kodiaksb2ex10-6.htm


    
      

      

    

    Exhibit
      10.6

     

    AGENCY
      AGREEMENT

     

    October
      30, 2007

     

    Kodiak
      Energy, Inc.

    Suite
      460, 734 – 7th Avenue
      SW

    Calgary
      Alberta  T2P 3P6

     

    
      	
              Attention:

            	
              Mr. Mark
                Hlady

            


    

    Chairman
      and Chief Executive Officer

     

    Dear
      Sir:

     

    
      	
              Re:

            	
              Private
                Placement of Common Shares and “Flow-Through” Common
                Shares

            


    

    

      Research
        Capital Corporation (the “Agent”) understands that Kodiak
        Energy, Inc. (the “Corporation”) proposes to issue and sell up
        to US$9,000,000 worth of  common shares of the Corporation (the
“Offered Common Shares”) or common shares of the Corporation
        issued on a “flow-through” basis pursuant to the Tax Act (as defined below) (the
“Flow-Through Shares”), or a combination thereof.

       

      Subject
        to the terms and conditions hereof, the Agent agrees to act as, and the
        Corporation appoints the Agent as, the sole and exclusive agent of the
        Corporation to offer the Offered Securities (as defined below) for sale on
        the
        Closing Date in the Selling Jurisdictions (as defined below) on a private
        placement basis at a price of US$2.50 per Offered Common Share and US$3.00
        per
        Flow-Through Share and to use its best efforts to secure subscriptions
        therefor.  The Corporation acknowledges and agrees that the Agent may,
        but is not obligated to, purchase any of the Offered Securities as
        principal.

    

     

    The
      Agent
      shall be entitled in connection with the offering and sale of the Offered
      Securities to retain as sub agents other registered securities dealers and
      may
      receive (for delivery to the Corporation at the Closing Time (as defined below))
      subscriptions for Offered Securities from Subscribers (as defined below) from
      other registered dealers.  The fee payable to such sub agents shall be
      for the account of the Agent.

     

    In
      consideration for its services hereunder, including the ancillary service of
      acting as financial advisor to the Corporation in respect of the issue of the
      Offered Securities and advising on the terms and conditions of the subject
      private placement, the Agent shall be entitled to the commissions provided
      for
      in paragraph 9, which commissions shall be payable from the general
      corporate funds of the Corporation at the time specified in
      paragraph 9.  For greater certainty, the services provided by the
      Agent in connection herewith will not be subject to the Goods and Services
      Tax
      provided for in the Excise Tax Act (Canada) and taxable supplies
      provided will be incidental to the exempt financial services provided. The
      Agent
      is also entitled to the Agent’s Warrants (as defined below) provided for in
      paragraph 9.

     

    


     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      2
      -

     

     

    The
      Corporation hereby grants to the Agent an option (the “Over-Allotment
      Option”), at the Agent’s election exercisable at any time and from time
      to time up to the Closing Time, to arrange for the issuance and sale of up
      to an
      additional 1,200,000 Offered Common Shares (the “Over-Allotment
      Shares”) for the purpose of covering over-allotments, if any, at the
      purchase price of US$2.50 per Over-Allotment Share.

     

    
      	
              1.

            	
              Definitions

            


    

     

    In
      this
      Agreement:

     

    
      	
               

            	
              (a)

            	
              “Act”
                means the Income Tax Act (Canada), together with any and all
                regulations promulgated thereunder, as amended from time to
                time;

            


    

     

    
      	
               

            	
              (b)

            	
              “Agent’s
                counsel” means Stikeman Elliott LLP or such other legal counsel
                as the Agent, with the consent of the Corporation, may
                appoint;

            


    

     

    
      	
               

            	
              (c)

            	
              “Agent’s
                Warrants” shall have the meaning ascribed thereto in
                paragraph 9 of this Agreement;

            


    

     

    
      	
               

            	
              (d)

            	
              “Alternative
                Transaction” means any equity or debt financing, merger,
                amalgamation, arrangement, business combination, take-over bid, insider
                bid, issuer bid, reorganization, joint venture, sale or exchange
                of all or
                substantially all of the assets or Common Shares of the Corporation
                or any
                similar transaction involving the Corporation with any arm’s length party
                that is introduced to the Corporation by the Agent in the course
                of the
                offering of Offered Securities;

            


    

     

    
      	
               

            	
              (e)

            	
              “Applicable
                Securities Laws” means all applicable securities, corporate and
                other laws, rules, regulations, notices and policies applicable in
                the
                Selling Jurisdictions and in the United States, and all notices,
                blanket
                orders, blanket rulings, rules and policies of the Exchange, the
                Securities Commissions and the United States Securities and Exchange
                Commission;

            


    

     

    
      	
               

            	
              (f)

            	
              “Business
                Day” means a day which is not Saturday or Sunday or a legal
                holiday in the City of Calgary,
                Alberta;

            


    

     

    
      	
               

            	
              (g)

            	
              “Canadian
                Development Expense” or “CDE” means Canadian
                development expense described in paragraphs (a) or (b) of the definition
                of “Canadian development expense” in subsection 66.2(5) of the Act or that
                would be described in paragraph (f) of such definition if the words
                “paragraphs (a) to (e)” in that paragraph were read as “paragraphs (a) and
                (b)”, excluding amounts which are prescribed to constitute “Canadian
                exploration and development overhead expense” under the Act and the amount
                of any assistance described in paragraph 66(12.62)(a)
                or  66(12.601)(c) of the
                Act;

            


    

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    - 3
      -

     

    


    
      	
               

            	
              (h)

            	
              “Canadian
                Exploration Expense” or “CEE” means expenses
                described in paragraph (a) or (d) of the definition of “Canadian
                exploration expense” in subsection 66.1(6) of the Act or that would
                be described in paragraph (h) of such definition if the words
                “paragraphs (a) to (d) and (f) to (g.1)” were read as
                “paragraphs (a) and (d)”, excluding amounts which are prescribed to
                constitute “Canadian exploration and development overhead expense” under
                the Act, the amount of any assistance described in
                paragraph 66(12.6)(a) of the Act, and any other expense described in
                paragraph 66(12.6)(b.1) of the
                Act;

            


    

     

    
      	
               

            	
              (i)

            	
              “Cash
                Penalty” shall have the meaning ascribed thereto in
                subparagraph 2(i) of this
                Agreement;

            


    

     

    
      	
               

            	
              (j)

            	
              “CRA”
                means the Canada Revenue Agency;

            


    

     

    
      	
               

            	
              (k)

            	
              “Closing
                Date” means October 30, 2007 or such other date as the Agent and
                the Corporation may agree and, as the context requires, such subsequent
                dates as the Agent and the Corporation agree for the purpose of completing
                subsequent closings;

            


    

     

    
      	
               

            	
              (l)

            	
              “Closing
                Time” means 7:00 a.m. (Calgary time) or such other time on a
                Closing Date as the Agent and the Corporation may
                agree;

            


    

     

    
      	
               

            	
              (m)

            	
              “Commitment
                Amount” means the amount equal to US$3.00 multiplied by the
                number of Flow-Through Shares subscribed and paid for pursuant to
                the
                applicable Flow-Through Subscription
                Agreement;

            


    

     

    
      	
               

            	
              (n)

            	
              “Common
                Shares” means the common shares in the capital of the
                Corporation;

            


    

     

    
      	
               

            	
              (o)

            	
              “Corporation”
                means Kodiak Energy, Inc.;

            


    

     

    
      	
               

            	
              (p)

            	
              “Corporation’s
                counsel” means Borden Ladner Gervais LLP in Canada Golenbock
                Eiseman Assor Bell and Peskoe in the United States or such other
                legal
                counsel as the Corporation, with the consent of the Agent, may
                appoint;

            


    

     

    
      	
               

            	
              (q)

            	
              “Corporation’s
                Subsidiaries” has the meaning ascribed thereto in
                subparagraph 6(c) of this
                Agreement;

            


    

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      4
      -

     

     

    
      	
               

            	
               (r)

            	
              “Directed
                Selling Efforts” means “directed selling efforts” as that term is
                defined in Rule 902 of Regulation S.  Without limiting
                the foregoing, but for greater clarity, such term means, subject
                to the
                exclusions from the definition of “directed selling efforts” contained in
                Regulation S, any activity undertaken for the purpose of, or that
                could
                reasonably be expected to have the effect of, conditioning the market
                in
                the United States for any of the Offered Securities and includes,
                without
                limitation, the placement of any advertisement in a publication with
                a
                general circulation in the United States that refers to the offering
                of
                any of the Offered Securities;

            


    

     

    
      	
               

            	
              (s)

            	
              “Documents”
                means, collectively:

            


    

     

    
      	
               

            	
              (i)

            	
              the
                proxy statement of the Corporation dated July 11, 2007 relating to
                the annual meeting of shareholders of the Corporation held on
                August 7, 2007 (including without limitation those Annexes attached
                to the proxy statement);

            


    

     

    
      	
               

            	
              (ii)

            	
              Form 10-QSB
                – Quarterly Report under Section 13 or 15(d) of the U.S. Securities
                Act for the quarterly periods ended March 31, 2007 and June 30,
                2007;

            


    

     

    
      	
               

            	
              (iii)

            	
              Form 10-KSB
                - Annual Report under Section 13 or 15(d) of the U.S. Securities Act
                for the fiscal year ended December 31,
                2006;

            


    

     

    
      	
               

            	
              (iv)

            	
              Form 51-101F3
                – Report of Management and Directors on Reserves Data and Other
                Information dated July 18, 2007 for the year ended December 31,
                2006;

            


    

     

    
      	
               

            	
              (v)

            	
              Form 51-101F2
                – Report on Reserves Data by an Independent Qualified Reserves Evaluator
                dated July 18, 2007 as prepared by Trimble Engineering Associates
                Ltd.;

            


    

     

    
      	
               

            	
              (vi)

            	
              Form 51-101F1
                – Statement of Reserves Data and Other Oil and Gas Information dated
                May 22, 2007 for the year ended December 31,
                2006;

            


    

     

    
      	
               

            	
              (vii)

            	
              all
                press releases released by the Corporation since January 1, 2006;
                and

            


    

     

    
      	
               

            	
              (viii)

            	
              all
                material change reports or Form 8-K Current Reports pursuant to
                Section 13 or 15(d) of the U.S. Securities Act filed by the
                Corporation since January 1,
                2007;

            


    

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      5
      -

     

     

    
      	
               

            	
               (t)

            	
              “Environmental
                Laws” shall have the meaning ascribed thereto in
                subparagraph 6(ee) of this
                Agreement;

            


    

     

    
      	
               

            	
              (u)

            	
              “Environmental
                Permits” shall have the meaning ascribed thereto in
                subparagraph 6(ff) of this
                Agreement;

            


    

     

    
      	
               

            	
              (v)

            	
              “Exchange”
                means the TSX Venture Exchange
                Inc.;

            


    

     

    
      	
               

            	
              (w)

            	
              “Expenditure
                Period” means the period commencing on the Closing Date and
                ending on the earlier of:

            


    

     

    
      	
               

            	
              (i)

            	
              the
                date on which the Commitment Amount has been fully expended in accordance
                with the terms of the Flow-Through Subscription Agreements;
                and

            


    

     

    
      	
               

            	
              (ii)

            	
              December 31,
                2008;

            


    

     

    
      	
               

            	
              (x)

            	
              “Financial
                Statements” means, the consolidated financial statements of the
                Corporation for the six month period ended June 30, 2007 and the
                audited consolidated financial statements of the Corporation as at
                December 31, 2006;

            


    

     

    
      	
               

            	
              (y)

            	
              “Forward-looking
                Statement” shall have the meaning ascribed thereto in
                subparagraph 6(uu);

            


    

     

    
      	
               

            	
              (z)

            	
              “Flow-Through
                Subscription Agreement” means the agreement entered into by a
                Subscriber for Flow-Through Shares relating to a subscription for
                Flow-Through Shares which is accepted by the
                Corporation;

            


    

     

    
      	
               

            	
              (aa)

            	
              “Indemnified
                Parties” shall have the meaning ascribed thereto in
                paragraph 16 of this
                Agreement;

            


    

     

    
      	
               

            	
              (bb)

            	
              “Indemnitor”
                shall have the meaning ascribed thereto in paragraph 16 of this
                Agreement;

            


    

     

    
      	
               

            	
              (cc)

            	
              “Interests”
                shall have the meaning ascribed thereto in subparagraph 6(oo) of this
                Agreement;

            


    

     

    
      	
            	
              (dd)

            	
              “Liabilities”
                shall have the meaning ascribed thereto in paragraph 16 of this
                Agreement;

            


    

     

    
      	
               

            	
              (ee)

            	
              “OFAC”
                shall have the meaning ascribed thereto in subparagraph 6(ddd) of
                this Agreement;

            


    

     

    
      	
               

            	
              (ff)

            	
              “Offered
                Common ShareSubscription Agreement” means the
                agreement entered into by a Subscriber for Offered Common Shares
                relating
                to a subscription for Offered Common Shares which is accepted by
                the
                Corporation;

            


    

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      6
      -

    


     

    
      	
            	
               (gg)

            	
              “Offered
                Securities” means, collectively, the Offered Common Shares and
                the Flow-Through Shares and, to the extent the Over-Allotment Option
                has
                been or may still be validly exercised, also includes the Over-Allotment
                Shares;

            


    

     

    
      	
               

            	
              (hh)

            	
              “OTCBB”
                means the NASDAQ Over-The-Counter Bulletin
                Board;

            


    

     

    
      	
               

            	
              (ii)

            	
              “principal
                business corporation” means a principal business corporation as
                defined in subsection 66(15) of the
                Act;

            


    

     

    
      	
               

            	
              (jj)

            	
              “Proceedings”
                shall have the meaning ascribed thereto in paragraph 16 of this
                Agreement;

            


    

     

    
      	
               

            	
              (kk)

