Document:

Exhibit 10.1

 

DATED

 

30
SEPTEMBER 2009

 

QUOTA PURCHASE AGREEMENT

 

between

 

TOREADOR RESOURCES CORPORATION

 

and

 

ROHÖL-AUFSUCHUNGS AKTIENGESELLSCHAFT

 

 

CONTENTS

 

	
  1.

  	
   

  	
  INTERPRETATION

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  CONDITIONS

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  SALE AND PURCHASE

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  PURCHASE PRICE

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  CLOSING

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  WARRANTIES AND
  INDEMNITIES

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  CLAIMS BY THE BUYER

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  BUYER’S WARRANTIES

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  TAX MATTERS AND WELL
  INDEMNITY

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  CONFIDENTIALITY AND
  ANNOUNCEMENTS

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
   

  	
  FURTHER ASSURANCE

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
   

  	
  ASSIGNMENT

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
   

  	
  WHOLE AGREEMENT

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
   

  	
  VARIATION AND WAIVER

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
   

  	
  COSTS

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
   

  	
  NOTICE

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
   

  	
  INTEREST ON LATE PAYMENT

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  18.

  	
   

  	
  COUNTERPARTS

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  19.

  	
   

  	
  LANGUAGE

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  20.

  	
   

  	
  SEVERANCE

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  21.

  	
   

  	
  AGREEMENT SURVIVES
  CLOSING

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  22.

  	
   

  	
  GOVERNING LAW AND
  JURISDICTION

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SCHEDULE
  1 - PARTICULARS OF THE COMPANY AND THE MINORITY SUBSIDIARY

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  PART
  1. THE COMPANY

  	
   

  	
   

  

 

 

	
  PART
  2. MINORITY SUBSIDIARY

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 2 - CONDITIONS

  	
   

  	
  32

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 4 - ADDITIONAL
  PAYMENT

  	
   

  	
  33

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 5 – WARRANTIES

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  ORGANISATION

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  POWER TO SELL THE
  COMPANY

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  QUOTA OF THE COMPANY

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  CONSTITUTIONAL AND
  CORPORATE DOCUMENTS

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  INFORMATION

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  COMPLIANCE WITH LAWS

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  LICENCES AND CONSENTS
  AND APPLICATIONS

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  JOINT VENTURE AGREEMENTS

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  WORK PROGRAMS

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  STATUS OF OPERATIONS

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
   

  	
  INSURANCE

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
   

  	
  POWER OF ATTORNEY

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
   

  	
  DISPUTES AND
  INVESTIGATIONS

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
   

  	
  CONTRACTS

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
   

  	
  FINANCE AND GUARANTEES

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
   

  	
  INSOLVENCY

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
   

  	
  ASSETS

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  18.

  	
   

  	
  CONDITION OF EQUIPMENT

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  19.

  	
   

  	
  DEMERGER

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  20.

  	
   

  	
  EMPLOYMENT

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  21.

  	
   

  	
  PROPERTY

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  22.

  	
   

  	
  ACCOUNTS

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  23.

  	
   

  	
  INTRAGROUP RELATIONSHIPS

  	
   

  	
  44

  

 

 

	
  24.

  	
   

  	
  FINANCIAL AND OTHER
  RECORDS

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  25.

  	
   

  	
  CHANGES SINCE ACCOUNTS
  DATE

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  26.

  	
   

  	
  TAXATION

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  27.

  	
   

  	
  ENVIRONMENTAL MATTERS

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  28.

  	
   

  	
  INTELLECTUAL PROPERTY

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  29.

  	
   

  	
  LIABILITY FOR BROKERS’ FEES

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SCHEDULE 6 - PARTICULARS OF PROPERTIES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  PART 1. FREEHOLD PROPERTIES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  PART 2. LEASEHOLD PROPERTIES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  PART 3. OTHER REAL PROPERTY

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 7 - DISCLOSURE LETTER

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 8 - ARTICLES OF ASSOCIATION OF
  THE COMPANY

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 9 – NEW ARTICLES OF ASSOCIATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 10 – CLOSING AGENDA

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE
  11 – ESCROW AGREEMENT

  	
   

  	
   

  

 

 

THIS
AGREEMENT
is dated 30 September 2009

 

PARTIES

 

(1)                                 TOREADOR
RESOURCES CORPORATION a corporation organized under the laws of Delaware
and whose registered office is at 13760 Noel Road, Suite 1100, Dallas,
Texas TX 75240-1383, United States of America (Seller).

 

(2)                                 ROHÖL-AUFSUCHUNGS
AKTIENGESELLSCHAFT,  a corporation
organized under the laws of Austria, registered under company registration
number FN 78563 i, having its registered office at Schwarzenbergplatz 16,
1015 Vienna, Austria (Buyer).

 

BACKGROUND

 

(A)                             The Company has a registered
capital of HUF 3,070,000 (three million and seventy thousand Hungarian Forints)
consisting of HUF 3,010,000 (three million and ten thousand Hungarian Forints)
in cash and HUF 60,000 (sixty thousand Hungarian Forints) by way of
contribution in kind.

 

(B)                               Further particulars of the
Company and of its Minority Subsidiary at the date of this Agreement are set
out in Schedule 1.

 

(C)                               The Seller owns the legal and
beneficial title to the Quota.

 

(D)                              The Seller has agreed to sell
and the Buyer has agreed to buy the Quota subject to the terms and conditions
of this Agreement.

 

(E)                                The Seller and the Buyer
acknowledge that the Company’s intention is that it will be demerged into a
number of separate legal entities subsequent to the Closing.

 

AGREED TERMS

 

1.                                      INTERPRETATION

 

1.1                                 The
definitions and rules of interpretation in this Clause apply in this
Agreement.

 

Accounts: the draft interim audited
financial statements of the Company as at and to the Accounts Date issued by
RSM DTM Audit KFT dated September 29, 2009.

 

Accounts
Date:
31 July 2009.

 

Additional
Payment:
EUR 2,000,000 (two million Euros).

 

Additional
Payment Condition: has the meaning ascribed to it in Schedule 4.

 

Affiliates:
with respect to
any person, a person that directly or indirectly controls, is controlled by or
is under common control with such person, with control in such context meaning
the ability to direct the management or policies of a person through 

 

1

 

ownership of voting shares or other
securities, pursuant to a written agreement, or otherwise, but for the
avoidance of any doubt does not include the Minority Subsidiary.

 

Agreed Assets are all Assets EXCEPT FOR
(i) concessions, licenses and similar rights insofar as they relate to
Ot-Ny-5 only; (ii) assets in the course of construction; (iii) raw
materials and consumables; and (iv) EUR 600,000 (six hundred thousand
Euros) and in respect of (i), (ii) and (iii) as shown in the Accounts
and in respect of (iv) in respect of the cleared funds held in the
Specified Bank Account.

 

Agreed
Provisions are the abandonment provisions for those Wells which are not expected
to produce being (i) Ba-K-1; (ii) Kiha-D-1; (iii) Orm-DK-1; (iv) Orm-K-3;
(v) Orm-K-4; (vi) Zsa-Ny-1; (vii) Tik-1; and (viii) Nko-Ny-1
and which are shown in the Accounts.

 

Agreement: means this Quota Purchase Agreement.

 

Applications: the application for the BA-IX mining plot license, the
Mezotur-V mining plot license and the Inke Application.

 

Approvals:
has
the meaning ascribed to it in Section 7 of Schedule 5 of this Agreement.

 

Articles
of Association: the articles of association (deed of foundation) of the
Company registered at the Registry Court and shown in Schedule 8.

 

Assets: the Company’s assets as shown
in the Accounts.

 

Business
Day:
a day (other than a Saturday, Sunday or public holiday) when banks in both
Budapest and Vienna are open for business.

 

Buyer’s
Report: the report to be provided by the Buyer to the Seller pursuant to the
provisions of Clause 5.6.

 

Buyer’s
Warranties:  the
representations and warranties in Clause 8 given by the Buyer in favour of the
Seller.

 

Claim: a claim for breach of this
Agreement including a breach of any of the Warranties. A Claim is connected
with another Claim if they all arise out of the occurrence of the same event or
relate to the same subject matter.

 

Clause:
means a clause or Section of
this Agreement.

 

Close
of Business:
18:00 hours on a Business Day.

 

Closing:
the
closing of the sale and purchase of the Quota in accordance with this Agreement.

 

Closing
Agenda:
a document in the agreed form set forth in Schedule 10 (a) identifying the
matters to be undertaken at Closing and (b) including drafts of the
documents to be exchanged by the Buyer and Seller at Closing including (i) a
joint written notification of the Buyer and the Seller addressed to the
managing directors of the Company that the Buyer has acquired the Quota and
requesting the managing directors to register such change of ownership in the
members’ list of the Company; 

 

2

 

(ii) the
members’ list signed by the managing directors of the Company showing the Buyer
as the new sole holder of the Quota along with the New Articles of Association;
(iii) the withdrawal of the managing directors and the appointment of the
new managing directors Travis Wetzlaugk and Ernst Burgschwaiger; (iv) a
declaration by the Buyer that it regards the provisions of the New Articles of
Association as binding upon itself; and (v) the power of attorney of the
Company in favour of PRK to proceed with the formal registration of the
purchase of the Quota at the Registry Court on the Closing Date.

 

Closing
Balance Sheet:
the unaudited financial statements of the Company as at the Closing Date on a
basis consistent with the Accounts (i.e. in accordance with applicable
Hungarian accounting standards for statutory year end accounts) to be prepared
by the Seller which will be accompanied by (but not form part of the Closing
Balance Sheet) (i) an additional calculation to demonstrate the Closing
Net Assets and (ii) a trial balance.

 

Closing
Date: has
the meaning given in Clause 5.1.

 

Closing
Net Assets: the amount by which the Agreed Assets varies from the sum of (x) the
amount of Agreed Provisions and (y) the amount of Total Debt or expressed
as follows Closing Net Assets = Agreed Assets – (Agreed
Provisions + Total Debt)

 

Closing
Payment: EUR
3,700,000 (three million seven hundred thousand Euros).

 

Closing
Payment Holdback: EUR 300,000 (three hundred thousand Euros).

 

Company: Toreador Hungary Limited (to
be renamed as RAG Hungary Limited after Closing), a company incorporated and
registered in Hungary with Company Registration Number: Cg. 01-09-679019 and
having its registered office at H-1113 Budapest, Bocskai út 134-146, Dorottya
Udvar Building D, 3rd floor, further
details of which are set out in Part 1 of Schedule 1.

 

Confidentiality
Agreement: the confidentiality agreement between the Seller and Buyer dated 9 June 2009.

 

Conditions: the conditions, and each of
them, as set out in Schedule 2.

 

Contract
Area: any and all areas
with respect to which the Company has a right of use under Hungarian Permits,
including the Licenses, as at the date of this Agreement.

 

Damages:  any and all damages or
losses, liabilities, costs (including, without limitation, proper legal and
other similar professional costs), charges, expenses, actions, fines and
penalties (in each case calculated on a Euro to Euro basis) suffered or
sustained by the Buyer or the Company including losses of future revenues,
income or profits (in Hungarian: “elmaradt haszon” or “elmaradt vagyoni elöny”),
but excluding consequential damages (in Hungarian: “közvetett kár”) and damages
or losses which are contingent, potential or unforeseen.

 

Demerger:
the legal process pursuant
to which the Company will be demerged into 4 corporate entities created by way
of legal succession, the purpose of which is to 

 

3

 

transfer certain assets and liabilities from the
Company into the relevant newly formed entities and thereby to mitigate the tax
consequences of the transfers of such certain assets and liabilities.

 

Disclosed: all matters disclosed in or
under the Disclosure Letter.

 

Disclosure
Letter: the letter to be issued by the Seller in favour of the Buyer in the
form shown in Schedule 7 to this Agreement.

 

Draft
Closing Balance Sheet: a draft of the Closing Balancing Sheet to be prepared
in accordance with the requirements of Clause 5.5 of this Agreement.

 

Encumbrance: any interest or equity of any
person (including any right to acquire, option or right of pre-emption) or any
mortgage, lease, charge, pledge, lien, assignment, hypothecation, security,
interest, voting interest, title, retention or any other security agreement or
arrangement including any third party rights of a similar kind or having a
similar effect to the foregoing.

 

Escrow
Account: the
bank account of the Escrow Agent the details of which are Bank:
Notartreuhandbank AG (NTB), Bank Code: 31500, Account Number: 896-01.398.403,
In the name of: Toreador Hungary/TH, IBAN: AT21 3150 0896 0139 8403, BIC:
RZBAATWW.

 

Escrow
Agent: Dr. Rudolf
Kaindl, Austrian notary public, Vienna-Donaustadt IV, 1220 Vienna,
Donaustadtstraße 1.

 

Escrow
Agreement:  the
agreement attached to this agreement as Schedule 11 to be made between (1) the
Buyer (2) the Seller and (3) the Escrow Agent setting out the terms
and conditions of the Escrow Agent and the holding of the Additional Payment.

 

EUR or €: the single currency of a member state of the European
Communities that adopts or has adopted the euro as its lawful currency under
the legislation of the European Community for Economic Monetary Union.

 

Expert: a person appointed in accordance
with the provisions of Clause 5.9 and Clauses 5.11 to 5.20 (inclusive) to
resolve any dispute arising in connection with the Closing Balance Sheet.

 

Exploration
Licenses: mean (i) the single license to explore Szolnok
Block and the Tompa Block as issued by the Hungarian Mining Authority pursuant
to resolution number 1828/99 dated April 20th,
1999 and, extended by resolution no. 4432/2005/1 dated April 25th,
2005 and (ii) the Inke Exploration License.

 

Governmental
Authority: any government and/or any political subdivision thereof, including
departments, courts, commissions, boards, bureaus, ministries, agencies or
other instrumentalities.

 

Hungarian
Governmental Authority: any Governmental Authority in or of the Republic of
Hungary.

 

Hungarian
Mining Authority: the  Hungarian Office
for Mining and Geology and all and any district mining offices in Hungary.

 

4

 

Hungarian Permits: all permits, licenses, variances, approvals and other
authorizations of Hungarian Governmental Authorities required to use, own,
operate or maintain the Licenses including, without limitation, the drilling
permit for Balotaszallas-E-1.

 

Hungarian Taxes: all Taxes imposed by any Hungarian Governmental Authority.

 

Inke Application: the application dated 8 July 2009 for an exploration license for
hydrocarbons in the area known as Inke.

 

Inke Exploration License: the single
license to explore the Inke Applicatino area as issued by the Hungarian Mining
Authority pursuant to resolution number 4572/15/2009 dated September 14, 2009, but which
remains subject to a 14 day appeal period from date of receipt of the letter on
September 22, 2009.

 

Joint Venture Agreements means each of (a) the Szolnok JOA, (b) the Tompa FIA, (c) the Tompa
SFA and/or (d) the TK Articles of Association, copies of which have been
provided to the Buyer.

 

Kiskunhalas Application: the application for a hydrocarbon exploration license in respect of
the Kiskunhalas Area dated 20 March 2007 and finally rescinded by the Hungarian
Mining Authority on 12 February 2009.

 

Kiskunhalas Area: the area known by the Company as Kiskunhalas and as set out in the
Kiskunhalas Application.

 

Kiskunhalas Litigation: the supervisory request submitted by the Company to the Supreme
Court of Hungary dated 18 March 2009 in relation to the judgment of the
Kecskemet County Court dated 16 January 2009 affecting the Kiskunhalas
Application.

 

Laws: all laws, statutes, rules, regulations, ordinances, orders, decrees,
requirements, judgments and codes of Governmental Authorities in force,
fully-implemented and enforceable as of the date hereof.

 

Lease: the lease referred to in Part 2 of Schedule 6.

 

Licenses: the Exploration Licenses and/or the Mining Plot License.

 

Material
Contract: has the meaning given in paragraph 14.1 of Schedule 5.

 

Mining Plot
License: the mining plot license
known as Balotaszallas-VIII and issued by the Hungarian Mining Authority on 2 June
2009 under resolution SzBK-1.562/15/2009.sz and amended on 16 June 2009 under
resolution SzBK-1.562/18/2009.sz.

 

Minority
Subsidiary:
TK-Services Limited further particulars of which are set out in Part 2 of
Schedule 1.

 

New
Articles of Association: the new articles of association (deed of foundation) of the
Company to be registered at the Registry Court upon Closing and shown in
Schedule 9.

 

5

 

OTP Merkantil Loan: the financing provided to the Company by OTP Merkantil in respect
of certain vehicles as shown in the Accounts.

 

Party: the Seller or the Buyer, as the case may be.

 

Parties: the Seller and/or the Buyer.

 

Properties: has the meaning
given in paragraph 21 of Schedule 5.

 

Purchase
Price: the purchase price for the Quota to be paid by the Buyer to the
Seller in accordance with Clause 4.

 

Quota: the Seller’s holding
of HUF 3,070,000 (three million and seventy thousand Hungarian Forints)
consisting of HUF 3,010,000 (three million and ten thousand Hungarian Forints)
in cash and HUF 60,000 (sixty thousand Hungarian Forints) as in-kind
contribution all of which has been fully paid up and which represents 100% (one
hundred per cent.) of the registered capital of the Company.

 

Records: all books, records, data, files, maps and accounting records
related to the Licenses or other Assets or used or held for use in connection
with the use, ownership, operation or maintenance thereof, or which otherwise
relate to the Company or its business, but excluding
(i) all corporate, financial and Taxation records of the Company’s Affiliates
(including the Seller), (ii) any work product of legal counsel for the Company
pertaining to this Transaction or any Affiliate (including the Seller)
including any and all correspondence pertaining thereto; and (iii) any and all
records concerning any bids or offers or communications received from and
records of negotiations with third parties relating to the sale of the Quota
and/or the Assets (together the “Excluded Records”).

 

Registry Court: the Municipal Court of Budapest, Hungary acting as the registry
court.

 

Section: means a section or Clause of this Agreement.

 

Specified
Bank Account: the
account with K&H Bank in which the sum of EUR 600,000 (six hundred thousand
Euros) is held as follows:- Account name: Toreador Magyarország Kft; Account
number (IBAN): HU33 1040 1093 4956 4856 5552 1056; Bank name: K&H Bank
Nyrt.; Bank address: H-1051 Budapest, Vigadó sq. 1.; SWIFT code: OKHBHUHB.

 

Subsidiary: in relation to a
company (the holding company), any other company in which the holding company
(or a person acting on its behalf) directly or indirectly holds or controls
either:

 

(a)                                  a majority of the voting rights exercisable at shareholder meetings
of the company; or

 

(b)                                 the
right to appoint or remove directors having a majority of the voting rights
exercisable at meetings of the board of directors of the company;

 

6

 

and any company which is a Subsidiary of
another company is also a Subsidiary of that company’s holding company.

 

Unless the context otherwise requires, the
application of the definition of Subsidiary to any company at any time shall
apply to the company as it is at that time.

 

Szolnok
Block: the
Contract Area covered by resolution number 1828/99 dated April 20th, 1999 and
extended by resolution number 4432/2005/1 dated April 25th, 2005 in each case
by the Hungarian Mining Authority and with the following EOV co-ordinates:

 

	
   

  	
   

  	
  Y

  	
   

  	
  X

  	
   

  
	
  1.

  	
   

  	
  722000

  	
   

  	
  220000

  	
   

  
	
  2.

  	
   

  	
  782000

  	
   

  	
  220000

  	
   

  
	
  3.

  	
   

  	
  782000

  	
   

  	
  200000

  	
   

  
	
  4.

  	
   

  	
  752000

  	
   

  	
  200000

  	
   

  
	
  5.

  	
   

  	
  752000

  	
   

  	
  180000

  	
   

  
	
  6.

  	
   

  	
  782000

  	
   

  	
  180000

  	
   

  
	
  7.

  	
   

  	
  782000

  	
   

  	
  170000

  	
   

  
	
  8.

  	
   

  	
  772000

  	
   

  	
  170000

  	
   

  
	
  9.

  	
   

  	
  772000

  	
   

  	
  160000

  	
   

  
	
  10.

  	
   

  	
  722000

  	
   

  	
  160000

  	
   

  

 

Szolnok Farmees’ Loans: the aggregate amount outstanding due to the farmees under the Szolnok
JOA which is approximately HUF 1,792 million (one thousand seven hundred and
ninety two million Hungarian forints).

 

Szolnok
JOA: the
joint operating agreement in respect of the Szolnok Area dated 17 December 2007
and made by and between (1) the Company, (2) Ascent Resources plc, (3) Contact
International Exploration Limited (“Contact”), (4) Oil
and Gas Solutions Limited, and (5) PetroVentures Europe B.V. as such agreement
was amended by the replacement of Contact with the Buyer pursuant to two agreements
both dated 20 March 2008 between (1) Contact and (2) the Buyer and a further
agreement dated 20 March 2008 made between (1) the Buyer and (2) the Company.

 

Taxation: all taxes, including
income tax, corporate income tax, solidarity tax and local business tax,
surtax, remittance tax, presumptive tax, net worth tax, special contribution,
production tax, pipeline transportation tax, value added tax, withholding tax,
gross receipts tax, windfall profits tax, profits tax, severance tax, personal
property tax, real property tax, sales tax, service tax, transfer tax, use tax,
excise tax, premium tax, customs duties, stamp tax, motor vehicle tax,
entertainment tax, insurance tax, capital stock tax, franchise tax, occupation
tax, payroll tax, employment tax, social security, unemployment tax, disability
tax, alternative or add-

 

7

 

on minimum tax, estimated tax, special
remuneratory benefit, and any other assessments, duties, fees, levies or other
charges imposed by a Governmental Authority together with any interest, fine or
penalty thereon, or addition thereto, including any taxes arising from transfer
pricing issues and Tax or Taxes shall
have the same meaning.

 

Tax Returns: all returns, reports, declarations, claims for refund, statements,
forms or other filings with respect to Taxation, including any schedules,
attachments or amendments thereto.

 

Tied-Up
Capital: the supplementary payment received by the
Company and shown in the Accounts.

 

Third Party
Claim: has the meaning ascribed to it in Section 7.1.

 

Third Party Claim Review Period: has the meaning ascribed to it in Section 7.

 

TK Articles
of Association: the articles of association of TK Services, a copy of
which has been Disclosed to the Buyer.

 

TK Services: the Minority Subsidiary.

 

Tompa
Block: the Contract Area covered by  resolution no. 1828/99 dated April 20th, 1999 and, extended by
resolution no. 4432/2005/1 dated April 25th, 2005 in each case issued by the Hungarian Mining Authority and with
the following EOV co-ordinates:

 

	
   

  	
   

  	
  Y

  	
   

  	
  X

  	
   

  
	
  1.

  	
   

  	
  685000

  	
   

  	
  120000

  	
   

  
	
  2.

  	
   

  	
  702000

  	
   

  	
  120000

  	
   

  
	
  3.

  	
   

  	
  702000

  	
   

  	
  100000

  	
   

  
	
  4.

  	
   

  	
  710000

  	
   

  	
  100000

  	
   

  
	
  5.

  	
   

  	
  710000

  	
   

  	
  national
  border

  	
   

  
	
  6.

  	
   

  	
  685000

  	
   

  	
  national
  border

  	
   

  

 

Tompa FIA: the agreement made between (1) the Company and (2) Delta Hydrocarbons
B.V. (“Delta”) dated 28 March 2008, a copy of
which has been Disclosed to the Buyer.

 

Tompa SFA: the agreement made between (1) the Company; (2) Delta; and (3) Delta
Hydrocarbons KFT dated 26 June 2008, a copy of which has been Disclosed to the
Buyer.

 

Toreador
International:  Toreador International Holding Limited, a company incorporated and
registered in Hungary with Company Registration Number: Cg. 01-09-868606 and
having its registered office at H-1113 Budapest, Bocskai út 134-146, Dorottya
Udvar Building D, 3rd floor.

 

8

 

Total Debt: the Company’s aggregate amount of liabilities to the Seller, its
Affiliates and any third parties but which for the avoidance of doubt excludes
any amount of Agreed Provisions and further which excludes the aggregate of the
(a) OTP Merkantil Loan; (b) TK Services Loan; and (c) Szolnok Farmees’ Loans.

 

Transaction: the transaction
contemplated by this Agreement or any part of that transaction.

 

TK Services
Loan: the loan due to TK Services
from the Company as shown in the Accounts being approximately HUF 55.5 million
(fifty five million five hundred thousand Hungarian forints) together with all
interest thereon.

 

Value Added
Tax or VAT:  means value
added tax (in Hungary
known as ÁFA) and defined in Act No CXXVII of 2007 on Value Added Tax.

 

Vizvar: the area for exploration contained in Resolution Number 365/12/2008 of the Pécs
Mining Authority.

 

Vizvar Application: the application for a hydrocarbon exploration license dated 19 March
2007 and finally rescinded on 5 August
2009.

 

Vizvar Litigation: the judicial proceedings affecting the Vizvar Application including
the right to launch a supervisory request to the Supreme Court of Hungary in
relation to the judgment of the Somogy County Court affecting the Vizvar
Application dated 30 June 2009 and received on 27 July 2009.

 

Warranties: the representations
and warranties of the Seller in Clause 6 and Schedule 5.

 

Well: means each of the wells shown in the Accounts.

 

Well Structure: means that part of the well which is non-removable and permanently
installed including the well casing.

 

Well Sketches and End of Well
Reports: mean those diagrams and those
reports written by the Company delivered to the Buyer prior to the Closing.

 

1.2                                Clause and schedule
headings do not affect the interpretation of this Agreement.

 

1.3                                A person
includes a corporate or unincorporated body.

 

1.4                                Words in the singular
include the plural and in the plural include the singular.

 

1.5                                A reference to one gender
includes a reference to the other gender.

 

1.6                                A reference to a
particular statute, statutory provision or subordinate legislation is a
reference to it as it is in force at the date of this Agreement, taking account

 

9

 

of any amendment or
re-enactment and includes any statute, statutory provision or subordinate
legislation which it amends or re-enacts and subordinate legislation for the
time being in force made under it.

 

1.7                                Writing or written
includes faxes but not e-mail.

 

1.8                                Documents in agreed form are documents in the form agreed by the Parties
to this Agreement and initialled by them for identification.

 

1.9                                A reference in this
Agreement to other documents referred to in the Agreement is a reference to the
following documents:

 

(a)           Escrow Agreement; and

 

(b)           Disclosure Letter.

 

1.10                         References to times of
day are, unless the context otherwise requires, to Budapest time and references
to a day are to a period of twenty four hours running from midnight on the
previous day.

 

1.11                         Any amount expressed to
be in Euros shall, to the extent that it requires, in whole or in part, to be
expressed in any other currency in order to give full effect to this Agreement,
be deemed for that purpose to have been converted into the relevant currency on
the last Business Day immediately preceding Closing. Subject to any applicable
legal requirements governing conversions into that currency, the rate of
exchange shall be the Hungarian National Bank’s published mid rate for the purchase
of that currency with Euros at the time of the deemed conversion.

 

1.12                         Without prejudice to the
application of Hungarian law to this Agreement, any reference to a legal term
in the English language for any action, remedy, method of judicial proceeding,
legal document, legal status, court, official or any legal concept or thing in
respect of the jurisdiction of Hungary shall be deemed to include a reference
to what most nearly approximates the Hungarian legal term.

 

2.                                      CONDITIONS

 

2.1                               The Seller and the Buyer
shall use all reasonable endeavours so far as lies within their respective
powers to procure that the Conditions as defined in Schedule 2 are satisfied as
soon as practicable and in any event no later than:

 

(a)                                  Close of Business on Wednesday 30 September 2009; or

 

(b)                                 such later time and date as may be agreed in writing by the Seller
and Buyer.

 

10

 

2.2                               The Buyer and the Seller
shall co-operate fully and in good faith in all and any actions necessary, or
deemed desirable, to procure the satisfaction of the Conditions.

 

2.3                               The Buyer may, at any
time and to such extent as it thinks fit, waive in whole or in part any of the
Conditions by written notice to the Seller.

 

2.4                               If any of the Conditions
have not been satisfied or waived by the date and time provided in Clause 2.1,
this Agreement shall cease to have effect immediately after that time on that
date except for:

 

(a)                                  the provisions mentioned in Clause 2.5; and

 

(b)                                 any rights or liabilities that have accrued under this Agreement.

 

2.5                               The following provisions
shall continue to have effect, notwithstanding failure to waive or satisfy the
Conditions:

 

(a)           Clause 1;

 

(b)           Clause 2;

 

(c)           Clause 10;

 

(d)           Clause 13;

 

(e)           Clause 14;

 

(f)            Clause 15;

 

(g)           Clause 16 ;

 

(h)           Clause 19;
and

 

(i)            Clause 22.

 

3.                                      SALE AND PURCHASE

 

3.1                               On the terms of this
Agreement and subject to the satisfaction of the Conditions, at the Closing,
the Seller shall sell, and the Buyer shall buy, the Quota free from all
Encumbrances.

 

3.2                               The Quota is sold with
all rights that attach, or may in the future attach, to it (including, in
particular, the right to be repaid the amount of the Tied-up Capital, the right
to receive all dividends and distributions declared, made or paid on or after
the Closing Date).

 

3.3                               The Buyer is not obliged
to complete the purchase of the Quota unless the purchase of the entire amount
of the Quota is completed simultaneously.

 

11

 

3.4                               The Seller acknowledges
that the Buyer enters into this Agreement on the basis of, and in reliance on
the Warranties, but at all times subject to all matters Disclosed, and the
Seller enters into this Agreement on the basis of, and in reliance on, the
Buyer’s Warranties.

 

3.5                               If at any time before or
at Closing it becomes apparent that:

 

(a)                                  a Warranty has been materially and adversely breached, is materially
and adversely untrue or incorrect or that the Seller has breached any other
term of this Agreement that in either case is materially adverse to the sale
and purchase of the Quota, the Buyer may (without prejudice to any other rights
it may have in relation to the breach):

 

(i)                           rescind this Agreement by notice to the Seller; or

 

(ii)                       proceed to Closing;

 

(b)                                 a Buyer’s Warranty has been materially and adversely breached, is
materially and adversely untrue or incorrect or that the Buyer has breached any
other term of this Agreement that in either case is materially adverse to the
sale and purchase of the Quota, the Seller may (without prejudice to any other
rights it may have in relation to the breach):

 

(i)                           rescind this Agreement by notice to the Buyer; or

 

(ii)                       proceed to Closing.

 

4.                                      PURCHASE PRICE

 

4.1                               Subject to the following
amounts becoming due and owing under the terms of this Agreement, the Purchase
Price to be paid for the Quota is EUR 6,000,000 (six million Euros) comprising
of (i) the Closing Payment; and (ii) the Closing Payment Holdback, to the
extent that the same becomes payable pursuant to the provisions set out in
Clauses 5.5 to 5.20 (inclusive), and any CP Excess (as defined in Clause 5.10)
or Remaining CP Holdback Amount (as defined in Clause 5.10), if any; and (iii) the
Additional Payment, to the extent that the Additional Payment Condition has
been triggered and in accordance with the provisions of Schedule 4. For the
avoidance of doubt the Parties agree and acknowledge that independent of
whether or not the Closing Payment Holdback, CP Excess (as defined in Clause
5.10), CP Deficit (as defined in Clause 5.10), Remaining CP Holdback Amount (as
defined in Clause 5.10) and/or Additional Payment becomes due and owing to the
Seller, the payment of the Closing Payment at Closing shall result in the
transfer of the Quota to the Buyer.

 

12

 

5.                                      CLOSING

 

5.1                               Provided that the
Conditions shall have been satisfied or waived in accordance with Clause 2,
Closing shall take place at the offices of the Company at 10 a.m. on Wednesday
30 September 2009 or at such other location, time or date as the Seller and the
Buyer may agree in writing. The date on which Closing shall take place is
referred to herein as the “Closing Date”.

 

5.2                               At Closing the Seller
shall:

 

(a)                                  transfer the Quota in such manner as is necessary for the Buyer to
establish legal ownership in accordance with Hungarian law pursuant to the
documentation as set out in the Closing Agenda;

 

(b)                                 deliver a certified copy of the resolution adopted by the board of
directors of the Seller authorising the Transaction and the execution and
delivery by the officers specified in the resolution of this Agreement, any
documents necessary to transfer the Quota in accordance with Clause 5.2(a) and
any other documents referred to in this Agreement;

 

(c)                                  deliver all other documents identified in the Closing Agenda as
documents to be delivered by the Seller at Closing;

 

(d)                                 deliver letters of withdrawal of the managing directors of the
Company effective as of Closing;

 

(e)                                  deliver new bank mandate (signatory card) instructions to be completed
and signed in accordance with the Buyer’s instructions to replace the bank
mandate instructions existing immediately prior to Closing; and

 

(f)                                    deliver an original bank statement from the Specified Bank Account
evidencing the EUR 600,000 (six hundred thousand) as being readily available to
the Company and a letter from K & H Bank confirming that Travis Wetzlaugk
and Ernst Burgschwaiger are jointly authorised to dispose over the funds in the
Specified Bank Account.

 

5.3                               At Closing the Buyer
shall:

 

(a)                                  deliver all other documents identified in the Closing Agenda as
documents to be delivered by the Buyer at Closing;

 

(b)                                 deliver declarations of acceptance of each of the managing directors
and the members of the supervisory board which it wishes to appoint in the
Company;

 

(c)                                  pay the Closing Payment by bank transfer to the Seller or the Seller’s
appointee (who shall have been irrevocably authorised by the Seller to receive
it). The Seller’s bank account details are Natixis Paris. IBAN number FR76 3000
7999 9927 4344 4100 006. SWIFT Code CCBPFRPPFMP; and

 

13

 

(d)                                 pay an amount equal to the Additional Payment by bank transfer to
the Escrow Account, to be held in accordance with the terms of the Escrow
Agreement.

 

All
matters at Closing will be considered to take place simultaneously, and no
delivery of any document will be deemed complete until all transactions and
deliveries of documents required by this Agreement are completed, and title to
the Quota shall not be transferred and the Buyer shall have no property rights
or interest in the Quota unless and until the Closing actually takes place and
the payments referenced in subsection (c) and (d) above have been effectively
received by the intended payees. Prior to signing the Closing Agenda, the
Parties agree that the last step to be taken as part of the Closing procedure
consists of the receipt of the amounts set forth in subsections (c) and (d) above
by the specified recipient.

 

5.4                               At Closing, but in no way
later than 5 (five) Business Days after Closing, the Seller shall make
available to the Buyer all Records that are not in possession of the Company
and not otherwise required to be delivered at Closing under this Agreement.

 

5.5                               The Buyer shall procure
that the Company prepares, on behalf of the Seller, and delivers to the Buyer
the Draft Closing Balance Sheet as soon as reasonably practicable after the
Closing Date and in any event not later than 15 (fifteen) Business Days
thereafter.

 

5.6                               The Buyer shall ensure
that, within 10 (ten) Business Days starting on the Business Day immediately
following its receipt of the Draft Closing Balance Sheet, it submits to the
Seller a report stating whether or not it agrees with the Draft Closing Balance
Sheet (and in the case of disagreement, the areas of dispute in reasonable
detail to enable the Seller to understand the matters in dispute) (“Buyer’s Report”).

 

5.7                               If the Buyer agrees the
Draft Closing Balance Sheet, the Buyer’s Report will confirm this and the Draft
Closing Balance Sheet shall become the Closing Balance Sheet and it shall
become final and binding on the Parties for the purpose of this Agreement.

 

5.8                               If the Buyer disagrees
with the Draft Closing Balancing Sheet, the Parties shall use their respective
best endeavours to agree any matter in dispute. If the matter in dispute is
resolved by agreement between the Parties, the Buyer and the Seller shall
certify the Draft Closing Balance Sheet (subject to any amendment agreed
between the Parties) as being the Closing Balance Sheet and it shall become
final and binding on the Parties for the purpose of this Agreement.

 

14

 

5.9           If
the Parties are unable to resolve any disagreement within 20 (twenty) Business
Days of the Seller’s receipt of the Buyer’s Report, either Party shall have the
right to refer the disagreement to the Audit Expert.

 

5.10         Within
5 (five) Business Days, starting on the day after the Closing Balance Sheet is
in final and agreed form whether by agreement between the Parties or
determination by the Audit Expert:

 

(a)           if the Closing Net Assets is equal to zero
or not greater than EUR 50,000 (fifty thousand Euros), then the Buyer shall pay
to the Seller the Closing Payment Holdback in the same manner as payment of the
Closing Payment; or

 

(b)           if the Closing Net Assets exceed EUR 50,000
(fifty thousand Euros) (“CP Excess”),
then the Buyer shall pay to the Seller an amount equal to the aggregate of the
Closing Payment Holdback and the CP Excess in the same manner as payment of the
Closing Payment; or

 

(c)           if the Closing Net Assets is shown to be in
deficit by more than EUR 50,000 (fifty thousand Euros) (“CP
Deficit”), then the Seller shall pay to
the Buyer the amount of the CP Deficit. Payment of the CP Deficit up to and
including the amount of the Closing Payment Holdback shall be made by the
Seller to the Buyer by way of set off from the Closing Payment Holdback. If the
Closing Payment Holdback is insufficient to meet the CP Deficit then the Seller
shall be obliged to pay the difference to the Buyer by bank transfer to the
Buyer’s account notified in writing to the Seller. If the amount of the CP
Deficit is less than the Closing Payment Holdback (“Remaining CP
Holdback Amount”), the Buyer shall pay the Remaining CP Holdback
Amount to the Seller.

 

5.11         The
Audit Expert shall be appointed by the President of the Hungarian Chamber for
Auditors within five (5) Business Days of a request of either Party and shall
be duly qualified as an auditor in Hungary, fluent in English and appropriately
experienced in dealing with the matters in dispute.

 

5.12         Each of the Parties shall promptly, but in any event within five (5) Business
Days of the confirmed appointment of the Audit Expert, prepare a written
statement on the matters in dispute which (together with the relevant
documents) shall be submitted to the Audit Expert for determination.

 

5.13         The
Audit Expert shall prepare a written decision, including what adjustments (if any) are necessary to the Draft Closing Balance
Sheet in respect of the matters in dispute in order to comply with the requirements
of this Agreement and his reasons therefor, and he
shall give notice (including a copy) of the 

 

15

 

decision to the Parties
within a maximum of 20 (twenty) Business Days of the matter being referred to
him.

 

5.14         If
the Expert dies or becomes unwilling or incapable of acting, or does not
deliver the decision within the time required by Clause 5.14 then

 

(a)       either Party may apply to the President of the Hungarian Chamber for
Auditors to discharge the Audit Expert and to appoint a replacement Audit
Expert; and

 

(b)       this Clause 5.14 applies in relation to the
new Audit Expert as if he were the first Audit Expert appointed.

 

5.15         All
matters under Clauses 5.11 to 5.20 (inclusive) shall be conducted, and the
Audit Expert’s decision shall be written, in the English language.

 

5.16         The
Parties are entitled to make written submissions to the Audit Expert and shall
provide (or procure that others provide) the Audit Expert with such assistance
and documents as the Audit Expert reasonably requires for the purpose of
reaching a decision.

 

5.17         Unless
agreed by the Parties, the Audit Expert may not instruct professional advisers
to assist him in reaching his decision.

 

5.18         Each
Party shall, with reasonable promptness, supply each other with all information
and give each other access to all documentation and personnel as each other
reasonably requires to make a submission under Clauses 5.12 and/or 5.16.

 

5.19         The
Audit Expert shall act as an expert and not as an arbitrator. The Audit Expert
shall determine any dispute, which may include any issue involving the
interpretation of any provision of this Agreement, his jurisdiction to
determine the matters and issues referred to him or his terms of reference. The
Audit Expert’s written decision on the matters referred to him shall be final
and binding in the absence of manifest error or fraud.

 

5.20         The
Audit Expert’s fees and any costs properly incurred by him in arriving at his
determination shall be borne by the Parties in such proportion as the Audit
Expert in his sole discretion directs.

 

6.             WARRANTIES
AND INDEMNITIES

 

6.1           Except
as and exclusively to the extent explicitly set forth in this Clause 6 and in
Schedule 5, the Seller makes no representations or warranties, whether 

 

16

 

expressly or implied by
the Laws or otherwise and the Buyer expressly acknowledges and accepts such
limitation.

 

6.2           The
Warranties (except to the extent expressly stated to be made as of a specified
date) and the matters Disclosed are each deemed to be repeated at Closing and
any reference made to the date of this Agreement (whether express or implied)
in relation to any Warranty or Disclosure shall be construed, in relation to
any such repetition, as a reference to the Closing Date.

 

6.3           From
and after the Closing, and subject to the provisions of this Clause 6 and
Clause 7, including the agreed limitation on the liability of the Seller, the
Seller shall indemnify, defend and hold harmless the Buyer against any and all
Damages suffered or sustained by the Buyer or the Company as a result of any
breach of any Warranty by the Seller. This is without prejudice to the rights
of the Buyer to bring an action against the Seller for any other breaches of
this Agreement. If recovering under a claim, the claiming party shall not be required
to demonstrate that the indemnifying party was at fault (in Hungarian: “felróhato”)
and the indemnifying party shall have no defence to liability on the basis of
the absence of fault.

 

6.4           The
Buyer is not entitled to recover damages or otherwise obtain restitution more
than once in respect of the same loss.

 

6.5           Warranties
given so far as the Seller is aware are deemed to be given in relation to the
actual knowledge, information and belief of the Seller’s current officers and
directors after having made due inquiry of the Company’s Managing Directors
based on their respective actual knowledge, information and belief at the time
of the enquiry.

 

6.6           Each
of the Warranties is separate and, unless specifically provided, is not limited
by reference to any other Warranty or anything in this Agreement. Each of the
defend, hold harmless and indemnification obligations of the Seller shall be
construed as a separate defend, hold harmless and indemnification obligation
and shall not be limited or restricted by reference to or inference from the
terms of any other defend, hold harmless and indemnification obligation.

 

6.7           The
Seller agrees that any information supplied by the Company or by or on behalf
of any of the employees, directors, agents or officers of the Company (Officers) to the Seller or its advisers in connection with
the Warranties, the information Disclosed in the Disclosure Letter or otherwise
shall not constitute a warranty, representation or guarantee as to the accuracy
of such information in favour of the Seller, and the Seller hereby undertakes
to the Buyer and to the 

 

17

 

Company and each Officer
that it waives any and all claims which it might otherwise have against any of
them in respect of such claims.

 

6.8           Subject
at all times to matters Disclosed, neither any investigation or examination by
the Buyer before or after the Closing Date nor the establishment of the Closing
Balance Sheet or the review thereof or the review of the Accounts by the Buyer
shall (a) affect the terms of survival of or the basis for any claim under the
Warranties and/or (b) entitle the Seller to object to the validity and/or the
survival of the Warranties.

 

6.9           None
of the limitations contained in this Section 6 shall apply to any breach of any
representation and warranty which (or the delay in discovery of which) is the
consequence of intentional misstatement, concealment or other conduct by the
Seller or any of its Affiliates or any management or board member or employee
of Seller.

 

7.             CLAIMS BY
THE BUYER

 

7.1           All
Claims by the Buyer shall be asserted and resolved as follows:

 

(a)        Claim Notices.  In the event that (x) any claim, demand or
proceeding is asserted, notified or instituted by any person (including by any
Governmental Authority) other than the Parties and their respective Affiliates
which, if successful, could give rise to Damages for which the Seller would be
liable to the Buyer hereunder (any such claim, demand or proceeding, a “Third Party Claim”), or (y) the Buyer shall have a claim
against the Seller which does not involve a Third Party Claim (any such claim,
a “Direct Claim”), the Buyer shall send to
the Seller a written notice (a “Claim Notice”)
specifying the factual basis of such claim and the amount or a good faith
estimated amount of related Damages (which estimate shall not be conclusive of
the final amount of such claim), all with reasonable particularity and
containing a reference to the provisions of this Agreement in respect of which
a right to Claim is made, together with such readily available supporting
evidence as may reasonably be required by the Seller to assess the merits of
the claim and the computation or estimate of Damages.

 

(b)        Time for Claim
Notice.  The Buyer shall send a Claim Notice as soon
as is reasonably practicable after the Buyer (including the Company) first
becomes aware of a Claim (which in the case of a Direct Claim includes when the
facts upon which such claim is based) and in the event of a Third Party Claim
by no later than thirty (30) days of receipt (including by the Company) of
actual notice of such Third Party Claim, but in any event within the applicable
survival period set out in cause 7.9. Failure to comply with this time period
shall not preclude the Buyer from raising a Claim 

 

18

 

against the Seller, provided however that any Damages
resulting from the delay in providing the Claim Notice that can be proven by
the Seller will result in a reduction of such amount from the amount of the
Claim which could otherwise be made by the Buyer against the Seller.

 

(c)        Direct Claims.  In the event of a Direct Claim, the Seller
shall have thirty (30) days following its receipt of the relevant Claim Notice
or, if the amount of the Direct Claim was not determined at the time of the
Claim Notice, the date on which the amount of the Direct Claim has been
notified to it by the Seller (the “Direct Claim Review Period”)
to make such investigation of the underlying Claim as it considers necessary or
desirable.  During the Direct Claim
Review Period, the Parties shall use their respective reasonable endeavours to
reach an agreement with respect to the validity and the amount of the Direct
Claim.  If the Parties agree, on or prior
to the expiration of the Direct Claim Review Period, upon the validity and the
amount of such Direct Claim, the Seller shall pay to the Buyer, within ten (10)
Business Days following the date of such agreement, the full agreed amount of
such Direct Claim.  If the Parties fail
to agree, on or prior to the expiration of the Direct Claim Review Period, upon
the validity and/or the amount of such Direct Claim, the dispute may be
resolved in accordance with Clause 22.2.

 

(d)        Third Party
Claims.

 

(i)         Third Party Claim
Review Period.  In the event of a Third Party
Claim, the Seller shall have thirty (30) days following its receipt of the
relevant Claim Notice (the “Third Party Claim Review
Period”) to make such investigation of the underlying claim as it
considers necessary or desirable.  During
the Third Party Claim Review Period, the Parties shall use their respective
reasonable endeavours to reach an amicable solution with respect to such Third
Party Claim.  If the Parties fail to
agree, on or prior to the expiration of the Third Party Claim Review Period,
upon an amicable solution with respect to such Third Party Claim, the dispute
may be resolved in accordance with Clause 22.2.

 

(ii)        Defence of Third
Party Claim.

 

(A)          From and after the delivery of a Claim
Notice hereunder, the Seller shall have the right (but not the obligation) to
control the defence of such Third Party Claim and to retain (at its expense)
counsel of its choice, reasonably acceptable to the Buyer, to represent the
Company so long as the Seller has admitted its liability in writing to the
Buyer in respect of the Buyer’s Claim against the Seller in respect of the
Third Party Claim.  Subject to the
admission of liability aforesaid, if the Seller exercises its right to control
the said defence, then the Buyer shall take (and shall procure that the Company
takes) 

 

19

 

such actions as the Seller shall consider reasonably
necessary or appropriate under the circumstances to cooperate with the Seller
and its counsel in defending such Third Party Claim (including procuring that
the Company (x) grants to the Seller all necessary powers to represent the
Company in connection with such Third Party Claim, (y) insofar as reasonable,
furnishes to the Seller all necessary information and documentation concerning
the Company and such Third Party Claim, and (z) follows any reasonable
instructions of the Seller issued in connection with the defence of such Third
Party Claim), and shall refrain (and shall procure that the Company refrains)
from taking any action likely to jeopardize or interfere with the defence of
such claim.   The Buyer may assist, at
its expense, in the defence of any Third Party Claim with counsel of its
choice, reasonably acceptable to the Seller. 
The Seller shall keep the Buyer reasonably informed of the development
of the underlying claim.

 

(B)           In the event that the Seller (x) shall not
assume control of the defence of a Third Party Claim with reasonable promptness
after written notice to such effect by the Buyer, or (y) shall notify the Buyer
of its intention not to assume control of the defence of a Third Party Claim,
the Buyer shall conduct (or shall procure that the Company conducts) the
defence of such Third Party Claim (subject to subsection (iv) below) in good
faith and using all reasonable means and defences available to it.  The Seller may assist, at its expense, in the
defence of any Third Party Claim with counsel of its choice, reasonably
acceptable to the Buyer.  The Buyer shall
keep the Seller reasonably informed of the development of the underlying claim.

 

(iii)       Counterclaim and
Cross-Claim. To the extent reasonably requested by the Seller with respect to any
Third Party Claim, the Buyer shall make (or shall procure that the Company
makes) any reasonable and appropriate counterclaim against any person asserting
such Third Party Claim or any reasonable and appropriate cross-claim against
any other person which may be liable; no such counterclaim or cross-claim shall
be settled without the prior written consent of the Seller, which consent shall
not be unreasonably withheld.

 

20

 

(iv)       Settlement of
Third Party Claims.  The Seller
shall not be liable for any Third Party Claim which is settled or otherwise compromised
by the Buyer or in respect of which any admission of liability is made by the
Buyer without 10 (ten) Business Days’ prior written notice to the Seller. .

 

(v)        Access.  From and after the delivery of a Claim Notice
in relation to a Third Party Claim, at the reasonable request of the Seller,
the Buyer shall grant to the Seller and its representatives (including
professional advisors) such reasonable access to the premises, books, records,
computerized systems and senior management of the Company to the extent
reasonably related to the matters to which the Claim Notice relates and which
the Seller reasonably requires in order to review and assess the merits of the
Claim.

 

7.2           The
Buyer shall use its reasonable endeavours (and shall procure that the Company
uses its reasonable endeavours) to mitigate any Damages resulting from or
arising out of any matters giving rise to a Claim.

 

7.3           No
amount shall become due and payable by the Seller (x) in respect of any Claim
arising by reason of a contingent liability, unless and to the extent that such
contingent liability ceases to be contingent and has become an actual liability
(without prejudice to the right of the Buyer to raise a Claim in respect of the
contingent liability as and when such liability arises); and (y) in respect of
any Third Party Claim unless and to the extent that the Buyer has paid or
settled the Third Party Claim.

 

7.4           In
calculating the amount of any Damages which may be due and payable by the
Seller as a result of any Claim brought by the Buyer there shall be deducted:

 

(a)        the amount of any indemnification or other
recoveries (including insurance proceeds) actually paid to the Buyer or the
Company ; and

 

(b)        the amount of any reserve or provision
included in the Accounts and/or the Closing Balance Sheet for Damages of the
type to which such Claim relates.

 

7.5           The
Seller shall not be liable for a Claim unless:

 

(a)        the amount of Damages against which the
Buyer would be entitled in respect of a Claim or a series of connected Claims,
of which that Claim is one, exceeds EUR 50,000 (fifty thousand Euros); and

 

(b)        the amount of Damages in respect of which
the Seller is obligated to make payment under Clause 7.5(a), when taken
together, exceeds EUR 150,000 (one hundred and fifty thousand Euros).

 

21

 

7.6           The
aggregate maximum amount of Damages howsoever arising for which the Seller may
be liable under this Agreement shall not exceed 1.7 Million Euro (one million
and seven hundred thousand Euros) except
for (i) Claims for wilful intent or fraud by the Seller and (ii) breaches
of Warranties set forth in Sections 1 through 4 of Schedule 5 of this
Agreement, with (i) and (ii) not being subject
to any maximum liability limitation, and (iii) breaches of the Warranties set
forth in Section 22 and (iv) claims under the Well Indemnity which shall both
be subject to an aggregate limitation of 3.4 million Euros (three million four
hundred thousand Euros).

 

7.7           The
Seller is not liable for any Claim to the extent that the Claim

 

(a)           relates to matters Disclosed; or

 

(b)           relates to any matter specifically and fully provided
for in the Accounts and/or the Closing Balance Sheet.

 

7.8           Except
for (a) Tax matters, which are specifically regulated in Section 9 and specifies
the Tax Indemnity Period; (b) Claims for breaches of any of the Warranties set
forth in clauses 1 through 4 of Schedule 5, which shall survive Closing and
continue until time-barred by applicable Laws; (c) Claims for breach of the
Warranties set forth in Section 22 and (d) the Well Indemnity which shall each
survive Closing until the second anniversary of the Closing Date, the Seller is
not liable for a Claim unless the Buyer shall have issued a Claim Notice to the
Seller within the period of 18 (eighteen) months beginning with the Closing
Date.

 

7.9           Where
the Seller has received a valid Claim Notice within the applicable survival
period provided for the claim set out in the Claim Notice, then notwithstanding
the expiry of the applicable survival period the Buyer shall be entitled to
recover Damages with respect to such claim referenced in the Claim Notice if
the Buyer has commenced proceedings under Clause 22.2 within six (6) months of
the date of such Claim Notice.

 

7.10         The
Buyer specifically acknowledges that the Purchase Price agreed between the
Parties takes account of the limitations on the liability of the Seller as
specified in this Clause 7 as contemplated by Section 314 (2) of the Act No. IV
of 1959 of the Civil Code of the Republic of Hungary.

 

8.             BUYER’S
WARRANTIES

 

The Buyer represents and warrants that the following
matters are true and accurate, both as at the date of this Agreement and again
as at the date of Closing:

 

22

 

8.1           Articles
of Association of the Company: The Buyer is aware of the
New Articles of Association of the Company and accepts the provisions thereof
as binding upon itself as from the date of Closing;

 

8.2           Organisation.
The Buyer is a stock corporation duly organized and validly existing under the
laws of Austria;

 

8.3           Authority.
The Buyer has all requisite power and authority to enter into, execute, deliver
and perform this Agreement, in particular to buy and accept the transfer of the
Quota from the Seller, in accordance with its terms and the other documents
referred to in it. As of Closing, the Buyer, its respective shareholders,
corporate and supervisory boards, as applicable, have taken all necessary
actions, steps and proceedings to approve or authorize, validly and effectively,
the entering into, and the execution, delivery and performance of, this
Agreement and the purchase and transfer of the Quota from the Seller and the
Agreement constitutes a valid and binding obligation of Buyer, enforceable
against it in accordance with its terms.

 

8.4           No
Violation. Neither the execution, delivery and
performance of this Agreement by Buyer, nor the consummation of the Transaction
will (i) conflict with or violate any provision of Buyer’s organisational
documents, any agreement to which it is a party or any judgment, order of any
court or governmental body by which it is bound, or (ii) violate any law or
permit applicable to it.

 

8.5           Litigation.  There are no actions, suits or proceedings
pending, or to the Buyer’s knowledge, threatened in writing before any
Governmental Authority or arbitrator against the Buyer or any Subsidiary of the
Buyer which are reasonably likely to impair materially the Buyer’s ability to
perform its obligations under this Agreement.

 

8.6           Financing.  The Buyer has sufficient cash, available
lines of credit or other sources of immediately available funds (in EUR) to
enable it to make the payments required to be made by it at Closing under
Clause 5.2. Furthermore, the Buyer has the financial capability to satisfy the
payment obligations it will assume under the Szolnok JOA following Closing and
the Buyer undertakes to forthwith provide, for and on behalf of the Company in
discharge of its obligations set out in Clause 12.3 of the Szolnok JOA,
evidence reasonably satisfactory to the other parties to the Szolnok JOA that
following Closing it shall continue to have the financial capability to satisfy
its payment obligations under the Szolnok JOA.

 

23

 

8.7                                 Liability
for Brokers’ Fees. 
Neither the Seller nor any of its Affiliates shall directly or
indirectly have any responsibility, liability or expense, as a result of
undertakings or agreements of the Buyer, for brokerage fees, finder’s fees,
agent’s commissions or other similar forms of compensation to an intermediary
in connection with the negotiation, execution or delivery of this Agreement or
any agreement or transaction contemplated hereby.

 

8.8                                 The
Buyer shall indemnify, defend and hold harmless the Seller against any and all
Damages suffered or sustained by the Seller or the Company as a result of any
breach of any Buyer’s warranties.

 

9.                                      TAX
MATTERS AND WELL INDEMNITY

 

9.1                                 Liability
for Taxes:

 

(a)                                  From and after Closing, the
Seller shall indemnify, defend and hold harmless the Buyer from and against any
amounts actually paid by the Buyer or the Company in respect of any Taxes that
are imposed on or incurred by the Company and attributable to any taxable
period beginning after December 31, 2005 and ending prior to the Closing
Date as well as the portion, determined as described in Clause 9.1(b), of any
such Taxes for any taxable period beginning (i) after December 31,
2005 but prior to the Closing Date and (ii) ending on or after the Closing
Date, which is allocable to the portion of such period occurring prior to the
Closing Date (the “Pre-Effective Time Period”).

 

(b)                                 Whenever it is necessary for
purposes of this Agreement to determine the portion of any Taxes of or with
respect to the Company for a taxable period beginning prior to and ending after
the Closing Date which is allocable to the Pre-Effective Time Period and the
period occurring on or after the Closing Date (“Post-Effective
Time Period”), the determination shall be made by assuming that the
Pre-Effective Time Period and the Post-Effective Time Period each constitutes a
separate taxable period and by taking into account the actual taxable events
occurring during each such period.

 

(c)                                  Any claim for indemnification
under this Clause 9.1 must be made no later than three (3) months
following the end of the applicable Hungarian statutory limitation period in
respect of the relevant Tax Return to which the claim for indemnification
relates (“Tax Indemnity Period”) in accordance
with the provisions applicable to a Third Party Claim contained in Clause 7.1.

 

(d)                                 Notwithstanding
anything to the contrary in Clause 9.1(a):

 

(i)                          No claim in respect of Taxes
shall entitle the Buyer to be indemnified to the extent that it corresponds to
a mere change in the time when a Tax should have been paid or such Tax can
effectively be deducted or recovered by the Company (except that the Buyer 

 

24

 

shall be
entitled to be indemnified for any resulting interest charges or penalties for
late payment) and/or to the extent that such claim arises (or
such claim having arisen, is increased) by a failure or omission on the part of
the Company to make any election, surrender or disclaimer or to give any notice
or consent or do any other thing after the Closing including the filing of any
applicable Tax Returns under the provisions of any the Laws relating to
Hungarian Taxes.

 

(ii)                       The Seller shall not have any
liability for any Taxes which result from or arise out of actions taken or
omissions by or on behalf of the Buyer or the Company after the Closing
concerning any changes in accounting methods or policies and/or the passing of,
or any change in, any the Laws or administrative practice of any Governmental
Authority, in any such case not actually in force at the date of this Agreement
(even if retroactive in effect), including any increase in the rate of Taxes in
effect at the date of this Agreement or the imposition of any Taxes not in
effect at the date of this Agreement.

 

9.2                                 Preparation
and Filing of Tax Returns:

 

(a)                                  With respect to each Tax
Return for, by or with respect to the Company that is required to be filed at
any time between the date of this Agreement and on or before the Closing Date,
the Seller shall cause such Tax Return to be prepared, shall cause to be
included in such Tax Return all items of income, gain, loss, deduction and
credit or other items (collectively “Tax Items”)
required to be included therein and shall timely file or cause to be filed (assuming
it has authority to do so) such Tax Return with the appropriate Government
Authority and shall pay the amount of Taxes shown to be due on such Tax Return.

 

(b)                                 Upon request, the Buyer shall
provide to the Seller copies of all Tax Returns required to be filed by the
Company after the Closing Date for tax periods up to and which include the
Closing Date, along with the proof of payment of any Taxes reflected in such
Tax Returns.

 

(c)                                  Any Tax Return to be prepared
pursuant to the provisions of this Clause 9.2 shall be prepared in a manner
consistent with practices followed in prior years with respect to similar Tax
Returns, except for changes required by changes in the Laws.

 

(d)                                 Neither the Buyer nor the
Company shall, without the prior written consent of the Seller (i) cause
or allow the Company to originate the recalculation or re-filing of any Tax
Return of the Company for any taxable period for which the Seller is
responsible, in whole or in part, for the payment of Taxes under the terms of
Clause 9.1 or (ii) request an audit by any taxing authority of the Company
with respect to any taxable period for which the Seller is 

 

25

 

responsible, in whole or in part, for the
payment of Taxes under the terms of Clause 9.1, unless the Company is obliged
by the Laws to undertake a recalculation or re-filing or the request of an
audit.

 

9.3                                 Access
to Information:

 

(a)                                  The Buyer shall grant to the
Seller (or its designees) access at all reasonable times, in the period from
the Closing Date until the expiry of the Tax Indemnity Period, to all of the
information, books and records relating to the Company within the possession of
the Company (including without limitation work papers and correspondence with
taxing authorities) to the extent reasonably necessary to investigate and/or
defend any claim by the Buyer.,

 

(b)                                 Each of the Parties will
preserve and retain all schedules, work papers and other documents relating to
any Tax Returns of or with respect to the Company or to any claims, audits or
other proceedings affecting the Company until the expiration of the statute of
limitations (including extensions) applicable to the taxable period to which
such documents relate or until the final determination of any controversy with
respect to such taxable period, and until the final determination of any
payments that may be required with respect to such taxable period under this
Agreement.

 

9.4                                 VAT
Refunds:

 

The Buyer agrees to pay to
the Seller any refund received by the Company after the Closing in respect of
any VAT for which the Company has been charged prior to the Closing Date and
such payment is to be made within 20 (twenty) days of its receipt by the
Company. The Buyer shall cooperate with the Seller in order to take all necessary
steps to claim any such refund. The Buyer acknowledges that there is a VAT
Refund due to the Company of approximately HUF 4,000,000 (four million HUF).

 

9.5                                 Well
Indemnity:

 

The Seller shall indemnify
and hold harmless the Buyer or the Company in respect of a maximum of fifty per
cent. (50%) of all costs and expenses properly required to (a) put the
Well Structure of each Well into the condition that such Well is shown in the
Well Sketches and the End of Well Reports; and (b) to remediate any environmental
liability which arises as a result of the Well not being the condition referred
to in (a) above.

 

26

 

10.                               CONFIDENTIALITY
AND ANNOUNCEMENTS

 

10.1                           The
Seller undertakes to the Buyer to keep confidential the terms of this Agreement
and all information about the Buyer and about the Company, and use the
information only for the purposes contemplated by this Agreement.

 

10.2                           The
Buyer undertakes to the Seller to keep confidential the terms of this Agreement
and all information that it has acquired about the Seller and to use the
information only for the purposes contemplated by this Agreement.

 

10.3                           Neither
Party is required to keep confidential or to restrict its use of:

 

(a)                                  information that is or becomes
public knowledge other than as a direct or indirect result of the information
being disclosed in breach of this Agreement; or

 

(b)                                 information that the Parties
agree in writing is not confidential; or

 

(c)                                  information about the other
Party or the Company that it finds out from a source not connected with that
Party or the Company and that it has acquired free from any obligation of
confidence to any other person.

 

10.4                           The
Buyer does not have to keep confidential or restrict its use of:

 

(a)                                  information about the Company
after Closing; or

 

(b)                                 information that is known to
the Buyer before the date of this Agreement and that it has acquired free from
any obligation of confidence to any other person.

 

10.5                           Either
Party may disclose any information that it is otherwise required to keep
confidential under this Clause:

 

(a)                                  to such of its employees,
professional advisers, consultants, or officers as are reasonably necessary to
advise on this Agreement, or to facilitate the Transaction, if the disclosing
Party procures that the people to whom the information is disclosed keep it
confidential as if they were that Party; or

 

(b)                                 with the other Party’s written
consent (such consent not to be unreasonably withheld, delayed or conditioned);
or

 

(c)                                  to confirm that the sale has
taken place and the date of the sale (including any relevant terms of the
Agreement) for the purposes of making an announcement to the media, but the
non-disclosing Party shall give its prior written consent to the disclosure
such consent not to be unreasonably withheld, delayed or conditioned; or

 

(d)                                 to the extent that the
disclosure is required:

 

(i)                                     by the Laws; or

 

27

 

(ii)                                  by a regulatory body, tax
authority or securities exchange; or

 

(iii)                               to make any filing with, or
obtain any authorisation from, a Governmental Authority, regulatory body, tax
authority or securities exchange; or

 

(iv)                              under any arrangements in
place under which negotiations relating to terms and conditions of employment
are conducted; or

 

(v)                                 to protect the disclosing
Party’s interest in any legal proceedings,

 

but shall use reasonable endeavours to
consult the other Party and to take into account any reasonable requests it may
have in relation to the disclosure before making it.

 

10.6         Each
Party shall supply the other with any information about itself or this
Agreement as the other may reasonably require for the purposes of satisfying
the requirements of any the Laws, regulatory body or securities exchange to
which the requiring Party is subject.

 

10.7         This
Clause shall continue to have effect for the period of thirty six (36) months
from the Closing Date.

 

11.          FURTHER
ASSURANCE

 

11.1         The
Seller shall, at the Buyer’s expense, promptly execute and deliver all
documents, and do all things that the Buyer may from time to time reasonably
require for the purpose of giving full effect to the provisions of this
Agreement.

 

11.2         The
Parties undertake to fully cooperate with one another in case the Registry
Court should require, in connection with the registration of the transfer of
the Quota, the submission of additional information or the modification of the
notification of amendments on any procedural grounds or because of any formal
deficiencies in the application or its enclosures.

 

12.          ASSIGNMENT

 

12.1         Each
person that has rights under this Agreement is acting on its own behalf.

 

12.2         Neither
Party shall have the right to assign this Agreement or any rights and
obligations hereunder or transfer any rights or obligations hereunder except
with the prior written consent of the other Party.

 

28

 

13.                               WHOLE
AGREEMENT

 

13.1         This
Agreement, and any documents referred to in it, constitute the whole agreement
between the Parties and supersede any arrangements, understanding or previous
agreement between them relating to the subject matter they cover.

 

14.                               VARIATION
AND WAIVER

 

14.1         Any
variation of this Agreement shall be in writing and signed by or on behalf of
all Parties.

 

14.2         Any
waiver of any right under this Agreement is only effective if it is in writing,
and it applies only to the Party to whom the waiver is addressed and the
circumstances for which it is given and shall not prevent the Party who has
given the waiver from subsequently relying on the provision it has waived with
respect to other circumstances.

 

14.3         No
failure to exercise or delay in exercising any right or remedy provided under
this Agreement or by law constitutes a waiver of such right or remedy or will
prevent any future exercise in whole or in part thereof.

 

14.4         No
single or partial exercise of any right or remedy under this Agreement shall
preclude or restrict the further exercise of any such right or remedy.

 

14.5         Unless
specifically provided otherwise, rights arising under this Agreement are
cumulative and do not exclude rights provided by law.

 

15.                               COSTS

 

15.1         Unless
otherwise provided, all costs in connection with the negotiation, preparation,
execution and performance of this Agreement, and any documents referred to in
it, shall be borne by the Party that incurred the costs.

 

15.2         All
costs of the notary public arising in connection with the Escrow Agreement
shall be borne by the Parties equally.

 

16.                               NOTICE

 

16.1         All
notices authorised or required between the Parties by any of the provisions of
this Agreement shall be in writing (in English) and delivered in person or by
courier service or by facsimile transmission so long as evidenced by written
confirmation of complete transmission, and properly addressed to the other 

 

29

 

Party.
Verbal communication and email does not constitute notice for purposes of this
Agreement. A notice given under any provision of this Agreement shall be deemed
delivered only when received by the Party to whom such notice is addressed, and
the time for such Party to deliver any counter-notice in response to such notice
shall run from the date the notice is received. “Received” for purposes of this Section shall
mean the receipt of the notice by the Party specified hereunder.

 

16.2         The
addresses for service of notice are:

 

(a)                TOREADOR RESOURCES
CORPORATION:

 

(i)                           address: 13760 Noel Road, Suite 1100,
Dallas, Texas TX 75240-1383

 

(ii)                        for the attention of: The
Directors

 

(iii)                     fax number: +1 2145593945

 

(iv)                    With a copy to:

 

PRK Partners / Bellak the Laws Office

 

(i)                           address: Pauler Office
Building, 11 Pauler utca, Budapest 1013

 

(ii)                        for the attention of: Steven
Conybeare

 

(iii)                     fax number: +36 1 354 0125

 

(b)                       ROHÖL-AUFSUCHUNGS
AKTIENGESELLSCHAFT

 

(i)                           address: Schwarzenbergblatz
16, 1015 Vienna, Austria

 

(ii)                        for the attention of: Board of
Directors

 

(iii)                     fax number: +431/501 16-238

 

17.                               INTEREST
ON LATE PAYMENT

 

17.1         Where
a sum is required to be paid under this Agreement but is not paid on the date
the Parties agreed, the Party due to pay the sum shall also pay an amount equal
to interest on that sum for the period beginning with that date and ending with
the date the sum is paid (and the period shall continue after as well as before
judgment).

 

17.2         The
rate of interest shall be 5 % (five per cent) per annum above the 6 months
EURIBOR (“Interest  Rate”).
Interest shall accrue on a daily basis and be compounded quarterly.

 

30

 

18.                               COUNTERPARTS

 

This Agreement
may be executed in any number of counterparts, each of which is an original and
which together have the same effect as if each Party had signed the same
document.

 

19.                               LANGUAGE

 

If this
Agreement is translated into any language other than English, the English
language text shall prevail.

 

20.                               SEVERANCE

 

20.1         If
any provision of this Agreement (or part of a provision) is found by any court
or administrative body of competent jurisdiction to be invalid, unenforceable
or illegal, the other provisions shall remain in force except if, in the
absence of the invalid, unenforceable or illegal provision, the Parties would
not have entered into this Agreement.

 

20.2         If
any invalid, unenforceable or illegal provision would be valid, enforceable or
legal if some part of it were deleted, the provision shall apply with whatever
modification is necessary to give effect to the commercial intention of the
Parties.

 

21.                               AGREEMENT
SURVIVES CLOSING

 

This Agreement
(other than obligations that have already been fully performed) remains in full
force after Closing.

 

22.                               GOVERNING
LAW AND JURISDICTION

 

22.1         This
Agreement and any disputes or claims arising out of or in connection with its
subject matter, formation and interpretation (including non-contractual
disputes or claims) are governed by and construed in accordance with the laws
of Hungary without giving effect to any choice or conflict of law provisions.

 

22.2         All
disputes arising out of or in connection with this Agreement (including
non-contractual disputes or claims) (“Dispute”) shall
be finally settled under the Rules of Arbitration of the International
Chamber of Commerce by three arbitrators appointed in accordance with the said
Rules. The place of arbitration shall be Vienna. The language of the
arbitration shall be the English language.

 

This Agreement has been entered into on the date
stated at the beginning of it.

 

31

 

Schedule
2 - Conditions

 

1.                                       Evidence reasonably
satisfactory to the Buyer that the Company’s bank account has a positive
balance of not less than €600,000 (six hundred thousand Euros) in cleared
funds.

 

32

 

Schedule
4 - Additional Payment

 

1.             For purposes of this Agreement, the “Additional Payment Condition” shall be the conclusion of
arrangements between the Company and/or the Buyer and a third party directly
related to certain assets of the Company in Hungary.

 

2.             (i)            If the Additional Payment
Condition has been fulfilled by no later than two (2) years of the Closing
Date, then the Additional Payment shall in accordance with the Escrow Agreement
be released to the Seller by the Escrow Agent within five (5) Business
Days therefrom and the Buyer and the Seller shall jointly deliver a written
notice to the Escrow Agent pursuant to the Escrow Agreement setting forth
instructions for the payment of the Additional Payment to the Seller.

 

(ii)           If the Additional Payment Condition has not been
fulfilled by no later than two (2) years of the Closing Date, then the
Additional Payment shall in accordance with the Escrow Agreement be released to
the Buyer by the Escrow Agent within five (5) Business Days therefrom and
the Buyer and the Seller shall jointly deliver a written notice to the Escrow
Agent pursuant to the Escrow Agreement.

 

3.             During the period from the Closing Date through to the
second (2nd) anniversary of the Closing
Date (or the earlier satisfaction of the Additional Payment Condition) the
Buyer shall:

 

(i)            keep the Seller generally appraised of its progress in
terms of the Additional Payment Condition being satisfied;

 

(ii)           act in good faith in its dealings concerning its
arrangements relating to the Additional Payment Condition; and

 

(iii)          not execute any agreement the terms and effect of
which would be to prohibit or otherwise adversely effect the Buyer’s
obligations set out in Section 3 of this Schedule 4.

 

4.             The Parties acknowledge that due to the nature of the
arrangements contemplated by the Additional Payment Condition, it is not
possible to record with absolute certainty the scope and extent of such
arrangements and the Parties shall use their respective good faith reasonable
endeavours to reach an agreement as to whether or not the satisfaction of the
Additional Payment Condition has been achieved on a case by case basis.

 

33

 

Schedule
5 — Warranties

 

1.                                      ORGANISATION

 

1.1           The
Seller and the Company are duly organized and validly existing under the laws
of the country in which they are incorporated or in existence.

 

2.                                      POWER
TO SELL THE COMPANY

 

2.1           The
Seller has all requisite power and authority to enter into, execute, deliver
and perform this Agreement, in particular to sell, assign and transfer the
Quota to the Buyer, in accordance with its terms and the other documents
referred to in it. The Seller and its shareholders and/or corporate boards, as
applicable, have taken all necessary actions, steps and proceedings to approve
or authorise, validly and effectively, the entering into, and the execution,
delivery and performance of, this Agreement and the sale and transfer of the
Quota by the Seller to the Buyer contemplated thereby.

 

2.2           Except
for the requirements explicitly foreseen in this Agreement, including the
requirements of the Hungarian Companies Act 2006 and the Registry Court, the
execution and delivery of this Agreement, as well as performance by Seller of
its obligations hereunder, and the consummation by it of the Transaction, do
not and will not require by the Laws any consent, approval, authorisation, or
other action by filing with, submission, application or notification to, any
court authority according to applicable the Laws.

 

2.3           This
Agreement constitutes (or shall constitute when executed) valid, legal and
binding obligations on the Seller in the terms of this Agreement.

 

2.4           Compliance
with the terms of this Agreement and the documents referred to in it shall not
conflict with, breach or constitute a default under any of the following:

 

(a)                        any provision of the
memorandum or articles of association or equivalent constitutional documents of
the Seller; or

 

(b)                       any agreement or instrument to
which the Seller or the Company is a party or by which it is bound; or

 

(c)                        any order, judgment, decree,
resolution, law or other restriction applicable to the Seller or the Company.

 

34

 

3.             QUOTA OF THE COMPANY

 

3.1           The
Seller has full legal and beneficial title to the Quota free and clear of all
Encumbrances. The Quota constitutes the whole of the registered capital of the
Company and is fully paid up.

 

3.2           There is
no right, nor has any commitment been given, to require the Company to issue
any new capital to any third party, including without limitation outstanding
subscriptions, options, warrants, convertible securities, agreements or rights
to purchase, subscribe or otherwise acquire from any Seller or any Affiliate
any equity interests of, or any securities convertible into equity of the
Company.

 

3.3           The
Company is the sole legal and beneficial owner of its 25% (twenty five per
cent.) holding in the Minority Subsidiary.

 

3.4           Save for
the Minority Subsidiary, the Company does not hold or beneficially own, and has
not agreed to acquire, any securities of any corporation.

 

3.5           Save as
Disclosed, the Company is not or has not agreed to become a member of any
partnership or other unincorporated association, joint venture or consortium
(other than recognised trade associations).

 

3.6           As of
Closing, (i) Seller will convey to Buyer and Buyer will acquire good and
valid title to the Quota free and clear of any Encumbrances and (ii) Buyer
shall be entitled to all of the rights attached to or arising from the Quota so
acquired.

 

3.7           The
Company has a registered capital of 3,070,000 HUF (three million and seventy
thousand Hungarian Forint). The Quota of the Company has been validly issued,
is fully paid-up, and was not issued in violation of the terms of any agreement
binding upon the Company or any applicable the Laws. There is no contractual
obligation relating to the Quota between the Seller and a third party under
which it is required to make any additional payments and/or contributions to
the capital of the Company.

 

4.             CONSTITUTIONAL AND
CORPORATE DOCUMENTS

 

4.1           The
copies of the constitutional and corporate documents of the Company (including
the Articles of Association) Disclosed to the Buyer are in all material
respects true, accurate and complete and copies of all the resolutions and
agreements required to be annexed to or incorporated in those documents by
applicable the Laws are annexed or incorporated.

 

35

 

4.2           All
statutory books and registers of the Company have been properly kept and no
notice or allegation that any of them is incorrect or should be rectified has
been received (in writing) by the Company.

 

4.3           All
returns, particulars, resolutions and other documents which the Company is
required by applicable the Laws to file with or deliver to any Governmental
Authority have been correctly made up in all material respects and filed with
or delivered to such Governmental Authority.

 

5.             INFORMATION

 

5.1           The
particulars relating to the Company set out in Schedule 1 are true and
accurate.

 

5.2           The
particulars relating to the Minority Subsidiary set out in Schedule 1 are true
and accurate at the date of this Agreement. So far as the Seller is aware and
save as Disclosed there is no liability attached to the 25% of the quota which
it owns in the Minority Subsidiary.

 

6.             COMPLIANCE WITH LAWS

 

The Company has at all times conducted its business in
accordance with all applicable Laws and all applicable industry practice in
Hungary, in each case in all material respects, save that the Kiskunhalas
Application was subject to the Kiskunhalas Litigation and the Vizvar
Application was subject to the Vizvar Litigation.

 

7.             LICENCES AND CONSENTS
AND APPLICATIONS

 

7.1           The
Company has obtained, free and clear of any Encumbrance, the Licenses and all
Hungarian Permits in order to carry on its business in the places and in the
manner in which it is carried out in accordance with applicable Laws. True and
accurate copies of the Licenses and Hungarian Permits have been delivered to
the Buyer. The Mining Plot License,  the
Inke Exploration License, the water injection permit Öt Ny-2, the environmental
permit for the pipeline from the Örm-K field and all construction permits have
been validly issued and/or extended, are in full force and effect, are not
subject to being invalidated and are in compliance with Hungarian the Laws and
have been complied with in all material respects, provided, however, that the
Inke Exploration License is still subject to the appeal as set forth in the
definition of Inke Exploration License. The other Licenses are in full force
and effect, are not subject to being invalidated and are in compliance with
Hungarian the Laws and have been complied with in all material respects and, to
the best of Seller’s knowledge, have been validly issued and/or extended. True
and correct copies of the 

 

36

 

Licenses and the Hungarian
permits mentioned above have been Disclosed to the Buyer.

 

7.2           Without
limiting the generality of the provisions of clause 7.1 above, the Company has
not received any notice (in written form) from any Governmental Authority
(whether from Hungary or any other applicable jurisdiction) that any of such
Licenses or Hungarian Permits or authorities will be suspended, cancelled,
revoked or not renewed on the same terms.

 

7.3           The
Applications have been submitted in accordance with current industry practice
of Hungary and in compliance in all material respects with the applicable Laws.
True and correct copies of the License Applications have been Disclosed to the
Buyer.

 

8.             JOINT VENTURE
AGREEMENTS

 

8.1           The
Joint Venture Agreements are in full force and effect, are not subject to being
invalidated and no default, termination, or breach under the Joint Venture
Agreements has occurred with respect to any of the parties to the Joint Venture
Agreements, save for the default of each of Contact International Limited and
Ascent Resources plc under the Szolnok JOA. True and correct copies of the
Joint Venture Agreements have been Disclosed to the Buyer.

 

8.2           With
respect to the Joint Venture Agreements, no other person is entitled to
exercise any right (including any right of termination or any right of
pre-emption or other option) as a result of the sale and transfer of the Quota.

 

8.3           There is
no third party activity related to exploration and/or exploitation of
hydrocarbons in the Contract Areas, or condition or circumstance that could impede
operations under the Joint Venture Agreements, save as Disclosed by the
Licenses.

 

8.4           The
Joint Venture Agreements and all associated Authorisations for Expenditure
(AFEs), work programs and the applicable Laws insofar as they pertain to levies
and/or royalties payable to the Governmental Authorities contain the full
details of the Company’s entitlement to and the costs of participation in the
activities contemplated thereby.

 

8.5           The
Joint Venture Agreements, together with the Licenses and all applicable Laws,
set out the entirety of the obligation of the Company to the Governmental
Authorities, and no other understanding or agreement exists between the Seller
or the Company on the one hand and the Governmental 

 

37

 

Authority
on the other in relation to the subject matter of the Joint Venture Agreements.

 

8.6           The
Company’s interests under each of the Joint Venture Agreements are not subject
to any Encumbrances except as otherwise expressly set forth in the applicable
Laws, the respective Joint Venture Agreements and the Licenses.

 

9.             WORK PROGRAMS

 

9.1           All work
programs agreed to be performed under the Joint Venture Agreements in relation
to the Licenses have been completed in accordance with the relevant Joint Venture
Agreement. There are no work programs associated with the Licenses save that
the Inke Exploration License will require a work program to be submitted as
part of or together with a technical operating plan.

 

10.          STATUS OF OPERATIONS

 

10.1         The status of operations
is that (i) the BA-E-1 Well in the Contract Area is undergoing an
intermediate production test which is intended to recover all the fluids from
the previously conducted fracture stimulation program and (ii) the
Kiskunhalas pipeline is presently suspended pending award of further required
permits to continue construction.

 

11.          INSURANCE

 

11.1         The insurance policies
maintained by or on behalf of the Company provide cover against losses and
liabilities normally insured against by a person carrying on the same type of
business as the Company and as required by the applicable Laws.

 

11.2         The particulars of those
policies set out in the Disclosure Letter are true and accurate.

 

11.3         There are no outstanding
claims under, or in respect of the validity of, any of those policies and at
the date of this Agreement, there are no pending proceedings or circumstances
likely to give rise to any claim under those policies.

 

11.4         So far as the Seller is
aware, all the insurance policies are in full force and effect, are not void or
voidable.

 

38

 

11.5         Nothing has been done or
not done by the Company which could make any of the insurance policies void or
voidable.

 

11.6         Closing will not
terminate, or entitle any insurer to terminate, any such policy which is issued
to and in the name of the Company alone. The benefit of any insurance policies
provided to the Company by the Seller and/or its Affiliates will cease upon
Closing.

 

12.          POWER OF ATTORNEY

 

12.1         There are no powers of
attorney in force given by the Company save for those set out in the Disclosure
Letter.

 

12.2         Other than the managing
directors of the Company, no person, as agent or otherwise, is entitled or
authorised to bind or commit the Company to any obligation not in the ordinary
course of the Company’s business.

 

13.          DISPUTES AND
INVESTIGATIONS

 

13.1         Save for the Kiskunhalas
Litigation and the Vizvar Litigation, the Company:

 

(a)        is not engaged in any litigation, administrative, mediation or
arbitration proceedings or other proceedings or hearings before any statutory
or government body, department, board or agency (except for debt collection in
the normal course of business); and

 

(b)        is not the subject of any formal investigation, inquiry or enforcement
proceedings by any government, administrative or regulatory body.

 

The
Kiskunhalas Litigation and Vizvar Litigation documents as Disclosed are true,
accurate and not misleading by omission or otherwise.

 

13.2         No proceeding,
investigation or inquiry of the types mentioned in paragraph 13.1 of this
Schedule has been threatened against the Company.

 

13.3         The Company is not subject
to any existing judgments or rulings and has not given any undertakings arising
from legal proceedings to a court, governmental agency, regulator or third
party.

 

14.          CONTRACTS

 

14.1         The definition in this
paragraph applies in this Agreement.

 

Material Contract: an agreement or arrangement
to which the Company is a party and which is of material importance to the
business, profits or assets of the Company.

 

39

 

14.2         Except for the agreements
and arrangements Disclosed, the Company is not a party to or subject to any
agreement or arrangement which:

 

(a)                        is a Material Contract; or

 

(b)                       is of an unusual or
exceptional nature; or

 

(c)                        is not in the ordinary and
usual course of business of the Company; or

 

(d)                       involves partnership, joint
venture, consortium, joint development, shareholders or similar arrangements;
or

 

(e)                        is incapable of complete
performance in accordance with its terms within six months after the date on
which it was entered into; or

 

(f)                          involves or is likely to
involve an aggregate consideration payable by or to the Company in excess of
€50,000 (fifty thousand Euros); or

 

(g)                       is not on arm’s length terms.

 

14.3         Each Material Contract is
in full force and effect and the Company has not defaulted under or breached a
Material Contract and so far as the Seller is aware, no other party to a
Material Contract has defaulted under or breached such a contract. True and
correct copies of the Material Contracts have been Disclosed to the Buyer.

 

14.4         No notice of termination
of a Material Contract has been received or served by the Company (in writing).

 

15.          FINANCE AND GUARANTEES

 

15.1         Full particulars of all
money borrowed, and not repaid, by the Company (including full particulars of
the terms on which such money has been borrowed) have been Disclosed.

 

15.2         No guarantee, mortgage,
charge, pledge, lien assignment or other security agreement or arrangement has
been given by or entered into by the Company.

 

15.3         All debts (less any
provision for bad and doubtful debts) owing to the Company are reflected in the
Accounts and all debts in excess of EUR 50,000 (fifty thousand Euros) which
have been subsequently incurred have been Disclosed.

 

15.4         The Company is not subject
to any arrangement for receipt or repayment of any grant, subsidy or financial
assistance from any Governmental Authority.

 

15.5         The amount of the Tied-up
Capital shown in the Accounts will be repayable to the Buyer immediately
following Closing (but prior to Closing will remain 

 

40

 

repayable to the Seller as
the owner of the Quota) and further there are no payment obligations of any
kind to Pogo Hungary Limited and/or Van Apeldoorn Crystal Holdings B.V.

 

16.          INSOLVENCY

 

16.1         The Company is neither
insolvent nor unable to pay its debts within the meaning of applicable
Hungarian Laws; nor has any order been made, petition presented, resolution
passed or meeting convened for the winding-up (or other process whereby the
business is terminated and the related assets of the Company are distributed
amongst the creditors and/or members or other contributories) of the Company,
except for all and any steps in relation to the Demerger.

 

17.          ASSETS

 

17.1         Save as Disclosed, the
Company is the full legal and beneficial owner of and has good marketable title
to (i) all the Assets included in the Accounts, except for those disposed
of since the Accounts Date in the normal course of business, and (ii) any
assets acquired since the Accounts Date.

 

17.2         The Company is in
possession and control of all the Assets included in the Accounts, and those acquired
since the Accounts Date, except for those Disclosed as being in the possession
of a third party in the normal course of business and those disposed of since
the Accounts Date in the normal course of business.

 

17.3         Save as Disclosed, none of
the Assets shown in the Accounts or acquired by the Company since the Accounts
Date or otherwise used by the Company is the subject of any Encumbrance, lease
hire agreement, hire purchase agreement or agreement for payment on deferred
terms or is the subject of any licence or factoring arrangement. Save as
Disclosed, no person has any call upon, option to purchase, or similar right to
obtain production from or attributable to the Assets, or to acquire any of the
Assets from the Company.

 

17.4         All of the assets in
respect of which the Company has a right to use are under the control of the
Company.

 

18.          CONDITION OF EQUIPMENT

 

18.1         The inventory equipment
and vehicles used in connection with the business of the Company:

 

41

 

(a)        are in working order; and

 

(b)        are capable of being utilised for the purpose for which they were
designed.

 

19.          DEMERGER

 

19.1         The Company has not, up to
the Closing Date, undertaken any formal requirements (as is required by the
Laws) concerning the Demerger.

 

19.2         The Company has not
obtained or sought to obtain any consents and/or approvals required for the
Demerger whether under the Tompa FIA, Tompa SFA, the TK Services Articles of
Association and/or the parties to the Szolnok JOA or otherwise. There are no
consents or approvals required to commence the Demerger (except for the
resolution to be passed by the owner of the Quota). As at the Closing Date
there are no consents or approvals required to implement the Demerger apart
from the approval of the Hungarian mining authorities for transfers of
Licenses.

 

19.3         The conversions into
equity as reflected in the Accounts along with the capital increase since the
Accounts Date have been undertaken in full compliance with the applicable Laws.
There is no debt owing by the Company to the Seller or any of its Affiliates.

 

20.          EMPLOYMENT

 

20.1         The names of each person
who is a managing director of the Company at the date of this Agreement are set
out in Part 1 of Schedule 1.

 

20.2         The Disclosure Letter lists
all individuals employed by the Company at the date of this Agreement and the
particulars of the contract of employment of each individual including:

 

(a)        the individual’s position or job title;

 

(b)        the current salary of the individual (including any benefits and
privileges provided, or which the Company is bound to provide);

 

(c)        the length of service of the employee;

 

(d)        the length of notice necessary to terminate the contract of employment;
and

 

(e)        the type of contract (whether full- or part-time or other).

 

20.3         The Disclosure Letter
lists all individuals who are providing services to the Company at the date of
this Agreement under an agreement which is not a contract of employment with
the Company (including, in particular, where the 

 

42

 

individual acts as a
consultant or is on secondment) and the particulars of the terms on which the
individual provides services, including:

 

(a)        a description of the individual’s services to be provided;

 

(b)        the remuneration of the individual (including any benefits and
privileges provided, or which the Company is bound to provide);

 

(c)        the length of notice necessary to terminate the agreement; and

 

(d)        the term of the agreement.

 

20.4         The Disclosure Letter includes
particulars of all the employees of the Company at the date of this Agreement
who are on secondment, on maternity leave, statutory leave or absent due to
ill-health or for any other reason.

 

20.5         There is no notice
outstanding at the date of this Agreement that terminates the contract of
employment of any employee of the Company (whether given by the employer or
employee).

 

20.6         No offer of a contract of
employment has been made by the Company at the date of this Agreement to any
individual which has not yet been accepted or which has been accepted but where
the individual’s employment has not yet started.

 

20.7         In so far as they apply to
its employees, the Company has complied in all material respects with any:

 

(a)                        legal obligations;

 

(b)                       codes of conduct or practice;
and

 

(c)                        collective agreements, customs
and practice.

 

21.          PROPERTY

 

21.1         The definitions in this
paragraph apply in this Agreement.

 

Properties: all those properties
identified in Schedule 6.

 

21.2         The Properties are the
only real properties owned, used or occupied by the Company.

 

21.3         The Company has no right
of ownership, right of use, option, right of first refusal or contractual
obligation to purchase, or any other legal or equitable right affecting any
real property other than the Properties.

 

43

 

21.4         All the Properties are
used by the Company in connection with the business of the Company.

 

21.5         The information contained
in Schedule 6 is true and accurate and includes all the information needed to
identify the Properties.

 

22.          ACCOUNTS

 

22.1         The Accounts have been
prepared in accordance with the accounting standards, principles and practices
generally accepted in Hungary and in accordance with the applicable Laws of
Hungary, and the Accounts are presented fairly in all material respects, and
they are in conformity with applicable accounting Laws and principles generally
accepted in Hungary and present a true and fair view of the financial position,
results of operations and cash flows of the Company as at the Accounts Date.
Without limiting the generality of the foregoing, the Accounts either make full
provision for or disclose all liabilities (whether actual, contingent or
disputed), all outstanding capital commitments and all bad or doubtful debts,
in each case only in accordance with and to the extent required by the
accounting standards, principles and practices generally accepted in Hungary
and in accordance with the applicable Laws of Hungary.

 

22.2         The Accounts have been
prepared on a basis consistent with the audited accounts of the Company for the
two prior accounting periods save that it is recognised that the Accounts are
for a period of seven months whereas the Company’s two prior accounting periods
are for periods of 12 months each.

 

23.          INTRAGROUP
RELATIONSHIPS

 

23.1         There are no agreements or
arrangements between (i) the Seller and (ii) the Company.

 

24.          FINANCIAL AND OTHER
RECORDS

 

24.1         Since June 2005 all
financial records of the Company required by the Laws to be prepared and
maintained by the Company:

 

(a)        have been properly prepared and maintained;

 

(b)        constitute in all respects an accurate record of all matters that are
required to appear in them save for any minor or typographical errors;

 

(c)        do not contain any materially adverse inaccuracies or discrepancies;
and

 

44

 

(d)        are in the possession of the Company.

 

24.2         Since June 2005 all
statutory records, including the accounting records, required by the Laws to be
kept or filed by the Company have been properly kept or filed and comply (save
for any minor administrative or typographical errors) with all requirements of
any applicable Laws.

 

24.3         All material deeds and
documents belonging to the Company are in the possession of the Company.

 

25.          CHANGES SINCE ACCOUNTS
DATE

 

25.1         Since the Accounts Date
and up to the date of this Agreement, the Company has conducted its business in
the normal course and as a going concern, and since the Accounts Date there has
been no material adverse change to the Company’s business save as Disclosed.

 

26.          TAXATION

 

26.1         Since 31 December 2005
all Tax Returns of or with respect to any Taxes that are required to be filed
by or with respect to the Company have been duly filed in accordance with all
applicable Laws.

 

26.2         No claim, assessment,
deficiency or adjustment has been asserted against the Company with respect to
any Tax Return and no audits actions proceedings investigations claims or
assessments are pending against or have been notified to the Company with
respect to the Taxes since 31 December 2005.

 

26.3         The Company has not
entered into an agreement or is in negotiation with any Governmental Authority
with respect to Taxes.

 

26.4         No Encumbrances have been
imposed upon or asserted against the Company as a result of or in connection
with the failure or alleged failure to pay any Tax.

 

27.          ENVIRONMENTAL MATTERS.

 

27.1         None of the past or
current activities or operations of the Company, nor any of its ownership or
use of any real property, has obligated or obligates the Company to
investigate, clean up, remedy or otherwise restore to a former condition, by
itself or jointly with others, any contamination or contaminated surface water,
ground water, soil or any natural resources associated therewith as required by
applicable Hungarian Laws.

 

45

 

27.2         No notice has been
delivered on the Company from any person or Governmental Authority regarding
any existing, pending or any threatened investigation or inquiry related to
alleged violations under any applicable environmental laws, in particular, but
without limitation, with respect to air pollution, waste water, hazardous or
non-hazardous waste or regarding any claims for removal or remedial obligations
or action under any applicable environmental laws.

 

28.          INTELLECTUAL PROPERTY

 

28.1         The Company does not own
or possess or require for the conduct of its business any rights with respect
to trade marks, trade names, patents, inventions, registered design rights,
copyrights, and all other similar proprietary rights, including, where such
rights are obtained or enhanced by registration, any registration of such
rights or applications or rights to apply for such registrations.

 

29.          LIABILITY
FOR BROKERS’ FEES

 

Neither
the Buyer nor any of its Affiliates shall directly or indirectly have any
responsibility, liability or expense, as a result of undertakings or agreements
of the Seller, for brokerage fees, finder’s fees, agent’s commissions or other
similar forms of compensation to an intermediary in connection with the
negotiation, execution or delivery of this Agreement or any agreement or
transaction contemplated hereby.

 

46

 

 

	
  Signed
  by Craig McKenzie

  	
   

  	
  /s/
  Craig McKenzie

  
	
  for
  and on behalf of TOREADOR RESOURCES
  CORPORATION

  	
   

  	
  Director

  

 

47

 

 

	
  Signed
  by Thomas Teyssen and Kurt Sonnleitner

  	
   

  	
  /s/
  Thomas Teyssen

  
	
  for and on behalf of ROHÖL-AUFSUCHUNGS
  AKTIENGESELLSCHAFT

  	
   

  	
  Authorised
  Signatory

  
	
   

  	
   

  	
  /s/
  Kurt Sonnleitner

  
	
   

  	
   

  	
  Authorised
  Signatory

  

 

48Exhibit 10.2

 

EXECUTION
VERSION

 

 

SHARE PURCHASE AGREEMENT

 

 

BY AND BETWEEN

 

TOREADOR RESOURCES CORPORATION

as Seller

 

TIWAY OIL BV

as Purchaser

 

AND

 

TIWAY OIL AS

as Guarantor

 

WITH RESPECT TO

 

TOREADOR TURKEY LTD

 

 

Dated: September 30, 2009

 

 

 

	
  ARTICLE I INTERPRETATION

  	
  1

  
	
   

  	
   

  
	
  ARTICLE II PURCHASE AND
  SALE OF THE SHARES

  	
  13

  
	
   

  	
   

  
	
  ARTICLE III WARRANTIES OF THE SELLER

  	
  20

  
	
   

  	
   

  
	
  ARTICLE IV WARRANTIES OF THE
  PURCHASER AND THE GUARANTOR

  	
  29

  
	
   

  	
   

  
	
  ARTICLE V MUTUAL WARRANTIES

  	
  29

  
	
   

  	
   

  
	
  ARTICLE VI INDEMNITIES; CLAIMS; INSURANCE

  	
  30

  
	
   

  	
   

  
	
  ARTICLE VII CONFIDENTIALITY AND PRESS RELEASES

  	
  38

  
	
   

  	
   

  
	
  ARTICLE VIII
  MISCELLANEOUS

  	
  39

  

 

 

SHARE PURCHASE AGREEMENT

 

THIS SHARE PURCHASE AGREEMENT, dated September 30, 2009 (as the same may be
amended, supplemented or otherwise modified from time to time in accordance
with its terms, this “Agreement”), is entered into by and among:

 

·                  TOREADOR
RESOURCES CORPORATION, a Delaware corporation (the “Seller”);

 

·                  TIWAY
OIL BV, a company registered, incorporated and existing
under the laws of the Netherlands with an office located at Naritaweg 165
Telestone 8, 1043BW Amsterdam (the “Purchaser”).

 

and

 

·                  TIWAY OIL
AS,
a company registered under the laws of Norway (the “Guarantor”)

 

RECITALS:

 

WHEREAS:

 

(A)                              The Seller owns
100,000 ordinary shares of par value $1.00 each (the “Shares”) in
Toreador Turkey Ltd., a company registered in the Cayman Islands with company
registration number 147391 and whose registered office is at the offices of
Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman,
KY1-1104, Cayman Islands (the “Company”) representing the entire issued
share capital of the Company;

 

(B)                                The Company is
engaged in offshore and onshore oil and natural gas exploration development,
production and acquisition activities in Turkey (the “Business”) and
holds interests in exploration and exploitation permits for such purposes; and

 

(C)                                Upon the terms
hereinafter set forth, the Seller desires to sell and the Purchaser desires to
purchase, all the Shares.

 

NOW, THEREFORE, the Parties agree as follows:

 

ARTICLE I

INTERPRETATION

 

1.1                  Certain Definitions.  Whenever used in this Agreement, the
following terms shall have the meanings assigned to them hereunder unless
specifically defined otherwise or unless the context otherwise requires:

 

“$/boe” shall be the per barrel of oil
equivalent value calculated as set forth on Annex A.

 

“1 C Economic Contingent Resources”
shall mean those Contingent Resources that are currently economically
recoverable as defined in COGEH 5.3.4.a and which are the low estimate (high
certainty) of such economically recoverable Contingent Resources as explained
in the abbreviation of 1 C in COGEH 5.3.2. 
To clarify, should sufficient wells not have been drilled to prove up
the recoverable hydrocarbons by the Date of Reserve Evaluation, modern 2 and
3-D seismic, logs, test data and gas water contacts defined from pressure
gradients, shall be used to define the contingent resources (while assuming a
continuous reservoir with drainage area down to the gas water contact).

 

 

“Accrued G&A” shall mean a portion
of the Company’s general and administrative charges from the Closing Date until
the receipt by the Company of the first revenue resulting in a Net Profit
Interest becoming payable, which shall accrue at the rate of one hundred and
fifty-five thousand Dollars ($155,000) per calendar year.

 

“Affiliate” when used with reference to
a specified Person, shall mean any Person that directly or indirectly through
one or more intermediaries controls, is controlled by or is under common
control with the specified Person; for such purposes, the term “control”
(including the terms “controlling”, “controlled by” and “under
common control with”) shall mean the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.

 

“Agreed Interest Rate” shall mean
interest compounded on a monthly basis, at the rate per annum equal to the one (1)
month-term, London Inter Bank Offered Rate (LIBOR rate) for Dollar deposits, as
published by The Wall Street Journal or if not so published, then such rates as
published by the Financial Times of London, or if not so published, then by an
equivalent source reasonably selected by the Parties, plus two (2) percentage
points, applicable on the first Business Day prior to the due date of payment
and thereafter on the first Business Day of each succeeding calendar
month.  If the aforesaid rate is contrary
to any applicable usury law, the rate of interest to be charged shall be the
maximum rate permitted by such applicable law.

 

“Agreement” shall have the meaning
ascribed to it in the Preamble.

 

“Akcakoca Member” shall mean the
Akcakoca Member of the Lower-Middle Eocene Kusiri Formation.

 

“Annual Cap” shall have the meaning
ascribed to it in Section 2.6(i).

 

“Applicable Accounting Principles” shall
mean, as the context requires, the accounting principles and methodologies as
consistently applied by the Company Branch in the preparation of its financial
statements for fiscal years ended December 31, 2008 and December 31, 2007.

 

“Bakuk” shall mean the area described as such
in Annex C.

 

“Balance Sheet” shall have the meaning
ascribed to it in Section 3.6(a).

 

“Barrel” shall mean a volume of forty-two
(42) standard U.S. gallons, liquid measure, net of basic sediments and water,
corrected to a temperature of sixty degrees Fahrenheit (60°F), under one
atmosphere of pressure.

 

“Base Purchase Price” shall have the
meaning ascribed to it in Section 2.2(a).

 

“boe” shall mean the total volume where gas
volumes, whether in-place or as production, are converted to a liquid volume
such that six (6) cubic feet of gas (at one thousand (1000) BTU/cubic foot) is
counted as 1 boe and is added to oil where 1 barrel of oil is one 1 boe.

 

“bopd” shall mean Barrels of Crude Oil per
day.

 

“BTU” shall mean the heating quantity
required to increase the temperature of one pound of pure water by one degree
Fahrenheit at the standard absolute pressure of fourteen point seven three
(14.73) pounds per square inch.

 

“Business” shall have the meaning ascribed
to it in Recital (B).

 

2

 

“Business Day” shall mean any day other
than a Saturday, Sunday or bank or public holiday in Paris, France, or any
other day on which commercial banking institutions in Paris, France are
authorized or required to close.

 

“Calendar Quarter” shall mean any of the
four periods of three (3) calendar months each within a calendar year,
commencing on January 1st, April 1st, July 1st, and October 1st.

 

“Calling Notice” shall mean the calling
notice disseminated to the shareholders of the Guarantor on September 23, 2009
seeking to solicit the vote of the shareholders of the Guarantor necessary to
obtain the Required Shareholder Approval, as attached in Annex D.

 

“Cash Value” shall mean, in respect of a
Divestiture, the market value (expressed in Dollars) of the Participating
Interest subject to that Divestiture, based upon the amount in cash a willing
buyer would pay a willing seller in an arm’s length transaction.

 

“Cendere” shall mean the area described as
such in Annex C.

 

“Claim Notice” shall have the
meaning ascribed to it in Section 6.3(a).

 

“Closing” shall have the meaning
ascribed to it in Section 2.5(a).

 

“Closing Date” shall have the meaning
ascribed to it in Section 2.5(a).

 

“Closing Expenditures” shall mean the
Expenditures minus (x) the Petrol Ofisi Payments, (y) the Stratic Royalty
Payments and (z) the Pre-Interim Period Production Payments, as set forth on Annex
F.

 

“Closing Purchase Price” shall have the
meaning ascribed to it in Section 2.2(a).

 

“Closing Revenues” shall mean the
Revenues minus (x) the Petrol Ofisi Receivables, (y) the Stratic Royalty
Receivables and (z) the Pre-Interim Period Production Receivables, as set forth
on Annex F.

 

“COGEH” shall mean the Society of
Petroleum Evaluation Engineers Canadian Oil and Gas Evaluation Handbook.

 

“Commercial Discovery” shall have the
meaning ascribed to it in Section 2.6(c).

 

“Company” shall have the meaning
ascribed to it in Recital (A).

 

“Company Branch” shall mean Toreador
Turkey Limited (Merkezi Cayman Adalari) Ankara Turkiye Subesi, being the
wholly-owned branch of the Company operating in Turkey.

 

“Company’s Share” shall mean the Company’s
Participating Interest in the Licence in which the Commercial Discovery occurs,
as determined in accordance with the applicable Licence JOA, which for the
purposes of calculating Exploration Success Payments only, shall be capped at a
fifty percent (50%) Participating Interest for any given Licence.

 

“Confidentiality Agreement” shall mean
the Confidentiality Agreement that the Guarantor and the Purchaser entered into
on 6 April 2009.

 

“Contingent Resources” as defined in
COGEH 5.2, shall mean those quantities of petroleum estimated, as of a given
date, to be potentially recoverable from known accumulations using established
technology or technology under development, but which are not currently
considered to be commercially recoverable due to one or more contingencies.
Contingencies may include 

 

3

 

factors such as economic, legal, environmental,
political, and regulatory matters, or a lack of markets.  It is also appropriate to classify as “Contingent
Resources” the estimated discovered recoverable quantities associated with a
project in the early evaluation stage. 
Contingent Resources are further classified in accordance with the level
of certainty associated with the estimates and may be sub-classified based on
project maturity and/or characterized by their economic status.

 

“Contract” shall mean any written
contract, agreement, obligation, promise, commitment or other undertaking.

 

“Crude Oil” shall mean crude mineral oil,
distillates, asphalt, ozocerite, and all kinds of hydrocarbons and bitumen
regardless of gravity, either solid or liquid, in their natural condition.

 

“Cumulative Claim Threshold Amount”
shall have the meaning ascribed to it in Section 6.6(b).

 

“Damages” shall mean any damages,
liabilities or losses or expenses excluding (i) fees of attorneys and other
professionals, (ii) any damages or losses which are contingent such as loss of
future revenues, income or profits or loss in opportunity and (iii) any
reduction in the Company’s available tax loss carry-forwards other than as a
result of a breach of Section 3.6(b).

 

“Data Room Documentation” shall mean the
documents previously made available to the Purchaser on electronic and optical
media and documents for the Purchaser’s review in the electronic data room set
out in the hard-drive provided to the Purchaser by Stellar Energy Advisors
Limited on behalf of the Seller on 22 June 2009, as updated or supplemented by
the Seller or by Stellar Energy Advisors Limited thereafter.

 

“Date of Reserve Evaluation” shall mean,
in respect of each discovery which is the subject of an evaluation by the
Independent Expert of Contingent Resources and Reserves in accordance with Section
2.6(c), the date of completion of that evaluation.

 

“Deep Water” shall mean (x) any well
located offshore Turkey in water too deep to be drilled by a conventional jack
up rig available within the area of the Black Sea at the time of spudding or (y)
where a locally available jack up rig is not available within the area of the
Black Sea when required, any well located offshore Turkey would be classified
as a deep water well as the result of the higher cost of mobilizing a rig from
outside the Black Sea.

 

“Depreciation Charge” shall mean a
depreciation charge calculated in respect of each Net Profit Interest which
shall equal:

 

(a)                                 the sum of:

 

(i)                                    any direct capital expenditures
incurred in or on the applicable Licence area prior to the beginning of the
period in respect of which such Net Profit Interest is being calculated that
have not yet been depreciated as at the date of that calculation; and

 

(ii)                                 direct capital expenditures
incurred in or on the applicable Licence area during the period in respect of
which such Net Profit Interest is being calculated,

 

multiplied by

 

(b)                                the lesser of 25% or straight-line
depreciation of the estimated remaining production life of the applicable
field.

 

4

 

“Direct Claim” shall have the
meaning ascribed to it in Section 6.3(a).

 

“Direct Claim Review Period” shall have
the meaning ascribed to it in Section 6.3(c).

 

“Disclosure Letter” shall mean the
disclosure letter delivered separately to the Purchaser by the Seller on the
date hereof in relation to and qualifying the Seller Warranties.

 

“Divestiture” shall have the meaning
ascribed to it in Section 2.9(a).

 

“$” or “Dollar” shall mean United
States dollars, being the currency of the United States of America.

 

“Encumbrance” shall mean any charge,
claim, community property interest, lien, deed of trust, attachment, easement,
right of way, encumbrance, mortgage, option, pledge, security interest, right
of first refusal, any Third Party rights of any nature or restriction of any
kind, including any restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership, and “Encumbers” has a
corresponding meaning.

 

“Entity” shall mean any company,
partnership (limited or general), joint venture, trust, association, economic
interest group or other organization, enterprise or entity.

 

“Environmental Claim” shall mean any
claim, proceeding or investigation by any Person in respect of any
Environmental Law.

 

“Environmental Laws” shall mean any Law
which, by its terms, is expressly designed to minimize, prevent, punish or
remedy the consequences of actions or omissions that damage or threaten the
environment or human, animal or plant health or safety, and notably, all Laws
relating to air, water, soil and sub-soil, asbestos, pollution or protection of
the environment or human, animal or plant health and/or the disposal, release,
use, storage, packaging or transport of any substance which alone or in
combination with other substances causes significant harm to environment or
human, animal or plant health or safety.

 

“Existing Directors” shall have the
meaning ascribed to it in Section 2.5(b)(i)(B).

 

“Expenditures” shall mean the total
expenditures and cash calls made or paid by the Company, or on the Company’s
behalf in the Interim Period.

 

“Exploitation Lease” shall mean a lease
issued under the Petroleum Law and conferring on the holder the rights set out
in Article 60 of the Petroleum Law.

 

“Exploration Licence” shall mean a licence
issued under the Petroleum Law and conferring on the holder the rights set out
in Article 50 of the Petroleum Law.

 

“Exploration Success Payment” and “Exploration
Success Payments” shall have the meaning ascribed to those terms in Section
2.6(a).

 

“Final Expenditures” shall mean the
Expenditures minus (x) the Petrol Ofisi Payments, (y) the Stratic Royalty
Payments and (z) the Pre-Interim Period Production Payments, as determined in
accordance with Section 2.4.

 

“Final Figures” shall have the meaning
ascribed to it in Section 2.4(c).

 

“Final Revenues” shall mean the Revenues
minus each of the following:  (x) the
Petrol Ofisi Receivables, (y) the Stratic Royalty Receivables and (z) the Pre-Interim
Period Production Receivables, as determined in accordance with Section 2.4.

 

5

 

“GDPA” shall mean the General
Directorate of Petroleum Affairs of Turkey.

 

“Governmental Authority” shall mean any
domestic, foreign or supranational court or other judicial authority or
governmental, administrative or regulatory body, department, agency,
commission, authority or instrumentality.

 

“Governmental Authorization” shall mean
any approval, consent, permit, ruling, waiver, exemption,  licence or other
authorization (including the lapse, without objection, of a prescribed time
under a statute or regulation that states that a transaction may be implemented
if a prescribed time lapses following the giving of notice without an objection
being made) issued, granted, given or otherwise made available by or under the
authority of any Governmental Authority or pursuant to any Law.

 

“Guarantor EGM” shall mean the extraordinary
general meeting of the shareholders of Guarantor held on September 30, 2009.

 

“Guarantor” shall have the meaning
ascribed to it in the Preamble.

 

“Hydrocarbon” shall mean any of oil,
bitumen and products derived therefrom, synthetic crude oil, petroleum, natural
gas, natural gas liquids, and any other substances produced in association with
any of the forgoing, whether liquid, solid or gaseous.

 

“Hydrocarbon Agreement” shall mean a
Hydrocarbon production sharing contract, association agreement, concession
agreement, incremental production contract, lease or licence, permit or other
similar agreement or right permitting the Company (either alone or with other
Persons) to explore for, develop, use, produce, sever, process, operate and
occupy Hydrocarbon interests and associated fixtures or structures for a specified
period of time, as well as any farm-out or farm-in agreement, association
agreement, operating agreement, unit agreement, pooling or communitization
agreement, technical evaluation agreement, declaration or order, joint venture,
option or acquisition agreement, any oil and gas production, sales, marketing,
transportation, exchange and processing contract or agreement, or any other
contract affecting the ownership or operation of properties held for
exploration or production of Hydrocarbons, or the disposition of Hydrocarbons
produced therefrom, in each case to which the Company is a party.  For the avoidance of doubt, Hydrocarbon
Agreements shall include (i) the Licences and (ii) the JOAs.

 

“Indemnified Party” shall have the
meaning ascribed to it in Section 6.3.

 

“Indemnifying Party” shall have the
meaning ascribed to it in Section 6.3.

 

“Independent Accountant” shall have the
meaning ascribed to it in Section 2.4(d).

 

“Independent Expert” shall mean Gaffney,
Cline & Associates, provided that if Gaffney, Cline & Associates are
unavailable to carry-out the relevant evaluation for the purposes of Section 2.6,
the Parties shall agree upon an alternate independent expert from among (w) Ryder
Scott Company, (x) Sproule Associates, (y) Miller & Lents, or (z) TRACS
International Ltd.

 

“Individual Claim Threshold Amount” shall have the
meaning ascribed to it in Section 6.6(a).

 

“Intellectual Property Right” shall mean
any registered patent, trademark, copyright, design right, service mark, domain
name, trade name or other intellectual property right (in each case whether
registered or unregistered and including applications taken from any such
rights).

 

“Interim Period” shall mean the period
beginning on July 1, 2009 and ending on the Closing Date.

 

6

 

“JOA” shall mean each joint operating
agreement, joint venture agreement or other similar document entered into
between the Company and other Persons having an interest in a Licence which
defines those parties’ respective
rights and obligations with respect to their operations in respect of that
Licence, and “JOAs” shall mean all such agreements collectively.

 

“Judgment” shall mean any award,
decision, injunction, judgment, order or ruling entered, issued, made or rendered
by any court, administrative agency or other Governmental Authority or by any
arbitrator.

 

“Knowledge” when used with respect to an
individual, shall mean such individual’s actual knowledge of a fact or other
matter or such facts or matters that a prudent person could be expected to have
discovered or otherwise become aware of in the course of conducting a due and
careful investigation concerning the existence of such fact or other matter.

 

“Knowledge of the Seller” shall mean the
Knowledge of the following individuals:

 

(a)                                  each of the Listed
Employees;

 

(b)                                 Mr Craig McKenzie;
and

 

(c)                                  Mr Charles Campise.

 

“Law” shall mean any law, statute,
regulation, rule, ordinance, principle, order or decree of any Governmental
Authority (including any judicial or administrative interpretation thereof) in
force, fully implemented and enforceable (including, for the avoidance of
doubt, the Petroleum Law and the Environmental Laws).

 

“Licence” shall mean each Exploitation
Lease or Exploration Licence listed in Annex C, and “Licences”
shall mean all of them collectively.

 

“Listed Employees” shall mean the key
management members of the Company as of the date hereof, being the following
individuals:

 

(a)                                  Mr Roy Barker;

 

(b)                                 Mr Kubilay Yildirim;

 

(c)                                  Mr Senol Yanmaz; and

 

(d)                                 Mr Cuneyt Ozdil.

 

“Material Adverse Effect” when used with
respect to any change, situation, development or other event, shall mean that
such change, situation, development or other event has a material adverse
effect on (a) the business, financial or results of operations of the Company, (b)
one or more of the Licences, or (c) any of the Company’s Participating
Interests; other than an effect resulting from or arising out of an Excluded
Matter; for such purposes, an “Excluded Matter” shall mean any matter or
change out of the control and independent from the Parties which materially and
adversely effects the condition of the financial markets, the economy, the
industry or business sectors in which the Company operates.

 

“Material Contracts” and “Material
Contract” shall have the meanings ascribed to those terms in Section 3.15(a).

 

“MMboe” shall mean one million (1,000,000)
boe.

 

7

 

“MMscf” shall mean one million (1,000,000) standard cubic feet.

 

“MMscfd” shall mean a flow rate of one million (1,000,000)
standard cubic feet per day.

 

“Natural Gas” shall mean all hydrocarbons that are in gaseous
phase at Standard Conditions; including casing head gas and residue gas
remaining after the extraction or separation of liquid hydrocarbons from wet
gas, and all non-hydrocarbon gas or other substances (including carbon dioxide,
sulphur and helium) which are produced in association with gaseous
hydrocarbons.

 

“Net Profit” shall mean, in respect of each Net Profit Interest
payable in respect of a Licence per Calendar Quarter, the gross revenue earned
by the Company (before corporate income Taxes) from the sale of Hydrocarbons
from the applicable Licence in the applicable Calendar Quarter minus (x) the
direct costs or expenses associated with extracting such Hydrocarbons,
including Turkish government royalty, transportation and other direct costs in
such Calendar Quarter, (y) a portion of the Company’s general and
administration charges that shall be twenty five thousand Dollars ($25,000) per
Calendar Quarter and which shall be allocated between all Licences in respect
of which a Net Profit Interest is paid in the ratio of the Calendar Quarterly
revenue received for each such Licence, and (z) all Expenditures made or
paid by the Company in the Interim Period in respect of the field; provided
that, no portion of the Base Purchase Price shall in any case be
deducted from gross revenue for the purpose of calculating Net Profit.  For the avoidance of doubt, in no case shall
Net Profit be less than zero Dollars ($0).

 

“Net Profit Interest” and “Net
Profit Interests” shall have the meaning
ascribed to those terms in Section 2.7(a).

 

“Onshore” shall mean any field located in an
area onshore Turkey which is not in Van or Bakuk.

 

“Ordinary Course of Business” or “Ordinary
Course” shall mean the normal operation of the Company, consistent with its
past practice.

 

“Organizational Documents” shall mean when used
with respect to the Company or other incorporated Entity, the memorandum and
articles of association, charter or similar constitutive document of such
company or other incorporated Entity, as filed with the relevant commercial
registry, company registrar or other Governmental Authority, as the same may be
amended, supplemented or otherwise modified from time to time.

 

“Overriding Royalty” shall mean the one and
one-half percent (1.5%) overriding royalty interest due to Netherby Investments
Limited on overall production from SASB Licences pursuant to the agreement
between the Company and Netherby Investments Limited dated 16 October 2003.

 

“Participating Interest” shall mean, in respect
of each Licence, the undivided interest of the Company (expressed as a percentage
of the total interests of all parties) in the rights and obligations in respect
of that Licence and the JOA in respect of that Licence as at the Closing Date,
as listed in Annex C, and “Participating Interests” shall mean
all of them collectively.

 

“Party” shall mean each of the Seller, the
Guarantor and the Purchaser individually, as the case may be, and “Parties”
shall mean all of them.

 

“Permitted Encumbrance” shall
mean (i) any retention of title provision applicable to any machinery,
equipment or inventory purchased by the Company, (ii) any (x) easement
or right of way or similar Encumbrance, or (y) Encumbrance arising by
operation of Law and incurred or arising in the Ordinary Course of Business
which, in either case, does not individually or in the aggregate with other
such Encumbrances materially impair the transferability or use of the relevant
asset by the Company in the conduct of its business as presently conducted, and
(iii) any 

 

8

 

rights, limitations, reservations or Encumbrance to the benefit of any
Person under the Hydrocarbon Agreements and (iv) any Encumbrances
disclosed in Schedule to the Disclosure Letter.

 

“Permitted Transfer” shall have the meaning
ascribed to it in Section 2.7(e).

 

“Person” shall mean a natural person, Entity,
or Governmental Authority.

 

“Petrol Ofisi Payments” shall mean amounts paid
by the Company in connection with the Petrol Ofisi Sale, including (x) any
expenditures or cash calls made or paid by the Company on behalf of Petrol
Ofisi, (y) any payments made by the Company to the Seller (or any of its
Affiliates) in respect of the five million Dollars ($5,000,000) paid to the
Company by Petrol Ofisi on September 1, 2009 in respect of the Petrol
Ofisi Sale purchase price; and (z) any payments made by the Company to
Petrol Ofisi in respect of post-closing Petrol Ofisi Sale purchase price
adjustments.

 

“Petrol Ofisi Receivables” shall mean amounts
received by the Company in connection with the Petrol Ofisi Sale, including (x) the
five million Dollars ($5,000,000) paid to the Company by Petrol Ofisi on September 1,
2009 in respect of the Petrol Ofisi Sale purchase price, (y) any payments
received by the Company from Petrol Ofisi in respect of post-closing Petrol
Ofisi Sale purchase price adjustments and (z) any gas revenues invoiced
and received by the Company on behalf of Petrol Ofisi.

 

“Petrol Ofisi Sale” shall mean the Company’s
sale on March 3, 2009 to Petrol Ofisi of a 26.75% interest in SASB
Licences.

 

“Petroleum Law” shall mean the Petroleum Law of
Turkey, as amended from time to time.

 

“Petroleum Registry” shall mean the petroleum
registry maintained by the GDPA in accordance with the Petroleum Law.

 

“Post-Closing Addition” shall have the meaning
ascribed to it in Section 2.4(a)(ii).

 

“Post-Closing Reduction” shall have the meaning
ascribed to it in Section 2.4(a)(i).

 

“Pre-Interim Period Production Payments” shall
mean any expenditures or cash calls made by the Company in the Interim Period
relating to production prior to July 1, 2009.

 

“Pre-Interim Period Production Receivables”
shall mean any revenues received by the Company in the Interim Period relating
to production prior to July 1, 2009.

 

“Proceeding” shall mean any litigation,
arbitration, dispute, hearing, investigation, control, audit, verification or
other legal proceeding (civil or criminal) commenced, brought, conducted or
heard by or before any Governmental Authority or arbitrator.

 

“Prohibited Payment” shall mean any offer,
gift, payment, promise to pay, or authorization of the payment of any money or
anything of value, including charitable contributions, to a Public Official, or
to any person, while knowing that all or a portion of the money or thing of
value will be paid, offered, promised, or given, directly or indirectly, to a
Public Official, for the purposes of (i) influencing any act or decision
of the Public Official in his capacity as such; (ii) inducing the Public
Official to do or omit to do any act in violation of his lawful duty; (iii) securing
any improper advantage; or (iv) inducing the Public Official to use his
influence with a government or instrumentality thereof to affect or influence
any act or decision of such 

 

9

 

government or instrumentality, in order to assist in
obtaining or retaining business or in directing business to any party.

 

“Proven Reserves” shall mean “Proved Reserves” defined according
to COGEH section 5.4.1.a.

 

“Public Official” shall mean any officer,
employee or representative, whether elected or appointed, of any federal, state
or local government or any department, agency or instrumentality thereof
(including, but not limited to, any government-owned or -controlled commercial
enterprise, such as a government-controlled oil company) or of any public
international organization, any person acting in an official capacity on behalf
for or on behalf of such government or department, agency or instrumentality or
any public international organization, or any political party or any officer or
candidate thereof.

 

“Purchaser” shall have the meaning ascribed to
it in the Preamble.

 

“Purchaser’s Representatives” shall have the
meaning ascribed to it in Section 8.12(c).

 

“Purchaser Warranties” shall mean the
warranties in ARTICLE IV and the warranties given by the Purchaser and the
Guarantor in ARTICLE V.

 

“Reference Financial Statements” shall have the
meaning ascribed to it in Section 3.6(a).

 

“Required Shareholder Approval” shall mean the
resolution of the Guarantor EGM to increase the capital of the Guarantor in
accordance with the Calling Notice.

 

“Reserves” shall mean, in respect of the applicable Commercial
Discovery, Proven Reserves plus 1 C Economic Contingent Resources per the
classification of reserves prepared by the Standing Committee on Reserves
Definitions of the Petroleum Society of the CIM, incorporated COGEH and
specified by National Instrument 51-101.

 

“Retention Agreement” shall
have the meaning ascribed to it in Section 6.13(a).

 

“Revenues” shall mean the total revenues
received by the Company during the Interim Period.

 

“Samsun” shall mean the area described as such in Annex C.

 

“SASB” shall mean the area
described as such in Annex C.

 

“SASB Licences”
shall have the meaning ascribed to it in Annex C.

 

“scf” shall mean the volume of Natural Gas contained in one
cubic foot at Standard Conditions.

 

“Seller” shall have the meaning ascribed to it
in the Preamble.

 

“Seller Warranties” shall mean the warranties
in Article III and the warranties given by the Seller in ARTICLE V.

 

“Seller’s Account” shall mean a bank account of
the Seller, the details of which have been provided by the Seller to the
Purchaser.

 

“Seller’s Representatives” shall have the
meaning ascribed to it in Section 8.12(b).

 

“Settlement Offer” shall have the meaning
ascribed to it in Section 6.3(d)(iii).

 

10

 

“Shallow Water” shall mean any well located in
shallow water offshore Turkey that can be drilled with a conventional jack up
rig available within the area of the Black Sea.

 

“Shares” shall have the meaning ascribed to it
in Recital (A).

 

“Standard Conditions” shall mean a temperature of fifteen
degrees Celsius (15oC) and pressure of one (1) atmosphere (equivalent to
1.01325 Bar or 101.325 kilopascal (kPa) or 14.696 pounds per square inch (psi),
or as mutually agreed by the Parties from time to time.

 

“Stratic Royalty Payments” shall mean any
payments made by the Company to the Seller (or any of its Affiliates) in
respect of royalty payments received by the Company from Stratic Energy
Corporation in the Interim Period.

 

“Stratic Royalty Receivables” shall mean any
royalty payments received by the Company from Stratic Energy Corporation in the
Interim Period.

 

“Subsidiary” when used with reference to a specified
Person, shall mean any incorporated Entity of which more than 50% of the issued
share capital and voting rights exercisable at a shareholders meeting of that
Entity are at the time owned, directly or indirectly through one or more
intermediaries, or both, by such Person.

 

“Tax” or “Taxes” shall mean all taxes,
duties, assessments and governmental charges of any kind, whether payable
directly or by withholding, including income, transfer, real and personal
property, sales, customs, registration, value added, excise, franchise,
employment, payroll and social security taxes, charges and contributions,
together with any interest, penalties (civil or criminal) or additions to tax
with respect thereto, imposed by or due to any Governmental Authority having authority
in respect of the Company.

 

“Tax Return” shall mean any return,
declaration, report, estimate, form, schedule, information statement, notice or
other documentation (including any additional or supporting material) filed or
maintained, submitted or required to be filed, submitted or maintained, in
connection with the calculation, determination, assessment, collection or
payment of any Tax.

 

“TDF” shall mean, in relation to the date on which a well that
is the subject of a Commercial Discovery is spudded, (v) in Year 1, 100%, (w) in
Year 2, 75%, (x) in Year 3, 50%, (y) in Year 4, 25%, and (z) after
Year 4, 0%.

 

“Third Party” shall mean any Person (including any Governmental
Authority and any Affiliate of a Party) other than the Parties hereto.

 

“Third Party Claim” shall
have the meaning ascribed to it in Section 6.3(a).

 

“Third Party Claim Review Period” shall
have the meaning ascribed to it in Section 6.3(d).

 

“Thrace Black Sea” shall mean the area
described as such in Annex C.

 

“Toreador Name and Toreador Marks” shall
have the meaning ascribed to it in Section 8.1(a).

 

“TPAO” shall mean Türkiye Petrolleri Anonim Ortaklığı
(also known as Turkey Petroleum Corporation).

 

“TPAO Receivable” shall have the meaning ascribed to it in Section 6.15.

 

“Trabzon” shall mean the area described as such in Annex C.

 

11

 

“Transfer NPI” shall
have the meaning ascribed to it in Section 2.7(c).

 

“Turkey” shall mean the Republic of Turkey.

 

“Van” shall mean the area described as such in Annex
C.

 

“Warranties” shall mean the Seller Warranties
or the Purchaser Warranties (as the context requires).

 

“Wells” shall have the meaning ascribed to it
in Section 6.11.

 

“Year” shall mean each of Year 1, Year 2, Year 3 and Year 4, and
“Years” shall mean Year 1, Year 2, Year 3 and Year 4 collectively.

 

“Year 1” shall mean the period commencing on the Closing Date
and concluding on the eve of the first anniversary of the Closing Date.

 

“Year 2” shall mean the period commencing on the first
anniversary of the Closing Date and concluding on the eve of the second
anniversary of the Closing Date.

 

“Year 3” shall mean the period commencing on the second
anniversary of the Closing Date and concluding on the eve of the third
anniversary of the Closing Date.

 

“Year 4” shall mean the period commencing the third anniversary
of the Closing Date and concluding on the eve of the fourth anniversary of the
Closing Date.

 

1.2      Principles of
Construction.  In this Agreement:

 

(a)                                 All references
herein to Articles and Sections shall be deemed references to articles and
sections of this Agreement unless the context shall otherwise require.  The descriptive headings to Articles and
Sections are inserted for convenience only, and shall have no legal effect.

 

(b)                                When
calculating the period of time within which or following which any act is to be
done or step taken, the date which is the reference day in calculating such
period shall be excluded and if the last day of such period is not a Business
Day, the period shall end on the next day which is a Business Day.

 

(c)                                 The following rules of
interpretation shall apply unless the context shall require otherwise:

 

(i)                                    Definitions used in this Agreement shall apply equally to both the
singular and plural forms of the terms defined.

 

(ii)                                 Whenever used in this Agreement:

 

(A)                             the words “include”, “includes” and “including”
shall be deemed to be followed by the phrase “without limitation”; and

 

(B)                               the words “hereof”, “herein” and similar words shall be
construed as references to this Agreement as a whole and not just to the
particular Section or subsection in which the reference appears.

 

(iii)                              A reference to a specific time of day shall be to local time in Paris,
France.

 

12

 

(iv)                             A reference to any Party  to
this Agreement or any party to any other agreement or document includes such
Party or party’s successors and permitted assigns.

 

(v)                                The word “or” shall have a disjunctive and not alternative meaning
(i.e., where two items or qualities are separated by the word “or”, the
existence of one item or quality shall not be deemed to be exclusive of the
existence of the other).

 

(vi)                             The headings used in this Agreement are inserted for convenience only
and shall not affect the construction of this Agreement.

 

(vii)                          Any reference in this Agreement to a Hydrocarbon Agreement (or any
agreement entered into pursuant to a Hydrocarbon Agreement) shall be deemed to
include any variation, modification, extension, renewal or re-enactment of such
Hydrocarbon Agreement or agreement.

 

(viii)                       Reference to any Law includes a reference to that Law provision as from
time to time modified or re-enacted.

 

ARTICLE II

PURCHASE AND SALE OF THE SHARES

 

2.1      Agreement to Purchase and to Sell the Shares.  Upon the terms
set forth in this Agreement, at the Closing:

 

(a)                                 the Purchaser
shall purchase from the Seller; and

 

(b)                                the Seller
shall sell and deliver to the Purchaser,

 

the Shares free and clear of all Encumbrances together with all rights
and benefits now and hereafter attaching thereto.

 

2.2      Consideration for the Shares.  The aggregate consideration to be paid for
the Shares shall be:

 

(a)                                 seven million
and five hundred thousand Dollars ($7,500,000) to be paid on the Closing Date
in cash (the “Base Purchase Price”), subject to adjustments pursuant to
and in accordance with Section 2.3 (the Base Purchase Price, after giving
effect to any such adjustment, the “Closing Purchase Price”);

 

(b)                                all Exploration
Success Payments (if any) that become payable in accordance with Section 2.6;
and

 

(c)                                 all Net Profit Interest
payments (if any) that become payable in accordance with Section 2.7,
subject to offset of the Exploration Success Payments paid in respect of each
such Net Profit Interest as further described in that Section.

 

The Closing Purchase Price shall be subject to adjustment after Closing
in accordance with Section 2.4 below.

 

13

 

2.3      Closing Adjustment Amount.  The Seller’s good faith estimate of the
Closing Revenues, the Closing Expenditures and the Closing Purchase Price is
set forth in Annex F and represents the agreed basis for the Closing
Purchase Price.  At the Closing, the Base
Purchase Price shall be adjusted as follows:

 

(a)                                 reduced by the
Closing Revenues; and

 

(b)                                increased by
the Closing Expenditures.

 

2.4      Post-Closing Adjustment to Closing Purchase Price.

 

(a)                                 After the
Closing, the Closing Purchase Price shall be adjusted as follows:

 

(i)                                    reduced
by the amount, if any, by which the Final Revenues exceeds the Closing Revenues
set forth on Annex F (the “Post-Closing Reduction”); and

 

(ii)                                 increased
by the amount, if any, by which the Final Expenditures exceeds the Closing
Expenditures set forth on Annex F (the “Post-Closing Addition”),

 

each as determined pursuant to Sections 2.4(c) to
2.4(e) inclusive.

 

(b)                                After the
calculation of each of the Final Revenues and the Final Expenditures becomes
final and binding upon the Parties in accordance with the remaining provisions
of this Section 2.4, then, within five (5) Business Days following
such calculation:

 

(i)                                    if a
Post-Closing Reduction is required, the Seller shall deliver such amount in
immediately available funds by wire transfer to an account specified by the
Purchaser; and

 

(ii)                                 if a
Post-Closing Addition is required, Purchaser shall deliver such amount in
immediately available funds by wire transfer to the Seller’s Account (or such
other account as may be designated by the Seller).

 

(c)                                 As soon as
practicable after the Closing Date, but no later than forty-five (45) days
after the Closing Date, the Purchaser will deliver to the Seller a statement
setting forth its proposed calculation of each of the Final Revenues, the Final
Expenditures, the Post-Closing Reduction, if any, and the Post-Closing
Addition, if any (collectively the “Final Figures”).

 

If the Seller does not object to the Purchaser’s calculation of the
Final Figures within forty-five (45) days after receipt thereof, such
calculation shall be final, conclusive and binding on the Parties.

 

If the Seller objects to the Purchaser’s calculations of the Final
Figures, the Seller shall within such forty-five (45)-day period notify
Purchaser of the same and deliver its proposed modifications of such
calculations to Purchaser.  If the
Purchaser disagrees with any of the Seller’s proposed modifications of the
calculation of the Final Figures, delivered to the Purchaser pursuant to this Section 2.4(c),
the Parties shall negotiate in good faith to reach an agreement with respect to
the disputed items during the fifteen (15)-day period following delivery of
such proposed modification.

 

(d)                                If, upon
completion of the fifteen (15)-day period described in Section 2.4(c), the
Seller and the Purchaser are unable to reach an agreement, they shall promptly
cause 

 

14

 

an internationally recognized accounting firm (the “Independent
Accountant”) reasonably satisfactory to the Seller and the Purchaser to
review this Agreement and the disputed items or the amounts for the purpose of
calculating the Final Figures.

 

In making such calculation, the Independent Accountant shall consider
only those items or amounts in the calculation of the Final Figures, as to
which the Seller and the Purchaser have disagreed.

 

The Independent Accountant shall deliver to the Seller and Purchaser,
as promptly as practicable, a report setting forth its calculations.  Such report shall be binding and final upon
the Seller and the Purchaser.  The cost
of such review and report shall be paid one-half by the Seller and one-half by
the Purchaser.

 

(e)                                 The Parties
hereto agree that they will cooperate and assist in the preparation of the
calculation of the Final Figures, and in the conduct of the reviews set forth
in Section 2.4(c) and 2.4(d), including, without limitation, by
making available, to the extent necessary, relevant books, records,
information, work papers or other documents and personnel.

 

2.5      Closing.

 

(a)                                 The
consummation of the sale and purchase of the Shares (the “Closing”)
shall take place on October 7, 2009 at the offices of Willkie Farr &
Gallagher LLP, Paris, France or at such other location as the Purchaser and the
Seller may agree in writing.  The date on
which the Closing shall take place is referred to herein as the “Closing
Date”.

 

(b)                                At the Closing:

 

(i)                                    the Seller shall deliver to the Purchaser:

 

(A)                             transfer form in respect of the Shares duly executed by the Seller in
favor of the Purchaser;

 

(B)                               Board of Directors resolution approving the entry of the Purchaser into
the Company’s Register of Members after the passing of which Mr. Campise, Mr. Lovett
and Mr. Fitzgerald (the “Existing Directors”)
shall  resign as directors of the Company;

 

(C)                               resignation letters of the Existing Directors with effect as from the
Closing;

 

(D)                              Board
of Directors resolution in respect of (i) the removal of Mr. Roy A.
Barker from his position as the resident representative of the Company in
Turkey with effect as from the Closing and (ii) revocation of his power of
attorney dated July 27, 2005 to that effect;

 

(E)                                release
letter of Mr. Barker which shall include Mr. Barker’s irrevocable
release towards the Company and his unconditional undertaking that he shall
have no claims whatsoever against the Company in relation to his removal from
the position as the resident representative of the Company in Turkey;

 

15

 

(F)                                Board
of Directors resolution in respect of (i) appointment of Mr. Robert
Healey as the new resident representative of the Company in Turkey with effect
as from the Closing and (ii) execution under the common seal of the
Company of the power of attorney for Mr. Robert Healey to that effect;

 

(G)                               copies
of all existing powers of attorney previously granted by the Company; provided
the Seller shall procure that the originals of those documents are promptly
delivered to such Person as the Purchaser shall notify the Seller following the
Closing Date;

 

(H)                              certified
copies of the resolutions and minutes of the Company and certified extracts
from the corporate registers of the Company, provided that the Seller shall
procure that the original minutes books and corporate registers of the Company
are promptly delivered to such Person in the Cayman Islands as the Purchaser
shall notify the Seller following the Closing Date;

 

(I)                                   copies of any share
certificates that have been issued in respect of the Shares if any of the
Shares are held in certificated form, together with a declaration of lost
certificate; and

 

(J)                                  other documents, computer
files or records in the possession of the Seller relating to the Company,
provided the Seller shall procure that any remaining such documents, computer
files or records are promptly delivered to the Purchaser following the Closing
Date; and

 

(ii)                                 the Purchaser shall pay to the Seller an amount equal to the Closing
Purchase Price by wire transfer of immediately available funds to the Seller’s
Account.

 

All matters at the Closing will be considered to take
place simultaneously, and no delivery of any document will be deemed complete
until all transactions and deliveries of documents required by this Agreement are
completed, and title to the Shares shall not be transferred and the Purchaser
shall have no property rights or interest in the Shares unless and until the
Closing actually takes place and the payment referenced in subsection 2.5(b)(ii) has
been effectively made.

 

2.6      Exploration Success
Payments.

 

(a)                                 Subject to the
remaining provisions of this Section 2.6, if a Commercial Discovery has
occurred, the Purchaser shall pay to the Seller an exploration success payment
in respect of such Commercial Discovery calculated in accordance with Section 2.6(b) and
paid in accordance with Section 2.6(f) (each an “Exploration
Success Payment” and collectively the “Exploration Success Payments”).

 

(b)                                Each
Exploration Success Payment shall, in respect of the Commercial Discovery to
which it applies, equal Reserves multiplied by $/boe multiplied by TDF
multiplied by Company’s Share.

 

(c)                                 A “Commercial
Discovery” shall mean a discovery that has Contingent Resources, as
determined by the Independent Expert, that are in excess of the amounts set
forth in Annex B.

 

(d)                                Subject to Section 2.8,
the Purchaser shall provide prompt written notice to the Seller:

 

16

 

(i)                                    upon the commencement of the
spudding of an exploration well in any of the Licences in the period commencing
on the Closing Date and concluding at the end of Year 4; and

 

(ii)                                 following any material
developments with respect thereto.

 

(e)                                 The Purchaser shall instruct the Independent
Expert to complete its evaluation of the Contingent Resources and the Reserves
within twelve (12) weeks of receiving the data pertaining to each successful
exploration well, and the Purchaser shall provide prompt notice to the Seller
upon such instruction.  The fees of the Independent
Expert appointed pursuant to Section 2.6(e) in respect of that
evaluation shall be paid one-half by the Seller and one-half by the Purchaser.

 

(f)                                   The Exploration
Success Payment for the first Commercial Discovery following the Closing Date
shall become payable immediately following the date of first production from
such Commercial Discovery. For each subsequent Commercial Discovery the
Exploration Success Payment shall become payable one (1) calendar month
after receipt of the determination of Reserves by the Independent Expert in
respect of such Commercial Discovery. 
The Purchaser shall make each Exploration Success Payment by wire
transfer of immediately available funds to the Seller’s Account (or such other
account as may be designated by the Seller), such payment to be accompanied by
a detailed statement setting forth the Purchaser’s calculation of the
Exploration Success Payment (subject always to Section 2.8).  Exploration Success Payments shall be made by
the Purchaser in the order in which they become due.

 

(g)                                No Exploration
Success Payment shall be due in the event the Purchaser declares a field
unviable and declines to move forward with development of Contingent Resources.

 

(h)                                Notwithstanding
any other provision of this Section 2.6, no Exploration Success Payment
shall be payable in respect of any:

 

(i)            existing
discoveries in SASB or Cendere;

 

(ii)           discoveries
in the sands of the Akcakoca Member by a well drilled from a SASB platform
either currently in place, or currently planned in SASB Phase II; or

 

(iii)          Hydrocarbons
produced from an existing well which are at any time after the Closing Date
tied back to a platform described in Section 2.6(h)(ii).

 

(i)                                    In no circumstances shall the aggregate
Exploration Success Payments exceed forty million Dollars ($40,000,000) in the
period commencing on the Closing Date and concluding at the end of Year 4 nor
ten million Dollars ($10,000,000) in any Year (the “Annual Cap”).  Where the Annual Cap
is reached in any given Year, any Exploration Success Payments that became
payable in such Year in excess of the Annual Cap shall become payable on the
last day of the sixth (6th) month of the subsequent Year (subject
to the Annual Cap for that subsequent Year), provided  that no
Exploration Success Payments shall accrue or be carried over after the end of
Year 4.

 

17

 

2.7                              Net Profit Interest.

 

(a)        If a field goes into
production that was discovered by an exploration well drilled prior to the end
of Year 4 on any of the Licences still held by the Purchaser as at the date at
which that well is drilled/field goes into production, the Purchaser shall:

 

(i)            subject
to Section 2.8, promptly provide written notice to the Seller;

 

(ii)           subject to Section
2.8, provide to the Seller at the end of each Calendar Quarter a detailed
statement setting forth the Purchaser’s calculation of the Net Profit Interest
for that Calendar Quarter; and

 

(iii)          pay to the Seller
at the end of each Calendar Quarter a net profit interest in respect of such
discovery, calculated in accordance with Section 2.7(b) (each a “Net Profit
Interest” and collectively the “Net Profit Interests”).

 

The Purchaser shall make each Net Profit Interest payment,  without
any deductions being made for Taxes other than withholding taxes required by
Law in any or all of the jurisdictions in which the payment passes, by wire transfer of
immediately available funds to the Seller’s Account (or such other account
designated by the Seller).

 

(b)       Each Net Profit Interest
shall, in respect of the discovery to which it applies, equal (x) 10%
multiplied by (a) Net Profit minus (b) Depreciation Charge minus (y) the sum of
Accrued G&A not deducted in any previous Net Profit Interest calculation
and any and all Exploration Success Payments paid by the Purchaser in respect
of that discovery, if any, not deducted in any previous Net Profit Interest
calculation.

 

(c)        Subject to Section 2.7(e),
in the event the Seller seeks to sell, assign or otherwise dispose of all or
part of its rights derived from any Net Profit Interest payable to it under
this Section 2.7 (a “Transfer NPI”), the Purchaser shall have right of
first refusal in respect of such Transfer NPI, subject to the following:

 

(i)            The
Seller shall notify the
Purchaser promptly of its intention to sell, assign or otherwise dispose of a
Transfer NPI and shall provide the Purchaser with all relevant
information and documentation concerning such Transfer NPI as shall reasonably
be required by the Purchaser in connection with the possible exercise by the
Purchaser of such right of first refusal.

 

(ii)           The Seller shall
not sell, assign or otherwise dispose of all or any part of such Transfer NPI
to a person other than the Purchaser until the earlier of (x) a waiver by the
Purchaser of its right of first refusal or (y) one (1) calendar month following
the Purchaser’s receipt of notice by the Seller under Section 2.7(c)(i).

 

(iii)          In no circumstances shall the Seller sell,
assign or otherwise dispose of any Transfer NPI where such disposal is on terms
and conditions less favourable to the Seller (including after taking into
account the Seller’s potential tax liability in connection therewith) than the
terms and conditions offered to the Purchaser pursuant to this Section 2.7(c).

 

(iv)          Subject to the limitations in this Section 2.7,
the Purchaser shall reasonably cooperate in the taking of any actions, and the
preparation and execution of 

 

18

 

any documents related to the sale, assignment or
disposal by the Seller of any Transfer NPI.

 

(d)       Notwithstanding any other
provision of this Section 2.7, no Net Profit Interest shall be payable in
respect of any:

 

(i)            existing
discoveries in SASB or Cendere;

 

(ii)           discoveries in the sands of the Akcakoca Member by a well drilled from a
SASB platform either currently in place, or currently planned in SASB Phase II;
or

 

(iii)          Hydrocarbons
produced from an existing well which are at any time after the Closing Date
tied back to a platform described in Section 2.7(d)(ii).

 

(e)        Notwithstanding any other
provision of this Section 2.7, the Seller may sell, assign, transfer or
otherwise dispose of all or any part of its rights derived from any Net Profit
Interest payable to it under this Section 2.7 to any of its Affiliates (a “Permitted
Transfer”), provided that prior to such Permitted Transfer, such Affiliate
agrees to be bound by the terms of this Section 2.7.

 

(f)        Notwithstanding anything herein to the
contrary, the Seller shall, upon written notice to Purchaser, have the right to
audit the accounts and records of the Purchaser relating to the Net Profits
Interest within the twenty-four (24) month period following the first month of
production.

 

(g)       The Parties acknowledge and agree that no
Net Profit Interest payment in respect of a field will fall due until such time
as the cumulative Net Profit Interest payable in respect of that field exceeds
the Exploration Success Payment payable in respect of that field (if any).

 

2.8                              Disclosure
of Information. The Purchaser and Guarantor shall use their best
efforts to timely obtain any Third Party consents required for the release of
information required to be provided to the Seller under Section 2.6 or Section 2.7.  The Seller shall give the Purchaser and the
Guarantor such assistance as the Purchaser and/or the Guarantor reasonably
request, including the execution of any documentation and the taking of any
step reasonably necessary in order to obtain such consents.  In the event any such consent cannot be
obtained, the Parties shall appoint a Third Party reasonably satisfactory to all
Parties to verify on behalf of the Seller that the calculation of the
applicable Exploration Success Payment or Net Profit Interest is in accordance
with this Agreement.  The fees of such
Third Party shall be paid one-half by the Seller and one-half by the Purchaser.

 

2.9                              Divestiture.

 

(a)        Subject to Section 2.9(b), if the
Purchaser elects to sell, assign or otherwise divest any or all of the
Participating Interests (other than to the Seller, an Affiliate of the Seller
or an Affiliate of the Purchaser) (a “Divestiture”), the following
provisions shall apply:

 

(i)            10% of the consideration the Purchaser
and/or the Company (as the case may be) receives in respect of such Divestiture
(after deduction for withholding taxes required by law in any or all of the
jurisdictions in which the payment passes), less an amount equal to all
Exploration Success Payments paid by the Purchaser to the Seller in respect of
the Licence that is subject of the 

 

19

 

Divestiture, shall be payable to the Seller within
five (5) Business Days of the Purchaser’s receipt of that consideration;

 

(ii)           in the event the Purchaser and/or the
Company (as the case may be) receives all or a portion of the consideration for
such Divestiture in a form other than cash, the procedures set forth in Annex
E shall govern the determination of that Cash Value;

 

(iii)          the Parties acknowledge and agree that if
the Purchaser divests of the entire Participating Interest in a Licence and
pays to the Seller the amount due in respect of that Divestiture in accordance
with this Section 2.9, then no further Exploration Success Payments or Net
Profit Interest shall be payable in respect of that Licence; and

 

(iv)          the Parties acknowledge and agree that if
the Purchaser divests of only part of the Participating Interest in a Licence
and pays to the Seller the amount due in respect of that Divestiture in
accordance with this Section 2.9, the Company’s Share shall be reduced
accordingly and the Net Profit applicable to Net Profit Interest payable in
respect of that Licence (if any) shall be reduced accordingly.

 

(b)       The Parties agree that if the Purchaser
assigns, transfers or novates any or all of the Participating Interests to a
Third Party (other than to an Affiliate of any of the Parties) in consideration
for:

 

(i)            that Third Party carrying out, or causing to be carried out,
certain specified seismic, drilling, work program or other activities in the
Licence to which the Participating Interest pertains; and/or

 

(ii)           that Third Party paying the Company’s
Participating Interest share of costs and expenses associated with certain
specified seismic, drilling, work program or other activities in such Licence,

 

such an assignment, transfer or novation of any interest in excess of a
50% Participating Interest shall not be a Divestiture for the purposes of this
Agreement; provided that if the payment due by the Purchaser to the Seller under this Section 2.9
shall render the related project uneconomic, the Parties shall agree to
negotiate an equitable settlement in lieu of such payment.  This provision shall not apply to, and no
payment shall be due under this Section 2.9 in respect of, Participating
Interests in respect of Samsun and Trabzon.

 

ARTICLE III

WARRANTIES

OF THE SELLER

 

The
Seller hereby warrants to the Purchaser that each of the statements made in
this ARTICLE III  is true and correct as
of the date hereof and the Closing Date:

 

3.1                              Legal
Capacity, Enforceability, Absence of Certain Claims.

 

(a)        The Seller is (x) duly
organized and validly existing under the laws of its jurisdiction of
incorporation, and (y) has the corporate capacity and authority and full legal
right to enter into this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby.

 

20

 

(b)       The entering into of this
Agreement and the performance of the obligations of the Seller hereunder have
been duly authorized by all necessary action (corporate or other) and
proceedings, and this Agreement constitutes the valid and binding obligation of
the Seller, enforceable against it in accordance with its terms.

 

(c)        No direct or indirect shareholder of the Company
which is an Affiliate of the Seller has any claim against the Company.

 

3.2                              No
Conflict or Violation.  Neither the entering into of this Agreement,
nor the performance by the Seller of its respective hereunder, nor the consummation of the transactions provided
for hereby, does or will:

 

(a)        conflict with or violate any
provision of the Organizational Documents of the Seller; nor

 

(b)       constitute a material
violation by the Seller of any Laws or Judgments.

 

3.3                              Governmental Authorizations.

 

(a)        No material Governmental Authorization is
required to be made or obtained by the Seller in connection with: (x) the entering
into of this Agreement, (y) the performance of its obligations hereunder, or (z)
the consummation of any of the transactions contemplated by this Agreement.

 

(b)       To the Knowledge of the Seller, all
material Governmental Authorizations required by Law for the Company to conduct
its operations in respect of the Licences as now being conducted have been obtained and are in full force
and effect.

 

3.4                              The
Shares.

 

(a)        All of the Shares are duly authorized, have been
properly and validly issued, are fully paid-up and are owned, legally and
beneficially by the Seller free and clear of all Encumbrances.

 

(b)       The Shares are the only
issued and outstanding interests in the share capital of the Company and there
are no outstanding subscription rights, options, conversion rights, warrants,
or other agreements providing for the issuance, sale or purchase of any
interests in the share capital of the Company or any securities of any Person
outstanding which upon conversion or exchange or exercise would require, the issuance,
sale, purchase, redemption or transfer of any additional shares of capital
stock or other securities of the Company or other securities convertible into,
exchangeable or exercisable for or evidencing the right to subscribe for or
purchase shares of capital stock or other securities of the Company.  The Seller is not a party to any voting trust
relating to the Shares.

 

(c)        Without limitation to the
preceding provisions of this Section 3.4 the pledge by the shareholder of the
Company in respect of all or some of the Shares in favour of Barclays Bank PLC
has been released and no longer Encumbers the Shares (or any of them).

 

3.5                              The Company.

 

(a)        The Company (x) is a company
duly incorporated and validly existing under the laws of the jurisdiction of its
incorporation and has all requisite corporate capacity to hold

 

21

 

title to its assets and to conduct its Business as
now being conducted, and (y) is qualified or otherwise authorized to do
business as a foreign corporation in Turkey and in each jurisdiction in which
the character of the properties owned or held by it under lease or licence or
its business requires such qualification or authorization.  Documentation to dissolve the Company in
Liberia was duly filed and, following such filing, the Company was duly
dissolved in accordance with Liberian law.

 

(b)       The
Purchaser has been provided with a true and complete copy of
the Company’s Organizational Documents as amended through the date hereof.  No
resolution has been adopted providing for the amendment of any such
Organizational Documents which is not reflected therein, nor for the
dissolution or winding-up of the Company.

 

(c)        The Company neither has
direct or indirect Subsidiaries nor owns any equity interest or voting rights
in any other company, partnership, joint venture or other Entity.

 

(d)       As of the date of this
Agreement, the Company has not filed for bankruptcy, or sought or obtained
protection from creditors, in any jurisdiction and there has been no formal
request for the annulment or the dissolution of the Company or appointment of
an administrator to manage the Company’s affairs, nor has any petition been
filed (or threatened to be filed) with any competent authority requesting the
initiation of any restructuring or liquidation procedures with respect to the
Company.

 

(e)        Without limitation to Section
3.6(c), as of the date of this Agreement the Company has complied with
applicable Laws relating to the filing of statutory corporate statements with
Governmental Authorities.  All material
corporate records of the Company have been properly maintained and duly filed.

 

(f)        On and from the date on
which the Company was registered by way of continuation in the Cayman Islands:

 

(i)            the corporate records of the Company have
been kept in accordance with the corporate laws governing them; and

 

(ii)           the
share register of the Company has at all times from that date been kept and
maintained in the Cayman Islands.

 

3.6                              Financial
Statements.

 

(a)        Schedule 3.6 to the
Disclosure Letter sets forth copies of the audited balance sheet of the Company
Branch as at December 31, 2008, together with the related audited profit and
loss statement, the audited statement of cash flows (if submitted for Turkish
statutory purposes), other audited financial information (as applicable) and
the related notes (if applicable) for the fiscal year ended 31 December 2008,
accompanied by the report of PWC Turkey. 
Schedule 3.6 to the Disclosure
Letter shall also include the unaudited balance sheet, profit and loss
statement and statement of cash flows for the interim period ended 30 June 2009.  Such balance sheets being referred to as the “Balance
Sheets”, and such financial statements being referred to collectively as
the “Reference Financial Statements”).

 

(b)       The Reference Financial
Statements, except as indicated therein, were each prepared in accordance with
Applicable Accounting Principles and Turkish statutory accounting principles,
and are complete and correct.

 

22

 

(c)        As of the date of this
Agreement, the Company (and the Company Branch) has complied with applicable
Laws relating to the filing of statutory financial statements with the Turkish
Governmental Authorities and with accounting requirements with respect to Tax
accounting.  All material financial
records of the Company have been properly maintained and duly filed.

 

(d)       Except as set forth on Schedule 3.6 to the Disclosure
Letter, since June 30, 2009 until the date of this Agreement there has been no
Material Adverse Effect.

 

(e)        The current balance payable by the
Company to the Seller, in the amount of $87 million equivalent, which was
included in the Company statutory balance sheet as of 30 June 2009 has been
properly accounted for in the statutory accounts of the Company in accordance
with the applicable Law.  The Seller
relinquishes all risks, rights, benefits, claims and/or privileges associated
with such amount at Closing.

 

(f)        The financial statements of the Company
provided by the Company (or on the Company’s behalf with the Company’s consent)
to Governmental Authorities in Turkey were, to the Seller’s Knowledge, complete
and correct.

 

3.7                              Ordinary Course of Business.  Except as set
forth on Schedule 3.7,
since June 30, 2009 until the Closing Date, (i) the Company has conducted its
Business in all material respects in the Ordinary Course in substantially the
same manner as theretofore conducted and (ii) there have been no events or
transactions of any kind which have had or are reasonably likely to have a
Material Adverse Effect.

 

3.8                              Tax Matters.  As of the date of this Agreement:

 

(a)        the Company has properly and timely filed
or caused to be filed with the appropriate Governmental Authorities all
material Tax Returns that were required to be filed by or on behalf of the
Company through the date hereof;

 

(b)       the Company has properly and timely paid
all Taxes, to the extent that such Taxes were required to be paid by the
Company prior to the date hereof;

 

(c)        to the Knowledge of the Seller, there are
no pending audits, investigations or other Proceedings relating to the
assessment or collection of Taxes for which the Company is liable; and

 

(d)       to the Knowledge of the Seller, without
limitation to the preceding provisions of this Section 3.8, the Company has no
outstanding material liability in respect of interest, penalties or fines in
respect of any Taxes due and payable by the Company.

 

3.9                               Real
Property.

 

(a)        As of the date hereof, the Company owns no  real properties.

 

(b)       Schedule 3.9(b)  to the Disclosure Letter sets forth an accurate and complete list of
all leases of the Company as of the date hereof which are material to the
Business as presently conducted.  Except
as disclosed on Schedule 3.9(b)
to the Disclosure Letter and as of the date hereof, assuming valid title in
the lessor of such real property, to the Knowledge of the Seller the Company
has the right to occupy and use all real property shown on such Schedule as
leased by them.

 

23

 

3.10                       Tangible
Personal Property.  As of the date of this Agreement, (x) the
Company has valid title to all such items of machinery
and equipment which it owns, in each case free and clear of any Encumbrances
other than Permitted Encumbrances, (y) where required by applicable Law,
maintenance contracts for such items of machinery and equipment are in full
force and effect.

 

3.11                        Intellectual
Property and Software.

 

(a)        Schedule 3.11 to the
Disclosure Letter sets forth a list of all material Intellectual Property
Rights owned by or licenced to the Company as of the date of this Agreement.

 

(b)       To the Knowledge of the
Seller, as of the date of this Agreement:

 

(i)            the
Company has valid title to the Intellectual Property
Rights shown on Schedule 3.11 to
the Disclosure Letter as being owned by it, free and clear of any Encumbrances
other than Permitted Encumbrances; and

 

(ii)           no Proceedings are pending wherein the Company is alleged to have infringed or otherwise violated any Intellectual
Property Right owned by any Third Party.

 

3.12                        Proceedings.  Except as disclosed on Schedule 3.12 to the Disclosure Letter
and as of the date of this Agreement:

 

(a)        the Company is not involved,
whether as claimant or defendant or other party, in any Proceeding currently in
process or, to the Knowledge of the Seller, threatened in writing (other than
as a claimant in the collection of debts arising in the Ordinary Course which
in aggregate do not exceed one hundred thousand Dollars ($100,000), and which
individually do not exceed ten thousand Dollars ($10,000)), which if adversely
determined against the Company is reasonably likely to have a Material Adverse
Effect;

 

(b)       the Company is not subject
to any Judgment that has or is reasonably likely to have a Material Adverse
Effect; and

 

(c)        to the Knowledge of the
Seller, there is no investigation or enquiry, including any pending or
threatened investigation or enquiry, against the Company which if adversely
determined against the Company would have or is reasonably likely to have a
Material Adverse Effect.

 

3.13                       Hydrocarbon Agreements.  Except as disclosed on Schedule 3.13, with respect to the
Hydrocarbon Agreements and as of the date of this Agreement:

 

(a)        the Hydrocarbon Agreements
are in full force and effect in accordance with their respective terms and
constitute legal, valid and binding obligations of all parties thereto;

 

(b)       all royalties, rentals and
other payments due thereunder have been properly and timely paid;

 

(c)        to the Knowledge of the
Seller, there are currently pending no written requests or demands for
payments, adjustments of payments or performance pursuant thereto except, as
the case may be, for penalties and forfeiture payments which arise or may 

 

24

 

arise in relation to the Hydrocarbon Agreements as a
result of the non-participation in exploration or development; and

 

(d)       to the Knowledge of the
Seller, no other party to any Hydrocarbon Agreement is in breach of any of its
obligations thereunder.

 

3.14                        Title to the Participating Interests.  Without limitation to Section 3.13
above:

 

(a)        the Company’s legal and beneficial
ownership of each License is consistent with its Participating Interest in
respect of the applicable Licence set out in Annex C;

 

(b)       the right, title and interest of the
Company in and to the Licences and to each such Participating Interest is free
and clear of all Encumbrances; and

 

(c)        each of the Licences are in full force
and effect in accordance with their respective terms.

 

3.15                        Material
Contracts.

 

(a)        Schedule 3.15  to the Disclosure Letter sets forth a list of all Contracts of each of
the following types to which the Company is a party and under which the Company
has any express obligations to any Person continuing as of the date of this
Agreement:

 

(i)            any loan or
security agreement relating to the borrowing or lending of money by the Company
in excess of fifty thousand Dollars ($50,000);

 

(ii)           any agreement
pursuant to which the Company is expressly committed to sell any of its assets
or properties (other than inventory) to a Third Party for a sale price in
excess of fifty thousand Dollars ($50,000) (excluding value added tax, sales
tax or any other similar taxes) in any one case or pursuant to which the
Company has granted to a Third Party any option or preferential right to
purchase any of its assets or properties (other than inventory);

 

(iii)          any guarantee
pursuant to which the Company has expressly guaranteed the obligations of a
Third Party;

 

(iv)          any agreement
pursuant to which the Company has expressly agreed not to engage in or not to
compete with any Third Party in any line of business which is material to the
Company;

 

(v)           any agreement
with the Seller or any of its Affiliates, irrespective of the content or value
of such agreement;

 

(vi)          all areas of
mutual interests agreements, purchase or sale agreements (other than with
respect to production of Hydrocarbons in the Ordinary Course), partnership
agreements (other than tax partnerships), joint venture and exploration or
development program agreements relating to the Licences or by which the
Licences are bound;

 

(vii)         all Hydrocarbons
production sales or purchase, transportation, marketing, supply, exchange and
processing agreements relating to the Licences other than such agreements that
are terminable on upon not more than ninety (90) days’ notice without material
penalty by the Company;

 

25

 

(viii)        any contracts or
agreements that could reasonably be expected to require capital expenditures by
the Company in excess of one hundred thousand Dollars ($100,000) in any
calendar year;

 

(ix)          other than
contracts governing the sale of Hydrocarbons, any contracts or agreements
related to the Licences under which the Company has received in excess of one
hundred thousand Dollars ($100,000) of revenues net of direct expenses in any
calendar year;

 

(x)           any contracts or
agreements providing for a call upon, option to purchase or similar right under
any agreements with respect to the Hydrocarbons from the Licences;

 

(xi)          any contract or
agreement with any labor union or employee association that relates to the
Company’s employees (or any of them);

 

(xii)         other than (x) this
Agreement, (y) contracts or agreements governing the sale of Hydrocarbons or (z)
the disposition in the Ordinary Course of equipment no longer suitable for
Hydrocarbons field operation, any contract or agreement for, or that
contemplates, the sale, exchange or transfer of any of the Company’s
Participating Interest;

 

(xiii)        any unit
agreement and any operating agreement applicable to any Licence; and

 

(xiv)        any other
agreement material to the Business of the Company as presently conducted, made
other than in the Ordinary Course of Business and pursuant to which the Company
is expressly committed to make future payments in excess of fifty thousand
Dollars ($50,000) (excluding
value added tax, sales tax any other similar taxes) during any calendar year
and which is not cancellable by the Company without material penalty upon one
year’s notice or less,

 

(the foregoing Contracts being referred to
collectively as the “Material Contracts” and individually as a “Material
Contract”).

 

(b)                      Except as
disclosed on Schedule 3.15(b)  to
the Disclosure Letter, except as would not have a Material Adverse Effect:

 

(i)            the Company has
not violated or breached, or committed any default under such Material
Contracts and, to the Knowledge of the Seller, no other party to such Material
Contract has violated or breached, or committed any default under a Material
Contract;

 

(ii)           neither entering
into, nor compliance with, nor completion of this Agreement by the Company will
result in a material breach of or, to the Knowledge of the Seller, permit a
party thereto to terminate or vary, or result in any material Encumbrance,
under any Material Contract;

 

(iii)          the Company has
not received or given written notice as of the date of this Agreement that the
Company is in material default under any Material Contract, which default
remains unremedied as of the date hereof;

 

(iv)          each of the
Material Contracts is in full force and effect; and

 

26

 

(v)           the Company has
not received or given written notice as of the date of this Agreement that a
party to any Material Contract intends to exercise any right of cancellation,
termination, acceleration or modification under any such Material Contract.

 

(c)        Prior
to the date hereof, the Seller has furnished to the Purchaser a true and
complete copy of each Material Contract and all amendments thereto.

 

3.16                       Insurance.  Subject to Section 6.10,
all material insurance policies maintained by the Company as of the date hereof
are in full force and effect and, except as disclosed on Schedule 3.16 to the Disclosure Letter,
will not terminate or lapse solely by reason of the sale and purchase of the
Shares pursuant to the terms hereof. 
There are no outstanding unpaid premiums other than premiums accrued but
not yet payable in the Ordinary Course of Business of the Company, and there
are no provisions in any insurance coverage of the Company for retroactive
premium adjustments in respect of all material insurance policies maintained by
the Company.

 

3.17                        Employment
Matters.

 

(a)        Except as disclosed on Schedule 3.17(a)  to the Disclosure
Letter, there are no Contracts, plans or other arrangements by which the
Company is bound which contain any “change of control” or similar severance
provisions with respect to any of the Listed Employees.

 

(b)       Except as disclosed on Schedule 3.17(b), during the past
twelve (12) months until the date hereof the Company has not undertaken to
materially increase the rates of remuneration or to grant a material bonus to
any of the Listed Employees.  There is no
Listed Employee who is entitled upon termination of his or her employment
agreement with the Company to the payment by the Company of an amount exceeding
that required by applicable law.

 

(c)        During
the past twelve (12) months until the date hereof there have been no claims or
actions brought on behalf of any employees or strike action.

 

(d)       During the past twelve (12) months until the date hereof, the Company has
not received any written notice of any investigations or audit by any
Governmental Authority relating to employment, labor or workplace health and
safety matters and no such investigation or audit is in progress.

 

(e)        During the past twelve (12)
months until the date hereof, the Company
has not received written notice (the subject of which has not been resolved as
required thereby or otherwise to the satisfaction of the Person who sent the
same) of any material violation of any Law relating to employment, employment
practices or the terms and conditions of employment, including with respect to
health, safety, overtime, working conditions, retirement.

 

(f)        There are no share
incentive, share option, profit sharing, bonus or other incentive arrangements
covering any employees or former employees of the Company.

 

(g)       Except as is required by
Law, the Company is not under any obligation to provide any payment on
retirement or retirement pension or death pension to or in respect of any
current or past employee or director.

 

27

 

3.18                        Customs  Obligations.

 

(a)        During the past twelve (12)
months until the date hereof, the Company
has timely complied with all material customs obligations in connection with
its import and export operations.

 

(b)       During the past twelve (12)
months until the date hereof, there are and have been no audits, investigations
or other Proceedings relating to compliance by the Company of its customs
obligations, and no claim related to customs duties or obligations has been
notified in writing to the Company by any Governmental Authority on or before
the date hereof.

 

3.19                        Legal Compliance.  Without limitation to the preceding
provisions of this ARTICLE III:

 

(a)        the Company is not, and has
not been in the two (2) years prior to the date hereof, in violation or default
of any applicable Law, except for violations of such Laws that would not have
or are not reasonably likely to have a Material Adverse Effect;

 

(b)       the Company is not, and has
not been in the two (2) years prior to the date hereof, in violation or default
of any anti-corruption, trading-in influence, anti-bribery, anti-terrorism or
anti-money laundering Laws applicable to the Company or the Seller, whether or
not directly applicable to the Company;

 

(c)        to the Knowledge of the
Seller, the Company does not, have any direct or indirect owner, director,
officer or employee who is a Public Official; and

 

(d)       to the Knowledge of the
Seller, neither the Company nor its directors, officers or employees has made,
promised or authorized the making of a Prohibited Payment with respect to (i) any
circumstances related to the Company’s Business or the award of the Hydrocarbon
Agreements or (ii) any circumstances pertaining to any and all activities and
affairs related to the Company’s Business or the Hydrocarbon Agreements.

 

3.20                        Environmental Compliance.

 

(a)        The Company is not in material
violation or default of any applicable Environmental Law.

 

(b)       To the Knowledge of the
Seller, no Environmental Claim has been commenced and no Environmental Claim is
threatened against the Company, in each case where such Environmental Claim is
reasonably likely to be adversely determined against the Company, and which, if
so determined, would have or is reasonably likely to have a Material Adverse
Effect.

 

28

 

ARTICLE IV

WARRANTIES

OF THE PURCHASER AND THE GUARANTOR

 

The
Purchaser and the Guarantor each hereby warrant to the Seller that each of the
statements made in this ARTICLE IV is true and correct as of the date hereof
and the Closing Date:

 

4.1              Organization; Legal Capacity and Enforceability.

 

(a)                                 Each of the
Purchaser and the Guarantor is duly organized and validly existing under the
laws of its jurisdiction of incorporation and has the corporate capacity and
authority and full legal right to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.

 

(b)                                The entering
into of this Agreement and the performance of each of the Purchaser’s and the
Guarantor’s obligations hereunder have been authorized by all necessary actions
(corporate or other) and proceedings on the part of the Purchaser and the
Guarantor, as applicable.  This Agreement
has been duly signed by the Purchaser and the Guarantor and constitutes a
legal, valid and binding obligation of each of the Purchaser and the Guarantor,
enforceable against it in accordance with its terms.

 

4.2              No Conflict or Violation.  Neither the
entering into of this Agreement, nor the performance by the Purchaser or the
Guarantor of its respective obligations hereunder, nor the consummation of the
transactions provided for hereby does or will:

 

(a)                                 conflict with
or violate any provision of the Organizational Documents of either of the
Purchaser or the Guarantor; or

 

(b)                                constitute a
violation by either the Purchaser or the Guarantor of any Laws or Judgments.

 

4.3              Governmental Authorizations.  No Governmental Authorization
is required to be made or obtained by the Purchaser or the Guarantor in
connection with:  (a) the entering
into of this Agreement by each of the Purchaser and the Guarantor (b) the
performance by each of the Purchaser and the Guarantor of its obligations
hereunder or (c) the consummation of any of the transactions contemplated
by this Agreement.

 

4.4              Availability
of Funds.  Sufficient funds will be
available to the Purchaser on the Closing Date to satisfy the Closing Purchase
Price.

 

4.5              Required
Shareholder Approval. The Required Shareholder Approval has been
obtained.

 

ARTICLE V

MUTUAL WARRANTIES

 

Without limitation to the
representations and warranties set out in Article III and Article IV
above, each Party hereby represents and warrants to each other Party with
effect as of both the date hereof and the Closing Date that neither that Party
nor its Affiliates have made, offered, or authorized and will not make, offer
or authorize any Prohibited Payment in connection with the matters which are
the subject to this Agreement, where such payment, gift or promise would
violate:

 

5.1              the
Laws applicable to such Party;

 

29

 

5.2              the
laws of the country of formation of the Party or such Party’s ultimate parent
company (or its principal place of business); or

 

5.3              the
principles described in the Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions, signed in Paris on December 17,
1997, which entered into force on February 15, 1999, and the Convention’s
Commentaries.

 

ARTICLE VI

INDEMNITIES;
CLAIMS; INSURANCE

 

6.1              Indemnification Obligations.
From and after the Closing and subject to the provisions of this ARTICLE VI:

 

(a)                                 the Purchaser
shall be entitled to demand the Seller pay as a partial repayment of the
Closing Purchase Price an amount equal to all Damages suffered by either or
both the Purchaser and the Company as a direct result of any material breach of
any of the Seller Warranties; and

 

(b)                                the Seller shall be entitled to demand
from the Purchaser an amount equal to all Damages suffered by the Seller as a
direct result of any material breach of any of the Purchaser Warranties.

 

6.2              Disclosure Letter.

 

(a)                                 From and after
the Closing, and absent fraud or willful misconduct, the right to Damages shall
be the Purchaser’s exclusive remedy for any such inaccuracy or breach of Seller
Warranties.

 

(b)                                The Disclosure
Letter (including Schedules thereto which in any case is deemed to be included
in the Disclosure Letter) is part of the present Agreement, and any matter
fairly disclosed in the Disclosure Letter (including Schedules thereto) shall
be deemed disclosed for all purposes of this Agreement notwithstanding the
absence of any specific cross-references in the Schedule or Section in
question.

 

6.3              Method of Asserting Claims, etc.  Any claims by a Party (the “Indemnifying
Party”) against another Party (the “Indemnified Party”) under this
ARTICLE VI shall be asserted and resolved as follows:

 

(a)                                 Claim
Notices. In the event that (x) any claim or proceeding
is asserted or instituted by any Third Party which, if successful, could give
rise to Damages for which the Indemnifying Party could be obligated to the Indemnified
Party pursuant to Section 6.1, (any such claim or proceeding, a “Third
Party Claim”), or (y) the Indemnified Party has a claim against the Indemnifying
Party which does not involve a Third Party Claim (any such claim, a “Direct
Claim”), the Indemnified Party shall send to the Indemnifying Party a
written notice (a “Claim Notice”) specifying the factual basis of such
claim and the amount or a good faith estimated amount of related Damages (which
estimate shall not be conclusive of the final amount of such claim) and such
available supporting evidence available to the Indemnified Party as may
reasonably be requested by the Indemnifying Party to assess the merits of the
claim and the computation or estimate of Damages.

 

(b)                                Time
for Claim Notice. The Indemnified Party shall deliver a Claim Notice
to the Indemnifying Party:  (x) in
the case of a Third Party Claim, within thirty (30) days of 

 

30

 

receipt of actual notice of such Third Party
Claim (or such shorter period as may be necessary or warranted under the
circumstances); and (y) in the case of a Direct Claim, within ten (10) days
after the Indemnified Party first becomes aware of the facts upon which such Direct
Claim is based; provided, however, that a failure by the Indemnified Party to comply with the notice periods set forth above shall have no
consequences on its ability to claim under this ARTICLE VI unless and to the extent that (x) such failure
has caused the Damages for which the Indemnified Party is entitled to under this ARTICLE VI to be greater than they would have been had the Indemnified
Party given timely notice (it
being agreed the Damages for which the Indemnifying Party may be obligated shall be reduced to the extent of any
such prejudice) or (y) has reduced the likelihood to prevail against a
Third Party Claim.

 

(c)                                 Direct
Claims. In the event of a Direct Claim, the Indemnifying
Party shall have thirty (30) days following its receipt of the relevant Claim
Notice or, if the amount of the Direct Claim was not determined at the time of
the Claim Notice, the date on which the amount of the Direct Claim has been
notified to it by the Indemnified Party (the “Direct Claim Review Period”)
to make such investigation of the underlying claim as it considers necessary or
desirable acting reasonably.  During the
Direct Claim Review Period, the Indemnifying Party and Indemnified Party shall
use their commercially reasonable endeavors to reach an amicable solution with
respect to the validity and the amount of the Direct Claim.  If the Indemnifying Party and the Indemnified
Party agree, on or prior to the expiration of the Direct Claim Review Period,
upon the validity and amount of such Direct Claim, the Indemnifying Party shall
pay to the Indemnified Party, within ten (10) days following the date of
such agreement, the full agreed amount of such Direct Claim.  If the Indemnifying Party and the Indemnified
Party fail to agree, on or prior to the expiration of the Direct Claim Review
Period, upon the validity and amount of such Direct Claim, the dispute shall be
resolved by arbitration proceedings as provided by Section 8.15.

 

(d)                                Third
Party Claims.

 

(i)                                    Third Party Claim Review Period.  In the event of a Third Party
Claim, the Indemnifying Party shall
have thirty (30) days following its receipt of the relevant Claim Notice (the “Third
Party Claim Review Period”) to make such investigation of the underlying
claim as it considers necessary or desirable acting reasonably.  During the Third Party Claim Review Period,
the Indemnifying Party and
the Indemnified Party shall use their reasonable endeavors to reach an amicable
solution with respect to such Third Party Claim.  If the Indemnifying
Party and the Indemnified Party fail to agree, on or
prior to the expiration of the Third Party Claim Review Period, upon an
amicable solution with respect to such Third Party Claim, the dispute may be
resolved by arbitration proceedings as provided by Section 8.15.

 

(ii)                                 Defense of Third Party Claim.

 

(A)                             From and after
the delivery of a Claim Notice hereunder and until such time, if any, as it is
determined or agreed that the Indemnifying Party has no liability to the Indemnified
Party in respect of the relevant Third Party Claim, the Indemnifying Party
shall have the right (but not the obligation) to control the defense of each
Third Party Claim and to retain the counsel of its choice, to represent the Indemnified
Party (and the Company).  The Indemnified
Party shall (at the Indemnifying Party’s cost) take (and procure that the
Company take) such actions as the Indemnifying Party shall consider reasonably 

 

31

 

necessary or appropriate under the
circumstances to cooperate with the Indemnifying Party and its counsel in
defending such Third Party Claim, and shall refrain (and shall procure that the
Company refrains) from taking any action likely to jeopardize or interfere with
the defense of such claim.  The Indemnified
Party may assist, at its expense, in the defense of any Third Party Claim with
counsel of its choice, reasonably acceptable to the Indemnifying Party.  The Indemnifying Party shall keep the Indemnified
Party reasonably informed of the development of the underlying claim.  The conduct of the defense of a Third Party
Claim by the Indemnifying Party shall at all times take into account the
legitimate business interests of the Company and shall not be deemed to
constitute an admission or acknowledgement of liability to the Indemnified
Party in respect of such Third Party Claim.

 

(B)                               In the event that
the Indemnifying Party (x) shall fail to assume control of the defense of
a Third Party Claim after written notice to such effect by the Indemnified
Party, or (y) shall notify the Indemnified Party of its intention not to
assume control of the defense of a Third Party Claim, the Indemnified Party
shall conduct the defense of such Third Party Claim in good faith and using all
reasonable means and defenses available to it taking into account the
legitimate business interests of the Company and shall have the right to retain
counsel of its choice, reasonably acceptable to the Indemnifying Party, at the
cost of the Indemnifying Party (under circumstances where the Indemnifying
Party is ultimately found to be liable for Damages resulting from or arising
out of such Third Party Claim).  The Indemnifying
Party may assist, at its expense, in the defense of any Third Party Claim with
counsel of their choice, reasonably acceptable to the Indemnified Party.  The Indemnified Party shall keep the Indemnifying
Party reasonably informed of the development of the underlying claim.

 

(iii)                              Settlement of Third Party Claims.  The Indemnifying Party shall
not be liable for any Third Party Claim which is settled or otherwise
compromised or in respect of which any admission of liability is made without
its prior written consent and no amounts payable in respect of any such
settlement or compromise of a Third Party Claim made without the prior written
consent of the Indemnifying Party shall be due by the Indemnifying Party.  In such connection, in the event the Indemnified
Party (or the Company) shall (x) receive from a Third Party or (y) propose
to make to a Third Party, an offer of settlement of a Third Party Claim (a “Settlement
Offer”), the Indemnified Party shall notify the Indemnifying Party of such
Settlement Offer promptly upon receipt thereof from the Third Party and
reasonably in advance of responding thereto, or reasonably in advance of making
such Settlement Offer, and shall provide with such notice all related
supporting documentation reasonably required to enable the Indemnifying Party to assess the
relative merits of the Settlement Offer. 
At the reasonable request of either the Indemnified Party or the Indemnifying Party, the Parties
will consult in good faith with respect to any such Settlement Offer.  In the event that a Settlement Offer is
received which the Indemnifying Party, but not the Indemnified Party is willing
to accept, the Indemnified Party may elect to continue the defense of such
Third Party Claim at its own expense, in which case the liability of 

 

32

 

the Indemnifying Party shall be capped at
Damages calculated as if the Third Party Claim were settled in accordance with
the proposed Settlement Offer.

 

(e)                                 Duty
to Mitigate. The Indemnified Party shall use its reasonable
endeavors to mitigate any Damages resulting from or arising out of any matters
giving rise to a claim under this ARTICLE VI.

 

(f)                                   Payment. No amount
shall become due and payable by the Indemnifying Party to the Indemnified Party
(x) in respect of any claim arising by reason of contingent liability,
unless and to the extent that such contingent liability ceases to be contingent
and has become an actual liability; and (y) in respect of any Third Party
Claim unless and to the extent that the Indemnified Party (or the Company) is
under the obligation to pay the relevant Damages to the relevant Third Party as
a result of a Judgment or a binding settlement or other agreement among the
relevant Parties entered into in accordance with the terms of this
Agreement.  If the Seller pays any sum to the Purchaser in respect of a claim under
the Seller Warranties, the Closing Purchase Price shall be deemed, to the
extent permissible under applicable law, to be reduced by the amount of such
payment.

 

(g)                                Subrogation. No amount
shall become due and payable to the Indemnified Party in respect of any claim
unless the Indemnified Party shall have used its best efforts to subrogate the Indemnifying
Party in all its (and the Company’s) rights against Third Parties in respect of
such claim.

 

(h)                                Right
of Set-off. The Purchaser may set-off any and all amounts determined pursuant to:

 

(i)                                    in respect of a Direct Claim,
an arbitral Judgment in accordance with Section 8.15; or

 

(ii)                                 in respect of a Third Party
Claim, a final, non-appealable Judgment of a court of competent jurisdiction,

 

to be payable by the Seller pursuant to this ARTICLE VI
against amounts due from the Purchaser to Seller in respect of Exploration
Success Payments and Net Profit Interests.

 

6.4              Consequential Damages. Notwithstanding
any term or provision of this Agreement to the contrary, in no event shall any
Party nor Affiliate of a Party be liable to any other Party for any indirect,
incidental, consequential, special, exemplary or punitive damages arising out
of or relating to this Agreement; except to the extent any such Party was
required to pay such damages to a Third Party in connection with a Third Party
Claim, in which event such damages shall be recoverable hereunder.

 

6.5              Calculation of Damages.

 

(a)                                 Deductions.  In calculating the amount of any Damages
which may be due and payable to the Indemnified Party as a result of any claim
brought by the Indemnified Party pursuant to the above, there shall be
deducted:

 

(i)                                    the amount of any indemnification or other recoveries (including
insurance proceeds) paid to the Indemnified Party (or to the Company in the
case of a claim brought by the Purchaser) by any Third Party with respect to
such Damages;

 

33

 

(ii)                                 the amount of any insurance proceeds which would have been recoverable
by the Purchaser or the Company with respect to such Damages had the insurance
coverage of the Company in effect on date hereof not been modified by the
Purchaser or the Company on or subsequent to the date hereof (unless such
modifications were unilaterally imposed by the relevant insurers on the Company
as a direct consequence of any events occurring prior to the date hereof);

 

(iii)                              the amount of any reserve, provision or liability included in the
Reference Financial Statements for Damages of the type to which such claim
relates;

 

(iv)                             the amount of any corresponding Tax savings or benefit (including any
Tax reduction, credit, or loss carry-back or carry-forward) actually available
to the Indemnified Party (or to the Company in the case of a claim brought by
the Purchaser) which, in the case of any Damages which are of a type deductible
from the taxable results of the Indemnified Party (or to the Company in the
case of a claim brought by the Purchaser), shall be equal to the product of (x) the
amount of such Damages, and (y) the applicable corporate tax rate at the time
of payment; and

 

(v)                                in the case of any Damages suffered or incurred by the Company, the
amount of any corresponding gain or benefit (net of Tax) (including the
reduction or discharge of any liability) effectively accrued to the Company
directly from the specific matter giving rise to such Damages (including, in
the case of any cancellation of any provision giving rise to any liability for
Taxes, the amount of any corresponding income accruing to the Company as a
result of such cancellation), provided that such set off shall never result in
an obligation for the Purchaser (or to the Company in the case of a claim
brought by the Purchaser) to effect any payment for the excess (if any) of the
gain or benefit over the Damages.

 

(b)                                No
Multipliers.  For purposes
of computing the amount of any Damages, only the Damages actually sustained by
the Indemnified Party or the Company shall be taken into account, to the
exclusion of any price/earnings or similar multiplier or valuation factor
(whether or not implicit in the Closing Purchase Price).

 

6.6              Limitations, De minimis, Thresholds.  No amount shall
become due and payable by the Indemnifying Party in respect of any claim from
breach of Warranties brought by the Indemnified Party, unless and only to the
extent that:

 

(a)                                 the amount of
Damages against which the Indemnified Party is entitled to recover in respect
of any single claim or series of related claims exceeds seventy five thousand
Dollars ($75,000) (the “Individual Claim Threshold Amount”) (it being
understood that if the amount of such Damages shall exceed the Individual Claim
Threshold Amount, the Indemnified Party’s repayment obligation shall extend to
the entire amount of such Damages, including the amount up to the Individual
Claim Threshold Amount, subject, however to Section 6.6(b) below);
and

 

(b)                                the cumulative
and aggregate amount of all Damages in respect of which the Indemnified Party
is entitled to under Section 6.6(a) (the “Cumulative Claim
Threshold Amount”) shall:

 

(i)                                    exceed seventy five thousand
Dollars ($75,000) in respect of any claim from breach any of the Seller
Warranties set out in Sections 3.4, 3.5(a) - 3.5(e) 

 

34

 

(inclusive) and 3.14, provided that if
this Cumulative Claim Threshold Amount is reached then the Seller shall be
liable for the entire amount of such Damages including the amount up to the
Cumulative Claim Threshold Amount; and

 

(ii)                                 exceed one
million Dollars ($1,000,000) in respect of any claim from breach of any of the
other Warranties, provided that if this Cumulative Claim Threshold Amount is
reached then the Indemnifying Party shall be liable for the entire amount of
such Damages including the Cumulative Claim Threshold.

 

(c)                                 Maximum
Liability.  The maximum
aggregate liability amount of Damages for which the Indemnifying Party may be
liable for claims made under the Warranties (other than for claims made in
respect of the Warranties set out in any of Sections 3.4, 3.5(a) - 3.5(e) (inclusive)
or 3.14, for which the maximum aggregate liability shall be one hundred percent
(100%) of the Closing Purchase Price) shall be equal to twenty-five percent
(25%) of the Closing Purchase Price.

