Document:

EXHIBIT
4(C)

TRINIDAD
PARTICIPATION AGREEMENT

[*] Denotes confidential information which has been
filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 under the Securities Exchange Act of 1934, as amended.

 

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;

 2
 

 

(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;

 3
 

 

(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;

 4
 

 

(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

 5
 

 

(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.

 6
 

 

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.

 7
 

 

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

 

Schedule “A”

Lands

 

This is Schedule “A” attached to
and forming part of a Participation In A Farmout Agreement dated the 17th Day
of November, 2004 Between Challenger Energy Corp., And Canadian Superior
Trinidad And Tobago Ltd.

 

 

Schedule “B”

Farmout Agreement

 

FARMOUT AGREEMENT

 

BETWEEN

 

PETROLEUM COMPANY

OF TRINIDAD AND TOBAGO LIMITED

 

AND

CANADIAN SUPERIOR

TRINIDAD AND TOBAGO LTD.

 

FOR

 

MAYARO-GUAYAGUAYARE BAY BLOCK

 

OFFSHORE TRINIDAD

 

THIS AGREEMENT is made as of the Effective Date
between PETROLEUM COMPANY OF TRINIDAD AND TOBAGO LIMITED, a Company duly
incorporated in Trinidad and Tobago under the Companies Ordinance, Chapter 31
No. 1 and continued under the Companies Act Chapter 81:01 of the Laws of
Trinidad and Tobago with its registered office at Petroleum Company of Trinidad’ and Tobago Administration Building, Southern
Main Road, Pointe-á -Pierre, Trinidad in the Republic of Trinidad and Tobago
(hereinafter called “Petrotrin”, which expression shall include its successors
and permitted assigns) of the One Part, and CANADIAN
SUPERIOR TRINIDAD AND TOBAGO LTD., a company
incorporated under the Business
Corporations Act of the Province of Alberta with its Head Office at
3300, 400-3rd Avenue S.W., Calgary, Alberta T2P 4H2, Canada
and registered as an External Company in Trinidad and Tobago under the
Companies Act, Chapter 81:01 with its Principal Office in Trinidad and Tobago
situate at Nos. 48-50 Sackville Street, Port of Spain, Trinidad in the Republic
of Trinidad and Tobago (hereinafter called “Canadian Superior” which expression
shall include its successors and permitted assigns) of the Other Part.

WHEREAS:

All capitalised words used in these recitals A, B, C, D and E shall have the meaning given to them
as stated in Article 1 herein.

A.                                   Petrotrin
holds the Mayaro Bay Licence and the Guayaguayare Bay Licence registered as
numbers 500 of 1953 and 1038 of 1953 respectively entitling it to explore and
exploit Hydrocarbons from within the submarine area comprising the Mayaro Bay
Licence and the Guayaguayare Bay Licence (see attached Provisional Map).

B.                                     The
Parties wish to explore and exploit the Contract Area and have applied to the
President of Trinidad and to the Minister for a State Licence entitling them to
explore and exploit the Contract Area.

C.                                     By
the Petrotrin Deeds of Surrender, Petrotin has surrendered to the State its
Mayaro Bay Licence and its Guayaguayare Bay Licence in order to facilitate the
grant of the State Licence over the entire Contract Area to the Parties
concurrently with this Agreement thereby enabling Canadian Superior to conduct
Petroleum Operations.

D.                                    On
the                                       
the President of Trinidad and the Minister granted to the Parties the State
Licence entitling them to explore and exploit the Contract Area.

E.                                      In
consideration of the surrender by Petrotrin of its Mayaro Bay Licence and the
Guayaguayare Bay Licence and Petrotrin facilitating the grant of the State
Licence to itself and Canadian Superior thereby allowing Canadian Superior to
explore and exploit the Contract Area, the Parties have agreed to enter into
this Agreement and Joint Operating Agreement concurrently herewith in order to
carry out their objectives in respect of the exploration and exploitation of
the Contract Area and to document the conditions under which Canadian Superior
shall earn a seventy

 

percent (70%) Participating Interest share in the
Hydrocarbons won and saved from the Contract Area.

NOW THEREFORE in consideration of the premises and
the mutual covenants and agreements herein and in the State Licence contained
and in consideration of the mutual covenants and agreements of the Joint
Operating Agreement entered into by the Parties concurrently herewith, it is
hereby agreed as follows:

ARTICLE
1

DEFINITIONS

1.1                                 “Act” means the
Petroleum Act, Chapter 62:01 of the Laws of Trinidad and any amendments thereto
or re-enactments thereof from time to time in force and any regulations and
orders made thereunder from time to time.

1.2                                 “Affiliate”means a subsidiary company, a parent company, or a sister company of or
to a Party hereto. For the purposes of the foregoing definition:

(a)                                  a
parent company is a company that Controls a Party hereto;

(b)                                 a
sister company is a company that is Controlled by the same parent company as a
Party hereto; and

(c)                                  a
subsidiary company is a company Controlled by a Party hereto, a parent company
or a sister company.

For the purposes of this definition “Control” means
that a company owns at least [*] 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.

1.3                                 “Agreement” means this
agreement, together with all Schedules and attachments hereto, and any extension,
renewal or amendment hereof agreed to in Writing by the Parties.

1.4                                 “Allowable Deductions” means all
costs and expenses associated with or attributable to delivering all
Hydrocarbons downstream of the Measurement Point such as storage, gathering,
transportation and compression costs and expenses but does not include any
costs and expenses associated with (i) delivering Hydrocarbons from any wells
and/or platforms to the Measurement Point; and (ii) treating Hydrocarbons to
meet relevant pipeline specifications inclusive of the removal and disposal of
sediment and water such costs and expenses being for the sole account of
Canadian Superior.

1.5                                 “Appraisal Well” means any
well drilled and Tested and whose purpose at the time of commencement of drilling
such well is the determination of the extent or the volume, the produceability
and the fluid properties of any Hydrocarbon reserves contained in an existing
Discovery.

1.6                                 “Calendar” means the
Gregorian calendar.

 

1.7                                 “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 Hydrocarbons at a later date.  “Capping” and other
derivatives shall be construed accordingly.

1.8                                 “Commercial Discovery” and “Declaration of Commerciality”shall each mean any Discovery that contains commercial quantities of
Hydrocarbons as determined by the Parties jointly or, if no such determination
is made by the Parties prior to the expiry of the Exploration Period and a
Party wishes to proceed exclusively with the development of such Discovery
after the expiry of the Exploration Period, then as determined by that Party,
subject in either case to obtaining approval from the Ministry of Energy to
commence Exploitation.

1:9                                 “Completion” means an operation intended to
complete a well as a producer of Hydrocarbons in one or more Zones, including
but not limited to the setting of production casing, perforating, stimulating
the well and production testing conducted in such operation.  “Complete” and other derivatives shall be
construed accordingly.

1.10                           “Contract(s)” means collectively this Farmout
Agreement, the Joint Operating Agreement, the State Licence, and any extension,
renewal or amendment thereof which is agreed to in Writing by the Parties and
approved by the Ministry of Energy and Government where such approval is
necessary.

1.11                           “Contract Area” means the
area comprising approximately 55,063 acres more or less which is more
particularly described in Schedule I hereto and shown coloured pink in the
survey plan attached and marked “X” in Schedule II hereto.  The perimetre and perimetres of the Contract
Area shall correspond to that area covered by the State Licence as such area
may vary from time to time in accordance with Article 3 of this Agreement.

1.12                           “Crude or Crude Oil” means all
Hydrocarbon in a liquid state (other than NGLs) at sixty degrees (60°)
Fahrenheit and fourteen point seven (14.7) pounds per square inch absolute
pressure the rights to which are granted by the State Licence.

1.13                           “Date of Declaration of Commercial
Discovery” means the date on which the Minister approves the Development
Plan in respect of a Commercial Discovery.

1.14                           “Day” means a Calendar day unless
otherwise specifically provided.

1.15                           “Development and Production Costs” means
those capital and non-capital costs of all operations conducted in accordance
with a Development Plan to facilitate the extraction, production and sale of
Hydrocarbons and all other expenses related to the development of the Contract
Area or part thereof, including but not limited to overhead expenses made in
respect of the development of the Contract Area.

1.16                           “Development Plan” means a
plan for the development of Hydrocarbons from a Field prepared and approved as
a Joint Operation or an Exclusive Operation in accordance with this Agreement
and the Joint Operating Agreement.  Such
plan shall include but not be

 

limited to information as to all major design,
engineering, wells, facilities, Production operations, Development and
Production Costs and services required for such development.

1.17                           “Development Well” means any
well drilled, including an Appraisal Well reclassified as a Development Well,
for the Production of Hydrocarbons pursuant to a Development Plan and approved
as such by the Ministry.

1.18                           “Discovery” means the
discovery of an accumulation of Hydrocarbons in the Contract Area whose
existence until that moment was unproven by drilling.

1.19.                        “Effective Date” shall
mean the                                 .

1.20                           “Election Period” has the
meaning ascribed to it in Article 7.1. 1.21 “Environment” has the meaning given in
Article 6.4(g)(i).

1.22                           “Environmental Documents” has the
meaning given in Article 6.4(e). 1.23 “Environmental Law” has the meaning given in Article
6.4(g)(ii).

1.24                           “Environmental Liability” and “Environmental Liabilities” have the
meaning given in Article 6.4(g)(iii).

1.25                           “Exclusive Operations”has the meaning ascribed to it in the Joint Operating, Agreement.

1.26                           “Exit Audit” has the meaning
ascribed to it in Article
6.4(f).

1.27                           “Exploitation” means the
extraction and Production of Hydrocarbons from a Field.

1.28                           “Exploration Period” means the
first four (4) years after the Effective Date of this Agreement and any
extensions thereof as contemplated by Article 3.2(b) hereof and where necessary
approved as such by the Ministry of Energy.

1.29                           “Exploration Well” means any well the purpose of which
at the time of the commencement of drilling is to explore for an accumulation
of Hydrocarbons, which accumulation was at that time unproven by drilling and
which has been classified by Ministry of Energy as an exploration well.

1.30                           “Fees” means where applicable the
following:  the application fee for the
issuance of the State Licence, registration fees, stamp duty fees, commissioner
of affidavit fees and any other costs and expenses associated with the State
Licence being issued to the Parties and registered with the office of the
Register General’s Department in the Ministry of Legal Affairs.

1.31                           “Field” means that
part of the Contract Area, which has had a Commercial Discovery consisting of a
Hydrocarbon reservoir or multiple Hydrocarbon reservoirs all grouped on or
related to the same or stacked geological structures or stratigraphic conditions.  All reservoirs overlying and underlying from
the sea floor down to mantle shall constitute part of such Field.  A Field’s boundaries shall

 

encompass all Proved and
Probable Reserves (as defined by the Society of Petroleum Engineers and World
Petroleum Congress) within the Zone(s) of the Commercial Discovery plus an
additional zero point five (0.5) kilometre halo surrounding the outermost
geographic limits of such Zone(s).

1.32                           “Force Majeure” has the
meaning given to it in the Act.

1.33                           “Government” means the
Government of Trinidad or any Ministry, department, competent authority or
agency thereof, other than Petrotrin.  “Governmental” and other
derivatives shall be construed accordingly.

1.34                           “Gross Production” means the
total undivided Hydrocarbons won and saved from the Contract Area or any Field
or any relevant part thereof as applicable, prior to any deduction whatsoever
including but not limited to Royalties, Petrotrin Royalties, Overriding Royalty
or division of interests or costs and expenses related to gathering, treating,
compressing, transporting and storage. 
Gross Production shall not include any Hydrocarbons that are reasonably
used or unavoidably lost during any drilling, Testing, Capping or Production
Operations conducted within the Contract Area.

1.35                           “Guayaguayare-Bay
Licence” means a
portion of the acreage under Deed of Licence registered as 1038 of 1953 with
the office of the Register General’s Department in the Ministry of Legal
Affairs.

1.36                           “Hydrocarbon(s)” has the
meaning ascribed to it in the Joint Operating Agreement.

1.37                         “Joint Account” has the
meaning ascribed to it in the Joint Operating Agreement

1.38                           “Joint Operating Agreement” means the
agreement entered into between the Parties as of the Effective Date
concurrently herewith to provide for the exploration, development, marketing
and exploitation of the Hydrocarbons and any related activities in and with
respect to the Contract Area.

1.39                           “Joint Operation(s)” has the meaning ascribed to it in the
Joint Operating Agreement.

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

1.41                           “Mayaro Bay Licence” means the
Deed of Licence registered as number 500 of 1953 with the office of the
Registrar General’s Department in the Ministry of Legal Affairs.

1.42                           “Measurement Point” means the
first point at which Hydrocarbons are metered, measured or allocated downstream
of the wellhead in which Petrotrin computes its royalty to the Government.

1.43                           “Minimum Payments” means the
sums payable by the Parties as the respective licensees in accordance with
Regulation 56 of the Act for the state lands in the licenced area as provided
in the State Licence.

 

1.44                           “Minimum Work Obligations” means
those activities, which are more particularly described in Schedule III of this
Agreement that shall be performed by Canadian Superior.

1.45                           “Minister” means the member of
Cabinet charged with responsibility for the exploration, development and
production of Hydrocarbons in Trinidad and all matters consequential thereto.

1.46                           “Ministry/Ministry of Energy” means the
ministry of the Government under the purview of the Minister, which regulates
Petroleum Operations in Trinidad and which at the Effective Date, is called the
Ministry of Energy and Energy Industries.

1.47                           “Natural Gas” means all
hydrocarbons in a gaseous state at sixty degrees (60°) Fahrenheit and at
fourteen point seven (14.7) pounds per square inch absolute pressure (including
wet gas, dry gas and residue gas), the rights to which are granted by the State
Licence.

1.48                           “NGLs” means all naturally occurring
gaseous hydrocarbons (including ethane, propane, butane or condensate) that are
initially components of Natural Gas and may be extracted in a liquid state at a
processing facility.

1.49                           “Laws/Regulations” means
those applicable laws, statutes, regulations accords, instruments, agreements,
orders or documents governing any or all activities under the Contracts.

1.50                           “Notice” has the meaning ascribed to it in
Article 18 of the Joint Operating Agreement.

1.51                           “Operator” means any
Person appointed from time to time to serve as Operator pursuant to Article 4
of the Joint Operating Agreement in respect of the Joint Operations.

1.52                           “Operating Committee” means the
committee constituted in accordance with Article 5 of the Joint Operating
Agreement.

1.53                           “Overriding Royalty” means the
overriding percentage interest of the aggregate daily production rates of all
Hydrocarbons won and saved from the Contract Area as specified in Schedule IV
that are payable to Petrotrin pursuant to this Agreement.  Such Overriding Royalty shall be based on
production after Allowable Deductions and on Petrotrin’s Participating Interest
in the Contract Area as at the effective time of such election by Petrotrin to
convert its Participating Interest share in such Hydrocarbons to an Overriding
Royalty in accordance with Article 7 herein.

1.54                           “Participating Interest(s)” means as to any Party, the undivided
interest of such Party (expressed as a percentage of the total interests of all
Parties) in the rights and obligations derived from the Contracts or any of
them and in respect of the Contract Area as initially set out in Article 2.1.

1.55                           “Party” means either Canadian Superior or
Petrotrin, and “Parties” means both Canadian

 

Superior and Petrotrin,
and includes the respective successors and permitted assigns of each.

1.56                           “Person(s)” mean a
natural person, corporation, company, partnership, trust, unincorporated
association, sole proprietorship, union, government or governmental department,
ministry, board, commission or agency.

1.57                           “Petroleum Operations” has the
meaning given to the term “petroleum operations” in the Act relating to
activities in the Contract Area.

1.58                           “Petrotrin Deeds of Surrender” means
those two (2) deeds of surrender executed by Petrotrin to the State of the
acreages which form part of the Contract Area made the [*] day of [*] and
registered with the office of the Registrar General in the Ministry of Legal
Affairs as [*] of [*] and [*] of [*] respectively.

1.59                           “Petrotrin Royalty” means a
royalty of one and one quarter percent (1.25%) of the total Hydrocarbons won
and saved within, upon, under or attributed to the Contract Area that is
payable to Petrotrin pursuant to this Agreement, as more particularly outlined
in Article 5 hereof.

1.60                           “Production” means that
activity related to when a well is opened for long term extraction of
Hydrocarbons to a gathering station or other production facilities after all
well tests are completed.  Well test
shall include drillstem tests and extended well tests, which may be carried out
to define aerial extent and deliverability of a reservoir.

1.61                           “Production Operations” has the meaning ascribed to it in
the Joint Operating Agreement.

1.62                           “Public Petroleum Rights” has the meaning given to the term “public
petroleum rights” in the Act.

1.63                           “Reserves” means the estimates of Hydrocarbons
in accordance with the “Hydrocarbon Reserves Definitions” as approved by the
Society of Petroleum Engineers and World Petroleum Congress.

1.64                           “Royalty” means
royalty payable to the Government pursuant to the State Licence in respect of
Public Petroleum Rights.

1.65                           “Secondee” has the
meaning ascribed to it in the Joint Operating Agreement.

1.66                           “Secondment” means
placement within Canadian Superior’s organisation of one or more persons who
are employed by Petrotrin.

1.67                           “State” means the
Republic of Trinidad and Tobago.

1.68                           “State Licence” means the
Exploration and Production (Public Petroleum Rights) Licence granted to the
Parties by the President of Trinidad and the Minister entitling the Parties to
explore, drill and exploit any Hydrocarbons found in the Contract Area, and
includes any extension, renewal or amendment thereof or any substitute

 

Licence therefor as
requested by the Parties in accordance with the Contracts.

1.69                           “Testing” means an operation intended to
evaluate the capacity of all prospective Zones to produce Hydrocarbons in any
well in accordance with good industry practices.  “Test” and other derivatives shall be
construed accordingly.

1.70                           “Third Party” means a
Person other than a Party.

1.71                           “Trinidad” means the
Republic of Trinidad and Tobago.

1.72                           “Wilful MissconMissconduct/Gross Negligence” means an intentional and conscious
or reckless disregard by any Party of any provision of the Contracts; but shall
not include any error or judgment or mistake made by any director, officer,
manager, supervisor or other employee or agent of such Party in the exercise,
in good faith, of any function, or authority or discretion conferred upon such
Party.

1.73                           “Work Programme and Budget” means the
annual schedule of activities, revenues and costs described and approved in
accordance with Article 6 of the Joint Operating Agreement which during the
relevant year of the Exploration Period or Joint Operations shall include but
not necessarily be limited to the Minimum Work Obligations.

1.74                           “Writing” or “Written” means a document delivered by
registered mail, by prepaid courier service, by facsimile transmissions or by
hand.

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

ARTICLE 2

PARTICIPATING
INTERESTS

2.1                               Participating Interests

(a)                                  Canadian
Superior shall be required to conduct, at its sole risk and expense, the
Minimum Work Obligations during the Exploration Period.  Upon completion of the Minimum Work
Obligations by Canadian Superior, the Participating Interests of the Parties
shall, in any Field(s) discovered in which there has beers a Declaration of
Commerciality during the conducting of the Minimum Work Obligations, be as
follows:

	
  Canadian Superior

  	
   

  	
  70

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Petrotrin

  	
   

  	
  30

  	
  %

  

 

 

(b)                                 If
the Minimum Work Obligations are completed prior to the expiry of the
Exploration Period, any operations that the Parties conduct within- the Contract Area during the period following
the completion of the Minimum Work Obligations and prior to the expiry of the
Exploration Period shall, subject to Article 2.1(g), be Joint Operations
conducted pursuant to the Joint Operating Agreement and, subject to Article
6.1, shall be for the Joint Account.

(c)                                  Upon
the expiry of the Exploration Period, Canadian Superior shall relinquish its
Participating Interest in all lands that are within the Contract Area but
outside the boundaries of any Field(s), discovered during the Minimum Work
Obligations conducted under Article 2.1(a), any Joint Operations conducted
under Article 2.1(b) and any operations conducted under 2.1(g).  The boundaries of such Field(s) shall be
determined in accordance with Article 3.4. 
Thereafter, subject to Article 2.1(d) and subject also to Article 6.1:

(i)                                     the
Parties shall be entitled to conduct Joint Operations and/or Exclusive
Operations within such Field(s) to explore for, win, take and remove
Hydrocarbons on and from such Field(s), all in accordance with the provisions
of the Joint Operating Agreement; and

(ii)                                any
Joint Operation so conducted shall be for the Joint Account and any Exclusive
Operation so conducted shall be for the exclusive benefit and obligation of the
Party or Parties conducting such Exclusive Operation.

(d)                                 If
Petrotrin elects to convert its Participating Interest to the Overriding
Royalty pursuant to Article 7 hereof, then as and from the effective date of
such conversion:

(i)                                     Petrotrin
shall receive the Overriding Royalty in accordance with the applicable
provisions of this Agreement and shall be deemed to have surrendered all of its
Participating Interest to Canadian Superior;

(ii)                                  other
than the Petrotrin Royalty and the Overriding Royalty which shall be for the
sole benefit of Petrotrin, all benefits and obligations, including without
limitation all revenues from sales of Hydrocarbons produced from a Field or
Fields and all costs and expenses associated therewith, shall be for the sole
account and benefit of Canadian Superior; and

(iii)                               Petrotrin
shall forthwith transfer and assign its Participating Interest to Canadian
Superior, provided that, with respect to its interest in the State Licence,
Petrotrin shall be entitled, at its election, to deliver an irrevocable
Declaration of Trust to Canadian Superior, satisfactory in form and substance
to Canadian Superior, acting reasonably, in satisfaction of its obligations
under this subsection. pertaining to its Participating Interest in the State
Licence.

(e)                                  The
Participating Interests may be amended from time to time in: accordance with
the provisions of this Agreement and the Joint Operating Agreement.

 

(f)                                    The
rights, duties and obligations of the Parties under the Contracts shall be
several and not joint or collective and each Party shall be responsible only
for its Participating Interest in the obligations set forth in the Contracts.

(g)                                 Notwithstanding
the foregoing, upon the completion of the Minimum Work Obligations, Canadian
Superior shall have the option; but not the obligation, to drill one or more
additional Exploration Wells prior to the expiry of the Exploration Period.  If Canadian Superior elects to drill such
additional Exploration Well(s), it shall give Notice(s) of such election to
Petrotrin.  Within sixty (60) Days of
receipt of such Notice(s), Petrotrin shall advise Canadian Superior by Notice
that it either elects to participate or not to participate in such additional
Exploration Well(s) proposed by Canadian Superior.  If Petrotrin elects to participate, all
operations conducted in respect of such additional Exploration Well(s) shall be
Joint Operations conducted pursuant to the Joint Operating Agreement and shall
be for the Joint Account.  If Petrotrin
elects not to participate, Canadian Superior shall be entitled, but shall not
be obligated to proceed with such additional Exploration Well(s).  If Canadian Superior elects to proceed, the
operations conducted by Canadian Superior in respect of such additional
Exploration Well(s) shall be Exclusive Operations conducted pursuant to the
Joint Operating Agreement and shall be for the exclusive benefit and obligation
of Canadian Superior, provided that if Petrotrin wishes to reinstate its rights
in respect of such additional Exploration Well(s) pursuant to Article 7.4(C) of
the Joint Operating Agreement, the amount otherwise payable by Petrotrin to
Canadian Superior in respect of such additional Exploration Well(s) shall be
100 % percent of Petrotrin’s Participating Interest share of all liabilities,
costs and expenses pursuant to Article 7.5(A) of the Joint Operating Agreement
plus an additional penalty of [*] of Petrotrin’s Participating Interest share
of all liabilities, costs and expenses pursuant to Article 7.5.(B)(3) of the
Joint Operating Agreement, that were incurred in connection with such
additional Exploration Well(s) prior to Petrotrin making such election under
Article 7.4(C) of the Joint Operating Agreement.  For greater clarity the amounts referred to
herein that is payable by Petrotrin to Canadian Superior shall be equal to but
not exceed two times Petrotrin’s Participating Interest Share of all
liabilities, costs and expenses incurred in connection with such additional
Exploration Well(s).

(h)                                 In
the event Canadian Superior, drills an Additional Exploration Well pursuant
to Article 2.1(g) and Petrotrin does not elect to reinstate its rights in
respect of such additional Exploration Well then Petrotrin shall be deemed to
have relinquished its Participating Interest to Canadian Superior at the time
in which there has been a Declaration of Commerciality with respect to any
Field in which such additional
Exploration Well is drilled.  The
boundaries of any Field(s) discovered in accordance with Article 2.1(g) shall
be determined pursuant to Article 3.4.

(i)                                     Upon
issuance of the State Licence and the execution of this Agreement the interests
of the Parties in the Contracts shall be as follows:

 

 

	
  Canadian Superior

  	
   

  	
  70

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Petrotrin

  	
   

  	
  30

  	
  %

  

 

ARTICLE
3

TERM AND RELINQUISHMENT

3.1                               Term
of the Agreement

This Agreement shall take effect upon the Effective
Date and, unless terminated by a subsequent written agreement between the
Parties or in accordance with the provisions herein, shall continue in full
force and effect until the expiry of the Exploration Period (including any
extension thereof pursuant to Article 3.2).

3.2                               Exploration
Period

(a)                                  During
the Exploration Period, the Parties shall have the exclusive right to explore
for Hydrocarbons in the Contract Area. Subject to Article 3.2 (c) Canadian
Superior shall complete the Minimum Work Obligations within the stipulated
timeframes as set out in Schedule III herein during the first four (4) years of
the Exploration Period. Subject to any applicable provision of this Agreement
to the contrary, no Party may withdraw from the Contracts before the completion
of the Minimum Work Obligations.

(b)                                 If,
prior to the end of the fourth year of the Exploration Period, Canadian
Superior has committed to Petrotrin to conduct further exploration work which
has been mutually agreed by both Parties, the Exploration Period shall be
extended by a further period of [*] that is to [*] years from the Effective
Date of this Agreement.  Where the
Parties mutually agree to such further exploration work Petrotrin would be
required to pay its Participating Interest share of all costs associated with
such further exploration work.

(c)                                  The
relevant periods set out in Schedule III hereof to carry out the various stages
of the Minimum Work Obligations shall be extended by:

(i)                                   the
length of any delay which is caused by the inability of the Parties or either Party for reasons beyond its reasonable
control or other permissions whatsoever (including any necessary seismic and/or
environmental approvals or permits) for Joint Operations in the relevant
portions of the Contract Area; and

(ii)                                  the
length of any other period of Force Majeure.

Once Canadian Superior demonstrates to the reasonable
satisfaction of Petrotrin that any delay as a result of the event(s) as stated
in Article 3 .2(c)(i) or any other period of Force Majeure has occurred, and if
the delay as a result of the event(s) as stated in Article 3.2(c)(i) or Force
Majeure causes the suspension of this Agreement for an unabated period of more
than three (3) months and six (6) months respectively, the Parties shall meet
and mutually agree to take such action as is reasonable in the circumstances to
deal

 

with the event of the delay and Force Majeure.

(d)                                 In
no event shall any clause in the Contracts have the effect of extending the
Exploration Period to a period longer than six (6) years from the Effective Date.  The Parties agree that where any clause has
such an effect such clause
would be deemed null and void and of no effect.

3.3                               Extension / Renewal for Commercial
Discovery

If pursuant to the terms of the Contracts it is
determined that a Commercial Discovery has occurred during the Exploration Period,
in which Canadian Superior has participated, the Parties shall jointly apply
pursuant to the provisions of the State Licence or Regulation 13(5) of the Act
for the maximum period of the extension or renewal of the State Licence
permitted by the Act as it relates to the Field which is the subject of a
Commercial Discovery.  If there is more
than one Commercial Discovery during the Exploration Period, then the Parties
shall apply for the extension or renewal of the State Licence for each Field or
Fields, which is the subject of a Commercial Discovery.  The Parties agree that the application for an
extension will occur near the end of the Exploration Period so as to permit the
Parties to have as much information as possible about the Field or Fields,
which are the subject of the application for extension or renewal.

3.4                               Determination of Field
Boundaries

(a)                                  If
the Parties have jointly determined that a Discovery is a Commercial Discovery,
the geographic limits of the proposed Field will be defined by the Operating
Committee applying sound geological, geophysical and reservoir engineering
principles and/or the data from any
Exploration Well, Testing, Appraisal Well or Development Well where applicable.

The
Operating Committee shall hold a meeting for the purpose of determining: the
boundaries of a proposed Field not later than three (3) Calendar months after
such declaration of a Discovery as a Commercial Discovery.

(b)                                 If
the Operating Committee rejects a Party’s proposal establishing the boundaries
of a proposed Field and is unable to determine the boundaries of a proposed
Field within three (3) Calendar months after the first meeting, then upon
Notice by either Party (which Notice shall include such Party’s nomination . of
an expert), the Parties shall seek to agree on the joint appointment of the
expert within thirty (30) Days of such Notice failing which, an expert shall be
appointed to determine such boundaries in accordance with Article 19.3 of the
Joint Operating Agreement.  The expert
shall, acting as an expert and not an arbitrator, make his decision in
accordance with the definition of the term “Field”, and the provisions of
Article 3.4(a).  The Parties agree to be
bound by the decision of the expert and further agree that such decision shall
not be capable of review.

(c)                                  The
boundaries of a Field or Fields may be amended from time to time prior to
relinquishment under Article 3.5 to take into account new information and data
and in any event shall be amended to reflect any restrictions imposed by the Government
when the relevant Development Plan is approved. 
The revised boundaries of the Field or Fields shall

 

be determined by the Operating Committee in the manner
contemplated by Article 3.4(a) and failing a decision of the Operating
Committee, shall be determined by an expert as contemplated in Article 3.4(c).

3.5                               Relinquishment at End of
Exploration Period

(a)                                  At
the end of the Exploration Period, Canadian Superior shall relinquish its
entire interest in the Contract Area except for those areas which are within
any Field or Fields.

(b)                                 If
the geographic limits of any proposed Field or Fields have not yet been
determined in accordance with Article 3.4, the time for Canadian Superior to
relinquish its interest in respect of that part of the Contract Area which may
fall outside the proposed Field or Fields under Article 3.5(a) above shall be
extended, subject to the provisions of the State Licence, to thirty (30) Days
after such determination.

(c)                                  Where
Canadian Superior is to relinquish any interest pursuant to the terms of the
Contracts, it shall relinquish, withdraw and assign from its corresponding
rights under the State Licence, the Joint Operating Agreement, this Agreement
and any other contracts that it may have entered into in so far as they relate
to the relinquished lands, and shall reassign, grant or surrender to Petrotrin
their rights and interests under the State Licence.

(d)                            Canadian
Superior shall be released as of the date of relinquishment under Article
3.5(a) and any extensions thereto or provided for by Article 3.5(b) from any
obligation to pay any Minimum Payments, rents, Royalties, Fees or any other
payments under the State Licence in so far as they relate to the relinquished
lands.

(e)                             Canadian
Superior shall as of the date of relinquishment under Article 3.5(a) co-operate
and execute any instrument prepared by Petrotrin in order to accomplish the
relinquished lands being vested in Petrotrin solely pursuant to Article 3.5(c).

ARTICLE
4

MINIMUM WORK OBLIGATIONS

4.1                               Minimum
Work Obligations

(a)                                  Commencement
Date of Minimum Work Obligations

Canadian Superior shall not later than [*] from the
Effective Date hereof commence the Minimum Work Obligations and subject to
Article 3.2 (c) complete same within the timeframes stated in Schedule III and shall
not engage in speculation concerning the Contract Area during the conduct of
the Minimum Work Obligations.

(b)                                 Performance
Guarantee

(i)                                     As
a means of securing the due performance of the Minimum Work Obligations upon
execution of the Contracts, Canadian Superior shall provide to Petrotrin an
appropriate performance guarantee to the

 

satisfaction of Petrotrin and the Ministry of Energy
to cover the full value of the Minimum Work Obligations. Where the Parties have
mutually agreed to further exploration work in accordance with Article 3.2 (b)
Canadian Superior shall provide to Petrotrin an appropriate performance
guarantee to the satisfaction of Petrotrin and the Ministry of Energy to cover
the full value of such further exploration work.

(ii)                                  In
the event that Canadian Superior defaults in its obligations as contained in
the Contracts Petrotrin may seek redress to Canadian Superior under the terms
of the performance guarantee.

(iii)                               Nothing
in this clause shall prejudice any rights, which Petrotrin may have in law or
in equity in the event of the breach of any terms of this Agreement by Canadian
Superior.

(c)                                  Bonus
Payments

(i)                                     Signature
Bonus

Canadian Superior shall pay a signature bonus in the
sum of  [*] upon the execution of
the Contracts.

(ii)                                  Training
Bonus

Canadian Superior shall pay a training bonus in the
sum of [*] upon the execution of the Contracts.

(iii)                               Research
and Development Bonus

Canadian Superior shall pay a research and development
bonus in the sum of [*] upon
the execution of the Contracts.

Petrotrin shall decide the manner and to whom the
signature, training and research and development bonuses shall be made provided
always that if the entire sums of the respective bonus payments are made to the
Ministry of Energy pursuant to
the terms of the State Licence it shall be in full and final settlement of all
bonus payments by Canadian Superior to Petrotrin.

ARTICLE 5

STATE ROYALTIES/ STATE LICENCE FEES
/PETROTRIN’S ROYALTIES

5.1                               State Royalties, Fees and Taxes

During the Exploration Period Petrotrin and Canadian
Superior shall be responsible for payment of [*] and [*] respectively of such
Minimum Payments, Royalties, Fees and taxes (save and except taxes related to
income (“Taxes”)).  After the Exploration
Period such Minimum Payments, Royalties, Fees and Taxes shall be for the Joint
Account. All State Licence Minimum Payments, Royalties, Fees and

 

Taxes in respect of the Contract Area, shall be paid
by the Operator and shall be paid in accordance with the terms of the State
Licence and the Joint Operating Agreement.

5.2                               Petrotrin Royalties

(a)                                  Royalty
in cash payments

The Petrotrin Royalty shall be payable to Petrotrin on
Gross Production by any Party to the Contracts other than Petrotrin, on a pro
rata basis and on the same basis and at the same time as Royalties are payable
by Petrotrin to the Ministry of Energy.

(b)                                 Royalty
in kind

(i)                                     Petrotrin
may by Notice of not less than ninety (90) Days, elect to take its Petrotrin
Royalty on Gross Production in kind in lieu of the whole or part of the
Petrotrin Royalty due.

(ii)                                  Such
Hydrocarbons as Petrotrin elects to take in kind pursuant to this Article
5.2(b) shall be delivered by Canadian Superior or such other Parties, as
applicable, free of all transportation or handling charges at any established
receiving installation along the route over which Hydrocarbons are transported
from the Contract Area to the refinery or shipping terminal as Petrotrin, may
direct.

(iii)                               Petrotrin
may require Canadian Superior or such other Parties as applicable to hold any
Crude Oil as it elects to take in kind in storage at the Field or at the
shipping terminal, free of any storage charge, but not for a period exceeding
thirty (30) Days.

(iv)                              Any
Crude Oil of which Petrotrin does not dispose within the period mentioned in
Article 5.2(b)(iii) above or for which further terms of disposal have not been
agreed upon shall be deemed to have been sold to Canadian Superior at the same
prices as apply in the calculation of the Petrotrin Royalty paid in cash and
the sums payable in respect thereof shall be a debt due and payable to
Petrotrin and shall be settled by Canadian Superior or such other Parties as
applicable within one (1) Calendar month.

ARTICLE
6

COSTS, EXPENSES AND INDEMNITIES

6.1                               Minimum Work Obligations
Costs

Canadian Superior shall pay all costs including
Petrotrin’s Participating Interest share associated with, incurred in,
incidental to and/or necessary for the conduct and completion of the Minimum
Work Obligations and such other costs and expenses that

 

the Parties agree to incur after the completion of the
Minimum Work Obligations to a [*] such costs and expenses.  For greater certainty Petrotrin shall pay its
Participating Interest share of all costs upon the depletion of the [*].  Further, Petrotrin shall have no obligation
to repay the costs of conducting the Minimum Work Obligations or the [*]
referred to in this Article 6.1, nor does Canadian Superior have any right to
recover those costs from Production.

6.2                               Tax
Allowance

All allowances and benefits for tax purposes arising
as a consequence of Canadian Superior paying the costs referred to in this Article 6 shall be
available to Canadian Superior as the Party defraying the said costs.

6.3                               General Indemnity

(a)                                  Canadian
Superior shall indemnify and keep Petrotrin indemnified against any actions,
claims or demands of whatever nature (including, but not limited to, legal
costs and expenses incurred by Petrotrin in defending such actions, claims or
demands on a full indemnity basis) made against Petrotrin by any Third Party
and against any loss or damage, costs including, but not limited to, any
substantial loss or damage suffered or incurred by Petrotrin its Affiliates or
their respective contractors, sub-contractors, directors, officers, managers,
supervisors and other employees or agents, or liability suffered or incurred by
Petrotrin, arising from the conduct of the Minimum Work Obligations and/or out
of any breach by Canadian Superior of this Agreement and any of the Contracts
or any failure by Canadian Superior to observe and perform its obligations
under any of the Contracts or any act, omission or negligence of Canadian
Superior or its employees, except to the extent that any such action, claim or
demand is due to the Wilful Misconduct/Gross Negligence of Petrotrin or any of
its directors, managerial or supervisory employees.

(b)                                 Petrotrin
shall indemnify and keep Canadian Superior indemnified against any actions,
claims or demands of whatever nature (including, but not limited to, legal
costs and expenses incurred by Canadian Superior in defending such actions,
claims or demands on a full indemnity basis) made against Canadian Superior by
any Third Party and against any loss or damage, costs including, but not
limited to, any substantial loss or damage suffered or incurred by Canadian
Superior, its Affiliates or their respective contractors, sub-contractors,
directors, officers, managers, supervisors and other employees or agents, or
liability suffered or incurred by Canadian Superior arising out of any breach
by Petrotrin of any of the Contracts or any failure by Petrotrin to observe and
perform its obligations under any of the Contracts or any act, omission or
negligence of Petrotrin or its employees, except to the extent that any such
action, claim or demand is due to the Wilful Misconduct/Gross Negligence of
Canadian Superior or any of its directors, managerial or supervisory employees.

 

(c)                                  The
obligations under and indemnities in all the Contracts (including in particular
but not limited to Articles 6.3(a), 6.3(b), 6.4(a) and 6.4(b) of this
Agreement) shall not include any liability for exemplary, punitive or any other
similar indirect or incidental damages or losses arising from business
interruption, inability to produce Hydrocarbons or loss of profits.

6.4                               Environmental Indemnity

(a)                                  Petrotrin
shall indemnify and keep Canadian Superior, its Affiliates and their respective
directors, officers, managers, supervisors and other employees, agents,
contractors and sub-contractors, indemnified against any orders, notices,
requirements, actions, claims or demands of whatever nature (including, but not
limited to, any orders, notices or requirements or any judgments or awards in
respect of any actions, claims or demands of whatsoever nature, in each case, for
pollution control and environmental amelioration, remediation or rehabilitation
and together with legal costs and expenses incurred by Canadian Superior or its
Affiliates or their respective directors, officers, managers, supervisors and
other employees, agents, contractors or sub-contractors in defending such
orders, notices, requirements, actions, claims or demands on a full indemnity
basis) made against Canadian Superior or its Affiliates or their respective
directors, officers, managers, supervisors and other employees, agents,
contractors or subcontractors by the Government or any other Third Party and
against any loss or damage, costs (including any legal costs on a full
indemnity basis) or liability suffered or incurred by Canadian Superior or its Affiliates
or their respective directors, officers, managers, supervisors and other
employees, agents, contractors or sub-contractors arising directly or
indirectly out of:

(i)                                     any
Environmental Liabilities relating to the Contract Area in existence prior to
or at the Effective Date.  For the
avoidance of doubt such Environmental Liabilities shall not include any
Environmental Liability in the Contract. Area caused solely by a Third Party;
and

(ii)                                  any
Environmental Liability which occurs after the Effective Date and relates to
Exclusive Operations conducted by Petrotrin, until Canadian Superior elects to
participate in such Exclusive Operations.

(b)                                 Canadian
Superior shall indemnify and keep Petrotrin, its Affiliates and their
respective directors, officers, managers, supervisors and other employees,
agents, contractors and sub-contractors, indemnified against any orders,
notices, requirements, actions, claims or demands of whatever nature
(including, but not limited to, any orders, notices or requirements or any
judgments or awards in respect of any actions, claims or demands of whatsoever
nature, in each case, for pollution control and environmental amelioration,
remediation or rehabilitation and together with legal costs and

 

expenses incurred by Petrotrin or its Affiliates or
their respective directors, officers, managers, supervisors and other
employees, agents, contractors or sub-contractors in defending such orders,
notices, requirements, actions, claims or demands on a full indemnity basis)
made against Petrotrin or its Affiliates or their respective directors,
officers, managers, supervisors and other employees, agents, contractors or
subcontractors by the Government or any other Third Party and against any loss
or damage, costs (including any legal costs on a full indemnity basis) or
liability suffered or incurred by Petrotrin or its Affiliates or their
respective directors, officers, managers, supervisors and other employees,
agents, contractors or sub-contractors arising directly or indirectly out of:

(i)                                     any
Environmental Liability related to the execution of the Minimum Work
Obligations;

(ii)                                  any
Environmental Liability which occurs after the Effective Date and relates to
Exclusive Operations conducted by Canadian Superior until Petrotrin elects to
participate in such Exclusive Operations; and

(iii)                               any
Environmental Liability that is related to Canadian Superior . obligations in
respect of the Contract Area and that which occurs after Petrotrin has elected
to convert its Participating Interest to an Overriding Royalty under Article 7
of this Agreement.

(c)                                  The
Parties acknowledge their joint reclamation and remediation obligations for
environmental matters in respect of Joint Operations conducted within the
Contract Area after the Effective Date. 
If development of a Field occurs where Petrotrin is participating in
Production the Parties acknowledge that their joint obligations include
reclamation and remediation, if necessary, of any wells and related facilities
that are within the boundaries of the Field and any Environmental Liabilities
related to such wells and facilities.

(d)                                 Where
Exclusive Operations are conducted in a Field(s) the relevant obligations
described in Article 6.4(c), Article 6.4(e), and Article 6.4(f) shall be
fulfilled by the Party conducting the Exclusive Operations, unless the other
Party later elects to participate in such Exclusive Operations.  When Petrotrin has elected to convert its
Participating Interests in the Contract Area to an Overriding Royalty, the
relevant obligations described in Article 6.4(c), Article 6.4(e), and Article
6.4(f) shall be fulfilled by Canadian Superior.

(e)                                  The
Parties acknowledge and agree that the Exit Audit report, any review report,
any environmental baseline study, environmental impact assessment or other
environmental exercise whatsoever conducted in respect of the Joint Operations
or as an Exclusive Operation in the Contract Area (collectively the “Environmental
Documents”), together with all drafts, working copies, notes, memoranda,
minutes of meetings, documents, data and information

 

relating to the creation
of the Environmental Documents or any report or document arising from the
Environmental Documents, are all subject to the confidentiality obligations
under Article 16 of the Joint Operating Agreement and consist of information
relating to trade secrets or confidential business information or other matters
of a business, commercial or financial nature, the disclosure of which under
the Freedom of Information Act, 1999 of Trinidad, as amended, the Environmental
Management Act, 2000 of Trinidad, or otherwise, would expose the transactions
contemplated by this Farmout Agreement to disadvantage and accordingly shall be
treated by Petrotrin as exempt documents under the said Freedom of Information
Act, 1999 and by the Parties as confidential information under the said
Environmental Management Act, 2000.

