##### 



May 24, 2007
 SHAREHOLDER RIGHTS PLAN AGREEMENT
 BETWEEN
 INTEROIL CORPORATION
 AND
 COMPUTERSHARE INVESTOR SERVICES INC.
 Made as of May 28, 2007




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May 24, 2007
 TABLE OF CONTENTS
 ARTICLE 1INTERPRETATION1.1
    
    Certain Definitions
    
    
    21.2
    
    Currency
    
    
    161.3
    
    Number and Gender
    
    
    161.4
    
    Sections and Headings
    
    
    161.5
    
    Statutory References
    
    
    161.6
    
    Determination of Percentage Ownership
    
    
    161.7
    
    Acting jointly or in Concert
    
    
    171.8
    
    Generally Accepted Accounting Principles
    
    
    17ARTICLE 2THE RIGHTS2.1
    
    Legend on Common Share Certificates
    
    
    172.2
    
    Initial Exercise Price; Exercise of Rights; Detachment of Rights
    
    
    182.3
    
    Adjustments to Exercise Price; Number of Rights
    
    
    212.4
    
    Date on Which Exercise is Effective
    
    
    272.5
    
    Execution, Authentication, Delivery and Dating of Rights Certificates
    
    
    282.6
    
    Registration, Transfer and Exchange
    
    
    282.7
    
    Mutilated, Lost, Stolen and Destroyed Rights Certificates
    
    
    292.8
    
    Persons Deemed Owners
    
    
    302.9
    
    Delivery and Cancellation of Certificates
    
    
    302.10
    
    Agreement of Rights Holders
    
    
    302.11
    
    Exclusion of Warranty by Rights Agent
    
    
    31ARTICLE 3ADJUSTMENTS TO THE RIGHTS3.1
    
    Flip in Event
    
    
    323.2
    
    Fiduciary Duties of the Board of Directors
    
    
    33ARTICLE 4THE RIGHTS AGENT4.1
    
    General
    
    
    344.2
    
    Merger, Amalgamation, Consolidation or Change of Name of Rights Agent
    
    
    354.3
    
    Duties of Rights Agent
    
    
    354.4
    
    Change of Rights Agent
    
    
    37ARTICLE 5MISCELLANEOUS5.1
    
    Redemption, Waiver, Extension and Termination
    
    
    385.2
    
    Expiration
    
    
    405.3
    
    Issuance of New Rights Certificates
    
    
    405.4
    
    Supplements and Amendments
    
    
    40




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- ii - 5.5
    
    Fractional Rights and Fractional Shares
    
    
    425.6
    
    Rights of Action
    
    
    425.7
    
    Holder of Rights Not Deemed a Shareholder
    
    
    435.8
    
    Notice of Proposed Actions
    
    
    435.9
    
    Notices
    
    
    435.10
    
    Costs of Enforcement
    
    
    445.11
    
    Regulatory Approvals
    
    
    445.12
    
    Declaration as to Non-Canadian and Non-United States Holders
    
    
    445.13
    
    Successors
    
    
    455.14
    
    Benefits of this Agreement
    
    
    455.15
    
    Shareholder Review
    
    
    455.16
    
    Determinations and Actions by the Board of Directors
    
    
    455.17
    
    Governing Law
    
    
    465.18
    
    Language
    
    
    465.19
    
    Counterparts
    
    
    465.20
    
    Severability
    
    
    465.21
    
    Effective Date
    
    
    465.22
    
    Time of the Essence
    
    
    46




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SHAREHOLDER RIGHTS PLAN AGREEMENT
 th
 INTEROIL CORPORATION Business
Corporations Act Corporation
  COMPUTERSHARE INVESTOR SERVICES INC. Rights Agent
 WHEREAS:
 A.
    
    The Board of Directors has determined that it is advisable to adopt a shareholder rights plan
(the Rights Plan) to ensure, to the extent possible, that all shareholders of the
Corporation are treated fairly in connection with any take-over offer for the Corporation or
other acquisition of control of the Corporation.B.
    
    In order to implement the Rights Plan, the Board of Directors has:
 (a)
    
    authorized and declared a distribution of one right (a Right) effective at
the Close of Business at the Record Time in respect of each Common Share outstanding at
the Close of Business at the Record Time;(b)
    
    authorized the issuance of one Right in respect of each Common Share issued
after the Record Time and prior to the earlier of the Separation Time and the
Expiration Time; and(c)
    
    authorized the issuance of Rights Certificates to holders of Rights pursuant to
the terms and subject to the conditions set forth herein.
 C.
    
    Each Right entitles the holder thereof, after the Separation Time, to purchase securities of
the Corporation pursuant to the terms and subject to the conditions set forth herein.
 D.
    
    The Corporation desires to appoint the Rights Agent to act on behalf of the Corporation, and
the Rights Agent is willing to so act, in connection with the issuance, transfer, exchange and
replacement of Rights Certificates, the exercise of Rights and other matters referred to
herein.




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##### 



- 2 - ARTICLE 1
 INTERPRETATION
 1.1
    
    Certain Definitions
  (a)
    
    Acquiring Person means any Person who is the Beneficial Owner of 20% or more
of the outstanding Common Shares, but does not include:
 (i)
    
    the Corporation or any Subsidiary of the Corporation;(ii)
    
    any Person who becomes the Beneficial Owner of 20% or more of
the outstanding Common Shares as a result of one or any combination of:
 (A)
    
    a Common Share Reduction,(B)
    
    a Permitted Bid Acquisition,(C)
    
    an Exempt Acquisition, and(D)
    
    a Pro Rata Acquisition,
 provided, however, that if a Person shall become the Beneficial Owner of 20%
or more of the outstanding Common Shares by reason of one or any combination
of a Common Share Reduction, a Permitted Bid Acquisition, an Exempt
Acquisition and a Pro Rata Acquisition, and thereafter becomes the
Beneficial Owner of more than an additional 1.0% of the number of Common
Shares outstanding pursuant to one or any combination of a Common Share
Reduction, a Permitted Bid Acquisition, an Exempt Acquisition or a Pro Rata
Acquisition or any combination thereof, then, as of the date that such
Person becomes a Beneficial Owner of such additional Common Shares, such
Person shall become an Acquiring Person;(iii)
    
    for the period of 10 days after the Disqualification Date (as
hereinafter defined), any Person who becomes the Beneficial Owner of 20% or
more of the outstanding Common Shares as a result of such Person becoming
disqualified from relying on Clause 1.1(d)(ii)(B) where such disqualification
results solely because such Person is making or has announced a current
intention to make a Take-over Bid, either alone or by acting jointly or in
concert with any other Person, unless such disqualified Person during such 10
day period acquires more than 1.0% of the number of Common Shares then
outstanding in addition to those Common Shares such disqualified Person already
holds. For the purposes of this definition, Disqualification Date means the
first date of public announcement that




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- 3 - such Person is making or intends to make a Take-over Bid, either alone or by
acting jointly or in concert with another Person;(iv)
    
    an underwriter or a member of a banking or selling group that becomes
the Beneficial Owner of 20% or more of the Common Shares in connection with a
distribution of securities pursuant to an underwriting agreement with the
Corporation; or(v)
    
    a Grandfather Person provided, however, that if such Person shall
thereafter become the Beneficial Owner of more than an additional 1% of the
number of Common Shares of the Corporation outstanding other than pursuant to
share acquisitions or redemptions of shares by a Common Share Reduction, a
Permitted Bid Acquisition, an Exempt Acquisition, a Pro Rata Acquisition or as
compensation for acting as an officer or director of the Corporation, then as
of the date of any such acquisition such Person shall become an Acquiring
Person.
 (b)
    
    Affiliate, when used to indicate a relationship with a specified company or
corporation, means a Person that directly, or indirectly, controls, or is controlled
by, or is under common control with, such specified company or corporation.(c)
    
    Associate, when used to indicate a relationship with a specified Person,
means any relative of such specified Person who has the same home as such specified
Person, or any person to whom such specified Person is married, or any person with whom
such specified Person is living in a conjugal relationship outside marriage, or any
relative of such spouse or other Person who has the same home as such specified Person.
 (d)
    
    (i)
    
    A Person shall be deemed the Beneficial Owner of, and to have Beneficial
Ownership of, and to Beneficially Own:
 (A)
    
    any securities of which such Person or any of
such Persons Affiliates or Associates is the owner at law or in
equity;(B)
    
    any securities of which such Person or any of
such Persons Affiliates or Associates has the right to acquire within
60 days (whether such right is exercisable immediately or within a
period of 60 days thereafter and whether or not on the condition or
occurrence of a contingency or the making of one or more payments) upon
the conversion, exchange or exercise of any Convertible Security or
pursuant to any agreement, arrangement, pledge or understanding,
whether or not in writing, other than:
 (1)
    
    customary agreements with and
between underwriters and banking group or selling group members
with respect to a distribution of securities, and




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- 4 - (2)
    
    pledges of securities in the
ordinary course of the pledgees business; and
 (C)
    
    any securities that are Beneficially Owned
within the meaning of Clauses 1.1(d)(i)(A) or 1.1(d)(i)(B) by any other
Person with which such Person is acting jointly or in concert.
 (ii)
    
    Notwithstanding the provisions of Clause 1.1(d)(i), a Person
shall not be deemed the Beneficial Owner of, or to have Beneficial
Ownership of, or to Beneficially Own, any security because:
 (A)
    
    
    (1
    )
    
    the holder of such security has agreed to
deposit or tender such security to a Take-over Bid made by such Person
or any of such Persons Affiliates or Associates or any other Person
referred to in Clause 1.1(d)(i)(C) pursuant to a Permitted Lock-up
Agreement, or(2
    )
    
    such security has been deposited
or tendered pursuant to a Take-over Bid made by such Person or
any of such Persons Affiliates or Associates or made by any
other Person acting jointly or in concert with such Person until
such deposited or tendered security has been taken up;
 (B)
    
    such Person, any Affiliate or Associate of such
Person or any other Person acting jointly or in concert with such
Person holds such security; provided that:
 (1)
    
    the ordinary business of such
Person (the Portfolio Manager) includes the management or
administration of investment funds for other Persons and such
security is held by the Portfolio Manager in the ordinary course
of such business in the performance of the Portfolio Managers
duties for the account of any other Person (a Client),
including non-discretionary accounts held on behalf of a Client
by a registered broker or dealer,(2)
    
    the ordinary business of such
Person (the Fund Manager) is manager or trustee of one or more
mutual funds registered or qualified to issue its securities
under the laws of Canada or the United States of America or any
province or state thereof (each, a Mutual Fund), or is a
Mutual Fund, and holds such security for the purposes of its
activity as such Fund Manager or Mutual Fund,(3)
    
    such Person (the Trust Company)
is licensed to carry on the business of a trust company under
applicable laws and, as such, acts as trustee or administrator
or in a similar capacity in relation to the estates of deceased
or