            	
              “Public
                Record” means all information filed by or on behalf of the
                Corporation with the securities commissions of the province of Alberta,
                and the Securities and Exchange Commission in the United States,
                including
                without limitation, the Documents and any other information filed
                with any
                securities commission in compliance, or intended compliance, with
                any
                Applicable Securities Laws;

            


    

     

    
      	
               

            	
              (ll)

            	
              “Qualifying
                CDE” means an amount of CDE incurred by the Corporation which
                is
                eligible for renunciation as CEE under Subsection 66(12.601) of the
                Act;

            


    

     

    
      	
            	
              (mm)

            	
              “Qualifying
                Expenditures” means expenses that are CEE or Qualifying CDE to be
                incurred by the Corporation during the Expenditure
                Period;

            


    

     

    
      	
               

            	
              (nn)

            	
              “Regulation S”
                means Regulation S under the U.S. Securities
                Act;

            


    

     

    
      	
               

            	
              (oo)

            	
              “Responses” means
                the responses delivered on behalf of the Corporation by certain officers
                of the Corporation at the Due Diligence
                Session;

            


    

     

    
      	
            	
              (pp)

            	
              “Resale
                Rules” means Multilateral Instrument 45-102 and Companion
                Policy 45-102CP (Resale of
                Securities);

            


    

     

    
      	
               

            	
              (qq)

            	
              “Securities
                Commissions” means the securities commissions or similar
                regulatory authorities in the Selling Jurisdictions and the United
                States
                Securities and Exchange Commission;

            


    

     

    
      	
               

            	
              (rr)

            	
              “Selling
                Jurisdictions” means the Provinces of Alberta, British Columbia,
                Ontario and Québec, to the extent permitted herein, and other foreign
                jurisdictions as the Agent and the Corporation may mutually agree
                to prior
                to the Closing Date;

            


    

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      7
      -

    


     

    
      	
               

            	
               (ss)

            	
              “Subscriber”
                means a person who executes a Subscription Agreement, as applicable,
                relating to the subscription for Offered Securities which is accepted
                by
                the Corporation;

            


    

     

    
      	
               

            	
              (tt)

            	
              “Subscription
                Agreement” means the Flow-Through Subscription Agreements and the
                Offered Common Share Subscription Agreements, as applicable, entered
                into
                by each Subscriber for Offered Securities and the Corporation in
                respect
                of the Subscriber’s subscription for Offered
                Securities;

            


    

     

    
      	
            	
              (uu)

            	
              “subsidiaries”
                has the meaning ascribed thereto in the Business Corporations Act
                (Alberta);

            


    

     

    
      	
               

            	
              (vv)

            	
              “Subscriber”
                means a person who executes a Subscription Agreement relating to
                a
                subscription for Offered Securities which is accepted by the
                Corporation;

            


    

     

    
      	
            	
              (ww)

            	
              “Swaps”
                means any transaction which is a rate swap transaction, basis swap,
                forward rate transaction, commodity swap, commodity option, equity
                or
                equity index swap, equity or equity index option, bond option, interest
                rate option, foreign exchange transaction, cap transaction, floor
                transaction, collar transaction, currency swap transaction, cross
                currency
                rate swap transaction, currency option, forward sale, exchange traded
                futures contract or any other similar transaction (including any
                option
                with respect to any of these transactions or any combination of these
                transactions);

            


    

    

      
        	
                 

              	
                (xx)

              	
                “U.S.
                  Securities Act” means the United States Securities Act of
                  1933, as amended; and

              


      

       

    

    “misrepresentation”,
      “material change” and “material fact” shall
      have the meanings ascribed thereto under the Applicable Securities Laws of
      the
      Selling Jurisdictions, “distribution” means “distribution” or
“distribution to the public”, as the case may be, as defined under the
      Applicable Securities Laws of the Selling Jurisdictions and
“distribute” has a corresponding meaning.

    
       

      The
        division of this Agreement into sections, subsections, paragraphs and other
        subdivisions and the insertion of headings are for convenience of reference
        only
        and shall not affect the construction or interpretation of this
        Agreement.  Unless something in the subject matter or context is
        inconsistent therewith, references herein to sections, subsections, paragraphs
        and other subdivisions are to sections, subsections, paragraphs and other
        subdivisions of this Agreement.

    

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      8
      -


     

     

    Unless
      otherwise expressly provided, all amounts expressed herein in terms of money
      refer to lawful currency of Canada and all payments to be made hereunder shall
      be made in such currency.

     

    If
      any
      provision of this Agreement shall be adjusted by a competent authority to be
      invalid or for any reason unenforceable, such invalidity or unenforceability
      shall not affect the validity, enforceability or operation of any other
      provision herein.

     

    Schedule
“A“
-Form
      of
      Agent’s Warrants

    


    
      	
              2.

            	
              Corporation’s
                Covenants as to Issuance

            


    

     

    The
      Corporation agrees:

     

    
      	
               

            	
              (a)

            	
              that
                at each Closing Time, the Offered Securities will be duly and validly
                created, allotted, reserved and authorized, and upon receiving full
                payment therefor will be issued as fully paid and non-assessable
                shares of
                the Corporation;

            


    

     

    
      	
               

            	
              (b)

            	
              to
                grant the Over-Allotment Option to the
                Agent;

            


    

     

    
      	
               

            	
              (c)

            	
              to
                enter into the Agent’s Warrants substantially in the form provided in
                Schedule “A“ hereto and grant the Agent’s Warrants in accordance with
                paragraph 9;

            


    

     

    
      	
               

            	
              (d)

            	
              at
                each Closing Time, the form and terms of the definitive certificates
                representing the Offered Securities will have been approved and adopted
                by
                the Corporation and comply with all corporate, legal and,  in
                respect of the form of Common Shares and OTCBB requirements relating
                thereto;

            


    

     

    
      	
               

            	
              (e)

            	
              to
                duly punctually and faithfully perform and comply with all the obligations
                to be performed by it, and all of its covenants and agreements, under
                and
                pursuant to this Agreement, the Subscription Agreements and the Agent’s
                Warrants, including, without limitation, all covenants and agreements
                of
                the Corporation relating to or in respect of the incurring and renouncing
                of Qualifying Expenditures to Subscribers for Flow-Through Shares
                and all
                reporting obligations relating
                thereto;

            


    

     

    
      	
               

            	
               (f)

            	
              to
                file all necessary forms and reports in connection with the issuance
                of
                the Offered Securities hereunder with the appropriate Securities
                Commissions and other regulatory authorities, including those regulatory
                authorities in the United States as applicable, such that the resale
                of
                the Offered Securities and the Common Shares issuable upon exercise
                of the
                Agent’s Warrants shall be subject to no greater than a four month and a
                day hold period under the Resale Rules in Canada (including the filing
                thereof on SEDAR);

            


    

    
      
 

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

      -
        9
        -

      


    

    
      	
               

            	
              (g)

            	
              to
                use its best commercial efforts to ensure that by December 29,
                2007 it will have
                obtained listing of the Common Shares on the Exchange, including
                filing of
                all necessary documentation in accordance with the requirements of
                the
                Exchange in connection with the listing and posting for trade of
                the
                Offered Securities and the Common Shares issuable upon exercise of
                the
                Agent’s Warrants on the Exchange;

            


    

    

      
        	
                 

              	
                (h)

              	
                to
                  notify the Exchange, in connection with its application to list
                  and post
                  for trading its Common Shares (including the Offered Securities
                  and the
                  Common Shares issuable upon exercise of the Agent’s Warrants) on the
                  Exchange, of this offering of Offered
                  Securities;

              


      

       

      
        	
                 

              	
                (i)

              	
                that
                  should it fail to have its Common Shares (including the Offered
                  Securities
                  and the Common Shares issuable upon exercise of the Agent’s Warrants)
                  listed and posted for trading on the Exchange by December 29, 2007,
                  the Corporation shall pay to the Subscribers, a cash penalty on
                  a pro
                  rata basis equal to 2% of the aggregate proceeds raised pursuant
                  to
                  the offering of Offered Securities (the “Cash
                  Penalty”).  At the end of each 30-day period subsequent
                  to December 29, 2007, if the Common Shares (including the Offered
                  Securities and the Common Shares issuable upon exercise of the
                  Agent’s
                  Warrants) are not listed and posted for trading on the Exchange,
                  then the
                  Corporation agrees to again pay the Cash Penalty by paying to the
                  Subscribers, cash on a pro rata basis equal to 2% of the
                  aggregate number of Offered Securities issued pursuant to the offering
                  of
                  Offered Securities;

              


      

       

      
        	
                 

              	
                (j)

              	
                to
                  allow the Agent, prior to each Closing Time and during the period
                  from the
                  date hereof until completion of the distribution of the Offered
                  Securities, to conduct all due diligence which the Agent may reasonably
                  require in order to:  (i) confirm the Public Record is
                  accurate, complete and current in all material respects; and
                  (ii) fulfill the Agent’s obligations as
                  registrants.  Without limiting the generality of the foregoing,
                  the Corporation shall, on reasonable notice, make available its
                  directors
                  and senior management and request that its auditors, legal counsel
                  and
                  independent engineers (if applicable) be available to answer any
                  questions
                  which the Agent may have and to participate in one or more due
                  diligence
                  sessions to be held prior to Closing Time (collectively, the “Due
                  Diligence Session”).  The Agent shall distribute a list
                  of written questions to be answered in advance of such Due Diligence
                  Session and the Corporation shall use its reasonable efforts to
                  provide
                  and to have its auditors, legal counsel and independent engineers
                  (if
                  applicable) provide written responses to such questions in advance
                  of the
                  Due Diligence Session.

              


      

       



    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      10
      -

    


     

    
      	
              3.

            	
              Corporation’s
                Covenants as to Changes

            


    

     

    The
      Corporation agrees that:

     

    
      	
               

            	
              (a)

            	
              during
                the period of distribution of the Offered Securities, the Corporation
                will
                promptly inform the Agent of the full particulars
                of:

            


    

     

    
      	
               

            	
              (i)

            	
              any
                material change (actual, anticipated or threatened) in the assets,
                liabilities (absolute, accrued, contingent or otherwise), business,
                operations, capital or condition (financial or otherwise) of the
                Corporation;

            


    

     

    
      	
               

            	
              (ii)

            	
              any
                change in any material fact contained or referred to in any of the
                Public
                Record;

            


    

     

    
      	
               

            	
              (iii)

            	
              the
                occurrence of a material fact or event which, in any such case, is,
                or may
                be, of such a nature as to: i) render any part of the Public Record
                untrue, false or misleading in a material respect; ii) result in
                a
                misrepresentation in any part of the Public Record; or iii)result
                in any
                part of the Public Record not complying with Applicable Securities
                Laws;
                or

            


    

     

    
      	
               

            	
              (iv)

            	
              the
                discovery by the Corporation of any misrepresentation in any part
                of the
                Public Record or any information provided to the Agent by the
                Corporation,

            


    

     

    provided
      that if there may be any reasonable doubt as to whether a material change,
      change, occurrence or event of the nature referred to in this subsection has
      occurred, the Corporation shall promptly inform the Agent of the full
      particulars of the occurrence giving rise to the uncertainty and shall consult
      with the Agent as to whether the occurrence is of such nature;

     

    
      	
               

            	
              (b)

            	
              during
                the period of distribution of the Offered Securities, the Corporation
                will
                promptly inform the Agent of the full particulars
                of:

            


    

     

    
      	
               

            	
              (i)

            	
              any
                request of any Securities Commission or similar regulatory authority
                for
                any amendment to any part of the Public Record or for any additional
                information;

            


    

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

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               (ii)

            	
              the
                issuance by any Securities Commission or similar regulatory authority
                or
                by any other competent authority of any order to cease or suspend
                trading
                of any securities of the Corporation or of the institution or threat
                of
                institution of any proceedings for that purpose;
                or

            


    

     

    
      	
               

            	
              (iii)

            	
              the
                receipt by the Corporation of any communication from any Securities
                Commission or similar regulatory authority or any other competent
                authority relating to any part of the Public Record or the distribution
                of
                the Offered Securities; and

            


    

     

    
      	
               

            	
              (c)

            	
              during
                the period of distribution of the Offered Securities, the Corporation
                will
                promptly comply, to the reasonable satisfaction of the Agent and
                the
                Agent’s counsel, with Applicable Securities Laws with respect to any
                material change, change, occurrence or event of the nature referred
                to in
                subparagraph 3(a) and subparagraph 3(b) and the Corporation will
                prepare and file promptly at the Agent’s request, acting reasonably, any
                amendment to any part of the Public Record which in the Agent’s opinion
                may be reasonably necessary to comply with Applicable Securities
                Laws and
                the Corporation shall consult with the Agent with respect to the
                form and
                content of any amendment to any part of the Public Record proposed
                to be
                filed by the Corporation and shall not file any such amendment without
                the
                prior review and approval thereof by the Agent, acting
                reasonably.

            


    

     

    
      	
              4.

