Document:

FORBEARANCE
      AGREEMENT

    

    This
      Forbearance Agreement (this “Agreement”)
      dated
      as of June 26, 2008, is by and among Tekoil
      and Gas Gulf Coast, LLC,
      a
      Delaware limited liability company (the “Company”),
      Tekoil
      & Gas Corporation,
      a
      Delaware corporation, as guarantor (the “Parent”),
      the
      lenders party to the Credit Agreement described below (“Lenders”),
      J.
      Aron & Company,
      as Lead
      Arranger and as Syndication Agent (in such capacities, “Syndication
      Agent”),
      and
J.
      Aron & Company,
      as
      Administrative Agent for such Lenders (in such capacity, the “Administrative
      Agent”)
      and as
      counterparty to the Company under the ISDA Master Agreement referred to below
      (in such capacity, “Lender
      Counterparty”).

     

    RECITALS

     

    A. Reference
      is made to that certain Credit and Guaranty Agreement dated as of May 11, 2007
      among the Company, Parent, the Lenders, the Syndication Agent and the
      Administrative Agent (as amended or supplemented to the date hereof, the
“Credit
      Agreement”).
      Reference is further made to that certain ISDA Master Agreement dated as of
      May
      11, 2007, between the Company and Lender Counterparty (as amended, supplemented,
      or restated to the date hereof and together with all confirmations issued
      thereunder, the “ISDA
      Master Agreement”).
      Reference is further made to that certain Limited Guaranty dated October 24,
      2007, made by Mark Western (“Western”)
      in
      favor of the Administrative Agent for the benefit of the Lenders (the
“Western
      Guaranty”).

     

    B. Reference
      is made to the “Existing
      Defaults”
      described in that certain Default Notice dated May 1, 2008 from Administrative
      Agent to the Company, Parent and Western and to the “Defaults” and “Events of
      Default” under the ISDA Master Agreement described in that certain Default
      Letter dated June 11, 2008, from Lender Counterparty to Borrower and the prior
      default letters referenced therein (collectively, the “ISDA
      Defaults”).

     

    C. Parent
      filed a voluntary petition for relief under Chapter 11 of the United States
      Bankruptcy Code, 11 U.S.C. §§ 101, et
      seq.
      (the
“Bankruptcy
      Code”)
      on
      June 10, 2008, In
      re
      Tekoil & Gas Corporation,
      Case
      No. 08-8-0270 (the “Parent
      Bankruptcy”),
      in
      the United States Bankruptcy Court for the Southern District of Texas, Galveston
      Division (the “Bankruptcy
      Court”).
      In
      addition to the Existing Defaults and the ISDA Defaults, the Parent Bankruptcy
      constitutes an Event of Default under the Credit Agreement and the ISDA Master
      Agreement.

     

    D. The
      Company and Parent have requested that the Lenders, the Syndication Agent,
      the
      Administrative Agent and the Lender Counterparty, as applicable, forbear
      exercising remedies under the Transaction Documents (other than the Western
      Guaranty) with respect to the Parent Bankruptcy, the Existing Defaults and
      the
      ISDA Defaults for a limited period of time, subject to the terms and conditions
      below.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    E. The
      Lenders, the Syndication Agent, the Administrative Agent and the Lender
      Counterparty agree to the request of the Company and Parent to forbear
      exercising remedies under the Transaction Documents (other than the Western
      Guaranty) with respect to the Parent Bankruptcy, the Existing Defaults and
      the
      ISDA Defaults for a limited period of time, subject to the terms and conditions
      below.

     

    NOW
      THEREFORE, in consideration of their mutual undertakings, the Company, Parent,
      the Lenders, the Syndication Agent, the Administrative Agent and the Lender
      Counterparty hereby agree as follows:

     

    Section
      1. Definitions
      and Interpretations.
      As used
      in this Agreement, each of the terms defined in the opening paragraph and the
      Recitals above shall have the meanings assigned to such terms therein. Each
      term
      defined in the Credit Agreement and used herein without definition shall have
      the meaning assigned to such term in the Credit Agreement, unless expressly
      provided to the contrary. Article, Section, Schedule, and Exhibit references
      are
      to this Agreement, unless otherwise specified. Section headings have been
      inserted in this Agreement as a matter of convenience for reference only and
      it
      is agreed that such section headings are not a part of this Agreement and shall
      not be used in the interpretation of any provision of this
      Agreement.

     

    Section
      2. No
      Waiver of Defaults or Events of Default.
      The
      execution, delivery and performance of this Agreement by the parties hereto
      and
      the acceptance by Administrative Agent, Syndication Agent, Lender Counterparty
      and Lenders of the performance of the Company, Parent and Western herewith
      (A)
      shall not constitute a waiver or release by Administrative Agent, Syndication
      Agent, Lender Counterparty and Lenders of
      any
      Default, Event of Default that may now or hereafter exist under the Transaction
      Documents or
      the
      ISDA Master Agreement,
      and (B)
      shall be without prejudice to, and is not a waiver or release of, Administrative
      Agent’s, Syndication Agent’s, Lender Counterparty’s and Lenders’ rights at any
      time in the future after termination of this Agreement to exercise any and
      all
      rights conferred upon Administrative Agent, Syndication Agent, Lender
      Counterparty and Lenders by the Transaction Documents or the
      ISDA
      Master Agreement
      or
      otherwise at law or in equity, including the right to institute foreclosure
      proceedings, exercise its rights under assignments of production, exercise
      its
      rights under the UCC or other applicable law, call upon the Guarantees, and/or
      to institute collection proceedings against any Person. 

     

    Section
      3. Acknowledgment
      of Events of Default.
       The
      Company and Parent agree and acknowledge that the Parent Bankruptcy, the
      Existing Defaults and the ISDA Defaults currently exist.

     

    Section
      4. Forbearance.
      

     

    (a) So
      long
      as this Agreement is not terminated as provided in Section
      7,
      Administrative Agent, Syndication Agent, Lender Counterparty and Lenders agree
      that they will not exercise any rights or remedies under the Transaction
      Documents (other
      than the Western Guaranty) with
      respect to the Parent Bankruptcy, the Existing and
      the
      ISDA
      Defaults
      for a
      period beginning on the date first set forth above and ending on close of
      business October 31, 2008 (the “Effective
      Period”)
      provided, the Lender Counterparty reserves the right to terminate, and the
      Company will agree to terminate, any or all of the Hedging Contracts with Lender
      Counterparty during the Effective Period. 

     

    
      
        
        

      

      
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    (b) During
      the Effective Period, Lenders shall have no Commitment to fund any Loans under
      the Credit Agreement, except as set forth herein, and the Company shall not
      be
      required to make any regularly scheduled principal and interest payments due
      to
      the Lenders including any principal or interest payments due under the ISDA
      Master Agreement except the Company shall pay monthly, on the first Business
      day
      of each month, commencing July 1, 2008, an amount equal to 100% of Monthly
      Adjusted Net Cash Flow for the immediately preceding month to be applied by
      Administrative Agent in its sole discretion against the Obligations in such
      order as Administrative Agent may direct. “Monthly Adjusted Net Cash Flow” shall
      be calculated as provided under the definition of Adjusted Net Cash Flow except
      that it shall be computed on a monthly basis, not a quarterly basis.

     

    (c) Since
      the
      occurrence of the first of the Existing Defaults, in conformance with the Credit
      Agreement, and the ISDA Defaults, in conformance with the ISDA Master Agreement,
      the Obligations have accrued interest at the Post-Default Rate or the “Default
      Rate,” as applicable under the Credit Agreement and the ISDA Master Agreement.
      From and after the date of this Agreement until the Effective Date or its is
      otherwise terminated under the provisions of Section
      7,
      interest on the Obligations including without limitation, (i) to the extent
      permitted by applicable Law, any accrued but unpaid interest payments on the
      Obligations owed hereunder, and (ii) the average daily balance of the notional
      amount of hedges and all other unpaid amounts under ISDA Master Agreement,
      shall
      bear interest at the Effective Rate. 

     

    (d) Notwithstanding
      anything in this Section
      4 to
      the
      contrary, during the Effective Period the Company is, and shall remain,
      obligated to pay and account to Royalty Owner for all proceeds attributable
      to
      the ORRI. 

     

    (e) Upon
      the
      termination of the Effective Period, or under the provisions of Section
      7,
      all
      sums due and owing under the Notes and Transaction Documents shall be due and
      payable in full without further notice, and Administrative Agent, Syndication
      Agent, Lender Counterparty and Lenders
      may
      exercise any and all remedies available with respect to the Parent Bankruptcy,
      the Existing Defaults under the Transaction Documents and the ISDA Defaults
      under the ISDA Master Agreement, pursuant to applicable law, under equity,
      or
      otherwise. 