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- 5 - incompetent Persons (each, an Estate Account) or in
relation to other accounts (each, an Other Account) and
holds such security in the ordinary course of such duties for
such Estate Accounts or for such Other Accounts,(4)
    
    such Person (the Crown Agent)
is established by statute for purposes that include, and the
ordinary business or activity of such Person includes, the
management of investment funds for employee benefit plans,
pension plans, insurance plans, or various public bodies, or(5)
    
    such Person (the Plan
Administrator) is the administrator or the trustee of one or
more pension funds or plans registered under the laws of Canada
or the United States of America or any province or state thereof
(each, a Plan), or is a Plan, and holds such security for the
purposes of its activity as such Plan Administrator or Plan,
 provided; however, that in any of the foregoing cases, the Portfolio
Manager, the Fund Manager, the Mutual Fund, the Trust Company, the
Crown Agent, the Plan Administrator or the Plan, as the case may be,
is not then making or has not then announced an intention to make, a
Take-over Bid, other than an Offer to Acquire Common Shares or other
securities pursuant to a distribution by the Corporation, a Permitted
Bid or by means of ordinary market transactions (including
pre-arranged trades entered into in the ordinary course of business
of such Person) executed through the facilities of a stock exchange
or organized over-the-counter market in respect of securities of the
Corporation, alone or by acting jointly or in concert with any other
Person;(C)
    
    such Person is a Client of the same Portfolio
Manager as another Person on whose account the Portfolio Manager holds
such security, or because such Person is an Estate Account or an Other
Account of the same Trust Company as another Person on whose account
the Trust Company holds such security or because such Person is a Plan
with the same Plan Administrator as another Plan on whose account the
Plan Administrator holds such security;(D)
    
    such Person is a Client of a Portfolio Manager
and such security is owned at law or in equity by the Portfolio Manager
or because such Person is an Estate Account or an Other Account of a
Trust Company and such security is owned at law or in equity by the
Trust Company or such Person is a Plan and such security is owned at
law or in equity by the Plan Administrator of such Plan; or




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- 6 - (E)
    
    such Person is the registered holder of
securities as a result of carrying on the business, or acting as a
nominee, of a securities depositary.
 For the purposes of this Agreement, in determining the percentage of the
outstanding Common Shares with respect to which a Person is or is deemed to
be the Beneficial Owner, any unissued Common Shares as to which such Person
is deemed the Beneficial Owner pursuant to this Subsection 1.1(d) shall be
deemed outstanding.
 (e)
    
    Board of Directors means the board of directors of the Corporation or any
duly constituted and empowered committee thereof.(f)
    
    Business Day means any day, other than a Saturday or Sunday or a day on which
banking institutions in Toronto, Ontario are authorized or obligated by law to close.(g)
    
    Canadian Dollar Equivalent of any amount which is expressed in United States
dollars means on any day the Canadian dollar equivalent of such amount determined by
reference to the U.S.  Canadian Exchange Rate in effect on such date.(h)
    
    Close of Business on any given date means the time on such date (or, if such
date is not a Business Day, the time on the next Business Day) at which the principal
office of the transfer agent for the Common Shares in Toronto, Ontario (or after the
Separation Time, the principal office of the Rights Agent in Toronto, Ontario) is
closed to the public.(i)
    
    Closing Price per security of any securities on any date of determination
means:
 (i)
    
    the closing board lot sale price or, if such price is not
available, the average of the closing bid and asked prices, for each of such
securities as reported by the principal stock exchange or national securities
quotation system on which such securities are listed or admitted to trading
(provided that, if at the date of determination such securities are listed or
admitted to trading on more than one stock exchange or national securities
quotation system, then such price or prices shall be determined based upon the
stock exchange or quotation system on which such securities are then listed or
admitted to trading on which the largest number of such securities were traded
during the most recently completed calendar year);(ii)
    
    if for any reason none of such prices is available on such day
or the securities are not listed or admitted to trading on a stock exchange or
a national securities quotation system, then the last sale price, or in case no
sale takes place on such date, the average of the high bid and low asked prices
for each of such securities in the over-the-counter market, as quoted by any
reporting system then in use; or




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- 7 - (iii)
    
    if for any reason none of such prices is available on such day
or the securities are not listed or admitted to trading on a stock exchange or
a national securities quotation system or quoted by any such reporting system,
then the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the securities selected in good
faith by the Board of Directors,
 provided, however, that (A) if for any reason none of such prices are available on
such date, then the Closing Price per security of such securities on such date
shall mean the fair value per security of the securities on such date as determined
by a nationally or internationally recognized investment dealer or investment banker
with respect to the fair value per security of such securities, and (B) if the
Closing Price so determined is expressed in United States dollars, then such amount
shall be converted to the Canadian Dollar Equivalent.(j)
    
    Co-Rights Agents has the meaning ascribed thereto in Subsection 4.1(a).(k)
    
    Common Share Reduction means an acquisition or redemption by the Corporation
of Common Shares which, by reducing the number of Common Shares outstanding, increases
the percentage of Common Shares Beneficially Owned by any Person to 20% or more of the
Common Shares then outstanding.(l)
    
    Common Shares means the common class shares in the share capital of the
Corporation as presently constituted, as such shares may be subdivided, consolidated,
reclassified or otherwise changed from time to time.(m)
    
    Competing Permitted Bid means a Take-over Bid that:
 (i)
    
    is made after another Permitted Bid has been made and prior to
the expiry of such Permitted Bid;(ii)
    
    satisfies all components of the definition of a Permitted Bid
other than the requirement set forth in Subclause 1.1(ii)(ii)(A)(1); and(iii)
    
    contains, and the take-up and payment for securities tendered
or deposited thereunder is subject to, irrevocable and unqualified conditions
that no Common Shares shall be taken up or paid for pursuant to such Take-over
Bid prior to the Close of Business on a date that is no earlier than the later
of:
 (A)
    
    35 days after the date of such Take-over Bid,
and(B)
    
    the earliest date on which Common Shares may be
taken up or paid for under any other Permitted Bid that preceded the
Competing Permitted Bid that is then in existence for the Common
Shares.
 (n)
    
    Controlled means as follows:




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- 8 - 
 (i)
    
    a body corporate is controlled by another Person if:
 (A)
    
    securities entitled to vote in the election of
directors carrying more than 50% of the votes for the election of
directors are held, directly or indirectly, by or for the benefit of
the other Person, and(B)
    
    the votes carried by such securities are
entitled, if exercised, to elect a majority of the board of directors
of such body corporate; and
 (ii)
    
    a Person which is not a body corporate is controlled by
another Person if more than 50% of the voting or equity interests of such
Person are held, directly or indirectly, by or for the benefit of the other
Person,
 and controls, controlling and under common control with shall be interpreted
accordingly.(o)
    
    Convertible Security means a security convertible or exchangeable into a
Common Share.(p)
    
    Disposition Date has the meaning ascribed thereto in Subsection 5.1(b).(q)
    
    Effective Date means May 28, 2007.(r)
    
    Election to Exercise has the meaning ascribed thereto in Clause 2.2(d)(ii).(s)
    
    Exchange means the Toronto Stock Exchange and any other exchange on which the
Common Shares may, from time to time, be listed for trading.(t)
    
    Exempt Acquisition means a share acquisition in respect of which the Board of
Directors has waived the application of Section 3.1 pursuant to Subsections 5.1(b),
5.1(d), or 5.1(f) or which was made on or prior to the Record Time.(u)
    
    Exercise Price means, as of any date, the price at which a holder of a Right
may purchase the securities issuable upon exercise of one whole Right and, until
adjustment thereof in accordance with the terms hereof, the Exercise Price shall be
$100.00.(v)
    
    Expansion Factor has the meaning ascribed thereto in Subclause
2.3(b)(iv)(A)(2).(w)
    
    Expiration Time means the earlier of:
 (i)
    
    the Termination Time; and




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- 9 - (ii)
    
    the Close of Business on the date on which the first annual
meeting of shareholders of the Corporation following the third year anniversary
of the Effective Date is held,
 provided, however, that if the resolution referred to in Section 5.15 is approved by
the Independent Shareholders in accordance with Section 5.15 at or prior to such
annual meeting, Expiration Time means the earlier of:
 (iii)
    
    the Termination Time; and(iv)
    
    the Close of Business on May 29, 2013.
 (x)
    
    Fiduciary means a trust company registered under the trust company
legislation of Canada or any province thereof, a trust company organized under the laws
of any state of the United States, a portfolio manager registered under the securities
legislation of one or more provinces of Canada or an investment adviser registered
under the United States Investment Advisers Act of 1940, as amended, or any other
securities legislation of the United States or any state of the United States.(y)
    
    Flip-in Event means a transaction or event in or pursuant to which any Person
becomes an Acquiring Person.(z)
    
    Grandfather Person means any Person who is the Beneficial Owner of 20% or
more of the outstanding Common Shares of the Corporation at the date of this Agreement.(aa)
    
    Holder has the meaning ascribed thereto in Section 2.8.(bb)
    
    Independent Shareholders means holders of outstanding Common Shares, other
than any:
 (i)
    
    Acquiring Person;(ii)
    
    Offeror other than a Person who at the relevant time is deemed
not to Beneficially Own such Common Shares by reason of Clause 1.1(d)(ii)(B);(iii)
    
    Affiliate or Associate of such Acquiring Person or Offeror;(iv)
    
    Person acting jointly or in concert with such Acquiring Person
or Offeror; or(v)
    
    employee benefit plan, stock purchase plan, deferred profit
sharing plan and any similar plan or trust for the benefit of employees of the
Corporation or a Subsidiary of the Corporation, unless the beneficiaries of
such plan or trust direct the manner in which the Common Shares are to be voted
or withheld from voting or direct whether or not the Common Shares are to be
tendered to a Take-over Bid.




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- 10 - 
 (cc)
    
    Market Price per security of any securities on any date of determination
means the average of the daily Closing Prices per security of such securities on each
of the 20 consecutive Trading Days through and including the Trading Day immediately
preceding such date of determination; provided, however, that if an event of a type
analogous to any of the events described in Section 2.3 shall have caused any Closing
Price used to determine the Market Price on any Trading Day not to be fully comparable
with the Closing Price on the Trading Day immediately preceding such date of
determination, each such Closing Price so used shall be appropriately adjusted in a
mariner analogous to the applicable adjustment provided for in Section 2.3 in order to
make it fully comparable with the Closing Price on the Trading Day immediately
preceding such date of determination.(dd)
    
    NBBCA means the Business Corporations Act(New Brunswick), and the
regulations thereunder, and any comparable or successor laws or regulations thereto.(ee)
    
    Nominee has the meaning ascribed thereto in Subsection 2.2(c).(ff)
    
    Offer to Acquire shall include:
 (i)
    
    an offer to purchase or a solicitation of an offer to sell
Common Shares, or a public announcement of an intention to make such an offer
or solicitation; and(ii)
    
    an acceptance of an offer to sell Common Shares, whether or not
such offer to sell has been solicited,
 or any combination thereof, and the Person accepting an offer to sell shall be
deemed to be making an Offer to Acquire to the Person that made the offer to sell.(gg)
    
    Offeror means a Person who has announced a current intention to make, or who
is making, a Take-over Bid.(hh)
    
    Offerors Securities means the aggregate of the Common Shares Beneficially
Owned on the date of a Take-over Bid by an Offeror.(ii)
    
    Permitted Bid means a Take-over Bid made by way of a Take-over Bid circular
and which also complies with the following additional provisions:
 (i)
    
    the Take-over Bid is made to all holders of record of Common
Shares other than the Offeror; and(ii)
    
    the Take-over Bid contains, and the take-up and payment for
securities tendered or deposited thereunder is subject to, irrevocable and
unqualified conditions that:




