EXHIBIT
4(C)


 


TRINIDAD
PARTICIPATION AGREEMENT


 

















 


AMENDED
AND RESTATED PARTICIPATION IN A FARMOUT AGREEMENT


 


This Agreement dated this 30th day of
December, 2005.


 


Between:


 


CHALLENGER
ENERGY CORP., a corporation incorporated under the laws of
Alberta, Canada (hereinafter “CNE”)


 


- and –


 


CANADIAN
SUPERIOR TRINIDAD AND TOBAGO LTD., a corporation incorporated
under the laws of Alberta, Canada (hereinafter “Canadian Superior”)


 


WHEREAS
each Party recognizes the abilities and expertise that the other Party possesses
with respect to the exploration and development of oil and gas properties;


 


AND
WHEREAS each Party wishes to secure the benefits of the
abilities and expertise offered by the other Party and to apply such benefits
collectively to the Project;


 


AND WHEREAS
CNE has agreed to participate with Canadian Superior in the Mariner Test Well
as defined in an Amended and Restated Farmout and Option Agreement between the
Parties and dated December 30, 2005 (“Mariner Farmout”);


 


AND
WHEREAS in furtherance of the foregoing mutually beneficial
opportunities, Canadian Superior, on behalf of the Parties, is in the process
of finalizing an agreement to acquire the Lands and Licences;


 


AND
WHEREAS in consideration of the terms and provisions of the
Rights Issuance the Parties have agreed to amend the provisions of the
Participation in a Farmout Agreement made by them and dated November 17, 2004
(the “Prior Agreement”);


 


AND
WHEREAS the Parties wish to confirm the terms of the Parties’
agreement and more formally provide for the respective rights, obligations and
benefits of each of them in connection with the acquisition, exploration and
development of the Lands and Licences;


 


NOW
THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, the Parties hereto covenant and agree as follows:


 


ARTICLE 1

INTERPRETATION


 


1.1                                                                               Definitions


 


Capitalized words and
phrases used in this Agreement, including in the recitals hereto, have the
meaning set forth in this Section 1.1, namely:


 


(a)                                  “Abandon” means the proper plugging and abandonment of a
well including the salvage of salvageable material and equipment therefrom and
the restoration of the applicable well site, all in accordance with the
Regulations and good offshore oilfield practices;


 

















 


(b)                                 “Additional Exploration Well” means those wells or well
which may or may not be drilled
pursuant to Article 2.1 (g) of the Farmout Agreement;


 


(c)                                  “Affiliate” means a subsidiary company, a parent company, or
a sister company of or to a Party hereto. For the purposes of this definition:


 


(i)                                     a
parent company is a company that controls or ultimately controls a Party
hereto;


 


(ii)                                  a
sister company is a company that is controlled by or ultimately controlled by
the same parent company as a Party hereto;


 


(iii)                               a subsidiary company is a company controlled by a Party hereto, a
parent company or a sister company; and


 


(iv)                              “control”
means that a company owns at least 30% of share capital (either directly or
through other companies which confers upon it a majority of the votes at the
shareholders’ meetings) of a company which is controlled or which has a common
majority shareholder.


 


(d)                                 “Agreement” means the main body of this agreement together
with all Schedules and attachments hereto, as amended from time to time;


 


(e)                                  “AMI Interests” means any right or interest in and/or to any
Petroleum Substances related to the Area of Mutual Interest;


 


(f)                                    “Area of Mutual Interest” means all lands within the area
designated as such on Schedule “D” attached hereto;


 


(g)                                 “Business Day” means any day other than a Saturday, Sunday
or statutory holiday in Calgary, Alberta, Canada;


 


(h)                                 “Cap” means, with respect to a well, the installation of
such production-quality casing, plugs and equipment as are necessary to enable
the well to be used for the production of Petroleum Substances at a later date;


 


(i)                                     “Commitment” has the meaning ascribed to it in Section 3.1;


 


(j)                                     “Crown Royalty” means the royalty payable or royalty share
of Petroleum Substances deliverable to the Ministry pursuant to the Regulations;


 


(k)                                  “Earned Interest” means an undivided 70% interest in that
portion of the Lands and Licences that Canadian Superior is entitled to
pursuant to Article 2.1 of the Farmout Agreement;


 


(l)                                     “Earning Date” means the date on which Canadian Superior has
completed the Minimum Work Obligations and earned the Earned Interest pursuant
to the Farmout Agreement;


 


(m)                               “Effective Date” means the 17th day of November,
2004;


 


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(n)                                 “Existing Seismic Data” means the seismic data delivered to
Canadian Superior from Petrotrin respecting the Lands and all seismic records,
data and information associated with such seismic data;


 


(o)                                 “Exploration Period” means the period of time described in
the Farmout Agreement;


 


(p)                                 “Exploration Well” shall have the meaning ascribed to it in
the Farmout Agreement;


 


(q)                                 “Farmout Agreement” means the final draft of the Farmout
Agreement between Canadian Superior and Petrotrin for the Mayaro Lands and the
Guayaguayare Bay Lands a copy of which is attached as Schedule “B” hereto, all
schedules attached thereto and any agreements entered into between Petrotrin
and Canadian Superior covering the Lands and Licences or, if applicable any
documents replacing and/or amending the Farmout Agreement in whole or in part;


 


(r)                                    “Field” shall have the meaning ascribed to it in the Farmout
Agreement;


 


(s)                                  “Guayaguayare Bay Lands” means all lands within the area
designated as such on Schedule “A” hereto and located offshore the Republic of
Trinidad and Tobago;


 


(t)                                    “Guayaguayare Bay Licence”
means the licences, leases, permits and other documents of title by virtue of
which the holder thereof is entitled to drill for, win, take, own or remove the
Petroleum Substances within, upon, or under the Guayaguayare Bay Lands or by
virtue of which the holder thereof is deemed to be entitled to a share of
Petroleum Substances removed from the Guayaguayare Bay Lands or any lands with
which the Guayaguayare Bay Lands are pooled or unitized and includes all renewals
and extensions of such documents, and all documents issued in substitution
therefor;


 


(u)                                 “Joint Operating Agreement” means the Joint Operating
Agreement between Canadian Superior and Petrotrin that is applicable to the
Mayaro Lands and the Guayaguayare Bay Lands a final draft of which is attached
as Schedule “C” hereto;


 


(v)                                 “Lands” means, collectively, the Guayaguayare Bay Lands and
the Mayaro Lands;


 


(w)                               “Lands and Licences” means, collectively, the Guayaguayare
Bay Licence, the Mayaro Licence, the Guayaguayare Bay Lands, and the Mayaro
Lands;


 


(x)                                   “Mayaro Lands” means all lands within the area designated as
such on Schedule “A” hereto and located offshore the Republic of Trinidad and
Tobago;


 


(y)                                 “Mayaro Licence” means the licences, leases, permits and
other documents of title by virtue of which the holder thereof is entitled to
drill for, win, take, own or remove the Petroleum Substances within, upon, or
under the Mayaro Lands or by virtue of which the holder thereof is deemed to be
entitled to a share of Petroleum Substances removed from the Mayaro Lands or
any lands with which the Mayaro Lands are pooled or unitized and includes all
renewals and extensions of such documents, and all documents issued in
substitution;


 


(z)                                   “Minimum Work Obligations” shall have the meaning ascribed
to it in the Farmout Agreement;


 


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(aa)                            “Ministry” means the Ministry of Energy and Energy
Industries of the Republic of Trinidad and Tobago;


 


(bb)                          “New Seismic Data” means approximately one hundred and sixty
(160) square kilometres of three-dimensional, seismic data covering such
locations within the Guayaguayare Bay Lands and the Mayaro Lands as Canadian
Superior may determine and as committed to be acquired by Canadian Superior as
part of the Minimum Work Obligations in the Farmout Agreement and all seismic
records, data and information associated with such seismic data;


 


(cc)                            “Operator” has the meaning ascribed to it in the Farmout
Agreement; (dd) “Party” means a party bound by this Agreement;


 


(dd)                          “Permitted Encumbrance” means the Crown Royalty, the
Overriding Royalty (as described in the Farmout Agreement) and the Petrotrin
Royalty (as described in the Farmout Agreement;


 


(ee)                            “Person” means a natural person, corporation, company,
partnership, trust, unincorporated association, sole proprietorship, union,
government or governmental department, ministry, board, commission or agency;


 


(ff)                                “Petroleum Substances” means petroleum, natural gas, natural
gas liquids, condensate and every other mineral or substance, or any of them,
in which an interest in or right to explore for is granted or acquired under
the Title Documents;


 


(gg)                          “Petrotrin” means Petroleum Company of Trinidad and Tobago
Limited;


 


(hh)                          “Project” means the joint acquisition and development of the
State Licence as contemplated by this Agreement and the Farmout Agreement;


 


(ii)                                  “Regulations” means all laws, statutes, regulations,
accords, instruments, agreements, orders or documents of a regulatory nature
issued, made or granted by a Regulatory Authority from time to time;


 


(jj)                                  “Regulatory Authority” means a government, or a government
department, agency or other authority including courts, tribunals, boards or
panels having apparent or actual jurisdiction over the Parties, the State
Licence, or otherwise in relation to the subject matter hereof, including
without limitation the Ministry;


 


(kk)                            “Rights Issuance” means the proposed issuance by CNE to
Canadian Superior (and, subsequently, to Canadian Superior’s shareholders) (to
occur immediately following the completion by CNE of a registration statement
with the Securities and Exchange Commission, but in any event, no later than
December 31, 2006) of the right to acquire common shares in the share capital
of CNE, either by way of right, warrant or convertible preferred share, or such
other matter of convertible security of CNE as mutually agreed to between
Canadian Superior and CNE, acting reasonably, such rights to be distributed by
Canadian Superior to its shareholders by way of an in specie dividend and/or distribution, subject to requisite
regulatory approvals, as applicable, and subject to compliance with all
requisite securities laws;


 


(ll)                                  “Seismic Data” means, collectively, the Existing Seismic
Data and the New Seismic Data and all interpretations and processed versions
thereof;


 


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(mm)                      “State Licence” shall have the meaning ascribed to it
in the Farmout Agreement;


 


(nn)                          “Test” means an operation, conducted to the reasonable
satisfaction of CNE, Canadian Superior and any Regulatory Authority and in
accordance with the Regulations and good offshore oilfield practices,
undertaken in respect of a well drilled to evaluate the presence of Petroleum
Substances in an interpreted geological structure or stratigraphic trap and to
evaluate the capacity thereof to produce such Petroleum Substances from such
well;


 


(oo)                          “Third Party” means a Person other than a Party;


 


(pp)                          “Title Documents” means any and all documents of title, including
but not limited to the State Licence, the Guayaguayare Bay Licence and the
Mayaro Bay Licence under and by virtue of which the holder thereof is entitled
to explore for, win, take, remove, or sell Petroleum Substances produced from
the Guayaguayare Bay Lands and/or the Mayaro Bay Lands, and any and all
renewals, extensions or continuations thereof, or further documents of title
issued pursuant to, subsequent to, or in substitution therefore in whole or in
part, from time to time;


 


(qq)                          “Well Data” means all data and information gathered from or
in connection with the drilling and Testing of a well; and


 


(rr)                                “Working Interest” means with respect to each Party, the
following undivided interest of such Party in the rights and obligations
derived from the Farmout Agreement, the Joint Operating Agreement and the State
Licence and shall be:


 


	
  CNE

  	
   

  	
  33.33

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Canadian Superior

  	
   

  	
  66.67

  	
  %

  



 


1.2                                                                               Interpretation


 


In this Agreement, unless the contrary intention appears from the
context or express provisions of this Agreement:


 


(a)                                  the
inclusion of headings and a table of contents are for convenience of reference
only and are not to be considered or taken into account in construing the
provisions of this Agreement or to in any way qualify, modify or explain the effect
of any such provisions;


 


(b)                                 references
to an Article, Section or Schedule are references to an Article, Section or
Schedule, as the case may be, in this Agreement;


 


(c)                                  words
importing the singular shall include the plural and vice versa and words importing
a particular gender shall include all genders;


 


(d)                                 all
monetary amounts are expressed in lawful currency of the United States of
America;


 


(e)                                  where
a period of time is specified, dated or calculated from a date or event, the
period shall be calculated excluding such date or the date on which such event
occurs, as the case may be;


 


(f)                                    time
shall be of the essence; and


 


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(g)                                 where
a term is defined in this Agreement, a derivative of that term shall have a
corresponding meaning unless the context otherwise requires.


 


1.3                                                                               Business
Day


 


If, pursuant to this Agreement, a Notice must be given or an action
taken within a specified period or on or before a specified date and such
period ends on, or such date falls on, a day that is not a Business Day, such
Notice may be given or such action may be taken on the next succeeding Business
Day.


 


1.4                                                                               Governing
Law


 


Regardless of where executed or delivered, this Agreement and the
rights and obligations of the Parties hereunder shall be governed by, and
construed and interpreted in accordance with the laws of Alberta, Canada.


 


1.5                                                                               Conflicts


 


If there is a conflict or inconsistency between any provision of the
main body of this Agreement and any of the Schedules, the provision contained
in the main body of this Agreement shall govern and prevail to the extent of
the conflict or inconsistency.


 


1.6                                                                               Schedules


 


The following Schedules are attached to and form part of this
Agreement:


 


	
  Schedule “A”

  	
  Lands

  
	
   

  	
   

  
	
  Schedule “B”

  	
  Farmout Agreement

  
	
   

  	
   

  
	
  Schedule “C”

  	
  Joint Operating Agreement

  
	
   

  	
   

  
	
  Schedule “D”

  	
  Area of Mutual Interest

  



 


ARTICLE
2

GRANT OF OPTION


 


2.1                                                                               Grant
of Option


 


CNE has agreed to participate with Canadian Superior in certain
operations described in the Mariner Farmout and in consideration of entering
into the Mariner Farmout and $1.00, the receipt of which is hereby
acknowledged, Canadian Superior hereby agrees to fulfill the Commitment
described in this Agreement and hereby grants to CNE the option described in Section
4 of this Agreement.


 


2.2                                                                               Acceptance
of Option


 


CNE hereby accepts the obligation of Canadian Superior to fulfill the
Commitment and the granting of the option described in Section 4 of this
Agreement.


 


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2.3                                                                               Interest
Held in Trust


 


(a)                                  During
the period of time from the Effective Date until the termination of the option
described in Section 4 of this Agreement, Canadian Superior agrees that
Canadian Superior holds and stands possessed of the interest of CNE in and to
the Farmout Agreement, the Joint Operating Agreement, the Lands and Licences
and the Title Documents and Canadian Superior shall hold such interests in
trust for and on behalf of CNE.


 


(b)                                 Canadian
Superior covenants and agrees that it will not sell, assign, transfer, convey,
encumber or surrender the Farmout Agreement, the Joint Operating Agreement, the
Title Documents or Lands and Licences insofar as same affects or relates to the
interests held in trust hereunder for CNE, except upon the written instructions
of CNE.


 


ARTICLE 3

COMMITMENT


 


3.1                                                                               Commitment


 


On or before the Effective Date, Canadian Superior shall at its sole
risk, cost and expense, and subject to the terms and conditions of this
Agreement, commence the following operations and initiate the timely
fulfillment of the following obligations (collectively, the “Commitment”) on or
with respect to the Guayaguayare Bay Lands and the Mayaro Lands and shall
conclude such operations and fulfill such obligations prior to December 31,
2006:


 


(a)                                  use
best efforts to finalize and execute the Farmout Agreement;


 


(b)                                 reprocess
the Existing Seismic Data; and


 


(c)                                  fulfill
any and all requirements from the Ministry and/or Petrotrin relating to
security deposits, guarantees or similar instruments that may be necessary in
the issuance of the State Licence.


 


3.2                                                                               Consultation
with CNE


 


During the course of conducting the Commitment, Canadian Superior shall
consult on a regular basis (and no less often than every two weeks) with CNE
concerning progress and fulfillment of the Commitment.


 


3.3                                                                               Delivery
of Seismic and Other Data to CNE


 


(a)                                  Within
60 days following completion of the Commitment, Canadian Superior shall deliver
copies of the Existing Seismic Data and any reprocessed copies thereof at no
expense to CNE.


 


(b)                                 Within
a reasonable time following the completion of the Commitment, Canadian Superior
shall deliver copies of all data and documents acquired or produced by or on
behalf of Canadian Superior in relation to the Farmout Agreement and copies of
all Regulatory fillings made in respect of same to CNE or the nominee of CNE
immediately upon Canadian Superior’s receipt of such data and documents and
thereafter provide such aforesaid data and documents on a regular basis to CNE.


 


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ARTICLE
4

OPTION


 


4.1                                                                               Option
Upon Completion or Commitment


 


Within fifteen (15) days of Canadian Superior completing the Commitment
and after delivery of all information to CNE pursuant to Section 3.3, Canadian
Superior shall provide to CNE written notice thereof (“CS Notice”)and CNE shall
have the option to elect within 60 days of receipt of the CS Notice, to either:


 


(a)                                  participate
for its Working Interest in that portion of the Minimum Work Obligations that
have not been completed by Canadian Superior as of the date of such election by
CNE; or


 


(b)                                 terminate its rights and obligations
hereunder.


 


4.2                                                                               Participation
in Farmout Agreement


 


In the event CNE elected pursuant to Section 4.1(a) of this Agreement
and prior to the Earning Date, all rights, duties, obligations, elections and
privileges to which Canadian Superior is entitled under the Farmout Agreement
shall be shared and may be separately exercised by each Party as to their
Working Interest. The Parties agree that Canadian Superior shall be Operator
and shall represent CNE under the Farmout Agreement until CNE is formally
recognized by Petrotrin.


 


4.3                                                                               Interests
of Parties in the Event CNE Participates


 


In the event CNE elected pursuant to Section 4.1(a) of this Agreement,
then on the Earning Date, the interest of the Parties and Petrotrin in the
Lands and Licences (or any part thereof), the Title Documents and the Farmout
Agreement shall be:


 


	
  Canadian
  Superior

  	
   

  	
  52.5

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  CNE

  	
   

  	
  17.5

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Petrotrin

  	
   

  	
  30.0

  	
  %

  



 


(hereinafter referred to as “Joint
Interests”)


 


4.4                                                                               Option
to Drill Additional Exploration Wells


 


In the event that Canadian Superior elects to drill one or more
Additional Exploration Well(s) pursuant to the Farmout Agreement, then for each
such Additional Exploration Well, Canadian Superior shall deliver a written
Notice (“Well Notice”) of such election to CNE. The Well Notice shall contain
all relevant information necessary for CNE to make an informed decision to
participate or not in the particular Additional Exploration Well including but
not limited to: a geological and geophysical discussion along with supporting
data, economic data, expected well performance data, expected reservoir data,
exact location, detailed cost estimate, estimate of commencement date,
estimated duration of the drilling operation and expected total depth. Within
120 days from receipt of delivery of each Well Notice, CNE shall have the
option to elect, by written notice to Canadian Superior, to either:


 


8

















 


(a)                                  participate
for its Working Interest in each Additional Exploration Well on a well by well
basis; however, in the event Petrotrin elects to participate in such Additional
Exploration Well, then the interests of each party shall be the Joint
Interests; or


 


(b)                                 terminate
such option to participate and forfeit any rights and obligations pursuant to
the Farmout Agreement in relation to such Additional Exploration Well.


 


4.5                                                                               Interests
of Parties in the Event CNE Participates in Additional Exploration Wells)


 


In the event CNE elected pursuant to Section 4.4(a) of this Agreement,
then, upon Canadian Superior earning an interest pursuant to Article 2.1(h) of
the Farmout Agreement, the resultant interest in any applicable Field(s)
related to such Additional Exploration Well(s) shall be apportioned as per the
Joint Interests. However, in the event Petrotrin does not participate in such
Additional Exploration Well(s) then the Parties shall share the Petrotrin
interest proportionately to their Working Interest percentage.


 


4.6                                                                               Participation after Earning


 


Once Canadian Superior has earned the Earned Interest pursuant to the
Farmout Agreement all benefits and obligations arising from any and all
operations conducted by the Parties on or in respect of the Lands, including
without limitation all revenues from sales of Petroleum Substances produced
therefrom and all costs and expenses (including without limitation the Crown
Royalty and all applicable operating expenses) associated therewith, shall be
shared by the Parties on the basis of their respective Joint Interests, and all
operations conducted on the Lands shall be governed by and conducted in
accordance with the Joint Operating Agreement.


 


ARTICLE
5

PETROTRIN ROYALTIES


 


5.1                                                                               Overriding Royalty


 


The Parties hereto in proportion to each other’s Joint Interests agree
to be each responsible for the payment to Petrotrin of the Overriding Royalty
described in the Farmout Agreement. In addition, in the event Petrotrin elects
to convert its participating interest to an Overriding Royalty in accordance
with Article 7 of the Farmout Agreement, the Parties hereto in proportion to
each other’s Joint Interests shall be each entitled to all rights and benefits
of such conversion along with being each responsible for all obligations
pertaining to such conversion.


 


5.2                                                                               Petrotrin
1.25% Royalty


 


The Parties hereto in proportion to each other’s Joint Interests agree
to be each responsible for the payment to Petrotrin of the 1.25% Petrotrin
Royalty described in the Farmout Agreement.


 


ARTICLE
6

TITLE AND OPERATIONAL MATTERS


 


6.1                                                                               Transfer
and Registration of Earned Interests


 


(a)                                  Canadian
Superior agrees to use its best efforts to transfer and convey to CNE the
interests CNE is entitled to hereunder and shall use documentation in form and
content acceptable to CNE to


 


9

















 


complete such task, and
Canadian Superior shall execute, deliver and register as required under the
Regulations or otherwise by a Regulatory Authority, all assignments, transfers
and other documents as may be necessary to fully and properly transfer and
convey such interests to CNE, when requested to do so in writing by CNE and at
no cost to CNE.