     

    (f) Administrative
      Agent, Syndication Agent, Lender Counterparty and Lenders make no commitment
      to,
      and currently do not expect under any circumstances to, extend the duration
      of
      the Effective Period. Further, nothing in this Agreement constitutes a waiver
      of
      the Parent Bankruptcy, the Existing Defaults and the ISDA Defaults, or any
      other
      existing or future Defaults or Events of Default or a waiver of Administrative
      Agent’s, Syndication Agent’s, Lender Counterparty’s and Lenders’ right to insist
      upon compliance by all other relevant parties with each Transaction Document,
      except as specifically set forth herein.

    
      
        
        

      

      
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    Section
      5. Conditions
      Precedent.
      Notwithstanding any contrary provision herein, the forbearance described in
      Section
      3
      above
      does not become effective unless and until:

     

    (a) The
      representations and warranties by the Company and Parent in this Agreement
      are
      true and correct;

     

    (b) Administrative
      Agent receives counterparts of this Agreement executed by each party on the
      signature page or pages of this Agreement; 

     

    (c) Administrative
      Agent receives an original fully executed Disbursement Request in form of
Exhibit
      A
      hereto;

     

    (d) The
      Company and Parent shall execute the amendment to the Management Services
      Agreement to provide for its termination, at the election of Administrative
      Agent, upon the expiration of the Effective Period or other termination event
      as
      provided under Section
      7 herein,
      in form of the First Amendment to Management Services Agreement attached as
      Exhibit
      B;
      and

     

    (e) Administrative
      Agent receives sufficient counterparts of original fully executed Instruction
      to
      Purchaser Letters completed with accurate information addressed to each of
      the
      Company’s current purchasers of production, gathering customers and other
      account parties in form of Exhibit
      D1 and
      D2
      hereto
      directing payments to the Collateral Account.

     

    Section
      6. Covenants
      during Effective Period.
      

     

    (a) The
      Company shall immediately grant Corporate Accounting Group (the “Financial
      Advisor”)
      full
      access to all of the Company’s and Parent’s books, records and personnel. The
      Financial Advisor shall report solely to the Administrative Agent and shall
      have
      no duties or obligations to the Company, Parent or Western.

     

    (b)
       Within
      ten days from the date hereof, Parent shall execute an amendment to the Equity
      Document in form satisfactory to Administrative Agent provide that (i) upon
      the
      expiration of the Effective Period or other termination event as provided under
      Section
      7 herein,
      Parent shall resign effective immediately as the Managing Member of the Company,
      without necessity of providing notice, written or otherwise and no acceptance
      of
      such resignation shall be necessary to make such action effective, (ii)
      Administrative Agent shall have the option to designate Goldman Sachs & Co.
      as the Managing Member or to appoint a non-member designee as Contract Managing
      Member, and (iii) Parent shall execute such amendments, consents, election
      ballots, or other documents as may be necessary, under the Equity Document
      as
      amended, to effectuate such resignation of Parent and designation of the new
      Managing Member to be selected at Administrative Agent’s option in its sole
      discretion upon the expiration of the Effective Period or other termination
      event as provided under Section
      7 herein.

    
      
        
        

      

      
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    (c)
       Parent
      shall use its best efforts to obtain the Bankruptcy Court’s approval of (i) the
      assumption pursuant to section 365(a) of the Bankruptcy Code of the Equity
      Document, as amended in accordance with the provisions above, and the Management
      Services Agreement, as amended in accordance with Exhibit
      B
      attached
      hereto, and (ii) this Agreement and all terms and conditions set forth herein,
      by entry of an order by the Bankruptcy Court entered on or before July 25,
      2008,
      in form and substance acceptable to the Administrative Agent.

     

    (d) The
      Company shall within three (3) business days of this Agreement close and shall
      cause the transfer all funds held by the Company in any banking accounts,
      depository accounts or trust accounts, and all funds held for the benefit of
      the
      Company in any Affiliate or third party banking accounts, depository accounts
      or
      trust accounts into the Collateral Account maintained at Amegy Bank subject
      to
      the control agreement in favor of Administrative Agent dated May 11, 2007 (the
      “Amegy
      Control Agreement”);
      provided, however, that the Parent shall not be required to close, or transfer
      funds from, the Parent’s debtor-in-possession account opened and maintained by
      the Parent in connection with the Parent Bankruptcy.

     

    (e) The
      Company shall within (3) business days of this Agreement provide a full
      accounting of all revenue received in April, May and June, 2008 and the use
      of
      those funds, such accounting to be in form and substance acceptable to the
      Administrative Agent.

     

    (f) The
      Company shall remit weekly reports delivered at 5:00 pm Houston, Texas time
      on
      Thursday of each week during the term of this Agreement regarding financial
      and
      operational matters, including a cash flow report and rolling 2-week and 13-week
      cash flow forecasts in a format to be designated by, and which otherwise is
      in
      form and substance acceptable the Administrative Agent. Provided that the
      Administrative Agent has approved the expenditures set forth in the rolling
      2-week cash flow forecasts and given it prior written consent, the Company
      shall
      be permitted to use funds maintained in the Collateral Account to pay
      expenditures set forth on the rolling 2-week cash flow forecasts.

     

    (g) The
      Company and Parent shall remit weekly reports delivered at 5:00 pm Houston,
      Texas time on Thursday of each week during the term of this Agreement regarding
      efforts to sell the Company or substantially all of the Company’s assets and/or
      to refinance the Obligations, including without limitation, the Hedging
      Contracts, including the names of potential purchasers, investors, or capital
      providers and copies of any term sheets, correspondence (including electronic
      correspondence) exchange in connection therewith in a format to be designated
      by, and which otherwise is in form and substance acceptable the Administrative
      Agent.

    
      
        
        

      

      
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    (h) Notwithstanding
      any conditions to the contrary under Section 5.20 of the Credit Agreement,
      upon
      written notice from Lender Counterparty, the Company shall agree to mutually
      terminate any or all of the existing Hedging Contracts and unless and until
      such
      written notification by Lender Counterparty, the Company shall maintain in
      effect for their full term (and will not sell, assign, transfer or novate)
      the
      Company’s existing Hedging Contracts covering no less than 70.0% of Company’s
      aggregate Projected Oil and Gas Production through the Maturity Date. Within
      three business day after the date of this Agreement, the Company shall agree
      to
      terminate any Hedging Contracts in excess of the 70.0% level under an agreement
      substantially in the form of the Partial Transaction Termination Agreement
      attached hereto as Exhibit
      C. From
      time
      to time thereafter, the Company shall terminate additional Hedging Contracts
      as
      may be necessary to comply with the 70% threshold based upon the Company’s
      Project Oil and Gas Production as such production is projected in subsequent
      Engineering Reports to be delivered after the date hereof pursuant to
Section
      5.2(e)
      of the
      Credit Agreement.

     

    (i) Within
      30
      days following execution of this Agreement, the Company shall retain a contract
      operator satisfactory to Administrative Agent to operate the Company’s Oil and
      Gas Properties under terms and conditions satisfactory to Administrative
      Agent.

     

    (j)
       The
      Company shall not enter into any agreements nor make any payments to Parent
      or
      Western or any of their respective affiliate(s) without the prior written
      consent from Administrative Agent. 

     

    (k) The
      Company shall not amend any production sales agreements or enter into any new
      production sales agreements without Administrative Agent’s prior written
      consent.

     

    (l) The
      Permitted G&A Expense Amount shall be $0, and there shall be no deduction
      for Permitted G&A Expense Amount included in the calculation of ANCF
      LOE.

     

    (m) The
      Company shall not make any capital expenditures from the Collateral or any
      proceeds thereof, including without limitation, any ANCF Capital Expenditures,
      without the Administrative Agent’s prior written consent. The Company may pay
      certain pre-approved accounts payable up to an aggregate amount of $1,500,000
      (the “Critical
      Vendor A/Ps”)
      described on Exhibit
      E
      hereto.
      The Lenders, through the Administrative Agent, shall advance up to $1,500,000
      to
      the Company from time to time to pay Critical Vendor A/Ps or other expenditures
      set forth on the Company’s 2-week rolling budget approved by Administrative
      Agent. Notwithstanding the Administrative Agent’s prior termination of its
      funding commitments under the Credit Agreement resulting from the Company’s
      Defaults, any advances made to the Company by the Lenders under this Agreement
      shall be deemed advances made under the Credit Agreement and shall be subject
      to
      the terms and conditions of the Credit Agreement.

