Document:

Exhibit
4.2

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “Agreement”) is made and entered into as of January 31,
2006, by and among Canadian Superior Energy Inc., a corporation incorporated
under the laws of the Province of Alberta, Canada (the “Company”),
and West Coast Asset Opportunity Fund, LLC Inc., a Delaware limited liability
company (“Purchaser” and collectively with any
permitted transferees hereunder, the “Purchasers”).

This Agreement is made pursuant to the Preferred Share
Unit Purchase Agreement, dated as of the date hereof among the Company and the
Purchaser (the “Purchase Agreement”).

The Company and the Purchaser hereby agree as follows:

1.             Definitions.
Capitalized terms used and not otherwise defined herein that are defined in the
Purchase Agreement will have the meanings given such terms in the Purchase
Agreement. As used in this Agreement, the following terms have the respective
meanings set forth in this Section 1:

“Advice” has the meaning set forth in Section 6(c).

“Commission”
means the U.S. Securities and Exchange Commission.

“Common Stock” means the Common Shares of the Company.

“Effective Date”
means the date that the Registration Statement filed pursuant to Section 2(a) or
2(b) is first declared effective by the Commission.

“Effectiveness Date”
means (a) with respect to the initial Registration Statement required to
be filed under Section 2(a), the earlier of: (a)(i) the 180th day following the Closing Date, and (ii) the
fifth Trading Day following the date on which the Company is notified by the
Commission that the initial Registration Statement will not be reviewed or is
no longer subject to further review and comments, and (b) with respect to
any additional Registration Statements that may be required pursuant to Section 2(b),
the earlier of (i) the 180th day following (x) if such Registration
Statement is required because the Commission shall have notified the Company in
writing that certain Registrable Securities were not eligible for inclusion on
a previously filed Registration Statement, the date or time on which the
Commission shall indicate as being the first date or time that such Registrable
Securities may then be included in a Registration Statement, or (y) if
such Registration Statement is required for a reason other than as described in
clause (x) above, the date on which the Company first knows, or reasonably
should have known, that such additional Registration Statement(s) is
required, and (ii) the fifth Trading Day following the date on which the Company
is notified by the Commission that such additional Registration Statement will
not be reviewed or is no longer subject to further review and comments.

“Effectiveness Period”
has the meaning set forth in Section 2(a).

 

“Exchange Act”
means the Securities Exchange Act of 1934, as amended.

“Filing Date”
means (a) with respect to the initial Registration Statement required to
be filed under Section 2(a), the 30th day following the Closing Date, and (b) with
respect to any additional Registration Statements that may be required pursuant
to Section 2(b), the 45th day following (x) if such Registration
Statement is required because the Commission shall have notified the Company in
writing that certain Registrable Securities were not eligible for inclusion on
a previously filed Registration Statement, the date or time on which the
Commission shall indicate as being the first date or time that such Registrable
Securities may then be included in a Registration Statement, or (y) if
such Registration Statement is required for a reason other than as described in
(x) above, the date on which the Company first knows, or reasonably should
have known, that such additional Registration Statement(s) is required.

“Holder” or “Holders” means the holder or holders, as the case may be,
from time to time of Registrable Securities.

“Indemnified Party”
has the meaning set forth in Section 5(c).

“Indemnifying Party”
has the meaning set forth in Section 5(c).

“Losses” has the
meaning set forth in Section 5(a).

“Preferred Shares”
means the Cumulative Convertible Redeemable Preferred Shares issued or issuable
to the Purchasers pursuant to the Purchase Agreement.

“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.

“Prospectus”
means the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by a Registration
Statement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such Prospectus.

“Registrable Securities”
means: (i) the Shares, (ii) the Warrant Shares and (iii) any
securities issued or issuable upon any stock split, dividend or other
distribution, recapitalization or similar event, or any adjustment with respect
to any of the securities referenced in (i) or (ii) above.

“Registration Statement”
means the initial registration statement required to be filed in accordance
with Section 2(a) and any additional registration statement(s) required
to be filed under Section 2(b), including (in each case) the Prospectus,
amendments and supplements to such registration statements or Prospectus,
including pre- and post-effective amendments, all

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exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by reference
therein.

“Rule 144”
means Rule 144 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.

“Rule 415”
means Rule 415 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.

“Rule 424”
means Rule 424 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.

“Securities Act”
means the Securities Act of 1933, as amended.

“Shares” means
the shares of Common Stock issued or issuable to the Purchasers upon conversion
of the Preferred Shares or as payment of a dividend on the Preferred Shares or
the Common Stock issued or issuable upon conversion of the Preferred Shares.

“Trading Day”
shall mean a day on which the Trading Market is open for the transaction of
business or, if the Common Stock is not listed or admitted to trading on any
national securities exchange or included in the Nasdaq National Market System,
a business day.

“Trading Market”
means the American Stock Exchange, Inc. or such other stock exchange or
electronic trading market which represents the highest volume market (measured
over the prior monthly period at the time of determination) in the United
States on which the Common Stock trades.

“Units” means the Preferred Shares and Warrants issued or issuable
to the Purchasers pursuant to the Purchase Agreement.

“Warrants” means the Common Stock purchase warrants issued or issuable
to the Purchasers pursuant to the Purchase Agreement.

“Warrant Shares” means the shares of Common Stock issued or issuable upon
exercise of the Warrants or as payment of a dividend on the Common Stock issued
or issuable upon exercise of the Warrants.

2.             Registration.

(a)                 On
or prior to each Filing Date, the Company shall prepare and file with the
Commission a Registration Statement covering the resale of all Registrable
Securities not already covered by an existing and effective Registration
Statement for an offering to be made on a continuous basis pursuant to Rule 415,
on Form F-1 (or on such other form appropriate for such purpose). Such
Registration Statement shall contain (except if otherwise required pursuant to
written comments received from the Commission upon a

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review of such
Registration Statement) the “Plan of Distribution” substantially in the form
attached hereto as Annex A. The
Company shall use all commercially reasonable efforts to cause such
Registration Statement to be declared effective under the Securities Act as
soon as practicable but, in any event, no later than its Effectiveness Date,
and shall use all commercially reasonable efforts to keep the Registration
Statement continuously effective under the Securities Act until the date which
is the earlier of (i) two years after the date of this Agreement, (ii) such
time as all of the Registrable Securities covered by such Registration
Statement have been publicly sold by the Holders, or (iii) such time as
all of the Registrable Securities covered by such Registration Statement may be
sold by the Holders pursuant to Rule 144(k) as determined by the
counsel to the Company pursuant to a written opinion letter to such effect,
addressed and acceptable to the Company’s transfer agent and the affected
Holders (the “Effectiveness Period”).

(b)             If for any reason
the Commission does not permit all of the Registrable Securities to be included
in the Registration Statement filed pursuant to Section 2(a), or for any
other reason any outstanding Registrable Securities are not then covered by an
effective Registration Statement, then the Company shall prepare and file by
the Filing Date for such Registration Statement, an additional Registration
Statement covering the resale of all Registrable Securities not already covered
by an existing and effective Registration Statement for an offering to be made
on a continuous basis pursuant to Rule 415, on Form F-1 (or on
such other form appropriate for such purpose). Each such Registration Statement
shall contain (except if otherwise required pursuant to written comments
received from the Commission upon a review of such Registration Statement) the “Plan
of Distribution” substantially in the form attached hereto as Annex A. The Company shall use all
commercially reasonable efforts to cause each such Registration Statement to be
declared effective under the Securities Act as soon as practicable but, in any
event, by its Effectiveness Date, and shall use all commercially reasonable
best efforts to keep such Registration Statement continuously effective under the
Securities Act during the entire Effectiveness Period.

