ASSET PURCHASE AGREEMENT

Exhibit 10.9

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “Agreement”) made as of the 21 ^st day of September, 2006.

BETWEEN:

SKH Management L.P., a Delaware limited partnership having an office at 7700 San Felipe — 5 ^th Floor Houston, Texas 77063 (hereinafter collectively referred to as the “Vendor A”)

— and —

SKH Management II L.P., a Delaware limited partnership having an office at 7700 San Felipe — 5 ^th Floor Houston, Texas 77063 (hereinafter collectively referred to as the “Vendor A-2”)

— and —

SKH Management III LLC, a Delaware limited liability company having an office at 7700 San Felipe — 5 ^th Floor Houston, Texas 77063 (hereinafter collectively referred to as the “Vendor A-3”)

— and —

SKH Energy Fund, L.P., a Delaware limited partnership having an office at 7700 San Felipe — 5 ^th Floor Houston, Texas 77063 (hereinafter collectively referred to as the “Vendor B”)

— and —

Antares Exploration Fund, L.P., a Delaware limited partnership having an office at 7700 San Felipe — 5 ^th Floor Houston, Texas 77063 (hereinafter collectively referred to as the “Vendor C”)

(Vendor A, Vendor A-2, Vendor A-3, Vendor B and Vendor C, each a “Vendor” and collectively, the “Vendors”)

— and —

AUSAM ENERGY CORPORATION, a body corporate incorporated pursuant to the laws of the Province of Alberta and having an office in the City of Calgary, in the Province of Alberta (hereinafter referred to as the “Purchaser”)

     WHEREAS the Vendors wish to sell and the Purchaser wishes to purchase the interests of the Vendors in and to the Assets, subject to and in accordance with the terms and conditions hereof;

     NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the premises and the mutual covenants and agreements hereinafter set forth, the Parties have agreed as follows:

ARTICLE 1
INTERPRETATION

1.1

Definitions

In this Agreement, unless the context otherwise requires:

	(a)		“Affiliate” shall mean any Person that, directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, another Person. The term “control” and its derivatives with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
	(b)		“Assets” means all of each of the Vendors’ right, title and interests in and to the following:

	(i)		all oil, gas or mineral leases, leasehold estates, operating rights and other rights authorizing the owner thereof to explore or drill for and produce Hydrocarbons and other minerals, contractual rights to acquire any such of the foregoing interests which have been earned by performance, and fee mineral, royalty and overriding royalty interests, net profits interests, production payments and other interests payable out of Hydrocarbon production, in each case, described in Schedule A (it being understood that, prior to Closing, the Vendors may substitute one or more prospects of equal value for a Prospect designated on Schedule A with the consent of the Purchaser), together with any Additional Leases acquired as contemplated by Section 2.3(d) (collectively, the “Leases”);
	(ii)		all of the rights-of-way, easements, leases, fee estates, servitudes, permits, and licenses of any of the Vendors that are necessary or useful for the location, operation, maintenance, repair, replacement, use or ownership of the Leases or processing, storing, gathering, transporting or marketing of Hydrocarbons therefrom (collectively, the Easements”);
	(iii)		to the extent transferable without payment of any fees or penalty (unless the Purchaser expressly agrees to pay such fees), all contracts and agreements relating to the Leases or the processing, storing, gathering, transporting or marketing of Hydrocarbons therefrom, including seismic licenses (collectively, the “Contracts”); and
	(iv)		all original files, records, data, information and documentation of the Vendors (or if originals are not available, copies of such items) pertaining to or evidencing any of the Vendors’ use, ownership or operation of any of the foregoing Assets, including, without limitation, lease files, land files, division order files, title opinions and abstracts, legal records (excluding any records or information the disclosure of which would result in the waiver of an attorney-client privilege), tax records (other than income tax of the Vendors), governmental, tribal and

regulatory filings and permits, environmental records, geological and geophysical data, seismic records, maps, and computer software (subject to the Vendors’ licensing obligations) (collectively, the “Records”).

	(c)		“Business Day” means a day other than a Saturday, a Sunday or a statutory holiday in Calgary, Alberta;
	(d)		“Closing” means the closing of the purchase and sale herein provided for;
	(e)		“Closing Date” means the third Business Day subsequent to the day on which all of the conditions stated in Article 3 hereof are satisfied or waived, or such other date as may be agreed upon in writing by the Vendors and the Purchaser, but in no event later than December 31, 2006;
	(f)		“Closing Place” means the offices of the Purchaser, or such other place as may be agreed upon in writing by the Vendors and the Purchaser;
	(g)		“Closing Time” means 10:00 am Mountain Time on the Closing Date or such other time as may be agreed upon in writing by the Vendors and the Purchaser;
	(h)		“Conveyance” means the form of Conveyance attached hereto as Schedule “B”;
	(i)		“Environmental Liabilities” means all Losses and Liabilities pertaining to the Assets in respect of the environment, whether or not caused by a breach of the Regulations and whether or not resulting from operations conducted with respect to the Assets, including Losses and Liabilities related to:

	(i)		the transportation, storage, use or disposal of toxic or hazardous substances or hazardous, dangerous or non-dangerous oilfield substances or waste;
	(ii)		the release, spill, escape or emission of toxic or hazardous substances;
	(iii)		any other pollution or contamination of the surface, substrate, soil, air, ground water, surface water or marine environments; and
	(iv)		any obligations imposed by the Regulations to protect the environment or to rectify environmental problems;

	(j)		“Financing” has the meaning ascribed to it in Section 3.1(c).
	(k)		“Governmental Authority” shall mean any federal, state, local, municipal, tribal or other government; any governmental, regulatory or administrative agency, commission, body or other authority exercising or entitle to exercise any administrative, executive, judicial, legislative, belief, regulatory or taxing authority or power; and any court or governmental tribunal, including any tribal authority having or asserting jurisdiction.
	(1)		“Hydrocarbons” means oil, condensate, gas, casinghead gas and other liquid or gaseous hydrocarbons, or any of them or any combination thereof, and all products and substances produced therewith, extracted, separated, processed and produced therefrom.