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- 11 - 
 (A)
    
    no Common Shares shall be taken up or paid for
pursuant to the Take-over Bid:
 (1)
    
    prior to the Close of Business on
a date which is not less than 60 days following the date of the
Take-over Bid, and(2)
    
    unless, at the Close of Business
on such date, more than 50% of the then outstanding Common
Shares held by Independent Shareholders have been deposited or
tendered pursuant to the Take-over Bid and have not been
withdrawn,
 (B)
    
    unless the Take-over Bid is withdrawn, Common
Shares may be deposited pursuant to such Take-over Bid at any time
prior to the Close of Business on the date of the first take-up of or
payment for Common Shares,(C)
    
    any Common Shares deposited pursuant to the
Take-over Bid may be withdrawn until taken up and paid for, and(D)
    
    in the event that the requirement set forth in
Subclause 1.1(ii)(ii)(A)(2) is satisfied, the Offeror will make a
public announcement of that fact and the Take-over Bid will remain open
for deposits and tenders of Common Shares for not less than 10 Business
Days from the date of such public announcement,
 provided that, should a Permitted Bid cease to be a Permitted Bid because it
ceases to meet any or all of the requirements mentioned above prior to the
time it expires (after giving effect to any extension) or is withdrawn, then
any acquisition of Common Shares made pursuant to such Permitted Bid shall
not be a Permitted Bid Acquisition. The term Permitted Bid shall include a
Competing Permitted Bid.
 (jj)
    
    Permitted Bid Acquisition means an acquisition of Common Shares made pursuant
to a Permitted Bid or a Competing Permitted Bid.(kk)
    
    Permitted Lock-up Agreement means an agreement between a Person and one or
more holders of Common Shares (each, a Locked-up Person) (the terms of which are
publicly disclosed and a copy of which is made available to the public, including the
Corporation, not later than the date of the Lock-up Bid (as defined below) or, if the
Lock-up Bid has been made prior to the date on which such agreement is entered into,
not later than the first Business Day following the date of such agreement) pursuant to
which each such Locked-up Person agrees to deposit or tender Common Shares to a
Take-over Bid (the Lock-up Bid) made or to be made by the Person, any of such
Persons Affiliates or Associates or any other Person acting jointly or in concert with
such Person, provided that:




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- 12 - 
 (i)
    
    the agreement permits any Locked-up Person to terminate its
obligation to deposit or tender to or not to withdraw Common Shares from the
Lock-up Bid in order to tender or deposit the Common Shares to another
Take-over Bid or support another transaction:
 (A)
    
    where the price or value per Common Share
offered under such other Take-over Bid or transaction is higher than
the price or value per Common Share offered under the Lock-up Bid, or(B)
    
    if:
 (1)
    
    the price or value per Common
Share offered under the other Take-over Bid or transaction
exceeds by as much as or more than a specified amount (the
Specified Amount) the price or value per Common Share offered
under the Lock-up Bid, provided that such Specified Amount is
not greater than 7% of the price or value per Common Share
offered under the Lock-up Bid, or(2)
    
    the number of Common Shares to be
purchased under the other Take-over Bid or transaction exceeds
by as much as or more than a specified number (the Specified
Number) the number of Common Shares that the Offeror has
offered to purchase under the Lock-up Bid at a price or value
per Common Share that is not less than the price or value per
Common Share offered under the Lock-up Bid, provided that the
Specified Number is not greater than 7% of the number of Common
Shares offered under the Lock-up Bid,
 and, for greater clarity, the agreement may contain a right of first refusal
or require a period of delay to give such Person an opportunity to match a
higher price in another Take-over Bid or transaction or other similar
limitation on a Locked-up Persons right to withdraw Common Shares from the
agreement, so long as the limitation does not preclude the exercise by the
Locked-up Person of the right to withdraw Common Shares during the period of
the other Take-over Bid or transaction; and(ii)
    
    no break-up fees, top-up fees, penalties, expenses or other
amounts that exceed in the aggregate the greater of:
 (A)
    
    the cash equivalent of 2.5% of the price or
value of the consideration payable under the Lock-up Bid to a Locked-up
Person; and(B)
    
    50% of the amount by which the price or value
of the consideration payable under another Take-over Bid or transaction
to a Locked-up Person exceeds the price or value of the consideration
that such Locked-up Person would have received under the Lock-up Bid,




---



##### 



- 13 - shall be payable by a Locked-up Person pursuant to the agreement in the
event a Locked-up Person fails to deposit or tender Common Shares to the
Lock-up Bid or withdraws Common Shares previously tendered thereto in order
to accept the other Take-over Bid or support another transaction.
 (ll)
    
    Person includes any individual, firm, partnership, association, trust,
trustee, executor, administrator, legal personal representative, government,
governmental body or authority, corporation, or other incorporated or unincorporated
organization, syndicate or other entity.(mm)
    
    Pro Rata Acquisition means an acquisition by a Person of Common Shares
pursuant to:
 (i)
    
    any dividend reinvestment plan or share purchase plan of the
Corporation made available to all holders of Common Shares (other than holders
resident in any jurisdiction where participation in any such plan is restricted
or impractical as a result of applicable law);(ii)
    
    a stock dividend, a stock split or other event pursuant to
which such Person becomes the Beneficial Owner of Common Shares on the same pro
rata basis as all other holders of Common Shares of the same class or series;(iii)
    
    the acquisition or exercise of rights to purchase Common
Shares distributed to all holders of Common Shares (other than holders resident
in any jurisdiction where such distribution is restricted or impractical as a
result of applicable law) by the Corporation pursuant to a rights offering (but
only if such rights are acquired directly from the Corporation); or(iv)
    
    a distribution of Common Shares or Convertible Securities made
pursuant to a prospectus or by way of a private placement or a conversion or
exchange of any Convertible Security,
 provided, however, that such Person does not thereby acquire a greater percentage of
Common Shares or of Convertible Securities so offered than such Persons percentage
of Common Shares Beneficially Owned immediately prior to such acquisition.
 (nn)
    
    Record Time means the Close of Business on the Effective Date.(oo)
    
    Redemption Price has the meaning attributed thereto in Subsection 5.1(a).(pp)
    
    Regular Periodic Cash Dividend means cash dividends paid on the Common Shares
at regular intervals in any fiscal year of the Corporation to the extent that such cash
dividends do not exceed in the aggregate in any fiscal year, on a per share basis, the
greatest of:




---



##### 



- 14 - 
 (i)
    
    200% of the aggregate amount of cash dividends declared payable
by the Corporation on its Common Shares in its immediately preceding fiscal
year divided by the number of Common Shares outstanding as at the end of such
fiscal year;(ii)
    
    300% of the arithmetic mean of the aggregate amounts of cash
dividends declared payable by the Corporation on its Common Shares in its three
immediately preceding fiscal years divided by the arithmetic mean of the number
of Common Shares outstanding as at the end of each of such fiscal years; and(iii)
    
    100% of the aggregate consolidated net income of the
Corporation, before extraordinary items, for its immediately preceding fiscal
year divided by the number of Common Shares outstanding as at the end of such
fiscal year.
 (qq)
    
    Rights means the herein described rights to purchase securities pursuant to
the terms and subject to the conditions set forth herein.(rr)
    
    Rights Certificate means the certificates representing the Rights after the
Separation Time which shall be substantially in the form attached hereto as Schedule A.(ss)
    
    Rights Register and Rights Registrar have the respective meanings ascribed
thereto in Subsection 2.6(a).(tt)
    
    Securities Act means the [Securities Act(Alberta)],as amended, and the
rules and regulations made thereunder, as now in effect or as the same may from time to
time be amended, re-enacted or replaced.(uu)
    
    Separation Time means the Close of Business on the tenth Business Day (or
such later Business Day as may be determined at any time or from time to time by the
Board of Directors) after the earlier of:
 (i)
    
    the Stock Acquisition Date;(ii)
    
    the date of the commencement of, or first public announcement
or disclosure of the intent of any Person (other than the Corporation or any
Subsidiary of the Corporation) to commence, a Take-over Bid (other than a
Permitted Bid, so long as such Take-over Bid continues to satisfy the
requirements of a Permitted Bid); and(iii)
    
    the date on which a Permitted Bid ceases to qualify as a
Permitted Bid,
 provided; however, that if any such Take-over Bid expires, is cancelled, is
terminated or is otherwise withdrawn prior to the Separation Time, then such
Take-over Bid shall be deemed, for purposes of this Subsection 1.1(u) never to have
been made, and, provided further, that if the Board of Directors determines,




---



##### 



- 15 - pursuant to Section 5.1, to waive the application of Section 3.1 to a Flip-In Event,
then the Separation Time in respect of such Flip-In Event shall be deemed never to
have occurred.(vv)
    
    Stock Acquisition Date means the first date of public announcement or
disclosure by the Corporation or an Acquiring Person of facts indicating that a Person
has become an Acquiring Person, which, for the purposes of this definition, shall
include, without limitation, a report filed pursuant to Section 176 of the Securities
Act or Section 13(d) of the U.S. Exchange Act announcing or disclosing such
information.(ww)
    
    Subsidiary means a body corporate that is controlled by another Person.(xx)
    
    Take-over Bid means an Offer to Acquire Common Shares or Convertible
Securities where the Common Shares subject to the Offer to Acquire, together with the
Common Shares into or for which the securities subject to the Offer to Acquire are
convertible or exchangeable and the Offerors Securities, constitute in the aggregate
20% or more of the outstanding Common Shares at the date of the Offer to Acquire.(yy)
    
    Termination Time means the time at which the right to exercise Rights shall
terminate pursuant to Section 5.1.(zz)
    
    Trading Day, when used with respect to any securities, means the day on which
the principal Canadian or United States securities exchange (as determined by the Board
of Directors) on which such securities are listed or admitted to trading is open for
the transaction of business or, if the securities are not listed or admitted to trading
on any Canadian or United States securities exchange, a Business Day.(aaa)
    
    U.S.  Canadian Exchange Rate on any date means:
 (i)
    
    if on such date the Bank of Canada sets an average noon spot
rate of exchange for the conversion of one United States dollar into Canadian
dollars, such rate; and(ii)
    
    in any other case, the rate for such date for the conversion of
one United States dollar into Canadian dollars which is calculated in the
manner which shall be determined by the Board of Directors from time to time
acting in good faith.
 (bbb)
    
    U.S. Exchange Act means the United States Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder as from time to time in effect,
and any comparable or successor laws, rules or regulations thereto.(ccc)
    
    1933 Act means the United States Securities Act of 1933, as amended, and the
rules and regulations thereunder, and any comparable or successor laws, rules or
regulations thereto.




---



##### 



- 16 - 
 1.2
    
    Currency
  1.3
    
    Number and Gender
  1.4
    
    Sections and Headings
 Agreement hereunder hereof
 1.5
    
    Statutory References
  1.6
    
    Determination of Percentage Ownership
  100
    
    
    x
    
    AB
  A
    
    =
    
    the aggregate number of votes for the election of
all directors generally attaching to the Common
Shares Beneficially Owned by such Person; andB
    
    =
    
    the aggregate number of votes for the election of
all directors generally attaching to all
outstanding Common Shares.




