Document:

ex10-2.htm

    
      Exhibit 10.2

       

      PARTICIPATION
AGREEMENT

       

      THIS
Participation Agreement (this “Agreement”) is entered into on the 12th day of
March, 2010 (the “Execution Date”) between Upland Oil and Gas, LLC Sucursal del
Peru, a Texas limited liability company acting through its branch registered
under the laws of the Republic of Peru (“Operator”), and Gulf United Energy del
Peru Ltd., a company organized and existing under the laws of the British Virgin
Islands (“Gulf”).  Operator and Gulf are sometimes referred to
collectively as “Parties” and individually as “Party.”

       

      WITNESSETH:

       

      WHEREAS,
on March 21, 2007, Upland Oil and Gas LLC Sucursal del Peru, Endevco Eureka del
Peru S.A.C. and East Cameron Partners del Peru S.A.C. entered into the License
Contract for Exploration and Exploitation of Hydrocarbons for Block XXIV with
PeruPetro S.A. (“Block XXIV License Contract”); and

       

      WHEREAS,
as of the date of this Agreement, Operator owns not less than eighty percent
(80%) of the rights and obligations of the Contractor under the Block XXIV
License Contract and the Contract Area (as defined below); and

       

      WHEREAS,
Operator is willing to assign and transfer an undivided thirty-five percent
(35%) of the rights and obligations of the Contractor under the Block XXIV
License Contract to Gulf subject to a proportionate part of the overriding
royalty interest of the 1% of gross revenues from Block XXIV assigned to HTX
Capital, LLC pursuant to that certain Override Agreement by and between Operator
and HTX Capital, LLC, dated the 20th day of
January, 2010 (the “License Override”) and to a proportionate part of the
1% net production interest in Block XXIV assigned to Adam Pollack pursuant to
that certain Agreement dated November 23, 2009 by and between Adam Pollack and
Jorge Rivera (the “Pollack Net Production Interest”) in accordance with the
terms set forth herein and Gulf wishes to acquire such interest;
and

       

      WHEREAS,
on February 28, 2008 Petron Resources, LP entered into the Regional Studies
Agreement with PeruPetro S.A. (the “TEA Agreement”) covering Areas I, II, III,
and IV (“TEA Areas”); and

       

      WHEREAS,
pursuant to that certain Assignment and Assumption Agreement by and between
Operator and Petron Resources, LP dated January 7, 2009 (the “Petron
Assignment”), Petron Resources, LP assigned all of its interest in the TEA
Agreement to Operator; and

       

      WHEREAS,
as of the date of this Agreement, Operator owns one hundred percent (100%) of
the rights and obligations of The Company under the TEA Agreement in the TEA
Areas (as defined below), subject to final regulatory approval of the Petron
Assignment  and to an overriding royalty interest of 1% of gross
revenues from TEA Areas I, II, III, and IV assigned to  HTX Capital,
LLC pursuant to that certain Override Agreement by and between Operator and HTX
Capital, LLC, dated the 20th day of
January, 2010 (the “TEA Override”); and

       

      WHEREAS,
Operator is willing to assign and transfer thirty-five percent (35%) of the
rights and obligations of The Company under the TEA Agreement to Gulf in
accordance with the terms set forth herein and Gulf wishes to acquire such
interest.

       

      
        
          
          

        

        
          -1-

          
            

          

        

        
          
          

        

      

      NOW
THEREFORE, in consideration of the mutual covenants set forth in this Agreement,
the Parties agree as follows:

       

      
        	
                 
      

              	
                1.Definitions.  Unless
      otherwise defined herein, terms defined in the Block XXIV License Contract
      or the TEA Agreement when used in this Agreement shall have the same
      meaning as defined in the Block XXIV License Contract or TEA Agreement, as
      applicable. Terms defined in the singular shall have the same meaning when
      used in the plural and vice versa.  A reference to a “Clause” is a
      reference to a numbered clause of this Agreement unless otherwise
      specified.

              

      

       

      
        	
                 
      

              	
                1.1

              	
                “AFE”
      has the meaning specified in the Block XXIV
JOA.

              

      

       

      
        	
                 
      

              	
                1.2

              	
                “Affiliate”
      means with respect to any Person, a Person that directly or indirectly
      Controls, or is Controlled by, or is under common Control with, such
      Person.    For purposes of this definition, Control
      means the ownership directly or indirectly of fifty percent (50%) or more
      of the voting rights in a Person.  “Controls”, “Controlled by”
      and other derivatives shall be construed
  accordingly.

              

      

       

      
        	
                 
      

              	
                1.3

              	
                “Approval
      Date” has the meaning specified in Clause
2.3.

              

      

       

      
        	
                 
      

              	
                1.4

              	
                “Approval
      Notice” has the meaning specified in Clause
2.3.

              

      

       

      
        	
                 
      

              	
                1.5

              	
                “Adjusted
      Participating Interest” means a Block XXIV Adjusted Participating Interest
      or a TEA Adjusted Participating Interest, as
  applicable.

              

      

       

      
        	
                 
      

              	
                1.6

              	
                “Assignments”
      means the instruments in the form attached hereto as Exhibit A (“Block
      XXIV Deed of Assignment”) (for the Block XXIV License Contract), and
      Exhibit B (“TEA Deed of Assignment”) (for the TEA Agreement) and such
      other instruments as may be necessary or appropriate to transfer and
      assign the Gulf Participating Interests from Operator to Gulf, free and
      clear of all Encumbrances except the Block XXIV JOA and a proportionate
      part of the obligations under the HTX Override and the Pollack Net
      Production Interest.

              

      

       

      
        	
                 
      

              	
                1.7

              	
                “Block
      XXIV Approvals” has the meaning specified in Clause
  3.5.

              

      

       

      
        	
                 
      

              	
                1.8

              	
                “Block
      XXIV Carried Costs” has the meaning specified in Clause
    2.4.

              

      

       

      
        	
                 
      

              	
                1.9

              	
                “Block
      XXIV JOA” means the Operating Agreement dated July 23, 2007 between
      Operator, Endevco Eureka Del Peru S.A.C., and East Cameron Partners Del
      Peru S.A.C., together with all future amendments of the
    same.

              

      

       

      
        	
                 
      

              	
                1.10

              	
                “Block
      XXIV License Contract” has the meaning specified in the recitals to this
      Agreement.

              

      

       

      
        	
                 
      

              	
                1.11

              	
                “Block
      XXIV Adjusted Participating Interest” means a Block XXIV Participating
      Interest as adjusted pursuant to Clauses 2.8(b) and (c), as
      applicable.

              

      

       

      
        
          
          

        

        
          -2-

          
            

          

        

        
          
          

        

      

      
        	
                 
      

              	
                1.12

              	
                “Block
      XXIV Participating Interest” means the undivided percentage interest of
      any Person in the rights and obligations of the Contractor under the Block
      XXIV License Contract.

              

      

       

      
        	
                 
      

              	
                1.13

              	
                “Business
      Day” means a day (other than a Saturday or Sunday) on which commercial
      banks in Texas are generally open for
business.

              

      

       

      
        	
                 
      

              	
                1.14

              	
                “Carry
      Period” has the meaning specified in Clause
2.4.

              

      

       

      
        	
                 
      

              	
                1.15

              	
                “Contract
      Area” shall have the same meaning as such term is defined in the Block
      XXIV License Contract.  The current Contract Area covered by the
      Block XXIV License Contract is set forth on Exhibit C attached
      hereto.

              

      

       

      
        	
                 
      

              	
                1.16

              	
                “Contractor”
      means all of the parties to the Block XXIV License Contract, except
      PeruPetro S.A., and their successors and permitted
  assigns.

              

      

       

      
        	
                 
      

              	
                1.17

              	
                “Cut-off
      Date” means June 1, 2010.

              

      

       

      
        	
                 
      

              	
                1.18

              	
                “Encumbrance”
      means any lien, security interest, pledge, encumbrance, claim, restriction
      on voting, hypothecation, option, right of first refusal, preemptive
      right, community property interest, mortgage, charge, title retention
      agreement or other encumbrance, or other restriction of any
      kind.

              

      

       

      
        	
                 
      

              	
                1.19

              	
                “Escrow
      Agent” means Davis, Gerald & Cremer, P.C., attorneys at
      law.

              

      

       

      
        	
                 
      

              	
                1.20

              	
                “Execution
      Date” has the meaning specified in the opening sentence of this
      Agreement.

              

      

       

      
        	
                 
      

              	
                1.21

              	
                “Governmental
      Entity” means any government, including the Government of Peru, and all
      departments, political subdivisions, instrumentalities, agencies,
      corporations or commissions under the direct or indirect control thereof
      or owned thereby and shall include any court, legislature, council or
      state government or national, regional, municipal or local
      authorities.

              

      

       

      
        	
                 
      

              	
                1.22

              	
                “Gulf
      Participating Interests” means an undivided 35% of the rights and
      obligations of the Contractor under the Block XXIV License Contract and an
      undivided 35% of the rights and obligations of The Company under the TEA
      Agreement.

