Document:

Exhibit 10.8

PURCHASE AND SALE AGREEMENT

       THIS PURCHASE AND
SALE AGREEMENT (this “Agreement”), dated as of
July __, 2007, is between Catlin Oil and Gas, Inc., a Nevada corporation,
hereinafter referred to as “Buyer”, and each of Jilpetco,
Inc., a Texas corporation (“Jilpetco”), Petro Pro, Ltd., a
Texas limited partnership (“Petro Pro”), PKC Energy, LLC, a
Texas Limited Liability Company (“PKC”) and Jed Miesner, an
individual and resident of Texas (“Miesner”), hereinafter
collectively referred to as “Seller”.

       WHEREAS, Seller
desires to sell (subject to the Retained Interest described below) and Buyer
desires to purchase, upon and subject to the terms and conditions hereinafter
set forth, Seller’s interest in and to those properties described in
Exhibit A, attached hereto, and shown on the map attached as Exhibit
B hereto (the “Properties”), being (i) all right, title
and interest in the oil and gas leases, including a like interest in all
formations, depths and unit rights listed on Exhibit C attached hereto
(the “Leases”), (ii) all of Seller’s right, title and
interest in (A) all wells listed on Exhibit D attached hereto (plugged or
unplugged) (the “Wells”), (B) the permits that relate to the
Wells and the Properties, listed on Exhibit E attached hereto (the
“Permits”), and (C) all equipment, materials and personal
property, fixtures, and facilities used or useful in the production, gathering,
storing, measuring, treating, operating, maintaining, marketing or
transportation of hydrocarbon production from the Leases or lands pooled or
unitized therewith and relating to the Wells and Properties, listed on
Exhibit F attached hereto (the “Equipment”), (iii) all
of Seller’s right, title and interest in all contracts and contractual
rights insofar and only insofar as they relate to the Leases and Equipment,
including without limitation all unit agreements, surface rights and leases, gas
sale and purchase contracts, oil and gas leases and/or subleases and
assignments, mineral deeds, royalty deeds, operating agreements, easements,
rights of way, farm-out and farm-in agreements and all similar rights leased or
owned by Seller, and oil and gas sales, purchase, exchange and processing
contracts and agreements, whether of record or not (the
“Contracts”). It is the intent of Seller to convey and assign
all of its right, title and interest in and to the Interests in the area shown
on the map attached as Exhibit B, SAVE AND EXCEPT 6.25% of 8/8th’s
working interest, with a net revenue interest of 0.04812500, and 1% of
8/8th’s overriding royalty interest, such working interest and overriding
royalty interest (collectively, the “Retained Interest”)
being retained by Petro Pro. The aggregate Interests being conveyed are a 93.75%
Working Interest with a net revenue interest of 0.72187500, whether or not such
Interests are described on any other exhibit hereto. Seller’s interest in
the Properties, Leases, Wells, Permits, Equipment and Contracts, net of the
Retained Interest described above, shall hereinafter together be called the
“Interests”.

       THEREFORE, in
consideration of the above recitals and of the covenants and agreements herein
contained, Seller and Buyer agree as follows:

1.     Sale and Purchase. Subject
to and upon all of the terms and conditions hereinafter set forth, Seller shall
sell, transfer, assign, convey and deliver the Interests to Buyer, and Buyer
shall purchase, receive, pay for and accept the Interests from Seller, effective
July 1, 2007, at 7 a.m. local time (the “Effective
Time”).

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2.     Sale Price.

       (a)     The
sale price for the Interests (“Sale Price”) shall be Three
Million Six Hundred Thousand Dollars ($3,600,000.00) together with 12,500,000
restricted shares of common stock, par value $0.001 per share, of Universal
Property Development and Acquisition Corporation (“UPDA”), a
Nevada corporation (the “UPDA Common Stock”) plus 4,000,000
restricted shares of common stock, par value $0.001 per share, of Heartland Oil
and Gas Corp. (“HOGC”), a Nevada corporation (the
“HOGC Common Stock”). The Sale Price is subject to any
applicable price adjustment as provided for in Sections 3 and 8 hereof. The
number of shares of UPDA Common Stock and the number of shares of HOGC Common
Stock will be adjusted as of the date of closing to reflect a total payment of
$800,000 in UPDA Common Stock and $400,000 in HOGC Common Stock based upon the
average of the closing prices for each stock for the five days immediately
preceding and the five days immediately subsequent to the date of closing. The
per share price of the UPDA Common Stock, as so adjusted, shall be referred to
as the “UPDA Reference Price,” and the per share price of the HOGC
Common Stock, as so adjusted, shall be referred to as the “HOGC Reference
Price.” The number of shares of UPDA Common Stock and HOGC Common Stock is
further subject to the make-whole provisions set forth in Section 2(c) and
(d).

       (b)     The
Sale Price shall be allocated among the Interests in accordance with Exhibit
G attached hereto, and in compliance with Internal Revenue Code Section 1060
and the regulations promulgated thereunder. Seller will not file any tax return
or other document with, or make any statement or declaration to, any federal,
state or local governmental authority that is inconsistent with such
allocation.

       (c)     The
number of shares of UPDA Common Stock issuable hereunder is subject to further
adjustment, as follows: in the event Petro Pro (or Miesner) sells all or a
portion of the UPDA Common Stock in accordance with Rule 144 (in one or more
distinct sale transactions), within the six-month time frame commencing on the
one-year anniversary of the Closing Date and ending six months thereafter, and
the proceeds of any such sales (gross of commissions) are less than the
UPDA Reference Price per share sold, then UPDA or Buyer shall deliver additional
shares of UPDA Common Stock (valued for purposes hereof at the UPDA Reference
Price) to Petro Pro (or Miesner, as the case may be), or, in UPDA’s sole
discretion, cash, in the amount of such shortfall. Although such adjustment
mechanism may cover multiple sale transactions, the adjustment mechanism set
forth in this section may be exercised on no more than one occasion, six months
following the one-year anniversary of the Closing Date. Each of Petro Pro and
Miesner agrees that sales of UPDA Common Stock during the six-month time frame
commencing on the one-year anniversary of the Closing Date and ending six months
thereafter, shall not exceed 105,000 shares per day or 500,000 shares per
week.

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       (d)     The
number of shares of HOGC Common Stock issuable hereunder is subject to further
adjustment, as follows: in the event Petro Pro sells all or a portion of the
HOGC Common Stock in accordance with Rule 144 (in one or more distinct sale
transactions), within the six-month time frame commencing on the one-year
anniversary of the Closing Date and ending six months thereafter, and the
proceeds of any such sales (gross of commissions) are less than the HOGC
Reference Price per share sold, then HOGC or Buyer shall deliver additional
shares of HOGC Common Stock (valued for purposes hereof at the HOGC Reference
Price per share) to Petro Pro, or, in HOGC’s sole discretion, cash, in the
amount of such shortfall. Although such adjustment mechanism may cover multiple
sale transactions, the adjustment mechanism set forth in this section may be
exercised on no more than one occasion, six months following the one-year
anniversary of the Closing Date. Petro Pro agrees that sales of HOGC Common
Stock during the six-month time frame commencing on the one-year anniversary of
the Closing Date and ending six months thereafter, shall not exceed 35,000
shares per day or 150,000 shares per week.

3.     Adjustments to the Sale
Price.  In addition to any upward or downward adjustments to the Sale Price
as a result of Title Defects, as discussed more fully in Section 8, below, the
Sale Price may be adjusted upward or downward according to the following
provisions:

       (a)     Gas
Imbalances.  The Sale Price shall be adjusted upward in an amount equal to
$[client insert price here] per mcf of gas in the event of an imbalance of less
than five thousand (5,000) mcf in the production of gas prior to the Effective
Time as a result of which Seller is entitled to (i) make up from the
Properties such volume of gas less than five thousand (5,000) mcf, or (ii)
compensation for such volume of gas.  The Sale Price shall be adjusted downward
in an amount equal to $[client insert price here] per mcf of gas in excess of
five thousand (5,000) mcf for which Seller is obligated to (iii) permit third
parties to make up from the Properties in excess of such volume of gas or (iv)
compensate third parties for such volume of gas.

       (b)     Oil
in Storage.  The Sale Price shall be adjusted upward in an amount equal to
the value of all merchantable, allowable, oil in storage at the Effective Time,
above the pipeline connection, which is sold and which is credited to the
Properties and paid to Buyer, such value to be the actual price received by
Buyer, less taxes and deductions.  The Sale Price shall be adjusted downward in
an amount equal to the proceeds received by Seller from the sale of oil, gas, or
other hydrocarbons attributable to the Properties and which are produced after
the Effective Time.

4.     Seller’s Representations
and Warranties.  Seller represents and warrants to Buyer that as of the
Closing Date:

       (a)     Organization
and Authority. Sellers are a duly organized, validly existing and in good
standing in the State of Texas; Sellers are duly qualified to carry on business
in the state in which the Interests are located; Sellers have full power and
authority to enter into and perform under this Agreement according to its terms
and conditions, and this Agreement has been duly executed and delivered by
Sellers and constitutes a legal, valid and binding obligation of Sellers,
enforceable against Sellers in accordance with its
terms;

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       (b)     Litigation.
Seller is not aware of any pending or threatened legal action, investigation or
administrative proceeding by any third party or federal, state or local
governmental authority which may prohibit the transfer and sale of the
Interests, encumber the Interests or affect the validity of any of the Leases or
Contracts. Seller shall promptly notify Buyer of any such proceeding arising
prior to the Closing;

       (c)     Bankruptcy.
Sellers are not now in, nor do Sellers contemplate entering into, bankruptcy
protection or any similar state law protection;

       (d)     No
Conflicts. The execution and delivery of this Agreement does not, and the
fulfillment of and compliance with the terms and conditions hereof will not:
(i) result in the imposition or creation of any lien, charge or other
encumbrance upon or with respect to any of the Interests; (ii) contravene,
violate, or be in conflict with or breach any material provision of, or give any
person the right to declare a default or exercise any remedy under, or to
cancel, terminate or modify, any of the Contracts; or (iii) contravene, violate,
be in conflict with, or give any federal, state or local governmental authority
or other person the right to challenge any of the transactions contemplated
herein or to exercise any remedy or obtain any relief under, any federal, state
or local laws, except such contraventions, violations, challenges, conflicts or
claims for or exercises of any remedy or relief as would not, individually or in
the aggregate, have a material adverse effect on the Interests, or
Seller’s ability to consummate this Agreement or the transactions
contemplated hereby;

       (e)     Compliance
with Laws. Except as would not have a material adverse effect on any of the
Interests, to the best of its knowledge: (i) Seller’s ownership and
operation, and any third-party operator’s operation, of or with respect to
the Interests is and has been in compliance with all applicable federal, state
or local laws, rules, regulations and permits; (ii) all permits and/or bonds
applicable to the Interests are specified on Exhibit E, and (A) Seller, or any
third-party operator of or with respect to the Interests, has acquired and
maintains all permits and bonds from appropriate federal, state or local
governmental authorities necessary to conduct any operations now being performed
in compliance with all applicable federal, state and local laws rules,
regulations and permits; (B) Seller, or any third-party operator of or with
respect to the Interests, is in compliance with all such permits and bonds, and
all such permits and bonds are in full force and effect; and (C) there are
no legal or administrative investigations or proceedings, pending or threatened,
challenging or seeking revocation or limitation of any such permits and bonds;
and (iii) all plans, applications, reports, certificates and other instruments
filed by Seller, or any third-party operator of or with respect to the
Interests, with any federal, state or local governmental authority with respect
to the Interests do not: (A) contain any untrue statement of fact; or (B) omit
any statement of fact necessary to make the statements therein not
misleading;

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       (f)     Environmental
Conditions. To the best of Seller’s knowledge, with respect to or
affecting the Interests, Seller, and each third-party operator of or with
respect to the Interests, have been in material compliance with, and have not
been and are not in any material respect in violation of or liable under, any
federal, state or local environmental law, rule or regulation in effect at the
Effective Time. Seller has no knowledge of any facts relating to the condition,
use or operation of any of the Interests that are reasonably likely to
constitute or result in a violation of any federal, state or local environmental
law, rule or regulation in effect at the Effective Time, or result in a suit,
action, claim, investigation, inquiry or proceeding under or with respect to
such environmental law;

       (g)     Special
Title Warranty. Seller specially warrants to Buyer and its successors and
assigns that it has an ownership interest in the Interests which is equal to or
greater than the interest shown on Exhibit A, and that it has not previously
conveyed or encumbered the Interests, that it has the full and unrestricted
authority to convey the Interests, in full and unlimited ownership to the extent
set forth on Exhibit A, and that it warrants and will defend title to the
Interests against the claims and demands of all persons whomsoever claim the
same or any part thereof, by, through, and under Seller, but not otherwise, to
the extent and subject to the limitations set forth on Exhibit A. The Interests
are free and clear of valid claims or rights of any person claiming rights or
interests therein by, through or under Seller, and there are no liens or
encumbrances upon the Interests, except for those liens set forth on Exhibit H
attached hereto (the “Permitted Liens”), and to the best of
Seller’s knowledge, no person claims an interest in or upon the
Interests;

       (h)     Take
or Pay or Similar Contracts.  To the best of Seller’s knowledge, (i)
Seller is not obligated by virtue of any prepayment arrangement under any
contract for the sale of hydrocarbons and containing a “take or pay”
or similar provision or a production payment or any other arrangement to deliver
hydrocarbons produced from the Properties at some future time without then or
thereafter receiving full payment therefor, and (ii) Seller has not produced a
share of gas greater than its ownership percentage and Seller is under no
obligation to reduce its share of production under any gas balancing agreement
or similar contract to allow produced parties to come back into
balance.

       (i)     To
the best of Seller’s knowledge, there does not exist an obligation with
respect to imbalances in the production of gas prior to the Effective Time as a
result of which Seller is obligated to (i) permit third parties to make up from
the Properties in excess of five thousand (5,000) mcf of gas, or (ii) compensate
third parties for such volume of gas.

       (j)     To
the best of Seller’s knowledge, there are no material defects in the
personal Property and fixtures to be conveyed to Buyer pursuant to the terms
hereof which would prevent the continued operation of the Properties in
accordance with prior practice.

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       (k)     To
the best of Seller’s knowledge, all material royalties (other than
royalties held in suspense), rentals, and other payments due under the Leases,
have been properly and timely paid, and all conditions necessary to keep the
Leases in force have been fully performed.  No notices have been received by
Seller of any claim to the contrary.

       (l)     To
the best of Seller’s knowledge, all ad valorem, property, production,
severance, and similar taxes and assessments based on or measured by the
ownership of property or the production of hydrocarbons and the receipt of
proceeds therefrom from the Properties have been properly paid and all such
taxes and assessments which become due and payable prior to the Effective Time
shall be properly paid by Seller.

       (m)     Seller
has incurred no liability, contingent or otherwise, for brokers’ or
finders’ fees relating to the transactions contemplated by this Agreement
for which Buyer shall have any responsibility whatsoever.

       (n)     No
Material Adverse Change. Since the earlier of the date hereof or the date of
the most recently provided production reports relating to the Interests, (i) to
the best of Seller’s knowledge, there has not been any material adverse
change in the operations or condition of the Interests, and no event has
occurred or circumstance exists that may result in such a material adverse
change; provided, however, that in no event shall any change
resulting from conditions affecting the coal or oil and gas industry generally,
changes in commodity prices, or changes in general business or economic
conditions constitute a material adverse change in the operations or condition
of the Interests; and (ii) Seller has not sold, transferred or abandoned any
part of the Interests or terminated any of the Leases or Contracts, or
voluntarily permitted any of the Interests or any material rights with respect
thereto to expire, and has not waived or released any material rights with
respect to the Interests;

       (o)     Insurance.
All of the Interests are covered by self insurance or currently effective
insurance policies of such types and amounts as are consistent with customary
practices and standards in the oil and gas industry.

