Exhibit 10.2

 

Joint OPERATING AGREEMENT

 

PEL 512 South Block

SOUTH AUSTRALIA

 

Discovery Energy SA Pty Ltd

 

WESI PEL512 Pty Ltd

 

 

 

 

Table of Contents

 

ARTICLE 1 - DEFINITIONS AND INTERPRETATIONS 1   1.1 Definitions 1   1.2
Interpretation 7         ARTICLE 2 - TERM AND TERMINATION 8   2.1 Term 8        
ARTICLE 3 - SCOPE 8   3.1 Scope 8   3.2 Participating Interest 9   3.3
Ownership, Obligations and Liabilities 9         ARTICLE 4 - OPERATOR 9   4.1
Designation of Operator 9   4.2 Rights and Duties of Operator 9   4.3 Operator
Personnel 11   4.4 Information Supplied by Operator 11   4.5 Settlement of
Claims and Lawsuits 12   4.6 Limitation on Liability of Operator 13   4.7
Insurance Obtained by Operator 13   4.8 Commingling of Funds 15   4.9
Resignation of Operator 15   4.10 Removal of Operator 15   4.11 Appointment of
Successor 16         ARTICLE 5 - OPERATING COMMITTEE 17           5.1
Establishment of Operating Committee 17   5.2 Powers and Duties of Operating
Committee 17   5.3 Authority to Vote 17   5.4 Subcommittees 17   5.5 Notice of
Meeting 17   5.6 Contents of Meeting Notice 17   5.7 Location of Meetings 18  
5.8 Operator’s Duties for Meetings 18   5.9 Voting Procedure 18   5.10 Record of
Votes 19   5.11 Minutes 19   5.12 Voting by Notice 19   5.13 Effect of Vote 19  
      ARTICLE 6 - WORK PROGRAMS AND BUDGETS 20           6.1 Preparation and
Approval 20   6.2 Exploration and Appraisal 22   6.3 Development 23   6.4
Production 24   6.5 HSE Plan 25   6.6 Contract Awards 25   6.7 Authorization for
Expenditure (“AFE”) Procedure 26   6.8 Over-expenditures of Work Programs and
Budgets 27         ARTICLE 7 - OPERATIONS BY FEWER THAN ALL PARTIES 28          
7.1 Limitation on Applicability 28

 

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  7.2 Procedure to Propose Exclusive Operations 29   7.3 Responsibility for
Exclusive Operations 30   7.4 Consequences of Exclusive Operations 30   7.5
Premium to Participate in Exclusive Operations 32   7.6 Order of Preference of
Operations 33   7.7 Stand-By Costs 34   7.8 Special Considerations Regarding
Deepening and Sidetracking 34   7.9 Use of Property 35   7.10 Lost Production
during Tie-In of Exclusive Operation Facilities 35   7.11 Conduct of Exclusive
Operations 36         ARTICLE 8 - DEFAULT 37           8.1 Default and Notice 37
  8.2 Operating Committee Meetings, Data, and Entitlements 37   8.3 Allocation
of Defaulted Amounts 38   8.4 Remedies 39   8.5 Survival 44   8.6 No Right of
Set Off 44         ARTICLE 9 - DISPOSITION OF PRODUCTION 45           9.1 Right
and Obligation to Take in Kind 45   9.2 Disposition of Crude Oil and/or Natural
Gas 45         ARTICLE 10 - ABANDONMENT 45           10.1 Abandonment of Wells
Drilled as Joint Operations 45   10.2 Abandonment of Exclusive Operations 46  
10.3 Provision for and Conduct of Abandonment 46         ARTICLE 11 - SURRENDER,
EXTENSIONS AND RENEWALS 46           11.1 Surrender 46   11.2 Extension of the
Term 46         ARTICLE 12 - TRANSFER OF INTEREST OR RIGHTS AND CHANGES IN
CONTROL 47           12.1 Obligations 47   12.2 Transfer 47   12.3 Change in
Control 49         ARTICLE 13 - WITHDRAWAL FROM AGREEMENT 51           13.1
Right of Withdrawal 51   13.2 Partial or Complete Withdrawal 51   13.3 Rights of
a Withdrawing Party 51   13.4 Obligations and Liabilities of a Withdrawing Party
52   13.5 Emergency 52   13.6 Assignment 52   13.7 Approvals 53   13.8 Security
53   13.9 Withdrawal or Abandonment by All Parties 53         ARTICLE 14 -
RELATIONSHIP OF PARTIES AND TAX 53           14.1 Relationship of Parties 53  
14.2 Tax 53   14.3 United States Tax Election 54         ARTICLE 15 - VENTURE
INFORMATION - CONFIDENTIALITY - INTELLECTUAL PROPERTY 54           15.1 Venture
Information 54

 

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  15.2 Confidentiality 55   15.3 Intellectual Property 55   15.4 Continuing
Obligations 56   15.5 Trades 56         ARTICLE 16 - FORCE MAJEURE 56        
ARTICLE 17 - NOTICES 57           17.1 Form of Notices 57   17.2 Delivery of
Notices 57   17.3 Change of Address 57         ARTICLE 18 - APPLICABLE LAW -
DISPUTE RESOLUTION - WAIVER OF SOVEREIGN IMMUNITY 58           18.1 Applicable
Law 58   18.2 Dispute Resolution 58   18.3 Expert Determination 59   18.4 Waiver
of Sovereign Immunity 60         ARTICLE 19 - GENERAL PROVISIONS 60          
19.1 Conduct of the Parties 60   19.2 Conflicts of Interest 61   19.3 Public
Announcements 61   19.4 Successors and Assignees 62   19.5 Waiver 62   19.6 No
Third Party Beneficiaries 62   19.7 Joint Preparation 62   19.8 Severance of
Invalid Provisions 62   19.9 Counterpart Execution 62   19.10 Entirety 63

 

Exhibit A - Accounting Procedure           Exhibit B - Contract Area  

 

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JOINT OPERATING AGREEMENT

 

THIS AGREEMENT is made as of ______________ (the “Effective Date”) among:

 

Discovery Energy SA Pty Ltd ACN 158 204 052 of Level 8, 350 Collins Street,
Melbourne VIC 3000, a company existing under the laws of Victoria, Australia
(hereinafter referred to as “DESAL”) and, WESI PEL512 Pty Ltd ACN 635 946 682 of
Suite 33.01, Chifley Tower, 2 Chifley Square, Sydney NSW 2000, a company
existing under the laws of New South Wales, Australia (hereinafter referred to
as “WESI”).

 

The companies named above may sometimes individually be referred to as “Party”
and collectively as the “Parties”.

 

This Agreement is premised on the fact that:

 

DESAL holds one hundred percent (100%) of the rights to explore, develop and
produce hydrocarbons covering Petroleum Exploration Licence (PEL) 512
(hereinafter referred to as “Licence”). The Licence was issued by the Government
of the State of South Australia (hereinafter referred to as “Government) to
DESAL on 26 October 2012; and

 

The Parties have entered into a Farmout Agreement dated effective ___________
(as amended, supplemented, restated or otherwise modified from time to time,
hereinafter referred to as “Farmout Agreement”) under which DESAL, subject to
the terms of the Farmout Agreement and in exchange for the consideration
expressed in the Farmout Agreement, agreed to transfer certain beneficial and
legal interests in its rights and obligations in the Licence to WESI insofar as
the Licence relates to the area shown as the South block of the Licence labelled
as Block A on the map attached as Exhibit B and the Lycium block labelled as
Block B on the map attached as Exhibit B and referred to in this Agreement as
the Contract Area, excepting and reserving unto DESAL certain beneficial
interests in the West Block;

 

The Parties desire to define their respective rights and obligations concerning
operations and activities under the Licence;

 

In consideration of the premises set out above and the mutual covenants,
agreements, and obligations set out below and to be performed, the Parties agree
as follows:

 

ARTICLE 1 - DEFINITIONS AND Interpretations

 

1.1 Definitions

 

As used in this Agreement, the following capitalized terms shall have the
meaning ascribed to them below:

 

Accounting Procedure means the rules, provisions, and conditions contained in
Exhibit A.

 

Acquired Party means the Party subject to a Change in Control.

 

Acquirer means the Party or third party proposing to acquire Control in a Change
in Control.

 

Act means the Petroleum and Geothermal Energy Act 2000 (SA).

 

AFE means an authorization for expenditure under Article 6.8.

 

Affiliate means a legal entity that at any tier Controls, is Controlled by, or
is Controlled by an entity that Controls, a Party.

 

Agreed Interest Rate means interest compounded on a monthly basis, at LIBOR plus
three (3) percentage points, applicable on the first Business Day before the due
date of payment and afterwards on the first Business Day of each succeeding
Calendar Month. If the resulting rate is contrary to any applicable usury law,
then the rate of interest to be charged shall be the maximum rate permitted by
applicable law.

 

1

 

 

Agreement means this agreement, together with the Exhibits attached to this
agreement, and any extension, renewal, or amendment agreed to in writing by the
Parties.

 

Anti-Bribery Laws and Obligations means for each Party: (i) the Laws relating to
combating bribery and corruption, and/or 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; and (ii) the laws
relating to combating bribery and corruption in the countries of such Party’s
place of incorporation, principal place of business, and/or place of
registration as an issuer of securities, and/or in the countries of such Party’s
ultimate parent company’s place of incorporation, principal place of business,
and/or place of registration as an issuer of securities.

 

Appraisal Well means any well (other than an Exploration Well or a Development
Well), whose purpose at the time drilling commences, is to evaluate the areal
extent of an existing Discovery and/or the volume of Hydrocarbon reserves
contained in an existing Discovery.

 

Business Day means a Day on which the banks in Australia are customarily open
for business.

 

Calendar Month means one of the twelve (12) calendar months of the Gregorian
Calendar commencing on the first Day of each calendar month.

 

Calendar Quarter means a period of three (3) consecutive Calendar Months
commencing January 1 and ending March 31, commencing April 1 and ending June 30,
commencing July 1 and ending September 30, or commencing October 1 and ending
December 31.

 

Calendar Year means a period of twelve (12) consecutive Calendar Months,
commencing January 1 and ending December 31.

 

Cash Call means any request for the Parties to advance their respective
Participating Interest shares of estimated cash requirements for the next
Calendar Month’s Joint Operations in accordance with an approved Work Program
and Budget.

 

Cash Transfer means a Transfer where the sole consideration, other than the
assumption of obligations relating to the transferred Participating Interest, is
cash, cash equivalents, promissory notes, or retained interests (e.g. production
payments) in the Participating Interest being transferred.

 

Cash Value means the portion of the total monetary value (expressed in
Australian dollars) of the consideration being offered by the proposed
transferee (including any cash, other assets, and tax savings to the transferor
from a non-cash deal) that reasonably should be allocated to the Participating
Interest subject to the proposed Transfer or Change in Control.

 

Change in Control means a direct or indirect change in Control of a Party
(whether through merger, spin-off, sale of shares or other equity interests, or
otherwise) through a single transaction or series of related transactions, from
one or more transferors to one or more transferees, in which the market value of
the Party’s Participating Interest represents more than 30% percent of the
aggregate market value of the assets of the Party and its Affiliates that are
subject to the change in Control. For this definition, market value will be
determined based upon the cash a willing buyer would pay a willing seller in an
arm’s length transaction.

 

Commercial Discovery means any Discovery that is sufficient to entitle the
Parties to apply for authorization from the Government to commence exploitation.

 

Completion means operations intended to complete a well through the Christmas
tree as a producer of Hydrocarbons in one or more Zones, including the setting
of production casing, perforating, stimulating the well and production Testing
conducted in such operation. “Complete” and other derivatives shall be construed
accordingly.

 

2

 

 

Consenting Party means a Party that agrees to participate in and pay its share
of the cost of an Exclusive Operation.

 

Consequential Loss means any losses, damages, costs, or liabilities caused
(directly or indirectly) by any of the following arising out of, relating to, or
connected with this Agreement or the operations and/or activities carried out
under this Agreement: (i) reservoir or formation damage; (ii) inability to
produce, use or dispose of Hydrocarbons; (iii) loss or deferment of income; (iv)
punitive damages; or (v) indirect damages or losses whether or not similar to
the foregoing.

 

Contract Area means as of the Effective Date the South block of the Licence
labelled as Block A on the map attached as Exhibit B and the Lycium block
labelled as Block B on the map attached as Exhibit B. The perimeter or
perimeters of the Contract Area shall correspond to the South and Lycium blocks
shown in Exhibit B as covered by the Licence, as such area may vary from time to
time during the term of validity of the Licence.

 

Control means the ownership directly or indirectly of fifty (50) percent or more
of the voting rights in a legal entity.

 

Corporations Act means the Corporations Act 2001 (Cth).

 

Crude Oil means all crude oils, condensates, natural gas liquids and other
Hydrocarbons in a liquid state at standard pressure that are covered by the
Licence.

 

Day means a Gregorian Calendar day unless otherwise specifically provided.

 

Deepening means an operation to drill a well to an objective Zone below the
deepest Zone in which such well was previously drilled, or below the deepest
Zone proposed in the associated AFE (if required), whichever is the deeper.

 

Default Amount means the amount of the Defaulting Party’s share of Joint Account
charges that the Defaulting Party has failed to pay when due under this
Agreement or the Farmout Agreement.

 

Default Interest Rate means interest compounded on a monthly basis, at LIBOR
plus three (3) percentage points, applicable on the first Business Day before
the due date of payment and afterwards on the first Business Day of each
succeeding Calendar Month. If the resulting rate is contrary to applicable usury
law, then the rate of interest to be charged shall be the maximum rate permitted
by such applicable law.

 

Default Notice means the notice of default given to a Defaulting Party.

 

Defaulting Party shall have the meaning ascribed in Article 8.1.A.

 

Default Period means the period beginning on the fifth (5th) Business Day after
the date that the Default Notice is received under Article 8.1.A and ending when
the Defaulting Party has remedied its default in full by paying the Total Amount
in Default.

 

Delivery Point means the point at which title and risk of loss of each Party’s
Entitlement passes to such Party.

 

Development Operations means operations and activities, including acquiring G&G
Data and drilling Development Wells, conducted under an approved Development
Plan.

 

Development Plan means an overall plan and cost estimate for the development of
Hydrocarbons from a Commercial Discovery.

 

Development Well means any well drilled, whose purpose relates to the production
of Hydrocarbons under a Development Plan.

 

Discovery means the discovery of an accumulation of Hydrocarbons, the existence
of which until that moment was unproven by drilling.

 

3

 

 

Dispute means any dispute, controversy, or claim (of any and every kind or type,
whether based on contract, tort, statute, regulation, or otherwise) arising out
of, relating to, or connected with this Agreement or the operations and
activities carried out under this Agreement, including any dispute as to the
construction, validity, interpretation, enforceability, breach, or termination
of this Agreement.

 

Effective Date shall mean the date first written above in this Agreement.

 

Encumbrance means with respect to any interest or asset, a mortgage, lien,
pledge, charge, or other burden.

 

Entitlement means the quantity of Hydrocarbons (excluding all quantities used or
lost in Joint Operations) that a Party has the right and obligation to own, take
in kind, and dispose of under this Agreement and the Licence, as such right and
obligation may be modified by any lifting, balancing, sales and other agreements
entered into under Article 9.

 

Environmental Loss means any losses, damages, costs, or liabilities (other than
Consequential Loss) caused by a discharge of Hydrocarbons, pollutants, or other
contaminants into or onto any medium (including land, surface water, ground
water and/or air) relating to this Agreement or the operations and activities
carried out under this Agreement, including: (i) injury or damage to, or
destruction of, natural resources or real or personal property; (ii) cost of
pollution control, cleanup and removal; (iii) cost of restoration of natural
resources; and (iv) fines, penalties, or other assessments.

 

Exclusive Operation means those operations and activities carried out under this
Agreement, the costs of which are chargeable to the account of fewer than all
the Parties.

 

Exclusive Well means a well drilled as an Exclusive Operation.

 

Exploitation Area means that part of the Contract Area that is established for
development of a Commercial Discovery under the Licence or, if the Licence does
not establish an exploitation area, then that part of the Contract Area that is
delineated as the exploitation area in a Development Plan approved as a Joint
Operation or as an Exclusive Operation.

 

Exploitation Period means any periods of exploitation during which the
production and removal of Hydrocarbons is permitted under the Licence.

 

Exploration Operations means operations and activities, including acquiring G&G
Data and drilling Exploration Wells, whose purpose is to explore for
accumulations of Hydrocarbons.

 

Exploration Period means any periods of exploration set out in the Licence.

 

Exploration Well means any well, whose purpose at the time drilling commences,
is to explore for an accumulation of Hydrocarbons, which accumulation was at
that time unproven by drilling.

 

Farmout Agreement has the meaning given in the recitals to this Agreement,
together with all exhibits and appendicies thereto, as such agreement, exhibits
and appendicies may be amended, supplemented or otherwise modified from time to
time.

 

Force Majeure has the same meaning as is set out in the Licence.

 

G & G Data means only geological, geophysical, geochemical and, other similar
data and information that is not obtained through a well bore.

 

Government means the government of the State of South Australia and any
political subdivision, agency or instrumentality of such government.

 

Gross Negligence / Willful Misconduct means any act or failure to act (whether
sole, joint or concurrent) by any person or entity that was intended to cause,
or was in reckless disregard of or wanton indifference to, harmful consequences
such person or entity knew, or should have known, such act or failure would have
on the safety or property of another person or entity.

 

4

 

 

Hydrocarbons mean all substances that are covered by the Licence, including
Crude Oil and Natural Gas.

 

HSE means Health, Safety, and the Environment.

 

HSE Plan shall have the meaning set out in Article 6.6.A.

 

Joint Account means the accounts maintained by Operator under this Agreement and
the Accounting Procedure to record costs, receipts, and credits of Joint
Operations.

 

Joint Operations means the operations and activities within the scope of this
Agreement (or whose purpose at the time undertaken was within the scope of this
Agreement) conducted by Operator on behalf of all Parties, including Exploration
Operations, Appraisal Operations, Development Operations, Production Operations,
and operations and activities for the purposes of Decommissioning.

 

Joint Property means, at any point in time, all wells, facilities, equipment,
materials, information, funds, and property (other than Hydrocarbons) held for
use in Joint Operations.

 

Laws mean those laws, statutes, rules, and regulations of South Australia
governing the Licence and this Agreement.

 

LIBOR means the interest rate per annum equal to the London Interbank Offered
Rate as administered by the ICE Benchmark Administration (or any other person
that takes over administrative of such rate for U.S. dollars) for one month U.S.
dollar deposits, as published in London by the Financial Times or if not
published, then by The Wall Street Journal.

 

Licence means Petroleum Exploration Licence (PEL) 512 issued by the Government
to DESAL on 26 October 2012 insofar as the Licence pertains to the Contract Area
and any licence granted under the Act in substitution, replacement, extension or
renewal of that licence insofar as it pertains to the Contract Area. If a
separate petroleum exploration licence is granted covering the Contract Area as
provided herein, Licence means that licence and any licence granted under the
Act in substitution, replacement, extension or renewal of that licence

 

Minimum Work Obligations mean those work and/or expenditure obligations
specified in the Licence that must be performed in order to satisfy the
obligations of the Licence in the then current period or phase of the Licence.

 

Natural Gas means all Hydrocarbons in a gaseous state at standard temperature
and pressure (including wet gas, dry gas, and residue gas) that are covered by
the Licence, but excluding Crude Oil.

 

Non-Consenting Party means each Party who elects not to participate in an
Exclusive Operation.

 

Non-Operator means each Party to this Agreement other than Operator.

 

Operating Committee means the committee established under Article 5.

 

Operator means the Party designated in Article 4 or 7.12.F.

 

Operator Indemnitee means any of the Operator, its Affiliates, or their
respective directors, officers, and employees. Operator Indemnitees means all of
them.

 

Participating Interest means each Party’s undivided share (expressed as a
percentage of the total shares of all Parties) in the rights, interests,
obligations, and liabilities of the Parties derived from the Licence as it
covers the Contract Area and this Agreement.

 

Party means each of the persons and entities named in the preamble, including
their respective successors and assignees to rights, interests and obligations
in the Contract Area, generically, and Parties means all of the persons and
entities named in the preamble, including their respective successors and
assignees to rights, interests, and obligations in the Contract Area,
collectively.

 

5

 

 

Plugging Back means a single operation whereby a deeper Zone is abandoned in
order to attempt a Completion in a shallower Zone.

 

Production Bonus means the bonus, if any, payable by the Parties under the
Licence.

 

Production Operations means operations and activities intended to extract
Hydrocarbons for commercial purposes, especially operations and activities
concerning producing wells (including Recompleting and Reworking), and field
separation, processing, storage, and handling of Hydrocarbons upstream of the
Delivery Point, conducted to progress a Development Plan and/or a projected
production schedule.

 

Public Official means (i) any officer, employee, director, principal,
consultant, agent or representative, whether appointed or elected, of any
government (whether central, federal, state or provincial), ministry, body,
department, agency, instrumentality or part of any of them, or any public
international organization, or any state or government owned or controlled
entity, agency, enterprise, joint venture, or partnership (including a partner
or shareholder of such an enterprise); (ii) any person acting in an official
capacity for or on behalf of (a) any government, ministry, body, department,
agency, instrumentality or part of any of them, or (b) any public international
organization, or (c) any political party or political party official or
candidate for office.

 

Recompletion means an operation whereby a Completion in a Zone (or part of a
Zone) is abandoned in order to attempt a Completion in a different Zone (or
different part of a Zone) within the existing wellbore.

 

Reserve Fund shall have the meaning set out in Article 8.4.C.

 

Reworking means an operation conducted in the wellbore of a well after it is
Completed to secure, restore, or improve production in a Zone (or part of a
Zone) that is currently open to production in the wellbore. Such operations
include well stimulation operations, but exclude any routine repair or
maintenance work, drilling, Sidetracking, Deepening, Completing, Recompleting,
or Plugging Back of a well.

 

Secondee means an employee of a Non-Operator or its Affiliate, who is subject to
Secondment.

 

Secondment means the placement under Article 4.3 of an employee of a
Non-Operator or its Affiliate in Operator’s organization to provide services
under a Secondment Agreement between Operator and such Non-Operator or its
Affiliates.

 

Security means (i) an irrevocable standby letter of credit or irrevocable
commercial bank guarantee issued by a bank; (ii) an on-demand bond issued by a
surety corporation; (iii) an irrevocable guarantee issued by a corporation or
government; (iv) any financial security required by the Licence, this Agreement
or the Farmout Agreement; and (v) any financial security agreed from time to
time by the Parties; provided that the bank, surety, corporation or government
issuing the guarantee, standby letter of credit, bond, or other security (as
applicable) has a net worth sufficient to pay its obligations in all reasonably
foreseeable circumstances.

 

Senior Executive means any individual who has authority to settle a Dispute for
a Party.

 

Senior Supervisory Personnel means, with respect to a Party, any director or
officer of such Party, and any individual who functions for such Party or one of
its Affiliates at a management level equivalent or superior to any individual
functioning as such Party’s senior onsite manager or supervisor(s) who is
responsible for or in charge of the conduct of seismic acquisition, drilling,
construction or production and related operations, or any other field
operations, but excluding all individuals functioning at a level below such
field manager or supervisor.

 

Sidetracking means the directional control and intentional deviation of a well
bore to change the bottom hole location unless done to straighten the hole or to
drill around junk in the hole or to overcome other mechanical difficulties.

 

6

 

 

South Block means the South block of the Licence labelled as Block A on the map
attached as Exhibit B and the Lycium block labelled as Block B on the map
attached as Exhibit B.

 

Testing means an operation conducted in the well bore that is intended to
evaluate the capacity of a Zone to produce Hydrocarbons. “Test” and other
derivatives shall be construed accordingly.

 

Total Amount in Default means the sum of: (i) the Amount in Default; (ii)
third-party costs of obtaining and maintaining a Security held by the
non-defaulting Parties, or the funds paid by the Parties to allow Operator to
obtain or maintain Security, under Article 8.3.A.2; plus (iii) interest at the
Default Interest Rate accrued on the amount calculated under (i) from the date
this amount is due by the Defaulting Party until paid in full by the Defaulting
Party and on the amount calculated under (ii) from the date this amount is
incurred by the non-defaulting Parties until paid in full by the Defaulting
Party.

 

Total Available Production means all Hydrocarbons produced in the Contract Area
and saved less the quantities used for Joint Operations and any losses.

 

Transfer means any sale, assignment, novation, Encumbrance or other disposition
by a Party of any rights or obligations that pertain to the Contract Area and
that are derived from the Licence or this Agreement (including its Participating
Interest), other than its Entitlement and its rights to any credits, refunds or
payments under this Agreement, and excluding any direct or indirect Change in
Control of a Party; provided that “Transfer” shall not be interpreted to include
any sale, assignment, novation, Encumbrance or other disposition by DESAL of any
rights, interests, or obligations in the West Block.

