Document:

Filed by Automated Filing Services Inc. (604) 609-0244 - Shellbridge Oil & Gas, Inc. - Exhibit 4.1

ARRANGEMENT AGREEMENT

THIS ARRANGEMENT AGREEMENT made and
effective as of the 20th day of July, 2005.

BETWEEN:

DYNAMIC OIL & GAS, INC., a
corporation incorporated under the laws of the Province of British Columbia
(hereinafter referred to as “Dynamic”)

AND

SEQUOIA OIL & GAS TRUST, an
open-ended unincorporated investment trust organized under the laws of the
Province of Alberta (hereinafter referred to as “Sequoia”)

AND

SHELLBRIDGE OIL & GAS,
INC., a body corporate incorporated under the laws of the Province of
Alberta (hereinafter referred to as “ExploreCo”)

AND

0730008 B.C. LTD., a body
corporate incorporated under the laws of the Province of British Columbia
(“AcquisitionCo”)

     WHEREAS Dynamic wishes to
reorganize its business for the benefit of the Dynamic Securityholders (as
defined herein);

     AND WHEREAS Dynamic has caused
ExploreCo to be incorporated for the purpose of acquiring the Exploration Assets
(as defined herein) from Dynamic;

     AND WHEREAS Dynamic will, prior
to the Effective Date, cause the Partnership (as defined herein) to be formed
and the Partnership will acquire the Non-exploration Assets (as defined herein)
from Dynamic;

     AND WHEREAS Dynamic and Sequoia
propose a business combination whereby: (i) Sequoia will, indirectly through
AcquisitionCo, acquire all of the Dynamic Shares (as defined herein) on the
terms described in the Plan of Arrangement (as defined herein) attached as
Exhibit 1 in exchange for, in aggregate, cash consideration equal to the
Cash Consideration (as defined herein) and the AcquisitionCo Note (as defined
herein) and (ii) Dynamic Shareholders will exchange the AcquisitionCo Note they
receive from AcquisitionCo with ExploreCo for the common shares of
ExploreCo;

     AND WHEREAS the parties hereto
intend to carry out the proposed business combination by way of an arrangement
of Dynamic under the provisions of the Business Corporations Act (British
Columbia) (the “Arrangement”);

     AND WHEREAS the board of
directors of Dynamic has determined, based in part upon advice from its
financial advisors, that the consideration to be received by the Dynamic
Shareholders pursuant to the Arrangement is fair, from a financial point of
view, to the Dynamic Shareholders and that the board of 

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directors of Dynamic will cooperate with Sequoia with respect to the Arrangement as set forth herein and recommend that the Dynamic Securityholders vote in favour of the Arrangement;

     AND WHEREAS the board of directors of Dynamic has unanimously determined that it would be in the best interests of Dynamic and the Dynamic Securityholders for the directors to recommend that the Dynamic Securityholders
vote in favour of the Arrangement; 

     AND WHEREAS the board of directors of Sequoia Oil & Gas Ltd., as administrator of Sequoia, has unanimously determined that it would be in the best interests of Sequoia to enter into this Agreement;

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

ARTICLE 1 DEFINITIONS

	
1.1 		
In this Agreement, unless the context otherwise requires:

	
	 	 	 
		
(a) 		
“ABCA” means the Business Corporations Act (Alberta), RSA 2000 c. B-9, as amended, including the regulations promulgated thereunder, as is in effect on the date hereof;

	
	 	 	 
		
(b) 		
“Acclaim Agreement” has the meaning ascribed thereto in the ExploreCo Conveyance Agreement;

	
	 	 	 
		
(c) 		
“AcquisitionCo” means 0730008 B.C. Ltd., a corporation incorporated under the BCBCA and wholly-owned by Sequoia;

	
	 	 	 
		
(d) 		
“AcquisitionCo Note” means the demand interest-free promissory note issued by AcquisitionCo in favour of the Dynamic Shareholders, having a principal amount equal to the ExploreCo Principal Amount and issued
pursuant to the Plan of Arrangement;

	
	 	 	 
		
(e) 		
“affiliate” has the meaning contemplated by the ABCA;

	
	 	 	 
		
(f) 		
“Agreement” means this agreement, including the recitals and all Exhibits to this agreement, as amended or supplemented from time to time, and “hereby”, “hereof”,
“herein”, “hereunder” and similar terms refer to this Agreement and not to any particular provision of this Agreement;

	
	 	 	 
		
(g) 		
“Applicable Laws” means applicable corporate and securities laws, regulations and rules, all policies thereunder (including Rule 61-501 of the Ontario Securities Commission and the rules of the United States
Securities and Exchange Commission) and rules of applicable stock exchanges, including the TSX and NASDAQ;

	
	 	 	 
		
(h) 		
“Arrangement” means the arrangement under the provisions of Division 5 of Part 9 under the BCBCA on the terms and conditions set out in the Plan of Arrangement, as supplemented, modified or amended;

	
	 	 	 
		
(i) 		
“Arrangement Filings” means the records and information provided to the Registrar under section 292(a) of the BCBCA that the Registrar requires and the records filed under

	

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			 section 292(a) of the BCBCA that the Registrar requires
        to give effect to any provision of the Arrangement, together with a copy
        of the entered Final Order;

	 	 	 
	 	 (j) 	 “Assumed Liabilities” has the meaning
        ascribed thereto in the ExploreCo Conveyance Agreement;

	 	 	 
	 	 (k) 	 “BCBCA” means the Business Corporations
        Act (British Columbia), S.B.C. 2002 c. 57, as amended, including the
        regulation promulgated thereunder as is in effect on the date hereof;

	 	 	 
	 	 (l) 	 “Business” means all of the assets,
        undertaking and liabilities of Dynamic and its subsidiaries, including,
        without limitation, its producing and non-producing petroleum and natural
        gas properties and lands, facilities and related equipment, and other
        assets except for the Exploration Assets;

	 	 	 
	 	 (m) 	 “business day” means a day, other
        than a Saturday, Sunday or statutory holiday, when banks are generally
        open in the City of Calgary and the City of Vancouver for the transaction
        of banking business;

	 	 	 
	 	 (n) 	 “Canadian GAAP” means Canadian generally
        accepted accounting principles;

	 	 	 
	 	 (o) 	 “Cash Consideration” has the meaning
        ascribed thereto in the Plan of Arrangement;

	 	 	 
	 	 (p) 	 “Closing” means the completion of
        the Arrangement;

	 	 	 
	 	 (q) 	 “control” means, with respect to
        control of a body corporate by a person, the holding (other than by way
        of security) by or for the benefit of that person of securities of that
        body corporate to which are attached more than 50% of the votes that may
        be cast to elect directors of the body corporate (whether or not securities
        of any other class or classes shall or might be entitled to vote upon
        the happening of any event or contingency) provided that such votes, if
        exercised, are sufficient to elect a majority of the board of directors
        of the body corporate;

	 	 	 
	 	 (r) 	 “Court” means the Supreme Court of
        British Columbia;

	 	 	 
	 	 (s) 	 “Depositary” means CIBC Mellon Trust
        Company;

	 	 	 
	 	 (t) 	 “Dynamic” means Dynamic Oil &
        Gas, Inc. a corporation incorporated under the laws of British Columbia;

	 	 	 
	 	 (u) 	 “Dynamic Acquisition Proposal” shall
        have the meaning ascribed thereto in subsection 8.1(c)(i);

	 	 	 
	 	 (v) 	 “Dynamic Break Fee” has the meaning
        ascribed thereto in Section 10.2 hereof;

	 	 	 
	 	 (w) 	 “Dynamic Counsel” means McCarthy
        Tétrault LLP, or such other legal counsel as may be designated
        by Dynamic;

	 	 	 
	 	 (x) 	 “Dynamic Financial Statements” means
        the audited financial statements of Dynamic as at, and for the year ended
        December 31, 2004 and the unaudited financial statements of Dynamic as
        at, and for the three months ended, March 31, 2005;

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	 	(y) 	 “Dynamic GP” means a corporation to
        be incorporated under the ABCA, which will be a wholly-owned subsidiary
        of Dynamic and will be a general partner of Partnership;

	 	 	 
	 	(z) 	 “Dynamic Office Lease” means the lease
        dated as of March 13, 2005 between SunLife Assurance Company of Canada
        and Dynamic;

	 	 	 
	 	(aa) 	 “Dynamic Optionholders” means the holders
        from time to time of Dynamic Options;

	 	 	 
	 	(bb) 	 “Dynamic Options” means, collectively,
        all outstanding options, whether or not vested, entitling the holders
        to acquire Dynamic Shares, details of which are set out in Exhibit
        4 hereto;

	 	 	 
	 	(cc) 	 “Dynamic Public Documents” means all
        documents or information which has been filed by or on behalf of Dynamic
        in compliance with or intended compliance with Applicable Laws;

	 	 	 
	 	(dd) 	 “Dynamic Reserve Report” means the
        report of Sproule dated May 18, 2005, and effective as of April 30, 2005,
        evaluating certain of Dynamic’s oil, natural gas liquids and natural
        gas reserves and the estimated future cash flows from such reserves;

	 	 	 
	 	(ee) 	 “Dynamic Securityholders” means, collectively,
        Dynamic Shareholders and Dynamic Optionholders;

	 	 	 
	 	(ff) 	 “Dynamic Shareholders” means the holders
        of Dynamic Shares;

	 	 	 
	 	(gg) 	 “Dynamic Shares” means the common shares
        of Dynamic as constituted on the date hereof;

	 	 	 
	 	(hh) 	 “Effective Date” means the date on
        which the Arrangement Filings are filed with the Registrar;

	 	 	 
	 	(ii) 	 “Effective Time” means the time on
        the Effective Date at which the Arrangement is effective, as specified
        in the Plan of Arrangement;

	 	 	 
	 	(jj) 	 “Encumbrance” includes, without limitation,
        any mortgage, pledge, assignment, charge, lien, security interest, claim,
        trust, royalty or carried, participation, net profits or other third party
        interest and any agreement, option, right of first refusal, right or privilege
        (whether by law, contract or otherwise) capable of becoming any of the
        foregoing;

	 	 	 
	 	(kk) 	 “Environmental Laws” has the meaning
        ascribed thereto in subsection 6.1(ll)(i);

	 	 	 
	 	(ll) 	 “Exploration Assets” means the assets
        owned by Dynamic and to be sold to ExploreCo pursuant to the ExploreCo
        Conveyance Agreement, all as more particularly described in Exhibit
        2 hereto;

	 	 	 
	 	(mm) 	 “ExploreCo” means Shellbridge Oil &
        Gas, Inc., a body corporate incorporated under the laws of the Province
        of Alberta, as a wholly-owned subsidiary of Dynamic;

	 	 	 
	 	(nn) 	 “ExploreCo Conveyance Agreement” means
        the oil and gas asset purchase agreement to be entered into between Dynamic
        and ExploreCo concurrently with this Agreement and in a form satisfactory
        to Sequoia effecting the sale by Dynamic to ExploreCo of the Exploration
        Assets in exchange for the ExploreCo Note;

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	 	 (oo) 	 “ExploreCo Note” means the demand
        interest-free promissory note issued by ExploreCo in favour of Dynamic,
        having a principal amount equal to the ExploreCo Principal Amount and
        issued pursuant to the ExploreCo Conveyance Agreement;

	 	 	 
	 	 (pp) 	 “ExploreCo Principal Amount” means
        $30,925,000;

	 	 	 
	 	 (qq) 	 “ExploreCo Shares” means the common
        shares in the capital of ExploreCo as constituted on the date hereof;

	 	 	 
	 	 (rr) 	 “Fairness Advisory Fee” has the meaning
        ascribed thereto in Section 6.1(k);

	 	 	 
	 	 (ss) 	 “Fairness Opinion” means the opinion
        of Peters & Co. Limited that the consideration to be received by the
        Dynamic Shareholders pursuant to the Arrangement is fair, from a financial
        point of view, to the Dynamic Shareholders;

	 	 	 
	 	 (tt) 	 “Final Order” means the final order
        of the Court approving the Arrangement under Section 291 of the BCBCA,
        as such order may be affirmed, amended or modified by any court of competent
        jurisdiction;

	 	 	 
	 	 (uu) 	 “Financial Advisory Fee” has the
        meaning ascribed thereto in Section 6.1(k);

	 	 	 
	 	 (vv) 	 “Governmental Authority” includes
        any federal, provincial, municipal or other political subdivision, government
        department, commission, board, bureau, agency or instrumentality, domestic
        or foreign;

	 	 	 
	 	 (ww) 	 “Information Circular” means the
        information circular – proxy statement of Dynamic to be mailed to
        the Dynamic Shareholders in connection with the holding of the Meeting;

	 	 	 
	 	 (xx) 	 “Interim Order” means an interim
        order of the Court to be issued pursuant to the application referred to
        in subsection 8.1(o) of this Agreement and, containing declarations
        and directions with respect to the Arrangement and the holding of the
        Meeting, as such order may be affirmed, amended or modified by any court
        of competent jurisdiction;

	 	 	 
	 	 (yy) 	 “Lock-up Agreements” means the lock-up
        agreements to be entered into by all of the directors and officers of
        Dynamic who are Dynamic Shareholders, representing not less than 8% of
        the outstanding Dynamic Shares at the date hereof, on a non-diluted basis,
        each of which provides that, inter alia, such director or officer
        will vote in favour of the Arrangement at the Meeting;

	 	 	 
	 	 (zz) 	 “Material Adverse Change” means any
        change (or any condition, event or development giving rise to a prospective
        change) in or to the business, operations, results of operations, assets,
        capitalization, financial condition, rights, liabilities, prospects or
        privileges, whether contractual or otherwise, of Sequoia or Dynamic, as
        applicable, which, or could reasonably be expected to have, a Material
        Adverse Effect;

	 	 	 
	 	 (aaa) 	 “Material Adverse Effect” means any
        effect that is, or would reasonably be expected to be, materially adverse
        to the business, operations, results of operations, assets, capitalization
        or financial condition of Sequoia or Dynamic, as applicable, each on a
        consolidated basis taken as a whole, but “Material Adverse Effect”
        shall not include an effect resulting from (i) an action taken by Sequoia
        or Dynamic, as the case may be, to which the other consented to in writing,
        (ii) conditions affecting the oil and gas industry in the jurisdictions
        in which Sequoia

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			 or Dynamic, as the case may be, holds its assets,
        each on a consolidated basis including, without limitation, changes in
        commodity prices, (iii) general economic, financial, currency exchange,
        securities or commodity market conditions in Canada including, without
        limitation, changes in currency exchange rates, or (iv) conditions affecting
        the Exploration Assets only;

	 	 	 
	 	 (bbb) 	 “Meeting” means the special meeting
        of the Dynamic Securityholders to be called to, inter alia, consider
        and, if thought advisable, authorize, approve and adopt the Arrangement
        in accordance with the Interim Order, and any adjournments thereof;

	 	 	 
	 	 (ccc) 	 “misrepresentation” includes any
        untrue statement of a material fact, any omission to state a material
        fact that is required to be stated and any omission to state a material
        fact that is necessary to be stated in order for a statement not to be
        misleading;

	 	 	 
	 	 (ddd) 	 “NASDAQ” means the NASDAQ Small Cap
        Market;

	 	 	 
	 	 (eee) 	 “Non-exploration Assets” means the
        assets owned by Dynamic and to be sold to the Partnership pursuant to
        the Partnership Conveyance Agreement, all as more particularly described
        in Exhibit 3 hereto;

	 	 	 
	 	 (fff) 	 “Partnership” means a general partnership
        to be formed on or before September 1, 2005 under the laws of Alberta,
        having Dynamic and Dynamic GP as its partners;

	 	 	 
	 	 (ggg) 	 Partnership Conveyance Agreement” means
        the agreement to be entered into among the Partnership, Dynamic and Dynamic
        GP, with such representations, warranties, covenants and indemnities which
        are customary for a transaction of this nature and otherwise in a form
        satisfactory to Sequoia, acting reasonably, effecting the sale by Dynamic
        to Partnership of the Non-exploration Assets;

	 	 	 
	 	 (hhh) 	 “person” includes any individual,
        partnership, firm, trust, body corporate, government, governmental body,
        agency or instrumentality, unincorporated body of persons or association;

	 	 	 
	 	 (iii) 	 “Plan of Arrangement” means the plan
        of arrangement substantially in the form set out in Exhibit 1 hereto
        as amended or supplemented from time to time in accordance with Article
        13 hereof;

	 	 	 
	 	 (jjj) 	 “Registrar” means the Registrar of
        Companies appointed under the BCBCA;

	 	 	 
	 	 (kkk) 	 “Regulations” means all statutes,
        laws, rules, orders, directives and regulations in effect from time to
        time and made by governments or governmental agencies having jurisdiction
        over the Business;

	 	 	 
	 	 (lll) 	 “Sequoia” means Sequoia Oil &
        Gas Trust, an open-ended unincorporated investment trust organized under
        the laws of Alberta;

	 	 	 
	 	 (mmm) 	 “Sequoia Break Fee” has the meaning
        ascribed thereto in Section 8.3 hereof;

	 	 	 
	 	 (nnn) 	 “Sequoia Counsel” means Gowling Lafleur
        Henderson LLP, or such other legal counsel as may be designated by Sequoia;

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	 	(ooo) 	 “Sequoia Information” means
        all information contained in the Information Circular relating to Sequoia
        and its subsidiaries;

	 	 	 	 
	 	(ppp) 	 “Sequoia Trust Indenture” means
        the trust indenture dated as of March 16, 2005, as amended from time to
        time, pursuant to which Sequoia was created;

	 	 	 	 
	 	(qqq) 	 “Severance Obligations” has
        the meaning ascribed thereto in subsection 6.1(x);

	 	 	 	 
	 	(rrr) 	 “Sproule” means Sproule Associates
        Limited, independent petroleum engineering consultants;

	 	 	 	 
	 	(sss) 	 “subsidiary” means, when
        used to indicate a relationship with another body corporate or trust,

	 	 	 	 
			(i) 	 a body corporate or trust which is controlled by (A)
        that other, or (B) that other and one or more bodies corporate or trusts,
        each of which is controlled by that other, or (C) two or more bodies corporate
        or trusts each of which is controlled by that other; or

	 	 	 	 
			(ii) 	 a subsidiary of a body corporate or trust that is the
        other’s subsidiary;

	 	 	 	 
	 	(ttt) 	 “Tax Act” means the Income
        Tax Act (Canada), R.S.C. 1985, c. 1 (5th Supp), including the regulations
        promulgated thereunder, as amended;

	 	 	 	 
	 	(uuu) 	 “Tax Pools” means undepreciated
        capital cost of any particular class of depreciable property, cumulative
        Canadian exploration expense, cumulative Canadian development expense,
        cumulative Canadian oil and gas property expense, foreign exploration
        and development expense, capital losses, non capital losses, cumulative
        eligible capital and investment tax credits, all as defined in the Tax
        Act, and financing expenses referred to in Section 20(1)(e) of the Tax
        Act;

	 	 	 	 
	 	(vvv) 	 “Taxes” means all taxes (including
        income, capital, profit, state profit share, gross receipts, windfall
        or excess profits, severance, royalty, production, sales, use, goods and
        services, value added, property, license, excise, franchise, surtax, education,
        health and payroll taxes, pension, unemployment insurance and worker’s
        compensation levies), duties, premiums, assessments, rates, imposts, fees,
        levies or other charges, including any governmental charges, penalties,
        interest and fines imposed by or payable to any Governmental Authority;
        and

	 	 	 	 
	 	(www) 	 “TSX” means the Toronto Stock
        Exchange.

	1.2 	
      The following Exhibits form part of this
  Agreement:

Exhibit 1 — Plan of Arrangement

Exhibit 2 — Exploration Assets 
Exhibit 3 — Non-exploration Assets

Exhibit 4 — Outstanding Dynamic Options

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ARTICLE 2
INTERPRETATION

	2.1 	
      The division of this Agreement into Articles, Sections,
      subsections and paragraphs, the provision of a table of contents hereto
      and the insertion of headings are for convenience of reference only and
      shall not affect in any way the meaning or interpretation of this
      Agreement.

	 	 
	2.2 	
      Unless the contrary intention appears, references in this
      Agreement to an Article, Section, subsection, paragraph, clause, subclause
      or schedule by number or letter or both refer to the article, section,
      subsection, paragraph, clause, subclause or schedule, respectively,
      bearing that designation in this Agreement.

	 	 
	2.3 	
      In this Agreement, unless the contrary intention appears,
      words importing the singular include the plural and vice versa and; words
      importing gender shall include all genders.

	 	 
	2.4 	
      In the event that the date on which any action is
      required to be taken hereunder by any of the parties is not a business day
      in the place where the action is required to be taken, such action shall
      be required to be taken on the next succeeding day which is a business day
      in such place.

	 	 
	2.5 	
      References in this Agreement to any statute or sections
      thereof shall include such statute as amended or substituted and any
      regulations promulgated thereunder from time to time in effect.

	 	 
	2.6 	
      Unless otherwise specifically designated, all references
      in this Agreement to sums of money are expressed in lawful money of
      Canada.

	 	 
	2.7 	
      All representations, warranties, covenants and opinions
      in or contemplated by this Agreement as to the enforceability of any
      covenant, agreement or document are subject to enforceability being
      limited by applicable bankruptcy, insolvency, fraudulent transfer,
      reorganization, moratorium and other laws relating to or affecting
      creditors’ rights generally, and the discretionary nature of certain
      remedies (including specific performance and injunctive relief and general
      principles of equity).

	 	 
	2.8 	
      All references to the date of this Agreement, “the date
      hereof” or similar expressions or references shall mean July 20, 2005,
      except as is expressly provided herein.

	 	 
	2.9 	
      Unless otherwise stated, all accounting terms used in
      this Agreement shall have the meanings attributable thereto under Canadian
      GAAP and all determinations of an accounting nature required to be made
      shall be made in a manner consistent with Canadian GAAP applied on a
      consistent basis.

	 	 
	2.10 	
      Whenever used in this Agreement, the words “includes” and
      “including” and similar terms of inclusion shall not, unless expressly
      modified by the words “only” or “solely”, be construed as terms of
      limitation, but rather shall mean “includes but is not limited to” and
      “including but not limited to”, so that references to included matters
      shall be regarded as illustrative without being either characterizing or
      exhaustive.

	 	 
	2.11 	
      In this Agreement, whenever a representation or warranty
      is made on the basis of the knowledge or awareness of Dynamic or Sequoia,
      as applicable, such knowledge or awareness consists only of the actual
      knowledge or awareness, as of the date of this Agreement, of the directors
      and officers of Dynamic or Sequoia, as applicable, but does not include
      the knowledge or awareness of any other individual or any constructive,
      implied or imputed knowledge.

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ARTICLE 3
DYNAMIC’S CLOSING CONDITIONS

	3.1 	
      The obligation of Dynamic and ExploreCo to complete the
      transactions contemplated herein are subject to the fulfilment of the
      following conditions precedent on or before the Effective Date or such
      other time as is specified below:

	 	 	 	 	 
		(a) 	
      the representations and warranties made by Sequoia and
      AcquisitionCo in Section 7.1 of this Agreement shall be true as of
      the Effective Date as if made on and as of such date (except for
      representations and warranties which refer to another date, which shall be
      true as of that date) except where the failure of such representations and
      warranties to be true and correct would not, directly or indirectly,
      adversely affect the completion of the Arrangement in accordance with its
      terms and Sequoia shall have provided to Dynamic a certificate of an
      officer of Sequoia Oil & Gas Ltd. certifying as to such matters on
      behalf of Sequoia on the Effective Date;

	 	 	 	 	 
		(b) 	
      Sequoia shall have provided Dynamic with opinions of
      Sequoia Counsel satisfactory to Dynamic, acting reasonably, dated the
      Effective Date and addressed to Dynamic to the effect that:

	 	 	 	 	 
			(i) 	
      Sequoia is a duly formed and validly subsisting trust
      organized under the laws of the Province of Alberta;

	 	 	 	 	 
			(ii) 	
      all necessary proceedings and actions of each of Sequoia
      and AcquisitionCo have been taken to fully, validly and effectively
      authorize this Agreement and the transactions contemplated herein,
      including the Arrangement, the performance by Sequoia and AcquisitionCo of
      their obligations hereunder and thereunder, and the execution and delivery
      by Sequoia and AcquisitionCo of this Agreement and all documents to be
      delivered pursuant hereto;

	 	 	 	 	 
			(iii) 	
      the execution and delivery by each of Sequoia and
      AcquisitionCo of this Agreement and all related documents to be delivered
      pursuant to this Agreement to which Sequoia or AcquisitionCo is a party,
      the performance by Sequoia and AcquisitionCo of their obligations
      hereunder and thereunder, and the consummation of the transactions
      contemplated herein and therein will not:

	 	 	 	 	 
				(A) 	
      result in the breach of or violate any term or provision
      of the Sequoia Trust Indenture or any other governing documents of Sequoia
      or the notice of articles or articles or other governing documents of
      AcquisitionCo; or

	 	 	 	 	 
				(B) 	
      violate any provision of law or administrative regulation
      or, in each case as known to Sequoia Counsel, without special inquiry, any
      judicial or administrative order, award, judgment or decree applicable to
      Sequoia; and

	 	 	 	 	 
			(iv) 	
      this Agreement has been, and the documents delivered
      pursuant hereto to which Sequoia or AcquisitionCo is a party have been,
      duly executed and delivered by Sequoia and AcquisitionCo and this
      Agreement and such other documents are, valid and binding on Sequoia and
      AcquisitionCo and enforceable against Sequoia and AcquisitionCo in
      accordance with their terms,

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      Sequoia shall also have provided to Dynamic customary
      transaction opinions of Sequoia Counsel satisfactory to Dynamic, acting
      reasonably, pertaining to AcquisitionCo in respect to matters concerning
      due incorporation; due authorization, execution, delivery, performance and
      enforceability of the transaction agreements; and to breach of governing
      documents or violation of laws, which opinions shall be dated the
      Effective Date and shall be addressed to Dynamic.

	 	 	 
	 		
      In giving the foregoing opinions, Sequoia Counsel may
      rely, in respect of matters governed by the laws of any jurisdiction other
      than the Province of British Columbia or Alberta, or the laws of Canada
      applicable therein, upon the opinion of local counsel in such jurisdiction
      provided that Sequoia Counsel is of the opinion that the opinion of such
      local counsel is one upon which Sequoia Counsel may properly rely and, in
      respect of matters of fact, upon certificates of senior officers of
      Sequoia or any other appropriate persons reasonably acceptable to Dynamic
      Counsel provided further that such opinion shall be limited to the
      applicable federal and provincial laws of Canada;

	 	 	 
	 	(c) 	
      Sequoia and AcquisitionCo shall have complied in all
      material respects with their covenants in this Agreement and Sequoia shall
      have provided to Dynamic a certificate of a senior officer of Sequoia Oil
      and Gas Ltd. certifying, on behalf of Sequoia and AcquisitionCo, as to
      such compliance and Sequoia shall have no actual knowledge to the
      contrary; and

	 	 	 
	 	(d) 	
      no later than three (3) business days before the
      Effective Date, an amount equal to the Cash Consideration payable by
      AcquisitionCo pursuant to the Arrangement, shall have been deposited with
      the Depositary in accordance with Section 5.2 of the Plan of
      Arrangement.

The foregoing conditions precedent are for the benefit of
Dynamic and ExploreCo and may be waived, in whole or in part, by Dynamic in
writing at any time. If any of the conditions precedent shall not be complied
with or waived by Dynamic on or before the date required for the performance
thereof, Dynamic may, in addition to the other remedies it may have at law or
equity, rescind and terminate this Agreement by written notice from Dynamic to
Sequoia.

