EX-10.1






ARRANGEMENT AGREEMENT




Among:




Marathon oil corporation




- and -




1339971 Alberta ltd.




- and -




Western oil sands inc.




- and -




Westernzagros resources inc.




July 30, 2007




	 	 	 	 	 	 	 	 	 	 	 	 	 
	ARTICLE 1INTERPRETATION	 	2	 	 	 	 
	1.1Definitions
	 	 	 	 	 	 	 	 	 	 	2	 
	1.2Interpretation Not Affected by Headings, etc
	 	 	9	 
	1.3Number and Gender
	 	 	 	 	 	 	 	 	 	 	10	 
	1.4Date for Any Action
	 	 	 	 	 	 	 	 	 	 	10	 
	1.5Entire Agreement
	 	 	 	 	 	 	 	 	 	 	10	 
	1.6Currency
	 	 	 	 	 	 	 	 	 	 	10	 
	1.7Accounting Matters
	 	 	 	 	 	 	 	 	 	 	10	 
	1.8Disclosure in Writing
	 	 	 	 	 	 	10	 
	1.9Interpretation Not Affected by Party Drafting
	 	 	10	 
	1.10Knowledge
	 	 	 	 	 	 	 	 	 	 	11	 
	1.11Schedule
	 	 	 	 	 	 	 	 	 	 	11	 
	ARTICLE 2THE ARRANGEMENT
	 	 	 	 	 	 	11	 
	2.1Plan of Arrangement
	 	 	 	 	 	 	 	 	 	 	11	 
	2.2Interim Order
	 	 	 	 	 	 	 	 	 	 	11	 
	2.3Information Circular and the Western Meeting
	 	 	12	 
	2.4Securities Law Compliance
	 	 	 	 	 	 	12	 
	2.5Preparation of Filings
	 	 	 	 	 	 	13	 
	2.6Employees
	 	 	 	 	 	 	 	 	 	 	13	 
	2.7WesternZagros and Completion of Transactions
	 	 	14	 
	2.8Effective Date
	 	 	 	 	 	 	 	 	 	 	15	 
	2.9Recommendation of Western Board of Directors
	 	 	15	 
	2.10Dissenting Shareholders
	 	 	 	 	 	 	15	 
	2.11Disclosure Letter
	 	 	 	 	 	 	 	 	 	 	15	 
	2.12Tax Withholdings
	 	 	 	 	 	 	 	 	 	 	15	 
	2.13Marathon Guarantee
	 	 	 	 	 	 	 	 	 	 	15	 
	2.14Western Guarantee
	 	 	 	 	 	 	 	 	 	 	16	 
	2.15Tax Election
	 	 	 	 	 	 	 	 	 	 	16	 
	ARTICLE 3COVENANTS
	 	 	 	 	 	 	 	 	 	 	16	 
	3.1Covenants of Purchaser and AcquisitionCo
	 	 	 	 	 	 	16	 
	3.2Additional Covenants of Purchaser and AcquisitionCo
	 	 	18	 
	3.3Covenants of Western and WesternZagros
	 	 	 	 	 	 	18	 
	3.4Mutual Covenants Regarding the Arrangement
	 	 	25	 
	3.5Covenants Regarding Non-Solicitation
	 	 	 	 	 	 	26	 
	3.6Provision of Information; Access
	 	 	 	 	 	 	29	 
	ARTICLE 4REPRESENTATIONS AND WARRANTIES
	 	 	 	 	 	 	29	 
	4.1Representations and Warranties of Purchaser
	 	 	29	 
	4.2Representations and Warranties of Western
	 	 	 	 	 	 	34	 
	4.3Representations and Warranties of WesternZagros
	 	 	45	 
	4.4Privacy Issues
	 	 	 	 	 	 	 	 	 	 	46	 
	ARTICLE 5CONDITIONS PRECEDENT
	 	 	 	 	 	 	48	 
	5.1Mutual Conditions Precedent
	 	 	 	 	 	 	48	 
	5.2Additional Conditions to Obligations of Purchaser
	 	 	50	 
	5.3Additional Conditions to Obligations of Western
	 	 	51	 
	5.4Notice and Effect of Failure to Comply with Conditions
	 	 	53	 
	5.5Satisfaction of Conditions
	 	 	 	 	 	 	53	 
	ARTICLE 6AGREEMENT AS TO DAMAGES AND OTHER ARRANGEMENTS
	 	 	53	 
	6.1Purchaser Damages
	 	 	 	 	 	 	 	 	 	 	53	 
	6.2Liquidated Damages
	 	 	 	 	 	 	 	 	 	 	54	 
	ARTICLE 7AMENDMENT
	 	 	 	 	 	 	 	 	 	 	54	 
	7.1Amendment
	 	 	 	 	 	 	 	 	 	 	54	 
	ARTICLE 8TERMINATION
	 	 	 	 	 	 	 	 	 	 	54	 
	8.1Termination
	 	 	 	 	 	 	 	 	 	 	54	 
	ARTICLE 9NOTICES
	 	 	 	 	 	 	 	 	 	 	56	 
	9.1Notices
	 	 	 	 	 	 	 	 	 	 	56	 
	ARTICLE 10GENERAL
	 	 	 	 	 	 	 	 	 	 	57	 
	10.1Binding Effect
	 	 	 	 	 	 	 	 	 	 	57	 
	10.2Assignment
	 	 	 	 	 	 	 	 	 	 	57	 
	10.3Public Communications
	 	 	 	 	 	 	57	 
	10.4Costs
	 	 	 	 	 	 	 	 	 	 	57	 
	10.5Severability
	 	 	 	 	 	 	 	 	 	 	57	 
	10.6Further Assurances
	 	 	 	 	 	 	 	 	 	 	58	 
	10.7Time of Essence
	 	 	 	 	 	 	 	 	 	 	58	 
	10.8Governing Law
	 	 	 	 	 	 	 	 	 	 	58	 
	10.9Waiver
	 	 	 	 	 	 	 	 	 	 	58	 
	10.10Third Party Beneficiaries
	 	 	 	 	 	 	58	 
	10.11Counterparts
	 	 	 	 	 	 	 	 	 	 	59	 
	SCHEDULE “A”
	 	 	–	 	 	Plan of Arrangement	 	 	 	 






1




ARRANGEMENT AGREEMENT




THIS ARRANGEMENT AGREEMENT is dated as of the 30th day of July, 2007,



AMONG:



MARATHON OIL CORPORATION, a corporation existing under the laws of
Delaware (hereinafter referred to as “Marathon” or “Purchaser”)



AND:



1339971 ALBERTA LTD., a corporation existing under the laws of the
Province of Alberta (hereinafter referred to as “AcquisitionCo”)



AND:



WESTERN OIL SANDS INC., a corporation existing under the laws of the
Province of Alberta (hereinafter referred to as “Western”)



AND:



WESTERNZAGROS RESOURCES INC., a corporation existing under the laws
of the Province of Alberta (hereinafter referred to as
“WesternZagros”)



WHEREAS:



A. AcquisitionCo wishes to acquire all of the issued and outstanding shares of Western;



B. AcquisitionCo is an indirect subsidiary of Purchaser;



C. Purchaser, AcquisitionCo, Western and WesternZagros wish to propose an arrangement involving,
among other things, the acquisition by AcquisitionCo of all of the issued and outstanding shares of
Western and the distribution of shares of WesternZagros to the shareholders of Western;



D. the Parties intend to carry out the transactions contemplated herein by way of an arrangement
under the provisions of the Business Corporations Act (Alberta); and



E. the Parties have entered into this Agreement to provide for the matters referred to in the
foregoing recitals and for other matters relating to such arrangement.



NOW THEREFORE, in consideration of the covenants and agreements herein contained and other
good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the
Parties hereto do hereby covenant and agree as follows:



ARTICLE 1




INTERPRETATION




1.1 Definitions



In this Agreement, the following defined terms have the meanings hereinafter set forth:




	(a)	 	"ABCA” means the Business Corporations Act, R.S.A. 2000, c. B-9, as amended, including the
regulations promulgated thereunder;






	(b)	 	"Acquisition Proposal” means any written proposal or offer made to Western or the Western
Shareholders (including any takeover bid initiated by advertisement or circular) relating to:
(i) any merger, amalgamation, take-over bid, tender offer, arrangement, share exchange,
dissolution, liquidation, recapitalization or other business combination involving any
purchase by a single Person (other than AcquisitionCo, Marathon or any of their subsidiaries)
or combination of Persons (other than AcquisitionCo, Marathon or any of their subsidiaries) of
Western Common Shares that, if consummated, would result in any Person (other than
AcquisitionCo, Marathon or any of their subsidiaries) beneficially owning more than 20% of the
voting rights attached to the Western Common Shares, or any liquidation or winding-up in
respect of Western or any material Western subsidiary (other than WesternZagros); (ii) any
purchase or sale of Western or its subsidiaries (other than WesternZagros) or any assets,
where such assets represent more than 20% of the fair market value of the consolidated assets
of Western or contribute more than 20% of the revenues of Western (on a consolidated basis)
(or other arrangement having the same economic effect as a purchase or sale of assets);
(iii) any sale or acquisition of 20% or more of the Western Common Shares or rights or
interests therein or thereto; or (iv) any similar business combination or transaction, of or
involving Western and/or any subsidiary of Western (other than WesternZagros), that if
consummated, would result in any Person (other than AcquisitionCo, Marathon or any of their
subsidiaries) beneficially owning more than 20% of the voting rights attached to the Western
Common Shares;






	(c)	 	"AcquisitionCo” means 1339971 Alberta Ltd., an indirect subsidiary of the Purchaser
incorporated under the ABCA for purposes of completing the Arrangement;






	(d)	 	"AcquisitionCo Board of Directors” means the board of directors of AcquisitionCo, as it may
be comprised from time to time;






	(e)	 	"Agreement”, “herein”, “hereof”, “hereto”, “hereunder” and similar expressions mean and refer
to this arrangement agreement (including the schedules hereto) as supplemented, modified or
amended, and not to any particular article, section, schedule or other portion hereof;






	(f)	 	"Applicable Canadian Securities Laws” means, collectively, and as the context may require,
the applicable securities legislation of each of the provinces and territories of Canada, and
the rules, regulations, instruments, orders and policies published and/or promulgated
thereunder, as such may be amended from time to time prior to the Effective Date;






	(g)	 	"Applicable Laws”, in the context that refers to one or more Persons, means the Laws that
apply to such Person or Persons or its or their business, undertaking, property or securities
and emanate from a Person having jurisdiction over the Person or Persons or its or their
business, undertaking, property or securities;






	(h)	 	"Arrangement” means the arrangement under the provisions of Section 193 of the ABCA, on the
terms and conditions set forth in the Plan of Arrangement as supplemented, modified or
amended;






	(i)	 	"Arrangement Resolution” means the special resolution to be attached as Appendix A to the
Information Circular in respect to the Arrangement;






	(j)	 	"Articles of Arrangement” means the articles of arrangement to be prepared by Western, with
the cooperation, consultation and prior approval of Marathon, acting reasonably, as provided
for herein, in respect of the Arrangement required under Subsection 193(10) of the ABCA to be
sent to the Registrar after the Final Order has been granted, giving effect to the
Arrangement;






	(k)	 	"Business Day” means a day other than a Saturday, Sunday or other day when banks in the City
of Calgary, Alberta or the City of Houston, Texas are not generally open for business;






	(l)	 	"Certificate” means the certificate or other confirmation of filing to be issued by the
Registrar pursuant to Subsection 193(11) of the ABCA giving effect to the Arrangement;






	(m)	 	"Closing Time” shall be 1:00 p.m. (Calgary time) on the Effective Date, or such other time on
the Effective Date as is agreed to by Purchaser and Western;






	(n)	 	"Code” means the United States Internal Revenue Code of 1986, as amended;






	(o)	 	"Competition Act” means the Competition Act, R.S.C. 1985, c. C-34, as amended;






	(p)	 	"Confidential Information” has the meaning ascribed thereto in Section 3.5(j);






	(q)	 	"Confidentiality Agreement” means the confidentiality agreement dated November 8, 2006
between Western and Marathon Petroleum Company LLC entered into in connection with the
transaction contemplated herein;






	(r)	 	"Continuing Employees” has the meaning ascribed thereto in Section 2.6(b);






	(s)	 	"Contract” means, with respect to a Party, a contract, lease, instrument, note, bond,
debenture, mortgage, agreement, arrangement or understanding, written or oral, to which such
Party, or any of its subsidiaries, is a Party or under which such Party or any of its
subsidiaries is bound, has unfulfilled obligations or contingent liabilities or is owed
unfulfilled obligations, whether known or unknown, and whether asserted or not;






	(t)	 	"Court” means the Court of Queen’s Bench of Alberta;






	(u)	 	"Disclosed Personal Information” has the meaning ascribed thereto in Section 4.4(b);






	(v)	 	"Disclosure Letter” means the disclosure letter dated as of the date hereof from Western to
Purchaser as amended, supplemented or otherwise agreed to between Western and Purchaser prior
to the Effective Time;






	(w)	 	"Dissent Rights” means the rights of dissent granted in favour of registered Western
Shareholders in respect of the Arrangement as described in the Plan of Arrangement;






	(x)	 	"Effective Date” means the date the Arrangement becomes effective under the ABCA, provided
that such date shall not be later than the Outside Date, unless otherwise agreed to by
Purchaser and Western;






	(y)	 	"Effective Time” means the time at which Articles of Arrangement are filed with the Registrar
on the Effective Date;






	(z)	 	"Employee Obligations” means any obligations or liabilities of Western to pay any amount to
or on behalf of its officers, directors, consultants or employees, other than for salary,
accrued bonuses for 2007, vacation pay and directors’ fees in the ordinary course, in each
case in amounts consistent with historic practices and, without limiting the generality of the
foregoing, Employee Obligations shall include the obligations of Western to officers or
employees: (i) for severance or termination payments on the change of control of Western
pursuant to Western’s severance policies and any involuntary severance, termination and
employment offer agreements, including payments associated with Code Sections 280G and 4999
which define excise taxes associated with a change of control for United States taxpayers;
(ii) for retention bonus payments pursuant to any retention bonus program or executive
employment agreement; (iii) for payments with respect to any options, share appreciation
rights, participating performance units, deferred share units or similar plans; and
(iv) payments with respect to Western’s Supplemental Employee Retirement Plan and its
registered pension plan;






	(aa)	 	"Encumbrances” means, in the case of property or an asset, all mortgages, pledges, charges,
liens, debentures, hypothecs, trust deeds, outstanding demands, burdens, capital leases,
assignments by way of security, security interests, conditional sales contracts or other title
retention agreements or similar interests or instruments charging, or creating a security
interest in, or against title to, such property or asset, or any part thereof or interest
therein, and any agreements, leases, options, easements, rights of way, restrictions,
executions or other charges or encumbrances (including notices or other registrations in
respect of any of the foregoing) against title to any of the property or asset, or any part
thereof or interest therein;






	(bb)	 	"Environmental Laws” means, with respect to any Person or its business, activities, property,
assets or undertaking, all federal, provincial, territorial, state, municipal, local or
foreign Laws of any Governmental Authority or of any court, tribunal or other similar body,
relating to environmental or health and safety matters in the jurisdictions applicable to such
Person or its business, activities, property, assets or undertaking, including, without
limitation, legislation governing the use and storage of Hazardous Substances;






	(cc)	 	"Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and the
rules, regulations and orders promulgated thereunder;






	(dd)	 	"Exchange Trust Agreement” means the agreement to be entered into between the Purchaser,
AcquisitionCo and the Depositary as trustee prior to the Effective Time;






	(ee)	 	"Exchangeable Shares” means the exchangeable shares in the capital of AcquisitionCo, the
principal terms of which are set out in Appendix A to the Plan of Arrangement;






	(ff)	 	"Final Order” means the order of the Court approving the Arrangement to be applied for by
Western following the Western Meeting and to be granted pursuant to Subsection 193(9) of the
ABCA in respect of the Western Shareholders, Western and WesternZagros, as such order may be
affirmed, amended or modified by any court of competent jurisdiction;





	 	 	 
	(gg)

(hh)

(ii)

(jj)

	 	"Form S-3” has the meaning ascribed thereto in Section 2.4(b);

"GAAP” has the meaning ascribed thereto in Section 1.7;

"GLJ” has the meaning ascribed thereto in Section 4.2(t);

"GLJ Report” has the meaning ascribed thereto in Section 4.2(l);







	(kk)	 	"Governmental Authority” means any multinational, federal, provincial, state, regional,
municipal, local or other government or any governmental or public department, court,
tribunal, arbitral body, commission, board, bureau or agency, domestic or foreign, any
subdivision, agent, commission, board or authority of any of the foregoing, or any
quasi-governmental or private body exercising any regulatory, expropriation or taxing
authority under or for the account of any of the foregoing;






	(ll)	 	"Governmental Authorization” has the meaning ascribed thereto in Section 4.1(l);






	(mm)	 	"Hazardous Substances” means any pollutant, contaminant, waste of any nature, hazardous
substance, hazardous material, toxic substance, dangerous substance or dangerous good as
defined, judicially interpreted or identified in any Environmental Laws;






	(nn)	 	"Information Circular” means the management information circular and proxy statement of
Western, together with all appendices thereto to be mailed or otherwise distributed by Western
to the Western Shareholders or such other securityholders of Western as may be required
pursuant to the Interim Order in connection with the Western Meeting;






	(oo)	 	"Interests” has the meaning ascribed thereto in Section 4.2(s);






	(pp)	 	"Interim Order” means an interim order of the Court concerning the Arrangement under
Subsection 193(4) of the ABCA in respect of the Western Shareholders, Western and
WesternZagros, containing declarations and directions with respect to the Arrangement and the
holding of the Western Meeting, as such order may be affirmed, amended or modified by any
court of competent jurisdiction;






	(qq)	 	"Investment Canada Act” means the Investment Canada Act, R.S.C. 1985, c. 28 (1st Supp.), as
amended;






	(rr)	 	"ITA” means the Income Tax Act (Canada), R.S.C. 1985, c. 1 (5th Supp.), as amended, including
the regulations promulgated thereunder, as amended from time to time;






	(ss)	 	"Laws” means all laws, statutes, regulations, by-laws, statutory rules, orders, ordinances,
protocols, codes, guidelines, notices, directions (including all Applicable Canadian
Securities Laws and U.S. Securities Laws), and terms and conditions of any grant of approval,
permission, authority or license of any court, Governmental Authority, statutory body or
self-regulatory authority (including the TSX and NYSE);






	(tt)	 	"Liabilities” means any and all debts, liabilities and obligations of any nature whatsoever,
whether accrued or fixed, absolute or contingent, including those arising under any Law,
Contract, permit, license or other undertaking and as a result of any act or omission;






	(uu)	 	"Mailing Date” has the meaning ascribed thereto in Section 3.4(f);






	(vv)	 	"Material Adverse Change” or “Material Adverse Effect” means, with respect to either Western
or Marathon, as the case may be, any matter or action that has an effect or change that is, or
would reasonably be expected to be, material and adverse to the business, operations, assets,
capitalization, financial condition or prospects of such Party and its subsidiaries, taken as
a whole, other than any matter, action, effect or change relating to or resulting from:
(i) general economic, financial, currency exchange, securities or commodity prices in Canada,
the United States or elsewhere; (ii) conditions affecting the oil and gas exploration,
exploitation, development and production industry as a whole, and not specifically relating to
any Party and/or its subsidiaries, including changes in Laws; (iii) any decline in crude oil
or natural gas prices on a current or forward basis; (iv) any matter which has been publicly
disclosed or has been communicated in writing, in the case of Marathon, to Western, and in the
case of Western or WesternZagros, to Marathon, as of the date of this Agreement; or (v) any
changes arising from matters consented to or approved in writing by Western, in the case of
changes relating to Marathon, or by Marathon in the case of changes relating to Western or
WesternZagros, as applicable;






	(ww)	 	"NYSE” means the New York Stock Exchange;






	(xx)	 	"Other Party” means, with respect to the applicable Purchaser Party(ies), the applicable
Western Party(ies) and, with respect to the applicable Western Party(ies), the applicable
Purchaser Party(ies);






	(yy)	 	"Outside Date” has the meaning ascribed thereto in Section 3.4(f);






	(zz)	 	"Parties” means, collectively, the parties to this Agreement, and “Party” means any one of
them, or where implied by the context, means the Purchaser Parties or the Western Parties, as
the case may be;






	(aaa)	 	"Person” includes any individual, firm, partnership, joint venture, venture capital fund,
association, trust, trustee, executor, administrator, legal personal representative, estate
group, body corporate, corporation, unincorporated association or organization, Governmental
Authority, syndicate or other entity, whether or not having legal status;






	(bbb)	 	"Plan of Arrangement” means the plan of arrangement substantially in the form set out in
Schedule A hereto as amended or supplemented from time to time in accordance with the terms
thereof and hereof;






	(ccc)	 	"Publicly Disclosed by Purchaser” means disclosed by Purchaser in a public filing made by it
with the SEC from January 1, 2006 to and including the date hereof;






	(ddd)	 	"Public Record” means all information filed by or on behalf of Western or Purchaser, as the
case may be, with the Securities Authorities, in compliance, or intended compliance, with any
Laws;






	(eee)	 	"Purchase Funds” means the aggregate cash amount required to purchase the Western Common
Shares pursuant to the terms of the Arrangement;






	(fff)	 	"Purchaser Balance Sheet” has the meaning ascribed thereto in Section 4.1(t)(i);






	(ggg)	 	"Purchaser Board of Directors” means the board of directors of Purchaser, as it may be
comprised from time to time, including any duly constituted and acting committee thereof;






	(hhh)	 	"Purchaser Damages Event” has the meaning ascribed thereto in Section 6.1;






	(iii)	 	"Purchaser Financial Statements” means, collectively, the audited consolidated financial
statements of Purchaser as at and for the fiscal year ended December 31, 2006, together with
the notes thereto and the auditors’ report thereon and the unaudited consolidated financial
statements of Purchaser as at and for the three months ended March 31, 2007, together with the
notes thereto;






	(jjj)	 	"Purchaser Information” means the information included in the Information Circular
describing the Purchaser Parties and the business, operations and affairs of the Purchaser
Parties;






	(kkk)	 	"Purchaser Parties” means, collectively and taken as a whole, Purchaser and AcquisitionCo
and “Purchaser Party” means either of them;





	 	 	 
	(lll)

(mmm)

	 	"Purchaser Shares” means the common shares in the capital of Purchaser;

"Purchaser Termination Fee” has the meaning ascribed thereto in Section 6.1;







	(nnn)	 	"Registrar” means the Registrar of Corporations or the Deputy Registrar of Corporations
appointed pursuant to Section 263 of the ABCA;





	 	 	 
	(ooo)

(ppp)

	 	"SEC” means the United States Securities and Exchange Commission;

"Securities Act” means the Securities Act, R.S.A. 2000, c. S-4, as amended;







	(qqq)	 	"Securities Authorities” means, collectively, the securities commissions or similar
securities regulatory authorities in each of the Provinces or Territories of Canada and the
SEC in the United States;






	(rrr)	 	"subsidiary” has the meaning ascribed thereto in the Securities Act (and shall include all
trusts or partnerships directly or indirectly owned by Western or Purchaser, as the case may
be);






	(sss)	 	"Superior Proposal” means an unsolicited, bona fide Acquisition Proposal made after the date
hereof that: (i) involves the purchase or acquisition of or offer by such Person to purchase
all of the outstanding Western Common Shares or all or substantially all of the assets of
Western and its subsidiaries; (ii) that is made available to all or substantially all Western
Shareholders and offers or makes available substantially equivalent consideration in form and
amount per Western Common Share to be purchased or otherwise acquired; (iii) that is not
subject to a due diligence and/or access condition that would allow access to the books,
records or personnel of Western or its subsidiaries beyond 5:00 p.m. (Mountain time) on the
tenth Business Day after which access is first afforded to the Person making the Acquisition
Proposal (provided that the foregoing shall not restrict the ability of such third party to
continue to review information provided to it by Western during such ten Business Day period
or thereafter); (iv) is reasonably likely to be completed without undue delay, taking into
account all legal, financial, regulatory and other aspects of such proposal and the Person
making such proposal; (v) in respect of which any required financing to complete such
Acquisition Proposal has been obtained or is reasonably likely to be obtained; and (vi) in
respect of which the Western Board of Directors determines in good faith (after consultation
with its financial advisors and outside counsel) would, if consummated in accordance with its
terms (but not disregarding any risk of non-completion), result in a transaction more
favourable to the Western Shareholders from a financial point of view than the transactions
contemplated by this Agreement, provided that no Acquisition Proposal shall be a Superior
Proposal if the Person making such Acquisition Proposal is in default of any standstill
obligation with Western;






	(ttt)	 	"Support Agreement” means an agreement to be entered into by, among others, Purchaser and
AcquisitionCo;






	(uuu)	 	"Tax” or “Taxes” shall mean all taxes, however denominated, including any interest,
penalties or other additions that may become payable in respect thereof, imposed by any Taxing
Authority, which taxes shall include, without limiting the generality of the foregoing, all
income or profits taxes (including, but not limited to, federal income taxes and provincial
income taxes), payroll and employee withholding taxes, employment insurance premiums,
unemployment insurance, social insurance taxes, Canada Pension Plan contributions, sales and
use taxes, value added taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts
taxes, business license taxes, occupation taxes, real and personal property taxes, stamp
taxes, environmental taxes, transfer taxes, workers’ compensation and other governmental
charges, and other obligations of the same or of a similar nature to any of the foregoing,
which Western or Purchaser, as applicable (or any of their respective subsidiaries), as the
case may be, is required to pay, withhold, remit or collect;






	(vvv)	 	"Tax Returns” shall mean all reports, estimates, elections, designations, forms,
declarations of estimated tax, information statements and returns relating to, or required to
be supplied to any Taxing Authority in connection with, any Taxes (including any attached
Schedules);






	(www)	 	"Taxing Authority” shall mean any Governmental Authority responsible for the imposition of
any Tax (domestic or foreign);





	 	 	 
	(xxx)

(yyy)

(zzz)

	 	"Third Party Approvals” has the meaning ascribed thereto in Section 5.1(g);

"Third Party Beneficiaries” has the meaning ascribed thereto in Section 10.10;

"TSX” means the Toronto Stock Exchange;







	(aaaa)	 	"United States” means the United States of America, its territories and possessions, any
state of the United States, and the District of Columbia;






	(bbbb)	 	"U.S. GAAP” has the meaning ascribed thereto in Section 1.7;






	(cccc)	 	"U.S. Securities Act” means the United States Securities Act of 1933, as amended, and the
rules, regulations and orders promulgated thereunder;






	(dddd)	 	"U.S. Securities Laws” means the federal and state securities legislation of the United
States and all rules, regulations and orders promulgated thereunder, as amended from time to
time;





	 	 	 
	(eeee)

(ffff)

	 	"Western” means Western Oil Sands Inc., a corporation incorporated under the ABCA;

"Western Balance Sheet” has the meaning ascribed thereto in Section 4.2(w)(i);







	(gggg)	 	"Western Board of Directors” means the board of directors of Western as it may be comprised
from time to time;





	 	 	 
	(hhhh)

(iiii)

(jjjj)

(kkkk)

	 	"Western Budget” has the meaning ascribed thereto in Section 3.3(g);

"Western Common Shares” means the common shares in the capital of Western;

"Western DSU Plan” has the meaning ascribed thereto in Section 2.6(d);

"Western DSUs” has the meaning ascribed thereto in Section 2.6(d);







	(llll)	 	"Western Financial Statements” means, collectively, the audited consolidated financial
statements of Western as at and for the fiscal year ended December 31, 2006, together with the
notes thereto and the auditors’ report thereon and the unaudited consolidated financial
statements of Western as at and for the six months ended June 30, 2007, together with the
notes thereto;






	(mmmm)	 	"Western Group” has the meaning ascribed thereto in Section 4.2(c);






	(nnnn)	 	"Western Information” means the information included in the Information Circular describing
the Western Parties and the business, operations and affairs of the Western Parties;






	(oooo)	 	"Western Meeting” means the special meeting of Western Shareholders to be held to consider
the Arrangement Resolution and related matters, and any adjournment thereof;





	 	 	 
	(pppp)

(qqqq)

	 	"Western Option Plan” has the meaning ascribed thereto in Section 2.6(c);

"Western Options” has the meaning ascribed thereto in Section 2.6(c)(i);







	(rrrr)	 	"Western Parties” means, collectively and taken as a whole, Western and WesternZagros, and
“Western Party” means either of them;





	 	 	 
	(ssss)

(tttt)

(uuuu)

(vvvv)

(wwww)

	 	"Western Plans” has the meaning ascribed thereto in Section 4.2(x);

"Western PSU Plan” has the meaning ascribed thereto in Section 2.6(c);

"Western PSUs” has the meaning ascribed thereto in Section 2.6(c)(i);

"Western Shareholders” means holders of Western Common Shares;

"Western Shareholder Rights Plan” means the shareholder rights plan of Western;







	(xxxx)	 	"WesternZagros” means WesternZagros Resources Inc., a corporation incorporated under the
ABCA;






	(yyyy)	 	"WesternZagros Board of Directors” means the board of directors of WesternZagros as it may
be comprised from time to time;






	(zzzz)	 	"WesternZagros Shares” means the common shares in the capital of WesternZagros; and






	(aaaaa)	 	"WesternZagros Information” means the information included in the Information Circular
describing WesternZagros and the business, operations and affairs of WesternZagros.





