Document:

exhibit_10-23.htm

    Exhibit
10.23

      
 

      Portions
of this Exhibit 10.23 have been omitted based upon a request for confidential
treatment. This Exhibit 10.23, including the non-public information, has been
filed separately with the Securities and Exchange Commission “*” designates
portions of this document that have been redacted pursuant to the request for
confidential treatment filed with the Securities and Exchange
Commission.

      TITANIUM SPONGE SUPPLY
AGREEMENT

      

      This
Agreement is entered into as of the 14th day of
November 2007 by and between Toho Titanium Ltd. Co., a company organized and
existing under the laws of Japan, having its principal place of business at
3-3-5 Chigasaki, Chigasaki-City, Kanagawa-Pref. 253-8510 Japan (hereinafter
called “Toho”) and Titanium Metals Corporation, a company organized and existing
under the laws of the State of Delaware, having its principal place of business
at Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240
(hereinafter called “TIMET”).  Toho and TIMET are hereinafter
collectively called the “Parties” and individually a “Party.”

      

      WITNESSETH:

      

      WHEREAS,
TIMET requires a stable supply of Commodity (as hereinafter defined) for use at
its facilities,

      

      WHEREAS,
Toho is desirous of providing TIMET with a stable supply of Commodity throughout
the term hereof.

      

      WHEREAS,
TIMET is desirous of obtaining an assurance by Toho that TIMET will have a
stable source of supply of Commodity, and Toho is willing to provide such
assurance.

      

      NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained, the Parties agree as follows:

      

      ARTICLE 1.
DEFINITIONS

      

      
        	
                1.1

              	
                As
      used in this Agreement, the following terms shall have the meanings as
      specified below:

              

      

      

      “Business
Day” shall mean any day other than Saturday, Sunday or national holiday in the
United States of America or Japan.

      

      “Commodity”
shall mean Structural Grade (as defined below) titanium sponge meeting the
Specifications (as defined below) set forth on Appendix A.  Upon
TIMET’s election as set forth in Article 4.3, the term “Commodity” also shall
include Standard Disc Quality (as defined below) titanium sponge meeting the
Specifications set forth on Appendix A.

      

      “Commodity
Mix” shall have the meaning set forth in Article 4.4.

      

      “Consignment
Agreement” means the Titanium Sponge Consignment Agreement dated 14th November 2007 by and
between Toho and TIMET and attached hereto as Appendix B.

      

      “Consignment
Place” shall have the meaning set forth in Clause 2.1 of the Consignment
Agreement.

      

      “Contract
Year” means each year from 1st January
to 31st
December during the term of this Agreement, commencing with the year of 1st January
to 31st
December 2010.

      

      “Cost
Adjustment” shall have the meaning set forth in Article 5.4(a).

      

      “Currency
Adjustment” shall have the meaning set forth in Article 5.5(a).

      

      “Existing
Agreement” shall mean that certain Titanium Sponge Supply Agreement and related
Titanium Sponge Consignment Agreement by and between TIMET UK and Mitsui EUROPE,
dated 23 October 2007.

      

      “Firm
Annual Quantity” shall have the meaning set forth in Articles 4.1 and
4.2.

      

      “Firm
Price” shall have the meaning set forth in Article 5.1.

      

      “Force
Majeure” shall have the meaning set forth in Article 15.

      

      
        	
                 
      

              	
                “Mitsui”
      means Mitsui & Co. Ltd or its
affiliates.

              

      

      

      
        	
                 
      

              	
                “Mitsui
      EUROPE” means Mitsui & Co. Europe
PLC.

              

      

      

      “MT”
shall have the meaning set forth in Article 4.1.

      

      “Price
Disagreement” shall have the meaning set forth in Article 6.1.

       

      
 

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      “Specification”
means the latest version of the specifications for differing purities of
Commodity (Structural Grade and Standard Disc Quality), which are attached
hereto as Appendix A.

      

      “Standard
Disc Quality” shall mean titanium sponge produced by Toho meeting Specification
RMS 71.4.

      

      “Structural
Grade” shall mean titanium sponge produced by Toho meeting Specification RMS
72.4.

      

      “Take or
Pay Payment” shall have the meaning set forth in Article 7.2.

      

      “TIMET
Final Counteroffer” shall have the meaning set forth in Article
6.2(b)(ii).

      

      “TIMET
Final Offer” shall have the meaning set forth in Article 6.3(a).

      

      “Toho
Facility” means any titanium sponge production facility of Toho located in
Japan.

      

      “Toho
Final Counteroffer” shall have the meaning set forth in Article
6.3(b)(ii).

      

      “Toho
Final Offer” shall have the meaning set forth in Article 6.2(a).

      

      ARTICLE 2.
DELIVERY

      

      Toho
agrees to deliver to TIMET, and TIMET agrees to take delivery from Toho of
Commodity in the amount of the Firm Annual Quantity at the Firm Price pursuant
to the provisions of the Consignment Agreement.  In case of a
discrepancy between this Agreement and the Consignment Agreement, the former
shall prevail.

      

      ARTICLE 3. TIMET ANNUAL
CONFIRMATION

      

      
        	
                3.1

              	
                The
      Firm Price of the Commodity under this Agreement during each Contract Year
      shall be confirmed by TIMET and Toho in writing (hereinafter called the
      “Annual Confirmation”), which shall be made annually within thirty (30)
      days after the Parties have agreed the Firm Price of Commodity for the
      next Contract Year.  The form of the Annual Confirmation is
      attached hereto as Appendix C.  In the event of TIMET’s election
      under Article 4.3, the Annual Confirmation also will set forth the
      Commodity Mix (as defined below).

              

      

      

      
        	
                3.2

              	
                The
      Annual Confirmation shall stipulate the monthly delivery schedule of
      Commodity in the applicable Contract
Year.

              

      

      

      
        	
                3.3

              	
                Each
      Annual Confirmation shall be deemed to incorporate the terms and
      conditions set forth in this Agreement and the Consignment
      Agreement.  If there is any conflict or difference in
      interpretation between this Agreement and any Annual Confirmation, the
      terms and conditions of this Agreement shall supersede those of said
      Annual Confirmation, and any such conflicting or different terms or
      conditions shall be deemed rejected by the other Party, unless such
      conflicting or different terms or conditions are incorporated into the
      relevant Annual Confirmation by writing or typing conspicuously on the
      Annual Confirmation and identifying the specific changes to this Agreement
      as an amendment and signed by the duly authorized representatives of TIMET
      and Toho.

              

      

       

      
        	
                ARTICLE 4.
      QUANTITY

              	
                 

              

      

      

      
        	
                4.1

              	
                For
      Contract Year 2010, the Firm Annual Quantity shall be * metric tons (“MT”)
      of Commodity, and for Contract Year 2011, the Firm Annual Quantity shall
      be * MT of Commodity.

              

      

      

      
        	
                4.2

              	
                For
      Contract Years 2012 to 2024, the Firm Annual Quantity shall be * MT of
      Commodity.

              

      

      

      
        	
                4.3

              	
                Upon
      eighteen (18) months advance written notice to Toho commencing with the
      supply of the Commodity for Contract Year 2014 and continuing for the
      remaining term of the Agreement, TIMET may elect to convert up to * MT per
      year of Structural Grade Commodity to Standard Disc Quality Commodity;
      provided that TIMET provides the reasonable and necessary assistance to
      Toho to qualify the Standard Disc Quality Commodity for rotor grade
      approval.  Toho agrees to cooperate fully with TIMET to qualify
      the Standard Disc Quality Commodity for rotor grade
      approval.  In addition, upon eighteen (18) months advance
      written notice to Toho commencing with the supply of Commodity for
      Contract Year 2014 and continuing for the remaining term of the Agreement,
      TIMET may elect to convert in excess of * MT per year of Structural Grade
      Commodity to Standard Disc Quality Commodity.  In this event the
      Parties will meet to discuss and agree upon the excess volume of titanium
      sponge that can be so converted.  In addition, upon eighteen
      (18) months advance written notice to Toho, TIMET may elect to convert
      Structural Grade Commodity to Standard Disc Quality Commodity for supply
      in a Contract Year prior to Contract Year 2014, and in this event the
      Parties will meet to discuss and agree upon the volume of titanium sponge
      that can be so converted.

              

      

      

      
        	
                4.4

              	
                In
      the event of TIMET’s election to convert Commodity as set forth in Article
      4.3, TIMET will provide notice to Toho on or prior to June 30th
      of the year that precedes the Contract Year in which the Commodity shall
      be supplied (e.g. June 30th
      2015 for Contract Year 2016) setting forth the quantity of Structural
      Grade Commodity and Standard Disc Quality Commodity (up to a maximum of *
      MT of Standard Disc Quality Commodity or such higher amount to which the
      Parties agree) to be supplied in the upcoming Contract Year (hereinafter
      the “Commodity Mix”).

              

      

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      
 

      
        	
                ARTICLE 5.
      PRICE

              	
                 

              

      

      

      
        	
                5.1

              	
                On
      or prior to June 30th
      of the year that precedes each Contract Year, Toho will provide to TIMET
      the price for the Commodity for the upcoming Contract Year.  (In
      the event that there is a Cost Adjustment (as defined below) or a Currency
      Adjustment (as defined below) applicable to the upcoming Contract Year,
      Toho will provide to TIMET the price for the Commodity by July 31st
      of the year that precedes such upcoming Contract year.) The Parties will
      engage in negotiation within the applicable price ranges detailed in
      Article 5.3, and will take into consideration the market situation of
      titanium sponge in their final agreement on the price of Commodity to be
      reached by September 30th
      of the year that precedes such Contract Year (the “Firm
      Price”).  If no agreement is reached by September 30th,
      the terms of Article 6 shall apply.

              

      

      

      
        	
                5.2

              	
                The
      Firm Price shall be set out in each Annual Confirmation issued pursuant to
      Article 3.1. All prices are stipulated in U.S. Dollars per kilogram, DDU
      (notwithstanding any provisions of the Consignment Agreement, as defined
      in INCOTERMS 2000) Consignment Place basis, and the Firm Price shall be
      held final and binding on both Parties for the applicable Contract
      Year.

              

      

      

      
        	
                5.3

              	
                The
      permissible price ranges for the minimum and maximum Firm Price shall be
      as set forth in the table below, as adjusted pursuant to Articles 5.4 and
      5.5 below. The price range below, adjusted as applicable, for the
      Commodity shall be applicable for each Contract Year during the term of
      this Agreement.

              

      

      

      
        	
                        Specification

              	
                Minimum
      Price

              	
                Maximum
      Price

              
	
                        Structural
      Grade

              	
                *

              	
                *

              
	
                        Standard Disc
      Quality

              	
                *

              	
                *

              

      

      

      
        	
                5.4

              	
                 

              	
                (a)

              	
                Beginning
      with Contract Year 2015 and ending with Contract Year 2019, Toho will have
      a one-time option to elect an upward adjustment in the minimum and maximum
      values of the price ranges set forth in Article 5.3 (the “Cost
      Adjustment”) if Toho’s aggregate costs for certain defined raw materials
      and production costs (i.e. titanium feedstock, energy and labor) increase
      by * or more from the defined base levels set forth in Article
      5.4(b).  If elected, the Cost Adjustment will be calculated
      according to the formula described in Article 5.4(b).  Toho must
      send to TIMET written notice of Toho’s election to make the Cost
      Adjustment by July 15 of the Contract Year preceding the Contract Year to
      which the Cost Adjustment would
apply.

              

      

      

      
        	
                 
      

              	
                (b)

              	
                The
      formula to compute the Cost Adjustment to be applied to the minimum and
      maximum values for the price ranges set forth in Article 5.3 will be as
      follows:

              

      

      

      *

      *

      *

      

      Where:

      

      *

      “Price
Change” is the amount of the adjustment (upward only for Toho’s one-time option,
and upward or downward for the 2019 mandatory calculation) expressed in USD to
the minimum and maximum values of the price range in effect prior to the Cost
Adjustment.

      

      “BM-F” is
the Benchmark Index for Feedstock, which is the average actual cost per ton of
all rutile feedstock purchased and received by Toho (as delivered but excluding
inland freight and consumption tax) during the 12 month period ending March 31,
2008.  Based on the “actual purchases spreadsheet” provided to TIMET
by Toho on October 24, 2007, this value is fixed at *per ton.

      

      “BM-E” is
the Benchmark Index for Energy, which is based on the Bank of Japan Domestic
Corporate Goods Price Index (page 71) for electricity expressed as a simple
average of the index values for each of the 12 months ended March 31, 2006
(where 2000 average = 100).  The BM-E is fixed at *.

      

      “BM-L” is
the Benchmark Index for Labor, which is based on the Ministry of Internal
Affairs and Communications Statistics Bureau Consumer Price Index expressed as a
simple average of the index values for each of the 12 months ended March 31,
2006 (where 2005 average = 100). The BM-L is fixed at *.

      

      “RI-F” is
the Reference Index for Feedstock, which is based on the estimated average cost
per ton of all rutile feedstock purchased and received by Toho (as delivered but
excluding inland freight and consumption tax) during the 12-month period ending
March 31 of the Contract Year to which the Cost Adjustment would apply (e.g.,
the 12 months ending March 31, 2015 for the Cost Adjustment to be applied to the
2015 Contract Year) (hereinafter referred to as the “RI-F Measurement
Period”).  Because the RI-F is based on the estimated average cost per
ton of all purchased rutile feedstock, Toho will make the RI-F data to TIMET by
June 30 preceding any Contract Year to which the Cost Adjustment would
apply.  If it is subsequently determined that there is a significant
difference between the estimated average cost per ton of all rutile feedstock
and the actual average cost per ton of all rutile feedstock, the Cost Adjustment
shall be revised based on the actual average cost per ton provided that Toho
notifies TIMET in writing of such significant difference within thirty (30) days
after Toho has received the actual average cost per ton data.

      

      “RI-E” is
the Reference Index for Energy, which is based on the Bank of Japan Domestic
Corporate Goods Price Index (page 71) for electricity expressed as a simple
average of the index values for each of the 12 months ended March 31 preceding
the Contract Year for which the Cost Adjustment would apply.

      

      “RI-L” is
the Reference Index for Labor, which is based on the Ministry of Internal
Affairs and Communications Statistics Bureau Consumer Price Index expressed as a
simple average of the index values for each of the 12 months ended March 31
preceding the Contract Year for which the Cost Adjustment would
apply.

      

      The *
value is derived from the sum of the * per kilogram (which is the agreed amount
subject to the Cost Adjustment) plus *, which represents the * cost increase to
be borne at all times by Toho without any Cost Adjustment.

      

      As an
illustration of the foregoing calculation, if the RI-F, the RI-E and the RI-L
were to increase by * (to *, *, respectively) (i) during the RI-F Measurement
period (which in this illustration would be March 31, 2017) with respect to the
RI-F and (ii) as of March 31, 2016 with respect to each of the RI-E and RI-L,
then the Cost Adjustment to the minimum and maximum values of the price range
for Contract Year 2017 would be an increase of *.

       

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      
 

      
        	
                 
      

              	
                (c)

              	
                In
      addition, in Contract Year 2019, a mandatory calculation will be made, and
      the minimum and maximum values of the price range for Contract Years 2020
      through 2024 will be increased or decreased to reflect changes in the
      aggregate costs for the defined raw materials and production costs (i.e.,
      titanium feedstock, energy and labor) from the BM-F, BM-E and
      BM-L.

              

      

      

      
        	
                 
      

              	
                (i)

              	
                If
      the aggregate costs reflected in (i) the RI-F during the RI-F Measurement
      Period and (ii) the RI-E and RI-L for the 12 months ending March 31, 2019
      do not exceed the aggregate costs of the BM-F, BM-E and BM-L by * or more,
      the price range for Contract Years 2020 through 2024 shall be the original
      price range of * to * (adjusted for currencies if
    applicable).