 

Urgent Operational Matters means decisions on matters involving the use of a
drilling rig, vessel or other equipment (not normally maintained in the Contract
Area) that is standing by in the Contract Area.

 

Venture Information means the information and results developed or acquired in
Joint Operations, which will be Joint Property, unless provided otherwise in
this Agreement and/or the Licence.

 

West Block means the West block of PEL 512 labelled as Block C on the map
attached as Exhibit B.

 

Work Program and Budget means a work program for Joint Operations and
corresponding budget as described and approved under Article 6.

 

Zone means a stratum of earth containing or thought to contain an accumulation
of Hydrocarbons separately producible from any other accumulation of
Hydrocarbons.

 

1.2 Interpretation

 

1.2.A Title and Headings. The title and topical headings used in this Agreement
are for convenience only and shall not be construed as having any substantive
significance or as indicating that all of the provisions of this Agreement
relating to any topic are to be found in any particular Article.     1.2.B
Derivatives. A capitalized derivative or other variation of a defined term will
have a corresponding meaning and be construed accordingly.     1.2.C Singular
and Plural. Reference to the singular includes a reference to the plural and
vice versa.     1.2.D Gender. Reference to any gender includes a reference to
all other genders.     1.2.E Article. Unless otherwise provided, reference to
any Article or an Exhibit means an Article or Exhibit of this Agreement.    
1.2.F Conflicts. If the provisions in the body of this Agreement conflict with
the provisions in the body of the Farmout Agreement, the provisions in the body
of the Farmout Agreement shall prevail to the extent of such conflict. If the
provisions in the body of this Agreement conflict with the provisions in any
Exhibit, the provisions in the body of this Agreement shall prevail

 

7

 

 

1.2.G Include. The terms “include” and “including” shall mean include or
including without limiting the generality of the description preceding such term
and are used in an illustrative sense and not a limiting sense.

 

ARTICLE 2 - TERM AND TERMINATION

 

2.1 Term

 

2.1.A This Agreement shall have effect from the Effective Date and shall
continue in effect until:

 

  2.1.A.1 the Licence terminates;         2.1.A.2 all materials, equipment and
personal property acquired for or used in connection with Joint Operations or
Exclusive Operations have been disposed of or removed; and         2.1.A.3 final
settlement (including settlement of any financial audit carried out under the
Accounting Procedure) has been made.

 

2.1.B Despite Article 2.1.A:

 

  2.1.B.1 Article 10 shall remain in effect until all Abandonment obligations
under the Licence and applicable Laws have been satisfied; and         2.1.B.2
the liability and payment obligations under Article 3.3.B and 3.3.C, Article
4.5, Article 8, Article 15.2, Article 18, and the indemnity obligations under
Article 4.6.B, 7.3.A, 7.9.E, 10.1.C, 10.2.E.2, 14.2, 191.C shall remain in
effect until all obligations have been extinguished and all Disputes have been
resolved.

 

2.1.C Termination of this Agreement shall be without prejudice to any rights and
obligations arising out of or in connection with this Agreement that have
vested, matured, or accrued before such termination.

 

ARTICLE 3 - SCOPE

 

3.1 Scope

 

3.1.A The purpose of this Agreement is to establish the respective rights and
obligations of the Parties concerning operations and activities in the Contract
Area, including the joint exploration, appraisal, development, production of
Hydrocarbons (including treatment, storage, transportation and handling of
produced Hydrocarbons upstream of the Delivery Point), the determination of
Entitlements at the Delivery Point, Abandonment and Decommissioning.     3.1.B
The Parties confirm that, except to the extent expressly included in the
Licence, the following activities are outside of the scope of this Agreement:

 

  3.1.B.1 Construction, operation, ownership, maintenance, repair, and removal
of facilities downstream from the Delivery Point;         3.1.B.2 Transportation
of the Parties’ Entitlements downstream from the Delivery Point;         3.1.B.3
Marketing and sales of Hydrocarbons, except as expressly provided in Article
7.12.E, Article 8.4 and Article 9;         3.1.B.4 Acquisition of rights to
explore for, appraise, develop or produce Hydrocarbons outside of the Contract
Area (other than through unitization with an adjoining licence area under the
Licence or Laws);

 

8

 

 

  3.1.B.5 Exploration, appraisal, development, or production of minerals other
than Hydrocarbons, whether inside or outside the Contract Area.

 

3.2 Participating Interest

 

3.2.A Unless otherwise provided in this Agreement, the Participating Interests
of the Parties as of the Effective Date are:

 

Party Participating Interest     DESAL 50% WESI 50%

 

3.2.B If a Party Transfers all or part of its Participating Interest under the
provisions of this Agreement and the Licence, the Participating Interests of the
Parties shall be revised accordingly.

 

3.3 Ownership, Obligations and Liabilities

 

3.3.A Unless otherwise provided in this Agreement, all the rights and interests
in and under the Licence, all Joint Property, and any Hydrocarbons produced from
the Contract Area shall, subject to the terms of the Licence, be owned by the
Parties in proportion to their respective Participating Interests.     3.3.B
Unless otherwise provided in this Agreement, the obligations of the Parties
under the Licence and all costs and liabilities incurred by Operator (or by any
Party on behalf of all Parties, as set out in this Agreement) in connection with
Joint Operations shall be charged to the Joint Account and all credits to the
Joint Account shall be shared by the Parties, in proportion to their respective
Participating Interests.     3.3.C Each Party shall pay when due, in accordance
with the Accounting Procedure, its Participating Interest share of Joint Account
charges, including Cash Calls and interest, accrued under this Agreement. A
Party’s payment of any charge under this Agreement shall not prejudice its right
to later contest the charge.     3.3.D During the “Obligatory Expenditure Work
Progam” (as defined in the Farmout Agreement), WESI shall pay and discharge all
Joint Acount charges, including Cash Calls and interest, attributable to the
Participating Interest share of DESAL. During the Obligatory Expenditure Work
Program, all payments by WESI towards Joint Account charges shall first be
applied towards amounts attributable to DESAL’s Participating Intrest share and
second to WESI’s Participating Interest share.

 

ARTICLE 4 - OPERATOR

 

4.1 Designation of Operator

 

DESAL is designated as Operator, accepts the rights, duties, and obligations of
Operator, and agrees to act as such in accordance with this Agreement.

 

4.2 Rights and Duties of Operator

 

4.2.A Subject to the terms and conditions of this Agreement, Operator shall have
all of the rights, functions, and duties of Operator under the Licence, shall
have exclusive charge of Joint Operations, and shall conduct all Joint
Operations. Operator may employ independent contractors and agents, including
Affiliates of Operator, Non-Operators, or Affiliates of a Non-Operator, in such
Joint Operations.

 

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4.2.B In the conduct of Joint Operations Operator shall:

 

  4.2.B.1 Perform Joint Operations in accordance with the Licence, the Laws, and
this Agreement, and consistent with approved Work Programs and Budgets (and if
applicable approved AFEs), and the decisions of the Operating Committee not in
conflict with this Agreement;         4.2.B.2 Conduct Joint Operations in a
diligent, safe, and efficient manner in accordance with good and prudent
petroleum industry practices and field conservation principles generally
followed by the international petroleum industry under similar circumstances;  
      4.2.B.3 Exercise due care with respect to the receipt, payment and
accounting of funds in accordance with good and prudent practices generally
followed by the international petroleum industry under similar circumstances;  
      4.2.B.4 Charge to the Joint Account in accordance with this Agreement and
the Accounting Procedure any damage, loss, cost, or liability arising out of,
incident to, or resulting from Joint Operations;         4.2.B.5 Subject to
Article 4.6 and the Accounting Procedure, neither gain a profit nor suffer a
loss as a result of being the Operator, provided that Operator may rely upon
Operating Committee approval of specific accounting practices not in conflict
with the Accounting Procedure;         4.2.B.6 Perform the duties for the
Operating Committee set out in Article 5, and prepare and submit to the
Operating Committee in a timely manner proposed Work Programs and Budgets (and
if applicable AFEs), as provided in Article 6;         4.2.B.7 Acquire all
permits, consents, approvals, and surface or other rights that may be required
for or in connection with the conduct of Joint Operations;         4.2.B.8 Upon
receipt of reasonable advance notice, permit representatives of any Party to
have at all reasonable times during normal business hours and at such Party’s
own risk and cost reasonable access to Joint Operations, to observe Joint
Operations, to inspect Joint Property, to conduct HSE audits, and to conduct
financial audits and to observe taking of inventory as provided in the
Accounting Procedure;         4.2.B.9 Undertake to maintain the Licence in full
force and effect consistent with good and prudent petroleum industry practices
generally followed by the international petroleum industry under similar
circumstances. Operator shall timely pay and discharge all costs and liabilities
incurred in connection with Joint Operations and use its reasonable endeavors to
keep the Joint Property free from all liens, charges, and Encumbrances arising
out of Joint Operations;         4.2.B.10 Pay in cash, and/or make available in
kind, to the Government on behalf of the Parties, in accordance with the Licence
and the Laws, all periodic payments, royalties, any domestic supply obligations,
taxes, fees and other payments relating to Joint Operations but excluding any
taxes measured by the incomes of the Parties;         4.2.B.11 Carry out the
obligations of Operator under the Licence, including preparing and furnishing
such reports, records and information as may be required under the Licence;    
    4.2.B.12 Have, in accordance with the decisions of the Operating Committee,
the exclusive right and obligation to represent the Parties in all dealings with
the Government with respect to matters arising under the Licence and Joint
Operations. Operator shall notify the other Parties as soon as possible of the
time, place, and agenda of such meetings. Subject to the Licence and any
necessary Government approvals, Non-Operators shall have the right to attend any
meetings with the Government with respect to such matters, but only as
observers. Nothing contained in this Agreement shall restrict any Party from
discussing with the Government any matter peculiar to its particular business
interests arising under the Licence or this Agreement, but in such event such
Party shall promptly advise the Parties, if possible before and in any event
promptly after such discussions; provided that such Party has no duty to divulge
to the other Parties any proprietary information involved in such discussions or
any matters not affecting the other Parties;

 

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  4.2.B.13 Subject to Article 9.3 and any decisions of the Operating Committee,
assess (to the extent lawful) alternatives for the disposition of Natural Gas
from a Discovery;         4.2.B.14 In case of an emergency (including a
significant fire, explosion, Natural Gas release, Crude Oil release, or
sabotage; incident involving loss of life, serious injury to an employee,
contractor, or third party, or serious property damage; strikes and riots; or
evacuations of Operator personnel): (i) take all necessary and proper measures
for the protection of life, health, the environment and property; and (ii) as
soon as reasonably practicable, report to Non-Operators the details of such
event and any measures Operator has taken or plans to take in response thereto;
        4.2.B.15 Establish and implement under Article 6.6 an HSE Plan, which
complies with the Licence, Laws relating to HSE, this Agreement, generally
accepted practices of the international petroleum industry and decisions of the
Operating Committee;         4.2.B.16 Establish and implement anti-bribery and
anti-corruption policies and procedures consistent with Article 20.1;        
4.2.B.17 Prior to appointing or engaging any independent contractor conduct
appropriate and proportionate due diligence concerning relevant criteria,
including such contractor’s ability to perform the proposed work properly, on
time, within budgeted cost, and in compliance with applicable legal and
contractual requirements;         4.2.B.18 Include in its contracts with
independent contractors and to the extent practical and lawful, provisions that:

 

  (a) Establish that such contractors can enforce their contracts only against
Operator;         (b) Permit Operator, on behalf of the Parties, to enforce
contractual warranties and indemnities against such contractors and their
sub-contractors, and to recover from such contractors and sub-contractors losses
and damages suffered by the Parties that are recoverable under their contracts;
        (c) Require such contractors to obtain and maintain insurance required
by Article 4.7.H;

 

4.3 Operator Personnel

 

Operator shall engage and/or retain only such employees, Secondees, contractors,
consultants, and agents as are reasonably necessary to conduct Joint Operations.
Subject to the Licence and this Agreement, Operator shall determine the number
of such employees, Secondees, contractors, consultants, and agents, the
selection of such persons, their hours of work, and (except for Secondees) their
compensation.

 

4.4 Information Supplied by Operator

 

4.4.A Subject to Article 15.3, Operator shall provide Non-Operators in a timely
manner with copies of the following information, data and reports relating to
Joint Operations (to the extent to be charged to the Joint Account) in digitized
format and if not available then in hard-copy as they are currently produced or
compiled from Joint Operations:

 

  4.4.A.1 All logs, and surveys;         4.4.A.2 Proposed well design and any
revisions for each well;

 

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  4.4.A.3 Daily drilling reports;         4.4.A.4 All Tests and core data and
analysis reports;         4.4.A.5 Final well recap report;         4.4.A.6
Plugging reports;         4.4.A.7 Seismic sections and if applicable shot point
location maps;         4.4.A.8 Final, and if requested by any Non-Operator
intermediate, geological and geophysical maps, interpretations and reports;    
    4.4.A.9 Engineering studies, and monthly and annual progress reports on
Development Operations, which progress reports shall at least set out the then
current development schedule, the status of each such Development Operation from
inception to date, its cumulative costs to date and the cumulative commitments
undertaken;         4.4.A.10 Weekly production summary and production activity
reports, and monthly reports on well, reservoir, field and infrastructure
performance;         4.4.A.11 Reservoir studies, annual reserve estimates, and
annual forecasts of production capability, infrastructure capacity, and
scheduled outages, provided that Operator makes no representations about the
accuracy of its identification of reserves and that each Non-Operator retains
full responsibility for making its own assessment of reserves for internal and
reporting purposes;         4.4.A.12 Before filing with the Government, copies
of all material reports relating to Joint Operations or the Licence required, or
anticipated, to be furnished by Operator to the Government, and copies of such
reports as filed;         4.4.A.13 As reasonably requested by a Non-Operator,
other material studies and reports relating to Joint Operations;        
4.4.A.14 Data, reports, forecasts and schedules under agreements provided for in
Article 9;         4.4.A.15 Copies of accounting information and reports to be
furnished under Article 6.8 and the Accounting Procedure;         4.4.A.16
Monthly and annual HSE key performance data and reports;         4.4.A.17 Such
additional information as a Non-Operator may reasonably request, provided that
the preparation of such information will not unduly burden Operator’s
administrative and technical personnel, that the requesting Party or Parties pay
the costs of preparation of such information, and that only Non-Operators who
pay such costs will receive such additional information; and         4.4.A.18
Other reports as directed by the Operating Committee.

 

4.4.B Operator shall give Non-Operators access at all reasonable times during
normal business hours to all data and reports (other than data and reports
provided to Non-Operators under Article 4.4.A) acquired in the conduct of Joint
Operations and for which a Non-Operator may reasonably request. Any Non-Operator
may make copies of such other data at its sole expense.

 

4.5 Settlement of Claims and Lawsuits

 

4.5.A Operator shall promptly notify the Parties of any material claims or suits
that relate in any way to Joint Operations. Operator shall represent the Parties
and defend or oppose the claim or suit. Operator may in its sole discretion
compromise or settle any such claim or suit or any related series of claims or
suits for an amount not to exceed the equivalent of 150,000 Australian dollars
exclusive of legal fees. Operator shall obtain the approval and direction of the
Operating Committee on amounts in excess of the above-stated amount. Without
prejudice to the foregoing, each Non-Operator shall have the right to be
represented by its own counsel at its own expense in the settlement, compromise,
or defense of such claims or suits.

 

12

 

 

4.5.B Any Non-Operator shall promptly notify the other Parties of any claim made
against such Non-Operator by a third party that arises out of or may affect the
Joint Operations, and such Non-Operator shall defend or settle the same in
accordance with any directions given by the Operating Committee. Those costs and
damages that are incurred under such defense or settlement, and that are
attributable to Joint Operations shall be reimbursed by the Operator to such
Non-Operator and charged to the Joint Account.     4.5.C Despite Article 4.5.A
and Article 4.5.B, each Party shall have the right to participate in any such
suit, prosecution, defense, or settlement conducted under Article 4.5.A and
Article 4.5.B, at its sole expense; provided always that no Party may settle its
Participating Interest share of any claim without first satisfying the Operating
Committee that it can do so without prejudicing the interests of the Joint
Operations.

 

4.6 Limitation on Liability of Operator

 

4.6.A Except as set out in Article 4.6.D, if applicable, neither Operator nor
any other Operator Indemnitee shall bear (except as a Party to the extent of its
Participating Interest share) any damage, loss, cost, or liability resulting
from performing (or failing to perform) the duties and functions of Operator,
and the Operator Indemnitees are hereby released from liability to Non-Operators
for any and all damages, losses, costs, and liabilities arising out of, incident
to, or resulting from such performance or failure to perform, even though caused
in whole or in part by a pre-existing defect, or the negligence (whether sole,
joint or concurrent), gross negligence, willful misconduct, strict liability or
other legal fault of Operator (or any other Operator Indemnitee).     4.6.B
Except as set out in Article 4.6.D, if applicable, the Parties shall (in
proportion to their Participating Interests) defend and indemnify Operator
Indemnitees from any damages, losses, costs (including reasonable legal costs
and attorneys’ fees), and liabilities incident to claims, demands, or causes of
action brought by or for any person or entity, which claims, demands or causes
of action arise out of, are incident to or result from Joint Operations, even
though caused in whole or in part by a pre-existing defect, or the negligence
(whether sole, joint or concurrent), gross negligence, willful misconduct,
strict liability or other legal fault of Operator (or any other Operator
Indemnitee).     4.6.C Nothing in this Article 4.6 shall be deemed to relieve
Operator from its obligation to perform its duties and functions under this
Agreement, or from its Participating Interest share of any damage, loss, cost,
or liability arising out of, incident to, or resulting from Joint Operations.  
  4.6.D Despite Article 4.6.A or 4.6.B, if any Senior Supervisory personnel of
Operator or its Affiliates engage in Gross Negligence / Willful Misconduct that
proximately causes the Parties to incur damage, loss, cost, or liability for
claims, demands or causes of action referred to in Article 4.6.A or 4.6.B, then,
in addition to its Participating Interest share, Operator shall bear all such
damages, losses, costs, and liabilities.

 

Despite the foregoing, under no circumstances shall Operator (except as a Party
to the extent of its Participating Interest) or any other Operator Indemnitee
bear any Consequential Loss or Environmental Loss.

 

4.7 Insurance Obtained by Operator

 

4.7.A Operator shall procure and maintain for the Joint Account the types and
amounts of insurance required by the Licence or the Laws.     4.7.B Operator
shall procure and maintain any additional insurance, at reasonable rates, as the
Operating Committee may require. If such additional insurance is, in Operator’s
reasonable opinion, unavailable or available only at an unreasonable cost,
Operator shall promptly notify the Non-Operators so that the Operating Committee
may reconsider such requirement for additional insurance.

 

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4.7.C Each Party will be provided the opportunity to underwrite any or all of
the insurance to be obtained by Operator under Articles 4.7.A and 4.7.B, through
such Party’s Affiliate insurance company or, if direct insurance is not so
permitted, through reinsurance policies to such Party’s Affiliate insurance
company. Any Party exercising its rights under this Article shall furnish to
Operator details of the proposed insurance. If Operator in its discretion is
satisfied with the security and creditworthiness of such insurance or
reinsurance arrangements, and that the premiums for such insurance or
reinsurance will not be significantly higher than market rate and will be
recoverable under the Licence, then Operator shall procure such insurance or
reinsurance from such Party.     4.7.D Subject to the Licence and the Laws, any
Party may elect not to participate in the insurance to be procured under
Articles 4.7.A and 4.7.B; provided such Party:

 

  4.7.D.1 Promptly notifies Operator to that effect;         4.7.D.2 Does not
interfere with Operator’s negotiations for such insurance;         4.7.D.3
Provides to the Operator before the relevant operations begin (and at least
annually during the continuance of such operations) a current certificate of
adequate coverage, or other evidence of financial responsibility that fully
covers such non-participating Party’s Participating Interest share of the risks
that would be covered by the insurance to be procured under Article 4.7.A and/or
Article 4.7.B, as applicable, and that the Operating Committee determines to be
acceptable. No such determination of acceptability shall in any way absolve a
non-participating Party from its obligation to meet each Cash Call or billing
(except, under Article 4.7.F, regarding the costs of the insurance policy in
which such Party has elected not to participate) including any Cash Call or
billing with respect to damages and losses and/or the costs of remedying the
same under this Agreement, the Licence and the Laws. If such non-participating
Party obtains other insurance, such insurance shall (i) contain a waiver of
subrogation in favor of all the other Parties, the Operator and their insurers
but only with respect to their interests under this Agreement; (ii) provide that
thirty (30) Days written notice be given to Operator before any material change
in, or cancellation of, such insurance policy; (iii) be primary to, and receive
no contribution from, any other insurance maintained by, or for, or benefiting
Operator or the other Parties; and (iv) contain adequate territorial extensions
and coverage in the location of the Joint Operations; and         4.7.D.4 Is
responsible for all deductibles, coinsurance payments, self-insured exposures,
uninsured or underinsured exposures relating to its interests under this
Agreement.

 

4.7.E covers the risks that would be covered by the insurance to be procured
under Articles 4.7.A and 4.7.B.     4.7.F The cost of insurance in which all the
Parties are participating shall be for the Joint Account, and the cost of
insurance in which fewer than all the Parties are participating shall be charged
to the Parties participating in proportion to their respective Participating
Interests. Subject to the preceding sentence, the cost of insurance with respect
to an Exclusive Operation shall be charged to the Consenting Parties.     4.7.G
Operator shall, with respect to all insurance obtained under this Article 4.7:

 

  4.7.G.1 Use reasonable endeavors to procure, or cause to be procured, such
insurance before the relevant operations begin, and maintain, or cause to be
maintained, such insurance during the term of the relevant operations or any
longer term required under the Licence or the Laws;         4.7.G.2 Promptly
inform the participating Parties when such insurance is obtained and supply them
with certificates of insurance or copies of the relevant policies when issued;

 

14

 

 

  4.7.G.3 Arrange for the participating Parties, according to their respective
Participating Interests, to be named as co-insureds on the relevant policies
with waivers of subrogation in favor of all the Parties but only to the extent
of their interests under this Agreement;         4.7.G.4 Use reasonable
endeavors to ensure that each policy shall survive the default or bankruptcy of
the insured for claims arising out of an event before such default or bankruptcy
and that all rights of the insured shall revert to the Parties not in default or
bankruptcy; and         4.7.G.5 Duly file all claims and take all necessary and
proper steps to collect any proceeds and credit any proceeds to the
participating Parties in proportion to their respective Participating Interests.

 

4.7.H Operator shall use its reasonable endeavors to require all contractors
performing work with respect to Joint Operations to:

 

  4.7.H.1 Obtain and maintain any insurance in the types and amounts required by
the Licence, the Laws or any decision of the Operating Committee;        
4.7.H.2 Name the Parties as additional insureds on the contractor’s insurance
policies and obtain from their insurers waivers of all rights of recourse
against the Parties and their insurers; and         4.7.H.3 Provide Operator
with certificates evidencing such insurance before the commencement of their
services.

 

4.8 Commingling of Funds

 

4.8.A Operator may not commingle with Operator’s own funds the monies that
Operator receives from or for the Joint Account under this Agreement. However,
Operator reserves the right to make future proposals to the Operating Committee
concerning the commingling of funds to achieve financial efficiency.     4.8.B
The Operating Committee may require Operator to deposit monies received for the
Joint Account in an interest-bearing account after the approval of the
Development Plan.

 

Operator shall allocate interest earned among the Parties on an equitable basis
taking into account the amounts received from each Party and the date of
receipt. Operator shall apply each Party’s allocation of earned interest to such
Party’s next succeeding Cash Call or, if directed by the Operating Committee,
pay it to each such Party.

 

4.9 Resignation of Operator

 

Subject to Article 4.11, Operator may resign as Operator by so notifying the
other Parties at least one hundred and twenty (120) Days before the effective
date of such resignation.

 

4.10 Removal of Operator

 

4.10.A Subject to Article 4.11, Operator shall be removed upon receipt of notice
from any Non-Operator if:

 

  4.10.A.1 Operator becomes insolvent or bankrupt, or makes an assignment for
the benefit of creditors;         4.10.A.2 A court order is made or an effective
resolution is passed for the reorganization under any bankruptcy law,
dissolution, liquidation, or winding up of Operator;         4.10.A.3 A receiver
is appointed for a substantial part of Operator’s assets; or         4.10.A.4
Operator dissolves, liquidates, winds up, or otherwise terminates its existence.

 

4.10.B  Subject to Article 4.11, Operator may be removed by the decision of the
Non-Operators, as set out below, if Operator has committed a material breach of
this Agreement and has either failed to commence to cure that breach within
thirty (30) Days of receipt of a notice from Non-Operators detailing the alleged
breach or failed to diligently pursue the cure to completion. Any decision of
Non-Operators to give notice of breach to Operator or to remove Operator under
this Article 4.10.B shall be made by an affirmative vote of Non-Operators,
excluding any Affiliates of the Operator, holding a combined Participating
Interest of at least sixty five percent (65%) of the Participating Interests of
the Non-Operators excluding the Participating Interests held by Affiliates of
the Operator. However, if Operator disputes such alleged commission of or
failure to cure a material breach and Dispute resolution proceedings are
initiated under Article 18.2 concerning such breach, then Operator shall remain
appointed and no successor Operator may be appointed pending the conclusion or
abandonment of such proceedings, subject to the terms of Article 8.3 with
respect to Operator’s breach of its payment obligations.