1.2 Interpretation Not Affected by Headings, etc.



The division of this Agreement into articles, sections and subsections is for convenience of
reference only and does not affect the construction or interpretation of this Agreement. The terms
“this Agreement”, “hereof”, “herein” and “hereunder” and similar expressions refer to this
Agreement (including Schedule A hereto) and not to any particular article, section or other portion
hereof and include any agreement or instrument supplementary or ancillary hereto.



1.3 Number and Gender



Words importing the singular number include the plural and vice versa, and words importing the
use of any gender include all genders.



1.4 Date for Any Action



If any date on which any action is required to be taken hereunder by any of the Parties is not
a Business Day and a business day in the place where an action is required to be taken, such action
is required to be taken on the next succeeding day which is a Business Day and a business day, as
applicable, in such place.



1.5 Entire Agreement



This Agreement, the Confidentiality Agreement and the Disclosure Letter constitute the entire
agreement among the Parties pertaining to the subject matter hereof and supersede all prior
agreements, understandings, negotiations and discussions, whether oral or written, among the
Parties with respect to the subject matter hereof.



1.6 Currency



All sums of money that are referred to in this Agreement are expressed in lawful money of
Canada.



1.7 Accounting Matters



Unless otherwise stated, all accounting terms used in this Agreement shall have the meanings
attributable thereto under Canadian generally accepted accounting principles (“GAAP”) and all
determinations of an accounting nature are required to be made shall be made in a manner consistent
with GAAP.



References in this Agreement to “U.S. GAAP” shall mean generally accepted accounting
principles as in effect in the United States.



1.8 Disclosure in Writing



Reference to disclosure in writing herein shall, in the case of disclosure to Purchaser,
include disclosure in writing to Purchaser or its representatives or, in the case of disclosure to
Western, include disclosure in writing to Western or its representatives.



1.9 Interpretation Not Affected by Party Drafting



The Parties hereto acknowledge that their respective legal counsel have reviewed and
participated in settling the terms of this Agreement, and the Parties agree that any rule of
construction to the effect that any ambiguity is to be resolved against the drafting party will not
be applicable in the interpretation of this Agreement.



1.10 Knowledge



Where any representation or warranty contained in this Agreement is expressly qualified by
reference to the knowledge of Western or Marathon, as applicable, it refers to the actual knowledge
of James Houck, David Dyck, Joanne Alexander, Steve Reynish, Simon Hatfield and Jack Jenkins in
respect of Western, and Clarence P. Cazalot, Janet F. Clark, Daniel J. Sullenbarger, James F. Meara
and William F. Schwind, Jr. in respect of Marathon, in each case after reasonable inquiry.



1.11 Schedule



The following schedule attached hereto is incorporated into and forms an integral part of this
Agreement:




A – Plan of Arrangement



ARTICLE 2




THE ARRANGEMENT




2.1 Plan of Arrangement



As soon as is reasonably practicable, Western will forthwith file, proceed with and diligently
prosecute an application for an Interim Order providing for, among other things, the calling and
holding of the Western Meeting for the purpose of considering and, if deemed advisable, approving
the Arrangement Resolution and the other matters to be considered at the Western Meeting. Provided
all necessary approvals for the Arrangement Resolution are obtained from the Western Shareholders,
Western shall submit the Arrangement to the Court and apply for the Final Order. Upon issuance of
the Final Order and subject to the conditions precedent in Article 5, Western and WesternZagros
shall forthwith proceed to file the Articles of Arrangement and such other documents as may be
required to give effect to the Arrangement with the Registrar pursuant to Subsection 193(10) of the
ABCA, whereupon the transactions comprising the Arrangement shall occur and shall be deemed to have
occurred in the order set out therein without any further act or formality.



2.2 Interim Order



The Interim Order shall provide that:




	(a)	 	the securities of Western for which holders shall be entitled to vote on the Arrangement
Resolution shall be the Western Common Shares;






	(b)	 	the Western Shareholders shall be entitled to vote on the Arrangement Resolution with each
Western Shareholder being entitled to one vote for each Western Common Share held by such
holder; and






	(c)	 	the requisite majority for the approval of the Arrangement Resolution shall be two thirds of
the votes cast by the Western Shareholders present in person or by proxy at the Western
Meeting.





2.3 Information Circular and the Western Meeting



As promptly as practical following the execution of this Agreement, and in compliance with the
Interim Order and Applicable Laws (including Applicable Canadian Securities Laws):




	(a)	 	Purchaser shall prepare the Purchaser Information for inclusion in the Information Circular
and provide the Purchaser Information to Western in a timely and expeditious manner;






	(b)	 	Western shall prepare the Information Circular and Western shall ensure that the Information
Circular provides Western Shareholders with information in sufficient detail to permit them to
form a reasoned judgment concerning the matters before them, in all cases ensuring compliance
in all material respects with all Applicable Laws on the date of issue thereof;






	(c)	 	Western shall convene the Western Meeting; and






	(d)	 	Western shall cause the Information Circular to be mailed to the Western Shareholders and
such other securityholders of Western or other third parties as may be required pursuant to
the Interim Order, and filed with applicable regulatory authorities and other Governmental
Authorities in all jurisdictions where the same are required to be mailed and filed.





2.4 Securities Law Compliance




	(a)	 	Purchaser shall use reasonable efforts to obtain all orders, if any, required from the
applicable Canadian Securities Authorities to permit the issuance and first resale of (i) the
Exchangeable Shares and Purchaser Shares issued pursuant to the Arrangement and (ii) the
Purchaser Shares issued upon exchange of the Exchangeable Shares from time to time, in each
case without qualification with or approval of or the filing of any prospectus or similar
document, or the taking of any proceeding with, or the obtaining of any further order, ruling
or consent from, any Governmental Authority under any Applicable Laws or pursuant to the rules
and regulations of any Governmental Authority administering such Laws, or the fulfillment of
any other legal requirement in any such jurisdiction (other than, with respect to such first
resales, any restrictions on transfer by reason of, among other things, a holder being a
“control person” of Purchaser or Western for purposes of Canadian federal, provincial or
territorial securities Laws); and






	(b)	 	Purchaser shall prepare and file a registration statement on Form S-3 (or other applicable
form) (the “Form S-3”), in order to register under the U.S. Securities Act the issuance of the
Purchaser Shares to be issued from time to time after the Effective Time upon exchange of the
Exchangeable Shares. Purchaser shall use reasonable efforts to cause the Form S-3 to become
effective under the U.S. Securities Act by the Effective Time and to maintain such
effectiveness for the period that the Exchangeable Shares remain outstanding. If Purchaser is
a “well-known seasoned issuer” as defined in Rule 405 under the U.S. Securities Act and
eligible to use an automatic shelf registration statement as defined in Rule 405 for purposes
of registering the issuance of Purchaser Shares upon exchange of the Exchangeable Shares, then
Purchaser shall file an automatic shelf registration statement on or before the Effective Date
and shall use reasonable efforts to maintain the effectiveness for the period during which the
Exchangeable Shares are outstanding.





2.5 Preparation of Filings




	(a)	 	Purchaser and Western shall cooperate in:






	 	(i)	 	the preparation of any application for the orders and the preparation of
any required registration statements and any other documents reasonably deemed by
Purchaser or Western to be necessary to discharge their respective obligations under
Canadian and United States federal, provincial, territorial and state securities Laws
in connection with the Arrangement and the other transactions contemplated hereby;






	 	(ii)	 	the taking of all such action as may be required under any applicable
Canadian and United States federal, provincial, territorial or state securities Laws
(including “blue sky laws”) in connection with the issuance of the Exchangeable
Shares and the Purchaser Shares in connection with the Arrangement; provided,
however, that with respect to the United States “blue sky” and Canadian provincial
qualifications neither Purchaser nor Western shall be required to register or qualify
as a foreign corporation or to take any action that would subject it to service of
process in any jurisdiction where such entity is not now so subject, except as to
matters and transactions arising solely from the offer of the Exchangeable Shares and
the Purchaser Shares in connection with the Arrangement; and






	 	(iii)	 	the taking of all such action as may be required under the ABCA,
Applicable Canadian Securities Laws, the U.S. Securities Act and the Exchange Act in
connection with the transactions contemplated by this Agreement and the Plan of
Arrangement; and






	(b)	 	Each of Purchaser and Western shall promptly furnish to the other all information concerning
it and its securityholders as may be required for the effectuation of the actions described in
Sections 2.1 and 2.4 and the foregoing provisions of this Section 2.5, and each covenants that
no information furnished by it (to its knowledge in the case of information concerning its
shareholders) in connection with such actions or otherwise in connection with the consummation
of the Arrangement and the other transactions contemplated by this Agreement will contain any
misrepresentation or any untrue statement of a material fact or omit to state a material fact
required to be stated in any such document or necessary in order to make any information so
furnished for use in any such document not misleading in the light of the circumstances in
which it is furnished.





2.6 Employees




	(a)	 	Western shall arrange for the termination or resignation of, and use its reasonable
commercial efforts to obtain releases in a form acceptable to Western and Purchaser, each
acting reasonably, from those Western directors, officers and employees as may be determined
by Purchaser prior to the Effective Date, without payment or accrual for payment of any
severance costs except as set forth in the Disclosure Letter or as may be agreed upon by
Purchaser in writing;






	(b)	 	Purchaser agrees that, prior to the Effective Date, it will interview such Western employees
and consultants with a view to determining which individuals it wishes to extend an offer of
continued employment or provision of services (the “Continuing Employees”);






	(c)	 	The Parties acknowledge that the Arrangement will result in a “change of control” for
purposes of the Western share option plan and the agreements thereunder (the “Western Option
Plan”) and the Western performance share unit plan and the agreements thereunder (the “Western
PSU Plan”) and Western executive and employee (if applicable) employment and “change of
control” agreements and that all awards pursuant to the Western Option Plan and Western PSU
Plan will be accelerated thereunder and, in that regard:






	 	(i)	 	Purchaser acknowledges that upon approval of the Arrangement by the Western
Shareholders, all outstanding options (“Western Options”) granted pursuant to the
Western Option Plan and all performance share units (“Western PSUs”) granted pursuant
to the Western PSU Plan shall be vested and shall be exercised, terminated or
surrendered such that no options to purchase or receive Western Common Shares remain
outstanding as at the Effective Date; and






	 	(ii)	 	Purchaser acknowledges that pursuant to the Western Option Plan, a holder
of Western Options (the “Optionee”) may, prior to the Effective Time, elect to
exercise all of the Western Options held by the Optionee, whether previously vested
or unvested, upon payment to Western of the exercise price therefor and receive
Western Common Shares in respect of the number of Western Options so exercised
pursuant to the terms of the Western Option Plan. Purchaser acknowledges that
Western may provide financing to the Optionees to facilitate the exercise of Western
Options prior to the Effective Date on terms, conditions and documentation
satisfactory to Purchaser, acting reasonably, provided that Western will retain a
security interest in any such shares and any proceeds therefrom (including any
proceeds received pursuant to the Arrangement) until such financing is repaid;






	(d)	 	Western shall use its reasonable commercial efforts to cause all Western Common Shares issued
upon the exercise of Western Options or payment of Western PSUs or Western deferred share
units (“Western DSUs”) granted pursuant to the Western deferred share unit plan (“Western DSU
Plan”) on or prior to the record date for the Western Meeting to be voted in favour of the
Arrangement Resolution by those persons who continue to hold such Western Common Shares as of
the Record Date;






	(e)	 	Purchaser agrees that, prior to the Effective Time, the Western Board of Directors shall
cause Western’s contributions to the registered pension plan of Western to vest;






	(f)	 	The Employee Obligations of Western shall not exceed the amount set forth in the Disclosure
Letter; and






	(g)	 	Western acknowledges that prior to giving effect to any of the foregoing matters provided for
in this Section 2.6, it shall cooperate and consult with Marathon in respect thereof.





2.7 WesternZagros and Completion of Transactions



Western, as the sole shareholder of WesternZagros, covenants and agrees to cause WesternZagros
to take all steps, to do and perform all such acts and things and to execute and deliver all such
agreements, documents and other instruments as are reasonably necessary or desirable to effect and
complete the transactions contemplated herein and in the Plan of Arrangement in accordance with the
terms and conditions hereof and thereof and any and all covenants and agreements of Western
contained herein and in the Plan of Arrangement shall, to the extent that they are required to be
performed by WesternZagros, be and be deemed to be covenants and agreements of both Western and
WesternZagros.



	 	 	 
	2.8	 	Effective Date
	2.9

	 	The Arrangement shall become effective at the Effective Time on the Effective Date.

Recommendation of Western Board of Directors






The Western Board of Directors has unanimously determined that the Arrangement is in the best
interests of Western and the Western Shareholders, and has, based upon, among other things, the
opinions of Western’s financial advisors, unanimously determined that the consideration in respect
of the Arrangement is fair, from a financial point of view, to Western Shareholders, unanimously
approved the Arrangement and the entering into of the Arrangement Agreement and has resolved
unanimously to recommend Western Shareholders vote in favour of the Arrangement. Notice of such
approvals, determinations and resolution shall, subject to the terms hereof, be included, along
with the written fairness opinions of Western’s financial advisors, confirming the aforementioned
opinions of such financial advisors, in the Information Circular.



2.10 Dissenting Shareholders



Registered Western Shareholders entitled to vote at the Western Meeting may exercise Dissent
Rights with respect to their Western Common Shares in connection with the Arrangement pursuant to
and in the manner set forth in the Plan of Arrangement. Western shall give Purchaser prompt notice
of any written notice of a dissent, withdrawal of such notice, and any other instruments served
pursuant to such Dissent Rights and received by Western and provide Purchaser with copies of such
notices and written objections.



2.11 Disclosure Letter



Notwithstanding anything in the Disclosure Letter to the contrary, all disclosures in the
Disclosure Letter must reference a particular Section in this Agreement in order to be deemed to
relate to or modify such Section of this Agreement. The inclusion of any item in the Disclosure
Letter shall not be construed as an admission by Western of the materiality of such item.



2.12 Tax Withholdings



Purchaser and AcquisitionCo shall be entitled to deduct and withhold from any consideration
otherwise payable to any Western Shareholder and, for greater certainty, from any amount payable to
a Dissenting Shareholder, as the case may be, under the Plan of Arrangement such amounts as
Purchaser or AcquisitionCo are required or reasonably believed to be required to deduct and
withhold from such consideration in accordance with applicable Tax Laws. Any such amounts will be
deducted and withheld from the consideration payable pursuant to the Plan of Arrangement and shall
be treated for all purposes as having been paid to the Western Shareholder in respect of which such
deduction and withholding was made, provided that such withheld amounts are actually remitted to
the appropriate Taxing Authority.



2.13 Marathon Guarantee



Marathon hereby unconditionally and irrevocably guarantees the due and punctual performance by
AcquisitionCo of each and every covenant and obligation of AcquisitionCo arising under the
Arrangement, including, without limitation, the due and punctual payment of the Purchase Funds,
Exchangeable Shares and Purchaser Shares pursuant to the Arrangement. Marathon hereby agrees that
Western shall not have to proceed first against AcquisitionCo before exercising its rights under
this guarantee against Marathon.



2.14 Western Guarantee



Western hereby unconditionally and irrevocably guarantees the due and punctual performance by
WesternZagros of each and every covenant and obligation of WesternZagros arising under the
Arrangement. Western hereby agrees that Marathon shall not have to proceed first against
WesternZagros before exercising its rights under this guarantee against Western.



2.15 Tax Election



Western or the member of the Western Group that sells the WesternZagros Shares to SpinCo (as
defined in the Plan of Arrangement), as applicable, (the “Electing Party”) shall be entitled to
make an income tax election pursuant to subsection 85(1) of the ITA (and analogous provisions of
provincial income tax law) with respect to such transfer following the Effective Time by providing
two duly completed signed copies of the necessary election form to SpinCo at any time following the
Effective Date. The elected amount therein shall be the lesser of $412,669,383 and the aggregate
redemption amount of the redeemable preferred shares issued by SpinCo to the Electing Party.
Thereafter, subject to the election form complying with the provisions of the ITA (or applicable
provincial income tax law) the forms shall be signed by SpinCo and returned to Western within 30
days after receipt thereof. SpinCo will not be responsible for the proper completion of any
election form and, except for the obligation of SpinCo to sign and return a duly completed election
form, SpinCo will not be responsible for any taxes, interest or penalties resulting from the
failure of the Electing Party to properly complete or file the election form in the form and manner
and within the time prescribed by the ITA (or any applicable provincial legislation).



ARTICLE 3




COVENANTS




3.1 Covenants of Purchaser and AcquisitionCo



Each of Purchaser and AcquisitionCo covenant and agree that, from the date of this Agreement
until the Effective Date or termination of this Agreement, except with the prior written consent of
Western (such consent not to be unreasonably withheld or delayed), and except as otherwise
expressly permitted or specifically contemplated by this Agreement (including the Plan of
Arrangement) or required by Applicable Laws:




	(a)	 	the business of Purchaser and AcquisitionCo shall be conducted only in the usual and ordinary
course consistent with past practices;






	(b)	 	Purchaser and AcquisitionCo shall not directly or indirectly do or permit to occur any of the
following: (i) amend the constating documents of Purchaser or AcquisitionCo except as required
in connection with the Arrangement and, in the case of AcquisitionCo, to facilitate the
issuance of preferred shares with a value of approximately $65,000; (ii) adopt a plan of
liquidation or resolutions providing for the liquidation, dissolution, merger, consolidation
or reorganization of Purchaser or AcquisitionCo; or (iii) enter into or modify any contract,
agreement, commitment or arrangement with respect to any of the foregoing except as disclosed
in writing to Western prior to the date hereof;






	(c)	 	Purchaser and AcquisitionCo will use their reasonable commercial efforts to satisfy or cause
the satisfaction of the conditions set forth in Sections 5.1 and 5.3 as soon as reasonably
practicable, to the extent the fulfillment of the same is within the control of Purchaser or
AcquisitionCo, as the case may be;






	(d)	 	each of Purchaser and AcquisitionCo will forthwith carry out the terms of the Interim Order
and the Final Order to the extent applicable to it and will use its reasonable commercial
efforts to assist Western in obtaining such orders and to carry out the intent or effect of
this Agreement and the Arrangement;






	(e)	 	Purchaser will use reasonable commercial efforts to obtain approval of the listing of
Purchaser Shares issuable under the Arrangement and upon exercise of the Exchangeable Shares
on the NYSE prior to the mailing of the Information Circular;






	(f)	 	Purchaser and AcquisitionCo will make all other necessary filings and applications under
Applicable Laws required on the part of Purchaser or AcquisitionCo, as the case may be, in
connection with the transactions contemplated herein and take all reasonable action necessary
to be in compliance with such Applicable Laws;






	(g)	 	neither Purchaser nor AcquisitionCo shall take any action, refrain from taking any action, or
permit any action to be taken or not taken, inconsistent with this Agreement, which might
directly or indirectly interfere with or affect the consummation of the Arrangement in
accordance with the terms and conditions herein;






	(h)	 	Purchaser and AcquisitionCo shall jointly and severally indemnify and save harmless Western,
its subsidiaries and their respective directors, officers, employees, advisors and agents from
and against any and all liabilities, claims, demands, losses, costs, damages and expenses
(excluding any loss of profits or consequential damages) to which Western, its subsidiaries
and their respective directors, officers, employees, advisors or agents may be subject or
which Western, its subsidiaries and their respective directors, officers, employees, advisors
or agents may suffer, whether under the provisions of any statute or otherwise, in any way
caused by, or arising, directly or indirectly, from or in consequence of:






	 	(i)	 	any misrepresentation or alleged misrepresentation in the Purchaser
Information;






	 	(ii)	 	any order made or any inquiry, investigation or proceeding by any
securities commission or other competent authority based upon any untrue statement or
omission or alleged untrue statement or omission of a material fact or any
misrepresentation or any alleged misrepresentation in any material filed by or on
behalf of Purchaser or AcquisitionCo in compliance or intended compliance with
Applicable Laws, which prevents or restricts the trading in the Purchaser Shares or
the Exchangeable Shares; and






	 	(iii)	 	Purchaser or AcquisitionCo not complying with any requirement of
Applicable Laws in connection with the transactions contemplated in this Agreement;






except that neither Purchaser nor AcquisitionCo shall be liable in any such case to the
extent that any such liabilities, claims, demands, losses, costs, damages and expenses
arise out of or are based upon any misrepresentation or alleged misrepresentation of a
material fact based on the Western Information, the negligence of Western or the
non-compliance by Western with any requirement of Applicable Laws in connection with the
transactions contemplated in this Agreement;




	(i)	 	subject to Section 10.3, except for non-substantive communications with third parties and
communications to legal and other advisors of Purchaser, Purchaser and AcquisitionCo will
furnish promptly to Western: (i) a copy of each notice, report, schedule or other document
delivered, filed or received by Purchaser or AcquisitionCo in connection with the Arrangement
from any Governmental Authority; (ii) any filings under Applicable Laws in connection with the
Arrangement; and (iii) any documents related to dealings with Governmental Authorities in
connection with the transactions contemplated herein;






	(j)	 	except as contemplated herein, neither Purchaser nor AcquisitionCo shall take any action that
would render, or may reasonably be expected to render, any representation or warranty made by
Purchaser or AcquisitionCo, as the case may be, in this Agreement untrue in any material
respect;






	(k)	 	Purchaser and AcquisitionCo shall promptly notify Western in writing of any material change
(actual, anticipated, contemplated or, to the knowledge of Purchaser or AcquisitionCo
threatened) in the business, operations, affairs, assets, capitalization, financial condition,
prospects, licenses, permits, rights, privileges or liabilities of Purchaser or AcquisitionCo,
whether contractual or otherwise;






	(l)	 	Purchaser and AcquisitionCo shall use their reasonable commercial efforts to obtain the
consent of any third parties required by Purchaser or AcquisitionCo for the transactions
contemplated hereby and provide the same to Western on or prior to the Effective Date; and






	(m)	 	Purchaser and AcquisitionCo shall take all commercially reasonable actions to give effect to
the transactions contemplated by this Agreement and the Plan of Arrangement.