       (p)     No
Untrue Statements. None of the written materials provided or to be provided
to Buyer in connection with its review of the Interests contained or will
contain any untrue statement of material fact or omitted or will omit any fact
necessary to make any statement therein not misleading; and

       (q)     Survival.
The representations and warranties contained in this Section 4 will survive the
consummation of the transactions contemplated by this Agreement, for a period of
one year.

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5.     Buyer’s Representations
and Warranties.  Buyer represents and warrants to Seller that as of the
Closing Date:

       (a)     Organization
and Qualification. Buyer is a duly organized corporation, validly existing
and in good standing under the laws of the State of Nevada, with the requisite
power and authority to own and use its properties and assets and to carry on its
business as currently conducted; Buyer is duly qualified to carry on its
business as a foreign corporation in the state of Texas, in which the Interests
are located;

       (b)     Authorization;
Enforcement. Buyer has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by this Agreement and
otherwise to carry out its obligations hereunder. The execution and delivery of
this Agreement by Buyer and the consummation by Buyer of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of Buyer and no further action is required by Buyer in connection
therewith. This Agreement has been duly executed by Buyer and constitutes a
valid and binding obligation of Buyer enforceable against Buyer in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ and contracting parties
rights generally;

       (c)     No
Conflicts. The execution, delivery and performance of this Agreement by
Buyer and the consummation by Buyer of the transactions contemplated hereby do
not and will not (i) conflict with or violate any provision of Buyer’s
certificate or articles of incorporation or bylaws, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, credit facility, debt or other instrument to which
Buyer is a party or by which any property or asset of  Buyer is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which Buyer is subject (including federal and state securities laws
and regulations), or by which any property or asset of Buyer is bound or
affected;

       (d)     Filings,
Consents and Approvals. Buyer is not required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other person in connection with the execution,
delivery and performance by Buyer of this Agreement, other than (i) any filing
with the Securities and Exchange Commission (the
“Commission”) and applicable Blue Sky filings, and (ii) such
other filings as may be required following the Closing Date under the Securities
Act of 1933, as amended (the “Securities Act”), the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”) and state corporate law;

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       (e)     Issuance
of UPDA Common Stock and HOGC Common Stock. The shares of UPDA Common Stock
and HOGC Common Stock are duly authorized and, when issued in accordance with
this Agreement, will be duly and validly issued, fully paid and nonassessable,
free and clear of all liens, charges, security interests, encumbrances or other
restrictions (“Liens”);

       (f)     SEC
Reports. Buyer has filed all reports required to be filed by Buyer under the
Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) of the Exchange Act, for the two years preceding the date hereof (or such
shorter period as the Company was required by law to file such material) (the
foregoing materials, including the exhibits thereto, being collectively referred
to herein as the “SEC Reports”) on a timely basis or
has received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. As of their respective
dates, the SEC Reports complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading;

       (g)     Litigation.
Except as disclosed in the SEC Reports, there is no action, suit, inquiry,
notice of violation, proceeding or investigation pending or, to the knowledge of
Buyer, threatened against or affecting Buyer or any of Buyer’s properties
before or by any court, arbitrator, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) (collectively,
an “Action”) which (i) materially and adversely affects or
challenges the legality, validity or enforceability of this Agreement or (ii)
could, if there were an unfavorable decision, have or reasonably be expected to
result in a material adverse effect on the results of operations, assets,
business or financial condition of Buyer. Neither Buyer nor any director or
officer thereof is or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty. There has not been, and to the knowledge of Buyer,
there is not pending or contemplated, any investigation by the Commission
involving Buyer or any current or former director or officer of Buyer;

       (h)     Compliance.
Buyer (i) is not in default under or in violation of (and no event has occurred
that has not been waived that, with notice or lapse of time or both, would
result in a default by Buyer under), nor has Buyer received notice of a claim
that it is in default under or that it is in violation of, any indenture, loan
or credit agreement or any other agreement or instrument to which it is a party
or by which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is not in violation of any order of any court,
arbitrator or governmental body, or (iii) is not in violation of any statute,
rule or regulation of any governmental authority, including without limitation
all foreign, federal, state and local laws applicable to its
business;

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       (i)     Regulatory
Permits. Buyer possesses all certificates, authorizations and permits issued
by the appropriate federal, state, local or foreign regulatory authorities
necessary to conduct its business (“Material
Permits”), and Buyer has not received any notice of proceedings
relating to the revocation or modification of any Material Permit;

       (j)     Application
of Takeover Protections. To Buyer’s knowledge, Buyer and its Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any non-statutory control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or other
similar anti-takeover provision under Buyer’s certificate of incorporation
or the laws of its state of incorporation that is or could become applicable to
Petro Pro as a result of Petro Pro’s fulfillment of its obligations under
this Agreement, including without limitation the issuance to Petro Pro of the
shares of UPDA Common Stock and HOGC Common Stock and the ownership of shares of
UPDA Common Stock and HOGC Common Stock by Petro Pro;

       (k)     Nature
of Interest. Buyer has purchased the Interests for its own account and not
with an interest to resale or distribution in violation of any applicable
securities laws;

       (l)     Bankruptcy.
Buyer is not now in, nor does it contemplate entering into bankruptcy protection
or any similar state law protection; and

       (m)     Reliance
on Expertise. Buyer has fully relied upon its own expertise and information
in making its decision to enter into this Agreement; provided,
however, that nothing in this Section 5(m) shall be constituted to
relieve Seller from any liability for misrepresentation with respect to
Seller’s representations and warranties contained in Section 4
hereof.

       (n)     Survival.
The representations and warranties contained in this Section 5 will survive the
consummation of the transactions contemplated by this Agreement, for a period of
one year.

6.     Covenants Of Seller.
Seller covenants and agrees with Buyer as follows:

       (a)     Within
two days after the date of this Agreement, Seller, at the expense of Seller,
shall make available to Buyer the following information relating to the
Interests:

                   (i)     Title
opinions;

                   (ii)     Copies
of the Leases, prior conveyances of the Properties, unitization, pooling,
farmout, farm-in, right-of-way, easement, assignment, and operating agreements,
licenses, division and transfer orders, mortgages, deeds of trust, security
agreements, chattel mortgages, financing statements, and other encumbrances not
discharged and affecting the title to or the value of the Properties and all
other information contained in the land files of
Seller;

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                   (iii)     Abstracts
of title and status reports;

                   (iv)     Other
land records;

                   (v)     Rental
and royalty payment records;

                   (vi)     Tax
payment records;

                   (vii)     Maps
and surveys;

                   (viii)     Production,
sale, processing and transportation agreements;

                   (ix)     Permits
and orders;

                   (x)     Production
and operational records and verification;

                   (xi)     Accounting
records;

                   (xii)     Filings
made with regulatory agencies;

                   (xiii)     Operating
expense records and verification;

                   (xiv)     Inventories
of personal property and fixtures;

                   (xv)     Bonds
and insurance policies;

                   (xvi)     Salt
water disposal agreements and other operation agreements;

                   (xvii)     Engineering,
geological and geophysical data;

                   (xviii)     Development
Plans and permits.

                   (xix)     Any
other information reasonably related to the Interests.

                   All
of the information set forth above this paragraph (a) shall be open to
inspection and photocopying by Buyer at Seller’s offices any reasonable
time following execution of this Agreement, and Seller shall make available any
additional information which is reasonably related to the Interests,
simultaneously with the provision of information provided for by this Section
6(a).  To the extent the foregoing information is not in Seller’s
possession, Seller agrees to cooperate with Buyer in Buyer’s efforts to
obtain, at Buyer’s expense, such additional information relating to the
Properties as Buyer may reasonably desire.

       (b)     Between
the date of execution of this Agreement by Buyer and Closing, Seller shall cause
the Properties to be developed, maintained and operated in a good and
workmanlike manner, shall maintain insurance now in force with respect to the
Interests, shall pay or cause to be paid all costs and expenses incurred in
connection with the Properties, shall keep the Leases in full force and effect
and shall perform and comply with all of the covenants and conditions contained
in the Leases and all agreements relating to the Properties; provided,
however, Seller shall not commence operations for the drilling of any new
well or the redrilling or reworking of any existing well on the Properties after
the date of execution of this Agreement without the prior written consent of
Buyer.

       (c)     Between
the date of execution of this Agreement by Buyer and Closing, Seller shall carry
on its business with respect to the Properties in substantially the same manner
as Seller has prior to the date of this Agreement, and shall not introduce any
new method of management, operation or accounting with respect to the
Properties.

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       (d)     Without
the prior written consent of Buyer, between the date of execution of this
Agreement by Buyer and Closing, Seller shall not enter into any new agreements
or commitments with respect to the Properties, shall not make any expenditures
on any Properties in excess of $1,000.00, shall not abandon any well located on
the Properties, nor release or abandon all or any portion of any of the Leases,
shall not modify or terminate any of the agreements relating to the Interests,
and shall not encumber, sell or otherwise dispose of any of the Interests, other
than personal property that is replaced by equivalent property or consumed in
the normal operation of the Properties.

       (e)     Between
the date of execution of this Agreement by Buyer and Closing, Seller shall take
all steps necessary to allow Buyer to take over operations of all Wells as of 7
a.m. local time on the day after the Closing, and shall also take all steps
necessary to cause Buyer to be duly designated operator, for Buyer’s own
account, of those wells as of such date.

       (f)     Between
the date of execution of this Agreement by Buyer and Closing, Seller shall
maintain and preserve its field organization for operating the Properties in
order to preserve such field organization for Buyer on and after
Closing.

       (g)     Between
the date of execution of this Agreement by Buyer and Closing, Seller shall
exercise reasonable care in safeguarding and maintaining in a secure manner all
engineering, geological and geophysical data, reports and maps, and all other
confidential data in the possession of Seller, relating to the
Properties.

       (h)     Between
the date of execution of this Agreement by Buyer and Closing, Seller shall
continue to comply with all applicable laws, rules, regulations, ordinances and
orders of all local, tribal, state and federal governmental bodies, authorities
and agencies having jurisdiction over the Properties.

       (i)     Between
the date of execution of this Agreement by Buyer and Closing, Seller grants
Buyer and its employees and agents the right of access to the Properties and the
right to witness and conduct well tests on the Properties.

       (j)     Seller
shall use its best efforts to take or cause to be taken all such actions as may
be necessary or advisable to consummate and make effective the sale of the
Properties and the transactions contemplated by this Agreement, including but
not limited to promptly prosecuting the transfer of all Permits necessary for
the operation of the Properties, and to assure that as of the Closing Date,
Seller will not be under any material corporate, legal or contractual
restriction that would prohibit or delay the timely consummation of such
transactions.

-11-
   

       (k)     Seller
shall use its best efforts to identify (i) all preferential rights to purchase
and rights to require that consents to assignments be obtained which would be
applicable to the transactions contemplated hereby, and (ii) the parties holding
such rights.  Seller shall immediate request, from the parties so identified
(and in accordance with the documents creating such rights), waivers of the
preferential rights to purchase and requirements that consents to assignment be
obtained which were so identified.  Seller shall have no obligation hereunder
other than to so attempt to identify such preferential rights and requirements
that consents to assignment be obtained, to use reasonable efforts to obtain
such waivers and consents, and to immediately notify Buyer in the event Seller
is unable to obtain such waivers or consents.  If a party from whom a waiver of
a preferential right to purchase or a consent to assignment is requested fails
or refuses to give such waiver or consent, the parties agree that the Property
affected by the holder’s refusal or failure to give such waiver or consent
will constitute a property with a Title Defect, as described in Section 8
herein.

       (l)     Seller
shall cause all of its representations and warranties contained in this
Agreement to be true and correct on and as of the Closing Date. To the extent
the conditions precedent to the obligations of Buyer are within the control of
Seller, Seller shall cause such conditions to be satisfied on or prior to the
Closing Date and, to the extent the conditions precedent to the obligations of
Buyer are not within the control of Seller, Seller shall use diligent effort to
cause such conditions to be satisfied on or prior to the Closing Date.

       (m)     Seller
shall promptly notify Buyer if any representation or warranty of Seller
contained in this Agreement is discovered to be or becomes untrue, or if Seller
fails to perform or comply with any covenant, condition or agreement contained
in this Agreement or it is reasonably anticipated that Seller will be unable to
perform or comply with any covenant, condition or agreement contained in this
Agreement.

       (n)     Through
July 31, 2007, Seller shall not solicit from any third party any proposals or
offers, or enter into any negotiations relating to the distribution of any of
the Interests, the acquisition of its stock, or its merger or
consolidation.

7.     Covenants of Buyer.  Buyer
covenants and agrees with Seller as follows:

       (a)     Buyer
shall use diligent efforts to take or cause to be taken all such actions as may
be necessary or advisable to consummate and make effective the purchase of the
Properties and the transactions contemplated by this Agreement, and to assure
that as of the Closing Date, Buyer will not be under any material corporate,
legal or contractual restriction that would prohibit or delay the timely
consummation of such transactions.

       (b)     Buyer
shall cause all of its representations and warranties contained in this
Agreement to be true and correct on and as of the Closing Date. To the extent
the conditions precedent to the obligations of Seller are within the control of
Buyer, Buyer shall cause such conditions to be satisfied on or prior to the
Closing Date and, to the extent the conditions precedent to the obligations of
Seller are not within the control of Buyer, Buyer shall use diligent effort to
cause such conditions to be satisfied on or prior to the Closing
Date.

-12-
   

       (c)     Buyer
shall promptly notify Seller if any representation or warranty of Buyer
contained in this Agreement is discovered to be or becomes untrue, or if Buyer
fails to perform or comply with any covenant, condition or agreement contained
in this Agreement or it is reasonably anticipated that Buyer will be unable to
perform or comply with any covenant,, condition or agreement contained in this
Agreement.

       (d)     Buyer
shall use its best efforts in safeguarding and maintaining in a secure manner
all engineering, geological and geophysical data, reports and maps, and all
other confidential data provided by Seller, in the possession of Buyer, relating
to the Properties.

8.     Title Procedure and Casualty
Loss. For purposes of this Agreement, “marketable title” shall
mean title that is free from reasonable doubt such that a prudent person, with
knowledge of all salient facts and circumstances and their legal significance,
would be willing to accept it. If any of the information or material supplied by
Seller pursuant to this Agreement or any other information or data obtained by
Buyer reflects the existence of any encumbrance, encroachment, defect in or
objection to title, other than those set forth in Exhibit A and Exhibit G, that
renders title to the Properties or any portion of the Properties defective or
encumbered, such that the title to the Properties or any portion of the
Properties is  not marketable  due to such  encumbrance, encroachment, title
defect or objection (“Title Defects”):

       (a)     Buyer
shall notify Seller of the Title Defects, as they are identified, but in any
event within ten days following execution of this Agreement, and providing
Seller adequate information to enable Seller to go forward with curing the Title
Defects. Within ten days prior to Closing, Seller shall furnish Buyer all
documentation satisfying the Title Defects.

       (b)     If
Seller is unable to cure a particular Title Defect, Buyer shall have the option
to do one of the following:  (i) remove the Property on which there is a Title
Defect from the transaction contemplated by this Agreement and reduce the Sale
Price by the amount of the Sale Price Allocation for the particular Property set
forth in Exhibit G.  By way of example, in the event of a Title Defect on any or
all of the Barron 1, 2, or 3 Properties, Buyer may remove the Barron 1, 2 and 3
Properties from the transaction contemplated by this Agreement and reduce the
Sale Price by $931,304.35; or (ii) accept the Property with the Title Defect
with no reduction in the Sale Price.