(c)             Promptly following
any date on which the Company becomes eligible to use a registration statement
on Form F-3 (or similar form that permits incorporation of
subsequently filed documents by reference) to register the Registrable
Securities for resale, the Company shall file a registration statement on such Form covering
the Registrable Securities (or a post-effective amendment on such Form to
the then effective Registration Statement) and shall use all commercially
reasonable efforts to cause such Registration Statement to be declared
effective as soon as practicable thereafter, but in any event prior to the
Effectiveness Date therefor. Such Registration Statement shall contain (except
if otherwise required pursuant to written comments received from the Commission
upon a review of such Registration Statement) the “Plan of Distribution”
substantially in the form attached hereto as Annex
A. The Company shall use all commercially reasonable efforts to keep
such Registration Statement continuously effective under the Securities Act
during the entire Effectiveness Period.

(d)              If: (i) a
Registration Statement is not filed on or prior to its Filing Date (if the
Company files a Registration Statement without affording the Holders the
opportunity to review and comment on the same as required by Section 3(a) hereof,
the

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Company shall
not be deemed to have satisfied this clause (i)), or (ii) a Registration
Statement is not declared effective by the Commission on or prior to its
required Effectiveness Date, or (iii) after its Effective Date, without
regard for the reason thereunder or efforts therefore, such Registration
Statement ceases for any reason to be effective and available to the Holders as
to all Registrable Securities to which it is required to cover at any time
prior to the expiration of its Effectiveness Period for more than an aggregate
of 35 Trading Days (which need not be consecutive) (any such failure or breach
being referred to as an “Event,”
and for purposes of clauses (i) or (ii) the date on which such Event
occurs, or for purposes of clause (iii) the date which such 35 Trading
Day-period is exceeded, being referred to as “Event
Date”), then in addition to any other rights the Holders may have
hereunder or under applicable law:  on
each such Event Date until the applicable Event is cured, the Company shall pay
to each Holder an amount in cash, as partial liquidated damages and not as a
penalty, equal to 1/30th of 1.0% of the
aggregate Purchase Price paid by such Holder for Units pursuant to the Purchase
Agreement; provided that in no event shall the aggregate amount payable to any
such Holder exceed 6.0% of the aggregate Purchase Price paid by such Holder for
the Units. All such amounts shall be pro-rated with respect to any Holder in
the case the Company has not breached the requirements of this Section 2(d) with
respect to a portion of the Registrable Securities issued or issuable to such
Holder based on the relative number of Registrable Securities which are not so
registered compared to the total number of Registrable Securities issued or
issuable to such Holder. The Company shall be obligated to pay any such partial
liquidated damages pursuant to this Section 2(d) in arrears on a
weekly basis on the last business day of each such week. If the Company fails
to pay any partial liquidated damages pursuant to this Section 2(d) in
full within seven days after the date payable, the Company will pay interest
thereon at a rate of 10% per annum (or such lesser maximum amount that is
permitted to be paid by applicable law) to the Holder, accruing daily from the
date such partial liquidated damages are due until such amounts, plus all such
interest thereon, are paid in full.

(e)         
Each Holder agrees to furnish to the Company a completed Questionnaire
in the form attached to this Agreement as Annex
B (a “Selling Holder Questionnaire”).
The Company shall not be required to include the Registrable Securities of a
Holder in a Registration Statement and shall not be required to pay any
liquidated or other damages under Section 2(d) to any Holder who
fails to furnish to the Company a fully completed Selling Holder Questionnaire
at least two Trading Days prior to the Filing Date (subject to the requirements
set forth in Section 3(a)).

3.             Registration Procedures.

In connection with the Company’s registration
obligations hereunder, the Company shall:

(a)       
Not less than six Trading Days prior to the filing of a Registration
Statement or any related Prospectus or any amendment or supplement thereto
unless a shorter time is agreed to in writing by the Holder, the Company shall furnish
to each Holder for review copies of the “Selling Shareholders” and “Plan of
Distribution” sections of such document, as proposed to be filed with such
documents. The Company shall not file a Registration Statement, any Prospectus
or any amendments or supplements thereto in which

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the disclosure
in the “Selling Shareholder” section thereof differs from the information
received from a Holder in its Selling Holder Questionnaire (as amended or
supplemented).

(b)             (i)  Prepare
and file with the Commission such amendments, including post-effective
amendments, to each Registration Statement and the Prospectus used in
connection therewith as may be necessary to keep such Registration Statement
continuously effective as to the applicable Registrable Securities for the
applicable Effectiveness Period and prepare and file with the Commission such
additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; (iii) respond
as promptly as reasonably practicable to any comments received from the
Commission with respect to each Registration Statement or any amendment thereto
and, as promptly as reasonably practicable provide the Holders copies of all
correspondence from and to the Commission relating to such Registration
Statement that would not result in the disclosure to the Holders of material
and non-public information concerning the Company; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange
Act with respect to the Registration Statements and the disposition of all
Registrable Securities covered by each Registration Statement.

(c)             Notify the Holders
as promptly as reasonably practicable (and, in the case of (i)(A) below,
not less than three Trading Days prior to such filing) and, if requested by any
such Person, confirm such notice in writing no later than one Trading Day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to a Registration Statement is proposed to be
filed; (B) when the Commission notifies the Company whether there will be
a “review” of such Registration Statement and whenever the Commission comments
in writing on such Registration Statement (the Company shall provide copies
thereof and all written responses thereto to each of the Holders that pertain
to the Holders as a selling shareholder or to the “Plan of Distribution”
section, but not information which the Company believes would constitute
material and non-public information); and (C) with respect to each
Registration Statement or any post-effective amendment, when the same has
become effective; (ii) of any request by the Commission for amendments or
supplements to a Registration Statement or Prospectus or for additional
information; (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of a Registration Statement covering any or all of
the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any Proceeding for such purpose; and (v) of
the occurrence of any event or passage of time that makes the financial
statements included in a Registration Statement ineligible for inclusion
therein or any statement made in such Registration Statement or Prospectus or
any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to such
Registration Statement, Prospectus or other documents so that, in the case of
such Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated

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therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.

(d)             Use all
commercially reasonable efforts to avoid the issuance of, or, if issued, obtain
the withdrawal of (i) any order suspending the effectiveness of a
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.

(e)             Furnish to each
Holder, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto and all exhibits to the extent requested
by such Person (including those previously furnished) promptly after the filing
of such documents with the Commission.

(f)              Promptly deliver
to each Holder, without charge, as many copies of each Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request. The Company hereby
consents to the use of such Prospectus and each amendment or supplement thereto
by each of the selling Holders in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.

(g)             Prior to any public
offering of Registrable Securities, to use all commercially reasonable efforts
to register or qualify or cooperate with the selling Holders in connection with
the registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of all jurisdictions within the United States, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the Registration Statements.

(h)             Cooperate with the
Holders to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be delivered to a transferee pursuant to
the Registration Statements, which certificates shall be free, to the extent
permitted by the Purchase Agreement, of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in such names
as any such Holders may request.

(i)              Cause all such
Registrable Securities registered pursuant hereunder to be listed on each
securities exchange on which similar securities issued by the Company are then
listed.