              

      

       

      
        	
                 
      

              	
                1.23

              	
                “Gulf
      Adjusted Participating Interests” means the undivided percentage of the
      rights and obligations of Contractor under the portions of the Block XXIV
      License Contract as to which such percentage applies and of The Company
      under the TEA Agreement as determined and redetermined under Clauses
      2.8(b) and (c).

              

      

       

      
        	
                 
      

              	
                1.24

              	
                “HTX
      Override” means the License Override and the TEA
  Override.

              

      

       

      
        	
                 
      

              	
                1.25

              	
                “JOA”
      means the Block XXIV JOA or the TEA JOA, as
  applicable.

              

      

       

      
        
          
          

        

        
          -3-

          
            

          

        

        
          
          

        

      

      
        	
                 
      

              	
                1.26

              	
                “K”
      means 1,000.  Example:  “$500K” means
      $500,000.

              

      

       

      
        	
                 
      

              	
                1.27

              	
                “License
      Override” has the meaning specified in the recitals to this
      Agreement.

              

      

       

      
        	
                 
      

              	
                1.28

              	
                “M”
      means 1,000,000.  Example:  “$1.8M” means
      $1,800,000.

              

      

       

      
        	
                 
      

              	
                1.29

              	
                “On-Going
      Costs” means any and all costs and expenses incurred in accordance with
      the applicable JOA in carrying out Operations conducted on or after the
      Execution Date.

              

      

       

      
        	
                 
      

              	
                1.30

              	
                “Operations”
      shall have the same meaning as such term is defined in the Block XXIV
      License Contract or TEA Agreement as the case may
  be.

              

      

       

      
        	
                 
      

              	
                1.31

              	
                “Participating
      Interest” means a Block XXIV Participating Interest or a TEA Participating
      Interest, as applicable.

              

      

       

      
        	
                 
      

              	
                1.32

              	
                “Past
      Costs” covers any and all costs and expenses incurred in carrying out
      Operations conducted prior to the Execution Date, which include, without
      limitation, costs such as:  (a) third-party costs for (i) data
      acquisition, licensing and evaluation, (ii) Block XXIV License Contract
      negotiations and acquisitions, including legal, consulting, translation
      and secretarial services, and (iii) environmental studies; (b) internal
      costs (salaries, benefits and other related overhead) for personnel of
      Operator and its Affiliates related to (i) Block XXIV License Contract
      negotiations and acquisitions, (ii) preparation for drilling operations,
      and (iii) data acquisition, licensing and evaluation, (c) drilling costs;
      and (d) costs and expenses incurred in relation to the bidding
      stage.  For the purposes of this Agreement, Gulf’s proportionate
      share of the Past Costs is stipulated to be Four Million One Hundred
      Thousand Dollars ($4,100,000).

              

      

       

      
        	
                 
      

              	
                1.33

              	
                “Person”
      means any natural or judicial person, including an individual, firm,
      corporation, partnership, limited liability company, trust, association,
      joint venture, Governmental Entity or other
  entity.

              

      

       

      
        	
                 
      

              	
                1.34

              	
                “Petron
      Assignment” has the meaning specified in the recitals to this
      Agreement.

              

      

       

      
        	
                 
      

              	
                1.35

              	
                “Pollack
      Net Production Interest” has the meaning specified in the recitals to this
      Agreement.

              

      

       

      
        	
                 
      

              	
                1.36

              	
                “Required
      Approvals” means the Block XXIV Approvals and the TEA
      Approvals.

              

      

       

      
        	
                 
      

              	
                1.37

              	
                “Restructuring
      Period” has the meaning specified in Clause
7.3.

              

      

       

      
        	
                 
      

              	
                1.38

              	
                “TEA
      Adjusted Participating Interest” means a TEA Participating Interest as
      adjusted pursuant to Clauses 2.8(b) and (c), as
  applicable.

              

      

       

      
        	
                 
      

              	
                1.39

              	
                “TEA
      Agreement” has the meaning specified in the recitals to this
      Agreement.

              

      

       

      
        
          
          

        

        
          -4-

          
            

          

        

        
          
          

        

      

      
        	
                 
      

              	
                1.40

              	
                “TEA
      Approvals” has the meaning specified in Clause
  3.5.

              

      

       

      
        	
                 
      

              	
                1.41

              	
                “TEA
      Area” shall have the same meaning as such term is defined in the TEA
      Agreement.  The current TEA Area (Blocks I, II, III and IV)
      covered by the TEA Agreement is set forth in Exhibit D
    hereto.

              

      

       

      
        	
                 
      

              	
                1.42

              	
                “TEA
      Carried Costs” has the meaning specified in Clause
  2.6.

              

      

       

      
        	
                 
      

              	
                1.43

              	
                “TEA
      JOA” means the Joint Operating Agreement entered into between Operator and
      Gulf pursuant to Clause 2.7 covering the TEA Agreement and the TEA
      Area.

              

      

       

      
        	
                 
      

              	
                1.44

              	
                “TEA
      Override” has the meaning specified in the recitals to this
      Agreement.

              

      

       

      
        	
                 
      

              	
                1.45

              	
                “TEA
      Participating Interest” means the undivided percentage interest of any
      Person in the rights and obligations of The Company under the TEA
      Agreement.

              

      

       

      
        	
                 
      

              	
                1.46

              	
                “The
      Company” means all of the parties to the TEA Agreement, other than
      PeruPetro S.A., and their successors and permitted
  assigns.

              

      

       

      
        	
                 
      

              	
                1.47

              	
                “Transfer
      Date” has the meaning specified in Clause
2.3.

              

      

       

      
        	
                2. 

              	
                Assignments and
      Consideration.

              

      

       

      
        	
                 
      

              	
                2.1

              	
                Execution of
      Documents.  On the Execution Date, the following shall
      occur:

              

      

       

      
        	
                 
      

              	
                (a)

              	
                Operator
      and Gulf shall execute the Assignments and deliver them to Escrow
      Agent.   Escrow Agent shall hold all counterparts of the
      Assignments until the Required Approvals have been
    obtained.

              

      

       

      
        	
                 
      

              	
                (b)

              	
                Gulf
      shall pay Operator by wire transfer of immediately available funds to the
      account of Operator specified by notice in writing from Operator to Gulf
      $200,000, reimbursing Operator for a portion of the Past
      Costs.

              

      

       

      
        	
                 
      

              	
                (c)

              	
                Operator
      shall deliver to Gulf a Certificate of Operator executed by the Secretary
      or other appropriate officer of Operator certifying that (i) attached
      thereto are true and correct copies of the organizational documents of
      Operator and of the resolutions duly adopted by Operator approving this
      Agreement and the transactions contemplated hereby, (ii) such resolutions
      were duly adopted in accordance with the organizational documents of
      Operator and are in full force and effect, and (iii) the identity, and
      specimen signatures, of the officers of Operator duly authorized to
      execute and deliver this Agreement and the other documents contemplated
      hereby.

              

      

       

      
        	
                 
      

              	
                (d)

              	
                Gulf
      shall deliver to Operator a Certificate of Gulf executed by the Secretary
      or other appropriate officer of Gulf certifying that (i) attached thereto
      are true and correct copies of the organizational documents of Gulf and of
      the resolutions duly adopted by Gulf approving this Agreement and the
      transactions contemplated hereby, (ii) such resolutions were duly adopted
      in accordance with the organizational documents of Gulf and are in full
      force and effect, and (iii) the identity, and specimen signatures, of the
      officers of Gulf duly authorized to execute and deliver this Agreement and
      the other documents contemplated
hereby.

              

      

       

      
        
          
          

        

        
          -5-

          
            

          

        

        
          
          

        

      

      
        	
                 
      

              	
                (e)

              	
                Operator
      shall deliver to Gulf agreements executed by the equity owners of Operator
      in form and substance satisfactory to Gulf whereby such equity owners
      approve and agree to the provisions of Clause 7.4 of this Agreement and
      agree to execute and deliver any instruments necessary or appropriate to
      convert the Gulf Participating Interests to preferred and common equity
      interests in Operator as contemplated
thereby.

              

      

       

      
        	
                 
      

              	
                2.2

              	
                Required
      Approvals.  Within thirty (30) Business Days following
      the Execution Date, Operator shall request the approvals from PeruPetro
      S.A. and the Ministry of Energy and Mines, the Ministry of Finance and the
      President of Peru, and any other applicable Governmental Entities and
      third Persons required for the Assignments and shall submit all
      documentation required in order to obtain such
      approvals.  Operator shall provide Gulf a copy of all documents
      submitted in connection with such requests for approval.  Gulf
      will cooperate with Operator in connection with such
      requests.  Without limiting the foregoing, within thirty (30)
      days following the Execution Date, Gulf will provide Operator with
      information regarding the qualification requirements set forth on Exhibit
      H attached hereto. Operator shall use its best efforts to obtain the
      Required Approvals as soon as possible after the Execution
      Date.  Operator shall keep Gulf fully informed of all
      communications with PeruPetro S.A., other Governmental Entities and third
      Persons with respect to the process for obtaining such
      approvals.  Operator will promptly provide Gulf copies of all
      correspondence, notices and requests received or made by it with respect
      to the Required Approvals.

