Document:

Unassociated Document

    
      Exhibit
        10.41

       

      EXECUTION
        COPY

    

    

    
      	
              STATE
                OF TEXAS

            	
              §

            
	 	
              §

            
	
              COUNTIES
                OF CHAMBERS

            	
              §

            
	
              AND
                GALVESTON

            	
              §

            

    

    

    ASSIGNMENT
      OF OVERRIDING ROYALTY

    

    IN
      CONSIDERATION OF Ten Dollars ($10.00) and other good and valuable consideration,
      all cash, the receipt and sufficiency of which are acknowledged, and subject
      to
      the other provisions in this Assignment of Overriding Royalty (the “Assignment”),
      MASTERS
      RESOURCES, L.L.C., and MASTERS OIL & GAS, L.L.C. (collectively, “Assignor”),
      each a Texas limited liability company having its principal place of business
      at
      9801 Westheimer, Suite 1070, Houston, Texas 77042, hereby grants, bargains,
      sells, transfers, conveys and assigns to MASTERS PIPELINE, L.L.C. (“Assignee”),
      a Texas limited liability company having its principal place of business at
      9801
      Westheimer, Suite 1070, Houston, Texas 77042, three (3) discrete overriding
      royalty interests (collectively, the “ORRI”) in accordance with the
      following:

    

    
      	 	
              1.1.

            	
              An
                aggregate overriding royalty (the “Declining ORRI”) initially equal to 6%
                of 8/8ths of the production from those “Wells” (as defined herein)
                described as representing “Proved Undeveloped Reserves” and “Proved
                Non-Producing Reserves” on Exhibit B attached hereto and made part hereof
                , and any well later drilled on the lands covered by each Lease as
                described on the attached Exhibit
                A;

            

    

    

    
      	 	
              1.2.

            	
              An
                aggregate overriding royalty (the “Fixed ORRI”) initially equal to 3% of
                8/8ths of the production from those Wells described as representing
                “Proved Developed Producing” on Exhibit C attached hereto and made part
                hereof (the declining ORRI and the Fixed ORRI are called the “Adjustable
                ORRI” in this Agreement); and 

            

    

    

    
      	 	
              1.3.

            	
              An
                aggregate overriding royalty (the “Additional ORRI”) equal to 2% of 8/8ths
                of the production from any well now existing or later drilled on
                the lands
                covered by each Lease as described on the attached Exhibit A, including
                any Well already burdened by the Declining ORRI or the Fixed ORRI;
                provided, however, that this interest shall terminate on the third
                anniversary of the Effective Date hereof as defined below.
                

            

    

    

    The
      ORRI
      is conveyed by Assignor and accepted by Assignee subject to the following terms
      and conditions:

    

    
      	 	
              2.1.

            	
              The
                ORRI shall be proportionately reduced to the extent that, as of the
                Effective Time, the working interest of Assignor in any Lease is
                less than
                100% or the net revenue interest of Assignor in any Lease is less than
                80% of 100%. By way of example (applicable to any Declining ORRI,
                Fixed
                ORRI or Additional ORRI): (1) If
                as of the Effective Time, the working
                interest owned by Assignor in a Lease is 60% (not 100%)
                and the net
                revenue interest of Assignor in the same Lease is not less than 80%
                of
                100%, then the Declining ORRI in that
                Lease
                shall be 60/100 of 6%, or 3.6%; or in the case of the Fixed ORRI,
                60/100
                of 3%, or 1.8%; (2) If, as of the Effective Time, the working interest
                owned by Assignor in a Lease is 100% and the net revenue interest
                of
                Assignor in the same Lease is 75% of 100%, then the Declining ORRI
                in that
                Lease shall be 75/80 x 6%, or 5.625%, or, in the case of the Fixed
                ORRI,
                75/80 x 3%, or 2.8125%; (3) If, as of the Effective Time, the working
                interest in a Lease is less than 100% and the net revenue interest
                in the
                same Lease is less
                than
                80%, then the reduction of the ORRI shall be implemented for both
                the
                working interest and the net revenue interest.

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    
      	 	
              2.2.

            	
              When
                Assignee has received payments from the Adjustable ORRI in the aggregate
                amount of $20,000,000.00,
                the following shall occur:

            

    

    

    a. Assignee
      shall execute and deliver to Assignor an assignment with special warranty of
      an
      overriding royalty interest carved out of the Declining ORRI equal to 2% of
      8/8
      so that the Declining ORRI shall thereafter be reduced to an overriding royalty
      interest equal to 4% of 8/8 proportionately reduced as set out in Section 2.1
      above. The Declining ORRI as reduced in accordance with the preceding sentence
      is called the “First
      Adjusted Declining ORRI”
in
      this
      Assignment.

    

    b. Assignor
      shall execute and deliver to Assignee as an addition to the Fixed ORRI, an
      assignment with special warranty of an overriding royalty interest equal to
      1%
      of 8/8ths of the production from those Wells described as “Proved Developed
      Producing” on Exhibit B, so that the Fixed ORRI shall thereafter be increased to
      an overriding royalty interest equal to 4% of 8/8 proportionately reduced as
      set
      out in Section 2.1. The Fixed ORRI as increased in accordance with the preceding
      sentence is called the “First Adjusted Fixed ORRI” in this
      Assignment.

    

    
      	 	
              2.3.

