Document:

exh10-1_agreement.htm

     

    
      

      

    

    
 

     

     

     

     

    EXHIBIT
      10.1

     

    PURCHASE
      AND SALE AGREEMENT BETWEEN

    PETROHUNTER
      HEAVY OIL LTD. AND PEARL EXPLORATION AND PRODUCTION
      LTD.

    EFFECTIVE
      OCTOBER 1, 2007

    
 

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    

    

    

    

    

    PURCHASE
      AND SALE AGREEMENT

    

    Between

    

    PETROHUNTER
      HEAVY OIL LTD.

    

    and

    

    PEARL
      EXPLORATION AND PRODUCTION LTD.

    

    

    EFFECTIVE
      OCTOBER 1, 2007

    

    

    

    
      
        
        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    TABLE
      OF CONTENTS

    

     Page

     

    
      
        	
                ARTICLE
                  I DEFINITIONS

              	
                1

              
	 	 
	
                ARTICLE
                  II PURCHASE AND SALE

              	
                6

              
	
                   2.1     Purchase
                  and Sale

              	
                6

              
	
                   2.2     Assets

              	
                6

              
	
                   2.3     Effective
                  Time

              	
                8

              
	 	 
	
                ARTICLE
                  III PURCHASE PRICE

              	
                8

              
	
                   3.1     Total
                  Purchase Price

              	
                8

              
	
                   3.2     Adjustments
                  to Initial Purchase Price

              	
                10

              
	 	 
	
                ARTICLE
                  IV BUYER’S INSPECTION

              	
                11

              
	
                   4.1     Access
                  to Records

              	
                11

              
	
                   4.2     Disclaimer

              	
                11

              
	
                   4.3     Access
                  to the Assets

              	
                11

              
	 	 
	
                ARTICLE
                  TITLE MATTERS

              	
                12

              
	
                   5.1     Definitions

              	
                12

              
	
                   5.2     Unit
                  Holdback

              	
                14

              
	
                   5.3     Interest
                  Additions

              	
                15

              
	
                   5.4     Dispute
                  Resolution

              	
                16

              
	
                   5.5     Condemnation
                  and Eminent Domain

              	
                16

              
	
                   5.6     Preferential
                  Rights and Consents

              	
                16

              
	
                   5.7     Exclusive
                  Remedies

              	
                17

              
	 	 
	
                ARTICLE
                  VI ENVIRONMENTAL MATTERS

              	
                17

              
	
                   6.1     As-Is
                  Where-Is Purchase

              	
                17

              
	
                   6.2     Initial
                  Purchase Price Adjustments for Environmental Defects

              	
                17

              
	
                   6.3     Exclusive
                  Remedies

              	
                20

              
	 	 
	
                ARTICLE
                  VII SELLER’S REPRESENTATIONS

              	
                20

              
	
                   7.1     Corporate
                  Representations

              	
                20

              
	
                   7.2     Seller’s
                  Representations with Respect to the Assets

              	
                21

              
	 	 
	
                ARTICLE
                  VII BUYER’S REPRESENTATIONS

              	
                27

              
	
                   8.1     Organization
                  and Standing

              	
                27

              
	
                   8.2     Power

              	
                27

              
	
                   8.3     Authorization
                  and Enforceability

              	
                27

              
	
                   8.4     Liability
                  for Brokers’ Fees

              	
                27

              
	
                   8.5     Litigation

              	
                27

              
	
                   8.6     No
                  Bankruptcy

              	
                27

              
	
                   8.7     Financial
                  Resources

              	
                27

              
	
                   8.8     Buyer’s
                  Evaluation

              	
                27

              
	
                   8.9     Canadian
                  Securities Matters

              	
                28

              
	 	 
	
                ARTICLE
                  IX COVENANTS AND AGREEMENTS

              	
                29

              
	
                   9.1     Covenants
                  and Agreements of Seller

              	
                29

              
	
                   9.2     Covenants
                  and Agreements of Buyer

              	
                31

              
	
                   9.3     Covenants
                  and Agreements of the Parties

              	
                33

              

      

       

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                ARTICLE
                  X TAX MATTERS

              	
                33

              
	
                  10.1     Apportionment
                  of Tax Liability

              	
                33

              
	
                  10.2     Sales
                  Taxes

              	
                34

              
	
                  10.3     Survival

              	
                34

              
	 	 
	
                ARTICLE
                  XI CONDITIONS PRECEDENT TO CLOSING

              	
                34

              
	
                  11.1     Seller’s
                  Conditions Precedent

              	
                34

              
	
                  11.2     Buyer’s
                  Conditions Precedent

              	
                36

              
	 	 
	
                ARTICLE
                  XII RIGHT OF TERMINATION AND ABANDONMENT

              	
                38

              
	
                  12.1     Termination

              	
                38

              
	
                  12.2     Liabilities
                  Upon Termination

              	
                39

              
	 	 
	
                ARTICLE
                  XIII CLOSING

              	
                39

              
	
                  13.1     Date
                  of Closing

              	
                39

              
	
                  13.2     Time
                  and Place of Closing

              	
                39

              
	
                  13.3     Closing
                  Obligations

              	
                39

              
	 	 
	
                ARTICLE
                  XIV POST-CLOSING OBLIGATIONS

              	
                40

              
	
                  14.1     Post-Closing
                  Adjustments

              	
                40

              
	
                  14.2     Records

              	
                40

              
	
                  14.3     Proceeds
                  and Invoices For Property Expenses Received After the Final Settlement
                  Date

              	
                41

              
	
                  14.4     Further
                  Assurances

              	
                41

              
	
                  14.5     Survival

              	
                41

              
	 	 
	
                ARTICLE
                  XV ASSUMPTION AND RETENTION OF OBLIGATIONS AND
                  INDEMNIFICATION

              	
                41

              
	
                  15.1     Buyer’s
                  Assumption of Liabilities and Obligations

              	
                41

              
	
                  15.2     Seller’s
                  Retention of Liabilities and Obligations

              	
                41

              
	
                  15.3     Indemnification

              	
                42

              
	
                  15.4     Procedure

              	
                42

              
	
                  15.5     No
                  Insurance; Subrogation

              	
                43

              
	
                  15.6     Reservation
                  as to Non-Parties

              	
                44

              
	 	 
	
                ARTICLE
                  XVI MISCELLANEOUS

              	
                44

              
	
                  16.1     Expenses

              	
                44

              
	
                  16.2     Notices

              	
                44

              
	
                  16.3     Amendments

              	
                45

              
	
                  16.4     Assignment

              	
                45

              
	
                  16.5     Announcements

              	
                45

              
	
                  16.6     Confidentiality
                  Agreement

              	
                45

              
	
                  16.7     Confidentiality

              	
                45

              
	
                  16.8     Counterparts

              	
                45

              
	
                  16.9     Governing
                  Law

              	
                45

              
	
                  16.10    Entire
                  Agreement

              	
                46

              
	
                  16.11    Binding
                  Effect

              	
                46

              
	
                  16.12    Survival

              	
                46

              
	
                  16.13     No
                  Third-Party Beneficiaries

              	
                46

              
	 	 

      

       

      

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EXHIBIT
      LIST

    

    EXHIBIT
      A                                Leases

    EXHIBIT
      B                                Wells

    EXHIBIT
      C                                Facilities

    EXHIBIT
      D                                Material
      Agreements

    EXHIBIT
      E                                Preferential
      Purchase Rights and Required Consents

    EXHIBIT
      F                                Form
      of Assignment, Bill of Sale and Conveyance

    EXHIBIT
      F-1                             Form
      of Assignment of Oil and Gas Leases

    EXHIBIT
      G                                Capital
      Projects

    

    

     

     

     

     

     

     

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    PURCHASE
      AND SALE AGREEMENT

     

    THIS
      PURCHASE AND SALE AGREEMENT (“Agreement”) is made and entered into this 2nd day
      of November, 2007, but effective October 1, 2007 (the “Effective Date”), by and
      between PetroHunter Heavy Oil Ltd. (“Seller”), and Pearl Exploration and
      Production Ltd. (“Buyer”).  Seller and Buyer may be referred to
      individually as a “Party” or collectively as the “Parties.”

     

    ARTICLE
      I

    DEFINITIONS

     

    1.1.                      “Aggregate
      Adjustment” means the aggregate of the Environmental Defect Adjustment and
      the Interest Addition Adjustment.

     

    1.2.                      “Aggregate
      Defect Threshold” has the meaning set forth 5.1(c).

     

    1.3.                      “Agreement”
      means this Purchase and Sale Agreement.

     

    1.4.                      “Allocated
      Value” means $1,500 per net acre, with respect to the Fiddler Creek Property
      only.

     

    1.5.                      “Applicable
      Securities Laws” means, in reference to a jurisdiction, the securities
      legislation of such jurisdiction, and the regulations, rules, orders made and
      forms prescribed thereunder together with all applicable policy statements,
      instruments, blanket orders and rulings issued by the applicable Securities
      Commission thereunder.

     

    1.6.                      "Assets"
      has the meaning set forth in Section 2.2.

     

    1.7.                      ”Assignee”
      shall mean Pearl Montana Exploration and Production Ltd., a Nevada corporation
      or such other wholly-owned subsidiary of the Buyer to whom the Buyer may
      determine to assign this Agreement.

     

    1.8.                      “Assumed
      Liabilities” has the meaning set forth in Section 15.1.

     

    1.9.                      “Authorization”
      means, with respect to any Person, any order, permit, approval, consent,
      acknowledgement, waiver, license or similar authorization of any Governmental
      Authority having jurisdiction over the Person.

     

    1.10.                      “business
      day” means a date on which banks are open for the transaction of business in
      Denver, Colorado and Calgary, Alberta.

     

    1.11.                      “Buyer”
      means Pearl Exploration and Production Ltd., a company existing under the
      federal laws of Canada.

     

    1.12.                      "Capital
      Projects" has the meaning set forth in Section 7.2(a).

     

    1.13.                      “CBCA”
      means the Canada Business Corporations Act.

     

    1.14.                      “Claim”
      has the meaning set forth in Section 15.4(d).

     

    1.15.                      "Claim
      Notice" has the meaning set forth in Section 15.4(c).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    1.16.                      "Closing"
      has the meaning set forth in Section 13.1.

     

    1.17.                      "Closing
      Amount" has the meaning set forth in Section 3.2(a).

     

    1.18.                      "Closing
      Date" has the meaning set forth in Section 13.1.

     

    1.19.                      “Common
      Shares” means the common shares in the capital of the Buyer.

     

    1.20.                      "Defensible
      Title" has the meaning set forth in Section 5.1(a).

     

    1.21.                      “Dollar”
      or “$” means, unless otherwise indicated, lawful money of the United States
      of America.

     

    1.22.                      “ECA”
      means Energy Corporation of America.

     

    1.23.                      “ECA
      Agreement” means that certain Asset Purchase and Sale Agreement between ECA,
      Westech Energy Corporation, and MAB, dated August 1, 2006, subsequently assigned
      to Seller pursuant to that certain agreement between MAB and Seller, dated
      September 15, 2006.

     

    1.24.                      “ECA
      Expiry Date” has the meaning set forth in Section 2.3(b).

     

    1.25.                      “ECA
      Holdback Shares” has the meaning set forth in Section 2.3(c).

     

    1.26.                      “ECA
      Leases” means the Leases with respect to those Lands subject to the ECA
      Agreement.

     

    1.27.                      “Effective
      Date” has the meaning first captioned above.

     

    1.28.                      "Effective
      Time" has the meaning set forth in Section 2.4.

     

    1.29.                      “Encumbrance”
      means any mortgage, charge, easement, encroachment, lien, adverse claim,
      assignment by way of security, security interest, servitude, pledge,
      hypothecation, conditional sale agreement, security agreement, net profit
      interest, area of mutual interest agreement, title retention agreement,
      financing statement, royalty, imperfection of title, title exemption, title
      defect, right of possession or other encumbrance.

     

    1.30.                      “Environmental
      Consultant” means a third party environmental consultant selected by Buyer
      and approved by Seller, which approval shall not be unreasonably
      withheld.

     

    1.31.                      “Environmental
      Defect” has the meaning set forth in Section 6.2(a).

     

    1.32.                      "Environmental
      Defect Adjustment" has the meaning set forth in Section 6.2(g).

     

    1.33.                      “Environmental
      Defect Notice” has the meaning set forth in Section 6.2(b).

     

    1.34.                      “Environmental
      Defect Value” has the meaning set forth in Section 6.2(e).

     

    1.35.                      “Environmental
      Defect Notice Date” has the meaning set forth in Section
      6.2(b).

     

    1.36.                      "Environmental
      Defects Threshold" has the meaning set forth in Section 6.2(a).

     

    
      
        
        

      

      
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    1.37.                      “Environmental
      Holdback Shares” has the meaning set forth in Section
      6.2(d)(1).

     

    1.38.                      “Environmental
      Law” means any Law in effect on or before the Effective Date relating to the
      control of any pollutant or protection of the air, water, land, or environment
      or the release or disposal of hazardous materials, hazardous substances or
      waste
      materials.

     

    1.39.                      “Escrow
      Agent” has the meaning set forth in Section 5.2(a).

     

    1.40.                      “Exchange”
      means the TSX Venture Exchange.

     

    1.41.                      "Facilities"
      has the meaning set forth in Section 2.2(b).

     

    1.42.                      ”Fiddler
      Creek Area” means Townships 5 and 6 South, Ranges 15 through 18 East
      (inclusive), in the State of Montana.

     

    1.43.                      “Fiddler
      Creek Property” means those Leases identified in Exhibit A as being a part
      of the Fiddler Creek Property.

     

    1.44.                      "Final
      Initial Purchase Price" has the meaning set forth in Section
      14.1(a).

     

    1.45.                      "Final
      Settlement Date" has the meaning set forth in Section 14.1(a).

     

    1.46.                      “Final
      Settlement Statement” has the meaning set forth in Section
      14.1(a).

     

    1.47.                      “Governmental
      Authority” means any federal, provincial, state, municipal, county or
      regional governmental or quasi-governmental authority, domestic or foreign,
      and
      includes any ministry, department, court, tribunal, arbitral body, commission,
      bureau, board administrative or other agency or regulatory body or
      instrumentality thereof, any quasi-governmental body or private body exercising
      regulatory, expropriation or taxing authority  under or for the
      account, if any, of the foregoing and any stock exchange or self-regulatory
      authority.

     

    1.48.                      “Holdback
      Shares” has the meaning set forth in Section 5.2(a).

     

    1.49.                      “Hydrocarbons”
      has the meaning set forth in Section 2.2(a).

     

    1.50.                      "Indemnified
      Party" has the meaning set forth in Section 15.4(c).

     

    1.51.                      "Indemnifying
      Party" has the meaning set forth in Section 15.4(c).

     

    1.52.                      “Individual
      Defect Threshold” has the meaning set forth 5.1(c).

     

    1.53.                      "Initial
      Purchase Price" has the meaning set forth in Section 3.1(a).

     

    1.54.                      "Interest
      Addition" has the meaning set forth in Section 5.3.

     

    1.55.                      “Interest
      Addition Adjustment” has the meaning set forth in Section 5.3.

     

    1.56.                      "Interest
      Addition Notice" has the meaning set forth in Section 5.3.

     

    1.57.                      “Knowledge”
      means to the best knowledge of a Person, after making due inquiry and, with
      respect to a Person which is not an individual, means to the best knowledge
      of
      each of

     

    
      
        
        

        
        

      

      
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    the
      directors and senior officers (including without limitation, Vice President
      of
      Land and General Counsel) of such Person, after making due inquiry.

     

    1.58.                      "Lands"
      has the meaning set forth in Section 2.2(a).

     

    1.59.                      “Laws”
      means, collectively, all applicable legislation, regulations, instruments,
      rules, by-laws, statutes, codes, laws, ordnances, orders, judgments, decrees,
      injunctions, directives, rules, consents, permits, guidelines, approvals and
      policies and other regulatory instruments of any Governmental
      Authority.

     

    1.60.                      "Leases"
      has the meaning set forth in Section 2.2(a).

     

    1.61.                      "Losses"
      means any actual losses, costs, expenses (including court costs, reasonable
      fees
      and expenses of attorneys, technical experts and expert witnesses and the cost
      of investigation), liabilities, damages, demands, suits, claims, and sanctions
      of every kind and character (including civil fines) arising from, related
      directly or indirectly or reasonably incident to matters indemnified against;
      excluding however any special, consequential, punitive or exemplary damages,
      loss of profits incurred by a Party hereto (other than such losses which an
      Indemnified Party is obligated to pay to a third party in connection with an
      indemnified claim).

     

    1.62.                      “MAB”
      means MAB Resources LLC.

     

    1.63.                      “Material
      Adverse Effect” when used in connection with an entity means any change
      (including a decision to implement such a change made by the board of directors
      or by senior management who believe that confirmation of the decision by the
      board of directors is probable), event, violation, inaccuracy, circumstance
      or
      effect that is materially adverse to the business, assets (including intangible
      assets), liabilities, capitalization, ownership, financial condition or results
      of operations of such entity on a consolidated basis or would materially
      interfere with the ability of such entity to perform its obligations under
      this
      Agreement and any ancillary agreement contemplated herein.

     

    1.64.                      "Material
      Agreements" has the meaning set forth in Section 2.2(d).

     

    1.65.                      “Material
      Change” has the meaning given to such term in the Securities
      Act.

     

    1.66.                      “Misrepresentation”
      means a misrepresentation as defined in the Securities Act.

     

    1.67.                      “NI
      45-106” means National Instrument 45-106 – Prospectus and Registration
      Exemptions.

     

    1.68.                      "NRI"
      means with respect to any Lease, an interest (expressed as a percentage or
      decimal fraction) in and to all Hydrocarbons produced and saved from or
      attributable to the Lands covered by such Lease, after giving effect to all
      royalties, overriding royalties and other burdens upon, measured by, or payable
      out of production therefrom.

     

    1.69.                      “Offering
      Jurisdictions” means, collectively, the Province of Alberta and the United
      States of America.

     

    1.70.                      “Offered
      Shares” has the meaning set forth in Section 3.1(b).

     

    1.71.                      “Performance
      Payment” has the meaning set forth in Section 3.1(c).

     

    
      
        
        

      

      
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    1.72.                      "Permitted
      Encumbrances" has the meaning set forth in Section 5.1(b).

     

    1.73.                      “Person”
      means a natural person, partnership, limited partnership, limited liability
      partnership, corporation, limited liability corporation, unlimited liability
      company, joint stock company, trust, unincorporated association, joint venture
      or other entity or Governmental Authority, and pronouns that have a similarly
      extended meaning.

     

    1.74.                      "Preliminary
      Settlement Statement" has the meaning set forth in Section
      3.2(a).

     

    1.75.                      "Property
      Expenses" has the meaning set forth in Section 3.2(b).

     

    1.76.                      "Records"
      has the meaning set forth in Section 2.2(e).

     

    1.77.                      “Regulation
      D” means Regulation D as promulgated under the 1933 Act.

     

    1.78.                      “Regulations
      S” means Regulation S as promulgated under the 1933 Act.

     

    1.79.                      
      “Remediation” means actions taken to correct an Environmental Defect in
      order to conform in all material respects with Environmental Laws and as
      recommended in writing by an Environmental Consultant.

     

    1.80.                      
      “Remediation Costs” means the costs or estimates thereof, to remediate a
      particular Environmental Defect, as estimated in writing by an Environmental
      Consultant.

     

    1.81.                      “Reporting
      Jurisdictions” means collectively the provinces of British Columbia and
      Alberta.

     

    1.82.                      "Required
      Consents" has the meaning set forth in Section 5.6.

     

    1.83.                      “Retained
      Liabilities” has the meaning set forth in Section 15.2.

     

    1.84.                      “Retained
      Litigation Liabilities” has the meaning set forth in
      Section 15.2.

     

    1.85.                      “Securities
      Act” means the Securities Act (Alberta) as amended.

     

    1.86.                      “Securities
      Commissions” means collectively, the applicable securities commission or
      regulatory authority in each of the Offering Jurisdictions.

     

    1.87.                      “Seller”
      means PetroHunter Heavy Oil Ltd., a corporation existing under the laws of
      the
      State of Nevada.

     

    1.88.                      "Taxes"
      has the meaning set forth in Section 10.1.

     

    1.89.                      “Title
      Defect Notice” has the meaning set forth in Section 5.2(b).

     

    1.90.                      ”Title
      Defect Notice Date” has the meaning set forth in Section
      5.2(b).

     

    1.91.                      "Title
      Defect" has the meaning set forth in Section 5.1(c).

     

    1.92.                      "Title
      Defect Value" has the meaning set forth in Section 5.1(d).

     

    1.93.                      “Total
      Purchase Price” has the meaning set forth in Section 3.1.

     

    
      
        
        

      

      
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    1.94.                      “Transfer
      Agent” means Computershare Investor Services Inc., in its capacity as
      transfer agent and registrar of the Buyer at its principal offices in Calgary,
      Alberta.

     

    1.95.                      “Unit
      Agreement” means the Unit Agreement of the Development and Operation of the
      Fiddler Creek Unit Area, County of Stillwater, Montana, in the form approved
      by
      the Bureau of Land Management in its letter to Seller, dated October 29, 2007,
      together with the Unit Operating Agreement related thereto to be entered into
      by
      Seller.

     

    1.96.                      “Unit
      Well” has the meaning set forth in Section 9.1(a)(3).

     

    1.97.                      "Wells"
      has the meaning set forth in Section 2.2(b).

     

    1.98.                      "WI"
      means with respect to any Lease, a working interest (expressed as a percentage
      or decimal fraction) in and to such Lease and all rights and obligations of
      every kind and character appurtenant thereto, or arising therefrom, without
      regard to any royalties, overriding royalties or other encumbrances or charges
      against production therefrom, insofar as such interest is burdened with the
      obligations to bear and pay costs and expenses attributable to the maintenance,
      development and operation of the Lands covered by such Lease.

     

    1.99.                      “1933
      Act” means the United States Securities Act of 1933 as
      amended.

     

    ARTICLE
      II

    PURCHASE
      AND SALE

     

    2.1           Purchase
      and Sale.    In
      consideration of the mutual promises, covenants and warranties contained herein,
      and other good and valuable consideration, the receipt and sufficiency of which
      are hereby acknowledged, the Seller agrees to sell the Assets to Buyer and
      Buyer
      agrees to purchase the Assets from the Seller, pursuant to the terms and
      conditions of this Agreement.

     

    2.2           Assets.  
As
      used
      herein, the term “Assets” refers to all of Seller’s right, title and interest in
      and to the following:

     

    (a)           (i)
      The oil, gas and mineral leases, other fee interests, royalty interests,
      overriding royalty interests, and other leasehold interests specifically
      described in Exhibit A (the “Leases”), (ii) the oil, gas and all other
      hydrocarbons and minerals (including but not limited to coalbed methane) and
      other products and byproducts (collectively referred to herein as
“Hydrocarbons”) attributable to the Leases and the lands covered thereby (the
“Lands”) including any Hydrocarbons extracted from the Lands from and after the
      Effective Time, (iii) the Lands, and (iv) to the extent transferable, all
      contract rights and interests associated with the Leases and Hydrocarbons,
      thereon.

     

    (b)            The
      oil and gas wells located on the Leases or Lands or on lands pooled or unitized
      therewith, including any wells in progress that have been spudded, if any,
      specifically including, without limitation, the wells described in Exhibit
      B
      (collectively, the “Wells”), and the gathering lines, pipelines, tanks,
      separation equipment, processing plants, and property associated therewith,
      including those specifically described in Exhibit C (collectively, the
“Facilities”), together with all injection and disposal wells on the Lands or on
      lands pooled or unitized
      therewith, and all real property, personal property, equipment, fixtures,
      improvements, permits, rights-of-way, easements, licenses and site leases used
      or held for use in connection with the production, separation, gathering,
      treatment, processing, storing, transporting, sale or 

     

    
      
        
        

      

      
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      disposal
        of Hydrocarbons or water produced from the properties and interests described
        in
        this Section 2.2 including, without limitation, all equipment installed,
        or in
        the process of being installed, on the Wells and Facilities as of the Effective
        Time.

