AMENDMENT 1 To AMENDED AND RESTATED INDIRECT PARTICIPATION INTEREST AGREEMENT by and among INTEROIL CORPORATION AND the INVESTORS (who have executed counterparts of this Amendment) December 15, 2005

AMENDMENT 1

To

AMENDED AND RESTATED INDIRECT PARTICIPATION
INTEREST AGREEMENT

by and among

INTEROIL CORPORATION

AND

the

INVESTORS

(who have executed counterparts of this Amendment)

December 15, 2005

     This amendment (the “Amendment”), dated as of December 15, 2005, is entered into by and among InterOil Corporation, a New Brunswick, Canada corporation (“InterOil”), and those persons who have executed this Amendment (individually, an “Investor” and collectively the “Investors”).

     WHEREAS, InterOil and the Investors entered into an Amended and Restated Indirect Participation Interest Agreement, dated February 25, 2005 (the “Original Agreement”); and

     WHEREAS, InterOil and the Investors desire to amend certain sections of the Original Agreement as set forth herein in order to clarify certain provisions of the Original Agreement;

     NOW, THEREFORE, for good and valuable consideration, InterOil and the Investors agree as follows:

     1. Section 3.6 of the Original Agreement is hereby amended to read in its entirety as follows:

     Section 3.6 InterOil to Pay Costs. InterOil will be responsible for, and shall pay promptly when due, on behalf of itself and the Investors, all costs, including costs allocable to each Investor’s IPI Percentage, incurred to drill each of the Designated Exploration Xxxxx and Optional Exploration Xxxxx to Total Depth, including, without limitation, any costs incurred for materials, services and labor in connection with the drilling of each such well. For further clarification, InterOil shall not charge to the Investors, and the Investors shall not be required to pay, any Operator Direct Charges or Operator Indirect Charges attributable to any operations with respect to the drilling of the Exploration Xxxxx other than from the Purchase Price deposited and disbursed from the Joint Account established under Section 14.5. InterOil shall also pay from the Joint Account all commissions and other expenses incurred in connection with structuring this Agreement, soliciting Investors, and otherwise entering into this Agreement.

     2. The portion of the first sentence of Section 14.5 of the Original Agreement prior to the proviso is hereby amended to read as follows:

     “InterOil will hold funds paid to it pursuant to Section 2.2 in the Joint Account or Joint Accounts and will only use funds to pay or reimburse commissions and other expenses incurred in connection with structuring this Agreement, soliciting Investors, and otherwise entering into this Agreement, and all exploration, geology, geophysical, general and administrative and all other support costs, drilling, logging and testing costs paid since September 1, 2004 with respect to the eight (8) well drilling Program contemplated by this Agreement;”

     3. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, U.S.A., WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PROVISIONS THEREUNDER.

     4. This Amendment may be executed in multiple counterparts, each such Amendment so executed shall have the effect of an original, but all such counterparts shall together constitute but one and the same instrument.

     5. Except as specifically amended by this Amendment, the Original Agreement shall not be deemed amended, altered or waived in any manner. Capitalized terms used and not defined in this Amendment have the meaning given to them in the Original Agreement.

     6. This Amendment shall become effective upon execution by each of the Investors and the Company.

     In Witness Whereof, this Amendment has been executed by each of the parties to the Agreement.

[signature pages follow]

     In Witness Whereof, this Amendment has been executed by each of the parties to the Original Agreement effective as of the day and year first written above.

INTEROIL CORPORATION,
a New Brunswick, Canada Corporation
 

By:  

Xxxx X. Xxxxxxx 

Chief Executive Officer 

INVESTORS

KINGS ROAD INVESTMENTS LIMITED,

a Cayman Islands limited company

By:

Name:

Title:

IPWI PARTNERS LC

By:

Name:

Title:

LASCO DEVELOPMENT, INC.

By:

Name:

Title:

LASCO FAMILY TRUST

By:

Name:

Title:

CLARION FINANZ A.G.
By:
Name:
Title:
PEQUOT PNG OIL, INC.
By:
Name:
Title:
XXXXX XXXXXX
SENECA CAPITAL LP
By:		Seneca Capital Advisors, LLC,
		as General Partner
By:
Name:
Title:
SENECA CAPITAL INTERNATIONAL LTD.
By:		Seneca Capital Investments, LLC,
		as Investment Adviser
By:
Name:
Title:

SMITHFIELD FIDUCIARY LLC
By:
Name:
Title:
CYRUS OPPORTUNITITES MASTER FUND LTD.
By:		Cyrus Capital Partners, L.P.,
		as Investment Manager
By:		Cyrus Capital Partners, GP, LLC,
		as General Partner
By:
Name:
Title:
CYRUS OPPORTUNITITES MASTER FUND II LTD.
By:		Cyrus Capital Partners, L.P.,
		as Investment Manager
By:		Cyrus Capital Partners, GP, LLC,
		as General Partner
By:
Name:
Title:
CAPITAL VENTURES INTERNATIONAL
By:		Heights Capital Management, Inc.,
		its authorized agent
By:
Name:
Title:

XXXX FAMILY 1997 TRUST
By:
Name:
Title:
XXXXXXX XXXX
PROVIDENT PREMIER MASTER FUND LTD
By:
Name:
Title:
EPIC LIMITED PARTNERSHIP
By:
Name:
Title:
EPIC LIMITED PARTNERSHIP II
By:
Name:
Title:
Xxxx X. Xxxx
By:
Name:		Xxxx X. Xxxx
Title:		Partner