the
Buyers, and that certain June 2009 Waiver and Amendment Agreement, dated as of
June 16, 2009, among the Company and the Buyers;

     

    WHEREAS,
(i) the Company failed to deliver the First Quarter Waiver Payment to the Buyers
in a timely manner (the “First
Quarter Waiver Payment
Default”); (ii) the Company failed to deliver to the Buyers in a timely
manner Interest (as defined in the Notes) (collectively, the “Interest Default Amounts” and,
together with the First Quarter Waiver Payment Amount, the “Payment Default Amounts”), due
and payable on July 1, 2009 and August 3, 2009, respectively (such failures,
collectively, the “Interest
Payment Default” and, together with the First Quarter Waiver Payment
Default, the “Payment
Defaults”); and (iii) a Financial Covenant Test Failure (as defined in
each of the Purchase Agreements) exists with respect to the calendar quarter
ended June 30, 2009 (the “Financial Covenant Default”;
the Financial Covenant Default and the Payment Defaults being referred to
collectively as the “Subject
Defaults”), which Subject Defaults, individually and in the aggregate,
constitute Events of Default (as defined in the Notes) under the
Notes;

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    WHEREAS,
as a result of the Payment Defaults, each of the First Quarter Waiver Payment
Amount and the Interest Default Amounts has borne interest at the Default Rate
(as defined in the Notes) from the first date of such Event of Default through
the date of this Agreement (such amounts due and payable to the Buyers at the
Default Rate, collectively, the “Interest and Waiver Default Rate
Amounts”);

     

    WHEREAS,
as a result of the Subject Defaults, the outstanding Principal (as defined in
the Notes) of each of the Notes has borne interest at the Default Rate from the
date of the first Subject Default through the date of this Agreement (such
interest due and payable on the Notes that is attributable to the percentage
points by which the Default Rate exceeds the Interest Rate (as defined in the
Notes) (i.e., 5.00% or 500 basis points), collectively, the “Principal Default Rate Amounts”; the
Principal Default Rate Amounts together with the Interest and Waiver Default
Rate Amounts being collectively referred to herein as the “Default Rate Interest
Amounts”);

     

    WHEREAS,
pursuant to that certain Bill of Sale, dated as
of July 10, 2009 (the “Asset
Sale Transaction Date”), the Company transferred, assigned, granted, sold
and conveyed to Horizon Drilling Ltd and Drillstuff Ltd (the “Asset Sale Transaction”) all
of its right, title and interest in that certain Schramm T130XD Rota-drill,
serial number J130-0131, mounted on a Crane Carriage custom transport truck, and
all associated equipment and accessories (the “Transferred
Assets”);

     

    WHEREAS,
pursuant to certain restrictive covenants set forth in the Amended and Restated
Security Agreement (as defined in the April Purchase Agreement), the Bridge
Security Agreement (as defined in the Bridge Purchase Agreement) and the other
Transaction Documents (collectively, the “Applicable Restrictive
Covenants”), the Company would have been prohibited from consummating the
Asset Sale Transaction without the prior written consent of the Buyers; however, on or prior
to the Asset Sale Transaction Date, the Buyers provided their oral waiver of the
Applicable Restrictive Covenants, solely with respect to the Asset Sale
Transaction and only insofar as the Amended and Restated Security Agreement, the
Bridge Security Agreement and the other Transaction Documents pertain to and
include the Transferred Assets as assets under the Transaction Documents, and
agreed to confirm and memorialize such waiver in writing
thereafter;

     

    WHEREAS,
the Company desires to confirm and memorialize, in writing, the Buyers’ waiver
of the Applicable Restrictive Covenants, effective as of the Asset Sale
Transaction Date, solely with respect to the Asset Sale Transaction and only
insofar as the Amended and Restated Security Agreement, the Bridge Security
Agreement and the other Transaction Documents pertain to and include the
Transferred Assets as assets under the Transaction Documents;

     

    WHEREAS,
as partial consideration for the Buyers’ agreement to waive the Subject Defaults
and the Applicable Restrictive Covenants as provided herein, the Company has
delivered to the Buyers an aggregate amount in cash equal to $160,000 (the
“August Waiver Fee”), in
satisfaction of the Company’s obligation to deliver to the Buyers (i) the First
Quarter Waiver Payment; (ii) the Default Rate Interest Amounts; and (iii) an
amount for the reimbursement of the Buyers’ legal expenses through the date
hereof (but not in satisfaction of the Company’s obligation to reimburse the
Buyers’ for their legal expenses related to this Agreement pursuant to Section 10 hereof)
pursuant to the Transaction Documents (the “Reimbursement Amount” and,
together with the First Quarter Waiver Payment Amount and the Default Rate
Interest Amounts, the “Company
Obligation Amount”); and

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    WHEREAS,
the Buyers have agreed, subject to the terms and conditions set forth herein, to
waive (i) the Subject Defaults, (ii) the Company’s obligation to pay to the
Buyers any portion of the Company Obligation Amount in excess of the August
Waiver Fee and (iii) the Applicable Restrictive Covenants solely with respect to
the Asset Sale Transaction.