    

     

    (c)             The
      unitization, pooling and communitization agreements, declarations and orders,
      and the units created thereby and all other such agreements relating to the
      properties and interests described in this Section 2.2 and to the production
      of
      Hydrocarbons, if any, attributable to said properties and
      interests.

     

    (d)             Subject
      to Section 11.2(k), all existing and effective sales, purchase, exchange,
      gathering, transportation and processing contracts, operating agreements,
      balancing agreements, farmout agreements, service agreements, exploration
      agreements, surface leases, permits and licenses, surface use agreements, other
      surface rights, subsurface use agreements, and other contracts, agreements
      and
      instruments, insofar as they relate to the properties and interests described
      in
      this Section 2.2, including without limitation, the material agreements
      described in Exhibit D (the “Material Agreements”).

     

    (e)              All
      the files, records and data maintained by Seller and relating to the interests
      described in this Section 2.2 (including without limitation, all engineering
      files, lease files, land files, well files, drilling reports, files relating
      to
      the Material Agreements, division order files, abstracts and title opinions
      and
      copies of applicable accounting records and copies of all land, geological,
      geophysical data, maps and interpretations), but only to the extent not subject
      to unaffiliated third party contractual restrictions on disclosure or transfer
      and only to the extent related to the Assets or the mapping/evaluation of the
      Assets (the “Records”).  To the extent the Buyer must obtain
      permission and/or pay a licensing fee to a third party to have access to the
      data, the Buyer and the Seller will cooperate to obtain the same, at the Buyer’s
      sole expense.

     

    2.3           Transfer
      of ECA Assets

     

    (a)              Notwithstanding
      anything to the contrary in this Agreement, Buyer will not be required to
      acquire any of the ECA Leases or any of the Wells located on lands covered
      by
      the ECA Leases or any other Assets related exclusively thereto
      (collectively, the ECA Leases, such Wells and such other Assets
      are referred to as the "ECA Assets") until such time at or after
      Closing as ECA has agreed to an amendment to the ECA Agreement in form and
      content satisfactory to Buyer.  If at Closing no such amendment has been
      entered into then the ECA Assets shall not be transferred to Buyer at Closing
      and, pending transfer of the ECA Assets, the Total Purchase Price will be
      reduced by the amount of US$6,583,030, with the total number of Offered Shares
      being reduced by 960,025 shares (the "ECA Shares"), and the Performance Payment
      being reduced by US$2,742,929.09 (to
      US$9,757,070.91).   In the event the ECA Assets
      are not transferred to Buyer at Closing, any adjustments to the Initial Purchase
      Price that would otherwise be required by Section 3.2 shall not be made at
      Closing but shall instead be applied at the time at which the ECA Assets are
      actually transferred, and the number of ECA Shares issuable at such time shall
      be adjusted accordingly, with each ECA Share being deemed to have a value of
      US$4.00.

     

    (b)              From
      the date hereof until the date six months from the date of this Agreement (the
      “ECA Expiry Date”), Buyer shall provide Seller with regular and timely updates
      as to the status of its negotiations with ECA.  Upon Buyer and ECA entering
      into an agreement with
      respect to the ECA Leases or upon the ECA Agreement otherwise being amended,
      in
      either case in form and content satisfactory to Buyer, Buyer shall so advise
      Seller in writing and 

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

       

      Buyer
        and
        Seller will proceed expeditiously to transfer the ECA Assets from Seller
        to
        Buyer and each of the parties shall take all such actions as are necessary
        to
        effect such transfer. 

    

     

    (c)              Concurrently
      with the transfer referred to in Section 2.3(b), the amount of the Performance
      Payment shall be re-adjusted to $12,500,000 and Buyer will issue share
      certificates registered in Seller's name representing the ECA Shares, of which
      an aggregate of 551,001 ECA Shares (plus or minus the amount of any
      adjustment pursuant to Section 2.3(a)) shall be delivered to Seller and the
      remaining 409,024 ECA Shares (the "ECA Holdback Shares") will be delivered
      to
      the Escrow Agent.  The ECA Holdback Shares will be held in escrow by the
      Escrow Agent and may be released from escrow under the same terms as
      provided in Section 5.2, mutatis mutandis, provided that for purposes of this
      Section 2.3(b): (1) the term "Holdback Shares" shall be deemed to refer to
      the
      ECA Holdback Shares; (2)  the term "Lands" shall refer to the lands
      covered by the ECA Leases; (3) the Closing shall be deemed to have occurred
      on the date on which the ECA Assets were transferred to Buyer hereunder; and
      (4)
      the term "Aggregate Defect Threshold" shall be deemed to mean
      US$200,000.

     

    (d)              In
      the event that Seller no longer holds an interest to the ECA Assets prior to
      the
      ECA Expiry Date and Buyer instead enters into a binding agreement to acquire
      the
      ECA Leases from ECA prior to the ECA Expiry Date, then Section 2.3(c) will
      apply
      regardless of the fact that Buyer did not acquire the ECA Assets directly from
      the Seller, Buyer shall issue the ECA Shares and the Performance Payment shall
      be re-adjusted in exchange for which Seller shall concurrently transfer to
      Buyer
      any remaining ECA Assets to which it holds title.  For greater
      certainty, in the event that Buyer does not enter into a binding agreement
      to
      acquire the ECA Leases from ECA prior to the ECA Expiry Date, Section 2.3(c)
      shall not apply, the ECA Shares will not be issued and the Performance Payment
      shall not be re-adjusted.

     

    2.4           Effective
      Time.  The
      purchase and sale of the Assets shall be effective at 12:01 a.m. Mountain Time
      on the Effective Date (the “Effective Time”).

     

    ARTICLE
      III

    PURCHASE
      PRICE

     

    3.1           Total
      Purchase Price.  Subject
      to adjustment as set forth herein and subject to the Performance Payment
      becoming due and payable, the total purchase price for the Assets shall be
      thirty million dollars (US$30,000,000) comprised of the Initial Purchase Price,
      the Offered Shares, and the Performance Payment, as set forth below (the “Total
      Purchase Price”):

     

    (a)           Initial
      Purchase Price.  A cash payment in the amount of seven million
      five hundred thousand dollars (US$7,500,000) (subject to adjustments pursuant
      to
      Section 3.2), payable upon the Closing (the “Initial Purchase
      Price”).

     

    (b)           Offered
      Shares.  A payment in kind consisting of 2,500,000 Common
      Shares which the parties hereto agree have a deemed value equal to US$4.00
      per
      share and ten million dollars (US$10,000,000) in the aggregate (the “Offered
      Shares”).  Seller acknowledges
      that these shares will be subject to a four month hold period under Applicable
      Securities Laws in Canada during which the Seller shall not sell or dispose
      of
      the shares except in accordance with Applicable Securities
      Laws.  Seller further acknowledges that a certain number of Offered
      Shares might become subject to Sections 2.3, 5.2 and/or 6.2, thereby resulting
      in a reduction in the number of Offered Shares which become due and payable
      to
      Seller at Closing or a reduction in the number of Offered Shares which become
      due after Closing, in which event the term “Offered Shares” will be amended
      accordingly.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    (c)           Performance
      Payment.

     

    (1)           A
      cash payment in the amount of $9,757,070.91 (or twelve million five hundred
      thousand dollars (US$12,500,000) in the event that Buyer enters into a binding
      agreement to acquire the ECA Leases prior to the ECA Expiry Date), payable
      within fifteen (15) days after the earlier to occur of: (i) production from
      the
      Assets reaching 5,000 barrels of oil equivalent per day; or (ii) Buyer receiving
      a completed reserve report indicating that proven reserves on the Lands equal
      or
      exceed fifty million barrels of oil equivalent, as certified by a third party
      reserve engineer selected by the Buyer at its sole discretion and subject to
      the
      provisions of Section 3.1(c)(2) and (3), below (with said payment referred
      to
      herein as the “Performance Payment”).  The Buyer shall provide Seller
      with a copy of any and all completed reserve reports (in final form only)
      prepared by any third party reserve engineer pertaining to the Lands, within
      ten
      (10) days after Buyer’s receipt thereof.

     

    (2)           For
      purposes of this Section 3.1(c), the Buyer shall proceed with the evaluation
      and
      development of the Assets in such manner and at such times which it sees fit,
      in
      its sole direction, provided that any evaluation or development which Buyer
      elects to proceed with shall be conducted in accordance with industry
      standards.  For greater certainty, the Parties agree that there are no
      implied covenants on the Buyer to develop the Assets or to produce Hydrocarbons
      therefrom.  Until the Performance Payment is paid in full or the
      obligations of Buyer under this Section 3.1(c) have expired, Buyer shall provide
      to Seller (A) a written statement of average daily production from the Assets
      commencing 90 days after the Closing, and quarterly thereafter, and (B) a third
      party reserve engineer report pertaining to the Lands prepared by a third party
      reserve engineer selected by Buyer at its sole discretion, to be provided to
      Seller annually concurrently with filing of such report by Buyer with the
      Alberta Securities Commission.  Seller shall have the right to review
      Buyer’s books and records pertaining to the Assets, in Buyer’s offices during
      normal business hours and, in the event that Seller’s engineers believe in good
      faith that the threshold set out above has been met or exceeded, to require
      Buyer obtain a third party reserve engineer report (in addition to the annual
      report referred to in subparagraph (B) above) prepared by a third party reserve
      engineer selected by Buyer at its sole discretion in either case, once annually
      up to the time the Performance Payment is made in full or the obligations of
      Buyer under this Section 3.1(c)(2) have expired.  The third party
      reserve engineer shall be a person or entity generally regarded by other oil
      and
      gas industry reserve engineers as reputable and competent.  The
      determination of the third party reserve engineer appointed pursuant to Sections
      3.1(c)(1) and 3.1(c)(2) shall be final and determinative of the quantum of
      the
      proven reserves as of the date of such determination, and shall be based on
      all
      actual objective data available to Buyer at the time of such
      determination.  In the event that the performance targets have not
      been achieved within three (3) years after the Effective Date of this Agreement,
      the Performance Payment obligations of Buyer hereunder shall expire and the
      Total Purchase Price shall be reduced accordingly.

     

    (3)           Buyer’s
      obligation to make the Performance Payment shall survive the Closing and shall
      constitute a covenant enforceable against Buyer irrespective of any subsequent
      disposition by Buyer of any of the Assets.   That is, the daily
      production and proven reserves attributable to all the Assets, as described
      in
      Exhibit A, shall be calculated on a cumulative basis for the purpose of
      determining whether the Performance Payment is due, regardless of the ownership
      of the Assets at the time that one or both of the thresholds are
      met.  For greater certainty, the obligations in this Section 3.1(c)(3)
      do not burden or otherwise run with the Assets or any of the Lands comprising
      a
      part of the Assets and, after Closing, Buyer may sell, transfer, assign or
      

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

      otherwise
        dispose of the Assets or any part of them to any other party free and clear
        of
        such obligations, provided that Buyer may not sell, transfer, assign or
        otherwise dispose of any Assets unless Buyer obtains a covenant from the
        transferee thereof to provide Buyer with the information and reports referred
        to
        in Section 3.1(c)(2) and Buyer agrees to continue to provide such information
        and reports to Seller in accordance with Section 3.1(c)(2) notwithstanding
        such
        sale, transfer, assignment or disposal.  If Buyer assigns all or any
        rights and obligations under this Agreement pursuant to Section 16.4 before
        Closing, or if Buyer sells, transfers, assigns or otherwise disposes of all
        or
        any portion of the Assets to an affiliate or subsidiary of Buyer at any time
        after Closing, then both Buyer and such transferee shall be bound by the
        obligations contained in this Section 3.1(c)(3).

    

     

    3.2           Adjustments
      to Initial Purchase Price.  All
      adjustments to the Initial Purchase Price shall be made according to the factors
      described in this Section 3.2, in accordance with United States generally
      accepted accounting principles as consistently applied in the oil and gas
      industry, and without duplication.

     

    (a)           Preliminary
      Settlement Statement.  The Initial Purchase Price shall be
      adjusted at Closing pursuant to a preliminary settlement statement (the
“Preliminary Settlement Statement”) prepared by Seller and submitted to Buyer
      prior to or at Closing for Buyer’s comment and review.  Prior to
      Closing, the Seller shall provide Buyer wire transfer instructions for payment
      of the Initial Purchase Price, and the Parties shall agree upon the Preliminary
      Settlement Statement.  The Preliminary Settlement Statement shall set
      forth the amount to be paid at Closing, including all adjustments to the Initial
      Purchase Price and associated calculations, adjusted as provided in this
      Agreement using reasonable estimates if actual numbers are not available (the
      “Closing Amount”).

     

    (b)           Property
      Expenses.  The term “Property Expenses” shall mean all
      capital expenses, operating expenses, joint interest billings, lease operating
      expenses, lease rental and maintenance costs, royalties, Taxes (as defined
      and
      apportioned as of the Effective Time pursuant to Article X), drilling expenses
      (including all expenses related to drilling the Unit Well), completion expenses,
      workover expenses, geological, geophysical and any other exploration,
      development or maintenance expenditures chargeable under applicable operating
      agreements or other agreements consistent with the standards established by
      the
      Council of Petroleum Accountant Societies of North America that are attributable
      to the Assets prior to the Effective Time or after the Effective Time, as
      applicable, but shall not include any of Seller’s general and administrative
      expenses to the extent not chargeable under applicable operating
      agreements.

     

    (c)           Upward
      Adjustments.  The Initial Purchase Price shall be adjusted
      upward by:

     

               (1)           An
      amount equal to all direct and actual expenses attributable to the Assets,
      including, without limitation, the Property Expenses, paid by or on behalf
      of
      Seller that are attributable to the period after the Effective
      Time;

     

    (2)           To
      the extent not covered in the preceding paragraph, an amount equal to all
      prepaid expenses attributable to the Assets during the period of time occurring
      after the Effective Time that were paid by or on behalf of Seller, including
      without limitation, prepaid rental charges and utility charges, but excluding
      paid up lease rentals;

     

    (3)           In
      the event that the Interest Addition Adjustment exceeds the Environmental Defect
      Adjustment, an amount equal to the Aggregate Adjustment, but only to the extent
      the Aggregate Adjustment amount exceeds five percent of the Total Purchase
      Price
      prior to adjustment pursuant to Section 3.2;

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    (4)           Any
      other amount as may be agreed to in writing by Buyer and Seller;
      and

     

    (d)           Downward
      Adjustments.  The Initial Purchase Price shall be adjusted
      downward by:

     

    (1)           The
      amount of all direct and actual expenses attributable to the Assets, including,
      without limitation, the Property Expenses, that are attributable to the period
      prior to the Effective Time;

     

    (2)           In
      the event the Environmental Defect Adjustment exceeds the Interest Addition
      Adjustment, an amount equal to the Aggregate Adjustment, but only to the extent
      the Aggregate Adjustment amount exceeds five percent of the Total Purchase
      Price
      prior to adjustment pursuant to Section 3.2;

     

    (3)           An
      amount equal to the value of Assets excluded from the Closing pursuant to
      Section 5.6; and

     

    (4)           Any
      other amount as may be agreed to in writing by Buyer and Seller.

     

    ARTICLE
      IV

    BUYER’S
      INSPECTION

     

    4.1           Access
      to Records.  From
      and
      after the date hereof until Closing and subject to Sections 9.3(a) and (b),
      Seller and its agents and representatives will make the Records, and any other
      information relating directly to the Seller’s ownership and operation of the
      Assets in Seller’s possession, available to Buyer and its agents and
      representatives for inspection and review during normal business hours to permit
      Buyer to perform its due diligence review.  Buyer may inspect and copy
      the Records, at its sole expense, and such additional information only to the
      extent such inspection does not violate any contractual commitment of Seller
      to
      a third party.

     

    4.2           Disclaimer.  Except
      for the representations and warranties contained in this Agreement, Seller
      makes
      no warranty or representation of any kind as to the Records and the Assets,
      or
      any information provided by Seller to the Buyer prior to the Effective Date,
      or
      any information contained therein.  Buyer agrees that any conclusions
      drawn from the Records and from any information provided by Seller to Buyer
      prior to the Effective Date shall be the result of its own independent review
      and judgment.

     

    4.3           Access
      to the Assets.  To the extent that Seller is legally able, Seller
      agrees to grant Buyer and its agents and representatives access to the Assets
      during reasonable business hours, so Buyer may conduct, at its sole risk and
      expense, on-site inspections and environmental assessments of the
      Assets.  If Buyer or its agents prepares an environmental assessment
      of any Asset, Buyer agrees to keep such assessment confidential for a period
      of
      three years following the Effective Date in the event the Parties are not able
      to effect a Closing of this Agreement.  In connection with any on-site
      inspections, Buyer (i) agrees not to interfere with the normal operation of
      the
      Assets, and (ii) agrees to comply with all requirements of the operators of
      the
      Assets.  Buyer waives, releases and agrees to indemnify Seller, and
      its directors, officers, shareholders, members, employees, agents and
      representatives against all liabilities and obligations, including without
      limitation, personal injury, death and/or property damage, arising from Buyer’s
      activities on the Assets except to the extent such liabilities or 

     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

      damages
        are caused by Seller’s negligence or willful misconduct.  The
        provisions of this Section shall survive Closing and termination of this
        Agreement.

    

     

    ARTICLE
      V

    TITLE
      MATTERS

     

    5.1           Definitions.

     

    (a)           Defensible
      Title.  “Defensible Title” means such recorded title to the Assets
      that, subject to and except for Permitted Encumbrances: (i) entitles Seller
      to
      receive and retain, without suspension, reduction or termination, not less
      than
      the NRI in the Assets as set forth on Exhibits A and B through the economic
      life
      of such Assets (assuming termination of those interests required to be
      terminated in accordance with Sections 11.2(k) and (l)); (ii) obligates the
      Seller to bear costs and expenses relating to the maintenance, development,
      operation and the production of Hydrocarbons from the Assets as described on
      Exhibits A and B through the economic life of such Asset in an amount not
      greater than WI set forth in Exhibits A and B for each Asset through the
      economic life of such Asset (assuming termination of those interests required
      to
      be terminated in accordance with Sections 11.2(k) and (l)); (iii) is free and
      clear of Title Defects; and (iv) is not subject to any Required Consent which
      has not been obtained with respect to transfer to Buyer pursuant to this
      Agreement or to any right of first refusal or other preferential right which
      has
      not been waived by the holder thereof with respect to transfer to Buyer pursuant
      to this Agreement.

     

    (b)           Permitted
      Encumbrances.  “Permitted Encumbrances” means:

     

    (1)           lessors’
      royalties, overriding royalties, net profits interests, production payments,
      reversionary interests and similar burdens (payable or in suspense) as set forth
      in Exhibits A and B (other than such as are required to be terminated in
      accordance with Section 11.2(k) and (l));

     

    (2)           liens
      for Taxes, or similar assessments not yet due and delinquent or, if delinquent,
      that are being contested in good faith in the normal course of business and
      if
      so required by statute, for which a bond has been posted;

     

    (3)           all
      required notices, consents, actions, or filings with any governmental agency
      related to conveyance of the applicable Asset, if the same are customarily
      obtained after Closing;

     

    (4)           rights
      of reassignment to third parties upon the surrender or expiration of any
      Lease;

     

    (5)           easements
      (including but not limited to conservation easements and set-asides),
      rights-of-way, servitudes, permits, surface leases, permits and licenses,
      surface use agreements and other surface rights on or over the Assets or any
      restrictions on access thereto that do not materially interfere with the
      operation or value of the affected Asset;

     

    (6)           the
      terms and conditions of the Material Agreements that do not operate to reduce
      the NRI below that set forth in Exhibits A and B or increase the WI to greater
      than the WI set forth in Exhibits A and B (in each case, assuming termination
      of
      those interests required to be terminated in accordance with Section 11.2(k)
      and
      (l)); and

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    (7)           materialmen’s,
      mechanics’, operators’ or other similar liens arising in the ordinary course of
      business incidental to operation of the Assets (i) if such liens and charges
      have not been filed pursuant to law and the time for filing such liens and
      charges has expired, or (ii) if their validity is being contested in good faith
      by appropriate action.

     

    (c)           Title
      Defect.  “Title Defect” means any Encumbrance, claim upon, defect
      in or objection to property title to an individual Lease within the Fiddler
      Creek Property only.  Buyer shall not have the right or ability to
      claim the existence of any Title Defects other than with respect to the Fiddler
      Creek Property.   The “Individual Defect Threshold” shall be
      US$30,000 for each Lease individually, and the “Aggregate
      Defect Threshold” shall be US$1,000,000 for Title Defects applicable to Leases
      in the aggregate.  For greater certainty, for example, if there are
      Title Defects totaling US$25,000 applicable to Lease #1 and Title Defects
      totaling US$75,000 applicable to Lease #2, only Lease #2 will be included in
      the
      total value of Title Defects.  Further, if the total amount of Title
      Defects (for those Leases which meet the Individual Defect Threshold does not
      reach or exceed the US$1,000,000 Aggregate Defect Threshold, there shall not
      be
      any adjustment to the Purchase Price pursuant to Section 5.2(b).  If
      the Title Defect Value of an asserted Title Defect does not reduce the value
      of
      the specific Lease by an amount greater than the Individual Defect Threshold
      or,
      together with the Title Defect Value of other Title Defects with respect to
      all
      Leases, by an amount greater than the Aggregate Defect Threshold, the Buyer
      will
      be deemed to have Defensible Title for such Lease, notwithstanding such Title
      Defect.  Notwithstanding the foregoing, the following shall not be
      considered Title Defects with respect to a specific Lease:

     

    (1)           defects
      based solely on lack of information in the Seller’s files, provided that
      recorded evidence in lieu of any such lacking information otherwise
      exists;

     

    (2)           nominal
      defects in the early chain of title, such as failure to recite marital status
      or
      omissions of successors of heirship or estate proceedings, unless Buyer provides
      affirmative evidence that such failure or omission has resulted in another
      party’s actual and superior claim of title to the relevant Asset;

     

    (3)           defects
      related to mineral ownership other than oil and natural gas, condensate, and
      associated gas (including coalbed methane);

     

    (4)           defects
      arising out of lack of corporate or other entity authorization unless Buyer
      provides affirmative evidence that the action was not authorized and results
      in
      another party’s actual and superior claim of title to the Asset;
      and

     

    (5)           defects
      that are defensible by possession under applicable statutes of limitation for
      adverse possession or for prescription.

     

    (d)           Title
      Defect Value.  “Title Defect Value” means the amount by which the
      value of a specific Asset affected by an asserted Title Defect is reduced by
      such asserted Title Defect (and assuming the value of each Lease shall be
      US$1500 multiplied by the number of net acres of such Lease).  In
      determining the Title Defect Value, the Parties intend to include only that
      portion of the Lease affected by the Title Defect.  The Parties shall
      determine the Title Defect Value as follows:

     

    (1)           If
      the Title Defect is an indebtedness secured by an Encumbrance on an Asset that
      may be discharged in full by the satisfaction of such indebtedness, the Title
      Defect Value shall be the total amount to discharge such indebtedness (together
      with all 

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

       

      applicable
        filing or regulatory fees relating to such discharge) so that such Encumbrance
        no longer burdens the Asset.

    

     

    (2)           If
      the Title Defect is an actual reduction in NRI with no change in WI, the Title
      Defect Value shall be the value for the particular Lease, multiplied by a
      fraction, the number of which is the actual NRI and the denominator of which
      is
      the NRI as set forth on Exhibits A and B.