    
      
        
        

      

      
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    (n) Parent
      and the Company shall actively market the Company and/or substantially all
      of
      the Company’s Oil and Gas Properties and shall by:

     

    (i) 
      July 21,
      2008, retain a broker acceptable to Administrative Agent with regional or
      national recognition of expertise in oil and gas asset dispositions (“Broker”)
      on terms and conditions satisfactory to Administrative Agent; 

     

    (ii)
       August
      15, 2008, (a) prepare or cause to be prepared by the Broker a final offering
      memorandum, (b) open or cause to be opened by the Broker a data room; and (c)
      invite or cause Broker to invite prospective bidders for purposes of soliciting
      offers to purchase the Oil and Gas Properties; 

     

    (iii) September
      15, 2008, deadline for receiving or causing to be received by Broker indications
      of interests from prospective buyers with a summary provided to the
      Administrative Agent, in addition to any other information requested by the
      Administrative Agent; 

     

    (iv) October
      1, 2008, enter into a purchase and sale agreement with a bona fide purchaser
      for
      the sale of substantially all of the Oil and Gas properties in form and
      substance satisfactory to Administrative Agent (“Approved Purchase and Sale
      Agreement”), which shall require a minimum cash deposit of at least 5% of the
      purchase price set forth in the Approved Purchase and Sale Agreement;
      and

     

    (v) October
      31, 2008, consummate the Approved Purchase and Sale Agreement, without any
      modifications, waivers or amendments to the Approved Purchase and Sale
      Agreement, except to the extent agreed in writing by Administrative
      Agent.

     

    Section
      7. Termination
      of Limited Forbearance.
      The
      limited forbearance will terminate upon the expiration of the Effective Period
      and shall be terminated upon the occurrence of any of the following events
      described below, but in the latter case, only after Administrative Agent has
      provided written notice of termination to the Company specifying the reasons
      for
      the termination:

     

    
      
        
        

      

      
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    (a) Any
      event
      or condition occurs on or after the date hereof which could be reasonably
      expected to have a Material Adverse Effect, excluding any Material Adverse
      Effect that exists as of the date of this Agreement.

     

    (b) This
      Agreement and the Parent’s assumption of the Equity Document, as amended, and
      the Management Services Agreement, as amended, are not approved by the
      Bankruptcy Court on or before July 25, 2008.

     

    (c) Any
      Default or Event of Default (other than the Parent Bankruptcy, the Existing
      Defaults and the ISDA Defaults) exists.

     

    (d) Any
      representation or warranty of the Company or Parent set forth herein is not
      true
      and correct.

     

    (e) Any
      change in the current members of the Board of Directors of Parent except to
      the
      extent consented to by the Administrative Agent.

     

    (f) The
      Company or Parent fails to comply with any covenant set forth
      herein.

     

    The
      Company and Parent acknowledge that upon the termination of the forbearance,
      the
      Administrative Agent, Syndication Agent, Lender Counterparty and Lenders may
      exercise any and all remedies available under the Transaction Documents with
      respect to the Parent Bankruptcy, Existing Defaults, the ISDA Master Agreement
      with respect to the ISDA Defaults, or any other defaults under the Transaction
      Documents, pursuant to applicable law, under equity, or otherwise. 

     

    Section
      8. Ratification.
      The
      Company and Parent each (a) ratifies and confirms all provisions of the
      Transaction Documents and
      the
      ISDA Master Agreement
      applicable to such party, (b) ratifies and confirms that all guaranties,
      assurances, and Liens granted, conveyed, or assigned to Administrative Agent
      or
      any Lender under the Transaction Documents or
      the
      ISDA Master Agreement
      by the
      Company, Parent or Western are not released, reduced, or otherwise adversely
      affected by this Agreement and continue to guarantee, assure, and secure full
      payment and performance of the present and future Obligations, as applicable,
      (c) ratifies and confirms that Administrative Agent holds a valid and first
      perfected lien and security interest in the Collateral Account and all other
      proceeds from the Collateral and (d) agrees to perform such acts and duly
      authorize, execute, acknowledge, deliver, file, and record such additional
      documents and certificates as Administrative Agent may request in order to
      create, perfect, preserve, and protect those guaranties, assurances, and
      Liens.

     

    Section
      9. Representations.
      The
      Company and Parent each represents and warrants to Administrative Agent,
      Syndication Agent, Lender Counterparty and Lenders that as of the date of this
      Agreement:

     

    (a) The
      Company represents and warrants that: (i) the execution, delivery and
      performance of this Agreement and the other documents, instruments, certificates
      and agreements required to be delivered by this Agreement ("Other
      Documents")
      and to
      which the Company is a party are within the corporate power and authority of
      the
      Company and have been duly authorized by appropriate corporate action and
      proceedings; (ii) this Agreement and the Other Documents to which the Company
      is
      a party constitute legal, valid, and binding obligations of the Company
      enforceable in accordance with their respective terms, except as limited by
      applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws
      affecting the rights of creditors generally and general principles of equity;
      and (iii) the liens under the Security Documents are valid and subsisting and
      secure the Company's obligations under the Credit Agreement, the ISDA Master
      Agreement, and the other Transaction Documents, including, without limitation,
      the repayment of any advances made to the Company by the Lenders in accordance
      with this Agreement.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (b) Parent
      represents and warrants that (i) subject to approval by the Bankruptcy Court
      to
      the extent required under any provision of the Bankruptcy Code, the execution,
      delivery and performance of this Agreement and the Other Documents to which
      Parent is a party are within the corporate power and authority of Parent and
      have been duly authorized by appropriate corporate action and proceedings;
      (ii)
      subject to approval by the Bankruptcy Court to the extent required under any
      provision of the Bankruptcy Code, this Agreement and the Other Documents to
      which Parent is a party constitute legal, valid, and binding obligations of
      Parent enforceable in accordance with their respective terms, except as limited
      by applicable bankruptcy, insolvency, reorganization, moratorium, or similar
      laws affecting the rights of creditors generally and general principles of
      equity; and (iii) the Liens under the Security Documents are valid and
      subsisting and secure Company's obligations under the Credit Agreement, the
      ISDA
      Master Agreement, and the other Transaction Documents, including, without
      limitation, the repayment of any advances made to the Company by the Lenders
      in
      accordance with this Agreement.

     

    Section
      10. Effect
      on Transaction Documents and
      ISDA Master Agreement;
      Acknowledgments.

     

    (a) The
      Company and Parent each acknowledges that on the date hereof all Obligations
      are
      payable without defense, offset, counterclaim or recoupment.

     

    (b) Except
      as
      set forth in Section
      2
      above,
      the Lenders, Lender Counterparty, and Administrative Agent, Royalty Owner and
      Warrant Owner hereby expressly reserve all of their respective rights, remedies,
      and claims under the Credit Agreement, the ISDA Master Agreement, and the other
      Transaction Documents. Nothing in this Agreement shall constitute a waiver
      or
      relinquishment of (i) any Default or Event of Default, or any “Event of Default”
or “Potential Event of Default” (as such terms are defined in the ISDA Master
      Agreement), under the Credit Agreement, the ISDA Master Agreement, or any of
      the
      other Transaction Documents other than as expressly set forth in Section
      2
      above,
      (ii) any of the agreements, terms or conditions contained in the Credit
      Agreement, the ISDA Master Agreement, or any of the other Transaction Documents,
      (iii) any rights or remedies of the Lenders, Lender Counterparty, Administrative
      Agent, Royalty Owner, or Warrant Owner with respect to the Credit Agreement,
      the
      ISDA Master Agreement, and the other Transaction Documents, (iv) the right
      of
      Royalty Owner to all proceeds attributable to the ORRI, or (v) the rights of
      each of the Lenders, the Lender Counterparty, and the Administrative Agent
      to
      collect the full amounts owing to it under the Credit Agreement, the ISDA Master
      Agreement, and the other Transaction Documents.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (c) The
      Company, Parent, the Lenders and Administrative Agent, each hereby adopts,
      ratifies, and confirms the Credit Agreement, as amended hereby, and the Company,
      Parent, and the Lender Counterparty each hereby adopts, ratifies, and confirms
      the ISDA Master Agreement, and each of the foregoing parties acknowledges and
      agrees that the Credit Agreement, as amended hereby, the ISDA Master Agreement
      and the other Transaction Documents are and remain in full force and effect,
      and
      the Company and Parent each acknowledges and agrees that neither its liabilities
      under the Credit Agreement, the ISDA Master Agreement, and the other Transaction
      Documents nor the validity, perfection, or priority of any lien or security
      interest securing the Obligations are impaired in any respect by this
      Agreement.