              

      

       

      
        	
                 
      

              	
                2.3

              	
                Gulf Participating
      Interests.

              

      

       

      
        	
                 
      

              	
                (a)

              	
                Within
      thirty (30) Business Days following the date (the “Approval Date”) on
      which the Required Approvals have been obtained, Operator shall deliver a
      notice (the “Approval Notice”) to Gulf stating that such approvals have
      been obtained and including copies of the documentation evidencing such
      approvals.  On the later to occur of: (i) the 30th
      day (or the next Business Day  thereafter if such day is not a
      Business Day) following delivery of the Approval Notice to Gulf or (ii)
      the 90th
      day (or the next Business Day  thereafter if such day is not a
      Business Day) following the Execution Date (the “Transfer Date”), the
      following shall occur at the offices of Vinson & Elkins LLP in
      Houston, Texas:

              

      

       

      
        	
                 
      

              	
                (i)

              	
                Gulf
      shall pay $900,000 to Operator by wire transfer of immediately available
      funds to the account of Operator specified by notice in writing from
      Operator to Gulf, reimbursing Operator for a portion of the Past
      Costs;

              

      

       

      
        
          
          

        

        
          -6-

          
            

          

        

        
          
          

        

      

      
        	
                 
      

              	
                (ii)

              	
                the
      Parties shall instruct the Escrow Agent to deliver to Gulf the original
      counterparts of the Assignments delivered to the Escrow Agent pursuant to
      Clause 2.1(a);

              

      

       

      
        	
                 
      

              	
                (iii)

              	
                the
      assignment and transfer from Operator to Gulf of the Gulf Participating
      Interests shall be effective; and

              

      

       

      
        	
                 
      

              	
                (iv)

              	
                Operator
      and Gulf shall execute and deliver such other instruments as may be
      necessary or appropriate to implement the transfer and assignment of the
      Gulf Participating Interests from Operator to
  Gulf.

              

      

       

      
        	
                 
      

              	
                (b)

              	
                Operator
      shall notify Gulf at least sixteen (16) days before, but no more than
      twenty-one (21) days before each of the first six (6) wells to be drilled
      in the Contract Area is spudded.  Within fifteen (15) days after
      the receipt of each such notice, Gulf shall pay to Operator by wire
      transfer of immediately available funds to the account of Operator
      specified by notice in writing from Operator to Gulf $500,000, which
      payments together with the amounts paid pursuant to Clause 2.1(b), Clause
      2.3(a)(i) and Clause 2.3(c) shall fully reimburse Operator for the Past
      Costs.  The amounts to be paid by Gulf pursuant to this Clause
      2.3(b) in connection with each of the first six (6) wells drilled in the
      Contract Area are in addition to the amounts to be paid by Gulf pursuant
      to Clause 2.4 in connection with each such
well.

              

      

       

      
        	
                 
      

              	
                (c)

              	
                In
      the event that six (6) wells have not been spudded in the Contract Area
      prior to the Cut-Off Date, Operator shall notify Gulf and within fifteen
      (15) days after the receipt of such notice, Gulf shall pay to Operator by
      wire transfer of immediately available funds to the account of Operator
      specified in such notice the difference between $4,100,000 and the amounts
      paid by Gulf pursuant to Clauses 2.3(a) and 2.3(b).  Thereafter,
      Gulf shall have no further obligations under Clause
  2.3(b).

              

      

       

      
        	
                 
      

              	
                2.4

              	
                Block XXIV Carried
      Costs.  Subject to the terms and conditions of this
      Agreement and the Block XXIV JOA, Gulf agrees to participate in all
      Operations conducted in the Contract Area pursuant to Work Programs and
      Budgets approved pursuant to Article VI of the Block XXIV JOA and attached
      hereto as Exhibit E, and to pay 80% of the On-Going Costs incurred in
      connection therewith in accordance with the Block XXIV JOA, until the
      earlier of the following:  (i) six (6) wells have been drilled
      in the Contract Area, or (ii) 80% of the On-Going Costs incurred under the
      JOA equals $6,000,000.  The On-Going Costs that Gulf agrees to
      pay pursuant to the preceding sentence are the “Block XXIV Carried Costs”
      and the period of time from the Execution Date to the earlier of times
      described in clauses (i) and (ii) of the preceding sentence is the “Carry
      Period”.  During the Carry Period, Operator shall provide Gulf
      with an AFE at least sixteen (16) days before, but no more than twenty-one
      (21) days before, each of the first six (6) wells in the Contract Area is
      scheduled to be spudded, and Gulf will pay the Block XXIV Carried Costs
      attributable to each AFE in accordance with the terms of the Block XXIV
      JOA within fifteen (15) days after receipt of the AFE, except that Gulf
      will pay the Block XXIV Carried Costs for the first such well to be
      drilled on the Contract Area as set forth in the AFE for such well
      attached hereto as Exhibit F on or before March 20,
      2010.  Operator will consult with Gulf in advance concerning the
      location, depth and AFE for each future well proposed to be drilled in the
      Contract Area during the Carry Period.  Notwithstanding anything
      to the contrary contained in this Agreement or the Block XXIV JOA, during
      the Carry Period the Block XXIV Carried Costs of any well shall not be due
      prior to 15 days after the date the Block XXIV Carried Costs of any other
      well were due so that there will always be at least fifteen (15) days
      between the date that the Block XXIV Carried Costs for any well are due
      under this Clause 2.4 and the date the Block XXIV Carried Costs of any
      other well are due under this Clause 2.4.  During the Carried
      Period, Operator will not drill more than one well at a
      time.  Notwithstanding anything to the contrary, during the
      Carry Period, Operator has no duty to spud a given well until and unless
      Operator has received payment from Gulf of the applicable Carried Costs
      for that well together with any payment then-due by Gulf under 2.3(a) or
      2.3(b) for Past Costs.

              

      

       

      
        
          
          

        

        
          -7-

          
            

          

        

        
          
          

        

      

      
        	
                 
      

              	
                2.5

              	
                Block XXIV
      JOA.  All Operations conducted in the Contract Area shall
      be conducted pursuant to the terms of the Block XXIV JOA and Gulf and
      Operator shall be responsible for their respective Block XXIV
      Participating Interest shares of the On-Going Costs of such Operations,
      except that during the Carry Period, Gulf shall be responsible for, and
      shall pay, the Block XXIV Carried Costs as provided in Clause
      2.4.  From and after the Execution Date, Gulf shall be deemed to
      have a 35% Participating Interest under the Block XXIV JOA and Gulf shall
      be entitled to exercise all rights under the Block XXIV JOA attributable
      to such 35% Participating Interest.  Gulf’s rights under this
      Clause 2.5, the Block XXIV Deed of Assignment, or the TEA Deed of
      Assignment may not be assigned except as provided in Clause
      3.7.

              

      

       

      
        	
                 
      

              	
                2.6

              	
                TEA Carried
      Costs.  Subject to the terms and conditions of this
      Agreement and the TEA JOA, Gulf agrees to pay 100% of the On-Going Costs
      of all Operations conducted with respect to the TEA Areas pursuant to work
      programs and budgets approved pursuant to the terms of the TEA JOA
      (specifically including EarthSat imaging study and aeromagnetic survey and
      evaluation) up to $1.5 million (the “TEA Carried
      Costs”).  Operator shall bill Gulf for, and Gulf will pay, the
      TEA Carried Costs incurred in accordance with the terms of the TEA
      JOA.  Operator will consult with Gulf in advance concerning all
      Operations with respect to which Gulf agrees to pay 100% of the On-Going
      Costs pursuant to this Clause 2.6.

              

      

       

      
        	
                 
      

              	
                2.7

              	
                TEA JOA. The
      Parties will work in good faith to negotiate and enter as soon as
      practicable after the execution of this Agreement a joint operating
      agreement covering  the TEA Agreement and TEA Areas and
      designating Operator as the operator thereunder. The joint operating
      agreement so entered into is referred to in this agreement as the “TEA
      JOA”. All Operations conducted with respect to the TEA Area shall be
      conducted pursuant to the terms of the TEA JOA, and Gulf and Operator
      shall be responsible for their respective TEA Participating Interest
      shares of the On-Going Costs of such Operations, except as otherwise
      provided in Clause 2.6.

              

      

       

      
        
          
          

        

        
          -8-

          
            

          

        

        
          
          

        

      

      
        	
                 
      

              	
                2.8

              	
                Default.