	(m)		“Information Circular” means the information circular to be mailed by the Purchaser to its shareholders in connection with the annual and special general meeting of the shareholders of the Purchaser called for the purpose of, among other things, obtaining approval of the shareholders of the Purchaser to the issue of the Shares to the Vendors;
	(n)		“Joint Operating Agreement” means an operating agreement governing the conduct of operations on each Prospect after an assignment by the Purchaser to the Vendors of an interest in the Prospect which shall be substantially in the form attached to this Agreement as Schedule “G.”
	(o)		“Leases” has the meaning ascribed to it in the definition of Assets.
	(p)		“Losses and Liabilities” means all claims, liabilities, actions, proceedings, demands, losses, costs, penalties, fines, damages and expenses which may be sustained or incurred by any of a Party, its directors, officers, agents and employees, including reasonable legal fees and disbursements;
	(q)		“Party” means a party to this Agreement;
	(r)		“Permitted Encumbrances” means:

	(i)		liens for taxes, assessments and governmental charges which are not due or contested in good faith;
	(ii)		vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, workmen’s, materialmen’s, construction or other like liens arising by operation of law in the ordinary course of business or incident to the construction or improvement of any property in respect of obligations which are not yet due or which are being contested in good faith by appropriate proceedings by or on behalf of any Vendor;
	(iii)		easements, rights of way, servitudes and other similar rights in land (including without limitation 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 and cable television conduits, poles, wires and cables) which do not materially impair the use of the Assets affected thereby;
	(iv)		the right reserved to or vested in any Governmental Authority to control or regulate any of the Assets, including all rights to consent by, required notices to, filings with, or other actions by Governmental Authorities in connection with the sale or conveyance of oil and gas leases or interests therein, if the same are customarily obtained subsequent to such sale or conveyance;
	(v)		any security held by any Third Party encumbering the Vendors’ interest in and to the Assets or any part or portion thereof, in respect of which the Vendors deliver a release thereof to the Purchaser at or prior to Closing; and
	(vi)		all royalty burdens, liens, adverse claims, penalties, reductions in interests and other encumbrances set out in Schedule “A” under “Encumbrances”;

	(vii)		preferential rights to purchase and required Third Party consents to assignments and similar agreements with respect to, each of which, prior to Closing, (i) waivers or consents are obtained from the appropriate parties, (ii) the appropriate time period for asserting such rights has expired without an exercise of such rights,;
	(viii)		conventional rights of reassignment requiring less than ninety (90) days’ notice to the holders of such rights;
	(ix)		such title or other property defects as the Purchaser may have waived in writing; and
	(x)		rights of a common owner of any interest in rights-of-way or easements currently held by any Vendor and such common owner as tenant in common or through common ownership;

	(s)		“Person” shall mean any individual, firm, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, Governmental Authority or any other entity.
	(t)		“Prime Rate” means the annual rate of interest equal to the annual rate of interest announced from time to time by the Royal Bank in the City of Calgary as the reference rate then in effect for determining interest rates on Canadian dollar commercial loans in Canada;
	(u)		“Prospect” means an area in which there is expected to occur, based upon the information developed as a result of the interpretation of the geological and geophysical data, one or more commercial accumulations of oil and/or gas in one or more specific structural or stratigraphic traps and the requisite acreage covering said structural or stratigraphic traps to control the testing and development of the same for the production of oil and/or gas. Each Prospect is further described in Schedule A. Each Prospect shall be deemed protected by a Prospect AMI established pursuant to the terms of the Participation and Right of First Refusal Agreement;
	(v)		“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 Assets or the Parties;
	(w)		“Shares” means common shares in the capital of the Purchaser;
	(x)		“Third Party” means any individual or entity other than the Vendors and the Purchaser, including without limitation any partnership, corporation, trust, unincorporated organization, union, government and any department and agency thereof and any heir, executor, administrator or other legal representative of an individual;
	(y)		“this Agreement”, “herein”, “hereto”, “hereof and similar expressions mean and refer to this Asset Purchase Agreement;
	(z)		“TSXV” means the TSX Venture Exchange.