 

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4.10.C If as a result of a Transfer, the total Participating Interests of
Operator and its Affiliates would become equal to or less than thirty percent
(30%), then Operator shall promptly notify the other Parties. The Parties shall
vote within thirty (30) Days of such notification on whether or not Operator
should be removed and a successor Operator should be named under Article 4.11.  
  4.10.D If there is a Change in Control of Operator (other than a transfer of
Control to an Affiliate of Operator), Operator shall promptly notify the other
Parties. The Parties shall vote within thirty (30) Days of such notification on
whether or not Operator should be removed and a successor Operator should be
named under Article 4.11.

 

An affirmative vote of one (1) or more of the total number of Non-Operators
holding a combined Participating Interest of at least sixty five percent (65%)
of the Participating Interest held by all of the Non-Operators excluding
Participating Interests held by Affiliates of the Operator, shall be required to
remove Operator under this Article.

 

4.11 Appointment of Successor

 

When a change of Operator occurs under Article 4.9 or Article 4.10:

 

4.11.A The Operating Committee shall meet as soon as possible to appoint a
successor Operator under the voting procedure of Article 5.9. No Party may be
appointed successor Operator against its will.     4.11.B If Operator is
removed, other than under Article 4.10.C or Article 4.10.D, neither Operator,
nor any Affiliate of Operator, shall have the right to be considered as a
candidate for the successor Operator.     4.11.C The resigning or removed
Operator shall, subject to its duty to use reasonable efforts to mitigate the
costs related to its resignation or removal, be compensated out of the Joint
Account for its reasonable costs directly related to its resignation or removal,
except for removal under Article 4.10.B.     4.11.D The resigning or removed
Operator and the successor Operator shall arrange to take an inventory of all
Joint Property and Hydrocarbons, and to audit the books and records of the
removed Operator. Such inventory and audit shall be completed, if possible, no
later than the effective date of the change of Operator and shall be subject to
the approval of the Operating Committee. The costs and liabilities of such
inventory and audit shall be charged to the Joint Account.     4.11.E The
resignation or removal of Operator and its replacement by the successor Operator
shall not become effective before receipt of any necessary Government approvals.
Upon the effective date of the resignation or removal, the successor Operator
shall succeed to all duties, rights and authority prescribed for Operator. The
former Operator shall transfer to the successor Operator all Joint Property,
books of account, records and other documents maintained by Operator pertaining
to the Contract Area and to Joint Operations, and shall endeavor to transfer
rights, warranties, indemnities and duties under contracts and licenses entered
into for Joint Operations. Upon the effective date of its resignation or removal
the former Operator shall be released and discharged from all obligations and
liabilities as Operator accruing after the date the former Operator transfers
all contracts and data to the successor Operator.

 

16

 

 

ARTICLE 5 - OPERATING COMMITTEE

 

5.1 Establishment of Operating Committee

 

To provide for the overall supervision and direction of Joint Operations, the
Parties establish an Operating Committee composed of representatives of each
Party holding a Participating Interest. Each Party shall appoint one (1)
representative and one (1) alternate representative to serve on the Operating
Committee. Each Party shall as soon as possible after the date of this Agreement
give notice in writing to the other Parties of the name and address of its
representative and alternate representative to serve on the Operating Committee.
Each Party shall have the right to change its representative and alternate
representative at any time by giving notice of such change to the other Parties.

 

5.2 Powers and Duties of Operating Committee

 

The Operating Committee shall have the power and duty to authorize and supervise
Joint Operations that are necessary or desirable to fulfill the Licence and
properly explore and exploit the Contract Area under this Agreement, the
Licence, the Laws, and generally accepted practices of the international
petroleum industry under similar circumstances; provided that Operating
Committee may not compel any Party to exercise, make, or take, or prevent any
Party from exercising, making, or taking, any right, decision, or action
concerning any matter or proposal under this Agreement, which right, decision or
action is reserved or delegated to a Party or the Parties.

 

5.3 Authority to Vote

 

The representative of a Party, or in the representative’s absence the alternate
representative, shall be authorized to represent and bind such Party with
respect to any matter that is within the powers and duties of the Operating
Committee and is properly brought before the Operating Committee. Each such
representative or alternate representative shall have a vote equal to the
Participating Interest of the Party such person represents. The alternate
representative of each Party may attend any Operating Committee meetings, but
shall have no vote at such meetings, unless such Party’s representative is
absent. In addition to the representative and alternate representative, each
Party may send technical and other advisors to any Operating Committee meetings.

 

5.4 Subcommittees

 

The Operating Committee will establish a Technical Subcommittee and such other
subcommittees as may be deemed necessary composed of repesentatives of each
Party. Each subcommittee shall function in an advisory capacity to the Operating
Committee or as otherwise determined unanimously by the Parties. Each Party
shall have the right to appoint a representative to each subcommittee.

 

5.5 Notice of Meeting

 

5.5.AOperator may call a meeting of the Operating Committee by giving notice to
the Parties at least fifteen (15) Days in advance of such meeting.

 

5.5.BAny Non-Operator may request a meeting of the Operating Committee by giving
notice to all the other Parties. Upon receiving such request, Operator shall
call such meeting for a date not fewer than fifteen (15) Days nor more than
twenty (20) Days after receipt of the request.

 

5.5.CThe notice periods above may only be waived with the unanimous consent of
all the Parties.

 

5.6 Contents of Meeting Notice

 

5.6.A Each notice of a meeting of the Operating Committee as provided by
Operator shall contain:

 

  5.6.A.1 The date, time, and location of the meeting;

 

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  5.6.A.2 An agenda of the matters and proposals to be considered and/or voted
upon at such meeting; and         5.6.A.3 Information about each matter and
proposal to be considered and/or voted on at the meeting (including all
appropriate supporting information not previously distributed to the Parties)
sufficient to enable the Parties to be well informed about such matters and
proposals before such meeting.

 

5.6.B A Party may add additional matters and proposals to the agenda for any
meeting, by giving notice to the other Parties not fewer than seven (7) Days
before such meeting.     5.6.C On the request of a Party, and with the unanimous
consent of all Parties, the Operating Committee may consider at a meeting a
matter and/or proposal not in the agenda for such meeting.

 

5.7 Location of Meetings

 

All meetings of the Operating Committee shall be held in Melbourne, Victoria, or
elsewhere as the Operating Committee may decide.

 

5.8 Operator’s Duties for Meetings

 

5.8.A Operator’s duties, concerning meetings of the Operating Committee and any
subcommittee, shall include:

 

  5.8.A.1 Timely preparation and distribution of the agenda;         5.8.A.2
Organization and conduct of the meeting; and         5.8.A.3 Preparation of a
written record or minutes of each meeting.

 

5.8.B Operator shall have the right to appoint the chairman of the Operating
Committee and all subcommittees.

 

5.9 Voting Procedure

 

5.9.A Except as otherwise expressly provided in this Agreement, decisions,
approvals, and other actions of the Operating Committee on all proposals (other
than proposals on matters reserved to the Parties) coming before it shall be
decided by the affirmative vote of two (2) or more Parties that are not
Affiliates then having collectively at least sixty five percent (65%) of the
Participating Interests.     5.9.B Notwithstanding the provisions of Article
5.9(A), the unanimous vote of the Parties shall be required to approve the
following:

 

  5.9.B.1 Subject to Article 7, Drilling, Deepening, Testing, Sidetracking,
Plugging Back, Recompleting or Reworking Exploration Wells beyond the Minimum
Work Obligation.         5.9.B.2 Subject to Article 7, Development Plans.      
  5.9.B.3 Subject to Article 7, determination that a Discovery is a Commercial
Discovery.         5.9.B.4 Unitization with an adjoining contract area.        
5.9.B.5 Modifications in scope of an approved Development Plan which result in a
more than 25% increase or decrease in the total cost of the Development Plan.  
      5.9.B.6 Voluntary relinquishment of all or any part of the Contract Area.
        5.9.B.7 Voluntary termination of the Licence.         5.9.B.8 Subject to
Article 11, Amendments, Renewals and Extensions to the Licence.

 

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5.10 Record of Votes

 

The chairman of the Operating Committee shall appoint a secretary who shall make
a record of each proposal voted on and the results of such voting at each
Operating Committee meeting. Each representative shall sign and be provided a
copy of such record of votes at the end of such meeting. Such signed record
shall be considered the final record of the decisions of the Operating
Committee.

 

5.11 Minutes

 

The secretary shall provide each Party with a copy of the minutes of the
Operating Committee meeting within fifteen (15) Business Days after the end of
the meeting. Each Party shall notify the secretary within fifteen (15) Days
after receipt of such minutes specifying any objections and corrections to the
minutes. A failure to give notice specifying objections and corrections to such
minutes within such fifteen (15) Day period shall be deemed to be approval of
such minutes. In any event, the record of votes under Article 5.10 shall take
precedence over the minutes described above.

 

5.12 Voting by Notice

 

5.12.A In lieu of a meeting, any Party may submit any proposal to the Operating
Committee for a vote by notice. The proposing Party or Parties shall notify
Operator who shall give each Party’s representative notice describing the
proposal so submitted and whether Operator considers such proposal to require
urgent determination. Operator shall include with such notice adequate
documentation in connection with such proposal to enable the Parties to decide.
Each Party shall communicate its vote by notice to Operator and the other
Parties within one of the following appropriate time periods after receipt of
Operator’s notice:

 

  5.12.A.1 Forty-eight (48) hours in the case of Urgent Operational Matters; and
        5.12.A.2 Fifteen (15) Days in the case of all other proposals.

 

5.12.B Except in the case of Article 5.12.A.1, any Party may, by notice
delivered to all Parties within five (5) Days of receipt of Operator’s notice,
request that the proposal be decided at a meeting rather than by notice. In such
event, that proposal shall be decided at a meeting duly called for that purpose.
    5.12.C Except as provided in Article 10, any Party failing to communicate
its vote in a timely manner shall be deemed to have voted against such proposal.
    5.12.D If a meeting is not requested, then at the expiration of the
appropriate time period, Operator shall give each Party a confirmation notice
stating the tabulation and results of the vote.

 

5.13 Effect of Vote

 

All decisions taken by the Operating Committee under this Article 5 shall be
conclusive and binding on all the Parties, except in the following cases.

 

5.13.A If under this Article 5, a Joint Operation has been properly proposed to
the Operating Committee and the Operating Committee has not approved such
proposal in a timely manner, then any Party that voted for such proposal shall
have the right for the appropriate period specified below to propose, under
Article 7, an Exclusive Operation involving operations essentially the same as
those proposed for such Joint Operation.

 

  5.13.A.1 For proposals related to Urgent Operational Matters, such right shall
be exercisable for twenty-four (24) hours after the time specified in Article
5.12.A.1 has expired or after receipt of Operator’s notice given to the Parties
under Article 5.13.D, as applicable.         5.13.A.2 For proposals to develop a
Discovery, such right shall be exercisable for ten (10) Days after the date the
Operating Committee was required to consider such proposal under Article 5.6 or
Article 5.12.

 

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  5.13.A.3 For all other proposals, such right shall be exercisable for five (5)
Days after the date the Operating Committee was required to consider such
proposal under Article 5.6 or Article 5.12.

 

5.13.B If a Party voted against any proposal that was approved by the Operating
Committee and is of a type that could be conducted as an Exclusive Operation
under Article 7, then such Party shall have the right not to participate in the
operation contemplated by such approval. Any such Party wishing to exercise its
right of non-consent must give notice of non-consent to all other Parties within
five (5) Days (or twenty-four (24) hours for Urgent Operational Matters) after
Operating Committee approval of such proposal. If a Party exercises its right of
non-consent, the Parties who were not entitled to give or did not give notice of
non-consent shall be Consenting Parties as to the operation contemplated by the
Operating Committee approval, and shall conduct such operation as an Exclusive
Operation under Article 7; provided, however, that any such Party who was not
entitled to give or did not give notice of non-consent may, by notice provided
to the other Parties within five (5) Days (or twenty-four (24) hours for Urgent
Operational Matters) after the notice of non-consent given by any Non-Consenting
Party, require that the Operating Committee vote again on the proposal in
question. Only the Parties that were not entitled to or have not exercised their
right of non-consent with respect to the contemplated operation shall
participate in such second vote of the Operating Committee, with voting rights
proportional to their respective Participating Interest. If the Operating
Committee approves again the contemplated operation, any Party that voted
against the contemplated operation in such second vote may elect to be a
Non-Consenting Party with respect to such operation, by notice of non-consent
provided to all other Parties within five (5) Days (or twenty-four (24) hours
for Urgent Operational Matters) after the Operating Committee’s second approval
of such contemplated operation.

 

5.13.C If the Consenting Parties to an Exclusive Operation under Article 5.13.A
or Article 5.13.B concur, then the Operating Committee may, at any time, under
this Article 5, reconsider and approve, decide or take action on any proposal
that the Operating Committee declined to approve earlier, or modify or revoke an
earlier approval, decision or action.     5.13.D Once a Joint Operation for the
drilling, Deepening, Testing, Sidetracking, Plugging Back, Completing,
Recompleting, Reworking, or plugging of a well has been approved and commenced,
such operation shall not be stopped without the consent of the Operating
Committee; provided, however, that such operation may be stopped if:

 

  5.13.D.1 An impenetrable substance or other condition in the hole is
encountered which in the reasonable judgment of Operator causes the continuation
of such operation to be impractical; or         5.13.D.2 Other circumstances
occur that in the reasonable judgment of Operator cause the continuation of such
operation to be unwarranted and the Operating Committee, within the period
required under Article 5.12.A.1 after receipt of Operator’s notice, approves
discontinuing such operation.

 

On the occurrence of either of the above, Operator shall promptly notify the
Parties that such operation is being stopped, and any Party shall have the right
to propose under Article 7 an Exclusive Operation to continue such operation.

 

ARTICLE 6 - WORK PROGRAMS AND BUDGETS

 

6.1 Preparation and Approval

 

6.1.A Within thirty (30) Days after the signing of this Agreement, Operator
shall deliver to the Parties a proposed annual Work Program and Budget detailing
the Joint Operations proposed to be performed and the estimated costs forecast
to be charged to the Joint Account during the remainder of the Calendar Year in
which this Agreement was signed and, if appropriate, for the next Calendar Year.
On or before the 1st Day of September of each Calendar Year afterwards, Operator
shall deliver to the Parties a proposed annual Work Program and Budget detailing
the Joint Operations Operator proposes to be performed and the estimated costs
forecast to be charged to the Joint Account during the next Calendar Year.

 

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6.1.B During the preparation of the proposed Work Programs and Budgets,
Appraisal Plans and Development Plans contemplated in this Article 6, Operator
shall consult with the Operating Committee or the appropriate subcommittees
regarding the contents of such Work Programs and Budgets, Appraisal Plans, and
Development Plans.     6.1.C Each annual Work Program and Budget shall with
respect to the applicable Calendar Year contain inter alia:

 

  6.1.C.1 An itemized list of the operations and activities to be conducted,
described in sufficient detail to afford ready identification of the nature,
scope, location, timing, and duration of each such operation and activity,
including:

 

  (a) designating whether such line item is intended to satisfy the Minimum Work
Obligations of the Licence, the commitments of a previously approved Work
Program and Budget, and/or the commitments of a previously approved Development
Plan; and         (b) specifying whether such line item is firm or contingent
and the conditions under which the Operating Committee may decide to make a
contingent line item firm;

 

  6.1.C.2 An estimate of the costs corresponding to each such line item
enumerated in sufficient detail to be readily tracked and charged under the
Accounting Procedure and consistent with the Contract;         6.1.C.3 An
estimate of funds to be expended by Calendar Quarter;         6.1.C.4 During the
Exploration Period, a forecast of annual operations and activities and
corresponding estimated costs through the end of the Exploration Period;        
6.1.C.5 Information with respect to Operator’s estimated manpower requirements
and costs and Operator’s allocation procedures under the Accounting Procedure;  
      6.1.C.6 Reasonable and necessary supporting information; and        
6.1.C.7 Any additional information and detail as the Operating Committee may
deem suitable.

 

6.1.D Within thirty (30) Days of such delivery, or earlier if necessary to meet
any applicable deadline under the Licence, the Operating Committee shall meet to
consider, modify (if appropriate), and either approve or reject the proposed
Work Program and Budget (including any agreed modifications) under Article 5.9;
provided that no Work Program and Budget may provide for Appraisal Operations
that exceed the scope of, or conflict with, any previously approved Appraisal
Plan, and/or provide for Development Operations that exceed the scope of, or
conflict with, any previously approved Development Plan, unless such previously
approved plans, programs, and budgets are amended at or before the adoption of
the annual Work Program and Budget.     6.1.E Any Joint Operations that cannot
be efficiently completed within a single Calendar Year may be proposed in a
multi-year Work Program and Budget. Upon approval by the Operating Committee,
such multi-year Work Program and Budget shall, subject only to revisions
approved by the Operating Committee afterwards: (i) remain in effect as between
the Parties (and the associated cost estimate shall be a binding pro-rata
obligation of each Party) through the completion of such Joint Operations; and
(ii) be reflected in each annual Work Program and Budget. If the Licence
requires that Work Programs and Budgets be submitted to the Government for
approval, such multi-year Work Program and Budget shall be submitted to the
Government either in a single request for a multi-year approval or as part of
the annual approval process, under the Licence.     6.1.F Approval of a Work
Program and Budget by the Operating Committee shall authorize Operator to submit
such Work Program and Budget to the Government for approval (if required) under
the Licence. If the Government requests changes to such Work Program and Budget
as a condition to granting its approval under the Licence, Operator shall
promptly notify the Parties of the Government’s proposed changes and shall
submit a revised Work Program and Budget to the Operating Committee for further
consideration.

 

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6.1.G If a Work Program and Budget is not approved by the Operating Committee at
least two (2) Business Days before the last date for Government approval under
the Licence, Operator may submit to the Government a Work Program and Budget for
the applicable Calendar Year, setting out those Joint Operations, which are:

 

  6.1.G.1 consistent with the scope of, and not in conflict with, the Minimum
Work Obligations of the Licence, the commitments of a previously approved
appraisal Work Program and Budget, and/or the commitments of a previously
approved Development Plan; and         6.1.G.2 reasonably necessary to keep the
Licence in full force and effect, to satisfy the Minimum Work Obligations of the
Licence, to meet the commitments of a previously approved appraisal Work Program
and Budget, and to meet the commitments of a previously approved Development
Plan, that in each case are required to be carried out during the relevant
Calendar Year. In determining the Joint Operations that are reasonably necessary
for the purposes of the preceding sentence, the proposed Joint Operations
receiving the largest Participating Interest vote (even if less than the
applicable percentage under Article 5.9) shall be adopted. If competing
proposals receive equal Participating Interests votes, then Operator shall
choose between those competing proposals.

 

In this event, the Operating Committee shall be deemed to have approved such
Work Program and Budget. Operator shall be reimbursed by the Parties for their
Participating Interest shares of costs incurred by Operator and deemed approved
under this Article 6.1.G.

 

6.1.H A Party may at any time, by notice to the other Parties, propose that a
Work Program and Budget be amended. To the extent that such amendment is
approved by the Operating Committee, the relevant Work Program and/or Budget
shall, subject to obtaining any requisite Government approval under the Licence,
be deemed amended accordingly; provided that, any such amendment shall not
deauthorize or invalidate any commitment or expenditure already made by the
Operator in accordance with any previous authorization given under this
Agreement.     6.1.I If a Work Program and Budget, as proposed, revised and/or
amended, is approved by the Operating Committee and satisfies the requirements
of the Licence, including (if required) being approved, or deemed to be
approved, by the Government, Operator shall, subject to complying with Articles
6.8 and 6.9, be authorized to conduct the Joint Operations set out in such
approved Work Program and Budget.

 

6.2 Exploration and Appraisal

 

6.2.A Subject to Article 6.8, approval of any Work Program and Budget that
includes:

 

  6.2.A.1 An Exploration Well, whether by drilling, Deepening or Sidetracking,
shall include approval for: Only expenditures necessary for the drilling,
Deepening or Sidetracking of such Exploration Well, as applicable. When an
Exploration Well has reached its authorized depth, all logs, cores and other
approved Tests have been conducted and the results furnished to the Parties,
Operator shall submit to the Parties under Article 5.12.A.1 an election to
participate in an attempt to Complete such Exploration Well. Operator shall
include in such submission Operator’s recommendation on such Completion attempt
and an AFE for such Completion costs.         6.2.A.2 An Appraisal Well, whether
by drilling, Deepening or Sidetracking, shall include approval for: Only
expenditures necessary for the drilling, Deepening or Sidetracking of such
Appraisal Well, as applicable. When an Appraisal Well has reached its authorized
depth, all logs, cores and other approved Tests have been conducted and the
results furnished to the Parties, Operator shall submit to the Parties under
Article 5.12.A.1 an election to participate in an attempt to Complete such
Appraisal Well. Operator shall include in such submission Operator’s
recommendation on such Completion attempt and an AFE for such Completion costs.

 

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6.2.B Any Party desiring to propose a Completion attempt, or an alternative
Completion attempt, must do so within the time period provided in Article
5.12.A.1 by notifying all other Parties. Any such proposal shall include an AFE
for such Completion costs.     6.2.C If a Discovery is made, Operator shall
deliver any notice of Discovery required under the Licence and shall as soon as
possible submit to the Parties a report containing available details concerning
the Discovery and Operator’s recommendation as to whether the Discovery merits
appraisal.     6.2.D If the Operating Committee determines that the Discovery
merits appraisal, Operator within thirty (30) Days shall deliver to the Parties
a proposed Appraisal Plan for such Discovery, which shall in addition to the
information required under Article 6.1.C contain:

 

  6.2.D.1 A delineation of the proposed Appraisal Area; and         6.2.D.2 Any
other information concerning the proposed Appraisal Operations requested by a
Party,

 

together with the proposed appraisal Work Program and Budget (or a multi-year
appraisal Work Program and Budget under Article 6.1.E) to carry out the first
Calendar Year of the Appraisal Plan, and provisional Work Programs and Budgets
to carry out the remainder of the Appraisal Plan.

 

6.2.E Within sixty (60) Days after receipt of the proposed Appraisal Plan and
associated proposed appraisal Work Program and Budget, or earlier if necessary
to meet any applicable deadline under the Licence, the Operating Committee shall
meet to consider, modify (if appropriate), and then either approve or reject the
proposed Appraisal Plan (including any proposed modifications) and the first
annual (or multi-year) appraisal Work Program and Budget.     6.2.F If the
Operating Committee approves the Appraisal Plan and the associated appraisal
Work Program and Budget, Operator shall, as soon as possible, take such steps as
may be required under the Licence to secure approval of such Appraisal Plan and
the associated appraisal Work Program and Budget for the first Calendar Year by
the Government. If the Government requests changes to such Appraisal Plan or
associated appraisal Work Program and Budget for the first Calendar Year as a
condition to granting its approval under the Licence, then Operator shall
promptly notify the Parties of the Government’s proposed changes and may submit
a revised Appraisal Plan and associated appraisal Work Program and Budget for
the first Calendar Year to the Operating Committee for further consideration.  
  6.2.G If the Appraisal Plan is approved by the Government, the associated
appraisal Work Program and Budget for the first Calendar Year shall be deemed to
be incorporated into and form part of the then current annual Work Program and
Budget.

 

6.3 Development

 

6.3.A If the Operating Committee determines that a Discovery may be a Commercial
Discovery, Operator, within ninety (90) Days of such determination but within
any time limit which may be imposed by the Licence, shall deliver to the Parties
a proposed Development Plan for such Discovery, which shall in addition to the
information required under Article 6.1.C contain:

 

  6.3.A.1 A delineation of the proposed Exploitation Area;         6.3.A.2 An
estimated date for the commencement of Production Operations;         6.3.A.3 A
production forecast of estimated production of each type of Hydrocarbon to be
produced by Calendar Year for the estimated productive life of the Commercial
Discovery;         6.3.A.4 A description of all material facilities to be
constructed as Joint Property;         6.3.A.5 An estimated Abandonment Work
Program and Budget; and

 

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  6.3.A.6 Any other information related to Development Operations and Production
Operations requested by the Operating Committee,

 

together with the proposed development Work Program and Budget (or a multi-year
development Work Program and Budget under Article 6.1.E) for the first Calendar
Year of the Development Plan, and work schedule for the remainder of the
Development Plan.

