Transaction Proposal and Exclusivity Agreement dated September 26, 2008 between Ballyliffin Capital Corp., Fox Energy Exploration Limited, and Fox Petroleum Inc

Price and Structure of Transaction

Definitive Agreements

Fox UK having prepared and provided audited financial statements and reports compliant with National Instrument 51-101 respecting Standards of Disclosure for Oil and Gas Activities;

receipt by the parties of all required third party approvals;

the parties having used their good faith efforts to prepare all necessary disclosure and filing documentation in respect of the Transaction and receipt by the parties of all regulatory approvals (including relevant stock exchanges);

required approval by the stakeholders of BLL, Fox UK and Fox US;

approval by the board of directors of BLL, Fox UK and Fox US;

as for the Transaction, completion by Fox UK and Fox US of a satisfactory due diligence on BLL pursuant to paragraph 8 of this Letter Agreement;

as for the Transaction, completion by BLL of a satisfactory due diligence on Fox UK and Fox US pursuant to paragraph 8 of this Letter Agreement; and

if required by the TSX Venture Exchange, a qualified Sponsor (as defined under the TSX Venture Exchange Manual) shall accept to sponsor the Transaction and shall file with the TSX Venture Exchange at its entire satisfaction a Sponsor Report (as defined under the TSX Venture Exchange Manual).

Other Matters respecting the Transaction and the Resulting Issuer

Subsequent Merger of Fox Canada and Fox US

Business Activities

shall conduct its business only in the usual and ordinary course of business, consistent with past practices and it shall use all commercially reasonable efforts to maintain and preserve its business, assets and advantageous business relationships;

shall not (i) amend its articles or by-laws; (ii) declare, set aside or pay any dividend or make any other distribution or payment (whether in cash, shares or property) in respect of its outstanding shares; (iii) issue or agree to issue any shares, or securities convertible into or exchangeable or exercisable for, or otherwise evidencing a right to acquire, shares, other than the issuance of shares or securities pursuant to the Financing or the exercise of currently outstanding employee stock options; (iv) redeem, purchase or otherwise acquire any of its outstanding shares or other securities; (v) split, combine or reclassify any of its shares; (vi) adopt a plan of liquidation or resolutions providing for its liquidation, dissolution, merger, consolidation or reorganization; or (vii) enter into or modify any contract, agreement, commitment or arrangement with respect to any of the foregoing;

shall not, except as previously disclosed or contemplated by this Letter Agreement, or without prior consultation with and the consent of the other party, such consent not to be unreasonably withheld, directly or indirectly (i) sell, pledge, dispose of or encumber any assets (other than in the ordinary course of business) having an individual value in excess of $100,000; (ii) expend or commit to expend more than $50,000 individually or $200,000 in the aggregate with respect of any capital expenditures (other than in the ordinary course of business); (iii) expend or commit to expend any amounts with respect to any operating expenses (other than in the ordinary course of business); (iv) acquire (by merger, amalgamation, consolidation or acquisition of shares or assets) any corporation, partnership or other business organization or division thereof, or make any investment therein either by purchase of shares or securities, contributions of capital or property transfer; (v) acquire any assets with an acquisition cost in excess of (A) $50,000 individually or (B) $200,000 in the aggregate (other than in the ordinary course of business); (vi) incur any indebtedness for borrowed money in excess of existing credit facilities, or any other material liability or obligation or issue any debt securities or assume, guarantee, endorse or otherwise become responsible for, the obligations of any other individual or entity, or make any loans or advances, other than in respect of fees payable to legal, financial and other advisors in the ordinary course of business or in respect of the Transaction; (vii) authorize any release or relinquishment of any material contract right (other than in the ordinary course of business); (viii) waive, release, grant or transfer any material rights of value or modify or change in any material respect any existing material license, lease, contract, production sharing agreement, government land concession or other material document (other than in the ordinary course of business); (ix) enter into or terminate any hedges, swaps or other financial instruments or like transactions (other than in the ordinary course of business); or

(x) authorize any of the foregoing, or enter into or modify any contract, agreement, commitment or arrangement to do any of the foregoing;

except as set forth in Schedule B attached hereto, shall not make any payment to any employee, officer or director outside of their ordinary and usual compensation for services provided;

except as set forth in Schedule B attached hereto, shall not grant any officer, director or employee an increase in compensation in any form, grant any general salary increase, 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 (other than to permit accelerated vesting of currently outstanding stock options), or make any loan to any officer, director or any other party not at arm’s length;

except as set forth in Schedule B attached hereto, shall not adopt or amend or make any contribution to any bonus, cost plus employee benefit plan, profit sharing, option, deferred compensation, insurance, incentive compensation, other compensation or other similar plan, agreement, trust, fund or arrangements for the benefit of employees, except as is necessary to comply with the law or with respect to existing provisions of any such plans, programs, arrangements or agreements;

shall use its commercially reasonable efforts to maintain in force its current insurance policies and will pay all premiums in respect of such insurance policies that become due after the date hereof; and

shall not take any action, refrain from taking any action, permit any action to be taken or not taken, inconsistent with this Letter Agreement, which might directly or indirectly interfere or affect the consummation of the Transaction and the Financing.