ARTICLE 4
SEQUOIA’S CLOSING CONDITIONS

	4.1 	
      The obligation of AcquisitionCo and Sequoia to complete
      the transactions contemplated herein is subject to fulfilment of the
      following conditions precedent on or before the Effective Date or such
      other time as is specified below:

	 	 	 
		(a) 	
      the representations and warranties made by Dynamic in
      Section 6.1 of this Agreement shall be true as of the Effective
      Date as if made on and as of such date (except for representations and
      warranties which refer to another date, which shall be true as of that
      date) except where the failure of such representations and warranties to
      be true and correct would not have a Material Adverse Effect on Dynamic
      and its subsidiaries, taken as a whole; and Dynamic shall have provided to
      Sequoia a certificate of an officer of Dynamic certifying as to such
      matters on the Effective Date and Dynamic shall have no actual knowledge
      to the contrary;

	 	 	 
		(b) 	
      Dynamic shall have provided Sequoia with opinions of
      Dynamic Counsel satisfactory to Sequoia and Sequoia Counsel, acting
      reasonably, dated the Effective Date and addressed to
  Sequoia:

C-11

	 	(i) 	
      to the effect that Dynamic is a valid and subsisting
      corporation under the laws of the Province of British Columbia and has
      full power and authority to enter into this Agreement and perform its
      obligations hereunder;

	 	 	 	 
	 	(ii) 	
      to the effect that all necessary corporate proceedings
      and actions of Dynamic, have been taken to fully, validly and effectively
      authorize this Agreement and the Arrangement and the transactions
      contemplated herein and therein, including the performance by Dynamic of
      its obligations hereunder and thereunder, and the execution and delivery
      by Dynamic of this Agreement and all documents delivered pursuant hereto
      or thereto;

	 	 	 	 
	 	(iii) 	
      to the effect that the execution and delivery by Dynamic
      of this Agreement and all related documents delivered pursuant to this
      Agreement to which Dynamic is a party, the performance by Dynamic of its
      obligations hereunder and thereunder, and the consummation of the
      transactions contemplated herein and therein will not:

	 	 	 	 
	 		(A) 	
      result in the breach of or violate any term or provision
      of the notices of articles or articles of Dynamic; or

	 	 	 	 
	 		(B) 	
      violate any provision of law or administrative regulation
      or, in each case as known to Dynamic Counsel, without special inquiry, any
      judicial or administrative order, award, judgment or decree applicable to
      Dynamic, or the Business.

	 	 	 	 
	 	(iv) 	
      to the effect that this Agreement and the documents
      delivered pursuant hereto to which Dynamic is a party have been duly
      executed and delivered by Dynamic and this Agreement is, and such other
      documents are, valid and binding on Dynamic and enforceable against it in
      accordance with their respective terms; and

	 	 	 	 
	 	(v) 	
      as to the authorized and outstanding capital of Dynamic
      immediately prior to the Effective Date.

	 		
      Dynamic shall also have provided to Sequoia customary
      transaction opinions of Dynamic Counsel satisfactory to Sequoia, acting
      reasonably, pertaining to Dynamic’s subsidiaries in respect to matters
      concerning due formation or incorporation (as applicable); due
      authorization, execution, delivery, performance and enforceability of
      transaction agreements; and to breach of governing documents or violation
      of laws, which opinions shall be dated the Effective Date and shall be
      addressed to Sequoia.

	 	 	 
	 		
      In giving such opinions, Dynamic Counsel may rely, in
      respect of matters governed by the laws of any jurisdiction other than the
      Provinces of British Columbia or Alberta or, the laws of Canada applicable
      therein, upon the opinion of local counsel in such jurisdiction provided
      that Dynamic Counsel is of the opinion that the opinion of such local
      counsel is one upon which Dynamic Counsel may properly rely and, in
      respect of matters of fact, upon certificates of senior officers of
      Dynamic or any other appropriate persons reasonably acceptable to Sequoia
      Counsel;

	 	 	 
	 	(c) 	
      Dynamic shall have complied in all material respects with
      its covenants in this Agreement and Dynamic shall have provided to Sequoia
      a certificate of a senior officer certifying as to such compliance and
      Dynamic shall have no actual knowledge to the
contrary;

C-12

	 	(d) 	
      Dynamic shall have received in cash the entire gross
      proceeds payable upon the exercise of those Dynamic Options exercised from
      the date of this Agreement until the Effective Time and Dynamic shall have
      provided to Sequoia a certificate of its Chief Financial Officer
      certifying as to such receipt;

	 	 	 
	 	(e) 	
      before giving effect to the transactions contemplated by
      this Agreement, there shall have been no Material Adverse Change or any
      condition event or development involving a prospective Material Adverse
      Change in respect of Dynamic or the Business, except as disclosed in the
      Dynamic Public Documents (including the Dynamic Financial Statements)
      prior to the date hereof or except as have been previously disclosed in
      writing to Sequoia prior to the date hereof;

	 	 	 
	 	(f) 	
      the Partnership shall have been created and the
      Non-Exploration Assets shall have been conveyed to the Partnership
      pursuant to the Partnership Conveyance Agreement on or before September 1,
      2005;

	 	 	 
	 	(g) 	
      prior to the Effective Time, all of the outstanding
      Dynamic Options shall have been exercised, cancelled or otherwise
      terminated, as evidenced by a certificate from a senior officer of Dynamic
      confirming that all Dynamic Options have been exercised, cancelled or
      terminated, or Sequoia shall be otherwise satisfied that the Dynamic
      Options will no longer represent any right to acquire Dynamic Shares after
      giving effect to the Arrangement;

	 	 	 
	 	(h) 	
      holders of not more than 5% of the issued and outstanding
      Dynamic Shares shall have exercised rights of dissent in relation to the
      Arrangement;

	 	 	 
	 	(i) 	
      the board of directors of Dynamic shall have made and
      shall not have changed, withdrawn or modified its endorsement of the
      Arrangement, its determination that the Arrangement is fair and in the
      best interests of Dynamic and the Dynamic Shareholders and its
      recommendation that Dynamic Shareholders vote in favour of the
      Arrangement;

	 	 	 
	 	(j) 	
      each of the members of the board of directors of Dynamic
      and each of the officers of Dynamic shall have provided their written
      resignations as directors and officers effective on or before the
      Effective Date together with a release (satisfactory to Sequoia, acting
      reasonably) in favour of Dynamic, in exchange for a release of Dynamic
      (satisfactory to Sequoia acting reasonably) in favour of each of such
      directors and officers (subject, in each case, to ongoing rights of
      indemnity in favour of such directors and officers), and the board of
      directors of Dynamic shall have been reconstituted with nominees of
      Sequoia as at the Effective Date;

	 	 	 
	 	(k) 	
      Sequoia shall be satisfied that there are no outstanding
      claims or rights or securities which could become claims or rights to
      Dynamic Shares;

	 	 	 
	 	(l) 	
      immediately prior to the Effective Time: (i) the
      aggregate number of Dynamic Shares, issued and outstanding (including
      those which may be issued pursuant to the exercise of the then outstanding
      Dynamic Options) does not exceed 26,467,278; (ii) there are no other
      shares of Dynamic outstanding; and (iii) no person has any agreement or
      option or any right or privilege (whether by law, pre-emptive right, by
      contract or otherwise) capable of becoming an agreement or option for the
      purchase, subscription, allotment or issuance of any unissued Dynamic
      Shares; and Dynamic shall have provided to Sequoia a certificate from
      Dynamic’s registrar and transfer agent as to the issued and outstanding
      Dynamic Shares, as at the

C-13

	 		
      Effective Date and before giving effect to the
      transactions contemplated pursuant to the Arrangement;

	 	 	 
	 	(m) 	
      there shall be no action taken under any existing law,
      regulation, rule or order, nor any statute, rule, regulation or order
      which is enacted, enforced, promulgated or issued by any court,
      department, commission, board, regulatory body, government or regulatory
      authority or similar agency, domestic or foreign, that imposes any
      material limitations on the ability of AcquisitionCo to effectively
      exercise full rights of ownership of the Dynamic Shares, including,
      without limitation, the right to vote any such shares, or the ability of
      Sequoia to operate, use and enjoy the Business; and

	 	 	 
	 	(n) 	
      Sequoia and the Dynamic Shareholders referred to in
      Section 1.1(yy) will have executed and delivered Lock-up Agreements
      on or before 4:00 p.m. on July 21, 2005.

The foregoing conditions precedent are for the benefit of
Sequoia and AcquisitionCo and may be waived, in whole or in part, by Sequoia in
writing at any time. If any of the said conditions precedent shall not be
complied with or waived by Sequoia on or before the date required for the
performance thereof, Sequoia may, in addition to the other remedies it may have
at law or equity, rescind and terminate this Agreement by written notice to
Dynamic.

ARTICLE 5
MUTUAL CLOSING CONDITIONS

	5.1 	
      The obligations of Sequoia, AcquisitionCo, Dynamic and
      ExploreCo to complete the transactions contemplated herein and to file the
      Arrangement Filings in order to give effect to the Arrangement are subject
      to fulfilment of the following conditions precedent on or before the
      Effective Date or such other time as is specified below:

	 	 	 
		(a) 	
      on or before September 1, 2005, the Interim Order shall
      have been granted in form and substance satisfactory to each of Sequoia
      and Dynamic, each acting reasonably, and such Interim Order shall not have
      been set aside or modified in a manner unacceptable to Sequoia or Dynamic,
      each acting reasonably;

	 	 	 
		(b) 	
      the “Arrangement Resolution” (as defined in the Plan of
      Arrangement) shall have been passed by the Dynamic Securityholders as
      required pursuant to the Interim Order and all Applicable Laws, on or
      before September 29, 2005, in form and substance satisfactory to each of
      Sequoia and Dynamic, acting reasonably, duly approving the Arrangement in
      accordance with the Interim Order;

	 	 	 
		(c) 	
      on or before September 30, 2005, the Final Order shall
      have been granted in form and substance satisfactory to Sequoia and
      Dynamic, each acting reasonably;

	 	 	 
		(d) 	
      the Arrangement shall have become effective on or before
      September 30, 2005 in accordance with the terms of the Plan of
      Arrangement;

	 	 	 
		(e) 	
      there shall be no action taken under any existing
      applicable law, regulation, rule or order, nor any statute, rule,
      regulation or order which is enacted, enforced, promulgated or issued by
      any court, department, commission, board, regulatory body, government or
      regulatory authority or similar agency, domestic or foreign,
  that:

C-14

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

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

	 	 	 	 
	 	(f) 	
      Dynamic and Sequoia shall have obtained all consents,
      approvals and authorizations (including, without limitation, all stock
      exchange, securities commission and other regulatory approvals) required
      or necessary in connection with the transactions contemplated herein on
      terms and conditions satisfactory to Dynamic and Sequoia, acting
      reasonably, and all applicable domestic and foreign statutory or
      regulatory waiting periods to the transactions contemplated under the
      Arrangement shall have expired or been terminated, and no objection or
      opposition shall have been filed, initiated or made by any regulatory
      authority during any applicable statutory or regulatory period;
  and

	 	 	 	 
	 	(g) 	
      On or before the Effective Date, either the TSX or the
      TSX Venture Exchange shall have conditionally approved the listing of the
      ExploreCo Shares issuable under the Arrangement on terms which ExploreCo
      is capable of satisfying after giving effect to the
  Arrangement.

The foregoing conditions are for the mutual benefit of Sequoia
and Dynamic and may be waived, in whole or in part, by Sequoia and Dynamic
together, at any time. If any of the said conditions precedent shall not be
complied with or waived as aforesaid on or before the date required for the
performance thereof, Sequoia or Dynamic may, in addition to the other remedies
it may have at law or in equity, rescind and terminate this Agreement by written
notice to the other parties.

ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF DYNAMIC
AND EXPLORECO

	6.1 	
      Dynamic represents, warrants and covenants to Sequoia
      that:

	 	 	 
		(a) 	
      Dynamic is duly organized and validly existing under the
      laws of the Province of British Columbia, has the capacity, power and
      authority to own or lease its property and assets and carry on its
      business as now conducted by it;

	 	 	 
		(b) 	
      at the Effective Date, Dynamic GP will be duly organized
      and validly existing under the laws of the Province of Alberta and will
      have the capacity, power and authority to own or lease its property and
      assets and carry on its business;

	 	 	 
		(c) 	
      Dynamic is, and at the Effective Date Dynamic GP will be,
      duly qualified to carry on business and is in good standing in each
      jurisdiction in which the nature of its business or the property or assets
      owned or leased by it makes such qualification necessary, except where the
      failure to be so qualified or in good standing will not have a Material
      Adverse Effect on Dynamic or the Business;

	 	 	 
		(d) 	
      at the Effective Date, the Partnership will be a validly
      existing partnership under the laws of the Province of Alberta and will
      own the Non-exploration Assets;

	 	 	 
		(e) 	
      at the date hereof Dynamic does not have any subsidiaries
      other than ExploreCo and at the Effective Date Dynamic will not have any
      subsidiaries other than ExploreCo;

C-15

	 	(f) 	
      Dynamic has all requisite corporate power and authority
      to enter into this Agreement and, subject to the Dynamic Securityholders
      approving the Arrangement Resolution pursuant to and in accordance with
      the Interim Order, all documents to be delivered pursuant hereto to which
      Dynamic will be a party and, subject to the Dynamic Securityholders
      approving the Arrangement Resolution pursuant to and in accordance with
      the Interim Order, to perform its obligations hereunder and
    thereunder;

	 	 	 	 
	 	(g) 	
      this Agreement has been duly authorized, executed and
      delivered by Dynamic and all documents to be executed and delivered by
      Dynamic pursuant to this Agreement will be duly executed and delivered,
      and this Agreement constitutes, and each of the other documents to be
      executed and delivered by Dynamic pursuant to this Agreement will, once
      executed, constitute, a legal, valid and binding obligation of Dynamic
      enforceable against it in accordance with its terms;

	 	 	 	 
	 	(h) 	
      the execution and delivery of this Agreement and all
      documents to be delivered pursuant hereto to which Dynamic will be a
      party, the performance of the terms hereof and thereof and the
      consummation of the transactions contemplated herein and therein do not
      and will not:

	 	 	 	 
	 		(i) 	
      result in the breach of or violate any term or provision
      of the notice of articles or articles of Dynamic;

	 	 	 	 
	 		(ii) 	
      conflict with, result in a breach of, constitute a
      default under, or accelerate or permit the acceleration of the performance
      required by, any agreement, contract, instrument, license, permit or
      authority to which Dynamic is a party or by which it is bound or to which
      any of its property is subject;

	 	 	 	 
	 		(iii) 	
      give to any person any material interest or right,
      including the right of purchase, termination, cancellation or acceleration
      under any such agreement, contract instrument, license, permit or
      authority;

	 	 	 	 
	 		(iv) 	
      result in the creation of any Encumbrance upon any assets
      comprised in the Business; or

	 	 	 	 
	 		(v) 	
      violate any provision of law or administrative regulation
      or any judicial or administrative order, award, judgment or decree
      applicable to Dynamic, the Dynamic Shares, or the Business,

	 	 	 	 
	 		
      except to the extent such result or occurrence as set
      forth in this subsection 6.1(h) does not have a Material Adverse
      Effect on Dynamic;

	 	 	 	 
	 	(i) 	
      Dynamic has complied with and is in compliance with all
      laws or regulations applicable to the operation of the Business, including
      all Applicable Laws and Regulations, except where failure to do so would
      not have a Material Adverse Effect on Dynamic, and Dynamic has all
      licenses, permits, orders or approvals of, and has made all required
      registrations with any government or regulatory body that are material to
      the conduct of the Business;

	 	 	 	 
	 	(j) 	 the board of directors of Dynamic, upon consultation
        with its advisors and upon receipt of a Fairness Opinion, has unanimously
        approved the Arrangement and Dynamic entering into this Agreement and
        has determined that (i) the Arrangement is fair to Dynamic Shareholders,
        (ii) the Arrangement is in the best interests of Dynamic and the Dynamic
        Shareholders, and (iii) that the board of directors of Dynamic will unanimously
        recommend that Dynamic Shareholders vote in favour of the Arrangement;
      

C-16

	 	(k)	 Dynamic has not incurred any obligation or liability,
        contingent or otherwise, for brokerage fees, finder’s fees, agent’s
        commission, financial advisory fees or other similar forms of compensation
        with respect to the transactions contemplated herein, other than: (i)
        the fee payable pursuant to the financial advisory agreement dated October
        8, 2004 entered into between Orion Securities Inc. and Dynamic (the “Financial
        Advisory Fee”), a copy of which has been provided to Sequoia,
        and the Financial Advisory Fee will not exceed $1,230,575; and (ii) the
        fee payable pursuant to the financial advisory agreement dated June 22,
        2005 entered into between Peters & Co. Limited and Dynamic (the “Fairness
        Advisory Fee”), a copy of which has been provided to Sequoia,
        and the Fairness Advisory Fee will not exceed $225,000;

	 	 	 
	 	(l) 	 except as previously disclosed in writing to Sequoia,
        there are no actions, suits, other legal, administrative or arbitration
        proceedings or government investigations commenced, or to the knowledge
        of Dynamic contemplated, at law or in equity or before or by any court
        or other Governmental Authority and which involve or affect Dynamic, or
        the Business, including, without limitation, the title to, or ownership
        of, the Business, which could have a Material Adverse Effect on Dynamic
        or the Business and, to the best of the knowledge, information and belief
        of Dynamic, there are no grounds upon which any such actions, suits or
        proceedings may be commenced with a reasonable likelihood of success;

	 	 	 
	 	(m) 	 as of the date hereof, the authorized capital of Dynamic
        consists of up to 60 million Dynamic Shares, of which as at the date hereof,
        24,558,978 Dynamic Shares are presently issued and outstanding, all of
        which are issued as fully paid and non-assessable;

	 	 	 
	 	(n) 	 no person has any agreement, option, right or privilege
        (including, without limitation, whether by law, pre emptive right, contract
        or otherwise) to purchase, subscribe for, convert into, exchange for or
        otherwise require the issuance of, nor any agreement, option, right or
        privilege capable of becoming any such agreement, option, right or privilege,
        any of the unissued shares or other securities of Dynamic, except for
        Dynamic Options to purchase in an aggregate not more than 1,908,300 Dynamic
        Shares, the particulars of which are set out in Exhibit 4 hereto;

	 	 	 
	 	(o) 	 except as disclosed in writing to Sequoia prior to the
        date hereof, as at the date hereof the minute books of Dynamic are complete,
        accurate and up to date in all material respects and contain the minutes
        of all meetings and all resolutions of the directors and shareholders
        of Dynamic;

	 	 	 
	 	(p) 	 the Dynamic Financial Statements have been prepared
        in accordance with Canadian GAAP applied on a basis consistent with that
        of prior periods (except as stated therein) and present fairly the financial
        position of Dynamic as of the dates provided therein and the results of
        its operations and the changes in financial position for the periods then
        ended and reflect all assets, liabilities and obligations (absolute, accrued,
        contingent or otherwise) of Dynamic as at the dates thereof and in all
        material respects all accounts receivable included in the Dynamic Financial
        Statements, except to the extent collected since the date thereof, are
        bona fide, collectible and not subject to set-off or counterclaim;

C-17

	 	(q) 	
      no securities commission, stock exchange or similar
      regulatory authority has issued any order preventing or suspending trading
      of any securities of Dynamic, and Dynamic is not in default of any
      requirement of Applicable Laws;

	 	 	 	 
	 	(r) 	
      the information and statements set forth in the Dynamic
      Public Documents were true, correct and complete and did not contain any
      material misrepresentations, as of their respective dates, no material
      change has occurred in relation to Dynamic which is not disclosed in such
      public record, and Dynamic has not filed any confidential material change
      reports which continue to be confidential;

	 	 	 	 
	 	(s) 	
      since December 31, 2004, Dynamic has:

	 	 	 	 
	 		(i) 	
      not amended its articles or notice of articles;

	 	 	 	 
	 		(ii) 	
      not disposed of any property or assets out of the
      ordinary course of business and not disposed of any material properties
      set forth in the Dynamic Reserve Report;

	 	 	 	 
	 		(iii) 	
      conducted its business in all material respects in the
      usual, ordinary and regular course and consistent with past
    practice;

	 	 	 	 
	 		(iv) 	
      not suffered any Material Adverse Change in its
      Business;

	 	 	 	 
	 		(v) 	
      not made any change in its accounting principles and
      practices as theretofore applied including, without limitation, the basis
      upon which its assets and liabilities are recorded on its books and its
      earnings and profits and losses are ascertained, except as required under
      Canadian GAAP;

	 	 	 	 
	 		(vi) 	
      not paid any bonuses or other unusual payments other than
      directors fees or as otherwise as disclosed in writing to Sequoia prior to
      the date hereof;

	 	 	 	 
	 		(vii) 	
      not issued any guarantees or made any commitments outside
      the normal course of business other than as disclosed in writing to
      Sequoia prior to the date hereof;

	 	 	 	 
	 		(viii) 	
      not incurred any material liabilities of any nature,
      whether accrued, contingent or otherwise or which would be required by
      Canadian GAAP to be reflected on the balance sheet of Dynamic;
  and

	 	 	 	 
	 		(ix) 	
      except as disclosed in writing to Sequoia prior to the
      date hereof, not entered into or closed any hedge, swap or other like
      transactions;

	 	 	 	 
	 	(t) 	
      since December 31, 2004, there has been no Material
      Adverse Change in the affairs, operations, capitalization, financial
      condition, prospect, licenses, permits, rights or privileges, whether
      conditional or otherwise, of Dynamic and its subsidiaries on a
      consolidated basis;

	 	 	 	 
	 	(u) 	
      Dynamic has conducted and is conducting the Business and
      operations of Dynamic in accordance with good oil and gas industry
      practice and in compliance in all material respects with all Applicable
      Laws and Regulations and, in particular, all applicable licensing and
      environmental legislation, regulations or by-laws or other lawful
      requirements of any governmental or regulatory bodies applicable to
      Dynamic of each jurisdiction in which it carries on business, and Dynamic
      holds all licenses, registrations and qualifications
  material

C-18

	 		
      to its business and assets (and which are necessary or
      desirable to carry on its business) in all jurisdictions in which it
      carries on business and where the failure to so conduct business or be in
      such compliance would have a Material Adverse Effect on the business and
      operations of Dynamic, taken as a whole, and none of such licenses,
      registrations or qualifications contains any burdensome term, provision,
      condition or limitation which has or is likely to have any Material
      Adverse Effect on the Business and operations of Dynamic, taken as a
      whole;

	 	 	 
	 	(v) 	
      all ad valorem, property, production, severance and
      similar taxes and assessments, royalties or lease rentals based on or
      measured by the ownership of property or the production of petroleum
      substances or the receipts of proceeds therefrom payable by Dynamic in
      respect of any properties or assets up to the date hereof and to the
      Effective Time have been or will be properly and fully paid and
      discharged;

	 	 	 
	 	(w) 	
      except as disclosed in writing to Sequoia prior to the
      date hereof, no officer, director, employee or consultant of Dynamic, any
      associate or affiliate of any such person or any party not at arm’s length
      to Dynamic owns, has or is entitled to any royalty, net profits interest,
      carried interest or other Encumbrances of any nature whatsoever which are
      based on production from Dynamic’ properties or assets or any revenue or
      rights attributed thereto;

	 	 	 
	 	(x) 	
      except as have been disclosed in writing to Sequoia prior
      to the date hereof, there are no written contracts, bonus, severance or
      other arrangements to which Dynamic is a party with any director, officer,
      employee or consultant of Dynamic, or any associate or affiliate of any
      such director, officer, employee or consultant, nor is there any
      indebtedness owing by Dynamic to any such parties or by any such parties
      to Dynamic and the aggregate amount payable under all employment
      contracts, bonus and severance arrangements or obligations, whether by
      agreement, arrangement or required by law and whether or not in writing,
      upon the completion of the Arrangement does not exceed $1,773,650 (the
      “Severance Obligations”);

	 	 	 
	 	(y) 	
      prior to the Effective Date Dynamic will not implement
      any shareholder rights plan, amend its existing shareholder rights plan
      or, except as contemplated in this Agreement, any other form of plan,
      agreement, contract or instrument that will trigger any rights to acquire
      Dynamic Shares or other securities of Dynamic or rights, entitlements or
      privileges in favour of any person upon the entering into of this
      Agreement or on the Arrangement becoming effective;

	 	 	 
	 	(z) 	
      all policies of insurance in force as of the date hereof
      naming Dynamic as an insured have been disclosed to Sequoia, all such
      policies of insurance shall remain in force and effect and shall not be
      cancelled or otherwise terminated as a result of the transactions
      contemplated hereby or by the Plan of Arrangement and, in the event such
      policies expire pursuant to their terms, Dynamic will use reasonable
      commercial efforts to renew such insurance for at least such period of
      time as is necessary to have adequate insurance until after the Effective
      Date;

	 	 	 
	 	(aa) 	
      Dynamic has made available to Sproule prior to the
      issuance of the Dynamic Reserve Report, all information necessary for and
      material to the accurate assessment of the petroleum and natural gas
      reserves. None of such information contained a material misrepresentation
      and (other than as may be affected by the disposition of petroleum and
      natural gas assets in the ordinary course of its business) Dynamic has no
      knowledge of any Material Adverse Change to the petroleum and natural gas
      reserves of Dynamic since the effective date of the Dynamic Reserve
      Report;

C-19

	 	(bb) 	
      Dynamic has renounced all amounts required to be
      renounced by it under all flow-through agreements to which it is a party
      and, as at the date hereof, Dynamic has outstanding obligations to incur
      expenditures of not more than $1,421,838 pursuant to such flow-through
      agreements;

	 	 	 
	 	(cc) 	
      except as has been disclosed in writing to Sequoia prior
      to the date hereof, Dynamic is not aware of any defects, failures or
      impairments in the title of Dynamic to its petroleum and natural gas
      properties or facilities which in aggregate could have a Material Adverse
      Effect on Dynamic, taken as a whole, or the anticipated cash-flow of
      Dynamic or the Business;

	 	 	 
	 	(dd) 	
      as of May 1, 2005, Dynamic’s liabilities did not exceed
      $29,000,000;

	 	 	 
	 	(ee) 	
      at or before Closing, Dynamic will have duly and timely
      filed, in proper form, all returns in respect of Taxes under the Tax Act,
      the Alberta Corporate Tax Act (Alberta), the income tax legislation
      of any other province of Canada or any foreign country in which it carries
      on business or to the jurisdiction of which it is otherwise subject, the
      Mines and Minerals Tax Act (Alberta), the Freehold Mineral
      Rights Tax Act (Alberta) and similar legislation of other provinces
      having jurisdiction over the affairs of Dynamic, the Excise Tax Act
      (Canada) and any sales tax legislation of a province of Canada or any
      foreign country in which it is liable to pay or remit Taxes for all prior
      periods in respect of which such filings are required and due under
      applicable legislation; such returns are true, complete and correct in all
      material respects; the tax liability of Dynamic is as shown on such
      returns; all Taxes payable with respect to periods ending on or prior to
      May 1, 2005 related to Dynamic have been paid or reflected in the Dynamic
      Financial Statements and calculated in accordance with Canadian GAAP; all
      payments by Dynamic to any non-resident of Canada have been made in
      accordance with all applicable legislation in respect of withholding tax;
      Dynamic has withheld from each payment made to any of its present or
      former officers, directors and employees the amount of all Taxes
      (including, without limitation, income tax) and other deductions required
      to be withheld therefrom and has paid the same to the proper tax or other
      authority within the time required under any applicable tax legislation;
      Dynamic has remitted any goods and services tax or sales tax payable by it
      or collected by it to the proper tax authority within the time required
      under any applicable tax legislation except for such taxes arising as a
      result of the creation and existence of the Partnership or which arise as
      a result of any action or omission taken by AcquisitionCo or Sequoia;
      Dynamic has made all instalment payments required to be made prior to the
      date hereof under all applicable tax legislation and will have made on or
      before the Effective Date all instalment payments required to be made
      prior to the Effective Date except for such instalment payments arising as
      a result of the creation and existence of the Partnership or which arise
      as a result of any action or omission taken by AcquisitionCo or Sequoia;
      and Dynamic has paid all taxes which are due and payable as at the date
      hereof and will have paid all taxes due or payable prior to the Effective
      Date on or before the Effective Date, except for such taxes arising as a
      result of the creation and existence of the Partnership or which arise as
      a result of any action or omission taken by AcquisitionCo or
    Sequoia;

	 	 	 
	 	(ff) 	
      there are no outstanding agreements or waivers material
      to Dynamic extending the statutory period of limitations applicable to any
      federal, provincial or other income tax return for any period and there
      are no proposed or issued assessments or reassessments respecting Dynamic
      material to Dynamic or the Business pursuant to which there are amounts
      owing or discussions in respect thereof with any taxing
  authority;

C-20

	 	(gg) 	
      Dynamic has received notices of assessment with respect
      to income tax for all periods ending on or before December 31, 2003 and
      with respect to goods and services tax for all periods ending on or before
      March 31, 2005;

	 	 	 	 
	 	(hh) 	
      Dynamic has no liability, contingent or otherwise, for
      Taxes, other than Taxes not now due and payable with respect to its
      ordinary operations during the current fiscal period. There are no
      contingent tax liabilities or any grounds which could reasonably be
      expected to prompt an assessment or reassessment of Dynamic and Dynamic
      has not received any indication from any taxing authority that an audit,
      investigation, assessment or reassessment is proposed or underway,
      regardless of its merits;

	 	 	 	 
	 	(ii) 	
      as of the Effective Date the Partnership has not had a
      fiscal year ending on or before Closing and no tax election forms have
      been completed or filed with respect to the Partnership;

	 	 	 	 
	 	(jj) 	
      as at July 1, 2005, after accounting for income accrued
      to July 1, 2005 and deductions from the Tax Pools expected as a
      consequence of the transfer of the Exploration Assets to ExploreCo
      pursuant to the ExploreCo Conveyance Agreement, Dynamic had Tax Pools of
      at least the following:

