Document:

Exhibit 10.1

    
      

    

    

     

    

    RÉPUBLIQUE
      DE
      GUINÉE

    

    

    

     

    ROYALTY

    AND

    PRODUCTION
      SHARING

    AGREEMENT

    BETWEEN

    

    

    

    THE
      REPUBLIC OF GUINEA

    

    

    AND

    

    

    USOil
      Corporation

    

    

    

    INTERNAL
      TRANSLATION

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    
      	 	 	 	
              Page

            
	 	 	 	 
	
              ARTICLE
                1

            	
              :

            	
              DEFINITIONS

            	
              4

            
	 	 	 	 
	
              ARTICLE
                2

            	
              :

            	
              NATURE
                AND OBJECT OF THE CONTRACT

            	
              6

            
	 	 	 	 
	
              ARTICLE
                3

            	
              :

            	
              DURATION
                OF THE CONTRACT

            	
              7

            
	 	 	 	 
	
              ARTICLE
                4

            	
              :

            	
              EXPLORATION
                WORK AND EXPENDITURE OBLIGATIONS

            	
              9

            
	 	 	 	 
	
              ARTICLE
                5

            	
              :

            	
              SURRENDERS

            	
              11

            
	 	 	 	 
	
              ARTICLE
                6

            	
              :

            	
              APPRAISAL
                OF A DISCOVERY

            	
              11

            
	 	 	 	 
	
              ARTICLE
                7

            	
              :

            	
              DEVELOPMENT
                AND PRODUCTION

            	
              13

            
	 	 	 	 
	
              ARTICLE
                8

            	
              :

            	
              NATURAL
                GAS

            	
              15

            
	 	 	 	 
	
              ARTICLE
                9

            	
              :

            	
              ANNUAL
                WORK PROGRAMMES AND PETROLEUM OPERATIONS MANAGEMENT
                COMMITTEE

            	
              16

            
	 	 	 	 
	
              ARTICLE
                10

            	
              :

            	
              PREFERENCE
                TO LOCAL PERSONNEL AND SUBCONTRACTORS

            	
              18

            
	 	 	 	 
	
              ARTICLE
                11

            	
              :

            	
              CONTRACTOR'S
                OBLIGATIONS IN THE CONDUCT OF PETROLEUM
                OPERATIONS

            	
              29

            
	 	 	 	 
	
              ARTICLE
                12

            	
              :

            	
              CONTRACTOR’S
                RIGHTS IN THE CONDUCT OF PETROLEUM OPERATIONS

            	
              21

            
	 	 	 	 
	
              ARTICLE
                13

            	
              :

            	
              RECOVERY
                OF PETROLEUM COSTS AND PRODUCTION SHARING

            	
              22

            
	 	 	 	 
	
              ARTICLE
                14

            	
              :

            	
              VALUATION
                OF PETROLEUM

            	
              24

            
	 	 	 	 
	
              ARTICLE
                15

            	
              :

            	
              STATE
                PARTICIPATION

            	
              25

            
	 	 	 	 
	
              ARTICLE
                16

            	
              :

            	
              TAXATION

            	
              27

            
	 	 	 	 
	
              ARTICLE
                17

            	
              :

            	
              OBLIGATION
                TO SUPPLY DOMESTIC CONSUMPTION

            	
              28

            
	 	 	 	 
	
              ARTICLE
                18

            	
              :

            	
              SUPERVISION
                AND INSPECTION OF PETROLEUM OPERATIONS

            	
              29

            
	 	 	 	 
	
              ARTICLE
                19

            	
              :

            	
              INFORMATION
                AND REPORTS

            	
              30

            

    

     

    
      
        
          Royalty
            and Production Sharing Agreement between Republic of Guinea and USOil
            Corporation 2002

        

        
          1

          
            

          

        

        
          
          

        

      

    

    

    
      	
              ARTICLE
                20

            	
              :

            	
              ACCOUNTING
                AND PAYMENTS

            	
              32

            
	 	 	 	 
	
              ARTICLE
                21

            	
              :

            	
              IMPORTS
                AND EXPORTS

            	
              33

            
	 	 	 	 
	
              ARTICLE
                22

            	
              :

            	
              FOREIGN
                EXCHANGE CONTROL

            	
              34

            
	 	 	 	 
	
              ARTICLE
                23

            	
              :

            	
              ASSIGNMENTS
                AND TRANSFERS

            	
              35

            
	 	 	 	 
	
              ARTICLE
                24

            	
              :

            	
              SURRENDERS
                AND TERMINATION

            	
              36

            
	 	 	 	 
	
              ARTICLE
                25

            	
              :

            	
              FORCE
                MAJEURE

            	
              37

            
	 	 	 	 
	
              ARTICLE
                26

            	
              :

            	
              APPLICABLE
                LAW AND STABILITY OF CONDITIONS

            	
              38

            
	 	 	 	 
	
              ARTICLE
                27

            	
              :

            	
              SETTLEMENT
                OF DISPUTES

            	
              39

            
	 	 	 	 
	
              ARTICLE
                28

            	
              :

            	
              NOTICES
                

            	
              40

            
	 	 	 	 
	
              ARTICLE
                29

            	
              :

            	
              MISCELLANEOUS
                PROVISIONS

            	
              41

            
	 	 	 	 
	
              ARTICLE
                30

            	
              :

            	
              EFFECTIVE
                DATE

            	
              42

            
	 	 	 	 
	 	 	 	 
	
              APPENDIX
                A

            	
              #1

            	 	
              43

            

    

     

    

    
      
        
          Royalty
            and Production Sharing Agreement between Republic of Guinea and USOil
            Corporation 2002

        

        
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    CONTRACT

    

    

    BETWEEN

    

    

    The
      Republic of Guinea, hereinafter referred to as the 'Government', represented
      for
      the purposes of this Contract by the Ministre-Directeur du Cabinet Particulier
      du President de la Republic de Guinee

    On
      the one hand,

    

    

    AND

    

    

    US
      Oil Corp., a corporation incorporated under the laws of the State of Texas,
      and
      having its office in Houston, hereinafter referred to as Contractor, and
      represented for the purposes of this Contract by Mr. Dinesh Shukla, its
      president, hereinafter referred to either collectively or individually as the
      “Contractor”,

    On
      the other hand,

    

    

    WITNESSETH:

    

    WHEREAS,
      the Government wishes to promote the exploration and exploitation of Petroleum
      within the territory of the Republic of Guinea to contribute to the economic
      development of the country;

    

    WHEREAS,
      the Government, in order to carry out in the best technical and economic
      conditions the Petroleum exploration and exploitation operations concerning
      the
      Contract Area, wishes to contract the services of a qualified
      contractor;

    

    WHEREAS,
      the Contractor represents that it has the technical competence and financial
      ability to perform the Petroleum Operations herein described, and wishes to
      carry out such Petroleum Operations under the terms and conditions of a royalty
      and production sharing contract pursuant to the provisions of the Petroleum
      Code;

    

    NOW
      THEREFORE, the Parties hereby agree as follows:

     

    
      
        
          Royalty
            and Production Sharing Agreement between Republic of Guinea and USOil
            Corporation 2002

        

        
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              ARTICLE
                1:

            	
              DEFINITIONS

            

    

    

    The
      words used in this Contract shall have the following
      meanings;

    

    1.1

    “Calendar
      Year” means a period of twelve (12) consecutive months commencing with the first
      day of January and ending the last day of the following
      December.

    

    1.2

    “Contract
      Year” means a period of twelve (12) consecutive months commencing on the
      Effective Date or the anniversary date of the Effective
      Date.

    

    1.3

    “Barrel”
      means a quantity consisting of 158.984 liters at standard atmospheric pressure
      of 1.01325 bars and temperature of fifteen degrees centigrade (15 degree
      C).

    

    1.4

    “Petroleum
      Code” means the Ordinance N 119/PRG/86 of September 23, 1986 concerning the
      legal and fiscal regime of the exploration and exploitation of Petroleum as
      well
      as the regulations made thereunder.

    

    1.5

    “Contractor”
      means collectively or individuallyUSOil as well as any company to which rights
      and obligations may be transferred pursuant to Article 23
      below.

    

    1.6

    “Contract”
      means this document and its appendices, as well as any extension or modification
      hereto which may be mutually agreed by the Parties in accordance with the
      provisions of Article 29 below.

    

    1.7

    “Petroleum
      Costs” means all costs and expenses incurred in carrying out the Petroleum
      Operations under this Contract.

    

    1.8

    “Effective
      Date” means the date on which this Contract comes into force and effect, as
      defined in Article 30 below.

    

    1.9

    “Commercial
      Discovery” means the discovery of a Petroleum field which has been duly
      evaluated in accordance with the provisions of the Article below, and which
      can
      be produced commercially after taking into account all technical and economic
      data.

    

    1.10

    “Dollar”
      means dollar of the United States of America.

    

    1.11

    “Natural
      Gas” means the dry and wet gas, whether or not associated with Crude Oil, as
      well as all gases produced in association with Petroleum.

     

    
      
        
          Royalty
            and Production Sharing Agreement between Republic of Guinea and USOil
            Corporation 2002

        

        
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    1.12

    “Government”
      or “” means the Republic of Guinea.

    

    1.13

    “Petroleum”
      means Crude Oil and Natural Gas.

    

    1.14

    “Minister”
      means the Minister in charge of the Petroleum sector or his designated
      representative.

    

    1.15

    “Petroleum
      Operations” means the operations authorized under this Contract, related to the
      exploration, appraisal, development, production, transportation and sale of
      Petroleum, and includes Natural Gas processing operations as well as all
      necessary connected operations, but does not include refining and marketing
      of
      petroleum products.

    

    1.16

    “Parties”
      means the Government and the Contractor, and “Party” means either the Government
      or the Contractor.

    

    1.17

    “Exploitation
      Area” means that portion of the Contract Area delimited by a Commercial
      Discovery and defined pursuant to Article 7.2 below.

    

    1.18

    “Crude
      Oil” means all hydrocarbons that are produced in liquid state and at atmospheric
      pressure, at the wellhead, at the separator or after processing, asphalt,
      ozokerites and all other liquid hydrocarbons either in natural condition or
      obtained from Natural Gas by condensation or extraction, including inter alia
      (?) (Looks like byproducts, literally, products condensated between others)
      condensates and Natural Gas liquids.

    

    1.19

    “Delivery
      Point” means the FOB point at loading terminal of Crude oil or Natural Gas in
      the Republic of Guinea or any other point agreed upon by the
      Parties.

    

    1.20

    “Affiliated
      Company” means any company that directly or indirectly controls or is controlled
      by any entity constituting the Contractor, or any company that directly or
      indirectly controls or is controlled by a company or entity which itself
      directly or indirectly controls any entity constituting the Contractor. For
      the
      purposes of the foregoing definition, “Control” means the direct or indirect
      ownership by a company or any other entity of at least fifty percent (50%,)
      of
      the shares or interest forming the capital of another company or entity
      conferring upon the owner thereof a majority of voting rights exercisable at
      general meetings of that another Company or entity, or a participation giving
      a
      determining position in the management of another company or
      entity.

    

    1.21

    “Quarter”
      means a period of three (3) consecutive months commencing with the first day
      of
      January, April, July and October.

     

    
      
        
          Royalty
            and Production Sharing Agreement between Republic of Guinea and USOil
            Corporation 2002

        

        
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    1.22

    “Contract
      Area” means the area described in Appendix A. It is understood that the zones
      given back by the Contractor will be considered as excluded from the Contract
      Area. Conversely, the exploitation zones will form an integral part of the
      Contract Area during the term of this contract. The Contract Area is represented
      by (?) a surface of {blank} as indicated by the map on Appendix
      A.

     

    
      
        
          Royalty
            and Production Sharing Agreement between Republic of Guinea and USOil
            Corporation 2002

        

        
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              ARTICLE
                2:

            	
              NATURE
                AND OBJECT OF THE CONTRACT

            

    

    

    2.1

    This
      Contract is a royalty and production sharing contract whereby the Government
      appoints the Contractor for rendering all the necessary services, on behalf
      of
      the Government, regarding the exploration for and, where applicable, the
      exploitation of Petroleum that may exist in the Contract
      Area.

    

    The
      Contractor shall act, on a exclusive basis for the Government for the entire
      Contract Area, to conduct and carry out the Petroleum Operations. It shall
      supply all technical means technologies, equipment and materials as well as
      the
      personnel necessary for operations.

    

    The
      Contractor shall bear, at its sole risk and expense, the full responsibility
      to
      finance the Petroleum Operations, subject to the provisions of Article 15
      below.

    

    In
      the event of a Commercial Discovery in the Contract Area, the production of
      Petroleum shall be, during the term of the exploitation period, shared between
      the Parties in accordance with the provisions of Article 13
      below.

    

    2.2

    The
      object of this Contract is to define the terms and conditions under which the
      Contractor shall provide the Government with the services set forth in the
      Article above, as well as the respective rights and obligations of the
      Parties.

     

    
      
        
          Royalty
            and Production Sharing Agreement between Republic of Guinea and USOil
            Corporation 2002

        

        
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              ARTICLE
                3:

            	
              DURATION
                OF THE CONTRACT

            

    

    

    3.1

    This
      Contract shall consist of a First Exploration period and a Second Exploration
      period, and in respect of each Commercial Discovery, an exploitation
      period.

    

    3.2

    The
      First Exploration period shall be ONE
      Contract Year.

    

    3.3

    The
      Contractor shall begin the Petroleum exploration operations within
two
      (2)
      months after the Effective Date.

    

    3.
      4

    If
      the Contractor has fulfilled for the First Exploration period its work and
      expected expenditure obligations as set forth in Article 4 hereof, it shall
      obtain ipso jure a new Exploration period of two
      (2)
      Contract Years. For each renewal, he Contractor shall notify, in accordance
      with
      the provisions of the Petroleum Code, a justifiable application with the
      Minister at least two (2) months prior to the expiry of the First Exploration
      period.

    

    3.5

    In
      order to enable the Contractor to complete its work and expected expenditure
      obligations, the Minister will grant an extension to the Second Exploration
      period for a period not exceeding twelve(12)
      months, upon notification made by the Contractor at least two (2) months prior
      to the expiry of the Second Exploitation period.