     

    NOW,
THEREFORE, in consideration of the agreements, provisions and covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each of the undersigned agrees as
follows:

     

    1.            
Amendment to the
Purchase Agreements.

     

    a.           Each of the Buyers, severally
and not jointly, hereby agrees with the Company that, as of the date first above
written, the first sentence of Section 6(t)(i) of each of the Purchase
Agreements is hereby amended and restated in its entirety to read as
follows:

     

    (i)           The
Company shall not allow the Daily Barrel Average to be less than 125 barrels of
oil and/or its equivalent in natural gas (including barrels of oil and barrels
of oil equivalents from gas produced into a sales pipeline at a ratio of one (1)
barrel of oil for each six thousand (6,000) cubic feet (“MCF”) of gas (collectively,
“BOEs”)) in the calendar
quarter ending September 30, 2009, or be less than 200 BOEs in the calendar
quarter ending December 31, 2009, or be less than 250 BOEs in any calendar
quarter ending on or after March 31, 2010(the failure of the Daily Barrel
Average to be at least the applicable minimum (as set forth in this sentence) in
any such calendar quarter being referred to as a “Financial Covenant
Failure”).

     

    b.           As
amended hereby, the Purchase Agreements shall remain in full force and
effect.

     

    2.            
Amendment of the April
Notes.

     

    a.           The
Company hereby agrees with each of the Buyers, severally and not jointly, that,
as of the date first above written, the second sentence of Section 2 of the
April Notes shall be amended and restated to read in its entirety as
follows:

     

    “Interest
shall be paid quarterly in arrears on each Interest Payment Date and on the
Maturity Date.”

     

    b.           The
Company hereby agrees with each of the Buyers, severally and not jointly, that,
as of the date first above written, the following definitions set forth in the
Appendix to the April Notes shall be amended and restated to read in their
entirety as follows:

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    “Interest Payment Date” means
the first Business Day of each calendar quarter, beginning with the calendar
quarter that commences on July 1, 2008, through and including the last calendar
quarter that commences prior to the Maturity Date.

     

    c.           The
Company hereby agrees with each of the Buyers, severally and not jointly, that,
notwithstanding anything set forth in the April Notes, the Interest Amount (as
defined in the Notes) due and payable on July 1, 2009 with respect to Principal
on each April Note shall not be paid in cash to the Buyers, but shall instead be
added to the Principal on such April Note (i.e., by capitalizing such Interest
Amount), effective as of July 1, 2009; accordingly, the Principal for each April
Note shall be increased to the amount set forth opposite the description of such
April Note on Schedule
A hereto.

     

    d.           The
Company shall promptly, and in no event later than five Business Days (as
defined in the Purchase Agreements) from the date of this Agreement, execute and
deliver to each Buyer the April Notes of such Buyer, representing the increased
Principal amounts thereof as set forth on Schedule A hereto and
as otherwise amended.  Upon the issuance by the Company to each Buyer
of such Buyer’s April Notes, representing the increased Principal amounts
thereof as set forth on Schedule A hereto and
as otherwise amended, each of such Buyer’s existing April Notes will be void and
of no further force and effect, and such Buyer shall promptly return its
existing April Notes to the Company for cancellation.

     

    e.           As
amended hereby, each of the April Notes shall remain in full force and
effect.

     

    3.            
Amendment of the
Bridge Notes.

     

    a.           The
Company hereby agrees with each of the Buyers, severally and not jointly, that,
as of the date first above written, the second sentence of Section 2 of the
Bridge Notes shall be amended and restated to read in its entirety as
follows:

     

    “Interest
shall be paid quarterly in arrears on each Interest Payment Date and on the
Maturity Date.”

     

    b.           The
Company hereby agrees with each of the Buyers, severally and not jointly, that,
as of the date first above written, the following definitions set forth in the
Appendix to the Bridge Notes shall be amended and restated to read in their
entirety as follows:

     

    “Interest Payment Date” means
the first Business Day of each calendar quarter, beginning with the calendar
quarter that commences on October 1, 2008, through and including the last
calendar quarter that commences prior to the Maturity Date.