       (c)     The
value of Title Defects not constituting a breach of any of Seller’s
representations or warranties must exceed $25,000.00 in value before any
adjustment to the Sale Price will be made. Upon the determination that all such
Title Defects total in excess of $25,000.00 in value, all identified Title
Defects may give rise to a Sale Price adjustment. Notwithstanding this
limitation, Buyer always shall have the option to remove from this transaction
any Properties on which there are Title Defects, regardless of the value
assigned to the Title Defects and affected Properties.

-13-
   

       (d)     Casualty
Loss. If, prior to Closing, all or any portion of the Properties shall be
destroyed by fire or other casualty, or if any portion of the Properties shall
be taken in condemnation or under the right of eminent domain, or, if
proceedings for such purposes shall be pending or threatened, Buyer may elect to
terminate this Agreement. If Buyer makes this election, neither party shall have
any further obligation to the other under or by this Agreement, except such
obligations which, by their terms, survive termination of this Agreement. If not
so terminated, this Agreement shall remain in full force and effect
notwithstanding any such destruction, condemnation, or taking, and Seller shall,
at Closing, pay to Buyer all sums (such as insurance proceeds, condemnation
proceeds, or takings compensation) paid to Seller by reason of such destruction,
condemnation, or taking. In addition, Seller shall assign, transfer and set over
to Buyer all of the right, title and interest of Seller in and to any unpaid
awards or other payments arising out of such destruction, condemnation, or
taking. Seller shall not voluntarily compromise, settle or adjust any amounts
payable by reason of such destruction, condemnation, or taking without first
obtaining the written consent of Buyer.

9.     Physical and Environmental
Inspection. After the execution of this Agreement, Buyer and its authorized
representative shall have physical access to the Interests at Buyer’s sole
cost, risk and expense for the purpose of inspecting the Interests as may be
reasonably necessary and appropriate, in Buyer’s sole judgment, to
evaluate the physical and environmental condition of the Interests, including
the identification of wetlands. Buyer shall defend and indemnify Seller from any
and all liability, claims, causes of action, injury to Buyer’s employees,
agents or contractors or to Seller’s property which may arise out of
Buyer’s inspections, but only to the extent of Buyer’s negligence.
Buyer agrees to provide Seller, upon reasonable request, a copy of any
environmental assessments including any reports, data and conclusions. Except as
otherwise provided by law or regulation, Buyer and Seller shall keep any and all
such data or information obtained or determined during such inspections and the
results of any analysis strictly confidential and shall not disclose same to any
person or agency without the prior written approval of both Buyer and Seller.
The foregoing obligation of confidentiality shall survive the Closing or
termination of this Agreement.

10.     Due Diligence Period.
During the period between the date of execution of this Agreement by Buyer and
Closing (the “Due Diligence Period”), Buyer shall complete its
physical and environmental inspections and such other due diligence as it deems
reasonably necessary, in its sole judgment, prior to Closing.

11.     Warranty of Title. In all
conveyances executed and delivered hereunder, Seller shall specially warrant to
Buyer and its successors and assigns that it has an ownership interest in the
Properties which is equal to or greater than the interest shown on Exhibit A,
and that it has not previously conveyed or encumbered the Properties, that it
has the full and unrestricted authority to convey the Properties, in full and
unlimited ownership to the extent set forth on Exhibit A, and that it will
warrant and defend title to the Properties against the lawful claims and demands
of all persons whomsoever claim the same or any part thereof, by, through, and
under Seller, but not otherwise, to the extent and subject to the limitations
set forth on Exhibit A. Except for those representations and warranties set
forth in this Agreement, the “Petro Pro Assignment, Conveyance, and Bill
of Sale” instrument attached hereto as Exhibit “I,” and the
“Jilpetco Assignment, Conveyance, and Bill of Sale” instrument
attached hereto as Exhibit “J,” Seller makes no other warranty or
representation as to the quantity or quality of title to the
Properties.

-14-
   

12.     Other Agreements of the
Parties.

       (a)     Transfer
Restrictions. Each of Petro Pro and Miesner agrees to the imprinting, so long as
is required by this Agreement, of a legend on any of the shares of UPDA Common
Stock and HOGC Common Stock substantially in the following form:

	

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”). THE SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS REGISTERED UNDER THE SECURITIES ACT AND QUALIFIED UNDER
APPLICABLE STATE SECURITIES LAWS OR UNLESS SUCH SALE, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND THE QUALIFICATION REQUIREMENTS OF APPLICABLE STATE SECURITIES
LAWS.

             Certificates
evidencing the UPDA Common Stock and HOGC Common Stock shall not contain any
legend (including the legend set forth in this Section 12(a)), (i) following any
sale of such UPDA Common Stock and HOGC Common Stock pursuant to Rule 144
promulgated by the Commission pursuant to the Securities Act (“Rule
144”), or (ii) if such UPDA Common Stock and/or HOGC Common Stock is
eligible for sale under Rule 144(k). Each of UPDA and HOGC agrees that at such
time as such legend is no longer required under this Section 12(a), it will, no
later than seven Trading Days following the delivery to UPDA’s transfer
agent or HOGC’s transfer agent, as the case may be, of a certificate
representing UPDA Common Stock and/or HOGC Common Stock issued with a
restrictive legend (together with standard documentation to establish the facts
permitting the removal of legends hereunder), deliver or cause to be delivered a
certificate representing such UPDA Common Stock and/or HOGC Common Stock that is
free from all restrictive and other legends. Neither of UPDA nor HOGC may make
any notation on its records or give instructions to UPDA’s transfer agent
or HOGC’s transfer agent, as the case may be, that enlarge the
restrictions on transfer set forth in this Section.

-15-
   

       (b)     Furnishing
of Information. As long as Petro Pro or Miesner owns shares of UPDA Common Stock
and/or HOGC Common Stock, each of UPDA and HOGC covenants to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by UPDA and/or HOGC after the date
hereof pursuant to the Exchange Act. Upon the request of Petro Pro or Miesner,
UPDA and HOGC shall deliver to Petro Pro and Miesner a written certification of
a duly authorized officer as to whether it has complied with the preceding
sentence. Each of UPDA and HOGC further covenants that it will take such further
action as Petro Pro or Miesner may reasonably request, all to the extent
required from time to time to enable Petro Pro and Miesner to sell such UPDA
Common Stock and/or HOGC Common Stock without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144.

       (c)     Quotation/Listing
of Common Stock. Each of UPDA and HOGC hereby agrees to use its reasonable best
efforts to maintain the quotation or listing of the UPDA Common Stock and HOGC
Common Stock on the OTC Bulletin Board. Each of UPDA and HOGC will take
commercially reasonable actions necessary to continue the quotation or listing
of the UPDA Common Stock and HOGC Common Stock on the OTC Bulletin Board and
will comply in all respects with the reporting, filing and other obligations
under the bylaws or rules of the OTC Bulletin Board.

       (d)     Facilitation
of Immediate Transfer.  Upon the receipt from Seller of transfer documentation
deemed sufficient by their respective transfer agents, each of UPDA and HOGC
hereby agree to use their best efforts to facilitate an immediate transfer to
the business associates of Petro Pro and Miesner, of a portion of the shares of
UPDA Common Stock and HOGC Common Stock issuable to Petro Pro and Miesner under
this Agreement and each shall direct their respective transfer agents to
cooperate therein.  The provisions of subsections 2(c) and 2(d) of this
Agreement shall apply to all of such transferred shares of UPDA Common Stock and
HOGC Common Stock, and Petro Pro and Miesner agree that each such transfer shall
be accompanied by written agreement on the part of the transferee, to abide by
the provisions of subsections 2(c) and 2(d) of this Agreement.

13.     Conditions of Closing by
Buyer. The obligation of Buyer to close is subject to the satisfaction of
the following conditions:

       (a)     Buyer
shall have had reasonable access to all data and records which it has reasonably
requested;

       (b)     Buyer
shall have had reasonable access to the leases and equipment included in the
Interests to conduct an inspection for all purposes, including environmental
condition;

       (c)     No
material adverse change in the condition of or title to the Interests shall have
occurred prior to the Effective Time, except depletion through normal production
within authorized, allowable, ordinary changes in the rates of production and
depreciation of equipment through ordinary wear and tear;

-16-
   

       (d)     All
representations and warranties of Seller contained in the Agreement shall be
true, correct and not misleading in all material respects, and Seller shall have
performed and satisfied all agreements and covenants in all material respects
required by this Agreement to be performed and satisfied by Seller;

       (e)     The
Closing of the transactions contemplated by this Agreement shall not violate any
order or decree of any court, agency, tribunal, or other governmental authority
having competent jurisdiction over the transaction contemplated by this
Agreement;

       (f)     All
necessary consents, permissions, novations, approvals, and releases by third
parties in connection with the sale and transfer of the Properties shall have
been received prior to or at Closing except those governmental consents
customarily generated and received in the ordinary course of business at a
post-closing date; and

       (g)     Seller
shall have obtained releases of all liens affecting the Properties.

14.     Conditions of Closing by
Seller. The obligation of Seller to close is subject to the satisfaction of
the following conditions: Seller shall be satisfied with the results of its due
diligence review of Buyer; all representations and warranties of Buyer contained
in the Agreement shall be true, correct and not misleading in all material
respects, and Buyer shall have performed and satisfied all agreements and
covenants in all material respects required by this Agreement to be performed
and satisfied by Buyer.

15.     Closing. The closing (the
“Closing”) shall occur on or before August ___, 2007 (the
“Closing Date”), at the offices of Seller or at such other
time and place as the parties may mutually agree in writing. At Closing, the
following will occur:

       (a)     Each
of the parties comprising Seller shall execute, acknowledge and deliver the
Petro Pro Assignment, Conveyance and Bill of Sale, on the form attached hereto
as Exhibit “I” and the Jilpetco Assignment, Conveyance, and Bill of
Sale attached hereto as Exhibit “J,” covering all of the Interests
to be sold pursuant hereto;

       (b)     Buyer
shall deliver to Jilpetco by wire transfer the cash portion of the Sale Price as
directed in writing by Jilpetco;

       (c)     Buyer
shall issue to Petro Pro or Miesner the UPDA Common Stock (with an effective
date of issuance prior to July 9, 2007, in order to give to Petro Pro or Miesner
the benefit of the July 9, 2007 spin-off transaction involving shares of
Continental Fuels, Inc., a Nevada corporation), and Buyer shall issue to Petro
Pro the HOGC Common Stock;

       (d)     Seller
and Buyer shall execute all necessary forms to be filed with the appropriate
regulatory authorities concerning the change in ownership and operatorship of
the Interests and Buyer shall submit same for approval by such regulatory
authorities at Buyer’s expense and Buyer shall deliver to Seller evidence
of the appropriate state and federal plugging bond, surety letter or letter of
credit acceptable to such authority to authorize Buyer or Buyer’s
designee’s right to conduct operations, if
applicable;

-17-
   

       (e)     Seller
shall deliver to Buyer exclusive possession of the Interests;

       (f)     Seller
shall deliver to Buyer letters-in-lieu of transfer order in form and content
satisfactory to Buyer;

       (g)     Seller
shall provide Buyer any maps, reports and other written material relating to the
Interests including, without limitation, lease files, property records, contract
files, operations files, copies of tax and accounting records and files, well
files, geological and geophysical maps, core analyses and hydrocarbon analyses,
well logs, mud logs, core data and field studies (“Records”).
Except for accounting records and files, all such documents and files shall be
originals including, without limitation, original file jackets and
folders.

16.     Reservations and
Exceptions. Sale and purchase of the Interests is made subject to all
reservations, exceptions, limitations, contracts and other burdens or
instruments which are of record or of which Buyer has actual notice, other than
those caused or created by Seller or those such as would constitute a breach of
Seller’s representations, warranties and covenants.

17.     Assumption of Liabilities and
Indemnities. As used in this paragraph and the subparagraphs hereunder,
“Claims” shall include claims, demands, causes of action,
liabilities, damages, penalties and judgments of any kind or character and all
costs and fees in connection therewith, including reasonable attorney’s
fees.

       (a)     Without
limiting the representations and warranties of Seller contained herein or
Buyer’s remedies in respect thereof, the Interests have been used for
exploring, developing and producing oil and gas. Spills of wastes, crude oil,
produced water, hazardous substances and other materials may have occurred in
the past on the leases or in connection with the Interests. There is a
possibility that there are currently unknown wells, abandoned wells, plugged
wells, pipelines and other equipment on or underneath the property. Seller
warrants and represents that it is unaware of any such conditions at the time of
Closing. It is the intent, therefore, that all liability associated with the
above matters, to the extent that they are unknown to Seller at the time of
Closing, as well as any liability to plug or re-plug such wells in accordance
with the applicable rules, regulations and requirements of governmental agencies
are passed to Buyer at Closing and that Buyer shall assume all liability for
such matters and all claims related thereto absent proof of Seller’s
fraudulent concealment thereof. Additionally, the Interests may contain
hazardous substances or Naturally Occurring Radioactive Material
(“NORM”). NORM may affix or attach itself to the inside of
wells, materials and equipment as scale or in other forms; wells, materials and
equipment located on the leases or included in the Interests may contain NORM
and NORM containing material may have been buried or otherwise disposed of on
the leases. Seller is unaware of any such conditions as of the Closing. Special
procedures may be required for remediating, removing, transporting and disposing
of NORM, hazardous materials and other substances from the Interests and absent
proof of Seller’s fraudulent concealment, Buyer assumes all liability for
any assessment, remediation, removal, transportation and disposal of these
materials and associated activities in accordance with the applicable rules,
requirements and regulations of governmental agencies.

-18-
   

       (b)     At
Closing, Buyer shall assume and be responsible for and comply with all duties
and obligations of Seller, express or implied, arising on or after the Closing,
with respect to the Interests, including, without limitation, those arising
under or by virtue of any lease, contract, agreement, document, permit,
applicable statute or rule, regulation or order of any governmental authority
assigned to it except to the extent (i) that the existence of such duties and
obligations constitute a breach of Seller’s representations, warranties or
covenants or (ii) Seller failed to disclose any such duty or obligation to Buyer
in writing prior to the Effective Time.

       (c)     Seller
shall defend, indemnify and hold Buyer harmless from any and all claims relating
to matters or events arising or relating to the period of time preceding the
Closing Date including, without limitation, mispayment of royalties and other
accounting matters, and for any breach by Seller of any representation, warranty
or covenant contained herein.

       (d)     The
indemnities in this paragraph shall inure to the benefit of Buyer and Seller and
their respective officers, directors, employees, agents, successors and
assigns.

18.     Taxes. All ad valorem
taxes, real property taxes, and similar obligations with respect to the tax
period in which the Effective Date occurs (the “current tax period”)
shall be apportioned between Seller and Buyer as of the Effective Date based on
the immediately preceding tax period assessment. Seller shall pay, and defend
and hold Buyer harmless with respect to payment of all taxes relating to the
Properties for the current tax period, before the Effective Date and prior
years, together with any interest or penalties assessed thereon. Buyer shall
pay, and defend and hold Seller harmless with respect to payment of all taxes
relating to the Properties for the tax period after the Effective Date and
thereafter, together with any interest or penalties assessed thereon.

19.     Accounting. All proceeds
(including proceeds held in suspense or escrow) from the sale of production
actually sold and delivered prior to the Effective Time attributable to the
Interests shall belong to Seller and all proceeds from production and/or sales
thereafter shall belong to Buyer. All costs, expenses and obligations relating
to the Interests which accrue prior to the Effective Time shall be paid and
discharged by Seller regardless of when or where invoices for such costs,
expenses and obligations are received.

20.     Broker’s Fees.
Seller has not utilized a broker in connection with this transaction and Buyer
shall be responsible for any Broker’s fee it incurs as a result of this
transaction.

21.     Attachments. In addition
to the attachments previously referenced, Seller shall provide and attach to
this Agreement (i) an list showing all field equipment such as pumps, tanks,
tools, meters, pipe, etc. which shall be attached hereto as Exhibit F;
(ii) a comprehensive list of all wells, identifying each as producing,
non-producing, plugged, injection, etc. which shall be attached hereto as
Exhibit D, (iii) copies of any and all notices from any governmental
authority relating to the Interests and subject to compliance which shall be
attached hereto as Exhibit E.

-19-
   

22.     Notices. All
communications required or permitted under this Agreement shall be in writing
and any communication or delivery hereunder shall be deemed to have been fully
made if actually delivered or if mailed by registered or certified mail, postage
prepaid to the addresses set forth below:

	

SELLER:

	

711 W. 7th

	
 	

P.O. Box 241

	
 	

Spearman, Texas 79081

	
 	

Attention: Jed Miesner

	
 
	
 
	

BUYER

	

Catlin Oil & Gas, Inc.

	
 	

14255 US Highway 1, Suite 209

	
 	

Juno Beach, Florida 33408

	
 	

Attn: Steven A. Fall, President

	
 	

Phone: 561 630 2977

	
 	

Facsimile: 561 277 2430

	
 

23.     Further Assurances. After
Closing, each of the parties shall execute, acknowledge and deliver to the other
such further instruments and take such other actions as may be reasonably
necessary or convenient to carry out the provisions of this Agreement.

24.     Operations by Seller.
Seller shall operate the Interests until the Closing at which time the
operations will be turned over to and become the responsibility of Buyer. The
risk of casualty loss relating to the Interests shall pass from Seller to Buyer
on the Closing Date.

25.     Entire Agreement. This
Agreement, including all exhibits hereto, plus each Assignment, Conveyance and
Bill of Sale to be delivered at Closing, contains the entire agreement of the
Parties. This Agreement supersedes any prior Agreements between the Parties
concerning sale of the Interests.

26.     Assignability. This
Agreement and the rights and obligations hereunder shall not be assigned or
delegable by either party hereto without the prior written consent of the other
party, which consent shall not be unreasonably withheld.

27.     Survival. All
representations, warranties, covenants and agreements set forth herein or in any
instrument or certificate delivered in connection herewith shall survive the
Closing without limitation as to time.

28.     Governing Law. This
agreement shall be governed by the laws of the State of Texas without regard to
conflicts of laws.

29.     Counterparts. This
Agreement may be executed in counterparts each counterpart shall constitute a
binding original.

-20-
   

30.     Attorneys Fees. In the
event that any litigation, arbitration, or other proceeding is brought hereunder
or in respect hereof, the prevailing party shall be entitled to recover its
reasonable attorneys’ fees and costs of investigation.

31.     Amendments. This
Agreement may not be amended nor any rights hereunder waived except by an
instrument in writing signed by the parties to be charged with such amendment or
waiver and delivered by such party to the party claiming to benefit from such
amendment or waiver.

32.     Headings. The headings of
the articles and sections of this Agreement for guidance and convenience of
reference only and shall not limit or otherwise affect any of the terms and
provisions of this Agreement.

33.     References. References
made in this Agreement, including the use of a pronoun, shall be deemed to
include where applicable, masculine, feminine, singular, or plural, individuals,
partnerships, or corporations.  As may be used in this Agreement,
“person” shall mean any natural person, corporation, partnership,
trust, estate, or other entity.

34.     Parties in Interest.
This Agreement shall be binding upon and shall inure to the benefit of, the
parties hereto and, except as otherwise prohibited, their respective successors
and assigns; and except as otherwise stated herein, nothing contained in this
Agreement or implied herefrom, is intended to confer upon any other person or
entity any benefits, rights, or remedies.

35.     Notices After Closing.
Buyer and Seller hereby agree that each party shall notify the other of its
receipt, after the Closing Date, of any instrument, notification, or other
document affecting the Properties while owned by such other party.

36.     Severability. If a court
of competent jurisdiction determines that any clause or provision of this
Agreement is void, illegal, or unenforceable, the other clauses and provisions
of the Agreement shall remain in full force and effect and the clauses which are
determined to be void, illegal, or unenforceable shall be limited so that they
shall remain in effect to the extent permissible by
law.

Signatures appear on the following
page.

-21-
   

       EXECUTED as of the date
first above mentioned.

	

SELLER

	
 
	

Jilpetco, Inc.

	
 
	
 
	

By:

	

  

	
 
	

Name:

	

  

	
 
	

Title:

	

  

	
 
	

Date:

	

  

	
 
	
 
	
 
	

Petro Pro, Ltd.

	
 
	
 
	

By:

	

  

	
 
	

Name:

	

  

	
 
	

Title:

	

  

	
 
	

Date:

	

  

	
 
	
 
	
 
	

PKC Energy, LLC

	
 
	
 
	

By:

	

  

	
 
	

Name:

	

  

	
 
	

Title:

	

  

	
 
	

Date:

	

  

	
 
	
 
	
 
	
 
	

   

	
 
	

Jed Miesner 

	
 
	

Date:

	

    

	
 

-22-
   

BUYER

CATLIN OIL AND GAS, INC.

By: /s/ Kamal Abdallah 
Name:
Kamal Abdallah
Title:
Chairman
Date:  08/13/2007

-23-
   

Executed for purposes of Section 2 and Section12:

UNIVERSAL PROPERTY DEVELOPMENT AND ACQUISITION
CORPORATION

By: /s/ Kamal Abdallah
Name:
Kamal Abdallah
Title:
Chairman
Date: 08/13/2007

HEARTLAND OIL AND GAS CORP.

By: /s/ Kamal Abdallah
Name:
Kamal Abdallah
Title:
Chairman
Date: 08/13/2007

-24-
   

EXHIBITS

Exhibit A - Description of
Properties
Exhibit B - Map of
Properties
Exhibit C -
Leases
Exhibit D -
Wells
Exhibit E - Permits and Governmental
Authorizations
Exhibit F -
Equipment
Exhibit G - Sale Price
Allocation
Exhibit H - Permitted
Liens
Exhibit I - Petro Pro Assignment,
Conveyance, and Bill of Sale
Exhibit J -
Jilpetco Assignment, Conveyance, and Bill of Sale

-25-
   

Exhibit G

Sale Price Allocation

	

Barron 1,2,3

	

$931,304.35

	

Barron 5,6,7,8,9

	

$1,771,304.35

	

Branham

	

$26,086.95

	

Welch

	

$871,304.35

	

Hill

	

$626,086.95

	

Keck

	

$573,913.05

	

Total

	

$4,800,000.00

-26-EX-4.1

Exhibit 4.1

LUMINENT MORTGAGE CAPITAL, INC.

CAPITAL STOCK WARRANT AGREEMENT

Dated as of August 17, 2007

1

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Section 1.
	 	Issuance of Warrants	 	 	 	 	 	 	1	 	 	 	 	 
	Section 2.
	 	Form of Warrant Certificates	 	 	 	 	 	 	1	 	 	 	 	 
	Section 3.
	 	Execution of Warrant Certificates	 	 	 	 	 	 	1	 	 	 	 	 
	Section 4.
	 	Registration	 	 	 	 	 	 	2	 	 	 	 	 
	Section 5.
	 	Transfers and Exchanges	 	 	 	 	 	 	2	 	 	 	 	 
	Section 6.	 	Mutilated or Missing Warrant Certificates	 	 	2	 	 	 	 	 
	Section 7.	 	Exercisability or Cancellation of Warrants; Exercise of Warrants; Voting Control	 	 	3	 
	 
	 	Limitation	 	 	 	 	 	 	 	 	 	 	 	 
	Section 8.	 	Adjustment of Number of Warrant Shares Issuable upon Exercise of a Warrant	 	 	5	 	 	 	 	 
	Section 9.
	 	Reservation of Shares	 	 	 	 	 	 	7	 	 	 	 	 
	Section 10.
	 	No Impairment; Certain Company Actions	 	 	 	 	 	 	7	 	 	 	 	 
	Section 11.
	 	No Rights or Liabilities as Stockholder	 	 	 	 	 	 	8	 	 	 	 	 
	Section 12.
	 	Fractional Interests	 	 	 	 	 	 	9	 	 	 	 	 
	Section 13.
	 	Registration Rights	 	 	 	 	 	 	9	 	 	 	 	 
	Section 14.	 	Representations and Warranties by the Company	 	 	16	 	 	 	 	 
	Section 15.
	 	Definitions	 	 	 	 	 	 	17	 	 	 	 	 
	Section 16.
	 	Notices	 	 	 	 	 	 	19	 	 	 	 	 
	Section 17.
	 	Supplements, Amendments and Waivers	 	 	 	 	 	 	20	 	 	 	 	 
	Section 18.	 	Representations and Warranties of the Warrantholders	 	 	20	 	 	 	 	 
	Section 19.
	 	Successors and Assigns	 	 	 	 	 	 	20	 	 	 	 	 
	Section 20.
	 	Termination	 	 	 	 	 	 	20	 	 	 	 	 
	Section 21.
	 	Governing Law; Jurisdiction	 	 	 	 	 	 	20	 	 	 	 	 
	Section 22.
	 	Third Party Beneficiaries	 	 	 	 	 	 	21	 	 	 	 	 
	Section 23.
	 	Headings	 	 	 	 	 	 	21	 	 	 	 	 
	Section 24.
	 	Entire Agreement	 	 	 	 	 	 	21	 	 	 	 	 
	Section 25.
	 	Joint Drafting	 	 	 	 	 	 	21	 	 	 	 	 
	SCHEDULE A
	 	List of Warrantholders	 	 	 	 	 	 	 	 	 	 	 	 
	EXHIBIT A
	 	Form of Warrant Certificate	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Form of	 	Election to Purchase	 	 	 	 	 	 	 	 

Form of Assignment

2

THIS WARRANT AGREEMENT (this “Agreement”), dated as of August 17, 2007, is made by
Luminent Mortgage Capital, Inc., a Maryland corporation (including any successor, the
“Company”), for the benefit of the holders from time to time (the “Warrantholders”)
of the Capital Stock Warrants to be issued pursuant hereto. Certain capitalized terms used herein
are defined in Section 15 hereof.

Section 1. Issuance of Warrants.

In consideration for the entry by GGRE LLC into the Repurchase Agreements (defined below) as
“Buyer” thereunder, the Company hereby authorizes a series of warrants known as the Luminent
Mortgage Capital, Inc. Capital Stock Warrants (the “Warrants”) and issues and grants to the
Warrantholders listed on Schedule A hereto warrants to purchase common stock of the
Company, par value $0.001 per share (the “Common Stock”) and/or nonvoting preferred stock
of the Company, par value $0.001 (“Preferred Stock”), representing aggregate economic
ownership of 51% of the Company and 49% of the voting power of all classes of capital stock of the
Company on a fully-diluted basis as of the date hereof (after giving effect to exercise of the
Warrants to be issued pursuant hereto, the conversion of all convertible debt securities of the
company and exercise of any and all outstanding options or other purchase rights relating to the
Common Stock). Each Warrantholder shall receive the number of Warrants set forth opposite the name
of such Warrantholder on Schedule A attached hereto under the heading “Aggregate Number of
Warrants”. Each Warrant shall entitle the holder, subject to the conditions relating to
exercisability and exercise set forth in Section 7 of this Agreement, to purchase on or after
August 30, 2007 (the “Initial Exercise Date”) and prior to 5:00 p.m., New York City time,
on the Expiration Date one share of Common Stock or Preferred Stock equivalent in economic
ownership to one share of Common Stock, in each case, at the Exercise Price. The number of
Warrants issued to each Warrantholder pursuant to this Agreement and the number of shares of Common
Stock and/or Preferred Stock, as the case may be, issuable upon exercise of each Warrant (the
“Warrant Shares”) are all subject to adjustment pursuant to Section 8 hereof. Every
reference to “Stock” shall mean, as the context requires, (i) the Common Stock or the
Preferred Stock, as applicable, or (ii) the Common Stock and the Preferred Stock collectively.

Section 2. Form of Warrant Certificates.

The Company shall cause to be executed and delivered on or about the Closing Date to each
Warrantholder one or more certificates evidencing the Warrants (the “Warrant Certificates”)
to be issued to such Warrantholder. Warrant Certificates shall be issued in registered form only,
shall be substantially in the form set forth in Exhibit A attached hereto, and may have
such letters, numbers or other identification marks and legends, summaries or endorsements printed
thereon as the Company may deem appropriate and that are not inconsistent with the terms of this
Agreement or as may be required by applicable law, rule or regulation. Each Warrant Certificate
shall be dated the date of execution by the Company.

Section 3. Execution of Warrant Certificates.

Each Warrant Certificate delivered hereunder shall be signed on behalf of the Company by its
Chief Executive Officer, its President, a Vice President of the Company or any other officer,
employee or agent of the Company authorized by the board of directors of the Company (the
“Board”) to sign on behalf of the Company. Each such signature may be in the form of a
facsimile thereof and may be imprinted or otherwise reproduced on the Warrant Certificates.

If any officer of the Company who signed any Warrant Certificate ceases to be an officer of
the Company before the Warrant Certificate so signed shall have been delivered by the Company, such
Warrant Certificate nevertheless may be delivered as though such person had not ceased to be such
officer of the Company.

Section 4. Registration.

The Company will keep or cause to be kept books for registration of ownership and transfer of
each Warrant Certificate issued pursuant to this Agreement. Each Warrant Certificate issued
pursuant to this Agreement shall be numbered by the Company and initially shall be registered by
the Company in the name of the applicable Warrantholder set forth on Schedule A hereto.
The Company may deem and treat the registered holder of any Warrant Certificate as the absolute
owner thereof (notwithstanding any notation of ownership or other writing thereon made by anyone),
for the purpose of any exercise thereof and for all other purposes, and the Company shall not be
affected by any notice to the contrary.

Section 5. Transfers and Exchanges.

A. Transfers. Subject to the following provisions of this Section 5, the Warrants are
transferable, in whole or in part, upon surrender of the Warrant Certificates evidencing such
Warrants at the office of the Company referred to in Section 16, together with a written assignment
in the form of the Assignment appearing at the end of the form of Warrant Certificate attached
hereto as Exhibit A, duly executed by Warrantholder or its agent or attorney. Upon such
surrender, the Company shall, subject to this Section 5, register or cause the registration of the
transfer upon the books maintained by or on behalf of the Company for such purpose. If the
Warrants evidenced by any Warrant Certificate are to be transferred in whole, the Company shall
execute and deliver a new Warrant Certificate or Warrant Certificates in the name of the assignee
or assignees in the denominations specified in the instrument of assignment. If the Warrants
evidenced by any Warrant Certificate are to be transferred in part, the Company shall execute and
deliver a new Warrant Certificate or Warrant Certificates to and in the name of the assignee or
assignees in the denominations specified in the instrument of assignment and a new Warrant
Certificate to and in the name of the applicable Warrantholder in an amount equal to the number of
Warrants evidenced by the surrendered Warrant Certificate that were not transferred.

B. Restrictions on Transfer. No Warrant may be sold, pledged, hypothecated, assigned,
conveyed, transferred or otherwise disposed of (each a “transfer”) unless the transfer
complies with all applicable securities laws and the provisions of this Agreement.