 

6.3.B As soon as practicable after receipt of the proposed Development Plan and
associated proposed development Work Program and Budget, each Party shall
furnish to Operator and the other Parties any comments, suggestions, or proposed
amendments it may have for the proposed Development Plan.     6.3.C Within
ninety (90) Days after receipt of the proposed Development Plan and associated
proposed development Work Program and Budget, or earlier if necessary to meet
any applicable deadline under the Licence, the Operating Committee shall meet to
consider, modify (if appropriate) and then either approve or reject the proposed
Development Plan (including any proposed modifications) and the associated first
annual (or multi-year) Work Program and Budget.     6.3.D If the Operating
Committee determines that the Discovery is a Commercial Discovery and approves
the corresponding Development Plan, Operator shall, as soon as possible, deliver
any notice of Commercial Discovery required under the Licence and take such
other steps as may be required under the Licence to secure approval of the
Development Plan and associated development Work Program and Budget for the
first Calendar Year by the Government. If the Government requests changes in the
Development Plan and associated development Work Program and Budget for the
first Calendar Year as a condition to granting approval under the Licence, then
Operator shall promptly notify the Parties of the Government’s proposed changes
and may submit a revised Development Plan and associated development Work
Program and Budget for the first Calendar Year to the Operating Committee for
further consideration.     6.3.E If the Development Plan is approved by the
Government, the associated development Work Program and Budget for the first
Calendar Year shall be incorporated into and form part of the then current Work
Program and Budget. Operator shall periodically review the Development Plan and
development Work Program and Budget and propose amendments as may be prudent,
and the Operating Committee shall consider, modify (if necessary), and approve
or reject those proposed amendments under Article 5.9.

 

6.4 Production

 

6.4.A Within sixty (60) Days before first commercial production, Operator shall
deliver to the Parties a proposed production Work Program and Budget that shall
in addition to the information required under Article 6.1.C contain the
projected production schedule for the remainder of the Calendar Year in which
first commercial production begins and, if fewer than four ( 4 ) Months remain
in the current Calendar Year, for the next Calendar Year. On or before the 1st
Day of September of each Calendar Year thereafter, Operator shall deliver to the
Parties a proposed production Work Program and Budget that shall in addition to
the information required under Article 6.1.C contain the projected production
schedule for the next Calendar Year.     6.4.B Within thirty (30) Days after
receipt of the proposed production Work Program and Budget, or earlier if
necessary to meet any applicable deadline under the Licence, the Operating
Committee shall meet to consider, modify (if appropriate) and then either
approve or reject the proposed production Work Program and Budget.     6.4.C If
the Operating Committee approves the production Work Program and Budget,
Operator shall, as soon as possible, take such steps as may be required under
the Licence to secure approval of such production Work Program and Budget by the
Government. If the Government requests changes to such production Work Program
and Budget Year as a condition to granting its approval under the Licence, then
Operator shall promptly notify the Parties of the Government’s proposed changes
and shall submit a revised production Work Program and Budget to the Operating
Committee for further consideration.

 

24

 

 

6.4.D If a production Work Program and Budget is not approved by the Operating
Committee before the date by which approval is required under the Licence,
Operator may submit to the Government a Work Program and Budget for the
applicable Calendar Year, setting out those Joint Operations that are:

 

  6.4.D.1 consistent with the scope of, and not in conflict with, the
commitments of a previously approved Development Plan; and         6.4.D.2
necessary to keep the Licence in full force and effect and meet the commitments
of a previously approved Development Plan that are required to be carried out
during the relevant Calendar Year.

 

6.5 HSE Plan

 

6.5.A Operator shall in the conduct of Joint Operations:

 

  6.5.A.1 Prepare and establish an HSE Plan designed to achieve safe and
reliable conduct of operations and activities, to avoid significant and
unintended impact on the safety and health of people, on property, and on the
environment, and to comply with Laws relating to HSE;         6.5.A.2 Carry out
the HSE Plan in conformance with Laws relating to HSE and in a manner consistent
with standards and procedures generally followed in the international petroleum
industry under similar circumstances;         6.5.A.3 Plan and conduct Joint
Operations consistent with the HSE Plan; and         6.5.A.4 Design and operate
Joint Property consistent with the HSE Plan.

 

6.5.B The Operating Committee shall at least annually review and approve the
details of the HSE Plan, the implementation of the HSE Plan, and of the
effectiveness of the HSE Plan.     6.5.C In the conduct of Joint Operations,
Operator shall establish and carry out a program for regular HSE assessments.
The purpose of such assessments is to periodically review HSE systems and
procedures, including actual practice and performance, to verify that the HSE
Plan is in place and fulfills the requirements of Article 6.6.A, that the HSE
Plan is being properly carried out and that the HSE Plan as carried out is
effective. Operator shall, at a minimum, conduct such an assessment before
entering into significant new Joint Operations and before undertaking any major
changes to existing Joint Operations. Upon reasonable notice given to Operator,
Non-Operators shall have the right to participate in such HSE assessments.    
6.5.D Without prejudice to a Party’s rights under Article 4.2.B.8, with
reasonable advance notice, Operator shall permit at all reasonable times during
normal business hours each Non-Operator (at its own risk and cost) to conduct an
audit of the HSE Plan, its implementation and effectiveness. Where there are two
or more Non-Operators, the Non-Operators shall make a reasonable effort to
conduct joint or simultaneous HSE audits in a manner that will result in a
minimum of inconvenience to Operator.

 

6.6 Contract Awards

 

Subject to the Licence, Operator shall award each contract for Joint Operations
on the following basis (the amounts stated are in thousands of Australian
dollars):

 

  Procedure A   Procedure B   Procedure C Exploration and Appraisal Operations 0
to 99   100 to 250   > 250 Development Operations 0 to 99   100 to 250   > 250
Production Operations 0 to 249   250 to 500   > 500

 

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6.6.A Procedure A

 

Operator shall award the contract to the best qualified contractor, as
determined by cost, quality, and ability to perform the contract properly, on
time, within budgeted cost, and in compliance with applicable legal and
contractual requirements, without the obligation to tender and without informing
or seeking the approval of the Operating Committee, except that before entering
into contracts with Affiliates of Operator or of any Non-Operator, Operator
shall obtain the approval of the Operating Committee.

 

6.6.B Procedure B

 

Operator shall:

 

  6.6.B.1 Provide the Parties with a list of the entities whom Operator proposes
to invite to tender for the contract;         6.6.B.2 Add to the tender list any
entity whom a Party reasonably requests to be added within fourteen (14) Days of
receipt of such list;         6.6.B.3 Complete the tendering process within a
reasonable period of time;         6.6.B.4 Inform the Parties of the entities to
whom the contract has been awarded, provided that before awarding contracts to
Affiliates of Operator or of any Non-Operator, Operator shall obtain the
approval of the Operating Committee;         6.6.B.5 Circulate to the Parties a
competitive bid analysis stating the reasons for the choice made; and        
6.6.B.6 Upon the request of a Party, provide such Party with a copy of the final
version of the contract.

 

6.6.C Procedure C

 

Operator shall:

 

  6.6.C.1 Provide the Parties with a list of the entities whom Operator proposes
to invite to tender for the contract;         6.6.C.2 Add to such list any
entity whom a Party reasonably requests to be added within fourteen (14) Days of
receipt of such list;         6.6.C.3 Prepare and dispatch the tender documents
to the entities on the tender list and to Non-Operators;         6.6.C.4 After
the expiration of the period allowed for tendering, consider, and analyze the
details of all bids received;         6.6.C.5 Prepare and circulate to the
Parties a competitive bid analysis, stating Operator’s recommendation as to the
entity to whom the contract should be awarded, the reasons for the
recommendation, and the technical, commercial, and contractual terms to be
agreed upon;         6.6.C.6 Obtain the approval of the Operating Committee to
the recommended bid; and         6.6.C.7 Upon the request of a Party, provide
such Party with a copy of the final version of the contract.

 

6.7 Authorization for Expenditure (“AFE”) Procedure

 

6.7.A Before incurring any commitment or expenditure for a Joint Operation,
which commitment or expenditure is estimated to be:

 

  6.7.A.1 More than 300,000 Australian dollars in an exploration or appraisal
Work Program and Budget;         6.7.A.2 More than 500,000 Australian dollars in
a development Work Program and Budget;         6.7.A.3 More than 500,000
Australian dollars in a production Work Program and Budget.

 

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Operator shall send to each Non-Operator an AFE as described in Article 6.7.C;
provided that, Operator shall not be obliged to furnish an AFE to the Parties
with respect to any Minimum Work Obligations, workovers of wells and general and
administrative costs that are listed as separate line items in an approved Work
Program and Budget.

 

6.7.B Before entering into any commitments or making any expenditures subject to
the AFE procedure in Article 6.7.A, Operator shall submit the corresponding AFE
for approval by the Operating Committee. If the Operating Committee approves an
AFE for a commitment or expenditure within the applicable time period under
Article 5.12.A, Operator shall be authorized to enter into such commitment or
incur such expenditure and conduct the corresponding Joint Operation under this
Agreement. If the Operating Committee fails to approve an AFE for a commitment
or expenditure within the applicable time period, the corresponding Joint
Operation shall be deemed rejected. Operator shall promptly notify the Parties
that the Joint Operation has been rejected, and, subject to Article 7, any Party
may afterwards propose to conduct such operation or activity as an Exclusive
Operation under Article 7. When a Joint Operation is rejected under this Article
6.7.B or a commitment or expenditure is approved for differing amounts than
those provided for in the applicable line items of the approved Work Program and
Budget, the Work Program and Budget shall, subject to obtaining any Government
consent required under the Licence, be deemed to be revised accordingly;
provided that no revised Work Program and Budget may provide for Appraisal
Operations that exceed the scope of, or conflict with, any previously approved
Appraisal Plan, and/or provide for Development Operations that exceed the scope
of, or conflict with, any previously approved Development Plan, unless such
previously approved plans, programs and budgets are amended at or before the
adoption of the revised Work Program and Budget.

 

6.7.C Each AFE furnished by Operator shall:

 

  6.7.C.1 Identify the corresponding Joint Operation by specific reference to
the applicable line items in the Work Program and Budget;         6.7.C.2
Describe the Joint Operation in detail;         6.7.C.3 Contain Operator’s best
estimate of the total commitments and expenditures required to carry out such
Joint Operation;         6.7.C.4 Outline the proposed work schedule;        
6.7.C.5 Provide a forecast schedule of commitments and expenditures, if known;
and         6.7.C.6 Be accompanied by such other supporting information as is
necessary for an informed decision, or as may be requested by a Party.

 

6.8 Over-expenditures of Work Programs and Budgets

 

6.8.A For commitments and expenditures with respect to any line item of an
approved Work Program and Budget, Operator shall be entitled to incur in
connection with the corresponding Joint Operation without further approval of
the Operating Committee a combined over-commitment and over-expenditure for such
line item up to ten percent (10%) of the authorized amount for such line item;
provided that the cumulative total of all over-commitments and over-expenditures
for a Calendar Year shall not exceed five percent (5%) of the total annual Work
Program and Budget in question.     6.8.B At such time Operator reasonably
anticipates that the total amount of the commitments and expenditures actually
incurred plus the commitments to be incurred with respect to such line item
exceeds the limits of Article 6.8.A, Operator shall furnish to the Operating
Committee Operator’s reasonably detailed estimate of the total commitments and
expenditures required to carry out the Joint Operation corresponding to such
line item, together with supporting information.

 

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  6.8.B.1 Within fifteen (15) Days after receipt of such proposal, or earlier if
necessary to meet any applicable deadline under the Licence, the Operating
Committee shall meet to consider, modify (if appropriate), and then either
approve or reject the proposed revised Work Program and Budget (including any
agreed modifications); provided that no revised Work Program and Budget may
provide for Appraisal Operations that exceed the scope of, or conflict with, any
previously approved Appraisal Plan, and/or provide for Development Operations
that exceed the scope of, or conflict with, any previously approved Development
Plan, unless such previously approved plans, programs, and budgets are amended
at or before the adoption of the revised Work Program and Budget.        
6.8.B.2 If the Operating Committee approves the revised Work Program and Budget,
Operator shall, as soon as possible, take such steps as may be required under
the Licence to secure approval of such revised Work Program and Budget by the
Government. If the Government requires changes to such revised Work Program and
Budget Year as a condition to granting its approval under the Licence, then
Operator shall resubmit the proposed changes to the revised Work Program and
Budget to the Operating Committee for further consideration.

 

6.8.C The requirements contained in this Article 6 shall be without prejudice to
Operator’s rights and duties to make immediate expenditures, incur commitments
and/or take actions for emergencies under Article 4.2.B.14; provided that
Operator shall promptly report the particulars of the emergency to the Parties,
together with the future actions it intends to take and its estimate of the cost
of expenditures and commitments incurred or to be incurred. As soon as
practicable, Operator shall submit any necessary budget revision concerning such
emergencies to the Operating Committee for approval and incorporation into the
relevant Work Program and Budget.

 

ARTICLE 7 - OPERATIONS BY FEWER THAN ALL PARTIES

 

7.1 Limitation on Applicability

 

7.1.A No operations may be conducted under the Licence except as Joint
Operations under Article 5 or as Exclusive Operations under this Article 7. No
Exclusive Operation shall be conducted (other than the tie-in of Exclusive
Operation facilities with existing production facilities under Article 7.10)
that conflicts with a previously approved Joint Operation or with a previously
approved Exclusive Operation.     7.1.B Operations that are required to fulfill
the Minimum Work Obligations for the then current phase or period of the Licence
must be proposed and conducted as Joint Operations under Article 5, and may not
be proposed or conducted as Exclusive Operations under this Article 7.      
Except for Exclusive Operations relating to Deepening, Testing, Completing,
Sidetracking, Plugging Back, Recompletions or Reworking of a well originally
drilled to fulfill the Minimum Work Obligations for the then current phase or
period of the Licence, no Exclusive Operations may be proposed or conducted
until the Minimum Work Obligations for the then current phase or period of the
Licence are fulfilled.     7.1.C No Party may propose or conduct an Exclusive
Operation under this Article 7 unless and until such Party has properly
exercised its right to propose an Exclusive Operation under Article 5.13, or is
entitled to conduct an Exclusive Operation under Article 10.     7.1.D Only the
following operations may be proposed and conducted as Exclusive Operations,
subject to the terms of this Article 7:

 

  7.1.D.1 Drilling of Exploration Wells and Appraisal Wells;         7.1.D.2
Testing of Exploration Wells and Appraisal Wells;

 

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  7.1.D.3 Completion of Exploration Wells and Appraisal Wells not then Completed
as productive of Hydrocarbons;         7.1.D.4 Deepening, Sidetracking, Plugging
Back, Reworking and/or Recompletion of Exploration Wells and Appraisal Wells;  
      7.1.D.5 Development of a Commercial Discovery;         7.1.D.6 Any
operations specifically authorized to be undertaken as an Exclusive Operation
under Article 10; and

 

No other type of operation may be proposed or conducted as an Exclusive
Operation.

 

7.2 Procedure to Propose Exclusive Operations

 

7.2.A Subject to Article 7.1, if any Party proposes to conduct an Exclusive
Operation, such Party shall give notice of the proposed operation to all
Parties, other than Non-Consenting Parties who have relinquished their rights to
participate in such operation under Article 7.4.B or Article 7.4.F and have no
option to reinstate such rights under Article 7.4.C. Such notice shall specify
that such operation is proposed as an Exclusive Operation and include the work
to be performed, the location, the objectives, and estimated cost of such
operation.     7.2.B Any Party entitled to receive such notice shall have the
right to participate in the proposed operation.

 

  7.2.B.1 For proposals to Deepen, Test, Complete, Sidetrack, Plug Back,
Recomplete, or Rework related to Urgent Operational Matters, any such Party
wishing to exercise such right must so notify the proposing Party and Operator
within twenty-four (24) hours after receipt of the notice proposing the
Exclusive Operation.         7.2.B.2 For proposals to develop a Discovery, any
Party wishing to exercise such right must so notify Operator and the Party
proposing to develop within sixty (60) Days, or earlier if necessary to meet any
applicable deadline under the Licence, after receipt of the notice proposing the
Exclusive Operation.         7.2.B.3 For all other proposals, any such Party
wishing to exercise such right must so notify the proposing Party and Operator
within ten (10) Days, or earlier if necessary to meet any applicable deadline
under the Licence, after receipt of the notice proposing the Exclusive
Operation.

 

7.2.C Failure of a Party to whom a proposal notice is delivered to reply
properly within the period specified above shall be deemed an election by that
Party not to participate in the proposed operation.     7.2.D If all Parties
properly exercise their rights to participate, then the proposed operation shall
be conducted as a Joint Operation. Operator shall commence such Joint Operation
as promptly as practicable and conduct it with due diligence.     7.2.E If fewer
than all Parties entitled to receive such proposal notice properly exercise
their rights to participate, then:

 

  7.2.E.1 Immediately after the expiration of the applicable notice period set
out in Article 7.2.B, Operator shall notify all Parties of the names of the
Consenting Parties and the recommendation of the proposing Party as to whether
the Consenting Parties should proceed with the Exclusive Operation.        
7.2.E.2 Concurrently, Operator shall request the Consenting Parties to specify
the Participating Interest each Consenting Party is willing to bear in the
Exclusive Operation.         7.2.E.3 Within twenty-four (24) hours after receipt
of such notice, each Consenting Party shall respond to Operator stating that it
is willing to bear a Participating Interest in such Exclusive Operation equal
to:

 

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  (a) Only its Participating Interest as stated in Article 3.2.A;         (b) A
fraction, the numerator of which is such Consenting Party’s Participating
Interest as stated in Article 3.2.A and the denominator of which is the
aggregate of the Participating Interests of the Consenting Parties as stated in
Article 3.2.A; or         (c) The Participating Interest as contemplated by
Article 7.2.E.3.b plus all or any part of the difference between one hundred
percent (100%) and the total of the Participating Interests subscribed by the
other Consenting Parties. Any portion of such difference claimed by more than
one Party shall be distributed to each claimant on a pro-rata basis.

 

  7.2.E.4 Any Consenting Party failing to advise Operator within the response
period set out above shall be deemed to have elected to bear the Participating
Interest set out in Article 7.2.E.3.b as to the Exclusive Operation.        
7.2.E.5 If, within the response period set out above, the Consenting Parties
subscribe less than one hundred percent (100%) of the Participating Interest in
the Exclusive Operation, the Party proposing such Exclusive Operation shall be
deemed to have withdrawn its proposal for the Exclusive Operation, unless within
twenty-four (24) hours of the expiry of the response period set out in Article
7.2.E.3, the proposing Party notifies the other Consenting Parties that the
proposing Party shall bear the unsubscribed Participating Interest.        
7.2.E.6 If one hundred percent (100%) subscription to the proposed Exclusive
Operation is obtained, Operator shall promptly notify the Consenting Parties of
their Participating Interests in the Exclusive Operation.         7.2.E.7 As
soon as any Exclusive Operation is fully subscribed under Article 7.2.E.6,
Operator, subject to Article 7.12.F, shall commence such Exclusive Operation as
promptly as practicable and conduct it with due diligence under this Agreement.
        7.2.E.8 If such Exclusive Operation has not been commenced within ninety
(90) Days (excluding any extension specifically agreed by all Parties or allowed
by the Force Majeure provisions of Article 16) after the date of the notice
given by Operator under Article 7.2.E.6, the right to conduct such Exclusive
Operation shall terminate. If any Party still desires to conduct such Exclusive
Operation, then such Party must resubmit to the Parties notice proposing such
operation under Article 5, as if no proposal to conduct an Exclusive Operation
had been previously made.

 

7.3 Responsibility for Exclusive Operations

 

7.3.A The Consenting Parties shall bear in accordance with the Participating
Interests agreed under Article 7.2.E the entire cost and liability of conducting
an Exclusive Operation and shall indemnify the Non-Consenting Parties from any
damages, losses, costs (including reasonable legal costs and attorneys’ fees),
and liabilities incurred incident to such Exclusive Operation (including
Consequential Loss and Environmental Loss) and shall keep the Contract Area free
of all liens and Encumbrances of every kind created by or arising from such
Exclusive Operation.     7.3.B Despite Article 7.3.A, each Party shall continue
to bear its Participating Interest share of the cost and liability incident to
the operations in which it participated, including plugging and abandoning and
restoring the surface location, but only to the extent those costs were not
increased by the Exclusive Operation.

 

7.4 Consequences of Exclusive Operations

 

7.4.A With respect to any Exclusive Operation, for so long as a Non-Consenting
Party has the option under Article 7.4.C to reinstate the rights it relinquished
under Article 7.4.B, such Non-Consenting Party shall be entitled to have access
concurrently with the Consenting Parties to all data and other information
relating to such Exclusive Operation, other than G&G Data obtained in an
Exclusive Operation. If a Non-Consenting Party desires to receive and acquire
the right to use such G & G Data, then such Non-Consenting Party shall have the
right to do so by paying to the Consenting Parties its Participating Interest
share as set out in Article 3.2.A of the cost incurred in obtaining such G & G
Data.

 

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7.4.B Subject to Article 7.4.C Article 7.6.E and Article 7.8, each
Non-Consenting Party shall be deemed to have relinquished to the Consenting
Parties, and the Consenting Parties shall be deemed to own, in proportion to the
incremental Participating Interest that each agreed to bear under Article 7.2.E
in any Exclusive Operation:

 

  7.4.B.1 All of each such Non-Consenting Party’s right:

 

  (a) to participate in further operations to drill, Deepen, Recomplete, Rework,
Sidetrack, Test in the well, or Deepened or Sidetracked portion of a well, in
which the Exclusive Operation was conducted; and         (b) under the Licence
to take and dispose of Hydrocarbons produced and saved from the well, or from a
Recompleted, Reworked, Deepened or Sidetracked portion of a well, in which the
Exclusive Operation was conducted; and

 

  7.4.B.2 All of each such Non-Consenting Party’s right:

 

  (a) to participate in any Discovery made during such Exclusive Operation;    
    (b) to participate in any Discovery appraised in the course of such
Exclusive Operation; and         (c) under the Licence to take and dispose of
Hydrocarbons produced and saved from any Appraisal Well or Development Well
drilled during such Exclusive Operation.

 

7.4.C A Non-Consenting Party shall have only the following options to reinstate
the rights it relinquished under Article 7.4.B:

 

  7.4.C.1 If the Consenting Parties decide to appraise a Discovery made in the
course of an Exclusive Operation, the Consenting Parties shall submit to each
Non-Consenting Party the approved Appraisal Plan. For thirty (30) Days (or
forty-eight (48) hours for Urgent Operational Matters) from receipt of such
Appraisal Plan, each Non-Consenting Party shall have the option to reinstate the
rights it relinquished under Article 7.4.B and to participate in such Appraisal
Plan. The Non-Consenting Party may exercise such option by notifying Operator
within the period specified above that such Non-Consenting Party agrees to bear
its Participating Interest share of the cost and liability of such Appraisal
Plan, and to pay such amounts as set out in Articles 7.5.A and 7.5.B.        
7.4.C.2 If the Consenting Parties decide to develop a Discovery made or
appraised during an Exclusive Operation, the Consenting Parties shall submit to
the Non-Consenting Parties a Development Plan substantially in the form intended
to be submitted to the Government under the Licence. For sixty (60) Days from
receipt of such Development Plan or such lesser period of time prescribed by the
Licence, each Non-Consenting Party shall have the option to reinstate the rights
it relinquished under Article 7.4.B and to participate in such Development Plan.
The Non-Consenting Party may exercise such option by notifying Operator within
the period specified above that such Non-Consenting Party agrees to bear its
Participating Interest share of the cost and liability of such Development Plan
and such future operating and producing costs, and to pay the amounts as set out
in Articles 7.5.A and 7.5.B.         7.4.C.3 Subject to Article 7.8, if the
Consenting Parties decide to Deepen, Complete, Sidetrack, Plug Back or
Recomplete an Exclusive Well and such further operation was not included in the
original proposal for such Exclusive Well, the Consenting Parties shall submit
to the Non-Consenting Parties the approved AFE for such further operation. For
thirty (30) Days (or forty-eight (48) hours for Urgent Operational Matters) from
receipt of such AFE, each Non-Consenting Party shall have the option to
reinstate the rights it relinquished under Article 7.4.B and to participate in
such operation. The Non-Consenting Party may exercise such option by notifying
Operator within the period specified above that such Non-Consenting Party agrees
to bear its Participating Interest share of the cost and liability of such
further operation, and to pay the amounts as set out in Articles 7.5.A and
7.5.B.

 

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A Non-Consenting Party shall not be entitled to reinstate its rights in any
other type of operation.