              

      

       

      
        	
                 
      

              	
                (a)

              	
                In
      the event that Gulf defaults in the payment of any Block XXIV Carried
      Costs or TEA Carried Costs due under this Agreement or any JOA, Operator
      shall notify Gulf of such failure in accordance with the terms of Article
      VIII of the applicable JOA.  In the event that Gulf fails to
      cure any such default within the times contemplated by Article 8.4(D) of
      the applicable JOA, Operator may, at its option exercisable anytime
      thereafter until such default is cured, as its sole and exclusive remedy
      notify Gulf that Gulf’s Participating Interests in the Block XXIV License
      Contract and the TEA Agreement and Gulf’ rights and obligations under the
      Block XXIV JOA and TEA JOA are terminated, save and except notwithstanding
      anything to the contrary contained in this Agreement or any JOA, or
      otherwise available to Operator in law or equity, it is understood and
      agreed Gulf shall be entitled to retain its (i) 35% Participating Interest
      in each well for which it has paid the Block XXIV Carried Costs
      theretofore invoiced to Operator and the equipment and other facilities
      therein or used in connection therewith, (ii) 70% of
      the  revenues attributable to the Block XXIV Participating
      Interests of Operator and Gulf in such wells in excess of the costs and
      expenses incurred under the Block XXIV JOA attributable to the Block XXIV
      Participating Interests of Operator and Gulf for operating and maintaining
      the wells, equipment and other facilities in or used in connection with
      the Contract Area and producing, transporting, marketing and otherwise
      disposing of production from the Contract Area until such time as Gulf has
      recovered from such excess revenues the amounts actually paid by Gulf
      under Clauses 2.1, 2.3, 2.4 and 2.6; thereafter revenue with respect to
      such wells shall be shared in proportion to each Party’s Adjusted
      Participating Interest therein, and (iii) all rights and obligations under
      the Block XXIV JOA and TEA JOA attributable to the rights and interests
      retained by Gulf under Clauses 2.8(a)(i) and
  (ii).

              

      

       

      
        	
                 
      

              	
                (b)

              	
                In
      the event that Gulf defaults in the payment of any Past Costs due under
      this Agreement, Operator shall notify Gulf of such failure and if Gulf
      fails to cure such default within thirty (30) days after the receipt of
      such notice, Operator may notify Gulf that Operator has elected to reduce
      Gulf’s Participating  Interest and increase Operator’s
      Participating Interest to their respective Adjusted Participating
      Interests, except as otherwise provided in Clause 2.8(a). Gulf’s Block
      XXIV Adjusted Participating Interest and its TEA Adjusted Participating
      Interest shall be the percentage determined by dividing the total amount
      of Block XXIV Carried Costs, TEA Carried Costs and Past Costs paid by Gulf
      pursuant to Clauses 2.1, 2.3, 2.4 and 2.6 of this Agreement by $11,600,000
      and multiplying such quotient by 35%.  Operator’s Block XXIV
      Adjusted Participating Interest and its TEA Adjusted Participating
      Interest shall be its Block XXIV Participating Interest and its TEA
      Participating Interest increased by the difference between Gulf’s
      Participating Interest and Gulf’s Adjusted Participating
      Interest.  In the event that Operator elects to reduce Gulf’s
      Participating Interest and increase Operator’s Participating Interest to
      their respective Adjusted Participating Interests, the Adjusted
      Participating Interests shall become effective as to Block XXIV License
      Contract and the TEA Agreement five (5) Business Days after receipt by
      Gulf of Operator’s notice of election to reduce Gulf’s Participating
      Interest and increase Operator’s Participating Interest to their
      respective Adjusted Participating Interests as provided by this Clause
      2.8(b), except as otherwise provided in Clause
  2.8(a).

              

      

       

      
        
          
          

        

        
          -9-

          
            

          

        

        
          
          

        

      

      
        	
                 
      

              	
                (c)

              	
                In
      the event that Operator elects to reduce Gulf’s Participating Interest and
      increase Operator’s Participating Interest to their respective Adjusted
      Participating Interests as provided by this Clause 2.8(b) and at any time
      thereafter on or before the Cut-off Date, Gulf pays all or any portion of
      the Past Costs that it had failed to pay under this Agreement, then the
      Adjusted Participating Interests shall be redetermined based on the same
      formula as set forth in the second sentence of Clause 2.8(b) but taking
      into account all Block XXIV Carried Costs, TEA Carried Costs and Past
      Costs paid by Gulf.  In the event that at such time of
      redetermination the total amount of Block XXIV Carried Costs and TEA
      Carried Costs that have been invoiced to Gulf in accordance with the terms
      of this Agreement and the applicable JOAs is less than $7,500,000, then
      for the purpose redetermining the Adjusted Participating Interests
      pursuant to this Clause 2.8(c), the $11,600,000 amount used in the formula
      in the second sentence of Clause 2.8(b) shall be $4,100,000 plus the total
      amount of Block XXIV Carried Costs and TEA Carried Costs that have been
      invoiced  to Gulf in accordance with the terms of this Agreement
      and the applicable JOAs.  In the event that the Adjusted
      Participating Interests are redetermined pursuant to this Clause 2.8(c),
      such Adjusted Participating Interests shall be effective as of the date
      that Operator paid the Past Costs that resulted in such redetermination as
      to Block XXIV License Contract and the TEA Agreement, except for any wells
      that were commenced between the time that the Adjusted Participating
      Interests became effective under Clause 2.8(b) and the time that Operator
      paid such unpaid Past Costs.  With respect to the wells in which
      Operator retained its 35% Participating Interest as provided in Clause
      2.8(a), the redetermined Adjusted Participating Interests shall become
      effective after Gulf has recovered the amounts contemplated by in part
      (ii) of the last sentence of Clause 2.8(a).  The rights and
      remedies set forth in Clauses 2.8(b) and (c) shall be Operator’s sole and
      exclusive rights and remedies arising out of any failure of Gulf to pay
      any Past Costs under this
Agreement.

              

      

       

      
        	
                 
      

              	
                (d)

              	
                In
      the event of any default by Operator in the performance of any of its
      obligations under this Agreement or any JOA, Gulf may exercise all of the
      rights and remedies available to it under Article VIII of the applicable
      JOA and any other rights and remedies available to Gulf in law or
      equity.

              

      

       

      
        	
                 
      

              	
                (e)

              	
                Each
      Party is specifically granted the right to seek specific performance of
      the terms of this Agreement, except that Operator’s sole right and
      remedies with respect to failure of Gulf to pay On-Going Costs and Past
      Costs under this Agreement are set forth in Clauses 2.8(a), (b) and
      (c).  Operator’s rights and remedies under the TEA JOA and Block
      XXIV JOA with respect to any other breaches or defaults by Gulf are not
      restricted by this Clause 2.8.

              

      

       

      
        
          
          

        

        
          -10-

          
            

          

        

        
          
          

        

      

      
        	
                3.

              	
                Additional
      Agreements.

              

      

       

      
        	
                 
      

              	
                3.1

              	
                Disproportionate
      Revenue Sharing.  Gulf shall be entitled to receive 70%
      of the revenues attributable to the Block XXIV Participating Interests of
      Operator and Gulf in excess of the costs and expenses incurred under the
      Block XXIV JOA attributable to the Block XXIV Participating Interests of
      Operator and Gulf for operating and maintaining wells, equipment and other
      facilities in or used in connection with the Contract Area and producing,
      transporting, marketing and otherwise disposing of production from the
      Contract Area until such time as Gulf has recovered from such excess
      revenues the amounts actually paid by Gulf under Clauses 2.1, 2.3, 2.4 and
      2.6; thereafter revenue shall be shared in proportion to each Party’s
      Participating Interest.

              

      

       

      
        	
                 
      

              	
                3.2

              	
                Gulf Branch
      Registration.  Promptly following the Execution Date,
      Gulf shall register a branch in the Republic of Peru, if required pursuant
      to the laws of the Republic of
Peru.

              

      

       

      
        	
                 
      

              	
                3.3

              	
                Payment
      Currency.  Payments between the Parties under this
      Agreement shall be made in US dollars (US
$).

              

      

       

      
        	
                 
      

              	
                3.4

              	
                Share of Contractor’s
      Obligations.  Gulf hereby ratifies, confirms and accepts
      the terms of the Block XXIV License Contract and the TEA Agreement, and
      Gulf agrees to abide by and comply with the terms of the Block XXIV
      License Contract and TEA Agreement to the extent of its Block XXIV
      Participating Interest and TEA Participating
  Interest.