(f)                                    Exit
Audit

The Parties shall jointly conduct an Exit Audit
(hereinafter referred to as the “Exit Audit”) of the Contract Area to be
completed within six (6) Calendar months prior to the date of any
relinquishment of the Contract Area or part thereof for the purpose of
identifying any Environmental Liabilities in relation to Joint Operations and,
where applicable, Exclusive Operations and wells and related facilities that
are within the boundaries of a Field(s). 
The Parties agree that any such Environmental Liabilities disclosed in
the Exit Audit shall be satisfied and paid out of the Joint Account

(g)                                 In
this Article 6.4, the following terms shall have the meanings given below:

(i)                                     “Environment” includes all land, areas beneath the land surface, atmosphere,
climate, surface, surface water, ground water, aquifers, sea, marine and
coastal areas, seabed, wetlands, plant and animal life and natural resources
within the jurisdiction of Trinidad;

(ii)                                  “Environmental Law”
means any applicable law (which expression herein includes, without limitation,
any statute, subordinate legislation, common law and the doctrines of equity)
of Trinidad intended to protect or preserve, or which pertains to, the
Environment and any applicable law of Trinidad relating to the storage,
handling, transportation, use, spill, release, emission, disposal or recycling
of any toxic or hazardous substance;

(iii)                               “Environmental Liabilities”
means any and all liabilities in respect of the Environment arising from
Hydrocarbon exploration, transportation, development and production operations,
including:

(A)                              liabilities
in respect of contamination, pollution or other damage to the Environment;

(B)                                liabilities
in respect of damage caused by the presence, storage,

 

transportation, release,
spill, emission, disposal or recycling of any substance (including any form of
energy), including, without limitation, corrosion or deterioration of structures
or other property and death or injury to human beings, plants or animals, but
excluding naturally occurring seepage of hydrocarbons;

(C)                                liabilities
for any curative action, remediation, restoration or reclamation of the
Environment or tangibles in the Contract Area; and

(D)                               liabilities
under any Environmental Law.

ARTICLE 7

CONVERSION
OPTION

7.1                               Option of Petrotrin to
convert its Participating Interest to Overriding Royalty

Petrotrin shall have [*] option to elect to convert
its Participating Interest share in the Contract Area to an Overriding
Royalty.  Such election may occur at any
point in time from the Effective Date to five (5) years following the
completion of the Minimum Work Obligations (“the Election Period”).  Petrotrin shall exercise such option by
delivering to Canadian Superior a Notice. 
Where Petrotrin has failed to so elect within the Election Period it
shall be deemed to have elected not to convert its Participating Interest to an
Overriding Royalty and this conversion option shall expire.  In the event that Petrotrin elects to convert
its Participating Interest share in the Contract Area to an Overriding Royalty,
then the Parties shall enter into a Royalty Agreement which will provide inter
alia the following terms:

(a)                                  Petrotrin
shall remain liable for its Participating Interest share of all costs, expenses
and liabilities which occurred during the period prior to the effective date of
Petrotrin’s conversion to an Overriding Royalty;

(b)                                 Subject
to Article 7.1(a):

(i)                                     with
effect as and from the effective date of Petrotrin’s conversion to an
Overriding Royalty, Canadian Superior shall assume full and sole responsibility
for all costs and expenses associated with the Contracts including, without
limitation:

(A)                              any
Environmental Liability related to obligations of Canadian Superior that accrue
in respect of the Contract Area during the period after Petrotrin has elected
to convert its Participating Interest to an Overriding Royalty under this
Article 7; and

(B)                                all
costs and expenses associated with abandonment and decommissioning of
facilities; and

 

(ii)                                  Petrotrin
shall be released from all its obligations and liabilities whatsoever under the
Contracts.  Such costs and expenses shall
include but not be limited to abandonment liabilities and decommissioning of
facilities;

(c)                                  Canadian
Superior shall be entitled to recover and keep for its own account any and all
net amounts realised from the salvage of all decommissioned facilities that it
was responsible for decommissioning;

(d)                                 Petrotrin
at its option can either accept its Overriding Royalty in kind at the
Measurement Point or in cash; and

(e)                                  Petrotrin
shall give ninety (90) Days Notice to Canadian Superior advising of whether it
shall be taking its Overriding Royalty in kind or in cash.

ARTICLE 8
COVENANTS

8.1                               Disclosure of
Information by Petrotrin

(a)                                  Petrotrin
hereby represents and warrants to and covenants with Canadian Superior that it
shall make available any seismic, well and other data which was obtained within
the Contract Area in its possession and which it may lawfully disclose.  Any costs incurred in making such data
available shall be for the sole account of Canadian Superior.  Where data are required in any other instance
whatsoever all costs incurred in making such data available shall also be for
Canadian Superior’s sole account.  The
supply of such data does not amount to a representation on the part of
Petrotrin as to its accuracy or otherwise except that Petrotrin does represent
that it has provided such information lawfully and in doing so has not
contravened any agreement to which it may be bound. Further, it is clearly
understood and agreed that Petrotrin does not warrant the accuracy or otherwise
of such data and shall in no event be liable for any claims, actions, demands,
proceedings, liabilities, losses, costs and expenses whatsoever arising
directly or indirectly out of or as a consequence of the use of such data.

(b)                                  Canadian
Superior hereby represents and undertakes that any information or data that it
has used and shall use in the Joint Operations has been and will be obtained
lawfully and that in doing so it has not contravened and shall not contravene
any agreement to which it may be bound.

(c)                                  Canadian Superior’s
Warranties and Covenants

Canadian Superior represents and warrants that as at
the Effective Date it has the financial resources, technical know-how and
expertise to perform, and undertakes to effect the Minimum Work Obligations and
Joint Operations using the methods and practices customary used in good and
prudent oilfield practices and also in accordance with the terms of this
Agreement, the State Licence and the laws of Trinidad.

 

ARTICLE
9

OPERATING
RIGHTS /OBLIGATIONS

9.1                               Designation of Operator

Canadian Superior is hereby appointed as the Operator
under the Contracts to carry out the Minimum Work Obligations and Joint
Operations during the Exploration Period. 
Canadian Superior shall accordingly observe and perform all the
obligations of the Operator referred to in the Contracts.  Canadian Superior shall properly perform and
discharge its duties and obligations as Operator in accordance with the terms
of the Contracts, the Act, and the Petroleum Regulations and good offshore
oilfield practices.

9.2                               Obligations of Operator

Canadian Superior undertakes to carry out this
Agreement with due diligence and to act in accordance with good petroleum
industry practice in the conduct and fulfillment of the Minimum Work
Obligations and the obligations under this Agreement.  Without prejudice to the generality of the
foregoing provision, Canadian Superior shall, in particular:

(1)                                  Observe
sound technical and engineering principles:

(ii)                                  in
regulating the conservation of the. deposits of Hydrocarbons; in preventing damage
to adjoining Hydrocarbon bearing strata;

(iii)                               in
controlling the flow and in preventing the escape or waste of Hydrocarbon
discovered;

(iv)                              in
preventing the entrance of fluids through wells into Hydrocarbon bearing strata
except in approved fluid injection operations; and

(v)                                 in
protecting fresh water bearing strata encountered in the course of drilling.

(2)                                  Adopt
all reasonable precautions to prevent pollution of the land, sea, beaches, air,
coastal waters and rivers, by the escape of Hydrocarbon, mud or any other
material which might contaminate the Contract Area or be injurious to
vegetation, land and marine resources.

(3)                                  Take
all reasonable precautions and safety measures to prevent the occurrence of
blow-out and fire.

(4)                                  Ensure
that all installations, apparatus, appliances, boreholes and wells are
maintained in good condition, and wells pursuant to this Agreement are
maintained.

(5)                                  Ensure
that operations do not unreasonably interfere with other activities in the area
and that agriculture, fishing, authorized scientific researches and conservation
of the living resources of the land and sea are not unjustifiably hindered and
take all possible care to avoid damage to cables, pipelines and

 

other installations.

(6)                                  Obey
and act in accordance with all Laws/Regulations
including without limitation the Act and Regulations and the Environmental Act, 2000.

ARTICLE
10

DATA
RECORDS

10.1                        Maintenance of Records

Canadian Superior as Operator shall:

(a)                                  maintain
appropriate and proper records containing full data of all operations such as,
but not limited to, drilling, deepening, workover, repair, plugging or
abandonment; such records shall contain particulars of:

(i)                                     the
surface and sub-surface locations of and the number assigned to every well in
the Contract Area;

(ii)                                  all
geological formations through which the well was drilled;

(iii)                               the
drilling history of each well, including mud weights, hole sizes, depths
penetrated, tools employed, cementation and other details;

(iv)                              the
casing inserted in any well and any alteration to such casing;

(v)                                 any
Hydrocarbon, water or other minerals encountered during drilling; and

(vi)                              such
other particulars as the Parties may from time to time require.

(b)                                 preserve
in Trinidad in final form, all geological and geophysical reports, including
records, sections, plans and maps relating to the Contract Area.

10.2                        Technical Support in Trinidad

Operator shall consider the technical support services
of Petrotrin’s laboratories in Trinidad for work to be performed under the Work
Programme and Budget submitted by Operator to the Operating Committee and
consider the use of same provided the services offered at the said laboratories
are the equivalent of services offered by Third Parties taking into
consideration quality, timing and cost of services offered by Third Parties.

10.3                        Copies of Materials

Operator shall submit to Petrotrin at no cost to
Petrotrin, within a reasonable time, and in any event not later than thirty
(30) Days after they are available to Operator, accurate copies of the new 3D
seismic data (including field tapes) the reprocessed 2D

 

seismic, all maps, records, sections and reports which
have been prepared, together with reservoir rock and fluid analyses, fluid
injection reports, pressure survey data as well as all available scientific and
technical data and interpretations thereof resulting from the conduct of the
Joint Operations within the Contract Area. 
Where data to be provided under this Article is available in digital
format, it will also be provided to Petrotrin in that format at no cost to
Petrotrin.

10.4                        Well Reports

Operator shall at no cost to Petrotrin prepare and
submit comprehensive well reports with geophysical, geological, engineering,
financial and other relevant information on all Exploration Wells within thirty
(30) Days of Completion or abandonment. 
Where data to be provided under this Article is available in digital
format, it will also be provided to Petrotrin in that format at no cost to
Petrotrin.

10.5                        Reporting Discovery of Mineral
Substances

Whenever Operator shall find in the Contract Area any
mineral substance other than Hydrocarbons or substances which are produced in
association with Hydrocarbons, Operator shall report such discovery in Writing,
to the Parties within thirty (30) Days with full particulars as to the nature
and position of each find.

10.6                        Preservation of Samples

(a)                                  Operator
shall correctly label and preserve in Trinidad for a period of one hundred and
eighty (180) Days, unless otherwise agreed, for reference and testing,
representative specimens from samples taken ‘ of the strata, Hydrocarbons,
water or other minerals encountered in any borehole or well in the Contract
Area. Operator shall be required to deliver to Petrotrin up to two (2) such
specimens at no cost to Petrotrin.  Operator
shall retain one (1) representative specimen each from such samples in Trinidad
for the period described above.  Not
earlier than the expiration of the one hundred and eighty (180) Day period,
Operator shall give Notice before the disposal of any such specimens or samples
held in pursuant to this Article.  Where
no reply in Writing to such Notice has been given by Petrotrin within thirty
(30) Days or receipt of such notification, consent to such disposal shall be
deemed given.

(b)                                 If
such sample is a full-hole, core, then such full-hole core shall be made
available to Petrotrin for its retention at no cost to Petrotrin.  Provided however, that Canadian Superior
shall upon giving reasonable Notice to Petrotrin have access to view such core
at a time convenient to Petrotrin.

10.7                        Reports of Samples

So far as it shall not be reasonably practical to
preserve these samples as aforesaid, Operator shall make and preserve reports
containing full descriptions or analyses of such samples.  Copies of these reports are to be furnished
to Petrotrin at no cost to Petrotrin.

 

ARTICLE 11

SECONDEES
AND EMPLOYMENT

11.1                        Petrotrin Secondees and
Trainees

(a)                                  With
effect from three (3) Calendar months after the Effective Date and continuing
during each month that the Minimum Work Obligations are being conducted.

(i)                                     Petrotrin
shall be entitled to have its personnel involved with Canadian Superior in all
aspects of the Minimum Work Obligations and the Joint Operations detailed in
the Work Programme and Budget submitted by Canadian Superior.

(ii)                                  In
order to improve the effectiveness of the conduct of the Minimum Work
Obligations, Joint Operations and to assist Petrotrin in improving its
technological capabilities, Petrotrin shall have the right to nominate at least
one geoscientist to be seconded to work in any location in which the technical
evaluations and the like are being conducted, on terms and conditions to be
agreed between the Parties.

(iii)                               If
Petrotrin is unable to avail itself of permitting a Petrotrin geoscientist to
be seconded as provided in Article 11.1(a)(ii) then during each Calendar month
of the Minimum Work Obligations that Petrotrin does not have a geoscientist
Secondee, Canadian Superior agrees to remit United States Dollars [*] to
Petrotrin.  The Parties agree that
payment by Canadian Superior to Petrotrin under this Article 11.1(a)(iii) shall
be made at the end of every four (4) Calendar months.

(iv)                              All
amounts remitted by Canadian Superior to Petrotrin under Article 11.1(a)(iii)
above shall be utilised for training of Petrotrin personnel in technical,
professional and other fields associated with the Hydrocarbon industry.  Such training shall include but not be
limited to, in house courses, foreign courses, foreign company programmes as
well as granting of scholarships to Petrotrin personnel and nationals of
Trinidad. Petrotrin shall determine the manner in which these monies are
utilised.

(v)                                 All
costs attributable to the participation of Petrotrin’s Secondees during each
Calendar month of the Minimum Work Obligation shall be for the sole account of
Canadian Superior.  The Secondment costs
shall include but not be limited to the Secondee’s salaries and benefits being
paid by Petrotrin for such personnel immediately prior to such secondments
including any increases due to promotion and bargaining unit agreements
together with necessary and reasonable travel and living expenses outside of
Trinidad for the Secondee and his accompanying immediate family members.  These

 

costs shall be paid by Petrotrin and invoiced to
Canadian Superior.

(b)                                 Canadian
Superior shall take all reasonable precautions and comply with all instructions
issued by any lawful Government authority from time to time that are reasonably
necessary for securing the health, safety and welfare of individuals employed
for the purpose of carrying out the Minimum Work Obligations.

ARTICLE 12

BREACH
AND TERMINATION

12.1
Material Breach

(b)                                 If
Canadian Superior fails in a material respect to fulfil the Minimum Work
Obligations, or fails to promptly pay applicable Minimum Payments, fees, taxes
and Royalties to the Government or Ministry of Energy or if applicable to
Petrotrin the Petrotrin Royalty within thirty (30) Days of the required period,
or commits some other material breach- of this Agreement, Petrotrin shall be
entitled (at its option) to terminate this Agreement as hereafter provided.

(c)                                  If
Petrotrin commits, a material breach of this Agreement, Canadian Superior shall
be entitled (at its option) to terminate this Agreement as hereinafter
provided.

(c)                                  The
following provisions relating to material breach in Articles 12.1(a) and (b)
shall apply to both Parties:

(i)                                     where
there is a material breach of any term of this Agreement the innocent Party
shall give Notice to the offending Party indicating the nature of the breach
and requiring that steps be taken to remedy the same within a reasonable time
and commencing not less than thirty (30) Days from the receipt of such Notice;

(ii)                                  if
steps to remedy the material breach have not been commenced after the
expiration of the time specified in the Notice referred to in Article
12.1(c)(i) above or such steps have commenced but the material breach has not
been remedied within a reasonable time then, in each case the innocent Party
may at its option terminate this Agreement and the other Contracts without
prejudice to its right to seek any other remedy available to it; provided that
where there is a dispute between the Parties as to whether there is a material
breach or whether such steps to remedy the breach have been commenced or
commenced within the time specified in Article 12.1(c)(i) or whether the
material breach has been remedied within a reasonable time, any such matter may
be referred to arbitration under Article 19 of the Joint Operating Agreement,
in which case the innocent Party shall not be entitled to terminate this
Agreement until the matter has been determined by arbitration and the
defaulting Party has failed,

 

within thirty (30) Days of such determination, to
remedy the material breach or breaches;

(iii)                               the
innocent Party shall be entitled to such damages for breach of any obligations
under this Agreement and/or to be indemnified against all actions, claims,
demands, loss or damage, costs or liabilities made, suffered or incurred as
provided for in this Agreement, as determined in each case by the arbitrator(s)
and to such further or other relief as may be awarded by the arbitrator(s); and

(iv)                              either
Party shall also be entitled (without prejudice to its right to termination) to
refer any breach of any obligations under this Agreement (including a material
breach) for redress as determined by arbitration (such redress to include, but
not be limited to, specific performance of the obligations under this Agreement
and any damages, indemnities, costs, expenses and other relief).

(d)                                 This
Agreement may also be terminated:

(i)                                     by
mutual agreement at any lime after completion of the Minimum Work Obligations
during the Exploration Period;

(ii)                                  by
thirty (30) Days Notice at the option of the innocent Party:

(a)                                  if
either Party hereto has a receiver appointed over all or any of its assets,
passes a resolution to be wound up (other than by way of a member’s voluntary
winding up for the purpose of reconstruction), has an order for its winding up
made by a court in Trinidad in a petition for its winding up, or makes any
arrangement or composition with its creditors;

(b)                                 upon
failure by a Party to pay any sum which may have been awarded against it or to
perform and discharge any other award made against it in arbitration
proceedings as provided for herein; or

(iii)                               as
otherwise provided for in this Agreement.

12.2                        Termination
by Mutual Agreement.

Where this Agreement is
terminated by mutual agreement:

(a)                                  all
privileges and powers conferred upon Canadian Superior by this Agreement and
the other Contracts and all rights and privileges held by it for the purpose of
carrying out Joint Operations under this Agreement and the other Contracts
shall terminate and/or be reassigned. Such termination shall not affect any
obligations or liabilities that may have been incurred prior to such
termination;

 

(d)                                 the
assets and liabilities of the Parties acquired under this Agreement (excluding
Hydrocarbons in strata) shall be apportioned in accordance with each Party’s
Participating Interest, except that Petrotrin shall have no liability for any
costs, expenses or damages resulting from any act or omission done in the
execution of or in pursuance of the Minimum Work Obligations;

(e)                                  subject to paragraph (b) above and
Section 16 of the Act, except as otherwise agreed the tangible assets of the
Joint Property shall be disposed of and the proceeds divided among the Parties
in proportion to their Participating Interests after taking into account any
outstanding obligations or liabilities which may have been incurred prior to such
termination; and

(f)                                    such
termination shall not affect any obligations or liabilities that may have been
incurred prior to such termination and this Agreement and the other Contracts
shall remain in full force and effect with regard to such obligations or
liabilities until they are discharged in full.

12.3                        Termination for Petrotrin
Default

Where Canadian Superior has a right to terminate this
Agreement as a result of Petrotrin’s default:

(a)                                  Canadian
Superior shall be entitled, at its option, in lieu of such termination, to seek
an order for specific, performance, either before the courts of
Trinidad or in arbitration proceedings, subject to such terms and conditions as
may be awarded by such courts or determined by the arbitrator(s);

(b)                                 Canadian
Superior shall also be entitled, at its option, to’ damages for breach of
contract as is determined by the arbitrator(s) in addition to or in
substitutions for the order for specific performance; and

(c)                                  Canadian
Superior shall also be entitled to such further or other relief and costs as
may be awarded by the arbitrators) or the courts of Trinidad, as the case may
be.

12.4                        Termination for Canadian
Superior Default.

Where Petrotrin has a
right to terminate this Agreement as a result of Canadian Superior’s default:

(a)                                  Petrotrin
shall be entitled, at its option, in lieu of such termination, to seek an order
for specific performance, either before the courts of Trinidad or in
arbitration proceedings, subject to such terms and conditions as maybe awarded
by such courts or determined by the arbitrator(s);

(b)                                 at
its option, Petrotrin shall be entitled to terminate all rights, licences,
privileges and powers conferred upon Canadian Superior by this Agreement and
all rights and privileges held for the purpose of carrying out Joint Operations
under this Agreement;

 

(c)                                  Petrotrin
shall be entitled to such damages for breach of contract as determined by the
arbitrator(s) in addition to or in substitution for the order of specific
performance as set out in paragraph b above; and

(d)                                 Petrotrin
shall also be entitled to such further or other relief as may be awarded by the
arbitrator(s) or the courts of Trinidad, as the case may be.

123                           Prior Obligations

Whether this Agreement is terminated by mutual
agreement, as a result of Petrotrin’ s default, or as a result of Canadian
Superior’s default pursuant to Articles 12.2, 12.3 or 12.4 respectively hereof,
such termination shall not affect any obligations, liabilities or indemnities
that may have accrued prior to such termination and this Agreement and the
remaining Contracts shall, in each case; remain-in full force and effect with
regard to such obligations, liabilities of indemnities until they are
discharged in full.

ARTICLE 13

ASSIGNMENT

13.1                        Assignment by Canadian Superior

Canadian Superior shall
be entitled to assign all or any portion of its rights, benefits and
obligations hereunder to one or more Third Parties with the consent of
Petrotrin, such consent not to be unreasonably withheld or delayed.

13.2                        Assignment by Petrotrin

Petrotrin shall be entitled to assign all or any
portion of its rights, benefits and obligations hereunder to one or more Third
Parties without the consent of Canadian Superior provided always that any
assignment by Petrotrin of its interest in this Agreement or the other
Contracts shall not prejudice the rights of Canadian Superior under this
Agreement or the other Contracts.

13.3
Assignment to Affiliates

Notwithstanding Articles 13.1 and 13.2 of this
Agreement, Canadian Superior and Petrotrin shall be entitled to assign all or
any portion of their respective rights, benefits and obligations hereunder to
any of their respective Affiliates without the consent of the other Party
hereto.

13.4                        Assignment of a portion of a
Party’s Participating Interest

In the event of an assignment by Canadian Superior of
a portion of its rights, benefits and obligations hereunder to one or more
Third Parties (such that the rights, benefits and obligations under this
Agreement which are, as of the date of execution of this Agreement, held solely
by Canadian Superior are, following such assignment, held by Canadian Superior
and one or more Third Parties):

 

(a)                                  all
Notices and other information to be provided to Canadian Superior hereunder
shall be provided individually to Canadian Superior and each such Third Party
assignee; and

(b)                                 subject
to any rights of conversion provided for hereunder, the rights, benefits and
obligations of Canadian Superior and. all such Third Party assignees shall be
several and not joint or collective, and shall accrue proportionately to each
of them in accordance with that portion of the Participating Interest held by
each of them following such assignment(s).

ARTICLE
14

ACCESS
TO PIPELINES

Petrotrin shall provide to Canadian Superior on a
reasonable and economic basis access to any pipelines used to transport
Hydrocarbon substances that may be reasonably re

ARTICLE 15

JOINT
OPERATING AGREEMENT

15.1                        Application of the Joint
Operating Agreement Prior to Completion of the Minimum Work Obligations

Prior to completion of the Minimum Work Obligations,
the following Articles of the Joint Operation Agreement shall also apply to
this Agreement, mutatis mutandis:

Article 1                                                   Definitions
(to the extent required for the interpretation of the relevant provisions of
the Joint Operating Agreement adopted by this Article).

Article 4                                                   Operator

Article 5                                                   Operating
Committee

Article 6                                                   Work
Programme and Budget

Article 9                                                   Disposition
of Production

Article 10                                             Abandonment
of Wells

Article 13                                             Transfer
of Interests or . Rights and Changes in Control

Article 15                                             Relationship
of Parties and Tax

Article 16                                             Confidentiality

Article 18                                             Notices

Article 19                                             Applicable
Law and Dispute Resolution

 

Article 20                                             General
Provisions

Subject to Article 15.2 herein, if any Exclusive
Operations are proposed by a Party during the Exploration Period, then Article
7 of the Joint Operating Agreement shall also apply.

15.2.                     Joint Exploration Operations Under
Joint Operating Agreement During Exploration Period

A Party may propose the drilling of an Exploration Well
as a Joint Operation during the Exploration Period only if all of the Minimum
Work Obligations have been completed.

15.3                        Application of Agreement After
Completion of the Minimum Work Obligations

After the completion of the Minimum Work Obligations,
the Joint Operating Agreement shall govern Joint Operations of the Parties, but
all provisions of this Agreement which pertain or are otherwise necessary for a
Parry to maintain title to its Participating Interest hereunder (subject at all
times, with respect to Petrotrin’s Participating Interest, to the possible
application of Article 7) shall continue to apply in respect of matters of
title.  In addition, and without limiting
the generality of the foregoing, the following Articles of this Agreement shall
also continue to apply:

Article
2                                                   Participating
Interests / Earned Interests;

Article
5                                                   State
Royalties/ State Licence Fees/ Petrotrin’s Royalties;

Article 6.3                                          General
Indemnity

Article 6.4                                          Environmental
Indemnity

Article
7                                                   Conversion
Option

Article .8                                                Covenants

Article 10                                             Data
Records

Article 12                                             Breach
and Termination

Article 13                                             Assignment

Article 14                                             Access
to Pipelines

15.4                        Conflict Between This Agreement
and Joint Operating Agreement

a)                                      If
there is a conflict between the provisions of this Agreement and the Joint
Operating Agreement, then during the Exploration Period this shall prevail and
in the event of such conflict thereafter, the Joint Operating Agreement shall
prevail.

 

(b)                                 Where
this Agreement and the Joint Operating Agreement both contain a provision
requiring performance of a similar obligation,’ in whole or in part,
performance of such obligation under one agreement shall also constitute
performance under the other, and in the case partial duplication, to the extent
of the duplication.

ARTICLE- 16

GENERAL PROVISIONS

16.1                        Interpretation In this Agreement, unless the context otherwise requires:

(a)                                  words
importing the singular shall include the plural and vice versa and words
importing one gender shall include the other gender;

(b)                                 a
reference to a particular statute of Trinidad shall include any amendments
thereto and any re-enactment or replacement thereof for the time being in force
as well as any subsidiary legislation made under such statute;

(c)                                  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;

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

(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; and

(f)                                    time
shall be of the essence.

16.2                        Counterpart Execution

This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

16.3                        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 including without
limitation the Confidentiality Agreement between the Parties dated effective
July 26, 2002 and the Letters dated April 9, 2003 and September 18, 2003.

16.4                        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.

16.5                        Enurement

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

16.6                        Amendments

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

IN WITNESS of their agreement each Party has caused
its duly authorised representative or representatives to sign this Agreement on
the date indicated below the signature of such representative(s).

 

	
  PETROLEUM COMPANY OF
  TRINIDAD AND TOBAGO LIMITED

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  In the present
  of:

  
	
   

  
	
   

  
	
  CANADIAN
  SUPERIOR TRINIDAD AND
  TOBAGO LTD.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
  Date:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
									

 

 

Schedule III

to Farmout Agreement, Mayaro—Guayaguayare Bay Block

Offshore Trinidad

Minimum Work Obligations

(a)                                  Not
later than the first anniversary of the Effective Date, Canadian Superior
..shall;

(1)                                  complete
the reprocessing of the existing 2D seismic data as detailed in. Canadian Superior’s bid dated October 31 2002
in the document entitled “Technical Portion of Bid” under the heading “Geophysical”;

(2)                                  complete
a technical study of the Contract Area; and

(3)                                  in
consultation with Petrotrin’s HS &E Manager complete the Health, Safety and
Environment Plan and an environmental protection plan which plans shall include
Petrotrin’s Occupational Safety and Health Policy and Environmental Policy and
shall cover all activities to be conducted by the Parties during the
Exploration Period as detailed in Canadian Superior’s bid dated October 31 2002
in the document entitled “Technical Portion of Bid” under the heading “Environmental
Plan”.

(b)                                 Not
later than [*] Calendar months from the Effective
Date, Canadian Superior shall acquire, process and interpret a minimum of [*]
of hazard survey and [*] of full fold 3-D seismic.

(c)                                  Not
later than [*] Calendar months from the Effective Date, Canadian Superior shall
drill, Complete, Test, plug and abandon one Exploration Well to a minimum depth
of [*] subsea.

(d)                                 Not
later than [*] Calendar months from the Effective Date, Canadian Superior shall
drill, Complete, Test, plug and abandon one Exploration Well to a minimum depth
of [*] subsea.

(e)                                  In
respect of the Exploration Wells referred to in (c) and (d) above Canadian
Superior shall Complete and Test appropriate to well conditions and zone
potentials in accordance with good industry practices.

 

Schedule
IV

To
Farmout Agreement, Mayaro-Guagyaguaryare Bay Block

Offshore
Trinidad

Royalty Schedule

	
  Production in BOE per day

  from the Mayaro

  Guayaguayare Bay Marine

  Licences

  	
   

  	
  Applicable Overriding

  Royalty

  Payable to Petrotrin

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Less than 5,000

  	
   

  	
  [*]

  	
   

  
	
  5,000 to 8,999

  	
   

  	
  [*]

  	
   

  
	
  9,000 to 10,999

  	
   

  	
  [*]

  	
   

  
	
  11,000 to 12,999

  	
   

  	
  [*]

  	
   

  
	
  13,000 to 14,999

  	
   

  	
  [*]

  	
   

  
	
  15,000 to 16,999

  	
   

  	
  [*]

  	
   

  
	
  17,000 to 18,999

  	
   

  	
  [*]

  	
   

  
	
  19,000 to 20,999

  	
   

  	
  [*]

  	
   

  
	
  21,000 to 22,999

  	
   

  	
  [*]

  	
   

  
	
  23,000 to 24,999

  	
   

  	
  [*]

  	
   

  
	
  25,000 and
  greater

  	
   

  	
  [*]

  	
   

  

 

BOE represents
barrel of oil equivalent and in the case of natural gas the conversion of
production of natural gas to BOE is calculated such that for every six thousand
cubic feet of natural gas the equivalent is on BOE.

 

Provisional Map Showing the Mayaro – Guayaguayare
Bay Licences

 

Schedule “C”

Joint Operating Agreement

 

JOINT
OPERATING AGREEMENT

 

BETWEEN

 

PETROLEUM
COMPANY OF TRINIDAD

AND
TOBAGO LIMITED

 

AND

 

CANADIAN
SUPERIOR TRINIDAD

AND
TOBAGO LTD.

 

FOR

 

MAYARO-GUAYAGUAYARE
BAY BLOCK

OFFSHORE
TRINIDAD

 

 

TABLE OF
CONTENTS

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1

  	
  DEFINITIONS

  	
  4

  
	
  ARTICLE 2

  	
  EFFECTIVE DATE AND TERM

  	
  11

  
	
  2.1

  	
  Effective Date and Term

  	
  11

  
	
  ARTICLE 3

  	
  SCOPE

  	
  11

  
	
  3.1

  	
  Scope

  	
  11

  
	
  3.2

  	
  Participating Interest

  	
  12

  
	
  3.3

  	
  Ownership, Obligations and Liabilities

  	
  12

  
	
  ARTICLE 4

  	
  OPERATOR

  	
  13

  
	
  4.1

  	
  Designation of Operator

  	
  13

  
	
  4.2

  	
  Rights and Duties of Operator

  	
  13

  
	
  4.3

  	
  Operator Personnel

  	
  16

  
	
  4.4

  	
  Information Supplied by Operator

  	
  17

  
	
  4.5

  	
  Claims and Lawsuits

  	
  20

  
	
  4.6

  	
  Limitation on Liability of Operator

  	
  21

  
	
  4.7

  	
  Insurance Obtained by Operator

  	
  22

  
	
  4.8

  	
  Commingling of Funds

  	
  24

  
	
  4.9

  	
  Resignation of Operator

  	
  25

  
	
  4.10

  	
  Removal of Operator

  	
  25

  
	
  4.11

  	
  Appointment of Successor

  	
  26

  
	
  4.12

  	
  Health, Safety and Environment (HSE)

  	
  27

  
	
  ARTICLE 5

  	
  OPERATING COMMITTEE

  	
  28

  
	
  5.1

  	
  Establishment of Operating Committee

  	
  28

  
	
  5.2

  	
  Powers and Duties of Operating Committee

  	
  28

  
	
  5.3

  	
  Authority to Vote

  	
  28

  
	
  5.4

  	
  Subcommittees

  	
  29

  
	
  5.5

  	
  Notice of Meeting

  	
  29

  
	
  5.6

  	
  Contents of Meeting Notice

  	
  29

  
	
  5.7

  	
  Location of and Quorum for Meetings

  	
  30

  
	
  5.8

  	
  Operator’s Duties for Meetings

  	
  30

  
	
  5.9

  	
  Voting Procedure

  	
  31

  
	
  5.10

  	
  Record of Votes

  	
  33

  
	
  5.11

  	
  Minutes

  	
  33

  
	
  5.12

  	
  Voting by Notice

  	
  33

  
	
  5.13

  	
  Effect of Vote

  	
  34

  
	
  ARTICLE 6

  	
  WORK PROGRAMMES AND BUDGETS

  	
  36

  
	
  6.1

  	
  Exploration and Appraisal

  	
  36

  
	
  6.2

  	
  Commercial Discovery and Development

  	
  38

  
	
  6.3

  	
  Production

  	
  39

  
	
  6.4

  	
  Itemisation of Expenditures

  	
  39

  
	
  6.5

  	
  Multi Year Work Programme and Budget

  	
  40

  
	
  6.6

  	
  Contract Awards

  	
  40

  

 

 i
 

 

 

	
  6.7

  	
  Authorisation for Expenditure Procedure

  	
  42

  
	
  6.8

  	
  Over Expenditures of Work Programme and Budgets

  	
  43

  
	
  ARTICLE 7

  	
  OPERATIONS BY LESS THAN ALL PARTIES

  	
  43

  
	
  7.1

  	
  Limitation on Applicability

  	
  43

  
	
  7.2

  	
  Procedure to Propose Exclusive Operations

  	
  44

  
	
  7.3

  	
  Responsibility for Exclusive Operations

  	
  46

  
	
  7.4

  	
  Consequences of Exclusive Operations

  	
  47

  
	
  7.5

  	
  Cost to Participate in Exclusive Operations

  	
  49

  
	
  7.6

  	
  Order of Preference of Operations

  	
  50

  
	
  7.7

  	
  Stand By Costs

  	
  52

  
	
  7.8

  	
  Special Considerations Regarding Deepening and
  Sidetracking

  	
  53

  
	
  7.9

  	
  Use of Property

  	
  53

  
	
  7.10

  	
  Lost Production During Tie In of Exclusive Operation
  Facilities

  	
  55

  
	
  7.11

  	
  Conduct of Exclusive Operations

  	
  55

  
	
  ARTICLE 8

  	
  DEFAULT

  	
  57

  
	
  8.1

  	
  Default and Notice

  	
  57

  
	
  8.2

  	
  Operating Committee Meetings and Data

  	
  57

  
	
  8.3

  	
  Allocation of Defaulted Accounts

  	
  58

  
	
  8.4

  	
  Remedies

  	
  59

  
	
  8.5

  	
  Survival

  	
  63

  
	
  8.6

  	
  No Right of Set Off

  	
  63

  
	
  ARTICLE 9

  	
  DISPOSITION OF PRODUCTION

  	
  64

  
	
  9.1

  	
  Right and Obligation to Take in Kind

  	
  64

  
	
  9.2

  	
  Disposition of Crude Oil

  	
  64

  
	
  9.3

  	
  Disposition of Natural Gas

  	
  64

  
	
  9.4

  	
  Right of First Offer

  	
  64

  
	
  ARTICLE 10

  	
  ABANDONMENT OF WELLS

  	
  65

  
	
  10.1

  	
  Abandonment of Wells Drilled as Joint Operations

  	
  65

  
	
  10.2

  	
  Abandonment of Exclusive Operations

  	
  66

  
	
  10.3

  	
  Abandonment of Minimum Work Obligation Wells

  	
  66

  
	
  ARTICLE 11

  	
  SURRENDER / RELINQUISHMENT

  	
  66

  
	
  11.1

  	
  Surrender / Relinquishment

  	
  66

  
	
  ARTICLE 12

  	
  ENVIRONMENTAL AUDIT

  	
  67

  
	
  12.1

  	
  Environmental Audit

  	
  67

  
	
  ARTICLE 13

  	
  TRANSFER OF INTEREST OR RIGHTS AND CHANGES IN CONTROL

  	
  67

  
	
  13.1

  	
  Obligations

  	
  67

  
	
  13.2

  	
  Transfer

  	
  68

  
	
  13.3

  	
  Change in Control

  	
  71

  
	
  ARTICLE 14

  	
  WITHDRAWAL FROM AGREEMENT

  	
  72

  
	
  14.1

  	
  Right of Withdrawal

  	
  72

  
	
  14.1

  	
  Right of Withdrawal

  	
  72

  
	
  14.2

  	
  Withdrawal by Some or All Parties

  	
  73

  
	
  14.3

  	
  Rights of Withdrawing Party

  	
  73

  
	
  14.4

  	
  Obligations and Liabilities of a Withdrawing Party

  	
  74

  
	
  14.5

  	
  Emergency

  	
  75

  

 

 ii
 

 

 

	
  14.6

  	
  Assignment

  	
  75

  
	
  14.7

  	
  Approvals

  	
  75

  
	
  14.8

  	
  Security

  	
  76

  
	
  14.9

  	
  Withdrawal or Abandonment by all Parties

  	
  76

  
	
  14.10

  	
  Conversion of Participating Interest

  	
  76

  
	
  ARTICLE 15

  	
  RELATIONSHIP OF PARTIES AND TAX

  	
  76

  
	
  15.1

  	
  Relationship of Parties

  	
  76

  
	
  15.2

  	
  Tax

  	
  77

  
	
  ARTICLE 16

  	
  CONFIDENTIALITY

  	
  77

  
	
  16.1

  	
  Venture Information

  	
  77

  
	
  16.2

  	
  Confidentiality

  	
  78

  
	
  16.3

  	
  Petrotrin’s Confidentiality

  	
  79

  
	
  16.4

  	
  Continuing Obligations

  	
  79

  
	
  16.5

  	
  Trades

  	
  79

  
	
  ARTICLE 17

  	
  FORCE MAJEURE

  	
  80

  
	
  17.1

  	
  Obligations

  	
  80

  
	
  17.2

  	
  Definition of Force Majeure

  	
  80

  
	
  17.3

  	
  Six Month Force Majeure

  	
  80

  
	
  ARTICLE 18

  	
  NOTICES

  	
  80

  
	
  ARTICLE 19

  	
  APPLICABLE LAW — DISPUTE RESOLUTION

  	
  81

  
	
  19.1

  	
  Applicable Law

  	
  81

  
	
  19.2

  	
  Dispute Resolution

  	
  81

  
	
  19.3

  	
  Expert Determination

  	
  84

  
	
  19.4

  	
  Waiver of Sovereign Immunity

  	
  84

  
	
  ARTICLE 20

  	
  GENERAL PROVISIONS

  	
  85

  
	
  20.1

  	
  Conduct of the Parties

  	
  85

  
	
  20.2

  	
  Conflicts of Interest

  	
  85

  
	
  20.3

  	
  Public Announcements

  	
  86

  
	
  20.4

  	
  Successors and Assigns

  	
  86

  
	
  20.5

  	
  Waiver

  	
  87

  
	
  20.6

  	
  No Third Party Beneficiaries

  	
  87

  
	
  20.7

  	
  Joint Preparation

  	
  87

  
	
  20.8

  	
  Severance of Invalid Provisions

  	
  87

  
	
  20.9

  	
  Modifications

  	
  87

  
	
  20.10

  	
  Interpretation

  	
  87

  
	
  20.11

  	
  Counterpart Execution

  	
  88

  
	
  20.12

  	
  Entirety

  	
  88

  

 iii

 

THIS AGREEMENT is
made as of the Effective Date between PETROLEUM COMPANY OF
TRINIDAD AND TOBAGO LIMITED, a Company duly incorporated in Trinidad
and Tobago under the Companies Ordinance, Chapter 31 No. 1 and
continued under the Companies Act Chap. 81:01
of the Laws of Trinidad and Tobago with its registered office at Petroleum
Company of Trinidad and Tobago Administration Building, Southern Main Road,
Pointe-á-Pierre, Trinidad in the Republic of Trinidad and Tobago
(hereinafter called “Petrotrin,” which expression shall include its successors
and permitted assigns) of the One Part, and CANADIAN
SUPERIOR TRINIDAD AND TOBAGO LTD., a corporation duly incorporated
under the Business Corporations Act of the
Province of Alberta, with its head office at 3300, 400 — 3rd Avenue SW,
Calgary, Alberta, Canada, 4H2 5C5, and registered as an external company
in Trinidad and Tobago under the Companies Act,
Chap. 81:01 with its principal Office in Trinidad and Tobago, situate at
Nos. 48-50 Sackville Street, Port-of-Spain, Trinidad
(hereinafter called “Canadian Superior” which expression shall include its
successors and permitted assigns) of the Other Part.

WHEREAS:

All capitalised
words used in these recitals A, B and C shall have the meaning given to
them as stated in Article 1 herein.

A.                                   As
of the Effective Date Petrotrin and Canadian Superior hold a State Licence and
are entitled to explore for, win and get Hydrocarbons from the Contract Area.

B.                                     The
Parties desire to define their respective rights and obligations with respect
to their operations under the Contracts and in this regard have agreed to enter
into this Joint Operating Agreement.

C.                                     Contemporaneously
with this Joint Operating Agreement the Parties have executed the Farmout
Agreement.

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

ARTICLE 1

DEFINITIONS

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

1.2.                              “Act” means the Petroleum Act,
Chapter 62:01 of the Laws of Trinidad and any amendments thereto or re-enactments
thereof from time to time in force and any regulations and orders made
thereunder from time to time.

1.3.                              “AFE” means an authorization for
expenditure pursuant to Article 6.7.

1.4.                              “Affiliate” means a subsidiary
company, a parent company, or a sister company of or to a Party hereto.  For the purposes of the foregoing definition:

(a)                                  a
parent company is a company that Controls a Party hereto;

 4
 

 

(b)                                 a
sister company is a company that is Controlled by the same parent company as a
Party hereto; and

(c)                                  a
subsidiary company is a company Controlled by a Party hereto, a parent company
or a sister company.

For the purposes of this definition “Control” means
that a company owns at least [*]  of
share capital either directly or through other companies which confers upon a
majority of the votes at the shareholder’s meetings of a company which is
controlled or which has a common majority shareholder.

1.5.                              “Agreed Interest Rate” means interest
compounded on a monthly basis, at the rate per annum equal to the one (1) month
term, London Interbank offered rate (LIBOR rate) for U.S. dollar deposits, as
published by The Wall Street Journal or if not published, then by the Financial
Times of London, plus two percent (2%), applicable on the first Business Day
prior to the due date of payment and thereafter on the first Business Day of
each succeeding calendar month.  If the
aforesaid rate is contrary to any applicable usury law, the rate of interest to
be charged shall be the maximum rate permitted by such applicable law.

1.6.                              “Agreement” means this agreement,
together with the Exhibits attached to this agreement, and any extension,
renewal or amendment hereof agreed to in Writing by the Parties.

1.7.                              “Appraisal Well” has the meaning
ascribed to it in the Farmout Agreement.

1.8.                              “Barrel” means a quantity consisting
of forty-two (42) United States gallons, corrected to a temperature of
sixty (60°) degrees Fahrenheit under one (1) atmosphere of pressure.

1.9.                              “Business Day” means a Day on which
the banks in Trinidad are customarily open for business.

1.10.                        “Calendar Year” means a period of
twelve (12) months commencing with January 1 and ending on the following
December 31 according to the Gregorian Calendar.

1.11.                        “Commercial Discovery” and “Declaration of Commerciality” each
has the meaning ascribed to it in the Farmout Agreement.

1.12.                        “Completion” has the meaning ascribed
to it in the Farmout Agreement.

1.13.                        “Consenting Party” means a Party who
agrees to participate in and pay its share of the cost of an Exclusive
Operation.

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

 5
 

 

1.15.                        “Contracts” means, collectively, the
Farmout Agreement, this Joint Operating Agreement and the State Licence, and
includes any extension, renewal or amendment thereof which is agreed to by the
Parties and approved by the Government where such approval is necessary.

1.16.                        “Contract Area” has the meaning
ascribed to it in the Farmout Agreement.

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

1.18.                        “Crude or Crude Oil” means all
hydrocarbons in a liquid state (other than NGLs) at sixty degrees (60°)
Fahrenheit and 14.7 pounds per square inch absolute pressure the rights to
which are granted by the State Licence.

1.19.                        “Date of Declaration of Commercial Discovery”
has the meaning ascribed to it in the Farmout Agreement.

1.20.                        “Day” means a calendar day.

1.21.                        “Deepening” means an operation
whereby a well is drilled to an objective Zone below the deepest Zone in which
the well was previously drilled, or below the deepest Zone proposed in the
associated AFE (if required) and approved by the Minister, whichever is the
deeper.