(j)              Provide a transfer
agent and registrar for all Registrable Securities registered pursuant
hereunder and a CUSIP number for all such Registrable Securities, in each case
not later than the effective date of such registration.

(k)             Upon the occurrence
of any event contemplated by Section 3(c)(v), as promptly as reasonably
practicable, prepare a supplement or amendment, including a post-effective
amendment, to the affected Registration Statements or a

 

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supplement to
the related Prospectus or any document incorporated or deemed to be
incorporated therein by reference, and file any other required document so
that, as thereafter delivered, no Registration Statement nor any Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.

4.             Registration Expenses. All fees and expenses
incident to the performance of or compliance with this Agreement by the Company
shall be borne by the Company whether or not any Registrable Securities are
sold pursuant to a Registration Statement. The fees and expenses referred to in
the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees and expenses (A) with
respect to filings required to be made with the Trading Market on which the
Common Stock is then listed for trading, and (B) in compliance with
applicable state securities or Blue Sky laws), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is reasonably requested by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) fees
and disbursements of counsel for the Company and the reasonable fees and
disbursements of one counsel for the selling Holders not to exceed $15,000 in
the aggregate, (iv) Securities Act liability insurance, if the Company so
desires such insurance, and (v) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. Such fees and expenses shall not include fees
and disbursements of counsel for the selling shareholders. In addition, the
Company shall be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit and the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange as required
hereunder.

5.             Indemnification.

(a)        Indemnification
by the Company. The Company shall, notwithstanding any termination of this
Agreement, indemnify and hold harmless each Holder, the officers, directors,
agents, investment advisors, partners, members and employees of each of them,
each Person who controls any such Holder (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses,
claims, damages, liabilities, costs (including, without limitation, reasonable
costs of preparation and reasonable attorneys’ fees) and expenses
(collectively, “Losses”), as
incurred, arising out of or relating to any untrue or alleged untrue statement
of a material fact contained in any Registration Statement, any Prospectus or
any form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein (in the case of any Prospectus or form of
prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading or any violation or alleged violation by the
Company of the Securities Act, the

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Exchange Act,
any state securities laws or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any state securities laws, except to the
extent, but only to the extent, that (1) such untrue statements or
omissions are based solely upon information regarding such Holder furnished in
writing to the Company by such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such Holder’s proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto (it being understood that the Holder has approved Annex A hereto for this purpose) or (2) in
the case of an occurrence of an event of the type specified in Section 3(c)(ii)-(v),
the use by such Holder of an outdated or defective Prospectus after the Company
has notified such Holder in writing that the Prospectus is outdated or
defective and prior to the receipt by such Holder of Advice or an amended or
supplemented Prospectus, but only if and to the extent that following the
receipt of the Advice or the amended or supplemented Prospectus the
misstatement or omission giving rise to such Loss would have been corrected. The
Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with
the transactions contemplated by this Agreement.

(b)        Indemnification
by Holders. Each Holder shall, severally and not jointly, indemnify and
hold harmless the Company, its directors, officers, agents and employees, each
Person who controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents or employees of such controlling Persons, to the fullest
extent permitted by applicable law, from and against all Losses, as incurred,
arising solely out of or based solely upon: (x) such Holder’s failure to comply
with the prospectus delivery requirements of the Securities Act or (y) any
untrue statement of a material fact contained in any Registration Statement,
any Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or form of prospectus or supplement
thereto, in light of the circumstances under which they were made) not
misleading to the extent, but only to the extent that, (1) such untrue
statements or omissions are based solely upon information regarding such Holder
furnished in writing to the Company by such Holder expressly for use therein,
or to the extent that such information relates to such Holder or such Holder’s
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in the
Registration Statement (it being understood that the Holder has approved Annex A hereto for this purpose), such
Prospectus or such form of prospectus or in any amendment or supplement thereto
or (2) in the case of an occurrence of an event of the type specified in Section 3(c)(ii)-(v),
the use by such Holder of an outdated or defective Prospectus after the Company
has notified such Holder in writing that the Prospectus is outdated or  defective and prior to the receipt by such
Holder of Advice or an amended or supplemented Prospectus, but only if and to
the extent that following the receipt of the Advice or the amended or
supplemented Prospectus the misstatement or omission giving rise to such Loss
would have been corrected. In no event shall the liability of any selling
Holder hereunder be greater in amount than the dollar amount of the net
proceeds received

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by such Holder
upon the sale of the Registrable Securities giving rise to such indemnification
obligation.

(c)          
Conduct of Indemnification Proceedings. If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party
shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment
of counsel reasonably satisfactory to the Indemnified Party and the payment of
all fees and expenses incurred in connection with defense thereof; provided,
that the failure of any Indemnified Party to give such notice shall not relieve
the Indemnifying Party of its obligations or liabilities pursuant to this
Agreement, except to the extent, and only to the extent, that it shall be
finally determined by a court of competent jurisdiction (which determination is
not subject to appeal or further review) that such failure shall have
proximately and materially adversely prejudiced the Indemnifying Party.

An Indemnified Party shall have the right to employ
separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party or Parties unless: 
(1) the Indemnifying Party has agreed in writing to pay such fees
and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) representation
of such Indemnified Party by the counsel retained by the Indemnifying Party would
be inappropriate due to actual or potential differing interests between such
Indemnified Party and any other party represented by such counsel in such
proceeding, in which case, if such Indemnified Party notifies the Indemnifying
Party in writing that it elects to employ separate counsel at the expense of
the Indemnifying Party, the Indemnifying Party shall not have the right to
assume the defense thereof and such counsel shall be at the expense of the
Indemnifying Party. The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding.

All fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent incurred in connection
with investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as incurred,
within ten Trading Days of written notice thereof to the Indemnifying Party
(regardless of whether it is ultimately determined that an Indemnified Party is
not entitled to indemnification hereunder; provided, that the Indemnifying
Party may require such Indemnified Party to undertake to reimburse all such
fees and expenses to the extent it is finally judicially determined that such
Indemnified Party is not entitled to indemnification hereunder).

(d)        Contribution.
If a claim for indemnification under Section 5(a) or 5(b) is
unavailable to an Indemnified Party (by reason of public policy or otherwise),
then each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to

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the amount
paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been
taken or made by, or relates to information supplied by, such Indemnifying
Party or Indemnified Party, and the parties’ relative intent, knowledge, access
to information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 5(c),
any reasonable attorneys’ or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have
been indemnified for such fees or expenses if the indemnification provided for
in this Section was available to such party in accordance with its terms.

The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were
determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d),
no Holder shall be required to contribute, in the aggregate, any amount in
excess of the amount by which the proceeds actually received by such Holder
from the sale of the Registrable Securities subject to the Proceeding exceeds
the amount of any damages that such Holder has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission.

The indemnity and contribution agreements contained in
this Section are in addition to any liability that the Indemnifying
Parties may have to the Indemnified Parties.

6.             Miscellaneous.

(a)            
No Piggyback on Registrations. Without the prior written consent
of Holders of a majority in interest of the then outstanding Registrable
Securities (i) neither the Company nor any of its security holders (other
than the Holders in such capacity pursuant hereto) may include securities of
the Company in a Registration Statement other than the Registrable Securities,
and (ii) the Company shall not during the Registration Period enter into
any agreement providing any such right to any of its security holders.

(b)            
Compliance. Each Holder covenants and agrees that it will comply
with the prospectus delivery requirements of the Securities Act as applicable
to it in connection with sales of Registrable Securities pursuant to the
Registration Statement.