 

6.7              Exclusions.

 

(a)                                 Tax
Claims.  No claim in respect of Taxes shall
entitle the Indemnified Party to be indemnified to the extent that:

 

(i)                                    it
arises or is increased as a result only of any imposition of a new Tax; any
change in the rates of Tax; or any change in law (or change in interpretation
on the basis of case law);

 

(ii)                                 it
would not have arisen but for a voluntary act or transaction carried out by the
Indemnified Party or the Company after the date hereof otherwise than in the
Ordinary Course of Business or otherwise pursuant to a legally binding
obligation of the Company created on or before the date hereof;

 

(iii)                              it
corresponds to mere changes in time when a Tax should have been paid or if such
Tax can effectively be deducted or recovered;

 

(v)                                any
overpayment of Taxes made by the Company at any time prior to the Closing Date
is repaid to, or a credit in respect thereof is received by, the Company from
the relevant Tax authorities after Closing Date; and

 

(vi)                             such
claim arises (or such claim having arisen, is increased) by a failure or
omission on the part of the Company to make any election, surrender or
disclaimer or to give any notice or consent or do any other thing after the
Closing under the provisions of any Laws relating to Tax.

 

(b)                                No
Double Recovery.  Any liability for indemnification
pursuant to this Agreement shall be determined without duplication of recovery,
and the Indemnifying Party shall not be required to indemnify the Indemnified
Party more than once in respect of claims based on account of the same events,
facts, matters, circumstances or omissions.

 

(c)                                 Prosecution
of Claims.  Any claim made by the Indemnified
Party against the Indemnifying Party which is not satisfied, settled or
withdrawn within six (6) months of the date of delivery of the Claim
Notice relating to such claim shall be deemed to have been withdrawn (and the Indemnified
Party shall not be permitted to make any new or additional claims in respect of
any event, fact, matter, circumstance or 

 

35

 

omission which gave rise to such initial
claim) unless appropriate Proceedings in respect of such claim have been
commenced against the Indemnifying Party prior to such time and are being
diligently prosecuted by the Indemnified Party.

 

6.8              Claim Periods, Extinction of Claims.  To be valid, a
Claim Notice (setting forth a factual basis sufficient to demonstrate the
validity of the claim) for breach of Warranties hereof must be delivered prior
to the date which is twenty four (24) months after the date hereof.

 

6.9              Fraud. None of the limitations
contained in Section 6.6 shall apply to any claim which arises or is
increased, and to the extent to which it arises or is increased, as a result of
fraud, a fraudulent act or a fraudulent misrepresentation by the Seller or any
of its directors, officers, employees or agents.

 

6.10       Insurance.  The Parties agree that all
of the Company’s insurance policies covering onshore and offshore property,
operator’s extra expense, loss of production income and liability will be
terminated effective as of the date hereof.

 

6.11       Reimbursement
of Removal Costs; Environmental Claims.

 

(a)                                 From and after the Closing, in the event
the Purchaser is required by any Governmental Authority and/or by the
designated operator of the SASB project to pay, and the Purchaser or an
Affiliate of the Purchaser pays, any costs to:

 

(i)                                    remove; or

 

(ii)                                 conduct environmental
remediation related to,

 

any or all of the fallen caissons of Akkaya-1, Ayazli-2
and Ayazli-3 wells (the “Wells”), the Seller shall reimburse the
Purchaser for such costs within ten (10) days of receipt of written demand
from the Purchaser, such demand to include such detailed supporting evidence as
may reasonably be requested by the Seller.   
The Purchaser shall provide prompt written notice to the Seller upon its
receipt of notice that the Wells are to be removed or environmental remediation
is to be conducted and any material developments relating to such removal or
remediation thereafter.

 

(b)                                From and after the Closing, the Seller
shall indemnify and hold harmless the Purchaser from any Environmental Claims
directly related to the Wells and/or the fallen caissons of the Wells (or any
of them).

 

(c)                                 None of the limitations contained in Section 6.6,
nor the limitation of claim period described in Section 6.8, shall apply
to this Section 6.11.

 

6.12       Overriding
Royalty.

 

(a)                                 The Seller shall indemnify and hold the
Purchaser harmless from any and all claims arising from the Overriding
Royalty.  Any such claim shall be treated
in accordance with the Third Party Claim provisions set forth in Section 6.3(d).

 

(b)                                None of the limitations contained in Section 6.6,
nor the limitation of claim period described in Section 6.8, shall apply
to this Section 6.12.

 

36

 

6.13       Payments to
Employees.

 

(a)                                 Within ten (10) Business Days of the
Closing Date, the Seller will make the payments set forth on Annex G to such employees in
accordance with, and upon the execution by each such employee of, a retention
agreement (each a “Retention Agreement”), the form of which is to be
agreed by the Parties prior to the Closing Date; provided that the Seller shall
have no obligation under this Section 6.13(a) if the form of
Retention Agreement is not agreed by the Parties prior to the Closing Date,
such agreement not to be unreasonably withheld.

 

(b)                                The Purchaser and the Guarantor shall be
responsible for, and shall pay:

 

(i)                                    the retention payments payable
to such employees as set forth on Annex G in
accordance with each such employee’s Retention Agreement; and

 

(ii)                                 any severance, or other
payments, required by Turkish Law or otherwise to be paid to any employee of
the Company upon a termination of such employee following the Closing Date.

 

(c)                                 The Purchaser and the Guarantor shall
indemnify and hold the Seller harmless from any and all claims made by any
employee of the Company against the Seller relating to severance payments
payable as a result of a termination by the Company of such employee following
the Closing Date.

 

6.14       Monetary
Fines

 

(a)                                 In the
event monetary fines or penalties are imposed on the Purchaser by the Turkish
Competition Board as provided for by Turkish Competition Law in connection with
the transaction contemplated under this Agreement, the Purchaser shall be
entitled to demand from the Seller an amount equal to such monetary fines or
penalties actually imposed and paid or otherwise borne by the Purchaser as
follows:

 

(i)                                    in the event the Turkish
Competition Board imposes a monetary fine or penalty for failure to notify the
Turkish Competition Board of the transaction contemplated hereunder, an amount
up to 0.1% of the turnover generated in the year preceding the date of the
fining decision; and

 

(ii)                                 in the event the Turkish
Competition Board determines that the transaction contemplated hereunder
violates Article 7 of the Turkish Competition Law, an amount up to 10% of
the turnover generated in the year preceding the date of the fining decision.

 

(b)                                The Purchaser shall, at the Seller’s
request and expense, take actions the Seller shall, acting reasonably, consider
to be necessary or appropriate under the circumstances to (i) avoid the
imposition of any such fines or penalties or (ii) appeal any decision by
the Turkish Competition Board imposing any such fines or penalties and in any
event seek to minimize the amount of such fines or penalties, to the extent
permitted under applicable Law.

 

(c)                                 The limitations contained in Sections 6.6(a) and
(b) shall not apply to this Section 6.14.

 

6.15       TPAO
Payment.  In the event payment of
$194,419 currently owed by TPAO to the Company (the “TPAO Receivable”)
is not made or otherwise credited to the Company within twelve (12) months
following the date hereof, the Purchaser shall have the right to demand from
the Seller the amount of the TPAO Receivable not then paid or credited to the

 

37

 

Company; provided, however, that any such amount of
the TPAO Receivable that is paid by the Seller to the Purchaser shall be
reimbursed by the Purchaser within five (5) Business Days of the payment
or credit of such amount by TPAO.

 

ARTICLE VII

CONFIDENTIALITY AND PRESS RELEASES

 

7.1        Confidentiality.

 

(a)           Each Party agrees that all
information disclosed under this Agreement, except information in the public
domain or lawfully in possession of a Party prior to the Closing Date, shall be
considered confidential and shall not be disclosed to any other Person without
the prior written consent of the Party which owns such confidential
information. This obligation of confidentiality shall remain in force until the
later of:  (x) two (2) years
following the Closing Date or (y) with respect to any confidential
information provided to the Seller in accordance with Section 2.6, 2.7 or
2.9 after Closing, two (2) years following the receipt by the Seller
thereof.  Notwithstanding the foregoing,
confidential information may be disclosed without consent and without violating
the obligations contained in this Section in the following circumstances:

 

(i)            to an Affiliate
provided the Affiliate is bound by confidentiality provisions substantially
similar to the provisions of this Section 7.1 and the Party disclosing is
responsible and will indemnify the other Parties for the violation of an
Affiliate;

 

(ii)           to a Governmental
Authority when required by the Hydrocarbon Agreements;

 

(iii)          to the extent
such information is required to be furnished in compliance with the applicable
Laws, or pursuant to any Proceeding or because of any Judgment binding upon a
Party;

 

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

 

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

 

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

 

(vii)         to a bank or
other financial institution to the extent appropriate to a Party arranging for
funding;

 

(viii)        to the extent
such information must be disclosed pursuant to any rules or requirements
of any government or stock exchange having jurisdiction over such Party, or its
Affiliates; provided that such Party shall comply with the requirements of Section 7.2
hereunder;

 

38

 

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

 

(x)           to the extent any
information which, through no fault of a Party, becomes a part of the public
domain.

 

(b)           Disclosure as pursuant to
Sections 7.1(a)(v), 7.1(a)(vi) and 7.1(a)(vii) shall not be made
unless prior to such disclosure the disclosing Party has obtained a written
undertaking from the recipient party to keep the information strictly
confidential for at least as long as the period set out above and to use the
information for the sole purpose described in Sections 7.1(a)(v), 7.1(a)(vi) and
7.1(a)(vii), whichever is applicable, with respect to the disclosing Party.

 

(c)           The Parties agree that this Agreement supersedes the
Confidentiality Agreement.

 

7.2       Public Announcements.  Neither the Seller nor any of its Affiliates,
nor the Purchaser or any of its Affiliates, shall issue or cause the
publication of any press release or other public announcement or disclosure
with respect to this Agreement, the contents of this Agreement, or the
transactions contemplated hereby without the prior written consent of the other
Party, which consent shall not be unreasonably withheld, except that each Party
shall be permitted to make such public announcements or disclosures as such
party deems is required by applicable Law, including but not limited to the rules and
regulations promulgated by the U.S. Securities and Exchange Commission or a
stock exchange on which either of the Parties or their respective Affiliates is
then listed.  In the event any such press
release, public announcement or other disclosure is required by Law to be made
by the Party proposing to issue the same, such Party shall notify the other
Party prior to the issuance or making of any such press release, public
announcement or other disclosure and shall use its reasonable endeavors to
consult in good faith with the other Party and to take into account the
comments of such Party to the extent practicable.  For purposes of this section a “Party” shall
be deemed to include the Seller or any of its Affiliates, on the one hand, or
the Purchaser or any of its Affiliates, on the other hand.

 

ARTICLE VIII

MISCELLANEOUS

 

8.1        Toreador Name and Toreador Marks.

 

(a)           As
of the Closing Date, Purchaser, the Company and their respective Affiliates
shall not use in any manner any trademarks of the Seller or any of its Affiliates,
including “Toreador” (in block letters or otherwise) or the Toreador monogram,
either alone or in combination with other words, phrases, symbols, or devices,
or any other trademarks confusingly similar to or embodying any of the
foregoing (all of the foregoing collectively, the “Toreador Name and
Toreador Marks”).  As promptly as
practicable after the Closing Date, but in no event more than sixty (60) days
after the Closing Date.  Purchaser shall
cause the Company and each of their Affiliates  (i) to cease using in any manner the Toreador
Name and Toreador Marks, (ii) to make all filings with the appropriate
Governmental Authority (including without limitation, filing amendments to the
applicable charters and by-laws and filing appropriate amendments to policy
form filings) to cause the Company and each of its Affiliates to change any of their names that contain any of the
Toreador Name and Toreador Marks to a new corporate name that does not include
the Toreador Name and Toreador Marks; (iii) to cease to use in any form
whatsoever any of the Toreador Name and Toreador Marks; and (iv) to
re-label, destroy or exhaust all materials 

 

39

 

bearing
the Toreador Name and Toreador Marks, including signage, advertising,
promotional materials, electronic materials, collateral goods, stationery,
business cards, websites, and other materials.

 

(b)           Purchaser acknowledges and
agrees that neither it, the Company nor any of their respective Affiliates are
acquiring any (i) ownership interest in the Toreador Name and Toreador Marks or (ii) any other rights to the Toreador Name and Toreador Marks.  The Purchaser, acting on behalf of itself,
the Company and each of their respective Affiliates hereby assigns and
relinquishes to the Seller or its designee any and all rights that the
Purchaser, the Company and their Affiliates may heretofore have had to use the Toreador Name and Toreador Marks in any trade or
business or otherwise. Purchaser, the Company, and their respective Affiliates
agree not to contest the ownership or validity of any rights of Seller or any
of its Affiliates in, or related to, the Toreador Name and Toreador Marks.

 

(c)           Purchaser agrees that after
the Closing Date, none of the Purchaser, the Company and their respective
Affiliates will expressly, or by implication, do business as, or represent
themselves as controlled by, the Seller or any of its Affiliates.

 

8.2       Further Actions.  Subject to the terms and
conditions herein provided, each of the Parties shall use its reasonable
endeavours to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under all applicable Laws to
consummate and make effective the transactions contemplated by this Agreement, provided
that neither the Seller nor any of its Affiliates shall be under any obligation
to pay money to, or to make any accommodation in favour of, any Third Party.

 

8.3       Governmental Authorizations

 

(a)           Without limitation to Section 8.2
and with regard to any filing with or approval by any Governmental Authority
requested or required by Law in connection with the consummation of the
transactions hereunder:

 

(i)            the Parties shall
reasonably cooperate in all respects in the preparation of any filing and in connection
with any submission, investigation or inquiry;

 

(ii)           subject to the
remaining provisions of this Section 8.3(a), the Seller shall contact
Governmental Authorities in respect of the Company only after consultation with
the Purchaser;

 

(iii)          the Seller shall
provide such other information and communications to Governmental Authorities
or other Persons as the Purchaser may reasonably request in connection with
such transactions;

 

(iv)          the Seller shall
reasonably cooperate with the Purchaser as promptly as practicable and in
obtaining all consents, approvals or actions of, making all filings with, and
giving all notices to, Governmental Authorities and other Persons required of
the Purchaser in connection with such transactions; and

 

(v)           the Seller shall
advise the Purchaser of any communications by the Seller (and, unless precluded
by Law, provide copies of any such written communications) with any
Governmental Authority or other Person relating to the Company.

 

40

 

(b)           Notwithstanding any other
provision of this Agreement, any and all agreements, consents, approvals,
waivers or the like that are required from an Affiliate of the Seller shall be
deemed granted for the purposes of this Agreement on and from the Closing Date.

 

8.4       Costs and
Expenses.  Whether or
not the transactions contemplated by this Agreement are consummated, except as
may otherwise be expressly provided herein, the Seller, on the one hand, and
the Purchaser, on the other hand, shall bear their own expenses incurred in
connection with the negotiation, preparation and signing of this Agreement and
the consummation of the transactions provided for hereby.  Any notary fees, transfer or similar levies
that may become payable as a result of the signing of this Agreement or the
transfer of the Shares pursuant hereto shall be borne by the Purchaser.  Any stamp taxes or similar levies that become
payable in respect of this Agreement shall be borne by the Party that submits,
endorses, or benefits from the provisions of, this Agreement in the applicable
jurisdiction or that takes any other action that directly results in such stamp
taxes or similar levies becoming payable in such jurisdiction, and such Party
shall indemnify the other Parties in respect of any such fees or taxes.

 

8.5       Notices.  All notices and other
communications required or permitted to be given or made pursuant to this
Agreement shall be in writing in the English language and shall be: (x) delivered
by hand against an acknowledgement of delivery dated and signed by the
recipient; (y) sent by an overnight courier service of recognized
international standing (all charges paid); or (z) sent by facsimile
transmission and confirmed by registered mail (postage prepaid, return receipt
requested) posted no later than the following Business Day (with any such
facsimile transmission to be deemed received at the time indicated on the
corresponding activity report, a copy of which shall be included in the
confirmation by mail) (provided that any notice or communication which is
received after 6 p.m. (local time in the place of receipt) on a Business
Day or on any day which is not a Business Day shall be deemed received only at
9 a.m. (local time in the place of receipt) on the next Business Day) to
the relevant Party at its address set forth below:

 

	
   

  	
  If to the Purchaser or the

  	
  Tiway Oil AS

  
	
   

  	
  Guarantor, to:

  	
  P.O Box 573 Sentrum

  
	
   

  	
   

  	
  0101 Oslo

  
	
   

  	
   

  	
  Norway

  
	
   

  	
   

  	
  Attn: Mr. Per Skaug

  

 

41

	
   

  	
   

  	
   

  

 

	
   

  	
  Fax:

  	
  +47 22 43 29 01

  
	
   

  	
   

  
	
   

  	
  with a copy to:

  
	
   

  	
   

  
	
   

  	
  Arntzen de Besche Advokatfirma AS

  
	
   

  	
  P.O. Box 2734 Solli, NO-0204 Oslo

  
	
   

  	
  Norway

  
	
   

  	
  Attn: Erlend B. Bakken

  
	
   

  	
  Fax:

  	
  + 47 23 89 40 01

  
	
   

  	
   

  
	
   

  	
  and

  
	
   

  	
   

  
	
   

  	
  King & Spalding LLP

  
	
   

  	
  P.O. Box 25930

  
	
   

  	
  Dubai, United Arab Emirates

  
	
   

  	
  Attn: Amelia Jalleh

  
	
   

  	
  Fax:

  	
  +971 4 305 0055

  
	
   

  	
   

  
	
  If
  to the Seller:

  	
  Toreador Resources Corporation

  
	
   

  	
  c/o Toreador Holdings SAS

  
	
   

  	
  9 rue Scribe

  
	
   

  	
  75009 Paris, France

  
	
   

  	
  Attn:

  	
  Craig M. McKenzie

  
	
   

  	
  Fax:

  	
  +33 147 033 371

  
	
   

  	
   

  
	
   

  	
  with a copy to:

  
	
   

  	
   

  
	
   

  	
  Willkie Farr & Gallagher LLP

  
	
   

  	
  21-23. rue de la Ville l’Evêque

  
	
   

  	
  75008 Paris

  
	
   

  	
  Attn:

  	
  Laurent Faugérolas

  
	
   

  	
  Fax:

  	
  + 0031 4006 9606

  

 

or to
such other Persons or at such other addresses as hereafter may be furnished by
any Party by like notice to the other Parties. 
Any such notice or other communication shall be effective only upon
actual receipt thereof by its intended recipient.

 

8.6       Entire
Agreement.  This Agreement (together with any documents
referred to herein or required to be entered into pursuant to this Agreement)
represents the entire agreement and understanding of the Parties with reference
to the transactions set forth herein and no warranties have been made in
connection with this Agreement other than those expressly set forth
herein.  This Agreement supersedes all
prior negotiations, discussions, correspondence, communications, understandings
and agreements between the Parties relating to the subject matter of this
Agreement and all prior drafts of this Agreement, all of which are merged into
this Agreement.  No prior drafts of this
Agreement or any of the Schedules to the Disclosure Letter may be used to show
the intent of the Parties in connection with this Agreement or shall otherwise
be admissible into evidence in any Proceeding or other legal action involving
this Agreement.

 

8.7       No Third
Party Rights; Assignment.  Except as expressly provided herein, this
Agreement shall inure to the benefit of, and be binding upon, the Parties
hereto and their respective successors and assigns; provided, however,
that none of the Parties shall assign any of its 

 

42

 

rights or delegate
any of its obligations created under this Agreement without the prior written
consent of the other Parties.  Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the Parties to this Agreement any right, remedy or claim under or
with respect to this Agreement or any provision of this Agreement and a Person
who is not a Party to this Agreement shall have no right under the Contracts
(Rights of Third Parties) Act 1999 to enforce any of its terms.  This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the Parties to this
Agreement and their successors and permitted assigns.

 

8.8       Severability.  This Agreement shall be deemed
severable, and the invalidity or unenforceability of any term or provision
hereof shall not affect the validity or enforceability of this Agreement or of
any other term or provision hereof. 
Furthermore, in lieu of any such invalid or unenforceable term or
provision, the Parties hereto intend that there shall be added as a part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.

 

8.9       Waivers
and Amendments.  No modification or variation of or amendment
to this Agreement shall be valid unless in writing signed by the Parties hereto
referring specifically to this Agreement and stating the Parties’ intention to
modify or amend the same.  Any waiver of
any term or condition of this Agreement must be in writing signed by the Party
sought to be charged with such waiver referring specifically to the term or
condition to be waived, and no such waiver shall be deemed to constitute the
waiver of any other breach of the same or of any other term or condition of
this Agreement.

 

8.10    Exclusion of Limitation of Fraud.  Nothing in this Agreement shall operate to
limit the liability of a Party (or the remedies available to the other Party)
in respect of a fraudulent act or fraudulent misrepresentation by such Party.

 

8.11    No Rescission.  This Agreement may not be rescinded after
Closing.

 

8.12    Parties’ Inquiry

 

(a)           The Purchaser acknowledges
that (x) it and its advisors have been given access to and have reviewed
to their entire satisfaction the Data Room Documentation, (y) it has
been afforded the opportunity to discuss the Data Room Documentation with
senior management of the Company, and (z) has taken its review and
analysis of the Data Room Documentation into account in the terms of its
offer to acquire the Shares to be acquired by it pursuant to the Agreement.

 

(b)           The
Purchaser further acknowledges that the Seller Warranties set forth in this
Agreement supersede any and all earlier representations, warranties or
statements made by any directors, officers, employees, agents, representatives
or advisors of the Seller or its Affiliates (collectively, the “Seller’s
Representatives”) regarding the Company or any other matter referenced in
the Agreement, and that the Seller and the Seller’s Representatives shall have
no liability in respect of any such earlier representations, warranties or
statements.  Except as expressly set
forth in the Agreement, none of the Seller nor any of the Seller’s Representatives
makes any representation or warranty, either express or implied, of any kind
whatsoever with respect to the Company or any of the transactions contemplated
hereby or thereby (including as to the accuracy or completeness of any
information provided to the Purchaser or its representatives).  Without limiting the generality of the
foregoing, the Purchaser acknowledges that none of the Seller or any of the
Seller’s Representatives makes any representation or warranty with respect to
the future relations of any of the Company with any customers, suppliers or
Governmental Authority, or with regard to 

 

43

 

the
future financial or business prospects or future costs of operations of any of
the Company.  In furtherance of the
foregoing, to the fullest extent permitted by applicable Law, the Purchaser
hereby irrevocably waives the benefit of any warranties generally available to
purchasers under applicable Law.

 

(c)           The
Seller acknowledges that the Purchaser Warranties set forth in this Agreement
supersede any and all earlier representations, warranties or statements made by
any directors, officers, employees, agents, representatives or advisors of the
Purchaser, the Guarantor or any of their respective Affiliates (collectively,
the “Purchaser’s Representatives”) regarding any matter referenced in
the Agreement, and that the Purchaser and the Purchaser’s Representatives shall
have no liability in respect of any such earlier representations, warranties or
statements.  Except as expressly set
forth in the Agreement, none of the Purchaser nor any of the Purchaser’s
Representatives makes any representation or warranty, either express or
implied, of any kind whatsoever with respect to any of the transactions
contemplated hereby (including as to the accuracy or completeness of any
information provided to the Seller or its representatives).  furtherance of the foregoing, to the fullest
extent permitted by applicable Law, the Seller hereby irrevocably waives the
benefit of any warranties generally available to sellers under applicable Law.

 

8.13    Guarantee.

 

(a)           In consideration of the
Seller entering into this Agreement, the Guarantor, being a duly organized and
validly existing company under the laws of its jurisdiction of incorporation,
and having the corporate capacity and authority and full legal right to enter
into this Agreement and to perform its obligations hereunder and to consummate
the transactions contemplated hereby, unconditionally and irrevocably, as a
continuing obligation, hereby guarantees to the Seller the performance by the
Purchaser of all its obligations, commitments and undertakings under or
pursuant to this Agreement (including obligations to pay Damages) and agrees to
indemnify the Seller against all direct damages, costs and expenses which the
Seller may suffer as a result of any failure by the Purchaser so to perform and
observe any of its obligations, commitments and undertakings under or pursuant
to this Agreement.

 

(b)           If and each time that the
Purchaser fails to perform or observe any of the obligations, commitments or
undertakings referred to in paragraph (a) of this Section 8.13, the
Guarantor shall forthwith upon demand unconditionally perform (or procure the
performance or observance of) and satisfy (or procure the satisfaction of) the
obligation, commitment or undertaking in regard to which such failure has
occurred in the manner prescribed in this Agreement so that the same benefits
shall be received by, or conferred on, the Seller as it would have had if such
obligation, commitment or undertaking had been duly performed, observed and
satisfied by the Purchaser.

 

(c)           For the avoidance of doubt,
in no event shall the Guarantor be liable for any greater amount than would be
due by the Purchaser in respect of any obligation under this Agreement.

 

8.14    Default Interest.  If
any Party fails to pay any amount payable by it under this Agreement on its due
date, interest shall accrue on the overdue amount from, and including, the due
date up to, but excluding, the date of actual payment at the Agreed Interest
Rate.

 

44

 

8.15        Governing Law and Arbitration.

 

(a)           This Agreement shall be
governed by and construed in accordance with, the laws of England and Wales.

 

(b)           Any dispute between the
Parties hereto arising out of or in connection with this Agreement, including
its validity, implementation, interpretation, termination or enforcement, shall
be finally and exclusively settled under binding arbitration by three (3) arbitrators,
who shall be appointed and be operating in accordance with the Rules of
the London Court of International Arbitration. The arbitrators shall apply
English substantive law. The venue of the arbitration shall be Paris,
France.  All proceedings of the
arbitration, including arguments and briefs, shall be conducted in the English
language and (to the extent not provided for by the above mentioned Rules)
governed by English procedural rules applicable to international
arbitrations. The Parties expressly agree that nothing in this Section shall
preclude any Party from seeking temporary or preliminary injunctive relief from
any court of competent jurisdiction.

 

(c)           Each Party to this Agreement
irrevocably submits to such arbitration and agrees that a decision of the
arbitrators referred to in this Section in connection with this Agreement
is conclusive and binding on it and may be enforced against it in the courts of
any jurisdiction.

 

(d)           Each Party irrevocably
waives any objections to the jurisdiction of the arbitration panel or courts
referred to in this Section.

 

8.16    Counterparts.  This Agreement may be executed as two or more
counterparts and execution by each of the Parties of one of such counterparts
will constitute due execution of this Agreement.  Each such counterpart shall be deemed to be
an original and when taken together shall constitute one and the same document.

 

45

 

	
  Acting By:

  	
  /s/ Craig M. McKenzie

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: TIWAY OIL BV

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Acting By:

  	
  /s/ Per Skaug

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: TIWAY OIL AS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Acting By:

  	
  /s/ Per Skaug

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

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