Document:

exv10w1

 

Exhibit 10.1

EXECUTION COPY

 

PROJECT NUMBER 25485

Loan and Guarantee Agreement

among

TOREADOR RESOURCES CORPORATION

as Guarantor

TOREADOR TURKEY LTD.

as Borrower and Guarantor

TOREADOR ROMANIA LTD.

as Borrower and Guarantor

MADISON OIL FRANCE SAS

as Borrower and Guarantor

TOREADOR ENERGY FRANCE S.C.S

as Borrower and Guarantor

TOREADOR INTERNATIONAL HOLDING L.L.C.

as Guarantor

and

INTERNATIONAL FINANCE CORPORATION

Dated December 28, 2006

 

 

- i - 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	Article/	 	 	 	 
	Section	 	Item	 	Page No.
	 
	 	 	 	 	 	 
	ARTICLE I	 	 	2	 
	 
	 	 	 	 	 	 
	Definitions and Interpretation	 	 	2	 
	 
	 	 	 	 	 	 
	Section 1.01.
	 	Definitions	 	 	2	 
	Section 1.02.
	 	Financial Calculations	 	 	32	 
	Section 1.03.
	 	Interpretation	 	 	32	 
	Section 1.04.
	 	Business Day Adjustment	 	 	33	 
	 
	 	 	 	 	 	 
	ARTICLE II	 	 	33	 
	 
	 	 	 	 	 	 
	The Facility	 	 	33	 
	 
	 	 	 	 	 	 
	Section 2.01.
	 	The Facility	 	 	33	 
	Section 2.02.
	 	Facility Procedure and Rollover	 	 	34	 
	Section 2.03.
	 	Interest	 	 	35	 
	Section 2.04.
	 	Change in Interest Period	 	 	37	 
	Section 2.05.
	 	Default Rate Interest	 	 	37	 
	Section 2.06.
	 	Repayment	 	 	38	 
	Section 2.07.
	 	Prepayment and Mandatory Prepayment	 	 	38	 
	Section 2.08.
	 	Fees	 	 	41	 
	Section 2.09.
	 	Currency and Place of Payments	 	 	42	 
	Section 2.10.
	 	Allocation of Partial Payments	 	 	43	 
	Section 2.11.
	 	Increased Costs	 	 	43	 
	Section 2.12.
	 	Unwinding Costs	 	 	43	 
	Section 2.13.
	 	Suspension or Cancellation by IFC	 	 	44	 
	Section 2.14.
	 	Cancellation by the Borrowers	 	 	45	 
	Section 2.15.
	 	Taxes	 	 	45	 
	Section 2.16.
	 	Expenses	 	 	45	 
	Section 2.17.
	 	Limitation of Liability	 	 	47	 
	 
	 	 	 	 	 	 
	ARTICLE III	 	 	47	 
	 
	 	 	 	 	 	 
	Guarantee	 	 	47	 
	 
	 	 	 	 	 	 
	Section 3.01.
	 	Guarantee	 	 	47	 
	Section 3.02.
	 	Indemnity	 	 	48	 
	Section 3.03.
	 	Continuing Guarantee	 	 	48	 
	Section 3.04.
	 	No Set-off	 	 	48	 
	Section 3.05.
	 	Taxes	 	 	48	 
	Section 3.06.
	 	Currency and Place of Payment	 	 	49	 

 

- ii - 

	 	 	 	 	 	 	 
	Article/	 	 	 	 
	Section	 	Item	 	Page No.
	Section 3.07.
	 	Certificate Conclusive	 	 	50	 
	Section 3.08.
	 	Allocation	 	 	50	 
	Section 3.09.
	 	Waivers and Defenses	 	 	50	 
	Section 3.10.
	 	Immediate Recourse	 	 	51	 
	Section 3.11.
	 	Non-Competition	 	 	51	 
	Section 3.12.
	 	Bankruptcy or Liquidation of Company	 	 	52	 
	Section 3.13.
	 	Appropriation of Monies	 	 	52	 
	Section 3.14.
	 	Reinstatement	 	 	52	 
	Section 3.15.
	 	Additional Security	 	 	53	 
	Section 3.16.
	 	Limitation of Liability	 	 	53	 
	 
	 	 	 	 	 	 
	ARTICLE IV	 	 	53	 
	 
	 	 	 	 	 	 
	Representations and Warranties	 	 	53	 
	 
	 	 	 	 	 	 
	Section 4.01.
	 	Representations and Warranties of Each Obligor	 	 	53	 
	Section 4.02.
	 	Representations and Warranties of Madison Oil and Toreador France	 	 	57	 
	Section 4.03.
	 	IFC Reliance	 	 	58	 
	 
	ARTICLE V	 	 	58	 
	 
	 	 	 	 	 	 
	Conditions of Disbursement	 	 	58	 
	 
	 	 	 	 	 	 
	Section 5.01.
	 	Conditions of First Disbursement	 	 	58	 
	Section 5.02.
	 	Conditions of All Disbursements	 	 	60	 
	Section 5.03.
	 	Additional Conditions of the first A Loan	 	 	63	 
	Section 5.04.
	 	Certification	 	 	64	 
	Section 5.05
	 	Conditions for IFC Benefit	 	 	64	 
	 
	 	 	 	 	 	 
	ARTICLE VI	 	 	64	 
	 
	 	 	 	 	 	 
	Particular Covenants	 	 	64	 
	 
	 	 	 	 	 	 
	Section 6.01.
	 	Affirmative Covenants	 	 	64	 
	Section 6.02.
	 	Negative Covenants	 	 	70	 
	Section 6.03.
	 	Reporting Requirements	 	 	77	 
	Section 6.04.
	 	Insurance	 	 	80	 
	 
	ARTICLE VII	 	 	83	 
	 
	 	 	 	 	 	 
	Events of Default	 	 	83	 
	 
	 	 	 	 	 	 
	Section 7.01.
	 	Acceleration after Default	 	 	83	 

 

- iii - 

	 	 	 	 	 	 	 
	Article/	 	 	 	 
	Section	 	Item	 	Page No.
	Section 7.02.
	 	Events of Default	 	 	84	 
	Section 7.03.
	 	Bankruptcy	 	 	87	 
	 
	 	 	 	 	 	 
	ARTICLE VIII	 	 	87	 
	 
	 	 	 	 	 	 
	Miscellaneous	 	 	87	 
	 
	 	 	 	 	 	 
	Section 8.01.
	 	Saving of Rights	 	 	87	 
	Section 8.02.
	 	Notices	 	 	88	 
	Section 8.03.
	 	English Language	 	 	89	 
	Section 8.04.
	 	Term of Agreement	 	 	89	 
	Section 8.05.
	 	Applicable Law and Jurisdiction	 	 	90	 
	Section 8.06.
	 	Disclosure of Information	 	 	91	 
	Section 8.07.
	 	Indemnification	 	 	92	 
	Section 8.08.
	 	Successors and Assignees	 	 	92	 
	Section 8.09.
	 	Amendments, Waivers and Consents	 	 	93	 
	Section 8.10.
	 	Counterparts	 	 	93	 

 

- iv - 

	 	 	 	 	 	 	 
	Article/	 	 	 	 
	Section	 	Item	 	Page No.
	ANNEX A	 	 	96	 
	 
	 	 	 	 	 	 
	PROJECT COST AND FINANCIAL PLAN	 	 	96	 
	 
	 	 	 	 	 	 
	ANNEX B	 	 	97	 
	 
	 	 	 	 	 	 
	KEY AUTHORIZATIONS	 	 	97	 
	 
	 	 	 	 	 	 
	ANNEX C	 	 	99	 
	 
	 	 	 	 	 	 
	INSURANCE REQUIREMENTS	 	 	99	 
	 
	 	 	 	 	 	 
	ANNEX D	 	 	102	 
	 
	 	 	 	 	 	 
	PROHIBITED ACTIVITIES	 	 	102	 
	 
	 	 	 	 	 	 
	SCHEDULE 1	 	 	104	 
	 
	 	 	 	 	 	 
	FORM OF CERTIFICATE OF INCUMBENCY AND AUTHORITY	 	 	104	 
	 
	 	 	 	 	 	 
	SCHEDULE 2	 	 	106	 
	 
	 	 	 	 	 	 
	FORM OF REQUEST FOR LOANS	 	 	106	 
	 
	 	 	 	 	 	 
	SCHEDULE 3	 	 	109	 
	 
	 	 	 	 	 	 
	FORM OF LOAN RECEIPT	 	 	109	 
	 
	 	 	 	 	 	 
	SCHEDULE 4	 	 	110	 
	 
	 	 	 	 	 	 
	FORM OF SERVICE OF PROCESS LETTER	 	 	110	 
	 
	 	 	 	 	 	 
	SCHEDULE 5	 	 	112	 
	 
	 	 	 	 	 	 
	IFC BASE CASE ASSUMPTIONS	 	 	112	 
	 
	 	 	 	 	 	 
	SCHEDULE 6	 	 	115	 
	 
	 	 	 	 	 	 
	FORM OF LETTER TO COMPANY’S AUDITORS	 	 	115	 
	 
	 	 	 	 	 	 
	SCHEDULE 7	 	 	117	 
	 
	 	 	 	 	 	 
	INFORMATION TO BE INCLUDED IN QUARTERLY AND ANNUAL REVIEW OF OPERATIONS	 	 	117	 
	 
	 	 	 	 	 	 
	SCHEDULE 8	 	 	123	 
	 
	 	 	 	 	 	 
	GROUP OWNERSHIP	 	 	123	 

 

 

LOAN AND GUARANTEE AGREEMENT

LOAN AND GUARANTEE AGREEMENT (the “Agreement”) dated December 28, 2006, between:

	(A)	 	TOREADOR RESOURCES CORPORATION, a corporation organized and existing under the laws of
Delaware, as a guarantor (the “Company”);
	 
	(B)	 	TOREADOR TURKEY LTD., a company organized and existing under the laws of the Cayman Islands,
as a borrower, and as a guarantor (“Toreador Turkey”);
	 
	(C)	 	TOREADOR ROMANIA LTD., a company organized and existing under the laws of the Cayman Islands,
as a borrower, and as a guarantor (“Toreador Romania”);
	 
	(D)	 	MADISON OIL FRANCE SAS, a sociétés par actions simplifies, organized and existing under the
laws of France, as a borrower and a guarantor (“Madison Oil”);
	 
	(E)	 	TOREADOR ENERGY FRANCE S.C.S, a sociétés en commandite simple, organized and existing under
the laws of France, as a borrower and a guarantor (“Toreador France”);
	 
	(F)	 	TOREADOR INTERNATIONAL HOLDING L.L.C., a limited liability company organized and existing
under the laws of Hungary, as a guarantor (“Toreador International”); and
	 
	(G)	 	INTERNATIONAL FINANCE CORPORATION, an international organization established by Articles of
Agreement among its member countries including the Cayman Islands (“IFC”),

the parties listed as (B), (C), (D) and (E) being each a “Borrower” and the parties listed as (A)
to (F) being each a “Guarantor” (in the case of the parties listed as (B), (C), (D) and (E), such
parties being a Guarantor with respect to the obligations of the other Borrowers) and the Borrowers
and the Guarantors together being the “Obligors”.

 

- 2 -

ARTICLE I

Definitions and Interpretation

     Section 1.01. Definitions. Wherever used in this Agreement, the following terms
have the meanings opposite them:

	 	 	 	 	 	 	 
	“A Loan”	 	the principal amount of each borrowing under the
A Loan Facility or, as the context requires, the
principal amount outstanding of that borrowing;
provided that for avoidance of doubt, and in
accordance with Section 2.02(c) hereof, on each
Interest Payment Date all A Loans (including
Rollover Loans) outstanding prior to such
Interest Payment Date shall (to the extent not
repaid and subject to the fulfillment of the
conditions for the making of each Rollover Loan
set forth in Section 5.02 (Conditions of All
Disbursements) and Section 5.04
(Certification)) be rolled over into a single A
Loan on such Interest Payment Date;
	 
	 	 	 	 	 	 
	“A Loan Facility”	 	the facility specified in Section 2.01(a)(i)
(Loan Procedure and Rollover) or, as the context
requires, its principal amount from time to time
outstanding thereunder;
	 
	 	 	 	 	 	 
	“A Loan Interest Rate”	 	for any Interest Period, the rate at which
interest is payable on each A Loan during that
Interest Period, determined in accordance with
Section 2.03 (Interest) and, if applicable,
Section 2.04 (Change in Interest Period);
	 
	 	 	 	 	 	 
	“Accounting Standards”	 	United States Generally Accepted Accounting
Principles promulgated by the Financial
Accounting Standards Board (“FASB”), together
with pronouncements thereon from time to time by
FASB and applied on a consistent basis;
	 
	 	 	 	 	 	 
	“Accounts Agreements”	 	upon execution, the French Accounts Agreement,
the Turkish Accounts Agreement and the Romanian
Accounts Agreement;

 

- 3 -

	 	 	 	 	 	 	 
	“Additional Compensation”	 	as of the date of any calculation, an amount
equal to:
	 
	 

	 	(i)
	 	(A)
	 	US$10,000,000
(except in respect of any calculation made in respect of
the payments due after December 15, 2014, in which case
such number shall be US$5,000,000); divided by
	 
	 	 	 	 	 	 
	 

	 	 	 	(B)
	 	the
product of two (2) and Adjusted Tangible Net Worth
in respect of the immediately preceding Financial
Year;
	 
	 	 	 	 	 	 
	 	 	multiplied by
	 
	 	 	 	 	 	 
	 	 	(ii)	 	EBITDAX for the
Company in respect of the immediately preceding Financial
Year;
	 
	 	 	 	 	 	 
	“Adjusted Financial Debt”	 	Financial Debt on a Consolidated Basis,
excluding any Financial Debt incurred in respect
of the Existing Convertible Senior Notes;
	 
	 	 	 	 	 	 
	“Adjusted Tangible Net
Worth”	 	as of the date of any calculation:
	 
	 	 	 	 	 	 
	 	 	(i)	 	Tangible Net Worth of
the Company as at December 31, 2005 as reflected in its
audited annual financial statements for Financial Year
2005; plus
	 
	 	 	 	 	 	 
	 	 	(ii)	 	the positive or
negative amount of net income in any subsequent Financial
Year as reflected in the annual audited financial
statements of the Company for that Financial Year; provided
that for the purpose of this definition, any income derived
from any revaluation of assets, disposal of assets or other
extraordinary gains shall not be counted in net income;
less

 

- 4 -

	 	 	 	 	 	 	 
	 	 	(iii)	 	the amount of any
dividend or distribution made by the Company in the
Financial Year referred to in (ii) above,
	 
	 	 	 	 	 	 
	 	 	as such calculation is determined by the Auditors and agreed by
IFC;
	 
	 	 	 	 	 	 
	“Affiliate”	 	with respect to any Person, 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 or policies of a Person, directly or
indirectly, whether through the ownership of shares or
other securities, by contract or otherwise, provided
that the direct or indirect ownership of fifty one per
cent (51%) or more of the voting share capital of a
Person shall be deemed to constitute control of that
Person, and “controlling” and “controlled” have
corresponding meanings);
	 
	 	 	 	 	 	 
	“Annual Monitoring
Report”	 	the annual monitoring report setting out the specific
social, environmental and developmental impact
information to be provided by the Company in respect
of the Project, which form shall be in form and
substance satisfactory to IFC, and as such form may be
amended or supplemented from time to time with IFC’s
consent;
	 
	 	 	 	 	 	 
	“Applicable Margin”
	 	 	 	 	 	 
	 	 	(i)	 	with respect to the A
Loan, two percent (2%) per annum; and
	 
	 	 	 	 	 	 
	 	 	(ii)	 	with respect to the C Loan:
	 
	 	 	 	 	 	 
	 

	 	 	 	(x)
	 	one point five percent (1.5%) per annum, until
the date of disbursement of the first A Loan;
and

 

- 5 -

	 	 	 	 	 	 	 
	 

	 	 	 	(y)
	 	zero point five percent (0.5%) per annum, on and
after the date of disbursement of the first A
Loan;
	 
	 	 	 	 	 	 
	“Auditors”	 	Grant Thornton or such other firm that the Company
appoints from time to time as its auditors pursuant to
Section 6.01(e) (Affirmative Covenants);
	 
	 	 	 	 	 	 
	“Authority”	 	any national, supranational, regional or local
government or governmental, administrative, fiscal,
judicial, or government-owned body, department,
commission, authority, tribunal, agency or entity, or
central bank (or any Person, whether or not government
owned and howsoever constituted or called, that
exercises the functions of a central bank);
	 
	 	 	 	 	 	 
	“Authorization”	 	any consent, registration, filing, agreement,
notarization, certificate, license, approval, permit,
authority or exemption from, by or with any Authority,
whether given by express action or deemed given by
failure to act within any specified time period and all
corporate, creditors’ and shareholders’ approvals or
consents;
	 
	 	 	 	 	 	 
	“Authorized
Representative”	 	in respect of any Obligor, any natural person who is
duly authorized by the relevant Obligor to act on its
behalf for the purposes specified in, and, in respect
of the Company and each Borrower, whose name and a
specimen of whose signature appear on, the Certificate
of Incumbency and Authority most recently delivered by
such Person to IFC;
	 
	 	 	 	 	 	 
	“Available Amount”	 	the lesser of:
	 
	 	 	 	 	 	 
	 

	 	(i)
	 	(A)
	 	the C Loan in an amount not to exceed $10,000,000, plus
	 
	 	 	 	 	 	 
	 

	 	 	 	(B)
	 	the Maximum Facility Amount, as cancelled in accordance with
Section 2.13

 

\

- 6 -

	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(Suspension or Cancellation by
IFC) or Section 2.14 (Suspension or Cancellation by
the Borrowers), or as reduced in accordance with
Section 2.06(b) (Repayment) from time to time;
and
	 
	 	 	 	 	 	 	 	 
	 	 	(ii)
	 	the Borrowing Base Amount,
	 
	 	 	 	 	 	 	 	 
	 	 	minus:
	 
	 	 	 	 	 	 	 	 
	 	 	 	(1	)	 	the amount of any
outstanding Loans under the Facility; and
	 
	 	 	 	 	 	 	 	 
	 	 	 	(2	)	 	in relation to any
proposed Loan (other than a Rollover Loan), the amount of
any Loans that have been requested by the Borrowers and
are due to be made under the Facility on or before the date
of the proposed Loan;
	 
	 	 	 	 	 	 	 	 
	“Availability Period”	 	 	(i	)	 	with respect to the A Loan Facility, the period from the date of this Agreement to June 30, 2011; and
	 
	 	 	 	 	 	 	 	 
	 	 	(ii)
	 	with respect to the C
Loan Facility, the period from the date of this Agreement
to June 30, 2007;
	 
	 	 	 	 	 	 	 	 
	“Borrowing Base Amount”	 	for the relevant Calculation Period:
	 
	 	 	 	 	 	 	 	 
	 	 	 	(i	)	 	the Loan-Life NPV; divided by
	 
	 	 	 	 	 	 	 	 
	 

	 	(ii)
	 	(A)
	 	1.2 for Financial Years 2006 and 2007;
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	(B)
	 	1.3 for Financial Year 2008; and
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	(C)
	 	1.4 for Financial Year 2009 and thereafter;
	 
	 	 	 	 	 	 	 	 
	“Borrowing Base Assets”	 	all oil and gas assets (including concessions)
with respect to which the Company or any of the
other

 

- 7 -

	 	 	 	 	 	 	 
	 	 	Obligors has from time to time any Proved
Reserves determined in accordance with the
Reserves Criteria, and, includes for avoidance of
doubt, any assets in France, Hungary, Turkey,
Romania and the United States of America, which
are, more fully described in the most current
Reserves Certification;
	 
	 	 	 	 	 	 
	“Business Day”	 	a day when banks are open for business in New
York, New York or, solely for the purpose of
determining the applicable Interest Rate other
than pursuant to Section 2.03 (d) (ii) (Interest),
London, England;
	 
	 	 	 	 	 	 
	“C Loan”	 	the principal amount of the C Loan Facility or, as
the context requires, the principal amount
outstanding of that facility;
	 
	 	 	 	 	 	 
	“C Loan Facility”	 	the facility specified in Section 2.01(a)(ii) (The
Facility) or, as the context requires, its
principal amount from time to time outstanding;
	 
	 	 	 	 	 	 
	“C Loan Interest Rate”	 	for any Interest Period, the rate at which
interest is payable on the C Loan during that
Interest Period, determined in accordance with
Section 2.03 (Interest) and, if applicable,
Section 2.04 (Change in Interest Period);
	 
	 	 	 	 	 	 
	“Calculation Period”	 	for any calculation, a period of four (4)
consecutive quarters most recently ended prior to
the event requiring the calculation for which
financial statements have been or should have been
delivered to IFC pursuant to Section 6.03
(Reporting Requirements);
	 
	 	 	 	 	 	 
	“CAO”	 	Compliance Advisor Ombudsman, the independent
accountability mechanism for IFC that impartially
responds to environmental and social concerns of
affected communities and aims to enhance outcomes;

 

- 8 -

	 	 	 	 	 	 	 
	“CAO’s Role”	 	(i)	 	to respond to complaints
by persons who have been
or are likely to be
directly affected by the
social or environmental
impacts of IFC projects;
and
	 
	 	 	 	 	 	 
	 	 	(ii)	 	to oversee audits of
IFC’s social and environmental performance, particularly
in relation to sensitive projects, and to ensure
compliance with IFC’s social and environmental policies,
guidelines, procedures and systems;
	 
	 	 	 	 	 	 
	“Certificate of Incumbency
and Authority”	 	a certificate provided to IFC by each of the
Company and the Borrowers in the form of
Schedule 1;
	 
	 	 	 	 	 	 
	“Charter”	 	with respect to any Obligor, the memorandum and
articles of association, statutes, or other
constitutive document of such Obligor;
	 
	 	 	 	 	 	 
	“Change of Control”	 	any of the following circumstances:
	 
	 	 	 	 	 	 
	 	 	(i)	 	any Obligor sells,
transfers, pledges or otherwise disposes of any shares
held by it in another Obligor as of the date hereof, other
than a transfer from such Obligor to another Obligor; or
	 
	 	 	 	 	 	 
	 	 	(ii)	 	Control of any
Obligor is otherwise transferred without IFC’s prior
written consent, other than a transfer of Control to
another Obligor; or
	 
	 	 	 	 	 	 
	 	 	(iii)	 	any of the Obligors
ceases to be the Operator of the respective Borrowing Base
Assets of which it is the Operator as of the date hereof
(except (A) in Turkey where TPAO may take operatorship
over certain of the concessions listed in the most recent
Reserve
Certification, and (B) for a sale or

 

- 9 -

	 	 	 	 	 	 	 
	 	 	 	 	transfer
permitted under Section 6.02 (o) (Negative
Covenants)); or
	 
	 	 	 	 	 	 
	 	 	(iv)	 	the board of
directors at any date of the Company shall cease to
consist of a majority of directors who have continued in
such capacity for at least one (1) year as of such date;
	 
	 	 	 	 	 	 
	“Consolidated” or
“Consolidated Basis”	 	

(with respect to any financial statements to be
provided, or any financial calculation to be
made, under or for the purposes of this Agreement
and any other Transaction Document) the method
referred to in Section 1.02 (c) (Financial
Calculations); and the entities whose accounts
are to be consolidated are the Company and all of
its Subsidiaries or other entities which are
required to be consolidated in accordance with
the Accounting Standards;
	 
	 	 	 	 	 	 
	“Contingent Facility
Amount”
	 	fifteen million Dollars ($15,000,000);

	 
	“Contract Assignment(s)”	 	
the instrument or instruments pursuant to which
the relevant Obligors grant to IFC a first
ranking security interest in all of their
respective rights, interests and benefits under
certain gas sales agreements, marketing
agreements and oil sales agreement identified
therein, and all warranties, guarantees and
undertakings issued thereunder, together with the
notices and acknowledgements and consents in the
forms attached thereto, which instrument shall be
in form and substance satisfactory to IFC;
	 
	 	 	 	 	 	 
	“Control”	 	the power to direct the management or policies of
a Person, directly or indirectly, whether through
the ownership of shares or other securities, by
contract or otherwise, provided that the direct
or indirect ownership of fifty-one per cent (51%)
or more of
the voting share capital of a Person is deemed to

 

- 10 -

	 	 	 	 	 	 	 
	 	 	constitute
control of that Person, and “Controlling” and “Controlled” have
corresponding meanings;
	 
	 	 	 	 	 	 
	“Corrective Action Plan”	 	the plan dated November 3, 2006, a copy of which
is attached hereto as an annex to ESRS setting
out specific social and environmental measures to
be undertaken by the Company and certain of the
Obligors, to enable the Project to be in
compliance with the Performance Standards, as
such action plan may be amended or supplemented
from time to time with IFC’s consent;
	 
	 	 	 	 	 	 
	“Derivative Transaction”	 	any swap agreement, cap agreement, collar
agreement, futures contract, forward contract or
similar arrangement with respect to interest
rates, currencies or commodity prices;
	 
	 	 	 	 	 	 
	“Discount Rate”	 	ten per cent (10%) per annum;
	 
	 	 	 	 	 	 
	“Dollars” and “$”	 	the lawful currency of the United States of America;
	 
	 	 	 	 	 	 
	“EBITDA”	 	in respect of any period, earnings before
interest, taxes, depreciation and amortization;
	 
	 	 	 	 	 	 
	“EBITDAX”	 	in respect of any period, earnings before
interest, taxes, depreciation, amortization, and
expensed exploration expenditures (and for the
avoidance of doubt, EBITDAX excludes any
write-off of exploration costs);
	 
	 	 	 	 	 	 
	“Environmental and Social
	 	 
	
Manager”	 	a technically qualified Person, satisfactory to
IFC, appointed by the Obligors pursuant to
Section 6.01(q) (Affirmative Covenants);
	 
	 	 	 	 	 	 
	“Environmental, Health
and Safety	 	 
	 Guidelines”	 	IFC Guidelines for Oil and Gas Developments
(Offshore) (December 2000), IFC Occupational
Health and Safety Guidelines (June 2003), and
World Bank Guidelines for Oil and Gas
Development (Onshore) (July 1998) copies of

 

- 11 -

	 	 	 	 	 	 	 
	 	 	which have been
delivered to, and receipt of which have been acknowledged by,
the Company by letter dated November 3, 2006, which guidelines
are incorporated herein by reference;
	 
	 	 	 	 	 	 
	“Event of Default”	 	any one of the events specified in Section 7.02
(Events of Default);
	 
	 	 	 	 	 	 
	“ESRS”	 	the Environmental and Social Review Summary dated
November 3, 2006 and the Corrective Action Plan
attached thereto prepared by IFC and approved by the
Obligors;
	 
	 	 	 	 	 	 
	“Existing Convertible
Senior	 	 
	Notes”	 	5% Convertible Senior Notes due October 1, 2025,
issued by Toreador Resources Corporation in an
aggregate principal amount of eighty six million and
two hundred and fifty thousand Dollars
($86,250,000);
	 
	 	 	 	 	 	 
	“Facility”	 	together, the facilities described in Section 2.01
(The Facility) comprising the A Loan Facility and
the C Loan Facility;
	 
	 	 	 	 	 	 
	“Final Maturity Date”	 	June 15, 2015;
	 
	 	 	 	 	 	 
	“Financial Debt”	 	with respect to any Person:
	 
	 	 	 	 	 	 
	 	 	(i)	 	any indebtedness of
such Person for borrowed money;
	 
	 	 	 	 	 	 
	 	 	(ii)	 	the outstanding
principal amount of any bonds, debentures, notes, loan
stock, commercial paper, acceptance credits, bills or
promissory notes drawn, accepted, endorsed or issued by
such Person;
	 
	 	 	 	 	 	 
	 	 	(iii)	 	any indebtedness of
such Person for the deferred purchase price of assets or
services (except trade accounts incurred and payable in the
ordinary course of business to trade
creditors within ninety (90) days of the date

 

- 12 -

	 	 	 	 	 	 	 
	 	 	 	 	they are
incurred and which are not more than thirty (30) days
overdue);
	 
	 	 	 	 	 	 
	 	 	(iv)	 	non-contingent
obligations of such Person to reimburse any other Person
for amounts paid by that Person under a letter of credit or
similar instrument (excluding any letter of credit or
similar instrument issued for the account of such Person
with respect to trade accounts incurred and payable in the
ordinary course of business to trade creditors within
ninety (90) days of the date they are incurred and which
are not more than thirty (30) days overdue);
	 
	 	 	 	 	 	 
	 	 	(v)	 	the amount of any
obligation of such Person in respect of any Financial
Lease;
	 
	 	 	 	 	 	 
	 	 	(vi)	 	amounts raised by such
Person under any other transaction having the financial
effect of a borrowing and which would be classified as a
borrowing under the Accounting Standards;
	 
	 	 	 	 	 	 
	 	 	(vii)	 	the amount of the
obligations of such Person under derivative transactions
entered into in connection with the protection against or
benefit from fluctuation in any rate or price (but only the
net amount owing by such Person after marking the relevant
derivative transactions to market);
	 
	 	 	 	 	 	 
	 	 	(viii)	 	 any premium payable by such Person on a mandatory
redemption or replacement of any of the foregoing items;
	 
	 	 	 	 	 	 
	 	 	(ix)	 	all indebtedness of the
types described in the foregoing items secured by a lien on
any property owned by such Person, whether or not such
indebtedness has been assumed by such Person;

 

- 13 -

	 	 	 	 	 	 	 
	 	 	(x)	 	all obligations of such
Person to pay a specified purchase price for goods and
services, whether or not delivered or accepted (i.e., take
or pay or similar obligations);
	 
	 	 	 	 	 	 
	 	 	(xi)	 	any repurchase
obligation or liability of such Person with respect to
accounts or notes receivable sold by such Person, any
liability of such Person under any sale and leaseback
transactions that do not create a liability on the balance
sheet of such Person, any obligation under a “synthetic
lease” or any obligation arising with respect to any other
transaction which is the functional equivalent of or takes
the place of borrowing but which does not constitute a
liability on the balance sheet of such Person; and
	 
	 	 	 	 	 	 
	 	 	(xii)	 	the amount of any
obligation in respect of any guarantee or indemnity for any
of the foregoing items incurred by any other Person;
	 
	 	 	 	 	 	 
	“Financial Lease”	 	any lease or hire purchase contract which would,
under the Accounting Standards, be treated as a
finance or capital lease;
	 
	 	 	 	 	 	 
	“Financial Plan”	 	the proposed sources of financing for the Project as
set out in Annex A (Project Cost and Financial
Plan);
	 
	 	 	 	 	 	 
	“Financial Year”	 	the accounting year of the Obligors commencing each
year on January 1 and ending on the following
December 31, or such other period as any Obligor,
with IFC’s consent, from time to time designates as
its accounting year;
	 
	 	 	 	 	 	 
	“Financing Documents”	 	together:
	 
	 	 	 	 	 	 
	 	 	(i)	 	this Agreement; and
	 
	 	 	 	 	 	 
	 	 	(ii)	 	the Security Documents;

 

 

- 14 -

	 	 	 	 	 
	“French
Accounts Agreement”
	 	the agreement or agreements between certain of the
Obligors, IFC and an account bank in France
acceptable to IFC providing for the establishment of
accounts in France into which all of the revenues of
Madison Oil and/or Toreador France will be
deposited, and the Reserve Account, and security
over such accounts in favour of IFC, which agreement
shall be in a form and substance satisfactory to
IFC;
	 
	 	 	 	 
	“Gas Prices”	 	in respect of any Obligor in any jurisdiction:
	 
	 	 	 	 
	 

	 	(i)
	 	if such Obligor has
entered into any Long Term Contracts, as of any date, the
lower of (A) the average of contracted price determined in
accordance with such Long Term Contracts and (B) the World
Bank Group forecast Oil Equivalent Price; and
	 
	 	 	 	 
	 

	 	(ii)
	 	if such Obligor has
not entered into any Long Term Contract, as of any date,
the lower of (A) such Obligor’s average gas sale price in
the prior four (4) quarters and (B) the World Bank
forecast Oil Equivalent Price;
	 
	 	 	 	 
	“Gas Sales Agreements”	 	together, the Romania Gas Sales Agreement and,
upon execution, the Turkish Gas Sales Agreement;
	 
	 	 	 	 
	“Guarantee”	 	the Guarantors’ guarantee of the Guaranteed
Obligations, as set forth in Article III;
	 
	 	 	 	 
	“Guaranteed Obligations”	 	all present and future Obligations of the
Borrowers;
	 
	 	 	 	 
	“Guarantors”	 	each entity identified as a Guarantor in the
introductory paragraph of this Agreement
(including the Borrowers in the capacity of
Guarantor);
	 
	 	 	 	 
	“IFC
Base Case  Assumptions” 
	 	the economic and technical assumptions and
principles used in respect of the IFC Base Case,
as

 

- 15 -

	 	 	 	 	 	 	 
	 	 	set forth in Schedule 5 and as applied in a
manner acceptable to IFC;
	 
	 	 	 	 	 	 
	“Increased Costs”	 	the amount certified in an Increased Costs
Certificate to be the net incremental costs of,
or reduction in return to, IFC in connection with
the making or maintaining of the Loans that
result from:
	 
	 	 	 	 	 	 
	 	 	(i)	 	any change in any
applicable law or regulation or directive (whether or not
having the force of law) or in its interpretation or
application by any Authority charged with its
administration; or
	 
	 	 	 	 	 	 
	 	 	(ii)	 	compliance with any
request from, or requirement of, any central bank or other
monetary or other Authority;
	 
	 	 	 	 	 	 
	 	 	which, in either case, after the date of this Agreement:
	 
	 	 	 	 	 	 
	 

	 	 	 	(A)
	 	imposes, modifies or makes applicable any
reserve, special deposit or similar requirements
against assets held by, or deposits with or for
the account of, or loans made by, IFC;
	 
	 	 	 	 	 	 
	 

	 	 	 	(B)
	 	imposes a cost on IFC as a result of IFC having
made the Loans or reduces the rate of return on
the overall capital of IFC that it would have
achieved, had IFC not made the Loans;
	 
	 	 	 	 	 	 
	 

	 	 	 	(C)
	 	changes the basis of taxation on payments
received by IFC in respect of the Loans
(otherwise than by a change in taxation of the
overall net income of IFC imposed by the
jurisdiction of its incorporation or in

 

- 16 -

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	any political subdivision of any such
jurisdiction); or
	 
	 	 	 	 	 	 
	 

	 	 	 	(D)
	 	imposes on IFC any other condition regarding the
making or maintaining of the Loans;
	 
	 	 	 	 	 	 
	“Increased
Costs Certificate”
	 	a certificate provided from time to time by IFC,
certifying:
	 
	 	 	 	 	 	 
	 	 	(i)	 	the circumstances
giving rise to the Increased Costs;
	 