            	
              When
                Assignee has received payments from the Adjustable ORRI in the aggregate
                amount of an additional $10,000,000.00, Assignee shall execute and
                deliver
                to Assignor an assignment with special warranty
                carved out of the First Adjusted Declining ORRI
                of
                an overriding royalty interest equal to: (a) 2% of 8/8 so that the
                First
                Adjusted Declining ORRI shall thereafter be reduced to an overriding
                royalty interest equal to 2% of 8/8, and (b) 4% of 8/8 carved out
                of the
                Fixed ORRI so that the Fixed ORRI shall thereafter be vested in Assignor.
                The First Adjusted Declining ORRI as reduced in accordance with the
                preceding sentence is called the “Final Adjusted ORRI” in this
                Assignment.

            

    

    

    
      	 	
              2.4.

            	
              Assignor
                acknowledges and agrees that: (a) the ORRI is an interest in land
                owned by
                and vested in Assignee, and (b) Assignee also owns the proceeds of
                sale of
                oil, gas, and other hydrocarbons, or other products attributable
                to the
                ORRI and is entitled to received such proceeds directly from the
                purchasers of such oil, gas and other hydrocarbons, or other
                products.  Notwithstanding
                anything contained herein to the contrary, Assignee may, at its option,
                upon not less that 60 days notice to Assignor, require at any time
                or from
                time to time that payment of all or any overriding royalties accruing
                to
                Assignee under this Agreement be made in kind without deduction only
                to
                the same extent provided for royalties reserved to the lessors under
                the
                applicable Leases.  Assignee’s right to take the ORRI in kind shall
                not diminish or negate Assignee’s rights or Assignor’s obligations,
                whether express or implied, under this Assignment. Until
                such time as Assignee elects to take the ORRI in kind, Assignor shall
                market such oil, gas and other hydrocarbons or other products on
                behalf of
                Assignee, and Assignor agrees to pay Assignee said proceeds or to
                have the
                purchasers pay said proceeds to Assignee directly at Assignee’s sole
                discretion. If Assignee elects to take its share of production in
                kind, to
                the extent that additional facilities are required for Assignee to
                take
                its share of production in kind, Assignee shall bear the cost and
                expense
                of installing such facilities.

            

    

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

    

    
      	 	
              2.5.

            	
              Each
                payment by Assignor to Assignee shall include a calculation of the
                aggregate of all payments made to Assignee until Assignee’s ownership is
                limited to the Final Adjusted ORRI and the Additional
                ORRI.

            

    

    

    
      	 	
              2.6.

            	
              At
                any time, and from time to time (but not more often than once each
                calendar year), Assignee may audit the payments on the ORRI made
                by
                Assignor to Assignee.

            

    

    

    
      	 	
              2.7.

            	
              The
                ORRI shall apply to and attach to any renewals or extensions of the
                Leases
                and/or any new leases taken within one (1) year of the expiration
                of any
                of the Leases which cover any of the lands covered by the Leases
                taken by
                the Assignor, its agents, affiliates or
                successors.

            

    

    

    This
      Assignment is made by Assignor and accepted by Assignee subject to the
      following:

    

    
      	 	
              3.1

            	
              All
                matters shown of record in Chambers and Galveston Counties, Texas,
                TO THE
                EXTENT ONLY THAT any thereof are valid and subsisting and affect
                all or
                any portion of the ORRI;

            

    

    

    
      	 	
              3.2

            	
              Conventional
                rights of reassignment requiring notice to the holders of those rights;
                

            

    

    

    
      	 	
              3.3

            	
              It
                is expressly provided that no ORRI
                shall be paid nor shall accrue upon any production used for operating,
                development or production purposes upon the lands covered by a Lease,
                or
                that portion of any production returned to the lands covered by a
                Lease
                for operating, development or production purposes or upon that portion
                of
                production which is unavoidably
                lost;

            

    

    

    
      	 	
              3.4

            	
              The
                ORRI
                in
                any Lease may be pooled and unitized in the same manner and under
                the same
                and identical terms, conditions and provisions as the lessors’ royalty may
                be pooled and unitized under the terms of the Lease to which such
                ORRI
                is
                applicable;

            

    

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

       

    

    
      	 	
              3.5

            	
              No
                obligations, either express or implied, shall arise by reason of
                this
                assignment of the ORRI by Assignor which shall obligate Assignor
                to keep
                and to maintain any of the Leases in force and effect either by the
                payment of rentals, compensatory royalty or other payments, or by
                the
                drilling of any wells, it being expressly understood that Assignee
                is to
                receive Assignee’s ORRI only out of the production if, as and when
                produced, saved and sold at the will of Assignor from the lands under
                the
                terms and provisions of the Leases, and Assignor may release any
                of the
                Leases, or any part thereof, or permit any of the Leases or any part
                thereof, to revert or to terminate at will and without liability
                to
                Assignor.

            

    

    

    TO
      HAVE
      AND TO HOLD, all and singular, the ORRI unto Assignee and Assignee’s successors
      in title and assigns forever. Assignor agrees to warrant and forever defend
      title to the ORRI unto Assignee, its successors and assigns, against the claims
      and demands of all persons claiming, or to claim the same, or any part thereof
      by, through or under Assignor, but not otherwise. This Assignment is made with
      full substitution and subrogation of Assignee in and to all covenants,
      indemnities, representations and warranties by others heretofore given or made
      with respect to the ORRI or any part thereof.