     

    c.           The
Company hereby agrees with each of the Buyers, severally and not jointly, that,
notwithstanding anything set forth in the Bridge Notes, the Interest Amount (as
defined in the Notes) due and payable on July 1, 2009 with respect to Principal
on each Bridge Note shall not be paid in cash to the Buyers, but instead shall
be added to the Principal on such Bridge Note (i.e., by capitalizing such
Interest Amount), effective as of July 1, 2009; accordingly, the Principal for
each Bridge Note shall be increased to the amount set forth opposite the
description of such Bridge Note on Schedule A
hereto.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    d.           The
Company shall promptly, and in no event later than five Business Days (as
defined in the Purchase Agreements) from the date of this Agreement, execute and
deliver to each Buyer the Bridge Notes of such Buyer, representing the increased
Principal amounts thereof as set forth on Schedule A hereto and
as otherwise amended.  Upon the issuance by the Company to each Buyer
of such Buyer’s Bridge Notes, representing the increased Principal amounts
thereof as set forth on Schedule A hereto and
as otherwise amended, each of such Buyer’s existing Bridge Notes will be void
and of no further force and effect, and such Buyer shall promptly return its
existing Bridge Notes to the Company for cancellation.

     

    e.           As
amended hereby, each of the Bridge Notes shall remain in full force and
effect.

     

    4.            
Exchange
Option.

     

    a.           The
Company hereby grants to the Buyers, or their respective designees, the joint
and several right, during the period commencing on the date hereof and ending on
the date that is 120 days after the date hereof (the “Exchange Option Period”), (i)
to purchase from the Company and the Subsidiaries, as applicable, all of the
Company’s and such Subsidiaries’ right, title and interest in the Exchange
Property (as defined below), in exchange, and in full consideration (without the
payment or delivery of cash), for (ii) the satisfaction in full and cancellation
of $3,000,000 in principal amount of the Notes, in accordance with Section 4(b) hereof
(the “Exchange
Option”).  For purposes hereof, the “Exchange Property” means the
Real Property (as defined in the Purchase Agreements) set forth on Schedule B hereto
(which the Company hereby represents and warrants constitutes all of the
Company’s and the Subsidiaries’ interests in the Bigfoot Field and Kyote Field),
including (a) all oil, gas and mineral leases, leasehold interests, operating
rights, working interests, production payments, reversionary interests,
convertible interests, net profit interests and net revenue interests and other
rights to oil, gas and minerals in place, related to such Real Property, whether
producing or non-producing, and all such leases (and any ratifications and/or
amendments to such leases) and interests covering such Real Property; (b) all
existing and valid oil, gas and/or mineral unitization, pooling and/or
communication agreements, declarations or designations and statutorily,
judicially or administratively created drilling, spacing and/or productions
units and/or orders (including all units formed under orders, rules, regulations
or other official acts of any federal, state or other authority having
jurisdiction, and voluntary unitization agreements, designations and/or
declarations) whether recorded or unrecorded, insofar as the same are relating
to such Real Property, to the extent and only to the extent such rights, titles
and interests are attributable to such Real Property; (c) all existing and valid
production sales agreements, operating agreements, gathering agreements,
transportation agreements, farmout and farmin agreements, unitization, pooling
and communitization agreements, purchase agreements, exploration agreements,
area of mutual interest agreements, exchange and processing contracts and
agreements, partnership and joint venture agreements and any other contracts,
agreements and instruments which relate to any of such Real Property, to the
extent and only to the extent such rights, titles and interests are attributable
to such Real Property; and (d) all tangible personal property, equipment,
machinery, fixtures and improvements located on such Real Property, including
all oil and gas wells, injection wells, salt water disposal facilities, well
heads, casing, tubing, pumps, motors, gauges, valves, heaters, treaters, water
lines, vessels, tanks, boilers, separators, treating equipment, owned
compressors and other equipment, automation systems including meters and related
telemetry on wells, pipelines, power lines, telephone and communication lines
and other appurtenances owned in connection with the production, treating,
storing, transportation or marketing of crude oil, natural gas, casinghead gas,
condensate, sulfur, natural gas liquids and other liquid or gaseous hydrocarbons
from such Real Property and located on such Real Property and used in connection
with the exploration, development, operation or maintenance thereof, to the
extent and only to the extent such rights, titles and interests are attributable
to such Real Property.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    b.           The
Buyers, or their respective designees, shall have the joint and several right to
exercise the Exchange Option by delivering, at any time during the Exchange
Option Period, a notice to the Company of its intention to exercise the Exchange
Option (the “Exchange Option
Notice”).  The Exchange Option Notice shall set forth (i) a
Buyer’s or the Buyers’, or its or their respective designee’s or designees’,
intention to exercise the Exchange Option (such electing Buyer or Buyers, or its
or their designee or designees, the “Electing Party”), and (ii) the
Notes, or portions of the Notes, and the Principal amounts with respect thereto
(the “Exchange Notes”),
which will be exchanged (and upon consummation of the Exchange Transaction (as
defined below), the Principal of such Exchange Notes or portions of Exchange
Notes exchanged will be cancelled) pursuant to the Exchange Option, which shall
be determined by the Buyers in their sole discretion; provided, that, in
any event, the aggregate Principal amount of Exchange Notes to be exchanged
pursuant to the Exchange Option shall be $3,000,000; provided, further, that nothing
set forth herein shall affect the Company’s obligation to pay to the Buyers
Interest on the Principal exchanged pursuant to the Exchange Option through (and
including) the date of the consummation of the Exchange Transaction (i.e., the
applicable Interest Amount on the Principal on each of the Notes that is
exchanged in the Exchange Transaction shall be due and payable on the first
Interest Payment Date immediately following the consummation of the Exchange
Transaction).  Promptly, and in any event no later than 15 days after
the delivery by the Electing Party to the Company of an Exchange Option Notice
(the “Exchange
Deadline”), the Company and the Subsidiaries, as applicable, shall (x)
duly execute and deliver to the Electing Party, and file and record, any and all
documents, instruments, certificates or other agreements, in each case in form
reasonably acceptable to the Electing Party; (y) obtain all consents, approvals,
authorizations or orders of any court, governmental agency or body or
arbitrator, or of the shareholders of the Company and any Subsidiaries, in each
case, reasonably necessary; and (z) do and perform, or cause to be done and
performed, all such further acts and things, in each case (i.e., with respect to
each of the items set forth in clauses (x), (y) and (z) of this sentence) as the
Electing Party may reasonably request, to convey to the Electing Party good and
marketable title to the Exchange Property, free and clear of all Liens (as
defined in each of the Purchase Agreements) (the “Exchange
Transaction”).  Any failure of the Company or any Subsidiary,
as applicable, to consummate the Exchange Transaction by the Exchange Deadline
shall constitute an immediate Event of Default under each Exchange
Note.