	 	 	 	 	 	 
	 	 	(ii)	 	that the costs of IFC
have increased or the rate of return of either of them has
been reduced;
	 
	 	 	 	 	 	 
	 	 	(iii)	 	that IFC has, in its
opinion, exercised reasonable efforts to minimize or
eliminate the relevant increase or reduction, as the case
may be; and
	 
	 	 	 	 	 	 
	 	 	(iv)	 	the amount of
Increased Costs and describing in reasonable detail, the
basis and calculation of such Increased Costs;
	 
	 	 	 	 	 	 
	“Independent
Reserve Engineer”
	 	Laroche Petroleum Consultants Ltd. or such other
independent reserves engineer selected by the Company
and acceptable to IFC who shall from time to time
carry out the Reserve Certification and other
services reasonably required by IFC;
	 
	 	 	 	 	 	 
	“Interest
Coverage Ratio”
	 	for any Calculation
Period, the result obtained by dividing the:
	 
	 	 	 	 	 	 
	 	 	(i)	 	EBITDA for such
Calculation Period; by
	 
	 	 	 	 	 	 
	 	 	(ii)	 	the aggregate amount of
all interest paid or payable for such period, net of any
interest actually earned during such Calculation Period,

 

- 17 -

	 	 	 	 	 
	 	 	all such amounts calculated on a Consolidated Basis;
	 
	 	 	 	 
	“Interest
Determination Date”
	 	except as otherwise provided in Section 2.03 (d)
(ii) (Interest), the second Business Day before
the beginning of each Interest Period;
	 
	 	 	 	 
	“Interest Payment Date”	 	June 15 and December 15 in each year or, in the
case of any Interest Period of less than six (6)
months, pursuant to Section 2.04 (Change in
Interest Period), any day that is the
15th day of the month in which the
relevant Interest Period ends;
	 
	 	 	 	 
	“Interest Period”	 	each period of six (6) months or, in the
circumstances referred to in Section 2.04 (Change
in Interest Period), each period of three (3)
months or one (1) month determined pursuant to
that Section, in each case beginning on an
Interest Payment Date and ending on the day
immediately before the next following Interest
Payment Date, except in the case of the first
period applicable to each Loan when it means the
period beginning on the date on which that Loan is
made and ending on the day immediately before the
next following Interest Payment Date;
	 
	 	 	 	 
	“Interest Rate”

	 	(i)
	 	with respect to the A
Loan, the A Loan
Interest Rate; and
	 
	 	 	 	 
	 

	 	(ii)
	 	with respect to the C
Loan, the C Loan Interest Rate;
	 
	 	 	 	 
	“Joint
Operating Agreements”
	 	 	 	together:
	 
	 	 	 	 
	 

	 	(i)
	 	the Operating
Agreement dated September 28, 1995, as amended from time
to time, among Arco Turkey Inc., TPAO and Stratic Energy
Corporation;

 

- 18 -

	 	 	 	 	 
	 

	 	(ii)
	 	the joint operating
agreement dated March 15, 1985, as amended from time to
time, between Arco Turkey Inc. and TPAO with respect to
the Cendere field in Turkey; and
	 
	 	 	 	 
	 

	 	(iii)
	 	the joint operating
agreement dated May 2, 2005 between Madison Oil Turkey
Inc. and HEMA Enerji A.S;
	 
	 	 	 	 
	“Liabilities”	 	the aggregate of all obligations of any Person to pay or repay money, including,
without limitation:
	 
	 	 	 	 
	 

	 	(i)
	 	Financial Debt of
such Person;
	 
	 	 	 	 
	 

	 	(ii)
	 	the amount of all
liabilities of such Person (actual or contingent) under
any conditional sale or a transfer with recourse or
obligation to repurchase, including, without limitation,
by way of discount or factoring of book debts or
receivables;
	 
	 	 	 	 
	 

	 	(iii)
	 	taxes (including
deferred taxes) of such Person;
	 
	 	 	 	 
	 

	 	(iv)
	 	trade accounts
incurred and payable in the ordinary course of business
to trade creditors within ninety (90) days of the date
they are incurred and which are not more than thirty
(30) days overdue (including letters of credit or
similar instruments issued for the account of such
Person with respect to such trade accounts);
	 
	 	 	 	 
	 

	 	(v)
	 	accrued expenses
of such Person, including wages and other amounts due to
employees and other services providers;
	 
	 	 	 	 
	 

	 	(vi)
	 	the amount of all
liabilities of such Person howsoever arising to redeem
any of its shares; and
	 
	 	 	 	 
	 

	 	(vii)
	 	to the extent (if
any) not included in the definition of Financial Debt,
the amount of all liabilities of any Person to the
extent

 

- 19 -

	 	 	 	 	 
	 

	 	 	 	such Person guarantees them or otherwise
obligates itself to pay them;
	 
	 	 	 	 
	“Liabilities to Tangible
	 	 	 	 
	Net Worth Ratio”	 	the result obtained by dividing Liabilities by
Tangible Net Worth; Ratio”
	 
	 	 	 	 
	“LIBOR”	 	the British
Bankers’ Association (“BBA”)
interbank offered rates for deposits in the Loan
Currency
which appear on the relevant page of the Telerate Service
(currently page 3750) or, if not available, on the relevant
pages of any other service (such as Reuters Service or
Bloomberg Financial Markets Service) that displays such BBA
rates; provided that if BBA for any reason ceases (whether
permanently or temporarily) to publish interbank offered rates
for deposits in the Loan Currency, “LIBOR” shall mean the rate
determined pursuant to Section 2.03 (d) (Interest);
	 
	 	 	 	 
	“Lien”	 	any mortgage, pledge, charge, assignment,
hypothecation, security interest, title retention,
preferential right, trust arrangement, right of
set-off, counterclaim or banker’s lien, privilege
or priority of any kind having the effect of
security, any designation of loss payees or
beneficiaries or any similar arrangement under or
with respect to any insurance policy or any
preference of one creditor over another arising by
operation of law;
	 
	 	 	 	 
	“Life
of Loan Coverage Ratio”
	 	as at any date of determination, the ratio obtained
by dividing:
	 
	 	 	 	 
	 

	 	(i)
	 	the Loan-Life NPV
calculated as of the most recent calculation date on or
prior to such date of determination; by
	 
	 	 	 	 
	 

	 	(ii)
	 	the aggregate amount of
principal outstanding (excluding principal outstanding
under the Existing Convertible Senior Notes), and any

 

- 20 -

	 	 	 
	 

	 	overdue interest and other amounts owing on that date on or
in respect of Financial Debt;

	 
	 	 
	“Loan Currency”

	 	Dollars;
	 
	 	 
	“Loan-Life NPV”

	 	as of any calculation date, the present value, discounted
at the Discount Rate, of the projected Net Cash Flow of
the Company on a Consolidated Basis derived from the
Proved Reserves of the Borrowing Base Assets, as certified
in the most recent Reserve Certification and calculated
using the Proved Reserves Criteria, the World Bank Group
forecast oil prices, as updated from time to time, and Gas
Price(s), and other IFC Base Case Assumptions, for the period
commencing on the day immediately following such calculation
date up to and including the Final Maturity Date;
	 
	 	 
	“Local Development Impact
	 	 
	Data Sheet”

	 	a report which details benefits of the Project
to the local community, including local
employment generated by the Project;
	 
	 	 
	“Long Term Contracts”

	 	any gas sales agreement, marketing agreement or
any other agreement for a term of not less than
twelve (12) months, entered into by any of the
Obligors for the sale of oil and gas produced
from the Borrowing Base Assets;
	 
	 	 
	“Loans”

	 	together, the A Loan and the C Loan or, as the
context requires, their principal amount from
time to time outstanding and “Loan” means either
of them or, as the context requires, its
principal amount from time to time outstanding;
	 
	 	 
	“Marketing Contract(s)”

	 	at any time, the agreement(s) entered into by
any of Madison Oil and Toreador France for the
marketing and transportation of their share of
the oil and gas produced from the relevant
Borrowing Base Assets;

 

- 21 -

	 	 	 	 	 
	“Material
Adverse Effect”
	 	a material adverse effect on:
	 
	 	 	 	 
	 

	 	(i)
	 	any of the Obligors’
respective businesses, operations, properties,
liabilities, condition (financial or otherwise) or the
carrying on of any of the Obligors’ respective businesses
or operations;
	 
	 	 	 	 
	 

	 	(ii)
	 	the implementation of
the Project or the Financial Plan; or
	 
	 	 	 	 
	 

	 	(iii)
	 	the ability of any
Obligor to comply with its respective material obligations
under this Agreement or under any other Transaction
Document to which any of them is a party;
	 
	 	 	 	 
	“Maximum
Facility Amount”
	 	in respect of the A Loan:
	 
	 	 	 	 
	 

	 	(i)
	 	prior to the Phase II
Effectiveness Date, twenty five million Dollars
($25,000,000); and
	 
	 	 	 	 
	 

	 	(ii)
	 	following the Phase II
Effectiveness Date, forty million Dollars ($40,000,000);
	 
	 	 	 	 
	“NATIXIS Facility”	 	the US$15,000,000 reserve base revolving facility
agreement dated December 23, 2004 among Toreador France
as the borrower, Madison Oil as the guarantor, the
Company and Toreador International as the obligors, and
NATIXIS as the lender, agent, arranger, and technical
bank;
	 
	 	 	 	 
	“Net Cash Flow”	 	for any period of determination, the net cash flow
during such period determined on a Consolidated Basis,
including the sum of:
	 
	 	 	 	 
	 

	 	(i)
	 	all proceeds received
from the sale of the share of oil and gas production from
the Borrowing Base Assets; minus

 

- 22 -

	 	 	 	 	 
	 

	 	(ii)
	 	the share of
operating costs, administrative costs, transportation
costs, cash fund contributions as required under any
concessions or service agreements relating to the
Borrowing Base Assets, taxes, royalties, exploration and
capital expenditures paid for in the same period, but
excluding, for the purpose of this definition, any
payments in respect of Financial Debt (whether principal,
interest or other fees and charges) for the same period,
but including for the purpose of this definition any
interest on Existing Convertible Senior Notes; plus
	 
	 	 	 	 
	 

	 	(iii)
	 	the net proceeds of
Loans borrowed less the Loans repaid during such period;
	 
	 	 	 	 
	“Obligations”

	 	(i)
	 	the outstanding principal of, and interest on, the Loans (including, without
limitation,
interest accruing under Section 2.05 (Default Rate
Interest)); and
	 
	 	 	 	 
	 

	 	(ii)
	 	all other amounts
owing or which may be owing by the Borrowers to IFC as a
result of the Borrowers’ obligations under the Financing
Documents to which it is a party, whether absolute or
contingent, due or to become due, or now existing or
hereafter incurred, which arise under the Financing
Documents to which it is a party, delivered or given in
connection herewith or therewith, in each case whether on
account of principal, interest, reimbursement obligations,
fees, indemnities, costs, charges, expenses (including
legal and judicial fees and expenses) or otherwise;
	 
	 	 	 	 
	“Official”	 	any officer of a political party or candidate
for political office in any country or any
officer or employee (i) of any government
(including any legislative, judicial,
executive or administrative

 

- 23 -

	 	 	 
	 

	 	department,
agency or instrumentality thereof) or (ii) of
a public international organization;
	 
	 	 
	“Oil Equivalent Price”

	 	the oil equivalent price of gas is derived
through the equation: one (1) barrel of oil
= six thousand (6,000) cubic feet of gas;
	 
	 	 
	“Operator”

	 	with respect to any Borrowing Base Asset, the
party designated as such pursuant to the
relevant operating agreement for such
Borrowing Base Asset;
	 
	 	 
	“Performance Standards”

	 	IFC’s Performance Standards on Social &
Environmental Sustainability, dated April 30,
2006, copies of which have been delivered to
the Borrowers each of whom hereby
acknowledges receipt thereof;
	 
	 	 
	“Permitted Lien”

	 	a Lien permitted in Section 6.02(g)
(Permitted Liens);
	 
	 	 
	“Person”

	 	any natural person, corporation, company,
partnership, firm, voluntary association,
joint venture, trust, unincorporated
organization, Authority or any other entity
whether acting in an individual, fiduciary or
other capacity;
	 
	 	 
	“Phase II Effectiveness Date”

	 	the date on which the Company shall have
provided to IFC a new Reserve Certification
with augmented Proved Reserves and an updated
IFC Base Case satisfactory to IFC, reflecting
a projected total Borrowing Base Amount
which, for each Calculation Period from such
date until the Final Maturity Date, exceeds
fifty million Dollars ($50,000,000) for such
Calculation Period;
	 
	 	 
	“Policy on Disclosure of Information”

	 	IFC’s Policy on Disclosure of Information,
dated April 30, 2006, copies of which have
been delivered

 

- 24 -

	 	 	 
	 

	 	to and receipt of which has
been acknowledged by the Company;
	 
	 	 
	“Potential Event of Default”

	 	any event or circumstance which would, with
notice, lapse of time, the making of a
determination or any combination thereof,
become an Event of Default;
	 
	 	 
	“Prohibited Activities”

	 	the activities specified in Annex D;
	 
	 	 
	“Prohibited Payments”

	 	any offer, gift, payment, promise to pay or
authorization of the payment of any money or
anything of value, directly or indirectly, to
or for the use or benefit of any Official
(including to or for the use or benefit of
any other Person if any Obligor knows, or has
reasonable grounds for believing, that the
other Person would use such offer, gift,
payment, promise or authorization of payment
for the benefit of any such Official), for
the purpose of influencing any act or
decision or omission of any Official in order
to obtain, retain or direct business to, or
to secure any improper benefit or advantage
for, any Obligor, its Affiliates or any other
Person; provided that any such offer, gift,
payment, promise or authorization of payment
shall not be considered a Prohibited Payment
if, in IFC’s reasonable
opinion, it (i) is lawful under applicable written laws and
regulations or (ii) is made for the purpose of expediting or
securing the performance of a routine governmental action (as
such term is construed under applicable law);
	 
	 	 
	“Project”

	 	the financing of capital expenditure, working capital
requirements, debt repayments and other general
corporate purposes for the Borrowers’ operations in
Turkey and Romania as further detailed in Annex A;
	 
	 	 
	“Project Accounts”

	 	together, accounts to be created under the Accounts
Agreements;

 

- 25 -

	 	 	 	 	 
	“Project Cost”	 	the total estimated cost of the Project, not less than
the equivalent of two hundred and three million
Dollars ($203,000,000), as set forth in Annex A
(Project Cost and Financial Plan);
	 
	 	 	 	 
	“Project Documents”	 	each of the following:
	 
	 	 	 	 
	 

	 	(i)
	 	the Joint Operating
Agreements;
	 
	 	 	 	 
	 

	 	(ii)
	 	the Gas Sales Agreements;
	 
	 	 	 	 
	 

	 	(iii)
	 	the Royalty Agreement; and
	 
	 	 	 	 
	 

	 	(iv)
	 	the Marketing Contracts.
	 
	 	 	 	 
	“Proved Reserves”	 	at any date, the estimated quantities of
hydrocarbons which geological and engineering
data demonstrate with reasonable certainty to
be recoverable in future years from known
reservoirs under existing economic and
operating conditions. Proved Reserves are
limited to those quantities of hydrocarbons
which can be estimated, with reasonable
certainty, to be recoverable commercially at
current prices and costs, under existing
regulatory practices and with existing
conventional equipment and operating methods
(taking into account applicable laws and
regulations to which the relevant Obligor is
subject);
	 
	 	 	 	 
	“Proved Reserves Criteria”	 	100% of the Proved Reserves as certified by the
Independent Reserve Engineer or such criteria
as IFC may accept in its sole discretion;
	 
	 	 	 	 
	“Required
Ratios”
	 	has the meaning assigned thereto in Section
6.01(m) (Affirmative Covenants);
	 
	 	 	 	 
	“Reserve Account”	 	the account established in the French Accounts
Agreement in which the Obligors shall ensure
that such account is funded in accordance with
Section 6.01(r) (Accounts Agreement; Reserve
Accounts) hereof;

 

- 26 -

	 	 	 	 	 
	“Reserve Tail Ratio”	 	for any calculation date, with respect to any
Borrowing Base Asset(s), the ratio obtained by
dividing:
	 
	 	 	 	 
	 

	 	(i)
	 	the Proved Reserves
from such Borrowing Base Asset(s), forecasted to be
extracted beyond the Final Maturity Date, as applicable, as
certified in the latest Reserves Certification prepared in
respect of such Borrowing Base Asset(s), as applicable; by
	 
	 	 	 	 
	 

	 	(ii)
	 	the Proved Reserves
from such Borrowing Base Asset(s), as certified in the
Reserves Certification dated June 30, 2006 prepared in
respect of such Borrowing Base Asset(s), or as certified in
the updated Reserves Certification provided that the Proved
Reserves in it are higher than the Reserves Certification
dated June 30, 2006;
	 
	 	 	 	 
	“Reserves Certification”	 	the certification of any or all of the Borrowing
Base Assets’ Proved Reserves prepared from time
to time by the Independent Reserve Engineer
(subject to Section 6.03(l) (Reserve
Certification));
	 
	 	 	 	 
	“Restricted Payment”	 	with respect to any Person, the:
	 
	 	 	 	 
	 

	 	(i)
	 	declaration or
payment of a dividend, distribution or return of any
equity capital to its stockholders, partners or members or
authorization or making of any other
distribution, payment or delivery of property (other
than common stock of such Person) or cash to its
stockholders, partners or members in their capacity as
such; or
	 
	 	 	 	 
	 

	 	(ii)
	 	redemption,
retirement, purchase or other acquisition of, or
permitting of any Subsidiary to redeem, retire, purchase,
or otherwise acquire, directly or indirectly, any shares
of any class of its capital stock

 

- 27 -

	 	 	 	 	 
	 

	 	 	 	outstanding on or after
the date of this Agreement (or any options or warrants
issued by such person with respect to its capital stock),
or setting aside of any funds for any of the foregoing
purposes; or
	 
	 	 	 	 
	 

	 	(iii)
	 	making of any
payment of any kind on or in respect of Financial Debt
held by any Affiliate or shareholder of such Person;
	 
	 	 	 	 
	“Rollover Loan”	 	a Loan made on an Interest Payment Date in the same
amount as all or a portion of an outstanding Loan
or Loans maturing on such Interest Payment Date,
and which is applied solely in refinancing all or a
portion of such maturing Loan, all in accordance
with Section 2.02(c) (Loan Procedure and Rollover);
	 
	 	 	 	 
	“Romanian
Accounts Agreement”
	 	the agreement or agreements between Toreador
Romania, IFC and an account bank in Romania
acceptable to IFC providing for the establishment
of accounts in Romania into which all of the
revenues generated from the activities of the
Company and/or Toreador Romania in Romania will be
deposited, and security over such account in favour
of IFC, which agreement shall be in a form and
substance satisfactory to IFC;
	 
	 	 	 	 
	“Romania
Gas Sales Agreement”
	 	the Gas Sales Agreement dated August 1, 2006
between Toreador Romania and Petrom Gas SRL and any
gas sales agreement entered into in the future by
Toreador Romania;
	 
	 	 	 	 
	“Romanian Concession Transfer Date”
	 	the date when IFC receives evidence satisfactory to
it that the Romanian Concessions are legally
transferred to Toreador Romania by the Company;

 

- 28 -

	 	 	 	 	 
	“Romanian Concessions”	 	the following concession agreements:
	 
	 	 	 	 
	 

	 	(i)
	 	the concession
agreement for petroleum exploration, development, and
exploitation in the zone of E V-1 Moinesti between Agentia
Nationala Pentru Resurse Minerale (National Agency for
Mineral Resources of Romania) and Toreador Resources;
	 
	 	 	 	 
	 

	 	(ii)
	 	the concession
agreement for petroleum exploration, development, and
production on the block E IV-2 Viperesti between the
Agentia Nationala Pentru Resurse Minerale and Toreador
Resources; and
	 
	 	 	 	 
	 

	 	(iii)
	 	the concession
agreement of the oil exploitation perimeter DEE V-11
Fauresti between Agentia Nationala Pentru Resurse Minerale
and Toreador Resources;
	 
	 	 	 	 
	“Royalty Agreement”	 	the Royalty Agreement dated November 30, 2001 between
Madison (Turkey) Inc. and Aladdin Middle East with
respect to the Zeynel Field in Turkey;
	 
	 	 	 	 
	“S&E
Management System”
	 	the social and environmental management system of the
Company and the Borrowers enabling them to identify,
assess and manage risks on an ongoing basis;
	 
	 	 	 	 
	“Security”

	 	(i)
	 	a first ranking security
interest in certain
proceeds, receivables and
contract rights of the
Obligors, relating to and
from the sale of their share
of oil and gas production
from the Borrowing Base
Assets in France, Turkey and
Romania;
	 
	 	 	 	 
	 

	 	(ii)
	 	first ranking
security interest in the funds (including any Authorized
Investments made with such funds) held from time to time in the Project Accounts, upon execution of the relevant
Accounts

 

- 29 -

	 	 	 	 	 
	 

	 	 	 	Agreements in accordance with Section 6.01(r)
(Accounts Agreements; Reserves Accounts) hereof;
	 
	 	 	 	 
	 

	 	(iii)
	 	 an assignment by way
of security of all rights and claims to any compensation
or other special payments in respect of all the
concessions other than those arising in the normal course
of operations which are payable to the Borrowers’ by the
governments of Turkey and Romania or any of its agencies
or by any other party and for whatever reason;
	 
	 	 	 	 
	 

	 	(iv)
	 	a first ranking
pledge by Toreador International of all its shares in the
Borrowers;
	 
	 	 	 	 
	 

	 	(v)
	 	a first ranking
pledge by Madison Oil of all its shares in Toreador
France; and
	 
	 	 	 	 
	 

	 	(vi)
	 	a first ranking
pledge by the Company of all its shares in Toreador
International;
	 
	 	 	 	 
	“Security Documents”	 	the documents providing for the Security consisting of:
	 
	 	 	 	 
	 

	 	(i)
	 	the Share Pledges;
	 
	 	 	 	 
	 

	 	(ii)
	 	the Contracts Assignments; and
	 
	 	 	 	 
	 

	 	(iii)
	 	the Accounts Agreements;
	 
	 	 	 	 
	“Series A-1 Convertible
	 	 	 	 
	Preferred Stock”	 	the 72,000 shares of the Company’s Series A-1 Convertible Preferred Stock outstanding as of June 30,
2006;
	 
	 	 	 	 
	“Share Pledges”	 	together, the instruments providing for a pledge in favour of IFC of all of the issued and outstanding
shares of Toreador International, Toreador Turkey, Toreador Romania, Madison Oil and Toreador

 

- 30 -

	 	 	 	 	 	 	 	 	 
	 	 	France,
each in form and substance satisfactory to IFC, together with, as applicable, original share
certificates and instruments of transfer in respect of all such shares executed in blank;
	 
	 	 	 	 	 	 	 	 
	“Subsidiary”	 	with respect to any Person, an Affiliate over fifty per cent (50%) of whose capital is owned, directly
or indirectly, by such Person;
	 
	 	 	 	 	 	 	 	 
	“Tangible Net Worth”	 	the aggregate of:
	 
	 	 	 	 	 	 	 	 
	 	 	(i)	 	(A)	 	the amount paid up or credited as paid up on the share
capital of any Person; and
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	(B)	 	the
amount standing to the credit of the reserves of
such Person (including, without limitation, any
share premium account, capital redemption reserve
funds and any credit balance on the accumulated
profit and loss account);
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	after deducting from the amounts in (A) and (B):
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	(w)
	 	any debit balance on the profit and
loss account or impairment of the issued
share capital of such Person (except to
the extent that deduction with respect
to that debit balance or impairment has
already been made);
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	(x)
	 	amounts set aside for dividends to the
extent not already deducted from equity;
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	(y)
	 	amounts of deferred tax assets; and

 

- 31 -

	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	(z)
	 	amounts attributable to capitalized
items such as goodwill, trademarks,
deferred charges, licenses,
patents and other intangible assets;
and
	 
	 	 	 	 	 	 	 	 
	 	 	(ii)	 	if applicable, that
part of the net results of operations and the net assets
of any Subsidiary of such Person attributable to interests
that are not owned, directly or indirectly, by such
Person;
	 
	 	 	 	 	 	 	 	 
	“Taxes”	 	any present or future taxes, withholding
obligations, duties and other charges of whatever
nature levied by any Authority;
	 
	 	 	 	 	 	 	 	 
	“Texas Facility”	 	the US$25,000,000 credit agreement dated December
30, 2004 between Toreador Exploration & Production
Inc. and Toreador Acquisition Corporation as the
borrowers and Texas Capital Bank, N.A. as the
lender;
	 
	 	 	 	 	 	 	 	 
	“TPAO”	 	Turikye Petrolleri A.O., the national oil &
natural gas company of Turkey;
	 
	 	 	 	 	 	 	 	 
	“Transaction Documents”	 	together:
	 
	 	 	 	 	 	 	 	 
	 	 	(i)	 	the Financing Documents; and
	 
	 	 	 	 	 	 	 	 
	 	 	(ii)	 	the Project Documents;
	 
	 	 	 	 	 	 	 	 
	“Turkey”	 	the Republic of Turkey;
	 
	 	 	 	 	 	 	 	 
	“Turkey
Gas Sales Agreement”
	 	any gas sales agreement to be entered into by either
TPAO or Toreador Turkey for the sale of gas in Turkey;

 

- 32 -

	 	 	 	 	 	 	 	 	 
	“Turkish
Accounts Agreement”
	 	the agreement or agreements between Toreador Turkey, IFC
and an account bank in Turkey acceptable to IFC
providing for the establishment of accounts in Turkey
into which all of the revenues of Toreador Turkey will
be deposited, and security over such account in favour
of IFC, which agreement shall be in a form and substance
satisfactory to IFC; and
	 
	 	 	 	 	 	 	 	 
	“World Bank”	 	the International Bank for Reconstruction and
Development, an international organization established
by Articles of Agreement among its member countries.

     Section 1.02. Financial Calculations. (a) All financial calculations to be made
under, or for the purposes of, this Agreement and any other Transaction Document on a Consolidated
Basis shall be made in accordance with the Accounting Standards and, except as otherwise required
to conform to any provision of this Agreement, shall be calculated from the then most recently
issued quarterly financial statements which the Company is obligated to furnish to IFC under
Section 6.03(a) (Reporting Requirements).

     (b) Where quarterly financial statements from the last quarter of a Financial Year are used
for the purpose of making certain financial calculations then, at IFC’s option, those calculations
may instead be made from the audited financial statements for such Financial Year.

     (c) If a financial calculation is to be made under or for the purposes of this Agreement or
any other Transaction Document on a Consolidated Basis, that calculation shall be made by reference
to the sum of all amounts of similar nature reported in the relevant financial statements of each
of the entities whose accounts are to be consolidated (as stated in the definition of Consolidated
Basis plus or minus the consolidation adjustments customarily applied to avoid double counting of
transactions among any of those entities).

     Section 1.03. Interpretation. In this Agreement, unless the context otherwise
requires:

     (a) headings are for convenience only and do not affect the interpretation of this Agreement;

 

- 33 -

     (b) words importing the singular include the plural and vice versa;

     (c) a reference to an Annex, Article, party, Schedule or Section is a reference to that
Article or Section of, or that Annex, party or Schedule to, this Agreement;

     (d) a reference to a document includes an amendment or supplement to, or replacement or
novation of, that document but disregarding any amendment, supplement, replacement or novation made
in breach of this Agreement; and

     (e) a reference to a party to any document includes that party’s successors and permitted
assigns.

     Section 1.04. Business Day Adjustment. (a) When an Interest Payment Date is not a
Business Day, then such Interest Payment Date shall be automatically changed to the next Business
Day in that calendar month (if there is one) or the preceding Business Day (if there is not).

     (b) When the day on or by which a payment (other than a payment of principal or interest) is
due to be made is not a Business Day, that payment shall be made on or by the next Business Day in
that calendar month (if there is one) or the preceding Business Day (if there is not).

ARTICLE II

The Facility

     Section 2.01. The Facility. (a) Subject to the provisions of this Agreement, IFC
agrees to make available to

	 	(i)	 	the Borrowers, the Facility consisting of the A Loan
Facility in an aggregate principal amount of up to the Maximum Facility
Amount; and
	 
	 	(ii)	 	Toreador Turkey Ltd and Toreador Romania Ltd, the C Loan
Facility of ten million Dollars ($10,000,000).

     (b) Each Loan under each Facility shall be used solely for the Project.

 

- 34 -

     (c) The A Loan Facility is a revolving facility. Accordingly, any amount of the A Loan which
is prepaid or repaid may, subject to the provisions of this Agreement, be reborrowed. For the
avoidance of doubt, amounts:

	 	(i)	 	cancelled pursuant to Section 2.13 (Suspension or
Cancellation by IFC) or Section 2.14 (Cancellation by the Borrowers);
	 
	 	(ii)	 	repaid pursuant to Section 2.06(b) (Repayment); or
	 
	 	(iii)	 	repaid following the issuance of a notice pursuant to
Section 7.01 (Acceleration after Default);

     may not be re-borrowed.

     (d) Any amount of the C Loan that is prepaid, repaid or canceled may not be reborrowed;
provided that for avoidance of doubt, the C Loan may not be prepaid without the consent of IFC in
accordance with Section 2.07(b) (Prepayment and Mandatory Prepayment).

     Section 2.02. Facility Procedure and Rollover.

     (a) Subject to Section 2.01 (The Facility), any Borrower may request Loans during the
Availability Period by delivering to IFC, at least ten (10) Business Days prior to the proposed
date of a Loan, a Loan request substantially in the form of Schedule 2. Such Borrower shall
deliver to IFC within five (5) Business Days of the disbursement of such Loan a receipt
substantially in the form of Schedule 3. No Loan shall exceed the Available Amount, and each Loan
shall:

	 	(i)	 	with respect to the A Loan Facility, be in an amount of not
less than five million Dollars ($5,000,000); and
	 
	 	(ii)	 	with respect to the C Loan Facility, be for the full amount
of the C Loan.

     (b) Each Loan shall be made by IFC at a bank in New York, New York for further credit to the
relevant Borrower’s account at a bank in a place reasonably acceptable to IFC, all as specified by
the Borrower in the relevant Loan request.

 

- 35 -

     (c) Where any A Loan is outstanding on any Interest Payment Date, then, in respect of that A
Loan, the Borrowers, on a joint and several basis, will be conclusively deemed to have requested,
and IFC shall be deemed to make, a Rollover Loan (of an aggregate amount equal to the outstanding
amount of all A Loans, including any Rollover Loan, which are scheduled to mature on that Interest
Payment Date) which will be applied in refinancing the outstanding A Loan or A Loans in full
unless:

	 	(i)	 	no later than thirty (30) days prior to such Interest
Payment Date, the relevant Borrower which borrowed such A Loan(s) or any
other Obligor irrevocably notifies IFC that it will pay all or part of the
outstanding amount of the relevant A Loan(s) on or prior to such Interest
Payment Date;
	 
	 	(ii)	 	the aggregate outstanding amount of all Loan(s) exceeds the
Available Amount on the such Interest Payment Date, in which case a Rollover
Loan may only be deemed to be
requested and made under this Section 2.02(c) in an amount which would not
cause the Available Amount to be exceeded (and any amount of any A Loan(s)
which are not so refinanced by Rollover Loans shall be repaid by the
Borrowers in accordance with Section 2.06(a)(Repayment)); or
	 
	 	(iii)	 	an Event of Default has occurred and is continuing.

     Section 2.03. Interest. Subject to the provisions of Section 2.05 (Default Rate
Interest), each of the Borrowers shall, on a joint and several basis, pay interest on each Loan in
accordance with this Section 2.03:

     (a) During each Interest Period, the Loans shall bear interest at the applicable Interest Rate
for that Interest Period.

     (b) Interest on each Loan shall accrue from day to day, be prorated on the basis of a 360-day
year for the actual number of days in the relevant Interest Period and be payable in arrears on the
Interest Payment Date immediately following the end of that Interest Period; provided that with
respect to any Loan made less than fifteen (15) days before an Interest Payment Date, interest on
that Loan shall be payable on the second Interest Payment Date following the date of that Loan.

 

- 36 -

     (c) The Interest Rate for any Interest Period shall be the rate which is the sum of:

	 	(i)	 	the Applicable Margin; and
	 
	 	(ii)	 	LIBOR on the Interest Determination Date for that
Interest Period for six (6) months (or, in the case of the first Interest
Period for any Loan, for one (1) month, two (2) months, three (3) months or
six (6) months, whichever period is closest to the duration of the relevant
Interest Period (or, if two periods are equally close, the longer one))
rounded upward to the nearest three decimal places.

     (d) If, for any Interest Period, IFC cannot determine LIBOR by reference to the Telerate
Service or any other service that displays BBA rates, IFC shall notify Borrowers and shall instead
determine LIBOR:

	 	(i)	 	on the second Business Day before the beginning of the
relevant Interest Period by calculating the arithmetic mean (rounded upward
to the nearest three decimal places) of the offered rates advised to IFC on
or around 11:00 a.m.,
London time, for deposits in the Loan Currency and otherwise in
accordance with Section 2.03 (c) (ii), by any four (4) major banks
active in the Loan Currency in the London interbank market, selected by
IFC; provided that if less than four quotations are received, IFC may
rely on the quotations so received if not less than two (2); or
	 
	 	(ii)	 	if less than two (2) quotations are received from the
banks in London in accordance with subsection (i) above, on the first day of
the relevant Interest Period, by calculating the arithmetic mean (rounded
upward to the nearest three decimal places) of the offered rates advised to
IFC on or around 11:00 a.m., New York time, for loans in the Loan Currency
and otherwise in accordance with Section 2.03(c)(ii), by a major bank or
banks in New York, New York selected by IFC.

     (e) On each Interest Determination Date for any Interest Period, IFC shall determine the
Interest Rate applicable to that Interest Period and promptly notify the Borrowers of those rates.

 

- 37 -

     (f) The determination by IFC, from time to time, of the applicable Interest Rate shall be
final and conclusive and bind the Borrowers (unless the Borrowers show to IFC’s satisfaction that
the determination involves manifest error).