C. Exchanges. A Warrant Certificate may be exchanged, at the option of the applicable
Warrantholder, upon surrender of such Warrant Certificate at the office of the Company referred to
in Section 16, for one or more other Warrant Certificates of like tenor and representing in the
aggregate the same number of Warrants as was represented by the surrendered Warrant Certificate.

D. Cancellation. Warrant Certificates surrendered for transfer or exchange shall be
canceled by the Company.

Section 6. Mutilated or Missing Warrant Certificates.

If any Warrant Certificate is mutilated, lost, stolen or destroyed, the Company shall issue,
upon surrender and cancellation of any mutilated Warrant Certificate, or in lieu of and
substitution for any lost, stolen or destroyed Warrant Certificate, a new Warrant Certificate of
like tenor and representing an equal number of Warrants. In the case of a lost, stolen or
destroyed Warrant Certificate, a new Warrant Certificate shall be issued by the Company only upon
the Company’s receipt of a reasonably satisfactory affidavit regarding such loss, theft or
destruction.

Section 7. Exercisability or Cancellation of Warrants; Exercise of Warrants; Voting Control
Limitation.

A. Exercisability and Cancellation of Warrants.

(i) Warrants shall only be exercisable in accordance with the terms of this Section 7A.

(ii) Each Warrantholder’s Warrants shall become immediately exercisable on the Initial
Exercise Date and shall not be canceled except as provided in Section 7B.

(iii) If an exercise of Warrants would otherwise result in any Warrantholder (or “person” or
“group” including such Warrantholder(s)) being deemed to be the “beneficial owner” or “beneficial
owners” of 49% or more of the voting power of the Company’s issued and outstanding capital stock
during any time that the Convertible Notes contain a change in control provision whereby the
holders thereof would have a right, as a result of such exercise by such Warrantholder, to cause
the Company to repurchase the Convertible Notes, such exercise request shall be deemed to be an
election by the exercising Warrantholder to receive nonvoting Preferred Stock to the extent
necessary to keep its ownership of voting capital stock below 49%. For the avoidance of doubt,
during any such time referred to in the preceding sentence, the Warrants:

(a) in the aggregate shall not be exercisable for more than 49% the total
voting power in the aggregate of all classes of beneficial interest of the Company
then outstanding entitled to vote generally in elections of the Company’s directors;

(b) in the aggregate, when added to all voting equity holdings of any and all
Warrantholders, shall not be exercisable for more than 49% the total voting power in
the aggregate of all classes of beneficial interest of the Company then outstanding
entitled to vote generally in elections of the Company’s directors; and

(c) no Warrantholder (or ”person” or “group”) shall, by virtue of holding
Warrants, be deemed the “beneficial owner” or “beneficial owners”, of more than 49%
of the issued and outstanding shares of the Common Stock or any voting securities of
the Company.

For the purposes of this Section 7A(iii), the terms “person”, “group” and “beneficial owner” shall
have the meanings used for purposes of Sections 13(d) and 14(d) of the Exchange Act.

(iv) Notwithstanding Section 7A(ii) and subject to Section 7A(iii), each Warrantholder may at
any time irrevocably elect to receive nonvoting Preferred Stock with respect to the Warrants
represented by any Warrant Certificate held by it.

B. Exercise. Subject to the terms and conditions set forth in this Section 7,
Warrants may be exercised, in whole or in part (but not as to any fractional part of a Warrant), at
any time or from time to time on and from the Initial Exercise Date until 5:00 p.m., New York City
time, on the Expiration Date.

To exercise any Warrant that has become exercisable in accordance with Section 7A, a
Warrantholder shall deliver to the Company at its office referred to in Section 16 the following:
(i) a written notice in the form of the Election to Purchase appearing at the end of the form of
Warrant Certificate attached as Exhibit A hereto of such Warrantholder’s election to
exercise exercisable Warrants, which notice shall specify the number of such Warrantholder’s
Warrants being exercised; (ii) the Warrant Certificate or Warrant Certificates evidencing the
Warrants being exercised; and (iii) payment of the aggregate Exercise Price.

All rights of Warrantholder with respect to any Warrant that has become exercisable in
accordance with Section 7A but that has not been exercised on or prior to 5:00 p.m., New York City
time, on the Expiration Date shall immediately cease and such Warrants shall be automatically
canceled without any further action on the part of the Company or any Warrantholder.

C. Payment of Exercise Price. Payment of the aggregate Exercise Price with respect to
Warrants being exercised hereunder may, at the election of Warrantholder, be made as follows: (i)
by the payment to the Company, in cash, by check or wire transfer, of an amount equal to the
Exercise Price multiplied by the number of Warrants then being exercised; or (ii)  by surrendering
to the Company for cancellation Warrant Certificates evidencing Warrants to acquire a number of
Warrant Shares equal to (x) the aggregate Exercise Price divided by (y) the Fair Market Value of
one Warrant Share (a “cashless exercise”).

If a Warrantholder elects a cashless exercise, the number of Warrant Shares to be issued to
Warrantholder upon such exercise shall be computed using the following formula:

	 	 	 
	X =

	 	Y(A-B)
	
 
	 	 
	X =

Y =

A =

B =

	 	A

the number of Warrant Shares to be issued to Warrantholder

the number of Warrant Shares underlying the Warrants being exercised

the Fair Market Value of one Warrant Share

the Exercise Price

Anything herein to the contrary notwithstanding, in connection with a cashless exercise a
Warrantholder shall only be entitled to surrender for cancellation Warrant Certificates that are
currently exercisable in accordance with Section 7A.

D. Payment of Taxes. The Company shall be responsible for paying any and all issue,
documentary, stamp or other taxes that may be payable in respect of any issuance or delivery of
Warrant Shares on the exercise of a Warrant.

E. Delivery of Warrant Shares. Upon receipt of the items referred to in Section 7B,
the Company shall, as promptly as practicable, and in any event within three (3) Business Days
thereafter, execute and deliver or cause to be executed and delivered, to or upon the written order
of the applicable Warrantholder, and in the name of such Warrantholder or such Warrantholder’s
designee, a stock certificate or stock certificates representing the number of Warrant Shares to be
issued on exercise of the Warrant(s). Such certificates may bear any restrictive legend required
under applicable law, rule or regulation. The stock certificate or certificates so delivered shall
be registered in the name of the applicable Warrantholder or such other name as shall be designated
in said notice. A Warrant shall be deemed to have been exercised and such stock certificate or
stock certificates shall be deemed to have been issued, and such holder or any other Person so
designated to be named therein shall be deemed to have become a holder of record of such shares for
all purposes, as of the date that such notice, together with payment of the aggregate Exercise
Price and the Warrant Certificate or Warrant Certificates evidencing the Warrants to be exercised,
is received by the Company as aforesaid. If the Warrants evidenced by any Warrant Certificate are
exercised in part, the Company shall, at the time of delivery of the certificates representing the
Warrant Shares, deliver to the holder thereof a new Warrant Certificate evidencing the Warrants
that were not exercised or surrendered, which shall in all respects (other than as to the number of
Warrants evidenced thereby) be identical to the Warrant Certificate being exercised. Any Warrant
Certificates surrendered upon exercise of Warrants shall be canceled by the Company.

F. Legend on Warrant Shares. If required under applicable law, rule or regulation,
the Warrant Shares to be issued upon exercise of any Warrant shall be stamped or imprinted with a
legend substantially in the following form:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH, OR PURSUANT TO AN EXEMPTION FROM,
THE REQUIREMENTS OF SUCH ACT AND LAWS.

If the Warrant Shares are issued with the aforementioned legend, upon the occurrence of any event
permitting the removal of such legend, the Company, upon the surrender of certificates containing
such legend, shall, at its own expense, deliver to the holder one or more new certificates
evidencing Warrant Shares not bearing such legend.

Section 8. Adjustment of Number of Warrant Shares Issuable upon Exercise of a Warrant.

A. Adjustment for Stock Splits, Stock Dividends, Recapitalizations. The number of
Warrant Shares issuable upon exercise of each Warrant and the Exercise Price thereof shall be
proportionately adjusted to reflect any stock dividend, stock split, reverse stock split,
recapitalization or the like affecting the number of outstanding shares of Stock that occurs after
the date hereof.

B. Adjustments for Reorganization, Consolidation, Merger. If after the date hereof,
the Company (or any other entity, the stock or other securities of which are at the time receivable
upon the exercise of the Warrants), consolidates with or merges into another entity or conveys all
or substantially all of its assets to another entity, then, in each such case, each Warrantholder,
upon any permitted exercise of a Warrant (as provided in Section 7), at any time after the
consummation of such reorganization, consolidation, merger or conveyance, shall receive, in lieu of
the stock or other securities and property receivable upon the exercise of the Warrant prior to
such consummation, the stock or other securities or property to which such Warrantholder would have
been entitled upon the consummation of such reorganization, consolidation, merger or conveyance if
such Warrantholder had exercised the Warrant immediately prior thereto, all subject to further
adjustment as provided in this Section 8. The successor or purchasing entity in any such
reorganization, consolidation, merger or conveyance (if other than the Company) shall, upon the
effectiveness of such reorganization, consolidation, merger or conveyance, duly execute and deliver
to each Warrantholder a written acknowledgment of such entity’s obligations under the Warrants and
this Agreement. The provisions of this Section 8B shall similarly apply to successive
reorganizations, consolidations, mergers or conveyances.

C. Other Adjustments. If any event shall occur as to which the provisions of Sections
8A and B are not strictly applicable but as to which the failure to make any adjustment would
adversely affect the purchase rights represented by the Warrants in accordance with the essential
intent and principles of such sections (which are to place the holders of Warrants in a position as
nearly equal as possible to the position such holders would have occupied had such holders
purchased shares of Common Stock on the date hereof), then, in each such case, the Board, in its
good faith, shall cause the Company to make such adjustments, on a basis consistent with the
essential intent and principles established in Sections 8A and B, necessary to preserve, without
dilution, the purchase rights represented by the Warrants.

D. Adjustments for Dilutive Issuances. The number of Warrant Shares issuable upon
exercise of each Warrant shall be subject to adjustment from time to time as follows:

(i) (a) If the Company shall issue, after the date of this Agreement, any Additional Stock,
the number of Warrant Shares issuable upon exercise of each Warrant shall be adjusted by dividing
the number of Warrant Shares issuable upon exercise of each Warrant by a fraction, the numerator of
which shall be the number of shares of Stock (as determined in accordance with subsection
8(D)(i)(b) below) that the aggregate consideration received by the Company for such issuance would
purchase at the Fair Market Value of the Stock plus the number of shares of Stock outstanding
immediately prior to the issuance of such Additional Stock and the denominator of which shall be
the number of shares of Stock outstanding immediately prior to such issuance plus the number of
shares of such Additional Stock;

(a) In the case of the issuance (whether before, on or after the date of this Agreement) of
options to purchase or rights to subscribe for Stock, securities by their terms convertible into or
exchangeable for Stock or options to purchase or rights to subscribe for such convertible or
exchangeable securities, the following provisions shall apply for all purposes of this subsection
8(D)(i) and subsection (8)(D)(ii):

(1) The aggregate maximum number of shares of Stock deliverable upon exercise (to the extent
then exercisable) of such options to purchase or rights to subscribe for Stock shall be deemed to
have been issued at the time such options or rights were issued.

(2) The aggregate maximum number of shares of Stock deliverable upon conversion of or in
exchange (to the extent then convertible or exchangeable) for any such convertible or exchangeable
securities or upon the exercise of options to purchase or rights to subscribe for such convertible
or exchangeable securities and subsequent conversion or exchange thereof shall be deemed to have
been issued at the time such securities were issued or such options or rights were issued.

(3) In the event of any change in the number of shares of Stock deliverable upon exercise of
such options or rights or upon conversion of or in exchange for such convertible or exchangeable
securities, including, but not limited to, a change resulting from the antidilution provisions
thereof, the number of shares of Stock deemed issued pursuant to subsections 8(D)(i)(b)(l) and (2)
shall be appropriately adjusted to reflect such change.

(4) Upon the expiration of any such options or rights, the termination of any such rights to
convert or exchange or the expiration of any options or rights related to such convertible or
exchangeable securities, the number of shares of Stock deemed issued pursuant to subsections
8(D)(i)(b)(l) and (2) shall be appropriately adjusted to reflect such expiration or termination.

(ii) “Additional Stock” shall mean any shares of Common Stock or Preferred Stock
issued (or deemed to have been issued pursuant to subsection 8(D)(i)(b)) by the Company after the
date of this Agreement other than:

(a) Stock issued pursuant to a transaction described in Section 8A hereof;

(b) shares of Stock issuable or issued to officers, directors or employees of, or consultants
to, the Company pursuant to a stock option plan, stock purchase plan or restricted stock plan
approved by the Board; provided that (1) in the case of any option, such options are issued
at an exercise price not less than the par value of the Stock and otherwise in accordance with the
Company’s past practices, and (2) in the case of all other issuances, such issuances are made in
accordance with the Company’s past practices (including, without limitation, as to the amounts
issued and in the case of any stock purchase plan, the prices at which shares are issued).

(c) shares of Stock issued upon conversion or exercise of convertible or exercisable
securities outstanding as of the date hereof including the Warrants to be issued pursuant hereto.

E. Certificate of Adjustments.

Upon the occurrence of any event resulting in an adjustment in the number of Warrant Shares
(or other stock or securities or property) receivable upon the exercise of the Warrants, the
Company shall promptly thereafter (i) compute such adjustment in accordance with the terms of the
Warrants, (ii) prepare a certificate setting forth such adjustment and showing in detail the facts
upon which such adjustment is based, and (iii) mail copies of such certificate to each
Warrantholder.

Section 9. Reservation of Shares.

The Company shall at all times reserve and keep available, free from preemptive rights, out of
the aggregate of its authorized but unissued Common Stock and its authorized and issued Common
Stock held in its treasury the aggregate number of the Common Stock Warrant Shares deliverable upon
the exercise of all outstanding Warrants (whether or not currently), for the purpose of enabling it
to satisfy in Common Stock any obligation to issue the Warrant Shares upon the due and punctual
exercise of the Warrants, through 5:00 p.m., New York City time, on the Expiration Date. The
Company shall and reserve and keep available, free from preemptive rights, its entire class of
authorized but unissued Preferred Stock in order to satisfy any election by a Warrantholder to
receive nonvoting Preferred Stock with a liquidation preference reflecting economic ownership that
would otherwise be equivalent to the Common Stock Warrant Shares. The Company shall designate the
Preferred Stock as further set forth in Section 10 hereof.

Section 10. No Impairment; Certain Company Actions.

The Company shall not, by amendment of its certificate of incorporation or bylaws, or through
reorganization, consolidation, merger, dissolution, issuance or sale of securities, sale of assets
or any other voluntary action, avoid or seek to avoid the observance or performance of any of the
terms of the Warrants or this Agreement, and shall at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be necessary or
appropriate in order to protect the rights of the Warrantholders under the Warrants and this
Agreement against wrongful impairment. Without limiting the generality of the foregoing, the
Company: (i) shall not set or increase the par value of any Warrant Shares above the amount
payable therefor upon exercise, (ii) shall designate before the Initial Exercise Date a series of
10 million shares of nonvoting Preferred Stock in form and substance acceptable to the
Warrantholders, each share of which will represent economic ownership of the Company equal to 5.1
shares of Common Stock, subject to anti-dilution adjustments, and in conformity with the principles
outlined in this Agreement and (iii) shall take all actions that are necessary or appropriate in
order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares
upon the exercise of the Warrants.

Section 11. No Rights or Liabilities as Stockholder.