     

    (d) The
      Company and Parent agree and consent to Administrative Agent, Lender
      Counterparty, and the Lenders making such disclosures of information regarding
      the Company and its business, including the Collateral to bona fide or potential
      assignees, transferees, purchasers or participants in connection with a
      contemplated assignment, transfer or participation in the Loans, any Hedging
      Contracts, the Collateral including without limitation the Oil and Gas
      Properties, the Warrants, the ORRI, or the Company. 

     

    (e) This
      Agreement and each of the Other Documents is a Transaction Document for the
      purposes of the provisions of the other Transaction Documents. Without limiting
      the foregoing, any breach of representations, warranties, and covenants under
      this Agreement shall be a Default or Event of Default, as applicable, under
      the
      Credit Agreement
      and the
      ISDA Master Agreement.

     

    (f) The
      Company acknowledges receipt of the notice attached hereto as Exhibit
      F,
      which
      was sent by the Lender Counterparty to the Company on June 11, 2008, under
      the
      ISDA Master Agreement.

     

    (g) The
      Company and the Lender Counterparty agree and acknowledge that Section
      12(a) of the ISDA Master Agreement shall be, and hereby is, amended to delete
      the following parenthetical in the second and third lines thereof: "(except
      that
      a notice or other communication under Section 5 or 6 may not be given by
      facsimile transmission or electronic messaging system)". 

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (h) The
      Company and the Lender Counterparty further agree and acknowledge that Part
      4(a)(ii) of the Schedule to ISDA Master Agreement shall be, and hereby is,
      amended to add the following at the end of such clause: "Notwithstanding the
      foregoing, all notices from Aron to Counterparty shall be deemed to be effective
      upon delivery, by electronic messaging, facsimile or other means, to counsel
      to
      Tekoil, Neligan & Foley LLP, 325 North St. Paul Street, Suite 3600, Dallas,
      Texas 75201.

     

    Section
      11. Reaffirmation
      of the Guaranty.
      Parent
      hereby ratifies, confirms, and acknowledges that its obligations under the
      Guaranty is in full force and effect and that Parent continues to
      unconditionally and irrevocably guarantee the full and punctual payment, when
      due, whether at stated maturity or earlier by acceleration or otherwise, all
      of
      the Guaranteed Obligations. 

     

    Section
      12. Miscellaneous.

     

    (a) Counterparts.
      This
      Agreement may be signed in any number of counterparts, each of which shall
      be an
      original and all of which, taken together, constitute a single instrument.
      This
      Agreement may be executed by facsimile signature and all such signatures shall
      be effective as originals.

     

    (b) Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties hereto
      and their respective successors and assigns permitted pursuant to the Credit
      Agreement or ISDA Master Agreement, as applicable.

     

    (c) Invalidity.
      In the
      event that any one or more of the provisions contained in this Agreement shall
      for any reason be held invalid, illegal or unenforceable in any respect, such
      invalidity, illegality or unenforceability shall not affect any other provision
      of this Agreement.

     

    (d) Governing
      Law.
      THIS
      AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
      GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS
      OF
      THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES
      THEREOF.

     

    THIS
      AGREEMENT, THE CREDIT AGREEMENT AS AMENDED BY THIS AGREEMENT, THE NOTES, THE
      ISDA MASTER AGREEMENT, AND THE OTHER TRANSACTION DOCUMENTS CONSTITUTE THE ENTIRE
      UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF
      AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT
      THERETO.

     

    THERE
      ARE
      NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    [signature
      pages to follow]

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
      by
      their respective officers thereunto duly authorized, as of the date fast above
      written.

    

    
      	
              COMPANY

            
	 	 
	
              TEKOIL
                AND GAS GULF COAST, LLC

            
	 	 
	
              By:

            	
              Tekoil
                & Gas Corporation, its

            
	 	
              Managing
                Member

            
	 	 
	 	 
	
              By:

            	 

	 	
              Mark
                Western

            
	 	
              CEO
                and Chairman of the Board of

            
	 	
              Directors

            
	 	 
	 	 
	
              GUARANTOR

            
	 	 
	
              TEKOIL
                & GAS CORPORATION

            
	 	 
	 	 
	
              By:

            	 

	 	
              Mark
                Western

            
	 	
              CEO
                and Chairman of the Board of
                Directors

            

    

     

    Signature
      Page 1

    Tekoil
      Forbearance Agreement

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    
      	
              J.
                ARON & COMPANY,

            
	
              as
                Lead Arranger, Syndication Agent, Administrative

              Agent,
                Lender Counterparty and a Lender

            
	 	 
	 	 
	
              By:

            	  

	 	
              Authorized
                Signatory

            

    

     

    Signature
      Page 2

    Tekoil
      Forbearance Agreement

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

    

    Funds
      Disbursement Request

    

    JUNE
      [__], 2008

    

    Reference
      is made to the Credit and Guaranty Agreement, dated as of May 11, 2007 (as
      it
      may be amended, supplemented or otherwise modified, the “Credit Agreement”: the
      terms defined therein and not otherwise defined herein being used herein as
      therein defined), by and among TEKOIL
      AND GAS GULF COAST, LLC.,
      a
      Delaware limited liability company (“Company”),
      Tekoil & Gas Corporation and the other guarantors party thereto from time to
      time, various lenders party thereto from time to time, J.
      ARON & COMPANY,
      as Lead
      Arranger and Syndication Agent, and J.
      ARON
      & COMPANY,
      as
      Administrative Agent.

    

    Section
      2.19(a) (iv)
      of the
      Credit Agreement contemplates that Company may not instruct the administrator
      of
      the Collateral Account to transfer or disburse amounts from the Collateral
      Account. Administrative Agent shall, subject to the provisions of subsection
      Section
      2.19(a)(v)
      of the
      Credit Agreement, transfer or disburse amounts from the Collateral Account
      (or
      such account of Administrative Agent into which such amounts are swept pursuant
      to the Collateral Account Agreement) to Company’s operating account (or, in
      Administrative Agent’s discretion, directly to the Persons entitled to receive
      payment of such amounts) from time to time for use in the ordinary course of
      Company’s business, subject to the terms and provisions of the Credit Agreement,
      including the priority of payment provisions specified in Section
      2.19(a)(iii)
      of the
      Credit Agreement. 

    

    Company
      hereby requests that Administrative Agent authorize the transfer of $25,566.22 out
      of
      the collateral
      Account to the Company’s operating account pursuant to the following wire
      transfer instructions:

    

    
      	
              Financial
                Institution Name:

            	
              Amegy
                Bank National Association

            
	
              ABA
                Number: 

            	
              113011258

            
	
              From
                Account Number:

            	
              3770257

            
	
              Account
                Name:

            	
              Collateral
                Account

            
	
              To
                Account Number:

            	
              3770249

            
	
              Account
                Name:

            	
              Operating
                Account

            

    

    

    Company
      hereby further authorizes Administrative Agent to log onto and access the
      referenced depository bank’s web-based banking program in order to initiate such
      transfer of funds. Attached hereto as Schedule
      1
      is a
      proposed use of such funds itemized by the categories of approved expenses
      detailed in the “ANCF”
(or
      “Adjusted
      Net Cash Flow”)
      definition of the Credit Agreement, and Company hereby agrees to apply such
      funds as set forth in such Schedule 1.

    

    Exhibit
      A 1

    Tekoil
      Forbearance Agreement

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    This
      Funds Disbursement Request is executed as of the date first written
      above.

    

    
      	TEKOIL
              AND GAS GULF COAST, LLC
	 	 
	
              By:

            	
               

            
	Name:
              Gerald Goodman
	Title:CFO

 

    Exhibit
      A 2

    Tekoil
      Forbearance Agreement

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    SCHEDULE
      1

    

    EXPENSE
      ITEMIZATION

    

    
      	
              Direct
                Taxes paid on Properties or production of Hydrocarbons

            	 	
              $

            	
              -0-

            	 
	
              Delay
                rentals and lease bonuses payable that are included in the
                APOD

            	 	
              $

            	
              -0-

            	 
	
              ANCF
                Capital Expenditures

            	 	
              $

            	
              -0-

            	 
	
              ANCF
                LOE

            	 	
              $

            	
              -0-

            	 
	
              ANCF
                LOE GLO/RRC

            	 	
              $

            	
              -0-

            	 
	
              ANCF
                Overhead Costs

            	 	
              $

            	
              -0-

            	 
	
              ANCF
                Transportation Costs (included in LOE)

            	 	
              $

            	
              -0-

            	 
	
              Payments
                owing under Hedging Contracts permitted under the Credit
                Agreement

            	 	
              $

            	
              -0-

            	 
	
              Interest
                payable on the Loans together with payments, if any, due to Agents
                and
                Lenders under Section 2.9 of the Credit Agreement or under any similar
                sections of any other Transaction Documents.