 

7.4.D If a Non-Consenting Party does not properly and in a timely manner
exercise its option under Article 7.4.C, including paying all amounts due under
Articles 7.5.A and 7.5.B, such Non-Consenting Party shall have forfeited the
options as set out in Article 7.4.C and the right to participate in the proposed
program, unless such program, plan or operation is materially modified or
expanded (in which case a new notice and option shall be given to such
Non-Consenting Party under Article 7.4.C).     7.4.E A Non-Consenting Party
exercising its option under Article 7.4.C shall notify the other Parties that it
agrees to bear its share of the cost and liability of such further operation and
to reimburse the amounts set out in Articles 7.5.A and 7.5.B that such
Non-Consenting Party had not previously paid. Such Non-Consenting Party shall in
no way be deemed to be entitled to any amounts paid under Articles 7.5.A and
7.5.B incident to such Exclusive Operations. The Participating Interest of such
Non-Consenting Party in such Exclusive Operation shall be its Participating
Interest set out in Article 3.2.A. The Consenting Parties shall contribute to
the Participating Interest of the Non-Consenting Party in proportion to the
incremental Participating Interest that each agreed to bear under Article 7.2.E.
If all Parties participate in the proposed operation, then such operation shall
be conducted as a Joint Operation under Article 5.     7.4.F If after the expiry
of the period in which a Non-Consenting Party may exercise its option to
participate in a Development Plan the Consenting Parties desire to proceed,
Operator shall give notice to the Government under the appropriate provision of
the Licence requesting a meeting to advise the Government that the Consenting
Parties consider the Discovery to be a Commercial Discovery. After such meeting
such Operator for such development shall apply for an Exploitation Area (if
applicable in the Licence). Unless the Development Plan is materially modified
or expanded before the commencement of operations under such plan (in which case
a new notice and option shall be given to the Non-Consenting Parties under
Article 7.4.C), each Non-Consenting Party to such Development Plan shall:

 

  7.4.F.1 If the Licence so allows, elect not to apply for an Exploitation Area
covering such development and forfeit all interest in such Exploitation Area, or
        7.4.F.2 If the Licence does not so allow, be deemed to have:

 

  (a) Elected not to apply for an Exploitation Area covering such development;  
      (b) Forfeited all economic interest in such Exploitation Area; and        
(c) Assumed a fiduciary duty to exercise its legal interest in such Exploitation
Area for the benefit of the Consenting Parties.

 

In either case such Non-Consenting Party shall be deemed to have withdrawn from
this Agreement to the extent it relates to such Exploitation Area, even if the
Development Plan is modified or expanded after the start of operations under
such Development Plan and shall be further deemed to have forfeited any right to
participate in the construction and ownership of facilities outside such
Exploitation Area designed solely for the use of such Exploitation Area.

 

7.5 Premium to Participate in Exclusive Operations

 

7.5.A Each such Non-Consenting Party shall:

 

Immediately upon the exercise of its option under Article 7.4.C, begin to bear
one hundred percent (100%) of the Cash Calls made on each Consenting Party that
took the risk of such Exclusive Operations in respect of both Joint Operations
and Exclusive Operations until such Non-Consenting Party has reimbursed the
original Consenting Parties (in proportion to the incremental Participating
Interest that each agreed to bear under Article 7.2.E in such Exclusive
Operations in which such Non-Consenting Party is reinstating its rights) an
amount equal to such Non-Consenting Party’s Participating Interest share of all
costs and liabilities that were incurred in every Exclusive Operation relating
to the Discovery (or Exclusive Well, as applicable) in which the Non-Consenting
Party desires to reinstate the rights it relinquished under Article 7.4.B and
that were not previously paid by such Non-Consenting Party.

 

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7.5.B In addition to the payment required under Article 7.5.A, immediately after
the exercise of its option under Article 7.4.C each such Non-Consenting Party
shall be liable to reimburse the Consenting Parties that took the risk of such
Exclusive Operations (in proportion to the incremental Participating Interest
that each agreed to bear under Article 7.2.E in such Exclusive Operations in
which such Non-Consenting Party is reinstating its rights) an amount equal to
the total of:

 

  7.5.B.1 Six hundred percent (600%) of such Non-Consenting Party’s
Participating Interest share of all costs and liabilities that were incurred in
any Exclusive Operation relating to the drilling, Deepening, Testing,
Completing, Sidetracking, Plugging Back, Recompleting, and Reworking of the
Exploration Well that made the Discovery in which the Non-Consenting Party
desires to reinstate the rights it relinquished under Article 7.4.B, and that
were not previously paid by such Non-Consenting Party; plus         7.5.B.2
Three hundred percent (300%) of the Non-Consenting Party’s Participating
Interest share of all costs and liabilities that were incurred in any Exclusive
Operation relating to the drilling, Deepening, Testing, Completing,
Sidetracking, Plugging Back, Recompleting and Reworking of the Appraisal Well(s)
that delineated the Discovery in which the Non-Consenting Party desires to
reinstate the rights it relinquished under Article 7.4.B, and that were not
previously paid by such Non-Consenting Party.

 

7.5.C Each such Non-Consenting Party that is liable for the amounts set out in
Article 7.5.B shall:

 

Within thirty (30) Days of the exercise of its option under Article 7.4.C, pay
in immediately available funds the full amount due from it under Article 7.5.B
to such Consenting Parties, in the currency designated by such Consenting
Parties.

 

7.6 Order of Preference of Operations

 

7.6.A Except as otherwise specifically provided in this Agreement, if any Party
desires to propose the conduct of an operation that will conflict with an
existing proposal for an Exclusive Operation, such Party shall have the right
exercisable for five (5) Days (or twenty-four (24) hours for Urgent Operational
Matters) from receipt of the proposal for the Exclusive Operation, to deliver
such Party’s alternative proposal to all Parties entitled to participate in the
proposed operation. Such alternative proposal shall contain the information
required under Article 7.2.A.     7.6.B Each Party receiving such proposals
shall elect by delivery of notice to Operator and to the proposing Parties
within the appropriate response period set out in Article 7.2.B to participate
in one of the competing proposals. Any Party not notifying Operator and the
proposing Parties within the response period shall be deemed to have voted
against the proposals.     7.6.C The proposal receiving the largest aggregate
Participating Interest vote shall have priority over all other competing
proposals. In the case of a tie vote, Operator shall choose among the proposals
receiving the largest aggregate Participating Interest vote. Operator shall
deliver notice of such result to all Parties entitled to participate in the
operation within five (5) Days (or twenty-four (24) hours for Urgent Operational
Matters).     7.6.D Each Party shall then have two (2) Days (or twenty-four (24)
hours for Urgent Operational Matters) from receipt of such notice to elect by
delivery of notice to Operator and the proposing Parties whether such Party will
participate in such Exclusive Operation, or will relinquish its interest under
Article 7.4.B. Failure by a Party to deliver such notice within such period
shall be deemed an election not to participate in the prevailing proposal.

 

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7.6.E Despite the provisions of Article 7.4.B, if for reasons other than the
encountering of granite or other practically impenetrable substance or any other
condition in the hole rendering further operations impracticable, a well drilled
as an Exclusive Operation fails to reach the deepest objective Zone described in
the notice proposing such well, Operator shall give notice of such failure to
each Non-Consenting Party who submitted or voted for an alternative proposal
under this Article 7.6 to drill such well to a shallower Zone than the deepest
objective Zone proposed in the notice under which such well was drilled. Each
such Non-Consenting Party shall have the option exercisable for forty-eight (48)
hours from receipt of such notice to participate for its Participating Interest
share in the initial proposed Completion of such well. Each such Non-Consenting
Party may exercise such option by notifying Operator that it wishes to
participate in such Completion and by paying its Participating Interest share of
the cost of drilling such well to its deepest depth drilled in the Zone in which
it is Completed. All costs and liabilities for drilling and Testing the
Exclusive Well below that depth shall be for the sole account of the Consenting
Parties. If any such Non-Consenting Party does not properly elect to participate
in the first Completion proposed for such well, the relinquishment provisions of
Article 7.4.B shall continue to apply to such Non-Consenting Party’s interest.

 

7.7 Stand-By Costs

 

7.7.A When an operation has been performed, all tests have been conducted and
the results of such tests furnished to the Parties, stand by costs incurred
pending response to any Party’s notice proposing an Exclusive Operation for
Deepening, Testing, Sidetracking, Completing, Plugging Back, Recompleting,
Reworking, or other further operation in such well (including the period
required under Article 7.6 to resolve competing proposals) shall be charged and
borne by the Parties as part of the operation just completed. Stand by costs
incurred after all Parties respond, or after expiration of the response time
permitted, whichever first occurs, shall be charged to and borne by the Parties
proposing the Exclusive Operation in proportion to their Participating
Interests, regardless of whether such Exclusive Operation is actually conducted.
    7.7.B If a further operation related to Urgent Operational Matters is
proposed while the drilling rig to be used is on location, any Party may request
and receive up to five (5) additional Days after expiration of the applicable
response period specified in Article 7.2.B.1 within which to respond by
notifying Operator that such Party agrees to bear all stand by costs and other
costs incurred during such extended response period. Operator may require such
Party to pay the estimated stand by costs in advance as a condition to extending
the response period. If more than one Party requests such additional time to
respond to the notice, stand by costs shall be allocated between such Parties on
a Day-to-Day basis in proportion to their Participating Interests.

 

7.8 Special Considerations Regarding Deepening and Sidetracking

 

7.8.A An Exclusive Well shall not be Deepened or Sidetracked without first
affording the Non-Consenting Parties under this Article 7.8 the opportunity to
participate in such operation.     7.8.B If any Consenting Party desires to
Deepen or Sidetrack an Exclusive Well, such Party shall initiate the procedure
contemplated by Article 7.2. If a Deepening or Sidetracking operation is
approved under such provisions, and if any Non-Consenting Party to the Exclusive
Well elects to participate in such Deepening or Sidetracking operation, such
Non-Consenting Party shall not owe amounts under Article 7.5.B, and such
Non-Consenting Party’s payment under Article 7.5.A shall be such Non-Consenting
Party’s Participating Interest share of the costs and liabilities incurred in
connection with drilling the Exclusive Well from the surface to the depth
previously drilled which such Non-Consenting Party would have paid had such
Non-Consenting Party agreed to participate in such Exclusive Well; provided,
however, all costs and liabilities for Testing and Completing or attempting
Completion of the well incurred by Consenting Parties before the commencement of
actual operations to Deepen or Sidetrack beyond the depth previously drilled
shall be for the sole account of the Consenting Parties.

 

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7.9 Use of Property

 

7.9.A The Parties participating in any Deepening, Testing, Completing,
Sidetracking, Plugging Back, Recompleting, or Reworking of any well drilled
under this Agreement shall be permitted to use (free of cost) all casing,
tubing, and other equipment in the well that is not needed for operations by the
owners of the wellbore, but the ownership of all such equipment shall remain
unchanged. On abandonment of a well in which operations with differing
participation have been conducted, the Parties abandoning the well shall account
for all equipment in the well to the Parties owning such equipment by tendering
to them their respective Participating Interest shares of the value of such
equipment less the cost of salvage.     7.9.B Spare capacity in equipment that
is constructed under this Agreement and used for processing or transporting
Crude Oil and Natural Gas after it has passed through primary separators and
dehydrators (including treatment facilities, gas processing plants and
pipelines) shall be available for use by any Party for Hydrocarbon production
from the Contract Area on the terms set forth below. All Parties desiring to use
such equipment shall nominate capacity in such equipment on a monthly basis by
notice to Operator at least ten (10) Days before the beginning of each month.
Operator may nominate capacity for the owners of the equipment if they so elect.
If at any time the capacity nominated exceeds the total capacity of the
equipment, the capacity of the equipment shall be allocated in the following
priority: (1) first, to the owners of the equipment up to their respective
Participating Interest shares of total capacity, (2) second, to owners of the
equipment desiring to use capacity in excess of their Participating Interest
shares, in proportion to the Participating Interest of each such Party and (3)
third, to Parties not owning interests in the equipment, in proportion to their
Participating Interests in this Agreement. Owners of the equipment shall be
entitled to use up to their Participating Interest share of total capacity
without payment of a fee under this Article 7.9.B. Otherwise, each Party using
equipment under this Article 7.9.B shall pay to the owners of the equipment
monthly throughout the period of use an arm’s-length fee based upon third party
charges for similar services in the vicinity of the Contract Area. If no
arm’s-length rates for such services are available, then the Party desiring to
use equipment under this Article 7.9.B shall pay to the owners of the equipment
a monthly fee equal to (1) that portion of the total cost of the equipment,
divided by the number of months of useful life established for such equipment
under the tax law of Australia, that the capacity made available to such Party
on a fee basis under this Article 7.9.C bears to the total capacity of the
equipment plus (2) that portion of the monthly cost of maintaining, operating
and financing the equipment that the capacity made available to such Party on a
fee basis under this Article 7.9.B bears to the total capacity of the equipment.
    7.9.C Payment for the use of equipment under Article 7.9.B shall not result
in an acquisition of any additional interest in the equipment by the paying
Parties. However, such payments shall be included in the costs that the paying
Parties are entitled to recoup under Article 7.5.     7.9.D Parties electing to
use spare capacity in equipment under Article 7.9.B shall indemnify the owners
of the equipment or platform against any costs and liabilities incurred as a
result of such use (including any Consequential Loss and Environmental Loss) but
excluding costs and liabilities for which Operator is solely responsible under
Article 4.6.

 

7.10 Lost Production during Tie-In of Exclusive Operation Facilities

 

If, during the tie-in of Exclusive Operation facilities with the existing
production facilities of another operation, the production of Hydrocarbons from
such other pre-existing operations is temporarily lessened as a result, then the
Consenting Parties shall compensate the parties to such existing operation for
such loss of production in the following manner. Operator shall determine the
amount by which each Day’s production during the tie-in of Exclusive Operation
facilities falls below the previous month’s average daily production from the
existing production facilities of such operation. The so-determined amount of
lost production shall be recovered by all Parties who experienced such loss in
proportion to their respective Participating Interest. Upon completion of the
tie-in, such lost production shall be recovered in full by Operator deducting up
to one hundred percent (100%) of the production from the Exclusive Operation,
before the Consenting Parties being entitled to receive any such production.

 

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7.11 Conduct of Exclusive Operations

 

7.11.A Each Exclusive Operation shall be carried out by the Consenting Parties
acting as the Operating Committee, subject to the provisions of this Agreement
applied mutatis mutandis to such Exclusive Operation and subject to the terms
and conditions of the Licence.     7.11.B The computation of costs and
liabilities incurred in Exclusive Operations, including the costs and
liabilities of Operator for conducting such operations, shall be made in
accordance with the principles set out in the Accounting Procedure.     7.11.C
Operator shall maintain separate books, financial records and accounts for
Exclusive Operations which shall be subject to the same rights of audit and
examination as the Joint Account and related records, all as provided in the
Accounting Procedure. Said rights of audit and examination shall extend to each
of the Consenting Parties and each of the Non-Consenting Parties so long as the
latter are, or may be, entitled to elect to participate in such Exclusive
Operations.     7.11.D If Operator is conducting an Exclusive Operation for the
Consenting Parties, regardless of whether it is participating in that Exclusive
Operation, Operator shall be entitled to request cash advances and shall not be
required to use its own funds to pay any cost or liability attributable to any
Exclusive Operations and shall not be obliged to commence or continue Exclusive
Operations until cash advances requested have been made, and the Accounting
Procedure shall apply to Operator concerning any Exclusive Operations conducted
by it.     7.11.E If a Development Plan has been approved under Article 6.3, or
if any Party proposes (but does not yet have the right to commence) a
development under this Article 7 where neither the Development Plan nor the
development proposal call for the drilling of one or more Appraisal Wells, and
should any Party wish to drill an additional Appraisal Well before development,
then the Party proposing the Appraisal Well as an Exclusive Operation shall be
entitled to proceed first, but without the right (subject to the following
sentence) to future reimbursement under Article 7.5. If such an Appraisal Well
is produced, any Consenting Party shall own and have the right to take in kind
and separately dispose of all of the Non-Consenting Party’s Entitlement from
such Appraisal Well until the value received in sales to purchasers in
arm-length transactions equals one hundred percent (100%) of such Non-Consenting
Party’s Participating Interest shares of all costs and liabilities that were
incurred in any Exclusive Operations relating to the Appraisal Well. After the
completion of drilling such Appraisal Well as an Exclusive Operation, the
Parties may proceed with the Development Plan approved under Article 5.9, or (if
applicable) the Parties may complete the procedures to propose an Exclusive
Operation to develop a Discovery. If, as the result of drilling such Appraisal
Well as an Exclusive Operation, the Party or Parties proposing to develop the
Discovery decide(s) not to do so, then each Non-Consenting Party who voted in
favor of such Development Plan before the drilling of such Appraisal Well shall
pay to the Consenting Party the amount such Non-Consenting Party would have paid
had such Appraisal Well been drilled as a Joint Operation.     7.11.F If
Operator is a Non-Consenting Party to an Exclusive Operation to develop a
Discovery, then Operator may resign, but in any event shall resign on the
unanimous request of the Consenting Parties, as Operator for the Exploitation
Area for such Discovery, and the Consenting Parties shall select a Consenting
Party to serve as Operator for such Exclusive Operation only.

 

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ARTICLE 8 - DEFAULT

 

8.1 Default and Notice

 

8.1.A Any Party that fails to pay when due its share of Joint Account charges
(including Cash Calls and interest), or provide when due and maintain any
Security required of such Party under the Licence, this Agreement or the Farmout
Agreement, or perform its obligations under the Licence, this Agreement or the
Farmout Agreement, shall be in default under this Agreement (together with each
of its Affiliates party to this Agreement or otherwise owning an interest in the
Licece, a “Defaulting Party”). Operator, or any non-defaulting Party in case
Operator is in default under this Agreement, shall promptly give a Default
Notice to the Defaulting Party and each of the other Parties.     8.1.B For the
duration of the Default Period the Party in default shall be a Defaulting Party
for the purposes of this Agreement. All Default Amounts shall bear interest at
the Default Interest Rate from the due date to the date of receipt of payment.

 

8.2 Operating Committee Meetings, Data, and Entitlements

 

8.2.A Except as provided in Article 8.3.C, the Defaulting Party has no right,
during the Default Period, to:

 

  8.2.A.1 Call or attend Operating Committee or subcommittee meetings;        
8.2.A.2 Vote on any matter coming before the Operating Committee or any
subcommittee;         8.2.A.3 Have access to any data or information relating to
any operations under this Agreement;         8.2.A.4 Consent to or reject data
trades between the Parties and third parties, nor access any data received in
such data trades;         8.2.A.5 Consent to or reject any Transfer or otherwise
exercise any other rights with respect to Transfers under this Article 8 or
under Article 12;         8.2.A.6 Receive its Entitlement under Article 8.4; or
        8.2.A.7 Take assignment of any portion of another Party’s Participating
Interest if such other Party is either in default or withdrawing from this
Agreement and the Licemce.

 

8.2.B During the Default Period the Defaulting Party:

 

May not Transfer all or part of its Participating Interest, except to
non-defaulting Parties under this Article 8.

 

8.2.C Despite any other provisions in this Agreement, during the Default Period:

 

  8.2.C.1 Unless agreed otherwise by the non-defaulting Parties, the voting
interest of each non-defaulting Party shall be equal to the ratio such
non-defaulting Party’s Participating Interest bears to the total Participating
Interests of the non-defaulting Parties;         8.2.C.2 Any matters requiring a
unanimous vote or approval of the Parties shall not require the vote or approval
of the Defaulting Party;         8.2.C.3 The Defaulting Party shall be deemed to
have elected not to participate in any operations that are voted upon during the
Default Period, to the extent such an election would be permitted by Article
5.13 and Article 7; and         8.2.C.4 The Defaulting Party shall be deemed to
have approved, and shall join with the non-defaulting Parties in taking, any
other actions voted on during the Default Period.

 

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8.3 Allocation of Defaulted Amounts

 

8.3.A The Party providing the Default Notice under Article 8.1 shall include in
the Default Notice to each non-defaulting Party a statement of:

 

  8.3.A.1 The amount that the non-defaulting Party shall pay as its portion of
the Amount in Default; and         8.3.A.2 If the Defaulting Party has failed to
obtain or maintain any Security required of such Party in order to maintain the
Licence in full force and effect, the type and amount of the Security the
non-defaulting Parties shall post or the funds they shall pay in order to allow
Operator, or (if Operator is in default) the notifying Party, to post and
maintain such Security.

 

Unless otherwise agreed, the non-defaulting Parties shall satisfy the
obligations for which the Defaulting Party is in default in proportion to the
ratio that each non-defaulting Party’s Participating Interest bears to the
Participating Interests of all non-defaulting Parties.

 

8.3.B If the Defaulting Party remedies its default in full before the Default
Period commences, the notifying Party shall promptly notify each non-defaulting
Party by facsimile and by telephone or email, and the non-defaulting Parties
shall be relieved of their obligations under Article 8.3.A.  Otherwise, each
non-defaulting Party shall satisfy its obligations under Article 8.3.A.1 before
the Default Period commences and its obligations under Article 8.3.A.2 within
ten (10) Days after the Default Notice.  If any non-defaulting Party fails to
timely satisfy such obligations, such Party shall be a Defaulting Party subject
to the provisions of this Article 8.  The non-defaulting Parties shall be
entitled to receive their respective shares of the Total Amount in Default
payable by such Defaulting Party under this Article 8.     8.3.C At any time
before the date of:

 

Notice of exercise of the rights under Article 8.4.D to compel the Defaulting
Party to withdraw from this Agreement or to sell its Participating Interest, as
applicable, a Defaulting Party may remedy its default by paying to the Operator
the Total Amount in Default. A Party may pay a portion of its default by paying
to the Operator less than the Total Amount in Default, but shall remain in
default.

 

  8.3.C.1 If a Defaulting Party makes any payment, the amount so received shall
first be applied first to the payment of interest due and then to payment of
principal.         8.3.C.2 Operator shall pay any such payment to the
non-defaulting Parties in proportion to the ratio of the amount each
non-defaulting Party has paid for the Defaulting Party bears to the total
amounts all non-defaulting Parties have paid for the Defaulting Party.

 

8.3.D If Operator is a Defaulting Party, then all payments otherwise payable to
the Joint Account under this Agreement shall be made to the notifying Party
instead of to the Joint Account until the Operator’s default is cured or a
successor Operator appointed.

 

  8.3.D.1 The notifying Party shall maintain such funds in a segregated account
separate from its own funds and shall apply such funds to third party claims due
and payable from the Joint Account of which it has notice, to the extent
Operator would be authorized to make such payments under this Agreement.  The
notifying Party shall be entitled to bill or Cash Call the other Parties under
the Accounting Procedure for proper third party charges that become due and
payable during such period to the extent sufficient funds are not
available.  When Operator has cured its default or a successor Operator is
appointed, the notifying Party shall turn over all remaining funds in the
account to Operator and shall provide Operator and the other Parties with a
detailed accounting of the funds received and expended during this period.  The
notifying Party shall not be liable for damages, losses, costs, or liabilities
arising as a result of its actions under this Article 8.3.D, except to the
extent Operator would be liable under Article 4.6.

 

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  8.3.D.2 While the Operator is a Defaulting Party, the Operator shall continue
to perform its other functions as the Operator that are not transferred to the
notifying Party by this Article, until Operator is removed or resigns.

 

8.3.E If all Parties are Defaulting Parties, then the Parties shall be deemed to
have collectively decided to withdraw, and the Parties agree that they shall be
bound by the terms and conditions of this Agreement for so long as may be
necessary to wind up the affairs of the Parties with the Government, to satisfy
any requirements of the Licence and Laws and to facilitate the sale, disposition
or abandonment of property or interests held by the Joint Account, all under
Article 2.

 

8.4 Remedies

 

8.4.A During the Default Period, the Defaulting Party has no right to take in
kind or separately dispose of its Entitlement, which Entitlement shall under
this Article 8.4.A vest in and be the property of the non-defaulting Parties.
Operator (or the notifying Party if Operator is a Defaulting Party) shall be
authorized and under Article 8.4.I has a power of attorney to take and sell such
Entitlement in an arm’s-length sale on terms that are commercially reasonable
under the circumstances and, after deducting all costs and liabilities incurred
in connection with such sale pay the net proceeds to the non-defaulting Parties
in proportion to the amounts they are owed by the Defaulting Party as a part of
the Total Amount in Default (in payment of first the interest and then the
principal) and apply such net proceeds toward the establishment of the Reserve
Fund, if applicable, until the Total Amount in Default is recovered and such
Reserve Fund is established.  Any surplus remaining shall be paid to the
Defaulting Party, and any deficiency shall be carried forward as a Default
Amount.  When making sales under this Article 8.4.A, the non-defaulting Parties
shall have no obligation to share any existing market or obtain a price equal to
the price at which their own production is sold.     8.4.B If Operator disposes
of any Joint Property or if any other credit or adjustment is made to the Joint
Account during the Default Period, Operator (or the notifying Party if Operator
is a Defaulting Party) shall be entitled to apply the Defaulting Party’s
Participating Interest share of the proceeds of such disposal, credit, or
adjustment against the Total Amount in Default (against first the interest and
then the principal) and toward the establishment of the Reserve Fund, if
applicable.  Any surplus remaining shall be paid to the Defaulting Party, and
any deficiency shall be carried forward as a Default Amount.     8.4.C The
non-defaulting Parties shall be entitled to apply the net proceeds received
under Articles 8.4.A and 8.4.B toward the creation of a reserve fund (the
“Reserve Fund”) in an amount equal to the Defaulting Party’s Participating
Interest share of:

 

  8.4.C.1 The estimated Decommissioning Costs, to the extent the Parties have
not provided for Decommissioning Security under Article 10;         8.4.C.2 The
estimated cost of severance benefits for local employees upon cessation of
operations; and         8.4.C.3 Any other identifiable costs that the
non-defaulting Parties anticipate will be incurred in connection with the
cessation of operations.