     Section 2.04. Change in Interest Period. Without prejudice to the provisions of
Section 2.05 (Default Rate Interest), if at any time any of the Borrowers fails to pay any amount
of principal of, or interest on, any Loan when due (whether at stated maturity or upon
acceleration), and any part of that amount remains unpaid on the third Business Day immediately
preceding any Interest Payment Date falling after that amount became due, then:

     (a) IFC may elect that the duration of the Interest Period commencing on that Interest Payment
Date and, subject to Section 2.04 (c), any subsequent Interest Period shall be either three (3)
months or one (1) month and shall notify the Borrowers of that election in the notice referred to
in Section 2.03 (e) (Interest);

     (b) the Interest Rates applicable to any Interest Period which is three (3) months or one (1)
month shall be determined in accordance with Section 2.03 (Interest) in all respects, except that
any reference in Section 2.03 (c) (ii) to six (6) months shall be deemed to be a reference to three
(3) months or, as the case may be, one (1) month; and

     (c) unless an Event of Default or Potential Event of Default has occurred and is continuing,
IFC shall reinstate Interest Periods of six (6) months as of the first Interest Payment Date which
is June 15 or December 15 falling at least three (3) Business Days after the payment default is
remedied in full and shall inform the Borrowers of that reinstatement in the notice referred to in
Section 2.03 (e) (Interest).

     Section 2.05. Default Rate Interest. (a) Without limiting the remedies available to
IFC under this Agreement or otherwise (and to the maximum extent permitted by applicable law), if
the Borrowers fail to make any payment of principal or interest (including interest payable
pursuant to this Section) or any other payment provided for in Section 2.08 (Fees) when due as
specified in this Agreement (whether at stated maturity or upon acceleration), the Borrowers shall,
on a joint and several basis, pay interest on the amount of that payment due and unpaid at the rate
which shall be the sum of two per cent (2%) per annum and the Interest Rate in effect from time to
time.

 

- 38 -

     (b) Interest at the rate referred to in Section 2.05 (a) shall accrue from the date on which
payment of the relevant overdue amount became due until the date of actual payment of that amount
(as well after as before judgment), and shall be payable on demand or, if not demanded, on each
Interest Payment Date falling after any such overdue amount became due.

     Section 2.06. Repayment.

     (a) Subject to Section 2.02(c) (Loan Procedure and Rollover) and to Section 2.07 (Prepayment
and Mandatory Prepayment), the Borrowers shall, on a joint and several basis, repay each A Loan
made under this Agreement in full on the Interest Payment Date immediately following the date on
which such A Loan is made.

     (b) The Maximum Facility Amount shall be reduced to the following amounts on the following
Interest Payment Dates:

	 	 	 	 	 
	Interest Payment Date	 	Maximum Facility Amount
	December 15, 2011
	 	$	35,000,000	 
	June 15, 2012
	 	$	30,000,000	 
	December 15, 2012
	 	$	25,000,000	 
	June 15, 2013
	 	$	20,000,000	 
	December 15, 2013
	 	$	15,000,000	 
	June 15, 2014
	 	$	10,000,000	 
	December 15, 2014
	 	$	0	 

     (c) The Borrowers shall, on a joint and several basis, repay the C Loan on the following dates
and in the following amounts:

	 	 	 	 	 
	Date Payment Due	 	Principal Amount Due
	December 15, 2014
	 	$	5,000,000	 
	June 15, 2015
	 	$	5,000,000	 
	Total
	 	$	10,000,000	 

     Section 2.07. Prepayment and Mandatory Prepayment Without prejudice to Section
6.04(c) (Insurance):

 

- 39 -

     (a) any of the Borrowers may prepay all or any part of any A Loan, on not less than thirty
(30) days’ prior notice to IFC, but only if:

	 	(i)	 	such Borrower simultaneously pays all accrued interest
and Increased Costs (if any) on the amount of any A Loan to be prepaid,
together with all other amounts then due and payable under this Agreement,
including the amount payable under Section 2.12 (Unwinding Costs), if the
prepayment is not made on an Interest Payment Date;
	 
	 	(ii)	 	for a partial prepayment, that prepayment is an amount
not less than five million Dollars ($5,000,000); and
	 
	 	(iii)	 	if requested by IFC, such Borrower delivers to IFC,
prior to the date of prepayment, evidence satisfactory to IFC that all
necessary Authorizations with respect to the prepayment have been obtained.

     (b) The Borrowers shall, on a joint and several basis, prepay all or part of the A Loans and,
but only if IFC so requests, the C Loan in the following circumstances:

	 	(i)	 	upon receipt of the proceeds (net of Taxes, costs and
expenses) of any asset sales which are permitted under, and which are not
being reinvested, in each case in accordance with Section 6.02(o) (Negative
Covenants) in excess of one million Dollars ($1,000,000) in the aggregate
(in any calendar year) by any Obligor, in which case, an amount equal to one
hundred percent (100%) of such proceeds will be applied in such prepayment;
and
	 
	 	(ii)	 	unless otherwise agreed with IFC, upon receipt by any
Obligor of property insurance proceeds which are required to be applied in
such prepayment in accordance with Section 6.04(c) (Insurance) or the
proceeds of compensation for any expropriation, taking or condemnation of
any asset of any Obligor the proceeds of which are in aggregate of one
million Dollars ($1,000,000) or more (in any calendar year), in which case,
an amount equal to one hundred percent (100%) of such proceeds will be
applied in such prepayment other than in respect of insurance claims filed
prior to the date hereof; and

 

- 40 -

	 	(iii)	 	if on any Interest Payment Date (taking into account any
A Loans repaid on such Interest Payment Date) the aggregate outstanding
amount of the Loans are in excess of the Available Amount as at such
Interest Payment Date, then the Borrowers shall be required, on a joint and
several basis, to prepay the A Loans, and if IFC so requests, the C Loan, in
an amount equal to such excess;

and

	 	(A)	 	the Borrowers (or other Obligor, as the
case may be) shall simultaneously pay all accrued interest and
Increased Costs (if any) on the amount of any Loan to be prepaid,
together with all other amounts then due and payable under this
Agreement, including the amount payable under Section 3.11
(Unwinding Costs), if the payment is not made on an Interest Payment
Date; and
	 
	 	(B)	 	if requested by IFC, the Borrowers (or
other Obligor, as the case may be) shall deliver to IFC, prior to
the date of payment, evidence satisfactory to IFC that all necessary
Authorizations with respect to the payment have been obtained; and

     (c) Amounts of principal prepaid under this Section shall be applied by IFC in reduction of
the respective reduction installments of the Maximum Facility Amount set out in Section
2.06(a)(Repayment) in inverse order.

     (d) Upon delivery of a notice in accordance with Section 2.07 (a), the Borrowers, on a joint
and several basis, shall make the prepayment in accordance with the terms of that notice.

     (e) Any principal amount of any A Loan prepaid under Section 2.07(a) or Section 2.07(b) may be
re-borrowed.

     (f) The C Loan may not be prepaid except following a request by IFC in accordance with Section
2.07(b). If, notwithstanding the provisions of this Agreement, any Obligor prepays all or any part
of the C Loan, then the Borrowers shall, on a joint and several basis, also pay to IFC within
thirty (30) days of the date of such prepayment the present value, calculated using the Discount
Rate, of

 

- 41 -

the Additional Compensation which would be payable if no prepayment of the C Loan was
made, for the period commencing on the day immediately following the calculation date up to and
including the Final Maturity Date.

     Section 2.08. Fees. (a) The Borrowers shall, on a joint and several basis, pay to
IFC a commitment fee:

	 	(i)	 	with respect to the A Loan Facility, at the rate(s) equal
to:

	 	(A)	 	one percent (1%) of the Maximum
Facility Amount that from time to time has not been disbursed or
canceled, beginning to accrue on the date of this Agreement; and
	 
	 	(B)	 	a half percent (0.5%) of the Contingent
Facility Amount, beginning to accrue on the date of this Agreement
and ceasing to accrue on the Phase II Effectiveness Date;

	 	(ii)	 	with respect to the C Loan Facility, at the rate per
annum equal to fifty percent (50%) of the Applicable Margin specified in
paragraph (ii)(x) of the definition of “Applicable Margin”, on that part of
the C Loan that from time to time has not been disbursed or canceled,
beginning to accrue on the date of this Agreement;
	 
	 	(iii)	 	in each case, pro rated on the basis of
a 360-day year for the actual number of days elapsed; and
	 
	 	(iv)	 	payable semi-annually, in arrears, on each Interest
Payment Date, the first such payment to be due on June 15, 2007.

     (b) The Borrowers shall also, on a joint and several basis, pay to IFC:

	 	(i)	 	a front-end fee on the A Loan Facility of six hundred
thousand Dollars ($600,000), to be paid on the earlier of (x) the date which
is thirty (30) days after the date of this
Agreement and (y) the date immediately preceding the date of
disbursement of the first A Loan;
	 
	 	(ii)	 	a front-end fee on the C Loan Facility of one hundred and
fifty thousand Dollars ($150,000), to be paid on the earlier

 

- 42 -

	 	 	 	of (x) the date
which is thirty (30) days after the date of this Agreement and (y) the date
immediately preceding the date of disbursement of the C Loan;
	 
	 	(iii)	 	a portfolio supervision fee of fifteen thousand Dollars
($15,000) per annum, payable on January 15 of each calendar year; and
	 
	 	(iv)	 	if the Obligors and IFC agree to restructure all or part
of the Loans, the Borrowers and IFC shall negotiate in good faith an
appropriate amount to compensate IFC for the additional work of IFC staff
required in connection with such restructuring.

     (c) Following the disbursement of the C Loan and subject to Section 2.07(f), the Borrowers, on
a joint and several basis, shall pay the Additional Compensation to IFC on April 30 of each year in
respect of the previous Financial Year up to and including the Final Maturity Date (pro rated in
respect of any partial Financial Year).

     Section 2.09. Currency and Place of Payments. (a) Each Obligor shall make all
payments of principal, interest, fees, and any other amount due to IFC under this Agreement in the
Loan Currency, in same day funds, to the account of IFC at Northern Trust International Banking
Corporation, New York, New York, U.S.A., ABA#026001122, for credit to IFC’s account number
10215220300, or at such other bank or account in New York as IFC from time to time designates.
Payments must be received in IFC’s designated account no later than 1:00 p.m. New York time.

     (b) The tender or payment of any amount payable under this Agreement (whether or not by
recovery under a judgment) in any currency other than the Loan Currency shall not novate, discharge
or satisfy the obligation of the Borrowers (or any other Obligor, as applicable) to pay in the Loan
Currency all amounts payable under this Agreement except to the extent that (and as of the date
when) IFC actually receives funds in the Loan Currency in the account specified in, or pursuant to,
Section 2.09 (a).

     (c) The Borrowers shall, on a joint and several basis, indemnify IFC against any losses
resulting from a payment being received or an order or
judgment being given under this Agreement in any currency other than the Loan Currency or any place
other than the account specified in, or pursuant to, Section 2.09 (a). The Borrowers shall, as a
separate obligation, and on a joint and

 

- 43 -

several basis, pay such additional amount as is necessary
to enable IFC to receive, after conversion to the Loan Currency at a market rate and transfer to
that account, the full amount due to IFC under this Agreement in the Loan Currency and in the
account specified in, or pursuant to, Section 2.09 (a).

     (d) Notwithstanding the provisions of Section 2.09 (a) and Section 2.09 (b), IFC may require
the Borrowers, on a joint and several basis, to pay (or reimburse IFC) for any Taxes, fees, costs,
expenses and other amounts payable under Section 2.15 (a) (Taxes) and Section 2.16 (Expenses) in
the currency in which they are payable, if other than the Loan Currency.

     Section 2.10. Allocation of Partial Payments. If at any time IFC receives less than
the full amount then due and payable to it under this Agreement, IFC may allocate and apply the
amount received in any way or manner and for such purpose or purposes under this Agreement as IFC
in its sole discretion determines, notwithstanding any instruction that any Borrower may give to
the contrary.

     Section 2.11. Increased Costs. On each Interest Payment Date, the Borrowers shall,
on a joint and several basis, pay, in addition to interest, the amount which IFC from time to time
notifies to the Borrowers, on a joint and several basis, in an Increased Costs Certificate as being
the aggregate Increased Costs of IFC accrued and unpaid prior to that Interest Payment Date.

     Section 2.12. Unwinding Costs. (a) If IFC incurs any cost, expense or loss as a
result of the Borrower:

	 	(i)	 	failing to borrow in accordance with a Loan request made
pursuant to Section 2.02 (Loan Procedure and Rollover);
	 
	 	(ii)	 	failing to prepay in accordance with a notice of
prepayment;
	 
	 	(iii)	 	prepaying all or any portion of the Loans on a date
other than an Interest Payment Date; or
	 
	 	(iv)	 	after acceleration of any Loan, paying all or a portion
of the Loans on a date other than an Interest Payment Date;

then the Borrowers shall, on a joint and several basis, immediately pay to IFC the amount that IFC
from time to time notifies to the Borrowers as being the amount
of those costs, expenses or losses incurred; provided that such notice sets forth in

 

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reasonable
detail the basis on which such costs, expenses or losses were calculated.

     (b) For the purposes of this Section, “costs, expenses or losses” include any premium, penalty
or expense incurred to liquidate or obtain third party deposits, borrowings, hedges or swaps in
order to make, maintain, fund or hedge all or any part of any drawing or prepayment of any Loan, or
any payment of all or part of the Loans upon acceleration.

     Section 2.13. Suspension or Cancellation by IFC. (a) IFC may, by notice to the
Borrowers, suspend the right of the Borrowers to borrow Loans or cancel the undisbursed portion of
the Facility in whole or in part:

	 	(i)	 	if the first Loan has not been made by June 30, 2007, or
such other date as the parties agree;
	 
	 	(ii)	 	if any Event of Default has occurred and is continuing or
if the Event of Default specified in Section 7.02(f) (Events of Default) is,
in the reasonable opinion of IFC, imminent; or
	 
	 	(iii)	 	if any event or condition has occurred which has or can
be reasonably expected to have a Material Adverse Effect.

     (b) Upon the giving of any such notice referred to in Section 2.13(a), the right of each
Borrower to draw the undisbursed portion of the Facility shall be suspended or canceled, as the
case may be. The exercise by IFC of its right of suspension shall not preclude IFC from exercising
its right of cancellation, either for the same or any other reason specified in Section 2.13(a) and
shall not limit any other provision of this Agreement. Upon any cancellation the Borrowers shall,
on a joint and several basis, subject to paragraph (d) of this Section 2.13, pay to IFC all fees
and other amounts accrued (whether or not then due and payable) under this Agreement up to the date
of that cancellation.

     (c) Any portion of the Facility that is cancelled under this Section 2.13 may not be
reborrowed.

     (d) In the case of partial cancellation of the Facility pursuant to paragraph (a) of this
Section 2.13, or Section 2.14(a) (Cancellation by the Borrowers), interest on the amount then
outstanding of the Loans remains payable as provided in Section 2.03 (Interest).

 

- 45 -

     Section 2.14. Cancellation by the Borrowers. (a) The Borrowers may, by notice to
IFC, irrevocably request IFC to cancel the undisbursed portion of the Facility on the date
specified in that notice (which shall be a date not earlier than thirty (30) days after the date of
that notice).

     (b) IFC shall, by notice to the Borrowers, cancel the undisbursed portion of the Facility
effective as of that specified date if, subject to Section 2.13(e) (Suspension or Cancellation by
IFC), IFC has received all fees and other amounts accrued (whether or not then due and payable)
under this Agreement up to such specified date.

     (c) Any portion of the Facility that is cancelled under this Section 2.14 may not be
reborrowed.

     Section 2.15. Taxes. (a) The Borrowers shall, on a joint and several basis, pay or
cause to be paid all Taxes (other than taxes, if any, payable on the overall income of IFC)
on or in connection with the payment of any and all amounts due under this Agreement that are
now or in the future levied or imposed by any governmental Authority or any jurisdiction through or
out of which a payment is made.

     (b) All payments of principal, interest, fees and other amounts due under this Agreement shall
be made without deduction for or on account of any Taxes.

     (c) If any Borrower is prevented by operation of law or otherwise from making or causing to be
made those payments without deduction, the principal or (as the case may be) interest, fees or
other amounts due under this Agreement shall be increased to such amount as may be necessary so
that IFC receives the full amount it would have received (taking into account any Taxes payable on
amounts payable by such Borrower under this subsection) had those payments been made without that
deduction.

     (d) If Section 2.15 (c) applies and IFC so requests, such Borrower shall deliver to IFC
official tax receipts evidencing payment (or certified copies of them) within thirty (30) days of
the date of that request.

     Section 2.16. Expenses. (a) The Borrowers shall, on a joint and several basis, pay
or, as the case may be, reimburse IFC or its assignees any amount paid by them on account of, all
taxes (including stamp taxes), duties, fees or other charges payable on or in connection with the
execution, issue, delivery,

 

- 46 -

registration or notarization of the Transaction Documents and any other
documents related to this Agreement or any other Transaction Document.

     (b) The Borrowers shall, on a joint and several basis, pay to IFC or as IFC may direct fees
and expenses reasonably incurred by IFC in respect of:

	 	(i)	 	IFC’s technical and market consultants including the
Independent Reserve Engineer and the public accountants incurred in
connection with the investment by IFC provided for under this Agreement;
	 
	 	(ii)	 	IFC’s counsel in the Cayman Islands, Delaware, England,
France, Hungary, Turkey and Romania, incurred in connection with:

	 	(A)	 	the preparation of the investment by
IFC provided for under this Agreement and any other Transaction
Document;
	 
	 	(B)	 	the preparation and/or review,
execution and, where appropriate, translation and registration of
the Transaction Documents and any other documents related to them;
	 
	 	(C)	 	the giving of any legal opinions
required by IFC under this Agreement and any other Transaction
Document;
	 
	 	(D)	 	the administration by IFC of the
investment provided for in this Agreement or otherwise in
connection with any amendment, supplement or modification to, or
waiver under, any of the Transaction Documents;
	 
	 	(E)	 	the registration (where appropriate)
and the delivery of the evidences of indebtedness relating to the
Loan and its disbursement;
	 
	 	(F)	 	the occurrence of any Event of Default
or Potential Event of Default; and

 

- 47 -

	 	(G)	 	the release of the Security following
repayment in full of the Loans;

	 	(iii)	 	the costs and expenses reasonably incurred by IFC in
relation to the supervision and administration of the Facility.
	 
	 	(iv)	 	the costs and expenses incurred by IFC in relation to
efforts to enforce or protect its rights under any Transaction Document, or
the exercise of its rights or powers consequent upon or arising out of the
occurrence of any Event of Default or Potential Event of Default, including
legal and other professional consultants’ fees on a full indemnity basis.

     Section 2.17. Limitation of Liability. Any amounts required to be paid by either
Toreador France or Madison Oil, as a result of its joint and several liability as a Borrower, shall
not exceed fifty million Dollars ($50,000,000) in the aggregate; provided that, for the avoidance
of doubt, this provision shall not apply to any other Borrower.

ARTICLE III

Guarantee

     Section 3.01. Guarantee. In consideration of IFC making available the Facility to
the Borrowers, each of the Guarantors hereby irrevocably, absolutely and unconditionally and on a
joint and several basis (subject to Section 3.16 (Limitation of Liability):

     (a) guarantees to IFC the due and punctual payment of all of the Guaranteed Obligations or any
unpaid portion thereof whether at stated maturity, upon acceleration or otherwise; and

     (b) undertakes that whenever the Borrowers do not pay any amount of the Guaranteed Obligations
when due, the Guarantors will immediately and in any event, forthwith upon demand by IFC, pay that
amount to IFC, in the Loan Currency, and otherwise in the same manner in all respects as the
Guaranteed Obligations are required to be paid by the Borrowers under this Agreement.

 

- 48 -

     Section 3.02. Indemnity. Each of the Guarantors hereby irrevocably, absolutely and
unconditionally and on a joint and several basis agrees, as a primary obligation, to indemnify IFC
from time to time on demand from and against any loss incurred by IFC as a result of any of the
Guaranteed Obligations being or becoming void, voidable, unenforceable or ineffective for any
reason whatsoever, whether or not known to IFC, the amount of such loss being the amount which IFC
would otherwise have been entitled to recover from the Borrowers.

     Section 3.03. Continuing Guarantee. (a) The guarantee and indemnity contained in
this Article 3 is each a continuing, separate and independent obligation of each of the Guarantors,
notwithstanding any settlement of account or the occurrence of any other event or thing, and shall:

	 	(i)	 	remain in full force and effect until the Guaranteed
Obligations have been fully and irrevocably paid strictly in accordance with
the provisions of the Transaction Documents, regardless of any intermediate
payment or discharge in whole or in part; and
	 
	 	(ii)	 	survive the termination of the Transaction Documents.

     (b) If for any reason the Guarantee ceases to be a continuing security, IFC may either
continue any then existing account(s) or open new account(s) for the Borrowers, but in any case the
Guarantors’ obligations under this Article 3 shall be unaffected by, and shall be calculated
without regard to, any payment into or out of any such account after the Guarantee has ceased to be
a continuing security.

     Section 3.04. No Set-off. All payments which each Guarantor is required to make
under this Article 3 shall be made without any set-off, counterclaim, deduction or condition.

     Section 3.05. Taxes. (a) Each of the Guarantors shall pay or cause to be paid all
present and future taxes, duties, fees and other charges of whatsoever nature, if any, now or in
the future levied or imposed by any governmental Authority or any jurisdiction through or out of
which a payment is made on or in connection with the payment of any and all amounts due under this
Article 3.

     (b) All payments due under this Article 3 shall be made without deduction for or on account of
any such taxes, duties, fees or other charges.

 

- 49 -

     (c) If any Guarantor is prevented by operation of law or otherwise from making or causing to
be made such payments without deduction, the amounts due under this Article 3 shall be increased to
such amount as may be necessary so that IFC receives the full amount it would have received (taking
into account any such taxes, duties, fees or other charges payable on amounts payable by such
Guarantor under this subsection) had such payments been made without such deduction.

     (d) If Section 3.05(c) above applies and IFC so requires, the relevant Guarantor shall deliver
to IFC an original receipt or a certified copy thereof issued by the relevant Authority evidencing
payment to that Authority of all amounts required to be deducted in respect of payments due under
the Guarantee.

     Section 3.06. Currency and Place of Payment.

     (a) Each Guarantor shall make all payments of any amount due to IFC under this Article 3 in
the Loan Currency, in same day funds, to the account of IFC specified in Section 2.09 (Currency and
Place of Payment).

     (b) The tender or payment of any amount payable under this Article 3 (whether or not by
recovery under a judgment) in any currency other than the Loan Currency shall not novate, discharge
or satisfy the obligation of any Guarantor to pay in the Loan Currency all amounts payable under
the Guarantee except to the extent that (and as of the date when) IFC actually receives funds in
the Loan Currency in the account specified in, or pursuant to, Section 3.06(a).

     (c) Notwithstanding the provisions of Section 3.06(a) and Section 3.06(b), IFC may require any
Guarantor to pay (or reimburse IFC) for any Guaranteed Obligations in the currency in which they
are payable under this Agreement or other Transaction Document, if other than the Loan Currency.

     (d) In no circumstances whatsoever will any Guarantor have the right to make payments
hereunder in any currency other than the Loan Currency in respect of Guaranteed Obligations that
have been re-denominated into a currency other than the Loan Currency as a result of the
application of any law, order, decree or regulation in any jurisdiction other than the United
States of America, and in such circumstances the Guaranteed Obligations shall, for purposes of this
Agreement, be deemed to remain denominated and payable to IFC in the Loan Currency. Each Guarantor
hereby irrevocably and unconditionally waives any legal or equitable defense it may have to the
payment of any of the Guaranteed Obligations in a currency other than the Loan Currency.

 

- 50 -

     Section 3.07. Certificate Conclusive. A certificate of IFC stating:

     (a) any amount due and payable by any Guarantor under this Agreement; or

     (b) the amount of the Guaranteed Obligations, whether currently due and payable or not,

shall be conclusive in the absence of manifest error.

     Section 3.08. Allocation. IFC may allocate and apply:

     (a) any amounts received by it or recovered under any security, and any other document or
agreement which is a security for any of the Guaranteed Obligations; or

     (b) any amount received from or on behalf of any Guarantor under this Agreement,

in each case, if such amount is less than the full amount then due and payable to IFC under this
Agreement, in any manner and for such purposes in respect of this Agreement or any other Financing
Document as IFC in its sole discretion determines, notwithstanding any instruction that any
Guarantor may give to the contrary.

     Section 3.09. Waivers of Defenses (a) Each Guarantor’s obligations under this
Article III and IFC’s rights under this Agreement shall not be affected or impaired or waived or
precluded for additional or future exercise, by any act, omission, circumstance, matter or thing
(other than full and irrevocable payment of the Guaranteed Obligations) which, but for this
provision, would reduce, release or prejudice any of its obligations under the Guarantee or which
might otherwise constitute a legal or equitable discharge or defense of a surety or a guarantor, or
otherwise discharge, impact or affect the obligations of any Guarantor or the rights of IFC,
including (whether or not known to such Guarantor or to IFC):

     (i) any time, waiver, composition, forbearance or concession given to the Borrowers or any
other Person;

     (ii) any assertion of, or failure to assert, or delay in asserting, any right, power or remedy
against the Borrowers or any other Person, in respect of any Security;

 

- 51 -

     (iii)
any amplification, amendment (however fundamental), variation or replacement of the provisions of any Transaction Document or of any other agreement or security between IFC and the Borrowers;

     (iv)
any failure of the Borrowers or any Guarantor to comply with any requirement of any law, regulation or order;

     (v)
the dissolution, liquidation, reorganization or other alteration of the legal status or structure of the Borrowers or any Guarantor;

     (vi)
any purported or actual assignment of the Loans by IFC to any other party;

     (vii)
this Agreement or any other Transaction Document being in whole or in part illegal, void, voidable, avoided, invalid, unenforceable or otherwise of limited force and effect; or

     (viii)
any failure by IFC to take, enforce, release, discharge, exchange or substitute, or to realise the full value of, the security or any other security taken in respect of the Guaranteed Obligations.

     Section 3.10. Immediate Recourse. Each Guarantor waives any right it may have of first requiring IFC (or any trustee, agent or other person acting on its behalf) to:

     (i)
give any notice to, make a demand upon, or take any action against any of the Borrowers;

     (ii)
give any prior notice to any Guarantor with regard to any default by the Borrowers; or

     (iii)
proceed against, obtain a judgment, file a proof in a winding-up or dissolution of any of the Borrowers, enforce any other rights or security or make a demand or claim payment from any Person,

before making a claim against any Guarantor under this Agreement.

     Section 3.11. Non-Competition. If any amounts have become payable or have been paid by any Guarantor under this Agreement, none of the Guarantors shall, in respect of such monies, seek to enforce repayment, obtain the benefit of any security, be indemnified or receive collateral from any of the Borrowers or a

 

   - 52 -

contribution from any other Person, or exercise any other rights or legal remedies of any kind
which may accrue to any Guarantor against any of the Borrowers, including in any proceeding of the
type referred to in Section 3.12, and whether by way of subrogation, offset, counterclaim or
otherwise, in respect of the amount so payable or so paid (or in respect of any other monies for
the time being due to the Guarantor from the Borrowers) if and for so long as any Guaranteed
Obligations remain payable. Each Guarantor shall hold in trust for, and forthwith pay or transfer
to, IFC any payment or distribution or benefit of security received by it contrary to this Section
3.11, including where (notwithstanding Section 3.12) such payment, distribution or benefit was
received by IFC in any proceeding of the type referred to in Section 3.12.

     Section 3.12. Bankruptcy or Liquidation of Company. If any of the Borrowers becomes
bankrupt, enters into a composition or makes any arrangement with its creditors, or is dissolved,
liquidated or wound up, no Guarantor shall claim, rank, prove or vote as a creditor of the relevant
Borrower or its estate in competition with IFC in respect of any amounts owing to such Guarantor by
the Borrowers on any account whatsoever, but instead shall give IFC the benefit of any such proof
and of all amounts to be received in respect of that proof until all Guaranteed Obligations have
been fully paid.

     Section 3.13. Appropriation of Monies. Until all of the Obligations have been
irrevocably paid in full, IFC (or any trustee, agent or other person acting on its behalf)
may:

     (a) refrain from applying or enforcing any other monies, security or rights held or
received by IFC (or such trustee, agent or other person) in respect of the Guaranteed Obligations,
or apply and enforce the same in such manner and order as it sees fit (whether against the
Guaranteed Obligations or otherwise) and the Guarantor shall not be entitled to the benefit of the
same; and

     (b) hold and keep for such time as it thinks prudent any monies received, recovered or
realized under the Guarantee, to the credit either of the Guarantors or such other Person or
Persons as it thinks fit or in a suspense account.  

     Section 3.14. Reinstatement. (a) Where any discharge (whether in respect of the
obligations of the Borrowers, any Guarantor or any security for those obligations or otherwise) is
made in whole or in part or any arrangement is made on the faith of any payment, security or other
disposition which is avoided or must be restored on insolvency, liquidation or otherwise without
limitation, the liability of the Guarantors under this Agreement shall continue or shall be

 

- 53 -

reinstated (as the case may be) as if such discharge or arrangement had not occurred.

     (b) IFC (or any trustee, agent or other person acting on its behalf) may concede or compromise
any claim that any payment, security or other disposition is liable to avoidance or restoration.

     Section 3.15. Additional Security. The Guarantee is in addition to, and is not in
any way prejudiced by, any collateral or other security now or hereafter held by IFC, nor shall
such collateral or other security held by IFC or the liability of any Person for all or any part of
the Guaranteed Obligations be in any manner prejudiced or affected by the Guarantee.

     Section 3.16. Limitation of Liability. Any amounts required to be paid by either
Toreador France or Madison Oil, pursuant to this Article III, shall not exceed fifty million
Dollars ($50,000,000) in the aggregate; provided that, for the avoidance of doubt, this provision
shall not apply to any other Guarantor.

ARTICLE IV

Representations and Warranties

     Section 4.01. Representations and Warranties of Each Obligor. Each Obligor
represents and warrants that:

     (a) Organization and Authority. It is a company or corporation limited by shares duly
incorporated and validly existing under the laws of the jurisdiction of its incorporation and has
the corporate power and has obtained all required Authorizations to own its assets, conduct its
business as presently conducted and to enter into, and comply with its obligations under, the
Transaction Documents to which it is a party or will, in the case of any Transaction Document not
executed as at the date of this Agreement, when that Transaction Document is executed, have the
corporate power to enter into, and comply with its obligations under, that Transaction Document;

     (b) Validity. Each Transaction Document to which it is a party has been, or will be,
duly authorized and executed by it and constitutes, or will when executed constitute, its valid and
legally binding obligation, enforceable in accordance with its terms and none of the Project
Documents has been, or will be, amended or modified except as permitted under this Agreement;

 

- 54 -

     (c) No Conflict. Neither the making of any Transaction Document to which it is a party
nor (when all the Authorizations referred to in Section 5.01(d) (Conditions of Disbursement) have
been obtained) the compliance with its terms will conflict with or result in a breach of any of the
terms, conditions or provisions of, or constitute a default or require any consent under, any
indenture, mortgage, agreement or other instrument or arrangement to which it is a party or by
which it is bound, or violate any of the terms or provisions of its Charter or any Authorization,
judgment, decree or order or any statute, rule or regulation applicable to it;

     (d) Status of Authorizations. To the best of its knowledge, after due inquiry, it has
all of the Authorizations (other than Authorizations that are of a routine nature and are obtained
in the ordinary course of business and other than, prior to the disbursement of the first A Loan,
Authorizations necessary with respect to the creation and perfection of the Security) needed by it
to conduct its business, carry out the Project and execute, and comply with its obligations under,
this Agreement and each of the other Transaction Documents to which it is a party, and all such
Authorizations have been obtained and are in full force and effect and in respect of Authorizations
not required to be obtained for the purposes specified above at the time of making this
representation, it has no reason to believe that it will not obtain those Authorizations in a
timely manner.

     (e) No Amendments to Charter. Its Charter has not been amended since the date, prior
to the date of this Agreement, it provided such Charter to IFC;

     (f) No Immunity. Neither it nor any of its property enjoys any right of immunity from
set-off, suit or execution with respect to its assets or its obligations under any Transaction
Document;

     (g) Disclosure. All written information given by it to IFC relating to such Obligor
or the Project was and continues to be true and accurate (other than projections and other
forward-looking statements which it believes to be reasonable) and does not contain any
information which is misleading in any material respect nor does it omit any information the
omission of which makes the information contained in it misleading in any material respect;

     (h) Financial Condition. Since December 31, 2005, it:

	 	(i)	 	has not suffered any change that has a Material Adverse
Effect or incurred any substantial loss or liability;

 

- 55 -

	 	(ii)	 	has not undertaken or agreed to undertake any substantial
obligation other than in the ordinary course of business;

     (i) Financial Statements. Its financial statements for the period ending on December
31, 2005:

	 	(i)	 	have been prepared in accordance with the Accounting
Standards and give a true and fair view of the financial condition of it as
of the date as of which they were prepared and the results of its operations
during the period then ended, subject to any adjustments to be made pursuant
to the ongoing restatement of such financial statements, provided that any
such adjustment cannot reasonably be expected to have a Material Adverse
Effect;
	 
	 	(ii)	 	disclose all of its liabilities (contingent or
otherwise), and the reserves, if any, for such liabilities and all
unrealized or anticipated liabilities and losses arising from commitments
entered into by it (whether or not such commitments have been disclosed in
such financial statements);

     (j) Title to Assets and Permitted Liens.

	 	(i)	 	It has good and marketable title to all of the assets
purported to be owned by it and possesses a valid leasehold interest in all
assets which it purports to lease, in all cases free and clear of all Liens,
other than Permitted Liens and no contracts or arrangements, conditional or
unconditional, exist for the creation by it of any Lien, except for the
Security;
	 
	 	(ii)	 	the provisions of the Security Documents are effective to
create, in favor of IFC, legal, valid and enforceable Liens on or in all of
the assets covered by the Security; and
	 
	 	(iii)	 	all recordings and filings have been made in all public
offices, all necessary consents obtained and all other action has been taken
so that the Liens created by each Security Document constitute perfected
Liens on the Security with the priority specified in the Security Documents;

 

- 56 -

provided that the representations in Sections 5.01(k)(ii) and (iii) shall not be
deemed made prior to the disbursement of the first A Loan;

     (k) Taxes. All of its tax returns and reports required by law to be filed have been
duly filed and all Taxes, obligations, fees and other governmental charges upon it, or its
properties, or its income or assets, which are due and payable or to be withheld, have been paid or
withheld, other than those:

	 	(i)	 	payable without penalty or interest; and
	 
	 	(ii)	 	being contested in good faith by appropriate proceedings,
and so long as such Obligor (A) has set aside adequate reserves sufficient
to promptly pay in full any amounts that such Obligor may be ordered to pay
on final determination of such proceedings and (B) is diligently prosecuting
such proceedings;

     (l) Litigation.

	 	(i)	 	It is not engaged in nor, to the best of its knowledge,
after due inquiry, threatened by, any litigation, arbitration or
administrative proceedings, the outcome of which could reasonably be
expected to have a Material Adverse Effect; and
	 
	 	(ii)	 	no judgment or order has been issued which has or may
reasonably be expected to have a Material Adverse Effect;

     (m) Compliance with Law. To the best of its knowledge and belief after due inquiry, it
is not in violation of any material statute or regulation of any Authority;

     (n) Environmental Matters.