1.2		Headings
		The expressions “Article”, “section”, “subsection”, “clause”, “subclause”, “paragraph” and “Schedule” followed by a number or letter or combination thereof mean and refer to the specified article, section, subsection, clause, subclause, paragraph and schedule of or to this Agreement.
1.3		Interpretation Not Affected by Headings
		The division of this Agreement into Articles, sections, subsections, clauses, subclauses and paragraphs and the provision of headings for all or any thereof are for convenience and reference only and shall not affect the construction or interpretation of this Agreement.
1.4		Included Words
		When the context reasonably permits, words suggesting the singular shall be construed as suggesting the plural and vice versa, and words suggesting gender or gender neutrality shall be construed as suggesting the masculine, feminine and neutral genders.
1.5		Schedules
		There are appended to this Agreement the following schedules pertaining to the following matters:

		Schedule “A”		—		Leases
		Schedule “B”		—		Form of Conveyance
		Schedule “C”				Value Allocation
		Schedule “D”				Disclosure Schedules
		Schedule “E”				Interim Report — Current Lease Obligations and Commitments
		Schedule “F”				Participation and Right of First Refusal Agreement
		Schedule “G”				Form of Joint Operating Agreement
		Schedule “H”				Form of Accredited Investor Certificate

		Such schedules are incorporated herein by reference as though contained in the body hereof. Wherever any term or condition of such schedules conflicts or is at variance with any term or condition in the body of this Agreement, such term or condition in the body of this Agreement shall prevail.
1.6		Knowledge
		In this Agreement, references to a Party’s knowledge or awareness and similar references mean the knowledge of the current officers of such Party after reasonable inquiry.

ARTICLE 2
PURCHASE AND SALE AND CLOSING

2.1		Purchase and Sale
		The Vendors hereby agree to assign, sell, transfer, convey and set over to the Purchaser, and the Purchaser hereby agrees to purchase from the Vendors, the Assets subject to and in accordance with the terms of this Agreement.
2.2		Closing
		Closing shall take place at the Closing Place at the Closing Time. Subject to all other provisions of this Agreement, possession, risk and beneficial ownership of the Vendors’ interest in and to the Assets shall pass from the Vendors to the Purchaser at the Closing Time.
2.3		Consideration

(a)

The consideration (the “Consideration”) to be paid by the Purchaser to the Vendors for the Vendors’ interest in and to the Assets shall be the issuance and delivery of an aggregate of 63,417,143 Shares plus an aggregate amount of cash equal to $13,419,558 USD to the Vendors as follows plus any Post Execution GG&L (as defined below):

	(i)		Vendor A, Zero Shares plus $ -0- USD in cash;
	(ii)		Vendor A-2, 2,846,451 Shares plus $602,331USD in cash;
	(iii)		Vendor A-3, 16,299,778 Shares plus $3,449,159 USD in cash;
	(iv)		Vendor B, 11,630,140 Shares plus $2,461,028 USD in cash; and
	(v)		Vendor C, 32,640,775 Shares plus $6,907,041 USD in cash.
	(vi)		The allocation of the Consideration among the Vendors will be adjusted as of the Closing Time based upon the relative increase in value of the Assets attributed to any Post Execution GG&L.

	(b)		At Closing, the Purchaser shall cause to be delivered to each of the Vendors a share certificate in the name of such Vendor representing the number of the Shares to be issued to such Vendor and the Purchaser shall cause each of the Vendors to be recorded and registered in the share register of the Purchaser as the registered holder of such number of the Shares.
	(c)		The value of the Consideration shall be allocated among the Assets as set forth in Schedule “C” and any Post Execution GG&L will be allocated to the Prospects on which such costs are expended. The value of the Shares shall be deemed to be CA $0.35 per Share.
	(d)		The cash portion of the Consideration is intended to allow the Vendors to recover the expenditures made by them pertaining to the acquisition, ownership, and maintenance of the Leases included in each of the Prospects, together with the costs and expenses incurred and paid by the Vendors in connection with the geological and geophysical

analysis and development of the Prospects included in the Assets incurred prior to the date of this Agreement (such cash amount is referred to herein as “GG&L” and is allocated among the Prospects on Schedule “C”). Following the date of this Agreement until the Closing Date, the Vendors may continue to acquire Leases on lands included within the area covered by one or more Prospects (the “Additional Leases”), and to the extent that the Vendors continue to incur and pay costs and expenses in connection with the acquisition of Additional Leases and the maintenance of Leases already held by the Vendors, the Vendors are entitled to reimbursement of all of such costs and expenses so incurred and paid as a part of the Consideration contemplated in this Section 2.3; provided, however, that following the date of the this Agreement until the Closing Date, the Vendors cannot incur such costs in excess of $2,000,000 in the aggregate or $200,000 in any individual incurrence without the prior consent of AEC. Such additional costs and expenses related are referred to herein as the “Post Execution GG&L.” The cash portion of the Consideration shall be allocated among the respective Vendors in the proportion that the aggregate GG&L of the Prospects contributed by each of the Vendors bears to the aggregate GG&L of all of the Prospects as set forth on Schedule “C.”

2.4

Deliveries at Closing

(a)

At Closing, the Vendors shall deliver the following:

	(i)		Conveyances for the Assets in the form set forth in Schedule “B” hereto, duly executed by the appropriate Vendors in sufficient counterparts for filing in the counties and parishes where the Assets are located;
	(ii)		duly executed counterparts of the Participation Agreement in the form set forth as Schedule F hereto;
	(iii)		such other items, including executed general conveyance documents sufficient to transfer the Assets not conveyed by the Conveyances, as may be specifically required by this Agreement.

(b)

At Closing, the Purchaser shall deliver the following:

	(i)		share certificates in the name of each of the Vendors as set forth in Section 2.3 hereof;
	(ii)		cash in the amounts specified in Section 2.3(a) by wire transfer of immediately available funds;
	(iii)		duly executed counterparts of the Participation Agreement in the form set forth as Schedule “F” hereto; which may be executed by a wholly-owned subsidiary of Purchaser to which Purchaser has assigned its interest in the Assets pursuant to Section 11.4; and
	(iv)		such other items as may be specifically required by this Agreement.

