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MEGAWEST ENERGY CORP.

STOCK OPTION PLAN



Dated August 24, 2004

Amended and Restated February 19, 2007 and August 9, 2007

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TABLE OF CONTENTS

|ARTICLE 1 DEFINITIONS AND INTERPRETATION  | 1  
|----------------------------------------- | ---
|                                          | 1.1
|                                          | 1.2
|                                          | 1.3
|ARTICLE 2 PURPOSE AND PARTICIPATION       | 3  
|                                          | 2.1
|                                          | 2.2
|                                          | 2.3
|                                          | 2.4
|                                          | 2.5
|                                          | 2.6
|ARTICLE 3 TERMS AND CONDITIONS OF OPTIONS | 5  
|                                          | 3.1
|                                          | 3.2
|                                          | 3.3
|                                          | 3.4
|                                          | 3.5
|                                          | 3.6
|                                          | 3.7
|                                          | 3.8
|ARTICLE 4 EXERCISE OF OPTION              | 10 
|                                          | 4.1
|                                          | 4.2
|                                          | 4.3
|                                          | 4.4
|ARTICLE 5 ADMINISTRATION                  | 12 
|                                          | 5.1
|                                          | 5.2
|ARTICLE 6 AMENDMENT AND TERMINATION       | 13 
|                                          | 6.1
|                                          | 6.2
|                                          | 6.3
|                                          | 6.4

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STOCK OPTION PLAN

ARTICLE 1 DEFINITIONS AND INTERPRETATION

1.1Definitions

As used herein, unless anything in the subject matter or
context is inconsistent therewith, the following terms shall have the meanings
set forth below:

| | (a) | "Administrator" means, initially, the secretary of the
      Company and thereafter shall mean such director or other senior officer or
      employee of the Company as may be designated as Administrator by the Board
      from time to time;                                                                                                                                                                                                                                          
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (b) | "Affiliate" has the meaning prescribed in the Business
      Corporations Act(British Columbia) as amended from time to
    time;                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (c) | "Applicable Laws" means all legal requirements relating
      to the administration of stock option plans and the issuance and
      distribution of shares, if any, under applicable corporate laws,
      applicable securities laws, the Income Tax Act(Canada), the rules
      of any applicable stock exchange or stock quotation system on which the
      Shares may be listed, and the rules of any foreign jurisdiction applicable
      to Options granted to residents therein;
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (d) | "Associate" has the meaning prescribed in the
      Securities Act(British Columbia) as amended from time to
    time;                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (e) | "Award Date" means the date on which the Board grants and
      announces a particular Option;                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (f) | "Board" means the board of directors of the
    Company;                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (g) | "Change of Control" means, in respect of the Company, the
      occurrence of any of:                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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- 2 -

| |      | conversion of the Convertible Securities beneficially
      owned by Subject Persons) where the Board continues to be supportive of
      the direction of the Company under the management of the Chief Executive
      Officer, shall not constitute a "Change of Control"; or
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                 
| | (ii) | approval by the shareholders of:                                                                                                                                                                                                                                                
| |      |                                                                                                                                                                                                                                                                                 
| |      | (A)                                                                                                                                                                                                                                                                             
| |      |                                                                                                                                                                                                                                                                                 
| |      | (B)                                                                                                                                                                                                                                                                             
| |      |                                                                                                                                                                                                                                                                                 
| |      | (C)                                                                                                                                                                                                                                                                             
| |      |                                                                                                                                                                                                                                                                                 
| |      | (D)                                                                                                                                                                                                                                                                             
| |      |                                                                                                                                                                                                                                                                                 
| |      | (E)                                                                                                                                                                                                                                                                             

| | (h) | "Company" means Megawest Energy Corp., formerly Brockton
      Capital Corp., or any "affiliate" (as defined under the Business
      Corporations Act(British Columbia));                                                                              
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                         
| | (i) | "Director" means any individual holding the office of
      director or senior officer of the Company;                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                         
| | (j) | "Employee" means any individual regularly employed on a
      full-time or part-time basis by the Company or other persons who perform
      management or consulting services or investor relations services for the
      Company on an ongoing basis;
| |     |                                                                                                                                                                                                                                                         
| | (k) | "Exercise Notice" means the notice respecting the
      exercise of an Option, in the form set out as Schedule B hereto, duly
      executed by the Option Holder;                                                                                      
| |     |                                                                                                                                                                                                                                                         
| | (l) | "Exercise Period" means the period during which a
      particular Option may be exercised and is the period from and including
      the Award Date through to and including the Expiry Date;                                                          
| |     |                                                                                                                                                                                                                                                         
| | (m) | "Exercise Price" means the price at which an Option may
      be exercised as determined in accordance with Section
  3.5;                                                                                                                              

