Amended And Restated Limited Liability Company Agreement of Republic Exploration

Exhibit 10.7

REPUBLIC EXPLORATION LLC

AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

AGREEMENT dated as of April 1, 2008 among (1) SAM Group (Delaware) Incorporated, a Delaware Corporation (" SAM" ), with offices at 14100 Southwest Freeway, Suite 600, Sugar Land, Texas 77478, Fax (281) 275-7550, (2) Juneau Exploration , L.P., a Texas limited partnership (" Juneau" ), with offices at 3700 Buffalo Speedway, Suite 925, Houston, Texas, 77098, Fax: (713) 524-8197, (3) REX Offshore Corporation, a Delaware corporation (" REX" ), with offices at 3700 Buffalo Speedway, Suite 960, Houston, Texas 77098, Fax (713) 960-1065, and (4) CGM II, LP, a Texas limited partnership (" CGM II" ), with offices at 3050 Post Oak Boulevard, Suite 850, Houston, Texas 77056, Fax: (713) 554-1333 (" Agreement" ).

WITNESSETH: WHEREAS, Juneau caused Republic Exploration LLC (the " Company" ) to be formed under the Limited Liability Company Act of the State of Delaware (the " Act" , which term will include any future amendments thereto), a copy of the certificate of formation (the " Certificate" ) being attached hereto as EXHIBIT A ; WHEREAS, SAM, Juneau, CGM II and REX wish to, among other things, amend and restate the Limited Liability Company Agreement of the Company, as amended to the date hereof, on the terms hereinafter set forth;

NOW, THEREFORE, SAM, Juneau, CGM II and REX agree as follows.

1. Limited Liability Company Agreement . This Agreement is a limited liability company agreement under and as provided in the Act. 2. Members . Concurrently with the execution of this Agreement, SAM, Juneau, CGM II and REX will become and be the members of the Company. SAM, Juneau, CGM II and REX and any other individual, corporation or other entity that becomes a member of the Company in accordance with the terms of this Agreement are collectively called " Members" ; and any one of them is called a " Member" . The neuter pronoun will refer to a Member regardless of the Member' s gender.

3. Duration of the Company . The Company will have perpetual existence.

4. Business of the Company . The business of the Company will be the identification, recovery and exploitation of hydrocarbon deposits.

5. Contributions by the Members .

(a) SAM . An affiliate of SAM, Fairfield Industries Incorporated (" Fairfield" ) grants the Company, without charge, a non-exclusive, non-transferable license on the terms hereinafter

set forth to the seismic data identified in EXHIBIT 5(a)-1 hereto and to any reprocessed data that Fairfield makes available to the Company as hereinafter provided (the " Data" , which term will also include any result or product derived from any processing, interpretation or other use of the Data by the Company). The Company may use the Data solely to identify, recover and exploit hydrocarbon prospects for itself. Neither the Company nor any of the Members may (i) use any of the Data for any other purpose, or (ii) except as hereinafter provided, disclose any of the Data or make any of the Data available to anyone else (including, without limitation, any parent, subsidiary or affiliated entity); but these restrictions will not preclude Fairfield from licensing to others Data it has licensed to the Company. SAM' s capital account will not be credited to any extent for the grant of this license to the Company. FAIRFIELD MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND OR DESCRIPTION, EXPRESS OR IMPLIED, WITH RESPECT TO THE DATA EXCEPT THAT IT MAY LICENSE IT TO THE COMPANY PURSUANT TO THIS AGREEMENT WITHOUT THE CONSENT OR APPROVAL OF ANY THIRD PARTY AND WITHOUT VIOLATING ANY RIGHT OF ANY THIRD PARTY. ANY USE WHICH THE COMPANY MAKES OF THE DATA AND ANY ACTION WHICH THE COMPANY TAKES BASED ON THE DATA WILL BE AT THE COMPANY' S SOLE RISK, EXPENSE AND LIABILITY, AND THE COMPANY WILL NOT HAVE ANY CLAIM AGAINST FAIRFIELD BY REASON OF ANY SUCH USE OR ACTION.

Juneau, CGM II, REX and the Company acknowledge that Fairfield' s business is the licensing and other exploitation of the very Data licensed to the Company under this Agreement and that the protection of the Data as provided in this Agreement is essential to Fairfield.