              

      

       

      
        	
                 
      

              	
                3.5

              	
                Required
      Approvals.  The Assignment contemplated hereby with
      respect to the Block XXIV License Contract and the Block XXIV JOA can only
      be made effective after PeruPetro S.A. approves the qualifications of Gulf
      in accordance with Clause 16 of the Block XXIV License Contract and the
      provisions of Peruvian law and PeruPetro S.A. approves such Assignment
      (the “Block XXIV Approvals”).  The Assignment contemplated
      hereby with respect to the TEA Agreement can only be made effective after
      PeruPetro S.A. approves the qualifications of Gulf in accordance with
      Peruvian law, the Assignment with respect to the TEA Agreement and the
      assignment of the TEA Agreement from Petron Resources, LP to Operator (the
      “TEA Approvals”).  After the Execution Date, each Party will use
      all reasonable efforts to timely take any actions, make any filings or
      submissions and affect any undertakings reasonably required in order to
      obtain the Required Approvals.  Until such time as the Required
      Approvals are obtained and the actions described in Clause 2.3(a) have
      been taken, Operator shall hold the Gulf Participating Interests in trust
      for the benefit and enjoyment of
Gulf.

              

      

       

      
        
          
          

        

        
          -11-

          
            

          

        

        
          
          

        

      

      
        	
                 
      

              	
                3.6

              	
                Non-Operator
      Dealings.  For a period of twelve (12) months following
      the Execution Date, Gulf agrees that it will not purchase or otherwise
      acquire any rights of any third Person (including, without limitation,
      East Cameron Partners del Peru S.A.C. or Endevco Eureka del Peru S.A.C.)
      under the Block XXIV JOA or the Block XXIV License Contract without the
      express written permission of Operator, which permission shall not be
      unreasonably withheld.

              

      

       

      
        	
                 
      

              	
                3.7

              	
                Non-Assignment.  Gulf
      agrees that it will not sell, assign or transfer the Gulf Participating
      Interests, its rights under the Assignments, the Block XXIV License
      Contract, or the TEA Agreement, except as permitted by the terms of the
      applicable JOA.  Operator shall not sell, assign or transfer its
      Participating Interests or its rights in the Block XXIV License Contract
      or the TEA Agreement except as permitted by the terms of the applicable
      JOA.

              

      

       

      
        	
                4.

              	
                License
      Contract.

              

      

       

      
        	
                 
      

              	
                4.1

              	
                Operator.  Notwithstanding
      the amendment of the Block XXIV License Contract, the Operator shall
      remain as Operator thereunder, subject to the terms of the Block XXIV
      JOA.

              

      

       

      
        	
                5.

              	
                Confidentiality and
      Access to Data.

              

      

       

      
        	
                 
      

              	
                5.1

              	
                Confidentiality.  Each
      Party agrees that all information disclosed under this Agreement, except
      information which (a) at the time such information is provided to a Party
      under this Agreement, is in the public domain; (b) subsequently comes into
      the public domain, except through breach of the undertakings set out in
      this Clause 5; or (c) is already lawfully in possession of a Party prior
      to the Execution  Date, shall be considered confidential and
      shall not be disclosed to any other person or entity without the prior
      written consent of the Party which owns such confidential
      information.  This obligation of confidentiality shall remain in
      force during the term of the Block XXIV License Contract or TEA Agreement,
      as the case may be, and for a period of two (2) years
      thereafter.  Notwithstanding the foregoing, confidential
      information may be disclosed without consent and without violating the
      obligations contained in this Clause 5 in the following
      circumstances:

              

      

       

      
        	
                 
      

              	
                (a)

              	
                to
      an Affiliate provided the Affiliate is bound to the provisions of this
      Clause 5 and the Party disclosing is responsible for the violation of an
      Affiliate;

              

      

       

      
        	
                 
      

              	
                (b)

              	
                to
      a governmental agency or other entity when required by the Block XXIV
      License Contract or TEA Agreement;

              

      

       

      
        	
                 
      

              	
                (c)

              	
                to
      the extent such information is required to be furnished in compliance with
      the applicable laws/regulations, or pursuant to any legal proceedings or
      because of any order of any court binding upon a
  Party;

              

      

       

      
        
          
          

        

        
          -12-

          
            

          

        

        
          
          

        

      

      
        	
                 
      

              	
                (d)

              	
                to
      attorneys engaged, or proposed to be engaged, by any Party where
      disclosure of such information is essential to such attorneys’ work for
      such Party and such attorneys are bound by an obligation of
      confidentiality;

              

      

       

      
        	
                 
      

              	
                (e)

              	
                to
      contractors and consultants engaged, or proposed to be engaged, by any
      Party where disclosure of such information is essential to such
      contractor’s or consultant’s work for such
  Party;

              

      

       

      
        	
                 
      

              	
                (f)

              	
                to
      a bona fide prospective transferee of all or a portion of a Party’s
      Participating Interest, or portion thereof, to the extent appropriate in
      order to allow the assessment of such Participating Interest (including an
      entity with whom a Party and/or its Affiliates are conducting bona fide
      negotiations directed toward a merger, consolidation or the sale of a
      majority of its or an Affiliate’s
shares);

              

      

       

      
        	
                 
      

              	
                (g)

              	
                to
      a bank. or other Person to the extent appropriate to a Party arranging for
      funding;

              

      

       

      
        	
                 
      

              	
                (h)

              	
                to
      the extent that a Party determines in good faith that such information is
      required to be disclosed by any law, rule or regulation of any Government
      Entity or stock exchange having jurisdiction over such Party, or its
      Affiliates or is subject to a request by any regulatory authority or
      Governmental Entity; provided that such Party shall provide notice of the
      disclosure to the non-disclosing Party and to the extent Clause 12 is
      applicable thereto, comply with the requirements
  thereof;

              

      

       

      
        	
                 
      

              	
                (i)

              	
                to
      its respective employees, subject to each Party taking sufficient
      precautions to ensure such information is kept confidential;
      and

              

      

       

      
        	
                 
      

              	
                (j)

              	
                to
      the other parties to the Block XXIV License Contract and JOA and PeruPetro
      S.A. solely to the extent as may be required to satisfy the
      Conditions.

              

      

       

      Disclosure
as pursuant to Clause 5.1 (e), (f), (g) and (j) shall not be made unless prior
to such disclosure the disclosing Party has obtained a written undertaking from
the recipient party to keep the information strictly confidential for at least
as long as the period set out above and to use the information for the sole
purpose described in Clause 5.1 (e), (f), (g), and (k), whichever is applicable,
with respect to the disclosing Party.

       

      
        	
                 
      

              	
                5.2

              	
                Access to
      Data.  Each Party shall provide the other Party with
      access to all data relating to the Contract Area and the TEA Areas in its
      possession, custody or control, including without limitation technical,
      geological, commercial and other information relating to the Contract
      Area.  The data provided under this Clause 5.2 shall be subject
      to the confidentiality obligations under Clause
  5.1.

              

      

       

      
        	
                6.

              	
                Representations and
      Warranties.

              

      

       

      
        	
                 
      

              	
                6.1

              	
                Gulf
      hereby represents and warrants to Operator as of the Execution Date and
      the Transfer Date as follows:

              

      

       

      
        
          
          

        

        
          -13-

          
            

          

        

        
          
          

        

      

      
        	
                 
      

              	
                (a)

              	
                In
      making the decision to enter into this Agreement and consummate the
      transactions contemplated hereby, Gulf has relied solely on the basis of
      its own independent due diligence
investigation.

              

      

       

      
        	
                 
      

              	
                (b)

              	
                Gulf
      has all necessary corporate power and authority to enter into this
      Agreement and the Assignments and to perform its obligations hereunder and
      thereunder.  All necessary corporate action has been taken to
      authorize Gulf to sign and deliver, and perform, the transactions
      contemplated by this Agreement and the Assignments.  This
      Agreement has been duly executed and delivered by Gulf and constitutes a
      legal, valid and binding obligation of Gulf, enforceable against Gulf in
      accordance with its terms, subject to the legal doctrines of bankruptcy,
      insolvency or similar legal doctrines affecting creditors’ rights
      generally and general principles of equity.  The Assignments,
      once executed by Gulf and Operator, will have been duly executed and
      delivered by Gulf and constitute legal, valid and binding obligations of
      Gulf, enforceable against Gulf in accordance with their terms, subject to
      the legal doctrines of bankruptcy, insolvency or similar legal doctrines
      affecting creditors’ rights generally and general principles of
      equity.

              

      

       

      
        	
                 
      

              	
                (c)

              	
                No
      event has occurred which constitutes, or which with the giving of notice
      and/or the lapse of time and/or a relevant determination would constitute,
      a contravention of, or default under, any agreement or instrument by which
      Gulf or any of its assets is bound or affected, being a contravention or
      default which would have a material adverse effect on the business,
      assets, or condition of Gulf and which would materially and adversely
      affect its ability to observe or perform its obligations under this
      Agreement and the transactions contemplated
  hereby.

              

      

       

      
        	
                 
      

              	
                (d)

              	
                No
      litigation, arbitration or administrative proceeding or claim which might
      by itself or together with any other such proceedings or claims materially
      and adversely affect Gulf’s ability to observe or perform its obligations
      under this Agreement and the agreements contemplated hereby, is presently
      in progress or pending or, to the best of the knowledge, information and
      belief of Gulf, threatened against Gulf or any Affiliate of
      Gulf.