     

    (3)           If
      the Title Defect is an actual increase in WI with no proportionate increase
      in
      the NRI as set forth on Exhibits A and B, the Buyer will submit to Seller a
      proposed Title Defect Value calculated as the difference between the value
      for
      such Lease and the value for such Lease recalculated as the net present value
      of
      the affected Lease determined by using the same economic model made by Buyer
      to
      determine the value of the Lease, but using instead the actual WI of the
      Seller.  If Buyer and Seller agree on such amount, then such amount
      shall be the Title Defect Value for such Title Defect.  If Buyer and
      Seller are unable to agree on such amount, the Title Defect Value shall be
      determined in accordance with Section 5.4, using a mutually agreed reservoir
      engineer (instead of a title attorney) to make a final determination of the
      Title Defect Value for such Title Defect.

     

    (4)           If
      the Title Defect is not of a type described in subsections (1), (2) or (3),
      then
      the Title Defect Value shall be determined by the Parties in good faith, taking
      into account all relevant factors, including without limitation, the value
      of
      the affected Lease, whether the Title Defect represents only a possibility
      of
      title failure and the probability that such failure will occur; and the legal
      effect of the Title Defect.  If Buyer and Seller are unable to agree
      on such amount, the Title Defect Value shall be determined in accordance with
      Section 5.4, using a mutually agreed reservoir engineer (instead of a title
      attorney) to make a final determination of the Title Defect Value for such
      Title
      Defect.

     

    5.2           Unit
      Holdback.

     

    (a)           Unit
      Holdback.  Subject to Section 2.3, with respect to any and all
      Lands for which Buyer has not confirmed that Seller has Defensible Title within
      the Fiddler Creek Property only (the “Non-Confirmed Leases”), at Closing Buyer
      shall deliver to a mutually agreed-upon escrow agent (the “Escrow Agent”)
      certificates representing 592,822 Offered Shares (the “Holdback Shares”) and
      said Holdback Shares shall remain in the Escrow Agent’s possession and control
      pursuant to this Section 5.2.  Seller shall use its best efforts to
      provide Buyer with evidence as to Defensible Title to the Non-Confirmed Leases
      and to cure any applicable Title Defect post-Closing.  Subject to
      Section 2.3, there shall not be any adjustment to the Initial Purchase Price
      or
      to the Total Purchase Price, or any other recourse by Buyer, for any alleged
      title defect on Leases or other Assets other than the Non-Confirmed
      Leases.

     

    (b)           Title
      Defects Notice.  Buyer
      shall as soon as
      reasonably possible after Closing, but no later than 30 days after Closing
      (the
“Title Defect Notice Date”), give Seller written notice of asserted Title
      Defects (the “Title Defect Notice”) with respect to the Non-Confirmed
      Leases.  In order to be validly submitted, the Title Defect Notice
      must: (i) be in writing and received on or before the Title Defect Notice Date;
      (ii) identify the Asset affected by such asserted Title Defect; (iii) describe
      each asserted Title Defect and the basis for such assertion in reasonably
      specific detail; (iv) state the Allocated Value of the affected Asset; and
      (v)
      state Buyer’s good faith estimate and calculation of the asserted Title Defect
      Value.  Upon the written request of the Seller, the Buyer shall
      provide supporting documentation (to the extent such supporting documentation
      is
      available) to Seller within three business days, for each asserted

     

     

    
      
        
        

      

      
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      Title
        Defect which shall include, but
        not be limited to, (w) Buyer’s computation of the estimated Title Defect Value
        and, if applicable, any curative action necessary to cure the Title Defect,
        (x)
        if the basis is derived from any document, a copy of such document (or pertinent
        part thereof) or (y) if the basis is derived from any gap in the Seller’s chain
        of title, the recorded documents preceding and following the gap, or (z)
        if the
        basis is not as described in clauses (x) and (y) above, then reasonable,
        written
        documentation.  The Buyer irrevocably waives all Title Defects that
        are not submitted in a timely manner or are not validly submitted.  On
        the Title Defect Notice Date or on the earlier submission of the Title Defect
        Notice to Seller, Buyer and Seller shall direct the Escrow Agent to release
        all
        Holdback Shares from escrow other than a number of Holdback Shares (the
“Retained Holdback Shares”) with a value (deemed to be US$4.00 per share) equal
        to the aggregate Title Defect Value set out in the Title Defect Notice, and
        the
        Retained Holdback Shares will continue to be held in escrow by the Escrow
        Agent
        pending resolution of the process outlined in this Section
        5.2.

    

     

    (c)           Purchase
      Price Adjustments for Title
      Defects.  Seller will provide
      a
      written response to Buyer’s Title Defect Notice no later than five business days
      after receipt thereof, which shall include identification of any Title Defects
      Seller disputes.  The Final Purchase Price shall be subject to
      adjustment by an amount equal to the aggregate of all Title Defect Values,
      but
      only to the extent each Title Defect exceeds the Individual Defect Threshold
      and
      the aggregate exceeds the Aggregate Defect Threshold (with such amount being
      the
“Title Defect Adjustment”), unless: (i) Seller successfully contests the Title
      Defect, in which case the provisions of Section 5.4 shall apply, or (ii) Seller
      cures the Title Defect no later than ninety calendar days after Closing, or
      (iii) Buyer agrees in writing to waive the relevant Title Defect, or (iv) Seller
      elects on or before the date ninety calendar days after Closing to indemnify
      Buyer against any Loss attributable to the relevant Title
      Defect.

     

    (d)           Actions
      to be taken after Closing.  If Seller cannot cure the applicable
      Title Defect within ninety days from the Closing Date (or such longer period
      as
      may be agreed to by the Parties), and if Buyer does not waive the Title Defect,
      then Seller may substitute and assign to Buyer new Leases (obtained by Seller
      after Closing within the Fiddler Creek Property) acceptable to Buyer in its
      sole
      discretion for all or a portion of the number of net acres which are the subject
      of the applicable Title Defect.  To the extent Seller does not cure
      the Title Defect and Buyer does not accept said substitute Leases (if any),
      for
      any reason, then the Total Purchase Price will be reduced by the amount of
      the
      Title Defect Value applicable to such Lease, and the Parties shall instruct
      the
      Escrow Agent to return the applicable number of Retained Holdback Shares to
      Buyer.  To the extent that Seller cures the applicable Title Defect or
      provides evidence satisfactory to Buyer as to Defensible Title or to the extent
      Buyer accepts substitute Leases within the ninety calendar day time period
      (or
      such longer period as may be agreed to by the Parties), or if Buyer waives
      the
      Title Defect, Buyer and Seller shall instruct the Escrow Agent to deliver to
      Seller the applicable number of Retained Holdback Shares.  In the
      event that the total value of outstanding Title Defects does not exceed the
      Aggregate Defect Threshold at any time within ninety days of the Closing Date
      then Seller shall be deemed to have Defensible Title to all such Leases and
      Buyer and Seller shall instruct the Escrow Agent to deliver to Seller the
      remaining Holdback Shares.

     

    5.3           Interest
      Additions. Promptly on discovery by Seller,
      before or up to 90 days after Closing, Seller shall in good faith
      notify Buyer in writing (“Interest Addition Notice”) of any lease or interest to
      which Seller has Defensible Title that is located within the Fiddler Creek
      Area, but is not set forth on Exhibit A, including any NRI increases without
      a
      proportionate change in WI, or WI decreases without a proportionate change
      in
      NRI (an “Interest Addition”).  If on or before the last business day before
      Closing, Buyer has actual knowledge of an Interest Addition, Buyer 

     

     

    
      
        
        

      

      
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      shall
        promptly notify Seller of same.  Upon receipt of an Interest Addition
        Notice or discovery by Buyer of an Interest Addition, Buyer may, in its sole
        discretion, provide notice to Seller that Buyer wishes to acquire the Interest
        Addition, in which case the Interest Addition shall be deemed to be a part
        of
        the Assets hereunder for all purposes.  If any Interest Additions
        become a part of the Assets prior to Closing, the Initial Purchase Price
        shall
        be subject to adjustment at Closing pursuant to Section 3.2 by an amount
        equal to the aggregate out of pocket costs incurred by the Seller in
        acquiring all such Interest Additions (with such amount being the “Interest
        Addition Adjustment”).  The Parties in good faith taking into account
        all relevant factors shall determine the amount of Interest
        Addition Adjustment. If the Parties cannot agree on the amount of
        the Interest Addition Adjustment, such amount shall be determined in
        the same manner as provided in Section 5.4, mutatis mutandis, for resolving
        Title Defect disputes.  If any Interest Additions become a part of the
        Assets after Closing, Seller shall transfer such Interest Additions to
        Buyer promptly after receipt of Buyer's notice of acceptance of such and
        Buyer
        shall concurrently pay to Seller an amount equal to the aggregate out of
        pocket costs incurred by the Seller in acquiring such Interest
        Additions.

    

     

    5.4           Dispute
      Resolution.  If the Parties cannot agree upon whether Buyer
      has Defensible Title to or the Title Defect Value of a particular Asset
      comprising a part of the Fiddler Creek Property, the matter shall be submitted
      to a mutually agreed attorney experienced in oil and gas title matters in the
      applicable jurisdiction.  The fees and expenses of such attorney shall
      be borne, in full, by the losing party.  The attorney so selected
      shall make a final written determination as to whether the
      Seller  holds less than Defensible Title (taking into consideration
      the Individual or Aggregate Defect Threshold, as applicable), or the Title
      Defect Value, as the case may be.  The Parties agree to be bound by
      the final determination made by the title attorney pursuant to this Section
      5.4.

     

    5.5           Condemnation
      and Eminent Domain. If a portion of the Assets is taken or threatened to be
      taken by process of condemnation or under the right of eminent domain, shall
      be
      deemed to be a Title Defect and accordingly such Assets will be deemed to be
      Holdback Assets, and shall be treated accordingly.

     

    5.6           Preferential
      Rights and Consents.  To Seller’s knowledge, the preferential
      purchase rights and the Assets subject to such rights are listed on Exhibit
      E.  Seller shall use its best efforts to obtain all Required Consents
      and all other consents and to give notices required in connection with
      preferential purchase rights with respect to the Assets prior to
      Closing.  Prior to Closing, if Buyer discovers other Assets affected
      by Required Consents, other consents or preferential purchase rights with
      respect to the Assets, Buyer shall notify Seller immediately and Seller shall
      use its best efforts to obtain such consents and/or to give the notices required
      in connection with the preferential rights prior to Closing. The term “Required
      Consent” means a consent that if not obtained by Closing would invalidate the
      conveyance of the Assets or any of them or subject Buyer to material damages;
      provided, however, that consents and approvals that are customarily obtained
      post Closing (such as federal and state approvals of assignments), and other
      consents that do not specifically invalidate the conveyance (or subject Buyer
      to
      material damages) if not obtained are not Required Consents.

     

    (a)           Consents.  If
      a Required Consent has not been obtained as of the Closing, then (i) the portion
      of the Assets for which such Required Consent has not been obtained shall not
      be
      conveyed at the Closing, (ii) the Initial Purchase Price shall be adjusted
      pursuant to Section 3.2 by an amount equal to the Allocated Value for the
      affected Asset, and (iii) Seller shall use its reasonable efforts to obtain
      such
      consent as promptly as possible following Closing.  If such Required
      Consent has been obtained as of the Final Settlement Date, 

     

    
      
        
        

      

      
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      Seller
        shall convey the affected Asset to Buyer effective as of the Effective Time
        and
        Buyer shall pay Seller the Allocated Value of the affected Asset, reduced
        or
        increased by any applicable adjustments under Section 3.2.  If such
        Required Consent has not been obtained as of the Final Settlement
        Date, then
        that
        portion of the Assets affected by such Required Consent shall no longer be
        subject to this Agreement.  Buyer shall reasonably cooperate with
        Seller in obtaining any Required Consent.

    

     

    (b)           Preferential
      Purchase Rights.

     

    (1)           If
      any preferential right to purchase any portion of the Assets is exercised prior
      to the Closing Date, or if the time frame for the exercise of such preferential
      purchase right has not expired and Seller has not received notice of an intent
      not to exercise or waiver of the preferential purchase right, then that portion
      of the Assets affected by such preferential purchase right shall be excluded
      from the Assets at Closing and the Initial Purchase Price shall be adjusted
      downward by an amount equal to the Allocated Value of such affected
      Assets.

     

    (2)           If
      a third party exercises its preferential right to purchase, but does not
      consummate the transaction prior to Closing, Seller shall retain the affected
      Assets at Closing and the Initial Purchase Price shall be adjusted downward
      by
      an amount equal to US$1,500 per acre of such affected Assets.  In the
      event such third party subsequently fails to consummate the transaction within
      the time frame specified in the preferential purchase right (provided that
      the
      reason therefor is not Seller’s default), Seller agrees to convey the affected
      Asset to Buyer as soon as possible after the expiration of the time for
      consummation of the transaction by such third party, such conveyance to be
      effective as of the Effective Time, and Buyer agrees to pay Seller the Allocated
      Value of such affected Asset, reduced or increased by any applicable adjustments
      under Section 3.2.

     

    5.7           Exclusive
      Remedies.  The rights and remedies granted each Party in this
      Article V constitute the exclusive remedies for Title Defects, Interest
      Additions, Preferential Rights and Required Consents relating to or affecting
      the Assets.

     

    ARTICLE
      VI

    ENVIRONMENTAL
      MATTERS

     

    6.1           As-Is
      Where-Is Purchase.  Except as set forth in this Article VI and
      Article XV, Buyer agrees to indemnify and hold harmless the Seller as set forth
      in Article XV from all claims, costs, expenses, liabilities, and obligations
      attributable to and relating to environmental conditions in, on or under the
      Assets attributable to the period of time before and after the Effective Time,
      including but not limited to the obligation to plug, abandon and reclaim all
      well sites and Wells.

     

    6.2           Initial
      Purchase Price Adjustments for Environmental Defects.

     

    (a)           Environmental
      Defects.   “Environmental Defect” means a condition in, on or
      under a specific Asset (including, without limitation, air, land, soil, surface
      and subsurface strata, surface water and ground water) which forms a part of
      the
      Fiddler Creek Property that causes or would cause such Asset to be in violation
      of, or that would impose a remedial obligation under, an Environmental Law,
      and
      the Remediation Costs for such asserted Environmental Defect would exceed
      US$100,000  (the “Environmental Defects Threshold”).  If an
      asserted Environmental Defect does not exceed the Environmental Defects
      Threshold, the 

     

     

    
      
        
        

      

      
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      Buyer
        shall be deemed to have accepted and acquired such Asset (including Assets
        for
        which an Environmental Defect Notice was given) in an “AS-IS WHERE-IS condition,
        subject to Section 15.3.

    

     

    (b)           Environmental
      Defects Notice.   The Buyer shall give Seller written notice
      of Environmental Defects (the “Environmental Defect Notice”) as soon as
      reasonably possible but in no event later than three business days prior to
      the
      Closing Date (the “Environmental Defect Notice Date”). In order to be validly
      submitted, an Environmental Defect Notice must: (i) be in writing and received
      on or before the Environmental Defect Notice Date, (ii) identify the specific
      Asset affected by such asserted Environmental Defect, (iii) describe in
      reasonably specific detail the condition in, on or under such Asset that causes
      the Environmental Defect and the Environmental Laws that form the basis for
      such
      defect, (iv) state the Buyer’s estimate and calculation of Remediation Costs;
      and (v) include sufficient supporting documentation for a particular asserted
      Environmental Defect (to the extent such supporting documentation is reasonably
      available).  For purposes of this Section, sufficient supporting
      documentation of an asserted Environmental Defect and Remediation Costs shall
      include relevant portions of reports prepared by, or the basis of tests
      performed by, an Environmental Consultant.  If Buyer fails to timely
      deliver an Environmental Defect Notice substantially meeting the requirements
      of
      this Section 6.2(b) with respect to a specific Asset affected by an asserted
      Environmental Defect, the Buyer shall be deemed to have accepted the
      Environmental Defect with respect to that particular Asset, to have waived
      its
      right to claim an Environmental Defect with respect to that particular Asset,
      and to have accepted and acquired such Asset in an AS-IS WHERE-IS
      condition.

     

    (c)           Seller’s
      Elections. If Buyer timely delivers a valid Environmental Defect Notices to
      Seller with a Environmental Defect Value exceeding the Environmental Defect
      Threshold, the Seller may elect, in its sole discretion, one or more of the
      following options: (i) remediate the asserted Environmental Defect either before
      Closing or within ninety days after Closing; or (ii) contest the existence
      of
      the asserted Environmental Defect and the related Remediation Cost; or (iii)
      pay
      Buyer’s estimate of the Remediation Cost with respect to the asserted
      Environmental Defect and reduce the Initial Purchase Price pursuant to Section
      3.3 by the amount of such estimate.

     

    (d)           Post-Closing
      Cure.

     

    (1)           Actions
      to be taken at Closing.  If Seller elects to cure the applicable
      Environmental Defect post-Closing, then Buyer shall at Closing withhold and
      deliver to a mutually agreed upon escrow agent that number of Offered Shares
      (the “Environmental Holdback Shares”) with a value (determined in accordance
      with Section 3.1(b)) equal to the Canadian Dollar Equivalent of the Allocated
      Value for each acre of such Lands subject to such Environmental Defect and
      Seller shall not assign the affected Assets to Buyer at
      Closing.  There shall not be any adjustment to the Initial Purchase
      Price or to the Total Purchase Price, or any other recourse by Buyer, for any
      alleged Environmental Defect on Leases or other Assets other than the Leases
      included within the Fiddler Creek Property.

     

    (2)           Actions
      to be taken after Closing.  If Seller elects to cure the
      applicable Environmental Defect post-Closing, but does not cure the applicable
      Environmental Defect within ninety days from the Closing Date (or such longer
      period as may be agreed to by the Parties), then Buyer may elect one of the
      following: (i) Buyer may waive the applicable Environmental Defect, and the
      Parties shall instruct the escrow agent to deliver to Seller that number of
      Environmental Holdback Shares with a value (determined in accordance with
      Section 3.1(b)) equal to the Allocated Value of the affected Asset and Seller
      shall assign such Asset to Buyer, or (ii) if Buyer does not waive the
      Environmental Defect, then the Parties shall instruct the escrow agent to
      deliver to Seller that number of Environmental Holdback Shares with a value
      (determined in accordance with Section 

     

    
      
        
        

      

      
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      3.1(b))
        equal to the difference between the Allocated Value of the affected Asset
        and
        the Environmental Defect Value and Seller shall assign such Asset to
        Buyer.  If Seller cures the applicable Environmental Defect within the
        ninety calendar day time period (or such longer period as may be agreed to
        by
        the Parties), the Parties shall instruct the escrow agent to deliver to Seller
        that number of Environmental Holdback Shares with a value (determined in
        accordance with Section 3.1(b)) equal to the Allocated Value of the affected
        Asset and Seller shall assign such Asset to Buyer.

    

     

    (e)           Environmental
      Defect Value.  “Environmental Defect Value” means the amount of
      Remediation Costs required to bring the Asset subject to the Environmental
      Defect into material compliance with Environmental Laws.

     

    (f)           Contested
      Environmental Defects. Seller shall provide a written response to Buyer’s
      Environmental Defect Notice no later than two business days prior to Closing,
      which shall identify all asserted Environmental Defects or Environmental Defect
      Values that the Seller disputes and the election under Section 6.2(c) that
      Seller has made in respect of all asserted Environmental Defects.  The
      Seller’s written notice of contest shall state with reasonable specificity the
      basis of the Seller’s contest of the asserted Environmental Defect or
      Environmental Defect Value.  Within one business day of the Seller
      providing written notice of contest, representatives of Buyer and Seller
      knowledgeable in environmental matters shall meet and either agree to reject
      the
      asserted Environmental Defect, or agree upon the validity of the asserted
      Environmental Defect, and with respect to Contested Environmental Defect Values
      either agree to the Environmental Defect Value or not agree.  If the
      Parties cannot reach agreement upon the acceptance or rejection of a particular
      asserted Environmental Defect or an Environmental Defect Value prior to Closing:
      (i) the Initial Purchase Price will be adjusted pursuant to Section 3.2 by
      an
      amount equal to the Allocated Value attributable to the specific Asset affected
      by the asserted Environmental Defect, (ii) the specific Asset shall be withdrawn
      from the Assets being purchased by the Buyer, and (iii) the Parties shall
      continue in good faith their efforts to resolve any such disputed Environmental
      Defects or Environmental Defect Value no later than thirty calendar days
      following the Closing.  Upon the final resolution of all disputed
      Environmental Defects or Environmental Defect Values pursuant to the procedures
      set forth in this Section 6.2(f): (i) the Seller shall convey to the Buyer
      all
      Assets that were previously withheld at the Closing pursuant to this Section
      6.2(f), (ii) the Buyer shall pay the Seller the Allocated Value for such Assets
      previously withheld at the Closing pursuant to this Section 6.2(f) subject
      to
      any applicable adjustment under Section 3.2; and (iii) the Parties shall
      recalculate the Environmental Defect Adjustment and effect a final settlement
      of
      disputed Environmental Defects pursuant to the procedures set forth in Section
      14.1(a).

     

    (g)           Environmental
      Defect Adjustment.  The number of Offered Shares shall be subject
      to adjustment at Closing pursuant to Section 3.2 by an amount equal to the
      aggregate Environmental Defect Value of all Environmental Defects undisputed
      by
      the Seller (with such amount being the “Environmental Defect
      Adjustment”).  The Initial Purchase Price shall not be reduced at
      Closing as a result of any Environmental Defect.  The number of
      Offered Shares shall not be reduced at Closing with respect to an asserted
      Environmental Defect in the event: (i) Seller successfully contests the asserted
      Environmental Defect prior to Closing, or (ii) Seller cures the asserted
      Environmental Defect prior to Closing, or (iii) Buyer agrees to waive the
      asserted Environmental Defect prior to Closing, or (iv) Seller elects on or
      before Closing to cure such asserted Environmental Defect no later than ninety
      calendar days following the 

     

     

    
      
        
        

      

      
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      Closing,
        or (v) Seller elects on or before Closing to indemnify the Buyer against
        any
        Loss attributable to the asserted Environmental Defect.

    

     

    6.3           Exclusive
      Remedies.  The rights and remedies granted each Party in this
      Article VI, constitute the exclusive rights and remedies with regard to
      environmental matters relating to or affecting the Assets.

     

    ARTICLE
      VII

    SELLER’S
      REPRESENTATIONS

     

    7.1           Corporate
      Representations.  The Seller represents and warrants to Buyer as
      follows, and acknowledges that Buyer is relying upon such representations and
      warranties:

     

    (a)           Incorporation/Qualification.  Seller
      is a corporation duly organized, validly existing and in good standing under
      the
      laws of the State of Nevada and is duly registered as a foreign corporation
      and
      qualified to conduct business in states where it owns and operates the
      Assets.

     

    (b)           Power
      and Authority.  Seller has all requisite power and authority to
      own the Assets and to carry on its business as presently conducted and to
      execute and deliver this Agreement (and any agreement executed by Seller
      pursuant hereto) and perform its respective obligations under this Agreement
      (and any agreement executed by Seller pursuant thereto), including, but not
      limited to, having all requisite corporate power and authority to sell, assign,
      transfer and convey the Assets to Buyer in accordance with the
      Agreement.