1.22.                        “Development and Production Costs”
means those capital and non-capital costs of all operations conducted in
accordance with a Development Plan to facilitate the extraction, production and
sale of Hydrocarbons and all other expenses related to the development of the
Contract Area or part thereof, including but not limited to overhead expenses
made in respect of the development of the Contract Area.

1.23.                        “Development Operation” means an
operation conducted for the purposes of obtaining production of Hydrocarbons
from the Contract Area, including, but not limited to, the drilling of
Development Wells and the design and construction of all necessary Project
Facilities.

1.24.                        “Development Plan” has the meaning
ascribed to it in the Farmout Agreement.

1.25.                        “Development Well” has the meaning
ascribed to it in the Farmout Agreement.

1.26.                        “Discovery” means the discovery of an
accumulation of Hydrocarbons in the Contract Area whose existence until that
moment was unproven by drilling.

1.27.                        “Dispute” means any dispute,
controversy or claim (of any and every kind or type, whether based on contract,
tort, statute, regulation, or otherwise) arising out of, relating to, or
connected with the Farmout Agreement and/or this Agreement or the operations
carried out thereunder, including any Dispute involving the construction,
validity, interpretation, enforceability or breach of the Farmout Agreement
and/or this Agreement.

1.28.                        “Effective Date” means [*].

 6
 

 

1.29.                        “Entitlement” means that quantity of
Hydrocarbons (excluding all quantities used or lost in Joint Operations) of
which a Party has the right and obligation to take delivery pursuant to the
terms of the Contracts, as such rights and obligations may be adjusted by the
terms of any other agreement(s) entered into pursuant to Article 9.

1.30.                        “Environment” has the meaning
ascribed to it in the Farmout Agreement.

1.31.                        “Environmental Auditor” means an
independent environmental auditor chosen by mutual agreement of the Parties to
conduct the Exit Audit.

1.32.                        “Environmental Law” means any
applicable (which expression herein includes, without limitation, any statute,
subordinate legislation, common law and doctrines of equity) of Trinidad
intended to protect or preserve, or which pertains to, the Environment and any
applicable law of Trinidad relating to the storage, handling, transportation,
use, spill, release, emission, disposal or recycling of any toxic or hazardous
substance.

1.33.                        “Environmental Liabilities” has the
meaning ascribed to it in the Farmout Agreement.

1.34.                        “Environmental Loss” means any loss,
damages, costs, expenses, or liabilities (other than Consequential Loss) caused
by (i) a discharge of Hydrocarbons, pollutants or other contaminants into
or unto any medium (such as land, surface, water, ground water and/or air) or
(ii) any activity which affects the Environment, arising out of, relating
to, or connected with this Agreement or the operations carried out under this
Agreement, including any of the following: (i) injury or damage to, or
destruction of, natural resources or real or personal property; (ii) cost
of pollution control, cleanup and removal; (iii) cost of restoration of
natural resources; and (iv) fines, penalties or other assessments.

1.35.                        “Equipping” means the installation of
such equipment as is required to produce Hydrocarbons from a Completed well,
including without restricting the generality of the foregoing, a pump (or other
artificial lift equipment), and, if necessary, a heater, dehydrator, flow-line,
production tankage or other wellsite facility for the initial treatment of
Hydrocarbons produced from a completed well to prepare such production for
transportation to market.

1.36.                        “Exclusive Operation(s)” means those
operations and activities carried out pursuant to Article 7 of this
Agreement, the costs of which are chargeable to the account of less than all
the Parties.

1.37.                        “Exclusive Well” means a well drilled
pursuant to an Exclusive Operation.

1.38.                        “Exit Audit” has the meaning ascribed
to it in Article 12.1.

1.39.                        “Exploitation Period” means any and
all periods of extraction and Production of Hydrocarbons from a Field as
permitted under the terms of the State Licence.

1.40.                        “Exploration Operation” means the
obtaining, processing and assessment of any G & G Data in relation to the
Contract Area and/or the drilling of one or more Exploration Wells

 7
 

 

or Appraisal Wells with
respect to any Zone(s) within the Contract Area in which no Discovery has yet
been made.

1.41.                        “Exploration Period” has the meaning
ascribed to it in the Farmout Agreement.

1.42.                        “Exploration Well” has the meaning
ascribed to it in the Farmout Agreement.

1.43.                        “Farmout Agreement” means the Farmout
Agreement dated •, 2004 between the Parties.

1.44.                        “Field” has the meaning ascribed to
it in the Farmout Agreement.

1.45.                        “Force Majeure” has the meaning given
to it in the Act.

1.46.                        “Fiscal Year” means a period of
twelve (12) months commencing with October 1st and ending on the following
September 30th, according to the Gregorian calendar.

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

1.48.                        “Government” means the Government of
Trinidad or any Ministry, department, competent authority or agency thereof,
other than Petrotrin.

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

1.50.                        “HSE Plan” means a health, safety and
environmental plan developed by Operator in accordance with Article 4.12
and in consultation with the HSE Manager(s) of any and all Non-Operators.

1.51.                        “Hydrocarbon(s)” means all petroleum
substances, the rights to which are granted by the State Licence, including
Crude Oil, Natural Gas and NGLs.

1.52.                        “Information-Only Notice” means
a Written notice delivered by a Party to the other Party or Parties hereto
pursuant to a requirement set out herein for the delivery of such notice,
providing the receiving Party with the type of information identified in such
requirement, in a reasonably detailed manner, for the sole purpose of informing
or advising the receiving Party of the information contained in such notice and
not for any other purpose.

1.53.                        “Joint Account” means an account for
the joint benefit and obligation of all of the Parties, and includes any
accounts established and maintained by the Operator to record all receipts and
disbursements relating to Joint Operations.

1.54.                        “Joint Operation(s)” means any
Petroleum Operations carried out by the Operator pursuant to the Contracts, the
costs of which are for the Joint Account. 
For greater

 8
 

 

certainty, all Petroleum
Operations undertaken by Canadian Superior in fulfilling the Minimum Work
Obligations shall not constitute Joint Operations.

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

1.56.                        “Laws/Regulations” means those
applicable laws, statutes, rules and regulations governing any or all
activities under the Contracts.

1.57.                        “Minimum Work Obligations” has the meaning
ascribed to it in the Farmout Agreement.

1.58.                        “Minister” has the meaning ascribed
to it in the Farmout Agreement.

1.59.                        “Ministry/Ministry of Energy” has the
meaning ascribed to it in the Farmout Agreement.

1.60.                        “Natural Gas” means all hydrocarbons
in a gaseous state at sixty degrees (60°) Fahrenheit and at 14.7 pounds
per square inch absolute pressure, (including wet gas, dry gas and residue
gas), the rights to which are granted by the State Licence.

1.61.                        “NGLs” means, all naturally occurring
gaseous hydrocarbons (including ethane, propane, butane or condensate) that are
initially components of Natural Gas and may be extracted in a liquid state at a
processing facility.

1.62.                        “Non-Consenting Party” means
any Party who elects not to participate in an Exclusive Operation.

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

1.64.                        “Operating Committee” means the
committee constituted in accordance with Article 5.

1.65.                        “Operator” means a Party to this
Agreement designated as such in accordance with Article 4 or 7.11(F)
and includes any successor Operator appointed in accordance with the provisions
hereof.

1.66.                        “Overriding Royalty” has the meaning
ascribed to it in the Farmout Agreement.

1.67.                        “Participating Interest” means, for a
Joint Operation, the undivided interest of a Party in the rights and
obligations of that Party in such Joint Operation as derived from the Parties’
interest in the Contracts, and for an Exclusive Operation means such undivided
interest as is determined pursuant to Article 7, in either case expressed
as a percentage of the total interests of all Parties participating in such
Joint Operation or Exclusive Operation, as applicable.

1.68.                        “Party” means either Canadian
Superior or Petrotrin, and “Parties” means
both Canadian Superior and Petrotrin, and includes the respective successors
and permitted assigns of each.

 9
 

 

1.69.                        “Person(s)” has the meaning ascribed
to it in the Farmout Agreement.

1.70.                        “Petroleum Operations” has the
meaning ascribed to it in the Farmout Agreement.

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

1.72.                        “Production Operations” means the
operation of flowing Hydrocarbons from a Zone to the surface for a purpose
other than Testing.

1.73.                        “Project Facilities” means those real
and personal properties, assets and undertakings used in conjunction with the
production of Hydrocarbons under a Development Plan, the ownership, leasing or
other acquisition costs of which are for the Joint Account.

1.74.                        “Public Petroleum Rights” has the
meaning given to the term “public petroleum rights” in the Act.

1.75.                        “Recompletion” means an operation
whereby a Completion in one Zone is abandoned in order to attempt a Completion
in a different Zone within the existing wellbore.

1.76.                        “Reserves” has the meaning ascribed
to it in the Farmout Agreement.

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

1.78.                        “Secondee” means an individual
employed and designated by a Non-Operator and seconded to the Operator
under a secondment agreement and entered into between the Operator and such Non-Operator.

1.79.                        “Security” means any one or more of
(i) a guarantee or standby letter of credit issued by a bank; (ii) an
on-demand bond issued by a surety corporation; (iii) a corporate
guarantee; (iv) any financial security required by the Contract or this
Agreement; and (v) any financial security agreed from time to time by the
Parties; provided, however, that the bank, surety or corporation issuing the
guarantee, standby letter of credit, bond or other security (as applicable) has
a credit rating indicating it has a sufficient worth to pay its obligations in
all reasonably foreseeable circumstances.

1.80.                        “Senior Supervising Personnel” means,
with respect to a Party, any individual who functions as its senior resident
manager who directs all operations and activities of such Party in the country
or region in which he is resident, and any manager who directly reports to such
senior resident manager in such country or region.

1.81.                        “Sidetracking” means plugging back,
the directional control and intentional deviation of an existing well so as to’
change the original bottom hole location unless done to straighten the hole or
to drill around junk in the hole or to overcome other mechanical difficulties.

 10
 

 

1.82.                        “State Licence” has the meaning
ascribed to it in the Farmout Agreement.

1.83.                        “Testing” has the meaning ascribed to
it in the Farmout Agreement.

1.84.                        “Trinidad” means the Republic of
Trinidad and Tobago.

1.85.                        “Urgent Operational Matters” has the
meaning ascribed to it in Article 5.12(A)(1).

1.86.                        “Work Programme and Budget” means an
annual schedule of activities, costs and production levels for Joint Operations
and the budget therefor as described and approved in accordance with
Article 6.

1.87.                        “Writing” or “Written”
means a document delivered by registered mail, by prepaid courier delivery
service, by facsimile transmission or by hand.

1.88.                        “Zone” has the meaning ascribed to it
in the Farmout Agreement.

ARTICLE 2

EFFECTIVE DATE AND TERM

2.1          Effective Date and
Term

This Agreement shall have effect from the Effective
Date and shall continue in effect until the following occur in accordance with
the terms of this Agreement: this Agreement terminates; all materials,
equipment, and personal property used in connection with Joint Operations or
Exclusive Operations have been disposed of or removed in accordance with the
provisions of the Act; and final settlement (including settlement in relation
to any financial audit carried out pursuant to the Accounting Procedure) has
been made.  Notwithstanding the preceding
sentence: (i) Article 10 shall remain in effect until all abandonment
obligations under the Contracts have been satisfied; and
(ii) Article 4.5, Article 8, Article 15.2, Article 18
and the indemnity obligation under Article 19.1(A) shall remain in effect
until all obligations have been extinguished and all Disputes have been
resolved.  Termination of this Agreement
shall be without prejudice to any rights and obligations arising out of or in
connection with this Agreement which have vested, matured or accrued prior to
the effective time of such termination.

ARTICLE 3

SCOPE

3.1          Scope

(A)                              The
purpose of this Agreement is to establish the respective rights and obligations
of the Parties with regard to operations carried out in the Contract Area under
the Contracts, including without limitation the exploration, appraisal,
development, production and disposition of Hydrocarbons from the Contract Area,
and the abandonment of any wells and decommissioning of any facilities.

 11
 

 

(B)                                For
greater certainty, the Parties confirm that, except to the extent expressly
included in the Contract, the following activities are outside of the scope of
this Agreement and are not addressed herein:

(1)                                  construction,
operation, ownership, maintenance, repair and removal of facilities downstream
from the delivery point (as determined under the lifting agreement provided for
in Article 9) of the Parties’ Entitlements;

(2)                                  transportation
of the Parties’ Entitlements downstream from the delivery point (as determined
under the lifting agreement provided for in Article 9);

(3)                                  marketing
and sales of Hydrocarbons, except as expressly provided in
Article 7.11(E), Article 8.4 and Article 9;

(4)                                  acquisition
of rights to explore for, appraise, develop or produce Hydrocarbons outside of
the Contract Area (other than as a consequence of unitisation with an adjoining
contract area under the terms of the Contract); and

(5)                                  exploration,
appraisal, development or production of minerals other than Hydrocarbons,
whether inside or outside of the Contract Area.

3.2          Participating Interest

(A)                              Upon
completion by Canadian Superior of the Minimum Work Obligations and any further
Exploration Wells pursuant to Article 2.1(g) of the Farmout Agreement, the
Participating Interests of the Parties in any Field(s) discovered in which
there has been a Declaration of Commerciality shall be as follows:

	
  Petrotrin

  	
   

  	
  30

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Canadian Superior

  	
   

  	
  70

  	
  %

  

 

(B)                                If
a Party transfers all or part of its Participating Interest in accordance with
the applicable provisions of the Farmout Agreement and this Agreement, the
Participating Interests of the Parties shall be revised accordingly.

3.3          Ownership, Obligations and Liabilities

(A)                              Unless
otherwise provided in this Agreement and the Farmout Agreement, all the rights
and interests in and under the Contracts, all Joint Property, and any
Hydrocarbons won and produced from the Contract Area (prior to the
determination of a Field) or, after a Field has been determined, from that
Field, or any well drilled in the Contract Area, subject to Article 7, by
the Parties, shall, subject to the terms of the Contracts, be owned by the
Parties in accordance with their respective Participating Interests.

 12
 

 

(B)                                Unless
otherwise provided in this Agreement, the obligations of the Parties under the
Contracts and all liabilities and expenses incurred by Operator in connection
with Joint Operations, save and except those operations related to the
completion of the Minimum Work Obligations, shall be charged to the Joint
Account, and all credits to the Joint Account shall be shared by the Parties in
accordance with their respective Participating Interests.

(C)                                Each
Party shall pay when due, in accordance with the Accounting Procedure, its
Participating Interest share of Joint Account expenses, including cash advances
and interest, accrued pursuant to this Agreement.  A Party’s payment of any charge under this
Agreement shall be without prejudice to its right to later contest the charge.

ARTICLE 4

OPERATOR

4.1          Designation of Operator

(A)                              Canadian
Superior is designated as Operator hereunder and agrees to act as such in
accordance with this Agreement.

(B)                                In
the event that Operator disposes of all of its Participating Interest a
successor Operator shall be appointed in accordance with Article 4.11.

4.2          Rights and Duties of Operator

(A)                              Subject
to the terms and conditions of this Agreement, Operator shall have all of the
rights, functions and duties of Operator under the Contracts and shall have
exclusive charge of and shall conduct all Joint Operations.  Operator may employ independent contractors
and agents (which independent contractors and agents may include an Affiliate
of Operator, a Non-Operator or an Affiliate of a Non-Operator) in
such Joint Operations.

(B)                                In
the conduct of Joint Operations Operator shall:

(1)                                  perform
Joint Operations in accordance with the provisions of the Contracts and the
decisions of the Operating Committee not in conflict with this Agreement;

(2)                                  conduct
all Joint Operations in a diligent, safe and efficient manner in accordance
with such good and prudent petroleum industry practices and field conservation
principles as are generally followed by the international petroleum industry
under similar circumstances;

(3)                                  exercise
due care with respect to the receipt, payment and accounting of funds in
accordance with good and prudent practices as are generally

 13
 

 

followed by the international petroleum industry under
similar circumstances;

(4)                                  subject
to Article 4.6 and the Accounting Procedure, neither gain a profit nor
suffer a loss as a result of being the Operator in its conduct of Joint
Operations, provided that Operator may rely upon Operating Committee approval
of specific accounting practices not in conflict with the Accounting Procedure;

(5)                                  perform
the duties for the Operating Committee as set out in Article 5, and
prepare and submit to the Operating Committee proposed Work Programmes and
Budgets and (if required) AFEs, as provided in Article 6;

(6)                                  use
all reasonable efforts to acquire all permits, consents, approvals, and surface
or other rights that may be required for or in connection with the conduct of
Joint Operations;

(7)                                  upon
receipt of reasonable advance notice, permit the representatives of any of the
Parties to have at all reasonable times during normal business hours and at
their own risk and expense reasonable access to the Joint Operations with the
right to observe all Joint Operations and to inspect all Joint Property and to
conduct financial audits as provided in the Accounting Procedure;

(8)                                  undertake
to maintain the Contracts in full force and effect in accordance with such good
and prudent petroleum industry practices as are generally followed by the
international petroleum industry under similar circumstances.  Operator shall promptly pay and discharge all
liabilities and expenses incurred in connection with Joint Operations and use
its reasonable endeavours to keep and maintain the Joint Property free from all
liens, charges and encumbrances arising out of Joint Operations;

(9)                                  pay
to the Government for the Joint Account, within the periods and in the manner
prescribed by the Contracts and the Laws/ Regulations, all periodic payments,
royalties, taxes, fees and other payments pertaining to Joint Operations but
excluding any taxes measured by the incomes of the Parties;

(10)                            carry
out the obligations of Operator pursuant to the Contracts, including preparing
and furnishing such reports, records and information as may be required
pursuant to the Contracts, and the Act;

(11)                            have,
in accordance with any decisions of the Operating Committee, the exclusive
right and obligation to represent the Parties in all meetings and other
dealings with the Government with respect to matters arising under the
Contracts.  Operator shall notify the
other Parties as soon as possible of all such meetings.  To the extent that Operator meets with the
Government, prior to the completion of the Minimum Work Obligations, with
respect to

 14
 

 

matters arising under the Contracts, then Operator
shall deliver an Information-Only Notice to all Non-Operators
within a reasonable time following such meeting containing a brief summary of
the matters discussed and/or decisions made by the Government and/or the
Operator during such meeting.  Non-Operators
shall have the right to attend any and all such meetings with the Government
with respect to such matters, but only in the capacity of observers.  Nothing contained in this Agreement shall
restrict any Party from holding discussions with the Government with respect to
any issue peculiar to its particular business interests arising under the
Farmout Agreement or this Agreement, but in such event such Party shall
promptly advise the other Parties, if possible, before and in any event
promptly after such discussions, provided that such Party shall not be required
to divulge to the other Parties any matters discussed to the extent the same
involve proprietary information or matters not affecting such other Parties;

(12)                            in
accordance with Article 9.3, and any decisions of the Operating Committee,
assess (to the extent lawful) alternatives for the disposition of Natural Gas
from a Discovery;

(13)                            in
case of an emergency (including a significant fire, explosion, Natural Gas
release, Crude Oil release, or sabotage; incident involving loss of life,
serious injury to an employee, contractor, or third party, or serious property
damage; strikes and riots; or evacuations of Operator personnel): (i) take
all necessary and proper measures for the protection of life, health, the
Environment and property; (ii) after taking all steps required to satisfy
its obligations under the foregoing subsection (i), immediately notify the Non-Operators
of the occurrence of such event, and (iii) as soon as reasonably
practicable, report to the Non-Operators the details of such event and
any measures Operator has taken or plans to take in response thereto;

(14)                            establish
and implement the HSE Plan;

(15)                            include,
to the extent practical, in its contracts with independent contractors and to
the extent lawful, provisions which:

(a)                                  establish
that such contractors, subcontractors and any third parties can only enforce
their contracts against Operator;

(b)                                 permit
Operator, on behalf of itself and Non-Operators, to enforce contractual
indemnities against, and recover losses and damages suffered by them (insofar
as recovered under their contracts) from, such contractors; and

(c)                                  require
such contractors to take insurance required by Article 4.7.

 15
 

 

4.3          Operator Personnel

(A)                              Operator
shall engage or retain only such employees, Secondees, contractors, consultants
and agents as are reasonably necessary to conduct Joint Operations.

(B)                                (1)                                  Subject
to the Farmout Agreement and this Agreement, Operator shall determine the
number of employees, Secondees, contractors, consultants and agents, the
selection of such persons, their hours of work, and (except for Secondees) the
compensation to be paid to all such persons in connection with Joint
Operations.

(2)                                  Notwithstanding
paragraph (1) above, if following the completion of the Minimum Work
Obligations (i) the Parties agree to continue Joint Operations in which
Petrotrin is a paying partner, (ii) Petrotrin has not elected to convert
its Participating Interest to the Overriding Royalty, and (iii) Petrotrin
retains a Participating Interest of no less than fifteen (15%) per cent,
Petrotrin shall be entitled to request that Operator engage, for the Joint
Account, at least one current employee of Petrotrin to occupy a reasonably
senior role in connection with the Joint Operations.  Such persons shall be selected by Canadian Superior
from a reasonably comprehensive list of Petrotrin employees who are
appropriately qualified by education and experience to occupy such position.

(C)                                No
Secondment may be implemented except in accordance with paragraphs (1)
to (7) below.

(1)                                  Any
Party may propose Secondment for a designated purpose related to Joint
Operations.  Any proposal for Secondment
must include the:

(a)                                  designated
purpose and scope of Secondment, including duties, responsibilities, and
deliverables;

(b)                                 duration
of the Secondment;

(c)                                  number
of Secondees and minimum expertise, qualifications and experience required;

(d)                                 work
location and position within Operator’s organization of each Secondee; and

(e)                                  estimated
costs of the Secondment.

(2)                                  In
relation to a proposed Secondment meeting the requirements of
Article 4.3(C)(1), Operator shall, as soon as reasonably practicable,
approve or reject any Secondment proposed by a Non-Operator, in Operator’s
sole discretion.

 16

 

(3)                                  Any
proposal for one or more Secondment positions approved by Operator is subject
to: (i) the Operating Committee’s authorization of an appropriate budget
for such Secondment positions; and (ii) Non-Operators continuing to
make available to Operator Secondees qualified to fulfill the designated
purpose and scope of such Secondment.

(4)                                  As
to each approved and authorized Secondment position, Operator shall request Non-Operators
to nominate, by a specified date, qualified personnel to be the Secondee for such
position.  Each Non-Operator has
the right (but not the obligation) to nominate for each Secondment position one
or more proposed Secondees who such Non-Operator considers reasonably
qualified to fulfill the designated purpose and scope of such Secondment.

(5)                                  Following
the deadline for submitting nominations, Operator shall consider the expertise
and experience of each such nominee in light of the expertise and experience
required for the approved and authorized Secondment position, and shall select
or reject any nominee in Operator’s sole discretion.

(6)                                  Operator
shall have the right to terminate the Secondment for cause in accordance with
the secondment agreement provided for under Article 4.3(D).

(7)                                  Although
each Secondee shall report to and be directed by Operator, each Secondee shall
remain at all times the employee of the Party (or its Affiliate) nominating
such Secondee.

(D)                               Any
Secondment under this Agreement shall be in accordance with a separate
secondment agreement to be negotiated and entered into between Operator and the
employer of the Secondee, which agreement shall be consistent with this
Article 4.3.

(E)                                 All
costs related to Secondment and Secondees that are within the Work Programme
and Budget related to such Secondment position shall be charged to the Joint
Account.

4.4                               Information
Supplied by Operator

(A)                              Where
available, Operator shall provide Non-Operators with the following data
and reports (to be charged to the Joint Account and in a digitally recorded
format, where available) if, as and when such data and reports are produced or
compiled from Joint Operations:

(1)                                  copies
of all surveys and, if reasonable in the circumstances, all logs within twenty-four
hours of receipt of such logs by Operator;

(2)                                  daily
drilling reports;

 17
 

 

(3)                                  copies
of all Tests and core data analysis reports, (including drill stem tests and
pressure surveys) and all other technical data surveys (if any);

(4)                                  final
well recap report;

(5)                                  copies
of plugging reports;

(6)                                  paleontology
samples (drill cuttings) and also rock samples obtained from seismic
acquisition to be preserved and submitted for analyses;

(7)                                  fifty
percent (50%) or more of all full holes cores cut along the long axis obtained
from all wells cored;

(8)                                  fifty
percent (50%) or more of any representative samples of all sidewall cores
remaining after analysis;

(9)                                  palaeontology
sample analyses indicating lithologies, faunal assemblages and all geological
formations through which the well was drilled;

(10)                            copies
of the final processed version and any subsequent reprocessing of all seismic
lines and positioning, shot point location base map, observer’s reports,
seismic field tapes and final acquisition/processing reports, all geophysical
information, including but not limited to seismic, magnetic and gravity data
and weekly summaries of seismic activity;

(11)                            engineering
studies, development schedules and quarterly progress reports on development
projects;

(12)                            field
and well performance reports, including reservoir studies and reserve
estimates;

(13)                            (i) copies
of all material reports relating to Joint Operations or the Contract Area
furnished by Operator to the Government; and (ii) other material studies
and reports relating to Joint Operations;

(14)                            copies
of final interpretations, including but not limited to geological and
geophysical maps, seismic and well log cross sections and relevant reports, all
as are reasonable in the circumstances;

(15)                            such
additional information as a Non-Operator may reasonably request, provided
that the requesting Party or Parties pay the costs of preparation of such
information and that the preparation of such information will not unduly burden
Operator’s administrative and technical personnel.  Only Non-Operators who pay such costs
will receive such additional information; and

(16)                            other
reports as directed by the Operating Committee.

 18
 

 

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

(C)                                Notwithstanding
subsections 4.4(A) and (B), Petrotrin shall be entitled to a copy of all
data and reports, drill cuttings, cores and reservoir samples described therein
regardless of whether the same was obtained or prepared in connection with the
Minimum Work Obligations, Joint Operations and/or Exclusive Operations in which
Petrotrin has not participated, including for greater certainty any such
operations conducted after Petrotrin has elected to convert its Participating
Interest to the Overriding Royalty, provided always that:

(1)                                  Petrotrin
shall be entitled to receive and use all such data and reports, drill cuttings,
cores and reservoir samples at no cost to Petrotrin, except in instances where
joint Operations are being conducted in which Petrotrin is a paying partner, or
where Petrotrin is reinstated, in accordance with the provisions of
Article 7 as a Consenting Party in an Exclusive Operation in which it had
previously been a Non-Consenting Party. 
In such cases, Petrotrin will be required to pay its Participating
Interest share of obtaining such data and reports, cores, drill cuttings and
reservoir samples;

(2)                                  Petrotrin
shall be required to pay 100% of all costs associated with obtaining any
duplicate copies of such data and reports obtained or prepared in connection
with any Minimum Work Obligation or Exclusive Operation in which Petrotrin has
not participated;

(3)                                  any
Party in addition to Petrotrin shall be entitled to copies of such data and
reports obtained or prepared in connection with any Exclusive Operation in
which it has not participated and which was conducted by Petrotrin (whether
solely or jointly with any other Parties) provided that such Party shall be
required to pay the lesser of (i) 100% of all costs of making such copies
or, (ii) if more than one other Party did not participate in such Exclusive
Operation and also wishes to obtain a copy of such data and reports, its pro
rata share of all costs of making the total number of copies required; and

(4)                                  Petrotrin
shall store all core samples provided to it pursuant to Article 4.4(A) at
its storage facilities in Trinidad, and shall give all other Parties hereto
access at all reasonable times during normal business-hours to all such
samples which a Party may reasonably request.

(5)                                  Petrotrin’s
rights under this Article 4.4 shall not be assignable by it to any third
party.

 19
 

 

4.5                               Claims
and Lawsuits

(A)                              Operator
shall promptly notify the Parties of any and all material claims or suits
brought by any third party or parties and served upon Operator that relate in
any way to the Contract Area, Joint Operations and/or the Joint Property.  Operator shall represent the Parties and
defend or oppose the claim or suit. 
Operator may in its sole discretion compromise or settle any such claim
or suit or any related series of claims or suits for an amount not to exceed
the equivalent [*], inclusive of legal fees. 
Operator shall obtain the unanimous approval and direction of the
Operating Committee on amounts in excess of the above-stated amount.  Notwithstanding the foregoing, each Non-Operator
shall have the right to be represented by its own counsel at its own expense in
the settlement, compromise or defence of such claims or suits.

(B)                                Any
Non-Operator shall promptly notify the other Parties in Writing of any
claim made against such Non-Operator by a third party which relates to or
affects (or may affect) the other Parties, the Contracts, the Contract Area
and/or the operations conducted thereon pursuant to the Contracts.  Such notice shall include, without
limitation, a copy of the Statement of Claim or other document or notice
originating the claim.  Upon receipt of
such notice, the Operator shall convene a meeting of the Operating Committee to
discuss the Parties’ respective views on how to best address such claim and to
determine which of the following procedures shall apply to the defence and/or
settlement of such claim.  If the claim
relates:

(1)                                  entirely
to operations to operations carried out by Canadian Superior in furtherance of
the Minimum Work Obligations, Canadian Superior shall assume carriage of such
claim and shall defend and/or settle same in a manner that it, in its sole
discretion after having consulted with such Non-Operator, deems
appropriate.  All costs, expenses and
damages incurred pursuant to such defence and/or settlement shall be for the
sole account of Canadian-Superior; and

(2)                                  to
Joint Operations or the Joint Property, Operator shall defend and/or settle
such claim same in consultation with all Non-Operators and in accordance
with all decisions, if any, of the Operating Committee in relation thereto.  All costs, expenses and damages incurred
pursuant to such defence and/or settlement shall be for the Joint Account.

(C)                                Notwithstanding
Article 4.5(A) and Article 4.5(B), each Party shall have the right to
participate in any such suit, prosecution, defence or settlement conducted in
accordance with Article 4.5(A) and Article 4.5(B), at its sole cost
and expense; provided always that no Party may settle its Participating
Interest share of any claim without first satisfying the Operating Committee
that it can do so without prejudicing the interests of the Joint Operations or
the Joint Property and obtaining the approval of the Operating Committee to
that effect.

 20
 

 

(D)                               In
the event that Operator determines that it is in the best interests of the
Contract Area, the Joint Operations and/or the Joint Property to initiate any
material claim against one or more third parties in connection therewith,
Operator shall provide notice to all Non-Operators with notice of such
decision.  Operator shall then convene a
meeting of the Operating Committee within a reasonable time thereafter in order
to discuss the merits of proceeding with such claim: At such meeting the
Operator shall provide any information it may have in its possession in order
to assist the Non-Operators to determine whether the commencement of an
action in respect of such claim is in the best interests of the Contract Area,
the Joint Operations and/or the Joint Property. 
Unless the Operating Committee determines during this meeting that
proceeding with such claim is not in the best interests of the Parties (having
exclusive regard to the operations being conducted or proposed to be conducted
in the Contract Area and not to any other interests or assets of the Parties),
then the Operating Committee shall authorize the Operator to proceed with such
claim in a timely manner.  Thereafter,
and throughout the course of such claim, the Operator shall provide regular
updates on the status of such claim to the Non-Operators, including
during meetings of the Operating Committee convened in accordance with
Article 5 and at other intervals where such updates would reasonably be
provided.

4.6                               Limitation
on Liability of Operator

(A)                              Except
as set out in Article 4.6(C), neither Operator nor any other Indemnitee
(as defined below) shall bear (except as a Party to the extent of its
Participating Interest share) any damage, loss, cost, expense or liability
resulting from performing (or failing to perform) the duties and functions of
Operator, and the Indemnitees are hereby released from liability to Non-Operators
for any and all damages, losses, costs, expenses and liabilities arising out
of, incident to or resulting from such performance or failure to perform, even
though caused in whole or in part by a pre-existing defect, or the
negligence (whether sole, joint or concurrent), gross negligence, willful
misconduct, strict liability or other legal fault of Operator (or any such
Indemnitee).

(B)                                Except
as set out in Article 4.6(C), the Parties shall (in proportion to their
Participating Interests) defend and indemnify Operator and its Affiliates, and
their respective directors, officers, and employees (collectively, the “Indemnitees”),
from any and all damages, losses, costs, expenses (including reasonable legal
costs, expenses and attorneys’ fees) and liabilities incident to claims,
demands or causes of action brought by or on behalf of any person or entity,
which claims, demands or causes of action arise out of, are incident to or
result from Joint Operations, even if the same are or have been caused in whole
or in part by a pre-existing defect, or the negligence (whether sole,
joint or concurrent), gross negligence, willful misconduct, strict liability or
other legal fault of Operator (or any such Indemnitee).

(C)                                Notwithstanding
Articles 4.6(A) or 4.6(B), if any personnel of Operator or its Affiliates
engage in Gross Negligence / Wilful Misconduct which proximately causes the
Parties to incur damage, loss, cost, expense or liability for claims,

 21
 

 

demands or causes of action referred to in
Articles 4.6(A) or 4.6(B), then, in addition to its Participating Interest
share, Operator shall bear all such damages, losses, costs, expenses and
liabilities.

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

(D)                               Nothing
in this Article 4.6 shall be deemed to relieve Operator from its
Participating Interest share of any damage, loss, cost, expense or liability
arising out of, incident to, or resulting from Joint Operations.

4.7                               Insurance
Obtained by Operator

(A)                              Operator
shall procure and maintain for the Joint Account all insurance in the types and
amounts required by the Laws / Regulations, including without limitation
workmens’ compensation, well control, comprehensive general liability and all
risks insurance.

(B)                                Operator
shall procure and maintain any further insurance, at reasonable rates, as the
Operating Committee may from time to time require.  In the event that such further insurance is,
in Operator’s reasonable opinion, unavailable or available only at an
unreasonable cost, Operator shall promptly notify the Non-Operators in
order to allow the Operating Committee to reconsider such further
insurance.  Where the Operating Committee
unanimously decides that such further insurance is required the Operator shall
be obligated to obtain such further insurance. 
Prior to the completion of the Minimum Work Obligations, Operator shall
provide an Information-Only Notice to the Non-Operators containing
a brief summary of the Operator’s decisions from time to time respecting
matters pertaining to insurances obtained by the Operator pursuant to the
Contracts.

(C)                                Notwithstanding
Articles 4.7(A) and (B) but subject to the Contracts and the
Laws/Regulations, any Party may elect not to participate in the insurance to be
procured under Articles 4.7(A) and 4.7(B) provided such Party:

(1)                                  gives
prompt Written notice to that effect to Operator and all Non-Operators
(as the case may be);

(2)                                  does
nothing which may interfere with Operator’s negotiations for such insurance for
the other Parties;

(3)                                  obtains
such insurance prior to or concurrent with the commencement of relevant
operations and maintains such insurance (in respect of which an annual
certificate of adequate coverage from a reputable insurance underwriter shall
be sufficient evidence) or other evidence of financial responsibility which
fully covers its Participating Interest share of the risks that would be
covered by the insurance procured under Articles 4.7(A)

 22
 

 

and 4.7(B) (as the case may be), and which the
Operating Committee determines to be acceptable.  No such determination of acceptability shall
in any way absolve a non-participating Party from its obligation to meet
each cash call (except, in accordance with Article 4.7(D) as regards the
costs of the insurance policy in which such Party has elected not to
participate) including any cash call with respect to damages and losses and/or
the costs of remedying the same in accordance with the terms of the Contracts
and the Laws/Regulations.  If such Party
obtains other insurance, such insurance shall (a) contain a waiver of
subrogation in favour of all the other Parties, the Operator and their respective
insurers, but only with respect to their interests under the Contracts;
(b) provide that thirty (30) Days Written notice be given to the
Operator and all Non-Operators (as the case may be), prior to any
material change in, or cancellation of, such insurance policy; (c) be
primary to, and receive no contribution from, any other insurance maintained by
or on behalf of, or benefiting Operator or the other Parties; and
(d) contain adequate territorial extensions and coverage in the location of
the Joint Operations; and

(4)                                  is
responsible for all deductibles, coinsurance payments, self-insured
exposures, uninsured or underinsured exposures relating to its interests under
the Contracts.

(D)                               Notwithstanding
the provisions of Articles 4.7(A), 4.7(B) and 4.7(C), the cost of
insurance during the Minimum Work Obligations phase shall be for the account of
Canadian Superior.  Thereafter, the cost
of insurance in respect of Joint Operations shall be for the Joint Account and
the cost of insurance in respect of any Exclusive Operation shall be charged
pro rata to the Parties participating in such Exclusive Operation in proportion
to their respective Participating Interests therein.

(E)                                 Operator
shall, with respect to all insurance obtained under this Article 4.7:

(1)                                  use
its reasonable efforts to procure or cause to be procured such insurance prior
to or concurrent with, the commencement of relevant operations and maintain or
cause to be maintained such insurance during the term of the relevant
operations or any longer term required under the Contracts or the Laws /
Regulations;

(2)                                  promptly
inform the participating Parties when such insurance is obtained and supply
them with certificates of insurance or copies of the relevant policies when the
same are issued;

(3)                                  arrange
for the participating Parties, according to their respective Participating
Interests, to be named as co-insureds on the relevant policies with
waivers of subrogation in favour of all the Parties but only with respect to
their interests under this Agreement;

 23
 

 

(4)                                  use
its reasonable efforts to ensure that each policy shall survive the default or
bankruptcy of the insured for claims arising out of an event before such
default or bankruptcy and that all rights of the insured shall revert to the
Parties not in default or bankruptcy; and

(5)                                  duly
file all claims and take all necessary and proper steps to collect any proceeds
and credit any proceeds to the participating Parties in proportion to their
respective Participating Interests.

(F)                                 Operator
shall use its reasonable endeavours to require all contractors, subcontractors
and third parties performing work with respect to Joint Operations to:

(1)                                  obtain
and maintain any and all insurance from companies approved by the Operating
Committee and in the types and amounts required by the Contracts, the Laws /
Regulations or any decision of the Operating Committee;

(2)                                  name
the Parties as additional insureds on the contractor’s, subcontractors’ and
third parties’ insurance policies and obtain from their insurers waivers of all
rights of recourse against Operator, Non-Operators and their insurers;
and

(3)                                  provide
Operator with certificates reflecting such insurance prior to the commencement
of their services.

4.8                               Commingling
of Funds

(A)                              Operator
may not commingle with Operator’s own funds the monies which Operator receives
from or for the Joint Account pursuant to this Agreement.

(B)                                Operator
shall open one (1) or more bank accounts (separate and distinct from its own
bank accounts as a Party) into which all funds held or received for Joint
Operations shall be deposited and from which all disbursements for the Joint
Operations shall be made (hereinafter called the “Joint Bank Accounts”).  Any excess cash in Joint Bank Accounts shall
be invested in interest bearing, short-term deposits under the applicable
financial regulations and the Parties shall own them, and any interest credited
to such accounts in undivided interests, in proportion to their respective
contributions to such accounts.  Interest
earned shall be allocated among the Parties on an equitable basis taking into
account the date of funding by each Party and its share of the Joint Account
monies, Operator shall apply such earned interest to the next succeeding cash
call or, if directed by any Party, pay it to the Parties.

(C)                                Operator
shall maintain proper records (including reconciled bank statements) in respect
of the Joint Account.  Upon Written
request of any Non-Operator, Operator shall provide joint bank account
statements on a quarterly basis.

 24
 

 

4.9                               Resignation
of Operator

Subject to Article 4.11, Operator may resign as
Operator at any time by so notifying the other Parties in Writing at least one
hundred and twenty (120) Days prior to the effective date of such
resignation.  Operator shall not,
however, resign as Operator at any time before completion of the Minimum Work
Obligations and shall continue to carry out its responsibilities as Operator in
accordance with its rights and obligations as Operator hereunder until it has
been replaced by a successor Operator pursuant to Article 4.11.

4.10                        Removal
of Operator

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

(1)                                  Operator
dissolves, liquidates, is wound up or otherwise terminates its corporate
existence;

(2)                                  Operator
becomes insolvent, bankrupt or makes an assignment for the benefit of
creditors;

(3)                                  a
receiver is appointed for a substantial part of Operator’s assets; or

(4)                                  an
order is made by a court or an effective resolution is passed for the re-organisation
under any bankruptcy law, dissolution, liquidation, or winding up of Operator.

(B)                                Subject
to Articles 4.11 and 19.2, Operator may be removed by the decision of the
Non-Operators if Operator has committed a material breach of the Contracts
and has either failed to commence to cure that breach within thirty (30) Days
of receipt of a Written notice from Non-Operators detailing the alleged
breach or has failed to diligently pursue the cure to completion.  Any decision of Non-Operators to give
notice of breach to Operator or to remove Operator under this
Article 4.10(B) shall be made by an affirmative vote of one or more of the
total number of Non-Operators holding a combined Participating Interest
of at least thirty percent (30%). 
However, if Operator disputes such alleged commission of or failure to
cure a material breach and dispute resolution proceedings are initiated
pursuant to Article 19.2 in relation to such breach, then Operator shall
remain appointed and no successor Operator may be appointed pending the
conclusion or abandonment of such proceedings, subject to the terms of
Article 8.3 with respect to Operator’s breach of its payment obligations.

(C)                                If
Operator together with any Affiliates of Operator is or becomes directly or
indirectly the holder of a Participating Interest of less than twenty-five
percent.  (25%) then Operator shall be
required to promptly notify the other Parties in Writing.  The Parties (other than Operator or any
Affiliate of Operator) shall then vote within thirty (30) Days of such
notification on whether or not a successor Operator should be named pursuant to
Article 4.11.

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(D)                               Subject
to Article 4.11, Operator may be removed at any time by the affirmative
vote of two (2) or more Parties holding a combined Participating Interest of at
least sixty percent (60%).

4.11                        Appointment
of Successor

When Operator
assigns or disposes of all of its Participating Interest pursuant to
Article 4.1(B) or when a change of Operator occurs pursuant to
Article 4.9 or Article 4.10:

(A)                              The
Operating Committee shall meet as soon as possible to appoint a successor
Operator pursuant to the voting procedure of Article 5.9.  No Party may be appointed successor Operator
against its will.  In the event that no
successor Operator has been appointed within one hundred and twenty (120) Days
of the resignation of Operator, the Operating Committee shall be entitled to
appoint a third party to act as interim Operator.

(B)                                If
Operator is removed; other than in the case of Article 4.10(C) or Article 4.10(D),
neither Operator nor any Affiliate of Operator shall have the right to be
considered as a candidate for the successor Operator.

(C)                                The
resigning or removed Operator shall be compensated out of the Joint Account for
its reasonable expenses not exceeding [*] directly related to its resignation
or removal, except in the case of removal pursuant to Article 4.10(B).

(D)                               The
resigning or removed Operator and the successor Operator shall arrange for the
taking of an inventory of all Joint Property and Hydrocarbons, and an audit of
the books and records of the removed Operator. 
Such inventory and audit shall be completed, if possible, no later than
the effective date of the change of Operator and shall be subject to the
approval of the Operating Committee.  The
liabilities and expenses of such inventory and audit shall be charged to the
Joint Account.

(E)                                 The
resignation or removal of Operator and its replacement by the successor
Operator shall not become effective prior to receipt of any necessary Government
approvals.

(F)                                 Upon
the effective date of such resignation or removal, the successor Operator shall
succeed to all duties, rights and authority prescribed for Operator, be
required to perform same commencing immediately upon effective date of such resignation
or removal.  The former Operator shall
transfer to the successor Operator custody of all Joint Property, books of
account, records and other documents maintained by Operator pertaining to the
Contract Area and to Joint Operations. 
Upon delivery of the above-described property and data, the former
Operator shall be released and discharged from all obligations and liabilities
as Operator accruing after such date, provided that in the event that the
successor Operator is prevented by force majeure from
immediately assuming and carrying out its duties and responsibilities as
Operator, the resigning or removed Operator shall, subject to any contrary
decision of the Operating Committee, continue to carry out its responsibilities
as Operator in

 26
 

 

accordance with its rights and obligations as Operator
hereunder until it has been replaced by a successor Operator.

4.12                        Health,
Safety and Environment (HSE)

(A)                              With
the goal of achieving safe and reliable operations in compliance with
applicable HSE laws, rules and regulations (including avoiding significant and
unintended impact on the safety or health of people, on property, or on the
environment), Operator shall in the conduct of Joint Operations:

(1)                                  establish
and implement the HSE Plan in a manner consistent with standards and procedures
generally followed in the international petroleum industry under similar
circumstances;

(2)                                  design
and operate Joint Property consistent with the HSE plan; and

(3)                                  conform
with locally applicable HSE laws, rules and regulations and other HSE-related
statutory requirements that may apply.