     

    c.           Notwithstanding
anything to the contrary set forth in this Section 4, upon the
consummation of any Exchange Transaction, the Electing Party shall not be
required to physically surrender any Exchange Note to the Company unless all of
the Principal on such Exchange Note is being repaid and the related Interest
Amount and all other obligations payable by the Company to the Electing Party
under such Exchange Note have been paid in full.  To the extent the
Principal of any Exchange Note that is being exchanged pursuant to this Section 4 represents
less than all of the Principal of such Exchange Note, the Principal of such
Exchange Note shall be deemed to be reduced by the amount so exchanged, without
further action of the Electing Party or the Company.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    5.            
Limited
Waiver.

     

    a.           Subject
to the conditions set forth in Section 5(b), each of
the Buyers, severally and not jointly, hereby waives (i) each of the Subject
Defaults, (ii) the Company’s obligation to deliver payment to the Buyers of any
portion of the Company Obligation Amount in excess of the August Waiver Fee and
(iii) the Applicable Restrictive Covenants, effective as of the Asset Sale
Transaction Date, solely with respect to the Asset Sale Transaction and only
insofar as the Amended and Restated Security Agreement, the Bridge Security
Agreement and the other Transaction Documents pertain to and include the
Transferred Assets as assets under the Transaction Documents.

     

    b.           The
limited waivers set forth in Section 5(a) hereof,
(i) are not, nor shall they be deemed to be, waivers under any other
circumstance or waivers of any other condition, requirement, provision or breach
of, or rights under, any of the Purchase Agreements (as amended hereby), any of
the Notes (as amended hereby), any of the other Transaction Documents or any
other agreement or instrument, (ii) are not, nor shall they be deemed to be,
waivers of any obligations of the Company to pay to any Buyer (A) any Interest
due and payable on any of the Notes at the Interest Rate (i.e., 13.00%) or (B)
any Principal of any of the Notes, and (iii) do not, nor shall they be
deemed to, establish a custom or course of dealing.

     

    6.            
Representations and
Warranties of the Company.  The Company represents and warrants
to each of the Buyers that:

     