	 	 	 	 
	 		(i) 	
      undepreciated capital cost: $nil,

	 	 	 	 
	 		(ii) 	
      Canadian oil and gas property expense:
  $4,000,000,

	 	 	 	 
	 		(iii) 	
      Canadian development expense: $10,000,000, and

	 	 	 	 
	 		(iv) 	
      Canadian exploration expense: $2,500,000;

	 	 	 	 
	 	(kk) 	
      except as disclosed to Sequoia prior to the date hereof,
      neither Dynamic nor ExploreCo is party to any written contracts of
      employment or consulting agreements or collective bargaining agreements
      and there are no currently existing employment benefit plans, arrangements
      or agreements, other than health and group insurance plans and customary
      government plans such as Canada Pension Plan, Employment Insurance and
      Workers Compensation, to which Dynamic is a party or by which it is
      bound;

	 	 	 	 
	 	(ll) 	
      to the best of the knowledge of Dynamic, except to the
      extent that any violation or other matter referred to in this paragraph
      does not have a Material Adverse Effect on Dynamic, taken as a
    whole:

	 	 	 	 
	 		(i) 	
      Dynamic is not in violation of any applicable federal,
      provincial, municipal or local laws, regulations, orders, government
      decrees, directives or ordinances with respect to environmental, health or
      safety matters (collectively, “Environmental Laws”);

	 	 	 	 
	 		(ii) 	
      Dynamic has operated the Business at all times and has
      received, handled, used, stored, treated, shipped and disposed of all
      contaminants without violation of Environmental Laws;

	 	 	 	 
	 		(iii) 	
      except as disclosed in writing to Sequoia prior to the
      date hereof including as disclosed in a report entitled “Environmental
      Monitoring Programs, St. Albert Gas Plant”, prepared by Brian Lundale,
      Manager Health, Safety and Environment for Dynamic, there have been no
      spills, releases, deposits or discharges of hazardous
or

C-21

			  
	toxic substances, contaminants or wastes which have
        not been rectified on any of the real property owned or leased by Dynamic
        or under its control;

	 	 	 	 
			(iv) 	 there have been no releases, deposits or discharges,
        in violation of Environmental Laws, of any hazardous or toxic substances,
        contaminants or wastes into the earth, air or into any body of water or
        any municipal or other sewer or drain water systems by Dynamic;

	 	 	 	 
			(v) 	 no orders, directions or notices of any Governmental
        Authority have been issued and remain outstanding pursuant to any Environmental
        Laws relating to the business, assets or operations of Dynamic;

	 	 	 	 
			(vi) 	 Dynamic has not failed to report to the proper Governmental
        Authority the occurrence of any event which is required to be so reported
        by any Environmental Law; and

	 	 	 	 
			(vii) 	 Dynamic holds all licenses, permits and approvals required
        under any Environmental Laws in connection with the operation of its business
        and the ownership and use or operation of its assets, all such licenses,
        permits and approvals are in full force and effect, and except for (A)
        notifications and conditions of general application to assets of the type
        owned by Dynamic, and (B) notifications relating to reclamation obligations
        under the Environmental Protection and Enhancement Act (Alberta),
        Dynamic has not received any notification pursuant to any Environmental
        Laws that any work, repairs, construction or capital expenditures are
        required to be made by it as a condition of continued compliance with
        any Environmental Laws, or any license, permit or approval issued pursuant
        thereto, or that any license, permit or approval referred to above is
        about to be reviewed, made subject to limitation or conditions, revoked,
        withdrawn or terminated;

	 	 	 	 
	 	(mm) 	 Dynamic is a “reporting issuer”
        or the equivalent thereof in the provinces of British Columbia and Ontario
        and is a registrant in the United States and is in material compliance
        with all Applicable Laws of such jurisdictions and the rules and policies
        of the TSX and NASDAQ and the Dynamic Shares are listed only on the TSX
        and NASDAQ;

	 	 	 	 
	 	(nn) 	 except for the approvals contemplated in this
        Agreement and approvals that have been obtained and other than in the
        normal course in connection with or in compliance with the provisions
        of Applicable Laws and, the rules of the TSX and NASDAQ, (i) there is
        no legal impediment to the consummation by Dynamic of the transactions
        contemplated by this Agreement or any agreement contemplated hereunder
        and (ii) other than certain filings in the United States, no filing or
        registration with, or authorization, consent or approval of, any domestic
        or foreign public body or authority is necessary in connection with the
        making of this Agreement by Dynamic or the consummation of the transactions
        contemplated by this Agreement or any agreement contemplated hereunder;

	 	 	 	 
	 	(oo) 	 all information relating to Dynamic and the
        Business in the Information Circular shall be true and complete in all
        material respects and shall not contain any material misrepresentation;
        and

	 	 	 	 
	 	(pp) 	 all of the data and information relating to
        Dynamic, its subsidiaries and the Business provided or disclosed to Sequoia
        or any of its officers, employees, agents or other

C-22

		
       
	representatives in writing was accurate and correct in all
      material respects as at the date of such data and information.
	 	 	 	 
	6.2 	
      ExploreCo represents, warrants and covenants to Sequoia
      that:

	 	 	 	 
		(a) 	
      ExploreCo is duly organized and validly existing under
      the laws of the Province of Alberta, has the capacity, power and authority
      to own or lease its property and assets and carry on its business as now
      conducted by it;

	 	 	 	 
		(b) 	
      this Agreement has been duly authorized, executed and
      delivered by ExploreCo and all documents to be executed and delivered by
      ExploreCo pursuant to this Agreement including, without limitation, the
      ExploreCo Conveyance Agreement will be duly executed and delivered, and
      this Agreement constitutes, and each of the other documents to be executed
      and delivered by ExploreCo pursuant to this Agreement will, once executed,
      constitute, a legal, valid and binding obligation of ExploreCo enforceable
      against it in accordance with its terms;

	 	 	 	 
		(c) 	
      the execution and delivery of this Agreement and all
      documents to be delivered by ExploreCo pursuant hereto, the performance of
      the terms hereof and thereof and the consummation of the transactions
      contemplated herein and therein do not and will not:

	 	 	 	 
			(i) 	
      result in the breach of or violate any term or provision
      of the articles, by laws or governing documents of ExploreCo;

	 	 	 	 
			(ii) 	
      conflict with, result in a breach of, constitute a
      default under, or accelerate or permit the acceleration of the performance
      required by, any agreement, contract, instrument, license, permit or
      authority to which ExploreCo is a party or by which it is bound or to
      which any of its property is subject;

	 	 	 	 
			(iii) 	
      give to any person any material interest or right,
      including the right of purchase, termination, cancellation or acceleration
      under any such agreement, contract instrument, license, permit or
      authority;

	 	 	 	 
			(iv) 	
      violate any provision of law or administrative regulation
      or any judicial or administrative order, award, judgment or decree
      applicable to ExploreCo;

	 	 	 	 
			
      except to the extent such result or occurrence as set
      forth in this subsection 6.1(h) does not have a Material Adverse
      Effect on ExploreCo;

	 	 	 	 
		(d) 	
      except as disclosed in writing to Sequoia prior to the
      date hereof, ExploreCo is not party to any written contracts of employment
      or consulting agreements or collective bargaining agreements and there are
      no currently existing employment benefit plans, arrangements or
      agreements, other than health and group insurance plans and customary
      government plans such as Canada Pension Plan, Employment Insurance and
      Workers Compensation, to which ExploreCo is a party or by which it is
      bound;

ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF
SEQUOIA

	7.1 	
      Sequoia and AcquisitionCo jointly and severally
      represent, warrant and covenant to Dynamic
that:

C-23

	 	(a) 	
      Sequoia is a trust duly created and validly existing
      under the laws of Alberta and Sequoia Oil & Gas Ltd. and AcquisitionCo
      are each a corporate body duly incorporated and organized and validly
      existing under the laws of Alberta, and each has the requisite power and
      capacity to undertake its investment activities in the case of Sequoia and
      to carry on its business in the case of Sequoia Oil & Gas Ltd. and
      AcquisitionCo as such activities are or such business is now being
      conducted;

	 	 	 
	 	(b) 	
      Sequoia is the registered and beneficial owner of 100% of
      the outstanding voting shares of Sequoia Oil & Gas Ltd. and the
      beneficial owner of 100% of AcquisitionCo with good and valid title to all
      such shares, free and clear of all liens and encumbrances;

	 	 	 
	 	(c) 	
      Sequoia has the requisite trust power and capacity to
      enter into this Agreement and all documents to be delivered pursuant
      hereto to which Sequoia will be a party and to perform out its obligations
      hereunder and thereunder. AcquisitionCo has all requisite corporate power
      and authority to enter into this Agreement and all documents to be
      delivered pursuant hereto to which AcquisitionCo will be a party and to
      perform its obligations hereunder and thereunder. This Agreement has been
      duly authorized, executed and delivered by Sequoia and AcquisitionCo and
      all documents to be executed and delivered by Sequoia and AcquisitionCo
      pursuant to this Agreement will be duly executed and delivered, and this
      Agreement constitutes, and each of the other documents to be executed and
      delivered by Sequoia or AcquisitionCo pursuant to this Agreement will,
      once executed, constitute, a legal, valid and binding obligation of
      Sequoia and AcquisitionCo, as applicable, enforceable against it in
      accordance with its terms.

	 	 	 
	 	(d) 	
      the execution and delivery of this Agreement and all
      documents to be delivered pursuant hereto to which Sequoia or
      AcquisitionCo will be a party, the performance of the terms hereof and
      thereof and the consummation of the transactions contemplated herein and
      therein do not and will not:

	 	(i) 	
      result in the breach of or violate any term or provision
      of the Sequoia Trust Indenture or any term or provision of the notice of
      articles or articles or other governing documents of AcquisitionCo or any
      of the subsidiaries of Sequoia;

	 	 	 
	 	(ii) 	
      conflict with, result in a breach of, constitute a
      default under, or accelerate or permit the acceleration of the performance
      required by, any agreement, contract, instrument, license, permit or
      authority to which Sequoia or AcquisitionCo is a party or by which either
      Sequoia or AcquisitionCo is bound or to which any of their property is
      subject; or

	 	 	 
	 	(iii) 	
      violate any provision of law or administrative regulation
      or any judicial or administrative order, award, judgment or decree
      applicable to Sequoia or AcquisitionCo;

	 		
      except to the extent such result or occurrence as set
      forth in this subsection 7.1(d) will not, directly or indirectly,
      adversely affect the completion of the Arrangement in accordance with the
      terms of the Plan of Arrangement;

	 	 	 
	 	(e) 	
      completion of the Arrangement will not require the
      approval of the unitholders of Sequoia;

	 	 	 
	 	(f) 	
      Sequoia has made arrangements such that it will have
      available cash sufficient to permit AcquisitionCo to pay the Cash
      Consideration payable as partial consideration for
the

C-24

			 Dynamic Shares pursuant to the Plan of Arrangement and
        as contemplated in Section 3.1(d) and Section 10.1(k) and
        will advance the Cash Consideration to AcquisitionCo prior to three (3)
        business days before the Effective Date to permit AcquisitionCo to satisfy
        the condition set out in such section and comply with Section 10.1(k);
        and

	 	 	 
	 	(g) 	 all of the data and information relating to Sequoia
        and its subsidiaries provided or disclosed to Dynamic or any of its officers,
        employees, agents or other representatives was accurate and correct in
        all material respects as at the date of such data and information.

ARTICLE 8 
COVENANTS OF DYNAMIC

	8.1 	
      Dynamic covenants and agrees with Sequoia that, until
      Closing or the termination of this Agreement (except Section 8.1(i)
      and 8.1(m) which, as set out in Section 12.4 will
      survive termination), whichever is the earlier, except with the prior
      written consent of Sequoia:

	 	 	 	 
		(a) 	
      other than as contemplated herein or as otherwise
      approved by Sequoia in writing, Dynamic will not, directly or indirectly,
      do or permit to occur any of the following:

	 	 	 	 
			(i) 	
      pursue any corporate acquisition or disposition outside
      of the ordinary course of business or amalgamation, merger or arrangement
      or purchase or sale of assets outside of the ordinary course of business
      or make any material change to the business, capital or affairs of
      Dynamic;

	 	 	 	 
			(ii) 	
      issue, enter into any agreement to issue or grant any
      right to acquire (whether absolute or contingent) any securities of
      Dynamic other than the issuance of Dynamic Shares pursuant to outstanding
      Dynamic Options;

	 	 	 	 
			(iii) 	
      amend any agreements relating to outstanding Dynamic
      Options without Sequoia’s prior written consent, which consent shall not
      be unreasonably withheld;

	 	 	 	 
			(iv) 	
      propose or effect any changes in its capital structure or
      its articles or notice of articles;

	 	 	 	 
			(v) 	
      split, combine or re-classify the outstanding Dynamic
      Shares, or declare, set aside or pay any dividend or other distribution
      payable in cash, stock, property or otherwise in respect of Dynamic
      Shares;

	 	 	 	 
			(vi) 	
      redeem, purchase or offer to purchase any Dynamic Shares,
      Dynamic Options or other securities;

	 	 	 	 
			(vii) 	
      reduce the stated capital of Dynamic or any of its
      outstanding shares;

	 	 	 	 
			(viii) 	
      pay any dividends or make any distributions to the
      Dynamic Shareholders;

	 	 	 	 
			(ix) 	
      acquire or agree to acquire (by merger, amalgamation,
      acquisition of securities or assets or otherwise) any person, corporation,
      partnership or other business or organization or division or, except in
      the ordinary course of business, any assets or
property;

C-25

	 	(x) 	
      conduct any activity or operations that would otherwise
      be detrimental to completion of the Arrangement;

	 	 	 
	 	(xi) 	
      other than pursuant to commitments entered into by
      Dynamic prior to the date of the Agreement and disclosed to Sequoia prior
      to the date hereof, expend any amounts, incur any liabilities, create any
      Encumbrance on any of its properties or assets, enter into any agreements,
      arrangements, provide any loans, or make any commitments outside of the
      ordinary course of business (whether absolute, contingent or otherwise),
      or make any offers that could result in any agreements or commitments,
      whether or not in the ordinary course of business (in each case, other
      than with respect to the Exploration Assets) (A) in respect of capital or
      operating expenditures, in an amount in excess of $25,000 for any one
      transaction and $100,000 in aggregate, and (B) in respect of asset
      acquisitions, in an amount in excess of $100,000 for any one transaction
      and $100,000 in aggregate;

	 	 	 
	 	(xii) 	
      other than pursuant to commitments entered into by
      Dynamic prior to the date of this Agreement and disclosed to Sequoia prior
      to the date hereof, pay, discharge or satisfy any material claims,
      liabilities or obligations other than in the ordinary course of business
      consistent with past practice;

	 	 	 
	 	(xiii) 	
      enter into or close any hedge, swaps or other like
      transactions;

	 	 	 
	 	(xiv) 	
      other than pursuant to commitments entered into by
      Dynamic prior to the date of this Agreement and disclosed to Sequoia prior
      to the date hereof, sell, dispose of, transfer, convey, encumber,
      surrender, release or abandon the whole or any part of its assets, other
      than in the ordinary course of business, including through
    production;

	 	 	 
	 	(xv) 	
      make any payment to any director, officer or employee
      outside of their ordinary and usual compensation for services
    provided;

	 	 	 
	 	(xvi) 	
      except as disclosed in writing to Sequoia prior to the
      date hereof, grant any officer or director an increase in compensation in
      any form or take any action with respect to the amendment or grant of any
      severance or termination pay policies or arrangements for any directors,
      officers or employees, nor adopt or amend or make any contribution to any
      bonus, profit sharing, option, pension, retirement, deferred compensation,
      insurance, incentive compensation, other compensation or other similar
      plan for the benefit of directors, officers or employees except as is
      necessary to comply with applicable laws or the existing provisions of any
      such plans or agreement, nor will it make any loan to any director,
      officer, employee, consultant or any other party not at arm’s length with
      Dynamic;

	 	 	 
	 	(xvii) 	
      terminate any employees which would give rise to
      liability greater than disclosed in Section 6.1(x);

	 	 	 
	 	(xviii) 	
      take any action, refrain from taking any action, permit
      any action to be taken or not taken, inconsistent with this Agreement,
      which might directly or indirectly interfere or affect the consummation of
      the Arrangement;

	 	(b) 	
      it shall:

C-26

	 		(i) 	
      except as otherwise permitted in this Agreement, conduct
      its business only in the usual ordinary course of business consistent with
      past practice (for greater certainty, where it is an operator of any
      property, it shall operate and maintain such property in the proper and
      prudent manner in accordance with good industry practice and the
      agreements governing the ownership and operation of such property) and
      shall consult with Sequoia in respect of its ongoing business and affairs
      and keep Sequoia up to date on all material developments related
      thereto;

	 	 	 	 
	 		(ii) 	
      provide to Sequoia reports on Dynamic’s operations and
      affairs as may be reasonably requested from time to time by
  Sequoia;

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

	 	 	 	 
	 		(iv) 	
      use its reasonable commercial efforts to preserve intact
      its business organizations and goodwill and to maintain satisfactory
      relationships with suppliers, distributors, customers, joint operators and
      others having business relationships with it;

	 	 	 	 
	 		(v) 	
      promptly notify Sequoia orally and in writing of any
      Material Adverse Change to Dynamic or the Business, and of any material
      governmental or third party complaints, investigations or hearings (or
      communications indicating that the same may be contemplated);
and

	 	 	 	 
	 		(vi) 	
      it shall retain all of the gross proceeds received from
      the exercise of Dynamic Options occuring from the date of this Agreement
      until the Effective Time and may only use such proceeds in a manner
      permitted by this Agreement;

	 	 	 	 
	 	(c) 	
      it shall not, and shall cause the directors, officers,
      employees, advisors and other representatives of Dynamic and its
      subsidiaries (“Representatives”) not to, directly or
    indirectly:

	 	 	 	 
	 		(i) 	
      solicit, facilitate, initiate, encourage or take any
      action to solicit, facilitate, initiate, entertain or encourage, any
      inquiries or communication regarding or the making of any proposal or
      offer that constitutes or may constitute a Dynamic Acquisition Proposal
      (as defined below) (including, without limitation, by way of furnishing
      information) any inquiry or the making of any proposal to Dynamic or its
      shareholders from any person which constitutes, or may reasonably expect
      it to lead to (in either case whether in one transaction or a series of
      transactions): (A) an acquisition from Dynamic or its shareholders of any
      securities of Dynamic; (B) any acquisition of a substantial amount of
      assets of Dynamic; (C) an amalgamation, arrangement, merger, consolidation
      of any of Dynamic; or (D) any take-over bid, issuer bid, exchange offer,
      re-capitalization, liquidation, dissolution, re-organization into a
      royalty trust or income fund or similar transaction involving any of
      Dynamic or any other transaction, the consummation of which would or could
      reasonably be expected to impede, interfere with, prevent or delay the
      Arrangement or which would or could reasonably be expected to materially
      reduce the benefits of the

C-27

	 		
      Arrangement to Sequoia (any such inquiry or proposal in
      respect of any of the foregoing referred to as a “Dynamic Acquisition
      Proposal”). Dynamic shall immediately cease and cause to be
      terminated, and shall cause its subsidiaries and all Representatives to
      immediately terminate and cause to be terminated, all existing discussions
      or negotiations with any person conducted heretofore with respect to, or
      that could reasonably be expected to lead to a Dynamic Acquisition
      Proposal. Dynamic shall promptly notify each Representative of its
      obligations under this Section 8.1(c)(i) and without limiting the
      foregoing, it is agreed that any violation of the restrictions set forth
      above by any subsidiary of Dynamic or any Representative, whether or not
      such person is purporting to act on behalf of Dynamic, shall be deemed to
      be a breach of this Section 8.1(c)(i);

	 	 	 
	 	(ii) 	
      enter into or participate in any discussions or
      negotiations regarding a Dynamic Acquisition Proposal or, except in the
      ordinary course of business, furnish any other person any information with
      respect to the business, properties, operations, prospects or conditions
      (financial or otherwise) of Dynamic or of a Dynamic Acquisition Proposal
      or otherwise cooperate in any way with, or assist or participate in,
      facilitate or encourage, any effort or attempt of any other person to do
      or seek to do any of the foregoing; or

	 	 	 
	 	(iii) 	
      waive, or otherwise forbear (except in respect of
      non-material matters) in the enforcement of, or enter into or participate
      in any discussions, negotiations or agreements to waive or otherwise
      forbear in respect of any rights or other benefits of Dynamic in any
      confidential information agreement, including, without limitation, any
      “standstill provision” thereunder;

provided that the foregoing shall not
prevent the board of directors of Dynamic from responding as required by law to
any bona fide unsolicited offer or proposal in writing regarding a
Dynamic Acquisition Proposal from a third party (provided that prior to
providing any additional information, such third party first enters into a
confidentiality agreement substantially similar to the confidentiality agreement
provided to Sequoia and which confidentiality agreement shall not in any way
restrict disclosure to Sequoia by Dynamic, including disclosure of prospective
discussions and negotiations between Dynamic and such third party) or making any
disclosure to its shareholders with respect thereto, if and only to the extent
that such third party has demonstrated that the funds or other consideration
necessary for the Dynamic Acquisition Proposal are available and Dynamic’s board
of directors shall have concluded in good faith after receiving advice of its
financial advisors, that such Dynamic Acquisition Proposal would, if consummated
in accordance with its terms, result in a transaction financially more
favourable to Dynamic and the Dynamic Securityholders than the Arrangement, and
after considering applicable law and written advice of its outside counsel, that
any such response in connection with such Dynamic Acquisition Proposal is
necessary in order for the board of directors of Dynamic to act in a manner
consistent with its fiduciary duties under applicable law and after giving
effect to all proposals to adjust the terms and conditions of this Agreement and
the Arrangement which may be offered by Sequoia during the 48 hours notice
period set forth below. Dynamic shall give Sequoia orally and in writing at
least 48 hours advance notice of any meeting of the board of directors of
Dynamic to accept, recommend, approve or implement a Dynamic Acquisition
Proposal and such notice shall include the principal business terms and
conditions of the Dynamic Acquisition Proposal and the general attributes of any
non cash consideration;

C-28

	 	(d) 	
      it will notify Sequoia immediately if any inquiries or
      proposals contemplated by subsection 8.1(c) are received by
      Dynamic, its subsidiaries or Representatives and the details of any such
      inquiries or proposals, or if any such information is requested from or
      any such negotiations or discussions are sought to be initiated or
      conducted with Dynamic, its subsidiaries or Representatives;

	 	 	 
	 	(e) 	
      if any information is provided to a third party after the
      execution of this Agreement for the purpose of assisting that third party
      in making an offer or proposal to it or its shareholders which has not
      been previously made available to Sequoia, such information will
      simultaneously be provided to Sequoia;

	 	 	 
	 	(f) 	
      it will keep Sequoia fully informed as to the decisions
      required with respect to the most advantageous methods of exploring,
      operating and producing from the Business;

	 	 	 
	 	(g) 	
      it will use reasonable commercial efforts to cooperate
      with Sequoia to enable an orderly integration of the business and affairs
      of Dynamic with Sequoia after the Effective Date;

	 	 	 
	 	(h) 	
      it will make available and cause to be made available to
      Sequoia, its agents and advisors, as Sequoia may reasonably request, all
      documents and agreements in any way relating to or affecting the Business,
      or the business, operations, prospects, affairs or financial status of
      Dynamic and its subsidiaries (including without limitation, any
      correspondence between Dynamic and its advisors or any Governmental
      Authority and all minute books) and it will provide Sequoia with access to
      Dynamic’s premises, field operations, records, computer systems and
      employees and such other documents or agreements as may be necessary to
      enable Sequoia to verify the truth of the representations and warranties
      of Dynamic herein and compliance by Dynamic with the terms and conditions
      hereof, except where Dynamic is contractually precluded from making such
      document or agreement available, and cooperate with Sequoia in securing
      access for Sequoia to any such documentation not in the possession or
      under the control of Dynamic;

	 	 	 
	 	(i) 	
      it will not disclose to any person, other than officers,
      directors and key employees and professional advisors of Dynamic or its
      subsidiaries, any confidential information relating to Sequoia or its
      affiliates except such confidential information required to be disclosed
      by law or otherwise known to the public;

	 	 	 
	 	(j) 	
      it will not take any action or omit to take any action
      which results in a reduction of the Tax Pools of Dynamic except for
      actions contemplated by the Plan of Arrangement or the ExploreCo
      Conveyance Agreement, through the ordinary course of business or as a
      result of any flow-through share renunciation associated with flow-through
      share issuances completed prior to the date of this Agreement;

	 	 	 
	 	(k) 	
      it will not make any elections or designations under the
      Tax Act on or before the Effective Date without the written consent of
      Sequoia, which consent shall not be unreasonably withheld;

	 	 	 
	 	(l) 	
      it will not take any action that would render, or that
      may reasonably be expected to render, any representation or warranty made
      by Dynamic in this Agreement untrue at any time prior to the Effective
      Time;

	 	 	 
	 	(m) 	
      it shall indemnify and save harmless Sequoia and the
      directors, officers and agents of Sequoia from and against any and all
      liabilities, claims demands, losses, costs, damages
and

C-29

	 		
      expenses (excluding any loss of profits or consequential
      damages) to which Sequoia, or any director, officer, advisor or agent
      thereof, may be subject or which Sequoia, or any director, officer or
      agent thereof, may suffer, whether under the provisions of any statute or
      otherwise, in any way caused by, or arising, directly or indirectly, from
      or in consequence of any misrepresentation or alleged misrepresentation in
      the Information Circular relating or any material in respect of Dynamic or
      its affiliates filed in compliance or intended compliance with Applicable
      Laws;

	 	 	 	 
	 	(n) 	
      it will use its reasonable commercial efforts to fulfill
      or cause the fulfilment of the conditions set forth in Sections 4.1
      and 5.1, to the extent the fulfilment of the same is within the
      control of Dynamic;

	 	 	 	 
	 	(o) 	
      it will forthwith file, proceed with and diligently
      prosecute an application to the Court under the BCBCA for an Interim Order
      of the Court with respect to the matters pertaining to the Arrangement and
      acceptable to Sequoia, acting reasonably;

	 	 	 	 
	 	(p) 	
      it will:

	 	 	 	 
	 		(i) 	
      forthwith carry out the terms of the Interim Order to the
      extent applicable to it;

	 	 	 	 
	 		(ii) 	
      convene the Meeting and solicit proxies to be voted at
      the Meeting in favour of the Arrangement;

	 	 	 	 
	 		(iii) 	
      provide notice to Sequoia of the Meeting and allow
      Sequoia’s representatives to attend the Meeting unless such attendance is
      prohibited by rules governing such Meeting; and

	 	 	 	 
	 		(iv) 	
      conduct the Meeting in accordance with the Interim Order,
      the articles of Dynamic and any instrument governing such Meeting, as
      applicable, and as otherwise required by law;

	 	 	 	 
	 	(q) 	
      it will prepare (in consultation with Sequoia), file and
      distribute to the Dynamic Securityholders, in a timely, and expeditious
      manner the Information Circular, and any amendments or supplements to the
      Information Circular, and will include the Fairness Opinion as a schedule
      thereto, all as required by the Interim Order or by applicable law, in all
      jurisdictions where the same is required, complying in all material
      respects with all applicable legal requirements on the date of issue
      thereof;

	 	 	 	 
	 	(r) 	
      subject to the provisions of Section 8.2, it will
      include in the Information Circular the unanimous recommendation of the
      board of directors of Dynamic that the Dynamic Shareholders vote in favour
      of the Arrangement;

	 	 	 	 
	 	(s) 	
      it will, subject to the approval of the Arrangement in
      accordance with the provisions of the Interim Order, forthwith file,
      proceed with and diligently prosecute an application for the Final
      Order;

	 	 	 	 
	 	(t) 	
      it will forthwith carry out the terms of the Final Order
      to the extent applicable to Dynamic and will forthwith file the
      Arrangement Filings, with the Registrar;

	 	 	 	 
	 	(u) 	
      except for proxies and other non-substantive
      communications with Dynamic Securityholders, Dynamic will furnish promptly
      to Sequoia a copy of each notice, report, schedule or
  other

C-30

		
       
	
      document delivered, filed or received by Dynamic in
      connection with: (i) the Arrangement; (ii) the Meeting; (iii) any filings
      under Applicable Laws; and (iv) any dealings with regulatory agencies in
      connection with the transactions contemplated herein;

	 	 	 
		(v) 	
      it will make other necessary filings and applications
      under Applicable Laws required on the part of Dynamic or ExploreCo in
      connection with the transactions contemplated herein and take all
      reasonable action necessary to be in compliance with such Applicable
      Laws;

	 	 	 
		(w) 	
      it will promptly advise Sequoia of the number of Dynamic
      Shares for which Dynamic has received notices of dissent (if required by
      the Interim Order) or written objections to the Arrangement and will
      provide Sequoia with copies of such notices or written objections;
    and

	 	 	 
		(x) 	
      it will not, unless approved by Sequoia in advance and in
      writing, which approval shall not be unreasonably withheld, amend the
      ExploreCo Conveyance Agreement in any manner whatsoever.

