Unassociated Document

This Blocked Deposit Account Control Agreement dated as of May 11, 2007 (this “Agreement”) among TEKOIL AND GAS GULF COAST, LLC, a Delaware limited liability company (the “Debtor”), J. ARON & COMPANY, as administrative agent for the beneficiaries (the “Secured Party”) and AMEGY BANK NATIONAL ASSOCIATION, a national banking association, in its capacity as a “bank” as defined in Section 9-102 of the UCC (in such capacity, the “Financial Institution”). Capitalized terms used but not defined herein shall have the meaning assigned thereto in the Pledge and Security Agreement, dated as of May 11, 2007, among the Debtor, the other Grantors party thereto, and the Secured Party (as amended, restated, supplemented or otherwise modified from time to time, the “Security Agreement”). Capitalized terms used but not otherwise defined herein or in the Security Agreement shall have the meaning assigned thereto in the Credit and Guaranty Agreement, dated as of May 11, 2007, among the Debtor, Tekoil & Gas Corporation, other guarantors party thereto, various lenders, and the Secured Party, as administrative agent for the various lenders. All references herein to the “UCC” shall mean the Uniform Commercial Code as in effect in the State of New York.

(a) The Financial Institution has established account number XXXXXXX in the name “Tekoil and Gas Gulf Coast - Blocked Receivable Account” (such account and any successor account, the “Deposit Account”) and the Financial Institution shall not change the name or account number of the Deposit Account without the prior written consent of the Secured Party; and

(a) The Deposit Account shall be under the control of the Secured Party. The Secured Party shall at all times have "control" (as defined in Section 9-104 of the Uniform Commercial Code as adopted in the state of New York) of the Deposit Account. The Financial Institution shall comply with instructions originated by the Secured Party directing disposition of funds in the Depository Account without further consent by the Debtor.

(b) The Secured Party shall have exclusive dominion and control over the Deposit Account. Neither the Debtor nor any person acting through or on behalf of the Debtor shall have any right of access to or withdrawal from the Deposit Account, and the Financial Institution shall not comply with any instructions originated by the Debtor or any such person directing disposition of funds in the Deposit Account.

(c) Upon receipt of a funding disbursement notice (a "Disbursement Notice") from the Secured Party to the Financial Institution's address as set forth in Section 11 of this Agreement, the Financial Institution will initiate a federal funds wire transfer of all or a portion of collected funds, as indicated in such Disbursement Notice (subject to the Financial Institution's funds availability policy), in the Deposit Account to the master/operating account, (account number XXXXXXX) of the Debtor with the Financial Institution (or such other account as may be designated in writing by the Secured Party in such Disbursement Notice).

(d) The Financial Institution has established a unique U.S. Postal Service address, P.O. Box 4346, Dept. 938, Houston, Texas 77210-4346 (the "Lockbox"). The Debtor will cause its account debtors to remit payment of the Debtor's accounts receivable to the Lockbox. The Financial Institution shall have exclusive and unrestricted access to, and use of, the Lockbox for purposes of handling such remittances. The Financial Institution will collect, open and process for deposit into the Deposit Account all mail received in the Lockbox in accordance with the procedures set forth on Exhibit A attached hereto.

Section 3. Subordination of Lien; Waiver of Set-Off. In the event that the Financial Institution has or subsequently obtains by agreement, by operation of law or otherwise a security interest in the Deposit Account or any funds credited thereto, the Financial Institution hereby agrees that such security interest shall be subordinate to the security interest of the Secured Party. Money and other items credited to the Deposit Account will not be subject to deduction, set-off, banker’s lien, or any other right in favor of any person other than the Secured Party (except that the Financial Institution may set off (i) all amounts due to the Financial Institution in respect of customary fees and expenses for the routine maintenance and operation of the Deposit Account and (ii) the face amount of any checks which have been credited to such Deposit Account but are subsequently returned unpaid because of uncollected or insufficient funds).

(a) Neither this Agreement nor the Security Agreement imposes or creates any obligation or duty of Financial Institution except for those expressly set forth in this Agreement, and no implied obligations shall be read into this Agreement against Financial Institution.

(b) Financial Institution may rely on notices and communications it reasonably believes have been given by an authorized representative of Administrative Agent or Debtor, and Financial Institution shall have no obligation to review or confirm that actions taken pursuant to any such notice in accordance with this Agreement comply with any other agreement or document.

(c) If Debtor becomes subject to a bankruptcy proceeding or if Financial Institution is otherwise served with legal process which Financial Institution believes affects funds deposited in the Deposit Account, Financial Institution shall have the right to place a hold on funds in the Deposit Account until such time as Financial Institution receives an appropriate court order or other assurances satisfactory to Financial Institution establishing that funds may continue to be disbursed in accordance with this Agreement.

