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PARTICIPATION AGREEMENT

THIS AGREEMENT made the 2nd day of December, 2002

BETWEEN:
PATCH ENERGY INC.

(herein called "Patch")





OF THE FIRST PART

AND:
FAIRCHILD INTERNATIONAL CORPORATION

(herein called "Fairchild")





OF THE SECOND PART

WHEREAS:



	Pursuant to the terms of a farmout and joint operating agreement dated May 1, 2002 (the "Farmout Agreement") between Patch, True Energy Inc. and Arsenal Capital Inc., Patch has earned a 12.5% interest (the "Interest") in the Farmout Lands (as defined in the Farmout Agreement) by incurring 15.625% of the costs (the "Initial Costs") associated with the Test Wells (as defined in the Farmout Agreement);


	Fairchild is desirous of earning up to a one-third (1/3) share of the Interest (the "Partial Interest"), being a 4.167% interest in the Farmout Lands in consideration of incurring an equal portion of the Costs to a maximum of 5.208% of the costs associated with the Test Wells.

THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties hereto agree as follows:

1.PARTICIPATION

1.1Patch hereby agrees to grant to Fairchild the right to earn the Partial Interest.

1.2In order to earn the Partial Interest Fairchild shall fund such portion of the Costs, otherwise to be incurred by Patch pursuant to the terms of the Farmout Agreement, as is equal to the amount of the Partial Interest to be earned by Fairchild (the "Partial Costs") and in this regard Fairchild shall pay such Partial Costs as and when requested by Patch in order that Patch may fulfil its obligations under the Farmout Agreement in respect of the Partial Costs provided that, if Fairchild fails to make any such payments, its right to earn the Partial Interest shall cease and this Agreement shall be terminated.

1.3In circumstances where Fairchild incurs all the Partial Costs, it shall have earned the right to the Partial Interest and, in such instance, Patch shall use its reasonable best efforts to seek the consents necessary to assign the Partial Interest to Fairchild provided that, if such consents are not obtained, Patch shall hold the Partial Interest in trust for Fairchild.

2.REPRESENTATIONS AND WARRANTIES OF PATCH

2.1Patch represents and warrants to Fairchild in order to induce Fairchild to enter into this Agreement, as follows:

(a)the Farmout Agreement is in good standing, not in default and enforceable by Patch in accordance with its terms;

(b)Patch has not assigned, transferred, optioned or otherwise encumbered the Interest except as provided for herein; and

(c)Patch has all corporate authority and has obtained any and all consents required to enter into this Agreement.

3.REPRESENTATIONS AND WARRANTIES OF FAIRCHILD

3.1Fairchild represents and warrants to Patch in order to induce Patch to enter into this Agreement that Fairchild has all corporate authority and has obtained any and all consents required to enter into this Agreement.

4.COVENANTS OF PATCH

4.1Patch covenants with Fairchild that it shall:

(a)upon receipt of any payments from Fairchild pursuant to section 1.2 hereof, advance those payments to True in accordance with the terms of the Farmout Agreement;

(b)keep Fairchild informed in a timely manner of the operations under the Farmout Agreement and shall provide Fairchild with copies of any data it shall receive of the Test Wells; and

(c)upon Fairchild having earned the Partial Interest, forthwith upon receipt of same, forward any revenues received by Patch on account of the Partial Interest to Fairchild.

5.GENERAL

5.1Time shall be of the essence in this Agreement.

5.2This Agreement may be executed in counterpart and delivered by facsimile transmission and each counterpart, once so delivered to the other party, shall be binding on the parties.

5.3This Agreement shall be subject to, interpreted, construed and enforced in accordance with the laws in effect in the Province of British Columbia.  Each party accepts the jurisdiction of the courts of the Province of British Columbia.

5.4This Agreement supersedes and replaces all other agreements, documents, discussions and verbal understandings between the parties with respect to the Second Program and contains the entire agreement between the parties.

5.5The address for service of notices for each party is:

	To Patch:

Patch Energy Inc.

100 - 856 Homer Street

Vancouver, BC   V6B 2W5

Attention:  George Tsafalas



	 
	To Fairchild:

Fairchild International Corporation

100 - 856 Homer Street

Vancouver, BC   V6B 2W5

Attention:  George Tsafalas






5.6This Agreement shall enure to the benefit of and be binding upon the parties hereto and each of their respective successors and assigns.

5.7Each of the parties covenant and agree to do such acts and execute and deliver all such documents, conveyance and transfers as may be reasonably requested or required by the other party, in order to fully perform and carry out the terms of this Agreement.

IN WITNESS WHEREOF the parties have executed this Agreement as of the date first set out above.

PATCH ENERGY INC.

/s/ /s/ George Tsafalas

Per:

Authorized Signatory

FAIRCHILD INTERNATIONAL CORPORATION

/s/ George Tsafalas

Per:

Authorized Signatory