---



##### 



- 17 -  1.7
    
    Acting jointly or in Concert
  1.8
    
    Generally Accepted Accounting Principles
  ARTICLE 2
 THE RIGHTS
 2.1
    
    Legend on Common Share Certificates
 (a)
    
    One Right for each Common Share shall be issued and Certificates representing
the Common Shares (including without limitation Common Shares issued upon the
conversion of Convertible Securities) issued after the later of (i) the Record Time and
(ii) the date on which all required regulatory approvals required in respect of this
Agreement have been received, but prior to the Close of Business on the earlier of
(iii) the Separation Time and (iv) the Expiration Time, shall also evidence one Right
for each Common Share represented thereby and shall have impressed on, printed on,
written on or otherwise affixed to them the following legend:
 Until the Separation Time (as defined in the Rights Agreement
referred to below), this certificate also evidences and entitles the
holder hereof to certain Rights as set forth in a Shareholder Rights
Plan Agreement, made as of May 28, 2007, as such agreement may from
time to time be amended, restated, varied or replaced (the




---



##### 



- 18 - Rights Agreement), between InterOil Corporation and Computershare
Investor Services Inc., as Rights Agent, the terms of which are
hereby incorporated herein by reference and a copy of which is on
file at the registered office of the Corporation and is available
for viewing at www.sedar.com. Under certain circumstances, as set
forth in the Rights Agreement, such Rights may be amended or
redeemed, may expire, may become void (if, in certain cases, they
are Beneficially Owned by an Acquiring Person, as such terms are
defined in the Rights Agreement, or a transferee thereof) or may be
evidenced by separate certificates and may no longer be evidenced by
this certificate. The Corporation will mail or arrange for the
mailing of a copy of the Rights Agreement to the holder of this
certificate without charge as soon as practicable after the receipt
of a written request therefor.
 (b)
    
    Certificates representing Common Shares that are issued and outstanding at the
later of (i) the Record Time and (ii) the date on which all required regulatory
approvals required in respect of this Agreement have been received, shall evidence one
Right for each Common Share evidenced thereby, notwithstanding the absence of the
foregoing legend, until the earlier of (iii) the Separation Time and (iv) the
Expiration Time.
 2.2
    
    Initial Exercise Price; Exercise of Rights; Detachment of Rights
 (a)
    
    Subject to adjustment as herein set forth, including without limitation as set
forth in Article 3, each Right will entitle the holder thereof, from and after the
Separation Time and prior to the Expiration Time, to purchase one Common Share for the
Exercise Price as at the Business Day immediately preceding the Separation Time (which
Exercise Price and number of Common Shares are subject to adjustment as set forth
below). Notwithstanding any other provision of this Agreement, any Rights held by the
Corporation or any of its Subsidiaries shall be void.(b)
    
    Until the Separation Time:
 (i)
    
    the Rights shall not be exercisable and no Right may be
exercised; and(ii)
    
    each Right will be evidenced by the certificate for the
associated Common Share registered in the name of the holder thereof (which
certificate shall be deemed to represent a Rights Certificate) and will be
transferable only together with, and will be transferred by a transfer of, such
associated Common Share.
 (c)
    
    From and after the Separation Time and prior to the Expiration Time, the Rights
may be exercised, and the registration and transfer of the Rights shall be separate
from and independent of Common Shares. Promptly following the Separation Time, the
Corporation will prepare or cause to be prepared and the Rights Agent




---



##### 



- 19 - will mail to each holder of record of Common Shares as of the Separation Time and,
in respect of each Convertible Security converted into Common Shares after the
Separation Time and prior to the Expiration Time, promptly after such conversion,
the Corporation will prepare or cause to be prepared and the Rights Agent will mail
to the holder so converting (other than a Person indicated by the Corporation in
writing to be an Acquiring Person and, in respect of any Rights Beneficially Owned
by such Acquiring Person which are not held of record by such Acquiring Person, the
holder of record of such rights as indicated by the Corporation in writing (a
Nominee)) at such holders address as shown by the records of the Corporation (the
Corporation hereby agreeing to furnish copies of such records to the Rights Agent
for this purpose):
 (i)
    
    a Rights Certificate, substantially the form of Schedule A
appropriately completed, representing the number of Rights held by such holder
at the Separation Time and having such marks of identification or designation
and such legends, summaries or endorsements printed thereon as the Corporation
may deem appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any law, rule or regulation or
judicial or administrative order, or with any article or regulation of any
stock exchange or quotation system on which the Rights may from time to time be
listed or traded, or to conform to usage; and(ii)
    
    a disclosure statement prepared by the Corporation describing
the Rights,
 provided that a Nominee shall be sent the materials provided for in Clauses
2.2(c)(i)and 2.2(c)(ii) only in respect of all Common Shares held of record by it
which are not Beneficially Owned by an Acquiring Person as indicated to the Rights
Agent by the Corporation in writing, and the Corporation may require any Nominee or
suspected Nominee to provide such information and documentation as the Corporation
may reasonably require for such purpose.(d)
    
    Rights may be exercised in whole or in part on any Business Day after the
Separation Time and prior to the Expiration Time by submitting to the Rights Agent, at
its principal office in Toronto, Ontario:
 (i)
    
    the Rights Certificate evidencing such Rights;(ii)
    
    an election to exercise (an Election to Exercise),
substantially in the form attached to the Rights Certificate, duly completed,
and duly completed and executed in a manner acceptable to the Rights Agent; and(iii)
    
    payment by certified cheque, bankers draft or money order
payable to the order of the Corporation, of a sum equal to the Exercise Price
multiplied by the number of Rights being exercised and a sum sufficient to
cover any transfer tax or charge which may be payable in respect of any
transfer involved in the transfer or delivery of Rights Certificates or the
issuance or




---



##### 



delivery of certificates for Common Shares in a name other than that of the
holder of the Rights being exercised.
 (e)
    
    Upon receipt of a Rights Certificate, accompanied by a duly completed and
executed Election to Exercise, which does not indicate that such Right is null and void
as provided by Subsection 3.1(b) and payment as set forth in Subsection 2.2(d), the
Rights Agent (unless otherwise instructed by the Corporation) will thereupon promptly:
 (i)
    
    requisition from the transfer agent of the Common Shares
certificates representing the number of Common Shares to be purchased (the
Corporation hereby irrevocably authorizing its transfer agent to comply with
all such requisitions);(ii)
    
    after receipt of such Common Share certificates, deliver such
certificates to, or to the order of, the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder in the Election to Exercise;(iii)
    
    when appropriate and pursuant to Section 5.5, requisition from
the Corporation the amount of cash, if any, to be paid in lieu of issuing
fractional Common Shares;(iv)
    
    when appropriate and pursuant to Section 5.5, after receipt of
such cash, deliver such cash to, or to the order of, the registered holder of
the Rights Certificate; and(v)
    
    tender to the Corporation all payments received on exercise of
the Rights.
 (f)
    
    If the holder of any Rights exercises less than all the Rights evidenced by
such holders Rights Certificate, a new Rights Certificate evidencing the Rights
remaining unexercised will be issued by the Rights Agent to such holder or to such
holders duly authorized assigns.(g)
    
    The Corporation covenants and agrees that it will:
 (i)
    
    take all such action as may be necessary and within its power
to ensure that all Common Shares delivered upon the exercise of Rights shall,
at the time of delivery of the certificates for such Common Shares (subject to
payment of the Exercise Price), be duly and validly authorized, executed,
issued and delivered as fully paid and non-assessable;(ii)
    
    take all such action as may reasonably be considered to be
necessary and within its power to comply with any applicable requirements of
the NBBCA, the Securities Act, the U.S. Exchange Act, the 1933 Act and
comparable legislation of each of the other provinces and territories of Canada
and states of the United States of America, or the rules and regulations
thereunder or any other applicable law, rule or regulation, in




---



##### 



- 21 - connection with the issuance and delivery of the Rights, the Rights
Certificates and the issuance of any Common Shares upon exercise of the
Rights;
 (iii)
    
    use reasonable efforts to cause all Common Shares issued upon
exercise of the Rights to be listed on the principal exchanges on which the
Common Shares are listed at that time;(iv)
    
    cause to be reserved and kept available out of its authorized
and unissued Common Shares, the number of Common Shares that, as provided in
this Agreement, will from time to time be sufficient to permit the exercise in
full of all outstanding Rights;(v)
    
    pay when due and payable, if applicable, any and all federal,
provincial and municipal taxes (not in the nature of income, capital gains or
withholding taxes) and charges which may be payable in respect of the original
issuance or delivery of the Rights Certificates or certificates for Common
Shares issued upon the exercise of Rights, provided that the Corporation shall
not be required to pay any transfer tax or charge which may be payable in
respect of any transfer of Rights or the issuance or delivery of certificates
for Common Shares issued upon the exercise of Rights, in a name other than that
of the holder of the Rights being transferred or exercised; and(vi)
    
    after the Separation Time, except as permitted by Section 5.1or
Section 5.4, not take (or permit any Subsidiary to take) any action if at the
time such action is taken it is reasonably foreseeable that such action will
diminish substantially or otherwise eliminate the benefits intended to be
afforded by the Rights.
 2.3 Adjustments to Exercise Price; Number of Rights
 (a)
    
    The Exercise Price, the number and kind of securities subject to purchase upon
exercise of each Right and the number of Rights outstanding are subject to adjustment
from time to time as provided in this Section 2.3 and in Article 3.(b)
    
    In the event that the Corporation shall at any time after the Record Time and
prior to the Expiration Time:
 (i)
    
    declare or pay a dividend on the Common Shares payable in
Common Shares or Convertible Securities in respect thereof other than pursuant
to any optional stock dividend plan;(ii)
    
    subdivide or change the then outstanding Common Shares into a
greater number of Common Shares;(iii)
    
    consolidate or change the then outstanding Common Shares into
a smaller number of Common Shares; or




---



##### 



- 22 - 
 (iv)
    
    issue any Common Shares (or Convertible Securities in respect
thereof) in respect of, in lieu of or in exchange for existing Common Shares,
whether in a reclassification, amalgamation, statutory arrangement,
consolidation or otherwise,
 then the Exercise Price and the number of Rights outstanding (or, if the payment or
effective date therefor shall occur after the Separation Time, the securities
purchasable upon the exercise of Rights) shall be adjusted as follows:
 (A)
    
    if the Exercise Price and number of Rights
outstanding are to be adjusted:
 (1)
    
    the Exercise Price in effect
after such adjustment will be equal to the Exercise Price in
effect immediately prior to such adjustment divided by the
number of Common Shares (or other securities of the Corporation)
(the Expansion Factor) that a holder of one Common Share
immediately prior to such dividend, subdivision, change,
combination or issuance would hold thereafter as a result
thereof, and(2)
    
    each Right held prior to such
adjustment will become that number of Rights equal to the
Expansion Factor, and the adjusted number of Rights will be
deemed to be allocated among the Common Shares with respect to
which the original Rights were associated (if they remain
outstanding) and the securities of the Corporation issued in
respect of such dividend, subdivision, change, consolidation or
issuance, so that each such Common Share (or other security of
the Corporation) will have exactly one Right associated with it,
and
 (B)
    
    if the securities purchasable upon exercise of
Rights are to be adjusted, the securities purchasable upon exercise of
each Right after such adjustment will be the securities that a holder
of the securities purchasable upon exercise of one Right immediately
prior to such dividend, subdivision, change, consolidation or issuance
would hold thereafter as a result thereof.
 Adjustments made pursuant to this Subsection 2.3(b)shall be made successively,
whenever an event referred to in this Subsection 2.3(b) occurs.
 (c)
    
    If, after the Record Time and prior to the Expiration Time, the Corporation
shall issue any of its securities other than Common Shares in a transaction of a type
described in Clauses 2.3(b)(i) or 2.3(b)(iv), or such securities shall be treated
herein as nearly equivalent to Common Shares as may be practicable and appropriate
under the circumstances and the Corporation and the Rights Agent agree to amend this
Agreement in order to effect such treatment.