3.2 Additional Covenants of Purchaser and AcquisitionCo



Purchaser and AcquisitionCo further covenant and agree that:




	(a)	 	Prior to the Effective Time, AcquisitionCo shall not: (i) issue any securities or enter into
any agreements to issue or grant options, warrants or rights to purchase any of its securities
except for the issuance of a nominal number of common shares and preferred shares; or
(ii) carry on any business, enter into any transaction or effect any corporate act whatsoever,
other than as contemplated herein or as reasonably necessary to carry out the transactions
contemplated by the Plan of Arrangement unless previously consented to in writing by Western,
acting reasonably;






	(b)	 	all rights to indemnification existing in favour of present and former directors and officers
of (i) Western or (ii) any corporation of which Western is or was a shareholder or creditor
and who are serving or did serve at Western’s request, as provided by contract, in Western’s
articles or by-laws or in similar documents of any of Western’s subsidiaries in effect as of
the date of this Agreement with respect to matters occurring prior to the Effective Date,
shall survive and shall continue in full force and effect without modification for a period of
not less than the later of their terms, if any, or the statutes of limitations applicable to
such matters, and Purchaser further unconditionally and irrevocably covenants and agrees to be
jointly and severally liable with Western for the performance of this covenant following the
Effective Date; and






	(c)	 	Western shall be permitted to secure “run off” directors’ and officers’ liability insurance
for Western’s current and former directors and officers, covering claims made prior to or
within six years after the Effective Date which has a scope and coverage substantially
equivalent in scope and coverage to that provided pursuant to Western’s current directors’ and
officers’ insurance policy and Purchaser agrees to not take any action to terminate or
otherwise adversely affect such directors’ and officers’ insurance.





3.3 Covenants of Western and WesternZagros



Western and WesternZagros covenant and agree that, from the date of this Agreement until the
Effective Date or termination of this Agreement, except with the prior written consent of Purchaser
(such consent not to be unreasonably withheld or delayed), and except as otherwise expressly
permitted or specifically contemplated by this Agreement (including the Plan of Arrangement) or
required by Applicable Laws:




	(a)	 	Western and WesternZagros will use their reasonable commercial efforts to satisfy or cause
the satisfaction of the conditions set forth in Sections 5.1 and 5.2 as soon as practicable,
to the extent the fulfillment of the same is within the control of Western and WesternZagros,
as applicable;






	(b)	 	each of Western and WesternZagros, as applicable, will forthwith carry out the terms of the
Interim Order and the Final Order to the extent applicable to it;






	(c)	 	Western and WesternZagros will make all necessary filings and applications under Applicable
Laws, including U.S. Securities Laws, if applicable, reasonably required to be made on the
part of Western and WesternZagros in connection with the transactions contemplated herein and
shall take all reasonable action necessary to be in compliance with such Applicable Laws;






	(d)	 	neither Western nor WesternZagros will take any action, refrain from taking any action, or
permit any action to be taken or not taken, inconsistent with this Agreement, which might
directly or indirectly interfere with or affect the consummation of the Arrangement in
accordance with the terms and conditions herein;






	(e)	 	the business of Western and of its subsidiaries shall be conducted only in the usual and
ordinary course consistent with past practices (for greater certainty, where it is an operator
of any property, it shall operate and maintain such property in a proper and prudent manner in
accordance with good industry practice and the agreements governing the ownership and
operation of such property) and it shall use all commercially reasonable efforts to maintain
and preserve its business, assets and advantageous business relationships, provided that it
shall be entitled and authorized to comply with all pre emptive rights, first purchase rights
or rights of first refusal set forth in the Disclosure Letter that are applicable to its
assets and become operative by virtue of this Agreement or any of the transactions
contemplated by this Agreement;






	(f)	 	Western shall not directly or indirectly do, or permit to occur, any of the following:
(i) amend its constating documents; (ii) declare, set aside or pay any dividend or other
distribution or payment (whether in cash, shares or property) in respect of outstanding
Western Common Shares; (iii) issue, grant, sell or pledge or agree to issue, grant, sell or
pledge any Western Common Shares or other securities of Western or any of its subsidiaries
(other than the issuance of any securities of WesternZagros), including, without limitation,
securities convertible into or exchangeable or exercisable for, or otherwise evidencing a
right to acquire, Western Common Shares (other than on exercise of Western Options or pursuant
to the Western PSU Plan); (iv) redeem, purchase or otherwise acquire any of the outstanding
Western Common Shares or other securities, other than to satisfy the obligations of Western
pursuant to the Western DSU Plan or the Western PSU Plan; (v) split, combine or reclassify any
of the outstanding Western Common Shares; (vi) adopt a plan of liquidation or resolutions
providing for the liquidation, dissolution, merger, consolidation or reorganization of
Western; or (vii) enter into or modify any contract, agreement, commitment or arrangement with
respect to any of the foregoing;






	(g)	 	other than pursuant to commitments, expenditures or indebtedness which are set forth in the
Disclosure Letter or which have been set forth in Western’s annual budget of capital
expenditures, operating expenses and general and administrative expenses as amended and
supplemented by the Western Board of Directors (the “Western Budget”) which for certainty
includes expenditures made prior to the date of this Agreement as well as expenditures to be
made after the date of this Agreement relating to the business and operations of
WesternZagros, and previously provided to Purchaser in writing, Western shall not directly or
indirectly: (i) sell, pledge, dispose of or encumber any assets except for the sale of
petroleum substances in the ordinary course of business and consistent with Western’s current
marketing practices; (ii) expend or commit to expend any funds in excess of the Western Budget
except in emergency situations; (iii) expend or commit to expend any amounts with respect to
any operating expenses other than in the ordinary course of business or pursuant to the
Arrangement; (iv) other than as set forth in the Plan of Arrangement in respect of the
distribution of WesternZagros Shares to Western Shareholders, reorganize, amalgamate, merge of
otherwise continue Western or any of its subsidiaries with any other Person or other business
organization whatsoever; (v) acquire (by merger, amalgamation, consolidation or acquisition of
            shares or assets or otherwise) any corporation, trust, partnership or other business
organization or division thereof, or make any investment therein either by purchase of shares
or securities, contributions of capital or property transfer; (vi) except as provided by
Section 3.3(bb) and Section 3.3(cc), acquire any assets (other than purchases of inventories
in the ordinary course of business); (vii)  incur any indebtedness for borrowed money or any
other material liability or obligation or issue any debt securities or assume, guarantee,
endorse or otherwise become responsible for, the obligations of any other individual or
entity, or make any loans or advances (except to a subsidiary of Western other than
WesternZagros), or amend the terms of any of its office leases or existing credit facilities;
(viii) except for Employee Obligations, pay, discharge or satisfy any material claims,
liabilities or obligations other than the payment, discharge or satisfaction in the ordinary
course of business, consistent with past practice, of liabilities reflected or reserved
against in the Western Financial Statements or incurred in the ordinary course of business
consistent with past practice; (ix) authorize, recommend or propose any release or
relinquishment of any material Contracts; (x) except the distribution of the WesternZagros
Shares to Western Shareholders pursuant to the Arrangement and obtaining all necessary
consents to such transactions pursuant to Western’s existing debt agreements, waive, release,
grant or transfer any material rights of value or modify or change in any material respect any
existing material license, lease, contract, production sharing agreement, government land
concession or other material document; (xi) enter into or terminate any strategic hedges,
swaps or other financial instruments or like transactions; (xii) advance funds, transfer
assets, or commit to advancing funds or transferring assets, directly or indirectly, to or for
the benefit of WesternZagros; or (xiii) authorize or propose any of the foregoing, or enter
into or modify any contract, agreement, commitment or arrangement to do any of the foregoing;






	(h)	 	except as permitted by Section 2.6, Western shall not make any payment to any employee,
officer or director outside of their ordinary and usual compensation for services provided,
except to the extent that any such entitlement to payment to a former employee or officer has
accrued prior to the date hereof;






	(i)	 	except as permitted by Section 2.6, neither Western nor any of its subsidiaries shall adopt
or amend or make any contribution to any bonus, employee benefit plan, profit sharing, option,
pension, retirement, deferred compensation, insurance, incentive compensation, other
compensation or other similar plan, agreement, share incentive or purchase plan, trust fund or
arrangements for the benefit of employees, except as is necessary to comply with Applicable
Laws or with respect to existing provisions of any such plans, programs, arrangements or
agreements;






	(j)	 	except as permitted by Section 2.6 or as may be agreed to by Purchaser, neither Western nor
any of its subsidiaries shall: (i) grant any officer, director, employee or consultant an
increase in compensation in any form; (ii) grant any general salary increase; (iii) take any
action with respect to the amendment or grant of any severance or termination pay policies or
arrangements for any directors, officers, employees or consultants; (iv) adopt or amend or
make any contribution to any bonus, profit-sharing, option, pension, retirement, deferred
compensation, insurance, incentive compensation, other compensation or other similar plan (or
amend any outstanding rights thereunder) from a trust fund or arrangement for the benefit of
directors, officers, employees or consultants, except to permit accelerated vesting of
currently outstanding Western Options, Western PSUs or as is necessary to comply with
Applicable Laws or with the existing provisions of any such plans, programs, arrangements or
agreements; or (v) advance any loan to any officer or director of Western or any of its
subsidiaries or any other party not at arm’s length to Western or any of its subsidiaries;






	(k)	 	except as set forth in the Disclosure Letter, Western shall use its reasonable commercial
efforts to cause its current insurance (or re-insurance) policies for Western and any of its
subsidiaries not to be cancelled or terminated or any of the coverage thereunder to lapse,
unless simultaneously with such termination, cancellation or lapse, replacement policies
underwritten by insurance or re-insurance companies of nationally recognized standing
satisfactory to Purchaser providing coverage equal to or greater than the coverage under the
cancelled, terminated or lapsed policies for substantially similar premiums are full force and
effect;






	(l)	 	no amendments shall be made to outstanding Western Options or awards pursuant to the Western
PSU Plan or the Western DSU Plan without the prior written consent of Purchaser other than as
may be required to accommodate the treatment of Western Options, Western PSUs or Western DSUs
as contemplated by Section 2.6(c) and Section 2.6(d) hereof and as permitted pursuant to
Section 3.3(n) hereof;






	(m)	 	subject to Section 2.6, Western shall use its commercially reasonable efforts to cause the
resignation of all of the directors of Western and Western’s subsidiaries as of Effective Time
(and for mutual releases in form and substance satisfactory to Purchaser and Western, each
acting reasonably, to be provided);






	(n)	 	Western shall use its commercially reasonable efforts to ensure that all outstanding Western
Options, Western PSUs and Western DSUs are either exercised, terminated, expired or
surrendered prior to the Effective Time; provided that Western shall not pay the holders any
amount of consideration therefor other than as set out herein, nor shall Western make any
amendment to outstanding Western Options without the prior written consent of Purchaser,
except: (i) to permit the early vesting of Western Options; and (ii) to permit the Optionee to
exercise Western Options in accordance with Section 2.6(c) hereof;






	(o)	 	Western and WesternZagros shall not take any action that would render, or may reasonably be
expected to render, any representation or warranty made by it in this Agreement untrue in any
material respect at any time prior to the Effective Date or termination of this Agreement,
whichever first occurs;






	(p)	 	Western shall promptly notify Purchaser in writing of any material change (actual,
anticipated, contemplated or, to the knowledge of Western, threatened, financial or otherwise)
in the business, operations, affairs, assets, capitalization, financial condition, prospects,
licenses, permits, rights, privileges or liabilities, whether contractual or otherwise, of
Western or any of its subsidiaries or of any change in any representation or warranty provided
by Western or WesternZagros in this Agreement which change is or may be of such a nature as to
render any representation or warranty misleading or untrue in any material respect and Western
shall in good faith discuss with Purchaser any such change in circumstances which is of such a
nature that there may be a reasonable question as to whether notice need be given to Purchaser
pursuant to this provision;






	(q)	 	Western shall ensure that it has available funds to permit the payment of the Purchaser
Termination Fee having regard to its other liabilities and obligations, and shall take all
such actions as may be necessary to ensure that it maintains such availability to ensure that
it is able to pay such amount when required;






	(r)	 	Western shall use its reasonable commercial efforts to obtain the consent of its bankers and
any other third party consents required for the transactions contemplated hereby and provide
the same to Purchaser on or prior to the Effective Date;






	(s)	 	Western shall provide notice to Purchaser of the Western Meeting and allow Purchaser’s
representatives and legal counsel to attend such Western Meeting;






	(t)	 	Western shall indemnify and save harmless Purchaser, its subsidiaries and their respective
directors, officers, employees, advisors and agents from and against any and all liabilities,
claims, demands, losses, costs, damages and expenses (excluding any loss of profits or
consequential damages) to which Purchaser, its subsidiaries or their respective directors,
officers, employees, advisors or agents may be subject or which Purchaser, its subsidiaries or
their respective directors, officers, employees, advisors or agents may suffer, whether under
the provisions of any statute or otherwise, in any way caused by, or arising, directly or
indirectly, from or in consequence of:






	 	(i)	 	any misrepresentation or alleged misrepresentation in the Western
Information;






	 	(ii)	 	any order made or any inquiry, investigation or proceeding by any
securities commission or other competent authority based upon any untrue statement or
omission or alleged untrue statement or omission of a material fact or any
misrepresentation or any alleged misrepresentation or in any material filed by or on
behalf of Western in compliance or intended compliance with Applicable Canadian
Securities Laws; and






	 	(iii)	 	Western not complying with any requirement of Applicable Laws in
connection with the transactions contemplated in this Agreement;






except that Western shall not be liable in any such case to the extent that any such
liabilities, claims, demands, losses, costs, damages and expenses arise out of or are
based upon any misrepresentation or alleged misrepresentation of a material fact based on
the Purchaser Information, the negligence of Purchaser or the non-compliance by Purchaser
with any requirement of Applicable Laws in connection with the transactions contemplated
by this Agreement;




	(u)	 	WesternZagros shall indemnify and save harmless Purchaser, its subsidiaries and their
respective directors, officers, employees, advisors and agents from and against any and all
liabilities, claims, demands, losses, costs, damages and expenses (excluding any loss of
profits or consequential damages) to which Purchaser, its subsidiaries or their respective
directors, officers, employees, advisors or agents may be subject or which Purchaser, its
subsidiaries or their respective directors, officers, employees, advisors or agents may
suffer, whether under the provisions of any statute or otherwise, in any way caused by, or
arising, directly or indirectly, from or in consequence of:






	 	(i)	 	any misrepresentation or alleged misrepresentation in the WesternZagros
Information;






	 	(ii)	 	any order made or any inquiry, investigation or proceeding by any
securities commission or other competent authority based upon any untrue statement or
omission or alleged untrue statement or omission of a material fact or any
misrepresentation or any alleged misrepresentation or in any material filed by or on
behalf of WesternZagros in compliance or intended compliance with Applicable Canadian
Securities Laws; and






	 	(iii)	 	WesternZagros not complying with any requirement of Applicable Laws in
connection with the transactions contemplated in this Agreement;






except that WesternZagros shall not be liable in any such case to the extent that any such
liabilities, claims, demands, losses, costs, damages and expenses arise out of or are
based upon any misrepresentation or alleged misrepresentation of a material fact based on
the Purchaser Information, the negligence of Purchaser or the non-compliance by Purchaser
with any requirement of Applicable Laws in connection with the transactions contemplated
by this Agreement;




	(v)	 	subject to Section 10.3, except for proxies and other non-substantive communications with
securityholders, Western will furnish promptly to Purchaser or Purchaser’s counsel, a copy of
each notice, report, schedule or other document delivered, filed or received by Western and
WesternZagros in connection with: (i) the Arrangement; (ii) the Western Meeting; (iii) any
filings under Applicable Laws; and (iv) any dealings with Governmental Authorities in
connection with the transactions contemplated hereby;






	(w)	 	management of Western shall solicit proxies to be voted at the Western Meeting in favour of
matters to be considered at the Western Meeting, including the Arrangement Resolution;






	(x)	 	Western shall conduct the Western Meeting in accordance with the by-laws of Western, the
ABCA, Applicable Canadian Securities Laws and any instrument governing the Western Meeting
(including, without limitation, the Interim Order), as applicable, and as otherwise required
by Applicable Laws;






	(y)	 	Western agrees to defer (or postpone) the separation time of the rights under the Western
Shareholder Rights Plan in respect of the transactions contemplated herein and to waive the
application of the Western Shareholder Rights Plan to the Arrangement immediately prior to the
Effective Time;






	(z)	 	Western and WesternZagros will take all commercially reasonable actions to give effect to the
transactions contemplated by this Agreement and the Plan of Arrangement;






	(aa)	 	Western shall promptly advise Purchaser of the number of Western Common Shares for which
Western receives notices of dissent or written objections to the Arrangement and provide
Purchaser with copies of such notices and written objections;






	(bb)	 	Western will use its reasonable commercial efforts to elect to participate in the Expansion 2
Feasibility Study set forth in the Feasibility Notification dated July 5, 2007 prior to the
expiry of the 60 day election period therefor;






	(cc)	 	in the event that Western becomes entitled to participate in the acquisition of any lease in
accordance with any area of mutual interest agreement (including without limitation, the
Athabasca Oil Sands Project Participation and AMI Agreement dated December 6, 1999, as
amended), Western shall promptly notify Purchaser upon receipt by Western of notice in respect
thereof and consult with Purchaser regarding such acquisition opportunity. If requested by
Purchaser, Western shall exercise its right to participate in such acquisition in accordance
with the terms and conditions of such area of mutual interest agreement;






	(dd)	 	Western shall: (i) duly and on a timely basis file all Tax Returns required to be filed by it
on or after the date hereof and all such Tax Returns will be true, complete and correct in all
material respects; (ii) timely pay all Taxes shown on such Tax Returns; (iii) not make or
rescind any material express or deemed election relating to Taxes, or file any amended Tax
Returns where the result of such action is inconsistent with past practice; (iv) not make a
request for a Tax ruling or enter into a closing agreement with any Governmental Authority;
(v) not settle any claim, action, suit, litigation, proceeding, arbitration, investigation,
audit or controversy relating to a material amount of Taxes; (vi) not change in any material
respect any of its methods of reporting income, deductions or accounting for Tax purposes from
those employed in the preparation of its Tax Return for the taxation years ending December 31,
2005 and December 31, 2006; and (vii) properly reserve (and reflect such reserves in its books
and records and financial statements) in accordance with GAAP, for all Taxes accruing in
respect of Western which are not due or payable prior to the Effective Date;






	(ee)	 	the Western Group shall not make any Tax filings outside the ordinary course of business,
including making, amending or rescinding any Tax Return, election or designation, without the
consent of Purchaser, such consent not to be unreasonably withheld;






	(ff)	 	Western agrees to cooperate, and to cause the other members of the Western Group to
cooperate, with Purchaser and its tax advisors in planning and implementing transactions:






	 	(i)	 	subject to the terms of Western’s existing credit facilities, to
restructure and refinance the outstanding indebtedness of the Western Group in a
manner that is tax effective, including the possible liquidation of Western Oil Sands
Finance Inc.;






	 	(ii)	 	in preparation for the ultimate sale of the WesternZagros Shares by a
member of the Western Group including, without limitation, a possible sale of the
WesternZagros Shares within the Western Group;






	 	(iii)	 	to address certain tax issues arising from the Western Oil Sands L.P.,
including the possible liquidation of Western Oil Sands L.P.; and






	 	(iv)	 	to the extent possible, to ensure that there is tax shelter available in
the relevant taxation year to the relevant member of the Western Group that is
sufficient to offset gains incurred by such member of the Western Group as a result
of the realization of foreign currency exchange gains upon the restructuring and
refinancing of outstanding indebtedness of the Western Group and on the disposition
of WesternZagros Shares,






such transactions to be implemented in a manner satisfactory to Purchaser, acting
reasonably;




	(gg)	 	Western and WesternZagros will use their reasonable commercial efforts to, prior to the
Closing Time, assign and novate or terminate those Contracts set forth in the Disclosure
Letter (other than those Contracts which have expired and are no longer in effect); and






	(hh)	 	concurrently with the execution of this Agreement, executed support agreements from all of
the directors and officers of Western will be delivered to Purchaser in the form agreed to by
Western and Purchaser as of the date hereof.





3.4 Mutual Covenants Regarding the Arrangement



From the date of this Agreement until the Effective Date or termination of this Agreement,
each of Purchaser and Western will use its reasonable commercial efforts to: (i) satisfy (or cause
the satisfaction of) the conditions precedent to its obligations (and those of any of its
subsidiaries) hereunder; (ii) not take, or cause to be taken, any action or cause anything to be
done that would cause such obligations not to be fulfilled in a timely manner; and (iii) take, or
cause to be taken, all other action and to do, or cause to be done, all other things necessary,
proper or advisable under Applicable Laws to complete the Arrangement, including using reasonable
commercial efforts:




	(a)	 	to ensure that the Information Circular provides Western Shareholders with information in
sufficient detail to permit them to form a reasoned judgment concerning the matters before
them, and, in that regard, the Information Circular will set out the Purchaser Information in
the form approved by Purchaser and the Western Information in the form approved by Western and
shall include, without limitation: (i) any financial statements in respect of prior
acquisitions made by Western that are required to be included therein in accordance with
Applicable Laws; (ii) the unanimous determination of the Western Board of Directors that the
Arrangement is fair to Western Shareholders and is in the best interests of Western and
Western Shareholders, and include the unanimous recommendation of the Western Board of
Directors that the Western Shareholders vote in favour of the consideration in respect of the
Arrangement Resolution; and (iii) the fairness opinions of Western’s financial advisors that
the consideration in respect of the Arrangement is fair, from a financial point of view, to
Western Shareholders;






	(b)	 	to, on or before the Effective Date, cause confirmations of employment to be made to the
Continuing Employees pursuant to the provisions of Section 2.6(b);






	(c)	 	to obtain all necessary consents, assignments, waivers and amendments to or terminations of
any agreements and take such measures as may be appropriate to fulfill its obligations
hereunder and to carry out the transactions contemplated hereby;






	(d)	 	to effect all necessary registrations, filings and submissions of information requested by
Governmental Authorities required to be effected by it in connection with the Arrangement;






	(e)	 	reasonably cooperate with the other Party and its tax advisors in structuring the Arrangement
and other transactions contemplated to occur in conjunction with the Arrangement in a tax
effective manner and making such amendments to this Agreement or the Plan of Arrangement, as
the other Party and its tax advisors shall consider necessary acting reasonably, including any
amendments required as a result of the planning and implementation of the matters set forth in
Section 3.3(ff) and assist the other Party and its tax advisors in making such investigations
and inquiries with respect to such Party in that regard, as the other Party and its tax
advisors shall consider necessary, acting reasonably, provided that Western shall not be
obligated to consent or agree to any structuring contemplated by this Section 3.4(e) that has
the effect of reducing the consideration to be received under the Arrangement by the Western
Shareholders or the tax deferred treatment to such securityholders in respect of the
Exchangeable Shares to be received by such securityholders under the ITA; and






	(f)	 	to cause the Effective Date to occur on or before November 30, 2007 (the “Outside Date”) and
to cause the mailing of the Information Circular to Western Shareholders to occur as soon as
reasonably practicable following the date hereof and in any event by October 1, 2007 (the
“Mailing Date”).





Each of Purchaser and Western will use its reasonable commercial efforts to cooperate with the
other in connection with the performance by the other of their obligations under this Section 3.4
and this Agreement including, without limitation, continuing to provide reasonable access to
information and to maintain ongoing communications as between officers of Purchaser and Western,
subject in all cases to the Confidentiality Agreement.