(B)                                Operator
shall provide the Operating Committee, on an annual basis, with an HSE letter
of assurance providing adequate evidence that the HSE Plan is in place and that
any major HSE issues have been brought to the attention of the Operating
Committee and are being properly managed.

(C)                                In
the conduct of Joint Operations, Operator shall establish an annual audit
programme whereby independent auditors review and verify the effectiveness of
the HSE Plan.

(D)                               Operator
shall require its contractors, consultants and agents undertaking activities
for the Joint Operations to manage HSE risks in a manner consistent with the
requirements of this Article 4.12.

(E)                                 Operator
shall establish and enforce rules consistent with those generally followed in
the international petroleum industry under similar circumstances that, at a
minimum, prohibit within the Contract Area the following:

(1)                                  possession,
use, distribution or sale of firearms, explosives, or other weapons without the
prior Written approval of senior management of Operator;

(2)                                  possession,
use, distribution or sale of alcoholic beverages without the prior Written
approval of senior management of Operator; and

(3)                                  possession,
use, distribution or sale of illicit or non-prescribed controlled
substances and the misuse of prescribed drugs.

(F)                                 Without
prejudice to a Party’s rights under Article 4.2(B)(7), with reasonable
advance notice, Operator shall permit each Non-Operator to have at all
reasonable

 27
 

 

times during normal business hours (and at its own
risk and expense) the right to conduct its own HSE audit.

ARTICLE 5

OPERATING COMMITTEE

5.1                               Establishment
of Operating Committee

(A)                              An
Operating Committee comprised of representatives of each Party shall be
established within ninety (90) days of the Effective Date.  During the conduct of the Minimum Work
Obligations the powers and duties of the Operating Committee shall be limited
to those outlined in the Farmout Agreement.

(B)                                Upon
the establishment of the Operating Committee under Article 5.1(A), each
Party shall appoint one (1) representative and one (1) alternate representative
to serve on the Operating Committee. 
Each Party shall, within thirty (30) Days after the Effective Date, give
notice in Writing to the other Parties of the name and address of its
representative and alternate representative to serve on the Operating
Committee.  Each Party shall have the
right to change its representative and alternate at any time by giving proper
notice in accordance with Article 18 of such change to the other Parties.

5.2                               Powers
and Duties of Operating Committee

The Operating Committee shall have power and duty to
authorise, supervise and direct Joint Operations that are necessary or
desirable to enjoy the rights and fulfil the obligations of the Parties under
the Contracts and properly explore and exploit the Contract Area in accordance
therewith and in a manner appropriate in the circumstances.

5.3                               Authority
to Vote

(A)                              The
representative of a Party, or in his absence his alternate representative,
shall be authorised to represent and bind such Party with respect to any matter
which is within the powers of the Operating Committee and is properly brought
before the Operating Committee.  Each
such representative shall have a vote equal to the Participating Interest of
the Party such person represents.  Each
alternate representative shall be entitled to attend all Operating Committee
meetings but shall have no vote at such meetings except in the absence of the
representative for whom he is the alternate. 
In addition to the representative and alternate representative, each
Party may also bring to any Operating Committee meetings such technical and
other advisors as it may deem appropriate.

(B)                                If
a Party fails to attend two (2) consecutive duly convened meetings of the
Operating Committee, it shall be deemed to have voted in the affirmative for
all resolutions presented at each such meeting and which were contemplated in
the agendas prepared for such meetings are proposals to be voted on during such
meetings.

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5.4                               Subcommittees

(A)                              The
Operating Committee shall establish a technical subcommittee and may establish
such other subcommittees, including financial subcommittees, as the Operating
Committee may deem appropriate.  The
functions of such subcommittees shall be in an advisory capacity or as
otherwise unanimously determined by the Parties.  Each Party shall have the right to appoint at
least one (1) representative to each subcommittee.

(B)                                Each
subcommittee shall meet no less than one (1) time in any given Calendar Year.

5.5                               Notice
of Meeting

(A)                              Any
reference in this Article to notice, proper notice or confirmation notice
must be given in accordance with Article 18.

(B)                                Operator
shall convene a meeting of the Operating Committee at least once every Calendar
Year.

(C)                                Operator
may call a meeting of the Operating Committee by giving Written notice to the
Parties at least fifteen (15) Business Days in advance of such meeting, unless
otherwise agreed by the Parties.

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

(E)                                 The
notice periods above may only be waived with the unanimous consent of all the
Parties.

5.6                               Contents
of Meeting Notice

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

(1)                                  the
date, time and location of the meeting;

(2)                                  an
agenda of the matters and proposals to be considered and/or voted upon;

(3)                                  all
applicable background information available to Operator; and

(4)                                  copies
of all proposals to be considered at the meeting (including all appropriate
supporting information not previously distributed to the Parties).

 29
 

 

(B)                                A
Party, by Written notice to the other Parties given not less than seven (7)
Business Days prior to a meeting, may add additional matters to the agenda for
a meeting.

(C)                                On
the request of a Party, and with the unanimous consent of all Parties, the
Operating Committee may consider at a meeting a matter not contained in such
meeting agenda.

5.7                               Location
of and Quorum for Meetings

(A)                              Unless
otherwise agreed to by all Parties, all meetings of the Operating Committee and
any subcommittee(s) established hereunder shall be held at a mutually agreed
venue and location, failing which they shall be held at a location in Trinidad
chosen by Operator.  Travel expenses of
representatives of Parties and any other employees of Parties who are required
by agenda to be in attendance shall be for the account of each of the
respective Parties.

(B)                                A
quorum for a meeting of the Operating Committee shall consist of
representatives or alternate representatives of the Parties sufficient to pass
a vote under Article 5.9.  If a
quorum for a meeting of the Operating Committee is not present or deemed to not
be present at a duly constituted meeting of the Operating Committee, that
meeting shall be adjourned.  Any meeting
so adjourned may be reconvened upon not less than forty-eight (48) hours’
prior Written notice given by any Party to the other Parties, provided always
that any such reconvened meeting shall not be subject to the relevant quorum
requirements and if a quorum is not present for such reconvened meeting the
provisions of Article 5.3(B) shall apply.

(C)                                Provided
that each Party agrees and gives Written notice in advance, the Party’s
Operating Committee representative designated under Article 5.1(B) may
participate in such meetings by telephone or other electronic telecommunication
or video conference device that permits all representatives of the Parties
participating in the meeting to hear and communicate with each other
simultaneously, and all representatives of the Parties so participating shall
be deemed to be present at that meeting for all purposes.  Notwithstanding the above, the Parties shall
in events of emergency, use all reasonable efforts to convene meetings and
participate in the manner described in this Article 5.7(C).

5.8                               Operator’s
Duties for Meetings

(A)                              With
respect to meetings of the Operating Committee and any subcommittee, Operator’s
duties shall include, but not be limited to:

(1)                                  timely
preparation and distribution of the agenda;

(2)                                  organisation
and conduct of the meeting;

(3)                                  recording
minutes of each meeting.

 30
 

 

(B)                                Operator
shall have the right to appoint the chairman of the Operating Committee and any
subcommittees.

5.9                               Voting
Procedure

(A)                              Any
matters which require the approval of the Operating Committee under the
Contracts shall be submitted to a vote of the Operating Committee only after
proper Written notice of a meeting has been given in accordance with the
provisions of this Article 5, or such other notice as is specifically
permitted under the provisions of Article 5.12.

(B)                                Each
Party shall have a voting interest equal to its Participating Interest.  Unless otherwise provided herein, decisions
of the Operating Committee shall be made by the affirmative vote of one (1) or
more parties holding at least seventy percent (70%) of the aggregate
Participating Interests.

(C)                                Notwithstanding
the provisions of Article 5.9(B) and subject to the provisions of
Article 7, the following matters shall require the affirmative vote of two
(2) or more Parties holding at least eighty percent (80%) of the aggregate
Participating Interests:

(1)                                  selecting,
drilling, Deepening, Testing, Completing, Sidetracking, Plugging Back,
Recompleting and/or Reworking any Appraisal Well or any Exploration Well (other
than the Exploration Wells to be drilled pursuant to the Minimum Work
Obligations);

(2)                                  determining
whether a Discovery is a Commercial Discovery;

(3)                                  defining
or redefining the boundaries of a Field;

(4)                                  unitizing
with one or more contract areas;

(5)                                  approving
or modifying the Work Programme and Budget for Joint Operations;

(6)                                  approving
and modifying a Development Plan; and

(7)                                  plugging
and Abandoning of any well and decommissioning of any facilities.

(D)                               If
the Operating Committee fails to pass a resolution presented by any Party
relating to either of Article 5.9(C)(l) or 5.9(C)(6) above, any Party or
Parties may proceed with such operation as an Exclusive Operation in accordance
with the provisions of Article 7. 
If an Exclusive Operation results in a Party or Parties declaring a
Commercial Discovery, the other Party or Parties shall participate and
cooperate in such further actions as are necessary or desirable under this
Agreement and the other Contracts to give effect to such Commercial Discovery.

 31
 

 

(E)                                 If
the Operating Committee fails to pass a resolution presented by the Operator
relating to Article 5.9(C)(3) above, any Party or Parties may refer the
matter to be determined by an expert in accordance with Article 19.3
hereof.  The Parties acknowledge and
agree to be bound by the decision of the expert and such matters shall not be
capable of review.

(F)                                 If
the Operating Committee fails to pass a resolution presented by any Party
relating to all or any part of a Work Programme and Budget, or a revised Work
Programme and Budget, in either case is contemplated in Article 5.9(C)(5)
above, then the following shall apply:

(1)                                  where
there is only one Non Operator, Operator and Non-Operator shall meet
within seven (7) Days after adjournment of the Operating Committee meeting (and
thereafter at least once per week as may be necessary) with a view to resolving
their differences;

(2)                                  where
there are two (2) or more Non-Operators, Operator shall, within seven (7)
Days after adjournment of the Operating Committee meeting, provide the Non-Operators
with its Written assessment of the objection(s) of those Parties whose
representatives did not approve all or any part of the proposed Work Programme
and Budget, its assessment of the reasons therefor and the modifications
proposed by such Party or Parties. 
Within seven (7) Days after the issuance of the Operator’s assessment
(and thereafter at least once per week as may be necessary) the Parties shall
meet with a view to resolving their differences; and

(3)                                  if
the Parties fail to resolve their differences pursuant to either of
subsections (1) or (2) above by the later of (i) the beginning of the
Fiscal Year for which the Work Programme and Budget is to apply, and
(ii) the end of the period covered by the previously approved Work
Programme and Budget, then Operator shall operate under a provisional work
programme and budget, until such time as the Parties have resolved their
differences through ongoing discussions, that incorporates such items as have
been approved pursuant to the Operating Committee meeting(s) and any subsequent
meetings mandated pursuant to subsections (1) and/or (2) above, plus the
modifications (if any) required by the Operating Committee on the pending item(s)
to the extent that such modifications:

(a)                                  are
in keeping with the objectives and timing of the Development Plan (if any) and
this Agreement; and

(b)                                 do
not increase the amount proposed by Operator of any effected expenditure items
by more than ten percent (10%) or decrease the amount proposed by Operator of
any effected expenditure by more than thirty percent (30%).

 32

 

(G)                                If
the Operating Committee fails to pass a resolution presented by any Party
relating to Article 5.9(C)(2), 5.9(C)(4) or 5.9(C)(7), the matter shall be
determined by the Minister.

(H)                               The
unanimous agreement of the Parties shall be required to:

(1)                                  use
Joint Property and any spare capacity therein, other than in connection with
any Joint Operations approved in accordance herewith;

(2)                                  trade
data and/or acquire, develop and use Venture Information;

(3)                                  subject
to Articles 6.8(A) and 6.8(C), approve any over-expenditure of the
Work Programme and Budget.

(I)                                    Prior
to the completion of the Minimum Work Obligations, the Operator shall deliver
an Information-Only Notice to the Non-Operators advising of any
material particulars or determinations pertaining to any Exploration Well that
it is drilling [or proposes to drill] in furtherance of the Minimum Work
Obligations.

5.10                        Record
of Votes

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

5.11                        Minutes

The secretary shall provide each Party with a copy of
the minutes of the Operating Committee meeting within fifteen (15) Days after
the end of the meeting.  Each Party shall
have fifteen (15) Days after receipt of such minutes to give notice of its
objections to the minutes to the secretary. 
A failure to give notice specifying the objection to such minutes within
said fifteen (15) Day period shall be deemed to be approval of such
minutes.  Where the votes recorded under
Article 5.10 conflict with the minutes described above, the said votes
shall take precedence over the said minutes.

5.12                        Voting
by Notice

(A)                              In
lieu of a meeting any Party may submit any proposal to the Operating Committee
for a vote by notice.  The proposing
Party or Parties shall notify Operator who shall give each Party’s
representative notice describing the proposal so submitted including, if such
proposal deals with matters involving Joint Operations or Exclusive Operations,
whether Operator considers such proposal to require urgent determination.  Operator shall include with such notice
adequate documentation in connection with such proposal to enable the Parties
to make a decision.  Each Party shall
communicate its vote by Written notice to the Operator and the other Parties

 33
 

 

within one of the following appropriate time periods
after receipt of the Operator’s Written notice:

(1)                                  Forty-Eight
(48) hours in the case of operations which involve the use of a drilling rig
that is standing by in the Contract Area (such operations and matters being
referred to as “Urgent Operational Matters”); and

(2)                                  Thirty
(30) Days in the case of all other proposals.

(B)                                Except
in the case of Article 5.12(A)(1), any Party may by Written notice
delivered to all Parties within five (5) Days of receipt of Operator’s Written
notice, request that the proposal be decided at a meeting rather than by
notice.  In such event, that proposal
shall be decided at a meeting duly called for that purpose.

(C)                                Except
as provided in Article 10, any Party failing to communicate its vote in a
timely manner shall be deemed to have voted against such proposal.

(D)                               If
a meeting is not requested, then at the expiration of the appropriate time
period, Operator shall give each Party a confirmation notice stating the
tabulation and results of the vote.

5.13                        Effect
of Vote

All decisions taken by the Operating Committee
pursuant to this Article 5 shall be conclusive and binding on all the
Parties except in the following cases:

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

(1)                                  for
proposals related to Urgent Operational Matters, such right shall be exercisable
for twenty-four (24) hours after the time specified in
Article 5.12(A)(1) has expired or after receipt of Operator’s notice given
to the Parties pursuant to Article [5.13(D)], as applicable;

(2)                                  for
proposals to develop a Discovery, such right shall be exercisable for ten (10)
Days after the date the Operating Committee was required to consider such
proposal pursuant to Article 5.5 or Article 5.12;

(3)                                  for
all other matters or proposals, such right shall be exercisable for five (5)
Days after the date the Operating Committee was required to consider such
matter or proposal pursuant to Article 5.5 or Article 5.12.

(B)                                If
a Party voted against any proposal which was approved by the Operating
Committee and which could be conducted as an Exclusive Operation pursuant to

 34
 

 

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

(C)                                If
the Consenting Parties to an Exclusive Operation under Article 5.13(A) or
Article 5.13(B) concur, then the Operating Committee may, at any time,
pursuant to this Article, reconsider and approve, decide or take action on any
proposal that the Operating Committee declined to approve earlier, or modify or
revoke an earlier approval, decision or action.

(D)                               Once
a Joint Operation for the drilling, Deepening, Testing, Sidetracking, Plugging
Back, Completing, Recompleting, Reworking or plugging of a well, has been approved
and commenced, such operation shall not be discontinued without the approval of
the Operating Committee, provided, however, that such operation may be
discontinued, if:

(1)                                  an
impenetrable substance or other condition in the hole is encountered which in
the reasonable judgment of Operator causes the continuation of an operation to
be impractical; or

(2)                                  other
circumstances occur which in the reasonable judgment of Operator cause the
continuation of an operation to be unwarranted and the Operating Committee,
within the period required under Article 5.12(A)(1) and after receipt of
Operator’s Written notice, approves discontinuing such operation.

On the occurrence of either of the above events,
Operator shall promptly notify the Parties that such operation is being
discontinued pursuant to the foregoing, and any Party shall

 35
 

 

have the right to propose in accordance with
Article 7 an Exclusive Operation to continue such operation.

ARTICLE 6

WORK PROGRAMMES AND BUDGETS

6.1                               Exploration
and Appraisal

(A)                              Within
sixty (60) days of the Effective Date with respect to all operations carried
out by Canadian Superior in furtherance of the Minimum Work Obligations,
Canadian Superior shall deliver to Petrotrin an Information-Only Notice
setting out its proposed Work Programmes and Budgets in accordance with this
Article for the remainder of the current Fiscal Year.  Thereafter, if applicable, with respect to
all operations carried out by Canadian Superior in furtherance of the Minimum
Work Obligations, on or before the 15th May of each subsequent Fiscal Year,
Canadian Superior shall deliver to the Petrotrin an Information-Only
Notice setting out its proposed Work Programmes and Budget in the Contract Area
for such following Fiscal Year.  For
avoidance of doubt, such Work Programmes and Budgets submitted shall not be
subject to the approval of Petrotrin or any other provisions of the Contracts
respecting Joint Operations.

(B)                                With
respect to all Joint Operations carried out hereunder:

(1)                                  Within
a reasonable period prior to the conduct of Joint Operations, Operator shall
deliver to the Parties a copy of a proposed Work Programme and Budget detailing
the Joint Operations that Operator proposes to perform in the Contract Area
during the remainder of the then current Fiscal Year and, if appropriate, for
the following Fiscal Year.  Within forty-five
(45) Days of such delivery, the Operating Committee shall meet to consider and
to endeavour to agree on the Work Programme and Budget as proposed or
containing such revisions as the Parties may agree.

(2)                                  On
or before the 15th May of each subsequent Fiscal Year, Operator
shall deliver to the Parties a proposed Work Programme and Budget detailing the
Joint Operations to be performed in the Contract Area for the following Fiscal
Year.  Within forty-five (45) Days
of such delivery, the Operating Committee shall meet to consider and to
endeavour to agree on a Work Programme and Budget in respect of such Joint
Operations.

(3)                                  If
a Discovery is made whether during the conduct of the Minimum Work Obligations
or during the conduct of a Joint Operation, Operator shall deliver a Written
notice of such Discovery and shall, as soon as reasonably possible thereafter,
submit to the Parties a report containing available details concerning the
Discovery and Operator’s recommendation as to whether the Discovery merits
evaluation and/or appraisal.  If the
Operating Committee determines that the Discovery merits evaluation and/or
appraisal, Operator within thirty (30) Days shall deliver to the Parties a 

 36
 

 

proposed Work Programme and Budget for the evaluation
and/or appraisal of the Discovery.  As
soon as reasonably practicable after such delivery, and in any event within
sufficient time to meet any applicable deadline under any of the Contracts, the
Operating Committee shall meet to consider, modify and then either approve or
reject such Work Programme and Budget. 
If such Work Programme and Budget is approved by the Operating
Committee, Operator shall take such steps as may be required under the
Contracts to seek the approval of such Work Programme and Budget by the
Government.  In the event the Government
requires changes in such Work Programme and Budget, the Operator shall revise
and resubmit an amended Work Programme and Budget respecting the proposed evaluation
and/or appraisal operations to the Operating Committee for approval.  Upon receipt of such approval by the
Operating Committee, the Operator shall again take such steps as may be
required under the Contracts to seek the approval of such revised Work
Programme and Budget by the Government.

(C)                                The
Operating Committee may revise any approved Work Programme and Budget from time
to time.  To the extent such revisions
are approved by the Operating Committee, the Work Programme and Budget shall be
amended accordingly.  Operator shall
prepare and submit a corresponding Work Programme and Budget amendment to the
Government if required by the Contracts.

(D)                               Subject
to Article 6.8, approval of any such Work Programme and Budget which
includes:

(1)                                  an
Exploration Well, whether by drilling, Deepening or Sidetracking, shall include
approval for all expenditures necessary for drilling, Deepening or
Sidetracking, as applicable, and Testing and Completing and abandoning such
Exploration Well; and

(2)                                  an
Appraisal Well, whether by drilling, Deepening or Sidetracking, shall include
approval for all expenditures necessary for drilling, Deepening or
Sidetracking, as applicable, and Testing and Completing and abandoning such
Appraisal Well.

(E)                                 Any
Party desiring to propose a Completion attempt, or an alternative Completion
attempt, must do so within the time period provided in Article 5.12(A)(1)
by notifying all other Parties in Writing. 
Any such proposal shall include an AFE for such Completion costs.

(F)                                 Notwithstanding
anything to the contrary contained in the Contracts, Operator shall:

(1)                                  take
such actions for the account of Canadian Superior in respect of the Minimum
Work Obligations as are necessary, but only to the extent necessary, to
maintain the Contracts in full force and effect; and

 37
 

 

(2)                                  take
such actions for the Joint Account in respect of Joint Operations as are
necessary, but only to the extent necessary, to maintain the Contracts in full
force and effect.

6.2                               Commercial
Discovery and Development

(A)                              Operator
shall, within sixty (60) Days after the completion of the appraisal operations
set out in the Work Programme and Budget prepared pursuant to Article 6.1,
deliver a report containing inter alia the
results of such operations and Operator’s recommendations as to whether the
Discovery merits further appraisal or possible commercial development.  If the Operating Committee determines that
further appraisal works are required, Operator shall within thirty (30) Days
deliver to the Parties a proposed Work Programme and Budget for the further
appraisal of the Discovery.  Within
thirty (30) Days of such delivery, or earlier if necessary, the Operating
Committee shall meet to consider, modify and then either approve or reject such
Work Programme and Budget.  If such Work
Programme and Budget is approved by the Operating Committee, Operator shall,
within ninety (90) Days of such approval or such further period as Operator may
reasonably require, take such steps as may be required under the Contracts to
seek the approval of such Work Programme by the Government.  In the event that the Government requires
changes in such Work Programme, the Operator shall revise and resubmit an
amended evaluation and/or appraisal Work Programme and Budget to the Operating
Committee and, after approval by the Operating Committee, to the Government.

If the Operating Committee determines that the
Discovery is a possible Commercial Discovery, or a Party who is acting as
operator in respect of an Exclusive Operation declares a Discovery to be a
Commercial Discovery, the Operator or such other Party, as applicable, shall,
within ninety (90) Days in respect of a Crude Oil Discovery and as soon as
practicable thereafter in respect of a Natural Gas Discovery, deliver to the
Parties a Development Plan together with the first annual Work Programme and
Budget (or a Multi- Year Work Programme Budget pursuant to
Article 6.5) which shall contain, inter alia:

(1)                                  delineation
of the proposed Field;

(2)                                  details
of the proposed work to be undertaken in such Field;

(3)                                  appropriate
economic and technical justifications including geological and geophysical
maps, Reserves, production forecasts, personnel required, and expenses to be
incurred, including timing of same, on a Fiscal Year basis;

(4)                                  estimated
date for the commencement of Production Operations;

(5)                                  plans
for the abandonment of all proposed wells and the decommissioning of all
proposed facilities, including an estimate of the costs associated therewith;
and

 38
 

 

(6)                                  any
other appropriate information.

(B)                                Not
later than ninety (90) Days after receipt by the Parties of the documents
referred to in paragraph (A) above, or earlier if necessary to meet any
applicable deadline under the Contracts, the Operating Committee shall meet to
consider, modify and then either approve or reject the proposed Field as
delineated by Operator, the proposed Development Plan and/or the proposed first
annual Work Programme and Budget for the development of the Discovery, all as
submitted by Operator.  If the Operating
Committee determines that the Discovery is a Commercial Discovery and approves
the proposed Field and the corresponding proposed Development Plan and Work
Programme and Budget, Operator shall, within a reasonably practicable time
following the Operating Committee’s approval, deliver any notice of Commercial
Discovery required under the Contracts and take such other steps as may be
required under the Contracts and the Laws/Regulations to seek the approval of
the Development Plan by the Government. 
In the event the Government requires changes in the Development Plan,
the Operator shall revise and resubmit an amended Development Plan to the
Operating Committee for approval.  Upon
receipt of such approval by the Operating Committee, the Operator shall again
take such steps as may be required under the Contracts and the Laws/Regulations
to seek the approval of such revised Development Plan by the Government.

(C)                                If
the Government approves the Development Plan, the Joint Operations contained in
the Development Plan shall be incorporated into and form part of the Work
Programme and Budget for that Fiscal Year. 
Subject to Article 6.5, Operator shall, on or before the May 15th
of each Fiscal Year, submit a Work Programme and Budget for the Field in
respect of the following Fiscal Year. 
Within a reasonably practicable time after such submittal, the Operating
Committee shall meet and endeavour to agree to such Work Programme and Budget,
including any necessary or appropriate revisions to the Work Programme and
Budget for the approved Development Plan.

(D)                               If
the Development Plan is not approved by the Operating Committee at such
meeting, then the Party or Parties who approved the Development Plan may
proceed with the development of the Discovery in accordance with the provisions
of Article 7.

6.3                               Production

On or before the 15th May of each Fiscal Year,
Operator shall deliver to the Parties a proposed production Work Programme and
Budget detailing the Joint Operations to be performed in the Field and the
projected production schedule for the following Fiscal Year.

6.4                               Itemisation
of Expenditures

(A)                              During
the preparation of the proposed Work Programmes and Budgets and Development
Plans contemplated in this Article 6, Operator shall consult with the

 39
 

 

Operating Committee regarding the contents of such
Work Programmes and Budgets and Development Plans.

(B)                                Each
Work Programme and Budget and Development Plan submitted by Operator shall
contain an itemised estimate of the costs of Joint Operations and all other
expenditures to be made for the Joint Account during the Fiscal Year in
question and shall, inter alia:

(1)                                  identify
each work category in sufficient detail to afford the ready identification of
the nature, scope and duration of the activity in question;

(2)                                  include
such reasonable information regarding Operator’s allocation procedures and
estimated manpower costs as the Operating Committee may determine;

(3)                                  comply
with the requirements of the Contract;

(4)                                  contain
an estimate of funds to be expended by calendar month; and

(5)                                  during
the Exploration Period, provide a forecast of annual expenditures and
activities through the end of the Exploration Period.

(C)                                The
Work Programme and Budget shall designate the portion or portions of the
Contract Area in which Joint Operations itemised in such Work Programme and
Budget are to be conducted and shall specify the kind and extent of such
operations in such detail as the Operating Committee may deem suitable.

6.5                               Multi-Year
Work Programme and Budget

If the Operating Committee approves any operation(s)
that, in the opinion of the Operator, cannot be efficiently completed within a
single Fiscal Year the Operator may (but shall not be obligated to) propose
such operation(s) as part of a multi-year Work Programme and Budget.  Upon approval by the Operating Committee,
such multi-year Work Programme and Budget shall, subject only to
revisions approved by the Operating Committee thereafter: (i) remain in
effect as between the Parties (and the associated cost estimate shall be a
binding pro-rata obligation of each Party) through the completion of the
work; and (ii) be reflected in each annual Work Programme and Budget.  If the Contracts require that Work Programmes
and Budgets be submitted to the Government for approval, such multi-year
Work Programme and Budget shall be submitted to the Government either in a
single request for a multi-year approval or as part of the annual
approval process, according to the terms of the Contract.

6.6                               Contract
Awards

Operator shall award each contract for approved Joint
Operation on the following basis (the amounts stated are in United States
Dollars):

 40
 

 

 

	
  Procedure A

  	
   

  	
  Procedure B

  	
   

  	
  Procedure C

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  

 

Procedure A

Operator shall award the contract to the best
qualified contractor as determined by cost and ability to perform the contract
without the obligation to tender and without informating or seeking the
approval of the Operating Committee, except that for contracts with Affiliates
of Operator which exceed United States Dollars [*], Operator shall obtain the
approval of the Operating Committee; provided, such award shall be in
compliance with the applicable provisions of the Contracts concerning
procurement.  If requested by any Party,
Operator shall circulate to the Parties a copy of the final version of the
evaluation and contract(s) awarded.

Procedure B

Operator shall comply with the applicable provisions
of the Contracts concerning procurement and shall:

(A)                              provide
the parties with a list of the entities whom Operator proposes to invite to
tender for the said contract;

(B)                                add
to or, where a Party provides reasonable grounds for doing so, remove from such
list any entity whom a Party requests to be added or removed within fourteen
(14) Business Days of receipt of such list;

(C)                                complete
the tendering process within a reasonable period of time;

(D)                               inform
the parties of the entity or entities to whom the contract has been awarded,
provided that before awarding contracts to Affiliates of Operator which exceed
United States Dollars [*], Operator shall obtain the approval of the Operating
Committee;

(E)                                 circulate
to the Parties a competitive bid analysis stating the reasons for the choice
made; and

(F)                                 provide
a requesting Party with a copy of the final version of the contract awarded.

Procedure C

Operator shall comply with the applicable provisions
of the Contracts concerning procurement and shall:

 41
 

 

(A)                              provide
the Parties with a list of the entities whom Operator proposes to invite to
tender for the said contract;

(B)                                add
to or, where a Party provides reasonable grounds for doing so, remove from such
list any entity whom a Party may within fourteen (14) Business Days of receipt
of such list reasonably request to be added or removed from;

(C)                                prepare
and dispatch the tender documents to the persons on the list as aforesaid and
to Non-Operators;

(D)                               after
the expiration of the period allowed for tendering, consider and analyse the
details of all bids received;

(E)                                 prepare
and circulate to the Parties a competitive bid analysis, stating Operator’s
recommendation as to the entity to whom the contract should be awarded, the
reasons thereof and the technical, commercial and contractual terms to be
agreed upon;

(F)                                 obtain
the approval of the Operating Committee to the recommended bid award; and

(G)                                provide
a requesting Party with a copy of the final version of the contract.

6.7                               Authorisation
for Expenditure Procedure

(A)                              Prior
to incurring any commitment or expenditure, which is estimated to be in excess
of United States Dollars One Hundred Thousand (US$100,000), Operator shall send
to each Non-Operator an AFE containing Operator’s best estimate of the
total funds required to carry out such work; the estimated timing of
expenditures, and any other necessary supportive information.  Notwithstanding the above, Operator shall not
be obliged to submit an AFE to the Parties before incurring any commitment or
expenditures in connection with any Minimum Work Obligations, that are listed
as separate line items in any approved Work Programme and Budget.

(B)                                All
AFEs shall be for informational purposes only. 
Approval of an operation in the current Work Programme and Budget shall
authorise Operator to conduct the’ operation (subject to Article 6.8)
without further authorisation from the Operating Committee.

(C)                                Each
AFE submitted by Operator shall:

(1)                                  identify
the operation by specific reference to the applicable line items in the Work
Programme and Budget;

(2)                                  describe
the work in detail;

(3)                                  contain
Operator’s best estimate of the total funds required to carry out such work;

 42
 

 

(4)                                  outline
the proposed work schedule;

(5)                                  provide
a timetable of expenditures, if known; and

(6)                                  be
accompanied by such other supporting information as required for informational
purposes only.

6.8                               Over-Expenditures
of Work Programme and Budgets

(A)                              For
expenditures on any line item of an approved Work Programme and Budget,
Operator shall be entitled to incur without further approval of the Operating
Committee an over-expenditure for such line item up to ten percent (10%)
of the authorised amount for such line item; provided that the cumulative total
of all over-expenditures for a Fiscal Year shall not exceed five percent
(5%) of the Work Programme and Budget in question pertaining to that Fiscal
Year.

(B)                                At
such time Operator reasonably anticipates the over-expenditure limits
provided in Article 6.8(A) will be exceeded, Operator shall furnish to the
Operating Committee a supplemental AFE for the further estimated over-expenditures
for its approval, and Operator shall provide reasonable details of all such
over-expenditures.  Upon receipt of
such approval, the Work Programme and Budget shall be revised accordingly and
all over-expenditures so approved shall be deemed included as part of the
revised Work Programme and Budget. 
Operator shall promptly give notice of the amounts of such over-expenditures
when they are actually incurred.

(C)                                The
restrictions contained in this Article 6 shall be without prejudice to
Operator’s rights to make expenditures for emergencies as set out in
Article 14.5 without the Operating Committee’s approval.

ARTICLE 7

OPERATIONS BY LESS THAN ALL PARTIES

7.1                               Limitation
on Applicability

(A)                              Other
than operations conducted by Canadian Superior in furtherance of completing the
Minimum Work Obligations and other operations pursuant to Article 2.1(g)
of the Farmout Agreement, no operations may be conducted in furtherance of the
Farmout Agreement and/or this Agreement except as Joint Operations under
Article 5 or as Exclusive Operations under this Article 7.  No Exclusive Operation shall be conducted if
it conflicts with a previously approved Joint Operation or with a previously
approved Exclusive Operation, or if the Exclusive Operation being proposed has
been materially modified when compared to the Joint Operation originally
proposed.

(B)                                No
Party may propose or conduct an Exclusive Operation under this Article 7
unless and until such Party has properly exercised its right to propose an
Exclusive

 43
 

 

Operation pursuant to Article 5.13 or is entitled
to conduct an Exclusive Operation pursuant to Article 10.

(C)                                The
following operations may be proposed and conducted as Exclusive Operations,
subject to the terms of this Article 7:

(1)                                  drilling
and/or Testing of Exploration Wells and Appraisal Wells;

(2)                                  Completion
of Exploration Wells and Appraisal Wells not then Completed as productive of
Hydrocarbons;

(3)                                  Deepening,
Sidetracking, Plugging Back, Recompletion, and/or Rework, of Exploration Wells
and Appraisal Wells;

(4)                                  development
of a Commercial Discovery;

(5)                                  acquisition
of G & G Data;

(6)                                  any
operations specifically authorised to be undertaken as an Exclusive Operation
under Article 10.

Except with the consent of all the Parties no other
type of operation may be proposed or conducted as an Exclusive Operation.

7.2                               Procedure
to Propose Exclusive Operations

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

(B)                                Any
Party entitled to receive such notice shall have the right to participate in
the proposed operation.

(1)                                  For
proposals to Deepen, Test, Complete, Sidetrack, Plug Back, Recomplete or Rework
related to Urgent Operational Matters, any such Party wishing to exercise such
right must so notify the proposing Party and Operator within twenty-four
(24) hours after receipt of the notice proposing the Exclusive Operation.

(2)                                  For
proposals to develop a Discovery, any Party wishing to exercise such right must
so notify Operator and the Party proposing to develop within sixty (60) Days
after receipt of the notice proposing the Exclusive Operation:

 44
 

 

(3)                                  For
all other proposals, any such Party wishing to exercise such right must so
notify the proposing Party and Operator within thirty (30) Days after receipt
of the notice proposing the Exclusive Operation.

(C)                                Failure
of a Party to whom a proposal notice is delivered to properly reply within the
period specified above shall constitute an election by that Party not to
participate in the proposed operation.

(D)                               If
all Parties properly exercise their rights to participate, then the proposed operation
shall be conducted as a Joint Operation. 
Operator shall commence such Joint Operation as promptly as practicable
and conduct it with due diligence.

(E)                                 If
less than all Parties entitled to receive such proposal notice properly
exercise their rights to participate, then:

(1)                                  Immediately
after the expiration of the applicable notice period set out in
Article 7.2(B), Operator shall notify all Parties of the names of the
Consenting Parties and the recommendation of the proposing Party as to whether
the Consenting Parties should proceed with the Exclusive Operation.

(2)                                  Concurrently,
Operator shall request the Consenting Parties to specify the Participating
Interest each Consenting Party is willing to bear in the Exclusive Operation.

(3)                                  Within
twenty-four (24) hours after receipt of such notice, each Consenting
Party shall respond to Operator stating that it is willing to bear a
Participating Interest in such Exclusive Operation equal to:

(a)                                  only
its Participating Interest as stated in Article 3.2(A);

(b)                                 a
fraction, the numerator of which is such Consenting Party’s Participating
Interest as stated in Article 3.2(A) and the denominator of which is the
aggregate of the Participating Interests of the Consenting Parties as stated in
Article3.2(A); or

(c)                                  the
Participating Interest as contemplated by Article 7.2(E)(3)(b) plus all or
any part of the difference between one hundred percent (100%) and the total of
the Participating Interests subscribed by the other Consenting Parties.  Any portion of such difference claimed by
more than one Party shall be distributed to each claimant on a pro-rata
basis.

(4)                                  Any
Consenting Party failing to advise Operator within the response period set out
above shall be deemed to have elected to bear the Participating Interest set
out in Article 7.2(E)(3)(b) as to the Exclusive Operation.

 45
 

 

(5)                                  If,
within the response period set out above, the Consenting Parties subscribe less
than one hundred percent (100%) of the Participating Interest in the Exclusive
Operation, the Party proposing such Exclusive Operation shall be deemed to have
withdrawn its proposal for the Exclusive Operation, unless within twenty-four
(24) hours of the expiry of the response period set out in
Article 7.2(E)(3), the proposing Party notifies the other Consenting
Parties that the proposing Party shall bear the unsubscribed Participating
Interest.

(6)                                  If
one hundred percent (100%) subscription to the proposed Exclusive Operation is
obtained, Operator shall promptly notify the Consenting Parties of their
Participating Interests in the Exclusive Operation.

(7)                                  As
soon as any Exclusive Operation is fully subscribed pursuant to
Article 7.2(E)(6), Operator, subject to Article 7.11(F), shall
commence such Exclusive Operation as promptly as practicable and conduct it with
due diligence in accordance with this Agreement and the Contracts.

(8)                                  If
such Exclusive Operation has not been commenced within ninety (90) Days
(excluding any extension specifically agreed by all Parties or allowed by the force majeure provisions of Article 17) after the date
of the notice given by Operator under Article 7.2(E)(6), the right to
conduct such Exclusive Operation shall terminate.  If any Party still desires to conduct such
Exclusive Operation, notice proposing such operation must be resubmitted to the
Parties in accordance with Article 5, as if no proposal to conduct an
Exclusive Operation had been previously made.

7.3                               Responsibility
for Exclusive Operations

(A)                              The
Consenting Parties shall be fully responsible and liable for and shall bear, in
accordance with their respective Participating Interests agreed under
Article 7.2(E), the entire cost and liability of conducting an Exclusive
Operation and shall indemnify and keep the Non-Consenting Parties, its
Affiliates and their respective directors, officers, managers, supervisors and
other employees, agents, contractors and subcontractors indemnified against any
actions, claims or demands of whatever nature (including, but not limited to,
legal costs and expenses incurred by the Non-Consenting Parties in
defending such actions, claims or demands on a full indemnity basis) made
against the Non-Consenting Parties by any third party and against any
loss or damage (including, but not limited to, any substantial loss or damage
suffered or incurred by the Non-Consenting Parties, its Affiliates or
their respective contractors, sub-contractors, directors, officers,
managers, supervisors and other employees or agents) incident to, associated
with or arising from any such Exclusive Operation (including but not limited to
any Consequential Loss and/or Environmental Loss) and shall keep the Contract
Area free and clear of all liens and encumbrances of every kind created by or
arising from such Exclusive Operation.

 46
 

 

(B)                                For
the avoidance of doubt, each Party shall continue to bear its Participating
Interest share of the cost and liability incident to, associated with or
arising from all operations in which it participates, including without
limitation plugging and abandoning and restoring the surface location, but only
to the extent those costs were not increased by an Exclusive Operation.

7.4                               Consequences
of Exclusive Operations

(A)                              With
regard to any Exclusive Operation, for so long as a Non-Consenting Party
has the option under Article 7.4(C) to reinstate the rights it
relinquished under Article 7.4(B), such Non-Consenting Party shall
be entitled to have access concurrently with the Consenting Parties to all data
and other information relating to such Exclusive Operation, other than data
obtained in an Exclusive Operation for the purpose of acquiring G & G
Data.  If a Non-Consenting Party
desires to receive and acquire the right to use such G & G Data, then such
Non-Consenting Party shall have the right to do so by Written notice to
the Consenting Parties.  If a Non-Consenting
Party wishes to receive more than one copy of such data and information, it
shall bear 100% of the costs required to create such additional copies.

(B)                                Subject
to Article 7.4(C) and Articles 7.6(E) and 7.8, each Non-Consenting
Party shall be deemed to have relinquished to the Consenting Parties the
Zone(s) in which the Exclusive Operations are being conducted, and the
Consenting Parties shall be deemed to own, in proportion to their respective
Participating Interests in any Zone(s) of such Exclusive Operation:

(1)                                  all
of each such Non-Consenting Party’s right to participate in further
operations in the well or Deepened or Sidetracked portion of a well in which
the Exclusive Operation was conducted and on any Discovery made or appraised in
the course of such Exclusive Operation; and

(2)                                  all
of each such Non-Consenting Party’s right pursuant to the Contracts to
take and dispose of Hydrocarbons produced and saved:

(a)                                  from
the well or Deepened or Sidetracked portion of a well in which such Exclusive
Operation was conducted; and

(b)                                 from
any wells drilled to appraise or develop a Discovery made or appraised in the
course of such Exclusive Operation.

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

(1)                                  If
the Consenting Parties decide to appraise a Discovery made in the course of an
Exclusive Operation, the Consenting Parties shall submit to each Non-Consenting
Party the approved appraisal program. 
For thirty (30) Days (or forty-eight (48) hours for Urgent
Operational Matters) from

 47
 

 

receipt of such appraisal program, each Non-Consenting
Party shall have the option to reinstate the rights it relinquished pursuant to
Article 7.4(B) and to participate in such appraisal programme.  The Non-Consenting Party may exercise
such option by notifying Operator within the period specified above that such
Non-Consenting Party agrees to bear its Participating Interest share of
the expense and liability of such appraisal programme, and to pay such amounts
as set out in Articles 7.5(A) and (B).

(2)                                  If
the Consenting Parties decide to develop a Discovery made or appraised in the
course of an Exclusive Operation, the Consenting Parties shall submit to the
Non-Consenting Parties a Development Plan substantially in the form
intended to be submitted to the Government under the Contract.  For sixty (60) Days from receipt of such
Development Plan or such lesser period of time prescribed by the Contract, each
Non-Consenting Party shall have the option to reinstate the rights it
relinquished pursuant to Article 7.4(B) and to participate in such
Development Plan.  The Non-Consenting
Party may exercise such option by notifying Operator within the period
specified above that such Non-Consenting Party agrees to bear its
Participating Interest share of the liability and expense of such Development
Plan and such future operating and producing costs, and to pay the amounts as
set out in Articles 7.5(A) and (B).

(3)                                  If
the Consenting Parties decide to Deepen, Complete, Sidetrack, Plug Back or
Recomplete an Exclusive Well and such further operation was not included in the
original proposal for such Exclusive Well, the Consenting Parties shall submit
to the Non-Consenting Parties, the approved AFE for such further
operation.  For thirty (30) Days (or
forty-eight (48) hours for Urgent Operational Matters) from receipt of
such AFE, each Non-Consenting Party shall have the option to reinstate
the rights it relinquished pursuant to Article 7.4(B) and to participate
in such operation.  The Non-Consenting
Party may exercise such option by notifying Operator within the period
specified above that such Non-Consenting Party agrees to bear its
Participating Interest share of the liability and expense of such further operation,
and to pay the amounts as set out in Articles 7.5(A) and (B).

(D)                               If
a Non-Consenting P arty does not properly and in a timely manner exercise
its option under Article 7.4(C), including paying all amounts due in
accordance with Articles 7.5(A) and (B), such Non-Consenting Party
shall have forfeited the options as set out in Article 7.4(C) and the
right to participate in the proposed programme, unless such programme, plan or
operation is materially modified or expanded (in which case a new notice and
option shall be given to such Non-Consenting Party under
Article 7.4(C)).

(E)                                 A
Non-Consenting Party exercising its option under Article 7.4(C)
shall notify the other Parties that it agrees to bear its share of the
liability and expense of such further operation and to reimburse the amounts
set out in Articles 7.5(A) and (B)

 48
 

 

that such Non-Consenting Party had not
previously paid.  Such Non-Consenting
Party shall in no way be deemed to be entitled to any amounts paid pursuant to
Articles 7.5(A) and (B) incident to such Exclusive Operations.  The Participating Interest of such Non-Consenting
Party in such Exclusive Operation shall be its Participating Interest set out
in Article 3.2(A).  The Consenting
Parties shall contribute to the Participating Interest of the Non-Consenting
P arty in proportion to the excess Participating Interest that each received
under Article 7.2(E).  If all
Parties participate in the proposed operation, then such operation shall be
conducted as a Joint Operation pursuant to Article 5.