              

      

      

      
        	
                 
      

              	
                (ii)

              	
                If
      the aggregate costs reflected in (i) the RI-F during the RI-F Measurement
      Period and (ii) the RI-E and RI-L for the 12 months ending March 31, 2019
      exceed the aggregate costs of the BM-F, BM-E and BM-L by * or more, the
      minimum and maximum values of the price range for Contract Years 2020
      through 2024 will be adjusted using the formula set forth in Article
      5.4(b).  For purposes of clarity, in no event will the minimum
      and maximum values of the price range be decreased below the original
      price range of * to *.

              

      

      

      
        	
                 
      

              	
                (d)

              	
                With
      respect to the Benchmark and Reference Indices for feedstock (i.e., the
      BM-F and the RI-F), TIMET shall be permitted upon advance written notice
      to audit Toho’s books and records to verify the actual and estimated
      purchase costs incurred to purchase all rutile feedstock for all periods
      relevant to the Cost Adjustment
calculation.

              

      

      

      
        	
                 
      

              	
                (e)

              	
                The
      Parties shall complete the calculation of the Cost Adjustment to the price
      range by July 31 preceding the Contract Year to which the Cost Adjustment
      would apply.

              

      

      

      
        	
                5.5

              	
                 

              	
                (a)

              	
                Beginning
      in Contract Year 2015 and for every year thereafter for the remaining term
      of the Agreement, the minimum and maximum values of the price range will
      be adjusted as described below (hereinafter referred to as the “Currency
      Adjustment”) in the event that the exchange rate of Japanese Yen per one
      (1) United States Dollar, measured by the simple average of the daily
      midpoint exchange rates as published by the Bank of Tokyo Mitsubishi (the
      “Average Rate”) for the 12 month period from July 1 to June 30 of the
      previous year (the “Measurement Period”) increases or decreases by more
      than * Yen from the target exchange rate of * Yen per USD (the “Target
      Rate”.)  In any Contract Year in which a Cost Adjustment is
      made, such Cost Adjustment will be made prior to any Currency
      Adjustment.  If for any reason the Bank of Mitsubishi Tokyo
      ceases to publish the simple average of the daily midpoint exchange rates
      of the Japanese Yen, the Parties shall mutually agree to a substitute bank
      for such information.

              

      

      

      
        	
                 
      

              	
                (b)

              	
                If
      the Average Rate during the Measurement Period does not decrease below *
      Yen per USD or does not increase above * Yen per USD, there will be no
      Currency Adjustment to the price range for the corresponding Contract Year
      (the range from * Yen per USD to * Yen per USD is hereinafter referred to
      as the “Dead Zone”).

              

      

      

      
        	
                 
      

              	
                (c)

              	
                If
      the Average Rate during the Measurement Period falls outside of the Dead
      Zone, the price range will be adjusted according to the following
      formula:

              

      

      

      *

      

      Where:

      

      “Price
Change” is the increase or decrease expressed in USD to the minimum and maximum
values of the price range in effect prior to the adjustment excluding any
previous Currency Adjustments.

      

      “A” is
the minimum value of the price range in effect prior to such adjustment
excluding any previous Currency Adjustments.

      

      “B” is
the Target Rate of * Yen per one USD.

      

      “Average
Rate” is the new exchange rate during the Measurement Period as described under
Article 5.5(a).

      

      As an
illustration of this calculation, if the price range is * to * prior to
adjustment, and the Average Rate during the Measurement Period is * Yen per USD,
the minimum and maximum values of the price range after the Currency Adjustment
would be * to *.  As a further illustration, if the price range is *
to * prior to adjustment, and the Average Rate during the Measurement Period is
* Yen per USD, the minimum and maximum values of the price range after the
Currency Adjustment would be * to *.

      

      
        	
                 
      

              	
                (d)

              	
                The
      Parties shall complete the calculation of the Currency Adjustment to the
      price range by July 31 preceding the Contract Year to which the Currency
      Adjustment would apply.

              

      

      

      ARTICLE 6. PRICE
DISAGREEMENT

      

      
        	
                6.1

              	
                In
      the event that TIMET and Toho fail to agree on the Firm Price of the
      Commodity for any Contract Year pursuant to the provisions set forth in
      Article 5 on or before September 30th of the preceding Contract Year (the
      “Price Disagreement”), the terms and conditions of this Article 6 shall
      apply.

              

      

      

      
        	
                6.2

              	
                In
      case that the following Contract Year is an odd
  year:

              

      

      

      
        	
                 
      

              	
                (a)

              	
                Within
      10 Business Days after September 30th,
      Toho shall make an offer to TIMET in writing (hereinafter called “Toho’s
      Final Offer”), which will consist of the lowest prices (within the
      applicable price range) at which Toho is willing to sell the Firm Annual
      Quantity of the Commodity for such Contract
  Year.

              

      

      

      
        	
                 
      

              	
                (b)

              	
                Within
      10 Business Days after the receipt of Toho’s Final Offer, TIMET shall
      respond to Toho in writing as
follows:

              

      

      

      
        	
                 
      

              	
                (i)

              	
                by
      accepting Toho’s Final Offer; or

              

      

      

      
        	
                 
      

              	
                (ii)

              	
                by
      making its final offer price to Toho (hereinafter called “TIMET’s Final
      Counteroffer”), which will consist of the highest prices (within the
      applicable price range) at which TIMET is willing to purchase the Firm
      Annual Quantity of the Commodity for such Contract
  Year.

              

      

      

      
        	
                 
      

              	
                (c)

              	
                Unless
      the price of Commodity is mutually agreed by both Parties within 10
      Business Days after Toho’s receipt of TIMET’s Final Counteroffer, the
      price of Commodity stipulated in TIMET’s Final Counteroffer shall be
      deemed to be accepted by Toho and to be the Firm
  Price.

              

      

       

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      
 

      
        	
                6.3

              	
                In
      case that the following Contract Year is an even
  year:

              

      

      

      
        	
                 
      

              	
                (a)

              	
                Within
      10 Business Days after September 30th,
      TIMET shall make an offer to Toho in writing (hereinafter called “TIMET’s
      Final Offer”), which will consist of the highest prices (within the
      applicable price range) at which TIMET is willing to purchase the Firm
      Annual Quantity of the Commodity for such Contract
  Year.

              

      

      

      
        	
                 
      

              	
                (b)

              	
                Within
      10 Business Days after the receipt of TIMET’s Final Offer, Toho shall
      respond to TIMET in writing as
follows:

              

      

      

      
        	
                 
      

              	
                (i)

              	
                by
      accepting TIMET’s Final Offer; or

              

      

      

      
        	
                 
      

              	
                (ii)

              	
                by
      making its final offer price to TIMET (hereinafter called “Toho’s Final
      Counteroffer”), which will consist of the lowest prices (within the
      applicable price range) at which Toho is willing to sell the Firm Annual
      Quantity of the Commodity for such Contract
  Year.

              

      

      

      
        	
                 
      

              	
                (c)

              	
                Unless
      the price of Commodity is mutually agreed by both Parties within 10
      Business Days after TIMET’s receipt of Toho’s Final Counteroffer, the
      price of Commodity stipulated in Toho’s Final Counteroffer shall be deemed
      to be accepted by TIMET and to be the Firm
  Price.

              

      

      

      ARTICLE 7. TAKE OR
PAY

      

      
        	
                7.1

              	
                On
      or before January 31st
      following each Contract Year, Toho will calculate the amount of Commodity
      actually sold by Toho to TIMET hereunder for the immediately preceding
      Contract Year and shall advise TIMET in writing of the result of such
      calculation (hereinafter called the “Calculation Notice”).  If
      TIMET objects to such calculation, it shall advise Toho in writing of its
      objection within twenty-one (21) days after receipt of the Calculation
      Notice.  The date on which the Parties agree in writing as to
      such calculation shall be referred to as the “Calculation
      Date.”

              

      

      

      
        	
                7.2

              	
                If,
      for any reason other than Force Majeure (as defined in Article 15) or
      Toho’s failure to deliver the Commodity, TIMET fails to take the full
      amount of the Firm Annual Quantity, TIMET shall pay Toho USD * per
      kilogram (hereinafter referred to as the “Take or Pay Payment”) for the
      difference between the Firm Annual Quantity and the quantity of Commodity
      actually purchased by TIMET during the relevant Contract
      Year.  TIMET will pay to Toho the amount of the foregoing
      liquidated damages within thirty (30) days after the Calculation
      Date.  Beginning in Contract Year 2020 and for the remaining
      term of this Agreement, the “Take or Pay Payment” shall be reduced to USD
      * per kilogram.

              

      

      

      
        	
                7.3

              	
                The
      liquidated damages in the amount of the Take or Pay Payment stipulated in
      Article 7.2 shall settle all the damages arising from TIMET’s failure to
      take delivery of the full amount of the Firm Annual
    Quantity.

              

      

      

      ARTICLE 8.
PAYMENT

      

      Pursuant
to Clause 3.4 of the Consignment Agreement, the payment term for Commodity sold
and delivered to TIMET by Toho pursuant to the Consignment Agreement shall be
within * days after the end of the month during which the sale shall have taken
place pursuant to Clause 3.2 of the Consignment Agreement and shall be effected
by bank remittance to such bank account as designated by Toho.

      

      ARTICLE 9. TITLE AND
RISK

      

      Title to
and risk of loss of or damage to Commodity shall pass from Toho to TIMET,
pursuant to the provisions of the Consignment Agreement.

      

      
        	
                ARTICLE 10.
      SHIPMENT

              	
                 

              

      

      

      
        	
                10.1

              	
                The
      shipment of Commodity hereunder shall be made in accordance with the
      delivery schedule in the Annual Confirmation. Toho agrees to deliver the
      Commodity within fifteen (15) days before or after the delivery schedule
      in the Annual Confirmation.  If any scheduled shipment (other
      than due to Force Majeure) is delayed by more than sixty (60) days from
      the scheduled delivery date, and the Commodity held in Consignment is not
      sufficient to cover for such late delivery, TIMET may, at its sole
      election, provide written notice to Toho of TIMET’s election to (i) cancel
      the shipment and purchase an equivalent volume of Commodity from an
      alternate supplier, without liability to TIMET in which case Toho shall
      pay to TIMET within thirty (30) days after receipt of TIMET’s notice of
      election liquidated damages in the amount of the Take or Pay Payment
      applicable to such Contract Year per kilogram of Commodity of which
      shipment is cancelled as full settlement of all the damages arising from
      the delayed delivery; or (ii) take delivery of the delayed Commodity
      within forty-five (45) days of receipt of TIMET’s notice of election, and
      Toho agrees to supply the Commodity to TIMET on a first priority basis,
      with time of the essence in performance, until all TIMET’s orders have
      been brought current with the original delivery schedule.  The
      purchase from alternate suppliers shall be deemed a purchase under this
      Agreement for the purpose of determining TIMET’s annual purchase amount
      under Article 7.

              

      

      

      
        	
                10.2

              	
                TIMET
      shall use commercially reasonable efforts to schedule the shipments of
      Commodity to be evenly spread by calendar quarter (and also evenly spread
      in each calendar month) during each Contract Year.  The Parties
      understand, however, that actual quantities of Commodity to be purchased
      and taken delivery of by TIMET may vary upward or downward from
      quarter-to-quarter and month-to-month, depending on TIMET’s production
      requirements and availability of Commodity and on the production of
      Commodity at the Toho Facility.  For the avoidance of doubt, the
      actual quantity of Commodity to be delivered in each Contract Year shall
      in no way affect the obligation of TIMET or Toho with regard to delivery
      of the entire Firm Annual Quantity throughout the relevant Contract
      Year.

              

      

      

      
        	
                ARTICLE 11
      WARRANTY

              	
                 

              

      

      

      
        	
                11.1

              	
                Toho
      warrants to TIMET that Toho holds and will pass marketable title to the
      goods sold under the Consignment
Agreement.

              

      

      

      
        	
                11.2

              	
                Toho
      warrants to TIMET that Commodity shall strictly conform to the applicable
      Specification.

              

      

      

      
        	
                11.3

              	
                In
      the event that Commodity sold by Toho to TIMET hereunder does not conform
      to the warranty set forth in Article 11.2 above, then Toho shall, at its
      sole cost and expense, remove or otherwise dispose of such non-conforming
      Commodity and replace it promptly with an equivalent quantity of Commodity
      which conforms to such warranty.  Toho’s obligation to remove or
      dispose of and replace non-conforming Commodity with conforming Commodity
      shall not be applicable in the event TIMET fails to give notice of such
      non-conformity as provided for in Article
12.

              

      

      

      
        	
                11.4

              	
                Except
      for such warranties, no warranties whatsoever, express or implied, with
      respect to any quantities of Commodity delivered to TIMET hereunder are
      made by Toho and Toho expressly disclaims any warranty of merchantability,
      express, implied or statutory, with respect to such quantities of
      Commodity, and further disclaims any warranty of fitness for any
      purpose.

              

      

       

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      
 

      
        	
                ARTICLE 12
      INSPECTION

              	
                 

              

      

      

      TIMET
shall inspect all Commodity delivered by Toho and inform Toho pursuant to Clause
2.3 of the Consignment Agreement if the Commodity does not conform to the
Specifications.

      

      
        	
                ARTICLE 13. TERM AND
      TERMINATION

              	
                 

              

      

      

      
        	
                13.1

              	
                This
      Agreement shall come into effect on the 14th
      day of November 2007 and remain effective until 31st
      December 2024 (the “Termination
date”).

              

      

      

      
        	
                13.2

              	
                This
      Agreement shall terminate upon the occurrence of any of the
      following:

              

      

      

      
        	
                 
      

              	
                (a)

              	
                the
      Termination Date;

              

      

      

      
        	
                 
      

              	
                (b)

              	
                exercise
      of the right to terminate this Agreement set forth in Article 13.3 or 13.4
      below.

              

      

      

      
        	
                13.3

              	
                If
      either Party commits a material breach of this Agreement, the Annual
      Confirmation or the Consignment Agreement, the non-breaching Party may
      give a written notice demanding the breaching Party to remedy such breach,
      if such breach is capable of being remedied.  If the breaching
      Party fails to remedy the same within ninety (90) days (or fails to
      commence efforts to remedy the same within thirty (30) days) after receipt
      of such notice or such breach is not capable of being remedied, the
      non-breaching Party has a right to terminate this Agreement immediately by
      written notice to the breaching
Party.

              

      

      

      
        	
                13.4

              	
                Either
      Party has a right to terminate this Agreement immediately if bankruptcy,
      insolvency, reorganization proceedings, or any other proceedings analogous
      in nature or effect, are instituted by or against the other Party, or the
      other Party is dissolved or liquidated, whether voluntarily or
      involuntarily, or if a receiver or trustee is appointed for all or a
      substantial part of the assets of the other Party or if the other Party
      makes an assignment for the benefit of creditors
  generally.

              

      

      

      
        	
                13.5

              	
                The
      termination of this Agreement shall not affect the rights of the Parties
      that have accrued hereunder prior to such
  termination.

              

      

      

      
        	
                13.6

              	
                Notwithstanding
      Clause 5 of the Consignment Agreement, both Parties agree not to terminate
      the Consignment Agreement unless this Agreement is
    terminated.

              

      

      

      
        	
                13.7

              	
                An
      obligation to pay under Article 7 or Article 10.1 if accrued prior to the
      date of termination of this Agreement, shall survive the termination of
      this Agreement.