     

    (c)           No
      Lien, No Violation.  The execution, delivery and performance of
      this Agreement (and any agreement executed by Seller pursuant thereto) does
      not,
      and the fulfillment of and compliance with the terms and conditions hereof,
      will
      not, (i) create an Encumbrance on the Assets or trigger an outstanding security
      interest in the Assets that will remain in existence after Closing, (ii)
      violate, or be in conflict with, result in a default under, give rise to any
      right of termination, cancellation or acceleration under, any material provision
      of the Seller’s governing documents or any agreement, license, registration or
      instrument to which the Seller is, or the Assets are, bound, or (iii) to the
      Seller’s knowledge, violate or be in conflict with any Law applicable to the
      Seller or any of the Assets, or (iv) require any consents, approvals,
      notifications or authorizations of any governmental authorities or regulatory
      body exercising jurisdiction over the Assets or the Seller, except such as
      are
      customarily obtained in due course after the Closing and except for any such
      matters that would not have a Material Adverse Effect.

     

    (d)           Authorization
      and Enforceability.  The execution, delivery and performance of
      this Agreement (and that of any agreement executed by Seller pursuant hereto)
      is
      duly and validly authorized, and this Agreement has been duly executed and
      delivered and constitutes the legal, valid and binding obligation of Seller,
      enforceable in accordance with its terms, subject, however, to the effects
      of
      bankruptcy, insolvency, reorganization, moratorium and other laws for the
      protection of creditors, as well as to general principles of equity, regardless
      whether such enforceability is considered in a proceeding in equity or at
      law.

     

    (e)           Liability
      for Brokers’ Fees.  Seller has not incurred any obligation or
      liability, contingent or otherwise, for brokers’ or finders’ fees relating to
      the Assets or this Agreement for which Buyer shall have any responsibility
      whatsoever.

     

     

    
      
        
        

      

      
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    (f)           No
      Bankruptcy.  There are no bankruptcy proceedings pending, being
      contemplated by or, to Seller’s knowledge, threatened against Seller or in
      regard to the Assets.

     

    (g)           Litigation.  The
      Seller has not received any claim or demand notice that has not been resolved
      with respect to the Assets or title thereto.  There are no actions,
      suits, claims, investigations, written governmental inquiries or proceedings
      pending or, to Seller’s knowledge, threatened against the Seller or any of the
      Assets, in any court or by or before any federal, state, municipal or other
      governmental agency and to Seller’s knowledge there exists no particular
      circumstance which will give rise to such claim, proceeding, action,
      governmental investigation, or lawsuit.

     

    7.2           Seller’s
      Representations with Respect to the Assets.  The Seller represents
      and warrants to Buyer regarding the Assets as follows, and acknowledges that
      Buyer is relying upon such representations and warranties:

     

    (a)           Capital
      Projects.  Exhibit G is a list and description of all Wells or
      other capital projects in progress and associated costs or estimates thereof
      to
      the extent Seller has received an AFE therefor or is otherwise committed thereto
      and such costs or estimates exceed US$100,000 per Well or project net to the
      Seller’s interest (the “Capital Projects”).

     

    (b)           Insurance.  Seller
      has maintained and shall maintain through the Closing Date, customary insurance
      policy coverages and amounts of coverage with respect to the Assets and the
      operation of the Assets and, with respect to any Assets not transferred at
      Closing pursuant to Sections 2.3, 5.2, 5.6 or 6.2, the Seller shall maintain
      such insurance coverage until the earlier of the transfer of such Assets to
      Buyer in accordance with this Agreement or the expiry of the applicable cure
      period.

     

    (c)           No
      Liens.  The Seller is the owner of the Assets (except those assets
      which are leased) with good and marketable title thereto free of any Encumbrance
      other than Permitted Encumbrances, and except for Permitted Encumbrances, the
      Assets will be conveyed to Buyer at the Closing free and clear of all
      Encumbrances.

     

    (d)           No
      Other Agreements to Sell.  No Person, other than the Buyer under
      this Agreement, has any agreement or option or any right capable of becoming
      an
      agreement or option for the purchase from the Seller of any of the
      Assets.

     

    (e)           Judgments.  There
      are no unsatisfied judgments issued by a court of competent jurisdiction or
      other governmental agency outstanding against Seller or in regard to the
      Assets.

     

    (f)           Accuracy
      of Information.  Complete and correct copies (including
      amendments) of all Material Agreements, all Authorizations relating to the
      Assets and all other documents referred to in this Agreement or any Exhibit
      have been delivered or made available by Seller to Buyer or its agents. 
All records, data or information relating to the Assets are in the full
      possession or control of the Seller.  To the best of Seller's knowledge
      there are no material inaccuracies or misrepresentations in any of such records,
      data or information.

     

    (g)           Authorizations.  Except
      to the extent which is not material: (i) all Authorizations required in respect
      of the Assets have been issued or obtained and are in full force and effect,
      and
      (ii) there is no breach or violation thereof.

     

    
      
        
        

      

      
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    (h)           Taxes.  During
      Seller’s period of ownership and with respect to Taxes for all taxable periods
      during Seller’s period of ownership through the taxable period in which this
      Agreement is executed, all such Taxes have been paid when due, unless contested
      in good faith by appropriate proceeding.  All Taxes of Seller and
      obligations relating thereto that could result in an Encumbrance or other claim
      against any of the Assets have been properly paid, unless contested in good
      faith by appropriate proceeding, and if contested they will remain the
      obligation of the Seller.

     

    (i)           Royalties.  During
      Seller’s period of ownership, all lease rentals, royalties, overriding royalties
      and similar payments based on ownership of property or production from the
      Assets for Seller’s period of ownership through the Effective Time have been
      paid when due.  Seller has not received any notice and is not aware
      that any such payments for the period prior to Seller’s period of ownership are
      due.

     

    (j)           Production
      Sale Agreements.  As at the date hereof there are no contracts for
      the sale of Hydrocarbons from the Lands to which the Seller or any Person acting
      on its behalf is a party or is bound applicable to the production of
      Hydrocarbons from the Lands nor have the Lands been dedicated by the Seller
      to
      any other production sale contract or similar arrangement.

     

    (k)           Rights
      of Way and Surface Agreement.  Seller has all rights of access to
      the Lands and may enter into and upon the Lands as necessary to explore for
      and
      extract Hydrocarbons from the Lands.  Seller shall convey to Buyer any
      and all rights of way in its possession, surface leases, permits and licenses,
      surface use agreements and other surface rights relating to the
      Assets.

     

    (l)           Compliance
      with Laws. The Assets operated by Seller are, and Seller’s operation of such
      Assets has been and currently is, in substantial compliance with all applicable
      Laws.  To Seller’s knowledge, the Assets not operated by Seller are,
      and the operation of such Assets has been and currently is, in substantial
      compliance with all applicable Laws.

     

    (m)           Material
      Contracts. Exhibit D lists all material contracts and agreements (excluding
      Leases) that are material to the ownership or operation of the Assets as of
      the
      Effective Time or to which any Assets will be bound as of the Closing, including
      contracts and agreements with Affiliates of Seller, tax partnership agreements,
      contracts or agreements for the sale or purchase or other disposition of
      Hydrocarbons that are not terminable with less than thirty day notice without
      penalty, contract or agreement to sell, lease otherwise dispose of any interest
      in the Assets as of the Effective Time, unit or pooling agreements, or contracts
      and agreements that would require the owner of the Assets to pay amounts in
      excess of $100,000 annually, contract or agreements for gathering, transmission,
      processing or marketing of Hydrocarbons, contracts or agreements containing
      take
      or pay, advance payment, prepayment or similar provision obligating Seller
      to
      sell, deliver, process or transport any Hydrocarbons without then receiving
      full
      payment therefor.  Seller is not in default or breach under any such
      contracts and agreements and to Seller’s knowledge the other parties to such
      contracts or agreements are not in default or breach thereunder and to the
      best
      knowledge of the Seller there are no facts which, after notice or lapse of
      time
      or both, would constitute such a default.  To the best knowledge of
      the Seller, it is entitled to all rights and benefits under each of such
      agreements, contracts and commitments.  To the Seller’s knowledge, no
      such contract or agreement is subject to a claim that it is terminated or
      subject to termination.

     

    
      
        
        

      

      
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    (n)           Investment
      Company.  Seller is not an investment company or a company
      controlled by an investment company within the meaning of the Investment Company
      Act of 1940, as amended, or subject to the provisions of said act.

     

    (o)           Wells
      and Equipment.  Exhibit B lists all of the Wells on the Lands,
      whether producing, non-producing, injection or disposal wells, or wells that
      are
      shut in, temporarily or permanently abandoned.  Seller owns, or has
      title to a valid lease of, all tangible assets included in the Assets to be
      conveyed to Buyer, free and clear of all Encumbrances, other than Permitted
      Encumbrances, and such assets include all assets necessary to operate the Leases
      and Wells in the manner in which they were operated as of the Effective
      Time.  None of the Wells is subject to a production penalty arising
      under a contract as a result of an election by Buyer not to participate in
      a
      drilling operation or other operations.

     

    (p)           Eminent
      Domain.  To Seller’s knowledge, there is no actual or threatened
      taking (whether permanent, temporary, whole or partial) of any part of the
      Assets by reason of condemnation or eminent domain.

     

    (q)           Leases.  Except
      as set forth on Exhibit A, with respect to Leases:

     

    (1)           the
      Leases have been maintained by Seller according to their terms, in compliance
      with all material agreements to which the Leases are subject;

     

    (2)           each
      of the Leases is valid and subsisting and neither Seller nor, to the knowledge
      of Seller, any other party to any Lease is in breach or default with respect
      to
      any of its material obligations thereunder and Seller is entitled to all
      benefits and rights thereunder;

     

    (3)           while
      owned by Seller, there has not occurred any event, fact or circumstance which
      with the lapse of time or the giving of notice, or both, would constitute such
      a
      breach or default on behalf of Seller or, to the knowledge of Seller, with
      respect to any other parties;

     

    (4)           there
      are no provisions in the Leases or under any contract or law applicable to
      the
      Leases that increase the royalty share of the lessor thereunder;

     

    (5)           there
      are no Leases that are subject to a fixed term of duration, and (b) there are
      no
      unfulfilled drilling obligations affecting the Leases, other than (i)
      obligations implied in law and (ii) provisions requiring optional drilling
      as a
      condition of maintaining or earning all or a portion of the Lease;
      and

     

    (6)           the
      completion of the transactions contemplated hereby will not afford any of the
      parties to any of the Leases or any other person the right to terminate any
      Lease.

     

    Seller
      does not own any leases or other oil, gas or mineral interest in the Fiddler
      Creek Area other than the Assets.

     

    (r)           Consents
      and Preferential Rights.  To the Seller’s knowledge, none of the
      Assets, or any portion thereof, is subject to any third-party consents to
      assignment, preferential rights to purchase or restrictions on assignment which
      may be applicable to the transactions contemplated by this Agreement, except
      for
      governmental consents and approvals of 

     

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

       

      assignments
        that are customarily obtained after Closing, preferential rights, consents
        and
        restrictions contained in easements, rights-of-way or equipment leases, and
        Preferential Rights and Required Consents as are set forth on Exhibit
        E.

    

     

    (s)           Environmental
      Matters.  Seller:

     

    (1)           has
      not received any orders or directives under the Laws from a governmental
      authority relating to environmental matters requiring any work, repairs,
      constructions or capital expenditures with respect to the Assets, which order
      or
      directive remains outstanding on the Closing Date,

     

    (2)           has
      not received any demand or notice from a governmental authority or third party
      (other than Buyer) relating to the breach of any environmental, health or safety
      law applicable to the Assets, including without limitation, any Laws relating
      to
      the use, storage, treatment, shipping or disposition of environmental
      contaminants, which demand or notice has not been complied with in all material
      respects, and

     

    (3)           has
      made available to Buyer all environmental information within its possession
      and
      has not knowingly withheld any such information from Buyer relevant to
      environmental matters that relate to or affect the Assets.

     

    (t)           Registration
      under 1933 Act.  The Seller understands and agrees that the
      Offered Shares have not been and will not be registered under the 1933 Act,
      or
      applicable state securities laws, and  the Offered Shares are being
      offered and sold on behalf of the Buyer to the Seller in reliance upon Rule
      506
      of Regulation D and/or section 4(2) under the 1933 Act.

     

    (u)           Independent
      Evaluation.  The Seller has such knowledge and experience in
      financial and business matters as to be capable of evaluating the merits, and
      risks of the investment in the Offered Shares and it is able to bear the
      economic risk of loss of the investment.  The Seller has had the
      opportunity to ask questions of and receive answers from the Buyer regarding
      the
      investment, and has received all the information regarding the Buyer that it
      has
      requested.

     

    (v)           Not
      for Resale.  The Seller is acquiring the Offered Shares as
      principal for its own account and not for the account or benefit of any other
      person, for investment purposes only and not with a view to resale or
      distribution and, in particular, it has no intention to distribute, either
      directly or indirectly, any of the Offered Shares in the United States or
      elsewhere; provided, however, that the Seller may sell or otherwise dispose
      of
      any of the Offered Shares pursuant to registration thereof under the 1933 Act
      and any applicable state securities laws or under an applicable exemption from
      such registration requirements, provided that in connection with the resale
      or
      distribution of the Offered Shares pursuant to an exemption from such
      registration requirements, the Buyer and the Transfer Agent, may require an
      opinion of legal counsel of recognized standing in form and substance
      satisfactory to the Buyer to such effect.

     

    (w)           Accredited
      Investor.

     

    (1)           The
      Seller is an "accredited investor" as defined in Rule 501(a) of Regulation
      D (an
“Accredited Investor”), by virtue of being either (i) a corporation or
      partnership, not formed for the specific purpose of acquiring the Offered
      Shares, with total assets in excess of US $5,000,000; or (ii) an entity in
      which
      all of the equity owners are Accredited Investors.

     

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    (2)           Seller
      is an accredited investor as defined in NI 45-106, by virtue of being a
      corporation, not formed for the specific purpose of acquiring the Offered
      Shares, with total net assets in excess of CAD $5,000,000.

     

    (x)           Non-Solicitation.
      The Seller has not acquired the Offered Shares as a result of any form of
      general solicitation or general advertising, including advertisements, articles,
      notices or other communications published in any newspaper, magazine or similar
      media or broadcast over radio, or television, or any seminar or meeting whose
      attendees have been invited by general solicitation or general
      advertising.

     

    (y)           Re-Sale
      Restrictions.  The Seller agrees that if it decides to offer, sell
      or otherwise transfer the Offered Shares, it will not offer, sell or otherwise
      transfer any of such securities directly or indirectly, unless:

     

    (1)           the
      transfer is made outside the United States in a transaction meeting the
      requirements of Rule 904 ofRegulation S under the 1933 Act and in compliance
      with applicable local laws and regulations;

     

    (2)           the
      transfer is made in compliance with the exemption from the registration
      requirements under the 1933 Act provided by Rule 144 thereunder, if available,
      and in accordance with applicable state securities laws;

     

    (3)           the
      securities are transferred in a transaction that does not require registration
      under the 1933 Act or any applicable state laws and regulations governing the
      offer and sale of securities; and

     

    (4)           the
      Seller has prior to such sale furnished to the Buyer an opinion of counsel
      or
      other evidence of exemption, in either case reasonably satisfactory to the
      Buyer;

     

    (z)           US
      Legend Requirements.  The Seller understands that upon the
      issuance thereof, and until such time as the same is no longer required under
      the applicable requirements of the 1933 Act or applicable U.S. state laws and
      regulations, the certificates representing the Offered Shares will bear a legend
      in substantially the following form:

     

    "THE
      SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER
      THE
      UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933
      ACT").  THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR
      OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES
      IN
      COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE 1933 ACT, (C) IN COMPLIANCE
      WITH THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE 1933 ACT
      PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE
      STATE SECURITIES LAWS, OR (D) IN A TRANSACTION THAT DOES NOT REQUIRE
      REGISTRATION UNDER THE 1933 ACT OR ANY APPLICABLE STATE LAWS, AND THE HOLDER
      HAS, PRIOR TO SUCH SALE, FURNISHED TO THE COMPANY AN OPINION OF COUNSEL OR
      OTHER
      EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY 

     

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    SATISFACTORY
      TO THE COMPANY.  DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD
      DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN
      CANADA."

     

    provided,
      that if Offered Shares are being sold under clause (B) above, in an “offshore
      transaction” at a time when Buyer is a "foreign issuer" as defined in Rule 902
      under Regulation S, the legend set forth above may be removed by providing
      a
      declaration and other documentation, evidencing the availability of the
      exemption, in the form as Buyer may from time to time prescribe to the Transfer
      Agent, to the effect that the sale of the securities is being made in compliance
      with Rule 904 of Regulation S under the 1933 Act;

     

    provided
      further, that if any of the Offered Shares are being sold under clause (C)
      pursuant to Rule 144 of the 1933 Act, the legend may be removed by delivery
      to
      the Transfer Agent of an opinion satisfactory to Buyer to the effect that the
      legend is no longer required under applicable requirements of the 1933 Act
      or
      state securities laws.

     

    (aa)                      Notification
      of Transfer:  Seller understands that Buyer may instruct its
      Transfer Agent not to record any transfer of the Offered Shares, without first
      being notified by the Buyer that it is satisfied that such transfer is exempt
      from or not subject to the registration requirements of the 1933 Act and
      applicable state securities laws.

     

    (bb)                      No
      US Filing Obligation: Seller understands and acknowledges that the Buyer has
      no obligation or present intention of filing with the United States Securities
      and Exchange Commission or with any state securities administrator any
      registration statement in respect of resales of the Offered Shares in the United
      States.

     

    (cc)                      Blue
      Sky Jurisdiction:  The office of the Seller at which the Seller
      received and accepted the offer to purchase the Offered Shares is the address
      of
      the Seller listed in the notices clause of this Agreement.

     

    (dd)                      Certain
      Royalty Interests.  (A) MAB has agreed to terminate and reassign
      to Seller any and all overriding royalty interests that it may have in the
      Fiddler Creek Property, including any future right to receive any such
      overriding royalty interests in any leases covering lands located in the Fiddler
      Creek Area pursuant to: (i) the Finder’s Fee Agreement, dated October 26, 2005,
      between American Oil & Gas, Inc. (“AOGI”) and MAB; (ii) the Lease
      Acquisition Agreement dated January 13, 2006 between MAB and Savannah
      Exploration, Inc. (“Savannah”); (iii) the Prospect Assignment Agreement dated
      January 13, 2006 between MAB and Savannah; and (iv) the Acquisition and
      Consulting Agreement dated January 1, 2007 between MAB and Seller (collectively,
      the “American/Savannah Agreements”); (B) AOGI has agreed to waive any future
      right to receive any additional overriding royalty interests in any leases
      covering lands within the Fiddler Creek Area, as well as the termination of
      the
      production payment discussed in the October 26, 2005 Finder’s Fee Agreement; and
      (C) Savannah has agreed to reassign a portion of its overriding royalty
      interests within the Fiddler Creek Area as reflected in the attached Exhibit
      “A”, has further agreed to a reduction of the overriding royalty interests in
      any future leases covering lands within the Fiddler Creek Area, and has also
      agreed to the termination of the production payment discussed in the October
      26,
      2005 Finder’s Fee Agreement.

     

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    ARTICLE
      VIII

    BUYER’S
      REPRESENTATIONS

     

    The
      Buyer
      represents and warrants to Seller as follows, and acknowledges that Seller
      is
      relying upon such representations and warranties:

     

    8.1           Organization
      and Standing.  The
      Buyer
      is duly incorporated and organized and is validly subsisting under the federal
      laws of Canada, is current and up-to-date with all material filings required
      to
      be made by it under the CBCA and has all requisite corporate capacity, power
      and
      authority to carry on its business as now conducted.  As of the
      Closing, the Buyer or an affiliate thereof will be duly qualified to operate
      its
      business and own the Assets in the states where the Assets are
      located.

     

    8.2           Power. 
      Buyer
      has
      all requisite power and authority to carry on its business as presently
      conducted and to execute and deliver this Agreement and perform its obligations
      under this Agreement. 

     

    8.3           Authorization
      and Enforceability. This Agreement has been duly authorized, executed and
      delivered by the Buyer, and constitutes a valid and binding obligation of the
      Buyer, enforceable against the Buyer, in accordance with the terms thereof,
      except that (i) the enforcement thereof may be limited by applicable bankruptcy,
      insolvency, reorganization, moratorium or similar laws affecting the rights
      of
      creditors generally, (ii) equitable remedies, including, without limitation,
      specific performance and injunction, may be granted only in the discretion
      of a
      court of competent jurisdiction, and (iii) rights of indemnity, contribution
      and
      the waiver of contribution provided for herein, and any provisions exculpating
      a
      party from a liability or duty otherwise owed by it, may be limited under
      applicable law.  The Buyer is not in violation of its constituting
      documents or in default in the performance or observance of any material
      obligation, agreement, covenant or condition contained in any contract, option,
      indenture, trust deed, mortgage, loan agreement, note, lease, or other agreement
      or instrument to which it is a party or by which it or its property may be
      bound
      that impedes or is likely to impede its ability (i) to consummate the
      transactions contemplated by this Agreement or (ii) to assume the liabilities
      to
      be assumed by it under this Agreement.

     

    8.4           Liability
      for Brokers’ Fees.  Buyer has not incurred any obligation or
      liability, contingent or otherwise, for brokers’ or finders’ fees relating to
      the Assets or the transactions contemplated by this Agreement for which Seller
      shall have any responsibility whatsoever.

     

    8.5           Litigation.  There
      is no action, suit, proceeding, claim or investigation by any person, entity,
      administrative agency or governmental body pending or, to Buyer’s knowledge,
      threatened against it before any governmental authority that impedes or is
      likely to impede its ability (i) to consummate the transactions contemplated
      by
      this Agreement or (ii) to assume the liabilities to be assumed by it under
      this
      Agreement.

     

    8.6           No
      Bankruptcy.  There are no bankruptcy proceedings pending, being
      contemplated by or, to Buyer’s knowledge, threatened against Buyer.

     

    8.7           Financial
      Resources.   Buyer has the financial resources available to
      close the transactions contemplated by the Agreement without any financing
      contingency.

     

    8.8           Buyer’s
      Evaluation.

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    (a)           Records
      and Assets.  Buyer is experienced and knowledgeable in the oil and
      gas business and is aware of its risks.  Effective upon the Closing,
      the Buyer acknowledges that it has been afforded the opportunity to examine
      the
      Records and the Assets and all information provided by Seller to Buyer prior
      to
      and after the Effective Date.  Except for the representations and
      warranties of Seller contained in this Agreement and in the Assignments, Bill
      of
      Sale and Conveyance and the Assignment of Oil and Gas Leases delivered at
      Closing, Buyer acknowledges and agrees that Seller has not made any
      representations or warranties, express or implied, written or oral, as to the
      accuracy or completeness of the Records or any other information relating to
      the
      Assets provided to Buyer or its representatives, by or on behalf of Seller,
      prior to and after the Effective Date, including without limitation any estimate
      of the value of the Assets or reserves or any projections as to future
      events.

     

    (b)           Independent
      Evaluation.  In entering into this Agreement, except for Seller’s
      representations, warranties and covenants set forth in this Agreement, Buyer
      acknowledges and affirms that it has relied upon and will rely solely on the
      terms of this Agreement and upon its own independent analysis, evaluation and
      investigation of, and judgment with respect to, the business, economic, legal,
      tax or other consequences of the transactions contemplated by this Agreement,
      including without limitation, its estimate and appraisal of the extent and
      value
      of the Assets, and the petroleum, natural gas and other reserves associated
      with
      the Assets.  Except as expressly provided in this Agreement, Seller
      and its affiliates, agents, representatives, advisors, contractors, directors
      or
      employees shall not have any liability to Buyer or its affiliates, agents,
      representatives, advisors, contractors, directors or employees resulting from
      any use, authorized or unauthorized, of the Records or other information
      relating to the Assets provided by or on behalf of Seller.