(F)                                 If
after the expiry of the period in which a Non-Consenting Party may
exercise its option to participate in a Development Plan the Consenting Parties
desire to proceed, Operator shall give notice to the Government under the
appropriate provision of the Contracts requesting a meeting to advise the
Government that the Consenting Parties consider the Discovery to be a
Commercial Discovery.  Following such
meeting the Operator for such development shall apply for a Field.  Unless the Development Plan is materially
modified or expanded prior to the commencement of operations under such plan
(in which case a new notice and option shall be given to the Non-Consenting
Parties under Article 7.4(C)), each Non-Consenting Party to such
Development Plan shall:

(1)                                  if
the Contracts and the Laws/Regulations so allow, elect not to apply for a Field
covering such development and forfeit all interest in such Field, or

(2)                                  if
the Contracts and/or the Laws/Regulations do not so allow, be deemed to have:

(a)                                  elected
not to apply for a Field covering such development;

(b)                                 forfeited
all economic interest in such Field; and

(c)                                  assumed
a fiduciary duty to exercise its legal interest in such Field for the benefit
of the Consenting Parties.

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

7.5                               Cost
to Participate in Exclusive Operations

(A)                              Each
such Non-Consenting Party shall immediately upon the exercise of its
option under Article 7.4(C), begin to bear one hundred percent (100%) of
the cash calls made on each Consenting Party in respect of both Joint
Operations and Exclusive Operations until such Non-Consenting Party has
reimbursed the original

 49
 

 

Consenting Parties (in proportion to their respective
Participating Interest in the Exclusive Operations in which such Non-Consenting
Party is reinstating its rights) an amount equal to such Non-Consenting
Party’s Participating Interest share of all liabilities and expenses that were
incurred in every Exclusive Operation relating to the Discovery (or Exclusive
Well, as the case may be) in which the Non-Consenting Party desires to
reinstate the rights it relinquished pursuant to Article 7.4(B) and that
were not previously paid by such Non-Consenting Party.

(B)                                In
addition to the payment required under Article 7.5(A), immediately
following the exercise of its option under Article 7.4(C) each such Non-Consenting
Party shall be liable to reimburse the Consenting Parties who took the risk of
such Exclusive Operations (in proportion to their respective Participating
Interests) an amount equal to the total of:

(1)                                  [*]
of such Non-Consenting Party’s Participating Interest share of all
liabilities and expenses that were incurred in any Exclusive Operation relating
to the obtaining of the portion of the G & G Data which pertains to the
Discovery, and that were not previously paid by such Non-Consenting
Party; plus

(2)                                  [*]
of such Non-Consenting Party’s Participating Interest share of all
liabilities and expenses that were incurred in any Exclusive Operation relating
to the drilling, Deepening, Testing; Completing, Sidetracking, Plugging Back,
Recompleting and Reworking of the Exploration Well which made the Discovery in
which the Non-Consenting Party desires to reinstate the rights it
relinquished pursuant to Article 7.4(B), and that were not previously paid
by such Non-Consenting Party; plus

(3)                                  [*] of the Non-Consenting
Party’s Participating Interest share of all liabilities and expenses that were
incurred in any Exclusive Operation relating to the drilling, Deepening,
Testing, Completing, Sidetracking, Plugging Back, Recompleting and Reworking of
the Appraisal Well(s) which delineated the Discovery in which the Non-Consenting
Party desires to reinstate the rights it relinquished pursuant to
Article 7.4(B), and that were not previously paid by such Non-Consenting
Party.

7.6                               Order
of Preference of Operations

(A)                              Except
as otherwise specifically provided in this Agreement, if any Party desires to
propose the conduct of an operation that will conflict with an existing
proposal for an Exclusive Operation, such Party shall have the right
exercisable for five (5) Days (or twenty-four (24) hours for Urgent
Operational Matters) from receipt of the proposal for the Exclusive Operation,
to deliver by Written notice such Party’s alternative proposal to all Parties
entitled to participate in the proposed operation.  Such alternative proposal shall contain the
information required under Article 7.2(A).

 50

 

(B)                                Each
Party receiving such proposals shall elect by delivery of Written notice to
Operator and to the proposing Parties within the appropriate response period
set out in Article 7.2(B) to participate in one of the competing
proposals.  Any Party not notifying
Operator and the proposing Parties within the response period shall be deemed
to have voted against the proposals.

(C)                                The
proposal receiving the largest aggregate Participating Interest vote shall have
priority over all other competing proposals. 
In the case of a tie vote, Operator shall choose among the proposals
received.  Operator shall deliver Written
notice of such result to all Parties entitled to participate in the operation
within five (5) Days (or twenty-four (24) hours for Urgent Operational
Matters).

(D)                               Each
Party shall then have two (2) Days (or twenty-four (24) hours for Urgent
Operational Matters) from receipt of such notice to elect by delivery of
Written notice to Operator and the proposing Parties whether such Party will
participate in such Exclusive Operation, or will relinquish its interest
pursuant to Article 7.4(B).  Failure
by a Party to deliver such notice within such period shall be deemed an
election not to participate in the prevailing proposal.

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

(F)                                 The
following provisions of this Article 7.6(F) shall apply notwithstanding
the provisions of Article 7.4 and the foregoing provisions of this
Article 7.6.

(1)                                  Any
Party that proposes to drill a well as an Exclusive Operation in an existing
Field where such well targets a geological zone or formation below the then
deepest producing geological zone or formation in such Field (in this
Article 7.6(F), an “Applicable Well”), shall be required to deliver a 

 51
 

 

Written notice of such proposal to all other Parties
containing the information set out in Article 7.2(A).

(2)                                  Within
sixty (60) Days (or twenty-four (24) hours for Urgent Operational
Matters) from receipt of the proposal for the Applicable Well, the other
Parties shall be entitled to elect, by delivery of Written notice to the
Operator, and the proposing Party, to participate or refrain from participating
in such Applicable Well.  Failure by a
Party to deliver such notice within such period shall be deemed an election not
to participate in the Applicable Well.

(3)                                  If
a Party elects or is deemed to have elected not to participate in the
Applicable Well, then such Party shall be a Non-Consenting Party in
respect of the Applicable Well for the purposes of Article 7.5 and the
following shall apply to such Non-Consenting Party in connection with the
Applicable Well:

(a)                                  Applicable
Well shall be classified as an Exploration Well for all purposes of this Joint
Operating Agreement and, in particular, Article 7.5(B)(2) hereof, and
subject to 7.6(F)(3)(b) the amount payable by such Non-Consenting Party
in respect of the Applicable Well pursuant to Article 7.5(B)(2) shall
remain at six hundred (600%) percent of such Non-Consenting Party’s
Participating Interest share of all liabilities, costs and expenses that were
incurred during the drilling of the Applicable Well; and

(b)                                 in
the event the Applicable Well is capable of production from the upper
geological zone or formation that has been proven by the Field, then prior to
producing such zone or formation the Consenting Parties in the Exclusive
Operation must (i) consult with the Non-Consenting Parties to ensure
that no harmful inter well production interference occurs and (ii) if not
already done so pursuant to 7.6(F)(3)(a), offer the Non-Consenting
Parties an opportunity to re-instate their rights in the Applicable Well
by paying their participating interest share (with no penalties) of the
prorated drilling costs incurred by the well down to the depth of the deepest
proposed zone or formation intended for production.

7.7                               Stand-By
Costs

(A)                              When
an operation has been performed, all tests have been conducted and the results
of such tests furnished to the Parties, stand by costs incurred pending
response to any Party’s notice proposing an Exclusive Operation for Deepening,
Testing, Sidetracking, Completing, Plugging Back, Recompleting, Reworking or
other further operation in such well (including the period required under
Article 7.6 to resolve competing proposals) shall be charged and borne as
part of the operation just completed. 
Stand by costs incurred subsequent to all Parties responding, or

 52
 

 

expiration of the response time permitted, whichever
first occurs, shall be charged to and borne by the Parties proposing the
Exclusive Operation in proportion to their Participating Interests, regardless
of whether such Exclusive Operation is actually conducted.

(B)                                If
a further operation related to Urgent Operational Matters is proposed while the
drilling rig to be utilised is on location, any Party may request and receive
up to five (5) additional Days after expiration of the applicable response
period specified in Article 7.2(B)(l) within which to respond by notifying
Operator in Writing that such Party agrees to bear all stand by costs and other
costs incurred during such extended response period.  Operator may require such Party to pay the
estimated stand by costs in advance as a condition to extending the response
period.  If more than one Party requests
such additional time to respond to the notice; stand by costs shall be allocated
between such Parties on a Day-to-Day basis in proportion to their
Participating Interests.

7.8                               Special
Considerations Regarding Deepening and Sidetracking

(A)                              An
Exclusive Well shall not be Deepened or Sidetracked without first affording the
Non-Consenting Parties in accordance with this Article 7.8 the opportunity
to participate in such operation.

(B)                                In
the event any Consenting Party desires to Deepen or Sidetrack an Exclusive
Well, such Party shall initiate the procedure contemplated by
Article 7.2.  If a Deepening or
Sidetracking operation is approved pursuant to such provisions, and if any Non-Consenting
Party to the Exclusive Well elects to participate in such Deepening or
Sidetracking operation, such Non-Consenting Party shall not be required
to pay the amounts pursuant to Article 7.5(B) and such Non-Consenting
Party’s payment as stated in Article 7.5(A) shall be such Non-Consenting
Party’s Participating Interest share of the liabilities and expenses incurred
in connection with drilling the Exclusive Well from the surface to the depth
previously drilled which such Non-Consenting Party would have paid had
such Non-Consenting Party agreed to participate in such Exclusive Well;
provided, however, all liabilities and expenses for Testing and Completing or
attempting Completion of the well incurred by Consenting Parties prior to the
commencement of actual operations to Deepen or Sidetrack beyond the depth
previously drilled shall be for the sole account of the Consenting Parties.

7.9                               Use
of Property

(A)                              The
Parties participating in any Deepening, Testing, Completing, Sidetracking,
Plugging Back, Recompleting or Reworking of any well drilled under this
Agreement shall be permitted to use (free of cost) all casing, tubing and other
equipment in the well that is not needed for operations by the owners of the
wellbore, but the ownership of all such equipment shall remain unchanged.  On abandonment of a well in which operations
with differing participation have been conducted, the Parties abandoning the
well shall account for all equipment in the

 53
 

 

well to the Parties owning such equipment by tendering
to them their respective Participating Interest shares of the value of such
equipment less the cost of salvage.

(B)                                Any
Party (whether owning interests in the platform or not) shall be permitted to
use spare slots in a platform constructed pursuant to this Agreement for
purposes of drilling Exploration Wells and/or Appraisal Wells and running tests
in the Contract Area.  No Party except an
owner of a platform may drill Development Wells or run production from a well
(except production resulting from initial well tests) from the platform without
the prior Written consent of all platform owners.  If all owners of the platform participate in
the drilling of a well, then no fee shall be payable under this Article 7.9(B).  Otherwise, each time a well is drilled from a
platform, the Consenting Parties in the well shall pay to the owners of the
platform until all wells drilled by such Parties have been plugged and abandoned
a monthly fee equal to (1) that portion of the total cost of the platform
(including costs of material, fabrication, transportation and installation),
divided by the number of months of useful life established for the platform
under the tax law of the host country, that one well slot bears to the total
number of slots on the platform plus (2) that proportionate part of the
monthly cost of operating, maintaining and financing the platform that the well
drilled under this Article 7.9(B) bears to the respective levels of
production from all other wells served by such platform.  Consenting Parties who have paid to drill a
well from a platform under this Article 7.9(B) shall be entitled to Deepen
or Sidetrack that well for no additional charge if done prior to moving the
drilling rig off of location.

(C)                                Spare
capacity in equipment that is constructed pursuant to this Agreement and used
for processing or transporting Crude Oil and Natural Gas after it has passed
through primary separators and dehydrators (including treatment facilities, gas
processing plants and pipelines) shall be available for use by any Party for
Hydrocarbon production from the Contract Area on the terms set forth
below.  All Parties desiring to use such
equipment shall nominate capacity in such equipment on a monthly basis by
notice to Operator at least ten (10) Days prior to the beginning of each
month.  Operator may nominate capacity
for the owners of the equipment if they so elect.  If at any time the capacity nominated exceeds
the total capacity of the equipment, the capacity of the equipment shall be
allocated in the following priority: (1) first, to the owners of the
equipment up to their respective Participating Interest shares of total
capacity, (2) second, to owners of the equipment desiring to use capacity
in excess of their Participating Interest shares, in proportion to the
Participating Interest of each such Party and (3) third, to Parties not
owning interests in the equipment, in proportion to their Participating
Interests in the Agreement.  Owners of
the equipment shall be entitled to use up to their Participating Interest share
of total capacity without payment of a fee under this Article 7.9(C).  Otherwise, each Party using equipment
pursuant to this Article 7.9(C) shall pay to the owners of the equipment
monthly throughout the period of use an arm’s length fee based upon third party
charges for similar services in the vicinity of the Contract Area.  If no arm’s length rates for such services
are available, then the Party desiring to use equipment pursuant to this
Article 7.9(C)

 54
 

 

shall pay to the owners of the equipment a monthly fee
equal to (1) that portion of the total cost of the equipment, divided by
the number of months of useful life established for such equipment under the
tax law of the host country, that the capacity made available to such Party on
a fee basis under this Article 7.9(C) bears to the total capacity of the
equipment plus (2) that portion of the monthly cost of maintaining,
operating and financing the equipment that the capacity made available to such
Party on a fee basis under this Article 7.9(C) bears to the total capacity
of the equipment.

(D)                               Payment
for the use of a platform under Article 7.9(B) or the use of equipment
under Article 7.9(C) shall not result in an acquisition of any additional
interest in the equipment or platform by the paying Parties.  However, such payments shall be included in
the costs which the paying Parties are entitled to recoup under
Article 7.5.

(E)                                 Parties
electing to use spare capacity on platforms or in equipment pursuant to
Article 7.9(B) or Article 7.9(C) shall indemnify the owners of the
equipment or platform against any and all costs and liabilities incurred as a
result of such use (including any Consequential Loss and Environmental Loss)
but excluding costs and liabilities for which Operator is solely responsible
under Article 4.6.

7.10                        Lost
Production During Tie-In of Exclusive Operation Facilities

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

7.11                        Conduct
of Exclusive Operations

(A)                              Each
Exclusive Operation shall be carried out by the Consenting Parties acting as
the Operating Committee, subject to the provisions of this Agreement applied
mutatis mutandis to such Exclusive Operation and subject to the terms and
conditions of the Contract.

(B)                                The
computation of liabilities and expenses incurred in Exclusive Operations,
including the liabilities and expenses of Operator for conducting such
operations, shall be made in accordance with the principles set out in the
Accounting Procedure.

 55
 

 

(C)                                Operator
shall maintain separate books, financial records and accounts for Exclusive
Operations which shall be subject to the same rights of audit and examination
as the Joint Account and related records, all as provided in the Accounting
Procedure.  Said rights of audit and
examination shall extend to each of the Consenting Parties and each of the Non-Consenting
Parties so long as the latter are, or may be, entitled to elect to participate
in such Exclusive Operations.

(D)                               Operator,
if it is conducting an Exclusive Operation for the Consenting Parties,
regardless of whether it is participating in that Exclusive Operation, shall be
entitled to request cash advances and shall not be required to use its own
funds to pay any cost and expense and shall not be obliged to commence or
continue Exclusive Operations until cash advances requested have been made, and
the Accounting Procedure shall apply to Operator in respect of any Exclusive
Operations conducted by it.

(E)                                 Should
the submission of a Development Plan be approved in accordance with
Article 6.2, or should any Party propose (but not yet have the right to
commence) a development in accordance with this Article 7 where neither
the Development Plan nor the development proposal call for the conduct of an
Appraisal Well or additional appraisal drilling, and should any Party wish to
drill an Appraisal Well or an additional Appraisal Well prior to development,
then the Party proposing the Appraisal Well as an Exclusive Operation shall be
entitled to proceed first, but without the right (subject to the following
sentence) to future reimbursement pursuant to Article 7.5.  If such an Appraisal Well is produced, any
Consenting Party shall own and have the right to take in kind and separately
dispose of all of the Non-Consenting Party’s Entitlement from such
Appraisal Well until the value received in sales to purchasers in arm-length
transactions equals two hundred percent (200%) of such Non-Consenting
Party’s Participating Interest shares of all liabilities and expenses that were
incurred in any Exclusive Operations relating to the Appraisal Well.  Following the completion of drilling such
Appraisal Well as an Exclusive Operation, the Parties may proceed with the
Development Plan approved pursuant to Article 5.9, or (if applicable) the
Parties may complete the procedures to propose an Exclusive Operation to
develop a Discovery.  If, as the result
of drilling such Appraisal Well as an Exclusive Operation, the Party or Parties
proposing to develop the Discovery decide(s) not to do so or modifies the
Development Plan, then each Non-Consenting Party who voted in favour of
such Development Plan prior to the drilling of such Appraisal Well shall pay to
the Consenting Party the amount such Non-Consenting Party would have paid
had such Appraisal Well been drilled as a Joint Operation.

(F)                                 If
Operator is a Non-Consenting Party to an Exclusive Operation to develop a
Discovery, then Operator may resign, but in any event shall resign on the
unanimous request of the Consenting Parties, as Operator for the Field for such
Discovery, and the Consenting Parties shall select a Consenting Party to serve
as Operator for such Exclusive Operation only. 
Any such resignation of Operator and appointment of a Consenting Party
to serve as Operator for such Exclusive

 56
 

 

Operation shall be subject to the Parties having first
obtained any necessary Government approvals.

ARTICLE 8

DEFAULT

8.1                               Default
and Notice

(A)                              Any
Party that fails to:

(1)                                  pay
when due its share of Joint Account expenses (including cash advances and
interest); or

(2)                                  obtain
and maintain any Security required of such Party under the Contracts;

shall be in default under this Agreement (a “Defaulting Party”). 
Operator, or any non-defaulting Party in case Operator is the
Defaulting Party, shall promptly give notice of such default (the “Default Notice”) to the Defaulting Party and each of the non-defaulting
Parties.

(B)                                For
the purposes of this Article 8, “Default Period”
means the period beginning ten (10) Business Days from the date that the
Default Notice is received by the Defaulting Party in accordance with this
Article 8.1 and ending when all the Defaulting Party’s defaults pursuant
to this Article 8.1 have been remedied in full.

8.2                               Operating
Committee Meetings and Data

(A)                              Notwithstanding
any other provision of this Agreement, the Defaulting Party shall have no
right, during the Default Period, to:

(1)                                  call
or attend Operating Committee or subcommittee meetings;

(2)                                  vote
on any matter coming before the Operating Committee or any subcommittee;

(3)                                  access
any data or information relating to any operations under this Agreement;

(4)                                  consent
to or reject data trades between the Parties and third parties, nor access any
data received in such data trades;

(5)                                  Transfer
(as defined in Article 13.1) all or part of its Participating Interest,
except to non-defaulting Parties in accordance with this Article 8;

(6)                                  consent
to or reject any Transfer (as defined it Article 13.1) or otherwise
exercise any other rights in respect of Transfer under this Article 8 or
under Article 13;

 57
 

 

(7)                                  receive
its Entitlement in accordance with Article 8.4;

(8)                                  withdraw
from this Agreement under Article 14; or

(9)                                  take
assignment of any portion of another Party’s Participating Interest in the
event such other Party is either in default under or is withdrawing from this
Agreement and/or the Farmout Agreement.

(B)                                Notwithstanding
any other provisions in this Agreement, during the Default Period:

(1)                                  unless
agreed otherwise by the non-defaulting Parties, the voting interest of
each non-defaulting Party shall be equal to the ratio such non-defaulting
Party’s Participating Interest bears to the total Participating Interests of
the non-defaulting Parties;

(2)                                  any
matters requiring a unanimous vote or approval of the Parties shall not require
the vote or approval of the Defaulting Party;

(3)                                  the
Defaulting Party shall be deemed to have elected not to participate in any
operations that are voted upon during the Default Period, to the extent such an
election would be permitted by Article 5.13 and Article 7; and

(4)                                  the
Defaulting Party shall be deemed to have approved, and shall join with the non-defaulting
Parties in taking, any other actions voted on during the Default Period.

8.3                               Allocation
of Defaulted Accounts

(A)                              The
Party providing the Default Notice pursuant to Article 8.1 shall include
in the Default Notice to each non-defaulting P arty a statement of the
sum of money that the non-defaulting Party shall pay as its portion of
the Amount in Default.  Unless otherwise
agreed, the obligations for which the Defaulting Party is in default shall be
satisfied by the non-defaulting Parties within ten (10) Business Days
after receipt of the Default Notice in proportion to the ratio that each non-defaulting
Party’s Participating Interest bears to the Participating Interests of all non-defaulting
Parties.  For the purposes of this
Article 8:

“Amount in Default”
means the Defaulting Party’s share of Joint Account expenses which the
Defaulting Party has failed to pay when due pursuant to the terms of this
Agreement (but excluding any interest owed on such amount); and

“Total Amount in Default”
means the aggregate of the following amounts: (i) the Amount in Default,
plus (ii) any interest at the Agreed Interest Rate accrued on the amount
under (i) from the date this amount is due by the Defaulting Party until
paid in full by the Defaulting Party.

(B)                                The
Total Amount in Default paid by the non-defaulting Parties for the
Defaulting Parties shall constitute a debt due and owing by the Defaulting
Party to the

 58
 

 

non-defaulting Parties in proportion to such
amounts paid by the non-defaulting Parties.

(C)                                A
Defaulting Party may remedy its default by paying to Operator the Total Amount
in Default; at any time prior to the commencement of the Default Period, and
upon receipt of such payment Operator or any non-defaulting Party in case
operator is the Defaulting Party shall promptly notify each non-defaulting
Party by facsimile or telephone and by electronic mail and the non-defaulting
Parties shall be relieved of their obligations under Article 8.3(A).  Otherwise, each non-defaulting Party
shall satisfy its obligations under Article 8.3(A) within ten (10)
Business Days following its receipt of the Default Notice.  If any non-defaulting Party fails to
timely satisfy such obligations, such Party shall thereupon be a Defaulting
Party subject to the provisions of this Article 8.  The non defaulting Parties shall be entitled
to receive their respective shares of the Total Amount in Default payable by
such Defaulting Party pursuant to this Article 8.

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

8.4                               Remedies

(A)                              During
the Default Period, the Defaulting Party shall not have a right to its
Entitlement, which shall vest in and be the property of the non-defaulting
Parties.  Operator (or the notifying
Party if Operator is a Defaulting Party) shall be authorised to sell such
Entitlement in an arm’s-length sale on terms that are commercially
reasonable under the circumstances and, after deducting all costs, charges and
expenses incurred in connection with such sale, pay the net proceeds to the non-defaulting
Parties in proportion to the amounts they are owed by the Defaulting Party as a
part of the Total Amount in Default (in payment of first the interest and then
the principal) and apply such net proceeds toward the establishment of the
Reserve Fund (as defined in Article 8.4(C)), if applicable, until all such
Total Amount in Default is recovered and such Reserve Fund is established.  Any surplus remaining shall be paid to the
Defaulting Party, and any deficiency

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shall remain a debt due from the Defaulting Party to
the non-defaulting Parties.  When
making sales under this Article 8.4(A), the non-defaulting Parties
shall have no obligation to share any existing market or to obtain a price
equal to the price at which their own production is sold.

(B)                                If
Operator disposes of any Joint Property or if any other credit or adjustment is
made to the Joint Account during the Default Period, Operator (or the notifying
Party if Operator is a Defaulting Party) shall be entitled to apply the
Defaulting Party’s Participating Interest share of the proceeds of such
disposal, credit or adjustment against the Total Amount in Default (against
first the interest and then the principal) and toward the establishment of the
Reserve Fund as defined in Article 8.4(C), if applicable.  Any surplus remaining shall be paid to the
Defaulting Party, and any deficiency shall remain a debt due from the
Defaulting Party to the non-defaulting Parties.

(C)                                The
non-defaulting Parties shall be entitled to apply the net proceeds
received under Articles 8.4(A) and 8.4(B) toward the creation of a reserve
fund (the “Reserve Fund”) in an amount equal to the Defaulting Party’s
Participating Interest share of: (i) the estimated cost to abandon any
wells and other property in which the Defaulting Party participated;
(ii) the estimated cost of severance benefits for local employees upon
cessation of operations; and (iii) any other identifiable costs that the
non-defaulting Parties anticipate will be incurred in connection with the
cessation of operations.  Upon the
conclusion of the Default Period, all amounts held in the Reserve Fund shall be
returned to the Party previously in Default.

(D)                               Without
prejudice to any other rights available to each non-defaulting Party to
recover its portion of the Total Amount in Default if a Defaulting Party fails
to remedy all its defaults in accordance with his Article 8, each non-defaulting
Party may choose to recover its portion of the Total Amount in Default by
invoking the remedies provided in subsections (1) or (2) below.  For the avoidance of doubt, (i) no
Defaulting Party can invoke this clause and (ii) the availability of the
election under subsection (2) to a non-defaulting Party shall not be
construed as an admission by, or otherwise used as evidence in any judicial or
arbitration proceedings against, such non-defaulting Party that it is
not, or that it should not be, entitled to rely on the remedies avail able to
it under subsection (1) to the fullest extent available to it.

(1)                                  Forfeiture

If a Defaulting Party fails to fully remedy all its
defaults by the fortieth (40th) Business Day following the date of the Default
Notice is received by the Defaulting Parties, then, each non-defaulting
Party shall have, the option, exercisable at anytime thereafter during the Default
Period, to require that the Defaulting Party completely withdraw from this
Agreement and the other Contracts.  Such
option shall be exercised by Written notice to the Defaulting Party and each
non-defaulting Party.  If such
option is exercised, the Defaulting Party shall be deemed to have transferred,

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pursuant to Article 14.6, effective on the date
of the non-defaulting Party’s or Parties’ notice, its Participating
Interest to the non-defaulting Parties. 
Notwithstanding the terms of Article 14, in the absence of an
agreement among the non-defaulting Parties to the contrary, any transfer
to the non-defaulting Parties following a withdrawal pursuant to this
Article 8.4(D)(1) shall be in proportion to the Participating Interests of
the non-defaulting Parties.

(2)                                  Buy-Out
of Defaulting Party’s Participating Interest

In the event that a Party becomes a Defaulting Party
and fails to fully remedy all its defaults by the fortieth (40th) Business Day
following the date of the Default Notice, that Party grants to the other
Parties hereunder the exclusive right and option (the “Buy-Out Option”)
to acquire, on a pro rata basis in proportion to the non-defaulting
Parties’ respective Participating Interests and at their sole discretion, all
of such Defaulting Party’s Participating Interest for a value (the “Appraised
Value”) as determined in this Article 8.4(D)(2).  If a Defaulting Party fails to remedy its
default by the fortieth (40th) Business Day following the date of the Default
Notice is received by the Defaulting Parties, then any non-defaulting
Party may, but shall not be obligated to, exercise such Buy-Out Option by
notice to the Defaulting Party and each non-defaulting Party (the “Option
Notice”).  If more than one non-defaulting
Party elects to exercise the Buy-Out Option, each electing non-defaulting
Party (collectively, the “Acquiring Parties”) shall acquire a proportion of the
Participating Interest of the Defaulting Party equal to the ratio of its own
Participating Interest to the total Participating Interests of all Acquiring
Parties and pay such proportion of the Appraised Value (as defined below),
unless they otherwise agree.  The
Defaulting Party shall be obligated to transfer, pursuant to Article 13,
effective on the date of the Option Notice, its Participating Interest to the
Acquiring Parties in consideration of the payment to the Defaulting Party of
the Appraised Value.  In the Option
Notice the Acquiring Parties shall specify a value for the Defaulting Party’s
Participating Interest.  Within five (5)
Business Days of the Option Notice, the Defaulting Party shall (i) notify
the Acquiring Parties that it accepts the value specified in the Option Notice
(in which case such value is the “Appraised Value”); or (ii) refer the
Dispute to an independent expert pursuant to Article 19.3 for
determination of the value of its Participating Interest (in which case the
value determined by such expert shall be deemed the “Appraised Value”).  If the Defaulting Party fails to so notify
the Acquiring Parties, the Defaulting Party shall be deemed to have accepted
the Acquiring Parties’ value as the Appraised Value.

If the valuation of the Defaulting Party’s
Participating Interest is referred to an expert, such expert shall determine
the Appraised Value which shall be equal to the fair market value of the
Defaulting Party’s Participating Interest,

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less the following: (i) the Total Amount in
Default; (ii) all costs, including the costs of the expert, to obtain such
valuation; and (iii) [*] of the fair market value of the Defaulting Party’s
Participating Interest.

The Appraised Value shall be paid to the Defaulting
Party in four (4) instalments, each equal to [*] of the Appraised Value as
follows:

(1)                                  the
first instalment shall be due and payable to the Defaulting Party within
fifteen (15) Business Days after the date on which the Defaulting Party’s
Participating Interest is effectively transferred to the Acquiring Parties (the
“Transfer Date”);

(2                                      the
second instalment shall be due and payable to the Defaulting Party within one
hundred and eighty (180) Business Days after the Transfer Date;

(3)                                  the
third instalment shall be due and payable to the Defaulting Party within three
hundred and sixty five (365) Business Days after the Transfer Date; and

(4)                                  the
fourth instalment shall be due and payable to the Defaulting Party within five
hundred and forty five (545) Business Days after the Transfer Date.

(3)                                  Repeat
Defaults

A Party which is held in default under this Agreement
(and subsequently cures such default) shall be subject to the provisions of
this Article 8.4(D)(2) for a period of fifteen (15) Days following the
last Day of the Default Period associated with such initial occurrence of
default.  If such Party fails to remedy a
subsequent default by the fifteenth (15th) Day following the date of the
Default Notice associated with such subsequent occasion of default (a “Repeat Defaulting Party”), then, without prejudice to any
other rights available to each non-defaulting Party to recover its
portion of the Total Amount in Default, each non-defaulting Party shall
have the option, exercisable at any time thereafter until the Repeat Defaulting
Party has completely cured its defaults, to require that the Repeat Defaulting
Party completely withdraw from this Agreement and the other Contracts.  Such option shall be exercised by notice to
the Repeat Defaulting Party and each non-defaulting Party.  If such option is exercised, the Repeat
Defaulting Party shall be deemed to have transferred, pursuant to
Article 14.6, effective on the date of the non-defaulting Party’s or
Parties’ notice, its Participating Interest to the non-defaulting
Parties.  Notwithstanding the terms of
Article 14, in the absence of an agreement among the non-defaulting
Parties to the contrary, any transfer to the non-defaulting Parties
following a withdrawal pursuant to this

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Article 8.4(D)(2) shall be in proportion to the
Participating Interests of the non-defaulting Parties.

(E)                                 For
purposes of Article 8.4(D), the Defaulting Party shall, without delay
following any request from the non-defaulting Parties, do any act
required to be done by the Laws / Regulations and any other applicable laws in
order to render the transfer of its Participating Interest legally valid,
including obtaining all Governmental consents and approvals, and shall execute
any document and take such other actions as may be necessary in order to effect
a prompt and valid transfer.  The
Defaulting Party shall be obligated to promptly remove any liens and encumbrances
which may exist on its assigned Participating Interest.  In the event all Government approvals are not
timely obtained, the Defaulting Party shall hold the assigned Participating
Interest in trust for the non-defaulting Parties who are entitled to
receive it.  Each Party constitutes and
appoints each other Party its true and lawful attorney to execute such
instruments and make such filings and applications as may be necessary to make
such transfer legally effective and to obtain any necessary consents of the
Government.  Actions under this power of
attorney may be taken by any Party individually without the joinder of the
others.  This power of attorney is
irrevocable for the term of this Agreement and is coupled with an interest.  If requested, each Party shall execute a form
prescribed by the Operating Committee setting forth this power of attorney in
more detail.

(F)                                 The
non-defaulting Parties shall be entitled to recover from the Defaulting
Party all reasonable attorneys’ fees and all other reasonable costs sustained
in the collection of amounts owing by the Defaulting Party.

(G)                                The
rights and remedies granted to the non-defaulting Parties in this
Article 8 shall be cumulative, not exclusive, and shall be in addition to
any other rights and remedies that may be available to the non-defaulting
Parties, whether at law, in equity or otherwise.  Each right and remedy available to the non-defaulting
Parties may be exercised from time to time and so often and in such order as
may be considered expedient by the non-defaulting Parties in their sole
discretion.

8.5                               Survival

The obligations of the Defaulting Party and the rights
of the non-defaulting Parties shall survive the surrender of the
Contract, abandonment of Joint Operations, decommissioning of joint facilities
and termination of this Agreement.

8.6                               No
Right of Set Off

Each Party acknowledges and accepts that a fundamental
principle of this Agreement is that each Party pays its Participating Interest
share of all amounts due under this Agreement as and when required.  Accordingly, any Party which becomes a
Defaulting Party undertakes that, in respect of either any exercise by the non-defaulting
Parties of any rights under or the application of any of the provisions of this
Article 8, such Party hereby waives any right to raise by way of set off
or invoke as a defence, whether in law or equity,

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any failure by any other Party to pay amounts due and
owing under this Agreement or any alleged claim that such Party may have
against Operator or any Non-Operator, whether such claim arises under this
Agreement or otherwise.  Each Party
further agrees that the nature and the amount of the remedies granted to the
non-defaulting Parties hereunder are reasonable and appropriate in the
circumstances.

ARTICLE 9

DISPOSITION OF PRODUCTION

9.1                               Right
and Obligation to Take in Kind

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

9.2                               Disposition
of Crude Oil

The Parties shall, in good faith and not less than
three (3) months prior to the anticipated first delivery of Crude Oil (as
promptly notified by Operator), negotiate and endeavour to conclude the terms
of a lifting agreement to cover the offtake of Crude Oil produced from the
Contract Area.

9.3                               Disposition
of Natural Gas

(A)                              In
this Article 9.3, the words “Natural Gas”
shall be deemed to include Natural Gas and NGLs.

(B)                                The
Parties shall in good faith, and not less than three (3) months prior to the
anticipated first delivery of Natural Gas, (as promptly notified by the
Operator), negotiate and endeavour to conclude the terms of an agreement which
would cover the joint disposition and marketing of Natural Gas produced from
the Contract Area.

9.4                               Right
of First Offer

If and when Canadian Superior determines that
Hydrocarbons are or will be capable of being produced from a Field, Canadian
Superior shall by Written notice offer to Petrotrin the opportunity to purchase
of its Entitlement from such Field. 
Petrotrin shall, by Written notice to Canadian Superior within seven (7)
Days of receipt of such notice, advise Canadian Superior that it either wishes
or does not wish to commence negotiations with Canadian Superior respecting the
terms of the purchase and sale of Canadian Superior’s Entitlement to
Petrotrin.  Failure by Petrotrin to
respond to Canadian Superior in the manner provided herein shall be deemed an
election by Petrotrin to not commence such negotiations.  If Petrotrin elects in the manner provided
herein to commence such negotiations, then Canadian Superior and Petrotrin
shall negotiate in good faith a purchase and sale agreement as an arm’s length
transaction according to commercial conditions then prevailing in the Republic
of Trinidad and Tobago, for the purchase of Canadian Superior’s Entitlement
from such Field.  If Canadian Superior
and Petrotrin have not agreed on such

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terms and conditions within sixty (60) Days after
receipt by Petrotrin of Canadian Superior’s Written notice (or any mutually
agreed extension), then Canadian Superior shall be entitled to negotiate and
conclude sales of its Entitlement from such Field to any one or more third
parties without any further requirement to offer such Entitlement to Petrotrin
or otherwise account to Petrotrin in any manner in respect thereof.

ARTICLE 10

ABANDONMENT OF WELLS

10.1                        Abandonment
of Wells Drilled as Joint Operations

(A)                              The
Operator shall be responsible for all proposals to the Operating Committee to
abandon any well.  A decision to plug and
abandon any well shall require the approval of the Operating Committee.

(B)                                Should
any such Party fail to reply within the period prescribed in
Article 5.12(A)(1) or Article 5.12(A)(2), whichever is applicable,
after delivery of Written notice of Operator’s proposal to plug and abandon
such well, such Party shall be deemed to have consented to the proposed
abandonment.  If the Parties consent to
abandonment, such well shall be plugged and abandoned in accordance with
applicable Laws/Regulations and at the cost, risk and expense of the Parties
who participated in the cost of drilling such well.

(C)                                If
the Operating Committee does not approve a proposal to abandon a particular
well, a Party wishing to continue operations shall be entitled to do so and, if
such Party elects to continue operations such Party shall notify the Operator
in Writing, shall assume full financial responsibility of connection with the
well and for all purposes relating to such well shall be deemed to be a
Consenting Party conducting an Exclusive Operation pursuant to Article 7
hereof.

(D)                               Any
Party continuing operations of a well under Article 10.1(C) (hereinafter
in this Article 10 a “Consenting Party”) shall be entitled to produce
Hydrocarbons from any Zone already penetrated by the wellbore.  Such Consenting Party shall, subject to
Section 16 of the Act, pay to the each other Party (hereinafter in this
Article 10 a “Non-Consenting Party”) such Non-Consenting Party’s
Participating Interest share of the value of the well’s salvageable material
and equipment that is considered Joint Property determined in accordance with
the Accounting Procedure, less the estimated cost of salvaging and the
estimated cost of plugging and abandoning as of the date the Consenting Party
assumed responsibility for the well; provided, however, that in the event the
estimated plugging and abandoning and the estimated cost of salvaging are
higher than the value of the well’s salvageable material and equipment, as
aforesaid, such amounts shall be set off against each other and the Non-Consenting
Party shall continue to be liable pursuant to Article 7.3(B) hereof for
its Participating Interest share of the difference.  Subject to Article 10.1(D), the Non-Consenting
Party shall be deemed to have relinquished to the Consenting Party all of its
interest in the wellbore of a produced well and related equipment in accordance
with Article 7.4(B) hereof.

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(F)                                 Subject
to the agreement of the Consenting Party, Operator shall continue to operate a
producing well for the account of the Consenting Party at the rates and charges
contemplated by this Agreement.

10.2                        Abandonment
of Exclusive Operations

This Article 10 shall apply mutatis
mutandis to the abandonment of an Exclusive Well or any well in
which an Exclusive Operation has been conducted; provided that no well shall be
permanently plugged and abandoned unless and until all Parties having the right
to conduct further operations in such well have been notified of the proposed
abandonment and afforded the opportunity to elect to take over the well in accordance
with the provisions of this Article 10.

10.3                        Abandonment
of Minimum Work Obligation Wells

Canadian Superior shall be responsible for all costs
and expenses incurred in plugging and abandoning, in accordance with the
Laws/Regulations, of those wells drilled in the conduct of the Minimum Work
Obligations.

ARTICLE 11

SURRENDER / RELINQUISHMENT

11.1                        Surrender
/ Relinquishment

(A)                              If
the Contracts or the Laws/Regulations require the Parties to surrender, assign
or relinquish the Contract Area or any part thereof, Operator shall advise the
Operating Committee of such requirement at least one hundred and twenty (120)
Days in advance of the earlier of the date for filing irrevocable notice of
such surrender, assignment or relinquishment or the date of such surrender,
assignment or relinquishment.  Prior to
the end of such period, the Operating Committee shall determine, pursuant to
Article 5, the size and shape of the surrendered, assigned or relinquished
area, consistent with the requirements of the Contracts or the applicable laws
and regulations.  The Parties shall
execute any and all documents and take such other actions as may be necessary
to effect such surrender, assignment or relinquishment.  Each Party renounces all claims and causes of
action against Operator and any other Parties on account of any area
surrendered or relinquished in accordance with the foregoing but against its
recommendation whether Hydrocarbons are subsequently discovered or not under
the surrendered or relinquished area.

(B)                                Except
as permitted under the terms of the Farmout Agreement, a surrender or
relinquishment of all or any part of the Contract Area which is not required by
the Contracts or the applicable laws and regulations shall require the
unanimous consent of the Parties.

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ARTICLE 12

ENVIRONMENTAL AUDIT

12.1                        Environmental
Audit

At the end of the Exploitation Period the Parties
shall jointly conduct an environmental exit audit (hereinafter referred to as
the “Exit Audit”) of the Fields from which Productions Operations have been or
are being conducted.  The Exit Audit
shall be completed within six (6) months prior to the date of any
relinquishment of all such Fields and related facilities and equipment for the
purpose of identifying any Environmental Liabilities in relation to Joint
Operations, wells and related equipment and facilities (but excluding any
Exclusive Operations) as at the date of relinquishment.

An Environmental Auditor shall conduct the Exit
Audit.  The costs incurred under this
Article 12 shall be for the Joint Account.

ARTICLE 13

TRANSFER OF INTEREST OR RIGHTS AND CHANGES IN CONTROL

13.1                        Obligations

(A)                              Upon
the expiration of the Exploration Period and subject to the requirements of the
State Licence and the Laws/Regulations,

(i)                                           any
Transfer (except Transfers pursuant to Article 8 or Article 14) shall
be effective only if it satisfies the terms and conditions of
Article 13.2; and

(ii)                                        a
Party subject to a Change in Control must satisfy the terms and conditions of
Article 13.3.

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

(B)                                For
purposes of this Agreement:

“Cash Transfer”
means any Transfer where the sole consideration (other than the assumption of
obligations relating to the transferred Participating Interest) takes the form
of cash, cash equivalents, promissory notes or retained interests (such as
production payments) in the Participating Interest being transferred; and

“Cash Value”
means the market value (expressed in U.S. dollars) of the Participating
Interest subject to the proposed Transfer or Change in Control, based

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upon the amount in cash a willing buyer would pay a
willing seller in an arm’s length transaction.

“Change in Control”
means any direct or indirect change in Control of a Party (whether through
merger, sale of shares or other equity interests, or otherwise) through a
single transaction or series of related transactions, from one or more
transferors to one or more transferees, in which the market value of the Party’s
Participating Interest represents more than seventy percent (70%) of the
aggregate market value of the assets of such Party and its Affiliates that are
subject to the change in Control.  For
the purposes of this definition, market value shall be determined based upon
the amount in cash a willing buyer would pay a willing seller in an arm’s
length transaction.

“Encumbrance”
means a mortgage, lien, pledge, charge or other encumbrance.  “Encumber” and other derivatives shall be
construed accordingly.

“Transfer” means
any sale, assignment, Encumbrance or other disposition by a Party of any rights
or obligations derived from the Contract or this Agreement (including its
Participating Interest), other than its Entitlement and its rights to any
credits, refunds or payments under this Agreement, and excluding any direct or
indirect change in Control of a Party.

13.2                        Transfer

(A)                              Except
in the case of a Party transferring all of its Participating Interest, no
Transfer shall be made by any Party which results in the transferor or the
transferee holding a Participating Interest of less than twenty percent (20%)
or any interest other than a Participating Interest in the Contract and this
Agreement.

(B)                                Subject
to the terms of Articles 4.9 and 4.10, the Party serving as Operator shall
remain Operator following Transfer of a portion of its Participating Interest.  In the event of a Transfer of all of its
Participating Interest, except to an Affiliate, the Party serving as Operator
shall be deemed to have resigned as Operator, effective on the date the
Transfer becomes effective under this Article 13, in which event a
successor Operator shall be appointed in accordance with
Article 4.11.  If Operator transfers
all of its Participating Interest to an Affiliate, that Affiliate shall
automatically become the successor Operator, provided that the transferring Operator
shall remain liable for its Affiliate’s performance of its obligations.

(C)                                Both
the transferee, and, notwithstanding the Transfer, the transferring Party,
shall be liable to the other Parties for the transferring Party’s Participating
Interest share of any obligations (financial or otherwise) which have vested,
matured or accrued under the provisions of the Contract or this Agreement prior
to such Transfer.  Such obligations,
shall include any proposed expenditure approved by the Operating Committee prior
to the transferring Party notifying the other Parties of its proposed Transfer
and shall also include costs of plugging and abandoning wells or portions of
wells and decommissioning facilities in which the transferring Party
participated

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(or with respect to which it was required to bear a
share of the costs pursuant to this sentence) to the extent such costs are
payable by the Parties under the Contract.