              

      

      

      
        	
                ARTICLE 14.
      HARDSHIP

              	
                 

              

      

      

      The
Parties declare it to be their intention that the provisions of this Agreement
shall operate between them fairly without detriment to the interests of either
Party and this understanding forms the basis upon which this Agreement has been
negotiated and entered into.  If, during the course of the performance
of this Agreement, one Party notifies the other Party of its good faith belief
that, due to factors beyond the control of such Party, the terms of contract
contained herein have ceased to be fair or have become inequitable, including,
without limitation, substantial changes in economic circumstances from the
circumstances existing at the date hereof, then the Parties shall discuss the
situation and consider all contents hereof for possible
amendment.  There shall be no consequence under this Agreement if no
amendment is made as a result of such discussions.

      

      
        	
                ARTICLE 15. FORCE
      MAJEURE

              	
                 

              

      

      

      
        	
                15.1

              	
                Neither
      Party shall be liable for a failure to perform or delay in performing all
      or any part of this Agreement, the Consignment Agreement, or of any Annual
      Confirmation when such failure or delay is due to any cause or
      circumstance beyond the reasonable control of such Party including,
      without limitation, acts of God, fire, flood, storms, earthquake, typhoon,
      tidal wave, plague or other epidemics, laws, governmental orders,
      regulations, sanctions or restrictions, war (whether declared or not),
      armed conflict, or the serious threat of the same, hostilities,
      mobilization, blockade, embargo, detention, revolution, riot, looting,
      lockout, strike or other labor dispute or unavailability of transportation
      (each an event of “Force Majeure”).

              

      

      

      
        	
                15.2

              	
                If
      any of the events of Force Majeure occurs and the failure or delay caused
      thereby cannot be cured within ninety (90) days, any part of the Annual
      Confirmation affected thereby shall be deemed not to form a part of such
      Annual Confirmation and the Parties shall be discharged from any relevant
      obligations thereunder accordingly.

              

      

      

      
        	
                15.3

              	
                The
      Party affected by an event of Force Majeure shall promptly notify the
      other Party, in writing, as to its commencement and
      termination.  The Party so affected shall take commercially
      reasonable steps to resume performance hereunder with the least possible
      delay.

              

      

      

      
        	
                15.4

              	
                In
      the event of any Force Majeure occurring, both Parties shall use their
      commercially reasonable endeavours to find out possible lawful means to
      minimize the loss and damage resulting from such circumstances and may
      also seek alternative means to give effect to the objects of this
      Agreement.

              

      

      

      
        	
                ARTICLE 16.
      ARBITRATION

              	
                 

              

      

      

      
        	
                16.1

              	
                If
      there shall be any dispute under this Agreement (excluding that related to
      the Price Disagreement set forth in Article 6), the regular
      representatives of the Parties shall use their best efforts to resolve the
      matter on an amicable basis and in a manner fair to the Parties. If one
      Party notifies another Party that a dispute has arisen and the Parties are
      unable to resolve such dispute within a period of thirty (30) days from
      such notice, then the matter shall be referred to arbitration under
      Article 16.2

              

      

      

      
        	
                16.2

              	
                If
      a dispute is not resolved in the manner and within the period described in
      Article 16.1, the dispute shall be referred by either Party for final
      settlement by arbitration in accordance with the Rules of Arbitration of
      the International Chamber of Commerce. One arbitrator appointed in
      accordance with said Rules shall decide the matters in
      dispute.

              

      

      

      
        	
                16.3

              	
                The
      place of arbitration shall be New York City, New York, USA. The costs of
      arbitration, including reasonable attorneys’ fees, shall be awarded as the
      arbitrator shall equitably determine. The award shall set forth the legal
      and factual bases therefor.

              

      

      

      
        	
                16.4

              	
                The
      award of the arbitrator shall be final and binding and not subject to any
      appeal.  Judgment on the award may be entered in any court
      having jurisdiction thereof or having jurisdiction over the unsuccessful
      Party or its assets.

              

      

      

      
        	
                16.5

              	
                When
      adjudicating a dispute or proceeding among the Parties, the arbitrator
      shall be instructed to first apply the contractual provisions hereof and
      the mutual intent of the Parties as set forth in this Agreement and any
      Annual Confirmations that are part of such dispute or
      proceeding.

              

      

      

      
        	
                16.6

              	
                If
      a dispute, controversy or claim other than an issue of material breach is
      submitted to arbitration pursuant to this Article 16, the Parties, during
      the period of such arbitral proceedings and pending the making of an
      arbitral award, shall continue to perform their respective obligations
      under this Agreement insofar as the circumstances reasonably shall allow
      without prejudice to a final adjustment in accordance with the arbitral
      award made in respect of that dispute, controversy or
    claim.

              

      

       

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      
 

      
        	
                ARTICLE 17. GOVERNING
      LAW

              	
                 

              

      

      

      This
Agreement and any Annual Confirmation shall be in all respects governed by and
construed in accordance with the laws of the State of New York, USA without
regard to the conflicts of laws principles of England.

      

      
        	
                ARTICLE 18. ENTIRE
      AGREEMENT

              	
                 

              

      

      

      With the
exception of the Consignment Agreement and the Existing Agreement, this
Agreement, including the agreements represented in the Appendices hereto,
constitutes the entire agreement among the Parties regarding the subject matter
contained herein and wholly cancels, terminates and supersedes all previous
negotiations, agreements and commitments, whether formal or informal, oral or
written, with respect to the subject matter hereof.

      

      
        	
                ARTICLE 19.
      AMENDMENTS

              	
                 

              

      

      

      This
Agreement shall not be amended, changed or modified in any manner except by an
instrument in writing signed by duly authorized representatives of all the
Parties.

      

      
        	
                ARTICLE 20
      CONFIDENTIALITY

              	
                 

              

      

      

      
        	
                20.1

              	
                 

              	
                (a)

              	
                Neither
      Party shall disclose to any other person any information relating to or
      referring to the matters in this Agreement that such party (the “Receiving
      Party”) has received from the other party
  except:

              

      

      

      
        	
                 
      

              	
                (i)

              	
                to
      the extent such information was in the lawful possession of the Receiving
      Party without confidentiality restrictions prior to its receipt thereof
      from the disclosing Party;

              

      

      

      
        	
                 
      

              	
                (ii)

              	
                to
      the extent such information is or becomes public knowledge without the
      fault of the Receiving Party;

              

      

      

      
        	
                 
      

              	
                (iii)

              	
                where
      disclosure is required by law or is made in compliance with the order of
      any court of competent jurisdiction or by the rules or regulations of any
      stock exchange on which any securities of the Parties or any of their
      affiliates are registered, or any regulatory or statutory
      body;

              

      

      

      
        	
                 
      

              	
                (iv)

              	
                in
      the case of Toho, to Mitsui, Toho’s or Mitsui’s subsidiaries
      or  affiliates, or employees, consultants, advisors, lawyers,
      accountants or bankers of any of the foregoing, provided that such
      recipients of information are made aware of the confidentiality of such
      information;

              

      

      

      
        	
                 
      

              	
                (v)

              	
                in
      the case of TIMET, to its subsidiaries, its affiliates or its or its
      subsidiaries or affiliates’ employees, consultants, advisors, lawyers,
      accountants or bankers, provided that such recipients of information are
      made aware of the confidentiality of such
  information

              

      

      

      
        	
                 
      

              	
                (vi)

              	
                where
      it is independently developed by it or any of its affiliates without usage
      of any information that is confidential under this
    Agreement;

              

      

      

      
        	
                 
      

              	
                (vii)

              	
                is
      or becomes available to the Receiving Party on an unrestricted basis from
      a source having a right to make such disclosure;
  or

              

      

      

      
        	
                 
      

              	
                (viii)

              	
                is
      made available on an unrestricted basis by a third
  party.

              

      

      

      
        	
                 
      

              	
                (b)

              	
                The
      Parties will attempt to limit the exchange of information relating to or
      referring to the matters dealt with in this Agreement to only such
      information reasonably necessary for the purposes of this
      Agreement.

              

      

      
        	
                 
      

              	 

      

      
        	
                ARTICLE 21.
      ASSIGNMENT

              	
                 

              

      

      

      
        	
                21.1

              	
                This
      Agreement shall be binding upon and inure to the benefit of the Parties
      and their respective successors and permitted
  assigns.

              

      

      

      
        	
                21.2

              	
                Neither
      Party shall assign, transfer or otherwise dispose of its rights or
      obligations under this Agreement and the Annual Confirmation, in whole or
      in part, without the prior written permission of the other Party which
      will not be unreasonably withheld.

              

      

      

      
        	
                ARTICLE 22. NO
      WAIVER

              	
                 

              

      

      

      
        	
                22.1

              	
                No
      failure to exercise or delay in exercising any right or remedy under this
      Agreement, the Consignment Agreement, or under any Annual Confirmation by
      any Party shall operate as a waiver thereof or of any other right or
      remedy which such Party may have hereunder or thereunder, nor shall any
      single or partial exercise of such right or remedy preclude any further
      exercise thereof or of any other right or remedy which such Party may have
      hereunder or thereunder.

              

      

      

      
        	
                22.2

              	
                The
      rights and remedies provided herein are cumulative and not exclusive of
      any rights and remedies provided by law, in equity or
      otherwise.

              

      

       

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      
 

      
        	
                ARTICLE 23.
      SEVERABILITY

              	
                 

              

      

      

         
In the event that any provision or any portion of any provision of this
Agreement turns out to be invalid, illegal or unenforceable under any applicable
law, such provision or portion thereof shall be deemed to be deleted from this
Agreement and the validity of the remainder of this Agreement shall remain
unaffected thereby.

      

      
        	
                ARTICLE 24.
      NOTICES

              	
                 

              

      

      

      
        	
                24.1

              	
                All
      notices, requests or other communications required or permitted to be
      given hereunder shall be in writing in the English language and shall be
      sent by registered mail, postage prepaid, or e-mail or facsimile (with
      confirmation by registered mail, postage prepaid) to the Party at its
      address set forth below or to such other address as may from time to time
      be notified by any Party to the other in accordance with this Article
      24.1:

              

      

      

      If to
TIMET:                     
Titanium Metals Corporation

      Attn:
General Counsel

      3 Lincoln
Centre

      5430 LBJ
Freeway, Suite 1700

      Dallas,
Texas 75240-2697

      Facsimile:  (972)
448-1445

      

      With a
copy
to:                Timet
UK Limited

      PO Box
704, Witton Birmingham B6 7UR

      Attention:
Purchase Manager

      Facsimile:
0121-332-5338

      

      If to
Toho
:                        Toho
Titanium Co. Ltd.

      3-3-5
Chigasaki, Chigasaki-City

      Kanagawa-Pref.
253-8510 Japan

      Attention:
General Manager, Titanium Sales Dept.

      Facsimile:
81-467-82-6661

      

      With a
copy
to:                Mitsui
Bussan Metals Sales Co., Ltd.

      Nihonbashi
Dai-2, Bldg.

      41-12,
Nihonbashi-Hakozaki-Cho,

      Chuo-Ku,
Tokyo, 103-0015 Japan

      Attention:
General Manager, Titanium Division

      Facsimile:
81-3-3249-4532

      

      
        	
                24.2

              	
                All
      notices shall be deemed to have been given when duly transmitted by e-mail
      or facsimile or seven (7) days after such notice has been deposited in the
      mail and sent by registered mail as the case may
  be.

              

      

      

      ARTICLE 25.
HEADINGS

      

      The
headings of this Agreement are inserted for convenience of reference only and
shall not affect the construction or interpretation hereof.

      

      ARTICLE 26. LANGUAGE;
CURRENCY

      

      English
shall be the official language of this Agreement.  Except as expressly
stated otherwise, all currency figures in this Agreement are expressed in United
States dollars.

      

      ARTICLE 27.
CONFLICTS

      

      If there
is any conflict or difference in interpretation between this Agreement and the
Consignment Agreement, the terms and conditions of this Agreement shall
supersede those of the Consignment Agreement, unless provided otherwise in this
Agreement.

      

      ARTICLE 28.
COUNTERPARTS

      

      This
Agreement may be executed in two or more counterparts each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.

      

      ARTICLE 29. TAXES AND
DUTIES

      

      All taxes
and duties imposed on the sale of Commodity to TIMET by Toho hereunder shall be
the responsibility of TIMET; provided, however, that any taxes imposed on Toho’s
income shall be the responsibility of Toho.

       

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      
 

      ARTICLE 30.
COOPERATION

      

      In the
event that TIMET determines to construct a new titanium sponge plant in the
future (excluding any partnership, joint venture, acquisition or investment with
or in a third party or parties), TIMET agrees to enter into discussions with
Toho concerning possible cooperation between the parties prior to TIMET’s
construction of such new titanium sponge plant.  In the event that
Toho is unable or unwilling to accommodate any new or further supply that TIMET
may desire on terms acceptable to TIMET, Toho agrees to enter into discussions
with TIMET concerning the possibility of participation or cooperation in TIMET’s
plans and location of such new titanium sponge plant.  In the event
that Toho determines to construct a new titanium sponge plant in the future
(excluding any partnership, joint venture, acquisition or investment with or in
a third party or parties), Toho agrees to enter into discussions with TIMET
concerning possible cooperation between the parties prior to Toho’s construction
of such new titanium sponge plant.  For purposes of clarity, neither
party is obligated by the provisions of this Article 30 to continue discussions
beyond an initial meeting or to enter into any agreement with the other party
concerning the subject matter hereof.

      

      ARTICLE 31. APPOINTMENT OF
AGENT

      

      TIMET
agrees that Toho will be permitted to appoint Mitsui or its affiliates as its
agent to perform certain services under this Agreement (without cost to TIMET),
including but not limited to, delivery and shipment of the Commodity hereunder,
provided, however, that Toho shall remain obligated to TIMET hereunder for all
such services performed by Mitsui.

      

      ARTICLE 32. LONG TERM SPONGE
SUPPLY AGREEMENT I

      

      TIMET
agrees to give consideration to the Existing Agreement by and between TIMET UK
and Mitsui EUROPE, dated 23 October 2007 and to make a faithful effort to allow
such agreement to extend by its terms beyond the initial term thereof of 5
years.  Toho also agrees to give consideration to such Existing
Agreement and to make a faithful effort to allow such agreement to extend by its
terms beyond the initial term thereof of 5 years.

      

      

      
        	
                 
      

              	
                [Signature
      page follows.]

              

      

      

      
        
          
             

          

          
            9

            
              

            

          

          
             

          

        

      

      

      IN
WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their
respective duly authorized representatives on the day and year first above
written.

      

      

      Toho
Titanium Co. Ltd.

      

      By:  /s/ Takeshi
Kurushima        
                                                              

      Name:  Takeshi
Kurushima

      Title:  President
& C.E.O.

      

      

      Titanium
Metals Corporation

      

      

      By:  /s/ Bobby D.
O”Brien         
                                                              

      Name:  Bobby
D. O’Brien

      Title:
President

      

      
 

       

      

 

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

      
 

      Appendix A to Exhibit 10.23

       

      
        
          	
                  

                	
                   

                   

                  RAW
      MATERIAL SPECIFICATION

                	
                  RMS:

                   

                   

                  
                    REV:

                  

                	
                  71.4

                   

                   

                  
                    2

                  

                
	 
      	 
      	
                   

                	
                   

                
	 
      	
                  
                    PREMIUM
      GRADE SPONGE

                    CLASS
      A RAW MATERIAL

                  

                	
                  DATE:

                	
                  Jun
      98

                
	 
      	 
      	
                  PAGE:

                	
                  1 of
      5

                
	
                  HENDERSON,
      NV

                	 
      	 
      	 
      

           

        

        
           

          
            	
                     
      

                  	
                    1

                  	
                    SCOPE

                  

          

           

          
            	
                     
      

                  	
                    1.1

                  	
                    This
      specification covers titanium sponge, Class A Raw Material for conversion
      to semi-fabricated parts.

