Document:

EXHIBIT
        10.9

      
         

        Macquarie
          Capital Markets Canada Ltd.

      

       

      
        	
                181
                  Bay Street

                Brookfield
                  Place, Suite 3100

                P.O.
                  Box 830

                Toronto,
                  Ontario M5J 2T3 

                CANADA

              	
                Telephone

                Facsimile

                Internet

              	
                +1 (416)
                  848 3500

                +1 (416)
                  848 3162

                www.macquarie.com

              

      

    

    
 

    15
      January 2008

    

    
      	
              STRICTLY
                CONFIDENTIAL

            	 
	 	 
	 	 
	
              Refinery
                Science Corp.

              500
                W. University Ave.

              419
                Burges Hall

              El
                Paso, TX 79968-0685

            	 
	 	 
	
              Attention: 
                Mr David Rendina

            	 
	
              President
                and Chief Executive Officer

            	 

    

    

    Dear
      Sir,

    

    Financing
      Engagement Agreement - Extension of Engagement

    

    We
      refer
      to the Engagement Agreement entered into by Refinery Science Corp. and Orion
      Securities Inc. (now known as Macquarie Capital Markets Canada Ltd.)
      (“Macquarie”)
      on
      August 22, 2007 (the “Engagement
      Agreement”).

    

    Capitalized
      expressions used in this letter have the meanings set out in the Engagement
      Agreement, unless otherwise stated.

    

    Pursuant
      to clause 13 of the Engagement Agreement, Macquarie’s engagement was due to
      expire on December 31, 2007. The parties now wish to confirm in writing their
      agreement to extend the term of the engagement until February 28, 2008. By
      signing this letter below each of the Company and Macquarie confirm their
      agreement to vary clause 13 of the Engagement Agreement by deleting the words
      “December 31, 2007” and substituting “February 28, 2008”. 

    

    Would
      you
      please confirm your agreement to the terms of this extension letter by signing
      a
      copy of this letter and returning an original to us (Attention: Scott P. Hayduk,
      facsimile number (403) 263-9794).

    

    We
      look
      forward to working with you towards a successful conclusion to the
      Offering.

    

    Yours
      sincerely

    Macquarie
      Capital Markets Canada Ltd.

    

    

    
      	
              Lee
                A. Pettigrew

            	
              Scott
                Hayduk

            
	
              Managing
                Director

            	
              Vice
                President

            
	
              Macquarie
                Capital Advisers

            	
              Macquarie
                Capital Advisers

            

    

     

    
       

      
        

      

      Macquarie
        Capital Markets Canada Ltd. is not an authorised deposit-taking institution
        for
        the purposes of the Banking Act 1959 (Commonwealth of Australia), and Macquarie
        Capital Markets Canada Ltd.'s obligations do not represent deposits or other
        liabilities of Macquarie Bank Limited ABN 46 008 583 542. Macquarie Bank
        Limited
        does not guarantee or otherwise provide assurance in respect of the obligations
        of Macquarie Capital Markets Canada Ltd.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	Macquarie
              Capital Markets Canada Ltd.	
              2 

            

    

    
 

    Accepted
      for and on behalf of Refinery Science Corp.:

    

    

    Signature:___________________________________________

    

    Name:______________________________________________

    

    Title:_______________________________________________

    

    Date:_______________________________________________

     

    (The
      Signatory warrants that he/she is duly authorised by Refinery Science Corp.
      to
      enter into this agreement on its behalf).EXHIBIT
      10.10

     

    OPERATING
      AGREEMENT

     

    THIS
      OPERATING AGREEMENT (the “Agreement”) is made as of the 12th day of November,
      2007 (the “Effective
      Date”),
      by
      and among Refinery Science Corporation, a corporation duly formed and existing
      under the laws of Texas, USA (“RESI”);
      Cancen Oil Processors Inc., a corporation duly formed and existing under the
      laws of Alberta, Canada (“COPI”);
      and
      Upgrader Marketing Inc., a corporation duly formed and existing under the laws
      of Alberta, Canada (“UMI”).
      RESI,
      COPI and UMI, and their respective successors and assignees, if any, may
      sometimes individually be referred to as “Party” and collectively as the
“Parties”. 

    

    WITNESSETH:

    

    WHEREAS,
      the Parties have entered into that certain non-binding Memorandum of
      Understanding dated August 15, 2007, to form a business relationship with
      respect to the upgrading, marketing and sale of heavy crude oil;

    

    WHEREAS,
      RESI has exclusive rights to certain patented and patent pending intellectual
      property related to upgrading crude oil and production of steam useful in oil
      production throughout the world, and has developed, constructed, and
      demonstrated the unique upgrader technology to a pilot level and derived data
      sufficient to warrant commercial demonstration;

    

    WHEREAS,
      COPI has demonstrated expertise in oil processing site preparation, operation,
      and permitting and owns an oil processing site complete with power, disposal
      wells tankage, and where both heavy oil and light oil lines transverse the
      property and adjacent undeveloped property;

    

    WHEREAS,
      UMI has demonstrated expertise in transportation, logistics, purchasing and
      marketing crude and refined petroleum products and electricity;

    

    WHEREAS,
      the parties wish to contribute their skills and resources to a project to build,
      operate, and share profits from a facility used to upgrade crude oil and produce
      electric power in the Province of Alberta; and

    

    WHEREAS,
      the Parties desire to define their respective rights and obligations with
      respect to the foregoing recitals;

    

    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

    

    As
      used
      in this Agreement, the following words and terms shall have the meaning ascribed
      to them below:

    

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

            

    

    

    
      	
              1.2

            	
              AFE
                means an authorization for expenditure pursuant to Article
                6.7.

            

    

     

    
      	
              1.3

            	
              Affiliate
                means a legal entity which Controls, or is Controlled by, or which
                is
                Controlled by an entity which Controls, a Party.
                

            

    

     

    
      	
              1.4

            	
              Agreed
                Interest Rate
                means interest compounded on a semi-annual basis means the prime
                lending
                rate of the Bank of Montreal as published from time to time plus
                2
                percentage points 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. 

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
              1.5

            	
              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.

            

    

     

    
      	
              1.6

            	
              Business
                Day
                means a Day on which the banks in Edmonton, Alberta are customarily
                open
                for business.

            

    

     

    
      	
              1.7

            	
              Calendar
                Quarter
                means a period of three (3) months commencing with January 1 and
                ending on the following March 31, a period of three (3) months commencing
                with April 1 and ending on the following June 30, a period of three
                (3)
                months commencing with July 1 and ending on the following September
                30, or a period of three (3) months commencing with October 1 and
                ending
                on the following December 31.

            

    

     

    
      	
              1.8

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

            

    

     

    
      	
              1.9

            	
              Consequential
                Loss
                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
                similar to the foregoing. 

            

    

     

    
      	
              1.10

            	
              Control
                means the ownership directly or indirectly of more than fifty (50)
                percent
                of the voting rights in a legal entity. “Controls”,
                “Controlled
                by”, “in common Control with”
                and other derivatives shall be construed accordingly.
                

            

    

    

    
      	
              1.11

            	
               Crude
                Oil
                means all crude oils, condensates, and natural gas liquids at atmospheric
                pressure which are used in Joint
                Operations.

            

    

     

    
      	
              1.12

            	
              Day
                means a calendar day unless otherwise specifically
                provided.

            

    

     

    
      	
              1.13

            	
              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 this Agreement or
                the
                operations carried out under this Agreement, including any dispute
                as to
                the construction, validity, interpretation, enforceability or breach
                of
                this Agreement. 

            

    

     

    
      	
              1.14

            	
              Entitlement
                means that quantity of upgraded 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 this Agreement,
                as
                such rights and obligations may be adjusted by the terms of any blending
                and other disposition agreements entered into pursuant to Article
                8.

            

    

     

    
      	
              1.15

            	
              Environmental
                Loss
                means any loss, damages, costs, expenses or liabilities (other than
                Consequential Loss) caused by a discharge of Hydrocarbons, pollutants
                or
                other contaminants into or onto any medium (such as land, surface
                water,
                ground water and/or air) 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.
                

            

    

     

    
      	
              1.16

            	
              Exclusive
                Operation
                means those operations and activities carried out pursuant to this
                Agreement, the costs of which are chargeable to the account of less
                than
                all the Parties.

            

    

     

    
      	
              1.17

            	
              Government
                means the government of Canada and any political subdivision, agency
                or
                instrumentality thereof.

            

    

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    
      	
              1.18

            	
              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.
                

            

    

     

    
      	
              1.19

            	
              Hydrocarbons
                means all substances which are subject to and covered by the Joint
                Operations, including, but not limited to, upgraded hydrocarbons,
                Crude
                Oil and Natural Gas, and all electricity and other energy produced
                in
                connection with the Joint
                Operations.

            

    

     

    
      	
              1.20

            	
              Joint
                Account
                means the accounts maintained by Operator in accordance with the
                provisions of this Agreement, including the Accounting
                Procedure.

            

    

     

    
      	
              1.21

            	
              Joint
                Operations
                means those operations and activities carried out by Operator and
                Parties
                pursuant to this Agreement, the costs of which are chargeable to
                all
                Parties.

            

    

     

    
      	
              1.22

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

            

    

     

    
      	
              1.23

            	
              Laws
                / Regulations
                means those laws, statutes, rules and regulations governing activities
                under this Agreement.

            

    

     

    
      	
              1.24

            	
              Natural
                Gas
                means all gaseous hydrocarbons (including wet gas, dry gas and residue
                gas) which are subject to and covered by the Joint Operations, but
                excluding Crude Oil.

            

    

     

    
      	
              1.25

            	
              Non-Consenting
                Party
                means each Party who elects not to participate in an Exclusive Operation.
                

            

    

     

    
      	
              1.26

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

            

    

     

    
      	
              1.27

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

            

    

     

    
      	
              1.28

            	
              Operator
                means a Party to this Agreement designated as such in accordance
                with
                Articles 4 or 7.12(F). 

            

    

     

    
      	
              1.29

            	
              Participating
                Interest
                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 Parties’ interest in this Agreement.
                