	 	 	 
	8.2 	
      Notwithstanding the representation in subsection
      6.1(j) and the covenant in Section 8.1(r)and subject to
      compliance with subsection 8.1(c), if prior to the completion of
      the Arrangement, another bona fide Dynamic Acquisition Proposal is
      proposed, offered or made to the holders of Dynamic Shares or to Dynamic
      which, in the reasonable opinion of the board of directors of Dynamic,
      after consultation with its financial advisors, would result in a
      financially superior transaction, directly or indirectly, for the holders
      of Dynamic Shares than that contemplated by the Arrangement, the board of
      directors of Dynamic may withdraw, modify or change the recommendation
      regarding the Arrangement if, in the opinion of such board of directors
      acting reasonably and upon the advice of its outside legal counsel, such
      withdrawal, modification or change is required in discharge of the
      fiduciary duties of the board of directors of Dynamic.

	 	 	 
	8.3 	
      Dynamic agrees to pay to Sequoia in cash (on the date of
      the occurrence of any event below) the amount of $2,160,000 (the
      “Sequoia Break Fee”) if:

	 	 	 
		(a) 	
      the board of directors of Dynamic fails to recommend that
      Dynamic Securityholders vote in favour of the Arrangement or the board of
      directors of Dynamic withdraws, modifies or changes its recommendation to
      Dynamic Securityholders to vote in favour of the Arrangement (other than
      as a result of and in direct response to a material breach by Sequoia of
      its obligations under this Agreement that would or reasonably could be
      expected to result in the non-satisfaction of the conditions precedent to
      the closing of the transactions contemplated by this Agreement or a
      material misrepresentation by Sequoia of any of its representations or
      warranties contained in this Agreement);

	 	 	 
		(b) 	
      a bona fide Dynamic Acquisition Proposal has been
      announced by any third party and has not been withdrawn prior to the date
      of the Meeting to all or substantially all holder of Dynamic Shares, the
      Arrangement is not approved by the requisite majority of Dynamic
      Securityholders at the Meeting and such Dynamic Acquisition Proposal is
      implemented within 180 days of the Meeting;

	 	 	 
		(c) 	
      a breach or non-performance by Dynamic of any of its
      obligations, covenants, agreements, representations and warranties in the
      Agreement (except where such breach is itself the result of a material
      breach or non-performance by Sequoia of any of its obligations,
      representations, warranties or covenants contained in this Agreement)
      which breach or non-performance makes it impossible or unlikely that all
      of the conditions of the Arrangement will be satisfied, and which Dynamic
      fails to cure within five business days

C-31

after receipt of written notice
thereof from Sequoia (except that no cure period shall be provided for a breach
by Dynamic which by its nature cannot be cured and in no event shall a cure
period extend beyond Closing).

	8.4 	
      Dynamic acknowledges that the payment amount set out in
      Section 8.3 constitutes liquidated damages and is a genuine
      pre-estimate of the damages which Sequoia will suffer or incur in the
      event of the occurrence of one of the events set forth above, and Sequoia
      will not be able to seek further damages or participate in any legal
      action or suits in connection with such events.

	 	 
	8.5 	
      Dynamic covenants and agrees with Sequoia that it will
      assist and cooperate with Sequoia in its applications to have Dynamic’s
      Shares delisted from the TSX and NASDAQ upon
Closing.

ARTICLE 9
COVENANTS OF EXPLORECO

	9.1 	
      ExploreCo covenants and agrees with Sequoia that, until
      Closing or the termination of this Agreement, whichever is the earlier,
      except with the prior written consent of Sequoia:

	 	 	 	 
		(a) 	
      other than as contemplated herein or as otherwise
      approved by Sequoia in writing, ExploreCo will not, directly or
      indirectly, do or permit to occur any of the following:

	 	 	 	 
			(i) 	
      carry on any business, enter into any transaction or
      effect any corporate act whatsoever;

	 	 	 	 
			(ii) 	
      issue, enter into any agreement to issue or grant any
      right to acquire (whether absolute or contingent) any securities of
      ExploreCo other than pursuant to a private placement of up to $4,000,000
      of common shares of ExploreCo; or

	 	 	 	 
			(iii) 	
      it will not, unless approved by Sequoia in advance and in
      writing, which approval shall not be unreasonably withheld, amend the
      ExploreCo Conveyance Agreement in any manner whatsoever;

	 	 	 	 
		(b) 	
      it will not disclose to any person, other than officers,
      directors and key employees and professional advisors of ExploreCo, any
      confidential information relating to Sequoia or its affiliates except
      Sequoia Information required to be disclosed by law or otherwise known to
      the public; and

	 	 	 	 
		(c) 	
      it will not take any action that would render, or that
      may reasonably be expected to render, any representation or warranty made
      by ExploreCo in this Agreement untrue at any time prior to the Effective
      Time.

	 	 	 	 
	9.2 	
      ExploreCo covenants and agrees with Sequoia
  that:

	 	 	 	 
		(a) 	
      it will forthwith carry out the terms of the Final Order
      to the extent applicable to ExploreCo; and

	 	 	 	 
		(b) 	
      it shall indemnify and save harmless Sequoia and the
      directors, officers, advisors and agents of Sequoia from and against any
      and all liabilities, claims demands, losses, costs, damages and expenses
      (excluding any loss of profits or consequential damages) to which Sequoia,
      or any director, officer, advisor or agent thereof, may be subject or
      which Sequoia, or any director, officer, advisor or agent thereof, may
      suffer, whether under the provisions of any

C-32

statute or otherwise, in any way
caused by, or arising, directly or indirectly, from or in consequence of:

	 	(i) 	
      the breach by ExploreCo of any of the terms of this
      Agreement; or

	 	 	 
	 	(ii) 	
      any representation or warranty made by ExploreCo herein
      not being true or ceasing to be true.

ARTICLE 10
COVENANTS OF SEQUOIA

	10.1 	
      Sequoia and AcquisitionCo covenant and agrees with
      Dynamic that, until the Closing or the termination of this Agreement
      (except Sections 10.1(f) and 10.1(h) which, as set out in
      Section 12.4, will survive termination), whichever is the
      earlier:

	 	 	 	 
		(a) 	
      other than as contemplated herein, Sequoia and its
      subsidiaries will not do any of the following:

	 	 	 	 
			(i) 	
      conduct any activity or operations that would otherwise
      be detrimental to the Arrangement; or

	 	 	 	 
			(ii) 	
      take any action, refrain from taking any action, permit
      any action to be taken or not taken, inconsistent with this Agreement,
      which might directly or indirectly interfere or affect the consummation of
      the Arrangement;

	 	 	 	 
		(b) 	
      Sequoia shall promptly notify Dynamic orally and in
      writing of any Material Adverse Change in its business;

	 	 	 	 
		(c) 	
      Sequoia and AcquisitionCo will use their reasonable
      commercial efforts to fulfil or cause the fulfilment of the conditions set
      forth in Sections 3.1 and 5.1 as soon as reasonably possible
      to the extent the fulfilment of the same is within the control of Sequoia
      and AcquisitionCo ;

	 	 	 	 
		(d) 	
      Sequoia and AcquisitionCo will assist Dynamic in the
      preparation of the Information Circular and provide to Dynamic, in a
      timely and expeditious manner, all information as may be reasonably
      requested by Dynamic or is required by the Interim Order or applicable
      law, with respect to Sequoia and its subsidiaries, the Arrangement and the
      transactions to be completed at the Meeting for inclusion in the
      Information Circular and any amendments or supplements to the Information
      Circular, in each case complying in all material respects with all
      applicable legal requirements on the date of issue thereof;

	 	 	 	 
		(e) 	
      from and after the Effective Date, Sequoia and
      AcquisitionCo will cause Dynamic or any successor to Dynamic to: (i)
      fulfil its obligations pursuant to indemnities provided or available to
      past and present directors and officers of Dynamic pursuant to the
      provisions of the articles of Dynamic and applicable corporate legislation
      and any written indemnity agreements between Dynamic and its past and
      present directors and officers, and (ii) maintain any trailing liability
      or “run off” insurance secured by Dynamic for Dynamic’s past and present
      directors and officers and not take any action to terminate such
      insurance;

	 	 	 	 
		(f) 	
      Sequoia shall indemnify and save harmless Dynamic and the
      directors, officers, advisors and agents of Dynamic from and against any
      and all liabilities, claims demands, losses, costs, damages and expenses
      (excluding any loss of profits or consequential damages) to
  which

C-33

		
       
	
      Dynamic, or any director, officer, advisor or agent
      thereof may be subject or which Dynamic, or any director, officer or agent
      thereof, may suffer, whether under the provisions of any statute or
      otherwise, in any way caused by, or arising, directly or indirectly, from
      or in consequence of any misrepresentation or alleged misrepresentation in
      any material in respect of Sequoia or Sequoia Commercial Trust filed in
      compliance or intended compliance with Applicable Laws;

	 	 	 
		(g) 	
      Sequoia and AcquisitionCo will forthwith carry out the
      terms of the Interim Order and the Final Order to the extent applicable to
      Sequoia and AcquisitionCo provided that nothing shall require Sequoia or
      AcquisitionCo to consent to any material modification of this Agreement,
      the Arrangement or the obligations of Sequoia and AcquisitionCo hereunder
      or thereunder;

	 	 	 
		(h) 	
      Sequoia and AcquisitionCo will not disclose to any
      person, other than officers, directors and key employees and professional
      advisors of Sequoia, any confidential information relating to Dynamic or
      its affiliates except information disclosed in the Information Circular,
      required to be disclosed by law or otherwise known to the
public;

	 	 	 
		(i) 	
      Sequoia and AcquisitionCo will not take any action that
      would render, or that may reasonably be expected to render, any
      representation or warranty made by Sequoia and AcquisitionCo in this
      Agreement untrue at any time prior to the Effective Time;

	 	 	 
		(j) 	
      Sequoia and AcquisitionCo will make all necessary filings
      and applications under Applicable Laws and Regulations required on the
      part of Sequoia and AcquisitionCo in connection with the transactions
      contemplated herein and take all reasonable commercial action necessary to
      be in compliance with such laws and regulations; and

	 	 	 
		(k) 	
      Sequoia and AcquisitionCo will take all necessary actions
      to give effect to the transactions contemplated by this Agreement and the
      Arrangement, including, without limitation, if the Final Order is obtained
      and subject to the fulfilment or the waiver of each of the conditions
      referred to in Article 3, (other than the conditions in Section
      3.1(d), 4 and 5, on or before three Business Days prior to
      the Effective Date, 2005 AcquisitionCo will, and Sequoia will cause
      AcquisitionCo to, deposit with the Depositary the cash consideration
      payable by AcquisitionCo pursuant to the Arrangement in the amount of the
      Cash Consideration together with an irrevocable direction authorizing and
      directing the Depositary to pay the Cash Consideration payable pursuant to
      the Arrangement to the Dynamic Shareholders who are entitled to receive
      the Cash Consideration pursuant to and in accordance with the terms and
      conditions of the Plan of Arrangement;

	 	 	 
	10.2 	
      Sequoia agrees to pay to Dynamic in cash (on the date of
      the occurrence of any event below) the amount of $2,160,000 (the
      “Dynamic Break Fee”) in the event of a breach or non-performance by
      Sequoia of any of its obligations, representations and warranties in this
      Agreement, which breach or non-performance individually or in the
      aggregate would or reasonably could be expected to result in the
      non-satisfaction of the conditions precedent to the closing of the
      transactions contemplated by this Agreement or a material
      misrepresentation by Sequoia of any of its representations or warranties
      contained in this Agreement, and which Sequoia fails to cure within five
      business days after receipt of written notice thereof from Dynamic (except
      that no cure period shall be provided for a breach by Sequoia which by its
      nature cannot be cured and in no event shall any cure period extend beyond
      Closing), except where such breach is itself directly the result of a
      material breach or non-performance by Dynamic of any of its
      representations, warranties or covenants contained in this
    Agreement.

C-34

	10.3 	
      Sequoia acknowledges that the payment amount set out in
      Section 10.2 constitutes liquidated damages and is a genuine
      pre-estimate of the damages which Dynamic will suffer or incur in the
      event of the occurrence of one of the events set forth above, and Dynamic
      will not be able to seek further damages or participate in any legal
      action or suits in connection with such events.

	 	 
	10.4 	
      After the Closing, Sequoia shall cause Dynamic to incur
      sufficient expenditures to fullfil all of Dynamic’s outstanding
      obligations under all flow-through agreements to which it is a
    party.

ARTICLE 11
LIMITATION OF LIABILITY

	11.1 	
      The parties hereto acknowledge that Sequoia Oil & Gas
      Ltd. (the “Administrator”) is entering into this agreement solely
      in its capacity as administrator on behalf of Sequoia and the obligations
      of Sequoia hereunder shall not be personally binding upon the
      Administrator or any of the unitholders of Sequoia (a “Unitholder”)
      such that any recourse against Sequoia, the trustee of Sequoia or the
      Administrator or any Unitholder in any manner in respect of any
      indebtedness, obligation or liability of Sequoia arising hereunder or
      arising in connection herewith or from the matters to which this agreement
      relates, if any, including without limitation claims based in contract, on
      negligence, tortious behaviour or otherwise, shall be limited to, and
      satisfied only out of, the Trust Fund as defined in the Trust Indenture
      dated March 16, 2005, as amended, restated or replaced from time to time,
      relating to Sequoia.

ARTICLE 12
TERMINATION

	12.1 	
      Notwithstanding any other rights contained herein,
      Sequoia may terminate this Agreement provided that it is not materially in
      default of any of its representations, warranties or covenants under this
      Agreement upon notice to Dynamic:

	 	 	 
		(a) 	
      if the Plan of Arrangement is amended, modified or
      supplemented in any manner unacceptable to Sequoia, acting
    reasonably;

	 	 	 
		(b) 	
      if the Information Circular is not mailed by Dynamic to
      the Dynamic Shareholders in compliance with Applicable Laws on or prior to
      September 1, 2005;

	 	 	 
		(c) 	
      if the Interim Order is set aside or modified in a manner
      unacceptable to Sequoia, acting reasonably, on appeal or
  otherwise;

	 	 	 
		(d) 	
      if the Arrangement is not approved by Dynamic
      Securityholders in accordance with the terms of the Interim Order and all
      Applicable Laws on or before September 29, 2005;

	 	 	 
		(e) 	
      if the Final Order has not been granted in form and
      substance satisfactory to Sequoia, acting reasonably on or before
      September 29, 2005;

	 	 	 
		(f) 	
      if the Arrangement has not become effective on or before
      September 30, 2005;

	 	 	 
		(g) 	
      if the Sequoia Break Fee shall have become
  payable;

	 	 	 
		(h) 	
      if the Dynamic Break Fee shall have become payable and
      been paid by Sequoia;

C-35

		(i) 	
      if the Court, or any other court or a Governmental
      Authority shall have issued an order or taken any other action, in each
      case which has become final and non appealable and which restrains,
      enjoins or otherwise prohibits the Arrangement; or

	 	 	 
		(j) 	
      upon any other circumstances hereunder that give rise to
      a termination of this Agreement by Sequoia, including those set forth in
      Sections 4.1 and 5.1 hereof.

	 	 	 
	12.2 	
      Notwithstanding any other rights contained herein,
      Dynamic may terminate this Agreement provided that it is not materially in
      default of any of its representations, warranties or covenants under this
      Agreement upon notice to Sequoia:

	 	 	 
		(a) 	
      if the Plan of Arrangement is amended, modified or
      supplemented in any manner unacceptable to Dynamic and the board of
      directors of Dynamic, in each case acting reasonably;

	 	 	 
		(b) 	
      if the Interim Order is set aside or modified in a manner
      unacceptable to Dynamic, acting reasonably, on appeal or
  otherwise;

	 	 	 
		(c) 	
      if the Arrangement is not approved by Dynamic
      Securityholders in accordance with the terms of the Interim Order and all
      Applicable Laws on or before September 29, 2005;

	 	 	 
		(d) 	
      if the Final Order has not been granted in form and
      substance satisfactory to Dynamic, acting reasonably on or before
      September 29, 2005;

	 	 	 
		(e) 	
      if the Arrangement has not become effective on or before
      September 30, 2005;

	 	 	 
		(f) 	
      if Sequoia Break Fee shall have become payable and been
      paid by Dynamic;

	 	 	 
		(g) 	
      if the Dynamic Break Fee shall have become
  payable;

	 	 	 
		(h) 	
      if the Court, or any other court or a Governmental
      Authority shall have issued an order or taken any other action, in each
      case which has become final and non appealable and which restrains,
      enjoins or otherwise prohibits the Arrangement; or

	 	 	 
		(i) 	
      upon any other circumstances hereunder that give rise to
      a termination of this Agreement by Dynamic including those set forth in
      Sections 3.1 and 5.1 hereof.

	 	 	 
	12.3 	
      Unless otherwise provided herein, the exercise by any
      party of any right of termination hereunder shall be without prejudice to
      any other remedy available to such party.

	 	 	 
	12.4 	
      If this Agreement is validly terminated pursuant to any
      provision of this Agreement:

	 	 	 
		(a) 	
      the parties shall return all materials and copies of all
      materials delivered to Dynamic or Sequoia, as the case may be, or their
      agents and, except for the rights and obligations set forth in this
      Section and Sections 8.1(i), 8.1(m), 8.3, 10.1(f), 10.1(h), 10.2, 15.1,
      22.1 and 22.2 (which shall survive any termination of this
      Agreement and continue in full force and effect), no party shall have any
      further obligations to any other party hereunder with respect to this
      Agreement; and

	 	 	 
		(b) 	
      if, prior to the termination of this Agreement, Dynamic
      has taken any steps to create the Partnership and convey the
      Non-exploration Assets to the Partnership pursuant to
the

C-36

Partnership Conveyance Agreement,
Sequoia shall indemnify Dynamic for the costs (including transfer and other
incremental taxes) reasonably incurred to create the Partnership and convey the
Non-exploration Assets to the Partnership and to dissolve the Partnership,
including, but not limited to, the costs to convey the Non-exploration Assets
from the Partnership to Dynamic.

ARTICLE 13
AMENDMENT

	13.1 	
      This Agreement may, at any time and from time to time
      before or after the holding of the Meeting, be amended by written
      agreement of the parties hereto without further notice to or authorization
      on the part of their respective shareholders, and any such amendment may,
      without limitation:

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

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

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

provided that any such amendment may
not reduce or materially adversely affect the consideration to be received by a
Dynamic Securityholder.

ARTICLE 14
COSTS

	14.1 	
      Except as contemplated in the Arrangement and herein,
      each party hereto covenants and agrees to bear its own costs and expenses
      in connection with the transactions contemplated
hereby.

ARTICLE 15
DISCLOSURE

	15.1 	 Unless previously issued, upon execution of this Agreement,
        the parties hereto shall issue a joint press release which announces that
        the parties hereto have entered into a formal agreement providing for
        the implementation of the Arrangement. No party hereto shall disclose,
        by press release, any aspect of the transactions contemplated hereby without
        prior consent of the other party. Notwithstanding the foregoing, if either
        party is required by law or administrative regulation to make any disclosure
        relating to the transactions contemplated herein, such disclosure may
        be made, but that party will inform, to the extent reasonably feasible,
        the other party as to the wording of such disclosure prior to its being
        made.

ARTICLE 16
NOTICES

	16.1 	
      The address for service of each of the parties hereto
      shall be as follows:

	 	if to Sequoia:
	 	 
	 	                 
       Sequoia Oil & Gas Trust 
	 	                   1200,
      500 – 4th Avenue S.W. 

C-37

	 	               
         Calgary, Alberta T2P 2V6 
	 	               
         Telecopier No.: (403) 770-6303 
	 	           
             Attention: Bradley Johnson and Paul Beliveau
  
	 	  
	 	with a copy to: 
	 	  
	 	               
         Gowling Lafleur Henderson LLP 
	 	               
         1400, 700 – 2nd Street S.W. 
	 	               
         Calgary, AB T2P 4V5 
	 	               
         Telecopier No.: (403) 263-9193 
	 	           
             Attention: Jeffrey Dyck 
	 	  
	 	if to Dynamic or ExploreCo: 
	 	  
	 	               
         Dynamic Oil & Gas, Inc. 
	 	               
         230 – 10991 Shellbridge Way 
	 	               
         Richmond, British Columbia V6X 3C6 
	 	               
         Telecopier No.: (604) 214-0551 
	 	           
             Attention: Don K. Umbach, Vice President, Chief
      Operating Officer 
	 	  
	 	with a copy to: 
	 	  
	 	               
         McCarthy Tétrault LLP 
	 	               
         Suite 3300, 421 - 7th Avenue S.W. 
	 	               
         Calgary, AB T2P 4K9 
	 	               
         Telecopier No.: (403) 260-3501 
	 	           
             Attention: Ian Bock 

ARTICLE 17
TIME

	17.1 	
      Time shall be of the essence in this
  Agreement.

     ARTICLE 18
ENTIRE
AGREEMENT

	18.1 	
      This Agreement:

	 	(a) 	
      from the date hereof constitutes the entire agreement and
      supersedes all other prior agreements and undertakings, both written and
      oral, among the parties with respect to the subject matter hereof;
    and

	 	 	 
	 	(b) 	
      is not intended to confer upon any other person any
      rights or remedies hereunder unless expressly provided for
  herein.

ARTICLE 19
SEVERABILITY

	19.1 	
      If any one or more of the provisions or parts thereof
      contained in this Agreement should be or become invalid, illegal or
      unenforceable in any respect in any jurisdiction, the remaining
      provisions

C-38

or parts thereof contained herein shall
be and shall be conclusively deemed to be, as to such jurisdiction, severable
therefrom and:

	 	(a) 	
      the validity, legality or enforceability of such
      remaining provisions or parts thereof shall not in any way be affected or
      impaired by the severance of the provisions or parts thereof severed;
      and

	 	 	 
	 	(b) 	
      the invalidity, illegality or unenforceability of any
      provision or part thereof contained in this Agreement in any jurisdiction
      shall not affect or impair such provision or part thereof or any other
      provisions of this Agreement in any other
jurisdiction.

ARTICLE 20
FURTHER ASSURANCES

	20.1 	
      Each party hereto shall, from time to time, and at all
      times hereafter, at the request of the other party hereto, but without
      further consideration, do all such further acts and execute and deliver
      all such further documents and instruments as shall be reasonably required
      in order to fully perform and carry out the terms and intent
  hereof.

ARTICLE 21
GOVERNING LAW

	21.1 	
      This Agreement shall be governed by, and be construed in
      accordance with, the laws of the Province of Alberta and applicable laws
      of Canada but the reference to such laws shall not, by conflict of laws
      rules or otherwise, require the application of the law of any jurisdiction
      other than the Province of Alberta.

	 	 
	21.2 	
      Each party hereto hereby irrevocably attorns to the
      jurisdiction of the Courts of the Province of Alberta in respect of all
      matters arising under or in relation to this Agreement.

	 	 
	21.3 	
      Each of the parties hereto hereby irrevocably and
      unconditionally consents to and submits to the jurisdiction of the courts
      of the Province of Alberta in respect of all actions, suits or proceedings
      arising out of or relating to this Agreement or the matters contemplated
      hereby (and agrees not to commence any action, suit or proceeding relating
      thereto except in such courts) and further agrees that service of any
      process, summons, notice or document by single registered mail to the
      addresses of the parties set forth in this Agreement shall be effective
      service of process for any action, suit or proceeding brought against
      either party in such court. The parties hereby irrevocably and
      unconditionally waive any objection to the laying of venue of any action,
      suit or proceeding arising out of this Agreement or the matters
      contemplated hereby in the courts of the Province of Alberta and hereby
      further irrevocably and unconditionally waive and agree not to plead or
      claim in any such court that any such action, suit or proceeding so
      brought has been brought in an inconvenient forum.

ARTICLE 22
THIRD PARTY BENEFICIARIES

	22.1 	
      Subsection 8.1(m) hereof is intended for the
      benefit of the present and former directors and officers of Sequoia and
      shall be enforceable by each of such persons and his or her heirs,
      executors, administrators and other legal representatives (collectively
      the “Sequoia Third Party Beneficiaries”) and Sequoia and any
      successor to Sequoia shall hold the rights and benefits of this Section
      22.1 in trust for and on behalf of the Sequoia Third Party
      Beneficiaries and Sequoia hereby accepts such trust and agrees to hold the
      benefit of and enforce performance of such covenants
on

C-39

		
      behalf of the Sequoia Third Party Beneficiaries, and such
      are in addition to, and not in substitution for, any other rights that any
      Sequoia Third Party Beneficiary may have by contract or
  otherwise.

	 	 
	22.2 	
      Subsections 10.1(e) and 10.1(f) hereof are
      intended for the benefit of the present and former directors and officers
      of Dynamic and shall be enforceable by each of such persons and his or her
      heirs, executors, administrators and other legal representatives
      (collectively the “Dynamic Third Party Beneficiaries”) and Dynamic
      and ExploreCo and any successors to Dynamic and ExploreCo shall hold the
      rights and benefits of this Section 22.2 in trust for and on behalf
      of the Dynamic Third Party Beneficiaries and Dynamic and ExploreCo hereby
      accept such trust and agrees to hold the benefit of and enforce
      performance of such covenants on behalf of the Dynamic Third Party
      Beneficiaries, and such are in addition to, and not in substitution for,
      any other rights that any Dynamic Third Party Beneficiary may have by
      contract or otherwise.

ARTICLE 23
EXECUTION IN COUNTERPARTS

	23.1 	
      This Agreement may be executed in identical counterparts,
      each of which is and is hereby conclusively deemed to be an original and
      counterparts collectively are to be conclusively deemed one
    instrument.

ARTICLE 24
WAIVER

	24.1 	
      No waiver by any party hereto shall be effective unless
      in writing and any waiver shall affect only the matter, and the occurrence
      thereof, specifically identified and shall not extend to any other matter
      or occurrence.

ARTICLE 25
ENUREMENT AND ASSIGNMENT

	25.1 	
      This Agreement shall enure to the benefit of and be
      binding upon the parties hereto and their respective successors and
      assigns. This Agreement may not be assigned by any party hereto without
      the prior consent of the other party hereto except that Sequoia may assign
      all or a portion of its rights under this Agreement to any subsidiary of
      Sequoia, but no assignment shall relieve Sequoia of its obligations
      hereunder.

[remainder of page left intentionally blank]

C-40

IN WITNESS WHEREOF the parties hereto have executed this
Agreement.

	 	SEQUOIA OIL & GAS TRUST by its
      administrator 
	 	SEQUOIA OIL & GAS LTD.
  
	 	  	  
	 	Per: 	(signed) “Bradley Johnson” 
	 	  	Bradley Johnson, 
	 	  	President and Chief Executive
      Officer 
	 	  	  
	 	Per: 	(signed) “John Zang” 
	 	  	John Zang, 
	 	  	Secretary 
	 	  	  
	 	DYNAMIC OIL & GAS, INC.
  
	 	  	  
	 	Per: 	(signed) “Wayne Babcock” 
	 	  	Wayne Babcock, 
	 	  	President and Chief Executive
      Officer 
	 	  	  
	 	Per: 	(signed) “Don Umbach” 
	 	  	Don Umbach, 
	 	  	Vice President and Chief
      Operating Officer 
	 	  	  
	 	SHELLBRIDGE OIL & GAS,
      INC. 
	 	  	  
	 	Per: 	(signed) “Wayne Babcock” 
	 	  	Wayne Babcock, 
	 	  	President 
	 	  	  
	 	Per: 	(signed) “Don Umbach” 
	 	  	Don Umbach, 
	 	  	Chief Financial Officer
  
	 	  	  
	 	0730008 B.C. LTD. 
	 	  	  
	 	Per: 	(signed) “Bradley Johnson” 
	 	  	Bradley Johnson, 
	 	  	President 
	 	  	  
	 	Per: 	(signed) “John Zang” 
	 	  	John Zang, 
	 	  	Secretary

EXHIBIT 1

PLAN OF ARRANGEMENT

 

See Attached. 

 

 

 

 

 

EXHIBIT 2

EXPLORATION ASSETS

THE “ASSETS” (AS SUCH TERM IS DEFINED IN THE EXPLORECO CONVEYANCE AGREEMENT). 