    

    3.6

    In
      the event the contractor has completed its initial exploration work program,
      or
      before, if the Contractor believes exploration operations could be more
      beneficial, the contractor will commit to begin the second exploration period;
      to begin and to complete one (1) exploratory well and to undertake logging,
      testing and hook-up operations. To facilitate the Contractor in executing this
      work, the Minister will grant an extension to the second exploration period,
      for
      a period not to exceed four (4) years, upon notification made by the contractor
      at least two (2) months prior to the end of that exploration
      period.

    

    In
      the event a Petroleum discovery is made during this Second Exploration period
      and the remaining period of validity is insufficient to allow the Contractor
      to
      undertake the appraisal of that discovery, such exploration period shall, upon
      application by Contractor, be extended for the time necessary to the completion
      of that work. Such extension shall not exceed a period of twelve(12)
      months.

    

    3.7

    Subject
      to the provisions of Article 24 below, this Contract shall expire two years
      after the end of the second exploration period and all of the relevant
      extensionsfor the entirety of the Contract Area, with the exception of the
      Exploitation Area(s), each being defined as a contiguous area of 50 Kilometers
      by 50 Kilometers, to be designated by the Contractor following exploration
      and
      based on information furnished from the exploratory well.

    

    3.8

    Following
      the determination by the Contractor of the commercial viability of a discovery,
      the exploitation period with respect to that Commercial Discovery shall commence
      upon the date of adoption of the development plan in accordance with the
      provisions of Article 3.7 below and shall expire thirty five (35) years
      following that date.

    

    
      
        
          Royalty
            and Production Sharing Agreement between Republic of Guinea and USOil
            Corporation 2002

        

        
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    However,
      where the Contractor at the expiry of that exploitation period considers and
      demonstrates to the Minister that the field is able to continue to produce
      commercially, said exploitation period shall be extended up to a maximum of
      five
      (5) years.

    

    3.9

    The
      Contractor shall have the right to drill more wells in the Exploitation area
      during the Exploitation period and where there is more than one Commercial
      Discovery, each of them shall have a different exploitation
      period.

    

    
      
        
          Royalty
            and Production Sharing Agreement between Republic of Guinea and USOil
            Corporation 2002

        

        
          9

          
            

          

        

        
          
          

        

      

    

    

    
      	
              ARTICLE
                4:

            	
              EXPLORATION
                WORK AND EXPENDITURE
                OBLIGATIONS

            

    

    

    4.1

    The
      Contractor shall pay two hundred fifty thousand US Dollars (US$ 250,000) to
      the
      Republic of Guinea as a fee for access the seismic data at the beginning of
      the
      first exploration period and no later than ninety (90) days from the date that
      the present contract takes effect.

    

    4.2

    The
      Contractor shall carry out the following minimum exploration work and expected
      expenditures:

    

    
      	
              (a)

            	
              during
                the First Exploration
                period:

            

    

    

    
      	 	
              (i)

            	
              Data
                evaluation, reinterpretation and reprocessing seismic data, as may
                be
                needed;

            

    

    
      	 	
              (ii)

            	
              A
                3D survey or a topographical and seismic study of the field over
                4000
                Kilometers will be conducted to determine location of initial exploratory
                well;

            

    

    
      	 	
              (iii)

            	
              Estimated
                expenditure for the above is SixMillion Dollars
                ($6,000,000.00).

            

    

    

    
      	
              (b)

            	
              during
                the Second Exploration period the
                Contractor:

            

    

    

    
      	 	
              (i)

            	
              Should
                drill a minimum of One
                exploratory well with expected expenditure of $Ten Million Dollars
                ($10,000,000.00) each.

            

    

    
      	 	
              (ii)

            	
              Could
                acquire new additional seismic data (optional by
                Contractor)

            

    

    

    
      	
              (c)

            	
              During
                the exploitation period, the Contractor
                should:

            

    

    

    
      	 	
              (i)

            	
              Notify
                the appropriate minister of all of the effective discoveries in the
                granted area

            

    

    
      	 	
              (ii)

            	
              Pay
                to the Republic of Guinea One Million US Dollars (US $ 1,000,000.00)
                towards the grant of a permit covering a perimeter of 50 km x 50
                km for
                exploitation,

            

    

    
      	 	
              (iii)

            	
              Accomplish
                the work defined by articles 6 and
                7.

            

    

    

    4.3

    If
      the Contractor fails to fulfill the obligations set forth in Article 4.2(a),
      then this contract will become automatically null and
      void.

    

    4.4

    Each
      exploratory well set forth in this Article shall be drilled to a minimum depth
      of 2500
      meters. However, the Contractor may, after prior notice to the Minister,
      discontinue an exploratory well at a lesser depth than initially specified
      for
      one of the following reasons:

    

    -    (a)
      the basement is encountered at a lesser depth than the minimum contractual
      depth;

    

    -    (b)
      Continuation of drilling represents a manifest danger due to the existence
      of
      abnormal formation pressure;

    

    -    (c)
      Petroleum formations are encountered, the penetration of which requires the
      placement of casings for protection, and thus, prevents reaching the minimum
      contractual depth.

    

    In
      the event that any of the above reasons exists, the exploratory well in question
      shall be deemed to have been drilled to the minimum contractual
      depth.

    

    
      
        
          Royalty
            and Production Sharing Agreement between Republic of Guinea and USOil
            Corporation 2002

        

        
          10

          
            

          

        

        
          
          

        

      

    

    

    For
      the purposes of this Article, a well drilled under an appraisal work program
      shall not be considered as an exploratory well and shall not relieve the
      Contractor of the corresponding work obligations.

    

    4.5

    The
      Contractor can carry out, either during the First exploration period or during
      the Second exploration period, exploration works in excess of the minimum work
      obligations.

    

    4.6

    The
      expected exploration expenditure obligations set forth in Article 4.1 above
      are
      expressed in constant Dollars.

     

    
      
        
          Royalty
            and Production Sharing Agreement between Republic of Guinea and USOil
            Corporation 2002

        

        
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              ARTICLE
                5:

            	
              SURRENDERS

            

    

    

    5.1

    The
      Contractor shall surrender the entire exploration area, with the exception
      of a
      50 kilometer by 50-kilometer area, to be designated by the Contractor at the
      expiry of Second Exploration period or at the beginning of the exploitation
      period. 

    

    5.2

    For
      the purposes of Article 5.1 above:

    

    (a)

    each
      50km x 50 km area granted to the Contractor as an exploitation area will be
      returned to the Government according to the provisions of Articles 3.8 and
      3.9;

    

    (b)

    The
      surrendered area(s) shall consist of limited number of areas of a simple
      geometrical shape, as determined previously by the
      Contractor.

    

    5.3

    The
      Contractor will surrender the total Exploration area and discharge all its
      rights regarding any areas if there is no petroleum activity {on them}?over
      a
      consecutive period of six months during the first and second exploration
      periods.

     

    
      
        
          Royalty
            and Production Sharing Agreement between Republic of Guinea and USOil
            Corporation 2002

        

        
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              ARTICLE
                6:

            	
              APPRAISAL
                OF A DISCOVERY

            

    

    

    6.1

    The
      Contractor shall forthwith notify the Minister of any Petroleum discovery made
      within the Contract Area and shall supply the Minister with all information
      related to such discovery.

    

    6.2

    lf
      the Contractor decides to appraise the discovery above-mentioned, it shall
      notify the Petroleum Operations Management Committee defined in Article 9.2
      below, of the detailed appraisal work program and the corresponding budget
      for
      such discovery. The provisions of Article 9.5 below shall apply mutatis mutandis
      to that appraisal work program as regards its adoption by the
      Minister.

    

    6.3

    After
      adoption of the appraisal work program and the corresponding budget, the
      Contractor shall carry out such works with due diligence and in accordance
      with
      the established program.

    

    6.4

    Within
      two (2) months after the appraisal works are completed, the Contractor shall
      supply the Minister with a report establishing whether the discovery is
      commercial and including all information related to the technical and economic
      characteristics of such discovery.

    

    6.5

    If
      the Contractor has not commenced the appraisal works for a Petroleum discovery
      within two (2) years from the date of notice of such discovery to the Minister,
      or if the Contractor does not consider a discovery as commercial within eighteen
      (18) months from the completion date of the appraisal work, the Minister, at
      his
      discretion, may require the Contractor to relinquish all its rights in respect
      of the area of the discovery. In such a case, the Contractor shall lose the
      rights on the Petroleum produced from only this discovery and any areas
      surrendered in this manner will reduce the areas which are required to be
      abandoned under Article 5 above.

     

    
      
        
          Royalty
            and Production Sharing Agreement between Republic of Guinea and USOil
            Corporation 2002

        

        
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              ARTICLE
                7:

            	
              DEVELOPMENT
                AND PRODUCTION

            

    

    

    7.1

    If
      the Contractor considers a discovery to be a Commercial Discovery, it shall,
      within six (6) months from the completion of the appraisal work mentioned in
      Article 6.4 above, notify to the Petroleum Operations Management Committee
      referred to in Article 9.2 below the development plan concerning such Commercial
      Discovery.

    

    7.2

    The
      development plan submitted by the Contractor shall, inter alia,
      contain:

    

    
      	
              (a)

            	
              the
                preliminary definition of the Exploitation Areas related to the discovery
                covering the Commercial
                Discovery;

            

    

    
      	
              (b)

            	
              an
                estimate of the recoverable reserves and production
                profile;

            

    

    
      	
              (c)

            	
              the
                work necessary for the exploitation of the fields such as the number
                of
                wells, the facilities required for the production, treatment, storage
                and
                transportation of
                Petroleum;

            

    

    
      	
              (d)

            	
              an
                estimate of the duration of the above-mentioned
                work;

            

    

    
      	
              (e)

            	
              an
                estimate of the investment required for development and operating
                costs;

            

    

    
      	
              (f)

            	
              an
                economic study supporting the commercial nature of the
                discovery.

            

    

    

    The
      Contractor shall determine the commercial nature of a discovery, provided that
      the above-mentioned economic study demonstrates the commercial nature of that
      discovery. A discovery may be declared as commercial by the Contractor if,
      after
      taking into account the contractual provisions and the submitted development
      plan, the forecast of income and expenses prepared in accordance with the
      standards used in the international petroleum industry confirm its
      commerciality.

    

    7.3

    Within
      sixty (60) days from the notification of the development plan to the Petroleum
      Operations Management Committee; the latter may notify the Contractor of
      revisions or changes to that development plan. The Contractor will endeavor
      to
      include said revisions or changes in accordance with good international
      petroleum industry practice.

    

    No
      later than thirty (30) days after the expiry of the time period referred to
      above, the Contractor shall submit the development plan to the Minister, for
      its
      adoption within thirty (30) days.

    

    The
      date of adoption of the development plan shall be the date of notice given
      by
      the Minister. If the Minister fails to give such notice within the thirty (30)
      days’ period, the development plan submitted by the Contractor shall be deemed
      adopted at the date of expiry of said period.

    

    7.4

    The
      Contractor shall commence the physical development works on the field within
      six
      (6) months after the date of adoption of the development plan and shall continue
      them with due diligence.

    

    7.5

    No
      later than three (3) months prior to the end of each Calendar Year, the
      Contractor shall notify the Petroleum Operations Management Committee of the
      annual development program, and, as the case may be, the annual production
      program relating to each Exploitation Area, for the following Calendar Year.
      The
      provision of Article 9.5 below shall apply mutatis mutandis to the annual
      development and production program as regards their adoption by the
      Minister.

    

    
      
        
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    7.6

    During
      the Exploitation period of a field, the Contractor shall produce annually
      reasonable quantities of Petroleum from said field in accordance with good
      international petroleum industry practice and taking into consideration, inter
      alia, the rules for the proper conservation of fields and the optimal recovery
      of Petroleum reserves under economic conditions.

    

    7.7

    The
      suspension of production of a field during a continuous period of at least
      twelve (12) months, decided by the Contractor without the agreement of the
      Government, may result in the termination of this Contract pursuant to the
      provisions of Article 24.5 below.

    

    7.8

    Where
      a field extends beyond the boundaries of the Contract Area, the Minister may,
      as
      the case may be, require the Contractor to exploit said field in association
      with the contractor of the adjacent contract area under the provisions of a
      unitization agreement.

    

    Within
      six (6) months following the Minister’s request, the Contractor shall notify the
      Minister of the development plan relating to the Commercial Discovery that
      shall
      be prepared in agreement with the contractor of the adjacent contract
      area.

    

    If
      the development plan is not submitted to the Minister within the above-mentioned
      time period, or if the Minister does not adopt such plan, the latter will
      prepare a development plan in accordance with good international petroleum
      industry practice. Said plan shall be adopted by the Contractor, provided that
      the conditions imposed by the Minister do not reduce the economic profitability
      of the Contractor as arising from this Contract, and do not require more capital
      than normally the Contractor would contribute in the conduct of the Petroleum
      Operations.

    

    7.9

    The
      Contractor shall measure, in a point mutually agreed by the Parties, all
      Petroleum produced, after extraction of associated water and foreign substances,
      by using, after notification by the Minister, the measurement appliances and
      methods customarily used in the international petroleum industry. Pursuant
      to
      the provisions of Article 18 below, the Minister shall have the right to examine
      such measurements and to inspect the appliances and methods
      used.

    

    If
      during the Exploitation the Contractor wishes to modify said appliances and
      methods, it shall notify the Minister.

    

    Where
      the appliances and methods used therefore have caused an overstatement or
      understatement of measured quantities, the error shall be deemed to have existed
      since the date of the last calibration of the measurement device, unless the
      contrary may be justified, and an appropriate adjustment shall be made for
      the
      period said error has existed.

    

    
      
        
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              ARTICLE
                8:

            	
              NATURAL
                GAS

            

    

    

    8.1

    The
      provisions of this Contract shall apply mutatis mutandis to Natural Gas, subject
      to the specific provisions set forth below.

    

    8.2

    In
      order to enable the Contractor to establish the commercial nature of a
      non-associated Natural Gas discovery duly evaluated in accordance with the
      provisions of Article 6 above, the exploration period shall be, upon
      Contractor’s application, extended for the time period necessary to establish
      the commercial nature, provided that such extension shall only be with respect
      to the area of the discovered Natural Gas Field.

    

    8.3

    Any
      associated Natural Gas production, which, in the opinion of the Contractor,
      cannot be utilized in Petroleum Operations, or economically, reinjected or
      sold,
      may be flared.

    

    8.4

    If
      the Contractor decides to flare associated Natural Gas, or if the Contractor
      decides not to exploit a non-associated Natural Gas discovery, the Government
      may produce, process and dispose of said Natural Gas, without any compensation
      to the Contractor.