            

    

     

    
      	
              1.30

            	
              Security
                means (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 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.

            

    

     

    
      	
              1.31

            	
              Senior
                Supervisory 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,
                any manager who directly reports to such senior resident manager,
                and, in
                any of the above alternatives, any individual who functions for such
                Party
                or one of its Affiliates at a management level equivalent to or superior
                to the tier selected, or any officer or director of such Party or
                one of
                its Affiliates.

            

    

     

    
      	
              1.32

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

            

    

     

    
      	
              1.33

            	
              Work
                Program and Budget
                means a work program for Joint Operations and budget therefor as
                described
                and approved in accordance with Article
                6.

            

    

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    ARTICLE
      2

    EFFECTIVE
      DATE, TERM AND FORMATION OF CORPORATION

     

    
      	2.1	
              Scope

            

    

     

    This
      Agreement shall have effect from the Effective Date (as defined in the preamble
      to this Agreement) and shall continue in effect until the following occur in
      accordance with the terms of this Agreement: all materials, equipment and
      personal property used in connection with Joint Operations or Exclusive
      Operations have been disposed of or removed; 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 4.5, Article 7, Article 12.2, Article 15 and the
      indemnity obligation under Article 16.1 (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 such termination. 

     

    
      	2.2	
              Organization
                and Formation of
                Corporation

            

    

     

    The
      Parties hereby agree to, as soon as practicable, organize and form an Alberta
      corporation with the name “Alberta Upgrader Energy Inc.” (the “Operating
      Corporation”)
      under
      which all activities under this Agreement shall be performed by the Parties
      and
      in which the rights and privileges of the Parties, as agreed to in this
      Agreement, shall be embodied. The Parties shall execute and file such
      instruments as are necessary to form the Operating Corporation and shall file
      any necessary amendments to reflect the formal agreements contained herein.
      The
      Parties further agree that both (i) until such time as the Operating Corporation
      is formed and (ii) after the Operating Corporation is formed, the terms and
      conditions of this Agreement shall governing the relationship of the Parties,
      and any Articles of Incorporation or other charter document, Bylaws or other
      governance document, or any agreement by and between the Operating Corporation
      and any of the Parties, shall not contain terms or conditions which conflict
      with or are otherwise inconsistent with this Agreement.

     

    ARTICLE
      3

    SCOPE

     

    
      	3.1	
              Scope
                and General
                Responsibilities

            

    

     

    
      	 	
              (A)

            	
              The
                purpose of this Agreement is to establish the respective rights and
                obligations of the Parties with regard to the construction, operation
                and
                distribution of profits from a facility used to upgrade crude oil
                and
                other Hydrocarbons, and produce electric power, in the Province of
                Alberta, Canada. The facility shall be built in 1000 barrel per day
                increments, with a maximum production capacity of 6000 barrels of
                processed oil per day at the existing COPI processing site located
                in
                Alberta, Canada. The general responsibilities of the Parties are
                as
                follows:

            

    

     

    
      	 	
              (1)

            	
              RESI
                shall be responsible for all issues directly related to the construction,
                operation, and maintenance of any crude oil upgraders and power generation
                facilities. RESI shall also pay all costs associated with design,
                development, and construction of the first 1,000 barrel per day upgrader
                and 5 megawatt power unit. Delivery shall be made FOB to the COPI
                plant
                site. Additionally, RESI shall be responsible for all costs in connection
                with delivering an operational upgrader. All costs of maintaining
                any
                upgrader shall be borne by the Operating
                Corporation.

            

    

     

    
      	 	
              (2)

            	
              COPI
                shall be responsible for all issues directly related to the facility
                site.
                COPI shall provide all necessary permits and pay all costs necessary
                to
                prepare a suitable space on their current site to locate the first
                1,000
                barrel/day upgrader unit, and space for one 5 megawatt steam
                turbine/electrical generator. COPI shall be responsible for all costs
                for
                two 1,000 barrels oil storage tanks and all costs required to connect
                the
                facility to oil pipelines, the electrical transmission grid, and
                utilities.

            

    

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    
      	 	
              (3)

            	
              UMI
                shall (i) advance up to $500,000 to pay for operating costs in each
                of the
                first two years of the Operating Corporation, as and when required
                by the
                Operating Committee and (ii) be responsible for all issues related
                directly to the acquisition, distribution, and sale of petroleum
                products
                and electricity produced at the facility. UMI shall bear all costs
                required to prepare initial energy sales contracts and bid documents
                with
                the Province of Alberta, Canada, and to arrange for feedstock delivery
                to
                the facility and pipeline distribution of upgraded petroleum products
                from
                the facility to customers.

            

    

     

    
      	 	
              (B)

            	
              After
                successful technical and economic demonstration of the first 1000
                barrel/day upgrader unit, the Parties intend that the decision to
                expand
                the project to include facilities capable of processing up to an
                additional 5000 barrels/day of upgraded crude oil will be determined
                by a
                vote of the Operating Committee, pursuant to the terms and conditions
                of
                this Agreement. Should the Operating Committee vote to expand the
                project
                as described, then RESI shall provide to the Joint Operations the
                required
                additional upgraders at a purchase price equal to the sum of (i) the
                product cost (the “Product Cost”) for any additional upgraders, which
                shall be defined as:  direct materials cost, direct labor and an
                agreed 15% for administration costs plus 15% of the aforesaid total. 
                Product cost will be subject to acceptance of all invoices by
                the Operating Corporation. All purchase prices shall be ex works
                RESI, and
                the Operating Corporation shall be responsible for all freight, duty
                and
                insurance costs regarding any shipment of additional upgraders. All
                purchase prices shall be ex works RESI, and the Operating Corporation
                shall be responsible for all freight, duty and insurance costs regarding
                any shipment of additional upgraders.  The price of the first
                upgrader should be verified to satisfaction of the parties and the
                same
                procedure with any other upgrader and COPI shall provide a suitable
                site
                to the Joint Operations, at prevailing commercial lease rates or
                sell the
                parties sufficient suitable real property, at fair value, to expand
                the
                Joint Operations. In addition, should the Operating Committee vote
                not to
                proceed with the described expansion, COPI and/or UMI shall have
                180 days
                after commissioning of the first 1,000 barrel/day operation to elect
                to
                continue the expansion of the project independently subject to providing
                to RESI written evidence of financing available to COPI to purchase
                a
                minimum 1,000 to a maximum of 5,000 barrel/day upgrader and placement
                of
                an agreed non-refundable deposit to RESI for commencement of construction,
                design, and engineering of the additional upgraders. COPI and/or
                UMI shall
                continue to have the right to expand the site up to a maximum of
                incremental 5,000 barrel/day upgrader 180 days after each minimum
                expansion of 1,000 barrel/day up to this maximum. Notwithstanding
                the
                aforementioned any increments greater than 1,000 barrels/day prior
                to
                completion of subsequent 1,000 barrels/day expansion must have unanimous
                consent of all the Parties to this agreement.

            

    

    

    
      	
            	(C)	
              For
                greater certainty, the Parties confirm that the rights to construct,
                operate and distribute profits from a facility using technology licensed
                from RESI to upgrade crude oil and other Hydrocarbons, and produce
                electric power or other energy outside of the existing COPI sites
                located
                in the Province of Alberta, Canada, are outside of the scope of this
                Agreement and are not addressed herein. 

            

    

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    
      	3.2	
              Participating
                Interest; Distribution of Net Profits; Entitlement
                Amounts

            

    

    

    
      	 	
              (A)

            	
              The
                Participating Interests of the Parties as of the Effective Date are:
                

            

    

     

    RESI  45%

    COPI  45%

    UMI  10%

     

    
      	 	
              (B)

            	
              If
                a Party transfers all or part of its Participating Interest pursuant
                to
                the provisions of this Agreement, the Participating Interests of
                the
                Parties shall be revised
                accordingly.

            

    

     

    
      	 	
              (C)

            	
              The
                Parties acknowledge that capital expenditures for the delivery and
                operation of the first 1000 barrel/day upgrader are expected to be
                proportionally higher for RESI than for COPI and UMI (estimated at
                approximately 78% for RESI,
                15% for COPI, and 7% for UMI). Accordingly, the net profits (total
                revenues from the sale of Hydrocarbons and of all other operations,
                less
                the cost of feedstock, transportation, operating and maintenance
                costs and
                other costs customarily determined in connection with determining
                net
                profits) of the Operating Corporation shall be distributed on a pro
                rata
                basis based on the contribution of the parties, until such time as
                the
                Parties have recovered their respective capital investments in the
                Joint
                Operations plus the Agreed Interest Rate. Thereafter, the net profits
                of
                the Operating Corporation shall be distributed to the parties in
                accordance with their respective Participating Interests, i.e.,
                (i) 45% of net profits to RESI, (ii) 45% of net profits to
                COPI and
                (iii) 10% of net profits to UMI. 

            

    

    

    
      	 	
              (D)

            	
              Each
                Party shall have title and rights to its Entitlement in an amount
                equal to
                the amount of net profits that such Party has rights under this Article
                3.2.

            

    

    

    3.3 Ownership,
      Obligations and Liabilities

    

    
      	 	
              (A)

            	
              Unless
                otherwise provided in this Agreement, all Joint Property, and any
                Hydrocarbons produced from the Joint Operations shall be owned by
                the
                Parties in accordance with their respective Participating
                Interests.

            

    

     

    
      	 	
              (B)

            	
              Unless
                otherwise provided in this Agreement, all liabilities and expenses
                incurred by Operator in connection with Joint Operations 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.

            

    

     

    
      	 	
              (D)

            	
              RESI
                will make available to the Operating Corporation all improvements,
                advances, changes which are developed in connection with any upgrader
                and
                the up-grading technology.

