AMENDED AND RESTATED LOAN AGREEMENT

Amended and Restated Loan Agreement dated as of May 25, 2008 between Isramco Inc. and J.O.E.L. Jerusalem Oil Explorations Ltd

AMENDED AND RESTATED

LOAN AGREEMENT

$48,900,000

Dated as of

May 25, 2008

by and between

ISRAMCO, INC.

A Delaware corporation,

as the “Borrower”,

and

J.O.E.L. JERUSALEM OIL EXPLORATIONS, LTD.

As the “Lender”

AMENDED AND RESTATED LOAN AGREEMENT

WITNESSETH:

ARTICLE I  

CERTAIN DEFINITIONS

1.1   Business Day shall mean a day other than a Saturday, Sunday or a day upon which banks in the State of Texas are closed to business generally; provided that when used in connection with a Libor Loan, the term shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.

1.2   Default Rate shall mean the Stated Rate plus 12 percentage points (12%) per annum.

1.3   Effective Date shall mean May 25, 2008.

1.4   Event of Default shall mean any of the events specified in Section 7.1 of this Amended and Restated Agreement, and Default shall mean any event, which together with any lapse of time or giving of any notice, or both, would constitute an Event of Default.

1.5   Governmental Authority shall include the country, the state, county, city and political subdivisions in which any Person or such Person’s property is located or which exercises valid jurisdiction over any such Person or such Person’s property, and any Tribunal of any of them, including monetary authorities, which exercises valid jurisdiction over any such Person or such Person’s property.  Unless otherwise specified, all references to Governmental Authority herein shall mean a Governmental Authority having jurisdiction over, where applicable, Borrower, any of its Subsidiaries, any of Borrower’s properties or the Lender.

1.6   Governmental Requirement shall mean any Law, or other directive or requirement (whether or not having the force of law), including, without limitation, environmental laws, energy regulations and occupational, safety and health standards or controls, of any Governmental Authority.

1.7   Indebtedness shall mean any and all: (i) indebtedness, obligations and liabilities of the Borrower to the Lender  incurred or which may be incurred hereafter pursuant to the terms of this Amended and Restated Agreement or any of the other Loan Documents, and any extensions, renewals, substitutions, amendments and increases in amount thereof, including such amounts as may be evidenced by the Note and all lawful interest thereon and other charges, and all reasonable costs and expenses incurred by the Lender in connection with the preparation, filing and recording of the Loan Documents, including attorneys fees (ii) all reasonable costs and expenses, including attorneys’ fees, paid or incurred by the Lender in enforcing or attempting to enforce collection of any Indebtedness and in enforcing or realizing upon or attempting to enforce or realize upon any collateral or security for any Indebtedness and in protecting and preserving the Lender’s interest in the Indebtedness or any collateral or security for any Indebtedness in any bankruptcy or reorganization proceeding, including interest on all sums so expended by the Lender accruing from the date upon which such expenditures are made until paid, at an annual rate equal to the Default Rate; and (iii) sums expended by the Lender in curing any Event of Default or Default of the Borrower under the terms of this Amended and Restated Agreement, the other Loan Documents or any other security agreement or other writing evidencing or securing the payment of the Indebtedness described herein, including the Note.

1.8   Law(s) shall mean all statutes, laws, ordinances, regulations, orders, rules, codes, permits, franchises, licenses, certificates, writs, injunctions, or decrees of the United States, any state or commonwealth, any municipality, any foreign country, any territory or possession, or any Tribunal.

1.9   Libor shall mean the rate per annum of the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of the Interest Period for a term of 1 (one) month  or for a term comparable to the Interest Period, at Lender discretion.

1.10   Loan shall mean the funds owing to the Borrower by the Lender pursuant to the Prior Loan Agreements.

1.11   Loan Documents means, on any date, this Amended and Restated Agreement, the Note and all other agreements relating to this Amended and Restated Agreement entered into from time to time between Borrower and the Lender and all other documents and certificates executed and delivered to the Lender by the Borrower in connection with any of the foregoing, as from time to time amended, supplemented, amended and restated, or otherwise modified and in effect on such date.