    

    As
      used
      in this Assignment: “Leases” means the oil, gas and mineral leases and other
      real property described on Exhibit A attached to and made a part of this
      Assignment; and “Wells” means the oil and gas wells located on or attributable
      to the Leases and described on Exhibit B or Exhibit C attached to and made
      a
      part of this Assignment and for purposes of paragraphs 1.1 and 1.3 above any
      well later drilled on the lands covered by each Lease owned by
      Assignor.

    

    Assignor
      agrees to execute, to acknowledge and to deliver to Assignee any additional
      instruments, notices, division orders, transfer orders and other documents
      and
      to do any other acts and things which may be necessary to more fully and
      effectively assign and convey to Assignee and Assignee’s
      successors in title and assigns the ORRI intended to be assigned
      hereby.

    

    This
      Assignment shall be binding upon Assignor and Assignee as well as their
      respective successors and assigns.

    

    [Remainder
      of page intentionally blank. Signatures are on next page.]

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    Signed:
      May 11, 2007, TO BE EFFECTIVE, HOWEVER, AS OF October 1, 2006, at 7:00 a.m.
      Central Daylight Savings Time (the “Effective Time”).

     

    
      	 	 	 	 
	ASSIGNOR:	
              ASSIGNEE:

            
	 	 	 
	
              
                MASTERS
                  RESOURCES, L.L.C.

              

            	
              
                MASTERS
                  PIPELINE, L.L.C.

              

            
	 	 	 
	By:  	/s/ John W. Barton 	By:  	/s/
              John W. Barton
              
	 	
              

              John
                W. Barton, Managing Member

            	 	
              

              
                John
                  W. Barton, Managing Member

              

            
	 	 	 	 
	
              MASTERS
                OIL & GAS, L.L.C.

            	 	 
	 	 	 
	By:  	/s/ John W. Barton 	 	 
	 	
              

              John
                W. Barton, Managing Member

            	 	 

    

    
EXHIBITS:

     

    
      
        	
                Exhibit
                  A

              	
                Leases

              
	
                Exhibit
                  B

              	
                Proved
                  Undeveloped Reserves and Proved Non-Producing Reserves

              
	
                Exhibit
                  C

              	
                Proved
                  Developed Producing Reserves

              

      

    

     

    
      Signature
        Page to Assignment of Overriding Royalty

    

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    
      
        	
                STATE
                  OF TEXAS

              	
                §

              
	 	
                §

              
	
                COUNTY
                  OF HARRIS

              	
                §

              

      

    

    

    This
      instrument was acknowledged before me this 11th
      day of
      May, 2007, by John W. Barton, Managing Member of Masters Resources, L.L.C.,
      a
      Texas limited liability company, on behalf of each of said limited liability
      companies.

     

    
      	 	 	 
	RHONDEE M. DAMON	
            	/s/ Rhondee
              M. Damon
	
              Notary Public, State of
                Texas

              
                My
                  Commission Expires

                April
                  26, 2009

              

            	
              
Notary
              Public in and for the State of
              Texas

    

     

    
      	
              STATE
                OF TEXAS

            	
              §

            
	 	
              §

            
	
              COUNTY
                OF HARRIS

            	
              §

            

    

    

    This
      instrument was acknowledged before me this 11th
      day of
      May, 2007, by John W. Barton, Managing Member of Masters Oil & Gas, L.L.C.,
      a Texas limited liability company, on behalf of each of said limited liability
      companies.

     

    
      	 	 	 
	RHONDEE M. DAMON	
            	/s/ Rhondee
              M. Damon
	
              Notary Public, State of
                Texas

              
                My
                  Commission Expires

                April
                  26, 2009

              

            	
              
Notary
              Public in and for the State of
              Texas

    

     

    
      	
              STATE
                OF TEXAS

            	
              §

            
	 	
              §

            
	
              COUNTY
                OF HARRIS

            	
              §

            

    

    

    This
      instrument was acknowledged before me this 11th
      day of
      May, 2007, by John W. Barton, Managing Member of Masters Pipeline, LLC, a Texas
      limited liability company, on behalf of said limited liability
      company.

     

    
      	 	 	 
	RHONDEE M. DAMON	
            	/s/ Rhondee
              M. Damon
	
              Notary Public, State of
                Texas

              
                My
                  Commission Expires

                April
                  26, 2009

              

            	
              
Notary
              Public in and for the State of
              Texas

    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

    (Attached
      to and made part of Assignment of Overriding Royalty dated as of 7:00 a.m.
      Central Daylight Savings Time on October 1, 2006, from Masters Resources, L.L.C.
      and Masters Oil & Gas, L.L.C., to Masters Pipeline,
      L.L.C.)

    

    
      
        
        

      

      
        7

        
          

        

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      
        
        

      

    

    EXHIBIT
      B

    (Attached
      to and made part of Assignment of Overriding Royalty dated as of 7:00 a.m.
      Central Daylight Savings Time on October 1, 2006, from Masters Resources, L.L.C.
      and Masters Oil & Gas, L.L.C., to Masters Pipeline,
      L.L.C.)

    

    PROVED
      UNDEVELOPED RESERVES AND PROVED NON-PRODUCING RESERVES

     

    
      
        	
                FIELD

              	 	
                LEASE/WELL

              	 	
                RESERVE
                  CATEGORY

              
	
                FISHERS
                  REEF

              	 	
                STATE
                  TRACT 01-4A #12 (BP01)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                FISHERS
                  REEF

              	 	
                STATE
                  TRACT 01-4B #68H (BP01)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                FISHERS
                  REEF

              	 	
                STATE
                  TRACT 09-12B #112 (BP01)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                FISHERS
                  REEF

              	 	
                STATE
                  TRACT 01-4A #89F (BP02)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                FISHERS
                  REEF

              	 	
                STATE
                  TRACT 05-8A #01 (BP01)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                FISHERS
                  REEF

              	 	
                STATE
                  TRACT 05-8A #01 (BP02)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                FISHERS
                  REEF

              	 	
                STATE
                  TRACT 06-7A #01 (BP-01)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                FISHERS
                  REEF

              	 	
                STATE
                  TRACT 05-8A #02 (BP01)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                FISHERS
                  REEF

              	 	
                STATE
                  TRACT 05-8A #02 (BP02)

              	 	
                PROVED
                  BEHIND PIPE

              
	 	 	 	 	 
	
                POINT
                  BOLIVAR NORTH

              	 	
                STATE
                  TRACT 343 #014 (BP01)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                POINT
                  BOLIVAR NORTH

              	 	
                STATE
                  TRACT 343 #014 (BP02)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                POINT
                  BOLIVAR NORTH

              	 	
                STATE
                  TRACT 343 #014 (BP03)

              	 	
                PROVED
                  BEHIND PIPE

              
	 	 	 	 	 
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 200 186 (BP01)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 200 200

              	 	
                PROVED
                  BEHIND PIPE

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 247 001

              	 	
                PROVED
                  BEHIND PIPE

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 247 021 (BP02)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 247 021 (BP01)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 225 207 (BP01)

              	 	
                PROVED
                  BEHIND PIPE

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	
                FIELD

              	 	
                LEASE/WELL

              	 	
                RESERVE
                  CATEGORY

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 246 174D (BP01)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 246 181 (BP01)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 246 181 (BP02)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 247 023 (BP01)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 224 106 (BP01)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 224 106 (BP02)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 247 175-L (BP01)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 247 175-L (BP02)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 246 174D (BP02)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 247 212 (BP01)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 247 192 (BP01)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 247 212 (BP02)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 225 146

              	 	
                PROVED
                  BEHIND PIPE

              
	 	 	 	 	 
	
                TRINITY
                  BAY

              	 	
                TRINITY
                  BAY ST UNIT #1 053 (BP1)

              	 	
                PROVED
                  BEHIND PIPE

              
	
                TRINITY
                  BAY

              	 	
                TRINITY
                  BAY ST UNIT #1 135 (BP01)

              	 	
                PROVED
                  BEHIND PIPE

              
	 	 	 	 	 
	
                FISHERS
                  REEF

              	 	
                STATE
                  TRACT 01-4A ACW #01L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                FISHERS
                  REEF

              	 	
                STATE
                  TRACT 01-4A ACW #01U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                FISHERS
                  REEF

              	 	
                STATE
                  TRACT 02-3A ACW #04U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                FISHERS
                  REEF

              	 	
                STATE
                  TRACT 46 ACW #05U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                FISHERS
                  REEF

              	 	
                STATE
                  TRACT 46 ACW #08L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                FISHERS
                  REEF

              	 	
                STATE
                  TRACT 46 ACW #08U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                FISHERS
                  REEF

              	 	
                STATE
                  TRACT 46 ACW #09L

              	 	
                PROVED
                  UNDEVELOPED

              

      

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      
        	
                FIELD

              	 	
                LEASE/WELL

              	 	
                RESERVE
                  CATEGORY

              
	
                FISHERS
                  REEF

              	 	
                STATE
                  TRACT 01-4B ACW #02

              	 	
                PROVED
                  UNDEVELOPED

              
	
                FISHERS
                  REEF

              	 	
                STATE
                  TRACT 02-3A ACW #04L

              	 	
                PROVED
                  UNDEVELOPED

              
	 	 	 	 	 
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 200 ACW #12L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 200 ACW #12U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 200 ACW #13L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 200 ACW #01L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 200 ACW #13U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 200 ACW #01U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 200 ACW #03L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 200 ACW #03U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 224 ACW #15L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 224 ACW #15U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 224 ACW #19L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 224 ACW #19U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 224 ACW #23U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 224 ACW #21L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 224 ACW #21U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 224 ACW #22L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 224 ACW #22U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 224 ACW #23L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 225 ACW #05L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 225 ACW #05U

              	 	
                PROVED
                  UNDEVELOPED

              

      

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      
        	
                FIELD

              	 	
                LEASE/WELL

              	 	
                RESERVE
                  CATEGORY

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 225 ACW #07L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 225 ACW #07U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 225 ACW #24L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 225 ACW #26L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 225 ACW #26U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 247 ACW #30U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 246 ACW #27L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 246 ACW #27U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 247 ACW #10L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 247 ACW #10U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 247 ACW #33L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 247 ACW #28L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 247 ACW #28U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 247 ACW #29L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 247 ACW #29U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 247 ACW #30L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 224 ACW #16U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 224 ACW #17L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 224 ACW #18L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 224 ACW #18U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 246 ACW #35L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 246 ACW #35U (BP-02)

              	 	
                PROVED
                  UNDEVELOPED

              

      

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      
        	
                FIELD

              	 	
                LEASE/WELL

              	 	
                RESERVE
                  CATEGORY

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 200 ACW #34L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 200 ACW #34U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 247 ACW #33U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 247 119 OFFSET