(D)                               A
transferee shall have no rights in the Contract or this Agreement (except any
notice and cure rights or similar rights that may be provided to a Lien Holder
(as defined in Article 132(E)) by separate instrument signed by all
Parties) unless and until:

(1)                                  all
required Government approvals are obtained;

(2)                                  such
transferee expressly undertakes in Writing, by supplemental agreement or
instrument satisfactory to the other Parties, to assume and perform the
obligations of the transferor under the Contracts in respect of the
Participating Interest being transferred; and

(3)                                  except
in the case of a Transfer to an Affiliate, each Party has consented in writing
to such Transfer, which consent shall be denied only if the transferee fails to
establish to the reasonable satisfaction of each Party its financial capability
to perform its payment obligations under the Contract and this Agreement and
its technical capability to contribute to the planning and conduct of Joint
Operations.

No consent shall be required under this
Article 13.2(D)(2) for a Transfer to an Affiliate if the transferring
Party agrees in an instrument reasonably satisfactory to the other Parties to
remain liable for its Affiliate’s performance of its obligations.

(E)                                 Nothing
contained in this Article 13 shall prevent a Party from Encumbering all or
any undivided share of its Participating Interest to a third party (a “Lien  Holder”)
for the purpose of security relating to finance, provided that:

(1)                                  such
Party shall remain liable for all obligations relating to such interest;

(2)                                  the
Encumbrance shall be subject to any necessary approval of the Government and be
expressly subordinated to the rights of the other Parties under this Agreement;

(3)                                  such
Party shall ensure that any Encumbrance shall be expressed to be without
prejudice to the provisions of this Agreement.

(F)                                 Any
Transfer of all or a portion of a Party’s Participating Interest, other than a
Transfer to an Affiliate or the granting of an Encumbrance as provided in
Article 13.2(E), shall be subject to the following procedure.

(1)                                  Once
the final terms and conditions of a Transfer have been fully negotiated, the
transferor shall disclose all such final terms and conditions as are relevant
to the acquisition of the Participating Interest (and, if applicable,

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the determination of the Cash Value of the
Participating Interest) in a notice to the other Parties, which notice shall be
accompanied by a copy of all instruments or relevant portions of instruments
establishing such terms and conditions. 
Each other Party shall have the right to acquire the Participating
Interest subject to the proposed Transfer from the transferor on the terms and
conditions described in Article 13.2(F)(3) if, within thirty (30) Days of
the transferor’s notice, such Party delivers to all other Parties a counter-notification
that it accepts such terms and conditions without reservations or conditions
(subject to Articles 13.2(F)(3)). 
If no Party delivers such counter-notification, the Transfer to
the proposed transferee may be made, subject to the other provisions of this
Article 13, under terms and conditions no more favorable to the transferee
than those set forth in the notice to the Parties, provided that the Transfer
shall be concluded within one hundred eighty (180) Days from the date of the
notice plus such additional period as may be required to secure governmental
approvals.  No Party shall have a right
under this Article 13.2(F) to acquire any asset other than a Participating
Interest, nor may any Party be required to acquire any asset other than a
Participating Interest, regardless of whether other properties are included in
the Transfer.

(2)                                  If
more than one Party counter-notifies that it intends to acquire the
Participating Interest subject to the proposed Transfer, then each such Party
shall acquire a proportion of the Participating Interest to be transferred
equal to the ratio of its own Participating Interest to the total Participating
Interests of all the counter-notifying Parties, unless the counter-notifying
Parties otherwise agree.

(3)                                  In
the event of a Cash Transfer that does not involve other properties as part of
a wider transaction, each other Party shall have a right to acquire the
Participating Interest subject to the proposed Transfer on the same final terms
and conditions as were negotiated with the proposed transferee.  In the event of a Transfer that is not a Cash
Transfer or involves other properties included in a wider transaction (package
deal), the transferor shall include in its notification to the other Parties a
statement of the Cash Value of the Participating Interest subject to the proposed
Transfer, and each other Party shall have a right to acquire such Participating
Interest on the same final terms and conditions as were negotiated with the
proposed transferee except that it shall pay the Cash Value in immediately
available funds at the closing of the Transfer in lieu of the consideration
payable in the third party offer, and the terms and conditions of the
applicable instruments shall be modified as necessary to reflect the
acquisition of a Participating Interest for cash.  In the case of a package sale, no Party may
acquire the Participating Interest subject to the proposed package sale unless
and until the completion of the wider transaction (as modified by the exclusion
of properties subject to preemptive rights or excluded for other reasons) with
the package sale transferee.  If for any
reason the package sale

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terminates without completion, the other Parties’
rights to acquire the Participating Interest subject to the proposed package
sale shall also terminate.

(4)                                  Upon
the completion of any Transfer to a third party of all or any portion of any
Party’s Participating Interest, the transferor shall provide the other Parties
to this Agreement with documentary proof that the Transfer was a bona fide transfer in accordance with the disclosures made
pursuant to Article 13.2 (F)(1).

13.3                        Change
in Control

(A)                              A
Party subject to a Change in Control shall obtain any necessary Government
approval with respect to the Change in Control and furnish any replacement
Security required by the Government or the State Licence on or before the
applicable deadlines.

(B)                                A
Party subject to a Change in Control shall provide evidence reasonably
satisfactory to the other Parties that following the Change in Control such
Party shall continue to have the financial capability to satisfy its payment
obligations under the State Licence and this Agreement.  Should the Party that is subject to the
Change in Control fail to provide such evidence, any other Party, by notice to such
Party, may require such Party to provide Security satisfactory to the other
Parties with respect to its Participating Interest share of any obligations or
liabilities which the Parties may reasonably be expected to incur under the
State Licence and this Agreement during the then-current Exploration or
Exploitation Period or phase of the Contract.

(C)                                Any
Change in Control of a Party, other than one which results in ongoing Control
by an Affiliate, shall be subject to the following procedure.  For purposes of this Article 13.3, the
term “acquired Party” shall refer
to the Party that is subject to a Change in Control and the term “acquiror” shall refer to the Party
or third party proposing to acquire Control in a Change in Control.

(1)                                  Once
the final terms and conditions of a Change in Control have been fully
negotiated, the acquired Party shall disclose all such final terms and
conditions as are relevant to the acquisition of such Party’s Participating
Interest and the determination of the Cash Value of that Participating Interest
in a notice to the other Parties, which notice shall be accompanied by a copy
of all instruments or relevant portions of instruments establishing such terms
and conditions.  Each other Party shall
have the right to acquire the acquired Party’s Participating Interest on the
terms and conditions described in Article 13.3(C)(3) if, within thirty
(30) Days of the acquired Party’s notice, such Party delivers to all other
Parties a counter-notification that it accepts such terms and conditions
without reservations or conditions (subject to Article 13.3(0)(3) where
applicable).  If no Party delivers such
counter-notification, the Change in Control may proceed without further 

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notice, subject to the other provisions of this
Article 13, under terms and conditions no more favorable to the acquiror
than those set forth in the notice to the Parties, provided that the Change in
Control shall be concluded within one hundred eighty (180) Days from the date
of the notice plus such additional period as may be required to secure governmental
approvals.  No Party shall have a right
under this Article 13.3(C) to acquire any asset other than a Participating
Interest, nor may any Party be required to acquire any asset other than a
Participating Interest, regardless of whether other properties are subject to
the Change in Control.

(2)                                  If
more than one Party counter-notifies that it intends to acquire the
Participating Interest subject to the proposed Change in Control, then each
such Party shall acquire a proportion of that Participating Interest equal to
the ratio of its own Participating Interest to the total Participating
Interests of all the counter-notifying Parties, unless the counter-notifying
Parties otherwise agree.

(3)                                  The
acquired Party shall include in its notification to the other Parties a
statement of the Cash Value of the Participating Interest subject to the
proposed Change in Control, and each other Party shall have a right to acquire
such Participating Interest for the Cash Value, on the final terms and
conditions negotiated with the proposed acquiror that are relevant to the
acquisition of a Participating Interest for cash.  No Party may acquire the acquired Party’s
Participating Interest pursuant to this Article 13.3(C) unless and until
completion of the Change in Control.  If for
any reason the Change in Control agreement terminates without completion, the
other Parties’ rights to acquire the Participating Interest subject to the
proposed Change in Control shall also terminate.

ARTICLE 14

WITHDRAWAL FROM AGREEMENT

14.1                        Right
of Withdrawal

(A)                              Except
as may otherwise expressly be agreed between the Parties and subject to the
provisions of this Article and any applicable laws and regulations, any
Party not in default may withdraw from the Contracts by giving Written notice
to all other Parties stating its decision to withdraw and specifying a proposed
effective date of withdrawal which shall be at least one hundred and eighty
(180) Days after the date such notice is received by the other Parties.  Such notice shall be unconditional and
irrevocable when given.

(B)                                Notwithstanding
Articles 14.1(A) and 14.2, a Party shall not have the right to withdraw
from the Farmout Agreement and this Agreement until the Minimum Work
Obligations have been completed.

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(C)                                Subject
to Articles 14.1(A) and (B) and Article 14.5, the effective date of
withdrawal for a withdrawing Party shall be the later of:

(1)                                  the
effective date of the withdrawal as set out in the notice of withdrawal; and

(2)                                  the
date that the withdrawing Party has fulfilled its obligations in respect of the
Minimum Work Obligations.

14.2                        Withdrawal
by Some or All Parties

(A)                              Within
thirty (30) Days of receipt of each withdrawing Party’s notification, each of
the other Parties may also give Written notice that it desires to withdraw from
the Contracts.  Should all Parties give
Written notice of withdrawal, the Parties shall proceed to abandon the Contract
Area in accordance with the provisions of the State Licence and the Laws /
Regulations and terminate the Contracts. 
If less than all of the Parties give such notice of withdrawal, then the
withdrawing Parties shall take all steps to withdraw from the Contracts on the
earliest possible date and execute and deliver all necessary instruments and
documents to assign their respective Participating Interests therein to the
Parties which are not withdrawing for no additional compensation or other
consideration whatsoever, all in accordance with the provisions of
Article 14.6.

(B)                                Subject
to Article 14.1(B), any Party withdrawing under this Article 14
shall, at its option and to the extent allowed by the provisions of the
Contracts:

(1)                                  withdraw
from the entirety of the Contract Area and all of the Contracts; or

(2)                                  withdraw
from all future exploration activities under the Contracts, but not from a
particular Field or Fields as designated by such withdrawing Party.  If a withdrawing Party elects to retain its
interest in a particular Field or Fields, such withdrawing Party shall retain
its rights in all Joint Property, Exclusive Property and Hydrocarbons won,
taken and removed therefrom, but only insofar as they relate to any such Field
or Fields, and shall abandon all other rights in the Joint Property, Exclusive
Property and any Hydrocarbons respecting any other portions of the Contract
Area.

14.3                        Rights
of Withdrawing Party

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

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14.4                        Obligations
and Liabilities of a Withdrawing Party

(A)                              A
withdrawing Party, prior to its withdrawal being effective, shall pay or
otherwise satisfy its Participating Interest Share of all obligations and
liabilities and indemnities under all of the Contracts attributable to all
activities or matters that have taken place or occurred thereunder or in
connection therewith during the period prior to the effective date of its
withdrawal, including, without limitation, any and all:

(1)                                  expenditures
budgeted and/or approved by the Operating Committee prior to its Written
notification of withdrawal;

(2)                                  liability
for acts, failures to act, occurrences or other circumstances of any kind
taking place or existing at anytime prior to the effective date of its
withdrawal.

(B)                                Without
limiting the generality of the provisions of Article 14.4(A), a
withdrawing Party shall, following the effective date of its withdrawal, remain
liable for its Participating Interest share of the following:

(1)                                  costs
of all Joint Operations and Exclusive Operations in which it agreed to
participate, and were approved by the Operating Committee or Consenting Parties
as part of a Work Programme and Budget (including a multi-year Work Programme
and Budget under Article 6.5) or AFE prior to the effective date of the
withdrawing Party’s withdrawal, regardless of when such costs are incurred;

(2)                                  all
costs, losses and expenditures referred to in Article 4.2(B)(13) related
to an emergency occurring prior to the effective date of a Party’s withdrawal,
regardless of when such expenditures are incurred;

(3)                                  all
costs and expenditures referred to in Article 14.5;

(4)                                  all
other obligations and liabilities of the Parties or Consenting Parties, as applicable,
with respect to acts or omissions under this Agreement prior to the effective
date of such Party’s withdrawal;

(5)                                  in
the case of a partially withdrawing Party, any costs and liabilities with
respect to Fields, Commercial Discoveries and Discoveries from which it has not
withdrawn; and

(6)                                  with
respect to Canadian Superior, all costs and expenditures relating to Minimum
Work Obligations.

(C)                                The
obligations and liabilities for which a withdrawing Party remains liable shall
specifically include its share of any costs of decommissioning of facilities in
which the withdrawing Party participated, plugging and abandoning wells or
portions of

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wells in which it participated (or was required to
bear a share of the costs pursuant to Article 14.4(B)(1)) to the extent
such costs of plugging and abandoning are payable by the Parties under the
Contract.  Any mortgages, liens, pledges,
charges or other encumbrances which were placed on the withdrawing Party’s
Participating Interest prior to such Party’s withdrawal shall be fully
satisfied or released, at the withdrawing Party’s expense, prior to its
withdrawal being effective.  A Party’s
withdrawal shall not relieve it from liability to the non-withdrawing
Parties with respect to any obligations or liabilities or indemnities
attributable to the withdrawing Party under any of the Contracts which are
attributable to the period prior to the effective date of its withdrawal but
are not identified or identifiable as at the effective date of such withdrawal.

(D)                               Notwithstanding
the foregoing, a Party shall not be liable for any operations or expenditures
it voted against (other than operations and expenditures described in
Article 14.4(B)(2) or Article 14.5) if it sends Written notification
of its withdrawal within five (5) Days (or within twenty-four (24) hours
for Urgent Operational Matters) of the Operating Committee vote approving such
operation or expenditure.

14.5                        Emergency

If a well goes out of control or a fire, blow out,
sabotage, oil spill, or other emergency occurs, prior to the effective date of
a Party’s withdrawal, such withdrawing Party shall remain liable for its
Participating Interest share of all costs, losses and/or expenditures arising
from or attributable to such emergency regardless of when such costs losses
and/or expenditures are incurred.

14.6                        Assignment

A withdrawing Party shall, for no additional
consideration, assign its Participating Interest to the non-withdrawing
Party or Parties which shall be allocated in full to such Party or Parties and,
subject to Article 14.2(B), shall be accepted by such non-withdrawing
Party or Parties which (subject to Article 14.4(A), the terms of the
assignment and Article 14.8) shall assume and be liable for all
obligations (and if more than one proportionately in accordance with such non-withdrawing
Parties’ Participating Interests) under the Contracts as and from the effective
date of the withdrawing Party’s withdrawal and, in addition, shall indemnify
and keep indemnified the withdrawing Party from and against all claims,
demands, liabilities, cost and expenses whatsoever and wheresoever in respect
of the same.  All expenses associated
with such withdrawal and assignment shall be borne by the withdrawing Party.

14.7                        Approvals

A withdrawing Party shall promptly join in such
actions as may be necessary or desirable to obtain any Government approvals
required in connection with its withdrawal and all assignments arising
therefrom.  The non-withdrawing
Parties shall use reasonable endeavours to assist the withdrawing Party in
obtaining such approvals.  Any penalties
or

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expenses incurred by the Parties in connection
therewith shall be borne by the withdrawing Party.  If the Government does not approve a Party’s
withdrawal and assignment to the non-withdrawing Party or Parties, then
the withdrawing Party shall, at its option, either (1) retract its notice
of withdrawal by notice to the other Parties and remain a Party as if such
notice of withdrawal had never been sent, or (2) hold its Participating
Interest in trust for the sole and exclusive benefit of the non-withdrawing
Parties with the right to be reimbursed by the non-withdrawing Parties
for any subsequent costs and liabilities incurred by it for which it would not
have been liable had it successfully withdrawn.

14.8                        Security

A withdrawing Party shall provide Security
satisfactory to the other Parties to satisfy any such obligations or
liabilities or indemnities under the Contracts which were approved or accrued
prior to the effective date of its withdrawal, but which may have become due
and/or remain unsatisfied after withdrawal, including, without limitation,
Security to cover the costs of an abandonment, if applicable.  Failure to provide such Security shall
constitute default under this Agreement.

14.9                        Withdrawal
or Abandonment by all Parties

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

14.10                 Conversion
of Participating Interest

In the event that Petrotrin elects to convert its
Participating Interests to an Overriding Royalty pursuant to the provisions of
the Farmout Agreement, the Parties agree that Petrotrin shall not be deemed a
withdrawing Party by virtue of such election and conversion and the provisions
of this Article 14 shall not apply to any such conversion.

ARTICLE 15

RELATIONSHIP OF PARTIES AND TAX

15.1                        Relationship
of Parties

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

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15.2                        Tax

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

ARTICLE 16

CONFIDENTIALITY

16.1                        Venture
Information

(A)                              Except
as otherwise provided in this Agreement, each Party will be entitled to receive
all Venture Information related to operations in which such party is a
participant.  “Venture Information” means
any information and results developed or acquired as a result of Joint Operations
and shall be Joint Property, unless provided otherwise in accordance with this
Agreement and the Contract.

(B)                                Notwithstanding
the provisions of Article 16.1(A), upon termination of the Contracts any
Party shall be entitled to sell or otherwise convey Venture Information and/or
confidential data acquired under the Contracts to any third party with whom it
has entered or proposes to enter into a contract insofar as such contract
relates to all or a portion of the Contract Area.

(C)                                Each
Party may, subject to any applicable restrictions and limitations set forth in
the Contracts and the Laws / Regulations, extend the right to use Venture
Information to each of its Affiliates provided that such Affiliates agree to be
bound by the terms of this Article 16.

(D)                               The
acquisition or development of Venture Information under terms other than as
specified in this Article 16 shall require the approval of the Operating
Committee.  The request for approval
submitted by a Party shall be accompanied by a description of, and summary of
the use and disclosure restrictions which would, be applicable to, the Venture
Information, and any such Party will be obligated to arrange for rights to use
which are not less restrictive than the provisions of this Article 16.

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(E)                                 All
Venture Information received by a Party under this Agreement is received on an “as
is” basis without warranties, express or implied, of any kind.  Any use of such Venture Information by a
Party shall be at such Party’s sole risk.

16.2                        Confidentiality

(A)                              Subject
to the provisions of the Farmout Agreement and this Article 16, the
Parties agree that all information, including the contents of the Contracts, in
relation to Joint Operations or Exclusive Operations shall be considered
confidential and shall be kept confidential and not be disclosed during the
term of the Farmout Agreement and this Agreement (and for a further period of
two (2) years after termination, assignment or relinquishment thereof) to any
Person not a Party to this Agreement, except:

(1)                                  to
an Affiliate pursuant to Article 16.1(B);

(2)                                  to
a governmental agency or other entity when required by this Agreement;

(3)                                  to
the extent such information is required to be furnished in compliance with the
applicable law or regulations, or pursuant to any legal proceedings or because
of any order of any court binding upon a Party;

(4)                                  to
prospective or actual attorneys engaged by any Party where disclosure of such
information is essential to such attorney’s work for such Party;

(5)                                  to
prospective or actual contractors and consultants engaged by any Party where
disclosure of such information is essential to such contractor’s or consultant’s
work for such Party;

(6)                                  to
a bona fide prospective transferee of a Party’s Participating Interest to the
extent appropriate in order to allow the assessment of such Participating
Interest (including an entity with whom a Party and/or its Affiliates are
conducting bona fide negotiations directed toward a merger, consolidation or
the sale of a majority of its or an Affiliate’s shares);

(7)                                  to
a bank or other financial institution to the extent appropriate to a Parry
arranging for funding;

(8)                                  to
the extent such information must be disclosed pursuant to any rules or
requirements of any government or stock exchange having jurisdiction over such
Party, or its Affiliates; provided that if any Party desires to disclose
information in an annual or periodic report to its or its Affiliates’
shareholders and to the public and such disclosure is not required pursuant to
any rules or requirements of any government or stock exchange, then such Party
shall comply with Article 20.3;

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(9)                                  to
its respective employees for the purposes of Joint Operations or Exclusive
Operations as the case may be, subject to each Party taking customary precautions
to ensure such information is kept confidential; and

(10)                            any
information which, through no fault of a Party, becomes a part of-the
public domain.

(B)                                Disclosure
pursuant to Articles 16.2(A) (5), (6), and (7) shall not be made unless
prior to such disclosure the disclosing P arty has obtained a Written
undertaking from the recipient party to keep the information strictly
confidential and to use the information for the sole purpose described in
Articles 16.2(A) (5), (6), and (7), whichever is applicable, with respect
to the disclosing Party.

(C)                                Petrotrin
is in possession of certain data, information and interpretations relating
directly or indirectly to the Contract Area (“Petrotrin Proprietary Data”),
which it has either made available or shall make available to Canadian Superior
during the term of the Farmout Agreement and this Agreement Canadian Superior
hereby agrees that it will keep the Petrotrin Proprietary Data strictly
confidential and shall not sell, trade, publish or otherwise disclose to any
third party in any manner whatsoever, including by means of photocopy,
reproduction or otherwise without the Written consent of Petrotrin.  This Article 16.2(D) shall survive the
termination of the Farmout Agreement and this Agreement.

16.3                        Petrotrin’s
Confidentiality

Notwithstanding the foregoing, Petrotrin shall be
entitled to use all data and information acquired in respect of the Contract
Area or any portion thereof prior to the Effective Date in any manner
whatsoever without having to obtain the consent of any Party.

16.4                        Continuing
Obligations

Any Party ceasing to own a Participating Interest
during the term of this Agreement shall nonetheless remain bound by the
obligations of confidentiality in Article 16, and any disputes or expert
determinations in relation thereto shall be resolved in accordance with
Article 19.

16.5                        Trades

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

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ARTICLE 17

FORCE MAJEURE

17.1                        Obligations

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

17.2                        Definition
of Force Majeure

For the purposes of this
Article 17, the term “Force Majeure”
shall have the same meaning as ascribed to the term “force
majeure” in the Act.

17.3                        Six
Month Force Majeure

If Force Majeure causes the suspension of this
Agreement for an unabated period of more than six (6) months, the Parties shall
meet and mutually agree to take such action as is reasonable in the
circumstances to deal with the event of Force Majeure.

ARTICLE 18

NOTICES

Except as otherwise specifically provided, all notices
authorised or required between the Parties by any of the provisions of this
Agreement shall be in Writing (in English) and delivered in person or by
courier service or by any electronic means of transmitting Written communications
which provides Written confirmation of complete transmission, and addressed to
such Parties.  A notice shall contain
such information as is required under the relevant provisions of this Agreement
or the Farmout Agreement.  Oral
communication does not constitute notice for purposes of this Agreement, and e-mail
addresses and telephone numbers for the Parties are listed below as a matter of
convenience only.  A notice given under
any provision of this Agreement shall be deemed delivered only when received by
the Party to whom such notice is directed, and the time for such Party to
deliver any notice in response to such originating notice shall run from the
date the originating notice is received. 
“Received” for purposes of
this Article 18 shall mean actual delivery of

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the notice to the address of the Party specified
hereunder or to be thereafter notified in accordance with this
Article 18.  Each Party shall have
the right to change its address at any time and/or designate that copies of all
such notices be directed to another person at another address, by giving
Written notice thereof to all other Parties.

WHOSE DETAILS SHOULD BE INSERTED BELOW

PETROLEUM COMPANY

OF TRINIDAD AND TOBAGO

Administration Building,

Pointe-á-Pierre

Southern Main Road

Attention:                                         President

Fax:                                                                           (868)
658-1163

Telephone:                                    (868)
658-4200

CANADIAN SUPERIOR
TRINIDAD

AND TOBAGO LTD.

c/o 3300, 400 — 3rd
Avenue SW

Calgary, Alberta, Canada

Attention:                                         Land
Manager

Fax:                                                                           (403)
216-2374

Telephone:                                    (403)
294-1411

ARTICLE 19

APPLICABLE LAW – DISPUTE RESOLUTION

19.1                        Applicable
Law

This Agreement shall be governed by, construed,
interpreted and applied in accordance with the laws of Trinidad, excluding any
choice of law rules which would refer the matter to the laws of another
jurisdiction.

19.2                        Dispute
Resolution

(A)                              A
Party who desires to submit a Dispute for resolution shall commence the dispute
resolution process by providing the other parties to the Dispute with Written
notice of the Dispute (“Notice of Dispute”). 
The Notice of Dispute shall identify the parties to the Dispute and
contain a brief statement of the nature of the Dispute and the relief
requested.  The submission of a Notice of
Dispute shall toll any applicable statutes of limitation related to the
Dispute, pending the conclusion or abandonment of dispute resolution
proceedings under this Article 19.

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(B)                                The
parties to the Dispute shall seek to resolve any Dispute by negotiation between
Senior Executives.  A “Senior Executive”
means any individual who has authority to negotiate the settlement of the
Dispute for a Party.  Within thirty (30)
Days after the date of the receipt by each party to the Dispute of the Notice
of Dispute (which notice shall request negotiations among Senior Executives),
the Senior Executives representing the parties to the Dispute shall meet at a
mutually acceptable time and place to exchange relevant information in an
attempt to resolve the Dispute.  If a
Senior Executive intends to be accompanied at the meeting by an attorney, each
other party’s Senior Executive shall be given Written notice of such intention
at least three (3) Days in advance and may also be accompanied at the meeting
by an attorney.  Notwithstanding the
above, any Party may initiate arbitration proceedings pursuant to
Article 19.2 (C) concerning such Dispute within thirty (30) Days after the
date of receipt of the Notice of Dispute.

(C)                                Any
Dispute not resolved pursuant to Article 19.2(B) arising out of or in
relation to or in connection with the Farmout Agreement and/or this Agreement or
the operations carried out thereunder, including without limitation any Dispute
as to the validity, interpretation, enforceability or breach of the Farmout
Agreement and/or this Agreement, shall be exclusively and finally determined by
arbitration, and any Party may submit such Dispute to arbitration.

(D)                               The
arbitration shall be heard and determined by three (3) arbitrators.  Each Party shall appoint an arbitrator of its
choice (provided such arbitrator is appropriately qualified by education and
experience to assess, understand and pronounce upon the subject matter of the
Dispute) within twenty-eight (28) Days of the submission of a notice of
arbitration.  The Party-appointed
arbitrators shall in turn appoint a presiding arbitrator of the tribunal within
twenty-eight (28) Days following the appointment of both Party-appointed
arbitrators.  If the Party appointed
arbitrators cannot reach agreement on a presiding arbitrator of the tribunal
and/or one Party refuses to appoint its Party-appointed arbitrator within
said twenty-eight (28) Day period, the appointing authority for the
implementation of such procedure shall be the Court of Arbitration of the
International Chamber of Commerce, who shall appoint an independent arbitrator
as the presiding arbitrator and/or as the Party appointed arbitrator, in each
case, who does not have any financial interest in the dispute, controversy or
claim.  All decisions and awards by the
arbitration tribunal shall be made by majority vote.

(1)                                  If
there are more than two Parties to a Dispute, then the Parties shall attempt to
agree on a method to comply with the process described in
Article 19.2(D)(1) above, and failing which all three arbitrators shall be
appointed by the Court of Arbitration of the International Chamber of Commerce.

(E)                                 Unless
otherwise expressly agreed in Writing by the Parties to the arbitration
proceedings:

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(1)                                  The
arbitration proceedings shall be held in Port-of-Spain, Trinidad,
and the provisions of the First Schedule to the Arbitration
Act Chap. 5:01 of Trinidad shall, except where in conflict with
the provisions of this Agreement, apply to the arbitration proceedings;

(2)                                  The
arbitration proceedings shall be conducted in the English language and the
arbitrator(s) shall be fluent in the English language;

(3)                                  The
arbitrator(s) shall be and remain at all times wholly independent and
impartial;

(4)                                  The
arbitration proceedings shall be conducted under the Arbitration Rules of the
International Chamber of Commerce;

(5)                                  Any
procedural issues not determined under the arbitral rules selected pursuant to
Article 19.2(E)(4) shall be determined by the law of the place of
arbitration, other than those laws which would refer the matter to another
jurisdiction;

(6)                                  The
costs of the arbitration proceedings (including attorneys’ fees and costs)
shall be borne in the manner determined by the arbitrator(s);

(7)                                  The
arbitrators shall have the power to order specific performance of the Farmout
Agreement and this Agreement (revised as appropriate to take into account the
possible termination of either or both of them) in addition to or in
substitution for any award of damages;

(8)                                  The
decision of the arbitrators or a majority of the arbitrators, as the case may
be, shall be (i) reduced to Writing; (ii) final and binding without
the right of appeal; (iii) the sole and exclusive remedy regarding any
claims, counterclaims, issues or accountings presented to the arbitrator; and
(iv) made and promptly paid in United States Dollars free of any deduction
or offset.  Any costs or fees incidental
to enforcing the award shall, to the maximum extent permitted by law, be
charged against the Party resisting such enforcement;

(9)                                  Consequential
Losses/Damages shall not be allowed;

(10)                            The
award shall include interest from the date of any breach or violation of the
Farmout Agreement and/or this Agreement or any other Contract, as determined by
the arbitral award, and from the date of the award until paid in full, at the
Agreed Interest Rate;

(11)                            Judgment
upon the award may be entered in any court having jurisdiction over the Party
(and/or all or any part of its assets) against whom such judgment is made and
application may be made to such court for a judicial

 83
 

 

acceptance of the award and an order of enforcement,
as the case may be; and

(12)                            As
the Parties are incorporated in different countries, the presiding arbitrator
shall not be of the same nationality as the country of incorporation of any of
the Parties or their ultimate parent entities.

19.3                        Expert
Determination

For any decision referred to an expert under
Articles 5.9, 8.4 or 16.4, the Parties hereby agree that such decision
shall be conducted expeditiously by an expert selected unanimously by the
parties to the Dispute.  The expert is
not an arbitrator of the Dispute and shall not be deemed to be acting in an
arbitral capacity.  The Party desiring an
expert determination shall give the other parties to the Dispute Written notice
of the request for such determination. 
If the parties to the Dispute are unable to agree upon an expert within ten
(10) Days after receipt of the notice of request for an expert determination,
then, upon the request of any of the parties to the Dispute, the International
Centre for Expertise of the International Chamber of Commerce (ICC) shall
appoint such expert and shall administer such expert determination through the
ICC’s Rules for Expertise.  The expert,
once appointed, shall have no ex parte
communications with any of the parties to the Dispute concerning the expert
determination or the underlying Dispute. 
All Parties agree to cooperate filly in the expeditious conduct of such
expert determination and to provide the expert with access to all facilities,
books, records, documents, information and personnel necessary to make a fully
informed decision in an expeditious manner. 
Before issuing his final decision, the expert shall issue a draft report
and allow the parties to the Dispute to comment on it.  The expert shall endeavour to resolve the
Dispute within thirty (30) Days (but no later than sixty (60) Days) after his
appointment, taking into account the circuumstances requiring an expeditious
resolution of the matter in dispute.  The
expert’s decision shall be final and binding on the parties to the Dispute
unless challenged in an arbitration pursuant to Article 19.2(D) within
sixty (60) Days of the date the expert’s final decision is received by the
parties to the Dispute and until replaced by such subsequent arbitral
award.  In such arbitration (i) the
expert determination on the specific matter under Articles 5.9, 8.4 or
16.4 shall be entitled to a rebuttable presumption of correctness; and
(ii) the expert shall not (without the Written consent of the parties to
the Dispute) be appointed to act as an arbitrator or as adviser to the parties
to the Dispute.

19.4                        Waiver
of Sovereign Immunity

Any Party that now or hereafter has a right to claim
sovereign immunity for itself or any of its assets hereby waives any such
immunity to the fullest extent permitted by the laws of any applicable
jurisdiction.  This waiver includes
immunity from (i) any expert determination, mediation, or arbitration
proceeding commenced pursuant to this Agreement; (ii) any judicial,
administrative or other proceedings to aid the expert determination, mediation,
or arbitration commenced pursuant to this Agreement; and (iii) any effort
to confirm, enforce, or execute any decision, settlement, award, judgment,
service of process, execution order or attachment (including pre judgment
attachment) that results from an expert determination, mediation, arbitration
or any judicial or

 84
 

 

administrative proceedings commenced pursuant to this
Agreement.  Each Party acknowledges that
its rights and obligations hereunder are of a commercial and not a governmental
nature.

ARTICLE 20

GENERAL PROVISIONS

20.1                        Conduct
of the Parties

(A)                                    Each
Party warrants that it and its Affiliates have not made, offered, or authorised
and will not make, offer, or authorize with respect to the matters which are
the subject of the Farmout Agreement and this Agreement, any payment, gift,
promise or other advantage, whether directly or through any other person or
entity, to or for the use or benefit of any public official (i.e., any person
holding a legislative, administrative or judicial office, including any person
employed by or acting on behalf of a public agency, a public enterprise or a
public international organisation) or any political party or political party
official or candidate for office, where such payment, gift, promise or
advantage would violate (i) the applicable laws of Trinidad; (ii) the
laws of the country of incorporation of such Party or such Party’s ultimate
parent company and of the principal place of business of such ultimate parent
company; or (iii) the principles described in the Convention on Combating
Bribery of Foreign Public Officials in International Business Transactions,
signed in Paris, on December 17, 1997, which entered into force on
February 15, 1999, and the Convention’s Commentaries.  Each Party shall defend, indemnify and hold
the other Parties harmless from and against any and all claims,’ damages,
losses, penalties, costs and expenses arising from or related to, any breach by
such first Party of such warranty.  Such
indemnity obligation shall survive termination or expiration of the Farmout Agreement
and this Agreement.  Each Party shall in
good time (i) respond in reasonable detail to any notice from any other
Party reasonably connected with the above-stated warranty; and
(ii) furnish applicable documentary support for such response upon request
from such other Party.

(B)                                      Each
Party agrees to (i) maintain adequate internal controls;
(ii) properly record and report all transactions; and (iii) comply
with the laws applicable to it.  Each
Party must rely on the other Parties’ system of internal controls, and on the
adequacy of full disclosure of the facts, and of financial and other data
regarding the Joint Operations undertaken under this Agreement.  No Party is in any way authorised to take any
action on behalf of another Party that would result in an inadequate or
inaccurate recording and reporting of assets, liabilities or any other
transaction, or which would put such Party in violation of its obligations
under the laws applicable to the Joint Operations under this Agreement.

20.2                        Conflicts
of Interest

(A)                              Operator
undertakes that it shall avoid any conflict of interest between its own
interests (including the interests of Affiliates) and the interests of the
other Parties

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in dealing with suppliers, customers and all other
organisations or individuals doing or seeking to do business with the Parties
in connection with activities contemplated under the Farmout Agreement and this
Agreement.

(B)                                The
provisions of the preceding paragraph shall not apply to: (1) Operator’s
performance which is in accordance with the local preference laws or policies
of the Government; or (2) Operator’s acquisition of products or services
from an Affiliate, or the sale thereof to an Affiliate, made in accordance with
the terms of this Agreement.

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

20.3                        Public
Announcements

(A)                              If
a Party wishes to issue or make any public announcement or statement regarding
this Agreement or the Joint Operations conducted hereunder, it shall not do so
unless, prior to the release of the public announcement or statement, such
Party furnishes all the Parties with a copy of such announcement or statement,
and obtains the approval of Parties which are not Affiliates holding at least
eighty percent (80%) or more of the Participating Interests not held by such
announcing Party or its Affiliates; provided that:

(1)                                  notwithstanding
any failure to obtain such approval, no Party shall be prohibited from issuing
or making any such public announcement or statement if it is necessary to do so
in order to comply with the applicable laws, rules or regulations of any
government, court, securities commission or stock exchange having jurisdiction
over such Party or its Affiliates as set forth in Article 16.2, and

(2)                                  where
a public announcement or statement becomes necessary or desirable because of
danger to or loss of life, damage to property or pollution as a result of
activities arising under this Agreement, Operator shall be authorised to issue
and make such announcement or statement without prior approval of the Parties,
but shall promptly thereafter furnish all the Parties with a copy of such
announcement or statement.

20.4                        Successors
and Assigns

Subject to the limitations on Transfer contained in
Article 13, this Agreement shall inure to the benefit of and be binding
upon the successors and assigns of the Parties.

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20.5                        Waiver

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

20.6                        No
Third Party Beneficiaries

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

20.7                        Joint
Preparation

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

20.8                        Severance
of Invalid Provisions

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

20.9                        Modifications

Except as is provided in Article 20.8, there
shall be no modification of this Agreement or the Farmout Agreement except by
Written consent of all Parties.

20.10                 Interpretation

(A)                              Headings.  The topical headings used in this Agreement
are for convenience only and shall not be construed as having any substantive
significance or as indicating that all of the provisions of this Agreement
relating to any topic are to be found in any particular Article.

(B)                                Singular
and Plural.  Reference to the
singular includes a reference to the plural and vice versa.

(C)                                Gender.  Reference to any gender includes a reference
to all other genders.

 87
 

 

(D)                               Article.  Unless otherwise provided, reference to any
Article or an Exhibit means an Article or Exhibit of this Agreement.

(E)                                 Include.  “include” and “including” shall mean include or including without limiting
the generality of the description preceding such term and are used in an
illustrative sense and not a limiting sense.

(F)                                 Capitalized
words and phrases used herein which are derivatives of words or phrases
otherwise defined herein shall have a corresponding meaning.

20.11                 Counterpart
Execution

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

20.12                 Entirety

With respect to the subject matter contained herein,
this Agreement (i) is the entire agreement of the Parties; and
(ii) supersedes all prior understandings and negotiations of the Parties.

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

	
  PETROLEUM COMPANY OF TRINIDAD AND TOBAGO LIMITED

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
  Date:

  	
   

  	
   

  
	
   

  
	
  In the present
  of:

  
	
   

  
	
  CANADIAN
  SUPERIOR TRINIDAD AND TOBAGO LTD.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
  Date:

  	
   

  	
   

  
	
   

  
	
  In the presence
  of:

  
				

 

 88
 

 

 

Schedule
“D”

This is Schedule “D” attached to
and forming part of an Amended and Restated Participation Agreement in a
Farmout Agreement, dated December 30, 2005 between Challenger Energy Corp., and
Canadian Superior Trinidad and Tobago, Ltd.

 

 

 

 89EXHIBIT 4(D)

AMALGAMATION AGREEMENT

 

AMALGAMATION AGREEMENT

THIS AMALGAMATION
AGREEMENT made as of the 29th day of August, 2005.