1.12   Material Adverse Effect shall mean any material and adverse effect on (i) the assets, liabilities, financial condition, business, operations, prospects or affairs of the Borrower and its Subsidiaries taken as a whole; or (ii) the ability of the Borrower and its Subsidiaries, taken as a whole, to carry out their business on and after the Effective Date or as proposed as of the Effective Date to be conducted or meet its obligations under the Loan Documents on a timely basis.

1.13   Maturity Date shall mean, unless the Note is sooner accelerated pursuant to this Amended and Restated Agreement, June 30, 2015.

1.14   Maximum Rate shall mean at any particular in question, the maximum rate of interest which, under applicable law, may then be charged.  If such maximum rate changes after the date hereof, the Maximum Rate shall be automatically increased or decreased, as the case may be, without notice to Borrower from time to time as the effective date of each change in such maximum rate period.

1.15   Note shall mean the Note as described and defined in Article II of this Amended and Restated Agreement, together with each and every extension, renewal, modification, replacement, substitution and change in form thereof which may be from time to time and for any term or terms effected.

1.16   Person shall mean and include an individual, a partnership, a limited partnership, a limited liability company, a joint venture, a corporation, a trust, an unincorporated organization, and a government or any department, agency or political subdivision thereof.

1.17   Prior Loan Agreements means the First Loan Agreement, the Second Loan Agreement and the Third Loan Agreement.

1.18   Responsible Officer shall mean the chief executive officer, chief operating officer, chief financial officer, president or managing director of the Borrower.

1.19   Subsidiary shall mean (i) any corporation, at least 50% of the total combined voting power of all classes of Voting Stock of which shall, at the time as of which any determination is being made, be owned by the Borrower either directly or through Subsidiaries; and (ii) any partnership, joint venture or similar entity if at least a 50% interest in the profits or capital thereof is owned by the Borrower, either directly or through Subsidiaries.

1.20   Stated Rate shall mean a rate per annum equal to LIBOR plus 6.00%; provided, however, that if the Stated Rate ever exceeds the Maximum Rate, the Stated Rate shall then and thereafter be fixed at a rate per annum equal to the Maximum Rate then and from time to time thereafter in effect until the total amount of interest accrued at the Stated Rate on the unpaid balance of this Note equals the total amount of interest which would have accrued at the Maximum Rate from time to time in effect.

1.21   Taxes shall mean all taxes, assessments, fees, or other charges or levies from time to time or at any time imposed by any Laws or by any Tribunal as hereafter defined.

1.22   Tribunal shall mean any municipal, state, commonwealth, Federal, foreign, territorial or other sovereign, governmental entity, governmental department, court, commission, board, bureau, agency or instrumentality.

1.23   Other Definitional Provisions. References to Sections, subsections, Exhibits and Schedules shall be to Sections, subsections, Exhibits and Schedules, respectively, of this Amended and Restated Agreement unless otherwise specifically provided.  Any of the terms defined in Article I may, unless the content otherwise requires, be used in the singular or the plural depending on the reference.  In this Amended and Restated Agreement, words importing any gender include the other genders; the words including, includes and include shall be deemed to be followed by the words without limitation; references to agreements and other contractual instruments shall be deemed to include subsequent amendments, assignments, and other modifications thereto, but only to the extent such amendments, assignments and other modifications are not prohibited by the terms of this Amended and Restated Agreement or any other Loan Document; references to Persons include their respective permitted successors and assigns or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons; and all references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations.

ARTICLE II

LOAN

2.1   Loan.  Pursuant to the Prior Loan Agreements the Borrower has borrowed and the Lender has loaned sums to the Borrower having a current total balance outstanding of Forty Eight Million Nine Hundred Thousand U.S. Dollars ($48,900,000.00) (the “Loan”).  The receipt of the Loan is acknowledged by Borrower. The unpaid principal balance and all accrued interest of the Loan are due and payable on the Maturity Date.

2.2    Prior Loan Agreements Void.  Upon execution of this Amended and Restated Agreement all Prior Loan Agreements, together with all documents related thereto (including but not limited to loan documents, notes, etc.) shall be cancelled, terminated and void in their entirety as of the Effective Date.  As of the Effective Date, the terms and conditions of this Amended and Restated Agreement will govern the rights and obligations of the parties.