2.5		Post Closing Deliveries
		In addition to the deliveries made under Section 2.4 hereof, at any time within 15 business days of the Closing pursuant to the Purchaser’s reasonable request, the Vendors shall deliver to the Purchaser possession of the Records.

ARTICLE 3
CONDITIONS OF CLOSING

3.1		Purchaser’s Conditions of Closing
		The purchase of the Assets by the Purchaser is subject to the following conditions precedent for the exclusive benefit of the Purchaser, which may be waived in whole or in part by the Purchaser by written notice to the Vendors at or prior to Closing:

	(a)		all necessary shareholder and regulatory approval for the purchase of the Assets by the Purchaser shall have been obtained including, without limitation, TSXV and shareholder approval, and such further approvals as may be necessary or required by law or contract to consummate the transaction contemplated by this Agreement;
	(b)		the representations and warranties of the Vendors set forth in this agreement shall be true and correct in all material respects on and as of the Closing Time, with the same force and effect as though such representations and warranties had been made or given at and as of the Closing Date;
	(c)		the Vendors shall have materially performed or complied with all obligations, agreements and covenants contained in this Agreement as to which performance or compliance by the Vendors is required prior to or at the Closing Date;
	(d)		no material suit, action, or other proceeding shall be pending before any Governmental Authority seeking to restrain, prohibit, enjoin, or declare illegal, or seeking substantial damages in connection with, the transactions contemplated by this Agreement;
	(e)		the Purchaser shall have completed a due diligence review of the Assets and shall have obtained satisfactory results therefrom as determined by the Purchaser in its sole discretion; and
	(f)		the Purchaser shall have obtained binding commitments from investors to purchase securities of the Purchaser on or before the Closing Time such that the Purchaser will realize gross proceeds of at least USD $45 million (the “Financing”). To the extent applicable, the price per security will be determined in accordance with the policies of the TSXV and will be acceptable to the Purchaser, acting reasonably.

If any of the foregoing conditions has not been complied with, or waived by the Purchaser at or before the Closing Time the Purchaser may, in addition to any other remedies which it may have available to it, terminate its obligations to purchase the Assets by written notice to the Vendors at or prior to the Closing Time specifying the conditions which have not been satisfied and, in such event, the Purchaser shall be released and discharged from all further obligations hereunder, other than those contained in Section 10.1 and Article 11.

3.2		Vendors’ Conditions on Closing
		The sale of the Assets by the Vendors is subject to the condition precedent, for the exclusive benefit of the Vendors, that the Vendors shall have completed a due diligence review of the Purchaser and shall have concluded that no adverse material fact exists concerning the business or affairs of the Purchaser that has not been publicly disclosed, or disclosed to the Vendor in writing, prior to the date of the Information Circular. The Vendors may waive this condition in whole or in part by written notice to the Purchaser at or prior to October 15, 2006.
		If the foregoing condition has not been complied with or waived by the Vendors by October 15, 2006, the Vendors may, in addition to any other remedies which they may have available to them, terminate their obligations to sell the Assets by written notice to the Purchaser at or prior to the close of the Business Day on October 15, 2006, specifying what conditions have not been satisfied and, in such event, the Vendors shall be released and discharged from all further obligations hereunder, other than those contained in Section 10.1 and Article 11.
		The sale of the Assets by the Vendors is subject to the condition precedent, for the exclusive benefit of the Vendors, that the Purchaser shall have obtained binding commitments from investors with respect to the Financing.
		The sale of the Assets by the Vendors is also subject to the following conditions precedent for the exclusive benefit of the Vendors and which may be waived in whole or in part by the Vendors by written notice to the Purchaser at or prior to Closing:

	(a)		the representations and warranties of the Purchaser set forth in this agreement shall be true and correct in all material respects on and as of the Closing Time, with the same force and effect as though such representations and warranties had been made or given an and as of the Closing Date;
	(b)		the Purchaser shall have materially performed or complied with all obligations, agreements and covenants contained in this Agreement as to which performance or compliance by the Purchaser is required prior to or at the Closing Date; and
	(c)		no material suit, action, or other proceeding shall be pending before any Governmental Authority seeking to restrain, prohibit, enjoin, or declare illegal, or seeking substantial damages in connection with, the transactions contemplated by this Agreement.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES

4.1		Representations and Warranties of Vendor
		Each of the Vendors jointly and severally makes the following representations and warranties to the Purchaser, no claim in respect of which shall be made or be enforceable by the Purchaser unless written notice of such claim, with reasonable particulars, is given by the Purchaser to the Vendors within a period of twenty-four (24) months from the Closing Time:

(a)

each Vendor is duly organized and validly existing under the laws of its jurisdiction of organization, is authorized to carry on business in the jurisdiction in which the Lands are located, and now has good right, full power and absolute authority to sell, assign,