The Company' s right to use the Data will expire on the earlier of the twenty-fifth anniversary of the date of this Agreement or the dissolution and winding up of the Company. On expiration of its license to the Data, the Company will destroy all of the Data or return all of the Data to Fairfield. If the Company wishes to disclose any of the Data to a prospective partner or joint venturer in a prospect or to a prospective purchaser or lender, the Company may do so in accordance with the procedures set forth in EXHIBIT 5(a)-2 hereto or under other arrangements approved by Fairfield in writing. EXHIBIT 5(a)-2 also contains other provisions with respect to disclosure of the Data and additional obligations of the Company, all of which the Company and the Members acknowledge.

Within ten (10) days after the date of this Agreement, Fairfield will deliver to the Company the Data identified in EXHIBIT 5(a)-1 .

If Fairfield reprocesses any of theData other than under a processing contract with a third party, Fairfield will make that reprocessed Data available to the Company under the terms of the license set forth in this Agreement.

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(b) Juneau . Juneau will provide its know-how and expertise in oil and gas exploration and development to the Company. Juneau' s capital account will not be credited to any extent for its know-how and expertise.

(c) Following the execution of this Agreement, the Company will own the leases and assets listed on EXHIBIT 5(c) hereto and each Member' s capital account will be credited in the amounts set forth on EXHIBIT 5(c) . (d) The Company will not pay interest on capital contributions.

(e) Each of the Members confirms to the Company and to the other Members that it and/or its principal equity owner are experienced in the oil and gas industry and that it is fully aware of the risks involved in the venture set forth in this Agreement.

6. Management of the Company .

(a) Juneau will manage the business and affairs of the Company, and, except as hereinafter provided, Juneau will make all decisions with respect to the business, affairs and operations of the Company. (b) As part of its management responsibilities, Juneau will, for and on behalf of the Company, analyze, process, interpret and use the Data to identify hydrocarbon prospects in which the Company should acquire an interest, and, except as hereinafter provided, Juneau will make all decisions with respect to the acquisition of an interest, the development of the prospect, and the exploitation of the production from the prospect.

Juneau will cause its employees and others who work on the Data to use the Data only for the business of the Company and not to disclose any of the Data to anyone.

(c) Before the Company acquires an interest in any prospect, Juneau will advise the other Members of (i) the prospect and its potential and risks, (ii) the terms and other details of the interest to be acquired including whether that interest will be acquired alone or in conjunction with one or more other parties, (iii) the manner in which the Company will develop the prospect, (iv) the estimated cost to the Company to acquire the interest and develop the prospect, and (v) any other information about the prospect that a Member requests.

Notwithstanding the foregoing paragraph, if, under Section 6(d)(i) below, Juneau may cause the Company to acquire an interest in a prospect without the approval of the other Members, and if Juneau determines that the Company may lose a worthwhile opportunity if Juneau must report about the prospect to the other Members before the acquisition is made, then Juneau may cause the Company to acquire the interest before making the report; and if Juneau does so, then Juneau will, promptly thereafter, advise the other Members of the information required under the foregoing paragraph.

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(d) Juneau may, without the approval of the other Members, cause the Company to do any of the following and to enter into agreements to accomplish the same:

(i) acquire an interest in a prospect, either alone or in conjunction with one or more other parties, and make all arrangements with respect to that interest and prospect provided Juneau' s estimated cost for the Company to acquire the interest and develop the prospect does not exceed Two Million Dollars ($2,000,000.00);

(ii) borrow up to and including Ten Million Dollars ($10,000,000.00) in connection with any prospect in which the Company has acquired an interest and grant a security interest in the Company' s interest in that prospect to secure the Company' s obligations in respect of that borrowing;

(iii) sell, lease or otherwise dispose of any asset of the Company which has a reasonable value not exceeding One Million Dollars ($1,000,000.00); (iv) settle any claim for an amount not exceeding one Hundred Thousand Dollars ($100,000.00); (v) apart from the costs to acquire an interest and develop a prospect, budget and incur expenses for the operation of the Company not in excess of One Million Dollars ($1,000,000.00) per fiscal year of the Company (pro rata thereof for the fiscal year ending December 31, 2008).

In making its estimate of the cost to the Company to acquire an interest and develop a prospect, Juneau may take into account investments by participants to the extent that Juneau reasonably and in good faith determines that it can obtain participations by others in the prospect.

The amounts set forth in items (i) through (v) above may be reduced according to the determination of Members owning at least two-thirds (2/3) of the profits of the Company.