EXHIBIT 3

NON-EXPLORATION ASSETS

ALL PETROLEUM AND NATURAL GAS RIGHTS AND INTERESTS, TANGIBLE INTERESTS AND MISCELLANEOUS INTERESTS OWNED BY DYNAMIC AS OF MAY 1, 2005 EXCEPT THE “ASSETS” (AS SUCH TERM IS DEFINED IN THE EXPLORECO CONVEYANCE AGREEMENT)

EXHIBIT 4

OUTSTANDING DYNAMIC OPTIONS

	Number of Options 	Exercise Price 	Expiry Date 
	10,000 	$1.45 	January 23, 2005 
	30,000 	$1.75 	July 30, 2005 
	298,000 	$2.10 	September 28, 2005 
	20,250 	$2.17 	February 28, 2006 
	30,000 	$1.70 	April 3, 2006 
	30,800 	$2.25 	April 14, 2006 
	265,000 	$1.75 	February 27, 2007 
	30,000 	$3.80 	February 16, 2008 
	45,000 	$5.30 	June 18, 2008 
	215,500 	$4.66 	July 15, 2008 
	30,000 	$5.43 	August 21, 2008 
	65,000 	$4.75 	April 29, 2009 
	45,000 	$4.08 	June 18, 2009 
	30,000 	$4.18 	August 21, 2009 
	145,000 	$3.66 	September 20, 2009 
	25,000 	$1.45 	January 23, 2010 
	65,000 	$2.36 	April 29, 2010 
	45,000 	$2.65 	June 18, 2010 
	112,500 	$1.72 	August 16, 2010 
	18,750 	$2.10 	September 28, 2010

	52,500 	$2.15 	April 29, 2011 
	60,000 	$2.10 	   August 22, 2011 
	57,500 	$1.65 	April 29, 2012 
	60,000 	$1.75 	August 21, 2012 
	15,000 	$2.95 	December 16, 2012 
	12,500 	$3.91 	April 2, 2013 
	65,000 	$4.10 	April 29, 2013 
	1,878,300(1) 	  	 

	(1) 	
      An additional 30,000 stock options are to be granted on
      August 22, 2005.Filed by Automated Filing Services Inc. (604) 609-0244 - Shellbridge Oil & Gas, Inc. - Exhibit 4.3

OIL AND GAS ASSET PURCHASE AGREEMENT

 

DYNAMIC OIL & GAS, INC.

AND

SHELLBRIDGE OIL & GAS, INC.

MADE AS OF

July 20, 2005

OIL AND GAS ASSET PURCHASE AGREEMENT

Table of Contents

	ARTICLE 1 - INTERPRETATION 	1 
	 	1.01 	Definitions 	1 
	 	1.02 	Headings 	11 
	 	1.03 	Extended Meanings 	11 
	 	1.04 	Statutory References 	11 
	 	1.05 	Accounting Principles 	11 
	 	1.06 	Currency 	12 
	 	1.07 	Industry Terms 	12 
	 	1.08 	Knowledge 	12 
	 	1.09 	Schedules 	12 
	ARTICLE 2 - PURCHASE AND SALE 	12 
	 	2.01 	Purchase and Sale of the Assets 	12 
	 	2.02 	Purchase Price 	12 
	 	2.03 	Payment of the Purchase Price 	13 
	 	2.04 	Allocation of Base Price 	13 
	 	2.05 	Goods and Services Tax 	13 
	 	2.06 	Assumed Liabilities 	14 
	ARTICLE 3 - ADJUSTMENT PROCEDURE 	15 
	 	3.01 	Adjustment Principles 	15 
	 	3.02 	Determination of Adjustment Amount 	15 
	 	3.03 	Initial Adjustment Amount 	19 
	 	3.04 	Post-Closing Adjustment of Adjustment Amount 	19 
	ARTICLE 4 - REPRESENTATIONS AND WARRANTIES 	20 
	 	4.01 	Vendor’s Representations and Warranties 	20 
	 	4.02 	Limitation 	21 
	 	4.03 	Purchaser’s Representations and Warranties 	23 
	 	4.04 	Survival of Representations and Warranties 	24 
	 	4.05 	Survival of Covenants 	24 
	ARTICLE 5 - INTERIM OPERATIONS PERIOD 	24 
	 	5.01 	General Maintenance 	24 
	 	5.02 	Restricted Activities 	25 
	 	5.03 	Access to Assets and Information 	25 
	ARTICLE 6 - RESTRICTED ASSETS, REGULATORY APPROVALS AND
      SPECIFIC ASSIGNMENTS 	26 
	 	6.01 	Identification, Valuation and Notice 	26 
	 	6.02 	Restricted Asset Value Disputes 	26 
	 	6.03 	Extension of Closing Date 	27 
	 	6.04 	Restricted Assets Exclusion 	27 
	 	6.05 	Specific Assignments 	27 
	ARTICLE 7 - CONDITIONS TO CLOSING 	29 
	 	7.01 	Purchaser’s Conditions To Closing 	29 
	 	7.02 	Vendor’s Conditions to Closing 	29 
	 	7.03 	Waiver of Conditions 	30 

- ii -

	 	7.04 	Parties to Exercise Diligence and Good Faith with Respect
      to Conditions 	30 
	ARTICLE 8 - TERMINATION RIGHTS 	31 
	 	8.01 	Termination 	31 
	 	8.02 	In the Event of Termination 	31 
	 	8.03 	Effect of Termination 	31 
	ARTICLE 9 - CLOSING 	32 
	 	9.01 	Place of Closing 	32 
	 	9.02 	Vendor’s Closing Deliveries 	32 
	 	9.03 	Vendor’s Post-Closing Deliveries 	33 
	 	9.04 	Purchaser’s Closing Deliveries 	33 
	ARTICLE 10 - POST CLOSING 	34 
	 	10.01 	Post-Completion Administration 	34 
	 	10.02 	Operated Properties 	35 
	 	10.03 	Access 	35 
	 	10.04 	Signs and Notification to Governmental Agencies 	36 
	 	10.05 	Insurance 	36 
	ARTICLE 11 - INDEMNIFICATION 	36 
	 	11.01 	Purchaser’s Indemnification of the Vendor 	36 
	 	11.02 	Vendor’s Indemnification of the Purchaser 	37 
	 	11.03 	Purchaser’s Abandonment and Reclamation and Environmental
      Indemnifications. 	37
	 	11.04 	Exclusive Remedy 	38 
	 	11.05 	Holding of Indemnities 	38 
	 	11.06 	Procedures Relating to Indemnification Between the Purchaser
      and the Vendor 	38 
	 	11.07 	Procedures Relating to Indemnification for Third Party Claims
      	38 
	 	11.08 	Losses Net of Insurance and Taxes 	39 
	 	11.09 	Attorneys’ Fees 	39 
	 	11.10 	Time Limitation 	39 
	 	11.11 	Limitation of Liability 	40 
	 	11.12 	Mitigation 	40 
	 	11.13 	No Consequential Damages 	40 
	 	11.14 	Subrogation 	40 
	ARTICLE 12 - GENERAL 	41 
	 	12.01 	Confidentiality 	41 
	 	12.02 	Limited Conditions 	41 
	 	12.03 	Further Assurances 	41 
	 	12.04 	Time of the Essence 	41 
	 	12.05 	Fees and Commissions 	41 
	 	12.06 	Public Announcements 	42 
	 	12.07 	Benefit of the Agreement 	42 
	 	12.08 	Entire Agreement 	42 
	 	12.09 	Amendments and Waivers 	42 
	 	12.10 	Assignment 	42 
	 	12.11 	Notices 	42 
	 	12.12 	Governing Law 	44 
	 	12.13 	Attornment 	44 
	 	12.14 	Counterparts 	44 

- iii -

	 	12.15
      	Securities Disclosure 	44
      
	 	12.16
      	Electronic Execution 	44
      

SCHEDULES

	 	Schedule 1.01(A) 	- Facilities 
	 	Schedule 1.01(B) 	- Form of General Conveyance
      
	 	Schedule 1.01(C) 	- Lands, Leases, Hydrocarbon
      Interests, Encumbrances and Wells 
	 	Schedule 1.01(D) 	- Production Sales Contracts
      
	 	Schedule 5.02(E) 	- Outstanding AFE’s 

OIL AND GAS ASSET PURCHASE AGREEMENT

THIS AGREEMENT is made as of July 20,
2005

BETWEEN:

  
    
      
        DYNAMIC OIL & GAS, INC., a corporation incorporated
          under the laws of the Province of British Columbia (the “Vendor”),

      

    

  

- and -

  
    
      
        SHELLBRIDGE OIL & GAS, INC., a corporation
          incorporated under the laws of the Province of Alberta (the “Purchaser”).

      

    

  

          WHEREAS
pursuant to the Arrangement (as defined herein) the Vendor desires to sell and
the Purchaser desires to purchase all of the Vendor’s right, title, estate and
interest in and to the Assets (as defined herein), upon and subject to the terms
and conditions set out in this Agreement;

          NOW
THEREFORE, in consideration of the premises and the covenants and agreements
herein contained, the parties agree as follows:

ARTICLE 1 - INTERPRETATION

1.01  Definitions

          In
this Agreement, unless something in the subject matter or context is
inconsistent therewith:

“AFE” means authorities for expenditure, mail ballots,
cash calls or any other similar requests for approval received by the Vendor in
relation to the Hydrocarbon Interests or the Tangibles Interests as set out in
Schedule 5.02(E) .

“Abandonment and Reclamation Obligations” means all
obligations respecting the abandonment of any of the Hydrocarbon Assets
(including any associated closing, decommissioning, dismantling and removal of
any foundations, structures or equipment in connection with such abandonment)
and the restoration, remediation and reclamation of the surface or subsurface of
the Lands and any land pooled or unitized therewith or otherwise associated with
any activity on the Lands, all in compliance with applicable HSE Laws.

“Acclaim Agreement” means that certain 10-22 Settlement
and General Conveyance Agreement dated May 31, 2005, among the Vendor, Sequoia
Oil and Gas Ltd., Petrofund Corp. and Signalta Resources Limited (collectively
as vendor) and Acclaim Processing Co. Ltd. (as purchaser).

“Acclaim Agreement Receivable” means the amount of
receivable pursuant to the Acclaim Agreement (estimated to be $2,423,093).

“Accounting Firm” means Ernst & Young LLP.

- 2 -

“AcquisitionCo” means 0730008 B.C. Ltd., a body
corporate incorporated under the laws of the Province of British Columbia.

“Adjustment Amount” has the meaning set out in Section
3.01.

“Affected Party” has the meaning set out in Section
3.05.

“Affiliate” has the meaning attributed thereto in the
Business Corporations Act (Alberta).

“Agreement” means this agreement, including its recitals
and schedules, as amended from time to time.

“Alberta Mineral Tax Appeals” means Alberta mineral tax
appeals that have been filed by or on behalf of the Vendor prior to the
Execution Date or for which filing was underway as at the Effective Time and
that relate to the fiscal or calendar years 2001, 2002, 2003 and 2004.

“Applicable Law” means

	 	(a) 	
      any applicable domestic or foreign law including any
      statute, subordinate legislation or treaty, and

	 	 	 
	 	(b) 	
      any applicable guideline, directive, rule, standard,
      requirement, policy, order, judgment, injunction, award or decree of a
      Governmental Authority whether or not having the force of
  law.

“Arrangement” means the arrangement under the provisions
of Division 5 of Part 9 under the BCBCA on the terms and conditions set out in
the Plan of Arrangement, as supplemented, modified or amended.

“Arrangement Agreement” means the arrangement agreement
made effective as of July 20, 2005 among the Vendor, the Purchaser, Sequoia Oil
& Gas Trust and AcquisitionCo.

“Assets” means, collectively, the Hydrocarbon Interests,
the Tangibles Interests, the Miscellaneous Interests, the Miscellaneous
Intangible Interests, the Miscellaneous Assets, Initial Funding Cash, the
Acclaim Agreement Receivable and the Mineral Tax Receivable.

“Assumed Liabilities” has the meaning set out in Section
2.06(1) .

“Bank Debt” means the amount of the Vendor’s debt with
the National Bank of Canada pursuant to a revolving, demand credit facility as
of the Effective Time (estimated to be $21,375,000).

“Base Price” means the sum of $30,925,000.

“BCBCA” means the Business Corporations Act
(British Columbia), S.B.C. 2002 c. 57, as amended, including the regulation
promulgated thereunder as is in effect on the date hereof.

- 3 -

“BC Joint Venture Agreements” means all operating
agreements forming part of the Title and Operating Documents governing the
Hydrocarbon Assets located in the Province of British Columbia.

“BC Joint Venture Payables” means payables outstanding
as at the Closing Date related to the BC Joint Venture Agreements.

“boe” means barrel of oil equivalent.

“Business Day” means a day other than Saturday, Sunday
or any statutory holiday when banks are generally open for business in Calgary,
Alberta for the transaction of banking business in the Province of Alberta.

“Charges” means the Vendor’s proportionate share of any
costs and expenses incurred that are payable or accrued and that relate to the
Hydrocarbon Assets including:

	 	(a) 	
      capital and operating costs;

	 	 	 
	 	(b) 	
      costs payable under the Title and Operating Documents in
      the ordinary course of business;

	 	 	 
	 	(c) 	
      costs of utilities and insurance;

	 	 	 
	 	(d) 	
      directly chargeable salaries, wages and employee
      benefits;

	 	 	 
	 	(e) 	
      Recoverable Overhead; and

	 	 	 
	 	(f) 	
      property Taxes and other Taxes (other than income Taxes,
      and GST, if any, on the transactions contemplated by this Agreement),
      which are in each case attributable to the Hydrocarbon
  Assets.

“Closing” means the closing and consummation of the
transactions contemplated by this Agreement.

“Closing Date” means 12:00 a.m. on the first Business
Day following the date on which the Plan of Arrangement is filed.

“Defaulting Party” has the meaning set out in Section
3.05.

“Dynamic Transaction Costs” means the sum of the
Financial Advisory Fee (as defined in the Arrangement Agreement), the Fairness
Advisory Fee (as defined in the Arrangement Agreement) and all costs incurred by
the Vendor that are associated with the Arrangement and the Arrangement
Agreement and any agreements ancillary to the Arrangement Agreement or the
Arrangement, including this Agreement, including costs of creating the
Partnership (as defined in the Arrangement Agreement) and effecting the sale of
the Non-exploration Assets (as defined in the Arrangement Agreement) by the
Vendor to the Partnership (as defined in the Arrangement Agreement) pursuant to
the Partnership Conveyance Agreement (as defined in the Arrangement Agreement)
and all legal, accounting, tax, transfer agency, special committee of the
Vendor’s 

- 4 -

board of directors, printing and mailing costs and, for greater
certainty, excludes the Office Lease Payout Amount.

“Effective Time” means 12:00 a.m. on May 1, 2005.

“Environment” means the components of the earth and
includes:

	 	(a) 	
      ambient air, land, surface and sub-surface strata,
      surface water and groundwater;

	 	 	 
	 	(b) 	
      all layers of the atmosphere;

	 	 	 
	 	(c) 	
      all organic and inorganic matter and living organisms;
      and

	 	 	 
	 	(d) 	
      the interacting natural systems that include components
      referred to in subclauses (a) to (c).

“Environmental Liabilities” means all obligations,
responsibilities, liabilities, costs and expenses of whatever kind and nature of
the Vendor in respect of the Environment arising directly or indirectly
from:

	 	(a) 	
      any activity, omission, event or circumstance relating to
      or caused by the Hydrocarbon Assets or operations thereon or related
      thereto including drilling, production, storage, use, construction,
      processing, treatment, stabilization, disposition, handling,
      transportation or Release of Hydrocarbon Substances or Hazardous
      Substances;

	 	 	 
	 	(b) 	
      the non-compliance with, the breach of or any liability
      under, any applicable HSE Laws with respect to the Hydrocarbon
    Assets;

	 	 	 
	 	(c) 	
      any order, notice of responsibility, directive (including
      requirements embodied in HSE Laws), injunction, judgment or similar act
      (including settlements) by any Governmental Authority arising out of or
      under HSE

	 	 	 
	 		
      Laws with respect to the Hydrocarbon Assets;

	 	 	 
	 	(d) 	
      any impairment or damage to the Environment, including
      any Abandonment and Reclamation Obligations, and any other matters
      relating to surface, subsurface, air or groundwater contamination with
      respect to the Hydrocarbon Assets;

	 	 	 
	 	(e) 	
      any obligations, responsibilities, liabilities, costs and
      expenses caused by, arising from, incurred in connection with or relating
      in any way to the existence of asbestos or lead based paint at, on or
      within the Hydrocarbon Assets, including any incidental contamination
      resulting therefrom; and

	 	 	 
	 	(f) 	
      for greater certainty, any obligations, responsibilities,
      liabilities, costs and expenses in respect of the Hydrocarbon Assets
      caused by or resulting from (i) changes in, modifications to or amendments
      of HSE Laws that were in

- 5 -

effect prior to the Effective Time, or
(ii) HSE Laws promulgated, made or enacted on or after the Effective Time with
respect to the foregoing.

“Execution Date” means the date upon which this
Agreement is fully executed by the parties.

“Facilities” means all of the facilities used or useful
in the production, processing, transmission or treatment of Hydrocarbon
Substances such as pipelines, flow lines, gathering systems, batteries, and
plants, including those facilities described in Schedule 1.01(A) .

“Final Adjustment Statement” has the meaning set out in
Section 3.04(1) .

“GAAP” has the meaning set out in Section
1.05.

“General Conveyance” means the General Conveyance
substantially in the form set out in Schedule 1.01(B) .

“Governmental Authority” means any domestic or foreign
legislative, executive, judicial or administrative body or person having or
purporting to have jurisdiction in the relevant circumstances.

“GST” means the goods and services tax provided for in
the Excise Tax Act (Canada).

“Hazardous Substance” means any pollutants,
contaminants, dangerous goods or substances, toxic, radioactive or hazardous
substances or materials, asbestos, polychlorinated biphenyls, and includes any
substance, material, chemical or waste that is prohibited, controlled or
regulated by any Governmental Authority pursuant to HSE Laws.

“HSE Laws” means all Applicable Laws pertaining to or
regulating pollution, protection of the Environment, health and safety of
individuals, pipeline safety, natural resource damages, conservation of
resources, wildlife, waste management, the use, storage, generation, production,
treatment, emission, discharge, release, remediation, removal, disposal or
transport or any other activity related to a Hazardous Substance, toxic waste or
material, or any other environmental matter.

“Hydrocarbon Assets” means, collectively, the
Hydrocarbon Interests, the Miscellaneous Interests and the Tangibles
Interests.

“Hydrocarbon Interests” means all of the Vendor’s rights
and interests in and in respect of the Leases, the Lands and the Title and
Operating Documents (but only to the extent that the Title and Operating
Documents pertain to the Lands), including, without limitation, the rights and
interests set out in Schedule 1.01(C) .

“Hydrocarbon Substances” means petroleum, natural gas,
natural gas liquids, crude oil, crude bitumen, synthetic crude oil and related
hydrocarbons, and any other substances, whether gaseous, liquid or solid, and
whether hydrocarbons or not, (including, sulphur) that might be produced in
association therewith, or any of them, or any constituent of any of them.

“Indemnification Notice” has the meaning set out in
Section 11.06.

- 6 -

“Indemnified Party” has the meaning set out in Section
11.06.

 “Indemnifying Party” has the meaning set out in
Section 11.06.

 “Initial Adjustment Amount” has the meaning set
out in Section 3.03.

“Initial Funding Cash” means an amount equal to the
amount set forth in Section 2.04(e) payable on Closing by the Vendor to
the Purchaser to provide the Purchaser with initial working capital.

“Interest Rate” means an annual rate of interest in an
amount equal to the Prime Rate.

“Interim Period” means the period between the Effective
Time and the Closing Date.

“Interim Operations Period” means the period between the
close of business on the Execution Date and the completion of Closing.

“Lands” means the lands described in Schedule 1.01(C)
, and, except as otherwise specified in that Schedule, includes all
Hydrocarbon Substances located within or forming part of such lands, together
with the right to explore for, win, take, remove, recover and own the same
insofar as such rights are granted by the Leases.

“Leases” means, collectively, the various leases,
licences and other documents of title set forth and described in Schedule
1.01(C) , by virtue of which the holder thereof is entitled to explore
for, drill for, recover, remove or dispose of Hydrocarbon Substances within,
upon or under the Lands (or any lands with which the same have been pooled or
unitized), on the terms set forth therein, and includes all extensions and
renewals thereof, replacements or substitutions therefor or further documents of
title issued pursuant thereto, but only to the extent that they pertain to the
Lands.

“Losses” means all damages, expenses, losses, interest,
charges, assessments, fines and penalties, liabilities (whether accrued, actual,
contingent, latent or otherwise) claims and demands of whatever nature or kind
including all legal fees and costs on a solicitor and client basis, but
excluding any liability for indirect or punitive damages or income Taxes.

“Miscellaneous Assets” means, other than Tangibles, the
Office Lease, all furniture, computers and software owned by the Vendor and
presently located in British Columbia or Saskatchewan and all software services
contracts and all office equipment leases to which the Vendor is a party.

“Mineral Tax Appeals Receivable” means the amount of
Alberta Mineral Tax Appeals receivable from the Province of Alberta (estimated
to be $619,497).

“Miscellaneous Intangible Interests” means confidential
ideas, trade secrets, know-how, methods, processes, technology, databases,
general intangibles or other proprietary information, including all goodwill
associated with the Assets.

- 7 -

“Miscellaneous Interests” means all of the rights and
interests of the Vendor in all Hydrocarbon Assets including property, assets and
rights pertaining to either the Hydrocarbon Interests or Tangibles Interests,
including, without limitations, all of the rights and interests of the Vendor
in:

	 	(a) 	
      the Title and Operating Documents;

	 	 	 
	 	(b) 	
      all subsisting rights to enter upon, use and occupy the
      surface of any of the Lands (or any lands with which the Lands have been
      pooled or unitized) or any lands upon which any of the Tangibles are
      situate, or any lands to be traversed in order to gain access to any Lands
      or any Tangibles;

	 	 	 
	 	(c) 	
      the Permits;

	 	 	 
	 	(d) 	
      the well bores and downhole casing for all Wells;
    and

	 	 	 
	 	(e) 	
      the Vendor’s Records.

“Net Dynamic Payables” means the amount of the Vendor’s
net liabilities (amounts payable less amounts receivable determined in
accordance with GAAP) excluding those amounts included in Sections
3.02(2)(b)(i),(ii),(iv), and 3.02(2)(c) as of the Effective Time
(estimated to be $2,394,555).

“Office Lease” means the lease dated as of March 13,
2005 between SunLife Assurance Company of Canada and the Vendor.

“Office Lease Liabilities” means the lease obligations
of the Vendor under the Office Lease, excluding the Office Lease Payout
Amount.

“Office Lease Payout Amount” means the amount required
to fully relieve the Vendor of any and all obligations related to the capital
portion of the Office Lease (estimated to be $366,158).

“Operating Revenues” means all benefits and income of
every kind and nature relating to the Hydrocarbon Assets, including

	 	(a) 	
      sales proceeds attributable to Hydrocarbon Substances
      produced from the Hydrocarbon Assets, net of royalties, excise, severance
      and production taxes, and marketing costs (which include for purposes of
      this definition, costs of gathering, treating, processing, compression and
      transportation), and

	 	 	 
	 	(b) 	
      all other operating revenues attributable to the
      Hydrocarbon Assets, including producing, drilling and construction
      overhead receipts under operating agreements with third parties, but
      excluding refunds of Charges.

“Operations Penalties” means non-participation
production penalties or interest forfeitures that have resulted or may or will
result from the Vendor having elected not to participate or for failing to elect
on a timely basis, in drilling, completion or other operations, pursuant to
provisions of operating agreements applicable to the Hydrocarbon Assets.

- 8 -

“Permits” means all the permits, licences and approvals
or other instruments required by any Governmental Authority or otherwise by the
Applicable Laws in conjunction with the ownership, maintenance, operation or use
of the Assets.

“Permitted Encumbrances” means:

	 	(a) 	
      the Royalty Burdens, production penalties and other
      encumbrances identified in Schedule 1.01(D) as encumbering the
      Hydrocarbon Interests;

	 	 	 
	 	(b) 	
      easements, rights of way, servitudes and similar rights
      in land, including rights of way and servitudes for highways and other
      roads, railways, sewers, drains, gas and oil pipelines, gas and water
      mains, electric light, power, telephone, telegraph or cable television
      conduits, poles, wires and cables;

	 	 	 
	 	(c) 	
      the rights reserved to or vested in any Governmental
      Authority by the terms of any lease, licence, grant or Permit forming part
      of the Hydrocarbon Assets, or by any statutory provision to terminate any
      such lease, licence, grant or Permit, or to require annual or other
      periodic payments as a condition of the continuance thereof;

	 	 	 
	 	(d) 	
      the terms and conditions of the Title and Operating
      Documents including the requirement to pay any rentals or royalties to the
      grantor thereof to maintain the same in good standing;

	 	 	 
	 	(e) 	
      the reservations, limitations, provisos and conditions in
      any original grant and transfers from the Crown of any of the Lands or
      interests therein and statutory exceptions to title;

	 	 	 
	 	(f) 	
      liens securing the payment of Taxes or other Governmental
      Authority charges that are not due at the relevant time or the validity of
      which is being diligently contested in good faith by or on behalf of the
      Vendor;

	 	 	 
	 	(g) 	
      undetermined or inchoate liens (including processors’,
      operators’, mechanics’, builders’, materialmen’s and similar liens)
      against the Hydrocarbon Assets arising in the ordinary course of business
      for the Vendor’s proportionate share of the costs and expenses of
      operation of the Hydrocarbon Assets, which costs and expenses are not due
      or delinquent at the relevant time;

	 	 	 
	 	(h) 	
      Operations Penalties;

	 	 	 
	 	(i) 	
      liens incurred, created or granted in the ordinary course
      of business to a public utility or Governmental Authority in connection
      with operations conducted with respect to the Hydrocarbon Assets, but only
      insofar as such liens relate to costs and expenses for which payment is
      not due;

- 9 -

	 	(j) 	
      Production Sales Contracts that can be terminated on 31
      or less days’ notice without an early termination penalty or additional
      cost and those that are identified in Schedule 1.01(E);
  and

	 	 	 
	 	(k) 	
      agreements and plans related to pooling or
      unitization.

“Person” includes an individual, corporations, limited
and unlimited liability companies, general and limited partnerships,
associations, trusts, unincorporated organizations, joint ventures and
Governmental Authorities.

“Plan of Arrangement” means the plan of arrangement
substantially in the form set out in the Arrangement Agreement.

“Preferential Right Waiver” has the meaning set out in
Section 6.03.

“Prime Rate” means an annual rate of interest equal to
the annual rate of interest announced from time to time by main Calgary branch
of National Bank of Canada as the reference rate in effect for determining
interest rates on Canadian dollar commercial loans in Canada.

“Production Sales Contracts” means the contracts for the
purchase and sale of any of the Vendor’s interest in Hydrocarbon Substances
produced from or allocated to the Lands, including those described in Schedule
1.01(D) .

“Purchaser Indemnified Parties” has the meaning set out
in Section 11.02.

“Purchase Price” has the meaning set out in Section
2.02.

“Purchaser’s Objection” has the meaning set out in
Section 3.04(2) .

“Recoverable Overhead” means the amount payable to an
operator in relation to any of the oil and gas assets of the Vendor pursuant to
a joint operating agreement or similar agreement to compensate such operator for
the general overhead and administrative expenses that it incurs in performing
its responsibilities as operator.

“Release” means any unauthorized release, spill,
emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration of Hazardous Substances into or through the Environment or
into or out of any of the Hydrocarbon Assets that is not authorized under HSE
Laws.

“Restricted Assets” means Hydrocarbon Assets that are
subject to a right of first refusal or similar preferential right of purchase
pursuant to which a third party is entitled to purchase or otherwise acquire
such Hydrocarbon Assets, as a result of the Vendor having offered or agreed to
sell such Hydrocarbon Assets to the Purchaser.

“Restricted Asset Value” has the meaning set out in
Section 6.01.

“Royalty Burdens” means all lessor (Crown or freehold)
royalties and gross or net overriding royalties affecting the Vendor’s interest
in the Assets or any of them.

- 10 -

“Seismic” means the proprietary seismic data of the
Vendor relating solely to the Hydrocarbon Assets.

“Severance Obligations” means the amount of severance or
other employee termination costs incurred by the Vendor subsequent to the
Effective Time as a result of the transactions pursuant to the Arrangement
(estimated to be $1,773,650).

“Shellbridge Note” means the demand interest-free
promissory note issued by the Purchaser in favour of the Vendor, having a
principal amount equal to $30,925,000.

“Subject Instrument” has the meaning set out in Section
6.05(1) .