              

      

       

      
        	
                 
      

              	
                6.2

              	
                Operator
      hereby represents and warrants to Gulf that as of the date hereof and the
      Execution Date and as of the Transfer
Date:

              

      

       

      
        	
                 
      

              	
                (a)

              	
                Operator
      is a Contractor under the Block XXIV License
  Contract.

              

      

       

      
        	
                 
      

              	
                (b)

              	
                Operator
      holds not less than eighty percent (80%) of the rights and obligations of
      the Contractor under the Block XXIV License Contract, free and clear of
      all liens, claims and encumbrances other than the License Override and the
      Pollack Net Production Interest, and it has not received any notice or
      other communication from PeruPetro S.A., any other Governmental Entity or
      any other Person to terminate the Block XXIV License Contract or which
      would reduce Operator’s Participating Interest in the Block XXIV License
      Contract.

              

      

       

      
        
          
          

        

        
          -14-

          
            

          

        

        
          
          

        

      

      
        	
                 
      

              	
                (c)

              	
                The
      Block XXIV License Contract and all rights and interest thereunder or
      deriving therefrom of Operator are in full force and effect and no default
      or act or omission of Operator, or, as far as Operator is aware, of any
      other person, has occurred thereunder nor is there any notice or
      intimation to Operator in respect thereof whether as a result of its
      default, act or omission or those of any other person or
      otherwise.  Operator has provided Gulf with a complete and
      correct copy of the Block XXIV License
Contract.

              

      

       

      
        	
                 
      

              	
                (d)

              	
                The
      Block XXIV JOA is in full force and effect and no default or act or
      omission of Operator, or, as far as Operator is aware, except as provided
      in Exhibit G, of any other Person, has occurred
      thereunder.  Operator has not received any notice or intimation
      that it is in default in the performance of any of its obligations under
      the Block XXIV JOA.  Except as provided in Exhibit G, Operator
      has not delivered any notice or demand with respect to any default by any
      other Person in the performance of its obligations under the Block XXIV
      JOA.  Operator has provided Gulf with a complete and correct
      copy of the Block XXIV JOA.  Operator has validly exercised all
      of its rights under Article 8 of the Block XXIV JOA to cause East Cameron
      Partners del Peru S.A.C. and Endevco Eureka del Peru S.A.C. to forfeit
      their rights and interests in and to the Block XXIV License Contract, the
      Block XXIV JOA and the Contract Area as a result of defaults by such
      parties under the Block XXIV JOA, and such actions by Operator have been
      effective to cause such parties to forfeit all of their rights, titles and
      interests in and to the Block XXIV License Contract, the Block XXIV JOA
      and the Contract Area.

              

      

       

      
        	
                 
      

              	
                (e)

              	
                Operator
      is The Company under the TEA
Agreement.

              

      

       

      
        	
                 
      

              	
                (f)

              	
                Operator
      holds one hundred percent (100%) of the rights and obligations of The
      Company under the TEA Agreement, free and clear of all liens, claims and
      encumbrances other than the TEA Override, by means of the Petron
      Assignment, but which has not yet been formally approved by the
      appropriate regulatory authorities, and it has not received any notice or
      other communication from PeruPetro S.A., any other Governmental Entity or
      any other Person to terminate the TEA Agreement or which would reduce
      Operator’s Participating Interest in the TEA
  Agreement.

              

      

       

      
        	
                 
      

              	
                (g)

              	
                The
      TEA Agreement and all rights and interest thereunder or deriving therefrom
      of Operator are in full force and effect and no default or act or omission
      of Operator, or, as far as Operator is aware, of any other person, has
      occurred thereunder nor is there any notice or intimation to Operator in
      respect thereof whether as a result of its default, act or omission or
      those of any other person or otherwise.  Operator has provided
      Gulf with a complete and correct copy of the TEA
  Agreement.

              

      

       

      
        	
                 
      

              	
                (h)

              	
                Operator
      has all necessary corporate power and authority to enter into this
      Agreement and the Assignments and to perform its obligations hereunder and
      thereunder.  All necessary corporate action has been taken to
      authorize Operator to sign and deliver, and perform, the transactions
      contemplated by this Agreement and the Assignments.  This
      Agreement has been duly executed and delivered by Operator and constitutes
      a legal, valid and binding obligation of Operator, enforceable against
      Operator in accordance with its terms, subject to the legal doctrines of
      bankruptcy, insolvency or similar legal doctrines affecting creditors’
      rights generally and general principles of equity.  The
      Assignments, once executed by Operator and the Gulf, will have been duly
      executed and delivered by Operator and constitute legal, valid and binding
      obligations of Operator, enforceable against Operator in accordance with
      their terms, subject to the legal doctrines of bankruptcy, insolvency or
      similar legal doctrines affecting creditors’ rights generally and general
      principles of equity.

              

      

       

      
        
          
          

        

        
          -15-

          
            

          

        

        
          
          

        

      

      
        	
                 
      

              	
                (i)

              	
                No
      event has occurred which constitutes, or which with the giving of notice
      and/or the lapse of time and/or a relevant determination would constitute,
      a contravention of, or default under, any agreement (including, for the
      avoidance of doubt, the Block XXIV License Contract or TEA Agreement) or
      instrument by which Operator or any of its assets is bound or affected,
      being a contravention or default which would have a material adverse
      effect on the business, assets, or condition of Operator and which would
      materially and adversely affect its ability to observe or perform its
      obligations under this Agreement and the transactions contemplated
      hereby.

              

      

       

      
        	
                 
      

              	
                (j)

              	
                No
      litigation, arbitration or administrative proceeding or claim which might
      by itself or together with any other such proceedings or claims materially
      and adversely affect Operator’s ability to observe or perform its
      obligations under this Agreement and the agreements contemplated hereby,
      is presently in progress or pending or, to the best of the knowledge,
      information and belief of Operator, threatened against Operator or any
      Affiliate of Operator.

              

      

       

      
        	
                 
      

              	
                6.3

              	
                Each Party
      Acknowledges and Agrees
that:

              

      

       

      
        	
                 
      

              	
                (a)

              	
                The
      representations and warranties contained in this Agreement are the only
      representations or warranties of any kind given by or on behalf of the
      other Party and on which it may rely in entering into this
      Agreement;

              

      

       

      
        	
                 
      

              	
                (b)

              	
                Other
      than the representations and warranties given in this Agreement, no
      statement, promise or forecast made by or on behalf of any other Party or
      any other person may form the basis of, or be pleaded in connection with,
      any claim by such Party under or in connection with this Agreement;
      and

              

      

       

      
        	
                 
      

              	
                (c)

              	
                The
      Parties’ respective representations and warranties set out in this Clause
      6 shall be also true and accurate at the date the Assignments are
      effective pursuant to Clause 2.3.

              

      

       

      
        	
                 
      

              	
                6.4

              	
                Disclaimer of Other
      Representations and Warranties.  Except for the
      representations and warranties provided in this Clause 6, Operator and
      Gulf make no, and disclaim any, warranty or representation of any kind,
      either express, implied, statutory, or otherwise, including, without
      limitation, the accuracy or completeness of any data, reports, records,
      projections, information, or materials now, heretofore furnished or made
      available to Gulf in connection with this
  Agreement.

              

      

       

      
        
          
          

        

        
          -16-

          
            

          

        

        
          
          

        

      

      
        	
                7.

              	
                Term and
      Termination.

              

      

       

      
        	
                 
      

              	
                7.1

              	
                This
      Agreement shall become effective on the Execution Date and shall remain in
      full force until termination of this Agreement pursuant to this Clause
      7.

              

      

       

      
        	
                 
      

              	
                7.2

              	
                This
      Agreement shall terminate at the earlier to occur of (i) the date upon
      which the Parties agree in writing to terminate this Agreement or (ii) the
      date upon which the Block XXIV License Contract, the TEA Agreement and all
      Licenses and License Contracts issued pursuant to the TEA Agreement have
      been terminated, provided however the terms of Clause 3.1 shall survive
      termination of this Agreement.

              

      

       

      
        	
                 
      

              	
                7.3

              	
                If
      any of the Required Approvals have not been obtained by the Cut-off Date,
      then the Parties shall meet and discuss, within thirty (30) days after the
      Cut-off Date (such thirty (30) day period being the “Restructuring
      Period”), possible amendments to the transaction envisaged by this
      Agreement which would facilitate, or avoid the need for, obtaining such
      Required Approvals.  If, during the Restructuring Period, the
      Parties are unable agree to such amendments, then provided that no Default
      exists, Gulf shall elect one of the following by notice in writing to
      Operator within thirty (30) days after the end of the Restructuring
      Period: (a) terminate this Agreement, or (b) convert the Gulf
      Participating Interests into an equivalent economic interest in Operator
      as provided in Clause 7.4.  If, during the Restructuring Period,
      the Parties are unable to agree to such amendments, and a Default exists,
      Operator shall elect one of the following by notice in writing to Gulf
      within thirty (30) days after the end of the Restructuring Period: (a)
      terminate this Agreement, or (b) convert the Gulf Participating Interests
      into an equivalent economic interest in Operator as provided in Clause
      7.4.  Failure of the applicable Party to make an election under
      this Clause 7.3 within thirty (30) days following the end of the
      Restructuring Period shall constitute an election to terminate this
      Agreement.  In the event that this Agreement is terminated
      pursuant to this Clause 7.3,

              

      

       

      
        	
                 
      

              	
                (i)

              	
                Operator
      shall return to Gulf any amounts paid to date under the terms of Clause 2
      herein without interest; and

              

      

       

      
        	
                 
      

              	
                (ii)

              	
                Both
      Parties shall terminate the JOAs and any other transaction agreements
      specified herein.