Non-Solicitation

shall immediately cease and cause to be terminated any existing discussions or negotiations or other proceedings initiated prior to the date hereof by it, or its officers, directors, employees, financial advisors, representatives and agents (“Representatives”) or others with respect to all Take-over Proposals (as defined below);

shall not solicit or cause or facilitate anyone else to solicit any Take-over Proposal;

shall not provide information concerning its securities, assets or business to anyone for or in furtherance of anything mentioned in subparagraphs 6(a) or 6(b);

shall not release any person from any confidentiality or standstill agreement to which it and such person are parties or amend any such agreement; and

shall not, and shall not authorize or permit any of its Representatives to, directly or indirectly, solicit, initiate or encourage (including by way of furnishing information) any inquiries or the making of any proposal that constitutes or may reasonably be expected to lead to a Take-over Proposal from any person, or engage in any discussion, negotiations or inquiries relating thereto or accept any Take-over Proposal.

engage in discussions or negotiations with any person who (without any solicitation, initiation or encouragement, directly or indirectly, by BLL, Fox UK or Fox US, as the case may be, or its Representatives) seeks to initiate such discussions or negotiations and may furnish such third person information concerning it and its business, properties and assets that has previously been provided to the other party, provided that:

the other person has first made a bona fide written Take-over Proposal that the board of directors has determined in good faith would, if consummated in accordance with its terms, likely result in a transaction that is more favourable from a financial point of view to its shareholders (solely in their capacity of shareholders) than the Transaction and the Financing (a “Superior Proposal”) after taking into account the advice of a financial advisor and after taking into account any other relevant factors permitted by applicable law (including the likelihood of obtaining financing and

prior to furnishing such information to or entering into discussions or negotiations with such person or entity, and in any event, as soon as reasonably practicable, it provides notice orally and in writing to the other party hereto specifying that it is furnishing information to or entering into discussions or negotiations with such person or entity in respect to a Superior Proposal, receives from such person or entity an executed confidentiality agreement having confidentiality and standstill terms substantially similar to those contained herein and provides such other party hereto with a copy of such Superior Proposal and any amendments thereto and confirms in writing the determination of its board of directors that the Take-over Proposal, if completed, would constitute a Superior Proposal;

it provides notice to the other party at such time as it or such person or entity terminates any such discussions or negotiations; and

as soon as reasonably practicable, it provides or makes available to the other party any information provided to any such person or entity whether or not previously made available to such other party;

accept, recommend, approve or implement a Superior Proposal from a third person, but only (in the case of this subparagraph 6(b)) if prior to such acceptance, recommendation, approval or implementation, its board of directors shall have concluded in good faith, after receiving the advice of outside counsel, that the taking of such action is necessary for the board of directors in discharge of its fiduciary duties under applicable law and it concurrently terminates this Letter Agreement pursuant to subparagraph 12(b).

Shareholders’ Meetings

Due Diligence

permit the legal and professional representatives and agents of the other party full access to its books, records and documents provided that the disclosing party is satisfied, acting reasonably, that the confidentiality of the subject matter of the disclosure can be maintained in accordance with the confidentiality provisions contained herein; and

endeavour to include in the information furnished to the other party or obtained by the other party in the course of the aforesaid investigations, all information which would reasonably be considered to be relevant for the purposes of the other party’s investigation and not knowingly withhold any information which would make anything contained in the information delivered erroneous or misleading.

Confidentiality

Each party hereto recognizes that it is essential to the success of each of the other parties hereto that their business and affairs be kept in the strictest confidence. The party receiving information (the “Receiving Party”) from one of the other parties (the “Disclosing Party”) shall keep all information pertaining to or concerning the Disclosing Party (other than as hereinafter provided) in the strictest confidence and shall not utilize or make available any such information directly or indirectly in connection with any business or activity in which the Receiving Party is or proposes to be involved, and shall not disclose any of that information to any person other than:

as required by courts of competent jurisdiction, stock exchange rules or policies of or undertakings given to governmental entities having jurisdiction;

as required by law; or

to a governmental entity to which the disclosure is required by law and where there is no reasonable means to avoid that disclosure.

The standard of care for protecting confidential information under paragraph 9(a) shall be that degree of reasonable care which the Receiving Party would use to prevent disclosure, publication or dissemination of the Receiving Party’s own proprietary or confidential information,

The Receiving Party shall not be obligated to keep in confidence nor shall it incur any liability for disclosure of information to a third party (the “Recipient”) of the nature aforesaid which:

has become known or available to the Recipient in carrying on its business in the ordinary course without a breach of this Letter Agreement, or as required by law;

was permitted to be disclosed by the Disclosing Party;

has been public or is otherwise within the public domain at the time of its disclosure to the Recipient;

comes into the public domain without any breach of this Letter Agreement; or

becomes known or available to the Recipient other than as a result of the activities of the Receiving Party but without any breach of this Letter Agreement.

In the event of a breach of any covenant contained in this section, the Disclosing Party shall be entitled to an injunction restricting that breach or otherwise specifically to enforce any of those covenants in addition to any other remedies

provided by law. Any remedy expressly set forth in this Letter Agreement shall be in addition to and not exclusive of or dependant on the exercise of any other remedy available to the Disclosing Party at law or otherwise.

The Receiving Party shall be responsible for any breach by it, its representatives, agents and advisors of the covenants and obligations provided in this section of this Letter Agreement.

Material Changes

Announcements

Termination

by written agreement of both parties; or

by either BLL, on the one hand, or Fox UK and Fox US, on the other hand, advising that it is terminating this Letter Agreement in accordance with paragraph 6; or

by either BLL, on the one hand, or Fox UK and Fox US, on the other hand, advising that it is terminating this Letter Agreement if the Definitive Agreements have not been entered into within 30 days following the Retention Date;

by either BLL, on the one hand, or Fox UK and Fox US, on the other hand, in the event that the Financing is not completed as contemplated herein by November 30, 2008, unless the parties hereto agree in writing to extending the closing date of Financing; or

Fees and Expenses

Finders Fees

Enforceability

Currency

Applicable Law

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