                  

          

           

          
            	
                     
      

                  	
                    1.2

                  	
                    Titanium
      sponge to this specification shall be made by the Kroll process of
      Magnesium reduction of Titanium Tetrachloride followed by vacuum
      distillation. Material that is not manufactured using the Integral
      Reduction/Distillation method will be designated as so on test
      certificates.

                  

          

           

          
            	
                     
      

                  	
                    1.3

                  	
                    Titanium
      sponge supplied to this specification will be made according to a method
      of manufacture approved by TIMET.  No change will be made in the
      approved method of manufacture without prior consultation with
      TIMET.

                  

          

           

          
            	
                     
      

                  	
                    1.4

                  	
                    The
      method of manufacture will clearly detail the provision to deal with fire
      affected lots at all stages of processing and will be agreed by
      TIMET.

                  

          

           

           

          
            	
                     
      

                  	
                    2

                  	
                    ACKNOWLEDGEMENT

                  

          

           

          The
manufacturer shall explicitly incorporate this specification, RMS and revision
number, in all quotations, certifications and acknowledgments.

           

           

          
            	
                     
      

                  	
                    3

                  	
                    APPLICABLE
      DOCUMENTS

                  

          

           

          
            	
                     
      

                  	
                    3.1

                  	
                    TIMET
      RMS 1000 (latest revision)

                  

          

           

          
            	
                     
      

                  	
                    3.2

                  	
                    PWA
      1201 (latest revision)

                  

          

           

          
            	
                     
      

                  	
                    3.3

                  	
                    GE
      P1TF95 (latest revision)

                  

          

           

          
            	
                     
      

                  	
                    3.4

                  	
                    GE
      P1TF28 (latest revision)

                  

          

           

          
            	
                     
      

                  	
                    3.5

                  	
                    GE
      P1TF73 (latest revision)

                  

          

           

          
            	
                     
      

                  	
                    3.6

                  	
                    ASTM
      B299 (latest revision)

                  

          

           

          
            	
                     
      

                  	
                    3.7

                  	
                    ASTM
      E120 (latest revision)

                  

          

           

          
            	
                     
      

                  	
                    3.8

                  	
                    ASTM
      E10 (latest revision)

                  

          

           

           

          
            	
                     
      

                  	
                    4

                  	
                    TECHNICAL
      REQUIREMENTS

                  

          

           

          
            	
                     
      

                  	
                    4.1

                  	
                    Composition

                  

          

          Material
shall conform to the percentages by weight shown in
4.2.  Determination shall be by wet chemical methods in accordance
with ASTM E120, by Spectro Chemical methods or by other analytical methods
acceptable to TIMET.

          

          
            
              
                 

              

              
                11

                
                  

                

              

              
                 

                
                  
                    	
                            

                          	
                             

                             

                            RAW
      MATERIAL SPECIFICATION

                          	
                            RMS:

                             

                             

                            
                              REV:

                            

                          	
                            71.4

                             

                             

                            
                              2

                            

                          
	 
      	 
      	
                             

                          	
                             

                          
	 
      	
                            
                              PREMIUM
      GRADE SPONGE

                              CLASS
      A RAW MATERIAL

                            

                          	
                            DATE:

                          	
                            Jun
      98

                          
	 
      	 
      	
                            PAGE:

                          	
                            2 of
      5

                          
	
                             
      HENDERSON,
      NV

                          	 
      	 
      	 
      

                  

                  

                

              

            

          

          

          
            	
                     
      

                  	
                    4.2

                  	
                    Chemical
      Composition

                  

          

          The
following elements shall be determined and shall not exceed the limits detailed
below.  Titanium content shall be greater or equal to *

           

          

            
              	 
      	 
      	
                      WT percent
      max

                    
	 
      	
                      Nickel

                    	
                      *

                    
	 
      	
                      Chromium

                    	
                      *

                    
	 
      	
                      Aluminum

                    	
                      *

                    
	 
      	
                      Carbon

                    	*
	 
      	
                      Chlorine

                    	
                      *

                    
	 
      	
                      Hydrogen

                    	
                      *

                    
	 
      	
                      Magnesium

                    	
                      *

                    
	 
      	
                      Nitrogen

                    	
                      *

                    
	 
      	
                      Silicon

                    	*
	 
      	
                      Tin

                    	*
	 
      	
                      Water

                    	*
	 
      	
                      Other
      elements total

                    	
                      *

                    
	 
      	
                      Other
      elements target

                    	
                      *

                    
	 
      	
                      Oxygen

                    	
                      *

                    
	 
      	
                      Iron

                    	
                      *

                    

            

             

          

          Should
any of the elements exceed the above limit, the supplier must report to the
purchaser and seek to obtain a concession of acceptance.

        

        
           

          
            	
                     
      

                  	
                    4.3

                  	
                    Hardness

                  

          

          The
hardness of each lot of material shall be determined by methods agreed between
the Supplier and TIMET.  The maximum hardness shall be *.

           

          
            	
                     
      

                  	
                    4.4

                  	
                    Quality

                  

          

           

          
            	
                     
      

                  	
                    4.4.1

                  	
                    Sponge
      particles from each lot or blend of lots will be visually inspected to
      remove any particle of unusual colour or physical
      appearance.  Nitrogen content of any such segregated particle
      will be determined.

                  

          

           

          
            	
                     
      

                  	
                    4.4.2

                  	
                    No
      sponge or lot will be used when nitrogen content of any particle analyzed
      as per 4.4.1 exceeds*

                  

          

           

          
            	
                     
      

                  	
                    4.4.3

                  	
                    No
      sponge will be used which has been subjected to a fire or has been
      produced in equipment that has experienced a fire until that equipment has
      been cleaned, inspected for damage and has produced sponge not used for
      product meeting this specification.

                  

          

           

          
            	
                     
      

                  	
                    4.4.4

                  	
                    Specific
      procedures must be available detailing how any material covered under
      Section 4.4.3 is dealt with.

                  

          

           

          
            	
                     
      

                  	
                    4.4.5

                  	
                    Specific
      procedures must be available dealing with control of any dense metal tools
      used in the processing/inspection areas, e.g. tungsten or tungsten
      carbide.

                  

          

           

          
            	
                     
      

                  	
                    4.4.6

                  	
                    *

                  

          

           

          
            	
                     
      

                  	
                    4.4.7

                  	
                    No
      sponge batch with a nitrogen content of greater than * will be
      used.

                  

          

           

          
            	
                     
      

                  	
                    4.4.8

                  	
                    *

                  

          

           

          
            	
                     
      

                  	
                    4.4.9

                  	
                    Every
      effort must be made to keep 4.4.6 and 4.4.8 to a minimum and despatch all
      of one (1) batch at the same time if
possible.

                  

          

           

          
            
              
                 

              

              
                12

                
                  

                

              

              
                 

                
                  
                    	
                            

                          	
                             

                             

                            RAW
      MATERIAL SPECIFICATION

                          	
                            RMS:

                             

                             

                            
                              REV:

                            

                          	
                            71.4

                             

                             

                            
                              2

                            

                          
	 
      	 
      	
                             

                          	
                             

                          
	 
      	
                            
                              PREMIUM
      GRADE SPONGE

                              CLASS
      A RAW MATERIAL

                            

                          	
                            DATE:

                          	
                            Jun
      98

                          
	 
      	 
      	
                            PAGE:

                          	
                            3 of
      5

                          
	
                            HENDERSON,
      NV

                          	 
      	 
      	 
      

                  

                  

                

              

            

          

           

          
            	
                     
      

                  	
                    4.5

                  	
                    Screen
      Analysis

                  

          

           

          The
Titanium Sponge supplied will be in the particle size range as
below

          

          *

           

          
            	
                     
      

                  	
                    4.6

                  	
                    *

                  

          

           

          

          
            	
                     
      

                  	
                    4.7

                  	
                    Sampling

                  

          

           

          
            	
                     
      

                  	 	
                    A
      representative sample will be obtained by abstracting a representative
      portion of the stream of material when a lot is being fed into drum during
      packaging.  The size of the sample will be defined in the
      approved process outline.  The minimum size of the sample sent
      to the customer and removed from the representative portion will be 5kg
      and this will be sent with the lot in drum 1.  A slice of the
      manufacturer’s evaluation ingot/button is to be sent separately and ahead
      of the lot of the Technical Officer – Raw
  Materials.

                  

          

           

           

          
            	
                     
      

                  	
                    5

                  	
                    IDENTIFICATION

                  

          

           

          
            	
                     
      

                  	
                    5.1

                  	
                    The
      body of each drum (not the lid) will be legibly marked in with the words
      “Titanium Sponge”, and also the lot number and the drum number, in
      characters at least 40mm high.

                  

          

           

          
            	
                     
      

                  	
                    5.2

                  	
                    All
      old marking on the drums will be permanently obliterated with
      paint.

                  

          

           

          
            	
                     
      

                  	
                    5.3

                  	
                    The
      batch number will be repeated on the diametrically opposite side of the
      drum and in the top third of the
drum.

                  

          

           

           

          
            	
                     
      

                  	
                    6

                  	
                    PACKAGING

                  

          

           

          *

           

          
            
              
                 

              

              
                13

                
                  

                

              

              
                 

                
                  
                    	
                            

                          	
                             

                             

                            RAW
      MATERIAL SPECIFICATION

                          	
                            RMS:

                             

                             

                            
                              REV:

                            

                          	
                            71.4

                             

                             

                            
                              2

                            

                          
	 
      	 
      	
                             

                          	
                             

                          
	 
      	
                            
                              PREMIUM
      GRADE SPONGE

                              CLASS
      A RAW MATERIAL

                            

                          	
                            DATE:

                          	
                            Jun
      98

                          
	 
      	 
      	
                            PAGE:

                          	
                            4 of
      5

                          
	
                            HENDERSON,
      NV

                          	 
      	 
      	 
      

                  

                  

                

              

            

          

           

          
            	
                     
      

                  	
                    7

                  	
                    SHIPPING

                  

          

           

          
            	
                     
      

                  	
                    7.1

                  	
                    Within
      each delivery the drums will be arranged in order of lot and drum
      number.

                  

          

           

          
            	
                     
      

                  	
                    7.2

                  	
                    The
      method of packaging and delivery will not be altered without the prior
      agreement of TIMET.

                  

          

           

          
            	
                     
      

                  	
                    7.3

                  	
                    The
      samples that are required by section 4 of this specification are to be
      packed in No. 1 drum of the lot.

                  

          

           

           

          
            	
                     
      

                  	
                    8

                  	
                    CERTIFICATION

                  

          

           

          
            	
                     
      

                  	
                    8.1

                  	
                    The
      manufacturer will send to TIMET, FAO the Technical Officer – Raw
      Materials, prior to, or at the time of despatch.  A test report
      in duplicate stating the TIMET specification number and
      giving:

                  

          

           

          
            	
                     
      

                  	
                    8.1.1

                  	
                    Analyses
      required by section 4 of
specification.

                  

          

           

          
            	
                     
      

                  	
                    8.1.2

                  	
                    Hardness
      of each lot required by section 4 of
  specification.

                  

          

           

          
            	
                     
      

                  	
                    8.1.3

                  	
                    Particle
      size analysis as per section 4 of
specification.

                  

          

           

          
            	
                     
      

                  	
                    8.1.4

                  	
                    Certificate
      clearly stating that each lot conforms to the
    specification.

                  

          

           

          
            	
                     
      

                  	
                    8.1.5

                  	
                    If
      non-integrated process used, this must be
  stated.

                  

          

           

          
            	
                     
      

                  	
                    8.1.6

                  	
                    Statement
      that material meets Pratt & Whitney approval
    requirements.

                  

          

           

          
            	
                     
      

                  	
                    8.1.7

                  	
                    Statement
      that material meets General Electric
approval.

                  

          

           

          
            	
                     
      

                  	
                    8.2

                  	
                    A
      drum list in duplicate listing the number of each lot, the number of drums
      in each lot, and the total net and gross weight of each lot must also be
      sent.  These documents will be sent to arrive before or at the
      time of delivery.

                  

          

           

           

          
            	
                     
      

                  	
                    9

                  	
                    NON-CONFORMANCE

                  

          

           

          As per
RMS 1000.

           

           

          
            	
                     
      

                  	
                    10

                  	
                    QUALITY
      ASSURANCE

                  

          

           

          As per
RMS 1000.

           

           

          
            	
                     
      

                  	
                    11

                  	
                    OTHER
      CRITERIA

                  

          

           

          
            	
                     
      

                  	
                    11.1

                  	
                    Requirement
      precedence is Purchase Order, this RMS, RMS
  1000.

                  

          

           

          
            	
                     
      

                  	
                    11.2

                  	
                    Acceptance
      of this RMS must be acknowledged and a signed copy of such acceptance
      shall be returned to TIMET Purchasing Manager.  This acceptance
      must indicate the date from which material to the new specification will
      be despatched to TIMET.

                  

          

           

          
            
              
                 

              

              
                14

                
                  

                

              

              
                 

                
                  
                    	
                            

                          	
                             

                             

                            RAW
      MATERIAL SPECIFICATION

                          	
                            RMS:

                             

                             

                            
                              REV:

                            

                          	
                            71.4

                             

                             

                            
                              2

                            

                          
	 
      	 
      	
                             

                          	
                             

                          
	 
      	
                            PREMIUM
      GRADE SPONGE

                            CLASS
      A RAW MATERIAL

                          	
                            DATE:

                          	
                            Jun
      98

                          
	 
      	 
      	
                            PAGE:

                          	
                            5 of
      5

                          
	
                            HENDERSON,
      NV

                          	 
      	 
      	 
      

                  

                  

                

              

            

          

          

          
            	
                    APPROVED:

                  	
                     

                  

          

          

          

            
              	 
      	
                      /s/ D.
      Bretherton

                    	
                      7/2/98

                    
	 
      	
                      Quality
      Assurance Manager TIMET UK Limited

                    	 
      
	 
      	 
      	 
      
	 
      	
                      /s/ N.
      Catling

                    	
                      6/25/98

                    
	 
      	
                      Purchasing
      Manager TIMET UK Limited

                    	 
      
	 
      	 
      	 
      
	 
      	
                      /s/
      E. Wies

                    	
                      6/30/98

                    
	 
      	
                      Quality
      Assurance Manager TIMET Savoie

                    	 
      

            

          

        

      

       

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

       

       

      
        	
                

              	
                 

                 

                RAW
      MATERIAL SPECIFICATION

              	
                RMS:

                 

                 

                
                  REV:

                

              	
                72.4

                 

                 

                
                  0

                

              
	 
      	 
      	
                 

              	
                 

              
	 
      	
                
                  VDP
      TITANIUM SPONGE

                  STANDARD
      QUALITY

                

              	
                DATE:

              	
                09
      Nov 07

              
	 
      	 
      	
                PAGE:

              	
                1 of
      5

              
	
                 

              	 
      	 
      	 
      

         

      

      

      
        	
                 
      

              	
                1

              	
                SCOPE

              

      

       

      
        	
                 
      

              	
                1.1

              	
                This
      specification covers the manufacture of titanium sponge for use in making
      titanium products for standard quality (SQ)
  applications.

              

      

       

      
        	
                 
      

              	
                1.2

              	
                Titanium
      sponge produced to this RMS shall be made by the Kroll process of
      Magnesium Reduction of Titanium Tetrachloride followed by the Vacuum
      Distillation Process (VDP).

              

      

       

      
        	
                 
      

              	
                1.3

              	
                Titanium
      sponge applied to this specification shall be produced in accordance with
      a method of manufacture (MOM) approved by TIMET.  No changes
      shall be made to the approved method of manufacture without prior TIMET
      approval as defined in TIMET RMS
      1001.