(c)            
Discontinued Disposition. Each Holder agrees by its acquisition
of such Registrable Securities that, upon receipt of a notice from the Company
of the occurrence of any event of the kind described in Section 3(c), such
Holder will forthwith discontinue disposition of such Registrable Securities
under the Registration Statement until such Holder’s receipt of the copies of
the supplemented Prospectus and/or amended

 11
 

 

Registration
Statement or until it is advised in writing (the “Advice”) by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. The
Company may provide appropriate stop orders to enforce the provisions of this
paragraph.

(d)          
Amendments and Waivers. The provisions of this Agreement,
including the provisions of this Section 6(d), may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the same shall be in writing and
signed by the Company and the Holders of no less than a majority in interest of
the then outstanding Registrable Securities. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of certain Holders and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of at least a majority of the Registrable Securities to which such waiver
or consent relates.

(e)          
Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile
(provided the sender receives a machine-generated confirmation of successful
transmission) at the facsimile number specified in this Section prior to
6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading
Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number specified in this Section on
a day that is not a Trading Day or later than 5:00 p.m. (Calgary time) on
any Trading Day, (c) the Trading Day following the date of mailing, if
sent by U.S. nationally recognized overnight courier service, or (d) upon
actual receipt by the party to whom such notice is required to be given. The
address for such notices and communications shall be as follows:

	
  If to the Company:

  	
   

  	
   

  	
  Canadian Superior Energy Inc.

  
	
   

  	
   

  	
   

  	
  3300, 400 - 3rd Avenue SW

  
	
   

  	
   

  	
   

  	
  Calgary, Alberta

  
	
   

  	
   

  	
   

  	
  Canada T2P 4H2

  
	
   

  	
   

  	
   

  	
  Attn: Greg S. Noval

  
	
   

  	
   

  	
   

  	
  Facsimile: (403) 216-2374

  
	
   

  	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
   

  	
  Preston Gates & Ellis LLP

  
	
   

  	
   

  	
   

  	
  925 Fourth Avenue, Suite 2900

  
	
   

  	
   

  	
   

  	
  Seattle, WA 98104

  
	
   

  	
   

  	
   

  	
  Attn.: Gary J. Kocher

  
	
   

  	
   

  	
   

  	
  Facsimile: (206) 370-6105

  
	
   

  	
   

  	
   

  	
   

  
	
  If to a Purchaser:

  	
  To the address of such Purchaser as set forth under
  Section 7.5 of the Purchase Agreement.

  
	
   

  	
   

  

 

 12
 

 

 

	
  If to any other Person who
  is then the registered Holder:

  
	
   

  
	
   

  	
  To the address of such Holder as it appears in the
  stock transfer books of the Company

  
	
   

  	
   

  
	
  or such other address as may be designated in
  writing hereafter, in the same manner, by such Person.

  

 

(f)            
Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each Holder. The rights to cause the
Company to register Registrable Securities may be assigned (but only with all
related obligations) by a Holder to a transferee or assignee of such securities
that (i) is a subsidiary, parent, partner, limited partner, member,
retired partner or shareholder of a Holder, (ii) is a Holder’s family
member or trust for the benefit of an individual Holder, or (iii) after
such assignment or transfer, holds at least 100,000 shares of Registrable
Securities (subject to appropriate adjustment for stock splits, stock
dividends, combinations and other recapitalizations); provided, that in the
case of any such transfer, the Holder or Holders of a majority in interest of
the Registrable Securities shall be entitled to act for and bind the other
Holders in the case of any matter hereunder that requires the consent or action
of the Holders.

(g)           
Execution and Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.

(h)           
Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof.

(i)          
Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.

(j)          Severability.
If any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be hereafter declared invalid, illegal, void or unenforceable.

 13
 

 

 

(k)           
Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK

SIGNATURE PAGES TO FOLLOW]

 14
 

 

 

[Signature
Page to Registration Rights Agreement]

IN
WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as of the date first written above.

	
  

  	
   

  	
  CANADIAN SUPERIOR ENERGY INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Michael Coolen

  
	
   

  	
   

  	
   

  	
  Name: Michael
  Coolen

  
	
   

  	
   

  	
   

  	
  Title: Vice
  President East Coast Operations

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  WEST COAST OPPORTUNITY FUND, LLC

  
	
   

  	
   

  	
  By:

  	
  West Coast Asset Management, Inc, managing member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Atticus Lowe

  
	
   

  	
   

  	
   

  	
  Name: Atticus
  Lowe

  
	
   

  	
   

  	
   

  	
  Title:Vice
  President

  

 

 15

Annex A

Plan of
Distribution

The Selling Shareholders and any of their pledgees,
donees, transferees, assignees and successors-in-interest may, from time to
time, sell any or all of their shares of Common Stock on any stock exchange,
market or trading facility on which the shares are traded or in private
transactions. These sales may be at fixed or negotiated prices. The Selling
Shareholders may use any one or more of the following methods when selling
shares:

·                  ordinary brokerage transactions and
transactions in which the broker-dealer solicits Purchasers;

·                  block trades in which the broker-dealer
will attempt to sell the shares as agent but may position and resell a portion
of the block as principal to facilitate the transaction;

·                  purchases by a broker-dealer as
principal and resale by the broker-dealer for its account;

·                  an exchange distribution in
accordance with the rules of the applicable exchange;

·                  privately negotiated transactions;

·                  to cover short sales made after the
date that this Registration Statement is declared effective by the Commission;

·                  broker-dealers may agree with
the Selling Shareholders to sell a specified number of such shares at a
stipulated price per share;

·                  a combination of any such methods of
sale; and

·                  any other method permitted pursuant
to applicable law.

The Selling Shareholders may also sell shares under Rule 144
under the Securities Act, if available, rather than under this prospectus.

Broker-dealers engaged by the Selling
Shareholders may arrange for other brokers-dealers to participate in
sales. Broker-dealers may receive commissions or discounts from the
Selling Shareholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. The
Selling Shareholders do not expect these commissions and discounts to exceed
what is customary in the types of transactions involved.

The Selling Shareholders may from time to time pledge
or grant a security interest in some or all of the Shares owned by them and, if
they default in the performance of their secured obligations, the pledgees or
secured parties may offer and sell shares of Common Stock from time to time
under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act of 1933 amending the list of
Selling Shareholders to include the pledgee, transferee or other successors in
interest as Selling Shareholders under this prospectus.

 

Upon the Company being notified in writing by a
Selling Shareholder that any material arrangement has been entered into with a
broker-dealer for the sale of Common Stock through a block trade, special
offering, exchange distribution or secondary distribution or a purchase by a
broker or dealer, a supplement to this prospectus will be filed, if required,
pursuant to Rule 424(b) under the Securities Act, disclosing (i) the
name of each such Selling Shareholder and of the participating
broker-dealer(s), (ii) the number of shares involved, (iii) the price
at which such the shares of Common Stock were sold, (iv) the commissions
paid or discounts or concessions allowed to such broker-dealer(s), where
applicable, (v) that such broker-dealer(s) did not conduct any
investigation to verify the information set out or incorporated by reference in
this prospectus, and (vi) other facts material to the transaction. In
addition, upon the Company being notified in writing by a Selling Shareholder
that a donee or pledgee intends to sell more than 500 shares of Common Stock, a
supplement to this prospectus will be filed if then required in accordance with
applicable securities law.