“Tangibles” means all tangible depreciable assets used
or useful in connection with production, gathering, oil treatment, gas
measurement, storage, oil transportation, water injection, removal or other
operations relating to the Hydrocarbon Interests, the Leases or the Lands (or
lands with which the same have been pooled or unitized), whether they are
located within or upon the Lands (or lands with which the same have been pooled
or unitized) or elsewhere, including the Facilities and all equipment located in
or on the Wells, and all tangible depreciable assets that form part thereof, are
appurtenant thereto or are used in connection therewith.

“Tangibles Interests” means all rights and interests of
the Vendor in and in respect of the Tangibles.

“Tax Pools” has the meaning ascribed thereto in the
Arrangement Agreement.

“Taxes” means all taxes, charges, fees, imposts, duties,
levies, premiums, rates, withholdings or other assessments imposed by any
Governmental Authority, and any interest, fines, penalties, charges or additions
to tax attributable to or imposed on or with respect to any such assessment.

“Third Party Claim” has the meaning set out in Section
11.07(1) .

“Title and Operating Documents” means, in respect of any
Hydrocarbon Interests, Tangibles, Lands or surface interests, all documents of
title granting, reserving or conferring rights (including the Leases, the
Permits and certificates of title), operating agreements, unit agreements,
pooling agreements, royalty agreements, overriding royalty agreements, gross
overriding royalty agreements, participation agreements, farmin and farmout
agreements, purchase and sale agreements, assignments, trust declarations, net
profits agreements, common stream agreements, gas and liquid sales agreements,
agreements for the construction, ownership and operation of the Tangibles and
gathering, transportation and processing agreements) or other agreements that
relate to such Hydrocarbon Interests, Tangibles, Lands and surface interests or
the ownership, operation or exploitation thereof.

“Trade Payable Related to BC Disputed Items” means the
amount of the Vendor payables which are specifically payable due to claims made
against the Vendor which have been incurred under or in relation to BC Joint
Venture Agreements and remain unsettled as of the Effective Time determined in
accordance with GAAP (estimated to be $4,569,335).

“Transfer Taxes” means all transfer, sales, use, GST,
value added, and other similar Taxes.

- 11 -

“Vendor Indemnified Parties” has the meaning set out in
Section 11.01.

“Vendor Information” means all information concerning
the Vendor or its Affiliates or both, other than information that relates
exclusively to the Assets and other than any such information that is available
to the public on the Closing Date, or thereafter becomes available to the
public, other than as a result of a breach of Section 12.01.

“Vendor’s Records” means all the Vendor’s books,
records, files, reports, studies, maps, and logs pertaining to the Hydrocarbon
Interests, the Leases, the Lands (or any lands with which the Lands have been
pooled or unitized) or the Tangibles including the Seismic, but excluding any
non-proprietary seismic, interpretive data, forecasts or reports.

“Vendor’s Review Period” has the meaning set out in
Section 3.04(3) .

“Wells” means all producing, shut in, suspended, water
source, injection, disposal and abandoned wells located on the Lands (or on
lands with which the Lands have been pooled or unitized), including the wells
described in Schedule 1.01(C) .

1.02  Headings

          The
division of this Agreement into Articles and Sections and the insertion of a
table of contents and headings are for convenience of reference only and do not
affect the construction or interpretation of this Agreement. The terms “hereof”,
“hereunder” and similar expressions refer to this Agreement and not to any
particular Article, Section or other portion hereof. Unless something in the
subject matter or context is inconsistent therewith, references herein to
Articles, Sections and Schedules are to Articles and Sections of and Schedules
to this Agreement.

1.03  Extended Meanings

          In
this Agreement words importing the singular number only include the plural and
vice versa and words importing any gender include all genders. The term
“including” means “including without limiting the generality of the
foregoing”.

1.04  Statutory References

          In
this Agreement, unless something in the subject matter or context is
inconsistent therewith or unless otherwise herein provided, a reference to any
statute is to that statute as now enacted or as the same may from time to time
be amended or replaced and includes any regulation made thereunder.

1.05  Accounting Principles

          Wherever
in this Agreement reference is made to a calculation to be made or an action to
be taken in accordance with generally accepted accounting principles
(“GAAP”), such reference will be deemed to be to the generally accepted
accounting principles from time to time approved by the Canadian Institute of
Chartered Accountants, or any successor institute, applicable as at the date on
which such calculation or action is made or taken or required to be made or
taken.

- 12 -

1.06  Currency

          All
references to currency herein are to lawful money of Canada.

1.07  Industry Terms

          Words
and phrases that are not defined herein but that have a generally accepted
meaning in the custom and usage of the oil and gas industry in Western Canada as
at the Execution Date will be given such generally accepted meaning.

1.08  Knowledge

          For
purposes of this Agreement, “knowledge”, when used in the phrase “the Vendor’s
knowledge”, means, and will be limited to, the actual knowledge (without
independent investigation), as of the Execution Date, of those senior officers
of the Vendor who are responsible for the supervision of the subject matter of
the applicable statement, representation or warranty, but does not include the
knowledge of any other individual or any constructive, implied or imputed
knowledge.

1.09  Schedules

          The
following are the Schedules to this Agreement:

	 	Schedule 1.01(A) 	-	Facilities 
	 	Schedule 1.01(B) 	-	Form of General Conveyance 
	 	Schedule 1.01(C) 	- 	Lands, Leases, Hydrocarbon Interests,
      Encumbrances and Wells 
	 	Schedule 1.01(D) 	-	Production Sales Contracts 
	 	Schedule 5.02(E) 	-	Outstanding AFE’s 

Whenever any term or condition, whether express or implied, of
any Schedule conflicts with or is at variance with any term or condition of the
body of this Agreement, the latter will prevail.

ARTICLE 2 - PURCHASE AND SALE

2.01  Purchase and Sale of the
Assets

          Upon
and subject to the terms and conditions hereof, the Vendor hereby agrees to
sell, assign, transfer, convey and set over to the Purchaser and the Purchaser
hereby agrees to purchase from the Vendor, as of and with effect from the
Closing Date, all of the right, title, benefit and interest of the Vendor
(whether absolute or contingent, legal or beneficial) in and to the Assets.

2.02  Purchase Price

          The
purchase price payable by the Purchaser to the Vendor for the Assets (the
“Purchase Price”) will be the Base Price; plus or minus, as applicable,
the adjustments set forth in Article 3.

- 13 -

2.03  Payment of the Purchase
Price

          On
the Closing Date, the Purchase Price will be paid by the Purchaser to the Vendor
by: (i) the issuance to the Vendor of the Shellbridge Note (ii) if, applicable,
a cash payment by the Vendor to the Purchaser for the amount representing the
difference between the amount of the Shellbridge Note and the Purchase Price if
the Shellbridge Note exceeds the Purchase Price; and (iii) if, applicable, a
cash payment by the Purchaser to the Vendor for the amount representing the
difference between the amount of the Shellbridge Note and the Purchase Price if
the Purchase Price exceeds the Shellbridge Note.

2.04  Allocation of Base Price

          The
Base Price will be allocated among the Assets as follows:

	(a) 	to the Tangibles
      Interests 	$	 5,368,600 	 
	(b) 	to the Miscellaneous Interests
	$	 2,307,000 	 
	  	(other than
      Seismic) 	 	  	 
	(c) 	to the Seismic 	$	 550,000 	 
	(d) 	to the
      Hydrocarbon Interests 	$	 21,474,398 	 
	(e) 	to the Initial Funding Cash 	$	 1,225,000 	 
	(f) 	to the
      Miscellaneous Assets 	$	 1 	 
	(g) 	to the Miscellaneous Intangible
    	$	 1 	 
	  	Interests 	 	  	 
	  	  	$	 $30,925,000 	 

The Vendor and the Purchaser must each complete all tax returns
in a manner consistent with the final allocation and otherwise follow the final
allocation for all tax purposes on and subsequent to the Closing Date and not
take any position inconsistent with the final allocation. If such allocation is
disputed by any taxation or other Governmental Authority, the party receiving
notice of such dispute will promptly notify the other party and the parties will
use their reasonable best efforts to sustain the final allocation. The parties
will share information and cooperate to the extent reasonably necessary to
permit the transactions contemplated by this Agreement to be properly, timely
and consistently reported.

2.05  Goods and Services Tax

	 	(a) 	
      The Purchase Price is exclusive of any Transfer Taxes
      exigible in respect of the sale and purchase of the Assets. The Vendor and
      the Purchaser will on or before the Closing Date jointly execute an
      election, in prescribed form and containing the prescribed information, to
      have subsection 167(1.1) of the Excise Tax Act (Canada) apply to
      the sale and purchase of the Assets hereunder so that no tax is payable in
      respect of such sale and purchase under Part IX of the Excise Tax Act
      (Canada). At Closing, the Purchaser will file such election with the
      Minister of National Revenue within the time prescribed by the Excise
      Tax Act (Canada) to cause no GST to be exigible on the transfer of the
      Assets. The Purchaser shall pay and the Vendor shall remit any other
      Transfer Taxes (for greater

- 14 -

	 		
      certainty excluding GST) to the appropriate taxation
      authorities in accordance with Applicable Law. Each party represents that
      it will hold a valid GST registration account number on the Closing
      Date.

	 	 	 
	 	(b) 	
      Subject to Section 2.05(a), the Purchaser shall be
      solely liable for any and all sales and similar Taxes imposed by
      provincial or federal legislation in respect of the purchase of the Assets
      pursuant hereto. If the Vendor, as agent for the Crown, is required to
      collect such Taxes, the Purchaser shall pay the aggregate amount of such
      Taxes to the Vendor at Closing. The Vendor shall remit such amount to the
      appropriate authorities in accordance with Applicable Law.

	 	 	 
	 	(c) 	
      After Closing, the Purchaser shall be responsible for,
      and shall indemnify and save the Vendor harmless in respect of all amounts
      of Transfer Taxes (including, without limitation, interest and penalties
      assessed by any Governmental Authority) in respect of the purchase and
      sale of the Assets pursuant hereto which are in excess of the amounts
      collected by the Vendor from the Purchaser at
Closing.

2.06  Assumed Liabilities

          (1)      On
Closing, the Purchaser hereby, without any further action on the part of the
Vendor or the Purchaser, assumes and agrees to perform and discharge each of the
following obligations, responsibilities, liabilities, costs and expenses of
whatever kind or nature (collectively, the “Assumed Liabilities”):

	 	(a) 	
      that accrue in connection with ownership or operation of
      the Hydrocarbon Assets on or after the Effective Time, including the terms
      of the Title and Operating Documents,

	 	 	 
	 	(b) 	
      that have accrued or that accrue on or after the Closing
      Date in connection with the BC Joint Venture Agreements including, without
      limitation, the BC Joint Venture Payables which the parties understand
      have a net balance after deduction of receivables under the BC Joint
      Venture Agreements of $4,569,333 as at the Effective Time,

	 	 	 
	 	(c) 	
      now existing or arising at any time before, on or after
      the Effective Time in respect of employment and term of service employment
      obligations of current and former employees and consultants of the Vendor
      whether or not such current or former employees of the Vendor were
      terminated in association with the Arrangement but excluding Severance
      Obligations paid by the Vendor that have been accounted for in calculating
      the Adjustment Amount,

	 	 	 
	 	(d) 	
      that accrue in respect of the Miscellaneous Assets or in
      respect of any leases associated with any of the Assets on and after the
      Effective Time,

- 15 -

	 	(e) 	
      all Environmental Liabilities now existing or arising at
      any time before, on, or after the Effective Time, and

	 	 	 
	 	(f) 	
      that accrue in connection with the Office Lease
      Liabilities on or after the Closing Date.

          (2)     
The Vendor shall pay to the Purchaser at Closing cash in the amount equal to:
(i) the amount of the BC Joint Venture Payables outstanding at Closing, less;
(ii) the amount of the Acclaim Agreement Receivable outstanding at Closing,
less; (iii) the amount of the Mineral Tax Appeals Receivable outstanding at
Closing; and if the aforementioned determined amount is negative, the Purchaser
shall pay such amount to the Vendor.

          (3)     
In addition to the Purchaser's indemnities contained elsewhere in this
Agreement, subject to Closing occurring, the Purchaser shall be solely liable
for and shall, in addition, indemnify and hold harmless the Vendor and its
Affiliates from and against all Losses of any kind that may be brought against
or suffered by the Vendor or its Affiliates or that any of them may suffer,
sustain, pay or incur, in each case, that are caused by, arise from, are
incurred in connection with or relate in any way directly or indirectly to the
Assumed Liabilities.

          (4)      In
addition to any other provision for indemnification by the Purchaser contained
in this Agreement, the Purchaser will indemnify and save harmless the Vendor
from and against all Losses incurred by the Vendor directly or indirectly as a
result of the Vendor not collecting or remitting any tax under Part IX of the
Excise Tax Act (Canada) in respect of the sale of the Assets or because
of the Purchaser’s failure to file the election referred to in Section 2.05(i)
in a timely fashion.

ARTICLE 3 - ADJUSTMENT PROCEDURE

3.01  Adjustment Principles

          If
Closing occurs, the Purchase Price shall be increased or decreased, as the case
may be, by the value of the aggregate of the adjustment amounts determined in
accordance with the provisions of Section 3.02 (the “Adjustment
Amount”). The Adjustment Amount shall be paid by the Purchaser to the Vendor
if the Adjustment Amount is a negative amount and shall be paid by the Vendor to
the Purchaser if the Adjustment Amount is a positive amount. The Vendor and
Purchaser acknowledge that the principles set forth in Section 3.02 shall
apply in determining the Adjustment Amount. The adjustments pursuant to this
Article 3 or elsewhere in this Agreement shall constitute an increase or
decrease, as the case may be, to the Purchase Price and to the amount allocated
to the Hydrocarbon Interests.

3.02  Determination of Adjustment
Amount

          The
Adjustment Amount shall consist of the following:

          (1)     
All benefits, income, costs and expenses of every kind and nature whether
accruing, payable or paid and received or receivable in respect of the
Hydrocarbon Assets, including Operating Revenues and Charges, shall be adjusted
between the Vendor and the Purchaser for the Interim Period in accordance with
GAAP. Notwithstanding the generality of 

- 16 -

the foregoing, the Vendor and the Purchaser acknowledge that
the following principles shall apply to adjustments made under this Section
3.02(1) :

	 	(a) 	
      Except as expressly provided in this Agreement: (i) the
      Vendor is entitled to all Operating Revenues attributable to the
      Hydrocarbon Assets during the period prior to the Effective Time and is
      responsible for (and entitled to any refunds with respect to) all Charges
      attributable to the Hydrocarbon Assets during the period prior to the
      Effective Time, and (ii) the Purchaser is entitled to all Operating
      Revenues attributable to the Hydrocarbon Assets during the period from and
      after the Effective Time and is responsible for (and entitled to any
      refunds with respect to) all Charges attributable to the Hydrocarbon
      Assets during the period from and after the Effective Time. The
      determination of whether Charges and Operating Revenues with respect to
      the Hydrocarbon Assets are attributable to periods before or after the
      Effective Time will be determined in accordance with GAAP.

	 	 	 
	 	(b) 	
      All costs incurred in connection with work performed or
      goods and services provided in respect of the Hydrocarbon Assets will be
      deemed to have accrued as of the date the work was performed or the goods
      and services were provided regardless of the time those costs become
      payable.

	 	 	 
	 	(c) 	
      Advances, cash calls and deposits by the Vendor for
      operations pertaining to the Hydrocarbon Assets will be adjusted under
      this Section 3.02(1), and will be transferred to, and be for the
      benefit of the Purchaser.

	 	 	 
	 	(d) 	
      Adjustments in respect of production from the Hydrocarbon
      Assets shall be made in favour of the Vendor in respect of production
      beyond the wellhead at the Effective Time and in favour of the Purchaser
      in respect of all other production at and after the Effective
  Time.

	 	 	 
	 	(e) 	
      All surface and mineral lease payments, drilling
      penalties under the Leases and all Taxes (except income Taxes and any
      taxes based upon the volume of produced Hydrocarbon Substances) shall be
      apportioned on a per diem basis during the Interim Period.

	 	 	 
	 	(f) 	
      The Vendor will bear all Taxes, including sales Taxes,
      excise Taxes, severance or other production Taxes, ad valorem Taxes
      and any other federal, provincial, local or tribal Taxes attributable to
      the Vendor’s interest in the ownership or operation of the Hydrocarbon
      Assets prior to the Effective Time. All deductions, credits or refunds
      pertaining to such Taxes, no matter when received, belong to the Vendor.
      The Purchaser will bear all Taxes, including sales Taxes, excise Taxes,
      severance or other production Taxes, ad valorem Taxes and any other
      federal, provincial, local or tribal Taxes attributable to ownership or
      operation of the Hydrocarbon Assets at and after the Effective Time, and
      all deductions, credits and refunds pertaining to the aforementioned
      Taxes, no matter

- 17 -

	 		
      when received, belong to the Purchaser. Each party is
      responsible for filing any Tax returns and handling payment of any Tax due
      under Applicable Law.

	 	 	 
	 	(g) 	
      Notwithstanding the adjustments contemplated pursuant to
      this Section 3.02(1), the Vendor will remain the owner of the
      Hydrocarbon Assets until the Closing, and as a result thereof, will report
      all production volumes and all net income received or accrued from the
      Hydrocarbon Assets as the Vendor's own for income Tax purposes to such
      date.

	 	 	 
	 	(h) 	
      The Vendor will use its available Tax Pools to shield, to
      the extent reasonably possible having regard to this Agreement all taxable
      income allocated to both the Vendor and the Purchaser during the Interim
      Period provided however, the Tax Pools will be applied firstly to the
      disposition of assets under this Agreement and secondly, against taxable
      income of the Vendor accruing prior to the Effective Time. Subject to the
      foregoing, during the Interim Period, the Tax Pools will be applied
      proportionately against taxable income of the Vendor and the Purchaser on
      a per boe basis based (i) in the case of the Vendor, on actual production
      during the Interim Period from all of the Vendor’s oil and gas assets
      relative to the aggregate of actual production during the Interim Period
      from all of the Vendor’s oil and gas assets and from the Hydrocarbon
      Assets and (ii) in the case of the Purchaser, on actual production during
      the Interim Period from the Hydrocarbon Assets relative to the aggregate
      of actual production during the Interim Period from all the Vendor’s oil
      and gas assets and from the Hydrocarbon Assets.

	 	 	 
	 	(i) 	
      After Closing, the Purchaser will provide the Vendor with
      reasonable assistance in connection with the Vendor’s efforts to obtain
      all Operating Revenues, refunds, credits and Recoverable Overhead relating
      to Hydrocarbon Assets for the period prior to the Effective Time and the
      Vendor will provide the Purchaser with reasonable assistance in connection
      with the Purchaser’s efforts to obtain all Operating Revenues, refunds,
      credits and Recoverable Overhead relating to the Hydrocarbon Assets for
      the Interim Period.

	 	(2) 	
      The amount (positive or negative) determined as
      follows:

	 	 	 	 	 
	 		(a) 	
      $29,926,683,

	 	 	 	 	 
	 		(b) 	
      Less the aggregate of the following:

	 	 	 	 	 
	 			(i) 	
      the Bank Debt that was outstanding as at the Effective
      Time, plus

	 	 	 	 	 
	 			(ii) 	
      the Office Lease Payout Amount that has been paid since
      the Effective Time or that remains payable at the Effective Time,
    plus

- 18 -

	 	(iii) 	
      the Dynamic Transaction Costs paid since the Effective
      Time and/or payable at the Closing Date, plus

	 	 	 
	 	(iv) 	
      the Trade Payables Related to BC Disputed Items paid
      since the Effective Time and/or payable at the Closing Date,
plus

	 	 	 
	 	(v) 	
      the Net Dynamic Payables which have settled (collected or
      paid) since Effective Time and/or is receivable or payable at the Closing
      Date, plus

	 	 	 
	 	(vi) 	
      the Severance Obligations paid since the Effective Time
      and/or payable at the Closing Date,

	 	(c) 	
      Plus the aggregate of:

	 	 	 	 
	 		(i) 	
      the amount of the Acclaim Agreement Receivable received
      since Effective Time and/or receivable at Closing, plus

	 	 	 	 
	 		(ii) 	
      the amount of the Mineral Tax Appeals Receivable received
      since the Effective Time and/or receivable at
Closing.

	 	(3) 	
      The Purchaser will be allocated a portion of:

	 	 	 	 
	 		(a) 	
      all general and administrative costs and expenses
      including, without limitation, rent and operating costs payable in respect
      of the Office Lease,

	 	 	 	 
	 		(b) 	
      all operating, producing, drilling and construction
      overhead costs and expenses and any Recoverable Overhead, and

	 	 	 	 
	 		(c) 	
      all interest costs and expenses (including, without
      limitation, interest costs and expenses on the Bank
Debt)

incurred by the Vendor during the Interim Period regardless
when those costs and expenses are paid, on a per boe basis based on actual
production from the Hydrocarbon Assets during the Interim Period relative to
actual production from all of the Vendor's oil and gas assets (including, for
greater certainty, the Hydrocarbon Assets) during the Interim Period.

          (4)      A
reduction equal to the amount of any payments made to or commitments entered
into with or made to any Person or any obligation or liability assumed or
incurred (whether accrued, contingent or otherwise) by the Vendor during the
Interim Period, net of any benefits to the Vendor associated therewith, which
are not contemplated by the Arrangement Agreement or are made outside the
ordinary course of business of the Vendor.

          (5)      An
amount (positive or negative) determined as follows: (i) $41,733,317, minus;
(ii) the product of $1.71 multiplied by the number of common shares of the
Vendor acquired pursuant to the Arrangement; plus; (iii) the aggregate proceeds
received by the Vendor from the exercise of options to purchase common shares of
the Vendor from the Execution Date to and including the Closing Date.

- 19 -

3.03  Initial Adjustment Amount

          The
Vendor will, not later than five Business Days prior to the Closing Date,
provide to the Purchaser and AcquisitionCo a written statement setting forth the
Vendor’s good faith estimate of the Adjustment Amount (the “Initial
Adjustment Amount”).

3.04  Post-Closing Adjustment of Adjustment
Amount

          (1)     
The Vendor will prepare and deliver to the Purchaser, within 120 days after the
Closing Date, a written statement (the “Final Adjustment Statement”)
setting forth the Vendor’s good faith determination of the Adjustment Amount
based upon the actual information available from the accounting systems of the
Vendor. The Vendor or the Purchaser, as the case may be, shall pay to the other
party, within 40 days following delivery or receipt, as the case may be, of the
Final Adjustment Statement, an amount equal to the difference between the
Adjustment Amount set forth in the Final Adjustment Statement and the Initial
Adjustment Amount together with interest on the amount of such difference at the
Interest Rate from and including the Closing Date to but excluding the date of
payment.

          (2)      The
Purchaser will, within 30 days after the Vendor’s delivery of the Final
Adjustment Statement, complete its review of the Adjustment Amount set forth in
the Final Adjustment Statement. In the event that the Purchaser disputes the
Vendor’s determination of the Adjustment Amount set forth in the Final
Adjustment Statement, the Purchaser will so notify the Vendor, on or before the
last Business Day of such 30 day period, in writing (the “Purchaser’s
Objection”), and such notice will set forth a specific description of the
basis of the Purchaser’s Objection and the adjustments to the Adjustment Amount
set forth in the Final Adjustment Statement that the Purchaser believes should
be made. If the Purchaser does not deliver a Purchaser’s Objection within such
30 day period, the Adjustment Amount set forth in the Final Adjustment Statement
will be conclusive and binding on the parties. Except for the adjustments in
respect of which the Purchaser provides the Purchaser's Objection within the
aforesaid 30 day period, the Purchaser will not be entitled to make any claim
for any further adjustments to the Adjustment Amount set forth in the Final
Adjustment Statement after the expiration of the aforesaid 30 day period.

          (3)      The
Vendor will have 30 days (the “Vendor’s Review Period”) from its receipt
of the Purchaser’s Objection to review and respond to it, and the parties will
thereafter attempt in good faith to reach an agreement with respect to the
matter or matters in dispute in respect of the Adjustment Amount set forth in
the Final Adjustment Statement. If the Vendor and the Purchaser are unable to
resolve their disagreement as to the Adjustment Amount set forth in the Final
Adjustment Statement within 60 days following the expiration of the Vendor’s
Review Period, either party may by written notice given to the other party and
to the Accounting Firm, refer the matter in dispute to the Accounting Firm for
determination, who will, acting as experts and not as arbitrators, determine
whether and to what extent, if any, the Adjustment Amount set forth in the Final
Adjustment Statement requires adjustment.

          (4)      The
Vendor and the Purchaser will jointly direct the Accounting Firm to use its best
efforts to render its determination in writing within 10 Business Days. The
Accounting Firm’s determination will be final, conclusive and binding upon the
Purchaser and the Vendor.

- 20 -

In resolving the matter in dispute, the Accounting Firm may not
assign a value to any item greater than the greatest value for such item claimed
by either the Vendor or the Purchaser or less than the smallest value for such
item claimed by either the Vendor or the Purchaser. The Purchaser and the Vendor
will each pay one-half of the fees and disbursements incurred by the Accounting
Firm in determining the matter in dispute. The Purchaser and the Vendor will
make readily available to the Accounting Firm all relevant books and records and
all other items and information reasonably requested by the Accounting Firm in
relation to the matter in dispute.

          (5)      The
Adjustment Amount set forth in the Final Adjustment Statement will be revised to
reflect any adjustments agreed to by the parties or determined by the Accounting
Firm. If the Adjustment Amount set forth in the Final Adjustment Statement, as
may be revised in accordance with the immediately preceding sentence, is

	 	(a) 	
      greater than the Initial Adjustment Amount, the Purchaser
      will pay the Vendor an amount equal to the difference (between the
      Adjustment Amount in the revised Final Adjustment Statement and the
      Initial Adjustment Amount) together with interest on the amount of such
      difference at the Interest Rate from and including the Closing Date to but
      excluding the date of payment, or

	 	 	 
	 	(b) 	
      less than the Initial Adjustment Amount, the Vendor will
      pay the Purchaser an amount equal to the difference (between the
      Adjustment Amount in the revised Final Adjustment Statement and the
      Initial Adjustment Amount) together with interest on the amount of such
      difference at the Interest Rate from and including the Closing Date to but
      excluding the date of payment,

which payment is to be made within 10 Business Days following
the final determination of the Adjustment Amount.

Notwithstanding the foregoing, no adjustments will be made to
the calculations of the Trade Payable Related to BC Disputed Items, the Acclaim
Agreement Receivable or the Mineral Tax Appeals Receivable based on any
increases or decreases to such amounts which arise for any reason following the
Closing Date.

ARTICLE 4 - REPRESENTATIONS AND WARRANTIES

4.01  Vendor’s Representations and
Warranties

          Subject
to the disclaimers set forth in Section 4.02, the Vendor represents and
warrants to the Purchaser as of the Execution Date and as of the Closing Date
(except with respect to those representations and warranties that speak as to a
particular date or time, which need only be true and correct as of such date or
time), as follows:

	 	(a) 	
      The Vendor is a corporation duly organized and validly
      subsisting under the laws of British Columbia.

- 21 -

	 	(b) 	
      The Vendor has all requisite corporate power and
      authority to enter into and deliver this Agreement and to transfer the
      legal and beneficial title and ownership of the Assets to the
      Purchaser.

	 	 	 
	 	(c) 	
      This Agreement constitutes a valid and legally binding
      obligation of the Vendor enforceable against the Vendor in accordance with
      its terms subject to applicable bankruptcy, insolvency, reorganization and
      other laws of general application limiting the enforcement of creditor’s
      rights generally and to the fact that specific performance is an equitable
      remedy available only in the discretion of the court.

	 	 	 
	 	(d) 	
      Other than with respect to: (i) authorizations or other
      consents and approvals required for, or as a consequence of, the sale of
      the Assets from all applicable Governmental Authorities, and (ii) consents
      required in connection with the assignment of the Assets and the
      assumption of the Assumed Liabilities, no consent, approval of or by, or
      filing with or notice to any Person is required with respect to the Vendor
      in connection with the execution, delivery or enforceability of this
      Agreement or the consummation of the transactions provided for hereby,
      except where the failure to obtain such consent or approval, make such
      filing or give such notice would not have a material adverse effect on the
      Assets, taken as a whole.

	 	 	 
	 	(e) 	
      The Vendor is registered under Part IX of the Excise
      Tax Act (Canada) with registration number 1015322414 RT0001.

	 	 	 
	 	(f) 	
      The Vendor is not a non resident of Canada for purposes
      of Section 116 of the Income Tax Act
  (Canada).