			transfer, convey and set over the interest of such Vendor in and to the Assets according to the true intent and meaning of this Agreement;
	(b)		the execution, delivery and performance of this Agreement has been duly and validly authorized by any and all requisite corporate, partnership, shareholders’ and directors’ actions with respect to each Vendor and will not result in any violation of, be in conflict with or constitute a default under any articles, charter, bylaw or other governing document to which such Vendor is bound;
	(c)		the execution, delivery and performance of this Agreement will not result in any violation of, be in conflict with or constitute a default under any term or provision of any agreement or document to which the Vendors are party, by which the Vendors are bound or to which the Assets are subject, nor under any judgment, decree, order, statute, regulation, rule or license applicable to the Vendors;
	(d)		this Agreement and any other agreements delivered in connection herewith constitute valid and binding obligations of each Vendor enforceable against each Vendor in accordance with their terms, subject to the effects of bankruptcy, insolvency, reorganization, moratorium, and similar laws, as well as to principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law);
	(e)		no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body exercising jurisdiction over the Assets is required for the due execution, delivery and performance by the Vendors of this Agreement, other than authorizations, approvals or exemptions from requirements therefor, previously obtained and currently in force;
	(f)		none of the Vendors have incurred any obligation or liability, contingent or otherwise, for brokers’ or finders’ fees in respect of this Agreement or the transaction to be effected by it for which the Purchaser shall have any obligation or liability;
	(g)		except for the Permitted Encumbrances, the Assets are free and clear of all liens, mortgages, royalties, encumbrances, net profits interests, options, security interests or other burdens or adverse claims created by, through or under the Vendors and, to the knowledge of the Vendors, by Third Parties;
	(h)		there are no judgments and no claims, proceedings, actions or lawsuits in existence or, to the Vendors’ knowledge, contemplated or threatened against or with respect to the Assets;
	(i)		the sale of the Assets pursuant hereto is not subject to (i) any rights of first refusal which have not been waived by the holder thereof, or similar pre-emptive rights created by, through or under the Vendors or (ii) any other transfer restriction;
	(j)		as of the Closing Time, there are no AFEs, unit budget or similar financial commitments which have not already been disclosed and as are included in Schedule “E”, pursuant to which expenditures by the Purchaser in respect of the Assets are or may be required after the Closing Time; .

	(k)		to the Vendors’ knowledge, each of the Vendors has given the Purchaser access to all written information in its possession relating to Environmental Liabilities and Abandonment and Reclamation Obligations;
	(1)		none of the Vendors have received actual notice, written or oral, of:

	(A)		any material non-compliance in relation to the Assets with any law; or
	(B)		any claim in relation to the Assets by any Third Party of material Environmental Liabilities (including pollution) or material Abandonment and Reclamation Obligations;

	(m)		the Leases, Easements and Contracts are in full force and effect, and none of the Vendors is, and to the Vendors’ knowledge no other party is, in breach of any Lease Easement or Contract and to the Vendors’ knowledge no default exists thereunder;
	(n)		(i) none of the Leases contain royalty provisions (other than those allowing a lessor the right to take in kind and other than royalties due to governmental entities) requiring the payment of royalty on any basis other than proceeds actually received by the lessee, (ii) there are no Leases that are subject to a fixed term of duration, (iii) there are no unfulfilled drilling obligations affecting the Leasehold Interests, other than provisions requiring optional drilling as a condition of maintaining or earning all or a portion of a Lease, (iv) all royalties, rentals and other payments due in respect of the Leases have been timely paid and all other conditions necessary to keep such properties and interests in full force and effect during their primary term, and thereafter if commercial production has been established thereon or on lands pooled therewith, have been fully performed; (v) except as otherwise noted on Schedule D, there are no limitations as to the depths covered or minerals to which the Leases to apply; and (vi) except as otherwise noted on Schedule D, there are no restrictions on the Purchaser’s ability to utilize the surface of the Leases, to conduct operations on the Leases, or to have access to the Leases that would have an adverse effect, individually or in the aggregate on the value of any of the Assets or on the Purchaser’s ownership or operation thereof;
	(o)		(i) None of the Contracts subject all or any portion of the Assets to any tax partnership or to any obligation requiring a partnership income tax return to be filed under the application of Subchapter K of Chapter 1 of Subtitle A of the Code, or any similar state statute; (ii) none of the Contracts will subject the Purchaser to any area of mutual interest, non competition or similar provision restricting the Purchaser from independently conducting operations in any geographic area; and (iii) the Contracts include all contracts and agreement that are material to the ownership and operation of the Assets, as currently owned and operated;
	(p)		the Vendors have obtained all governmental permits, licenses and other authorizations required to own and operate the Assets; all such authorizations are in full force and effect; and to the Vendors’ knowledge no violations exist thereunder;
	(q)		all ad valorem, property, production, severance, sales, use, windfall profits and similar taxes and assessments based on or measured by the ownership of the Assets or the production of Hydrocarbons or the receipt of proceeds therefrom that have become due and payable with respect to the Assets have been, or will be, paid timely and all tax and

			information returns to tax authorities required to be filed with respect to the Assets have been, or will be, filed timely;
	(r)		the Vendors own and have the right to use without any limitations or restrictions (including without limitation restrictions related to transfers to, or use by, third parties), all technology, processes, maps, seismic records, shot points, field notes, interpretations and programs, geological and geophysical information and libraries included as part of the Assets and the consummation of the transactions contemplated by this Agreement will not alter or impair any such rights or breach any agreements with Third Party vendors or require payments of additional sums to such persons;
	(s)		none of the Vendors, their Affiliates nor anyone acting on their behalf has issued, sold or offered any security of the Purchaser to any person under circumstances that would cause the sale of the Shares, as contemplated by this Agreement, to be subject to the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”);
	(t)		each of the Vendors understands that the offering and sale of the Shares pursuant to this Agreement has not been registered under and is intended to be exempt from registration under the Securities Act pursuant to Section 4(2) thereof and Regulation D thereunder and each Vendor acknowledges that each certificate representing the Shares shall bear a legend substantially in the following form:
			THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AND MAY NOT BE SOLD TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
			UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE SECURITIES SHALL NOT TRADE THE SECURITIES BEFORE                                           .
			WITHOUT PRIOR WRITTEN APPROVAL OF THE TSX VENTURE EXCHANGE AND COMPLIANCE WITH ALL APPLICABLE SECURITIES LEGISLATION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE TRADED ON OR THROUGH THE FACILITIES OF THE TSX VENTURE EXCHANGE OR OTHERWISE IN CANADA OR TO OR FOR THE BENEFIT OF A CANADIAN RESIDENT UNTIL                                           .
	(u)		each of the Vendors is an “accredited investor” (as defined in Regulation D under the Securities Act) and has truthfully and accurately completed the certificate attached hereto as Schedule “G” indicating the basis on which it is representing its status as an “accredited investor;”
	(v)		each of the Vendors is acquiring the Shares to be acquired hereunder for its own account, for investment and not with a view to the public resale or distribution thereof in violation of any securities law; and