    

    In
      such a case, the Government shall bear all costs and risks related to the
      production, processing and disposal of said Natural Gas.

     

    
      
        
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              ARTICLE
                9:

            	
              ANNUAL
                WORK PROGRAMS AND PETROLEUM OPERATIONS MANAGEMENT
                COMMITTEE

            

    

    

    9.1

    The
      Contractor shall carry out all Petroleum Operations during any Calendar Year
      according to the annual work program and the corresponding budget with respect
      to that Calendar Year.

    The
      annual work program and budgets referred to above shall itemize the exploration,
      appraisal, development and production activities, and shall be submitted to
      the
      Minister in accordance with the provisions of the following
      Articles.

    

    9.2

    In
      order to ensure the timely notice of Petroleum Operations, a Petroleum
      Operations Management Committee shall be set up on the Effective
      Date.

    

    That
      Committee shall consist on one hand, of three (2) representatives from the
      Ministry, and, on the other hand, of two (2) representatives from the
      Contractor.

    

    That
      Committee shall be chaired by a representative of the Contractor for a two
      year
      term followed by a Ministry representative for a two year term and henceforth
      in
      this sequence. The Committee shall meet upon a reasonable request made by its
      chairman. Unless otherwise agreed by the Parties, the Committee shall meet
      in
      Conakry.

    

    9.3

    Within
      two (2) months from the Effective Date, the Contractor shall notify the
      Petroleum Operations Management Committee of the annual work program and the
      corresponding budget for the remaining period of the current Calendar
      Year.

    

    9.4

    For
      the following Calendar Year, the Contractor shall submit to the Petroleum
      Operations Management Committee no later than two (2) months prior to the expiry
      of each Calendar Year, the annual work program and the corresponding budget
      related to the following Calendar Year.

    

    9.5

    Within
      fifteen (15) days from the submission of the annual work program and budget
      to
      the Petroleum Operations Management Committee, the latter may advise the
      Contractor of revisions or changes to such program or budget. The Contractor
      may
      endeavor to include said revisions or changes in accordance with good
      international petroleum industry practice.

    

    No
      later than thirty (30) days after the expiry of the above-mentioned time period,
      the Contractor shall convey to the Minister, for its adoption within fifteen
      (15) days, the annual work program and the corresponding
      budget.

    

    The
      date of adoption of the annual work program and the corresponding budget shall
      be the date of notice given by the Minister.

    

    If
      the Minister fails to give such notice within the fifteen (15) days’ period, the
      annual work program and the corresponding budget submitted by the Contractor
      shall be deemed to have been adopted at the date of expiry of said
      period.

     

    
      
        
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    9.6

    After
      the adoption of the annual work program and budget by the Minister, the
      Contractor may make such changes to that program and budget as would be
      necessary for the Petroleum Operations and duly accounted for, provided that
      the
      fundamental objectives of said program are not modified. Such possible changes
      shall be timely communicated to the Minister.

    

    
      
        
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              ARTICLE
                10:

            	
              PREFERENCE
                TO LOCAL PERSONNEL AND
                SUBCONTRACTORS

            

    

    

    10.1

    From
      the commencement of Petroleum Operations, the Contractor
      shall:

    

    (a)

    give
      preference to the employment of qualified Guinean personnel as needed in
      Petroleum Operations;

    

    (b)

    contribute
      to the training of those personnel in order that they may have access to any
      position of skilled workers, foremen, executives and
      directors.

    

    10.2

    At
      the end of each year, the Contractor shall prepare and deliver to the Minister
      a
      recruitment program concerning Guinean personnel for the following years with
      a
      view to increasing the participation of Guinean personnel in Petroleum
      Operations.

    

    10.3

    In
      order to promote employment of Guinean personnel, at the end of each year,
      the
      Contractor shall establish and apprise the Minister of its training program
      for
      Guinean citizens forthe following year.

    

    The
      training program may, inter alia, include the participation of Guinean citizens
      to courses or training periods organized either in the Republic of Guinea or
      abroad, by the Contractor or third parties, as well as the granting of
      scholarships abroad.

    

    10.4

    The
      Contractor and its subcontractors shall give preference to products and
      equipment available in the Republic of Guinea, provided that such goods are
      competitive in price, quality, quantities, and timelines of delivery and terms
      of payment, with imported goods.

    

    10.5

    The
      Contractor and its subcontractors shall give preference to Guinean enterprises
      for all service, construction or supply contracts, provided that such services
      ere competitive in price, quality, quantities, timelines of delivery and terms
      of payment, with imported services.

     

    
      
        
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              ARTICLE
                11:

            	
              CONTRACTOR’S
                OBLIGATIONS IN THE CONDUCT OF PETROLEUM
                OPERATIONS

            

    

    

    11.
      1

    The
      Contractor shall undertake and carry out Petroleum Operations in accordance
      with
      the provisions of this Contract.

    

    11.2

    The
      Contractor shall carry out Petroleum Operations diligently and in accordance
      with good international petroleum industry practice.

    

    11.3

    The
      Contractor, in carrying out Petroleum Operations, shall use standard methods
      and
      technologies customarily used in the international petroleum industry and shall
      take all measures intended to prevent environment
      pollution.

    

    In
      particular, the Contractor shall:

    

    (a)ensure
      that all facilities and equipment used in Petroleum Operations

    

    (b)
      are in good order and correctly kept in good repair;

    

    (c)

    prevent
      water from entering any Petroleum bearing strata except where enhanced recovery
      methods by means of water injection are used;

    

    (d)

    avoid
      losses and discharges of Petroleum produced as well as losses and discharges
      of
      mud or any other product used in Petroleum Operations:

    

    (e)

    prevent
      Petroleum produced and substances used in Petroleum Operations from
      contaminating water bearing strata;

    

    (f)

    store
      Petroleum produced in facilities constructed for that purpose, and not store
      Petroleum in earthen reservoir, except temporarily in an
      emergency.

    

    11.4

    All
      work and facilities erected by the Contractor under this Contract shall,
      according to their nature and the circumstances, be built, indicated and marked
      out so as to allow at any time free and safe passage to navigation and, without
      prejudice to the foregoing, the Contractor shall, in order to facilitate
      navigation, install and keep in good repair sound or optical devices approved
      by
      the appropriate Guinean authorities.

    

    11.5

    In
      the event that the Contractor consists of several enterprises, the obligations
      and liabilities of those enterprises under this Contract are joint and
      several.

    

    The
      joint operating agreement between those enterprises shall be forthwith submitted
      to the Minister.

     

    
      
        
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    11.6

    For
      the purposes of the Petroleum Operations, the Contractor shall set up an office
      in the Republic of Guinea and appoint a representative in charge of the
      supervision of Petroleum Operations.

    

    11.7

    The
      Contractor shall take out, and cause to be taken out by its subcontractors,
      withrespect to Petroleum Operations, all insurance of the type and for such
      amounts in accordance with good international petroleum industry practice,
      including, inter ala, third party liability insurance and insurances to cover
      damage to property, installations, equipment and materials, without prejudice
      to
      such reasonable insurance as may be required under Guinean
      law.

    

    11.8

    On
      the expiration, surrender or termination date of this Contract with respect
      to
      all or part of the Contract Area, the Contractor shall transfer at no cost
      to
      the Government the ownership of installations, equipment and material and data
      used in connection with the Petroleum Operations carried out in the area so
      surrendered, and located either within or outside said area, except where those
      facilities, equipment and material are used by the Contractor for other
      petroleum operations in the Republic of Guinea.

    

    Such
      transfer of ownership shall cause the termination of any security or surety
      related to those facilities, equipment and material, or which those items
      constitute.

     

    
      
        
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              ARTICLE
                12:

            	
              CONTRACTOR’S
                RIGHTS IN THE CONDUCT OF PETROLEUM
                OPERATIONS

            

    

    

    12.1

    Subject
      to the laws and regulations in force and according to the provisions of this
      Contract, the Contractor shall have the right to take all measures and all
      actions, within or outside the Contract Area, which are necessary for the
      carrying out of Petroleum Operations, within and without the Contract
      Area.

    

    12.2

    The
      Contractor shall have the right, on its own responsibility, to use qualified
      subcontractors in order to undertake Petroleum Operations.

    

    12.3

    Subject
      to the provisions of the Petroleum Code, the employees and agents of the
      Contractor and its subcontractors shall have the right to enter into any place
      located within the Contract Area for conducting Petroleum Operations. However,
      other persons may be authorized by the government to enter the Contract Area
      to
      conduct mining work, among other things, except for any Petroleum exploration
      and exploitation activity, provided that said authorizations shall not interfere
      with the carrying out of Petroleum Operations.

    

    12.4

    The
      Contractor may, in accordance with the regulations in
      force:

    

    (a)

    use
      stones, sand, clay, gypsum, limestone and other analogous substances needed
      for
      Petroleum Operations;

    

    (b)

    use
      water needed for Petroleum Operations, provided that the persons or livestock
      watering places are not deprived of the water supply.

    

    12.5

    With
      authorization of the Minister, the Contractor shall have the right to build,
      within or outside the Contract Area, all facilities, works and buildings
      necessary to carry out Petroleum Operations, such as roads, conveyances,
      communication facilities, pipelines, storage facilities or port facilities.
      Said
      authorization shall not be unreasonably withheld but may, however, be subject
      to
      the availability of such facilities to third parties in the event they are
      not
      used to capacity by the Contractor, provided that such use shall not interfere
      with the carrying out of Petroleum Operations.

    

    12.6

    Except
      otherwise specifically provided in this Contract, no restriction shall be made
      to the entry, stay, displacement right, employment and repatriation of persons
      employed by the Contractor and its subcontractors and their
      families.

    

    The
      Government shall facilitate the issue and renewal at visas and residence permits
      for said employees and their families.

     

    
      
        
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              ARTICLE
                13:

            	
              RECOVERY
                OF PETROLEUM COSTS AND PRODUCTION
                SHARING

            

    

    

    13.1

    Following
      the date of initial production for each field, the Contractor shall pay to
      the
      Government a royalty of 15% based on the valuation of the petroleum
      products.

     

    13.2

    The
      Contractor shall have the unrestricted right to receive, each Calendar Year,
      for
      the purposes of recovery of Petroleum Costs, a maximum share of
fifty
      percent (50%) of the production from the Contract Area not lost or used in
      Petroleum Operations.

    

    13.3

    Petroleum
      Costs shall be recoverable as follows:

     

    (a)

    Petroleum
      Costs incurred during the execution of Petroleum Operations relative to the
      Contract Area, with the exception of Capital Expenditures, as defined in
      Appendix B {there is no Appendix B},which shall be recoverable either in the
      Calendar Year in which these Petroleum Costs are incurred or in the Calendar
      Year in which the first Commercial Discovery in the Contract Area is put into
      production, whichever is the later.

     

    (b)

    Capital
      Expenditures incurred relative to each Exploitation Area shall be recoverable
      at
      an accelerated depreciation rate. Recovery of Capital Expenditures related
      to an
      Exploitation Area shall commence either in the Calendar Year in which
      expenditure is incurred or in the Calendar Year in which production from said
      Petroleum Area commences, whichever is the later.

    

    (c)

    To
      the extent that, in a Calendar Year, recoverable Petroleum Costs exceed the
      value of the percentage set forth in Article 13.2 above, the excess shall be
      carried forward in the next succeeding years until said Petroleum Costs are
      fully recovered.

    

    13.4

    After
      determination of the share of Petroleum production allocated to recovery of
      Petroleum Costs by the Contractor pursuant to the provisions of Article 13.1,
      13.2 and 13.3 above, the Contractor shall receive, as its remuneration, a
      percentage of the remaining production after royalty during each Calendar Year.
      For this purpose, said remaining production shall be shared between the
      Government and the Contractor as follows:

    

      
        	
                Increments
                  of daily
                  production 

                (in
                  Barrels per day)

              	 	
                Government
                  Share

              	 	
                Contractor
                  Share

              	 
	 	 	 	 	 	 
	
                From
                  0 to 2000

              	 	
                25%

              	 	
                75%

              	 
	
                From
                  2001 to 5000

              	 	
                30%

              	 	
                70%

              	 
	
                From
                  5001 to 10000

              	 	
                40%

              	 	
                60%

              	 
	
                Over
                  10000

              	 	
                50%

              	 	
                50%

              	 

      

    

    

    
      
        
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    For
      the purpose of this Article 13.4, “daily production” means the average
      production rate in the Contract Area during the Quarter in question less the
      portion of production necessary for the recovery of Petroleum
      Costs.

    

    13.5

    Recovery
      of Petroleum Costs and production sharing shall be done each Quarter on an
      cumulative basis. Where actual quantities and recoverable Petroleum Costs are
      not known at the date of calculation, provisional estimates based on the annual
      work program and budget related to the Calendar Year in question as stipulated
      in Article 9 above shall be used. Two (2) months before the end of each Calendar
      Year, the actual amounts regarding recovery of Petroleum Costs and production
      sharing for said Calendar Year shall be determined as well as any necessary
      adjustments.

    

    13.6

    The
      Government shall decide whether to take in kind or in cash the remaining share
      of production to which it is entitled, after the recovery of Petroleum Costs.
      If
      the Government decides to take its share of production in kind, in whole or
      in
      part, the Minister shall notify the Contractor at least three (3) months before
      the commencement of each half-year of the Calendar Year, specifying the precise
      quantity he elects to take during the following half-year of a Calendar
      Year.

    

    If
      the Government decides to convert in cash its share of production, in whole
      or
      in part, the Contractor shall pay the Government the value of that production
      calculated according to Article 14 below. That payment shall be made monthly
      within thirty (30) days after the end of the month to which it relates and
      the
      Contractor shall have title on said share of production at the Delivery
      point.

    

    It
      is understood that the Contractor shall not enter into any sale commitment
      relative to the Government’s share of production for a term of more than six (6)
      months without the Minister’s written consent.

    

    13.7

    In
      the event of Natural Gas production, Petroleum Costs relating to that production
      shall be recoverable out of said production only. For the purpose of Article
      13.5 above, one hundred and sixty five (165) cubic meters of Natural Gas at
      a
      temperature of 15 degrees centigrade and pressure of one atmosphere shall be
      deemed to be equivalent to one (1) Barrel of Crude Oil.

    

    13.8

    For
      the purposes of this Article, the value of Petroleum produced shall be the
      value
      established according to Article 14 below.