	4.02 	
      Limitation

	 	 
		
      Except as otherwise expressly set forth in this
      Agreement:

	 	(a) 	
      The Vendor makes no representations or warranties except
      as expressly set forth in Section 4.01 and in particular, and
      without limitation, the Vendor hereby expressly negates any
      representations and warranties by it (except those contained in Section
      4.01) whether contained in any information, memorandum, or
      otherwise, whether provided to the Purchaser directly or through the
      Vendor’s agents with respect to:

	 	 	 	 
	 		(i) 	
      the quality, condition or merchantability of any of the
      Assets;

	 	 	 	 
	 		(ii) 	
      the fitness of any Assets for any purpose;

	 	 	 	 
	 		(iii) 	
      the assignability of any Permits and other property
      rights;

- 22 -

	 	(iv) 	
      the amounts, quality, recoverability or deliverability of
      reserves of Hydrocarbon Substances within or under the Lands or any lands
      pooled or unitized therewith;

	 	 	 
	 	(v) 	
      the value of the Assets or any estimates of prices or
      future cash flows arising from the sale of Hydrocarbon Substances produced
      from or allocated to the Lands or any estimates of other revenues or
      expenses attributable to the Hydrocarbon Assets or the availability or
      continued availability of facilities, services or markets for the
      processing, transportation or sale of any Hydrocarbon
Substances;

	 	 	 
	 	(vi) 	
      any data or information supplied by the Vendor in
      connection herewith; or

	 	 	 
	 	(vii) 	
      the title of the Vendor in and to the Hydrocarbon
      Assets.

	 	(b) 	
      The Purchaser acknowledges that it purchasing the Assets
      on an “as is, where is” basis and that it has only relied upon the
      representation and warranties contained in Section 4.01 and not on
      any representations or warranties outside this Agreement and the Vendor
      shall have no liability whether under contract, tort, statute, or
      otherwise in respect of any statements, information, representations or
      warranties made by it or by its directors, officers or shareholders,
      employees, agents or representatives except liability for the
      representations and warranties contained in Section 4.01 which
      liability shall be subject to the limitations contained in this Agreement
      and except in the case of an allegation of fraud on the part of the
      Vendor. The Purchaser acknowledges and confirms that except for the
      representations and warranties of the Vendor in Section 4.01, the
      Purchaser has performed its own due diligence and has relied, and will
      continue to rely, upon its own engineering and due diligence with respect
      to the state or condition of the Assets and the Assumed
  Liabilities.

	 	 	 
	 	(c) 	
      The Purchaser acknowledges that neither the Vendor nor
      any other Person has made any representation or warranty, express or
      implied, at law or in equity, as to the accuracy or completeness of any
      information regarding the Assets or the Assumed Liabilities, and the
      Purchaser further agrees that neither the Vendor nor any other Person will
      have or be subject to any liability to the Purchaser or any other Person
      resulting from the distribution to the Purchaser or the Purchaser’s use
      of, any such information, and any information, document or material made
      available to the Purchaser in certain “data rooms”, management
      presentations or any other form in expectation of the transactions
      contemplated by this Agreement.

	 	 	 
	 	(d) 	
      The Purchaser acknowledges
that:

- 23 -

	 	(i) 	
      there are uncertainties inherent in any estimates,
      projections and other forecasts and plans provided by the Vendor to the
      Purchaser;

	 	 	 
	 	(ii) 	
      the Purchaser is aware of and familiar with such
      uncertainties; and

	 	 	 
	 	(iii) 	
      the Purchaser takes full responsibility for making its
      own evaluation of the adequacy and accuracy of any such estimates,
      projections and other forecasts and plans in connection with the
      transactions contemplated by this Agreement;

accordingly, the Vendor makes no representations or warranties
with respect to such estimates, projections and other forecasts and plans
(including any geological, engineering or other interpretations or economic
evaluations of the Hydrocarbon Assets).

4.03  Purchaser’s Representations and
Warranties

          The
Purchaser represents and warrants to the Vendor as of the Execution Date and as
of the Closing Date (except with respect to those representations and warranties
that speak as to a particular date or time, which need only be true and correct
as of such date or time), as follows:

	 	(a) 	
      The Purchaser is a corporation duly incorporated,
      organized and validly subsisting under the laws of Alberta.

	 	 	 
	 	(b) 	
      The Purchaser has the power, authority and right to enter
      into and deliver this Agreement and to complete the transactions
      contemplated hereby and to carry out its obligations hereunder.

	 	 	 
	 	(c) 	
      This Agreement constitutes a valid and legally binding
      obligation of the Purchaser, enforceable against the Purchaser in
      accordance with its terms subject to applicable bankruptcy, insolvency,
      reorganization and other laws of general application limiting the
      enforcement of creditor’s rights generally and to the fact that specific
      performance is an equitable remedy available only in the discretion of the
      court.

	 	 	 
	 	(d) 	
      Other than with respect to authorizations or other
      consents and approvals required for, or as a consequence of, the purchase
      and sale of the Assets from all applicable Governmental Authorities, no
      consent, approval of or by, or filing with or notice to any other Persons
      is required with respect to the Purchaser in connection with the
      execution, delivery or enforceability of this Agreement or the
      consummation of the transactions provided for hereby.

	 	 	 
	 	(e) 	
      Subject to obtaining the consents described in Section
      4.03(d), the execution and delivery of this Agreement and the
      consummation of the transactions contemplated hereby and the compliance by
      the Purchaser with any of the provisions hereof does not and will not: (i)
      violate or conflict with, or result in a breach of, any provisions of, or
      constitute a

- 24 -

	 		
      default (or an event that, with notice or lapse of time
      or both, would constitute a default) under, or result in termination of,
      or accelerate the performance required by any of the terms, conditions or
      provisions of the articles, by laws or other organizational documents of
      the Purchaser or under any material agreement, instrument or obligation to
      which the Purchaser is a party or (ii) violate any Applicable
  Laws.

	 	 	 
	 	(f) 	
      The Purchaser has the financial resources available to
      complete the transaction contemplated by this Agreement.

	 	 	 
	 	(g) 	
      The Purchaser will be registered under Part IX of the
      Excise Tax Act (Canada) prior to the Closing
Date.

4.04  Survival of Representations and
Warranties

          (1)      The
representations and warranties of the Vendor in Section 4.01 will
continue in full force and effect for the benefit of the Purchaser for a period
of one year from the Closing Date.

          (2)      The
representations and warranties of the Purchaser in Section 4.03 will
continue in full force and effect for the benefit of the Vendor for a period of
one year from the Closing Date.

          (3)      No
claim in respect of any representation or warranty shall be made or be
enforceable against a party unless written notice of such claim, with reasonable
particulars, is given by the party asserting the claim to the other party within
a period of one year from the Closing Date.

4.05  Survival of Covenants

          (1)      The
covenants of the Vendor set forth in this Agreement that do not relate to
performance at or prior to Closing will survive the completion of the
transactions contemplated by this Agreement, and notwithstanding such
completion, will continue in full force and effect for the benefit of the
Purchaser in accordance with the terms thereof.

          (2)      The
covenants of the Purchaser set forth in this Agreement that do not relate to
performance at or prior to Closing will survive the completion of the
transactions contemplated by this Agreement, and notwithstanding such
completion, will continue in full force and effect for the benefit of the Vendor
in accordance with the terms thereof.

ARTICLE 5 - INTERIM OPERATIONS PERIOD

5.01  General Maintenance

          During
the Interim Operations Period, where and to the extent that the Vendor is the
operator, it will operate and maintain the Hydrocarbon Assets in a proper and
prudent manner in accordance with good oil and gas industry practices,
Applicable Laws, and the Title and Operating Documents.

- 25 -

5.02  Restricted Activities

          During
the Interim Operations Period the Vendor will not, without the prior written
approval of the Purchaser:

	 	(a) 	
      authorize or make any expenditure in respect of the
      Hydrocarbon Assets other than:

	 	 	 	 
	 		(i) 	
      usual operating expenditures incurred and allocable to
      the Hydrocarbon Assets pursuant to existing operating agreements with
      arm’s length third parties;

	 	 	 	 
	 		(ii) 	
      capital expenditures (as defined by the operator of the
      relevant property in an authorization for expenditure) required in
      accordance with accepted oil and gas industry practice, for which the
      Vendor’s share does not exceed $100,000 for any single
operation;

	 	 	 	 
	 		(iii) 	
      required by reason of an emergency event endangering life
      or property; and

	 	 	 	 
	 		(iv) 	
      pursuant to the AFE’s set forth in Schedule
      5.02(E);

	 	 	 	 
	 	(b) 	
      surrender, permit to expire, abandon or otherwise
      farmout, transfer or dispose of any of the Hydrocarbon Assets except in
      circumstances in which it is required to do so by Applicable Law or to
      comply with its obligations respecting any rights of first refusal or
      similar preferential right to purchase;

	 	 	 	 
	 	(c) 	
      amend or terminate any material contract or enter into
      any new material agreement or arrangement affecting the Hydrocarbon
      Assets; or

	 	 	 	 
	 	(d) 	
      resign as operator of any Hydrocarbon Assets operated by
      it.

5.03  Access to Assets and
Information

          (1)      During
the Interim Operations Period, the Vendor will provide the Purchaser and its
agents with full and complete access, during normal business hours and upon
reasonable notice, to all of the Vendor’s Records, to the Wells, to the
Tangibles and to the surface areas associated therewith, in order that the
Purchaser may conduct such examinations and investigations as it considers
appropriate in conjunction with the purchase and sale contemplated hereby. The
Purchaser acknowledges that access to the Wells, the Tangibles and the surface
areas associated therewith will in most instances be subject to typical notice
and convenience restrictions, and that the Purchaser will be required to conduct
its physical due diligence investigations in compliance with such restrictions.
The Purchaser further acknowledges that all examinations, investigations, and
due diligence conducted pursuant to this Section 5.03 will be conducted
at the Purchaser’s sole risk and expense.

- 26 -

          (2)      During
the Interim Operations Period, the Purchaser will not contact or communicate
with any the Vendor’s employees or customers of, or suppliers to, the Vendor
without the Vendor’s prior written consent.

          (3)      The
Purchaser will indemnify and hold the Vendor and its Affiliates harmless against
any and all Losses suffered by or incurred by the Vendor or its Affiliates in
connection with the exercise of the Purchaser’s rights under this Section
5.03. Notwithstanding any provisions in this Agreement to the contrary,
the Purchaser’s obligations under this Section 5.03 will survive the
termination of the transactions under this Agreement and the Closing.

ARTICLE 6 - RESTRICTED ASSETS, REGULATORY APPROVALS AND
SPECIFIC ASSIGNMENTS

6.01  Identification, Valuation and
Notice

          As
soon as reasonably practicable following the Execution Date, the Vendor will
provide the Purchaser with a description of all Restricted Assets, and of the
nature of a right of first refusal or similar preferential rights to purchase
relating thereto. Within two Business Days thereafter, the Purchaser will
provide the Vendor with its good faith assessment of the portion of the Base
Price, expressed as a dollar amount, that is properly attributable to each of
the Restricted Assets (each a “Restricted Asset Value”), and, subject to
the provisions of Section 6.02, the Vendor will forthwith serve all such
notices utilizing the Restricted Asset Value and request all such waivers as may
be required in order to permit the sale and conveyance of the Restricted Assets
to the Purchaser, without contravening any right of first refusal or similar
preferential right to purchase applicable thereto.

6.02  Restricted Asset Value
Disputes

          (1)     
If the Vendor does not agree with any Restricted Asset Value provided by the
Purchaser pursuant to Section 6.01, the Vendor may provide the Purchaser
with a notice to such effect, setting forth the Vendor’ good faith assessment of
each Restricted Asset Value that is in dispute.

          (2)      If
the Vendor provides the Purchaser with such a notice and the parties are unable
to agree upon a mutually acceptable Restricted Asset Value for a Restricted
Asset within two Business Days of the date of delivery of such notice, then, for
each such Restricted Asset, the Vendor will request a waiver from the applicable
third parties and will include the Purchaser’s Restricted Asset Value in the
request.

          (3)     The
Purchaser shall be solely liable for and shall, in addition, indemnify and save
the Vendor and its Affiliates harmless from and against all Losses of any kind
that may be brought against or suffered by the Vendor or its Affiliates or that
any of them may suffer, sustain, pay or incur, in each case, that are caused by,
arise from, are incurred in connection with or relate to or are attributable to
the use of the Purchaser’s Restricted Asset Value of any Restricted Asset
pursuant to this Article 6.

- 27 -

6.03  Extension of Closing Date

          If
on the last Business Day preceding the Closing Date, there remains any
Restricted Assets in respect of which the Vendor has been unable to obtain the
required waivers and in respect of which there has not been a lapse or deemed
waiver of the rights of first refusal or similar preferential rights to purchase
relating thereto, the Vendor will on that day so notify the Purchaser and
provide it with reasonable particulars of such Restricted Assets. If any rights
of first refusal or similar preferential right to purchase exercise period has
not lapsed prior to the Closing Date, then unless such right of first refusal or
similar preferential right is exercised prior to the Closing Date, or a waiver
of such rights of first refusal or similar preferential right to purchase (a
“Preferential Right Waiver”) is obtained prior to the Closing Date, the
closing date with respect to such Restricted Assets will be postponed to the
first Business Day following the day on which such exercise period lapses or
Preferential Right Waiver is obtained, whichever occurs first, provided that on
the Closing Date, the Purchaser will pay to the Vendor’s solicitors in trust for
the Vendor, the balance of the Purchase Price with respect to such Restricted
Assets.

6.04  Restricted Assets Exclusion

          If
any third party holding a right of first refusal or similar preferential right
to purchase in respect of any Restricted Assets lawfully exercises its right to
acquire such Restricted Assets:

	 	(a) 	
      such Restricted Assets will be excluded from the purchase
      and sale contemplated hereby;

	 	 	 
	 	(b) 	
      the terms “Assets”, “Hydrocarbon Assets”, “Hydrocarbon
      Interests”, “Tangible Interests”, and “Miscellaneous Interests” will
      thereafter be construed to exclude these Restricted Assets and to refer
      only to the non-excluded portion thereof;

	 	 	 
	 	(c) 	
      the Vendor will pay an amount to the Purchaser equal to
      the Restricted Asset Value of such Restricted Assets as determined
      pursuant to Section 6.01 or 6.02; and

	 	 	 
	 	(d) 	
      the amounts allocated to the Tangibles and Hydrocarbon
      Interests in Section 2.04 will be adjusted to reflect the exclusion
      of any Tangibles and Hydrocarbon Interests forming part of such Restricted
      Assets.

6.05     
Specific Assignments

          (1)     
With respect to any agreement, contract, Lease, Permit or other instrument (a
“Subject Instrument”) that is material to the operation of the Assets and
requires consent for the assignment thereof to the Purchaser in connection with
the conveyance of the Assets, the Vendor will take such actions as are
commercially reasonable and necessary, and the Purchaser will cooperate fully
with the Vendor in all commercially reasonable respects, to effect assignment
thereof as of the Closing Date. It is understood that such actions by the Vendor
will not include any requirement of the Vendor to expend money, commence any
litigation or offer or grant any accommodation (financial or otherwise) to any
third party. To the extent a deposit or fee is required in order to transfer a
Permit from the Vendor into the name of the Purchaser, the 

- 28 -

Purchaser will immediately pay such amount to the Vendor. In
the event that the Vendor is unable to obtain the requisite approval for
assignment of any Subject Instrument, or in the event any Subject Instrument is
required to be amended or supplemented and is not so amended or supplemented as
of the Closing Date, and such assignment is necessary to conduct the operation
of the Assets in the ordinary course of business without giving rise to a
material adverse effect on the Assets, the Vendor may

	 	(a) 	
      retain any such Subject Instrument provided that the
      Purchaser shall be liable for all Losses attributable to the Vendor’s
      obligations or omissions thereunder arising on or after the Effective Time
      (and shall, in addition, indemnify and hold harmless the Vendor and its
      Affiliates from and against all Losses of any kind that may be brought
      against or suffered by the Vendor or its Affiliates or that any of them
      may suffer, sustain, pay or incur, in such case that are caused by, arise
      from, are incurred in connection therewith or relate in any way thereto,
      directly or indirectly), and

	 	 	 
	 	(b) 	
      take all commercially reasonable and necessary actions
      required to transfer to the Purchaser, or amend or supplement, any such
      Subject Instrument as soon as practicable after the Closing
  Date.

          (2)     
The Vendor will use reasonable efforts to obtain all Preferential Right Waivers
on or before the Closing Date.

          (3)     
The assignment of a Subject Instrument that requires consent for assignment, or
amendment or supplement, may be effected after the Closing Date. The Purchase
Price will not be subject to adjustment, and subject to the Vendor’s conditions
to Closing set out in Section 7.02, the Closing will not be delayed, by
reason of any inability to obtain consent for assignment of any Subject
Instrument or any such amendment or supplement. The Purchaser agrees that the
Vendor will not have any liability whatsoever to the Purchaser arising out of or
relating to the failure to obtain any consents that may have been or may be
required in connection with the transactions contemplated by this Agreement or
because of the default, acceleration or termination of any Subject Instrument as
a result thereof. The Purchaser further agrees that no representation, warranty
or covenant of the Vendor contained herein will be breached or deemed breached
and no condition of the Purchaser will be deemed not to be satisfied as a result
of the failure to obtain any consent or as a result of any such default,
acceleration or termination or any lawsuit, action, claim, proceeding or
investigation commenced or threatened by or on behalf of any Persons arising out
of or relating to the failure to obtain any consent or any such default,
acceleration or termination.

          (4)      The
Purchaser shall bear all costs incurred in registering the transfer and
assignment of the Subject Instruments and registering any further assurances
required to convey the Assets to it. The Purchaser shall register all transfers
and assignments of the Subject Instruments promptly after Closing.

- 29 -

ARTICLE 7 - CONDITIONS TO CLOSING

7.01  Purchaser’s Conditions To
Closing

          The
Purchaser’s obligation to close the transactions contemplated under this
Agreement is subject to the fulfillment on or prior to the Closing Date of each
of the following conditions precedent (except to the extent that the Purchaser
agrees in writing to waive one or more of such conditions):

	 	(a) 	
      the representations and warranties of the Vendor made in
      this Agreement will be, and the Vendor will at Closing have certified in
      writing to the Purchaser that the said representations and warranties are,
      true and correct in all material respects as of the Execution Date and on
      and as of the Closing Date, as though made on and as of the Closing Date,
      except for representations and warranties that speak as of a specific date
      or time (which need only be true and correct as of such date or time) and
      except to the extent resulting from matters occurring during the Interim
      Operations Period and that are disclosed to the Purchaser;

	 	 	 
	 	(b) 	
      there will not be any third party judicial restraining
      order or injunction, preliminary or otherwise, in effect prohibiting the
      Closing of the transactions contemplated by this Agreement;

	 	 	 
	 	(c) 	
      at or prior to Closing, the Vendor shall deliver to the
      Purchaser, any releases and registerable discharges (requested by the
      Purchaser within a reasonable time prior to the Closing Date) in a form
      satisfactory to Purchaser, of any adverse liens and encumbrances that are
      not Permitted Encumbrances and relate to security held by any Person
      against the Assets or any part or portion thereof, but excluding any liens
      or encumbrances relating to the Assumed Liabilities, or if the Vendor is
      unable to do so by Closing, the Vendor shall deliver a written undertaking
      to the Purchaser stating that the Vendor shall obtain such releases or
      discharges shortly after Closing;

	 	 	 
	 	(d) 	
      the Vendor will have complied in all material respects
      with all of the Vendor’s covenants, agreements and conditions required by
      this Agreement to be performed or complied with by the Vendor on or prior
      to the Closing Date; and

	 	 	 
	 	(e) 	
      all rights of first refusal and similar preferential
      rights to purchase as further referred to in Article 6 shall either
      have been exercised upon or waived or lapsed by the passage of time prior
      to the Closing.

7.02  Vendor’s Conditions to
Closing

          The
Vendor’s obligation to close the transactions contemplated under this Agreement
is subject to the fulfillment on or prior to the Closing Date of each of the
following conditions 

- 30 -

precedent (except to the extent that the Vendor agrees in
writing to waive one or more of such conditions):

	 	(a) 	
      the Purchaser will have complied in all material respects
      with all of the Purchaser’s covenants, agreements and conditions required
      by this Agreement to be performed or complied with by the Purchaser on or
      prior to the Closing Date;

	 	 	 
	 	(b) 	
      the representations and warranties of the Purchaser made
      in this Agreement will be, and the Purchaser will at Closing have
      certified in writing to the Vendor that the said representations and
      warranties are, true and correct in all material respects as of the
      Execution Date and on and as of the Closing Date, as though made on and as
      of the Closing Date, except for representations and warranties that speak
      as of a specific date or time (which need only be true and correct as of
      such date or time);

	 	 	 
	 	(c) 	
      there will not be any third party judicial restraining
      order or injunction, preliminary or otherwise, in effect prohibiting the
      Closing of the transactions contemplated by this Agreement;

	 	 	 
	 	(d) 	
      all rights of first refusal and similar preferential
      rights to purchase as further referred to in Article 6 shall either
      have been exercised upon or waived or lapsed by the passage of time prior
      to the Closing;

	 	 	 
	 	(e) 	
      the Purchaser will have tendered the Purchase Price to
      the Vendor as provided in Section 2.03; and

	 	 	 
	 	(f) 	
      the Vendor will have received evidence satisfactory to
      the Vendor, acting reasonably, that the applicable Governmental
      Authorities will approve and register to the Purchaser, the Permits that
      are currently registered in the name of the
Vendor.

7.03  Waiver of Conditions

          The
conditions precedent in Sections 7.01 and 7.02 are for the sole
benefit of the Purchaser and the Vendor, respectively. The party for the benefit
of which such conditions precedent have been included may waive any of them, in
whole or in part, by written notice to the other party.

7.04  Parties to Exercise Diligence and Good
Faith with Respect to Conditions

          Each
party covenants to the other that it will proceed diligently, honestly, and in
good faith, and use commercially reasonable efforts with respect to all matters
within its reasonable control to satisfy their respective conditions in Sections
7.01 and 7.02.

- 31 -

ARTICLE 8 - TERMINATION RIGHTS

8.01  Termination

          (1)     
The transactions contemplated by this Agreement may be terminated at any time
prior to Closing as follows and in no other manner:

	 	(a) 	
      by mutual written consent of the Purchaser and the
      Vendor;

	 	 	 
	 	(b) 	
      by the Purchaser, if any condition set forth in Section
      7.01 becomes incapable of fulfillment and has not been waived by
      the Purchaser (provided, however, that the Purchaser is not in breach of
      its representations, warranties, covenants or agreements contained in this
      Agreement); or

	 	 	 
	 	(c) 	
      by the Vendor, if any condition set forth in Section
      7.02 becomes incapable of fulfillment and has not been waived by
      the Vendor (provided, however, that the Vendor is not in breach of its
      representations, warranties, covenants or agreements contained in this
      Agreement).

          (2)      This
Agreement will terminate without further action on the part of either party
hereto if the Arrangement does not become effective or if the Arrangement
Agreement is terminated.

8.02  In the Event of Termination

          In
the event of termination of this Agreement by the Purchaser or the Vendor
pursuant to the provisions of Section 8.01(1)(b) or (c), written
notice thereof will forthwith be given to the other party and the transactions
contemplated by this Agreement (including the parties’ obligation to consummate
the transactions) will be terminated without further action by either party. If
the transactions contemplated by this Agreement are terminated as provided
herein:

	 	(a) 	
      the Purchaser will return to the Vendor all documents and
      copies and other materials received from or on behalf of the Vendor
      relating to the transactions contemplated hereby, whether so obtained
      before or after the Execution Date, and

	 	 	 
	 	(b) 	
      all confidential information received by the Purchaser
      with respect to the Assets and all Vendor Information and all information
      relating to the Assets will be and remain confidential except to the
      extent that disclosure of any such information is requested or required by
      Applicable Law or authorized by the Vendor in
writing.

8.03  Effect of Termination

          Each
party’s rights of termination under this Section 8.01(1) are in addition
to any other rights it may have under this Agreement or otherwise, and the
exercise of a right of termination will not be an election of remedies. Nothing
in this Article 8 will limit or affect any other rights 

- 32 -

or causes of action any of the parties may have with respect to
the representations, warranties, covenants and indemnities in such party’s
favour contained in this Agreement, which representations, warranties, covenants
and indemnities will survive the termination of the transactions contemplated by
this Agreement. Nothing in this Article 8 will be deemed to release
either party from any liability for any breach by such party of the terms and
provisions of this Agreement, or to impair the right of either party to compel
specific performance by the other party of its obligations under this
Agreement.

ARTICLE 9 - CLOSING

9.01  Place of Closing

          Closing
will take place at the offices of the Vendor on the Closing Date.

9.02  Vendor’s Closing Deliveries

          On
the Closing Date, the Vendor will deliver or cause to be delivered to the
Purchaser among other things:

	 	(a) 	
      an original of the General Conveyance duly executed by
      the Vendor;

	 	 	 	 
	 	(b) 	
      a certificate of an officer of the Vendor that the
      representations and warranties of the Vendor herein given are true and
      correct in all material respects at the Closing Date;

	 	 	 	 
	 	(c) 	
      an assignment in favour of the Purchaser:

	 	 	 	 
	 		(i) 	
      the Acclaim Agreement Receivable (as defined in Section
      3.02(2)) outstanding on the Closing Date,

	 	 	 	 
	 		(ii) 	
      the Mineral Tax Appeals Receivable (as defined in Section
      3.02(2)) outstanding on the Closing Date, and

	 	 	 	 
	 		(iii) 	
      the Trade Payables Related to BC Disputed Items (as
      defined in Section 2.02(2) outstanding on Closing Date,

	 	 	 	 
	 	(d) 	
      a receipt for payment of the Purchase Price;

	 	 	 	 
	 	(e) 	
      a cash payment for the amount representing the difference
      between the amount of the Shellbridge Note and the Purchase Price if the
      Shellbridge Note exceeds the Purchase Price;

	 	 	 	 
	 	(f) 	
      a cash payment, if any, payable to the Purchaser in
      accordance with Section 2.06(2); and

	 	 	 	 
	 	(g) 	
      a joint election in Form 44 under Section 167 of the
      Excise Tax Act (Canada).

- 33 -

9.03  Vendor’s Post-Closing
Deliveries

          (1)     
On or within five Business Days after the Closing Date, the Vendor will deliver
or cause to be delivered to the Purchaser:

	 	(a) 	
      all such transfers, conveyances, assignments, novation
      agreements, notices and other documents and instruments as the Purchaser
      may reasonably request for the purpose of effecting the purchase and sale
      of the Assets in accordance with the terms of this Agreement, executed by
      the Vendor in all cases in which the Vendor is an appropriate signatory
      (but execution by third parties will not be required),

	 	 	 
	 	(b) 	
      the Vendor’s Records (or copies of same where
      necessary).

          (2)      The
Purchaser shall promptly register in the applicable registry all registerable
transfers, assignments and conveyances of the Assets and deliver to third
parties all assignments, novation, agreements and notices. All costs incurred in
registering any transfer, assignments and conveyance, and all costs of
registering any further assurances required to convey the Assets, will be borne
solely by the Purchaser.

9.04  Purchaser’s Closing
Deliveries

          On
the Closing Date, the Purchaser will deliver or cause to be delivered to the
Vendor among other things:

	 	(a) 	
      an original of the General Conveyance duly executed by
      the Purchaser;

	 	 	 
	 	(b) 	
      a certificate of an officer of the Purchaser that the
      representations and warranties of the Purchaser herein given are true and
      correct in all material respects at the Closing Date;

	 	 	 
	 	(c) 	
      the Shellbridge Note;

	 	 	 
	 	(d) 	
      a cash payment for the amount representing the difference
      between the Purchase Price and the amount of the Shellbridge Note if the
      Purchaser Price exceeds the amount of the Shellbridge Note;

	 	 	 
		(e) 	
      a cash payment, if any, payable to the Vendor in
      accordance with Section 2.06(2); and

	 	 	 
	 	(f) 	
      a joint election in Form 44 under Section 167 of the
      Excise Tax Act (Canada).

- 34 -

ARTICLE 10 - POST CLOSING

10.01 Post-Completion Administration

          (1)     
If Closing occurs, then until such time as the Purchaser becomes recognized by
third parties as the owner of the Assets in the place of the Vendor:

	 	(a) 	
      the provisions of Sections 5.01 and 5.02
      will apply, mutatis mutandis, in respect of such
  Assets;

	 	 	 	 
	 	(b) 	
      the Vendor will:

	 	 	 	 
	 		(i) 	
      hold and stand possessed of the Assets as bare trustee
      for the benefit of the Purchaser, and receive and hold all proceeds,
      benefits and advantages accruing in respect of the Assets fully for the
      benefit, use and ownership of the Purchaser, with the entitlement of the
      Vendor at any time to commingle any of the same with its own or any other
      assets,

	 	 	 	 
	 		(ii) 	
      subject to the adjustment provided for in Article
      3, within 15 Business Days of the date of receipt thereof, deliver
      to the Purchaser all revenues, proceeds and other benefits of any nature
      received by it in respect of the Assets,

	 	 	 	 
	 		(iii) 	
      in a timely manner deliver to the Purchaser all third
      party notices and communications received by the Vendor in respect of the
      Assets,

	 	 	 	 
	 		(iv) 	
      in a timely manner deliver to third parties all such
      notices and communications as the Purchaser may reasonably request, and
      all such money and other items as the Purchaser may reasonably provide in
      respect of the Assets, and

	 	 	 	 
	 		(v) 	
      as agent of the Purchaser, do and perform all such acts
      and things, and execute and deliver all such agreements, notices and other
      documents and instruments, as the Purchaser may reasonably request for
      purposes of facilitating the exercise of rights incidental to the
      ownership of the Assets.

	 	 	 	 
	 	(c) 	
      The Purchaser shall be liable to the Vendor and its
      Affiliates and, in addition, shall indemnify and save harmless the Vendor
      and its Affiliates from and against all Losses of any kind that may be
      brought against or suffered by the Vendor or its Affiliates or that any of
      them may suffer, sustain, pay or incur, in each case, that are caused by,
      arise from, are incurred in connection with or relate in any way directly
      or indirectly to the Vendor's obligations contained in Section
      10.01(1)(a) and (b).

- 35 -

          (2)     
The Purchaser will provide the Vendor with reasonable access to, and the Vendor
may retain or subsequently obtain from the Purchaser copies or photocopies of,
any of the documents comprised in Miscellaneous Interests that the Purchaser
considers necessary to

	 	(a) 	
      enable it to comply with any Applicable Laws or the
      requirements of any Governmental Authority, or

	 	 	 
	 	(b) 	
      conduct audits relating to the period prior to the
      Closing Date.

          (3)      Nothing
in this Section 10.01 will be construed as restricting or limiting in any
manner any of the other covenants, warranties, representations and other
obligations of the parties hereunder.

10.02 Operated Properties

          At
Closing, the Vendor will notify the co owners of those Hydrocarbon Assets that
the Vendor currently operates, that the Vendor is resigning as operator. The
Vendor makes no representations or warranties to the Purchaser as to
transferability or assignability of operatorship of any Hydrocarbon Assets the
Vendor currently operates. Rights and obligations associated with the
operatorship of the Hydrocarbon Assets are governed by operating and similar
agreements covering the Hydrocarbon Assets and will be decided in accordance
with the terms of such agreements. Notwithstanding the Vendor’s resignation as
operator, the Vendor will continue to serve as operator and will be entitled to
all Recoverable Overhead with respect thereto until the earlier of

	 	(a) 	
      the date on which a successor operator is elected and
      takes over operatorship pursuant to the terms of the applicable operating
      agreement, or

	 	 	 
	 	(b) 	
      the end of the applicable time period required for the
      Vendor to continue as operator as mandated by the terms of the applicable
      operating agreement.

10.03 Access

          To
the extent that any other assets currently owned by the Vendor are located at
any owned or leased real property constituting part of the Hydrocarbon Assets,
the Purchaser will grant to the Vendor and its representatives reasonable access
to such property from and after the Closing Date for a reasonable period of time
not to exceed 365 days in order to permit the Vendor and its representatives to
review and remove such assets and make any other appropriate arrangements with
respect thereto. The Vendor will consult with the Purchaser in advance of taking
any such actions following the Closing Date with a view towards establishing a
mutually agreeable plan for such review and removal so that these actions will
not unreasonably interfere with the normal operation of the Hydrocarbon
Assets.

- 36 -

10.04 Signs and Notification to Governmental
Agencies

          Following
Closing, the Vendor may remove any signs that indicate the Vendor’s ownership or
operation of the Hydrocarbon Assets. If the Purchaser is the operator of the
Hydrocarbon Assets, it will be the responsibility of the Purchaser as its sole
cost and expense to erect or install any signs required by Applicable Law that
pertain to the Hydrocarbon Assets within 45 days of Closing. In addition, the
Purchaser will be responsible for advising governmental agencies, contractors,
suppliers and other affected third parties of the Purchaser’s interest in the
Hydrocarbon Assets.

10.05 Insurance

          From
and after the date of Execution Date, the Purchaser will obtain and maintain
insurance with respect to the Assets on terms and conditions satisfactory to
comply with Applicable Laws, from time to time.

ARTICLE 11 - INDEMNIFICATION

11.01 Purchaser’s Indemnification of the
Vendor

          Except
as otherwise provided herein and subject to the provisions of this Article
11, provided that Closing occurs, in addition to the Purchaser's
indemnities contained elsewhere in the Agreement, the Purchaser shall be liable
for and shall, in addition, indemnify and hold harmless the Vendor and its
Affiliates, and their respective directors, officers, employees and agents
(collectively, the “Vendor Indemnified Parties”) from and against all
Losses of any kind incurred, suffered, sustained, paid or waived by the Vendor
Indemnified Parties or any of them, that are covered by, arise from, are
incurred in connection with or relate in any way to

	 	(a) 	
      the Purchaser’s breach of

	 	 	 	 
	 		(i) 	
      any covenant or agreement in this Agreement requiring
      performance by the Purchaser after the Closing Date, and

	 	 	 	 
	 		(ii) 	
      any representation or warranty of the Purchaser in this
      Agreement that survives the Closing,

	 	 	 	 
	 	(b) 	
      the Assets or the operation or ownership thereof from and
      after the Effective Time, and

	 	 	 	 
	 	(c) 	
      the Purchaser's failure to perform or pay any obligations
      on the part of the Purchaser to be performed or paid in respect of the
      Assumed Liabilities.

provided, however, that the Purchaser will not have any
liability or obligation for Losses that are the subject of the Vendor’s
indemnity in Section 11.02.

- 37 -

11.02 Vendor’s Indemnification of the
Purchaser

          Subject
to the provisions of this Article 11 and provided that Closing occurs,
the Vendor shall be liable for and shall, in addition, indemnify and hold
harmless the Purchaser and its directors, officers, employees and agents
(collectively, the “Purchaser Indemnified Parties”) from and against any
and all Losses of any kind incurred, suffered, sustained, paid or waived by the
Purchaser Indemnified Parties or any of them, that are caused by, arise from,
are incurred in connection with or relate in any way to the Vendor’s breach of
any covenant or agreement in this Agreement requiring performance by the Vendor
after the Closing Date, provided, however, that the Vendor will not have any
liability or obligation for Losses that are the subject of the Purchaser’s
indemnity in Section 11.01.

11.03 Purchaser’s Abandonment and Reclamation and
Environmental Indemnifications

          (1)      The
Vendor makes no warranty or representation, express, implied, statutory or
otherwise, with respect to Environmental Liabilities or the Abandonment and
Reclamation Obligations and will have no liability or obligation whatsoever in
respect of Environmental Liabilities or the Abandonment and Reclamation
Obligations to the Purchaser or any Person. In addition to Purchaser's
indemnities contained elsewhere in the Agreement, subject to Closing occurring,
the Purchaser shall be solely liable for and shall, in addition, indemnify and
hold harmless the Vendor Indemnified Parties from and against all Losses of any
kind that may be brought against or suffered by the Vendor Indemnified Parties
or that any of them may suffer, sustain, pay or incur, in each case, that are
caused by, arise from, are incurred in connection with or relate in any way
directly or indirectly to any past, present or future Environmental Liabilities
or Abandonment and Reclamation Obligations. The Purchaser hereby assumes all
Losses, obligations, covenants and liabilities of any kind in respect of any
Environmental Liabilities and any Abandonment and Reclamation Obligations,
regardless of whether they are attributable to, occurred, arose or accrued at,
prior to or subsequent to the Effective Time or the Closing Date. The liability
and indemnity of the Purchaser herein shall apply without limit and without
regard to cause or causes including, without limitation, the negligence, whether
sole, concurrent, gross, passive, primary or secondary or the wilful or wanton
misconduct of the Vendor, the Purchaser or any other Person. The Purchaser
acknowledges and agrees that it shall not be entitled to any rights or remedies
as against the Vendor under common law or statute pertaining in any way directly
or indirectly to any past, present or future Environmental Liabilities or the
Abandonment and Reclamation Obligations including, without limitation, the right
to name the Vendor as a party to any action commenced by any Person against the
Purchaser.

          (2)      After
Closing, the Purchaser shall be liable to the Vendor for and shall, in addition,
indemnify the Vendor indemnified from and against any and all Losses of any kind
that may be brought against or suffered by the Vendor Indemnified Parties or
that any of them may suffer, sustain, pay or incur, in each case, that are
caused by, arise from, are incurred in connection with or relate in any way
directly or indirectly to the Abandonment and Reclamation Obligations including,
without limitation, to the Purchaser’s failure to perform its Abandonment and
Reclamation Obligations in a timely manner.

- 38 -

11.04 Exclusive Remedy

          Any
claim or cause of action based on, arising out of or relating in any way to any
of the transactions contemplated under this Agreement must be brought by the
applicable party in accordance with the provisions and limitations of this
Agreement, whether such claim arises out of any contract, tort or otherwise. For
greater certainty, each of the parties acknowledge that after Closing, except as
set forth in Section 3.05 the remedies set forth in the indemnity
provisions contained in this Article 11 and elsewhere in this Agreement
are the sole and exclusive remedies of the parties with respect to the
transactions contemplated by this Agreement.

11.05 Holding of Indemnities

          The
Purchaser will hold the indemnity contained in Section 11.02 in trust on
behalf of the Purchaser Indemnified Parties, and may enforce the same on its and
their behalf. The Vendor will hold the indemnities contained in Sections
11.01 and 11.03 in trust on behalf of the Vendor Indemnified
Parties, and may enforce the same on its and their behalf.

11.06 Procedures Relating to Indemnification
Between the Purchaser and the Vendor

          Following
the discovery of any facts or conditions that could reasonably be expected to
give rise to a Loss for which indemnification is provided under this Agreement,
the party seeking indemnification (the “Indemnified Party”) will, as
promptly as reasonably possible thereafter, provide written notice (the
“Indemnification Notice”) to the party from whom indemnification is
sought (the “Indemnifying Party”), setting forth the specific facts and
circumstances, in reasonable detail, relating to such Loss and the amount of
Loss (or a reasonable, good faith estimate thereof if the actual amount of the
Loss is not known or not capable of reasonable calculation).

11.07 Procedures Relating to Indemnification for
Third Party Claims

          (1)     
In order for an Indemnified Party to be entitled to any indemnification provided
for under this Agreement in respect of, arising out of or involving a claim or
demand made by any Person against the Indemnified Party (a “Third Party
Claim”), such Indemnified Party must provide an Indemnification Notice to
the Indemnifying Party of the Third Party Claim as promptly as reasonably
possible after receipt by such Indemnified Party of notice of the Third Party
Claim. Thereafter, the Indemnified Party will deliver to the Indemnifying Party,
within five Business Days after the Indemnified Party’s receipt thereof, copies
of all notices and documents (including court papers) received by the
Indemnified Party relating to the Third Party Claim; provided, however, that
failure to provide an Indemnification Notice, or deliver copies of all notices
and documents, in a timely manner will not affect the indemnification provided
hereunder except to the extent the Indemnifying Party will have been actually
and materially prejudiced as a result of such failure.

          (2)     
If a Third Party Claim is made against an Indemnified Party, the Indemnifying
Party will be entitled to participate in the defence thereof and, if it so
chooses and acknowledges its obligation to indemnify the Indemnified Party
therefor, to assume the defence thereof with counsel selected by the
Indemnifying Party and reasonably satisfactory to the Indemnified Party.

- 39 -

Notwithstanding any acknowledgment made pursuant to the immediately
  preceding sentence, the Indemnifying Party will continue to be entitled to assert
  any limitation on its indemnification responsibility contained in Sections 11.10
  and 11.11. Should the Indemnifying Party so elect to assume the defence
  of a Third Party Claim, the Indemnifying Party will not be liable to the Indemnified
  Party for legal expenses subsequently incurred by the Indemnified Party in connection
  with the defence thereof. If the Indemnifying Party assumes such defence, the
  Indemnified Party will have the right to participate in the defence thereof
  and to employ counsel, at its own expense, separate from the counsel employed
  by the Indemnifying Party, it being understood, however, that the Indemnifying
  Party will control such defence. The Indemnifying Party will be liable for the
  fees and expenses of counsel on a solicitor and client basis employed by the
  Indemnified Party for any period during which the Indemnifying Party has not
  assumed the defence thereof. If the Indemnifying Party chooses to defend any
  Third Party Claim, the parties will cooperate in the defence or prosecution
  of such Third Party Claim. Such cooperation will include the retention and (upon
  the Indemnifying Party’s request) the provision to the Indemnifying Party
  of records and information that are reasonably relevant to such Third Party
  Claim, and making employees available on a mutually convenient basis to provide
  additional information and explanation of any material provided hereunder. Whether
  or not the Indemnifying Party assumes the defence of a Third Party Claim, the
  Indemnified Party will not admit any liability with respect to, or settle, compromise
  or discharge, or consent to the entry of any judgment with respect to, such
  Third Party Claim without the Indemnifying Party’s prior written consent
  (which consent will not be unreasonably withheld).

11.08 Losses Net of Insurance and
Taxes

          (1)      The
amount of any Loss under this Article 11 and elsewhere under this
Agreement will be determined net of any amounts recovered or recoverable by the
Indemnified Party under insurance policies, indemnities or other reimbursement
arrangements with respect to such Loss.

          (2)     
In determining the amount of any Loss for which any party is entitled to
indemnification under this Article 11, the gross amount thereof will be
reduced by the present value (discounted at the Interest Rate) of any net Tax
benefit realized by such party in connection with such Loss to the extent such
Tax benefit results directly from the incurrence of such Loss. 

11.09 Attorneys’ Fees

          In
connection with any litigation arising out of this Agreement or to enforce any
indemnification claim pursuant to this Agreement, the prevailing party will be
entitled to recover from the non prevailing party the prevailing party’s
reasonable attorneys’ fees and costs, including on appeal or otherwise.

11.10 Time Limitation

          Except
as otherwise provided herein and except in particular, for the Environmental
Liabilities and the Abandonment and Reclamation Obligation which shall survive
the one year period hereafter referred to, any claim by any Purchaser
Indemnified Party for indemnity arising under this Article 11 or
elsewhere in this Agreement will be brought within one year after the 

- 40 -

Closing Date. A claim will be deemed to have been brought only
upon delivery of a proper Indemnification Notice to the other party at the
notice address set forth in Section 12.11. Any claim required to be made
within the relevant period, as set out above, not so timely made will be forever
barred.

11.11 Limitation of Liability

          The
Purchaser will have no claim against the Vendor or its Affiliates under this
Agreement for any Losses that the Purchaser Indemnified Parties incurs, suffers,
sustains, pays or waives, except Losses which constitute insured claims of the
Vendor and only to the extent of an amount equal to the limits set forth in the
applicable policies of insurance presently maintained by the Vendor. Except as
otherwise provided in the Agreement, the Vendor’s liability pursuant to this
Agreement, including Section 11.02, will in no event arise unless the
claim relates to a matter for which the Vendor has a policy of insurance and for
which it is entitled to complete indemnification from its insurer.

11.12 Mitigation

          Each
party will take all reasonable steps and use all commercially reasonable efforts
to mitigate any Loss.

11.13 No Consequential Damages

          Except
as otherwise expressly set forth in this Agreement, a party will not be liable
for special, punitive, exemplary, consequential, incidental or indirect losses
or damages as a result of the performance or non performance of the obligations
of the other party under this Agreement, or the other party’s acts or omissions
related to this Agreement, whether or not arising from sole, joint or concurrent
negligence or strict liability or otherwise. The above limitation of liability
will apply to indirect liability involving suits brought against third parties
who, directly or through one or more other third parties or a party to this
Agreement, have a right of indemnification, interpleader, cross-claim,
contribution or other right of recovery against the Purchaser or the Vendor.

11.14 Subrogation

          Each
party will assign to the other party and subrogate the other party to all its
rights and remedies against any Person (other than, with respect to rights and
remedies of the Vendor, and its insurers) in respect of any payment made by the
other party in respect of any indemnification or liability assumed by the other
party pursuant to this Agreement or as a result of this Agreement (including
legal fees and other costs of litigation). Each party will provide all
reasonable cooperation and assistance required by the other party in making and
prosecuting any claim for recovery against any such Person to the extent that
payment is made by the other party. Neither party will knowingly take any action
to impair any such right or remedy of the other party to recover any such
payment.

- 41 -

ARTICLE 12 - GENERAL

12.01 Confidentiality

          (1)     
After the Closing Date, the Vendor will maintain the confidentiality of all
information, documents and materials relating exclusively to the Assets,
including all such materials that remain in the possession of the Vendor for a
period of one year from the Closing Date, except to the extent that disclosure
of any such information is requested or required by Applicable Laws or
authorized by the Purchaser or reasonably occurs in connection with the
settlement of adjustments, other amounts or disputes with respect to this
Agreement. The provisions of this Section 12.01(1) will not apply to any
information, documents or materials that are in the public domain or come into
the public domain, other than by reason of a breach by the Vendor of its
obligations hereunder.

          (2)      From
  and after the Closing Date, the Purchaser will, and will cause its Affiliates,
  directors, officers, employees, counsel, auditors, accountants, agents, advisors
  and other representatives, to keep the Vendor Information confidential following
  the Closing Date, except to the extent that disclosure of any Vendor Information
  is requested or required by Applicable Laws or authorized by the Vendor in writing
  or reasonably occurs in connection with disputes over the terms of this Agreement.
  The provisions of this Section 12.01(2) will not apply to any information,
  documents or materials that are in the public domain or will come in to the
  public domain, other than by reason of a breach by the Purchaser of its obligations
  hereunder. Notwithstanding the foregoing, the Purchaser will be permitted to
  disclose the Vendor Information to any of its Affiliates, provided such Affiliate
  agrees to comply with the terms of this Section 12.01(2) .

12.02 Limited Conditions

          For
the avoidance of doubt, the only conditions to Closing are those set forth in
Sections 7.01 and 7.02 herein, and no other covenants or
conditions set forth in this Agreement are intended to have any effect on the
Closing or the payment of the Purchase Price.

12.03 Further Assurances

          Each
of the Vendor and the Purchaser will from time to time execute and deliver all
such further documents and instruments and do all acts, matters and things as
the other party may, either before or after the Closing Date, reasonably require
to effectively carry out or better evidence or perfect the full intent and
meaning of this Agreement.

12.04 Time of the Essence

          Time
is of the essence of this Agreement.

12.05 Fees and Commissions

          Except
as otherwise provided in this Agreement or the Arrangement Agreement, each of
the Vendor and the Purchaser will pay its respective legal and accounting costs
and expenses incurred in connection with the preparation, execution and delivery
of this Agreement and all 

- 42 -

documents and instruments executed pursuant hereto and any
other costs and expenses whatsoever and howsoever incurred and will indemnify
and save harmless the other from and against any Loss for any broker’s, finder’s
or placement fee or commission alleged to have been incurred as a result of any
action by it in connection with the transactions hereunder.

12.06 Public Announcements

          Except
as required by Applicable Laws, no public announcement or press release
concerning the sale and purchase of the Assets may be made by the Vendor or the
Purchaser without the prior consent and joint approval of the Vendor and the
Purchaser.

12.07 Benefit of the Agreement

          This
Agreement will enure to the benefit of and be binding upon the respective heirs,
executors, administrators, other legal representatives, successors and permitted
assigns of the parties.

12.08 Entire Agreement

          This
Agreement constitutes the entire agreement between the parties with respect to
the subject matter hereof and cancels and supersedes any prior understandings
and agreements between the parties with respect thereto. There are no
representations, warranties, terms, conditions, undertakings or collateral
agreements, express, implied or statutory, between the parties other than as
expressly set forth in this Agreement.

12.09 Amendments and Waivers

          No
amendment to this Agreement will be valid or binding unless set forth in writing
and duly executed by both of the parties. No waiver of any breach of any
provision of this Agreement will be effective or binding unless made in writing
and signed by the party purporting to give the same and, unless otherwise
provided, will be limited to the specific breach waived.

12.10 Assignment

          This
Agreement may not be assigned by the Vendor without the written consent of the
Purchaser but may be assigned by the Purchaser without the consent of the Vendor
to an Affiliate of the Purchaser, provided that such Affiliate enters into a
written agreement with the Vendor to be bound by the provisions of this
Agreement in all respects and to the same extent as the Purchaser is bound and
provided that the Purchaser will continue to be bound by all the obligations
hereunder as if such assignment had not occurred and perform such obligations to
the extent that such Affiliate fails to do so.

12.11 Notices

          Any
demand, notice or other communication to be given in connection with this
Agreement must be given in writing and will be given by personal delivery, by
registered mail or by electronic means of communication addressed to the
recipient as follows:

- 43 -

To the Vendor:

Dynamic Oil & Gas, Inc. 
230 –
10991 Shellbridge Way 
Richmond, BC V6X 3C6 
Telecopier No.: (604) 214
0551

Attention: Don K. Umbach, Vice
President, Chief Operating Officer

with a copy to:

McCarthy Tétrault LLP
Suite 3300,
421 - 7th Avenue S.W. 
Calgary, AB T2P 4K9 
Telecopier No.: (403) 260 3501

Attention: Ian Bock

And with a copy to:

Sequoia Oil & Gas Trust 
1200,
500 – 4th Avenue S.W. 
Calgary, AB T2P 2V6 
Telecopier No.: (403)
770-6303

and with a copy to:

Gowling Lafleur Henderson LLP

1400, 700 – 2nd Street S.W. 
Calgary, AB T2P 4V5 
Telecopier No.:
(403) 263-9193 
Attention: Jeffrey Dyck

To the Purchaser:

Shellbridge Oil & Gas, Inc.

230 – 10991 Shellbridge Way 
Richmond, BC V6X 3C6 
Telecopier No.:
(604) 214 0551

Attention: Don K. Umbach, Vice
President, Chief Operating Officer

with a copy to:

McCarthy Tétrault LLP
Suite 3300,
421 - 7th Avenue S.W. 
Calgary, AB T2P 4K9 
Telecopier No.: (403) 260 3501

Attention: Ian Bock

- 44 -

or to such other street address, individual or electronic
communication number or address as may be designated by notice given by either
party to the other. Any demand, notice or other communication given by personal
delivery will be conclusively deemed to have been given on the day of actual
delivery thereof and, if given by registered mail, on the third Business Day
following the deposit thereof in the mail, and if given by electronic
communication, on the day of transmittal thereof if given during the normal
business hours of the recipient and on the Business Day during which such normal
business hours next occur if not given during such hours on any day. If the
party giving any demand, notice or other communication knows or ought reasonably
to know of any difficulties with the postal system that might affect the
delivery of mail, any such demand, notice or other communication may not be
mailed but must be given by personal delivery or by electronic
communication.

12.12 Governing Law

          This
Agreement is governed by and will be construed in accordance with the laws of
the Province of Alberta and the laws of Canada applicable therein.

12.13 Attornment

          For
the purpose of all legal proceedings this Agreement will be deemed to have been
performed in the Province of Alberta and the courts of the Province of Alberta
will have jurisdiction to entertain any action arising under this Agreement. The
Vendor and the Purchaser each hereby attorns to the jurisdiction of the courts
of the Province of Alberta.

12.14 Counterparts

          This
Agreement may be executed in any number of counterparts, each of which will be
deemed to be an original and all of which taken together will be deemed to
constitute one and the same instrument.

12.15 Securities Disclosure

          The
Vendor will make available to the Purchaser, its personnel and advisors
(including any auditors, accountants, legal, engineering and environmental
advisors engaged by the Purchaser) such information in the possession or control
of the Vendor as may be reasonably required by the Purchaser to satisfy the
disclosure obligations of the Purchaser relating to the Assets now or hereafter
arising under any national instrument or local securities commission rule.

12.16 Electronic Execution

          Delivery
of an executed signature page to this Agreement by any party by electronic
transmission will be as effective as delivery of a manually executed copy of the
Agreement by such party.

- 45 -

IN WITNESS WHEREOF the parties have executed this
Agreement.

	 	DYNAMIC OIL & GAS, INC. 
	 	 	 
	 	Per: 	  
	 	 	 
	 	Per: 	  
	 	 	 
	 	SHELLBRIDGE OIL & GAS, INC. 
	 	 	 
	 	Per: 	  
	 	 	 
	 	Per: 	  

	SCHEDULE 1.01(A) 
	 

Facilities

	SCHEDULE 1.01(B) 
	 

General Conveyance 

THIS CONVEYANCE is made as of •,
2005; BETWEEN:

  
    
      
        DYNAMIC OIL & GAS, INC., a corporation having
          an office in the City of Richmond, in the Province of British Columbia
          (the “Vendor”),

      

    

  

-and-

  
    
      
        SHELLBRIDGE OIL & GAS, INC., a corporation
          having an office at the City of Calgary, in the Province of Alberta
          (the “Purchaser”)

      

    

  

          WHEREAS
the Vendor has agreed to sell and convey the Vendor’s entire right, title,
benefit and interest in the Assets to the Purchaser and the Purchaser has agreed
to purchase and accept all of the Vendor’s right, title, benefit and interest in
and to the Assets.

          NOW
THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and the
covenants and agreements herein contained and $1.00 of lawful money of Canada
now paid by each of the parties to the other and other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged by
each of the parties), the parties agree as follows:

ARTICLE 1 - DEFINITIONS

          In
this Conveyance, including the recital, “Agreement” means the Oil and Gas Asset
Purchase Agreement made as of •, 2005 between the Vendor and the Purchaser. In
addition, terms used in this Conveyance that are defined in the Agreement and
are not otherwise defined herein will have the same meaning herein as in the
Agreement.

ARTICLE 2 - CLOSING

          The
Vendor and the Purchaser each hereby certify that it has performed and satisfied
all agreements and obligations that it was required to perform or satisfy
pursuant to the Agreement on or prior to the date hereof, that the
representations and warranties made by it as contained in the Agreement are true
in all material respects at and as of the Execution Date and the Closing Date,
(except with respect to those representations and warranties that speak as to a
particular date or time, which need only be true and correct as of such date and
time) that all closing conditions in its favour have either been satisfied or
are hereby waived, and Closing as the term is defined in the Agreement, is
hereby completed.

- 2 -

ARTICLE 3 - CONVEYANCE

          The
Vendor, for the consideration provided for in the Agreement, sells, assigns,
transfers and conveys the entire right, title, benefit and interest of the
Vendor (whether absolute or contingent, legal or beneficial) in and to the
Assets to the Purchaser, its successors and assigns and the Purchaser purchases
and accepts such interests from the Vendor, TO HAVE AND TO HOLD the same
absolutely, subject to the terms of the Agreement, the Permitted Encumbrances
and compliance with the terms of the Leases and the Title and Operating
Documents.

ARTICLE 4 - TITLE AND POSSESSION

          The
transfer of Title to and possession of the Vendor’s interest in and to the
Assets will, subject to the terms of the Agreement, be effective as of the date
of this Agreement.

ARTICLE 5 - SUBORDINATE DOCUMENT

          This
Conveyance is executed and delivered by the parties pursuant to the Agreement
for the purposes of the provisions of the Agreement, and the terms hereof will
be read in conjunction with the terms of the Agreement. The Agreement will
prevail if there is a conflict between the provisions of the Agreement and this
Conveyance.

ARTICLE 6 - ENUREMENT

          This
Conveyance enures to the benefit of and is binding upon the parties and their
respective successors and permitted assigns.

ARTICLE 7 - FURTHER ASSURANCES

          The
Vendor will from time to time and at all times hereafter upon every reasonable
request of the Purchaser or its successors and assigns, and without further
consideration, do and perform or cause to be done or performed all such further
acts and things, and execute or cause to be executed all such further deeds,
documents, writings or other instruments and give all such further assurances as
may be required by the Purchaser to effectively carry out the intent and meaning
hereof and of the Asset Purchase Agreement.

- 3 -

ARTICLE 8 - GOVERNING LAW

          This
Agreement will be governed by and construed in accordance with the laws of the
Province of Alberta.

IN WITNESS WHEREOF the parties have executed this Agreement.

	 	DYNAMIC OIL & GAS, INC. 
	 	 	 
	 	Per: 	  
	 	 	 
	 	Per: 	  
	 	 	 
	 	SHELLBRIDGE OIL & GAS, INC. 
	 	 	 
	 	Per: 	  
	 	 	 
	 	Per: 	  

	SCHEDULE 1.01(C) 
	 

Lands, Leases, Hydrocarbon Interests, Encumbrances and
Wells

	- 5 - 
	 
	SCHEDULE 1.01(D) 
	 

Production Sales Contracts

	SCHEDULE 5.02(E) 
	 

Outstanding AFE’s

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