The Selling Shareholders also may transfer the shares
of Common Stock in other circumstances, in which case the transferees, pledgees
or other successors in interest will be the selling beneficial owners for
purposes of this prospectus.

The Selling Shareholders and any broker-dealers
or agents that are involved in selling the shares may be deemed to be “underwriters”
within the meaning of the Securities Act in connection with such sales. In such
event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. Discounts,
concessions, commissions and similar selling expenses, if any, that can be
attributed to the sale of Securities will be paid by the Selling Shareholder
and/or the purchasers. Each Selling Shareholder has represented and warranted
to the Company that it acquired the securities subject to this registration
statement in the ordinary course of such Selling Shareholder’s business and, at
the time of its purchase of such securities such Selling Shareholder had no
agreements or understandings, directly or indirectly, with any person to
distribute any such securities.

The Company has advised each Selling Shareholder that
it may not use shares registered on this Registration Statement to cover short
sales of Common Stock made prior to the date on which this Registration Statement
shall have been declared effective by the Commission. If a Selling Shareholder
uses this prospectus for any sale of the Common Stock, it will be subject to
the prospectus delivery requirements of the Securities Act. The Selling
Shareholders will be responsible to comply with the applicable provisions of
the Securities Act and Exchange Act, and the rules and regulations
thereunder promulgated, including, without limitation, Regulation M, as
applicable to such Selling Shareholders in connection with resales of their
respective shares under this Registration Statement.

The Company is required to pay all fees and expenses
incident to the registration of the shares, but the Company will not receive
any proceeds from the sale of the Common Stock. The Company has agreed to
indemnify the Selling Shareholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.

 A-2

 

Annex B

CANADIAN
SUPERIOR ENERGY INC.

Selling
Securityholder Notice and Questionnaire

The undersigned beneficial owner of common stock (the “Common Stock”), of Canadian Superior Energy Inc. (the “Company”) or rights to acquire Common Stock understands
that the Company has filed or intends to file with the Securities and Exchange
Commission (the “Commission”) a Registration
Statement for the registration and resale of the Registrable Securities, in
accordance with the terms of the Registration Rights Agreement, dated as of January     ,
2006 (the “Registration Rights Agreement”), among
the Company and the Purchasers named therein. A copy of the Registration Rights
Agreement is available from the Company upon request at the address set forth
below. All capitalized terms used and not otherwise defined herein shall have
the meanings ascribed thereto in the Registration Rights Agreement.

The undersigned hereby provides the following
information to the Company and represents and warrants that such information is
accurate:

QUESTIONNAIRE

1.                                      Name.

(a)             Full Legal Name of
Selling Securityholder

	
   

  

  
	
  

  
	
   

  

 

(b)            Full Legal Name of
Registered Holder (if not the same as (a) above) through which Registrable
Securities Listed in Item 3 below are held:

	
   

  

  
	
  

  
	
   

  

 

(c)             Full Legal Name of
Natural Control Person (which means a natural person who directly or indirectly
alone or with others has power to vote or dispose of the securities covered by
the questionnaire):

	
   

  

  
	
  

  
	
   

  

 

2.             Address for Notices to Selling
Securityholder:

	
  

  
	
   

  
	
   

  
	
   

  

 

 

 

	
  Telephone:

  	
   

  
	
  Fax:

  	
   

  
	
  Contact Person:

  	
   

  
				

 

3.                                    Beneficial Ownership of
Registrable Securities:

Type and Principal Amount of Registrable Securities
beneficially owned:

	
   

  

  
	
   

  
	
   

  
	
   

  

 

4.                                    Broker-Dealer Status:

(a)             Are
you a broker-dealer?

	
  Yes

  	
   

  	
  o

  	
   

  	
  No

  	
   

  	
  o

  

 

Note:       If yes, the Commission’s
staff has indicated that you should be identified as an underwriter in the
Registration Statement.

(b)            Are
you an affiliate of a broker-dealer?

	
  Yes

  	
   

  	
  o

  	
   

  	
  No

  	
   

  	
  o

  

 

(c)             If
you are an affiliate of a broker-dealer, do you certify that you bought the
Registrable Securities in the ordinary course of business, and at the time of
the purchase of the Registrable Securities to be resold, you had no agreements
or understandings, directly or indirectly, with any person to distribute the
Registrable Securities?

	
  Yes

  	
   

  	
  o

  	
   

  	
  No

  	
   

  	
  o

  

 

Note:       If no, the Commission’s
staff has indicated that you should be identified as an underwriter in the  Registration Statement.

5. Beneficial Ownership of Other
Securities of the Company Owned by the Selling Securityholder.

Except
as set forth below in this Item 5, the undersigned is not the beneficial or
registered owner of any securities of the Company other than the Registrable
Securities listed above in Item 3.

 2
 

 

Type and Amount of Other Securities beneficially owned
by the Selling Securityholder:

	
  

  
	
   

  
	
   

  
	
   

  

 

6. Relationships with the Company:

Except
as set forth below, neither the undersigned nor any of its affiliates,
officers, directors or principal equity holders (owners of 5% of more of the
equity securities of the undersigned) has held any position or office or has
had any other material relationship with the Company (or its predecessors or
affiliates) during the past three years.

State any
exceptions here:

	
   

  

  
	
   

  
	
   

  
	
   

  

 

The undersigned agrees to promptly notify the Company
of any inaccuracies or changes in the information provided herein that may
occur subsequent to the date hereof and prior to the Effective Date for the
Registration Statement.

By signing below, the undersigned consents to the
disclosure of the information contained herein in its answers to Items 1
through 6 and the inclusion of such information in the Registration Statement
and the related prospectus. The undersigned understands that such information
will be relied upon by the Company in connection with the preparation or
amendment of the Registration Statement and the related prospectus.

IN WITNESS WHEREOF the undersigned, by authority duly
given, has caused this Notice and Questionnaire to be executed and delivered
either in person or by its duly authorized agent.

	
  Dated:

  	
   

  	
   

  	
  Beneficial Owner:

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
						

 

PLEASE
FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN
THE ORIGINAL BY OVERNIGHT MAIL, TO:

Devin Stockfish

Preston Gates & Ellis LLP

925 Fourth Avenue

Suite 2900

Seattle, WA 98104

Fax:  (206) 623-7022

 3Exhibit 10.1

CANADIAN SUPERIOR ENERGY
INC.

STOCK OPTION PLAN

April 30,
2001

(As amended June 11, 2004 and June 24,
2005)

 

 

 

CANADIAN SUPERIOR ENERGY INC.