BETWEEN:

GLOBAL EXPRESS ENERGY INC.,
a body corporate incorporated under the laws of the Province of Alberta, having
an office in the City of Calgary, in the Province of Alberta (hereinafter
called “Global”)

OF THE
FIRST PART

AND

CHALLENGER ENERGY CORP.,
a body corporate incorporated under the laws of Canada, having an office in the
City of Calgary, in the Province of Alberta (hereinafter called “Challenger”)

OF THE
SECOND PART

WHEREAS Global and
Challenger intend to effect a business combination transaction whereby, among
other things, Global and Challenger will amalgamate and continue as one
corporation in accordance with the terms and conditions hereof;

AND WHEREAS the
parties hereto intend to carry out the transactions contemplated herein
pursuant to an amalgamation under the CBCA;

NOW THEREFORE IN
CONSIDERATION of the covenants and agreements herein contained and other good
and valuable consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties hereto covenant and agree as follows:

ARTICLE 1

DEFINITIONS

1.1                                                                                 In
this Agreement, including in the recitals, unless the context otherwise
requires:

(a)                                  “ABCA” means
the Business Corporations Act
(Alberta), R.S.A. 2000, c. B-9, as amended, including the regulations
promulgated thereunder;

(b)                                 “Affiliate”
has the meaning set out in the Applicable Laws;

(c)                                  “Agreement”
means this agreement, including the recitals and all exhibits to this
agreement, as amended or supplemented from time to time, and “hereby”, “hereof”,
“herein”, “hereunder”, “herewith” and similar terms refer to this Agreement and
not to any particular provision of this Agreement;

(d)                                 “Amalco” means
the amalgamated corporation resulting from the amalgamation of Challenger and
Global, which will carry on business under the name “Challenger Energy Corp.”;

(e)                                  “Amalco Options”
means the options to purchase Amalco Shares pursuant to the stock option plan
of Amalco to be approved at the Meeting;

 

(f)                                    “Amalco Shares”
or “Common
Shares” means the common shares of Amalco to be created and issued
in connection with the Amalgamation;

(g)                                 “Amalgamation”
means the amalgamation of Global and Challenger pursuant to Sections 182 and
183 of the ABCA and in accordance with the policies of the TSXV in respect of “reverse
take-over” transactions, on the terms and conditions set forth in this
Agreement;

(h)                                 “Applicable Laws”
means applicable corporate and securities laws, regulations and rules, all
policies thereunder and rules of applicable stock exchanges, including the
TSXV, all securities laws, regulations and rules and all policies of the
provinces of Canada, the United States
Securities Act of 1933, as amended (the “1933 Act”), the United States Securities Exchange Act of 1934,
as amended (the “1934 Act”), and the United States securities and “blue sky”
laws and regulations;

(i)                                     “Articles of
Amalgamation” means the articles of amalgamation set forth in Exhibit 1
together with such other changes or amendments thereto as are permitted hereby
or otherwise agreed to by Challenger and Global;

(j)                                     “business day”
means a day, other than a Saturday, Sunday or statutory holiday, when banks are
generally open in the City of Calgary for the transaction of banking business;

(k)                                  “CBCA” means
the Canada Business Corporations Act,
R.S. 1985, C-44, as amended, including the regulations promulgated thereunder;

(l)                                     “Certificate of
Amalgamation” means the certificate to be issued by the Director
pursuant to Subsection 185(4) of the ABCA giving effect to the
Amalgamation;

(m)                               “Challenger”
means Challenger Energy Corp., a corporation incorporated under the laws of
Canada;

(n)                                 “Challenger Financial
Statements” means the audited consolidated financial statements of
Challenger prepared as at September 7, 2004;

(o)                                 “Challenger Meeting”
means the annual and special meeting of the Challenger Shareholders to be
called to, inter alia, consider
and, if thought fit, authorize, approve and adopt the Challenger Resolution, to
be held on October 28, 2005 at 10:00 a.m. (Calgary Time) (or such
other time as the parties may agree) at the offices of Burnet Duckworth &
Palmer LLP (or such other venue as the parties may agree);

(p)                                 “Challenger Options”
means 1,750,000 outstanding options to purchase Challenger Shares at an
exercise price of $0.10 per share;

(q)                                 “Challenger Resolution”
means the special resolution approving the Amalgamation to be considered by the
Challenger Shareholders at the Challenger Meeting;

(r)                                    “Challenger Shareholders”
means the holders of Challenger Shares;

(s)                                  “Challenger Shares”
means the Class ”A” voting common shares of Challenger as constituted on
the date hereof;

(t)                                    “Challenger Warrants”
means 500,000 Challenger common share purchase warrants, each such common share
purchase warrant entitling the holder thereof to acquire one Challenger Share
at an exercise price of $0.05 per share;

 2
 

 

(u)                                 “Change of Business”
means the change of business of Global from an “unclassified” issuer to an “oil
and gas” issuer pursuant to the policies of the TSXV;

(v)                                 “Closing”
means the completion of the Amalgamation;

(w)                               “Closing Date”
means the date on which the Closing takes place, which date shall be September 30,
2005, and in any event shall be no later than November 30, 2005, unless
mutually agreed between the parties in writing;

(x)                                   “control”
means, with respect to control of a body corporate by a person, the holding
(other than by way of security) by or for the benefit of that person of
securities of that body corporate to which are attached more than 50% of the
votes that may be cast to elect directors of the body corporate (whether
or not securities of any other class or classes shall or might be entitled
to vote upon the happening of any event or contingency) provided that such
votes, if exercised, are sufficient to elect a majority of the board of
directors of the body corporate;

(y)                                 “Depositary”
means: (i) for Global, Computershare Trust Company of Canada, or such
other trust company as may be designated by Global, and (ii) for Challenger, Challenger itself;

(z)                                   “Director”
means the director appointed pursuant to Section 260 of the CBCA;

(aa)                            “Dissenting Shareholders”
means the Global Shareholders or the Challenger Shareholders, as the case may be,
who exercise the right of dissent available to such holders in respect of the
Global Resolution or the Challenger Resolution to be placed before the Global
Shareholders and the Challenger Shareholders, respectively, at the Meetings;

(bb)                          “Effective Date”
means the date shown on the Certificate of Amalgamation;

(cc)                            “Effective Time”
means 12:01 p.m. on the Effective Date;

(dd)                          “Employee Obligations”
means any obligations or liabilities of Global or Challenger to pay any amount
to or on behalf of the officers, directors, employees or consultants of Global
or Challenger, respectively, other than for salary, bonuses under their
existing bonus arrangements and directors’ fees in the ordinary course, in each
case in amounts consistent with historic practices and, without limiting the
generality of the foregoing, Employee Obligations shall include the obligations
of Global or Challenger to their respective directors, officers, or employees
for severance or termination payments or any other manner of payment whatsoever
(including retention bonuses) on or relating to a change of control, pursuant
to any agreement or severance policy;

(ee)                            “Encumbrance”
includes, without limitation, any mortgage, pledge, assignment, charge, lien,
security interest, claim, trust, royalty or carried, participation, net profits
or other third party interest and any agreement, option, right or privilege
(whether by law, contract or otherwise) capable of becoming any of the
foregoing;

(ff)                                “Global”
means Global Express Energy Inc., a corporation incorporated under the laws of
the Province of Alberta;

(gg)                          “Global Financial
Statements” means the unaudited consolidated financial statements of
Global for the year ended December 31, 2004, the audited consolidated
financial statements for the years ended December 31, 2003 and 2002, and
the unaudited interim financial statements for the three months ended March 31,
2005;

 3
 

 

(hh)                          “Global Meeting”
means the annual and special meeting of the Global Shareholders to be called
to, inter alia, consider and, if
thought fit, authorize, approve and adopt the Global Resolution, to be held on October 28,
2005 at 10:30 a.m. (Calgary Time) (or such other time as the parties may agree)
at the offices of Burnet Duckworth & Palmer LLP (or such other venue
as the parties may agree);

(ii)                                  “Global Public Documents”
means all documents or information filed by or on behalf of Global in
compliance with or intended compliance with Applicable Laws;

(jj)                                  “Global Resolution”
means the special resolution approving the Amalgamation and the Change of
Business to be considered by the Global Shareholders at the Global Meeting;

(kk)                            “Global Shares”
means the common shares in the capital stock of Global;

(ll)                                  “in writing”
means written information including documents, files, records, books and other
materials made available, delivered or produced by or on behalf of a party to
the other party or its agents, advisors or representatives in the course of a
party conducting its due diligence review in respect of the other party between
Global and Challenger, prior the date of this Agreement;

(mm)                      “Income Tax Act”
means the Income Tax Act
(Canada), R.S.C. 1985, c. 1 (5th Supp.), as amended, including the regulations
promulgated thereunder;

(nn)                          “Information Circular”
means the joint information circular - proxy statement of Global and
Challenger, to be dated on or about September 30, 2005, or such other day
as mutually agreed between Global and Challenger, to be mailed to Global
Shareholders and Challenger Shareholders in connection with the holding of the
Meetings;

(oo)                          “Letter Agreement”
means the agreement in writing between Challenger and Global dated July 26,
2005, in which the terms of the Amalgamation were initially agreed to;

(pp)                          “Material Adverse Change”
means any change (or any condition, event or development involving a
prospective change) in the business, operations, results of operations, assets,
capitalization, financial condition, licenses, permits, rights, liabilities,
prospects or privileges, whether contractual or otherwise, of a party or its
subsidiaries which is materially adverse to the business of that party on a
consolidated basis, which shall include, in respect of each party, a
determination by the other party, acting reasonably, following due
investigation, that there exists (a) a material defect or deficiency in
the title to the assets or properties of Challenger or Global, as applicable,
or (b) a previously undisclosed Encumbrance of material significance on
the assets or properties of Challenger or Global; as applicable, but “Material
Adverse Change” shall not include a change resulting from (i) a matter of
which the other party has been advised of in writing as of the date of this
Agreement, or (ii) a change in property prices; provided however that
there will not be deemed to be a Material Adverse Change unless such change or
changes in aggregate relates to one or more adverse changes from a financial
point of view of at least $200,000, in the case of Global or Challenger, as the
case may be;

(qq)                          “Material Adverse Effect”
means any effect that is, or would reasonably be expected to be, material and
adverse to the business, operations or financial condition of Global or
Challenger, as applicable, on a consolidated basis; but shall not include an
effect resulting from a matter of which the other party has been advised of in
writing as of the date of this Agreement, provided however that there will not
be deemed to be a Material Adverse Effect unless such effect or effects in
aggregate relates to one or more adverse effects from a financial point of view
of at least $200,000, in the case of Global or Challenger, as the case may be;

 4
 

 

(rr)                                “Meetings”
means the Challenger Meeting and the Global Meeting;

 

(ss)                            “misrepresentation”
includes any untrue statement of a material fact, any omission to state a
material fact that is required to be stated and any omission to state a
material fact that is necessary to be stated in order for a statement not to be
misleading;

(tt)                                “person”
includes any individual, partnership, firm, trust, body corporate, government,
governmental body, agency or instrumentality, unincorporated body of persons or
association;

(uu)                          “Private Placement”
means the private placement of a minimum of 3,000,000 Challenger Shares and a
maximum of 5,000,000 Challenger Shares issued at $0.25 per share, for aggregate
proceeds of not less than $650,000 and not more than $1,250,000;

(vv)                          “Related Party”
means any officer, director, employee or consultant of Challenger or any
Challenger Subsidiary, and any associate or Affiliate of any of the foregoing
persons;

(ww)                      “Shareholders”
means the holders of Common Shares;

(xx)                              “Subsidiary”
means, when used to indicate a relationship with another body corporate,

(i)                                     a
body corporate which is controlled by (A) that other, or (B) that other
and one or more bodies corporate, each of which is controlled by that other, or
(C) two or more bodies corporate each of which is controlled by that
other, or

(ii)                                  a
subsidiary of a body corporate is the other’s subsidiary; and

(yy)                          “TSXV” means
the TSX Venture Exchange, Inc.

1.2                                 The
following Exhibit forms part of this Agreement:

Exhibit 1 - Articles of Amalgamation

ARTICLE 2

INTERPRETATION

2.1                                                                                 The
division of this Agreement into articles, sections, subsections and paragraphs
and the insertion of headings are for convenience of reference only and shall
not affect in any way the meaning or interpretation of this Agreement.

2.2                                                                                 Unless
the contrary intention appears, references in this Agreement to an Article,
Section, Subsection, paragraph, clause, subclause, exhibit or schedule by
number or letter or both refer to the article, section, subsection, paragraph,
clause, subclause, exhibit or schedule, respectively, bearing that
designation in this Agreement.

2.3                                                                                 In
this Agreement, unless the contrary intention appears, words importing the
singular include the plural and vice versa; words importing gender shall
include all genders.

2.4                                                                                 In
the event that the date on which any action is required to be taken hereunder
by any of the parties is not a business day in the place where the action is
required to be taken, such action shall be required to be taken on the next
succeeding day which is a business day in such place.

 5
 

 

2.5                                                                                 References
in this Agreement to any statute or sections thereof shall include such statute
as amended or substituted and any regulations promulgated thereunder from time
to time in effect.

2.6                                                                                 Unless
otherwise stated, all references in this Agreement to sums of money are
expressed in lawful money of Canada.

2.7                                                                                 All
representations, warranties, covenants and opinions in or contemplated by this
Agreement as to the enforceability of any covenant, agreement or document are
subject to enforceability being limited by applicable bankruptcy, insolvency,
reorganization and other laws affecting creditors rights generally, and the
discretionary nature of certain remedies (including specific performance and
injunctive relief).

2.8                                                                                 All
references to the date of this agreement, “the date hereof” or similar
expressions or references shall mean the date listed on the face page of
this Agreement, except as is expressly provided herein.

ARTICLE 3

CHALLENGER’S CLOSING CONDITIONS

3.1                                                                                 The
obligations of Challenger to complete the transactions contemplated herein are
subject to the fulfilment of the following conditions precedent on or before
the Effective Date or such other time as is specified below:

(a)                                  Global
shall have permitted Challenger and its representatives to have made such “due
diligence” investigations of the assets of Global (which, for these purposes, shall
include any Subsidiary or Affiliate of Global) and of its financial and legal
condition as Challenger shall have considered necessary or advisable to
familiarize itself with such assets and such financial and legal condition, and
Challenger shall, in its sole discretion, have been satisfied with the results
of its due diligence investigations of Global;

(b)                                 Global
shall have continued under the CBCA, and such representations and warranties
made by Global in Section 7.1 of this Agreement relating to the ABCA shall
be true under the CBCA as of the Effective Date as if made on and as of such
date;

(c)                                  the
representations and warranties made by Global in Section 7.1 in this
Agreement shall be true as of the Effective Date as if made on and as of such
date (except to the extent such representation and warranty speaks as of a
particular date) except where the failure of such representations and
warranties to be true and correct would not have a Material Adverse Effect on
Global. Global shall have provided to Challenger a certificate of one officer
or director of Global certifying as to such matters on the Effective Date and
Challenger shall have no actual knowledge to the contrary;

(d)                                 Global
shall have complied in all material respects with its respective covenants in
this Agreement and Global shall have provided to Challenger a certificate of
one officer of Global certifying as to such compliance and Challenger shall
have no actual knowledge to the contrary;

(e)                                  there
shall not have occurred any actual or threatened change (including a proposal
by the Minister of Finance of Canada to amend the Income Tax Act (Canada) or any announcement, governmental or
regulatory initiative, condition, event or development involving a change or a
prospective change) that, in the judgment of Challenger, acting reasonably,
directly or indirectly, has or may have a Material Adverse Effect with
respect to Global, or entities in which Global has

 6
 

 

a material interest, with respect to the regulatory
regime applicable to their respective businesses and operations or with respect
to consummating the Amalgamation;

(f)                                    before
giving effect to the transactions contemplated by this Agreement, there shall
have been no Material Adverse Change, financial or otherwise, in the assets,
liabilities, business, operations, prospects, affairs, capital or financial
condition of Global from that disclosed in the Global Financial Statements and
the unaudited financial statements of Global for the three months ended March 31,
2005, or any occurrences or circumstances which have resulted or might
reasonably be expected to result in a Material Adverse Change thereto (other
than a change due to changes in general economic conditions (including
commodity prices) applicable to corporations conducting business similar to
that of Global);

(g)                                 the
board of directors of Global shall not have changed, withdrawn or modified its
endorsement of the Amalgamation, its determination that the Amalgamation is
fair and in the best interests of Global and the Global Shareholders. and its
recommendation that Global Shareholders vote in favour of the Amalgamation;

(h)                                 except
as contemplated by this Agreement, Global shall not, from the date of the
Letter Agreement to the Effective Date, without the prior written consent of
Challenger, have effected or taken any steps to effect: (i) an issuance of
securities; (ii) a change to its articles; (iii) a subdivision,
consolidation or other change to the outstanding Global Shares; (iv) the
payment of any dividend; (v) any transaction or action out of the ordinary
course of its current business; (vi) the sale or purchase of any asset; or
(vii) any business other than that necessary to complete the Amalgamation;

(i)                                     other
than as disclosed to Challenger, Global shall not have incurred any expenses or
liabilities from July 26, 2005 until the Effective Date, other than
ordinary course operating expenses, or those expenses incurred in connection
with the transactions contemplated by this Agreement; and

(j)                                     not
more than 5% of the issued and outstanding Global Shares shall have exercised
rights of dissent in relation to the Amalgamation and Global shall have
provided to Challenger a certificate of an officer of Global certifying on the
Effective Date the number of Global Shares in respect of which, to such officer’s
knowledge, the holders thereof have exercised rights of dissent.

The foregoing
conditions precedent are for the benefit of Challenger and may be waived,
in whole or in part, by Challenger on behalf of itself in writing at any time. If
any of the said conditions precedent shall not be complied with or waived by
Challenger on or before the date required for the performance thereof,
Challenger may, in addition to the other remedies it may have at law or
equity, rescind and terminate this Agreement by written notice from Challenger
to Global.

ARTICLE 4

GLOBAL’S CLOSING CONDITIONS

4.1                                                                                 The
obligation of Global to complete the transactions contemplated herein is
subject to fulfilment of the following conditions precedent on or before the
Effective Date or such other time as is specified below:

(a)                                  Challenger
shall have permitted Global and its representatives to have made such “due
diligence” investigations of the assets of Global (which, for these purposes,
shall include any Subsidiary or Affiliate of Challenger) and of its financial
and legal condition as Global shall have considered necessary or advisable to
familiarize itself with such assets and such financial and legal condition,

 7
 

 

and Global shall, in its sole discretion, have been
satisfied with the results of its due diligence investigations of Challenger;

(b)                                 the
representations and warranties made by Challenger in Section 6.1 hereof
shall be true as of the Effective Date as if made on and as of such date
(except to the extent such representations and warranties speak to a particular
date) except where the failure of such representations and warranties to be
true and correct would not have a Material Adverse Effect on Challenger and
Challenger shall have provided to Global a certificate of one officer or
director of Challenger certifying as to such matters on the Effective Date and
Global shall have no knowledge to the contrary;

(c)                                  Challenger
shall have complied in all material respects with its covenants in this
Agreement and Challenger shall have provided to Global a certificate of one
officer or director certifying as to such compliance and Global shall have no
actual knowledge to the contrary;

(d)                                 as
of the Closing Date, the unallocated working capital of Challenger, prior to
the payment of expenses related to the completion of the Amalgamation, shall
not be less than $200,000;

(e)                                  there
shall not have occurred any actual or threatened change (including a proposal
by the Minister of Finance of Canada to amend the Income Tax Act (Canada) or any announcement, governmental or
regulatory initiative, condition, event or development involving a change or a
prospective change) that, in the judgment of Global, acting reasonably,
directly or indirectly, has or may have a Material Adverse Effect with respect
to Challenger, or entities in which Challenger has a material interest, with
respect to the regulatory regime applicable to their respective businesses and
operations or with respect to consummating the Amalgamation;

(f)                                    before
giving effect to the transactions contemplated by this Agreement, there shall
have been no Material Adverse Change, financial or otherwise, in the assets,
liabilities, business, operations, prospects, affairs, capital or financial
condition of Challenger from that disclosed in the Challenger Financial
Statements or any occurrences or circumstances which have resulted or might
reasonably be expected to result in a Material Adverse Change thereto (other
than a change due to changes in general economic conditions (including commodity
prices) applicable to corporations conducting business similar to that of
Challenger);

(g)                                 the
board of directors of Challenger shall not have changed, withdrawn or modified
its endorsement of the Amalgamation, its determination that the Amalgamation is
fair and in the best interests of Challenger and the Challenger Shareholders
and its recommendation that Challenger Shareholders vote in favour of the
Amalgamation;

(h)                                 except
as contemplated by this Agreement, Challenger shall not, from the date of the
Letter Agreement to the Effective Date, without the prior written consent of
Global, have effected or taken any steps to effect: (i) an issuance of
securities; (ii) a change to its articles; (iii) a subdivision,
consolidation or other change to the outstanding Challenger Shares; (iv) the
payment of any dividend; (v) any transaction or action out of the ordinary
course of its current business; (vi) the sale or purchase of any asset; or
(vii) any business other than that necessary to complete the Amalgamation;

(i)                                     other
than as disclosed to Global, Challenger shall not have incurred any expenses or
liabilities from July 25, 2005 until the Effective Date, other than
ordinary course operating expenses, or those expenses incurred in connection
with the transactions contemplated by this Agreement; and

 8
 

 

(j)                                     holders
of not more than 5% of the issued and outstanding Challenger Shares shall have
exercised rights of dissent in relation to the Amalgamation and Challenger
shall have provided to Global a certificate of an officer of Challenger
certifying on the Effective Date the number of Challenger Shares in respect of
which, to such officer’s knowledge, the holders thereof have exercised rights
of dissent.

 

The foregoing
conditions precedent are for the benefit of Global and may be waived, in
whole or in part, by Global in writing at any time. If any of the said
conditions precedent shall not be complied with or waived by Global on or
before the date required for the performance thereof, Global may, in addition
to the other remedies it may have at law or equity, rescind and terminate
this Agreement by written notice to Challenger.

ARTICLE 5

MUTUAL CLOSING CONDITIONS

5.1                                                                                 The
obligations of Global and Challenger to complete the transactions contemplated
herein are subject to fulfilment of the following conditions precedent on or
before the Effective Date or such other time as is specified below:

(a)                                  the
Challenger Resolution and the Global Resolution shall have been passed by the
Challenger Shareholders and Global Shareholders, respectively, on or before the
Closing Date on terms satisfactory to each of Global and Challenger, acting
reasonably, and the TSXV, duly approving the Amalgamation and, in the case of
Global, the Change of Business;

(b)                                 the
Amalgamation shall have become effective on or before the Closing Date;

(c)                                  the
Articles of Amalgamation shall be substantially in the form attached as Exhibit 1
to this Agreement;

(d)                                 there
shall be no action taken under any existing Applicable Laws or regulation, nor
any statute, rule, regulation or order which is enacted, enforced, promulgated
or issued by any court, department, commission, board, regulatory body,
government or governmental authority or similar agency, domestic or foreign,
that:

(i)                                     makes
illegal or otherwise directly or indirectly restrains, enjoins or prohibits the
Amalgamation or any other transactions contemplated herein; or

(ii)                                  results
in a judgment or assessment of material damages directly or indirectly relating
to the transactions contemplated herein; and

(e)                                  all
requisite domestic and foreign regulatory approvals and consents, including,
without limitation, those of the TSXV to the Amalgamation and the Change of
Business, and the listing of the Common Shares issuable under the Amalgamation,
and of securities regulatory authorities in respect of the Common Shares being
freely tradable in Canada without restriction (other than those associated with
“control block” provisions or as required by the TSXV) or applicable antitrust
authorities, shall have been obtained on terms and conditions satisfactory to
Challenger and Global, acting reasonably, and all applicable domestic and
foreign statutory or regulatory waiting periods to the transactions
contemplated under the Amalgamation, shall have expired or been terminated, and
no objection or opposition shall have been filed, initiated or made by any
regulatory authority during any applicable statutory or regulatory period; and

 9
 

 

(f)                                    Challenger
shall have obtained a final sponsorship report satisfactory in form and
substance to both Challenger and Global, acting reasonably, and the TSXV in
accordance with TSXV Policies 2.2 and 5.2.

 

The foregoing
conditions are for the mutual benefit of Global and Challenger and may be
waived, in whole or in part, by Global and Challenger together, at any time. If
any of the said conditions precedent shall not be complied with or waived as
aforesaid on or before the date required for the performance thereof, Global or
Challenger may, in addition to the other remedies it may have at law or in
equity, rescind and terminate this Agreement by written notice to the other
party.

ARTICLE 6

CHALLENGER’S REPRESENTATIONS AND WARRANTIES

6.1                                                                                 Challenger
hereby represents and warrants (and, as applicable, covenants) to Global as
follows and acknowledges that Global is relying upon these representations,
warranties and covenants in connection with the entering into of this
Agreement:

(a)                                  Challenger
is a corporation duly incorporated and organized and validly existing under the
laws of Canada and has the requisite corporate power and authority to own its
properties and conduct its business as now owned and conducted. Challenger is
duly registered to do business and is in good standing in each jurisdiction in
which the character of its properties, owned or leased, or the nature of its
activities make such registration necessary, except where the failure to be so
registered or in good standing would not have a Material Adverse Effect on
Challenger.

(b)                                 Challenger
has the requisite corporate authority to enter into this Agreement and all
agreements contemplated hereunder and to carry out its obligations hereunder
and thereunder. The execution and delivery of this Agreement and all agreements
contemplated hereunder and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by Challenger’s board of
directors, and no other corporate proceedings on the part of Challenger
are necessary to authorize this Agreement or any other agreement contemplated
hereunder and the transactions contemplated hereby and thereby. This Agreement
and all agreements contemplated hereunder have been or will be on or before the
Effective Date duly executed and delivered by Challenger and constitute the
legal, valid and binding obligation of Challenger (if a party thereto)
enforceable against Challenger in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other laws relating to or affecting creditors’ rights generally, and to general
principles of equity.

(c)                                  Challenger
has the requisite corporate authority to enter into a farm-out agreement (the “Farm-out Agreement”)
with Canadian Superior Energy Inc. (“Canadian Superior”), a
participation agreement with Canadian Superior (the “Participation Agreement”) and a
farm-out agreement (the “Trinidad Farm-out Agreement”) with
Canadian Superior Trinidad and Tobago Ltd., a wholly-owned subsidiary of
Canadian Superior, and to carry out its obligations under such agreements. The
execution and delivery of the Farm-out Agreement, the Participation Agreement
and the Trinidad Farm-out Agreement and the consummation of the transactions
contemplated thereby have been duly authorized by Challenger’s board of
directors, and no other corporate proceedings on the part of Challenger
are necessary to authorize the Farm-out Agreement, the Participation Agreement
and the Trinidad Farm-out Agreement and the transactions contemplated thereby. The
Farm-out Agreement, the Participation Agreement and the Trinidad Farm-out Agreement
have been duly executed and delivered by Challenger and constitute the legal,
valid and binding obligation of Challenger enforceable against Challenger in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other laws relating to or affecting
creditors’ rights generally, and to general principles of equity.

 10
 

 

(d)                                 Except
as previously disclosed in writing to Global, neither the execution and
delivery of this Agreement or any other agreement contemplated hereunder by
Challenger, the consummation of the transactions contemplated hereby and
thereby nor compliance by Challenger with any of the provisions hereof and
thereof will: (i) violate, conflict with, or result in breach of any
provision of, require any consent, approval or notice under, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) or result in a right of termination or acceleration
under, or result in a creation of any Encumbrance upon any of the properties or
assets of Challenger under, any of the terms, conditions or provisions of (A) the
constating documents of Challenger, or (B) any note, bond, mortgage,
indenture, loan agreement, deed of trust, agreement, lien, contract or other
material instrument or obligation to which Challenger is a party or to it, or
any of its properties or assets, may be subject or by which Challenger is
bound; (ii) subject to compliance with the statutes and regulations
referred to in Section 6.1(e), violate any judgement, ruling, order, writ,
injunction, determination, award, decree, statute, ordinance, rule or
regulation applicable to Challenger (except, in the case of each of clauses (i) and
(ii) above, for such violations, conflicts, breaches, defaults,
terminations which, or any consents, approvals or notices which if not given or
received, would not have any Material Adverse Effect on Challenger or on the
ability of Challenger to consummate the transactions contemplated hereby); or (iii) cause
the suspension or revocation of any authorization, consent, approval or license
currently in effect which would have a Material Adverse Effect on Challenger.

(e)                                  Except
as previously disclosed in writing to Global, and other than in connection with
or in compliance with the provisions of Applicable Laws and any pre-merger
notification statutes, (i) there is no legal impediment to Challenger’s
consummation of the transactions contemplated by this Agreement or any
agreement contemplated hereunder and (ii) no filing or registration with,
or authorization, consent or approval of, any domestic or foreign public body
or authority is necessary by Challenger in connection with the making or the
consummation of the Amalgamation, except for such filings or registrations
which, if not made, or for such authorizations, consents or approvals, which,
if not received, would not have a Material Adverse Effect on Challenger or the
ability of Challenger to consummate the transactions contemplated hereby.

(f)                                    Challenger
has no subsidiaries and does not have an interest (either directly or
indirectly) in any person, nor is it a party to or bound by any agreement to
acquire such an interest.

(g)                                 Challenger
is not a “reporting issuer” in any jurisdiction.

(h)                                 As
of the date hereof and prior to the completion of the Private Placement, the
authorized share capital of Challenger consists of an unlimited number of Class ”A”
voting common shares, an unlimited number of Class ”B” voting common
shares, an unlimited number of Class ”C” non-voting common shares and an
unlimited number of preferred shares. As of the date hereof, only 15,700,000
Challenger Shares and no others are issued and outstanding.

(i)                                     No
person has any agreement or option or right capable of becoming an agreement
for the purchase of any of the Challenger Shares, except for the Challenger
Options, the Challenger Warrants and the Challenger Shares to be issued in
conjunction with the Private Placement. Other than as disclosed in the
preceding sentence, there are no options, warrants or other rights, agreements
or commitments of any character whatsoever requiring the issuance, sale or
transfer by Challenger of any shares of Challenger (including Challenger
Shares) or any securities convertible into, or exchangeable or exercisable for,
or otherwise evidencing a right to acquire, any shares of Challenger (including
Challenger Shares), nor are there any outstanding stock appreciation rights,
phantom equity or similar rights, agreements, arrangements or commitments based
upon the book value, income or other attribute of Challenger other than the
Challenger

 11
 

 

Warrants and the Challenger Options. All outstanding
Challenger Shares have been duly authorized and validly issued, are fully paid
and non-assessable and are not subject to, nor were they issued in violation
of, any pre-emptive rights.

(j)                                     To
the best of the knowledge of Challenger, since the date of completion of the
Challenger Financial Statements, there has not been any Material Adverse Change
in respect of Challenger.

(k)                                  To
the best of the knowledge of Challenger, all material data and information
provided by Challenger to Global and its agents and representatives in
connection with this Agreement or for the purposes of its “due diligence”
investigations is complete and true and correct in all material respects.

(l)                                     Except
(i) as disclosed or reflected in the Challenger Financial Statements, and (ii) for
liabilities and obligations (A) incurred in the ordinary course of
business and consistent with past practice, (B) pursuant to the terms of
this Agreement, or (C) as disclosed in writing to Global prior to the date
of this Agreement, Challenger has not incurred any material liabilities of any
nature, whether accrued, contingent or otherwise or which would be required by
generally accepted accounting principles applicable in Canada to be reflected
on a consolidated balance sheet of Challenger as of the date hereof.

(m)                               Challenger’s
has no Employee Obligations;

(n)                                 other
than the engagement of Acumen Capital Partners as sponsor to the Amalgamation
in accordance with the policies of the TSXV, Challenger has not retained nor
will it retain any financial advisor, broker, agent or finder or paid or agreed
to pay any financial advisor, broker, agent or finder on account of this Agreement,
any transaction contemplated hereby or any transaction presently ongoing or
contemplated.

(o)                                 Since
the date of the Letter Agreement, Challenger has not taken any action that
would be in violation of Section 8.1 hereof if such provision had been in effect
since such date, other than violations which would not have any Material
Adverse Effect on the business, operations or financial condition of Challenger
and would not materially affect Challenger’s ability to consummate the
transactions contemplated hereby.

(p)                                 Challenger
will during the term of this Agreement deliver to Global as soon as reasonably
practicable, true and complete copies of any report or statement filed by it
with any securities authority under Applicable Laws subsequent to the date hereof.
As of their respective dates, such reports and statements (excluding any
information therein provided by Global, as to which Challenger makes no
representation) (i) will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading, and (ii) will comply in all material
respects with all Applicable Laws. The Challenger Financial Statements issued
by Challenger or to be included in such reports and statements (excluding any
information therein provided by Global, as to which Challenger makes no
representation) will be prepared in accordance with generally accepted
accounting principles in Canada (except in the related report of Challenger’s
independent accountants), and will present fairly the financial position,
results of operations and changes in financial position of Challenger as of the
dates thereof and for the periods indicated therein.

(q)                                 The
corporate records and minute books of Challenger have been maintained in
accordance with all applicable statutory requirements and are complete and
accurate in all material respects.

 12
 

 

(r)                                    Except
as set forth or specifically reflected in any document disclosed in writing to
Global prior to the date hereof, there is no claim, action, proceeding or
investigation pending or, to the knowledge of Challenger, threatened against or
relating to Challenger or affecting any of its properties or assets before any
court or governmental or regulatory authority or body that, if adversely
determined, is likely to have a Material Adverse Effect on Challenger or
prevent or materially delay consummation of the transactions contemplated by
this Agreement or the Amalgamation, nor is Challenger aware of any basis for
any such claim, action, proceeding or investigation. Challenger is not subject
to any outstanding order, writ, injunction or decree that has had or is
reasonably likely to have a Material Adverse Effect on Challenger or prevent or
materially delay consummation of the transactions contemplated by this
Agreement or the Amalgamation.

 

(s)                                  Except
as has been disclosed to Global in writing prior to the date hereof, to the
knowledge and belief of Challenger:

(i)                                     Neither
Challenger nor its properties are in material violation of any applicable
federal, provincial, municipal or local laws, regulations, orders, government
decrees or ordinances with respect to environmental, health or safety matters
(collectively, “Environmental Laws”);

(ii)                                  Challenger
has operated its business at all times and has received, handled, used, stored,
treated, shipped and disposed of all contaminants without material violation of
Environmental Laws;

(iii)                               there
have been no releases, deposits or discharges, in material violation of
Environmental Laws, of any hazardous or toxic substances, contaminants or
wastes into the earth, air or into any body of water or any municipal or other
sewer or drain water systems by Challenger; and

(iv)                              no
material orders, directions or notices have been issued and remain outstanding
pursuant to any Environmental Laws relating to the business or assets of
Challenger other than abandonment and similar notices issued in connection with
the normal course of business of Challenger.

(t)                                    Challenger
is the absolute beneficial owner of, and has good and marketable title in fee
simple to its assets and properties, free and clear of any and all
Encumbrances, except for as disclosed previously to Global:

(u)                                 To
the knowledge of Challenger:

(i)                                     there
are no outstanding work orders, non-compliance orders, deficiency notices or
other such notices relative to any of its properties, which have been issued by
any regulatory authority, environment, labour, health or other governmental
authorities or agencies;

(ii)                                  there
are no matters under discussion between Challenger and any such department or
authority relating to work orders, non-compliance orders, deficiency notices or
other such notices; and

(iii)                               no
amounts are owing by Challenger in respect of any of its properties to any
governmental authority or public utility, other than current accounts which are
not in arrears.

 13
 

 

(v)                                 Policies
of insurance in force as of the date hereof naming Challenger as an insured
adequately cover all risks reasonably and prudently foreseeable in the
operation and conduct of the business of Challenger as would be customary in
respect of the businesses carried on by Challenger. All such policies of
insurance shall remain in force and effect and shall not be cancelled or
otherwise terminated as a result of the transactions contemplated hereby or by
Amalgamation.

 

(w)                               Other
than as disclosed in writing to Global prior to the date hereof, Challenger:

(i)                                     has
no defined benefit plans or other employee benefit plans, and has not made any
promises with respect to increased benefits under such plans;

(ii)                                  except
as otherwise disclosed herein, is not a party to any agreement to provide any
Challenger Shares or other Challenger securities (including any securities
convertible into or exchangeable or exercisable for, or otherwise evidencing a
right to acquire Challenger Shares) or to provide any options to acquire
Challenger Shares or any other Challenger securities convertible into or
exchangeable or exercisable for, or otherwise evidencing a right to acquire,
Challenger Shares to any person.

(x)                                   Challenger
is not aware of any defects, failures or impairments in the title of Challenger
to its oil and gas properties or facilities, which in aggregate could have a Material
Adverse Effect on Challenger, or the anticipated cash flow of Challenger.

(y)                                 The
head office of Challenger is located at 3300, 400 — 3rd Avenue S.W., Calgary, Alberta, T2P 4H2. The
records office where its books and records are kept is located at 1400, 350 — 7th Avenue S.W., Calgary, Alberta, T2P 3N9.

(z)                                   Except
as disclosed in writing to Global prior to the date hereof, there is no
non-competition, exclusivity or other similar agreement, commitment or
understanding in place, whether written or oral, to which Challenger, or, to
the knowledge of Challenger, any director, officer, employee or consultant or
any Affiliate of such persons is a party or is otherwise bound that would now
or hereafter, in any way limit the business or operations of Challenger:  (a) in a particular manner or to a
particular locality or geographic region, or (b) for a limited period of
time.

(aa)                            The
execution, delivery and performance of this Agreement do not and will not
result in the restriction of Challenger from engaging in its business or from
competing with any person or in any geographical area and do not and will not
result in a Material Adverse Effect on its business or trigger or cause to
arise any rights of any person under any contract or arrangement to restrict any
of the foregoing from engaging in the business currently carried on by
Challenger.

(bb)                          The
board of directors of Challenger, upon consultation with its advisors, has
determined that the Amalgamation is fair to the Challenger Shareholders, that
the Amalgamation is in the best interests of Challenger and Challenger
Shareholders, has unanimously approved the Amalgamation and the entering into
of this Agreement and will unanimously recommend that Challenger Shareholders
vote in favour of the Amalgamation.

(cc)                            All
offers and sales of securities in the capital of Challenger including, without
limitation, the Challenger Shares have been made in compliance with Applicable
Laws.

(dd)                          Challenger
has conducted and is conducting its business in compliance in all material
respects with all Applicable Laws, rules and regulations requirements of
any governmental or regulatory bodies applicable to Challenger in each
jurisdiction in which it carries on business and holds all licences,
registrations and qualifications material to its business and assets in all
jurisdictions in

 14
 

 

which it carries on business which are necessary or
desirable to carry on the business of Challenger, as now conducted, and where
the failure to so conduct business or be in such compliance would have a
Material Adverse Effect on Challenger and none of such licences, registrations
or qualifications contains any burdensome term, provision, condition or
limitation which has or is likely to have any Material Adverse Effect on
Challenger.

(ee)                            All
information relating to Challenger in the Information Circular shall be true
and complete in all material respects and shall not contain any
misrepresentation.

ARTICLE 7

GLOBAL’S REPRESENTATIONS AND WARRANTIES

7.1                                                                                 Global
hereby represents and warrants (and, as applicable, covenants) to Challenger as
follows and acknowledges that Challenger is relying upon these representations
and warranties in connection with the entering into of this Agreement:

(a)                                  Global
is a corporation duly incorporated and organized and validly existing under the
laws of Alberta and has the requisite corporate power and authority to own its
properties and conduct its business as now owned and conducted. Global is duly
registered to do business only in Alberta;

(b)                                 Global
has the requisite corporate authority to enter into this Agreement and all
agreements contemplated hereunder and to carry out its obligations hereunder
and thereunder. The execution and delivery of this Agreement and all agreements
contemplated hereunder and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by Global’s board of directors,
and no other corporate proceedings on the part of Global are necessary to
authorize this Agreement or any other agreement contemplated hereunder and the
transactions contemplated hereby and thereby. This Agreement and all agreements
contemplated hereunder have been or will be on or before the Effective Date
duly executed and delivered by Global and constitute the legal, valid and
binding obligation of Global (if a party thereto) enforceable against Global in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other laws relating to or affecting
creditors’ rights generally, and to general principles of equity.

(c)                                  Except
as previously disclosed in writing to Challenger, neither the execution and
delivery of this Agreement or any other agreement contemplated hereunder by
Global, the consummation of the transactions contemplated hereby and thereby
nor compliance by Global with any of the provisions hereof and thereof will: (i) violate,
conflict with, or result in breach of any provision of, require any consent,
approval or notice under, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) or result in a
right of termination or acceleration under, or result in a creation of any
Encumbrance upon any of the properties or assets of Global under, any of the
terms, conditions or provisions of (A) the constating documents of Global
or (B) any note, bond, mortgage, indenture, loan agreement, deed of trust,
agreement, lien, contract or other material instrument or obligation to which
Global is a party or to it, or any of its properties or assets, may be
subject or by which Global is bound; (ii) subject to compliance with the
statutes and regulations referred to in Section 7.1(d), violate any
judgement, ruling, order, writ, injunction, determination, award, decree,
statute, ordinance, rule or regulation applicable to Global (except, in
the case of each of clauses (i) and (ii) above, for such violations,
conflicts, breaches, defaults, terminations which, or any consents, approvals
or notices which if not given or received, would not have any Material Adverse
Effect on Global or on the ability of Global to consummate the transactions
contemplated hereby); or (iii) cause the suspension or revocation of any
authorization, consent, approval or license currently in effect which would
have a Material Adverse Effect on Global.

 15
 

 

(d)                                 Except
as previously disclosed in writing to Challenger, other than in connection with
or in compliance with the provisions of Applicable Laws, the rules of the
TSXV and any pre-merger notification statutes, (i) there is no legal impediment
to Global’s consummation of the transactions contemplated by this
Agreement  or any agreements contemplated
hereunder and (ii) no filing or registration with, or authorization,
consent or approval of, any domestic or foreign public body or authority is
necessary by Global in connection with the making or the consummation of the
Amalgamation, except for such filings or registrations which, if not made, or
for such authorizations, consents or approvals, which, if not received, would
not have a Material Adverse Effect on the ability of Global to consummate the
transactions contemplated hereby.

(e)                                  Global
is a “reporting issuer” in British Columbia and Alberta and is in material
compliance with all Applicable Laws; provided, however, that Global is late in
holding its annual shareholders’ meeting for 2004.

(f)                                    The
Global Shares are listed and posted for trading on the NEX board of the TSXV.

(g)                                 As
of the date hereof, the authorized capital of Global consists of an unlimited
number of Global Shares. As of the date hereof 1,586,874 Global Shares are
issued and outstanding.

(h)                                 No
person has any agreement or option or right capable of becoming an agreement
for the purchase of any of the Challenger Shares, except for an aggregate of up
to 300,000 Global Shares (or Global Shares and warrants to purchase Global
Shares) issuable to John Mackay on conversion of certain outstanding debts of
Global in the approximate aggregate amount of $30,000. Other than as disclosed
in the preceding sentence, as of the date hereof, there are no options,
warrants or other rights, agreements or commitments of any character whatsoever
requiring the issuance, sale or transfer by Global of any Global Shares of or
any securities convertible into, or exchangeable or exercisable for, or otherwise
evidencing a right to acquire, any Global Shares nor are there any outstanding
stock appreciation rights, phantom equity or similar rights, agreements,
arrangements or commitments based upon the book value, income or other
attribute of Global. All outstanding Global Shares have been duly authorized
and validly issued, are fully paid and non-assessable, and all Global Shares to
be issued in connection with the Amalgamation will be duly authorized and
validly issued, fully paid and non-assessable.

(i)                                     Since
the date of completion of the March 31, 2005 unaudited financial
statements of Global, there has not been any Material Adverse Change with
respect to Global.

(j)                                     To
the best of the knowledge of Global, all material data and information provided
by Global to Challenger and its agents and representatives in connection with
this Agreement or for the purposes of its “due diligence” investigations  is complete and true and correct in all
material respects.

(k)                                  Except
(i) as disclosed or reflected in the Global Financial Statements, and (ii) for
liabilities and obligations (A) incurred in the ordinary course of
business and consistent with past practice, (B) pursuant to the terms of
this Agreement, or (C) as disclosed in the Global Public Documents or writing
to Challenger prior to the date of this Agreement, Global has not incurred any
material liabilities of any nature, whether accrued, contingent or otherwise or
which would be required by generally accepted accounting principles applicable
in Canada to be reflected on the balance sheet of Global as of the date hereof.

(l)                                     Global
does not have Employee Obligations.

 16

 

(m)                               Since
December 31, 2004 and except as disclosed in the Global Public Documents,
Global has not taken any action that would be in violation of Section 9.1
if such provision had been in effect since such date, other than violations
which would not have any Material Adverse Effect on Global and would not
materially affect Global’s ability to consummate the transactions contemplated
hereby.

(n)                                 Global
will post to SEDAR a true and complete copy of the Information Circular
relating to the Global Meeting and Global has posted to SEDAR true and complete
copies of; (i) Global’s Information Circular relating to Global’s 2003
annual meeting of Shareholders and (ii) all prospectus or other offering
documents used by Global in the offering of its securities or filed with
securities authorities since December 31, 2004. As of their respective
dates, such documents (including all exhibits and schedules thereto and
documents incorporated by reference therein) (i) did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and (ii) complied
in all material respects with Applicable Laws. The audited financial statements
and unaudited interim financial statements of Global publicly issued by Global,
posted to SEDAR were prepared in accordance with generally accepted accounting
principles in Canada (except (i) as otherwise indicated in such financial
statements and the notes thereto or, in the case of audited statements, in the
related report of Global’s independent accountants, or (ii) in the case of
unaudited interim financial statements), and fairly present the financial
position, results of operations and changes in financial position of Global as
of the dates thereof and for the periods indicated therein (subject, in the
case of any unaudited interim financial statements, to normal year-end audit
adjustments).

(o)                                 Global
will during the term of this Agreement deliver to Challenger, as soon as
reasonably practicable, true and complete copies of any report or statement
filed by it with any securities regulatory body subsequent to the date hereof. As
of their respective dates, such reports and statements (excluding any
information therein provided by Challenger as to which Global make no
representation) (i) will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading, and (ii) will comply in all material
respects with all Applicable Laws. The financial statements of Global issued by
Global or to be included in such reports and statements (excluding any
information therein provided by Challenger, as to which Global make no
representation) will be prepared in accordance with generally accepted
accounting principles in Canada (except (i) as otherwise indicated in such
financial statements and the notes thereto or, in the case of audited
statements, in the related report of Global’s independent accounts, or (ii) in
the case of unaudited interim financial statements, to the extent they may not
include footnotes or may be condensed or summary statements) and will
present fairly the financial position, results of operations and changes in
financial position of Global as of the dates thereof and for the periods
indicated therein (subject, in the case of any unaudited interim financial
statements, to normal year-end audit adjustments).

(p)                                 The
corporate records and minute books of Global have been maintained in accordance
with all applicable statutory requirements and are complete and accurate in all
material respects.

(q)                                 Except
as set forth or specifically reflected in any document disclosed in writing to
Challenger prior to the date hereof or in the Global Public Documents, there is
no claim, action, proceeding or investigation pending or, to the knowledge of
Global, threatened against or relating to Global or affecting any of their
respective properties or assets before any court or governmental or regulatory
authority or body that, if adversely determined, is likely to have a Material
Adverse Effect on Global or its subsidiaries, taken as a whole, or prevent or
materially delay consummation of the transactions contemplated by this
Agreement or the Amalgamation, nor is

 17
 

 

Global aware of any basis of any such claim, action,
proceeding or investigation. Global is not subject to any outstanding order,
writ, injunction or decree that has had or is reasonably likely to have a
Material Adverse Effect on Global or any of its subsidiaries, taken as a whole,
or prevent or materially delay consummation of the transactions contemplated by
this Agreement or the Amalgamation.

(r)                                    All
offers and sales of securities in the capital of Global have been made in
compliance with Applicable Laws.

(s)                                  Global
currently carries on no business, other than the pursuit of completion of the
transactions contemplated by this Agreement.

(t)                                    The
head office of Global is located at 306, 908 — 17th Avenue SW, Calgary, Alberta, T2T 0A5. The
registered office is located at 3300, 421 — 7th Avenue S.W., Calgary, Alberta.

(u)                                 The
execution, delivery and performance of this Agreement do not and will not
result in the restriction of Global from engaging in its business or from
competing with any person or in any geographical area and do not and will not
result in a Material Adverse Effect on its business or trigger or cause to
arise any rights of any person under any contract or arrangement to restrict
any of the foregoing from engaging in the business currently carried on by
Global.

(v)                                 The
board of directors of Global has determined that the Amalgamation and the
Change of Business are fair to the Global Shareholders, that the Amalgamation
and the Change of Business are in the best interests of Global and the Global
Shareholders, has unanimously approved the Amalgamation and the Change of
Business and the entering into of this Agreement and will unanimously recommend
that Global Shareholders vote in favour of the Amalgamation and the Change of
Business.

(w)                               No
securities commission or similar regulatory authority has issued any order
preventing or suspending trading of any securities of Global, and Global is not
in default of any requirement of Applicable Laws where any such default would
have any Material Adverse Effect on Global.

(x)                                   The
information and statements set forth in the Global Public Documents were true,
correct and complete and did not contain any misrepresentations, as of their
respective dates, no material change has occurred in relation to Global which
is not disclosed in such public record, and Global has not filed any
confidential material change reports which continue to be confidential.

(y)                                 All
information relating to Global provided by Global to Challenger for inclusion
in the Information Circular shall be true and complete in all material respects
and shall not contain any misrepresentation.