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- 3 -

| | (n) | "Expiry Date" means the date determined in accordance
      with Section 3.3 and after which a particular Option cannot be
      exercised;                                                             
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                         
| | (o) | "Option" means an option to acquire Shares, awarded to a
      Director or Employee pursuant to the Plan;                                                                                               
| |     |                                                                                                                                                                                                         
| | (p) | "Option Certificate" means the certificate, substantially
      in the form set out as Schedule A hereto, evidencing an Option;                                                                         
| |     |                                                                                                                                                                                                         
| | (q) | "Option Holder" means a Director or Employee or former
      Director or Employee, who holds an unexercised and unexpired Option or,
      where applicable, the Personal Representative of such person;
| |     |                                                                                                                                                                                                         
| | (r) | "Personal Representative" means:                                                                                                                                                                        
| |     |                                                                                                                                                                                                         
| |     | (i)                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                         
| |     | (ii)                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                         
| | (s) | "Plan" means this Megawest Energy Corp. stock option
      plan; and                                                                                                                                    
| |     |                                                                                                                                                                                                         
| | (t) | "Share" or "Shares" means, as the case may be, one or
      more common shares without par value in the capital of the
  Company;                                                                       

1.2Choice of Law

The Plan is established under and the provisions of the Plan
shall be interpreted and construed in accordance with the laws of the Province
of British Columbia and the federal laws applicable therein.

1.3Headings

The headings used herein are for convenience only and are not
to affect the interpretation of the Plan.

ARTICLE 2PURPOSE AND PARTICIPATION

2.1Purpose

The purpose of the Plan is to provide the Company with a
share-related mechanism to attract, retain and motivate qualified Directors and
Employees who make valuable contributions toward the long term goals of the
Company and to enable and encourage such Directors and Employees to acquire
Shares as long term investments.

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- 4 -

2.2Participation

The Board shall, from time to time, in its sole discretion
determine those Directors and Employees, if any, to whom Options are to be
awarded. If the Board elects to award an Option to a Director, the Board shall,
in its sole discretion but subject to Section 3.2, determine the number of
Shares to be acquired on the exercise of such Option. If the Board elects to
award an Option to an Employee, the Board shall, in its sole discretion but
subject to Section 3.2, determine, the number of Shares to be acquired on the
exercise of such Option, and in so doing the Board may take into account the
following criteria:

| | (a) | the annual salary of the Employee as at the Award Date in
      relation to the total annual salaries payable by the Company to all of its
      Employees as at the Award Date;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                 
| | (b) | the length of time that the Employee has been employed by
      the Company; and                                                                                                
| |     |                                                                                                                                                                                 
| | (c) | the quality of work performed by the
  Employee.                                                                                                                                

2.3Representation of Employee Status

In awarding an Option to an Employee, the Board shall
represent, on behalf of the Company that the Employee is either:

| | (a) | a bona fide employee of the Company, being:                                                                                                                                                                                            
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                        
| |     | (i)                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                        
| |     | (ii)                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                        
| |     | (iii)                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                        
| | (b) | a bona fide consultant, being in relation to the Company,
      an individual (or a company of which the consultant is an employee or
      shareholder, or a partnership of which the consultant is an employee or
      partner) who:
| |     |                                                                                                                                                                                                                                        
| |     | (i)                                                                                                                                                                                                                                    

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- 5 -

| | (ii)  | possesses technical, business or management expertise of
      value to the Company or an Affiliate of the Company;                                                          
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                              
| | (iii) | spends a significant amount of time and attention on the
      business and affairs of the Company or an Affiliate of the Company;
    and                                   
| |       |                                                                                                                                                                              
| | (iv)  | has a relationship with the Company or an Affiliate of
      the Company that enables the individual to be knowledgeable about the
      business and affairs of the Company.

2.4Notification of Award

Following the approval by the Board of the awarding of an
Option, the Administrator shall notify the Option Holder in writing of the award
and shall enclose with such notice the Option Certificate representing the
Option so awarded.

2.5Copy of Plan

Each Option Holder, concurrently with the delivery of the
notice of the award of the Option made pursuant to Section 2.4, shall be
provided with a copy of this Plan. A copy of any amendment to this Plan shall be
promptly provided by the Administrator to each Option Holder.

2.6Limitation

The Plan does not give any Option Holder that is a Director the
right to serve or continue to serve as a Director of the Company nor does it
give any Option Holder that is an Employee the right to be or to continue to be
employed by the Company.

ARTICLE 3TERMS AND CONDITIONS OF OPTIONS

3.1Board to Allot Shares

The Shares to be issued to Option Holders upon the exercise of
Options shall be allotted and authorized for issuance by the Board prior to the
exercise thereof.

3.2Number of Shares

The total number of Shares that may be issued upon the exercise
of the Options shall not exceed: (a) 20% of the total number of shares issued
and outstanding from time to time; (b) less the total number of Shares that may
be issued upon the exercise of options granted by the Company pursuant to a
supplementary stock option plan dated January 5, 2007 for U.S. based employees;
and (c) less the total number of Shares that may be issued upon the exercise of
options otherwise granted by the Company. The Company may not grant Options to
any one person which will, when exercised, exceed five percent (5%) of the
issued and outstanding Shares of the Company. The Company may not grant Options
to any person and that persons Associates that will in the aggregate, when
exercised, exceed, in any 12 month period, five percent (5%) of the issued and
outstanding shares of the Company.

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- 6 -

If any Option expires or otherwise terminates for any reason
without having been exercised in full, the number of Shares in respect of which
Option expired or terminated shall again be available for the purposes of the
Plan.

3.3Term of Option

At the time of the grant of an Option, the Board shall
designate the expiration date of an Option (the "Expiry Date"), provided that
the Expiry Date of an Option shall be the earlier of the date so fixed by the
Board at the time the Option is awarded and the date established, if applicable,
in paragraphs (a) to (c) below:

| | (a) | Death                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | In the event that the Option Holder should die while he
      or she is still a Director (if he or she holds his or her Option as
      Director) or Employee (if he or she holds his or her Option as Employee),
      the Expiry Date shall be one (1) year from the date of death of the Option
      Holder; or                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (b) | Ceasing to Hold Office                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | In the event that the Option Holder holds his or her
      Option as Director of the Company and such Option Holder ceases to be a
      Director of the Company other than by reason of death, the Expiry Date of
      the Option shall be the 30th day following the date the Option Holder
      ceases to be a Director of the Company unless the Option Holder ceases to
      be a Director of the Company but continues to be engaged by the Company as
      an Employee, in which case the Expiry Date shall remain unchanged, or
      unless the Option Holder ceases to be a Director of the Company as a
      result of:
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | in which case the Expiry Date shall be the date the
      Option Holder ceases to be a Director of the
Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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| | (c) | Ceasing to be Employed                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | In the event that the Option Holder holds his or her
      Option as an Employee of the Company and such Option Holder ceases to be
      an Employee of the Company other than by reason of death, or if the
      Employee is a party providing investor relations services or management or
      consulting services to the Company and ceases to continue providing such
      services to the Company, the Expiry Date of the Option shall be the 30th
      day following the date the Option Holder ceases to be an Employee of the
      Company or ceases to continue providing such investor relations,
      management and consulting services to the Company unless the Option Holder
      ceases to be an Employee of the Company or ceases to continue providing
      such services to the Company as a result of:
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | in which case the Expiry Date shall be the
        date the Option Holder ceases to be an Employee of the Company or ceases
        to continue providing such services. Notwithstanding any other provision
        hereof, the Expiry Date of one or more outstanding Options may be extended
        by the Administrator or the Board, in the absence of such, at such times
        as it shall determine in its sole discretion.                                                                                                                                                                                                                                                                                                                                                                                              

3.4Exercise of Option

An Option Holder may exercise an Option in whole or in part at
any time or from time to time during the Exercise Period provided that, with
respect to the exercise of part of an Option, the Board may at any time and from
time to time fix a minimum or maximum number of Shares in respect of which an
Option Holder may exercise part of any Option held by such Option Holder.