              

      

       

       

      
        	
                 
      

              	
                2

              	
                ACKNOWLEDGEMENT

              

      

       

      The
manufacturer, defined throughout this specification as the supplier, shall
explicitly incorporate this specification, RMS 72.4 and revision number, in all
quotations, certifications, and acknowledgements.

       

       

      
        	
                 
      

              	
                3

              	
                APPLICABLE
      DOCUMENTS

              

      

       

      
        	
                 
      

              	
                3.1

              	
                ASTM
      E10, Standard Test
      Method for Brinell Hardness of Metallic
  Minerals.

              

      

       

      
        	
                 
      

              	
                3.2

              	
                ASTM
      E2371, Standard Test
      Methods for Chemical Analysis of Titanium and Ti
      Alloys.

              

      

       

      
        	
                 
      

              	
                3.3

              	
                TIMET RMS 1001, Standard Aerospace and
      Industrial Application Raw Material Quality System
      Requirements.

              

      

       

       

      
        	
                 
      

              	
                4

              	
                TECHNICAL
      REQUIREMENTS

              

      

       

       

      
        	
                 
      

              	
                4.1

              	
                Composition:

              

      

       

      Material
shall conform to the chemical weight percentages and Brinell hardness values
shown in the table below.  Determination shall be by ASTM E2371,
spectrographic, or by other analytical methods acceptable to
TIMET.  All elements in the table are to be analyzed.  All
elements (except Ti) shall be reported to three (3) decimal
places.  Particle size requirements shall be specified on the purchase
order.

       

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

       

      
        	
                

              	
                 

                 

                RAW
      MATERIAL SPECIFICATION

              	
                RMS:

                 

                 

                
                  REV:

                

              	
                72.4

                 

                 

                
                  0

                

              
	 
      	 
      	
                 

              	
                 

              
	 
      	
                
                  
                    
                      VDP
      TITANIUM SPONGE

                      STANDARD
      QUALITY

                    

                  

                

              	
                DATE:

              	
                09
      Nov 07

              
	 
      	 
      	
                PAGE:

              	
                2 of
      5

              
	
                 

              	 
      	 
      	 
      

        

 

      

      
        	
                Element

              	
                Chemical Composition (wt%
    max)

              
	
                Al

              	
                *

              
	
                C

              	
                *

              
	
                Cl

              	
                *

              
	
                Cr

              	
                *

              
	
                Fe

              	
                *

              
	
                Mg

              	
                *

              
	
                N

              	
                *

              
	
                Ni

              	
                *

              
	
                O

              	
                *

              
	
                Si

              	
                *

              
	
                Sn

              	
                *

              
	
                Other
      elements, each

              	
                *

              
	
                Other
      elements, total

              	
                *

              
	
                Titanium

              	
                remainder

              
	 
      	 
      
	
                Brinell
      Hardness (BHN)*

              	
                *

              
	 
      	 
      

      

       

      *Brinell
hardness shall be tested in accordance with ASTM E10 or by other methods
acceptable to TIMET.  Brinell hardness shall be capable of meeting the
above requirement.  However, determination is not required for routine
acceptance.

       

      
        	
                 
      

              	
                4.2

              	
                Sizing:
      Particle size requirements shall be specified on the purchase
      order:

              

      

       

      
        	
                *

              	
                90%
      min

              	
                *

              
	
                5%
      max

              	
                *

              
	
                *

              	
                90%
      min

              	
                *

              
	
                5%
      max

              	
                *

              
	
                *

              	
                90%
      min

              	
                *

              
	
                5%
      max

              	
                *

              

      

       

      
        	
                 
      

              	
                4.3

              	
                Quality:

              

      

       

      
        	
                 
      

              	
                4.3.1

              	
                *

              

      

       

      
        	
                 
      

              	
                4.3.2

              	
                Unless
      otherwise agree upon, sponge shall be 100% visually inspected to an
      established procedure to ensure the lot is clean, free from high density
      inclusions, oxides, nitrides, slag particles, discolored particles,
      non-metallic, and all other foreign materials
  (impurities).

              

      

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

      

      
        	
                

              	
                 

                 

                RAW
      MATERIAL SPECIFICATION

              	
                RMS:

                 

                 

                
                  REV:

                

              	
                72.4

                 

                 

                
                  0

                

              
	 
      	 
      	
                 

              	
                 

              
	 
      	
                
                  
                    
                      VDP
      TITANIUM SPONGE

                      STANDARD
      QUALITY

                    

                  

                

              	
                DATE:

              	
                09
      Nov 07

              
	 
      	 
      	
                PAGE:

              	
                3 of
      5

              
	
                 

              	 
      	 
      	 
      

         

      

      

      
        	
                 
      

              	
                5

              	
                IDENTIFICATION

              

      

       

      The body
of each container shall be permanently and legibly identified with, at minimum,
the source/supplier name, lot number, grade, and net weight.

       

       

      
        	
                 
      

              	
                6

              	
                PACKAGING

              

      

       

      
        	
                 
      

              	
                6.1

              	
                *

              

      

       

      
        	
                 
      

              	
                6.2

              	
                TIG
      welding to fabricate drums is
prohibited.

              

      

       

      
        	
                 
      

              	
                6.3

              	
                *

              

      

       

       

      
        	
                 
      

              	
                7

              	
                SHIPPING

              

      

       

      Sponge
shall be shipped in a manner that prevents moisture, contamination, and any
other damage.  All containers and shipping papers must be in
compliance with applicable regulations.  The product shall be prepared
for shipment in accordance with commercial practice and in compliance with
applicable International and U.S. Federal rules and regulations pertaining to
handling, packaging, and transportation to ensure carrier acceptance and safe
delivery.

       

       

      
        	
                 
      

              	
                8

              	
                CERTIFICATION

              

      

       

      A
certificate of analysis shall be provided with each lot unless otherwise
agreed.  As a minimum, the certificate shall include the following:
statement of conformance to TIMET RMS and revision number, lot number, chemical
analyses, hardness, particle size distribution, net weight, Method of
Manufacture, purchase order number, and approval signature.

       

       

      
        	
                 
      

              	
                9

              	
                NON-CONFORMANCE

              

      

       

      
        	
                 
      

              	
                9.1

              	
                Sponge
      not conforming to this specification or RMS 1001 shall be subject to
      rejection.  Sponge accepted by TIMET, which subsequently reveals
      defective material not detected at the place of manufacture or in the lot
      sample, shall be subject to
rejection.

              

      

       

      
        	
                 
      

              	
                9.2

              	
                Titanium
      sponge arriving in damaged containers or contaminated by water, mud, rust,
      etc., may be disqualified for this specification and subject to
      rejection.

              

      

       

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      
        
          	
                  

                	
                   

                   

                  RAW
      MATERIAL SPECIFICATION

                	
                  RMS:

                   

                   

                  
                    REV:

                  

                	
                  72.4

                   

                   

                  
                    0

                  

                
	 
      	 
      	
                   

                	
                   

                
	 
      	
                  
                    
                      
                        VDP
      TITANIUM SPONGE

                        STANDARD
      QUALITY

                      

                    

                  

                	
                  DATE:

                	
                  09
      Nov 07

                
	 
      	 
      	
                  PAGE:

                	
                  4 of
      5

                
	
                   

                	 
      	 
      	 
      

        

        
 

      

      
        	
                 
      

              	
                9.3

              	
                The
      supplier may apply, in writing using the forms identified in RMS 1001, to
      TIMET for an exemption to any requirement listed in this specification or
      the purchase order.  The supplier must receive a written
      authorization to ship non-conforming material prior to
      shipping.

              

      

       

       

      
        	
                 
      

              	
                10

              	
                QUALITY
      ASSURANCE

              

      

       

      
        	
                 
      

              	
                10.1

              	
                The
      supplier shall maintain a suitable quality program to ensure consistent
      quality products are delivered to
TIMET.

              

      

       

      
        	
                 
      

              	
                10.2

              	
                The
      supplier shall submit a Method of Manufacture (MOM) to TIMET that defines
      all applicable process steps and controlling procedures and parameters
      (including, but not limited to, supplier sources/methods/materials,
      reaction vessel sizes, crushing, sampling, inspection, packaging, and
      shipping).

              

      

       

      
        	
                 
      

              	
                10.2.1

              	
                This
      MOM constitutes a Fixed Practice Agreement (FPA) with
    TIMET.

              

      

       

      
        	
                 
      

              	
                10.2.2

              	
                No
      changes to this MOM are permitted without prior TIMET approval via a
      Process Change Request (PCR).

              

      

       

      
        	
                 
      

              	
                10.3

              	
                The
      supplier shall ensure their quality program has incorporated appropriate
      protective measures to provide sponge free of particles that can cause
      high-density or low-density inclusions, oxides, nitrides, and/or other
      foreign materials and contaminants.

              

      

       

      
        	
                 
      

              	
                10.4

              	
                Sponge
      that has evidence of being air contaminated (e.g., discolored particles
      subject to burn) shall be completely removed for application to this
      specification.  Equipment (e.g., vessel, lid, etc.) that has
      experienced a fire/air contamination event must be thoroughly cleaned and
      subsequently inspected and accepted to established standards prior to
      being returned to service for sponge applied to this
      specification.

              

      

       

       

      
        	
                 
      

              	
                11

              	
                OTHER
    CRITERIA

              

      

       

      The order
of precedence shall be any applicable agreements between TIMET and the supplier,
requirements listed on the TIMET Purchase Order or
contract, RMS 72.4 (latest revision), and RMS 1001 (latest
revision).

       

       

      
        	
                 
      

              	
                12

              	
                REVISION
      HISTORY:

              

      

      
        	
                 

              	
                Revision
      0:           09 Nov
      07

              	
                Original
      issue.

              

      

       

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

      
 

      
        	
                

              	
                 

                 

                RAW
      MATERIAL SPECIFICATION

              	
                RMS:

                 

                 

                
                  REV:

                

              	
                72.4

                 

                 

                
                  0

                

              
	 
      	 
      	
                 

              	
                 

              
	 
      	
                
                  
                    
                      VDP
      TITANIUM SPONGE

                      STANDARD
      QUALITY

                    

                  

                

              	
                DATE:

              	
                09
      Nov 07

              
	 
      	 
      	
                PAGE:

              	
                5 of
      5

              
	
                 

              	 
      	 
      	 
      

        
 

      

      
        	
                 
      

              	
                APPROVED:

              

      

       

      
        	
                /s/
      Michael Hausman

              	
                8
      Nov 07

              	 
      	
                /s/
      Paul Godown

              	
                8
      Nov 2007

              
	
                Quality
      & Technology Manager, Morgantown

              	
                Date

              	 
      	
                Purchasing
      Manager, Morgantown

              	
                Date

              
	 	 	 	 	 
	 	 	 	 	 
	
                /s/
      JR Berger

              	
                08
      Nov 07

              	 
      	
                /s/
      Margaret Bolding

              	
                08
      Nov 07

              
	
                Quality
      & Technology Manager, Henderson

              	
                Date

              	 
      	
                Purchasing
      Manager, Henderson

              	
                Date

              
	 	 	 	 	 
	 	 	 	 	 
	
                /s/
      RK Bolingbroke

              	
                9
      Nov 07

              	 
      	
                /s/
      J Horodecky

              	
                9
      Nov 07

              
	
                Quality
      & Technology Director, UK

              	
                Date

              	 
      	
                Purchasing
      Manager, Europe

              	
                Date

              
	 	 	 	 	 
	 	 	 	 	 
	
                /s/
      Y Millet

              	
                9
      Nov 07

              	 
      	 
      	 
      
	
                Quality
      & Technology Manager, Savoie

              	
                Date

              	 
      	 
      	 
      

      

      

      

      

       

      
        
           

           

           

           

           

           

           

           

           

           

           

           

           

           

          
            
               

            

            
              20Unassociated Document

    

     

    SECURITIES
PURCHASE AGREEMENT

     

    

     

    THIS
SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of
November 5, 2007, by and among Index Oil and Gas, Inc., a Nevada corporation
with headquarters located at 10000 Memorial Drive, Suite 440, Houston, Texas
77024 (the “Company”),
and the investors listed on the Schedule of Investors attached hereto as Exhibit A
(individually, an “Investor” and collectively,
the “Investors”).

     

    BACKGROUND

     

    A.             The
Company and each Investor acknowledges that the Agreement is intended to be an
offshore transaction pursuant to Regulation S (“Regulation S”) as promulgated by
the SEC under the Securities Act of 1933, as amended. The Investor understands
that the Company is relying in part upon the truth and accuracy of, and the
Investor’s compliance with the representations, warranties, agreements,
acknowledgments and understandings of the Subscriber set forth herein in order
to determine the availability of such exemptions and the eligibility of the
Subscriber to acquire the Securities.

     

    B.             The
Company is selling units, each unit consisting of one share of common stock,
$0.001 par value (the “Common
Stock”), and one Loyalty Warrant (the “Warrant”) to purchase 0.50
share of Common Stock, at a purchase price of $0.50 per unit (the “Purchase Price”) (the “Units”).  The
Warrant shall not be exercisable until the second anniversary of the Closing
Date, as defined herein, to those subscribers who meet the requirements set
forth in the Warrant.  The Warrants will be in the form attached
hereto as Exhibit B.

     

    

    C.           Each
Investor, severally and not jointly, wishes to purchase, and the Company wishes
to sell, upon the terms and conditions stated in this Agreement, Units
consisting of (i) the aggregate number of shares of Common Stock set forth
opposite such Investor’s name on the Schedule of Investors in Exhibit A (the
“Common Shares”) and
(ii) a Loyalty Warrant to acquire up to that aggregate number of shares of
Common Stock as set forth opposite such Investor’s name on the Schedule of
Investors (the “Warrant
Shares”), at the aggregate Purchase Price set forth opposite such
Investor’s name on the Schedule of Investors in Exhibit A, up to
an aggregate of twenty million (20,000,000) Units, for an aggregate purchase
price of not less than Four Million Dollars ($4,000,000) and not to exceed Ten
Million Dollars ($10,000,000).

    

    NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and the Investors agree as
follows:

     

    ARTICLE
I.

     

    DEFINITIONS

     

    1.1 Definitions.  In
addition to the terms defined elsewhere in this Agreement, for all purposes of
this Agreement, the following terms shall have the meanings indicated in this
Section 1.1:

     

     

     

     

    
      
         

      

      
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    "Action" means any action,
suit, inquiry, notice of violation, proceeding (including any partial proceeding
such as a deposition) or investigation pending or threatened in writing against
or affecting the Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative agency,
regulatory authority (federal, state, county, local or foreign), stock market,
stock exchange or trading facility.

     

    "Affiliate" means any Person
that, directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a Person, as such terms are used
in and construed under Rule 144.

     

    "Business Day" means any day
except Saturday, Sunday and any day that is a federal legal holiday or a day on
which banking institutions in the State of New York or State of Connecticut are
authorized or required by law or other governmental action to
close.

     

    "Closing" means the closing of
the purchase and sale of the Securities pursuant to Article II.

     

    "Closing Date" means the
Business Day immediately following the date on which all of the conditions set
forth in Sections 5.1 and 5.2 hereof are satisfied, or such other date as the
parties may agree.

     

    "Commission" means the
Securities and Exchange Commission.

     

    "Common Stock" means the
common stock of the Company, par value $0.001 per share, and any securities into
which such common stock may hereafter be reclassified.

     

    "Common Stock Equivalents"
means any securities of the Company or any Subsidiary which entitle the holder
thereof to acquire Common Stock at any time, including without limitation, any
debt, preferred stock, rights, options, warrants or other instrument that is at
any time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock or other securities that entitle the holder to
receive, directly or indirectly, Common Stock.

     

    "Company Counsel" means
Sichenzia Ross Friedman Ference LLP.