(w)

each Vendor (A) has been furnished with or has had full access to all of the information that it considers necessary or appropriate to make an informed investment decision with respect to the Shares, (B) has had an opportunity to discuss with management of the Purchaser the intended business and financial affairs of the Purchaser and to obtain information (to the extent the Purchaser possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to him or to which he had access, (C) can bear the economic risk of (I) an investment in the Shares indefinitely and (II) a total loss in respect of such investment and (D) has such knowledge and experience in business and financial matters so as to enable it to understand and evaluate the risks of and form an investment decision with respect to its investment in the Shares and to protect its own interest in connection with such investment.

4.2		Representations and Warranties of the Purchaser
		The Purchaser makes the following representations and warranties to the Vendors, no claim in respect of which shall be made or be enforceable by the Vendors unless written notice of such claim, with reasonable particulars, is given by the Vendors to the Purchaser within a period of twenty-four (24) months from the Closing Time:

	(a)		The Purchaser is a corporation duly formed and validly existing under the laws of the jurisdiction of organization of the Purchaser, as of Closing will be authorized to carry on business in the jurisdiction in which the Assets are located, and, subject to obtaining all necessary shareholder and regulatory approval, now has good right, full power and absolute authority to purchase the interest of the Vendors in and to the Assets according to the true intent and meaning of this Agreement;
	(b)		the execution and delivery of this Agreement has been duly and validly authorized by any and all requisite corporate and directors’ actions and, following shareholder approval thereof, will not result in any violation of, be in conflict with or constitute a default under any articles, charter, bylaw or other constating document to which the Purchaser is bound;
	(c)		the execution, delivery and performance of this Agreement will not result in any violation of, be in conflict with or constitute a default under any term or provision of any agreement or document to which the Purchaser is party or by which the Purchaser is bound, nor under any judgment, decree, order, statute, Regulation, rule or license applicable to the Purchaser;
	(d)		this Agreement and any other agreements delivered in connection herewith constitute valid and binding obligations of the Purchaser enforceable against the Purchaser in accordance with their terms, subject to the effects of bankruptcy, insolvency, reorganization, moratorium, and similar laws, as well as to principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).;
	(e)		subject to shareholder and regulatory approval, the Purchaser is authorized to issue and deliver the Shares to the Vendors, the rights, privileges, restrictions and conditions of which are defined in the articles of incorporation of the Purchaser;

	(f)		the Purchaser (A) has been furnished with or has had full access to all of the information that it considers necessary or appropriate to make an informed investment decision with respect to the Assets, (B) has had an opportunity to discuss with management of the Vendors the financial status of the Assets and to obtain information (to the extent the Vendors possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to the Purchase or to which it had access, (C) can bear the economic risk of (I) an investment in the Assets indefinitely and (II) a total loss in respect of such investment and (D) has such knowledge and experience in oil and gas exploration, drilling and development matters so as to enable it to understand and evaluate the risks of and form an investment decision with respect to its investment in the Assets and to protect its own interest in connection with such investment. In addition, by the Purchaser’s having had full access to all data in the possession of the Vendors regarding the Assets, the Purchaser exercising its own judgment has made its own evaluation and decisions regarding the Assets and has not relied upon the analyses performed by the Vendors in making its decision to acquire the Assets; provided that nothing in this paragraph shall operate to relieve the Vendors from their obligations under this Agreement or any liability they may have for any breach of a representation or warranty made by the Vendors in this Agreement;
	(g)		no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body exercising jurisdiction over the Assets is required for the due execution, delivery and performance by the Purchaser of this Agreement, other than authorizations, approvals or exemptions from requirements therefor, previously obtained and currently in force; and
	(h)		the Shares issued to each of the Vendors pursuant to the terms of this Agreement shall be issued as fully paid and non-assessable shares of the Purchaser.

ARTICLE 5
INDEMNITIES FOR REPRESENTATIONS AND WARRANTIES

5.1		The Vendors’ Indemnities for Representations and Warranties
		The Vendors shall be jointly and severally liable to the Purchaser for and shall, in addition, indemnify the Purchaser, its Affiliates, and all of its and their respective shareholders, partners, members, directors, officers, managers, employees, agents and representatives (the “Purchaser Indemnified Parties”) from and against all Losses and Liabilities arising out of, relating to or resulting from any breach by any of the Vendors of any of the representations and warranties contained in section 4.1 or any covenant or agreement of any Vendor contained in this Agreement.
5.2		Purchaser’s Indemnities for Representations and Warranties
		The Purchaser shall be liable to the Vendors for and shall, in addition, indemnify the Vendors, their Affiliates, and all of their respective shareholders, partners, members, directors, officers, managers, employees, agents and representatives (the “Vendor Indemnified Parties”) from and against all Losses and Liabilities arising out of, relating to or resulting from any breach by any of the Purchaser of any of the representations and warranties contained in section 4.2 or any covenant or agreement of the Purchaser contained in this Agreement.