STOCK OPTION PLAN

1.                                      INTERPRETATION

In this Plan (including this
clause), unless there is something in the subject matter or context
inconsistent therewith, words importing the singular number shall include the
plural and vice versa, words importing the masculine gender shall include the
feminine and neuter genders and the following expressions shall have the
following meanings, respectively:

(a)                                  “Board” shall
mean the Board of Directors of the Corporation;

(b)                                 “Change of
Control” includes:

(i)                                     the acquisition
by any person or corporation, or any persons or corporations acting jointly or
in concert (as determined by the Securities Act
(Alberta)), whether directly or indirectly, of voting securities of the
Corporation which, together with all other voting securities of the Corporation
held by such persons or corporations, constitutes, in the aggregate, more than
20% of all outstanding voting securities of the Corporation;

(ii)                                  an amalgamation,
arrangement or other form of business combination of the Corporation with
another corporation which results in the holders of voting securities of that
other corporation holding, in the aggregate, more than 20% of all outstanding
voting securities of the corporation resulting from the business combination;
or

(iii)                               the sale, lease
or exchange of all or substantially all of the property of the Corporation,
other than in the ordinary course of business of the Corporation or to a
Subsidiary, to another person or corporation;

(c)                                  “Committee” shall
mean a committee of Directors appointed by the Board in accordance with section
3 hereof;

(d)                                 “Common Shares”
shall mean voting common shares of the Corporation;

(e)                                  “Corporation”
shall mean Canadian Superior Energy Inc. and any successor or continuing
corporation resulting from any form of corporate reorganization;

(f)                                    “Early
Termination Date” shall mean the date that an Option terminates prior to the
Normal Expiration Date of such Option;

(g)                                 “Exercise Price”
shall mean the exercise price of Common Shares under an Option Agreement
determined as provided for in subsection (e) of section 7 hereof;

(h)                                 “Expiry Date”
shall mean the Normal Expiration Date or the Early Termination Date of an
Option, as the case may be;

(i)                                     “Insider” shall
mean:

(a)                                  an insider as
defined in the Securities Act (Alberta), other
than a person who falls within that definition solely by virtue of being a
director or senior officer of a subsidiary; and

 1
 

 

 

(b)                                 an associate, as
defined in the Securities Act (Alberta), of any
person who is an insider by virtue of (a) above;

(j)                                     “Market Value”
shall mean:

(i)                                     the last reported
sale price on the trading day immediately preceding the Option Date of an
Option at which Common Shares traded on the TSX; or

(ii)                                  if there is no
reported sale price at which Common Shares traded on such exchange on the
trading day immediately preceding such Option Date, the last reported sale price
at which Common Shares traded on such exchange prior to such Option Date; or

(iii)                               if the Common
Shares are not listed and trading on a stock exchange on such Option Date, such
price as the Board shall, in their sole discretion, determine is the fair value
of the Common Shares at such time;

(k)                                  “Normal
Expiration Date” shall mean, with respect to any Option, the date determined by
the Board on which such Option would normally terminate (except as otherwise
provided in subsections (g) (i) and (ii) of section 7 of the
Plan), which date shall in no event be later than the tenth anniversary of the
Option Date of such Option;

(l)                                     “Option” shall
mean an option to purchase Common Shares granted pursuant to the Plan;

(m)                               “Option Agreement”
shall mean an agreement, substantially in the form of the agreement set out in
Schedule A to this Plan, between the Corporation and a Participant setting out
the terms of an option granted to a Participant;

(n)                                 “Option Date”
shall mean the date on which the Board grants an Option to a Participant;

(o)                                 “Optionee” shall
mean a Participant who has entered into an Option Agreement with the
Corporation;

(p)                                 “Option Shares”
shall mean the Common Shares, which a Participant is entitled to purchase under
an Option;

(q)                                 “Participant”
shall mean, on any date:

(i)                                     a person who is
regularly employed by the Corporation;

(ii)                                  an officer of the
Corporation;

(iii)                               a director of the
Corporation;

(iv)                              a consultant to
the Corporation; or

(v)                                 a Service
Provider;

(r)                                    “Plan” shall mean
the Corporation’s “Stock Option Plan” as embodied herein, as from time to time
amended;

(s)                                  “Service Provider”
shall mean any person or company engaged to provide ongoing management or
consulting services for the Corporation or any entity controlled by the
Corporation;

 2
 

 

 

(t)                                    “Share
Compensation Arrangement” shall mean any stock option, stock option plan,
employee stock purchase plan or any compensation or incentive mechanism
involving the issuance or potential issuance of common shares, including a
share purchase from treasury which is financially assisted by the Corporation
by way of a loan, guarantee or otherwise; and

(u)                                 “TSX” shall mean
The Toronto Stock Exchange.

2.                                      PURPOSE
OF THE PLAN

The Purpose of the Plan is to
provide options to purchase Common Shares to employees, officers, directors of
the Corporation and consultants to the Corporation and others as an incentive
to assist the Corporation in achieving the long-term objectives of the
Corporation and to attract and retain persons of experience and ability.

3.                                      ADMINISTRATION,
PARTICIPANTS AND ALLOTMENTS

(a)                                  The Plan will be
administered by:

(i)                                     the Board;

(ii)                                  if determined by
the Board, by a compensation committee of the Board (the “Committee”)
consisting of not less than three directors; or

(iii)                               if determined by
the Board, by the President and Chief Executive Officer of the Corporation with
respect to Options granted to Participants at the commencement of the
employment or engagement of such Participants with or by the Corporation.

If a Committee is appointed to
administer the Plan, all references in this Plan to the Board will be deemed to
be references to the Committee. If the President and Chief Executive Officer of
the Corporation is appointed to administer the Plan with respect to Options
granted to Participants at the commencement of their employment or engagement,
then Options so granted shall be conditional on subsequent ratification by the
Board.

(b)                                 Subject to the
limitations of the Plan, the Board has the authority to:

(i)                                     determine which
Participants are to be granted Options and grant Options to those Participants;

(ii)                                  determine the
terms of such Options;

(iii)                               prescribe the
form of Option Agreement and Notice of Exercise with respect to a particular
Option, if other than as set forth in Schedules A and B to this Plan; and

(iv)                              interpret the
Plan and determine all questions arising out of the Plan and any option granted
pursuant to the Plan, which interpretations and determinations will be
conclusive and binding on the Corporation and all other affected persons.

(c)                                  The Board or the
Committee may prescribe rules and regulations relating to the Plan and may
approve the form and content and prescribe the use of such forms of
applications, directions, powers of attorney, and other documents or
instruments, either generally or in

 3
 

 

 

specific cases, as may be deemed necessary or
advisable for the grant or issuance of Options under the Plan and for the
proper administration and operation of the Plan.

(d)                                 The Board or the
Committee shall review the Plan from time to time with a view to making
revisions to it, granting additional Options and, in the case of the Committee,
making appropriate recommendations to the Board.

(e)                                  Nothing contained
in the Plan or in any resolution adopted or to be adopted by the Board or by the
Committee pursuant to the Plan shall constitute an Option hereunder.

(f)                                    An Option granted
by the Board to a Participant pursuant to the Plan is subject to, and shall be
of no force and effect until, the execution and delivery of an Option Agreement
by both the Corporation and such Participant.

(g)                                 The Corporation
shall be responsible for all costs of administration of the Plan, including the
fees, if any, of any trustee and the fees of all advisors or consultants
retained by such persons to assist them in the performance of their respective
duties; and

(h)                                 The
implementation and the operation of the Plan, including the granting of any
Option pursuant to the Plan, is subject:

(i)                                     to receipt by the
Corporation of all necessary approvals, advance rulings, exemptions or
registrations required or deemed advisable under applicable law or regulations
including without limiting the generality of the foregoing,  all necessary approval or registrations
required by any and all stock exchanges upon which the Common Shares are
listed; and

(ii)                                  to filings by or
on behalf of Optionees pursuant to applicable law or regulations with respect
to the Options, and the Option Shares underlying the Options, granted to the
Optionees.

4.                                      COMMON
SHARES RESERVED

(a)                                  The maximum number
of Common Shares that may be reserved for issuance pursuant to Options granted
under the Plan is 10% of the number of issued and outstanding Common Shares,
from time to time.