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 246 ACW #36U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 246 ACW #36L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 246 ACW #35L (BP-01)

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 246 ACW #35U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 246 ACW #40L

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 246 ACW #40U

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 246 ACW #40L (BP-01)

              	 	
                PROVED
                  UNDEVELOPED

              
	
                RED
                  FISH REEF

              	 	
                STATE
                  TRACT 204 002 LOC

              	 	
                PROVED
                  UNDEVELOPED

              
	 	 	 	 	 
	
                TRINITY
                  BAY

              	 	
                TRINITY
                  BAY ST UNIT #1 025A

              	 	
                PROVED
                  UNDEVELOPED

              

      

    

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    EXHIBIT
      C

    (Attached
      to and made part of Assignment of Overriding Royalty dated as of 7:00 a.m.
      Central Daylight Savings Time on October 1, 2006, from Masters Resources, L.L.C.
      and Masters Oil & Gas, L.L.C., to Masters Pipeline,
      L.L.C.)

    

    PROVED
      DEVELOPED PRODUCING RESERVES

     

    
      
        	
                FIELD

              	 	
                LEASE/WELL

              	 	
                RESERVE
                  CATEGORY

              
	
                FISHERS
                  REEF

              	 	
                ST
                  2-3A #1

              	 	
                PROVED

              
	
                FISHERS
                  REEF

              	 	
                ST
                  5-8A #2

              	 	
                PROVED

              
	
                FISHERS
                  REEF

              	 	
                ST
                  6-7A#1

              	 	
                PROVED

              
	
                FISHERS
                  REEF

              	 	
                ST
                  5-8A #1

              	 	
                PROVED

              
	
                FISHERS
                  REEF

              	 	
                ST
                  46 #10

              	 	
                PROVED

              
	
                FISHERS
                  REEF

              	 	
                ST
                  9-12B #1

              	 	
                PROVED

              
	
                FISHERS
                  REEF

              	 	
                ST
                  46 #51

              	 	
                PROVED

              
	
                FISHERS
                  REEF

              	 	
                ST
                  46 # 115

              	 	
                PROVED

              
	 	 	 	 	 
	
                POINT
                  BOLIVAR NORTH

              	 	
                ST
                  343 #9

              	 	
                PROVED

              
	
                POINT
                  BOLIVAR NORTH

              	 	
                ST
                  343 #14

              	 	
                PROVED

              
	 	 	 	 	 
	
                RED
                  FISH REEF

              	 	
                ST
                  132 #1

              	 	
                PROVED

              
	
                RED
                  FISH REEF

              	 	
                ST
                  200 #195

              	 	
                PROVED

              
	
                RED
                  FISH REEF

              	 	
                ST
                  224 #141-U

              	 	
                PROVED

              
	
                RED
                  FISH REEF

              	 	
                ST
                  224 #176

              	 	
                PROVED

              
	
                RED
                  FISH REEF

              	 	
                ST
                  224 #179

              	 	
                PROVED

              
	
                RED
                  FISH REEF

              	 	
                ST
                  224 #185

              	 	
                PROVED

              
	
                RED
                  FISH REEF

              	 	
                ST
                  225 #50

              	 	
                PROVED

              
	
                RED
                  FISH REEF

              	 	
                ST
                  225 #132

              	 	
                PROVED

              
	
                RED
                  FISH REEF

              	 	
                ST
                  225 #139

              	 	
                PROVED

              
	
                RED
                  FISH REEF

              	 	
                ST
                  225 #184

              	 	
                PROVED

              
	
                RED
                  FISH REEF

              	 	
                ST
                  246 #1

              	 	
                PROVED

              
	
                RED
                  FISH REEF

              	 	
                ST
                  246 #120

              	 	
                PROVED

              
	
                RED
                  FISH REEF

              	 	
                ST
                  246 #182

              	 	
                PROVED

              
	
                RED
                  FISH REEF

              	 	
                ST
                  246 #183

              	 	
                PROVED

              
	
                RED
                  FISH REEF

              	 	
                ST
                  247 #23

              	 	
                PROVED

              
	
                RED
                  FISH REEF

              	 	
                ST
                  247 
                  #106

              	 	
                PROVED

              
	
                RED
                  FISH REEF

              	 	
                ST
                  247 #175-L

              	 	
                PROVED

              
	
                RED
                  FISH REEF

              	 	
                ST
                  247 #188

              	 	
                PROVED

              
	
                RED
                  FISH REEF

              	 	
                ST
                  247 #198

              	 	
                PROVED

              
	 	 	 	 	 
	
                TRINITY
                  BAY

              	 	
                ST
                  UNIT 1#1

              	 	
                PROVED

              
	
                TRINITY
                  BAY

              	 	
                ST
                  UNIT 1#12

              	 	
                PROVED

              
	
                TRINITY
                  BAY

              	 	
                ST
                  UNIT 1#13

              	 	
                PROVED

              
	
                TRINITY
                  BAY

              	 	
                ST
                  UNIT 1#28

              	 	
                PROVED

              
	
                TRINITY
                  BAY

              	 	
                ST
                  UNIT 1#29

              	 	
                PROVED

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	
                FIELD

              	 	
                LEASE/WELL

              	 	
                RESERVE
                  CATEGORY

              
	
                TRINITY
                  BAY

              	 	
                ST
                  UNIT 1#32

              	 	
                PROVED

              
	
                TRINITY
                  BAY

              	 	
                ST
                  UNIT 1#35

              	 	
                PROVED

              
	