5.3		Time Limitation
		No claim under this Article 5 shall be made or be enforceable by a Party unless written notice of such claim, with reasonable particulars, is given by such Party to the Party against whom the claim is made within a period of twenty-four (24) months from the Closing Time.

ARTICLE 6
PURCHASER’S INDEMNITIES

6.1		General Indemnity
		The Purchaser shall be liable to the Vendors for and shall, in addition, indemnify the Vendors from and against all Losses and Liabilities suffered, sustained, paid or incurred by the Vendors which arise out of any matter or thing occurring or arising from and after the Closing Time and which relates to the Assets (other than any interest in the Assets assigned to the Vendors following Closing), provided that the Purchaser shall not be liable to the Vendors under this Section 6.1 in respect of Losses and Liabilities for which the Vendors have agreed to indemnify the Purchaser Indemnified Parties under Section 5.1 hereof.
6.2		Environmental Matters
		The Purchaser shall be liable to the Vendors for and shall, in addition, indemnify the Vendors from and against all Losses and Liabilities suffered, sustained, paid or incurred by the Vendors which pertain to Environmental Liabilities pertaining to or caused by the Assets or operations thereon or related thereto (other than any interest in the Assets assigned to the Vendors following Closing), however and by whomsoever caused, and whether such Environmental Liabilities occur or arise in whole or in part, from and after the Closing Time; provided that the Purchaser shall not be liable to the Vendors under this Section 6.2 in respect of Losses and Liabilities for which the Vendors have agreed to indemnify the Purchaser Indemnified Parties under Section 5.1 hereof.

ARTICLE 7
STATEMENT OF OBLIGATIONS/COMMITMENTS

7.1

Conduct of Business Prior to Closing

(a)

Each Vendor agrees that from and after the date hereof until Closing, except as expressly contemplated by this Agreement or as expressly consented to in writing by the Purchaser, to:

	(i)		operate and maintain the Assets in the usual, regular and ordinary manner consistent with past practice;
	(ii)		maintain the books of account and records relating to the Assets in the usual, regular and ordinary manner, in accordance with the usual practices of each such Vendor;
	(iii)		not enter into any contract or agreement related to the Assets that if entered into prior to the date of this Agreement, would be required to be listed in a schedule

			attached to this Agreement, or materially amend or change the terms of any of the Contracts; and
	(iv)		not transfer, sell, mortgage, pledge or dispose of any material portion of the Assets.

	(b)		Each Vendor will notify the Purchaser promptly after the discovery by such Vendor that any representation or warranty of such Vendor contained in this Agreement is, becomes or will be untrue in any material respect on or before the Closing Date.
	(c)		From and after the date hereof and through the Closing Date, each Vendor will provide the Purchaser and its representatives reasonable access during normal business hours to the Assets and the books and records relating to the Assets for review by the Purchaser.

7.2

Adjustments

	(a)		Except as otherwise provided in this Article 7 and subject to all other provisions of this Agreement, the Parties will adjust and apportion expenditures and revenues of every kind and nature incurred, payable or paid in respect of the Assets including royalties, property taxes, and taxes and assessments (other than income taxes), as at the Closing Time.
	(b)		The Vendors are entitled to the revenues and benefits from the ownership and operation of the Assets accrued prior to the Closing Time and are responsible for and will pay for the expenditures pertaining to the ownership, operation and development of the Assets incurred prior to the Closing Time; provided, however, that following the date of this Agreement until the Closing Date, the Vendors may continue to acquire Leases on lands included within the area covered by one or more Prospects, and to the extent that the Vendors continue to incur and pay costs and expenses in connection with the acquisition of Additional Leases and the maintenance of Leases already held by the Vendors (both of which are contemplated to occur), the Vendors shall be entitled to reimbursement as provided in Section 2.3; provided that the Vendors shall not incur such cost in excess of $2,000,000 in the aggregate or $200,000 in any individual incurrence without the prior consent of the Purchaser.
	(c)		The Purchaser is entitled to the revenues and benefits from the ownership and operation of the Assets accrued from and after the Closing Time and is responsible for and will pay for the expenditures pertaining to the ownership, operation and development of the Assets incurred from and after the Closing Time, subject to the Participation Agreement.
	(d)		To the extent that any of the Leases in a Prospect terminates, for any reason, prior to the Closing, there shall be a downward adjustment of the cash consideration payable to the Vendors based upon the acquisition and maintenance costs attributable to the terminated Lease; provided, however, that if the downward adjustment is less than $20,000, there shall be no downward adjustment, anything in the foregoing to the contrary notwithstanding. Prior to the Closing Time, each of the Vendors shall deliver to the Purchaser a written interim statement of obligations and commitments, including all applicable taxes, surface and mineral lease bonus, rentals and any similar payments made or required to be made by any of the Vendors to purchase or to preserve any of the Leases or any Easement, under this Agreement, including lease brokers’ expenses, legal fees and other related costs, and each of the Vendors will make available to representatives of the Purchaser all information necessary for the Purchaser to confirm the calculations in the