ARTICLE 8

CHALLENGER’S COVENANTS

8.1                                                                                 Challenger
covenants and agrees that, until the Closing or the termination of this
Agreement, unless Global shall otherwise agree in writing, except as required
by law or as otherwise expressly permitted or specifically contemplated by this
Agreement:

(a)                                  the
business of Challenger and other entities controlled by Challenger shall be
conducted only in, and Challenger shall not take any action except in, the
usual and ordinary course of business and consistent with past practice, and
Challenger shall use all commercially reasonable efforts to

 18
 

 

maintain and preserve its business organization,
assets, employees and advantageous business relationships;

(b)                                 other
than pursuant to commitments entered into by Challenger prior to the date of
this Agreement and which have been disclosed to Global in writing, Challenger
shall not, directly or indirectly, do any of the following (i) sell,
pledge, dispose of or encumber any assets; (ii) acquire (by merger,
amalgamation, consolidation or acquisition of shares or assets) any
corporation, partnership or other business organization or division thereof,
or, make any investment either by purchase of shares or securities,
contributions of capital, property transfer, or, except in the ordinary course
of business, purchase of any property or assets of any other individual or
entity, (iii) incur any indebtedness for borrowed money or any other
material liability or obligation or issue any debt securities or assume,
guarantee, endorse or otherwise as an accommodation become responsible for, the
obligations of any other individual or entity, or make any loans or advances,
except in the ordinary course of business; (iv) except for Employee
Obligations if any, payable on the completion of the Amalgamation, pay,
discharge or satisfy any material claims, liabilities or obligations other than
the payment, discharge or satisfaction in the ordinary course of business,
consistent with past practice, of liabilities reflected or reserved against in
its financial statements or incurred in the ordinary course of business
consistent with past practice; (v) authorize, recommend or propose any
release or relinquishment of any material contract right other than in the
ordinary course of business, consistent with past practice; (vi) waive,
release, grant or transfer any rights of material value or modify or change in
any material respect any existing material license, lease, contract or other
document, other than in the ordinary course of business, consistent with past
practice; (vii) other than as contemplated by this Agreement, the Farm-out
Agreement, the Participation Agreement and the Trinidad Farm-out Agreement,
incur any expenditures in excess of $50,000; or (viii) authorize or
propose any of the foregoing, or enter into or modify any contract, agreement,
commitment or arrangement to do any of the foregoing;

(c)                                  Challenger
shall use its reasonable commercial efforts to cause its current insurance (or
re-insurance) policies not to be cancelled or terminated or any of the coverage
thereunder to lapse, unless simultaneously with such termination, cancellation
or lapse, replacement policies underwritten by insurance and re-insurance
companies of nationally recognized standing providing coverage equal to or
greater than the coverage under the cancelled, terminated or lapsed policies
for substantially similar premiums are in full force and effect;

(d)                                 Challenger
shall:

(i)                                     use
its reasonable commercial efforts, to preserve intact its business
organizations and goodwill, to keep available the services of its officers and
employees as a group and to maintain satisfactory relationships with suppliers,
agents, distributors, customers and others having business relationships with
it;

(ii)                                  not
take any action that would render, or that reasonably may be expected to
render, any representation or warranty made by it in this Agreement untrue in
any material respect;

(iii)                               promptly
notify Global orally and in writing of any Material Adverse Change in respect
of Challenger and of any material governmental or third party complaints,
investigations or hearings (or communications indicating that the same may be
contemplated); and

(iv)                              confer,
prior to taking action (other than in emergency situations) with Global with
respect to all material operational matters involved in its business;

 19
 

 

(e)                                  Challenger
shall not create any new Employee Obligations other than as agreed between the
parties, Challenger shall not grant to any officer, director or employee an
increase in compensation in any form, grant any general salary increase other
than in accordance with the requirements of any existing collective bargaining
or union contracts, grant to any other employee any increase in compensation in
any form other than routine increases in the ordinary course of business
consistent with past practices, make any loan to any officer, director or
employee, or take any action with respect to the grant of any severance or
termination pay (other than as contemplated herein or as agreed to by Global,
acting reasonably) arising from the Amalgamation or a change of control of
Challenger, or enter into any employment agreement with, any person, or
increase any benefits payable under its current severance or termination pay
policies;

 

(f)                                    Challenger
shall not adopt or amend or make any contribution to any bonus, profit sharing,
option, pension, retirement, deferred compensation, insurance, incentive
compensation, other compensation or other similar plan, agreement, trust, fund
or arrangements for the benefit of employees, except as is necessary to comply
with the law or with respect to existing provisions of any such plans,
programs, arrangements or agreements;

(g)                                 Challenger
shall not enter into or modify any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this Section 8.1,
except as specifically permitted in this Section 8.1, without the prior
consent of Global;

(h)                                 it
will make available and cause to be made available to Global, its agents and
advisors, as Global may reasonably request, all documents and agreements
(including without limitation, any correspondence between Challenger and its
advisors or any governmental body and all minute books) and access to
Challenger’s premises, records, computer systems and employees in any way
relating to or affecting the business of Challenger, or the business,
operations, prospects, affairs or financial status of Challenger and such other
documents or agreements as may be necessary to enable Global to verify the
truth of the representations and warranties of Challenger herein and compliance
by Challenger with the terms and conditions hereof, except where Challenger is
contractually precluded from making such document or agreement available, and
cooperate with Global in securing access for Global to any such documentation
not in the possession or under the control of Challenger;

(i)                                     it
will not disclose to any person, other than officers, directors and key
employees and professional advisors of Challenger, any confidential information
relating to Global except information disclosed in the Information Circular,
required to be disclosed by law or otherwise known to the public;

(j)                                     it
will not take any action that would render, or that may reasonably be
expected to render, any representation or warranty made by Challenger in this
Agreement untrue at any time prior to the Effective Time;

(k)                                  it
will make other necessary filings and applications under applicable Canadian
federal and provincial laws and regulations required on the part of
Challenger in connection with the transactions contemplated herein and take all
reasonable commercial action necessary to be in compliance with such laws and
regulations;

(l)                                     it
will promptly advise Global of the number of Challenger Shares for which
Challenger has received notices of dissent or written objections to the
Amalgamation and will provide Global with copies of such notices or written
objections; and

 20
 

 

(m)                               it
will conduct its affairs so that all of Challenger representations and
warranties contained herein, in so far as the accuracy of such representations
and warranties constitute a condition of closing under Section 4.1 shall
be true and correct on and as of the date of Closing as if made thereon.

 

ARTICLE 9

GLOBAL’S COVENANTS

9.1                                                                                 Global
covenants and agrees that until the Closing or the termination of this
Agreement, whichever is the earlier:

(a)                                  the
business of Global, shall be conducted only in, and Global shall not take any
action except in, the usual and ordinary course of business and consistent with
past practice, and Global shall use all commercially reasonable efforts to
maintain and preserve its business organization, assets, employees and
advantageous business relationships;

(b)                                 other
than pursuant to commitments entered into by Global prior to the date of this
Agreement and which have been disclosed to Challenger in writing, Global shall
not, directly or indirectly, do any of the following (i) sell, pledge,
dispose of or encumber any assets; (ii) acquire (by merger, amalgamation,
consolidation or acquisition of shares or assets) any corporation, partnership
or other business organization or division thereof, or, make any investment
either by purchase of shares or securities, contributions of capital, property
transfer, or, except in the ordinary course of business, purchase of any
property or assets of any other individual or entity, (iii) incur any
indebtedness for borrowed money or any other material liability or obligation
or issue any debt securities or assume, guarantee, endorse or otherwise as an
accommodation become responsible for, the obligations of any other individual
or entity, or make any loans or advances, except in the ordinary course of
business; (iv) except for Employee Obligations if any payable on the completion of the
Amalgamation, pay, discharge or satisfy any material claims, liabilities or
obligations other than the payment, discharge or satisfaction in the ordinary
course of business, consistent with past practice, of liabilities reflected or
reserved against in its financial statements or incurred in the ordinary course
of business consistent with past practice; (v) authorize, recommend or
propose any release or relinquishment of any material contract right other than
in the ordinary course of business, consistent with past practice; (vi) waive,
release, grant or transfer any rights of material value or modify or change in
any material respect any existing material license, lease, contract or other
document, other than in the ordinary course of business, consistent with past
practice; (vii) other than as contemplated by this Agreement, incur any capital
expenditures in excess of $50,000; or (viii) authorize or propose any of
the foregoing, or enter into or modify any contract, agreement, commitment or
arrangement to do any of the foregoing;

(c)                                  Global
shall not create any new Employee Obligations other than as agreed between the
parties, Global shall not grant to any officer, director or employee an
increase in compensation in any form, grant any general salary increase other
than in accordance with the requirements of any existing collective bargaining
or union contracts, grant to any other employee any increase in compensation in
any form other than routine increases in the ordinary course of business
consistent with past practices, make any loan to any officer, director or
employee, or take any action with respect to the grant of any severance or
termination pay (other than as contemplated herein or as agreed to by
Challenger, acting reasonably) arising from the Amalgamation or a change of
control of Global, or enter into any employment agreement with, any person, or
increase any benefits payable under its current severance or termination pay
policies;

(d)                                 Global
shall not adopt or amend or make any contribution to any bonus, profit sharing,
option, pension, retirement, deferred compensation, insurance, incentive
compensation, other

 21
 

 

compensation or other similar plan, agreement, trust,
fund or arrangements for the benefit of employees, except as is necessary to
comply with the law or with respect to existing provisions of any such plans,
programs, arrangements or agreements;

(e)                                  it
will not take any action that would render, or that may reasonably be
expected to render, any representation or warranty made by Global in this
Agreement untrue at any time prior to the Effective Time;

(f)                                    it
will promptly advise Challenger of the number of Global Shares for which Global
has received notices of dissent or written objections to the Amalgamation and
will provide Challenger with copies of such notices or written objections;

(g)                                 Global
will:

(i)                                     use
its reasonable commercial efforts to fulfil or cause the fulfilment of the
conditions set forth in Sections 3.1 and 5.1 as soon as reasonably possible to
the extent the fulfilment of the same is within the control of Global;

(ii)                                  use
its reasonable commercial efforts, to preserve intact its business
organizations and goodwill, to keep available the services of its officers and
employees as a group and to maintain satisfactory relationships with suppliers,
agents, distributors, customers and others having business relationships with
it;

(iii)                               not
take any action that would render, or that reasonably may be expected to
render, any representation or warranty made by it in this Agreement untrue in
any material respect; and

(iv)                              promptly
notify the Challenger orally and in writing of any Material Adverse Change in
respect of Global and of any material governmental or third party complaints,
investigations or hearings (or communications indicating that the same may be
contemplated);

(h)                                 it
will make available and cause to be made available to Challenger, its agents
and advisors, as Challenger may reasonably request, all documents and
agreements (including without limitation, any correspondence between Global and
its advisors or any governmental body and all minute books) and access to
Global’s premises, records, computer systems and employees in any way relating
to or affecting the business of Global, or the business, operations, prospects,
affairs or financial status of Global and such other documents or agreements as
may be necessary to enable Challenger to verify the truth of the
representations and warranties of Global herein and compliance by Global with
the terms and conditions hereof, except where Global is contractually precluded
from making such document or agreement available, and cooperate with Challenger
in securing access for Challenger to any such documentation not in the
possession or under the control of Global;

(i)                                     except
for proxies and other non-substantive communications with securityholders,
Global will furnish promptly to Challenger a copy of each notice, report, schedule or
other document delivered, filed or received by Global in connection with (i) the
Amalgamation and the Change of Business, (ii) the Global Meeting, (iii) any
filings under Applicable Laws, and (iv) any dealings with regulatory
agencies in connection with the transactions contemplated herein;

(j)                                     will
make all other necessary filings and applications under applicable federal,
provincial and state laws and regulations in Canada required on the part of
Global in connection with the

 22
 

 

transactions contemplated herein and take all
reasonable commercial action necessary to be in compliance with such laws and
regulations; and

(k)                                  will
conduct its affairs so that all of Global’s representations and warranties
contained herein, insofar as the accuracy of such representations and
warranties constitute a condition of closing under Subsection 3.1(a),
shall be true and correct on and as of the Effective Date as if made thereon.

ARTICLE 10

MUTUAL COVENANTS

10.1                                                                           Challenger
and Global each mutually covenant and agree that until the Closing or the
termination of this Agreement, whichever is the earlier, neither Global nor
Challenger shall, from the date hereof to and including the earlier of the
Closing Date and the termination of this Agreement, solicit, initiate, or
encourage proposals or offers from any person, entity or group in connection
with: (i) the acquisition by such person, entity or group of all or substantially
all of the issued and outstanding Challenger Shares or Global Shares, as
applicable, or securities convertible or exchangeable into Challenger Shares or
Global Shares, as applicable, (ii) any amalgamation, merger or sale of all
or substantially all of the assets of Challenger or Global, or any of their
respective subsidiaries; (iii) any take-over bid or other similar business
combination involving Challenger or Global, or any of their respective
subsidiaries; or (iv) an issuance of any securities of Challenger or
Global;

10.2                                                                           In
addition, Challenger and Global each mutually covenant and agree that until the
Closing Date or the Termination of this Agreement, whichever is earlier:

(a)                                  Challenger
and Global will each convene the Meetings and distribute copies of this
Agreement (or a written summary thereof prepared jointly by Challenger and
Global);

(b)                                 Challenger
and Global will each solicit proxies to be voted at the Meetings in favour of
the Amalgamation and the Change of Business, as applicable; and

(c)                                  Challenger
and Global will each conduct the Meetings in accordance with their respective
bylaws and any instrument governing such Meetings, as applicable, and as
otherwise required by law.

10.3                                                                           Challenger
and Global will prepare file and distribute to the Challenger Shareholders and
Global Shareholders, respectively, in a timely and expeditious manner, the
Information Circular, and any amendments or supplements to the Information
Circular, all as required by Applicable Laws, in all jurisdictions where the
same is required complying in all material respects with all applicable legal
requirements on the date of issue thereof;

10.4                                                                           Global
and Challenger will include in the Information Circular the unanimous
recommendation of the board of directors of Challenger and Global that the
Challenger Shareholders and Global Shareholders vote in favour of the
Amalgamation, and in the case of the Global Shareholders the Amalgamation and
the Change of Business;

10.5                                                                           Except
for proxies and other non-substantive communications with securityholders,
Challenger and Global will each furnish promptly to the other a copy of each
notice, report, schedule or other document delivered, filed or received by
Challenger or Global in connection with (i) the Amalgamation and the
Change of Business, (ii) the Meeting, (iii) any filings under
Applicable Laws, and (iv) any dealings with regulatory agencies in
connection with the transactions contemplated herein;

 23
 

 

10.6                                                                           Challenger
and Global agree that all currently outstanding Challenger Warrants and
Challenger Options or other convertible securities shall rollover to become
Amalco Warrants or Amalco Options or other convertible securities,
respectively, having regard for the 1 to 1 exchange ratio set forth in Article 14.1
herein.

 

10.7                                                                           Challenger
and Global agree that in conjunction with the Closing, Challenger will be
permitted to nominate those individuals who will comprise the board of
directors and management of Amalco on a going-forward basis as set out in Section 12.2
herein.

ARTICLE 11

AMALGAMATION

11.1                                                                           Challenger
and Global hereby agree to amalgamate pursuant to the provisions of the ABCA
and to continue as one corporation on the terms and conditions set forth in
this Agreement.

11.2                                                                           On
the Effective Date, subject to the ABCA and the specific terms and provisions
of this Agreement:

(a)                                  the
amalgamation of Challenger and Global and their continuation as one
corporation, Amalco, under the terms and conditions prescribed in this
Agreement shall be effective;

(b)                                 the
property of each of Challenger and Global shall continue to be the property of
Amalco;

(c)                                  Amalco
shall continue to be liable for the obligations of each of Challenger and
Global;

(d)                                 any
existing cause of action, claim or liability to prosecution with respect to
either or both of Challenger or Global shall be unaffected;

(e)                                  any
civil, criminal or administrative action or proceeding pending by or against
Challenger or Global may be continued to be prosecuted by or against
Amalco; and

(f)                                    any
conviction against, or ruling, order or judgment in favour of or against,
Challenger or Global may be enforced by or against Amalco.

ARTICLE 12

AMALCO

12.1                                                                           Certain
provisions applicable to Amalco:

(a)                                  The
name of Amalco shall be “Challenger Energy Corp.”;

(b)                                 The
registered office of Amalco shall be located at Burnet, Duckworth &
Palmer LLP, 1400, 350 — 7th Ave. S.W., Calgary, Alberta T2P 3N9;

(c)                                  Amalco
shall be authorized to issue an unlimited number of common shares as well as an
unlimited number of first and second preferred shares, which shall have the
rights, privileges, restrictions and conditions set forth in the Articles of
Amalgamation;

(d)                                 The
minimum number of directors of Amalco shall be three (3) and the maximum
number of directors of Amalco shall be eleven (11);

(e)                                  There
shall be no restrictions on the right to transfer any shares of Amalco as set
forth in the Articles of Amalgamation; and

 24
 

 

(f)                                    There
shall be no restriction on the business that Amalco may carry on.

 

12.2                                                                           Amalco
Directors

(a)                                  The
first directors of Amalco, all of whom are resident Canadians, shall be the
persons whose names and addresses appear below:

	
  Name

  	
   

  	
  Address

  
	
   

  	
   

  	
   

  
	
  Greg Noval

  	
   

  	
  P.O. Box 447

  Turner Valley, Alberta T0L 2A0

  
	
   

  	
   

  	
   

  
	
  Neil MacKenzie

  	
   

  	
  1577 – 73rd Street SW

  Calgary, Alberta T3H 3X1

  
	
   

  	
   

  	
   

  
	
  Jim Brown

  	
   

  	
  PMB 339 109B, 5095 Napilihau Street,

  Lahaina, Hawaii 96761

  
	
   

  	
   

  	
   

  
	
  Joe Chatoor

  	
   

  	
  18 Goodwood Ridge, Goodwood Park,

  Trinidad & Tobago

  
	
   

  	
   

  	
   

  
	
  Mike Hibberd

  	
   

  	
  24226 Aspen Drive

  Calgary, Alberta T3R 1A4

  

 

(b)                                 The
first directors of Amalco shall hold office until the first annual meeting of
the shareholders of Amalco or until their successors are duly elected or
appointed.

12.3                                                                           Certificates

On the Effective Date:

(a)                                  upon
surrender to the Depositary of the certificates representing Challenger Shares
held by the Challenger Shareholders, other than Dissenting Shareholders, the
registered holders of Challenger Shares shall be entitled to receive one (1) Amalco
Share for every one (1) Challenger Share, as set forth in Article 14
of this Agreement;

(b)                                 upon
surrender of the certificates representing the Global Shares held by Global
Shareholders, other than Dissenting Shareholders, the registered holders of
Global Shares shall be entitled to receive one (1) Amalco Share for every
one (1) Global Share, as set forth in Article 14 of this Agreement;

(c)                                  each
outstanding convertible security of Challenger will be exchanged for a
comparable convertible security of Amalco, having regard for the 1 to 1
exchange ratio set forth above;

(d)                                 fractional
Amalco Shares will not be issued to holders of Global Shares or Challenger
Shares. Where the exchange ratio would have less result in the holder of Global
Shares or Challenger Shares being entitled to receive a fractional Amalco
Share, such holder will be entitled to receive the next greater whole number of
Amalco Shares. In calculating such fractional interest, all shares held be a
beneficial holder shall be aggregated; and

(e)                                  the
share certificates evidencing Challenger Shares or Global Shares shall cease to
represent any claim upon or interest in Challenger or Global or Amalco other
than the right of the holder to receive, pursuant to the terms hereof and the
Amalgamation, Common Shares in accordance with Article 14 hereof.

 25
 

 

12.4                                                                           The
first auditors of Amalco shall be Meyers Norris Penny LLP, Chartered
Accountants, Calgary, Alberta, which shall hold office until the first annual
meeting of Amalco following the Amalgamation or until their successors are
elected or appointed.

12.5                                                                           Amalco
shall adopt new by-laws on terms mutually agreed between Challenger and Global,
acting reasonably.

ARTICLE 13

ARTICLES OF AMALGAMATION

13.1                                                                           Challenger
and Global hereby agree that the articles of amalgamation of Amalco shall be
the Articles of Amalgamation.

13.2                                                                           Subject
to the provisions hereof, Challenger and Global will jointly file, with the
Director, the Articles of Amalgamation of Amalco and such other documents as may be
required by the Act to give effect to the Amalgamation as contemplated herein
on the Closing Date.

ARTICLE 14

EFFECT OF THE AMALGAMATION

14.1                                                                           Subject
to Section 14.2 hereof, on the Effective Date:

(a)                                  each
Challenger Shareholder, other than Dissenting Shareholders, shall receive one (1) Amalco
Common Share for each one (1) Challenger Share held by such Challenger
Shareholder;

(b)                                 each
Global Shareholder, other than Dissenting Shareholders, shall receive one (1) Amalco
Common Share for each one (1) Global Share held by such Global
Shareholder;

(c)                                  each
outstanding convertible security of Global and Challenger will be exchanged for
a comparable convertible security of Amalco, having regard for the exchange
ratios set forth above;

(d)                                 fractional
Amalco Shares will not be issued to holders of Global Shares or Challenger
Shares. Where the exchange ratio would have less result in the holder of Global
Shares or Challenger Shares being entitled to receive a fractional Amalco
Share, such holder will be entitled to receive the next greater whole number of
Amalco Shares. In calculating such fractional interest, all shares held by a
beneficial holder shall be aggregated; and

(e)                                  notwithstanding
the provisions of this Article 14, all Challenger Shares and Global Shares
held by or on behalf of Challenger or Global immediately prior to the Closing
Time on the Effective Date and pursuant to the Amalgamation shall be cancelled
without reimbursement to Challenger or Global for the capital represented by
such Challenger Shares or Global Shares.

14.2                                                                           On
the Effective Date:

(a)                                  the
registers of transfer for the Challenger Shares and Global Shares shall be
closed;

(b)                                 subject
to Section 14.1, the registered holders of Challenger Shares and Global
Shares shall cease to be holders of Challenger Shares or Global Shares,
respectively.

 26
 

 

ARTICLE 15

TERMINATION

15.1                                                                           Notwithstanding
any other rights contained herein, either Global or Challenger may terminate
this Agreement upon notice to the other party:

(a)                                  if
the Amalgamation has not become effective on or before November 30, 2005,
or such other date as may be agreed to by Challenger and Global;

(b)                                 in
the event that the board of directors of Challenger or of Global changes,
withdraws or modifies its recommendation to Challenger Shareholders and Global
Shareholders, respectively, to vote in favour of the Amalgamation; or

(c)                                  upon
any other circumstances hereunder that give rise to a termination of this
agreement by Global or Challenger, including those set forth in Sections 3.1,
4.1 and 5.1 hereof.

15.2                                                                           The
exercise by any party of any right of termination hereunder shall be without
prejudice to any other remedy available to such party.

ARTICLE 16

ADDITIONAL AGREEMENTS

16.1                                                                           Subject
to the termination of this Agreement as provided in Article 15, the
Closing will take place at the offices of Burnet, Duckworth & Palmer
LLP on the Closing Date and at a time to be mutually agreed upon by the
parties, which date shall be no later than the first business day after all
conditions to Closing set forth herein shall have been satisfied or waived,
unless another place, time and date is mutually selected by Global and Challenger.
Each of Global and Challenger hereby agree to use their reasonable best efforts
to cause their respective legal counsel to render opinions, dated as of the
Effective Date, in respect of such matters related to the transactions
contemplated by this Agreement and the Amalgamation as may be reasonably
requested by the other party. Concurrently with the Closing, the Amalgamation
will be filed with the Director under the CBCA.

16.2                                                                           Provided
all other conditions of this Agreement have been satisfied or waived,
Challenger shall, on the Effective Date, file Articles of Amalgamation pursuant
to Section 184 of the CBCA to give effect to the Amalgamation.

16.3                                                                           Global
agrees that all rights to indemnification existing in favour of the present or
former directors and officers of Challenger (as such) or present or former
directors and officers (as such) of Challenger serving or who served at
Challenger’s request as a director, officer, employee, agent or representative
of another corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise (each such present or former director or officer of
Challenger an “Indemnified Party”), as provided by contract or in Challenger’s
charter or bylaws in effect as of the date hereof with respect to matters
occurring prior to the Effective Date, shall survive and shall continue in full
force and effect and without modification for a period of not less than the
statutes of limitations applicable to such matters.

ARTICLE 17

AMENDMENT

17.1                                                                           Any
term or provision of this Agreement may be amended, and the observance of
any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively) only by a
writing signed by the party to be bound thereby which writing expressly refers
to this Agreement and the operation of the provisions of Article 17.1. The
waiver by a party of any

 27

 

breach hereof or default
in the performance hereof will not be deemed to constitute a waiver of any
other default or any succeeding breach or default. This Agreement may be
amended by the parties hereto at any time before or after approval of the
Challenger Shareholders but, after such approval, no amendment will be made
which by Applicable Laws requires the further approval of the Challenger
Shareholders without obtaining such further approval.

ARTICLE 18

COSTS

18.1                         Except
as contemplated in the Amalgamation and herein, Challenger covenants and agrees
to bear the reasonable costs and expenses in connection with the transactions
contemplated hereby.

ARTICLE 19

DISCLOSURE

19.1                         Upon
execution of this Agreement, the parties hereto shall issue a joint press release
which announces that the parties hereto have entered into a formal agreement
providing for the implementation of the Amalgamation. No party hereto shall
disclose, by press release, any aspect of the transactions contemplated hereby,
without prior written consent of the other party. Notwithstanding the
foregoing, if either party is required by law or administrative regulation to
make any disclosure relating to the transactions contemplated herein, such
disclosure may be made, but that party will inform, to the extent
reasonably feasible, the other party as to the wording of such disclosure prior
to its being made.

ARTICLE 20

MISCELLANEOUS

20.1                         Any
notice, consent, waiver, direction or other communication required or permitted
to be given under this Agreement by a party to any other party shall be in
writing and may be given by delivering same or sending same by facsimile
transmission or by hand delivery addressed to the party to whom the notice is
to be given at its address for service herein. Any notice, consent, waiver,
direction or other communication aforesaid shall, if delivered, be deemed to
have been given and received on the date on which it was delivered to the
address provided herein (if a business day and, if not, the next succeeding
business day) if actually received prior to 4:00 p.m. at the point of
delivery and if sent by facsimile transmission be deemed to have been given and
received at the time of receipt unless actually received after 4:00 p.m.
at the point of delivery in which case it shall be deemed to have been given
and received on the next business day. The address for service of each of the
parties hereto shall be as follows:

if to Challenger:

Challenger Energy Corp.

3300, 400 – 3rd Avenue S.W.

Calgary, Alberta

T2P 4H2

Telecopier No.:     (403) 503-8811

Attention:              Neil Mackenzie

 28
 

 

with a copy to:

Burnet, Duckworth &
Palmer LLP

Suite 1400, 350 – 7th Avenue S.W.

Calgary, Alberta

T2P 3N9

Telecopier No.:     (403) 260-0337

Attention:              J.G. (Jeff) Lawson

if to Global:

Global Express Energy
Inc.

306, 908 – 17th Avenue SW

Calgary, Alberta

T2T 0A5

Telecopier No.:     (403) 234-9978

Attention:              John Mackay

with a copy to:

McCarthy Tetrault LLP

3300, 421 – 7th Avenue S.W.

Calgary, Alberta

T2P 4K9

Telecopier No.:     (403) 260-3501

Attention:              David Phillips

20.2                         Time
shall be of the essence in this Agreement.

20.3                         This
Agreement, which includes the Exhibits and Schedules hereto between Global and
Challenger and any other documents referred to herein or contemplated hereby (a) constitutes
the entire agreement between the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter hereof; (b) are
not intended to confer upon any other person any rights or remedies
hereunder (except that

Article 16.3 is for the benefit of Challenger’s directors and
officers and is intended to confer rights on such persons); and (c) shall
not be assigned by operation of law or otherwise except as otherwise
specifically provided.

20.4                         If
any one or more of the provisions or parts thereof contained in this Agreement
should be or become invalid, illegal or unenforceable in any respect in any
jurisdiction, the remaining provisions or parts thereof contained herein shall
be and shall be conclusively deemed to be, as to such jurisdiction, severable
therefrom and:

(a)           the
validity, legality or enforceability of such remaining provisions or parts
thereof shall not in any way be affected or impaired by the severance of the
provisions or parts thereof severed; and

(b)           the
invalidity, illegality or unenforceability of any provision or part thereof
contained in this Agreement in any jurisdiction shall not affect or impair such
provision or part thereof or any other provisions of this Agreement in any
other jurisdiction.

20.5                         Each
party hereto shall, from time to time, and at all times hereafter, at the
request of the other party hereto, but without further consideration, do all
such further acts and execute and deliver all

 29
 

 

such further documents and instruments as shall be reasonably required
in order to fully perform and carry out the terms and intent hereof.

 

20.6                         This
Agreement shall be governed by, and be construed in accordance with, the laws
of the Province of Alberta and Applicable Laws of Canada but the reference to
such laws shall not, by conflict of laws rules or otherwise, require the
application of the law of any jurisdiction other than the Province of Alberta.
Each party hereto hereby irrevocably attorns to the exclusive jurisdiction of
the Courts of the Province of Alberta in respect of all matters arising under
or in relation to this Agreement.

20.7                         This
Agreement may be executed in identical counterparts, each of which is and
is hereby conclusively deemed to be an original, including any counterpart transmitted
by facsimile, and counterparts collectively are to be conclusively deemed one
instrument.

20.8                         No
waiver by any party hereto shall be effective unless in writing and any waiver
shall affect only the matter, and the occurrence thereof, specifically
identified and shall not extend to any other matter or occurrence.

20.9                         This
Agreement shall enure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns. This Agreement may not be
assigned by any party hereto without the prior consent of the other party
hereto.

IN WITNESS WHEREOF
the parties hereto have executed this Agreement.

 

	
  

  	
  GLOBAL EXPRESS ENERGY INC.

  
	
   

  	
   

  
	
   

  	
  Per:

  	
   /s/ John Mackay

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CHALLENGER ENERGY CORP.

  
	
   

  	
   

  
	
   

  	
  Per:

  	
   /s/ Neil Mackenzie

  

 30

 

EXHIBIT 1

ARTICLES OF AMALGAMATION

 

 

	
  

  	
  Industry Canada

  	
  Industrie Canada

  	
   

  	
  FORMULE 9

  
	
   

  	
   

  	
   

  	
   

  	
  STATUTS DE
  FUSION

  
	
   

  	
  Canada Business

  	
  Loi canadienne sur les

  	
   

  	
  (ARTICLE 185)

  
	
   

  	
  Corporations Act

  	
  sociétés par actions

  	
   

  	
   

  

 

FORM 9

ARTICLES OF AMALGAMATION

(SECTION 185)

	
  1 – Name of the Amalgamated Corporation 

  	
  Dénomination sociale de la
  société issue de la fusion

  
	
   

  	
   

  
	
  CHALLENGER ENERGY CORP.

  
	
  2
  – The province or territory in Canada where the registered office

  is to be situated

  	
  La
  province ou ie territoire au Canada où se situera le siége social

  
	
  Alberta

  
	
  3 – The classes and any
  maximum number of shares that the corporation is authorized to issue

  	
  Catégories et tout
  nombre maximal d’actions que la société est authorisée à émettre

  
	
  See Schedule “A”
  attached hereto.

  
	
  4 – Restrictions, if
  any, on share transfers

  	
  Restrictions sur le
  transfert des actions, s’il y a lieu

  
	
  None

  
	
  5 – Number (or minimum
  and maximum number) of directors

  	
  Nombre (ou nombre
  minimal et maximal) d’administrateurs

  
	
  Not less than three (3)
  directors and not more than eleven (11) directors.

  
	
  6 – Restrictions, if
  any, on business the corporation may carry on

  	
  Limites imposées á l’activité
  commerciale de la société, s’il y a lieu

  
	
  None

  
	
  7 – Other provisions,
  if any

  	
  Autres dispositions, s’il
  y a lieu

  
	
  See Schedule “B”
  attached hereto.

  
	
  8 – The amalgamation
  has been approved pursuant to that section or subsection of the Act which is
  indicated as follows:

  	
  La fusion a été
  approuvée en accord avec l’article ou le paragraphe de la Loi indiqué
  ci-après.

  
	
   

  	
   

  x  183

  o  184(1)

  o  184(2)

  
			

 

	
  9 – Name of
  the amalgamating corporations

  Dénomination sociale des sociétés fusionnantes

  	
   

  	
  Corporation

  No.

  N’ de la

  société

  	
   

  	
  Signature

  	
   

  	
  Date

  	
   

  	
  Title

  Titre

  	
   

  	
  Tel. No.

  N’ de tél.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Global Express
  Energy Inc.

  	
   

  	
  206916777

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Challenger
  Energy Corp.

  	
   

  	
  626967-2

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

FOR DEPARTMENTAL USE ONLY - [ILLEGIBLE]

 

 

 

IC 3190 (2003/06)

 

 

SCHEDULE “A”

The authorized capital of
the Corporation shall consist of an unlimited number of Common Shares, First
Preferred Shares and Second Preferred Shares, which classes of shares, shall
have attached thereto the rights, privileges, restrictions and conditions as
set forth below:

Common Shares

1. Voting Rights

The holders of Common
Shares shall be entitled to notice of, to attend and to one vote per share held
at any meeting of the shareholders of the Corporation (other than meetings of a
class or series of shares of the Corporation other than the Common Shares as
such).

2. Dividends

The holders of Common Shares shall be entitled to
receive dividends as and when declared by the Board of Directors of the
Corporation on the Common Shares as a class, subject to prior satisfaction of
all preferential
rights to dividends attached to all shares of other classes of shares of the
Corporation ranking in priority to the Common Shares in respect of dividends
and the Board of Directors shall be entitled to declare dividends in favour of
the holders of other classes of shares at different times or at the same time but in different
amounts as dividends declared in favour of the holders of the Common Shares or
in favour of
the holders of the Common Shares at different times or at the same time but in
different amounts as dividends declared in favour of the holders of the other
classes of shares.

3. Liquidation

The holders of Common Shares shall be entitled in the
event of any liquidation, dissolution or winding-up of the Corporation,
whether voluntary or involuntary, or any other distribution of the assets of
the Corporation among its shareholders for the purpose of winding-up its
affairs, and subject to prior satisfaction of all preferential rights to return
of capital on dissolution attached to all shares of other classes of shares of
the Corporation ranking in priority to the Common Shares in respect of return
of capital on dissolution, to
share rateably, together with the Non-Voting Common Shares and with the holders of shares of any other class of shares of
the Corporation ranking equally with the Common Shares in respect of return of
capital, in such assets of the Corporation as are available for distribution.

First Preferred Shares

1.             The
First Preferred Shares may at any time or from time to time be issued in one or
more series. Before any shares of a particular series are issued, the Directors
of the Corporation shall, by resolution, fix the number of shares that will
form such series and shall, subject to the limitations set out herein, by
resolution fix the designation, rights, privileges, restrictions and conditions
to be attached to the First Preferred Shares of such series, including, but
without in any way limiting or restricting the generality of the foregoing, the
rate, amount or method of calculation of dividends thereon, the time and place
of payment of dividends, the consideration for and the terms and conditions of
any purchase for cancellation, retraction or redemption thereof, conversion or
exchange rights (if any), and whether into or for securities of the Corporation
or otherwise, the voting rights attached thereto (if any), the terms and
conditions of any share purchase or retirement plan or sinking fund, and
restrictions on the payment of dividends on any shares other than First
Preferred Shares or payment in respect of capital on any shares in the capital
of the Corporation or creation or issue of debt or equity securities; the whole
subject to filing with the Director (as defined in the Canada
Business Corporations Act or
successor legislation thereto) of Articles

 

 

of Amendment setting forth a description of such series
including the designation, rights, privileges, restrictions and
conditions attached to the shares of such series.

2.             Notwithstanding paragraph 1, the Directors of the
Corporation may at any time or from time to time change the rights, privileges,
restrictions and conditions attached to unissued shares of any series of First
Preferred Shares, subject to filing with the Director (as defined in the Canada Business Corporations Act) of Articles of Amendment
setting forth the changes in rights, privileges, restrictions and conditions
attached to the shares of such series.

3.             The First Preferred Shares of each series shall rank on
a parity with the First Preferred Shares of every other series with respect to
accumulated dividends and return of capital. The First Preferred Shares shall
be entitled to a preference over the Second Preferred Shares and the Common
Shares and over any other shares of the Corporation ranking junior to the First
Preferred Shares with respect to priority in the payment of dividends and in
the distribution of assets in the event of the liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary, or any other
distribution of the assets of the Corporation among its shareholders for the
purpose of winding-up its affairs.   If
any cumulative dividends or amounts payable on a return of capital are not paid
in full, the First Preferred Shares of all series shall participate rateably in
respect of such dividends, including accumulations, if any, in accordance with
the sums that would be payable on such shares if all such dividends were
declared and paid in full, and in respect of any repayment of capital in
accordance with the sums that would be payable on such repayment of capital if
all sums so payable were paid in full; provided, however, that in the event of
there being insufficient assets to satisfy in full all such claims as
aforesaid, the claims of the holders of the First Preferred Shares with respect
to repayment of capital shall first be paid and satisfied and any assets
remaining thereafter shall be applied towards the payment in satisfaction of
claims in respect of dividends.   The
First Preferred Shares of any series may also be given such other preferences
not inconsistent with paragraphs 1 through 5 hereof over the Second Preferred
Shares and the Common Shares and any other shares ranking junior to the First
Preferred Shares as may be determined in the case of each such series of First
Preferred Shares.

4.             The rights, privileges, restrictions and conditions
attaching to the First Preferred Shares as a class may be added to, changed or
removed but only with the approval of the holders of the First Preferred Shares
given as herein specified.

5.             The rights, privileges, restrictions and conditions
attaching to the First Preferred Shares as a class as provided herein and as
may be provided from time to time may be repealed, altered, modified, amended
or amplified or otherwise varied only with the sanction of the holders of the
First Preferred Shares given in such manner as may then be required by law,
subject to a minimum requirement that such approval be given by resolution
passed by the affirmative vote of a least two-thirds of the votes cast at a
meeting of holders of First Preferred Shares duly called for such purpose and
held upon at least twenty- one (21) days’ notice at which a quorum is present
comprising at least two persons present, holding or representing by proxy at
least twenty (20%) per cent of the outstanding First Preferred Shares.   If any such quorum is not present within
half an hour after the time appointed for the meeting, then the meeting shall
be adjourned to a date being not less than fifteen (15) days later and at such
time and place as may be appointed by the chairman and at such meeting a quorum
will consist of that number of shareholders present in person or represented by
proxy, The formalities to be observed with respect to the giving of notice of
any such meeting or adjourned meeting and the conduct thereof shall be those
which may from time to time be prescribed in the by laws of the Corporation
with respect to meetings of shareholders. On every vote taken at every such
meeting or adjourned meeting each holder of a First Preferred Share shall be
entitled to one (1) vote in respect of each one ($1) dollar of stated value of
First Preferred Shares held.

 A-2
 

 

Second Preferred Shares

1.             The Second Preferred Shares may at any time or from time
to time be issued in one or more series. Before any shares of a particular
series are issued, the Directors of the Corporation shall, by resolution, fix
the number of shares that will form such series and shall, subject to the
limitations set out herein, by resolution fix the designation, rights,
privileges, restrictions and conditions to be attached to the Second Preferred
Shares of such series, including, but without in any way limiting or
restricting the generality of the foregoing, the rate, amount or method of
calculation of dividends thereon, the time and place of payment of dividends,
the consideration for and the terms and conditions of any purchase for
cancellation, retraction or redemption thereof, conversion or exchange rights
(if any), and whether into or for securities of the Corporation or otherwise,
the voting rights attached thereto (if any), the terms and conditions of any
share purchase or retirement plan or sinking fund, and restrictions on the
payment of dividends on any shares other than Second Preferred Shares or
payment in respect of capital on any shares in the capital of the Corporation
or creation or issue of debt or equity securities; the whole subject to filing
with the Director (as defined in the Canada Business
Corporations Act or successor legislation thereto) of Articles of
Amendment setting forth a description of such series including the designation,
rights, privileges, restrictions and conditions attached to the shares of such
series.

2.             Notwithstanding paragraph 1, the Directors of the
Corporation may at any time or from time to time change the rights, privileges,
restrictions and conditions attached to unissued shares of any series of Second
Preferred Shares, subject to filing with the Director (as defined in the Canada Business Corporations Act) of Articles of Amendment
setting forth the changes in rights, privileges, restrictions and conditions
attached to the shares of such series.

3.             The Second Preferred Shares of each series shall rank on
a parity with the Second Preferred Shares of every other series with respect to
accumulated dividends and return of capital.  
The Second Preferred Shares shall be entitled to a preference over the
Common Shares and over any other shares of the Corporation ranking junior to
the Second Preferred Shares with respect to priority in the payment of
dividends and in the distribution of assets in the event of the liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
or any other distribution of the assets of the Corporation among its shareholders
for the purpose of winding-up its affairs. If any cumulative dividends or
amounts payable on a return of capital are not paid in full, the Second
Preferred Shares of all series shall participate rateably in respect of such
dividends, including accumulations, if any, in accordance with the sums that
would be payable on such shares if all such dividends were declared and paid in
full, and in respect of any repayment of capital in accordance with the sums
that would be payable on such repayment of capital if all sums so payable were
paid in full; provided, however, that in the event of there being insufficient
assets to satisfy in full all such claims as aforesaid, the claims of the
holders of the Second Preferred Shares with respect to repayment of capital shall
first be paid and satisfied and any assets remaining thereafter shall be
applied towards the payment in satisfaction of claims in respect of
dividends.   The Second Preferred Shares
of any series may also be given such other preferences not inconsistent with
paragraphs 1 through 5 hereof over the Common Shares, and any other shares
ranking junior to the Second Preferred Shares as may be determined in the case
of each such series of Second Preferred Shares.

4.             The rights, privileges, restrictions and conditions
attaching to the Second Preferred Shares as a class may be added to, changed or
removed but only with the approval of the holders of the Second Preferred
Shares given as herein specified.

5.             The rights, privileges, restrictions and conditions attaching
to the Second Preferred Shares as a class as provided herein and as may be
provided from time to time may be repealed, altered, modified, amended or
amplified or otherwise varied only with the sanction of the holders of the
Second Preferred

 A-3
 

 

Shares given in such a
manner as may then be required by law, subject to a minimum requirement that
such approval be given by resolution passed by the affirmative vote of at least
two-thirds of the votes cast at a meeting of holders of Second Preferred Shares
duly called for such purpose and held upon at least twenty one (21) days’
notice at which a quorum is present comprising at least two persons present,
holding or representing by proxy at least twenty (20%) per cent of the
outstanding Second Preferred Shares. If any such quorum is not present within
half an hour after the time appointed for the meeting, then the meeting shall
be adjourned to a date being not less than fifteen (15) days later and at such
time and place as may be appointed by the chairman and at such meeting a quorum
will consist of that number of shareholders present in person or represented by
proxy. The formalities to be observed with respect to the giving of notice of
any such meeting or adjourned meeting and the conduct thereof shall be those
which may from time to time be prescribed in the by-laws of the Corporation
with respect to meetings of shareholders. On every vote taken at every such
meeting or adjourned meeting each holder of a Second Preferred Share shall be
entitled to one (1) vote in respect of each one ($1) dollar of stated value of
Second Preferred Shares held.

 A-4

 

SCHEDULE “B”

(a)           The directors of the corporation may,
without authorization of the shareholders:

(i)            borrow
money on the credit of the Corporation;

(ii)           issue,
reissue, sell or pledge debt obligations of the Corporation;

(iii)          subject
to the Canada Business Corporations Act, give a
guarantee on behalf of the Corporation to secure performance of an obligation
of any person, and;

(iv)          mortgage,
hypothecate, pledge or otherwise create a security interest in all or any
property of the Corporation, owned or subsequently acquired, to secure any
obligation of the Corporation.

(a)           The
directors may, by resolution, delegate
the powers referred to in Subsection (a) hereof to a director, a committee of
directors or an officer.

(b)           The
directors may, between annual general meetings, appoint one or more additional
directors of the Corporation to serve until the next annual general
meeting, but the number of additional directors shall not at any time exceed
1/3 of the number of directors who held office at the expiration of the last
annual general meeting of the Corporation.

(c)           Meetings
of the shareholders may be held at any place within Canada that the directors
may determine.

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