            	
              Corporation’s
                Other Covenants

            


    

     

    The
      Corporation agrees:

     

    
      	
               

            	
              (a)

            	
              during
                the period of distribution of the Offered Securities, the Corporation
                will
                promptly provide to the Agent for review by the Agent and the Agent’s
                counsel, prior to filing or issuance of the same, any proposed public
                disclosure document, including without limitation, any financial
                statements of the Corporation, report to shareholders, information
                circular or any press release or material change
                report;

            


    

     

    
      	
               

            	
              (b)

            	
              that
                the subscription funds for the Flow-Through Shares will be expended
                in
                accordance with the terms of the Flow-Through Subscription Agreements
                and
                the provisions hereof;

            


    

     

    
      	
               

            	
              (c)

            	
              it
                will use the proceeds from the issuance and sale of the Flow-Through
                Shares to fund the Corporation’s ongoing crude oil and natural gas
                exploration and development activities, such that an amount equal
                to the
                Commitment Amount shall be expended on Qualifying Expenditures in
                accordance with the Flow-Through Subscription Agreements, and will
                use the
                proceeds from the issuance and sale of the Offered Common Shares
                for other
                oil and gas exploration and development activities other than those
                incurred by expending the proceeds from the offering of Flow-Through
                Shares;

            


    

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      12
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               (d)

            	
              neither
                the Corporation, nor its affiliates nor any person acting on its
                or their
                behalf have engaged in or will engage in any Directed Selling Efforts
                in
                the United States with respect to the Offered
                Securities;

            


    

     

    
      	
               

            	
              (e)

            	
              neither
                the Corporation, nor its affiliates nor any person acting on its
                or their
                behalf has offered or sold, nor will any of them offer or sell, any
                Offered Securities except in an offshore transaction in accordance
                with
                Rule 903 of Regulation S;

            


    

     

    
      	
               

            	
              (f)

            	
              all
                certificates representing the Offered Securities shall contain a
                legend to
                the effect that transfer is prohibited except in accordance with
                the
                provisions of Regulation S, pursuant to a registration statement
                under the U.S. Securities Act, or pursuant to an available exemption
                therefrom; and that hedging transactions may not be conducted except
                in
                compliance with the U.S. Securities
                Act;

            


    

     

    
      	
               

            	
              (g)

            	
              it
                shall refuse to register any transfer of the Offered Securities not
                made
                in accordance with the provisions of Regulation S, pursuant to
                registration under the U.S. Securities Act, or pursuant to an available
                exemption therefrom;

            


    

     

    
      	
               

            	
              (h)

            	
              it
                shall use its best efforts to maintain its status as a reporting
                issuer
                not in default of any Applicable Securities Laws in the province
                of
                Alberta until January 1, 2009;
                and

            


    

     

    
      	
               

            	
              (i)

            	
              to
                keep proper books, records and accounts of all Qualifying Expenditures
                and
                all transactions affecting the Commitment Amounts and the Qualifying
                Expenditures and to provide such assistance to the Subscribers as
                may be
                reasonably required should a dispute arise with respect to the Qualifying
                Expenditures;

            


    

     

    
      	
               

            	
              (j)

            	
              to
                incur, during the Expenditure Period, Qualifying Expenditures in
                such
                amount as enables the Corporation to renounce to each Subscriber
                for
                Flow-Through Shares, as CEE, in accordance with the Act and the applicable
                Flow-Through Subscription Agreement, Qualifying Expenditures in the
                amount
                equal to the Commitment Amount;

            


    

     

    
      	
               

            	
              (k)

            	
              to
                renounce (in accordance with the Act and the applicable Flow-Through
                Subscription Agreement) to each Subscriber for Flow-Through Shares,
                effective on or before December 31, 2007, Qualifying Expenditures to
                be incurred during the Expenditure Period equal to the Commitment
                Amount;

            


    

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      13
      -

    


     

    
      	
               

            	
               (l)

            	
              if
                it does not incur during the Expenditure Period and renounce to each
                Subscriber for Flow-Through Shares, effective on or before
                December 31, 2007, Qualifying Expenditures equal to the Commitment
                Amount, the Corporation shall indemnify each such Subscriber as to,
                and
                pay to each such Subscriber, an amount equal to the amount of any
                tax
                payable under the Act (and under any corresponding provincial legislation)
                by the Subscriber for Flow-Through Shares as a consequence of such
                failure
                such payment to be made on a timely basis once the amount is definitively
                determined; provided that nothing in this paragraph shall derogate
                from
                any rights or remedies the Subscriber may have at common law with
                respect
                to liabilities other than those payable under the Act and any
                corresponding provincial legislation and for certainty, the foregoing
                indemnity shall have no force or effect and the Subscriber shall
                not have
                any recourse or rights of action to the extent that such indemnity,
                recourse or rights of action would otherwise cause the Flow-Through
                Shares
                to be “prescribed shares” within the meaning of Section 6202.1 of the
                regulations to the Act;

            


    

     

    
      	
               

            	
              (m)

            	
              to
                deliver to each Subscriber at the Subscriber’s address set forth in the
                applicable Flow-Through Subscription Agreement, not later than
                March 1, 2008, Form T101 Supplementary setting forth the
                aggregate amounts of Qualifying Expenditures renounced to the Subscriber
                pursuant to the Flow-Through Subscription Agreement for filing with
                the
                Subscriber’s tax return;

            


    

     

    
      	
               

            	
              (n)

            	
              that
                it will not reduce the amount renounced to each Subscriber for
                Flow-Through Shares pursuant to subsections 66(12.6) and 66(12.601)
                of the Act and, in the event that the amount renounced to each such
                Subscriber pursuant to subsection 66(12.73) of the Act is reduced,
                the Corporation will indemnify each Subscriber for Flow-Through Shares
                as
                to, and pay to each such Subscriber, an amount equal to the amount
                of any
                tax payable under the Act (and under any corresponding provincial
                legislation) by each such Subscriber as a consequence of such reduction,
                such payment to be made on a timely basis once the amount is definitively
                determined, provided that nothing in this paragraph shall derogate
                from
                any rights or remedies the Subscriber may have at common law with
                respect
                to liabilities other than those payable under the Act and any
                corresponding provincial legislation and for certainty, the foregoing
                indemnity shall have no force or effect and the Subscriber shall
                not have
                any recourse or rights of action to the extent that such indemnity,
                recourse or rights of action would otherwise cause the Flow-Through
                Shares
                to be “prescribed shares” within the meaning of section 6202.1 of the
                regulations to the Act ;

            


    

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

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      14
      -

    


     

    
      	
               

            	
               (o)

            	
              to
                maintain its status as a “principal business corporation” until
                December 31, 2008;

            


    

     

    
      	
               

            	
              (p)

            	
              that
                it has not and will not enter into transactions or take deductions
                which
                would otherwise reduce its cumulative CEE or cumulative CDE to an
                extent
                which would preclude a renunciation of Qualifying Expenditures hereunder
                and in an amount equal to Commitment Amounts effective on or before
                December 31, 2007; and

            


    

     

    
      	
               

            	
              (q)

            	
              to
                file all forms required under the Act necessary to effectively renounce
                Qualifying Expenditures equal to the Commitment Amount of each Subscriber
                effective on or before December 31, 2007, and to provide the
                Subscriber with a copy of all such forms on a timely basis and, in
                particular, to file with the CRA the form prescribed by
                subsection 66(12.68) of the Act together with a copy of the
                Flow-Through Subscription Agreement and any “selling instruments”
                contemplated by such subsection within the time prescribed by the
                Act.

            


    

     

    
      	
              5.

            	
              Agent’s
                Covenants

            


    

     

    The
      Agent
      covenants and agrees with the Corporation that it will:

     

    
      	
               

            	
              (a)

            	
              use
                its best efforts to identify Subscribers for the Offered
                Securities;

            


    

     

    
      	
               

            	
              (b)

            	
              conduct
                its activities in connection with the proposed offer and sale of
                the
                Offered Securities in compliance with all Applicable Securities Laws
                of
                the Selling Jurisdictions and cause a similar covenant to be contained
                in
                any agreement entered into with any selling dealer group in connection
                with the distribution of the Offered
                Securities;

            


    

     

    
      	
               

            	
              (c)

            	
              not
                solicit subscriptions for Offered Securities, trade in Common Shares
                or
                otherwise do any act in furtherance of a trade of Common Shares outside
                of
                the Selling Jurisdictions;

            


    

     

    
      	
               

            	
              (d)

            	
              not
                advertise the proposed offering or sale of the Offered Securities
                in
                printed media of general or regular paid circulation, radio or
                television;

            


    

     

    
      	
               

            	
              (e)

            	
              obtain
                from each Subscriber an executed Subscription Agreement, including
                all
                applicable exhibits thereto and deliver all such Subscription Agreements
                to the Corporation at least 24 hours prior to the applicable Closing
                Time;

            


    

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      15
      -

    


     

    
      	
               

            	
               (f)

            	
              obtain
                from each Subscriber such applicable forms as may be required by
                the
                Exchange, the OTCBB or the relevant Securities Commissions and supplied
                to
                the Agent for completion in connection with the distribution of the
                Offered Securities;

            


    

     

    
      	
               

            	
              (g)

            	
              provide
                to the Corporation as soon as practicable following the applicable
                Closing
                Date all information necessary to allow the Corporation to file with
                each
                of the Securities Commissions, if required, a report of trade in
                accordance with securities laws, rules, regulations and policies
                of the
                Selling Jurisdictions within 10 days of the applicable Closing
                Date;

            


    

     

    
      	
               

            	
              (h)

            	
              not
                offer or sell any Offered Securities, except in accordance with
                Rule 903 of Regulation S and accordingly, neither the Agent, its
                affiliates nor any persons acting on its or their behalf will engage
                in
                any Directed Selling Efforts in the United States with respect to
                the
                Offered Securities; and

            


    

     

    
      	
               

            	
              (i)

            	
              not
                engage in hedging transactions with regard to the Offered Securities
                prior
                to the expiration of the one-year period commencing on the later
                of the
                commencement of the offering of Offered Securities and the Closing
                Date,
                in each case unless such securities are registered under the U.S.
                Securities Act and the securities laws of all applicable states of
                the
                United States or unless such hedging transactions are pursuant to
                an
                exemption therefrom, and they will comply with the “offering restrictions”
                requirement in Rule 902(g) of
                Regulation S.

            


    

     

    
      	
              6.

            	
              Representations
                and Warranties of the
                Corporation

            


    

     

    The
      Corporation represents and warrants to the Agent, and acknowledges that the
      Agent is relying upon such representations and warranties, that:

     

    
      	
               

            	
              (a)

            	
              the
                Corporation has been duly incorporated in the State of Delaware and
                is
                organized and is validly subsisting under the laws of the State of
                Delaware and has all requisite corporate authority and power to carry
                on
                its business, as now conducted and as presently proposed to be conducted
                by it, and to own, lease and operate its properties and
                assets;

            


    

     

    
      	
               

            	
              (b)

            	
              the
                Corporation is qualified to carry on business under the laws of each
                jurisdiction in which it carries on a material portion of its
                business;

            


    

     

    
      	
               

            	
              (c)

            	
              other
                than Kodiak Petroleum ULC, Kodiak Petroleum (Montana), Inc. and Kodiak
                Petroleum (Utah), Inc. (collectively, the “Corporation’s
                Subsidiaries”) and, the Corporation has no subsidiaries and the
                Corporation is not affiliated with, nor is it a holding corporation
                of any
                other body corporate;

            


    

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      16
      -

    


     

    
      	
               

            	
               (d)

            	
              the
                Corporation’s Subsidiaries have been duly incorporated and are valid and
                subsisting in good standing under the laws of their jurisdiction
                of
                incorporation and have all requisite corporate power and capacity
                to carry
                on their business as now conducted and as presently proposed to be
                conducted by them and to own, lease and operate their properties
                and
                assets;

            


    

     

    
      	
               

            	
              (e)

            	
              all
                of the issued and outstanding shares in the capital of the Corporation’s
                Subsidiaries are fully paid and non-assessable and legally and
                beneficially owned by the Corporation free and clear of all mortgages,
                liens, charges, pledges, security interests, encumbrances, claims
                or
                demands whatsoever (other than as provided in the credit facilities
                of the
                Corporation) and no person holds any securities convertible into
                or
                exchangeable for issued or unissued shares of the Corporation’s
                Subsidiaries or has any agreement, warrant, option, right or privilege
                (whether pre emptive or contractual) being or capable of becoming
                an
                agreement, warrant, option or right for the acquisition of any unissued
                or
                issued securities of the Corporation’s
                Subsidiaries;

            


    

     

    
      	
               

            	
              (f)

            	
              at
                each Closing Time, the Offered Securities subscribed for will, upon
                receipt by the Corporation of the consideration therefor, be duly
                and
                validly created, authorized and issued as fully paid and
                non-assessable;

            


    

     

    
      	
               

            	
              (g)

            	
              at
                each Closing Time, the Common Shares issuable pursuant to the exercise
                of
                the Agent’s Warrants granted pursuant to this Agreement will be duly and
                validly authorized, allotted and reserved for issuance and, upon
                exercise
                of such Agent’s Warrants, upon receipt by the Corporation of the
                consideration therefor, the Common Shares issued pursuant to the
                Agent’s
                Warrants will be issued as fully paid and
                non-assessable;

            


    

     

    
      	
               

            	
              (h)

            	
              the
                form and terms of the definitive certificates representing the Offered
                Securities have been approved and adopted by the Corporation and
                will
                comply with all corporate and legal requirements relating thereto,
                including, without limitation, the requirements of the Exchange and
                the
                OTCBB and Rule 903 of Regulation
                S;

            


    

     

    
      	
               

            	
              (i)

            	
              the
                Corporation is not in default or breach of, and the execution and
                delivery
                of, and the performance of and compliance with the terms of, this
                Agreement, the Agent’s Warrants and the Subscription Agreements and the
                performance of any of the transactions contemplated hereby (including,
                without limitation, the grant of the Over-Allotment Option) and thereby
                by
                the Corporation, do not and will not result in any breach of, or
                constitute a default under, and do not and will not create a state
                of
                facts which, after notice or lapse of time or both, will result in
                a
                breach of or constitute a default under any applicable laws which
                are
                material to the Corporation or any term or provision of the articles,
                by
                laws or resolutions of the directors or shareholders of the Corporation,
                or any mortgage, note, indenture, contract, agreement (written or
                oral),
                instrument, lease or other document to which the Corporation is a
                party or
                by which it is bound, or any judgment, decree, order, statute, rule
                or
                regulation applicable to the Corporation, which default or breach
                might
                reasonably be expected to materially adversely affect the business,
                operations, capital or condition (financial or otherwise) of the
                Corporation (taken as a whole) or its properties or
                assets;

            


    

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      17
      -

    


     

    
      	
               

            	
               (j)