    a.           Authorization; Enforcement;
Validity.  Each of the Company and the Subsidiaries is a duly
organized and validly existing corporation or limited liability company and has
the requisite corporate or limited liability company power and authority to
enter into and perform its obligations under this Agreement, each of the
Purchase Agreements (as amended hereby), each of the Notes (as amended hereby)
and the other Transaction Documents.  The execution and delivery of
this Agreement by the Company and the Subsidiaries and the consummation of the
transactions contemplated hereby, by the Purchase Agreements (as amended
hereby), by the Notes (as amended hereby) and by the other Transaction Documents
have been duly authorized by the respective boards of directors of the Company
and the Subsidiaries, and no further consent or authorization is required by the
Company, the Subsidiaries or their respective boards of directors or
shareholders.  This Agreement has been duly executed and delivered by
the Company and each of the Subsidiaries, and each of this Agreement, the
Purchase Agreements (as amended hereby), the Notes (as amended hereby) and the
other Transaction Documents constitutes a valid and binding obligation of each
of the Company and the Subsidiaries (as applicable), enforceable against each of
the Company and the Subsidiaries (as applicable) in accordance with its terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    b.           No
Conflicts.  The execution and delivery of this Agreement by
each of the Company and the Subsidiaries, as applicable, the performance by each
of the Company and the Subsidiaries (as applicable) of their respective
obligations hereunder, under the Purchase Agreements (as amended hereby), under
the Notes (as amended hereby) and under the other Transaction Documents, and the
consummation by each of the Company and the Subsidiaries (as applicable) of the
transactions contemplated hereby, by the Purchase Agreements (as amended
hereby), by the Notes (as amended hereby) and by the other Transaction Documents
will not (i) result in a violation of the articles of incorporation or the
bylaws of the Company or the organizational documents of any Subsidiary; (ii)
conflict with, or constitute a breach or default (or an event which, with the
giving of notice or lapse of time or both, constitutes or would constitute a
breach or default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or other remedy with respect to, any agreement,
indenture or instrument to which the Company or any of the Subsidiaries is a
party; or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations)
applicable to the Company or any of the Subsidiaries or by which any property or
asset of the Company or any of the Subsidiaries is bound or
affected.  Neither the Company nor any of the Subsidiaries is required
to obtain any consent, authorization or order of or make any filing or
registration with, any court or governmental agency or any regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under, or contemplated by, this Agreement, the Purchase Agreements
(as amended hereby), the Notes (as amended hereby) and the other Transaction
Documents.

     

    7.            
Representation and
Warranties of each of the Buyers.  Each of the Buyers,
severally, and not jointly, represents and warrants to the Company that (a) such
Buyer is a validly existing limited partnership and has the requisite limited
partnership power and authority to enter into and perform its obligations under
this Agreement, and (b) this Agreement has been duly and validly authorized,
executed and delivered on behalf of such Buyer and is a valid and binding
agreement of such Buyer, enforceable against such Buyer in accordance with its
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of applicable creditors’ rights and remedies.

     

    8.            
Acknowledgment of the
Company and the Subsidiaries.  The Company and each of the
Subsidiaries hereby irrevocably and unconditionally acknowledge, affirm and
covenant to such Buyer that:

     

    a.           such
Buyer is not in default under any of the Transaction Documents, as applicable,
and has not otherwise breached any obligations to the Company or any of the
Subsidiaries; and

     

    b.           there
are no offsets, counterclaims or defenses to the Obligations (as defined in each
of the Amended and Restated Security Agreement (as
defined in the April Purchase Agreement), the Subsidiary Guaranty (as defined in
April Purchase Agreement), the Bridge Security Agreement (as defined in the
Bridge Purchase Agreement) and the Bridge Guaranty (as defined in the Bridge
Purchase Agreement)), including the liabilities and obligations of the Company
under the Notes (as amended hereby), or to the rights, remedies or powers of
such Buyer in respect of any of the Obligations or any of the Transaction
Documents, as applicable, and the Company and each of the Subsidiaries agree not
to interpose (and each does hereby waive and release) any such defense, set-off
or counterclaim in any action brought by such Buyer with respect
thereto.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    9.            
Avoidance of
Doubt.  The parties hereto hereby agree, for the avoidance of
doubt, that (a) the term “Notes” as used in the
Transaction Documents (as defined in the April Purchase Agreement, the “April Transaction Documents”)
shall include the April Notes, as, and to the extent, amended by this Agreement,
(b) the term “Bridge
Notes” as used in the
Transaction Documents (as defined in the Bridge Purchase Agreement, the “Bridge Transaction Documents”)
shall mean the Bridge Notes, as, and to the extent, amended by this Agreement,
(c) the term “Obligations” as used in the
April Transaction Documents shall include all liabilities and obligations of the
Company under this Agreement, under the April Purchase Agreement (as amended
hereby), under the April Notes (as amended hereby) and under the other April
Transaction Documents, and (d) the term “Obligations” as used in the
Bridge Transaction Documents shall include all liabilities and obligations of
the Company under this Agreement, under the Bridge Purchase Agreement, under the
Bridge Notes (as amended hereby) and under the other Bridge Transaction
Documents, and each of the parties hereto agrees not to take any contrary
positions.

     

    10.           Expenses.  In
accordance with Section 5(h) of the April Purchase Agreement and Section
5(h)(ii) of the Bridge Purchase Agreement, the Company shall promptly reimburse
each Buyer for all of the out-of-pocket fees, costs and expenses incurred
thereby in connection with the drafting, negotiation and execution of this
Agreement.