	 	(i)	 	to the best of its knowledge and belief, after due
inquiry, there are no material social or environmental risks or issues in
relation to the Project;
	 
	 	(ii)	 	it has not received nor is aware of either (A) any
existing or threatened complaint, order, directive, claim, citation or
notice from any Authority or (B) any material written

 

- 57 -

	 	 	 	communication from any
Person concerning the Project’s failure to comply with any matter covered by
the Performance Standards which failure has, or could reasonably be expected
to have, a Material Adverse Effect or a material adverse impact on the
implementation or operation of the Project in accordance with the
Performance Standards; and
	 
	 	(iii)	 	each of the Obligors are in compliance in all material
respects with applicable country and IFC environmental guidelines, the
Performance Standards, ESRS and the Corrective Action Plan.

     (o) Labor Matters. There are no ongoing or, to the best of its knowledge after due
inquiry, threatened, strikes, slowdowns or work stoppages by its employees or any contractor with
respect to the Project, to the extent that any such threatened strikes, slowdowns or work stoppages
may reasonably be expected to have a Material Adverse Effect;

     (p) Prohibited Payments. Neither it nor any Affiliates, nor any Person acting on its
or their behalf, has made, with respect to the Project or any transaction contemplated by this
Agreement, any Prohibited Payment;

     (q) No Material Omissions. None of the representations and warranties in this Section
4.01 omits any matter the omission of which makes any of such representations and warranties
misleading in any material respect;

     (r) Pension Plans. It is in compliance with its obligations with regards to its
pension and employee benefit plans, including its funding obligations with regards to such pension
and employee benefit plans; and

     (s) Capitalization. Schedule 8 (Group Ownership) sets forth a true and accurate
description of the Obligors’ capitalization and ownership structure.

     Section 4.02. Representatiions and Warranties of Madison Oil and Toreador France.
Each of Madison Oil and Toreador France represents and warrants that:

     (a) it has received valid consideration, in accordance with the requirements of French law,
for acting as Guarantor under the Guarantee [and assuming joint and several liability as a
Borrower]; and

 

- 58 -

     (b) its incurrence of the liabilities under the Guarantee [and otherwise under this Agreement]
does not exceed its financial capacity as of the date of this Agreement (as determined in
accordance with French law).

     Section 4.03. IFC Reliance. Each Obligor acknowledges that it makes the
representations and warranties in Section 4.01 (Representations and Warranties of Each Obligor)
with the intention of inducing IFC to enter into this Agreement on the basis of, and in full
reliance on, each of such representations and warranties.

ARTICLE V

Conditions of Disbursement

     Section 5.01. Conditions of First Disbursement. The obligation of IFC to make the
first Loan is subject to the fulfillment prior to or concurrently with the making of that first
Loan of the following conditions:

     (a) Transaction Documents. The Transaction Documents (other than the Security
Documents), each in form and substance satisfactory to IFC, have been entered into by all parties
to them and have become (or, as the case may be, remain) unconditional and fully effective in
accordance with their respective terms (except for this Agreement having become unconditional and
fully effective, if that is a condition of any of those agreements), and IFC has received a copy of
each of those agreements to which it is not a party;

     (b) Charter Amendments. Each Obligor has delivered to IFC a certified copy of its
Charter (with all amendments thereto), and each such Charter is in a form and substance reasonably
satisfactory to IFC;

     (c) Authorizations. Each Obligor has obtained, and provided to IFC copies of, all
Authorizations listed in Annex B, and such other Authorizations not listed in those Sections that
may become necessary for such Obligor to have in relation to:

	 	(i)	 	the Loans;
	 
	 	(ii)	 	the business of the relevant Obligor as it is presently
carried on and is contemplated to be carried on;
	 
	 	(iii)	 	the Project and the implementation of the Financial
Plan;

 

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	 	(iv)	 	the due execution, delivery, validity and enforceability
of, and performance by the relevant Obligor of their respective obligations
under this Agreement and the other Transaction Documents, the Project
Documents and any other documents necessary or desirable to the
implementation of any of those agreements or documents other than any
Authorizations needed for the creation and perfection of the Security; and
	 
	 	(v)	 	the remittance to IFC or its assigns in the Loan Currency
of all monies payable with respect to the Transaction Documents;

and all those Authorizations are in full force and effect;

     (d) Legal Opinions. IFC has received legal opinions in a form satisfactory to it from
counsel for the Obligors and/or IFC in each of Delaware, France, Cayman Islands, Turkey, Romania
and Hungary and, if IFC so requests, from counsel for IFC in France, covering such matters relating
to the transactions contemplated by this Agreement as IFC may reasonably request;

     (e) CFO’s Certificate. IFC has received a certification from the Company’s chief
financial officer confirming that, as at a date within sixty (60) days prior to the date of the
first Loan, the Company is in compliance with the provisions of Section 6.01(m) (Affirmative
Covenants), subject to any adjustments to be made pursuant to the ongoing restatement of the
Company’s financial statements for the period ending on December 31, 2005, provided that any such
adjustment cannot reasonably be expected to have a Material Adverse Effect;

     (f) Insurance. IFC has received copies of all insurance policies required to be
obtained pursuant to Section 6.04 (Insurance) and Annex C, and a certification from the Company’s
insurers or insurance agents confirming that such policies are in full force and effect and all
premiums then due and payable under those policies have been paid;

     (g) Fees. IFC has received the fees which Section 2.08 (Fees) requires to be paid
before the date of the first Loan;

     (h) Legal Fees and Expenses. IFC has received the reimbursement of all invoiced fees
and expenses of IFC’s counsel as provided in Section 2.16 (b) (ii)

 

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or confirmation that those fees
and expenses have been paid directly to that counsel;

     (i) Authorization of Auditors. IFC has received a copy of the authorization to the
Auditors referred to in Section 6.01(e) (Affirmative Covenants);

     (j) Incumbency. IFC has received a Certificate of Incumbency and Authority from each
Borrower and the Company;

     (k) Appointment of Agent. Each Obligor has delivered to IFC evidence, substantially
in the form of Schedule 4, of appointment of an agent for service of process pursuant to Section
8.05 (Applicable Law and Jurisdiction);

     (l) IFC has received evidence satisfactory to it confirming that:

	 	(i)	 	no more than six million Dollars ($6,000,000) is
outstanding under the Texas Facility; and
	 
	 	(ii)	 	no more than eleven million Dollars ($11,000,000) is
outstanding under the NATIXIS Facility; and

     (m) IFC has received:

	 	(i)	 	evidence satisfactory to it that that consideration
referred to in Section 4.02(a) (Representations and Warranties of Madison
Oil and Toreador France) has been paid (or, if in the form of an annual fee,
the fee for the remainder of 2006 and the whole of 2007 has been paid) and
shall have received a certificate from the chief financial officer of the
Company certifying the payment terms of such consideration; and
	 
	 	(ii)	 	the board resolutions of Madison Oil and Toreador France
in form and substance satisfactory to IFC.

     Section 5.02. Conditions of All Disbursements. The obligation of IFC to make any
Loan, including the first Loan, is also subject to the conditions that:

     (a) No Default. No Event of Default and, solely in respect of a Loan other than a
Rollover Loan, no Potential Event of Default has occurred and is continuing;

 

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     (b) Use of Proceeds. The proceeds of that Loan:

	 	(i)	 	are, at the date of the relevant request, needed by the
relevant Borrower for the purpose of the Project, or will be needed for that
purpose within three (3) months of that date; and
	 
	 	(ii)	 	are not in reimbursement of, or to be used for,
expenditures in the territories of any country that is not a member of the
World Bank or for goods produced in or services supplied from any such
country;

     (c) No Material Adverse Effect. Since the date of this Agreement nothing has occurred
which has or can reasonably be expected to have a Material Adverse Effect;

     (d) No Material Loss or Liability. Since the date of this Agreement none of the
Obligors has incurred any material loss or liability except in the normal course of business
(except such liabilities as may be incurred in accordance with Section 6.02 (Negative Covenants));

     (e) Representations and Warranties. The representations and warranties made in Article
IV are true and correct in all material respects on and as of the date of that Loan with the same
effect as if those representations and warranties had been made on and as of the date of that Loan
(but in the case of Section 4.01(c) (Representations and Warranties of Each Obligor), without the
words in parentheses);

     (f) Legal Opinions. IFC has received (if it so requires) legal opinions in a form
satisfactory to it from counsel for the Obligors in each of Delaware, France, Cayman Islands,
Turkey, Romania and Hungary, with respect to any matters relating to that Loan;

     (g) No Violations. Following the making of the relevant Loan, no Obligor will be in
violation of:

	 	(i)	 	its Charter;
	 
	 	(ii)	 	any provision contained in any document to which it is a
party (including this Agreement) or by which it is bound; or

 

- 62 -

	 	(iii)	 	any law, rule, regulation, Authorization or agreement or
other document binding on it directly or indirectly limiting or otherwise
restricting its borrowing power or authority or its ability to borrow;

     (h) Borrower. If the relevant Borrower delivering the Loan request pursuant to
Section 2.02(a) (Facility Procedure and Rollover) is Toreador Romania, then the Romanian Concession
Transfer Date shall have occurred;

     (i) Available Amount and Required Ratios. Following the making of any Loan, including
any Rollover Loan under Section 2.02(c) (Loan Procedure and Rollover):

	 	(i)	 	the aggregate outstanding amount of all Loans under the
Facility shall not exceed the Available Amount; and
	 
	 	(ii)	 	the Company shall be in compliance with the Required
Ratios; and

     (j) Updated IFC Base Case. If IFC so requires in connection with the disbursement of
any Loan (including any Rollover Loan), the Borrower shall provide to IFC an updated IFC Base Case
confirming compliance with the requirements of Section 5.02(i).

     (k) French Borrowers. If the relevant Borrower delivering the Loan request pursuant
to Section 2.02(a) (Facility Procedure and Rollover) is Madison Oil France or Toreador Energy
France S.C.S.:

	 	(i)	 	an account shall be opened by such Borrower in Turkey
and/or Romania;
	 
	 	(ii)	 	the proceeds of the relevant Loan shall be deposited into
such account(s); and
	 
	 	(iii)	 	the proceeds of the relevant Loan shall be used for the
purposes of financing the capital expenditure and the working capital needs
of such Borrower in Turkey and Romania.

For the avoidance of doubt, the proceeds of the relevant loan will not be made available in France.

 

- 63 -

     Section 5.03. Additional Conditions of the first A Loan. The obligation of IFC to
make the first A Loan is subject to the fulfillment prior to or concurrently with the making of
that A Loan of the following additional conditions:

     (a) C Loan. The C Loan has been fully disbursed;

     (b) Security. Each Obligor has obtained, and provided to IFC, copies of all
Authorizations that are necessary for such Obligor to create and perfect the Security, and the
Security Documents, each in form and substance satisfactory to IFC, have been entered into by all
parties to them and have become (or, as the case may be, remain) unconditional and fully effective
in accordance with their respective terms, and the Security has been duly created and perfected as
first ranking security interests in all assets and rights subject to the Security Documents;

     (c) Legal Opinions. IFC has received legal opinions in a form satisfactory to it from
the Obligors’ and/or IFC’s counsel in each of Delaware, France, Cayman Islands, Hungary, England,
and at the option of IFC, Turkey and Romania, covering such matters relating to the transactions
contemplated by this Agreement as IFC may reasonably request, including, without limitation
confirmation that the Security Documents have been executed and have become fully effective;

     (d) NATIXIS Facility and Texas Facility. Each of the NATIXIS Facility and the Texas
Facility has been repaid in full, all further commitments in respect thereof have been cancelled,
and the security interests granted in relation thereto have been terminated;

     (e) Annual Monitoring Report. The Company and IFC have agreed on the form of the
Annual Monitoring Report;

     (f) Auditor’s Certificate. IFC has received a certification from the Auditors
confirming that the Company is in compliance with the provisions of Section 6.01(m) (Affirmative
Covenants) and that adequate accounting, management and cost control systems are in place; and

     (g) Obligors’ Liability. IFC has received evidence as it deems reasonably necessary
confirming that each Obligor remains fully liable for all of its obligations under this Agreement.

 

- 64 -

     Section 5.04. Certification. (a) The relevant Borrower shall deliver to IFC with
respect to each Loan request:

	 	(i)	 	certifications, in the form included in Schedule 2,
relating to the conditions specified in Section 5.02 (Conditions of All
Disbursements) (other than the condition in Section 5.02(f)) expressed to be
effective as of the date of that Loan, and in the case of Section 5.02(d),
also certified by the Auditors if IFC so requires; and
	 
	 	(ii)	 	such evidence as IFC may reasonably request of the proposed
utilization of the proceeds of that Loan or the utilization of the proceeds
of any prior Loan.

     (b) In the case of any Rollover Loan, except where any Borrower makes a specific
representation or where certifications or evidence is requested by IFC pursuant to Section 5.04(a)
above, each Borrower shall be deemed to have provided such certifications as of the date of such
Rollover Loan.

     Section 5.05 Conditions for IFC Benefit. The conditions in Section 5.01 through
Section 5.03 are for the benefit of IFC and may be waived only by IFC in its sole discretion.

ARTICLE VI

Particular Covenants

     Section 6.01. Affirmative Covenants. Unless IFC otherwise agrees:

     (a) Corporate Existence; Conduct of Business. Each Obligor shall maintain its
corporate existence and comply with its Charter; and shall implement the Project and conduct its
business with due diligence and efficiency and in accordance with sound international oil,
financial and business practices;

     (b) Use of Proceeds. Each Borrower shall cause the financing specified in the
Financial Plan to be applied exclusively to the Project;

 

- 65 -

     (c) Compliance with Laws; Taxes: Each Obligor shall:

	 	(i)	 	conduct its business in compliance, in all material
respects, with all applicable requirements of law; and
	 
	 	(ii)	 	file by the date due all returns, reports and filings in
respect of Taxes required to be filed by it and pay, when due, all Taxes due
and payable by it;

     (d) Accounting and Financial Management. Each Obligor shall promptly install, if not
yet installed, and maintain an accounting and control system, management information system and
books of account and other records, which together adequately give a fair and true view of the
financial condition of such Obligor and the results of its operations in conformity with the
Accounting Standards;

     (e) Auditors.

	 	(i)	 	Each Obligor shall appoint and maintain at all times a
firm of internationally recognized independent public accountants acceptable
to IFC as auditors of such Obligor; and
	 
	 	(ii)	 	the Company shall irrevocably authorize, in the form of
Schedule 6, the Auditors (whose fees and expenses shall be for the account
of the Company) to communicate directly with IFC at any time regarding the
Company’s financial statements (both audited and unaudited), accounts and
operations, and provide to IFC a copy of that authorization; provided that,
prior to any communications with the Auditors, IFC shall provide prior
written notice to the Company and, provided that, no Potential Event of
Default or Event of Default has occurred, allow the Company a reasonable
opportunity to participate in such discussions; and
	 
	 	(iii)	 	the Company shall, no later than thirty (30) days after
any change in Auditors, issue a similar authorization to the new Auditors
and provide a copy thereof to IFC;

 

- 66 -

     (f) Access. Upon IFC’s request, and with reasonable prior written notice, each Obligor
shall permit representatives of IFC and the CAO, during normal office hours, to:

	 	(i)	 	visit any of the sites and premises where the business of
such Obligor is conducted;
	 
	 	(ii)	 	inspect any of the sites, facilities, plants and
equipment of such Obligor;
	 
	 	(iii)	 	have access to the books of account and all records of
such Obligor; and
	 
	 	(iv)	 	have access to those employees, agents, contractors and
subcontractors of such Obligor who have or may have knowledge of matters
with respect to which IFC seeks information;

provided that (i) no such reasonable prior notice shall be necessary if an Event of Default or
Potential Event of Default is continuing or if special circumstances so require and (ii) in the
case of the CAO, such access shall be for the purpose of carrying out the CAO’s Role;

     (g) Environmental Matters. Through its employees, agents, contractors and
subcontractors, each Obligor shall ensure:

	 	(i)	 	that the design, construction, operation, maintenance,
management and monitoring of the Project’s sites, plants, equipment,
operations and facilities are undertaken in compliance with (A) the
Corrective Action Plan, and (B) the applicable requirements of the
Performance Standards; and
	 
	 	(ii)	 	that it otherwise complies with the Environmental, Health
and Safety Guidelines, the Performance Standards, all applicable
environmental laws, and the environmental assessment reports, including the
ESRS.

     (h) Review of Annual Monitoring Report. The Company shall periodically review the
form of the Annual Monitoring Report and advise IFC as to whether revision of the form is necessary
or appropriate in light of changes to any Obligor’s business or operations, or in light of
environmental or social risks

 

- 67 -

identified by any Obligor’s S&E Management System; and revise the
form as agreed with IFC;

     (i) S&E Management System. The Company, Toreador Turkey and Toreador Romania shall
use all reasonable efforts to ensure the continuing implementation and operation of the S&E
Management System to assess and manage social and environmental issues in a manner consistent with
the Performance Standards and the Corrective Action Plan;

     (j) Authorizations. Each Obligor shall:

	 	(i)	 	obtain and maintain in force (and where appropriate,
renew in a timely manner) all Authorizations, including without limitation
the Authorizations specified in Annex B, which are necessary for the
implementation of the Project, the carrying out of its business and
operations generally and the compliance by it with all its obligations under
the Transaction Documents; and
	 
	 	(ii)	 	comply with all the conditions and restrictions contained
in, or imposed on it by, those Authorizations;

     (k) Security; Further Assurances. The Obligors shall execute (or cause to be executed
as the case may be) all of the Security Documents, and ensure the Security referred to therein is
perfected and in full force and effect on or before February 28, 2006. From time to time, each
Obligor shall execute, acknowledge and deliver or cause to be executed, acknowledged and delivered
such further instruments as may reasonably be requested by IFC for perfecting or maintaining in
full force and effect the Security or for re-registering the Security or otherwise and, if
necessary, create and perfect additional Security, to enable it to comply with its obligations
under the Transaction Documents;

     (l) Royalties. Each Obligor shall pay all royalties and all license and other fees,
which are properly assessed against it, not later than the due date therefor;

     (m) Required Ratios. The Company shall maintain at all times, the following ratios
(the “Required Ratios”) on a Consolidated Basis at the following levels:

	 	(i)	 	Life of Loan Coverage Ratio of not less than:

 

- 68 -

	 	(A)	 	1.2:1.0 in 2006 and 2007;
	 
	 	(B)	 	1.3:1.0 in 2008; and
	 
	 	(C)	 	1.4:1.0 in 2009 and each subsequent year
thereafter;

	 	(ii)	 	Reserve Tail Ratio of not less than twenty five percent
(25%);
	 
	 	(iii)	 	Adjusted Financial Debt to EBITDA ratio of not more than
3.0:1.0;
	 
	 	(iv)	 	Liabilities to Tangible Net Worth Ratio of not more than
60:40; and
	 
	 	(v)	 	Interest Coverage Ratio of not less than 3.0:1.0;

     (n) Maintenance of Operating Records. Each Obligor shall ensure adequate segregation
of costs including financing thereof incurred in connection with the Project and any other activity
in its books of account and other financial records in conformity with applicable law, the
applicable Project Document, and any other relevant agreement binding on it and in accordance with
the Accounting Principles;

     (o) Public Disclosure. The Company shall publicly disclose, annually its share (and
any share of any Subsidiary of the Company) of all payments made to local, regional or central
governmental Authorities in Turkey and Romania, unless such disclosure has already been made by the
respective Authorities;

     (p) Pension and Employee Benefits. Each Obligor shall comply with all requirements
relating to its pension and employee benefit plans;

     (q) Environmental and Social Manager. The Company, Toreador Turkey and Toreador
Romania shall appoint, and maintain at all times the appointment of, the Environmental and Social
Manager;

     (r) Accounts Agreements; Reserve Account.

	 	(i)	 	On or prior to the date of the first A Loan, the Obligors
shall establish and maintain the accounts provided for in the French
Accounts Agreement (including the Reserve Account) and enter into the French
Accounts Agreement.

 

- 69 -

	 	(ii)	 	The Obligors shall ensure that a minimum amount shall be
maintained in the Reserve Account as follows:

	 	(1)	 	On or prior to the Phase II
Effectiveness Date:

	 	(i)	 	from and after January
1, 2009 until June 30, 2009, US$10,000,000;
	 
	 	(ii)	 	from and after July 1,
2009 until December 31, 2009, US$ 20,000,000;
	 
	 	(iii)	 	from and after January
1, 2010 until June 30, 2010, US$30,000,000; and
	 
	 	(iv)	 	from and after July 1,
2010, US$35,000,000; and

	 	(2)	 	from and after the occurrence of the
Phase II Effectiveness Date:

	 	(i)	 	from and after January
1, 2009 until June 30, 2009, US$15,000,000;
	 
	 	(ii)	 	from and after July 1,
2009 until December 31, 2009, US$ 25,000,000;
	 
	 	(iii)	 	from and after January
1, 2010 until June 30, 2010, US$40,000,000; and
	 
	 	(iv)	 	from and after July 1,
2010, US$50,000,000;

	 	(iii)	 	on or prior to the date of the first A Loan, the
Obligors shall establish and maintain the accounts provided for in the
Turkish Accounts Agreement and enter into the Turkish Accounts Agreement and
ensure, through arrangements reasonably acceptable to IFC, that all revenues
of Toreador Turkey from the sale of oil and gas in Turkey be deposited into
such accounts;
	 
	 	(iv)	 	on or prior to the date of the first A Loan, the Obligors
shall establish and maintain the accounts provided for in

 

- 70 -

	 	 	 	the Romanian
Accounts Agreement and enter into the Romanian Accounts Agreement and
ensure, through arrangements reasonably acceptable to IFC, that all revenues
of Toreador Romania from the sale of oil and gas in Romania be deposited
into such accounts; and
	 
	 	(v)	 	Madison Oil France and/or Toreador Energy France S.C.S.,
shall open an account in Turkey and/or Romania prior to delivering the Loan
request pursuant to Section 2.02(a) (Facility Procedure and Rollover) for
the purposes of paying the capital expenditure and working capital
requirements in Turkey and Romania.

     (s) Sales Contracts. Each Obligor shall enter into and maintain in effect at all
times sales contracts for the sale of all production from its Borrowing Base Assets and shall
promptly, after execution thereof, deliver to IFC a signed copy of each such agreement; and

     (t) Payments to Madison Oil and Toreador France. Each Obligor (other than Madison Oil
and Toreador France) shall ensure that, to the extent that the consideration referred to in Section
4.02(a) (Representations and Warranties of Madison Oil and Toreador France) is to be paid other
than in the form of a single up front payment, such consideration is paid to Madison Oil and
Toreador France in accordance with the terms agreed by Madison Oil and Toreador France.

     Section 6.02. Negative Covenants. Unless IFC otherwise agrees:

     (a) Distributions. No Obligor shall make any Restricted Payment except for:

	 	(i)	 	payment of dividends required under applicable law;
	 
	 	(ii)	 	payment of dividends on the Series A-1 Convertible
Preferred Stock, provided that:

	 	(A)	 	prior to and after paying such payment,
no Event of Default or Potential Event of Default shall have
occurred and be continuing; and
	 
	 	(B)	 	such payment is out of retained earnings;
provided further that the retained earnings out of which such

 

- 71 -

	 	 	 	payments may be made should in no event include any amount resulting
from the revaluation of assets;

	 	(iii)	 	payment of interest and principal on Financial Debt owed
to another Obligor, provided that prior to and after paying such payment, no
Event of Default or Potential Event of Default shall have occurred and be
continuing; and
	 
	 	(iv)	 	cash dividends paid to another Obligor, provided that
prior to and after paying such dividend:

	 	(A)	 	no Event of Default or Potential Event of
Default shall have occurred and be continuing; and
	 
	 	(B)	 	such payment or distribution is out of
retained earnings in the immediately preceding Financial Year;
provided further that the retained earnings out of which such
payments or distributions may be made should in no event include any
amount resulting from the revaluation of assets;

     (b) Capital Expenditures. No Obligor shall incur expenditures or commitments for
expenditures for fixed or other non-current assets, other than in accordance with the annual
capital expenditure budget of the Company (including any proposed acquisition of oil and gas
assets) which has been approved by IFC; provided that no such prior IFC approval shall be required
if:

	 	(i)	 	such expenditures or commitments of all Obligors do not
exceed an aggregate amount equivalent to five million Dollars ($5,000,000) in
any Financial Year; and
	 
	 	(ii)	 	after giving effect to such expenditures or commitments the
Company (on a Consolidated Basis) would be in compliance with Section 6.01(m)
(Affirmative Covenants);

     (c) Permitted Financial Debt. No Obligor shall incur, assume or permit to exist any
Financial Debt except:

	 	(i)	 	the Loans;
	 
	 	(ii)	 	the Existing Convertible Senior Notes;

 

- 72 -

	 	(iii)	 	other debt to any other Obligor;
	 
	 	(iv)	 	on or prior to the earlier of (i) February 28, 2007, and
(ii) the date of the making of the first A Loan, Financial Debt under the
Texas Facility which does not exceed, in the aggregate, six million Dollars
($6,000,000);
	 
	 	(v)	 	on or prior to the earlier of (i) February 28, 2007, and
(ii) the date of the making of the first A Loan, Financial Debt under the
NATIXIS Facility which does not exceed, in the aggregate, eleven million
Dollars ($11,000,000);
	 
	 	(vi)	 	short-term unsecured Financial Debt incurred in the
ordinary course of business in an aggregate amount which does not exceed two
million Dollars ($2,000,000); and
	 
	 	(vii)	 	non-speculative hedging programs permitted under Section
6.02(e).

     (d) Leases. No Obligor shall enter into any agreement or arrangement to lease any
property or equipment of any kind, except:

	 	(i)	 	Financial Leases, and then only to the extent permitted
under the other provisions of this Section 6.02; and
	 
	 	(ii)	 	otherwise only to the extent the aggregate payments under
all such agreements or arrangements do not exceed the equivalent of one
million Dollars ($1,000,000) in any Financial Year;

     (e) Derivative Transactions. No Obligor shall enter into any Derivative Transaction
or assume the obligations of any party to any Derivative Transaction except pursuant to
non-speculative hedging programs entered into in the ordinary course of business;

     (f) Guarantees and Other Obligations. No Obligor shall enter into any agreement or
arrangement to guarantee or, in any way or under any condition, assume or become obligated for all
or any part of any financial or other obligation of another Person except as provided in this
agreement or guarantees that are entered into in the ordinary course of business which, in the
aggregate, do not create liabilities in excess of exceed one million Dollars ($1,000,000) at any
time.

 

- 73 -

     (g) Permitted Liens. No Obligor shall create or permit to exist any Lien on any of
its property, revenues or other assets, present or future, or on any property, revenues or other
assets, present or future, of any of its Subsidiaries except for:

	 	(i)	 	the Security;
	 
	 	(ii)	 	the naming of IFC or any Obligor as loss payee under its
insurance policies;
	 
	 	(iii)	 	any Lien arising from any tax, assessment or other
governmental charge or other Lien arising by operation of law, in each case
if the obligation underlying any such Lien is not yet due or, if due, is
being contested in good faith by appropriate proceedings so long as:

	 	(A)	 	those proceedings do not involve any
substantial danger of the sale, forfeiture or loss of any part of
the Project, title thereto or any interest therein, nor interfere
in any material respect with the use or disposition thereof or the
implementation of the Project or the carrying on of its business;
and
	 
	 	(B)	 	such Obligor has set aside adequate
reserves sufficient to promptly pay in full any amounts that it may
be ordered to pay on final determination of any such proceedings;

	 	(iv)	 	prior to the earlier of February 28, 2007 and the making
of the first A Loan, Liens in effect on the date of this Agreement which
were created to secure the NATIXIS Facility; and
	 
	 	(v)	 	prior to the earlier of February 28, 2007 and the making
of the first A Loan, Liens in effect on the date of this Agreement which
were created to secure the Texas Facility;

     (h) Arm’s Length Transactions. No Obligor shall enter into any transaction except in
the ordinary course of business on the basis of arm’s-length arrangements (including, without
limitation, transactions whereby such Obligor might pay more than the ordinary commercial price for
any purchase or might

 

- 74 -

receive less than the full ex-works commercial price (subject to normal trade
discounts) for its products) except for any such lawful arrangement with another Obligor;

     (i) Purchasing or Sales Agency. No Obligor shall establish any sole and exclusive
purchasing or sales agency for a material portion of its purchases or sales;

     (j) Profit Sharing Arrangements. No Obligor shall enter into any partnership,
profit-sharing or royalty agreement or other similar arrangement whereby its income or profits are,
or might be, shared with any other Person other than as contemplated by the Project Documents or
any other agreement, concession or license in the ordinary course of the oil and gas business;

     (k) Management Contracts. No Obligor shall enter into any management contract or
similar arrangement whereby its business or operations are managed by any other Person, except for,
in respect of Toreador Romania, management arrangements with Lotus Petrol S.R.L. which are
acceptable to IFC;

     (l) Subsidiaries. No Obligor shall form or have any Subsidiary except for the
Subsidiaries described in Schedule 8 (Group Ownership);

     (m) Permitted Investments. No Obligor shall make or permit to exist loans or advances
to, or deposits (except commercial bank deposits in the ordinary course of business) with, other
Persons or investments in any Person or enterprise, other than:

	 	(i)	 	short-term investment grade marketable securities
acquired solely to give temporary employment to its idle funds;
	 
	 	(ii)	 	loans or advances to another Obligor;
	 
	 	(iii)	 	investments in the Borrowing Base Assets; and
	 
	 	(iv)	 	in respect of investments to purchase or acquire assets,
to the extent permitted under Section 6.02(u);

     (n) Fundamental Changes. No Obligor shall change:

	 	(i)	 	its Charter in any manner which would be inconsistent
with the provisions of any Transaction Document;

 

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	 	(ii)	 	its Financial Year;
	 
	 	(iii)	 	the Financial Plan; or
	 
	 	(iv)	 	the nature or scope of the Project or change the nature
of its present business or operations or engage in any Prohibited
Activities;

     (o) Asset Sales. No Obligor shall sell, transfer, lease or otherwise dispose of all
or a material part of its Borrowing Base Assets, other than inventory, whether in a single
transaction or in a series of transactions, related or otherwise, other than assets that have been
worn out or are obsolete and are replaced or upgraded within one hundred and eighty (180) days on a
basis that is acceptable to IFC or that are no longer required for the purposes of that Obligor’s
business in each case in the ordinary course of business and in a manner consistent with the
Transaction Documents; provided that, the proceeds of any sale, transfer, lease or disposal of any
Borrowing Base Assets permitted under this Section 6.02(o) shall be applied in accordance with
Section 2.07(b) (Prepayment and Mandatory Prepayment);

     (p) Merger, Consolidation, Etc. No Obligor shall undertake or permit any merger,
spin-off, consolidation or reorganization; provided that:

	 	(i)	 	any Subsidiary of a Guarantor (other than a Borrower) may
merge or consolidate with such Guarantor or a wholly-owned Subsidiary of
such Guarantor; provided further that the surviving entity remains a
Guarantor; and
	 
	 	(ii)	 	any Obligor may merge or consolidate with another
Obligor; provided further that if any such Obligor is a Borrower, then the
surviving entity shall be such Borrower;

     (q) Amendments and Waivers of Material Agreements. No Obligor shall terminate, amend
or grant any waiver with respect to any provision of:

	 	(i)	 	any Project Document; or
	 
	 	(ii)	 	the Existing Convertible Senior Notes

          if any such action could reasonably be expected to have a Material Adverse Effect;

 

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     (r) Use of Proceeds. No Borrower shall use or permit the use of the proceeds of any
Loan in the territories of any country that is not a member of the World Bank or for reimbursements
of expenditures in those territories or for goods produced in or services supplied from any such
country;

     (s) Amendment of Corrective Action Plan. The Company shall not amend the Corrective
Action Plan in any material respect without the prior written consent of IFC;

     (t) Prohibited Payments. No Obligor shall make (and shall not authorize or
permit any Affiliate or any other Person acting on its behalf to make) with respect to the Project
or any transaction contemplated by this Agreement, any Prohibited Payment. Each Obligor further
covenants that should IFC notify it of its concerns that there has been a violation of the
provisions of this Section or of Section 4.01(p) of this Agreement, it shall cooperate in good
faith with IFC and its representatives in determining whether such a violation has occurred, and
shall respond promptly and in reasonable detail to any notice from IFC, and shall furnish
documentary support for such response upon IFC’s request;

     (u) Inventory and Additional Property. No Obligor shall purchase or otherwise acquire
property other than:

	 	(i)	 	purchases of inventory, materials and equipment in the
ordinary course of business;
	 
	 	(ii)	 	expenditures to the extent permitted under Section
6.02(b); and

     provided that, with respect to acquisitions of oil and gas assets, IFC shall not unreasonably
withhold or delay its consent;

     (v) Sale-Leaseback Transaction. No Obligor shall enter into any sale-leaseback
transaction, unless:

	 	(i)	 	the asset(s) subject to such transaction are not subject
to the Security;
	 
	 	(ii)	 	after giving effect thereto, the Company is in compliance
with Section 6.01(m) (Affirmative Covenants) on a Consolidated Basis; and

 

 

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	 	(iii)	 	such Obligor receives fair market value and one hundred
percent (100%) cash consideration for such sale-leaseback transaction, paid at
the time of closing thereof; and

     (w) Land Acquisitions. No Obligor shall acquire any land, except where such
acquisition is in accordance with the Performance Standards, specifically, Performance Standard No.
5 (Land Acquisition and Resettlement Framework).