(b)                                 Any increase in
the number of issued and outstanding Common Shares will result in an increase
in the available number of Common Shares that may be reserved for issuance
under the Plan;

(c)                                  Any exercises of
Options will make new grants of Options available under the Plan;

(d)                                 The maximum
number of Common Shares that may be reserved for issuance to any one
Participant pursuant to Options granted under the Plan and all outstanding
agreements to grant Options is 5% of the number of Common Shares issued and
outstanding.

(e)                                  Any Option
Shares, which have not been purchased prior to the expiration or termination of
the Option, which such Option Shares underlie, shall become part of the Common
Shares reserved for issuance under the Plan but unallocated to any particular
Option. So long as any Options are outstanding under the Plan, the Board shall
at all times reserve, pursuant to this section 4, at least that number of
unissued Common Shares which is sufficient to enable all of such Options to be
exercised in accordance with their terms subject to any required regulatory
and/or shareholder approvals.

 4

 

5.                                      LIMITS
WITH RESPECT TO INSIDERS

(a)                                  The maximum
number of Common Shares that may be reserved for issuance to Insiders pursuant
to Options granted under the Plan and any other Share Compensation Arrangement
is 10% of the number of Common Shares outstanding.

(b)                                 The maximum
number of Common Shares that may be issued to Insiders under the Plan and any
other Share Compensation Arrangement within a one year period is 10% of the
number of Common Shares outstanding.

(c)                                  The maximum
number of Common Shares that may be issued to any one Insider (and such Insider’s
associates, as defined in the Securities Act
(Alberta)) under the Plan and any other Share Compensation Arrangement within a
one-year period is 5% of the number of Common Shares outstanding.

(d)                                 For the purposes
of (a), (b) and (c) above, any entitlement to acquire Common Shares
granted pursuant to the Plan or any other Share Compensation Arrangement prior
to the grantee becoming an Insider is to be excluded.

6.                                      PARTICIPATION
VOLUNTARY

Participation in the Plan by a
Participant is entirely voluntary and will not affect the Participant’s
employment. The Plan and any Options granted pursuant to the Plan shall not, of
itself, give any participant the right to continue to be an employee, officer
or director of the Corporation.

7.                                      CERTAIN
TERMS OF OPTION AGREEMENTS

The Option Agreements shall
(or may, if so indicated) contain provisions providing for the following terms
with respect to the exercise of Options under the Plan:

(a)                                  An Option may be
exercised by an Optionee as follows:

(i)                                     on and after the
first anniversary of the Option Date, as to 331¤3% of the Option
Shares or any part thereof;

(ii)                                  on and after the
second anniversary of the Option Date, as to an additional 331¤3% of the Option Shares or any
part thereof; and

(iii)                               on and after the
third anniversary of the Option Date, as to the remaining 331¤3% of the Option Shares or any
part thereof;

subject to the right of the
Board to determine at the time of the grant that a particular Option will be
exercisable in whole or in part on different dates and to determine after the
Option Date that a particular option will be exercisable in whole or in part on
earlier dates for any reason.

(b)                                 In the event of a
Change of Control and subject to the approval of the Board, the un-matured
portion of a Participant’s options may be exercisable in whole or in part on:

(i)                                     the date and time
of a takeover bid;

(ii)                                  the date of the
meeting of securityholders of the Corporation at which an amalgamation,
arrangement or other form of business combination, as the case may be, is
approved; or

 5
 

 

(iii)                               the date and time
of a meeting of securityholders of the Corporation at which the sale, lease or
exchange of all or substantially all of the property of the Corporation is
approved.

(c)                                  In the event the
unmatured portion of an Option is accelerated pursuant to paragraph 7(b)(i) is
not exercised by an Optionee and the securities of the Corporation are not
taken up and paid for under the takeover bid, such unmatured portion of the
Option which is accelerated shall cease to be accelerated and shall be
exercisable in accordance with the provisions of this plan other than paragraph
7(b).

(d)                                 An Option under
the Plan shall not be exercisable for less than 500 Common Shares at any one
time;

(e)                                  The Exercise
Price shall be the price per Common Share fixed by the Board on the Option Date
provided that such Exercise Price shall not be less than the Market Value on
the Option Date. The Exercise Price of Option Shares as to which an Option
shall be exercised shall be paid in full in Canadian funds by certified cheque
or bank draft payable to or to the order of the Corporation at the time or
exercise;

(f)                                    Each Option shall
terminate on its Normal Expiration Date but subject always to the provisions of
subsection (g) of this section 7;

(g)                                 If subsequent to
the Option Date of an Option and before its Normal Expiration Date, the
Optionee of such Option ceases to be a Participant:

(i)                                     by reason of
death or permanent disability, such Optionee’s Option may be exercised during
the period of one year after the date of death or date that the Optionee ceased
to be a Participant by reason of permanent disability (but only as to such
number of Option Shares in respect of which the Option would have been
exercisable under the Option Agreement on the date of death, or date that the
Optionee ceased to be a Participant by reason of permanent disability, if the
Optionee had not ceased to be a Participant as aforesaid); provided that,
notwithstanding anything provided for in this subsection (g)(i) of this
section 7 no Option may be exercised after the tenth anniversary of the Option
date of such Option. In this Plan “permanent disability” shall mean an illness
or physical or mental disability of an Optionee which in the opinion of
appropriate professional advisors, will for the foreseeable future, prevent the
Optionee from carrying on as a Participant;

(ii)                                  for any cause
other than death or permanent disability, such Optionee’s Option may be
exercised (but only as to such number of Option Shares in respect of which the
Option would have been exercisable under the provisions of the Option Agreement
on such date of exercise if such Optionee had not ceased to be a Participant as
aforesaid) up to a date 90 days (or such longer period as the Board in its
discretion may determine and, where required, the appropriate regulatory
authority may approve) after the date the Optionee ceased to be a Participant
or up to the Normal Expiration Date, whichever date shall first occur;

(h)                                 With respect to
subsection (g)(i) of this section 7, the rights to exercise the Option
after the death of the Optionee, as therein specified, may be exercised by the
person or persons to whom the Optionee’s rights under the Option Agreement
shall pass by will or applicable law or, if no such person has such right, by
the deceased Optionee’s executors or administrators; and

 6
 

 

(i)                                     An Optionee shall
have no rights whatsoever as a shareholder of the Corporation in respect of any
of the Option Shares (including any right to receive dividends or other
distribution there from or thereon) other than in respect of Option Shares in
respect of which the Optionee shall have exercised his Option thereunder and
which the Optionee shall have actually paid for and taken-up.

8.                                      CHANGES
IN STOCK

In the event:

(a)                                  of any change in
the Common Shares through subdivision, consolidation, reclassification,
amalgamation, merger or otherwise;

(b)                                 of any stock
dividend to holders of Common Shares;

(c)                                  that any rights
are granted to holders of Common Shares to purchase Common Shares at prices
substantially below fair market value; or

(d)                                 that as a result
of any recapitalization, merger, consolidation or otherwise, the Common Shares
are converted into or exchangeable for any other shares;

then in any such case, subject
to the terms of the Plan, the number of Common Shares reserved for issuance and
available for Options under the Plan, the number of Option Shares underlying
outstanding Options and the price per Option Share of such Options shall be
proportionately adjusted by the Board to prevent substantial dilution or
enlargement of the rights granted to, or available for, holders of Options as
compared to holders of Common Shares.

9.                                      COMMON
SHARES FULLY PAID AND NON-ASSESSABLE

All Common Shares issued upon
the exercise of any Option pursuant to the terms and conditions of the Plan
shall be issued as fully paid and non-assessable Common Shares.