     

    11.           Reservation of
Rights.  Except as expressly set forth in Section 5(a) hereof,
and subject to the terms and conditions of Section 5(b) hereof,
neither of the Buyers has hereby waived (a) any breach, default or Event of
Default that may be continuing under any of the Transaction Documents, as
applicable, or (b) any of such Buyer’s rights or remedies arising from any such
breach, default or Event of Default or otherwise available under the Transaction
Documents, as applicable, or at law.  Each of the Buyers expressly
reserves all such rights and remedies.

     

    12.           Payment Set Aside.  To the
extent that the Company or any of the Subsidiaries makes a payment or payments
to the Buyers pursuant to this Agreement, the Purchase Agreements (as amended
hereby), the Notes (as amended hereby) or any other Transaction Document or the
Buyers enforce or exercise their rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company or any of the Subsidiaries, by a trustee,
receiver or any other Person under any law (including any bankruptcy law, state
or federal law, common law or equitable cause of action), then, to the extent of
any such restoration, the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not
occurred.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    13.           Successors and
Assigns.  This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.  The successors and assigns of such entities shall
include their respective receivers, trustees or
debtors-in-possession.

     

    14.           Further
Assurances.  The Company hereby agrees from time to time, as
and when requested by any Buyer, to execute and deliver or cause to be executed
and delivered, all such documents, instruments and agreements, including
secretary’s certificates, and to take or cause to be taken such further or other
action, as any Buyer may reasonably deem necessary or desirable in order to
carry out the intent and purposes of this Agreement, the Purchase Agreements (as
amended hereby), the Notes (as amended hereby) and the other Transaction
Documents, as applicable.

     

    15.           Governing Law; Jurisdiction;
Jury Trial.  All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.  Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper.  Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof.  Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by
law.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.

     

    16.           Counterparts.  This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to each other
party.  In the event that any signature to this Agreement or any
amendment hereto is delivered by facsimile transmission or by e-mail delivery of
a “.pdf” format data file, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.  No party hereto shall raise
the use of a facsimile machine or e-mail delivery of a “.pdf” format data file
to deliver a signature to this Agreement or any amendment hereto or the fact
that such signature was transmitted or communicated through the use of a
facsimile machine or e-mail delivery of a “.pdf” format data file as a defense
to the formation or enforceability of a contract, and each party hereto forever
waives any such defense.

     

    
      
         

      

      
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    17.           Section
Headings.  The section headings herein are for convenience of
reference only, and shall not affect in any way the interpretation of any of the
provisions hereof.

     

    18.           No Strict
Construction.  The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction will be applied against any
party.

     

    19.           Merger.  This
Agreement, the Purchase Agreements (as amended hereby), the Notes (as amended
hereby), as applicable, and the other Transaction Documents represent the final
agreement of each of the parties hereto with respect to the matters contained
herein and may not be contradicted by evidence of prior or contemporaneous
agreements, or prior or subsequent oral agreements, among any of the parties
hereto.  Except as expressly set forth in this Agreement, in the
Purchase Agreements (as amended hereby), in the Notes (as amended hereby) and in
the other Transaction Documents, neither of the Company nor any of the Buyers
makes any representation, warranty, covenant or undertaking with respect to such
matters.

     

    20.           Interpretative
Matters.  Unless otherwise indicated or the context otherwise
requires, (i) all references to Sections, Schedules, Appendices or Exhibits are
to Sections, Schedules, Appendices or Exhibits contained in or attached to this
Agreement, (ii) words in the singular or plural include the singular and plural
and pronouns stated in either the masculine, the feminine or neuter gender shall
include the masculine, feminine and neuter, (iii) the words “hereof,” “herein”
and words of similar effect shall reference this Agreement in its entirety, and
(iv) the use of the word “including” in this Agreement shall be by way of
example rather than limitation.

     

    21.           Reaffirmation.  Each
of the Company and the Subsidiaries as issuer, debtor, grantor, pledgor,
mortgagor, guarantor or assignor, or in other any other similar capacity in
which such Person grants Liens or security interests in its property or
otherwise acts as accommodation party or guarantor, as the case may be, hereby
(i) acknowledges and agrees that it has reviewed this Agreement, (ii) ratifies
and reaffirms all of its obligations, contingent or otherwise, under each of the
Transaction Documents, including the Purchase Agreements (as amended hereby) and
the Notes (as amended hereby), to which it is a party (after giving effect
hereto), and (iii) to the extent such Person granted Liens on or security
interests in any of its property pursuant to any of the Transaction Document as
security for or otherwise guaranteed the Obligations under or with respect to
the Transaction Documents, ratifies and reaffirms such guarantee and grant of
security interests and Liens and confirms and agrees that such security
interests and Liens hereafter secure all of the Obligations as amended
hereby.  Each of the Company and the Subsidiaries hereby consents to
this Agreement and acknowledges that each of the Transaction Documents,
including the Purchase Agreements (as amended hereby), the Notes (as amended
hereby), remains in full force and effect and is hereby ratified and
reaffirmed.