A. No holder, as such, of any Warrant Certificate shall be entitled to vote, receive dividends
or be deemed the holder of Stock which may at any time be issuable on the exercise of the Warrants
represented thereby for any purpose whatsoever, nor shall anything contained herein or in any
Warrant Certificate be construed to confer upon the holder of any Warrant Certificate, as such, any
of the rights of a stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to
any corporate action (whether upon any recapitalization, issuance of stock, reclassification of
stock, change of par value or change of stock to no par value, consolidation, merger, conveyance or
otherwise), or to receive notice of meetings or, except as set forth in Section 11B, other actions
affecting stockholders or to receive dividend or subscription rights, or otherwise, until such
Warrant Certificate shall have been exercised in accordance with the provisions hereof and the
receipt and collection by the Company of the Exercise Price and any other amounts payable upon such
exercise. No provision hereof, in the absence of affirmative action by a Warrantholder to purchase
Warrant Shares shall give rise to any liability of such holder for the Exercise Price or as a
stockholder of the Company, whether such liability is asserted by the Company or any other Person.

B. Notice to Warrantholders. The Company shall give notice to the Warrantholder by
registered mail if at any time prior to the expiration or exercise in full of the Warrants, any of
the following events shall occur:

(i) the Company shall authorize the payment of any distribution upon Stock in any securities
or authorize the making of any distribution to all holders of Stock;

(ii) the Company shall authorize the issuance to all holders of Stock of any additional Stock
or securities convertible into or exchangeable for Stock or of rights, options or warrants to
subscribe for or purchase Stock or securities convertible into or exchangeable for Stock or of any
other subscription rights, options or warrants;

(iii) a dissolution, liquidation or winding up of the Company; or

(iv) a capital reorganization or reclassification of Stock (other than a subdivision or
combination of the outstanding Stock) or any consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger in which the Company is the continuing
company and that does not result in any reclassification or change of Stock outstanding) or in the
case of any sale or conveyance to another corporation of the property of the Company as an entirety
or substantially as an entirety.

Such giving of notice shall be initiated at least 20 Business Days prior to the date fixed as
a record date or effective date or the date of closing of the Company’s transfer books for the
determination of the holders entitled to such distribution or subscription rights, or for the
determination of the holders entitled to vote on such proposed merger, consolidation, sale,
conveyance, dissolution, liquidation or winding up. Such notice shall specify such record date or
the date of closing the transfer books, as the case may be. In addition, the Company shall provide
to Warrantholder, at the same time such notice is provided, such information relating to such
distribution or subscription rights, or proposed merger, consolidation, sale, conveyance,
dissolution, liquidation, winding up or conversion to corporate or other form as may be reasonably
necessary for Warrantholder to make an informed decision whether to exercise its rights, to the
extent exercisable, hereunder.

Section 12. Fractional Interests.

The Company shall not be required to issue fractional shares of Common Stock upon exercise of
the Warrants or to distribute certificates that evidence fractional shares of Common Stock. If any
fraction of a Common Stock Warrant Share would, except for the provisions of this Section 12, be
issuable to a Warrantholder, the number of Common Stock Warrant Shares to be issued by the Company
to such Warrantholder shall be rounded up. Warrant Shares comprised of Preferred Stock may be
issued as fractional interests.

Section 13. Registration Rights.

A. Demand Registration.

(i) Request for Registration. If the Company shall receive a request from Demand
Holders that the Company file a Registration Statement under the Securities Act (a “Demand
Registration”), the Company as promptly as practicable thereafter shall file a Registration
Statement with respect to all Registrable Securities that it has been so requested to include;
provided, however, the Company shall be entitled to defer such registration for a
period of up to sixty (60) days if and to the extent that the Board reasonably believes that the
filing thereof at the time requested, or the offering of securities pursuant thereto, would be
materially detrimental to the interests of the Company or the Company’s stockholders,
provided, further, that no registration may be deferred, pursuant to the provisions
of this sentence, on more than one occasion in any twelve (12) month period. The Company shall
also promptly give written notice to all other Holders of any Registrable Securities of its
intention to effect any Demand Registration within five (5) days after such notice has been
received by the Company and the Company shall include in the Registration Statement the Registrable
Securities which the Company has been so requested to register by the Holders thereof. The Company
shall only be required to effect three (3) Demand Registrations pursuant to this Section 13A(i).

(ii) Payment of Registration Expenses for Demand Registration. The Company shall pay
all Registration Expenses in connection with the Demand Registration.

(iii) Selection of Underwriters. If any Demand Registration is requested to be in the
form of an underwritten offering, the managing underwriter shall be selected and obtained by the
Holders of a majority of the Registrable Securities to be registered. Such selection shall be
subject to the Company’s consent, which consent shall not be unreasonably withheld or delayed.

(iv) Priority in Demand Registration. Notwithstanding any other provision contained
in this Section 13A, if a Demand Registration involves an offering by or through underwriters, and
the underwriter managing the offering reasonably believes in good faith that the inclusion of all
Registrable Securities requested by Holders to be included in the Registration Statement would
materially adversely affect such offering, such managing underwriter shall so advise each Holder of
Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of
shares of Registrable Securities of Holders that may be included in the underwriting shall be
allocated among all such Holders pro rata in proportion to the number of
Registrable Securities such Holders have requested to be registered; provided
however that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely excluded from the
underwriting.

B. Piggyback Registration.

(i) Right to Include Registrable Securities. If the Company proposes to register any
of its securities under the Securities Act on any form for the registration of securities under
such Act, whether or not for its own account (other than by a registration statement on Form S-8 or
other form which does not include substantially the same information as would be required in a form
for the general registration of securities or would not be available for the Registrable
Securities) (a “Piggyback Registration”), it shall give prompt written notice
thereof to all Holders of such Holders’ rights under this Section 13B(i). Upon the written request
of any such Holder made within twenty (20) days after receipt of any such notice (which request
shall specify the type and amount of the Registrable Securities intended to be disposed of by such
Holder), the Company shall include in the Registration Statement the Registrable Securities which
the Company has been so requested to register by the Holders thereof.

(ii) Withdrawal of Piggyback Registration by Company. If, at any time after giving
written notice of the intention to register any securities in a Piggyback Registration but prior to
the effective date of the related Registration Statement, the Company shall determine for any
reason not to register such securities, the Company shall give written notice of such determination
to each Holder and, thereupon, shall be relieved of its obligation to register any Registrable
Securities in connection with such Piggyback Registration. All reasonable efforts obligations of
the Company pursuant to Section 13D shall cease if the Company determines to terminate prior to
such effective date any registration where Registrable Securities are being registered pursuant to
this Section 13B.

(iii) Piggyback Registration of Underwritten Public Offerings. If a Piggyback
Registration involves an offering by or through underwriters, then, (a) all Holders requesting to
have their Registrable Securities included in the Company’s Registration Statement must sell their
Registrable Securities to the underwriters selected by the Company on the same terms and conditions
as apply to other selling unitholders and (b) any Holder requesting to have its Registrable
Securities included in such Registration Statement may elect in writing, not later than five (5)
Business Days prior to the effectiveness of the Registration Statement filed in connection with
such registration, not to have its Registrable Securities so included in connection with such
registration.

(iv) Payment of Registration Expenses for Piggyback Registration. The Company shall
pay all Registration Expenses in connection with any Piggyback Registration.

(v) Priority in Piggyback Registration. Notwithstanding any other provision contained
in this Section 13B, if a Piggyback Registration involves an offering by or through underwriters,
the Company shall not be required to include Registrable Securities therein if and to the extent
the underwriter managing the offering reasonably believes in good faith and advises each Holder
requesting to have Registrable Securities included in the Company’s Registration Statement that
such inclusion would materially adversely affect such offering; provided that (a) if other selling
stockholders who are employees, officers, directors or other Affiliates of the Company have
requested registration of securities in the proposed offering, the Company will reduce or eliminate
such other selling stockholders’ securities before any reduction or elimination of Registrable
Securities; and (b) any such reduction or elimination (after taking into account the effect of
clause (a)) shall be pro rata to all other holders of the securities of the Company
exercising piggyback registration rights similar to those set forth herein in proportion to the
respective number of securities they have requested to be registered.

C. Form S-3 Registration on Request.

(i) Request for Registration. If the Company shall receive a request from any Holder
of Registrable Securities then outstanding that the Company file a Registration Statement under the
Securities Act on Form S-3 (a “Form S-3 Registration”), the Company will: (a) promptly give
written notice of the proposed registration to all other holders of any other securities of the
Company; and (b) as soon as practicable, file a Form S-3 Registration Statement covering all or
such portion of such Holders’ Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holders joining in such request
(to the extent such other Holders make their written request for inclusion within fifteen (15) days
after receipt of written notice from the Company); provided, however, that the
Company shall not be obligated to effect any such registration pursuant to this Section 13C(i): (1)
if the Form S-3 is not available for such offering by the Holders; (2) if the Holders, together
with the holders of any other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an aggregate price to
the public (net of any underwriters’ discounts or commissions) of less than $100,000; (3) if the
Company shall furnish to the Holders a certificate signed by the Chairman and Chief Executive
Officer of the Company stating that in the good faith judgment of the Board, it would be seriously
detrimental to the Company and its stockholders for such Form S-3 Registration to be effected at
such time, in which event the Company shall have the right to defer the filing of the Form S-3
Registration Statement for a period of not more than ninety (90) days after receipt of the request
of the Holders under this Section 13C(i); provided, however, that the Company shall
not utilize this right more than once in any twelve (12) month period; (4) during the period ending
one hundred eighty (180) days after the effective date of a Piggyback Registration, provided that
the Holders making the request for the Form S-3 Registration were entitled to sell all securities
they requested to be included in the Piggyback Registration; or (5) if the Company has, within the
twelve month period preceding the date of such request, already effected three Form S-3
Registrations for Holders pursuant to this Section 13C(i). Subject to the foregoing, the Company
shall file a Registration Statement covering the Registrable Securities and other securities so
requested to be registered as soon as practicable after receipt of the request of the Holders.
Registrations effected pursuant to this Section 13C(i) shall not be counted as a Demand
Registration effected pursuant to Section 13A(i).

(ii) Payment of Registration Expenses for Registration. The Company shall pay all
Registration Expenses in connection with any Registration.

(iii) Selection of Underwriters. If any Registration is requested to be in the form
of an underwritten offering, the managing underwriter shall be selected and obtained by the Holders
of a majority of the Registrable Securities to be registered. Such selection shall be subject to
the Company’s consent, which consent shall not be unreasonably withheld or delayed.

D. Registration Procedures. In order to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in this Section 13, the Company shall,
as expeditiously as practicable:

(i) prepare and file with the SEC, a Registration Statement under the Securities Act on any
appropriate form chosen by the Company, in the Company’s sole discretion, which shall be available
for the sale of all Registrable Securities in accordance with the intended method(s) of
distribution thereof set forth in all applicable Holder notices, and use the Company’s reasonable
efforts to cause such Registration Statement to become effective as soon thereafter as reasonably
practicable but in no event more than one hundred twenty (120) days after receipt of such notices
or requests; provided, that, at least five (5) business days before filing with the SEC of
such Registration Statement (or any amendment thereto), the Company shall furnish to each Holder
whose Registrable Securities are included therein draft copies of such Registration Statement (or
amendment), including all exhibits thereto and documents incorporated by reference therein. The
Company shall provide to each Holder such number of copies of the Registration Statement, each
amendment and supplement thereto, the Prospectus included in such Registration Statement (including
each preliminary Prospectus), all exhibits thereto and documents incorporated by reference therein
and such other documents as such Holder may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such Holder included in such Registration
Statement. The Company shall modify or amend the Registration Statement as it relates to any
Holder as reasonably requested by such Holder on a timely basis, and shall reasonably consider
other changes to the Registration Statement (but not including any exhibit or document incorporated
therein by reference) reasonably requested by such Holder on a timely basis, in light of the
requirements of the Securities Act and any other applicable laws and regulations;

(ii) prepare and file with the SEC such amendments and post-effective amendments to a
Registration Statement as may be necessary to keep such Registration Statement effective for up to
two (2) years; and cause the related Prospectus to be supplemented by any required prospectus
supplement, and as so supplemented to be filed to the extent required pursuant to Rule 424
promulgated under the Securities Act, during such two (2) year period; and otherwise comply with
the provisions of the Securities Act and any other applicable Federal and state laws with respect
to the disposition of all Registrable Securities covered by such Registration Statement during the
applicable period in accordance with the intended method(s) of disposition of such Registrable
Securities set forth in such Registration Statement, Prospectus or supplement to such Prospectus;

(iii) notify the Holders whose Registrable Securities are included in such Registration
Statement and the underwriter(s), if any, of an underwritten offering of any of the Registrable
Securities included in such Registration Statement, and confirm such advice in writing, (a) when a
Prospectus or any prospectus supplement or post-effective amendment has been filed, and, with
respect to a Registration Statement or any post-effective amendment, when the same has become
effective, (b) of any request by the SEC for amendments or supplements to a Registration Statement
or related Prospectus or for additional information, (c) of the issuance by the SEC of any stop
order suspending the effectiveness of a Registration Statement or the initiation of any proceedings
for that purpose, (d) of the receipt by the Company of any notification with respect to the
suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose and (e) of the happening of any
event which makes any statement made in the Registration Statement, the Prospectus or any document
incorporated therein by reference untrue or which requires the making of any changes in the
Registration Statement or Prospectus so that such Registration Statement, Prospectus or document
incorporated by reference shall not contain any untrue statement of material fact or omit to state
any material fact required to be stated therein or necessary to make the statements therein not
misleading;

(iv) use reasonable efforts to obtain the withdrawal of any order suspending the effectiveness
of such Registration Statement at the earliest possible moment or to prevent the entry of such an
order;

(v) use reasonable efforts, to the extent necessary, to register or qualify the Registrable
Securities included in such Registration Statement under such other securities or blue sky laws of
such jurisdictions as any Holder whose Registrable Securities are included in such Registration
Statement reasonably requests in writing, and do any and all other acts and things which may be
necessary or advisable to enable such Holder to consummate the disposition in such jurisdictions of
such Registrable Securities; provided, that the Company shall not be required to
(a) qualify generally to do business in any jurisdiction where it would not otherwise be required
to qualify, (b) subject itself to taxation in any such jurisdiction, or (c) take any action which
would subject it to general service of process in any such jurisdiction;

(vi) make available for inspection by each Holder whose Registrable Securities are included in
such registration, any underwriter(s) participating in any disposition pursuant to such
Registration Statement, and any representative, agent or employee of or attorney or accountant
retained by any such Holder or underwriter(s) (collectively, the “Inspectors”), all
financial and other records, pertinent corporate documents and properties of the Company
(collectively, the “Records”), as shall be reasonably necessary to enable them to exercise
their due diligence responsibility (or establish a due diligence defense), and cause the officers,
directors and employees of the Company to supply all information reasonably requested by any such
Inspector in connection with such Registration Statement; provided, that records which the
Company determines, in good faith, to be confidential and which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors, unless (a) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent jurisdiction or (b) the
disclosure of such Records is required by any applicable law or regulation or any governmental or
regulatory authority with jurisdiction over the Holders or underwriter(s); provided,
further, that such Holders or underwriter(s) agree that such Holders or underwriter(s)
shall, upon learning the disclosure of such Records is sought in a court of competent jurisdiction,
give notice to the Company and allow the Company, at the Company’s expense, to undertake
appropriate action to prevent disclosure of the Records deemed confidential;

(vii) cooperate with the Holders whose Registrable Securities are included in such
Registration Statement and the underwriter(s), if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold thereunder, not bearing any
restrictive legends, and enable such Registrable Securities to be in such denominations and
registered in such names as such Holders or any underwriter(s) may reasonably request at least two
(2) business days prior to any sale of Registrable Securities;

(viii) comply with all applicable rules and regulations of the SEC;

(ix) enter into such customary agreements (including an underwriting agreement in customary
form) and take all such other actions reasonably requested by the Holders holding a majority of the
Registrable Securities included in such Registration Statement or the underwriter(s) in order to
expedite and facilitate the disposition of such Registrable Securities and in such connection,
whether or not an underwriting agreement is entered into and whether or not the registration is an
underwritten registration, (a) make such representations and warranties, if any, to the Holders of
such Registrable Securities and any underwriter(s) with respect to the Registration Statement,
Prospectus and documents incorporated by reference, if any, in form, substance and scope as are
customarily made by issuers to underwriter(s) in underwritten offerings and confirm the same if and
when requested, (b) obtain opinions of counsel to the Company and updates thereof addressed to each
such Holder and the underwriter(s), if any, with respect to the Registration Statement, Prospectus
and documents incorporated by reference, if any, covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as may be reasonably requested
by such Holders and underwriter(s), (c) obtain a “cold comfort” letter and updates thereof from the
Company’s independent certified public accountants addressed to such Holders and to the
underwriter(s), if any, which letters shall be in customary form and cover matters of the type
customarily covered in cold comfort letters by accountants in connection with underwritten
offerings, and (d) deliver such documents and certificates as may be reasonably requested by the
Holders holding a majority of such Registrable Securities and underwriter(s), if any, to evidence
compliance with any customary conditions contained in the underwriting agreement or other agreement
entered into by the Company; each such action required by this clause (ix) shall be done at each
closing of the disposition of Registrable Securities under such underwriting or similar agreements
or as and to the extent required thereunder;

(x) if requested by the holders of a majority of the Registrable Securities included in such
Registration Statement, use its reasonable efforts to cause all Registrable Securities which are
included in such Registration Statement to be listed, subject to notice of issuance, by the date of
the first sale of such Registrable Securities pursuant to such Registration Statement, on each
securities exchange, if any, on which securities similar to the Registered Securities are listed;
and

(xi) provide a transfer agent and registrar (which may be the same entity) for such
Registrable Shares.