---



##### 



- 23 - 
 (d)
    
    If an event occurs which would require an adjustment under both this Section
2.3 and Section 3.1, the adjustment provided for in this Section 2.3 shall be in
addition to, and shall be made prior to, any adjustment required pursuant to Section
3.1.(e)
    
    In the event the Corporation shall at any time after the Record Time and prior
to the Separation Time issue any Common Shares otherwise than in a transaction referred
to in Subsection 2.3(b), each such Common Share so issued shall automatically have one
new Right associated with it, which Right shall be evidenced by the certificate
representing such Common Share.(f)
    
    In the event the Corporation shall, at any time after the Record Time and prior
to the Expiration Time, fix a record date for the making of a distribution to all
holders of Common Shares of rights or warrants entitling them (for a period expiring
within 45 calendar days after such record date) to subscribe for or purchase Common
Shares (or Convertible Securities in respect of Common Shares) at a price per Common
Share (or, in the case of such a Convertible Security, having a conversion, exchange or
exercise price per share (including the price required to be paid to purchase such
Convertible Security)) less than 90% of the Market Price per Common Share on such
record date, the Exercise Price in effect after such record date will equal the
Exercise Price in effect immediately prior to such record date multiplied by a
fraction:
 (A)
    
    of which the numerator shall be the number of
Common Shares outstanding on such record date plus the number of Common
Shares which the aggregate offering price of the total number of Common
Shares so to be offered (and/or the aggregate initial conversion,
exchange or exercise price of the Convertible Securities so to be
offered (including the price required to be .paid to purchase such
Convertible Securities)) would purchase at such Market Price per Common
Share; and(B)
    
    of which the denominator shall be the number of
Common Shares outstanding on such record date plus the number of
additional Common Shares to be offered for subscription or purchase (or
into which the Convertible Securities so to be offered are initially
convertible, exchangeable or exercisable).
 (ii)
    
    In case such subscription price is satisfied, in whole or in
part, by consideration other than cash, the value of such consideration shall
be as determined in good faith by the Board of Directors. Such adjustment
shall be made successively whenever such a record date is fixed. To the extent
that such rights or warrants are not exercised prior to the expiration thereof,
the Exercise Price shall be readjusted in the manner contemplated above based
on the number of Common Shares (or securities convertible into or exchangeable
for Common Shares) actually issued upon the exercise of such rights or
warrants.




---



##### 



- 24 - 
 (iii)
    
    For purposes of this Agreement, the granting of the right to
purchase Common Shares (whether from treasury or otherwise) pursuant to any
dividend or interest reinvestment plan or any share purchase plan providing for
the reinvestment of dividends or interest payable on securities of the
Corporation or the investment of periodic optional payments or employee benefit
or similar plans (so long as such right to purchase is in no case evidenced by
the delivery of rights or warrants by the Corporation) shall not be deemed to
constitute an issue of rights or warrants by the Corporation; provided,
however, that in the case of any dividend or interest reinvestment or share
purchase plan, the right to purchase Common Shares is at a price per share of
not less than 90% of the current market price per share (determined as provided
in such plans) of the Common Shares.
 (g)
    
    In the event the Corporation shall at any time after the Record Time and prior
to the Expiration Time fix a record date for the making of a distribution to all
holders of Common Shares of:
 (i)
    
    evidences of indebtedness or assets (other than a Regular
Periodic Cash Dividend or a dividend paid in Common Shares, but including any
dividend payable in securities other than Common Shares); or(ii)
    
    rights or warrants entitling them to subscribe for or purchase
Common Shares (or Convertible Securities in respect of Common Shares),
 at a price per Common Share (or, in the case of a Convertible Security in respect of
Common Shares, having a conversion, exchange or exercise price per share (including
the price required to be paid to purchase such Convertible Security)) less than 90%
of the Market Price per Common Share on such record date (excluding rights or
warrants referred to in Subsection 2.3(f)), the Exercise Price in effect after such
record date shall be equal to the Exercise Price in effect immediately prior to such
record date less the fair market value (as determined in good faith by the Board of
Directors) of the portion of the assets, evidences of indebtedness, rights, warrants
or other securities so to be distributed applicable to each of the securities
purchasable upon exercise of one Right. Such adjustment shall be made successively
whenever such a record date is fixed.
 (h)
    
    Each adjustment made pursuant to this Section 2.3 shall be made as of:
 (i)
    
    the payment or effective date for the applicable dividend,
subdivision, change, combination or issuance, in the case of an adjustment made
pursuant to Subsection 2.3(b); and(ii)
    
    the record date for the applicable dividend or distribution, in
the case of an adjustment made pursuant to Subsections 2.3(f) or 2.3(g),
subject to readjustment to reverse the same if such distribution shall not be
made.




---



##### 



- 25 - 
 (i)
    
    In the event the Corporation shall at any time after the Record Time and prior
to the Expiration Time issue any shares (other than Common Shares), or rights or
warrants to subscribe for or purchase any such shares, or Convertible Securities in
respect of any such shares, in a transaction referred to in any of Clauses 2.3(b)(i) to
2.3(b)(iv), inclusive, if the Board of Directors acting in good faith determines that
the adjustments contemplated by Subsections 2.3(b), 2.3(f) and 2.3(g) in connection
with such transaction will not appropriately protect the interests of the holders of
Rights, then the Board of Directors may from time to time, but subject to obtaining the
prior approval of the holders of the Rights obtained as set forth in Subsection 5.4(b),
determine what other adjustments to the Exercise Price, number of Rights or securities
purchasable upon exercise of Rights would be appropriate and, notwithstanding
Subsections 2.3(b), 2.3(f) and 2.3(g), such adjustments, rather than the adjustments
contemplated by Subsections 2.3(b), 2.3(f) and 2.3(g), shall be made upon the Board of
Directors providing written certification thereof to the Rights Agent as set forth in
Subsection 2.3(q). The Corporation and the Rights Agent shall amend this Agreement as
appropriate to provide for such adjustments.(j)
    
    Notwithstanding anything herein to the contrary, no adjustment of the Exercise
Price shall be required unless such adjustment would require an increase or decrease of
at least 1% in such Exercise Price; provided, however, that any adjustments which by
reason of this Subsection 2.3(j) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All adjustments to the Exercise
Price made pursuant to this Section 2.3 shall be calculated to the nearest cent.(k)
    
    All Rights originally issued by the Corporation subsequent to any adjustment
made to an Exercise Price hereunder shall evidence the right to purchase, at the
adjusted Exercise Price, the number of Common Shares purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment as provided
herein.(l)
    
    Unless the Corporation shall have exercised its election, as provided in
Subsection 2.3(m), upon each adjustment of an Exercise Price as a result of the
calculations made in Subsections 2.3(f) and 2.3(g), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to purchase,
at the adjusted Exercise Price, that number of Common Shares obtained by:
 (i)
    
    multiplying (A) the number of Common Shares covered by a Right
immediately prior to such adjustment, by (B) the Exercise Price in effect
immediately prior to such adjustment; and(ii)
    
    dividing the product so obtained by the Exercise Price in
effect immediately after such adjustment.




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- 26 - 
 (m)
    
    The Corporation may elect on or after the date of any adjustment of an Exercise
Price to adjust the number of Rights, in lieu of any adjustment in the number of Common
Shares purchasable upon the exercise of a Right. Each of the Rights outstanding after
the adjustment in the number of Rights shall be exercisable for the number of Common
Shares for which a Right was exercisable immediately prior to such adjustment. Each
Right held of record prior to such adjustment of the number of Rights shall become the
number of Rights obtained by dividing the relevant Exercise Price in effect immediately
prior to adjustment of the relevant Exercise Price by the relevant Exercise Price in
effect immediately after adjustment of the relevant Exercise Price. The Corporation
shall make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the amount of
the adjustment to be made. This record date may be the date on which the relevant
Exercise Price is adjusted or any day thereafter, but, if the Rights Certificates have
been issued, shall be at least 10 calendar days later than the date of the public
announcement. If Rights Certificates have been issued, upon each adjustment of the
number of Rights pursuant to this Subsection 2.3(m), the Corporation shall, as promptly
as practicable, cause to be distributed to holders of record of Rights Certificates on
such record date, Rights Certificates evidencing, subject to Section 5.5, the
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Corporation, shall cause to be distributed to such
holders of record in substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if required
by the Corporation, new Rights Certificates evidencing all the Rights to which such
holders shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided for
herein and may bear, at the option of the Corporation, the relevant adjusted Exercise
Price and shall be registered in the names of holders of record of Rights Certificates
on the record date specified in the public announcement.(n)
    
    In any case in which this Section 2.3 shall require that an adjustment in an
Exercise Price be made effective as of a record date for a specified event, the
Corporation may elect to defer until the occurrence of such event the issuance to the
holder of any Right exercised after such record date of the number of Common Shares and
other securities of the Corporation, if any, issuable upon such exercise over and above
the number of Common Shares and other securities of the Corporation, if any, issuable
upon such exercise on the basis of the relevant Exercise Price in effect prior to such
adjustment; provided, however, that the Corporation shall deliver to such holder an
appropriate instrument evidencing such holders right to receive such additional Common
Shares (fractional or otherwise) or other securities upon the occurrence of the event
requiring such adjustment.(o)
    
    Notwithstanding anything in this Section 2.3 to the contrary, the Corporation
shall be entitled to make such adjustments in the Exercise Price, in addition to those
adjustments expressly required by this Section 2.3, as and to the extent that in its




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##### 



- 27 - good faith judgment the Board of Directors shall determine to be advisable in order
that any:
 (i)
    
    subdivision or consolidation of the Common Shares;(ii)
    
    issuance wholly for cash of any Common Shares at less than the
applicable Market Price;(iii)
    
    issuance wholly for cash of any Common Shares or securities
that by their terms are exchangeable for or convertible into or give a right to
acquire Common Shares;(iv)
    
    stock dividends; or(v)
    
    issuance of rights, options or warrants referred to in this
Section 2.3, hereafter made by the Corporation to holders of its Common Shares,shall not be taxable to such shareholders.
 (p)
    
    Irrespective of any adjustment or change in the securities purchasable upon
exercise of the Rights, the Rights Certificates thereto for and thereafter issued may
continue to represent the securities so purchasable which were represented in the
initial Rights Certificates issued hereunder.(q)
    
    Whenever an adjustment to the Exercise Price is made pursuant to this Section
2.3, the Corporation shall:
 (i)
    
    promptly prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment;(ii)
    
    promptly file with the Rights Agent and with each transfer
agent for the Common Shares a copy of such certificate and mail a brief summary
thereof to each holder of Rights who requests a copy; and(iii)
    
    cause notice of the particulars of such adjustment to be given
to the holders of the Rights by way of press release or by such other means as
the Corporation may determine.
 Failure to file such certificate or to cause such notice to be given as aforesaid,
or any defect therein, shall not affect the validity of any such adjustment or
change.
 2.4 Date on Which Exercise is Effective