            	 	
              $

            	
              -0-

            	 
	
              Permitted
                Tax Distributions and any other Permitted Other
                Distributions.

            	 	 	
              None

            	 
	
              Override/Royalty
                Payments

            	 	
              $

            	
              25,566.22

            	 
	
              Payment
                of fees to Goldman Sachs

            	 	
              $

            	
              -0-

            	 
	
              Payment
                to Tekoil and Gas - Management Fee

            	 	
              $

            	
              -0-

            	 

    

     

    Schedule
      1

    Tekoil
      Forbearance Agreement

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    EXHIBIT
      B

     

    FIRST
      AMENDMENT TO MANAGEMENT SERVICES AGREEMENT

     

    REFERENCE
      IS MADE
      to that
      certain Management Services Agreement, dated May 11, 2007, by and between
TekOil
      and Gas Corporation, a Delaware corporation (“Manager”),
      and
      TekOil and Gas Gulf Coast, LLC, a Delaware limited liability company,
      (“Company”),
      (together, “Parties”
or
      singularly, “Party”),
      as
      same may be further amended from time to time, (“Services
      Agreement”);

     

    WHEREAS
      by the
      terms of the Services Agreement, entered into in connection with that certain
      Credit Agreement of even date (“Credit
      Agreement”)
      between Company, as Borrower, Manager, as guarantor, the lenders party to the
      Credit Agreement (“Lenders”),
      J.
      Aron & Company, as Lead Arranger, Syndication Agent, Administrative Agent
      for such Lenders (“Agent”),
      and
      related Transaction Documents, as defined under the Credit Agreement, Manager,
      an affiliate of the Company, agreed to provide management and general and
      administrative support services for Company;

     

    WHEREAS Manager
      filed a voluntary petition for relief under Chapter 11 of the United States
      Bankruptcy Code, 11 U.S.C. §§ 101, et
      seq.
      on June
      10, 2008, In
      re
      Tekoil & Gas Corporation,
      Case
      No. 08-8-0270 (“Parent
      Bankruptcy”),
      in
      the United States Bankruptcy Court for the Southern District of Texas, Galveston
      Division.

     

    WHEREAS
      the
      Parent Bankruptcy constitutes an “Event of Default” under the Credit Agreement;

     

    WHEREAS
      on even
      dated herewith Manager, Company, Mark S. Western, as a limited guarantor,
      Lenders and Agent entered into a Forbearance Agreement (“Forbearance
      Agreement”)
      to
      forbear exercising certain remedies under the Credit Agreement with respect
      to
      the Parent Bankruptcy and other Events of Default described therein for a
      limited period of time, subject to the terms and conditions below; and

     

    WHEREAS
      as
      a
      requirement to, and as partial consideration for, entering into the Forbearance
      Agreement, Lenders and Agent have required Manager and Company amend the Service
      Agreement as more particularly provided in this First Amendment to Management
      Services Agreement (“Amendment”).

     

    NOW
      THEREFORE,
      for and
      in consideration for the mutual covenants set forth below and other good and
      valuable consideration in hand paid, the Parties agree as follows to amend
      the
      Services Agreement to be effective June __, 2008, (“Effective
      Date”):

     

    1. Defined
      Terms.
      All
      capitalized terms not otherwise defined under this Amendment shall have the
      same
      meanings as defined in the Services Agreement.

     

    2.
      Amendments. 

     

    (a) Section
      5
      of the
      Services Agreement is amended to delete the first sentence thereof and insert
      the following in lieu therefor:

     

    “The
      respective rights, duties, and obligations of the parties hereunder shall
      commence on the effective date hereof and shall continue until the earlier
      to
      occur of (i) the fourth anniversary of the effective date hereof, and (ii)
      upon
      written notice from Administrative Agent under the Credit Agreement following
      termination of the Forbearance Agreement dated
      June __, 2008, between Manager, the Company and others entered into in
      connection with the Credit Agreement,
      whether
      upon expiration of the “Effective Period,” as defined therein, or the occurrence
      of any other termination event as provided for in Section
      7 of
      the
      Forbearance Agreement.”

     

    Exhibit
      B 1

    Tekoil
      Forbearance Agreement

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    3.
      Representations
      and Warranties.
      The
      Parties each represent and warrant to the other, with full knowledge that such
      other Party is relying on the following representations and warranties in
      executing this Amendment, as follows:

     

    (a) It
      has
      the organizational power and authority to execute, deliver and perform this
      Amendment, and all organizational action on the part of it requisite for the
      due
      execution, delivery and performance of this Amendment has been duly and
      effectively taken.

    

    (b)
       This
      Amendment does not and will not violate any provisions of any of the
      organization documents of either Party or any contract, agreement, instrument
      or
      requirement of any governmental authority to which it is subject. 

    

    (c)
       Other
      than the approval of the Bankruptcy Court, execution, delivery and performance
      of this Amendment does not require the consent or approval of any other person,
      including, without limitation, any regulatory authority or governmental body
      of
      the United States of America or any state thereof or any political subdivision
      of the United States of America or any state thereof.

     

    4. Extent
      of Amendment.
      Except
      as otherwise expressly provided herein the Services Agreement is not amended,
      modified or affected. The Parties each hereby ratify and confirm that (i) except
      as expressly amended hereby, all of the terms, conditions, covenants,
      representations, warranties and all other provisions of the Services Agreement
      remain in full force and effect.

     

    5. 
      Execution and Counterparts.
      This
      Amendment may be executed in any number of counterparts and by different parties
      hereto in separate counterparts, each of which when so executed and delivered
      shall be deemed to be an original and all of which taken together shall
      constitute but one and the same instrument. Delivery of an executed counterpart
      of this Amendment by facsimile shall be equally as effective as delivery of
      a
      manually executed counterpart of this Amendment.

     

    6.  Governing
      Law.
      This
      Amendment shall be governed by and construed in accordance with the laws of
      the
      State of Texas, except to the extent that federal laws of the United States
      of
      America may apply.

     

    7. Express
      Beneficiaries.
      Company
      and Manager agree that Agent, each Lender, and each Lender Counterparty (i)
      is
      an express and intended third party beneficiary of the agreements made in this
      Amendment (which benefits are immediate and not incidental), and (ii) has acted
      in reliance upon its status as a third party beneficiary as set forth above
      (including entering into the Forbearance Agreement).

     

    8. NO
      ORAL AGREEMENTS.
      This
      amendment represents the final agreement between the parties, and may not be
      contradicted by evidence of prior, contemporaneous, or subsequent oral
      agreements by such parties. There are no unwritten oral agreements between
      such
      parties. 

     

    Remainder
      of page intentionally left blank. Signature pages
      follow

     

    Exhibit
      B 2

    Tekoil
      Forbearance Agreement

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective
      Date.

    

    
      	PARTIES:	 
	TEKOIL
              & OIL CORPORATION	 
	a
              Delaware corporation	 
	 	 	 
	 	 	 
	
              By:

            	
               

            	 
	Mark
              Western, CEO and Chairman	 
	of
              the Board of Directors	 
	 	 	 
	 	 	 
	TEKOIL
              & OIL GULF COAST, LLC	 
	a
              Delaware limited liability company	 
	 	 	 
	 	 	 
	
              By:

            	
               

            	 
	Mark
              Western, CEO and Chairman	 
	of
              the Board of Directors	 

    

    

    Exhibit
      B 3

    Tekoil
      Forbearance Agreement

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    EXHIBIT
      C

     

    PARTIAL
      TRANSACTION TERMINATION AGREEMENT

    between
      TEKOIL AND GAS GULF COAST, LLC

    and
      J.
      ARON & COMPANY

    

    This
      Partial Transaction Termination Agreement (this “Termination Agreement”) is made
      and entered into as of June __, 2008, by and between TEKOIL AND GAS GULF COAST,
      LLC (“TEKOIL”) and J. ARON & COMPANY (“ARON”).