(e) Approval by Members owning at least two-thirds (2/3) of the profits of the Company will be required (i) for any matter described in Section 6(d) above for which Juneau does not have sole authority, (ii) for the Company to enter into any agreement other than for the express purposes in the express situations described in Section 6(d) above, (iii) for the Company to lend money or issue a guarantee, (iv) except as provided in Section 6(d)(v) above, for the Company to engage the services of anyone, and (v) for the Company to arrange the defense or prosecution of any claim.

(f) Approval by all of the Members will be required (i) for the Company to merge, consolidate or otherwise combine with another entity, (ii) for the Company to make an assignment for the benefit of creditors or seek relief under any bankruptcy, insolvency or similar law, and (iii) for the Company to engage in any business other than that set forth in Section 4 above.

(g) In addition to the capital contributions provided in Section 5 above and revenues of the Company, the money to finance the business of the Company may be derived from (i) loans and extensions of credit to the Company from third parties permitted by this Agreement and (ii) Member Loans.


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In order to satisfy the financial needs of the Company, Juneau may cause the Company to borrow from banks, lending institutions or other third parties, and to pledge Company properties to secure or provide for the payment of such loans in accordance with and within the amounts described in Section 6(d) above; and all the Members may cause the Company to borrow from banks, lending institutions or other third parties, and to pledge properties to secure or provide for the payment of such loans for amounts in excess of those described in Section 6(d) above.

If Juneau determines that additional funds are required, and unless the Company can borrow funds from third parties on terms and conditions reasonably acceptable to Juneau and/or the Members, with due regard being given to the particular needs of the Company, Juneau shall give written notice to all of the Members which notice shall state the amount of additional funds required and a date upon which the Members wishing to participate therein may make loans to the Company (" Member Loans" ) in the amount of such additional funds. If there is more than one Member who desires to advance such funds to the Company, each such Member shall be entitled to advance such portion of the needed funds in proportion to the capital account (as of the date such Member Loans are required) of such Member bears to the aggregate capital accounts (as of the date such Member Loans are required) of all such Members desiring to so advance, or in such other proportions as they shall otherwise mutually agree upon. Member Loans made on or after the date hereof shall be made on such terms and conditions, including interest rates and maturity dates, as Juneau and/or the Members shall determine. Payment of interest and principal on Member Loans shall be made in accordance with these terms and as determined by Juneau and/or the Members. (h) At the request of any Member, the Members will meet to discuss the business of the Company. (i) The Members will record in writings signed by them their approvals, agreements, determinations and other actions under or in respect of this Agreement.

7. Compensation; Expenses .

(a) The Company will grant to Juneau or to those whom Juneau designates in writing, by an instrument substantially in the form of EXHIBIT 7(a) hereto, an overriding royalty of three and one-third percent (3-1/3%) of one hundred percent (100%) (proportionately reducible as provided in EXHIBIT 7(a) ) burdening any oil, gas and/or mineral interest that the Company acquires.

(b) Except as expressly provided in this Agreement, the Members will not be entitled to compensation or reimbursement for their services to the Company or for the services of their employees to the Company. Further, the Members will cause their employees not to seek compensation from the Company, and each Member will indemnify the Company against and hold it harmless from (i) any claims for compensation by any of its employees, and (ii) any expenses (including, without limitation, legal fees) which the Company incurs in connection with any such claim.


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(c) The Members will pay their own expenses (including, without limitation, legal fees) in connection with the preparation and negotiation of this Agreement.

8. Profits and Losses; Taxation . (a) The Members will have the following interests in the profits of the Company: SAM 33.33% REX 32.30% Juneau 25.00% CGM II 9.37 % 100.00%

The losses of the Company for any fiscal year will be shared by the Members in proportion to their capital accounts on the day before the last day of that fiscal year.

The capital accounts of the Members will be determined in accordance with the requirements of the Internal Revenue Code and the rules and regulations thereunder from time to time in effect (collectively called the " Code" ).

(b) The profits and losses of the Company and items of income, gain, loss, deduction, expense, credit and similar items will be determined by the Company' s accountants in accordance with generally accepted accounting principles.

(c) The Company will be treated as a partnership for federal income tax purposes and, wherever possible, for state and local income tax purposes.

The Company will make the following elections for its first and subsequent tax years: (i) to deduct currently, in accordance with the Code and the relevant provisions of state law, all intangible drilling and development costs with respect to drilling productive and non-productive wells and the preparation of wells for the production of hydrocarbons;

(ii) to recover the basis of recovery property using the maximum recovery rate permitted by the Code;

(iii) to deduct expenses of organizing the Com ...