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##### 



- 28 -  2.5 Execution, Authentication, Delivery and Dating of Rights Certificates
 (a)
    
    The Rights Certificates shall be executed on behalf of the Corporation by any
two officers or directors of the Corporation. The signature of any of these officers
or directors on the Rights Certificates may be manual or facsimile. Rights
Certificates bearing the manual or facsimile signatures of individuals who were at any
time the proper officers or directors of the Corporation shall bind the Corporation,
notwithstanding that such individuals or any of them have ceased to hold such offices
prior to the countersignature and delivery of such Rights Certificates.(b)
    
    Promptly following the Separation Time, the Corporation will notify the Rights
Agent of such Separation Time and will deliver Rights Certificates executed by the
Corporation to the Rights Agent for countersignature, and the Rights Agent shall
countersign (manually or by facsimile signature in a manner satisfactory to the
Corporation) and deliver such Rights Certificates to the holders of the Rights pursuant
to Section 2.2. No Rights Certificate shall be valid for any purpose until
countersigned by the Rights Agent as aforesaid.(c)
    
    Each Rights Certificate shall be dated the date of countersignature thereof.
 2.6 Registration, Transfer and Exchange
 (a)
    
    After the Separation Time, the Corporation will cause to be kept a register
(the Rights Register) in which, subject to such reasonable regulations as it may
prescribe, the Corporation will provide for the registration and transfer of Rights.
The Rights Agent is hereby appointed Rights Registrar for the purpose of maintaining
the Rights Register for the Corporation and registering Rights and transfers of Rights
as herein provided and the Rights Agent hereby accepts such appointment. In the event
that the Rights Agent shall cease to be the Rights Registrar, the Rights Agent will
have the right to examine the Rights Register at all reasonable times.(b)
    
    After the Separation Time and prior to the Expiration Time, upon surrender for
registration of transfer or exchange of any Rights Certificate, and subject to the
provisions of Subsections 2.6(d) and 3.1(b), the Corporation will execute, and the
Rights Agent will countersign, deliver and register, in the name of the holder or the
designated transferee or transferees, as required pursuant to the holders
instructions, one or more new Rights Certificates evidencing the same aggregate number
of Rights as did the Rights Certificates so surrendered.




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##### 



- 29 - 
 (c)
    
    All Rights issued upon any registration of transfer or exchange of Rights
Certificates shall be valid obligations of the Corporation, and such Rights shall be
entitled to the same benefits under this Agreement as the Rights surrendered upon such
registration of transfer or exchange.(d)
    
    Every Rights Certificate surrendered for registration of transfer or exchange
shall be duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Corporation or the Rights Agent, as the case may be, duly executed
by the holder thereof or such holders attorney duly authorized, in writing. As a
condition to the issuance of any new Rights Certificate under this Section 2.6, the
Corporation may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Rights Agent) in connection therewith.
 2.7 Mutilated, Lost, Stolen and Destroyed Rights Certificates
 (a)
    
    If any mutilated Rights Certificate is surrendered to the Rights Agent prior to
the Expiration Time, the Corporation shall execute and the Rights Agent shall
countersign and deliver in exchange therefor a new Rights Certificate evidencing the
same number of Rights as did the Rights Certificate so surrendered.(b)
    
    If there shall be delivered to the Corporation and the Rights Agent prior to
the Expiration Time:
 (i)
    
    evidence to their reasonable satisfaction of the destruction,
loss or theft of any Rights Certificate; and(ii)
    
    such security or indemnity as may be reasonably required by
them to save each of them and any of their agents harmless,
 then, in the absence of notice to the Corporation or the Rights Agent that such
Rights Certificate has been acquired by a bona fide purchaser, the Corporation shall
execute and, upon the Corporations request the Rights Agent shall countersign and
deliver, in lieu of any such destroyed, lost or stolen Rights Certificate, a new
Rights Certificate evidencing the same number of Rights as did the Rights
Certificate so destroyed, lost or stolen.
 (c)
    
    As a condition to the issuance of any new Rights Certificate under this Section
2.7, the Corporation may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Rights Agent) connected therewith.(d)
    
    Every new Rights Certificate issued pursuant to this Section 2.7 in lieu of any
destroyed, lost or stolen Rights Certificate shall evidence a contractual obligation of
the Corporation, whether or not the destroyed, lost or stolen Rights Certificate shall
be at any time enforceable by anyone, and shall be entitled to all the benefits




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##### 



- 30 - of this Agreement equally and proportionately with any and all other Rights duly
issued hereunder.
 2.8 Persons Deemed Owners
 holder
 2.9 Delivery and Cancellation of Certificates
  2.10 Agreement of Rights Holders
  (a)
    
    to be bound by and subject to the provisions of this Agreement, as amended from
time to time in accordance with the terms hereof, in respect of all Rights held;(b)
    
    that, prior to the Separation Time, each Right will be transferable only
together with, and will be transferred by a transfer of, the associated Common Share;(c)
    
    that, after the Separation Time, the Rights will be transferable only on the
Rights Register as provided herein;(d)
    
    that, prior to due presentment of a Rights Certificate (or, prior to the
Separation Time, the associated Common Share certificate) for registration of transfer,
the Corporation, the Rights Agent and any agent of the Corporation or the Rights Agent
may deem and treat the Person in whose name the Rights Certificate (or, prior to the
Separation Time, the associated Common Share certificate) is registered as the absolute
owner thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on such Rights Certificate or the associated Common Share
certificate made by anyone other than the




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##### 



- 31 - Corporation or the Rights Agent) for all purposes whatsoever, and neither the
Corporation nor the Rights Agent shall be affected by any notice to the contrary;
 (e)
    
    that such holder of Rights has waived its right to receive any fractional
Rights or any fractional Common Shares or other securities upon exercise of a Right
(except as provided herein);(f)
    
    that, without the approval of any holder of Rights or Common Shares and upon
the sole authority of the Board of Directors acting in good faith, this Agreement may
be supplemented or amended from time to time to cure any ambiguity or to correct or
supplement any provision contained herein which may be inconsistent with the intent of
this Agreement or is otherwise defective; and(g)
    
    notwithstanding anything in this Agreement to the contrary, neither the
Corporation nor the Rights Agent shall have any liability to any holder of a Right or
any other Person as a result of its inability to perform any of its obligations under
this Agreement by reason of any preliminary or permanent injunction or other order,
decree or ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority, prohibiting or
otherwise restraining performance of such obligation.
 2.11 Exclusion of Warranty by Rights Agent
 (a)
    
    The Rights Agent shall have no obligation under this Agreement to ensure or
verify compliance with any applicable laws or regulatory requirements on the issue,
exercise or transfer of any Rights or Common Shares issuable upon the exercise thereof.
The Rights Agent shall be entitled to process all proffered transfers and exercises of
Rights upon the presumption that such transfers or exercises are permissible pursuant
to all applicable laws and regulatory requirements.(b)
    
    The Rights Agent may assume for the purposes of this Agreement that any address
on the Register is the holders actual address and is determinative as to residency and
that the address of any transferee to whom any Rights are to be registered, as shown on
the transfer document, is the transferees residency.(c)
    
    The Rights Agent shall have no obligation to ensure that the legends appearing
on the Rights Certificates or Common Shares comply with the regulatory requirements or
securities laws of any applicable jurisdiction.




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##### 



- 32 - 
 ARTICLE 3  ADJUSTMENTS TO THE RIGHTS
 3.1 Flip-in Event
 (a)
    
    Subject to Subsection 3.1(b) and Section 5.1, in the event that prior to the
Expiration Time a Flip-in Event occurs, each Right shall thereafter constitute the
right to purchase from the Corporation, upon exercise thereof in accordance with the
terms hereof, that number of Common Shares as have an aggregate Market Price on the
date of the consummation or occurrence of such Flip-in Event equal to twice the
Exercise Price for an amount in cash equal to the Exercise Price (such right to be
appropriately adjusted in a manner analogous to the applicable adjustment provided for
in Section 2.3 if, after such date of consummation or occurrence, an event of a type
analogous to any of the events described in Section 2.3 shall have occurred with
respect to such Common Shares).(b)
    
    Notwithstanding anything in this Agreement to the contrary, upon the occurrence
of any Flip-in Event, any Rights that are or were Beneficially Owned on or after the
earlier of the Separation Time and the Stock Acquisition Date, or which may thereafter
be Beneficially Owned, by:
 (i)
    
    an Acquiring Person, any Affiliate or Associate of an Acquiring
Person, any other Person acting jointly or in concert with an Acquiring Person
or any Associate or Affiliate of an Acquiring Person (or any Affiliate or
Associate of any such Person so acting jointly and in concert); or(ii)
    
    a transferee, direct or indirect, of an Acquiring Person, any
Affiliate or Associate of an Acquiring Person, any other Person acting jointly
or in concert with an Acquiring Person or any Associate or Affiliate of an
Acquiring Person (or any Affiliate or Associate of any such Person so acting
jointly and in concert), in a transfer of Rights occurring subsequent to the
Acquiring Person becoming such,
 shall become null and void without any further action and any holder of such Rights
(including any transferee of, or other successor entitled to, such Rights, whether
directly or indirectly) shall thereafter have no right to exercise such Rights under
any provisions of this Agreement and, further, shall thereafter not have any rights
whatsoever with respect to such Rights, whether under any provision of this
Agreement or otherwise. The holder of any Rights represented by a Rights
Certificate which is submitted to the Rights Agent upon exercise or for registration
of transfer or exchange which does not contain the necessary certifications set
forth in the Rights Certificate establishing that such Rights are not void under
this Subsection 3.1(b) shall be deemed to be an Acquiring Person for the purposes of
this Subsection 3.1(b) and such Rights shall become null and void.