     

    8.9           Canadian
      Securities Matters.

     

    (a)           The
      Buyer is, and will be on the Closing Date, a reporting issuer and is not listed
      as in default of any requirements under Applicable Securities Law in the
      Provinces of British Columbia and Alberta (the “Reporting Jurisdictions”), and
      is in compliance in all material respects with the by-laws, rules and
      regulations of the Exchange; any Material Change relating to the Buyer that
      has
      occurred within the twelve months preceding the date hereof has been generally
      disclosed and such disclosure of a Material Change has not been made to any
      securities commission or similar regulatory authority on a confidential basis
      which has not subsequently been generally disclosed.

     

    (b)           No
      steps or proceedings have been taken by any Person, voluntary or otherwise
      requiring or authorizing dissolution or winding up of Buyer.

     

    (c)           All
      press releases, Material Change reports, financial statements, annual
      information forms and other documents filed by or on behalf of the Buyer, as
      required by Applicable Securities Laws in the Reporting Jurisdictions or the
      rules and policies of the Exchange, within the twelve months preceding the
      date
      hereof did not contain any Misrepresentations as at the respective dates of
      such
      filings.

     

    (d)           All
      consents, approvals, permits, authorizations or filings as may be required
      under
      any statute, rule or regulation applicable to the Buyer including, without
      limitation, Applicable Securities Laws in the Offering Jurisdictions and all
      necessary corporate action of the part of the Buyer for: (i) the execution
      and
      delivery of the Agreement; (ii) the issue, sale and delivery of the Offered
      Shares; and (iii) the completion of the transactions contemplated hereby, have
      been obtained or taken, as applicable provided that, following 

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

       

      Closing
        the Buyer will be required to obtain final acceptance from the Exchange of
        the
        transactions provided for in this Agreement.

    

     

    (e)           As
      of the Closing, all corporate action will have been taken by the Buyer to allot
      and authorize the issuance of the Offered Shares, which upon issuance, will
      be
      validly authorized and issued as fully paid and non-assessable securities of
      the
      Buyer.

     

    (f)           The
      execution and delivery of the Agreement, the issue, sale and delivery of the
      Offered Shares and the performance of all other transactions contemplated
      herein:

     

    (1)           do
      not require any filing, notice, consent, approval, Authorization or order of
      any
      court or governmental agency or body, except that which may be required under
      Applicable Securities Laws or by the Exchange;

     

    (2)           do
      not and will not result in the violation of any Laws applicable to the Buyer;
      and

     

    (3)           will
      not result in the breach of, or be in conflict with, or constitute a default
      under, or create a state of facts which, after notice or lapse of time, or
      both,
      would constitute a default, violation of, or conflict with or allow any other
      Person to exercise any rights under, any term or provision of the constituting
      documents, by-laws or resolutions of the Buyer or any material mortgage, note,
      indenture, contract or agreement (written or oral), instrument, lease or other
      document to which the Buyer is a party, or any judgment, decree or order or
      any
      term or provision thereof which is binding on the Buyer, except where such
      breach, conflict or default would not have a Material Adverse
      Effect.

     

    (g)             No
      order ceasing or suspending trading in securities of the Buyer or prohibiting
      the sale of securities by the Buyer has been issued and the Buyer has not been
      served with or otherwise received notice of or become aware of any proceedings
      for this purpose having been instituted, or being pending, contemplated or
      threatened.

     

    ARTICLE
      IX

    COVENANTS
      AND AGREEMENTS

     

    9.1           Covenants
      and Agreements of Seller.   Seller covenants and agrees with
      Buyer as follows:

     

    (a)             Operations
      Prior to Closing.

     

    (1)           Except
      as consented to in writing by Buyer or provided for in this Agreement, from
      the
      date of execution hereof to the Closing and with respect to any Assets not
      transferred at Closing pursuant to Section 2.3, until such Assets are
      transferred: (A) Seller will use its reasonable efforts to operate and maintain
      the Assets in a good and workmanlike manner consistent with past practices
      and
      in accordance with applicable Laws; (B) Seller will pay or cause to be paid
      its
      proportionate shares of all costs and expenses incurred in connection with
      such
      operations or necessary to maintain title to such Assets in good standing;
      (C)
      Seller will comply with all material covenants and conditions contained in
      the
      Material Agreements; (D) except as set forth on Exhibit G (Capital Projects),
      Seller will notify Buyer of ongoing activities and major capital expenditures
      in
      excess of US$10,000 per activity conducted on the Assets
      and shall consult with Buyer regarding all such matters and operations involving
      

     

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

       

      such
        expenditures; and (E) Seller will maintain customary insurance policy coverages
        and amounts of coverage with respect to the Assets and the operation of the
        Assets.

    

     

    (2)           Between
      the Effective Date and the Closing, Seller will use all reasonable efforts
      to
      finalize and execute the Unit Agreement and have the Unit Agreement filed with
      and approved by the Bureau of Land Management and all other regulatory bodies
      necessary for the Unit Agreement to become effective and shall thereafter comply
      with the terms thereof.

     

    (3)           Between
      the Effective Date and the Closing, the Seller will use its best efforts to
      obtain all necessary Authorizations to permit it to drill the Beartooth Federal
      43-33 well (the “Unit Well”) and will commence drilling of the Unit Well on or
      before October 31, 2007 and thereafter continually and diligently drill as
      required by the Unit Agreement.  For purposes of adjustment of the
      Initial Purchase Price pursuant to Section 3.2(c)(3), the Seller’s expenditures
      with respect to the Unit Well shall be deemed to have been incurred by the
      Seller on behalf of the Buyer.

     

    (b)             Restriction
      on Operations.  Subject to Section 9.1(a), and except for the
      Capital Projects set forth on Exhibit G, unless Seller obtains the prior written
      consent of Buyer to act otherwise, Seller will not (i) approve any operations
      on
      the Assets anticipated to cost the owner of the Assets more than US$10,000
      per
      activity, (ii) convey, dispose of or grant an Encumbrance over all or any part
      of the Assets (other than replacement of worn out or obsolete equipment in
      the
      ordinary course of business or sale of oil, gas, and other liquid products
      produced from the Assets in the regular course of business) or enter into any
      new farmout, farmin or other similar contract affecting the Assets, (iii) enter
      into any new contracts or amendments of existing contracts; or (iv) resign
      as
      operator or issue any notice of its intention to resign as operator of any
      of
      the Leases.

     

    (c)             Corporate
      Status.  Seller shall maintain its corporate status from the date
      hereof until the Final Settlement Date to assure that it will not be under
      any
      material corporate, legal or contractual restriction that would prohibit or
      delay the timely consummation of the Transaction.

     

    (d)             Notices
      of Claims.  Seller shall promptly notify Buyer, if, between the
      date of execution of this Agreement and the Closing Date and with respect to
      any
      Assets not transferred at Closing pursuant to Section 2.3, until such Assets
      are
      transferred, Seller receives written notice of any claim, suit, action or other
      proceeding or written notice of any material default under any Material
      Agreement.

     

    (e)             Compliance
      with Laws.  During the period from the date of execution of this
      Agreement to the Closing Date, and with respect to any Assets not transferred
      at
      Closing pursuant to Section 2.3, until such Assets are transferred Seller shall
      use good faith efforts to comply in all material respects with all applicable
      Laws relating to the Assets.

     

    (f)             Transfer
      of Field Operations.  Seller shall effect a transfer of all field
      operations to Buyer within sixty (60) days after Closing, and shall perform
      such
      other tasks as are necessary to complete the transfer of the Assets to Buyer
      following the Closing, including the filing of notices of change of operator
      with appropriate third parties and governmental agencies, giving notices of
      change of operator where required by agreement or otherwise, and the preparation
      and delivery of any required letters in lieu where required by agreement or
      otherwise.

     

     

    
      
        
        

      

      
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    (g)             Consents.  Commencing
      forthwith after the date hereof Seller shall use reasonable commercial efforts
      to obtain at or prior to the Closing Date such Authorizations which may be
      required in connection with the completion of the transactions herein
      contemplated.

     

    (h)             Discharge
      of Permitted Encumbrances.  To the extent that any of the
      Permitted Encumbrances relate to liabilities which will not be assumed by Buyer
      pursuant hereto, Seller covenants that it will duly make payment of all amounts
      due thereunder (except to the extent that Seller may dispute its liability
      therefor) and use reasonable commercial efforts to ensure that such Permitted
      Encumbrances are discharged as and when all such amounts have been duly
      paid.

     

    (i)             Other
      Matters.  Seller hereby covenants to Buyer that it
      shall:

     

    (1)           duly,
      punctually and faithfully perform all of the obligations to be performed by
      it
      under the Agreement;

     

    (2)           promptly
      inform Buyer and its counsel of the full particulars of:

     

    (A)           any
      Material Change (actual, anticipated, contemplated, proposed or threatened)
      in
      the assets, liabilities (absolute, accrued, contingent or otherwise), business,
      affairs, operations, obligations, prospects, capital, condition (financial
      or
      otherwise) of the Seller or its ownership; and

     

    (B)           the
      discovery by Seller of any Misrepresentation in any information regarding Seller
      provided to Buyer or its counsel by Seller;

     

    which
      occurs on or prior to the Closing, provided that if there may be any reasonable
      doubt as to whether a Material Change, change, occurrence or event of the nature
      referred to in this Section has occurred, the Seller shall promptly inform
      Buyer
      and its counsel of the full particulars of the occurrence giving rise to the
      uncertainty and shall consult with Buyer as to whether the occurrence is of
      such
      nature.

     

    (j)             Regulatory
      Communications.  On or prior to the Closing, the Seller shall
      promptly inform the Buyer of the full particulars of the receipt by Seller
      of
      any communication from any regulatory authority relating to the transactions
      which are the subject of this Agreement.

     

    9.2           Covenants
      and Agreements of Buyer. Buyer covenants and agrees with Seller
      that:

     

    (a)             Corporate
      Status.  Buyer shall maintain its status from the date hereof
      until the Final Settlement Date to assure that it will not be under any material
      corporate, legal or contractual restriction that would prohibit or delay the
      timely consummation of the transactions contemplated by this
      Agreement.

     

    (b)             Replacement
      Bonds and Instruments.  Buyer shall use reasonable efforts to file
      within 30 days after Closing appropriate surety instruments and bonds as
      required by applicable governmental agencies for Buyer to own and operate the
      Assets.

     

    
      
        
        

      

      
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    (c)             Transfer
      of Operations.  Following the Closing, the Buyer shall promptly
      file at its sole expense all notices and documents, and perform all other tasks
      customarily required by a buyer in order to effect a transfer of operations
      of
      those Assets  transferred at Closing, and shall take all actions
      necessary to assume operations from Seller within sixty (60) days after
      Closing.

     

    (d)             Securities
      Matters.  The Buyer hereby covenants to Seller that it
      shall:

     

    (1)           fulfill
      all legal requirements to be complied with by the Buyer to permit the issuance,
      offering and sale of the Offered Shares, including, without limitation,
      compliance with Applicable Securities Laws of the Offering Jurisdictions to
      enable the Offered Shares to be issued to Seller, without the necessity of
      filing a prospectus, registration statement or an offering memorandum under
      Applicable Securities Laws of the Offering Jurisdictions;

     

    (2)           use
      its best efforts to obtain the necessary regulatory consents from the Exchange
      and if required, the Securities Commissions to effect the transaction on the
      terms set forth herein and on such terms as are mutually acceptable to Seller
      and the Buyer;

     

    (3)           list
      and post for trading on the Exchange, the Offered Shares, subject to the resale
      restricted period of four months from the Closing Date pursuant to National
      Instrument 45-102 – Resale of Securities (“NI 45-102”) and the policies of the
      Exchange;

     

    (4)           within
      the time periods required under Applicable Securities Laws of the Offering
      Jurisdictions, file such documents as may be required under Applicable
      Securities Laws of the Offering Jurisdictions relating to the issuance of the
      Offered Shares which, without limiting the generality of the foregoing, shall
      include the filing with the Alberta Securities Commission of a Form 45-106F1
      as
      prescribed by NI 45-106;

     

    (5)           have
      taken on or prior to the Closing, all necessary steps to ensure the Offered
      Shares have been duly allotted and authorized for issue to the
      Seller;

     

    (6)           duly,
      punctually and faithfully perform all of the obligations to be performed by
      it
      under the Agreement;

     

    (7)           promptly
      inform Seller and its counsel of the full particulars of:

     

    (A)           any
      Material Change in the assets, liabilities (absolute, accrued, contingent or
      otherwise), business, affairs, operations, obligations, prospects, capital,
      condition (financial or otherwise) of the Buyer; and

     

    (B)           the
      discovery by the Buyer of any Misrepresentation in any information regarding
      the
      Buyer provided to Seller or its counsel by the Buyer;

     

    which
      occurs on or prior to the Closing, provided that if there may be any reasonable
      doubt as to whether a Material Change, change, occurrence or event of the nature
      referred to in this Section has occurred, the Buyer shall promptly inform Seller
      and its counsel of the full particulars of the occurrence giving rise to the
      uncertainty and shall consult with Seller as to whether the occurrence is of
      such nature; and

     

    
      
        
        

      

      
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    (8)           on
      or prior to the Closing, the Buyer shall promptly inform the Seller of the
      full
      particulars of the receipt by the Buyer of any communication from any regulatory
      authority relating to the transactions which are the subject of this
      Agreement;

     

    (e)             For
      a period of six months from the date of this Agreement, Buyer agrees to use
      its
      reasonable best efforts to negotiate and conclude an agreement with ECA, on
      terms satisfactory to the Buyer, in the event that Seller still holds title
      to
      the ECA Leases, to amend the terms of the ECA Leases or, thereafter, for the
      acquisition of all of the ECA Leases from ECA.

     

    9.3           Covenants
      and Agreements of the Parties.

     

    (a)             Confidentiality.  Except
      as permitted herein, for a period of two years following the Closing, the Seller
      shall maintain copied or retained Records as confidential, except disclosures
      as
      may be required by court order, applicable laws, rules and regulations or
      governmental agencies or stock exchanges.  The Seller shall inform the
      Buyer of such disclosures.  Unless prohibited by applicable law, the
      Seller shall provide the Buyer with advanced notice of any such
      disclosure.

     

    (b)             Cure
      Period for Breach.  If a Party believes the other Party has
      breached the terms of this Agreement, the Party who believes the breach has
      occurred shall give prompt written notice to the breaching Party of the nature
      of the breach, and the breaching Party shall have five business days after
      the
      effectiveness of such written notice to cure the alleged
      breach.  Notwithstanding the foregoing, this Section 9.3(b) shall not
      apply to breach of the Parties’ obligations at Closing and shall not operate to
      delay Closing.

     

    ARTICLE
      X

    TAX
      MATTERS

     

    10.1                      Apportionment
      of Tax Liability.  “Taxes”
      shall mean all ad valorem, property, production, excise, net proceeds, severance
      and all other taxes and similar obligations assessed against the Assets or
      based
      upon or measured by the ownership of the Assets or the production of
      Hydrocarbons or the receipt of proceeds there from, other than income taxes
      applicable on a gain for the sale of mineral rights or otherwise.  All
      Taxes based on or attributable to the ownership of, or based on production
      of
      Hydrocarbons shall be deemed attributable to the period for which such Taxes
      are
      assessed.  With respect to the Assets, all Taxes shall be prorated
      between Buyer and Seller as of the Effective Time for all taxable periods that
      include the Effective Time.  Accordingly, for the purpose of
      apportioning the liability for Taxes and the resulting Initial Purchase Price
      adjustment pursuant to Section 3.2 at Closing or pursuant to Section 14.1 in
      the
      Final Settlement Statement, (i) Buyer shall be responsible for all Taxes related
      to the Assets that are attributable to the period of time after the Effective
      Time and (ii) Seller shall be responsible for all Taxes related to the Assets
      that are attributable to the period of Seller’s ownership prior to the Effective
      Time.

     

    For
      the
      tax period in which the Effective Time occurs, Seller shall provide Buyer with
      copies of any tax reports or returns filed and received by Seller after Closing
      and provide Buyer with appropriate information which is necessary for Buyer
      to
      file any required tax reports and returns related to the
      Assets.  Buyer agrees to file all tax returns and reports applicable
      to the Assets that are required to be filed after the Closing, and pay all
      required Taxes payable with respect to the Assets subject to the provisions
      of
      Section 10.1.

     

    
      
        
        

      

      
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    10.2                      Sales
      Taxes.  Buyer
      shall be liable for and shall indemnify Seller for, any sales and use taxes,
      conveyance, transfer and recording fees and real estate transfer stamps or
      taxes
      that may be imposed on any transfer of the Assets pursuant to this Agreement,
      if
      applicable but not for income taxes applicable on a gain for the sale of mineral
      rights or otherwise.  Seller shall file all returns and reports and
      remit on behalf of the Buyer any sales or similar transaction Taxes that are
      required to be paid as a result of the transfer of the Assets to Buyer, provided
      Seller shall provide Buyer 30 days prior written notice before making any such
      filing.  Seller shall provide written notice and supporting detail to
      the Buyer with regard to such Taxes paid or to be paid on the Buyer’s behalf,
      and the Buyer shall reimburse the Seller for such Taxes no later than ten
      calendar days of the receipt of such written notice, unless Buyer contests
      in
      good faith that such Taxes are due and payable.

     

    10.3                      Survival.  The
      obligations set forth in this Article X shall survive Closing in accordance
      with
      Section 16.12.

     

    ARTICLE
      XI

    CONDITIONS
      PRECEDENT TO CLOSING

     

    11.1                      Seller’s
      Conditions Precedent.   The obligations of the Seller at the
      Closing are subject to the satisfaction or waiver at or prior to the Closing
      of
      the following conditions precedent:

     

    (a)             All
      representations and warranties of the Buyer contained in this Agreement are
      true
      and correct in all material respects (considering the transactions contemplated
      by the Agreement as a whole) at and as of the Closing in accordance with their
      terms as if such representations and warranties were made at and as of the
      Closing (except to the extent such representations or warranties are as of
      a
      specific time in which case as of such other time), and Buyer has performed
      and
      satisfied all covenants and agreements required by this Agreement to be
      performed and satisfied by Buyer at or prior to the Closing in all material
      respects.

     

    (b)             Seller
      shall have received at or prior to the Closing a favorable legal opinion from
      counsel to the Buyer, addressed to Seller, in form and substance acceptable
      to
      counsel to Seller, acting reasonably, to the effect that:

     

    (1)           the
      Buyer is a corporation incorporated under the CBCA, and has all requisite
      corporate capacity and power to carry on business and the Assignee is a
      corporation incorporated under the Nevada Corporations Act, and has all
      requisite corporate capacity and power to carry on business and is qualified
      to
      do business in each jurisdiction where it is required to do so;

     

    (2)           the
      execution and delivery of the Agreement and the assignment of the Agreement
      to
      the Assignee pursuant to section 16.4 hereof and the performance by the Buyer
      and the Assignee, of the transactions contemplated therein (including the
      issuance and sale of the Offered Shares), do not result in a breach of and
      do
      not conflict with or constitute a default under the articles of incorporation
      of
      the Buyer or Assignee, the by-laws of the Buyer or Assignee, or any resolution
      of the Buyer’s or Assignee directors (or any committee thereof) or
      shareholders;

     

    (3)           the
      Buyer has all requisite capacity and power to execute and deliver the Agreement
      and to perform all its obligations thereunder. All necessary corporate

     

     

    
      
        
        

      

      
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      action
        has been taken by the Buyer to authorize the execution and delivery of the
        Agreement and the performance by the Buyer of its obligations thereunder.
        The
        Agreement has been duly authorized, executed and delivered by the Buyer and
        constitutes valid and legally binding obligations of the Buyer and, when
        assigned, the Assignee enforceable against it and, upon assignment, the Assignee
        in accordance with its terms, except as enforcement thereof may be limited
        by
        bankruptcy, insolvency, liquidation, reorganization, moratorium or similar
        laws
        affecting the rights of creditors generally and except as limited by the
        application of equitable principles when equitable remedies are sought, and
        the
        qualification that the enforceability of rights of indemnity and contribution
        may be limited by applicable law;

    

     

    (4)           all
      necessary corporate action has been taken by the Buyer to authorize and validly
      issue the Offered Shares;

     

    (5)           the
      issuance by the Buyer of the Offered Shares at the Closing will be exempt from
      the prospectus requirements of Applicable Securities Laws of the Offering
      Jurisdictions, and no documents are required to be filed, proceedings taken
      or
      approvals, permits, consents or authorizations of regulatory authorities
      obtained by the Buyer under Applicable Securities Laws of the Offering
      Jurisdictions in connection therewith except that the Buyer is required to
      file,
      within ten days after the date of distribution, a report with the Alberta
      Securities Commission on Form 45-106F1, together with the fees prescribed by
      the
      Applicable Securities Laws of Alberta;

     

    (6)           the
      first trade of the Offered Shares, by the respective holders thereof will be
      exempt from the prospectus requirements of Applicable Securities Laws of the
      Reporting Jurisdictions provided that:

     

    (A)           the
      Buyer is and has been a reporting issuer for at least four months immediately
      preceding the first trade in any jurisdiction of Canada;

     

    (B)           at
      least four months have elapsed from the Closing Date;

     

    (C)           any
      ownership statement issued with respect to or any certificates representing
      the
      Offering Shares, issued on or within four months after the Closing Date were
      issued with a legend stating the prescribed restricted period in accordance
      with
      Section 2.5 of NI 45-102;

     

    (D)           such
      trade is not a control distribution as defined in NI 45-102;

     

    (E)           no
      unusual effort is made to prepare the market or to create a demand for the
      securities that are the subject of the trade;

     

    (F)           no
      extraordinary commission or consideration is paid to a Person or company in
      respect of such trade; and

     

    (G)           if
      the selling security holder is an insider or officer of the Buyer, the selling
      security holder has no reasonable grounds to believe that the Buyer is in
      default of any securities legislation.

     

    (7)           at
      the Closing, the Offered Shares will be validly issued as fully paid and
      non-assessable Common Shares in the capital of the Buyer; and

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

    (8)           such
      other matters as Seller may reasonably request in connection with the
      transaction;

     

    and
      in
      giving the opinions contemplated above, counsel to the Buyer shall be entitled,
      as to matters of fact, to rely upon certificates of fact from the Buyer, signed
      by the President or other officer of the Buyer in position to have knowledge
      of
      such facts and their accuracy, certificates of such public officials and other
      Persons as are necessary or desirable, and certificates of the Transfer Agent
      as
      to the number of Common Shares issued and outstanding;

     

    (c)             Seller
      shall have received a certificate of the Buyer dated as of the Closing Date,
      signed by the President, Chief Executive Officer or Chief Financial Officer
      of
      the Buyer, or by such other officers as may be acceptable to Seller, certifying,
      to the best of the knowledge, information and belief of such officers after
      due
      inquiry, on behalf of the Buyer and not in their personal capacities, as to
      certain matters reasonably requested by Seller with respect to the Buyer
      including certification that:

     

    (1)           no
      order halting, ceasing or suspending trading in securities of the Buyer or
      prohibiting the transaction or the issuance or distribution of any securities
      of
      the Buyer has been issued and no proceedings for such purpose are pending or,
      to
      the knowledge of the Buyer, threatened; and

     

    (2)           all
      of the representations and warranties of the Buyer contained in the Agreement,
      are true and correct and all covenants, terms and conditions relating to the
      Buyer contained herein, and required to be performed and complied with by the
      Buyer on or as or the Closing have been performed and complied with by the
      Buyer;

     

    (d)             as
      of the Closing, all covenants, agreements and obligations of the Buyer required
      to be performed or complied with on or before the Closing shall have been so
      performed or complied with and all conditions required to be complied with
      by
      the Buyer shall have been complied with;

     

    (e)             the
      Buyer shall, as of the Closing, be a reporting issuer not in default under
      Applicable Securities Laws of the Reporting Jurisdictions; and

     

    (f)             the
      Buyer shall have provided Seller with all agreements and related documents
      evidencing the assignment of Buyer’s contractual rights under this Agreement to
      the Assignee.