    

    Pursuant
      to this Termination Agreement, the parties hereby agree to terminate the volumes
      described on Annex A hereto in relation to the Transactions subject to
      the ISDA
      Master Agreement dated as of May 11, 2007 between ARON and TEKOIL (the “ISDA
      Master Agreement”) with ARON Contract Reference No. 897282306 1 1 and ARON
      Contract Reference No. 897282314 1 1 (such Transactions, the “Transactions” and
      such volumes to be terminated hereunder, the “Terminated Volumes”), together
      with all obligations with respect to the Terminated Volumes under the ISDA
      Master Agreement. Such termination shall be effective as of June __, 2008 (the
      “Termination Date”). 

    

    In
      consideration of such partial termination of the Transactions and the Terminated
      Volumes, the following payment (the “Termination Payment”) shall be an amount
      payable under the Master Agreement, subject to the terms thereof:

    

    Termination
      Payment: $____________

    Payable
      by: TEKOIL TO ARON

    Due
      Date:
      June __, 2008* 

    ABA
      NO: 021000089

    BANK
      NAME: CITIBANK

    CITY:
      NEW
      YORK

    A/C
      #: 09292521

    ENTITY
      NAME: J.ARON
      AND COMPANY, NEW YORK

    

    *subject
      to Forbearance Agreement (defined below).

    

    The
      parties have executed this Termination Agreement by their duly authorized
      officers effective as of the date hereof. By execution of this Termination
      Agreement, as modified by the terms of the Forbearance Agreement, the parties
      acknowledge and agree to the amount of the Termination Payment and the method
      of
      payment thereof.

    

    For
      purposes of this Termination Agreement, “Forbearance Agreement” means that
      certain Forbearance Agreement, dated as of June 26, 2008, by and among TEKOIL,
      Tekoil & Gas Corporation, Mark Western, the lenders party to the Credit
      Agreement described therein, Aron, as Lead Arranger, Syndication Agent,
      Administrative Agent for such Lenders and as counterparty to TEKOIL under the
      Master Agreement.

    

      Exhibit
        C 1

      Tekoil
        Forbearance Agreement

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Upon
      ARON’s receipt of the Termination Payment referred to above (as confirmed by
      ARON to TEKOIL in a written communication), ARON agrees to release and discharge
      Tekoil, its officers, directors, employees, agents, successor, assigns and
      credit support provider from all its obligations, cause of action, loss, cost,
      expense, liability, damage, claim or demand whatsoever in law or in equity
      under
      or related solely to the Terminated Volumes. For the avoidance of doubt,
      TEKOIL’s obligations with respect to the Transactions (other than with respect
      to the Terminated Volumes) shall remain unchanged. Apart from the Termination
      Payment referred to above, no further payment (including any accrued amounts)
      in
      respect of the Terminated Volumes will be due or payable by either party to
      the
      other with respect to the Terminated Volumes. 

     

    Notwithstanding
      the foregoing, TEKOIL’s payment obligations hereunder are subject to the terms
      of the Forbearance Agreement, and further TEKOIL shall not be released and
      discharged for such party’s liabilities and obligations (i) under the
      Transactions which are related to volumes other than the Terminated Volumes
      or
      (ii) related the Terminated Volumes for the performance periods occurring prior
      to the Termination Date, including accrued and unpaid obligations as set forth
      in the June 11, 2008 letter from Aron to Tekoil attached to the Forbearance
      Agreement and the additional letters referenced therein (including accrued
      interest or other amounts thereon), and such non-released obligations set forth
      in (i) and (ii) above shall continue to be performed by the parties in the
      ordinary course of business in accordance with the Master Agreement.

     

    The
      parties acknowledge that they have voluntarily agreed to enter into this
      Termination Agreement. The parties represent and warrant to the other that
      the
      delivery by each party of this Termination Agreement and the termination
      contemplated hereby are not prohibited by, and do not violate any provision
      or
      result in the breach of, or acceleration of the performance required by the
      terms of (i) any law or governmental order applicable to each respective party,
      or (ii) the respective articles of incorporation, by-laws, articles of
      organization, operating agreement, or organizational documents as applicable,
      of
      each party or any material contract, note, bond, mortgage indenture license
      or
      agreement to which each party is a party or is bound or by which any of the
      assets is bound.

    

    It
      is
      further represented to each party by the other that it has all of the necessary
      power and authority under its respective articles of incorporation, by-laws,
      articles of organization, operating agreement or organizational documents,
      under
      the laws of each respective party’s state of domestic jurisdiction and other
      applicable laws to execute, deliver and perform this Agreement. The execution,
      delivery and performance of this Termination Agreement have been duly authorized
      by all necessary partnership, corporate or limited liability company action.
      Each obligation of this Termination Agreement is a valid and binding obligation
      of each such party, enforceable against each such party in accordance with
      its
      terms.

    

    It
      is
      expressly understood and agreed that the termination and release of the
      Confirmation shall not affect, impair or otherwise modify the respective rights,
      obligations and liabilities of the parties for any other transactions between
      the parties all of which shall remain unchanged and in full force and
      effect.

     

    
      Exhibit
        C 2

      Tekoil
        Forbearance Agreement

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    The
      terms
      of this Termination Agreement shall be kept in confidence by the parties except
      in order to comply with any applicable law, regulation, or any exchange,
      transporter, control area or independent system operator rule or in connection
      with any court or regulatory proceeding; provided, however, each party shall,
      to
      the extent practicable, use reasonable efforts to prevent or limit the
      disclosure.

     

    Capitalized
      terms used but not defined herein shall have the meanings given such terms
      in
      the Master Agreement.

     

    [Remainder
      of Page Intentionally Left Blank. Signature Page to Follow.]

     

    
      Exhibit
        C 3

      Tekoil
        Forbearance Agreement

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

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

    

      
        	
                J.
                  ARON & COMPANY

              	
                              

              	
                TEKOIL
                  AND GAS GULF COAST LLC

              
	 	 	 
	
                By: 
                  __________________________

              	 	
                By:
                  ___________________________

              
	 	 	 
	
                Name:
                  _________________________

              	 	
                Name:
                  __________________________

              
	 	 	 
	
                Title:
                  __________________________

              	 	
                Title:
                  __________________________

              

      

    

     

    
      Exhibit
        C 4

      Tekoil
        Forbearance Agreement

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Annex
      A

    Termination
      Schedule

    

      
        	
                Month-

                Year

              	 	
                Gas

                Volumes

              	 
	
                 

              	 	
                (mcf)

              	 
	
                 

              	 	
                 

              	 
	
                Jul-08

              	 	 	
                23,056
                  

              	 
	
                Aug-08

              	 	 	
                22,441
                  

              	 
	
                Sep-08

              	 	 	
                21,159
                  

              	 
	
                Oct-08

              	 	 	
                20,815
                  

              	 
	
                Nov-08

              	 	 	
                19,274
                  

              	 
	
                Dec-08

              	 	 	
                19,457
                  

              	 
	
                Jan-09

              	 	 	
                19,109
                  

              	 
	
                Feb-09

              	 	 	
                17,097
                  

              	 
	
                Mar-09

              	 	 	
                18,128
                  

              	 
	
                Apr-09

              	 	 	
                16,847
                  

              	 
	
                May-09

              	 	 	
                17,024
                  

              	 
	
                Jun-09

              	 	 	
                16,117
                  

              	 
	
                Jul-09

              	 	 	
                16,297
                  

              	 
	
                Aug-09

              	 	 	
                15,948
                  

              	 
	
                Sep-09

              	 	 	
                15,112
                  

              	 
	
                Oct-09

              	 	 	
                15,768
                  

              	 
	
                Nov-09

              	 	 	
                14,947
                  

              	 
	
                Dec-09

              	 	 	
                15,131
                  

              	 
	
                Jan-10

              	 	 	
                13,894
                  

              	 
	
                Feb-10

              	 	 	
                11,914
                  

              	 
	
                Mar-10

              	 	 	
                12,057
                  

              	 
	
                Apr-10

              	 	 	
                11,491
                  

              	 

      

       

      
        Exhibit
          C 5

        Tekoil
          Forbearance Agreement

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	
                May-10

              	 	 	
                11,694
                  

              	 
	
                Jun-10

              	 	 	
                11,147
                  

              	 
	
                Jul-10

              	 	 	
                11,672
                  

              	 
	
                Aug-10

              	 	 	
                11,525
                  

              	 
	
                Sep-10

              	 	 	
                10,981
                  

              	 
	
