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Participation Agreement

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County Line Energy Corp.

 

PARTICIPATION AGREEMENT

Highway 21, Alberta

 

THIS AGREEMENT made this 21 st day of December, A.D., 2006.

 

BETWEEN:

COUNTY LINE   ENERGY CORP., a body corporate, having an office in the City of Calgary in the Province of Alberta, (hereinafter called "the Grantor")

PARTY OF THE   FIRST PART

 

- and -

 

NUANCE EXPLORATION LTD., a body corporate, having an office in the City of Vancouver in the Province of British Columbia, (hereinafter called "the Participant")

PARTY OF THE   SECOND PART

 

WHEREAS, pursuant to an Agreement (hereinafter referred to as "the Farmout Agreement") dated the 1 st day of December, A.D., 2006, and made between BMW Energy Inc.(hereinafter referred to as "Farmor") and the Grantor, it is provided that the Grantor by performing certain obligations in the Farmout Agreement contained, will become entitled to earn an interest in certain lands therein contained, all as more particularly described in the Farmout Agreement (a copy of the Farmout Agreement is attached hereto as Schedule "A"); and,

 

WHEREAS the Participant desires to participate with the Grantor as if it had been an original party to the Farmout Agreement by assuming a share of the obligations therein contained and earning a share of the interest to be earned thereunder.

 

NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the premises and of the covenants and agreements of the Parties as hereinafter set forth, the Parties do hereby covenant and agree as follows:

 

1. INTERPRETATION

 

(a)  

The headings of the clauses of this Agreement are inserted for convenience of reference only and shall not affect the meaning or construction thereof.

 

(b)  

The terms and expressions used herein shall have the same meanings as are ascribed to such terms and expressions under the Farmout Agreement.

 

(c)  

Wherever the plural or masculine or neuter is used the same shall be construed as meaning singular, or feminine, or body politic or corporate, or vice versa as the context so requires.

 

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2.   APPOINTMENT OF OPERATOR

 

Grantor is appointed as Operator as between Grantor and Participant with respect to all operations conducted hereunder and is authorized solely to deal with Farmor on behalf of the Parties in respect of all matters arising out of

the Farmout Agreement.

 

3.   FARMOUT AGREEMENT

 

Except as modified by the terms of this Agreement, all of the terms and conditions of the Farmout Agreement together with its operating provisions shall control the operation of the Parties and shall be deemed to be incorporated herein as if included mutatis mutandis.

 

4.   TRUST CONDITIONS AND TERM

 

The Participant understands that its earned working interest will not be recognized by Farmor until earned and consequently Grantor agrees to hold Participant's earned Working Interests in and to the Farmout Agreement in trust for the Participant until such time as Participant becomes a recognized party to the Farmout Agreement.

 

5.   REIMBURSEMENT OF SEISMIC COSTS

 

Along with an executed copy of this Agreement, Participant agrees to reimburse Grantor the gross costs of acquiring and interpreting any and all seismic carried out by Grantor in developing a drillable geological prospect on the Farmout Lands. By so doing the Participant shall thereafter own an undivided 100% ownership of such seismic data. The gross costs incurred by Grantor in that regard to the date hereof is $95,000 ($82,650 US).

 

6.   LAND SALE   PARTICIPATION

 

The Participant, by completing the conditions of Clause 5, shall earn the right to participate in the Alberta Crown Land Sale with the Grantor, subject to the terms and conditions of the Farmout Agreement, with the Participant paying 50% of the Land Sale costs should a drillable anomaly be located after the seismic review and interpretation. Grantor and Farmor shall be solely vested with the right and authority to determine the bid price of the Land Sale parcel.

 

7.   FARMOUT TERMS AND EARNING

 

Grantor solely shall be vested with the right and authority to elect to drill the Test Well pursuant to the terms and conditions of the Farmout Agreement.

 

The Participant shall bear, pay for and assume 50% of all of the costs, expenses and risks of the Drilling and either abandonment or Completion and Equipping of the Test Well.

 

By bearing and paying for costs as aforesaid and if Participant is not otherwise in default pursuant to the terms hereof, Participant shall earn 50% of Grantor's interest as per the Farmout Agreement and be subject always to the terms and conditions of

 

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the Farmout Agreement and this Agreement.

 

8. AFE's AND CASH CALLS

 

Grantor agrees to prepare and submit to Participant in advance proper and reasonable "Authorities for Expenditure" (AFE's) for any operation carried out under the Farmout Agreement.

 

Grantor shall be vested with the authority to issue to Participant Cash Call invoices based upon the said AFE's. The under noted terms and conditions shall a


 
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