     

    “Company Deliverables” has the
meaning set forth in Section 2.2(a).

     

     

    “Confidential Prospective Purchaser
Questionnaire” has the meaning set forth

     

    in
Section 2.2(b)(ii) and is attached hereto as Exhibit E.

    

     

    “Disclosure Materials” has the
meaning set forth in Section 3.1(h).

     

    "Escrow Agreement" means the
Escrow Agreement, dated as of November 2, 2007, among the Company, ICP and the
escrow agent (the “Escrow
Agent”) set forth therein, in the form of Exhibit D
hereto.

     

     

     

     

    
      
         

      

      
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    "Exchange Act" means the
Securities Exchange Act of 1934, as amended.

     

    “GAAP” means U.S. generally
accepted accounting principles.

     

    “ICP” ” means International
Capital Partners

     

    “Intellectual Property Rights”
has the meaning set forth in Section 3.1(p).

     

    "Investment Amount" means,
with respect to each Investor, the product of the Per Unit Purchase Price
multiplied by the number of Units being purchased by such Investor (as indicated
on such Investor’s signature page to this Agreement).

     

    “Investor Deliverables” has
the meaning set forth in Section 2.2(b).

     

    “Investor Party” has the
meaning set forth in Section 4.7.

     

    "Lien" means any lien, charge,
encumbrance, security interest, right of first refusal or other restrictions of
any kind.

     

    “Material Adverse Effect”
means any of (i) a material and adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material and adverse effect
on the results of operations, assets, prospects, business or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole,
or (iii) an adverse impairment to the Company's ability to perform on a timely
basis its obligations under any Transaction Document.

     

    “New York Courts” means the
state and federal courts sitting in the City of New York, Borough of
Manhattan.

     

    "Outside Date" means December 7,
2007.

     

    “Per Unit Purchase Price” means
$0.50 per Unit.

     

    “Person” means an individual
or corporation, partnership, trust, incorporated or unincorporated association,
joint venture, Limited Liability Company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.

     

    “Proceeding” means an action,
claim, suit, investigation or proceeding (including, without limitation, an
investigation or partial proceeding, such as a deposition), whether commenced or
threatened.

     

     “Rule 144” means Rule
144 promulgated by the Commission pursuant to the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
Rule.

     

    “SEC Reports” has the meaning
set forth in Section 3.1(h).

     

    “Securities” means the Shares,
the Warrants and the Warrant Shares.

     

     

    
      
         

      

      
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    “Securities Act” means the
Securities Act of 1933, as amended.

     

    “Shares” means the shares of
Common Stock issued or issuable to the Investors pursuant to this
Agreement.

     

    “Short Sales” include, without
limitation, all “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the Exchange Act and all types of direct and indirect stock
pledges, forward sale contracts, options, puts, calls, swaps and similar
arrangements (including on a total return basis), and sales and other
transactions through non-US broker dealers or foreign regulated
brokers.

     

    “Subsidiary” means any
“significant subsidiary” as defined in Rule 1-02(w) of Regulation S-X
promulgated by the Commission under the Exchange Act.

     

    “Trading Day” means (i) a day
on which the Common Stock is traded on a Trading Market, or (ii) if the Common
Stock is not quoted on any Trading Market, a day on which the Common Stock is
quoted in the over-the-counter market as reported by the Pink Sheets, LLC (or
any similar organization or agency succeeding to its functions of reporting
prices); provided, that in the event that the Common Stock is not listed or
quoted as set forth in (i) and (ii) hereof, then Trading Day shall mean a
Business Day.

     

    “Trading Market” means
whichever of the New York Stock Exchange, the American Stock Exchange, the
NASDAQ National Market, the NASDAQ SmallCap Market or OTC Bulletin Board on
which the Common Stock is listed or quoted for trading on the date in
question.

     

    “Transaction Documents” means
this Agreement, the Warrants, the Escrow Agreement and any other documents or
agreements executed in connection with the transactions contemplated
hereunder.

     

    “Unit” shall mean one Share of
the Company’s common stock and a Warrant to purchase one-half share of the
Company common stock.

     

    "Warrants" means the Common
Stock purchase warrants in the form of Exhibit
B.

     

    "Warrant Shares" means the
shares of Common Stock issuable upon exercise of the Warrants.

     

    ARTICLE
II.

     

    PURCHASE
AND SALE

     

    2.1 Closing.  Subject
to the terms and conditions set forth in this Agreement, at the Closing the
Company shall issue and sell to each Investor, and each Investor shall,
severally and not jointly, purchase from the Company, the Shares and the
Warrants representing such Investor’s Investment Amount.  The Closing
shall take place at the offices of Sichenzia Ross Friedman Ference LLP, 61
Broadway, 32nd Floor,
New York, NY 10006 on the Closing Date or at such other location or time as the
parties may agree.

     

     

    
      
         

      

      
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    2.2 Closing
Deliveries.  (a)  At the Closing, the Company shall
deliver or cause to be delivered to each Investor and the Placement Agent the
following (the "Company
Deliverables"):

     

    (i) a
certificate evidencing the number of Shares indicated on such Investor’s
signature page to this Agreement, registered in the name of such
Investor;

     

    (ii) a Form of
Warrant in the name of such Investor, pursuant to which such Investor shall have
the right, if the conditions contained within the Warrant are satisfied,
attached hereto as Exhibit B, to
exercise the Warrant on the 2 year anniversary of the Closing Date giving the
Subscriber the right to acquire the number of shares of Common Stock equal to
50% of the number of Shares issued and retained  by such Investor
pursuant to Section 2.2(a)(i);

     

    (iii) the legal
opinion of Company Counsel, in agreed form, addressed to the
Investors;

     

    (iv) the
Escrow Agreement, duly executed by the Company, ICP and the Escrow
Agent.

     

    (b) At the
Closing, each Investor shall deliver or cause to be delivered the following (the
"Investor
Deliverables"):

     

    (i) to the
Escrow Agent, its Investment Amount, in United States dollars and in immediately
available funds, by wire transfer to an account designated in writing by the
Escrow Agent for such purpose; and

     

    (ii) to the
Company the Confidential Prospective Questionnaire

     

    ARTICLE
III.

    REPRESENTATIONS
AND WARRANTIES

     

    3.1 Representations and
Warranties of the Company.  The Company hereby makes the
following representations and warranties to each Investor and the Placement
Agent :

     

    (a) Subsidiaries.  The
Company has no direct or indirect Subsidiaries other than as specified in the
SEC Reports.  Except as disclosed in Schedule 3.1(a), the
Company owns, directly or indirectly, all of the capital stock of each
Subsidiary free and clear of any and all Liens, and all the issued and
outstanding shares of capital stock of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar
rights.

     

    (b) Organization and
Qualification.  The Company and each Subsidiary are duly
incorporated or otherwise organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted.  Neither the Company nor any Subsidiary is in violation of
any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter
documents.  The Company and each Subsidiary are duly qualified to
conduct its respective businesses and are in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case may
be, could not, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect.

     

     

     

    
      
         

      

      
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    (c) Authorization;
Enforcement.  The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
thereunder.  The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company in
connection therewith.  Each Transaction Document has been (or upon
delivery will have been) duly executed by the Company and, when delivered in
accordance with the terms hereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.

     

    (d) No
Conflicts.  The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse
Effect.

     

    (e) Filings, Consents and
Approvals.  The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) filings required by state securities laws, (ii) the filing of a Notice of
Sale of Securities on Form D with the Commission under Regulation D of the
Securities Act, (iii) the filings required in accordance with Section 4.5 and
(iv) those that have been made or obtained prior to the date of this
Agreement.

     

    (f) Issuance of the
Securities.  The Securities have been duly authorized and, when
issued and paid for in accordance with the Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of all
Liens.  As of the Closing, the Company will have reserved from its
duly authorized capital stock the shares of Common Stock issuable pursuant to
this Agreement and the Warrants in order to issue the Shares and the Warrant
Shares.

     

     

     

    
      
         

      

      
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    (g) Capitalization.  The
number of shares and type of all authorized, issued and outstanding capital
stock of the Company, and all shares of Common Stock reserved for issuance under
the Company’s various option and incentive plans, is specified in the SEC
Reports.  Except as specified in the SEC Reports, no securities of the
Company are entitled to preemptive or similar rights, and no Person has any
right of first refusal, preemptive right, right of participation, or any similar
right to participate in the transactions contemplated by the Transaction
Documents.  Except as specified in the SEC Reports, or as set forth on
Schedule 3.1(g), there are no outstanding options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional shares of
Common Stock, or securities or rights convertible or exchangeable into shares of
Common Stock.  The issue and sale of the Securities will not,
immediately or with the passage of time, obligate the Company to issue shares of
Common Stock or other securities to any Person (other than the Investors) and
will not result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange or reset price under such
securities.

     

    (h) SEC Reports; Financial
Statements.  Except as disclosed on Schedule 3.1(h), the
Company has filed all reports required to be filed by it under the Securities
Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the twelve months preceding the date hereof (or such shorter period as the
Company was required by law to file such reports) (the foregoing materials being
collectively referred to herein as the "SEC Reports" and, together
with the Schedules to this Agreement (if any), the "Disclosure Materials") on a
timely basis or has timely filed a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such
extension.  As of their respective dates, the SEC Reports complied in
all material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.  The
financial statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of
filing.  Such financial statements have been prepared in accordance
with GAAP applied on a consistent basis during the periods involved, except as
may be otherwise specified in such financial statements or the notes thereto,
and fairly present in all material respects the financial position of the
Company and its consolidated Subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end audit
adjustments. The Company shall continue to timely file all SEC Reports in order
to enable Investors to sell their Shares in reliance on Rule 144 under the 1933
Act.  If, at any time after an Investor has held or is deemed to have
held his, her, or its Shares for a period of more than one year following
Closing and is not yet eligible to sell his, her or its Shares in reliance on
Rule 144(k) under the 1933 Act, the Company does not timely file an SEC Report
resulting in Investor’s inability to sell his Shares in reliance on Rule 144,
the Company will be liable to each such Investor for partial liquidated damages
for each Unit Share then eligible to be sold, in each instance, until cured, in
the amount of 1% of the aggregate Subscription Amount of the Shares then held by
such Investor for each 30 day period up to a maximum of 180 days

     

    (i) Press
Releases.  The press releases disseminated by the Company
during the twelve months preceding the date of this Agreement taken as a whole
do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made and
when made, not misleading.

     

     

     

    
      
         

      

      
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    (j) Material
Changes.  Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports or on Schedule 3.1(j), (i)
there has been no event, occurrence or development that has had or that could
reasonably be expected to result in a Material Adverse Effect, (ii) the Company
has not incurred any liabilities (contingent or otherwise) other than (A) trade
payables, accrued expenses and other liabilities incurred in the ordinary course
of business consistent with past practice and (B) liabilities not required to be
reflected in the Company's financial statements pursuant to GAAP or required to
be disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting or the identity of its auditors, (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock, and (v) the Company has not
issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option or restricted stock
plans.  The Company does not have pending before the Commission any
request for confidential treatment of information.

     

    (k) Litigation.  There
is no Action which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or (ii)
except as specifically disclosed in the SEC Reports, could, if there were an
unfavorable decision, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect.  Neither the Company
nor any Subsidiary, nor any director or officer thereof (in his or her capacity
as such), is or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty, except as specifically disclosed in the SEC
Reports.  There has not been, and to the knowledge of the Company,
there is not pending any investigation by the Commission involving the Company
or any current or former director or officer of the Company (in his or her
capacity as such).  The Commission has not issued any stop order or
other order suspending the effectiveness of any registration statement filed by
the Company or any Subsidiary under the Exchange Act or the Securities
Act.

     

    (l) Labor
Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company.

     

    (m) Compliance.  Except
as disclosed in the SEC Reports, neither the Company nor any Subsidiary (i) is
in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws relating to taxes, environmental protection, occupational health
and safety, product quality and safety and employment and labor matters, except
in each case as could not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect. The Company is in compliance
with all effective requirements of the Sarbanes-Oxley Act of 2002, as amended,
and the rules and regulations thereunder, that are applicable to it, except
where such noncompliance could not have or reasonably be expected to result in a
Material Adverse Effect.

     

    
      
         

      

      
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    (n) Regulatory
Permits.  The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect, and neither the
Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any such permits.

     

    (o) Title to
Assets.  Except as disclosed on Schedule 3.1(o), the
Company and the Subsidiaries have good and marketable title in fee simple to all
real property owned by them that is material to their respective businesses and
good and marketable title in all personal property owned by them that is
material to their respective businesses, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries. Any real property and
facilities held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance, except as could not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect.

     

    (p) Patents and
Trademarks.  The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have could, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect (collectively, the "Intellectual Property
Rights").  Neither the Company nor any Subsidiary has received
a written notice that the Intellectual Property Rights used by the Company or
any Subsidiary violates or infringes upon the rights of any
Person.  Except as set forth in the SEC Reports, to the knowledge of
the Company, all such Intellectual Property Rights are enforceable and there is
no existing infringement by another Person of any of the Intellectual Property
Rights.

     

    (q) Insurance.  The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged.  The Company has no reason to believe that it will not be
able to renew its and the Subsidiaries’ existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business on terms consistent with market for the
Company’s and such Subsidiaries’ respective lines of business.

     

    (r) Transactions With Affiliates
and Employees.  Except as set forth in the SEC Reports, none of
the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.

     

    (s) Internal Accounting
Controls.  Except as disclosed in the SEC Reports, the Company
and the Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.  The Company has established
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for the Company and designed such disclosure controls and
procedures to ensure that material information relating to the Company,
including its Subsidiaries, is made known to the certifying officers by others
within those entities, particularly during the period in which the Company’s
Form 10-K or 10-Q, as the case may be, is being prepared.  The
Company's certifying officers have evaluated the effectiveness of the Company's
controls and procedures in accordance with Item 307 of Regulation S-K under the
Exchange Act for the Company’s most recently ended fiscal quarter or fiscal
year-end (such date, the "Evaluation
Date").  The Company presented in its most recently filed Form
10-KSB or Form 10-Q the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date.  Since the Evaluation Date,
there have been no significant changes in the Company’s internal controls (as
such term is defined in Item 308(c) of Regulation S-K under the Exchange Act)
or, to the Company's knowledge, in other factors that could significantly affect
the Company's internal controls.

     

    (t) Solvency.  Based
on the financial condition of the Company as of the Closing Date (and assuming
that the Closing shall have occurred), (i) the Company's fair saleable value of
its assets exceeds the amount that will be required to be paid on or in respect
of the Company's existing debts and other liabilities (including known
contingent liabilities) as they mature, (ii) the Company's assets do not
constitute unreasonably small capital to carry on its business for the current
fiscal year as now conducted and as proposed to be conducted including its
capital needs taking into account the particular capital requirements of the
business conducted by the Company, and projected capital requirements and
capital availability thereof, and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate all
of its assets, after taking into account all anticipated uses of the cash, would
be sufficient to pay all amounts on or in respect of its debt when such amounts
are required to be paid.  The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its
debt).

     

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    (u) Certain Registration
Matters. Assuming the accuracy of the Investors’ representations and
warranties set forth in Section 3.2(b)-(e), no registration under the Securities
Act is required for the offer and sale of the Shares and Warrant Shares by the
Company to the Investors under the Transaction Documents.  The Company
is eligible to register the resale of its Common Stock for resale by the
Investors under Form SB-2 promulgated under the Securities
Act.  Except as specified in Schedule 3.1(u), the
Company has not granted or agreed to grant to any Person any rights (including
"piggy-back" registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority that have not
been satisfied.