2.3    Note.  The Borrower shall execute and deliver to the order of the Lender a promissory note in the original principal amount the Loan, the form of which is annexed hereto as Exhibit A and hereby made a part hereof (hereinafter referred to as the “Note”).  The Note shall be dated as of the Effective Date, and shall provide for payment of principal and accrued interest on the Maturity Date.  The Note shall bear interest on the unpaid balance of principal from time to time outstanding and on any past due interest at an annual interest rate determined pursuant to Section 2.6 hereof, but in no event at a rate greater than permitted by applicable Law.  All payments received shall be applied first to accrued interest and then to the outstanding principal amount owing on the Note.  All payments and prepayments shall be made in lawful money of the United States of America.  After maturity (whether by acceleration or otherwise) the Note shall bear interest at the Default Rate, payable on demand.  Interest shall be calculated on the basis of a year of 365 days, but assessed for the actual number of days elapsed before full payment.

2.4   Proceeds of Loan.  It is agreed and acknowledged that proceeds of the Prior Loan Agreements were used only for the purposes of (i) Borrower’s equity contribution to Isramco Energy, LLC and Isramco Resources, LLC, wholly owned subsidiaries of Borrower; (ii) working capital and general corporate purposes; and (iii) refinancing of existing debt.

2.5   Responsible Officer.  A Responsible Officer may, from time to time, notify the Lender in writing of a change in the Responsible Officer.  From and after the Lender’s receipt of such written notice, the Lender may rely on any such request or certificate purportedly signed by any individual who has been so designated as a Responsible Officer pursuant to this Amended and Restated Agreement unless or until it receives written notice from a Responsible Officer of the deletion of a Responsible Officer.

2.6   Interest Rates.

2.7   Prepayments.  Borrower shall have the right at its option, from time to time, to prepay the Loan in whole or part without premium or penalty at any time.  

2.8   Installment Payments.  Principal and accrued interest shall be payable in four (4) equal annual installments on June 30, 2012 through and including June 30, 2015.

2.9   Payments From Borrower.  All payments shall be payable to the Lender on the day when due without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, and an action therefor shall immediately accrue if not timely paid within applicable grace or curative periods herein specified.  Such payments shall be made to the Lender at such location as Lender may from time to time designate in writing in U.S. Dollars in funds immediately available at such office without set off, counterclaim or other deduction of any nature.  To the extent permitted by law, after there shall have become due (by acceleration or otherwise), interest or any other amounts due from the Borrower hereunder or under the Note (excluding overdue principal, which shall bear interest as described in Section 2.6(b) hereof), such amounts shall bear interest for each day until paid (before and after judgment), payable on demand, at the Default Rate.

2.10   Full Payment.  All outstanding principal and accrued but unpaid interest on the Note shall be due and payable at the Maturity Date.

ARTICLE III

CONDITIONS PRECEDENT TO LOANS

3.1   Conditions Precedent to Funding.  The effectiveness of this Amended and Restated Agreement is subject to the satisfaction of all of the following conditions on or prior to the Effective Date (in addition to the other terms and conditions set forth herein):

(a)   Representations and Warranties.  The covenants, representations and warranties set forth herein and in the other Loan Documents shall be true and correct in all material respects on and as of the Effective Date, with the same effect as though made on and as of the Effective Date.

(b)   Note. The Borrower shall have executed and delivered to the Lender the Note payable to the order of the Lender.

(c)    Other Information.  The Lender shall have received such other information, documents and assurances as shall be reasonably requested by the Lender.

ARTICLE IV

AFFIRMATIVE COVENANTS

The Borrower covenants and agrees with the Lender that from the date hereof and so long as this Amended and Restated Agreement is in effect (by extension, amendment or otherwise) and until payment in full of all Indebtedness and the performance of all other obligations of the Borrower under this Amended and Restated Agreement, unless the Lender shall otherwise consent in writing:

4.1   Payment of Taxes and Claims .  The Borrower will pay and discharge or cause to be paid and discharged all Taxes imposed upon the income or profits of the Borrower or upon the property, real, personal or mixed, or upon any part thereof, belonging to Borrower before the same shall be in default, and all lawful claims for labor, rentals, materials and supplies which, if unpaid, might become a Lien upon its property or any part thereof; provided, however, that the Borrower shall not be required to pay and discharge or cause to be paid or discharged any such Tax, assessment or cl