Document:

Exhibit 10.19

 

CONTINENTAL-GEOPETRO (BENGARA-II) LTD.

 

SHARES 
SALE  & PURCHASE AGREEMENT

 

This agreement (the “Agreement”), is entered into on the 29th September 2006, by and among:

 

CNPCHK
(INDONESIA) LIMITED (hereinafter referred to as the “Buyer”), a British Virgin Islands company
whose registered address is P.O. Box 957, Offshore Incorporations Centre, Road
Town, Tortola, British Virgin Islands;

 

CONTINENTAL
ENERGY CORPORATION (hereinafter referred to as “Continental”), a British Columbia, Canada
corporation located at Suite 1200, 14001 Dallas Parkway, Dallas, Texas, 75240,
USA;

 

GEOPETRO
RESOURCES COMPANY (hereinafter referred to as “GeoPetro”), a California, USA, corporation
located at Suite 700, One Maritime Plaza, San Francisco, CA, 94111, USA; and

 

CNPC
(HONG KONG) LIMITED (hereinafter referred to as the “Guarantor”), a Bermuda company located at
39th Floor, 118 Connaught Road West, Hong Kong.

 

Continental and GeoPetro are also referred to
hereinafter as “Sellers” or
individually as the context may dictate as “Seller”.

 

RECITALS; THAT

 

Whereas, Continental-GeoPetro (Bengara-II) Ltd.
(hereinafter referred to as “CGB2”),
is a corporation with registered offices located at 4th Floor Ellen Skelton
Building, 3076 Drake’s Highway, Road Town, Tortola, British Virgin Islands and
principal operational offices located at Jl. R.S. Fatmawati 31A, Cilandak,
Jakarta, 12430, Indonesia.

 

Whereas, CGB2 was
incorporated under the name Apex (Bengara-II) Ltd. as an International Business
Company in the British Virgin Islands under the International Business
Companies Act on September 9, 1997 registration number 247888. Apex
(Bengara-II) Ltd. changed its name to Continental-Wisdom-GeoPetro (Bengara-II)
Ltd. on 5 June 2003. Continental-Wisdom-GeoPetro (Bengara-II) Ltd. changed its
name to Continental-GeoPetro (Bengara-II) Ltd. on 17 December 2003.

 

Whereas, CGB2 was
originally incorporated with an authorized share capital of US$50,000
consisting of 50,000 common shares of US$1.00 par value each, all of which are
issued, outstanding and fully paid up and as of the date hereof no changes have
been made to the authorized, issued, outstanding and fully paid up share
capital of CGB2.

 

Whereas, CGB2 was
formed expressly for the sole purpose of entering into, holding and operating the
Bengara-II Production Sharing Contract which it signed with Pertamina, the
state owned oil enterprise of the Republic of Indonesia, on December 4, 1997
(together with any amendments thereto, the “Bengara-II
PSC”, a copy of which is initialed by the Parties for the purpose of
identification). CGB2 owns an undivided 100% participating interest in the
contract rights in the Bengara-II PSC. CGB2 has no business interests, property
or assets other than those directly pertaining to the Bengara-II PSC.

 

Whereas, The
Bengara-II PSC covers a 3,650 square kilometers contract area (reduced from
4,867 square kilometers in a June 2001 Bengara-II PSC mandated relinquishment)
located partially onshore and partially offshore in the province of East
Kalimantan, Indonesia

 

1

 

(“Bengara-II
Block”). In accordance with the terms and conditions of the
Bengara-II PSC, CGB2 has the exclusive authority to conduct, along with BP
Migas, petroleum exploration and production operations within the Bengara-II
PSC contract area for up to 30 years from 4 December 1997.

 

Whereas, the duly
registered beneficial Shareholders of CGB2 are Continental, who holds 30,000
common shares representing a 60% ownership interest in CGB2 and GeoPetro, who
holds 20,000 common shares representing a 40% ownership interest in CGB2.

 

Whereas, the Buyer
wishes to purchase and take up a percentage share holding in CGB2 and thereby
participate with Continental and GeoPetro in CGB2 and for that purpose the
Parties have created this Agreement.

 

Whereas, the
Guarantor wishes to guarantee the performance of the Buyer’s obligations under
this Agreement.

 

Now therefore, in consideration of the mutual
covenants and agreements herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Parties covenant and agree with each other as follows:

 

Article-1:  INTERPRETATION

 

1.1                               DEFINITIONS

 

In this Agreement, including the premises,
schedules and the exhibits hereto the following defined terms shall have the
meaning ascribed thereto as follows:

 

“Applicable
Law” means the applicable provisions of any Law having jurisdiction
over CGB2 or any of the Bengara-II Assets, and includes, without limitation,
the applicable provisions of any Permit issued to CGB2 in respect of the
Bengara-II Assets or any of them.

 

“Bengara-II
Assets” means collectively (i) an undivided 100% participating
interest in CGB2’s contract rights and interests in the Bengara-II PSC; (ii)
any Permit issued to CGB2 by a governmental authority in respect of activities
under or related to the Bengara-II PSC; (iii) all of CGB2’s rights and
interests under its third party contracts including any oil and gas sales
contracts, gas processing agreements and product offtake agreements; (iv) CGB2’s
bank accounts; and (v) all seismic, geological and well reports and other
assessment materials and technical data within and pertaining to the Bengara-II
PSC contract area.

 

“Bengara-II
PSC” means the Bengara-II Production Sharing Contract entered into
by CGB2 and Pertamina and approved by the Minister of Mines and Energy of the
Republic of Indonesia on 4 December 1997, including any amendments thereto or
extensions thereof.

 

“Bonus”
has the meaning ascribed thereto in Section-2.2.2.

 

“BP Migas”
means Badan Pelaksana Kegiatan Usaha Hulu Minyak Dan Gas Bumi, a state oil and
gas regulatory body established under the Directorate General of Oil and
Natural Gas of The Ministry of Mines and Energy (MIGAS) of the Republic of Indonesia;
and the successor in authority to Pertamina in relation to the Bengara-II PSC.

 

“Business
Day” means any day of the week except Saturday, Sunday or any
statutory holiday in Jakarta, Indonesia, Hong Kong or Dallas, Texas.

 

2

 

“Buyer”
shall mean CNPCHK (Indonesia) Limited.

 

“Cash”
has the meaning ascribed thereto in Section-2.2.1.

 

“CGB2”
means Continental-GeoPetro (Bengara-II) Ltd., a Party to this Agreement, whose
common shares are being bought and sold in the transaction contemplated in this
Agreement.

 

“Closing”
and “Closing Date” have the
meanings ascribed thereto in Section-4.1.

 

“Continental”
means Continental Energy Corporation, a Party to this Agreement, and one of the
Sellers as further defined herein.

 

“Completion
Resolutions” means the Consent Resolutions of Directors and Consent
Resolutions of Members required to give full force and effect to the completion
of Closing this Agreement and the Shareholders Agreement as provided for in
Article-4.1 and attached hereto and made a part hereof in their entirety in
Schedule-E.

 

“Contractor”
refers to CGB2 in the context of being a production sharing “Contractor” as the
term is used in the Bengara-II PSC.

 

“Data
Confidentiality Agreement” means that certain Data Confidentiality
Agreement between CGB2 and the Guarantor dated 18 May 2006 pursuant to and in
accordance with which CGB2 on behalf of itself and on behalf of the Sellers
provided certain Evaluation Information to the Guarantor.

 

“Diligence
Materials” means, exclusive of the Evaluation Information, all
legal, financial, and any other related due diligence information provided by
the Sellers or by CGB2 to the Buyer, the Guarantor, or to their attorneys,
Clifford Chance of Hong Kong, Mochtar Karuwin and Komar of Jakarta, and
accountants Pieter, Uways & Rekan of Jakarta.

 

“Director”
means a member of the Board of Directors of CGB2.

 

“Earning
Obligation” has the meaning ascribed thereto in Section-2.2.3.

 

“Effective
Date” has the meaning ascribed thereto in Section 3.1.

 

“Environmental
Deficiencies” means any (i) ground water, surface water or aquifer
contamination; (ii) soil contamination; (iii) toxic or hazardous substance
emission; or (iv) corrosion or deterioration of structures, equipment or other
property, that was directly caused by CGB2 as a direct and unequivocal result
of CGB2 work activities on the Bengara-II PSC block prior to the date of this
Agreement, the occurrence or existence of which could reasonably be expected to
give rise to criminal, quasi-criminal or civil liability on the part of CGB2 or
a holder of the Bengara-II Assets under presently subsisting Environmental Law.

 

“Environmental
Law” means any Applicable Law relating to protection of the
environment, persons or the public welfare from actual or potential exposure
(or the effects of exposure) to any actual or potential release, discharge,
spill or emission (whether past or present) of, or regarding the manufacture,
processing, production, gathering, transportation, use, treatment, storage or
disposal of, any chemical raw material, pollutant, contaminant or toxic,
corrosive or hazardous substance or waste.

 

“Evaluation
Information” means the geological, geophysical, engineering,
economic analyses and other technical information and data provided to the
Guarantor by CGB2 pursuant to the Data Confidentiality Agreement.

 

3

 

“Financial
Statements” means the unaudited 31 August 2006 financial statements
of CGB2 attached as Schedule-A which have been prepared by the management of
CGB2 in accordance with GAAP.

 

“GAAP”
means Indonesian Generally Accepted Accounting Principles and Bengara-II PSC
accounting for cost recovery purposes consistent with Annex-C to the Bengara-II
PSC entitled “Accounting Procedure”.

 

“GeoPetro”
means GeoPetro Resources Company, a Party to this Agreement, and one of the
Sellers as further defined herein.

 

“JOA” means the CGB2
joint operating agreement dated 1 January 2000 amongst Continental, GeoPetro
and CGB2,which will be terminated as of Closing.

 

“Laws”
shall mean:

 

a)                                all
constitutions, treaties, laws, statutes, codes, ordinances, orders, decrees,
rules, regulations, and municipal by-laws, whether domestic, foreign or
international;

 

b)                               all
judgments, orders, writs, injunctions, decisions, rulings, decrees, and awards
of any governmental authority or body; and

 

c)                                all
policies, practices and guidelines or any governmental authority or body which,
although not actually having the force of law, are considered by such governmental
authority or body as requiring compliance as if having the force of law;

 

in each case binding on or affecting the
Party or Person referred to in the context in which such word is used; and “Law”
shall mean any one of them.

 

“Material”
means having a monetary value in excess of US$ 50,000.

 

“Material
Adverse Effect” in respect of a person means any change, effect,
event, occurrence, condition or development that has or could reasonably be
expected to have, individually or in the aggregate, a Material and adverse
impact on the business, operations, results of operations, assets,
capitalization or financial condition of such person, other than any changes
related to the economy or the industry in which the person carries on business.

 

“Material
Contracts” means in addition to the Bengara-II PSC, all other
contracts, agreements, arrangements and commitments of financially material
substance to which CGB2 is a Party, by which it is bound or pursuant to which
it is entitled to any right or benefit, either directly or indirectly,
including those listed and described in Schedule-B and for which the breach or
violation of, or default under, the terms of any such Material Contract, would
have a substantially Material Adverse Effect on CGB2 or the Bengara-II Assets;

 

“Member”
means a Shareholder of CGB2.

 

“Outstanding
Contractual Commitments” means the outstanding contractual
commitments of CGB2 to third parties as listed and described in Schedule F
hereto which shall be terminated by the Sellers as provided for in Article-3.4
on or before 30 September 2006.

 

“Parties”
shall mean Continental Energy Corporation, GeoPetro Resources Company, CNPCHK
(Indonesia) Limited and CNPC (Hong Kong) Limited; and “Party” shall mean any
one of them.

 

“Permit”
shall mean a permit, license, consent, approval, certificate, qualification,
specification, registration or other authorization; or a filing of a
notification, report or assessment, in each case

 

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necessary for the effective operation of CGB2’s
business, its ownership, possession, occupation or use of the Bengara II Assets
or any asset or the execution or performance of this Agreement.

 

“Pertamina”
means P.T. Pertamina (Persero) (f/k/a Perusahaan Pertambangan Minyak dan Gas Bumi
Negara), a state enterprise established under the laws of the Republic of
Indonesia; and a party to the Bengara-II PSC.

 

“POD”
means the official plan of development for a commercial discovery or
exploitation of a Petroleum accumulation prepared by the Company and submitted
to BP Migas for its approval.

 

“Restated
Memorandum and Articles” means the Memorandum and Articles of CGB2
as described in Section-2.2.6 and as attached to and made a part of this
Agreement as Schedule-D, all as may be amended by the CGB2 Shareholders from
time to time.

 

“Requisite
Approvals” means all governmental and regulatory consents, approvals
and authorizations of any nature required to be obtained in order to permit the
sale and transfer of CGB2 Shares (as hereinafter defined) to the Buyer to be
duly and lawfully completed without any adverse effect on any of the Bengara-II
Assets.

 

“Secretary”
refers to the corporate Secretary of CGB2.

 

“Sellers”
shall mean Continental and GeoPetro; and “Seller” shall mean either one of them.

 

“Shareholder”
means a Member or Shareholder of Shares in CGB2.

 

“Shares”
refers to common shares of CGB2.

 

“Shareholders
Agreement” shall have the meaning ascribed thereto in Section-2.2.5
and refers to the agreement amongst the Parties attached to and made a part of
this Agreement as Schedule-C and any other shareholders agreement(s) or joint
operating agreement(s) made amongst the Parties from time to time.

 

“Taxes”
means any federal, state, provincial, municipal or other governmental taxes or
assessments in the nature of taxes of any nature whatsoever (including, without
limitation, income taxes, capital taxes, sales taxes, property taxes, goods and
services taxes, stamp taxes, value added taxes and use taxes and withholding
tax of whatsoever nature), and includes any interest, penalty or other
additional obligation associated therewith.

 

“Third
Party Claim” shall mean and include without limitation, any claims:
(a) arising out of or in relation to the JOA and the Outstanding Contractual
Commitments prior to 30 September 2006; or (b) any claims arising out of the
termination of the JOA and the Outstanding Contractual Commitments prior to 30
September 2006; or (c) any amount or liability that is payable by CGB2 under or
in connection with any Outstanding Contractual Commitments after 30 September
2006; and any other claims provided that any such claims shall be strictly
limited to claims brought within one year of the date of this Agreement by a
third party who can demonstrate a valid and lawful written contract justifying
its claim or by a relevant regulatory authority in Indonesia.

 

“Warranty”
means the representation, undertakings and warranties as set out in Section-5.

 

5

 

1.2                               SCHEDULES

 

The following additional agreements, annexes,
exhibits, schedules (collectively referred to hereinafter as “Schedules”) are annexed and attached to
this Agreement and form a part hereof and have the same force and effect as if
set out in the body of this Agreement:

 

	
  Schedule-A

  	
   

  	
  –

  	
   

  	
  CGB2’s
  Financial Statements at 31 August 2006

  
	
  Schedule-B

  	
   

  	
  –

  	
   

  	
  List of
  CGB2’s Material Contracts at 31 August 2006

  
	
  Schedule-C

  	
   

  	
  –

  	
   

  	
  Shareholders
  Agreement

  
	
  Schedule-D

  	
   

  	
  –

  	
   

  	
  Restated
  Memorandum and Articles

  
	
  Schedule-E

  	
   

  	
  –

  	
   

  	
  Completion
  Resolutions

  
	
  Schedule F

  	
   

  	
  –

  	
   

  	
  Outstanding
  Contractual Commitments

  

 

1.3                               CONSTRUCTION

 

In this Agreement, including the premises,
schedules and exhibits hereto, unless otherwise expressly stated:

 

a)                       References
to a “Party” or “Parties” are references to a Party or Parties to this
Agreement and include their respective successors and permitted assigns.

 

b)                      References
to “herein”, “hereby”, “hereunder”, “hereto”, “hereof” and similar expressions
are references to this Agreement and not to any particular section, subsection
or schedule.

 

c)                       References
to a statutory provision includes a reference to the statutory provision as
modified or re-enacted or both from time to time before the date of this
Agreement and any subordinate legislation made under the statutory provision
(as so modified or re-enacted) before the date of this Agreement.

 

d)                      References
to an “Article”, “Section”, “subsection”, or “clause” are references to an
Article, Section, subsection, or clause of this Agreement.

 

e)                       References
to a “Schedule” are references to a Schedule to this Agreement as described in
Section-1.2.

 

f)                         References
to dollar amounts are references to US dollar amounts.

 

g)                      Words
importing the singular shall include the plural and vice versa.

 

h)                      Words
importing gender shall include the masculine, feminine and neuter genders.

 

i)                          References
to a “person” or “persons” shall include individuals, corporations,
partnerships, associations, bodies politic and other entities, all as may be
applicable in the context.

 

j)                          The use
of headings is for convenience of reference only and shall not affect the
construction or interpretation hereof.

 

1.4                               ENTIRE AGREEMENT

 

This Agreement, together with the
Shareholders Agreement and the Restated Memorandum and Articles, and together
with all other agreements, instruments, certificates, assignments and other
documents to be delivered by the Parties pursuant to this Agreement, constitute
the entire agreement between the Parties pertaining to the subject matter of
this Agreement, and supersede the Data Confidentiality Agreement and all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the Parties, and there are no

 

6

 

representations, warranties or other
agreements between the Parties in connection with the subject matter of this
Agreement except as specifically set forth in this Agreement, the Shareholders
Agreement and any document delivered pursuant to this Agreement. This Agreement
may be amended only by written instrument executed by both the Sellers and the
Buyer and the Guarantor.

 

Article-2:  CONSIDERATION

 

2.1                               SHARES SALE

 

The Sellers hereby agree to sell and
transfer, in aggregate, 35,000 fully paid ordinary common shares of CGB2 (the “CGB2 Shares”) representing a 70% shareholding
equity ownership in CGB2 to the Buyer, and the Buyer hereby agrees to purchase
and accept CGB2 Shares from the Sellers, on the following terms and conditions:

 

a)              Continental agrees
to sell and transfer to the Buyer, in accordance with the terms and conditions
of this Agreement, 21,000 fully paid ordinary common shares of CGB2 Shares,
free and clear of all encumbrances together with all rights attaching thereto
as of the date of this Agreement. At Closing, Continental shall retain for its
own account and interest 9,000 fully paid ordinary common shares of CGB2
representing an 18% ownership of CGB2.

 

b)             GeoPetro agrees to
sell and transfer to the Buyer, in accordance with the terms and conditions of
this Agreement, 14,000 fully paid ordinary common shares of CGB2 Shares, free
and clear of all encumbrances together with all rights attaching thereto as of
the date of this Agreement. At Closing, GeoPetro shall retain for its own
account and interest 6,000 fully paid ordinary common shares of CGB2 representing
a 12% ownership of CGB2.

 

2.2                               SHARES PURCHASE

 

As consideration for its purchase of the CGB2
Shares the Buyer shall undertake obligations in Section-2.2.4 through
Section-2.2.6 and pay and provide the aggregate consideration in Section-2.2.1
through Section-2.2.2 as follows:

 

2.2.1                                             CASH

 

In addition to
the other consideration paid or provided by Buyer as set out in Section-2.2.2
through Section-2.2.3 below, the Buyer shall pay cash consideration upon the
Closing Date in the aggregate amount of US$ 35,000 (“Cash”) in the form of two wire transfers, one in the amount of
US$ 21,000 wired to Continental and one in the amount of US$ 14,000 wired to
GeoPetro, both in immediately available US dollar funds.

 

2.2.2                                             BONUS

 

In addition to
the other consideration paid or provided by Buyer as set out in Section-2.2.1
above, and subject to and conditional upon the receipt of BP Migas approval of
the first POD by CGB2, or its successor within the Bengara-II PSC contract
area, the Buyer shall pay a cash bonus in the aggregate amount of US$ 5,000,000
(the “Bonus”), in the form of a
payment of cash in the amount of US$ 3,000,000 to Continental and a payment of
cash in the amount of US$ 2,000,000 to GeoPetro; provided further, that:

 

7

 

a)              payment of the Bonus
shall be made in full to Continental and to GeoPetro by wire transfers within
five (5) business days of receipt of said written approval;

 

b)             in the event the
Parties decide to cause CGB2 to relinquish and terminate the entire Bengara-II
PSC prior to making an application for approval of any plan of development,
pursuant to the termination and relinquishment procedure set forth in the
Shareholders Agreement, then the Bonus payment obligation of the Buyer shall be
released and forgiven on the same date as the termination and relinquishment of
the entire Bengara-II PSC.

 

2.2.3                                             EARNING OBLIGATION

 

Upon the
Closing Date, the Buyer shall advance US$18,700,000 (the “Earning Obligation”)
in immediately available US dollar funds by wire transfer into the CGB2
multicurrency bank account number 808-215644-838 (referred to hereinafter as
the “Earn-In Joint Account” or the “EJA”) established at Hongkong and Shanghai
Banking Corporation Limited, Hong Kong main office, 1 Queen’s Road Central, and
operated as provided for in the Shareholders Agreement.

 

2.2.4                                             DEVELOPMENT LOANS

 

The Buyer
shall, conditional on the receipt of BP Migas approval of the first POD by
CGB2, become obliged to make advances from time to time required by the Company
to fund the working capital required for appraisal and development of any
successful Petroleum discovery of up to a total, maximum amount of forty one
million three hundred thousand US dollars, US$41,300,000 (the “Development Loans”) in excess of the
Earning Obligation funds, and utilize the Development Loans strictly in
accordance with the provisions set out in the Shareholders Agreement.

 

2.2.5                                             SHAREHOLDERS AGREEMENT

 

The Buyer and
the Guarantor has entered into a separate written agreement with Continental
and GeoPetro entitled the “Shareholders
Agreement” which is attached hereto in its entirety as Schedule-C.
The Shareholders Agreement, among other things, provides irrevocable, strict
and clear and comprehensive terms, conditions and procedures as to how:

 

a)              the Buyer’s Earning
Obligation as set forth in Section-2.2.3 shall be controlled, expended, and
realized as well as how the Earn-In Joint Account shall be established and
operated;

 

b)             the Development Loans
set forth in Section-2.2.4 shall be controlled, expended, and realized.

 

2.2.6                                             RESTATED MEMORANDUM &
ARTICLES

 

The Buyer has
entered into a separate written agreement with Continental and GeoPetro
entitled the “Restated Memorandum &
Articles” of CGB2 which is attached hereto in its entirety as Schedule-D.
The Restated Memorandum & Articles, together with the Shareholders
Agreement, among other things, provides irrevocable, strict, clear and
comprehensive terms, conditions and procedures as to how the Parties shall
manage, control, and operate CGB2 as a joint venture corporate vehicle to
operate the Bengara-II Assets on behalf of the Buyer, Continental and GeoPetro
in proportion to their respective CGB2 shareholding percentages.

 

8

 

Article-3:  Effectiveness & Continuation

 

3.1                               EFFECTIVE DATE

 

The purchase and sale contemplated in this
Agreement shall be effective from the Closing Date upon signature of this
Agreement and of the Shareholders Agreement.

 

3.2                               CONTINUITY

 

The Buyer accepts and agrees that the Buyer’s
purchase of CGB2 Shares is a purchase of CGB2 and its Bengara-II Assets as a
going concern business enterprise. The Parties agree that continuation and
success of CGB2 and the Bengara-II Assets is of paramount priority and
importance to the benefit of all the Parties and therefore the Earning
Obligation funds and the Development Loan (where applicable) shall be expended
and utilized to satisfy and discharge CGB2’s Bengara II PSC and other
obligations, liabilities, payables, and commitments as and from the date of
this Agreement, including but not limited to those accrued and noted on the
Financial Statements and summarized and listed as Material Contracts.

 

3.3                               TERMINATION OF JOA

 

The Sellers and CGB2 shall enter into an
agreement terminating the JOA effective on the same date as this Agreement in
the form termination agreement provided attached to Completion Resolution
number 1. Any costs of CGB2 terminating the JOA shall be funded by the Sellers
on or before 30-September-2006 and dealt with as further provided for in
Section 3.6 below. The Sellers hereby expressly release CGB2 from any past or
future obligations that each of the Sellers may have against CGB2 under the JOA
with effect from the date of termination. Each of the Sellers shall severally indemnify
CGB2 in respect of any of their respective antecedent breaches and/or failure
of their respective obligations under the JOA prior to its termination.

 

3.4                               TERMINATION OF OUTSTANDING
CONTRACTUAL COMMITMENTS

 

Subject to the provisions of Article-3.6, the
Sellers shall cause CGB2 to terminate the Outstanding Contractual Commitments
on or before 30 September 2006 and the Sellers shall fund the costs incurred in
accordance with the Outstanding Contractual Commitments through 30 September
2006 and any costs of terminating the Outstanding Contractual Commitments in
the manner and as further provided for in Section 3.6 below.

 

3.5                               ACCUMULATED COST RECOVERY
30-JUNE-2006

 

CGB2 has reported accumulated shareholder
loans against the Bengara-II PSC work commitment in the agreed aggregate amount
of US$ 6,300,000 at September 30, 2006. Of this total, 60% has been contributed
to CGB2 by Continental and 40% has been contributed to CGB2 by GeoPetro

 

3.6                               CGB2 WORKING CAPITAL FUNDING AND
COSTS THROUGH 30-SEPTEMBER-2006

 

Notwithstanding the Closing Date of the
transactions contemplated in this Agreement, the Sellers shall continue to fund
CGB2 sufficiently to pay CGB2’s working capital needs to fund its operations
through 30 September 2006 plus such additional funds as CGB2 may require to
negotiate, sever consultants and terminate the JOA as provided for in Section-3.3
and the Contractual Commitments on or before 30 September 2006 as provided for
in Section 3.4.

 

9

 

3.7                               CGB2 WORKING CAPITAL FUNDING AND
COSTS FROM 1-OCTOBER-2006

 

Notwithstanding the Closing Date of the
transactions contemplated in this Agreement, and in accordance with Section-3.3
through Section-3.6 above, the Earning Obligation funds and the Development
Loan (where applicable) shall be applied towards CGB2 working capital needs to
fund its operations commencing with effect from 1-October-2006 in accordance
with the provisions of this Agreement and the Shareholders Agreement.

 

Article-4:  COMPLETION

 

4.1                               CLOSING

 

The closing of the purchase and sale
contemplated hereby (“Closing”)
shall take place upon the signature of this Agreement and the Shareholders
Agreement upon a date (the “Closing Date”)
and at a place mutually agreed by the Parties. The Completion Resolutions
numbered 1 through 6 as included herein and attached hereto as Schedule-E,
together with their respective attachments and related agreements shall also be
signed by the applicable Parties at Closing and have full force and effect to
the same extent as if incorporated in the body of this Agreement.

 

4.2                               SELLERS’ CLOSING DELIVERIES

 

At the Closing, upon the Closing Date, the
Sellers shall deliver or cause to be delivered to the Buyer the following, in
form and substance satisfactory to the Buyer or as provided for in the
Completion Resolutions, duly authorized and executed:

 

a)              signature and
delivery of this Agreement;

 

b)             signature and
delivery of the Shareholders Agreement;

 

c)              signature and
delivery of the Restated Memorandum and Articles;

 

d)             transfers of CGB2
Shares to the Buyer from the Sellers as per the attachment to Completion
Resolution number-1 providing therefore;

 

e)              termination of the
JOA as per the attachment to
Completion Resolution number-1 providing therefore;

 

f)                resignation and
release letter of CGB2 Director Mr. S. J. Doshi as per the attachment to
Completion Resolution number-1 providing therefore;

 

g)             resignation and
release letter of CGB2 President & CEO Mr. Richard L. McAdoo, as per the
attachment to Completion Resolution number-6 providing therefore;

 

h)             consent to continue
to serve as a Director of CGB2 from Mr. Richard L. McAdoo as per the attachment
to Completion Resolution number-3 providing therefore;

 

i)                 signature of
Completion Resolutions numbered 1, 3 and 6 together with their attachments
covering the matters set out in the foregoing paragraphs 4.3.a through 4.3.h;
and

 

j)                 signature of
Completion Resolutions numbered 2 and 5 together with their attachments
covering the other Closing matters set out therein.

 

4.3                               BUYER’S CLOSING DELIVERIES

 

At the Closing, upon the Closing Date, the
Buyer shall deliver or cause to be delivered to the Sellers the following in
form and substance satisfactory to the Sellers, or as provided for in the
Completion Resolutions, duly authorized and executed:

 

10

 

a)              signature and
delivery of this Agreement;

 

b)             signature and
delivery of the Shareholders Agreement;

 

c)              signature and
delivery of the Restated Memorandum and Articles;

 

d)             proof of payment of
the Cash by wire transfers from Buyer to the Sellers in respect of the share
purchase payments due to the Sellers provided for in Section-2.2.1;

 

e)              proof of payment by
wire transfer from Buyer to the Earn-In Joint Account of the Earning Obligation
payment provided for in Section-2.2.3;

 

f)                consents to become
Directors of CGB2 from Mr. Li Hualin and Mr. Cheng Cheng and consent to become
Secretary of CGB2 from Mr. Patrick Lau as per the attachments to Completion
Resolution number-1 and number-3 providing therefore;

 

g)             transfers of CGB2
Shares to the Buyer from the Sellers as per the attachment to Completion
Resolution number-1 providing therefore;

 

h)             signature of
Completion Resolutions numbered 1, 3 and 6 together with their attachments
covering the matters set out in the foregoing paragraphs 4.3.a through 4.3.g;
and

 

i)                 signature of
Completion Resolutions numbered 2 and 5 together with their attachments
covering the other Closing matters set out therein.

 

Article-5:  REPRESENTATIONS & WARRANTIES

 

5.1                               SELLERS REPRESENTATIONS &
WARRANTIES

 

a)                                               The
Sellers hereby unconditionally warrant and represent to the Buyer that each
Warranty is true, accurate and not misleading at the date of this Agreement.

 

b)                                              The
Sellers acknowledge that the Buyer is entering into this Agreement in reliance
on each Warranty.

 

c)                                               The
Sellers shall not invoke the Buyer’s knowledge (actual, constructive or
imputed) of a fact or circumstance in relation to the Evaluation Information.

 

5.2                               EACH SELLER’S SEVERAL
REPRESENTATIONS & WARRANTIES

 

Each Seller hereby severally, and not
jointly, represent and warrant to the Buyer on its own behalf that, as of the
date of this Agreement:

 

a)              each of the Sellers
is a corporation duly incorporated and validly subsisting under the laws of its
jurisdiction of incorporation;

 

b)             Continental is the
duly registered and beneficial owner of 30,000 fully paid and non assessable
common shares of CGB2 representing a sixty percent (60%) ownership of CGB2
which were received by Continental as a duly authorized share transfer
registered by CGB2;

 

11

 

c)              GeoPetro is the duly
registered and beneficial owner of 20,000 fully paid and non assessable common
shares of CGB2 representing a forty percent (40%) ownership of CGB2 which were
received by GeoPetro as a duly authorized share transfer registered by CGB2;

 

d)             each of the Sellers
has full capacity and authority to sell and transfer its proportion of CGB2
Shares and to otherwise transact the affairs contemplated by this Agreement in
accordance with the provisions hereof;

 

e)              each of the Sellers
has all necessary power, authority and capacity to enter into and perform its
obligations under this Agreement and all other documents executed and delivered
by or on behalf of the Sellers pursuant hereto and to consummate the
transactions contemplated hereby;

 

f)                each of the
Sellers have taken all actions necessary for the authorization, execution and
delivery by it of this Agreement and to perform its obligations hereunder and
this Agreement has been duly authorized, executed and delivered;

 

g)             this Agreement and
all other documents executed and delivered by or on behalf of each of the
Sellers pursuant hereto shall constitute legal, valid and binding obligations
of each of the Sellers enforceable in accordance with their respective terms
and conditions;

 

h)             no dissolution,
winding up, bankruptcy, liquidation or similar proceedings have been commenced
or are pending or proposed in respect of either of the Sellers;

 

i)                 each Seller’s portion
of the CGB2 Shares are conveyed to the Buyer, free and clear of all liens,
encumbrances, security interests and other third party claims and interests of
any nature whatsoever except as otherwise set out herein;

 

j)                 there are no
Requisite Approvals stipulated by Indonesian statute or regulation of
Pertamina, BPMigas, MIGAS or other restrictions of any nature on the sale and
transfer of each Seller’s CGB2 Shares to the Buyer pursuant hereto, and each
Seller has the absolute right to effect such sale and transfer;

 

k)              there are no
agreements, options, rights or privileges (including, without limitation,
convertible securities, warrants or other rights of any nature) for the
purchase, subscription, allotment or issuance of any other shares in the
capital of CGB2, or of any other CGB2 securities of any nature or kind;

 

l)                 except for the
JOA, there is no voting trust or voting agreement or pooling agreement or proxy
with respect to any issued and outstanding shares in the capital of CGB2;

 

m)           neither of the Sellers
require the approval of its shareholders or any other third party or securities
regulators to authorize the sale and transfer of CGB2 Shares owned by such
Seller as contemplated in this Agreement; and

 

n)             neither the execution
and delivery of this Agreement nor the completion of the sale and transfer of
CGB2 Shares in accordance with the provisions of this Agreement nor the
compliance by each of the Sellers of its obligations hereunder will constitute
a default under, or be in contravention or breach of:

 

i)                                         any
provision of the articles of incorporation or any bylaws of either of the
Sellers,

 

12

 

ii)                                      any
applicable shareholder agreements to which either Seller is party except for
the JOA;

 

iii)                                   other
applicable contracts of either of the Sellers; or

 

iv)                                  any
Laws applicable to either of the Sellers.

 

5.3                               SELLERS’ JOINT REPRESENTATIONS
& WARRANTIES

 

The Sellers hereby jointly, and not
severally, represent and warrant to the Buyer in the proportions of 60% for
Continental and 40% for GeoPetro that, with respect to CGB2, as of the date of
this Agreement or, as the context may require, in the case of the Financial
Statements as of the date of the Financial Statements set forth in Schedule-A
hereof and in the case of Material Contracts and third party commitments as of
the 1 October 2006 date set forth in Schedule-B hereof:

 

a)              the authorized
capital of CGB2 is US$50,000, made up of a single class and series of shares
consisting of 50,000 common shares (the “Shares”) of US$1.00 par value, of
which all 50,000 are currently issued, fully paid and outstanding;

 

b)             CGB2 is a company
duly incorporated, validly subsisting and in good standing under the laws of
the British Virgin Islands;

 

c)              CGB2 has full
capacity and authority to conduct and carry on the business of CGB2 and all
other activities currently or proposed to be conducted and carried on by it
under the Bengara-II PSC;

 

d)             CGB2 has full
capacity and authority to own, operate, hold, use and in all respects deal with
the Bengara-II PSC and the Bengara-II Assets or any assets derived there from;

 

e)              CGB2 is in good
standing under applicable corporate legislation in the Republic of Indonesia;

 

f)                no dissolution,
winding up, bankruptcy, liquidation or similar proceedings have been commenced
or are pending or proposed in respect of CGB2;

 

g)             CGB2 holds the sole,
legal and beneficial title to an undivided 100% interest in the Contractor’s
contract rights in the Bengara-II Assets, free and clear of all liens, encumbrances,
security interests and other third party claims of any nature whatsoever;

 

h)             the Bengara-II PSC is
valid, in full force and effect and in good standing except for approximately
US$19,000,000 shortfall in work commitments which have not yet been realized;

 

i)                 the Financial
Statements have been prepared in accordance with GAAP, consistently applied
throughout the respective periods covered thereby, and accurately, completely
and fairly present the assets, liabilities and financial position of CGB2, and
the results of its operations, as of the respective dates thereof and for the
respective periods covered thereby;

 

j)                 since the date of
the Financial Statements, there has not been any change in the financial
condition of CGB2, other than in the ordinary course of business or that would
have a Material Adverse Effect on CGB2 or the Bengara-II Assets;

 

13

 

k)              since the date of
the Financial Statements, CGB2 has not incurred any onerous or unusual
liabilities, debts, claims, commitments or obligations, whether contingent or
otherwise, present or future;

 

l)                 other than in the
ordinary course of business and except as disclosed and set forth elsewhere
herein and in the Financial Statements, to the best of the Sellers’ knowledge,
CGB2 has no material liabilities, debts, claims or obligations of any nature,
whether absolute, accrued, determined, contingent or otherwise, present or
future that would have a Material Adverse Effect on CGB2 or the Bengara-II
Assets;

 

m)           the list and summary of
terms of the Material Contracts is a complete and accurate list of all material
third party agreements and contractual commitments in addition to those
provided for in the Bengara-II PSC and Permits as of the date thereof;

 

n)             other than in the
ordinary course of business and except as disclosed and set forth elsewhere
herein and in the summary and list of Material Contracts, to the best of the
Sellers’ knowledge, CBG2 has not entered into any additional material legally
binding contracts, arrangements, understanding, commitments with any third
party;

 

o)             all Material
Contracts are valid, binding and in full force and effect as to CGB2, and CGB2
is not in breach or violation of, or default under, the terms of any such
Material Contract, except where such breach, violation or default which would
not have a Material Adverse Effect on CGB2;

 

p)             Other than the
Bengara-PSC, the contractual commitments set out in Schedule F hereto that will
be severed prior to 30 September 2006 represents all the contractual
obligations and commitments that CGB2 entered into since the date of the
Financial Statements at the direction by the Sellers;

 

q)             CGB2 has complied and
continues to comply with all Applicable Laws. CGB2 has obtained, and has
complied with all the terms and conditions of each relevant Permit and action
required for the renewal or extension of each Permit has been taken;

 

r)                CGB2 is not a
party to any pension, retirement, bonus, profit sharing, compensation,
incentive, stock purchase, stock option, stock appreciation, severance,
change-of-control, savings; thrift, insurance, medical, hospitalization,
disability, death or other similar program, or practice providing Directors,
Officers, Shareholders or employees benefits;

 

s)              CGB2 has no outstanding
liabilities to any of its Officers for payment of salaries, bonuses, mandatory
pension or retirement payment or compensation for loss of office;

 

t)                except as
otherwise disclosed and set forth in the Financial Statements and provided for
in Article 5.3 of the Shareholders Agreement, CGB2 has filed Tax returns and
paid Taxes required to be paid by it when due; and adequate provision has been
made in the Financial Statements for all Taxes of any nature whatsoever for
which CGB2 may at any time in the future have any liability or obligation in
respect of operations, activities or transactions occurring prior to the
respective dates of such statements;

 

u)             CGB2 has not given
any Material guarantees and indemnities in respect of any third party;

 

v)             there are no
obligations or liabilities to the Government of Indonesia or BPMigas related to
the Bengara-II PSC or Bengara-II Assets that are not expressly set out in

 

14

 

the written
version thereof provided to the Buyer prior to the execution of this Agreement
or provided for in Applicable Law;

 

w)           CGB2 owes no amount to
a present or former Director, other Officer of CGB2 other than for accrued
remuneration or reimbursement of business expenses;

 

x)               CGB2 has no intellectual
property rights and there is no active, pending or threatened claim against
CGB2 for the infringement or unauthorized use of another party’s intellectual
property rights and the Sellers are not aware of any circumstances leading to
such claim;

 

y)             there are no
Environmental Deficiencies caused by CGB2 or Bengara-II PSC operations and the
Sellers are not aware of any circumstances leading to such Environment
Deficiencies;

 

z)               CGB2 has no
insurance policies in effect and is not required under Applicable Law to take
out any insurance policies other than blowout and well control insurance at or
near the time of drilling a well;

 

aa)        CGB2 does not carry on
business or conduct any operations or activities of any nature in any
jurisdictions other than Indonesia, the British Virgin Islands, and Hong Kong
and none of the Bengara-II Assets are located in any other jurisdiction;

 

bb)      CGB2 has no property or
assets other than those included in the Bengara-II Assets;

 

cc)        neither CGB2 nor any of
its Directors or Officers has granted any general or special power of attorney
in favor of any person except for the power of attorney granted to the
Guarantor’s Jakarta attorneys, Mr. Rizal et.al. of MKK, for conducting legal
due diligence on the transaction contemplated in this Agreement;

 

dd)      CGB2 does not own, and has
never owned, directly or indirectly, any shares in the capital of any Person
and has never made any investment in, and does not have, and has never had, any
property interest in, any Person;

 

ee)        neither the execution and
delivery of this Agreement nor the completion of the sale and transfer of CGB2
Shares in accordance with the provisions of this Agreement nor the compliance
by each of the Sellers of its obligations hereunder will constitute a default under,
or be in contravention or breach of:

 

i)            any provision of the
articles of incorporation or any bylaws of CGB2,

 

ii)         any applicable
shareholder agreements or Material Contracts to which CGB2 is party except for
the JOA;

 

iii)      Applicable Laws;

 

iv)     the Bengara-II PSC; or

 

v)        any agreement which the
Bengara-II Assets are subject;

 

ff)            neither the execution
and delivery of this Agreement nor the completion of the sale and transfer of
CGB2 Shares in accordance with the provisions of this Agreement will trigger
any rights or occurrences, as a result of the change of control of CGB2 or
otherwise, that may give rise to the termination of, or any other sanction
under or in respect of, the Bengara-II PSC or that may otherwise cause a
Material Adverse Effect on CGB2 or its Bengara-II Assets;

 

15

 

gg)      CGB2 is not a party to, and
is not otherwise aware of, any action, suit or other legal, administrative or
arbitration proceeding or governmental investigation, actual or threatened,
which might reasonably be expected to result in any Material Adverse Effect on
the Bengara-II Assets;

 

hh)      The Evaluation Information
given by, or on behalf of, the Sellers to the Buyer is authentic.

 

ii)              The Diligence
Materials given by, or on behalf of, the Sellers to the Buyer or to its
advisers leading to this Agreement is authentic, true, and not misleading and
all information about the CGB2 Shares, CGB2, the Bengara-II PSC and the
Bengara-II Assets which might be material for disclosure to a buyer of the CGB2
Shares has been disclosed to the Buyer in writing;

 

jj)              except as expressly
otherwise set forth herein these Sections 5.1 through 5.3 above; the Sellers
make absolutely NO representation and NO Warranty regarding the accuracy,
completeness or adequacy of the Evaluation Information and the Diligence
Materials provided by CGB2 to the Guarantor pursuant to and in accordance with
the Data Confidentiality Agreement.

 

5.4                               BUYER’S REPRESENTATIONS

 

The Buyer covenants with, and represents and
warrants to the Sellers severally that:

 

a)                       the Buyer
is a wholly owned subsidiary of the Guarantor;

 

b)                      the Buyer is
a corporation duly incorporated and validly subsisting under the laws of the
British Virgin Islands and has full capacity and authority to purchase CGB2
Shares, and to otherwise transact the affairs contemplated by this Agreement,
the Shareholders Agreement, and the Restated Memorandum and Articles, in
accordance with the provisions hereof and thereof;

 

c)                       the Buyer
has taken all corporate actions necessary to authorize the execution and
delivery of this Agreement, the Shareholders Agreement, and the Restated
Memorandum and Articles, and will at the Closing Date have taken all corporate
actions necessary to authorize and complete the purchase of CGB2 Shares in
accordance with the provisions hereof and thereof;

 

d)                      this Agreement,
the Shareholders Agreement and the Restated Memorandum and Articles, have been
validly executed and delivered, and it and all other documents executed and
delivered by or on behalf of the Buyer pursuant hereto shall constitute legal,
valid and binding obligations of the Buyer enforceable in accordance with their
respective terms and conditions;

 

e)                       completion
of the purchase of CGB2 Shares in accordance with the provisions of this
Agreement, the Shareholders Agreement, and the Restated Memorandum and
Articles, will not constitute a default under, or be in contravention or in
breach of any agreement or instrument to which the Buyer is a party, or by
which it is bound; and

 

f)                         the Buyer
has had the opportunity to consult his or her own independent professional
advisors with respect to the consequences of entering this Agreement.

 

16

 

5.5                               GUARANTOR’S REPRESENTATIONS

 

The Guarantor covenants with, and represents
and warrants to the Sellers severally that:

 

a)              the Buyer is a
wholly owned subsidiary of the Guarantor;

 

b)             the Guarantor is a
corporation duly incorporated and validly subsisting under the laws of Bermuda
and has full capacity and authority to transact the affairs contemplated by
this Agreement, in accordance with the provisions hereof;

 

c)              the Guarantor has
taken all corporate actions necessary to authorize the execution and delivery
of this Agreement and the Shareholders Agreement and necessary to authorize,
undertake and complete the guarantee as provided for in Section-7;

 

d)             this Agreement and
the Shareholders Agreement have been validly executed and delivered, and it and
all other documents executed and delivered by or on behalf of the Guarantor
pursuant hereto shall constitute legal, valid and binding obligations of the
Guarantor enforceable in accordance with their respective terms and conditions;

 

e)              completion of the
purchase of CGB2 Shares in accordance with the provisions of this Agreement
will not constitute a default under, or be in contravention or in breach of any
agreement or instrument to which the Guarantor is a party, or by which it is
bound.

 

Article-6:  LIABILITY & INDEMNIFICATION

 

6.1                               SELLERS’ SEVERAL LIABILITY AND
INDEMNIFICATION

 

Subject to the provisions of Section-6.5 and Section-6.11,
and limited to the proportions of 60% to Continental and of 40% to GeoPetro,
each Seller shall severally, and not jointly, be liable to the Buyer for, and
shall, on demand, indemnify the Buyer from and against, any and all liability,
loss, costs, claims or damages of any nature (including, without limitation,
legal costs on a solicitor/client basis) suffered or incurred by the Buyer
(whether directly or by virtue of any Third Party Claim as defined in Section
6.8) as a result of any occurrence, matter or thing the occurrence, existence
or non disclosure of which would constitute a breach or failure of any
severally made representation and Warranty made by each respective Seller in
Section-5.2, and from and against a reduction in the value of the CGB2 Shares
or the value of Bengara-II Assets; or a liability which CGB2 becomes subject
to, incurs or an increase in a liability which it would not have been subject
to or would not have incurred had the breach not occurred.

 

6.2                               SELLERS’ JOINT LIABILITY AND
INDEMNIFICATION

 

Subject to the provisions of Section-6.5 and
Section-6.11, and limited to the proportions of 60% to Continental and of 40%
to GeoPetro, the Sellers shall jointly, and not severally, be liable to the
Buyer for, and shall, on demand, indemnify the Buyer from and against, any and
all liability, loss, costs, claims or damages of any nature (including, without
limitation, legal costs on a solicitor/client basis) suffered or incurred by
the Buyer (whether directly or by virtue of any Third Party Claim as defined in
Section 6.8) as a result of any occurrence, matter or thing the occurrence,
existence or non disclosure of which would constitute a breach or failure of
any jointly made representation and Warranty on behalf of CGB2 in Section-5.3,
and from and against a reduction in the value of the CGB2 Shares or the value
of Bengara-II Assets; or a liability which CGB2 becomes subject to, incurs or
an increase in a liability which it would not have been subject to or would not
have incurred had the breach not occurred.

 

17

 

6.3                               BUYER’S LIABILITY AND
INDEMNIFICATION

 

Subject to the provisions of Section-6.5 and
Section-6.11, the Buyer shall be liable to the Sellers severally for, and shall
unconditionally and irrevocably indemnify the Sellers severally from and
against, any and all liability, loss, costs, claims or damages of any nature
(including, without limitation, legal costs on a solicitor/client basis)
suffered or incurred by the Sellers (whether directly or by virtue of any Third
Party Claim as defined in Section-6.8) as a result of any occurrence, matter or
thing the occurrence, existence or non-disclosure of which would constitute a
breach or failure of any representation, Warranty, covenant, agreement or other
obligation of the Buyer hereunder.

 

6.4                               GUARANTOR’S LIABILITY AND
INDEMNIFICATION

 

Subject to the provisions of Section-6.5 and
Section-6.11, the Guarantor and its successors shall be unconditionally and
irrevocably liable to the Sellers in the stead of the Buyer and shall indemnify
the Sellers in the event of any failure by Buyer in respect of any of its
obligations under Section-6.3.

 

6.5                               ENFORCEMENT LIMITATION

 

Notwithstanding the provisions of Sections
6.1 through 6.4 above, and notwithstanding any statutory or regulatory
provision, principle of law or rule of equity to the contrary:

 

a)                                      neither
the Buyer nor the Sellers shall be entitled to recover any indirect,
consequential or special damages from the other;

 

b)                                     each
Party shall be obligated to use reasonable efforts to mitigate any liability,
loss, costs, claims or damages sustained by it in connection with any matter
for which the other Party may have liability to it;

 

c)                                      neither
the Buyer nor the Sellers shall be entitled to invoke or claim any
indemnification from the other under this Section-6 as a result of any
liability, loss, costs, claims or damages of any nature suffered or incurred
by:

 

i)            CGB2 or by the
Bengara-II Assets from the Closing Date;

 

ii)         CGB2 or by the Bengara-II
Assets prior to the Closing Date if there is reasonable expectation that such
Third Party Claim as defined in Section-6.8 or assessment of any Tax is
recoverable under the Bengara-II PSC;

 

iii)      the Sellers or by the Buyer
as a direct result and consequence of being a shareholder in CGB2 from the
Closing Date; and

 

iv)     the Sellers or by the Buyer
as a direct result and consequence of being, from the Closing Date, a joint
venture participant in the Bengara-II Assets, or any other joint venture
agreement to which it is a party pertaining to the Bengara-II Assets

 

v)        any commitments or
obligations due to Indonesian authorities pursuant to the Bengara-II PSC or
related to obligations incumbent upon any Indonesian production sharing
contractor in the normal course of conducting Bengara-II PSC activities; and
any Taxes claimed by any tax authorities having jurisdiction, in each case
which cost may be recovered under the Bengara-II PSC.

 

6.6                               OBLIGATION TO REIMBURSE

 

The Party providing indemnification hereunder
(the “Indemnifying Party”) shall
reimburse, on demand, to the Party being indemnified hereunder (the “Indemnified Party”) the amount, without any
accumulated interest, of any losses suffered or incurred by the Indemnified
Party.

 

18

 

6.7                               NOTIFICATION

 

Promptly upon obtaining knowledge thereof,
the Indemnified Party shall notify the Indemnifying Party of any cause which
the Indemnified Party has determined has given or could give rise to
indemnification under this Section-6. The omission so to notify the
Indemnifying Party shall not relieve the Indemnifying Party from any duty to
indemnify and hold harmless which otherwise might exist with respect to such
cause unless (and only to that extent) the omission to notify materially
prejudices the ability of the Indemnifying Party to exercise its right to
defend as provided in this Section-6.

 

6.8                               DEFENSE OF THIRD PARTY CLAIM

 

If any legal proceeding shall be instituted
or any claim or demand shall be asserted by a third party against the
Indemnified Party (each a “Third Party Claim”
as defined in Section-1.1), then the Indemnifying Party shall have the right,
after receipt of the Indemnified Party’s notice under Section-6.7 and upon
giving notice to the Indemnified Party within 14 calendar days of such receipt,
to defend the Third Party Claim at its own cost and expense with counsel of its
own selection, provided that:

 

a)                                      the
Indemnified Party shall at all times have the right to fully participate in the
defense at its own expense;

 

b)                                     the
Third Party Claim seeks only monetary damages and does not seek any injunctive
or other relief against the Indemnified Party;

 

c)                                      the
Indemnifying Party unconditionally acknowledges in writing its obligation to
indemnify and hold the Indemnified Party harmless with respect to the Third
Party Claim; and

 

d)                                     legal
counsel chosen by the Indemnifying Party is satisfactory to the Indemnified
Party, acting reasonably.

 

Amounts payable by the Indemnifying Party
pursuant to a Third Party Claim shall be paid in accordance with the terms of
the settlement or, the judgment, as applicable.

 

6.9                               NO COMPROMISE

 

The Indemnifying Party shall not be permitted
to compromise and settle or to cause a compromise and settlement of any Third
Party Claim, without the prior written consent of the Indemnified Party,
unless:

 

a)                                      the
terms of the compromise and settlement require only the payment of money and do
not require the Indemnified Party and/or CGB2 to admit any wrongdoing or take
or refrain from taking any action; and

 

b)                                     the
Indemnified Party receives, as part of the compromise and settlement, a legally
binding and enforceable unconditional satisfaction or release, which is in form
and substance satisfactory to the Indemnified Party, acting reasonably, from any
and all obligations or liabilities it and/or CGB2, if applicable, may have with
respect to the Third Party Claim.

 

6.10                        FAILURE TO DEFEND

 

If the Indemnifying Party fails within 10
calendar days from receipt of the notice of a Third Party Claim to give notice
of its intention to defend the Third Party Claim in accordance with
Section-6.8; or to comply at any time with any of Section-6.8.c, then the
Indemnifying Party shall be deemed to have waived its right to defend the Third
Party Claim and the Indemnified Party shall have the right (but not the
obligation) to undertake or to cause CGB2 to undertake the defense

 

19

 

of the Third Party Claim and compromise and
settle the Third Party Claim on behalf, for the account and at the risk and
expense of the Indemnifying Party.

 

6.11                        LIMITATION ON INDEMNIFICATION

 

The obligations of indemnification set out in
the preceding sections of this Section-6 shall survive the Closing but shall
automatically expire and terminate in their entirety upon the first anniversary
of this Agreement.

 

6.12                        EXCLUSIONS

 

Nothing in this clause 6 shall have the
effect of limiting or restricting any liability of the Sellers in respect of a
Warranty Claim arising as a result of any fraud, willful misconduct or willful
concealment.

 

Article-7:  PARENT COMPANY GUARANTEE

 

7.1          The Guarantor and its successors hereby unconditionally and
irrevocably guarantee to the Sellers the due and punctual performance by the
Buyer of all of its obligations under this Agreement, under the Shareholders
Agreement and under the Restated Memorandum and Articles and undertakes to
severally indemnify and keep indemnified the Sellers against all losses,
damages, costs and expenses of whatsoever nature which it may suffer or incur
by reason of any default or unreasonable delay on the part of the Buyer in the
performance of the said obligations.

 

7.2          If any of the obligations of the Buyer that are the subject
of the guarantee contained in this Article-7 cease to be valid or enforceable
(in whole or in part) on any ground whatsoever (including, but not limited to,
any defect in or want of powers of the relevant party or irregular exercise
thereof or any lack of authority on the part of any person purporting to act on
behalf of the relevant party or any legal or other limitation, disability or
incapacity, or any change in the constitution of, or any amalgamation or
reconstruction of, or the liquidation receivership or insolvency of the
relevant party) the Guarantor shall nevertheless be liable to the Sellers
severally in respect of the purported obligation or liability as if the same
were fully valid and enforceable and the Guarantor was the principal obligor in
respect thereof.

 

Article-8:  GENERAL

 

8.1                               CONFIDENTIAL INFORMATION

 

The Parties shall maintain confidential the
content of this Agreement and the Shareholders Agreement attached, except as
provided for in Section-8.3.

 

8.2                               BROKERS’ FEES

 

No Party shall be liable for the payment of
any commissions or compensation in the nature of finders’ fees to any broker or
agent acting on behalf of the other Party.

 

20

 

8.3                               PUBLIC ANNOUNCEMENTS

 

Any press release or filing required of a
Party by securities regulatory authorities having jurisdiction with respect to
the transaction contemplated in this Agreement and the Shareholders Agreement,
shall be made by each of the Parties exerting its best efforts to cooperate and
coordinate with the other Parties as to the form, nature and extent of such
disclosure.

 

8.4                               COMMUNICATIONS

 

All notices and other communications given in
connection with this Agreement shall be in writing, and the respective
addresses of the Parties for the service of any such notices or other
communications shall be as follows:

 

BUYER &
GUARANTOR:

CNPCHK
(INDONESIA) LIMITED & CNPC (HONG KONG) LIMITED

39th Floor,
118 Connaught Road West, Hong Kong

Attention:  President, 
Fax No:  (852) 2868-1741

 

SELLERS:

CONTINENTAL
ENERGY CORPORATION

Suite 1200,
14001 Dallas Parkway, Dallas, Texas, 75240

Attention:  President, 
Fax No:  (1-972) 934-6718

and

GEOPETRO
RESOURCES COMPANY

Suite 700, One
Maritime Plaza, San Francisco, California 94111

Attention:  President, Fax No:  (1-415) 398-9227

 

Unless there is evidence that it was received
earlier, all notices and communications given in connection with this Agreement
shall be deemed to be sufficiently given if delivered by courier upon the date
of signature of the courier’s delivery ticket. A Party may change its address
for service by giving written notice thereof to the other Parties.

 

8.5                               TRANSACTION EXPENSES

 

Each party shall pay its own costs and
expenses of and incidental to the negotiation, preparation, execution and
implementation by it of this Agreement and of all other documents referred to
in it.

 

8.6                               ASSIGNMENT, SUCCESSIONS IN
INTEREST

 

This Agreement and the provisions hereof
shall inure to the benefit of and be binding upon the Parties and their
respective successors and permitted assigns. No Party may assign its rights
under this Agreement unless as provided for in the Shareholders Agreement.

 

8.7                               GOVERNING LAW

 

This Agreement shall be governed by and
construed in accordance with the laws of Hong Kong.

 

The courts of Hong Kong shall have
non-exclusive jurisdiction to hear and determine any suit, action or
proceedings (“Proceedings”), and
to settle any disputes, which may arise out of or in connection with this
Agreement and, for such purposes, the parties hereto irrevocably submit to the
jurisdiction of the courts of Hong Kong.

 

21

 

Each party irrevocably waives any objection
which it might at any time have to the courts of Hong Kong being nominated as
the forum to hear and determine any proceedings and to settle any disputes and
agrees not to claim that the courts of Hong Kong are not a convenient or
appropriate forum.

 

8.8                               FURTHER ASSURANCES

 

Each of the Parties shall from time to time
and at all times on and after the Closing Date, without further consideration,
do and perform all such further acts and things, and execute and deliver all
such further agreements, assurances, notices, releases and other documents and
instruments, as may reasonably be required to more fully assure the transfer of
CGB2 Shares to the Buyer and the performance of the Buyer in carrying out the
Earning Obligation and making the Development Loans in accordance with the
provisions of this Agreement, the Shareholders Agreement, and the Restated
Memorandum and Articles, and otherwise to assure the carrying out of the intent
and purpose of this Agreement, the Shareholders Agreement attached, and the
Restated Memorandum and Articles:

 

a)                                      the
performance of any Party of its obligations under this Agreement;

 

b)                                     the
performance of any Party of its obligations under the Shareholders Agreement;

 

c)                                      the
performance of any Party of its obligations under the Restated Memorandum and
Articles; and

 

d)                                     the
carrying out of the intent and purpose of this Agreement, the Shareholders
Agreement and the Restated Memorandum and Articles.

 

8.9                               WAIVER

 

The failure to exercise or delay in
exercising a right or remedy provided by this Agreement or by law does not
impair or constitute a waiver of the right or remedy or an impairment of or a
waiver of other rights or remedies. No single or partial exercise of a right or
remedy provided by this Agreement or by law prevents further exercise of the
right or remedy or the exercise of another right or remedy. No waiver by any
Party shall be effective unless in writing, and a waiver shall affect only the
matter, and the occurrence thereof, specifically identified in the writing
granting such waiver and shall not extend to any other matter or occurrence.

 

8.10                        SEVERABILITY

 

If any provision of this Agreement shall be
held to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

 

8.11                        RIGHTS CUMULATIVE

 

a)                                      Each
Party’s rights and remedies contained in this Agreement are cumulative and not
exclusive of rights or remedies provided by Applicable Law.

 

b)                                     Except
to the extent that they have been performed and except where this Agreement
provides otherwise, the obligations contained in this Agreement remain in force
after Closing.

 

c)                                      All
payments made by the Parties under Article-6 shall be made gross, free of right
of counterclaim or set off and without deduction of any kind other than any
deductions required by law.

 

22

 

8.12                        NON MERGER

 

The provisions contained in this Agreement
shall survive the Closing and shall not merge in any transfer or other document
or instrument issuing pursuant hereto or in connection herewith. Without
limiting the generality of the foregoing, the liability of a Party for any
breach of any of its representations, warranties, covenants, agreements or
other obligations hereunder prior to the completion of the purchase and sale
contemplated hereby shall not be extinguished or in any manner diminished by
such completion.

 

8.13                        MUTUAL DRAFTING

 

This Agreement, the Shareholders Agreement,
and the Restated Memorandum and Articles, are the joint product of the Sellers,
the Buyer and the Guarantor and each provision hereof and thereof has been
subject to the mutual consideration, negotiation and agreement of all of the
Parties and shall not be construed for or against any Party.

 

8.14                        TIME OF ESSENCE

 

Time shall be of the essence in this
Agreement.

 

8.15                        COUNTERPARTS

 

This Agreement may be executed in any number
of counterparts, each of which when executed and delivered shall be an
original, but all the counterparts together shall constitute one and the same
instrument and have the same force and effect as if all of the Parties had
executed the same instrument.

 

23

 

IN WITNESS WHEREOF the Parties have executed
and delivered this Agreement as of the date first above written.

 

	
   

  	
  The GUARANTOR

  CNPC (HONG KONG) Limited

  	
   

  	
  The BUYER

  CNPCHK (Indonesia) Limited

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
    /s/ Wang Mingcai

  	
   

  	
   

  	
    /s/ Wang Mingcai

  	
   

  
	
   

  	
  Wang Mingcai

  	
   

  	
  Wang Mingcai

  
	
   

  	
  Chairman

  	
   

  	
  Director

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  The SELLERS

  GEOPETRO RESOURCES COMPANY

  	
   

  	
  

  CONTINENTAL ENERGY CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
    /s/ S. J. Doshi

  	
   

  	
   

  	
    /s/ Richard L. McAdoo

  	
   

  
	
   

  	
  S. J. Doshi

  	
   

  	
  Richard L. McAdoo

  
	
   

  	
  President and CEO

  	
   

  	
  President and CEO

  

 

24

 

Schedule to the Continental-GeoPetro
(Bengara-II) Ltd.

Shares Sale and Purchase Agreement       September
2006

 

SCHEDULE-A

FINANCIAL STATEMENTS

 

List of Contents Schedule-A – Copies of
Financial Statements which includes:

 

1.               CGB2 Balance Sheet
31 August 2006.

2.               CGB2 Cost Recovery
Statement 31 August 2006.

3.               CGB2 Income
Statement 31 August 2006.

4.               CGB2 Shareholder
Loans Joint Interest Billing Statement 31 August 2006.

5.               CGB2 Shareholder
Loans Joint Interest Billing Statement Continental 31 August 2006.

6.               CGB2 Shareholder
Loans Joint Interest Billing Statement GeoPetro 31 August 2006.

 

25

 

Continental GeoPetro (Bengara-II) Ltd.

Monthly Financial Statements Expressed in US$

Balance Sheet

 

	
   

  	
   

  	
  31-Aug-06

  	
   

  
	
   

  	
   

  	
  Since PSC Projection Inception - 4Dec 97

  	
   

  
	
  Description of Account

  	
   

  	
  Balance
  at

  End Month

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ASSETS

  	
   

  	
   

  	
   

  
	
  Cash on Hand

  	
   

  	
   

  	
   

  
	
  Cash in Bank
  Accounts - US$ Accounts

  	
   

  	
  $

  	
  42,501.78

  	
   

  
	
  Cash in Bank
  Accounts - Rupiah Accounts

  	
   

  	
  $

  	
  1,184.75

  	
   

  
	
  Petty Cash

  	
   

  	
  $

  	
  1,667.83

  	
   

  
	
  Cash In
  Transit

  	
   

  	
  $

  	
  2,000.00

  	
   

  
	
  Total
  Cash on Hand

  	
   

  	
  $

  	
  47,354.36

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Accounts
  Receivable

  	
   

  	
   

  	
   

  
	
  Pertamina
  Working Advance

  	
   

  	
  $

  	
  75,000.00

  	
   

  
	
  Advances
  Made to Employees & Others

  	
   

  	
  $

  	
  —

  	
   

  
	
  Total Accounts
  Receivable

  	
   

  	
  $

  	
  75,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Inventory

  	
   

  	
   

  	
   

  
	
  Warehouse
  Stock - Capital Expenditure Items

  	
   

  	
  $

  	
  —

  	
   

  
	
  Warehouse
  Stock - Non-Capital Expense Items

  	
   

  	
  $

  	
  —

  	
   

  
	
  Inventory in
  Transit

  	
   

  	
  $

  	
  —

  	
   

  
	
  Total
  Inventory

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Prepaid
  Expenses

  	
   

  	
   

  	
   

  
	
  Prepaid Rent
  & Insurance

  	
   

  	
  $

  	
  15,910.62

  	
   

  
	
  Deposits
  & Advance Payments to Vendors/Contractors

  	
   

  	
  $

  	
  16,564.20

  	
   

  
	
  Total
  Prepaid Expenses

  	
   

  	
  $

  	
  32,474.82

  	
   

  
	
  Total Current Assets

  	
   

  	
  $

  	
  154,829.18

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Capitalized
  Property, Plant & Equipment

  	
   

  	
   

  	
   

  
	
  Property
  & Equipment not charged to cost recovery, net

  	
   

  	
   

  	
   

  
	
  Property
  & Equipment charged to cost recovery, net

  	
   

  	
  $

  	
  0.01

  	
   

  
	
  Total
  Capitalized Property, Plant & Equipment

  	
   

  	
  $

  	
  0.01

  	
   

  
	
  TOTAL ASSETS

  	
   

  	
  $

  	
  154,829.19

  	
   

  
	
  LIABILITIES

  	
   

  	
   

  	
   

  
	
  Jamsostek
  Social Insurance Payable

  	
   

  	
  $

  	
  —

  	
   

  
	
  PPh21 -
  Employee Withholding Tax Payable

  	
   

  	
  $

  	
  9,472.24

  	
   

  
	
  PPH23 -
  Vendor Withholding Taxes Payable

  	
   

  	
  $

  	
  —

  	
   

  
	
  Value Added
  Tax Payable

  	
   

  	
  $

  	
  3,506.60

  	
   

  
	
  Accrued
  Liabilities - PSC Operations

  	
   

  	
  $

  	
  —

  	
   

  
	
  Accrued
  Liabilities - PSC Operations-Pertamina

  	
   

  	
  $

  	
  —

  	
   

  
	
  Trade
  Accounts Payable - PSC Operations

  	
   

  	
  $

  	
  8,390.80

  	
   

  
	
  Total Current Liabilities

  	
   

  	
  $

  	
  21,369.64

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Joint
  Venture Contribution from Continental Energy Corp.

  	
   

  	
  $

  	
  3,824,963.10

  	
   

  
	
  Joint
  Venture Contribution from GeoPetro Resources Inc.

  	
   

  	
  $

  	
  2,539,909.26

  	
   

  
	
  Joint
  Venture Contribution from China Wisdom Int’l (HK) Ltd.

  	
   

  	
  $

  	
  —

  	
   

  
	
  Total Long Term Debt

  	
   

  	
  $

  	
  6,364,872.36

  	
   

  
	
  TOTAL LIABILITIES

  	
   

  	
  $

  	
  6,386,242.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EQUITY

  	
   

  	
   

  	
   

  
	
  Capital
  Stock (US$50,000 Fully amortized)

  	
   

  	
  $

  	
  —

  	
   

  
	
  Earnings
  (Deficit) Attributable to No Recoverable Costs

  	
   

  	
  $

  	
  (7,636.68

  	
  )

  
	
  Earnings
  (Deficit) Attributable to PSC Cost Recovery

  	
   

  	
  $

  	
  (6,223,776.88

  	
  )

  
	
  TOTAL EQUITY

  	
   

  	
  $

  	
  (6,231,413.56

  	
  )

  
	
   

  	
   

  	
   

  	
   

  
	
  TOTAL EQUITY & LIABILITIES

  	
   

  	
  $

  	
  154,828.44

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Check sum

  	
   

  	
  $

  	
  (0.75

  	
  ) 

  
									

 

26

 

Continental GeoPetro (Bengara-II) Ltd.

Monthly Financial Statements Expressed in US$

Cost Recovery Statement

 

	
   

  	
   

  	
   

  	
   

  	
  As At Month Ended: 31-Aug-06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Since PSC Project Inception - December 4, 1997

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Balance at 

  	
   

  	
  Transactions 

  	
   

  	
  Balance at 

  	
   

  
	
  Description of Account

  	
   

  	
   

  	
   

  	
  Start Month

  	
   

  	
  During Month

  	
   

  	
  End Month

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Summary of Expenditures Under the Bengara-II PSC

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Accumulated Recoverable Costs by Category
  of Expenditure

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Geological & Geophysical

  	
   

  	
   

  	
   

  	
  $

  	
  2,457,729.48

  	
   

  	
  $

  	
  13,333.38

  	
   

  	
  $

  	
  2,471,062.86

  	
   

  
	
  Engineering & Development

  	
   

  	
   

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
  Field Utilities, Camp, & Infrastructure

  	
   

  	
   

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
  Exploration Administration (Non-AFE Site
  & Field Offices G&A)

  	
   

  	
   

  	
   

  	
  $

  	
  16,459.57

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  16,459.57

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Budget
  AFE

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Drilling & Workover

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AFE # 03-0001 Drill Pungit-#1 Well

  	
   

  	
  $

  	
  4,728,877

  	
   

  	
  $

  	
  325,190.41

  	
   

  	
  $

  	
  5,157.47

  	
   

  	
  $

  	
  330,347.88

  	
   

  
	
  AFE # 04-0002 Drill Sebaraba-#1 Well

  	
   

  	
  $

  	
  6,199,474

  	
   

  	
  $

  	
  285,886.69

  	
   

  	
  $

  	
  5,157.47

  	
   

  	
  $

  	
  291,044.16

  	
   

  
	
  AFE # 03-0003 Drill Apung-#1 Well

  	
   

  	
  $

  	
  4,339,008

  	
   

  	
  $

  	
  261,602.64

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  261, 602.64

  	
   

  
	
  AFE # 05-0001 Drill Mulyo-#1 Well

  	
   

  	
  $

  	
  2,844,708

  	
   

  	
  $

  	
  45,609.95

  	
   

  	
  $

  	
  5,157.47

  	
   

  	
  $

  	
  50,767.42

  	
   

  
	
  AFE # 05-0002 Drill Bekawas-#1 Well

  	
   

  	
  $

  	
  2,927,470

  	
   

  	
  $

  	
  45,609.95

  	
   

  	
  $

  	
  5,157.47

  	
   

  	
  $

  	
  50,767.42

  	
   

  
	
  AFE # 04-0001 Drill Salinbatu-#1 Well

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AFE # 04-0002 Drill Mapat-#1 Well

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AFE # 04-0003 Drill Linta-#1 Well

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AFE # 04-0004 Drill Kuju-#1 Well

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
  21,039,537

  	
   

  	
  $

  	
  963,899.64

  	
   

  	
  $

  	
  20,629.88

  	
   

  	
  $

  	
  984,529.52

  	
   

  
	
  Production

  	
   

  	
   

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  	
  $

  	
  —

  	
   

  
	
  General & Administrative

  	
   

  	
   

  	
   

  	
  $

  	
  2,568,838.62

  	
   

  	
  $

  	
  65,896.13

  	
   

  	
  $

  	
  2,634,734.75

  	
   

  
	
  Warehouse Stock - Capital Expenditure Items

  	
   

  	
   

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
  Warehouse Stock - Non-Capital Expense Items

  	
   

  	
   

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
  Depreciation of Capital Assets Placed in
  Service

  	
   

  	
   

  	
   

  	
  $

  	
  14,385.34

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  14,385.34

  	
   

  
	
  Subtotal Accumulated Cost Recovery

  	
   

  	
   

  	
   

  	
  $

  	
  6,021,312.65

  	
   

  	
  $

  	
  99,859.39

  	
   

  	
  $

  	
  6,121,172.04

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Capital Assets Not yet Charged to Cost
  Recovery by Depreciation

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Inventory of Capital Assets Not Yet Placed
  In Service

  	
   

  	
   

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
  Inventory of Non-Capital Goods

  	
   

  	
   

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
  Capitalized Property, Plant and Equipment,
  net of depreciation

  	
   

  	
   

  	
   

  	
  $

  	
  10,377.38

  	
   

  	
  $

  	
  (10,377.37

  	
  ) 

  	
  $

  	
  0.01

  	
   

  
	
  Subtotal Recoverable Expenditure Not Yet
  Charged to Cost Recovery

  	
   

  	
   

  	
   

  	
  $

  	
  10,377.38

  	
   

  	
  $

  	
  (10,377.37

  	
  ) 

  	
  $

  	
  0.01

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Amount of Cost Recoverable
  Expenditures Made by Company and for which Corresponding Full Recovery of
  Such Cost is Expected

  	
   

  	
   

  	
   

  	
  $

  	
  6,031,690.03

  	
   

  	
  $

  	
  89,482.02

  	
   

  	
  $

  	
  6,121,172.05

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Capitalized Property, Plant and Equipment,
  net of depreciation, which Company has elected NOT to Charge to Cost Recovery
  but for which expenditure has been made. (See Note: )

  	
   

  	
   

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total amount of expenditure made by Company
  on the Bengara -II PSC Exploration Project to date

  	
   

  	
   

  	
   

  	
  $

  	
  6,031,690.03

  	
   

  	
  $

  	
  89,482.02

  	
   

  	
  $

  	
  6,121,172.05

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Costs Recovered From Production

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cost Recovery Limitation by FTP of this
  Month’s Production Revenue Less: Current Period’s Operating Cost’s Recovered
  Excess Available Cost Recovery Proceeds to Apply to Prior Period Costs

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Accumulated Balance Unrecovered Costs from
  Prior Periods

  	
   

  	
   

  	
   

  	
  $

  	
  5,816,425.17

  	
   

  	
  $

  	
  304,746.87

  	
   

  	
  $

  	
  6,121,172.04

  	
   

  
																		

 

27

 

Continental GeoPetro (Bengara-II) Ltd.

Monthly Financial Statements Expressed in US$

Profit/Loss Statement

 

	
   

  	
   

  	
   

  	
   

  	
  As At month Ended: 31-Aug-06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Since PSC Project Inception - December 4, 1997

  	
   

  
	
  Reference

  	
   

  	
  Description of Account

  	
   

  	
  Balance at

  Start Month

  	
   

  	
  Transactions

  During Month

  	
   

  	
  Balance at

  End Month

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  REVENUES:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PSC Production Revenues

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Gross Revenue from sales of Crude Oil

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  	
  $

  	
   —

  	
   

  
	
   

  	
   

  	
  Less: Transport Tariffs & Adjustments

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  	
  $

  	
   —

  	
   

  
	
   

  	
   

  	
  Subtotal PSC Revenue

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  	
  $

  	
   —

  	
   

  
	
   

  	
   

  	
  Less: Cost Recovery to Company

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  	
  $

  	
   —

  	
   

  
	
   

  	
   

  	
  Less: Investment Credits to Company

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  	
  $

  	
   —

  	
   

  
	
   

  	
   

  	
  Subtotal Shareable PSC Profit Oil Revenue

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  	
  $

  	
   —

  	
   

  
	
   

  	
   

  	
  Less: Pertamina Production Share:

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  	
  $

  	
   —

  	
   

  
	
  See Note:
  7.a

  	
   

  	
  TOTAL
  Company PROFIT OIL REVENUE

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  	
  $

  	
   —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Company Income

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Total Company Share of Profit Oil Revenue

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  	
  $

  	
   —

  	
   

  
	
   

  	
   

  	
  Total Cost Recovery

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  	
  $

  	
   —

  	
   

  
	
   

  	
   

  	
  Total Investment Credits

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  	
  $

  	
   —

  	
   

  
	
  See Note:
  7.a

  	
   

  	
  TOTAL
  Company INCOME

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  	
  $

  	
   —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EXPENDITURES:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Geological & Geophysical

  	
   

  	
  $

  	
  2,457,729.48

  	
   

  	
  $

  	
  13,333.38

  	
   

  	
  $

  	
   2,471,062.86

  	
   

  
	
   

  	
   

  	
  Engineering & Development

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
   —

  	
   

  
	
   

  	
   

  	
  Development Administration (Site &
  Field Offices G&A)

  	
   

  	
  $

  	
  16,459.57

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
   16,459.57

  	
   

  
	
   

  	
   

  	
  Drilling & Workover

  	
   

  	
  $

  	
  963,899.64

  	
   

  	
  $

  	
  20,629.88

  	
   

  	
  $

  	
   984,529.52

  	
   

  
	
   

  	
   

  	
  Production

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
   —

  	
   

  
	
   

  	
   

  	
  Surface Production Facilities

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
  Marine Production Transport/Storage
  Facilities

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
  General & Administrative

  	
   

  	
  $

  	
  2,568,838.62

  	
   

  	
  $

  	
  65,896.13

  	
   

  	
  $

  	
  2,634,734.75

  	
   

  
	
   

  	
   

  	
  For Warehouse Stock - Non-Capital ltems

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
  For Warehouse Stock - Capital ltems

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
  Depreciation of Capital Assets Placed in
  Service

  	
   

  	
  $

  	
  14,385.34

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  14,385.34

  	
   

  
	
   

  	
   

  	
  Other Costs Company Elects NOT to Charge to
  Cost Recovery

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
  PPh21 - Employee Withholding Tax Paid

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
  PPH23 - Vendor Withholding Tax Paid

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
  Value Added Tax Paid

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
  Income Tax Paid on Profit Oil Revenue

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
  TOTAL
  Company EXPENDITURES

  	
   

  	
  $

  	
  6,021,312.65

  	
   

  	
  $

  	
  99,859.39

  	
   

  	
  $

  	
  6,121,172.04

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Net After Taxes Company Income (Loss):

  	
   

  	
  $

  	
  (6,021,312.65

  	
  )

  	
  $

  	
  (99,859.39

  	
  )

  	
  $

  	
  (6,121,172.04

  	
  )

  

 

28

 

Continental GeoPetro (Bengara-II) Ltd.

Monthly Financial Statements Expressed in US$

Joint Interest Billing Statement

Contribution
Parity

 

	
   

  	
   

  	
   

  	
   

  	
  As At Month Ended: 31-Aug-06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  JV Accounts Since August 1, 1998

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Since PSC Project Inception - December 4, 1997

  	
   

  
	
  Effective

  Date

  	
   

  	
  Description of Account

  	
   

  	
  Cash

  Contributions

  to JV Ops

  	
   

  	
  Share of 

  Allocated

  Overheads

  	
   

  	
  Total

  Contribution

  to JV

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  31-Aug-06

  	
   

  	
  Actual
  Investment Made in Company to Date

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By Continental Energy Corp.

  	
   

  	
  $

  	
  3,311,363.10

  	
   

  	
  $

  	
  513,600.00

  	
   

  	
  $

  	
  3,824,963.10

  	
   

  
	
   

  	
   

  	
  By GeoPetro Resources Inc.

  	
   

  	
  $

  	
  2,197,509.25

  	
   

  	
  $

  	
  342,400.00

  	
   

  	
  $

  	
  2,539,909.25

  	
   

  
	
  See Note
  9.a

  	
   

  	
  Total Joint Venture Contribution Made

  	
   

  	
  $

  	
  5,508,872.35

  	
   

  	
  $

  	
  856,000.00

  	
   

  	
  $

  	
  6,364,872.35

  	
   

  

 

	
  31-Aug-06

  	
   

  	
  Actual Investment Made in Company to Date In %
  Terms

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By Continental Energy Corp

  	
   

  	
  60.10964

  	
  %

  	
  60.00000

  	
  %

  	
   

  	
   

  
	
   

  	
   

  	
  By GeoPetro Resources Inc.

  	
   

  	
  39.89036

  	
  %

  	
  40.00000

  	
  %

  	
   

  	
   

  
	
  See Note 9.a

  	
   

  	
  Total Joint Venture
  Contributions Made

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  	
   

  	
   

  

 

	
  31-Aug-06

  	
   

  	
  Over/Under Investment Made In Company to Date in %
  Terms

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  60%

  	
   

  	
  By Continental Energy Corp.

  	
   

  	
  0.10964

  	
  %

  	
  Over paid

  	
   

  	
   

  	
   

  
	
  40%

  	
   

  	
  By
  GeoPetro Resources Inc.

  	
   

  	
  -0.10964

  	
  %

  	
  Short Fall

  	
   

  	
   

  	
   

  

 

	
   

  	
   

  	
  Parity Calculation - If CEC Overpaid

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Continental Energy Has Paid

  	
   

  	
  $

  	
  3,311,363.10

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  GeoPetro Should Pay Proportional 40% or 

  	
   

  	
  $

  	
  2,207,575.40

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  GeoPetro Has Actually Paid Only

  	
   

  	
  $

  	
  2,197,509.25

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Amount GeoPetro Owes JV to
  Make Up Short Fall

  	
   

  	
  $

  	
  10,066.15

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
   

  	
   

  	
  Parity Calculation - If GeoPetro Overpaid

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  GeoPetro Resources Has Paid

  	
   

  	
  Not Applicable

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CEC Should Pay Proportional 60% or

  	
   

  	
  Not Applicable

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CEC Has Actually Paid Only

  	
   

  	
  Not Applicable

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Amount CEC Owes JV to Make
  Up Short Fall

  	
   

  	
  Not Applicable

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

29

 

Continental GeoPetro (Bengara-II) Ltd.

Monthly Financial Statements Expressed in US$

Joint Interest Billing Statement

CONTINENTAL ENERGY CORPORATION

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  As At Month Ended:   31-Aug-06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  JV Accounts Since August 1, 1998

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Since PSC Project Inception - December 4, 1997

  	
   

  
	
  Month of

  transaction

  	
   

  	
  Journal

  Voucher

  	
   

  	
  Detailed Listing of Actual Joint Venture Advances

  Made to Company by Continental Energy Corporation

  	
   

  	
  Cash

  Contributions

  to JV Ops

  	
   

  	
  Share of

  Allocated

  Overheads

  	
   

  	
  Total

  Contribution

  to JV

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  List of Wire Transfers, InterCo Billings &
  Adjustments

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  01-Jan-00

  	
   

  	
   

  	
   

  	
  JV Starting Point
  Contribution as per FOA-2.c at 01-JAN-2000

  	
   

  	
  $

  	
  225,00.00

  	
   

  	
   

  	
   

  	
  $

  	
  225,00.00

  	
   

  
	
  0-Jan-00

  	
   

  	
   

  	
   

  	
  CEC’s Credit to
  JV, Paid by GeoPetro Per FOA-2.a.1 & FOA-5.a on Behalf CEC

  	
   

  	
  $

  	
  100,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  100,000.00

  	
   

  
	
  0-Mar-00

  	
   

  	
   

  	
   

  	
  Adjustment
  Compensate GeoPetro FOA-2.c Payments to Start Point Balance

  	
   

  	
  $

  	
  (90,000.00

  	
  )

  	
   

  	
   

  	
  $

  	
  (90,000.00

  	
  )

  
	
  0-Mar-00

  	
   

  	
   

  	
   

  	
  CEC’s Credit to
  JV, Paid by GeoPetro Per FOA-2.c on Behalf CEC

  	
   

  	
  $

  	
  75,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  75,000.00

  	
   

  
	
  07-Apr-00

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  300,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  300,000.00

  	
   

  
	
  10-Apr-00

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  100,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  100,000.00

  	
   

  
	
  20-Apr-00

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  32,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  32,000.00

  	
   

  
	
  01-Jun-00

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  25,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  25,000.00

  	
   

  
	
  20-Jul-00

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  90,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  90,000.00

  	
   

  
	
  31-Jul-00

  	
   

  	
   

  	
   

  	
  Adjustment: To
  Actual JV Accounting Records Parity, as Per FOA-2.b

  	
   

  	
  $

  	
  (9,128.86

  	
  )

  	
   

  	
   

  	
  $

  	
  (9,128.86

  	
  )

  
	
  01-Aug-00

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  25,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  25,000.00

  	
   

  
	
  04-Sep-00

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  60,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  60,000.00

  	
   

  
	
  30-Nov-00

  	
   

  	
   

  	
   

  	
  CEC Direct
  Billing of JV Related Expenses

  	
   

  	
  $

  	
  24,222.00

  	
   

  	
   

  	
   

  	
  $

  	
  24,222.00

  	
   

  
	
  06-Dec-00

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  25,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  25,000.00

  	
   

  
	
  13-Mar-01

  	
   

  	
   

  	
   

  	
  Adjustment:
  Repayment to CEC From Funds to JV Ops

  	
   

  	
  $

  	
  (4,000.00

  	
  )

  	
   

  	
   

  	
  $

  	
  (4,000.00

  	
  )

  
	
  05-Aug-02

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  10,000.00

  	
   

  
	
  31-Aug-02

  	
   

  	
   

  	
   

  	
  CEC Paid JV
  Company Debt

  	
   

  	
  $

  	
  382,505.36

  	
   

  	
   

  	
   

  	
  $

  	
  382,505.36

  	
   

  
	
  31-Aug-02

  	
   

  	
   

  	
   

  	
  Adjustment:
  Transfer InterCo A/R Billing from GATB to Yapen

  	
   

  	
  $

  	
  (36,022.90

  	
  )

  	
   

  	
   

  	
  $

  	
  (36,022.90

  	
  )

  
	
  31-Aug-02

  	
   

  	
   

  	
   

  	
  Adjustment:
  Offset InterCo A/R Billing From Yapen

  	
   

  	
  $

  	
  (46,146.15

  	
  )

  	
   

  	
   

  	
  $

  	
  (46,146.15

  	
  )

  
	
  31-Aug-02

  	
   

  	
   

  	
   

  	
  Adjustment:
  Offset InterCo A/R Billing From GATB Against CEC JV Advances

  	
   

  	
  $

  	
  (58,989.98

  	
  )

  	
   

  	
   

  	
  $

  	
  (58,989.98

  	
  )

  
	
  13-Sep-02

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  30,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  30,000.00

  	
   

  
	
  21-Oct-02

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  30,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  30,000.00

  	
   

  
	
  30-Oct-02

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  35,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  35,000.00

  	
   

  
	
  31-Oct-02

  	
   

  	
   

  	
   

  	
  Adjustment: To
  Offset Yapen JV Parity Shortfall as per Directors

  	
   

  	
  $

  	
  (56,227.37

  	
  )

  	
   

  	
   

  	
  $

  	
  (56,227.37

  	
  )

  
	
  12-Nov-02

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  15,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  15,000.00

  	
   

  
	
  19-Nov-02

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  15,045.92

  	
   

  	
   

  	
   

  	
  $

  	
  15,045.92

  	
   

  
	
  02-Dec-02

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  5,510.65

  	
   

  	
   

  	
   

  	
  $

  	
  5,510.65

  	
   

  
	
  12-May-03

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  20,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  20,000.00

  	
   

  
	
  14-Aug-03

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  100,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  100,000.00

  	
   

  
	
  05-Nov-03

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  50,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  50,000.00

  	
   

  
	
  31-Dec-03

  	
   

  	
   

  	
   

  	
  CEC Pays Schell
  Director Fees

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  10,000.00

  	
   

  
	
  19-Feb-04

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  30,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  30,000.00

  	
   

  
	
  19-Feb-04

  	
   

  	
   

  	
   

  	
  CEC Pays BVI Fees
  for CGB2

  	
   

  	
  $

  	
  115.75

  	
   

  	
   

  	
   

  	
  $

  	
  115.75

  	
   

  
	
  23-Mar-04

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  30,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  30,000.00

  	
   

  
	
  13-Apr-04

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  24,985.00

  	
   

  	
   

  	
   

  	
  $

  	
  24,985.00

  	
   

  
	
  30-Apr-04

  	
   

  	
   

  	
   

  	
  Adjustment To
  Reallocate Overheads Previously Credited to CWI

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  32,400.00

  	
   

  	
  $

  	
  32,400.00

  	
   

  
	
  30-Apr-04

  	
   

  	
   

  	
   

  	
  Adjustment To
  Reallocate Cash JV Contribution Previously Credited to CWI

  	
   

  	
  $

  	
  431,869.75

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  431,869.75

  	
   

  
	
  30-Apr-04

  	
   

  	
  CEC Accumulated
  Share Overseas Overhead Allocations to end this date

  	
   

  	
   

  	
   

  	
  $

  	
  313,200.00

  	
   

  	
  $

  	
  313,200.00

  	
   

  
	
  31-May-04

  	
   

  	
   

  	
   

  	
  CEC Paid CGB2 BVI
  Agent Annual Fees

  	
   

  	
  $

  	
  600.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  600.00

  	
   

  
	
  01-Jun-04

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  25,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  25,000.00

  	
   

  
	
  17-Jan-05

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  12,500.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  12,500.00

  	
   

  
	
  17-Jan-05

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  12,500.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  12,500.00

  	
   

  
	
  18-Jan-05

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  12,500.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  12,500.00

  	
   

  
	
  19-Jan-05

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  2,500.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  2,500.00

  	
   

  
	
  03-Mar-05

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  10,000.00

  	
   

  
	
  04-Mar-05

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  10,000.00

  	
   

  
	
  07-Mar-05

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  10,000.00

  	
   

  
	
  08-Mar-05

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  4,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  4,000.00

  	
   

  
	
  06-Apr-05

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  75,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  75,000.00

  	
   

  
	
  11-Apr-05

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  30,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  30,000.00

  	
   

  
	
  03-May-05

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  15,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  15,000.00

  	
   

  
	
  23-May-05

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  45,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  45,000.00

  	
   

  
	
  05-Jul-05

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  15,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  15,000.00

  	
   

  
	
  31-Jul-05

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  15,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  15,000.00

  	
   

  
	
  31-Jul-05

  	
   

  	
   

  	
   

  	
  Credit value
  China Wisdom FO finder’s fees paid in shares by CEC on behalf JV

  	
   

  	
  $

  	
  552,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  552,000.00

  	
   

  
	
  31-Jul-05

  	
   

  	
   

  	
   

  	
  Adjust: Zero out
  I/O payable by CGB2 to GATB as Credit CEC JV Contribution

  	
   

  	
  $

  	
  38,716.62

  	
   

  	
   

  	
   

  	
  $

  	
  38,716.62

  	
   

  
	
  31-Jul-05

  	
   

  	
  Correction
  journal decreasing allocated overhead

  	
   

  	
   

  	
   

  	
  $

  	
  (25,200.00

  	
  )

  	
  $

  	
  (25,200.00

  	
  )

  
	
  03-Aug-05

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  15,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  15,000.00

  	
   

  
	
  05-Sep-05

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  15,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  15,000.00

  	
   

  
	
  30-Sep-05

  	
   

  	
   

  	
   

  	
  Adjust Zerp pit
  O/O payable by CGB2 to GATB as Credit CEC JV Contribution

  	
   

  	
  $

  	
  2,981.56

  	
   

  	
   

  	
   

  	
  $

  	
  2,981.56

  	
   

  
	
  06-Oct-05

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  15,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  15,000.00

  	
   

  
	
  31-Oct-05

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  22,500.00

  	
   

  	
   

  	
   

  	
  $

  	
  22,500.00

  	
   

  
	
  10-Nov-05

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  43,800.00

  	
   

  	
   

  	
   

  	
  $

  	
  43,800.00

  	
   

  
	
  15-Nov-05

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  68,400.00

  	
   

  	
   

  	
   

  	
  $

  	
  68,400.00

  	
   

  
	
  08-Dec-05

  	
   

  	
   

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  15,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  15,000.00

  	
   

  
	
  31-Dec-05

  	
   

  	
   

  	
   

  	
  CEC Funds CGB2 JV
  Ops: Payment ATE’s salary Nov & Dec 05

  	
   

  	
  $

  	
  15,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  15,000.00

  	
   

  
	
  31-Dec-05

  	
   

  	
  JVLD-011

  	
   

  	
  Adjust To parity
  China Wisdom finder’s Fee Paid by CEC

  	
   

  	
  $

  	
  (220,800.00

  	
  )

  	
   

  	
   

  	
  $

  	
  (220,800.00

  	
  )

  
	
  05-Jan-06

  	
   

  	
  JVAD-001

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  15,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  15,000.00

  	
   

  
	
  31-Jan-06

  	
   

  	
  JVAD-012

  	
   

  	
  CEC Funds CGB2 JV
  Ops: Cash Advance paid ATE in USA

  	
   

  	
  $

  	
  7,500.00

  	
   

  	
   

  	
   

  	
  $

  	
  7,500.00

  	
   

  
	
  03-Feb-06

  	
   

  	
  JVBD-001

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  15,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  15,000.00

  	
   

  
	
  09-Feb-06

  	
   

  	
  JVBD-001

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  15,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  15,000.00

  	
   

  
	
  16-Feb-06

  	
   

  	
  JVBD-001

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  45,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  45,000.00

  	
   

  
	
  28-Feb-06

  	
   

  	
  JVBD-008

  	
   

  	
  Adjust To Parity
  gain realized from zero out GATB I/O payable

  	
   

  	
  $

  	
  (16,679.27

  	
  )

  	
   

  	
   

  	
  $

  	
  (16,679.27

  	
  )

  
	
  02-Mar-06

  	
   

  	
  JVCD-011

  	
   

  	
  CEC Funded CGB2
  JV Ops: Paid ATE outstanding salary catch up thru Jan 06

  	
   

  	
  $

  	
  20,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  20,000.00

  	
   

  
	
  02-Mar-06

  	
   

  	
  JVCD-001

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  15,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  15,000.00

  	
   

  
	
  17-Mar-06

  	
   

  	
  JVCD-001

  	
   

  	
  CGX Pmt on behalf
  CGB2 . CEC 50% Share: B2 G&G work

  	
   

  	
  $

  	
  7,500.00

  	
   

  	
   

  	
   

  	
  $

  	
  7,500.00

  	
   

  
	
  31-Mar-06

  	
   

  	
  JVCD-009

  	
   

  	
  CGX Pmt on behalf
  CGB2 - CEC 50% Share. seismic reprocessing

  	
   

  	
  $

  	
  7,805.79

  	
   

  	
   

  	
   

  	
  $

  	
  7,805.79

  	
   

  
	
  31-Mar-06

  	
   

  	
  JVCD-010

  	
   

  	
  CEC Funded CGB2
  JV Ops: Paid ATE&RLMc salaries for Feb 06

  	
   

  	
  $

  	
  20,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  20,000.00

  	
   

  
	
  05-Apr-06

  	
   

  	
  JVDD-001

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  4,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  4,000.00

  	
   

  
	
  05-Apr-06

  	
   

  	
  JVDD-008

  	
   

  	
  CEC Funded CGB2
  JV Ops: Paid ATE&RLMc salaries for Mar 06

  	
   

  	
  $

  	
  20,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  20,000.00

  	
   

  
	
  30-Apr-06

  	
   

  	
  JVDD-009

  	
   

  	
  Adjust Parity
  Share Aug 05 May

  	
   

  	
  $

  	
  (18,000.00

  	
  )

  	
   

  	
   

  	
  $

  	
  (18,000.00

  	
  )

  
	
  30-Apr-06

  	
   

  	
  CEC Accumulated
  Share Overseas Overhead Allocation 2 Yrs 1May 04-30Apr 06

  	
   

  	
   

  	
   

  	
  $

  	
  174,000.00

  	
   

  	
  $

  	
  174,000.00

  	
   

  
	
  04-May-06

  	
   

  	
  JVED-001

  	
   

  	
  CEC Cash Funding
  to Joint Vnture for OPs

  	
   

  	
  $

  	
  9,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  9,000.00

  	
   

  
	
  04-May-06

  	
   

  	
  JVED-008

  	
   

  	
  CEC Funded CGB2
  JV OPS: Paid ATE&RLMc salaries for Apr 06

  	
   

  	
  $

  	
  20,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  20,000.00

  	
   

  
	
  23-May-06

  	
   

  	
  JVED-001

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  2,500.00

  	
   

  	
   

  	
   

  	
  $

  	
  2,500.00

  	
   

  
	
  06-Jun-06

  	
   

  	
  JVFD-001

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  6,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  6,000.00

  	
   

  
	
  06-Jun-06

  	
   

  	
  JVFD-001

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  19,200.00

  	
   

  	
   

  	
   

  	
  $

  	
  19,200.00

  	
   

  
	
  26-Jun-06

  	
   

  	
  JVFD-001

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  96, 000.00

  	
   

  	
   

  	
   

  	
  $

  	
  96, 000.00

  	
   

  
	
  30-Jun-06

  	
   

  	
  JVFD-008

  	
   

  	
  CEC Funded CGB2
  JV Ops: Paid ATE&RKMc salaries for May 06

  	
   

  	
  $

  	
  20,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  20,000.00

  	
   

  
	
  30-Jun-06

  	
   

  	
  JVFD-009

  	
   

  	
  Adjust Parity
  Share May 06

  	
   

  	
  $

  	
  (2,000.00

  	
  )

  	
   

  	
   

  	
  $

  	
  (2,000.00

  	
  )

  
	
  05-Jul-06

  	
   

  	
  JVGD-001

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  21,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  21,000.00

  	
   

  
	
  05-Jul-06

  	
   

  	
  JVGD-001

  	
   

  	
  Repayment loan to
  CGX account

  	
   

  	
  $

  	
  (2,500.00

  	
  )

  	
   

  	
   

  	
  $

  	
  (2,500.00

  	
  )

  
	
  31-Jul-06

  	
   

  	
  JVGD-008

  	
   

  	
  CEC Funded CGB2
  Jv Ops: Paid ATE&RLMc salaries for June 06

  	
   

  	
  $

  	
  20,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  20,000.00

  	
   

  
	
  31-Jul-06

  	
   

  	
  JVGD-010

  	
   

  	
  Adjust: Party
  Share June 06

  	
   

  	
  $

  	
  (2,000.00

  	
  )

  	
   

  	
   

  	
  $

  	
  (2,000.00

  	
  )

  
	
  02-Aug-06

  	
   

  	
  JVHD-001

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  41,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  41,000.00

  	
   

  
	
  29-Aug-06

  	
   

  	
  JVHD-001

  	
   

  	
  CEC Cash Funding
  to Joint Venture for Ops

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  10,000.00

  	
   

  
	
  30-Aug-06

  	
   

  	
  JVHD-001

  	
   

  	
  Proceed sold
  price of GATB Debt

  	
   

  	
  $

  	
  99.23

  	
   

  	
   

  	
   

  	
  $

  	
  99.23

  	
   

  
	
  31-Aug-06

  	
   

  	
  JVHD-008

  	
   

  	
  CEC Funded CGB2
  JV Ops: Paid ATE&RLMc salaries for July 06

  	
   

  	
  $

  	
  20,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  20,000.00

  	
   

  
	
  31-Aug-06

  	
   

  	
  JVHD-010

  	
   

  	
  Adjust Parity
  Share July 06

  	
   

  	
  $

  	
  (2,000.00

  	
  )

  	
   

  	
   

  	
  $

  	
  (2,000.00

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  31-Aug-06

  	
   

  	
  CEC Accumulated
  Share Overseas Overhead Allocation Since 1 May 2006

  	
   

  	
   

  	
   

  	
  $

  	
  19,200.00

  	
   

  	
  $

  	
  19,200.00

  	
   

  
	
   

  	
  Total JV Cont Contribution Made by Continental as of
  this Report Date

  	
   

  	
  $

  	
  3,311,363.10

  	
   

  	
  $

  	
  513,600.00

  	
   

  	
  $

  	
  3,824,963.10

  	
   

  

 

30

 

Continental GeoPetro (Bengara-II) Ltd.

Monthly Financial Statements Expressed in US$

Joint Interest Billing Statement

GeoPetro Resources Company

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  As At Month Ended:   31-Aug-06

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  JV Accounts Since August 1, 1998

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Since PSC Project Inception - December 4, 1997

  	
   

  
	
  Month of

  transaction

  	
   

  	
  Journal

  Voucher

  	
   

  	
  Detailed Listing of Actual Joint Venture Advances

  Made to Company by GeoPetro Resources Company

  	
   

  	
  Cash

  Contributions

  to JV Ops

  	
   

  	
  Share of

  Allocated

  Overheads

  	
   

  	
  Total

  Contribution

  to JV

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  List of Wire Transfers, InterCo Billings &
  Adjustments

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  01-Jan-00

  	
   

  	
   

  	
   

  	
  JV
  Starting Point Contributions as per FOA-2.c at 01-JAN-2000

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  	
  $

  	
  —

  	
   

  
	
  30-Mar-00

  	
   

  	
   

  	
   

  	
  GeoPetro
  paid CEC as per FOA-2.c to match parity of historical JV Cost

  	
   

  	
  $

  	
  75,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  75,000.00

  	
   

  
	
  18-Jul-00

  	
   

  	
   

  	
   

  	
  GeoPetro
  payment pursuant to FOA-5.a

  	
   

  	
  $

  	
  66,667.00

  	
   

  	
   

  	
   

  	
  $

  	
  66,667.00

  	
   

  
	
  30-Oct-00

  	
   

  	
   

  	
   

  	
  GeoPetro
  Direct Billing of JV Related Expenses

  	
   

  	
  $

  	
  13,799.70

  	
   

  	
   

  	
   

  	
  $

  	
  13,799.70

  	
   

  
	
  30-Oct-00

  	
   

  	
   

  	
   

  	
  GeoPetro
  Direct Billing of JV Related Expenses

  	
   

  	
  $

  	
  8,120.22

  	
   

  	
   

  	
   

  	
  $

  	
  8,120.22

  	
   

  
	
  09-Jan- 01

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  20,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  20,000.00

  	
   

  
	
  29-Jan- 01

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  20,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  20,000.00

  	
   

  
	
  26- Feb-01

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  30,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  30,000.00

  	
   

  
	
  29-Mar-01

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  10,000.00

  	
   

  
	
  27-Apr-01

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  20,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  20,000.00

  	
   

  
	
  28-May-01

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  20,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  20,000.00

  	
   

  
	
  27-Jun-01

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  20,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  20,000.00

  	
   

  
	
  30-Jun-01

  	
   

  	
   

  	
   

  	
  GeoPetro
  Direct Billing of JV Related Expenses

  	
   

  	
  $

  	
  1,664.95

  	
   

  	
   

  	
   

  	
  $

  	
  1664.95

  	
   

  
	
  30-Jul-01

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  20,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  20,000.00

  	
   

  
	
  07-Dec-01

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  12,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  12,000.00

  	
   

  
	
  24-Jan-02

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  5,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  5,000.00

  	
   

  
	
  03-Apr-02

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  8,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  8,000.00

  	
   

  
	
  24-May-02

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  5,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  5,000.00

  	
   

  
	
  10-Jun-02 

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  2,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  2,000.00

  	
   

  
	
  31-Aug-02

  	
   

  	
   

  	
   

  	
  GeoPetro
  Paid JV Company Debt

  	
   

  	
  $

  	
  180,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  180,000.00

  	
   

  
	
  31-Aug-02

  	
   

  	
   

  	
   

  	
  GeoPetro
  Paid JV Company Debt

  	
   

  	
  $

  	
  36,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  36,000.00

  	
   

  
	
  31-Aug-02

  	
   

  	
   

  	
   

  	
  Adjustments
  Transfer interCO A/R Billing from GATB to Yapen

  	
   

  	
  $

  	
  (24,015.27

  	
  )

  	
   

  	
   

  	
  $

  	
  (24,015.27

  	
  )

  
	
  31-Aug-02

  	
   

  	
   

  	
   

  	
  Adjustments
  Offset InterCo A/R Billing form Yapen

  	
   

  	
  $

  	
  (30,764.10

  	
  )

  	
   

  	
   

  	
  $

  	
  (30,764.10

  	
  )

  
	
  24-Sep-02

  	
   

  	
   

  	
   

  	
  GeoPetro
  Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  5,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  5,000.00

  	
   

  
	
  25-Oct-02

  	
   

  	
   

  	
   

  	
  GeoPetro
  Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  20,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  20,000.00

  	
   

  
	
  19-Nov-02

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  10,030.61

  	
   

  	
   

  	
   

  	
  $

  	
  10,030.61

  	
   

  
	
  02-Dec-02

  	
   

  	
   

  	
   

  	
  GeoPetro
  Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  3,673.76

  	
   

  	
   

  	
   

  	
  $

  	
  3,673.76

  	
   

  
	
  02-Jan-03

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  10,000.00

  	
   

  
	
  15-Jan-03

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  15,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  15,000.00

  	
   

  
	
  04-Feb-03

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  15,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  15,000.00

  	
   

  
	
  14-Mar-03

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops 

  	
   

  	
  $

  	
  60,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  60,000.00

  	
   

  
	
  04-Apr-03

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  10,000.00

  	
   

  
	
  17-Apr-03

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  60,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  60,000.00

  	
   

  
	
  22-May-03

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  40,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  40,000.00

  	
   

  
	
  25-Jun-03

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  40,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  40,000.00

  	
   

  
	
  23-Jul-03

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  40,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  40,000.00

  	
   

  
	
  26-Aug-03

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops 

  	
   

  	
  $

  	
  22,002.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  22,002.00

  	
   

  
	
  26-Sep-03

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  13,333.56

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  13,333.56

  	
   

  
	
  11-Nov-13

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  20,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  20,000.00

  	
   

  
	
  31-Dec-03

  	
   

  	
   

  	
   

  	
  GeoPetro
  Pays Doshi Director Fees

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  10,000.00

  	
   

  
	
  29-Jan-04

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  25,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  25,000.00

  	
   

  
	
  04-Mar-04

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  25,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  25,000.00

  	
   

  
	
  08-Apr-04

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  25,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  25,000.00

  	
   

  
	
  30-Apr-04

  	
   

  	
   

  	
   

  	
  Adjustment
  To Reallocate Overheads Previously Credited to CWI

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  21,600.00

  	
   

  	
  $

  	
  21,600.00

  	
   

  
	
  30-Apr-04

  	
   

  	
   

  	
   

  	
  Adjustment
  To Reallocate Cash JV Contribution Previously Credited to CWI

  	
   

  	
  $

  	
  287,913.17

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  287,913.17

  	
   

  
	
  30-Apr-04

  	
   

  	
  GeoPetro
  Accumulated Share Overseas Overhead Allocations to end this date

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  208,800.00

  	
   

  	
  $

  	
  208,800.00

  	
   

  
	
  04-May-04

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  25,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  25,000.00

  	
   

  
	
  08-Jun-04

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  25,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  25,000.00

  	
   

  
	
  02-Jul-04

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  25,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  25,000.00

  	
   

  
	
  03-Aug-04

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  25,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  25,000.00

  	
   

  
	
  14-Sep-04

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  20,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  20,000.00

  	
   

  
	
  19-Oct-04

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  20,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  20,000.00

  	
   

  
	
  10-Dec-04

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  20,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  20,000.00

  	
   

  
	
  14-Jan-05

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  20,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  20,000.00

  	
   

  
	
  02-Mar-05

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  15,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  15,000.00

  	
   

  
	
  04-Apr-05

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  10,000.00

  	
   

  
	
  03-May-05

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  10,000.00

  	
   

  
	
  03-Jun-05

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  28,000.00

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  28,000.00

  	
   

  
	
  04-Jul-05

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  10,000.00

  	
   

  
	
  31-Jul-05

  	
   

  	
  Correction
  journal decreasing allocated overhead

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  (16,800.00

  	
  )

  	
  $

  	
  (16,800.00

  	
  )

  
	
  03-Aug-05

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  10,000.00

  	
   

  
	
  05-Sep-05

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  10,000.00

  	
   

  
	
  05-Oct-05

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  10,000.00

  	
   

  
	
  09-Nov-05

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  29,200.00

  	
   

  	
   

  	
   

  	
  $

  	
  29,200.00

  	
   

  
	
  16-Nov-05

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  45,600.00

  	
   

  	
   

  	
   

  	
  $

  	
  45,600.00

  	
   

  
	
  08-Dec-05

  	
   

  	
   

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  10,000.00

  	
   

  
	
  31-Dec-05

  	
   

  	
  JVLD-011

  	
   

  	
  Adjust
  To Panty China Wisdom Finder’s Fee Paid by CEC

  	
   

  	
  $

  	
  220,800.00

  	
   

  	
   

  	
   

  	
  $

  	
  220,800.00

  	
   

  
	
  04-Jan-06

  	
   

  	
  JVAD-001

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  10,000.00

  	
   

  
	
  02-Feb-06

  	
   

  	
  JVBD-001

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  10,000.00

  	
   

  
	
  09-Feb-06

  	
   

  	
  JVBD-001

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  10,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  10,000.00

  	
   

  
	
  16-Feb-06

  	
   

  	
  JVBD-001

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  30,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  30,000.00

  	
   

  
	
  28-Feb-06

  	
   

  	
  JVBD-008

  	
   

  	
  Adjust
  to Party gain realized from zero out GATB I/C payable

  	
   

  	
  $

  	
  16,679.27

  	
   

  	
   

  	
   

  	
  $

  	
  16,679.27

  	
   

  
	
  17-Mar-06

  	
   

  	
  JVCD-001

  	
   

  	
  CGX
  Pmt on behalf CGB2 - GeoPetro 50% share: B2 G&G work

  	
   

  	
  $

  	
  7,500.00

  	
   

  	
   

  	
   

  	
  $

  	
  7,500.00

  	
   

  
	
  31-Mar-06

  	
   

  	
  JVCD-009

  	
   

  	
  CGX
  Pmt on behalf CGB2 - GeoPetr 50% share: seismic reprocessing

  	
   

  	
  $

  	
  7,805.79

  	
   

  	
   

  	
   

  	
  $

  	
  7,805.79

  	
   

  
	
  07-Apr-06

  	
   

  	
  JVDD-001

  	
   

  	
  Geo
  Petro Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  28,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  18,000.00

  	
   

  
	
  30-Apr-06

  	
   

  	
  JVDD-009

  	
   

  	
  Adjust:
  Parity Share Aug 05-May

  	
   

  	
  $

  	
  18,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  18,000.00

  	
   

  
	
  30-Apr-05

  	
   

  	
  GeoPetro
  Accumulated Share Overseas Overhead Allocation 2 Yrs 1May 04-30 Apr 06

  	
   

  	
   

  	
   

  	
  $

  	
  116,000.00

  	
   

  	
  $

  	
  116,000.00

  	
   

  
	
  16-May-06

  	
   

  	
  JVED-001

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  40,698.59

  	
   

  	
   

  	
   

  	
  $

  	
  40,698.59

  	
   

  
	
  23-May-06

  	
   

  	
  JVED-001

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  2,500.00

  	
   

  	
   

  	
   

  	
  $

  	
  2,500.00

  	
   

  
	
  07-Jun-06

  	
   

  	
  JVFD-001

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  26,800.00

  	
   

  	
   

  	
   

  	
  $

  	
  26,800.00

  	
   

  
	
  26-Jun-06

  	
   

  	
  JVFD-001

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  64,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  64,000.00

  	
   

  
	
  30-Jun-06

  	
   

  	
  JVFD-009

  	
   

  	
  Adjust:
  Parity Share Salary May 06

  	
   

  	
  $

  	
  2,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  2,000.00

  	
   

  
	
  04-Jul-06

  	
   

  	
  JVFD-001

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  24,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  24,000.00

  	
   

  
	
  05-Jul-06

  	
   

  	
  JVFD-001

  	
   

  	
  Loan
  repayment to CGX account

  	
   

  	
  $

  	
  (2,500.00

  	
  )

  	
   

  	
   

  	
  $

  	
  (2,500.00

  	
  )

  
	
  31-Jul-06

  	
   

  	
  JVFD-010

  	
   

  	
  Adjust:
  Parity Share June 06

  	
   

  	
  $

  	
  2,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  2,000.00

  	
   

  
	
  02-Aug-06

  	
   

  	
  JVHD-001

  	
   

  	
  GeoPetro
  Cash Funding to Joint Venture for Ops

  	
   

  	
  $

  	
  34,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  34,000.00

  	
   

  
	
  31-Aug-06

  	
   

  	
  JVHD-010

  	
   

  	
  Adjust:
  Parity Share July 06

  	
   

  	
  $

  	
  2,000.00

  	
   

  	
   

  	
   

  	
  $

  	
  2,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  31-Aug-06

  	
   

  	
  GeoPetro
  Accumulated Share Overseas Overhead Allocation Since 1 May 2006

  	
   

  	
   

  	
   

  	
  $

  	
  12,800.00

  	
   

  	
  $

  	
  12,800.00

  	
   

  
	
   

  	
  Total
  JV Contributions Made by GeoPetro as of this Report Date

  	
   

  	
  $

  	
  2,197,509.25

  	
   

  	
  $

  	
  342,400.00

  	
   

  	
  $

  	
  2,539,909.25

  	
   

  

 

31

 

SCHEDULE-B

MATERIAL CONTRACTS

 

The list and summary of the principle terms
and conditions of Material Contracts in effect between CGB2 and third parties
as of 1 October 2006 in accordance with Section-3 of this Agreement, are set
forth in the following table:

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Contract

  	
   

  	
   

  	
   

  	
  Expiry or

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Contract

  	
   

  	
  Covering

  	
   

  	
   

  	
   

  	
  Price or

  	
   

  	
   

  	
   

  	
  Notice to

  	
   

  	
   

  	
   

  
	
  No

  	
   

  	
  Date

  	
   

  	
  Number

  	
   

  	
  To

  	
   

  	
  Period

  	
   

  	
  Description

  	
   

  	
  Rate

  	
   

  	
  Period

  	
   

  	
  Terminate

  	
   

  	
  Remarks

  	
   

  
	
  1

  	
   

  	
  15-Jan-04

  	
   

  	
  GBSA-04-001

  	
   

  	
  PT.Asia Market Inv.

  	
   

  	
  15Jan04 - 14 Jan07

  	
   

  	
  Rent Jakarta Office

  	
   

  	
  47,500,000

  	
   

  	
  Rp/Year

  	
   

  	
  14-Jan-07

  	
   

  	
  Prepaid thru 14-Jan-07

  	
   

  
	
  2

  	
   

  	
  15-Aug-03

  	
   

  	
  Contract

  	
   

  	
  Perusda - Tarakan

  	
   

  	
  15Aug03 - 14 Aug06

  	
   

  	
  Rent Tarakan Office

  	
   

  	
  45,000,000

  	
   

  	
  Rp/Year

  	
   

  	
  14-Aug-06

  	
   

  	
  Prepaid thru 14-Feb-06

  	
   

  
	
  3

  	
   

  	
  26-Mar-05

  	
   

  	
  Contract

  	
   

  	
  Nuryati Siregar

  	
   

  	
  01Apr05- 31Mar07

  	
   

  	
  Rent House for
  Management

  	
   

  	
  $

  	
  830.00

  	
   

  	
  US$/Month

  	
   

  	
  31-Mar-07

  	
   

  	
  Prepaid thru 31-Mar-07

  	
   

  
																					

 

32

 

SCHEDULE-C

SHAREHOLDERS
AGREEMENT

 

The fully executed original of the
Shareholders Agreement and its exhibits entered into by the Parties upon the
date of the Shares Sale Agreement forms this Schedule-C.

 

33

 

CONTINENTAL-GEOPETRO
(BENGARA-II) LTD.

 

SHAREHOLDERS  AGREEMENT

 

This
shareholders agreement (the “Agreement”),
is entered into on the    th
September 2006, by and among:

 

CNPCHK
(INDONESIA)  LIMITED (hereinafter
referred to as the “CNPC-HKI”), a
British Virgin Islands company whose registered address is P.O. Box 957,
Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands;

 

CONTINENTAL
ENERGY CORPORATION (hereinafter referred to as “Continental”), a British Columbia, Canada
corporation located at Suite 1200, 14001 Dallas Parkway, Dallas, Texas, 75240,
USA;

 

GEOPETRO
RESOURCES COMPANY (hereinafter referred to as “GeoPetro”), a California, USA. corporation
located at Suite 700, One Maritime Plaza, San Francisco, CA, 94111, USA; and

 

CNPC
(HONG KONG) LIMITED (hereinafter referred to as the “Guarantor”, a Bermuda company located at
39th Floor, 118 Connaught Road West, Hong Kong;

 

hereinafter
referred to individually as “Party”
or collectively, as the context may dictate, as “Parties”.

 

RECITALS;
THAT

 

Whereas;
Continental-GeoPetro (Bengara-II) Ltd.
(hereinafter referred to as the “Company”
or as “CGB2”), is a British Virgin
Islands corporation with registered offices located at 4th Floor Ellen Skelton
Building, 3076 Drake’s Highway, Road Town, Tortola, British Virgin Islands and
principal operational offices located at Jl. R.S. Fatmawati 31A, Cilandak,
Jakarta, 12430, Indonesia;

 

Whereas,
The Parties have entered a separate written Shares Purchase and Sale Agreement
(hereinafter referred to as the “SPA”)
dated even date with this Shareholders Agreement pursuant to which CNPC-HKI
purchased 35,000 common shares of the Company from Continental and GeoPetro.

 

Whereas,
The Parties wish to enter into this Shareholders
Agreement to regulate their respective joint and several rights and obligations
as shareholders of the Company towards the operation and management of the
business and the affairs of the Company in addition to those provided for in
the Memorandum and Articles.

 

Whereas,
the Guarantor wishes to guarantee the performance of CNPC-HKI’s obligations
under this Shareholders Agreement.

 

Now
therefore, in consideration of the mutual covenants and agreements herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties covenant and agree
with each other as follows:

 

34

 

Article-1:   INTERPRETATION

 

1.1                 DEFINITIONS

In this
Shareholders Agreement, including the premises, schedules and the exhibits
hereto the following defined terms shall have the meaning ascribed thereto as
follows:

 

“Affiliate” means with respect to a party to
this Shareholders Agreement, a company which is, on or at any time after the
date of this Shareholders Agreement, a Subsidiary of such Party, a Parent
company of such Party, or a sister Subsidiary of a company having the same
Parent company; where Subsidiary and Parent have the meaning elsewhere defined
herein.

 

“Applicable Law” means the applicable provisions
of any Law having jurisdiction over CGB2 or any of the Bengara-II Assets, and
includes, without limitation, the applicable provisions of any permit, license
or other governmental or regulatory authorization issued to CGB2 in respect of
the Bengara-II Assets or any of them.

 

“Articles” means the articles of association
of the Company as amended or replaced from time to time.

 

“Bengara-II Assets” means collectively (i)
an undivided 100% participating interest in Contractor’s contract rights and
interests in the Bengara-II PSC; (ii) any permits, approvals, licenses,
endorsements or other authorizations issued to CGB2 by a governmental authority
in respect of activities under or related to the Bengara-II PSC; (iii) all of
CGB2’s rights and interests under its third party contracts including any oil
and gas sales contracts, gas processing agreements and product offtake
agreements; (iv) Company Accounts; (v) Company Property; and (vi) all seismic,
geological and well reports and other assessment materials and technical data
within and pertaining to the Bengara-II PSC contract area or arising as a
result of the Company’s Activities.

 

“Bengara-II PSC” means the Bengara-II
Production Sharing Contract entered into by CGB2 and Pertamina and approved by
the Minister of Mines and Energy of the Republic of Indonesia on 4 December
1997, including any amendments thereto or extensions thereof.

 

“BP Migas” means Badan Pelaksana Kegiatan
Usaha Hulu Minyak Dan Gas Bumi, a state oil and gas regulatory body established
under the Directorate General of Oil and Natural Gas of The Ministry of Mines
and Energy (MIGAS) of the Republic of Indonesia; and the successor in authority
to Pertamina in relation to the Bengara-II PSC.

 

“Board” means the board of Directors of the
Company for the time being and from time to time.

 

“Business  Day”
means any day other than a Saturday or Sunday or public holiday in Hong Kong,
USA or Indonesia.

 

“CGB2” means the Company.

 

“CNPC-HKI” means CNPCHK (Indonesia) Limited,
a Party to this Shareholders Agreement and a Shareholder of the Company.

 

“Company” means Continental-GeoPetro
(Bengara-II) Ltd.

 

“Company Account(s)” means all accounts
owned or kept by the Company including bank accounts, cash accounts, and the
EJA; together with the financial books, accounting related Records and
statements pertaining to them and expenditures made in satisfaction of Company
Costs incurred in performing Company’s Activities.

 

35

 

“Company’s Activities” means without limitation
any and all activities carried out by the Company in respect of the Company,
the Bengara-II PSC and the Bengara-II Assets or matters provided for in the
SPA, this Shareholders Agreement, the Memorandum, the Articles or otherwise
pertaining to the general business affairs of the Company.

 

“Company Costs” means any and all costs
incurred by the Company while carrying out Company’s Activities.

 

“Company Property” shall mean property owned
by the Company or under the custody and control of the Company as provided for
in the Bengara-II PSC.

 

“Continental” means Continental Energy
Corporation, a Party to this Shareholders Agreement and a Shareholder of the
Company.

 

“Contractor” refers to CGB2 in the context
of being a production sharing “Contractor” as the term is used in the
Bengara-II PSC.

 

“Consent Resolution” shall have the meaning
ascribed thereto in the Company’s Articles, specifically Paragraph-1 thereof,
and shall apply as therein defined to either a Consent Resolution of Directors
and to a Consent Resolution of Members.

 

“Corporate Records” means, without
limitation of the generality thereof, all, and each and every, corporate
register, minute book, Directors resolution, Members resolution maintained by
the Company or in the possession of the Company pertaining to the corporate
governance of the Company.

 

“Director” means a director and member of
the Board for the time being and from time to time of the Company including,
where applicable, any designated alternate Director, and “Directors” shall be construed accordingly.

 

“Earn-In Joint Account” or the “EJA” means the CGB2 owned multicurrency
bank account number 808-215644-838 established at Hongkong and Shanghai Banking
Corporation Limited, Hong Kong main office, 1 Queen’s Road Central, and
operated as provided for in Article-4 hereof.

 

“Encumbrance” means a mortgage, charge,
pledge, lien, option, restriction, right of first refusal, right of pre-emption,
third-party right or interest, other encumbrance or security interest of any
kind, or another type of preferential arrangement (including, without
limitation, a title transfer or retention arrangement) having similar effect.

 

“Guarantor” means CNPC (Hong Kong) Limited.

 

“GeoPetro” means GeoPetro Resources Company,
a Party to this Shareholders Agreement and a Shareholder of the Company.

 

“Hong Kong” means the Hong Kong Special
Administrative Region of the PRC.

 

“Laws” shall mean:

a)              all constitutions,
treaties, laws, statutes, codes, ordinances, orders, decrees, rules,
regulations, and municipal by-laws, whether domestic, foreign or international;

b)             all judgments,
orders, writs, injunctions, decisions, rulings, decrees, and awards of any
governmental authority or body; and

c)              all policies,
practices and guidelines or any governmental authority or body which, although
not actually having the force of law, are considered by such governmental
authority or body as requiring compliance as if having the force of law;

 

36

 

in each case
binding on or affecting the Company and the Company’s Activities; and “Law”
shall mean any one of them.

 

“Memorandum” means the Memorandum and
Articles of Association of the Company for the time being as amended from time
to time.

 

“Officer” means a corporate officer and
senior executive manager for the time being and from time to time of the
Company, and “Officers” shall be
construed accordingly.

 

“Ordinary Resolution” shall have the meaning
ascribed thereto in the Company’s Articles, specifically Paragraph-1 thereof,
and shall apply as therein defined to either a Ordinary Resolution of Directors
and to a Ordinary Resolution of Members.

 

“Parent” means owning or controlling a
Subsidiary company with more than 50% of the voting rights in general meeting.

 

“Parties” shall mean Continental Energy
Corporation, GeoPetro Resources Company, CNPCHK (Indonesia) Limited and CNPC
(Hong Kong) Limited; and “Party” shall mean any one of them.

 

“Pertamina” means P.T. Pertamina (Persero)
(f/k/a Perusahaan Pertambangan Minyak dan Gas Bumi Negara), a state enterprise
established under the laws of the Republic of Indonesia; and a party to the
Bengara-II PSC.

 

“Petroleum” has the same meaning as in the
Bengara-II PSC, and includes naturally occurring hydrocarbons commonly produced
from wells including crude oil, condensate, natural gas and natural gas
liquids.

 

“POD” means the official plan of development
for a commercial discovery or exploitation of a Petroleum accumulation prepared
by the Company and submitted to BP Migas for its approval.

 

“PRC” means the People’s Republic of China
and for the purpose of this Shareholders Agreement excludes Hong Kong, Macau
and Taiwan.

 

“Shareholder” means holders of Shares of the
Company; expressly CNPC-HKI, Continental, and GeoPetro and their respective
successors and permitted transferees.

 

“Shares” means common shares of the Company.

 

“Shares Holding” means in respect of each
Shareholder the total number of Shares held by that Shareholder at the relevant
time.

 

“Shares Percentage” means in respect of each
Shareholder the percentage of the total Shares of the Company held by that
Shareholder at the relevant time.

 

“SPA” means the Shares Purchase and Sale
Agreement amongst the Parties referred to in the recitals of this Shareholders
Agreement.

 

“Special Resolution” shall have the meaning
ascribed thereto in the Company’s Articles, specifically Paragraph-1 thereof,
and shall apply as therein defined to a Special Resolution of Members.

 

“Subsidiary” means, with respect to a
person, any corporation or other entity in which more than 50% of the voting
rights in general meeting or the composition of a majority of its board of
directors are controlled by the Parent.

 

37

 

“Taxes” means any federal, state,
provincial, municipal or other governmental taxes or assessments in the nature
of taxes of any nature whatsoever (including, without limitation, income taxes,
capital taxes, sales taxes, property taxes, goods and services taxes, stamp
taxes, value added taxes and use taxes and withholding tax of whatsoever
nature), and includes any interest, penalty or other additional obligation
associated therewith.

 

“US$” means United States Dollars, the
lawful currency of the United States.

 

1.2                 ANNEX

The following
additional agreements, annexes, exhibits, schedules (collectively referred to
hereinafter as “Annexes”) are
annexed and attached to this Shareholders Agreement and form a part hereof and
have the same force and effect as if set out in the body of this Shareholders
Agreement:

 

Annex-A                                               -                                            Form
Deed of Adherence

 

1.3                 CONSTRUCTION

In this
Shareholders Agreement, including the premises, schedules and exhibits hereto,
unless otherwise expressly stated:

 

a)        References to a “Party” or
“Parties” are references to a Party or Parties to this Shareholders Agreement
and include their respective successors and permitted assigns.

 

b)       References to “herein”,
“hereby”, “hereto”, “hereunder”, “hereof” and similar expressions are
references to this Shareholders Agreement and not to any particular section,
subsection or schedule.

 

c)        References to a statutory
provision includes a reference to the statutory provision as modified or
re-enacted or both from time to time before the date of this Shareholders
Agreement and any subordinate legislation made under the statutory provision
(as so modified or re-enacted) before the
date of this Shareholders Agreement.

 

d)       References to an “Article”,
“Section”, “subsection”, or “clause” are references to an Article, Section,
subsection, or clause of this Shareholders Agreement.

 

e)        References to an “Annex”
are references to an Annex to this Shareholders Agreement as described in
Section-1.2

 

f)          References to dollar
amounts are references to US dollar amounts.

 

g)       Words importing the
singular shall include the plural and vice versa.

 

h)       Words importing gender
shall include the masculine, feminine and neuter genders.

 

i)           References to a
“person” or “persons” shall include individuals, corporations, partnerships,
associations, bodies politic and other entities, all as may be applicable in
the context.

 

j)           The use of headings is
for convenience of reference only and shall not affect the construction or
interpretation hereof.

 

38

 

1.4                 ENTIRE
AGREEMENT

This
Shareholders Agreement together with its Annexes, the SPA, the Memorandum, and
the Articles, constitute the entire agreement between the Parties pertaining to
CGB2, the Company’s Activities and the Bengara-II Assets and supersede all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the Parties in connection with the subject matter of this
Shareholders Agreement. This Shareholders Agreement may be amended only by
written instrument executed by no less than all of the Parties hereto.

 

Article-2:    BUSINESS
OF THE COMPANY

 

2.1                               The Company was
incorporated under the name Apex (Bengara-II) Ltd. as an International Business
Company in the British Virgin Islands under the International Business
Companies Act on September 9, 1997 registration number 247888. Apex
(Bengara-II) Ltd. changed its name to Continental-Wisdom-GeoPetro (Bengara-II)
Ltd. on 5 June 2003. Continental-Wisdom-GeoPetro (Bengara-II) Ltd. changed its
name to Continental-GeoPetro (Bengara-II) Ltd. on 17 December 2003.

 

2.2                               The Company was originally
incorporated with an authorized share capital of US$ 50,000 consisting of
50,000 common shares of US$ 1.00 par value each, all of which are issued,
outstanding and fully paid up as of the date of this Shareholders Agreement.

 

2.3                               The Company was
formed expressly for the sole purpose of entering into, holding and operating
the Bengara-II Production Sharing Contract which it signed with Pertamina, the
state owned oil enterprise of the Republic of Indonesia, on December 4, 1997
(together with any amendments thereto, the “Bengara-II
PSC”). The Company owns an undivided 100% participating interest in
Contractor’s contract rights in the Bengara-II PSC.

 

2.4                               The Bengara-II PSC
covers a 3,650 square kilometers contract area (reduced from 4,867 square kilometers
in a June 2001 Bengara-II PSC mandated relinquishment) located partially
onshore and partially offshore in the province of East Kalimantan, Indonesia (“Bengara-II Block”). In accordance with the
terms and conditions of the Bengara-II PSC, the Company has the exclusive
authority to conduct, along with BP Migas, petroleum exploration and production
operations within the Bengara-II PSC contract area for up to 30 years from 4
December 1997.

 

2.5                               The Company has no
business interests, property or assets other than those directly pertaining to
the Bengara-II PSC and the “Bengara-II Assets”
as defined in Article-1.1.

 

Article-3:    THE
SHAREHOLDERS

 

3.1                               The Company has only
three Shareholders or Members and all three are Parties to this Shareholders
Agreement. The Guarantor is a Party to this Shareholders Agreement but is not a
Shareholder.

 

3.2                               Each Shareholder
owns a number of “Shares” of the
Company, its “Shares Holding”, in
the proportions to the total  “Shares Percentage” as these terms are
defined in Article-1.1 and in the amounts as are set forth in the following
table:

 

39

 

Table-3.2

 

	
  Shareholder

  	
   

  	
  Shares Holding

  	
   

  	
  Shares Percentage

  	
   

  
	
  CNPC-HKI

  	
   

  	
  35,000

  	
   

  	
  70

  	
  %

  
	
  Continental

  	
   

  	
  9,000

  	
   

  	
  18

  	
  %

  
	
  GeoPetro

  	
   

  	
  6,000

  	
   

  	
  12

  	
  %

  
	
  Total
  Shares

  	
   

  	
  50,000

  	
   

  	
  100

  	
  %

  

 

3.3                               As used in this
Shareholders Agreement, each Shareholder’s Shares Holding represents the total
number of the Company’s Shares owned by that Shareholder and each Shareholders
respective Shares Percentage refers to the percentage that the said
Shareholder’s Shares Holding represents to the total number of Shares of the
Company, equal to the percentages set forth in Table-3.2.

 

3.4                               Each Shareholder’s
respective Shares Percentage set forth in Table-3.2 represents the proportional
percentage that each respective Shareholder owns in the Company, in the
contractors rights and obligations under the Bengara-II PSC, and in the
Bengara-II Assets.

 

3.5                               Each Shareholder’s
respective Shares Percentage set forth in Table-3.2 represents the proportional
percentage that each respective Shareholder’s several rights, entitlements,
commitments, obligations, responsibilities and liabilities in respect of the
Company’s Activities under this Shareholders Agreement, the Memorandum and the
Articles.

 

3.6                               Each Shareholder’s
respective Shares Percentage set forth in Table-3.2 represents the proportional
percentage that each respective Shareholder is entitled to participate and
share in Dividends distributed by the Company as provided for as provided for
in Article-13 of this Shareholders Agreement.

 

3.7                               Each Shareholder’s
respective Shares Holding set forth in Table-3.2 represents the number of
Shares that respective Shareholder is entitled to vote at meetings of the
Members of the Company and which shall count as votes to pass Ordinary, Special
or Consent Resolutions of the Members as provided for in this Shareholders
Agreement and as further provided for and defined in the Memorandum and
Articles of the Company

 

3.8                               Each Shareholder
shall equally be entitled to inspect, and the Board of Directors shall provide
all reasonable access to each Shareholder for the inspection of any one or all
of the Corporate Records (as defined in Article-1.1) in the Company’s premises
in normal business hours provided 10-days prior written request from any
Shareholder has been given to the Company’s Secretary.

 

3.9                               The Shareholders and
the Directors shall at all times cause the Company to conduct the Company’s
Activities in accordance with prudent and good oil field practices to an
international standard.

 

Article-4:    EARN-IN
JOINT ACCOUNT & THE EARNING OBLIGATION

 

4.1                               In accordance with
its obligations under the provisions of Section-2.2.3 of the SPA CNPC-HKI, a
Party to this Shareholders Agreement, advanced eighteen million seven hundred
thousand US dollars (US$18,700,000)
to the Company (referred to in the SPA and hereinafter as the “Earning Obligation”) into CGB2’s
multicurrency bank account number 808-215644-838 (referred to in the SPA and
hereinafter as the “Earn-In Joint Account”
or the “EJA”) established at
Hongkong and Shanghai Banking Corporation Limited, Hong Kong main office, 1
Queen’s Road Central (hereinafter referred to as “HSBC-HK”).

 

40

 

4.2                               The Board shall ensure
that the Company shall provide HSBC-HK clear, written, irrevocable instructions
dated even date herewith mandating that the EJA shall always require two
signatures to authorize any disbursements and any transactions from or within
the EJA. Of the two mandatory signatures so required, one signature must be
from a group of duly authorized representatives of Continental and GeoPetro and
one signature must be from a group of duly authorized representatives of
CNPC-HKI.

 

4.3                               The Board shall
ensure that the Company shall also provide HSBC-HK clear, written, irrevocable
instructions dated even date herewith mandating that any amendment, alteration
or change to the operating instructions set forth in the preceding Article-4.2
shall first require a unanimous Consent Resolution of the Members, such consent
shall not be unreasonably withheld or delayed.

 

4.4                               Notwithstanding any
provisions in the Shareholders Agreement and the Memorandum:-

 

a) in the
event that the duly authorized signatories of Continental and GeoPetro
unreasonably withhold or delay the authorization of disbursement or any
transactions from or within the EJA, resulting in the termination of the
Bengara-II PSC, then the EJA account shall be closed immediately and all money
standing to the credit of the EJA account immediately after the said
termination shall be disbursed to CNPC-HKI.

 

b) in the
event that the duly authorized signatories of CNPC-HKI unreasonably withhold or
delay the authorization of disbursement or any transactions from or within the
EJA, resulting in the termination of the Bengara-II PSC, then the EJA account
shall be closed immediately. An amount of up to US$ 6.3 million (or any lower
credit balance) standing to the credit of the EJA account immediately after the
said termination shall be disbursed in the proportions of 60% to Continental
and 40% to GeoPetro. Any remaining credit balance in the EJA account shall be
disbursed to CNPC-HKI.

 

4.5                               The Parties may by
written notice to the other Parties, from time to time, designate a replacement
authorized signatory to their respective group as provided for in the preceding
paragraph.

 

4.6                               Any interest earned
on Earning Obligation funds deposited in the EJA shall remain in the EJA for
Company use and shall be credited as advances to the Company by CNPC-HKI
pursuant to the Development Loans (where applicable).

 

4.7                               The entire amount of
the Earning Obligation deposited by CNPC-HKI into the EJA shall, in the manner
provided for in this Shareholders Agreement, be exclusively used to pay for all
the Company’s expenditures and costs incurred in the exploration, drilling and
development operations on the Bengara-II Assets under Work Programs and Budgets
approved by BPMigas including, without limitation, the 4 exploration wells
already approved for drilling during 2006, namely Seberaba-1, Pungit-1, Mulyo-1
and Bekawas-1.

 

4.8                               The Company shall
utilize and expend all Earning Obligation funds from the EJA strictly in
accordance with all procurement regulations, tendering procedures and other
applicable regulations of BPMigas, Applicable Laws, and other Indonesian
governmental authorities having jurisdiction, to ensure that all funds are
recoverable under the Bengara-II PSC.

 

4.9                               In the event that
CNPC-HKI refuses to utilize and expend the Earning Obligations funds in the
exploration, drilling and development operations on the Bengara-II Assets under
Work Programs and Budgets from time to time approved by BPMigas resulting in a
termination of the Bengara-II PSC, then the EJA account shall be closed
immediately. All moneys standing to the credit of the EJA account shall be
utilized in the following priority: firstly, to pay off all the Company’s
outstanding third party obligations (other than those withholding tax penalty
or fine obligations referred to in Article 5.3 hereto in which Continental and
GeoPetro shall bear full responsibility for the settlement thereof);

 

41

 

secondly an
amount of up to US$ 6.3 million (or any lower credit balance) shall be
disbursed in the proportions of 60% to Continental and 40% to GeoPetro. Any
remaining credit balance in the EJA account shall be disbursed to CNPC-HKI.

 

Article-5:    PAST
COSTS, PARITY & COST RECOVERY

 

5.1                               The Earning
Obligation amount is intended by the Parties to be, and is hereby deemed to be,
a parity matching contribution to the Company from and by CNPC-HKI to bring
it’s 70% Shares Percentage contribution to the Company into parity with funds
already sunk in the Company by Continental and GeoPetro’s combined 30% Shares
Percentage contribution to the Company.

 

5.2                               The Parties agree
that at 30 September 2006 the Company shall have actually contributed a total
of US$ 6,300,000 (including the Company’s working capital needs to be
contributed by Continental and GeoPetro in accordance with Section 3.6 of the
SPA (hereinafter referred to as the “CG-Sunk
Cost”)) toward the Bengara-II PSC minimum work commitment which is
cost-recoverable by the Company under the terms and conditions of the
Bengara-II PSC. The CG-Sunk Cost was contributed to the Company in the
proportions of 60% from Continental and 40% from GeoPetro.

 

5.3                               Each of Continental
and GeoPetro further agrees to pay or settle, and to indemnify and hold the
Company or CNPC-HKI or the Guarantor harmless of at their respective cost of,
in the proportions of 60% from Continental and 40% from GeoPetro, any claim of
penalty or fine by any Indonesian authority against the Company or CNPC-HKI or
the Guarantor in connection with any accrued outstanding withholding tax liability
of any consultants or officer or part time staff of the Company that were or
are incurred at any time before 30 September 2006. For the avoidance of doubt,
each of Continental and GeoPetro, and not the Company or CNPC-HKI or the
Guarantor, shall, bear full responsibility for the prompt settlement of the
foregoing penalty or fine obligations in all circumstances. Where required,
each of Continental and GeoPetro expressly agrees and authorises the Company to
set off such indemnity obligations against any payment or distributions owed by
the Company to Continental and GeoPetro under this Agreement.

 

5.4                               From 1 October 2006
CNPC-HKI shall commence funding 100% of the Company’s working capital needs in
accordance with the terms and conditions of the SPA and this Shareholders
Agreement by advancing funds to the Company from the EJA until the Earning
Obligation funds together with accumulated interest, if any, thereon are
entirely expended.

 

5.5                               The Company shall
utilize and expend all Earning Obligation funds and Development Loans (where
applicable) strictly in accordance with all procurement regulations, tendering
procedures and other applicable regulations of BPMigas, Applicable Laws, and
other Indonesian governmental authorities having jurisdiction, to ensure that
all funds are recoverable under the Bengara-II PSC.

 

Article-6:    THE
DEVELOPMENT LOANS

 

6.1                               In accordance with
Section-2.2.4 of the SPA, as and from the date the Earning Obligation funds
have been entirely expended and conditional on the receipt of BP Migas approval
of the first POD by the Company, CNPC-HKI shall become obliged to make advances
from time to time required by the Company to fund the working capital required
for appraisal and development of any successful Petroleum discovery of up to a
total,

 

42

 

maximum amount of forty one million three hundred thousand US dollars (US$41,300,000) (the “Development Loans”).

 

6.2                               The Development
Loans, as and when advanced, shall be utilized to satisfy and discharge any and
all of the Company’s obligations, liabilities, payables, and commitments as and
from the date the Earning Obligation funds have been entirely expended.

 

6.3                               For the purposes of
calculating interest on the Development Loans, a rate equivalent to the London
Interbank Offering Rate for 90-day funds in effect at the time the Development
Loans are advanced to the Company shall apply.

 

6.4                               In the event that
for whatever reason the Bengara-II PSC is terminated or relinquished in its
entirety back to the Indonesian government at any time before the full amount
of the Development Loans are expended, then:

 

a)                     the Parties
shall immediately commence the winding up of the Company and as from the
termination of the Bengara-II PSC, CNPC-HKI shall be relieved of any further
obligation to provide the Development Loans, and further provided that;

 

b)                    if any money
is left standing to the credit of
the Company’s account after satisfaction of all costs relating to the winding
up, such sum shall be applied towards
repayment of portion of the
Development Loans already advanced together with the accumulated interest (if any) prior to the date of such winding
up.

 

Article-7:    FINANCING
CGB2 ACTIVITIES

 

Except for the
Earning Obligation funds and the Development Loans (where applicable) the
Company’s Board of Directors shall seek external finance to fund all further
Company working capital requirements.

 

Article-8:    MANAGEMENT

 

8.1                               Notwithstanding the
provisions of Paragraph-72 of the Company’s Articles the Parties hereby agree
that for so long as the Earning Obligation funds are not entirely expended or
CNPC-HKI continue to make advances to the Company pursuant to the Development
Loans as provided in Article-6.1 then; then the number of Directors on the
Company’s Board shall remain fixed at three (3) Directors. Additionally, of
these three (3), any two Directors shall be elected to the Board at the sole
direction of CNPC-HKI and one Director shall be elected to the Board at the
sole direction of Continental. GeoPetro shall have the right to have a
non-voting observer present at Board meetings to participate in discussions
until such time as the provisions of Article 8.2 apply.

 

8.2                               Notwithstanding the provisions
of the foregoing paragraph, the Parties hereby agree that immediately upon such
time as the Development Loans as provided for in Article-6.1 have been fully
expended or such obligation is released in accordance with the provisions of
Article-6.4 then the number of Directors on the Company’s Board shall thereupon
be increased to and fixed at five (5) Directors. Additionally, of these five
(5), any three Directors shall be elected to the Board at the sole direction of
CNPC-HKI, one Director shall be elected to the Board at the sole direction of
Continental, and one Director shall be elected to the Board at the sole
direction of GeoPetro.

 

8.3                               Notwithstanding the provisions
of Paragraph-98 of the Company’s Articles the Parties hereby agree that the
quorum of two (2) Directors required to validly constitute a meeting of the
Board shall only apply provided that of the two (2) Directors needed to
constitute a

 

43

 

quorum, one of the
Directors making up the quorum is a Director duly elected to the Board at the
direction of CNPC-HKI and the other Director making up the quorum is a Director
duly elected to the Board at the direction of either Continental or GeoPetro.

 

8.4                               Notwithstanding the provisions
of the previous Article-8.3, If within two hours from the time appointed for
the Board meeting a quorum is not present, the meeting, if convened upon the
requisition of Members, shall be dissolved; in any other case it shall stand
adjourned to the next business day at the same time and place or to such other
time and place as those Directors present may determine, and if at the
adjourned meeting there are present within one hour from the time appointed for
the meeting in person or by proxy not less than any two directors, those two
Directors present shall constitute a quorum but otherwise the meeting shall be
dissolved.

 

Article-9:    DEALING
IN SHARES & PERMITTED TRANSFERS

 

9.1                               Each of the Parties may transfer
or dispose of all or any of its Shares to any of its Affiliates (each a “Permitted Transfer”). A Permitted Transfer may be
made on the following conditions:

 

a)                     the
transferee shall execute a Deed of Adherence in such form attached hereto as
Annex-A confirming to the other Shareholders that it shall be bound by this
Shareholders Agreement as a Shareholder in respect of the Shares transferred to
it;

 

b)                    in the event
that the transferee ceases to be an Affiliate of the transferring Shareholder
(which expression shall not include a second or subsequent transferor in a
series of transfers), then the transferee shall forthwith transfer all its
Shares to the transferring Shareholder or an Affiliate of the transferring
Shareholder.

 

9.2                               Each of the Parties may transfer
or dispose of its Shares or any interest therein to a third party if the
provisions set out in the following paragraph and Article-10 are complied with.

 

9.3                               A transfer of any Share by a
Shareholder in accordance with Article-10 shall be on the following conditions:

 

a)                     the
Shareholder may give a “Transfer Notice”
(as defined in Article-10) in respect of all or part of the Shares held by it;
and

 

b)                    if
the Shareholder wishes to transfer any Share to a person that is not already a
Shareholder, it shall require the transferee as a condition of the transfer to
execute a Deed of Adherence in the form attached hereto as Annex-A confirming
to the other Shareholders that it shall be bound by this Shareholders Agreement
as a Shareholder in respect of each Share transferred.

 

9.4                               Each Shareholder shall oblige
its Directors to the Board to ensure that the Board only approves for
registration a transfer of Shares carried out in accordance with this
Shareholders Agreement and the Articles.

 

Article-10:    SHARE
TRANSFER RESTRICTIONS

 

10.1                        The restriction on transfer
contained in this Article shall not apply to a Permitted Transfer as defined in
Article-9 or to any transfer with the prior written consent of the other
Shareholders.

 

44

 

10.2                        Save as provided in the
preceding paragraph, no Shares (or any interest therein) shall be transferred
or disposed of to any person unless and until the rights of pre-emption
conferred by this Article have been exhausted and only then as permitted herein
below.

 

10.3                        If a Shareholder wishes to
transfer its Shares, the Shareholder (“Seller”) shall give all of the other Shareholders (“Offerees”) notice (“Transfer Notice”) stating:

 

a)                     the number of
Shares proposed to be transferred (“Sale
Shares”);

 

b)                    the cash price
per Sale Share (“Specified Price”);

 

c)                     the name of
the transferee (if known); and

 

d)                    any other
terms of the transfer.

 

10.4                        Within 20 Business Days after
receiving a Transfer Notice (“Offer Period”),
the Offerees shall give the Seller notice (“Offeree Notice”) stating whether it accepts or rejects in full the offer
made in the Transfer Notice. The Offerees shall also give the Board a copy of
its notice to the Seller. Failure of an Offeree to respond within the 20
Business Days period is agreed to mean no acceptance.

 

10.5                        If the Offeree accepts the offer
made in the Transfer Notice, the transfer of the Sale Shares shall be completed
on the tenth Business Day after the expiry of the Offer Period or such other
date as the Seller and the Offeree may agree in writing, when the Offeree shall
buy and the Seller shall sell the Sale Shares at the Specified Price.

 

10.6                        If the Offeree does not accept
the offer made in the Transfer Notice before the expiry of the Offer Period,
the Seller may sell the Sale Shares to a third party (“Purchaser”) provided that:

 

a)                     the transfer
shall be completed within 60 Business Days after giving the Transfer Notice to
the Offeree;

 

b)                    the transfer
shall be at a price per Sale Share not less than the Specified Price;

 

c)                     the transfer
shall be made on terms no more favorable to the Purchase than those offered to
the Offeree; and

 

d)                    the Purchaser
being approved by the Parties hereof, which approval shall not be unreasonably
withheld, and executing a Deed of Adherence as set out in Annex-A on the date
of the completion of the Transfer.

 

Article-11:    COMPLIANCE

 

11.1                        If any provision of the
Memorandum or of the Articles at any time conflicts with any provision of this
Shareholders Agreement, this Shareholders Agreement shall prevail and the
parties shall whenever necessary exercise all voting and other rights and
powers available to them to procure the amendment, waiver or suspension of the
relevant provision of the Memorandum and/or the Articles to the extent
necessary to permit the Company and its affairs to be administered as provided
in this Shareholders Agreement.

 

Article-12:    TERMINATION

 

12.1                        This Shareholders Agreement
shall continue in full force and effect until terminated.

 

12.2                        This Shareholders Agreement may
only be terminated by a separate written termination agreement signed by all
the Parties and then only after a unanimous Consent Resolution of the Members
agreeing to the termination has been made.

 

45

 

Article-13:    DIVIDEND
POLICY

 

13.1                        The Company shall determine, not
less frequently than semi-annually, upon 31 December and 30 June, the amount of
Distributable Cash (as defined in Article 13.4 (g) below) then available for
distribution to the Shareholders. Unless the Shareholders otherwise unanimously
agree, all Distributable Cash, if any, so then determined to be available shall
be distributed promptly to the Shareholders, as “Dividends” in proportion to their shareholding in the Company.

 

13.2                        Notwithstanding any provision of
this Shareholders Agreement to the contrary, the Company shall not make any
Dividend distributions pursuant to this Shareholders Agreement except to the
extent permitted under Applicable Law.

 

13.3                        Promptly upon learning of any
requirement under any provision of applicable law requiring the Company to
withhold any sum from a Dividend distribution to a Shareholder or to make any
payment to any taxing authority in respect of such Shareholder, the Company
shall give written notice to such Shareholder of such requirement. The Company
is authorized to withhold from such Dividend distributions to the Shareholders
and to pay over to any taxing authority any amounts which it reasonably
determines may be required to be so withheld pursuant to any provision of
Applicable Law. All amounts withheld pursuant to any provision of Applicable
Law with respect to any distribution to any Shareholder shall be treated as
Dividend distributed to such Shareholder pursuant to this Clause for all
purposes under this Shareholders Agreement.

 

13.4                        For the purposes of this
Article, subject to Article 13.2, surplus cash at any time available to the
Company (excluding amounts that are borrowed from the Shareholders or under any
external credit facility of the Company) for distribution to the Shareholders
including a 15% cushion of such surplus cash shall be applied in the following
priority before it becomes distributable:

 

a)                     In first
priority, by the Company to conduct its business as set forth in the business
plan and the annual budget as approved the Board which shall take into account
factors such as the then cash flow and working capital requirements of the
Company;

 

b)                    In second
priority, to be retained by the Company under applicable laws;

 

c)                     In third
priority, to repay external finance or loans due third party creditors by the
Company;

 

d)                    In fourth
priority, to repay the CG-Sunk Costs to Continental and GeoPetro as provided
for in Article-5;

 

e)                     In fifth
priority, to repay the Earning Obligation funds advanced by CNPC-HKI as
provided for in Article-4;

 

f)                       In sixth
priority, to repay any Development Loans advanced by CNPC-HKI as provided for
in Article-6; and

 

g)                    Any remaining
surplus cash thereafter shall become the “Distributable Cash”.

 

Article-14:    PARENT
COMPANY GUARANTEE

 

14.1                        The Guarantor hereby
unconditionally and irrevocably guarantees to Continental and to GeoPetro the
due and punctual performance by CNPC-HKI of its obligations under this

 

46

 

Shareholders
Agreement and undertakes to indemnify and keep indemnified Continental and
GeoPetro, severally, against all losses, damages, costs and expenses of
whatsoever nature which it may suffer or incur by reason of any default or
unreasonable delay on the part of CNPC-HKI in the performance of the said
obligations.

 

14.2                        If any of the obligations of
CNPC-HKI that are the subject of the guarantee contained in this Article cease
to be valid or enforceable (in whole or in part) on any ground whatsoever
(including, but not limited to, any defect in or want of powers of the relevant
party or irregular exercise thereof or any lack of authority on the part of any
person purporting to act on behalf of the relevant party or any legal or other
limitation, disability or incapacity, or any change in the constitution of, or
any amalgamation or reconstruction of, or the liquidation receivership or
insolvency of the relevant party) the Guarantor shall nevertheless be liable to
Continental and GeoPetro, severally, in respect of the purported obligation or
liability as if the same were fully valid and enforceable and the Guarantor was
the principal obligor in respect thereof.

 

Article-15:    GENERAL

 

15.1          CONFIDENTIAL INFORMATION

For so long as
this Shareholders Agreement is in full force and effect the Parties shall
maintain confidential the content of this Shareholders Agreement except as
provided for in Section-15.2. Also for so long as this Shareholders Agreement
is in full force and effect the Parties shall maintain the confidentiality of
the Evaluation Information as defined in, and as provided for in the Data
Confidentiality Agreement (as defined in Article-1.1) and as otherwise required
under Applicable Law and pursuant to the Bengara-II PSC and prevailing BPMigas
regulations therefore.

 

15.2          CONFIDENTIALITY AND PUBLIC ANNOUNCEMENTS

Each
Shareholder acknowledges and agrees to be abided by the confidentiality
obligations as may from time to time be required by BP Migas in respect of the
information relating to the Bengara-II PSC and the Bengara-II Assets.

 

Any press
release or filing required of a Party by securities regulatory authorities
having jurisdiction with respect to the transaction contemplated in this
Shareholders Agreement shall be made by each of the Parties exerting its best
efforts to cooperate and coordinate with the other Parties such disclosure as
to its form, nature and extent.

 

15.3          COMMUNICATIONS

All notices
and other communications given in connection with this Shareholders Agreement
shall be in writing, and the respective addresses of the Parties for the
service of any such notices or other communications shall be as follows:

 

CNPCHK
(INDONESIA) LIMITED  &  CNPC (HONG KONG) LIMITED

39th Floor,
118 Connaught Road West, Hong Kong

Attention:  President, 
Fax No:  (852) 2868-1741

 

CONTINENTAL
ENERGY CORPORATION

Suite 1200,
14001 Dallas Parkway, Dallas, Texas, 75240

Attention:  President, 
Fax No:  (1-972) 934-6718

 

47

 

GEOPETRO
RESOURCES COMPANY

Suite 700, One
Maritime Plaza, San Francisco, California 94111

Attention:  President, Fax No:  (1-415) 398-9227

 

Unless there is
evidence that it was received earlier, all notices and communications given in
connection with this Shareholders Agreement shall be deemed to be sufficiently
given if delivered by courier upon the date of signature of the courier’s
delivery ticket. A Party may change its address for service by giving written
notice thereof to the other Parties.

 

15.4          GOVERNING LAW

This
Shareholders Agreement shall be governed by and construed in accordance with
the laws of Hong Kong. The courts of Hong Kong shall have non-exclusive
jurisdiction to hear and determine any suit, action or proceedings (“Proceedings”), and to settle any disputes,
which may arise out of or in connection with this Shareholders Agreement and,
for such purposes, the parties hereto irrevocably submit to the jurisdiction of
the courts of Hong Kong.

 

Each party
irrevocably waives any objection which it might at any time have to the courts
of Hong Kong being  nominated as the
forum to hear and determine any proceedings and to settle any disputes and agrees
not to claim that the courts of Hong Kong are not a convenient or appropriate
forum.

 

15.5          TRANSACTION EXPENSES

Each party
shall pay its own costs and expenses of and incidental to the negotiation,
preparation, execution and implementation by it of this Shareholders Agreement
and of all other documents referred to in it.

 

15.6          ASSIGNMENT, SUCCESSIONS IN INTEREST

This
Shareholders Agreement and the provisions hereof shall inure to the benefit of
and be binding upon the Parties and their respective successors and permitted
assigns. No Party may assign its rights or transfer all or any portion of its
Shares Holding unless as provided for in this Shareholders Agreement and
particularly as provided for in Article-9, Article-10, and Annex-A.

 

15.7          FURTHER ASSURANCES

Each of the
Parties shall from time to time and at all times on and after the Closing Date,
without further consideration, do and perform all such further acts and things,
and execute and deliver all such further agreements, assurances, notices, releases
and other documents and instruments, as may reasonably be required to more
fully assure the performance of any Party of its obligations under this
Shareholders Agreement and the carrying out of the intent and purpose of this
Shareholders Agreement.

 

15.8          WAIVER

The failure to
exercise or delay in exercising a right or remedy provided by this Shareholders
Agreement or by law does not impair or constitute a waiver of the right or
remedy or an impairment of or a waiver of other rights or remedies. No single
or partial exercise of a right or remedy provided by this Shareholders
Agreement or by law prevents further exercise of the right or remedy or the
exercise of another right or remedy. No waiver by any Party shall be effective
unless in writing, and a waiver shall affect only the matter, and the
occurrence thereof, specifically identified in the writing granting such waiver
and shall not extend to any other matter or occurrence.

 

48

 

15.9          SEVERABILITY

If any
provision of this Shareholders Agreement shall be held to be invalid, illegal
or unenforceable, the validity, legality or enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

 

15.10   RIGHTS CUMULATIVE

Each Party’s
rights and remedies contained in this Shareholders Agreement are cumulative and
not exclusive of rights or remedies provided by Applicable Law.

 

15.11   MUTUAL DRAFTING

This
Shareholders Agreement is the joint product of the Parties and each provision
hereof and thereof has been subject to the mutual consideration, negotiation
and agreement of all of the Parties and shall not be construed for or against
any Party.

 

15.12   TIME OF ESSENCE

Time shall be
of the essence in this Shareholders Agreement.

 

15.13   COUNTERPARTS

This
Shareholders Agreement may be executed in any number of counterparts, each of
which when executed and delivered shall be an original, but all the
counterparts together shall constitute one and the same instrument and have the
same force and effect as if all of the Parties had executed the same
instrument.

 

49

 

IN
WITNESS WHEREOF the Parties have executed and delivered this Shareholders
Agreement as of the date first above written.

 

 

	
  The
  GUARANTOR

  	
   

  	
  CNPCHK
  (Indonesia) Limited

  
	
  CNPC
  (HONG KONG) Limited

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Wang
  Mingcai

  	
   

  	
  Wang
  Mingcai

  
	
  Chairman

  	
   

  	
  Director

  
	
   

  	
   

  	
   

  
	
  GEOPETRO
  RESOURCES COMPANY

  	
   

  	
  CONTINENTAL
  ENERGY

  
	
   

  	
   

  	
  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  S. J.
  Doshi

  	
   

  	
  Richard
  L. McAdoo

  
	
  President
  and CEO

  	
   

  	
  President
  and CEO

  
						

 

50

 

Annex
to the Continental-GeoPetro (Bengara-II) Ltd.

 

Shareholders
Agreement September 2006

 

 

ANNEX-A

FORM OF
DEED OF ADHERENCE

 

The following
draft form of a Deed of Adherence required by permitted Shares Transfers in the
form required as provided for in the Shareholders Agreement Article-9 and
Article-10, forms this Annex-A as follows:

 

FORM OF DEED OF ADHERENCE

 

THIS DEED is made the         day of           
20   by           
of address             
(the “New Shareholder”) and is
supplemental to the Shareholders Agreement dated    September  2006 
made between the CNPCHK (Indonesia) Limited, CNPC (Hong Kong) Limited,
Continental Energy Corporation and GeoPetro Resources Company (such agreement
as from time to time supplemented, varied and amended, the “Shareholders Agreement”).

 

WITNESSETH  as follows:

 

1. The New Shareholder
confirms that it has been supplied with a copy of the Shareholders Agreement
and of all supplements, variations and amendments thereto and hereby covenants
with the CNPCHK (Indonesia) Limited, Continental Energy Corporation and
GeoPetro Resources Company to observe, perform and be bound by all the terms
and conditions of the Shareholders Agreement which are capable of applying to
the New Shareholder to the intent and effect that the New Shareholder shall be
deemed as and with effect from the date hereof to be a party to the
Shareholders Agreement and to be a Shareholder (as defined in the Shareholders
Agreement).

 

2. The address, telephone
and facsimile number at which notices are to be served on the New Shareholder
under the Shareholders Agreement and the person for whose attention notices are
to be addressed are as follows: [•]

 

3. Words and expressions
defined in the Shareholders Agreement shall have the same meaning in this Deed.
This Deed shall be governed by and construed in accordance with the laws of
Hong Kong and the parties hereto respectively submit to the non- exclusive
jurisdiction of the Hong Kong courts.

 

IN WITNESS  whereof the New Shareholder has executed this
Deed the day and year first above written.

 

THE COMMON SEAL of        
was hereunto affixed      in the presence of                :

 

For and on behalf of the New
Shareholder by  its duly authorized
representatives undersigned.

 

	
   

  
	
   

  	
   

  
	
  (CEO/Director)

  
	
   

  
	
   

  
	
   

  	
   

  
	
  (Director/Secretary)

  

 

—oOo—

 

51

 

SCHEDULE-D

RESTATED MEMORANDUM &
ARTICLES OF CGB2

 

The fully executed
Restated Memorandum and Articles of CGB2 as signed by the Parties and dated
upon the signature date of this Agreement forms this Schedule-D.

 

52

 

 

No.: 247888

 

British Virgin Islands

 

The BVI Business Companies Act, 2004

 

(No. 16 of 2004)

 

Memorandum of Association

and

Articles of Association

of

 

CONTINENTAL-GEOPETRO (BENGARA-II) LTD.

 

Incorporated the 9th day of September, 1997 Under the IBC Act (Cap.
291)

 

These Memorandum and Articles Amended and Restated

under the BVI BC Act 2004 on the 9th day of September 2006

 

 

	
  

  	
  Registered
  Agent

  Portcullis TrustNet (BVI) Limited

  Portcullis TrustNet Chambers, P.O. Box 3444

  Road Town, Tortola, British Virgin Islands

  Telephone: (284) 494 5296 Fax: (284) 494 5283

  

 

53

 

TERRITORY OF THE BRITISH VIRGIN
ISLANDS

THE BVI BUSINESS COMPANIES ACT,
2004

(No. 16 of 2004)

 

MEMORANDUM
OF ASSOCIATION

 

OF

 

Continental-GeoPetro
(Bengara-II) Ltd.

 

NAME

1.                                      The name of the Company is Continental-GeoPetro (Bengara-II) Ltd.

 

TYPE OF COMPANY

2.                                      The Company is a company limited by shares.

 

REGISTERED OFFICE

3.                                      The Registered Office of the Company is the
offices of Portcullis TrustNet (BVI) Limited,
Portcullis TrustNet Chambers, P.O. Box 3444, Road Town, Tortola, British Virgin
Islands, the office of the Registered Agent.

 

REGISTERED AGENT

4.                                      The Registered Agent of the Company is Portcullis TrustNet (BVI) Limited of Portcullis
TrustNet Chambers, P.O. Box 3444, Road Town, Tortola,  British Virgin Islands.

 

ISSUED SHARES

5.                                      The Company is authorized to issue no more
than 50,000 shares.

 

CLASSES, NUMBER AND PAR VALUE OF SHARES

6.                                      The shares issued by the Company shall be
made up of one class and one series of shares divided into 50,000 common
shares, each share having One US Dollar (US$ 1.00) par value.

 

FRACTIONAL SHARES

7.                                      The Company may issue fractions of a share
and a fractional share shall have the same corresponding fractional
liabilities, limitations, preferences, privileges, qualifications,
restrictions, rights and other attributes of a whole share of the same class or
series of shares.

 

RIGHTS, PRIVILEGES, RESTRICTIONS AND CONDITIONS ATTACHING TO SHARES

8.                                      All shares shall have;

 

(a)          the right
to one vote at a meeting of the Members of the Company or on any resolution of
Members;

 

(b)         the right
to an equal share in any distribution by way of dividend paid by the Company;
and

 

(c)          the right
to an equal share in the distribution of the surplus assets of the Company on
its liquidation.

 

54

 

VARIATION OF CLASS RIGHTS

9.                                      If at any time the issued shares are divided
into different classes or series of shares, the rights attached to any class or
series (unless otherwise provided by the terms of issue of the shares of that
class or series) may, whether or not the Company is being wound up, be varied
with the consent in writing of the holders of not less than three-fourths of
the issued shares of that class or series and of the holders of not less than
three-fourths of the issued shares of any other class or series of shares which
may be affected by such variation.

 

RIGHTS NOT VARIED BY THE ISSUE OF SHARES PARI PASSU

10.                                The rights conferred upon the holders of the
shares of any class issued with preferred or other rights shall not, unless
otherwise expressly provided by the terms of issue of the shares of that class,
be deemed to be varied by the creation or issue of further shares ranking pari
passu therewith.

 

CAPACITY AND POWERS

11.                                Subject to the Act, any other British Virgin
Islands legislation and paragraph 12 below the Company has, irrespective of
corporate benefit:

 

(a)          full
capacity to carry on or undertake any business or activity, do any act or enter
into any transaction;

 

(b)         for
the purposes of paragraph (a), full rights, powers and privileges; and

 

(c)          full
powers to issue shares with pre-emptive rights, subject to the Articles.

 

LIMITATIONS ON THE COMPANY’S BUSINESS

12.                                For the purposes of section 9(4)  of the Act the Company may not;

 

(a)          carry
on banking or trust business, unless it is licensed to do so under the Banks
and Trust Companies Act, 1990;

 

(b)         carry
on business as an insurance or reinsurance company, insurance agent or
insurance broker, unless it is licensed under the Insurance Act 1994;

 

(c)          carry
on business of company management, unless it is licensed under the Company
Management Act, 1990;

 

(d)         carry
on the business of providing the registered office or the Registered Agent for
companies incorporated in the British Virgin Islands;

 

(e)          carry
on the business as a mutual fund, manager of mutual funds or administrator of
mutual funds unless it is recognized or licensed as the case may be under the
Mutual Funds Act 1996; or

 

(f)            carry
on any other business that gives rise to a licensing requirement under any law
for the time being in force in the British Virgin Islands unless it is
licensed, regulated, recognized or otherwise approved pursuant to such law.

 

13.                                The Company is established for the purposes
of owning and operating the Bengara-II production sharing contract signed by
the Company with Pertamina, the state oil company of the Republic of Indonesia
on 4 December 1997 and the Company may not engage in any business not directly
or indirectly pertaining thereto unless by express written Consent Resolution
of the Members.

 

14.                                The Members of the Company may from time to
time enter into separate written Shareholders Agreements containing terms,
conditions and provisions governing the relationships of the Members to one
another in addition to those provided for in this Memorandum and in the
Articles.

 

REGISTERED SHARES AND PROHIBITION ON ISSUE OF BEARER SHARES

15.                                Shares in the Company may only be issued as
registered shares. The issue of shares to bearer is prohibited.

 

PROHIBITION ON EXCHANGE AND CONVERSION OF REGISTERED SHARES TO BEARER
SHARES

16.                                The exchange or conversion of registered shares to bearer shares is
prohibited.

 

55

 

TRANSFER OF REGISTERED SHARES

17.                                Subject to the provisions of the Articles the
Company may upon receipt of an instrument of transfer enter the name of the
transferee in the register of Members subject to the prior or simultaneous
approval of the Company as evidenced by a Special Resolution of Members
provided that no Member may unreasonably withhold such approval.

 

AMENDMENT OF MEMORANDUM AND ARTICLES OF ASSOCIATION

18.                                The Company may amend its Memorandum or its
Articles only by a Consent Resolution of Members.

 

DEFINITIONS

19.                                The meanings of words in this Memorandum are as defined in the
Articles.

 

---

 

Whereas:
An original memorandum of association of the Company dated the 9th day of
September 1997 was made to incorporate the Company as Number 247888 in the name
Apex (Bengara-II) Ltd. under the International Business Corporations Act
(Cap.291) of the British Virgin Islands.

 

Whereas:
Apex (Bengara-II) Ltd. changed its name to Continental-Wisdom-GeoPetro
(Bengara-II) Ltd. on 5 June 2003. Continental-Wisdom-GeoPetro (Bengara-II) Ltd.
changed its name to Continental-GeoPetro (Bengara-II) Ltd. on 17 December 2003.

 

We, the undersigned Member shareholders of the
Company, owning and representing 100% of
the Company’s authorized, issued and fully paid up share capital, hereby sign this amended,
replacement Memorandum of Association the    th day of September, 2006
and indicate our unanimous consent that from said date this Memorandum of
Association amends, replaces and supersedes all others; for the purposes of
governing the Company in accordance with the Members’ wishes and also for the
purposes of conforming the Company’s Memorandum of Association to the BVI
Business Corporations Act, 2004 (Act 16 of 2004).

 

 

	
  On
  Behalf of Member

  	
   

  	
  On
  Behalf of Member

  	
   

  	
  On
  Behalf of Member

  
	
  CNPCHK
  (Indonesia) Limited

  	
   

  	
  Continental
  Energy Corporation

  	
   

  	
  GeoPetro
  Resources Company

  
	
  Shareholder
  and owner of 35,000 common shares of the Company representing 70% of the
  Company’s share capital

  	
   

  	
  Shareholder
  and owner of 9,000 common shares of the Company representing 18% of the
  Company’s share capital

  	
   

  	
  Shareholder
  and owner of 6,000 common shares of the Company representing 12% of the
  Company’s share capital

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  by
  its Director

  Mr. Wang Mingcai

  	
   

  	
  by
  its President & CEO

  Mr. Richard L. McAdoo

  	
   

  	
  by
  its President & CEO

  Mr. S.J. Doshi

  
								

 

56

 

TERRITORY OF THE BRITISH VIRGIN
ISLANDS

THE BVI BUSINESS COMPANIES ACT,
2004

(No. 16 of 2004)

 

ARTICLES OF ASSOCIATION

 

OF

 

Continental-GeoPetro (Bengara-II)
Ltd.

 

PRELIMINARY

 

1.                   In these Articles, if not inconsistent with
the subject or context, the words and expressions standing in the first column
of the following table shall bear the meanings set opposite them respectively
in the second column thereof.

 

	
  Words

  	
   

  	
  Meaning

  
	
   

  	
   

  	
   

  
	
  Act

  	
   

  	
  the BVI Business Companies Act 2004 (No 16 of 2004) including any
  modification, extension, re-enactment or renewal thereof and any regulations
  made thereunder.

  
	
   

  	
   

  	
   

  
	
  Articles

  	
   

  	
  these Articles of Association as originally framed or as from time to
  time amended.

  
	
   

  	
   

  	
   

  
	
  distribution

  	
   

  	
  in relation to a distribution by a company to a Member, means

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (a)          the direct or indirect transfer of an
  asset, other than the Company’s own shares, to or for the benefit of the Member
  or

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)         the incurring of a debt to or for the benefit of a Member,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  in relation to shares held by a Member, and whether by means of a
  purchase of an asset, the purchase, redemption or other acquisition of
  shares, a transfer of indebtedness or otherwise, and includes a dividend.

  
	
   

  	
   

  	
   

  
	
  Consent Resolution

  of Members

  	
   

  	
  A Consent Resolution of Members is any resolution approved by the
  affirmative unanimous vote of one hundred percent (100%) of the shares of the
  Company at a meeting where all duly registered Members entitled to vote under
  the Shareholders Agreement are represented and present or by a resolution
  consented to in writing by all duly registered Members.

  
	
   

  	
   

  	
   

  
	
  Consent Resolution

  of Directors

  	
   

  	
  A Consent Resolution of Directors is any resolution approved by the
  affirmative unanimous vote of one hundred percent (100%) of the duly elected
  or appointed Directors at a duly convened and constituted meeting of the
  Board or by a resolution consented to in writing by all of the duly elected
  or appointed Directors.

  
	
   

  	
   

  	
   

  
	
  Member

  	
   

  	
  in relation to the Company, means a person whose name is entered in
  the register of Members as the holder of one or more shares, or fractional
  shares, in the Company.

  
	
   

  	
   

  	
   

  
	
  Memorandum

  	
   

  	
  the Memorandum of Association of the Company as originally framed or
  as from time to time amended.

  
	
   

  	
   

  	
   

  
	
  person

  	
   

  	
  An individual, a corporation, a trust, trustee, the estate of a
  deceased individual, a partnership or an unincorporated association of
  persons.

  

 

57

 

	
  Ordinary Resolution

  of Directors

  	
   

  	
  An Ordinary Resolution of Directors is any resolution approved at a
  duly convened and constituted meeting of the Board of Directors of the
  Company by the affirmative vote of an absolute majority in excess of fifty
  percent (50%) of the Directors who are entitled to vote under the
  Shareholders Agreement and did not abstain; or a resolution consented to in
  writing by all duly elected or appointed Directors. Unless otherwise provided
  for in these Articles or in any Shareholders Agreement in effect an Ordinary
  Resolution of Directors shall prevail in decisions of the Board of Directors.

  
	
   

  	
   

  	
   

  
	
  Ordinary Resolution

  of Members

  	
   

  	
  An Ordinary Resolution of Members is any resolution approved at a
  duly convened and constituted meeting of the Members of the Company or by a
  resolution consented to in writing by the affirmative vote of an absolute
  majority of in excess of fifty percent (50%) of the votes of the authorized,
  issued and outstanding shares of the Company that are entitled to vote under
  the Shareholders Agreement.

  
	
   

  	
   

  	
   

  
	
  Seal

  	
   

  	
  Any Seal which has been duly adopted as the common seal of the
  Company.

  
	
   

  	
   

  	
   

  
	
  securities

  	
   

  	
  shares and debt obligations of every kind, and options, warrants and
  rights to acquire shares, or debt obligations.

  
	
   

  	
   

  	
   

  
	
  solvency test

  	
   

  	
  a company satisfies the solvency test if; the value of the company’s
  assets exceeds its liabilities, and the company is able to pay its debts as
  they fall due.

  
	
   

  	
   

  	
   

  
	
  Shareholders Agreement

  	
   

  	
  A separate written agreement amongst all the Members of the Company,
  which from time to time may be entered into by the Members to provide certain
  additional terms, conditions and or procedures for governing the Company and
  the relationships of the Members.

  
	
   

  	
   

  	
   

  
	
  Special Resolution

  of Members

  	
   

  	
  A Special Resolution of Members is any resolution approved at a duly
  convened and constituted meeting of the Members of the Company or by a
  resolution consented to in writing by the affirmative vote of a majority of
  in excess of seventy five percent (75%) of the votes of the authorized,
  issued and outstanding shares of the Company that are entitled to vote under
  the Shareholders Agreement.

  
	
   

  	
   

  	
   

  
	
  treasury shares

  	
   

  	
  shares in the Company that were previously issued but were
  repurchased, redeemed or otherwise acquired by the Company and not cancelled.

  

 

2.                   “Written” or any term of like import includes
words typewritten, printed, painted, engraved, lithographed, photographed or
represented or reproduced by any mode of 
reproducing words in a visible form, including telex, facsimile,
telegram, cable or other form of writing produced by electronic communication.

 

3.                   Save as aforesaid any words or expressions
defined in the Act shall bear the same meaning in these Articles.

 

4.                   Whenever the singular or plural number, or
the masculine, feminine or neuter gender is used in these Articles, it shall
equally, where the context admits, include the others.

 

5.                   A reference in these Articles to voting in
relation to shares shall be construed as a reference to voting by Members
holding the shares except that it is the votes allocated to the shares that
shall be counted and not the number of Members who actually voted and a
reference to shares being present at a meeting shall be given a corresponding
construction.

 

6.                   A reference to money in these Articles is,
unless otherwise stated, a reference to the currency in which shares in the
Company shall be issued according to the provisions of the Memorandum.

 

58

 

REGISTERED SHARES

 

7.                   Every Member holding registered shares in the
Company shall be entitled to a certificate signed by a Director or Officer of
the Company or such other person who may be authorized from time to time by
Ordinary Resolution of Directors or under the Seal, with or without the
signature of any Director of the Company, specifying the share or shares held
by him and the signature of the Director or Officer or person so authorized and
the Seal may be facsimiles.

 

8.                   Any Member receiving a share certificate for
registered shares shall indemnify and hold the Company and its Directors and
Officers harmless from any loss or liability which it or they may incur by
reason of any wrongful or fraudulent use or representation made by any person
by virtue of the possession thereof. If a share certificate for registered
shares is worn out or lost it may be renewed on production of the worn out
certificate or on satisfactory proof of its loss together with such indemnity
as may be required by an Ordinary Resolution of Directors.

 

9.                   If several persons are registered as joint
holders of any shares, any one of such persons may give an effectual receipt
for any distribution payable in respect of such shares.

 

SHARES AND ISSUED SHARES

 

10.             Subject to the provisions of these Articles,
the Members of the Company may, by Consent Resolution of the Members without
limiting or affecting any rights previously conferred on the holders of any
existing shares or class or series of shares; offer, allot, grant options over
or otherwise dispose of shares to such persons, at such times and upon such
terms and conditions as the Company may by Consent Resolution of the Members
determine. In such case the Company shall not issue more shares than the
maximum number provided for in the Memorandum.

 

11.             The Company may issue fully paid, partly paid
or nil paid shares as well as bonus shares. A partly paid or nil paid share or
a share issued for a promissory note or other written obligation for payment of
a debt may be issued subject to forfeiture in the manner prescribed in these
Articles.

 

12.             Shares in the Company may be issued for
consideration in any form, including money, a promissory note or other
obligation to contribute money or property, real property, personal property
(including goodwill and know-how) services rendered or a contract for future
services  and the amount of such
consideration shall be determined by Consent Resolution of the Members, except
that in the case of shares with par value, the amount shall not be less than
the par value, and in the absence of fraud the decision of the Consent
Resolution of the Members as to the value of the consideration received by the
Company in respect of the issue is conclusive unless a question of law is
involved.

 

13.             Before issuing shares for a consideration other
than money, the Directors shall pass a resolution stating;

 

(a)          the amount to be credited for the issue of the shares;

 

(b)         their determination of the reasonable present cash value of the
non-money consideration for the issue; and

 

(c)          that, in their opinion, the present cash value of the non-money
consideration for the issue is not less than the amount to be credited for the
issue of the shares.

 

14.             A share issued by the Company upon conversion
of, or in exchange for, another share or a debt obligation or other security in
the Company, shall be treated for all purposes as having been issued for money
equal to the consideration received or deemed to have been received by the
Company in respect of the other share, debt obligation or security.

 

15.             Treasury shares may be disposed of by the
Company on such terms and conditions (not otherwise inconsistent with these
Articles) as the Company may by Consent Resolution of the Members determine.

 

16.             Subject to these Articles, the Company may
purchase, redeem or otherwise acquire and hold its own shares save that the
Company may not purchase, redeem or otherwise acquire its own shares without
the consent of the Member whose shares are to be purchased, redeemed or
otherwise acquired unless the Company is permitted by the Act or any other
provision in the Memorandum or Articles to purchase, redeem or otherwise
acquire the shares without their consent.

 

17.             No purchase, redemption or other acquisition
of shares shall be made unless the Directors determine by resolution of the
Directors that immediately after the purchase, redemption or other acquisition
the value of the  Company’s assets will
exceed its liabilities and the Company will be able to pay its debts as they
fall due.

 

59

 

18.             Sections 60 (Process
for acquisition of own shares), 61 (Offer
to one or more shareholders) and 62 (Shares redeemed otherwise than at the option of company) of
the Act shall not apply to the Company.

 

19.             A determination by the Directors under
Article 17 is not required;

 

(a)          the Company redeems a share or shares pursuant to  a 
right  of  a Member to have his shares redeemed or to
have his shares exchanged for money or other property of the Company; or

 

(b)         by virtue of the provisions of Section 179 of the Act.

 

20.             Shares that the Company purchases, redeems or
otherwise acquires pursuant to Article 17 may be cancelled or held as treasury
shares except to the extent that such shares are in excess of 80 percent of the
issued shares of the Company in which case they shall be cancelled but they
shall be available for reissue.

 

21.             Shares in the Company shall only be held as
treasury shares where the Directors of the Company resolve as such and the
number of shares acquired, when aggregated with shares of the same class
already held by the Company as treasury shares, does not exceed 50% of the
shares of that class previously issued by the Company, excluding shares that
have been cancelled. All rights and obligations attaching to a treasury share are
suspended and shall not be exercised by or against the Company while it holds
the share as a treasury share. Treasury shares may be reissued by the Company
as new shares.

 

22.             The Company shall keep a register of Members
containing;

 

(a)          the names and addresses of the persons who hold registered shares in
the Company;

 

(b)         the number of each class and series of registered shares held by each
Member;

 

(c)          the date on which the name of each Member was entered in the register
of Members;

 

(d)         the date on which any person ceased to be a Member; and

 

(e)          such other information as may be prescribed pursuant to the Act.

 

23.             The register of Members may be in any such
form as the Directors may approve but if it is in magnetic, electronic or other
data storage form, the company must be able to produce legible evidence of its
contents.

 

24.             The original or a copy of the register of
Members shall be kept at the registered office of the Company or at the office
of the Registered Agent of the Company.

 

25.             A share is deemed to be issued when the name
of the Member is entered in the register of Members.

 

MORTGAGES AND CHARGES OF
REGISTERED SHARES

 

26.             Members may mortgage or charge their
registered shares in the Company with such mortgage or charge being evidenced
in writing and signed by, or with the authority of the registered holder of a
registered share to which the mortgage or charge relates. The Company shall
give effect to the terms of any valid mortgage or charge except insofar as it
may conflict with any requirements herein contained for consent to the transfer
of shares.

 

27.             In the case of the mortgage or charge of
registered shares there may be entered in the share register of the Company at
the request of the registered holder of such shares

 

(a)          a statement that the shares are mortgaged or charged;

 

(b)         the name of the mortgagee or chargee; and

 

(c)          the date on which the aforesaid particulars are entered in the share
register.

 

28.             Where particulars of a mortgage or charge are
entered in the register of Members, such particulars shall be cancelled

 

(a)          with the written consent of the named mortgagee or chargee or anyone
authorized to act on his behalf; or

 

(b)         upon evidence satisfactory to the Directors of the discharge of the
liability secured by the mortgage or charge and the issue of such indemnities
as the Directors shall consider necessary or desirable.

 

60

 

29.             Whilst particulars of a mortgage or charge
over registered shares are entered in the register of Members pursuant to the
preceding articles no transfer of any share comprised therein shall be effected
without the written consent of the named mortgagee or chargee or anyone
authorized to act on his behalf.

 

FORFEITURE

 

30.             When shares not fully paid on issue or issued
for a promissory note or other written obligation for payment of a debt have
been issued subject to forfeiture, the following provisions shall apply.

 

31.             Written notice specifying a date for payment
to be made and the shares in respect of which payment is to be made shall be
served on the Member who defaults in making payment pursuant to a promissory
note or other written obligations to pay a debt.

 

32.             The written notice specifying a date for
payment shall

 

(a)          name a further date not earlier than the expiration of 14 days from the
date of service of the notice on or before which payment required by the notice
is to be made; and

 

(b)         contain a statement that in the event of non-payment at or before the
time named in the notice the shares, or any of them, in respect of which
payment is not made will be liable to be forfeited.

 

33.             Where a written notice has been issued and
the requirements of the notice have not been complied with within the
prescribed time, the Directors may at any time before tender of payment forfeit
and cancel the shares to which the notice relates.

 

34.             The Company is under no obligation to refund
any moneys to the Member whose shares have been forfeited and cancelled
pursuant to these provisions. Upon forfeiture and cancellation of the shares
the Member is discharged from any further obligation to the Company with
respect to the shares forfeited and cancelled.

 

LIEN

 

35.             The Company shall have a first and paramount
lien on every share issued for a promissory note or for any other binding
obligation to contribute money or property or any combination thereof to the
Company, and the Company shall also have a first and paramount lien on every
share standing registered in the name of a Member, whether singly or jointly
with any other person or persons, for all the debts and liabilities of such
Member or his estate to the Company, whether the same shall have been incurred
before or after notice to the Company of any interest of any person other than
such Member, and whether the time for the payment or discharge of the same
shall have actually arrived or not, and notwithstanding  that 
the  same are joint debts or liabilities
of such Member or his estate and any other person, whether a Member of the
Company or not. The Company’s lien on a share shall extend to all distributions
payable thereon. The Directors may at any time either generally, or in any
particular case, waive any lien that has arisen or declare any share to be
wholly or in part exempt from the provisions of this Article.

 

36.             In the absence of express provisions
regarding sale in the promissory note or other binding obligation to contribute
money or property, the Company may sell, in such manner as the Directors may by
Consent Resolution of Directors determine, any share on which the Company has
a  lien, but no sale shall be made unless
some sum in respect of which the lien exists is presently payable nor until the
expiration of twenty-one days after a notice in writing, stating and demanding
payment of the sum presently payable and giving notice of the intention to sell
in default of such payment, has been served on the holder for the time being of
the share.

 

37.             The net proceeds of the sale by the Company
of any shares on which it has a lien shall be applied in or towards payment of
discharge of the promissory note or other binding obligation to contribute
money or property or any combination thereof in respect of which the lien
exists so far as the same is presently payable and any residue shall (subject
to a like lien for debts or liabilities not presently payable as existed upon
the share prior to the sale) be paid to the holder of the share immediately
before such sale. For giving effect to any such sale the Directors may
authorize some person to transfer the share sold to the purchaser thereof. The
purchaser shall be registered as the holder of the share and he shall not be
bound to see to the application of the purchase money, nor shall his title to
the share be affected by any irregularity or invalidity in the proceedings in
reference to the sale.

 

61

 

TRANSFER OF SHARES

 

38.             Registered shares in the Company are
transferred by a written instrument of transfer signed by the transferor and
containing the name and address of the transferee. The instrument of transfer
shall be signed by the transferee if registration as a holder of the share
shall impose a liability to the Company on the transferee. The instrument of
transfer of a registered share shall be sent to the Company for registration.
The instrument of transfer shall include provisions obliging any transferee to
become party to any Shareholder Agreement in effect at the time of transfer.

 

39.             The transfer of a registered share is
effective when the name of the transferee is entered on the register of
Members.

 

40.             If the Directors of the Company are satisfied
that an instrument of transfer relating to shares has been signed but that the
instrument has been lost or destroyed, they may resolve;

 

(a)          to accept such evidence of the transfer of the shares as they consider
appropriate; and

 

(b)         that the transferee’s name should be entered in the register of Members
notwithstanding the absence of the instrument of transfer.

 

41.             The Company must on the receipt of an
instrument of transfer from the transferor or transferee of a registered share
in the Company enter the name of the transferee of the share in the register of
Members and in the register of shares transfers without delay.

 

TRANSMISSION OF SHARES

 

42.             The personal representative of a deceased
Member may transfer a share even though the personal representative is not a
Member at the time of the transfer.

 

43.             The personal representative, executor or
administrator of a deceased Member, the guardian of an incompetent Member or
the trustee of a bankrupt Member shall be the only person recognized by the
Company as having any title to his share but they shall not be entitled to
exercise any rights as a Member of the Company until they have proceeded as set
forth in the next following three Articles.

 

44.             The production to the Company of any document
which is evidence of probate of the will, or letters of administration of the
estate, or confirmation as executor, of a deceased Member or of the appointment
of a guardian of an incompetent Member or the trustee of a bankrupt Member
shall be accepted by the Company even if the deceased, incompetent or bankrupt
Member is domiciled outside the 
British  Virgin Islands if the
document evidencing the grant of probate or letters of administration,
confirmation as executor, appointment as guardian or trustee in bankruptcy is
issued by a foreign court which had competent jurisdiction in the matter. For
the purpose of establishing whether or not a foreign court had competent
jurisdiction in such a matter the Directors may obtain appropriate legal advice.
The Directors may also require an indemnity to be given by the executor,
administrator, guardian or trustee in bankruptcy.

 

45.             The Company may enter in the register of
Members the name of any person becoming entitled by operation of law or
otherwise to a share or shares in consequence of the death, incompetence or
bankruptcy upon such evidence being produced as may reasonably be required by
the Directors.

 

46.             Any person who has become entitled to a share
or shares in consequence of the death, incompetence or bankruptcy of any Member
may, instead of being registered himself, request in writing that some person
to be named by him be registered as the transferee of such share or shares and
such request shall likewise be treated as if it were a transfer.

 

47.             What amounts to incompetence on the part of a
person is a matter to be determined by the court having regard to all the
relevant evidence and the circumstances of the case.

 

62

 

REDUCTION OR INCREASE IN
AUTHORISED AND UNISSUED SHARES

 

48.             Only by Consent Resolution of the Members,
the Company may amend the Memorandum to increase the maximum number of shares
the Company is authorized to issue and may in respect of any unissued shares
increase or reduce the number of such shares, increase or reduce the par value
of any such shares or effect any combination of the foregoing.

 

49.             Only by Consent Resolution of the Members,
the Company may amend the Memorandum to

 

(a)          divide the shares, including issued shares, of a class or series into a
larger number of shares of the same class or series; or

 

(b)         combine the shares, including issued shares, of a class or series into
a smaller number of shares of the same class or series,

 

provided, however, that;

 

(i)           where shares are divided or combined under
(a) or (b) of this Article, the aggregate par value of the new shares on issue
that have a par value must be equal to the aggregate par value of the original
issued shares that had a par value prior to the division or combination under
(a) or (b) of this Article; and

 

(ii)        the Company shall not divide its shares if it
would cause the maximum number of shares that the Company is authorized to
issue by its Memorandum to be exceeded.

 

MEETINGS AND CONSENTS OF MEMBERS

 

50.             The Directors of the Company may convene
meetings of the Members of the Company at such times and in such manner and
places within or outside the British Virgin Islands as the Directors consider
necessary or desirable.

 

51.             Upon the written request of Members holding
ten percent (10%) or more of the outstanding voting shares in the Company the
Directors shall convene a meeting of Members.

 

52.             The Directors shall give not less than 7 days
notice of meetings of Members to those persons whose names on the date the
notice is given appear as Members in the share register of the Company and are
entitled to vote at the meeting.

 

53.             The Directors may fix the date notice is
given of a meeting of Members as the record date for determining those shares
that are entitled to vote at the meeting.

 

54.             A meeting of Members may be called on short
notice:

 

(a)          if Members holding not less than 90 percent of the total number of
shares entitled to vote on all matters to be considered at the meeting, or 90
percent of the votes of each class or series of shares where Members are
entitled to vote thereon as a class or series together with not less than a 90
percent majority of the remaining votes, have agreed to short notice of the
meeting, or

 

(b)         if all Members holding shares entitled to vote on all or any matters to
be considered at the meeting have waived notice of the meeting and for this
purpose presence at the meeting shall be deemed to constitute waiver.

 

55.             Failure of the Directors to give notice of a
meeting to a Member invalidates a meeting of Members.

 

56.             A Member may be represented at a meeting of
Members by a proxy who may speak and vote on behalf of the Member.

 

57.             The instrument appointing a proxy shall be
produced at the place appointed for the meeting before the time for holding the
meeting at which the person named in such instrument proposes to vote.

 

63

 

58.             An instrument appointing a proxy shall be in
substantially the following form or such other form as the Chairman of the
meeting shall accept as properly evidencing the wishes of the Member appointing
the proxy.

 

(Name of Company)

 

I/We        being a
Member of the above Company with        shares
HEREBY APPOINT     of     or failing him,     
of     to be my/our proxy to
vote for me/us at the meeting of Members to be held on the    
day of     and at any adjournment thereof. (Any restrictions on
voting to be inserted here.) Signed this        
day of     .

                             
(Member)

 

59.             The following shall apply in respect of joint
ownership of shares:

 

(a)          if two or more persons hold shares jointly each of them may be present
in person or by proxy at a meeting of Members and may speak as a Member;

 

(b)         if only one of the joint owners is present in person or by proxy he may
vote on behalf of all joint owners, and

 

(c)          if two or more of the joint owners are present in person or by proxy
they must vote as one.

 

60.             A Member shall be deemed to be present at a
meeting of Members if he participates by telephone or other electronic means
and all Members participating in the meeting are able to hear each other.

 

61.             A meeting of Members is duly constituted if,
at the commencement of the meeting, there are present in person or by proxy not
less than seventy five percent (75%) of the votes of the shares or class or
series of shares entitled to vote on resolutions of Members to be considered at
the meeting. If a quorum be present, notwithstanding the fact that such quorum
may be represented by only one person then such person may resolve any matter
and a certificate signed by such person accompanied where such person be a
proxy by a copy of the proxy form shall constitute a valid resolution of
Members.

 

62.             If within two hours from the time appointed
for the meeting a quorum is not present, the meeting, if convened upon the
requisition of Members, shall be dissolved; in any other case it shall stand
adjourned to the next business day at the same time and place or to such other
time and place as the Directors may determine, and if at the adjourned meeting
there are present within one hour from the time appointed for the meeting in
person or by proxy not less than fifty percent (50%) of the votes of the  shares or each class or series of shares
entitled to vote on the resolutions to be considered by the meeting, those
present shall constitute a quorum but otherwise the meeting shall be dissolved.

 

63.             At every meeting of Members, the Chairman of
the Board of Directors shall preside as chairman of the meeting. If there is no
Chairman of the Board of Directors or if the Chairman of the Board of Directors
is not present at the meeting, the Members present shall choose some one of
their number to be the chairman. If the Members are unable to choose a chairman
for any reason, then the person representing the greatest number of voting
shares present in person or by prescribed form of proxy at the meeting shall
preside as chairman failing which the oldest individual Member or
representative of a Member present shall take the chair.

 

64.             The chairman may, with the consent of the
meeting, adjourn any meeting from time to time, and from place to place, but no
business shall be transacted at any adjourned meeting other than the business
left unfinished at the meeting from which the adjournment took place.

 

65.             At any meeting of the Members the chairman
shall be responsible for deciding in such manner as he shall consider
appropriate whether any resolution has been carried or not and the result of
his decision shall be announced to the meeting and recorded in the minutes
thereof. If the chairman shall have any doubt as to the outcome of any
resolution put to the vote, he shall cause a poll to be taken of all votes cast
upon such resolution, but if the chairman shall fail to take a poll then any
Member present in person or by proxy who disputes the announcement by the
chairman of the result of any vote may immediately following such announcement
demand that a poll be taken and the chairman shall thereupon cause a poll to be
taken. If a poll is taken at any meeting, the result thereof shall be duly
recorded in the minutes of that meeting by the chairman.

 

66.             Any person other than an individual shall be
regarded as one Member and subject to the specific provisions hereinafter
contained for the appointment of representatives of such persons the right of
any individual to speak for or represent such Member shall be determined by the
law of the jurisdiction where, and by the documents by which, the person is
constituted or derives its existence. In case of doubt, the Directors may in
good faith seek legal advice from any qualified person and unless and until a
court of competent jurisdiction shall otherwise rule, the Directors may rely
and act upon such advice without incurring any liability to any Member.

 

64

 

67.             Any person other than an individual which is
a Member of the Company may by resolution of its Directors or other governing
body authorize such person as it thinks fit to act as its representative at any
meeting of the Company or of any class of Members of the Company, and the
person so authorized shall be entitled to exercise the same powers on behalf of
the person which he represents as that person could exercise if it were an
individual Member of the Company.

 

68.             The chairman of any meeting at which a vote
is cast by proxy or on behalf of any person other than an individual may call
for a notarially certified copy of such proxy or authority which shall be
produced within 7 days of being so requested or the votes cast by such proxy or
on behalf of such person shall be disregarded.

 

69.             Directors of the Company may attend and speak
at any meeting of Members of the Company and at any separate meeting of the
holders of any class or series of shares in the Company.

 

70.             An action that may be taken by the Members at
a meeting may also be taken by a resolution of Members consented to in writing
or by telex, telegram, cable, facsimile or other written electronic
communication, without the need for any notice, provided the said Consent
Resolution of Members is adopted by the unanimous written consent of all
Members. Consent Resolutions shall satisfy the requirements of a Special
Resolution of Members as provided for in these Articles and the Memorandum. The
Consent Resolution may be in the form of counterparts, each counterpart being
signed by one or more Members.

 

DIRECTORS

 

71.             The Directors of the Company shall be elected
or appointed in accordance with the provisions hereof. A person shall not be
appointed as a Director unless he has consented in writing to be a Director and
is qualified to act as a Director under the Act.

 

72.             The number of Directors of the Company shall
be not less than three (3) and not more than five (5) as further provided for
in the Shareholders Agreement.

 

73.             Each Director shall hold office for the term
fixed by the Member who appointed such Director as provided for in article-72;
or until his earlier death, resignation or removal.

 

74.             Directors shall not be entitled to nominate a
reserve Director.

 

75.             A Director may be removed from office, with
or without cause, by the Member who appointed such Director as provided for in
article-72.

 

76.             A Director may resign his office by giving
written notice of his resignation to the Company and the resignation shall have
effect from the date the notice is received by the Company or from such later
date as may be specified in the notice.

 

77.             A Director of the Company shall resign
forthwith if he is, or becomes, disqualified to act as a Director under the
Act.

 

78.             The Members may at any time, in accordance
with the provisions of article-72, appoint any person to replace a Director or
to fill a vacancy. There is a vacancy if a Director dies, resigns or otherwise
ceases to hold office as a Director prior to the expiration of his term of
office. The Directors may not appoint a Director to fill a vacancy.

 

79.             The Company shall keep a register of
Directors containing:

 

(a)          the names and addresses of the persons who are Directors of the
Company;

 

(b)         the date on which each person whose name is entered in the register was
appointed as a Director of the Company;

 

(c)          the date on which each person named as a Director ceased to be a Director
of the Company; and

 

(d)         such other information as may be prescribed pursuant to the Act.

 

80.             The original or a copy of any register of
Directors shall be kept at the office of the Registered Agent of the Company.

 

81.             The register of Directors may be in any such
form as the Directors may approve but if it is in magnetic, electronic or other
data storage form, the Company and the Registered Agent of the Company must be
able to produce legible evidence of its contents.

 

65

 

82.             The Members may at any time by Consent
Resolution of Members made in accordance with the provisions therefore, if any,
of any Shareholder Agreement in effect, fix the emoluments of Directors with
respect to services to be rendered in any capacity to the Company.

 

83.             A Director shall not require a share
qualification and may be an individual or a company.

 

POWERS OF DIRECTORS

 

84.             The business and affairs of the Company shall
be managed by the Directors who may exercise all such powers of the Company as
are not by the Act or by the Memorandum or by these Articles or by any
Shareholders Agreement in effect; required to be exercised by the Members of
the Company, subject to any delegation of such powers as may be authorized by
these Articles and to such requirements as may be prescribed by a Special
Resolution of Members; provided that no such requirement shall invalidate any
prior act of the Directors which would have been valid if such requirement had
not been made. Notwithstanding anything in Section 175 of the Act the Directors
shall NOT have the power to sell, transfer, lease, exchange or otherwise
dispose of more than fifty percent (50%) of the assets of the Company without
first obtaining the consent of the Members by Special Resolution of Members of
the Company.

 

85.             If a Director is appointed by a corporate
Member in accordance with the provisions therefore, if any, of any Shareholder
Agreement in effect, then such Director may, and in some cases may be obliged,
when exercising powers or performing duties as a Director to act in a manner
which he believes is in the best interests of the corporate Member appointing
him even though it may not be in the best interests of the Company. Any
Director which is a body corporate may appoint any person its duly authorized
representative for the purpose of representing it at meetings of the Board of
Directors or with respect to unanimous written consents.

 

86.             The Directors may, by an Ordinary Resolution
of Directors made in accordance with the provisions therefore, if any, of any
Shareholder Agreement in effect, appoint any person, including a person who is
a Director, to be an Officer or Agent of the Company.

 

87.             Every Officer or Agent of the Company has
such powers and authority of the Directors, only as and strictly limited to
those conferred upon him in the Ordinary Resolution of Directors appointing the
Officer or Agent.

 

88.             Save as specifically required to be approved
by way of Special Resolution or Consent Resolution of Directors in the
Memorandum, these Articles, or any Shareholders Agreement in effect, the
Directors may, by Ordinary Resolution of Directors, exercise all the powers of
the Company.

 

89.             No Director, nor any committee of Directors,
nor the Board of Directors has any power or authority with respect to the
following without the prior, express, written Consent Resolution of the
Members;

 

(a)          to amend the memorandum or articles;

 

(b)         to amend any shareholder agreements;

 

(c)          to amend, terminate or relinquish the Bengara-II production sharing
contract including an assignment of interest thereof;

 

(d)         to open or close the Earn-In Obligation Joint Account at HSBC Hong Kong
Branch account number 808-215644-838 established as provided for in the
Shareholders Agreement;

 

(e)          to change the operating instructions and authorized signers on the
Earn-In Obligation Joint Account at HSBC Hong Kong Branch account number
808-215644-838 established except as provided for in the Shareholders
Agreement;

 

(f)            to approve a plan of merger, consolidation or
arrangement;

 

(g)         to authorize the Company to continue as a company incorporated under
the laws of a jurisdiction outside the British Virgin Islands; and

 

(h)         to delegate any of the aforesaid power and authority to Officers or
Agents.

 

90.             The Directors may, by Ordinary Resolution of
Directors made in accordance with the provisions therefore, if any, of any
Shareholder Agreement in effect, exercise all the powers of the Company,
whether to borrow money and to mortgage or charge its undertakings and property
or any part thereof, to issue debentures, debenture stock and other securities
whenever money is borrowed or as security for any debt, liability or obligation
of the Company or of any third party or otherwise.

 

66

 

91.             Except as provided for in articles 89.d and
89.e above, all cheques, promissory notes, drafts, bills of exchange and other
negotiable instruments and all receipts for moneys paid to  the 
Company, shall be signed, drawn, accepted, endorsed or otherwise
executed, as the case may be, in such manner as shall from time to time be
determined by Ordinary Resolution of Directors made in accordance with the
provisions therefore, if any, of any Shareholder Agreement in effect.

 

92.             The Company shall keep a register of all
relevant charges created by the Company showing:

 

(a)          if the charge is a charge created by the Company, the date of its
creation or if the charge is existing on property acquired by the Company, the
date on which the property was acquired;

 

(b)         a short description of the liability secured by the charge;

 

(c)          a short description of the property charged;

 

(d)         the name and address of the trustee for the security, or if there is no
such trustee the name and address of the chargee;

 

(e)          unless the charge is a security to bearer, the name and address of the
holder of the charge;

 

(f)            details of any prohibition or restriction ,
if any, contained in the instrument creating the charge on the power of the
company to create any future charge ranking in priority to or equally with the
charge; and

 

(g)         such other information as may be prescribed pursuant to the Act; and

 

the original or a copy of the register of charges
shall be kept at the registered office of the Company or at the office of the
Registered Agent of the Company.

 

93.             Each Director shall be obliged to familiarize
himself with the special terms and conditions of any Shareholders Agreement
which may be from time to time entered into by the Members. Each Director shall
also be obliged to act in his capacity as a Director in compliance with the
terms, procedures and conditions imposed on actions of Company Directors in
accordance with the provisions therefore of any Shareholders Agreement in
effect.

 

PROCEEDINGS OF DIRECTORS

 

94.             The Directors of the Company may meet at such
times and in such manner and places within or outside the British Virgin
Islands as the Directors may determine to be necessary or desirable. Any one or
more Directors may convene a meeting of Directors.

 

95.             A Director shall be deemed to be present at a
meeting of Directors if he participates by telephone or other electronic means
and all Directors participating in the meeting are able to hear each other.

 

96.             A Director shall be given not less than 3
days notice of meetings of Directors, but a meeting of Directors held without 3
days notice having been given to all Directors shall be valid if all the
Directors entitled to vote at the meeting who do not attend, waive notice of
the meeting and for this purpose, the presence of a Director at a meeting shall
constitute waiver on his part. The inadvertent failure to give notice of a
meeting to a Director invalidates the meeting.

 

97.             A Director may by a written instrument
appoint an alternate who need not be a Director and an alternate is entitled to
attend meetings in the absence of the Director who appointed him and to vote or
consent in place of the Director.

 

98.             A meeting of Directors is duly constituted
for all purposes if at the commencement of the meeting there are present in
person, or by alternate, a quorum of not less than two (2) directors as further
provided for in the Shareholders Agreement.

 

99.             If the Company shall have only one Director
the provisions herein contained for meetings of the Directors shall not apply
but such sole Director shall have full power to represent and act for the
Company in all matters as are not by the Act or the Memorandum or these
Articles required to be exercised by the Members of the Company and in lieu of
minutes of a meeting shall record in writing and sign a note or memorandum of
all matters requiring a resolution of Directors. Such a note or memorandum
shall constitute sufficient evidence of such resolution for all purposes.

 

100.       At every meeting of the Directors the Chairman of the Board of
Directors shall preside as chairman of the meeting. If there is no Chairman of
the Board of Directors or if the Chairman of the Board of Directors is not
present at the meeting the Vice Chairman of the Board of Directors shall
preside. If there is no Vice Chairman of the Board of Directors or if the Vice
Chairman of the Board of Directors is not present at the meeting the Directors
present shall choose some one of their number to be chairman of the meeting.

 

67

 

101.       An action that may be taken by the Board of Directors at a meeting may
also be taken by a resolution consented to in writing or by email, telex,
telegram, cable, facsimile or other written electronic communication by all
Directors on the Board, without the need for any notice, provided the said
resolution is adopted by the unanimous written consent of all the Directors on
the Board. Written Consent Resolutions shall satisfy the requirements of a
Consent Resolution of Directors as provided for in these Articles and the
Memorandum. The Consent Resolution may be in the form of counterparts, each
counterpart being signed by one or more Directors.

 

102.       The Directors shall cause permanent records to be kept of minutes of
all meetings of the Board of Directors, the Members, and committees; and copies of all resolutions consented to by
Directors and by Members.

 

103.       The resolutions, records and minutes referred to in the preceding
Article shall be kept at the registered office of the Company, its principal
place of business or at such other place as the Directors determine.

 

104.       The Directors may, by Ordinary Resolution of Directors, designate one
or more committees to advise the Board of Directors, each such committee may
consist of one or more Directors, Officers or Members.

 

105.       Any committee established by the Board of Directors shall not have any
of the powers or authority of a Director of the Board of Directors and shall
have power and authority only to investigate and advise the Board of Directors
on specific issues for which the committee was established.

 

106.       The Directors have no power to delegate any of the powers of a Director
or of the Board of Directors to a committee of Directors.

 

107.       The meetings and proceedings of each committee established by the
Directors shall be recorded in minutes which shall be provided to the Board of
Directors for the Company’s records.

 

OFFICERS

 

108.       The Company may by Ordinary Resolution of Directors made in accordance
with the provisions therefore, if any, of any Shareholder Agreement in effect,
appoint Officers of the Company at such times as shall be considered necessary
or expedient. Such Officers shall consist of a Chairman, a CEO (Chief Executive
Officer), a COO (Chief Operating Officer), a CXO (Chief Exploration Officer), a
CFO (Chief Financial Officer), a Secretary and such other Officers as may from
time to time be deemed desirable. Any number of offices may be held by the same
person.

 

109.       The Officers shall perform such duties as shall be prescribed at the
time of their appointment as provided for in article-86, but in the absence of
any specific allocation of duties it shall be the responsibility of the
Chairman to preside at meetings of Directors and Members, the CEO to manage the
day to day affairs of the Company, the COO to act in order of seniority in the
absence of the Chairman but otherwise to perform such duties as may be
delegated to them by the CEO or by the Board of Directors, the Secretary to
maintain the share register, minute books and records (other than financial
records) of the Company and to ensure compliance with all procedural
requirements imposed on the Company by applicable law, and the CFO to be
responsible for the financial affairs of the Company.

 

110.       The emoluments of all Officers shall be fixed by Ordinary Resolution of
Directors made in accordance with the provisions therefore, if any, of any
Shareholder Agreement in effect.

 

111.       The Officers of the Company shall hold office until their successors
are duly elected and qualified, but any Officer elected or appointed by the
Directors may be removed at any time, with or without cause, by Ordinary
Resolution of Directors made in accordance with the provisions therefore, if
any, of any Shareholder Agreement in effect. Any vacancy occurring in any
office of the Company may be filled by Ordinary Resolution of Directors made in
accordance with the provisions therefore, if any, of any Shareholder Agreement
in effect.

 

CONFLICT OF INTERESTS

 

112.       A Director of the Company shall, forthwith after becoming aware of the
fact that he is interested in a transaction entered into or to be entered into
by the Company, disclose the interest to all other Directors of the Company.

 

68

 

113.       A Director of the Company is not required to comply with Article 112
if;

 

(a)          the transaction or proposed
transaction is between the Director and the Company; and

 

(b)         the
transaction or proposed transaction is or is to be entered into in the ordinary
course of the company’s business and on usual terms and conditions.

 

114.       For the purposes of Article 112 a disclosure to all other Directors to
the effect that a Director is a Member, Director or Officer of another named
entity or has a fiduciary relationship with respect to the entity or a named
individual and is to be regarded as interested in any transaction which may,
after the date of the entry or disclosure, be entered into with that entity or
individual, is a sufficient disclosure of interest in relation to that
transaction.

 

115.       A Director of the Company who is interested in a transaction entered
into or to be entered into by the Company may:

 

(a)          not vote on a matter relating to the transaction;

 

(b)         attend a
meeting of Directors at which a matter relating to the transaction arises and
be included among the Directors present at the meeting for the purposes of a
quorum; and

 

(c)          not sign a document on behalf of the Company, or do any other thing in his
capacity as a Director, that relates to the transaction,

 

and, subject to compliance with the Act shall
not, by reason of his office be accountable to the Company for any benefit
which he derives from such transaction and no such transaction shall be liable
to be avoided on the grounds of any such interest or benefit.

 

INDEMNIFICATION

 

116.       Subject to the limitations hereinafter provided the Company may
indemnify against all expenses, including legal fees, and against all
judgments, fines and amounts paid in settlement and reasonably incurred in
connection with legal, administrative or 
investigative proceedings any person who;

 

(a)          is or was a party or is threatened to be made a party to any
threatened, pending or completed proceedings, whether civil, criminal,
administrative or investigative, by reason of the fact that the person is or
was a Director, an Officer or a liquidator of the Company; or

 

(b)         is or was, at the request of the Company, serving as a Director of, or
in any other capacity is or was acting for, another body corporate or a
partnership, joint venture, trust or other enterprise.

 

117.       The Company may only indemnify a person if the person acted honestly
and in good faith in what he believed to be in the best interests of the
Company and, in the case of criminal proceedings, the person had no reasonable
cause to believe that his conduct was unlawful.

 

118.       For the purposes of the preceding Article, a Director acts in the best
interests of the Company if he acts in the best interests of;

 

(a)          the Company’s holding company; or

 

(b)         a shareholder or shareholders of the Company;

 

in
either case, in the circumstances specified in Article 85.

 

119.       The decision of the Directors as to whether the person acted honestly
and in good faith and with a view to the best interests of the Company and as
to whether the person had no reasonable cause to believe that his conduct was
unlawful is, in the absence of fraud, sufficient for the purposes of these
Articles, unless a question of law is involved.

 

120.       The termination of any proceedings by any judgment, order, settlement,
conviction or the entering of a nolle prosequi does not, by itself, create a
presumption that the person did not act honestly and in good faith and with a
view to the best interests of the Company or that the person had reasonable
cause to believe that his conduct was unlawful.

 

69

 

121.       Expenses, including legal fees, incurred by a Director in defending any
legal, administrative or investigative proceedings may be paid by the Company
in advance of the final disposition of such proceedings upon receipt of an
undertaking by or on behalf of the Director to repay the amount if it shall
ultimately be determined that the Director is not entitled to be indemnified by
the Company in accordance with these Articles.

 

122.       Expenses, including legal fees, incurred by a former Director in
defending any legal, administrative or investigative proceedings may be paid by
the Company in advance of the final disposition of such proceedings upon
receipt of an undertaking by or on behalf of the former Director to repay the
amount if it shall ultimately be determined that the Director is not entitled
to be indemnified by the Company in accordance with these Articles.

 

123.       The indemnification and advancement of expenses provided by, or granted
pursuant to, these Articles is not exclusive of any other rights to which the
person seeking indemnification of advancement of expenses may be entitled under
any agreement, resolution of Members, resolution of disinterested Directors or
otherwise, both as to acting in the person’s official capacity and as to acting
in another capacity while serving as a Director of the Company.

 

124.       If a person to be indemnified has been successful in defense of any
proceedings referred to above the person is entitled to be indemnified against
all expenses, including legal fees, and against all judgments, fines and
amounts paid in settlement and reasonably incurred by the person in connection
with the proceedings.

 

125.       The Company may purchase and maintain insurance in relation to any
person who is or was a Director, an Officer or a liquidator of the Company, or
who at the request of the Company is or was serving as a Director, an Officer
or a liquidator of, or in any other capacity is or was acting for, another body
corporate or a  partnership, joint  venture, trust or other enterprise, against
any liability  asserted against the person
and incurred by the person in that capacity, whether or not the Company has or
would have had the power to indemnify the person against the liability as
provided in these Articles.

 

SEAL

 

126.       The Company shall have a Seal and may have more than one Seal.
References herein to the Seal shall be references to every Seal which shall
have been duly adopted by Ordinary Resolution of Directors. The Directors shall
provide for the safe custody of the Seal and for an imprint thereof to be kept
at the office of the Registered Agent of the Company. Except as otherwise
expressly provided herein, the Seal when affixed to any written instrument,
shall be witnessed and attested to by the signature of a Director or any other
person so authorized from time to time by Ordinary Resolution of Directors. Such
authorization may be before or after the Seal is affixed, may be general or specific
and may refer to any number of sealings. The Directors may provide for a
facsimile of the Seal and of the signature of any Director or authorized person
which may be reproduced by printing or other means on any instrument and it
shall have the same force and validity as if the Seal had been affixed to such
instrument and the same had been signed as hereinbefore described.

 

DISTRIBUTIONS

 

127.       The Directors of the Company may 
by Ordinary Resolution authorize a distribution by the Company at any
time and of any amount and to any Members they think fit if they are satisfied
on reasonable grounds that immediately after the distribution;

 

(a)          the value of the Company’s assets will exceed its liabilities, and

 

(b)         the Company will be able to pay its debts as they fall due.

 

128.       A resolution of the Directors passed under the preceding Article shall
contain a statement that, in the opinion of the Directors, immediately after
the distribution the value of the Company’s assets will exceed its liabilities,
and the Company will be able to pay its debts as they fall due.

 

129.       If, after a distribution is authorized and before it is made, the
Directors cease to be satisfied on reasonable grounds that the Company will,
immediately after the distribution satisfy the solvency test, any distribution
made by the Company is deemed not to have been authorized.

 

130.       If, by virtue of the preceding Article, a distribution is deemed not to
have been authorized, a Director who;

 

(a)          ceased, after authorization but before the making of the distribution,
to be satisfied on reasonable grounds for believing that the company would
satisfy the solvency test immediately after the distribution is made; and

 

70

 

(b)         failed to take reasonable steps to prevent the distribution being made;

 

is personally liable to the company to repay to the
company so much of the distribution as is not able to be recovered from
Members.

 

131.       A distribution made to a Member at a time when the company did not,
immediately after the distribution, satisfy the solvency test may be recovered
by the company from the Member unless;

 

(a)          the Member received the distribution in good faith and without
knowledge of the company’s failure to satisfy the solvency test;

 

(b)         the Member has altered his position in reliance on the validity of the
distribution; and

 

(c)          it would be unfair to require repayment in full or at all.

 

DISTRIBUTIONS BY WAY OF DIVIDEND

 

132.       The Company may by a Ordinary Resolution of Directors declare a
distribution by way of dividend and pay such distribution in money, shares or
other property. In the event that distributions by way of dividend are paid in
specie the Directors shall have responsibility for establishing and recording
in the Ordinary Resolution of Directors authorizing the distribution by way of
dividend, a fair and proper value for the assets to be so distributed.

 

133.       The Directors may from time to time pay to the Members such interim
distributions by way of dividend as appear to the Directors to be justified by
the profits of the Company.

 

134.       The Directors may, before declaring any distribution by way of
dividend, set aside out of the profits of the Company such sum as they think
proper as a reserve fund, and may invest the sum so set aside as a reserve fund
upon such securities as they may select.

 

135.       Notice of any distribution by way of dividend that may have been
declared shall be given to each Member in the manner hereinafter mentioned and
all distributions by way of dividend unclaimed for 3 years after having been
declared may be forfeited by Ordinary Resolution of Directors for the benefit
of the Company.

 

136.       No distribution by way of dividend shall bear interest as against the
Company and no distribution by way of dividend shall be paid on treasury shares
or shares held by another company of which the Company holds, directly or
indirectly, shares having more than 50 percent of the vote in electing
Directors.

 

137.       A share issued as a distribution by way of dividend by the Company
shall be treated for all purposes as having been issued for money equal to the
value determined by resolution of the Directors. In the absence of fraud the
decision of the Directors as to the value of the share is conclusive unless a
question of law is involved.

 

138.       A division of the issued and outstanding shares of a class or series of
shares into a larger number of shares of the same class or series having a
proportionately smaller par value does not constitute a distribution by way of
dividend of shares.

 

ACCOUNTS AND AUDIT

 

139.       The Directors shall prepare, not less than quarterly, a profit and loss
account and a balance sheet and distribute them to all Members. The profit and
loss account and balance sheet shall be drawn up so as to give respectively a
true and fair view of the profit and loss of the Company for the financial
period and a true and fair view of the state of affairs of the Company as at
the end of the financial period.

 

140.       The accounts of the Company shall be examined by internationally
recognized auditors not less than annually.

 

141.       Auditors shall be appointed by a Ordinary Resolution of Members.

 

142.       The auditors may not be Members of the Company and no Director or other
Officer shall be eligible to be an auditor of the Company during his
continuance in office.

 

71

 

143.       The remuneration of the auditors of the Company shall be fixed as
determined by Ordinary Resolution of Directors.

 

144.       The auditors shall examine each profit and loss account and balance
sheet required to be served on every Member of the Company or laid before a
meeting of the Members of the Company and shall state in a written report
whether or not

 

(a)          in their opinion the profit and loss account and balance sheet give a
true and fair view respectively of the profit and loss for the period covered
by the accounts, and of the state of affairs of the Company at the end of that
period; and

 

(b)         all the information and explanations required by the auditors have been
obtained.

 

145.       The report of the auditors shall be annexed to the accounts and shall
be read at the meeting of Members at which the accounts are laid before the
Company or shall be served on the Members.

 

146.       Every auditor of the Company shall have a right of access at all times
to the books of account and vouchers of the Company, and shall be entitled to
require from the Directors and Officers of the Company such information and
explanations as he thinks necessary for the performance of the duties of the
auditors.

 

147.       The auditors of the Company shall be entitled to receive notice of, and
to attend any meetings of Members of the Company at which the Company’s profit
and loss account and balance sheet are to be presented.

 

NOTICES

 

148.       Any notice, information or written statement to be given by the Company
to Members may be served in any way by which it can reasonably be expected to
reach each Member or by mail addressed to each Member at the address shown in
the share register.

 

149.       Any summons, notice, order, document, process, information or written
statement to be served on the Company may be served by leaving it, or by
sending it by registered mail addressed to the Company, at its registered
office, or by leaving it with, or by sending it by registered mail to, the
Registered Agent of the Company.

 

150.       Service of any summons, notice, order, document, process, information
or written statement to be served on the Company may be proved by showing that
the summons, notice, order, document, process, information or written statement
was delivered to the registered office or the Registered Agent of the Company
or that it was mailed in such time as to admit to its being delivered to the
registered office or the Registered Agent of the Company in the normal course
of delivery within the period prescribed for service and was correctly
addressed and the postage was prepaid.

 

PENSION AND SUPERANNUATION FUNDS

 

151.       The Directors may establish and maintain or procure the establishment
and maintenance of any non-contributory or contributory pension or
superannuation funds for the benefit of, and give or procure the giving of
donations, gratuities, pensions, allowances or emoluments to, any persons who
are or were at any time in the employment or service of the Company or any
company which is a subsidiary of the Company or is allied to or associated with
the Company or with any such subsidiary, or who are or were at any time
Directors or Officers of the Company or of any such other company as aforesaid
or who hold or held any salaried employment or office in the Company or such
other company, or any persons in whose welfare the Company or any such other
company as aforesaid is or has been at any time interested, and to the wives,
widows, families and dependents of any such person, and may make payments for
or towards the insurance of any such persons as aforesaid, and may do any of
the matters aforesaid either alone or in conjunction with any such other  company as aforesaid. Subject always to the
proposal being approved by Special Resolution of Members, a Director holding
any such employment or office shall be entitled to participate in and retain
for his own benefit any such donation, gratuity, pension allowance or
emolument.

 

VOLUNTARY WINDING UP AND
DISSOLUTION

 

152.       The Company may voluntarily commence to wind up and dissolve by a
Consent Resolution of Members.

 

72

 

CONTINUATION

 

153.       The Company may by a Consent Resolution of Members continue as a
company incorporated under the laws of a jurisdiction outside the British
Virgin Islands in the manner provided under those laws.

 

ARBITRATION

 

154.       Whenever any difference arises between the Company on the one hand and
any of the Members or their executors, administrators or assigns on the other
hand, touching the true intent and construction or the incidence or
consequences of these Articles or of the Act, touching anything done or
executed, omitted or suffered in pursuance of the Act or touching any breach or
alleged breach or otherwise relating to the premises or to these Articles, or
to any Act or Ordinance affecting the Company or to any of the affairs of the
Company such difference shall, unless the parties agree to refer the same to a
single arbitrator, be referred to 2 arbitrators one to be chosen by each of the
parties to the difference and the arbitrators shall before entering on the
reference appoint an umpire.

 

155.       If either party to the reference makes default in appointing an
arbitrator either originally or by way of substitution (in the event that an
appointed arbitrator shall die, be incapable of acting or refuse to act) for 10
days after the other party has given him notice to appoint the same, such other
party may appoint an arbitrator to act in the place of the arbitrator of the
defaulting party.

 

---

 

Whereas:
An original articles of association of the Company dated the 9th day of
September 1997 was made to incorporate the Company as Number 247888 in the name
Apex (Bengara-II) Ltd. under the International Business Corporations Act
(Cap.291) of the British Virgin Islands.

 

Whereas:
Apex (Bengara-II) Ltd. changed its name to Continental-Wisdom-GeoPetro
(Bengara-II) Ltd. on 5 June 2003. Continental-Wisdom-GeoPetro (Bengara-II) Ltd.
changed its name to Continental-GeoPetro (Bengara-II) Ltd. on 17 December 2003.

 

We, the undersigned Member shareholders of the
Company, owning and representing 100% of
the Company’s authorized, issued and fully paid up share capital, hereby sign this amended,
replacement Articles of Association the    th day of September, 2006
and indicate our unanimous consent that from said date this Articles of
Association amends, replaces and supersedes all others; for the purposes of
governing the Company in accordance with the Members’ wishes and also for the
purposes of conforming the Company’s Articles of Association to the BVI
Business Corporations Act, 2004 (Act 16 of 2004).

 

 

	
  On
  Behalf of Member

  	
   

  	
  On
  Behalf of Member

  	
   

  	
  On
  Behalf of Member

  
	
  CNPCHK
  (Indonesia) Limited

  	
   

  	
  Continental
  Energy Corporation

  	
   

  	
  GeoPetro
  Resources Company

  
	
  Shareholder
  and owner of 35,000 common shares of the Company representing 70% of the
  Company’s share capital

  	
   

  	
  Shareholder
  and owner of 9,000 common shares of the Company representing 18% of the
  Company’s share capital

  	
   

  	
  Shareholder
  and owner of 6,000 common shares of the Company representing 12% of the
  Company’s share capital

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  by
  its Director

  Mr. Li Hualin

  	
   

  	
  by
  its President & CEO

  Mr. Richard L. McAdoo

  	
   

  	
  by
  its President & CEO

  Mr. S.J. Doshi

  
								

 

73

 

SCHEDULE-E

COMPLETION RESOLUTIONS

 

The fully executed and
completed original resolutions of members and Directors required to Close and
complete the transactions contemplated in this Agreement forms this Schedule-E
and include:

 

1.               Completion Resolutions-1: Unanimous
consent resolutions of the Directors of CGB2, dated even date with this
Agreement, recognizing, confirming, ratifying and implementing Sellers’ Closing
deliverables and matters (where applicable) set out in Sections 4.2.a, 4.2.d,
4.2.e, 4.2.f, and 4.2.g. and Buyer’s Closing deliverables and matters (where
applicable) set out in Sections 4.3.a and 4.3.g.

 

2.               Completion Resolutions-2: Unanimous
consent resolutions of the Members of CGB2, dated even date with this
Agreement, recognizing, confirming, ratifying and implementing Sellers’ Closing
deliverables and matters (where applicable) set out in Sections 4.2.b and 4.2.c
and Buyer’s Closing deliverables and matters (where applicable) set out in
Sections 4.3.b and 4.3.c.

 

3.               Completion Resolutions-3: Unanimous
consent resolutions of the Members of CGB2, dated even date with this
Agreement, recognizing, confirming, ratifying and implementing Sellers’ Closing
deliverables and matters (where applicable) set out in Sections-4.2.h and
Buyer’s Closing deliverables and matters (where applicable) set out in
Section-4.3.f.

 

4.               Completion Resolutions-4:
Intentionally leave blank.

 

5.               Completion Resolutions-5: Unanimous
consent resolutions of the Directors of CGB2, dated even date with this
Agreement, ratifying and implementing the post Closing filing and registration
of the Restated Memorandum and Articles and the Shareholders Agreement with the
British Virgin Islands Companies Registrar and Portcullis TrustNet (BVI) Limited,
the Company’s Registered Agent.

 

6.               Completion Resolutions-6: Unanimous
consent resolutions of the Directors of CGB2, dated even date with this
Agreement, appointing first Officers and first employees of the Company in
accordance with the provisions of this Agreement and with those of the
Shareholders Agreement and Buyer’s Closing deliverables and matters (where
applicable) set out in Sections 4.3.g.

 

74

 

	
  

  	
  Continental-GeoPetro (Bengara-Il) Ltd.

  
	
  BVI IBC Company 247888 c/o Portcullis
  TrustNet Chambers

  
	
   

  	
  4th Floor, Ellen Skelton Building, 3076
  Drake’s Highway

  
	
  

  	
  Road Town, Tortola, British Virgin Islands

  The “Company”

  

 

 

 

UNANIMOUS CONSENT RESOLUTIONS OF THE
DIRECTORS

SPA Closing Completion Resolutions #1

 

Shares Transfers, New Secretary, Terminate
Old JOA, Director Resigns

 

These unanimous Consent Resolutions of the Directors are hereby
unanimously consented to and adopted in writing by the undersigned, being all
the directors of the Company as of the date last below written. These
resolutions may be signed by the directors in any number of counterparts and
may be delivered by facsimile to the Secretary, each of which when delivered
shall be deemed to be an original and all of which together shall constitute
one and the same document and notwithstanding the date of execution shall be
deemed to bear the date as last set forth below.

 

IT WAS NOTED THAT THE COMPANY HAS RECEIVED THE FOLLOWING, A COPY OF
EACH OF WHICH IS ATTACHED TO AND MADE A PART OF THIS RESOLUTION:

 

a.               A copy of a duly executed Shares
Purchase and Sales Agreement dated the same date as these resolutions amongst
CNPC (Hong Kong) Limited, CNPCHK (Indonesia) Limited, Continental Energy
Corporation, and GeoPetro Resources Company involving sale of Company shares by
Continental and by GeoPetro to CNPCHK (Indonesia) Limited which is hereinafter
referred to as the “Shares Purchase Agreement”.

 

b.              A copy of a duly executed shares transfer
authorization dated the same date as these resolutions by Continental Energy
Corporation as “Transferor” and CNPCHK (Indonesia) Limited as “Transferee” in
the amount of 21,000 common shares of the Company which is hereinafter referred
to as the “Continental Transfer Authorization”.

 

c.               A copy of a duly executed shares
transfer authorization dated the same date as these resolutions by GeoPetro
Resources Company as “Transferor” and CNPCHK (Indonesia) Limited as “Transferee”
in the amount of 14,000 common shares of the Company which is hereinafter
referred to as the “GeoPetro Transfer
Authorization”.

 

d.              A copy of a duly executed agreement dated
the same date as these resolutions amongst Continental Energy Corporation, the
Company and GeoPetro Resources Company terminating in its entirety the joint
operating agreement amongst them dated 1 January 2000, which is hereinafter
referred to as the “JOA Termination
Agreement”.

 

e.               A consent to serve as Company Secretary
dated the same date as these resolutions had been received from Mr. Lau Hak Woon Patrick.

 

f.                 The resignation of Director of the
Company Mr. Suresh J. Doshi dated the same date as these resolutions.

 

NOW THEREFORE IT WAS RESOLVED THAT: the Directors do hereby unanimously
pass the following resolutions:

 

1.               Mr. Lau Hak Woon Patrick be and is
hereby appointed as the Secretary of the Company with effect from the close of
meeting.

 

2.               On behalf of the Company the Directors
hereby recognize and confirm the Shares Purchase Agreement amongst CNPC (Hong
Kong) Ltd., CNPCHK (Indonesia) Limited, Continental Energy Corporation, and
GeoPetro Resources Company involving sale of Company shares by Continental and
by GeoPetro to CNPCHK (Indonesia) Limited.

 

3.               The Continental Transfer Authorization
is hereby recognized and approved and the Secretary is instructed and
authorized, in accordance with the instructions of the Continental Transfer
Authorization to cancel old share certificates held by Continental as
Transferor and issue new share certificates to CNPCHK (Indonesia) Limited as Transferee
and balance certificates dated the date of this resolution as follows:

 

75

 

•                  Transferor’s
Share Certificate Number -10- in the amount of 18,000 common shares shall be
cancelled.

•                  Transferor’s Share
Certificate Number -14- in the amount of 12,000 common shares shall be
cancelled.

•                  Share
Certificate Number -15- in the amount of 9,000 common shares shall be issued to
Transferor.

•                  Share
Certificate Number -16- in the amount of 21,000 common shares shall be issued
to Transferee.

 

and, the Secretary is further authorized and instructed to immediately
update and amend the Company’s permanent records and the Register of Share
Transfers and the Register of Members as of the date of this resolution to reflect
the aforesaid share holding changes as provided for in the Continental Transfer
Authorization.

 

4.               The GeoPetro Transfer Authorization is
hereby recognized and approved and the Secretary is instructed and authorized,
in accordance with the instructions of the GeoPetro Transfer Authorization to
cancel old share certificates held by GeoPetro and issue new share certificates
to CNPCHK (Indonesia) Limited as transferee and balance certificate to
GeoPetro, each dated the date of this resolution as follows:

 

•                  Transferor’s
Share Certificate Number -11- in the amount of 12,000 common shares shall be
cancelled.

•                  Transferor’s
Share Certificate Number -13- in the amount of 8,000 common shares shall be
cancelled.

•                  Share
Certificate Number -17- in the amount of 14,000 common shares shall be issued
to Transferee.

•                  Share
Certificate Number -18- in the amount of 6,000 common shares shall be issued to
Transferor.

 

and, the Secretary is further authorized and instructed to immediately
update and amend the Company’s permanent records and the Register of Share
Transfers and the Register of Members as of the date of this resolution to
reflect the aforesaid share holding changes as provided for in the GeoPetro
Transfer Authorization.

 

5.               On behalf of the Company the Directors
hereby confirm, ratify and approve the termination of the joint operating
agreement among the Company and Continental Energy Corporation and GeoPetro
Resources Company dated 1 January 2000 in accordance with the provisions of the
JOA Termination Agreement attached. The Continental and GeoPetro releases of
the Company under the JOA termination Agreement are hereby acknowledged.

 

6                  Lastly, the resignation of Mr. Suresh
J. Doshi from his post of Director is hereby accepted as of the date and time
of this resolution last indicated below. The Board thanks him for his valuable
service on behalf of the Company.

 

7.               These resolutions together with
appropriately amended registers of share transfers, members and directors shall
forthwith be filed by the Secretary in the Company’s permanent record of
resolutions and minutes and appropriate copies shall also be formally
registered as required with all applicable authorities having jurisdiction
including the British Virgin Islands Companies Registrar and Portcullis TrustNet
(BVI) Limited, the Company’s Registered Agent.

 

	
  By the Unanimous Consent of the Board of Directors

  	
   

  	
  Dated:     September 2006 09:00
  Hours Jakarta Time

  

 

 

	
   

  	
   

  	
   

  	
   

  
	
  Richard L. McAdoo

  	
   

  	
  S.J. Doshi

  	
   

  
	
  Director & President

  	
   

  	
  Director

  	
   

  

 

76

 

Continental Share Transfer Authorization

CONTINENTAL-GEOPETRO (BENGARA-II) LTD., THE
COMPANY

Incorporated 9-September-97 Under International
Business Companies Act (cap.291)

of the Territory of the British Virgin Islands
as IBC#-247888

Nominal Capital is US$50,000 Divided into
Common Shares of Par Value US$ 1.00 Each

 

We, Continental Energy Corporation,
the undersigned corporation and duly registered owner of 30,000
(Thirty Thousand) Common Shares, each of Par Value US$ 1.00, of
Continental-GeoPetro (Bengara-II) Ltd., consisting of:

 

1.               share certificate number -8-,
representing 18,000 Common Shares each Common Share numbered consecutively
beginning with the serial number -1- and continuing through until ending with
serial number -18,000- and

 

2.               share certificate number -14-,
representing 12,000 Common Shares each Common Share numbered consecutively
beginning with the serial number -30,001- continuing through until ending with
serial number -42,000-;

 

hereinafter called the TRANSFEROR, of
address Suite 1200, 14001 Dallas Parkway, Dallas, Texas, 75240, USA, in
consideration of good and valuable compensation paid, promised and provided to
us pursuant to a Share Sale & Purchase Agreement dated even date herewith,

 

DO HEREBY TRANSFER to,

 

CNPCHK (Indonesia) Limited, hereinafter called
the TRANSFEREE, a corporation of address
39th Floor, 118 Connaught Road West, Hong Kong, an amount of 21,000 (Twenty One Thousand) Common Shares each of Par Value
US$ 1.00, of Continental-GeoPetro (Bengara-II) Ltd., consisting of

 

1.               12,000 (Twelve Thousand)
Common Shares each Common Share numbered consecutively beginning
with the serial number -30,001- continuing through until ending with
serial number -42,000-; and

 

2.               9,000 (Nine Thousand)
Common Shares each Common Share numbered consecutively beginning
with the serial number -9,001-continuing through until ending with serial
number -18,000-;

 

TO HOLD unto the said TRANSFEREE, his heirs, executors, administrators,
successors, and assigns subject to the same joint and several conditions on
which the TRANSFEROR held these same Common Shares upon the date of execution
hereof, including without limitation the conditions and share transfer
restrictions imposed by the Company’s Memorandum of Association and Articles of
Association and those certain shareholder agreements to which TRANSFEREE is or
may become a party; the undersigned said TRANSFEREE do hereby agree to take the
said Common Shares subject to the same conditions and restrictions.

 

We the TRANSFEROR retain, keep and do not transfer under this agreement
an amount of 9,000 (Nine Thousand) Common Shares,
each of Par Value US$ 1.00, of Continental-GeoPetro (Bengara-II) Ltd. each
numbered consecutively beginning with the serial number -1- and continuing through
until ending with serial number -9,000-.

 

AS WITNESS, our hands here below this date:    September 2006.

 

 

	
   

  	
   

  	
   

  	
   

  
	
  Richard L. McAdoo, President & CEO

  	
   

  	
  Li Hualin, Director

  	
   

  
	
  On behalf of the TRANSFEROR

  	
   

  	
  On behalf of the TRANSFEREE

  	
   

  
	
  Continental Energy Corporation

  	
   

  	
  CNPCHK (Indonesia) Limited

  	
   

  

 

	
  Company Use Only - Transfer Recorded to
  Registers 2 and 3

  
	
   

  Date:     September 2006 

  	
  by

  	
   

  
	
   

  	
   

  	
  Patrick Lau, the Company Secretary

  
				

 

No transfer of the shares recorded hereon
will be registered by the Company until this Share Transfer Agreement

has been properly and legibly completed and
the original delivered to the Company Secretary.

 

77

 

GeoPetro Share Transfer Authorization

CONTINENTAL-GEOPETRO (BENGARA-II) LTD., THE COMPANY

Incorporated 9-September-97 Under International
Business Companies Act (cap.291)

of the Territory of the British Virgin Islands
as IBC#-247888

Nominal Capital is US$50,000 Divided into
Common Shares of Par Value US$ 1.00 Each

 

We, GeoPetro Resources  Company, the undersigned corporation and duly registered
owner of 20,000 (Twenty Thousand) Common Shares,
each of Par Value US$ 1.00, of Continental-GeoPetro (Bengara-II) Ltd.,
consisting of:

 

3.               share certificate number -11-,
representing 12,000 Common Shares each Common Share numbered consecutively
beginning with the serial number -18,001- and continuing through until ending
with serial number -30,000- and 

 

4.               share certificate number -13-,
representing 8,000 Common Shares each Common Share numbered consecutively
beginning with the serial number -42,001- continuing through until ending with
serial number -50,000-;

 

hereinafter called the TRANSFEROR, of
address Suite 700, One Maritime Plaza, San Francisco, California, 94111, USA,
in consideration of good and valuable compensation paid, promised and provided
to us pursuant to a Share Sale & Purchase Agreement dated even date
herewith,

 

DO HEREBY TRANSFER to,

 

CNPCHK (Indonesia) Limited, hereinafter called
the TRANSFEREE, a corporation of address
39th Floor, 118 Connaught Road West, Hong Kong, an amount of 14,000 (Fourteen Thousand) Common Shares each of Par Value
US$ 1.00, of Continental-GeoPetro (Bengara-II) Ltd., consisting of

 

3.               12,000 (Twelve Thousand)
Common Shares each Common Share numbered consecutively beginning
with the serial number -18,001- continuing through until ending with
serial number -30,000-; and

 

4.               2,000 (Two Thousand)
Common Shares each Common Share numbered consecutively beginning
with the serial number -42,001- continuing through until ending with
serial number -44,000-;

 

TO HOLD unto the said TRANSFEREE, his heirs, executors, administrators,
successors, and assigns subject to the same joint and several conditions on
which the TRANSFEROR held these same Common Shares upon the date of execution
hereof, including without limitation the conditions and share transfer
restrictions imposed by the Company’s Memorandum of Association and Articles of
Association and those certain shareholder agreements to which TRANSFEREE is or
may become a party; the undersigned said TRANSFEREE do hereby agree to take the
said Common Shares subject to the same conditions and restrictions.

 

We the TRANSFEROR retain, keep and do not transfer under this agreement
an amount of 6,000 (Six Thousand) Common Shares,
each of Par Value US$ 1.00, of Continental-GeoPetro (Bengara-II) Ltd. each
numbered consecutively beginning with the serial number -44,001- and continuing
through until ending with serial number -50,000-.

 

AS WITNESS, our hands here below this date:      September 2006.

 

 

	
   

  	
   

  	
   

  	
   

  
	
  Suresh J. Doshi, President & CEO

  	
   

  	
  Li Hualin, Director

  	
   

  
	
  On behalf of the TRANSFEROR

  	
   

  	
  On behalf of the TRANSFEREE

  	
   

  
	
  GeoPetro Resources Company

  	
   

  	
  CNPCHK (Indonesia) Limited

  	
   

  

 

Company Use Only - Transfer Recorded to
Registers 2 and 3

 

	
  Date:     September 2006

  	
  by

  	
   

  
	
   

  	
   

  	
  Patrick
  Lau, the Company Secretary

  
				

 

No transfer of the shares recorded hereon
will be registered by the Company until this Share Transfer Agreement 

has been properly and legibly completed and
the original delivered to the Company Secretary.

 

78

 

Suresh J. Doshi

 

The Board of Directors

Continental-GeoPetro (Bengara-II) Ltd.

JI. R.S. Fatmawati 31A, Cilandak, Jakarta, 125430

INDONESIA

 

Gentlemen,

 

I, Suresh J. Doshi, hereby tender my immediate resignation as a
director of Continental-GeoPetro (Bengara-II) Ltd. with effect from the date
last below written.

 

I, Suresh J. Doshi, resign my office as director of the Company with
immediate effect from the date last below written and acknowledge and declare
that I have no claim whatsoever against the Company or any of its subsidiaries
for breach of contract, compensation for loss of office, redundancy, unfair
dismissal or retirement or on any other account whatsoever and there is no
agreement or arrangement outstanding under which the Company has or could have
any obligation to me whether now or in the future.

 

This confirmation of resignation and release shall be governed by the
laws of the British Virgin Islands.

 

Dated this           day
of                       
2006

 

 

	
   

  	
   

  
	
  Suresh J. Doshi

  

 

79

 

	
  

  	
  Continental-GeoPetro (Bengara-Il) Ltd.

  
	
  BVI IBC Company 247888 c/o Portcullis
  TrustNet Chambers

  
	
   

  	
  4th Floor, Ellen Skelton Building, 3076
  Drake’s Highway

  
	
  

  	
  Road Town, Tortola, British Virgin Islands

  The “Company”

  

 

 

UNANIMOUS CONSENT RESOLUTIONS OF THE MEMBERS

SPA Closing Completion Resolutions #2

 

Adoption Memorandum & Articles &
Shareholders Agreement

 

These unanimous Consent Resolutions of the Members are hereby
unanimously consented to and adopted in writing by all of the undersigned
shareholders of the Company as of the date and time last below written. The
undersigned shareholders represent 100% of the Company’s authorized, issued,
outstanding and fully paid up share capital. These resolutions may be signed by
the Members authorized representatives in any number of counterparts and may be
delivered by facsimile to the Secretary, each of which when delivered shall be
deemed to be an original and all of which together shall constitute one and the
same document and notwithstanding the date of execution shall be deemed to bear
the date as last set forth below.

 

IT WAS NOTED BY THE MEMBERS THAT:

 

a.               A copy of the new and restated “Memorandum of Association” of the Company dated the same
date as these resolutions, in its entirety, is attached to and made a part of
this resolution.

 

b.              A copy of the new and restated “Articles of Association” of the Company dated the same date
as these resolutions, in its entirety, is attached to and made a part of this
resolution.

 

c.               A copy of an agreement amongst all of
the undersigned Members of the Company dated the same date as these
resolutions, which is hereinafter referred to as the “Shareholders
Agreement”, is, in its entirety, attached to and made a part of this
resolution.

 

IT WAS ALSO DULY NOTED BY THE MEMBERS THAT:

 

A)          Restatement of the Company’s Memorandum of
Association and Memorandum of Articles is required by the British Virgin
Islands, BVI Business Companies Act 2004 (No 16 of 2004) including the
amendments thereto made by the British Virgin Islands Statue Revision Act 2005
(No 25 of 2005), hereinafter referred to as the “Act”,
on or before 1 January 2007.

 

B)            The Shareholders Agreement provides for
terms, conditions and procedures under which the Company shall be governed and
the relationships amongst its Members shall be governed in addition to those
expressed in the aforesaid restated Memorandum of Association and Articles of
Association.

 

NOW THEREFORE IT IS HEREBY RESOLVED BY A UNANIMOUS VOTE OF 100% OF THE
COMPANY’S AUTHORIZED, ISSUED, OUTSTANDING AND FULLY PAID UP SHARES DULY HELD BY
THE UNDERSIGNED MEMBERS THAT THE MEMBERS DO HEREBY PASS AND ADOPT THE FOLLOWING
RESOLUTIONS:

 

1.               The attached Memorandum of Association
is hereby adopted, ratified and confirmed and from its date shall replace and
supersede all others as the Memorandum of Association of the Company and is
signed by all of the Members of the Company simultaneously with signature of
these resolutions.

 

2.               The attached Articles of Association is
hereby adopted, ratified and confirmed and from its date shall replace and
supersede all others as the Articles of Association of the Company and is
signed by all of the Members of the Company simultaneously with signature of
these resolutions.

 

80

 

3.               The attached Shareholders Agreement is
hereby adopted, ratified and confirmed and from the date last below written
shall replace and supersede all others as the Shareholders Agreement of the
Company and is dated and signed by all of the Members of the Company
simultaneously with signature of these resolutions.

 

4.               The attached Memorandum of Association,
Articles of Association and the Shareholders Agreement together with past and
future duly executed and validly made Members resolutions shall constitute the “Constating Documents of the Company”.

 

5.               All directors, officers and agents of
the Company shall be and are hereby instructed and obliged by the Members to at
all times act in their respective capacities on behalf of the Company strictly
in accordance with and as provided for in the Constating Documents of the
Company and as provided for in the Act and other applicable law. Further, any
and all appointments, engagements or contracts entered into by the Company with
any and all directors, officers and agents shall contain specific provisions to
strictly so oblige the subject director, officer or agent to comply with and at
all times act in accordance with the Constating Documents of the Company.

 

6.               The said new and restated Memorandum of
Association and Articles of Association are intended by the Members to conform
to and comply with the Act and any modifications needed thereto which may be
expressed by the British Virgin Islands Companies Registrar or other authority
having jurisdiction shall be promptly made by similar unanimous resolution of
the Members upon the Members being advised such revision is required.

 

7.               These resolutions together with the
restated Memorandum of Association and the restated Articles of Association and
the Shareholders Agreement shall forthwith be filed in the Company’s permanent
record of resolutions and minutes and appropriate originals or certified true
copies shall also be formally be filed with and registered as may be required
with all applicable authorities having jurisdiction including, without
limitation, the British Virgin Islands Companies Registrar and Portcullis
TrustNet (BVI) Limited, the Company’s Registered Agent in the British Virgin
Islands.

 

8.               The Company’s Secretary, and failing
him, any one director or the Company’s President are hereby authorized and
instructed to sign and/or take whatever action is required for the benefit of
and on behalf of the Company and of the Members to register, record and
otherwise act as needed to give full force and effect to the actions and
intentions stated in the aforesaid resolutions.

 

	
  BY THE UNANIMOUS CONSENT OF THE MEMBERS

  	
   

  	
  Dated: Upon     September 2006 09:10 Hours Jakarta
  Time

  

 

 

	
  On Behalf of Member

  	
   

  	
  On Behalf of Member

  	
   

  	
  On Behalf of Member

  
	
  CNPCHK (Indonesia) Limited

  	
   

  	
  Continental Energy Corporation

  	
   

  	
  GeoPetro Resources Company

  
	
  Shareholder and owner of 35,000 common shares of the Company
  representing 70% of the Company’s share capital.

  	
   

  	
  Shareholder and owner of 9,000 shares of the Company representing 18%
  of the Company’s share capital

  	
   

  	
  Shareholder and owner of 6,000 common shares of the Company
  representing 12% of the Company’s share capital.

  
	
  /s/ Wang Mingcai

  	
   

  	
   

  	
   

  	
   

  
	
  by its Director

  	
   

  	
  by its President & CEO

  	
   

  	
  by its President & CEO

  
	
  Mr. Wang Mingcai

  	
   

  	
  Mr. Richard L. McAdoo

  	
   

  	
  Mr. S.J. Doshi

  

 

81

 

	
  

  	
  Continental-GeoPetro (Bengara-Il) Ltd.

  
	
  BVI IBC Company 247888 c/o Portcullis
  TrustNet Chambers

  
	
   

  	
  4th Floor, Ellen Skelton Building, 3076
  Drake’s Highway

  
	
  

  	
  Road Town, Tortola, British Virgin Islands

  The “Company”

  

 

 

UNANIMOUS CONSENT RESOLUTIONS OF THE MEMBERS

SPA Closing Completion Resolutions #3

 

Election of New Directors

 

These unanimous Consent Resolutions of the Members are hereby
unanimously consented to and adopted in writing by all of the undersigned
shareholders of the Company as of the date and time last below written. The
undersigned shareholders represent 100% of the Company’s authorized, issued,
outstanding and fully paid up share capital. These resolutions may be signed by
the Members authorized representatives in any number of counterparts and may be
delivered by facsimile to the Secretary, each of which when delivered shall be
deemed to be an original and all of which together shall constitute one and the
same document and notwithstanding the date of execution shall be deemed to bear
the date as last set forth below.

 

IT WAS NOTED BY THE MEMBERS THAT THE COMPANY HAS RECEIVED THE FOLLOWING,
A COPY OF EACH OF WHICH IS ATTACHED TO AND MADE A PART OF THIS RESOLUTION:

 

a.               A consent to serve as a Director of the
Company dated     September 2006 has been received from Mr. Li
Hualin.

 

b.              A consent to serve as a Director of the
Company dated     September 2006 has been received from Mr.
Cheng Cheng.

 

c.               A consent to continue to serve as a
Director of the Company dated     September 2006 had been
received from

Mr. Richard L. McAdoo.

 

IT WAS ALSO DULY NOTED BY THE MEMBERS THAT:

 

A)          The agreement dated    
September 2006 amongst all of the undersigned Members of the Company which is hereinafter
referred to as the “Shareholders Agreement”
provides certain terms and conditions pertaining to the election of Directors
of the Company and, among others, fixing the number of directors on the Board
of Directors of the Company at this time at three (3) Directors.

 

B)            The undersigned Member, Continental Energy
Corporation, exercising its rights under the Shareholders Agreement has
designated the re-election of Mr. Richard L. McAdoo, a current duly registered
Director of the Company.

 

C)            The undersigned Member, CNPCHK (Indonesia)
Limited, exercising its rights there under has designated the election of

Mr. Li Hualin and Mr. Cheng Cheng as Directors of the Company.

 

NOW THEREFORE IT IS HEREBY RESOLVED BY A UNANIMOUS VOTE OF 100% OF THE
COMPANY’S AUTHORIZED, ISSUED, OUTSTANDING AND FULLY PAID UP SHARES DULY HELD BY
THE UNDERSIGNED MEMBERS THAT THE MEMBERS DO HEREBY PASS AND ADOPT THE FOLLOWING
RESOLUTIONS:

 

1.               Mr. Li Hualin, nominated to the post by
Company shareholder CNPCHK (Indonesia) Limited is hereby duly elected and
appointed a Director of the Company and Chairman of the Board of Directors by
the unanimous consent of the undersigned shareholders to serve for a term until
his death, resignation or removal in accordance with the Company’s Memorandum
and Articles of Association and with the applicable provisions of the
Shareholders Agreement amongst the Members of the Company as it may from time
to time be amended.

 

82

 

2.               Mr. Cheng Cheng, nominated to the post
by Company shareholder CNPCHK (Indonesia) Limited is hereby duly elected and
appointed a Director of the Company by the unanimous consent of the undersigned
shareholders to serve for a term until his death, resignation or removal in
accordance with the Company’s Memorandum and Articles of Association and with
the applicable provisions of the Shareholders Agreement amongst the Members of
the Company as it may from time to time be amended.

 

3.               Mr. Richard L. McAdoo, nominated to the
post by Company shareholder Continental Energy Corporation, is hereby duly
re-elected and re-appointed a Director of the Company by the unanimous consent
of the undersigned shareholders to serve for a term until his death,
resignation or removal in accordance with the Company’s Memorandum and Articles
of Association and with the applicable provisions of the Shareholders Agreement
amongst the Members of the Company as it may from time to time be amended.

 

4.               The aforementioned elected Directors
shall at all times exercise their power and authority in their capacities as Directors
of the Company in the best interests of the Company, strictly subject to and in
accordance with the applicable provisions on Directors duties, powers, meetings
and authority as set forth in the Company’s Memorandum and Articles of
Association and with the additional applicable provisions of the Shareholders Agreement
amongst the Members of the Company as it may from time to time be amended.

 

5.               These resolutions together with
appropriately amended registers of directors shall forthwith be filed in the
Company’s permanent record of resolutions and minutes and appropriate copies
shall also be formally registered as required with all applicable authorities
having jurisdiction including the British Virgin Islands Companies Registrar
and with Portcullis TrustNet (BVI) Limited, the Company’s Registered Agent.

 

6.               The Company’s Secretary, and failing
him, any one director and/or the Company’s President are hereby authorized and
instructed to sign and/or take whatever action is required for the benefit of
and on behalf of the Company and of the Members to register, record and
otherwise as needed to give full force and effect to the actions and intentions
stated in the aforesaid resolutions.

 

	
  By the Unanimous Consent of the Members

  	
   

  	
  Dated:     September 2006 09:20 Hours Jakarta Time

  

 

 

	
  On Behalf of Member

  	
   

  	
  On Behalf of Member

  	
   

  	
  On Behalf of Member

  
	
  CNPCHK (Indonesia) Limited

  	
   

  	
  Continental Energy Corporation

  	
   

  	
  GeoPetro Resources Company

  
	
  Shareholder and owener of 35,000

  	
   

  	
  Shareholder and owner of 9,000 common

  	
   

  	
  Shareholder and owner of 6,000 

  
	
  common shares of the Company

  	
   

  	
  shares of the Company representing 18%

  	
   

  	
  common shares of the Company 

  
	
  representing 70% of the Company’s

  	
   

  	
  of the Company’s share capital

  	
   

  	
  representing 12% of the Company’s 

  
	
  share capital.

  	
   

  	
   

  	
   

  	
  share capital

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  /s/ Wang Mingcai

  	
   

  	
   

  	
   

  	
   

  
	
  by its Director

  	
   

  	
  by its President & CEO

  	
   

  	
  by its President & CEO

  
	
  Mr. Wang Mingcai

  	
   

  	
  Mr. Richard L McAdoo

  	
   

  	
  Mr. S.J. Doshi

  

 

83

 

Richard L. McAdoo

 

	
  THE BOARD OF DIRECTORS

  	
   

  	
  19-September-2006

  
	
  Continental-GeoPetro (Bengara-II) Ltd.

  	
   

  	
   

  
	
  JI. R.S. Fatmawati 31A, Cilandak

  	
   

  	
   

  
	
  Jakarta, 124300, Indonesia

  	
   

  	
   

  
	
  By Fax to 62-21-765-8293

  	
   

  	
   

  
	
  Original Delivered by Hand

  	
   

  	
   

  

 

Subject:         Consent to Serve as a Director

 

Gentlemen,

 

This is to confirm my acceptance of continuation of service as a
director on the board of Continental GeoPetro (Bengara-II) Ltd. as the
designated director appointee for and on behalf of Continental Energy Corporation
as provided for in the Shareholders Agreement and in the Shares Sale and
Purchase Agreements both dated 19 September 2006 between CNPCHK (Indonesia)
Limited, Continental Energy Corporation, GeoPetro Resources Company, and CNPC
(Hong Kong) Limited.

 

I shall familiarize myself with the duties of a director as required by
the Memorandum and Articles of Continental-GeoPetro (Bengara-II) Ltd. including
the additional duties and procedures required under the said Shareholders
Agreement and Shares Sale and Purchase Agreements and agree to abide by and act
in my capacity as director in accordance with their provisions.

 

I am a citizen of the USA and a resident of Indonesia. My residential
contact address is JI. Bumipratama Timur BHP Blok R25, Jakarta, 13550,
Indonesia. My residence phone number is 62-21-841-2784. My cell phone number is
62-81-694-0853.

 

I am a director and officer of the Continental Energy Corporation. My
office address is at Continental Energy Corporation, Suite 1200, 14001 Dallas
Parkway, Dallas, Texas, USA, phone 1-972-934-6774, fax 1-972-934-6718, email
rlmcadoo@continentalenergy.com.

 

I am the holder of USA passport number 206537367 issued by USA at NPC
expiring on date 13 June 2010 and my date of birth was 10 May 1954 and my place
of birth was Higgins, Texas, USA.

 

I am also the holder of Oregon drivers license number 5845224 issued by
State of Oregon, USA, expiring on date 10 May 2010.

 

Attached please find a color copy of my passport picture page and of my
Oregon drivers license.

 

	
  Sincerely Yours,

  
	
   

  
	
   

  
	
  /s/ Richard L. McAdoo

  	
   

  
	
  Richard L. McAdoo

  

 

84

 

	
  

  	
  Continental-GeoPetro (Bengara-Il) Ltd.

  
	
  BVI IBC Company 247888 c/o Portcullis
  TrustNet Chambers

  
	
   

  	
  4th Floor, Ellen Skelton Building, 3076
  Drake’s Highway

  
	
  

  	
  Road Town, Tortola, British Virgin Islands

  The “Company”

  

 

 

UNANIMOUS CONSENT RESOLUTIONS OF THE
DIRECTORS

SPA Closing Completion Resolutions #5

 

Ratify Memorandum, Articles &
Shareholders Agreement

 

These unanimous Consent Resolutions of the Directors are hereby
unanimously consented to and adopted in writing by the undersigned, being all
the directors of the Company as of the date last below written. These resolutions
may be signed by the directors in any number of counterparts and may be
delivered by facsimile to the Secretary, each of which when delivered shall be
deemed to be an original and all of which together shall constitute one and the
same document and notwithstanding the date of execution shall be deemed to bear
the date as last set forth below.

 

IT WAS NOTED THAT: The Company has received a
copy of a unanimous consent resolution of the Members dated the same date as
these resolutions adopting a new restated Memorandum and Articles of
Incorporation for the Company together with adoption by the Members of a
Shareholders Agreement amongst the Members.

 

NOW THEREFORE IT WAS RESOLVED THAT: the Directors do hereby unanimously
pass the following resolutions:

 

1.               Mr. Li Hualin is hereby elected Chairman
of the Board of Directors of the Company to serve in such capacity until
replaced by action of the Directors.

 

2.               On behalf of the Company the Directors
hereby confirm, ratify and approve the Restated Memorandum and Articles of the
Company dated the same date as these resolutions adopted by the Members in
their unanimous consent resolution dated 9:00 AM Jakarta time the same date as
these resolutions and hereby direct, authorize and empower any one director plus
the Secretary to take all necessary action to appropriately file and register
and give full force and effect to the new Memorandum and Articles with both the
British Virgin Islands Companies Registrar and Portcullis TrustNet (BVI)
Limited, the Company’s Registered Agent.

 

3.               On behalf of the Company the Directors
hereby confirm, ratify and recognize the Shareholders Agreement amongst the
Members of the Company dated the same date as these resolutions adopted by the
Members in their unanimous consent resolution dated 9:00 AM Jakarta time the
same date as these resolutions and hereby direct, authorize and empower any one
director plus the Secretary to take all necessary action to appropriately file
and register and give full force and effect to the new Memorandum and Articles
with Portcullis TrustNet (BVI) Limited, the Company’s Registered Agent.

 

4.               These resolutions together with
appropriately amended registers of share transfers, members and directors shall
forthwith be filed by the Secretary in the Company’s permanent record of
resolutions and minutes and appropriate copies shall also be formally
registered as required with all applicable authorities having jurisdiction
including the British Virgin Islands Companies Registrar and Portcullis
TrustNet (BVI) Limited, the Company’s Registered Agent.

 

	
  By the Unanimous Consent of the Board of Directors

  	
   

  	
  Dated:     September 2006 09:40 Hours Jakarta Time

  

 

 

	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Li Hualin

  	
   

  	
  Cheng Cheng

  	
   

  	
  Richard L. McAdoo

  
	
  Director & Chairman

  	
   

  	
  Director

  	
   

  	
  Director

  

 

85

 

UNANIMOUS CONSENT RESOLUTIONS OF THE
DIRECTORS

SPA Closing Completion Resolutions #6

 

Appointment of First Officers

 

These unanimous Consent Resolutions of the Directors are hereby
unanimously consented to and adopted in writing by the undersigned, being all
the directors of the Company as of the date last below written. These
resolutions may be signed by the directors in any number of counterparts and
may be delivered by facsimile to the Secretary, each of which when delivered
shall be deemed to be an original and all of which together shall constitute
one and the same document and notwithstanding the date of execution shall be
deemed to bear the date as last set forth below.

 

IT WAS NOTED THAT: The Shareholders Agreement dated
the same date as these resolutions amongst the Members of the Company imposes
certain obligations on the directors to appoint officers and senior management
of the Company.

 

IT WAS NOTED THAT: In accordance with the
Shares Sale and Purchase Agreement and the Shareholders Agreement both dated
the same date as these resolutions amongst the Members of the Company the
resignation of Mr. Richard L. McAdoo as President and CEO of the Company has
been received, a copy of which is attached to these resolutions.

 

NOW THEREFORE IT WAS RESOLVED THAT: the Directors do hereby unanimously
pass the following resolutions:

 

1.               The resignation of Mr. Richard L. McAdoo
as CEO of the Company is hereby accepted and the Board thanks him for past
services in such capacity.

 

2.               Mr. Li Hualin is hereby made an
Executive Director and Chairman of the Company to serve in accordance with the
Shareholders Agreement.

 

3.               Mr. Cheng Cheng is hereby made an
Executive Director of the Company to serve in accordance with the Shareholders
Agreement.

 

4.               Mr. Richard L. McAdoo is hereby made an
Executive Director and is also hereby appointed to the position of Chief
Exploration Officer (CXO) of the Company based in Jakarta to serve in
accordance with the Shareholders Agreement.

 

5.               Mr. Lau Wak Hoon Patrick is hereby
reconfirmed as Secretary of the Company to serve in accordance with the
Shareholders Agreement.

 

6.               These resolutions shall forthwith be
filed by the Secretary in the Company’s permanent record of resolutions and
minutes and appropriate copies shall also be formally registered as required
with all applicable authorities having jurisdiction including Portcullis
TrustNet (BVI) Limited, the Company’s Registered Agent.

 

	
  By the Unanimous Consent of the Board of Directors

  	
   

  	
  Dated:     September 2006

  

 

 

	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Li Hualin

  	
   

  	
  Cheng Cheng

  	
   

  	
  Richard L. McAdoo

  
	
  Director & Chairman

  	
   

  	
  Director

  	
   

  	
  Director

  

 

86

 

Richard L. McAdoo

 

The Board of Directors

Continental-GeoPetro (Bengara-II) Ltd. (the “Company”)

JI. R.S. Fatmawati 31A, Cilandak, Jakarta, 125430

INDONESIA

 

Resignation

 

Gentlemen,

 

I, Richard L. McAdoo, hereby resign my office as President and CEO of
the Company with effect from the date last below written.

 

In such event that this resignation actually does become effective as
provided for above then at such time I acknowledge and declare that I have no
claim whatsoever against the Company or any of its subsidiaries for breach of
contract, compensation for loss of office, redundancy, unfair dismissal or
retirement or on any other account whatsoever accruing on or before and
applicable to my tenure as President and CEO during periods prior to the date
hereof.

 

Date:     September 2006

 

	
  Yours faithfully

  
	
   

  
	
   

  	
   

  
	
  Richard L. McAdoo

  

 

87

 

SCHEDULE-F

CONTRACTUAL OBLIGATIONS TO BE
TERMINATED PRIOR TO 30 SEPTEMBER 2006

 

A list and summary of the
principle terms and conditions of contractual commitment between CGB2 and third
parties a to be terminated prior to 30 September 2006 are set forth in the
following table:

 

Expatriate
Management Consulting & Related Contracts

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Contract

  	
   

  	
   

  	
   

  	
  Expiry or

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Contract

  	
   

  	
  Covering

  	
   

  	
   

  	
   

  	
  Price or

  	
   

  	
   

  	
   

  	
  Notice to

  	
   

  	
   

  	
   

  
	
  No

  	
   

  	
  Date

  	
   

  	
  Number

  	
   

  	
  To

  	
   

  	
  Period

  	
   

  	
  Description

  	
   

  	
  Rate

  	
   

  	
  Period

  	
   

  	
  Terminate

  	
   

  	
  Remarks

  	
   

  
	
  1

  	
   

  	
  28-Nov-05

  	
   

  	
  B2SA-099/05

  	
   

  	
  Susila Waryi

  	
   

  	
  1Dec05- 31Dec07

  	
   

  	
  Rent Car for Staff Toyota Harrier

  	
   

  	
  20,000,000

  	
   

  	
  Rp/Month

  	
   

  	
  31-Dec-07

  	
   

  	
  Paid monthly

  	
   

  
	
  2

  	
   

  	
  31-Dec-05

  	
   

  	
  B2SA-06-004

  	
   

  	
  Susila Waryi

  	
   

  	
  1Dec04 - 30 Nov07

  	
   

  	
  Rent House for Senior Management

  	
   

  	
  $

  	
  3,000.00

  	
   

  	
  US$/Month

  	
   

  	
  30-Nov-07

  	
   

  	
  Prepaid thru 30-Nov-06

  	
   

  
	
  3

  	
   

  	
  20-Jul-06

  	
   

  	
  B2SA-121/06

  	
   

  	
  AT Eriksson

  	
   

  	
  01Aug06 - 31July07

  	
   

  	
  Rent House for Expatriate Staff

  	
   

  	
  $

  	
  1,000.00

  	
   

  	
  US$/Month

  	
   

  	
  31-Jul-07

  	
   

  	
  Paid monthly

  	
   

  
	
  4

  	
   

  	
  20-Jul-06

  	
   

  	
  B2SA-122/06

  	
   

  	
  AT Eriksson

  	
   

  	
  01Aug06 - 31July07

  	
   

  	
  Rent Car for Staff KIA Sportage

  	
   

  	
  $

  	
  1,500.00

  	
   

  	
  US$/Month

  	
   

  	
  31-Jul-07

  	
   

  	
  Paid monthly

  	
   

  
	
  5.

  	
   

  	
  20-Mar-06

  	
   

  	
  B2SA-06-007

  	
   

  	
  Rita Mardalina

  	
   

  	
  20 Mar06-Open

  	
   

  	
  Consultant: Geophysicist

  	
   

  	
  400,000

  	
   

  	
  Rp/Day

  	
   

  	
  90 Days

  	
   

  	
  Part Time Temporary

  	
   

  
	
  6.

  	
   

  	
  4-Jul-06

  	
   

  	
  B2SA-114/06

  	
   

  	
  Iin Hendriana

  	
   

  	
  01Jul06 - 30 Sep06

  	
   

  	
  Consultant: Tarakan Office Manager

  	
   

  	
  2,000,000

  	
   

  	
  Rp/Month

  	
   

  	
  3 Days

  	
   

  	
  Full Time Staff

  	
   

  
	
  7.

  	
   

  	
  24-Jul-06

  	
   

  	
  B2SA-123/06

  	
   

  	
  D.R. Wibowo

  	
   

  	
  01Aug06 - 31July07

  	
   

  	
  Consultant: IT Supervisor

  	
   

  	
  250,000

  	
   

  	
  Rp/Day

  	
   

  	
  90 Days

  	
   

  	
  Full Time Staff

  	
   

  
	
  8.

  	
   

  	
  24-Jul-06

  	
   

  	
  B2SA-124/06

  	
   

  	
  R.M. Budijarto

  	
   

  	
  01Aug06 - 31July07

  	
   

  	
  Consultant: Senior Geophysicist

  	
   

  	
  625,000

  	
   

  	
  Rp/Day

  	
   

  	
  90 Days

  	
   

  	
  Full Time Staff

  	
   

  
	
  9.

  	
   

  	
  20-Jul-06

  	
   

  	
  B2SA-117/06

  	
   

  	
  Richard L. McAdoo

  	
   

  	
  01Aug06 - 31July07

  	
   

  	
  Consultant: Exploration Management

  	
   

  	
  $

  	
  12,500.00

  	
   

  	
  US$/Month

  	
   

  	
  90 Days

  	
   

  	
  Full Time Staff

  	
   

  
	
  10.

  	
   

  	
  20-Jul-06

  	
   

  	
  B2SA-118/06

  	
   

  	
  Andrew T. Eriksson

  	
   

  	
  01Aug06 - 31July07

  	
   

  	
  Consultant: Geological Management

  	
   

  	
  $

  	
  7,500.00

  	
   

  	
  US$/Month

  	
   

  	
  90 Days

  	
   

  	
  Full Time Staff

  	
   

  
	
  11.

  	
   

  	
  20-Jul-06

  	
   

  	
  B2SA-119/06

  	
   

  	
  B. Dorpi Parlindungan

  	
   

  	
  01Aug06 - 31July07

  	
   

  	
  Consultant: Management Advisor

  	
   

  	
  $

  	
  5,000.00

  	
   

  	
  US$/Month

  	
   

  	
  90 Days

  	
   

  	
  Full Time Staff

  	
   

  
	
  12.

  	
   

  	
  20-Jul-06

  	
   

  	
  B2SA-120/06

  	
   

  	
  Maridjo Utomo

  	
   

  	
  01Aug06 - 31July07

  	
   

  	
  Consultant: Accounting Management

  	
   

  	
  $

  	
  3,000.00

  	
   

  	
  US$/Month

  	
   

  	
  90 Days

  	
   

  	
  Full Time Staff

  	
   

  

 

88Exhibit (4)(b)

SNAP-ON INCORPORATED

to

U.S. BANK NATIONAL
ASSOCIATION

Trustee

INDENTURE

Dated as of January 8, 2007

Debt Securities

 

TABLE OF CONTENTS*

	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Parties

  	
   

  	
  1

  
	
  Recitals

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE ONE.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Definitions.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 1.01. Definitions

  	
   

  	
  1

  
	
  Affiliate

  	
   

  	
  1

  
	
  Authenticating
  Agent

  	
   

  	
  2

  
	
  Board of
  Directors

  	
   

  	
  2

  
	
  Board Resolution

  	
   

  	
  2

  
	
  Business Day

  	
   

  	
  2

  
	
  Capitalized Rent

  	
   

  	
  2

  
	
  Company

  	
   

  	
  3

  
	
  Company Request
  and Company Order

  	
   

  	
  3

  
	
  Consolidated
  Current Liabilities

  	
   

  	
  3

  
	
  Consolidated Net
  Tangible Assets

  	
   

  	
  3

  
	
  Consolidated
  Shareholders’ Equity

  	
   

  	
  3

  
	
  Consolidated
  Subsidiary

  	
   

  	
  4

  
	
  Consolidated
  Tangible Assets

  	
   

  	
  4

  
	
  Conversion Date

  	
   

  	
  4

  
	
  Currency
  Determination Agent

  	
   

  	
  4

  
	
  Debt Security or
  Debt Securities

  	
   

  	
  4

  
	
  Debt Security
  Register

  	
   

  	
  5

  
	
  Depository

  	
   

  	
  5

  
	
  Dollar

  	
   

  	
  5

  
	
  Dollar
  Equivalent of the Foreign Currency

  	
   

  	
  5

  
	
  Event of Default

  	
   

  	
  5

  
	
  Foreign Currency

  	
   

  	
  5

  
	
  Funded Debt

  	
   

  	
  5

  
	
  Global Debt
  Security

  	
   

  	
  6

  
	
  Government
  Obligations

  	
   

  	
  6

  
	
  Holder

  	
   

  	
  6

  
	
  Indenture

  	
   

  	
  6

  
	
  Indexed Debt
  Security

  	
   

  	
  6

  
	
  Interest

  	
   

  	
  6

  
	
  Interest Payment
  Date

  	
   

  	
  6

  
	
  Market Exchange
  Rate

  	
   

  	
  7

  
	
  Officers’
  Certificate

  	
   

  	
  7

  

 

*              This table of contents shall not, for any purpose, be
deemed to be a part of the Indenture.

 

 

	
  Opinion of Counsel

  	
   

  	
  7

  
	
  Original Issue
  Discount Debt Security

  	
   

  	
  7

  
	
  Outstanding

  	
   

  	
  7

  
	
  Permitted
  Receivables Financing

  	
   

  	
  8

  
	
  Person

  	
   

  	
  9

  
	
  Place of Payment

  	
   

  	
  9

  
	
  Predecessor Debt
  Security

  	
   

  	
  9

  
	
  Principal Office
  of the Trustee

  	
   

  	
  9

  
	
  Principal
  Property

  	
   

  	
  9

  
	
  Receivables
  Subsidiary

  	
   

  	
  10

  
	
  Redemption Date

  	
   

  	
  10

  
	
  Redemption Price

  	
   

  	
  10

  
	
  Regular Record
  Date

  	
   

  	
  10

  
	
  Responsible
  Officer

  	
   

  	
  10

  
	
  Restricted
  Subsidiary

  	
   

  	
  10

  
	
  Secured Debt

  	
   

  	
  11

  
	
  Security
  Interest

  	
   

  	
  11

  
	
  Special Record
  Date

  	
   

  	
  11

  
	
  Stated Maturity

  	
   

  	
  11

  
	
  Subsidiary

  	
   

  	
  11

  
	
  Trustee

  	
   

  	
  11

  
	
  Trust Indenture
  Act of 1939

  	
   

  	
  11

  
	
  Unrestricted
  Subsidiary

  	
   

  	
  12

  
	
  Valuation Date

  	
   

  	
  12

  
	
  Voting Stock

  	
   

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE TWO.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Debt Security Forms.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.01. Forms Generally

  	
   

  	
  12

  
	
  SECTION 2.02. Forms of Debt Securities

  	
   

  	
  13

  
	
  SECTION 2.03. Form of Trustee’s Certificate of
  Authentication

  	
   

  	
  13

  
	
  SECTION 2.04. Debt Securities in Global Form

  	
   

  	
  14

  
	
   

  	
   

  	
   

  
	
  ARTICLE THREE.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  The Debt
  Securities.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.01. Title and Terms

  	
   

  	
  16

  
	
  SECTION 3.02. Denominations

  	
   

  	
  18

  
	
  SECTION 3.03. Payment of Principal and Interest

  	
   

  	
  18

  
	
  SECTION 3.04. Execution of Debt Securities

  	
   

  	
  18

  
	
  SECTION 3.05. Temporary Debt Securities

  	
   

  	
  20

  
	
  SECTION 3.06. Exchange and Registration of Transfer
  of Debt Securities

  	
   

  	
  21

  
	
  SECTION 3.07. Mutilated, Destroyed, Lost or Stolen
  Debt Securities

  	
   

  	
  22

  

 

 

 

	
  SECTION 3.08. Payment of Interest; Interest
  Rights Preserved

  	
   

  	
  23

  
	
  SECTION 3.09. Persons Deemed Owners

  	
   

  	
  24

  
	
  SECTION 3.10. Cancellation of Debt Securities Paid,
  etc

  	
   

  	
  24

  
	
  SECTION 3.11. Currency and Manner of Payments

  	
   

  	
  25

  
	
   

  	
   

  	
   

  
	
  ARTICLE FOUR.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Redemption of
  Debt Securities; Sinking Funds.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4.01. Applicability of Article

  	
   

  	
  26

  
	
  SECTION 4.02. Notice of Redemption; Selection of
  Debt Securities

  	
   

  	
  27

  
	
  SECTION 4.03. Payment of Debt Securities Called for
  Redemption

  	
   

  	
  28

  
	
  SECTION 4.04. Exclusion of Certain Securities from
  Eligibility for Selection for Redemption

  	
   

  	
  29

  
	
  SECTION 4.05. Provisions with Respect to any Sinking
  Funds

  	
   

  	
  29

  
	
   

  	
   

  	
   

  
	
  ARTICLE FIVE.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Particular
  Covenants of the Company

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.01. Payment of Principal, Premium and
  Interest

  	
   

  	
  31

  
	
  SECTION 5.02. Offices for Notices and Payments, etc

  	
   

  	
  31

  
	
  SECTION 5.03. Appointments to Fill Vacancies in
  Trustee’s Office

  	
   

  	
  31

  
	
  SECTION 5.04. Provisions as to Paying Agent

  	
   

  	
  31

  
	
  SECTION 5.05. Limitation on Secured Debt

  	
   

  	
  32

  
	
  SECTION 5.06. Sale and Leaseback Transactions

  	
   

  	
  35

  
	
  SECTION 5.07. Restrictions on Transfer of Principal
  Property to Unrestricted Subsidiaries

  	
   

  	
  35

  
	
  SECTION 5.08. Certificate to Trustee

  	
   

  	
  36

  
	
  SECTION 5.09. Waivers of Covenants

  	
   

  	
  36

  
	
   

  	
   

  	
   

  
	
  ARTICLE SIX.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Holders’ Lists
  and Reports by the Company and the Trustee.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6.01. Holders’ Lists

  	
   

  	
  36

  
	
  SECTION 6.02. Preservation and Disclosure of Lists

  	
   

  	
  37

  
	
  SECTION 6.03. Reports by the Company

  	
   

  	
  37

  
	
  SECTION 6.04. Reports by the Trustee

  	
   

  	
  37

  
	
   

  	
   

  	
   

  
	
  ARTICLE SEVEN.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Remedies of the
  Trustee and Holders on Event of Default.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.01. Events of Default

  	
   

  	
  38

  
	
  SECTION 7.02. Payment of Debt Securities Upon
  Default; Suit Therefor

  	
   

  	
  41

  
	
  SECTION 7.03. Application of Moneys Collected by
  Trustee

  	
   

  	
  43

  

 

 

 

	
  SECTION 7.04. Proceedings by Holders

  	
   

  	
  44

  
	
  SECTION 7.05. Proceedings by Trustee

  	
   

  	
  44

  
	
  SECTION 7.06. Remedies Cumulative and Continuing

  	
   

  	
  44

  
	
  SECTION 7.07. Direction of Proceedings and Waiver of
  Defaults by Majority of Holders

  	
   

  	
  45

  
	
  SECTION 7.08. Notice of Defaults

  	
   

  	
  46

  
	
  SECTION 7.09. Undertaking to Pay Costs

  	
   

  	
  46

  
	
  SECTION 7.10. Unconditional Right of Holders to
  Receive Principal, Premium and Interest

  	
   

  	
  46

  
	
   

  	
   

  	
   

  
	
  ARTICLE EIGHT.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Concerning the
  Trustee.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.01. Duties and Responsibilities of Trustee

  	
   

  	
  46

  
	
  SECTION 8.02. Reliance on Documents, Opinions,
  etc

  	
   

  	
  46

  
	
  SECTION 8.03. No Responsibility for Recitals, etc

  	
   

  	
  48

  
	
  SECTION 8.04. Trustee and Agents May Own Debt
  Securities

  	
   

  	
  48

  
	
  SECTION 8.05. Moneys to be Held in Trust

  	
   

  	
  48

  
	
  SECTION 8.06. Compensation and Expenses of Trustee

  	
   

  	
  49

  
	
  SECTION 8.07. Officers’ Certificate as Evidence

  	
   

  	
  49

  
	
  SECTION 8.08. Conflicting Interest of Trustee

  	
   

  	
  49

  
	
  SECTION 8.09. Eligibility of Trustee

  	
   

  	
  49

  
	
  SECTION 8.10. Resignation or Removal of Trustee

  	
   

  	
  50

  
	
  SECTION 8.11. Acceptance by Successor Trustee

  	
   

  	
  51

  
	
  SECTION 8.12. Succession by Merger, etc

  	
   

  	
  52

  
	
  SECTION 8.13. Limitation on Rights of Trustee as a
  Creditor

  	
   

  	
  52

  
	
  SECTION 8.14. Authenticating Agents

  	
   

  	
  53

  
	
   

  	
   

  	
   

  
	
  ARTICLE NINE.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Concerning the
  Holders.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.01. Action by Holders

  	
   

  	
  56

  
	
  SECTION 9.02. Proof of Execution by Holders

  	
   

  	
  56

  
	
  SECTION 9.03. Who Are Deemed Absolute Owners

  	
   

  	
  56

  
	
  SECTION 9.04. Company-Owned Debt Securities
  Disregarded

  	
   

  	
  56

  
	
  SECTION 9.05. Revocation of Consents; Future Holders
  Bound

  	
   

  	
  57

  
	
   

  	
   

  	
   

  
	
  ARTICLE TEN

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Holders’
  Meetings.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 10.01. Purposes of Meetings

  	
   

  	
  57

  
	
  SECTION 10.02. Call of Meetings by Trustee

  	
   

  	
  58

  
	
  SECTION 10.03. Call of Meetings by Company or
  Holders

  	
   

  	
  58

  
	
  SECTION 10.04. Qualifications for Voting

  	
   

  	
  58

  

 

 

 

	
  SECTION 10.05. Regulations

  	
   

  	
  59

  
	
  SECTION 10.06. Voting

  	
   

  	
  59

  
	
  SECTION 10.07. No Delay of Rights by Meeting

  	
   

  	
  60

  
	
   

  	
   

  	
   

  
	
  ARTICLE ELEVEN.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Supplemental
  Indentures.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.01. Supplemental Indentures without
  Consent of Holders

  	
   

  	
  60

  
	
  SECTION 11.02. Supplemental Indentures with Consent
  of Holders

  	
   

  	
  62

  
	
  SECTION 11.03. Effect of Supplemental Indentures

  	
   

  	
  63

  
	
  SECTION 11.04. Notation on Debt Securities

  	
   

  	
  63

  
	
  SECTION 11.05. Evidence of Compliance of Supplemental
  Indenture to be Furnished Trustee

  	
   

  	
  63

  
	
   

  	
   

  	
   

  
	
  ARTICLE TWELVE.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Consolidation,
  Merger, Sale and Conveyance.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12.01. Company May Consolidate, etc., on
  Certain Terms

  	
   

  	
  63

  
	
  SECTION 12.02. Successor Person to be Substituted

  	
   

  	
  64

  
	
  SECTION 12.03. Opinion of Counsel to Be Given
  Trustee

  	
   

  	
  64

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  THIRTEEN.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Satisfaction and
  Discharge of Indenture.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 13.01. Satisfaction, Discharge and
  Defeasance of Debt Securities of any Series

  	
   

  	
  65

  
	
  SECTION 13.02. Defeasance of Debt Securities of any
  Series

  	
   

  	
  67

  
	
  SECTION 13.03. Application of Trust Funds;
  Indemnification

  	
   

  	
  68

  
	
  SECTION 13.04. Return of Unclaimed Moneys

  	
   

  	
  69

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  FOURTEEN.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Immunity of
  Incorporators, Stockholders, Officers, Directors, etc.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 14.01. Indenture and Debt Securities Solely
  Obligations of the Company

  	
   

  	
  69

  
	
   

  	
   

  	
   

  
	
  ARTICLE FIFTEEN.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Miscellaneous
  Provisions.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 15.01. Provisions Binding on Successors of
  the Company

  	
   

  	
  70

  
	
  SECTION 15.02. Indenture for Sole Benefit of Parties
  and Holders of Debt Securities

  	
   

  	
  70

  
	
  SECTION 15.03. Addresses for Notices, etc

  	
   

  	
  70

  
	
  SECTION 15.04. New York Contract

  	
   

  	
  70

  

 

 

 

	
  SECTION 15.05. Evidence of Compliance with
  Conditions Precedent

  	
   

  	
  70

  
	
  SECTION 15.06. Legal Holidays

  	
   

  	
  71

  
	
  SECTION 15.07. Trust Indenture Act of 1939 to
  Control

  	
   

  	
  71

  
	
  SECTION 15.08. Table of Contents, Headings, etc

  	
   

  	
  71

  
	
  SECTION 15.09. Determination of Principal Amount

  	
   

  	
  71

  
	
  SECTION 15.10. Execution in Counterparts

  	
   

  	
  72

  
	
  Signatures

  	
   

  	
   

  
	
  Acknowledgements

  	
   

  	
   

  

 

 

CROSS REFERENCE SHEET

Between

Provisions of Sections 310 through 318(a) inclusive of
Trust Indenture Act of 1939 and the Indenture dated as of January 8, 2007
between Snap-on Incorporated and U.S. Bank National Association, as Trustee.

	
  Section of Act

  	
   

  	
  Section of Indenture

  
	
   

  	
   

  	
   

  
	
  310(a)(1) and (2)

  	
   

  	
  8.09

  
	
  310(a)(3) and (4)

  	
   

  	
  *

  
	
  310(b)

  	
   

  	
  8.08 and 8.10

  
	
  310(c)

  	
   

  	
  *

  
	
  311(a)

  	
   

  	
  8.13(a)

  
	
  311(b)

  	
   

  	
  8.13(b)

  
	
  311(c)

  	
   

  	
  *

  
	
  312(a)

  	
   

  	
  6.01 and 6.02(a)

  
	
  312(b)

  	
   

  	
  6.02(b)

  
	
  312(c)

  	
   

  	
  6.02(c)

  
	
  313(a)(1), (2), (3), (4), (6) and (7)

  	
   

  	
  6.04(a)(1-6)

  
	
  313(a)(5)

  	
   

  	
  *

  
	
  313(b)(1)

  	
   

  	
  *

  
	
  313(b)(2)

  	
   

  	
  6.04(b)

  
	
  313(c)

  	
   

  	
  6.04(c)

  
	
  313(d)

  	
   

  	
  6.04(d)

  
	
  314(a)(1)

  	
   

  	
  6.03(a)

  
	
  314(a)(2)

  	
   

  	
  6.03(b)

  
	
  314(a)(3)

  	
   

  	
  6.03(c)

  
	
  314(b)

  	
   

  	
  *

  
	
  314(c)(1)

  	
   

  	
  15.05

  
	
  314(c)(2)

  	
   

  	
  15.05

  
	
  314(c)(3)

  	
   

  	
  *

  
	
  314(d)

  	
   

  	
  *

  
	
  314(e)

  	
   

  	
  15.05

  
	
  314(f)

  	
   

  	
  *

  
	
  315(a), (c) and (d)

  	
   

  	
  8.01

  
	
  315(b)

  	
   

  	
  7.08

  
	
  315(e)

  	
   

  	
  7.09

  
	
  316(a)(1)

  	
   

  	
  7.07

  
	
  316(a)(2)

  	
   

  	
  *

  
	
  316(a) last para

  	
   

  	
  9.04

  
	
  316(b)

  	
   

  	
  7.10

  
	
  317(a)

  	
   

  	
  7.02

  
	
  317(b)

  	
   

  	
  5.04

  
	
  318(a)

  	
   

  	
  15.07

  

 

*                                         Not
applicable.

**                                  This
cross reference sheet shall not, for any purpose, be deemed to be part of the
Indenture.

 

THIS INDENTURE, dated as of January 8,
2007, between Snap-on Incorporated, a Delaware corporation (the “Company”), and
U.S. Bank National Association, a national banking corporation, as trustee (the
“Trustee”).

RECITALS OF THE COMPANY

The
Company has duly authorized the execution and delivery of this Indenture to
provide for the issue from time to time of its unsecured debentures, notes,
bonds or other evidences of indebtedness to be issued in one or more series as
in this Indenture provided, up to such principal amount or amounts as may from
time to time be authorized in or pursuant to one or more resolutions of the
Board of Directors.

All
things necessary to make this Indenture a valid agreement of the Company, in
accordance with its terms, have been done.

NOW,
THEREFORE, THIS INDENTURE WITNESSETH:

For
and in consideration of the premises and the purchase or acceptance of the Debt
Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of the respective Holders from time to time
of the Debt Securities or of any series thereof as follows:

ARTICLE ONE.

Definitions.

SECTION
1.01.  Definitions.  The terms defined in this Section 1.01
(except as herein otherwise expressly provided or unless the context otherwise
requires) for all purposes of this Indenture and of any indenture supplemental
hereto shall have the respective meanings specified in this Section 1.01.  All other terms used in this Indenture which
are defined in the Trust Indenture Act of 1939 or which are by reference
therein defined in the Securities Act of 1933, as amended, shall have (except
as herein otherwise expressly provided or unless the context otherwise
requires) the meanings assigned to such terms in said Trust Indenture Act of
1939 and in said Securities Act as in force at the date of the execution of
this Indenture.  All accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles and, except as otherwise herein
expressly provided, the term “generally accepted accounting principles” with
respect to any computation required or permitted hereunder shall mean such
accounting principles as are generally accepted at the date of such
computation.  All references to such
terms herein shall be both to the singular or the plural, as the context so
requires.

Affiliate:

The
term “Affiliate”, when used with respect to any specified Person, means any
other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person.  For the purposes of this definition,

 

“control” when
used with respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms “controlling”
and “controlled” have meanings correlative to the foregoing.

Authenticating Agent:

The
term “Authenticating Agent” shall mean the agent of the Trustee, if any, which
at the time shall be appointed and acting pursuant to Section 8.14.

Board of Directors:

The
term “Board of Directors” shall mean the Board of Directors of the Company or
any authorized committee of such Board designated by the Board of Directors or
the by-laws or the certificate of incorporation of the Company to act for such
Board for purposes of this Indenture.

Board Resolution:

The
term “Board Resolution” means a copy of a resolution certified by a Vice
President, the Secretary or an Assistant Secretary of the Company to have been
duly adopted by the Board of Directors and to be in full force and effect on
the date of such certification, and delivered to the Trustee.

Business Day:

The
term “Business Day”, when used with respect to any Place of Payment, means each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in that Place of Payment are authorized or obligated by
law to close.

Capitalized Rent:

The
term “Capitalized Rent” means the total net amount of rent payable for the
remaining term as of the date of determination thereof under a lease of
Principal Property by the Company or any of its Restricted Subsidiaries,
discounted from the respective due dates thereof to such date at the rate per annum
equal to the weighted average interest rate borne by the Debt Securities.  The weighted average interest rate borne by
the Debt Securities shall be calculated by dividing the aggregate of the annual
interest payments required on the Debt Securities, based on the amount
Outstanding at the latest date any Debt Securities were issued hereunder, by
the aggregate principal amount of the Debt Securities Outstanding at such
date.  The total net amount of rent
payable under any such lease for any period shall be the total amount of the
rent payable by the lessee with respect to such period but shall not include
amounts required to be paid on account of maintenance and repairs, insurance,
taxes, assessments, water rates, sewer rents and similar charges and contingent
rents such as those based on sales.  The
remaining term under any lease shall be calculated without giving effect to any
unexercised option of the lessee for the renewal or extension of any term.  In the case of any

 2
 

 

lease which is
terminable by the lessee upon the payment of a penalty, such net amount shall
also include the amount of such penalty, but no rent shall be considered as
required to be paid under such lease subsequent to the first date upon which it
may be so terminated.

Company:

The
term “Company” shall mean Snap-on Incorporated, a Delaware corporation, and,
subject to Article Twelve, shall include its successors and assigns.

Company Request and
Company Order:

The
terms “Company Request” and “Company Order” mean, respectively, a written request
or order signed in the name of the Company by its Chairman of the Board, Vice
Chairman of the Board, President or a Vice President, and by its Treasurer,
Secretary, Assistant Secretary or Assistant Treasurer, and delivered to the
Trustee.

Consolidated Current
Liabilities:

The
term “Consolidated Current Liabilities” means the aggregate of the current
liabilities of the Company and its Restricted Subsidiaries (excluding
liabilities of Unrestricted Subsidiaries and excluding billings on uncompleted
contracts in excess of related costs and profits) appearing on the most recent
available consolidated balance sheet of the Company and its Restricted
Subsidiaries, all in accordance with generally accepted accounting principles; provided, however, that
in no event shall Consolidated Current Liabilities include any obligation of
the Company and its Restricted Subsidiaries issued under a revolving credit or
similar agreement if the obligation issued under such agreement matures by its
terms within 12 months from the date thereof but by the terms of such agreement
such obligation may be renewed or extended or the amount thereof reborrowed or
refunded at the option of the Company or any Restricted Subsidiary for a term
in excess of 12 months from the date of determination.

Consolidated Net Tangible
Assets:

The
term “Consolidated Net Tangible Assets” means Consolidated Tangible Assets
after deduction of Consolidated Current Liabilities.

Consolidated
Shareholders’ Equity

The
term “Consolidated Shareholders’ Equity” means at any date the stockholders’
equity of the Company and its Consolidated Subsidiaries determined on a
consolidated basis as of such date in accordance with generally accepted
accounting principles; provided that,
for purposes hereof, the consolidated stockholders’ equity of the Company and
its Consolidated Subsidiaries shall be calculated without giving effect to
(i) the application of Financial Accounting Standards Board Statement
No. 106 or (ii) the cumulative foreign currency translation adjustment.

 3
 

 

Consolidated
Subsidiary

The
term “Consolidated Subsidiary” shall mean, as to any Person, each Subsidiary of
such Person (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been) consolidated with
the financial statements of such Person in accordance with generally accepted
accounting principles.

Consolidated Tangible
Assets:

The
term “Consolidated Tangible Assets” means the aggregate of all assets of the
Company and its Restricted Subsidiaries (including the value of all existing
Sale and Leaseback Transactions (as defined in Section 5.06) and any assets
resulting from the capitalization of other long-term lease obligations in
accordance with generally accepted accounting principles but excluding the
value of assets or investments in any Unrestricted Subsidiary or any non-majority-owned
Subsidiary) appearing on the most recent available consolidated balance sheet
of the Company and its Restricted Subsidiaries at their net book values, after
deducting related depreciation, amortization and other valuation reserves and
excluding (a) any capital write-ups resulting from reappraisals of assets
or of other investments after September 30, 2006 (other than a write-up
of any assets constituting part of the assets and business of another Person
made in connection with the acquisition, direct or indirect, of the assets and
business of such other Person) except as permitted in accordance with generally
accepted accounting principles, (b) treasury stock and (c) patent and
trademark rights, good will, unamortized discounts and expenses and any other
intangible items, all in accordance with generally accepted accounting
principles.

Conversion Date:

The
term “Conversion Date” shall have the meaning set forth in Section 3.11.

Currency Determination
Agent:

The
term “Currency Determination Agent” shall mean the financial institution, if
any, from time to time selected by the Company and approved by the Trustee for
purposes of Section 3.11.

Debt Security or Debt
Securities:

The
terms “Debt Security” or “Debt Securities” shall mean any unsecured notes,
debentures or other indebtedness of any series, as the case may be, issued by
the Company from time to time, and authenticated and delivered under this
Indenture.

Debt Security Register:

The
term “Debt Security Register” shall have the meaning set forth in Section 3.06.

 4
 

 

Depository:

The
term “Depository” shall mean, unless otherwise specified by the Company
pursuant to Section 3.01, with respect to Debt Securities of any series
issuable or issued as a Global Debt Security, The Depository Trust Company, New
York, New York, or any successor thereto registered as a clearing agency
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934, as amended, or other applicable statute or regulation.

Dollar:

The
term “Dollar” shall mean the coin or currency of the United States of America
which as of the time of payment is legal tender for the payment of public and
private debts.

Dollar Equivalent of the
Foreign Currency:

The
term “Dollar Equivalent of the Foreign Currency” shall have the meaning set
forth in Section 3.11.

Event of Default:

The
term “Event of Default” shall mean any event specified in Section 7.01,
continued for the period of time, if any, and after the giving of the notice,
if any, therein designated.

Foreign Currency:

The
term “Foreign Currency” shall mean a currency issued by the government of any
country other than the United States of America.

Funded Debt:

The
term “Funded Debt” means all indebtedness for money borrowed having a maturity
of more than twelve months from the date of the most recent consolidated
balance sheet of the Company and its Restricted Subsidiaries (excluding
indebtedness of Unrestricted Subsidiaries) or renewable and extendible beyond
twelve months at the option of the borrower and all obligations in respect of
lease rentals which under generally accepted accounting principles would be
shown on a consolidated balance sheet of the Company as a liability item other
than a current liability; provided, however, that Funded Debt shall not include any of the
foregoing to the extent that such indebtedness or obligations are not required
by generally accepted accounting principles to be shown on the balance sheet of
the Company.

Global Debt Security:

The
term “Global Debt Security” means a Debt Security issued to evidence all or
part of a series of Debt Securities.

 5
 

 

Government Obligations:

The
term “Government Obligations” means securities which are (i) direct obligations
of the government which issued the currency in which the Debt Securities of a
series are denominated or (ii) obligations of a person controlled or supervised
by and acting as an agency or instrumentality of the government which issued
the currency in which the Debt Securities of such series are denominated, the
payment of which obligations is unconditionally guaranteed by such government,
and which, in either case, are full faith and credit obligations of such
government, are denominated in the currency in which the Debt Securities of
such series are denominated and which are not callable or redeemable at the
option of the issuer thereof.

Holder:

The
term “Holder” means any Person in whose name a Debt Security of any series is
registered in the Debt Security Register applicable to Debt Securities of such
series.

Indenture:

The
term “Indenture” shall mean this instrument as originally executed or, if
amended or supplemented as herein provided, as so amended or supplemented,
pursuant to the applicable provisions hereof.

Indexed Debt Security

The
term “Indexed Debt Security” means a Debt Security the terms of which provide
that the principal amount thereof payable at Stated Maturity may be more or
less than the principal face amount thereof at original issuance.

Interest:

The term
“interest”, when used with respect to an Original Issue Discount Debt Security
which by its terms bears interest only after maturity, means interest payable
after maturity.

Interest Payment Date:

The
term “Interest Payment Date”, when used with respect to any series of Debt
Securities, means the Stated Maturity of an installment of interest on such
Debt Securities.

Market Exchange Rate:

The
term “Market Exchange Rate” shall have the meaning set forth in Section 3.11.

 6
 

 

Officers’ Certificate:

The
term “Officers’ Certificate”, when used with respect to the Company, shall mean
a certificate signed by its Chairman of the Board, Vice Chairman of the Board,
President, or a Vice President and by its Treasurer, Secretary, Assistant
Secretary or Assistant Treasurer and delivered to the Trustee.  Each such certificate shall include the
statements provided for in Section 15.05 to the extent required by the
provisions of such Section.

Opinion of Counsel:

The
term “Opinion of Counsel” shall mean an opinion in writing signed by legal
counsel who may be an employee of or counsel to the Company, and who shall be
reasonably acceptable to the Trustee. 
Each such opinion shall include the statements provided for in Section
3.04 and Section 15.05 to the extent required by the provisions of such
Sections.

Original Issue Discount
Debt Security:

The
term “Original Issue Discount Debt Security” means any Debt Security which
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the maturity thereof pursuant to
Section 7.01.

Outstanding:

The
term “Outstanding”, when used with respect to Debt Securities or Debt
Securities of any series, means, as of the date of determination, all such Debt
Securities theretofore authenticated and delivered under this Indenture, except:

(i)  such Debt Securities theretofore cancelled by
the Trustee or delivered to the Trustee for cancellation;

(ii)  such Debt Securities for whose payment or
redemption money in the necessary amount and in the specified currency has been
theretofore deposited with the Trustee or any paying agent (other than the
Company) in trust or set aside and segregated in trust by the Company (if the
Company shall act as its own paying agent) for the Holders of such Debt
Securities, provided, however, that if such Debt Securities are
to be redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has been made;

(iii)  such Debt Securities in exchange for or in
lieu of which other such Debt Securities have been authenticated and delivered
pursuant to this Indenture, or such Debt Securities which have been paid,
pursuant to this Indenture, unless proof satisfactory to the Trustee is
presented that any such Debt Securities are held by Persons in whose hands any
of such Debt Securities are a legal, valid and binding obligation of the
Company; and

 7
 

 

(iv)  such Debt Securities the indebtedness in
respect to which has been discharged in accordance with Section 13.01.

provided, however, that in determining whether the
Holders of the requisite principal amount of such Outstanding Debt Securities
have given any request, demand, authorization, direction, notice, consent or
waiver hereunder, such Debt Securities owned by the Company or such other
obligor upon such Debt Securities or any Affiliate of the Company or such other
obligor shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only such
Debt Securities which the Trustee knows to be so owned shall be so
disregarded.  Such Debt Securities so
owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee’s right
so to act with respect to such Debt Securities and that the pledgee is not the
Company or any other such obligor upon such Debt Securities or any Affiliate of
the Company or such other obligor.  In
case of a dispute as to such right, the decision of the Trustee upon the advice
of counsel shall be full protection to the Trustee.  Upon request of the Trustee, the Company
shall furnish to the Trustee promptly an Officers’ Certificate listing and
identifying all such Debt Securities, if any, known by the Company to be owned
or held by or for the account of any of the above described Persons; and,
subject to the provisions of Section 8.01, the Trustee shall be entitled to
accept such Officers’ Certificate as conclusive evidence of the facts therein
set forth and of the fact that all such Debt Securities not listed therein are
Outstanding for the purpose of any such determination.

Permitted Receivables
Financing:

The term “Permitted
Receivables Financing” means any financing pursuant to which the Company or any
Subsidiary or Subsidiaries of the Company may sell, convey or otherwise
transfer, directly or indirectly, to a Receivables Subsidiary or any other
Person, or grant a Security Interest in, any accounts receivable, general
intangibles, chattel paper or other financial assets (and related rights and
assets) of the Company or such Subsidiary or Subsidiaries, provided
that such financing shall be with limited or no recourse to the Company and its
Subsidiaries (other than the Receivables Subsidiary) except to the extent
customary (in the reasonable judgment of the Company) for such transactions.

Person:

The
term “Person” means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.

Place of Payment:

The
term “Place of Payment”, when used with respect to the Debt Securities of any
series, means the place or places where the principal of (and premium, if any)
and interest on the Debt Securities of that series are payable as specified in
accordance with Section 3.01.

 8
 

 

Predecessor Debt
Security:

The
term “Predecessor Debt Security” of any particular Debt Security means every
previous Debt Security evidencing all or a portion of the same debt as that
evidenced by such particular Debt Security, and for the purposes of this
definition, any Debt Security authenticated and delivered under Section 3.07 in
lieu of a mutilated, lost, destroyed or stolen Debt Security shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Debt
Security.

Principal Office of the
Trustee:

The term “principal
office of the Trustee”, or other similar terms, means the principal office of
the Trustee in New York, New York, at which at any particular time its trust
business shall be administered, which office on the date hereof is located at
100 Wall Street, Suite 1600, New York, NY 
10005.

Principal Property:

The
term “Principal Property” means any manufacturing plant, office building or
similar facility (including associated fixtures but excluding leases and other
contract rights which might otherwise be deemed real property) owned by the
Company or any Restricted Subsidiary, whether owned on the date hereof or
thereafter, provided each such plant, office building or similar facility has a
gross book value (without deduction for any depreciation reserves) at the date
as of which the determination is being made of in excess of five percent of the
Consolidated Net Tangible Assets of the Company and the Restricted Subsidiaries
and is located in the United States of America, Canada or the Commonwealth of
Puerto Rico, other than any such plant, office building or similar facility or
portion thereof which, in the opinion of the Board of Directors (evidenced by a
certified Board Resolution thereof delivered to the Trustee), is not of
material importance to the business conducted by the Company and its Restricted
Subsidiaries taken as a whole.

Receivables Subsidiary:

The term “Receivables
Subsidiary” means a bankruptcy remote, special purpose wholly owned Subsidiary
of the Company (or another wholly-owned Subsidiary of the Company) formed in
connection with a Permitted Receivables Financing.

Redemption Date:

The
term “Redemption Date”, when used with respect to any Debt Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.

 9
 

 

Redemption Price:

The
term “Redemption Price”, when used with respect to any Debt Security to be
redeemed, means the price specified in such Debt Security at which it is to be
redeemed pursuant to this Indenture.

Regular Record Date:

The
term “Regular Record Date” for the interest payable on any Debt Security on any
Interest Payment Date means the date specified in such Debt Security as the “Regular
Record Date” as contemplated by Section 3.01.

Responsible Officer:

The
term “Responsible Officer”, when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any vice president, the
secretary, any assistant secretary, the treasurer, any assistant treasurer, the
cashier, any assistant cashier, any trust officer or assistant trust officer,
the controller or any assistant controller or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.

Restricted Subsidiary:

The
term “Restricted Subsidiary” means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.

Secured Debt:

The
term “Secured Debt” means indebtedness for money borrowed and any Funded Debt
which, in each case, is secured by a Security Interest in (a) any
Principal Property or (b) any shares of capital stock or indebtedness of
any Restricted Subsidiary.

Security Interest:

The
term “Security Interest” shall mean any mortgage, pledge, lien, encumbrance,
conditional sale agreement, title retention agreement (excluding an operating
lease) or other security interest which secures payment or performance of an
obligation.

Special Record Date:

The
term “Special Record Date” for the payment of any Defaulted Interest (as
defined in Section 3.08) means a date fixed by the Trustee pursuant to Section
3.08.

 10
 

 

Stated Maturity:

The
term “Stated Maturity” when used with respect to any Debt Security or any
installment of principal thereof or of interest thereon, means the date
specified in such Debt Security as the fixed date on which the principal of
such Debt Security, or such installment of interest, is due and payable.

Subsidiary:

The
term “Subsidiary” means any Person of which the Company, or the Company and one
or more Subsidiaries, or any one or more Subsidiaries, directly or indirectly
own more than 50% of the Voting Stock.

Trustee:

The
term “Trustee” shall mean U.S. Bank National Association and, subject to the
provisions of Article Eight hereof, shall also include its successors and assigns
as Trustee hereunder.

Trust Indenture Act of
1939:

The
term “Trust Indenture Act of 1939” means the Trust Indenture Act of 1939, as
amended, as in force at the date as of which this Indenture was executed; provided, however,
that in the event the Trust Indenture Act of 1939 is amended after such date, “Trust
Indenture Act of 1939” means to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.

Unrestricted Subsidiary:

The
term “Unrestricted Subsidiary” means (a) any Subsidiary of the Company
that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors (provided, however, that any Subsidiary of the Company having, as of
the end of the Company’s most recently completed fiscal year, (i) assets
with a value in excess of 5% of the total value of the assets of the Company
and its Subsidiaries taken as a whole, or (ii) gross revenue in excess of
5% of the total (gross) revenue of the Company and its Subsidiaries taken as a
whole, may not be designated as an Unrestricted Subsidiary hereunder); and
(b) any Subsidiary of an Unrestricted Subsidiary.

Valuation Date:

The
term “Valuation Date” shall have the meaning set forth in Section 3.11.

 11
 

 

Voting Stock:

The
term “Voting Stock” means outstanding shares of capital stock or similar equity
interests having under ordinary circumstances voting power for the election of
directors, managers or the substantial equivalent thereof whether at all times
or only so long as no senior class of stock or similar equity interest has such
voting power by reason of the happening of any contingency.

ARTICLE TWO.

Debt Security Forms.

SECTION
2.01.  Forms
Generally.  The Debt
Securities of each series and the certificates of authentication thereon shall
have such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture (the provisions of which shall
be appropriate to reflect the terms of each series of Debt Securities,
including the currency or denomination, which may be Dollars or Foreign
Currency), and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon, as may be required to comply
with the rules of any securities exchange, or as may, consistently herewith, be
determined by the officers executing such Debt Securities, as evidenced by
their signing of such Debt Securities. 
Any portion of the text of any Debt Security may be set forth on the
reverse thereof, with an appropriate reference thereto on the face of the Debt
Security.

The
definitive Debt Securities shall be printed, lithographed or engraved or
produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange, all as determined by
the officers executing such Debt Securities, as evidenced by their signing of
such Debt Securities.

SECTION
2.02.  Forms
of Debt Securities.  The Debt
Securities of each series shall be in such form or forms (including global
form) as shall be established by or pursuant to a Board Resolution.

Prior
to the delivery of a Debt Security of any series in any such form to the
Trustee for the Debt Securities of such series for authentication, the Company
shall deliver to the Trustee the following:

(1)  The Board Resolution by or pursuant to which
such form of Debt Security has been approved;

(2)  An Officers’ Certificate dated the date such
Certificate is delivered to the Trustee stating that all conditions precedent
provided for in this Indenture relating to the authentication and delivery of
Debt Securities in such form have been complied with; and

(3)  An Opinion of Counsel stating that Debt
Securities in such form, together with any coupons appertaining thereto, when
(a) completed by appropriate insertions

 12
 

 

and executed and
delivered by the Company to the Trustee for authentication in accordance with
this Indenture, (b) authenticated and delivered by such Trustee in accordance
with this Indenture within the authorization as to aggregate principal amount
established from time to time by the Board of Directors, and (c) sold in the
manner specified in such Opinion of Counsel, will be the legal, valid and
binding obligations of the Company, subject to applicable bankruptcy,
reorganization, insolvency and other similar laws generally affecting creditors’
rights, to general equitable principles and to such other qualifications as
such counsel shall conclude do not materially affect the rights of Holders of
such Debt Securities.

The
definitive Debt Securities and coupons, if any, shall be printed, lithographed
or engraved or produced by any combination of these methods on a steel engraved
border or steel engraved borders or may be produced in any other manner, all as
determined by the officers executing such Debt Securities or coupons, as
evidenced by their execution thereof.

SECTION
2.03.  Form
of Trustee’s Certificate of Authentication.  The following is the form of the Certificate
of Authentication of the Trustee to be endorsed on the face of all Debt Securities
substantially as follows:

This is one of the Debt Securities of the series
designated herein issued under the within-mentioned Indenture.

	
  

  	
  U.S. BANK NATIONAL
  ASSOCIATION,

  
	
   

  	
  a national
  banking association, as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Authorized Officer

  

 

SECTION
2.04.  Debt
Securities in Global Form. 
(a)  If the Company shall
establish pursuant to Section 3.01 that the Debt Securities of a particular
series are to be issued in whole or in part in the form of one or more Global
Debt Securities, then the Company shall execute and the Trustee or its agent
shall, in accordance with Section 3.04 and the Company Order delivered to the
Trustee or its agent thereunder, authenticate and deliver such Global Debt Security
or Global Debt Securities, which (i) shall represent, and shall be denominated
in an amount equal to the aggregate principal amount of, the Outstanding Debt
Securities of such series to be represented by such Global Debt Security or
Global Debt Securities, or such portion thereof as the Company shall specify in
a Company Order, (ii) shall be registered in the name of the Depository for
such Global Debt Security or Global Debt Securities or its nominee, (iii) shall
be delivered by the Trustee or its agent to the Depository or pursuant to the
Depository’s instruction and (iv) shall bear a legend substantially to the
following effect:  “Unless this
certificate is presented by an authorized representative of the Depository to
the Company or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of the nominee of the
Depository or in such other name as is requested by an authorized
representative of the Depository (and any payment is made to the nominee of the
Depository or to such other entity as is requested by an authorized
representative

 13
 

 

of the
Depository), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, the
nominee of the Depository, has an interest herein.”

(b)  Notwithstanding any other provision of this
Section 2.04 or of Section 3.06, and subject to the provisions of paragraph (c)
below, unless the terms of a Global Debt Security expressly permit such Global
Debt Security to be exchanged in whole or in part for individual certificates
representing Debt Securities, a Global Debt Security may be transferred, in
whole but not in part and in the manner provided in Section 3.06, only to a
nominee of the Depository for such Global Debt Security, or to the Depository,
or a successor Depository for such Global Debt Security selected or approved by
the Company, or to a nominee of such successor Depository.

(c)  (1)  If
at any time the Depository for a Global Debt Security notifies the Company that
it is unwilling or unable to continue as Depository for such Global Debt
Security or if at any time the Depository for the Global Debt Securities for
such series shall no longer be eligible or in good standing under the Securities
Exchange Act of 1934, as amended, or other applicable statute or regulation,
the Company shall appoint a successor Depository with respect to such Global
Debt Security.  If a successor Depository
for such Global Debt Security is not appointed by the Company within 90 days
after the Company receives notice or becomes aware of such ineligibility, the
Company will execute, and the Trustee or its agent, upon receipt of a Company
Request for the authentication and delivery of certificates representing Debt
Securities of such series in exchange for such Global Debt Security, will
authenticate and deliver, certificates representing Debt Securities of such
series of like tenor and terms in an aggregate principal amount equal to the
principal amount of the Global Debt Security in exchange for such Global Debt
Security.

(2)  The Company may at any time and in its sole
discretion determine that the Debt Securities of any series or portion thereof
issued or issuable in the form of one or more Global Debt Securities shall no
longer be represented by such Global Debt Security or Global Debt
Securities.  In such event the Company
will execute, and the Trustee, upon receipt of a Company Request for the
authentication and delivery of certificates representing Debt Securities of
such series in exchange in whole or in part for such Global Debt Security, will
authenticate and deliver certificates representing Debt Securities of such
series of like tenor and terms in definitive form in an aggregate principal
amount equal to the principal amount of such Global Debt Security or Global
Debt Securities representing such series or portion thereof in exchange for
such Global Debt Security or Global Debt Securities.

(3)  If specified by the Company pursuant to
Section 3.01 with respect to Debt Securities issued or issuable in the form of
a Global Debt Security, the Depository for such Global Debt Security may
surrender such Global Debt Security in exchange in whole or in part for
certificates representing Debt Securities of such series of like tenor and
terms in definitive form on such terms as are acceptable to the Company and
such Depository.  Thereupon the Company
shall execute, and the Trustee or its agent shall authenticate and deliver, without
a service charge, (1) to each Holder specified by the Debt Security registrar
(as defined in Section 3.06)

 14
 

 

or the Depository
a certificate or certificates representing Debt Securities of the same series
of like tenor and terms and of any authorized denomination as requested by such
person in an aggregate principal amount equal to and in exchange for such
Holder’s beneficial interest as specified by the Debt Security registrar or the
Depository in the Global Debt Security; and (2) to such Depository a new Global
Debt Security of like tenor and terms and in an authorized denomination equal
to the difference, if any, between the principal amount of the surrendered
Global Debt Security and the aggregate principal amount of certificates
representing Debt Securities delivered to Holders thereof.

(4)  In any exchange provided for in any of the
preceding three paragraphs, the Company will execute and the Trustee or its
agent will authenticate and deliver certificates representing Debt Securities
in definitive registered form in authorized denominations for Debt Securities
of the same series or any integral multiple thereof.  Upon the exchange of the entire principal
amount of a Global Debt Security for certificates representing Debt Securities,
such Global Debt Security shall be cancelled by the Trustee or its agent.  Except as provided in the preceding
paragraph, certificates representing Debt Securities issued in exchange for a
Global Debt Security pursuant to this Section shall be registered in such names
and in such authorized denominations for Debt Securities of that series or any
integral multiple thereof, as the Debt Security registrar (as defined in
Section 3.06) or Depository shall instruct the Trustee or its agent.  The Trustee or the Debt Security registrar
shall deliver at its trust office such certificates representing Debt
Securities to the Holders in whose names such Debt Securities are so
registered.

ARTICLE THREE.

The Debt Securities.

SECTION
3.01.  Title
and Terms.  The aggregate
principal amount of Debt Securities which may be authenticated and delivered
under this Indenture is unlimited.  The
Debt Securities may be issued up to the aggregate principal amount of Debt
Securities from time to time authorized by or pursuant to a Board Resolution.

The
Debt Securities may be issued in one or more series.  All Debt Securities of each series issued
under this Indenture shall in all respects be equally and ratably entitled to
the benefits hereof with respect to such series without preference, priority or
distinction on account of the actual time or times of the authentication and
delivery or maturity of the Debt Securities of such series.  There shall be established in or pursuant to
a Board Resolution, and set forth in an Officers’ Certificate to the extent not
established in a Board Resolution, or established in one or more indentures
supplemental hereto, prior to the issuance of Debt Securities of any series:

(1)  the title of the Debt Securities of the
series (which shall distinguish the Debt Securities of the series from all
other series of Debt Securities);

 15
 

 

(2)  any limit upon the aggregate principal amount
of the Debt Securities of the series which may be authenticated and delivered
under this Indenture (except for Debt Securities authenticated and delivered
upon registration of transfer of, or in exchange for, or in lieu of, other Debt
Securities of that series pursuant to this Article Three, the second paragraph
of Section 4.03, or Section 11.04);

(3)  the date or dates (or the manner of
calculation thereof) on which the principal of the Debt Securities of the
series is payable;

(4)  the rate or rates (or the manner of
calculation thereof) at which the Debt Securities of the series shall bear
interest, if any, the date or dates from which such interest shall accrue, the
Interest Payment Dates on which such interest shall be payable and the Regular
Record Date for the interest payable on any Interest Payment Date;

(5)  the Place of Payment;

(6)  the period or periods within which, the price
or prices at which, the currency or currency units in which, and the terms and
conditions upon which Debt Securities of the series may be redeemed, in whole
or in part, at the option of the Company;

(7)  the obligation, if any, of the Company to
redeem or purchase Debt Securities of the series pursuant to any sinking fund
or analogous provisions or at the option of a Holder thereof and the period or
periods within which, the price or prices in the currency at which, the
currency or currency units in which, and the terms and conditions upon which
Debt Securities of the series shall be redeemed or purchased, in whole or in
part, pursuant to such obligation;

(8)  the denominations in which the Debt
Securities of such series shall be issuable if other than denominations of
$1,000 and any integral multiple thereof;

(9)  the application, if any, of Section 13.02;

(10)  if other than Dollars, the currencies in
which payments of interest or principal of (and premium, if any, with respect
to) the Debt Securities of the series are to be made;

(11)  if the interest on or principal of (or
premium, if any, with respect to) the Debt Securities of the series are to be
payable, at the election of the Company or a Holder thereof or otherwise, in a
currency other than that in which such Debt Securities are payable, the period
or periods within which, and the other terms and conditions upon which, such
election may

 16

 

be made, and the time and manner of determining the
exchange rate between the currency in such Debt Securities are denominated or
stated to be payable and the currency in which such Debt Securities or any of
them are to be so payable;

(12)  whether the amount of payments of interest on
or principal of (or premium, if any, with respect to) the Debt Securities of
such series may be determined with reference to an index, formula or other
method (which index, formula or method or method may be based, without limitation,
on one or more currencies, commodities, equity indices or other indices), and,
if so, the terms and conditions upon which and the manner in which such amounts
shall be determined and paid or payable;

(13)  the extent to which any Debt Securities will
be issuable in permanent global form, the manner in which any payments on a
permanent global Debt Security will be made, and the appointment of any
Depository relating thereto;

(14)  any deletions from, modifications of or
additions to the Events of Default or covenants with respect to the Debt
Securities of such series, whether or not such Events of Default or covenants
are consistent with the Events of Default or covenants set forth herein;

(15)  if any of the Debt Securities of such series
are to be issuable upon the exercise of warrants, this shall be so established
as well as the time, manner and place for such Debt Securities to be
authenticated and delivered; and

(16)  any other terms of the series (which terms
shall not be inconsistent with the provisions of this Indenture).

All
Debt Securities of any one series shall be substantially identical except as to
denomination and except as may otherwise be provided in or pursuant to such
Board Resolution and set forth in such Officers’ Certificate or in any such
indenture supplemental hereto.

SECTION
3.02.  Denominations.  The Debt Securities of each series shall be
issuable in registered form without coupons in such denominations as shall be
specified as contemplated in Section 3.01. 
In the absence of any specification with respect to the Debt Securities
of any series, the Debt Securities of such series shall be issuable in
denominations of $1,000 and any integral multiple thereof, which may be in
Dollars or any Foreign Currency.

SECTION
3.03.  Payment
of Principal and Interest. 
The principal of, premium, if any, and interest on the Debt Securities
shall be payable at the office or agency of the Company designated for that
purpose in the Place of Payment, as provided in Section 5.02; provided, however,
that interest may be payable at the option of the Company by check mailed to

 17
 

 

the address of the
Person entitled thereto as such address shall appear on the Debt Security
Register on the Regular Record Date for such interest payment.

SECTION
3.04.  Execution
of Debt Securities.  The Debt
Securities shall be executed manually or by facsimile in the name and on behalf
of the Company by its Chairman of the Board of Directors, its President, one of
its Vice Presidents or its Treasurer and by its Secretary or one of its
Assistant Secretaries.  Only such Debt
Securities as shall bear thereon a certificate of authentication substantially
in the form hereinbefore recited, manually executed by the Trustee, shall be
entitled to the benefits of this Indenture or be valid or become obligatory for
any purpose.  Such certificate by the
Trustee upon any Debt Security executed by the Company shall be conclusive
evidence that the Debt Security so authenticated has been duly authenticated
and delivered hereunder and that the Holder is entitled to the benefits of this
Indenture.

In
case any officer of the Company who shall have executed any of the Debt
Securities shall cease to be such officer before the Debt Securities so
executed shall have been authenticated and delivered by the Trustee, or
disposed of by the Company, such Debt Securities nevertheless shall be valid
and binding and may be authenticated and delivered or disposed of as though the
Person who executed such Debt Securities had not ceased to be such officer of
the Company; and any Debt Securities may be executed on behalf of the Company
by such Persons as, at the actual date of the execution of such Debt Security,
shall be the proper officers of the Company, although at the date of such Debt
Security or of the execution of this Indenture any such Person was not such an
officer.

At any
time and from time to time after the execution and delivery of this Indenture,
the Company may deliver Debt Securities of any series, properly created in
accordance with Section 3.01 and executed by the Company, to the Trustee for
authentication; and the Trustee shall authenticate and deliver such Debt
Securities upon Company Order.  In the
event that any other Person performs the Trustee’s duties as Authenticating
Agent pursuant to a duly executed agreement, the Company shall notify the
Trustee in writing of the issuance of any Debt Securities hereunder, such
notice to be delivered in accordance with the provisions of Section 15.03 on
the date such Debt Securities are delivered by the Company for authentication
to such other Person.

Prior
to any such authentication and delivery, the Trustee shall be entitled to
receive, and shall be fully protected in relying upon, in addition to the
Opinion of Counsel to be furnished to the Trustee pursuant to Section 15.05 and
the Officers’ Certificate relating to the issuance of any series of Debt
Securities pursuant to Sections 15.05 and 3.01, Opinions of Counsel stating
that:

(1)  all instruments furnished to the Trustee
conform to the requirements of this Indenture and constitute sufficient
authority hereunder for the Trustee to authenticate and deliver such Debt
Securities;

(2)  all laws and requirements with respect to the
form and execution by the Company of the supplemental indenture, if any, have
been complied with, the execution and delivery of the supplemental indenture,
if any, will

 18
 

 

not violate the terms of this Indenture, the
supplemental indenture has been duly qualified under the Trust Indenture Act of
1939, the Company has legal power to execute and deliver any such supplemental
indenture and has taken all necessary entity action for those purposes and any
such supplemental indenture has been executed and delivered and constitutes the
legal, valid and binding obligation of the Company enforceable in accordance
with its terms (subject, as to enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting
creditors’ rights generally from time to time in effect);

(3)  the form and terms of such Debt Securities
have been established in conformity with the provisions of this Indenture;

(4)  all laws and requirements with respect to the
execution and delivery by the Company of such Debt Securities have been
complied with, the authentication and delivery of the Debt Securities by the
Trustee will not violate the terms of this Indenture, the Company has the legal
power to issue such Debt Securities and such Debt Securities, assuming due
authentication and delivery by the Trustee, constitute legal, valid and binding
obligations of the Company in accordance with their terms and are entitled to
the benefits of this Indenture, equally and ratably with all other Outstanding
Debt Securities, if any, of such series; and

(5)  such other matters as the Trustee may
reasonably request.

The
Trustee shall not be required to authenticate such Debt Securities if the issue
thereof will adversely affect the Trustee’s own rights, duties or immunities
under the Debt Securities and this Indenture or otherwise in a manner which is
not reasonably acceptable to the Trustee or such action would expose the
Trustee to personal liability to existing Holders.

Unless
otherwise provided in the form of Debt Security for any series, all Debt
Securities shall be dated the date of their authentication.

No
Debt Security shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Debt Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any Debt
Security shall be conclusive evidence, and the only evidence, that such Debt
Security has been duly authenticated and delivered hereunder.

SECTION
3.05.  Temporary
Debt Securities.  Pending the
preparation of definitive Debt Securities of any series, the Company may
execute, and upon receipt of the documents required by Sections 2.02, 3.01 and
3.04, together with a Company Order, the Trustee shall authenticate and
deliver, such temporary Debt Securities which may be printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized
denominations, substantially of the tenor of such definitive Debt Securities in
lieu of which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as

 19
 

 

the officers
executing such temporary Debt Securities may determine, as evidenced by their
execution of such temporary Debt Securities.

If
temporary Debt Securities of any series are issued, the Company will cause
definitive Debt Securities of such series to be prepared without unreasonable
delay.  After the preparation of
definitive Debt Securities of any series, the temporary Debt Securities of such
series shall be exchangeable for definitive Debt Securities of such series,
upon surrender of the temporary Debt Securities of such series at any office or
agency maintained by the Company for such purposes as provided in Section 5.02,
without charge to the Holder.  Upon
surrender for cancellation of any one or more temporary Debt Securities of any
series, the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefore a like principal amount of definitive Debt
Securities of such series having the same interest rate and Stated Maturity and
bearing interest from the same date of any authorized denominations.  Until so exchanged the temporary Debt
Securities of such series shall in all respects be entitled to the same
benefits under this Indenture as definitive Debt Securities of such series.

SECTION
3.06.  Exchange
and Registration of Transfer of Debt Securities.  Debt Securities may be exchanged for a like
aggregate principal amount of Debt Securities of such series that are of other
authorized denominations.  Debt Securities
to be exchanged shall be surrendered at any office or agency to be maintained
for such purpose by the Company, as provided in Section 5.02, and the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefore the Debt Security or Debt Securities of authorized denominations
which the Debt Security Holder making the exchange shall be entitled to
receive.  Each agent of the Company
appointed pursuant to Section 5.02 as a person authorized to register and
register transfer of Debt Securities is sometimes herein referred to as a “Debt
Security registrar.”

The
Company shall keep, at each such office or agency of the Company maintained for
such purpose, as provided in Section 5.02, a register for each series of Debt
Securities hereunder (the registers of all Debt Security registrars being
herein sometimes collectively referred to as the “Debt Security Register”) in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of Debt Securities and shall register the
transfer of Debt Securities as in this Article Three provided.  At all reasonable times, such Debt Security
Register shall be open for inspection by the Trustee and any Debt Security
registrar other than the Trustee.  Upon
due presentment for registration of transfer of any Debt Security at any such
office or agency, the Company shall execute and register and the Trustee shall
authenticate and deliver in the name of the transferee or transferees a new
Debt Security or Debt Securities of authorized denominations for an equal
aggregate principal amount.  Registration
or registration of transfer of any Debt Security by any Debt Security registrar
in the registry books maintained by such Debt Security registrar, and delivery
of such Debt Security, duly authenticated, shall be deemed to complete the
registration or registration of transfer of such Debt Security.

The
Company will at all times designate one Person (who may be the Company and who
need not be a Debt Security registrar) to act as repository of a master list of

 20
 

 

names and
addresses of Holders of the Debt Securities. 
The Trustee shall act as such repository unless and until some other
Person is, by written notice from the Company to the Trustee and each Debt
Security registrar, designated by the Company to act as such.  The Company shall cause each Debt Security
registrar to furnish to such repository, on a current basis, such information
as such repository may reasonably request as to registrations, transfers, exchanges
and other transactions effected by such registrar, as may be necessary or
advisable to enable such repository to maintain such master list on as current
a basis as is reasonably practicable.

No
Person shall at any time be appointed as or act as a Debt Security registrar
unless such Person is at such time empowered under applicable law to act as
such and duly registered to act as such under and to the extent required by
applicable law and regulations.

All
Debt Securities presented to a Debt Security registrar for registration of
transfer shall be duly endorsed by, or be accompanied by a written instrument
or instruments of transfer in form satisfactory to the Company and such Debt
Security registrar duly executed by, the registered Holder or his attorney duly
authorized in writing.

No
service charge shall be made for any exchange or registration of transfer of
Debt Securities, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
therewith.

The
Company shall not be required to issue, exchange or register a transfer of (a)
any Debt Securities of any series for a period of 15 days next preceding the
mailing of a notice of redemption of Debt Securities of such series and ending
at the close of business on the day of the mailing of a notice of redemption of
Debt Securities of such series so selected for redemption, or (b) any Debt
Securities selected, called or being called for redemption except, in the case
of any Debt Security to be redeemed in part, the portion thereof not so to be
redeemed.

All
Debt Securities issued in exchange for or upon registration of transfer of Debt
Securities shall be valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Debt Securities
surrendered for such exchange or registration of transfer.

None
of the Trustee, any agent of the Trustee, any paying agent or the Company will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests of a Global Debt
Security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.

SECTION
3.07.  Mutilated,
Destroyed, Lost or Stolen Debt Securities.  In case any temporary or definitive Debt
Security shall become mutilated or be destroyed, lost or stolen, the Company in
its discretion may execute, and upon its request the Trustee shall authenticate
and deliver, a new Debt Security, bearing a number, letter or other
distinguishing mark not contemporaneously Outstanding, in exchange and
substitution for the mutilated Debt Security, or in lieu of and in substitution
for the Debt Security so destroyed, lost or stolen.  In every case the applicant for a substituted
Debt Security shall furnish to the Company and to the

 21
 

 

Trustee such
security or indemnity as may be required by them to save each of them harmless,
and, in every case of destruction, loss or theft, the applicant shall also
furnish to the Company and to the Trustee evidence to their satisfaction of the
destruction, loss or theft, of such Debt Security and of the ownership thereof.

In the
absence of notice to the Trustee or the Company that such Debt Security has
been acquired by a bona fide purchaser, the Trustee shall authenticate any such
substituted Debt Security and deliver the same upon any Company Request.  Upon the issuance of any substituted Debt
Security, the Company may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and
any other expenses connected therewith. 
In case any Debt Security which has matured or is about to mature shall
become mutilated or be destroyed, lost or stolen, the Company may, instead of
issuing a substituted Debt Security, pay or authorize the payment of the same
(without surrender thereof except in the case of a mutilated Debt Security) if
the applicant for such payment shall furnish to the Company and to the Trustee such
security or indemnity as may be required by them to save each of them harmless
and, in case of destruction, loss or theft, evidence satisfactory to the
Company and to the Trustee of the destruction, loss or theft of such Debt
Security and of the ownership thereof.

Every
substituted Debt Security issued pursuant to the provisions of this Section
3.07 by virtue of the fact that any Debt Security is destroyed, lost or stolen
shall constitute an additional contractual obligation of the Company, whether
or not the destroyed, lost or stolen Debt Security shall be found at any time,
and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Debt Securities duly issued hereunder.  All Debt Securities shall be held and owned
upon the express condition that the foregoing provisions are exclusive with
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Debt Securities and shall preclude (to the extent permitted by law) any and all
other rights or remedies with respect to the replacement or payment of
negotiable instruments or other securities without their surrender.

SECTION
3.08.  Payment
of Interest; Interest Rights Preserved.  Interest which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date, on any Debt Security,
shall unless otherwise provided in such Debt Security be paid to the Person in
whose name the Debt Security (or one or more Predecessor Debt Securities) is
registered at the close of business on the Regular Record Date for such
interest.

Unless
otherwise stated in the form of Debt Security of a series, interest on the Debt
Securities of any series shall be computed on the basis of a 360 day year
comprised of twelve 30 day months.

Any
interest on any Debt Security which is payable, but is not punctually paid or
duly provided for, on any Interest Payment Date (herein called “Defaulted
Interest”) shall forthwith cease to be payable to the registered Holder on the
relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in Clause (1) or (2) below:

 22
 

 

(1)  The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names any such Debt Securities (or
their respective Predecessor Debt Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest,
which shall be fixed in the following manner. 
The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Debt Security and the date of
the proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory to
the Trustee for such deposit prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the Persons entitled
to such Defaulted Interest as in this clause provided.  Thereupon the Trustee shall fix a Special
Record Date for the payment of such Defaulted Interest which shall be not more
than 15 days and not less than 10 days prior to the date of the proposed payment
and not less than 10 days after the receipt by the Trustee of the notice of the
proposed payment.  The Trustee shall
promptly notify the Company of such Special Record Date and, in the name and at
the expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefore to be mailed,
first-class postage prepaid, to each Holder of such Debt Securities, at his
address as it appears in the Debt Security Register, not less than 10 days
prior to such Special Record Date. 
Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefore having been mailed as aforesaid, such Defaulted
Interest shall be paid to the Persons in whose names such Debt Securities (or
their respective Predecessor Debt Securities) are registered on such Special
Record Date and shall no longer be payable pursuant to the following Clause
(2).

(2)  The Company may make payment of any Defaulted
Interest in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Debt Securities of that series may be
listed, and upon such notice as may be required by such exchange, if , after
notice given by the Company to the Trustee of the proposed payment pursuant to
this Clause, such payment shall be deemed practicable by the Trustee.

Subject
to the foregoing provisions of this Section, each Debt Security delivered under
this Indenture upon transfer of or in exchange for or in lieu of any other Debt
Security shall carry the rights to interest accrued and unpaid, and to accrue,
which were carried by such other Debt Security.

SECTION
3.09.  Persons
Deemed Owners.  The Company,
the Trustee and any agent of the Company or the Trustee may treat the Person in
whose name any Debt

 23
 

 

Security is
registered as the owner of such Debt Security for the purpose of receiving
payment of principal of, premium, if any, and (subject to Section 3.08)
interest on, such Debt Security and for all other purposes whatsoever whether
or not such Debt Security be overdue, and neither the Company, the Trustee, nor
any agent of the Company or the Trustee shall be affected by notice to the
contrary.

SECTION
3.10.  Cancellation
of Debt Securities Paid, etc. 
All Debt Securities surrendered for the purpose of payment, redemption,
exchange or registration of transfer or delivered in satisfaction in whole or
in part of any sinking fund obligation shall, if surrendered to the Company or
any agent of the Trustee or the Company under this Indenture, be delivered to
the Trustee and promptly cancelled by it, or, if surrendered to the Trustee,
shall be promptly cancelled by it, and no Debt Securities shall be issued in
lieu thereof except as expressly permitted by any of the provisions of this
Indenture.  The Trustee shall dispose of
cancelled Debt Securities in accordance with a Company Order.

SECTION
3.11.  Currency
and Manner of Payments.  (a)
With respect to Debt Securities denominated in Dollars or a Foreign Currency,
the following payment provisions shall apply:

(1)  Except as provided in subparagraph (a)(2) or
in paragraph (c) of this Section 3.11, payment of principal of and premium, if
any, on any Debt Securities will be made at the offices established pursuant to
Section 5.02 by delivery of a check in the currency in which the Debt Security
is denominated on the payment date against surrender of such Debt Security, and
any interest on any Debt Security will be paid at such office by mailing a
check in the currency in which the Debt Securities were issued to the Person
entitled thereto at the address of such Person appearing on the Debt Security
Register.

(2)  Payment of the principal of and premiums, if
any, and interest on such Debt Security may also, subject to applicable laws
and regulations, be made at such other place or places as may be designated by
the Company by any appropriate method.

(b)                                 Not
later than the fourth Business Day after the Regular Record Date for such
Interest Payment Date, the paying agent will deliver to the Company a written
notice specifying, in the currency in which each series of the Debt Securities
are denominated, the respective aggregate amounts of principal of and premium,
if any, and interest on the Debt Securities to be made on such payment date,
specifying the amounts so payable in respect of the Debt Securities.  The failure of the paying agent to deliver
such notice shall not relieve the Company from its obligation to make all
payments with respect to any Debt Security when due.

(c)                                  If
the Foreign Currency in which any of the Debt Securities are denominated ceases
to be used both by the government of the country which issued such currency and
for the settlement of transactions by public institutions of or within the
international banking community, then with respect to each date for the payment
of Foreign Currency

 24
 

 

occurring after
the last date on which the Foreign Currency was so used (the “Conversion Date”),
the Dollar shall be the currency of payment for use on each such Interest
Payment Date.  The Dollar amount to be
paid by the Company to the Trustee and by the Trustee or any paying agent to
the Holder of such Debt Securities with respect to such payment date shall be
the Dollar Equivalent of the Foreign Currency as determined by the Currency
Determination Agent as of the Regular Record Date (the “Valuation Date”) in the
manner provided in paragraph (d).

(d)                                 The
“Dollar Equivalent of the Foreign Currency” shall be determined by the Currency
Determination Agent as of each Valuation Date and shall be obtained by
converting the specified Foreign Currency into Dollars at the Market Exchange
Rate on the Valuation Date.

(e)                                  The
“Market Exchange Rate” shall mean, for any currency, the highest firm bid
quotation for Dollars received by the Currency Determination Agent at
approximately 11:00 a.m., New York City time, on the second Business Day
preceding the applicable payment date (or, if no such rate is quoted on such
date, the last date on which such rate was quoted), from three recognized
foreign exchange dealers in the City of New York selected by the Currency
Determination Agent and approved by the Company (one of which may be the
Currency Determination Agent) for the purchase by the quoting dealer, for
settlement on such payment date, of the aggregate amount of such currency payable
on such payment in respect of all Debt Securities denominated in such currency.

All
decisions and determinations of the Currency Determination Agent regarding the
Dollar Equivalent of the Foreign Currency and the Market Exchange Rate shall be
in its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and irrevocably binding upon the Company and all
Holders of the Debt Securities.  In the
event that the Foreign Currency ceases to be used both by the government of the
country which issued such currency and for the settlement of transactions by
public institutions of or within the international banking community, the
Company, after learning thereof, will immediately give notice thereof to the
Trustee (and the Trustee will promptly thereafter give notice in the manner
provided in Section 15.03 to the Holders) specifying the Conversion Date.

The
Trustee shall be fully justified and protected in relying on and acting upon
the information so received by it from the Company or the Currency
Determination Agent and shall not otherwise have any duty or obligation to
determine such information independently.

If the
principal of (and premium, if any) and interest on any Debt Securities is
payable in a Foreign Currency and such Foreign Currency is not available for
payment due to the imposition of exchange controls or other circumstances
beyond the control of the Company, then the Company shall be entitled to
satisfy its obligations to Holders under this Indenture by making such payment
in Dollars on the basis of the Market Exchange Rate for such Foreign Currency
on the latest date for which such rate was established on or before the date on
which payment is due.  Any payment made
pursuant to this Section 3.11 in Dollars where the required payment is in a
Foreign Currency shall not constitute a default under this Indenture.

 25
 

 

ARTICLE FOUR.

Redemption of Debt Securities; Sinking Funds.

SECTION
4.01.  Applicability
of Article.  The Company may
reserve the right to redeem and pay before Stated Maturity all or any part of
the Debt Securities of any series, either by optional redemption, sinking fund
(mandatory or optional) or otherwise, by provision therefor in the form of Debt
Security for such series on such terms as are specified in such form or the
Board Resolution or Officers’ Certificate delivered pursuant to Section 3.01 or
the indenture supplemental hereto as provided in Section 3.01 with respect to
Debt Securities of such series. 
Redemption of Debt Securities of any series shall be made in accordance
with the terms of such Debt Securities and, to the extent that this Article
does not conflict with such terms, in accordance with this Article.

SECTION
4.02.  Notice
of Redemption; Selection of Debt Securities.  In case the Company shall desire to exercise
the right to redeem all, or, as the case may be, any part of a series of Debt
Securities pursuant to Section 4.01, the Company shall fix a date for
redemption and the Company, or, at the Company’s request, the Trustee in the
name of and at the expense of the Company, shall mail a notice of such
redemption at least 30 and not more than 60 days prior to the date fixed for
redemption to the Holders of Debt Securities so to be redeemed as a whole or in
part at their last addresses as the same appear on the Debt Securities
Register.  Such mailing shall be by first
class mail.  The notice if mailed in the
manner herein provided shall be conclusively presumed to have been duly given,
whether or not the Holder receives such notice. 
In any case, failure to give such notice by mail or any defect in the
notice to the Holder of any Debt Security designated for redemption as a whole
or in part shall not affect the validity of the proceedings for the redemption
of any other Debt Security.

Notice
of redemption shall be given in the name of the Company and shall specify the
date fixed for redemption, the Redemption Price at which Debt Securities of any
series are to be redeemed, the place of payment (which shall be at the offices
or agencies to be maintained by the Company pursuant to Section 5.02), that
payment of the Redemption Price will be made upon presentation and surrender of
such Debt Securities, that interest accrued to the date fixed for redemption
will be paid as specified in said notice, that on and after said date interest
thereon or on the portions thereof to be redeemed will cease to accrue, and the
Section of this Indenture pursuant to which Debt Securities will be
redeemed.  In case less than all Debt
Securities of any series are to be redeemed, the notice of redemption shall
also identify the particular Debt Securities to be redeemed as a whole or in
part and shall state that the redemption is for the sinking fund, if such is
the case.  In case any Debt Security is
to be redeemed in part only, the notice of redemption shall state the portion
of the principal amount thereof to be redeemed and shall state that on and
after the date fixed for redemption, upon surrender of such Debt Security, a
new Debt Security or Debt Securities of such series in aggregate principal
amount equal to the unredeemed portion thereof will be issued without charge to
the Holder.

If
less than all the Debt Securities of any series are to be redeemed, the Company
shall give the Trustee notice, at least 45 days (or such shorter period
acceptable to the Trustee) in advance of the date fixed for redemption, as to
the aggregate principal amount of

 26
 

 

Debt Securities to
be redeemed.  Debt Securities may be
redeemed in part in multiples equal to the minimum authorized denomination for
Debt Securities of such series or any multiple thereof.  Thereupon the Trustee shall select, in such
manner as in its sole discretion it shall deem appropriate and fair, the Debt
Securities or portions thereof to be redeemed, and shall as promptly as
practicable notify the Company of the Debt Securities or portions thereof so
selected.  For all purposes of this
Indenture, unless the context otherwise requires, all provisions relating to
the redemption of Debt Securities of any series shall relate, in the case of
any Debt Security redeemed or to be redeemed only in part, to the portion of
the principal amount of such Debt Security which has been or is to be redeemed.

On or
prior to the date fixed for redemption specified in the notice of redemption given
as provided in this Section 4.02, the Company will deposit with the Trustee or
with the paying agent an amount of money in the currency in which the Debt
Securities of such series are payable sufficient to redeem on the date fixed
for redemption all the Debt Securities so called for redemption at the
appropriate Redemption Price, together with accrued interest to the date fixed
for redemption.

The
Trustee shall not mail any notice of redemption of any series of Debt
Securities during the continuation of any default in payment of interest on any
series of Debt Securities when due or of any Event of Default, except that
where notice of redemption with respect to any series of Debt Securities shall
have been mailed prior to the occurrence of such default or Event of Default,
the Trustee shall redeem such Debt Securities provided funds are deposited with
it for such purpose.

SECTION
4.03.  Payment
of Debt Securities Called for Redemption.  If notice of redemption has been given as
herein provided, the Debt Securities or portions of Debt Securities with
respect to which such notice has been given shall become due and payable on the
date and at the place stated in such notice at the applicable Redemption Price,
together with interest accrued to the date fixed for redemption, and on and
after said date (unless the Company shall default in the payment of such Debt
Securities or portions thereof at the Redemption Price, together with interest
accrued to said date) interest on the Debt Securities or portions of Debt Securities
so called for redemption shall cease to accrue, and such Debt Securities and
portions of Debt Securities shall be deemed not to be Outstanding hereunder and
shall not be entitled to any benefit under this Indenture except to receive
payment of the Redemption Price, together with accrued interest to the date
fixed for redemption.  On presentation
and surrender of such Debt Securities at the place of payment in said notice
specified, the said Debt Securities or the specified portions thereof shall be
paid and redeemed by the Company at the applicable Redemption Price, together
with interest accrued thereon to the date fixed for redemption; provided, however, that any installments
of interest becoming due on the date fixed for redemption shall be payable to
the Holders of such Debt Securities, or one or more previous Debt Securities
evidencing all or a portion of the same debt as that evidenced by such
particular Debt Securities, registered as such on the relevant record dates
according to their terms and the provisions of Section 3.08.

 27
 

 

Upon
presentation and surrender of any Debt Security redeemed in part only, with, if
the Company or the Trustee so required, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in writing, the
Company shall execute and the Trustee shall authenticate and deliver to the
Holder thereof, at the expense of the Company, a new Debt Security or Debt Securities
of the same series having the same interest rate and Stated Maturity and
bearing interest from the same date, of any authorized denominations as
requested by such Holder, in aggregate principal amount equal to the unredeemed
portion of the Debt Security so presented and surrendered.

SECTION
4.04.  Exclusion
of Certain Securities from Eligibility for Selection for Redemption.  Debt Securities shall be excluded from
eligibility for selection for redemption if they are identified by registration
and certificate number in a written statement signed by an authorized officer
of the Company and delivered to the Trustee at least 45 days prior to the last
date on which notice of redemption may be given as being owned of record and
beneficially by, and not pledged or hypothecated by, either (a) the Company or
(b) an entity specifically identified in such written statement directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company.

SECTION
4.05.  Provisions
with Respect to any Sinking Funds. 
Unless the form or terms of any series of Debt Securities shall provide
otherwise, in lieu of making all or any part of any mandatory sinking fund
payment with respect to such series of Debt Securities in cash, the Company may
at its option (1) deliver to the Trustee for cancellation any Debt Securities
of such series theretofore acquired by the Company, or (2) receive credit for
any Debt Securities of such series (not previously so credited) acquired by the
Company and theretofore delivered to the Trustee for cancellation.  Debt Securities so delivered or credited
shall be credited at the applicable sinking fund Redemption Price with respect
to the Debt Securities of such series.

On or
before the 45th day next preceding each sinking fund Redemption Date, the
Company will deliver to the Trustee a certificate signed by the Chief Financial
Officer, any Vice President, the Treasurer or any Assistant Treasurer of the
Company specifying (i) the portion of the mandatory sinking fund payment to be
satisfied by deposit of cash in the currency in which the Debt Securities of
such series are payable, by delivery of Debt Securities theretofore purchased
or otherwise acquired by the Company (which Debt Securities shall accompany
such certificate) and by credit for Debt Securities acquired by the Company and
theretofore delivered to the Trustee for cancellation redeemed by the Company
and stating that the credit to be applied has not theretofore been so applied
or applied in lieu of retiring Funded Debt pursuant to Section 5.06 and (ii)
whether the Company intends to exercise its right, if any, to make an optional
sinking fund payment, and, if so, the amount thereof.  Such certificate shall also state that no
Event of Default has occurred and is continuing.  Such certificate shall be irrevocable and
upon its delivery the Company shall be obligated to make the payment or
payments therein referred to, if any, on or before the next succeeding sinking
fund payment date.  In case of the
failure of the Company on or before the 45th day next preceding each sinking
fund Redemption Date to deliver such certificate (or to deliver the Debt
Securities specified in this paragraph), the sinking

 28
 

 

fund payment due
on the next succeeding sinking fund payment date shall be paid entirely in cash
(in the currency described above) and shall be sufficient to redeem the
principal amount of Debt Securities as a mandatory sinking fund payment,
without the option to deliver or credit Debt Securities as provided in the first
paragraph of this Section 4.05 and without the right to make an optional
sinking fund payment as provided herein.

If the
sinking fund payment or payments (mandatory or optional) with respect to any
series of Debt Securities made in cash (in the currency described above) shall
exceed the minimum authorized denomination set forth in an Officers’
Certificate pursuant to Section 3.01 or the equivalent in the currency in which
the Debt Securities of such series are payable (or a lesser sum if the Company
shall so request), unless otherwise provided by the terms of such series of
Debt Securities, said cash shall be applied by the Trustee on the sinking fund
Redemption Date with respect to Debt Securities of such series at the
applicable sinking fund Redemption Price with respect to Debt Securities of
such series, together with accrued interest, if any, to the date fixed for
redemption, with the effect provided in Section 4.03.  The Trustee shall select, in the manner provided
in Section 4.02, for redemption on such sinking fund Redemption Date a
sufficient principal amount of Debt Securities of such series to utilize said
cash and shall thereupon cause notice of redemption of the Debt Securities of
such series for the sinking fund to be given in the manner provided in Section
4.02 (and with the effect provided in Section 4.03) for the redemption of Debt
Securities in part at the option of the Company.  Debt Securities of any series which are
identified by registration and certificate number in an Officers’ Certificate
at least 45 days prior to the sinking fund Redemption Date as being
beneficially owned by, and not pledged or hypothecated by, the Company or an
entity directly or indirectly controlling or controlled by or under direct or
indirect common control with the Company shall be excluded from Debt Securities
of such series eligible for selection for redemption.  Any sinking fund moneys not so applied or
allocated by the Trustee to the redemption of Debt Securities of such series
shall be added to the next cash sinking fund payment with respect to Debt
Securities of such series received by the Trustee and, together with such
payment, shall be applied in accordance with the provisions of this Section
4.05.  Any and all sinking fund moneys
with respect to Debt Securities of any series held by the Trustee at the
maturity of Debt Securities of such series, and not held for the payment or
redemption of particular Debt Securities of such series, shall be applied by
the Trustee, together with other moneys, if necessary, to be deposited
sufficient for the purpose, to the payment of the principal of the Debt
Securities of such series at maturity.

The
Trustee shall not convert any currency in which the Debt Securities of such
series are payable for the purposes of such sinking fund application unless a
Company Request is made, and any such conversion agreed to by the Trustee in
response to such request shall be for the account and at the expense of the
Company and shall not affect the Company’s obligation to pay the Holders in the
currency to which such Holders are entitled.

On or
before each sinking fund Redemption Date provided with respect to Debt
Securities of any series, the Company shall pay to the Trustee in cash in the
currency described above a sum equal to all accrued interest, if any, to the
date fixed for redemption on

 29
 

 

Debt Securities to
be redeemed on such sinking fund Redemption Date pursuant to this Section 4.05.

ARTICLE FIVE.

Particular Covenants of
the Company.

SECTION
5.01.  Payment
of Principal, Premium and Interest. 
The Company will duly and punctually pay or cause to be paid (in the
currency in which the Debt Securities of such series are payable) the principal
of and premium, if any, and interest on each of the Debt Securities at the
place (subject to Section 3.03), at the respective times and in the manner
provided in each series of Debt Securities and in this Indenture.

SECTION
5.02.  Offices
for Notices and Payments, etc. 
(a) So long as the Debt Securities of any series remain Outstanding, the
Company will maintain at the Place of Payment, an office or agency where the
Debt Securities may be presented for payment, an office or agency where the
Debt Securities may be presented for registration of transfer and for exchange
as in this Indenture provided, and an office or agency where notices and
demands to or upon the Company in respect of the Debt Securities or of this
Indenture may be served and shall give the Trustee written notice thereof and
any changes in the location thereof.  In
case the Company shall at any time fail to maintain any such office or agency,
or shall fail to give notice to the Trustee of any change in the location
thereof, presentation and demand may be made and notice may be served in
respect of the Debt Securities or of this Indenture at said office of the
Trustee.

(b)                                 In
addition to the office or agency maintained by the Company pursuant to Section
5.02(a), the Company may from time to time designate one or more other offices
or agencies where the Debt Securities may be presented for payment and
presented for registration of transfer and for exchange in the manner provided
in this Indenture, and the Company may from time to time rescind such
designations, as the Company may deem desirable or expedient; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain such office and agency at the Place of Payment, for the
purposes abovementioned.  The Company
will give to the Trustee prompt written notice of (i) any such designation or
rescission thereof, and (ii) the location of any such office or agency outside
the Place of Payment and of any change of location thereof.

SECTION
5.03.  Appointments
to Fill Vacancies in Trustee’s Office.  The Company, whenever necessary to avoid or
fill a vacancy in the office of Trustee, will appoint, in the manner provided
in Section 8.10, a Trustee, so that there shall at all times be a Trustee
hereunder.

SECTION
5.04.  Provisions
as to Paying Agent.  (a)
(1)  Whenever the Company shall have one
or more paying agents for any series of Debt Securities other than the Trustee,
it will, on or before each due date of the principal of (and premium, if any)
or interest on any Debt Securities of such series, deposit with a paying agent
a sum sufficient to pay such amount becoming due, such sum to be held as
provided by the Trust Indenture Act of 1939, and

 30
 

 

(unless such
paying agent is the Trustee) the Company will promptly notify the Trustee of
its action or failure so to act.

(2)  The Company will cause each paying agent other
than the Trustee to execute and deliver to the Trustee an instrument in which
such paying agent shall agree with the Trustee, subject to the provisions of
this Section, that such paying agent will: 
(i) comply with the provisions of the Trust Indenture Act of 1939
applicable to it as a paying agent and (ii) during the continuance of any
default by the Company (or any other obligor upon any series of Debt
Securities) in the making of any payment in respect of the Debt Securities of
such series, upon the written request of the Trustee, forthwith pay to the
Trustee all sums held in trust by such paying agent as such.

(b)                                 If
the Company shall act as its own paying agent, it will, on or prior to each due
date of the principal of and premium, if any, or interest on Debt Securities of
any series, set aside, segregate and hold in trust for the benefit of the
Holders of such Debt Securities a sum sufficient to pay such principal and
premium, if any, or interest so becoming due and will notify the Trustee of any
failure to take such action and of any failure by the Company (or by any other
obligor on such series of Debt Securities) to make any payment of the principal
of and premium, if any, or interest on the Debt Securities when the same shall
become due and payable.

(c)                                  Anything
in this Section 5.04 to the contrary notwithstanding, the Company may, at any
time, for the purpose of obtaining a satisfaction and discharge of this
Indenture with respect to any or all series of Debt Securities then
Outstanding, or for any other reason, pay or cause to be paid to the Trustee
all sums held in trust by the Company, or any paying agent hereunder, as
required by this Section 5.04, such sums to be held by the Trustee upon the
trusts herein contained.

(d)                                 Anything
in this Section 5.04 to the contrary notwithstanding, the agreement to hold
sums in trust provided in this Section 5.04 is subject to Section 13.04.

SECTION 5.05.  Limitation on Secured Debt.

(a)                                  So
long as the Debt Securities shall remain Outstanding, the Company will not at
any time create, assume or guarantee, and will not cause, suffer or permit a
Restricted Subsidiary to create, assume or guarantee, any Secured Debt without
making effective provision (and the Company covenants that in such case it will
make or cause to be made effective provision) whereby the Debt Securities then
Outstanding subject to applicable priorities of payment shall be secured by
such Security Interest equally and ratably with any and all other obligations
and indebtedness which shall be so secured; provided, however, that the foregoing covenants shall not be
applicable to the following:

(1)  (a) any
Security Interest on any property hereafter acquired or constructed by the
Company or a Restricted Subsidiary to secure or provide for the payment of all
or any part of the purchase price or

 31
 

 

construction cost of such property, including, but not
limited to, any indebtedness incurred by the Company or a Restricted Subsidiary
prior to, at the time of, or within 180 days after the later of the
acquisition, the completion of construction (including any improvements on an
existing property) or the commencement of commercial operation of such
property, which indebtedness is incurred for the purpose of financing all or
any part of the purchase price thereof or construction or improvements thereon;
or (b) the acquisition of property subject to any Security Interest upon
such property existing at the time of acquisition thereof, whether or not
assumed by the Company or such Restricted Subsidiary; or (c) any Security
Interest existing on the property or on the outstanding shares of capital stock
or indebtedness of a Person at the time such Person shall become a Restricted
Subsidiary; or (d) a Security Interest on property or shares of capital
stock or indebtedness of a Person existing at the time such Person is merged
into or consolidated with the Company or a Restricted Subsidiary or at the time
of a sale, lease or other disposition of the properties of a Person or firm as
an entirety or substantially as an entirety to the Company or a Restricted
Subsidiary, provided, however,
that no such Security Interest shall extend to any other Principal Property of
the Company or such Restricted Subsidiary prior to such acquisition or to any
other Principal Property thereafter acquired other than additions to such
acquired property;

(2)  Security
Interests in property of the Company or a Restricted Subsidiary in favor of the
United States of America or any State thereof, or any department, agency or
instrumentality or political subdivision of the United States of America or any
State thereof, or in favor of any other country, or any department, agency or
instrumentality or political subdivision thereof (including, without
limitation, Security Interests to secure indebtedness of the pollution control
or industrial revenue bond type), in order to permit the Company or a
Restricted Subsidiary to perform any contract or subcontract made by it with or
at the request of any of the foregoing, or to secure partial, progress, advance
or other payments pursuant to any contract or statute or to secure any
indebtedness incurred for the purpose of financing all or any part of the
purchase price or the cost of constructing or improving the property subject to
such Security Interests;

(3)  Any Security Interest on any property or
assets of any Restricted Subsidiary to secure indebtedness owing by it to the
Company or to a Restricted Subsidiary;

(4)  Any Security Interest on any property or
assets of the Company to secure indebtedness owing by it to any Restricted
Subsidiary;

 32

 

(5)  Mechanics’, materialmen’s, carriers’ or other
like liens arising in the ordinary course of business (including construction
of facilities) in respect of obligations which are not due or which are being
contested in good faith;

(6)  Any Security Interest arising by reason of
deposits with, or the giving of any form of security to, any governmental
agency or any body created or approved by law or governmental regulations,
which is required by law or governmental regulation as a condition to the
transaction of any business, or the exercise of any privilege, franchise or
license and any Security Interest to secure public or statutory obligations;

(7)  Security Interests for taxes, assessments or
governmental charges or levies not yet delinquent, or the Security Interests
for taxes, assessments or government charges or levies already delinquent but
the validity of which is being contested in good faith;

(8)  Security Interests (including judgment liens)
arising in connection with legal proceedings so long as such proceedings are
being contested in good faith and, in the case of judgment liens, execution
thereon is stayed;

(9)  Landlords’ liens on fixtures located on
premises leased by the Company or a Restricted Subsidiary in the ordinary
course of business;

(10)  Security Interests in connection with a
Permitted Receivables Financing; or

(11)  Any extension, renewal or replacement (or
successive extensions, renewals or replacements) in whole or in part of any
Security Interest permitted by subsection (a) of this Section 5.05.

(b)           Notwithstanding the provisions of
subsection (a) of this Section 5.05, the Company and any one or more
Restricted Subsidiaries may without securing the Debt Securities issue, assume
or guarantee Secured Debt which would otherwise be subject to the foregoing
restrictions in an aggregate amount which, together with all other Secured Debt
of the Company and its Restricted Subsidiaries which would otherwise be subject
to the foregoing restrictions (not including Secured Debt permitted to be
secured under subsection (a) above) and the aggregate value of the Sale
and Leaseback Transactions (as defined in Section 5.06) in existence at
such time (not including Sale and Leaseback Transactions the proceeds of which
have been or will be applied in accordance with Section 5.06(b)), does not
exceed 10% of Consolidated Shareholders’ Equity, determined as of a date not
more than 90 days prior thereto.

(c)           In the event that the Company shall
hereafter secure the Debt Securities of each series equally and ratably with
any other obligation or indebtedness pursuant to the provisions of this
Section 5.05, the Trustee is hereby authorized to enter into an indenture

 33
 

 

or agreement
supplemental hereto and to take such action, if any, as it may deem advisable
to enable it to enforce effectively the rights of the Holders of the Debt
Securities so secured, equally and ratably with such other obligation or
indebtedness.

SECTION
5.06.  Sale
and Leaseback Transactions. 
So long as the Debt Securities shall remain Outstanding, the Company
will not, and will not permit any Restricted Subsidiary to, sell or transfer
(except to the Company or one or more Restricted Subsidiaries, or both) any
Principal Property owned by it and in full operation for more than 180 days
with the intention of taking back a lease on such property (except a lease for
a term of no more than three years entered into with the intent that the use by
the Company or such Restricted Subsidiary of such property will be discontinued
on or before the expiration of such term) (herein referred to as a “Sale and
Leaseback Transaction”) unless either (a) the Company or such Restricted
Subsidiary would be entitled, pursuant to the provisions of Section 5.05
hereof, to incur Secured Debt equal in amount to the amount realized or to be
realized upon such sale or transfer secured by a Security Interest on the
property to be leased without equally and ratably securing the Debt Securities,
or (b) the Company or a Restricted Subsidiary shall apply an amount equal
to the value of the property so leased to the retirement (other than any
mandatory retirement), within 120 days of the effective date of any such
arrangement, of Funded Debt as shown on the most recent consolidated balance
sheet of the Company and which, in the case of such Funded Debt of the Company,
is not subordinate and junior in right of payment to the prior payment of the
Debt Securities; provided, however,
that in lieu of applying all or any part of such amount to such retirement, the
Company may at its option (x) deliver to the Trustee Debt Securities
theretofore purchased or otherwise acquired by the Company, or (y) receive
credit for the Debt Securities theretofore redeemed at its option.  If the Company shall so deliver the Debt
Securities to the Trustee (or receive credit for Debt Securities so delivered),
the amount which the Company shall be required to apply to the retirement of
indebtedness pursuant to this Section 5.06 shall be reduced by an amount
equal to the aggregate principal amount of such Debt Securities.

The
term “value” shall mean, with respect to a Sale and Leaseback Transaction, as
of any particular time, the amount equal to the greater of (i) the
Capitalized Rent with respect thereto, or (ii) the fair value of such
property at the time of entering into such Sale and Leaseback Transaction as
determined by the Board of Directors.

SECTION
5.07.  Restrictions
on Transfer of Principal Property to Unrestricted Subsidiaries.  So long as the Debt Securities of any series
remain Outstanding, the Company will not itself, and will not cause, suffer or
permit any Restricted Subsidiary to, transfer (whether by merger, consolidation
or otherwise) any Principal Property to any Unrestricted Subsidiary, unless it
shall apply, within one year after the effective date of such transaction, or
shall have committed within one year after such effective date to apply, an
amount equal to the fair value of such Principal Property at the time of such
transfer, as determined by the Board of Directors, to (a) the acquisition,
construction, development or improvement of properties or facilities which are,
or, upon, such acquisition, construction, development or improvement will be, a
Principal Property or Principal Properties or a part thereof, (b) the
redemption of Debt Securities of any series in accordance with the provisions
of Article Four and at the Redemption Price referred to in Section 4.02
applicable at the time of

 34
 

 

such redemption or
(c) the repayment of Funded Debt of the Company or of any Restricted
Subsidiary (other than any Funded Debt owed to any Restricted Subsidiary), or
in part to such acquisition, construction, development or improvement and in
part to such redemption and/or repayment; provided that,
in lieu of applying an amount equivalent to all or any part of such fair value
to such redemption, the Company may, within one year after such transfer,
deliver to the Trustee Debt Securities (other than Debt Securities made the
basis of reduction in a mandatory sinking fund payment pursuant to
Section 4.05) for cancellation and thereby reduce the amount to be applied
to the redemption of the Debt Securities of that series pursuant to
clause (b) above by an amount equivalent to the aggregate principal amount
of the Debt Securities so delivered. 
Redemption of Debt Securities pursuant to this Section 5.07 shall
not be used as credits against mandatory sinking fund payments.

SECTION
5.08.  Certificate
to Trustee.  So long as the
Debt Securities of any series remain Outstanding, the Company will deliver to
the Trustee on or before 120 days after the end of each fiscal year an Officers’
Certificate stating that in the course of the performance by the signers of
their duties as officers of the Company, they would normally have knowledge of
any default by the Company in the performance or fulfillment or observance of
any covenants or agreements contained herein during the preceding fiscal year,
stating whether or not they have knowledge of any such default and, if so,
specifying each such default of which the signers have knowledge and the nature
thereof.  The Officers’ Certificate need
not comply with Section 15.05.

SECTION
5.09.  Waivers
of Covenants.  Anything in
this Indenture to the contrary notwithstanding, the Company may fail or omit,
in respect of any series of Debt Securities, and in any particular instance, to
comply with a covenant, agreement or condition contained in Sections 5.02 and
5.04 (other than in 5.04(a)(1) and (2)) to 5.08, inclusive, if the Company
shall have obtained and filed with the Trustee before or after the time for
such compliance the consent in writing of the Holders of more than 50% in
aggregate principal amount of the Debt Securities of the series affected by
such waiver at the time Outstanding, either waiving such compliance in such instance
or generally waiving compliance with such covenant or condition, but no such
waiver shall extend to or affect any obligation not expressly waived nor impair
any right consequent thereon and, until such waiver shall become effective, the
obligations of the Company and the duties of the Trustee in respect of any such
covenant or condition shall remain in full force and effect.

ARTICLE SIX.

Holders’ Lists and
Reports by the Company

and the Trustee.

SECTION
6.01.  Holders’
Lists.  The Company covenants
and agrees that it will furnish or cause to be furnished to the Trustee, not
more than 15 days after each Regular Record Date with respect to the Debt
Securities of any series, and at such other times as the Trustee may request in
writing, within 30 days after receipt by the Company of any such request, a
list in such form as the Trustee may reasonably require of the names and
addresses of the

 35
 

 

Holders of Debt
Securities of such series as of a date not more than 15 days prior to the time
such information is furnished; provided,
however, that no such list with respect to any particular series of
Debt Securities need be furnished at any such time if the Trustee is in
possession thereof by reason of its acting as the Debt Security registrar for
such series designated under Section 3.06 or otherwise.

SECTION
6.02.  Preservation
and Disclosure of Lists.  (a)
The Trustee shall preserve, in as current a form as is reasonably practicable,
all information as to the names and addresses of the Holders of Debt Securities
contained in the most recent list furnished to it as provided in Section 6.01
or received by the Trustee in the capacity of the Debt Security registrar (if
so acting) under Section 3.06.  The
Trustee may destroy any list furnished to it as provided in Section 6.01 upon
receipt of a new list so furnished.

(b)           The rights of Holders to communicate
with other Holders with respect to their rights under this Indenture or under
the Debt Securities of any series or of all Debt Securities, and the
corresponding rights and duties of the Trustee, shall be as provided by the
Trust Indenture Act of 1939.

(c)           Every Holder of Debt Securities, by
receiving and holding the same, agrees with the Company and the Trustee that
neither the Company nor the Trustee nor any agent of either of them shall be
held accountable by reason of any disclosure of information as to names and
addresses of Holders made pursuant to the Trust Indenture Act of 1939.

SECTION
6.03.  Reports
by the Company.  The Company
agrees to file with the Trustee and the Commission, and transmit to Holders,
such information, documents and other reports, and such summaries thereof, as
may be required pursuant to the Trust Indenture Act of 1939 at the times and in
the manner provided pursuant to such Act; provided
that any such information, documents or reports required to be filed with the
Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, shall be filed with the Trustee within 15 days after the same
is so required to be filed with the Commission.

SECTION
6.04.  Reports
by the Trustee.  (a)  The Trustee shall transmit to Holders such
reports concerning the Trustee and its actions under this Indenture as may be
required pursuant to the Trust Indenture Act of 1939 at the times and in the
manner provided pursuant thereto.  The
interval between transmissions of reports to be transmitted at intervals shall
be twelve months or such shorter time required by the Trust Indenture Act of
1939.  If the Trust Indenture Act of 1939
does not specify the date on which a report is due, the such report shall be
due on May 15 of each year following the first issuance of Debt Securities.

(b)           A copy of each such report shall, at
the time of such transmission to Holders, be filed by the Trustee with each
stock exchange upon which Debt Securities of any series are listed, with the
Commission and with the Company.  The
Company will notify the Trustee when the Debt Securities of any series are
listed on any stock exchange.

 36
 

 

ARTICLE SEVEN.

Remedies of the Trustee
and Holders

on Event of Default.

SECTION
7.01.  Events
of Default.  “Event of Default”,
with respect to any series of Debt Securities, wherever used herein, means any
one of the following events (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body), unless such event is
either inapplicable to a particular series or it is specifically deleted or
modified in the supplemental indenture under which such series of Debt
Securities is issued or in the form of Debt Security for such series:

(a)     default in the payment of any installment
of interest upon any Debt Security of such series as and when the same shall
become due and payable, and continuance of such default for a period of 30
days; or

(b)     default in the payment of the principal of
and premium, if any, on any Debt Security of such series as and when the same
shall become due and payable either at maturity, upon redemption, by
declaration of acceleration or otherwise; or

(c)     default in the payment or satisfaction of
any sinking fund payment or analogous obligation, if any, with respect to the
Debt Securities of such series as and when the same shall become due and
payable by the terms of the Debt Securities of such series; or

(d)     failure on the part of the Company duly to
observe or perform any of the covenants, warranties or agreements on the part
of the Company in respect of the Debt Securities of such series in this
Indenture (other than a covenant, warranty or agreement a default in whose
performance or whose breach is elsewhere in this Section specifically dealt
with) continued for a period of 60 days after the date on which written notice
of such failure, specifying such failure and requiring the same to be remedied,
shall have been given to the Company by the Trustee, by registered mail, or to
the Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Outstanding Debt Securities of such series; or

(e)     an event of default with respect to any
other series of Debt Securities issued or hereafter issued pursuant to this
Indenture or if default shall be made (and shall not have been cured or waived)
in the payment of principal of or interest on any other obligation for borrowed
money of the Company beyond any period of grace with respect thereto if (i) the
aggregate principal amount (or, in the case of Original Issue Discount Debt
Securities, such portion of the principal amount as may be specified

 37
 

 

in the terms of such indebtedness as due and payable
upon acceleration) of any such obligation in respect of which principal or
interest is and remains in default is in excess of the greater of $50,000,000
or 5% of consolidated total debt and (ii) the default in such payment is not
being contested by the Company in good faith and by appropriate proceedings; provided, however, that subject to the
provisions of Section 7.08 and Section 8.01 the Trustee shall not be charged
with knowledge of any such default unless written notice thereof shall have
been given to the Trustee by the Company, by the holders or an agent of the
holders of any such indebtedness, by the trustee then acting under any
indenture or other instrument under which such default shall have occurred, or
by the Holders of not less than 25% in aggregate principal amount of such
series of Debt Securities at the time Outstanding; or

(f)      a decree or order by a court having
jurisdiction in the premises shall have been entered adjudging the Company a
bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization of the Company under the Federal bankruptcy laws or any other
similar applicable Federal or state law, and such decree or order shall have
continued undischarged and unstayed for a period of 60 days; or a decree or
order of a court having jurisdiction in the premises for the appointment of a
receiver or liquidator or trustee or assignee or other similar official in
bankruptcy or insolvency of the Company or of all or substantially all of its
property, or for the winding up or liquidation of its affairs, shall have been
entered, and such decree or order shall have continued undischarged and
unstayed for a period of 60 days; or

(g)     the Company shall institute proceedings to
be adjudicated a voluntary bankrupt, or shall consent to the filing of a
bankruptcy proceeding against it, or shall file a petition or answer or consent
seeking an arrangement or a reorganization under the Federal bankruptcy laws or
any other similar applicable Federal or state law, or shall consent to the
filing of any such petition, or shall consent to the appointment of a receiver
or liquidator or trustee or assignee or other similar official in bankruptcy or
insolvency of it or of all or substantially all of its property, or shall make
an assignment for the benefit of creditors, or shall admit in writing its
inability to pay its debts generally as they become due; or

(h)     any other Event of Default provided in the
supplemental indenture under which such series of Debt Securities is issued or
in the form of Debt Security for such series.

In the case of each and every Event of Default, so
long as such Event of Default with respect to any series of Debt Securities for
which there are Debt Securities Outstanding occurs and is continuing (other
than an Event of Default specified in clause (f) or (g) of Section 7.01)
and shall

 38
 

 

not have been remedied or waived to the extent permitted
by the terms of this Indenture, unless the principal of all of the Debt
Securities of such series shall have already become due and payable, either the
Trustee or the Holders of not less than 25% in aggregate principal amount of
the Outstanding Debt Securities of such series, by notice in writing to the
Company (and to the Trustee if given by Holders), may declare the principal
(or, if the Debt Securities of that series are Original Issue Discount Debt
Securities, such portion of the principal amount as may be specified in the
terms of that series) of all the Debt Securities of such series and the
interest accrued thereon to be due and payable immediately, and upon any such
declaration the same shall become and shall be immediately due and payable, anything
in this Indenture or in the Debt Securities of such series contained to the
contrary notwithstanding.  If an Event of
Default specified in clause (f) or (g) of Section 7.01 occurs and is
continuing, then the principal amount of (or, if the Debt Securities of that
series are Original Issue Discount Debt Securities, such portion of the
principal amount as may be specified in the terms thereof as due and payable
upon acceleration) and any accrued and unpaid interest on that series shall
immediately become due and payable without any declaration or other act on the
part of the Trustee or any Holder.  This
provision, however, is subject to the condition that if, at any time after the
principal of the Debt Securities of such series shall have been so declared due
and payable, and before any judgment or decree for the payment of the moneys
due shall have been obtained or entered as hereinafter provided, the Company
shall pay or shall deposit with the Trustee a sum sufficient to pay in the
currency in which the Debt Securities of such series are payable all matured
installments of interest upon all of the Debt Securities and the principal of
and premium, if any, on any and all Debt Securities of such series which shall
have become due otherwise than by such declaration (with interest on overdue
installments of interest to the extent that payment of such interest is
enforceable under applicable law and on such principal and premium, if any, at
the rate borne by the Debt Securities of such series or as otherwise provided
in the form of Debt Security for such series, to the date of such payment or
deposit) and the expenses of the Trustee (subject to Section 8.06), and any and
all defaults under this Indenture, other than the nonpayment of principal of
and accrued interest on Debt Securities of such series which shall have become
due by such declaration, shall have been cured or shall have been waived in
accordance with Section 7.07 or provision deemed by the Trustee to be adequate
shall have been made therefor—then and in every such case the Holders of at
least a majority in aggregate principal amount of the Debt Securities of such
series then Outstanding, by written notice to the Company and to the Trustee,
may rescind and annul such declaration and its consequences; but no such
rescission and annulment shall extend to or shall affect any subsequent
default, or shall impair any right consequent thereon.

In
case the Trustee or any Holders shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such rescission and annulment or for any other reason or shall have
been determined adversely to the Trustee, then and in every such case the
Company, the Trustee and the Holders shall be restored respectively to their
several positions and rights hereunder, and all rights, remedies and powers of
the Company, the Trustee and the Holders shall continue as though no such
proceeding had been taken.

 39
 

 

SECTION
7.02.  Payment
of Debt Securities Upon Default; Suit Therefor.  The Company covenants that (a) in case
default shall be made in the payment of any installment of interest upon any
Debt Security of any series as and when the same shall become due and payable,
and such default shall have continued for a period of 30 days, or (b) in case
default shall be made in the payment of the principal of and premium, if any,
on any Debt Security of any series as and when the same shall have become due
and payable, whether at maturity of the Debt Security or upon redemption or by
declaration or otherwise or (c) in case default shall be made in the making or
satisfaction of any sinking fund payment or analogous obligation with respect
to the Debt Securities of any series when the same becomes due by the terms of
the Debt Securities of any series—then, upon demand of the Trustee, the Company
will pay to the Trustee, for the benefit of the Holders (or Holders of Debt
Securities of any such series in the case of clause (c) above), the whole
amount that then shall have become due and payable on any such Debt Security
(or Debt Securities of any such series in the case of clause (c) above) for
principal and premium, if any, or interest, or both, as the case may be, with
interest upon the overdue principal and premium, if any, and (to the extent
that payment of such interest is enforceable under applicable law) upon the
overdue installments of interest at the rate borne by the Debt Securities of
such series or as otherwise provided in the form of Debt Security of such
series; and, in addition thereto, such further amount as shall be sufficient to
cover the costs and expenses of collection, including a reasonable compensation
to the Trustee, its agents, attorneys and counsel, and any expenses or
liabilities incurred and advances made by the Trustee, except compensation or
advances arising, or expenses or liabilities incurred, as a result of the
Trustee’s negligence or bad faith.

Until
such demand is made by the Trustee, the Company may pay the principal of and
premium, if any, and interest on the Debt Securities of any series to the
Persons entitled thereto, whether or not the principal of and premium, if any,
and interest on the Debt Securities of such series are overdue.

In
case the Company shall fail forthwith to pay such amounts upon such demand, the
Trustee, in its own name and as trustee of an express trust, shall be entitled
and empowered to institute any actions or proceedings at law or in equity for
the collection of the sums so due and unpaid, and may prosecute any such action
or proceeding to judgment or final decree, and may enforce any such judgment or
final decree against the Company or any other obligor on such Debt Securities
and collect, in the manner provided by law out of the property of the Company
or any other obligor on such Debt Securities wherever situated, the moneys
adjudged or decreed to be payable.  If
any Event of Default with respect to any series of Debt Securities occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Debt Securities of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.

In
case there shall be pending proceedings for the bankruptcy or for the
reorganization of the Company or any other obligor on the Debt Securities of
any series under

 40
 

 

the Federal
bankruptcy laws or any other applicable law, or in case a receiver or trustee
shall have been appointed for the property of the Company or such other
obligor, or in the case of any other similar judicial proceedings relative to
the Company or other obligor upon the Debt Securities of any series, or to the
creditors or property of the Company or such other obligor, the Trustee,
irrespective of whether the principal of the Debt Securities of such series
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand
pursuant to the provisions of this Section 7.02, shall be entitled and
empowered by intervention in such proceedings or otherwise, (a) to file and
prove a claim or claims for the whole amount of principal and interest owing
and unpaid in respect of the Debt Securities of such series, and, in case of
any judicial proceedings, to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee and
of the Holders of the Debt Securities of such series allowed in such judicial
proceedings relative to the Company or any other obligor on such Debt
Securities, its or their creditors, or its or their property, (b) unless
prohibited by applicable law and regulations, to vote on behalf of the Holders
of any Debt Securities of any series in any election of a trustee or a standby
trustee in arrangement, reorganization, liquidation or other bankruptcy or
insolvency proceedings or person performing similar functions in comparable
proceedings, and (c) to collect and receive any moneys or other property
payable or deliverable on any such claims, and to distribute the same after the
deduction of its charges and expenses; and any receiver, assignee or trustee in
bankruptcy or reorganization is hereby authorized by each of the Holders of the
Debt Securities of such series to make such payments to the Trustee, and, in
the event that the Trustee shall consent to the making of such payments
directly to such Holders, to pay to the Trustee such amount as shall be
sufficient to cover reasonable compensation to the Trustee, its agents,
attorneys and counsel, and all other expenses and liabilities incurred and
advances made by the Trustee except compensation or advances arising, or
expenses or liabilities incurred, as a result of the Trustee’s negligence or
bad faith.

Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept, or adopt on behalf of any Holder any plan or
reorganization, arrangement, adjustment or composition affecting the Debt
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Holder (except, as aforesaid, for the
election of a trustee in bankruptcy or other Person performing similar
functions) in any such proceeding.

All
rights of action and of asserting claims under this Indenture, or under any of
the Debt Securities of any series, may be enforced by the Trustee without the
possession of any of such Debt Securities, or the production thereof on any
trial or other proceeding relative thereto, and any such suit or proceeding
instituted by the Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment shall be for the ratable benefit of
the Holders of the Debt Securities of such series in respect of which such
judgment has been recovered.

In any
proceedings brought by the Trustee (and also any proceedings involving the
interpretation of any provision of this Indenture to which the Trustee shall be
a party), the Trustee shall be held to represent all the Holders of the Debt
Securities in respect to

 41
 

 

which such action
was taken, and it shall not be necessary to make any Holders of such Debt
Securities parties to any such proceedings.

SECTION
7.03.  Application
of Moneys Collected by Trustee. 
Any moneys collected by the Trustee pursuant to Section 7.02 shall be
applied in the order following, at the date or dates fixed by the Trustee for
the distribution of such moneys, upon presentation of the Debt Securities of
such series, and stamping thereon the payment, if only partially paid, and upon
surrender thereof, if fully paid:

FIRST: To the payment of
costs and expenses of collection and reasonable compensation to the Trustee,
its agents, attorneys and counsel, and of all other expenses and liabilities
incurred, and all advances made, by the Trustee except compensation or advances
arising, or expenses or liabilities incurred, as a result of its negligence or
bad faith, and any other amounts owing the Trustee under Section 8.06;

SECOND: In case the
principal of the Debt Securities of such series shall not have become due and
be unpaid, to the payment of interest on such Debt Securities, in the order of
the maturity of the installments of such interest, with interest (to the extent
that such interest has been collected by the Trustee) upon the overdue
installments of interest at the rate borne by such Debt Securities, such
payments to be made ratable to the Persons entitled thereto;

THIRD: In case the
principal of the Debt Securities of such series shall have become due, by
declaration or otherwise, to the payment of the whole amount then owing and
unpaid upon such Debt Securities for principal and premium, if any, and
interest, with interest on the overdue principal and premium, if any, and (to
the extent that such interest has been collected by the Trustee) upon overdue
installments of interest at the rate borne by such Debt Securities; and in case
such moneys shall be insufficient to pay in full the whole amounts so due and
unpaid upon such Debt Securities, then, to the payment of such principal and
premium, if any, and interest without preference or priority of principal and
premium, if any, over interest, or of interest over principal and premium, if
any, or of any installment of interest over any other installment of interest,
or of any Debt Security of such series over any other such Debt Security,
ratably to the aggregate of such principal and premium, if any, and accrued and
unpaid interest;

FOURTH: To the payment of
any surplus then remaining to the Company, its successors or assigns, or to
whomsoever may be lawfully entitled to receive the same.

SECTION
7.04. Proceedings by Holders.  No Holder of any Debt Security of any series
shall have any right by virtue of or by availing of any provision of this
Indenture to

 42
 

 

institute any
suit, action or proceeding in equity or at law or in bankruptcy or otherwise
upon or under or with respect to this Indenture or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless such Holder
previously shall have given to the Trustee written notice of default and of the
continuance thereof, as hereinbefore provided, and unless also the Holders of
not less than 25% in aggregate principal amount of the Debt Securities of such
series then Outstanding shall have made written request upon the Trustee to
institute such action, suit or proceeding in its own name as Trustee hereunder
and shall have offered to the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred therein or
thereby, and the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity, shall have neglected or refused to institute any such
action, suit or proceeding (and no direction inconsistent with such written
request shall have been given to the Trustee pursuant to Section 7.07), it being
understood and intended, and being expressly covenanted by the taker and Holder
of every Debt Security of every series with every other taker and Holder and
the Trustee, that no one or more Holders of Debt Securities shall have any
right in any manner whatever by virtue of or by availing of any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holder
of such Debt Securities, or to obtain or seek to obtain priority over or
preference to any other such Holder, or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of all Holders of Debt Securities.

SECTION
7.05.  Proceedings
by Trustee.  In case of an
Event of Default hereunder the Trustee may in its discretion proceed to protect
and enforce the rights vested in it by this Indenture by such appropriate
judicial proceedings as the Trustee shall deem most effectual to protect and
enforce any of such rights, either by suit in equity or by action at law or by
proceeding in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of the exercise
of any power granted in this Indenture, or to enforce any other legal or
equitable right vested in the Trustee by this Indenture or by law.

SECTION
7.06.  Remedies
Cumulative and Continuing. 
All powers and remedies given by this Article Seven to the Trustee or to
the Holders shall, to the extent permitted by law, be deemed cumulative and not
exclusive of any thereof or of any other powers and remedies available to the
Trustee or the Holders, by judicial proceedings or otherwise, to enforce the
performance or observance of the covenants and agreements contained in this
Indenture, and no delay or omission of the Trustee or of any Holder to exercise
any right or power accruing upon any default occurring and continuing as
aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or an acquiescence therein; and, subject to the
provisions of Section 7.04, every power and remedy given by this Article Seven
or by law to the Trustee or to the Holders may be exercised from time to time,
and as often as shall be deemed expedient, by the Trustee or by the Holders.

SECTION
7.07.  Direction
of Proceedings and Waiver of Defaults by Majority of Holders.  The Holders of a majority in aggregate
principal amount of the Outstanding Debt Securities of any series shall have
the right to direct the time, method, and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any

 43
 

 

trust or power
conferred on the Trustee with respect to the Debt Securities by this Indenture;
provided, however, that (subject
to the provisions of Section 8.01) the Trustee shall have the right to decline
to follow any such direction if the Trustee shall determine upon advice of
counsel that the action or proceeding so directed may not lawfully be taken or
would be materially and unjustly prejudicial to the rights of Holders not
joining in such direction or if the Trustee in good faith by its board of
directors or trustees, executive committee, or a trust committee of directors
or trustees and/or Responsible Officers shall determine that the action or
proceeding so directed would involve the Trustee in personal liability or if
the Trustee in good faith shall so determine that the actions or forebearances
specified in or pursuant to such direction would be unduly prejudicial to the
interests of Holders of the Debt Securities of all series not joining in the
giving of said direction, it being understood that (subject to Section 8.01)
the Trustee shall have no duty to ascertain whether or not such actions or
forebearances are duly prejudicial to such Holders.  The Trustee may take any other action deemed
proper by the Trustee not inconsistent with such direction.  The Holders of a majority in aggregate
principal amount of the Outstanding Debt Securities of any series may on behalf
of the Holders of all the Debt Securities of such series waive any past default
or Event of Default hereunder and its consequences except a default in the
payment of principal of or premium, if any, or interest on such Debt
Securities, or a default in the making of any sinking fund payment with respect
to such Debt Securities.  Upon any such
waiver the Company, the Trustee and the Holders of such Debt Securities shall
be restored to their former positions and rights hereunder, respectively; but
no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon. 
Whenever any default or Event of Default shall have been waived as
permitted by this Section 7.07, said default or Event of Default shall for all
purposes of the Debt Securities and this Indenture be deemed to have been cured
and to be not continuing.

This
Section 7.07 shall be in lieu of Sections 316(a)(1)(A) and 316(a)(1)(B) of the
Trust Indenture Act of 1939 and such Sections 316(a)(1)(A) and Section
316(a)(1)(B) are hereby expressly excluded from this Indenture, as permitted by
the Trust Indenture Act of 1939.

SECTION
7.08.  Notice
of Defaults.  The Trustee
shall give the Holders notice of any default hereunder as and to the extent
provided by the Trust Indenture Act of 1939; provided,
however, that in the case of any
default of the character specified in Section 7.01(d), no such notice to
Holders shall be given until at least 60 days after the occurrence
thereof.  For the purpose of this
Section, the term “default” means any event which is, or after notice or lapse
of time or both would become, an Event of Default.

SECTION
7.09.  Undertaking
to Pay Costs.  In any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken, suffered or omitted by it as Trustee,
a court may require any party litigant in such suit to file an undertaking to
pay the costs of such suit, and may assess costs against any such party
litigant, in the manner and to the extent provided in the Trust Indenture Act
of 1939; provided that neither
this Section nor the Trust Indenture Act of 1939 shall be deemed to authorize
any court to require such an undertaking or to make such an assessment in any
suit

 44
 

 

instituted by the
Company, and any provision of the Trust Indenture Act of 1939 to such effect is
hereby expressly excluded from this Indenture, as permitted by the Trust
Indenture Act of 1939.

SECTION
7.10.  Unconditional
Right of Holders to Receive Principal, Premium and Interest.  Notwithstanding any other provision in this
Indenture, the Holder of any Debt Security shall have the rights, which are
absolute and unconditional, to receive payment of the principal of, premium, if
any, and (subject to Section 3.08) interest on such Debt Security on the
respective Stated Maturities expressed in such Debt Security (or in the case of
redemption or repayment, on the date for redemption or repayment, as the case
may be) and to institute suit for the enforcement of any such payment, and such
rights shall not be impaired without the consent of such Holder.

ARTICLE EIGHT.

Concerning the Trustee.

SECTION
8.01.  Duties
and Responsibilities of Trustee. 
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act of 1939. 
Notwithstanding the foregoing, no implied covenants or obligations,
except as provided by the Trust Indenture Act of 1939, shall be read into this
Indenture against the Trustee, and no provision of this Indenture shall require
the Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it. 
Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section.

SECTION
8.02.  Reliance
on Documents, Opinions, etc. 
Subject to the provisions of Section 8.01,

(a)  the Trustee may rely and shall be protected
in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order, bond,
debenture, note or other paper document believed by it to be genuine and to
have been signed or presented by the proper party or parties;

(b)  any request, direction, order or demand of
the Company mentioned herein shall be sufficiently evidenced by an Officers’
Certificate (unless otherwise evidence in respect thereof be herein
specifically prescribed); and any resolution of the Board of Directors may be
evidenced to the Trustee by a copy thereof certified by the Secretary or an
Assistant Secretary of the Company;

 45
 

 

(c)  the Trustee may consult with counsel and the
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or omitted by it
hereunder in good faith and in accordance with such advice or Opinion of
Counsel;

(d)  the Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Indenture at the
request, order or direction of any of the Holders, pursuant to the provisions
of this Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby;

(e)  the Trustee shall not be liable for any
action taken or omitted by it in good faith and believed by it to be authorized
or within the discretion or rights or powers conferred upon it by this
Indenture;

(f)  prior to the occurrence of an Event of
Default with respect to the Debt Securities of any series and after the curing
or waiving of all Events of Default with respect to such Debt Securities, the
Trustee shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, approval, bond, debenture, note, or other
paper or document, unless requested in writing to do so by the Holders of not
less than a majority in principal amount of such Debt Securities then Outstanding;
provided, however, that the
reasonable expenses of every such investigation shall be paid by the Company
or, if paid by the Trustee, shall be repaid by the Company upon demand; and provided, further, that if the payment
within a reasonable time to the Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation is, in the
opinion of the Trustee, not reasonably assured to the Trustee by the security
afforded to it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such expenses or liabilities as a condition to so
proceeding;

(g)  the Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through agents or attorneys, and the Trustee shall not be liable or responsible
for any misconduct, bad faith or negligence on the part of any agent or
attorney appointed with due care by it hereunder; and

(h)  the Trustee shall not be deemed to have
knowledge of any default or Event of Default unless a Responsible Officer of
the Trustee has actual knowledge thereof or Holders of greater than 50% of the
Outstanding

 46
 

 

principal amount of Debt Securities of any series
shall have notified the Trustee thereof.

SECTION
8.03.  No
Responsibility for Recitals, etc. 
The recitals contained herein and in the Debt Securities (except in the
Trustee’s certificate of authentication) shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for the correctness of
the same.  The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Debt Securities of any series.  The
Trustee represents that it is duly authorized to execute and deliver this
Indenture and perform its obligations hereunder.  Neither the Trustee nor the Authenticating
Agent shall be accountable for the use or application by the Company or any
Debt Securities or the proceeds of any Debt Securities authenticated and
delivered by the Trustee in conformity with the provisions of this Indenture.

SECTION
8.04.  Trustee
and Agents May Own Debt Securities. 
The Trustee, any paying agent, or any agent of the Trustee or the
Company under this Indenture, in its individual or any other capacity, may
become the owner or pledgee of Debt Securities of any series with the same
rights it would have if it were not Trustee or such agent and, subject to
Sections 8.08 and 8.13, if operative, may otherwise deal with the Company and
receive, collect, hold, and retain collections from the Company with the same
rights it would have if it were not the Trustee or such agent.

SECTION
8.05.  Moneys
to be Held in Trust.  Subject
to the provisions of Section 13.04, all moneys received by the Trustee shall,
until used or applied as herein provided, be held in trust for the purposes for
which they were received, but need not be segregated from other funds except to
the extent required by law.  Neither the
Trustee nor any paying agent shall be under any liability for interest on any
moneys received by it hereunder except such as it may agree with the Company to
pay thereon.  So long as no Event of
Default with respect to the Debt Securities of any series shall have occurred
and be continuing, all interest allowed on any such moneys shall be paid from
time to time upon the written order of the Company, signed by its President,
its Chief Financial Officer, any Vice President, its Treasurer or an Assistant
Treasurer.

SECTION
8.06.  Compensation
and Expenses of Trustee.  The
Company covenants and agrees to pay to the Trustee from time to time, and the
Trustee shall be entitled to, reasonable compensation (which shall not be
limited by any provision of law in regard to the compensation of a trustee of
an express trust), and the Company will pay or reimburse the Trustee upon its
request for all reasonable expenses, disbursements and advances incurred or
made by the Trustee in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the expenses and disbursements of its
counsel and all persons not regularly in its employ and any amounts paid by the
Trustee to any Authenticating Agent pursuant to Section 8.14) except any such
expense, disbursement or advance as may arise from its negligence or bad faith.  The Company also covenants to indemnify the
Trustee for, and to hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on the part of the Trustee and arising
out of or in connection with the acceptance or administration of this trust, or
the performance of its duties hereunder, including the current payment of all
costs and expenses of defending itself against any claim of liability in the
premises.  The obligations of

 47

 

the Company under
this Section 8.06 to compensate and indemnify the Trustee and to pay or
reimburse the Trustee for expenses, disbursements and advances shall constitute
additional  indebtedness hereunder.  Such additional indebtedness shall be secured
by a lien prior to that of the Debt Securities upon all property and funds held
or collected by the Trustee as such, except funds held in trust for the benefit
of the Holders of particular Debt Securities.

SECTION
8.07. Officers’ Certificate as Evidence.  Subject to the provisions of Section 8.01,
whenever in the administration of the provisions of this Indenture the Trustee
shall deem it necessary or desirable that a matter be proved or established
prior to taking or omitting any action hereunder, such matter (unless other
evidence in respect thereof be herein specifically prescribed) may, in the
absence of negligence or bad faith on the part of the Trustee, be deemed to be
conclusively proved and established by an Officers’ Certificate delivered to
the Trustee, and such Officers’ Certificate, in the absence of negligence or
bad faith on the part of the Trustee, shall be full warrant to the Trustee for
any action taken or omitted by it under the provisions of this Indenture upon
the faith thereof.

SECTION
8.08.  Conflicting
Interest of Trustee.  If the
Trustee has or shall acquire any conflicting interest within the meaning of the
Trust Indenture Act of 1939, the Trustee shall either eliminate such
conflicting interest or resign in the manner provided by, and subject to the
provisions of, the Trust Indenture Act of 1939 and this Indenture.

SECTION
8.09.  Eligibility
of Trustee.  There shall at
all times be a Trustee with respect to each series of Debt Securities hereunder
which shall be a Person organized and doing business under the laws of the
United States or any state or territory thereof or of the District of Columbia
authorized under such laws to exercise trust powers, having a combined capital
and surplus of at least $5,000,000, subject to supervision or examination by
Federal, state, territorial, or District of Columbia authority and willing to
act as Trustee hereunder. If such Person publishes reports of condition at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this Section 8.09,
the combined capital and surplus of such Person shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published.  In case at any
time the Trustee with respect to any series of Debt Securities shall cease to
be eligible in accordance with the provisions of this Section 8.09, such
Trustee shall resign immediately in the manner and with the effect specified in
Section 8.10.

SECTION
8.10.  Resignation
or Removal of Trustee.  (a)
The Trustee may at any time resign with respect to any series of Debt
Securities by giving written notice by first class mail of such resignation to
the Company and to the Holders of such series of Debt Securities at their
addresses as they shall appear on the Debt Security Register.  Upon receiving such notice of resignation,
the Company shall promptly appoint a successor trustee with respect to such
series by written instrument, in duplicate, executed by order of the Board of
Directors, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor trustee. 
If no successor trustee with respect to such series shall have been so
appointed and have accepted appointment within 60 days after the mailing of
such notice of resignation to the Holders, the resigning Trustee may petition
any court of competent jurisdiction for the 

 48
 

 

appointment of a
successor trustee, or any Holder of such series of Debt Securities who has been
a bona fide Holder of a Debt Security or Debt Securities of such series for at
least six months may, subject to the provisions of Section 7.09, on behalf of
himself and all others similarly situated, petition any such court for the
appointment of a successor trustee with respect to such series.  Such court may thereupon, after such notice,
if any, as it may deem proper and prescribe, appoint such successor trustee.

(b) In
case at any time any of the following shall occur—

(1) the Trustee shall
fail to comply with the provisions of Section 8.08 after written request
therefor by the Company or by any Holder who has been a bona fide Holder of a
Debt Security or Debt Securities of such series for at least six months, unless
the Trustee’s duty to resign is stayed in accordance with the provisions of
Section 310(b) of the Trust Indenture Act of 1939, or

(2) the Trustee shall
cease to be eligible in accordance with the provisions of Section 8.09 and
shall fail to resign after written request therefor by the Company or by any
such Holder of a note of such series, or

(3) the Trustee shall
become incapable of acting with respect to any series of Debt Securities, or
shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,

then, in any such case, the Company may remove the
Trustee with respect to such series and appoint a successor trustee for such
series by written instrument, in duplicate, executed on instruction of the
President, The Chief Financial Officer or the Treasurer of the Company, one
copy of which instrument shall be delivered to the Trustee so removed and one
copy to the successor trustee, or, subject to the provisions of Section 7.09,
any Holder who has been a bona fide Holder of a Debt Security or Debt
Securities of such series for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor trustee with
respect to such series.  Such court may
thereupon, after such notice, if any, as it may deem proper and prescribe,
remove such Trustee and appoint such successor trustee.

(c)
The Holders of a majority in aggregate principal amount of the Outstanding Debt
Securities of any series may at any time remove the Trustee with respect to
such series by delivering to the Trustee so removed, to the successor trustee
so appointed and to the Company the evidence provided for in Section 9.01 of
the action in that regard taken by the Holders, and nominate a successor
Trustee which shall be deemed appointed as successor Trustee unless within ten
days after such nomination the Company objects thereto, in which case the
Trustee so removed or any Holder of a Debt Security or Debt Securities of such
series, upon the terms and conditions and otherwise as in subsection (a) of
this Section 8.10 provided, may 

 49
 

 

petition any court
of competent jurisdiction for an appointment of a successor Trustee with
respect to such series.

(d)
Any resignation or removal of the Trustee with respect to all or any series of
Debt Securities and any appointment of a successor Trustee pursuant to any of
the provisions of this Section 8.10 shall become effective upon acceptance of
appointment by the successor Trustee as provided in Section 8.11.

SECTION
8.11.  Acceptance
by Successor Trustee.  Any
successor Trustee appointed as provided in Section 8.10 shall execute,
acknowledge and deliver to the Company and to its predecessor Trustee an
instrument accepting such appointment hereunder, and thereupon the resignation
or removal of the predecessor Trustee shall become effective with respect to
all or any series as to which it is resigning as Trustee, and such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, duties and obligations of its predecessor hereunder
with respect to all or any such series, with like effect as if originally named
as Trustee herein with respect to all or any such series; nevertheless, on the
written request of the Company or of the successor Trustee, the Trustee ceasing
to act shall, upon payment of any amounts then due it pursuant to the
provisions of Section 8.06, execute and deliver an instrument transferring to
such successor Trustee all the rights and powers of the Trustee with respect to
all or any such series so ceasing to act. 
Upon request of any such successor Trustee, the Company shall execute
any and all instruments in writing for more fully and certainly vesting in and
confirming to such successor Trustee all such rights and powers.  Any Trustee ceasing to act shall,
nevertheless, retain a lien upon all property or funds held or collected by
such Trustee with respect to all or any series as to which it is resigning as
Trustee, to secure any amounts and shall be entitled to any indemnities then
due it pursuant to the provisions of Section 8.06.

No
successor Trustee shall accept appointment as provided in this Section 8.11
unless at the time of such acceptance such successor Trustee shall be qualified
under the provisions of Section 8.08 and eligible under the provisions of
Section 8.09.

Upon
acceptance of appointment by a successor Trustee with respect to all or any
series of Debt Securities as provided in this Section 8.11, the Company shall
mail notice of the succession of such Trustee hereunder to the Holders of Debt
Securities of such series at their addresses as they shall appear on the Debt
Security Register.  If the Company fails
to mail such notice within ten days after acceptance of appointment by the
successor Trustee, the successor Trustee shall cause such notice to be mailed
at the expense of the Company.

In
case the appointment hereunder of a successor Trustee with respect to the Debt
Securities of one or more (but not all) series, the Company, the retiring
Trustee and each successor Trustee with respect to the Debt Securities of any
applicable series shall execute and deliver an indenture supplemental hereto
which shall contain such provisions as shall be deemed necessary or desirable
to confirm that all the rights, powers, trusts and duties of the retiring
Trustee with respect to the Debt Securities of any series as to which the
retiring Trustee is not retiring shall continue to be vested in the retiring
Trustee, and shall add to or change any of 

 50
 

 

the provisions of
this Indenture as shall be necessary to provide for or facilitate the administration
of the trusts hereunder by more than one Trustee, it being understood that
nothing herein or in such supplemental indenture shall constitute such Trustees
co-trustees of the same trust and that each such Trustee shall be Trustee of a
trust or trusts hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustee.

SECTION
8.12.  Succession
by Merger, etc.  Subject to
Sections 8.08 and 8.09, any Person into which the Trustee may be merged or
converted or with which it may be consolidated, or any Person resulting from
any merger, conversion or consolidation to which the Trustee shall be a party,
or any Person succeeding to the trust business of the Trustee, shall be the
successor of the Trustee hereunder without the execution or filing of any paper
or any further act on the part of any of the parties hereto.

In
case at the time any successor to the Trustee shall succeed to the trusts
created by this Indenture any of the Debt Securities shall have been authenticated
but not delivered, any such successor to the Trustee may adopt the certificate
of authentication of any predecessor Trustee, and deliver such Debt Securities
so authenticated; and in case at that time any of the Debt Securities shall not
have been authenticated, any successor to the Trustee may authenticate such
Debt Securities either in the name of such successor Trustee or, if such
successor Trustee is a successor by merger, conversion or consolidation, the
name of any predecessor hereunder; and in all such cases such certificate shall
have the full force which it is anywhere in the Debt Securities or in this
Indenture provided that the certificate of the Trustee shall have.

SECTION
8.13.  Limitation
on Rights of Trustee as a Creditor. 
If and when the Trustee shall be or become a creditor of the Company (or
any other obligor upon the Debt Securities), the Trustee shall be subject to
the provisions of the Trust Indenture Act of 1939 regarding the collection of
claims against the Company (or any such other obligor).

SECTION
8.14.  Authenticating
Agents.  There may be an
Authenticating Agent or Authenticating Agents appointed by the Trustee from
time to time with power to act on its behalf and subject to its direction in
the authentication and delivery of any series of Debt Securities issued upon
original issuance, exchange, transfer or redemption thereof as fully to all
intents and purposes as though such Authenticating Agent (or Authenticating
Agents) had been expressly authorized to authenticate and deliver such Debt
Securities, and Debt Securities so authenticated shall be entitled to the
benefits of this Indenture and shall be valid and obligatory for all purposes
as though authenticated by the Trustee hereunder.  For all purposes of this Indenture, the
authentication and delivery of Debt Securities by any Authenticating Agent
pursuant to this Section 8.14 shall be deemed to be the authentication and
delivery of such Debt Securities “by the Trustee”, and whenever this Indenture
provides that “the Trustee shall authenticate and deliver” Debt Securities or
that Debt Securities “shall have been authenticated and delivered by the
Trustee”, such authentication and delivery by any Authenticating Agent shall be
deemed to be authentication and delivery by the Trustee.  Any such Authenticating Agent shall at all
times be a Person organized and doing business under the laws of the United
States of America or of any State or Territory or the District of Columbia,
with a combined 

 51
 

 

capital and
surplus of at least $5,000,000 and authorized under such laws to act as an
authenticating agent, duly registered to act as such, if and to the extent
required by applicable law and subject to supervision or examination by Federal
or State authority.  If such Person
publishes reports of its condition at least annually pursuant to law or the
requirements of such authority, then for the purposes of this Section 8.14 the
combined capital and surplus of such Person shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published.  If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 8.14, or to be duly registered if and to the extent
required by applicable law and regulations, it shall resign immediately in the
manner and with the effect herein specified in this Section 8.14.

Whenever
reference is made in this Indenture to the authentication and delivery of Debt
Securities of any series by the Trustee or the Trustee’s certificate of
authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Trustee by its Authenticating Agent appointed with
respect to the Debt Securities of such series and a certificate of
authentication executed on behalf of the Trustee by its Authenticating Agent
appointed with respect to the Debt Securities of such series.

Any
Person into which any Authenticating Agent may be merged or converted or with
which it may be consolidated, or any Person resulting from any merger,
consolidation or conversion to which any Authenticating Agent shall be a party,
or any Person succeeding to the authenticating agency business of any
Authenticating Agent, shall be the successor of such Authenticating Agent
hereunder, if such successor Person is otherwise eligible under this Section
8.14, without the execution or filing of any paper or any further act on the
part of the parties hereto or such Authenticating Agent or such successor
Person.

In
case at the time such successor to any such agency shall succeed to such agency
any of the Debt Securities shall have been authenticated but not delivered, any
such successor to such Authenticating Agent may adopt the certificate of
authentication of any predecessor Authenticating Agent and deliver such Debt
Securities so authenticated; and in case at that time any of the Debt
Securities shall not have been authenticated, any successor to any
Authenticating Agent may authenticate such Debt Securities either in the name
of any predecessor hereunder or in the name of the successor Authenticating
Agent; and in all cases such certificate shall have the full force which it has
anywhere in the Debt Securities or in this Indenture provided that the
certificate of the predecessor Authenticating Agent shall have had such force; provided, however, that the right to adopt
the certificate of authentication of any predecessor Authenticating Agent or to
authenticate Debt Securities in the name of any predecessor Authenticating
Agent shall apply only to its successor or successors by merger, conversion or
consolidation.

Any
Authenticating Agent may at any time resign as Authenticating Agent with
respect to any series of Debt Securities by giving written notice of
resignation to the Trustee and to the Company. 
The Trustee may at any time terminate the agency of any Authenticating
Agent with respect to any series of Debt Securities by giving written notice of
termination to such Authenticating Agent and to the Company.  Upon receiving such a notice of resignation
or 

 52
 

 

upon such a
termination, or in case at any time Authenticating Agent shall cease to be
eligible under this Section 8.14, the Trustee may, and shall, upon request of
the Company, promptly use its best efforts to appoint a successor
Authenticating Agent.

Upon
the appointment, at any time after the original issuance of any of the Debt
Securities, of any successor, additional or new Authenticating Agent, the
Trustee shall give written notice of such appointment to the Company and shall
at the expense of the Company mail notice of such appointment to all Holders of
Debt Securities of such series as the names and addresses of such Holders
appear on the Debt Security Register.

Any
successor Authenticating Agent with respect to any series of Debt Securities upon
acceptance of its appointment hereunder shall become vested with all the
rights, powers and duties of its predecessor hereunder, with like effect as
though originally named as an Authenticating Agent herein with respect to such
series. No successor Authenticating Agent shall be appointed unless eligible
under the provisions of this Section 8.14 and duly registered if and to the
extent required under applicable law and regulations.

Any
Authenticating Agent by the acceptance of its appointment with respect to any
series of Debt Securities shall be deemed to have agreed with the Trustee that:
it will perform and carry out the duties of an Authenticating Agent as herein
set forth with respect to such series, including among other things the duties
to authenticate and deliver Debt Securities when presented to it in connection
with exchanges, registrations of transfer or redemptions thereof; it will keep
and maintain, and furnish to the Trustee from time to time as requested by the
Trustee appropriate records of all transactions carried out by it as
Authenticating Agent and will furnish the Trustee such other information and
reports as the Trustee may reasonably require; it is eligible for appointment
as Authenticating Agent under this Section 8.14 and will notify the Trustee
promptly if it shall cease to be so qualified; and it will indemnify the
Trustee against any loss, liability or expense incurred by the Trustee and will
defend any claim asserted against the Trustee by reason of any acts or failures
to act of the Authenticating Agent with respect to such series but it shall
have no liability for any action taken by it at the specific written direction
of the Trustee.

The
Company agrees to pay to each Authenticating Agent from time to time reasonable
compensation and expenses for its services, and the Trustee shall have no
liability for such payments.

The
provisions of Sections 8.02(a), (b), (c), (e) and (f), 8.03, 8.04, 8.06
(insofar as it pertains to indemnification), 9.01, 9.02 and 9.03 shall bind and
inure to the benefit of each Authenticating Agent  to the same extent that they bind and inure
to the benefit of the Trustee.

 53
 

 

If an
appointment with respect to one or more series is made pursuant to this Section
8.14, the Debt Securities of such series may have endorsed thereon, in addition
to the Trustee’s certificate of authentication, an alternate certificate of
authentication in the following form:

This is one of the Debt Securities of the series
designated herein issued under the within-mentioned Indenture.

 

	
  U.S. BANK NATIONAL
  ASSOCIATION,

  	
  U.S. BANK NATIONAL ASSOCIATION,

  
	
  as Trustee

  	
  as Trustee

  
	
   

  	
   

  
	
  - OR -

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
  ,

  
	
  Authorized Officer

  	
   

  	
   as Authenticating Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized
  Signatory

  
								

 

ARTICLE NINE.

Concerning the Holders.

SECTION
9.01.  Action
by Holders.  Whenever in this
Indenture it is provided that the Holders of a specified percentage in
aggregate principal amount of the Debt Securities of any series may take any
action (including the making of any demand or request, the giving of any
notice, consent or waiver or the taking of any other action) the fact that at
the time of taking any such action the Holders of such specified percentage of
such series have joined therein may be evidenced (a) by any instrument or any
number of instruments of similar tenor executed by Holders of such series in
person or by agent or proxy appointed in writing, or (b) by the record of the
Holders of such series voting in favor thereof at any meeting of such Holders
duly called and held in accordance with the provisions of Article Ten, or (c)
by a combination of such instrument or instruments and any such record of such
a meeting of Holders of such series.

SECTION
9.02.  Proof
of Execution by Holders. 
Subject to the provisions of Sections 8.01, 8.02 and 10.05, proof of the
execution of any instrument by a Holder or his agent or proxy shall be
sufficient if made in accordance with such reasonable rules and regulations as
may be prescribed by the Trustee or in such manner as shall be satisfactory to
the Trustee.  The ownership of Debt
Securities shall be provided by the Debt Security Register or by a certificate
of the Debt Security registrar with respect to a series of Debt Securities.

The
record of any Holders’ meeting shall be proved in the manner provided in
Section 10.06.

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SECTION
9.03.  Who
Are Deemed Absolute Owners. 
The Company, the Trustee with respect to a series of Debt Securities,
and any agent of the Trustee or the Company under this Indenture may deem the
Person in whose name such Debt Security shall be registered upon the Debt
Security Register to be, and may treat him as, the absolute owner of such Debt
Security (whether or not such Debt Security shall be overdue and
notwithstanding any notation of ownership or other writing thereon made by
anyone other than the Company, the Trustee or any such agent) for the purpose
of receiving payment of or on account of the principal of and premium, if any,
and interest on such Debt Security and for all other purposes; and neither the
Company nor the Trustee nor any such agent shall be affected by any notice to
the contrary.  All such payments so made
to any Holder for the time being or upon his order shall, to the extent of the
sum or sums so paid, be effectual to satisfy and discharge the liability for
moneys payable upon any such Debt Security.

SECTION
9.04.  Company-Owned
Debt Securities Disregarded. 
In determining whether the Holders of the requisite aggregate principal
amount of Debt Securities of any series have concurred in any direction or
consent under this Indenture, Debt Securities of such series which are owned by
the Company or any other obligor on the Debt Securities of such series or by
any Person directly or indirectly controlling or controlled by or under direct
or indirect common control with the Company or any other obligor on such Debt
Securities shall be disregarded and deemed not to be Outstanding for the
purpose of any such determinations; provided,
however, that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction or consent only such Debt
Securities which the Trustee knows are so owned shall be so disregarded.  Debt Securities so owned which have been
pledged in good faith may be regarded as Outstanding notwithstanding this
Section 9.04 if the pledgee shall establish to the satisfaction of the Trustee
the right of the pledgee to vote such Debt Securities and that the pledgee is
not a Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any such other
obligor.  Upon request of the Trustee,
the Company shall furnish to the Trustee promptly an Officers’ Certificate
listing and identifying all Debt Securities of a series, if any, known by the
Company to be owned or held by or for the account of the Company or any other
obligor on such Debt Securities or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
the Company or any other obligor on such Debt Securities; and, subject to the
provisions of Section 8.01, the Trustee shall be entitled to accept such
Officers’ Certificates as conclusive evidence of the facts therein set forth
and of the fact that all such Debt Securities not listed therein are
Outstanding for the purpose of any such determination.

SECTION
9.05.  Revocation
of Consents; Future Holders Bound. 
At any time prior to (but not after) the evidencing to the Trustee, as
provided in Section 9.01, of the taking of any action by the Holders of the
percentage in aggregate principal amount of the Debt Securities of any series
specified in this Indenture in connection with such action, any Holder of a
Debt Security which is shown by the evidence to be included in the Debt
Securities the Holders of which have consented to or are bound by consents to
such action, may, by filing written notice with the Trustee at its principal
office and upon proof of holding as provided in Section 9.02, revoke such
action so far as concerns such Debt Security. 
Except as aforesaid any such action taken by the Holder of any Debt
Security shall be conclusive and binding upon such Holder and 

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upon all future
Holders and owners of such Debt Security and of any Debt Security issued on
transfer thereof or in exchange or substitution therefor, irrespective of
whether or not any notation in regard thereto is made upon any such Debt
Security.  Any action taken by the
Holders of the percentage in aggregate principal amount of the Debt Securities
specified in this Indenture in connection with such action shall be
conclusively binding upon the Company, the Trustee and the Holders of all of
the Debt Securities affected by such action.

ARTICLE TEN

Holders’ Meetings.

SECTION
10.01.  Purposes
of Meetings.  A meeting of Holders
of the Debt Securities of all or any series may be called at any time and from
time to time pursuant to the provisions of this Article Ten for any of the
following purposes:

(1)  to give any notice to the Company or to the
Trustee with respect to such series, or to give any directions to the Trustee,
or to consent to the waiving of any default hereunder and its consequences, or
to take any other action authorized to be taken by Holders pursuant to any of
the provisions of Article Seven;

(2)  to remove the Trustee and nominate a
successor trustee pursuant to the provisions of Article Eight;

(3)  to consent to the execution of an indenture
or indentures supplemental hereto pursuant to the provisions of Section 11.02;
or

(4)  to take any other action authorized to be
taken by or on behalf of the Holders of any specified aggregate principal
amount of the Debt Securities of all or any series, as the case may be, under
any other provision of this Indenture or under applicable law.

SECTION
10.02.  Call
of Meetings by Trustee.  The
Trustee may at any time call a meeting of Holders of Debt Securities of all or
any series to take any action specified in Section 10.01, to be held at such
time and at such place as the Trustee shall determine.  Notice of every meeting of the Holders of
Debt Securities of all or any series, setting forth the time and place of such
meeting and in general terms the action proposed to be taken at such meeting,
shall be mailed by the Trustee to Holders of Debt Securities of each series that
may be affected by the action proposed to be taken at such meeting at their
addresses as they shall appear on the Debt Security Register.  Such notice shall be mailed not less than 20
nor more than 90 days prior to the date fixed for the meeting.

SECTION
 10.03. 
Call of Meetings by Company or
Holders.   In case at any time
the Company, pursuant to a resolution by the Board of Directors, or the Holders
of at least 10% in aggregate principal amount of the Debt Securities then
Outstanding of each series 

 56
 

 

that may be
affected by the action proposed to be taken shall have requested the Trustee to
call a meeting of such Holders, by written request setting forth in reasonable
detail the action proposed to be taken at the meeting, and the Trustee shall
not have mailed the notice of such meeting within 20 days after receipt of such
request, then the Company or such Holders may determine the time and place for
such meeting and may call such meeting to take any action authorized in Section
10.01, by mailing notice thereof as provided in Section 10.02.

SECTION
10.04.  Qualifications
for Voting.  To be entitled to
vote at any meeting of Holders of Debt Securities a person shall (a) be a
Holder of one or more Debt Securities of a series affected by the action
proposed to be taken or (b) be a Person appointed by an instrument in writing
as proxy by a Holder of one or more such Debt Securities.  The rights of Holders of Debt Securities to
have their votes counted shall be subject to the provisions in the definition
of “Outstanding” in Section 1.01.  The
only Persons who shall be entitled to be present or to speak at any meeting of
Holders of Debt Securities shall be the Persons entitled to vote at such
meeting and their counsel, any representatives of the Trustee and its counsel
and any representatives of the Company and its counsel.

SECTION
10.05.  Regulations.  Notwithstanding any other provisions of this
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Holders of Debt Securities, in regard to proof of
the holding of Debt Securities and of the appointment of proxies, and in regard
to the appointment and duties of inspectors of votes, the submission and
examination of proxies, certificates and other evidence of the right to vote,
and such other matters concerning the conduct of the meeting as it shall think
fit.  Except as otherwise permitted or
required by any such regulation, the holding of Debt Securities shall be proved
in the manner specified in Section 9.02 and the appointment of any proxy shall
be proved in the manner specified in said Section 9.02 or by having the
signature of the Person executing the proxy witnessed or guaranteed by any
bank, broker or trust company.

The
Trustee shall, by an instrument in writing, appoint a temporary chairman of the
meeting, unless the meeting shall have been called by the Company or by Holders
of Debt Securities as provided in Section 10.03, in which case the Company or
the Holders of Debt Securities calling the meeting, as the case may be, shall
in like manner appoint a temporary chairman. 
A permanent chairman and a secretary of the meeting shall be elected by
vote of the Holders of a majority in aggregate principal amount of the Debt
Securities represented at the meeting and entitled to vote.

Subject
to the provisions of Section 9.04, at any meeting each Holder of a Debt
Security of a series entitled to vote at such meeting or proxy shall be
entitled to one vote for each $1,000 principal amount of Debt Securities of
such series held or represented by him; provided,
however, that no vote shall be cast or counted at any meeting in
respect of any Debt Security challenged as not Outstanding and ruled by the
chairman of the meeting to be not Outstanding. The chairman of the meeting shall
have no right to vote except as a Holder of Debt Securities of such series or
proxy therefor.  Any meeting of Holders
of Debt Securities duly called pursuant to the provisions of Section 10.02 or
10.03 may be adjourned from time to time and the meeting may be held as so
adjourned without further notice.

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At any
meeting of Holders of Debt Securities, the presence of Persons holding or
representing Debt Securities in an aggregate principal amount sufficient to
take action upon the business for the transaction of which such meeting was
called shall be necessary to constitute a quorum; but, if less than quorum be
present, the Persons holding or representing a majority of the Debt Securities
represented at the meeting may adjourn such meeting with the same effect, for
all intents and purposes, as though a quorum had been present.

SECTION
10.06.  Voting.  The vote upon any resolution submitted to any
meeting of Holders of Debt Securities shall be by written ballots on which
shall be subscribed the signatures of the holders of Debt Securities entitled
to vote at such meeting or of their representatives by proxy, and the letter or
letters, serial number or numbers or other distinguishing marks of the Debt
Securities held or represented by him. 
The permanent chairman of the meeting shall appoint two inspectors of
votes who shall count all votes cast at the meeting for or against any
resolution and who shall make and file with the secretary of the meeting their
verified written reports in duplicate of all votes cast at the meeting.  A record in duplicate of the proceedings of
each meeting of Holders of Debt Securities shall be prepared by the secretary
of the meeting and there shall be attached to said record the original reports
of the inspectors of votes on any vote by ballot taken thereat and affidavits
by one or more persons having knowledge of the facts setting forth a copy of
the notice of the meeting and showing that said notice was mailed as provided
in Section 10.02.  The record shall be
signed and verified by the affidavits of the permanent chairman and secretary
of the meeting and one of the duplicates shall be delivered to the Company and
the other to the Trustee to be preserved by the Trustee, the latter to have
attached thereto the ballots voted at the meeting.

Any
record so signed and verified shall be conclusive evidence of the matters
therein stated.

SECTION
10.07.  No
Delay of Rights by Meeting. 
Nothing in this Article Ten contained shall be deemed or construed to
authorize or permit, by reason of any call of a meeting of Holders of Debt
Securities of any or all series or any rights expressly or impliedly conferred
hereunder to make such call, any hindrance or delay in the exercise of any
right or rights conferred upon or reserved to the Trustee or to the Holders of
Debt Securities under any of the provisions of this Indenture or of the Debt
Securities.

ARTICLE ELEVEN.

Supplemental Indentures.

SECTION
11.01  Supplemental
Indentures without Consent of Holders.  The Company, when authorized by a Board Resolution,
and the Trustee may from time to time and at any time enter into an indenture
or indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act of 1939 as in force at the date of the execution thereof)
for one or more of the following purposes:

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(a)  to evidence the succession of another Person
to the Company, or successive successions, and the assumption by the successor
Person of the covenants, agreements and obligations of the Company pursuant to
Articles Five and Twelve hereof;

(b)  to add to the covenants of the Company such
further covenants, restrictions, conditions or provisions as the Board of
Directors and the Trustee shall consider to be for the protection of the
Holders of Debt Securities of any or all series, and to make the occurrence, or
the occurrence and continuance, of a default in any of such additional
covenants, restrictions, conditions or provisions a default or an Event of
Default with respect to such series permitting the enforcement of all or any of
the several remedies provided in this Indenture as herein set forth; provided, however, that in respect of any
such additional covenant, restriction or condition, such supplemental indenture
may provide for a particular period of grace after default (which period may be
shorter or longer than that allowed in the case of other defaults) or may
provide for an immediate enforcement upon such default or may limit the
remedies available to the Trustee upon such default;

(c)  to cure any ambiguity or to correct or
supplement any provision contained herein or in any supplemental indenture
which may be defective or inconsistent with any other provision contained
herein or in any supplemental indenture; to convey, transfer, assign, mortgage
or pledge any property to or with the Trustee; or to make such other provisions
in regard to matters or questions arising under this Indenture as shall not
adversely affect the interests of the Holders of the Debt Securities;

(d)  to secure the Debt Securities of all series in
accordance with the provisions of Sections 5.05;

(e)  to evidence and provide for the acceptance of
appointment by another Person as a successor Trustee hereunder with respect to
one or more series of Debt Securities and to add to or change any of the provisions
of this Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee, pursuant to
Section 8.11;

(f)  to modify, amend or supplement this Indenture
in such a manner as to permit the qualification of any indenture supplemental
hereto under the Trust Indenture Act of 1939 as then in effect, except that
nothing herein contained shall permit or authorize the inclusion in any
indenture supplemental hereto of the provisions referred to in Section
316(a)(2) of the Trust Indenture Act of 1939;

 59
 

 

(g)  to provide for the issuance under this
Indenture of Debt Securities in coupon form (including Debt Securities
registrable as to principal only) and to provide for exchangeability of such
Debt Securities with Debt Securities of the same series issued hereunder in
fully registered form and to make all appropriate changes for such purpose;

(h)  to change or eliminate any of the provisions
of this Indenture, provided, however, that
any such change or elimination shall become effective only when there is no
Debt Security Outstanding of any series created prior to the execution of such
supplemental indenture which is entitled to the benefit of such provision; or

(i)  to establish any additional form of Debt
Security, as permitted by Section 2.02, and to provide for the issuance of any
additional series of Debt Securities, as permitted by Section 3.01, and to set
forth the terms thereof.

The
Trustee is hereby required to join with the Company in the execution of any
such supplemental indenture, to make any further appropriate agreements and
stipulations which may be therein contained and to accept the conveyance,
transfer, assignment, mortgage or pledge of any property thereunder, but the
Trustee shall not be obligated to enter into any such supplemental indenture
which affects the Trustee’s own rights, duties or immunities under this
Indenture or otherwise.

Any
supplemental indenture authorized by the provisions of this Section 11.01 may
be executed by the Company and the Trustee without the consent of the Holders
of any of the Debt Securities at the time Outstanding, notwithstanding any of
the provisions of Section 11.02.

SECTION
11.02.  Supplemental
Indentures with Consent of Holders. 
With the consent (evidenced as provided in Section 9.01) of the Holders
of greater than 50% in aggregate principal amount of the Outstanding Debt
Securities of each series affected by such supplemental indenture (all such
Holders voting as a single class), by act of said Holders delivered to the
Company and the Trustee, the Company, when authorized by a Board Resolution,
and the Trustee may from time to time and at any time enter into an indenture
or indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture
or of any supplemental indenture or of modifying in any manner the rights of
the Holders of the Debt Securities of each series under this Indenture; provided, however, that no such
supplemental indenture shall (i) without the consent of the Holder of each
Outstanding Debt Security affected thereby, extend the fixed maturity of any
Debt Security, or reduce the rate or extend the time of payment of interest
thereon, or reduce the principal amount thereof or any premium thereon, or make
the principal thereof or interest or premium thereon payable in any coin or
currency other than that provided in the Debt Securities or (ii) without the
consent of the Holders of all of the Outstanding Debt Securities of each series
affected reduce the aforesaid percentage of Debt Securities, the Holders 

 60
 

 

of which are
required to consent (a) to any such supplemental indenture, (b) to rescind and
annul a declaration that any Debt Securities are due and payable as a result of
the occurrence of an Event of Default, (c) to waive any past default under the
Indenture and its consequences and (d) to waive compliance with Sections 5.02
and 5.04 (other than 5.04(a)(1) and (2)) to 5.08, inclusive.

Upon
the request of the Company, accompanied by a copy of a Board Resolution
certified by its Secretary or Assistant Secretary authorizing the execution of
any such supplemental indenture, and upon the filing with the Trustee of
evidence of the consent of Holders of Debt Securities as aforesaid, the Trustee
shall join with the Company in the execution of such supplemental indenture
unless such supplemental indenture affects the Trustee’s own rights, duties or
immunities under this Indenture or otherwise, in which case the Trustee may in
its discretion, but shall not be obligated to, enter into such supplemental
indenture.

It
shall not be necessary for the consent of the Holders of Debt Securities under
this Section 11.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.

SECTION
11.03.  Effect
of Supplemental Indentures. 
Upon the execution of any supplemental indenture pursuant to the
provisions of this Article Eleven, this Indenture shall be and be deemed to be
modified and amended in accordance therewith and the respective rights,
limitation of rights, obligations, duties and immunities under this Indenture
of the Trustee, the Company and the Holders of Debt Securities shall thereafter
be determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.

SECTION
11.04.  Notation
on Debt Securities.  Debt
Securities authenticated and delivered after the execution of any supplemental
indenture pursuant to the provisions of this Article Eleven may bear a notation
in form approved by the Trustee as to any matter provided for in such
supplemental indenture.  If the Company
or the Trustee shall so determine, new Debt Securities of any series so
modified as to conform, in the opinion of the Trustee and the Board of Directors
to any modification of this Indenture contained in any such supplemental
indenture may be prepared and executed by the Company, authenticated by the
Trustee and delivered in exchange for the Outstanding Debt Securities of such
series.

SECTION 11.05.  Evidence
of Compliance of Supplemental Indenture to be Furnished Trustee. The
Trustee, subject to the provisions of Sections 8.01 and 8.02, shall receive,
and shall be fully protected in relying upon, an Officers’ Certificate and an
Opinion of Counsel as conclusive evidence that any supplemental indenture
executed pursuant hereto complies with the requirements of this Article Eleven
and is authorized and permitted by this Indenture.

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ARTICLE TWELVE.

Consolidation, Merger,
Sale and Conveyance.

SECTION
12.01.  Company
May Consolidate, etc., on Certain Terms. Nothing contained in this
Indenture or in any of the Debt Securities shall prevent any consolidation or
merger of the Company with or into any other Person (whether or not affiliated
with the Company), or successive consolidations or mergers in which the Company
or its successor or successors shall be a party or parties, or shall prevent
any sale, conveyance or lease of all or substantially all of the property of
the Company to any other Person (whether or not affiliated with the Company)
authorized to acquire and operate the same; provided,
however, and the Company hereby covenants and agrees, that any such
consolidation, merger, sale, conveyance or lease shall be upon the condition
that (a) immediately after such consolidation, merger, sale, conveyance or
lease the entity (whether the Company or such other Person) formed by or
surviving any such consolidation or merger, or to which such sale, conveyance
or lease shall have been made, shall not be in default in the performance or
observance of any of the terms, covenants and conditions of this Indenture to
be kept or performed by the Company; (b) the Person (if other than the Company)
formed by or surviving any such consolidation or merger or to which such sale,
conveyance or lease shall have been made, shall be a Person organized under the
laws of the United States of America or any state thereof; and (c) the due and
punctual payment of the principal of and premium, if any, and interest on all
of the Debt Securities, according to their tenor, and the due and punctual
performance and observance of all of the covenants and conditions of this
Indenture to be performed or observed by the Company, shall be expressly
assumed, by supplemental indenture satisfactory in form to the Trustee,
executed and delivered to the Trustee by the Person (if other than the Company)
formed by such consolidation, or into which the Company shall have been merged,
or by the Person which shall have acquired or leased such property.

SECTION
12.02.  Successor
Entity to be Substituted.  In
case of any such consolidation, merger, sale, conveyance or lease and upon the
assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the due
and punctual payment of the principal of and premium, if any, and interest on
all of the Debt Securities and the due and punctual performance and observance
of all of the covenants and conditions of this Indenture to performed or
observed by the Company, such successor Person shall succeed to and be
substituted for the Company, with the same effect as if it had been named
herein as the party of the first part, and (except in the event of a conveyance
by way of lease) the predecessor entity shall be relieved of any further
obligation under this Indenture and the Debt Securities.  Such successor Person thereupon may cause to
be signed, and may issue either in its own name or in the name of Snap-on
Incorporated any or all of the Debt Securities issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee; and, upon the order of such successor Person instead of the Company
and subject to all the terms, conditions and limitations in this Indenture
prescribed, the Trustee shall authenticate and shall deliver any Debt
Securities which previously shall have been signed and delivered by the
officers of the Company to the Trustee for authentication, and any Debt
Securities which such successor Person thereafter shall cause to be 

 62
 

 

signed and
delivered to the Trustee for that purpose. 
All the Debt Securities of each series so issued shall in all respects
have the same legal rank and benefit under this Indenture as the Debt
Securities of such series theretofore or thereafter issued in accordance with
the terms of this Indenture as though all of such Debt Securities had been
issued at the date of the execution hereof.

In
case of any such consolidation, merger, sale, conveyance or lease such changes
in phraseology and form (but not in substance) may be made in the Debt
Securities thereafter to be issued as may be appropriate.

SECTION
12.03.  Opinion
of Counsel to Be Given Trustee. 
The Trustee, subject to Sections 8.01 and 8.02, shall receive an Opinion
of Counsel as conclusive evidence that any such consolidation, merger, sale or
conveyance and any such assumption complies with the provisions of this Article
Twelve and that all conditions precedent herein provided relating to such
transactions have been complied with.

ARTICLE THIRTEEN.

Satisfaction and
Discharge of Indenture.

SECTION
13.01.  Satisfaction,
Discharge and Defeasance of Debt Securities of any Series.  The Company shall be deemed to have paid and
discharged the entire indebtedness on all the Debt Securities of a series, the
provisions of this Indenture (except as to (x) the rights of Holders of Debt
Securities of such series to receive, from the money, in the currency required,
and Government Obligations deposited with the Trustee pursuant to Section
13.02(1) or the interest and principal received by the Trustee in respect of
such Government Obligations, payment of the principal of (and premium, if any)
and any installment of principal of (and premium, if any) or interest on such
Debt Securities on the Stated Maturities thereof or upon the Redemption Dates
for Debt Securities required to be redeemed pursuant to any mandatory sinking
fund or analogous provisions relating to Debt Securities of that series or
pursuant to any call for redemption relating to Debt Securities of that series,
(y) the Company’s rights and obligations with respect to such Debt Securities
under Sections 3.06, 3.07, 13.03 and 13.04, 5.02, 5.04, 6.01, 8.06, 8.10, 8.11
and, to the extent applicable to such series, Article Four, so long as the
principal of (and premium, if any) and interest on the Debt Securities of such
series remain unpaid and, thereafter, only the Company’s rights and obligations
under Sections 5.04, 8.06, 13.03 and 13.04, and (z) the rights, powers, trusts,
duties and immunities of the Trustee with respect to the Debt Securities of
such series) as it relates to such Debt Securities shall no longer be in
effect, and the Trustee, at the expense of the Company, shall, upon Company
Request, execute proper instruments acknowledging the same if:

(a) (1) all Debt
Securities of such series therefore authenticated and delivered (other than (i)
Debt Securities which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 3.07 and (ii) Debt Securities for whose
payment money has theretofore been deposited in trust or segregated and held in
trust by the Company and 

 63
 

 

thereafter repaid to the Company or discharged from
such trust, as provided in Sections 13.03 and 13.04) have been delivered to the
Trustee for cancellation;

(2)  the Company has paid or caused to be paid in
the currency required all other sums payable under this Indenture in respect of
the Debt Securities of such series; and

(3)  the Company has delivered to the Trustee an
Officers’ Certificate, an Opinion of Counsel and a written opinion of
independent public accountants, each stating that all conditions precedent
herein provided for relating to the satisfaction of the entire indebtedness of
all Debt Securities of any such series and the discharge of the Indenture as it
relates to such Debt Securities have been complied with; or

(b) (1) all Debt
Securities of such series not theretofore delivered to the Trustee for
cancellation (i) have become due and payable, or (ii) will become due and
payable at their Stated Maturity within one year, or (iii) are to be called for
redemption within one year under arrangements satisfactory to the Trustee for
the giving of notice of redemption by the Trustee in the name, and at the
expense of the Company;

(2)  the condition described in paragraph (1) of
Section 13.02 has been satisfied; and

(3)  the conditions described in paragraphs (a)(2)
and (a)(3) of this Section 13.01 have been satisfied; or

(c) (1) the conditions
referred to in paragraphs (b)(2) and (b)(3) of this Section 13.01 have been
satisfied;

(2)  no Event of Default or event which with
notice or lapse of time would become an Event of Default shall have occurred
and be continuing on the date of the deposit referred to in paragraph (1) of
Section 13.02 or on the ninety-first day after the date of such deposit; provided, however, that should that
condition fail to be satisfied on or before such ninety-first day, the Trustee
shall promptly, upon satisfactory receipt of evidence of such failure, return
such deposit to the Company;

(3)  the Company has either (i) delivered to the
Trustee an opinion of counsel of a nationally-recognized independent tax
counsel to the effect that Holders of the Debt Securities of such series will
not recognize income, gain or loss for Federal income tax purposes as a result
of such deposit and the satisfaction, discharge and defeasance contemplated by
this paragraph (c) of this Section 13.01 and will be subject to Federal income
tax on the same amounts and in the same manner and at the same 

 64
 

 

times as would have been the case if such deposit and
defeasance had not occurred or (ii) the Company shall have received from, or
there shall have been published by, the United States Internal Revenue Service
a ruling to the effect stated in subsection (i) of this Section 13.01(c)(3);
and

(4)  the Company has received an Opinion of
Counsel to the effect that the satisfaction, discharge and defeasance
contemplated by this Section 13.01 will not result in the delisting of the Debt
Securities of that series from any nationally-recognized securities exchange on
which they are listed.

SECTION
13.02.  Defeasance
of Debt Securities of any Series. 
The provisions of this Indenture (except as to (x) the rights of Holders
of Debt Securities of any series to receive, from the money, in the currency
required, and Government Obligations deposited with the Trustee pursuant to
paragraph (1) below or the interest and principal received by the Trustee in
respect of such Government Obligations, payment of the principal of (and
premium, if any) and any installment of principal of (and premium, if any) or
interest on such Debt Securities on the Stated Maturities thereof or upon the
Redemption Dates for Debt Securities required to be redeemed pursuant to any
mandatory sinking or analogous provisions relating to Debt Securities of that
series or pursuant to any call for redemption relating to Debt Securities of
that series, (y) the Company’s rights and obligations with respect to such Debt
Securities under Sections 3.06, 3.07, 13.03, 13.04, Article Seven (other than
subsections (d) and (e) of Section 7.01), Sections 5.01, 5.02, 5.04, 6.01,
8.06, 8.10, 8.11 and, to the extent applicable to such series, Article Four, so
long as the principal of (and premium, if any) and interest on the Debt
Securities of such series remain unpaid and, thereafter, only the Company’s
rights and obligations under Sections 5.04, 8.06, 13.03 and 13.04, and (z) the
rights, powers, trusts, duties and immunities of the Trustee with respect to
the Debt Securities of such series) as it relates to Debt Securities of any
series shall no longer be in effect, and the Trustee, at the expense of the
Company shall, upon Company Request, execute proper instruments acknowledging
the same if:

(1)  the Company has deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose (A) the
Dollars or Foreign Currency, as applicable, in an amount, or (B) Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide on or before the due date
of any payment in respect of such series of Debt Securities in an amount, or (C)
a combination thereof, sufficient, after payment of all Federal, state and
local taxes in respect thereof payable by the Trustee, in the opinion of a
nationally-recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and discharge
(i) the principal of (and premium, if any) and each installment of principal
(and premium, if any) and interest on the Outstanding Debt Securities of that
series on the Stated Maturity of such principal or installment of principal or
interest and (ii) any mandatory sinking fund payments or analogous payments or
payments pursuant to any call for 

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redemption applicable to Debt Securities of such
series on the day on which such payments are due and payable in accordance with
the terms of the Indenture and such Debt Securities;

(2)  no Event of Default or event which with
notice or lapse of time would become an Event of Default shall have occurred
and be continuing on the date of such deposit;

(3)  the interest of the Holders in such deposit
shall have been duly perfected under the applicable provisions of the Uniform
Commercial Code; and

(4)  the Company has delivered to the Trustee an
Officers’ Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the defeasance contemplated by this
Section have been complied with.

SECTION
13.03.  Application
of Trust Funds; Indemnification. 
(a)  Subject to the provisions of
Section 13.04, all money and Government Obligations deposited with the Trustee
pursuant to Section 13.01 or 13.02 and all money received by the Trustee in
respect of Government Obligations deposited with the Trustee, shall be held in
trust and applied by it, in accordance with the provisions of the Debt
Securities and this Indenture, to the payment, either directly or through any
paying agent (including the Company acting as its own paying agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal (and
premium, if any) and interest for whose payment such money and Government
Obligations have been deposited with or received by the Trustee as contemplated
by Section 13.01 or 13.02.

(b)  The Company shall pay and shall indemnify the
Trustee against any tax, fee or other charge imposed on or assessed against
Government Obligations deposited pursuant to Section 13.01 or 13.02 or the
interest and principal received in respect of such obligations, other than any
such tax, fee or other charge payable by or on behalf of Holders.  The Company shall be entitled to prompt
notice of an assessment or the commencement of any proceeding for which
indemnification may be sought hereunder and, at its election, to contest such
assessment or to participate in, assume the defense of, or settle such
proceeding.

(c)  The Trustee shall deliver or pay to the
Company from time to time upon Company Request any Government Obligations or
money held by it as provided in Section 13.01 or 13.02 which, in the opinion of
a nationally-recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, are then in excess of
the amount thereof which then would have been required to be deposited for the
purpose for which such obligations or money were deposited or received.

(d)  If the Trustee is unable to apply any money
or Government Obligations in accordance with this Section 13.03 by reason of
any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company’s obligations under this Indenture and the 

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Debt Securities,
if any, of such series shall be revived and reinstated as though no deposit had
occurred pursuant to Section 13.02 until such time as the Trustee is permitted
to apply all such money or Government Obligations in accordance with this
Section 13.03; provided, however,
that if the Company has made any payment of interest on or principal of (and
premium, if any) on any Debt Securities, if any, of such series because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such series of Debt Securities, if any, to receive such
payment from the money or Government Obligations held by the Trustee.

SECTION
13.04.  Return
of Unclaimed Moneys.  Any
moneys deposited with or paid to the Trustee or any paying agent for payment of
the principal of and premium, if any, or interest on Debt Securities and not
applied but remaining unclaimed by the Holders of Debt Securities for two years
after the date upon which the principal of and premium, if any, or interest on
such Debt Securities, as the case may be, shall have become due and payable,
shall be repaid to the Company by the Trustee or such paying agent on demand;
and the Holder of any of the Debt Securities entitled to receive such payment
shall thereafter look only to the Company for any payment thereof.

ARTICLE FOURTEEN.

Immunity of Incorporators, Stockholders,

Officers, Directors, etc.

SECTION
14.01.  Indenture
and Debt Securities Solely Obligations of the Company.  No recourse under or upon any obligation,
covenant or agreement of this Indenture, any supplemental indenture, or of any
Debt Security, or for any claim based thereon or otherwise in respect thereof,
shall be had against any incorporator, organizer, stockholder, member, owner,
officer, director, manager or employee, as such, past, present or future, of
the Company or any Subsidiary or of any predecessor or successor Person, either
directly or through the Company, whether by virtue of any constitution, statute
or rule of law, or by the enforcement of any assessment or penalty or
otherwise; it being expressly understood that this Indenture and the
obligations issued hereunder are solely obligations of the Company, and that no
such personal liability whatever shall attach to, or is or shall be incurred
by, any incorporator, organizer, stockholder, member, owner, officer, director,
manager or employee, as such, of the Company or of any predecessor or successor
Person, or any of them, because of the creation of the indebtedness hereby
authorized, or under or by reason of the obligations, covenants or agreements
contained in this Indenture, or in any of the Debt Securities or implied
thereby; and that any and all such personal liability, either at common law or
in equity or by constitution or statute of, and any and all such rights and
claims against, every such incorporator, organizer, stockholder, member, owner,
officer, director, manager or employee, as such, because of the creation of the
indebtedness hereby authorized, or under or by reason of the obligations,
covenants or agreements contained in this Indenture or in any of the Debt
Securities or implied thereby, are hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issue of such Debt Securities.

 67
 

 

ARTICLE FIFTEEN.

Miscellaneous Provisions.

SECTION
15.01.  Provisions
Binding on Successors of the Company.  All of the covenants, stipulations, promises
and agreements in this Indenture contained by the Company shall bind its
successors and assigns whether so expressed or not.

SECTION
15.02.  Indenture
for Sole Benefit of Parties and Holders of Debt Securities.  Nothing in this Indenture or in the Debt
Securities, expressed or implied, shall give or be construed to give to any
Person, firm or corporation, other than the parties hereto, any agent of the
Trustee or the Company under this Indenture and the Holders of the Debt
Securities, any legal or equitable right, remedy or claim under or in respect
of this Indenture, or under any covenant, condition or provision herein
contained; all such covenants, conditions and provisions being, subject to the
provisions of Articles Twelve and Fourteen, for the sole benefit of the parties
hereto, any agent of the Trustee or the Company under this Indenture and the
Holders of the Debt Securities.

SECTION
15.03.  Addresses
for Notices, etc.  Any notice
or demand which by any provision of this Indenture is required or permitted to
be given or served by the Trustee or by the Holders of Debt Securities on the
Company may be given or served by being deposited, registered or certified mail
postage prepaid, in a post office letter box in the United States addressed
(until another address is filed by the Company with the Trustee) to the
Company, 2801 80th Street, Kenosha, Wisconsin 53143, Attention: Secretary.  Any notice, direction, request or demand by
any Holder of a Debt Security or the Company to or upon the Trustee shall be
deemed to have been sufficiently given or made, for all purposes, if given or
made in writing at the principal office of the Trustee, addressed to the
attention of its Trust Department.  Any
notice, report or other instrument required by any of the provisions of this
Indenture to be given by the Trustee to the Holders of Debt Securities of any
or all series shall be deemed to have been sufficiently given, for all
purposes, when mailed by first class mail.

SECTION
15.04.  New
York Contract.  This Indenture
and the Debt Securities shall for all purposes be construed in accordance with
and governed by the laws of the State of New York.

SECTION
15.05.  Evidence
of Compliance with Conditions Precedent.  Upon any Company request to the Trustee to take
any action under any of the provisions of this Indenture, the Company shall
furnish to the Trustee an Officers’ Certificate stating that all conditions
precedent, if any (including any covenant, compliance with which constitutes a
condition precedent) provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that, in the
opinion of such counsel, all such conditions precedent have been complied with,
except that in the case of any such application or demand as to which the
furnishing of such document is specifically required by any provision of this
Indenture relating to such particular application or demand, no additional
certificate or opinion need be furnished.

 68
 

 

Each
certificate or opinion provided for in this Indenture and delivered to the
Trustee with respect to compliance with a condition or covenant provided for in
this Indenture shall include (1) a statement that the Person making such
certificate or opinion has read such covenant or condition; (2) a brief
statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are
based; (3) a statement that, in the opinion of such Person, he has made such examination
or investigation as is necessary to enable him to express an informed opinion
as to whether or not such covenant or condition has been complied with; and (4)
a statement as to whether or not, in the opinion of such Person, such condition
or covenant has been complied with.

SECTION
15.06.  Legal
Holidays.  In any case where
the date of maturity of interest on or principal of or premium, if any, on any
series of Debt Securities or the date fixed for redemption of any Debt Security
or Debt Securities will be a legal holiday or a day on which banking
institutions are legally authorized or obligated to close in New York or any
other location where a paying agent appointed pursuant to Section 5.02 is
located, then payment of such interest on or principal of and premium, if any,
on such Debt Securities need not be made by such paying agent on such date but
may be made by such paying agent on the next succeeding business day that is
not a day in such location that is either a legal holiday or a day on which
banking institutions are legally authorized or obligated to close, with the
same force and effect as if made on such date of maturity or the date fixed for
redemption and no interest shall accrue for the period from and after such
prior date.

SECTION
15.07.  Trust
Indenture Act of 1939 to Control. 
If any provision hereof limits, qualifies or conflicts with the duties
imposed by any of Sections 310 through 317 of the Trust Indenture Act of 1939,
by the operation of Section 318(c) thereof, such imposed duties shall control,
except as, and to the extent, expressly excluded from this Indenture, as
permitted by the Trust Indenture Act of 1939. 
If any provision of this Indenture modifies or excludes any provision of
the Trust Indenture Act of 1939 that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or to be
excluded, as the case may be.

SECTION
15.08.  Table
of Contents, Headings, etc. 
The table of contents and the titles and headings of the articles and
sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof, and shall in no way modify or
restrict any of the terms or provisions hereof.

SECTION
15.09.  Determination
of Principal Amount.  In
determining whether the Holders of the requisite principal amount of
Outstanding Debt Securities of any series have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, or whether
sufficient funds are available for redemption or for any other purpose, (i) the
principal amount of an Original Issue Discount Debt Security that shall be
deemed to be Outstanding for such purposes shall be the amount of the principal
thereof that would be due and payable as of the date of such determination upon
a declaration of acceleration of the maturity thereof pursuant to Section 7.01,
(ii) the principal amount of any Debt Securities denominated in 

 69
 

 

a Foreign Currency
that shall be deemed to be Outstanding for such purposes shall be determined by
converting the Foreign Currency into Dollars at the Market Exchange Rate as of
the date of such determination and (iii) the principal amount of any Indexed
Debt Security that shall be deemed to be Outstanding for such purposes shall be
the amount of the principal face amount of such Indexed Debt Security at
original issuance, unless otherwise provided in or pursuant to this Indenture.

SECTION
15.10.  Execution
in Counterparts.  This
Indenture may be executed in any number of counterparts, each of which shall be
an original and such counterparts shall together constitute but one and the
same instrument.  U.S. Bank National
Association hereby accepts the trusts in this Indenture declared and provided,
upon the terms and conditions hereinabove set forth.

[SIGNATURE PAGE
FOLLOWS]

 70

 

IN WITNESS
WHEREOF, the undersigned have executed this Indenture as of the date first set
forth above.

	
   

  	
  SNAP-ON INCORPORATED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Martin M. Ellen

  	
   

  
	
   

  	
  Name: Martin M. Ellen

  
	
   

  	
  Title:  
  Senior Vice President-Finance

  
	
   

  	
              And Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  U.S. BANK NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gene E. Ploeger

  	
   

  
	
   

  	
  Name:   Gene
  E. Ploeger

  
	
   

  	
  Title:     
  Vice President

  

 

Signature Page to
Indenture

 

 

	
  STATE OF WISCONSIN

  	
  )

  
	
   

  	
  )

  	
  SS:

  
	
  COUNTY OF KENOSHA

  	
  )

  

 

On the 5th day of January, 2007, before me
personally came Martin M. Ellen to me known, who, being by me duly sworn, did
depose and say that he or she is Sr. V. P. Finance & CFO of SNAP-ON
INCORPORATED, one of the corporations described in and which executed the
foregoing instrument; that he or she signed his name thereto; and said he or
she acknowledged said instrument to be his or her free act and deed and the
free act and deed of said corporation.

WITNESS
my hand and official seal the day and year first above written.

	
  

  	
  /s/ Shelly J. Lange

  	
   

  
	
   

  	
  Notary Public

  
	
   

  	
   

  
	
   

  	
   

  
	
  (NOTARIAL SEAL)

  	
  My commission expires:

  	
  April 1, 2007

  	
   

  
					

 

 

 

	
  STATE OF WISCONSIN

  	
  )

  
	
   

  	
  )

  	
  SS:

  
	
  COUNTY OF MILWAUKEE

  	
  )

  

 

On the 8th day of January, 2007, before me personally
came Gene E. Ploeger, to me known, who, being by me duly sworn, did depose and
say that he or she is Vice President of U.S. BANK NATIONAL ASSOCIATION, one of
the corporations described in and which executed the foregoing instrument; that
he or she signed his or her name thereto; and said he or she acknowledged said
instrument to be his or her free act and deed and the free act and deed of said
corporation.

WITNESS
my hand and official seal the day and year first above written.

	
  

  	
  /s/ Steven Post

  	
   

  
	
   

  	
  Notary Public

  
	
   

  	
   

  
	
   

  	
   

  
	
  (NOTARIAL SEAL)

  	
  My commission expires:

  	
  12/19/2010

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