 

Upon the conclusion of the Default Period, all amounts held in the Reserve Fund
shall be returned to the Party previously in Default.

 

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8.4.D If a Defaulting Party fails to fully remedy all its defaults by the
thirtieth (30th) Day of the Default Period, or by the fifteenth (15th) Day of
the corresponding Default Period of any subsequent default occurring within
twelve (12) Months of the preceding default, then, without prejudice to any
other rights available to each non-defaulting Party to recover its portion of
the Total Amount in Default, at any time afterwards until the Defaulting Party
has cured its defaults:

 

  8.4.D.1 any non-defaulting Party shall have the option, exercisable in its
discretion at any time, to require that the Defaulting Party offer to completely
withdraw from this Agreement and assign all of its Participating Interest, as
described in Article 8.4.E; and/or         8.4.D.2 any non-defaulting Party
shall have the option, exercisable in its discretion at any time, to require
that the Defaulting Party offer to sell and assign all of its Participating
Interest to any non-defaulting Parties wishing to purchase such Participating
Interest, as described in Article 8.4.F; and/or         8.4.D.3 any
non-defaulting Party shall have the option, exercisable in its discretion with
respect to a default occurring at any time under an approved Development Plan,
to require that the Defaulting Party offer to assign a part of the Defaulting
Party’s Participating Interest in the corresponding Exploitation Area to any
non-defaulting Parties wishing to accept assignment of such part, as described
in Article 8.4.G; and/or         8.4.D.4 any non-defaulting Party shall have the
option, exercisable in its discretion at any time, to foreclose its mortgage and
security interest against a pro rata share of the Collateral, as described in
Article 8.4.H.

 

Such options shall be exercised by providing notice of such election to the
Defaulting Party and each non-defaulting Party. Until the Defaulting Party’s
Participating Interest has been assigned in full under this Article 8.4, each
option is cumulative, not exclusive. The exercise of one option that does not
result in the assignment of the Defaulting Party’s Participating Interest shall
not preclude the non-defaulting Parties from exercising such option again, or
from exercising another option; provided that if an option set out in Article
8.4.D.2 or Article 8.4.D.3 is exercised, then the other options may not be
exercised unless and until the non-defaulting Parties have been deemed to have
elected not to acquire all or part of the Participating Interest of the
Defaulting Party under Article 8.4.F or Article 8.4.G, as applicable. All costs
pertaining to any such assignment (including any stamp duty incurred on the
documents signed to effect such assignment) shall be the responsibility of the
Defaulting Party.

 

8.4.E If the option set out in Article 8.4.D.1 is exercised, the Defaulting
Party shall be deemed to have proposed to withdraw and assign, under Article
13.6, effective on the date of the non-defaulting Party’s or Parties’ notice,
its Participating Interest to the non-defaulting Parties; provided that any
non-defaulting Party that did not join in the notice of exercise of such option
shall have the right exercisable for ten (10) Days from the date of such notice
to notify the other non-defaulting Parties that it refuses to accept such
proposed assignment.  In the absence of an agreement to the contrary among the
non-defaulting Parties willing to accept an assignment, any assignment to the
non-defaulting Parties after a withdrawal under this Article 8.4.E shall be in
proportion to the Participating Interests of the non-defaulting Parties,
excluding any non-defaulting Party that has given notice that it refuses to
accept such proposed assignment.     8.4.F  In connection with the option set
out in Article 8.4.D.2 each Party grants to each of the other Parties the right
and option to acquire (the “Buy-Out Option”) under Article 8.4.F.1 all of its
Participating Interest for the consideration determined under Article 8.4.F.2
(the “Buy-Out Price”) and paid under Article 8.4.F.3.

 

  8.4.F.1 Each non-defaulting Party may, but shall not be obligated to, exercise
such Buy-Out Option by notice to the Defaulting Party and each other
non-defaulting Party (the “Buy-Out Notice”). The Defaulting Party shall be
deemed to have proposed to sell and assign, effective on the date of the Buy-Out
Notice, its entire Participating Interest to the non-defaulting Parties having
exercised the Buy-Out Option (each, an “Acquiring Party”). Any other
non-defaulting Party that gives an Option Notice within thirty (30) Days after
the Buy-Out Option is first exercised by an Acquiring Party shall also become an
Acquiring Party. Any non-defaulting Party that fails to exercise its Buy-Out
Option during such thirty (30) Day period shall be deemed to have elected not to
become an Acquiring Party, and its Buy-Out Option with respect to the Defaulting
Party shall terminate. Each Acquiring Party shall be deemed to have proposed to
acquire a proportion of the Participating Interest of the Defaulting Party equal
to the ratio of such Acquiring Party’s Participating Interest to the total
Participating Interests of all Acquiring Parties and pay such proportion of the
Buy-Out Price, unless they otherwise agree.

 

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  8.4.F.2 The Buy-Out Price shall be determined as follows:

 

Each Acquiring Party shall specify in its Buy-Out Notice a value for the
Defaulting Party’s entire Participating Interest. Within five (5) Days after the
thirty (30) Day period after the Buy-Out Option is first exercised, the
Defaulting Party shall (i) notify the Acquiring Parties that it accepts, with
respect to each Acquiring Party, such Acquiring Party’s proportionate share of
the value specified by such Acquiring Party in its Buy-Out Notice (in which case
this value is, with respect to such Acquiring Party, the “Buy-Out Price”); or
(ii) refer the Dispute to an independent expert pursuant to Article 18.3 for
determination of the value of its entire Participating Interest (in which case
each Acquiring Party’s proportionate share of the value determined by such
expert shall be deemed the “Buy-Out Price” with respect to each such Acquiring
Party). If the Defaulting Party fails to so notify the Acquiring Parties, then
the Defaulting Party shall be deemed to have accepted, with respect to each
Acquiring Party, such Acquiring Party’s proportionate share of the value
proposed by such Acquiring Party as the Buy-Out Price. If the valuation of the
Defaulting Party’s Participating Interest is referred to an expert, such expert
shall determine the Buy-Out Price which shall be deemed to be equal to the fair
market value of the Defaulting Party’s entire Participating Interest, less the
following:

 

  (a) The Total Amount in Default;         (b) All costs, including the costs of
the expert, to obtain such valuation; and         (c) thirty percent (30%) of
the fair market value of the Defaulting Party’s Participating Interest.

 

  8.4.F.3 The Buy-Out Price shall be paid to the Defaulting Party in four (4)
installments, each equal to 25% of the Buy-Out Price as follows:

 

  (a) The first installment shall be due and payable to the Defaulting Party
within 15 Days after the date on which the Defaulting Party’s Participating
Interest is effectively assigned to the Acquiring Parties (the “Assignment
Date”);         (b) The second installment shall be due and payable to the
Defaulting Party within 180 Days after the Assignment Date;         (c) The
third installment shall be due and payable to the Defaulting Party within 365
Days after the Assignment Date; and         (d) The fourth installment shall be
due and payable to the Defaulting Party within 545 Days after the Assignment
Date.

 

  8.4.F.4 On the Assignment Date the Total Amount in Default shall be deemed to
have been satisfied, and if the assignment under Article 8.4.F was to fewer than
all of the non-defaulting Parties, the Acquiring Parties in proportion to their
proportionate share of the Buy-Out Price shall pay to each non-defaulting Party
that was not an Acquiring Party the portion of the Total Amount in Default owed
to such non-defaulting Party.

 

8.4.G In connection with the option set out in Article 8.4.D.3 each Defaulting
Party grants to each of the other Parties the right and option to acquire under
this Article 8.4.G a part of its Participating Interest in the applicable
Exploitation Area (the “Withering Option”), in which it is in default.

 

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  8.4.G.1 Each non-defaulting Party may, but shall not be obligated to, exercise
such Withering Option by notice to the Defaulting Party and each other
non-defaulting Party (the “Withering Notice”). The Defaulting Party shall be
deemed to have proposed to assign, effective on the date of the Withering
Notice, the Withering Interest to the non-defaulting Parties having exercised
the Withering Option (each, an “Acquiring Party”). Any other non-defaulting
Party that gives a Withering Notice within thirty (30) Days after the Withering
Option is first exercised by an Acquiring Party shall also become an Acquiring
Party. Any non-defaulting Party that fails to exercise its Withering Option
during such thirty (30) Day period shall be deemed to have elected not to become
an Acquiring Party and its Withering Option regarding the Defaulting Party shall
terminate. Each Acquiring Party shall be deemed to have proposed to acquire a
proportion of the Withering Interest of the Defaulting Party equal to the ratio
of such Acquiring Party’s Participating Interest to the total Participating
Interests of all Acquiring Parties and pay such proportion of the Withering
Price, unless they otherwise agree.         8.4.G.2 The Withering Interest shall
be determined based on the following formula:

 

Withering Interest =   [Withering Price x Default Factor x DPPI]   DPETC

 

Where:

 

“Withering Interest” means the lesser of: (i) the Defaulting Party’s entire
Participating Interest, in the applicable Exploitation Area to be assigned to
the Acquiring Parties (expressed as a percentage); or (ii) the part out of the
Defaulting Party’s Participating Interest, in the applicable Exploitation Area
to be assigned to the Acquiring Parties (expressed as a percentage).

 

“Withering Price” means the amount equal to DPETC less DPACP.

 

“Estimated Total Costs” means the estimated total costs to be expended to
complete the approved Development Plan for the applicable Exploitation Area,
including any contingent amounts, amendments and approved cost over-runs arising
before the due date of the Cash Call giving rise to the default.

 

“DPETC” means the Defaulting Party’s Participating Interest share of the
Estimated Total Costs.

 

“DPACP” means the aggregate costs paid by the Defaulting Party regarding the
applicable Development Plan before the date of the Cash Call giving rise to the
default.

 

“Default Factor” means:

 

1.25, if less than twenty-five percent (25%) of the Estimated Total Costs have
been expended by the Parties;

 

1.20, if at least twenty-five percent (25%) but less than fifty percent (50%) of
the Estimated Total Costs have been expended by the Parties;

 

1.15, if at least fifty percent (50%) but less than seventy-five percent (75%)
of the Estimated Total Costs have been expended by the Parties; or

 

1.10, if at least seventy five percent (75%) of the Estimated Total Costs have
been expended by the Parties.

 

“DPPI” means the Defaulting Party’s Participating Interest as of the due date of
the Cash Call giving rise to the default (expressed as a percentage).

 

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  8.4.G.3 If the Withering Interest is effectively assigned to the Acquiring
Parties under Article 8.4.G, then from the due date of the Cash Call giving rise
to the default:

 

  (a) The Defaulting Party has no obligation to pay any further Cash Calls under
the applicable Development Plan, except to the extent of the Defaulting Party’s
obligation to fund its revised Participating Interest share of any cost
over-runs arising after such date;         (b) The Acquiring Parties shall bear
all costs attributable to the Withering Interest and the Defaulting Party’s
revised Participating Interest under the applicable Development Plan, except to
the extent of the Defaulting Party’s obligation to fund its revised
Participating Interest share of any cost over-runs arising after such date.

 

  8.4.G.4 On the date the Withering Interest is effectively assigned the Total
Amount in Default shall be deemed to have been satisfied, and if the assignment
under Article 8.4.G was to fewer than all of the non-defaulting Parties, the
Acquiring Parties in proportion to their proportionate share of the Withering
Price shall pay to each non-defaulting Party that was not an Acquiring Party the
portion of the Total Amount in Default owed to such non-defaulting Party.

 

8.4.H In addition to the other remedies available to the non-defaulting Parties
under this Article 8 and any other rights available to each non-defaulting Party
to recover its portion of the Total Amount in Default, if a Defaulting Party
fails to remedy its default within thirty (30) Days of the Default Notice, the
non-Defaulting Parties may elect to enforce a mortgage and security interest on
the Defaulting Party’s Participating Interest as set forth below, subject to the
Licence and the Laws.

 

  8.4.H.1 Each Party grants to each of the other Parties, in pro rata shares
based on their relative Participating Interests, a mortgage and security
interest on its Participating Interest, whether now owned or later acquired,
together with all products and proceeds derived from that Participating Interest
(collectively, the “Collateral”) as security for:

 

  (a)   The payment of all amounts owing by such Party (including interest and
costs of collection) under this Agreement and the Farmout Agreement; and        
(b)   Any Security that such Party is required to provide under the Licence,
this Agreement or the Farmout Agreement.

 

  8.4.H.2 Should a Defaulting Party fail to remedy its default by the thirtieth
(30th) Day after the date of the Default Notice, then, each non-defaulting Party
shall have the option, exercisable at any time afterwards during the Default
Period, to foreclose its mortgage and security interest against its pro rata
share of the Collateral by any means permitted under the Licence and the Laws
and to sell all or any part of that Collateral in public or private sale after
providing the Defaulting Party and other creditors with any notice required by
the Licence or the Laws, and subject to the provisions of Article 12.   Except
as may be prohibited by the Licence or the Laws, the non-defaulting Party that
forecloses its mortgage and security interest shall be entitled to become the
purchaser of the Collateral sold and shall have the right to credit toward the
purchase price the amount to which it is entitled under Article 8.4.   Any
deficiency in the amounts received by the foreclosing Party shall remain a debt
due by the Defaulting Party.  The foreclosure of mortgages and security
interests by one non-defaulting Party shall neither affect the amounts owed by
the Defaulting Party to the other non-defaulting Parties nor in any way limit
the rights or remedies available to them.  Each Party agrees that, should it
become a Defaulting Party, it waives the benefit of any Appraisal Operation,
valuation, stay, extension or redemption law and any other debtor protection law
that otherwise could be invoked to prevent or hinder the enforcement of the
mortgage and security interest granted above.         8.4.H.3 Each Party agrees
to sign such memoranda, financing statements and other documents, and make such
filings and registrations, as may be reasonably necessary to perfect, validate
and provide notice of the mortgages and security interests granted by this
Article 8.4.H.

 

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8.4.I The Defaulting Party shall promptly join in such actions as may be
necessary or desirable to obtain any Government approvals required regarding
such proposed withdrawal and assignment.  The non-defaulting Parties shall use
reasonable endeavors to assist the Defaulting Party in obtaining such
approvals.  Any penalties, damages, losses, costs (including reasonable legal
costs and attorneys’ fees) and liabilities incurred by the Parties in connection
with such proposed withdrawal and assignment shall be borne by the Defaulting
Party.  If the Government does not approve the Defaulting Party’s proposed
withdrawal and assignment, then the non-defaulting Parties (excluding any
non-defaulting Party that has given notice that it refuses to accept such
proposed assignment) shall have the right to retract the notice of proposed
withdrawal and assignment by notice to all Parties. The acceptance by a
non-defaulting Party of any portion of a Defaulting Party’s Participating
Interest shall not limit any rights or remedies that such non-defaulting Party
has to recover any remaining balance plus interest owing under this Agreement by
the Defaulting Party. For purposes of Article 8.4.E, 8.4.F, 8.4.G, or 8.4.H, as
elected, the Defaulting Party shall, without delay after any request from the
non-defaulting Parties, do any act required to be done by the Laws and any other
applicable laws in order to render the sale of its Entitlement and/or assignment
of its Participating Interest legally valid, including obtaining all necessary
governmental consents and approvals, and shall sign any document and take such
other actions as may be necessary in order to effect a prompt and valid sale of
its Entitlement and/or assignment of its Participating Interest.  The Defaulting
Party shall promptly remove any Encumbrances which may exist on the date of sale
of its Entitlement and/or assignment of its Participating Interests (other than
any existing Encumbrances that affect all Parties in proportion to their
Participating Interests).  If all Government approvals are not timely obtained,
the Defaulting Party shall to the extent allowed under the Licence and
applicable Laws hold its Participating Interest in trust or escrow arrangement
for the benefit of the non-defaulting Parties who are entitled to receive
it.  Each Party appoints each other Party its true and lawful attorney to sign
such instruments and make such filings and applications as may be necessary to
make such sale or assignment legally effective and to obtain any necessary
consents of the Government.  Actions under this power of attorney may be taken
by any Party individually without the joinder of the others.  This power of
attorney is irrevocable for the term of this Agreement and is coupled with an
interest.  If requested, each Party shall execute a form prescribed by the
Operating Committee setting forth this power of attorney in more detail.    
8.4.J The non-defaulting Parties shall be entitled to recover from the
Defaulting Party all reasonable attorneys’ fees and all other reasonable costs
sustained in the collection of amounts owing by the Defaulting Party.     8.4.K
The rights and remedies granted to the non-defaulting Parties in this Article 8
shall be cumulative, not exclusive, and shall be in addition to any other rights
and remedies that may be available to the non-defaulting Parties, whether at
law, in equity or otherwise.  Each right and remedy available to the
non-defaulting Parties may be exercised from time to time and so often and in
such order as may be considered expedient by the non-defaulting Parties in their
sole discretion.

 

8.5 Survival

 

The obligations of the Defaulting Party and the rights of the non-defaulting
Parties shall survive the surrender of the Licence, Decommissioning, and
termination of this Agreement.

 

8.6 No Right of Set Off

 

Each Party acknowledges and accepts that a fundamental principle of this
Agreement is that each Party pays its Participating Interest share of all
amounts due under this Agreement as and when required. Accordingly, any Party
that becomes a Defaulting Party undertakes that, in respect of either any
exercise by the non-defaulting Parties of any rights under or the application of
any of the provisions of this Article 8, such Party hereby waives any right to
raise by way of set off or invoke as a defense, whether in law or equity, any
failure by any other Party to pay amounts due and owing under this Agreement or
any alleged claim that such Party may have against Operator or any Non-Operator,
whether such claim arises under this Agreement or otherwise. Each Party further
agrees that the nature and the amount of the remedies granted to the
non-defaulting Parties are reasonable and appropriate in the circumstances.

 

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ARTICLE 9 - DISPOSITION OF PRODUCTION

 

9.1 Right and Obligation to Take in Kind

 

Except as otherwise provided in this Article 9 or in Article 8, each Party shall
have the right and obligation to own, take in kind and separately dispose of its
Entitlement.

 

9.2 Disposition of Crude Oil and/or Natural Gas

 

If Crude Oil (or Natural Gas) is to be produced from an Exploitation Area, the
Parties shall in good faith, and not fewer than six (6) Months before the
anticipated first delivery of Crude Oil (or Natural Gas), as promptly notified
by Operator, negotiate and conclude the terms of a lifting agreement to cover
the offtake of Crude Oil (or Natural Gas) produced under the Licence.

 

ARTICLE 10 - ABANDONMENT

 

10.1 Abandonment of Wells Drilled as Joint Operations

 

10.1.A A decision to plug and abandon any well that was drilled as a Joint
Operation shall require the approval of the Operating Committee.     10.1.B If
any Party fails to reply within the period prescribed in Article 5.12.A.1 or
Article 5.12.A.2, whichever applies, after delivery of notice of Operator’s
proposal to plug and abandon such well, such Party shall be deemed to have
consented to the proposed abandonment.     10.1.C If the Operating Committee
approves a decision to plug and abandon an Exploration Well or Appraisal Well,
subject to the Laws, any Party voting against such decision may propose (within
the time periods allowed by Article 5.13.A) to conduct an alternate Exclusive
Operation in the wellbore.  If no Exclusive Operation is timely proposed, or if
an Exclusive Operation is timely proposed but is not commenced within the
applicable time periods under Article 7.2, such well shall be plugged and
abandoned.     10.1.D Any well plugged and abandoned under this Agreement shall
be plugged and abandoned under the Laws and at the cost and risk of the Parties
who participated in the cost of drilling such well.     10.1.E Despite anything
to the contrary in this Article 10.1:

 

  10.1.E.1 If the Operating Committee approves a decision to plug and abandon a
well from which Hydrocarbons have been produced and sold, subject to the Laws,
any Party voting against the decision may propose (within five (5) Days after
the time specified in Article 5.6, Article 5.12.A.1 or Article 5.12.A.2,
whichever applies, has expired) to take over the entire well as an Exclusive
Operation.  Any Party originally participating in the well shall be entitled to
participate in the operation of the well as an Exclusive Operation by response
notice within ten (10) Days after receipt of the notice proposing the Exclusive
Operation. In such event, the Consenting Parties shall be entitled to conduct an
Exclusive Operation in the well; provided that the proposed operation may not be
in the same Zone from which production was previously obtained nor be in a Zone
that is produced by any other Joint Operation wells.            10.1.E.2 Each
Non-Consenting Party shall be deemed to have relinquished free of cost to the
Consenting Parties in proportion to their Participating Interests all of its
interest in the wellbore of a produced well and related equipment under Article
7.4.B.  The Consenting Parties shall afterwards bear all cost and liability of
plugging and abandoning such well under the Laws, to the extent the Parties are
or become obligated to contribute to such costs and liabilities, and the
Consenting Parties shall indemnify the Non-Consenting Parties against all such
costs and liabilities.

 

45

 

 

  10.1.E.3 Subject to Article 7.12.F, Operator shall continue to operate a
produced well for the account of the Consenting Parties at the rates and charges
contemplated by this Agreement, plus any additional costs that may arise as the
result of the separate allocation of interest in such well.

 

10.2 Abandonment of Exclusive Operations

 

This Article 10 shall apply mutatis mutandis to the Decommissioning of
facilities and/or equipment acquired for an Exclusive Operation and abandonment
of an Exclusive Well or any well in which an Exclusive Operation has been
conducted (in which event all Parties having the right to conduct further
operations in such well shall be notified and have the opportunity to conduct
Exclusive Operations in the well under this Article 10).

 

10.3 Provision for and Conduct of Abandonment

 

If under the Licence or the Laws, the Parties are or become obliged to pay or
contribute to the cost of ceasing operations, then during preparation of a
Development Plan, the Parties shall make a preliminary plan for the abandonment
of wells, and shall negotiate a security agreement which shall be completed and
executed by all Parties participating in such Development Plan.

 

ARTICLE 11 - SURRENDER, EXTENSIONS AND RENEWALS

 

11.1 Surrender

 

11.1.A If the Licence requires the Parties to surrender any portion of the
Contract Area, Operator shall advise the Operating Committee of such requirement
at least one hundred and twenty (120) Days in advance of the earlier of the date
for filing irrevocable notice of such surrender or the date of such
surrender.  Before the end of such period, the Operating Committee shall
determine under Article 5 the size and shape of the surrendered area, consistent
with the requirements of the Licence.  If a sufficient vote of the Operating
Committee cannot be attained, then the proposal supported by a simple majority
of the Participating Interests shall be adopted.  If no proposal attains the
support of a simple majority of the Participating Interests, then the proposal
receiving the largest aggregate Participating Interest vote shall be
adopted.  In the event of a tie, Operator shall choose among the proposals
receiving the largest aggregate Participating Interest vote.  The Parties shall
sign any documents and take such other actions as may be necessary to effect the
surrender.  Each Party renounces all claims and causes of action against
Operator and any other Parties on account of any area surrendered in accordance
with the foregoing but against its recommendation if Hydrocarbons are later
discovered under the surrendered area.     11.1.B A surrender of all or any part
of the Contract Area that is not required by the Licence shall require the
unanimous consent of the Parties.

 

11.2 Extension of the Term

 

11.2.A A proposal by any Party to enter into or extend the term of any
Exploration Period or Exploitation Period or any phase of the Licence, or a
proposal to extend the term of the Licence, shall be brought before the
Operating Committee under Article 5.     11.2.B Any Party shall have the right
to enter into or extend the term of any Exploration Period or Exploitation
Period or any phase of the Licence or to extend the term of the Licence,
regardless of the level of support in the Operating Committee.  If any Party
takes such action, any Party not wishing to extend shall have a right to
withdraw, subject to the requirements of Article 13.

 

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ARTICLE 12 - TRANSFER OF INTEREST OR RIGHTS AND CHANGES IN CONTROL

 

12.1 Obligations

 

Subject to the requirements of the Licence,

 

12.1.A Any Transfer (except Transfers under Article 7, Article 8, or Article 13)
shall be effective only if it satisfies the terms and conditions of Article
12.2; and     12.1.B A Party subject to a Change in Control must satisfy the
terms and conditions of Article 12.3.

 

If a Transfer subject to this Article or a Change in Control occurs without
satisfaction (in all material respects) by the transferor or the Party subject
to the Change in Control, as applicable, of the requirements of this Agreement,
then each other Party shall be entitled to enforce specific performance of the
terms of this Article, in addition to any other remedies (including damages) to
that it may be entitled. Each Party agrees that monetary damages alone would not
be an adequate remedy for the breach of any Party’s obligations under this
Article.