     

    [Remainder
of page intentionally left blank; Signature page follows]

     

     

     

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    IN
WITNESS WHEREOF, this Agreement has been duly executed and delivered by each of
the undersigned as of the date first above written.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      	 	
                                                              COMPANY:

                                                            
	 	 
      	 
      
	 	
                                                              SOUTH
      TEXAS OIL COMPANY,

                                                            
	 	
                                                              a
      Nevada corporation

                                                            
	 	 
      	 
      
	 	
                                                              By:

                                                            	
                                                              /s/
      Michael J. Pawelek

                                                            
	 	
                                                              Name:

                                                            	
                                                              Michael
      J. Pawelek

                                                            
	 	
                                                              Title:

                                                            	
                                                              Chief
      Executive Officer

                                                            
	 	 	 
	 	 
      	 
      
	 	
                                                              SUBSIDIARIES:

                                                            
	 	
                                                              SOUTHERN
      TEXAS OIL COMPANY., 
a Texas
      corporation

                                                            
	 	 
      	 
      
	 	
                                                              By:

                                                            	
                                                              /s/
      Michael J. Pawelek

                                                            
	 	
                                                              Name:

                                                            	
                                                              Michael
      J. Pawelek

                                                            
	 	
                                                              Title:

                                                            	
                                                              Chief
      Executive Officer

                                                            
	 	 	 
	 	 	 
	 	
                                                              STO
      OPERATING COMPANY, 

                                                              a
      Texas corporation

                                                            
	 	 
      	 
      
	 	
                                                              By:

                                                            	
                                                              /s/
      Wayne Psencik

                                                            
	 	
                                                              Name:

                                                            	
                                                              Wayne
      Psencik

                                                            
	 	
                                                              Title:

                                                            	
                                                              President

                                                            
	 	 	 
	 	 	 
	 	
                                                              STO
      PROPERTIES LLC,

                                                            
	 	
                                                              a
      Texas limited liability company

                                                            
	 	 
      	 
      
	 	
                                                              By:

                                                            	
                                                              /s/
      Wayne Psencik

                                                            
	 	
                                                              Name:

                                                            	
                                                              Wayne
      Psencik

                                                            
	 	
                                                              Title:

                                                            	
                                                              Manager

                                                            
	 	 	 
	 	 	 
	 	
                                                              STO
      DRILLING COMPANY,

                                                            
	 	
                                                              a
      Texas corporation

                                                            
	 	 
      	 
      
	 	
                                                              By:

                                                            	
                                                              /s/
      Michael J. Pawelek

                                                            
	 	
                                                              Name:

                                                            	
                                                              Michael
      J. Pawelek

                                                            
	 	
                                                              Title:

                                                            	
                                                              Chief
      Executive
Officer

                                                            

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    [Signature
page to August 2009 Waiver and Amendment Agreement]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

      
        
          
            
              
                
                  
                    
                      	 	
                              MARQUIS:

                            
	 	 
      	 
      
	 	
                              LONGVIEW
      MARQUIS MASTER FUND, L.P.

                            
	 	 
      	 
      
	 	
                              By:

                            	
                              Summerline
      Asset Management, LLC

                            
	 	
                              Its:

                            	
                              Investment
      Advisor

                            
	 	 
      	 
      
	 	
                              By:

                            	
                              /s/
      Robert J. Brantman

                            
	 	
                              Name:

                            	
                              Robert
      J. Brantman

                            
	 	
                              Title:

                            	
                              Co-Managing
      Member

                            
	 	 	 
	 	 
      	 
      
	 	
                              SUMMERVIEW:

                            
	 	 
      	 
      
	 	
                              SUMMERVIEW
      MARQUIS FUND, L.P.

                            
	 	 
      	 
      
	 	
                              By:

                            	
                              Summerline
      Asset Management, LLC

                            
	 	
                              Its:

                            	
                              Investment
      Advisor

                            
	 	 
      	 
      
	 	
                              By:

                            	
                              /s/
      Robert J. Brantman

                            
	 	
                              Name:

                            	
                              Robert
      J. Brantman

                            
	 	
                              Title:

                            	
                              Co-Managing
      Member

                            

                    

                     

                  

                

              

            

          

        

      

    

    [Signature
page to August 2009 Waiver and Amendment Agreement]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Schedule
A

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    
                                                                      
                                                                        
                                                                          	
                                                                                  Note

                                                                                	 	
                                                                                  New Principal

                                                                                  (Effective as of July 1,
    2009)

                                                                                
	 	 	 
	
                                                                                  Senior
      Note, dated January 31, 2007, and amended and restated as of April 1,
      2008, issued to Marquis in the principal amount of
      $4,754,889.04.