                Oct-10

              	 	 	
                10,960
                  

              	 
	
                Nov-10

              	 	 	
                10,334
                  

              	 
	
                Dec-10

              	 	 	
                10,485
                  

              	 
	
                Jan-11

              	 	 	
                10,335
                  

              	 
	
                Feb-11

              	 	 	
                9,322
                  

              	 
	
                Mar-11

              	 	 	
                10,205
                  

              	 
	
                Apr-11

              	 	 	
                9,734
                  

              	 
	
                 

              	 	 	
                501,477
                  

              	 

      

    

     

    
      Exhibit
        C 6

      Tekoil
        Forbearance Agreement

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      D-1

     

    JOINT
      INSTRUCTION LETTER

     

    PURCHASERS
      OF PRODUCTION

     

    June
      ___,
      2008

     

    TO: The
      Purchaser named on Schedule 1

     

    Tekoil
      and Gas Gulf Coast, LLC hereby authorizes and instructs you to make all payments
      for purchases by you of oil, gas and other hydrocarbons accruing to all
      interests of the undersigned, including but not limited to those properties
      listed on the attached Schedule 1 (regardless of whether purchased before or
      after your receipt of this letter) to:

    

      
        	
                Financial
                  Institution Name:

              	
                Amegy
                  Bank National Association

              
	
                ABA
                  Number:

              	
                113011258

              
	
                Account
                  Number:

              	
                3770257

              
	
                Account
                  Name:

              	
                Tekoil
                  and Gas Gulf Coast, LLC Collateral

              
	 	
                Account

              

      

    

     

    The
      undersigned hereby agree that you are relieved of any responsibility in
      connection with the application or distribution of the amounts paid by you
      as
      hereinabove specified and hereby ratifies and confirms all assurances and
      indemnities previously given for your benefit with respect to the application
      and distribution of amounts paid by you.

     

    These
      instructions shall not be revoked or revised in any way whatsoever unless such
      instructions are executed by both of the undersigned
      parties.

    

      
        	 	
                TEKOIL
                  AND GAS GULF COAST, LLC

              
	 	
                By:
                  Tekoil & Gas Corporation,

              
	 	
                           
                  its Managing Member

              
	 	 
	 	 
	 	
                By:______________________________

              
	 	 	
                Name:
                  Mark Western 

              
	 	 	
                CEO
                  and Chairman of the Board of
                  Directors

              

      

    

    

      Exhibit
        D-1  1

      Tekoil
        Forbearance Agreement

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    
      	 	
              J.
                ARON & COMPANY

            
	 	 
	 	
              By:___________________________

            
	 	 	
              Name:

            
	 	 	
              Title:

            

    

    
       

      Exhibit
        D-1  2

      Tekoil
        Forbearance Agreement

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    Receipt
      of this document is

    hereby
      acknowledged by the

    undersigned.

    

    By:
      ____________________________________ 

    Name:
      _________________________________

     

    
      Exhibit
        D-1 3

      Tekoil
        Forbearance Agreement

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      1

     

    TO
      JOINT
      INSTRUCTION LETTER 

     

    PURCHASERS
      OF PRODUCTION

     

    
      
        	
                Well/County/State

              	
                DOI
                  #/Purchaser ID No.

              	 

      

    

    

      Exhibit
        D-1 Schedule 1

      Tekoil
        Forbearance Agreement

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      D-2

     

    JOINT
      INSTRUCTION LETTER 

    TRANSPORTATION
      CONTRACTS

     

    June
      ___,
      2008

     

    TO: _____________________

     

    Tekoil
      and Gas Gulf Coast, LLC (“Tekoil”) hereby authorizes and instructs you to make
      all payments for all fees owed to Tekoil pursuant to that certain [Production
      Handling Agreement dated October 11, 2006, between St. Mary Land &
Exploration Company and Masters Resources LLC - GC-103-0008][Gas Transportation
      Contract dated May 22, 2006, between Masters Resources LLC and Erskine Energy
      Partners II LP - GC-101-0003] (regardless of whether such amounts have accrued
      before or after your receipt of this letter) to:

     

    
      	
              Financial
                Institution Name:

            	 	
              Amegy
                Bank National Association

            
	
              ABA
                Number: 

            	 	
              113011258

            
	
              Account
                Number:

            	 	
              3770257

            
	
              Account
                Name:

            	 	
              Tekoil
                and Gas Gulf Coast, LLC Collateral

            
	 	 	
              Account

            

    

    

    The
      undersigned hereby agree that you are relieved of any responsibility in
      connection with the application or distribution of the amounts paid by you
      as
      hereinabove specified
      and
      hereby ratifies and confirms all assurances and indemnities previously given
      for
      your benefit with respect to the application and distribution of amounts paid
      by
      you.

    

    These
      instructions shall not be revoked or revised in any way whatsoever unless such
      instructions are executed by both of the undersigned
      parties.

     

    
      	 	
              TEKOIL
                AND GAS GULF COAST, LLC

            
	 	
              By:

            	
              Tekoil
                & Gas Corporation,

            
	 	 	
              its
                Managing Member

            
	 	 
	 	
              By:

            	 
	 	 	
              Mark
                Western,

            
	 	 	
              CEO
                and Chairman of the Board of
                Directors

            

    

    

      Exhibit
        D-2  1

      Tekoil
        Forbearance Agreement

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	
              J.
                ARON & COMPANY

            
	 	 
	 	
              By:

            	 
	 	
              Name:

            
	 	
              Title:

            

    

    

      Exhibit
        D-2  2

      Tekoil
        Forbearance Agreement

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Receipt
      of this document is

    hereby
      acknowledged by the

    undersigned.

     

    By:________________________________________

    Name:______________________________________

    Title:_______________________________________

     

    
      Exhibit
        D-2 3

      Tekoil
        Forbearance Agreement

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      E

    

    CRITICAL
      VENDORS LIST

     

    
      
        	
                -
                  Prosper

              	 	
                170,000
                  

              	 
	
                -
                  Creel & Assoc.

              	 	
                15,000
                  

              	 
	
                -
                  Fuel for next 30 days

              	 	
                56,000
                  

              	 
	
                -
                  Peninsula

              	 	
                60,000
                  

              	 
	
                -
                  Kelly Pump Service

              	 	
                3,700
                  

              	 
	
                -
                  Davis Petroleum

              	 	
                15,000
                  

              	 
	
                -
                  TransTech

              	 	
                60,000
                  

              	 
	
                -
                  Exterran

              	 	
                145,000
                  

              	 
	
                -
                  Marine Transport Svcs

              	 	
                12,000
                  

              	 
	
                -
                  Field Office Rent

              	 	
                5,000
                  

              	 
	
                -
                  Home Office Rent & Util.

              	 	
                3,000
                  

              	 
	
                -
                  Cathodic Protect

              	 	
                9,000
                  

              	 
	
                -
                  JD Hall (GLO)

              	 	
                10,000
                  

              	 
	
                -
                  Home Office Computers (Nova)

              	 	
                800
                  

              	 
	
                -
                  Reliant Energy

              	 	
                7,000
                  

              	 
	
                -
                  Afco / Benfield

              	 	
                351,226
                  

              	 
	
                -
                  Koch Trading

              	 	
                58,000
                  

              

      

    

     

    
      Exhibit
        E 1

      Tekoil
        Forbearance Agreement

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHBIT
      F

    

    ISDA
      MASTER AGREEMENT NOTICE

     

    

      Exhibit
        F 1

      Tekoil
        Forbearance Agreement

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

     

    

      Exhibit
        F 2

      Tekoil
        Forbearance Agreement

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

     

     

    
      Exhibit
        F 3

      Tekoil
        Forbearance Agreement

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

     

    

      Exhibit
        F 4

      Tekoil
        Forbearance Agreement

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

       

      
Exhibit
        F 5

    

    
      Tekoil
        Forbearance Agreement

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

     

     

     

     

    Exhibit
      F 6

    Tekoil
      Forbearance Agreement

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

     

     

    Exhibit
      F 7

    
      Tekoil
        Forbearance AgreementUnassociated Document

    AGREEMENT

    

    AGREEMENT
      (this
      “Agreement”), dated
      as
      of May 10, 2008 (the “Effective Date”), by and between GSV, Inc., a Delaware
      corporation (the “Company”), and D. Emerald Investments Ltd., an Israeli
      corporation (the “Investor”).