              

      

       

      
        	
                 
      

              	
                7.4

              	
                Equivalent Economic
      Interest.  In the event that an election is made under
      Clause 7.3 to convert the Gulf Participating Interests into an equivalent
      economic interest in Operator, the Gulf Participating Interests shall be
      converted into a preferred equity interest in Operator having distribution
      rights equivalent to Gulf’s rights under Clause 4.1 and common equity
      interests in Operator having a value equivalent to the balance of Gulf’s
      rights under this Agreement, the Gulf Participating Interests and the
      JOAs.  In determining the preferred and common equity interests
      in Operator that Gulf would be entitled to under the terms of this Clause
      7.4, all relevant facts and circumstances will be taken into account,
      including without limitation, differences in value between the direct
      interests in the Block XXIV License Contract and the TEA provided under
      this Agreement and the indirect interest represented by an interest in
      Operator.  In the event that the Parties are unable to agree
      upon the equivalent economic interests in Operator into which the Gulf
      Participating Interests would be converted, then at the request of either
      Party such equivalent economic interests shall be determined pursuant to
      Clause 9.2.  When such equivalent economic interest have been
      finally determined pursuant to Clause 9.2 or agreed upon by the Parties,
      Operator and Gulf shall execute and deliver, and Operator shall cause its
      equity owners to execute and deliver, such instruments as are necessary or
      appropriate to convert the Gulf Participating Interests into such
      equivalent economic interests in Operator, free and clear of all
      Encumbrances.  Prior to the time the Required Approvals have
      been obtained, Operator shall not create or issue any preferred equity
      interests in itself, will not incur any indebtedness and will fund all of
      its operations with capital contributions from its equity
      owners.

              

      

       

      
        
          
          

        

        
          -17-

          
            

          

        

        
          
          

        

      

      
        	
                8.

              	
                Further Assistance and
      Business Ethics.  Each of the Parties shall perform such
      further acts and execute and deliver such further documents as shall be
      reasonably required to perform its obligations pursuant to the terms of
      this Agreement; provided, however, each of the Parties represents to the
      other and agrees:

              

      

       

      
        	
                 
      

              	
                8.1

              	
                No Improper
      Payments.  It has not made nor shall it make in
      connection with the performance of this Agreement any payments, loans or
      gifts or promises or offers of payments, loans or gifts of any money or
      anything of value directly or indirectly to or for the use or benefit of
      any official or employee of any government or the agency or
      instrumentality of any government or to any political party or official or
      candidate thereof or to any other person if such Party knows or has reason
      to suspect that any part of such payment, loan or gift will be directly or
      indirectly given or paid to any such governmental official or employee or
      political party or candidate or official thereof or to any other person or
      entity the making of which would violate the laws or policies of the
      Republic of Peru or the United
States.

              

      

       

      
        	
                 
      

              	
                8.2

              	
                Compliance
      Information.  It shall answer, in reasonable detail, any
      written or oral questionnaire from the other Party to the extent such
      questionnaire pertains to compliance with its representations provided in
      Clause 8.1.

              

      

       

      
        	
                9.

              	
                Governing Law and
      Arbitration.

              

      

       

      
        	
                 
      

              	
                9.1

              	
                Governing
      Law.  This Agreement shall be governed by and interpreted
      in accordance with the laws of the State of Texas, United States except to
      the extent the laws of any other jurisdiction are mandatorily
      applicable.

              

      

       

      
        	
                 
      

              	
                9.2

              	
                Arbitration.  Any
      dispute arising out of this Agreement which any Party determines in its
      sole discretion cannot be settled by mutual agreement shall be settled by
      arbitration in accordance with the Rules of the International Chamber of
      Commerce (“ICC”).  The place of arbitration shall be Houston,
      Texas.  The number of arbitrators shall be three (3), one (1)
      appointed by each of the Parties and the third appointed by mutual
      agreement of the Parties.  The award rendered by the arbitration
      tribunal shall be final and binding upon the Parties
      concerned.  The proceedings shall be in English and the award
      shall be final, binding and not subject to appeal.  Judgment
      upon the award rendered may be entered in any court having jurisdiction
      thereof.

              

      

       

      
        
          
          

        

        
          -18-

          
            

          

        

        
          
          

        

      

      
        	
                 
      

              	
                9.3

              	
                Specific
      Performance.    Each Party acknowledges and
      agrees that the other Parties would be damaged irreparably, and in a
      manner for which monetary damages would not be an adequate remedy, in the
      event any of the provisions of this Agreement are not performed in
      accordance with its specific terms or otherwise are
      breached.  Accordingly, each Party agrees that the other Parties
      shall be entitled to enforce specifically this Agreement and the terms and
      provisions hereof in any proceeding instituted pursuant to Clause 9.2, in
      addition to any other remedy to which they may be entitled, at Law or in
      equity.

              

      

       

      
        	
                10.

              	
                Waiver of Sovereign
      Immunity.  Any Party that now or hereafter has a right to
      claim sovereign immunity for itself or any of its assets hereby waives any
      such immunity to the fullest extent permitted by the laws of any
      applicable jurisdiction.  This waiver includes immunity from (i)
      any expert determination, mediation, or arbitration proceeding commenced
      pursuant to this Agreement; (ii) any judicial, administrative or other
      proceedings to aid the expert determination, mediation, or arbitration
      commenced pursuant to this Agreement; and (iii) any effort to confirm,
      enforce, or execute any decision, settlement, award, judgment, service of
      process, execution order or attachment (including pre-judgment attachment)
      that results from an expert determination, mediation, arbitration or any
      judicial or administrative proceedings commenced pursuant to this
      Agreement.  Each Party acknowledges that its rights and
      obligations hereunder are of a commercial and not a governmental
      nature.

              

      

       

      
        	
                11.

              	
                Notices.  Any
      notice required or permitted to be given under this Agreement shall be
      given in writing in the English language and shall be deemed to have been
      sufficiently given when received whether delivered personally, mailed or
      couriered (postage prepaid), or sent by fax, with written confirmation of
      complete transmission, in accordance with the address information
      applicable to the receiving Party as set forth below or such other address
      or the attention of such other person as such Party may have designated by
      notice given in accordance with this Clause
11.

              

      

       

      Upland
Oil and Gas LLC Sucursal del Peru

      Attention:  Jorge
Rivera c/o Thomas E. Kelly

      505 N.
Big Spring, Suite 101

      Midland,
TX 79701

      Tel: 0 +
51 1 4346270, 4346271, 4346272, 4346273

      Fax: 0 +
51 1 4366319

      

      
        
          
          

        

        
          -19-

          
            

          

        

        
          
          

        

      

      With copy
to (which shall not constitute notice):

      

      Davis,
Gerald & Cremer, PC

      Attention:  David
H. Smith

      400 W.
Illinois, Suite 1400

      Midland,
TX 79701

      Tel: 432-687-0011

      Fax: 432-687-1735

      

                 and

      

      BARRIOS
FUENTES GALLO

      Attention:  Germán
Barrios

      Abogados

      Arias
Araguez 250, Miraflores, Lima 18, Perú

      Tel: (511)
610-6100

      Fax: (511)
445-1015 / 242-2403

      

      Gulf
United Energy del Peru Ltd.

      Attention:
Heath C. Trisdale

      Address:
3 Riverway, Suite 1800

      Houston,
TX  77056

      Tel: (713)
209-2917

      Fax: (713)
209-2927

      

      
        	
                12.   
      Public
      Announcements.

              

      

       

      
        	
                 
      

              	
                12.1

              	
                Consent of
      Parties.  No Party shall without written consent of the
      other Party, which consent shall not be unreasonably withheld, no Party
      will issue, or permit any of its Affiliates to issue, any press release or
      otherwise make any public statement relating to the subject matter of this
      Agreement unless such release or statement is deemed in good faith by the
      disclosing Party to be required by any law, rule or regulation of any
      Governmental Entity or the rules and regulations of a stock exchange on
      which the shares of such Party or any of its Affiliates are
      listed.   In each case to which such exception applies,
      prior to making such press release or public statement, the releasing
      Party will provide a copy of such press release or public statement to the
      other Party.  To the extent feasible under the circumstances,
      the Parties will coordinate with each other on the issuance of press
      releases and public statements regarding the subject matter of this
      Agreement.