                                                                                	 	
                                                                                  $4,904,505.21

                                                                                
	 	 	 
	
                                                                                  Senior
      Note, dated January 31, 2007, and amended and restated as of April 1,
      2008, issued to Summerview in the principal amount of
      $1,596,524.36.

                                                                                	 	
                                                                                  $1,646,760.20

                                                                                
	 	 	 
	
                                                                                  Senior
      Note, dated April 8, 2008, issued to Marquis in the principal amount of
      $397,218.26.

                                                                                	 	
                                                                                  $409,717.03

                                                                                
	 	 	 
	
                                                                                  Senior
      Note, dated April 8, 2008, issued to Summerview in the principal amount of
      $133,371.91.

                                                                                	 	
                                                                                  $137,568.56

                                                                                
	 	 	 
	
                                                                                  Senior
      Note, dated May 14, 2008, issued to Marquis in the principal amount of
      $392,457.95.

                                                                                	 	
                                                                                  $404,806.94

                                                                                
	 	 	 
	
                                                                                  Senior
      Note, dated May 14, 2008, issued to Summerview in the principal amount of
      $131,773.56.

                                                                                	 	
                                                                                  $135,919.91

                                                                                
	 	 	 
	
                                                                                  Senior
      Note, dated May 15, 2008, issued to Marquis in the principal amount of
      $196,162.88.

                                                                                	 	
                                                                                  $202,335.29

                                                                                
	 	 	 
	
                                                                                  Senior
      Note, dated May 15, 2008, issued to Summerview in the principal amount of
      $65,864.59.

                                                                                	 	
                                                                                  $67,937.07

                                                                                
	 	 	 
	
                                                                                  Senior
      Note, dated May 21, 2008, issued to Marquis in the principal amount of
      $195,766.19.

                                                                                	 	
                                                                                  $201,926.12

                                                                                
	 	 	 
	
                                                                                  Senior
      Note, dated May 21, 2008, issued to Summerview in the principal amount of
      $65,731.39.

                                                                                	 	
                                                                                  $67,799.68

                                                                                
	 	 	 
	
                                                                                  Senior
      Note, dated June 26, 2008, issued to Marquis in the principal amount of
      $773,544.21.

                                                                                	 	
                                                                                  $797,884.36

                                                                                
	 	 	 
	
                                                                                  Senior
      Note, dated June 26, 2008, issued to Summerview in the principal amount of
      $259,728.92.

                                                                                	 	
                                                                                  $267,901.49

                                                                                
	 	 	 
	
                                                                                  Senior
      Note, dated September 19, 2008, issued to Marquis in the principal amount
      of $5,240,443.53.

                                                                                	 	
                                                                                  $5,405,338.03

                                                                                
	 	 	 
	
                                                                                  Senior
      Note, dated September 19, 2008, issued to Summerview in the principal
      amount of $1,759,556.47.

                                                                                	 	
                                                                                  $1,814,922.24

                                                                                

                                                                        

                                                                      

                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Schedule
B

    

    Exchange
Property

    

    All of
the Company’s and the Subsidiaries’ right title and interests in and to those
certain oil and gas wells and properties from the surface to the base of the
currently producing formations in those properties described and set forth in
those certain Mortgage, Deed of Trust, Assignment of Production, Security
Agreement, Fixture Filing and Financing Statements as follows:

    

    FRIO
COUNTY TEXAS

    

    Oil and
Gas properties described in Exhibit "A" as set forth under the heading of
BIGFOOT FIELD, Frio County Texas to that certain Mortgage, Deed of Trust,
Assignment of Production, Security Agreement, Fixture Filing and Financing
Statement dated and effective September 19, 2008 between Southern Texas Oil
Company to Walter H. Walne, III, as Trustee for Viking Asset Management, LLC as
recorded in Volume 52 Page 355 of the Official Public Records of Frio County
Texas.

    

    ATASCOSA
COUNTY TEXAS

    

    Oil and
Gas properties described in Exhibit "A" as set forth under the heading
of  KYOTE FIELD, Atascosa County Texas to that certain Mortgage, Deed
of Trust, Assignment of Production, Security Agreement, Fixture Filing and
Financing Statement dated and effective September 19, 2008 between Southern
Texas Oil Company  to Walter H. Walne, III, as Trustee for Viking
Asset Management, LLC  as recorded in  DT Document # 101218
of the Official Public Records of Atascosa County Texas.

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