     Section 6.03. Reporting Requirements. Unless IFC otherwise
agrees:

     (a) Quarterly Financial Statements and Reports. As soon as available but in any event
within forty-five (45) days after the end of each quarter of its Financial Year:

	 	(i)	 	each Obligor shall deliver to IFC, two (2) copies of such
Obligor’s complete unaudited financial statements for such quarter and for the
Financial Year to date. Such financial statements shall be prepared on an
unconsolidated basis and, with respect to the Company, on a Consolidated Basis,
in each case, in accordance with the Accounting Standards and certified by the
Company’s chief financial officer;
	 
	 	(ii)	 	the Company shall deliver to IFC, a report on the consolidated
operations of the Company and its Subsidiaries during that quarter and for the
Financial Year to date, in the form of, and addressing the topics listed in,
Schedule 7; provided that the operations of each Borrowing Base Asset, shall be
described in individual sections of the report;
	 
	 	(iii)	 	the Company shall deliver to IFC, a report (in the form
pre-agreed by IFC), signed by its chief financial officer, concerning
compliance with Section 6.01(m) (Affirmative Covenants) (including a clear
description of the methodology used in the respective calculations);

     (b) Annual Financial Statements and Reports. As soon as available but in any event
within ninety (90) days after the end of its Financial Year, the Company shall deliver to IFC:

 

 

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	 	(i)	 	two (2) copies of its complete and audited financial statements
for that Financial Year (which are in agreement with its books of account)
prepared, on an unconsolidated basis and Consolidated Basis, in accordance with
the Accounting Standards, together with the Auditors’ audit report on them, all
in form satisfactory to IFC;
	 
	 	(ii)	 	a management letter and any other communication from its
Auditors commenting, with respect to that Financial Year, on, among other
things, the adequacy of the Company’s financial control procedures, accounting
systems and management information system;
	 
	 	(iii)	 	a report (in the form pre-agreed by IFC), signed by its chief
financial officer and reviewed by its Auditors, concerning compliance with
Section 6.01(m) (Affirmative Covenants) (including a clear description of the
methodology used in the respective calculations) and the calculation of the Additional
Compensation;
	 
	 	(iv)	 	a statement by the Company of all transactions between the
Company and each of its Affiliates during that Financial Year, and a
certification by the Company’s chief financial officer that those transactions
were on the basis of arm’s-length arrangements;
	 
	 	(v)	 	a capital and operating budget, for the Company and its
Subsidiaries, for the next Financial Year, in form and substance satisfactory
to IFC;
	 
	 	(vi)	 	a report which details revenues paid and attributed to any
Authorities in Turkey and Romania in that Financial Year, presented in separate
sections with respect to each country; and
	 
	 	(vii)	 	an updated Local Development Impact Data Sheet.

     (c) Management Letters. Each Obligor shall deliver to IFC, promptly following
receipt, a copy of any management letter or other communication sent by the Auditors (or any other
accountants retained by such Obligor) to any Obligor or its management in relation to such
Obligor’s financial, accounting and

 

 

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other systems, management or accounts, if not provided pursuant
to Section 6.03 (b) (ii);

     (d) Annual Monitoring Report. Within ninety (90) days after the end of its Financial
Year, the Company shall deliver to IFC the corresponding Annual Monitoring Report confirming
compliance with the Corrective Action Plan, the social and environmental covenants set forth in
Sections 6.01 (Affirmative Covenants) and 6.02 (Negative Covenants) or, as the case may be,
identifying any non-compliance or failure, and the actions being taken to remedy it;

     (e) Notice of Accidents, Etc. Within three (3) days after its occurrence, the Company
shall notify IFC of any social, labor, health and safety, security or environmental incident,
accident or circumstance having, or which could reasonably be expected to have, a Material Adverse
Effect or material adverse impact on the implementation or operation of the Project in accordance
with the Performance Standards, specifying in each case the nature of the incident, accident, or
circumstance and any effect resulting or likely to result therefrom, and promptly thereafter, a
report on the measures the Company is taking or plans to take to address them and to prevent any
future similar event; and keep IFC informed of the on-going implementation of those measures and
plans. 

     (f) Shareholder Matters. The Company shall give notice to IFC, concurrently with the
Company’s notification to its shareholders, of any meeting of its shareholders, such notice to
include the agenda of the meeting; and, as soon as available, deliver to IFC two (2) copies of:

	 	(i)	 	all notices, reports and other communications of such Obligor
to its shareholders, whether any such communication has been made on an
individual basis or by way of publication in a newspaper or other communication
medium; and
	 
	 	(ii)	 	the minutes of all shareholders’ meetings;

     (g) Changes to Project; Material Adverse Effect. The Company shall promptly notify
IFC of any proposed change in the nature or scope of the Project or the business or operations of
the Company or its Subsidiaries and of any event or condition that has or may reasonably be
expected to have a Material Adverse Effect;

 

 

- 80 -

     (h) Litigation. Promptly upon becoming aware of any litigation or administrative
proceedings before any Authority or arbitral body which has or may reasonably be expected to have a
Material Adverse Effect, each Obligor shall notify IFC by facsimile of that event specifying the
nature of that litigation or those proceedings and the steps the relevant Obligor is taking or
proposes to take with respect thereto;

     (i) Default. Promptly upon the occurrence of an Event of Default or Potential
Event of Default, any Obligor with notice of such Event of Default or Potential Event of Default
shall notify IFC (unless such Obligor is aware that IFC has already been notified by another
Obligor) by facsimile specifying the nature of that Event of Default or Potential Event of Default
and any steps being taken to remedy it;

     (j) Other Information. Each Obligor shall promptly provide to IFC such other
information as IFC from time to time requests about the any Obligor, its assets and the Project;
and

     (k) IFC Base Case. Within ninety (90) days of the end of each Financial Year, the
Company shall provide IFC with a copy of the IFC Base Case in accordance with Section 6.05 (IFC
Base Case).

     (l) Reserves Certification. The Company shall promptly provide to IFC a Reserve
Certification, prepared at the Company’s expense, within sixty (60) days of the end of each
Financial Year and, from time to time but no more than two (2) times per Financial Year, as
otherwise reasonably requested by IFC.

     Section 6.04 . Insurance.

     (a) Insurance Requirements and Undertakings. Unless IFC otherwise agrees, the Company
and/or each Obligor shall:

	 	(i)	 	insure and keep insured, with financially sound and reputable
insurers and reinsurers, all its assets and business against all insurable
losses, including the insurances specified in Annex C and any
insurance required by law;
	 
	 	(ii)	 	punctually pay any premium, commission and any other amounts
necessary for effecting and maintaining in force each insurance policy;

 

 

- 81 -

	 	(iii)	 	promptly notify the relevant insurer of any claim by the
Company and/or Obligor under any policy written by that insurer and diligently
pursue that claim;
	 
	 	(iv)	 	comply with all warranties under each policy of insurance;
	 
	 	(v)	 	not do or omit to do, or permit to be done or not done,
anything which might prejudice the Company’s or such Obligor’s, or, where IFC
is a loss payee or an additional named insured, IFC’s right to claim or recover
under any insurance policy; and
	 
	 	(vi)	 	not vary, rescind, terminate, cancel or cause a material change to any
insurance policy;

provided always that if at any time and for any reason any insurance required
to be maintained under this Agreement shall not be in full force and effect, then
IFC shall thereupon or at any time while the same is continuing be entitled (but
have no obligation) on its own behalf to procure that insurance at the expense of
the Company and/or Obligor and to take all such steps to minimize hazard as IFC may
consider expedient or necessary.

     (b) Policy Provisions. Each insurance policy required to be obtained pursuant to
this Section shall be on terms and conditions acceptable to IFC, and shall contain provisions to
the effect that:

	 	(i)	 	no policy can expire nor can it be canceled or suspended by neither the
Company, any Obligor nor the insurer for any reason (including failure to renew
the policy or to pay the premium or any other amount) unless IFC and, in the
case of expiration or if cancellation or suspension is initiated by the
insurer, the Company or relevant Obligor receives at least forty-five (45)
days’ notice (or such lesser period as IFC may agree with respect to
cancellation, suspension or termination in the event of war and kindred peril)
prior to the effective date of termination, cancellation or suspension;
	 
	 	(ii)	 	IFC is named as additional named insured on all liability
policies;

 

 

- 82 -

	 	(iii)	 	where relevant, all its provisions (except those relating to
limits of liability) shall operate as if they were a separate policy covering
each insured party; and
	 
	 	(iv)	 	on every insurance policy on each of the Company’s and/or
Obligor’s assets which are the subject of the Security and for business
interruption or delayed start-up, IFC is named as loss payee for any claim, or
any series of claims arising with respect to the same event, whose aggregate
amount is the equivalent of one million Dollars ($1,000,000) or more, other
than in respect of insurance claims filed prior to the date hereof.

     (c) Application of Proceeds.

	 	(i)	 	At its discretion, IFC may remit the proceeds of any insurance
paid to it to the Borrowers to repair or replace the relevant damaged assets or
may apply those proceeds towards any amount payable to IFC under this
Agreement, including to repay or prepay all or any part of the Loans in
accordance with Section 2.07 (Prepayment and Mandatory Prepayment); provided
that there shall be no minimum amount or notice period for any such prepayment.
	 
	 	(ii)	 	The Company and/or each Obligor shall use any insurance proceeds it
receives (whether from IFC or directly from the insurers) for loss of or damage
to any asset solely to replace or repair that asset.

     (d) Reporting Requirements. Unless IFC otherwise agrees, the Company and/or each
Obligor shall provide to IFC the following:

	 	(i)	 	as soon as possible after its occurrence, notice of any event
which entitles the Company and/or such Obligor to claim for an aggregate amount
exceeding the equivalent of five hundred thousand Dollars ($500,000) under any
one or more insurance policies;
	 
	 	(ii)	 	within thirty (30) days after any insurance policy is issued to
the Company and/or such Obligor, a copy of that policy incorporating any loss
payee/additional named insured provisions required under Section 6.04 (b) (iv)
(unless that

 

 

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policy has already been provided to IFC pursuant to Section
5.01(i) (Conditions of First Disbursement));

	 	(iii)	 	not less than ten (10) days prior to the expiry date of any
insurance policy (or, for insurance with multiple renewal dates, not less than
ten (10) days prior to the expiry date of the policy on the principal asset), a
certificate of renewal from the insurer, insurance broker or agent confirming
the renewal of that policy and the renewal period, the premium, the amounts
insured for each asset or item and any changes in terms or conditions from the
policy’s issue date or last renewal, and confirmation from the insurer that
provisions naming IFC as loss payee or additional named insured, as applicable,
remain in effect;
	 
	 	(iv)	 	such evidence of premium payment as IFC may from time to time request; and
	 
	 	(v)	 	any other information or documents on each insurance policy as IFC requests
from time to time.

     Section 6.05. IFC Base Case. The IFC Base Case shall be prepared in a manner
acceptable to IFC, and the Net Cash Flow and the Relevant Figures determined as of and from the
most recent calculation date, in accordance with the IFC Base Case Assumptions, the latest Reserve
Certification and other relevant information, and submitted by the Company to IFC within ninety
days (90) days of the end of each Fiscal Year, subject to the provisions of Section
6.03(m)(Required Ratios), and at any time requested by IFC, including, without limitation on or
prior to any Interest Payment Date.

ARTICLE VII

Events of Default

     Section 7.01. Acceleration after Default. If any Event of Default
occurs and is continuing (whether it is voluntary or involuntary, or results from operation of law
or otherwise), IFC may, by notice to the Borrowers, require that all or any of the Borrowers to
repay the Loans or such part of the Loans as is specified in that notice. On receipt of any such
notice, the Borrowers shall immediately repay the Loans (or that part of the Loans specified in
that notice) and pay all interest accrued on it and any other amounts then payable under this
Agreement. Each of

 

 

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the Borrowers waives any right it might have to further notice, presentment,
demand or protest with respect to that demand for immediate payment.

     Section 7.02 . Events of Default. It shall be an Event of Default
if:

     (a) Failure to Pay Principal or Interest. The Borrowers fail to pay when due any
part of the principal of, or interest on, the Loans and such failure continues for a period of five
(5) days;

     (b) Failure to Pay Other IFC Loans. Any Obligor fails to pay when due any part of the
principal of, or interest on, or any other amount owing in respect of any loan from IFC to any
Obligor other than the Loans and any such failure continues for the relevant grace period allowed
for in the agreement providing for that loan;

     (c) Failure to Comply with Obligations. Any Obligor fails to comply with any of its
obligations under this Agreement or any other Transaction Document or any other agreement between
any Obligor and IFC (other than for the payment of the principal of, or interest on, the Loans or
any other loan from IFC to any Obligor), and except to the extent such failure is a failure to
comply with Section 6.01(f) (Payments to Madison Oil and Toreador France) any such failure
continues for a period of thirty (30) days after the date on which IFC notifies the relevant
Obligor of that failure, or such Obligor otherwise becomes aware of such failure;

     (d) Failure by Other Parties to Comply with Obligations. Any party to a Transaction
Document (other than IFC or the Obligors) fails to observe or perform any of its obligations under
that Transaction Document, and any such failure continues for a period of thirty (30) days after
the date on which IFC notifies any of the Obligors of that failure or any Obligor otherwise becomes
aware of that failure;

     (e) Misrepresentation. Any representation or warranty made in Article IV or in
connection with the execution of, or any request (including a request for Loan) under, this
Agreement or any other Transaction Document is found to be incorrect in any material respect;

     (f) Expropriation, Nationalization, Etc. Any Authority condemns, nationalizes,
seizes, or otherwise expropriates all or any substantial part of the property or other assets of
any Obligor or of the Obligors’ respective share capital, or assumes custody or control of that
property or other assets or of the business or operations of any Obligor or of the Obligors’
respective share capital, or takes any

 

 

- 85 -

action for the dissolution or disestablishment of any
Obligor or any action that would prevent any Obligor or their respective officers from carrying on
all or a substantial part of its business or operations;

     (g) Voluntary Proceedings. Any Obligor:

	 	(i)	 	takes any step (including petition, giving notice to convene or
convening a meeting) for the purpose of making, or proposes or enters into, any
arrangement, assignment or composition with or for the benefit of its
creditors;
	 
	 	(ii)	 	ceases or threatens to cease to carry on its business or any
substantial part of its business; or
	 
	 	(iii)	 	is unable, or admits in writing its inability to pay its
Liabilities as they fall due or otherwise becomes insolvent;

     (h) Involuntary Proceedings. An order is made or an effective resolution passed or
analogous proceedings taken for any Obligor’s winding up, bankruptcy or dissolution or a petition
is presented or analogous proceedings taken for the winding up or dissolution of any Obligor and is
not discharged within sixty (60) days;

     (i) Appointment of Liquidator; Attachment. Any encumbrancer lawfully takes possession
of, or a liquidator, judicial custodian, receiver, administrative receiver or trustee or any
analogous officer is appointed in respect of the whole or any material part of the undertaking or
assets of any Obligor; or an attachment, sequestration, distress or execution (or analogous
process) is levied or enforced upon or issued against any of the assets or property of any Obligor
and is not discharged within sixty (60) days; or

     (j) Analogous Events to Bankruptcy. Any other event occurs which under any applicable
law would have an effect analogous to any of those events listed in Section 7.02 (g), Section 7.02
(h) or Section 7.02 (i);

     (k) Cross-Default. Any Obligor fails to make any payment in respect of any of its
Liabilities (other than the Loans or any other loan from IFC to such Obligor) with an aggregate
outstanding amount of five hundred thousand Dollars ($500,000) or more or to perform any of its
obligations under any agreement pursuant to which there is outstanding any Liability (other than
any such failure occurring soley as the result of the failure to file or deliver timely financial
statements for the quarter ended September 30, 2006), and any such failure

 

 

- 86 -

continues for more than
any applicable period of grace or any such Liability becomes prematurely due and payable or is
placed on demand;

     (l) Failure to Maintain Authorizations. Any Authorization necessary for any Obligor
to perform and observe its obligations under any Transaction Document, or to carry out the Project,
is not obtained when required or is rescinded, terminated, lapses or otherwise ceases to be in full
force and effect, including with respect to the remittance to IFC or its assignees, in the Loan
Currency, of any amounts payable under any Transaction Document, and is not restored or reinstated
within sixty (60) days of notice by IFC to such Obligor requiring that restoration or
reinstatement;

     (m) Revocation, Etc., of Security Documents. Any Security Document or any of its
material provisions:

	 	(i)	 	is revoked, terminated or ceases to be in full force and effect
or ceases to provide the security intended, without, in each case, the prior
consent of IFC;
	 
	 	(ii)	 	becomes unlawful or is declared void; or
	 
	 	(iii)	 	is repudiated or its validity or enforceability is challenged
by any Person and any such repudiation or challenge continues for a period of
sixty (60) days during which period such repudiation or challenge has no
effect;

     (n) Revocation, Etc., of Transaction Documents. Any Transaction Document (other than
a Security Document) or any of its material provisions:

	 	(i)	 	is revoked, terminated or ceases to be in full force and effect
without, in each case, the prior consent of IFC, and that event, if capable of
being remedied, is not remedied to the satisfaction of IFC within thirty (30)
days of IFC’s notice to the Borrowers (except for Marketing Contracts or Gas
Sales Agreements which expire in accordance with their respective terms and are
replaced with equivalent contracts satisfactory to IFC); or
	 
	 	(ii)	 	becomes unlawful or is declared void; or
	 
	 	(iii)	 	is repudiated or the validity or enforceability of any of its
provisions at any time is challenged by any Person and

 

 

- 87 -

such repudiation or
challenge is not withdrawn within thirty (30) days of IFC’s notice to the
Borrowers requiring that withdrawal; provided that no such notice shall
be required or, as the case may be, the notice period shall terminate if and
when such repudiation or challenge becomes effective;

     (o) Non-Performance of Project Documents. Any Project Document:

	 	(i)	 	is breached by any party to it and such breach has or could
reasonably be expected to have a Material Adverse Effect; or
	 
	 	(ii)	 	is revoked, terminated or ceases to be in full force and effect
without the prior consent of IFC, or performance of any of the material
obligations under any such agreement becomes unlawful or any such agreement is
declared to be void or is repudiated or its validity or enforceability at any
time is challenged by any party to it.

     (p) Change of Control. A Change of Control occurs.

     Section 7.03. Bankruptcy. If any Borrower is liquidated or declared bankrupt, the
Loans, all interest accrued on them and any other amounts payable under this Agreement will become
immediately due and payable without any presentment, demand, protest or notice of any kind, all of
which the Borrowers waive.

ARTICLE VIII

Miscellaneous

     Section 8.01. Saving of Rights. (a) The rights and remedies of IFC in
relation to any misrepresentation or breach of warranty on the part of any Obligor shall not be
prejudiced by any investigation by or on behalf of IFC into the affairs of such Obligor, by the
execution or the performance of this Agreement or by any other act or thing which may be done by or
on behalf of IFC in connection with this Agreement and which might, apart from this Section,
prejudice such rights or remedies.

 

 

- 88 -

     (b) No course of dealing or waiver by IFC in connection with any condition of disbursement of
the Loans under this Agreement shall impair any right, power or remedy of IFC with respect to any
other condition of disbursement, or be construed to be a waiver thereof; nor shall the action of
IFC with respect to any disbursement affect or impair any right, power or remedy of IFC with
respect to any other disbursement.

     (c) Unless otherwise notified to the Borrowers by IFC and without prejudice to the
generality of Section 8.01 (b), the right of IFC to require compliance with any condition under
this Agreement that may be waived by IFC with respect to any disbursement is expressly preserved
for the purposes of any subsequent disbursement.

     (d) No course of dealing and no failure or delay by IFC in exercising, in whole or in part,
any power, remedy, discretion, authority or other right under this Agreement or any other agreement
shall waive or impair, or be construed to be a waiver of, such or any other power, remedy,
discretion, authority or right under this Agreement, or in any manner preclude its additional or
future exercise; nor shall the action of IFC with respect to any default, or any acquiescence by it
therein, affect or impair any right, power or remedy of IFC with respect to any other default.

     Section 8.02 . Notices. Any notice, request or other communication to
be given or made under this Agreement shall be in writing. Subject to Section 6.03 (h) and (i)
(Reporting Requirements) and Section 7.05 (Enforcement), any such communication may be delivered by
hand, airmail, facsimile or established courier service to the party’s address specified below or
at such other address as such party notifies to the other party from time to time, and will be
effective upon receipt.

     For each Obligor:

4809 Cole Avenue

Suite 108

Dallas, Texas 75205

Facsimile: (214) 559 3933

Attention: Douglas W. Weir

                  Senior Vice President and Chief Fianncial Officer

 

 

- 89 -

	 	 	 	 	 
	 

	 	  With a copy to:
	 	Haynes and Boone, LLP
	 

	 	 	 	901 Main Street, Suite 3100
	 

	 	 	 	Dallas, Texas 75202
	 

	 	 	 	Attention: Paul H. Amiel
	 

	 	 	 	Facsimile : (214) 200-0555

     For IFC:

International Finance Corporation

2121 Pennsylvania Avenue, N.W.

Washington, D.C. 20433

United States of America

Facsimile: (202) 974-4322

Attention: Director, Oil, Gas, Mining and Chemicals Department

With a copy (in the case of communications relating to payments) sent to the
attention of the Director, Department of Financial Operations, at:

Facsimile: 202-522-7419.

     Section 8.03. English Language. (a) All documents to be
provided or communications to be given or made under this Agreement shall be in the English
language.

     (b) To the extent that the original version of any document to be provided, or communication
to be given or made, to IFC under this Agreement or any other Transaction Document is in a language
other than English, that document or communication shall be accompanied by an English translation
certified by an Authorized Representative to be a true and correct translation of the original.
IFC may, if it so requires, obtain an English translation of any document or communication received
in a language other than English at the cost and expense of the Borrower. IFC may deem any such
English translation to be the governing version between the Borrower and IFC.

     Section 8.04. Term of Agreement. This Agreement shall continue
in force until all monies payable under it have been fully paid in accordance with its provisions.

 

 

- 90 -

     Section 8.05. Applicable Law and Jurisdiction.   (a) This
Agreement is governed by and shall be construed in accordance with the laws of England.

     (b) For the exclusive benefit of IFC, each Obligor irrevocably agrees that any legal action,
suit or proceeding arising out of or relating to this Agreement or any other Transaction Document
to which such Obligor is a party may be brought in the courts of England. By the execution of this
Agreement, each Obligor irrevocably submits to the non-exclusive jurisdiction of such courts in any
such action, suit or proceeding. Final judgment against any Obligor in any such action, suit or
proceeding shall be conclusive and may be enforced in any other jurisdiction by suit on the
judgment, a certified or exemplified copy of which shall be conclusive evidence of the judgment, or
in any other manner provided by law.

     (c) Nothing in this Agreement shall affect the right of IFC to commence legal proceedings or
otherwise sue any Obligor in any other appropriate jurisdiction, or concurrently in more than one
jurisdiction, or to serve process, pleadings and other papers upon any Obligor in any manner
authorized by the laws of any such jurisdiction.

     (d) Each Obligor hereby irrevocably designates, appoints and empowers HTD Services
Ltd, with offices currently located at Irongate House, Duke’s Place, London, EC3A 7HX, as its
authorized agent solely to receive for and on its behalf service of the writ of summons or other
legal process in any action, suit or proceeding arising out of or relating to this Agreement or any
Transaction Document which IFC may bring in the courts of England.

     (e) As long as this Agreement or any other Transaction Document to which an Obligor is a party
remains in force, such Obligor shall maintain a duly appointed and authorized agent to receive for
and on its behalf service of the writ of summons or other legal process in any action, suit or
proceeding brought by IFC in the courts of England with respect to this Agreement or such other
Transaction Documents. Such Obligor shall keep IFC advised of the identity and location of such
agent.

     (f) Each Obligor irrevocably waives:

	 	(i)	 	any objection which it may have now or in the future to the laying of the
venue of any action, suit or proceeding in any court referred to in this
Section; and

 

 

- 91 -

	 	(ii)	 	any claim that any such action, suit or proceeding has been brought in an
inconvenient forum.

     (g) To the extent that any Obligor may be entitled in any jurisdiction to claim for itself or
its assets immunity with respect to its obligations under this Agreement or any other Transaction
Document to which it is a party from any suit, execution, attachment (whether provisional or final,
in aid of execution, before judgment or otherwise) or other legal process or to the extent that in
any jurisdiction that immunity (whether or not claimed), may be attributed to it or its assets,
such Obligor irrevocably agrees not to claim and irrevocably waives such immunity to the fullest
extent now or in the future permitted by the laws of such jurisdiction.

     (h) Each Obligor also consents generally with respect to any proceedings arising out of or in
connection with this Agreement or any other Transaction Document to which it is a party to the
giving of any relief or the issue of any process in connection with such proceedings including,
without limitation, the making, enforcement or execution against any property whatsoever
(irrespective of its use or intended use) of any order or judgment which may be made or given in
such proceedings.

     (i) To the extent that the any Obligor may, in any suit, action or proceeding brought in any
of the courts referred to in Section 8.05 (b) or a court elsewhere arising out of or in connection
with this Agreement or any other Transaction Document to which such Obligor is a party, be entitled
to the benefit of any provision of law requiring IFC in such suit, action or proceeding to post
security for the costs of such Obligor, or to post a bond or to take similar action, such Obligor
hereby irrevocably waives such benefit, in each case to the fullest extent now or in the future
permitted under the laws of the jurisdiction in which such court is located.

     (j) Each Obligor also irrevocably consents, if for any reason such Obligor’s authorized agent
for service of process of summons, complaint and other legal process in any action, suit or
proceeding is not present in England, to service of such papers being made out of those courts by
mailing copies of the papers by registered air mail, postage prepaid, to such Obligor at its
address specified pursuant to Section 8.02 (Notices). In such a case, IFC shall also send by
facsimile, or have sent by facsimile, a copy of the papers to such Obligor.

     Section 8.06. Disclosure of Information. (a) IFC may disclose
any documents or records of, or information about, this Agreement or any other Transaction
Document, or the assets, business or affairs of the Obligors to:

 

 

- 92 -

	 	(i)	 	its outside counsel, auditors and rating agencies,
	 
	 	(ii)	 	any Person who intends to purchase a participation in a portion
of the Loans, and
	 
	 	(iii)	 	any other Person as IFC may deem appropriate in connection
with any proposed sale, transfer, assignment or other disposition of IFC’s
rights under this Agreement or any Transaction Document or otherwise for the
purpose of exercising any power, remedy, right, authority, or discretion
relevant to this Agreement or any other Transaction Document.

     (b) Each Obligor acknowledges and agrees that, notwithstanding the terms of any other
agreement between such Obligor and IFC, a disclosure of information by IFC in the circumstances
contemplated by Section 8.06 (a) does not violate any duty owed to such Obligor under this
Agreement or under any such other agreement.

     Section 8.07. Indemnification.  To the fullest
extent permitted by applicable law, each of the Borrowers agree, on a joint and several basis, to
indemnify and hold harmless IFC and its officers, directors, employees, agents and advisors (each,
an “Indemnified Party”) from and against any and all claims, damages, losses, liabilities
(including without limitation liabilities under applicable securities laws) and expenses
(including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or
asserted or awarded against any Indemnified Party, in each case arising out of or in connection
with or by reason of, or in connection with the preparation for a defense of, any investigation,
litigation or proceeding arising out of, related to or in connection with this Agreement or any
other Financing Document, any of the transactions contemplated herein or the actual or proposed use
of the proceeds of the Loans, in each case whether or not such investigation, litigation or
proceeding is brought by a Borrower, its directors, shareholders or creditors or an Indemnified
Party or any Indemnified Party is otherwise a party thereto and whether or not the transactions
contemplated hereby are consummated, except to the extent such claim, damage, loss, liability or
expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party’s gross negligence or willful misconduct.

     Section 8.08. Successors and Assignees. This Agreement binds and
benefits the respective successors and assignees of the parties. However, no

 

 

- 93 -

Obligor may assign or
delegate any of its rights or obligations under this Agreement without the prior consent of IFC.

     Section 8.09. Amendments, Waivers and Consents. Any amendment or
waiver of, or any consent given under, any provision of this Agreement shall be in writing and, in
the case of an amendment, signed by the parties.

     Section 8.10. Counterparts. This Agreement may be executed in
several counterparts, each of which is an original, but all of which together constitute one and
the same agreement.

     IN WITNESS WHEREOF, the parties have caused this Agreement to be signed in their respective
names as of the date first above written.

	 	 	 	 	 	 	 
	 	 	TOREADOR RESOURCES CORPORATION
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By :
	 	/s/ Douglas W. Weir	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:
	 	Douglas W. Weir	 	 
	 
	 	 	 	 	 	 
	 

	 	Title :
	 	Senior Vice President and CFO	 	 
	 
	 	 	 	 	 	 
	 	 	TOREADOR TURKEY LTD.
	 
	 	 	 	 	 	 
	 

	 	By :
	 	/s/ Douglas W. Weir	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:
	 	Douglas W. Weir	 	 
	 
	 	 	 	 	 	 
	 

	 	Title :
	 	Director and Officer	 	 
	 
	 	 	 	 	 	 
	 	 	TOREADOR ROMANIA LTD.
	 
	 	 	 	 	 	 
	 

	 	By :
	 	/s/ Douglas W. Weir	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:
	 	Douglas W. Weir	 	 
	 
	 	 	 	 	 	 
	 

	 	Title :
	 	Director and Officer	 	 

 

 

- 94 -

	 	 	 	 	 	 	 
	 	 	MADISON OIL FRANCE SAS
	 
	 	 	 	 	 	 
	 

	 	By :
	 	 /s/ E. Rousset
	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:
	 	E. Rousset	 	 
	 
	 	 	 	 	 	 
	 

	 	Title :
	 	 President	 	 
	 
	 	 	 	 	 	 
	 	 	TOREADOR ENERGY FRANCE S.C.S.
	 
	 	 	 	 	 	 
	 

	 	By :
	 	 /s/ E. Rousset	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:
	 	E. Rousset	 	 
	 
	 	 	 	 	 	 
	 

	 	Title :
	 	 General Manager	 	 
	 
	 	 	 	 	 	 
	 	 	TOREADOR INTERNATIONAL HOLDING L.L.C.
	 
	 	 	 	 	 	 
	 

	 	By :
	 	 /s/ Douglas W. Weir	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:
	 	Douglas W. Weir	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:
	 	Director and Officer	 	 
	 
	 	 	 	 	 	 
	 	 	INTERNATIONAL FINANCE CORPORATION
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Rashad Kaldany	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:
	 	Rashad Kaldany	 	 
	 
	 	 	 	 	 	 
	 

	 	Title :	 	 	 	 
	 

	 	 	 	 	 	 

 

 

- 95 -

ANNEX A

Page 1 of 1

PROJECT COST AND FINANCIAL PLAN

TRANSACTION COST AND FINANCIAL PLAN (2006 to 2010)

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Transaction Cost US$ MM	 	Phase 1	 	 	Phase 2	 	 	Total	 	 	%	 
	 
	Turkey and Romania CAPEX
	 	 	107	 	 	 	29	 	 	 	136	 	 	 	67	%
	Other CAPEX
	 	 	44	 	 	 	23	 	 	 	67	 	 	 	33	%
	Total CAPEX
	 	 	151	 	 	 	52	 	 	 	203	 	 	 	100	%
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Financial Plan US$ MM	 	Phase 1	 	 	Phase 2	 	 	Total	 	 	%	 
	 
	IFC A
	 	 	25	 	 	 	15	 	 	 	40	 	 	 	20	%
	IFC C
	 	 	10	 	 	 	—	 	 	 	10	 	 	 	5	%
	Convertible Bond
	 	 	86	 	 	 	—	 	 	 	86	 	 	 	42	%
	Internal Cash Generation
	 	 	30	 	 	 	37	 	 	 	67	 	 	 	33	%
	Total Financing
	 	 	151	 	 	 	52	 	 	 	203	 	 	 	100	%
	 

 

 - 96 - 

ANNEX B

Page 1 of 2

KEY AUTHORIZATIONS

(See Sections 3.01 (d) and 4.01 (e) of the Loan and Guarantee Agreement)

COMPANY AUTHORIZATIONS

	1.	 	Board Resolution dated December 14, 2006 for Toreador Turkey Ltd.
	 
	2.	 	Board Resolution dated December 14, 2006 for Toreador Romania Ltd.
	 
	3.	 	Board Resolution dated December 14, 2006 for Madison Oil France SAS.
	 
	4.	 	Board Resolution dated December 14, 2006 for Toreador Energy France S.C.S.
	 
	5.	 	Board Resolution dated December 14, 2006 for Toreador International Holding L.L.C.
	 
	6.	 	Board Resolution dated December 14, 2006 for Toreador Resources Corporation
	 
	7.	 	Board Resolution of Madison Oil France SAS expressly authorizing the Guarantee and the
assumption of joint and several liability under the Loan and Guarantee Agreement as a Borrower
	 
	8.	 	Board Resolution of Toreador Energy France S.C.S. expressly authorizing the Guarantee and the
assumption of joint and several liability under the Loan and Guarantee Agreement as a
Borrower.

 

 - 97 - 

ANNEX B

Page 2 of 2

EXPLORATION/EXPLOITATION AUTHORIZATION

	 	 	 	 	 	 	 
	Country	 	Block	 	# Authorizations	 	Entity
	TURKEY

	 	W. Black Sea

T. Black Sea

C. Black Sea

E. Black Sea

SE. Turkey

Van

Buyukbey
	 	8

7

2

3

1

9

1
	 	TTL

TTL

TTL

TTL

TTL

TTL

TTL
	 	 	 	 	 	 
	 
	 	 	31	 	 
	 	 	 	 	 	 
	 
	Cendere

Zeynel
	 	2

1
	 	TTL

MTI
	 
	 	 	 	 	 
	 
	Total
	 	3

34	 	 
	 	 	 	 	 	 	 
	Romania
	 	Fauresti

Moinesti

Viperesti
	 	1

1

1
	 	TRL

TRL

TRL
	 
	 	 	 	 	 
	 
	Total
	 	3

3	 	 
	 	 	 	 	 	 	 
	France
	 	Courtenay

Aufferville

Nemour
	 	1

1

1
	 	TEF

TEF

TEF
	 
	 	 	 	 	 
	 
	 	 	3	 	 
	 	 	 	 	 	 
	 
	Charmottes

Neocomian
	 	1

2
	 	TEF

TEF
	 
	 	 	 	 	 
	 
	Total
	 	3

6	 	 
	 	 	 	 	 	 	 
	Hungary
	 	Szolnok
	 	1
	 	THL
	 
	Tompa
	 	1
	 	THL
	 
	 	 	 	 	 
	 
	Total
	 	2

2	 	 
	 	 	 	 	 	 
	 
	International Total
	 	45	 	 

	 	 	 
	TTL – Toreador Turkey Ltd.

	 	MTI – Madison Turkey Inc.
	TRL – Toreador Romania Ltd.

	 	TEF – Toreador Energy France
	THL – Toreador Hungary Ltd.
	 	 

 

 - 98 - 

ANNEX C

Page 1 of 4

INSURANCE REQUIREMENTS

(See Section 6.04 (a) of the Loan and Guarantee Agreement)

The Company shall effect and maintain the following insurance covers, at all times during the
period of the Loan and Guarantee Agreement, under forms of policies and with insurers and
reinsurers acceptable to IFC, in the following terms:

1. Operational Insurances – Energy Package

     A. COVERAGE

	 	Section A:	 	 All Risks (including Sabotage & Terrorism) of Physical Loss or
Damage to property forming part of the Borrowers’ operations and/or other
property in the care, custody or control of the insured including Removal of
Debris and/or Wreck and for Sue & Labor.
	 
	 	Section B:	 	Operator’s Extra Expense including Control of Well, Extended
and Restoration Limited Cost Redrill, Seepage and Pollution and Clean Up and
Containment, Underground Blowout, Making Wells Safe, Removal of
Debris/Wreck, Evacuation Expenses, Deliberate Well Firing. To include
extension for Care, Custody and Control.
	 