            

    

     

    ARTICLE
      4

    OPERATOR

     

    
      	
              4.1

            	
              Designation
                of Operator

            

    

     

    COPI
      is
      designated as Operator and agrees to act as such in accordance with this
      Agreement.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    
      	
              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 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 this Agreement,
                the
                Laws / Regulations, this Agreement, 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 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 set out in Article 5, and
                prepare
                and submit to the Operating Committee proposed Work Programs and
                Budgets
                and (if required) AFEs, as provided in Article
                6;

            

    

     

    
      	 	
              (6)

            	
              acquire
                all licenses, permits, consents, approvals 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 Joint Operations in full force and effect in accordance
                with
                such good and prudent petroleum industry practices as are generally
                followed by the Alberta petroleum industry under similar circumstances.
                Operator shall timely pay and discharge all liabilities and expenses
                incurred in connection with Joint Operations and use its reasonable
                endeavors 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 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)

            	
              have,
                in accordance with any decisions of the Operating Committee, the
                exclusive
                right and obligation to represent the Parties in all dealings with
                the
                Government with respect to matters arising under this Agreement and
                Joint
                Operations. Operator shall notify the other Parties as soon as possible
                of
                such meetings. Subject to this Agreement and any necessary Government
                approvals, Non-Operators shall have the right to attend any 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 this
                Agreement, but in such event such Party shall promptly advise the
                Parties,
                if possible, before and in any event promptly after such discussions,
                provided that such Party shall not be required to divulge to the
                Parties
                any matters discussed to the extent the same involve proprietary
                information or matters not affecting the
                Parties;

            

    

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    
      	 	
              (11)

            	
              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; and (ii) as soon as reasonably
                practicable, report to Non-Operators the details of such event and
                any
                measures Operator has taken or plans to take in response
                thereto;

            

    

     

    
      	 	
              (12)

            	
              establish
                and implement pursuant to Article 4.12 an HSE plan to govern Joint
                Operations which is designed to ensure compliance with applicable
                HSE
                laws, rules and regulations and this
                Agreement;

            

    

     

    
      	 	
              (13)

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

            

    

     

    
      	 	
              (a)

            	
              establish
                that such contractors 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(H).

            

    

     

    
      	
              4.3

            	
              Information
                Supplied by Operator

            

    

     

    
      	 	
              (A)

            	
              Operator
                shall provide Non-Operators with the following data and reports (to
                the
                extent to be charged to the Joint Account) as they are currently
                produced
                or compiled from Joint Operations:

            

    

     

    
      	 	
              (1)

            	
              copies
                of all purchase orders, contracts or other documentation evidencing
                the
                purchase or supply of Crude Oil or other Hydrocarbons, in both paper
                and
                digitally recorded format.

            

    

     

    
      	 	
              (2)

            	
              daily
                processing reports of Hydrocarbons, including all disposals to disposal
                wells with reconciliations to daily sales reports of upgraded
                Hydrocarbons

            

    

     

    
      	 	
              (3)

            	
              copies
                of all test and analysis reports of Hydrocarbons supplied and upgraded
                Hydrocarbons sold

            

    

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    
      	 	
              (4)

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

            

    

     

    
      	 	
              (5)

            	
              as
                requested by a Non-Operator, (i) copies of all material reports relating
                to Joint Operations furnished by Operator to the Government; and
                (ii)
                other material studies and reports relating to Joint Operations;
                

            

    

     

    
      	 	
              (6)

            	
              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

            

    

     

    
      	 	
              (7)

            	
              other
                reports as directed by the Operating
                Committee.

            

    

     

    
      	 	
              (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. 

            

    

     

    
      	
              4.5

            	
              Settlement
                of Claims and
                Lawsuits

            

    

     

    
      	 	
              (A)

            	
              Operator
                shall promptly notify the Parties of any and all material claims
                or suits
                that relate in any way to Joint Operations. 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
                of
                Five Thousand ($5,000) U.S. dollars, exclusive of legal fees. Operator
                shall obtain the approval and direction of the Operating Committee
                on
                amounts in excess of the above-stated amount. Without prejudice to
                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 defense
                of
                such claims or suits.

            

    

     

    
      	 	
              (B)

            	
              Any
                Non-Operator shall promptly notify the other Parties of any claim
                made
                against such Non-Operator by a third party that arises out of or
                may
                affect the Joint Operations, and such Non-Operator shall defend or
                settle
                the same in accordance with any directions given by the Operating
                Committee. Those costs, expenses and damages incurred pursuant to
                such
                defense or settlement which are attributable to Joint Operations
                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, defense 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.

            

    

     

    
      	
              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).

            

    

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    
      	 	
              (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 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).
                

            

    

     

    
      	 	
              (C)

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

            

    

     

    
      	 	
              (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.

            

    

    

    
      	 	
              (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.

            

    

    

    
      	 	
              (C)

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

            

    

    

    
      	 	
              (1)

            	
              use
                reasonable endeavors 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 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 favor of all the Parties but only with
                respect
                to their interests under this
                Agreement;

            

    

    

    
      	 	
              (4)

            	
              use
                reasonable endeavors 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

            

    

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    
      	 	
              (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.

            

    

    

    
      	 	
              (H)

            	
              Operator
                shall use its reasonable endeavors to require all contractors performing
                work with respect to Joint Operations to:

            

    

    

    
      	 	
              (1)

            	
              obtain
                and maintain any and all insurance in the types and amounts required
                by
                the Laws / Regulations or any decision of the Operating
                Committee;

            

    

    

    
      	 	
              (2)

            	
              name
                the Parties as additional insureds on the contractor’s 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 

            

    

     

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

     

    The
      Operating Committee may decide that monies Operator receives for the Joint
      Account shall be deposited in an interest-bearing account at any
      time. Interest
      earned shall be allocated among the Parties on an equitable basis taking into
      account the date of the 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 the Operating Committee, pay it to the Parties.

     

    
      	
              4.9

            	
              Resignation
                of Operator

            

    

     

    Subject
      to Article 4.11, Operator may resign as Operator at any time by so notifying
      the
      other Parties at least one hundred and twenty (120) Days prior to the effective
      date of such resignation.

     

    
      	
              4.10

            	
              Removal
                of Operator

            

    

     

    
      	 	
              (A)

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

            

    

     

    
      	 	
              (1)

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

            

    

     

    
      	 	
              (2)

            	
              an
                order is made by a court or an effective resolution is passed for
                the
                reorganization under any bankruptcy law, dissolution, liquidation,
                or
                winding up of Operator; 

            

    

     

    
      	 	
              (3)

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

            

    

     

    
      	 	
              (4)

            	
              Operator
                dissolves, liquidates, is wound up, or otherwise terminates its existence.
                

            

    

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    
      	 	
              (B)

            	
              Subject
                to Article 4.11, Operator may be removed by the decision of the
                Non-Operators if Operator has committed a material breach of this
                Agreement and has either failed to commence to cure that breach within
                thirty (30) Days of receipt of a notice from Non-Operators detailing
                the
                alleged breach or 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 (1) or more of the total number of Non-Operators holding
                a
                combined Participating Interest of at least fifty and one-tenth percent
                (50.10%). However, if Operator disputes such alleged commission of
                or
                failure to cure a material breach and dispute or claim resolution
                proceedings are initiated 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 7.3 with respect to Operator’s breach of its payment
                obligations.

            

    

     

    
      	 	
              (C)

            	
              If
                Operator together with any Affiliates of Operator is or becomes the
                holder
                of a Participating Interest of less than forty-five percent (45%),
                then
                Operator shall be required to promptly notify the other Parties.
                The
                Operating Committee 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.

            

    

     

    
      	 	
              (D)

            	
              If
                there is a direct or indirect change in Control of Operator (other
                than a
                transfer of Control to an Affiliate of Operator), Operator shall
                be
                required to promptly notify the other Parties. The Operating Committee
                shall vote within thirty (30) Days of such notification on whether
                or not
                a successor Operator should be named pursuant to Article
                4.11.

            

    

     

    
      	 	
              (E)

            	
              Subject
                to Article 4.11, Operator may be removed at any time without cause
                by the
                affirmative vote of one (1) or more of the total number of Non-Operators
                holding a combined Participating Interest of at least fifty and one
                tenth
                percent (50.10%).

            

    

     

    
      	
              4.11

            	
              Appointment
                of Successor

            

    

     

    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.

            

    

     

    
      	 	
              (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 directly related to its resignation
                or
                removal, except in the case of 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
                both
                Crude oil and Upgraded Hydrocarbons located in tanks at site, 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.

            

    

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    
      	 	
              (F)

            	
              Upon
                the effective date of the resignation or removal, the successor Operator
                shall succeed to all duties, rights and authority prescribed for
                Operator.
                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 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.

            

    

     

    
      	
              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 an 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)

            	
              The
                Operating Committee shall be provided by Operator, on an annual basis,
                with an HSE letter of assurance providing adequate evidence that
                an 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 and implement
                a
                program for regular HSE assessments. The purpose of such assessments
                is to
                periodically review HSE systems and procedures, including actual
                practice
                and performance, to verify that the HSE plan is being implemented
                in
                accordance with the policies and standards of the HSE plan. Operator
                shall, at a minimum, conduct such an assessment before entering into
                significant new Joint Operations and before undertaking any major
                changes
                to existing Joint Operations. Upon reasonable notice given to Operator,
                Non-Operators shall have the right to participate in such HSE
                assessments.

            

    

    

    
      	 	
              (D)

            	
              Operator
                shall require its contractors, consultants and agents undertaking
                activities for the Joint Account 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 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.

            

    

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    
      	 	
              (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 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

            

    

     

    To
      provide for the overall supervision and direction of Joint Operations, there
      is
      established an Operating Committee composed of representatives of each Party
      holding a Participating Interest. Each Party shall appoint one (1)
      representative and one (1) alternate representative to serve on the Operating
      Committee. Each Party shall as soon as possible after the date of this Agreement
      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 notice of such change to the other Parties. 

     

    
      	
              5.2

            	
              Powers
                and Duties of Operating
                Committee

            

    

     

    The
      Operating Committee shall have power and duty to authorize and supervise Joint
      Operations that are necessary or desirable to fulfill the purpose of this
      Agreement and in a manner appropriate in the circumstances.

     

    
      	
              5.3

            	
              Authority
                to Vote

            

    

     

    The
      representative of a Party, or in his absence his alternate representative,
      shall
      be authorized 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.