    

    13.9

    Except
      otherwise agreed, the Contractor shall have title to Petroleum to which it
      is
      entitled under this Contract at the Delivery Point.

     

    
      
        
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              ARTICLE
                14:

            	
              VALUATION
                OF PETROLEUM

            

    

    

    14.1

    For
      the purposes of this Contract and, in particular, for the purposes of Article
      13
      above, the unit selling price of Crude Oil at the Delivery Point shall be
      denominated in Dollars and calculated each Quarter as
      follows:

    

    (a)

    If
      Crude Oil from Contract Area is sold to Third Parties by the Contractor, the
      unit price of Crude Oil shall be calculated on the basis of the weighted average
      of the F.O.B. destination realized selling prices obtained by the Contractor
      during said Quarter from Third Parties in sales at arm’s length not involving
      swap, barter or discount, but taking into account differentials concerning
      quality, gravity, transportation and terms of payment;

    

    (b)

    in
      the absence of such sales of Crude Oil during said Quarter but if there have
      been sales of Guinean Crude Oil to Third Parties made by another contractor,
      the
      provisions of paragraph (a) above shall apply mutatis
      mutandis;

    

    (c)

    in
      the absence of sales of Guinean Crude Oil during said Quarter, the unit price
      of
      Crude Oil shall be calculated on the basis of the F.O.B. destination realized
      selling prices obtained during that Quarter on the international market in
      arm's
      length transactions for Crude Oils from neighboring countries or from the
      region, taking into account the conditions of sales as well as differentials
      concerning quality, gravity, transportation and terms of
      payment.

    

    For
      the purpose of this Article, “Third Parties” means any person that is neither an
      Affiliated Company nor a Party to this Contract.

    

    14.2

    A
      committee directed by the Minister or his representative and consisting of
      representatives of the administration and representatives of the Contractor
      shall meet at the request of its chairmen in order to establish in accordance
      with the provisions of Article 14.1 the unit selling price of Crude Oil produced
      applicable to each Quarter. The decisions of the committee shall be reached
      by
      unanimous vote; the Minister and the Contractor having one vote
      each.

    

    14.3

    If
      no decision is made by the committee within thirty (30) days from the and of
      said Quarter, the unit selling price of Crude Oil produced shall be determined
      by an internationally recognized expert, appointed by mutual agreement between
      the Parties or, failing such agreement, upon request by the most diligent Party,
      which shall be notified to the other Party, by the International Center for
      Technical Expertise from the International Chamber of Commerce. The expert
      shall
      determine the price within twenty (20) days from his appointment and his
      conclusion shall be final and binding upon the Parties.

    

    14.4

    Pending
      the determination of Crude Oil price, the provisional unit-selling price in
      respect of a Quarter shall be the unit-selling price of the preceding Quarter.
      Any necessary adjustment shall be made within thirty (30) days after the
      unit-selling price for the Quarter in question is
      established.

    

    14.5

    For
      the purpose of this Contract, the value of Natural Gas sold shall be the
      realized price obtained by the Contractor for the sale of said Natural
      gas.

     

    
      
        
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              ARTICLE
                15:

            	
              PARTICIPATION

            

    

    

    15.1

    At
      the adoption date of the development plan concerning a Commercial Discovery
      as
      mentioned above in Article 7.3, the Government can opt to participate in the
      risks and results of the Petroleum Operations related to that Commercial
      Discovery.

    

    To
      this end, the Government can opt at that date to acquire an interest of up
      to
      fifteen percent (15%), whether directly or through a nationalized partner as
      designated by the Government for that purpose.

    

    15.2

    The
      Government shall exercise its option to participate by written notice to the
      Contractor within three (3) months from the date the development plan is
      adopted. Such notice shall specify the participating interestGovernment has
      elected to acquire.

    

    When
      the Government exercises its option to participate, the entities constituting
      the Contractor shall transfer, each one in proportion to its participating
      interest, a percentage of their interest in said Exploitation Area so that
      the
      total interest transferred is equal to the level of participation elected by
      the
      Government.

    

    15.3

    The
      effective date of the Government participation shall be the date of adoption
      of
      the development plan.

    

    15.4

    Within
      three (3) months from the date of notice of the option to participate, the
      Parties shall negotiate and conclude a joint operating agreement established
      in
      accordance with good international petroleum industry
      practice.

    

    In
      addition to the customary provisions, that agreement shall contain provisions
      to
      implement the following principles:

    

    (a)

    the
      participation shall not imply the establishment of a legal
      entity;

    

    (b)

    the
      Government shall have a voting right equal to its participating interest with
      respect to all decisions regarding said Exploitation Area;

    

    (c)

    the
      Government shall, in proportion to its participating interest, dispose of the
      production received by the Contractor under Articles 13.1 and 13.3 above with
      respect to said Exploitation Area;

    

    (d)

    the
      Government shall assume, in proportion to its participating interest, its share
      of all costs and expenses incurred by the Contractor from the effective date
      of
      participation with respect to the Petroleum Operations within said Exploitation
      Areas.

     

    
      
        
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    (e)

    the
      Government shall reimburse the Contractor, in proportion to its participating
      interest, its share of all costs and expenses incurred by the Contractor with
      respect to the Petroleum Operations within said Exploitation Area from the
      date
      that the participation becomes effective to the option exercise
      date.

    

    That
      reimbursement shall be made within three (3) months after the date of notice
      by
      the Government of its decision to participate.

    

    (f)

    subject
      to the provisions of Article 11.9 above, the assets acquired for the Petroleum
      Operations provided for in the joint operating agreement shall be the joint
      property of the Government and the Contractor, in proportion to their
      participating interests; and

    

    (g)

    the
      operator on duty upon the date of exercise of the option to participate shall
      continue to act as operator in accordance with the provisions of the joint
      operating agreement.

     

    
      
        
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              ARTICLE
                16:

            	
              TAXATION

            

    

    

    16.1

    The
      Contractor shall be subject to the direct tax on industrial and trading profits
      as provided for in the General Income Tax Code (“Code des Contributions
      Directes”) as well as in Section V of the Petroleum Code.

    

    16.2

    For
      the purposes of the tax legislation of the Republic of Guinea, the share of
      Petroleum which the Contractor is entitled to take under Article 13.2, 13.3,
      and
      13.4 above shall be deemed to include both the recovery of Petroleum Costs
      and
      the net profit after payment of the direct tax on industrial and trading profits
      of the Contractor under this Contract. The share of production which the
      Government is entitled to take under Article 13.1, 13.2 and 13.4 above shall
      therefore include the portion necessary to pay all direct tax on industrial
      and
      trading profits due by the Contractor. The Government undertakes to pay and
      discharge on this portion the direct tax on industrial and trading profits
      for
      and on behalf of the Contractor.

    

    For
      the determination of the taxable income of the Contractor, the annual gross
      income of the Contractor derived from the sales of the share of Petroleum which
      the Contractor is entitled to take under Article 13.2, 13.3 and 13.4 above
      shall
      be increased by the value of the portion of Petroleum which is necessary for
      the
      payment of the direct tax on industrial and trading profits as provided for
      in
      this Article.

    

    Within
      three (3) months after the date the Contractor files its income tax return
      to
      the Government, the Minister will furnish the Contractor with proper receipts
      and other documents certifying that the Contractor has complied with all its
      tax
      obligations under this Article.

    

    Nota
      Bene:

    If
      necessary, the Government would be prepared to consider changes to the wording
      of this Article in order to prevent possible double taxation problems, provided
      that such changes do not have adverse financial consequences for the
      government.

    

    16.3

    Expatriate
      employees of the Contractor and its subcontractors shall be exempt from the
      general income tax provided for in the General Income Tax Code (“impot general
      sur le revenu prevu au Code des Contributions Directes”).

    

    16.4

    Foreign
      subcontractors of the Contractor having no permanent establishment in the
      Republic of Guinea shall be exempt from the direct tax on industrial and trading
      profits derived from services rendered to the Contractor that are directly
      necessary for Petroleum Operations.

     

    
      
        
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              ARTICLE
                17:

            	
              OBLIGATION
                TO SUPPLY DOMESTIC
                CONSUMPTION

            

    

    

    17.1

    The
      Contractor shall have the option to supply by priority the Crude Oil domestic
      consumption of the Republic of Guinea if the Government is unable to meet that
      consumption with the share(s) of production to which it is
      entitled.

    

    17.2

    The
      Minister to the Contractor shall notify the quantity of Crude Oil the Contractor
      shall have the option to sell to the Republic of Guinea at least three (3)
      months prior to the commencement of each Quarter. Said quantity shall not exceed
      the maximum amount calculated for each Quarter according to the following
      formula:

    

    
      	 	
              A

            	
              =
                

            	
              B

            	
              x
                

            	
              C 

            	
              -
                

            	
              E

            	 
	 	 	 	 	 	
              D

            	 	 	 

    

    

    where:

    

    A
      means the maximum amount of Crude Oil the Contractor shall sell to the
      Government for said Quarter;

    

    B
      means the domestic consumption of the Republic of Guinea for said Quarter,
      with
      the exception of Crude Oil refined for the purpose of its export, if
      any;

    

    C
      means the total Crude Oil production from the Contract Area for said
      Quarter;

    

    D
      means the total Crude Oil production in the Republic of Guinea for said
      Quarter;

    

    E
      means the quantity of Crude Oil produced from the Contract Area during said
      Quarter and to which the Government is entitled under Articles 13.1, 13.4 and
      15.4 above.

    

    For
      the purposes of this Article, the Government or the national Company when they
      participate in Petroleum Operations as provided for in Article 15 above shall
      be
      considered as entities constituting the Contractor.

    

    17.3

    When
      the Contractor supplies Crude Oil to the Government for domestic consumption
      in
      the Republic of Guinea, the price paid by the Government shall be determined
      in
      accordance with the provisions of Article 14 above.

    

    Such
      sales shall be invoiced monthly to the Government and shall be paid in Dollars
      within two (2) months after the receipt of the invoice, unless otherwise agreed
      by the Parties.

    

    Any
      late payment shall bear interest at a rate determined by average lending rates
      normally charged by local banks at that time, from the date said payment should
      have been paid.

     

    
      
        
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              ARTICLES
                18:

            	
              SUPERVISION
                AND INSPECTION OF PETROLEUM
                OPERATIONS

            

    

    

    18.1

    The
      Contractor shall provide the Minister as soon as practicable all details of
      projected Petroleum Operations, such as geological survey, seismic survey,
      commencement of drilling, installation of a platform, etc... In the event the
      Contractor decides to abandon a well, it shall so notify the
      Minister.

    

    18.2

    One
      or more duly authorized representatives of the Minister shall have the right,
      at
      reasonable intervals, to inspect the facilities, equipment, material, records
      and books related to Petroleum Operations, provided that such inspection shall
      not unduly delay the proper conduct of said operations.

    

    18.3

    In
      order to permit the exercise of the above-mentioned rights, the Contractor
      shall
      provide to the representatives of the Minister reasonable assistance as regards,
      inter alia, transportation and accommodation. Transportation and accommodation
      costs and expenses directly connected with the supervision and inspection shall
      be borne by the Government.

     

    
      
        
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              ARTICLE
                19:

            	
              INFORMATION
                AND REPORTS

            

    

    

    19.1

    The
      Contractor shall record and keep in accordance with good international petroleum
      industry practice all information and data resulting from Petroleum Operations
      and, as soon as practicable, shall furnish to the Minister a copy of all
      information, data, documents, reports and interpretations obtained or prepared
      in the course of Petroleum Operations, and consisting of, inter
      alia:

    

    (a)

    geological
      studies and synthesis reports as well as the maps and documents related
      thereto;

    

    (b)

    geophysical
      studies, measurements and interpretation reports, along with the maps, profiles,
      sections and other documents related thereto and, upon request by the Minister,
      a copy of the records made. In any event, the Minister shall be supplied with
      these records at the expiry of the Contract;

    

    (c)

    the
      well location reports, well completion reports, measurements, analyses or other
      results concerning any activity charged to the Petroleum Costs account under
      this Contract.

    

    The
      Contractor shall also supply the Minister with a representative portion of
      the
      cores, cutting and samples of fluids produced during production
      tests.

    

    All
      maps, sections, profiles and all other geophysical or geological documents
      shall
      be delivered to the Minister on transparent media suitable for use in later
      reproduction.

    

    At
      the Minister’s request, the Contractor shall communicate to him all other
      information in its possession relating to Petroleum
      Operations.

    

    19.2

    In
      addition, the Contractor shall prepare and furnish to the Minister the following
      periodic reports:

    

    (a)

    daily
      reports concerning drilling and production activities;

    

    (b)

    weekly
      reports on geophysical activities;

    

    (c)

    within
      thirty (30) days from the end of each Quarter, a report concerning Petroleum
      Operations during the previous Quarter and which shall contain, inter alia,
      a
      detailed description of Petroleum Operations carried out and a detailed
      statement of Petroleum Costs incurred;

    

    (d)

    within
      sixty (60) days from the end of each Calendar Year, or on any other date agreed
      by the Parties, a report concerning Petroleum Operations carried out during
      the
      previous Calendar Year and which shall contain, inter alia, a detailed
      description of Petroleum Operations carried out and a detailed statement of
      Petroleum Costs incurred.

     

    
      
        
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    19.3

    All
      reports, documents and data the Minister is provided for by the Contractor
      under
      this Article shall be considered as confidential for five (5) years after their
      submission.

    

    However,
      the Minister may supply his employees or persons acting on his behalf with
      such
      information, and these persons shall abide by the above confidentiality clause.
      In addition, the Minister may use any information obtained, for the purpose
      of
      preparing and publishing such reports as may be required by applicable laws
      as
      well as reports of a general nature.

    

    Notwithstanding
      the foregoing provisions, the Minister may publish any information that relates
      to an area on which the Contractor has no longer exclusive
      rights.

    

    19.5

    The
      Contractor shall give notice to the Minister of any discovery of mineral
      substances.

     

    
      
        
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              ARTICLE
                20:

            	
              ACCOUNTING
                AND PAYMENTS

            

    

    

    20.1

    The
      Contractor shall keep accounts in accordance with the regulations in
      force.

    

    20.2

    The
      registers and accounting books shall be kept in the French language and in
      Dollars. Such registers shall be used, inter alia, to establish the amount
      of
      Petroleum Costs, the recovery of said costs, the production sharing and for
      the
      filing of the Contractor’s tax return.