	 	Section C:	 	Comprehensive General Liabilities arising out of or incidental
to the Borrowers’ operations.
	 
	 	Section D:	 	Loss of Production Income following an event covered under
Section A or Section B, to include contingent Loss of Production Income;
provided that such insurance shall only be required prior to disbursement of
the

 

 - 99 - 

	 	 	 	first A Loan under the A Loan Facility
	 
	 	     Section E:	 	Builder’s risk, where construction value exceeds US$5,000,000.

     B. SUM INSURED/LIMIT OF LIABILITY

	 	     Section A:	 	An amount sufficient to reinstate the property
	 
	 	     Section B:	 	US$10,000,000 for any one occurrence Onshore

	 	(i)	 	Prior to disbursement of the first A Loan under
the A Loan Facility, US$20,000,000, for any one
occurrence Offshore; and
	 
	 	(ii)	 	After disbursement of the first A Loan under the
A Loan Facility, (x) US$25,000,000 in respect of
jack-up rigs, and (y) US$50,000,000 in respect of
semisubmersible or other rigs, in each case, for
any one occurrence Offshore.

	 	     Section C:	 	US$10,000,000 for any one occurrence.
	 
	 	     Section D:	 	Fixed expenses including debt service during an indemnity
period of 12 months.
	 
	 	     Section E:	 	An amount equivalent to the construction project value.

     C. DEDUCTIBLES AND/OR EXCESS

	 	     Section A:	 	US$250,000
	 
	 	     Section B:	 	US$250,000 any one occurrence Onshore

US$750,000 any one occurrence Offshore

 

 - 100 - 

	 	Section C:	 	US$100,000 any one occurrence
	 
	 	Section D:	 	Maximum 30 days

Section E: US$250,000
	 
	 	Section E:	 	US$250,000

2. Miscellaneous

     Other insurance which,

	 	a)	 	is customary or necessary to comply with local or other requirements, such
as contractual insuring responsibility, Workers’ Compensation and Employers’
Liability insurances in relation to all workmen employed at the sites or in
connection with its operation; motor vehicle liability insurance for all vehicles
owned, hired, leased, used or borrowed for use in the countries of operation;
	 
	 	b)	 	is considered by the Borrowers to be desirable or prudent, or required by
IFC; or
	 
	 	c)	 	are required by local legislation and the Concession Agreements.

3. General

	 	a)	 	The Borrowers shall procure that each policy effected pursuant to this
schedule shall provide:

	 	i)	 	that the protection which is granted to IFC under the
policies is not to be invalidated by any act or failure to act on the part
of the Borrowers, their contractors or subcontractors;
	 
	 	ii)	 	that IFC is not responsible to the insurers or reinsurers
for the payment of insurance premiums or any other obligations of the
Borrowers.

	 	b)	 	Each policy effected pursuant to this Annex C:

	 	i)	 	shall be in such form and substance as is consistent with
the obligations of the Borrowers under this Annex C, as may be approved by
IFC.

 

 - 101 - 

ANNEX D

Page 1 of 2

PROHIBITED ACTIVITIES

	1.	 	Production or activities involving harmful or exploitative forms of forced labor/harmful
child labor.
	 
	2.	 	Production or trade in any product or activity deemed illegal under host country laws or
regulations or international conventions and agreements.
	 
	3.	 	Production or trade in weapons and munitions.
	 
	4.	 	Production or trade in alcoholic beverages (excluding beer and wine).
	 
	5.	 	Production or trade in tobacco
	 
	6.	 	Gambling, casinos and equivalent enterprises.
	 
	7.	 	Trade in wildlife or wildlife products regulated under Convention on International Trade in
Endangered Species of Wild Fauna and Flora.
	 
	8.	 	Production or trade in radioactive materials.
	 
	9.	 	Production or trade in or use of unbonded asbestos fibers.
	 
	10.	 	Commercial logging operations or the purchase of logging equipment for use in primary
tropical moist forest (prohibited by the Forestry policy).
	 
	11.	 	Production or trade in products containing PCBs.
	 
	12.	 	Production or trade in pharmaceuticals subject to international phase outs or bans.
	 
	13.	 	Production or trade in pesticides/herbicides subject to international phase out.
	 
	14.	 	Production or trade in ozone depleting substances subject to international phase out.
	 
	15.	 	Drift net fishing in the marine environment using nets in excess of 2.5 km in length.

 

 - 102 - 

	16.	 	Knowingly provide or permit to be provided any product or services (or any text, pictures,
graphics, sound, video, or other data in connection with any services) that:

	 	(a)	 	infringe on any third party’s copyright, patent, trademark, trade secret or
other proprietary rights or rights or publicity of privacy;
	 
	 	(b)	 	violate any law, statute, ordinance or regulation (including, without
limitation, the laws and regulations governing export control);
	 
	 	(c)	 	are defamatory, trade libelous, unlawfully threatening or harassing;
	 
	 	(d)	 	are obscene or pornographic or contain child pornography;
	 
	 	(e)	 	violate any laws regarding competition, privacy, anti-discrimination or false
advertising; or
	 
	 	(f)	 	contain any viruses, Trojan horses, worms, time-bombs, cancel bots or other
computer routines that are intended to damage, detrimentally interfere with,
surreptitiously intercept or expropriate any system, data or personal information.

 

 - 103 - 

SCHEDULE 1

Page 1 of 2

FORM OF CERTIFICATE OF INCUMBENCY AND AUTHORITY

(See Section 1.01 (Definitions) and Section 5.01(j) (Conditions of First

Disbursement) of the Loan and Guarantee Agreement)

[Company’s/Borrower’s Letterhead]

[Date]

International Finance Corporation

2121 Pennsylvania Avenue, N.W.

Washington, D.C. 20433

United States of America

Attention: Director, Oil, Gas, Mining and Chemicals Department

Ladies and Gentlemen:

Certificate of Incumbency and Authority

     With reference to the Loan and Guarantee Agreement among Toreador Turkey Ltd., Toreador
Romania Ltd., Toreador Resources Corporation, Toreador International Holding L.L.C., Madison Oil
France SAS, Toreador Energy France S.C.S and International Finance Corporation, dated December ___,
2006 (the “Loan Agreement”), I, the undersigned [Chairman/Director] of [Name of Obligor], (the
“Obligor”), duly authorized to do so, hereby certify that the following are the names, offices and
true specimen signatures of the persons [each] [any two] of whom are, and will continue to be,
authorized:

     (a) to sign on behalf of the Obligor the requests for Loans provided for in Section 2.02
(Facility Procedure and Rollover) of the Loan Agreement;

     (b) to sign the certifications provided for in Section 5.04 (Certification) of the Loan
Agreement; and

 

 - 104 - 

SCHEDULE 1

Page 2 of 2

     (c) to take any other action required or permitted to be taken, done, signed or executed under
the Loan Agreement or any other agreement to which IFC and the Obligor may be parties.

	 	 	 	 	 	 	 	 	 
	Name	 	Office	 	 	Specimen Signature	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 

     You may assume that any such person continues to be so authorized until you receive written
notice from an Authorized Representative of the Obligor that they, or any of them, is no longer so
authorized.

	 	 	 	 	 	 	 
	 	 	Yours truly,	 	 
	 
	 	 	 	 	 	 
	 	 	[NAME OF OBLIGOR]	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	[Chairman/Director]	 	 

 

 - 105 - 

SCHEDULE 2

Page 1 of 3

FORM OF REQUEST FOR LOANS

(See Section 2.02 (Facility Procedure and Rollover) and Section 5.04

(Certification) of the Loan and Guarantee Agreement)

[Borrower’s Letterhead]

[Date]

International Finance Corporation

2121 Pennsylvania Avenue, N.W.

Washington, D.C. 20433

United States of America

Attention: Director, Oil, Gas, Mining and Chemicals Department

Ladies and Gentlemen:

Project No. 25485

Request for Loan No. [      ]

1. Please refer to the Loan and Guarantee Agreement (the “Loan Agreement”) dated December ___, 2006,
among Toreador Turkey Ltd., Toreador Romania Ltd., Toreador Resources Corporation, Toreador
International Holding L.L.C., Madison Oil France SAS, Toreador Energy France S.C.S and
International Finance Corporation (“IFC”). Terms defined in the Loan Agreement have their defined
meanings whenever used in this request.

2. The Borrower irrevocably requests the disbursement on ___, ___ (or as soon as
practicable thereafter) of the amount of ___(___) under the [A Loan Facility] [C
Loan Facility] (the “Loan”) in accordance with the provisions of Section 2.02 of the Loan
Agreement. You are requested to pay such amount to the account in [New York] of [Name of Borrower]
[Name of correspondent Bank], Account No. ___ at [Name and Address of Bank] for further
credit to the Borrower’s Account No. ___ at [Name and address of Bank] in [city and country].

 

 - 106 - 

3. For the purpose of Section 5.04 (Certification) of the Loan Agreement, the Borrower certifies as
follows:

     (a) no Event of Default and no Potential Event of Default has occurred and is continuing;

     (b) the proceeds of the Loan:

	 	(i)	 	are at the date of this request needed by the Borrower
for the purpose of the Project, or will be needed for such purpose within
three (3) months of such date; and
	 
	 	(ii)	 	are not in reimbursement of, or to be used for,
expenditures in the territories of any country that is not a member of the
World Bank or for goods produced in or services supplied from any such
country;

     (c) since the date of the Loan Agreement nothing has occurred which has or could reasonably be
expected to have a Material Adverse Effect;

     (d) since the date of the Loan Agreement none of the Obligors have incurred any material loss
or liability other than in the normal course of business and except such liabilities as may be
incurred in accordance with Section 6.02 (Negative Covenants) of the Loan Agreement;

     (e) the representations and warranties made in Article IV of the Loan Agreement are true on
the date of this request and will be true on the date of the Loan with the same effect as if such
representations and warranties had been made on and as of each such date (but in the case of
Section 4.01(c), without the words in parenthesis);

     (f) after making the Loan, no Obligor will be in violation of:

	 	(i)	 	its Charters;
	 
	 	(ii)	 	any provision contained in any document to which it is a
party (including the Loan Agreement) or by which it is bound; or

 

 - 107 - 

	 	(iii)	 	any law, rule, regulation, Authorization or agreement or
other document binding on it directly or indirectly, limiting
or otherwise restricting its borrowing power or authority or its ability
to borrow; and

     (g) following the making of the Loan, including any Rollover Loan under Section 2.02(c) (Loan
Procedure and Rollover) of the Loan Agreement:

	 	(i)	 	the aggregate outstanding amount of all Loans under the
Facility shall not exceed the Available Amount; and
	 
	 	(ii)	 	the Company shall be in compliance with the Required
Ratios.

     The above certifications are effective as of the date of this Loan Request and shall continue
to be effective as of the date of the Loan. If any of these certifications is no longer valid as
of or prior to the date of the requested Loan, the Borrower undertakes to immediately notify IFC.

	 	 	 	 	 	 	 
	 	 	Yours truly,	 	 
	 
	 	 	 	 	 	 
	 	 	[NAME OF BORROWER]	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Authorized Representative	 	 

	 	 	 
	Copy to: 

	 	Director, Department of Financial Operations
	 

	 	International Finance Corporation

 

 - 108 - 

SCHEDULE 3

Page 1 of 1

FORM OF LOAN RECEIPT

(See Section 2.02 (Facility Procedure and Rollover) of the Loan and Guarantee Agreement)

[Borrower’s Letterhead]

International Finance Corporation

2121 Pennsylvania Avenue, N.W.

Washington, D.C. 20433

United States of America

Attention: Director, Department of Financial Operations

Ladies and Gentlemen:

Project No. 25485

Loan Receipt No. [          ]

     We, [Name of Borrower], hereby acknowledge receipt on the date hereof, of the sum of
___(___) disbursed to us by International Finance Corporation (“IFC”) under the Loan of
___(___) provided for in the Loan and Guarantee Agreement dated December ___, 2006 among
Toreador Turkey Ltd., Toreador Romania Ltd., Toreador Resources Corporation, Toreador International
Holding L.L.C., Madison Oil France SAS, Toreador Energy France S.C.S and International Finance
Corporation.

	 	 	 	 	 	 	 
	 	 	Yours truly,	 	 
	 
	 	 	 	 	 	 
	 	 	[NAME OF BORROWER]	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Authorized Representative	 	 

 

 - 109 - 

SCHEDULE 4

Page 1 of 2

FORM OF SERVICE OF PROCESS LETTER

[Letterhead of Agent for Service of Process]

(See Section 5.01(k) (Conditions of First Disbursement) of the Loan and

Guarantee Agreement)

[Date]

International Finance Corporation

2121 Pennsylvania Avenue, N.W.

Washington, D.C. 20433

Attention: Director, Oil, Gas, Mining and Chemicals Department

Re: Toreador Group

Dear Sirs:

     Reference is made to Section 5.01(k) of the Loan and Guarantee Agreement dated December ___,
2006 (the “Loan Agreement”) among Toreador Turkey Ltd., Toreador Romania Ltd., Toreador Resources
Corporation, Toreador International Holding L.L.C., Madison Oil France SAS, Toreador Energy France
S.C.S and International Finance Corporation. Unless otherwise defined herein, capitalized terms
used herein shall have the meaning specified in the Loan Agreement.

     Pursuant to Section 8.05(d) (Applicable Law and Jurisdiction) of the Loan Agreement, each
Obligor has irrevocably designated and appointed the undersigned, HTD Services Ltd, with offices
currently located at Irongate House, Duke’s Place, London, EC3A 7HX, as its authorized agent to
receive for and on its behalf service of process in any legal action or proceeding with respect to
the Loan Agreement and the other Financing Documents to which it is a party in the courts of
England.

     The undersigned hereby informs you that it has irrevocably accepted that appointment as
process agent as set forth in Section 8.05(d) (Applicable Law and Jurisdiction) of the Loan
Agreement from the date hereof until September 15,

 

 - 110 - 

2015, and agrees with you that the undersigned (i) shall inform IFC promptly in writing of any
change of its address, (ii) shall perform its obligations as such
process agent in accordance with the relevant provisions of Section 8.05 (Applicable Law and
Jurisdiction) of the Loan Agreement, and (iii) shall forward promptly to each Obligor any legal
process received by the undersigned in its capacity as process agent.

     As process agent, the undersigned and its successor or successors agree to discharge the
above-mentioned obligations and will not refuse fulfillment of such obligations as provided under
Section 8.05 (Applicable Law and Jurisdiction) of the Loan Agreement.

	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 
	 	 	[                    ]	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 

cc: [Obligors]

 

 - 111 - 

SCHEDULE 5

Page 1 of 3

IFC BASE CASE ASSUMPTIONS

For the avoidance of doubt, all assumptions and estimates made by the Company in the preparation of
the IFC Base Case are subject to IFC’s review and approval.

	1.	 	Production Profile: Based on the production profile corresponding to the Proved Reserves
Criteria updated from the most recent Reserve Certification, net of all production royalties,
or as otherwise agreed by IFC.
	 
	2.	 	Crude Oil Prices: Based on the World Bank Group oil price forecast, adjusted for the
corresponding discount applicable to each field. For fields with historical sales, apply
historical discounts, otherwise use best estimates based on fields with comparable oil
quality.
	 
	3.	 	Gas Prices: As defined in “Gas Prices” in General Definitions, or otherwise agreed by IFC.
	 
	4.	 	Capital Expenditures (CAPEX): Based on the Company’s annual capital budget, as submitted
each year and agreed by IFC.
	 
	5.	 	Lease Operating Expense (“LOE”): Based on historical and budgeted costs.
	 
	6.	 	General & Administrative Expense (“G&A”): Based on historical and budgeted costs.
	 
	7.	 	Expensed Exploration Costs: Assume no expensed exploration costs and write-offs for dry
holes (i.e. all CAPEX is capitalized and amortized).
	 
	8.	 	Depletion, Depreciation, & Amortization: Based on the unit-of-production method of
depreciation, done on a per-country basis.
	 
	9.	 	Interest Income: No interest income assumed on cash on the balance sheet.
	 
	10.	 	Interest Expense: Based on interest rates and additional compensation (for the C Loan) in
the loan agreement. Six-month US Dollar Libor projections will be based on the six-month US
Dollar forward curve according to Bloomberg function FWCV [GO], as of the date of calculation.

 

 - 112 - 

	11.	 	Income Taxes: As per the applicable income tax rates for income earned in each jurisdiction.
Apply applicable net operating loss carry forwards as permitted in each jurisdiction.
	 
	12.	 	Preferred Stock and Preferred Dividends: Assume no more than the existing 72,000 Series A-1
Convertible Preferred Stock (“Preferred Shares”) outstanding, which earn a US$2.25 preferred
dividend per share, will earn dividends only until converted at the end of 2007, after which
they are assumed to be converted into common shares at a price of US$4.00 per common share.
	 
	13.	 	Accounts Receivable: Initially assume at 30 days’ sales, based on the French sales
arrangements. Contractual terms for gas sales in Turkey and Romania are to be determined once
contracts are entered into, after which assumptions for Accounts Receivable should be updated
to reflect the new contracts.
	 
	14.	 	Income Taxes Receivable: Updated as per latest consolidated quarterly statement of the
Company and assumed to remain constant throughout the projection period, unless recent events
provide reason to for current and future changes in the account.
	 
	15.	 	Other Current Assets: Updated as per latest consolidated quarterly statement of the Company
and assumed to remain constant throughout the projection period, unless recent events provide
reason to for current and future changes in the account.
	 
	16.	 	PP&E: PP&E beginning balance is updated as per the latest consolidated quarterly balance
sheet of the Company.
	 
	17.	 	Investments in Unconsolidated Entities: Updated as per latest consolidated quarterly
statement of the Company and assumed to remain constant throughout the projection period,
unless recent events provide reason to for current and future changes in the account.
	 
	18.	 	Goodwill: No impairments projected. Updated as per latest consolidated quarterly statement
of the Company and assumed to remain constant throughout the projection period, unless recent
events provide reason to for current and future changes in the account.
	 
	19.	 	Other LT assets: Updated as per latest consolidated quarterly statement of the Company and
assumed to remain constant throughout the projection

 

 - 113 - 

	 	 	period, unless recent events provide reason to for current and future changes in the
account.
	 
	20.	 	Accounts Payable: Assume that any existing balances are paid down immediately.
Subsequently, no Accounts Payable is assumed. Assume that future purchases are immediately
paid for.
	 
	21.	 	Income Taxes Payable: Assume that any existing balances are paid down immediately, after the
account will remain at zero throughout the rest of the projection period.
	 
	22.	 	Deferred Income Tax Liability: Assume to remain constant throughout the projection period
based on the latest consolidated quarterly statement of the Company.
	 
	23.	 	Long Term Accrued Liability: Assume to remain constant throughout the projection period
based on the latest consolidated quarterly statement of the Company.
	 
	24.	 	Production Taxes: Based on the latest applicable tax rules and regulations.
	 
	25.	 	Royalties: Based on the latest applicable royalty laws and agreements.
	 
	26.	 	Dividends: No dividends assumed as per dividend restrictions in this Loan Agreement and as
per the Company’s policy. Excess cash is kept on the balance sheet for projection purposes.
	 
	27.	 	Projected Disbursements of the IFC A Loan and C Loan: As projected by the Company and agreed
by IFC.
	 
	28.	 	Projected Shareholders’ Capital Increases: Assume no capital increases unless otherwise
projected by the Company and agreed by IFC.
	 
	29.	 	Other assumptions: As projected by the Company and agreed by IFC.

 

 - 114 - 

SCHEDULE 6

Page 1 of 2

FORM OF LETTER TO COMPANY’S AUDITORS

(See Section 5.03(f) (Additional Conditions of First A Loan) and Section 6.01(e)

(Affirmative Covenants) of the Loan and Guarantee Agreement)

[Company’s Letterhead]

[Date]

[NAME OF AUDITORS]

[ADDRESS]

Ladies and Gentlemen:

     We hereby authorize and request you to give to International Finance Corporation of 2121
Pennsylvania Avenue, N.W., Washington, D.C. 20433, United States of America (“IFC”), all such
information as IFC may reasonably request with regard to the financial statements (both audited and
unaudited), accounts and operations of the undersigned company. We have agreed to supply that
information and those statements under the terms of a Loan and Guarantee Agreement between the
undersigned company and IFC (amongst others) dated December ___, 2006 (the “Loan Agreement”). For
your information we enclose a copy of the Loan Agreement.

     We authorize and request you to send two copies of the audited accounts of the undersigned
company to IFC to enable us to satisfy our obligation to IFC under Section 6.03 (b) (i) of the Loan
Agreement. When submitting the same to IFC, please also send, at the same time, a copy of your full
report on such accounts in a form reasonably acceptable to IFC.

     Please note that under Section 6.03 (b) (ii) and (iii) and Section 6.03 (c) of the Loan
Agreement, we are obliged to provide IFC with:

 

 - 115 - 

     (a) a copy of the annual and any other management letter or other communication from you to
the undersigned company or its management commenting on, among other things, the adequacy of the
undersigned company’s financial control procedures and accounting and management information
system; and

     (b) a report (in form pre-agreed by IFC), signed by the Company’s chief financial officer and
reviewed by the Auditors, concerning the Company’s compliance with the covenants in Section 6.01(m)
(Affirmative Covenants) (including a clear methodology used in the respective calculations) and a
calculation of the Additional Compensation.

     Please also submit each such communication and report to IFC with the audited accounts.

     For our records, please ensure that you send to us a copy of every letter that you receive
from IFC immediately upon receipt and a copy of each reply made by you immediately upon the issue
of that reply.

	 	 	 	 	 	 	 
	 	 	Yours truly,	 	 
	 
	 	 	 	 	 	 
	 	 	TOREADOR RESOURCES CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Authorized Representative	 	 

Enclosure

	 	 	 
	cc:

	 	Director
	 

	 	Director, Oil, Gas, Mining and Chemicals Department
	 

	 	International Finance Corporation
	 

	 	2121 Pennsylvania Avenue, N.W.
	 

	 	Washington, D.C. 20433
	 

	 	United States of America

 

 - 116 - 

SCHEDULE 7

Page 1 of 6

INFORMATION TO BE INCLUDED IN 

QUARTERLY AND ANNUAL REVIEW OF OPERATIONS

(See Sections 6.03 (a) (ii) and (b) (iv) of the Loan and Guarantee Agreement)

Reporting on a Per Country and a Per Field Basis

Country:                                         

Field:                                         

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Current	 	 	 	 	 	 	YTD	 
	 	 	Quarter	 	 	YTD	 	 	Budget	 
	Production
	 	 	 	 	 	 	 	 	 	 	 	 
	Gross oil production (MGbl)
	 	 	 	 	 	 	 	 	 	 	 	 
	Gross gas production (MMCF)
	 	 	 	 	 	 	 	 	 	 	 	 
	Gross condensate production (MBbl)
	 	 	 	 	 	 	 	 	 	 	 	 
	Gross water production (MBbl)
	 	 	 	 	 	 	 	 	 	 	 	 
	Gross water injection (MBbl)
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Average realized oil, gas and condensate prices
	 	 	 	 	 	 	 	 	 	 	 	 
	Oil (US$/bbl)
	 	 	 	 	 	 	 	 	 	 	 	 
	Gross Price
	 	 	 	 	 	 	 	 	 	 	 	 
	Quality Discount, if any
	 	 	 	 	 	 	 	 	 	 	 	 
	Production Taxes, if any
	 	 	 	 	 	 	 	 	 	 	 	 
	Transportation Cost, if any
	 	 	 	 	 	 	 	 	 	 	 	 
	Fiscal Royalties, if any
	 	 	 	 	 	 	 	 	 	 	 	 
	Net Price
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Gas (US$/mcf)
	 	 	 	 	 	 	 	 	 	 	 	 
	Gross Price
	 	 	 	 	 	 	 	 	 	 	 	 
	Quality Discount, if any
	 	 	 	 	 	 	 	 	 	 	 	 
	Production Taxes, if any
	 	 	 	 	 	 	 	 	 	 	 	 
	Transportation Cost, if any
	 	 	 	 	 	 	 	 	 	 	 	 
	Fiscal Royalties, if any
	 	 	 	 	 	 	 	 	 	 	 	 

 

 - 117 - 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Current	 	 	 	 	 	 	YTD	 
	 	 	Quarter	 	 	YTD	 	 	Budget	 
	Net Price
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Condensate (US$/bbl)
	 	 	 	 	 	 	 	 	 	 	 	 
	Gross Price
	 	 	 	 	 	 	 	 	 	 	 	 
	Quality Discount, if any
	 	 	 	 	 	 	 	 	 	 	 	 
	Production Taxes, if any
	 	 	 	 	 	 	 	 	 	 	 	 
	Transportation Cost, if any
	 	 	 	 	 	 	 	 	 	 	 	 
	Fiscal Royalties, if any
	 	 	 	 	 	 	 	 	 	 	 	 
	Net Price
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Sales of oil, gas and condensate (US$MM)
	 	 	 	 	 	 	 	 	 	 	 	 
	Oil
	 	 	 	 	 	 	 	 	 	 	 	 
	Gas
	 	 	 	 	 	 	 	 	 	 	 	 
	Condensate
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Operating Expenses1
	 	 	 	 	 	 	 	 	 	 	 	 
	Opex (US$MM)
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	General and Administrative Expenses 2
	 	 	 	 	 	 	 	 	 	 	 	 
	In-Country G&A (US$MM)
	 	 	 	 	 	 	 	 	 	 	 	 
	Corporate G&A allocated to Country (US$MM)
	 	 	 	 	 	 	 	 	 	 	 	 
	Total G&A (In-Country + Corporate Allocation)
(US$MM)
	 	 	 	 	 	 	 	 	 	 	 	 
	% of Corporate G&A Allocated
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Capital Expenditures 3
	 	 	 	 	 	 	 	 	 	 	 	 
	Capex (US$MM)
	 	 	 	 	 	 	 	 	 	 	 	 
	# of Wells drilled
	 	 	 	 	 	 	 	 	 	 	 	 

 

			
	1	 	Provide breakdown by major line items
(lifting, transportation, workovers, personnel, etc.).
	 
	2	 	Provide breakdown by major line items.
G&A need not be broken down by field if G&A is allocated by country only.
	 
	3	 	Provide breakdown by major line items.

 

 - 118 - 

Reporting on a per Country Basis4

Country:                                         

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Current	 	 	 	 	 	 	YTD	 
	 	 	Quarter	 	 	YTD	 	 	Budget	 
	Payments to Government (US$MM)
	 	 	 	 	 	 	 	 	 	 	 	 
	Production Taxes
	 	 	 	 	 	 	 	 	 	 	 	 
	To National Government
	 	 	 	 	 	 	 	 	 	 	 	 
	To Regional Government
	 	 	 	 	 	 	 	 	 	 	 	 
	To Local Government
	 	 	 	 	 	 	 	 	 	 	 	 
	Total Payments to Government
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Income Taxes
	 	 	 	 	 	 	 	 	 	 	 	 
	To National Government
	 	 	 	 	 	 	 	 	 	 	 	 
	To Regional Government
	 	 	 	 	 	 	 	 	 	 	 	 
	To Local Government
	 	 	 	 	 	 	 	 	 	 	 	 
	Total Payments to Government
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Royalties
	 	 	 	 	 	 	 	 	 	 	 	 
	To National Government
	 	 	 	 	 	 	 	 	 	 	 	 
	To Regional Government
	 	 	 	 	 	 	 	 	 	 	 	 
	To Local Government
	 	 	 	 	 	 	 	 	 	 	 	 
	Total Payments to Government
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	All Other Taxes / Payments / Contributions to
Government5
	 	 	 	 	 	 	 	 	 	 	 	 
	To National Government
	 	 	 	 	 	 	 	 	 	 	 	 
	To Regional Government
	 	 	 	 	 	 	 	 	 	 	 	 
	To Local Government
	 	 	 	 	 	 	 	 	 	 	 	 
	Total Payments to Government
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Personnel Data
	 	 	 	 	 	 	 	 	 	 	 	 
	# of Direct Employees
	 	 	 	 	 	 	 	 	 	 	 	 
	# of Indirect Employees (e.g. through an
agent or contractor)
	 	 	 	 	 	 	 	 	 	 	 	 
	Total # of Direct and Indirect Employees
	 	 	 	 	 	 	 	 	 	 	 	 

 

			
	4	 	This section needs to be provided only for Turkey and Romania.
	 
	5	 	Specify what type of payment and for what purpose

 

 - 119 - 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Current	 	 	 	 	 	 	YTD	 
	 	 	Quarter	 	 	YTD	 	 	Budget	 
	# of Direct Employees from the Local
Community
	 	 	 	 	 	 	 	 	 	 	 	 
	# of Indirect Employees from the Local
Community
	 	 	 	 	 	 	 	 	 	 	 	 
	# of Direct Employees who are Nationals of
the Country of Operation
	 	 	 	 	 	 	 	 	 	 	 	 
	# of Indirect Employees who are Nationals
of the Country of Operation
	 	 	 	 	 	 	 	 	 	 	 	 
	# of New Direct Employment Created since
Beginning of the Year
	 	 	 	 	 	 	 	 	 	 	 	 
	# of New Indirect Employment Created since
Beginning of the Year
	 	 	 	 	 	 	 	 	 	 	 	 
	# of Employees in Top Management Team of
the Country of Operation
	 	 	 	 	 	 	 	 	 	 	 	 
	% of Top Management Team of the Country of
Operation who are Nationals
	 	 	 	 	 	 	 	 	 	 	 	 
	Salary rates compared to alternative (%
premium over comparable employment in the
country)
	 	 	 	 	 	 	 	 	 	 	 	 
	# of Employees Receiving Training
	 	 	 	 	 	 	 	 	 	 	 	 
	Amount Spent on Training (US$MM)
	 	 	 	 	 	 	 	 	 	 	 	 
	Amount Spent on Training per Employee
(US$MM)
	 	 	 	 	 	 	 	 	 	 	 	 
	Salaries (US$MM)
	 	 	 	 	 	 	 	 	 	 	 	 
	Pension Benefits (US$MM)
	 	 	 	 	 	 	 	 	 	 	 	 
	Tax Related Benefits (US$MM)
	 	 	 	 	 	 	 	 	 	 	 	 
	Other Benefits (US$MM)6
	 	 	 	 	 	 	 	 	 	 	 	 

 

			
	6	 	Specify what type of benefit

 

 - 120 - 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Current	 	 	 	 	 	 	YTD	 
	 	 	Quarter	 	 	YTD	 	 	Budget	 
	Trading Partners/Markets for Goods and Services
	 	 	 	 	 	 	 	 	 	 	 	 
	National Suppliers for Construction /
Drilling
	 	 	 	 	 	 	 	 	 	 	 	 
	Total Purchases (US$MM)
	 	 	 	 	 	 	 	 	 	 	 	 
	- National Purchases (US$MM)
	 	 	 	 	 	 	 	 	 	 	 	 
	- Community Purchases (US$MM)
	 	 	 	 	 	 	 	 	 	 	 	 
	- Imports and foreign suppliers
purchases/services (US$MM)
	 	 	 	 	 	 	 	 	 	 	 	 
	Number of community suppliers (#)
	 	 	 	 	 	 	 	 	 	 	 	 
	Number of national suppliers (#)
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	National Suppliers for Operations
	 	 	 	 	 	 	 	 	 	 	 	 
	Total Purchases (US$MM)
	 	 	 	 	 	 	 	 	 	 	 	 
	- National Purchases (US$MM)
	 	 	 	 	 	 	 	 	 	 	 	 
	- Community Purchases (US$MM)
	 	 	 	 	 	 	 	 	 	 	 	 
	- Imports and foreign suppliers
purchases/services (US$MM)
	 	 	 	 	 	 	 	 	 	 	 	 
	Number of community suppliers (#)
	 	 	 	 	 	 	 	 	 	 	 	 
	Number of national suppliers (#)
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Domestic Sales (US$MM)
	 	 	 	 	 	 	 	 	 	 	 	 
	Exports (US$MM)
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Other Impacts of Operations7
	 	 	 	 	 	 	 	 	 	 	 	 
	Greater Competition?
	 	 	 	 	 	 	 	 	 	 	 	 
	Lower Prices?
	 	 	 	 	 	 	 	 	 	 	 	 
	New Industries?
	 	 	 	 	 	 	 	 	 	 	 	 
	Demonstration Impact?
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Contributions to Local Community 8
	 	 	 	 	 	 	 	 	 	 	 	 
	Item 1 (US$)
	 	 	 	 	 	 	 	 	 	 	 	 
	Item 2 (US$)
	 	 	 	 	 	 	 	 	 	 	 	 

 

			
	7	 	Provide explanation of impact, if any
	 
	8	 	Itemize any contributions/donations/support to the local community and provide US$ value

 

 - 121 - 

Supplemental Annual Operating Information9

1. Macroeconomic Conditions. Brief description of any material changes that affect
the Company. For example, changes in corporate taxation, import duties, foreign exchange
availability, price controls, other areas of regulation.

2. Markets. Brief description of changes in the Company’s market conditions, with
emphasis on changes in sales contracts/agreements, market prices, competitive landscape.

3. Management and Organizational Structure. Summary of significant changes in the
Company’s senior management or organizational structure.

4. Corporate Strategy. Description of any changes to the Company’s corporate or
operational strategy.

5. Operating Performance. Discussion of major factors affecting the year’s results,
including key operating indicators (e.g.: sales — by volume, value and market, operating costs,
margins, capacity utilization).