10.                               CONDITIONS OF ISSUANCE OF SHARES

(a)                                  If at any time
the Board shall determine, in its discretion, that:

(i)                                     the registration
or qualification of the Common Shares, which are the subject of any Option
Agreement, upon, or the consent or approval of, any securities exchange or
stock exchange upon which the Common Shares are listed;

(ii)                                  the registration
or qualification under any laws of Canada or any Province thereof or the United
States or any State thereof or the consent or approval or any regulatory
authority thereof;

(iii)                               evidence (in form
and content satisfactory to the Board) of the investment intent of the
Optionee; and/or

(iv)                              an undertaking of
the Optionee as to the sale or disposition of such Common Shares purchased
pursuant to an Option Agreement to the effect that such Common Shares so
purchased will not be traded by the Optionee for a specified period of time;

is necessary or desirable as a
condition of the issuance of any Common Shares pursuant to any Option
Agreement, then the issuance of any Common Shares pursuant to the exercise of
an Option shall not be made unless and until such registration, qualification, 

 7
 

 

consent, approval, evidence or
undertaking shall have been effected or obtained free of any condition not
acceptable to the Board.

(b)                                 Any trade by the
Optionee in any Common Share issued to the Optionee pursuant to the Plan,
including any sale or disposition for valuable consideration, and any transfer,
pledge, or encumbrance of any Common Shares issued to an Optionee pursuant to
the Plan, shall be subject to such regulatory approvals as may be required at
the time of the trade. Accordingly, the Corporation makes no representation as
to the ability of any Optionee to trade in any Common Shares acquired pursuant
to the Plan.

(c)                                  The Corporation
cannot and does not assure a profit, or protect the Optionee against a loss,
with respect to the Common Shares purchased pursuant to the Plan. The
Corporation does not assume any responsibility relating to any tax liability of
the Optionee by reason of the exercise of any Option or any subsequent trade of
any Common Shares issued to an Optionee pursuant to the exercise of an Option.

11.                               ACCOUNTS AND STATEMENTS

The Corporation shall maintain
records indicating the number of Options granted to each Optionee and the
number of Options exercised under the Plan. Upon written request from an
Optionee, the Corporation shall furnish to the Optionee a statement indicating
the number of Options held on behalf of the Optionee.

12.                               INTERPRETATION, AMENDMENT AND
DISCONTINUANCE

(a)                                  The Board may
amend, suspend or terminate the Plan at any time, provided that no such
amendment, suspension or termination may:

(i)                                     be made without
obtaining any required regulatory or shareholder approvals (which approvals
will always be required in the case of an amendment to increase the maximum
number of Common Shares that may be reserved for issuance pursuant to Options
granted under the Plan); or

(ii)                                  alter or impair
any Options previously granted to an Optionee without the consent or deemed
consent of the Optionee.

(b)                                 The Board may
amend the terms of any outstanding Option (including, without limitation, the
cancellation of an Option or an amendment to the date or dates on which an
Option or portion thereof vests and so becomes exercisable), provided that:

(i)                                     any required
regulatory and shareholder approvals are obtained;

(ii)                                  the Board would
have had the authority to initially grant the Option under terms as so amended;
and

(iii)                               the consent or
deemed consent of the Optionee is obtained.

13.                               WAIVER

No waiver by the Corporation
of any term of this Plan or any breach thereof by an Optionee shall be
effective or binding on the Corporation unless the same be expressed in writing
and any waiver so expressed shall not limit or affect the Corporation’s rights
with respect to any other or future breach.

 8
 

 

14.                               GENERAL

(a)                                  The Plan and each
Option granted under the Plan shall be governed by and construed in accordance
with the laws of the Province of Alberta and any Option Agreement entered into
pursuant to the Plan shall be treated in all respects as an Alberta contract;

(b)                                 Any officer or
director of the Corporation is hereby authorized to execute and deliver, under
corporate seal or otherwise, all instruments and documents (including, without
limitation, Option Agreements) and do all things necessary or desirable for
carrying out the provisions of the Plan.

(c)                                  Nothing contained
herein shall restrict or limit or be deemed to restrict or limit the rights or
powers of the Board in connection with any allotment and issuance of shares in
the capital stock of the Corporation which are not reserved for issuance
hereunder.

(d)                                 The Plan and any
Option Agreement entered into pursuant hereto shall enure to the benefit of and
be binding upon the Corporation, its successors and assigns. The interest of
any Optionee hereunder or under any Option Agreement shall not be transferable
or alienable by the Optionee either by assignment or in any other manner
whatsoever and, during the Optionee’s lifetime, shall be vested only in the
Optionee, but shall, subject to the terms hereof and of the Option Agreement,
enure to the benefit of and be binding upon the legal personal representatives
of the Optionee.

	
  

  	
   

  
	
   

  	
  , Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  , Director

  

 

 9

 

SCHEDULE A — FORM OF OPTION AGREEMENT

CANADIAN SUPERIOR ENERGY INC.

STOCK OPTION PLAN

OPTION AGREEMENT

This Option Agreement is entered into between
Canadian Superior Energy Inc. (the “Corporation”) and the Optionee named below
pursuant to the Canadian Superior Energy Inc. Stock Option Plan (the “Plan”), a
copy of which is attached hereto, and confirms that:

1.                                       on                     ,
200    (the “Option Date”);

2.                                                                
(the “Optionholder”);

3.                                       was granted a
non-assignable option to purchase         
Common Shares (the “Optioned Shares”) of the Corporation, exercisable as to 331¤3% on each of the first, second
and third anniversary dates of the Option Date [or
otherwise];

4.                                       at a price (the “Exercise
Price”) of $       per Common Share; and

5.                                       for a term
expiring at 5:00 p.m.,        time, on           ,
200    (the “Expiry Date”);

all on terms and subject to the conditions set
out in the Plan. By signing this agreement, the Optionee acknowledges that he
or she has read and understands the Plan.

IN WITNESS WHEREOF the Corporation and the
Optionee have executed this Option Agreement as of           ,
200   .

	
  

  	
  CANADIAN
  SUPERIOR ENERGY INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name of Optionee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature of Optionee

  

 

 1

 

SCHEDULE B — FORM OF NOTICE OF EXERCISE

CANADIAN SUPERIOR ENERGY INC.

STOCK OPTION PLAN

NOTICE OF EXERCISE

To:                             Canadian
Superior Energy Inc.

Suite 3300

400 - 3rd Avenue S.W.

Calgary, Alberta

T2P 4H2

Reference is made to the Option Agreement made
as of                                 ,
200   , between Canadian Superior Energy Inc. (the “Corporation”)
and the Optionee named below. The Optionee hereby exercises the Option to
purchase Common Shares of the Corporation as follows:

	
  Number
  of Option Shares for which Option being exercised:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise Price per Common Share:

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Total Exercise Price (in the form of a cheque (which
  need not be a :

  	
   

  	
  $

  
	
  certified cheque) or bank draft tendered with this
  Notice of Exercise)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name of Optionee as it is to appear on share
  certificate:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address of Optionee as it is to appear on the
  register of Common 

  	
   

  	
   

  
	
  Shares of the Corporation and to which a certificate
  representing the 

  	
   

  	
   

  
	
  Common Shares being purchased is to be delivered:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

Dated                                ,
200   .

	
  

  	
   

  
	
   

  	
  Name of Optionee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature of Optionee

  

 

 1

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