    

    For
      informational purposes only, the accounts and balance sheets may be also kept
      in
      Guinean Francs.

    

    20.3

    Whenever
      it is necessary to convert into a currency the expenses and receipts expressed
      in another freely convertible currency, the expenses and receipts shall be
      valued on the basis of the arithmetical average of the daily closing rates
      for
      the sale of said currency during the month when the expenses were paid and
      the
      receipts collected.

    

    The
      exchange rates to be applied in order to make the conversions provided for
      in
      this Article shall be those quoted on the Paris foreign exchange
      market.

    

    20.4

    The
      registers and accounting books shall be materially supported by detailed
      documents proving the expenses and receipts of the Contractor under this
      Contract.

    

    20.5

    The
      government shall have the right to examine and audit the registers and
      accounting books concerning Petroleum Operations and shall have four (4) years
      following the end of an accounting year to carry out examination or audit and
      to
      submit to the Contractor any discrepancy or error encountered during that
      examination or audit.

    

    The
      absence of a claim by the Government within the above-mentioned four (3) years'
      period shall terminate the right for the Government to make any objection,
      contestation or claim in respect of the accounting year in
      question.

    

    20.6

    All
      sums due to the Government or the Contractor under this Contract shall be paid
      in Dollars or other convertible currency agreed to by the
      Parties.

     

    
      
        
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              ARTICLE
                21:

            	
              IMPORTS
                AND EXPORTS

            

    

    

    21.1

    Subject
      to the provisions of Article 10 above, the Contractor and its subcontractors
      shall have the right to import into the Republic of
      Guinea:

    

    (a)

    the
      equipment, machinery and vehicles necessary for Petroleum Operations, all import
      duties and taxes on which shall be suspended;

    

    (b)

    the
      materials, spare parts and consumable items necessary for Petroleum Operations,
      exempt from all import duties and taxes.

    

    21.2

    The
      expatriate employees of the Contractor and its subcontractors as well as their
      families shall have the right to import into the Republic of
      Guinea.

    

    (a)

    personal
      effects and household goods as well as the foodstuffs they need, free of all
      import duties and taxes,

    

    (b)

    one
      (1) automobile per expatriate employee for his own use, in respect of which
      all
      import duties and taxes, shall be suspended.

    

    21.3

    Subject
      to the provisions of Article 10 above, the Contractor, its subcontractors,
      their
      expatriate employees and their families may export from the Republic of Guinea,
      free of all export duties and taxes, the goods imported under Articles 21.1
      and
      21.2 above which are no longer needed for Petroleum
      Operations.

    

    21.4

    The
      goods imported under Articles 21.1 and 21.2 above which are no longer directly
      assigned to the Petroleum Operations or to the personal use of the expatriate
      employees may be sold in the Republic of Guinea by the Contractor, its
      subcontractors, or their expatriate employees, provided however that prior
      notice is given to the Minister. In this case, the seller shall fulfill all
      formalities prescribed by the Customs regulations in force and shall pay the
      duties and taxes which are applicable at the date of transaction, except if
      the
      aforementioned goods are transferred to other holders of Petroleum contracts
      concluded with the Government or a national company.

    

    21.5

    During
      the term of this Contract, the Contractor shall have the right to freely export,
      at the point exportation chosen for this purpose, exempt from all export duties
      and taxes, the share of Petroleum to which the Contractor is entitled under
      the
      provisions of this Contract.

    

    21.6

    All
      imports and exports made under this Contract shall be subject to the formalities
      required by customs.

     

    
      
        
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              ARTICLE
                22:

            	
              FOREIGN
                EXCHANGE CONTROL

            

    

    

    22.1

    The
      Contractor shall be subject to foreign exchange control regulations in force
      in
      the Republic of Guinea, it being however understood that the Government
      guarantees during the term of this Contract, to the Contractor and its
      subcontractors, and only with respect to Petroleum Operations under this
      Contract, the following benefits:

    

    (a)

    the
      right to open and operate bank accounts outside the Republic of
      Guinea;

    

    (b)

    the
      right to receive, retain on those foreign accounts all funds acquired or
      borrowed abroad, including the proceeds of sales of Petroleum made by the
      Contractor, within the limit of the amounts which exceed their domestic
      requirements concerning their operations in the Republic of Guinea, as well
      as
      the right to freely dispose of such excess funds abroad;

    

    (c)

    the
      right to freely remit outside the Republic of Guinea the proceeds of sales
      of
      Petroleum to which the Contractor is entitled under this Contract, the dividends
      and other proceeds of any kind arising from Petroleum
      Operations;

    

    (d)

    the
      right to pay directly abroad the enterprises which provide for goods and
      services necessary to carry out Petroleum Operations; and

    

    (e)

    with
      respect to carry out of Petroleum Operations, the right to convert national
      currency and foreign convertible currencies, through banks and agents installed
      in the Republic of Guinea and duly authorized, at exchange rates which are
      no
      less favorable to the Contractor or its subcontractors than either the daily
      rate or the rate generally applicable in the Republic of Guinea to other
      enterprises on the day the exchange transactions occur.

     

    
      
        
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              ARTICLE
                23:

            	
              ASSIGNMENTS
                AND TRANSFERS

            

    

    

    23.1

    The
      Contractor, or each entity constituting the Contractor, shall not assign part
      or
      all of its rights and obligations arising from this Contract without the prior
      approval of the Minister. 

    Within
      thirty (30) days after notice to the Minister of the intended assignment, the
      assignment shall be approved or disapproved by the
      Minister.

    

    Upon
      approval, the assignee shall be bound by the terms and conditions of this
      Contract.

    

    23.2

    If
      the Contractor, or an entity constituting the Contractor notifies the Minister
      an intended assignment to an Affiliate, the Minister shall authorize that
      assignment, provided that the assignor accepts to be bound by the terms and
      conditions of this Contract.

    

    23.3

    In
      accordance with the provisions of Article 11.5 above, where a partial assignment
      is notified, the Contractor and the assignor shall be jointly and severally
      liable for all obligations hereunder as from the date of such
      authorization.

     

    
      
        
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              ARTICLE
                24:

            	
              SURRENDER
                AND TERMINATION

            

    

    

    24.1

    The
      Contractor, upon giving three (3) months' prior notice to the Minister, may
      at
      any time surrender its rights with respect to the entire Contract Area or any
      portion thereof, subject to the provisions of Article 24.2 below.

    

    In
      case of the surrender of a part only of the Contract Area, the provisions of
      Article 5.2 above shall apply.

    

    A
      surrender during an exploration period shall not reduce the exploration work
      and
      financial obligations for that exploration period as provided for in Article
      4
      above.

    

    24.2

    In
      addition, the Contractor, upon giving twelve (12) months' prior notice to the
      Minister, may at any time surrender its rights in respect of whole or part
      of an
      Exploitation Area, provided however that all the obligations under this Contract
      have been fulfilled at the date of surrender.

    

    24.3

    A
      surrender pursuant to Article 24.1 and 24.2 above, shall not exempt the
      Contractor of any obligation under this Contract incurred before the effective
      date of such surrender.

    

    24.4

    Subject
      to the provisions of Article 24.3 above, surrender in respect of the whole
      Contract Area shall terminate this Contract.

    

    24.
      5

    The
      Government may terminate this Contract in any of the following
      events:

    

    (a)

    material
      breach by the Contractor of the provisions of the Petroleum Code or this
      Contract;

    

    (b)

    failure
      of the Contractor to make a payment to the Government for a period exceeding
      three (3)

    months;

    

    (c)

    failure
      of the Contractor to comply, within the prescribed period laid down with any
      final arbitrated award rendered in accordance with the provisions of Article
      27
      below; or

    

    (d)

    bankruptcy,
      creditor workout agreements (adjustments to creditor accounts) or liquidation
      of
      assets of the Contractor.

    

    Except
      in respect of paragraph (d) above, the Government will pronounce the termination
      only after having given the Contractor notice to remedy such default within
      three (3) months from the date of such notification. Should there be no remedy
      within the prescribed period, the Government may terminate the
      Contract.

    

    Any
      dispute as to whether any grounds exist to justify the termination pronounced
      by
      the Government may be subject to arbitration under Article 27 below. In the
      case
      of any such dispute, this Contract shall remain in force until the execution
      by
      the Parties of the arbitral award, without prejudice to the provisions of
      Article 24.3 above.

     

    
      
        
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              ARTICLE
                25:

            	
              FORCE
                MAJEURE

            

    

    

    25.1

    Where
      either Party is prevented from performing its Contractual obligations (other
      then the obligations to make payments of money) or may only perform them with
      delay, the non-performance or delay in performance shall not be considered
      as a
      breach to this Contract if such non-performance or delay is caused by a case
      of
      Force Majeure and provided however that there is a direct link between the
      non-performance and the case of Force Majeure invoked.

    

    25.2

    For
      the purposes of this Contract, may be considered as a case of Force Majeure
      any
      event unforeseeable and beyond the control of a Party, such as earthquake,
      strike, riot, insurrection, civil war, sabotage, act of war or conditions
      resulting from war. The intent of the Parties is that Force Majeure shall be
      interpreted in conformity with the principles and customary rules of
      international law.

    

    25.3

    When
      either Party considers it is prevented from performing any of its obligations
      by
      the occurrence of a case of Force Majeure, such Party
      shall:

    

    (a)

    forthwith
      notify the other Party of the occurrence thereof and state the reasons
      therefore;

    

    (b)

    take
      all actions which ere useful and necessary to permit the normal resumption
      of
      the performance of the concerned obligations upon termination of the event
      constituting the case of Force Majeure.

    

    25.4

    If
      as a result of Force Majeure, the performance of any contractual obligation
      is
      delayed, that delay together with such period as may be necessary for the repair
      of any damage caused during such delay shall be added to the period allowed
      in
      this Contract for the performance of that obligation, as well as to the duration
      of this Contract.

     

    
      
        
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              ARTICLE
                26:

            	
              APPLICABLE
                LAW AND STABILITY OF
                CONDITIONS

            

    

    

    26.1

    The
      laws of Guinea shall apply to this Contract, to operations made under this
      Contract, to individuals and entities that intervene in this respect within
      the
      territory of the Republic of Guinea.

    

    26.2

    The
      Contractor shall be subject at any time to the laws and regulations in force
      in
      the Republic of Guinea.

    

    26.3

    This
      Contract is executed by the Parties in accordance with the laws and regulations
      in force at the date of its signing, and on the basis of the provisions of
      said
      laws and regulations, as regards, inter alia, the economic, fiscal and financial
      provisions of this Contract.

    Consequently,
      where new laws and regulations modify the provisions of the laws and regulations
      in force at the date of signing of this Contract and where such modifications
      shall bring about a material change concerning the respective economic situation
      of the Parties resulting from the original provisions of this Contract, the
      Parties shall in good faith enter into an agreement with a view to modifying
      these provisions in order to restore the economic balance as intended at the
      signing of this Contract.

    

    In
      the event the Parties, in spite of their efforts, are unable to reach an
      agreement, the provisions of Article 27 below shall apply.

     

    
      
        
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              ARTICLE
                27:

            	
              SETTLEMENT
                OF DISPUTES

            

    

    

    27.1

    In
      the event of any dispute between the Government and the Contractor arising
      out
      of, or in relation to, or in connection with, the interpretation or execution
      of
      the provisions of this Contract, the Parties shall make their best efforts
      to
      settle such dispute amicably.

    

    If
      no settlement is reached by the Parties within three (3) months after the date
      of notice of the dispute by either Party to the other, the dispute shall, at
      the
      request of the most diligent Party, be referred for arbitration to the
      International Center for Settlement of Investment Disputes in accordance with
      the rules set forth by the Convention on the Settlement of Investment Disputes
      between States and Nationals of Other States signed and ratified by the
      Government of the Republic of Guinea.

    

    27.2

    The
      place of arbitration shall be London (England), the French and English language
      shall be used in the arbitration proceedings, and the applicable law shall
      be
      the principles and rules of international law applicable on the
      subject.

    

    The
      Parties shall execute the award of the arbitral tribunal without appeal or
      any
      other remedy.

    

    27.3

    The
      Parties shall conform in any circumstances to any measure prescribed or
      recommended by the arbitrators, being understood that any request to arbitration
      shall suspend the contractual provisions concerning the subject matter of the
      dispute but all other rights and obligations of the Parties arising from the
      other provisions of this Contract shall not be suspended.

     

    
      
        
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            and Production Sharing Agreement between Republic of Guinea and USOil
            Corporation 2002

        

        
          40

          
            

          

        

        
          
          

        

      

    

    

    
      	
              ARTICLE
                28:

            	
              NOTICES

            

    

    

    28.1

    Any
      notice or other communication regarding this Contract shall be in writing and
      shall be considered as received as soon as they are delivered by hand, by
      registered mail with acknowledgement of receipt, or sent by telegram, facsimile
      or telex to the following addresses:

    

    

    

    
      	 	
              -

            	
              to
                the Government:

            

    

    

    Dr.
      Alpha Mady Soumah

    Le
      Ministre - Cabinet Parti

    

     

    

    
      	 	
              -

            	
              to
                the Contractor:

            

    

    USOil
      Corporation

    6676
      Southwest Freeway, Suite 600

    Houston,
      Texas 770774

    USA

    

    FAX
      7137870675

    

    

    

    
    

    28.2

    The
      Government and the Contractor may at any time change its authorized
      representative or its address herein on giving the other at least ten (10)
      days
      notice in writing to such effect.

     

    
      
        
          Royalty
            and Production Sharing Agreement between Republic of Guinea and USOil
            Corporation 2002

        

        
          41

          
            

          

        

        
          
          

        

      

    

    

    
      	
              ARTICLE
                29:

            	
              MISCELLANEOUS
                PROVISIONS

            

    

    

    29.1

    Headings
      in this Contract are inserted for purposes of convenience and reference and
      in
      no event shall define, restrict or describe the scope or object of the Contract
      or of any of its clauses.

    

    29.2

    Appendix
      A which are attached are an integral part of this
      Contract.

    

    29.3

    This
      Contract shall not be modified except in writing and with the mutual agreement
      of the Parties.

    

    29.4

    Any
      waiver of the Government concerning the performance of an obligation of the
      Contractor shall be in writing and signed by the Minister, and no waiver shall
      be implied if the Minister does not exercise a remedy under this
      Contract.