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##### 



- 33 - 
 (c)
    
    Any Rights Certificate that represents Rights Beneficially Owned by a Person
described in either of Clauses 3.1(b)(i) or 3.1(b)(ii) or transferred to any Nominee of
any such Person, and any Rights Certificate issued upon transfer, exchange, replacement
or adjustment of any other Rights Certificate referred to in this sentence, shall
contain or will be deemed to contain the following legend:
 The Rights represented by this Rights Certificate were issued to a
Person who was an Acquiring Person or an Affiliate or an Associate
of an Acquiring Person (as such terms are defined in the Rights
Agreement) or acting jointly or in concert with any of them. This
Rights Certificate and the Rights represented hereby shall be void
in the circumstances specified in Subsection 3.1(b) of the Rights
Agreement.
 The Rights Agent shall not be under any responsibility to ascertain the existence of
facts that would require the imposition of such legend but shall be required to
impose such legend only if instructed to do so by the Corporation or if a holder
fails to certify upon transfer or exchange in the space provided to do so.
 (d)
    
    After the Separation Time, the Corporation shall do all such acts and things
necessary and within its power to ensure compliance with the provisions of this Section
3.1 including, without limitation, all such acts and things as may be required to
satisfy the requirements of the NBBCA, the Securities Act and the securities laws or
comparable legislation in each of the provinces of Canada and in any other jurisdiction
where the Corporation is subject to such laws and the rules of the stock exchanges
where the Common Shares are listed at such time in respect of the issue of Common
Shares upon the exercise of Rights in accordance with this Agreement.
 3.2 Fiduciary Duties of the Board of Directors




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##### 



- 34 - ARTICLE 4  THE RIGHTS AGENT
 4.1 General
 (a)
    
    The Corporation hereby appoints the Rights Agent to act as agent for the
Corporation arid the holders of the Rights in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Corporation may from
time to time appoint such co-rights agents (Co-Rights Agents) as it may deem
necessary or desirable. In the event the Corporation appoints one or more Co-Rights
Agents, the respective duties of the Rights Agent and Co-Rights Agents shall be as the
Corporation may determine. The Corporation agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder and, from time to
time, on demand of the Rights Agent, its reasonably incurred expenses and other
disbursements in the administration and execution of this Agreement and the exercise
and performance of its duties hereunder, including fees and disbursements of counsel
and other experts consulted by the Rights Agent pursuant to Subsection 4.3(a). The
Corporation also agrees to indemnify the Rights Agent and each of its directors,
officers, employees, agents and shareholders for, and to hold each of them harmless
against, any loss, liability, cost, claim, action, damage, suit or expense, incurred
without negligence, bad faith or wilful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance and
administration of this Agreement, including without limitation the costs and expenses
of defending against any claim of liability, which right to indemnification will
survive the termination of this Agreement. In the event of any disagreement arising
regarding the terms of this Agreement the Rights Agent shall be entitled, at its
option, to refuse to comply with any and all demands whatsoever until the dispute is
settled either by written agreement amongst the parties to this Agreement or by a court
of competent jurisdiction.(b)
    
    The Rights Agent shall be protected and shall incur no liability for or in
respect of any action taken, suffered or omitted by it in connection with its
administration of this Agreement in reliance upon any certificate for Common Shares,
Rights Certificate, certificate for other securities of the Corporation, instrument of
assignment or transfer, power of attorney, endorsement, affidavit, letter, notice,
direction, consent, certificate, statement, or other paper or document believed by it
to be genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons.(c)
    
    The Corporation shall inform the Rights Agent in a reasonably timely manner of
events which may materially affect the administration of this Agreement by the Rights
Agent and, at any time upon request, shall provide to the Rights Agent an incumbency
certificate certifying the then current officers of the Corporation.




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- 35 - 
 4.2 Merger, Amalgamation, Consolidation or Change of Name of Rights Agent
 (a)
    
    Any corporation into which the Rights Agent or any successor Rights Agent may
be merged or amalgamated or with which it may be consolidated, or any corporation
resulting from any merger, amalgamation or consolidation to which the Rights Agent or
any successor Rights Agent is a party, or any corporation succeeding to the shareholder
services business of the Rights Agent or any successor Rights Agent, will be the
successor to the Rights Agent under this Agreement without the execution or filing of
any document or any further act on the part of any of the parties hereto, provided that
such corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 4.4. In case at the time such successor Rights Agent
succeeds to the agency created by this Agreement any of the Rights Certificates have
been countersigned but not delivered any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Rights Certificates
so countersigned; and in case at that time any of the Rights Certificates have not been
countersigned, any successor Rights Agent may countersign such Rights Certificates
either in the name of the predecessor Rights Agent or in the name of the successor
Rights Agent; and in all such cases such Rights Certificates will have the full force
provided in the Rights Certificates and in this Agreement.(b)
    
    In case at any time the name of the Rights Agent is changed and at such time
any of the Rights Certificates shall have been countersigned but not delivered, the
Rights Agent may adopt the countersignature under its prior name and deliver Rights
Certificates so countersigned; and in case at that time any of the Rights Certificates
shall not have been countersigned, the Rights Agent may countersign such Rights
Certificates either in its prior name or in its changed name; and in all such cases
such Rights Certificates shall have the full force provided in the Rights Certificates
and in this Agreement.
 4.3 Duties of Rights Agent
  (a)
    
    The Rights Agent may consult with legal counsel (who may be legal counsel for
the Corporation) and the opinion of such counsel will be full and complete
authorization and protection to the Rights Agent as to any action taken or omitted by
it in good faith and in accordance with such opinion; the Rights Agent may also, with
the approval of the Corporation (such approval not to be unreasonably withheld),
consult with such other experts as the Rights Agent shall consider necessary or
appropriate to properly carry out the duties and obligations imposed under this
Agreement and the Rights Agent shall be entitled to rely in good faith on the advice of
any such expert.




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##### 



- 36 - 
 (b)
    
    Whenever in the performance of its duties under this Agreement the Rights Agent
deems it necessary or desirable that any fact or matter be proved or established by the
Corporation prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by a person
believed by the Rights Agent to be the Chief Executive Officer, President, Chief
Financial Officer or the Secretary or Assistant Secretary of the Corporation and
delivered to the Rights Agent; and such certificate will be full authorization to the
Rights Agent for any action taken or suffered in good faith by it under the provisions
of this Agreement in reliance upon such certificate.(c)
    
    The Rights Agent will not be liable hereunder except for losses caused
principally and directly by its negligence, bad faith or wilful misconduct.(d)
    
    The Rights Agent will not be liable for or by reason of any of the statements
of fact or recitals contained in this Agreement or in the certificates for Common
Shares, or the Rights Certificates (except its countersignature thereof which
countersignature shall not be construed as a representation or warranty by the Rights
Agent as to the validity of this Agreement or the Rights Certificate(s), except the due
certification thereof) or be required to verify the same, and all such statements and
recitals are and will be deemed to have been made by the Corporation only.(e)
    
    The Rights Agent will not be under any responsibility in respect of the
validity of this Agreement or the execution and delivery hereof (except the due
authorization, execution and delivery hereof by the Rights Agent) or in respect of the
validity or execution of any Common Share certificate, or Rights Certificate (except
its countersignature thereof); nor will it be responsible for any breach by the
Corporation of any covenant or condition contained in this Agreement or in any Rights
Certificate; nor will it be responsible for any change in the exercisability of the
Rights (including the Rights becoming void pursuant to Subsection 3.1(b) or any
adjustment required under the provisions of Section 2.3 or responsible for the manner,
method or amount of any such adjustment, nor will it be responsible for the
ascertaining of the existence of facts that would require any such adjustment (except
with respect to the exercise of Rights after receipt of the certificate contemplated by
Section 2.3 describing any such adjustment or any written notice from the Corporation
or any holder that a Person has become an Acquiring Person); nor will it by any act
hereunder be deemed to make any representation or warranty as to the authorization of
any Common Shares to be issued pursuant to this Agreement or any Rights or as to any
Common Shares, when issued, being duly and validly authorized, issued and delivered as
fully paid and non-assessable.(f)
    
    The Corporation agrees that it will perform, execute, acknowledge and deliver
or cause to be performed, executed, acknowledged and delivered all such further and
other acts, instruments and assurances as may reasonably be required by the Rights
Agent for the carrying out or performing by the Rights Agent of the provisions of this
Agreement.




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##### 



- 37 - 
 (g)
    
    The Rights Agent is hereby authorized and directed to accept instructions with
respect to the performance of its duties hereunder from any individual believed by the
Rights Agent to be the Chief Executive Officer, President, Chief Financial Officer, or
the Secretary or Assistant Secretary of the Corporation, and to apply to such
individuals for advice or instructions in connection with its duties, and it shall not
be liable for any action taken or suffered by it in good faith in accordance with
instructions of any such individual. It is understood that instructions to the Rights
Agent shall, except where circumstances make it impractical or the Rights Agent
otherwise agrees, be given in writing and, where not in writing, such instructions
shall be confirmed in writing as soon as reasonably practicable after the giving of
such instructions.(h)
    
    The Rights Agent and any shareholder or director, officer or employee of the
Rights Agent may buy, sell or deal in Common Shares, Rights or other securities of the
Corporation or become pecuniarily interested in any transaction in which the
Corporation may be interested, or contract with or lend money to the Corporation or
otherwise act as fully and freely as though it were not the Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any other
capacity for the Corporation or for any other legal entity.(i)
    
    The Rights Agent may execute and exercise any of the rights or powers hereby
vested in it or perform any duty hereunder either itself or by or through its attorneys
or agents, and the Rights Agent will not be answerable or accountable for any act,
default, neglect or misconduct of any such attorneys or agents or for any loss to the
Corporation resulting from any such act, default, neglect or misconduct, provided
reasonable care was exercised in the selection and continued employment thereof.
 4.4 Change of Rights Agent




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##### 



- 38 -  ARTICLE 5  MISCELLANEOUS
 5.1 Redemption, Waiver, Extension and Termination
 (a)
    
    Subject to the prior consent of the holders of Common Shares or Rights obtained
as set forth in Subsections 5.4(a) or 5.4(b), as applicable, the Board of Directors
acting in good faith may, at any time prior to the later of the Stock Acquisition Date
and the Separation Time, elect to redeem all but not less than all of the then
outstanding Rights at a redemption price of $0.00001 per Right, appropriately adjusted
in a manner analogous to the applicable adjustment provided for in Section 2.3 if an
event of the type analogous to any of the events described in Section 2.3 shall have
occurred, (such redemption price being herein referred to as the Redemption Price).(b)
    
    The Board of Directors shall waive the application of Section 3.1 in respect of
the occurrence of any Flip-in Event if the Board of Directors has determined in good
faith, following the Stock Acquisition Date and prior to the Separation Time, that a
Person became an Acquiring Person by inadvertence and without any intention to become,
or knowledge that it would become, an Acquiring Person under this Agreement and, in the
event that such a waiver is granted by the Board of Directors, such Stock Acquisition
Date shall be deemed not to have occurred. Any such waiver pursuant to this Subsection
5.1(b) may only be given on the condition that such Person, within 14 days after the
foregoing determination by the Board of Directors or such later date as the Board of
Directors may determine (the Disposition Date), has reduced its Beneficial Ownership
of Common Shares such that the Person is no longer an Acquiring Person. If the Person
remains an Acquiring Person at the Close of Business on the Disposition Date, then the
Disposition Date shall be deemed to be the date of occurrence of a further Stock
Acquisition Date and Section 3.1 shall apply thereto.(c)
    
    In the event that a Person acquires Common Shares pursuant to a Permitted Bid
or an Exempt Acquisition referred to in Subsection 5.1(d), then the Board of Directors
shall, immediately upon the consummation of such acquisition and




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##### 



- 39 - without further formality, be deemed to have elected to redeem the Rights at the
Redemption Price.
 (d)
    
    The Board of Directors acting in good faith may, prior to the occurrence of the
relevant Flip-in Event, upon prior written notice delivered to the Rights Agent,
determine to waive the application of Section 3.1 to a Flip-in Event that may occur by
reason of a Take-over Bid made by means of a Take-over Bid circular to all holders of
record of Common Shares; provided that, if the Board of Directors waives the
application of Section 3.1 to a particular Take-over Bid pursuant to this Subsection
5.1(d), then the Board of Directors shall be deemed to have waived the application of
Section 3.1 to any other Take-over Bid made by means of a Take-over Bid circular to all
holders of record of Common Shares prior to the expiry of any Take-over Bid in respect
of which a waiver is, or is deemed to have been, granted under this Subsection 5.1(d).(e)
    