    

    WITNESSETH:

    

    WHEREAS,
      pursuant
      to a Purchase Agreement dated as of May 11, 2004 (the “Purchase Agreement”), the
      Investor purchased (i) a two-year 8% convertible promissory note in the
      principal amount of $200,000 (the “Original Note”), and (ii) a warrant to
      purchase up to 1,142,857 shares (“Shares”) of common stock, par value $.001 per
      share (“Common Stock”), of the Company, at a price of $.70 per share (the
“Original Warrant” from the Company; 

    

    WHEREAS,
      the
      Investor and the Company extended and renewed the Original Note and Original
      Warrant such that the maturity date of the Original Note became July 10, 2008,
      the last date on which the Original Note could be converted into Common Stock
      became July 10, 2008 and the expiration date of the Warrant became May 10,
      2008;
      and

    

    WHEREAS,
      the
      Company and the Investor now desire to amend and restate the terms of the
      Original Note and Original Warrant in order to renew and extend again their
      respective rights and obligations under such agreements. 

    

    NOW,
      THEREFORE,
      in
      consideration of the premises, the mutual covenants herein contained and other
      good and valuable consideration, the receipt and sufficiency of which is hereby
      acknowledged, the parties hereto agree as follows:

    

    1.    Amendment
      and Restatement of Original Note.
      The
      Original Note will be amended and restated in the form of Exhibit
      A
      hereto
      (the “Substitute Note”), which shall in all respects substitute for the Original
      Note and shall be executed and delivered by the Company to the Investor
      contemporaneously with this Agreement, together with delivery by the Company
      to
      the Investor of the executed consent of Polystick U.S. Corporation in the form
      of Exhibit
      B
      hereto.

    

    2.    Amendment
      and Restatement of Original Warrant.
      The
      Original Warrant will be amended and restated in the form of Exhibit
      B
      hereto
      (the “Substitute Warrant”), which shall in all respects substitute for the
      Original Warrant and shall be executed and delivered by the Company to the
      Investor contemporaneously with this Agreement.

    

    3.    Representations
      and Warranties of the Company

    

    The
      Company hereby represents, warrants and agrees to and with the Investor as
      follows: 

    

    (a)    Organization
      and Good Standing.
      The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the State of Delaware and has all requisite corporate power
      and authority to carry on its business as now conducted. The Company is duly
      qualified to transact business and is in good standing in each jurisdiction
      in
      which the failure so to qualify would have a material adverse effect on its
      business or properties. The rights, preferences, privileges and restrictions
      granted to or imposed upon the Shares, and the holders thereof are as set forth
      in the Company's Certificate of Incorporation and Certificates of Amendment
      thereof, Certificate of Merger and Amended and Restated By-laws, true and
      complete copies of which have been delivered to Investor and are attached as
      Exhibit E to the Purchase Agreement, except insofar as such rights are affected
      by the terms of the Company’s Series C preferred stock, the provisions of which
      have been previously provided to the Investor.

    

    
      
         

      

      
        1

        
          

        

      

      
         

      

       

    

    (b)    Authorization.
      All
      corporate action on the part of the Company, its officers, directors and
      stockholders necessary for the authorization, execution and delivery of this
      Agreement and the performance of all obligations of the Company hereunder has
      been taken. This Agreement constitutes the valid and legally binding obligation
      of the Company, enforceable in accordance with its terms, except (i) as limited
      by applicable bankruptcy, insolvency, reorganization, moratorium and other
      laws
      of general application affecting enforcement of creditors' rights generally,
      and
      (ii) as limited by laws relating to the availability of specific performance,
      injunctive relief or other equitable remedies. 

    

    4.    Representations
      and Warranties of Investor

    

    The
      Investor hereby represents, warrants and agrees to and with the Company as
      follows: 

    

    (a)    Organization,
      Good Standing.
      The
      Investor is a corporation duly organized, validly existing and in good standing
      under the laws of Israel. 

    

    (b)    Authorization.
      All
      corporate action on the part of the Investor, its officers, directors and
      stockholders, necessary for the authorization, execution and delivery of this
      Agreement and the performance of all obligations of the Investor hereunder
      has
      been taken. This Agreement constitutes the valid and legally binding obligation
      of the Investor, enforceable in accordance with its terms, except (i) as limited
      by applicable bankruptcy, insolvency, reorganization, moratorium and other
      laws
      of general application affecting enforcement of creditors’ rights generally, and
      (ii) as limited by laws relating to the availability of specific performance,
      injunctive relief or other equitable remedies.

    

    5.    Miscellaneous.

    

    (a)    Further
      Assurances.
      The
      parties to this Agreement agree to execute and deliver any and all papers and
      documents that may be necessary to carry out the terms of this
      Agreement.

    

    (b)    Entire
      Agreement.
      Except
      as otherwise provided in this Agreement or the Purchase Agreement, this
      Agreement, the Purchase Agreement, the Substitute Note and the Substitute
      Warrant contain the entire agreement among the parties hereto and there are
      no
      agreements, representations or warranties that are not set forth herein. This
      Agreement may not be amended, revised, terminated or waived except by an
      instrument in writing signed and delivered by the party to be charged
      therewith.

    

    (c)    Binding
      Effect,
      Assignment.
      This
      Agreement shall be binding upon and inure to the benefit of the successors
      of
      the respective parties hereto. 

    

    
      
         

      

      
        2

        
          

        

      

      
         

      

       

    

    (d)    Governing
      Law and Jurisdiction.
      This
      Agreement will be deemed to have been made and delivered in New York City and
      will be governed as to validity, interpretation, construction, effect and in
      all
      other respects by the internal laws of the State of New York. Each of the
      Company and the Investor hereby (i) agrees that any legal suit, action or
      proceeding arising out of or relating to this Agreement will be instituted
      exclusively in New York State Supreme Court, County of New York or in the United
      States District Court for the Southern District of New York, (ii) waives any
      objection to the venue of any such suit, action or proceeding and the right
      to
      assert that such forum is not a convenient forum for such suit, action or
      proceeding, (iii) irrevocably consents to the jurisdiction of the New York
      State
      Supreme Court, County of New York and the United States District Court for
      the
      Southern District of New York in any such suit, action or proceeding, (iv)
      agrees to accept and acknowledge service of any and all process that may be
      served in any such suit, action or proceeding in New York State Supreme Court,
      County of New York or in the United States District Court for the Southern
      District of New York and (v) agrees that service of process upon it mailed
      by
      certified mail to its address set forth in Section 5(f) below will be deemed
      in
      every respect effective service of process upon it in any suit, action or
      proceeding.

    

    (e)    Notices.
      All
      notices, consents, requests, demands and other communications herein shall
      be in
      writing and shall be deemed duly given to any party or parties (a) upon delivery
      to the address of the party or parties as specified below if delivered in person
      or any courier or if sent by certified or registered mail (return receipt
      requested); or (b) upon dispatch if transmitted by confirmed telecopy or other
      means of confirmed facsimile transmissions, in each case as addressed to such
      party or parties at their addresses as set forth in the Purchase Agreement.
      The
      parties hereto may designate different addresses or facsimile numbers by written
      notice in the aforesaid manner. 

    

    (f)    Survival
      of Representations and Warranties.
      The
      representations, warranties and covenants of the Company and the Investor
      contained in or made pursuant to this Agreement shall survive the execution
      and
      delivery of this Agreement and shall in no way be affected by any investigation
      of the subject matter thereof by or on behalf of the Investor or the Company.
      

    

    (g)    Severability.
      In the
      event any provision of this Agreement is found to be void and unenforceable
      by a
      court of competent jurisdiction, the remaining provisions of this Agreement
      shall nevertheless be binding upon the parties with the same effect as though
      the void or unenforceable part had been severed and deleted.

    

    (h)    Counterparts.
      This
      Agreement may be signed in two counterparts, each of which shall be an original
      and both of which together shall constitute one and the same instrument. It
      shall not be necessary in making proof of this Agreement or any counterpart
      hereof to produce or account for any of the other counterparts.

    

    [Signatures
      appear on following page]

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    

    IN
      WITNESS WHEREOF,
      the
      parties hereto have caused this Agreement to be executed as of the date first
      written above.

    

    

    
      	 	GSV, INC.
	 	 
	 	 
	 	By:  
/s/
              Gilad
              Gat                              
	 	Name:    Gilad
              Gat
	 	Title:     
              Chief
              Executive Officer and President
	 	 
	 	 
	 	D. EMERALD INVESTMENTS
              LTD.
	 	 
	 	 
	 	By:   /s/
              Roy
              Harel                             
              
	 	Name:    Roy
              Harel
	 	Title:     
              Manager

    

     

    
      
         

      

      
        4

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