E. Indemnification.

(i) Indemnification by Company. In connection with each Registration Statement
relating to disposition of Registrable Securities, the Company shall indemnify and hold harmless
each Holder and each underwriter of Registrable Securities and each Person, if any, who controls
such Holder or underwriter (within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act) against any and all losses, claims, damages and liabilities, joint or several
(including any reasonable investigation, legal and other expenses incurred in connection with, and
any amount paid in settlement of any action, suit or proceeding or any claim asserted), to which
they, or any of them, may become subject under the Securities Act, the Exchange Act or other
Federal or state law or regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement, Prospectus or preliminary
prospectus or any amendment thereof or supplement thereto, or arise out of or are based upon any
omission or alleged omission to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading; provided, however, that
such indemnity shall not inure to the benefit of any Holder or underwriter (or any Person
controlling such Holder or underwriter within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) on account of any losses, claims, damages or liabilities arising
from the sale of Registrable Securities if (a) such untrue statement or omission or alleged untrue
statement or omission was made in such Registration Statement, Prospectus or preliminary
prospectus, or such amendment or supplement, in reliance upon and in conformity with information
furnished in writing to the Company by the Holder or underwriter, as applicable, specifically for
use therein or (b) such Holder or underwriter was informed by the Company, pursuant to Section 13D,
that a Prospectus or preliminary prospectus contained an untrue statement or omission or alleged
untrue statement or omission and such Holder or underwriter, as applicable, continued to effect
sales of Registrable Securities using such Prospectus or preliminary prospectus. The Company shall
also indemnify selling brokers, dealer managers and similar securities industry professionals
participating in the distribution, their officers and directors and each Person who controls such
Persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
to the same extent as provided above with respect to the indemnification of the Holders of
Registrable Securities, if requested. This indemnity agreement shall be in addition to any
liability that the Company may otherwise have.

(ii) Indemnification by Holder. In connection with each Registration Statement, each
Holder shall indemnify, to the same extent as the indemnification provided by the Company in
Section 13E(i), the Company, its directors and each officer who signs the Registration Statement
and each Person who controls the Company (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act) but only insofar as such losses, claims, damages and
liabilities arise out of or are based upon any untrue statement or omission or alleged untrue
statement or omission which was made in the Registration Statement, the Prospectus or preliminary
prospectus or any amendment thereof or supplement thereto, in reliance upon and in conformity with
information relating to such Holder and furnished in writing by such Holder to the Company
specifically for use therein. In no event shall the liability of any selling Holder of Registrable
Securities hereunder be greater in amount than the dollar amount of the net proceeds received by
such Holder upon the sale of the Registrable Securities giving rise to such indemnification
obligation. The Company shall be entitled to receive indemnities from underwriters, selling
brokers, dealer managers and similar securities industry professionals participating in the
distribution, to the same extent as provided above, with respect to information so furnished in
writing by such Persons specifically for inclusion in any Prospectus, Registration Statement or
preliminary prospectus or any amendment thereof or supplement thereto.

(iii) Conduct of Indemnification Procedure. Any party that proposes to assert the
right to be indemnified hereunder will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim is to be made against an
indemnifying party or parties under this Section, notify each such indemnifying party of the
commencement of such action, suit or proceeding, enclosing a copy of all papers served. No
indemnification provided for in Section 13E(i) or 13E(ii) shall be available to any party who shall
fail to give notice as provided in this Section 13E(iii) if the party to whom notice was not given
was unaware of the proceeding to which such notice would have related and was materially prejudiced
by the failure to give such notice, but the omission so to notify such indemnifying party of any
such action, suit or proceeding shall not relieve it from any liability that it may have to any
indemnified party for contribution or otherwise than under this Section. In case any such action,
suit or proceeding shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be entitled to
participate in, and, to the extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof and the approval by the indemnifying party to such
indemnified party of its election so to assume the defense thereof and the approval by the
indemnified party of such counsel, the indemnifying party shall not be liable to such indemnified
party for any legal or other expenses, except as provided below and except for the reasonable costs
of investigation subsequently incurred by such indemnified party in connection with the defense
thereof. The indemnified party shall have the right to employ its counsel in any such action, but
the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i)
the employment of counsel by such indemnified party has been authorized in writing by the
indemnifying parties, (ii) the indemnified party shall have reasonably concluded that there may be
a conflict of interest between the indemnifying parties and the indemnified party in the conduct of
the defense of such action (in which case the indemnifying parties shall not have the right to
direct the defense of such action on behalf of the indemnified party) or (iii) the indemnifying
parties shall not have employed counsel to assume the defense of such action within a reasonable
time after notice of the commencement thereof, in each of which cases the fees and expenses of
counsel shall be at the expense of the indemnifying parties. An indemnifying party shall not be
liable for any settlement of any action, suit, proceeding or claim effected without its written
consent, such consent not to be unreasonably withheld. If an indemnifying party has assumed the
defense of any action, suit, proceeding or claim, the indemnifying party shall not settle any such
action, suit, proceeding or claim without the consent of the indemnified party unless such
settlement contains, as a term thereof, a full and unconditional release of such indemnified party.

(iv) Contribution. If the indemnification provided for in this Section 13E is held by
a court of competent jurisdiction to be unavailable to an indemnified party with respect to any
loss, liability, claim, damage or expense referred to therein, then the indemnifying party, in lieu
of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying party on the one
hand and of the indemnified party on the other in connection with the statements or omission that
resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable
considerations; provided, that in no event shall any contribution by a Holder under this Section
13E exceed the net proceeds from the offering received by such Holder. The relative fault of the
indemnifying party and of the indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the omission to state
a material fact relates to information supplied by the indemnifying party or by the indemnified
party and the parties’ relative intent.

(v) Waiver, Release or Settlement. The Company hereby agrees not to enter into any
waiver, release or settlement of any action, suit or proceeding arising under this Section 13
(whether or not the Holder is a formal party to any action, suit or proceeding) without the prior
written consent of the Holder (such consent not to be unreasonably withheld).

(vi) Specific Performance. The Company and the Holder acknowledge that remedies at
law for the enforcement of this Section 13E may be inadequate and intend that this Section 13E
shall be specifically enforceable.

Section 14. Representations and Warranties by the Company.

The Company hereby covenants, represents and warrants to each Warrantholder that:

(a) it is a corporation organized and validly existing under the laws of the State of
Maryland;

(b) this Agreement has been duly authorized, executed and delivered on its behalf and
constitutes the legal, valid and binding obligation of the Company;

(c) the execution, delivery and performance of this Agreement by the Company does not and will
not violate any applicable law or regulation and does not require the consent of any governmental
or other regulatory body except for such consents and approvals as have been obtained and are in
full force and effect;

(d) it has not adopted, and will not adopt, any resolution electing to be, or to make any
share of Stock, subject to any of the provisions of the Maryland Control Share Acquisition Act or
the Maryland Business Combination Act (as amended or supplemented from time to time and
collectively, the “Maryland Interested Shareholder Statutes”) and all shares of Stock
currently outstanding or issued in the future are and will be exempt from the Maryland Interested
Shareholder Statutes to the fullest extent permitted by Maryland law;

(e) the Board has on or prior to the Closing Date (i) on the basis of representations and
warranties of the Warrantholders in Section 18(c), duly exempted the Warrantholders from the
ownership limitation imposed by section 5.2(b)(i)(w) of the Company’s charter (as amended and
restated as of the date hereof, the “Company’s Articles”) pursuant to and in accordance
with Article 5.2(f) the Company’s Articles, (ii) approved, and the Audit Committee of the Board has
expressly approved, the exception set forth in Paragraph 312.05 of the NYSE Listed Company Manual
to the shareholder approval policy set forth in Paragraph 312.03 thereof (the “Exception”) and
(iii) directed that there be promptly mailed (and in no event later than 10 days prior to the
Initial Exercise Date) to all shareholders a letter alerting them to the Company’s omission to seek
the shareholder approval that would otherwise be required absent the Exception and indicating that
the Audit Committee of the Board has expressly approved the Exception; and

(f) all transactions contemplated by this Agreement are in compliance with, and not in
violation of any applicable securities laws, regulations or rules, including, without limitation,
the Securities Act or the Exchange Act.

Section 15. Definitions.

Unless the context otherwise requires, the terms defined in this Section 15, whenever used in
this Agreement shall have the respective meanings hereinafter specified and words in the singular
or in the plural shall each include the singular and the plural and the use of any gender shall
include all genders.

“Affiliate” shall mean, with respect to any Person, any officer of director of such
Person, or any other Person directly or indirectly controlling, controlled by or under common
control with such Person. For purposes of this definition, “control” means the power to
direct the management and policies of such person, directly or indirectly, whether through
ownership of voting securities, by contract or otherwise, and the terms “controlling” and
“controlled” have meanings correlative to the foregoing.

“Business Day” shall mean any day on which banking institutions are generally open for
business in the City of New York.

“Closing” shall mean 4:00 p.m., New York City time.

“Closing Date” shall mean the date hereof..

“Convertible Notes” shall mean the 8.125% Convertible Senior Notes due 2027 issued by
the Company.

“Demand Holders” shall mean Holders of Registrable Securities representing at least
twenty percent (20%) of the Registrable Securities that would be outstanding if all Warrants issued
hereunder were exercised.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

“Exercise Price” shall mean an amount per Warrant Share equal to $0.18.

“Expiration Date” shall mean the fifth anniversary of the Initial Exercise Date.

“Fair Market Value” shall mean when used with respect to the Warrant Shares or any
other shares of Stock,

(a) the average over the twenty (20) trading-day period ending on the trading day which is two
(2) trading days prior to the date of the event giving rise to the computation of Fair Market Value
(e.g. the surrender of any Warrant Certificate in connection with a cashless exercise or the
issuance of any Additional Stock), of:

(i) the Closing sales prices of the Stock on the primary national securities exchange on which
the Stock may at the time be listed, or

(ii) if there were no sales on such exchange on any such trading day, the average of the
highest bid and lowest asked prices on such exchange at the Closing, on such day, or

(iii) if on any such trading day the Stock is not so listed, the Closing sales prices (or, if
on any day there is no Closing sales price, the average of the representative bid and asked prices)
quoted on Nasdaq on such day, or

(iv) if on any such trading day the Stock is not quoted on Nasdaq, the Closing sales prices
(or, if on any day there is no Closing sales price, the average of the highest bid and lowest
asked price) on such day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor organization; or

(b) if the Stock is not listed, traded, or quoted as set forth in subsection (a) above, an
amount equal to the most recent per share price at which shares of Stock (or securities
convertible, exchangeable or exercisable for shares of Stock) were sold by the Company to a third
party purchaser that is neither an Affiliate nor an employee of the Company in a bona-fide,
arms’-length transaction (a “Bona-Fide Private Sale”). In determining the price at which
any such shares of Stock (or convertible, exchangeable or exercisable securities) were sold, any
non-cash consideration shall be valued at the fair value thereof as determined by the Board acting
in good faith (irrespective of any accounting treatment) and, in the case of the issuance of any
securities convertible, exchangeable or exercisable for shares of Stock, shall include in addition
to the consideration, if any, received on the issuance of such securities, the minimum price, if
any, provided in such securities that is payable to the Company on the conversion, exchange or
exercise thereof for the shares of Stock covered thereby. If no Bona-Fide Private Sale has
occurred within six (6) months of the date of the event giving rise to the computation of Fair
Market Value (e.g. the surrender of any Warrant Certificate in connection with a cashless exercise
or the issuance of any Additional Stock), the Fair Market Value of the Stock shall be determined in
good faith by the Board after taking reasonable steps to determine such value including obtaining
third party appraisals or valuation opinions from nationally recognized investment banks.

“Holder” shall mean a holder of Registrable Securities.

“Person” shall mean any corporation, association, partnership, limited liability
company, joint venture, trust, organization, business, individual, government or political
subdivision thereof or governmental body.

“Prospectus” shall mean any prospectus included in any Registration Statement, as
amended or supplemented, with respect to the terms of the offering of any portion of the
Registrable Securities covered by such Registration Statement and all other amendments and
supplements to the Prospectus, including post-effective amendments and all material incorporated by
reference in such Prospectus.

“Registration Expenses” shall mean any and all expenses incurred in connection with
any registration or action incident to performance of or compliance by the Company with Section 13,
including, without limitation, (i) all SEC, national securities exchange and NASD registration and
filing fees; all listing fees and all transfer agent fees; (ii) all fees and expenses of complying
with state securities or blue sky laws (including the fees and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the Registrable Securities); (iii) all
printing, mailing, messenger and delivery expenses; (iv) all fees and disbursements of counsel for
the Company and of its accountants, including the expenses of any special audits and/or “cold
comfort” letters required by or incident to such performance and compliance; and (v) the fees and
disbursements of one counsel retained by the holders of Registrable Securities to advise them in
their capacity as Holders of Registrable Securities, but excluding underwriting discounts and
commissions, brokerage fees and transfer taxes, if any.

“Registrable Securities” means (a) any Warrant Shares issued to the Warrantholders,
and (b) any other Securities of the Company issued as (or issuable upon the conversion or exercise
of any warrant, right or other security which is issued as) a dividend or other distribution with
respect to, or in exchange for or in replacement of, the shares described in clause (a);
provided that any Warrant Share or such other Security shall cease to be a Registrable
Security when it is sold pursuant to a Registration Statement or Rule 144 under the Securities Act,
or is eligible for resale under Rule 144(k) under the Securities Act and the Company has agreed to
remove any restrictive legends imprinted on such Warrant Share or other Security.