    Subject to the prior consent of the holders of Common Shares obtained as set
forth in Subsection 5.4(b)(i), the Board of Directors may, at any time prior to the
occurrence of a Flip-in Event as to which the application of Section 3.1 has not been
waived pursuant to this Section 5.1, if such Flip-in Event would occur by reason of an
acquisition of Common Shares otherwise than pursuant to a Take-over Bid made by means
of a Take-over Bid circular to all registered holders of Common Shares and otherwise
than in the circumstances set forth in Subsection 5.1(c)(b), waive the application of
Section 3.1 to such Flip-in Event. In such event, the Board of Directors shall extend
the Separation Time to a date at least 10 Business Days subsequent to the meeting of
shareholders called to approve such waiver.(f)
    
    The Board of Directors may, prior to the Close of Business on the tenth
Business Day following a Stock Acquisition Date or such later Business Day as it may
from time to time determine, upon prior written notice delivered to the Rights Agent,
waive the application of Section 3.1 to the related Flip-in Event; provided that the
Acquiring Person has reduced its Beneficial Ownership of Common Shares (or has entered
into a contractual arrangement with the Corporation, acceptable to the Board of
Directors, to do so within 10 days of the date on which such contractual arrangement is
entered into or such later date as the Board of Directors may determine) such that, at
the time the waiver becomes effective pursuant to this Subsection 5.1(f), such Person
is no longer an Acquiring Person. In the event of such a waiver becoming effective
prior to the Separation Time, for the purposes of this Agreement, such Flip-in Event
shall be deemed not to have occurred.(g)
    
    Where a Take-over Bid that is not a Permitted Bid Acquisition is withdrawn or
otherwise terminated after the Separation Time has occurred and prior to the occurrence
of a Flip-in Event, or if the Board of Directors grants a waiver under Subsection
5.1(f) after the Separation Time, then the Board of Directors may elect to redeem all
the outstanding Rights at the Redemption Price. Upon the Rights being redeemed
pursuant to this Subsection 5.1(g), all of the provisions of this




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- 40 - Agreement shall continue to apply as if the Separation Time had not occurred and
Rights Certificates representing the number of Rights held by each holder of record
of Common Shares at the Separation Time had not been mailed to each such holder and
for all purposes of this Agreement the Separation Time shall be deemed not to have
occurred and the Corporation shall be deemed to have issued replacement Rights to
the holders of its then outstanding Common Shares.
 (h)
    
    If the Board of Directors is deemed under Subsection 5.1(c) to have elected or
elects under Subsections 5.1(a) or 5.1(f) to redeem the Rights, then the right to
exercise the Rights will thereupon, without further action and without notice,
terminate and the only right thereafter of the holders of Rights shall be to receive
the Redemption Price.(i)
    
    Within 10 days after the Board of Directors is deemed under Subsection
5.1(d)(c) to have elected or elects under Subsection 5.1(a) or 5.1(g) to redeem the
Rights, the Corporation shall give notice of redemption to the holders of the then
outstanding Rights by mailing such notice to each such holder at his last address as it
appears upon the Rights Register or, prior to the Separation Time, on the registry
books of the transfer agent for the Common Shares. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the payment of
the Redemption Price will be made.
 5.2 Expiration
  5.3 Issuance of New Rights Certificates
  5.4 Supplements and Amendments
 (a)
    
    Subject to Subsections 5.4(b) and 5.4(c), the Corporation may from time to time
amend, vary or delete any of the provisions of this Agreement and the Rights provided
that no amendment, variation or deletion made on or after June 20, 2006, shall be made
without the prior consent of the shareholders of the Corporation or holders of the
Rights, given as provided in Subsection 5.4(b) except that amendments, variations or
deletions made for any of the following purposes shall not require such prior approval
but shall be subject to subsequent ratification in accordance with Subsection 5.4(b):




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- 41 -
 (i)
    
    in order to make such changes as are necessary in order to
maintain the validity of this Agreement and the Rights as a result of any
change in any applicable legislation, regulations or rules; or(ii)
    
    in order to make such changes as are necessary in order to cure
any clerical or typographical error.
 Notwithstanding anything in this Section 5.4 to the contrary, no amendment,
variation or deletion shall be made to the provisions of Article 4.4 or any other
provision specifically relating to the rights or duties of the Rights Agent except
with the written concurrence of the Rights Agent thereto.(b)
    
    Any amendment, variation or deletion made by the Board of Directors pursuant to
Subsection 5.4(a) shall if made:
 (i)
    
    Prior to the Separation Time, be submitted to the shareholders
of the Corporation at the next meeting of shareholders and the shareholders
may, by resolution passed by a majority of the votes cast by Independent
Shareholders who vote in respect of such amendment, variation or deletion,
confirm or reject such amendment or supplement; or(ii)
    
    after the Separation Time, be submitted to the holders of
Rights at a meeting to be held on a date not later than the date of the next
meeting of shareholders of the Corporation and the holders of Rights may, by
resolution passed by a majority of the votes cast by the holders of Rights
which have not become void pursuant to Subsection 3.1(b) who vote in respect of
such amendment, variation or deletion, confirm or reject such amendment or
supplement.
 Any amendment, variation or deletion pursuant to Subsection 5.4(a) shall be
effective from the later of the date of the consent of the holders of Common Shares
or Rights, as applicable, adopting such amendment, variation or deletion and the
date of approval thereof by the Exchange (except in the case of another amendment,
variation or deletion referred to in Clauses 5.4(a)(i) or (ii), which shall be
effective from the later of the date of the resolution of the Board of Directors
adopting such amendment, variation or deletion and the date or approval thereof by
the Exchange and shall continue in effect until it ceases to be effective (as in
this Subsection 5.4(b) described) and, where such amendment, variation or deletion
is confirmed, it shall continue in effect in the form so confirmed). If an
amendment, variation or deletion pursuant to Clauses 5.4(a)(i) or (ii), is rejected
by the shareholders or the holders of Rights or is not submitted to the shareholders
or holders of Rights as required, then such amendment, variation or deletion shall
cease to be effective from and after the termination of the meeting at which it was
rejected or to which it should have been but was not submitted or from and after the
date of the meeting of holders of Rights that should have been but was not held, and
no subsequent resolution of the Board of Directors to amend, vary or delete any
provision of this Agreement to substantially the same effect shall be




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- 42 - effective until confirmed by the shareholders or holders of Rights, as the case may
be.(c)
    
    For greater certainty, neither the exercise by the Board of Directors of any
power or discretion conferred on it hereunder nor the making by the Board of Directors
of any determination or the granting of any waiver it is permitted to make or give
hereunder shall constitute an amendment, variation or deletion of the provisions of
this Agreement or the Rights, for purposes of this Section 5.4 or otherwise.(d)
    
    The approval, confirmation or consent of the holders of Rights with respect to
any matter arising hereunder shall be deemed to have been given if the action requiring
such approval, confirmation or consent is authorized by the affirmative votes of the
holders of Rights present or represented at and entitled to be voted at a meeting of
the holders of Rights and representing a majority of the votes cast in respect thereof.
For the purposes hereof, each outstanding Right (other than Rights which are void
pursuant to the provisions hereof or which, prior to the Separation Time, are held
otherwise than by Independent Shareholders) shall be entitled to one vote, and the
procedures for the calling, holding and conduct of the meeting shall be those, as
nearly as may be, which are provided in the Corporations bylaws and the NBBCA with
respect to meetings of shareholders of the Corporation.
 5.5
    
    Fractional Rights and Fractional Shares
 (a)
    
    The Corporation shall not be required to issue fractions of Rights or to
distribute Rights Certificates which evidence fractional Rights. After the Separation
Time there shall be paid, in lieu of such fractional Rights, to the registered holders
of the Rights Certificates with regard to which fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the Market Price of a whole
Right.(b)
    
    The Corporation shall not be required to issue fractional Common Shares upon
exercise of the Rights or to distribute certificates that evidence fractional Common
Shares. In lieu of issuing fractional Common Shares, the Corporation shall pay to the
registered holder of Rights Certificates at the time such Rights are exercised as
herein provided, an amount in cash equal to the same fraction of the Market Price of
one Common Share at the date of such exercise.(c)
    
    The Rights Agent shall have no obligation to make any payments in lieu of
fractional Rights unless the Corporation shall have provided the Rights Agent with the
necessary funds to pay in full all amounts payable in accordance with Subsection
2.2(e).
 5.6
    
    Rights of Action




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- 43 -  5.7
    
    Holder of Rights Not Deemed a Shareholder
  5.8
    
    Notice of Proposed Actions
  5.9
    
    Notices
  (a)
    
    if to the Corporation:




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- 44 - 
 (b)
    
    if to the Rights Agent:
 th
 
 (c)
    
    if to the holder of any Rights, to the address of such holder as it appears on
the Rights Register or, prior to the Separation Time, on the registry books of the
Corporation for the Common Shares.
  5.10
    
    Costs of Enforcement
  5.11
    
    Regulatory Approvals
   5.12
    
    Declaration as to Non-Canadian and Non-United States Holders




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- 45 -  5.13
    
    Successors
  5.14
    
    Benefits of this Agreement
  5.15
    
    Shareholder Review
  5.16
    
    Determinations and Actions by the Board of Directors
  (a)
    
    may be relied upon by the Rights Agent (and in the case of reliance by the
Rights Agent, the good faith of the Board of Directors shall be presumed); and(b)
    
    shall not subject the Board of Directors to any liability to the holders of the
Rights or to any other parties.




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- 46 - 
 5.17
    
    Governing Law
  5.18
    
    Language
  5.19
    
    Counterparts
  5.20
    
    Severability
  5.21
    
    Effective Date
  5.22
    
    Time of the Essence




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- 47 - th
 INTEROIL CORPORATIONBy:By:COMPUTERSHARE INVESTOR SERVICES INC.By:By:




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SCHEDULE A
  [Form of Rights Certificate]
 Certificate No.
    
    Rights
   Rights Agreement Corporation Rights Agent Common
Share




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##### 



A - 2




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##### 



A - 3   
 INTEROIL CORPORATIONBy:By:Countersigned:COMPUTERSHARE INVESTOR SERVICES INC.By:




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FORM OF ELECTION TO EXERCISE
  
 Rights Certificate No.NameAddressCity and ProvinceSocial Insurance No. or other
taxpayer identification
numbers
  NameAddressCity and ProvinceSocial Insurance No. or other
taxpayer identification
numbers
 Date:SignatureWritten Signature Guaranteed
    
    
    
    (Signature must correspond to name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever)




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##### 



Signature
 NOTICE
 In the event that the certifications set forth above in the Form of Election to Exercise and
Assignment are not completed, the Corporation shall deem the Beneficial Owner of the Rights
represented by this Rights Certificate to be an Acquiring Person (as defined in the Rights
Agreement) and, accordingly, such Rights shall be null and void.




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FORM OF ASSIGNMENT
  (Please print name and address
of transferee)
  Date:
    
    
    
    Signature:Written Signature Guaranteed
    


    (Signature must correspond to name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever)
    Signature(Please print name below signature)
 NOTICE
 In the event that the certifications set forth above in the Form of Election to Exercise and
Assignment are not completed, the Corporation shall deem the Beneficial Owner of the Rights
represented by this Rights Certificate to be an Acquiring Person (as defined in the Rights
Agreement) and, accordingly, such Rights shall be null and void.6