(d) If at any time Financial Institution, in good faith, is in doubt as to the action it should take under this Agreement, Financial Institution shall have the right (i) to place a hold on funds in the Deposit Account until such time as Financial Institution receives an appropriate court order or other assurances satisfactory to Financial Institution as to the disposition of funds in the Deposit Account, or (ii) to commence an interpleader action in an appropriate court and to take no further action except in accordance with joint instructions from Administrative Agent and Debtor or in accordance with the final order of the court in such action.

(f) Financial Institution will not be liable to any party hereunder for any expense, claim, cause of action, liability, loss, damage or cost arising out of or relating to the Deposit Account or this Agreement other than those resulting from Financial Institution’s acts or omissions constituting gross negligence or willful misconduct, and Debtor agrees to indemnify and hold Financial Institution harmless from any such expense, claim, cause of action, liability, loss, damages or cost.

(g) Financial Institution shall not be liable for losses or delays resulting from computer malfunction, interruption of communication facilities, labor difficulties, acts of God, terrorist acts, and other causes beyond Financial Institution’s reasonable control. In no event shall Financial Institution be liable for any indirect, special, consequential, exemplary or punitive damages including, without limitation, lost profits.

Section 5. Choice of Law. This Agreement and the Deposit Account shall each be governed by the laws of the State of New York. Regardless of any provision in any other agreement, for purposes of the UCC, New York shall be deemed to be the Financial Institution’s jurisdiction (within the meaning of Section 9-304 of the UCC) and the Deposit Account shall be governed by the laws of the State of New York.

Section 6 Interpleader. If at any time Financial Institution receives conflicting claims to or demands regarding the Deposit Accounts and reasonably believes it may become subject to liability as a result of complying with this Agreement or any instructions from Secured Party, Bank may (a) freeze and hold all funds in the Deposit Accounts pending resolution of such issues, and/or (b) interplead all Deposit Account funds and deposits in an action commenced in a court of competent jurisdiction naming Debtor, Secured Party, and any competing claimants as defendants. Upon interpleading such funds, Financial Institution will be released from all further liability under this Agreement and the costs and expenses of Financial Institution relating to the interpleader action, including filling fees and reasonable attorneys fees, shall be paid by Debtor and, if Debtor fails to pay, Secured Party shall pay such fees.

(ii) It has not entered into, and until the termination of this Agreement, will not enter into, any agreement with any other person relating the Deposit Account and/or any funds credited thereto pursuant to which it has agreed to comply with instructions originated by such persons as contemplated by Section 9-104 of the UCC.

Section 8. Adverse Claims. The Financial Institution does not know of any liens, claims or encumbrances relating to the Deposit Account. If any person asserts any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Deposit Account, the Financial Institution will promptly notify the Secured Party and the Debtor thereof.

Section 9. Maintenance of Deposit Account. In addition to, and not in lieu of, the obligation of the Financial Institution to honor instructions as set forth in Section 2 hereof, the Financial Institution agrees to maintain the Deposit Account as follows:

(a) Statements and Confirmations. Upon receipt of a written request by Secured Party, the Financial Institution will promptly send copies of all statements, confirmations and other correspondence concerning the Deposit Account simultaneously to each of the Debtor and the Secured Party at the address for each set forth in Section 11 of this Agreement; and

Section 11. Indemnification of Financial Institution. The Debtor and the Secured Party hereby agree that (a) the Financial Institution is released from any and all liabilities to the Debtor and the Secured Party arising from the terms of this Agreement and the compliance of the Financial Institution with the terms hereof, except to the extent that such liabilities arise from the Financial Institution’s negligence and (b) the Debtor, its successors and assigns shall at all times indemnify and save harmless the Financial Institution from and against any and all claims, actions and suits of others arising out of the terms of this Agreement or the compliance of the Financial Institution with the terms hereof, except to the extent that such arises from the Financial Institution’s negligence, and from and against any and all liabilities, losses, damages, costs, charges, counsel fees and other expenses of every nature and character arising by reason of the same, until the termination of this Agreement.

Section 12. Successors; Assignment. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective corporate successors or heirs and personal representatives who obtain such rights solely by operation of law. The Secured Party may assign its rights hereunder only with the express written consent of the Financial Institution and by sending written notice of such assignment to the Debtor.

Section 13. Notices. Any notice, request or other communication required or permitted to be given under this Agreement shall be in writing and deemed to have been properly given when delivered in person, or when sent by telecopy or other electronic means and electronic confirmation of error free receipt is received or two (2) days after being sent by certified or registered United States mail, return receipt requested, postage prepaid, addressed to the party at the address set forth below.

