
                       COTTON VALLEY RESOURCES CORPORATION
                          8350 North Central Expressway
                                   Suite M2030
                               Dallas, Texas 75206

              NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS

NOTICE IS HEREBY  GIVEN THAT an Annual and Special  Meeting of  Shareholders  of
COTTON VALLEY  RESOURCES  CORPORATION  (the  "Corporation")  will be held at the
offices  of the  Corporation  at 8350 North  Central  Expressway,  Suite  M2030,
Dallas,  Texas 75206 on Tuesday,  the 10th day of December,  1996 at the hour of
10:00 o'clock in the forenoon (Toronto time), for the following purposes:

(a)  To receive the report to shareholders and financial statements for the year
     ended June 30, 1996 together with the Report of the Auditors thereon;

(b)  To elect five (5) directors for the ensuing year;

(c)  To appoint auditors and authorize the directors to fix their remuneration;

(d)  To consider and, if deemed advisable,  to pass with or without variation, a
     resolution to approve a financing of between US$7,500,000 and US$20,000,000
     through  the  issuance  of a minimum  of  1,250,000  units and a maximum of
     3,333,333 units,  each unit to consist of 1 Series A Convertible  Preferred
     Share  and 1  Redeemable  Common  Share  Purchase  Warrant.  A copy  of the
     resolution  concerning the proposed public financing is annexed as Schedule
     "A" to the Information Circular;

(e)  To consider and, if deemed  advisable,  to pass with or without variation a
     special resolution  authorizing the continuance of the Corporation from the
     Business Corporations Act (Ontario) (the "OBCA") to the jurisdiction of the
     Yukon  Territory and  authorizing the Corporation to apply to the Registrar
     of Corporations  of the Yukon Territory under the Business  Corporation Act
     (Yukon)  (the  "YBCA"),   for  Articles  of  Continuance,   continuing  the
     Corporation   as  if  it  had  been   incorporated   under  the  YBCA  (the
     "Continuance") in the form annexed as Schedule "B";

(f)  To  transact  such other  business as  properly  may be brought  before the
     Meeting or any adjournment or adjournments thereof,

all as described in the Management Information Circular accompanying this Notice

Take notice that pursuant to the OBCA  shareholders have a right to dissent with
regard to the special  resolution  to continue  the  Corporation  into the Yukon
Territory.  Please see the information  entitled "Dissent Rights" with regard to
the  process in order to provide  notice of  dissent  to the  Corporation.  As a
result of providing a notice of dissent  according to the OBCA, the  Corporation
will be required  to purchase  all your shares in respect of which the notice of
dissent was given,  provided that the  procedure  contained in the OBCA is fully
completed.


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                                                           - 2 -
Shareholders  who are unable to attend the  Meeting in person are  requested  to
sign  and  return  the  enclosed  form of proxy to the  Corporation  c/o  Equity
Transfer  Services Inc., 120 Adelaide Street West, Suite 800,  Toronto,  Ontario
M5H 3V1.

A copy of the Financial Statements,  the Report of the Auditors and a Management
Information  Circular accompany this Notice, all of which have been sent to each
director, each shareholder entitled to notice of the meeting and to the auditors
of the Corporation.

          DATED at Toronto, Ontario this 5th day of November, 1996.

                                            BY ORDER OF THE BOARD





                                            EUGENE A. SOLTERO
                                            Chief Executive Officer


NOTES:

1.  As  provided  in  the  Business  Corporations  Act  (Ontario),  shareholders
registered on the books of the  Corporation at the close of business on November
4, 1996 are entitled to notice of the meeting.

2.  Shareholders  registered  on the  books of the  Corporation  at the close of
business on November 4, 1996 are entitled to vote at the meeting.

3. The  directors  have fixed the hour of 4:00 p.m. in the afternoon on the last
business day preceding the day of the meeting or any adjournment  thereof before
which time the  instrument  of proxy to be used at the meeting must be deposited
with the  Corporation,  c/o Equity  Transfer  Services Inc., 120 Adelaide Street
West,  Suite  800,  Toronto,  Ontario  M5H  3V1,  provided  that a proxy  may be
delivered  to the  Chairman  of the  meeting  on the day of the  meeting  or any
adjournment thereof prior to the time for voting.

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