                TRINITY
                  BAY

              	 	
                ST
                  UNIT 1#37

              	 	
                PROVED

              
	
                TRINITY
                  BAY

              	 	
                ST
                  UNIT 1#38

              	 	
                PROVED

              
	
                TRINITY
                  BAY

              	 	
                ST
                  UNIT 1#51

              	 	
                PROVED

              
	
                TRINITY
                  BAY

              	 	
                ST
                  UNIT 1#63D

              	 	
                PROVED

              
	
                TRINITY
                  BAY

              	 	
                ST
                  UNIT 1#64

              	 	
                PROVED

              
	
                TRINITY
                  BAY

              	 	
                ST
                  UNIT 1#68

              	 	
                PROVED

              
	
                TRINITY
                  BAY

              	 	
                ST
                  UNIT 1#75F

              	 	
                PROVED

              
	
                TRINITY
                  BAY

              	 	
                ST
                  UNIT 1#122

              	 	
                PROVED

              
	
                TRINITY
                  BAY

              	 	
                ST
                  UNIT 1#124

              	 	
                PROVED

              
	
                TRINITY
                  BAY

              	 	
                ST
                  UNIT 1#130

              	 	
                PROVED

              
	
                TRINITY
                  BAY

              	 	
                ST
                  UNIT 1#133

              	 	
                PROVED

              
	
                TRINITY
                  BAY

              	 	
                ST
                  UNIT 1 #135

              	 	
                PROVED

              

      

    

     

    
      
         

      

      
        2Unassociated Document

    
      Exhibit
        10.42

       

      EXECUTION
        COPY 

    

    
INDEMNITY
      AGREEMENT

     

    This
      INDEMNITY AGREEMENT (herein so called) dated as of May 11, 2007 (the
“Effective
      Date”)
      is
      made by MASTERS
      RESOURCES, L.L.C., MASTERS OIL & GAS, L.L.C., and MASTERS PIPELINE,
      L.L.C.,
      all
      Texas limited liability companies (collectively, “Masters”),
      and
TEKOIL
      & GAS GULF COAST, LLC, a
      Delaware limited liability company (“Tekoil”).
      In
      this Indemnity Agreement, Masters, collectively or individually, and Tekoil,
      individually, are sometimes called the “Party”,
      and
      Masters and Tekoil are collectively sometimes called the “Parties”).

     

    RECITALS

     

    Masters
      Resources, L.L.C. and Masters Oil & Gas, L.L.C. (collectively, “Sellers”)
      and Tekoil have entered into a Purchase and Sale Agreement dated effective
      as
      of
      October
      1,
      2006,
      as
      amended (collectively, the “Purchase
      Agreement”),
      pursuant to which Sellers have agreed to sell, and Tekoil has agreed to
      purchase, on terms acceptable to both, certain properties covering lands in
      Galveston Bay, Chambers and Galveston Counties, Texas (the “Subject
      Properties”).
      In
      the Purchase Agreement, inter
      alia,
      Tekoil
      agreed to allow Sellers to reserve an overriding royalty interest in portions
      of
      the Subject Properties and Masters agreed to indemnify and hold harmless Tekoil
      from the “Claims”
      (defined herein). Sellers have requested that the overriding royalty that was
      to
      be reserved by the Sellers be granted instead to Masters Pipeline, L.L.C. Tekoil
      has agreed to that request upon the conditions, inter
      alia,
      that
      (a) Masters Pipeline, L.L.C. join in the indemnity of Tekoil required by the
      Purchase Agreement, (b) that the overriding royalty interest to be granted
      to
      Masters Pipeline, L.L.C. be made the subject of a lien and security interest
      securing to secure those indemnity obligations, and (c) that the indemnity
      obligations of Masters also be secured by a security interest covering one
      or
      more certificates of deposit in the original principal amount of not less than
      One Million and No\100 Dollars ($1,000,000.00). Contemporaneously with the
      execution and delivery of this Indemnity Agreement, the transaction contemplated
      by the Purchase Agreement will close and, as a condition to and as a portion
      of
      the consideration for, Tekoil’s purchase of the Subject Properties, the Parties
      agree as set out in this Indemnity Agreement.

     

    1. Claims.
      As used
      in this Indemnity Agreement the term “Claims”
means
      any and all (a) liabilities or claims, or fines, penalties or assessments by
      any
“Person”
      (defined herein) (insofar as not prohibited by law), or losses, damages costs
      or
      expenses (including costs of defense, settlement and reasonable attorneys’
fees), which directly or indirectly arise out of or by virtue of either or
      both
      of the following causes of action listed below, AND
      SHALL INCLUDE WITHOUT LIMITATION ANY INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE,
      EXEMPLARY, OR CONSEQUENTIAL DAMAGE, COST, EXPENSE OR OTHER LIABILITY, OR LOSS
      OF
      REVENUE OR OPPORTUNITY, LOSS OF GOODWILL, DOWN TIME COSTS OR SIMILAR CLAIMS
      OR
      SUCH CLAIMS BY THIRD PARTIES AGAINST TEKOIL, WHETHER ARISING OUT OF CONTRACT,
      TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, OR ANY OTHER CAUSE OF OR FORM
      OF
      ACTION WHATSOEVER, and
      (b)
      any threat to bring any action or the bringing of an action seeking to assert
      against, or collect from, or impose upon, Tekoil, or assets purchased by Tekoil
      from Masters, any such liabilities or claims, or fines, penalties or assessments
      by any Person, or losses, damages costs or expenses (including costs of defense,
      settlement and reasonable attorneys’ fees):

    

    
      	 	
              1.