     

    
      	
              5.4

            	
              Subcommittees

            

    

     

    The
      Operating Committee may establish such subcommittees, including technical
      subcommittees, as the Operating Committee may deem appropriate. The functions
      of
      such subcommittees shall be in an advisory capacity or as otherwise determined
      unanimously by the Parties. Each Party shall have the right to appoint a
      representative to each subcommittee. 

     

    
      	
              5.5

            	
              Notice
                of Meeting

            

    

     

    Any
      Party
      may call a meeting of the Operating Committee by giving notice to the Parties
      at
      least five (5) Days in advance of such meeting. Such five-day notice period
      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 a Party
                shall contain:

            

    

     

    
      	 	
              (1)

            	
              the
                date, time and location of the meeting;

            

    

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    
      	 	
              (2)

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

            

    

     

    
      	 	
              (3)

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

            

    

     

    
      	 	
              (B)

            	
              A
                Party, by notice to the other Parties given not less than two (2)
                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 proposal not contained
                in
                such meeting agenda.

            

    

     

    
      	
              5.7

            	
              Location
                of Meetings

            

    

     

    All
      meetings of the Operating Committee shall be held in Calgary, Alberta, Canada,
      or elsewhere as the Operating Committee may decide. Any member of the Operating
      Committee may attend a meeting of the Operating Committee by telephone
      conference call.

     

    
      	
              5.8

            	
              Operator’s
                Duties for Meetings

            

    

     

    
      	 	
              (A)

            	
              With
                respect to meetings of the Operating Committee and any subcommittee,
                the
                duties of a Party who calls a meeting of the Operating Committee
                shall
                include: 

            

    

     

    
      	 	
              (1)

            	
              timely
                preparation and distribution of the agenda;

            

    

     

    
      	 	
              (2)

            	
              organization
                and conduct of the meeting; and

            

    

     

    
      	 	
              (3)

            	
              preparation
                of a written record or minutes of each meeting.

            

    

     

    
      	 	
              (B)

            	
              Operator
                shall have the right to appoint the chairman of the Operating Committee
                and all subcommittees.

            

    

     

    
      	
              5.9

            	
              Voting
                Procedure

            

    

     

    Except
      as
      otherwise expressly provided in this Agreement, all decisions, approvals and
      other actions of the Operating Committee on all proposals coming before it
      shall
      be decided by the affirmative vote of one (1) or more Parties which are not
      Affiliates then having collectively at least fifty and one-tenth percent
      (50.10%) of the Participating Interests.

     

    
      	
              5.10

            	
              Record
                of Votes

            

    

     

    The
      chairman of the Operating Committee shall appoint a secretary who shall make
      a
      record of each proposal voted on and the results of such voting at each
      Operating Committee meeting. Each representative 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) Business Days after the end of the
      meeting. Each Party shall have fifteen (15) Days after receipt of such minutes
      to give notice to the secretary of its objections to the minutes. A failure
      to
      give notice specifying objection to such minutes within said fifteen (15) Day
      period shall be deemed to be approval of such minutes. In any event, the votes
      recorded under Article 5.10 shall take precedence over the minutes described
      above.

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    
      	
              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 and whether Operator considers
                such
                operational matter 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 notice to Operator and the other Parties within one of the
                following appropriate time periods after receipt of Operator’s notice:
                

            

    

     

    
      	 	
              (1)

            	
              Twelve
                (12) hours in the case of operations which involve the use of equipment
                that is standing by and such other operational matters reasonably
                considered by Operator to require by their nature urgent determination
                (such operations and matters being referred to as “Urgent
                Operational Matters”);
                and

            

    

     

    
      	 	
              (2)

            	
              Three
                (3) Days in the case of all other
                proposals.

            

    

     

    
      	 	
              (B)

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

            

    

     

    
      	 	
              (C)

            	
              Except
                as provided in Article 9, any Party failing to communicate its vote
                in a
                timely manner shall be deemed to have voted for 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.

     

    ARTICLE
      6

    WORK
      PROGRAMS AND BUDGETS

     

    
      	
              6.1

            	
              Plan
                of Operations

            

    

     

    
      	 	
              (A)

            	
              Within
                thirty (30) Days after the Effective Date, Operator shall deliver
                to the
                Parties a proposed Work Program and Budget detailing the Joint Operations
                to be performed for the remainder of the current Calendar Year and,
                if
                appropriate, for the following Calendar Year. Within fifteen (15)
                Days of
                such delivery, the Operating Committee shall meet to consider and
                to
                endeavor to agree on a Work Program and
                Budget.

            

    

     

    
      	 	
              (B)

            	
              On
                or before the 15th Day of September of each Calendar Year, Operator
                shall
                deliver to the Parties a proposed Work Program and Budget detailing
                the
                Joint Operations to be performed for the following Calendar Year.
                Within
                fifteen (15) Days of such delivery, the Operating Committee shall
                meet to
                consider and to endeavor to agree on a Work Program and Budget.
                

            

    

     

    
      	 	
              (C)

            	
              If
                within the time periods prescribed in this Article 6.1 the Operating
                Committee is unable to agree on such a Work Program and Budget, then
                the
                proposal capable of satisfying the Joint Operations for the Calendar
                Year
                in question that receives the largest Participating Interest vote
                (even if
                less than the applicable percentage under Article 5.9) shall be deemed
                adopted as part of the annual Work Program and Budget. If competing
                proposals receive equal votes, then Operator shall choose between
                those
                competing proposals. 

            

    

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    
      	 	
              (D)

            	
              Any
                approved Work Program and Budget may be revised by the Operating
                Committee
                from time to time. To the extent such revisions are approved by the
                Operating Committee, the Work Program and Budget shall be amended
                accordingly. 

            

    

     

    
      	
              6.3

            	
              Production

            

    

     

    On
      or
      before the 15th Day of September of each Calendar Year, Operator shall deliver
      to the Parties a proposed thorough put processing of hydrocarbons schedule,
      Work
      Program and Budget detailing the Joint Operations to be performed and the
      projected production and sales schedule for the following Calendar Year. Within
      fifteen (15) Days of such delivery, the Operating Committee shall agree upon
      a
      production Work Program and Budget.

     

    
      	
              6.4

            	
              Itemization
                of Expenditures

            

    

     

    
      	 	
              (A)

            	
              During
                the preparation of the proposed Work Programs and Budgets contemplated
                in
                this Article 6, Operator shall consult with the Operating Committee
                or the
                appropriate subcommittees regarding the contents of such Work Programs
                and
                Budgets.

            

    

     

    
      	 	
              (B)

            	
              Each
                Work Program and Budget submitted by Operator shall contain an itemized
                estimate of the costs of Joint Operations and all other expenditures
                to be
                made for the Joint Account during the Calendar 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;
                and

            

    

     

    (3) contain
      an estimate of funds to be expended by Calendar Quarter; and

    

     

    
      	 	
              (C)

            	
              The
                Work Program and Budget shall specify the kind and extent of such
                operations in such detail as the Operating Committee may deem
                suitable.

            

    

     

    
      	
              6.5

            	
              Multi-Year
                Work Program and
                Budget

            

    

     

    Any
      work
      that cannot be efficiently completed within a single Calendar Year may be
      proposed in a multi-year Work Program and Budget. Upon approval by the Operating
      Committee, such multi-year Work Program 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 Program and Budget. 

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    
      	
              6.6

            	
              Contract
                Awards

            

    

     

    Operator
      shall award contracts to the best qualified contractor as determined by cost
      and
      ability to perform the contract without the obligation to tender and without
      informing or seeking the approval of the Operating Committee, except that before
      entering into contracts with Affiliates of Operator exceeding Five Thousand
      ($5,000) U.S. Dollars, Operator shall obtain the approval of the Operating
      Committee.

     

    
      	 	
              6.7

            	
              Authorization
                for Expenditure (“AFE”)
                Procedure

            

    

     

    
      	 	
              (A)

            	
              Prior
                to incurring any commitment or expenditure for the Joint Account,
                which is
                estimated to be in excess of Five Thousand ($5,000) U.S. Dollars
                in a
                development or production Work Program and Budget, Operator shall
                send to
                each Non-Operator an AFE as described in Article 6.7(C).
                

            

    

     

    
      	 	
              (B)

            	
              Prior
                to making any expenditures or incurring any commitments for work
                subject
                to the AFE procedure in Article 6.7(A), Operator shall obtain the
                approval of the Operating Committee. If the Operating Committee approves
                an AFE for the operation within the applicable time period under
                Article
                5.12(A), Operator shall be authorized to conduct the operation under
                the
                terms of this Agreement. If the Operating Committee fails to approve
                an
                AFE for the operation within the applicable time period, the operation
                shall be deemed rejected. When an operation is rejected under this
                Article
                6.7(B) or an operation is approved for differing amounts than those
                provided for in the applicable line items of the approved Work Program
                and
                Budget, the Work Program and Budget shall be deemed to be revised
                accordingly.

            

    

     

    
      	 	
              (C)

            	
              Each
                AFE proposed by Operator shall:

            

    

     

    
      	 	
              (1)

            	
              identify
                the operation by specific reference to the applicable line items
                in the
                Work Program and Budget;

            

    

     

    
      	 	
              (2)

            	
              describe
                the work in detail;

            

    

     

    
      	 	
              (3)

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

            

    

     

    
      	 	
              (4)

            	
              outline
                the proposed work schedule;

            

    

     

    
      	 	
              (5)

            	
              provide
                a timetable of expenditures, if known;
                and

            

    

     

    
      	 	
              (6)

            	
              be
                accompanied by such other supporting information as is necessary
                for an
                informed decision.

            

    

     

    
      	6.8	
              Overexpenditures
                of Work Programs and
                Budgets

            

    

     

    
      	 	
              (A)

            	
              For
                expenditures on any line item of an approved Work Program and Budget,
                Operator shall be entitled to incur without further approval of the
                Operating Committee an overexpenditure for such line item up to ten
                percent (10%) of the authorized amount for such line item; provided
                that
                the cumulative total of all overexpenditures for a Calendar Year
                shall not
                exceed five percent (5%) of the total annual Work Program and Budget
                in
                question.