     

    11.2                      Buyer’s
      Conditions Precedent.  The obligations of Buyer at the Closing are
      subject to the satisfaction or waiver at or prior to the Closing of the
      following conditions precedent:

     

    (a)             Subject
      to Section 11.2(h), all representations and warranties of Seller contained
      in
      this Agreement are true and correct in all material respects (considering the
      transactions contemplated by the Agreement as a whole) at and as of the Closing
      in accordance with their terms as if such representations and warranties were
      made at and as of the Closing (except to the extent such representations or
      warranties are as of a specific time in which case as of such other time),
      and
      Seller has performed and satisfied all covenants and agreements required by
      this
      Agreement to be performed and satisfied by Seller at or prior to the Closing
      in
      all material respects.

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

    (b)             The
      board of directors of the Buyer shall have approved the terms and conditions
      of
      this Agreement.

     

    (c)             The
      Buyer shall have completed its technical and financial due diligence, including
      Buyer’s receipt of a third party reserve report by the Buyer’s
      auditor.

     

    (d)             The
      Buyer shall have received conditional approval of the transactions contemplated
      by this Agreement from the Exchange on or prior to the Closing
      Date.

     

    (e)             Buyer
      shall have received at or prior to the Closing Date a favorable legal opinion
      from counsel to the Seller, addressed to Buyer, in form and substance acceptable
      to counsel to Buyer, acting reasonably, to the effect that:

     

    (1)           the
      Seller is a corporation incorporated under the laws of the State of Nevada,
      and
      has all requisite corporate capacity and power to carry on
      business;

     

    (2)           the
      execution and delivery of the Agreement and the performance by the Seller,
      of
      the transactions contemplated therein, do not result in a breach of and do
      not
      conflict with or constitute a default under the articles of incorporation of
      the
      Seller, the by-laws of the Seller, or any resolution of the Seller’s directors
      (or any committee thereof) or shareholders;

     

    (3)           the
      Seller has all requisite capacity and power to execute and deliver the Agreement
      and to perform all its obligations thereunder. All necessary corporate action
      has been taken by the Seller to authorize the execution and delivery of the
      Agreement and the performance by the Seller of its obligations thereunder.
      The
      Agreement has been duly authorized, executed and delivered by the Seller and
      constitutes valid and legally binding obligations of the Seller enforceable
      against it in accordance with its terms, except as enforcement thereof may
      be
      limited by bankruptcy, insolvency, liquidation, reorganization, moratorium
      or
      similar laws affecting the rights of creditors generally and except as limited
      by the application of equitable principles when equitable remedies are sought,
      and the qualification that the enforceability of rights of indemnity and
      contribution may be limited by applicable law;

     

    (4)           such
      other matters as Buyer may reasonably request in connection with the
      transaction;

     

    and
      in
      giving the opinions contemplated above, counsel to the Seller shall be entitled,
      as to matters of fact, to rely upon certificates of fact from the Seller, signed
      by the President or other officer of the Seller in position to have knowledge
      of
      such facts and their accuracy, certificates of such public officials and other
      Persons as are necessary or desirable, and certificates of the Transfer Agent
      as
      to the number of Common Shares issued and outstanding;

     

    (f)             Buyer
      shall have received an opinion or opinions from Seller’s Montana counsel with
      respect to title to the Lands and Leases located in Montana, in form and content
      satisfactory to Buyer and its counsel;

     

    (g)             Buyer
      shall have received a certificate of the Seller dated as of the Closing Date,
      signed by the President, Chief Executive Officer or Chief Financial Officer
      of
      the Seller, or by such other officers as may be acceptable to Buyer, certifying,
      to the best of the knowledge, information and beliefs of such officers after
      due
      inquiry, on behalf of the Seller and not in their personal capacities, as to
      certain matters reasonably requested by Buyer with respect to the Seller
      including certification that:

     

    
      
        
        

      

      
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    (1)           no
      order prohibiting the transaction has been issued and no proceedings for such
      purpose are pending or, to the knowledge of the Seller, threatened;
      and

     

    (2)           all
      of the representations and warranties of the Seller contained in the Agreement,
      are true and correct and all covenants, terms and conditions relating to the
      Seller contained herein, and required to be performed and complied with by
      the
      Seller on or as or the Closing have been performed and complied with by the
      Seller;

     

    (h)           Seller
      shall have provided Buyer with evidence satisfactory to Buyer in its sole
      discretion that Seller has Defensible Title to not less than 75% of the
      aggregate area of the Lands which constitute the Fiddler Creek
      Property;

     

    (i)           Seller
      shall have received approval from all regulatory bodies necessary for the Unit
      Agreement to become effective and the Unit Agreement shall be in full force
      and
      effect unamended as of Closing;

     

    (j)           Seller
      shall have obtained all necessary Authorizations to permit it to drill the
      Unit
      Well and Seller shall, prior to October 31, 2007, have spudded and commenced
      the
      drilling of and thereafter diligently pursued the drilling of the Unit Well
      required to fulfill the initial well commitment under the Unit Agreement and
      shall have completed all such actions as are necessary to maintain the Leases
      in
      full force and effect and good standing;

     

    (k)           each
      of the American/Savannah Agreements referenced in Section 7.2(dd) among MAB,
      Savannah and AOGI shall have been terminated with respect to the Fiddler Creek
      Area, and be of no further force and effect and any and all claims by Savannah
      and MAB thereunder or otherwise with respect to the Assets shall have been
      waived and Buyer shall have entered into an agreement with Savannah to be
      effective as of and subject to Closing pursuant to which Buyer has granted
      an
      overriding royalty interest to Savannah as to any future leases covering lands
      within the Fiddler Creek Area; and

     

    (l)           as
      of the Closing, all covenants, agreements and obligations of the Seller required
      to be performed or complied with on or before the Closing shall have been so
      performed or complied with and all conditions required to be complied with
      by
      the Seller shall have been complied with.

     

    ARTICLE
      XII

    RIGHT
      OF TERMINATION AND ABANDONMENT

     

    12.1                      Termination.  This
      Agreement may be terminated in accordance with the following
      provisions:

     

    (a)           by
      Seller if the conditions set forth in Section 11.1 are not satisfied through
      no
      fault of Seller, and are not waived by Seller, as of November 30,
      2007;

     

    (b)           by
      Buyer if the conditions set forth in Section 11.2 are not satisfied through
      no
      fault of Buyer, and are not waived by Buyer, as of November 30,
      2007;

     

    (c)           by
      Seller if, through no fault of Seller, the Closing does not occur on or before
      November 30, 2007; and

     

    
      
        
        

      

      
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    (d)           by
      Buyer if, through no fault of Buyer, the Closing does not occur on or before
      November 30, 2007.

     

    12.2                      Liabilities
      Upon Termination.

     

    (a)           Buyer’s
      Breach.  If Closing does not occur because Buyer wrongfully fails
      to tender performance at Closing, and Seller is ready to close and is not in
      breach of this Agreement, Seller shall have all remedies available to it at
      law
      and equity, including specific performance, and shall have the right to pursue
      all such remedies.

     

    (b)           Seller’s
      Breach.  If Closing does not occur because Seller wrongfully fails
      to tender performance at Closing, and Buyer is ready to close and is not in
      breach of this Agreement, Buyer shall have all remedies available to it at
      law
      and equity, including specific performance, and shall have the right to pursue
      all such remedies.

     

    (c)           Termination
      Pursuant to Section 12.1.  If Buyer or Seller terminates this
      Agreement pursuant to Section 12.1 in the absence of a breach by the other
      Party, neither Buyer nor Seller shall have any liability to the other Party
      for
      termination of this Agreement.

     

    (d)           Limitation
      on Damages.  Buyer and Seller expressly waive any and all rights
      to consequential, special, incidental, punitive, or exemplary damages and loss
      of profits resulting from a breach of this Agreement.

     

    ARTICLE
      XIII

    CLOSING

     

    13.1                      Date
      of Closing.  Unless mutually agreed by the Seller and the Buyer,
      the closing of the transactions contemplated by this Agreement (“Closing”) shall
      be held on November 5, 2007 provided that if all of the conditions set forth
      in
      Article XI have not been satisfied or waived on or before such date then Closing
      shall be held on the date two business days following the satisfaction or waiver
      of the last of the conditions set forth in Article XI to be satisfied or waived
      other than conditions that by their terms are to be satisfied at
      Closing.  The date the Closing actually occurs is called the “Closing
      Date.”

     

    13.2                      Time
      and Place of Closing. The Closing shall be held at the offices of Seller in
      Denver, Colorado beginning at 9:00 a.m. Mountain Time, or at such other time
      and
      place as Buyer and Seller may agree in writing.

     

    13.3                      Closing
      Obligations.  At Closing, the following events shall occur, each
      being a condition precedent to the others and each being deemed to have occurred
      simultaneously with the others:

     

    (a)           Seller
      shall execute, acknowledge and deliver to Buyer, one or more Assignment, Bill
      of
      Sale and Conveyances in the form attached as Exhibit F, and one or more
      Assignment of Oil and Gas Leases in the form attached as Exhibit F-1, whichever
      is applicable, for all Assets to be conveyed to Buyer at the Closing pursuant
      to
      this Agreement, and any applicable governmental assignment forms, conveying
      such
      Assets to Buyer as of the Effective Time.

     

    (b)           Seller
      and Buyer shall agree upon the Preliminary Settlement Statement under Section
      3.2(a).

     

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    

    (c)           Buyer
      shall deliver the Closing Amount to the account at the Bank designated by Seller
      under Section 3.2(a), by wire transfer in immediately available funds, or by
      such other method as agreed to by the Parties.

     

    (d)           Buyer
      shall provide Seller with certificates representing the Offered Shares (other
      than the Holdback Shares and Environmental Holdback Shares) duly registered
      in
      the name of the Seller.

     

    (e)           Buyer
      shall provide Seller documents evidencing that Buyer, or its assignee pursuant
      to Section 16.4 is qualified to own the Assets.

     

    (f)           Seller
      shall deliver an executed statement as described in Treasury Regulation Section
      1.1445-2(b)(2) certifying that Seller is not a foreign person within the meaning
      of the Internal Revenue Code.

     

    (g)           Seller
      and Buyer shall take such other actions and deliver such other documents as
      are
      contemplated by this Agreement.

     

    ARTICLE
      XIV

    POST-CLOSING
      OBLIGATIONS

     

    14.1                      Post-Closing
      Adjustments.

     

    (a)           Final
      Settlement Statement.  No later than thirty (30) calendar days
      after Closing, Seller will prepare and deliver to Buyer, in accordance with
      customary industry accounting practices, the final settlement statement (the
      “Final Settlement Statement”) setting forth (i) each adjustment or payment that
      was not finally determined as of the Closing, (ii) the calculation of such
      adjustment and, (iii) the final  Initial Purchase Price (the “Final
      Initial Purchase Price”).  No later than ten calendar days after
      receipt of Seller’s proposed Final Settlement Statement, Buyer shall deliver to
      Seller a written report containing any changes that Buyer proposes to make
      to
      the Final Settlement Statement.  Buyer’s failure to deliver to Seller
      a written report detailing proposed changes to the Final Settlement Statement
      by
      that date shall be deemed an acceptance by Buyer of the Final Settlement
      Statement as submitted by Seller.  The Parties shall agree with
      respect to the changes proposed by Buyer, if any, no later than twenty calendar
      days after the Buyer’s receipt of Seller’s proposed Final Settlement
      Statement.  The date upon which such agreement is reached or upon
      which the Final Purchase Price is established shall be herein called the “Final
      Settlement Date.” If the Final Initial Purchase Price is more than the Closing
      Amount, Buyer shall pay Seller the amount of such difference.  If the
      Final Initial Purchase Price is less than the Closing Amount, Seller shall
      pay
      to Buyer the amount of such difference.  Any payment by a Party shall
      be made by wire transfer of immediately available funds within five calendar
      days of the Final Settlement Date.  Any adjustments requiring
      additional payment by either Buyer or Seller shall also be made in the same
      manner.

     

    14.2                      Records.  Seller
      agrees to make the Records available for pick up by Buyer as soon as is
      reasonably practical following the Closing but in no event more than ten
      business days after the Closing.  Seller shall have the right to
      review the Records during standard business hours upon reasonable notice for
      so
      long as Buyer retains the Records.  If and to the extent certain
      portions of the Records are subject to unaffiliated third party contractual
      restrictions on disclosure or transfer, Seller agrees to use reasonable efforts
      to obtain the waiver 

     

    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

       

      of
        such
        contractual restrictions; provided, however, that Seller shall not be required
        to expend any money in connection with obtaining such
        waivers.

    

     

    14.3                      Proceeds
      and Invoices For Property Expenses Received After the Final Settlement
      Date.    Proceeds attributable to the Assets received by
      a Party, or invoices for Property Expenses, or invoices paid by one Party for
      or
      on behalf of the other Party which were not already included as an Initial
      Purchase Price adjustment, shall be settled as follows:

     

    (a)           Property
      Expenses.  Invoices for Property Expenses received by Buyer which
      relate to operations on the Assets prior to the Effective Time shall be
      forwarded to Seller by Buyer , or if already paid by Buyer, invoiced by Buyer
      to
      Seller and Seller agrees to pay all such invoices as they become
      due.  Invoices for Property Expenses received by Seller which relate
      to operations on the Assets after the Effective Time shall be immediately
      forwarded to Buyer by Seller, or if already paid by Seller, invoiced by Seller
      to Buyer.

     

    (b)           Duration.  The
      provisions of this Section 14.3 shall apply until the first anniversary of
      the
      Closing, after which time, Buyer agrees to release Seller from all obligations
      and liabilities for Property Expenses related to the Assets attributable to
      the
      period of time both before and after the Effective Time.

     

       
                     14.4       
            
Further Assurances.  From time to time after Closing, Seller and
      Buyer shall each execute, acknowledge and deliver to the other such further
      instruments and take such other action as mat be reasonably requested in order
      to accomplish more effectively the purposes of the transactions contemplated
      by
      the Agreement.

     

    14.5                      Survival.  The
      obligations of the Parties set forth in this Article XIV shall survive the
      Closing in accordance with Section 16.12.

     

    ARTICLE
      XV

    ASSUMPTION
      AND RETENTION OF OBLIGATIONS AND INDEMNIFICATION

     

    15.1                      Buyer’s
      Assumption of Liabilities and Obligations. Upon Closing and subject to the
      provisions of Sections 2.3, 6.3, 14.3 and 15.3, and except for Retained
      Liabilities, Buyer agrees to assume and pay, perform, fulfill and discharge
      all
      claims, costs, expenses, liabilities and obligations accruing or relating to
      (a)
      the Assets, (b) the Material Agreements, and (c) the ownership, development,
      exploration, operation or maintenance of the Assets or the production,
      transportation and marketing of Hydrocarbons from the Assets relating to periods
      after the Effective Time, including, without limitation, the payment of Property
      Expenses, the payment of Taxes, royalties and overriding royalties, and
      irrespective of whether the following obligations arose prior to or after the
      Effective Time: the obligation to plug and abandon all wells located on the
      Lands and reclaim all Well sites located on the Lands; and (d) any other
      obligation or liability assumed by the Buyer pursuant to the provisions of
      this
      Agreement (collectively, the liabilities referred to in this Section 15.1 are
      referred to as the “Assumed Liabilities”).

     

    15.2                      Seller’s
      Retention of Liabilities and Obligations.  Notwithstanding Section
      15.1 upon Closing and subject to the provisions of Sections 2.3, 6.3, 14.3
      and
      15.3, Seller retains (a) all liabilities for Taxes relating to the Assets which
      accrued prior to the Effective Time and which remain unpaid at Closing; (b)
      all
      liabilities for any damages, penalties, fines or other claims whatsoever arising
      from any legal proceeding relating to the operations of the Assets prior to
      the
      Effective Time (the “Retained Litigation Liabilities”); and (c) all claims,
      costs, expenses, liabilities and obligations accruing or relating to any other
      obligation or liability assumed by the Seller 

     

     

    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

       

      pursuant
        to the provisions of this Agreement (collectively, the liabilities referred
        to
        in this Section 15.2, are referred to as the “Retained
        Liabilities”).

    

     

    15.3                      Indemnification.  After
      the Closing, Buyer and Seller shall indemnify each other as
      follows:

     

    (a)           Seller’s
      Indemnification of Buyer.  The Seller shall defend, indemnify,
      save and hold harmless Buyer, its officers, directors, employees and agents,
      from and against all Losses which arise from or in connection with: (i) the
      Retained Liabilities; (ii) any matter for which Seller has agreed to indemnify
      Buyer under this Agreement; and (iii) any breach of representations, warranties,
      covenants, or agreements by Seller under this Agreement.   The
      Seller’s indemnification of the Buyer herein expressly excludes any Losses,
      matters or claims arising under Articles V and VI of this Agreement; except
      to
      the extent such Losses are covered by clause (ii) or (iii) of the preceding
      sentence.

     

    (b)           Buyer’s
      Indemnification of Seller.  Buyer shall defend, indemnify, save
      and hold harmless Seller, its officers, directors, employees and agents, from
      and against all Losses which arise from or in connection with (i) the Assumed
      Liabilities, (ii) any matter for which Buyer has agreed to indemnify Seller
      under this Agreement, (iii) any breach of representations, warranties,
      covenants, or agreements by Buyer under this Agreement; and (iv) all claims,
      costs, expenses, liabilities and obligations accruing or relating to the
      ownership, development, exploration, operation or maintenance of the Assets
      or
      the production, transportation and marketing of Hydrocarbons from the Assets
      relating to periods before and after the Effective
      Time.  Notwithstanding the foregoing, Buyer provides no
      indemnification with respect to any matter listed in Section 15.3(a)(i), (ii)
      or
      (iii).

     

    (c)           Release.  Buyer
      shall be deemed to have released the Seller at the Closing from any Losses
      for
      which Buyer has agreed to indemnify Seller hereunder, and the Seller shall
      be
      deemed to have released Buyer at the Closing from any Losses for which Seller
      has agreed to indemnify Buyer hereunder.

     

    (d)           Survival.  The
      obligations set forth in this Section 15.3 shall survive Closing in accordance
      with Section 16.12.

     

    15.4                      Procedure.  The
      indemnifications contained in Section 15.3 shall be implemented as
      follows:

     

    (a)           Coverage.  Such
      indemnity shall extend to all Losses suffered or incurred by the indemnified
      Party.

     

    (b)           Time.  As
      a condition precedent to each Party’s obligation to indemnify the other Party,
      the Party seeking indemnification must deliver a written Claim Notice to the
      indemnifying Party on or before the third anniversary of the Closing Date,
      provided, however that there shall be no time limitation with respect to: (i)
      the Retained Litigation Liabilities, (ii) Taxes; and (iii) any provision in
      this
      Agreement whereby a Party has agreed to indemnify the other Party and such
      provision, either expressly or by its context, would require a Claim Notice
      to
      be delivered at a date later than the time limitation set forth in this
      Section.

     

    (c)           Claim
      Notice.  The Party seeking indemnification under the terms of this
      Agreement (“Indemnified Party”) shall submit a written claim notice (the “Claim
      Notice”) to the other Party (“Indemnifying Party”) which, to be effective, must
      state:  (i) the amount of each 

     

    
      
        
        

      

      
        42

        
          

        

      

      
        
        

      

       

      payment
        claimed by an Indemnified Party to be owing, (ii) the basis for such claim,
        with
        supporting documentation, and (iii) a list identifying, to the extent reasonably
        possible, each separate item of Loss for which payment is so
        claimed.  The amount claimed shall be paid by the Indemnifying Party
        to the extent required herein within thirty calendar days after receipt of
        the
        Claim Notice, or after the amount of such payment has been finally established,
        whichever last occurs.

    

     

    (d)           Information.  Within
      thirty calendar days after the Indemnified Party receives notice of a claim
      or
      legal action that may result in a Loss for which indemnification may be sought
      under this Agreement (a “Claim”), the Indemnified Party shall give a Claim
      Notice to the Indemnifying Party provided that the failure to deliver a Claim
      Notice within such time period shall not affect the Indemnified Party’s right to
      indemnification hereunder unless the Indemnifying Party can show that the
      defense of the Claim which is the subject of such Claim Notice was materially
      prejudiced by the Indemnified Party’s failure to provide timely
      notice.  If the Indemnifying Party or its counsel so requests, the
      Indemnified Party shall furnish the Indemnifying Party with copies of all
      pleadings and other information with respect to such Claim.  At the
      election of the Indemnifying Party made within sixty calendar days after receipt
      of such notice, the Indemnified Party shall permit the Indemnifying Party to
      assume control of such Claim (to the extent only that such Claim, legal action
      or other matter relates to a Loss for which the Indemnifying Party is liable),
      including the determination of all appropriate actions, the negotiation of
      settlements on behalf of the Indemnified Party and the conduct of litigation
      through attorneys of the Indemnifying Party’s choice.  No settlement
      of a Claim can result in any liability or cost to the Indemnified Party for
      which it is entitled to be indemnified hereunder without its
      consent.  If the Indemnifying Party elects to assume control, (i) any
      expense incurred by the Indemnified Party thereafter for investigation or
      defense of the matter shall be borne by the Indemnified
      Party  provided that in the event that (A) the Indemnifying Party does
      not diligently pursue defense of the Claim or (B) a conflict of interest exists
      between the Indemnifying Party and the Indemnified Party with respect to such
      Claim or one or more defenses are available to the Indemnified Party which
      are
      not available to the Indemnifying Party, the Indemnifying Party shall pay the
      costs and expenses of counsel to the Indemnified Party, and (ii) the Indemnified
      Party shall give all reasonable information and assistance, other than
      pecuniary, that the Indemnifying Party shall deem necessary to the proper
      defense of such Claim, legal action, or other matter.  In the absence
      of such an election, the Indemnified Party will use its best efforts to defend,
      at the Indemnifying Party’s expense, any claim, legal action or other matter to
      which such other Party’s indemnification under this Section 15.4 applies until
      the Indemnifying Party assumes such defense, and, if the Indemnifying Party
      fails to assume such defense within the time period provided above, settle
      the
      same in the Indemnified Party’s reasonable discretion at the Indemnifying
      Party’s expense.  If such a Claim requires immediate action, the
      Parties agree to cooperate in good faith to take appropriate action so as not
      to
      jeopardize defense of such Claim or either Party’s position with respect to such
      Claim.

     

    15.5                      No
      Insurance; Subrogation.  The indemnifications provided in this
      Agreement shall not be construed as a form of insurance.  Buyer and
      Seller hereby waive for themselves, their successors or assigns, including,
      without limitation, any insurers, any rights to subrogation for Losses for
      which
      each of them is respectively liable or against which each respectively
      indemnifies the other, and, if required by applicable policies, Buyer and Seller
      shall obtain waiver of such subrogation from their respective
      insurers.

     

    
      
        
        

      

      
        43

        
          

        

      

      
        
        

      

    

    15.6                      Reservation
      as to Non-Parties.  Nothing herein is intended to limit or
      otherwise waive any recourse Buyer or Seller may have against any non-party
      for
      any obligations or liabilities that may be incurred with respect to the
      Assets.

     

     

    ARTICLE
      XVI

    MISCELLANEOUS

     

    16.1                      Expenses.  Except
      as otherwise specifically provided, all fees, costs and expenses incurred by
      Buyer or Seller in negotiating this Agreement or in consummating the
      transactions consummated by this Agreement shall be paid by the Party incurring
      the same, including without limitation, engineering, land, title, legal and
      accounting fees, costs and expenses.