     

    
      
        
          Royalty
            and Production Sharing Agreement between Republic of Guinea and USOil
            Corporation 2002

        

        
          42

          
            

          

        

        
          
          

        

      

    

    

    
      	
              ARTICLE
                30:

            	
              EFFECTIVE
                DATE

            

    

    

    30.1

    This
      Contract shall be effective on December 2, 2002.

    

    IN
      WITNESS WHEREOF, the Parties have signed this Contract in 6
      copies.

    

    
      	
              Conakry:
                

            	 	
              2002

            	 	 
	  	 	 	 
	  	 	 	 
	  	 	 	 
	  	 	 	 
	  	 	 	 
	  	
               

            	
               

            	
              (Seal)

            
	
              For
                the Republic of Guinea:  

            	 	 
	
              Dr.
                Alpha Mady SOUMAH  

            	 	 
	
              Ministre-Director
                de Particuleir  

            	 	 
	
              President
                de la Republic de Guinea   

            	 
	
              Date:
                 _________,
                2002  

            	 	 
	   	 	 
	   	 	 
	   	 	 
	  	 	 	 
	  	    
	
            	
              (Seal)

            
	
              For
                the Contractor:  

            	 	 
	
              Date:
                _________,
                2002  

            	 	 

    

     

    
      
        
          Royalty
            and Production Sharing Agreement between Republic of Guinea and USOil
            Corporation 2002

        

        
          43

          
            

          

        

        
          
          

        

      

    

     

    APPENDIX
      A #1

    

    Attached
      to and made part of this Contract between the Government of the Republic of
      Guinea and the Contractor.

    

    

    CONTRACT
      AREA

    

    The
      Contract Area for the First Exploration Period represented on the attached
      map
      consists of an area deemed equal to around 65,000 sq.km.

    

    The
      points indicated on this map are defined hereinafter with reference to the
      Greenwich meridian

    

    
      	 	
              Point
                A:

            	 	
              10^49’55”N
                

            	 	
              15^10’33”W

            	 
	 	
              Point
                B: 

            	 	
              10^39’49”N
                

            	 	
              15^20’32”W
                

            	 
	 	
              Point
                C: 

            	 	
              10^39’49”N

            	 	
              15^34’16”W

            	 
	 	
              Point
                D: 

            	 	
              09^23’27”N
                

            	 	
              17^26’00”W
                

            	 
	 	
              Point
                E: 

            	 	
              08^10’30”N
                

            	 	
              14^21’12”W
                

            	 
	 	
              Point
                F: 

            	 	
              08^55’23”N
                

            	 	
              13^30’07”W
                

            	 
	 	
              Point
                G: 

            	 	
              10^10’38”N
                

            	 	
              14^30’00”W

            	 

    

    

    
      
        
          Royalty
            and Production Sharing Agreement between Republic of Guinea and USOil
            Corporation 2002

        

        
          44

          
            

          

        

        
          
          

        

      

    

    

    APPENDIX
      A #2

    

    CONTRACT
      AREA MAP AND COORDINATES 

    Contract
      Area: First Exploration Period

    

     

     

    Royalty
      and Production Sharing Agreement between Republic of Guinea and USOil
      Corporation 2002

    45EXHIBIT 10.1

                                 S U B L E A S E

                                     Between

                             THE STATE OF WASHINGTON

                                 Represented by

                              DEPARTMENT OF ECOLOGY

                                       and

                           US ECOLOGY WASHINGTON, INC.
                           ===========================

<PAGE>
<TABLE>
<CAPTION>
                                    I N D E X

Article                               Title                        Page
--------------  -------------------------------------------------  ----
<S>             <C>                                                <C>

ARTICLE I       Leased Premises                                       1

ARTICLE II      Relationship Between the Parties                      1

ARTICLE III     Term of This Sublease - Option to Renew               4

ARTICLE IV      Rent                                                  4

ARTICLE V       Use of Premises                                       6

ARTICLE VI      Access Rights of State                                6

ARTICLE VII     Perpetual Maintenance Fund                            7

ARTICLE VIII    State Inspection of Company Records                   8

ARTICLE IX      Termination of Sublease                               9

ARTICLE X       The Company's Withdrawal from Premises               10

ARTICLE XI      Permits and Licenses                                 11

ARTICLE XII     Protection Against Claims and Losses                 11

ARTICLE XIII    Casualty Destruction of Premises                     13

ARTICLE XIV     Taxes, Maintenance Costs                             13

ARTICLE XV      Nondiscrimination in Employment                      14

ARTICLE XVI     No Benefits for Officials                            14

                                        i
<PAGE>
ARTICLE XVII    No Contingent Fees                                   14

ARTICLE XVIII   No Waiver by the State                               15

ARTICLE XIX     Condition of Subleased Lands                         15

ARTICLE XX      Altering Premises                                    15

ARTICLE XXI     Additional Reserved Rights of the U.S. Government    16

ARTICLE XXII    Disputes With the U.S. Government                    16

ARTICLE XXIII   Disputes Between the Parties                         17

ARTICLE XXIV    Notices                                              17

ARTICLE XXV     Closure Fund                                         18

ARTICLE XXVI    Captions                                             19

ARTICLE XXVII   Invalidity of Particular Provisions                  19

ARTICLE XXVIII  Governing Law                                        19

ARTICLE XXIX    Time of Essence                                      20
</TABLE>

                                       ii
<PAGE>
     This  sublease,  dated  the _____ day of_______________, _____, and entered
into  pursuant  to RCW 43.200.080(1), is between the State of Washington, acting
through  the  Department  of  Ecology,  sublessor  ("State"),  and  US  Ecology
Washington,  Inc., sublessee ("Company"), a Delaware corporation and licensed to
do  business  in  Washington.

                                    ARTICLE I

                                 Leased Premises
                                 ---------------

     The  State  hereby  subleases  to  the  Company  that certain real property
situated  in  the County of Benton, State of Washington, within an area owned by
the  United  States  and  known as the Department of Energy Hanford Reservation,
more  particularly  described  as  follows:

     One  hundred  (100)  acres  of land, more or less, in the east half of
     Section 9, Township 12 North, Range 26 EWM, Benton County, Washington,
     more  particularly  described  as  follows:

     Beginning  at  the  Southeast corner of said Section 9; thence North 0
     degrees  53'  09"  West along the East line of Section 9 a distance of
     2942  feet;

     thence South 88 degrees 50' 56" West 1480 feet; thence South 0 degrees
     53' 09" East 2942 feet to the South line of said Section; thence North
     88  degrees

     50'  56'  East  along  said South line of the Section 1480 feet to the
     point  of  beginning.

                                   ARTICLE II

                        Relationship Between the Parties
                        --------------------------------

     1.   The  Company  acknowledges  that it has been furnished with a true and
correct  copy  of  the  lease  between  the  United  States  Government  ("U.S.
Government"),  as  represented by the Atomic Energy Commission (now succeeded by
the  United  States  Department  of  Energy  ("  Energy")  and  the State, dated
September  10,  1964,  as  amended.

     2.   The  Company  agrees  to  assume,  so  far  as the premises sublet are
concerned,  all  of  the  obligations  and  responsibilities which the State has
assumed  toward  the  U.S.  Government and/or Energy by the Prime Lease; and the
Company  acknowledges its complete awareness of the considerations involving the
national  defense and security set forth in the Prime Lease, which will, or may,
affect  the  Company's  operations  upon  the  subleased  premises.

                                        i
<PAGE>
     3.   The  State and the Company agree that in the event there is a conflict
between  the terms of this sublease and the terms of the Prime Lease, the latter
shall  be  controlling;  and  that  nothing herein shall be deemed to affect any
right  or  rights  that  the  U.S. Government and/or Energy have under the Prime
Lease.

     4.   The  Company  understands  that  the  State is a member state and host
state  under  the  Northwest  Interstate  Compact on Low-Level Radioactive Waste
Management  (hereafter "the Compact"); and the Company therefore agrees that its
facilities  and  activities  will  be  maintained  and  conducted  so  as not to
interfere with or endanger State policy with regard to the Compact.  The Company
further agrees that it will operate and manage the subleased premises in support
of  the  Compact  in  accordance  with  the  requirements  of the Compact and in
accordance  with  applicable  federal  and  state  law,  including the Low-Level
Radioactive  Waste  Act  of  1980 (as amended by the Low-Level Radioactive Waste
Policy  Amendments  Act  of  1985),  42  U.S.C.  Sec.  2021b-2021j.

     5.   The  State  agrees  that  with  respect  to the subleased premises the
Company  shall  enjoy  the  benefits  of  the  Prime  Lease  applicable thereto.

     6.   The  State  agrees to use its offices, in accordance with Articles VII
and  XXII, to represent the Company in presenting matters to the U.S. Government
and/or  Energy  involving  the  Company's  duties  and  obligations  to the U.S.
Government  and/or  Energy  under  the  Prime  Lease.

     7.   Except  as  provided  below,  the  Company  agrees  that it shall not,
without  the  State's  prior  written  approval,  which  approval  shall  not be
unreasonably  withheld,  assign,  hypothecate  or  transfer this sublease or any
interest  thereunder.  In  granting any such consent the State shall be entitled
to  consider,  among  other  items,  the  proposed  assignee's,  sublessee's  or
transferee's  financial condition, business reputation, business, and such other
factors  as may reasonably bear upon the suitability of the assignee, sublessee,
or  transferee  as  lessee  of  the  Premises.  If the Company is a corporation,
partnership,  or  other association, (l) the transfer of more than fifty percent
(50%)  of  the  ownership  interest  in  such  entity, or (2) the sale of all or
substantially  all of the assets of the Company shall be deemed to constitute an
"assignment"  of  this  Agreement  which requires the consent of the State.  The
consent  of the State to any one assignment shall not constitute a waiver of the
State's  right  to  consent  to subsequent assignments, nor shall consent of the
State  to  any one assignment relieve any party previously liable as a sublessee
from  any obligations under this Agreement, who shall remain joint and severally
liable as primary obligor and not as surety.  The acceptance by the State of the

                                       ii
<PAGE>
payment  of  rent  following  an  assignment shall not constitute consent to any
assignment  and  the  State's  consent  shall be evidenced only in writing.  The
sublease  may  be  assigned,  subject  to  all  conditions of this sublease, for
performance by a wholly owned subsidiary of the Company organized under the laws
of the State of Washington, without prior written approval by the State, but the
Company must give thirty (30) days prior written notice to the State of any such
proposed  transfer.

     8.   The  Company  agrees  that  it  shall  not,  without the State's prior
written  approval, sublet the premises or any part thereof, or permit the use of
the  premises  by  any party other than the Company except that the premises may
be,  subject to all conditions of this sublease, sublet to, or used by, a wholly
owned  subsidiary  of  the  Company  organized  under  the  laws of the State of
Washington without prior approval by the State, but the Company must give thirty
(30)  days  prior  written  notice  to  the State of any such proposed sublease.

     9.   Any  transactions under sections 7 and 8 of this Article shall require
notice  to  and  approval  by  Energy.

                                   ARTICLE III

                     Term of This Sublease- Option to Renew
                     --------------------------------------

     1.   The  term  of  this sublease shall be ten years commencing on the 29th
day  of  July,  2005.

     2.   The  Company shall have the option to extend the term of this sublease
for  four  additional  periods of ten years at rental rates to be agreed upon by
the  parties.  Upon  the  Company's  exercise  of such renewal option, the State
shall  have  the  option  to terminate the sublease if good cause exists, in the
State's  determination  of  the  best  interests  of the State, to terminate the
sublease.  In the event the parties hereto fail to agree as to rental rates, the
parties  may  attempt to resolve the disagreement in accordance with the dispute
resolution provisions in Article XXIII.  During the pendency of any negotiations
to  extend a sublease term, the State may extend the Sublease under the existing
terms  on  a  quarter-by-quarter  basis.

     3.   In  the  event  the  Company desires to exercise said option, it shall
give  notice  thereof  in writing to the State not less than six months prior to
the  expiration  of  the Sublease term.  In the event the Company chooses to not
exercise  said  option,  the  Company  will remain subject to the obligations in
Article  X.  In  the event the State desires to exercise its option to terminate
the  sublease, it shall give notice thereof in writing not less than five months
prior  to  the  expiration  of  the  lease  term.

                                      iii
<PAGE>
                                   ARTICLE IV

                                      Rent
                                      ----

     1.  The  Company shall pay to the State as annual rent for the premises and
related rights obtained under this Sublease the sum, as of the effective date of
the initial Sublease term, of $63,170 as adjusted by the percentage increase, if
any, in the Consumer Price Index, calculated for all urban consumers, all items,
West,  size class C over the previous three year period as last published by the
United States Department of Labor, Bureau of Labor Statistics, for each calendar
year  of  the  remaining term of this Sublease.  For the purposes of the initial
Sublease  term,  the  first  annual  rent adjustment shall be effective January,
2008.

     2.   Payments  of the rent shall be due quarterly, within fifteen (15) days
after  the  end  of  each calendar quarter.  If any payment is not made when due
hereunder,  a  late payment penalty in an amount equal to one percent applied to
the  amount  of  the  late  payment shall become immediately due and payable and
shall  be  applied for each month that any payment due hereunder remains unpaid.
Payments  shall  be  made in lawful money of the United States, at the office of
the  State  Department of Ecology, Olympia, Washington, or as otherwise directed
in  writing  by  the  State.

     3.   In  addition,  the  Company  agrees  to  pay as supplemental rent such
annual  sum, determined after the fact by the Department of Ecology and approved
by  the State Auditor, as will fairly and adequately reimburse the State for the
following  unforeseen  direct  costs  and unforeseen costs of administering this
sublease:  (1) those expenses incurred by the State in considering those matters
brought  before  it by the Company for approval as provided in Articles V and XX
herein,  excluding  any  matters relating to licensing activities, and (2) those
expenses  incurred  by  the  State in representing the Company, at the Company's
request,  in  accordance  with  Article  II-6,  Article  VII,  and Article XXII:
PROVIDED,  that  the State may request, and upon such request, the Company shall
provide,  an  acceptable  financial  assurance mechanism (e.g., a bond) assuring
payment  of  such  supplemental rent prior to the State incurring said expenses.
Any  dispute over the amount of a bond or other financial assurance requested by
the  State  shall  be  resolved  in  accordance with Article XXIII.  No expenses
incurred  by  the  State  in  collecting any fees, assessments, or other charges
associated  with  the  low-level  radioactive waste disposal site and no expense
incurred  by  the  State  for  activities  benefiting  third  parties  shall  be
reimbursable  as  supplemental  rent.  Supplemental  rent  so  assessed  for the
previous  year  shall  be  paid  at  the  same

                                       iv
<PAGE>
time the quarterly rent for the next succeeding quarter is paid, except that the
supplemental  rent  for the last year of the term of this Sublease shall be paid
within fifteen (15) days of notice to Company.  Reimbursable costs shall include
transportation  costs,  per  diem  expenses  as  authorized  by  state  law  for
department  personnel  and  telephone  expenses, but shall not include salaries,
secretarial  services,  or supplies, except where the State may undertake to use
its  offices on behalf of the Company in accordance with Articles II.6 and XXII.

                                    ARTICLE V

                                 Use of Premises
                                 ---------------

     The  Company  covenants  and agrees that it will use the subleased premises
for  the  management  of low-level radioactive waste and naturally occurring and
accelerator  produced radioactive materials and wastes, but for no other purpose
except  with the prior written approval of the State.  The Company covenants and
agrees  that  it  will use the premises in a manner consistent with the terms of
the  license  or  licenses  issued  to  the  Company by the appropriate state or
federal  agency  authorizing  and  regulating  the  activities mentioned in this
article,  and  with  all  other  applicable  laws  and  regulations.

     The  Company shall publish and maintain a schedule of all rates and charges
for  waste  received  under  the  Compact  subject to approval by the Washington
Utility  and  Transportation Commission or its successors in interest, a copy of
which  shall  be  furnished  to the State and to any other person requesting the
same.  The  parties acknowledge that worker safety and health shall be regulated
by  the  State  of  Washington.

                                   ARTICLE VI

                             Access Rights of State
                             ----------------------

     The  State,  or any person authorized by it, to the extent permitted by the
prime  lease,  shall  at all times have access to the subleased premises for all
reasonable  purposes,  including,  without  limitation,  the  following:

     1.   For  the  protection  of the health and safety of the public or of the
employees,  other  personnel,  or  contractors  of  the  State;  and

     2.   For  taking  readings  or  samples from or for servicing, maintaining,
repairing,  or  replacing  environmental  monitoring  devices,  other  similar
instruments,  or  ground  water monitoring wells located on the leased premises;
and for conducting any other remedial actions as defined by the Washington Model
Toxics  Control  Act,  chapter  70.105D  RCW.

                                        v
<PAGE>
     3.   For  inspecting  the  premises  and  determining  if  the  Company  is
complying  with  the  obligations imposed by this sublease, including compliance
with  all  applicable  laws.

                                   ARTICLE VII

                           Perpetual Maintenance Fund
                           --------------------------

     The  Company  agrees,  pursuant  to  WAC  173-44-040,  to pay to the State,
effective  on  the  commencement  of  this sublease, One Dollar and Seventy-five
Cents ($1.75) for each cubic foot of radioactive materials and waste permanently
stored  or  buried  at  the  commercial  low-level  radioactive  waste  disposal
facility.  The  payment  by the Company of the One Dollar and Seventy-five Cents
($1.75)  fee  shall continue until such time as the State amends WAC 173-44-040,
at  which  time  the new amount set forth in the amended regulation shall apply.

     The  State warrants that it will invest monies collected for perpetual care
and  maintenance in the same manner as other monies and in accordance with state
law.

     The One Dollar and Seventy-five Cent ($1.75) perpetual care and maintenance
fee  shall  be  paid  to  the State on a quarterly basis for the quarters ending
March  31,  June  30,  September 30 and December 31, provided, however, that the
Company  shall  have  up to forty-five (45) days from the end of each quarter to
make  payment  to  the State.  In the event the State makes a determination that
additional  perpetual  care and maintenance fees in excess of the One Dollar and
Seventy-five  Cents  ($1.75)  set  forth  herein  are necessary as a result of a
request  made by the United States to the State of Washington for the deposit of
additional amounts pursuant to the Perpetual Care Agreement dated July 29, 1965,
between  the  State  of  Washington  and the United States, the State shall give
reasonable  notice  to  the Company of such determination and shall not oppose a
request  by  the Company to participate in proceedings between the State and the
United States under Article 10 of such Perpetual Care Agreement or Article 19 of
the Prime Lease between the United States of America and the State of Washington
dated  September  10,  1964.  In  the  event  the Company is precluded from such
participation,  the  State shall use its best efforts to represent the Company's
position  on  such  proposed  fee  increase  and  to  present  such  facts  and
circumstances  on  behalf  of  the  Company  as  it may reasonably request.  Any
adjustments  to  the fee shall be made by rule adopted pursuant to Chapter 34.05
RCW.

                                       vi
<PAGE>
     All  payments  to  the  State  shall  be made in lawful money of the United
States  at  the  Department  of  Ecology,  Olympia,  Washington, or as otherwise
designated  in writing by the State, without notice of demand by the State.  The
State  shall maintain a segregated account of perpetual care and maintenance fee
payments  which  are deposited in the Perpetual Maintenance Fund, which includes
both  a  Perpetual  Surveillance  and Maintenance Account and a Closure Account.
The  Company  shall  identify  payments  made for perpetual care and maintenance
separately  from  any  payments  made  for  closure.

                                  ARTICLE VIII

                       State Inspection of Company Records
                       -----------------------------------

     The  Company  agrees  that  in  order for the State to determine the proper
payments  of  the  Company  into the Perpetual Maintenance Fund and to determine
compliance with this sublease, the State and its duly authorized representatives
shall  have  access  to and the right to examine and copy any directly pertinent
books,  documents,  papers,  accounts,  and  records  of  the  Company involving
operations  on  the subleased premises. Access to such books, documents, papers,
accounts,  and  records  shall  be  provided  at  a location within the state of
Washington  or  at the offices of the Company in Boise, Idaho.  Said right shall
continue  for three years after the termination of this sublease and any option,
if  exercised.

                                   ARTICLE IX

                             Termination of Sublease
                             -----------------------

     1.   Default.  The  Company  agrees  that  it  shall not violate any of the
terms  or  conditions  of  this  sublease,  or  violate the terms of authorizing
licenses  issued by the State or other appropriate authority, or use any part of
the  subleased  premises  in  a  manner  not  in substantial compliance with the
covenants  and  purposes of this sublease, or fail to comply with any applicable
laws,  regulations and ordinances of the United States and the state, territory,
or  political  subdivision in which the subleased premises are located.  If such
substantial  violation,  misuse  or  noncompliance occurs, the State may, at its
sole  option, have the right upon giving the Company sixty days' written notice,
to  terminate  this  sublease  and  reenter and take possession of the premises,
provided that such violation, misuse or noncompliance continues sixty days after
the  written  notice is provided by the State.  Upon any subsequent violation of
the  same  nature  after  such  written  notice has been provided, the State may
immediately  terminate  the  sublease  and  re-enter  and take possession of the
premises.  Notwithstanding  any  of  the

                                      vii
<PAGE>
foregoing,  if  such  violation,  misuse  or  noncompliance  involves  a nuclear
incident as defined in the U.S. Atomic Energy Act of 1954, as amended, 42 U.S.C.
Sec.  2014(q), the State may immediately terminate this sublease and reenter and
take  possession  of  the  premises.

     2.   Non-default termination.  Furthermore, the State reserves the right to
terminate the sublease upon: (a) sixty days' written notice should the Company's
authorizing license issued by the State be terminated or expire without renewal,
unless  the  Company has secured a stay of such termination in an administrative
or  judicial  proceeding contesting a decision by the State Department of Health
or  that  agency  of  the  state  with responsibility for the facility operating
license,  or  unless the Company has timely submitted an application for license
renewal;  or  (b)  five  months'  notice  should  the Compact lose the authority
provided  by  federal  law  as  of the time of entry of this sublease (Low-Level
Radioactive  Waste  Act  of  1980 [as amended by the Low-Level Radioactive Waste
Policy Amendments Act of 1985], 42 U.S.C. Sec. 2021b-2021j) to exclude access to
the  subleased  premises  for  the  disposal  of out-of-compact region low-level
radioactive  waste.  Termination  as provided in this paragraph does not, at the
State's  discretion,  relieve  the Company of any outstanding obligations or its
obligations  under  Article  X.

                                    ARTICLE X

                     The Company's Withdrawal from Premises
                     --------------------------------------

     1.   The  Company  agrees  that  it  shall,  either  before or within forty
working  days  after  the expiration or termination of the sublease, remove from
the premises at its own expense, all of its personal property not affixed to the
land:  PROVIDED,  that  if the Company fails to so remove its personal property,
the  State  may,  at its option, (1) take title to such property without cost or
liability  of any kind or (2) remove the personal property and have it stored on
behalf  of  the  Company  and at the sole expense of the Company, subject to any
storage  liens  and  right  of  sale  provided  by  law.

     2.   All  fixtures  and  improvements on the subleased premises made by the
Company  shall  remain  the  property  of  the  Company  during the term of this
sublease  no matter how they are attached to the land.  Upon the termination for
default  of  this sublease, all fixtures and improvements shall be forfeited and
become  the  property  of  the  State  unless the State elects in writing within
ninety  days  of termination to have Company remove fixtures and improvements to
which  the State does not intend to take title.  If the State elects to have the
some  or

                                      viii
<PAGE>
all  of  fixtures  and  improvements  removed  by Company, the Company agrees to
remove such fixtures and improvements identified in the notice, at Company's own
expense  and  within  forty  working  days after notice of the State's election.

     3.   Upon  the  expiration  or  termination of this sublease, the subleased
premises  and  all  personal  property, alterations, additions, and improvements
remaining  thereon  and  not  removed  (if  removal is permitted under the above
sections  of  this  article),  shall  be  returned to the State with radioactive
contamination  and  the release of any other hazardous substances resulting from
the  Company's  activities  reduced to a level and remediated in accordance with
the  Site  Stabilization  and  Closure Plan ("Closure Plan"), an agreed order or
consent  decree  entered  into  between  the  State  and the Company pursuant to
Chapter  70.105D  RCW,  or  an enforcement order issued by the State pursuant to
Chapter  70.105D  RCW.  The  Company shall, at its own expense and to the extent
directed to do so by the State, implement the Closure Plan and any agreed order,
consent  decree, or enforcement order, or at the option of the State, the State,
its  contractors  or  other  representatives  may  undertake compliance with the
Closure  Plan  and  any  agreed  order and consent decree, and the Company shall
reimburse  the  State  for the costs actually incurred for such compliance.  The
provisions  of  this Article shall not apply to the costs of compliance with the
Closure  Plan  or  any  agreed  order,  consent  decree, or enforcement order as
related  to  decontamination  of  any  land used as a burial or storage site for
radioactive  materials  and  wastes where appropriate payments have been made to
the  State's  Perpetual  Maintenance  Fund  in  accordance  with  Article  VII.

     4.   The  Company  shall  have  a  limited  license  after  expiration  or
termination  of the sublease to enter the subleased premises for the purposes of
carrying  out  the  provisions  of  this  Article.

                                   ARTICLE XI

                              Permits and Licenses
                              --------------------

     The  Company  shall  procure all necessary permits or licenses and abide by
all  applicable laws, regulations and ordinances of the United States and of the
state,  territory, and political subdivision in which the subleased premises are
located.

                                       ix
<PAGE>
                                   ARTICLE XII

                      Protection Against Claims and Losses
                      ------------------------------------

     1.   The  Company  shall  indemnify  and  save harmless the State, the U.S.
Government  and  its  agencies,  contractors  of  the  U.S.  Government, and the
officers,  employees  and  representatives  of  any  of  them,  from any and all
liability,  loss,  damage  or  costs  (including attorney's fees) incurred in or
arising  out  of any: (a) claim, suit, action or other legal proceedings arising
from,  related  to,  or  otherwise  associated  with  the  company's  use of the
subleased  premises,  including  the  Company's  erection  or  removal  of  any
equipment,  building  or part thereof or the making of any repairs, alterations,
additions  or  improvements  upon  the subleased premises; or (b) any default or
negligence  in  the  performance  of  any  covenant or obligation of the Company
hereunder:  PROVIDED,  That  the  foregoing  shall  not  apply  to  any  injury,
destruction  or  death as may be caused by the negligence or fault of the State,
the  U.S.  Government,  contractors  of  the  U.S.  Government, or the officers,
employees  or  representatives  of  any  of them; or (c) application of any law,
regulation,  or  other  regulatory requirement as a consequence of the Company's
rights  as  a  sublessee  or  the  Company's  use  of  the  subleased  premises.

     2.   For  purposes  of providing protection against the claims specified in
paragraph  XII(l)(a)  above, whether such activities be those of the Company, or
any  of  its  contractors, or the officers, employees, agents or subsidiaries of
the  Company,  the  Company maintain insurance in such amount as required by the
State  pursuant to RCW 43.200.200, RCW 43.200.210, and this sublease, and Energy
as required through the Prime Lease, by notice to the Company in writing.  As of
the  initial  term  of  this  sublease,  such insurance requirements shall be as
follows.  Combined coverage of $20,000,000 on a claims made basis for (a) bodily
injury  and  property  damage  to  third  parties  caused  by  sudden accidental
occurrences  arising  from  operations  of the subleased premises and (b) bodily
injury  and  property  damage  to  third parties caused by non-sudden accidental
occurrences  arising  from  operations  of  the  subleased premises.  The policy
providing  coverage  shall  be  consistent  with  the  requirements  of  WAC
173-303-620(8)(b)  (incorporating  by reference 40 C.F.R. Sec. 264.147 (a), (b),
(f),  (g),  (h),  (i), and (j)).  The Company shall also maintain nuclear energy
liability  insurance  (facility  form)  in  the  amount  of $10,000,000; and (d)
nuclear  energy  liability  insurance  (facility  worker  form) in the amount of
$300,000,000.  The  Company  shall  name  the  state government, and the federal
government,  as  additional  insureds  in  any  insurance  policies  obtained

                                        x
<PAGE>
in  compliance  herewith.  Copies  of all insurance policies shall be filed with
the  State  and  Energy and the insurance contracts shall provide that the State
and  Energy  shall  be  given  ten days' advance notice by mail of changes in or
cancellation  of  any  such  insurance.

     3.   Notwithstanding  any  other  provisions  of  this  sublease,  nothing
contained herein shall be construed to be a waiver on the part of the Company of
any  financial  protection  or  indemnity  which  might  be afforded it under an
applicable  nuclear hazards indemnity agreement executed either under provisions
of  future  state  legislation or under the provisions of Sec. 170 of the Atomic
Energy  Act  of 1954, as amended, or other contractual authority of the State or
Energy.

     4.   The  Company  and  the  State agree that the insurance amount required
under paragraph XII.2 is subject to renegotiation at the request of either party
at  five  year intervals from the effective date of this sublease to ensure that
the  amounts  adequately  cover  the  risk and keep pace with inflation.  If the
parties  fail  to  agree  during  any  such  renegotiations,  the matter will be
resolved  pursuant  Article  XXIII.

                                  ARTICLE XIII

                        Casualty Destruction of Premises
                        --------------------------------

     In  the event the premises are destroyed, damaged or made unusable by fire,
flood,  earthquake  or  other casualty, the State shall not be under obligation,
unless  it consents, to restore or repair the premises in any way.  If the State
elects  not  to restore or repair the premises, the Company shall have the right
(1)  to  restore  or  repair  the  premises  at  no cost to the sublessor (2) to
terminate  the  sublease  upon  curing  any  existing  defaults  and  satisfying
Company's  obligations  under  Article  X.

                                   ARTICLE XIV

                            Taxes, Maintenance Costs
                            ------------------------

     The  Company  agrees  to  pay  all  legally  imposed taxes, assessments and
similar  charges  which  may  be levied by the duly constituted authority of the
State, or any political subdivision of the State upon the subleased premises and
upon  any  improvements  now  or  hereafter  upon  the  subleased  premises.

                                       xi
<PAGE>
                                   ARTICLE XV

                         Nondiscrimination in Employment
                         -------------------------------

     The  Company  covenants  and  agrees  that in all matters pertaining to the
performance  of  this lease, the Company shall at all times conduct its business
in  a  manner  which  assures fair, equal and nondiscriminatory treatment of all
persons  without respect to race, sex, age, color, creed or national origin and,
in  particular:

     1.   The  Company  will  maintain  open hiring and employment practices and
will  welcome  applications  for  employment  in  all  positions  from qualified
individuals  who  are  members  of  racial  or  other  minorities,  and

     2.   The  Company  will comply strictly with all requirements of applicable
federal, state and local laws or regulations issued pursuant thereto relating to
the  establishment  of  nondiscriminatory  requirements in hiring and employment
practices  and  assuring  the  service  of  all  patrons  or  customers  without
discrimination  as  to  any  person's  race,  sex, age, creed, color or national
origin.

                                   ARTICLE XVI

                            No Benefits for Officials
                            -------------------------

     No  member  of  Congress  or  the  state  legislature,  or federal or state
government  official shall be admitted to any share or part of this sublease, or
to  any  benefit  which  may  arise  therefrom.

                                  ARTICLE XVII

                               No Contingent Fees
                               ------------------

     The  Company warrants that no person or selling agency has been employed or
retained  to  solicit or secure this sublease upon an agreement or understanding
for  a  commission,  percentage,  brokerage,  or  contingent  fee.

                                  ARTICLE XVIII

                             No Waiver by the State
                             ----------------------

     The  Company  agrees  that  the  State's  failure to insist upon the strict
performance  of  any  provision  of this sublease or to exercise any right based
upon  a  breach  thereof, or the acceptance by the State of any rent during such
breach,  shall  not  waive  any  of  the  State's  rights  under  this sublease.

                                      xii
<PAGE>
                                   ARTICLE XIX

                          Condition of Subleased Lands
                          ----------------------------

     The  Company  warrants that it has inspected and is fully familiar with the
physical  condition  of  the subleased lands.  It is further understood that the
State  has  made  no  representations,  warranties  or  undertakings  as to such
condition,  or  as  to the fitness or availability of the subleased land for any
particular  use,  or  that  the  subleased  land  is  free  and  clear  of  all
contamination  and  hidden  hazards.

                                   ARTICLE XX

                                Altering Premises
                                -----------------

     The  Company  agrees  that  it will not make any substantial enlargement or
substantially  change  its  facilities  or  operations without the prior written
approval  of the State.  For the purpose of obtaining State approval of either a
new  facility or operation or enlargement or change of a facility or activity or
the  operation  thereof, the Company shall give to the State such information as
the State may request and will not interfere with, or endanger the same.  If the
State  approves an enlargement or change of a facility, it may impose conditions
and  restrictions  necessary  to  carry  out the purposes of this article.  This
article's  requirements  in no way affect the need for obtaining any license now
or  hereafter  required  by  any applicable law or regulation, either federal or
state,  or  the  terms  and  conditions  of  any  such  license.

                                   ARTICLE XXI

      Additional Reserved Rights of the United States Department of Energy
      --------------------------------------------------------------------

     The  United  States  Department  of  Energy  has  reserved from those lands
subleased  to  the  Company  the  following  rights  in  addition  to the rights
otherwise  provided  for  in  this  sublease:

     1.   The  right  to construct on the subleased land and to maintain, repair
and  replace  utility  lines  as  may be necessary to provide electricity, heat,
water,  steam;  power,  protective,  gas,  telephone  and  other  communication
services,  to the extent necessary for Energy, provided that such lines will not
unreasonably  interfere  with  any  of  the  Company's  operations;

     2.   The  right  to construct on the subleased land and to maintain, repair
and  replace  drainage  facilities, including sanitary sewers, storm sewers, and
other  piping  and  conduits  to  the  extent  necessary  for  Energy;

                                      xiii
<PAGE>
     3.   The  right  to  place  monitoring  facilities,  fire control and alarm
facilities on the subleased land to the extent necessary for Energy, and to use,
repair  and  maintain  the  same;  and

     4.   The  right  to  construct  access  roads and railway facilities on the
subleased land to the extent necessary for Energy, and to maintain, replace, and
repair  the  same  provided  such  roads  and  facilities  will not unreasonably
interfere  with  any  of  the  Company's  operations.

                                  ARTICLE XXII

                        Disputes with the U.S. Government
                        ---------------------------------

     The  Company recognizes that under Article 19 of the Prime Lease, the State
is  obligated  to  exhaust  its  remedies  under federal administrative disputes
procedures, and that the rights of the Company as sublessee, derived through the
State,  are  subject  to  the  same  obligation.  In the event of a dispute with
Energy  in  which  the  Company has an interest, the State agrees to present the
Company's  claim  in  good  faith  and  with reasonable diligence, and shall not
oppose  the  intervention  by  the  Company as may be permitted under federal or
state  law,  or  by  the  action of any such federal agency, for the purposes of
representing its own interests in all such controversies.  The Company agrees to
accept  the  outcome  of such controversy without recourse against the State for
the  manner  in  which  the  State  shall  have  presented  the Company's claim,
provided,  however,  that  the  Company  shall not be bound by this Article from
pursuing  any  other  administrative remedy authorized by statute, regulation or
law.  In  the  event  that the Company is the real party in interest in any such
claim  and  requests in writing that the State represents its interests, it will
reimburse  the State for its reasonable costs in presenting the case; and if the
State,  or others, is likewise interested therein, the Company will pay its fair
share  of  the  expenses.

                                  ARTICLE XXIII

                          Disputes between the Parties
                          ----------------------------

     Any  dispute  under  Article  IV,  Article  XII, or Article XXV between the
Company  and  the  State  concerning a question under this sublease which is not
disposed  of  by  agreement, shall be decided by arbitration in each instance in
the  following manner: Within fourteen days of either party invoking the dispute
resolution  process  of this Article, each of the parties shall name and pay the
cost  of  one arbiter, and the two persons thus designated shall appoint a third
whose  cost  shared  by shared equally by the parties, the said three persons to
constitute  a  board of arbitration whose decision shall be final and conclusive
upon  the  parties.

                                      xiv
<PAGE>
                                  ARTICLE XXIV

                                     Notices
                                     -------

     All  notices,  demands,  requests,  consents,  approvals,  and  other
communications  which  may  or  are  required to be given by either party to the
other  under  this sublease shall be in writing and shall be deemed to have been
sufficiently  given  for  all  purposes  when delivered or mailed by first class
registered  or  certified  mail,  postage  prepaid.

     1.   Notice  to the State: To the Director, Department of Ecology, Olympia,
          ---------------------
Washington  98504  or at such other address as the State shall have furnished to
the  Company  in  writing.

     2.   Notice  to the Company: US Ecology Washington, Inc., Lakepointe Centre
          -----------------------
I,  300  E.  Mallard  Drive,  Suite  300,  Boise, Idaho, 83706, or at such other
address  as  the  Company  shall  have  furnished  to  the  State  in  writing.

                                   ARTICLE XXV

                                  Closure Fund
                                  ------------

     In order to assure the proper and expeditious closure of the facility after
the  cessation  of  waste  disposal  activities  of  the facility, the State may
require  additional  closure  fees  to be deposited in the Perpetual Maintenance
Fund.  The  State  shall  maintain  a segregated account of closure fee payments
which  are  deposited  in the Closure Fund which shall be utilized in paying all
reasonable  costs  of  closure, including approved closure related work prior to
the  cessation of waste disposal activities, required pursuant to the provisions
of  the  facility  license  and  Article  X.

     Prior  to  re-imposing  closure  fee  requirements, the State shall provide
reasonable  notice  to  the  Company  of such determination and shall afford the
Company  an  opportunity to be heard.  Upon failure of the Company and the State
to  agree  on  an  increased amount, the issue shall be submitted to arbitration
under  Article  XXIII.  The  State warrants that it will invest monies collected
for  closure  in  the  same  manner as other state monies and in accordance with
state  law.

     Any  required  closure  fee shall be paid to the State on a quarterly basis
for the quarters ending January 15, April 15, July 15, and October 15, provided,
however,  that the Company shall have up to forty-five (45) days from the end of
each  quarter  to  secure  collection  of  the  fees  from  its  customers  and
subsequently  make  payment

                                       xv
<PAGE>
to  the  State.  In  the  event  that  the  Company  performs  approved  closure
activities  at  the  facility,  the  State  warrants  that  the Company shall be
reimbursed  for  its costs plus a reasonable profit as shall be agreed to by the
parties  from  those  monies  collected  for  closure.  The State, subsequent to
satisfactory  performance  of  closure  by  the  Company  or  any  other  entity
acceptable  to  the  parties  (provided  that the Company shall not unreasonably
withhold  its approval of a duly qualified entity) shall transfer any unexpended
monies  from  the  closure  account  to  the  perpetual  maintenance  account.

     All  payments  to  the  State  shall  be made in lawful money of the United
States  at  the  Department  of  Ecology,  Olympia,  Washington, or as otherwise
designated  in writing by the State, without notice or demand by the State.  The
State  shall  maintain  a  segregated  account of closure fee payments which are
deposited  in  the  Perpetual  Maintenance  Fund.  The  Company  shall  identify
payments  made  for closure separately from payments made for Perpetual Care and
Maintenance.

                                  ARTICLE XXVI

                                    Captions
                                    --------

     The  captions  in this lease are for convenience only and do not in any way
limit  or  amplify  the  provisions  of  this  lease.

                                  ARTICLE XXVII

                       Invalidity of Particular Provisions
                       -----------------------------------

     If  any  term  or provision of this lease or the application thereof to any
person  or  circumstance  shall, to any extent, be invalid or unenforceable, the
remainder  of this lease or the application of such term or provision to persons
or  circumstances  other  than  those  as  to  which  it  is  held  invalid  or
unenforceable shall not be affected thereby and shall continue in full force and
effect.

                                 ARTICLE XXVIII

                                  Governing Law
                                  -------------

     This Agreement shall be construed, interpreted and enforced pursuant to the
laws  of  the State of Washington.  Venue shall be in Thurston County. The terms
of  this  Agreement  shall  be  given  their  ordinary  meaning and shall not be
presumed  construed  in  favor  of  or  against  either  party  hereto.

                                      xvi
<PAGE>
                                  ARTICLE XXIX

                                 Time of Essence
                                 ---------------

     Time  is expressly declared to be of the essence of this agreement and each
and  every  covenant  of  the  Company  and  the  State  hereunder.

     IN  WITNESS  WHEREOF,  the  parties  hereto  have  executed  this sublease.

                                   STATE OF WASHINGTON

                                   ---------------------------------------------
                                   JAY MANNING, Director
                                   Department of Ecology

                                   US ECOLOGY WASHINGTON, INC.

                                   By:
                                      ------------------------------------------
                                   STEPHEN ROMANO, President and Chief Executive
                                   Officer

Approved as to form only this _______ day of _____________________, 2005.

     ROB McKENNA
     Attorney General

     ----------------------------------------
     ANDREW A. FITZ
     Assistant Attorney General

                                      xvii
<PAGE>
                                 (FOR SUBLESSEE)
STATE OF__________________  )
                                 ) ss.
County of ________________  )

     On  this  ______  day  of  __________________, ______, before me personally
appeared  _________________________________,  to  me known to be President of US
Ecology  Washington, Inc., Lakepointe Centre I, 300 E. Mallard Drive, Suite 300,
Boise,  Idaho,  83706  and  executed  the  within  and foregoing instrument, and
acknowledged  said  instrument to be the free and voluntary act and deed of said
corporation, for the uses and purpose therein mentioned, and on oath stated that
he  was  authorized  to  execute  said  instrument.

     IN  WITNESS  WHEREOF,  I  have hereunto set my hand and affixed my official
seal  the  day  and  year  first  above  written.

                                  _____________________________________
                                  Printed Name:__________________________
                                  NOTARY PUBLIC in and for the State of
                                  ________________, residing at __________.
                                  My Commission Expires: _________________.

                                 (FOR SUBLESSOR)
STATE OF__________________  )
                                 ) ss.
County of ________________  )

     On  this  ______  day  of  __________________, ______, before me personally
appeared  _________________________________,  to  me  known  to  be  Director,
Department  of  Ecology, of the State of Washington, and executed the within and
foregoing  instrument,  and  acknowledged  said  instrument  to  be the free and
voluntary  act  and  deed  of  said  State,  for  the  uses and purposes therein
mentioned, and on oath stated that he was authorized to execute said instrument.

     IN  WITNESS  WHEREOF,  I  have hereunto set my hand and affixed my official
seal  the  day  and  year  first  above  written.

                                    ______________________________________
                                    Printed Name:  _______________________
                                    NOTARY PUBLIC in and for the State of
                                    _______________, residing at _________.
                                    My Commission Expires: _______________.

                                      xviii

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