            

    

     

    
      	 	
              (B)

            	
              At
                such time Operator reasonably anticipates the limits of Article 6.8(A)
                will be exceeded, Operator shall furnish to the Operating Committee
                a
                supplemental AFE for the estimated expenditures for the Operating
                Committee’s approval, and Operator shall provide reasonable details of
                such overexpenditures. The Work Program and Budget shall be revised
                accordingly and the overexpenditures permitted in Article 6.8(A)
                shall be
                based on the revised Work Program and Budget. Operator shall promptly
                give
                notice of the amounts of overexpenditures when actually
                incurred.

            

    

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

    
      	 	
              (C)

            	
              The
                restrictions contained in this Article 6 shall be without prejudice
                to
                Operator’s rights to make expenditures for Urgent Operational Matters and
                measures set out in Article 12.5 without the Operating Committee’s
                approval.

            

    

     

    ARTICLE
      7

    DEFAULT

     

    
      	
              7.1

            	
              Default
                and Notice

            

    

     

    
      	
            	(A)	
              Except
                with respect to the first upgrader delivered by RESI, 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 this Agreement;
                

            

    

     

    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 7, “Default
                Period”
                means the period beginning five (5) Business Days from the date that
                the
                Default Notice is issued in accordance with this Article 7.1 and
                ending
                when all the Defaulting Party’s defaults pursuant to this Article 7.1 have
                been remedied in full. 

            

    

     

    
      	
              7.2

            	
              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 11.1) all or part of its Participating Interest,
                except to non-defaulting Parties in accordance with this Article
                7;

            

    

     

    
      	 	
              (6)

            	
              consent
                to or reject any Transfer (as defined in Article 11.1) or otherwise
                exercise any other rights in respect of Transfers under this Article
                7 or
                under Article 11; 

            

    

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    
      	 	
              (7)

            	
              receive
                its Entitlement in accordance with Article
                7.4;

            

    

     

    
      	 	
              (8)

            	
              withdraw
                from this Agreement under Article 12;
                or

            

    

     

    
      	 	
              (9)

            	
              take
                assignment of any portion of another Party’s Participating Interest in the
                event such other Party is either in default or withdrawing from this
                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

            

    

     

    
      	 	
              (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.

            

    

     

    
      	
              7.3

            	
              Allocation
                of Defaulted Accounts

            

    

     

    
      	 	
              (A)

            	
              The
                Party providing the Default Notice pursuant to Article 7.1 shall
                include
                in the Default Notice to each non-defaulting Party 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 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 7:
                

            

    

     

    “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 following amounts: (i) the Amount in Default; (ii) third-party costs of
      obtaining and maintaining any Security incurred by the non-defaulting Parties
      or
      the funds paid by such Parties in order to allow Operator to obtain or maintain
      Security, in accordance with Article 7.3(A)(ii); plus (iii) 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 and
      on
      the amount under (ii) from the date this amount is incurred by the
      non-defaulting Parties until paid in full by the Defaulting Party. 

     

    
      	 	
              (B)

            	
              If
                the Defaulting Party remedies its default in full before the Default
                Period commences, the notifying Party shall promptly notify each
                non-defaulting Party by facsimile or telephone and by email, and
                the
                non-defaulting Parties shall be relieved of their obligations under
                Article 7.3(A). Otherwise, each non-defaulting Party shall satisfy
                its
                obligations under Article 7.3(A)(i) before the Default Period commences
                and its obligations under Article 7.3(A)(ii) within ten (10) Days
                following 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 7. 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
                7.
                

            

    

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

     

    
      	 	
              (C)

            	
              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 authorized 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 7.3(C), except to the extent Operator would be liable
                under
                Article 4.6.

            

    

     

    
      	
              7.4

            	
              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 authorized 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 7.4(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 shall remain a debt due from
                the
                Defaulting Party to the non-defaulting Parties. When making sales
                under
                this Article 7.4(A), the non-defaulting Parties shall have no obligation
                to share any existing market or 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
                7.4(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 Joint Operations and 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.

            

    

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

     

    
      	
            	(D)	
              (1) If
                a Defaulting Party fails to fully remedy all its defaults by the
                thirtieth
                (30th) Day following the date of the Default Notice, 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 anytime thereafter during
                the
                Default Period, to require that the Defaulting Party completely withdraw
                from this Agreement. Such option shall be exercised by notice to
                the
                Defaulting Party and each non-defaulting Party. If such option is
                exercised, the Defaulting Party shall be deemed to have transferred,
                pursuant to Article 12.6, 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 12,
                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 7.4(D)(1) shall be in proportion to the Participating
                Interests of the non-defaulting Parties.

            

    

     

    (2) A
      Party
      which is held in default under this Agreement (and subsequently cures such
      default) shall be subject to the provisions of this Article 7.4(D)(2) for a
      period of thirty (30) 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. 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 12.6, 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 12, 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
      7.4(D)(2) shall be in proportion to the Participating Interests of the
      non-defaulting Parties 

     

    
      	 	
              (E)

            	
              In
                addition to the other remedies available to the non-defaulting Parties
                under this Article 7 and any other rights available to each non-defaulting
                Party to recover its portion of the Total Amount in Default, in the
                event
                a Defaulting Party fails to remedy its default within thirty (30)
                Days of
                the Default Notice, the non-Defaulting Parties may elect to enforce
                a
                mortgage and security interest on the Defaulting Party’s Participating
                Interest as set forth below, subject to the Laws /
                Regulations. 

            

    

     

    
      	 	
              (1)

            	
              Each
                Party grants to each of the other Parties, in pro rata shares based
                on
                their relative Participating Interests, a mortgage and security interest
                on its Participating Interest, whether now owned or hereafter acquired,
                together with all products and proceeds derived from that Participating
                Interest (collectively, the “Collateral”)
                as security for (i) the payment of all amounts owing by such Party
                (including interest and costs of collection) under this Agreement. 
                

            

    

     

    
      	 	
              (2)

            	
              Should
                a Defaulting Party fail to remedy its default by the thirtieth (30th)
                Day
                following the date of the Default Notice, then, each non-defaulting
                Party
                shall have the option, exercisable at any time thereafter during
                the
                Default Period, to foreclose its mortgage and security interest against
                its pro rata share of the Collateral by any means permitted under
                the Laws
                / Regulations and to sell all or any part of that Collateral in public
                or
                private sale after providing the Defaulting Party and other creditors
                with
                any notice required by the Laws / Regulations, and subject to the
                provisions of Article 11.  Except as may be prohibited by the Laws /
                Regulations, the non-defaulting Party that forecloses its mortgage
                and
                security interest shall be entitled to become the purchaser of the
                Collateral sold and shall have the right to credit toward the purchase
                price the amount to which it is entitled under Article 7.4.  Any
                deficiency in the amounts received by the foreclosing party shall
                remain a
                debt due by the Defaulting Party. The foreclosure of mortgages and
                security interests by one non-defaulting Party shall neither affect
                the
                amounts owed by the Defaulting Party to the other non-defaulting
                Parties
                nor in any way limit the rights or remedies available to them. Each
                Party
                agrees that, should it become a Defaulting Party, it waives the benefit
                of
                any appraisal, valuation, stay, extension or redemption law and any
                other
                debtor protection law that otherwise could be invoked to prevent
                or hinder
                the enforcement of the mortgage and security interest granted
                above.

            

    

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

     

    
      	 	
              (3)

            	
              Each
                Party agrees to execute such memoranda, financing statements and
                other
                documents, and make such filings and registrations, as may be reasonably
                necessary to perfect, validate and provide notice of the mortgages
                and
                security interests granted by this Article
                7.4(E). 

            

    

     

    
      	 	
              (F)

            	
              For
                purposes of Articles 8.4(D) and 8.4(E), 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 Interests.
                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. 

            

    

     

    
      	 	
              (G)

            	
              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..

            

    

     

    
      	 	
              (H)

            	
              The
                rights and remedies granted to the non-defaulting Parties in this
                Article
                7 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.

            

    

     

    
      	
              7.5

            	
              Survival

            

    

     

    The
      obligations of the Defaulting Party and the rights of the non-defaulting Parties
      shall survive abandonment of Joint Operations and termination of this
      Agreement.

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

     

    
      	
              7.6

            	
              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 7, such Party hereby waives any right to raise by
      way
      of set off or invoke as a defense, whether in law or equity, 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
      8

    DISPOSITION
      OF HYDROCARBONS

     

    
      	
              8.1

            	
              Right
                and Obligation to Take in
                Kind

            

    

     

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

     

    
      	
              8.2

            	
              Disposition
                of Hydrocarbons

            

    

     

    The
      Parties shall in good faith, and not less than three (3) months prior to the
      anticipated first delivery of Hydrocarbons, as promptly notified by Operator,
      negotiate and endeavor to conclude the terms of an agreement to cover the
      disposition of Hydrocarbons by the Joint Operations, it being intended by the
      parties that the Operator shall dispose of and sell Hydrocarbons in a manner
      the
      most economically efficient for the Operating Corporation.

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

     

    ARTICLE
      9

    TRANSFER
      OF INTEREST OR RIGHTS AND CHANGES IN CONTROL

     

    
      	
              9.1

            	
              Obligations

            

    

     

    
      	 	
              (A)

            	
              Any
                Transfer (except Transfers pursuant to Article 7 or Article 10) shall
                be
                effective only if it satisfies the terms and conditions of Article
                9.2;
                and a Party subject to a Change in Control must satisfy the terms
                and
                conditions of Article 9.3. 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 portion of the total monetary value (expressed in U.S. dollars) of the
      consideration being offered by the proposed transferee (including any cash,
      other assets, and tax savings to the transferor from a non-cash deal) that
      reasonably should be allocated to the Participating Interest subject to the
      proposed Transfer or Change in Control. 

     

    “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 fifty percent (50%) 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 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.

     

    
      	
              9.2.

            	
              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 ten percent
                (10%)
                or any interest other than a Participating Interest in 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 9, 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.