     

    16.2                      Notices.  All
      notices and communications required or permitted under this Agreement shall
      be
      in writing and addressed as set forth below.  Any communication or
      delivery hereunder shall be deemed to have been duly made and the receiving
      Party charged with notice (i) if personally delivered, when received, (ii)
      if
      sent by telecopy or facsimile transmission, on the first business day on or
      after which such facsimile is successfully transmitted and received, (iii)
      if
      mailed, five business days after mailing, certified mail, return receipt
      requested, or (iv) if sent by overnight courier, the first business day on
      or
      after such notice is sent by overnight courier.  All notices shall be
      addressed as follows:

     

    If
      to
      Seller:

     

    PetroHunter
      Energy Corporation

    1875
      Lawrence Street, Suite 1400

    Denver,
      Colorado 80203

    Attention:  David
      E. Brody, Vice President and General Counsel

    Telephone
      303-893-1800

    Facsimile
      303-572-8972

     

    If
      to
      Buyer:

     

    Pearl
      Exploration and Production Ltd.

    2500
      Petro-Canada East Tower

    111
      - 5th
      Avenue S.W.

    Calgary,
      Alberta T2P 3Y6

    Attention:  Keith
      Hill, President and Chief Executive Officer

    Telephone
      604-689-7842

    Facsimile
      604-689-4250

     

    With
      a
      copy to:

     

    McCullough
      O’Connor Irwin LLP

    1100-888
      Dunsmuir Street

    Vancouver,
      British Columbia  V6C 3K4

    Attention:  Kevin
      Hisko

    Telephone
      604-687-7077

    Facsimile
      604-687-7099

     

    
      
        
        

      

      
        44

        
          

        

      

      
        
        

      

    

    Any
      Party
      may, by written notice so delivered to the other Party, change the address
      or
      individual to which delivery shall thereafter be made.

     

    16.3                      Amendments.  This
      Agreement may not be amended nor any rights hereunder waived except by an
      instrument in writing signed by the Party to be charged with such amendment
      or
      waiver and delivered by such Party to the Party claiming the benefit of such
      amendment or waiver.

     

    16.4                      Assignment.  Prior
      to Closing, a Party shall not assign all or any portion of its rights or
      delegate all or any portion of its duties hereunder provided that Buyer may
      transfer all or any part of its rights hereunder to a wholly owned direct or
      indirect subsidiary so long as it continues to remain liable for the performance
      of its obligations hereunder.  No such assignment or obligation shall
      increase the burden on Seller or impose any duty on Seller to communicate with
      or report to any transferee, Seller may continue to look to Buyer for all
      purposes under this Agreement. 

     

    16.5                      Announcements.  Seller
      and Buyer shall consult with each other with regard to all press releases and
      other announcements issued after the date of execution of this Agreement
      concerning this Agreement or the transactions contemplated hereunder and, except
      as may be required by applicable laws or the applicable rules and regulations
      of
      any governmental agency, financing entity or stock exchange, Buyer or Seller
      shall not issue any such press release or other publicity without the prior
      written consent of the other Party, which consent shall not be unreasonably
      withheld.

     

    16.6                      Confidentiality
      Agreement.  The Confidentiality Agreement dated June 8,
      2007 between the Parties controls all matters regarding confidentiality of
      data
      and information, whether written or oral, obtained from Seller in the Parties’
course of dealing prior to the Closing.  In the event a Closing does
      not occur the Parties agree that the Confidentiality Agreement shall continue
      to
      be in full force and effect pursuant to the terms and conditions therein.

     

    16.7                      Confidentiality.  Except
      as permitted herein, for a period of two years following the Closing, the
      Parties shall maintain the terms and conditions of this Agreement as
      confidential, except disclosures that as may be required by court order,
      applicable laws, rules and regulations of governmental agencies or stock
      exchanges.  Each Party shall inform the other of such
      disclosures.  Unless prohibited by applicable law, the disclosing
      Party shall provide the other Party with advanced notice of any such
      disclosure.

     

    16.8                      Counterparts.  This
      Agreement may be executed by Buyer and Seller in any number of counterparts,
      each of which shall be deemed an original instrument, but all of which together
      shall constitute but one and the same instrument.  Facsimile
      signatures shall be considered binding.

     

    16.9                      Governing
      Law.  This Agreement and the transactions contemplated thereunder,
      and any arbitration or dispute resolution conducted pursuant hereto shall be
      construed in accordance with, and governed by, the laws of the State of Colorado
      without reference to the conflict of laws principles thereof.  The
      Parties agree that venue for any dispute pursuant to this Agreement, or the
      transactions contemplated thereunder, shall be in state or federal court in
      Denver, Colorado, and the Parties agree to be subject to the jurisdiction of
      such venue and court.

     

    
      
        
        

      

      
        45

        
          

        

      

      
        
        

      

    

    16.10                      Entire
      Agreement.  This Agreement constitutes the entire understanding
      among the Parties with respect to the subject matter hereof, superseding all
      negotiations, prior discussions and prior agreements and understandings relating
      to such subject matter.

     

    16.11                      Binding
      Effect.  This Agreement shall be binding upon, and shall inure to
      the benefit of the Parties hereto and their respective permitted successors
      and
      assigns.

     

    16.12                      Survival.  The
      representations and warranties set forth in this Agreement shall survive: (i)
      the Closing; and (ii) the delivery and acceptance of the Assignment, Bill of
      Sale and Conveyance, subject to the terms and conditions of this Agreement,
      for
      a period of three years following Closing.  The other provisions of
      this Agreement shall survive the Closing if they are expressly stated to survive
      the Closing or are required by their context to survive the
      Closing.

     

    16.13                      No
      Third-Party Beneficiaries.  This Agreement is intended to benefit
      only the Parties hereto and their respective permitted successors and
      assigns.

     

    [Signature
      Page Follows]

     

    
      
        
        

        
        

      

      
        46

        
          

        

      

      
        
        

      

    

    The
      Parties have executed this Purchase and Sale Agreement, effective as of the
      Effective Date.

     

    

    SELLER

    

    PETROHUNTER
      HEAVY OIL LTD.

    

    

    By:       /s/
      David E.
      Brody             
 

    

    Title:   
      President                

    

    

    BUYER

    

    PEARL
      EXPLORATION AND PRODUCTION LTD.

    

    

    By:     /s/
      Keith
      Hill                             

       
             Keith Hill, President and
      CEO

     

     

     

     

     

    Purchase
      and Sale Agreement Execution PageExhibit
      10.1

     

    
      LEHMAN
        BROTHERS 

    

     

    Transaction

     

    
      
        
          
            	
                    Date:

                  	 	
                    November
                      6, 2007

                  
	 	 	 
	
                    To:

                  	 	
                    CVS
                      Caremark Corporation

                  
	 	 	
                    [                           ]

                  
	 	 	
                    Attention:  [  
                       ]

                  
	 	 	 	 
	
                    From:

                  	 	
                    Lehman
                      Brothers, Inc acting as Agent

                  
	 	 	
                    Lehman
                      Brothers OTC Derivatives Inc., acting as Principal

                  
	 	 	
                    Andrew
                      Yare - Transaction Management Group

                  
	 	 	
                    Facsimile:

                  	
                    646-885-9546
(United
                      States
                      of America)

                  
	 	 	
                    Telephone:

                  	
                    212-526-9986

                  
	 	 	 
	
                    Ref.
                      Numbers:

                  	 	
                    Global
                      Deal ID:  3467542

                  
	 	 	 
	 	 	 

          

        

      

    

     

    Dear
      Sir or Madam:

     

    The
      purpose of this communication (this “Confirmation”) is to
      confirm the terms and conditions of the transaction (the
“Transaction”) entered into between Lehman Brothers OTC
      Derivatives Inc. (“Party A”) and CVS Caremark Corporation
      (“Party B”) on the Trade Date specified below.  This
      Confirmation constitutes a “Confirmation” as referred to in the Agreement
      specified below. This Confirmation is sent on behalf both Party A and Lehman
      Brothers Inc. (“LBI”). Lehman Brothers OTC Derivatives
      Inc. is not a member of the Securities Investor Protection
      Corporation.

    

    This
      Confirmation evidences a complete and binding agreement between Party A and
      Party B as to the terms of the Transaction to which this Confirmation
      relates.  This Confirmation shall supplement, form a part of, and be
      subject to an agreement in the form of the 2002 ISDA Master Agreement (the
      “Agreement”) as if we had executed an agreement in such form
      (but without any Schedule) on the Trade Date of the Transaction.  In
      the event of any inconsistency between the provisions of that agreement, or
      the
      Agreement and this Confirmation, this Confirmation will prevail for the purpose
      of the Transaction.

     

    The
      definitions and provisions contained in the 2002 ISDA Equity Derivatives
      Definitions (the “Equity Definitions”) and the 2000 ISDA
      Definitions (the “Swap Definitions”, and together with the
      Equity Definitions, the “Definitions”), in each case as
      published by the International Swaps and Derivatives Association, Inc.
      (“ISDA”) are incorporated into this
      Confirmation.  References herein to “Transaction” shall be deemed
      references to “Swap Transaction” for purposes of the Swap
      Definitions.  In the event of any inconsistency between the Equity
      Definitions and the Swap Definitions, the Equity Definitions will
      govern.  In the event of any inconsistency between either set of
      Definitions and this Confirmation, this Confirmation will govern. The
      Transaction shall constitute a Share Forward Transaction for the purposes of
      the
      Equity Definitions and shall be the only Transaction under the
      Agreement.

     

    The
      terms of the Transaction to which
      this Confirmation relates are as follows:

     

    
      	
              Agent:

            	
              LBI
                is acting as agent on behalf
                of Party A and Party B for the Transaction.  LBI has no
                obligations, by guarantee, endorsement or otherwise, with respect
                to the
                performance of the Transaction by either party.

            
	 	 
	
              Trade
                Date:

            	
              November
                6,
                2007

            
	 	 
	
              Buyer:

            	
              Party
                B

            

    

     

     

    
      
        
        

      

      
        
          LEHMAN
            BROTHERS

          745
            SEVENTH AVENUE,

          NEW
            YORK
            NY 10019

        

        
          

        

      

      
        
        

      

    

    
 

    
      	
              Seller:

            	
              Party
                A

            
	 	 
	
              Shares:

            	
              Common
                stock, par value USD 0.01
                per share, of CVS Caremark Corporation (the
“Issuer”)
                Ticker Symbol:
                (“CVS”)

            
	 	 
	
              Prepayment:

            	
              Applicable

            
	 	 
	
              Prepayment
                Amount:

            	
              As
                specified in Schedule A

            
	 	 
	
              Prepayment
                Date:

            	
              One
                Exchange Business Day following the Trade Date.

            
	 	 
	
              Initial
                Hedge Period:

            	
              The
                period (the “Initial Hedge Period”) commencing on the
                Scheduled Trading Day immediately following the Trade Date and ending
                on
                the Exchange Business Day on which Party A completes the purchase
                of a
                number of Shares necessary to establish its initial hedge position
                with
                respect to the Transaction (such date, the “Hedge Period End
                Date”). On the 1st
                Scheduled
                Trading Day immediately following the Hedge Period End Date, Party
                A shall
                provide written notice (the “Confirmation Pricing
                Supplement”) to Party B in substantially the form attached hereto
                as Exhibit A, of the Hedging Price, Maximum Shares A, Maximum Shares
                B,
                Minimum Shares A, Minimum Shares B and first day of the Trading Period.
                Upon receipt of the Confirmation Pricing Supplement, Party B shall
                promptly execute and return the Confirmation Pricing Supplement to
                Party
                A; provided that Party B’s failure to so execute and return the
                Confirmation Pricing Supplement shall not affect the binding nature
                of the
                Confirmation Pricing Supplement, and the terms set forth therein,
                if
                accurately determined pursuant to the terms of this Confirmation,
                shall be
                binding on Party B to the same extent, and with the same force and
                effect,
                as if Party B had executed a written version of the Confirmation
                Pricing
                Supplement.

            
	 	 
	
              Hedging
                Price:

            	
              The
                arithmetic average of the 10b-18 VWAPs for all Scheduled Trading
                Days in
                the Initial Hedge Period.

            
	 	 
	
              Exchange:

            	
              New
                York Stock
                Exchange

            
	 	 
	
              Related
                Exchange:

            	
              All
                Exchanges

            
	 	 
	
              Transaction
                Fee:

            	
              Party
                B shall pay to Party A a
                Transaction Fee, as specified in Schedule A.

            
	 	 
	
              Valuation:

            	 
	 	 
	
              Trading
                Period:

            	
              The
                period of consecutive
                Scheduled Trading Days from and including the first Scheduled Trading
                Day
                following the Hedge Period End Date to and including the Maximum Maturity
Date,
                as specified in Schedule A;
                provided
                that,
                Party A may designate any
                

            

    

     

     

    
      
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              Scheduled
                Trading Day on or after the Minimum Maturity Date, as specified in
                Schedule A, as the last Scheduled Trading Day of the Trading Period.
                Party
                A shall notify Party B of any designation made pursuant to this provision
                prior to 9:00 A.M. (New York time) on the Scheduled Trading Day
                immediately following such designated day. 

            
	 	 
	
              Market
                Disruption
                Event:

            	
              The
                first sentence of Section 6.3(a) of the Equity Definitions is hereby
                amended by replacing clause (ii) and clause (iii) in their entirety
                with
                “(ii) an Exchange Disruption, which in either case the Calculation
                Agent
                determines is material, (iii) an Early Closure, (iv) a Regulatory
                Disruption or (v) a Liquidity Event.”

            
	 	 
	
              Regulatory
                Disruption:

            	
              A
                “Regulatory Disruption” shall occur if Party A determines in its
                reasonable discretion that it is appropriate in light of legal, regulatory
                or self-regulatory requirements or related policies or procedures
                for
                Party A to refrain from all or any part of the market activity in
                which it
                would otherwise engage in connection with the
                Transaction.

            
	 	 
	
              Liquidity
                Event:

            	
              A
                “Liquidity Event” shall occur if on any day the trading volume or
                liquidity of trading in the Shares is materially reduced from levels
                prevailing on the Trade Date and the Calculation Agent determines
                in its
                commercially reasonable discretion that as a result it would be
                appropriate to treat such day as a Disrupted Day or a partially Disrupted
                Day.

            
	 	 
	
              Consequence
                of Disrupted
                Days:

            	
              Notwithstanding
                anything to the contrary in the Equity Definitions, to the extent
                that a
                Disrupted Day occurs during the Initial Hedge Period or the Trading
                Period, the Calculation Agent may postpone the Maximum Maturity Date
                and
                the Minimum Maturity Date.  If any Disrupted Day occurs during
                the Initial Hedge Period or the Trading Period, the Calculation Agent
                shall determine whether (i) such Disrupted Day is a Disrupted Day
                in
                whole, in which case the 10b-18 VWAP for such Disrupted Day shall
                not be
                included for purposes of determining the Hedging Price, if such Disrupted
                Date occurs during the Initial Hedge Period, or the Forward Price,
                if such
                Disrupted Date occurs during the Trading Period, or (ii) such Disrupted
                Day is a Disrupted Day only in part, in which case the 10b-18 VWAP
                for
                such Disrupted Day shall be determined by the Calculation Agent based
                on
                Rule 10b-18 eligible transactions in the Shares on such Disrupted
                Day
                effected before the relevant Market Disruption Event (if any) occurred
                and/or after the relevant Market Disruption Event (if any) ended,
                and the
                Hedging Price, if such Disrupted Date occurs during
                

            

    

     

     

    
      
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              the
                Initial Hedge Period, or the Forward Price, if such Disrupted Date
                occurs
                during the Trading Period, shall be determined by the Calculation
                Agent
                using an appropriately weighted average of the 10b-18 VWAPs for all
                Scheduled Trading Days in the Initial Hedge Period or the Trading
                Period,
                as the case may be, instead of an arithmetic average.

            
	 	 
	
              Valuation
                Time:

            	
              The
                close of trading on the
                Exchange, without regard to extended trading
                hours.

            
	 	 
	
              Valuation
                Date:

            	
              The
                last Scheduled Trading Day
                during the Trading Period.

            
	 	 
	
              Settlement
                Terms:

            	 
	 	 
	
              Settlement
                Method Election:

            	
              Not
                Applicable

            
	 	 
	
              Physical
                Settlement:

            	
              Applicable

            
	 	 
	
              Settlement
                Currency:

            	
              USD

            
	 	 
	
              Forward
                Price:

            	
              The
                amount equal to (i) the arithmetic average of the 10b-18 VWAPs for
                all
                Scheduled Trading Days in the Trading Period minus (ii) the
                Discount, as specified in Schedule A.

            
	 	 
	
              10b-18
                VWAP:

            	
              (A)
                For any Scheduled Trading Day that is not a Disrupted Day, the
                volume-weighted average price at which the Shares trade as reported
                in the
                composite transactions for all United States securities exchanges
                on which
                such Shares are traded, excluding (i) trades that do not settle regular
                way, (ii) opening (regular way) reported trades in any relevant
                consolidated system on such Scheduled Trading Day, (iii) trades that
                occur
                in the last ten  minutes before the scheduled close of trading
                on any relevant exchange on such Scheduled Trading Day and ten minutes
                before the scheduled close of the primary trading in the market where
                the
                trade is effected, and (iv) trades on such Scheduled Trading Day
                that do
                not satisfy the requirements of Rule 10b-18(b)(3), as determined
                in good
                faith by the Calculation Agent, or (B) for any Scheduled Trading
                Day that
                is a Disrupted Day, an amount determined in good faith and in a
                commercially reasonable manner by the Calculation Agent as 10b-18
                VWAP.  Party B acknowledges that the Calculation Agent may refer
                to the Bloomberg Page “CVS <Equity>
                AQR SEC”
                (or any successor thereto) for any Scheduled Trading Day to determine
                the
                10b-18 VWAP.

            
	 	 
	
              Number
                of Shares to be Delivered:

            	
              The
                number of Shares equal to the Share Amount minus the number of
                Minimum Shares.

            

    

     

     

    
      
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              Share
                Amount:

            	
              The
                sum of (i) the quotient of the product of 0.50 multiplied by the
                Prepayment Amount divided by the Forward Price (provided
                that if such quotient is (A) greater than the Maximum Shares
                A, such
                quotient shall be deemed to be equal to the Maximum Shares A, and
                (B) less
                than the Minimum Shares A, such quotient shall be deemed to be equal
                to
                the Minimum Shares A) plus (ii) the quotient of the product of
                0.50 multiplied by the Prepayment Amount divided by the
                Forward Price  (provided that if such quotient is (A)
                greater than the Maximum Shares B, such quotient shall be deemed
                to be
                equal to the Maximum Shares B, and (B) less than the Minimum Shares
                B,
                such quotient shall be deemed to be equal to the Minimum Shares
                B).

            
	 	 
	
              Settlement
                Date:

            	
              One
                Exchange Business Day following the Valuation Date.

            
	 	 
	
              Initial
                Shares:

            	
              As
                specified in Schedule A.

            
	 	 
	
              Initial
                Share Delivery:

            	
              Party
                A shall deliver a number of Shares equal to the Initial Shares to
                Party B
                on the Initial Share Delivery Date in accordance with Section 9.4
                of the
                Equity Definitions, with the Initial Share Delivery Date being deemed
                to
                be a “Settlement Date” for purpose of such Section 9.4.

            
	 	 
	
              Initial
                Share Delivery Date:

            	
              One
                Exchange Business Day following the Trade Date

            
	 	 
	
              Minimum
                Shares A:

            	
              As
                specified in Schedule A.

            
	 	 
	
              Minimum
                Shares B:

            	
              As
                specified in Schedule A.

            
	 	 
	
              Minimum
                Shares:

            	
              As
                specified in Schedule A.

            
	 	 
	
              Minimum
                Share Delivery:

            	
              Party
                A shall deliver a number of Shares equal to (i) the Minimum Shares
                minus (ii) the number of Initial Shares on the Minimum Share
                Delivery Date in accordance with Section 9.4 of the Equity Definitions,
                with the Minimum Share Delivery Date being deemed to be a “Settlement
                Date” for purpose of such Section 9.4.

            
	 	 
	
              Minimum
                Share Delivery Date:

            	
              One
                Scheduled Trading Day following the Hedge Period End
                Date

            
	 	 
	
              Maximum
                Shares A:

            	
              As
                specified in Schedule A.

            
	 	 
	
              Maximum
                Shares B:

            	
              As
                specified in Schedule A.

            
	 	 
	
              Maximum
                Shares:

            	
              As
                specified in Schedule A.

            

    

    

    
      	
              Adjustment
                Payment:

            	
              On
                the Prepayment Date Party B shall pay to Party A as a price adjustment
                an
                amount equal to the Adjustment Payment, as specified in Schedule
                A.

            
	 	 
	
              Share
                Adjustments:

            	 

    

     

     

    
      
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              Method
                of
                Adjustment:

            	
              Calculation
                Agent
                Adjustment;
                provided clause
                (iii) of Section 11.2(e) of
                the Equity Definitions shall be deleted. For the avoidance of doubt,
                the
                Calculation Agent shall not make any adjustments to account for changes
                in
                cost of funding, expected dividends or stock loan
                rate.

            
	 	 
	
              Extraordinary
                Events:

            	 
	 	 
	
              Announcement
                Date:

            	
              The
                definition of “Announcement
                Date” in Section 12.1 of the Equity Definitions will be amended by
                replacing the words “voting shares” in the fifth line thereof with the
                word “Shares”.

            
	 	 
	
              Consequences
                of Merger
                Events:

            	 
	 	 
	
              Share-for-Share:

            	
              Modified
                Calculation Agent
                Adjustment

            
	 	 
	
              Share-for-Other:

            	
              Cancellation
                and
                Payment

            
	 	 
	
              Share-for-Combined:

            	
              Modified
                Calculation Agent
                Adjustment

            
	 	 
	
              Tender
                Offer:

            	
              Applicable

            
	 	 
	 	
              The
                definition of “Tender Offer”
                in Section 12.1 of the Equity Definitions will be amended by replacing
                the
                phrase “greater than 10% and less than 100% of the outstanding voting
                shares of the Issuer” in the third and fourth line thereof with “(a)
                greater than 10% and less than 100% of the outstanding Shares of
                the
                Issuer in the event that such Tender Offer is being made by the Issuer
                or
                any subsidiary thereof or (b) greater than 15% and less than 100%
                of the
                outstanding Shares of the Issuer in the event that such Tender Offer
                is
                being made by any entity or person other than the Issuer or any subsidiary
                thereof”.

               

              The
                definition of “Tender Offer
                Date” in Section 12.1 of the Equity Definitions will be amended by
                replacing the words “voting shares” in the first line thereof with the
                word “Shares”.

            
	 	 
	
              Consequences
                of Tender
                Offers:

            	 
	 	 
	
              Share-for-Share:

            	
              Modified
                Calculation Agent
                Adjustment

            
	 	 
	
              Share-for-Other:

            	
              Modified
                Calculation Agent
                Adjustment

            
	 	 
	
              Share-for-Combined:

            	
              Modified
                Calculation Agent
                Adjustment

            
	 	 
	
              New
                Shares:

            	
              The
                definition of “New Shares” in
                Section 12.1 of the Equity Definitions shall be amended by deleting
                subsection (i) in its entirety and replacing it with the following:
“(i)
                publicly quoted, traded or listed on the New
                York Stock Exchange,
                the American Stock Exchange, the NASDAQ Global Select Market or the
                NASDAQ
                Global Market (or their respective

            

    

    
    

     

     

    
      
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              successors)
              and”.
	 	 