 

Notwithstanding anything to the contrary, the requirements for assignment or
transfer under this Agreement shall not apply to or restrict any assignment or
transfer by DESAL of any interests or obligations pertaining to the West Block.

 

12.2 Transfer

 

12.2.A Except in the case of a Party transferring all of its Participating
Interest, no Transfer shall be made by any Party that results in the transferor
or the transferee holding a Participating Interest of less than ten percent
(10%) or any interest other than a Participating Interest in this Agreement.    
12.2.B Subject to the terms of Articles 4.9 and 4.10, the Party serving as
Operator shall remain Operator after Transfer of a portion of its Participating
Interest.  In the event of a Transfer of all of its Participating Interest,
except to an Affiliate, the Party serving as Operator shall be deemed to have
resigned as Operator, effective on the date the Transfer becomes effective under
this Article 12, in which event a successor Operator shall be appointed under
Article 4.11.  If Operator transfers all of its Participating Interest to an
Affiliate, that Affiliate shall automatically become the successor Operator,
provided that the transferring Operator shall remain liable for its Affiliate’s
performance of its obligations.     12.2.C Despite such Transfer, both the
transferee and the transferring Party shall be liable to the other Parties for
the transferring Party’s Participating Interest share of any obligations
(financial or otherwise) that have vested, matured, or accrued under the Licence
or this Agreement before such Transfer.  Such obligations, shall include any
proposed expenditure approved by the Operating Committee before the transferring
Party notifying the other Parties of its proposed Transfer but shall not include
costs of plugging and abandoning wells or portions of wells and Decommissioning
facilities in which the transferring Party participated (or was required to bear
a share of the costs pursuant to this sentence) to the extent such costs are
payable by the Parties under the Licence.     12.2.D A transferee has no rights
in the Licence or this Agreement (except any notice and cure rights or similar
rights that may be provided to a Lien Holder (as defined in Article 12.2.E) by
separate instrument signed by all Parties) unless and until:

 

  12.2.D.1 such transferee expressly undertakes in an instrument reasonably
satisfactory to the other Parties to perform the obligations of the transferor
under the Licence and this Agreement to the extent of the Participating Interest
being transferred and obtains any necessary Government approval for the Transfer
and furnishes any guarantees required by the Government or the Licence on or
before the applicable deadlines; and         12.2.D.2 in the case of a Transfer
to a transferee other than an Affiliate, each Party has consented in writing to
such Transfer, which consent shall be denied only if the transferee fails to
establish to the reasonable satisfaction of each Party its financial capability,
including enforceability of remedies under this Agreement against such
transferee, to perform its payment obligations under the Licence and this
Agreement, and its ability to comply with the provisions of Article 19.1.

 

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  12.2.D.3 in the case of a Transfer to an Affiliate, each Party has consented
in writing to such Transfer, which consent shall be denied only if the
transferee fails to establish to the reasonable satisfaction of each Party its
ability to comply with the provisions of Article 19.1, and the transferring
Party agrees in an instrument reasonably satisfactory to the other Parties to
remain liable for its Affiliate’s performance of its obligations.

 

12.2.E Nothing contained in this Article 12 shall prevent a Party from
Encumbering all or any undivided portion of its Participating Interest to a
third party (a “Lien Holder”) as security relating to financing, provided that:

 

  12.2.E.1 Such Party shall remain liable for all obligations relating to such
interest;         12.2.E.2 The Encumbrance shall be subject to any necessary
approval of the Government and be expressly subordinated to the rights of the
other Parties under this Agreement under a subordination agreement in favour of
and reasonably satisfactory to the other Parties;         12.2.E.3 Such Party
shall ensure that any Encumbrance shall be expressed to be without prejudice to
the provisions of this Agreement.

 

12.2.F Any Transfer of all or a portion of a Party’s Participating Interest,
other than a Transfer to an Affiliate or the granting of an Encumbrance as
provided in Article 12.2.E, shall be subject to the following procedure.

 

  12.2.F.1 Once the final terms and conditions of a Transfer have been fully
negotiated, the transferor shall disclose all such final terms and conditions as
are relevant to the acquisition of the Participating Interest (and, if
applicable, the determination of the Cash Value of the Participating Interest)
in a notice to the other Parties, which notice shall be accompanied by a copy of
all instruments or relevant portions of instruments establishing such terms and
conditions.  Each other Party shall have the right to acquire the Participating
Interest subject to the proposed Transfer from the transferor on the terms and
conditions described in Article 12.2.F.3 if, within thirty (30) Days of the
transferor’s notice, such Party delivers to all other Parties a
counter-notification that it accepts such terms and conditions without
reservations or conditions (subject to Articles 12.2.F.3 and 12.2.F.4, where
applicable).  If no Party delivers such counter-notification, the Transfer to
the proposed transferee may be made, subject to the other provisions of this
Article 12, under terms and conditions no more favorable to the transferee than
those set forth in the notice to the Parties, provided that the Transfer shall
be concluded within one hundred eighty (180) Days from the date of the notice
plus such additional period as may be required to secure governmental
approvals.  No Party shall have a right under this Article 12.2.F to acquire any
asset other than a Participating Interest, nor may any Party be required to
acquire any asset other than a Participating Interest, regardless of whether
other properties are included in the Transfer.         12.2.F.2 If more than one
Party counter-notifies that it intends to acquire the Participating Interest
subject to the proposed Transfer, then each such Party shall acquire a
proportion of the Participating Interest to be transferred equal to the ratio of
its own Participating Interest to the total Participating Interests of all the
counter-notifying Parties, unless the counter-notifying Parties otherwise agree.

 

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  12.2.F.3 If a Cash Transfer that does not involve other properties as part of
a wider transaction, each other Party shall have a right to acquire the
Participating Interest subject to the proposed Transfer on the same final terms
and conditions as were negotiated with the proposed transferee.  If a Transfer
that is not a Cash Transfer or involves other properties included in a wider
transaction (package deal), the transferor shall include in its notification to
the other Parties a statement of the Cash Value of the Participating Interest
subject to the proposed Transfer, and each other Party shall have a right to
acquire such Participating Interest on the same final terms and conditions as
were negotiated with the proposed transferee except that the acquiring Party
shall pay the Cash Value in immediately available funds at the closing of the
Transfer instead of the consideration payable in the third party offer, and the
terms and conditions of the applicable instruments shall be modified as
necessary to reflect the acquisition of a Participating Interest for cash.  In
the case of a package sale, no Party may acquire the Participating Interest
subject to the proposed package sale unless and until the completion of the
wider transaction (as modified by the exclusion of properties subject to
preemptive rights or excluded for other reasons) with the package sale
transferee.  If for any reason the package sale terminates without completion,
the other Parties’ rights to acquire the Participating Interest subject to the
proposed package sale shall also terminate.         12.2.F.4 For purposes of
Article 12.2.F.3, the Cash Value proposed by the transferor in its notice shall
be conclusively deemed correct unless any Party (each a “Disagreeing Party”)
gives notice to the transferor with a copy to the other Parties within ten (10)
Days of receipt of the transferor’s notice stating that it does not agree with
the transferor’s statement of the Cash Value, stating the Cash Value that the
Disagreeing Party believes is correct, and providing any supporting information
that the Disagreeing Party believes is helpful.  In such event, the transferor
and the Disagreeing Parties shall have fifteen (15) Days in which to attempt to
negotiate an agreement on the applicable Cash Value.  If no agreement has been
reached by the end of such fifteen (15) Day period, either the transferor or any
Disagreeing Party shall be entitled to refer the matter to an independent expert
as provided in Article 18.3 for determination of the Cash Value.        
12.2.F.5 If the determination of the Cash Value is referred to an independent
expert and the value submitted by the transferor is no more than five percent
(5%) above the Cash Value determined by the independent expert, the transferor’s
value shall be used for the Cash Value and the Disagreeing Parties shall pay all
costs of the expert.  If the value submitted by the transferor is more than five
percent (5%) above the Cash Value determined by the independent expert, the
independent expert’s value shall be used for the Cash Value and the transferor
shall pay all costs of the expert.  Subject to the independent expert’s value
being final and binding under Article 18.3, the Cash Value determined by the
procedure shall be final and binding on all Parties.         12.2.F.6 Once the
Cash Value is determined under Article 12.2.F.5, Operator shall provide notice
of such Cash Value to all Parties, and subject to the Licence, the transferor
shall be obligated to sell and the Parties which provided notice of their
intention to purchase the transferor’s Participating Interest under Article
12.2.F.1 shall be obligated to buy the Participating Interest at said value.

 

12.3 Change in Control

 

12.3.A A Party subject to a Change in Control shall obtain any necessary
Government approval with respect to the Change in Control and furnish any
replacement Security required by the Government or the Licence on or before the
applicable deadlines.     12.3.B A Party subject to a Change in Control shall
provide evidence reasonably satisfactory to the other Parties that after the
Change in Control such Party shall continue to have the financial capability to
satisfy its payment obligations under the Licence and this Agreement.  If the
Party that is subject to the Change in Control fail to provide such evidence,
any other Party, by notice to such Party, may require such Party to provide
Security satisfactory to the other Parties concerning its Participating Interest
share of any obligations or liabilities that the Parties may reasonably be
expected to incur under the Licence and this Agreement during the then-current
Exploration or Exploitation Period or phase of the Licence.

 

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12.3.C Any Change in Control of a Party, other than one that results in ongoing
Control by an Affiliate, shall be subject to the following procedure.

 

  12.3.C.1 Once the final terms and conditions of a Change in Control have been
fully negotiated, the Acquired Party shall disclose all such final terms and
conditions as are relevant to the acquisition of such Party’s Participating
Interest and the determination of the Cash Value of that Participating Interest
in a notice to the other Parties, which notice shall be accompanied by a copy of
all instruments or relevant portions of instruments establishing such terms and
conditions.  Each other Party shall have the right to acquire the Acquired
Party’s Participating Interest on the terms and conditions described in Article
12.3.C.3 if, within thirty (30) Days of the Acquired Party’s notice, such Party
delivers to all other Parties a counter-notification that it accepts such terms
and conditions without reservations or conditions (subject to Articles 12.3.C.3
and 12.3.C.4, where applicable).  If no Party delivers such
counter-notification, the Change in Control may proceed without further notice,
subject to the other provisions of this Article 12, under terms and conditions
no more favorable to the Acquirer than those set forth in the notice to the
Parties, provided that the Change in Control shall be concluded within one
hundred eighty (180) Days from the date of the notice plus such additional
period as may be required to secure governmental approvals.  No Party shall have
a right under this Article 12.3.C to acquire any asset other than a
Participating Interest, nor may any Party be required to acquire any asset other
than a Participating Interest, regardless of whether other properties are
subject to the Change in Control.         12.3.C.2 If more than one Party
counter-notifies that it intends to acquire the Participating Interest subject
to the proposed Change in Control, then each such Party shall acquire a
proportion of that Participating Interest equal to the ratio of its own
Participating Interest to the total Participating Interests of all the
counter-notifying Parties, unless the counter-notifying Parties otherwise agree.
        12.3.C.3 The Acquired Party shall include in its notification to the
other Parties a statement of the Cash Value of the Participating Interest
subject to the proposed Change in Control, and each other Party shall have a
right to acquire such Participating Interest for the Cash Value, on the final
terms and conditions negotiated with the proposed Acquirer that are relevant to
the acquisition of a Participating Interest for cash.  No Party may acquire the
Acquired Party’s Participating Interest under this Article 12.3.C unless and
until completion of the Change in Control.  If for any reason the Change in
Control agreement terminates without completion, the other Parties’ rights to
acquire the Participating Interest subject to the proposed Change in Control
shall also terminate.         12.3.C.4 For purposes of Article 12.3.C.3, the
Cash Value proposed by the Acquired Party in its notice shall be conclusively
deemed correct unless any Party (each a “Disagreeing Party”) gives notice to the
Acquired Party with a copy to the other Parties within ten (10) Days of receipt
of the Acquired Party’s notice stating that it does not agree with the Acquired
Party’s statement of the Cash Value, stating the Cash Value that the Disagreeing
Party believes is correct, and providing any supporting information that the
Disagreeing Party believes is helpful.  In such event, the Acquired Party and
the Disagreeing Parties shall have fifteen (15) Days in which to attempt to
negotiate an agreement on the applicable Cash Value.  If no agreement has been
reached by the end of such fifteen (15) Day period, either the Acquired Party or
any Disagreeing Party shall be entitled to refer the matter to an independent
expert as provided in Article 18.3 for determination of the Cash Value.

 

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  12.3.C.5 If the determination of Cash Value is referred to an independent
expert, and the value submitted by the Acquired Party is no more than five
percent (5%) above the Cash Value determined by the independent expert, the
Acquired Party’s value shall be used for the Cash Value and the Disagreeing
Parties shall pay all costs of the expert.  If the value submitted by the
Acquired Party is more than five percent (5%) above the Cash Value determined by
the independent expert, the independent expert’s value shall be used for the
Cash Value and the Acquired Party shall pay all costs of the expert.  Subject to
the independent expert’s value being final and binding under Article 18.3, the
Cash Value determined by the procedure shall be final and binding on all
Parties.         12.3.C.6 Once the Cash Value is determined under Article
12.3.C.4, Operator shall provide notice of such Cash Value to all Parties, and
subject to the Licenec, the acquired Party shall be obligated to sell and the
Parties that provided notice of their intention to purchase the acquired Party’s
Participating Interest under Article 12.3.C.1 shall be obligated to buy the
Participating Interest at said value.         12.3.C.7 Despite anything to the
contrary contained in this Agreement, Article 12.3.C shall not apply to any
Change of Control of the ultimate holding company or parent company of a Party.

 

ARTICLE 13 - WITHDRAWAL FROM AGREEMENT

 

13.1 Right of Withdrawal

 

13.1.A Subject to this Article 13 and the Licence, any Party not in default may
at its option withdraw from this Agreement and the Licence by giving notice to
all other Parties stating its decision to withdraw.  Such notice shall be
unconditional and irrevocable when given, except as may be provided in Article
13.7.     13.1.B The effective date of withdrawal for a withdrawing Party shall
be the end of the Calendar Month after the Calendar Month in which the notice of
withdrawal is given, provided that if all Parties elect to withdraw, the
effective date of withdrawal for each Party shall be the date determined by
Article 13.9.

 

13.2 Partial or Complete Withdrawal

 

13.2.A Within thirty (30) Days of receipt of each withdrawing Party’s
notification, each of the other Parties may also give notice that it desires to
withdraw from this Agreement and the Licence.  If all Parties give notice of
withdrawal, the Parties shall proceed to abandon the Contract Area and terminate
the Licence and this Agreement.  If fewer than all of the Parties give such
notice of withdrawal, then the withdrawing Parties shall take all steps to
withdraw from the Licence and this Agreement on the earliest possible date and
sign and deliver all necessary instruments and documents to assign their
Participating Interest to the Parties that are not withdrawing, without any
compensation whatsoever, under Article 13.6.     13.2.B Any Party withdrawing
under Article 11.2 or under this Article 13 shall at its option: (i) withdraw
from the entirety of the Contract Area; or (ii) withdraw only from all
Exploration Operations under the Licence, but not from any Exploitation Area,
Commercial Discovery, or Discovery (whether appraised or not) made before such
withdrawal.  Such withdrawing Party shall retain its rights in Joint Property,
but only insofar as they relate to any such Exploitation Area, Commercial
Discovery, or Discovery, and shall abandon all other rights in Joint Property.

 

13.3 Rights of a Withdrawing Party

 

A withdrawing Party shall have the right to receive its Entitlement produced
through the effective date of its withdrawal. The withdrawing Party shall be
entitled to receive all information to which such Party is otherwise entitled
under this Agreement until the effective date of its withdrawal. After giving
its notification of withdrawal, a Party shall not be entitled to vote on any
matters coming before the Operating Committee, other than matters for which such
Party has financial responsibility.

 

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13.4 Obligations and Liabilities of a Withdrawing Party

 

13.4.A A withdrawing Party shall, after its notification of withdrawal, remain
liable only for its share of the following:

 

  13.4.A.1 Costs of Joint Operations, and costs of Exclusive Operations in which
such withdrawing Party has agreed to participate, that were approved by the
Operating Committee or Consenting Parties as part of a Work Program and Budget
(including a multi-year Work Program and Budget under Article 6.1.E) or AFE
before such Party’s notification of withdrawal, regardless of when they are
incurred;         13.4.A.2 Any Minimum Work Obligations for the current period
or phase of the Licence, and for any subsequent period or phase that has been
approved under Article 11.2 and with respect to which such Party has failed to
timely withdraw under Article 13.4.B;         13.4.A.3 Expenditures described in
Articles 4.2.B.14 and 13.5 related to an emergency occurring before the
effective date of a Party’s withdrawal, regardless of when such expenditures are
incurred;         13.4.A.4 All other obligations and liabilities of the Parties
or Consenting Parties, as applicable, concerning acts or omissions under this
Agreement before the effective date of such Party’s withdrawal for which such
Party would have been liable, had it not withdrawn from this Agreement; and    
    13.4.A.5 In the case of a partially withdrawing Party, any costs and
liabilities concerning Exploitation Areas, Commercial Discoveries and
Discoveries from which it has not withdrawn.         13.4.A.6 The obligations
and liabilities for which a withdrawing Party remains liable shall specifically
include its share of any costs of plugging and abandoning wells or portions of
wells in which it participated (or was required to bear a share of the costs
under Article 13.4.A.1) to the extent such costs of plugging and abandoning are
payable by the Parties under the Licence.  Any Encumbrances that were placed on
the withdrawing Party’s Participating Interest before such Party’s withdrawal
shall be fully satisfied or released, at the withdrawing Party’s expense, before
its withdrawal.  A Party’s withdrawal shall not relieve it from liability to the
non-withdrawing Parties concerning any obligations or liabilities attributable
to the withdrawing Party under this Article 13 merely because they are not
identified or identifiable at the time of withdrawal.

 

13.4.B Despite the foregoing, a Party shall not be liable for any operations or
expenditures it voted against (other than operations and expenditures described
in Article 13.4.A.2 or Article 13.4.A.3) if it sends notification of its
withdrawal within five (5) Days (or within twenty-four (24) hours for Urgent
Operational Matters) of the Operating Committee vote approving such operation or
expenditure.  Likewise, a Party voting against voluntarily entering into, or
extending, an Exploration Period or Exploitation Period or any phase of the
Licence, or voting against voluntarily extending the Licence shall not be liable
for the Minimum Work Obligations associated therewith provided that it sends
notification of its withdrawal within thirty (30) Days of such vote under
Article 11.2.

 

13.5 Emergency

 

If a well goes out of control or a fire, blow out, sabotage or other emergency
occurs before the effective date of a Party’s withdrawal, the withdrawing Party
shall remain liable for its Participating Interest share of the costs of such
emergency, regardless of when they are incurred.

 

13.6 Assignment

 

A withdrawing Party shall assign its Participating Interest free of cost to each
of the non-withdrawing Parties in the proportion that each of their
Participating Interests (before the withdrawal) bears to the total Participating
Interests of all the non-withdrawing Parties (before the withdrawal), unless the
non-withdrawing Parties agree otherwise. The costs associated with the
withdrawal and assignments shall be borne by the withdrawing Party.

 

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13.7 Approvals

 

A withdrawing Party shall promptly join in such actions as may be necessary or
desirable to obtain any Government approvals required in connection with the
withdrawal and assignments. The non-withdrawing Parties shall use reasonable
endeavors to assist the withdrawing Party in obtaining such approvals. If the
Government does not approve a Party’s withdrawal and assignment to the other
Parties, then the withdrawing Party shall at its option either (1) retract its
notice of withdrawal by notice to the other Parties and remain a Party as if
such notice of withdrawal had never been sent, or (2) to the extent allowed
under the Licence and Laws hold its Participating Interest in trust for the
exclusive benefit of the non-withdrawing Parties with the right to be reimbursed
by the non-withdrawing Parties for any subsequent costs and liabilities incurred
by it for which it would not have been liable, had it successfully withdrawn.
Any penalties or costs incurred by the Parties in connection with such
withdrawal shall be borne by the withdrawing Party.

 

13.8 Security

 

A Party withdrawing from this Agreement and the Licence under this Article 13
shall provide Security satisfactory to the other Parties to satisfy any
obligations or liabilities for which the withdrawing Party remains liable under
Article 13.4, but which become due after its withdrawal, including Security to
cover the costs of Abandonment, if applicable.

 

13.9 Withdrawal or Abandonment by All Parties

 

If all Parties decide to withdraw, the Parties agree that they shall be bound by
the terms and conditions of this Agreement for so long as may be necessary to
wind up the affairs of the Parties with the Government, to satisfy any
requirements of the Licence and the Laws, and to facilitate the sale,
disposition or abandonment of property or interests held by the Joint Account,
all under Article 2.

 

ARTICLE 14 - RELATIONSHIP OF PARTIES AND TAX

 

14.1 Relationship of Parties

 

The rights, duties, obligations, and liabilities of the Parties under this
Agreement shall be individual, not joint or collective. It is not the intention
of the Parties to create, nor shall this Agreement be deemed or construed to
create, a mining or other partnership, joint venture or association or (except
as explicitly provided in this Agreement) a trust. This Agreement shall not be
deemed or construed to authorize any Party to act as an agent, servant or
employee for any other Party for any purpose whatsoever except as explicitly set
forth in this Agreement. In their relations with each other under this
Agreement, the Parties shall not be considered fiduciaries except as expressly
provided in this Agreement.

 

14.2 Tax

 

Each Party shall be responsible for reporting and discharging its own tax
measured by the profit or income of the Party and the satisfaction of such
Party’s share of all contract obligations under the Licence and under this
Agreement. Each Party shall protect, defend, and indemnify each other Party from
any damage, loss, cost or liability arising from the indemnifying Party’s
failure to report and discharge such taxes or satisfy such obligations. The
Parties intend that all income and all tax benefits (including deductions,
depreciation, credits and capitalization) regarding the expenditures made by the
Parties under this Agreement will be allocated by the Government tax authorities
to the Parties based on the share of each tax item actually received or
allocated to the Participating Interest share of each Party. If such allocation
is not accomplished due to the application of the Laws or other Government
action, the Parties shall attempt to adopt mutually agreeable arrangements that
will allow the Parties to achieve the financial results intended. Operator shall
provide each Party, in a timely manner and at such Party’s sole expense, with
such information concerning Joint Operations as such Party may reasonably
request for preparation of its tax returns or responding to any audit or other
tax proceeding.

 

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14.3 United States Tax Election

 

14.3.A If, for United States federal income tax purposes, this Agreement and the
operations under this Agreement are regarded as a partnership and if the Parties
have not agreed to form a tax partnership, each U.S. Party elects to be excluded
from the application of all of the provisions of Subchapter “K”, Chapter 1,
Subtitle “A” of the United States Internal Revenue Code of 1986, as amended (the
“Code”), to the extent permitted and authorized by Section 761(a) of the Code
and the regulations promulgated under the Code.  Operator, if it is a U.S.
Party, is authorized and directed to sign and file for each U.S. Party such
evidence of this election as may be required by the Internal Revenue Service,
including all of the returns, statements, and data required by United States
Treasury Regulations Sections 1.761-2 and 1.6031(a)-1(b)(5) and shall provide a
copy of such filing to each U.S. Party.  However, if Operator is not a U.S.
Party, the Party who holds the greatest Participating Interest among the U.S.
Parties shall fulfill the obligations of Operator under this Article
14.3.  Should there be any requirement that any U.S. Party give further evidence
of this election, each U.S. Party shall execute such documents and furnish such
other evidence as may be required by the Internal Revenue Service or as may be
necessary to evidence this election.     14.3.B No Party shall give any notice
or take any other action inconsistent with the foregoing election.  If any
income tax laws of any state or other political subdivision of the United States
or any future income tax laws of the United States or any such political
subdivision contain provisions similar to those in Subchapter “K”, Chapter 1,
Subtitle “A” of the Code, under which an election similar to that provided by
Section 761(a) of the Code is permitted, each U.S. Party shall make such
election as may be permitted or required by such laws.  In making the foregoing
election or elections, each U.S. Party states that the income derived by it from
operations under this Agreement can be adequately determined without the
computation of partnership taxable income.     14.3.C Unless approved by every
Non-U.S. Party, no activity shall be conducted under this Agreement that would
cause any Non-U.S. Party to be deemed to be engaged in a trade or business
within the United States under United States income tax laws and regulations.  
  14.3.D A Non-U.S. Party shall not be required to do any act or sign any
instrument that might subject it to the taxation jurisdiction of the United
States.     14.3.E For the purposes of this Article 14.3, “U.S. Party” shall
mean any Party that is subject to the income tax law of the United States in
respect with operations under this Agreement.  “Non-U.S. Party” shall mean any
Party that is not subject to such income tax law.