            	
              Erskine
                Energy Partners II, L.P. v. Masters Resources L.L.C.,
                Case No. 2007-15466, pending in the 55th
                Judicial District Court of Harris County, Texas,
                or

            

    

    

    
      	 	
              2.

            	
              Jiva
                International, Inc. v. Ashi Energy Services LLC,
                Cause No. 221687, pending in 151st
                Judicial District Court of Harris County,
                Texas.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    As
      used
      in this Indemnity Agreement, “Person”
means
      any natural person, corporation, limited or general partnership, joint venture,
      association, limited liability company, trust, bank, trust company, land trust,
      business trust, other entity or organization, including, without limitation,
      any
“Governmental
      Authority”,
      where
“Governmental
      Authority”
means
      any nation or government, any state or political subdivision thereof, any
      Federal, state, municipal, local, territorial or other governmental department,
      commission, board, bureau, agency, regulatory authority, instrumentality,
      judicial or administrative body, domestic or foreign, exercising executive,
      legislative, judicial, regulatory or administrative functions of or pertaining
      to government.

    

    2. Indemnity.

     

    2.1. Masters
      jointly and severally agrees
      to
      indemnify Tekoil against, and to save Tekoil harmless from, any and all
      Claims.

     

    2.2. Upon
      obtaining knowledge of any effort or intent by a Person to assert a Claim,
      or
      the assertion of a Claim, Tekoil shall, within ten (10) days of obtaining such
      knowledge, deliver a written notice of Claim to Masters; provided, however,
      the
      failure to provide (or timely provide) a written notice of Claim shall not
      affect Tekoil’s rights to indemnification except that Masters is not obligated
      to indemnify Tekoil for the increased amount of any damages which would
      otherwise have been payable to the extent that the increase resulted from
      Tekoil’s failure to deliver timely a notice of Claim.

    

    2.3. Masters
      shall have the right to control the defense of and shall defend, in good faith
      and at its own expense, any Claim set forth in a notice of Claim. Tekoil may
      participate in the defense, at its expense, except that Tekoil’s participation
      shall not be at Tekoil’s expense if (a) Masters chooses counsel not reasonably
      acceptable to Tekoil, (b) Masters does not use “Commercially
      Reasonable Efforts”
      (defined herein) to pursue such defense, or (c) both Masters and Tekoil are
      defendants in a Claim and Tekoil shall reasonably conclude that (i) there may
      be
      legal defenses available to it which are inconsistent with those available
      to
      Masters or (ii) there may be additional or inconsistent non-monetary
      consequences to it in such Claim. Tekoil shall have a right to notice of any
      settlement, and Masters shall not execute or otherwise agree to any settlement
      or consent decree which requires the payment of money or imposes any obligations
      or restrictions on Tekoil’s operations or the Subject Properties without
      Tekoil’s prior written consent, which consent shall not be unreasonably
      withheld, conditioned or delayed. Notwithstanding the foregoing, Tekoil shall
      have the right to pay or settle any such Claim, so long as in such event Tekoil
      shall waive any right to indemnity therefor by Masters. However, if Masters
      elects not to defend or settle any Claim and Tekoil defends, settles or
      otherwise deals with any Claim, (x) Tekoil shall provide fifteen (15) days’
advance written notice to Masters of any settlement, which settlement may be
      without the consent of Masters, and shall act reasonably and in accordance
      with
      its good faith business judgment; and (y) Masters shall pay such settlement
      in
      accordance with the terms thereof and reimburse Tekoil for its costs and
      expenses and reasonable attorneys fees incurred in connection therewith within
      ten (10) days of Tekoil’s demand for same. The Parties shall cooperate fully
      with each other in connection with the defense, negotiation or settlement of
      any
      Claim. As used in this Indemnity Agreement “Commercially
      Reasonable Efforts”
means,
      when used with reference to either Party, such prompt, substantial and
      persistent efforts of the Party as are commercially reasonable under the
      circumstances in the industry of such Party; however, “Commercially Reasonable
      Efforts shall not require a Party to expend unlimited resources or amounts
      of
      money, but only such amounts as are commercially reasonable in the applicable
      circumstances.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    2.4. If
      any
      Claim is asserted or pursued by a Person against Tekoil, Tekoil shall use its
      Commercially Reasonable Efforts to make available to Masters’ counsel those
      Persons under Tekoil’s control whose assistance, testimony or presence is
      necessary to assist Masters’ counsel in evaluating and in defending such Claim;
      provided, however, that any such access shall be conducted in such a manner
      as
      not to interfere unreasonably with the operations of the business of Tekoil
      and
      failure to use Commercially Reasonable Efforts to provide such necessary
      witnesses or access to information shall not excuse Master’s performance of its
      obligations under this Indemnity Agreement.

    

    2.5. The
      provisions of this Indemnity Agreement provide the exclusive remedy of the
      Parties and their respective “Related
      Persons”
with
      respect to all Claims.
      As used
      in this Indemnity Agreement, “Related
      Person”
means,
      as regards either Party, any officer, director, shareholder, member, partner,
      agent, employee, contractor, subcontractor, licensee or invitee of such Party
      or
      any of such Party’s “Affiliates”;
      and
“Affiliate”
means
      any Person that directly or indirectly (through one or more intermediaries)
      controls or is controlled by or is under common “control”
with
      the Person specified; and “control”
of
      a
      Person means the power, direct or indirect, to cause or determine the direction
      of the management and policies of such Person (whether by contract or
      otherwise).