	
              Modified
                Calculation Agent
                Adjustment:

            	
              For
                greater certainty, the definition of “Modified Calculation Adjustment” in
                Sections 12.2 and 12.3 of the Equity Definitions shall be amended
                by (i)
                adding the following italicized language after the stipulated
                parenthetical provision: “(including adjustments to account for changes in
                volatility, expected dividends, stock loan rate or liquidity relevant
                to
                the Shares or to the Transaction) from the Announcement Date to the
                Merger Date (Section 12.2) or Tender Offer Date (Section 12.3).” and
                (ii) deleting the phrase “, expected dividends, stock loan rate” from such
                stipulated parenthetical provision.

            
	 	 
	
              Announcement
                Event:

            	
              If
                an Announcement Event occurs,
                the Calculation Agent will determine the
                economic effect of the
                Announcement Date on the theoretical value of the Transaction (including
                without limitation any change in volatility 
                or liquidity relevant to the
                Shares or to the Transaction) from the Announcement Date to the
                Valuation
                Date. If such economic effect is
                material, the Calculation Agent will adjust the terms of the Transaction
                to reflect such economic effect.  “Announcement
                Event”
shall
                mean the occurrence of the Announcement Date of a Merger Event or
                Tender
                Offer.

            
	 	 
	
              Composition
                of Combined
                Consideration:

            	
              Not
                Applicable

            
	 	 
	
              Nationalization,
                Insolvency or
                Delisting:

            	
              Cancellation
                and
                Payment

            
	 	 
	
              Cancellation
                Amount:

            	
              Section
                12.8(d) of the Equity
                Definitions shall be amended by deleting the second sentence thereof
                and
                Section 12.8(e) of the Equity Definitions shall be
                deleted.

            
	 	 
	
              Delisting:

            	
              The
                definition of “Delisting” in
                Section 12.6 of the Equity Definitions shall be deleted in its entirety
                and replaced with the following: “‘Delisting’ means that the Exchange
                announces that pursuant to the rules of such Exchange, the Shares
                cease
                (or will cease) to be listed, traded or publicly quoted on the Exchange
                for any reason (other than a Merger Event or Tender Offer) and are
                not
                immediately re-listed, re-traded or re-quoted on the New
                York Stock Exchange,
                the American Stock Exchange, the NASDAQ Global Select Market or the
                NASDAQ
                Global Market (or their respective successors)”

            
	 	 
	
              Additional
                Disruption
                Events:

            	 
	 	 
	
              Change
                in
                Law:

            	
              Applicable;
provided
                that Section 12.9(a)(ii) of the
                Equity Definitions is hereby amended by (i) replacing the phrase
“the
                interpretation” in the third line thereof
                

            

    

     

     

    
      
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              with
                the phrase “or public announcement of the formal or informal
                interpretation”, (ii) immediately following the word “Transaction” in
                clause (X) thereof, adding the phrase “in the manner contemplated by the
                Hedging Party on the Trade Date” and (iii) deleting clause (Y)
                thereof. 

            

    

    

    
      	
              Insolvency
                Filing:

            	
              Not
                Applicable

            
	 	 
	
              Hedging
                Disruption:

            	
              Not
                Applicable

            
	 	 
	
              Increased
                Cost of
                Hedging:

            	
              Not
                Applicable

            
	 	 
	
              Loss
                of Stock
                Borrow:

            	
              Applicable;
provided
                that if Party A
                gives notice that it
                elects to terminate the Transaction pursuant to 12.9(b)(4) of the
                Equity
                Definitions, Party A
                in calculating the Cancellation
                Amount payable in
                connection
                with such Loss
                of
                Stock Borrow shall not consider the Stock Loan Rate or any changes
                thereto
                whether prior to or post such Loss of Stock Borrow.

               

              For
                purposes of Section 12.9 of
                the Equity Definitions, all references to “Hedging Shares” shall be deemed
                to be references to Party A’s short position in respect of the
                Transaction.

            
	 	 
	
              Maximum
                Stock Loan
                Rate:

            	
              50
                basis
                points

            
	 	 
	
              Increased
                Cost of Stock
                Borrow:

            	
              Not
                Applicable

            
	 	 
	
              Hedging
                Party:

            	
              Party
                A shall be the Hedging Party
                in connection with all Extraordinary Events

            
	 	 
	
              Determining
                Party:

            	
              Party
                A shall be the Determining
                Party in connection with all Extraordinary
                Events

            
	 	 
	
              Acknowledgments:

            	 
	 	 
	
              Non-Reliance:

            	
              Applicable

            
	 	 
	
              Agreements
                and Acknowledgments
                Regarding Hedging Activities:

            	
              Applicable

            
	 	 
	
              Additional
                Acknowledgments:

            	
              Applicable

            
	 	 
	
              Additional
                Representations,
                Warranties and Agreements of  Party
                B:

            	
              In
                addition to the
                representations, warranties and agreements set forth in the Agreement
                and
                elsewhere in this Confirmation, Party B further represents, warrants
                and
                agrees that:

               

              (a)
                (i) It understands that the Transaction is subject to complex risks
                which
                may arise without warning, may at times be volatile, and that losses
                may
                occur quickly and in unanticipated magnitude, and (ii) it has concluded
                that the Transaction is suitable in light of its own investment
                objectives, financial capabilities and expertise.

               

              (b)
                It is an “eligible contract
                participant” as the term is

            

    

     

    
 

    
      
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      	 	defined
              in Section 1a(12) of the Commodity Exchange Act, as amended. 
               

              
                (c)
                  Neither Party A nor any of its
                  affiliates has advised Party B with respect to any legal, regulatory,
                  tax,
                  accounting or economic consequences arising from the Transaction,
                  and
                  neither Party A nor any of its affiliates is acting as advisor
                  for Party B
                  in connection with the Transaction.

                

                (d)
                  Party B is not entering into
                  the Transaction on the basis of any material non-public information
                  concerning the business, operations or prospects of the
                  Issuer.

                

                “Material”
information
                  for these
                  purposes is any information to which an investor would reasonably
                  attach
                  importance in reaching a decision to buy, sell or hold any securities
                  of
                  Party B.

                 

                (e)
                  Each of its required filings
                  under all applicable securities laws have been filed and on
                  the Trade Date, (A) none of
                  Party B and its officers and directors is aware of any material
                  nonpublic
                  information regarding Party B or the Shares and (B) all reports
                  and other
                  documents filed by Party B with the Securities and Exchange Commission
                  pursuant to the Securities Exchange Act of 1934, as amended (the
                  “Exchange
                  Act”)
                  when
                  considered as a whole (with the more recent such reports and documents
                  deemed to amend inconsistent statements contained in any earlier
                  such
                  reports and documents), do not contain any untrue statement of
                  a material
                  fact or omit to state any material fact required to be stated therein
                  or
                  necessary to make the statements therein, in the light of the
                  circumstances in which they were made, not misleading.

                 

                (f)
                  Party B is not entering into
                  the Transaction to create actual or apparent trading activity in
                  the
                  Shares (or any security convertible into or exchangeable for Shares),
                  to
                  manipulate the price of the Shares (or any security convertible
                  into or
                  exchangeable for Shares) or to facilitate a distribution of Shares
                  (or any
                  security convertible into or exchangeable for Shares).

                 

                (g)
It
                  is not, and, after giving
                  effect to the transactions contemplated hereby will not be required
                  to register as
                  an “investment
                  company” as such term is defined in the Investment Company Act of 1940,
                  as
                  amended.

              

            
	 	 
	
              Additional
                Termination
                Events:

            	
              Notwithstanding
                any other provision hereof, an “Additional Termination Event” shall occur
                and Party B shall be the sole Affected Party pursuant to such
                

            

    

     

     

    
      
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              Additional
                Termination Event if on any day occurring after the Trade Date and
                on or
                prior to the last Scheduled Trading Day in the Trading Period an
                ex-dividend date occurs with respect to the Shares for (i) an
                extraordinary cash dividend, (ii) a regular quarterly dividend (A)
                in an
                amount greater than USD 0.06 for 2008 per Share per quarter (any
                quarterly
                dividend in such amount for 2008, a “Regular Quarterly
                Dividend”) or (B) with an ex-dividend date occurring prior
                to January 15, 2008 for the quarter ending March 31, 2008, (iii) a
                distribution, issue or dividend of securities or share capital of
                another
                issuer acquired or owned (directly or indirectly) by Party B as a
                result
                of a spin-off or other similar transaction or (iv) a distribution,
                issue
                or dividend of any other type of securities (other than Shares, which
                may
                constitute a Potential Adjustment Event), rights or warrants or other
                assets, in any case for payment (cash or other consideration) at
                less than
                the prevailing market price as determined by the Calculation Agent;
                provided that in calculating the amounts payable in connection with
                such
                Additional Termination Event, any such distribution, issue or dividend
                shall not be considered a loss recoverable by Party A.  Party B
                agrees to furnish Party A with written notice at least 30 days prior
                to
                the ex-dividend date corresponding to each of the foregoing distributions,
                issues and dividends except those described in clause (ii)
                above. 

            
	 	 
	
              Regulatory
                Provisions:

            	
              (a)
                Party B represents and warrants that it has received and read and
                understands the Notice of Regulatory Treatment and the OTC Option
                Risk
                Disclosure Statement.

               

              (b)
                The Agent will furnish Party B upon written request a statement as
                to the
                source and amount of any remuneration received or to be received
                by the
                Agent in connection with the Transaction evidenced
                hereby.

            
	 	 
	
              Solvency:

            	
              As
                of the Trade Date and the Minimum Share Delivery Date, Party B represents,
                warrants and
                agrees that Party B is not “insolvent” (as such term is defined
                under Section 101(32) of the U.S. Bankruptcy Code (Title 11 of the
                United
                States Code)) and Party B would be able to purchase the Maximum Shares
                in
                compliance with the laws of the jurisdiction of Party B’s
                incorporation.

            
	 	 
	
              Company
                Purchases:

            	
              Without
                the prior written consent of Party A and except for purchases which
                are
                not solicited by or behalf of Party B, its affiliates or affiliated
                purchasers (each as defined in Rule 10b-18), Party B shall not purchase,
                and shall not cause its affiliates or affiliated
                

            

    

     

     

    
      
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              purchasers
                to directly or indirectly purchase, any Shares (or any security
                convertible into or exchangeable for Shares) during the Initial Hedge
                Period or the Trading Period. 

            
	 	 
	
              Regulation
                M:

            	
              Party
                B represents that as of the Trade Date it has no current intention
                of
                engaging in a distribution, as such term is used in Regulation M
                under the
                Exchange Act (“Regulation M”), during the Initial Hedge
                Period or the Trading Period.

               

              On
                the Trade Date, and, without prior notice to Party A, on each day
                during
                the Initial Hedge Period and the Trading Period, the Shares shall
                not be
                subject to a “restricted period,” as such term is defined in Regulation
                M.

            
	 	 
	
              No
                Collateral:

            	
              Notwithstanding
                any provision of this Confirmation, the Agreement or the Definitions,
                or
                any other agreement between the parties, to the contrary, the obligations
                of Party B hereunder are not secured by any collateral.

            
	 	 
	
              Set-Off
                and Netting:

            	
              Obligations
                under the Transaction shall not be netted, recouped or set off (including
                pursuant to Section 6 of the Agreement) against any other obligations
                of
                the parties, whether arising under the Agreement, this Confirmation,
                under
                any other agreement between the parties hereto, by operation of law
                or
                otherwise, and no other obligations of the parties shall be netted,
                recouped or set off (including pursuant to Section 6 of the Agreement)
                against obligations under the Transaction, whether arising under
                the
                Agreement, this Confirmation, under any other agreement between the
                parties hereto, by operation of law or otherwise, and each party
                hereby
                waives any such right of setoff, netting or recoupment.

            
	 	 
	
              Rule
                10b-18:

            	
              During
                the Initial Hedge Period,
                Party A agrees to use best efforts to make all purchases of Shares
                in
                connection with the Transaction in a manner that would satisfy the
                requirements set forth in clauses (b)(2), (b)(3), (b)(4) and (c)
                of
                Rule10b-18 under the Exchange Act (“Rule
                10b-18”),
                as
                if such purchases were made by Party B.

               

              Party
                B shall, at least one day
                prior to the first day of the Initial Hedge Period, notify Party
                A in
                writing of the total number of Shares purchased in Rule 10b-18 purchases
                of blocks pursuant to the once-a-week block exception set forth in
                clause
                (b)(4) of Rule 10b-18 by Party B or any of its affiliates during
                each of
                the four calendar weeks preceding such day and during the calendar
                week in
                which such day occurs (“Rule
                10b-

            

    

     

    
 

    
      
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              purchase” and “blocks” each as defined in Rule
              10b-18). 
	 	 
	
              Rule
                10b5-1:

            	
              It
                is the intent of the
                parties that the
                Transaction
                comply
                with the requirements of Rule 10b5-1(c)(1)(i)(B) of the Exchange
                Act (“Rule
                10b5-1”),
                and the parties agree that
                this
                Confirmation shall be
                interpreted to comply with the requirements of Rule 10b5-1(c).  Without
                limiting the
                generality of the
                preceding sentence, Party B acknowledges
                and agrees that (A)
                Party B does not have,
                and shall not
                attempt to exercise, any influence over how, when
                or whether Party
                A effects
                any purchases in connection
                with the Transaction, (B)
                during the Initial Hedge Period and the Trading Period
                neither Party B nor its officers
                or employees
                shall, directly or indirectly, communicate any information
                regarding Party B or
                the Shares to any employee of Party A or its affiliates
                who is identified to Party B in
                writing by Party A as being directly involved with the hedging of
                and
                trading with respect to the Transaction,
                (C) Party B is entering
                into the
                Transaction in good
                faith and not as part of a plan or scheme to evade compliance with
                federal
                securities laws including, without
                limitation, Rule 10b-5
                and (D) Party B will
                not alter or deviate
                from this Confirmation or enter into
                or alter a
                corresponding hedging transaction with respect
                to the
                Shares.  Party B also acknowledges
                and agrees that
                any amendment, modification, waiver or termination of
                this
                Confirmation must be
                effected in accordance with the requirements for the amendment or
                termination of a “plan” as defined in Rule 10b5-1(c).
                Without limiting the generality
                of the foregoing, any such amendment, modification, waiver or termination
                shall be made in good faith and not as part of a plan or scheme to
                evade
                the prohibitions of Rule 10b-5.

            
	 	 
	
              Certain
                Payments and Deliveries: 

            	
              Notwithstanding  anything
                to the contrary herein, or in the Equity Definitions, if at any time
                (i)
                an Early Termination Date occurs and Party A would be required to
                make a
                payment pursuant to Section 6 of the Agreement, (ii) an Extraordinary
                Event occurs and Party A would be required to make a payment pursuant
                to
                Article 12 of the Equity Definitions or (iii) Party A is required
                to make
                a payment pursuant to any other provision hereof, of the Agreement
                or of
                the Definitions, then Party B shall have the right, in its sole and
                absolute discretion, to elect that, in lieu of such payment, Party
                A&
                shall deliver to Party B, at the time such payment would have been
                due and
                in the manner provided under “Physical Settlement” in the Equity
                Definitions, a number of Shares equal
                to 

            

    

     

     

    
      
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              the
                quotient obtained by dividing (A) the amount that would have been
                so
                payable by (B) the fair market value per Share of the  Shares
                so  delivered  at the  time  of
                such  delivery,  as determined by the Calculation
                Agent in a commercially reasonable manner. 

            
	 	 
	
               Payments
                on Early Termination:

               

            	
              Party
                A and Party B agree that for the Transaction, the definition of Close-out
                Amount in the Agreement shall be amended by deleting (a) the second
                sentence of the paragraph immediately following clause (iii) thereof
                and
                (b) the second paragraph following such clause (iii).

            
	 	 
	
              Agreement
                Regarding Calculations:

            	
              Notwithstanding
                any other provision of this Confirmation, the Definitions or the
                Agreement
                to the contrary, in calculating any adjustment pursuant to Article
                11 of
                the Equity Definitions or any amount payable pursuant to Article
                12 of the
                Equity Definitions or Section 6 of the Agreement, the Calculation
                Agent
                shall not take into account (i) changes to costs of funding, stock
                loan
                rates or any dividends since the Trade Date or (ii) losses or costs
                incurred in connection with terminating, liquidating or re-establishing
                any hedge related to the Transaction (or any gain resulting from
                any of
                them).

            
	 	 
	
              Special
                Provisions for Party B Payments:

            	
              Party
                A and Party B agree that, notwithstanding anything to the contrary
                herein
                or in the Agreement, in the event that (i) an Early Termination Date
                (whether as a result of an Event of Default or Termination Event)
                occurs
                or is designated with respect to any Transaction and, as a result,
                Party B
                owes to Party A an amount calculated under Section 6(e) of the Agreement
                or (ii) an Extraordinary Event occurs that results in the termination
                or
                cancellation of any Transaction pursuant to Article 12 of the Equity
                Definitions and, as a result, Party B owes to Party A a Cancellation
                Amount or any other amount in respect to the Transaction, such amount
                shall be deemed to be zero.  For the avoidance of doubt, the
                Party B shall not be required to make any additional cash payments
                (other
                than the Prepayment Amount) or deliver or return any Shares pursuant
                to
                the terms of the Transaction (including, without limitation, any
                Shares
                delivered on the Initial Share Delivery Date or the Minimum Share
                Delivery
                Date).

            
	 	 
	
              Transfer:

            	
              Notwithstanding
                Section 7 of the Agreement, Party A may assign its rights and obligations
                under the Transaction, in whole and not in part, to any Affiliate
                of
                Lehman Brothers Holdings Inc. (“Holdings”) effective upon
                delivery to Party B of the full 

            

    

     

     

    
      
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              unconditional
                guarantee by Holdings, in favor of Party B, of the obligations of
                such
                Affiliate; provided however, that Party A may not assign
                its rights and obligations under the Transaction if such assignment
                would
                result in an (i) Party B being required to pay to the assignee an
                amount
                in respect of an Indemnifiable Tax under Section 2(d)(i)(4) greater
                than
                the amount in respect of which Party B would have been required to
                pay to
                Party A in the absence of such assignment or (ii) Party B receiving
                a
                payment from which an amount has been withheld or deducted, on account
                of
                a Tax under Section 2(d)(i) in excess of that which Party A would
                have
                been required to so withhold or deduct in the absence of such assignment,
                unless the assignee would be required to make additional payments
                pursuant
                to Section 2(d)(i)(4) corresponding to such withholding or
                deduction. 

            
	 	 
	
              Binding
                Contract:

            	
              This
                Confirmation, as supplemented by the Confirmation Pricing Supplement,
                is a
                “qualified financial contract”, as such term is defined in Section
                5-701(b)(2) of the General Obligations Law of New York (the
                “General Obligations Law”); (ii) the Confirmation Pricing
                Supplement constitutes a “confirmation in writing sufficient to indicate
                that a contract has been made between the parties” hereto, as set forth in
                Section 5-701(b)(3)(b) of the General Obligations Law; and (iii)
                this
                Confirmation constitutes a prior “written contract” as set forth in
                Section 5-701(b)(1)(b) of the General Obligations Law, and each party
                hereto intends and agrees to be bound by this Confirmation, as
                supplemented by the Confirmation Pricing Supplement.  Party A
                and Party B further agree and acknowledge that this Confirmation,
                as
                supplemented by the Confirmation Pricing Supplement, constitutes
                a
                contract “for the sale or purchase of a security”, as set forth in Section
                8-113 of the Uniform Commercial Code of New York.

            
	 	 
	
              Governing
                Law:

            	
              The
                laws of the State of New York, without reference to choice of law
                doctrine.

            
	 	 
	
              Termination
                Currency:

            	
              USD

            

    

    

    
      	
              Waiver
                of Trial By
                Jury:

            	
              Insofar
                as is permitted by law,
                each party irrevocably waives any and all rights to trial by jury
                in any
                legal proceeding in connection with the
                Transaction, and acknowledges
                that this waiver is a material inducement to the other party’s entering
                into the
                Transaction
                hereunder.

            
	 	 
	
              Calculation
                Agent:

            	
              Lehman
                Brothers
                Inc.

            

    

     

     

    
      
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              All
                determinations made by the
                Calculation Agent shall be made in good faith and in a commercially
                reasonable manner. Following any calculation by the Calculation Agent
                hereunder, upon a written request by Party B, the Calculation Agent
                will
                provide to Party B by e-mail to the e-mail address provided by Party
                B in
                such a prior written request a report displaying in reasonable detail
                the
                basis for such
                calculation. 

            

    

    

    THE
      SECURITIES REPRESENTED BY THE
      CONFIRMATION HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
      UNDER THE UNITED STATES SECURITIES ACT OF 1933 OR ANY OTHER UNITED STATES
      FEDERAL OR STATE SECURITIES LAWS; SUCH SECURITIES MAY NOT BE SOLD OR OTHERWISE
      TRANSFERRED IN THE ABSENCE OF APPROPRIATE REGISTRATION UNDER SUCH SECURITIES
      LAWS OR EXCEPT IN A TRANSACTION EXEMPT FROM OR NOT SUBJECT TO THE REGISTRATION
      REQUIREMENTS OF SUCH SECURITIES LAWS.

     

     

    
      
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    Please
      confirm your agreement with the
      foregoing by executing this Confirmation and returning such Confirmation, in
      its
      entirety, to us at facsimile number 646-885-9546 (United
      States of America), Attention: Documentation.

     

     

    
      	
              Yours
                sincerely,

            	
              Accepted
                and agreed
                to:

            
	 	 
	
              Lehman
                Brothers OTC Derivatives Inc.

            	
              CVS
                Caremark
                Corporation

            

    

    

    
      	
              By:

            	
              /s/  Robert
                E.
                Guglielmo          

            	 	
              By:

            	
              /s/  Carol
                A.
                DeNale          

            	 
	
              Name:

            	
              Robert
                E.
                Guglielmo

            	 	
              Name:

            	
              Carol
                A.
                DeNale

            	 
	
              Title:

            	
              Senior
                Vice
                President

            	 	
              Title:

            	
              Vice
                President &
                Treasurer

            	 
	 	 	 	 	 	 

    

     

    Execution
      time
      will be furnished upon Party B's written request.

     

    

    
      
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    EXHIBIT
      A

    

    CONFIRMATION
      PRICING SUPPLEMENT

    

    Global
      Deal Id:    3467542

    

    This
      Confirmation Pricing Supplement is the Confirmation Pricing Supplement referred
      to in the Confirmation dated as of November 6, 2007 between Lehman Brothers
      OTC
      Derivatives Inc. and CVS Caremark Corporation.

    

    For
      all
      purposes under the Confirmation, the following terms of the Confirmation shall
      be as specified below:

    

    
      	
              1.

            	
              Hedging
                Price:

            	
              USD
                [                  ]

            
	 	 	 
	
              2.

            	
              Maximum
                Shares A:

            	 
	 	 	 
	
              3.

            	
              Maximum
                Shares B:

            	 
	 	 	 
	
              4.

            	
              Minimum
                Shares A:

            	 
	 	 	 
	
              5.

            	
              Minimum
                Shares B:

            	 
	 	 	 
	
              6.

            	
              First
                day of Trading Period:

            	
               [__________
                __], 2007

            

    

    

     

    
      	
              Yours
                sincerely,

            	
              Accepted
                and agreed
                to:

            
	 	 
	
              Lehman
                Brothers OTC Derivatives Inc.

            	
              CVS
                Caremark Corporation

            

    

    

    
      	
              By:

            	 	 	
              By:

            	 	 
	
              Name:

            	 	 	
              Name:

            	 	 
	
              Title:

            	 	 	
              Title:

            	 	 
	 	 	 	 	 	 

    

     

    Execution
      time will be furnished upon Party B’s written request.

    

    

     

    
      
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