            

    

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

     

    
      	 	
              (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 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.

            

    

     

    
      	 	
              (D)

            	
              A
                transferee shall have no rights in this Agreement (except any notice
                and
                cure rights or similar rights that may be provided to a Lien Holder
                (as
                defined in Article 9.2(E)) by separate instrument signed by all Parties)
                unless and until:

            

    

     

    
      	 	
              (1)

            	
              it
                expressly undertakes in an instrument reasonably satisfactory to
                the other
                Parties to perform the obligations of the transferor under this Agreement
                in respect of the Participating Interest being transferred and obtains
                any
                necessary Government approval for the Transfer and furnishes any
                guarantees required by the Government on or before the applicable
                deadlines; and

            

    

     

    
      	 	
              (2)

            	
              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
                this
                Agreement.

            

    

     

    No
      consent shall be required under this Article 9.2(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 9 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;
                and

            

    

     

    
      	 	
              (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 9.2(E), shall be subject to the following procedure.
                

            

    

     

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

     

    
      	 	
              (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, 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 9.2(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 12.2(F)(3) and 12.2(F)(4),
                where applicable). If no Party delivers such counter-notification,
                the
                Transfer to the proposed transferee may be made, subject to the other
                provisions of this Article 9, 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 9.2(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
                terminates without completion, the other Parties’ rights to acquire the
                Participating Interest subject to the proposed package sale shall
                also
                terminate.

            

    

     

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

     

    
      	 	
              (4)

            	
              For
                purposes of Article 9.2(F)(3), the Cash Value proposed by the transferor
                in its notice shall be conclusively deemed correct unless any Party
                (each
                a “Disagreeing
                Party”)
                gives notice to the transferor with a copy to the other Parties within
                ten
                (10) Days of receipt of the transferor’s notice stating that it does not
                agree with the transferor’s statement of the Cash Value, stating the Cash
                Value it believes is correct, and providing any supporting information
                that it believes is helpful. In such event, the transferor and the
                Disagreeing Parties shall have fifteen (15) Days in which to attempt
                to
                negotiate an agreement on the applicable Cash Value. If no agreement
                has
                been reached by the end of such fifteen (15) Day period, either the
                transferor or any Disagreeing Party shall be entitled to refer the
                matter
                to an independent expert as provided in Article 16.3 for determination
                of
                the Cash Value.

            

    

     

    
      	 	
              (5)

            	
              If
                the determination of the Cash Value is referred to an independent
                expert
                and the value submitted by the transferor is no more than five percent
                (5%) above the Cash Value determined by the independent expert, the
                transferor’s value shall be used for the Cash Value and the Disagreeing
                Parties shall pay all costs of the expert. If the value submitted
                by the
                transferor is more than five percent (5%) above the Cash Value determined
                by the independent expert, the independent expert’s value shall be used
                for the Cash Value and the transferor shall pay all costs of the
                expert.
                Subject to the independent expert’s value being final and binding in
                accordance with Article 16.3, the Cash Value determined by the procedure
                shall be final and binding on all Parties.

            

    

     

    
      	 	
              (6)

            	
              Once
                the Cash Value is determined under Article 9.2(F)(5), Operator shall
                provide notice of such Cash Value to all Parties and the transferor
                shall
                be obligated to sell and the Parties which provided notice of their
                intention to purchase the transferor’s Participating Interest pursuant to
                Article 9.2(F)(1) shall be obligated to buy the Participating Interest
                at
                said value. 

            

    

     

    
      	 	
              (F)

            	
              Any
                Transfer (other than a Transfer to an Affiliate and the granting
                of an
                Encumbrance as provided in Article 9.2(E)) shall be subject to the
                following procedure. 

            

    

     

    
      	 	
              (1)

            	
              In
                the event that a Party wishes to transfer any part or all of its
                Participating Interest, prior to the transferor entering into a written
                agreement providing for such a Transfer (whether or not such agreement
                is
                binding) the transferor shall send the other Parties notice of its
                intention and invite them to submit offers for the Participating
                Interest
                subject to the Transfer. The other Parties shall have thirty (30)
                Days
                from the date of such notification to deliver a counter-notification
                with
                a binding offer in accordance with Article 9.2(F)(3). If the transferor
                notifies the offering Party or Parties that the binding offer presents
                an
                acceptable basis for negotiating a Transfer agreement, the transferor
                and
                that offering Party or Parties shall have the next sixty (60) Days
                in
                which to negotiate in good faith and execute the terms and conditions
                of a
                mutually acceptable Transfer agreement. If the transferor does not
                find
                that any Party’s offer presents an acceptable basis for negotiating a
                Transfer agreement, or if the above sixty (60) Days elapse and the
                transferor in its sole discretion believes that a fully negotiated
                agreement based on the offer deemed acceptable by the transferor
                with all
                offering Parties is not imminent, the transferor shall be entitled
                for a
                period of one hundred eighty (180) Days from the expiration of the
                thirty
                (30) Day offer period or the sixty (60) Day negotiation period,
                respectively, plus such additional period as may be necessary to
                secure
                governmental approvals, to Transfer all or such portion of its
                Participating Interest to a third party, subject to the obligations
                set
                forth in this Article 9.

            

    

     

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

     

    
      	 	
              (2)

            	
              If
                more than one Party counter-notifies the transferor 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)

            	
              All
                Parties desiring to give such a counter-notice shall meet to formulate
                a
                joint offer. Each such Party shall make known to the other Parties
                the
                highest price or value that it is willing to offer to the transferor.
                The
                proposal with the highest price or value shall be offered to the
                transferor as the joint proposal of the Parties still willing to
                participate in such offer under the provisions of Article 9.2(F)(1)
                above.
                

            

    

     

    
      	
              9.3

            	
              Change
                in Control

            

    

     

    
      	 	
              (A)

            	
              If
                required by law, 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 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 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 this
                Agreement.

            

    

     

    
      	 	
              (C)

            	
              Any
                Change in Control of a Party, other than to an Affiliate, shall be
                subject
                to the following procedure. For purposes of this 12.3, the term
                “acquired
                Party”
                shall refer to the Party that is subject to the Change in
                Control.

            

    

     

    
      	 	
              (1)

            	
              In
                the event that the Affiliates of a Party wish to enter into a transaction
                that will result in a Change in Control of the Party, prior to such
                Affiliates entering into a written agreement (whether or not such
                agreement is binding) the acquired Party shall send the other Parties
                notice of its Affiliates’ intention and invite them to submit offers for
                the Participating Interest subject to the Change in Control. The
                other
                Parties shall have thirty (30) Days from the date of such notification
                to
                deliver a counter-notification with a binding offer in accordance
                with
                Article 9.3(C)(3). If the acquired Party notifies an offering Party
                or
                Parties that their binding offer presents an acceptable basis for
                negotiating a transfer agreement, the acquired Party and the offering
                Party or Parties shall have the next sixty (60) Days in which to
                negotiate
                in good faith and execute the terms and conditions of a mutually
                acceptable transfer agreement. If the acquired Party does not find
                that
                any Party’s offer presents an acceptable basis for negotiating a transfer
                agreement, or if the above sixty (60) Days elapse and the acquired
                Party
                in its sole discretion believes that a fully negotiated agreement
                with an
                offering Party or Parties is not imminent, the Change in Control
                may
                proceed without further notice, subject to the obligations set forth
                in
                this Article 9, provided that the Change in Control shall be concluded
                within one hundred eighty (180) Days from the expiration of the thirty
                (30) Day offer period or the sixty (60) Day negotiation period,
                respectively, plus such additional period as may be necessary to
                secure
                governmental approvals.

            

    

     

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

     

    
      	 	
              (2)

            	
              If
                more than one Party counter-notifies the acquired Party that it intends
                to
                acquire the Participating Interest subject to the proposed Change
                in
                Control, then each such Party shall acquire a proportion of the
                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)

            	
              All
                Parties desiring to give such a counter-notice shall meet to formulate
                a
                joint offer. Each such Party shall make known to the other Parties
                the
                highest price or value which it is willing to offer to the acquired
                Party.
                The proposal with the highest price or value shall be offered to
                the
                acquired Party as the joint proposal of the Parties still willing
                to
                participate in such offer under the provisions of Article 9.3(C)(1)
                above.

            

    

     

    ARTICLE
      10

    WITHDRAWAL
      FROM AGREEMENT

     

    
      	
              10.1

            	
              Right
                of Withdrawal

            

    

     

    
      	 	
              (A)

            	
              Subject
                to the provisions of this Article 10, any Party not in default may
                at its
                option withdraw from this Agreement by giving notice to all other
                Parties
                stating its decision to withdraw. Such notice shall be unconditional
                and
                irrevocable when given, except as may be provided in Article
                10.7.

            

    

     

    
      	 	
              (B)

            	
              The
                effective date of withdrawal for a withdrawing Party shall be the
                end of
                the calendar month following the calendar month in which the notice
                of
                withdrawal is given, provided that if all Parties elect to withdraw,
                the
                effective date of withdrawal for each Party shall be the date determined
                by Article 10.9.

            

    

     

    
      	
              10.2

            	
              Partial
                or Complete
                Withdrawal

            

    

     

    
      	 	
              (A)

            	
              Within
                thirty (30) Days of receipt of each withdrawing Party’s notification, each
                of the other Parties may also give notice that it desires to withdraw
                from
                this Agreement. Should all Parties give notice of withdrawal, the
                Parties
                shall proceed to abandon the Joint Operations and terminate this
                Agreement. If less than all of the Parties give such notice of withdrawal,
                then the withdrawing Parties shall take all steps to withdraw from
                this
                Agreement on the earliest possible date and execute and deliver all
                necessary instruments and documents to assign their Participating
                Interest
                to the Parties which are not withdrawing, without any compensation
                whatsoever, in accordance with the provisions of Article
                10.6.

            

    

     

    
      	 	
              (B)

            	
              Any
                Party withdrawing under Article 10.2 or under this Article 12 shall
                withdraw from the Joint Operations, and thus abandon to the other
                Parties
                not joining in its withdrawal all its rights to Hydrocarbons generated
                by
                operations after the effective date of such withdrawal and all rights
                in
                associated Joint Property.