“Registration Statement” means any registration statement of the Company filed or to
be filed with the SEC which covers any of the Registrable Securities pursuant to the provisions of
this Agreement, including all amendments (including post-effective amendments) and supplements
thereto, all exhibits thereto and all material incorporated therein by reference.

“Repurchase Agreements” shall mean, collectively, the repurchase agreements, dated as
of August 14, 2007 (as such agreements may be amended, amended and restated, supplemented or
otherwise modified, renewed or replaced from time to time), among each of Saturn Portfolio
Management, Mercury Mortgage Statutory Trust and Minerva Mortgage Finance Corporation as respective
“Sellers” thereunder and GGRE LLC.

“SEC” The Securities and Exchange Commission or any other federal agency at the time
administering the Securities Act or the Exchange Act.

“Securities” shall mean the Common Stock, the Preferred Stock or any other securities
into which the Common Stock or the Preferred Stock may hereafter be converted or for which the
Common Stock or Preferred Stock may be exchanged.

“Securities Act” shall mean the Securities Act of 1933, as amended, or any similar
federal statute as at the time in effect, and any reference to a particular section of such Act
shall include a reference to the comparable section, if any, of such successor federal statute.

Section 16. Notices.

All notices, consents, requests, waivers or other communications required or permitted under
this Agreement (each a “Notice”) shall be in writing and shall be sufficiently given (a) if
hand delivered, (b) if sent by nationally recognized overnight courier, or (c) if sent by
registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

if to the Company:

Luminent Mortgage Capital, Inc.

	 	 	 	 	 
	2005 Market Street, 21st Floor

	Philadelphia, PA 19103-2337

	Attention:Trez Moore

	Facsimile No.:
	 	 	215-564-5990	 

Telephone No.: 215-564-5990

if to a Warrantholder:

At the address of such Warrantholder set forth on Schedule A.

or such other address as shall be furnished by the Company or any of the Warrantholders (including
any transferee of an original Warrantholder) in a Notice. Any Notice shall be deemed given upon
receipt.

Section 17. Supplements, Amendments and Waivers.

This Agreement may be supplemented or amended only by a subsequent writing signed by the
Company and Warrantholders holding a majority of the outstanding Warrants; provided
that no supplement or amendment may be made to Section 7, Section 8 or this Section 17 (or
any of the defined terms used in Section 7, Section 8 or this Section 17) without a subsequent
writing signed by the Company and each Warrantholder.

Section 18. Representations and Warranties of the Warrantholders.

Each Warrantholder, by its acceptance of the Warrants to be issued herewith represents and
warrants to the Company that (a) such Warrantholder is an “accredited investor” as such
term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act, (b) such
Warrantholder is acquiring the Warrants and the Warrant Shares to be issued upon exercise of such
Warrants for investment, for its own account, and not with a view to, or for sale in connection
with, any distribution. and (c) solely in relation to the Warrants it receives and the Warrant
Shares it may receive in the future, (i) no individual’s (as defined in Section 542(a)(2) of the
Code, as modified by Section 856(h)(3)(A)(i) of the Code) Beneficial Ownership or Constructive
Ownership of Capital Stock has or will violate the Ownership Limit or the restriction contained in
sections 5.2(b)(i)(x), 5.2(b)(i)(y) or 5.2(b)(z) of the Company’s Articles and (ii) to its
knowledge, it does not own and will not own an interest in a tenant of the Company (or a tenant of
any entity owned or controlled by the Company) that would cause the Company to own actually or
Constructively, more than a 9.9% interest (as set forth in Section 856(d)(2)(B) of the Code) in
such tenant and (iii) it agrees that any violation or attempted violation of any of its
representations and warranties set out in Section 18(c)(i) and (ii) will result in such transfer to
the Trust of Capital Stock pursuant to Section 5.2(c) of the Company’s Articles (capitalized terms
used but not defined in this Section 18(c) shall have the meanings ascribed to them in the
Company’s Articles).

Section 19. Successors and Assigns.

Except as otherwise provided herein, the provisions of this Agreement shall be binding upon
and inure to the benefit of and be enforceable by the successors and permitted assigns of the
parties hereto. Warrants issued under this Agreement may be assigned by a Warrantholder only to
the extent such assignment satisfies the restrictions on transfer set forth in this Agreement; any
attempted assignment of Warrants in violation of the terms hereof shall be void ab initio.

Section 20. Termination.

This Agreement (other than Sections 7D, 11 and Sections 15 through 22, inclusive, and all
related definitions, all of which shall survive such termination) shall terminate on the earlier of
(i) the Expiration Date and (ii) the date on which all Warrants have been exercised or canceled in
accordance with Section 7.

Section 21. Governing Law; Jurisdiction.

A. Governing Law. This Agreement and each Warrant Certificate issued hereunder shall
be governed by and construed in accordance with the laws of the State of New York.

B. Submission to Jurisdiction. The Company and each Warrantholder by its acceptance
of a Warrant hereby irrevocably and unconditionally submits, for itself and its property, to the
jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the
United States District Court for the Southern District of New York, and any appellate court from
any thereof, in respect of actions brought against it as a defendant, in any action, suit or
proceeding arising out of or relating to this Agreement or the Warrant Certificates and Warrants to
be issued pursuant hereto, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such
action, suit or proceeding may be heard and determined in such courts. Each of the parties hereto
agrees that a final judgment in any such action, suit or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

C. Venue. The Company and each Warrantholder irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any action, suit or proceeding arising out of or relating
to this Agreement, or the Warrant Certificates and Warrants to be issued pursuant hereto, in any
court referred to in subsection B. The Company and each Warrantholder hereby irrevocably waives,
to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of
such action, suit proceeding in any such court.

Section 22. Third Party Beneficiaries.

This Agreement shall not benefit or create any right or cause of action in or on behalf of any
Person other than the Company, the Warrantholders and their respective successors and permitted
assigns.

Section 23. Headings.

The headings in this Agreement are for convenience only and shall not affect the construction
or interpretation of this Agreement.

Section 24. Entire Agreement.

This Agreement, together with the Warrant Certificates, Schedules and Exhibits, constitutes
the entire agreement and understanding between the Company and the Warrantholders hereto with
respect to the subject matter hereof and shall supersede any prior agreements and understandings
between the Company and the Warrantholders with respect to such subject matter.

Section 25. Joint Drafting.

This Warrant Agreement shall be deemed to have been jointly drafted by the Company and the
Warrantholders, and no provisions of it shall be interpreted or construed for or against the
Company or the Warrantholders because such party purportedly prepared or requested such provision,
any other provision, this Warrant Agreement or a Warrant Certificate.

[SIGNATURE ON THE FOLLOWING PAGE]

3

IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be duly
executed as of the day and year first above written.

LUMINENT MORTGAGE CAPITAL, INC.

	 	 	 
	By:

	 	_/s/ S. Trezevant Moore, Jr.      
	
 
	 	 
	
 
	 	Name: S. Trezevant Moore, Jr.

Title: President and Chief Executive Officer

4

ACCEPTED by the undersigned party as of the day and year first above written.

ARCO CAPITAL CORPORATION LTD.

	 	 	 
	By:

	 	_/s/ Jay Johnston      
	
 
	 	 
	
 
	 	Name: Jay Johnston

Title: Chief Executive Officer

5

SCHEDULE A

LIST OF WARRANTHOLDERS

	 	 	 	 	 
	 	 	 	 	Aggregate Number of
	Name of Warrantholder	 	Address	 	Warrants
	Arco Capital

Corporation Ltd.

	 	City View Plaza, Suite 800

Road 165 Km 1.2

Guaynabo, PR 00968

Phone: 787.993.9650

Fax: 787.993.9651
	 	

51,000,000

6

EXHIBIT A

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH, OR PURSUANT TO AN EXEMPTION FROM,
THE REQUIREMENTS OF SUCH ACT AND LAWS. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF, AND MAY ONLY BE TRANSFERRED
IN ACCORDANCE WITH, A WARRANT AGREEMENT MADE BY LUMINENT MORTGAGE CAPITAL, INC. FOR
THE BENEFIT OF THE HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE. THE
HOLDER OF THIS CERTIFICATE BY THE ACCEPTANCE HEREOF AGREES TO BE BOUND BY THE TERMS
OF THE WARRANT AGREEMENT. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN
REQUEST TO LUMINENT MORTGAGE CAPITAL, INC.

	 	 	 
	NO.    

	 	     WARRANTS
	 

	 	

FORM OF

Warrant Certificate

LUMINENT MORTGAGE CAPITAL, INC.

This Warrant Certificate certifies that      , a      , or
its registered assigns (the “Warrantholder”), is the registered holder of 51,000,000
Warrants to purchase up to 51 million shares (the “Warrant Shares”) of common stock of
Luminent Mortgage Capital, Inc. (the “Company”), par value $0.001 per share (the
“Common Stock”), and/or, at the holder’s option or as required by the Warrant Agreement,
nonvoting preferred stock of the Company, par value $0.001 (“Preferred Stock”) representing
economic ownership of the Company equivalent to 5.1 Warrant Shares per share of Preferred Stock, as
adjusted pursuant to, and as further described in, that certain Warrant Agreement dated as of
August 17, 2007, made by the Company for the benefit of the Warrantholders from time to time, so
that the Warrant Shares issued upon exercise represent aggregate economic ownership of no more than
51% of the Company and 49% of the voting power of all classes of capital stock of the Company on a
fully-diluted basis as of the date hereof (after giving effect to exercise of the Warrants, the
conversion of all convertible debt securities of the company and exercise of any and all
outstanding options or other purchase rights relating to the Common Stock, the “Voting Issuance
Cap”); provided, however, that the number of shares of Common Stock that may be purchased upon
exercise of the Warrants shall not at any time exceed (i) 41,604,846 shares of Common Stock, minus
all shares held by Warrantholders comprising a “group” under the Exchange Act, unless the
aggregate number of issued and outstanding shares of Common Stock of the Company exceeds 43,303,004
shares immediately prior to such exercise of Warrants and (ii) 48,594,970 shares of Common Stock
unless a greater number of unreserved authorized shares of Common Stock are available at the time
of such exercise of Warrants to allow for a higher share issuance without any Warrantholder or
“group” surpassing the Voting Issuance Cap. Each Warrant entitles the holder, subject to the
conditions relating to exercisability, cancellation and exercise set forth in Section 7 of the
Warrant Agreement referred to below, to purchase from the Company at any time on or after the
Initial Exercise Date (as defined in the Warrant Agreement) prior to 5:00 p.m., New York City time,
on the Expiration Date (as defined in the Warrant Agreement) one fully paid and nonassessable
Warrant Share at the Exercise Price (as defined in the Warrant Agreement). The number of Warrant
Shares for which each Warrant is exercisable and the Exercise Price are subject to adjustment as
provided in the Warrant Agreement.

The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of
Warrants to purchase Warrant Shares and are issued pursuant to a Warrant Agreement, dated as of
August 17, 2007 (the “Warrant Agreement”), made by the Company for the benefit of the
holders from time to time of the Warrants and the Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a description of the
rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the
Warrantholders. Capitalized terms used but not defined herein shall have the meanings ascribed to
them in the Warrant Agreement.

Warrantholder may exercise the Warrants represented by this Warrant Certificate (to the extent
exercisable in accordance with Section 7A of the Warrant Agreement) by surrendering this Warrant
Certificate, with the Election to Purchase attached hereto properly completed and executed,
together with payment of the aggregate Exercise Price, at the offices of the Company specified in
Section 16 of the Warrant Agreement. If upon any exercise of Warrants evidenced hereby the number
of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall
be issued to the holder hereof or its assignee a new Warrant Certificate evidencing the number of
Warrants not exercised.

This Warrant Certificate, when surrendered at the offices of the Company specified in Section
16 of the Warrant Agreement, by the registered holder thereof in person, by legal representative or
by attorney duly authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, for one or more other Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.

Warrantholder may transfer the Warrants evidenced by this Warrant Certificate, in whole or in
part, only in accordance with Sections 5 of the Warrant Agreement.

The Company may deem and treat the registered holder hereof as the absolute owner of this
Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof and for all other purposes, and the Company shall
not be affected by any notice to the contrary.

The Warrant Agreement and each Warrant Certificate, including this Warrant Certificate, shall
be governed by and construed in accordance with the laws of the State of New York.

7

WITNESS the signature of the duly authorized officer of the Company.

	 	 	 
	Dated: As of August 17, 2007

	 	LUMINENT MORTGAGE CAPITAL, INC.

By:      /s/ S. Trezevant Moore, Jr.     
	
 
	 	 
	
 
	 	Name: S. Trezevant Moore, Jr.

Title: Chief Executive Officer

8

FORM OF

ELECTION TO PURCHASE

(To be executed and delivered to the Company upon exercise of a Warrant on or after the
Initial Exercise Date and prior to the Expiration Date)

The undersigned hereby irrevocably elects to exercise      of the Warrants evidenced by
the attached Warrant Certificate to purchase      Warrant Shares in the form of Common Stock
and      Warrant Shares in the form of Preferred Stock, and herewith tenders (or is
concurrently tendering) payment for such Warrant Shares in an amount determined in accordance with
the terms of the Warrant Agreement. The undersigned requests that, in the case of Warrant Shares
solely in the form of Common Stock or Preferred Stock, a certificate or, in the case of Warrant
Shares in the form of Common Stock and Preferred Stock, two certificates representing such Warrant
Shares be registered in the name of      , whose address is      
     , and that such certificate or certificates, as the case may be, be
delivered to      , whose address is      . If said number
of Warrants is less than the number of Warrants evidenced by the Warrant Certificate, the
undersigned requests that a new Warrant Certificate evidencing the number of Warrants evidenced by
this Warrant Certificate that are not being exercised be registered in the name of
     , whose address is      and
that such Warrant Certificate be delivered to      , whose address is
     .

Dated     ,

Name of holder of Warrant Certificate:

     

     

(Please Print)

	 	 	 	Address:      

     

Federal Tax ID No.:      

Signature:      

	 	 	 	Note: The above signature must correspond with the
name as written in the first sentence of the attached Warrant
Certificate in every particular, without alteration or enlargement or
any change whatever, and if the certificate evidencing the Warrant
Shares or any Warrant Certificate representing Warrants not exercised
is to be registered in a name other than that in which this Warrant
Certificate is registered, the signature above must be guaranteed.

Signature Guaranteed:

Dated:      ,

9

FORM OF

ASSIGNMENT

For value received,      hereby sells, assigns and transfers unto      ,
     of the Warrants evidenced by the attached Warrant Certificate, together with all
right, title and interest therein, and does hereby irrevocably constitute and appoint
     as its due and lawful attorney, to register the transfer of said Warrants on
the books of Luminent Mortgage Capital, Inc., and to execute a new Warrant Certificate in the name
of      whose address is      evidencing the number of
Warrants so sold, assigned and transferred hereby. If the number of Warrants sold, assigned or
transferred hereunder is less than the number of Warrants evidenced by the attached Warrant
Certificate, then the undersigned requests that a new Warrant Certificate for an amount of Warrants
equal to the number of Warrants evidenced by the attached Warrant Certificate that were not sold,
transferred or assigned be registered in the name of the undersigned.

Dated     ,

Name of holder of Warrant Certificate:

     

     

(Please Print)

	 	 	 	Address:      

     

Federal Tax ID No.:      

Signature:      

	 	 	 	Note: The above signature must correspond with the
name as written in the first sentence of the attached Warrant
Certificate in every particular, without alteration or enlargement or
any change whatever, and such signature must be guaranteed.

Signature Guaranteed:      

Dated:      ,      

10

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