            	
              the
                Corporation has full corporate power and authority to grant the
                Over-Allotment Option and to enter into this Agreement, the Agent’s
                Warrants and the Subscription Agreements and to perform its obligations
                set out herein and therein including, without limitation, to issue
                the
                Offered Securities, the Agent’s Warrants and the Common Shares to be
                issued to the Agent upon exercise of the Agent’s Warrants and this
                Agreement has been, and the Subscription Agreements and Agent’s Warrants
                will be duly authorized, executed and delivered by the Corporation,
                and
                this Agreement is, and the Subscription Agreements, and the Agent’s
                Warrants will be legal, valid and binding obligations of the Corporation
                enforceable against the Corporation in accordance with their respective
                terms subject to the general qualifications
                that:

            


    

     

    
      	
               

            	
              (i)

            	
              the
                enforceability may be limited by bankruptcy, insolvency, moratorium,
                reorganization or other similar laws of general application affecting
                creditors’ rights;

            


    

     

    
      	
               

            	
              (ii)

            	
              equitable
                remedies, including the remedies of specific performance and injunctive
                relief, are available only in the discretion of the applicable
                court;

            


    

     

    
      	
               

            	
              (iii)

            	
              the
                enforceability of any provision exculpating a party from liability
                or duty
                otherwise owed by it may be limited under applicable
                law;

            


    

     

    
      	
               

            	
              (iv)

            	
              the
                enforceability of provisions which purport to sever any provision
                which is
                prohibited or unenforceable under applicable law without affecting
                the
                enforceability or validity of the remainder of such document would
                be
                determined only in the discretion of the
                court;

            


    

     

     

     

     

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      18
      -

    


     

    
      	
               

            	
               (v)

            	
              the
                equitable or statutory powers of the courts in Canada having jurisdiction
                to stay proceedings before them and the execution of
                judgments;

            


    

     

    
      	
               

            	
              (vi)

            	
              rights
                to indemnity and contribution hereunder may be limited under applicable
                law and may not be ordered by a court on grounds of public policy
                and may
                therefore not be available in particular
                instances;

            


    

     

    
      	
               

            	
              (vii)

            	
              the
                enforceability may be limited by applicable laws regarding limitation
                of
                actions; and

            


    

     

    
      	
               

            	
              (viii)

            	
              the
                costs of and incidental to proceedings authorized to be taken in
                court or
                before a judge are within the discretion of the court or judge before
                which such proceedings are brought and a court or judge has full
                power to
                determine by whom and to what extent the costs of such proceedings
                will be
                paid;

            


    

     

    
      	
               

            	
              (k)

            	
              other
                than as disclosed in the Documents, there has not been any materially
                adverse change in the assets, liabilities or obligations (absolute,
                contingent or otherwise) of the Corporation from the position set
                forth in
                the Financial Statements and there has not been any material adverse
                change in the business, operations, capital or condition (financial
                or
                otherwise) or results of the operations of the Corporation since
                January
                30, 2006; and since January 30, 2006 there have been no material
                facts,
                transactions, events or occurrences which could materially adversely
                affect the capital, assets, liabilities (absolute, accrued, contingent
                or
                otherwise), business, operations or condition (financial or otherwise)
                or
                results of the operations of the Corporation which have not been
                publicly
                disclosed;

            


    

     

    
      	
               

            	
              (l)

            	
              the
                Financial Statements fairly present in all material respects, in
                accordance with generally accepted accounting principles in the United
                States, consistently applied, the financial position and condition
                of the
                Corporation at the dates thereof and the results of the operations
                of the
                Corporation for the periods then ended and reflect all assets, liabilities
                or obligations (absolute, accrued, contingent or otherwise) of the
                Corporation as at the dates thereof that are required to be disclosed
                therein in accordance with generally accepted accounting principles
                in the
                United States;

            


    

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

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      19
      -

    


     

    
      	
               

            	
               (m)

            	
              there
                are no actions, suits, proceedings or inquiries, including, to the
                best of
                the Corporation’s knowledge, information and belief, after due inquiry,
                pending or threatened against or affecting the Corporation or the
                Corporation’s Subsidiaries at law or in equity or before or by any
                federal, provincial, municipal or other governmental department,
                commission, board, bureau, agency or instrumentality which in any
                way
                materially adversely affects, or may in any way materially adversely
                affect, the assets, business, operations or condition (financial
                or
                otherwise) of the Corporation or the Corporation’s Subsidiaries (taken as
                a whole) or which affects or may affect the distribution of the Offered
                Securities;

            


    

     

    
      	
               

            	
              (n)

            	
              the
                Corporation or the Corporation’s Subsidiaries are not a party to or bound
                by any agreement of guarantee, indemnification (other than an
                indemnification of directors and officers in accordance with the
                bylaws of
                the Corporation or the Corporation’s Subsidiaries and applicable laws and
                indemnities in favour of Subscribers pursuant to the Flow-Through
                Subscription Agreements or in favour of subscribers for “flow-through”
                Common Shares issued by the Corporation and other indemnities in
                favour of
                agents or underwriters in connection with an issuance of securities
                on
                like transactions and other than standard indemnities in favour of
                purchasers of assets in purchase and sale agreements and indemnities
                and
                guarantees in favour of the Corporation’s bankers) or any other like
                commitment of the obligations, liabilities (contingent or otherwise)
                of
                indebtedness of any other person;

            


    

     

    
      	
               

            	
              (o)

            	
              other
                than as disclosed in the Documents, the Corporation and the Corporation’s
                Subsidiaries do not have any loans or other indebtedness outstanding
                which
                have been made to or from any of its shareholders, officers, directors
                or
                employees or any other person not dealing at arm’s length with the
                Corporation or the Corporation’s Subsidiaries that are currently
                outstanding;

            


    

     

    
      	
               

            	
              (p)

            	
              other
                than as disclosed in the Documents, no officer, director, employee
                or any
                other person not dealing at arm’s length with the Corporation or the
                Corporation’s Subsidiaries or, to the knowledge of the Corporation, any
                associate or affiliate of any such person, owns, has or is entitled
                to any
                royalty, net profits interest, carried interest or any other encumbrances
                or claims of any nature whatsoever which are based on production
                from the
                Corporation’s or the Corporation’s Subsidiaries properties or assets or
                any revenue or rights attributed
                thereto;

            


    

     

    
      	
               

            	
              (q)

            	
              other
                than as disclosed in the Documents, none of the directors or senior
                officers of the Corporation, or to the knowledge of the Corporation,
                any
                “associate” or “affiliate” of any of the foregoing persons or companies
                (as such terms are defined in the Securities Act (Alberta)), has
                or has had any material interest, direct or indirect, in any continuing
                or
                existing material transaction or has any material interest, direct
                or
                indirect, in any proposed material transaction which is material
                to or
                will materially affect the
                Corporation;

            


    

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      20
      -

    


     

    
      	
               

            	
               (r)

            	
              the
                information and statements set forth in the Public Record, as it
                relates
                to the Corporation and the Corporation’s Subsidiaries, were in all
                material respects, true, correct, and complete and did not contain
                any
                misrepresentation, as of the respective dates of such information
                or
                statements, and no material change has occurred in relation to the
                Corporation or the Corporation’s Subsidiaries which is not disclosed in
                the Public Record, and the Corporation has not filed any confidential
                material change reports which continue to be
                confidential;

            


    

     

    
      	
               

            	
              (s)

            	
              other
                than as disclosed in the Documents, no event of material default
                under any
                agreement or instrument pursuant to which indebtedness of the Corporation
                has been issued, has occurred, and no event which with the giving
                of
                notice or the passage of time or both would constitute an event of
                material default under any such agreement or instrument has occurred
                and
                is continuing;

            


    

    

      
        	
                 

              	
                (t)

              	
                the
                  authorized capital of the Corporation consists of 300,000,000 with
                  par
                  value of US$0.001 per share, of which prior to the issuance of
                  the Offered
                  Securities, 105,242,498 Common
                  Shares are
                  outstanding, which shares are validly issued and fully paid and
                  non-assessable shares;

              


      

       

    

    
      	
               

            	
              (u)

            	
              no
                person, firm, corporation or other entity holds any securities convertible
                or exchangeable into securities of the Corporation or now has any
                agreement, warrant, option, right or privilege (whether pre emptive
                or
                contractual) being or capable of becoming an agreement for the purchase,
                subscription or issuance of any unissued shares or other securities
                (including convertible securities) of the Corporation other
                than:

            


    

     

    
      	
               

            	
              (i)

            	
              stock
                options to acquire up to 1,935,000 Common Shares at prices ranging
                from US$1.28 to US$2.74 per share until August 1, 2010, currently
                issued to directors, officers, employees and consultants of the
                Corporation; and

            


    

     

    
      	
               

            	
              (ii)

            	
              share
                purchase warrants to acquire up to 4,437,000 Common Shares at an
                exercise prices ranging from US$1.50 to US$2.70 per share issued
                pursuant
                to private placements expiring on or before May 10,
                2004;

            


    

     

    
      	
               

            	
              (v)

            	
              the
                issued and outstanding Common Shares currently are trading on the
                OTCBB;

            


    

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      21
      -

    


     

    
      	
               

            	
               (w)

            	
              the
                Corporation has made application to list and post for trading its
                Common
                Shares (including the Offered Securities and the Common Shares issuable
                upon exercise of the Agent’s Warrants) on the
                Exchange;

            


    

     

    
      	
               

            	
              (x)

            	
              other
                than as disclosed to the Agent that the Corporation
                and the Corporation's Subsidiaries have not
                filed Federal U.S. Income Tax returns in 2005 and 2006 as required,
                provided that the Corporation represents and warrants that no taxes,
                charges, penalties, interest or other fines are or will be payable
                in
                respect of any periods for which returns have not been filed and
                with such
                exceptions as are not material to the Corporation, the Corporation
                and
                the Corporation's Subsidiaries have duly and on a timely basis filed
                all tax returns required to be filed by them, has paid all taxes
                due and
                payable by them and has paid all assessments and
                re-assessments and all other taxes, governmental charges,
                penalties, interest and other fines due and payable by them and which
                are
                claimed by any governmental authority to be due and owing and adequate
                provision has been made for taxes payable for any completed fiscal
                period
                for which tax returns are not yet required and there are no agreements,
                waivers, or other arrangements providing for an extension of time
                with
                respect to the filing of any tax return or payment of any tax,
                governmental charge or deficiency by the Corporation or the Corporation's
                Subsidiaries and to the knowledge of the Corporation there are no
                actions,
                suits, proceedings, investigations or claims threatened or pending
                against
                the Corporation or the Corporation's Subsidiaries in respect of taxes,
                governmental charges or assessments or any matters under discussion
                with
                any governmental authority relating to taxes, governmental charges
                or
                assessments asserted by any such
                authority;

            


    

     

    
      	
               

            	
              (y)

            	
              the
                minute books of the Corporation and the Corporation’s Subsidiaries as
                provided to the Agent’s counsel are materially true and correct and
                contain the minutes of all meetings and all the resolutions of directors
                and shareholders thereof;

            


    

     

    
      	
               

            	
              (z)

            	
              the
                books of account and other records of the Corporation and the
                Corporation’s Subsidiaries, whether of a financial or accounting nature or
                otherwise, have been maintained in accordance with prudent business
                practices;

            


    

     

    
      	
               

            	
              (aa)

            	
              the
                Corporation is a “reporting issuer” in the province of Alberta within the
                meaning of the Applicable Securities Laws in such province, has held
                that
                status without interruption or suspension in that jurisdiction since
                August 27, 2007 and is not in default of any requirements of
                Applicable Securities Laws thereof;

            


    

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      22
      -

    


     

    
      	
            	
               (bb)

            	
              Olde
                Monmouth Stock Transfer Co. Inc. at its office in Atlantic Highlands,
                New
                Jersey is the duly appointed registrar and transfer agent of the
                Corporation with respect to the Common
                Shares;

            


    

     

    
      	
               

            	
              (cc)

            	
              the
                Corporation and the Corporation’s Subsidiaries have conducted and are
                conducting their business in compliance in all
                material respects with all applicable laws, rules and regulations
                and, in
                particular, all applicable licensing and environmental legislation,
                regulations or by laws or other lawful requirement of any governmental
                or
                regulatory bodies applicable to the Corporation and the Corporation’s
                Subsidiaries in each jurisdiction in which they carry on business
                and hold
                all licences, registrations and qualifications in all jurisdictions
                in
                which they carry on business which are necessary or desirable to
                carry on
                the business of the Corporation and the Corporation’s Subsidiaries, as now
                conducted and as presently proposed to be conducted, and all such
                licenses, registrations or qualifications are valid and existing
                and in
                good standing and none of such licenses, registrations or qualifications
                contains any burdensome term, provision, condition or limitation
                which has
                or is likely to have any material adverse effect on the business
                of the
                Corporation and the Corporation’s Subsidiaries as now conducted or as
                proposed to be conducted;

            


    

     

    
      	
            	
              (dd)

            	
              any
                and all operations of the Corporation and the Corporation’s Subsidiaries
                and, to the best of the Corporation’s knowledge, any and all operations by
                third parties, on or in respect of the assets and properties of the
                Corporation and the Corporation’s Subsidiaries, have been conducted in all
                material respects in accordance with good oilfield
                practices;

            


    

     

    
      	
               

            	
              (ee)

            	
              to
                the Corporation's knowledge, the Corporation and the Corporation’s
                Subsidiaries have been and are in material compliance with all applicable
                federal, provincial, state, municipal and local laws, statutes,
                ordinances, by laws and regulations and orders, directives and decisions
                rendered by any ministry, department or administrative or regulatory
                agency, domestic or foreign, (“Environmental Laws”)
                relating to the protection of the environment, occupational health
                and
                safety or the processing, use, treatment, storage, disposal, discharge,
                transport or handling of any pollutants, contaminants, chemicals
                or
                industrial, toxic or hazardous wastes or
                substance;

            


    

     

    
      	
               

            	
              (ff)

            	
              in
                respect of their properties and assets in which the Corporation or
                the
                Corporation’s Subsidiaries are an operator, the Corporation and the
                Corporation’s Subsidiaries have obtained all material licences, permits,
                approvals, consents, certificates, registrations and other authorizations
                under Environmental Laws (the “Environmental Permits”)
                necessary for the operation of their projects as currently operated
                and
                each Environmental Permit is valid, subsisting and in good standing
                and
                the holders of the Environmental Permits are not in default or breach
                thereof and no proceeding is pending or threatened to revoke or limit
                any
                Environmental Permit, except in each case where the result would
                not have
                a material adverse effect on the Corporation and the Corporation’s
                Subsidiaries on a consolidated
                basis;

            


    

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      23
      -

    


     

    
      	
            	
               (gg)

            	
              to
                the Corporation’s knowledge, in respect of their property and assets in
                which the Corporation or the Corporation’s Subsidiaries are not an
                operator, the Corporation and the Corporation’s Subsidiaries have obtained
                all Environmental Permits necessary for the operation of their projects
                as
                currently operated and each Environmental Permit is valid, subsisting
                and
                in good standing and the holders of the Environmental Permits are
                not in
                default or breach thereof and no proceeding is pending or threatened
                to
                revoke or limit any Environmental Permit, except in each case where
                the
                result would not have a material adverse effect on the Corporation
                and the
                Corporation’s Subsidiaries on a consolidated
                basis;

            


    

     

    
      	
               

            	
              (hh)

            	
              none
                of the Corporation and the Corporation’s Subsidiaries (including, if
                applicable, any predecessor companies thereof) have received any
                notice
                of, or been prosecuted for an offence alleging, material non-compliance
                with any Environmental Laws, and none of the Corporation and the
                Corporation’s Subsidiaries (including, if applicable, any predecessor
                companies) have settled any allegation of material non-compliance
                short of
                prosecution.  There are no orders or directions relating to
                environmental matters requiring any material work, repairs, construction
                or capital expenditures to be made with respect to any of the assets of
                the Corporation and the Corporation’s Subsidiaries nor have the
                Corporation or the Corporation’s Subsidiaries received notice of any of
                the same and which orders directions or notices remain outstanding
                as
                unresolved;

            


    

     

    
      	
               

            	
              (ii)

            	
              no
                Securities Commission or any other securities commission or similar
                regulatory authority or the OTCBB has issued any order preventing
                or
                suspending trading of any securities of the Corporation, the Corporation
                is not in default of any requirement of Applicable Securities Laws
                that
                would have a material effect on this offering or the Corporation
                and the
                Corporation is entitled to avail itself of the applicable prospectus
                exemptions available under such Applicable Securities Laws in Canada
                in
                respect of the trades in the Offered Securities to Subscribers as
                contemplated by this Agreement;

            


    

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      24
      -

    


     

    
      	
               

            	
               (jj)

            	
              to
                the knowledge of the Corporation after due inquiry, as at the date
                of this
                Agreement, no insider of the Corporation has a present intention
                to sell
                any securities of the Corporation held by
                it;

            


    

     

    
      	
               

            	
              (kk)

            	
              the
                Corporation has filed a Form 51-101F1 – Statement of Reserves Data
                and Other Oil and Gas Information for the year ended December 31,
                2006 and a Form 51-101F3 – Report of Management and Directors on
                Reserves Data and Other Information for the year ended December 31,
                2006 and such reports were correct as of the respective effective
                date
                thereof;

            


    

     

    
      	
               

            	
              (ll)

            	
              the
                Corporation made available to Trimble Engineering Associates Ltd.,
                in
                connection with the issuance of Form 51-101F2 - Report on Reserves
                Data by an Independent Qualified Reserves Evaluator dated July 18,
                2007 with respect to the Corporation’s petroleum and natural gas
                properties, for the purpose of preparing such document, all information
                requested by Trimble Engineering Associates Ltd., which information
                did
                not contain any material misrepresentation at the date such information
                was provided.  The Corporation has no knowledge of any material
                adverse change in any information provided to Trimble Engineering
                Associates Ltd. since the date that such information was
                provided;

            


    

     

    
      	
            	
              (mm)

            	
              the
                document as prepared by Trimble Engineering Associates Ltd. as described
                in subparagraph 6(ll) above considers and reports on all material
                petroleum and natural gas properties of the Corporation as at the
                effective date of that document;

            


    

     

    
      	
               

            	
              (nn)

            	
              the
                Corporation made available to Chapman Petroleum Engineering Ltd.,
                in
                connection with the issuance of the engineering report of Chapman
                Petroleum Engineering Ltd. dated August 1, 2007 with respect to the
                Corporation’s petroleum and natural gas properties in the Northwest
                Territories, for the purpose of preparing such document, all information
                requested by Chapman Petroleum Engineering Ltd., which information
                did not
                contain any material misrepresentation at the date such information
                was
                provided.  The Corporation has no knowledge of any material
                adverse change in any information provided to Chapman Petroleum
                Engineering Ltd. since the date that such information was
                provided;

            


    

     

    
      	
               

            	
              (oo)

            	
              although
                it does not warrant title:

            


    

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      25
      -

    


     

    
      	
               

            	
               (i)

            	
              the
                Corporation does not have reason to believe that it and the Corporation’s
                Subsidiaries do not have title to or the irrevocable right to produce
                and
                sell their petroleum, natural gas and related hydrocarbons (for the
                purposes 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 Corporation and the Corporation’s Subsidiaries, except as
                disclosed in the Public Record or those arising in the ordinary course
                of
                business (including, without limitation, security interests and charges
                by
                way of security granted to the Corporation’s and the Corporation’s
                Subsidiaries senior lender(s)), which are not material in the aggregate,
                and, to the knowledge of the Corporation and the Corporation’s
                Subsidiaries, the Corporation holds their Interests under valid and
                subsisting leases, licenses, permits, concessions, concession agreements,
                contracts, subleases, reservations or other agreements;
                and

            


    

     

    
      	
               

            	
              (ii)

            	
              to
                the Corporation’s knowledge, there are no material defects, failures or
                impairments in the title of the Corporation and the Corporation’s
                Subsidiaries to their oil and gas properties, whether or not an action,
                suit, proceeding or inquiry is pending or threatened and whether
                or not
                discovered by any third party, which in aggregate could have a material
                adverse affect on: (A) the quantity and pre tax present worth values
                of the oil and gas reserves of the Corporation shown in the technical
                reports for the Corporation’s petroleum and natural gas properties;
                (B) any current production of the Corporation; or (C) the
                current cash flow of the
                Corporation;

            


    

     

    
      	
            	
              (pp)

            	
              the
                Corporation is a principal business corporation as defined in
                subparagraph 1(ee) of this
                Agreement;

            


    

     

    
      	
               

            	
              (qq)

            	
              the
                Corporation is carrying on business in Canada for the purposes of
                the
                Act;

            


    

     

    
      	
               

            	
              (rr)

            	
              the
                Offered Securities do not constitute “United States real property
                interests” within the meaning of the Internal Revenue Code of the United
                States;

            


    

     

    
      	
               

            	
              (ss)

            	
              except
                as a result of any agreement or arrangement to which the Corporation
                is
                not a party or of which it has no knowledge, upon issuance pursuant
                to the
                provisions of the Flow-Through Subscription Agreements, the Flow-Through
                Shares will be “flow-through shares’’ as defined in subsection 66(15)
                of the Act and such Flow-Through Shares will not constitute “prescribed
                shares” for the purpose of Regulation 6202.1 included in the Regulations
                to the Act;

            


    

     

    
      	
               

            	
              (tt)

            	
              the
                Corporation currently has no Swaps
                outstanding;

            


    

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      26
      -

    


     

    
      	
            	
               (uu)

            	
              the
                Responses are true and correct where they relate to matters of fact,
                and
                the Corporation and its directors and officers have responded in
                a
                thorough and complete fashion.  Where the Responses reflect the
                opinion or view of the Corporation or its directors or officers (including
                Responses or portions of such Responses which are forward-looking
                or
                otherwise relate to projections, forecasts or estimates of future
                performance or results (operating, financial or otherwise)
                (“Forward-looking Statements”)), such opinions or views
                are subject to the qualifications set forth in the Responses and
                were
                honestly held and believed to be reasonable at the time they were
                given;
                provided, however, it shall not constitute a breach of this subparagraph,
                solely if the actual results vary or differ from those contained
                in
                Forward-looking Statements;

            


    

     

    
      	
               

            	
              (vv)

            	
              the
                Corporation has not incurred any obligation or liability, contingent
                or
                otherwise, for brokerage fees, finder’s fees, agent’s commission or other
                forms of compensation with respect to the transactions contemplated
                herein
                for which the Corporation will have any liability or obligation except
                as
                provided herein;

            


    

     

    
      	
            	
              (ww)

            	
              the
                Corporation does not have in place a shareholder rights protection
                plan;

            


    

     

    
      	
               

            	
              (xx)

            	
              the
                Corporation is not a party to any unanimous shareholders agreement
                and to
                its actual knowledge, neither the Corporation nor any of its shareholders
                is a party to any unanimous shareholders agreement, pooling agreement,
                voting trust or other similar type of arrangements in respect of
                outstanding securities of the
                Corporation;

            


    

    

      
        	
                 

              	
                (yy)

              	
                (other
                  than commitments in respect of the remaining expenditure of approximately $6,605,010
                  renounceable as CEE on or before
                  December 31, 2007) the Corporation has not entered into any agreements
                  or
                  made any covenants with any parties with respect to the renunciation
                  of
                  CEE or CDE, which amounts have not been fully expended and renounced
                  as
                  required thereunder;

              


      

       

      
        	
                 

              	
                (zz)

              	
                the
                  representations and warranties
                  of the Corporation in the Subscription Agreements are, or will
                  be at the
                  Closing Date, true and
                  correct;

              


      

       

      
        	
              	
                (aaa)

              	
                (other
                  than commitments in respect
                  of the remaining expenditure of approximately $6,605,010  renounceable
                  as CEE on or before December 31, 2007) the Corporation has not
                  entered
                  into any agreements or made any covenants with any parties that
                  would
                  restrict the Corporation from entering into the Flow-Through Subscription
                  Agreements and agreeing to incur and renounce Qualifying Expenditures
                  in
                  accordance with the Flow-Through Subscription Agreements, nor that
                  would
                  require the prior renunciation to any other person of Qualifying
                  Expenditures prior to the renunciation of the aggregate Commitment
                  Amount
                  in favour of the Subscribers and the Corporation has no outstanding
                  obligations to incur and renounce Qualifying Expenditures to any
                  persons;

              


      

       

    

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      27
      -

    


     

    
      	
            	
               (bbb)

            	
              no
                approval, authorization, consent or other order of any governmental
                authority is required in connection with the execution and delivery or the
                performance by the Corporation of this Agreement (including, without
                limitation, the grant of the Over-Allotment Option), the Agent’s Warrants,
                and the Subscription Agreements;

            


    

     

    
      	
            	
              (ccc)

            	
              neither
                the Corporation nor the Corporation’s Subsidiaries have, directly or
                indirectly: (i) 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
                (ii) 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 the Corporation or the Corporation’s Subsidiaries 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;

            


    

    

      
        	
              	
                (ddd)

              	
                none
                  of the Corporation, the Corporation’s Subsidiaries or, to the knowledge of
                  the Corporation, any director, officer, agent, employee, affiliate
                  or
                  person acting on behalf of the Corporation and/or the Corporation’s
                  Subsidiaries (or all of them) have been or is currently subject
                  to any
                  United States sanctions administered by the Office of Foreign Assets
                  Control of the United States Treasury Department
                  (“OFAC”); and the Corporation will not directly or
                  indirectly use any proceeds of the distribution of the Offered
                  Securities,
                  or lend, contribute or otherwise make available such proceeds to
                  the
                  Corporation and the Corporation’s Subsidiaries or to any affiliated
                  entity, joint venture partner or other person or entity, to finance
                  any
                  investments in, or make any payments to, any country or person
                  targeted by
                  any of the sanctions of the United States administered by
                  OFAC;  and

              


      

       

       

       

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      28
      -

    


    
       

      
        	
              	
                (eee)

              	
                the
                  Corporation has not completed any private placements that would
                  preclude
                  the Corporation from relying upon any exemptions contemplated by
                  the
                  Subscription Agreements.

              


      

       

    

    
      	
              7.

            	
              Conditions

            


    

     

    The
      obligations of the Agent hereunder shall be conditional upon the Agent
      receiving, and the Agent shall have the right on the Closing Date on behalf
      of
      Subscribers for Offered Securities to withdraw all Subscription Agreements
      delivered and not previously withdrawn by Subscribers unless the Agent receives,
      on or before each Closing Date:

     

    
      	
               

            	
              (a)

            	
              favourable
                legal opinions of the Corporation’s counsel addressed to the Agent and the
                Subscribers, in form and substance reasonably satisfactory to the
                Agent,
                with respect to such matters as the Agent may reasonably request
                relating
                to the offering of the Offered Securities, as applicable, including,
                without limitation, that:

            


    

     

    
      	
               

            	
              (i)

            	
              the
                Corporation has been duly incorporated in Delaware, is validly subsisting
                and has all requisite corporate power and authority to carry on its
                business as now conducted by it and to own its properties and assets
                and
                is qualified to carry on business in
                Delaware;

            


    

     

    
      	
               

            	
              (ii)

            	
              the
                Corporation has full corporate power and authority to enter into
                this
                Agreement, the Agent’s Warrants and the Subscription Agreements and this
                Agreement, the Subscription Agreements and the Agent’s Warrants have been
                duly authorized by the Corporation and constitute legal, valid and
                binding
                obligations of the Corporation enforceable against the Corporation
                in
                accordance with their respective terms subject to normal qualifications
                including those relating to creditors’ rights generally and except that
                rights to indemnity may be limited by applicable
                law;

            


    

     

    
      	
               

            	
              (iii)

            	
              the
                execution and delivery of this Agreement, the Agent’s Warrants, and the
                Subscription Agreements, and the fulfilment of the terms hereof and
                thereof by the Corporation, and the performance of and compliance
                with the
                terms of this Agreement (including, without limitation, the grant
                of the
                Over-Allotment Option), the Agent’s Warrants and the Subscription
                Agreements by the Corporation do not and will not result in a breach
                of,
                or constitute a default under, and do not and will not create a state
                of
                facts which, after notice or lapse of time or both, will result in
                a
                breach of or constitute a default under, (i) any laws in the Province
                of Alberta; (ii) any term or provision of the articles or by laws of
                the Corporation, or (iii) so far as counsel is aware, any mortgage,
                note, indenture, contract, agreement (written or oral), instrument,
                lease
                or other document to which the Corporation is a party or by which
                the
                Corporation is bound on the Closing Date, which might reasonably
                be
                expected to materially adversely affect the business, operations,
                capital
                or condition (financial or otherwise) of the Corporation or the
                Corporation’s Subsidiaries (taken as a whole) or its properties or
                assets;

            


    

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      29
      -

    


     

    
      	
               

            	
               (iv)

            	
              all
                Applicable Securities Laws in connection with the creation, offering,
                issuance and sale of the Offered Securities and the creation, issuance
                and
                delivery of the Agent’s Warrants have been complied
                with;

            


    

     

    
      	
               

            	
              (v)

            	
              in
                reliance upon a certificate of an officer of the Corporation, except
                as a
                result of any agreement to which the Corporation is not a party and
                of
                which the Corporation has no knowledge, the Flow-Through Shares,
                at the
                time of issuance, will be Flow-Through shares as defined in
                subsection 66(15) of the Act and will not constitute “prescribed
                shares” for purposes of Regulation 6202.1 of the Regulations of the
                Act;

            


    

     

    and
      additionally, relating to:

     

    
      	
               

            	
              (vi)

            	
              the
                first trade in the Offered Securities (including any Over-Allotment
                Shares
                issuable upon exercise of the Over-Allotment Option) and the Common
                Shares
                received upon exercise of the Agent’s
                Warrants;

            


    

     

    and
      as to
      all other legal matters as the Agent or Agent’s counsel may reasonably request,
      including, compliance with Applicable Securities Laws in any way connected
      with
      the creation, issuance, sale and delivery of the Offered Securities, the first
      trade of the Offered Securities and the Common Shares issuable upon exercise
      of
      the Agent’s Warrants, being subject to a hold period, including a four month and
      a day hold period under Applicable Securities Laws in the Selling Jurisdictions
      (subject to the conditions provided for under the Resale Rules).  It
      is understood that the respective counsel may rely on the opinions of local
      counsel acceptable to them as to matters governed by the laws of jurisdictions
      other than Alberta, British Columbia, Ontario or Québec and on certificates of
      officers of the Corporation and the auditors of the Corporation and the
      registrar and transfer agent of the Common Shares as to relevant matters of
      fact;

     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      30
      -

    


     

    
      	
               

            	
               (b)

            	
              a
                certificate of the Corporation dated the Closing Date, addressed
                to the
                Agent and the Agent’s counsel and signed on the Corporation’s behalf by
                its Chief Executive Officer and Chief Financial Officer (or other
                senior
                officer of the Corporation acceptable to the Agent), certifying
                that:

            


    

     

    
      	
               

            	
              (i)

            	
              the
                Corporation has complied with and satisfied all terms and conditions
                of
                this Agreement on its part to be complied with or satisfied at or
                prior to
                the Closing Time;

            


    

     

    
      	
               

            	
              (ii)

            	
              the
                representations and warranties of the Corporation set forth in this
                Agreement are true and correct at the Closing Time, as if made at
                such
                time except for any increase in the number of issued Common Shares
                resulting from the exercise of stock options or share purchase warrants
                referred to in subparagraph 6(u) of this
                Agreement;

            


    

     

    
      	
               

            	
              (iii)

            	
              no
                event of a nature referred to in subparagraphs 12(a), (b), (c) or (d)
                has occurred or to the knowledge of such officers is pending, contemplated
                or threatened, excluding with respect to subparagraphs 12(b), (c) and
                (d) of this Agreement any obligation to make a determination as to
                the
                Agent’s opinion; and

            


    

     

    
      	
               

            	
              (iv)

            	
              the
                Corporation has made or obtained on or prior to the Closing Time,
                all
                necessary filings, approvals, consents and acceptances of applicable
                regulatory authorities and under any applicable agreement or document
                to
                which the Corporation is a party or by which it is bound, required
                for the
                execution and delivery of this Agreement, the offering and sale of
                the
                Offered Securities and the consummation of the other transactions
                contemplated hereby (subject to completion of filings with certain
                regulatory authorities following the applicable Closing
                Date,

            


    

     

    and
      the
      Agent shall have no knowledge to the contrary;

    

      
        	
                 

              	
                (c)

              	
                definitive
                  certificates representing, in the aggregate, all of the Offered
                  Securities, issued on the applicable Closing Date and registered
                  in such
                  name or names as the Agent shall notify the Corporation in writing
                  not
                  less than twenty-four (24) hours prior to each Closing Time;
                  and

              


      

       

      
        	
                 

              	
                (d)

              	
                copies
                  of the Subscription Agreements delivered by the Agent and duly
                  executed by
                  the Corporation, each in form and substance reasonably satisfactory
                  to the
                  Agent and the Agent’s counsel.

              


      

       

       

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      31
      -

     

     

    
      	
              8.

            	
              Closing

            


    

     

    
      	
               

            	
              (a)

            	
              The
                sale of the Offered Securities shall be completed at the Closing
                Time at
                the offices of Corporation’s counsel in Calgary, Alberta or at such other
                place as the Corporation and the Agent may agree.  Subject to
                the conditions set forth in paragraph 7, the Agent, on the applicable
                Closing Date, shall deliver to the
                Corporation:

            


    

     

    
      	
               

            	
              (i)

            	
              all
                duly executed and properly completed Subscription Agreements;
                and

            


    

     

    
      	
               

            	
              (ii)

            	
              a
                certified cheque(s) or bank draft(s) payable to the Corporation at
                par in
                Calgary in an amount equal to US$3.00 for each Flow-Through Share
                and
                US$2.50 for each Offered Common Share issued hereunder or effect
                payment
                in such other manner as the Corporation and the Agent may
                agree;

            


    

     

    against
      delivery by the Corporation:

     

    
      	
               

            	
              (i)

            	
              the
                opinions, certificates and documents referred to in paragraph 7,
                including but not limited to the definitive certificates referred
                to in
                subparagraph 7(c) for the Offered Securities subscribed
                for;

            


    

     

    
      	
               

            	
              (ii)

            	
              to
                the Agent of a certified cheque or bank draft payable to “Research Capital
                Corporation” at par in Calgary in an amount equal to the aggregate
                commissions as calculated pursuant to subparagraphs 9(a)(i) and
                9(a)(ii);

            


    

     

    
      	
               

            	
              (iii)

            	
              to
                the Agent, the Agent’s Warrants as granted pursuant to
                subparagraph 9(a)(iii); and

            


    

     

    
      	
               

            	
               (iv)

            	
              of
                such further documentation as may be contemplated by this Agreement
                or
                that may reasonably be requested by Agent’s
                counsel.

            


    

     

    
      	
              9.

            	
              Commissions
                and Agent’s Warrants

            


    

     

    In
      consideration for services of the Agent hereunder the Corporation
      agrees:

     

    
      	
               

            	
              (a)

            	
              at
                each Closing Time:

            


    

     

    
      	
               

            	
              (i)

            	
              to
                pay to the Agent, in the aggregate, a corporate finance fee equal
                to 2.0%
                of the gross subscription proceeds from the issue and sale of the
                Offered
                Securities subscribed for (including any Over-Allotment Shares subscribed
                for and any Offered Securities purchased by the Agent as principal,
                if
                any) and for which subscription is accepted by the
                Corporation;

            


    

    
       

       

      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

      -
        32
        -

      


    

    
      	
               

            	
              (ii)

            	
              to
                pay to the Agent, in the aggregate, a cash commission equal to 6.0%
                of the
                gross proceeds from the issuance and sale of the Offered Securities
                subscribed for (including any Over-Allotment Shares subscribed for
                and any
                Offered Securities purchased by the Agent as principal, if any) and
                for
                which subscription is accepted by the Corporation;
                and

            


    

     

    
      	
               

            	
              (iii)

            	
              to
                grant to the Agent, in the aggregate, warrants (the “Agent’s
                Warrants”) entitling the Agent to acquire, upon exercise by the
                Agent in accordance with the terms of such Agent’s Warrants, that number
                of Common Shares equal to:

            


    

     

    
      	
               

            	
              (A)

            	
              8.0%
                of the number of Offered Common Shares subscribed for (including
                any
                Over-Allotment Shares subscribed for and any Offered Securities purchased
                by the Agent as principal, if any) and for which subscription is
                accepted
                by the Corporation, at a price of US$2.50 per Common Share expiring
                18
                months from the applicable Closing Date;
                and

            


    

     

    
      	
               

            	
              (B)

            	
              8.0%
                of the number of Flow-Through Shares subscribed for (including any
                Flow-Through Shares purchased by the Agent as principal, if any)
                and for
                which subscription is accepted by the Corporation, at a price of
                US$3.00
                per Common Share expiring 18 months from the applicable Closing
                Date.

            


    

     

    The
      form of the Agent’s Warrants will be substantially in the form
      as attached as Schedule “A”.
       

    

    The
      Agent
      agrees it will prepare a sponsorship report and/or a prospectus, if required,
      to
      assist the Corporation in becoming publicly listed in Canada on the Exchange
      and
      that the Corporation will provide any such sponsorship report and/or prospectus
      to the Corporation at a cost of $25,000, payable upon the listing of the
      Corporation to the Exchange and deductible from the corporate finance fee and
      cash commission payable by the Corporation pursuant to subparagraphs 9(a)(i)
      and
      9(a)(ii) of this Agreement, respectively, on a pro rata
basis.

     

    
      	
              10.

            	
              Expenses

            


    

     

    Whether
      or not the transactions contemplated herein shall be completed, all costs and
      expenses of or incidental to the creation and distribution of the Offered
      Securities shall be borne by the Corporation, including, without
      limitation:

    
       

      


      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

      -
        33
        -

      


    

    
      	
               

            	
              (a)

            	
              the
                fees and expenses of the Corporation’s counsel and of agent counsel
                retained by the Corporation or the Corporation’s
                counsel;

            


    

     

    
      	
               

            	
              (b)

            	
              the
                fees and expenses of the Corporation’s auditor and independent
                engineers;

            


    

     

    
      	
               

            	
              (c)

            	
              fees
                of any stock exchange or Securities
                Commission;

            


    

     

    
      	
               

            	
              (d)

            	
              any
                other filing fees;

            


    

     

    
      	
               

            	
              (e)

            	
              all
                out-of-pocket expenses of the Agent plus any applicable provincial
                sales
                tax and Goods and Services Tax; and

            


    

     

    
      	
               

            	
              (f)

            	
              the
                fees of the Agent’s counsel plus disbursements and Goods and Services
                Tax.

            


    

     

    
      	
              11.

            	
              Waiver

            


    

     

    Either
      party to this Agreement may waive in whole or in part any breach of, default
      under or non-compliance with any representation, warranty, term or condition
      hereof on the part of the other party, or extend the time for compliance
      therewith, without prejudice to any of its rights in respect of any other
      representation, warranty, term or condition hereof or any other breach of,
      default under or non-compliance with any other representation, warranty, term
      or
      condition hereof, provided that any such waiver or extension shall be binding
      on
      the waiving party only if the same is in writing.

     

    
      	
              12.

            	
              Termination
                Events

            


    

     

    The
      Agent
      may terminate their obligations hereunder, by written notice to the Corporation,
      in the event that after the date hereof and at or prior to the applicable
      Closing Time:

     

    
      	
               

            	
               (a)

            	
              any
                order to cease or suspend trading in any securities of the Corporation,
                or
                prohibiting or restricting the distribution of the Offered Securities
                is
                made, or proceedings are announced or commenced for the making of
                any such
                order, by any Securities Commission or similar regulatory authority,
                OTCBB, stock exchange or by any other competent authority, and has
                not
                been rescinded, revoked or
                withdrawn;

            


    

     

    
      	
               

            	
              (b)

            	
              a
                change of law or the interpretation or administration thereof in
                the
                Applicable Securities Laws has occurred or an inquiry, action, suit,
                investigation or other proceeding (whether formal or informal) is
                announced, commenced or threatened (and has not been rescinded, revoked
                or
                withdrawn) by any federal, provincial, state, municipal or other
                governmental department, commission, board, bureau, agency or
                instrumentality (including the OTCBB or any
                securities regulatory authority), or Securities Commission, stock
                exchange
                or similar regulatory authority, or any order is issued in relation
                to the
                Corporation, any of its affiliates, or any of its directors or officers
                or
                any of the Corporation’s securities (other than any such inquiry, action,
                suit, investigation or proceeding relating solely to the Agent) which
                in
                the opinion of the Agent, acting reasonably, seriously adversely
                affects,
                or involves, or will materially adversely affect or involve, the
                financial
                markets or the business, operations or affairs of the Corporation
                or the
                marketability of the Offered
                Securities;

            


    

    
       

      


      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

      -
        34
        -

       

       

    

    
      	
               

            	
              (c)

            	
              there
                should develop, occur or come into effect or existence any event,
                action,
                state, condition or major financial occurrence of national or
                international consequence or any law or regulation, or any occurrence
                of
                any nature whatsoever, which, in the sole opinion of the Agent, acting
                reasonably, materially adversely affects, or involves, or will materially
                adversely affect or involve, the financial markets or the business,
                operations or affairs of the Corporation or the state of the financial
                markets is such that the Offered Securities cannot, in the opinion
                of the
                Agent be successfully or profitably
                marketed;

            


    

     

    
      	
               

            	
              (d)

            	
              there
                should occur any material change, change of a material fact, occurrence
                or
                event of the nature referred to in subparagraph 3(a) or any
                development that could result in a material change or change of a
                material
                fact in which, in the opinion of the Agent as determined by the Agent
                in
                their sole discretion, acting reasonably, could reasonably be expected
                to
                have a material adverse effect on the business, operations or affairs
                of
                the Corporation or value or the marketability of the Offered
                Securities;

            


    

     

    
      	
               

            	
              (e)

            	
              the
                Agent, acting reasonably, determines that the Corporation shall be
                in
                breach of, default under or non-compliance in any material respect
                with
                any material representation, warranty, term or condition of this
                Agreement
                or the Subscription Agreements;

            


    

     

    
      	
               

            	
               (f)

            	
              the
                state of the financial markets is such that, in the opinion of the
                Agent,
                acting reasonably, it would be unprofitable to offer or continue
                to offer
                the Offered Securities for sale; or

            


    

     

    
      	
               

            	
              (g)

            	
              the
                Agent shall become aware, as a result of their due diligence review
                or
                otherwise, of any adverse material change with respect to the Corporation
                (in the sole opinion of the Agent, acting reasonably) which had not
                been
                disclosed to the Agent prior to the date
                hereof.

            


    

    
       

      


      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

      -
        35
        -

      


       

    

    
      	
              13.

            	
              Continuation
                of Termination Right

            


    

     

    The
      Agent
      may exercise any or all of the rights provided for in paragraphs 7, 11 or 12
      notwithstanding any material change, change, event or state of facts and
      notwithstanding any act or thing taken or done by the Agent or any inaction
      by
      the Agent, whether before or after the occurrence of any material change,
      change, event or state of facts including, without limitation, any act of the
      Agent related to the offering or continued offering of the Offered Securities
      for sale and any act taken by the Agent shall only be considered to have waived
      or be estoppel from exercising or relying upon any of their rights under or
      pursuant to paragraphs 7, 11 or 12 if such waiver or estoppel is in writing
      and specifically waives or estops such exercise or reliance.

     

    
      	
              14.

            	
              Exercise
                of Termination Right

            


    

     

    Any
      termination pursuant to the terms of this Agreement shall be effected by notice
      in writing delivered to the Corporation prior to the Closing Time, provided
      that
      no termination shall discharge or otherwise affect any obligation of the
      Corporation under paragraphs 10, 15, 16, 17 or 18.  The rights of
      the Agent to terminate its obligations hereunder are in addition to, and without
      prejudice to, any other remedies it may have.

     

    
      	
              15.

            	
              Survival

            


    

     

    It
      is
      understood that all representations and warranties herein or contained in
      certificates or documents submitted pursuant to or in connection with the
      transactions contemplated herein shall survive the payment for the Offered
      Securities and the termination of this Agreement and shall continue in full
      force and effect for the benefit of the Agent, the Subscribers and the
      Corporation for a period for two years from the date hereof.

     

    
      	
              16.

            	
              Indemnity

            


    

     

    The
      Corporation (the “Indemnitor”) shall indemnify and save
      harmless the Agent and the Agent’s affiliates, shareholders, directors,
      officers, employees and agent (collectively the “Indemnified
      Parties”) from and against all actual or threatened claims, actions,
      suits, investigations and proceedings (collectively
“Proceedings”) and all losses (other than loss of profits),
      expenses, fees, damages, obligations, payments and liabilities (collectively
      “Liabilities”) (including without limitation all statutory
      duties and obligations, all amounts paid to settle any action or to satisfy
      any
      judgment or award and all legal fees and disbursements actually incurred) to
      which one or more Indemnified Persons are subject or which one or more
      Indemnified Persons suffer or incur, now or any time hereafter, by reason of
      any
      event, act or omission in any way connected, directly or indirectly,
      with:

    
       

      


      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

      -
        36
        -

       

    

     

    
      	
               

            	
              (a)

            	
              any
                information or statement contained in the Subscription Agreements,
                the
                Documents or the Public Record (other than any information or statement
                relating solely to the Agent and furnished to the Corporation by
                the Agent
                expressly for inclusion in the Subscription Agreements, the Documents
                or
                the Public Record), which is or is alleged to be untrue or any omission
                or
                alleged omission to provide any information or state any fact the
                omission
                of which makes or is alleged to make any such information or statement
                untrue or misleading in light of the circumstances in which it was
                made;

            


    

     

    
      	
               

            	
              (b)

            	
              any
                misrepresentation or alleged misrepresentation (except a misrepresentation
                or alleged misrepresentation which is based upon information relating
                to
                the Agent and furnished to the Corporation by the Agent expressly
                for
                inclusion in the Subscription Agreements, the Documents or the Public
                Record) contained in the Subscription Agreements, the Documents or
                the
                Public Record;

            


    

     

    
      	
               

            	
              (c)

            	
              any
                misrepresentation or alleged misrepresentation contained in any of
                the
                responses (excluding responses which comprise “forward looking”
                information) provided to the Agent or the Agent’s counsel by the
                Corporation or its directors, officers or employees pursuant to a
                written
                request for information made by the Agent or by the Agent’s counsel to the
                Corporation or otherwise provided in response to a request by the
                Agent in
                a context where the Corporation understood the Agent to be relying
                on such
                information in assessing the suitability of the offering of the Offered
                Securities;

            


    

     

    
      	
               

            	
              (d)

            	
              any
                prohibition or restriction of trading in the securities of the Corporation
                or any prohibition or restriction affecting the distribution of the
                Offered Securities imposed by any competent authority if such prohibition
                or restriction is based on any misrepresentation or alleged
                misrepresentation of a kind referred to in
                subparagraph 16(b);

            


    

     

    
      	
               

            	
               (e)

            	
              any
                order made or any inquiry, investigation (whether formal or informal)
                or
                other proceeding commenced or threatened by any one or more competent
                authorities (not based upon the activities or the alleged activities
                of
                the Agent or their banking or selling group members, if any) relating
                to
                or materially affecting the trading of the Common Shares (including
                the
                Common Shares issuable upon exercise of the Agent’s Warrants), or
                distribution of the Offered
                Securities;

            


    

     

    
      	
               

            	
              (f)

            	
              any
                breach of, default under or non-compliance by the Corporation with
                any
                representation, warranty, term or condition of this Agreement, the
                Subscription Agreements or any requirement of Applicable Securities
                Laws;
                or

            


    

    
      


      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

      -
        37
        -

      


       

    

    
      	
               

            	
              (g)

            	
              the
                exercise by any Subscriber of the Offered Securities of any contractual
                right or statutory right of rescission in connection with the purchase
                of
                the Offered Securities;

            


    

     

    provided
      that in the event and to the extent that a court of competent jurisdiction
      in a
      final judgment from which no appeal can be made or a regulatory authority in
      a
      final ruling from which no appeal can be made shall determine that such
      Proceedings or Liabilities resulted solely from the negligence, fraud or wilful
      misconduct of, or the violation of applicable laws by, the Indemnified Party
      claiming indemnity, this indemnity shall not apply.

     

    The
      Corporation hereby waives its right to recover contribution from the Agent
      with
      respect to any liability of the Corporation by reason of or arising out of
      any
      misrepresentation in the Documents or the Public Record provided, however,
      that
      such waiver shall not apply in respect of liability caused or incurred by reason
      of or arising out of (i) any misrepresentation which is based upon information
      relating solely to the Agent contained in such document and furnished to the
      Corporation by the Agent expressly for inclusion in such document; or (ii)
      any
      failure by the Agent to provide to prospective purchasers of Offered Securities
      any document which the Corporation is required to provide to such prospective
      purchasers and which the Corporation has provided to the Agent to forward to
      such prospective purchasers.

     

    The
      Corporation agrees that in case any legal proceeding or investigation shall
      be
      brought against or initiated against the Corporation by any governmental
      commission, regulatory authority, exchange, court or other authority and an
      Indemnified Party or other representative of the Agent shall be required to
      testify or respond to procedures designed to discover information regarding,
      in
      connection with or relating to the performance of professional services rendered
      to the Corporation by the Agent hereunder, the Corporation shall pay the Agent
      the reasonable costs (including an amount to reimburse the Agent for the time
      spent by their personnel in connection therewith on a normal per diem basis
      and
      out of pocket expenses) in connection therewith unless such proceedings or
      investigations shall be brought or initiated as a result of any negligence,
      fraud or any actions or inactions of the Agent, or any of their
      affiliates.

     

    
      	
              17.

            	
              Notice
                of Indemnity Claim

            


    

     

    If
      any
      Proceeding is brought, instituted or threatened in respect of any Indemnified
      Party which may result in a claim for indemnification under this agreement,
      such
      Indemnified Party shall promptly after receiving notice thereof notify the
      Corporation of the nature of such claim, in writing, and the Corporation shall
      be entitled (but not required) to assume conduct of the defence thereof and
      retain counsel on behalf of the Indemnified Party who is reasonably satisfactory
      to the Indemnified Party, to represent the Indemnified Party in such Proceeding
      and the Corporation shall pay the fees and disbursements of such counsel and
      all
      other reasonable expenses of the Indemnified Party relating to such Proceeding
      as incurred.  Failure to so notify the Corporation shall not relieve
      the Corporation from liability except and only to the extent that the failure
      materially prejudices the Corporation.  If the Corporation assumes
      conduct of the defence for an Indemnified Party, the Indemnified Party shall
      fully cooperate in the defence including without limitation the provision of
      documents, appropriate officers and employees to give witness statements, attend
      examinations for discovery, make affidavits, meet with counsel, testify and
      divulge all information reasonably required to defend or prosecute the
      Proceedings.

    
       

      


      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

      -
        38
        -

      


    

    In
      any
      such Proceeding the Indemnified Party shall have the right to employ separate
      counsel and to participate in the defence thereof if:

     

    
      	
               

            	
              (a)

            	
              the
                Indemnified Party has been advised in writing by counsel that there
                may be
                a reasonable legal defence available to the Indemnified Party that
                is
                different from or in addition to those available to the Corporation
                or
                that a conflict of interest exists which makes representation by
                counsel
                chosen by the Corporation not
                advisable;

            


    

     

    
      	
               

            	
              (b)

            	
              the
                Indemnitor has not assumed the defence of the Proceeding and employed
                counsel therefor reasonably satisfactory to the Indemnified Party
                within
                ten (10) days after receiving notice thereof;
                or

            


    

     

    
      	
               

            	
              (c)

            	
              employment
                of such other counsel has been authorized by the
                Corporation;

            


    

     

    in
      which
      event the reasonable fees and disbursements of such counsel (on a solicitor
      and
      his client basis) shall be paid by the Corporation.  It being
      understood, however, that the Corporation shall not, in connection with any
      one
      such action or separate but substantially similar or related actions in the
      same
      jurisdiction arising out of the same general allegations or circumstances,
      be
      liable for the reasonable fees and expenses of more than one separate law firm
      (in addition to any local counsel) for all such Indemnified
      Parties.

     

    No
      admission of liability and no settlement of any Proceeding shall be made by
      the
      Indemnitor without the consent of the Indemnified Parties affected, such consent
      not to be unreasonably withheld.  No admission of liability shall be
      made by an Indemnified Party without the consent of the Indemnitor, such consent
      not to be unreasonably withheld, and the Indemnitor shall not be liable for
      any
      settlement of any Proceeding made without its consent, such consent not to
      be
      unreasonably withheld.

    
       

      


      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

      -
        39
        -

      


    

    
      	
              18.

            	
              Right
                of Contribution

            


    

     

    In
      order
      to provide for just and equitable contribution in circumstances in which the
      indemnification provided for in this Agreement is due in accordance with its
      terms but is (in whole or in part), for any reason, held by a court to be
      unavailable from the Corporation on ground of policy or otherwise, each of
      the
      Corporation and the party or parties seeking indemnification shall contribute
      to
      the aggregate Liabilities (or Proceedings in respect thereof) to which they
      may
      be subject or which they may suffer or incur:

     

    
      	
               

            	
              (a)

            	
              in
                such proportion as is appropriate to reflect the relative benefit
                received
                by the Corporation on the one hand and by the Agent on the other
                hand from
                the offering of the Offered Securities;
                or

            


    

     

    
      	
               

            	
              (b)

            	
              if
                the allocation provided by subparagraph (a) above is not permitted by
                applicable law, in such proportion as is appropriate to reflect not
                only
                the relative benefits referred to in subparagraph (a) above but also
                to reflect the relative fault of the party or parties seeking indemnity,
                on the one hand, and the parties from whom indemnity is sought, on
                the
                other hand, in connection with the statement, omission, misrepresentation
                or alleged misrepresentation, order, inquiry, investigation or other
                matter or thing which resulted in such liabilities, claims, demands,
                losses, costs, damages or expenses, as well as any other relevant
                equitable considerations.

            


    

     

    The
      relative benefits received by the Corporation, on the one hand, and the Agent,
      on the other hand, shall be deemed to be in the same proportion that the total
      proceeds of the offering received by the Corporation (net of fees but before
      deducting expenses) bear to the fees received by the Agent.  The
      relative fault of the Corporation, on the one hand, and of the Agent, on the
      other hand, shall be determined by reference, among other things, to whether
      the
      misrepresentation or alleged misrepresentation, order, inquiry, investigation
      or
      other matter referred to in paragraph 16 hereof relates to information
      supplied or which ought to have been supplied by the Corporation or the Agent
      or
      steps taken or done or which ought to have been done by the Corporation or
      the
      Agent and the parties’ relevant intent, knowledge, access to information and
      opportunity to correct or prevent such misrepresentation or alleged
      misrepresentation, order, inquiry, investigation or other matter referred to
      in
      paragraph 16 hereof.

     

    The
      amount paid or payable by the Indemnitor as a result of any Proceedings or
      Liabilities without limitation, include any legal or other expenses reasonably
      incurred by the Indemnified Person in connection with investigating or defending
      such liabilities, claims, demands, losses, costs, damages and expenses (or
      claims, actions, suits or proceedings in respect thereof), whether or not
      resulting in any action, suit, proceeding or claim.

    
      


      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

      -
        40
        -

      


       

    

    The
      Corporation agrees that it would not be just and equitable if contributions
      pursuant to this Agreement were determined by pro rata allocation or by any
      other method of allocation which does not take into account the equitable
      considerations referred to in the immediately preceding paragraphs.

     

    Any
      liability of the Agent under this paragraph 18 shall be limited to the
      amount of the cash fees paid to the Agent pursuant to paragraph 9
      hereof.

     

    The
      rights to indemnify and right of contribution provided in the foregoing
      paragraphs shall be in addition to and not in derogation of any other right
      to
      contribution which the Indemnified Parties may have by statute or otherwise
      at
      law or in equity.  Subject to the proviso following
      subparagraph 16(g), the Indemnitor waives all rights of contribution that
      it may have against any Indemnified Party relating to any Liability in respect
      of which the Indemnitor has agreed to indemnify the Indemnified Parties
      hereunder.

     

    It
      is the
      intention of the Corporation to constitute the Agent as trustee for the
      Indemnified Parties for the purposes of paragraphs 16 to 18 inclusive and
      the Agent, shall be entitled, as trustee, to enforce such covenants on behalf
      of
      any other Indemnified Persons.

     

    If
      any
      Proceeding is brought in connection with the transactions contemplated by this
      Agreement and the Agent is required to testify in connection therewith or is
      required to respond to procedures designed to discover information relating
      thereto, the Corporation shall pay to the Agent reasonable fees at the normal
      per diem rate for its directors, officers, employees and agent involved in
      preparation for and attendance at such Proceeding or in so responding, and
      any
      other reasonable costs and out-of-pocket expenses incurred by it in connection
      therewith will be paid by the Corporation as they are incurred, except in each
      case to the extent that such Proceeding is caused solely by or is the result
      of
      the negligence, fraud or wilful misconduct of, or violation of applicable laws
      by, an Indemnified Party.

     

    The
      obligations under the indemnity and right of contribution provided herein shall
      apply whether or not the transactions contemplated by this Agreement are
      completed and shall survive the completion of the transactions contemplated
      under this Agreement and the termination of this Agreement.

    
       

      


      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

      -
        41
        -

      


    

    
      	
              19.

            	
              Notices

            


    

     

    Any
      notice or other communication to be given hereunder shall, in the case of notice
      to be given to the Corporation, be addressed to:

     

    Kodiak
      Energy, Inc.

    Suite 460,
      734 – 7th
      Avenue SW

    Calgary,
      Alberta

    T2P
      3P6

     

    
      	
               

            	
              Attention:

            	
              Mark
                Hlady

            


    

    Chairman
      and Chief Executive Officer

    
      	
               

            	
              Telecopy
                No :

            	
              (403)
                513-2670

            


    

     

    and
      a
      copy to:

     

    Borden
      Ladner Gervais

    1000
      Canterra Tower, 400 – 3rd Avenue
      S.W.

    Calgary,
      Alberta

    T2P
      4H2


     

    
      	
               

            	
              Attention:

            	
              Bruce
                Lawrence

            


    

    
      	
               

            	
              Telecopy
                No:

            	
              (403)
                266-1395

            


    

     

    and,
      in
      the case of notice to be given to the Agent, be addressed to:

     

    Research
      Capital Corporation

    199
      Bay
      Street, Suite 4500

    Commerce
      Court West, Box 368

    Toronto,
      Ontario

    M5L
      1G2

    
      	
               

            	
              Attention:

            	
              Gage
                Jull

            


    

    
      	
               

            	
              Telecopy
                No.:

            	
              (416)
                860-7614

            


    

     

    and
      a
      copy to:

     

    Stikeman
      Elliott LLP

    4300
      Bankers Hall West

    888
–
      3rd Street
      S.W.

    Calgary,
      Alberta

    T2P
      5C5


     

    
      	
               

            	
              Attention:

            	
              Stuart
                M. Olley

            


    

    
      	
               

            	
              Telecopy
                No:

            	
              (403)
                266-9034

            


    

    
       

      


      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

      -
        42
        -

      


       

    

    or
      to
      such other address as the party may designate by notice given to the others.
      Each communication shall be personally delivered to the addressee or sent by
      facsimile transmission to the addressee, and:

     

    
      	
               

            	
              (a)

            	
              a
                communication which is personally delivered shall, if delivered before
                4:30 p.m. (Calgary time) on a Business Day, be deemed to be given
                and
                received on that day and, in any other case be deemed to be given
                and
                received on the first Business Day following the day on which it
                is
                delivered; and

            


    

     

    
      	
               

            	
              (b)

            	
              a
                communication which is sent by facsimile transmission shall, if sent
                on a
                Business Day before 4:30 p.m. (Calgary time), be deemed to be given
                and
                received on that day and, in any other case, be deemed to be given
                and
                received on the first business day following the day on which it
                is
                sent.

            


    

     

    
      	
              20.

            	
              Restrictions
                of Offerings

            


    

     

    The
      Corporation agrees that, prior to 120 days after the final Closing Date, it
      shall not, directly or indirectly, sell or offer to sell any Common Shares
      or
      other equity securities of the Corporation, or otherwise issue, lend, transfer
      or dispose of any securities exchangeable, convertible or exercisable into
      Common Shares, or announce any intention to do any of the foregoing without
      the
      prior written consent of the Agent, which consent shall not be unreasonably
      withheld provided that the foregoing shall not apply to: iv) Common Shares
      issued upon exercise of outstanding stock options or warrants; and v) grants
      of
      options to acquire Common Shares.

     

    
      	
              21.

            	
              Alternative
                Transaction

            


    

     

    The
      Corporation agrees that in the event that the offering of Offered Securities
      as
      contemplated hereby is not completed due to the Corporation deciding in its
      sole
      and absolute discretion not to proceed with such offering, and following the
      termination of this Agreement, the Corporation enters into a binding agreement
      in respect of, or makes a public announcement in respect of, an Alternative
      Transaction, then the Corporation shall, forthwith, to the extent not already
      paid, pay such expenses of the Agent pursuant to paragraph 10 hereof and
      the corporate finance fee and cash commission to the Agent pursuant to
      subparagraphs 9(a)(i) and 9(a)(ii) hereunder, that would be payable
      hereunder in respect of the completion of the offering of Offered Securities
      in
      its entirety, as contemplated hereby.  The corporate finance fee,
      commission and any unpaid expenses payable pursuant to
      subparagraphs 9(a)(i), 9(a)(ii) and paragraph 10 hereof, respectively,
      shall be payable immediately following completion of the Alternative
      Transaction. For greater certainty, in the event that this Agreement is
      terminated by the Agent and the Corporation subsequently enters into a binding
      agreement in respect of, or makes a public announcement in respect of, an
      Alternative Transaction, the Corporation shall have no obligation to pay the
      corporate finance fee and commission payable pursuant to
      subparagraphs 9(a)(i) and 9(a)(ii) hereunder, respectively, or to grant the
      Agent’s Warrants.

    
       

      


      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

      -
        43
        -

      


    

    
      	
              22.

            	
              Rights
                of First Refusal

            


    

     

    In
      the
      event that within 18 months after the completion of the sale of the Offered
      Securities the Corporation proposes to undertake a merger, acquisition or
      similar transaction involving the sale of all or substantially all of the assets
      or common shares of the Corporation, the Corporation will retain the Agent
      as
      its sole financial advisor and exclusive agent to advise in the completion
      of
      such transaction, subject to agreeing on mutually acceptable fee
      arrangements.  The terms and conditions relating to any such services
      will be outlined in a separate agreement and the fees for such services will
      be
      in addition to the corporate finance fee and cash commission payable pursuant
      to
      subparagraphs 9(a)(i) and 9(a)(ii) hereunder, will be negotiated separately
      and in good faith and will be consistent with fees paid to investment bankers
      in
      North America for similar services in connection with similar
      transactions.  The Corporation agrees not to engage any other party
      for the services described in this paragraph without first complying with the
      provisions of this paragraph 22 or obtaining the prior written consent of
      the Agent.

    

      The
        Corporation agrees that for a period of 18 months following the final
        Closing Date, the Corporation will offer to the Agent (for a period of
        10 Business Days) a right of first refusal to provide lead agent or primary
        investment banking services, as the case may be, to the Corporation or any
        of
        its subsidiaries, and any successor entity to the Corporation’s business or
        assets by reorganization (such as, but not limited to, an income trust) relating
        to any equity or debt, or equity or debt related, financing involving a
        distribution to the public in Canada.  The terms and conditions
        relating to any such services will be outlined in a separate engagement letter,
        underwriting or agency agreement and the fees for such services will be in
        addition to the corporate finance fee and cash commission payable pursuant
        to
        subparagraphs 9(a)(i) and 9(a)(ii) hereunder, will be negotiated separately
        and in good faith and will be consistent with fees paid to investment bankers
        in
        North America for similar services in connection with similar
        transactions.  The Corporation agrees not to engage any other party
        for the services described in this paragraph without first complying with
        the
        provisions of this paragraph 22 or obtaining the prior written consent of
        the Agent.

       

      The
        Corporation agrees to cooperate with Morgarten Financial Services Inc. of
        Zurich, Switzerland in seeking investors to any equity or debt, or equity
        or
        debt related financing of the Corporation involving a distribution to the
        public
        in Canada as per the preceding paragraph, on terms and conditions negotiated
        between the Agent and Morgarten Financial Services Inc. at such
        time.  On the condition that Morgarten Financial Services Inc. makes
        reciprocal invitations to the Agent, the Agent will invite Morgarten Financial
        Services Inc. to participate in any equity or debt, or equity or debt related
        financing of the Corporation involving a distribution to the public in Europe,
        on terms and conditions negotiated between the Agent and Morgarten Financial
        Services Inc. at such time.

    

    
       

      


      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

      -
        44
        -

      


    

    
      	
              23.

            	
              Relationship
                between the Corporation and the
                Agent

            


    

     

    The
      Corporation: b) acknowledges and agrees that the Agent have certain statutory
      obligations as a registrant under the Applicable Securities Laws and have
      fiduciary relationships with their clients; and c) consents to the Agent acting
      hereunder while continuing to act for its clients.  To the extent that
      the Agent’s statutory obligations as a registrant under Applicable Securities
      Laws or fiduciary relationships with its clients conflicts with its obligations
      hereunder, the Agent shall be entitled to fulfil its statutory obligations
      as a
      registrant under Applicable Securities Laws and its duties to its clients.
      Nothing in this Agreement shall be interpreted to prevent the Agent from
      fulfilling its statutory obligations as a registrant under Applicable Securities
      Laws or to act as a fiduciary of its clients.

     

    
      	
              24.

            	
              Severance

            


    

     

    If
      one or
      more of the provisions contained herein shall, for any reason, be held to be
      invalid, illegal or unenforceable in any respect, such invalidity, illegality
      or
      unenforceability shall not affect any other provision of this Agreement, but
      this Agreement shall be construed as if such invalid, illegal or unenforceable
      provision or provisions had never been contained herein.

     

    
      	
              25.

            	
              Trust

            


    

     

    The
      Corporation acknowledges and agrees that it is the intention of the parties
      hereto and the Corporation that each of the Subscribers be entitled to rely
      on
      the representations, warranties, terms, conditions and covenants of the
      Corporation contained herein (save and except as waived in whole or in part
      by
      the Agent pursuant to this Agreement).

     

    
      	
              26.

            	
              Governing
                Law

            


    

     

    This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      Province of Alberta and the laws of Canada applicable therein.  The
      parties hereto irrevocably attorn to the jurisdiction of the courts of the
      Province of Alberta with respect to any matters arising out of this Agreement
      and agree to be bound by any suit, action or proceeding commenced in such courts
      and by any order or judgment resulting from such suit, action or
      proceeding.  Each of the parties hereto irrevocably waives, to the
      fullest extent it may effectively do so, the defense of an inconvenient forum
      to
      the maintenance of such action or proceeding.

    
       

      


      
        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

      -
        45
        -

      


    

    
      	
              27.

            	
              Time
                of the Essence

            


    

     

    Time
      is
      of the essence of this Agreement.

     

    
      	
              28.

            	
              Counterpart
                Execution

            


    

     

    This
      Agreement may be executed in one or more counterparts each of which so executed
      shall constitute an original and all of which together shall constitute one
      and
      the same Agreement.

     

    
      	
              29.

            	
              Entire
                Agreement

            


    

     

    It
      is
      understood that the terms and conditions of this Agreement supersede any
      previous verbal or written agreement between the Agent and the Corporation
      in
      respect of the offer for sale by the Corporation of Offered Securities,
      including the letter agreement dated October 22, 2007 between the Corporation
      and the Agent.

     

    


     

     

     

     

     

     

    


     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    -
      46
      -


     

    


     

    If
      the
      foregoing is in accordance with your understanding and is agreed to by you,
      please confirm your acceptance by signing the enclosed copies of this letter
      at
      the place indicated and returning same to the Agent.

     

    
      	 	
              RESEARCH
                CAPITAL CORPORATION

            
	 	 	 
	 	
              Per:

            	 


    

     

    


     

     

    
      	
              ACCEPTED
                AND AGREED to as of the 30th
                day of
                October, 2007.

            
	
               

              KODIAK
                ENERGY, INC.

            
	
               

              By:

            	 
	 	
              Mark
                Hlady,

              Chairman
                and Chief Executive Officer

            


    

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    SCHEDULE
      “A“

     

    FORM
      OF AGENT’S WARRANTS