	Debtor:		Tekoil and Gas Gulf Coast, LLC
			25045 I-45 North, Suite 525
			The Woodlands, Texas 77380
			Attention: Mark Western
			Telecopier: 281-364-8007

	Secured Party:		J. Aron & Company
			85 Broad Street
			New York, New York 10004
			Attention: Steve Bunkin
			Telecopier: 212-428-3675

	with a copy to:		Goldman Sachs E&P Capital
			1000 Louisiana, Suite 550
			Houston, Texas 77002
			Attention: John K. Howie
			Telecopier: 713-658-2603

	Financial Institution:		Amegy Bank National Association
			Five Post Oak Park
			4400 Post Oak Parkway
			Houston, TX 77027
			Attention: Mark Serice
			Telecopier: ___________

			And

			Amegy Bank National Association
			Five Post Oak Park
			4400 Post Oak Parkway
			Houston, TX 77027
			Attention: Kacy Karl
			Telecopier: 713-561-0186

Section 14. Termination. The obligations of the Financial Institution to the Secured Party pursuant to this Agreement shall continue in effect until the security interest of the Secured Party in the Deposit Account has been terminated pursuant to the terms of the Security Agreement and the Secured Party has notified the Financial Institution of such termination in writing. The Secured Party agrees to provide Notice of Termination in substantially the form of Exhibit B hereto to the Financial Institution upon the request of the Debtor on or after the termination of the Secured Party’s security interest in the Deposit Account pursuant to the terms of the Security Agreement. The termination of this Agreement shall not terminate the Deposit Account or alter the obligations of the Financial Institution to the Debtor pursuant to any other agreement with respect to the Deposit Account.

(a)

Payees. An item not bearing an acceptable payee designation, as set forth in the specifications, or a reasonable variation thereof, will not be deposited in the Deposit Account. If a necessary endorsement of a payee other than the Debtor is missing, the item will not be deposited into the Deposit Account.

(c)

Amounts. If the written and numeric amounts of an item differ, the written amount shall control over the numeric amount unless the written amount is ambiguous. If the amount of an item cannot be determined from application of the preceding sentence, or if the amount is missing altogether, the item will not be deposited into the Deposit Account.

(d)	Drawer's Signatures. For an item in which the drawer's signature is missing, the Financial Institution will deposit it into the Deposit Account and affix a stamp requesting the drawee bank or other payor to contact the drawer for authority to pay the item.

(f)

Other Language. The Financial Institution will not examine the front and back sides of items to detect handwritten or typed "paid in full" or similar language. Such items will be deposited into the Deposit Account and the Financial Institution shall have no liability to the Debtor or the Secured Party for depositing such items.

(g)

International Payments. An item denominated in foreign currency and drawn on a foreign bank will not be deposited into the Deposit Account but will be submitted for collection only. An appropriate advice will be forwarded to the Debtor. The Financial Institution shall not be responsible for fluctuation in exchange rates.

3) Processing Procedures. Items found acceptable for deposit under Section 2 of this Exhibit A will be encoded, photocopied, endorsed and deposited into the Deposit Account. The endorsement will be the standard endorsement for lockbox items as used by the Financial Institution from time to time, and this endorsement will function as the endorsement of the payee of the item. In order to maximize daily receipts and funds availability, the Financial Institution will make deposits throughout the day in anticipation of major check clearing deadlines. The Financial Institution will send the following to the Debtor in accordance with the Financial Institution's customary and standard practices for maintenance of a Deposit Account:

(a)	photocopies of deposited items and the original accompanying papers.

(b)	one deposit ticket copy for each deposit.

(c)	except as set forth in Section 2(g) of this Exhibit A, original items unacceptable for deposit under Section 2 of this Exhibit A, accompanying papers and other miscellaneous written communications received through the lockbox.

4) Microfilm. All deposited items will be microfilmed in processing sequence for reference purposes. The Financial Institution will retain such microfilm for at least two years and will provide photocopies of deposited items to the Debtor within said time upon request and payment of the Financial Institution's retrieval and photocopying charges.

You are hereby notified that the Blocked Deposit Account Control Agreement dated as of May 11, 2007 among Tekoil and Gas Gulf Coast, LLC, you and the undersigned (a copy of which is attached) is terminated and you have no further obligations to the undersigned pursuant to such Agreement. Notwithstanding any previous instructions to you, you are hereby instructed to accept all future directions with respect to account number(s) __________________from Tekoil and Gas Gulf Coast, LLC. This notice terminates any obligations you may have to the undersigned with respect to such account, however nothing contained in this notice shall alter any obligations which you may otherwise owe to Tekoil and Gas Gulf Coast, LLC pursuant to any other agreement.


	TEKOIL AND GAS GULF COAST, LLC


	By: Tekoil & Gas Corporation, its Managing Member

	By:	/s/ Mark Western
		Name: Mark Western Title: CEO and Chairman of the Board of Directors


	J. ARON & COMPANY,
	as Secured Party

	By:	/s/ Colleen Foster
		Name: Colleen Foster Title: Managing Director


	AMEGY BANK NATIONAL ASSOCIATION
	as Financial Institution

	By:	/s/ Kenneth R. Batson, III
		Name: Kenneth R. Batson, III Title: Vice President


	Very truly yours,

	J. ARON & COMPANY,
	as Secured Party

	By:

	Name:
	Title: