EXHIBIT 4(B)


 


PARTICIPATION AGREEMENT


 

















 


AMENDED AND
RESTATED PARTICIPATION 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 ENERGY INC., a
corporation incorporated under
the laws of Alberta, Canada and having an office in the City of Calgary
(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 a
Farmout and Option Agreement between the Parties and dated November 17,
2004 as amended and restated as of the date hereof (“Mariner Farmout”);


 


AND WHEREAS
in furtherance of the
foregoing mutually beneficial opportunities, Canadian Superior has entered into
a Production Sharing Contract with respect to the Lands;


 


AND
WHEREAS, in
consideration of the terms and provisions of the Rights Issuance the Parties
have agreed to amend, restate and extend the provisions of the Participation
Agreement dated November 17, 2004 made between them in respect of the
joint participation by them in the acquisition, exploration and development of
the Lands (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;


 


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)                                  “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
50% 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.


 


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


 


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


 


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


 


(e)                                  “Block 5(c)” means that area of land located offshore
Trinidad and designated as “Block 5(c) in the Competitive Bidding Order;


 


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


 


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


 


(h)                                 “Competitive Bidding Order” means the Petroleum Regulations (Competitive
Bidding) Order, 2003 made by the Minister of the Ministry;


 


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


 


(j)                                     “Existing Data Package” means the seismic data, well information,
reports, studies and other documentation made available to Canadian Superior
from the Ministry prior to submitting a bid on Block 5(c) at the
Competitive Bidding Order;


 


(k)                                  “Joint Operating Agreement” means the 2002 Model Form International
Operating Agreement distributed by the Association of International Petroleum
Negotiators (“AIPN”) along with the 2004 AIPN Model Form International
Accounting Procedure (“Accounting Procedure”), as amended, copies of which are
attached and marked as Schedule “B” hereto with specific agreed upon
elections indicated in the documents;


 


(l)                                     “Lands” means Block 5 (c) and the right to
produce Petroleum Substances therefrom;


 


(m)                               “Ministry” means the Ministry of Energy and Energy
Industries of Trinidad;


 


(n)                                 “Operator” shall have the meaning ascribed to it in the
Joint Operating Agreement;


 


(o)                                 “Party” means a party bound by this Agreement;


 


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


 


(q)                                 “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;


 


(r)                                    “Project” means the joint acquisition, exploration and
development of Block 5(c);


 


(s)                                  “Production Sharing Contract”
means that agreement between
the President of Trinidad, the Minister of the Ministry and Canadian Superior
for the Lands, a copy of which is attached as Schedule “A” hereto, all
schedules attached thereto and any agreement entered into between the
aforementioned parties concerning the Lands, and if applicable, any documents
replacing and/or amending the said agreement;


 


(t)                                    “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;


 


(u)                                 “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 Lands, the
Title Documents, and the Production Sharing Contract or otherwise in relation
to the subject matter hereof, including without limitation the Ministry;


 


(v)                                 “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;


 


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


 


(x)                                   “Title Documents” means any and all documents of title,
including but not limited to the Production Sharing Contract under and by
virtue of which the holder thereof is entitled to explore for, win, take,
remove, or sell Petroleum Substances produced from the 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;


 


(y)                                 “Trinidad” means the Republic of Trinidad and Tobago;


 


(z)                                   “Working Interest” means with respect to each Party, the
following undivided interest of such Party in the rights and obligations
derived from the Production Sharing Contract and shall be:


 




	
  CNE

  	
   

  	
  25%

  	
   

  






 


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  Canadian Superior

  	
   

  	
  75%

  	
   

  






 


(aa)                            “Work Programme” shall have the meaning ascribed to it in the Production Sharing
Contract;


 


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)                                 with the exception of the amount set out in
clauses 4.1(a) and 4.1(b)(ii), all monetary amounts are expressed in
lawful currency of the Canada;


 


(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


 


(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:


 


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  Schedule “A”

  	
  Production Sharing Contract

  
	
  Schedule “B”

  	
  Joint Operating Agreement

  
	
  Schedule “C”

  	
  Area of Mutual Interest

  



 


ARTICLE 2
PARTICIPATION


 


2.1                                                                               Grant of Participation
Rights


 


The Parties acknowledge that
CNE has agreed to participate with Canadian Superior in certain operations
described in the Mariner Farmout. In consideration of entering into the Mariner
Farmout, the premises hereof and the payment of $1.00 by CNE to Canadian
Superior, the receipt of which is hereby acknowledged, Canadian Superior hereby
grants to CNE the participation rights described in Section 4 of this
Agreement.


 


2.2                                                                               Agreement to Participate


 


CNE hereby acknowledges that
Canadian Superior has fulfilled the Commitment set out in clause 3.1 of the
Prior Agreement and agrees to participate with Canadian Superior in the
acquisition, exploration and development of the Lands and the Project, in
accordance with the provisions hereof.


 


2.3                                                                               Rights Issuance


 


Canadian Superior agrees
that it shall cooperate fully with CNE in all matters relating to the Rights
Issuance and that it will take such steps as are required to give effect to it
in as timely a manner as possible.


 


2.4                                                                               Interest Held in Trust


 


(a)                                  Canadian Superior agrees that Canadian
Superior holds and stands possessed, and will continue to hold and stand
possessed of the interest of CNE in and to the Production Sharing Contract, the
Lands, 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
Production Sharing Contract, the Lands, and the Title Documents insofar as same
affects or relates to the interests held in trust hereunder for CNE, except
upon the written instructions of CNE.


 


ARTICLE 3

DELIVERY OF INFORMATION


 


3.1                                                                               Delivery of Existing Data
Package to CNE


 


Provided that CNE has
complied with the provisions of clause 4.1(a) hereof:


 


(a)                                  As soon as is reasonably practical following
such compliance by CNE. Canadian Superior shall, at Canadian Superior’s
expense, deliver to CNE a copy of: i) the Existing Data Package, ii) geological
and geophysical mapping of the Lands, iii) interpreted seismic sections
covering the Land, iv) a complete copy of the bid and any revisions of the bid
submitted to the Ministry on


 


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Block 5(c). and v) a copy of information, documents
and all other data generated by Canadian Superior respecting the Lands; and


 


(b)                                 Canadian Superior shall deliver copies of all
data and documents acquired or produced by or on behalf of Canadian Superior in
fulfilling the Commitment 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.


 


ARTICLE 4

WORK PROGRAMME PARTICIPATION


 


4.1                                                                               CNE Initial Commitment


 


(a)                                  on or before April 1, 2006 CNE shall pay
to Canadian Superior the sum of Two Million Five Hundred Thousand
(US$2,500,000.00) Dollars US to be credited to CNE’s one third share of the costs
incurred to date by Canadian Superior in respect of the Production Sharing
Contract;


 


(b)                                 on the earlier of;


 


(i)                                     April 30, 2006; or


 


(ii)                                  within 14 business days of CNE having
successfully raised a minimum of Twelve Million (US $12,000,000.00) Dollars US
by way of the Rights Issuance


 


CNE shall pay to Canadian
Superior the balance of CNE’s one-third share of the costs incurred by Canadian
Superior to that date in respect of the Production Sharing Contract;


 


(c)                                  CNE shall, not less than 10 business days
prior to the scheduled spud date of the first Exploration Well to be drilled
pursuant to the Work Programme (as defined in the Production Sharing Contract),
pay to Canadian Superior one third of the anticipated dry hole costs of such
first Exploration Well, provided that if drilling operations arc not commenced
within 30 days of such payment, such monies shall be returned to CNE forthwith.
For greater clarity, the Parties acknowledge that in calculating such
anticipated dry hole costs, no amounts in respect of anticipated testing or
completing costs of such well shall be included; and


 


(d)                                 CNE further commits to participate for one
third of the balance of the costs directly attributable to the Work Programme
and the second and third Exploration Wells drilled pursuant thereto.


 


(e)                                  During the course of the Work Programme
Canadian Superior shall consult on a regular basis (no less often than monthly)
with CNE concerning progress and fulfillment of the Work Programme and Canadian
Superior’s activities as Operator in respect thereof.


 


4.2                                                                               Default/Early Termination


 


(a)                                  In the event that CNE fails to pay when due
the amounts required pursuant to clause 4.2(c) above, this Agreement shall
terminate without further notice, and CNE shall have forfeited its right to participate
in the Project or to earn any interest hereunder.


 


(b)                                 In all other respects, should CNE fail to pay
within 30 days any other amounts payable by it pursuant to this Article 4
during the Work Programme, Canadian Superior shall be entitled to give notice
of such default (the “Default Notice”) to CNE. Should CNE fail to remedy such
default


 


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within 30 days of the date
the Default Notice is issued, the provisions of Article 8 of the Joint Operating
Agreement shall apply.


 


4.3                                                                               Ongoing Participation


 


In the event that CNE has
complied with the provisions of clause 4.1 hereof, upon completion of the Work
Programme:


 


(a)                                  all rights, duties, obligations, elections
and privileges to which Canadian Superior is entitled under the Production
Sharing Contract shall be shared and may be separately exercised by each Party
as to their Working Interest;


 


(b)                                 the Parties agree that Canadian Superior
shall be Operator and shall represent CNE under the Production Sharing Contract
until CNE is formally recognized by the Ministry; and


 


(c)                                  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 Working Interest, and shall be
governed by and conducted in accordance with the Joint Operating Agreement.
Notwithstanding the generality of the foregoing, to the extent that the parties
are entitled to apply the Cost Recovery provisions of Article 18 of the Production
Sharing Contract to the costs of the Project, such recovered costs shall be for
the account of, and be credited to, the parties in the same proportions that
such costs were originally borne by them.


 


ARTICLE 5

TITLE AND OPERATIONAL MATTERS


 


5.1                                                                               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 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, the cost of which shall be borne equally
by the parties.


 


(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 Production Sharing
Contract, and any costs relating thereto shall be borne equally by the parties.


 


5.2                                                                               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. Canadian Superior shall properly perform and discharge its
duties and obligations as Operator in accordance with the terms of this
Agreement, the Production Sharing Contract and good offshore oilfield
practices. In addition to the applicability of Article 8 of the Joint
Operating Agreement pursuant to clause 4.2(b) hereof, the following
provisions of the Joint Operating Agreement


 


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and the Accounting Procedure are hereby incorporated
and shall be applicable to Article 4 hereof, the Work Program and all
costs incurred and operations conducted pursuant thereto:


 


a)                                      Joint Operating Agreement


 


	
  Article 1

  	
  Definitions (to the extent required for interpretation of the
  relevant provisions of the Joint Operating Agreement incorporated herein

  
	
   

  	
   

  
	
  Clause 4.4

  	
  Information Supplied by Operator

  
	
   

  	
   

  
	
  Clause 6.7

  	
  Authorization for Expenditure Procedure

  
	
   

  	
   

  
	
  Article 15

  	
  Venture Information – Confidentiality
  – Intellectual Property

  
	
   

  	
   

  
	
  Article 16

  	
  Force Majcure

  



 


b)                                     Accounting Procedure


 


All provisions


 


5.3                                                                               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 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.


 


5.4                                                                               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 6

ENCUMBRANCES


 


6.1                                                                               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 in such a way as to adversely affect the Title
Documents or any of them or to make them or the Lands subject to termination or
forfeiture in any respect, except as may be expressly provided for in the
Production Sharing Contract.


 


ARTICLE 7

LIABILITY AND INDEMNITY


 


7.1                                                                               Canadian Superior’s Responsibility


 


Canadian Superior will:


 


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(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.


 


7.2                                                                               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, 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 8

NOTICES


 


8.1                                                                               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 Energy Inc.:

  	
  Suite 3300, 400 – 3rd Avenue SW

  Calgary, Alberta T2P 4H2

  



 


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  Attention:

  	
  President

  
	
   

  	
  Fax No.:

  	
  (403) 216-2374

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Challenger Energy Corp.

  	
  Suite 3300, 400 - 3rd Avenue SW

  Calgary, Alberta T2P 4112

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  President

  
	
   

  	
  Fax No.:

  	
  (403) 216-2374

  



 


8.2                                                                               Deemed Delivery


 


Any Notice given or made in
the manner set forth in Section 8.1 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.


 


8.3                                                                               Change of Address


 


A Party may change its
address or telecopier number by Notice
to the other Party given in accordance with Section 8.1.


 


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 a period commencing on the Effective
Date and ending 120 days after the rig release date of the last well drilled
pursuant to the Work Programme (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 lnterests 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 AMI 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


 


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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.


 


ARTICLE 10

COVENANTS


 


10.1                                                                        Covenants


 


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


 


ARTICLE
11

MISCELLANEOUS


 


11.1                                                                        Amendments


 


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


 


11.2                                                                        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.


 


11.3                                                                        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.


 


11.4                                                                        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.


 


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11.5                                                                        Primacy of Participation Agreement


 


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


 


11.6                                                                        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.


 


11.7                                                                        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.


 


11.8                                                                        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 delayed or withheld.


 


11.9                                                                        Enurement


 


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


 


11.10                                                                 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.


 


11.11                                                                 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 8, 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 enforceabilitv of
this Agreement against that Party.


 


11.12                                                                 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.


 


10.13                                                                 Authority


 


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


 


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


 


	
  CHALLENGER ENERGY CORP.

  
	
   

  	
   

  
	
  Per:

  	
  /s/ Neil MacKenzie

  	
   

  
	
   

  	
   

  
	
   

  
	
  CANADIAN SUPERIOR ENERGY INC.

  
	
   

  	
   

  
	
  Per:

  	
  /s/ Michael E. Coolen

  	
   

  
	
   

  	
  Michael E. Coolen, Director

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ T.J. Harp Dir.

  	
   

  
	
   

  	
  T.J. Harp

  	
   

  



 


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[Schedules intentionally deleted]