     

    (v) Listing and Maintenance
Requirements.  Except as specified in the SEC Reports and on
Schedule
3.1(v), the Company has not, in the two years preceding the date hereof,
received notice from any Trading Market to the effect that the Company is not in
compliance with the listing or maintenance requirements thereof.  The
Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with the listing and maintenance
requirements for continued listing of the Common Stock on the Trading Market on
which the Common Stock is currently listed or quoted.  The issuance
and sale of the Securities under the Transaction Documents does not contravene
the rules and regulations of the Trading Market on which the Common Stock is
currently listed or quoted, and no approval of the shareholders of the Company
thereunder is required for the Company to issue and deliver to the Investors the
Securities contemplated by Transaction Documents.

     

    (w) Investment
Company.  The Company is not, and is not an Affiliate of, and
immediately following the Closing will not have become, an “investment company”
within the meaning of the Investment Company Act of 1940, as
amended.

     

    (x) No Additional
Agreements.  The Company does not have any agreement or
understanding with any Investor with respect to the transactions contemplated by
the Transaction Documents other than as specified in the Transaction
Documents.

     

    (y) Disclosure.  The
Company confirms that neither it nor any Person acting on its behalf has
provided any Investor or its respective agents or counsel with any information
that the Company believes constitutes material, non-public information except
insofar as the existence and terms of the proposed transactions hereunder may
constitute such information. The Company understands and confirms that the
Investors will rely on the foregoing representations and covenants in effecting
transactions in securities of the Company.  All disclosure provided to
the Investors regarding the Company, its business and the transactions
contemplated hereby, furnished by or on behalf of the Company (including the
Company’s representations and warranties set forth in this Agreement) are true
and correct and do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.

     

    (z) Intentionally
Left Blank.

     

    (aa)           Tax Returns and
Payments.  The Company and each of its
Subsidiaries

    have
filed all tax returns (federal, state and local) required to be filed by
it.  All taxes shown to be due and payable on such returns, any
assessments imposed, and all other taxes due and payable by the Company or any
of its Subsidiaries on or before the Closing, have been paid or will be paid
prior to the time they become delinquent.  Except as set forth on
Schedule 3.1(aa), neither the Company nor any of its Subsidiaries has been
advised:

    

    (i)           that
any of its returns, federal, state or other, have been or are being audited as
of the date hereof; or

    

    (ii)           of
any adjustment, deficiency, assessment or court decision in respect of its
federal, state or other taxes.

    

    The
Company has no knowledge of any liability for any tax to be imposed upon its
properties or assets as of the date of this Agreement that is not adequately
provided for.

    

    (bb)           Registration Rights and
Voting Rights.  Except as set forth on Schedule 3.1(bb), except
as disclosed in the Company’s SEC Reports, neither the Company nor any of its
Subsidiaries is presently under any obligation, and neither the Company nor any
of its Subsidiaries has granted any rights, to register any of the Company’s or
any of its Subsidiaries’ presently outstanding securities or any of its
securities that may hereafter be issued.  Except as set forth on
Schedule 3.1(bb), except as disclosed in the Company’s SEC Reports, to the
Company’s knowledge, no stockholder of the Company or any of its Subsidiaries
has entered into any agreement with respect to the voting of equity securities
of the Company or any of its Subsidiaries.

    

    (cc)           Environmental and Safety
Laws.  Neither the Company nor any of its

    Subsidiaries
is in violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.  Except as set forth on Schedule 3.1(cc),
no Hazardous Materials (as hereinafter defined in this Section 3.1(cc)) are used
or have been used, stored, or disposed of by the Company or any of its
Subsidiaries or, to the Company’s knowledge, by any other person or entity on
any property owned, leased or used by the Company or any of its
Subsidiaries.  For the purposes of the preceding sentence, “Hazardous
Materials” shall mean:

     

     

    
 

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

     

    (i)           materials
which are listed or otherwise defined as “hazardous” or “toxic” under any
applicable local, state, federal and/or foreign laws and regulations that govern
the existence and/or remedy of contamination on property, the protection of the
environment from contamination, the control of hazardous wastes, or other
activities involving hazardous substances, including building materials;
or

    

    (ii)           any
petroleum products or nuclear materials.

    

    
      	
              (dd)  

            	
              Valid
      Offering.  Assuming the accuracy of the representations
      and

            

    

    warranties
of the Investors contained in this Agreement and any other documents or
agreements executed in connection with the transactions contemplated hereunder,
the offer, sale and issuance of the Securities will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
“Securities Act”), by reason of Regulation S thereunder and will have been
registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
securities laws.

    

    
      	
              (ee)  

            	
              Maintenance of Oil and
      Gas Properties.  The oil and gas properties of
      the

            

    

    Company
have been maintained, operated and developed in a good and workmanlike manner
and in conformity in all material respects with all governmental requirements
and in conformity in all material respects with the provisions of all leases,
subleases or other contracts comprising a part of the oil and gas properties and
other contracts and agreements forming a part of the oil and gas properties of
the Company.  Specifically in connection with the foregoing, (i) no
oil and gas property of the Company is subject to having allowable production
reduced below the full and regular allowable (including the maximum permissible
tolerance) because of any overproduction (whether or not the same was
permissible at the time) and (ii) none of the wells comprising a part of the oil
and gas properties of the Company is deviated from the vertical more than the
maximum permitted by governmental requirements, and such wells are, in fact,
bottomed under and are producing from, and the well bores are wholly within, the
oil and gas properties of the Company.  All pipelines, wells, gas
processing plants, platforms and other material improvements, fixtures and
equipment owned in whole or in part by the Company that are necessary to conduct
normal operations are being maintained in a state adequate to conduct normal
operations, and with respect to such of the foregoing which are operated by the
Company, in a manner consistent with such Company’s past practices.

    

    3.2 Representations and
Warranties of the Investors.  Each Investor hereby, for itself
and for no other Investor, represents and warrants to the Company and Placement
Agent as follows:

     

    (a)           Authority.  The
execution, delivery and performance by such Investor of the transactions
contemplated by this Agreement has been duly authorized by all necessary
corporate or, if such Investor is not a corporation, such partnership, limited
liability company or other applicable like action, on the part of such
Investor.  This Agreement has been duly executed by such Investor, and
when delivered by such Investor in accordance with terms hereof, will constitute
the valid and legally binding obligation of such Investor, enforceable against
it in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general application. The
Investor agrees that it is acquiring the Securities in an offshore transaction
pursuant to Regulation S, promulgated under the Securities Act, and hereby
represents to the Company as follows:

     

    (i)           Investor
is outside the United States when receiving and executing this Agreement;
and

     

    (ii)           Investor
has not acquired the Securities as a result of, and will not itself engage in,
any “directed selling efforts” (as defined in Regulation S under the Securities
Act) in the United States in respect of the Securities which would include any
activities undertaken for the purpose of, or that could reasonably be expected
to have the effect of, conditioning the market in the United States for the
resale of the Securities; provided, however, that the Investor may sell or
otherwise dispose of the Securities pursuant to registration of the Securities
under the Securities Act and any applicable state and provincial securities laws
or under an exemption from such registration requirements and as otherwise
provided herein.

     

    (b)           Compliance with U.S.
Securities Laws.  The Investor agrees that the Company will
refuse to register any transfer of the Securities not made in accordance with
the provisions of Regulation S, pursuant to an effective registration statement
under the Securities Act, or pursuant to an available exemption from the
registration requirements of the Securities Act and in accordance with
applicable state and provincial securities laws.

     

     

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    (c)           Distribution Compliance
Period.  The Investor understands and agrees that offers and
sales of any of the Securities prior to the expiration of a period of one year
after the date of transfer of the Securities under this Subscription Agreement
(the “Distribution Compliance Period”), shall only be made in compliance with
the safe harbor provisions set forth in Regulation S, pursuant to the
registration provisions of the Securities Act or an exemption therefrom, and
that all offers and sales after the Distribution Compliance Period shall be made
only in compliance with the registration provisions of the Securities Act or an
exemption therefrom, and in each case only in accordance with all applicable
securities laws.

     

    (d)           Investor
Status.  At the time such Investor was offered the Securities,
it was, and at the date hereof it is, and on each date on which it exercises
Warrants it will be, an "accredited investor" as defined in Rule 501(a) under
the Securities Act.  Such Investor is not a registered broker-dealer
under Section 15 of the Exchange Act.

     

    (e)           General
Solicitation.  Such Investor is not purchasing the Securities
as a result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or similar media
or broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

     

    (f)           Access to
Information.  Such Investor acknowledges that it has reviewed
the Disclosure Materials and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Shares and the merits and risks of investing in the Securities;
(ii) access to information about the Company and the Subsidiaries and their
respective financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment; and
(iii) the opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment.  Neither such inquiries nor any other investigation
conducted by or on behalf of such Investor or its representatives or counsel
shall modify, amend or affect such Investor's right to rely on the truth,
accuracy and completeness of the Disclosure Materials and the Company's
representations and warranties contained in the Transaction
Documents.

     

    (g)           Certain Trading
Activities.  Such Investor has not directly or indirectly, nor
has any Person acting on behalf of or pursuant to any understanding with such
Investor, engaged in any transactions in the securities of the Company
(including, without limitations, any Short Sales involving the Company’s
securities) since the earlier to occur of (1) the time that such Investor was
first contacted by the Company or ICP regarding an investment in the Company and
(2) the 30th
calendar day prior to the date of this Agreement.  Such Investor
covenants that neither it nor any Person acting on its behalf or pursuant to any
understanding with it will engage in any transactions in the securities of the
Company (including Short Sales) prior to the time that the transactions
contemplated by this Agreement are publicly disclosed.

     

    (h)           Limited
Ownership.                                           
The purchase by such Investor of the Securities issuable to it at the Closing
will not result in such Investor (individually or together with any other Person
with whom such Investor has identified, or will have identified, itself as part
of a “group” in a public filing made with the Commission involving the Company’s
securities) acquiring, or obtaining the right to acquire, in excess of 19.999%
of the outstanding shares of Common Stock or the voting power of the Company on
a post transaction basis that assumes that the Closing shall have
occurred.  Such Investor does not presently intend to, alone or
together with others, make a public filing with the Commission to disclose that
it has (or that it together with such other Persons have) acquired, or obtained
the right to acquire, as a result of the Closing (when added to any other
securities of the Company that it or they then own or have the right to
acquire), in excess of 19.999% of the outstanding shares of Common Stock or the
voting power of the Company on a post transaction basis that assumes that the
Closing shall have occurred.

     

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    (i)           Independent Investment
Decision.  Such Investor has independently evaluated the merits
of its decision to purchase Securities pursuant to the Transaction Documents,
and such Investor confirms that it has not relied on the advice of any other
Investor’s business and/or legal counsel in making such
decision.  Such Investor has not relied on the business or legal
advice of ICP or any of its agents, counsel or Affiliates in making its
investment decision hereunder, and confirms that none of such Persons has made
any representations or warranties to such Investor in connection with the
transactions contemplated by the Transaction Documents.

     

    The
Company acknowledges and agrees that no Investor has made or makes any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.

     

    ARTICLE
IV.

     

    OTHER
AGREEMENTS OF THE PARTIES

     

    4.1 (a)           Securities
may only be disposed of in compliance with state and federal securities
laws.  In connection with any transfer of the Securities other than
pursuant to an effective registration statement, to the Company, to an Affiliate
of an Investor or in connection with a pledge as contemplated in Section 4.1(b),
the Company may require the transferor thereof to provide to the Company an
opinion of counsel selected by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the
Securities Act.

     

    (b)           Certificates
evidencing the Securities will contain the following legend, until such time as
they are not required under Section 4.1(c):

     

    THESE
SECURITIES WERE ISSUED IN AN OFFSHORE TRANSACTION TO PERSONS WHO ARE NOT U.S.
PERSONS (AS DEFINED HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”).  ACCORDINGLY,
NONE OF THE SECURITIES TO WHICH THIS CERTIFICATE RELATES HAVE BEEN REGISTERED
UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO
REGISTERED, NONE MAY BE OFFERED OR SOLD IN THE UNITED STATES OR, DIRECTLY OR
INDIRECTLY, TO U.S. PERSONS (AS DEFINED HEREIN) EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.  IN ADDITION,
HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN
ACCORDANCE WITH THE 1933 ACT.

     

    The Company acknowledges and agrees
that an Investor may from time to time pledge, and/or grant a security interest
in some or all of the Securities pursuant to a bona fide margin agreement in
connection with a bona fide margin account and, if required under the terms of
such agreement or account, such Investor may transfer pledged or secured
Securities to the pledgees or secured parties.  Such a pledge or
transfer would not be subject to approval or consent of the Company and no legal
opinion of legal counsel to the pledgee, secured party or pledgor shall be
required in connection with the pledge, but such legal opinion may be required
in connection with a subsequent transfer following default by the Investor
transferee of the pledge.  No notice shall be required of such
pledge.  At the appropriate Investor’s expense, the Company will
execute and deliver such reasonable documentation as a pledgee or secured party
of Securities may reasonably request in connection with a pledge or transfer of
the Securities including the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) of the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of Selling
Stockholders thereunder.

     

    (c)           Certificates
evidencing the Shares and Warrant Shares shall not contain any legend (including
the legend set forth in Section 4.1(b)): (i) following a sale or transfer of
such Securities pursuant to an effective registration statement or (ii)
following a sale or transfer of such Shares or Warrant Shares pursuant to Rule
144 (assuming the transferor is not an Affiliate of the Company), or (iii) while
such Shares or Warrant Shares are eligible for sale under Rule
144(k).  The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section.

     

    4.2 Furnishing of
Information.  As long as any Investor owns the Securities, the
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act.  As long
as any Investor owns Securities, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to the Investors and make
publicly available in accordance with Rule 144(c) such information as is
required for the Investors to sell the Shares and Warrant Shares under Rule 144.
The Company further covenants that it will take such further action as any
holder of Securities may reasonably request, all to the extent required from
time to time to enable such Person to sell the Shares and Warrant Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.  If, at any time after an Investor has held or
is deemed to have held his, her, or its Common Shares comprising part of the
Units (the “Unit Shares’) or Warrant Shares for a period of more than one year
and is not yet eligible to sell his, her or its Unit Shares or Warrant Shares in
reliance on Rule 144(k) under the  Securities Act, the Company is or
becomes delinquent with regard to the filing of an Exchange Act report resulting
in an Investor’s inability to sell his, her, or its Unit Shares or Warrant
Shares in reliance on Rule 144, the Company will be liable to each such Investor
for partial liquidated damages, in each instance, until cured, in the amount of
one percent (1% ) for each thirty (30) day period, of the aggregate subscription
amount paid for the number of Unit Shares and/or Warrant Shares that are then
eligible for sale, as the case may be with respect to which the Investors
experience an inability to sell in reliance on Rule 144; provided, however, that
in no event shall the Company be liable for such partial liquidated damages for
any period in excess of an aggregate of one hundred and eighty (180)
days.

     

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

     

    4.3 Integration.  The
Company shall not, and shall use its best efforts to ensure that no Affiliate of
the Company shall, sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities in a
manner that would require the registration under the Securities Act of the sale
of the Securities to the Investors, or that would be integrated with the offer
or sale of the Securities for purposes of the rules and regulations of any
Trading Market in a manner that would require stockholder approval of the sale
of the securities to the Investors.