3.5Exercise Price

The Exercise Price shall be that price per share, as determined
by the Board, in its sole discretion, and announced as of the Award Date, at
which an Option Holder may purchase a Share upon the exercise of an Option.

3.6Assignment of Options

Options may not be assigned or transferred, provided however
that the Personal Representative of an Option Holder may, to the extent
permitted by Section 4.1, exercise the Option within the Exercise Period.

3.7Adjustments upon Changes in Capitalization

| | (a) | Adjustments                                                                                                                                                                                                                                                              
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                          
| |     | The aggregate number and class of shares for which
      Options may be granted under this Plan, the number and class of shares
      covered by each outstanding Option, and the Exercise Price per share
      thereof (but not the total price), and each such
Option,

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- 8 -

shall all be proportionately adjusted
for any increase or decrease in the number of issued Shares resulting from:

| | (i)  | a subdivision or consolidation of Shares or any like
      capital adjustment, or                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (ii) | the issuance of any Shares, or securities exchangeable
      for or convertible into Shares, to the holders of all or substantially all
      of the outstanding Shares by way of a stock dividend (other than the issue
      of Shares, or securities exchangeable for or convertible into Shares, to
      holders of Shares pursuant to their exercise of options to receive
      dividends in the form of Shares, or securities convertible into Shares, in
      lieu of dividends paid in the ordinary course on the
  Shares).

| | (b) | Merger, Liquidation or
Arrangement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | Except as provided in Section 3.7(c) hereof, upon a
      merger (other than a merger of the Company in which the holders of Shares
      immediately prior to the merger have the same proportionate ownership of
      common shares in the surviving corporation immediately after the merger),
      consolidation, acquisition of property or stock, separation,
      reorganization (other than a mere re-incorporation or the creation of a
      holding Company) or liquidation of the Company, as a result of which the
      shareholders of the Company, receive cash, shares or other property in
      exchange for or in connection with their Shares, any Option granted
      hereunder shall terminate, but the Option Holder shall have the right to
      exercise such Option Holder's Option immediately prior to any such merger,
      consolidation, acquisition of property or shares, separation,
      reorganization or liquidation, and to be treated as a shareholder of
      record for the purposes thereof, to the extent the vesting requirements
      set forth in the Option agreement have been satisfied (or accelerated
      pursuant to Section 3.8(b) hereof).                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (c) | Receipt of Exchange Shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | If the shareholders of the Company receive shares in the
      capital of another corporation ("Exchange Shares") in exchange for their
      Shares in any transaction involving a merger (other than a merger of the
      Company in which the holders of Shares immediately prior to the merger
      have the same proportionate ownership of Shares in the surviving
      corporation immediately after the merger), consolidation, acquisition of
      property or shares, separation or reorganization (other than a mere
      re-incorporation or the creation of a holding Company), all Options
      granted hereunder shall be converted into options to purchase Exchange
      Shares unless the Company and the corporation issuing the Exchange Shares,
      in their sole discretion, determine that any or all such Options granted
      hereunder shall not be converted into options to purchase Exchange Shares
      but instead shall terminate in accordance with, and subject to the Option
      Holder's right to exercise the Option Holder's Options pursuant to, the
      provisions of Section 3.7(b). The amount and price of converted options
      shall be determined by adjusting the amount and price of the Options
      granted hereunder in the same proportion as used for
  determining

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- 9 -

| |     | the number of Exchange Shares the holders of the Shares
      receive in such merger, consolidation, acquisition or property or stock,
      separation or reorganization. Unless accelerated by the Board, the vesting
      schedule set forth in the option agreement shall continue to apply to the
      options granted for the Exchange Shares.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                       
| | (d) | Fractional Shares                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                       
| |     | In the event of any adjustment in the number of Shares
      covered by any Option, any fractional shares resulting from such
      adjustment shall be disregarded and each such Option shall cover only the
      number of full shares resulting from such adjustment.                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                       
| | (e) | Decision of Board                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                       
| |     | All adjustments pursuant to this Section 3.7 shall be
      made by the Board or its designees or the Administrator, and its
      determination as to what adjustments shall be made, and the extent
      thereof, shall be final, binding and conclusive.                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                       
| | (f) | Discretion                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                       
| |     | The grant of an Option shall not affect in any way the
      right or power of the Company to make adjustments, reclassifications,
      reorganizations or changes of its capital or business structure, to merge,
      consolidate or dissolve, to liquidate or to sell or transfer all or any
      part of its business or assets.               

3.8Vesting

(a)General

Options granted pursuant to the Plan may contain conditions
relating to the vesting of the right to exercise an Option granted to any Option
Holder, which shall provide that the right to purchase shares under the Option
may not be exercised any earlier than certain specified times. Subject to
paragraph 3.8(b), such conditions relating to vesting shall be determined by the
Administrator, or in the absence of such, by the Board, on the Award Date.

The Option Certificate representing any such Option shall
disclose any vesting conditions.

(b)Acceleration
  of Vesting

Upon the occurrence of a Change of Control of the Company, all
unexpired and unvested Options shall immediately vest and shall be exercisable
for the acquisition of Shares. Notwithstanding any other provision hereof, the
vesting of one or more outstanding Options may be accelerated by the
Administrator or the Board, in the absence of such, at such times and in such
amounts as it shall determine in its sole discretion.

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- 10 -

ARTICLE 4 EXERCISE OF OPTION

4.1Exercise

An Option may be exercised only by the Option Holder or the
Personal Representative of any Option Holder. An Option Holder or the Personal
Representative of any Option Holder may exercise an Option in whole or in part
at any time or from time to time during the Exercise Period up to 5:00 p.m.
local time in Vancouver, British Columbia on the Expiry Date by delivering to
the Administrator an Exercise Notice, the applicable Option Certificate and a
certified cheque or bank draft payable to the Company in an amount equal to the
aggregate Exercise Price of the Shares to be purchased pursuant to the exercise
of the Option. Any Option or part thereof not exercised within the Exercise
Period shall terminate and become null, void and of no effect.

4.2Payment upon Exercise

Upon the exercise of any Option, the aggregate Exercise Price
shall be paid to the Company in cash or by certified or cashier's check. In
addition, if pre-approved in writing by the Administrator who may arbitrarily
withhold consent, the Option Holder may pay for all or any portion of the
aggregate Exercise Price by complying with one or more of the following
alternatives:

| | (a) | by delivering a properly executed Exercise Notice
      together with irrevocable instructions to a broker promptly to sell or
      margin a sufficient portion of the Shares and deliver directly to the
      Company the amount of sale or margin loan proceeds to pay the Exercise
      Price; or
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                        
| | (b) | by complying with any other payment mechanism approved by
      the Administrator at the time of exercise.                                                                                                                                                                                             

4.3Issue of Share Certificates

As soon as practicable following the receipt of the Exercise
Notice, the Administrator shall cause to be delivered to the Option Holder a
certificate for the Shares so purchased. If the number of Shares so purchased is
less than the number of Shares subject to the Option Certificate surrendered,
the Administrator shall forward a new Option Certificate to the Option Holder
concurrently with delivery of the aforesaid share certificate for the balance of
Shares available under the Option.

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- 11 -

4.4Condition of Issue

| | (a) | General                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | The issue of Shares by the Company pursuant to the
      exercise of an Option is subject to the Plan and compliance with the
      Applicable Laws. The Option Holder agrees to comply with all such
      Applicable Laws and agrees to furnish to the Company any information,
      report and/or undertakings required to comply with and to fully cooperate
      with the Company in complying with such Applicable Laws.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (b) | Securities Regulation and Tax
      Withholding                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                           

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its discretion, determines to result
upon exercise of an Option or from a transfer or other disposition of Shares
acquired upon exercise of an Option or otherwise related to an Option or Shares
acquired in connection with an Option. Upon approval of the Administrator, a
Option Holder may satisfy such obligation by complying with one or more of the
following alternatives selected by the Administrator:

| | A. | by delivering to the Company Shares previously held by
      such Option Holder or by the Company withholding Shares otherwise
      deliverable pursuant to the exercise of the Option, which Shares received
      or withheld shall have a fair market value at the date of exercise (as
      determined by the Administrator) equal to any withholding tax obligations
      arising as a result of such exercise, transfer or other disposition;
    or
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | B. | by complying with any other payment mechanism approved by
      the Administrator from time to time.                                                                                                                                                                                                                                                                                                                                                         

| | (iv) | The issuance, transfer or delivery of certificates
      representing Shares pursuant to the exercise of Options may be delayed, at
      the discretion of the Administrator, until the Administrator is satisfied
      that the applicable requirements of all Applicable Laws and the
      withholding provisions of the Income Tax Act(Canada) have been met
      and that the Option Holder has paid or otherwise satisfied any withholding
      tax obligation as described in Section 4.4(b)(iii)
above.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ARTICLE 5 ADMINISTRATION

5.1Administration

The Plan shall be administered by the Administrator on the
instructions of the Board. The Board may make, amend and repeal at any time and
from time to time such regulations not inconsistent with the Plan as it may deem
necessary or advisable for the proper administration and operation of the Plan
and such regulations shall form part of the Plan. The Board may delegate to the
Administrator or any Director, officer or employee of the Company such
administrative duties and powers as it may see fit.

5.2Interpretation

The interpretation by the Board of any of the provisions of the
Plan and any determination by it pursuant thereto shall be final and conclusive
and shall not be subject to any dispute by any Option Holder. No member of the
Board or any person acting pursuant to authority delegated by it hereunder shall
be liable for any action or determination in connection with the Plan made or
taken in good faith and each member of the Board and each such person shall be
entitled to indemnification with respect to any such action or determination in
the manner provided for by the Company.

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- 13 -

Without limiting the generality of the foregoing and subject to
the provisions of the Plan and any Applicable Laws, and with a view to effecting
the purpose of the Plan, the Board and its designees shall have sole authority,
in their absolute discretion, to:

| | (a) | construe and interpret the Plan;                                                                                                                                                              
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                               
| | (b) | define the terms used in the Plan;                                                                                                                                                            
| |     |                                                                                                                                                                                               
| | (c) | prescribe, amend and rescind the rules and regulations
      relating to the Plan;                                                                                                            
| |     |                                                                                                                                                                                               
| | (d) | correct any defect, supply any omission or reconcile any
      inconsistency in this Plan;                                                                                                    
| |     |                                                                                                                                                                                               
| | (e) | grant Options under the Plan;                                                                                                                                                                 
| |     |                                                                                                                                                                                               
| | (f) | determine the individuals to whom Options shall be
      granted under the Plan;                                                                                                              
| |     |                                                                                                                                                                                               
| | (g) | determine the time or times at which Options shall be
      granted under the Plan;                                                                                                           
| |     |                                                                                                                                                                                               
| | (h) | determine the number of Shares subject to each Option,
      the Exercise Price of each Option, the duration of each Option and the
      times at which each Option shall become exercisable;
| |     |                                                                                                                                                                                               
| | (i) | determine all other terms and conditions of the Options;
      and                                                                                                                            
| |     |                                                                                                                                                                                               
| | (j) | make all other determinations and interpretations
      necessary and advisable for the administration of the
  Plan.                                                                         

ARTICLE 6AMENDMENT AND TERMINATION

6.1Prospective Amendment

The Board may from time to time amend the Plan, subject to the
approval of the Companys shareholders, if required by applicable regulatory
policy, and the terms and conditions of any Option thereafter to be granted and,
without limiting the generality of the foregoing, may make such amendment for
the purpose of meeting any changes in any relevant law, rule or regulation
applicable to the Plan, any Option or the Shares or for any other purpose which
may be permitted by all relevant laws, rules and regulations provided always
that any such amendment shall not alter the terms or conditions of any Option or
impair any right of any Option Holder pursuant to any Option awarded prior to
such amendment.

6.2Retrospective Amendment

The Board may from time to time retrospectively amend the Plan,
subject to the approval of the Companys shareholders, if required by applicable
regulatory policy, and with the consent of the affected Option Holders,
retrospectively amend the terms and conditions of any Options which have been
previously granted.

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- 14 -

6.3Termination

The Board may terminate the Plan at any time provided that such
termination shall not alter the terms or conditions of any Option or impair any
right of any Option Holder pursuant to any Option awarded prior to the date of
such termination and notwithstanding such termination the Company, such Options,
Option Holders, Directors and Employees and Shares shall continue to be governed
by the provisions of the Plan.

6.4Agreement

The Company and every person to whom an Option is awarded
hereunder shall be bound by and subject to the terms and conditions of the Plan.

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SCHEDULE A

MEGAWEST ENERGY CORP.

STOCK OPTION PLANOPTION
CERTIFICATE

This Certificate is issued pursuant to the provisions of the
MEGAWEST ENERGY CORP. (the "Company") Stock Option Plan (the "Plan") and
evidences that ____________________is the holder of an option (the "Option")
to purchase up to ____________________ common shares (the "Shares") in the
capital stock of the Company at a purchase price of $__________ per Share.
Subject to the provisions of the Plan:

| | (a) | the Award Date of this Option is ____________________;
      and
| | --- | ----------------------------------------------------------------
| |     |                                                                 
| | (b) | the Expiry Date of this Option is
      ____________________.   

The right to purchase shares under the Option will vest in the
holder in increments over the term of the Option as follows:

Date
      Cumulative Number of Shares which may be Purchased


This Option may be exercised in accordance with its terms at
any time and from time to time from and including the Award Date through to and
including up to 5:00 local time in Vancouver, British Columbia on the Expiry
Date, by delivery to the Administrator of the Plan an Exercise Notice, in the
form provided in the Plan, together with this Certificate and a certified cheque
or bank draft payable to Megawest Energy Corp. in an amount equal to the
aggregate of the Exercise Price of the Shares in respect of which this Option is
being exercised.

This Certificate and the Option evidenced hereby is not
assignable, transferable or negotiable and is subject to the detailed terms and
conditions contained in the Plan. This Certificate is issued for convenience
only and in the case of any dispute with regard to any matter in respect hereof,
the provisions of the Plan and the records of the Company shall prevail.

The foregoing Option has been awarded this ______ day of
_______________________.

MEGAWEST ENERGY CORP.



Per:
_____________________________________________

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SCHEDULE B

EXERCISE NOTICE

|TO: | The Administrator, Canadian Stock Option Plan
|--- | ---------------------------------------------
|    | MEGAWEST ENERGY CORP.                        
|    | Suite 403  850 West Hastings Street         
|    | Vancouver, B.C.                              
|    | V6C 1E1                                      
|    |                                              
|1.  | Exercise of Option                           

The undersigned hereby irrevocably gives notice, pursuant to
the Megawest Energy Corp. (the "Company") Stock Option Plan (the "Plan"), of the
exercise of the Option to acquire and hereby subscribes for (cross out
inapplicable item):

| | (a) | all of the Shares; or                                                                                                      
| | --- | ---------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                            
| | (b) | of the Shares which are the subject of the option
      certificate attached hereto. Calculation of total Exercise
  Price:

| | (i)  | number of Shares to be acquired on exercise:
      shares |   |  |  |  | shares | 
| | ---- | --------------------------------------------------------- | - |  |  |  | ------ | 
| |      |                                                           |   |  |  |  |        | 
| | (ii) | times the Exercise Price per Share:                       | $ |  |  |  |        | 
| |      |                                                           |   |  |  |  |        | 
| |      | Total Exercise Price, as enclosed herewith:               | $ |  |  |  |        | 

The undersigned tenders herewith a cheque or bank draft (circle
one) in the amount of $____________ , payable to Megawest Energy Corp. in an
amount equal to the total Exercise Price of the Shares, as calculated above, and
directs the Company to issue the share certificate evidencing the Shares in the
name of the undersigned to be mailed to the undersigned at the following
address:

_____________________________________________________________

_____________________________________________________________

_____________________________________________________________

_____________________________________________________________

All capitalized terms, unless otherwise defined in this
exercise notice, will have the meaning provided in the Plan.

DATED the ______ day of _______________________.



|                        |  |                              
|----------------------- |  | -----------------------------
|Witness                 |  | Signature of Option Holder   
|                        |  |                              
|                        |  |                              
|Name of Witness (Print) |  | Name of Option Holder (Print)

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