    

    3. Security
      Interest.
      In order
      to secure the obligations of Masters arising out of this Indemnity Agreement,
      Masters shall deposit the sum of ONE MILLION AND NO/100 DOLLARS ($1,000,000.00)
      into an account pursuant to the terms and provisions of a Pledge and Security
      Agreement of even date herewith, copy of which marked Exhibit A is attached
      hereto and made a part hereof for all purposes. In addition to the foregoing,
      Masters Pipeline, L.L.C. shall, contemporaneously herewith, execute and deliver
      to Tekoil Deed
      of
      Trust, Mortgage, Assignment, Security Agreement, Fixture Filing, and Financing
      Statement substantially
      in the form of Exhibit B attached hereto and made part hereof for all purposes.
      The liens and security interests created by both said documents shall remain
      in
      full force and effect , until this Indemnity Agreement is terminated by the
      Parties in accordance with the provisions hereof.

    

    4. Term
      of Indemnity Agreement.
      This
      rights and obligations of the Parties under this Indemnity Agreement shall
      commence on the Effective Date and shall continue until terminated by the
      written agreement of the Parties, which termination shall not be granted unless
      and until, as to each of the proceedings described in Section 1 of this
      Indemnity Agreement, (a) a final non-appealable judgment in favor of Masters
      has
      been rendered, or (b) the proceedings are dismissed and such dismissal is final
      and not appealable, or (c) execution and delivery of written settlement
      agreement containing releases of liability and covenants not to sue in favor
      of
      Tekoil that have been approved in writing by Tekoil prior to the execution
      and
      delivery thereof, together with an agreed order of dismissal with prejudice
      to
      re-filing, and an Order of the Court to that effect signed and entered in
      accordance with the applicable Rules of Civil Procedure.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    5. Reliance.
      This
      Indemnity Agreement is made for the purpose of inducing Tekoil to close the
      transaction contemplated by the Purchase Agreement. Masters recognizes that
      Tekoil is relying upon this Indemnity Agreement in its election to close the
      transaction contemplated by the Purchase Agreement and that but for the
      obligations and undertakings of Masters herein, Tekoil would not close the
      transaction contemplated by the Purchase Agreement.

     

    6. Governing
      Law.
      THIS
      INDEMNITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
      LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO CONFLICTS OF LAW
      PRINCIPLES.

     

    7. Miscellaneous.
      This
      Indemnity Agreement embodies the entire agreement between the Parties with
      respect to the joint and several obligations of Masters to indemnify and hold
      harmless Tekoil. THIS
      WRITTEN INDEMNITY AGREEMENT REPRESENTS THE FINAL INDEMNITY AGREEMENT REGARDING
      CLAIMS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
      CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
      UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
      Except
      as set out in Section 2.5 above, this Indemnity Agreement, and Tekoil’s rights
      hereunder, are in addition to, and not in lieu of, other rights and remedies
      of
      Tekoil under applicable law.

     

    8. Assignment.
      Tekoil’s
      rights under this Indemnity Agreement may be assigned in connection with any
      assignment or transfer of the Subject Properties.

     

    9. Waiver.
      No
      course of dealing between Masters and Tekoil, nor any failure to exercise,
      nor
      any delay in exercising, any right, power or privilege of, Tekoil hereunder
      or
      under any other document relating to this transaction shall operate as a waiver
      thereof; nor shall any single or partial exercise of any right, power or
      privilege hereunder or thereunder preclude any other or further exercise thereof
      or the exercise of any other right, power or privilege.

     

    [Remainder
      of page intentionally blank. Signatures are on next page.]

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    EXECUTED
      as of the Effective Date.

     

    
      	 MASTERS
              RESOURCES, LLC,
              a
              Texas limited liability company	 	TEKOIL
              & GAS GULF COAST, LLC, a
              Delaware limited liability company
	 	 	 	 	 
	 	 	 	 	 
	By:	
               /s/
                John W. Barton

            	 	By:	Tekoil & Gas Corporation, Its Managing
              Member
	 	
              

              John
                W. Barton, Managing Member

            	 	 	
            
	 	 	 	By:	/s/ Mark S. Western
	 	 	 	 	
              
Mark
              S. Western, CEO & Chairman of the Board of Directors
	 	 	 	 	 

    

     

    
      	MASTERS
              OIL & GAS, LLC,
              a
              Texas limited liability company	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	By:	/s/
              John W. Barton	 	 	
            
	 	
              

              John
                W. Barton, Managing Member

            	 	 	
            
	 	
            	 	 	
            
	 	 	 	 	 
	
              MASTERS
                PIPELINE, L.L.C.,
                a
                Texas limited liability company

            	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	By:	/s/ John W. Barton	 	 	 
	 	
              

              John
                W. Barton, Managing Member

            	 	 	 

    

    

      
        	
                Exhibit
                  A

              	 	
                Pledge
                  and Security Agreement

              
	 	 	 
	
                Exhibit
                  B

              	 	
                Deed
                  of Trust, Mortgage, Assignment, Security Agreement, Fixture Filing
                  and
                  Financing Statement

              

      

    

     

    
      
        
        

      

      
        5

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