     

    4.4 Securities Laws Disclosure;
Publicity.  By 9:00 a.m. (New York time) on the 4th Trading
Day following the execution of this Agreement, and by 9:00 a.m. (New York time)
on the 4th Trading
Day following the Closing Date, the Company shall issue press releases
disclosing the transactions contemplated hereby and the Closing.  On
the 4th Trading
Day following the Closing Date of this Agreement the Company will file a Current
Report on Form 8-K disclosing the material terms of the Transaction Documents
(and attach as exhibits thereto the Transaction Documents) and disclosing the
Closing.  In addition, the Company will make such other filings and
notices in the manner and time required by the Commission and the Trading Market
on which the Common Stock is listed.  Notwithstanding the foregoing,
the Company shall not publicly disclose the name of any Investor, or include the
name of any Investor in any filing with the Commission (other than any exhibits
to filings made in respect of this transaction in accordance with periodic
filing requirements under the Exchange Act) or any regulatory agency or Trading
Market, without the prior written consent of such Investor, except to the extent
such disclosure is required by law or Trading Market regulations.

     

    

     

    4.5 Indemnification of
Investors.  The Company will indemnify and hold the Investors
and their directors, officers, shareholders, partners, employees and agents
(each, an "Investor
Party") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation (collectively, "Losses") that any such
Investor Party may suffer or incur as a result of or relating to any
misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any Transaction
Document.  In addition to the indemnity contained herein, the Company
will reimburse each Investor Party for its reasonable legal and other expenses
(including the cost of any investigation, preparation and travel in connection
therewith) incurred in connection therewith, as such expenses are
incurred.

     

    4.6 Non-Public
Information.  The Company covenants and agrees that neither it
nor any other Person acting on its behalf will provide any Investor or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Investor shall have
executed a written agreement regarding the confidentiality and use of such
information.  The Company understands and confirms that each Investor
shall be relying on the foregoing representations in effecting transactions in
securities of the Company.

     

    4.7 Listing of
Securities.  The Company agrees, (i) if the Company applies to
have the Common Stock traded on any other Trading Market, it will include in
such application the Shares and Warrant Shares, and will take such other action
as is necessary or desirable to cause the Shares and Warrant Shares to be listed
on such other Trading Market as promptly as possible, and (ii) it will take all
action reasonably necessary to continue the listing and trading of its Common
Stock on a Trading Market and will comply in all material respects with the
Company’s reporting, filing and other obligations under the bylaws or rules of
the Trading Market.

     

    4.8 Use of
Proceeds.  The Company will use the net proceeds from the sale
of the Securities hereunder for satisfaction of debt, acquisitions, general
working capital purposes and general and administrative expenses not otherwise
paid for by operating revenues.

     

    ARTICLE
V.

    CONDITIONS
PRECEDENT TO CLOSING

    

    5.1 Conditions Precedent to the
Obligations of the Investors to Purchase Securities.  The
obligation of each Investor to acquire Securities at the Closing is subject to
the satisfaction or waiver by such Investor, at or before the Closing, of each
of the following conditions:

     

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    (a) Representations and
Warranties.  The representations and warranties of the Company
contained herein shall be true and correct in all material respects as of the
date when made and as of the Closing as though made on and as of such
date;

     

    (b) Performance.  The
Company shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by it at or prior to the
Closing;

     

    (c) No
Injunction.  No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents;

     

    (d) Adverse
Changes.  Since the date of execution of this Agreement, no
event or series of events shall have occurred that reasonably could have or
result in a Material Adverse Effect;

     

    (e) No Suspensions of Trading in
Common Stock; Listing.  Trading in the Common Stock shall not
have been suspended by the Commission or any Trading Market (except for any
suspensions of trading of not more than one Trading Day solely to permit
dissemination of material information regarding the Company) at any time since
the date of execution of this Agreement, and the Common Stock shall have been at
all times since such date listed for trading on a Trading Market;

     

    (f) Company
Deliverables.  The Company shall have delivered the Company
Deliverables in accordance with Section 2.2(a).

     

    5.2 Conditions Precedent to the
Obligations of the Company to sell Securities.  The obligation
of the Company to sell Securities at the Closing is subject to the satisfaction
or waiver by the Company, at or before the Closing, of each of the following
conditions:

     

    (a) Representations and
Warranties.  The representations and warranties of each
Investor contained herein shall be true and correct in all material respects as
of the date when made and as of the Closing Date as though made on and as of
such date;

     

    (b) Performance.  Each
Investor shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Investor at or
prior to the Closing;

     

    (c) No
Injunction.  No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents;

     

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    (d) Investors
Deliverables.  Each Investor shall have delivered its Investors
Deliverables in accordance with Section 2.2(b).

     

    ARTICLE
VI.

     

    MISCELLANEOUS

     

    6.1 Fees and
Expenses.  Each party shall pay the fees and expenses of its
advisers, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of the Transaction Documents, however the Company shall pay all of
its own legal fees as well as those legal fees of ICP, plus all stamp and other
taxes and duties levied in connection with the sale of the Shares.

     

    6.2 Entire
Agreement.  The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements,
understandings, discussions and representations, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.

     

    6.3 Notices.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile (provided the sender receives a
machine-generated confirmation of successful transmission) at the facsimile
number specified in this Section prior to 6:30 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a Trading Day or later than 6:30
p.m. (New York City time) on any Trading Day, (c) the Trading Day following the
date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is required
to be given.  The address for such notices and communications shall be
as follows:

     

    
      	
               
      

            	
              If
      to the Company:

            

    

    

    
      	
               
      

            	
              Index
      Oil and Gas, Inc.

            

    

    
      	
               
      

            	
              10000
      Memorial Drive

            

    

    
      	
               
      

            	
              Suite
      440

            

    

    
      	
               
      

            	
              Houston,
      Texas 77024

            

    

    
      	
               
      

            	
              Phone:
      (212) 683-0800

            

    

    
      	
               
      

            	
              Facsimile:
      (212) 956-8855

            

    

    

    With a
copy to:

    

    
      	
               
      

            	
              Sichenzia
      Ross Friedman Ference LLP

            

    

    
      	
               
      

            	
              61
      Broadway, 32nd
      Floor

            

    

    
      	
               
      

            	
              New
      York, New York 10006

            

    

    
      	
               
      

            	
              Att:
      Richard Friedman, Esq.

            

    

    
      	
               
      

            	
              Phone:
      (212) 930-9700

            

    

    
      	
               
      

            	
              Facsimile:
      (212) 930-9725

            

    

    

    

    

    
      	
               
      

            	
              If
      to an Investor:

            	
              To
      the address set forth under such Investor's
name

            

    

    
      	
               
      

            	
              on
      the signature pages hereof;

            

    

    

     

    or such
other address as may be designated in writing hereafter, in the same manner, by
such Person.

     

    6.4 Amendments; Waivers; No
Additional Consideration.  No provision of this Agreement may
be waived or amended except in a written instrument signed by the Company and
the Investors holding a majority of the Shares.  No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such
right.  No consideration shall be offered or paid to any Investor to
amend or consent to a waiver or modification of any provision of any Transaction
Document unless the same consideration is also offered to all Investors who then
hold Shares.

     

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    6.5 Termination.  This
Agreement may be terminated prior to Closing:

     

    (a) by
written agreement of the Investors and the Company; and

     

    (b) by the
Company or an Investor (as to itself but no other Investor) upon written notice
to the other, if the Closing shall not have taken place by 6:30 p.m. Eastern
time on the Outside Date, as such may be extended pursuant to Section 6.5(c)
hereof; provided, that the
right to terminate this Agreement under this Section 6.5(b) shall not be
available to any Person whose failure to comply with its obligations under this
Agreement has been the cause of or resulted in the failure of the Closing to
occur on or before such time.

     

    In the event of a termination pursuant
to this Section, the Company shall promptly notify all non-terminating
Investors. Upon a termination in accordance with this Section 6.5, the Company
and the terminating Investor(s) shall not have any further obligation or
liability (including as arising from such termination) to the other and no
Investor will have any liability to any other Investor under the Transaction
Documents as a result therefrom.

     

    (c)           Notwithstanding
the termination provisions set forth in Section 6.5(b) the Outside Date may be
extended for up to 30 days by mutual agreement of ICP and the
Company.

     

    6.6 Construction.  The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.  The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.  This Agreement
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the Transaction
Documents.

     

    6.7 Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted
assigns.  The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Investors. Any
Investor may assign any or all of its rights under this Agreement to any Person
to whom such Investor assigns or transfers any Securities, provided such
transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions hereof that apply to the "Investors."

     

    6.8 No Third-Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.7 (as to each Investor
Party).

     

    6.9 Governing
Law.  All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law
thereof.  Each party agrees that all Proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective Affiliates, employees or agents) shall be
commenced exclusively in the New York Courts.  Each party hereto
hereby irrevocably submits to the exclusive jurisdiction of the New York Courts
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of the any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any Proceeding, any claim that
it is not personally subject to the jurisdiction of any such New York Court, or
that such Proceeding has been commenced in an improper or inconvenient
forum.  Each party hereto hereby irrevocably waives personal service
of process and consents to process being served in any such Proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof.  Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law.  Each party hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby.  If either party
shall commence a Proceeding to enforce any provisions of a Transaction Document,
then the prevailing party in such Proceeding shall be reimbursed by the other
party for its reasonable attorneys’ fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such
Proceeding.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    6.10 Survival.  The
representations, warranties, agreements and covenants contained herein shall
survive the Closing and the delivery of the Securities.

     

    6.11 Execution.  This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart.  In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

     

    6.12 Severability.  If
any provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the
parties will attempt to agree upon a valid and enforceable provision that is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.

     

    6.13 Rescission and Withdrawal
Right.  Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) the Transaction Documents,
whenever any Investor exercises a right, election, demand or option under a
Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Investor may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.

     

    6.14 Replacement of
Securities.  If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested.  The applicants for a new certificate or
instrument under such circumstances shall also pay any reasonable third-party
costs associated with the issuance of such replacement Securities.  If
a replacement certificate or instrument evidencing any Securities is requested
due to a mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.

     

    6.15 Remedies.  In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of the Investors and the Company will
be entitled to specific performance under the Transaction
Documents.  The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agree to waive in any
action for specific performance of any such obligation the defense that a remedy
at law would be adequate.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    6.16 Payment Set
Aside.  To the extent that the Company makes a payment or
payments to any Investor pursuant to any Transaction Document or an Investor
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

     

    6.17 Independent Nature of
Investors' Obligations and Rights.  The obligations of each
Investor under any Transaction Document are several and not joint with the
obligations of any other Investor, and no Investor shall be responsible in any
way for the performance of the obligations of any other Investor under any
Transaction Document.  The decision of each Investor to purchase
Securities pursuant to the Transaction Documents has been made by such Investor
independently of any other Investor.  Nothing contained herein or in
any Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction
Documents.  Each Investor acknowledges that no other Investor has
acted as agent for such Investor in connection with making its investment
hereunder and that no Investor will be acting as agent of such Investor in
connection with monitoring its investment in the Securities or enforcing its
rights under the Transaction Documents.  Each Investor shall be
entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Investor to
be joined as an additional party in any proceeding for such
purpose.  The Company acknowledges that each of the Investors has been
provided with the same Transaction Documents for the purpose of closing a
transaction with multiple Investors and not because it was required or requested
to do so by any Investor.

     

    6.18 Limitation of
Liability.  Notwithstanding anything herein to the contrary,
the Company acknowledges and agrees that the liability of an Investor arising
directly or indirectly, under any Transaction Document of any and every nature
whatsoever shall be satisfied solely out of the assets of such Investor, and
that no trustee, officer, other investment vehicle or any other Affiliate of
such Investor or any investor, shareholder or holder of shares of beneficial
interest of such a Investor shall be personally liable for any liabilities of
such Investor.

     

    

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE
PAGES FOLLOW]

     

     

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

     

    
      
        	 	INDEX
      OIL AND GAS, INC.	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ 	 
	 	 	Name:
      Lyndon West	 
	 	 	Title:
      Chief Executive Officer	 
	 	 	 	 

      

    

     

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE
PAGES FOR INVESTORS FOLLOW]

     

     

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

     

    IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

     

     

    
    

     

    
      	 	NAME OF
      INVESTOR	 
	 	 	 
	 	By: 	 
	 	Name:	 
	 	Title:	 
	 	 	 
	 	Number of Shares
      being purchased: 	 
	 	Tax ID
No.:	 
	 	 	 
	 	ADDRESS FOR
      NOTICE	 
	 	 	 
	 	c/o:  	 
	 	Street:  	 
	 	City/State/Zip:	 
	 	Attention:	 
	 	Tel:	 
	 	Fax:	 
	 	 	 
	 	DELIVERY
      INSTRUCTIONS	 
	 	(if different
      from above)	 
	 	 	 
	 	c/o: 	 
	 	Street: 	 
	 	City/State/Zip:	 
	 	Attention:  	 
	 	Tel: 	 

    

     

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

     

                

                                                                             

    

              

     

    Exhibit
A

     

    SCHEDULE OF
SHAREHOLDERS

     

    

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    

     

    

     

    EXHIBIT
B

     

    LOYALTY
WARRANT

     

    

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

     

     

    EXHIBIT
C

     

    None
provided

     

     

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

     

     

    EXHIBIT
D

     

    ESCROW AGENT
AGREEMENT

     

    

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

     

    Exhibit
E

     

    INVESTOR
QUESTIONNAIRE

     

    

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

     

    SCHEDULE
3.1(a)

    

    SUBSIDIARIES

    

    The LLC
subsidiaries are capitalized by way of capital contributions and do not issue
capital stock.

    

    SCHEDULE
3.1(g)

    

    CAPITALIZATION

    

    

    On August
13, 2007, Mr. John G. Williams informed the Company that he was resigning from
his position as Executive Vice President Exploration and Production effective as
of November 1, 2007.  As such, 25,000 of unvested shares previously
awarded to Mr. Williams in August 2006 were forfeited and also 250,000 unvested
options previously awarded to Mr. Williams in March 2007 were forfeited and the
term of exercise for the remaining 250,000 vested options was changed to end on
March 19, 2008.

    

    During
the three months ended September 30, 2007, the Company issued a stock award of
25,000 shares of common stock to an employee contingent on 183 days of
continuous service.  Upon satisfaction of the terms of the award, the
employee will be issued 25,000 shares of restricted common stock of the
Company.

    

    During
the three months ended September 30, 2007, the Company also issued stock options
to purchase 125,000 shares of common stock to a new employee, of which 62,500
options vested on date of grant.

     

     

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

     

     

    
 

    SCHEDULE
3.1(h)

    

    SEC REPORTS; FINANCIAL
STATEMENTS

    

    

    None.

    

    

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

     

     

    SCHEDULE
3.1(j)

    

    MATERIAL
CHANGES

    

    

    None.

    

    

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

     

     

    SCHEDULE
3.1(o)

    

    TITLE TO
ASSETS

    

    None

    

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

    
       

       

       

      SCHEDULE
3.1 (u)

       

      CERTAIN REGISTRATION
MATTERS

    

    

    

    None.

    

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

     

     

    SCHEDULE
3.1 (v)

    

    LISTING AND MAINTENANCE
REQUIREMENTS

    

    

    None.

    

    
      
         

      

      
        32

        
          

        

      

      
         

      

    

    

    

    SCHEDULE
3.1 (aa)

    

    TAX RETURNS AND
PAYMENTS

    

    

    The legal
entity Index Oil and Gas Inc. has not filed any UK Corporation tax returns
pending agreement with the relevant authorities as to whether it is UK tax
resident.

    

    The
Company’s UK subsidiary, Index Oil & Gas Limited, has been notified it is be
subject to a Value Added Tax (VAT) audit.

    

    

    
      
         

      

      
        33

        
          

        

      

      
         

      

    

    

    SCHEDULE
3.1 (BB)

    

    REGISTRATION RIGHTS AND
VOTING RIGHTS

    

    

    None.

    

    
      
         

      

      
        34

        
          

        

      

      
         

      

    

     

     

    SCHEDULE
3.1 (cc)

    

    ENVIRONMENTAL AND SAFETY
LAWS

    

    

    None.

    

    

    

    

    

    

    

    35

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