            

    

     

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

     

    
      	
              10.3

            	
              Rights
                of a 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.

     

    
      	
              10.4

            	
              Obligations
                and Liabilities of a Withdrawing
                Party

            

    

     

    
      	 	
              (A)

            	
              A
                withdrawing Party shall, following its notification of withdrawal,
                remain
                liable only for its share of the
                following:

            

    

     

    
      	 	
              (1)

            	
              costs
                of Joint Operations, and Exclusive Operations in which it has agreed
                to
                participate, that were approved by the Operating Committee or Consenting
                Parties as part of a Work Program and Budget (including a multi-year
                Work
                Program and Budget under Article 6.5) or AFE prior to such Party’s
                notification of withdrawal, regardless of when they are
                incurred;

            

    

     

    
      	 	
              (2)

            	
              expenditures
                described in Articles 4.2(B)(13) and 11.5 related to an emergency
                occurring prior to the effective date of a Party’s withdrawal, regardless
                of when such expenditures are
                incurred;

            

    

     

    
      	 	
              (3)

            	
              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 for which such Party
                would have been liable, had it not withdrawn from this Agreement;
                and
                

            

    

     

    
      	 	
              (4)

            	
              in
                the case of a partially withdrawing Party, any costs and liabilities
                with
                respect to Exploitation Areas, Commercial Discoveries and Discoveries
                from
                which it has not withdrawn.

            

    

     

    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. A Party’s withdrawal shall not relieve it from liability to
      the non-withdrawing Parties with respect to any obligations or liabilities
      attributable to the withdrawing Party under this Article 10 merely because
      they
      are not identified or identifiable at the time of withdrawal.

     

    
      	 	
              (B)

            	
              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 10.4(A)(2) or Article 10.4(A)(3)) if it sends
                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.

            

    

     

    
      	
              10.5

            	
              Emergency

            

    

     

    If
      equipment catches fire or explodes, sabotage or other emergency occurs prior
      to
      the effective date of a Party’s withdrawal, the withdrawing Party shall remain
      liable for its Participating Interest share of the costs of such emergency,
      regardless of when they are incurred.

     

    
      	
              10.6

            	
              Assignment

            

    

     

    A
      withdrawing Party shall assign its Participating Interest free of cost to each
      of the non-withdrawing Parties in the proportion which each of their
      Participating Interests (prior to the withdrawal) bears to the total
      Participating Interests of all the non-withdrawing Parties (prior to the
      withdrawal), unless the non-withdrawing Parties agree otherwise. The expenses
      associated with the withdrawal and assignments shall be borne by the withdrawing
      Party.

     

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

     

    
      	
              10.7

            	
              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 the
      withdrawal and assignments. The non-withdrawing Parties shall use reasonable
      endeavors to assist the withdrawing Party in obtaining such approvals. Any
      penalties or expenses incurred by the Parties in connection with such withdrawal
      shall be borne by the withdrawing Party. If the Government does not approve
      a
      Party’s withdrawal and assignment to the other 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.

     

    
      	
              10.8

            	
              Security

            

    

     

    A
      Party
      withdrawing from this Agreement pursuant to this Article 10 shall provide
      Security satisfactory to the other Parties to satisfy any obligations or
      liabilities for which the withdrawing Party remains liable in accordance with
      Article 10.4, but which become due after its withdrawal, including Security
      to
      cover the costs of an abandonment, if applicable.

     

    
      	
              10.9

            	
              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.

     

    ARTICLE
      11

    RELATIONSHIP
      OF PARTIES AND TAX

     

    
      	
              11.1

            	
              Relationship
                of Parties for the Purposes of Parties Subject to U.S. Tax
                Laws

            

    

     

    The
      rights, duties, obligations and liabilities of the Parties under this Agreement
      shall be individual, not joint or collective. It is not the intention of the
      Parties to create, nor shall this Agreement 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.

     

    
      	
              11.2

            	
              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 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.

     

    
      
         

      

      
        32

        
          

        

      

      
         

      

    

     

    
      	
              11.3

            	
              United
                States Tax Election

            

    

     

    
      	 	
              (A)

            	
              If,
                for United States federal income tax purposes, this Agreement and
                the
                operations under this Agreement are regarded as a partnership and
                if the
                Parties have not agreed to form a tax partnership, each U.S. Party
                elects
                to be excluded from the application of all of the provisions of Subchapter
                “K”, Chapter 1, Subtitle “A” of the United States Internal Revenue Code of
                1986, as amended (the “Code”),
                to the extent permitted and authorized by Section 761(a) of the Code
                and
                the regulations promulgated under the Code. Operator, if it is a
                U.S.
                Party, is authorized and directed to execute and file for each U.S.
                Party
                such evidence of this election as may be required by the Internal
                Revenue
                Service, including all of the returns, statements, and data required
                by
                United States Treasury Regulations Sections 1.761-2 and
                1.6031(a)-1(b)(5) and shall provide a copy thereof to each U.S. Party.
                However, if Operator is not a U.S. Party, the Party who holds the
                greatest
                Participating Interest among the U.S. Parties shall fulfill the
                obligations of Operator under this Article 13.3. Should there be
                any
                requirement that any U.S. Party give further evidence of this election,
                each U.S. Party shall execute such documents and furnish such other
                evidence as may be required by the Internal Revenue Service or as
                may be
                necessary to evidence this
                election.

            

    

     

    
      	 	
              (B)

            	
              No
                Party shall give any notice or take any other action inconsistent
                with the
                foregoing election. If any income tax laws of any state or other
                political
                subdivision of the United States or any future income tax laws of
                the
                United States or any such political subdivision contain provisions
                similar
                to those in Subchapter “K”, Chapter 1, Subtitle “A” of the Code, under
                which an election similar to that provided by Section 761(a) of the
                Code
                is permitted, each U.S. Party shall make such election as may be
                permitted
                or required by such laws. In making the foregoing election or elections,
                each U.S. Party states that the income derived by it from operations
                under
                this Agreement can be adequately determined without the computation
                of
                partnership taxable income. 

            

    

     

    
      	 	
              (C)

            	
              Unless
                approved by every Non-U.S. Party, no activity shall be conducted
                under
                this Agreement that would cause any Non-U.S. Party to be deemed to
                be
                engaged in a trade or business within the United States under United
                States income tax laws and
                regulations.

            

    

     

    
      	 	
              (D)

            	
              A
                Non-U.S. Party shall not be required to do any act or execute any
                instrument which might subject it to the taxation jurisdiction of
                the
                United States.

            

    

     

    
      	 	
              (E)

            	
              For
                the purposes of this Article 13.3, “U.S.
                Party”
                shall mean any Party that is subject to the income tax law of the
                United
                States in respect with operations under this Agreement. “Non-U.S.
                Party”
                shall mean any Party that is not subject to such income tax law.
                

            

    

     

    
      
         

      

      
        33

        
          

        

      

      
         

      

    

     

    ARTICLE
      12

    VENTURE
      INFORMATION - CONFIDENTIALITY - INTELLECTUAL PROPERTY

     

    
      	
              12.1

            	
              Venture
                Information

            

    

     

    
      	 	
              (A)

            	
              Except
                as otherwise provided in this Article 12 or in Articles 4.4 and 8.4(A),
                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 owned exclusively by RESI. By way of example
                and
                not limitation, Venture Information shall include all designs,
                documentation, methods, processes, improvements, inventions, works
                and
                other related information resulting Joint Operations or joint development
                efforts hereunder, including without limitation all patents (and
                all
                applications for the same whether in process or not), copyrights
                (and all
                applications for the same whether in process or not), marks, trade
                secrets
                and other intellectual and property rights in or based upon the foregoing,
                in whole or in part. RESI grants each Party the right to use all
                Venture
                Information it receives solely to copy, review and further Joint
                Operations. Such right shall not include rights to disclose, license,
                distribute, sell or any other right not expressly granted herein.
                

            

    

     

    
      	 	
              (B)

            	
              Each
                Party may extend the right to use Venture Information to each of
                its
                Affiliates which are obligated to terms not less restrictive that
                this
                Article 12. 

            

    

     

    
      	 	
              (C)

            	
              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.

            

    

    

    
      	
              12.2

            	
              Confidentiality

            

    

     

    
      	 	
              (A)

            	
              Subject
                to the provisions of this Article 12, the Parties agree that all
                information in relation with Joint Operations or Exclusive Operations
                shall be considered confidential and shall be kept confidential and
                not be
                disclosed during the course of any Joint Operations and for a period
                of
                twenty (20) years thereafter to any person or entity not a Party
                to this
                Agreement, except: 

            

    

    

    
      	 	
              (1)

            	
              to
                an Affiliate pursuant to Article 12.1(B);

            

    

    

    
      	 	
              (2)

            	
              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;
                

            

    

    

    
      	 	
              (3)

            	
              to
                prospective or actual attorneys engaged by any Party where disclosure
                of
                such information is essential to such attorney’s work for such
                Party;

            

    

    

    
      	 	
              (4)

            	
              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;

            

    

    

    
      	 	
              (5)

            	
              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);

            

    

     

    
      
         

      

      
        34

        
          

        

      

      
         

      

    

     

    
      	 	
              (6)

            	
              to
                a bank or other financial institution to the extent appropriate to
                a Party
                arranging for funding;

            

    

    

    
      	 	
              (7)

            	
              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;

            

    

    

    
      	 	
              (8)

            	
              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

            

    

    

    
      	 	
              (9)

            	
              any
                information which, through no fault of a Party, becomes a part of
                the
                public domain.

            

    

    

    
      	 	
              (B)

            	
              Disclosure
                as pursuant to Articles 12.2(A)(5), (6), and (7) shall not be made
                unless
                prior to such disclosure the disclosing Party has obtained a written
                undertaking from the recipient party to keep the information strictly
                confidential for at least ten (10) years and to use the information
                for
                the sole purpose described in Articles 12.2(A)(5), (6), and (7),
                whichever
                is applicable, with respect to the disclosing
                Party.