6. Others. Disclosure and discussion of all events that have caused or may cause a
material adverse effect on the Company’s operations

 

			
	9	 	Reported on a per country basis or on a
Company-wide basis as relevant.

 

 - 122 - 

SCHEDULE 8

Page 1 of 3

GROUP OWNERSHIP

1. CAPITALIZATION

Consolidated Capitalization in thousands as of 09/30/2006

	 	 	 	 	 
	Stockholders’ equity:
	 	 	 	 
	Preferred stock, Series A & A-1, $1.00 par value, 4,000,000
shares authorized; liquidation preference of $3,850,000;
72,000 and 154,000 issued
	 	 	72	 
	 
	 	 	 	 
	Common stock, $0.15625 par value, 30,000,000
shares authorized; 16,362,041
	 	 	2,602	 
	 
	 	 	 	 
	Capital in excess of par value
	 	 	117,295	 
	 
	 	 	 	 
	Retained earnings
	 	 	39,770	 
	 
	 	 	 	 
	Accumulated other comprehensive income
	 	 	(16	)
	 
	 	 	 
	 
	 	 	 	 
	 
	 	 	159,723	 
	 
	 	 	 	 
	Deferred compensation
	 	 	(6,141	)
	 
	 	 	 	 
	Treasury stock at cost, 721,027 shares
	 	 	(2,534	)
	 
	 	 	 
	 
	 	 	 	 
	Total stockholders’ equity
	 	 	151,048	 
	 
	 	 	 

 

 - 123 - 

2. CURRENT OWNERSHIP STRUCTURE and FUTURE OWNERSHIP STRUCTURE

[See Attached]exv10w1

 

Exhibit
10.1

 

Windstream 

2007 Deferred Compensation Plan

 

	 	 	 	 	 
	Article I
	 	 	1	 
	Establishment and Purpose
	 	 	1	 
	Article II
	 	 	1	 
	Definitions
	 	 	1	 
	Article III
	 	 	7	 
	Eligibility and Participation
	 	 	7	 
	Article IV
	 	 	7	 
	Deferral Elections
	 	 	7	 
	Article V
	 	 	10	 
	Modifications to Payment Schedules
	 	 	10	 
	Article VI
	 	 	11	 
	Company Contributions
	 	 	12	 
	Article VII
	 	 	12	 
	Valuation of Account Balances; Investments
	 	 	12	 
	Article VIII
	 	 	13	 
	Distribution and Withdrawals
	 	 	13	 
	Article IX
	 	 	15	 
	Administration
	 	 	15	 
	Article X
	 	 	16	 
	Amendment and Termination
	 	 	16	 
	Article XI
	 	 	18	 
	Informal Funding
	 	 	18	 
	Article XII
	 	 	18	 
	Claims
	 	 	18	 
	Article XIII
	 	 	20	 
	General Conditions
	 	 	20	 
	Article XIV
	 	 	22	 
	Prior Plans and Benefit Restoration Plan
	 	 	22	 

 

 

Article I

Establishment and Purpose

Windstream Corporation (the “Company”) hereby establishes the Windstream 2007 Deferred Compensation
Plan (the “Plan”). This Plan is effective on the Effective Date. The purpose of the Plan is to
attract and retain key employees by providing each Participant with an opportunity to defer receipt
of a portion of their salary, bonus, and other specified compensation and to provide for the
payment of certain amounts deferred under the prior plans maintained by the Company.

Article II

Definitions

	2.1	 	Account. Account means a bookkeeping account maintained by the Committee to record
the Company’s payment obligation to a Participant under the Plan. The Committee may maintain
an Account to record the total obligation to a Participant and component Accounts to reflect
amounts payable at different times and in different forms pursuant to the terms of a
Participant’s Deferral Election. The Account shall be a bookkeeping entry only and shall be
used solely as a device to measure and determine the amounts, if any, to be paid to a
Participant or his Beneficiary under the Plan.
	 
	2.2	 	Account Balance. Account Balance means, with respect to any Account, the total
amount of the Company’s payment obligation from such Account as of the most recent Valuation
Date.
	 
	2.3	 	Affiliate. Affiliate means any corporation, joint venture, partnership, limited
liability company, unincorporated association or other entity in which the Company has a
direct or indirect ownership or other equity interest and directly or indirectly owns or
controls fifty percent (50%) or more of the total combined voting or other decision-making
power.
	 
	2.4	 	Beneficiary or Beneficiaries. Beneficiary or Beneficiaries means the person
or persons, including one or more trusts, designated by a Participant in accordance with the
Plan to receive payment of the remaining balance of the Participant’s Account in the event of
the death of the Participant prior to the Participant’s receipt of the entire vested amount
credited to his Account.
	 
	2.5	 	Beneficiary Designation Form. Beneficiary Designation Form means the form
established from time to time by the Committee that a Participant completes signs and returns
to the Committee to designate one or more Beneficiaries.
	 
	2.6	 	Benefit Restoration Plan. Benefit Restoration Plan means the Windstream Benefit
Restoration Plan.
	 
	2.7	 	BRP Transferred Amounts. BRP Transferred Amounts has the meaning given to such term
in Section 14.2 hereof.

 

 

	2.8	 	Business Day. A Business Day is each day on which the New York Stock Exchange is
open for business.
	 
	2.9	 	Change in Control. Change in Control has the meaning given to such term in the
Windstream 2006 Equity Incentive Plan, as amended from time to time. Notwithstanding the
foregoing, to the extent that any event or occurrence described in the preceding definition
does not constitute a “change in the ownership or effective control” or a “change in the
ownership of a substantial portion of the assets” of the Company within the meaning of Code
Section 409A, such event or occurrence shall not constitute a Change in Control for purposes
of Sections 8.6 and 10.1(b)(2) hereof.
	 
	2.10	 	Claimant. Claimant means a Participant or Beneficiary filing a claim under Article
XII of this Plan.
	 
	2.11	 	Code. Code means the Internal Revenue Code of 1986, as amended from time to
time. 
	 
	2.12	 	Code Section 409A. Code Section 409A means section 409A of the Code, and regulations
and other guidance issued by the Treasury Department and Internal Revenue Service thereunder.
For purposes of the Plan, the phrase “permitted by Code Section 409A,” or words or phrases of
similar import, shall mean that the event or circumstance shall only be permitted to the
extent it would not cause an amount deferred or payable under the Plan to be includible in the
gross income of a Participant or Beneficiary under Code Section 409A(a)(1).
	 
	2.13	 	Commencement Date. Commencement Date has the meaning given to such term in Section
3.1 hereof.
	 
	2.14	 	Committee. Committee means the committee appointed to administer the Plan. Unless
and until otherwise specified by the Compensation Committee of the Board of Directors of the
Company, the Committee under the Plan shall be the Company’s Benefits Committee, or its
delegate.
	 
	2.15	 	Company. Company means Windstream Corporation and its successors, including, without
limitation, the surviving corporation resulting from any merger or consolidation of Windstream
Corporation with any other corporation, limited liability company, joint venture, partnership
or other entity or entities.

 

 

	2.16	 	Company Contribution. Company Contribution means a credit by the Company or any
Affiliate to a Participant’s Account(s) in accordance with the provisions of Article VI of
the Plan. Company Contributions are credited at the sole discretion of the Company and its
Affiliates and the fact that a Company Contribution is credited in one year shall not
obligate the Company or any Affiliate to continue to make such Company Contribution in
subsequent years.
	 
	2.17	 	Compensation. Compensation means a Participant’s base salary and annual bonus payable
under the Windstream Corporation Performance Incentive Compensation Plan or the Windstream
Corporation Executive Incentive Compensation Plan, or their successors, and such other cash or
equity-based compensation (if any) approved by the Committee as Compensation that may be
deferred under this Plan. For purposes of this Plan, base salary payable after the last day
of a Plan Year solely for services performed during the final payroll period described in Code
Section 3401(b) containing December 31 of such year shall be treated as earned during the
subsequent Plan Year.
	 
	2.18	 	Death Benefit. Death Benefit means payment to a Participant’s Beneficiary(ies) of
all remaining unpaid Account Balances as provided in Section 8.4 of the Plan.
	 
	2.19	 	Deferral. Deferral means the credits to a Participant’s Accounts attributable to
deferrals of Compensation and Earnings on such amounts, in each case as described in Code
Section 409A, except where the context of the Plan clearly indicates otherwise.
	 
	2.20	 	Deferral Election. Deferral Election means an agreement between a Participant and
the Company specifying any or all of the following: (i) the amount of each component of
Compensation subject to the Deferral Election; (ii) the investment allocation described in
Section 7.2; and (iii) the Payment Schedule applicable to the Deferral Election. The Committee
may permit different deferral amounts for each component of Compensation and may establish a
minimum or maximum deferral amount for each such component. Unless otherwise specified by the
Committee in the Deferral Election agreement, Participants may defer up to 25% of their base
salary and up to 50% of their annual bonus and/or other types of Compensation (if any) for a
Plan Year.
	 
	 	 	To the extent permissible under Code Section 409A, the Committee may reduce a Participant’s
Deferral Election as necessary to permit sufficient non-deferred Compensation from which the
Company may satisfy a Participant’s obligations regarding welfare plans and from which to
satisfy tax withholding obligations, and/or to conform the Deferral Election and the Plan to
applicable law.
	 
	2.21	 	Disability. Disability means that a Participant either (i) is unable to engage in any
substantial gainful activity by reason of any medically-determinable physical or mental
impairment which can be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months, or (ii) is, by reason of any
medically-determinable physical or mental impairment which can be expected to result in death
or can be expected to last for a continuous period of not less than twelve (12) months,
receiving income replacement benefits for a period of not less than three (3) months under an
accident and health plan covering employees of the Participant’s employer. The determination
of the existence of a Disability shall be made by the Committee in accordance with Code
Section 409A.

 

 

	2.22	 	Disability Benefit. Disability Benefit means a payment by the Company to a
Participant of all remaining unpaid Account Balances in a single lump sum as provided in
Section 8.3 of the Plan.
	 
	2.23	 	Earnings. Earnings means an adjustment to the value of an Account in accordance with
Article VII.
	 
	2.24	 	Effective Date. Effective Date means December 31, 2006.
	 
	2.25	 	Eligible Employee. Eligible Employee means any employee of the Company or its
Affiliates who is (i) expressly selected by the Compensation Committee of the Board of
Directors of the Company, in its sole discretion, to participate in the Plan, and (ii) a
member of a “select group of management or highly compensated employees,” within the meaning
of Sections 201, 301 and 401 of ERISA. In lieu of expressly selecting Eligible Employees for
Plan participation, the Compensation Committee of the Board of Directors of the Company may
establish eligibility criteria (consistent with the requirements of (i) and (ii) of this
section) providing for automatic participation of all Eligible Employees who satisfy such
criteria. Unless and until modified or revoked by the Compensation Committee of the Board of
Directors of the Company, such eligibility criteria are set forth on Exhibit A hereto.
	 
	2.26	 	ERISA. ERISA means the Employee Retirement Income Security Act of 1974, as amended
from time to time.
	 
	2.27	 	Participant. Participant means an Eligible Employee who has received notification of
his or her eligibility to defer Compensation under the Plan under Section 3.1 and any other
person with an Account Balance greater than zero, regardless of whether such individual
continues to be an Eligible Employee. Moreover, any individual with respect to whom receives
a credit to his or her Account under Article XIV as of the Effective Date shall automatically
participate, and be a “Participant,” in the Plan with respect to such amounts as of the
Effective Date. A Participant’s continued participation in the Plan shall be governed by
Section 3.2 and Section 3.3 of the Plan.
	 
	2.28	 	Payment Schedule. Payment Schedule means the date as of which payment under the Plan
will commence and the form in which such payment will be made.

	 	(a)	 	Retirement/Termination Account. Payment of a Participant’s vested
Retirement/Termination Account will be made (or will commence) on the later of: (i)
January of the Plan Year following the Plan Year of the Participant’s Separation from
Service; or (ii) the first Business Day of the seventh month following such Separation
from Service (or, if earlier, upon the Participant’s death as provided in Section 8.4
of the Plan). Payment will be made in a single lump sum unless the Participant
specifies an alternative form of payment in his first Deferral Election that he
delivers to the Committee pursuant to which amounts are credited to his
Retirement/Termination Account (or, if earlier, prior to the date that the Participant
obtains a legally binding right to Company Contributions under his
Retirement/Termination Account or such other date as permitted by the Committee in
accordance with Code Section 409A). Alternative forms of

 

 

	 	 	 	payment include (i) a lump sum payment between 0% and 100% of the Account Balance
and (ii) any remaining Account Balance payable in a series of substantially equal
annual installments from two (2) to ten (10) years. If a lump sum equal to less
than 100% of the Retirement/Termination Account is paid, the payment commencement
date for the installment form of payment will be the first anniversary of the
payment of the lump sum.
	 
	 	(b)	 	Specified Date Account. Payment from a Participant’s Specified Date Account
will be made (or will commence) as of the first day of a specified month of a
specified year (or if no month is specified, as of February 1 of the specified year),
or upon attaining a specified age, under the elections described in Section 4.4 as
modified under Section 5.1. Payment will be made in a single lump sum unless the
Participant specifies an alternative form of payment in his first Deferral Election
that he delivers to the Committee pursuant to which amounts are credited to that
Specified Date Account. Alternative forms of payment include a series of substantially
equal annual installments payable over two (2) to five (5) years. The time and form of
payment upon an earlier Separation from Service, death, Disability is specified in
Section 4.4(b).
	 
	 	(c)	 	Death Benefit. Payment to a Participant’s Beneficiary(ies) in the event of
death shall be paid in a single lump sum. Payment will be made as of the first day of
the first month following the Participant’s death.
	 
	 	(d)	 	Disability Benefit. Payment due to Disability will be made in a single lump
sum on the later of (i) the first day of the first month following the Participant’s
Disability, or (ii) to the extent required to comply with Code Section 409A, the first
Business Day of the seventh month following the Participant’s Separation from Service
(or, if earlier, upon the Participant’s death as provided in Section 8.4 of the Plan).
	 
	 	(e)	 	Prior Plan Account. Payment from a Participant’s Prior Plan Account will be
governed by Section 14.1.

	2.29	 	Performance-Based Compensation. Performance-Based Compensation means Compensation
where the amount of, or entitlement to, the Compensation is contingent on the satisfaction of
pre-established organizational or individual performance criteria relating to a performance
period of at least twelve (12) consecutive months in which the Participant performs services
for the Company or its Affiliates. Organizational or individual performance criteria are
considered pre-established if established in writing by not later than ninety (90) calendar
days after the commencement of the period of service to which the criteria relate, provided
that the outcome is substantially uncertain at the time the criteria are established.
Performance-Based Compensation does not include any amount or portion of any amount that will
be paid either regardless of performance, or based upon a level of performance that is
substantially certain to be met at the time the criteria is established. Performance criteria
may be subjective but must relate to the performance of the Participant, a group of employees
that includes the Participant or a business unit (which may include the Company) for which the
Participant provides services. The determination of whether Compensation qualifies as
“Performance-Based Compensation” will be made in accordance with Code Section 409A.

 

 

	2.30	 	Plan. Plan means the “Windstream 2007 Deferred Compensation Plan” as amended from
time to time.
	 
	2.31	 	Plan Year. Plan Year means January 1 through December 31.
	 
	2.32	 	Prior Plans. Prior Plans means the Windstream Executive Deferred Compensation Plan
and the Windstream Management Deferred Compensation Plan.
	 
	2.33	 	Prior Plan Account. Prior Plan Account means the Account established on behalf of
certain Participants in accordance with Section 14.1 of the Plan.
	 
	2.34	 	Retirement/Termination Account. Retirement/Termination Account means an Account
established by the Committee to record the amount payable to a Participant due to his or her
Separation from Service.
	 
	2.35	 	Separation from Service. A Participant incurs a Separation from Service upon
termination of employment with the Company other than due to death or Disability. The
occurrence of a Separation from Service is determined by the Committee in its sole discretion
under the facts and circumstances and in accordance with Code Section 409A.
	 
	2.36	 	Specified Date Account. A Specified Date Account means an Account established
pursuant to Section 4.4 that will be paid (or that will commence to be paid) at a future date
as specified in the Participant’s Deferral Election. Unless otherwise determined by the
Committee, a Participant may maintain no more than five (5) Specified Date Accounts. A
Specified Date Account may be identified in enrollment materials as an “In-Service Account”.
	 
	2.37	 	Subsequent Payment Election. Subsequent Payment Election has the meaning given to
such term in Section 5.1 hereof.
	 
	2.38	 	Unforeseeable Emergency. An Unforeseeable Emergency is a severe financial hardship
of the Participant or Beneficiary resulting from an illness or accident of the Participant or
Beneficiary, the Participant’s or Beneficiary’s spouse, or the Participant’s or Beneficiary’s
dependent (as defined in Code Section 152(a)); loss of the Participant’s or Beneficiary’s
property due to casualty (including the need to rebuild a home following damage to a home not
otherwise covered by insurance, for example, as a result of a natural disaster); or other
similar extraordinary and unforeseeable circumstances arising as a result of events beyond the
control of the Participant or Beneficiary. For example, the imminent foreclosure of or
eviction from the Participant’s or Beneficiary’s primary residence may constitute an
Unforeseeable Emergency. In addition, the need to pay for medical expenses, including
non-refundable deductibles, as well as for the costs of prescription drug medication, may
constitute an Unforeseeable Emergency. Finally, the need to pay for the funeral expenses of a
spouse or a dependent (as defined in Code Section 152(a)) may also constitute an Unforeseeable
Emergency. Except as otherwise provided in this section, the purchase of a home and the
payment of college tuition are not Unforeseeable Emergencies. Whether a Participant or
Beneficiary is faced with an Unforeseeable Emergency permitting a distribution under section
8.5 of the Plan is to be determined by the Committee, in its sole discretion, based on the
relevant facts and

 

 

	 	 	circumstances of each case, but, in any case, a distribution on account of Unforeseeable
Emergency may not be made to the extent that such emergency is or may be reimbursed through
insurance or otherwise, by liquidation of the Participant’s assets, to the extent the
liquidation of such assets would not cause severe financial hardship, or by cessation of
Deferrals under this Plan.
	 
	2.39	 	Valuation Date. Valuation Date shall mean each Business Day.

Article III

Eligibility and Participation

	3.1	 	Eligibility and Participation. An Eligible Employee becomes eligible to file a
Deferral Election on the date designated by the Committee or its designee (the “Commencement
Date”) that such Eligible Employee becomes a Participant upon the earlier to occur of (i) a
credit of Company Contributions under Article VI or (ii) filing his or her initial Deferral
Election in accordance with Article IV. If an Eligible Employee has not satisfied the
applicable enrollment requirements of Section 3.1 within thirty (30) days of his Commencement
Date (or such earlier date as specified by the Committee), such Eligible Employee must wait to
participate in the Plan until the start of the next Plan Year following the date the Eligible
Employee satisfies such enrollment requirements.
	 
	3.2	 	Duration. A Participant shall be eligible to defer Compensation and receive
allocations of Company Contributions, subject to the terms of the Plan, for as long as such
Participant is an Eligible Employee. A Participant’s entitlement to defer Compensation and
receive allocations of Company Contributions shall cease with respect to the calendar year
following the calendar year in which he ceases to be an Eligible Employee, although such
individual shall continue to be subject to all of the terms and conditions of the Plan for as
long as he remains a Participant. On and after a Separation from Service, a Participant shall
remain a Participant as long as his or her Account Balance is greater than zero and during
such time may continue to make investment allocation elections as provided in Section 7.2. An
individual shall cease being a Participant in the Plan when all benefits under the Plan to
which he or she is entitled have been paid.
	 
	3.3	 	Revocation of Future Participation. Notwithstanding the provisions of Section 3.2,
the Committee may, in its sole discretion, revoke a Participant’s eligibility to make future
Deferrals under this Plan effective as of the Plan Year commencing after such revocation.
Such revocation will not affect in any manner a Participant’s Account Balance or other terms
of this Plan.

Article IV

Deferral Elections

	4.1	 	Deferral Elections, Generally.

	 	(a)	 	An Eligible Employee shall submit a Deferral Election during the enrollment
periods established by the Committee and in the manner specified by the

 

 

	 	 	 	Committee, but in any event, in accordance with Section 4.2. A Deferral Election
that is not timely filed with respect to a service period or component of
Compensation shall be considered void and shall have no effect with respect to such
service period or Compensation.
	 
	 	(b)	 	Each Deferral Election will specify the amount of Deferrals and the allocation
of Deferrals to the Participant’s Accounts. A Participant may specify in his or her
initial Deferral Election the Payment Schedule for the Retirement/Termination Account.
A Participant may specify in the Deferral Election that establishes a Specified Date
Account the Payment Schedule for such Account in the manner set forth in Section 4.4.
If the Payment Schedule is not specified in a Deferral Election as provided in the
preceding sentence, the form of payment shall be the form specified in Section 2.28.
If the Deferral Election does not specify the allocation of the deferrals among the
Participant’s Retirement/Termination Account and the Specified Date Account(s), the
Deferrals shall be credited to the Participant’s Retirement/Termination Account.
	 
	 	(c)	 	Each Participant shall file a Beneficiary Designation Form with the Committee
at the time the Participant files an initial Deferral Election. A Participant’s
Beneficiary Designation Form may be changed at any time prior to his death by the
execution and delivery of a new Beneficiary Designation Form. The Beneficiary
Designation Form on file with the Company that bears the latest date at the time of the
Participant’s death shall govern. If a Participant fails to properly designate a
Beneficiary in accordance with this Section 4.1(c), then his Beneficiary shall be based
on the beneficiary designation in effect for such Participant under the Company’s group
term life insurance plan, or if none, his estate.

	4.2	 	Timing Requirements for Deferral Elections.

	 	(a)	 	First Year of Eligibility. Except as provided in Section 4.2(c) or (d), upon
notification of his or her eligible status under Section 3.1, and subject to this
paragraph (a), an Eligible Employee has up to thirty (30) calendar days from his
Commencement Date to submit a Deferral Election with respect to Compensation earned
during such year. The Deferral Election described in this paragraph becomes
irrevocable on the close of business on such 30th day. An Eligible Employee
may file a Deferral Election under this Section 4.2(a) only if he or she (i) does not
participate in any other “account balance plan” as defined in Code Section 409A
maintained by the Company or an Affiliate, and (ii) his or her Commencement Date occurs
after the first day of a Plan Year but prior to November 1 of such Plan Year.
	 
	 	 	 	A Deferral Election filed under this Section 4.2(a) applies to:

	 	(i)	 	Base salary earned during such Plan Year beginning with the
with the first payroll period that begins as soon as administratively
practicable after the date that the Deferral Election becomes irrevocable.

 

 

	 	(ii)	 	Unless otherwise provided in Section 4.2(c), the portion of the
annual bonus, if any, earned under the Windstream Corporation Performance
Incentive Compensation Plan or its successor for such Plan Year equal to the
total amount of the annual bonus earned during such period multiplied by a
fraction, the numerator of which is the number of calendar days beginning on
the day immediately after the date that the Deferral Election becomes
irrevocable and ending on the last day of the Plan Year, and the denominator of
which is the total number of calendar days in the performance period.
	 
	 	(iii)	 	The portion of the quarterly bonuses, if any, earned under the
Windstream Corporation Executive Incentive Compensation Plan or its successor
beginning with the first calendar quarter that commences as soon as
administratively practicable after the date that the Deferral Election becomes
irrevocable.
	 
	 	(iv)	 	With respect to other Compensation not described in (i) through
(iii) above, the Deferral Election shall only apply to Compensation earned
after the date that the Deferral Election becomes irrevocable in accordance
with procedures adopted by the Committee.

	 	(b)	 	Prior Year Deferrals. Except as provided in Section 4.2(a), (c), and (d),
Participants may defer Compensation by filing a Deferral Election no later than
December 31 of the Plan Year prior to the Plan Year in which such Compensation is
earned (or such earlier date as specified by the Committee from time to time). A
Deferral Election described in this paragraph shall become irrevocable with respect to
such Compensation as of such December 31 (or such earlier date as specified by the
Committee from time to time).
	 
	 	(c)	 	Performance-Based Compensation. To the extent permitted by the Committee, a
Deferral Election may be filed with respect to Performance-Based Compensation, provided
that:

	 	(i)	 	the Participant performs services continuously from a date no
later than the date upon which the performance criteria for such
Performance-Based Compensation are established and through a date no earlier
than the date upon which the Participant submits a Deferral Election;
	 
	 	(ii)	 	the Deferral Election is submitted no later than (and shall
become irrevocable as of) the date that is six (6) months before the end of the
performance period during which such Performance-Based Compensation is earned
(or such earlier date as specified by the Committee from time to time); and
	 
	 	(iii)	 	in no event may an election to defer Performance-Based
Compensation be made after such Performance-Based Compensation has become both
substantially certain to be paid and readily ascertainable.

	 	(d)	 	Deferral Election With Respect to Certain Forfeitable Rights. With respect to
a legally binding right to a payment in a subsequent Plan Year that is subject to a

 

 

	 	 	 	forfeiture condition requiring the Participant’s continued services for a period of
at least twelve (12) months from the date the Participant obtains the legally
binding right, the Committee may, in its sole discretion, permit an election to
defer such Compensation to be made on or before the 30th day after the
Participant obtains the legally binding right to the Compensation, provided that the
election is made at least twelve (12) months in advance of the earliest date at
which the forfeiture condition could lapse. The Deferral Election described in this
paragraph becomes irrevocable on the close of business of such 30th day.

	4.3	 	“Evergreen” Deferral Elections. The Committee, in its sole discretion, may provide
in the Deferral Election that such Deferral Election will continue in effect for each
subsequent Plan Year or performance period. Such “evergreen” Deferral Elections will become
effective with respect to an item of Compensation on the date such election becomes
irrevocable under Section 4.2. An evergreen Deferral Election may be terminated or modified
prospectively with respect to Compensation for which such election remains revocable under
Section 4.2. A Participant whose Deferral Election is suspended due to an Unforeseeable
Emergency will be required to file a new Deferral Election under this Article IV in order to
continue making Deferrals under the Plan.
	 
	4.4	 	Specified Date Elections. A Participant’s Deferral Election may establish a
Specified Date Account by specifying the Payment Schedule for Deferrals and Earnings credited
to such Account.

	 	(a)	 	Allocation of Deferrals. A Deferral Election may allocate Deferrals to one or
more Specified Date Accounts. The Committee may, in its sole discretion, establish a
minimum deferral period. Unless otherwise provided by the Committee, the minimum
deferral period shall be two (2) years following the year the Compensation subject to
the Deferral Election is earned.
	 
	 	(b)	 	Effect of Earlier Separation from Service, Death, Disability. In the event of
a Separation from Service, death, or Disability, the unpaid balance of a Specified Date
Account will be paid in accordance with the Payment Schedule for the earlier event.

	4.5	 	Deductions from Pay. The Committee has the authority to determine the payroll
practices under which any component of Compensation subject to a Deferral Election will be
deducted from a Participant’s Compensation.

Article V

Modifications to Payment Schedules

	5.1	 	Participant’s Right to Modify. Subject to Section 5.2, a Participant may modify the
Payment Schedule with respect to an Account, provided such modification complies with the
requirements of Sections 5.1 and 5.2 (a “Subsequent Payment Election”).

	 	(a)	 	In General. The Subsequent Payment Election may not take effect until at least
twelve (12) months after the date on which it is accepted by the Committee. The

 

 

	 	 	 	Subsequent Payment Election most recently accepted by the Committee and that
satisfies the requirements of this Section 5.1 shall govern the payout of the
specified Accounts notwithstanding any prior Payment Schedule to the contrary.
	 
	 	(b)	 	Retirement/Termination Account. A Participant may make a one-time election to
change the form of payment of his Retirement/Termination Account to a form otherwise
permitted under the Plan. If such a Subsequent Payment Election is accepted by the
Committee, then except in the event of the death, Disability or Unforeseeable Emergency
of the Participant, the payment of such Retirement/Termination Account will be delayed
until the fifth (5th) anniversary of the date that the Retirement/Termination Account
would otherwise have been paid under the Plan if such Subsequent Payment Election had
not been made (or, in the case of installment payments, which are treated as a single
payment for purposes of this Section 5.1, on the fifth (5th) anniversary of the date
the first installment payment was scheduled to be made).
	 
	 	(c)	 	Specified Date Account. A Participant may make one or more elections to delay
the payment date or change the form of payment of one or more Specified Date Account(s)
to a time or form permitted under the Plan. Such Subsequent Payment Election must be
filed with the Committee at least twelve (12) months prior to the previously scheduled
payment date (or, in the case of installment payments, at least twelve (12) months from
the date the first installment payment was scheduled to be made). On such Subsequent
Payment Election, the Participant must delay the payment date for a period of at least
five (5) years after the previously scheduled payment date (or, in the case of
installment payments, at least five (5) years from the date the first installment
payment was scheduled to be made).
	 
	 	(d)	 	Acceleration Prohibited. The Committee shall disregard any Subsequent Payment
Election by a Participant to the extent such election would result in an acceleration
of the time or schedule of any payment or amount scheduled to be paid under the Plan
within the meaning of Code Section 409A.

	5.2	 	Modifications Authorized Under Notice 2005-1, Proposed Regulations, and Notice
2006-79. Notwithstanding Section 5.1 of this Plan to the contrary, during calendar years
2006 and 2007, a Participant selected by the Committee may make one or more elections to
change the payment date or the form of payment of one or more Account(s) (including, without
limitation, a Prior Plan Account) to a time or form permitted under the Plan without regard to
the requirements of Section 5.1; provided, however, that any modification
election purporting to modify an Account with a Payment Schedule commencing during the same
Plan Year as the Plan Year in which the modification is made, or which would cause the
commencement date of the Payment Schedule for an Account to be accelerated into the same Plan
Year as the Plan Year in which the modification is made, shall be null and void to the extent
such election is inconsistent with the requirements of Code Section 409A. The Committee has
the sole authority to prescribe the time and manner under which such modifications may be
made.

 

 

Article VI

Company Contributions

	6.1	 	Discretionary Company Contributions. The Company or any Affiliate may, from time to
time in its sole and absolute discretion, credit Company Contributions to any Participant in
any amount determined by the Company or an Affiliate. Such contributions will be credited to
a Participant’s Retirement/Termination Account.
	 
	6.2	 	Vesting. Company Contributions described in Section 6.1, above, and the Earnings
thereon, shall vest in accordance with the vesting schedule(s) established by the Committee at
the time that the Company Contribution is made. All Company Contributions shall become 100%
vested upon the occurrence of the earliest of: (i) the death of the Participant; or (ii) the
Disability of the Participant. The Company may, at any time, in its sole discretion, increase
a Participant’s vested interest in a Company Contribution. The portion of a Participant’s
Accounts that remains unvested upon his or her Separation from Service after the application
of the terms of this Section 6.2 shall be forfeited.

Article VII

Valuation of Account Balances; Investments

	7.1	 	Valuation. Deferrals shall be credited to appropriate Accounts on the date such
Compensation would have been paid to the Participant absent the Deferral Election. Company
Contributions shall be credited in accordance with the provisions of Article VI, as determined
by the Committee. Valuation of Accounts shall be performed under procedures approved by the
Committee.
	 
	7.2	 	Earnings Credit. Each Account will be credited with Earnings on each Business Day,
based upon the Participant’s investment allocation among a menu of investment options selected
in advance by the Committee, in accordance with the provisions of this Section 7.2
(“investment allocation”).

	 	(a)	 	Investment Options. Investment options will consist of actual investments,
which may include stocks, bonds, mutual fund shares and other investments. Investment
options may also include a fixed interest crediting rate, as established by the
Committee. The Committee, in its sole discretion, shall be permitted to add or remove
investment options from the Plan menu from time to time provided that any such
additions or removals of investment options shall not be effective with respect to any
period prior to the effective date of such change.
	 
	 	(b)	 	Investment Allocations. A Participant’s investment allocation constitutes a
deemed, not actual, investment among the investment options comprising the investment
menu. At no time shall a Participant have any real or beneficial ownership in any
investment option included in the investment menu, nor shall the Company or any trustee
acting on its behalf have any obligation to purchase actual securities as a result of a
Participant’s investment allocation. A Participant’s investment allocation shall be
used solely for purposes of adjusting the value of a Participant’s Account Balances.

 

 

	 	 	 	A Participant’s Deferral Election shall specify the investment allocation for
Deferrals. Deferrals may be allocated among the investment options in increments
of 1%. The Participant’s investment allocation will become effective on the same
Business Day or, in the case of investment allocations received after a time
specified by the Committee, the next Business Day. The investment allocation
specified in such Deferral Election will remain in effect until the Participant
modifies the investment allocation in accordance with procedures adopted by the
Committee.
	 
	 	 	 	Participants also may re-allocate current Account Balances among the investment
options in increments of 1% by filing a new investment allocation at the time and in
the form specified by the Committee. The Participant’s investment allocation will
become effective on the same Business Day or, in the case of investment allocations
received after a time specified by the Committee, the next Business Day. The
investment allocation shall apply prospectively to the Account or Accounts
identified in the allocation.
	 
	 	(c)	 	Unallocated Deferrals and Accounts. If any portion of a Deferral or Account
Balance has not been allocated to an investment option, such portion shall be invested
in an investment option, the primary objective of which is the preservation of capital,
as determined by the Committee. 

Article VIII

Distribution and Withdrawals

	8.1	 	Separation Payments. The vested Account Balance of the Retirement/Termination
Account will be paid in accordance with the Payment Schedule in effect for such Account and
the provisions of Section 8.7.
	 
	8.2	 	Specified Date Accounts. Subject to Section 4.4(b), the vested Account Balance of
each Specified Date Account will be paid in accordance with the Payment Schedule in effect for
such Account and the provisions of Section 8.7.
	 
	8.3	 	Disability Benefit. Upon the Committee’s determination that a Participant is
Disabled, the Company shall pay all unpaid Account Balances as a Disability Benefit in
accordance with the Disability Benefit Payment Schedule and the provisions of Section 8.7.
	 
	8.4	 	Death Benefit. In the event of the Participant’s death prior to receiving all
payments from his or her Accounts, the Participant’s remaining Account Balances will be paid
to the Participant’s Beneficiaries in accordance with the Death Benefit Payment Schedule and
the provisions of Section 8.7.
	 
	8.5	 	Unforeseeable Emergency. A Participant may submit a written request to the Committee
to receive a distribution from his or her vested Account Balance(s) if the Participant

 

 

experiences an Unforeseeable Emergency. Distributions of amounts in the event of an
Unforeseeable Emergency are limited to the extent reasonably needed to satisfy the emergency
need which cannot be met from other sources. The amount of such distribution shall be
subtracted first from the vested portion of the Participant’s Retirement/Termination Account
until depleted and then from the vested Specified Date Accounts, beginning with the Specified
Date Account with the latest payment commencement date. For purposes of the preceding
sentence, any minimum deferral requirement specified in the Plan or Section 5.1 shall not
apply. Payment shall be made ten (10) calendar days following the determination by the
Committee that a hardship withdrawal will be permitted.

	8.6	 	Change in Control. To the extent permitted under Code Section 409A, a Participant
who incurs a Separation from Service within twenty four (24) months following the date of a
Change in Control shall receive payment of his or her vested Accounts in a single lump sum.

	8.7	 	Valuation and Payment. Payment amounts will be based on the valuation of the
applicable Account Balance as of the Valuation Date specified by the Committee in its sole
discretion.

Payment is treated as made upon the payment commencement date under the applicable Payment
Schedule if the payment is made on or after such date in the same calendar year or, if
later, by the 15th day of the third calendar month following the date specified
under the arrangement. If a calculation of the amount of the payment is not
administratively practical due to events beyond the control of the Participant, a
Beneficiary or the Participant’s estate, the payment will be treated as made upon the date
specified under the Payment Schedule if the payment is made during the first calendar year
in which the payment becomes administratively practicable.

	8.8	 	Installments; Declining Balance Calculation. If a Payment Schedule specifies
installment payments, annual payments will be made beginning as of the payment commencement
date for such installments and shall continue on each anniversary thereof until the number of
installment payments specified in the Payment Schedule has been paid. The amount of each
installment payment shall be determined by dividing (a) by (b):

	 	(a)	 	equals the Account Balance as of the Valuation Date and
	 
	 	(b)	 	equals the remaining number of installment payments.