 


(b)                                 Provided
that CNE has earned its Working Interest, upon receipt of a Notice from CNE,
Canadian Superior agrees to use its best efforts to have CNE recognized as a
party to the Farmout Agreement and any costs relating thereto shall be borne
equally by the parties.


 


(c)                                  All
rights, duties, obligations, elections and privileges to which Canadian
Superior is entitled or subject under the Farmout Agreement and the Joint
Operating Agreement shall be shared and may be separately exercised by each
Party in accordance with their Working Interest or, if applicable, their Joint Interests.


 


(d)                                 As
of the Effective Date, Canadian Superior shall provide to CNE, on a timely and
regular basis (no less than monthly), copies of and access to all Seismic Data,
well information, geological and geophysical mapping, aeromagnetic surveys and
interpretations thereof in which Canadian Superior creates, produces or
acquires pursuant to the Farmout Agreement and the Joint Operating Agreement or
in performing the Commitment and the Minimum Work Obligations.


 


6.2                                                                               Operations


 


Subject to the terms and conditions of this Agreement, and during the
period of time from the Effective Date until the Earning Date, the following
provisions of the Joint Operating Agreement shall apply to any operations
conducted under this Agreement:


 


	
  Article 1

  	
  Definitions (to the extent required for
  interpretation of the relevant provisions of the Joint Operating Agreement
  adopted by this Section)

  
	
   

  	
   

  
	
  Article 4

  	
  Operator

  
	
   

  	
   

  
	
  Article 8

  	
  Default

  
	
   

  	
   

  
	
  Article 13

  	
  Transfer of Interests or Rights and Changes in
  Control

  
	
   

  	
   

  
	
  Article 16

  	
  Venture Information – Confidentiality – Intellectual
  Property

  
	
   

  	
   

  
	
  Article 17

  	
  Force Majeure

  



 


6.3                                                                               Joint
Operating Agreement and Appointment of Operator


 


The Parties hereby appoint Canadian Superior as operator under and for
the purposes of the Joint Operating Agreement and the Farmout Agreement.
Canadian Superior shall properly perform and discharge its duties and
obligations as Operator in accordance with the terms of this Agreement, the
Farmout Agreement, the Joint Operating Agreement, the Regulations and good
offshore oilfield practices.


 


6.4                                                                               Access
to Pipelines


 


In consideration of CNE paying to Canadian Superior its proportionate
share of all costs and expenses related thereto, Canadian Superior shall
provide to CNE access, on the same basis


 


10

















 


and terms as Canadian Superior, to any pipelines as
may be necessary to transport all Petroleum Substances produced from the Lands
to any applicable sales point(s) for such Petroleum Substances.


 


6.5                                                                               Marketing
of Petroleum Substances


 


Canadian Superior shall provide to CNE access, on the same basis and
terms as Canadian Superior, to any marketing arrangements for Petroleum
Substances produced from the Lands.


 


ARTICLE 7

ENCUMBRANCES


 


7.1                                                                               No
Encumbrances


 


At all times while this Agreement remains in force, neither Party shall
do or cause to be done any act, or make or cause to be made any act or
omission, whereby the Title Documents or any of them become encumbered (other
than by a Permitted Encumbrance) in such a way as to adversely affect the Title
Documents or any of them or to make them or the Lands and Licences subject to
termination or forfeiture in any respect.


 


ARTICLE 8

LIABILITY AND INDEMNITY


 


8.1                                                                               Canadian
Superior’s Responsibility


 


Canadian Superior will:


 


(a)                                  be
liable to CNE for all losses, costs, damages and expenses whatsoever (whether
contractual or otherwise), excepting consequential damages, that CNE may
suffer, sustain, pay or incur; and, in addition


 


(b)                                 indemnify
and hold harmless CNE against all actions, causes of action, proceedings,
claims, demands, losses, costs, damages and expenses whatsoever that may be
brought against or suffered by CNE, or that it may sustain, pay or incur;


 


insofar as they are, in respect of operations or activities conducted by
Canadian Superior or on behalf of Canadian Superior hereunder, a result of: the
gross negligence or wilful or wanton misconduct of Canadian Superior, its
employees, agents or contractors. However, this obligation will not apply to
the extent that the particular act or omission was done or omitted to be done
in accordance with CNE’s instructions or concurrence. Costs in this Article
will include legal costs on a solicitor-client basis.


 


8.2                                                                               CNE’s
Responsibility


 


CNE will:


 


(a)                                  be
liable to Canadian Superior for all losses, costs, damages and expenses
whatsoever (whether contractual or otherwise), excepting consequential damages,
that Canadian Superior may suffer, sustain, pay or incur; and, in addition


 


(b)                                 indemnify
and hold harmless Canadian Superior and its directors, officers, agents,
consultants, and employees against all actions, causes of action, proceedings,
claims, demands, losses, costs,


 


11

















 


damages and expenses
whatsoever that may be brought against or suffered by Canadian Superior, its
directors, officers, agents, consultants, and employees or that they may
sustain, pay or incur;


 


insofar as they are, in
respect of operations or activities conducted by CNE or on behalf of CNE
hereunder, a result of: the gross negligence or wilful or wanton misconduct of
CNE, its employees, agents or contractors. However, this obligation will not
apply to the extent that the particular act or omission was done or omitted to
be done in accordance with Canadian Superior’s instructions or concurrence.
Costs in this Article will include legal costs on a solicitor-client basis.


 


ARTICLE
9

AREA OF MUTUAL INTEREST


 


9.1                                                                               Creation
of Area of Mutual Interest


 


The Parties hereby establish the Area of Mutual Interest. Except in accordance
with the terms of this Agreement, a Party shall not acquire any rights,
directly or indirectly, in any exploration licences, wells, or other,
petroleum, and or natural gas interests in the “Area of Mutual Interest” or the
“AMI”) at any time for the period from the Effective Date until 120 days after
the date of completion of the Minimum Work Obligation (the “AMI Period”). For
the purposes hereof each Party shall be deemed to have acquired any AMI
Interests acquired by its Affiliates, and shall at all times be required to
comply with all obligations provided for hereunder as if those AMI Interests
constituted property of that Party.


 


9.2                                                                               Acquisition
of Interests within AMI


 


(a)                                  If
a Party (the “Acquiring Party”) acquires an AMI Interest during the AMI Period,
that Party shall, within ten (10) days of acquiring such interest, notify in
writing (the “AMI Notice”) the other Party (the “Non-Acquiring Party”) and
offer to the other Party their Working Interest percent of the AMI Interest
acquired by the Acquiring Party, on the same terms and conditions as apply to
the Acquiring Party under the applicable licence, agreement or arrangement. The
Non-Acquiring Party shall have thirty (30) days from receipt of such AMI Notice
to accept or decline to exercise its option to acquire such interest from the
Acquiring Party. To be considered a valid AMT Notice, the AMI Notice shall
contain such sufficient information and detail of the terms and conditions of
the acquisition of the AMI Interest by the Acquiring Party such that the Non- Acquiring
Party may reasonably assess the acquisition opportunity.


 


(b)                                 If
the consideration stipulated in the licence, agreement or arrangement referred
to in Section 9.2(a) of this Agreement cannot be matched in kind by the other
Party, or involves an allocation of cash value to the applicable AMI Interest
where it forms a portion only of the assets subject to the applicable
transaction, the Acquiring Party shall, in its AMI Notice issued to the Non- Acquiring
Party, set out its bona-fide estimate of the cash equivalent of such
consideration, and acceptance of the offer and payment of the relevant portion
of that cash consideration shall constitute a valid acceptance and satisfaction
of the Non-Acquiring Party’s obligations in acquiring the share of the relevant
interest.


 


(c)                                  AMI
Interests which are acquired by a Party, in compliance with the terms hereof,
with or from a Third Party shall be governed by and subject to any agreement
that may be entered into between them with respect to those AMI Interests
separate and apart from this Agreement.


 


12

















 


ARTICLE
10

NOTICES


 


10.1                                                                        Notice


 


All demands, notices or other communications (in each case a “Notice”)
to be given in connection with this Agreement shall be in writing and shall be
sufficiently given or made if:


 


(a)                                  delivered
to the intended recipient personally or by courier during normal business hours
on a Business Day at the intended recipient’s address as set forth below; or


 


(b)                                 sent
by facsimile transmission or sent to the intended recipient by other means of
recorded electronic communication:


 


	
  Canadian Superior Trinidad and Tobago Ltd.

  	
  Suite 3300,400 – 3rd Avenue SW

  
	
   

  	
  Calgary, Alberta T2P 4H2

  
	
   

  	
   

  
	
   

  	
  Attention:

  	
  President

  
	
   

  	
  Fax No.:

  	
  (403) 216-2374

  
	
   

  	
   

  
	
  Challenger Energy Corp.

  	
  Suite 3300, 400 – 3rd Avenue SW

  
	
   

  	
  Calgary, Alberta T2P 4H2

  
	
   

  	
   

  
	
   

  	
  Attention:

  	
  President

  



 


10.2                                                                        Deemed
Delivery


 


Any Notice given or made in the manner set forth in Section 10.1 shall
be deemed to have been given or made and to have been received on the day of
its delivery or transmission, as the case may be, if such day is a Business Day
and such Notice is received prior to 2:00 p.m., Calgary time, and, if not, on
the First Business Day thereafter.


 


10.3                                                                        Change
of Address


 


(a)                                  A
Party may change its address or telecopier number by Notice to the other Party
given in accordance with Section 10.1.


 


ARTICLE
11

COVENANTS


 


11.1                                                                        Covenants


 


The Parties will use their reasonable commercial efforts to proceed
with the Rights Issuance contemplated pursuant to this Agreement.


 


13

















 


ARTICLE
12

MISCELLANEOUS


 


12.1                                                                        Amendments


 


All amendments to this Agreement shall be made in a written instrument
signed by both Parties.


 


12.2                                                                        Waiver in Writing


 


No waiver of any provision, or the breach of any provision, of this
Agreement shall be effective unless contained in a written instrument signed by
the Party granting the waiver. Such waiver shall affect only the matter
specifically identified in the instrument granting the waiver and shall not
extend to any other matter, provision or breach.


 


12.3                                                                        Delay
Not Waiver


 


The failure of a Party to give Notice to any other Party or to take any
other steps in exercising any right, or in respect of the breach or nonfulfillment
of any provision of this Agreement, shall not operate as a waiver of that
right, breach or provision nor shall any single or partial exercise of any
right preclude any other or future exercise of that right or the exercise of
any other right, whether in law or in equity or otherwise.


 


12.4                                                                        Acceptance
of Payment Not Waiver


 


Acceptance of payment by a Party after the breach or nonfulfillment of
any provision of this Agreement by another Party shall not constitute a waiver
of the provisions of this Agreement, other than any breach cured by such
payment.


 


12.5                                                                        Primacy of Participation Agreement


 


In the event of a conflict between the provisions of this Agreement and
the Farmout Agreement and the Joint Operating Agreement, the provisions of this
Agreement shall prevail.


 


12.6                                                                        Entire Agreement


 


This Agreement constitutes the entire agreement of the Parties in
respect of the subject matter hereof and supersedes all prior oral or written
agreements and understandings of the Parties.


 


12.7                                                                        Further Assurances


 


Each Party shall do all such things and execute and deliver all such
further instruments as the other Parties may reasonably request to give effect
to and implement this Agreement.


 


12.8                                                                        Assignment


 


This Agreement may not be assigned by either Party without the prior
written consent of the other Party, which consent shall not be unreasonably
withheld or delayed.


 


14

















 


12.9                                                                        Enurement


 


This Agreement is binding upon and shall enure to the benefit of the
Parties hereto and their respective successors and permitted assigns.


 


12.10                                                                 Counterpart
and Facsimile Execution


 


This Agreement may be executed in counterpart and all counterparts
shall together constitute one and the same Agreement. Any copies executed in
counterpart may be delivered via facsimile transmission and, if so delivered,
shall be considered to be originals for all purposes.


 


12.11                                                                 Delivery


 


A Party which has executed this Agreement may deliver it to the other
Party by facsimile transmission at its address for such transmissions set out
in Section 11, and any copy so delivered shall be deemed an original for all
purposes. A Party so delivering this Agreement shall thereafter forthwith
deliver to the other Party an original execution page hereof with its original
signature located thereon provided, however, that any failure by a Party to so
deliver such original execution page shall not affect the validity or
enforceability of this Agreement against that Party.


 


12.12                                                                 Severability


 


The invalidity or unenforceability of any Section or provision of this
Agreement shall not affect the validity or enforceability of any other Section,
provision or whole of this Agreement.


 


11.13                                                                 Authority


 


Each of the Parties agrees and acknowledges that it has the requisite
capacity, power and authority to enter into this Agreement and to take such
further steps as are required to give effect to the provisions hereof.


 


 


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


 


	
  CHALLENGER ENERGY CORP.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Neil Mackenzie

  	
   

  
	
   

  	
  President

  	
   

  
	
   

  
	
   

  
	
  CANADIAN SUPERIOR TRINIDAD AND TOBAGO LTD.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Michael E. Coolen

  	
   

  	
  /s/ T.J. Harp, Director

  	
   

  
	
   

  	
  Michael E. Coolen, Director

  	
   

  	
  T.J. Harp, Director

  
						



 


15

















 


[Schedules
intentionally deleted]