			statement as included in Schedule “E”. The Parties will cooperate in settling the adjustments and payment to be made on an interim basis, and the amount so agreed will be employed for the purposes of the Closing and completion of the transactions contemplated by this Agreement.
	(e)		Within 60 days following the Closing Time, the Parties will cooperate in preparing a final statement of all obligations, commitments and payments to be made pursuant to this Agreement. Upon agreement as to all adjustments and payments to be made, the net amount will be remitted by the Party who in the net result is obliged to make payment.
	(f)		Notwithstanding the preceding subsection, each Party will have the right, within the later of three months following the distribution of the final statement of adjustments by the Vendors or six months following the Closing Time, to examine, copy and audit the records of the other relative to the Assets for the purpose of effecting or verifying adjustments required under this Article. The auditing Party will, upon reasonable notice, conduct that audit at its sole expense during normal business hours at the offices of the audited Party or at such other premises where those records are maintained. Any material claims of discrepancies disclosed by that audit will be made in writing to the audited Party within two months following the completion of that audit. That Party will respond in writing to any such claims within three months of the receipt of notice of those claims.
	(g)		All payments made after the Closing Time are to be paid within 30 days after the amount is determined and, if not paid within the 30 days, will thereafter bear interest until paid at a rate of interest equal to the Prime Rate plus 1% compounded annually.
	(h)		Notwithstanding when Closing occurs, the Vendors shall perform the accounting and continue to collect, prepare, file and complete the information, reports, forms and documents normally required to be collected, prepared, filed and completed in the ordinary course of business for the entire month in which Closing occurs.

ARTICLE 8
POST-CLOSING OBLIGATIONS

8.1		Post-Closing
		In the event that for any reason, the Parties are unable on the Closing Date to cause the Purchaser to become the recognized holder of any of the Assets in the place and stead of the Vendors, then the Vendors shall:

	(a)		Standard of Care : hold and stand possessed of such Assets fully on behalf of the Purchaser, as bare trustee, 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, and cause such proceeds to be delivered to the Purchaser as soon as reasonably possible;
	(b)		Notices from Third Parties : in a timely manner, deliver to the Purchaser all third party notices and communications received by it in respect of such Assets;
	(c)		Notices to Third Parties : in a timely manner, deliver to third parties all such notices and communications as the Purchaser may reasonably request and all such monies and other items as the Purchaser may reasonably provide in respect of such Assets;

(d)

General : 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 in writing for purposes of facilitating the exercise of rights incidental to the ownership of such Assets or required by any government or regulatory agency of appropriate authority having jurisdiction.

		The Purchaser shall pay all invoices, cash calls and bills forwarded to it by the Vendors which pertain to the Assets in respect of any period after the Closing Time.
8.2		Liability
		The Vendors shall not be liable to the Purchaser for any loss or damages suffered, sustained, paid or incurred by the Purchaser in connection with the arrangements established by section 8.1, except to the extent that the loss or damage is caused by the Vendors’ gross negligence or its willful misconduct. The Purchaser shall:

	(a)		be liable to the Vendors for all losses whatsoever which the Vendors may suffer, sustain, pay or incur; and
	(b)		indemnify and save harmless the Vendors and each of their directors, officers, servants, agents, consultants and employees from and against any claims and losses whatsoever which may be brought against or suffered by any of them or which they may sustain, pay or incur arising out of the non-performance by the Purchaser of its obligations under section 8.1. An action or omission of the Vendors or any of their directors, officers, servants, agents or employees shall not be regarded as gross negligence or willful misconduct, however, to the extent it was done or omitted to be done in accordance with the instructions of or with the concurrence of the Purchaser. Nothing in this section 8.2 shall be construed as extending or restricting or limiting in any manner any of the other covenants, warranties, representations or other obligations of the Parties under this Agreement.

ARTICLE 9
TERMINATION

9.1		Right of Termination
		This Agreement and the transactions contemplated herein may be terminated at any time at or prior to Closing:

	(a)		by Purchaser, at Purchaser’s option, if any of the conditions set forth in Section 3.1 have not been satisfied on or before December 31, 2006 (the “Termination Date”);
	(b)		by the Vendors, at the Vendors’ option, if any of the conditions set forth in Section 3.2 have not been satisfied on or before the Termination Date;

provided, however, that no party shall have the right to terminate this Agreement pursuant to clause (a) or (b) above if such party or its Affiliates are at such time in material breach of any provision of this Agreement.

9.2		Effect of Termination
		If the obligation to close the transactions contemplated by this Agreement is terminated pursuant to any provision of Section 9.1 hereof, then, except as provided in this Section 9.2, Section 10.1 and Article 11, this Agreement shall forthwith become void and the Parties shall have no liability or obligation hereunder except and to the extent such termination results from the willful breach by a Party of any of its covenants or agreements hereunder; provided that if Purchaser is entitled to receive the Termination Fee as liquidated damages pursuant to Section 9.2(b), then such retention shall constitute full and complete satisfaction of any and all damages Purchaser may have against the Vendors.

ARTICLE 10
CONFIDENTIALITY

10.1		Confidentiality
		Further to recent discussions between the Vendors and the Purchaser regarding the Assets, the Parties have or will be supplying each other with information which includes, but is not limited to, financial, geological, geophysical, engineering, environmental and land data concerning the Assets or the Purchaser, as applicable, which is either non-public, confidential, or proprietary in nature (referred to hereinafter as the “Confidential Information”). As used herein, the term “Receiving Party” refers to the Party receiving Confidenti