	8.9	 	“De Minimis Account” Balance. In the event that a Participant’s vested Account has a
balance of less than $10,000 on the date of his Separation from Service (including upon his
death), his entire vested Account shall be paid in cash in a single lump sum on the date the
Account is otherwise payable under the Plan. Any Payment Schedule contrary to the provisions
of this Section 8.9 shall be null and void.

	8.10	 	Domestic Relations Order. Notwithstanding any benefit, Payment Schedule or other
provision of this Plan regarding the time and form of payment, the Committee may pay all or a
portion of a Participant’s Accounts to an “alternate payee” as specified under the terms of a
domestic relations order (defined in Code Section 414(p)(1)(B)). If a time or form of payment
is not specified in such order, payment will be made to such alternate

 

payee(s) in a single lump sum as soon as is administratively practical following the
Committee’s determination that the order meets the requirements of this Section 8.10.

	8.11	 	Conflicts of Interest. The Committee may permit such acceleration of the time or
schedule of a payment under the Plan as may be necessary to comply with a certificate of
divestiture (as defined in Code Section 1043(b)(2)), or which may be necessary to satisfy
requirements established pursuant to a written determination by the Office of Government
Ethics that: (1) divestiture of the financial interest or termination of the financial
arrangement is reasonably necessary to comply with any Federal conflict of interest statute,
regulation, rule or executive order (including section 208 of title 18, United States Code),
or is requested by a congressional committee as a condition of confirmation; and (2) specifies
the financial interest to be divested or terminated.

	8.12	 	Permissible Payment Delays. The Company will delay any payment to a Participant upon
the Committee’s reasonable determination of one or more of the following:

	 	(a)	 	Making such payment would violate a term of a loan agreement to which the
Company or an Affiliate is a party, or other similar contract to which the Company, or
an Affiliate, is a party, and such violation would cause material harm to the Company
or an Affiliate; provided that payment will be made at the earliest date on which the
Committee reasonably anticipates that making the payment will not cause such violation
or such violation will not cause material harm to the Company and subject to such other
requirements as are specified under Code Section 409A; or
	 
	 	(b)	 	Making such payment would violate federal securities laws or other applicable
law; provided that payment will be made at the earliest date which the Committee
anticipates that the making of the payment will not cause such violation, and subject
to such other requirements as are specified under Code Section 409A.

Article IX

Administration

	9.1	 	Plan Administration. The Company, through the Committee, shall be responsible for the
general administration of the Plan and for carrying out the provisions hereof. The Committee
shall have the full power, discretion and authority to carry out the provisions of the Plan,
including the authority to (a) resolve all questions relating to eligibility for participation
in the Plan and the amount in the Account of any Participant and all questions pertaining to
claims for benefits and procedures for claim review, (b) resolve all other questions arising
under the Plan, including any factual questions and questions of construction, and (c) take
such further action as the Company shall deem advisable in the administration of the Plan.
The actions taken and the decisions made by the Committee hereunder shall be final,
conclusive, and binding on all persons, including the Company, its shareholders, Affiliates,
employees, Participants, and their estates and Beneficiaries.

 

	9.2	 	Withholding. To the extent permitted under Code Section 409A, and to the extent
required by the law in effect at the time payments are made, the Company and its Affiliates
may withhold or cause to be withheld from any amounts deferred or payable under the Plan all
federal, state, local and other taxes as shall be legally required. The Company and its
Affiliates shall have the right in their sole discretion to (i) require a Participant to pay
or provide for payment of the amount of any taxes that the Company or its Affiliates may be
required to withhold with respect to interest or other amounts that the Company credits to a
Participant’s Account or (ii) deduct from any amount of salary, bonus or other payment
otherwise payable in cash to the Participant the amount of any taxes that the Company may be
required to withhold with respect to interest or other amounts that the Company credits to a
Participant’s Account.

	9.3	 	Indemnification. The Company shall indemnify and hold harmless each employee,
officer, director, agent or organization, to whom or to which it delegated duties,
responsibilities, and authority under the Plan or otherwise with respect to administration of
the Plan, including, without limitation, the Committee and the Committee’s agents, against all
claims, liabilities, fines and penalties, and all expenses reasonably incurred by or imposed
upon him or it (including but not limited to reasonable attorney fees) which arise as a result
of his or its actions or failure to act in connection with the operation and administration of
the Plan to the extent lawfully allowable and to the extent that such claim, liability, fine,
penalty, or expense is not paid for by insurance purchased or paid for by the Company.
Notwithstanding the foregoing, the Company shall not indemnify any person or organization if
his or its actions or failure to act are due to gross negligence or willful misconduct or for
any such amount incurred through any settlement or compromise of any action unless the Company
consents in writing to such settlement or compromise.

	9.4	 	Delegation of Authority. In the administration of this Plan, the Committee may, from
time to time, employ agents and delegate to them such administrative duties as it sees fit,
and may from time to time consult with legal counsel who shall be legal counsel to the
Company.

Article X

Amendment and Termination

	10.1	 	Amendment and Termination. The Company may at any time and from time to time amend
the Plan or may terminate the Plan as provided in this Section 10.1.

	 	(a)	 	Amendments. The Company reserves the right to amend, terminate or freeze the
Plan, in whole or in part, at any time by action taken by its Board of Directors or its
designee. The Committee may amend the Plan at any time in its sole discretion to
ensure that the Plan complies with the requirements of Code Section 409A or other
applicable law. In no event shall any such action by the Board of Directors of the
Company or Committee reduce the amounts that have been credited to the Account(s) of
any Participant prior to the date such action is taken without the consent of the
Participant or Beneficiary, unless the Board of Directors of the Company or the
Committee, as the case may be, determines in good faith that such action is necessary
to ensure compliance with Code Section 409A or other applicable law.

 

	 	(b)	 	Termination. In the event that the Plan is terminated, a Participant’s vested
Account Balance shall be distributed to the Participant or his Beneficiary on the dates
on which the Participant or his Beneficiary would otherwise receive benefits hereunder
without regard to the termination of the Plan. Notwithstanding the preceding sentence,
and to the extent permitted under Code Section 409A, the Company, by action taken by
its Board of Directors or its designee, may terminate the Plan and pay Participants and
Beneficiaries their Account Balances in a single lump sum at any time under the
following conditions:

	 	(1)	 	Company’s Discretion. The Company may terminate the
Plan in its discretion, provided that (i) all arrangements sponsored by the
Company that would be aggregated with any terminated arrangement under Code
Section 409A if the same Participant participated in all of the arrangements,
are terminated; (ii) no payments other than payments that would be payable
under the terms of the arrangements if the termination had not occurred are
made within twelve (12) months of the termination of the arrangements; (iii)
all payments are made within twenty-four (24) months of the termination of the
arrangements; and (iv) the Company or its Affiliates do not adopt a new
arrangement that would be aggregated with any terminated arrangement under Code
Section 409A if the same Participant participated in both arrangements, at any
time within five (5) years following the date of termination of the
arrangement.
	 
	 	(2)	 	Change in Control. The Company may terminate the Plan
within the thirty (30) calendar days preceding or the twelve (12) months
following a Change in Control. The Plan is considered terminated under this
paragraph only if all substantially similar arrangements are terminated, and
all participants under such arrangements are required to receive all amounts of
compensation deferred under the terminated arrangements within twelve (12)
months of the termination of such arrangements.
	 
	 	(3)	 	Dissolution; Bankruptcy Court Order. The Company may
terminate the Plan within 12 months of a corporate dissolution taxed under Code
Section 331, or with the approval of a bankruptcy court pursuant to 11 U.S.C.
Section 503(b)(1)(A), provided that the vested Account Balances are included in
Participants’ gross incomes in the latest of (i) the calendar year in which the
Plan terminates; (ii) the calendar year in which the amount is no longer
subject to a substantial risk of forfeiture, or (iii) the first calendar year
in which the payment is administratively practicable.

	10.2	 	Accounts Taxable Under Code Section 409A.

	 	(a)	 	It is intended that the Plan comply with the provisions of Code Section 409A,
so as to prevent the inclusion in gross income of any amounts deferred hereunder in a
taxable year that is prior to the taxable year or years in which such amounts would
otherwise actually be distributed or made available to Participants or Beneficiaries.
This Plan shall be construed, administered, and governed in a

 

manner that effects such intent, and the Committee shall not take any action that
would be inconsistent with such intent. Any provisions that would cause any amount
deferred or payable under the Plan to be includible in the gross income of any
Participant or Beneficiary or subject to interest or penalties under Code Section
409A(a)(1) shall have no force and effect unless and until amended to cause such
amount to not be so includible (which amendment may be retroactive to the extent
permitted by Code Section 409A). Although the Committee shall use its best efforts
to avoid the imposition of taxation, interest and penalties under Code Section 409A,
the tax treatment of deferrals under this Plan is not warranted or guaranteed.
Neither the Company, its Affiliates, directors, officers, nor the Committee shall be
held liable for any taxes, interest, penalties or other monetary amounts owed by any
Participant, Beneficiary or other taxpayer as a result of the Plan.

	 	(b)	 	If, after application of the preceding sentence, the Committee determines that
the Plan fails to meet the requirements of Code Section 409A, the Company will pay all
Accounts to Participants or their Beneficiaries in a single lump sum as provided
herein. The amount of the payment shall not exceed the lesser of (i) the Participant’s
Account Balance or (ii) an amount equal to the amount of income included in the
Participant’s taxable income as a result of such violation, plus an additional amount,
to the extent permissible under Treasury Department regulations, for penalties under
Code Section 409A, other taxes and interest or other costs. Payment under this Section
10.2, including the amount of any taxes, penalties, interest or other costs, shall be
applied against the Participant’s Accounts and shall constitute fulfillment of the
Company’s payment obligation to such Participant under the Plan to the extent of any
such payments.

Article XI

Informal Funding

The obligation of the Company and the Affiliates under the Plan to make payment of amounts
reflected in an Account merely constitutes the unsecured promise of the Company and the Affiliates
to make payments from their general assets and no Participant or Beneficiary shall have any
interest in, or a lien or prior claim upon, any property of the Company or any Affiliate. It is
the intention of the Company and the Affiliates that the Plan be unfunded for tax purposes and for
purposes of Title I of ERISA. The Company may create a trust to hold funds to be used in payment
of its and the Affiliates’ obligations under the Plan, and may fund such trust; provided,
however, that any funds contained therein shall remain liable for the claims of the
Company’s and any Affiliate’s general creditors.

Article XII

Claims

	12.1	 	Claim for Benefits. Any person who thinks that he is entitled to receive a benefit
under the Plan shall make application in writing on the form and in the manner prescribed by

 

the Committee. If any claim for benefits filed by any person under the Plan (the
“Claimant”) is denied in whole or in part, the Committee shall issue a written notice of
such adverse benefit determination to the Claimant. The notice shall be issued to the
Claimant within a reasonable period of time but in no event later than ninety (90) calendar
days from the date the claim for benefits was filed. The notice issued by the Committee
shall be written in a manner calculated to be understood by the Claimant, and shall include
the following:

	 	(a)	 	the specific reason or reasons for any adverse benefit determination;
	 
	 	(b)	 	the specific Plan provisions on which any adverse benefit determination is
based;
	 
	 	(c)	 	a description of any further material or information which is necessary for the
Claimant to perfect his claim and an explanation of why the material or information is
needed; and
	 
	 	(d)	 	an explanation of the Plan’s claim review procedure and time limits applicable
to the Plan’s claim review procedures, including a statement of the Claimant’s right to
bring a civil action under Section 502(a) of ERISA following an adverse benefit
determination on review.

The Committee shall comply with the additional requirements prescribed by Department of
Labor Reg. 2560.503-1 for claims regarding the determination of disability.

	12.2	 	Review. If the Committee denies a claim for benefits in whole or in part, or the
claim is otherwise deemed to have been denied, the Claimant or his duly authorized
representative may submit to the Committee a written request for review of the claim denial
within sixty (60) calendar days of the receipt of the notice of adverse benefit determination,
which request shall contain the following information:

	 	(a)	 	the date on which the Claimant’s request was filed with the Committee;
provided, however, that the date on which the Claimant’s request for review was in fact
filed with the Committee shall control in the event that the date of the actual filing
is later than the date stated by the Claimant pursuant to this paragraph (a);
	 
	 	(b)	 	the specific portions of the adverse benefit determination which the Claimant
requests the Committee to review;
	 
	 	(c)	 	a statement by the Claimant setting forth the basis upon which he believes the
Committee should reverse the previous adverse benefit determination and accept his
claim as made; and
	 
	 	(d)	 	any written material (offered as exhibits) which the Claimant desires the
Committee to examine in its consideration of his position as stated pursuant to
paragraph (c).

The Claimant or his duly authorized representative may:

	 	(a)	 	submit written comments, documents, records and other information relating to
the claim for benefits, and

 

	 	(b)	 	review pertinent documents, including, upon request in the manner and form
prescribed by the Committee and free of charge, be provided reasonable access to, and
copies of, all documents, records, and other information relevant to the Claimant’s
claim for benefits.

The review by the Committee shall take into account all comments, documents, records, and
other information submitted by the Claimant relating to the claim, without regard to whether
such information was submitted or considered in the initial benefit determination. The
Committee shall furnish a written decision on review not later than sixty (60) calendar days
after receipt of the written request for review of the adverse benefit determination, unless
special circumstances require an extension of the time for processing the appeal. If an
extension of time for review is required because of special circumstances, written notice of
the extension shall be furnished to the Claimant prior to the commencement of the extension,
and the Committee shall furnish a written decision on review not later than one hundred and
twenty (120) calendar days after receipt of the written request for review of the adverse
benefit determination. The decision on review shall be in writing, shall be written in a
manner calculated to be understood by the Claimant, and, in the case of an adverse benefit
determination on review, shall include (i) specific reasons for the adverse benefit
determination, (ii) references to the specific Plan provisions on which the decision is
based, (iii) a statement that the Claimant is entitled to receive, upon request and free of
charge, reasonable access to, and copies of, all documents, records and other information
relevant to the Claimant’s claim for benefits, (iv) a statement that there is no voluntary
appeal procedure offered by the Plan, and (v) a statement of the Claimant’s right to bring a
civil action under Section 502(a) of ERISA following an adverse benefit determination on
review.

The Committee shall comply with the additional requirements prescribed by Department of
Labor Reg. 2560.503-1 for review of claims regarding the determination of disability.

	12.3	 	Exhaustion of Remedies. No action for benefits under the Plan shall be brought unless
and until the aggrieved person has (a) submitted a written claim for benefits in accordance with
this Article XII within twelve (12) months of the date the first payment would have been due the
aggrieved person under the Plan, (b) been notified by the Committee that the claim has been denied,
filed a written request for a review of the claim in accordance with this Article XII, (c) been
notified in writing of an adverse benefit determination on review, and (d) filed the action within
three (3) years of the date the first payment (or amount, as applicable) would have been due the
aggrieved person under the Plan.

Article XIII

General Conditions

	13.1	 	Anti-assignment Rule. Except as permitted by the Plan, no right or interest under
the Plan of any Participant or Beneficiary shall, without the written consent of the Company,
be (i) assignable or transferable in any manner, (ii) subject to alienation, anticipation,
sale, pledge, encumbrance, attachment, garnishment or other legal process or (iii) in any
manner liable for or subject to the debts or liabilities of the Participant or Beneficiary.
Notwithstanding the foregoing, to the extent permitted by Code Section 409A and subject to
Section 8.10 hereof, the Committee shall honor a judgment, order or decree from a state
domestic relations court which requires the payment of part or all of a Participant’s

 

or Beneficiary’s interest under this Plan to an “alternate payee” as defined in Code Section
414(p).

	13.2	 	Claims of Other Persons. The provisions of the Plan shall in no event be construed
as giving any other person, firm or corporation any legal or equitable right as against the
Company or any Affiliate or the officers, employees or directors of the Company or any
Affiliate, except any such rights as are specifically provided for in the Plan or are
hereafter created in accordance with the terms and provisions of the Plan.

	13.3	 	Participation by Employees of Affiliates. Any Affiliate may, by action of its board
of directors or equivalent governing body and with the consent of the Company’s Board of
Directors, adopt the Plan; provided that the Company’s Board of Directors may waive the
requirement that such board of directors or equivalent governing body effect such adoption.
By its adoption of or participation in the Plan, an Affiliate shall be deemed to appoint the
Company its exclusive agent to exercise on its behalf all of the power and authority conferred
by the Plan upon the Company and accept the delegation to the Committee of all the power and
authority conferred upon it by the Plan. The authority of the Company to act as such agent
shall continue until the Plan is terminated as to the participating Affiliate. An Eligible
Employee who is employed by an Affiliate and who elects to participate in the Plan shall
participate on the same basis as an Eligible Employee of the Company. The Account of a
Participant employed by an Affiliate shall be paid in accordance with the Plan solely by such
Affiliate to the extent attributable to Compensation that would have been paid by such
Affiliate in the absence of deferral pursuant to the Plan, unless the Company’s Board of
Directors otherwise determines that the Company shall be the obligor.

	13.4	 	No Employment Contract. Nothing contained in this Plan shall confer upon a
Participant any right with respect to continuance of employment by the Company and its
Affiliates, nor limit or affect in any manner the right of the Company and its Affiliates to
terminate the employment or adjust the compensation of the Participant.

	13.5	 	Successors. The Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of
the business and/or assets of the Company expressly to assume this Plan. This Plan shall be
binding upon and inure to the benefit of the Company and any successor of or to the Company,
including without limitation any persons acquiring directly or indirectly all or substantially
all of the business and/or assets of the Company whether by sale, merger, consolidation,
reorganization or otherwise (and such successor shall thereafter be deemed the “Company” for
the purposes of this Plan), and the heirs, beneficiaries, executors and administrators of each
Participant.

	13.6	 	Relationship to Other Plans. The Plan is intended to serve the purposes of and to be
consistent with any incentive compensation plan approved by the Committee for purposes of the
Plan.

	13.7	 	Notice. Any notice or filing required or permitted to be delivered to the Committee
under this Plan shall be delivered in writing, in person, or through such electronic means as
is established by the Committee. Notice shall be deemed given as of the date of delivery or,

 

if delivery is made by mail, as of the date shown on the postmark on the receipt for
registration or certification. Written transmission shall be sent by certified mail to:

Windstream Corporation

Attn: Senior Vice President of Human Resources

4001 Rodney Parham Road

Little Rock, Arkansas 72212

Any notice or filing required or permitted to be given to a Participant under this Plan
shall be sufficient if in writing or hand-delivered, or sent by mail to the last known
address of the Participant.

	13.8	 	Headings. The headings of Sections are included solely for convenience of reference,
and if there is any conflict between such headings and the text of this Plan, the text shall
control.

	13.9	 	Invalid or Unenforceable Provisions. If any provision of this Plan shall be held
invalid or unenforceable, such invalidity or unenforceability shall not affect any other
provisions hereof and the Committee may elect in its sole discretion to construe such invalid
or unenforceable provisions in a manner that conforms to applicable law or as if such
provisions, to the extent invalid or unenforceable, had not been included.

	13.10	 	Governing Law. To the extent not preempted by federal law, the laws of the State of
Delaware shall govern the construction and administration of the Plan.

	13.11	 	Electronic or Other Media. Notwithstanding any other provision of the Plan to the
contrary, including any provision that requires the use of a written instrument, the Committee
may establish procedures for the use of electronic or other media in communications and
transactions between the Plan or the Committee and Participants and Beneficiaries. Electronic
or other media may include, but are not limited to, e-mail, the Internet, intranet systems and
automated telephonic response systems.

	13.12	 	Participants Deemed to Accept Plan. By accepting any benefit under the Plan, each
Participant and each person claiming under or through any such Participant shall be
conclusively deemed to have indicated his acceptance and ratification of, and consent to, all
of the terms and conditions of the Plan and any action taken under the Plan by the Board of
Directors of the Company, the Committee or the Company or its Affiliates, in any case in
accordance with the terms and conditions of the Plan.

Article XIV

Prior Plans and Benefit Restoration Plan

	14.1	 	Establishment of Prior Plan Accounts; Transfer of Balances From Prior Plans. The
Company will establish and maintain a Prior Plan Account in the name of each Participant who,
as of the day immediately prior to the Effective Date, had an outstanding

 

account balance under a Prior Plan. Each Participant’s outstanding account balances under
the Prior Plans (as adjusted for earnings through December 31, 2006) will be transferred and
credited to the Participant’s Prior Plan Account as of the Effective Date and, as a result
of such transfer and crediting, all of the Company’s obligations and Participant’s rights
under each Prior Plan shall automatically be extinguished and become obligations and rights
under this Plan without further action. Notwithstanding any provision of the Prior Plans to
the contrary, and the provision of this Plan will govern and control the payment and deemed
investment of all Prior Plan Accounts, and a Participant’s rights with respect to any such
Prior Plan Accounts will be determined exclusively under this Plan, as modified by
paragraphs (a), (b), (c) and (d) below:

	 	(a)	 	Each Prior Plan Account shall be treated as a single Specified Date Account for
all purposes of the Plan; provided, however, that with respect to
Participants who are not employed by the Company and its Affiliates as of January 1,
2007 (each a “Terminated Participant”):

	 	(i)	 	Section 4.4(b) shall not apply. Instead, in the event of a
Separation from Service, death, or Disability, the unpaid balance of each Prior
Plan Account of a Terminated Participant shall continue to be paid to the
Terminated Participant (or his or her designated Beneficiary) in accordance
with the Payment Schedule in effect for such account.
	 
	 	(ii)	 	Section 8.6 shall not apply. Instead, the unpaid balance of
each Prior Plan Account of a Terminated Participant shall be distributed in a
single lump sum within ten (10) calendar days following a Change in Control.

	 	(b)	 	Notwithstanding anything contained herein to the contrary, including without
limitation Section 4.1(c) and Article VIII, the amounts credited to the Prior Plan
Account hereunder shall remain subject to the same distribution elections and
beneficiary designations (which are attached hereto as Exhibit B) that were
controlling under the Prior Plans immediately prior to the Effective Date until a new
election is made in accordance with the terms of this Plan that by its terms supersedes
the prior election; provided, however, that a Participant who was not
employed by the Company or its Affiliates as of January 1, 2007 shall not be entitled
to change his or her distribution election under this Plan (unless otherwise provided
by the Committee) with respect to such amounts.
	 
	 	(c)	 	Notwithstanding anything contained herein to the contrary, including without
limitation Article VII, each Prior Plan Account shall be comprised of the following
three deemed investment funds:

	 	(i)	 	1993 Plan Fund. As of January 1, 2007, each Participant
designated on Exhibit C shall have credited to his 1993 Plan Fund the
amounts transferred on his or her behalf from his or her account under the
prior Windstream Executive Deferred Compensation Plan. Notwithstanding
anything contained in this Plan to the contrary, including without limitation
Article VII, amounts credited to the 1993 Plan Fund are credited as cash and
are adjusted as follows: As of the close of business on each December 31st
occurring after December 31, 2006 and prior to the full

 

payment thereof, the then current balance (if any) of a Participant’s 1993
Plan Fund shall be credited with an amount equal to the product of: (a) the
balance of the Participant’s 1993 Plan Fund as of the close of business on
that December 31st; and (b) 5.00%. As of the time at which payment of an
amount from a Participant’s 1993 Plan Fund occurs, there shall be added to
the amount paid an amount equal to the product of: (a) the amount to be paid
from the 1993 Plan Fund (determined without regard to this sentence); (b)
5.00%; and (c) a fraction, the numerator of which is the number of calendar
days elapsed subsequent to the immediately preceding December 31st and prior
to the date that payment is to occur, and the denominator of which is 365.

	 	(ii)	 	1998 Plan Fund. As of January 1, 2007, each Participant
designated on Exhibit D shall have credited to his 1998 Plan Fund the
amounts transferred on his or her behalf from his or her account under the
prior Windstream Executive Deferred Compensation Plan and/or the prior
Windstream Management Deferred Compensation Plan, as the case may be.
Notwithstanding anything contained in this Plan to the contrary, including
without limitation Article VII, amounts credited to the 1998 Plan Fund are
credited as cash and are adjusted as follows: As of the close of business on
each December 31st occurring after December 31, 2006 and prior to the full
payment thereof, the then current balance (if any) of a Participant’s 1998 Plan
Fund shall be credited with an amount equal to the product of: (a) the balance
of the Participant’s 1998 Plan Fund as of the close of business on that
December 31st; and (b) a percentage equal to the “Prime Rate” as published in
the first issue (in which the “Prime Rate” is published) of the Wall Street
Journal for the immediately succeeding Plan Year, plus two hundred (200) basis
points (the “Interest Rate”). As of the close of business on the day
immediately preceding the date as of which payment of a 1998 Plan Fund occurs,
the 1998 Plan Fund shall be credited with an amount equal to the product of:
(a) the balance of the 1998 Plan Fund as of the close of business on that day;
(b) the Interest Rate for the year during which the payment occurs; and (c) a
fraction, the numerator of which is the number of calendar days that have
elapsed subsequent to the immediately preceding December 31st through (and
including) the date that payment occurs, and the denominator of which is 365.
For purposes of the immediately preceding sentence, payment shall be deemed to
occur as of the date on which payment is transmitted to the payee in accordance
with the terms of the Plan. If the Interest Rate is no longer published, or
the basis on which the Interest Rate is changed significantly as determined by
the Committee in its sole and absolute discretion, the Committee shall timely,
in its sole and absolute discretion but in good faith, determine by written
action a substitute interest rate reasonably comparable to the Interest Rate,
which prospectively shall be used as the “Interest Rate” for purposes of the
Plan. If any substitute interest rate is no longer published, or the basis on
which the substitute interest rate is changed significantly as determined by
the Committee in its sole and absolute discretion, the Committee shall timely,
in its sole and absolute discretion but in good faith, determine by written
action another substitute interest rate

 

reasonably comparable to the substitute interest rate, which prospectively
shall be used as the “Interest Rate” for the purposes of this Section
14.1(b).

	 	(iii)	 	Alltel Phantom Stock Fund. As of January 1, 2007, each
Participant designated on Exhibit E shall have credited to his Alltel
Phantom Stock Fund the amounts transferred on his or her behalf from his or her
account under the prior Windstream Executive Deferred Compensation Plan.
Notwithstanding anything contained in this Plan to the contrary, including
without limitation Article VII, amounts credited to the Alltel Phantom Stock
Fund are credited as cash and are adjusted as follows:

	 	(A)	 	As of the close of business on December 31 of
each year, and prior to the date specified in Section 14.1(c)(iii)(B),
the Participant’s Deferred Compensation Account for the Plan Year shall
be credited with earnings in an amount, if any, equal to the greater of
(1) or (2) below:

	 	(1)	 	The balance of the Alltel Phantom
Stock Fund as of the close of business on the immediately
preceding December 31 after the crediting required by this
Section 14.1(c)(iii)(A), if any, multiplied by a percentage
determined by dividing the cash dividends paid during the
current Plan Year (the Plan Year for which the crediting, if
any, is to be made) on one share of Alltel Corporation common
stock by the book value of each share of Alltel Corporation
common stock as of the end of the Plan Year as reflected in its
published consolidated financial statements and as computed in
accordance with Exhibit E-2 attached hereto (“Book Value”) for
the Plan Year immediately preceding such current Plan Year; or
	 
	 	(2)	 	The balance of the Deferred
Compensation account as of the close of business on the
immediately preceding December 31 after the crediting required
by this Section 14.1(c)(iii)(A), if any, multiplied by a
percentage equal to the sum of (x) and (y) below:

	 	(x)	 	the percentage
increase (if any) in the closing sales price of one
share of the common stock of Alltel Corporation on the
New York Stock Exchange (or such other securities
exchange on which the shares of common stock of Alltel
Corporation are traded) on the last trading day of
Alltel Corporation’s fiscal year (the “Market Value”)
from the Plan Year immediately preceding the current
Plan Year (the Plan Year for which the crediting, if
any, is to be made) to the current Plan Year, except
that, if the Market Value for such immediately preceding
Plan

 

	 	 	 	Year is less than the Market Value used in
calculating earnings for any preceding Plan Year,
then the foregoing percentage increase shall instead
be the percentage increase (if any) in the Market
Value from the prior highest market value used in
calculating earnings to the Market Value for the
current Plan Year; and

	 	(y)	 	a percentage
determined by dividing the cash dividends paid during
the current Plan Year (the Plan Year for which the
crediting, if any, is to be made) on one share of Alltel
Corporation common stock by the Market Value for the
Plan Year immediately preceding the current Plan Year.

The Company’s Board of Directors may make or provide for such
adjustments in the cash dividends, Market Value and Book Value and in
the kind of shares upon which the Alltel Phantom Stock Fund is based,
as the Board of Directors, in its sole discretion, exercised in good
faith, may determine is equitably required to prevent dilution or
enlargement of the rights of Participants that otherwise would result
from (a) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the
Alltel Corporation, or (b) any merger, consolidation, spin-off,
split-off, spin-out, split-up, reorganization, partial or complete
liquidation or other distribution of assets (including, without
limitation, a special or large non-recurring dividend), issuance of
rights or warrants to purchase securities, or (c) any other corporate
transaction or event having an effect similar to any of the
foregoing. The actions taken and the decisions made by the Company’s
Board of Directors hereunder shall be final, conclusive, and binding
on all persons, including the Company, its shareholders, Affiliates,
employees, Participants, and their estates and Beneficiaries.

	 	(B)	 	If the date of payment of a Participant’s
Alltel Phantom Stock Fund occurs on any date other than December 31,
the portion of his Alltel Phantom Stock Fund consisting of deferrals
and earnings previously credited thereon under the Alltel Corporation
Executive Deferred Compensation Plan that related to elections made by
the Participant prior to February 18, 1993 (the “Separate Portion”)
shall not be credited as provided in Section 14.1(c)(iii)(A) for the
Plan Year in which such date occurs, but instead shall be credited with
interest on the basis specified in Section 14.1(c)(iii)(C) from January
1 of the Plan Year in which such date occurs through such date (after
which the provisions of Section 14.1(c)(iii)(C) shall apply).

 

	 	(C)	 	The amount of the Participant’s Alltel Phantom Stock Fund, together
with any interest and earnings credited to the Alltel Phantom Stock
Fund in accordance with this Section 14.1(c)(iii)(C), shall be paid to
the Participant in a lump sum or in a number of approximately equal
annual installments, as provided under the terms of the Plan. The
amount of the Alltel Phantom Stock Fund remaining unpaid shall bear
interest or be credited with earnings, beginning on the date of the
termination of a Participant’s employment with the Company and/or any
Subsidiary, the date of death of a Participant or, if earlier, on the
date elected by a Participant for commencement of payments, and
continuing until the lump sum payment or the last annual installment is
made, at which time the entire remaining balance shall be paid to the
Participant. In the case of any Separate Portion, interest to be
credited thereon shall be credited at the end of each calendar quarter
or, if earlier, on the date the Separate Portion and any earnings
thereon (a “Separate Portion Balance”) is paid in full, at the rate in
effect at the beginning of each calendar quarter at Key Bank or its
successor for one year Certificates of Deposit. In the case of the
remaining portion of a Participant’s Alltel Phantom Stock Fund (the
“Remaining Portion”), earnings thereon shall be credited at the end of
each Plan Year or, if earlier, on the date the Remaining Portion and
any earnings thereon are paid in full, at the rate determined in
accordance with Section 14.1(c)(iii)(A) for the corresponding period,
except that, in the case of a final payment or installment payable as
of a date other than December 31, earnings thereon shall be credited
using the rate applicable for the Plan Year immediately preceding the
Plan Year in which the final payment or installment is payable.

	 	(d)	 	Each of the 1993 Fund and the 1998 Fund shall be closed to additional Deferrals
and to transfers from any other investment option (including transfers between the two
funds). A Participant may elect, pursuant to rules and procedures prescribed by the
Committee, to reallocate amounts deemed invested in each of the 1993 Fund and the 1998
Fund into any other open investment option, but no amount so removed from the 1993 Fund
or the 1998 Fund may be transferred back to either such fund.

	14.2	 	BRP Transferred Amounts. Each Participant’s outstanding account balances under the
Profit-Sharing Plan portion and the Thrift Plan portion of the Benefit Restoration Plan for
services through December 31, 2006 (as adjusted for earnings through December 31, 2006) (the
“BRP Transferred Amounts”) as of the day immediately prior to the Effective Date will be
transferred and credited to the Participant’s Retirement/Termination Account as of the
Effective Date and, as a result of such transfer and crediting, all of the Company’s
obligations and Participant’s rights under the Profit-Sharing Plan portion and the Thrift Plan
portion (but not the Retirement and Spousal Death Benefit Plan portion) of the Benefit
Restoration Plan shall automatically be extinguished and become obligations and rights under
this Plan without any further action. Notwithstanding any provision of the Benefit
Restoration Plan to the contrary, or any elections made by a

 

Participant under the Benefit Restoration Plan (including any distribution or investment
election), the provision of this Plan, including without limitation, the provisions of
Article VII and VIII, will govern and control the payment and deemed investment of all BRP
Transferred Amounts credited to the Participant’s Retirement/Termination Accounts as
provided in this Section 14.2, and a Participant’s rights with respect to any such BRP
Transferred Amounts will be determined exclusively under this Plan, as modified by
paragraphs (a), (b) and (c) below:

	 	(a)	 	Notwithstanding anything contained herein to the contrary, including without
limitation Section 6.2, the BRP Transferred Amounts shall be subject to the same
vesting schedule that was controlling under the Benefit Restoration Plan immediately
prior to the Effective Date.
	 
	 	(b)	 	Notwithstanding anything contained herein to the contrary, including without
limitation Section 4.1(c), the BRP Transferred Amounts shall be subject to the same
beneficiary designations that were controlling under the Benefit Restoration Plan
immediately prior to the Effective Date.
	 
	 	(c)	 	Notwithstanding anything contained herein to the contrary, including without
limitation Article V and VIII, any BRP Transferred Amounts that were in pay status
under the Benefit Restoration Plan immediately prior to the Effective Date shall remain
subject to the same distribution schedule that was controlling under the Benefit
Restoration Plan immediately prior to the Effective Date. A Participant who was in pay
status under the Benefit Restoration Plan immediately prior to the Effective Date shall
not be entitled to change his or her distribution election under this Plan unless
otherwise provided by the Committee.

     IN WITNESS WHEREOF, the undersigned executed this Plan as of the 29th day of
December, 2006 to be effective as of the Effective Date.

Windstream Corporation

	 	 	 	 
	 	 
	By:  	/s/
John P. Fletcher 	 
	Name:  	John P. Fletcher 	 
	Title:  	Executive Vice President and General Counsel

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