3.5 Covenants Regarding Non-Solicitation




	(a)	 	Western shall and shall cause the officers, directors, employees, representatives and agents
of it and its subsidiaries to immediately cease any existing discussions or negotiations with
any Person (other than Purchaser) with respect to any proposal that constitutes, or may
reasonably be expected to constitute, an Acquisition Proposal and to request, in accordance
with the terms of any applicable confidentiality agreement, the return or destruction of all
confidential information provided in connection therewith;






	(b)	 	Subject to Sections 3.5(c), (d), (e) and (f), Western shall not, directly or indirectly,
through any of its subsidiaries or through any officer, director, employee, investment banker,
attorney or other representative or agent of it or any of its subsidiaries:






	 	(i)	 	solicit, initiate, knowingly facilitate or knowingly encourage (including
by way of furnishing information) the initiation of any inquiries or proposals
regarding an Acquisition Proposal;






	 	(ii)	 	participate in any discussions or negotiations regarding an Acquisition
Proposal;






	 	(iii)	 	withdraw or modify or propose publicly to withdraw or modify, in any
manner adverse to Purchaser, the approval of the Western Board of Directors of the
Arrangement or the recommendation of the Western Board of Directors to vote in favour
of the Arrangement;






	 	(iv)	 	furnish or provide access to any information concerning Western, its
subsidiaries or their respective businesses, properties or assets to any Person in
connection with, or that could reasonably be expected to lead to or facilitate, an
Acquisition Proposal;






	 	(v)	 	waive any provisions of or release or terminate any confidentiality or
standstill agreement between Western and any Person relating to an actual or
potential Acquisition Proposal, or amend any such agreement or consent to the making
of an Acquisition Proposal in accordance with the terms of such agreement; or






	 	(vi)	 	accept, recommend, approve or enter into or propose publicly to accept,
recommend, approve or enter into any agreement, arrangement or understanding (other
than a confidentiality agreement as permitted hereunder) related to any Acquisition
Proposal;






	(c)	 	Prior to the Effective Date, Western and its officers, directors, employees, advisors or
other representatives or agents may enter into, or participate in, any discussions or
negotiations with a Person who seeks to initiate such discussions or negotiations and, subject
to the entering into by such Person of a confidentiality agreement substantially similar to
the Confidentiality Agreement, may furnish to such Person information concerning Western and
its business, properties and assets, in each case if, and only to the extent that:






	 	(i)	 	such Person has first made an unsolicited bona fide Acquisition Proposal
which the Western Board of Directors determines in good faith (after consultation
with its financial advisors) would, if consummated in accordance with its terms, be
reasonably likely to result in, a Superior Proposal;






	 	(ii)	 	the Western Board of Directors, after receiving the advice of outside legal
counsel, has determined in good faith that the failure to take such action would be
inconsistent with the fiduciary duties of the Western Board of Directors to the
Western Shareholders; and






	 	(iii)	 	Western has provided to Purchaser the information required to be provided
under Section 3.5(e) in respect of such Acquisition Proposal and has promptly
notified Purchaser in writing of the determinations in paragraphs 3.5(c)(i) and (ii)
above;






	(d)	 	If, prior to the Effective Time, Western receives a request from a Person who is subject to a
standstill obligation to waive or release such Person from its standstill obligation in order
to make an unsolicited bona fide Acquisition Proposal, Western may release such Person from
its standstill obligation only to the extent required to allow such Person to provide the
Acquisition Proposal for consideration by the Western Board of Directors in accordance with
this Section 3.5 and to enter into, or participate in, any discussions or negotiations with
Western and be furnished with information concerning Western, to the extent permitted pursuant
to Section 3.5(c);






	(e)	 	Western shall promptly notify Purchaser, at first orally and then in writing, of any
Acquisition Proposal received after the date hereof, of any confidentiality agreement entered
into in respect of any such Acquisition Proposal and any inquiry or contact received after the
date hereof that could reasonably be expected to lead to an Acquisition Proposal, or any
request for non-public information relating to Western received after the date hereof or for
access to the properties, books or records of Western by any Person that informs Western that
it is considering making, or has made, an Acquisition Proposal after the date hereof; which
notice will include any known material terms and conditions of such Acquisition Proposal
(including any form of agreement proposed to be entered into) and shall indicate such details,
to the extent known, of the Acquisition Proposal, inquiry or contact as Purchaser may
reasonably request, including the identity of the Person making such proposal, inquiry or
contact. Western shall keep Purchaser informed of the status, including any change to the
material terms, of any such Acquisition Proposal or inquiry. In addition, Western shall
provide Purchaser with a list of or copies of the information provided to any Person in
respect of which a confidentiality agreement is entered into in respect of any Acquisition
Proposal pursuant to Section 3.5(c) and shall provide Purchaser with access to any information
provided to any such Person;






	(f)	 	Western shall give Purchaser, orally and in writing, at least three (3) Business Days advance
notice of any decision by the Western Board of Directors to accept, recommend, approve or
enter into an agreement to implement a Superior Proposal, which notice shall confirm that the
Western Board of Directors has determined that such Acquisition Proposal constitutes a
Superior Proposal, shall identify the Person making the Superior Proposal and shall provide a
true and complete copy thereof and any amendments thereto. During such three (3) Business Day
period, Western agrees not to accept, recommend, approve or enter into any agreement to
implement such Superior Proposal and shall not withdraw, modify or change its recommendation
in respect of the Arrangement or waive any provision of any standstill obligation with respect
thereto except as permitted in Section 3.5(d). In addition, during such three (3) Business
Day period Western shall, and shall cause its financial and legal advisors to, negotiate in
good faith with Purchaser and its financial and legal advisors, to make such adjustments in
the terms and conditions of this Agreement and the Arrangement as would enable Western to
proceed with the Arrangement as amended rather than the Superior Proposal. In the event
Purchaser proposes to amend this Agreement and the Arrangement to provide that the Western
Shareholders shall receive a value per Western Common Share equal to or having a value greater
than the value per Western Common Share provided in the Superior Proposal and so advises the
Western Board of Directors prior to the expiry of such three (3) Business Day period, the
Western Board of Directors shall not accept, recommend, approve or enter into any agreement to
implement such Superior Proposal and shall not release the party making the Superior Proposal
from any standstill provisions and shall not withdraw, modify or change its recommendation in
respect of the Arrangement. If the Western Board of Directors continues to believe that such
Superior Proposal remains a Superior Proposal and therefore rejects Purchaser’s amended
proposal, Western may terminate this Agreement pursuant to Section 8.1(a)(iv), provided
however, that Western must pay to the Purchaser the Purchaser Termination Fee concurrently
with such termination. In the event that Western provides Purchaser with a copy of the notice
referred to in this Section 3.5(f) on a date that is less than three (3) Business Days prior
to the Western Meeting, Western shall adjourn the Meeting to a date that is not less than
three (3) Business Days and not more than 10 Business Days after the date of the notice;






	(g)	 	Nothing contained in this Section 3.5 shall prohibit the Western Board of Directors from: (i)
making any disclosure of an Acquisition Proposal to the Western Shareholders prior to the
Effective Time if, in the good faith judgment of the Western Board of Directors after
receiving the advice of outside counsel, such disclosure is necessary for the Western Board of
Directors to act in a manner consistent with its fiduciary duties or is otherwise required
under Applicable Law; (ii) taking any other action with regard to an Acquisition Proposal to
the extent ordered or otherwise mandated by any court of competent jurisdiction; (iii)
responding to a bona fide request for information that could reasonably be expected to lead to
an Acquisition Proposal solely by advising that no information can be provided unless a bona
fide written Acquisition Proposal is made and then only in compliance with Section 3.5(c);
(iv) complying with Section 172 of the Securities Act and similar provisions under Applicable
Laws relating to the provision of directors’ circulars and making appropriate disclosure with
respect thereto to Western Shareholders; and (v) waiving the application of the Western
Shareholder Rights Plan in respect of any Superior Proposal but only following Western’s
compliance with Section 3.5(f);






	(h)	 	Western also acknowledges and agrees that each successive material modification of any
Acquisition Proposal shall constitute a new Acquisition Proposal for purposes of the
requirement under Section 3.5(f) to initiate an additional three (3) Business Day notice
period;






	(i)	 	The Western Board of Directors shall promptly reaffirm its recommendation of the Arrangement
by press release after any Acquisition Proposal (which is determined not to be a Superior
Proposal) is publicly announced or made; and






	(j)	 	Purchaser agrees that all information that may be provided to it by Western with respect to
any Acquisition Proposal pursuant to this Section 3.5 shall be treated as if it were
“Confidential Information” as that term is defined in the Confidentiality Agreement and shall
not be disclosed or used except in accordance with the provisions of the Confidentiality
Agreement or in order to enforce its rights under this Agreement in legal proceedings.





3.6 Provision of Information; Access



Until the Effective Date or termination of this Agreement, each Party agrees to keep the Other
Party fully appraised in a timely manner of every circumstance, action, occurrence or event
occurring or arising after the date hereof that would be relevant and material to a prudent
operator of the business and operations of Western and Purchaser. Each Party shall confer with and
obtain the approval of the Other Party (not to be unreasonably withheld or delayed), prior to
taking action (other than in emergency situations) with respect to any material operational matters
involved in its business.



ARTICLE 4




REPRESENTATIONS AND WARRANTIES




4.1 Representations and Warranties of Purchaser



Purchaser represents and warrants to and in favour of Western and acknowledges that Western is
relying upon such representations and warranties in connection with the matters contemplated by
this Agreement:




	(a)	 	Organization and Qualification. Each of Purchaser and AcquisitionCo is a corporation
duly incorporated or amalgamated and validly subsisting under the Laws of its jurisdiction of
incorporation and has the requisite corporate power and authority to own its assets and
properties as now owned and to carry on its business as now conducted. Each of the Purchaser
Parties is duly registered or authorized to conduct its affairs or do business, as applicable,
and is in good standing in each jurisdiction in which the character of its assets and
properties, owned or leased, or the nature of its activities makes such registration or
authorization necessary, except where the failure to be so registered or authorized would not,
individually or in the aggregate, have a Material Adverse Effect on Purchaser. Copies of the
constating documents of the Purchaser Parties provided to Western, together with all
amendments to date, are accurate and complete as of the date hereof and have not been amended
or superseded;






	(b)	 	Authority Relative to this Agreement. Each of the Purchaser and AcquisitionCo has
the requisite corporate power and authority to execute this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement and the consummation by
Purchaser and AcquisitionCo of the transactions contemplated by the Arrangement have been duly
authorized by the Purchaser Board of Directors and the AcquisitionCo Board of Directors and no
other proceedings on the part of Purchaser or AcquisitionCo are necessary to authorize this
Agreement or the Arrangement. This Agreement has been duly executed and delivered by Purchaser
and AcquisitionCo and constitutes a legal, valid and binding obligation of each of Purchaser
and AcquisitionCo enforceable against each of Purchaser and AcquisitionCo in accordance with
its terms, subject to the qualification that such enforceability may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and other Laws of general
application relating to or affecting rights of creditors and that equitable remedies,
including specific performance, are discretionary and may not be ordered;






	(c)	 	No Violations. Except as disclosed by Purchaser to Western in writing prior to the
date of this Agreement, or as contemplated by this Agreement:






	 	(i)	 	neither the execution and delivery of this Agreement by Purchaser or
AcquisitionCo nor the consummation of the transactions contemplated by the
Arrangement nor compliance by the Purchaser Parties with any of the provisions hereof
will: (A) violate, conflict with, or result in a breach of any provision of, require
any consent, approval or notice under, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) or result in a
right of termination or acceleration under, or result in the creation of any
encumbrance upon any of the properties or assets of the Purchaser Parties or cause
any indebtedness to come due before its stated maturity or cause any credit to cease
to be available, under any of the terms, conditions or provisions of: (1) the
certificate of incorporation, articles or by-laws of either Purchaser Party; or (2)
any note, bond, mortgage, indenture, loan agreement, deed of trust, agreement, lien,
contract or other instrument or obligation to which a Purchaser Party is a party or
to which any of them, or any of their respective properties or assets, may be subject
or by which a Purchaser Party is bound; or (B) subject to compliance with applicable
statutes and regulations, violate any judgment, ruling, order, writ, injunction,
determination, award, decree, statute, ordinance, rule or regulation applicable to
the Purchaser Parties or any of their properties or assets (except, in the case of
each of clauses (A) and (B) above, for such violations, conflicts, breaches,
defaults, terminations, accelerations or creations of encumbrances which, or any
consents, approvals or notices which if not given or received, would not,
individually or in the aggregate have any Material Adverse Effect on Purchaser, or
significantly impede the ability of the Purchaser Parties to consummate the
transactions contemplated by the Arrangement); or (C) cause the suspension or
revocation of any authorization, consent, approval or license currently in effect
which would have a Material Adverse Effect on Purchaser; and






	 	(ii)	 	other than in connection with or in compliance with the provisions of
Applicable Laws in relation to completion of the Arrangement or which are required to
be fulfilled post Arrangement: (A) there is no legal impediment to the Purchaser
Parties’ consummation of the Arrangement; and (B) no filing or registration with, or
authorization, consent or approval of, any domestic or foreign public body or
authority is required of the Purchaser Parties in connection with the consummation of
the Arrangement, except for such filings or registrations which, if not made, or for
such authorizations, consents or approvals which, if not received, would not,
individually or in the aggregate have a Material Adverse Effect on Purchaser, or
significantly impede the ability of the Purchaser Parties to consummate the
Arrangement;






	(d)	 	Financing. Purchaser has sufficient means and on the Effective Date will have made
arrangements to have sufficient financing available to effect payment of the aggregate cash
consideration payable in connection with the Arrangement, through AcquisitionCo;






	(e)	 	Litigation. Except as Publicly Disclosed by Purchaser, there are no claims, actions,
suits, proceedings, investigations, arbitrations, audits, grievances, assessments or
reassessments in existence or pending or, to the knowledge of Purchaser, threatened or for
which there is a reasonable basis, affecting or that would reasonably be expected to affect
Purchaser and its subsidiaries or affecting or that would reasonably be expected to affect any
of their respective properties or assets at law or equity or before or by any court or
Governmental Authority which claim, action, suit, proceeding, investigation, arbitration,
audit, grievance, assessment or reassessment involves a possibility of any judgment against
or liability of Purchaser and its subsidiaries which, if successful, would reasonably be
expected to cause, individually or in the aggregate, a Material Adverse Change to Purchaser,
or would significantly impede the ability of Purchaser to consummate the Arrangement;






	(f)	 	United States Securities Laws. Purchaser has filed all forms, reports and other
documents required to be filed by it with the SEC since January 1, 2007, under the Exchange
Act and the outstanding Purchaser Shares are listed for trading on the NYSE;






	(g)	 	Capitalization. As of the date hereof, the authorized capital of Purchaser consists
of 1,100,000,000 Purchaser Shares and 26,000,000 shares of preferred stock of Purchaser. As
of June 30, 2007, there are issued and outstanding 681,275,724 Purchaser Shares and no other
            shares are issued and outstanding. Except pursuant to officer, director and employee
compensation arrangements or incentive plans that have been Publicly Disclosed by Purchaser,
there are no options, warrants or other rights, plans, agreements or commitments of any nature
whatsoever requiring the issuance, sale or transfer by Purchaser of any securities of
Purchaser (including Purchaser Shares) or any securities convertible into, or exchangeable or
exercisable for, or otherwise evidencing a right to acquire, any securities of Purchaser
(including Purchaser Shares). All outstanding Purchaser Shares have been duly authorized and
validly issued, are fully paid and non-assessable and are not subject to, nor were they issued
in violation of, any pre-emptive rights and all Purchaser Shares issuable in accordance with
the Plan of Arrangement will be duly authorized and validly issued as fully paid and
non-assessable and will not be subject to any pre-emptive rights;






	(h)	 	Exchangeable Shares. All Exchangeable Shares issuable in accordance with the Plan of
Arrangement will be duly authorized and validly issued by AcquisitionCo as fully paid and
non-assessable and will not be subject to any pre-emptive rights;






	(i)	 	Purchaser Financial Statements. As of their respective dates, the Purchaser
Financial Statements did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading and complied in all
material respects with all Applicable Laws. The Purchaser Financial Statements, were prepared
in accordance with U.S. GAAP (except (i) as otherwise indicated in such financial statements
and the notes thereto or, in the case of audited statements, in the related report of
Purchaser’s independent auditors or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes, are subject to normal year-end adjustments or may be
condensed or summary statements), and present fairly, in accordance with U.S. GAAP, the
consolidated financial position, results of operations and changes in financial position of
Purchaser on a consolidated basis as of the dates thereof and for the periods indicated
therein (subject, in the case of any unaudited interim financial statements, to normal
year-end audit adjustments). There has been no material change in Purchaser accounting
policies, except as described in the notes to the Purchaser Financial Statements, since
January 1, 2007;






	(j)	 	Public Record. Since January 1, 2007, the information and statements set forth in
the Public Record were true, correct and complete in all material respects as of the date of
such information and statements and did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not misleading;






	(k)	 	Absence of Certain Changes or Events. Except as Publicly Disclosed by Purchaser, and
except for the Arrangement or any action taken in accordance with this Agreement, since
December 31, 2006, Purchaser has conducted its business only in the ordinary course of
business substantially consistent with past practice; and, without limiting the generality of
the foregoing, except as Publicly Disclosed by Purchaser, there has not occurred:






	 	(i)	 	an amendment or proposed amendment to the articles or by-laws of Purchaser;






	 	(ii)	 	a Material Adverse Change with respect to Purchaser;






	 	(iii)	 	any material damage, destruction or loss not fully covered by insurance
(subject to normal deductibles);






	 	(iv)	 	any redemption, repurchase or other acquisition of Purchaser Shares by
Purchaser, or any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, shares or property) with respect to the Purchaser
Shares, other than the payment of dividends in the ordinary course on the Purchaser
Shares, if any, in accordance with their terms and other than transactions after
March 31, 2007 that are of the kind described in Item 2 of Part II of Purchaser’s
Quarterly Report on Form 10-Q for the period ended March 31, 2007;






	 	(v)	 	any resolution to approve a split, consolidation or reclassification of any
of its outstanding Purchaser Shares;






	 	(vi)	 	any change in its financial accounting methods, policies or practices,
other than changes required by U.S. GAAP or official interpretations thereof and
except for changes in practices in the ordinary course of business consistent with
past practice; or






	 	(vii)	 	any agreement by Purchaser to do any of the foregoing;






	(l)	 	Registration, Exemption Orders, Licenses, etc. Purchaser has obtained and is in
compliance with all licenses, permits, certificates, consents, orders, grants, registrations,
recognition orders, exemption relief orders, no-action relief and other authorizations of or
from any Governmental Authority necessary in connection with the conduct of its business as it
is now, individually or in the aggregate, being or proposed to be conducted (collectively, the
“Governmental Authorizations”), except where the failure to obtain or be in compliance would
not, individually or in the aggregate, reasonably be expected to have a Material Adverse
Effect on Purchaser. Such Governmental Authorizations are in full force and effect in
accordance with their terms, and no event has occurred or circumstance exists that (with or
without notice or lapse of time) may constitute or result in a violation of any such
Governmental Authorization, except where the violation would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Purchaser. No
proceedings are pending or, to the knowledge of Purchaser, threatened, which could result in
the revocation or limitation of any such Governmental Authorization, and all steps have been
taken and filings made on a timely basis with respect to each Governmental Authorization and
its renewal, except where the failure to take such steps and make such filings would not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on
Purchaser;






	(m)	 	Compliance with Laws. Except as Publicly Disclosed by Purchaser, the operations and
business of Purchaser are and have been carried out in compliance and not in violation of any
Applicable Laws, other than non-compliance or violation, which individually and in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on Purchaser,
and Purchaser has not received any notice of any alleged violation of any such Laws except
where such notice would not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on Purchaser;






	(n)	 	Restrictions on Business Activities. Except as Publicly Disclosed by Purchaser,
there is no judgment, injunction or order binding upon Purchaser that has or could reasonably
be expected to have the effect of prohibiting, restricting or impairing its business or have a
Material Adverse Effect on Purchaser;






	(o)	 	Non-Arm’s Length Transactions. Except as Publicly Disclosed by Purchaser, there are
no material Contracts or other transactions currently in place between Purchaser, on the one
hand, and (i) any officer or director of Purchaser, (ii) any holder of record or beneficial
owner of 10% or more of the voting securities of Purchaser or (iii) any affiliate of any such
officer, director or beneficial owner, on the other hand;






	(p)	 	Taxes, etc. Except as disclosed in writing to Western:






	 	(i)	 	all Tax Returns required to be filed by or on behalf of Purchaser for
periods ended on and prior to the date of this Agreement by Purchaser have been duly
filed on a timely basis and such tax returns are complete and correct in all material
respects;






	 	(ii)	 	Purchaser has, in all material respects, paid or has withheld and remitted
to the appropriate Taxing Authority all Taxes, including any instalments or
prepayments of Taxes, that are due and payable whether or not shown as being due on
any Tax Return, or, where payment is not yet due, Purchaser has established adequate
accruals in conformity with U.S. GAAP in the Purchaser Financial Statements for the
period covered by such financial statements for any Taxes, including income taxes and
related future taxes, if applicable, that have not been paid, whether or not shown as
being due on any Tax Return. Purchaser has, in all material respects, made adequate
provision in its respective books and records for any Taxes accruing in respect of
any period subsequent to the period covered by such financial statements, whether or
not shown as being due on any Tax Return;






	 	(iii)	 	no material deficiencies exist or have been asserted with respect to Taxes
of Purchaser or any of its subsidiaries; and






	 	(iv)	 	none of Purchaser or its subsidiaries is a party to any action or
proceeding for assessment or collection of Taxes, nor, to the knowledge of Purchaser,
has such an event been asserted or threatened against Purchaser or its subsidiaries
or any of their respective assets that would have a Material Adverse Effect on
Purchaser;






	(q)	 	Pensions. Purchaser has provided adequate accruals in the Purchaser Financial
Statements (or such amounts are fully funded) for all pension or other employee benefit
obligations of Purchaser and its subsidiaries arising under or relating to each of the pension
or retirement income plans or other employee benefit plans or agreements or policies
maintained by or binding on Purchaser or its subsidiaries for such periods;






	(r)	 	No Orders. No order, ruling or determination having the effect of suspending the sale
of, or ceasing the trading of the Purchaser Shares or any other securities of Purchaser or
AcquisitionCo has been issued by any Governmental Authority and is continuing in effect and no
proceedings for that purpose have been instituted, are pending or, to the knowledge of
Purchaser or AcquisitionCo, are contemplated or threatened under any Applicable Laws or by any
Governmental Authority;






	(s)	 	Books and Records. The records and minute books of the Purchaser Parties have been
maintained substantially in accordance with all Applicable Laws and are complete and accurate
in all material respects;






	(t)	 	Absence of Undisclosed Liabilities. Except as Publicly Disclosed by Purchaser, none
of Purchaser or any of its subsidiaries has any material liabilities of any nature (matured or
unmatured, fixed or contingent), other than:






	 	(i)	 	those set forth or adequately provided for or disclosed in the most recent
balance sheet and associated notes thereto included in the Purchaser Financial
Statements (the “Purchaser Balance Sheet”);






	 	(ii)	 	those incurred in the ordinary course of business and not required to be
set forth in the Purchaser Balance Sheet under U.S. GAAP;






	 	(iii)	 	those incurred in the ordinary course of business since the date of the
Purchaser Balance Sheet and consistent with past practice; or






	 	(iv)	 	those incurred in connection with the execution of this Agreement.






	(u)	 	Environmental. Except as Publicly Disclosed by Purchaser, to the knowledge of
Purchaser, the Purchaser (i) is in compliance with any and all applicable Environmental Laws,
(ii) has received and is in compliance with all permits, licenses or other approvals required
of it under applicable Environmental Laws to conduct its business and (iii) has not received
notice of any actual or potential liability, proceeding, application, order or directive for
the investigation or remediation of any disposal or release of Hazardous Substances or
otherwise as may require any material work, repairs, construction or expenditure or any demand
or notice with respect to the breach of any Environmental Laws applicable to Purchaser,
including, without limitation, any regulations respecting the use, storage, treatment,
transportation or disposition of any Hazardous Substance, except, in the cases of clauses (i),
(ii) and (iii), where such non-compliance with Environmental Laws, failure to receive required
permits, licenses or other approvals, or liability or other matter would not, individually or
in the aggregate, have a Material Adverse Effect on Purchaser; and






	(v)	 	Board Approval. The Purchaser Board of Directors and the AcquisitionCo Board of
Directors have each unanimously endorsed the Arrangement and approved this Agreement and the
Arrangement.





4.2 Representations and Warranties of Western



Western represents and warrants to and in favour of the Purchaser Parties and acknowledges
that the Purchaser Parties are relying upon such representations and warranties in connection with
the matters contemplated by this Agreement and the consummation of the Arrangement.




	(a)	 	Organization and Qualification. Each member of the Western Group has been duly
incorporated, amalgamated or created, as the case may be, and is validly subsisting under the
Laws of its jurisdiction of formation and has the requisite power and authority to own its
assets and properties as now owned and to carry on its business as now conducted. Each member
of the Western Group is duly registered or authorized to conduct its affairs or do business,
as applicable, and each is in good standing in each jurisdiction in which the character of its
assets and properties, owned, leased, licensed or otherwise held, or the nature of its
activities makes such registration or authorization necessary, except where the failure to be
so registered or authorized would not, individually or in the aggregate, have a Material
Adverse Effect on Western. Copies of the constating documents of each member of the Western
Group provided to Purchaser, together with all amendments to date, are accurate and complete
as of the date hereof and have not been amended or superseded;






	(b)	 	Authority Relative to this Agreement. Each of Western and WesternZagros has the
requisite corporate power and authority to execute this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement and the consummation by
Western and WesternZagros of the transactions contemplated by the Arrangement has been duly
authorized by the Western Board of Directors and the WesternZagros Board of Directors and,
subject to the requisite approval of the Western Shareholders and the obtaining of the Final
Order, no other proceedings on the part of Western and WesternZagros are necessary to
authorize this Agreement or the Arrangement. This Agreement has been duly executed and
delivered by Western and WesternZagros and constitutes a legal, valid and binding obligation
of each of Western and WesternZagros enforceable against it in accordance with its terms,
subject to the qualification that such enforceability may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and other Laws of general
application relating to or affecting rights of creditors and that equitable remedies,
including specific performance, are discretionary and may not be ordered;






	(c)	 	Subsidiaries. Western has no subsidiaries, other than WesternZagros and 852006
Alberta Ltd., Western Oil Sands L.P., Western Oil Sands Finance Inc., WesternZagros Ltd.,
1331614 Alberta Ltd., Western US Holdings Inc., Western Oil Holdings (Barbados) Inc., Western
Oil International Holdings Limited, Western Oil Sands (USA) Inc., Western Bluewater Resources
(Trinidad) Inc. and 1318214 Alberta Ltd. (collectively, with Western, the “Western Group”) and
Western owns, directly or indirectly, 100% of the outstanding securities of each of such
subsidiaries. All of the outstanding shares and all other ownership interests in the
subsidiaries of Western are duly authorized, validly issued, fully paid and non-assessable,
and all such shares and other ownership interests held directly or indirectly by Western, are
owned by Western free and clear of all Encumbrances, except pursuant to restrictions on
transfer contained in the articles of such subsidiary. There are no rights of first refusal
and similar rights restricting transfer of the Western Common Shares contained in
shareholders, partnership, joint venture or similar agreements or pursuant to existing
financing arrangements and there are no outstanding contractual or other obligations of any
member of the Western Group to repurchase, redeem or otherwise acquire any of their respective
securities or with respect to the voting or disposition of any outstanding securities of any
of them;






	(d)	 	No Violations. Except as disclosed to Purchaser in the Disclosure Letter, or as
contemplated by this Agreement:






	 	(i)	 	neither the execution and delivery of this Agreement by Western and
WesternZagros nor the consummation of the transactions contemplated by the
Arrangement nor compliance by the Western Parties with any of the provisions hereof
will: (A) violate, conflict with, or result in a breach of any provision of, require
any consent, approval or notice under, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) or result in a
right of termination or acceleration under, or result in the creation of any
Encumbrance upon any of the properties or assets of the Western Parties or cause any
indebtedness to come due before its stated maturity or cause any credit to cease to
be available, under any of the terms, conditions or provisions of: (1) articles or
by-laws of either Western Party; or (2) any note, bond, mortgage, indenture, loan
agreement, deed of trust agreement, lien, contract or other instrument or obligation
to which a member of the Western Group is a party or to which any of them, or any of
their respective properties or assets, may be subject or by which a member of the
Western Group is bound; or (B) subject to compliance with applicable statutes and
regulations, violate any judgment, ruling, order, writ, injunction, determination,
award, decree, statute, ordinance, rule or regulation applicable to the Western Group
or any of their respective properties or assets (except, in the case of each of
clauses (A) and (B) above, for such violations, conflicts, breaches, defaults,
terminations, accelerations or creations of encumbrances which, or any consents,
approvals or notices which if not given or received, would not, individually or in
the aggregate, have any Material Adverse Effect on Western, or significantly impede
the ability of the Western Parties to consummate the transactions contemplated by the
Arrangement); or (C) cause the suspension or revocation of any authorization,
consent, approval or license currently in effect which would, individually or in the
aggregate, have a Material Adverse Effect on Western; and






	 	(ii)	 	other than in connection with or in compliance with the provisions of
Applicable Laws in relation to the completion of the Arrangement or which are
required to be fulfilled post Arrangement, and except for the requisite approval of
Western Shareholders and the obtaining of the Final Order: (A) there is no legal
impediment to the Western Parties’ consummation of the Arrangement; and (B) no filing
or registration with, or authorization, consent or approval of, any domestic or
foreign public body or authority is required of the Western Parties in connection
with the consummation of the Arrangement, except for such filings or registrations
which, if not made, or for such authorizations, consents or approvals which, if not
received, would not, individually or in the aggregate, have a Material Adverse Effect
on Western, or significantly impede the ability of the Western Parties to consummate
the Arrangement;






	(e)	 	Litigation. Except as set forth in the Disclosure Letter, there are no claims,
actions, suits, proceedings, investigations, arbitrations, audits, grievances, assessments or
reassessments in existence or pending or, to the knowledge of Western, threatened or for which
there is a reasonable basis, affecting or that would reasonably be expected to affect the
Western Group or affecting or that would reasonably be expected to affect any of their
respective properties or assets at law or in equity or before or by any court or Governmental
Authority which claim, action, suit, proceeding, investigation, arbitration, audit, grievance,
assessment or reassessment involves a possibility of any judgment against or liability of the
Western Group which would reasonably be expected to cause, individually or in the aggregate, a
Material Adverse Change to Western, or would significantly impede the ability of the Western
Parties to consummate the Arrangement;






	(f)	 	Taxes, etc. Except as disclosed to Purchaser in the Disclosure Letter:






	 	(i)	 	all Tax Returns required to be filed by or on behalf of any member of the
Western Group for periods ended on and prior to the date of this Agreement have been
duly filed on a timely basis and such tax returns are complete and correct in all
material respects. All Taxes shown to be payable on such Tax Returns or on
subsequent assessments with respect thereto have been paid in full on a timely basis,
and no other material Taxes are payable by any member of the Western Group with
respect to items or periods covered by such Tax Returns;






	 	(ii)	 	each member of the Western Group has, in all material respects, paid or has
withheld and remitted to the appropriate Taxing Authority all Taxes, including any
instalments or prepayments of Taxes, that are due and payable whether or not shown as
being due on any Tax Return, or, where payment is not yet due, Western has
established adequate accruals in conformity with GAAP in the Western Financial
Statements for the period covered by such financial statements for any Taxes,
including income taxes and related future taxes, if applicable, that have not been
paid, whether or not shown as being due on any Tax Return. Western has, in all
material respects, made adequate provision or disclosure in its books and records for
any Taxes accruing in respect of any period subsequent to the period covered by such
financial statements, whether or not shown as being due on any Tax Return;






	 	(iii)	 	Purchaser has been furnished by Western true and complete copies of:
(A) material portions of income tax audit reports, statement of deficiencies, closing
or other agreements received by any member of the Western Group or on behalf of any
member of the Western Group relating to the Taxes for any taxable period beginning
within 8 years from the date hereof; and (B) any material Tax Returns for each member
of the Western Group for any taxable period beginning within 3 years from the date
hereof;






	 	(iv)	 	no material deficiencies have been asserted in writing by any Governmental
Authority with respect to Taxes of Western or any of its subsidiaries that have not
yet been settled;






	 	(v)	 	no member of the Western Group is a party to any tax sharing, tax indemnity
or tax allocation agreement or arrangement and no member of the Western Group has or
could have any material liabilities or obligations in respect of Taxes under any such
tax sharing, tax indemnity or tax allocation agreement. No material liability (or
reasonable claim of material liability) shall arise under any tax sharing, tax
indemnity or tax allocation agreement or arrangement or as a result of this
transaction;






	 	(vi)	 	each of the owners of the Athabasca Oil Sands Project takes all of its
product in kind and does not engage in any joint marketing of products. Each joint
venture partner will continue to report separately its share of the items of income,
deduction and credits of the joint venture on their respective tax returns and such
separate reporting has occurred since the formation of the joint venture;






	 	(vii)	 	no member of the Western Group is a party to any action or proceeding for
assessment or collection of a material amount of Taxes, nor, to the knowledge of
Western, has such an event been asserted in writing by any Governmental Authority or
threatened against Western or its subsidiaries or any of their respective assets that
would have, individually or in the aggregate, a Material Adverse Effect on Western.
No waiver or extension of any statute of limitations is in effect with respect to
material Taxes or material Tax Returns of Western or its subsidiaries. No audit by
Taxing Authorities of Western or its subsidiaries is in process or to the knowledge
of Western, pending; and






	 	(viii)	 	the Disclosure Letter contains a list of all jurisdictions (whether foreign or
domestic) in which any member of the Western Group currently files a tax return;






	(g)	 	Pensions. Western has provided adequate accruals in the Western Financial Statements
(or such amounts are fully funded) for all pension or other employee benefit obligations of
Western and its subsidiaries arising under or relating to each of the pension or retirement
income plans or other employee benefit plans or agreements or policies maintained by or
binding on Western or its subsidiaries for such periods;






	(h)	 	Reporting Issuer Status. Western is a “reporting issuer” in each province of Canada
and is in material compliance with all Applicable Canadian Securities laws therein and the
Western Common Shares are listed and posted for trading on the TSX;






	(i)	 	Capitalization. As of the date hereof, the authorized capital of Western consists of
an unlimited number of Western Common Shares, an unlimited number of Non-voting Convertible
Class B Equity Shares, an unlimited number of Class C Preferred Shares and an unlimited number
of Class D Preferred Shares, issuable in series. As of the date hereof, there are issued and
outstanding 161,876,552 Western Common Shares and no other shares are issued and outstanding.
Other than Western Options, Western PSUs and Western DSUs to acquire up to 3,482,012 Western
Common Shares and rights issued under the Western Shareholder Rights Plan, there are no
options, warrants or other rights, plans agreements or commitments of any nature whatsoever
requiring the issuance, sale or transfer by Western of any securities of Western (including
Western Common Shares) or any securities convertible into, or exchangeable or exercisable for,
or otherwise evidencing a right to acquire, any securities of Western (including Western
Common Shares). All outstanding Western Common Shares have been duly authorized and validly
issued, are fully paid and non-assessable and are not subject to, nor were they issued in
violation of, any pre-emptive rights and all Western Common Shares issuable upon the exercise
of Western Options in accordance with the terms of such options will be duly authorized and
validly issued as fully paid and non-assessable and will not be subject to any pre-emptive
rights. Other than the Western Common Shares, there are no securities of any member of Western
Group outstanding which have the right to vote generally (or except for the Western Options,
Western PSUs and Western DSUs are exercisable or convertible into or exchangeable for
securities having the right to vote generally) with the Western Shareholders on any matter;






	(j)	 	Equity Monetization Plans. Except as set forth in the Disclosure Letter and other
than the Western Options, Western PSUs and Western DSUs, there are no outstanding stock
appreciation rights, phantom equity, profit sharing plan or similar rights, agreements,
arrangements or commitments payable to any employee of Western and which are based upon the
revenue, value, income or any other attribute of any member of the Western Group;






	(k)	 	No Orders. No order, ruling or determination having the effect of suspending the sale
of, or ceasing the trading of, the Western Common Shares or any other securities of Western or
WesternZagros has been issued by any Governmental Authority and is continuing in effect and no
proceedings for that purpose have been instituted, are pending or, to the knowledge of
Western, are contemplated or threatened under any Applicable Laws or by any Governmental
Authority;






	(l)	 	Reports. As of their respective dates: (i) the Western Financial Statements;
(ii) Western’s statement of oil and gas reserves data and other oil and gas information dated
February 7, 2007 (the “GLJ Report”) filed pursuant to National Instrument 51-101;
(iii) Western’s information circular dated May 1, 2007; and (iv) all Western press releases,
material change reports and business acquisition reports filed with the Securities Authorities
since January 1, 2007, did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading and complied in
all material respects with all Applicable Laws. The Western Financial Statements were prepared
in accordance with GAAP (except (x) as otherwise indicated in such financial statements and
the notes thereto or, in the case of audited statements, in the related report of Western’s
independent auditors or (y) in the case of unaudited interim statements, to the extent they
may not include footnotes, are subject to normal year end adjustments or may be condensed or
summary statements), and present fairly in accordance with GAAP the consolidated financial
position, results of operations and changes in financial position of Western on a consolidated
basis as of the dates thereof and for the periods indicated therein (subject, in the case of
any unaudited interim financial statements, to normal year-end audit adjustments) and reflect
appropriate and adequate reserves in respect of contingent liabilities, if any, of Western on
a consolidated basis. There has been no material change in Western accounting policies, except
as described in the notes to the Western Financial Statements, since January 1, 2007. Western
has not filed any prospectuses or other offering document used by Purchaser in the offering of
its securities, with the Securities Authorities since January 1, 2007;






	(m)	 	Books and Records. The financial books, records and accounts of each member of the
Western Group, in all material respects, (i) have been maintained in accordance with good
business practices on a basis consistent with prior years, (ii) are stated in reasonable
detail and accurately and fairly reflect the material transactions and dispositions of the
assets of the Western Group and (iii) accurately and fairly reflect the basis for the Western
Financial Statements. The corporate records and minute books of each member of the Western
Group have been maintained substantially in compliance with Applicable Laws and are complete
and accurate in all material respects, and full access thereto has been provided to Purchaser;






	(n)	 	Absence of Certain Changes or Events. Except as set forth in the Disclosure Letter
and except for the Arrangement or any action taken in accordance with this Agreement, since
December 31, 2006, Western has conducted its business only in the ordinary course of business
substantially consistent with past practice; and, without limiting the generality of the
foregoing, except as set forth in the Disclosure Letter, there has not occurred:






	 	(i)	 	an amendment or proposed amendment to the articles or by-laws of Western;






	 	(ii)	 	a Material Adverse Change with respect to Western;






	 	(iii)	 	any material damage, destruction or loss not fully covered by insurance
(subject to normal deductibles);






	 	(iv)	 	any redemption, repurchase or other acquisition for cancellation of Western
Common Shares by Western or any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, shares or property) with respect to the
Western Common Shares;






	 	(v)	 	any resolution to approve a split, consolidation or reclassification of any
of its outstanding Western Common Shares;






	 	(vi)	 	any change in its financial accounting methods, policies or practices,
other than changes required by GAAP or official interpretations thereof and except
for changes in practices in the ordinary course of business consistent with past
practice;






	 	(vii)	 	the granting by any member of the Western Group to any employees of the
Western Group of any increase in compensation or benefits (including without
limitation change of control agreements), except in the ordinary course of business
consistent with past practice;






	 	(viii)	 	the adoption of, any material amendment to or any termination of any bonus, profit
sharing, employee benefit plan, option, pension, retirement, deferred compensation,
insurance, incentive compensation, other compensation or other similar plan,
agreement, share incentive or purchase plan, trust fund or arrangement for the
benefit of Western employees, except in the ordinary course of business consistent
with past practice;






	 	(ix)	 	any sale, pledge, lease, disposition or Encumbrance of any of the assets of
any member of the Western Group except in the ordinary course of business consistent
with past practice;






	 	(x)	 	any acquisition by any member of the Western Group (by merger,
amalgamation, consolidation or acquisition of shares or assets or otherwise) of any
corporation, partnership or other Person or other business organization or division
thereof (other than a member of the Western Group), or any investment either by the
purchase of securities, contributions of capital, property, or any purchase of
property or assets of any other Person (other than a member of the Western Group);






	 	(xi)	 	other than in respect of Western’s existing credit facilities, the creation
by any member of the Western Group of any indebtedness for borrowed money owed to a
Person who is not a member of the Western Group or any other Liability or obligation
owed to a Person who is not a member of the Western Group, or the issuance by any
member of the Western Group of any debt securities or the guarantee, endorsement or
otherwise acceptance of responsibility for the obligations of any other Person, or
the making of any loans, or advances by any member of the Western Group, except in
the ordinary course of business consistent with past practice;






	 	(xii)	 	except as set forth in the Western Budget, the implementation of or
commitment to incur by any member of the Western Group any capital expenditure;






	 	(xiii)	 	any waiver of any provisions of, or release or termination of, any confidentiality
or standstill agreement by any member of the Western Group in favour of any Person,
or any amendment to any such agreement, or any consent to the making of a proposal in
accordance with the terms of such agreement;






	 	(xiv)	 	any material Tax election made or changed, any annual tax accounting
period changed, any method of tax accounting adopted or changed, any amended Tax
Returns or claims for material Tax refunds filed, any closing agreement entered into
or request for a Tax ruling made, any Tax claim, audit or assessment settled, or any
right to claim a material Tax refund, offset or other reduction in Tax liability
surrendered; or






	 	(xv)	 	any agreement by any member of the Western Group to do any of the
foregoing;






	(o)	 	Registration, Exemption Orders, Licenses, etc. To the knowledge of Western, Western
has obtained and is in compliance with all licenses, permits, certificates, consents, orders,
grants, registrations, recognition orders, exemption relief orders, no-action relief and other
Governmental Authorizations, except where the failure to obtain or be in compliance could not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on
Western. Such Governmental Authorizations are in full force and effect in accordance with
their terms, and no event has occurred or circumstance exists that (with or without notice or
lapse of time) may constitute or result in a violation of any such Governmental Authorization,
except where the violation would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect on Western. No proceedings are pending or, to the knowledge
of Western, threatened, which could result in the revocation or limitation of any Governmental
Authorization, and all steps have been taken and filings made on a timely basis with respect
to each Governmental Authorization and its renewal, except where the failure to take such
steps and make such filings would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Western;






	(p)	 	Compliance with Laws. The operations and business of each member of the Western
Group is and has been carried out in compliance with and not in violation of any Applicable
Laws, other than non-compliance or violation which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Western, and Western
has not received any notice of any alleged violation of any such Laws other than where such
notice would not reasonably be expected to have a Material Adverse Effect on Western;






	(q)	 	Restrictions on Business Activities. There is no judgment, injunction or order
binding upon any member of the Western Group that has or could reasonably be expected to have
the effect of prohibiting, restricting or impairing its business or, individually or in the
aggregate, have a Material Adverse Effect on Western;






	(r)	 	Non-Arm’s Length Transactions. There are no material Contracts or other transactions
currently in place between any member of the Western Group, on the one hand, and (i) any
officer or director of a member of Western, (ii) any holder of record or beneficial owner of
10% or more of the voting securities of Western or (iii) any affiliate of any such officer,
director or beneficial owner, on the other hand;






	(s)	 	Title. Although it does not warrant title, Western has no reason to believe that
Western or its subsidiaries, other than WesternZagros for which no representation and warranty
is given, does not have title to or the right to produce and sell their petroleum, natural gas
and related hydrocarbons (for the purpose of this clause, the foregoing are referred to as the
“Interests”) and does represent and warrant that the Interests are free and clear of adverse
claims created by, through or under the Western Group (other than WesternZagros) except as
disclosed in the Public Record, any governmental registry or those arising in the ordinary
course of business, which are not material in the aggregate, and that, to the best of its
knowledge, information and belief, Western holds the Interests under valid and subsisting
leases, licences, permits, concessions, concession agreements, contracts, subleases,
reservations or other agreements, except where the failure to hold such rights in the event of
such adverse claims or the failure to so hold its Interest would, individually or in the
aggregate, not have a Material Adverse Effect on Western;






	(t)	 	GLJ Report. Western has made available to GLJ Petroleum Consultants Ltd. (“GLJ”),
prior to the issuance of GLJ Report, for the purpose of preparing the GLJ Report, all
information requested by GLJ, which information did not contain any misrepresentation at the
time such information was provided. Except with respect to changes in the prices of oil and
gas, Western has no knowledge of a material adverse change in any production, cost price,
reserves or other relevant information provided to GLJ since the date that such information
was provided. Western believes that the GLJ Report reasonably presents the quantity and
pre-tax present worth values of the oil and natural gas reserves attributable to the crude
oil, natural gas liquids and natural gas properties evaluated in such report as of its
effective date based upon information available at the time such reserves information was
prepared, and Western believes that, at the date of such report, such report did not (and as
of the date hereof, except as may be attributable to production since the date of such report
does not) overstate the aggregate quantity or pre-tax present worth values of such reserves or
the estimated monthly production volumes therefrom;






	(u)	 	Environmental. To the knowledge of Western, each of the Western Parties (i) is in
compliance with any and all applicable Environmental Laws, (ii) has received and is in
compliance with all permits, licenses or other approvals required of it under applicable
Environmental Laws to conduct its respective businesses and (iii) has not received notice of
any actual or potential liability, proceeding, application, order or directive for the
investigation or remediation of any disposal or release of Hazardous Substances or otherwise
as may require any material work, repairs, construction or expenditure or any demand or notice
with respect to the breach of any Environmental Laws applicable to any member of the Western
Group, including, without limitation, any regulations respecting the use, storage, treatment,
transportation or disposition of any Hazardous Substance, except, in the cases of clauses (i),
(ii) and (iii), where such non-compliance with Environmental Laws, failure to receive required
permits, licenses or other approvals, or liability or other matter would not, individually or
in the aggregate, have a Material Adverse Effect on Western;






	(v)	 	Public Record. Since January 1, 2007, the information and statements set forth in
the Public Record were true, correct and complete in all material respects as of the date of
such information and statements and did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not misleading;






	(w)	 	Absence of Undisclosed Liabilities. None of Western or any of its subsidiaries has
any material liabilities of any nature (matured or unmatured, fixed or contingent), other
than:






	 	(i)	 	those set forth or adequately provided for in the most recent balance sheet
and associated notes thereto included in the Western Financial Statements (the
“Western Balance Sheet”);






	 	(ii)	 	those incurred in the ordinary course of business and not required to be
set forth in the Western Balance Sheet under GAAP;






	 	(iii)	 	those incurred in the ordinary course of business since the date of the
Western Balance Sheet and consistent with past practice; and






	 	(iv)	 	those incurred in connection with the execution of this Agreement;






	(x)	 	Employee Benefit Plans. Western has provided to Purchaser true, complete and correct
copies of each employee benefits plan (collectively, the “Western Plans”) covering active,
former or retired employees of each member of the Western Group, any related trust agreement,
annuity or insurance contract or other funding vehicle, and: (i) each Western Plan has been
maintained and administered in material compliance with its terms and is, to the extent
required by Applicable Law or contract, fully funded without having any deficit or unfunded
actuarial liability or adequate provision has been made therefor; (ii) all required employer
contributions under any such plans have been made and the applicable funds have been funded in
accordance with the terms thereof; (iii) each Western Plan that is required or intended to be
qualified under Applicable Law or registered or approved by a Governmental Authority has been
so qualified, registered or approved by the appropriate Governmental Authority, and to the
knowledge of Western, nothing has occurred since the date of the last qualification,
registration or approval that would reasonably be expected to adversely affect, or cause, the
appropriate Governmental Authority to revoke such qualification, registration or approval;
(iv) to the knowledge of Western, there are no pending or anticipated material claims against
or otherwise involving any of the Western Plans and no suit, action or other litigation
(excluding claims for benefits incurred in the ordinary course of Western Plan activities) has
been brought against or with respect to any Western Plan; (v) all material contributions,
reserves or premium payments required to be made to the Western Plans have been made or
provided for; and (vi) no member of the Western Group has any material obligations for retiree
health and life benefits under any Western Plan;






	(y)	 	Brokers and Finders. The Western Parties have not retained nor will they retain any
financial advisor, broker, agent or finder or paid or agreed to pay any financial advisor,
broker, agent or finder on account of this Agreement, any transaction contemplated hereby or
any transaction presently ongoing or contemplated, except that Goldman, Sachs & Co., TD
Securities Inc. and Tristone Capital Inc. have been retained as Western’s financial advisors
in connection with certain matters including the transactions contemplated hereby. Western has
delivered to the Purchaser Parties a true and complete copy of its agreements with Goldman,
Sachs & Co. and TD Securities Inc. and Western hereby agrees not to amend such agreements
without Purchaser’s consent. There are no fees payable to such advisors other than those
disclosed in such agreements;






	(z)	 	Employment and Officer Obligations. Other than as disclosed in the Disclosure Letter,
there are no existing health plans or pension obligations or other employment or consulting
services agreements, termination, severance and retention plans or policies of any member of
the Western Group. The obligations of the Western Group under all such employment or
consulting services agreements, termination, retention, severance plans or policies for
severance, termination, retention or bonus payments or any other payments related to any
Western incentive plan, arising out of or in connection with the Arrangement, shall not exceed
the amounts set forth in the Disclosure Letter;






	(aa)	 	Fairness Opinions. The Western Board of Directors has received opinions as of July
30, 2007 from Goldman, Sachs & Co. and TD Securities Inc. that the consideration to be
received from Purchaser by Western Shareholders in connection with the Arrangement is fair,
from a financial point of view, to the Western Shareholders;






	(bb)	 	Insurance. Policies of insurance that are in force as of the date hereof naming any
member of the Western Group as an insured adequately and reasonably cover all risks as are
customarily covered by oil and gas producers in the industry in which the Western Group
operates and having regard to the nature of the risk insured and the relative cost of
obtaining insurance protect such member of the Western Group’s interests. All such policies
shall remain in force and effect and shall not be cancelled or otherwise terminated as a
result of the transactions contemplated by this Agreement;






	(cc)	 	Board Approval. The Western Board of Directors has unanimously endorsed the
Arrangement and approved this Agreement, has unanimously determined that the Arrangement and
this Agreement are in the best interests of Western and the Western Shareholders, and has,
among other things, based on the opinion of its financial advisors, unanimously determined
that the consideration in the respect of the Arrangement is fair, from a financial point of
view, to Western Shareholders and has resolved to unanimously recommend approval of the
Arrangement by Western Shareholders;






	(dd)	 	Western Shareholder Rights Plan. The Western Shareholder Rights Plan will not apply
to the Arrangement and prior to the Effective Time, Western will not implement any other
shareholder rights plan or any other form of plan, agreement, contract or instrument that will
trigger any rights to acquire Western Common Shares or other securities of Western or rights,
entitlements or privileges in favour of any person upon the entering into of this Agreement or
in connection with the Arrangement;






	(ee)	 	Disclosure Letter. The matters disclosed to Purchaser in the Disclosure Letter
remain true and correct as of the date hereof;






	(ff)	 	Proceeds of Crime. To the knowledge of Western, neither Western nor WesternZagros
has, directly or indirectly, (a) made or authorized any contribution, payment or gift of funds
or property to any official, employee or agent of any governmental agency, authority or
instrumentality of any jurisdiction or (b) made any contribution to any candidate for public
office, in either case, where either the payment or the purpose of such contribution, payment
or gift was, is, or would be prohibited under the Canada Corruption of Foreign Public
Officials Act (Canada) or the Proceeds of Crime (Money Laundering) and Terrorist Financing Act
(Canada) or the rules and regulations promulgated thereunder or under any other legislation of
any relevant jurisdiction covering a similar subject matter applicable to Western and
WesternZagros and their respective operations and have instituted and maintained policies and
procedures designed to ensure, and which are reasonably expected to continue to ensure,
continued compliance with such legislation;






	(gg)	 	Material Contracts. Western has provided to Purchaser an index as disclosed in the
Disclosure Letter which lists the various Contracts regarding the Western Group which have
been provided to Purchaser. Except as disclosed in the Disclosure Letter, such Contracts
include all Contracts material to the conduct of the business and affairs of the Western Group
and all such material Contracts are valid and subsisting. To the knowledge of Western, it is
not, nor is it alleged to be (with or without the lapse of time or the giving of notice, or
both), in breach or default in any material respect of any such material Contract and, to the
knowledge of Western, no other party to any such material Contract is (with or without the
lapse of time or the giving of notice or both) in breach or default in any material respect
thereunder;






	(hh)	 	No Guarantees. Except as set forth in the Disclosure Letter, Western has not
guaranteed, endorsed, assumed, indemnified or accepted any responsibility for, and does not
and will not guarantee, endorse, assume, indemnify or accept any responsibility for,
contingently or otherwise, any indebtedness or the performance of any obligation of
WesternZagros; and






	(ii)	 	WesternZagros Contracts. There are no Contracts relating to the business and affairs
of WesternZagros other than as disclosed in the Disclosure Letter.





4.3 Representations and Warranties of WesternZagros



WesternZagros represents and warrants to and in favour of Purchaser and acknowledges that
Purchaser is relying upon such representations and warranties in connection with the matters
contemplated by this Agreement:




	(a)	 	Parent and Subsidiaries. Western owns 100% of the issued and outstanding shares of
WesternZagros and except for Western Oil International Holdings Limited and WesternZagros
Limited, WesternZagros has no subsidiaries that are material to its business, operation or
financial condition;






	(b)	 	Capitalization. As of the date hereof, the authorized capital of WesternZagros
consists of an unlimited number of common shares, an unlimited number of non-voting class A
common shares and an unlimited number of preferred shares, issuable in series. There are no
options, warrants or other rights, agreements or commitments of any nature whatsoever
requiring the issuance, sale or transfer by WesternZagros of any securities of WesternZagros
or any securities convertible into, or exchangeable or exercisable for, or otherwise
evidencing a right to acquire, any securities of WesternZagros. All outstanding common shares
and non-voting class A common shares in the capital of WesternZagros have been duly authorized
and validly issued, are fully paid and non-assessable and are not subject to, nor were they
issued in violation of, any pre-emptive rights;






	(c)	 	Organization and Qualification. WesternZagros is a corporation duly incorporated or
amalgamated and validly subsisting under the Laws of its jurisdiction of incorporation and has
the requisite corporate power and authority to own its assets and properties as now owned and
to carry on its business as now conducted. WesternZagros is duly registered or authorized to
conduct its affairs or do business, as applicable, and each is in good standing in each
jurisdiction in which the character of its assets and properties, owned, leased, licensed or
otherwise held or the nature of its activities makes such registration or authorization
necessary, except where the failure to be so registered or authorized would not, individually
or in the aggregate, have a material adverse effect on WesternZagros. Copies of the
constating documents of WesternZagros provided to Purchaser, together with all amendments to
date, are accurate and complete as of the date hereof and have not been amended or superseded;






	(d)	 	Authority Relative this Agreement. WesternZagros has the requisite corporate power
and authority to execute this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation by WesternZagros of the
transactions contemplated by the Arrangement has been duly authorized by the WesternZagros
Board of Directors and, expect as specified herein, no other proceedings on the part of
WesternZagros are necessary to authorize this Agreement or the Arrangement. This Agreement
has been duly executed and delivered by WesternZagros and constitutes a legal, valid and
binding obligation of WesternZagros enforceable against it in accordance with its terms,
subject to the qualification that such enforceability may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and other Laws of general
application relating to or affecting rights of creditors and that equitable remedies,
including specific performance, are discretionary and may not be ordered;






	(e)	 	Proceeds of Crime. To the knowledge of WesternZagros, neither Western nor
WesternZagros has, directly or indirectly, (a) made or authorized any contribution, payment or
gift of funds or property to any official, employee or agent of any governmental agency,
authority or instrumentality of any jurisdiction or (b) made any contribution to any candidate
for public office, in either case, where either the payment or the purpose of such
contribution, payment or gift was, is, or would be prohibited under the Canada Corruption of
Foreign Public Officials Act (Canada) or the Proceeds of Crime (Money Laundering) and
Terrorist Financing Act (Canada) or the rules and regulations promulgated thereunder or under
any other legislation of any relevant jurisdiction covering a similar subject matter
applicable to Western and WesternZagros and their respective operations and have instituted
and maintained policies and procedures designed to ensure, and which are reasonably expected
to continue to ensure, continued compliance with such legislation;






	(f)	 	No Guarantees. Except as set forth in the Disclosure Letter, Western has not
guaranteed, endorsed, assumed, indemnified or accepted any responsibility for, and does not
and will not guarantee, endorse, assume, indemnify or accept any responsibility for,
contingently or otherwise, any indebtedness or the performance of any obligation of
WesternZagros; and






	(g)	 	WesternZagros Contracts. There are no Contracts relating to the business and affairs
of WesternZagros other than as disclosed in the Disclosure Letter.





4.4 Privacy Issues




	(a)	 	For the purposes of this Section 4.4, the following definitions shall apply:






	 	(i)	 	"applicable law” means, in relation to any Person, transaction or event,
all applicable provisions of Laws by which such Person is bound or having application
to the transaction or event in question, including applicable privacy laws;






	 	(ii)	 	"applicable privacy laws” means any and all applicable laws relating to
privacy and the collection, use and disclosure of Personal Information in all
applicable jurisdictions, including but not limited to the Personal Information
Protection and Electronic Documents Act (Canada) and/or any comparable provincial law
including the Personal Information Protection Act (Alberta);






	 	(iii)	 	"authorized authority” means, in relation to any Person, transaction or
event, any (a) federal, provincial, municipal or local governmental body (whether
administrative, legislative, executive or otherwise), both domestic and foreign,
(b) agency, authority, commission, instrumentality, regulatory body, court, central
bank or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government, (c) court,
arbitrator, commission or body exercising judicial, quasi-judicial, administrative
or similar functions, and (d) other body or entity created under the authority of or
otherwise subject to the jurisdiction of any of the foregoing, including any stock or
other securities exchange, in each case having jurisdiction over such Person,
transaction or event; and






	 	(iv)	 	"Personal Information” means information (other than business contact
information when used or disclosed for the purpose of contacting such individual in
that individual’s capacity as an employee or an official of an organization and for
no other purpose) about an identifiable individual disclosed or transferred to
Purchaser by Western in accordance with this Agreement and/or as a condition of the
Arrangement;






	(b)	 	The Parties hereto acknowledge that they are responsible for compliance at all times with
applicable privacy laws which govern the collection, use or disclosure of Personal Information
disclosed to either Party pursuant to or in connection with this Agreement (the “Disclosed
Personal Information”);






	(c)	 	Prior to the completion of the Arrangement, neither Party shall use or disclose the Disclosed
Personal Information for any purposes other than those related to the performance of this
Agreement and the completion of the Arrangement. After the completion of the transactions
contemplated herein, a Party may only collect, use and disclose the Disclosed Personal
Information for the purposes for which the Disclosed Personal Information was initially
collected from or in respect of the individual to which such Disclosed Personal Information
relates or for the completion of the transactions contemplated herein, unless (a) either Party
shall have first notified such individual of such additional purpose, and where required by
applicable law, obtained the consent of such individual to such additional purpose, or (b)
such use or disclosure is permitted or authorized by applicable law, without notice to, or
consent from, such individual;






	(d)	 	Each Party acknowledges and confirms that the disclosure of the Disclosed Personal
Information is necessary for the purposes of determining if the Parties shall proceed with the
Arrangement, and that the Disclosed Personal Information relates solely to the carrying on of
the business or the completion of the Arrangement;






	(e)	 	Each Party acknowledges and confirms that it has taken and shall continue to take reasonable
steps to, in accordance with applicable law, prevent accidental loss or corruption of the
Disclosed Personal Information, unauthorized input or access to the Disclosed Personal
Information, or unauthorized or unlawful collection, storage, disclosure, recording, copying,
alteration, removal, deletion, use or other processing of such Disclosed Personal Information;






	(f)	 	Subject to the following provisions, each Party shall at all times keep strictly confidential
all Disclosed Personal Information provided to it, and shall instruct those employees or
advisors responsible for processing such Disclosed Personal Information to protect the
confidentiality of such information in a manner consistent with the Parties’ obligations
hereunder. Prior to the completion of the Arrangement, each Party shall take reasonable steps
to ensure that access to the Disclosed Personal Information shall be restricted to those
employees or advisors of the respective Party who have a bona fide need to access to such
information in order to complete the Arrangement;






	(g)	 	Where authorized by applicable law, each Party shall promptly notify the other Party to this
Agreement of all inquiries, complaints, requests for access, variations or withdrawals of
consent and claims of which the Party is made aware in connection with the Disclosed Personal
Information. To the extent permitted by applicable law, the Parties shall fully co-operate
with one another, with the persons to whom the Personal Information relates, and any
authorized authority charged with enforcement of applicable privacy laws, in responding to
such inquiries, complaints, requests for access, variations or withdrawals of consent and
claims; and






	(h)	 	Upon the expiry or termination of this Agreement, or otherwise upon the reasonable request of
either Party, the other Party shall forthwith cease all use of the Disclosed Personal
Information acquired by it in connection with this Agreement and will return to the requesting
Party or, at the requesting Party’s request, destroy in a secure manner, the Disclosed
Personal Information (and any copies thereof) in its possession.





ARTICLE 5




CONDITIONS PRECEDENT




5.1 Mutual Conditions Precedent



The respective obligations of the Parties to consummate the transactions contemplated hereby,
and in particular the Arrangement, are subject to the satisfaction, on or before the Effective Date
or such other time specified, of the following conditions, any of which may be waived by the mutual
consent of such Parties without prejudice to their right to rely on any other of such conditions:




	(a)	 	on or prior to September 28, 2007, the Interim Order shall have been granted in form and
substance satisfactory to each of Purchaser and Western, acting reasonably, and such order
shall not have been set aside or modified in a manner unacceptable to Purchaser and Western,
acting reasonably, on appeal or otherwise;






	(b)	 	the Mailing Date shall occur not later than October 1, 2007;






	(c)	 	the Arrangement Resolution shall have been passed by the Western Shareholders, on or prior to
November 23, 2007 in accordance with the Interim Order and in form and substance satisfactory
to each of Purchaser and Western, acting reasonably;






	(d)	 	on or prior to November 30, 2007, the Final Order shall have been granted in form and
substance satisfactory to Purchaser and Western, acting reasonably and such order shall not
have been set aside or modified in a manner unacceptable to Purchaser and Western, acting
reasonably, on appeal or otherwise;






	(e)	 	the Articles of Arrangement to be filed with the Registrar in accordance with the Arrangement
shall be in form and substance satisfactory to each of Purchaser and Western, acting
reasonably;






	(f)	 	the Effective Date shall have occurred not later than the Outside Date;






	(g)	 	Purchaser and Western shall have obtained all consents, waivers, permissions and approvals
necessary to complete the Arrangement by or from relevant Governmental Authorities, on terms
and conditions satisfactory to the Parties, acting reasonably, including without limitation:






	 	(i)	 	the approval of the Western Shareholders required for the Arrangement
pursuant to the ABCA or as required by the Court and other matters relating to the
Arrangement;






	 	(ii)	 	the approval of the Court and; if applicable, the required approvals from
the Minister of Industry under the Investment Canada Act;






	 	(iii)	 	either a notification or a request for an advance ruling certificate under
the Competition Act in respect of the Arrangement shall been made and (i) any waiting
periods prescribed under the Competition Act shall have expired and the Parties shall
have received a no-action letter from the Commissioner of Competition satisfactory to
Marathon, acting reasonably; or (ii) the Parties shall have received an advance
ruling certificate from the Competition Bureau in respect of the transactions
contemplated herein; or (iii) the Commissioner of Competition shall have waived the
obligation to file under section 114 of the Competition Act and the Parties shall
have received a no-action letter from the Commissioner of Competition satisfactory to
Marathon, acting reasonably;






	 	(iv)	 	the approval of the NYSE with respect to the additional listing of the
Purchaser Shares and the Purchaser Shares issuable on exchange of the Exchangeable
Shares issuable under the terms of the Arrangement; and






	 	(v)	 	the waiting period under the United States Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, if applicable to the transactions contemplated
under the Arrangement, shall have expired or been terminated, and no objection or
opposition shall have been filed, initiated or made during any applicable statutory
or regulatory period and remain unresolved,






(collectively, the “Third Party Approvals”);




	(h)	 	all domestic and foreign statutory and regulatory waiting periods applicable to the
transactions contemplated by the Arrangement, shall have expired or have been terminated and
no unresolved material objection or opposition shall have been filed, initiated or made during
any applicable statutory or regulatory period;






	(i)	 	there shall be no action taken under any existing Applicable Law, nor any statute, rule,
regulation or order which is enacted, enforced, promulgated or issued by any Governmental
Authority, that:






	 	(i)	 	makes illegal or otherwise directly or indirectly restrains, enjoins or
prohibits the Arrangement or any other transactions contemplated herein; or






	 	(ii)	 	results in a judgment or assessment of material damages directly or
indirectly relating to the transactions contemplated herein;






	(j)	 	the Form S-3 shall have become effective under the U.S. Securities Act and no stop order
suspending the effectiveness of the Form S-3 shall be in effect and no proceedings for such
purpose shall be pending before the SEC; and






	(k)	 	Purchaser and Western shall be satisfied that the Subsequent Transactions (as defined in the
Plan of Arrangement) will be completed immediately following the Effective Time on terms and
conditions mutually acceptable to Western and Purchaser.





The foregoing conditions are for the mutual benefit of Purchaser and Western and may be asserted by
Purchaser and Western regardless of the circumstances and may be waived by Purchaser and Western
(with respect to such Party) in their sole discretion, in whole or in part, at any time and from
time to time without prejudice to any other rights which Purchaser or Western may have. If any of
the foregoing conditions are not satisfied or waived, Western or Purchaser, as the case may be, may
terminate this Agreement (save and except for Article 6, Section 4.4, Section 2.13 and Section 2.14
hereof which shall survive such termination and remain in full force and effect), provided that,
prior to the filing of the Articles of Arrangement for the purpose of giving effect to the
Arrangement, the Party intending to rely thereon has delivered a written notice to the other Party,
specifying in reasonable detail all breaches of covenants, representations and warranties or other
matters which the Party delivering such notice is asserting as the basis for the non-fulfillment of
the applicable conditions precedent. More than one such notice may be delivered by a Party.



5.2 Additional Conditions to Obligations of Purchaser



The obligation of Purchaser and AcquisitionCo to consummate the transactions contemplated
hereby, and in particular the Arrangement, is subject to the following conditions:




	(a)	 	Representations and Warranties: The representations and warranties of Western and
WesternZagros set forth herein (i) that are qualified by a reference to Material Adverse
Effect shall be true and correct in all respects as of the Effective Date as if made on and as
of such date, and (ii) that are not qualified by a reference to a Material Adverse Effect
shall be true and correct in all respects as of the Effective Date as if made on and as of
such date unless the failure to be true or correct has not had or would not reasonably be
expected to have, a Material Adverse Effect (and, for this purpose, any reference to
“material” or other concepts of materiality in such representations and warranties shall be
ignored) except, in each case (i) to the extent such representations and warranties speak as
of an earlier date (in which case such representations and warranties shall be true and
correct in all respects as of such date) or (ii) as affected by transactions contemplated or
permitted by this Agreement, and each of Western and WesternZagros shall have provided to
Purchaser a certificate of two senior officers certifying such accuracy on the Effective Date;






	(b)	 	Covenants: Western and WesternZagros shall have complied in all material respects
with their respective covenants herein, except where the failure to comply with such covenants
would not reasonably be expected to have a Material Adverse Effect on the affairs, operations
or business of Western or materially impede the completion of the Arrangement, and each of
Western and WesternZagros shall have provided to Purchaser a certificate of two senior
officers certifying compliance with such covenants;






	(c)	 	No Actions: no act, action, suit, proceeding, objection or opposition shall have been
threatened or taken before or by any Governmental Authority or by any elected or appointed
public official or private Person in Canada or elsewhere, whether or not having the force of
law and no law, regulation, policy, judgment, decision, order, ruling or directive (whether or
not having the force of law) shall have been proposed, enacted, promulgated, amended or
applied, which in the sole judgment of Purchaser, acting reasonably, in either case has had
or, if the Arrangement was consummated, would result in a Material Adverse Effect on Western
or would have a material adverse effect on the ability of the Parties to complete the
Arrangement;






	(d)	 	Board and Shareholder Authorization: Western and WesternZagros shall have furnished
Purchaser and AcquisitionCo with:






	 	(i)	 	certified copies of the resolutions duly passed by the Western Board of
Directors and the WesternZagros Board of Directors approving this Agreement and the
consummation of the transactions contemplated hereby; and






	 	(ii)	 	certified copies of the resolutions of Western Shareholders, duly passed at
the Western Meeting, approving the Arrangement Resolution;






	(e)	 	Related Party Indebtedness: any director, officer, insider or other non-arm’s length
party that is indebted to Western shall have repaid such indebtedness on or prior to
completion of the Arrangement;






	(f)	 	Western Meeting: the Western Meeting shall have been held on or before the Outside
Date;






	(g)	 	Material Adverse Change: between the date hereof and the Effective Time, there shall
not have occurred or have been disclosed to Purchaser or the public, if not previously
disclosed to Purchaser or the public, any Material Adverse Change with respect to Western;






	(h)	 	Dissent Rights: holders of Western Common Shares representing not more than 15% of
the Western Common Shares then outstanding shall have validly exercised, and not withdrawn,
Dissent Rights;






	(i)	 	Western Options, etc.: all Western Options, Western PSUs and Western DSUs shall have
been exercised or terminated;






	(j)	 	Approval: the Western Board of Directors shall not have: (i) amended its affirmative
recommendation to the Western Shareholders in a manner adverse to Purchaser; or (ii) withdrawn
its affirmative recommendation to the Western Shareholders to vote in favour of the
Arrangement Resolution;






	(k)	 	Releases: executed releases in a form acceptable to Purchaser shall have been
received by Purchaser on or prior to the Effective Date from each Person entitled to receive a
severance amount or payment of an Employee Obligation as a consequence of the Arrangement,
each as set forth in Section 2.6 hereof, provided however, that such releases shall only be
required from each such individual who, as a consequence of the Arrangement, is no longer a
director, officer or employee of any of the Western Parties; and






	(l)	 	Zagros Agreement: Western, WesternZagros and WesternZagros Limited shall have signed
the Zagros agreement, in the form agreed to by Western and Purchaser as of the date hereof.





The conditions in this Section 5.2 are for the exclusive benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances or may be waived by Purchaser in its sole
discretion, in whole or in part, at any time and from time to time without prejudice to any other
rights which Purchaser may have. If any of the foregoing conditions are not satisfied or waived,
Purchaser may, in addition to any other remedies they may have at law or equity, terminate this
Agreement (save and except for Article 6, Section 4.4, Section 2.13 and Section 2.14 hereof which
shall survive such termination and remain in full force and effect) provided that, prior to the
filing of the Articles of Arrangement for the purpose of giving effect to the Arrangement,
Purchaser has delivered a written notice to Western, specifying in reasonable detail all breaches
of covenants, representations and warranties or other matters which Purchaser is asserting as the
basis for the non-fulfillment of the applicable conditions precedent. More than one such notice may
be delivered by Purchaser.



5.3 Additional Conditions to Obligations of Western



The obligation of Western to consummate the transactions contemplated hereby, and in
particular the Arrangement, is subject to the following conditions:




	(a)	 	Representations and Warranties: The representations and warranties of Purchaser set
forth herein (i) that are qualified by a reference to Material Adverse Effect shall be true
and correct in all respects as of the Effective Date as if made on and as of such date, and
(ii) that are not qualified by a reference to a Material Adverse Effect shall be true and
correct in all respects as of the Effective Date as if made on and as of such date unless the
failure to be true or correct has not had or would not reasonably be expected to have, a
Material Adverse Effect (and, for this purpose, any reference to “material” or other concepts
of materiality in such representations and warranties shall be ignored), except in each case
(i) to the extent such representations and warranties speak as of an earlier date (in which
case such representations and warranties shall be true and correct in all respects as of such
date), or (ii) as affected by transactions contemplated or permitted by this Agreement and
Purchaser shall have provided to Western a certificate of two senior officers certifying such
accuracy on the Effective Date;






	(b)	 	Covenants: The Purchaser Parties shall have complied in all material respects with
their respective covenants herein, except where the failure to comply with such covenants
would not reasonably be expected to have a Material Adverse Effect on Purchaser or materially
impede the Effective Date, and Purchaser shall have provided to Western a certificate of two
senior officers certifying compliance with such covenants;






	(c)	 	No Actions: no act, action, suit, proceeding, objection or opposition shall have been
threatened or taken before or by any Governmental Authority or by any elected or appointed
public official or private person in Canada or elsewhere, whether or not having the force of
law, and no law, regulation, policy, judgment, decision, order, ruling or directive (whether
or not having the force of law) shall have been proposed, enacted, promulgated, amended or
applied, which in the sole judgment of Western, acting reasonably, in either case has had or,
if the Arrangement was consummated, would result in a Material Adverse Effect on Purchaser or
would have a material adverse effect on the ability of the Parties to complete the
Arrangement;






	(d)	 	Board Authorization: Purchaser and AcquisitionCo shall have each furnished Western
with certified copies of the resolutions duly passed by the Purchaser Board of Directors and
the AcquisitionCo Board of Directors approving this Agreement and the consummation of the
transactions contemplated hereby;






	(e)	 	Purchaser Shares. The Purchaser Shares issuable upon completion of the Arrangement
and issuable upon exchange of the Exchangeable Shares issuable upon completion of the
Arrangement shall be listed on the NYSE, subject to notice of issuance, and each shall be
freely tradeable (other than as a result of any control person or affiliate restrictions which
may arise by virtue of the ownership thereof) under applicable securities Laws;






	(f)	 	Support Agreement and Exchange Trust Agreement. The Support Agreement and the
Exchange Trust Agreement shall have been executed and delivered by the Purchaser and
AcquisitionCo; and






	(g)	 	Transition Services Agreement. Western and WesternZagros shall have signed the
transition services agreement in the form agreed to by Western and Purchaser as of the date
hereof.





The conditions in this Section 5.3 are for the exclusive benefit of Western and may be asserted by
Western regardless of the circumstances or may be waived by Western in its sole discretion, in
whole or in part, at any time and from time to time without prejudice to any other rights which
Western may have. If any of the foregoing conditions are not satisfied or waived, Western may, in
addition to any other remedies it may have at law or equity, terminate this Agreement (save and
except for Article 6, Section 4.4, Section 2.13 and Section 2.14 hereof which shall survive such
termination and remain in full force and effect), provided that, prior to the filing of the
Articles of Arrangement for the purpose of giving effect to the Arrangement, Western has delivered
a written notice to Purchaser, specifying in reasonable detail all breaches of covenants,
representations and warranties or other matters which Western is asserting as the basis for the
non-fulfillment of the applicable conditions precedent. More than one such notice may be delivered
by Western.



5.4 Notice and Effect of Failure to Comply with Conditions



Each of Purchaser and Western shall give prompt notice to the other of the occurrence, or
failure to occur, at any time from the date hereof to the Effective Date of any event or state of
facts which occurrence or failure would, or would be likely to: (i) cause any of the
representations or warranties of such Party contained herein to be untrue or inaccurate in any
material respect; or (ii) result in the failure to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by any Party hereunder; provided, however, that no
such notification will affect the representations or warranties of the Parties or the conditions to
the obligations of the Parties hereunder.



5.5 Satisfaction of Conditions



The conditions set out in this Article 5 are conclusively deemed to have been satisfied,
waived or released when, with the agreement of the Parties, Articles of Arrangement are filed under
the ABCA to give effect to the Arrangement.



ARTICLE 6




AGREEMENT AS TO DAMAGES AND OTHER ARRANGEMENTS




6.1 Purchaser Damages



Provided that there is no material breach of a representation or warranty by Purchaser or
AcquisitionCo or material non performance by Purchaser or AcquisitionCo of any covenant by the date
specified herein (excluding the breach of a covenant where Purchaser is precluded from satisfying
its obligations through action or omission of Western), if at any time after the execution of this
Agreement and prior to its termination:




	(a)	 	the Western Board of Directors fails to make or has withdrawn, modified or publicly proposes
to withdraw or modify the approvals, recommendation or determinations referred to in
Section 2.9 in a manner adverse to Purchaser or shall have resolved to do so prior to the
Effective Date;






	(b)	 	an Acquisition Proposal is publicly announced, proposed, offered or made to the Western
Shareholders and the Western Shareholders do not approve the Arrangement or the Arrangement is
not submitted for their approval prior to the Outside Date and any Acquisition Proposal is
consummated within twelve months from the termination of this Agreement;






	(c)	 	Western accepts, recommends, approves or enters into or publicly proposes to accept,
recommend or approve an agreement to implement a Superior Proposal subject to compliance with
Section 3.5; or






	(d)	 	Western breaches the provisions of Section 3.5 in any material respect, and Purchaser is not
successful in completing the Arrangement,





(each of Section 6.1(a), 6.1(b), 6.1(c) and 6.1(d) above being a “Purchaser Damages Event”,
then in the event of the termination of this Agreement pursuant to Article 8, Western shall pay to
Purchaser $200,000,000 (the “Purchaser Termination Fee”) as liquidated damages in respect of a
Purchaser Damages Event in immediately available funds to an account designated by Purchaser within
one Business Day after the first to occur of the events described above. Following a Purchaser
Damages Event, but prior to payment of the Purchaser Termination Fee, Western shall be deemed to
hold such applicable payment in trust for Purchaser. Western shall only be obligated to pay one
Purchaser Termination Fee pursuant to this Section 6.1.



6.2 Liquidated Damages



Purchaser acknowledges that the Purchaser Termination Fee set out in Section 6.1 is a payment
of liquidated damages which are a genuine pre-estimate of the damages which the Purchaser will
suffer or incur as a result of the event giving rise to such damages and the resultant termination
of this Agreement and is not a penalty. Western irrevocably waives any right it may have to raise
as a defence that any such liquidated damages are excessive or punitive. For greater certainty,
Purchaser agrees that the payment of the amount pursuant to Section 6.1 is the sole monetary remedy
of Purchaser. Nothing herein shall preclude a Party from seeking injunctive relief to restrain any
breach or threatened breach of the covenants or agreements set forth in this Agreement, the
Confidentiality Agreement or otherwise to obtain specific performance of any of such act, covenants
or agreements, without the necessity of posting bond or security in connection therewith.



ARTICLE 7




AMENDMENT




7.1 Amendment



This Agreement may at any time and from time to time before or after the holding of the
Western Meeting be amended by written agreement of the Parties hereto without, subject to
Applicable Law, further notice to or authorization on the part of their respective securityholders
and any such amendment may, without limitation:




	(a)	 	change the time for performance of any of the obligations or acts of the Parties;






	(b)	 	waive any inaccuracies or modify any representation or warranty contained herein or in any
document delivered pursuant hereto;






	(c)	 	waive compliance with or modify any of the covenants herein contained and waive or modify
performance of any of the obligations of the Parties; or






	(d)	 	waive compliance with or modify any other conditions precedent contained herein;





provided that no such amendment reduces or materially adversely affects the consideration to be
received by a Western Shareholder without approval by the affected securityholders given in the
same manner as required for the approval of the Arrangement or as may be ordered by the Court.



ARTICLE 8




TERMINATION




8.1 Termination




	(a)	 	This Agreement may be terminated at any time prior to the Effective Date:






	 	(i)	 	by mutual written consent of Purchaser and Western;






	 	(ii)	 	as provided in Sections 5.1, 5.2 and 5.3;






	 	(iii)	 	by Purchaser upon the occurrence of a Purchaser Damages Event as provided
in Section 6.1;






	 	(iv)	 	by Western upon the occurrence of a Purchaser Damages Event as provided in
Section 6.1, provided that Western has paid to Purchaser the Purchaser Termination
Fee;






	 	(v)	 	by Western if:






	 	(A)	 	Purchaser is in breach of any of its covenants made in this
Agreement which breach individually or in the aggregate causes or would
reasonably be expected to have a Material Adverse Effect on the affairs,
operations or business of any of the Purchaser Parties or materially impedes
the completion of the Arrangement and the transactions contemplated herein,
and Purchaser fails to cure or cause the cure of such breach within five
Business Days after receipt of written notice thereof from Western (except
that no cure period shall be provided for a breach which by its nature cannot
be cured and, in no event, shall any cure period extend beyond the Outside
Date); or






	 	(B)	 	Purchaser is in breach of any of its representations or
warranties made in this Agreement (i) that are qualified by a reference to
Material Adverse Effect or (ii) that are not qualified by a reference to a
Material Adverse Effect and the breach thereof has or would reasonably be
expected to have, a Material Adverse Effect (and, for this purpose, any
reference to “material” or other concepts of materiality in such
representations and warranties shall be ignored) on Purchaser or, in either
case, such breach materially impedes the completion of the Arrangement, and
Purchaser fails to cure or cause the cure of such breach within five Business
Days after receipt of written notice thereof from Western (except that no
cure period shall be provided for a breach which by its nature cannot be
cured and, in no event, shall any cure period extend beyond the Outside
Date); or






	 	(vi)	 	by Purchaser if:






	 	(A)	 	Western is in breach of any of its covenants made in this
Agreement which breach individually or in the aggregate causes or would
reasonably be expected to have a Material Adverse Effect on the affairs,
operations or business of any of the Western Parties or materially impedes
the completion of the Arrangement and the transactions contemplated herein,
and Western fails to cure or cause the cure of such breach within five
Business Days after receipt of written notice thereof from Purchaser (except
that no cure period shall be provided for a breach which by its nature cannot
be cured and, in no event, shall any cure period extend beyond the Outside
Date); or






	 	(B)	 	Western is in breach of any of its representations or
warranties made in this Agreement (i) that are qualified by a reference to
Material Adverse Effect or (ii) that are not qualified by a reference to a
Material Adverse Effect and the breach thereof has or would reasonably be
expected to have, a Material Adverse Effect (and, for this purpose, any
reference to “material” or other concepts of materiality in such
representations and warranties shall be ignored) on the Western Parties or,
in either case, such breach materially impedes the completion of the
Arrangement, and Western fails to cure or cause the cure of such breach
within five Business Days after receipt of written notice thereof from
Purchaser (except that no cure period shall be provided for a breach which by
its nature cannot be cured and, in no event, shall any cure period extend
beyond the Outside Date); and






	(b)	 	If this Agreement is terminated in accordance with the foregoing provisions of this
Section 8.1, this Agreement shall forthwith become void and no Party shall have any further
liability to perform its obligations hereunder except as provided in Article 6, Section 4.4,
Section 2.13, and Section 2.14 and each Party’s obligations under the Confidentiality
Agreement, which shall survive such termination, and provided that neither the termination of
this Agreement nor anything contained in this Section 8.1(b) shall relieve any Party from any
liability for any breach by it of this Agreement, including from any inaccuracy in any of its
representations and warranties and any non-performance by it of its covenants made herein,
prior to the date of such termination.





ARTICLE 9




NOTICES




9.1 Notices



All notices that may or are required to be given pursuant to any provision of this Agreement
are to be given or made in writing and served personally, delivered by overnight courier or sent by
facsimile transmission:




	(a)	 	in the case of Purchaser or AcquisitionCo, to:






Marathon Oil Corporation


P.O. Box 4813


Houston, Texas 77210-4813




Attention: Clarence P. Cazalot, Jr., President and Chief Executive Officer


Facsimile: (713) 296-4100




with a copy to:




Bennett Jones LLP


Suite 4500, 855 – 2nd Street S.W.


Calgary, Alberta T2P 4K7




Attention: John H. Kousinioris


Facsimile: (403) 265-7219




	(b)	 	in the case of Western or WesternZagros, to:





	 	 	 
	Western Oil Sands Inc.

	2400 Ernst & Young Tower

	440 Second Avenue S.W.

	Calgary, Alberta T2P 5E9

	Attention:

Facsimile:

	 	James Houck, President and Chief Executive Officer

(403) 234-9156






	 	 	 
	with a copy to:

	 	

	Macleod Dixon LLP

	3700, 400 - 3rd Avenue SW

	Calgary, Alberta T2P 4H2

	Attention:

Facsimile:

	 	Charles W. Berard

(403) 264-5973






or such other address as the Parties may, from time to time, advise the other Parties hereto by
notice in writing. The date or time of receipt of any such notice will be deemed to be the date of
delivery or the time such facsimile transmission is received.



ARTICLE 10




GENERAL




10.1 Binding Effect



This Agreement shall be binding upon and enure to the benefit of the Parties hereto and their
respective successors and permitted assigns.



10.2 Assignment



Neither this Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the Parties hereto without the prior written consent of the other Parties
hereto.



10.3 Public Communications



Each of Purchaser and Western agree to consult with each other prior to issuing any press
releases or otherwise making public statements with respect to this Agreement or the Arrangement or
making any filing with any Governmental Authority with respect thereto. Without limiting the
generality of the foregoing, no Party shall issue any press release regarding the Arrangement, this
Agreement or any transaction relating to this Agreement without first providing a draft of such
press release to the other Party and reasonable opportunity for comment; provided, however, that
the foregoing shall be subject to each Party’s overriding obligation to make any such disclosure
required in accordance with Applicable Laws. If such disclosure is required and the other Party has
not reviewed or commented on the disclosure, the Party making such disclosure shall use all
commercially reasonable efforts to give prior oral or written notice to the other Party, and if
such prior notice is not possible, to give such notice promptly following such disclosure.



10.4 Costs



Except as otherwise expressly provided for in this Agreement, all fees, costs and expenses
incurred in connection with this Agreement and the transactions contemplated hereby shall be paid
by the Party incurring such cost or expense, whether or not the Arrangement is completed.



10.5 Severability



If any one or more of the provisions or parts thereof contained in this Agreement should be or
become invalid, illegal or unenforceable in any respect, the remaining provisions or parts thereof
contained herein shall be and shall be conclusively deemed to be severable therefrom and the
validity, legality or enforceability of such remaining provisions or parts thereof shall not in any
way be affected or impaired by the severance of the provisions or parts thereof severed. Upon such
determination that any term or other provision is invalid, illegal or incapable of being enforced,
the Parties shall negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the fullest extent possible.



10.6 Further Assurances



Each Party hereto shall, from time to time and at all times hereafter, at the request of the
other Parties hereto, but without further consideration, do all such further acts, and execute and
deliver all such further documents and instruments and provide all such further assurances as may
be reasonably required in order to fully perform and carry out the terms and intent hereof.



	 	 	 
	10.7	 	Time of Essence
	10.8

	 	Time shall be of the essence of this Agreement.

Governing Law






This Agreement shall be governed by and construed in accordance with the Laws of the Province
of Alberta and the Parties hereto irrevocably attorn to the exclusive jurisdiction of the courts of
the Province of Alberta.



10.9 Waiver



Any Party may, on its own behalf only, (i) extend the time for the performance of any of the
obligations or acts of the other Party, (ii) waive compliance with the other Party’s agreements or
the fulfillment of any conditions to its own obligations contained herein, or (iii) waive
inaccuracies in the other Party’s representations or warranties contained herein or in any document
delivered by the other Party; provided, however, that any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such Party and, unless otherwise
provided in the written waiver, will be limited to the specific breach or condition waived.



10.10 Third Party Beneficiaries.



The provisions of Section 3.1(h) and Section 3.2(b) are: (i) intended for the benefit of all
such present and former directors and officers and shall be enforceable by each of such persons and
his or her heirs, executors, administrators and other legal representatives (collectively, the
"Third Party Beneficiaries”) and Western shall hold the rights and benefits of such sections in
trust for and on behalf of the Third Party Beneficiaries and Western hereby accepts such trust and
agrees to hold the benefit of and enforce performance of such covenants on behalf of the Third
Party Beneficiaries; and (ii) are in addition to, and not in substitution for, any other rights
that the Third Party Beneficiaries may have by contract or otherwise.



10.11 Counterparts



This Agreement may be executed in counterparts, each of which shall be deemed an original, and
all of which together constitute one and the same instrument.



IN WITNESS WHEREOF the Parties have executed this Agreement as of the date first above
written.



	 	 	 
	MARATHON OIL CORPORATION
	By:

	 	(Signed) “David E. Roberts, Jr.”






	 	 	 
	
 
	 	DAVID E. ROBERTS, JR.

Senior Vice President,

Business Development
	1339971 ALBERTA LTD.

	By:

	 	(Signed) “David E. Roberts, Jr.”






	 	 	 
	
 
	 	DAVID E. ROBERTS, JR.

President
	WESTERN OIL SANDS INC.

	By:

	 	(Signed) “James Houck”






	 	 	 
	
 
	 	JAMES HOUCK

President and Chief Executive Officer
	WESTERNZAGROS RESOURCES INC.

	By:

	 	(Signed) “James Houck”







JAMES HOUCK


Director



2




SCHEDULE A




PLAN OF ARRANGEMENT UNDER SECTION 193




OF THE




BUSINESS CORPORATIONS ACT (ALBERTA)




ARTICLE I




INTERPRETATION




1.01 In this Plan of Arrangement, the following terms have the following meanings:




	 	(a)	 	"ABCA” means the Business Corporations Act, Alberta R.S.A. 2000, c. B-9,
including the regulations promulgated thereunder;






	 	(b)	 	"AcquisitionCo” means 1339971 Alberta Ltd. a corporation incorporated under the
ABCA;






	 	(c)	 	"Arrangement”, “herein”, “hereof”, “hereto”, “hereunder” and similar
expressions mean and refer to the arrangement pursuant to Section 193 of the ABCA set
forth in this Plan of Arrangement as supplemented, modified or amended, and not to any
particular article, section or other portion hereof;






	 	(d)	 	"Arrangement Agreement” means the agreement dated July 30, 2007 among Marathon,
AcquisitionCo, Western and WesternZagros with respect to the Arrangement and all
amendments thereto;






	 	(e)	 	"Articles of Arrangement” means the articles of arrangement in respect of the
Arrangement required under subsection 193(10) of the ABCA to be filed with the
Registrar after the Final Order has been granted to give effect to the Arrangement;






	 	(f)	 	"Cash Consideration” means $35.50 per Share to be received at the election or
deemed election of a Shareholder (other than a Dissenting Shareholder) pursuant to
Section 3.01(a) or Section 3.01(g);






	 	(g)	 	"Certificate” means the certificate or certificates or other confirmation of
filing to be issued by the Registrar pursuant to subsection 193(11) of the ABCA giving
effect to the Arrangement;






	 	(h)	 	"Class A Share” means a share of the class A shares in the capital of Western
created pursuant to Section 3.01(b)(i) and issued pursuant to Section 3.01(c);






	 	(i)	 	"Class B Aggregate Redemption Amount” means the lesser of $412,669,383 and the
aggregate redemption amount of all the issued and outstanding redeemable preferred
            shares to be issued by SpinCo during the course of the Subsequent Transactions;






	 	(j)	 	"Class B Redemption Amount” means an amount equal to the quotient obtained by
dividing the Class B Aggregate Redemption Amount by the number of issued and
outstanding Class B Shares;






	 	(k)	 	"Class B Share” means a share of the class B shares in the capital of Western
created pursuant to Section 3.01(b)(ii) and issued pursuant to Section 3.01(c);






	 	(l)	 	"Class C Aggregate Redemption Amount” means $1,000,000;






	 	(m)	 	"Class C Redemption Amount” means an amount equal to the quotient obtained by
dividing the Class C Aggregate Redemption Amount by the number of issued and
outstanding Class C Shares;






	 	(n)	 	"Class C Share” means a share of the class C shares in the capital of Western
created pursuant to Section 3.01(b)(iii) and issued pursuant to Section 3.01(c);






	 	(o)	 	"Common Shares” means the Class A Shares in the capital of Western;






	 	(p)	 	"Court” means the Court of Queen’s Bench of Alberta;






	 	(q)	 	"Depositary” means a trust company licensed to carry on business in the
Province of Alberta at its principal office in Calgary, Alberta;






	 	(r)	 	"Dissenting Shareholders” means registered Shareholders who validly exercise
the rights of dissent provided to them under the Interim Order;






	 	(s)	 	"Effective Date” means the date the Arrangement is effective under the ABCA;






	 	(t)	 	"Effective Time” means the time at which the Articles of Arrangement are filed
with the Registrar on the Effective Date;






	 	(u)	 	"Election Deadline” means 4:30 p.m. (Calgary time) on the business day
immediately prior to the date of the Meeting or, if such meeting is adjourned, such
time on the business day immediately prior to the date of such adjourned meeting;






	 	(v)	 	"Exchangeable Share” means an exchangeable share in the capital of
AcquisitionCo, to be created on or before the Effective Time, which shall initially be
exchangeable on a one for one basis for Marathon Shares, subject to adjustment for
future distributions with substantially the rights, privileges and restrictions set
forth in Appendix A;






	 	(w)	 	"Exchangeable Share Consideration” means the consideration in the form of
0.5932 of an Exchangeable Share to be received at the election or deemed election of a
Shareholder (other than a Dissenting Shareholder) pursuant to Section 3.01(g);






	 	(x)	 	"Final Order” means the final order of the Court approving this Arrangement
under subsection 193(9) of the ABCA, as such order may be affirmed, amended or modified
by any court of competent jurisdiction;






	 	(y)	 	"Information Circular” means the information circular to be prepared by Western
and forwarded as part of the proxy solicitation materials to Shareholders in respect of
the Meeting;






	 	(z)	 	"Interim Order” means the interim order of the Court under subsection 193(4) of
the ABCA containing declarations and directions with respect to this Arrangement, as
such order may be affirmed, amended or modified by any court of competent jurisdiction;






	 	(aa)	 	"ITA” means the Income Tax Act (Canada);






	 	(bb)	 	"Letter of Transmittal and Election Form” means the letter of transmittal and
election form accompanying the Information Circular sent to Shareholders for making
their election to receive, in addition to the SpinCo Share Consideration and the SpinCo
Warrant Consideration, the Cash Consideration, the Marathon Share Consideration, the
Exchangeable Share Consideration or a combination thereof in exchange for their Common
Shares;






	 	(cc)	 	"Marathon” means Marathon Oil Corporation, a corporation organized and existing
under the laws of Delaware and any successor corporation;






	 	(dd)	 	"Marathon Share” means a common share in the capital of Marathon;






	 	(ee)	 	"Marathon Share Consideration” means the consideration in the form of 0.5932 of
a Marathon Share to be received at the election of a holder of Shares pursuant to
Section 3.01(a) or Section 3.01(g);






	 	(ff)	 	"Meeting” means the special meeting of Shareholders to be held to consider the
Arrangement, and any adjournment thereof;






	 	(gg)	 	"Non-Resident” means: (i) a person who is not a resident of Canada for the
purposes of the ITA; or (ii) a partnership that is not a Canadian partnership for the
purposes of the ITA;





	 	 	 
	(hh)

(ii)

	 	"NYSE” means the New York Stock Exchange;

"Registrar” means the Registrar appointed under Section 263 of the ABCA;







	 	(jj)	 	"Shareholders” means, the holders from time to time of Common Shares, the Class
A Shares, the Class B Shares or the Class C Shares, collectively or individually, as
the context requires;






	 	(kk)	 	“Shares” means, the Common Shares, the Class A Shares, the Class B Shares or
the Class C Shares, collectively or individually, as the context requires;






	 	(ll)	 	“SpinCo” means a corporation to be incorporated pursuant to the ABCA prior to
the Effective Date;






	 	(mm)	 	"SpinCo Share” means a common share in the capital of SpinCo;






	 	(nn)	 	"SpinCo Share Consideration” means the consideration in the form of one SpinCo
Share to be received by the holders of Shares pursuant to Section 3.01(a) or Section
3.01(e);






	 	(oo)	 	“SpinCo Warrant” means a share purchase warrant entitling the holder thereof to
purchase one SpinCo Share at a price of $2.50 until the date which is three months from
the Effective Date in accordance with the terms and conditions of a warrant indenture
to be entered between SpinCo and a trust corporation;






	 	(pp)	 	"SpinCo Warrant Consideration” means the consideration in the form of one tenth
of a SpinCo Warrant to be received by the holders of Shares pursuant to Section 3.01(a)
or Section 3.01(e);






	 	(qq)	 	“Subsequent Transactions” means the transactions to be effected sequentially
forthwith after the Effective Time to: (i) issue additional common shares of
WesternZagros to Western for cash subscription proceeds of $81,533,877; (ii) transfer
all of the issued and outstanding shares of WesternZagros to SpinCo in consideration
for the issuance by SpinCo of redeemable preferred shares in the capital of SpinCo;
(iii) cause the redemption or purchase for cancellation of such SpinCo redeemable
preferred shares in consideration for the issuance of a demand non-interest bearing
promissory note of SpinCo; (iv) cause the redemption or purchase for cancellation of
the Class B Shares in consideration of the cancellation of such SpinCo promissory note;
and (v) cause the redemption or purchase for cancellation of the Class C Shares in
consideration of the payment by Western to SpinCo of $1,000,000.






	 	(rr)	 	"Western” means Western Oil Sands Inc., a corporation amalgamated under the
ABCA; and






	 	(ss)	 	"WesternZagros” means WesternZagros Resources Inc., a corporation incorporated
pursuant to the ABCA.





1.02 The division of this Plan of Arrangement into articles, sections and subsections and the
insertion of headings are for convenience of reference only and shall not affect the construction
or interpretation of this Plan of Arrangement.



1.03 Unless reference is specifically made to some other document or instrument, all references
herein to articles, sections and subsections are to articles, sections and subsections of this Plan
of Arrangement.



1.04 Unless the context otherwise requires, words importing the singular number shall include the
plural and vice versa; words importing any gender shall include all genders; and words importing
persons shall include individuals, partnerships, associations, corporations, funds, unincorporated
organizations, governments, regulatory authorities, and other entities.



1.05 Unless otherwise specified, all references to “dollars” or “$” shall mean Canadian dollars.



1.06 The following appendix to this Plan of Arrangement is incorporated by reference herein and
forms part of this Plan of Arrangement.




Appendix A — Exchangeable Share Terms



1.07 In the event that the date on which any action is required to be taken hereunder by any
of the parties is not a business day in the place where the action is required to be taken, such
action shall be required to be taken on the next succeeding day which is a business day in such
place.



1.08 References in this Plan of Arrangement to any statute or sections thereof shall include such
statute as amended or substituted and any regulations promulgated thereunder from time to time in
effect.



ARTICLE II




ARRANGEMENT AGREEMENT




2.01 This Plan of Arrangement is made pursuant and subject to the provisions of the Arrangement
Agreement.



2.02 This Plan of Arrangement, upon the filing of the Articles of Arrangement and the issue of the
Certificate, will become effective on, and be binding on and after, the Effective Time on: (i) the
Shareholders; (ii) Western; (iii) WesternZagros; (iv) SpinCo; (v) Marathon; and (vi) AcquisitionCo.



2.03 The Articles of Arrangement and Certificate shall be filed and issued, respectively, with
respect to this Arrangement in its entirety. The Certificate shall be conclusive evidence that the
Arrangement has become effective and that each of the provisions of Article 3 has become effective
in the sequence and at the times set out therein.



ARTICLE III




ARRANGEMENT




3.01 Commencing at the Effective Time, each of the events set out below shall occur and shall be
deemed to occur in the following order without any further act or formality except as otherwise
provided herein:




	 	(a)	 	each issued and outstanding Common Share held by a Non-Resident (other than
Common Shares held by Dissenting Shareholders) shall be exchanged with AcquisitionCo
for either Cash Consideration or Marathon Share Consideration in accordance with the
election of such Non-Resident pursuant to Section 3.02 and subject, in either case, to
prorating in accordance with Section 3.03; and as additional consideration for such
Common Share, AcquisitionCo shall deliver to such Non-Resident, the SpinCo Share
Consideration and SpinCo Warrant Consideration pursuant to Section 3.01(f);






	 	(b)	 	the articles of Western shall be amended to change its authorized capital by
the addition of:






	 	(i)	 	an unlimited number of shares designated as “Class A Shares”,
having the following rights, privileges, restrictions and conditions attaching
thereto:






	 	(A)	 	Dividends: The holders of the Class A
Shares are entitled to receive dividends, if, as and when declared by
the board of directors of Western, out of the assets of Western
properly applicable to the payment of dividends in such amounts and
payable at such times and at such place or places in Canada as the
board of directors may from time to time determine. Subject to the
rights of the holders of any other class of shares of Western entitled
to receive dividends in priority to or rateably with the Class A
Shares, the board of directors may in its sole discretion declare
dividends on the Class A Shares to the exclusion of any other class of
            shares of Western;






	 	(B)	 	Voting Rights: The holders of the Class
A Shares are entitled to receive notice of and to attend all annual and
special meetings of the shareholders of Western, and to one vote at all
such meetings in respect of each Class A Share held; and






	 	(C)	 	Participation upon Liquidation, Dissolution
or Winding-Up: In the event of the liquidation, dissolution or
winding-up of Western or other distribution of assets of Western among
its shareholders for the purpose of winding-up its affairs, the holders
of the Class A Shares shall, subject to the rights of the holders of
any other class of shares of Western upon such a distribution in
priority to the Class A Shares, be entitled to participate rateably in
any distribution of the assets of Western;






	 	(ii)	 	an unlimited number of shares designated as “Class B Shares”,
having the following rights, privileges, restrictions and conditions attaching
thereto:






	 	(A)	 	Dividends: The holders of the Class B
Shares are entitled to receive dividends, if, as and when declared by
the board of directors of Western, out of the assets of Western
properly applicable to the payment of dividends in such amounts and
payable at such times and at such place or places in Canada as the
board of directors may from time to time determine. Subject to the
rights of the holders of any other class of shares of Western entitled
to receive dividends in priority to or rateably with the Class B
Shares, the board of directors may in its sole discretion declare
dividends on the Class B Shares to the exclusion of any other class of
            shares of Western;






	 	(B)	 	No Voting Rights: Subject to the
provisions of the ABCA, the holders of the Class B Shares shall not be
entitled as such to receive notice of or to attend or to vote at any
meeting of the shareholders of Western;






	 	(C)	 	Participation upon Liquidation, Dissolution
or Winding-Up: In the event of the liquidation, dissolution or
winding-up of Western or other distribution of assets of Western among
its shareholders for the purpose of winding-up its affairs, the holders
of the Class B Shares shall be entitled, in priority to the holders of
any other class of shares of Western, to receive an amount per Class B
Share equal to the Class B Redemption Amount. After such distribution
to the holders of the Class B Shares as provided above, holders of
Class B Shares shall not be entitled to share in any further
distribution of the assets of Western;






	 	(D)	 	Redemption at the Option of Western:
Subject to applicable law, Western may redeem all, but not less than
all, of the then outstanding Class B Shares on delivery to the holders
of the Class B Shares of a redemption price per Class B Share equal to
the Class B Redemption Amount; and






	 	(E)	 	Redemption at the Option of Holder:
Subject to applicable law, the holder of a Class B Share may require
Western to redeem all, but not less than all, of the then outstanding
Class B Shares held by such holder on delivery to such holder of a
redemption price per Class B Share equal to the Class B Redemption
Amount; and






	 	(iii)	 	an unlimited number of shares designated as “Class C Shares”,
having the following rights, privileges, restrictions and conditions attaching
thereto:






	 	(A)	 	Dividends: The holders of the Class C
Shares shall not be entitled to receive dividends;






	 	(B)	 	No Voting Rights: Subject to the
provisions of the ABCA, the holders of the Class C Shares shall not be
entitled as such to receive notice of or to attend or to vote at any
meeting of the shareholders of Western;






	 	(C)	 	Participation upon Liquidation, Dissolution
or Winding-Up: In the event of the liquidation, dissolution or
winding-up of Western or other distribution of assets of Western among
its shareholders for the purpose of winding-up its affairs, the holders
of the Class C Shares shall be entitled, subject to the rights of the
holders of the Class B Shares, to receive an amount per Class C Share
equal to the Class C Redemption Amount. After such distribution to the
holders of the Class C Shares as above, holders of Class C Shares shall
not be entitled to share in any further distribution of the assets of
Western;






	 	(D)	 	Redemption at the Option of Western:
Subject to applicable law, Western may redeem all, but not less than
all, of the then outstanding Class C Shares on delivery to the holders
of the Class C Shares of a redemption price per Class C Share equal to
the Class C Redemption Amount; and






	 	(E)	 	Redemption at the Option of Holder:
Subject to applicable law, the holder of a Class C Share may require
Western to redeem all, but not less than all, of the then outstanding
Class C Shares held by such holder on delivery to such holder of a
redemption price per Class C Share equal to the Class C Redemption
Amount;






	 	(c)	 	the share capital of Western shall be reorganized such that each of the issued
and outstanding Common Shares (other than Common Shares held by Dissenting
Shareholders) shall be exchanged for one Class A Share, one Class B Share and one Class
C Share;






	 	(d)	 	each issued and outstanding Class B Share shall be transferred to SpinCo in
exchange for the issuance of the SpinCo Share Consideration;






	 	(e)	 	each issued and outstanding Class C Share shall be transferred to SpinCo in
exchange for the issuance of the SpinCo Warrant Consideration;






	 	(f)	 	AcquisitionCo shall deliver to each Non-Resident whose Common Shares were
exchanged pursuant to Section 3.01(a) such number of SpinCo Shares and SpinCo Warrants
as are deliverable to such Non-Resident pursuant to Section 3.01(a);






	 	(g)	 	each issued and outstanding Class A Share (other than those held by
AcquisitionCo and Dissenting Shareholders) shall be exchanged with AcquisitionCo in
accordance with the election or deemed election of the holder of such Class A Share in
accordance with Section 3.02, for:






	 	(i)	 	Cash Consideration;





	 	 	 
	(ii)

(iii)

(iv)

	 	Marathon Share Consideration;

Exchangeable Share Consideration; or

a combination thereof;







subject, in each case, to Section 3.03;



3.02 With respect to the exchange of securities effected pursuant to Section 3.01(a) and
Section 3.01(g):




	 	(a)	 	Shareholders who are Non-Residents or who are exempt from tax under Part I of
the ITA may elect to receive in respect of each Share exchanged, either the Cash
Consideration or the Marathon Share Consideration;






	 	(b)	 	Shareholders who are residents of Canada for the purposes of the ITA and not
exempt from tax under Part I thereof may elect to receive in respect of each Share
exchanged, the Cash Consideration, the Marathon Share Consideration, the Exchangeable
Share Consideration or a combination thereof, subject to Section 3.03;






	 	(c)	 	such elections as provided for in paragraphs (a) and (b) above shall be made by
depositing with the Depositary, prior to the Election Deadline, a duly completed Letter
of Transmittal and Election Form indicating such holder’s election, together with any
certificates representing such holder’s Common Shares; and






	 	(d)	 	any Shareholder who does not deposit with the Depositary a duly completed
Letter of Transmittal and Election Form prior to the Election Deadline, or otherwise
fails to comply with the requirements of Section 3.02(c) and the Letter of Transmittal
and Election Form shall be deemed to have elected to receive Cash Consideration as to
65%, and Marathon Share Consideration as to 35%, subject to proration in respect of the
aggregate consideration to be provided for such holder’s Shares.





3.03 For greater certainty, with respect to any election pursuant to Section 3.02, a Shareholder
may elect to receive a combination of the available types of consideration which may be elected in
exchange for the aggregate number of Shares in respect of which such an election is made; provided
however, for calculation purposes only, each individual Common Share may be only exchanged pursuant
to Section 3.01(a) for either Cash Consideration or Marathon Share Consideration and each
individual Class A Share may only be exchanged pursuant to Section 3.01(g) for any one of the Cash
Consideration, the Marathon Share Consideration or the Exchangeable Share Consideration. The
maximum amount of Cash Consideration to be paid to Shareholders pursuant to Section 3.01(a) and
Section 3.01(g) is $3,807,847,771. The minimum number of Exchangeable Shares that may be elected
by Shareholders pursuant to Section 3.01(g) is zero. The maximum number of Exchangeable Shares
that may be elected by Shareholders pursuant to Section 3.01(g) is 29,400,000. The maximum
aggregate number of Marathon Shares and Exchangeable Shares that may be issued to Shareholders
pursuant to Section 3.01(a) and Section 3.01(g) is 34,300,000. In the event that:




	 	(a)	 	the aggregate amount of Cash Consideration that would, but for this Section
3.03(a), be issued to Shareholders pursuant to Section 3.01(a) and Section 3.01(g)
exceeds $3,807,847,771, then the Cash Consideration to be issued to any holder shall be
determined by multiplying the total amount of Cash Consideration otherwise issuable to
such holder by a fraction, rounded to six decimal places, the numerator of which is
$3,807,847,771 and the denominator of which is the aggregate amount of the Cash
Consideration otherwise issuable to all holders; and such holder shall be deemed to
have elected to receive Marathon Share Consideration for the remainder of their Shares
for which, but for this Section 3.03(a), such holder would otherwise have received Cash
Consideration;






	 	(b)	 	the aggregate number of Exchangeable Shares that would, but for this Section
3.03(b) and Section 3.03(c), be issued to Shareholders pursuant to Section 3.01(g)
exceeds 29,400,000 Exchangeable Shares, then the number of Exchangeable Shares to be
issued to any holder, subject to rounding in accordance with Section 5.06, shall be
determined by multiplying the total number of Exchangeable Shares otherwise issuable to
such holder by a fraction, rounded to six decimal places, the numerator of which is
29,400,000 and the denominator of which is the aggregate number of Exchangeable Shares
otherwise issuable to all holders; and such holder shall be deemed to have elected to
receive Marathon Share Consideration for the remainder of their Shares for which, but
for this Section 3.03(b), such holder would otherwise have received Exchangeable
Shares; and






	 	(c)	 	the aggregate number of Marathon Shares and Exchangeable Shares that would, but
for this Section 3.03(c), be issued to Shareholders pursuant to Section 3.01(a) and
Section 3.01(g) (including those Marathon Shares which Shareholders are deemed to have
elected to receive pursuant to Section 3.03(b) above) exceeds 34,300,000 Marathon
Shares and Exchangeable Shares collectively, then the number of Marathon Shares and
Exchangeable Shares to be issued to any holder, subject to rounding in accordance with
Section 5.06, shall be determined by multiplying the total number of Marathon Shares
and Exchangeable Shares otherwise issuable to such holder by a fraction, rounded to six
decimal places, the numerator of which is 34,300,000 and the denominator of which is
the aggregate number of Marathon Shares and Exchangeable Shares otherwise issuable to
all holders; and such holder shall be deemed to have elected to receive Cash
Consideration for the remainder of their Shares for which, but for this Section
3.03(c), such holder would otherwise have received Marathon Shares and Exchangeable
Shares.





3.04 With respect to each holder of Common Shares (other than Dissenting Shareholders) immediately
before the Effective Time:




	 	(a)	 	upon the exchange of each Common Share effected pursuant to Section 3.01(a) and
the delivery of the SpinCo Share Consideration and SpinCo Warrant Consideration
pursuant to Section 3.01(f);






	 	(i)	 	such holder shall cease to be a holder of such Common Share and
the name of such holder shall be removed from the register of holders of Common
Shares;






	 	(ii)	 	AcquisitionCo shall become the holder of such Common Shares and
shall be added to the register of holders of Common Shares;






	 	(iii)	 	AcquisitionCo shall pay to such holder the Cash Consideration
or deliver the Marathon Share Consideration payable to such holder and, if
Marathon Share Consideration is payable, the name of such holder shall be added
to the register of holders of Marathon Shares;






	 	(iv)	 	AcquisitionCo shall cease to be the holder of the SpinCo Share
and SpinCo Warrant deliverable in respect of such Common Share and the name of
AcquisitionCo shall be removed from the register of holders of SpinCo Shares
and SpinCo Warrants;






	 	(v)	 	such holder shall become the holder of the SpinCo Share so
deliverable and shall be added to the register of holders of SpinCo Shares; and






	 	(vi)	 	such holder shall become the holder of the SpinCo Warrant so
deliverable and shall be added to the register of holders of SpinCo Warrants;






	 	(b)	 	upon the exchange of Common Shares for Class A Shares, Class B Shares and Class
C Shares pursuant to Section 3.01(c):






	 	(i)	 	each such Common Share shall and shall be deemed to be
exchanged as described in subsection 3.01(c) without any further action being
taken by the holder thereof;






	 	(ii)	 	the holders of such Common Shares shall cease to be the holders
of such Common Shares and such holders’ names shall be removed from the
register of Common Shares with respect to all such Common Shares;






	 	(iii)	 	each holder of such Common Shares thereafter shall and shall
be deemed to hold as fully paid and non-assessable shares a number of Class A
Shares equal to the number of Common Shares previously held by such holder and
such holder’s name shall be added to the register of Class A Shares as
registered holder of such shares and the share certificate representing Common
Shares shall represent Class A Shares of the same number after the above
described change as the number of Common Shares it represented before the
change;






	 	(iv)	 	each holder of such Common Shares thereafter shall and shall be
deemed to hold as fully paid and non-assessable shares a number of Class B
Shares equal to the number of Common Shares previously held by such holder and
such holder’s name shall be added to the register of Class B Shares as
registered holder of such shares and the share certificate representing Common
Shares shall represent Class B Shares of the same number after the above
described change as the number of Common Shares it represented before the
change;






	 	(v)	 	each holder of such Common Shares thereafter shall and shall be
deemed to hold as fully paid and non-assessable shares a number of Class C
Shares equal to the number of Common Shares previously held by such holder and
such holder’s name shall be added to the register of Class C Shares as
registered holder of such shares and the share certificate representing Common
Shares shall represent Class C Shares of the same number after the above
described change as the number of Common Shares it represented before the
change;






	 	(vi)	 	immediately after the exchange of the Common Shares for Class
A, Class B and Class C Shares, the stated capital of the Class A Shares, Class
B Shares and the Class C Shares shall be determined as follows:






	 	(A)	 	the aggregate stated capital for the Class A
Shares shall be an amount equal to $1.00;






	 	(B)	 	the aggregate stated capital for the Class B
Shares shall be an amount equal to the stated capital of the Common
Shares immediately before the Effective Time minus $1,000,001; and






	 	(C)	 	the aggregate stated capital for the Class C
Shares shall be an amount equal to $1,000,000; and






	 	(vi)	 	all references to a Common Share in the articles of Western
shall be deemed to be references to one Class A Share, one Class B Share and
one Class C Share;






	 	(c)	 	upon the exchange of Class B Shares for SpinCo Shares effected pursuant to
subsection 3.01(d):






	 	(i)	 	each holder of Class B Shares shall cease to be a holder of
Class B Shares and the name of such holder shall be removed from the register
of holders of Class B Shares;






	 	(ii)	 	SpinCo shall become the holder of the Class B Shares so
exchanged and shall be added to the register of holders Class B Shares;






	 	(iii)	 	SpinCo shall allot and issue to such holder the number of
SpinCo Shares on the basis set forth in subsection 3.01(d) and the name of such
holder shall be added to the register of holders of SpinCo Shares; and






	 	(iv)	 	SpinCo shall add to the aggregate stated capital for its SpinCo
Shares an amount equal to the Class B Aggregate Redemption Amount;






	 	(d)	 	upon the exchange of Class C Shares for SpinCo Warrants effected pursuant to
subsection 3.01(e):






	 	(i)	 	each holder of Class C Common Shares shall cease to be a holder
of Class C Shares and the name of such holder shall be removed from the
register of holders of Class C Shares;






	 	(ii)	 	SpinCo shall become the holder of the Class C Shares so
exchanged and shall be added to the register of holders of Class C Shares; and






	 	(iii)	 	SpinCo shall allot and issue to such holder the number of
SpinCo Warrants on the basis set forth in subsection 3.01(e) and the name of
such holder shall be added to the register of holders of SpinCo Warrants; and






	 	(e)	 	upon the exchange of Class A Shares by a holder pursuant to subsection 3.01(g):






	 	(i)	 	such holder shall cease to be a holder of Class A Shares and
the name of such holder shall be removed from the register of holders of Class
A Shares;






	 	(ii)	 	AcquisitionCo shall become the holder of the Class A Shares so
exchanged and shall be added to the register of holders Class A Shares; and






	 	(iii)	 	AcquisitionCo shall pay to such holder the Cash Consideration,
deliver the Marathon Share Consideration or allot and issue the Exchangeable
Share Consideration payable to such holder as required and, if Marathon Share
Consideration is payable, the name of such holder shall be added to the
register of holders of Marathon Shares, and if Exchangeable Share Consideration
is payable, the name of such holder shall be added to the register of holders
of Exchangeable Shares.





3.05 A former holder of Class A Shares who (i) has exchanged Class A Shares under the Arrangement;
and (ii) has received Exchangeable Shares in whole or in part under the exchange; shall be entitled
to make an income tax election, pursuant to subsection 85(1) or 85(2) of the ITA, as applicable
(and the analogous provisions of provincial income tax law) with respect to the transfer by the
holder of Class A Shares, as applicable, to AcquisitionCo by providing two signed copies of the
necessary election forms to Western within 120 days following the Effective Date, duly completed
with the details of the number of shares transferred and the applicable agreed amounts for the
purposes of such elections. Thereafter, subject to the election forms complying with the provisions
of the ITA (or applicable provincial income tax law), the forms will be signed by AcquisitionCo and
returned to such former holders of Class A Shares within 30 days after the receipt thereof by
Western for filing with the Canada Revenue Agency (or the applicable provincial taxing authority).
AcquisitionCo and Western will not be responsible for the proper completion of any election form
and, except for the obligation of AcquisitionCo and Western to so sign and return duly completed
election forms which are received by Western within 120 days of the Effective Date, AcquisitionCo
and Western will not be responsible for any taxes, interest or penalties resulting from the failure
by a former holder of Class A Shares to properly complete or file the election forms in the form
and manner and within the time prescribed by the ITA (or any applicable provincial legislation). In
its sole discretion, AcquisitionCo and Western may choose to sign and return an election form
received by it more than 120 days following the Effective Date, but AcquisitionCo and Western will
have no obligation to do so.



3.06 Western, AcquisitionCo, Marathon and the Depositary shall be entitled to deduct and withhold
from any dividend or consideration otherwise payable to any holder of Common Shares, Marathon
Shares or Exchangeable Shares such amounts as Western, AcquisitionCo, Marathon or the Depositary is
required to deduct and withhold with respect to such payment under the ITA, the United States
Internal Revenue Code of 1986 or any provision of federal, provincial, territorial, state, local or
foreign tax law. To the extent that amounts are so withheld, such withheld amounts shall be
treated for all purposes hereof as having been paid to the holder of the shares in respect of which
such deduction and withholding was made, provided that such withheld amounts are actually remitted
to the appropriate taxing authority. To the extent that the amount so required to be deducted or
withheld from any payment to a holder exceeds the cash portion of the consideration otherwise
payable to the holder, Western, AcquisitionCo, Marathon and the Depositary are hereby authorized to
sell or otherwise dispose of such other portion of the consideration as is necessary to provide
sufficient funds to Western, AcquisitionCo, Marathon or the Depositary, as the case may be, to
enable it to comply with such deduction or withholding requirement and Western, AcquisitionCo,
Marathon or the Depositary shall notify the holder thereof and remit any unapplied balance of the
net proceeds of such sale.



ARTICLE IV




DISSENTING SHAREHOLDERS




4.01 Each registered holder of Common Shares shall have the right to dissent with respect to the
Arrangement in accordance with the Interim Order. A Dissenting Shareholder shall, on the Effective
Date, cease to have any rights as a holder of Common Shares and shall only be entitled to be paid
the fair value of the holder’s Common Shares. A Dissenting Shareholder who is paid the fair value
of the holder’s Common Shares shall be deemed to have transferred the holder’s Common Shares to
Western for cancellation on the Effective Date, notwithstanding the provisions of Section 191 of
the ABCA. A Dissenting Shareholder who for any reason is not entitled to be paid the fair value of
the holder’s Common Shares shall be treated as if the holder had participated in the Arrangement on
the same basis as a non-dissenting holder of Common Shares and shall be deemed to have elected to
receive for such holder’s Shares the consideration specified in Section 3.02(d), notwithstanding
the provisions of Section 191 of the ABCA. The fair value of the Common Shares shall be determined
as of the close of business on the last business day before the day on which the Arrangement is
approved by the holders of Common Shares at the Meeting; but in no event shall Western be required
to recognize such Dissenting Shareholder as a shareholder of Western after the Effective Time and
the names of such holders shall be removed from the applicable register of shareholders as at the
Effective Time. For greater certainty, in addition to any other restrictions in Section 191 of the
ABCA, any person who has voted in favour of the Arrangement shall not be entitled to dissent with
respect to the Arrangement.



ARTICLE V




OUTSTANDING CERTIFICATES AND FRACTIONAL SECURITIES




5.01 From and after the Effective Time, certificates formerly representing Common Shares acquired
by AcquisitionCo under the Arrangement shall represent only the right to receive the consideration
to which the holders are entitled under the Arrangement, or as to those held by Dissenting
Shareholders, other than those Dissenting Shareholders deemed to have participated in the
Arrangement pursuant to Section 4.01, to receive the fair value of the Common Shares represented by
such certificates.



5.02 Western, AcquisitionCo and SpinCo, as applicable, shall, as soon as practicable following the
later of the Effective Date and the date of deposit by a former holder of Common Shares acquired by
AcquisitionCo under the Arrangement of a duly completed Letter of Transmittal and Election Form and
the certificates representing such Common Shares, either:




	 	(a)	 	forward or cause to be forwarded by first class mail (postage prepaid) to such
former holder at the address specified in the Letter of Transmittal and Election Form;
or






	 	(b)	 	if requested by such holder in the Letter of Transmittal and Election Form,
make available or cause to be made available at the Depositary for pickup by such
holder;





the Cash Consideration and certificates representing the number of SpinCo Shares, SpinCo
Warrants, Marathon Shares and/or Exchangeable Shares, as applicable, issued to such holder under
the Arrangement.



5.03 If any certificate which immediately prior to the Effective Time represented an interest
in outstanding Common Shares that were exchanged pursuant to Section 3.01 has been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming such certificate to
have been lost, stolen or destroyed, the Depositary will issue and deliver in exchange for such
lost, stolen or destroyed certificate the consideration to which the holder is entitled pursuant to
the Arrangement (and any dividends with respect thereto) as determined in accordance with the
Arrangement. The person who is entitled to receive such consideration shall as a condition
precedent to the receipt thereof give a bond satisfactory to Western and its transfer agent in such
form as is satisfactory to Western and such transfer agent or otherwise indemnify Western, Marathon
and AcquisitionCo and the transfer agent, to the reasonable satisfaction of such parties, against
any claim that may be made against any of them with respect to the certificate alleged to have been
lost, stolen or destroyed.



5.04 All dividends payable with respect to any Marathon Shares, Exchangeable Shares and SpinCo
Shares allotted and issued pursuant to this Arrangement for which a certificate has not been issued
shall be paid or delivered to the Depositary to be held by the Depositary in trust for the
registered holder thereof. All monies received by the Depositary shall be invested by it in
interest-bearing trust accounts upon such terms as the Depositary may reasonably deem appropriate.
The Depositary shall pay and deliver to any such registered holder, as soon as reasonably
practicable after application therefor is made by the registered holder to the Depositary in such
form as the Depositary may reasonably require, such distributions and any interest thereon to which
such holder, is entitled, net of applicable withholding and other taxes.



5.05 Any certificate formerly representing Common Shares that is not deposited with all other
documents as required by this Plan of Arrangement on or before the sixth anniversary of the
Effective Date shall cease to represent a right or claim of any kind or nature and the right of the
holder of such Common Shares to receive the certificates representing: (i) the SpinCo Shares; (ii)
SpinCo Warrants; (iii) Marathon Shares; (iv) Exchangeable Shares; and/or (v) cash.



5.06 No certificates representing fractional Marathon Shares, Exchangeable Shares, SpinCo Shares or
SpinCo Warrants shall be issued upon the exchange of the Common Shares for Marathon Shares or
Exchangeable Shares or the distribution of SpinCo Shares and SpinCo Warrants. In lieu of any
fractional Marathon Share, Exchangeable Share, SpinCo Share or SpinCo Warrant, each registered
Common Shareholder otherwise entitled to a fractional interest in a Marathon Share, Exchangeable
Share, SpinCo Share or SpinCo Warrant will receive the nearest whole number of Marathon Shares,
Exchangeable Shares, SpinCo Shares or SpinCo Warrants, as the case may be.



ARTICLE VI




AMENDMENTS




6.01 Western, WesternZagros, Marathon and AcquisitionCo may amend, modify and/or supplement this
Plan of Arrangement at any time and from time to time prior to the Effective Time, provided that
each such amendment, modification and/or supplement must be (i) set out in writing, (ii) approved
by the other parties, (iii) filed with the Court and, if made following the Meeting, approved by
the Court, and (iv) communicated to holders of Common Shares, if and as required by the Court.



6.02 Any amendment, modification or supplement to this Plan of Arrangement may be proposed by
Western, WesternZagros, Marathon or AcquisitionCo at any time prior to or at the Meeting (provided
that the other parties shall have consented thereto) with or without any other prior notice or
communication, and if so proposed and accepted by the persons voting at the Meeting (other than as
may be required under the Interim Order), shall become part of this Plan of Arrangement for all
purposes.



6.03 Any amendment, modification or supplement to this Plan of Arrangement that is approved by the
Court following the Meeting shall be effective only if it is consented to by each of Western,
WesternZagros, Marathon and AcquisitionCo.



6.04 Any amendment, modification or supplement to this Plan of Arrangement may be made following
the Effective Time unilaterally by Western, provided that it concerns a matter which, in the
reasonable opinion of Western, is of an administrative nature required to better give effect to the
implementation of this Plan of Arrangement and is not adverse to the financial or economic
interests of Western or any former holder of Common Shares.



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APPENDIX A




EXCHANGEABLE SHARES




TERM SHEET




	 	 	 
	Designation:

	 	Exchangeable Shares (non-voting redeemable preferred

shares) of a direct or indirect Canadian subsidiary

(“Purchaser”) of Marathon Oil Corporation (“Parent”).
	Basic Right:

	 	Exchangeable at any time on a one-for-one basis directly

for freely-trading shares of common stock of Parent

(“Parent Shares”), subject to adjustment.
	Dividends:

	 	Dividends will be payable on the Exchangeable Shares, if,

as and when declared by the board of directors of

Purchaser.
	Parent Dividends:

	 	In the event, from time to time, a cash dividend is paid

on the Parent Shares, the dividend paid shall be

evidenced by the adjustment of the Exchangeable

Consideration (as defined below) in such a manner as to

provide that the number of Parent Shares for which the

Exchangeable Shares are exchangeable shall be increased

to account for the cash dividend declared on the Parent

Shares on an economically equivalent basis.
	Retraction:

	 	Each Exchangeable Share is retractable at any time at the

option of the holder for an amount equal to the fair

market value of one Parent Share on the retraction date,

subject to adjustment, payment of which amount shall be

satisfied by the delivery to the holder of one Parent

Share (the “Exchangeable Consideration”), subject to

adjustment and subject to an overriding retraction call

right exercisable by Parent and any of its direct and

indirect subsidiaries by delivery of the Exchangeable

Consideration in exchange for the retracted Exchangeable

Shares.
	Exchange Right:

	 	Parent shall grant a direct exchange right to a trustee

pursuant to the terms of a Voting and Exchange Trust

Agreement for the benefit of the holders of Exchangeable

Shares.
	Liquidation:

	 	On liquidation of Purchaser, each Exchangeable Share

entitles the holder to receive the Exchangeable

Consideration in priority to any distribution made to the

common shares of Purchaser and all other classes of

shares ranking junior to the Exchangeable Shares, subject

to a liquidation call right exercisable by Parent and any

of its direct and indirect subsidiaries. On exercise of

the liquidation call right, Parent will pay the holder

the Exchangeable Consideration. In addition, an

automatic exchange right in the event of liquidation of

Parent will be granted by Parent to a trustee for the

benefit of holders of Exchangeable Shares pursuant to the

terms of the Voting and Exchange Trust Agreement.
	Redemption:

	 	Exchangeable Shares are not redeemable by Purchaser for

four years after closing. Automatic redemption after the

fourth anniversary date of closing, subject to extension

at the option of Purchaser. Redeemed by delivery of the

Exchangeable Consideration, subject to an overriding

redemption call right in favour of Parent and its direct

and indirect subsidiaries, exercisable by delivery of the

Exchangeable Consideration in exchange for the

Exchangeable Shares. There is also the possibility of an

earlier redemption by the Purchaser in the following

limited circumstances: (a) less than 20% of the

Exchangeable Shares remain outstanding, (b) change of

Canadian tax laws enabling holders to defer taxable event

notwithstanding exchange of the Exchangeable Shares for

Parent Shares, (c) a Parent control transaction where it

is not reasonably practicable to accommodate the

Exchangeable Shares, and (d) the occurrence of certain

events which would otherwise entitle the holders of

Exchangeable Shares to vote as shareholders of Purchaser

where it is not reasonably practicable to accommodate the

Exchangeable Shares or where the holders of Exchangeable

Shares fail to take the necessary action to approve or

disapprove of the matter to be voted on by the holders of

Exchangeable Shares.
	Voting Rights:

	 	Holders of Exchangeable Shares will have equivalent

voting rights to holders of Parent Shares. These rights

will be represented in a special Parent voting preferred

share issued to a trustee for the benefit of holders of

Exchangeable Shares. Holders of Exchangeable Shares will

have no voting rights in Purchaser, except as required by

law in connection with certain extraordinary transactions

or fundamental changes to Purchaser.
	Information Rights:

	 	Holders of Exchangeable Shares will be entitled to

receive substantially the same materials that are

distributed by Parent to holders of Parent Shares.
	Ranking:

	 	Exchangeable Shares rank in priority to the common shares

of Purchaser and all other classes of shares of Purchaser

ranking junior to the Exchangeable Shares as to dividends

and any other distributions.
	Other:

	 	Support Agreement between Parent and Purchaser and Voting

and Exchange Trust Agreement between Parent and the

trustee for the benefit of the holders of Exchangeable

Shares, each on terms and conditions customary for

transactions of this nature.







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