 

ARTICLE 15 - VENTURE INFORMATION - CONFIDENTIALITY - INTELLECTUAL PROPERTY

 

15.1 Venture Information

 

Except as otherwise provided in this Article 15 or in Article 4.4 and Article
8.4.A, each Party is entitled to receive all Venture Information related to
operations in which such party is a participant. “Venture Information” means any
information and results developed or acquired as a result of Joint Operations
and shall be Joint Property, unless provided otherwise under this Agreement and
the Licence. Each Party shall have the right to use all Venture Information it
receives without accounting to any other Party, subject to any applicable
patents and any limitations set forth in this Agreement and the Licence. For
purposes of this Article 15, such right to use shall include, the rights to
copy, prepare derivative works, disclose, license, distribute, and sell.

 

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15.2 Confidentiality

 

15.2.A Subject to the provisions of the Licence and this Article 15, the Parties
agree that all information in relation with Joint Operations or Exclusive
Operations shall be considered confidential and shall be kept confidential, and
shall not be disclosed during the term of the Licence and for a period of two
(2) years afterwards to any person or entity not a Party to this Agreement,
except:

 

  15.2.A.1 To an Affiliate under Article 15.1.B;         15.2.A.2 To a
governmental agency or other entity when required by the Licence;        
15.2.A.3 To the extent such information must be furnished in compliance with the
applicable law or regulations, or pursuant to any legal proceedings or because
of any order of any court binding upon a Party;         15.2.A.4 To prospective
or actual attorneys engaged by any Party where disclosure of such information is
essential to such attorney’s work for such Party;         15.2.A.5 To
prospective or actual contractors and consultants engaged by any Party where
disclosure of such information is essential to such contractor’s or consultant’s
work for such Party;         15.2.A.6 To a bona fide prospective transferee of a
Party’s Participating Interest to the extent appropriate in order to allow the
assessment of such Participating Interest (including an entity with whom a Party
and/or its Affiliates are conducting bona fide negotiations directed toward a
merger, consolidation, or the sale of a majority of its or an Affiliate’s
shares);         15.2.A.7 To a bank or other financial institution to the extent
appropriate to a Party arranging for funding;         15.2.A.8 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 if any Party desires to disclose information in an
annual or periodic report to its or its Affiliates’ shareholders and to the
public and if such disclosure is not required under any rules or requirements of
any government or stock exchange, then such Party shall comply with Article
20.3;         15.2.A.9 To its respective employees for the purposes of Joint
Operations or Exclusive Operations, as applicable, subject to each Party taking
customary precautions to ensure such information is kept confidential; and      
  15.2.A.10 Any information that, through no fault of a Party, becomes a part of
the public domain.

 

15.2.B Disclosure under Articles 15.2.A.5, 15.2.A.6, and 15.2.A.7 shall not be
made unless before 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 in Article 15.2.A and to
use the information for the sole purpose described in Articles 15.2.A.5,
15.2.A.6, and 15.2.A.7, whichever applies, with respect to the disclosing Party.

 

15.3 Intellectual Property

 

15.3.A Subject to Articles 15.3.C and 15.5 and unless provided otherwise in the
Licence, all intellectual property rights in the Venture Information shall be
Joint Property.  Each Party and its Affiliates have the right to use all such
intellectual property rights in their own operations (including joint operations
or a production sharing arrangement in which the Party or its Affiliates has an
ownership or equity interest) without the approval of any other
Party.  Decisions regarding obtaining, maintaining and licensing such
intellectual property rights shall be made by the Operating Committee, and the
associated costs shall be charged to the Joint Account.  With the unanimous
agreement of the Operating Committee concerning ownership, licensing rights, and
income distribution, the ownership of intellectual property rights in the
Venture Information may be assigned to the Operator or to a Party.

 

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15.3.B Nothing in this Agreement shall be deemed to require a Party to

 

  15.3.B.1 Divulge proprietary technology to any of the other Parties; or      
  15.3.B.2 Grant a license or other rights under any intellectual property
rights owned or controlled by such Party or its Affiliates to any of the other
Parties.

 

15.3.C If while carrying out activities charged to the Joint Account, a Party or
an Affiliate of a Party makes or conceives any inventions, discoveries, or
improvements that primarily relate to or are primarily based on the proprietary
technology of such Party or its Affiliates, then all intellectual property
rights to such inventions, discoveries, or improvements shall vest exclusively
in such Party and each other Party shall have a perpetual, royalty-free,
irrevocable license to use such inventions, discoveries, or improvements, but
only in connection with Joint Operations.     15.3.C Subject to Article 4.6.B,
all costs (including reasonable legal costs and attorneys’ fees) of defending,
settling, or otherwise handling any claim that is based on the actual or alleged
infringement of any intellectual property right shall be for the account of the
operation from which the claim arose, whether Joint Operations or Exclusive
Operations.

 

15.4 Continuing Obligations

 

Any Party ceasing to own a Participating Interest during the term of this
Agreement shall nonetheless remain bound by the obligations of confidentiality
in Article 15.2, and any Disputes in relation thereto shall be resolved under
Article 18.2.

 

15.5 Trades

 

Operator may, with approval of the Operating Committee, make well trades and
data trades for the benefit of the Parties, with any data so obtained to be
furnished to all Parties who participated in the cost of the data that was
traded. Operator shall cause any third party to such trade to enter into an
undertaking to keep the traded data confidential.

 

ARTICLE 16 - FORCE MAJEURE

 

If as a result of Force Majeure any Party is rendered unable, wholly or in part,
to carry out its obligations under this Agreement, other than the obligation to
pay any amounts due or to furnish Security, then the obligations of the Party
giving such notice, so far as and to the extent that the obligations are
affected by such Force Majeure, shall be suspended during the continuance of any
inability so caused and for such reasonable period afterwards as may be
necessary for the Party to put itself in the same position that it occupied
before the Force Majeure, but for no longer period. The Party claiming Force
Majeure shall notify the other Parties of the Force Majeure within a reasonable
time after the occurrence of the facts relied on and shall keep all Parties
informed of all significant developments. Such notice shall give reasonably full
particulars of the Force Majeure and also estimate the period of time that the
Party will probably require to remedy the Force Majeure. The affected Party
shall use all reasonable diligence to remove or overcome the Force Majeure
situation as quickly as possible in an economic manner but shall not be
obligated to settle any labor dispute except on terms acceptable to it, and all
such disputes shall be handled within the sole discretion of the affected Party.

 

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ARTICLE 17 - NOTICES

 

17.1 Form of Notices

 

17.1.A Except as otherwise specifically provided, all notices authorized or
required between the Parties by any of the provisions of this Agreement shall be
in writing (in English), shall be deemed to have been properly given when
addressed to the appropriate Parties at the addresses as set out below, and:

 

  17.1.A.1 delivered in person or by a recognized international courier service
maintaining records of delivery; or         17.1.A.2 transmitted by facsimile;
provided that the sender can and does provide evidence of successful and
complete transmission; or         17.1.A.3 transmitted by e-mail; provided that
the recipient transmits a manual written acknowledgment of successful receipt,
which the recipient shall have an affirmative duty to furnish promptly after
successful receipt.

 

Name: WESI PEL512 Pty Ltd Name: Discovery Energy SA Pty Ltd     Address: Suite
33.01, Chifley Tower Address: Level 8, 350 Collins Street     2 Chifley Square,
Sydney NSW 2000 Melbourne VIC 3000     Attention: Mr Simon Philis Attention: Mr
Keith Spickelmier     Email: sphilis@wesicorp.com Email: ks@discoveryenergy.com

 

17.1.B Oral communication does not constitute notice for purposes of this
Agreement, and telephone numbers for the Parties are listed above as a matter of
convenience only.  With respect to facsimile and/or e-mail communication
automatic delivery receipts issued without direct human authorization shall not
be evidence of effective notices for purposes of this Agreement.

 

17.2 Delivery of Notices

 

A notice given under this Agreement shall be deemed delivered only when received
by the Party to whom such notice is directed, and the time for such Party to
deliver any notice in response to such originating notice shall run from the
date the originating notice is received. “Received” for purposes of giving
notice under this Agreement shall mean actual delivery of the notice to the
address of the Party specified in Article 17.1 or to the most current address
specified in a notice under Article 17.3; provided that any notice sent by
facsimile or email after 5:00 p.m. on a Business Day or on a weekend or holiday
at the location of the receiving Party shall be deemed given on the next
following Business Day of the receiving Party.

 

17.3 Change of Address

 

Each Party shall have the right to change its address at any time and/or
designate that copies of all such notices be directed to another person at
another address, by giving written notice thereof to all other Parties.

 

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ARTICLE 18 - APPLICABLE LAW - DISPUTE RESOLUTION - WAIVER OF SOVEREIGN IMMUNITY

 

18.1 Applicable Law

 

The substantive laws of the State of South Australia, exclusive of any conflicts
of laws principles that could require the application of any other law, shall
govern this Agreement for all purposes.

 

18.2 Dispute Resolution

 

18.2.A Notification.  A Party who desires to submit a Dispute for resolution
shall commence the Dispute resolution process by providing the other parties to
the Dispute written notice of the Dispute (“Notice of Dispute”).  The Notice of
Dispute shall identify the parties to the Dispute and contain a brief statement
of the nature of the Dispute and the relief requested. The submission of a
Notice of Dispute shall toll any applicable statutes of limitation related to
the Dispute, pending the conclusion or abandonment of Dispute resolution
proceedings under this Article 18.     18.2.B Negotiations.  The parties to the
Dispute shall seek to resolve any Dispute by negotiation between Senior
Executives.  A “Senior Executive” means any individual who has authority to
negotiate the settlement of the Dispute for a Party.  Within thirty (30) Days
after the date of the receipt by each party to the Dispute of the Notice of
Dispute (which notice shall request negotiations among Senior Executives), the
Senior Executives representing the parties to the Dispute shall meet at a
mutually acceptable time and place to exchange relevant information in an
attempt to resolve the Dispute.  If a Senior Executive intends to be accompanied
at the meeting by an attorney, each other party’s Senior Executive shall be
given written notice of such intention at least three (3) Days in advance and
may also be accompanied at the meeting by an attorney.  Despite the above, any
Party may initiate arbitration proceedings under Article 18.2.C concerning such
Dispute within thirty (30) Days after the date of receipt of the Notice of
Dispute.     18.2.C Arbitration.  Any Dispute not finally resolved by
alternative Dispute resolution procedures set forth in Articles 18.2.B shall be
resolved through final and binding arbitration, it being the intention of the
Parties that this is a broad form arbitration agreement designed to encompass
all possible Disputes, including Disputes about the arbitrability of a Dispute.

 

  18.2.C.1 Rules. The arbitration shall be conducted under the arbitration rules
(as then in effect) of Australian Centre for Internal Commercial Arbitration
(ACICA) (the “Rules”).         18.2.C.2 Number of Arbitrators.  The arbitration
shall be conducted by three arbitrators, unless all parties to the Dispute agree
to a sole arbitrator within thirty (30) Days after the commencement of the
arbitration. For greater certainty, for purposes of this Article 18.2.C, the
commencement of the arbitration means the date on which the claimant’s request
or demand for, or notice of, arbitration is received by the other parties to the
Dispute.         18.2.C.3 Method of Appointment of the Arbitrators.  If the
arbitration is to be conducted by a sole arbitrator, then the arbitrator will be
jointly selected by the parties to the Dispute within thirty (30) Days after the
commencement of the arbitration.

 

If the arbitration is to be conducted by three arbitrators and there are only
two parties to the Dispute, then each party to the Dispute shall appoint one
arbitrator within thirty (30) Days of the commencement of the arbitration, and
the two arbitrators so appointed shall select the presiding arbitrator within
thirty (30) Days after the latter of the two arbitrators has been appointed by
the parties to the Dispute.

 

  18.2.C.4 Place of Arbitration. Unless otherwise agreed by all parties to the
Dispute, the place of arbitration shall be the the Melbourne Commercial
Arbitration and Mediation Centre.         18.2.C.5 Language.  The arbitration
proceedings shall be conducted in the English language and the arbitrator(s)
shall be fluent in the English language.

 

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  18.2.C.6 Entry of Judgment.  The award of the arbitral tribunal shall be final
and binding. Judgment on the award of the arbitral tribunal may be entered and
enforced under the non-exclusive jurisdiction of the Courts of the State of
Victoria.         18.2.C.7 Subject to Article 18.2.C.6, the Parties agree to
submit to the non-exclusive jurisdiction of the Courts of the State of Victoria
with respect only to any application for interim measures.         18.2.C.8
Notice.  All notices required for any arbitration proceeding shall be deemed
properly given if sent under Article 17.         18.2.C.9 Interest.  The award
shall include interest, as determined by the arbitral tribunal, from the date of
any default or other breach of this Agreement until the arbitral award is paid
in full.  Interest shall be awarded at the Agreed Interest Rate.        
18.2.C.10 Currency of Award.  The arbitral award shall be made and payable in
Australian dollars, free of any tax or other deduction.         18.2.C.11
Exemplary Damages.  The Parties waive their rights to claim or recover from each
other, and the arbitral tribunal shall not award, any punitive, multiple, or
other exemplary damages (whether statutory or common law) except to the extent
such damages have been awarded to a third party and are subject to allocation
between or among the parties to the Dispute.         18.2.C.12
Consolidation.  If the Parties initiate multiple arbitration proceedings, the
subject matters of which are related by common questions of law or fact and that
could result in conflicting awards or obligations, then all such proceedings may
be consolidated into a single arbitral proceeding.

 

18.2.D Confidentiality.  All negotiations, mediation, arbitration, and expert
determinations relating to a Dispute (including a settlement resulting from
negotiation or mediation, an arbitral award, documents exchanged or produced
during a mediation or arbitration proceeding, and memorials, briefs or other
documents prepared for the arbitration) are confidential and may not be
disclosed by the Parties, their employees, officers, directors, counsel,
consultants, and expert witnesses, except (under Article 15.2) to the extent
necessary to enforce this Article 18 or any arbitration award, to enforce other
rights of a Party, or as required by law; provided, however, that breach of this
confidentiality provision shall not void any settlement, expert determination or
award.

 

18.3 Expert Determination

 

For any decision referred to an expert under Article 8.4, 12.2 or 12.3, the
Parties hereby agree that such decision shall be conducted expeditiously by an
expert selected unanimously by the parties to the Dispute. The expert is not an
arbitrator of the Dispute and shall not be deemed to be acting in an arbitral
capacity. The Party desiring an expert determination shall give the other
parties to the Dispute written notice of the request for such determination. If
the parties to the Dispute are unable to agree upon an expert within ten (10)
Days after receipt of the notice of request for an expert determination, then,
upon the request of any of the parties to the Dispute, the International Centre
for Expertise of the International Chamber of Commerce (ICC) shall appoint such
expert and shall administer such expert determination through the ICC’s Rules
for Expertise. The expert, once appointed, must not have any ex parte
communications with any of the parties to the Dispute concerning the expert
determination or the underlying Dispute. All Parties agree to cooperate fully in
the expeditious conduct of such expert determination and to provide the expert
with access to all facilities, books, records, documents, information, and
personnel necessary to make a fully informed decision in an expeditious manner.
Before issuing his final decision, the expert shall issue a draft report and
allow the parties to the Dispute to comment on it. The expert shall endeavor to
resolve the Dispute within thirty (30) Days (but no later than sixty (60) Days)
after his appointment, taking into account the circumstances requiring an
expeditious resolution of the matter in Dispute. The expert’s decision shall be
final and binding on the parties to the Dispute unless challenged in an
arbitration under Article 18.2.C within sixty (60) Days of the date the expert’s
final decision is received by the parties to the Dispute. In such arbitration
(i) the expert determination on the specific matter under Article 8.4, 12.2 or
12.3 shall be entitled to a rebuttable presumption of correctness; and (ii) the
expert shall not (without the written consent of the parties to the Dispute) be
appointed to act as an arbitrator or as adviser to the parties to the Dispute.

 

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18.4 Waiver of Sovereign Immunity

 

Any Party that now or later has a right to claim sovereign immunity for itself
or any of its assets hereby waives any such immunity to the fullest extent
permitted by the laws of any applicable jurisdiction. This waiver includes
immunity from:

 

18.4.A any expert determination, mediation, or arbitration proceeding commenced
under this Agreement;     18.4.B any judicial, administrative or other
proceedings to aid the expert determination, mediation, or arbitration commenced
under this Agreement; and     18.4.C any effort to confirm, enforce, or execute
any decision, settlement, award, judgment, service of process, execution order
or attachment (including pre-judgment attachment) that results from an expert
determination, mediation, arbitration or any judicial or administrative
proceedings commenced under this Agreement.

 

For the purposes of this waiver only, each Party acknowledges that its rights
and obligations under this Agreement are of a commercial and not a governmental
nature.

 

ARTICLE 19 - GENERAL PROVISIONS

 

19.1 Conduct of the Parties

 

19.1.A Each Party with regard to operations and/or activities under this
Agreement (i) warrants that such Party and its Affiliates and their respective
directors, officers, employees and personnel have not made, offered, or
authorized, and (ii) covenants that such Party and its Affiliates and their
respective directors, officers, employees, and personnel will not make, offer,
or authorize, any payment, gift, promise or other advantage, whether directly or
through any other person or entity, to or for the use or benefit of any Public
Official, any political party, political party official, or candidate for
office, or any other individual or entity, where such payment, gift, promise or
advantage would violate the Anti-Bribery Laws and Obligations applicable to such
Party.     19.1.B Each Party shall as soon as possible notify the other Parties
of any investigation or proceeding initiated by a governmental authority
relating to an alleged violation of applicable Anti-Bribery Laws and Obligations
by such Party, or its Affiliates, or any of their directors, officers,
employees, personnel, or any service providers of such Party or its Affiliates,
concerning operations and activities under this Agreement. Such Party shall use
reasonable efforts to keep the other Parties informed as to the progress and
disposition of such investigation or proceeding, except that such Party shall
not be obligated to disclose to the other Parties any information that would be
considered legally privileged.     19.1.C Each Party shall indemnify the other
Parties for any damages, losses, penalties, costs (including reasonable legal
costs and attorneys’ fees), and liabilities arising from, or related to the
events underlying:

 

  19.1.C.1 such Party’s admission of allegations made by a governmental
authority concerning operations and/or activities under this Agreement that such
Party or its Affiliates or their directors, officers, employees and personnel
have violated Anti-Bribery Laws and Obligations applicable to such Party; or    
    19.1.C.2 the final adjudication concerning operations and/or activities
under this Agreement that such Party or its Affiliates or their directors,
officers, employees and personnel  have violated Anti-Bribery Laws and
Obligations applicable to such Party.

 

Such indemnity obligations shall survive termination or expiration of this
Agreement.

 

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19.1.D Each Party shall concerning matters that are the subject of this
Agreement:

 

  19.1.D.1 Devise and maintain adequate internal controls concerning such
Party’s undertakings under Article 20.1.A;         19.1.D.2 Establish and
prepare its books and records in accordance with generally accepted accounting
practices applicable to such Party;         19.1.D.3 Properly record and report
such Party’s transactions in a manner that accurately and fairly reflects in
reasonable detail such Party’s assets and liabilities;         19.1.D.4 Retain
such books and records for a period of at least 6 Calendar Years; and        
19.1.D.5 Comply with the laws applicable to such Party.

 

19.1.E Each Party must be able to rely on the adequacy of the other Parties’
system of internal controls, and on the adequacy of full disclosure of the
facts, and of financial and other information concerning operations and/or
activities under this Agreement.     19.1.F Each Party shall promptly respond in
reasonable detail to any reasonable request from any other Party concerning a
notice sent by such Party under Article 19.1.B and shall furnish applicable
documentary support for such Party’s response, including showing such Party’s
compliance with the undertakings set out in Article 19.1.A and Article 19.1.D,
except that such Party shall not be obligated to disclose to the other Parties
any information that would be considered legally privileged.

 

19.2 Conflicts of Interest

 

19.2.A Operator undertakes that it shall avoid any conflict of interest between
its own interests (including the interests of Affiliates) and the interests of
the other Parties in dealing with suppliers, customers and all other
organizations or individuals doing or seeking to do business with the Parties
concerning activities contemplated under this Agreement.     19.2.B The
provisions of the preceding paragraph shall not apply to:

 

  19.2.B.1 Operator’s performance that is in accordance with the local
preference laws or policies of the Government; or         19.2.B.2 Operator’s
acquisition of products or services from an Affiliate, or the sale of products
to an Affiliate, made under this Agreement.

 

19.2.C Unless otherwise agreed, the Parties and their Affiliates are free to
engage or invest (directly or indirectly) in an unlimited number of activities
or businesses, any one or more of which may be related to or in competition with
the business activities contemplated under this Agreement, without having or
incurring any obligation to offer any interest in such business activities to
any Party.

 

19.3 Public Announcements

 

19.3.A Operator shall be responsible for the preparation and release of all
public announcements and statements regarding this Agreement or the Joint
Operations; provided that no public announcement or statement shall be issued or
made unless, before its release, all the Parties have been furnished with a copy
of such statement or announcement and the approval of at least two (2) Parties
that are not Affiliates of Operator holding fifty percent (50%) or more of the
Participating Interests not held by Operator or its Affiliates has been
obtained.  If a public announcement or statement becomes necessary or desirable
because of danger to, or loss of, life, damage to property or pollution
resulting from activities arising under this Agreement, Operator is authorized
to issue and make such announcement or statement without prior approval of the
Parties, but Operator shall promptly furnish all the Parties with a copy of such
announcement or statement.

 

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19.3.B If a Party wishes to issue or make any public announcement or statement
regarding this Agreement or the Joint Operations, it shall not do so unless,
before the release of the public announcement or statement, such Party furnishes
all the Parties with a copy of such announcement or statement, and obtains the
approval of at least two (2) Parties which are not Affiliates holding fifty
percent (50%) or more of the Participating Interests not held by such announcing
Party or its Affiliates; provided that, despite any failure to obtain such
approval, no Party shall be prohibited from issuing or making any such public
announcement or statement if it is necessary to do so in order to comply with
the applicable laws, rules, or regulations of any government, legal proceedings
or stock exchange having jurisdiction over such Party or its Affiliates as set
forth in Article 15.2.

 

19.4 Successors and Assignees

 

Subject to the limitations on Transfer contained in Article 12, this Agreement
shall inure to the benefit of and be binding upon the successors and assignees
of the Parties except for any successor or assignee of DESAL’s rights,
interests, or obligations in the West Block.

 

19.5 Waiver

 

No waiver by any Party of any one or more defaults by another Party in the
performance of any provision of this Agreement shall operate or be construed as
a waiver of any future default or defaults by the same Party, whether of a like
or of a different character. Except as expressly provided in this Agreement no
Party shall be deemed to have waived, released, or modified any of its rights
under this Agreement unless such Party has expressly stated, in writing, that it
does waive, release, or modify such right.

 

19.6 No Third Party Beneficiaries

 

Except as provided under Article 4.6.B, the interpretation of this Agreement
shall exclude any rights under legislative provisions conferring rights under a
contract to persons not a party to that contract.

 

19.7 Joint Preparation

 

Each provision of this Agreement shall be construed as though all Parties
participated equally in the drafting of the same. Consequently, the Parties
acknowledge and agree that any rule of construction that a document is to be
construed against the drafting party shall not be applicable to this Agreement.

 

19.8 Severance of Invalid Provisions

 

If and for so long as any provision of this Agreement shall be deemed to be
judged invalid for any reason whatsoever, such invalidity shall not affect the
validity or operation of any other provision of this Agreement except only so
far as shall be necessary to give effect to the construction of such invalidity,
and any such invalid provision shall be deemed severed from this Agreement
without affecting the validity of the balance of this Agreement.

 

19.9 Counterpart Execution

 

This Agreement may be signed in any number of counterparts and each such
counterpart shall be deemed an original Agreement for all purposes; provided
that no Party shall be bound to this Agreement unless and until all Parties have
signed a counterpart. For purposes of assembling all counterparts into one
document, Operator is authorized to detach the signature page from one or more
counterparts and, after signature of such page by the respective Party, attach
each signed signature page to a counterpart.

 

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19.10 Entirety

 

This Agreement, including any attachments, constitutes the entire agreement of
the Parties, supersedes all prior representations, understandings and
negotiations of the Parties relating to the subject matter of this Agreement,
and except as set out in Article 19.8, may not be modified except by a written
amendment signed by all Parties.

 

IN WITNESS of their agreement each Party has caused its duly authorized
representative to sign this instrument on the date indicated below such
representative’s signature.

 

For and on behalf of Discovery Energy SA Pty

Ltd ABN 89 158 204 052 in accordance with

section 127(1) of the Corporations Act 2001 (Cth):

)

)

)

              Signature of director   Signature of company secretary            
Name (please print)   Name (please print)                  

For and on behalf of WESI PEL512 Pty Ltd

ACN 635 946 682 in accordance with

section 127(1) of the Corporations Act 2001 (Cth):

)

)

)

              Signature of director   Signature of director             Name
(please print)   Name (please print)

 

63

 

 

EXHIBIT A

 

ACCOUNTING PROCEDURE

 

1

 

 

EXHIBIT B

 

CONTRACT AREA

 

[ex10-2_001.jpg]

 

2