              

      

       

      
        	
                 
      

              	
                12.2

              	
                Consent of
      PeruPetro.  Without limiting the generality of what is
      stated in Clause 12.1, any consent requested by Gulf from Operator
      pursuant to Clause 12.1 shall not be considered unreasonably withheld so
      long as Operator is endeavoring to obtain the consent of PeruPetro S.A.
      for the making of any such public announcement, which consent Operator
      determines in its good faith judgment is reasonably required or
      desirable.

              

      

       

      
        
          
          

        

        
          -20-

          
            

          

        

        
          
          

        

      

      
        	
                 
      

              	
                12.3

              	
                Entire
      Agreement.  This Agreement represents the entire
      agreement of the Parties and supersedes all prior written or oral
      agreements.  The terms are contractual and not mere
      recitals.  In entering into this Agreement, each Party
      stipulates, warrants, and represents that it has relied on the advice of
      its own attorneys and financial advisors concerning the legal and tax
      consequences of the Agreement; that its, his, or her own attorneys have
      completely read and explained to it the terms of the Agreement; that each
      is a sophisticated business person with experience negotiating these types
      of transactions; that no special relationship of influence or trust
      existed among the Parties prior to the entry into this Agreement that
      caused it to enter this Agreement; that each fully understands and
      voluntarily accepts the terms of the Agreement without any duress or undue
      persuasion put upon it by the other or any other person, specifically
      including, but not limited to, counsel or accountants for either Party;
      and that no representations, promises, or statements outside the four
      comers of this Agreement by the opposite Party, nor any agent, employee,
      attorney, accountant, or other representative of the opposite Party has
      influenced it into entering this Agreement.  Each Party has had
      access to counsel and an opportunity to read, review, and revise this
      Agreement.  This Agreement is the result of the joint efforts of
      the Parties and each of the same’s counsel.  Therefore, the
      Parties agree that this Agreement, and any given provision of it, should
      not be construed against either Party.  Each of the Parties
      hereto recognize and stipulate that this provision is binding as a matter
      of law and fact and shall preclude said Party from asserting that it was
      wrongfully induced to enter into this Agreement by any representation,
      promise, or agreement, or statement of a past or existing fact, which is
      not found within the four corners of this
  Agreement.

              

      

       

      
        	
                13.

              	
                Headings.  The
      headings in this Agreement are for convenient reference only and shall not
      be used in the interpretation of this
Agreement.

              

      

       

      
        	
                14.

              	
                No Brokers or
      Finders.  Neither Party, nor any of their respective
      Affiliates, has employed or retained any broker, agent or finder in
      connection with this Agreement, or incurred any liability for, paid or
      agreed to pay any brokerage fee, finder’s fee, commission or similar
      payment to any person or entity on account of this Agreement or
      transactions contemplated hereby.

              

      

       

      
        	
                15.

              	
                Amendment of this
      Agreement.  This Agreement may be amended only by written
      agreement signed by the Parties.

              

      

       

      
        	
                16.

              	
                Each Party’s
      Expenses.  Each Party shall bear its own expenses with
      respect to the Assignments contemplated under this
    Agreement.

              

      

       

      
        	
                17.

              	
                Each Party’s
      Taxes.  Each Party shall be responsible for any taxes
      assessed against it as a result of the
  Assignments.

              

      

       

      
        	
                18.

              	
                Conflict.  To
      the extent any provision in this Agreement conflicts with any provision of
      the License Agreement or the TEA Agreement, this Agreement
      controls.

              

      

       

      IN
WITNESS WHEREOF, the Parties have caused this Agreement to be signed by their
respective, duly authorized representatives.

       

      
        
          	
                  Upland
      Oil and Gas LLC

                	 
      
	 	 
	
                  Upland
      Oil and Gas LLC Sucursal de Peru

                	
                  Gulf
      United Energy del Peru Ltd.

                
	 
      	 
      
	 
      	 
      
	
                  By:

                	
                  By:

                
	 
      	 
      
	
                  Name:

                	
                  Name:

                
	 
      	 
      
	
                  Title:

                	
                  Title:

                
	 
      	 
      
	
                  Date:

                	
                  Date:

                

        

       

      

       

      
        
          
          

        

        
          -21-ex10-3.htm

    Exhibit
10.3

     

    DEED OF
ASSIGNMENT

     

    This
Assignment is made and entered into as of the March 12, 2010, between Upland Oil
and Gas LLC Sucursal del Peru (“Upland”), as assignor, and Gulf United Energy
del Peru Ltd. (“Gulf”), as assignee.

     

    WHEREAS,
on March 21, 2007, PeruPetro S.A. and Upland entered into Contract for
Exploration and Exploitation of Hydrocarbons Block XXIV) (“Block XXIV License
Contract”);

     

    WHEREAS,
capitalized terms used, but not defined, in this Assignment have the meanings
ascribed to them in the Block XXIV License Contract;

     

    WHEREAS,
Upland owns not less than eighty percent (80%) of the rights and obligations of
the Contractor under the Block XXIV License Contract, subject only to a
proportionate part of the overriding royalty interest of 1% of gross revenues
from Block XXIV assigned to HTX Capital, LLC pursuant to that certain Override
Agreement by and between Upland and HTX Capital, LLC dated the 20th day of January, 2010
(“License Override”) and a proportionate part of the 1% net production interest
in Block XXIV assigned to Adam Pollack pursuant to that certain Agreement dated
November 23, 2009 by and between Adam Pollack and Jorge Rivera (the “Pollack Net
Production Interest”);

     

    WHERAS,
the Block XXIV License Contract is subject to the Operating Agreement dated July
23, 2007 between Upland, Endevco Eureka Del Peru S.A.C., and East Cameron
Partners Del Peru S.A.C (the “JOA”).

     

    WHEREAS,
Upland desires to assign to Gulf, and Gulf desires to accept, (i) an undivided
thirty-five percent (35%) of the rights and obligations of the Contractor under
the Block XXIV License Contract, subject to a proportionate part of the License
Override and (ii) the rights and obligations under the JOA attributable to said
thirty-five percent (35%) interest.

     

    NOW
THEREFORE, in consideration of the mutual covenants herein:

     

    
      	 
      	
              1.

            	
              Upland
      hereby assigns to Gulf, and Gulf hereby accepts from Upland, (i) an
      undivided thirty-five percent (35%) interest of the rights and obligations
      of the Contractor under the Block XXIV License Contract subject to a
      proportionate part of the License Override and a proportionate part of the
      Pollack Net Production Interest and (ii) the rights and obligations under
      the JOA attributable to said thirty-five percent (35%) interest (said
      interests are hereinafter referred to as the “Assigned
      Interest”).

               

            
	 
      	
              2.

            	
              Gulf
      hereby assumes all obligations with respect to the Assigned Interest
      arising after the date of this Assignment.

               

            

    

    
      	 
      	
              3.

            	
              Upland
      will continue being the Operator under the Block XXIV License
      Contract.

               

            
	 
      	
              4.

            	
              This
      Assignment shall be effective as from the date first set forth
      above.

            

    

    

    
      	 
      	
              5.

            	
              This
      Assignment shall be governed by and interpreted in accordance with the
      laws of the State of Texas, United States of America except to the extent
      the laws of any other jurisdiction are mandatorily
    applicable.

            

    

    

     

    
      
        
        

      

      
        -1-

        
          

        

      

      
        
        

      

    

    TO HAVE
AND TO HOLD the Assigned Interest together with all rights, hereditaments and
appurtenances thereto belonging, unto Gulf, its successors and assigns forever,
and Upland does hereby bind itself and its successors to warrant and forever
defend the Assigned Interest unto Gulf, its successors and assigns against every
person whomsoever lawfully claiming or to claim the same.

     

    This
Assignment is subject to that certain Participation Agreement by and between
Upland and Gulf dated the 12th day of March, 2010 (the
“Agreement”).  Any assignment of this Assignment or the Assigned
Interests transferred herein, in whole or in part (and any subsequent
assignments), will be subject to the terms and conditions of the Agreement, the
License Agreement, and the JOA, specifically including, without limitation, the
default provisions set forth in Clause 2.8 of the Agreement.

     

    [Signature
page follows.]

     

    

     

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    IN
WITNESS WHEREOF, Upland and Gulf have caused this Assignment to be signed by
their respective, duly authorized representatives as of the date first above
written.

     

    
      	
              Upland
      Oil and Gas LLC

            	 
      
	 
      	 
      
	
              Upland
      Oil and Gas LLC Sucursal de Peru

            	
              Gulf
      United Energy del Peru Ltd.

            
	 
      	 
      
	
              By:

            	
              By:

            
	 
      	 
      
	
              Name:

            	
              Name:

            
	 
      	 
      
	
              Title:

            	
              Title:

            
	 
      	 
      
	
              Date:

            	
              Date:

            

    

    

     

     

    
      
        
        

      

      
        -3-

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