            

    

    

    
      	
              12.3

            	
              Intellectual
                Property

            

    

     

    
      	 	
              (A)

            	
              Subject
                to Articles 15.3(C) and 15.5, title to all intellectual property
                rights in
                the Venture Information shall be owned exclusively by, and hereby
                vests
                in, RESI. RESI hereby grants to the Parties a limited, perpetual,
                royalty-free, irrevocable license to use, all such intellectual property
                rights solely in the Joint Operations. If any Venture Information
                amounts
                to a patentable invention, RESI shall be entitled to seek patent
                protection for such invention. The Parties shall perform all acts
                necessary to vest ownership of the development technology in RESI,
                including but not limited to executing the documents necessary to
                file,
                amend, prosecute and assign patents, copyrights and other intellectual
                property. The Parties hereby assign all Venture Information to
                RESI.

            

    

    

    
      	 	
              (B)

            	
              Nothing
                in this Agreement shall be deemed to require a Party to (i) divulge
                proprietary technology to any of the other Parties; or (ii) grant
                a
                license or other rights under any intellectual property rights owned
                or
                controlled by such Party or its Affiliates to any of the other Parties.
                

            

    

    

    
      	 	
              (C)

            	
              If
                in the course of carrying out activities charged to the Joint Account,
                a
                Party or an Affiliate of a Party makes or conceives any inventions,
                discoveries, or improvements which primarily relate to or are primarily
                based on the proprietary technology of RESI or its Affiliates, or
                is
                related to Joint Operations, then all intellectual property rights
                to such
                inventions, discoveries, or improvements shall vest exclusively in
                RESI,
                provided,
                however,
                each other Party shall have a perpetual, royalty-free, irrevocable
                license
                to use such inventions, discoveries, or improvements, but only in
                connection with the Joint
                Operations.

            

    

    

    
      	 	
              (D)

            	
              Subject
                to Article 4.6(B), all costs and expenses of defending, settling
                or
                otherwise handling any claim which is based on the actual or alleged
                infringement of any intellectual property right shall be for the
                account
                of the operation from which the claim arose, whether Joint Operations
                or
                Exclusive Operations.

            

    

     

    
      
         

      

      
        35

        
          

        

      

      
         

      

    

     

    
      	
              12.4

            	
              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
      12.2.

     

    ARTICLE
      13

    FORCE
      MAJEURE

     

    
      	
              13.1

            	
              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 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 notice shall give reasonably 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 manner but shall not be obligated to settle
      any labor dispute except on terms acceptable to it, and all such disputes shall
      be handled within the sole discretion of the affected Party.

     

    
      	
              13.2

            	
              Definition
                of Force Majeure

            

    

     

    For
      the
      purposes of this Agreement, “Force
      Majeure”
      shall
      mean circumstances which were beyond the reasonable control of the Party
      concerned and shall include strikes, lockouts and other industrial disturbances
      even if they were not “beyond the reasonable control” of the Party.

     

    ARTICLE
      14

    NOTICES

     

    Except
      as
      otherwise specifically provided, all notices authorized 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. Any notice delivered
      via e-mail shall be Received (as defined below) provided that the receiving
      party responds to such e-mail or otherwise acknowledges in writing receipt
      of
      such e-mail. 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 15 shall mean actual delivery of the notice to the
      address of the Party specified hereunder or to be thereafter notified in
      accordance with this Article 15. 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.

     

    
      	
            	If
              to RESI:	
              Refinery
                Science Corp.

            

    

    500
      W.
      University Ave., #321 Burges Hall

    El
      Paso,
      Texas 79968

    USA

    Tel:
      (915) 747-5560

    Fax:
      (915) 747-6977

    E-mail:
      lightyear4@hotmail.com

    Attn:
      David Rendina, President and Chief Executive Officer

     

    
      
         

      

      
        36

        
          

        

      

      
         

      

    

    

    
      	
            	If
              to COPI:	
              Cancen
                Oil Producers Inc.

            

    

    9659
      -
      49th Avenue

    Edmonton,
      Alberta

    Canada
      T6E 5Z5

    Tel:
      (780) 941-2272

    Fax:
      (780) 941-2188

    E-mail:
      dktalbot@telus.net

    Attn:
      Keith Talbot, President

    

    
      	
            	If
              to UMI:	
              Upgrader
                Marketing Inc.

            

    

    Suite
      404, Petro-Canada Centre

    100
      - 111
      Fifth Avenue

    Calgary,
      Alberta

    Canada
      T2P 3Y6

    Tel:
      (403) 605-4022

    Fax:
      (403) 697-2671

    E-mail:
      bugg@beauenergy.com

    Attn:
      Tom
      Bugg, President 

     

    ARTICLE
      15

    APPLICABLE
      LAW - DISPUTE RESOLUTION - WAIVER OF SOVEREIGN IMMUNITY

     

    
      	
              15.1

            	
              Applicable
                Law

            

    

     

    The
      substantive laws of the Province of Alberta apply exclusive of any conflicts
      of
      laws principles that could require the application of any other law, shall
      govern this Agreement for all purposes, including the resolution of all Disputes
      between or among Parties. 

     

    
      	
              15.2

            	
              Dispute
                Resolution

            

    

     

    
      	 	
              (A)

            	
              Notification.
                A
                Party who desires to submit a Dispute for resolution shall commence
                the
                dispute resolution process by providing the other parties to the
                Dispute
                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
                15.
                

            

    

     

    
      
         

      

      
        37

        
          

        

      

      
         

      

    

     

    
      	 	
              (B)

            	
              Negotiations.
                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.
                

            

    

     

    
      	15.3	
              Forum
                for Arbitration

            

    

     

    Any
      dispute between the Parties pertaining to this Agreement shall be resolved
      through binding arbitration. The parties agree that any arbitration proceeding
      shall be conducted in Vancouver, British Columbia and consent to exclusive
      jurisdiction and venue there. The award of the arbitrator(s) shall be final
      and
      binding, and the parties waive any right to appeal the arbitral award, to the
      extent that a right to appeal may be lawfully waived. Each party retains the
      right to seek judicial assistance (a) to compel arbitration, (b) to obtain
      injunctive relief and interim measures of protection pending arbitration, and
      (c) to enforce any decision of the arbitrator(s), including but not limited
      to
      the final award.

    

    ARTICLE
      16

    GENERAL
      PROVISIONS

     

    
      	
              16.1

            	
              Conduct
                of the Parties

            

    

     

    
      	 	
              (A)

            	
              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 authorized 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 operations under this Agreement.
                

            

    

     

    
      	
              16.2

            	
              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 in dealing with suppliers, customers and all other
                organizations or individuals doing or seeking to do business with
                the
                Parties in connection with activities contemplated under 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 this Agreement, without
                having or incurring any obligation to offer any interest in such
                business
                activities to any Party.

            

    

     

    
      
         

      

      
        38

        
          

        

      

      
         

      

    

     

    
      	
              16.3

            	
              Public
                Announcements

            

    

     

    
      	 	
              (A)

            	
              Operator
                shall be responsible for the preparation and release of all public
                announcements and statements regarding this Agreement or the Joint
                Operations; provided that no public announcement or statement shall
                be
                issued or made unless, prior to its release, all the Parties have
                been
                furnished with a copy of such statement or announcement and the approval
                of at least two (2) Parties which are not Affiliates of Operator
                holding
                fifty percent (50%) or more of the Participating Interests not held
                by
                Operator or its Affiliates has been obtained. 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 is authorized to issue and make such
                announcement or statement without prior approval of the Parties,
                but shall
                promptly furnish all the Parties with a copy of such announcement
                or
                statement.

            

    

     

    
      	 	
              (B)

            	
              If
                a Party wishes to issue or make any public announcement or statement
                regarding this Agreement or the Joint Operations, 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 at least two (2) Parties which
                are
                not Affiliates holding fifty percent (50%) or more of the Participating
                Interests not held by such announcing Party or its Affiliates; provided
                that, 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, legal proceedings
                or stock exchange having jurisdiction over such Party or its Affiliates
                as
                set forth in Article 14.2.

            

    

     

    
      	
              16.4

            	
              Successors
                and Assigns

            

    

     

    Subject
      to the limitations on Transfer contained in Article 11, this Agreement shall
      inure to the benefit of and be binding upon the successors and assigns of the
      Parties.

     

    
      	
              16.5

            	
              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 Agreement unless such Party has expressly stated, in writing, that it
      does
      waive, release or modify such right.

     

    
      	
              16.6

            	
              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. 

     

    
      	
              16.7

            	
              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.

     

    
      
         

      

      
        39

        
          

        

      

      
         

      

    

     

    
      	16.8	
              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.

     

    
      	
              16.9

            	
              Modifications

            

    

     

    Except
      as
      is provided in Articles 11.2(B) and 16.8, there shall be no modification of
      this
      Agreement, except by written consent of all Parties.

     

    
      	
              16.10

            	
              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.

            

    

     

    
      	 	
              (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.

            

    

     

    
      	
              16.11

            	
              Counterpart
                Execution

            

    

     

    This
      Agreement may be executed in any number of counterparts 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 a counterpart. For purposes of assembling all counterparts into one
      document, Operator is authorized 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.

     

    
      	
              16.12

            	
              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, including but not limited to that certain
      Memorandum of Understanding dated August 15, 2007, by and among the
      Parties.

     

    [signature
      page follows]

     

    
      
         

      

      
        40

        
          

        

      

      
         

      

    

    IN
      WITNESS of their agreement each Party has caused its duly authorized
      representative to sign this instrument on the date indicated below such
      representative’s signature.

     

    
      	 	 	 
	 	
              RESI:

              

              REFINERY
                SCIENCE CORP.

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:
                David Rendina

              Title:
                President

            

    

     

    
      	 	 	 
	 	
              COPI:

               

              CANCEN OIL PROCESSORS INC.

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:
                Keith Talbot

              Title:
                President

            

    

     

    
      	 	 	 
	 	
              UMI:

              

              UPGRADER
                MARKETING INC.

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:
                Thomas Bugg

              Title:
                President

            

    

     

    
      
         

      

      
        41

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