Ladiesand Gentlemen:

Re:

Third Amendment to Second Amended and Restated Credit Agreement and Forbearance Agreement (the “Third Amendment”) dated effective as of August 26, 2009, among Teton Energy Corporation, a Delaware corporation (“Borrower”), the financial institutions party thereto as lenders (“Lenders”), and JPMorgan Chase Bank, N.A., as Administrative Agent (“Administrative Agent”).  Unless otherwise defined herein, all terms used herein which are defined in the Third Agreement shall have the meaning assigned to such terms in the Third Amendment.

1.

Amendments.  In reliance on the representations, warranties, covenants and agreements contained in this letter agreement, and subject to the satisfaction of the conditions precedent set forth in Section 3 hereof, the Third Amendment is hereby amended effective as of the date hereof as follows:

“Indebtedness” means any and all amounts owing or to be owing by  Borrower, any Subsidiary or any Guarantor (whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising):  (a) to Administrative Agent, the Issuing Bank or any Lender under any Loan Document; (b) to any Lender or any Affiliate of a Lender under any Swap Agreement between Borrower or any Subsidiary and such Lender or Affiliate of a Lender while such Person (or in the case of its Affiliate, the Person affiliated therewith) is a Lender hereunder; (c) to any Lender or any Affiliate of a Lender created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor) in connection with treasury management services (including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate depository network services) provided to Borrower, any Subsidiary or any Guarantor by any Lender or any of its Affiliates; and (d) all renewals, extensions and/or rearrangements of any of the above.  

(c) Section 7.5 of the Third Amendment.  Section 7.5 of the Third Amendment is hereby amended by replacing the reference to “September 15, 2009” with “September 30, 2009”.  

2.

Representations and Warranties.  To induce Lenders and Administrative Agent to enter into this letter agreement, Borrower hereby represents and warrants to Lenders and Administrative Agent as follows:

(a) Reaffirm Existing Representations and Warranties.  Except for the representation and warranties made in Sections 7.04(b) and 7.22, each representation and warranty of Borrower and its Subsidiaries contained in the Credit Agreement is true and correct on the date hereof  and will be true and correct after giving effect to this letter agreement (other than breaches which result from the Specified Defaults).  

(b) Due Authorization; No Conflict.  The execution, delivery and performance by Borrower of this letter agreement are within Borrower’s corporate powers, have been duly authorized by all necessary action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not violate or constitute a default under any provision of applicable law or any material agreement binding upon Borrower or any of its Subsidiaries or result in the creation or imposition of any Lien upon any of the assets of Borrower or any of its Subsidiaries.  

(c) Validity and Enforceability.  This letter agreement constitutes the valid and binding obligation of Borrower enforceable in accordance with its terms, except as (a) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditor’s rights generally, and (b) the availability of equitable remedies may be limited by equitable principles of general application.  

(d) No Default or Event of Default.  No Default or Event of Default has occurred which is continuing, other than the Specified Defaults.  

(e) No Defense.  Borrower acknowledges that Borrower has no defense to (i) Borrower’s obligation to pay any amount payable under any Loan Document when due, or (ii) the validity, enforceability or binding effect against Borrower of the Credit Agreement or any of the other Loan Documents or any Liens intended to be created thereby.

3.

Conditions Precedent.  The amendments contained in Section 1 hereof shall be effective as of the date when the following conditions precedent have been satisfied:

(a) No Default.  No Default or Event of Default shall have occurred which is continuing, other than the Specified Defaults.

(b) Documents.  Administrative Agent shall have been provided with executed counterparts of this letter agreement and such other documents, instruments and agreements, and Borrower and each of its Subsidiaries shall have taken such actions, as the Administrative Agent may reasonably require in connection with this letter agreement and the transactions contemplated hereby.

4.

Miscellaneous.  (a) Borrower hereby agrees to pay on demand all reasonable fees and expenses incurred by the Administrative Agent (including, without limitation, reasonable fees and expenses of counsel to the Administrative Agent) in connection with the preparation, negotiation and execution of this letter agreement and all related documents, (b) this letter agreement may be executed in counterparts, and all parties need not execute the same counterpart; however, no party shall be bound by this letter agreement until a counterpart hereof has been executed by Borrower and Lenders; facsimiles or other electronic transmission (e.g., pdf) shall be effective as originals, (c) THIS LETTER AGREEMENT REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES REGARDING THE MATTERS SET FORTH HEREIN AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES, (d) this letter agreement constitutes a “Loan Document” under and as defined in Section 1.02 of the Credit Agreement, and (e) this letter agreement shall be governed by, and construed in accordance with, the laws of the State of Texas.

TETON ENERGY CORPORATION, as Borrower

 

 

By:

Dominic J. Bazile II,

President and Chief Operating Officer

 

TETON NORTH AMERICA LLC, as Guarantor

By:

Dominic J. Bazile II,

President and Chief Operating Officer

TETON PICEANCE LLC, as Guarantor

 

 

By:

Dominic J. Bazile II,

President and Chief Operating Officer

 

 

 

TETON DJ LLC, as Guarantor

 

 

By:

Dominic J. Bazile II,

President and Chief Operating Officer

TETON WILLISTON LLC, as Guarantor

 

 

By:

Dominic J. Bazile II,

President and Chief Operating Officer

 

 

 

 

TETON BIG HORN LLC, as Guarantor

 

 

 

By:

Dominic J. Bazile II,

President and Chief Operating Officer

 

 

 

 

TETON DJCO LLC, as Guarantor

 

 

By:

Dominic J. Bazile II,

President and Chief Operating Officer

JPMORGAN CHASE BANK, N.A., as Administrative Agent and a Lender

By:

John Runger,

Managing Director

ROYAL BANK OF CANADA, as Syndication Agent and a Lender

By:

Name:

Title:

GUARANTY BANK AND TRUST COMPANY, as a Lender

By:

Name:

Title:

U.S. BANK NATIONAL ASSOCIATION, as a Lender

By:

Name:

Title: