Exhibit
10.15


EXECUTION
COPY


SERIES A NOTE PURCHASE AGREEMENT


THIS SERIES A NOTE PURCHASE AGREEMENT (this “Agreement”) is made and entered into as
of this 19th day of January, 2007 (the “Execution
Date”) by and among Storm Cat Energy Corporation, a company
incorporated under the laws of the Province of British Columbia, Canada (the “Company”), and each of the purchasers
set forth on Schedule I
affixed hereto (each a “Purchaser”
and collectively the “Purchasers”).


Recitals:


A.            The Company is engaged in the exploration and development of large
unconventional gas reserves from fractured shales, coal beds and tight sand
formations and is seeking capital to fund its drilling program and repay
its existing mezzanine debt;


B.            The Company desires to sell and
issue to each Purchaser, and each Purchaser desires to purchase from the
Company, upon the terms and conditions stated in this Agreement, the Series A
Subordinated Convertible Notes due March 31, 2012 (the “Notes”)
in the aggregate principal amount of US$18,535,000, substantially in the form
attached hereto as Exhibit A
(the “Private Placement”);


C.            The Company has engaged Banc of
America Securities LLC, Coker & Palmer, Inc. and First Albany Capital Inc.
as its placement agents (the “Placement Agents”)
for the Private Placement on a “best efforts” basis;


D.            The Notes shall be convertible into
the Company’s common shares, without par value per share (the “Common Shares”) and contemporaneous
with the purchase and sale of the Notes, the parties hereto will enter into a
Convertible Notes Registration Rights Agreement, substantially in the form
attached hereto as Exhibit B
(the “Registration Rights Agreement”),
pursuant to which, among other things, the Company will agree to provide
certain registration rights with respect to the Common Shares issuable upon
conversion of the Notes under the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder (the “1933 Act”), and applicable state
securities laws;


E.             Concurrently with this Private
Placement, the Company intends to commence an offering of Series B Subordinated
Convertible Notes due March 31, 2012 (the “Series B Notes”) in the aggregate principal amount of
US$31,660,000 (the “Series B Note Offering”);


F.             The Company and the Purchasers are executing
and delivering this Agreement in reliance upon the exemption from securities
registration afforded by the provisions of Regulation D (“Regulation D”), as promulgated by the
U.S. Securities and Exchange Commission (the “SEC”) under the 1933 Act, and in reliance on the exemption
from Canadian prospectus and registration requirements contained in Canadian
National Instrument 45-106 as adopted by the British Columbia Securities
Commission, the Alberta Securities Commission and the Ontario Securities Commission
(“NI 45-106”); and


G.            The parties desire to set forth the
terms and conditions of and to provide for the issuance by the Company of the
Notes as described herein.













NOW,
THEREFORE, in consideration of the mutual promises made
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:


1.             Definitions.  In addition to those terms defined above and
elsewhere in this Agreement, for the purposes of this Agreement, the following
terms shall have the meanings set forth in this Section 1:


“Affiliate”
means, with respect to any Person, any other Person which directly or
indirectly Controls, is Controlled by, or is under common Control with, such
Person.


“Allocation Percentage”
means a fraction, the numerator of which is the aggregate principal amount of
Notes issued to a Purchaser on the Closing Date and the denominator of which is
the aggregate principal amount of all Notes issued on the Closing Date.


“AMEX”
means the American Stock Exchange.


“Approved Shares
Plan” means any employee benefit plan currently existing or
hereinafter created which has been approved by the Board of Directors of the
Company, pursuant to which the Company’s securities may be issued to any employee,
consultant, officer or director for services provided to the Company.


“Bloomberg”
means Bloomberg Financial Markets.


“Business Day”
means a day, other than a Saturday or Sunday, on which banks in New York City
are open for the general transaction of business.


“Capital Shares”
means: (1)  in the case of a corporation, corporate stock; (2) in the case
of an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of corporate
stock;  (3) in the case of a partnership or limited liability company,
partnership interests (whether general or limited) or membership interests; and
(4) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.


“Change of
Control” means any Fundamental Transaction other than (i) any
reorganization, recapitalization or reclassification of the Common Shares in
which holders of the Company’s voting power immediately prior to such
reorganization, recapitalization or reclassification continue after such
reorganization, recapitalization or reclassification to hold publicly traded
securities and, directly or indirectly, the voting power of the surviving entity
or entities necessary to elect a majority of the members of the board of
directors (or their equivalent if other than a corporation) of such entity or
entities, or (ii) pursuant to a migratory merger effected solely for the
purpose of changing the jurisdiction of incorporation of the Company.


“Change of
Control Prepayment Premium” means (i) for Change of Control
Notice delivered or required to be delivered in connection with a Change of
Control prior to the first (1st) anniversary of the Closing Date, 115%, (ii)
for Change of Control Notice delivered or required to be delivered in
connection with a Change of Control on or following the first (1st) anniversary
of the Closing Date but prior to the second (2nd) anniversary of the Closing
Date,



 2
 









112%, and (iii) for any Change of Control Notice
delivered or required to be delivered in connection with a Change of Control on
or following the second (2nd) anniversary of the Closing Date, 110%.


“Closing Sale
Price” means, for any security as of any date, the last closing
trade price for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing trade price then the last trade price
of such security prior to 4:00:00 p.m., New York Time, as reported by
Bloomberg, or, if the Principal Market is not the principal securities exchange
or trading market for such security the last trade price of such security on
the principal securities exchange or trading market where such security is
listed or traded as reported by Bloomberg, or if the foregoing do not apply,
the last trade price of such security in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or, if no
last trade price is reported for such security by Bloomberg, the average of the
ask prices of any market makers for such security as reported in the “pink
sheets” by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.).  If the Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Sale Price of such
security on such date shall be the fair market value as mutually determined by
the Company and the Requisite Holders.  If the Company and the Requisite
Holders are unable to agree upon the fair market value of such security, then
such dispute shall be resolved pursuant to Section 4.1(b)(iii). 
All such determinations to be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during the
applicable calculation period.


“Common Shares”
has the meaning set forth in the Recitals, and also includes any securities
into which the Common Shares may be reclassified, which in all cases shall be
prescribed securities under Regulation 6208 of the Income Tax
Act (Canada).


“Company’s
Knowledge” means the actual knowledge of the officers of the
Company, after reasonable due inquiry and investigation.


“Confidential
Information” means trade secrets, confidential information and
know-how (including but not limited to ideas, formulae, compositions,
processes, procedures and techniques, research and development information,
computer program code, performance specifications, support documentation,
drawings, specifications, designs, business and marketing plans, and customer
and supplier lists and related information).


“Control”
means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.


“Conversion
Amount” means the sum of (1) accrued interest since the last
payment of interest and Additional Amounts, if any, and (2) the aggregate
principal amount of the Note being converted or redeemed.


“Conversion Price”
means US$1.17, subject to adjustment as provided herein.


“Convertible
Securities” means any stock or securities (other than Options)
directly or indirectly convertible into or exchangeable or exercisable for Common
Shares.



 3
 









 


“Cumulative Dividend
Adjustment” means, for each Note, as of any date of
determination, the sum of all Dividend Adjustments for such Note made in
respect of all dividends or distributions declared or paid on the Common Shares
(other than a dividend or distribution in Common Shares) prior to such date of
determination.


“Dividend Adjustment”
means, for each Note, an amount equal to the quotient of (x) the aggregate
amount of any dividend or distribution (other than a dividend or distribution
in Common Shares) that the Purchaser of such Note would have received had such
Purchaser converted the entire amount of such Note into Common Shares at the
Conversion Rate in effect immediately prior to the record date for such
dividend or distribution, divided by (y) the average of the Weighted Average
Price of the Common Shares for the five consecutive Trading Days ended on such
record date.


“Eligible Market”
means the TSX, New York Stock Exchange, The NASDAQ Global Select Market, The
NASDAQ Global Market or The NASDAQ Capital Market.


“Equity
Conditions” means:  (i) on each day during the period
beginning six (6) months prior to the applicable date of determination and
ending on and including the applicable date of determination (the “Equity Conditions Measuring Period”),
either (x) the Registration Statement (as defined in the Registration
Rights Agreement) filed pursuant to the Registration Rights Agreement shall be
effective and available for the resale of all of the Registrable Securities in
accordance with the terms of the Registration Rights Agreement or (y) all
Common Shares issuable upon conversion of the Notes shall be eligible for sale
without restriction and without the need for registration under any applicable
federal or state securities laws; (ii) on each day during the Equity Conditions
Measuring Period, the Common Shares are designated for quotation on a Principal
Market or any applicable Eligible Market and shall not have been suspended from
trading on such exchange or market (other than suspensions of not more than
three (3) days and occurring prior to the applicable date of determination due
to business announcements by the Company) nor shall proceedings for such
delisting or suspension be pending or threatened in writing by such exchange or
market nor shall such proceeding have been commenced as a result of falling
below the minimum listing maintenance requirements of such exchange or market;
(iii) on each day during the Equity Conditions Measuring Period, the Company
shall have delivered Common Shares upon conversion of the Notes to the
Purchasers on a timely basis as set forth in Section 4.1(b)(ii) hereof,
respectively; (iv) any applicable Common Shares to be issued in connection with
the event requiring determination may be issued in full without violating Section
4.5 hereof or the rules or regulations of the exchange or market upon which
the Company’s Common Shares are then listed or quoted and from and after the
Shareholder Meeting Deadline, the Company shall have obtained the Shareholder
Approval; (v) during the Equity Conditions Measuring Period, the Company shall
not have failed to timely make any payments within five (5) Business Days of
when such payment is due pursuant to any Note Document; (vi) during the Equity
Conditions Measuring Period, there shall not have occurred either (A) the
public announcement of a pending, proposed or intended Fundamental Transaction
which has not been abandoned, terminated or consummated or (B) a Event of
Default or an event that with the passage of time or giving of notice would
constitute a Event of Default; (vii) the Company shall have no knowledge of any
fact that would cause (x) the Registration Statements required pursuant to the
Registration Rights Agreement not to be effective and available for the resale
of at least all of the Registrable Securities in accordance



 4
 









with the terms of the Registration Rights Agreement or
(y) any Common Shares issuable upon conversion of the Notes not to be eligible
for sale without restriction pursuant to Rule 144(k) and any applicable state
or Canadian provincial securities laws; and (viii) the Company otherwise shall
have been in material compliance with and shall not have materially breached
any provision, covenant, representation or warranty of any Note Document.


“Equity Interests”
means Capital Shares and all warrants, options or other rights to acquire
Capital Shares.


“Excluded
Securities” means any Common Shares issued or issuable or deemed
to be issued in accordance with Section 4.4 hereof by the Company: (i)
in connection with any Approved Shares Plan; (ii) upon conversion of the
Notes; (iii) upon conversion of the Series B Notes; (iv) upon conversion,
exercise or exchange of any Options or Convertible Securities which are
outstanding on the day immediately preceding the Execution Date, provided that
such issuance of Common Shares upon exercise of such Options or Convertible
Securities is made pursuant to the terms of such Options or Convertible
Securities in effect on the date immediately preceding the Execution Date and
such Options or Convertible Securities are not amended, modified or changed on
or after the Execution Date; and (v) in connection with any stock split, stock
dividend, recapitalization or similar transaction by the Company for which
adjustment is made pursuant to Section 4.4(b).


“Fundamental
Transaction” means that the Company shall (or in the case of
clause (v) any “person” or “group” (as these terms are used for purposes of
Sections 13(d) and 14(d) of the 1934 Act)), directly or indirectly, in one or
more related transactions, (i) sell, assign, transfer, convey or otherwise
dispose of all or substantially all of the properties or assets of the Company
to another Person, or (ii) allow another Person or Persons (other than a Person
or Persons already holding more than 50% of the aggregate ordinary voting power
represented by issued and outstanding common shares) to make a purchase, tender
or exchange offer that is accepted by the holders of more than the 50% of the
outstanding shares of Voting Shares (not including any shares of Voting Shares
held by the Person or Persons making or party to, or associated or Affiliated
with the Person or Persons making or party to, such purchase, tender or
exchange offer), or (iii) consummate a share purchase agreement or other
business combination (including, without limitation, a merger, consolidation,
reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than the 50% of the
outstanding shares of Voting Shares (not including any shares of Voting Shares
held by the other Person or other Persons making or party to, or associated or
Affiliated with the other Persons making or party to, such stock purchase
agreement or other business combination), or (iv) reorganize, recapitalize
or reclassify its Common Shares, or (v) is or shall become the “beneficial
owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly,
of 50% of the aggregate ordinary voting power represented by issued and outstanding
Common Shares.


“Indebtedness”
means, without duplication (i) all indebtedness for borrowed money, (ii) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services (including, without limitation, “capital leases” in
accordance with generally accepted accounting principles) (other than trade
payables entered into in the ordinary course of business), (iii) all
reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (iv) all obligations evidenced by notes,
bonds, debentures or



 5
 









similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets or
businesses, (v) all indebtedness created or arising under any conditional sale
or other title retention agreement, or incurred as financing, in either case
with respect to any property or assets acquired with the proceeds of such
indebtedness (even though the rights and remedies of the seller or bank under such
agreement in the event of default are limited to repossession or sale of such
property), (vi) all monetary obligations under any leasing or similar
arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a
capital lease, (vii) all indebtedness referred to in clauses (i) through (vi)
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any mortgage, lien, pledge,
charge, security interest or other encumbrance upon or in any property or
assets (including accounts and contract rights) owned by any Person, even
though the Person which owns such assets or property has not assumed or become
liable for the payment of such indebtedness, and (viii) all contingent
obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (i) through (vii) above.


“Intellectual
Property” means all of the following: (i) patents and patent
applications, patent disclosures and inventions (whether or not patentable and
whether or not reduced to practice); (ii) trademarks, service marks, trade
dress, trade names, corporate names, logos, slogans and Internet domain names,
together with all goodwill associated with each of the foregoing; (iii)
copyrights; (iv) registrations, applications and renewals for any of the
foregoing; (v) Confidential Information; and (vi) computer software (including,
but not limited to, data, data bases and documentation).


“Material Adverse
Effect” means a material adverse effect on (i) the assets,
liabilities, results of operations, condition (financial or otherwise), or
business of the Company or any Subsidiary; or (ii) the ability of the Company
to issue and sell the securities contemplated hereby and to perform its
obligations under the Note Documents.


“Material
Contract” means any contract of the Company or any Subsidiary
that was actually filed, or required to be filed, (i) as an exhibit to the SEC
Filings pursuant to Item 601(b)(4) or Item 601(b)(10) of Regulation S-K; or
(ii) with the securities regulatory authorities in the provinces and
territories of Canada through the System for Electronic Document Analysis and
Retrieval (“SEDAR”) under
applicable Canadian securities laws.


“Maturity Date”
means, with respect to each Note, March 31, 2012.


“Note”
or “Notes” has the meaning set forth in
the Recitals, and also includes any securities into which the Notes may be
reclassified.


“Note Documents”
means this Agreement, the Notes, the Subordination Agreement and the
Registration Rights Agreement.


“Options”
means any rights, warrants or options to subscribe for or purchase Common
Shares or Convertible Securities.


“Person”
means an individual, corporation, partnership, limited liability company,
trust, business trust, association, joint stock company, joint venture, sole



 6
 









proprietorship, unincorporated organization,
governmental authority or any other form of entity not specifically listed
herein.


“Placement Agents Agreement” means that certain Letter
Agreement, dated as of November 17, 2006, by and among the Company, Banc of
America Securities LLC, and Coker & Palmer, Inc., as amended on November
22, 2006, to join First Albany Capital Inc. and to amend the terms of
compensation to be paid to the Placement Agents.


“Principal Market”
means AMEX, or if the Common Shares are not traded on the Principal Market, an
Eligible Market.


“Redemption Date”
means any Event of Default Redemption Date and any Change of Control Redemption
Date.


“Requisite Holders”  means, with
respect to any consent, vote or other action, (i) prior to the Closing Date (as
defined in Section 2.2), the Purchasers who have subscribed to purchase
a majority of the aggregate principal amount of the Notes; and (ii) following
the Closing Date, the Purchasers holding a majority of the aggregate principal
amount of the Notes then outstanding.


“SEC
Filings” has the meaning set forth in Section 5.7.


“SEDAR
Filings” has the meaning set forth in Section 5.7.


“Senior Debt”
means the principal of (and premium, if any), interest on, and all fees and
other amounts (including, without limitation, any out-of-pocket costs,
enforcement expenses (including out-of-pocket legal fees and disbursements),
collateral protection expenses and other reimbursement or indemnity obligations
relating thereto) whether now or hereafter outstanding and payable by Company
and/or its Subsidiaries under or in connection with the (i) Credit Agreement,
dated as of July 28, 2006, as amended by the First Amendment to Credit
Agreement dated as of August 29, 2006, among the Company, Storm Cat Energy
(USA) Corporation, a Colorado corporation, various financial institutions party
thereto as lenders and JPMorgan Chase Bank, N.A., as Global Administrative
Agent, (ii) Credit Agreement, dated as of July 28, 2006, among the Company,
various financial institutions party thereto as lenders, JPMorgan Chase Bank,
N.A., Toronto Branch, as Canadian Administrative Agent, and JPMorgan Chase
Bank, N.A., as Global Administrative Agent, as the same may be further amended,
supplemented, restated, refinanced, or otherwise modified from time to time;
and (iii) any other Indebtedness ranking senior in right of payment to the
Notes incurred in the future by the Company.


“Series B Note
Purchase Agreement” means that certain Series B Note Purchase
Agreement, dated as  January 19, 2007, by
and among the Company and each of the purchasers party thereto.


“Subordination
Agreement” means that certain Subordination and Intercreditor Agreement,
dated as of the Closing Date, among the Company, Storm Cat Energy (USA)
Corporation, a Colorado corporation, JPMorgan Chase Bank, N.A., as Global
Administrative



 7
 









Agent, JPMorgan Chase Bank, N.A., Toronto Branch, as
Canadian Administrative Agent, and any other Person thereto.


“Subsidiary” of any
Person means another Person, an amount of the voting securities of which, other
voting ownership or voting partnership interests of which is sufficient to
elect at least a majority of its Board of Directors or other governing body
(or, if there are no such voting interests, 50% or more of the equity interests
of which), is owned directly or indirectly by such first Person.


“Successor Entity”
means the Person, which may be the Company, formed by, resulting from or
surviving any Fundamental Transaction or the Person with which such Fundamental
Transaction shall have been made.


“Tax”
means any tax, levy, impost, duty or other charge or withholding of a similar
nature (including any related penalty or interest).


“Tax Deduction”
means a deduction or withholding for or on account of Tax from a payment under
the Notes.


“TSX”
means the Toronto Stock Exchange.


“Trading Day”
means any day on which the Common Shares are traded on the Principal Market,
or, if the Principal Market is not the principal trading market for the Common
Shares, then on the principal securities exchange or securities market on which
the Common Shares are then traded; provided that “Trading Day” shall not
include any day on which the Common Shares are scheduled to trade on such
exchange or market for less than 4.5 hours or any day that the Common Shares
are suspended from trading during the final hour of trading on such exchange or
market (or if such exchange or market does not designate in advance the closing
time of trading on such exchange or market, then during the hour ending at
4:00:00 p.m., New York Time).


“Voting Shares”
of a Person means Capital Shares of such Person of the class or classes
pursuant to which the holders thereof have the general voting power to elect,
or the general power to appoint, at least a majority of the board of directors,
managers or trustees of such Person (irrespective of whether or not at the time
Capital Shares of any other class or classes shall have or might have voting
power by reason of the happening of any contingency).


“Weighted Average
Price” means, for any security as of any date, the dollar
volume-weighted average price for such security on the Principal Market during
the period beginning at 9:30:01 a.m., New York City Time, and ending at 4:00:00
p.m., New York City Time, as reported by Bloomberg through its “Volume at Price”
function or, if the foregoing does not apply, the dollar volume-weighted
average price of such security in the over-the-counter market on the electronic
bulletin board for such security during the period beginning at
9:30:01 a.m., New York City Time, and ending at 4:00:00 p.m., New York
City Time, as reported by Bloomberg, or, if no dollar volume-weighted average
price is reported for such security by Bloomberg for such hours, the average of
the highest closing bid price and the lowest closing ask price of any of the
market makers for such security as reported in the “pink sheets” by Pink Sheets
LLC (formerly the National Quotation Bureau, Inc.).  If the Weighted
Average



 8
 









Price cannot be calculated for such security on such
date on any of the foregoing bases, the Weighted Average Price of such security
on such date shall be the fair market value as mutually determined by the
Company and the Requisite Holders.  If the Company and the Requisite
Holders are unable to agree upon the fair market value of the Common Shares,
then such dispute shall be resolved pursuant to Section 4.1(b)(iii)
below with the term “Weighted Average Price” being substituted for the term “Closing
Sale Price.” All such determinations shall be appropriately adjusted for any
share dividend, share split or other similar transaction during such period.


“1934 Act”
means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.


2.             Purchase
and Sale of the Notes; Closing.


2.1           Purchase and Sale of the Notes.  The Company has duly authorized US$18,535,000
in aggregate principal amount of the Notes, for issuance to the Purchasers on
the terms and subject to the conditions set forth in this Agreement, and will
be in substantially the form of Exhibit A
attached hereto, with such changes thereto, if any, as may be approved by the
Requisite Holders.  Subject to the terms
and conditions of this Agreement, on the Closing Date (as defined below), each
of the Purchasers shall severally, and not jointly, purchase, and the Company
shall sell and issue to the Purchasers, the Notes in the respective amounts set
forth opposite the Purchasers’ names on Schedule
I attached hereto in exchange for the cash consideration set
forth opposite their respective names on Schedule
I.


2.2           Closing.


(a)           The closing (the “Closing”) of the purchase and sale of
the Notes to the Purchasers shall take place at the offices of King &
Spalding LLP, 1185 Avenue of the Americas, New York, New York 10036, or at such
other location and on such other date as the Company and the Requisite Holders
shall mutually agree. The date and time of the Closing (the “Closing Date”) shall take place on
10:00 AM, Eastern Standard Time, one (1) Business day following the
confirmation that the conditions to Closing specified herein have been
satisfied or duly waived by the Requisite Holders or the Company, as applicable
(or such other time and date mutually agreed to by the Company and the
Requisite Holders).


(b)           On the Closing Date, each Purchaser
shall (i) pay by wire transfer of immediately available funds (U.S. dollars) an
amount representing such Purchaser’s “Aggregate
Purchase Price”, as set forth on such Purchaser’s signature page
and opposite such Purchaser’s name on Schedule
I attached hereto, in accordance with the Company written wire
instructions set forth on Schedule II
attached hereto; and (ii) deliver to the Placement Agents and the Company a
duly executed counterpart to the Registration Rights Agreement and
Subordination Agreement.


(c)           On the Closing Date, (i) the Company
shall deliver to the King & Spalding LLP, in trust, the Notes, registered
in such name or names and such denomination or denominations as the Purchasers
may designate, with instructions that such Notes are to be held for release to
the Purchasers only upon payment in full of the Aggregate Purchase Price to the



 9
 









Company and (ii) the Company shall wire in immediately
available funds following receipt of the Aggregate Purchase Price (A) the Cash
Placement Agents Fee to the Placement Agents and (C) the Placement Agents
Counsel Fees to King & Spalding LLP and Osler, Hoskin & Harcourt LLP
(collectively, “Placement Agents Counsel”).


3.             Interest and Repayment.  With respect to each Note:


3.1.          Interest
on the Notes.  Interest will accrue
on the Notes from and including the issue date until such principal is paid in
full (whether at maturity or by redemption or conversion) and be payable in
arrears on each of March 31, June 30, September 30, December 31 of each year, commencing June 30, 2007, and on
the date on which such principal is repaid in full (whether at maturity or by
redemption or conversion).  The Notes
will bear interest on the outstanding principal amount thereof at a rate equal
to 9 1/4% per annum.  Each payment of
principal or interest on the Notes will be made to each Purchaser by certified
or bank cashier’s check or wire transfer of immediately available funds, at such
address or to such account as such Purchaser specifies in writing to the
Company at least five Business Days before such payment is to be made.


3.2.          Interest
after Maturity.  In the event the
Company shall fail to make any payment of the principal amount of, or interest
on, any Note when due, the Company shall pay interest on such unpaid amount,
payable from time to time on demand, from the date such amount shall have
become due to the date of payment thereof (after as well as before judgment),
accruing on a daily basis, at a per annum rate of 12%.


3.3.          Payments and Computations.  


(a)           The Company will pay all sums
becoming due on each Note for interest or principal, without the presentation
or surrender of the Note or the making of any notation thereon, except that if
a Note is paid in full (either in cash or upon conversion), following such
payment, the Note shall be surrendered to the Company at their principal office
for cancellation.


(b)           Interest on each Note shall be
calculated for the actual number of days (including the first day but excluding
the last day of any relevant period) elapsed and shall be computed on the basis
of a 360-day year of twelve 30-day months. 
Each interest rate which is calculated under this Agreement and the Note
on any basis other than the actual number of days in a calendar year (the “deemed
interest period”) is, for purposes of the Interest Act
(Canada), equivalent to a yearly rate calculated by dividing such interest rate
by the number of day in the deemed interest period, then multiplying such
result by the actual number of days in the calendar year (365 or 366).


(c)           If a payment date is not a Business
Day at a place of payment, then (notwithstanding any other provision of this
Agreement or the Notes) payment of interest, premium or principal otherwise due
on such date shall instead be made at that place on the next succeeding
Business Day and no interest shall accrue on such payment for the intervening
period.



 10
 









3.4.          Payment at
Maturity or Upon Conversion.


(a)           The outstanding principal amount of
each Note, together with any accrued interest thereon, shall be due and payable
in full in cash on the earlier of:  (i)
the Maturity Date, or (ii) such other date as the Note becomes due and payable
or purchasable pursuant to this Agreement. 
Payment of principal on the Notes will be made to each Purchaser by
certified or bank cashier’s check or wire transfer of immediately available
funds, at such address and to such account as the Purchaser shall specify in
writing to the Company at least five Business Days before such payment is to be
made.


(b)           Upon any conversion
of any Note in accordance with the terms of Section 4 hereunder, the
Conversion Amount shall be converted into a number of whole Common Shares at
the Conversion Rate (as defined below), with any fractional shares that may
result treated in the manner set forth in Section 4.1(a) of this
Agreement.


4.             Conversion of Notes.  The Notes
shall be convertible into Common Shares on the terms and conditions set forth
in this Section 4.


4.1.          Purchaser’s
Conversion Right.  Subject to the provisions of Section 4.5, at
any time or times on or after the Closing Date, any Purchaser shall be entitled
to convert the Conversion Amount into fully paid and nonassessable Common
Shares in accordance with Section 4.1(a) at the Conversion Rate (as
defined below):


(a)           Conversion. 
The number of Common Shares issuable upon conversion of each Note pursuant to
this Section 4.1 shall be determined according to the following formula
(the “Conversion Rate”):


(Conversion
Amount/Conversion Price) + the Cumulative Dividend Adjustment for that Note


No fractional
Common Shares are to be issued upon the conversion of any Note, but rather the
Company, at its option, shall either (a) round up such fraction to the nearest
whole share, or (b) pay an amount in cash equal to the product of (i) such
fraction, multiplied by (ii) the Closing Sale Price of a Common Share on the
date of the Conversion Notice (as defined below), computed to the nearest whole
cent, in lieu of issuing a fractional share.


(b)           Mechanics
of Conversion.  The conversion of Notes shall be conducted in the
following manner:


(i)            Purchaser’s
Delivery Requirements.  To convert Notes into Common Shares on any
date (a “Conversion Date”),
the Purchaser shall (A) transmit by facsimile (or otherwise deliver), for
receipt on or prior to 11:59 p.m., New York City Time, on such date, a copy of
a properly completed notice of conversion executed by the registered Purchaser
of the Notes subject to such conversion in the form attached hereto as Exhibit C (the “Conversion Notice”) to the Company and
the Company’s designated transfer agent (the “Transfer Agent”) and (B) surrender to a common carrier for
delivery to the Company as soon as practicable following such date the original
Notes being converted (or compliance with the procedures set forth in Section
10.3).



 11















(ii)           Company’s
Response.  Upon receipt by the Company of copy of the later of a
Conversion Notice and the original Note, the Company shall (I) as soon as
practicable, but in any event within two (2) Trading Days, send, via facsimile,
a confirmation of receipt of such Conversion Notice to such Purchaser and the
Transfer Agent, which confirmation shall constitute an instruction to the
Transfer Agent to process such Conversion Notice in accordance with the terms
herein and (II) on or before the third (3rd) Trading Day following the date of
receipt by the Company of the later of such Conversion Notice and the original
Note (the “Share Delivery Date”),
(A) provided the Transfer Agent is participating in the DTC Fast Automated
Securities Transfer Program and the Registration Statement (as defined in the
Registration Rights Agreement) upon which the Common Shares issuable upon
conversion of the Notes has been declared effective by the SEC, credit such
aggregate number of Common Shares to which the Purchaser shall be entitled to
the Purchaser’s or its designee’s balance account with DTC through its Deposit
Withdrawal Agent Commission system, or (B) if the Transfer Agent is not
participating in the DTC Fast Automated Securities Transfer Program, issue and
deliver to the address as specified in the Conversion Notice, a certificate,
registered in the name of the Purchaser or its designee, for the number of
Common Shares to which the Purchaser shall be entitled.  If the aggregate
principal amount of the Note that is being converted in accordance with the
Conversion Note is less than that aggregate principal amount of such Note being
converted, then the Company shall, as soon as practicable and in no event later
than three (3) Business Days after receipt of the original Note  (the “Note
Delivery Date”) and at its own expense, issue and deliver to the
Purchaser a new Note representing the aggregate principal amount of the Note
not converted.


(iii)          Dispute
Resolution.  In the case of a dispute as to the determination of the
Closing Sale Price or the arithmetic calculation of the Conversion Rate, the
Company shall instruct the Transfer Agent to issue to the Purchaser the number
of Common Shares that is not disputed and shall transmit an explanation of the
disputed determinations or arithmetic calculations to the Purchaser via
facsimile within two (2) Business Days of receipt of such Purchaser’s
Conversion Notice or other date of determination.  If such Purchaser and
the Company are unable to agree upon the determination of the Closing Sale
Price or arithmetic calculation of the Conversion Rate within two (2) Business
Days of such disputed determination or arithmetic calculation being transmitted
to the Purchaser, then the Company shall within two (2) Business Days submit
via facsimile (A) the disputed determination of the Closing Sale Price to an
independent, reputable investment bank selected by the Company and approved by
the Requisite Holders or (B) the disputed arithmetic calculation of the
Conversion Rate to the Company’s independent, outside accountant.  The
Company shall cause, at the Company’s expense, the investment bank or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the Purchasers of the results no later than two (2)
Business Days from the time it receives the disputed determinations or
calculations.  Such investment bank’s or accountant’s determination or
calculation, as the case may be, shall be binding upon all parties absent
error.


(iv)          Record
Holder.  The Person or Persons entitled to receive the Common Shares
issuable upon a conversion of Notes shall be treated for all purposes as the
record holder or holders of such Common Shares on the Conversion Date.



 12
 









(v)           Pro
Rata Conversion; Disputes.  In the event the Company receives a
Conversion Notice from more than one Purchaser for the same Conversion Date and
the Company can convert some, but not all, of such Notes, the Company shall
convert from each Purchaser electing to have Notes converted at such time a pro
rata amount of such Purchaser’s Notes submitted for conversion based on the
number of Notes submitted for conversion on such date by such Purchaser
relative to the number of Notes submitted for conversion on such date.  In
the event of a dispute as to the number of Common Shares issuable to a
Purchaser in connection with a conversion of Notes, the Company shall issue to
such Purchaser the number of Common Shares not in dispute and resolve such
dispute in accordance with Section 4.1(b)(iii).


4.2.          Conversion
at the Company’s Election.  On any date (the “Conversion Election Date”) after the
eighteen (18) month anniversary of the Closing Date, so long as (A) the Equity
Conditions shall have been satisfied or waived in writing by the applicable
Purchaser from and including the date of the Company Conversion Election Notice
(as defined below) through and including the Company Election Conversion Date
(as defined below) and (B) on any twenty (20) out of thirty (30) consecutive
Trading Days immediately preceding the date of the Company Conversion Election
Notice, the Weighted Average Price of the Common Shares exceeds 175% of the
Conversion Price (as adjusted for any stock dividend, stock split, stock
combination or other similar transaction during such period), the Company shall
have the right, in its sole discretion, to require that some or all of the
outstanding Notes be converted (the “Company
Conversion Election”) at the applicable Conversion Rate; provided,
however, that the Company may not consummate more than one (1) Company
Conversion in any thirty (30) Trading Day period. The Company shall exercise
its right to Company Conversion Election by providing each Purchaser written
notice (“Company Conversion Notice”)
by facsimile and overnight courier on the Conversion Election Date. The date on
which each of such Purchasers actually receives the Company Conversion Election
Notice is referred to herein as the “Company
Conversion Election Notice Date.”  If the Company elects to
require conversion of some, but not all, of such Notes then outstanding, the
Company shall require conversion of an amount from each Purchaser equal to the
product of (I) the total number of Notes which the Company has elected to
convert multiplied by (II) such Purchaser’s Allocation Percentage (such amount
with respect to each Purchaser of such Notes being referred to herein as its “Pro Rata Conversion Amount”). In the
event that any initial Purchaser of the Notes shall sell or otherwise transfer
any of such Purchaser’s Notes, the transferee shall be allocated a pro rata
portion of such Purchaser’s Allocation Percentage. The Company Conversion
Election Notice shall indicate (x) the aggregate principal amount of such Notes
the Company has selected for conversion, (y) the date selected by the Company
for conversion (the “Company Delivery Date”),
which date shall be not less than twenty (20) Trading Days or more than sixty
(60) Trading Days after the Company Conversion Election Notice Date, and (z)
each Purchaser’s Pro Rata Conversion Amount. Subject to the satisfaction of all
the conditions of this Section 4.2, on the Company Election Conversion
Date each Purchaser of Notes selected for conversion will be deemed to have
submitted a Conversion Notice in accordance with Section 4.1(b)(i) for a
the aggregate principal amount of Notes equal to such Purchaser’s Pro Rata
Conversion Amount. Notwithstanding the above, any Purchaser may convert such
Notes selected for conversion hereunder which shall reduce such Purchaser’s Pro
Rata Conversion Amount into Common Shares pursuant to Section 4.1 on or
prior to the date immediately preceding the Company Election Conversion Date.



 13
 









4.3.          Taxes.


(a)           Any
and all payments made by the Company hereunder, including any amounts received
on a conversion or redemption of the Notes and any amounts on account of
interest payments or deemed interest payments, must be made by it without any
Tax Deduction, unless a Tax Deduction is required by law.  If the Company is aware that it must make a Tax
Deduction (or that there is a change in the rate or the basis of a Tax
Deduction), it must notify the affected Purchasers promptly.


(b)           If
a Tax Deduction is required by law to be made by the Company as it applies on
the Closing Date and to the affected Purchaser or Purchasers according to their
legal status and domicile as at the Closing Date, then the amount of the
payment due from the Company will be increased to an amount which (after making
the Tax Deduction including any Tax Deduction applicable to additional sums
payable pursuant to this Section 4.3(b)) leaves an amount equal to the
payment which would have been due if no Tax Deduction had been required (“Additional Amount”).


(c)           If
the Company is required to make a Tax Deduction, it must make the minimum Tax
Deduction allowed by law and must make any payment required in connection with
that Tax Deduction within the time allowed by law.  As soon as practicable after making a Tax
Deduction or a payment required in connection with a Tax Deduction, the Company
must deliver to the Purchaser any official receipt or form, if any, provided by
or required by the taxing authority to whom the Tax Deduction was paid.


(d)           In
the event that the Company fails to make a required Tax Deduction or fails to
remit a Tax Deduction to the applicable taxing authority, the Company shall
indemnify and hold harmless each Purchaser for the full amount of any taxes,
interest payments and penalties assessed against such Purchaser, including the
amount of any taxes payable by such Purchaser in respect of payments received
pursuant to this Section 4.3(d).


(e)           In
addition, the Company agrees to pay in accordance with applicable law any
present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies that arise from any payment made hereunder or
in connection with the execution, delivery, registration or performance of, or
otherwise with respect to, the Notes (“Other
Taxes”). As soon as practicable after making a payment of Other
Taxes, the Company must deliver to such Purchaser any official receipt or form,
if any, provided by or required by the taxing authority to whom the Tax
Deduction was paid.


(f)            The
obligations of the Company under this Section 4.3 shall survive the
Maturity Date of the Notes and the payment for the Notes and all other amounts
payable hereunder.


4.4.          Adjustments
to Conversion Price. The Conversion Price will be subject to adjustment
from time to time as provided in this Section 4.4.


(a)           Adjustment of Conversion Price
upon Issuance of Common Shares. If and whenever on or after the Execution
Date, the Company issues or sells, or in accordance with this Section 4.4(a)
is deemed to have issued or sold, any Common Shares 



 14
 









(including the issuance or sale of Common Shares owned
or held by or for the account of the Company, but excluding Common Shares
deemed to have been issued or sold by the Company in connection with any
Excluded Security) for a consideration per share (the “New Issuance Price”) less than the
Conversion Price in effect immediately prior to such issue or sale (the
foregoing a “Dilutive Issuance”),
then immediately after such Dilutive Issuance, the Conversion Price then in
effect shall be reduced to an amount equal to the product of (x) the Conversion
Price in effect immediately prior to such issuance or sale, and (y) the
following fraction:


N(0) + N(1)

---------------

N(0) + N(2)


where:


N(0) =                  the number of
Common Shares of the Company outstanding immediately prior to such
Dilutive Issuance (without taking into account the conversion, exercise or exchange
of any Convertible Securities, including the Notes);


N(1) =                  the number of
Common Shares of such the Company for which the aggregate consideration, if
any, received or receivable by the Company for the total number of such
additional Common Shares so issued, sold or deemed issued or sold in such
dilutive issuance would be convertible or exchangeable at the Conversion Price
for such Common Shares in effect immediately prior to such Dilutive Issuance;
and


N(2) =                  the number of
such additional Common Shares of the Company so issued, sold or
deemed issued or sold in such Dilutive Issuance.


For
purposes of determining the adjusted Conversion Price under this Section
4.4(a), the following shall be applicable:


(i)            Issuance
of Options. If the Company in any manner grants or sells any Options and
the lowest price per share for which one Common Share is issuable upon the
exercise of any such Option or upon conversion or exchange or exercise of any
Convertible Securities issuable upon exercise of such Option is less than the
Conversion Price in effect immediately prior to such issue or sale, then each
such Common Share underlying such Option shall be deemed to be outstanding and
to have been issued and sold by the Company at the time of the granting or sale
of such Option for such price per share. For purposes of this Section
4.4(a)(i), the “lowest price per share for which one Common Share is
issuable upon the exercise of any such Option or upon conversion or exchange or
exercise of any Convertible Securities issuable upon exercise of such Option”
shall be equal to the sum of the lowest amounts of consideration (if any)
received or receivable by the Company with respect to any one Common Share upon
granting or sale of the Option, upon exercise of the Option and upon conversion
or exchange or exercise of any Convertible Security issuable upon exercise of
such Option. No further adjustment of the Conversion Price shall be made upon
the actual issuance of such Common Share or of such Convertible Securities upon
the exercise of such Options or 



 15
 









upon the actual issuance of such Common Shares upon
conversion or exchange or exercise of such Convertible Securities.


(ii)           Issuance
of Convertible Securities. If the Company in any manner issues or sells any
Convertible Securities and the lowest price per share for which one Common
Share is issuable upon such conversion or exchange or exercise thereof is less
than the Conversion Price in effect immediately prior to such issue or sale,
then each such Common Share underlying such Convertible Securities shall be
deemed to be outstanding and to have been issued and sold by the Company at the
time of the issuance or sale of such Convertible Securities for such price per
share. For the purposes of this Section 4.4(a)(ii), the “lowest price
per share for which one Common Share is issuable upon such conversion or
exchange or exercise” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to
any one Common Share upon the issuance or sale of the Convertible Security and
upon the conversion or exchange or exercise of such Convertible Security. No
further adjustment of the Conversion Price shall be made upon the actual
issuance of such Common Share upon conversion or exchange or exercise of such
Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of the
Conversion Price had been or are to be made pursuant to other provisions of
this Section 4.4(a), no further adjustment of the Conversion Price shall
be made by reason of such issue or sale.


(iii)          Change
in Option Price or Rate of Conversion. If the purchase price provided for
in any Options, the additional consideration, if any, payable upon the issue,
conversion,  exchange or exercise of any Convertible Securities, or the
rate at which any Convertible Securities are convertible into or exchangeable
or exercisable for Common Shares changes at any time, the Conversion Price in
effect at the time of such change shall be adjusted to the Conversion Price
which would have been in effect at such time had such Options or Convertible
Securities provided for such changed purchase price, additional consideration
or changed conversion rate, as the case may be, at the time initially granted,
issued or sold. For purposes of this Section 4.4(a)(iii), if the terms
of any Option or Convertible Security that was outstanding as of the Execution
Date are changed in the manner described in the immediately preceding sentence,
then such Option or Convertible Security and the Common Shares deemed issuable
upon exercise, conversion or exchange thereof shall be deemed to have been
issued as of the date of such change. No adjustment shall be made if such
adjustment would result in an increase of the Conversion Price then in effect.


(iv)          Calculation
of Consideration Received. In case any Option is issued in connection with
the issue or sale of other securities of the Company, together comprising one
integrated transaction in which no specific consideration is allocated to such
Options by the parties thereto, the Options will be deemed to have been issued
for a consideration of $0.01. If any Common Shares, Options or Convertible
Securities are issued or sold or deemed to have been issued or sold for cash,
the consideration received therefor will be deemed to be the net amount
received by the Company therefor. If any Common Shares, Options or Convertible
Securities are issued or sold for a consideration other than cash, the amount
of the consideration other than cash received by the Company will be the fair
value of such consideration, except where such consideration consists of
publicly traded securities, in which case the amount of consideration received
by the Company will be the Closing Sale Price of such 



 16
 









securities on the date of receipt of such securities.
If any Common Shares, Options or Convertible Securities are issued to the
owners of the non-surviving entity in connection with any merger in which the
Company is the surviving entity, the amount of consideration therefor will be
deemed to be the fair value of such portion of the net assets and business of
the non-surviving entity as is attributable to such Common Shares, Options or
Convertible Securities, as the case may be. The fair value of any consideration
other than cash or publicly traded securities will be determined jointly by the
Company and the Requisite Holders. If such parties are unable to reach
agreement within ten (10) days after the occurrence of an event requiring
valuation (the “Valuation Event”),
the fair value of such consideration will be determined within ten (10)
Business Days after the tenth (10th) day following the Valuation Event by an
independent, reputable appraiser jointly selected by the Company and the
Requisite Holders. The determination of such appraiser shall be deemed binding
upon all parties absent manifest error and the fees and expenses of such
appraiser shall be borne by the Company.


(v)           Record
Date. If the Company takes a record of the holders of Common Shares for the
purpose of entitling them (I) to receive a dividend or other distribution
payable in Common Shares, Options or in Convertible Securities or (II) to
subscribe for or purchase Common Shares, Options or Convertible Securities,
then such record date will be deemed to be the date of the issue or sale of the
Common Shares deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the granting
of such right of subscription or purchase, as the case may be.


(b)           Adjustment
of Conversion Price upon Subdivision or Combination of Common Shares. If
the Company at any time after the Execution Date subdivides (by any share
split, share dividend, recapitalization or otherwise) its outstanding Common
Shares into a greater number of shares, the Conversion Price in effect
immediately prior to such subdivision will be proportionately reduced. If the
Company at any time after the Execution Date combines (by combination, reverse
share split or otherwise) its outstanding Common Shares into a smaller number
of shares and the Conversion Price in effect immediately prior to such
combination will be proportionately increased.


(c)           Other
Events. If any event occurs of the type contemplated by the provisions of
this Section 4.4 but not expressly provided for by such provisions
(including, without limitation, the granting of share appreciation rights, “phantom
stock rights” or other rights with equity features), then the Company’s Board of
Directors will make an appropriate adjustment in the Conversion Price so as to
protect the rights of the Purchasers; provided that no such adjustment
will increase the Conversion Price as otherwise determined pursuant to this Section
4.4.


(d)           Notices.


(i)            Immediately
upon any adjustment of the Conversion Price pursuant to Section 4.4, the
Company will give written notice thereof to each Purchaser, setting forth in
reasonable detail, and certifying, the calculation of such adjustment. In the
case of a dispute as to the determination of such adjustment, then such dispute
shall be resolved in accordance with the procedures set forth in Section
4.1(b)(iii).



 17
 









(ii)           The
Company will give written notice to each Purchaser at least ten (10) Business
Days prior to the date on which the Company closes its books or takes a record
(I) with respect to any dividend or distribution upon the Common Shares, (II)
with respect to any pro rata subscription offer to holders of Common Shares or
(III) for determining rights to vote with respect to any Fundamental
Transaction, provided that such information shall be made known to the
public prior to or in conjunction with such notice being provided to such
Purchaser.


(iii)          The
Company will also give written notice to each Purchaser at least ten (10)
Business Days prior to the date on which any Fundamental Transaction will take
place, provided that such information shall be made known to the public prior
to or in conjunction with such notice being provided to such Purchaser.


(e)           Additional
Notes; Variable Securities; Dilutive Issuances. For so long as any Notes
are outstanding, the Company will not, without the prior written consent of the
Requisite Holders, issue any Notes and the Company shall not issue any other
securities that would cause a breach or default under this Agreement other than
those issued pursuant to the Series B Note Purchase Agreement. For so long as
any Notes remain outstanding, the Company shall not, in any manner, issue or
sell any rights, warrants or options to subscribe for or purchase Common Shares
or directly or indirectly convertible into or exchangeable or exercisable for
Common Shares at a conversion, exchange or exercise price which varies or may
vary after issuance with the market price of the Common Shares, including by
way of one or more reset(s) to any fixed price unless the conversion, exchange
or exercise price of any such security cannot be less than the then applicable
Conversion Price with respect to the Common Shares into which any Notes are
convertible.


4.5.          Limitation on Beneficial Ownership. The Company
shall not effect any conversion of Notes, and no Purchaser shall have the right
to convert any Notes, to the extent that after giving effect to such
conversion, the beneficial owner of such shares (together with such Person’s
Affiliates) would have acquired, through conversion of Notes or otherwise,
beneficial ownership of a number of Common Shares that exceeds 9.99% (“Maximum Percentage”) of the number of
Common Shares outstanding immediately after giving effect to such
conversion.  For purposes of the
foregoing, the number of Common Shares beneficially owned by a Person and its
Affiliates shall include the number of Common Shares issuable upon conversion
of the Notes with respect to which the determination of such sentence is being
made, but shall exclude the number of Common Shares which would be issuable
upon (A) conversion of the remaining, nonconverted Notes beneficially owned by
such Person or any of its Affiliates and (B) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company
(including, without limitation, any other notes, preferred shares or warrants)
subject to a limitation on conversion or exercise analogous to the limitation
contained in this Section beneficially owned by such Person or any of its
Affiliates. Except as set forth in the preceding sentence, for purposes of this
Section 4.5, beneficial ownership shall be calculated in accordance with
Section 13(d) of the 1934 Act. For purposes of this Section 4.5, in
determining the number of outstanding Common Shares, a Purchaser may rely on
the number of outstanding Common Shares as reflected in (1) the Company’s most
recent Form 10-K, Form 10-KSB, Form 10-Q, Form 10-QSB or Form 8-K, as the case
may be, (2) a more recent public announcement by the Company, or (3) any other
notice by the Company or the Transfer Agent setting forth the number of Common
Shares outstanding. For any reason at any time, upon the written request of 



 18
 









any Purchaser, the Company
shall within one (1) Business Day following the receipt of such notice, confirm
orally and in writing to any such Purchaser the number of Common Shares then
outstanding. In any case, the number of outstanding Common Shares shall be
determined after giving effect to the conversion or exercise of securities of
the Company, including the Notes, by such Purchaser and its Affiliates since
the date as of which such number of outstanding Common Shares was reported. By
written notice to the Company, any Purchaser may from time to time increase or
decrease the Maximum Percentage to any other percentage not in excess of 19.99%
nor below 9.99% as specified in such notice; provided, that (I) any such
increase or decrease will not be effective until the sixty-first (61st) day after such written notice is delivered to
the Company, and (II) any such increase or decrease will apply only to the
Purchaser providing such written notice and not to any other Purchaser.


4.6.
         Limitation on Number of
Common Shares Issuable Upon Conversion of Notes. Notwithstanding anything
to the contrary contained herein, the Company shall not issue any Common Shares
upon conversion of the Notes if the issuance of such Common Shares would:


(a)           exceed that number Common Shares
which the Company may issue upon conversion of the Notes without breaching the
Company’s obligations under the rules or regulations of the Principal Market,
or any other the market or exchange where the Common Shares are then traded
(the “Exchange Cap”); or


(b)           be
an issuance of Common Shares at an effective issue price per Common Share that
is less than the market
price for the Common Shares (as defined pursuant to Section 601 of the Toronto
Stock Exchange Company Manual) as at the date on which the Company entered into
this Agreement, less a discount of twenty percent (20%), except
that such limitations shall not apply in the event that the Company (c) obtains
Shareholder Approval as required by the applicable rules of both the Principal
Market and the Toronto Stock Exchange (and any successor rules or regulations)
for issuances of Common Shares in excess of such number of Common Shares, or at
an effective price per Common Share that is less than such discount from the
market price, or (d) obtains a written opinion from outside counsel to the
Company that such approval is not required, which opinion shall be reasonably
satisfactory to the Required Holders. Until such approval or written opinion is
obtained, no Purchaser shall be issued, in the aggregate, upon conversion of
the Notes, Common Shares in an amount greater than the product of (i) the
Exchange Cap amount multiplied by (ii) their Allocation Percentage (the “Exchange Cap Allocation”) nor shall
the Company issue any Common Shares at an effective price per Common Share that
is less than such discount from the market price. In the event that any
Purchaser shall sell or otherwise transfer any of such Purchaser’s Notes, the
transferee shall be allocated a pro rata portion of such Purchaser’s Exchange
Cap Allocation. In the event that any Purchaser shall convert all of such
Purchaser’s Notes into a number of Common Shares which, in the aggregate, is
less than such Purchaser’s Exchange Cap Allocation, then the difference between
such Purchaser’s Exchange Cap Allocation and the number of Common Shares
actually issued to such Purchaser shall be allocated to the respective Exchange
Cap Allocations of the remaining Purchasers on a pro rata basis in proportion
to the number of Notes then held by each such Purchaser.



 19
 









5.             Representations
and Warranties of the Company.  The
Company hereby represents and warrants to the Purchasers and the Placement
Agents that, except as set forth in the schedules delivered herewith
(collectively, the “Disclosure Schedules”):


5.1.          Organization, Good
Standing and Qualification.  The
Company is a company validly existing and in good standing under the Business Corporations Act (British
Columbia) and has all requisite power and authority to carry on its business as
now conducted and to own its properties. 
Each Subsidiary is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. The Company and each Subsidiary is duly qualified to do
business and is in good standing in each jurisdiction in which the conduct of
its business or its ownership or its leasing of property makes such
qualification necessary, unless the failure to so qualify would have a Material
Adverse Effect.  The Company is presently
a reporting issuer in the Canadian provinces of British Columbia, Alberta and
Ontario and is not in default of the applicable securities legislation of such
provinces.


5.2.          Authorization.  The Company has full power and authority and
has taken all requisite action on the part of the Company, its officers,
directors and shareholders necessary for (i) the authorization, execution and
delivery of the Note Documents; (ii) authorization of the performance of all
obligations of the Company hereunder or thereunder; and (iii) the
authorization, issuance and delivery of the Notes and the Common Shares upon
conversion of the Notes in accordance with the terms thereof  The Note Documents constitute the legal,
valid and binding obligations of the Company, enforceable against the Company
in accordance with their respective terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors’ rights generally.


5.3.          Capitalization.


(a)           Schedule
5.3 sets forth (i) the authorized capital shares of the Company on the date
hereof, (ii) the number of capital shares issued and outstanding as of December
31, 2006, (iii) the number of capital shares issuable pursuant to the Company’s
share plans as of December 31, 2006, and (iv) the number of capital shares
issuable and reserved for issuance pursuant to securities exercisable for, or
convertible into or exchangeable for any capital shares of the Company as of
December 31, 2006.  All of the issued and
outstanding Company capital shares have been duly authorized and validly issued
and are fully paid, nonassessable and free of pre-emptive rights.  Other than the Purchasers upon Closing, no
Person is entitled to pre-emptive or similar statutory or contractual rights
with respect to any securities of the Company. 
Except as described on Schedule 5.3 or pursuant to this
Agreement, (i) there are no outstanding warrants, options, convertible
securities or other rights, agreements or arrangements of any character under
which the Company is or may be obligated to issue any equity securities of any
kind and, except as contemplated by this Agreement, (ii) there are no
outstanding debt securities, notes, indentures, credit agreements, or credit
facilities of the Company or any of its Subsidiaries or by which the Company or
any of its Subsidiaries is or may become bound, (iii) there are no outstanding
securities or instruments of the Company or any of its Subsidiaries which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings 



 20
 









or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries, (iv) the Company does not have any stock appreciation
rights or “phantom stock” plans or agreements or any similar plan or agreement,
and (v) the Company is not currently in negotiations for the issuance of any
equity securities of any kind.  Except as
described on Schedule 5.3, there are no voting agreements, buy-sell
agreements, option or right of first purchase agreements or other agreements of
any kind among the Company and any of the security holders of the Company
relating to the securities of the Company. 
Except as described on Schedule 5.3, the Company has not granted
any Person the right to require the Company to register any securities of the
Company under the 1933 Act, or qualify the distribution of any securities of
the Company by prospectus under any Canadian securities laws whether on a
demand basis or in connection with the registration or qualification by
prospectus of securities of the Company for its own account or for the account
of any other Person, except as contemplated by the Registration Rights
Agreement.


(b)           Except
as described on Schedule 5.3 and in this Agreement, the issuance and
sale of the Notes hereunder will not obligate the Company to issue Common
Shares or other securities to any other Person (other than the Purchasers) and
will not result in the adjustment of the exercise, conversion, exchange or
reset price of any outstanding security.


(c)           Except
as set forth on Schedule 5.3 and in this Agreement, the Company does not
have outstanding shareholder purchase rights or any similar arrangement in
effect giving any Person the right to purchase any equity interest in the
Company upon the occurrence of certain events or otherwise.


5.4.          Subsidiaries.  Schedule 5.4 sets forth the direct and
indirect subsidiaries of the Company. 
The Company owns, directly or indirectly, all of the capital stock of
each Subsidiary free and clear of any and all liens, encumbrances and restrictions,
and all the issued and outstanding shares of capital stock of each Subsidiary
are validly issued and are fully paid, nonassessable and free of preemptive and
similar rights.  The Company or one of
its Subsidiaries has the unrestricted right to vote, and (subject to
limitations imposed by applicable law) to receive dividends and distributions
on, all capital securities of its Subsidiaries as owned by the Company or such
Subsidiary.  Neither the Company nor any
Subsidiary is party to any material joint venture, nor has any ownership
interest in any other entity that is material to the Company and not disclosed
in the SEC Filings and the SEDAR Filings.


5.5.          Valid Issuance.


(a)           The Notes have been
duly and validly authorized and, when issued and paid for pursuant to this
Agreement, will be validly issued, fully paid and nonassessable, and shall be
free and clear of all liens, encumbrances and restrictions, except for
restrictions on transfer set forth in the Note Documents or imposed by
applicable securities laws.


(b)           Upon conversion of the Notes in
accordance with this Agreement, the Common Shares will be validly issued, fully
paid and nonassessable free and clear of all encumbrances and restrictions,
except for restrictions on transfers and preemptive rights set forth in the
Note Documents or imposed by applicable securities laws. The Company has
reserved sufficient number of Common Shares for issuance upon the conversion of
the Notes, free and 



 21
 









clear of all encumbrances and restrictions, except for
restrictions on transfers and preemptive rights set forth  in the Note Documents or imposed by
applicable securities laws.


5.6.          Consents.  The execution, delivery and performance by
the Company of the Note Documents and the offer, issuance and sale of the Notes
require no consent of, action by or in respect of, or filing with, any Person,
governmental body, agency, or official other than those filings and consents
set forth on Schedule 5.6, consents or filings that have already been
obtained, filings with and approval by AMEX and TSX, the filings with the SEC of one or more
registration statements in accordance with the Registration Rights Agreement,
filings required by Section 12.7 hereof, and filings that have been made
pursuant to applicable state securities laws and post-sale filings pursuant to
applicable state and federal securities laws and applicable laws of the
securities regulatory authorities in the provinces and territories of Canada
which the Company undertakes to file within the applicable time periods.


5.7.          Delivery of SEC
Filings and SEDAR Filings; Business. 
All reports and other documents filed by the Company since January 1,
2004 (i) pursuant to the 1934 Act through the SEC’s Electronic Data Gathering,
Analysis and Retrieval (“EDGAR”)
system and prior to the date hereof (collectively, the “SEC Filings”) and (ii) with the securities regulatory
authorities in the provinces and territories of Canada through the System for
Electronic Document Analysis and Retrieval and prior to the date hereof (collectively,
the “SEDAR Filings”) are publicly available for viewing by
Purchasers.  The SEC Filings are the only
filings required of the Company pursuant to the 1934 Act for such period and
the SEDAR Filings are the only filings required of the Company pursuant to the
laws, rules and regulations of the securities regulatory authorities in the
provinces and territories of Canada for such period.


5.8.          Use of Proceeds.  The proceeds of the sale of the Notes
hereunder shall be used by the Company to repay debt and for general corporate
and working capital purposes.


5.9.          No Material
Adverse Change.  Except as identified
and described in the SEC Filings or the SEDAR Filings or as described on Schedule
5.9(a), since September 30, 2006, there has not been:


(a)           any
change in the consolidated assets, liabilities, financial condition or
operating results of the Company from that reflected in the financial
statements included in the SEC Filings or the SEDAR Filings, except for changes
in the ordinary course of business which would not have a Material Adverse
Effect, individually or in the aggregate;


(b)           any
declaration or payment of any dividend, or any authorization or payment of any
distribution, on any of the capital shares of the Company, or any redemption or
repurchase of any securities of the Company;


(c)           any
material damage, destruction or loss, whether or not covered by insurance to
any assets or properties of the Company;


(d)           any
waiver, not in the ordinary course of business, by the Company of a material
right or of a material debt owed to it;



 22















(e)           any
satisfaction or discharge of any lien, claim or encumbrance or payment of any
obligation by the Company, except in the ordinary course of business and which
is not material to the assets, properties, financial condition, operating
results or business of the Company;


(f)            any
change or amendment to the Company’s Notice of Articles and Articles or
material change to any Material Contract by which the Company is bound or to
which any of their respective assets or properties is subject;


(g)           any
material labor difficulties or labor union organizing activities with respect
to employees of the Company;


(h)           any
transaction entered into by the Company other than in the ordinary course of
business (other than as contemplated by the Note Documents);


(i)            the
loss of the services of any key employee, or material change in the composition
or duties of the senior management of the Company;


(j)            the
loss or threatened loss of any customer which had or would have a Material
Adverse Effect;


(k)           sold
any assets, individually or in the aggregate, in excess of US$500,000 outside
of the ordinary course of business;


(l)            had
capital expenditures, individually or in the aggregate, in excess of
US$1,500,000; or


(m)          any
other event or condition of any character that had or would have a Material
Adverse Effect; provided, however, any decline in the market
price of the Company’s Common Shares as a result of the transactions
contemplated by the Note Documents, the public announcement thereof, or change
in the general economic or industry conditions shall not be deemed to be such
an event or condition.


5.10.        SEC Filings; SEDAR
Filings.  At the time of filing
thereof, (i) the SEC Filings complied as to form in all material respects with
the requirements of the 1934 Act; and (ii) the SEDAR Filings complied as to
form in all material respects with the laws, rules and regulations of the
securities regulatory authorities in the provinces and territories of Canada,
and neither the SEC Filings nor the SEDAR Filings contained any untrue statement
of a material fact or omitted to state any material fact necessary in order to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading.  The
SEDAR Filings did not contain any “misrepresentation” within the meaning of
Canadian securities laws.  The Company is
not (with or without the lapse of time or the giving of notice, or both) in
material breach or default of any Material Contract and, to the Company’s
Knowledge, no other party to any Material Contract is (with or without the
lapse of time or the giving of notice, or both) in material breach or default
of any Material Contract.  The Company
has not received any notice of the intention of any party to terminate any
Material Contract.



 23
 









5.11.        No Conflict,
Breach, Violation or Default.  The
execution, delivery and performance of the Note Documents by the Company and
the issuance and sale of the Notes will not conflict with or result in a breach
or violation of any of the terms and provisions of, or constitute a default
under (i) the Company’s Notice of Articles and Articles, both as in effect on
the date hereof, or any Subsidiary’s certificate or articles of incorporation,
bylaws or other organizational or charter documents, each as in effect on the
date hereof; or (ii)(a) any statute, rule, regulation or order of any
governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company, any Subsidiary or any of their respective assets
or properties, or (b) except as set forth on Schedule 5.11, any Material
Contract to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary is bound or to which any of its assets or properties
is subject.


5.12.        Tax Matters.  The Company and each of its Subsidiaries has
timely prepared and filed all tax returns required to have been filed by the
Company and each of its Subsidiaries with all appropriate governmental agencies
and timely paid all taxes shown thereon or otherwise owed by them, except to
the extent being disputed in good faith or would not have a Material Adverse
Effect.  The charges, accruals and
reserves on the books of the Company in respect of taxes for all fiscal periods
are adequate in all material respects, and there are no material unpaid assessments
against the Company nor, to the Company’s Knowledge, any basis for the
assessment of any additional taxes, penalties or interest for any fiscal period
or audits by any foreign, federal, state or local taxing authority except for
any assessment that is not material to the Company.  All taxes and other assessments and levies
that the Company is required to withhold or to collect for payment have been
duly withheld and collected and paid to the proper governmental entity or third
party when due, except to the extent being disputed in good faith or would not
have a Material Adverse Effect.  There
are no tax liens or claims pending or, to the Company’s Knowledge, threatened
against the Company, any of its Subsidiaries or any of its assets or
property.  Except as described on Schedule
5.12, there are no outstanding tax sharing agreements or other such
arrangements between the Company or any Subsidiary and any other entity and
neither the Company nor any Subsidiary is presently undergoing any audit by a
taxing authority, or has waived or extended any statute of limitations at the
request of any taking authority.


5.13.        Title to
Properties.


(a)           Except as disclosed
in the SEC Filings or the SEDAR Filings, each of the Company and its
Subsidiaries has good title to all real properties and all other properties and
assets owned by it, in each case free from liens, encumbrances and defects,
except as would not individually or in the aggregate would have a Material
Adverse Effect; and except as disclosed in the SEC Filings or the SEDAR
Filings, the Company and each Subsidiary holds any leased real or personal
property under valid and enforceable leases with no exceptions that would
materially interfere with the use made or currently planned to be made thereof
by them, except as would not individually or in the aggregate would have a
Material Adverse Effect.


(b)           All interests in natural resource
properties of the Company and its Subsidiaries as disclosed in the SEC Filings
and the SEDAR Filings are in all material respects: (i) owned or held by the
Company or a Subsidiary as owner thereof with good title; (ii) valid and
enforceable; and (iii) free and clear of any liens, charges or encumbrances,
and no royalty is 



 24
 









payable in respect of any of them except as disclosed
in the SEC Filings and the SEDAR Filings, except as would not individually or
in the aggregate would have a Material Adverse Effect; no other material
property rights are necessary for the conduct of the Company’s and each
Subsidiary’s business, and there are no material restrictions on the ability of
the Company or any Subsidiary to use, transfer or otherwise exploit any such
property rights except as disclosed in the SEC Filings and the SEDAR Filings,
and the Company does not know of any claim or basis for a claim that may
adversely affect such rights in any material respects except as disclosed in
the SEC Filings and the SEDAR Filings.


5.14.        Certificates,
Authorities and Permits.  The Company
and its Subsidiaries possess adequate certificates, authorities or permits
issued by appropriate governmental agencies or bodies necessary to conduct the
business now operated by it, and neither the Company nor any of its
Subsidiaries has received any notice of proceedings relating to the revocation
or modification of any such certificate, authority or permit that, if
determined adversely to the Company or any Subsidiary, would have a Material
Adverse Effect, individually or in the aggregate.


5.15.        Employee
Relations.


(a) Neither the Company nor any of its Subsidiaries is
a party to any collective bargaining agreement or employs any member of a
union. The Company and its Subsidiaries believe that their relations with their
employees are good. No executive officer of the Company or any of its
Subsidiaries has notified the Company or any such Subsidiary that such officer
intends to leave the Company or any such Subsidiary or otherwise terminate such
officer’s employment with the Company or any such Subsidiary. No executive
officer of the Company or any of its Subsidiaries is to the Company’s
Knowledge, or is to the Company’s Knowledge expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each such executive officer does not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing matters.


(b)           The Company and its
Subsidiaries are in compliance with all U.S. and Canadian federal, state,
provincial, local and foreign laws and regulations respecting labor, employment
and employment practices and benefits, terms and conditions of employment and
wages and hours, except where failure to be in compliance would not, either
individually or in the aggregate, have a Material Adverse Effect.


5.16.        Intellectual
Property.


(a)           All Intellectual
Property of the Company is currently in compliance with all legal requirements
(including timely filings, proofs and payments of fees) and is valid and
enforceable, except to the extent that any non-compliance would not
individually or in the aggregate have a Material Adverse Effect.  No Intellectual Property of the Company that
is necessary for the conduct of Company’s business as currently conducted or as
currently proposed to be conducted has been or is now involved in any
cancellation, dispute or litigation, 



 25
 









and, to the Company’s Knowledge, no such action is
threatened.  No patent of the Company has
been or is now involved in any interference, reissue, re-examination or
opposition proceeding.


(b)           All of the licenses
and sublicenses and consent, royalty or other agreements concerning
Intellectual Property that are necessary for the conduct of the Company’s
business as currently conducted or as currently proposed to be conducted to
which the Company is a party or by which any of its assets are bound (other
than  generally commercially available, non-custom, off-the-shelf
software application programs having a retail acquisition price of less than
US$10,000 per license) (collectively, “License Agreements”)
are valid and binding obligations of the Company that are parties thereto and,
to the Company’s Knowledge, the other parties thereto, enforceable in accordance
with their terms, except to the extent that enforcement thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors’ rights generally,
and to the Company’s Knowledge there exists no event or condition that would
result in a material violation or breach of or constitute (with or without due
notice or lapse of time or both) a default by the Company under any such
License Agreement.


(c)           The Company owns or has
the valid right to use all of the Intellectual Property that is necessary for
the conduct of the Company’s business as currently conducted or as currently
proposed to be conducted, free and clear of all liens, encumbrances, adverse
claims or obligations to license all such owned Intellectual Property and
Confidential Information, other than licenses entered into in the ordinary
course of the Company’s business, except that any such invalidity or liens,
encumbrances, or obligations would not have a Material Adverse Effect.  The Company has a valid and enforceable right
to use all third party Intellectual Property and Confidential Information used
or held for use in the business of the Company as currently conducted or as
currently proposed to be conducted, except such invalidity or unenforceable
right shall not have a Material Adverse Effect.


(d)           To
the Company’s Knowledge, the conduct of the Company’s business as currently
conducted and as currently proposed to be conducted does not and will not
infringe any Intellectual Property rights of any third party or any
confidentiality obligation owed to a third party. To the Company’s Knowledge,
the Intellectual Property and Confidential Information of the Company that are
necessary for the conduct of Company’s business as currently conducted or as
currently proposed to be conducted are not being infringed by any third
party.  There is no litigation or order
pending or outstanding or, to the Company’s Knowledge, threatened or imminent,
that seeks to limit or challenge or that concerns the ownership, use, validity
or enforceability of any Intellectual Property or Confidential Information of
the Company and the Company’s use of any Intellectual Property or Confidential
Information owned by a third party, and, to the Company’s Knowledge, there is
no valid basis for the same.


(e)           The
consummation of the transactions contemplated hereby will not result in the
alteration, loss, impairment of or restriction on the Company’s ownership or
right to use any of the Intellectual Property or Confidential Information that
is necessary for the conduct of the Company’s business as currently conducted
or as currently proposed to be conducted, except as would not have a Material
Adverse Effect.


5.17.        Environmental
Matters.



 26
 









(a)           The Company and each
of its Subsidiaries has been and is in compliance with all applicable U.S. and
Canadian federal, state, provincial, municipal and local laws, statutes,
ordinances, bylaws and regulations and orders, directives and decisions
rendered by any ministry, department or administrative or regulatory agency,
domestic or foreign, (“Environmental
Laws”) relating to the
protection of the environment, occupational health and safety or the
processing, use, treatment, storage, disposal, discharge, transport or handling
of any pollutants, contaminants, chemicals or industrial, toxic or hazardous
wastes or substance except where such non-compliance would not have a Material
Adverse Effect on the Company on a consolidated basis.


(b)           The Company and each of its Subsidiaries
has obtained all licenses, permits, approvals, consents, certificates,
registrations and other authorizations under Environmental Laws (the “Environmental Permits”) necessary for
the operation of its projects as currently operated and each Environmental
Permit is valid, subsisting and in good standing and the holders of the
Environmental Permits are not in default or breach thereof and no proceeding is
pending or threatened to revoke or limit any Environmental Permit, except in
each case where the result would not have a Material Adverse Effect on the
Company and its Subsidiaries, on a consolidated basis.


(c)           Neither the Company
(including, if applicable, any predecessor companies thereof) nor any of its
Subsidiaries has received any notice of, or been prosecuted for an offence
alleging, material non-compliance with any Environmental Laws, and
neither the Company nor any of its Subsidiaries has settled any allegation of
material non-compliance short of prosecution.  There are no order or directions relating to
environmental matters requiring any material work, repairs, construction or
capital expenditures to be made with respect to any of the assets of the
Company or its Subsidiaries, nor has the Company or any of its Subsidiaries
received notice of any of the same and which orders directions or notices
remain outstanding as unresolved, that if adversely determined would have a
Material Adverse Effect.


5.18.        Litigation.  Except as disclosed in the SEC Filings or the
SEDAR Filings, there are no pending investigations, actions, suits or
proceedings against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court or governmental or regulatory
agency, authority or body; and except as disclosed in the SEC Filings or the
SEDAR Filings, to the Company’s Knowledge, no such legal, governmental or
regulatory investigations, actions, suits or proceedings are threatened or
contemplated that if adversely determined would have a Material Adverse Effect.


5.19.        Financial Statements.  The financial statements included in each SEC
Filing and each SEDAR Filing fairly present the financial position of the
Company and its Subsidiaries as of the dates shown and its results of
operations and cash flows for the periods shown, and such financial statements
have been prepared in conformity with Canadian or United States (as applicable)
generally accepted accounting principles applied on a consistent basis; provided,
however, that the unaudited financial statements are subject to normal
year end and quarter end audit adjustments (which are not expected to be
material either individually or in the aggregate), and do not contain all
footnotes required under generally accepted accounting principles.  Except as set forth in the financial statements
of the Company and its Subsidiaries included in the SEC Filings and the SEDAR
Filings, neither the Company nor any Subsidiary 



 27
 









has incurred any liabilities, contingent or otherwise,
except those which, individually or in the aggregate, would not have a Material
Adverse Effect.


5.20.        Insurance Coverage.  The Company and each of its Subsidiaries
maintains in full force and effect insurance coverage by insurers of recognized
financial responsibility against losses and risks and in amounts as are prudent
and customary in it business; and the Company reasonably believes such
insurance coverage is adequate. Neither the Company nor any such Subsidiary has
been refused any insurance coverage sought or applied for and neither the
Company nor any such Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material Adverse Effect.


5.21.        Brokers
and Finders.  Except for the cash
commission to be paid (the “Cash Placement
Agents Fee”) to the Placement Agents pursuant to the terms of
the Placement Agents Agreement in respect of the transactions contemplated
hereby, no Person will have, as a result of the transactions contemplated by
this Agreement, any valid right, interest or claim against or upon the Company
or any Purchaser for any commission, fee or other compensation pursuant to any
agreement, arrangement or understanding entered into by or on behalf of the
Company.  The Company acknowledges that
the Cash Placement Agents Fee relates wholly to services performed by the
Placement Agents outside Canada and that such fee will not be subject to any
Canadian withholding tax.


5.22.        No General
Solicitation.  Neither the Company
nor to the Company’s Knowledge any Person acting on its behalf has conducted
any “general solicitation” or “general advertising” (as those terms are used in
Regulation D) in
connection with the offer or sale of any of the Notes.


5.23.        No Integrated
Offering.  Neither the Company nor
any of its Affiliates, nor to the Company’s Knowledge any Person acting on its
or their behalf has, directly or indirectly, made any offers or sales of any
Company security or solicited any offers to buy any security, under
circumstances that would adversely affect reliance by the Company on Section
4(2) of the 1933 Act for the exemption from the registration requirements
imposed under Section 5 of the 1933 Act for the transactions contemplated
hereby or that would require such registration under the 1933 Act.


5.24.        Private Placement.  Subject to the accuracy of the
representations and warranties of the Purchasers contained in Section 6
hereof, the offer and sale of the Notes to the Purchasers as contemplated
hereby is exempt from the registration requirements of the 1933 Act and from
the prospectus and registration requirements of applicable Canadian securities
laws.


5.25.        Foreign Corrupt
Practices Act.  Neither the Company nor, to
the Company’s Knowledge, any of its current or former shareholders, directors,
officers, employees, agents or other Persons acting on behalf of the Company
has on behalf of the Company or in connection with its business, taken any action, directly or indirectly, that
would result in a violation by such persons of the Foreign Corrupt Practices
Act of 1977, as amended, and the rules and regulations thereunder or any
Canadian legislation to the corresponding effect 



 28
 









(“FCPA”), including, without limitation, making use of the
mails or any means or instrumentality of interstate commerce corruptly in
furtherance of an offer, payment, promise to pay or authorization of the
payment of any money, or other property, gift, promise to give, or authorization
of the giving of anything of value to any “foreign official” (as such term is
defined in the FCPA) or any foreign political party or official thereof or any
candidate for foreign political office, in contravention of the FCPA and the
Company has conducted its businesses in compliance with the FCPA and have
instituted and maintain policies and procedures designed to ensure, and which
are reasonably expected to continue to ensure, continued compliance therewith.


5.26.        Transactions with
Affiliates.  Except as disclosed in
SEC Filings or SEDAR Filings made on or prior to the date hereof, none of the
officers or directors of the Company and, to the Company’s Knowledge, none of
the employees of the Company is presently a party to any transaction with the Company
or to a presently contemplated transaction (other than for services as
employees, officers and directors) that would be required to be disclosed
pursuant to Item 404 of Regulation S-K promulgated under the 1933 Act or
pursuant to Item 13 of Form 51-102F2 of the Canadian Securities Administrators.


5.27.        Internal Controls.  The Company is in material compliance with
the provisions of the Sarbanes-Oxley Act of 2002 currently applicable to the
Company.  The Company maintains a system
of internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s general or
specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.  The
Company has established disclosure controls and procedures (as defined in 1934
Act Rules 13a-15 and 15d-15) for the Company and designed such disclosure
controls and procedures with the intent of ensuring that material information
relating to the Company is made known to the certifying officers by others
within those entities, particularly during the period in which the Company’s
most recently filed period report under the 1934 Act, as the case may be, is
being prepared.  Under the supervision
and with the participation of the Company’s management, the Company evaluated
the effectiveness of the Company’s disclosure controls and procedures as of the
end of the most recent periodic reporting period under the 1934 Act (such date,
the “Evaluation Date”).  The Company presented in its most recently
filed periodic report under the 1934 Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures
based on their evaluations as of the Evaluation Date and such conclusions are
accurate in all material respects.  Since
the Evaluation Date, there have been no significant changes in the Company’s
internal controls (as such term is defined in Item 308(c) of Regulation S-K)
or, to the Company’s Knowledge, in other factors that could significantly
affect the Company’s internal controls. 
The Company maintains a standard system of accounting established and administered
in accordance with generally accepted accounting principles and the applicable
requirements of the 1934 Act.


5.28.        Listing; Trading.  The Common Shares are listed and posted for
trading on AMEX and TSX and the Company has not received any notification
(written or oral) from 



 29
 









AMEX or TSX to the effect that the Company is not in
compliance with the listing or maintenance requirements of such exchange, nor
to the Company’s Knowledge, are there any facts or circumstances that would
reasonably be expected to lead to delisting or suspension of the Common Shares
by AMEX or TSX in the foreseeable future. 
Since its approval for listing, (i) the Common Shares have been
designated for quotation on AMEX or TSX (as applicable), (ii) trading in the
Common Shares has not been suspended by the SEC, AMEX or TSX, and (iii) the
Company has received no communication, written or oral, from the SEC, AMEX or
TSX regarding the suspension or delisting of the Common Shares from AMEX or TSX
(as applicable).


5.29.        Conduct of
Business. Neither the Company nor its Subsidiaries is in violation of any
term of or in default under its Notice of Articles or Articles, any other
certificate of designation, preferences or rights of any other outstanding
series of preferred shares of the Company or their organizational charter or
certificate of incorporation, certificate of formation, bylaws or operating
agreement, respectively. Neither the Company nor any of its Subsidiaries is in
violation of any judgment, decree or order or any statute, ordinance, rule or
regulation applicable to the Company or its Subsidiaries, except in all cases
for violations which would not, individually or in the aggregate, have a
Material Adverse Effect.


5.30.        Dilutive Effect.
The Company understands and acknowledges that the number of Common Shares
issuable upon conversion of the Notes will increase in certain circumstances.
The Company further acknowledges that its obligation to issue Common Shares
upon conversion of the Notes in accordance with this Agreement is absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other shareholders of the Company.


5.31.        Application of Takeover Protections;
Rights Agreement. The Company and its board of directors have taken all
necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the
Notice of Articles and Articles or the laws of the jurisdiction of its
formation or incorporation which is or could become applicable to any Purchaser
as a result of the transactions contemplated by this Agreement, including,
without limitation, the Company’s issuance of the Notes and Common Shares upon
conversion thereof and any Purchaser’s ownership of the Notes or Common Shares.
The Company has not adopted a shareholder rights plan or similar arrangement
relating to accumulations of beneficial ownership of Common Shares or a change
in control of the Company.


5.32.        Off Balance Sheet Arrangements.
There is no material transaction, arrangement, or other relationship between
the Company and an unconsolidated or other off balance sheet entity that is
required to be disclosed by the Company in its 1934 Act filings and is not so
disclosed.


5.33.        Investment Company Status. The
Company is not, and upon consummation of the sale of the Notes will not be, an
“investment company” as such term is defined in the Investment Company Act of
1940, as amended.



 30
 









5.34.        Transfer Taxes. On the Closing
Date, all transfer or other taxes (other than income or similar taxes) that are
required to be paid in connection with the sale and transfer of the Notes to be
sold to each Purchaser hereunder will be, or will have been, fully paid or
provided for by the Company, and all laws imposing such taxes will be or will
have been complied with.


5.35.        Manipulation of Price. The
Company has not, and to the Company’s Knowledge no one acting on its behalf has,
in violation of Regulation M, (i) taken, directly or indirectly, any action
designed to cause or to result in the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of any of
the Common Shares, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Common Shares, or (iii) paid or agreed to
pay to any person any compensation for soliciting another to purchase any other
securities of the Company.


5.36.        Disclosure. The Company confirms
that neither it nor any other Person acting on its behalf has provided any of
the Purchasers or their agents or counsel with any information that constitutes
material, nonpublic information, other than the existence of the transactions
contemplated by this Agreement. The Company understands and confirms that each
of the Purchasers will rely on the foregoing representations in effecting
transactions in securities of the Company.


6.             Representations and Warranties
of the Purchasers.  Each of the
Purchasers hereby severally, and not jointly, represents and warrants to the
Company and the Placement Agents that:


6.1.          Organization;
Authorization.  For each Purchaser
that is an entity, such Purchaser is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization with the
requisite corporate or organizational power and authority to enter into and to
consummate the transactions contemplated in the Note Documents and to otherwise
carry out its obligations thereunder. 
The execution, delivery and performance by the Purchaser of the
transactions contemplated by the Note Documents to which such Purchaser is a
party have been duly authorized and will each constitute the valid and legally
binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with their respective terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors’ rights generally.


6.2.          Purchase Entirely
for Own Account.  The Notes to be
purchased by the Purchaser hereunder will be acquired by the Purchaser as
principal for the Purchaser’s own account, for investment purposes, not as
nominee or agent, and not with a view to the resale or distribution of any part
thereof in violation of the 1933 Act, and the Purchaser has no present
intention of selling, granting any participation in, or otherwise distributing
the same in violation of the 1933 Act. 
The Purchaser is not a registered broker dealer or an entity engaged in
the business of being a broker dealer.


6.3.          Investment
Experience.  The Purchaser
acknowledges that it can bear the economic risk and complete loss of its
investment in the Notes and has such knowledge and experience in financial or
business matters that it is capable of evaluating the merits and risks of 



 31
 









the investment contemplated hereby.  The Purchaser is experienced in making
private investments in public equities, similar to the purchase of the Notes
hereunder.


6.4.          Disclosure of
Information.  The Purchaser has no
knowledge of any “material fact” or “material change” (as those terms are
defined in the Securities Act  (British Columbia)) in the affairs of the
Company that has not been generally disclosed to the public, other than this
particular transaction; the Purchaser’s decision to tender this offer and
purchase the Notes has not been made as a result of any verbal or written
representation as to fact or otherwise made by or on behalf of the Company, or
any other Person and is based entirely upon currently available public
information concerning the Company. The Purchaser has had an opportunity to
receive all additional information related to the Company requested by it and
to ask questions of and receive answers from the Company regarding the Company
and its business, to the extent such information is not material nonpublic
information, and the terms and conditions of the offering of the Notes.  The Purchaser acknowledges its satisfactory review
of the SEC Filings and SEDAR Filings. 
The Purchaser acknowledges that it has been afforded the opportunity to
obtain such additional information, other than material nonpublic information,
that the Company possesses or can acquire without unreasonable effort or
expense that is necessary to make an informed investment decision with respect
to the investment.


6.5.          Restricted
Securities.  The Purchaser
understands that the Notes and the Common Shares issuable upon conversion
thereof are “restricted securities” under the U.S. federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and agrees not to resell such Notes and such Common
Shares issuable upon conversion thereof unless the Notes and the Common Shares
issuable upon conversion thereof are registered pursuant to the 1933 Act, or
resold in accordance with Rule 144 or another exemption from registration is
available therefrom.  In connection with
any transfer of the Notes or the Common Shares issuable upon conversion thereof
other than pursuant to an effective registration statement, except as provided
for in Section 8.9, the Company may require the transferor thereof to
provide to the Company an opinion of counsel selected by the transferor, the
form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration of such
transferred Notes or such Common Shares issuable upon conversion thereof, as
applicable, under the 1933 Act and such transfer is in compliance with Rule 144
or another exemption from registration. 
The Purchaser understands that the Notes and the Common Shares issuable
upon conversion thereof are subject to resale restrictions in Canada under
applicable Canadian securities laws.


6.6.          Legends.


(a)           It is understood that Notes shall
bear the following legend:


“The securities represented
hereby have not been registered under the Securities Act of 1933, as amended
(the “1933 Act”), and may not be transferred unless (i) such securities have
been registered for sale pursuant to the 1933 Act, or (ii) the Company has
received an opinion of counsel satisfactory to it that such transfer may
lawfully be made without registration under Rule 144 under the 1933 Act or
qualification under applicable state securities laws.”



 32
 









“In Canada, unless
permitted under securities legislation, the holder of this security must not
trade the security before ________________ [NOTE: Insert the date that is 4
months plus one (1) day after issuance].”


(b)           It is understood that certificates
evidencing the Common Shares issued upon conversion of the Notes shall bear the
following legends:


“The securities represented
hereby have not been registered under the Securities Act of 1933, as amended
(the “1933 Act”), and may not be transferred unless (i) such securities have
been registered for sale pursuant to the 1933 Act, or (ii) the Company has
received an opinion of counsel satisfactory to it that such transfer may
lawfully be made without registration under Rule 144 under the 1933 Act or
qualification under applicable state securities laws.”


“In Canada, unless
permitted under securities legislation, the holder of this security must not
trade the security before ________________ [NOTE: Insert the date that is 4
months plus one (1) day after issuance].


The securities
represented by this certificate are listed on the Toronto Stock Exchange
(“TSX”); however, the said securities cannot be traded through the facilities
of TSX since they are not freely transferable, and consequently any certificate
representing such securities is not “good delivery” in settlement of
transactions on TSX.”


(c)           If required by the
authorities of any state or province in connection with the issuance of sale of
the Notes, the legend required by such state or provincial authority.


6.7.          Investor Status.  At the time such Purchaser was offered the
Notes, it was, and at the date hereof it is, an “accredited investor” as
defined in Rule 501(a) of Regulation D, as amended, under the 1933 Act, and has
completed and delivered with this Agreement the U.S. Accredited Investor
Certificate attached as Schedule III,
the representations and warranties contained in such certificate being
incorporated and forming part of this Agreement, and it was, and at the
date hereof it is, an “accredited investor” as defined in NI 45-106, and has
completed and delivered with this Agreement the Canadian Accredited Investor
Certificate attached as Schedule IV,
the representations and warranties contained in such certificate being
incorporated and forming part of this Agreement.  The Purchaser is a resident of that
jurisdiction specified in its address on the Schedule of Purchasers attached
hereto.


6.8.          No General
Solicitation.  The Purchaser did not
learn of the investment in the Notes as a result of any “general advertising”
or “general solicitation” as those terms are contemplated in Regulation D, as
amended, under the 1933 Act.


6.9.          Brokers and
Finders.  No Person will have, as a
result of the transactions contemplated by this Agreement, any valid right,
interest or claim against or upon the Company, 



 33
 









or any Purchaser for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Purchaser.


6.10.        Prohibited Transactions.  During the last thirty (30) days prior to the
Execution Date, neither the Purchaser nor any Affiliate of such Purchaser that
(x) has or had knowledge of the transactions contemplated hereby, (y) has or
shares discretion relating to such Purchaser’s investments or trading or
information concerning such Purchaser’s investments, including in respect of
the Notes, or (z) is subject to such Purchaser’s review or input concerning
such Affiliate’s investments or trading (collectively, “Trading Affiliates”) has, directly or
indirectly, effected or agreed to effect any transactions in the securities of
the Company, including any short sale, whether or not against the box,
established any “put equivalent position” (as defined in Rule 16a-1(h) under
the 1934 Act) with respect to the Common Shares, granted any other right
(including, without limitation, any put or call option) with respect to the
Common Shares or with respect to any security that includes, relates to or derived
any significant part of its value from the Common Shares or otherwise sought to
hedge its position in the Notes (each, a “Prohibited
Transaction”).  Such
Purchaser shall not, and shall cause its Trading Affiliates not to, engage,
directly or indirectly, in a Prohibited Transaction during the period from the
date hereof until such time as (i) the closing of the transactions contemplated
by this Agreement are first publicly announced or (ii) this Agreement is
terminated pursuant to Section 7.3 hereof.


6.11         Limited Ownership.  The purchase by such Purchaser of the Notes
issuable to it at the Closing will not result in such Purchaser (individually
or together with other Person with whom such Purchaser has identified, or will
have identified, itself as part of a “group” in a public filing made with the
SEC involving the Company’s securities) acquiring, or obtaining the right to
acquire, in excess of 19.999% of the outstanding Common Shares or the voting
power of the Company on a post transaction basis that assumes that such Closing
shall have occurred or otherwise becoming a “control person” of the Company as
such term is defined under applicable securities laws.  Such Purchaser does not presently intend to,
alone or together with others, make a public filing with the SEC to disclose
that it has (or that it together with such other Persons have) acquired, or
obtained the right to acquire, as a result of such Closing (when added to any
other securities of the Company that it or they then own or have the right to
acquire), in excess of 19.999% of the outstanding Common Shares or the voting
power of the Company on a post transaction basis that assumes that the Closing
at issue shall have occurred.


6.12.        Independent Investment Decision.  Such Purchaser has independently evaluated
the merits of its decision to purchase Notes pursuant to the Note Documents,
and such Purchaser confirms that it has not relied on the advice of any other
Purchaser’s business and/or legal counsel in making such decision.  Such Purchaser has not relied on the business
or legal advice of the Company or the Placement Agents or any of their agents,
counsel or Affiliates in making its investment decision hereunder.


6.13.        Use of Personal Information.  The Purchaser hereby acknowledges and consents
to: (a) the disclosure by the Purchaser and the Company of Personal Information
concerning the Purchaser to a securities commission or other regulatory
authority (a “Securities Commission”), or to
AMEX or TSX and its affiliates, authorized agents, subsidiaries and divisions
(collectively referred to in this section as the “Exchange”),
and any subsequent public 



 34
 









disclosure of Personal Information concerning the
Purchaser made by a Securities Commission or by an Exchange; and (b) the
collection, use and disclosure of Personal Information by the Exchange for the
following purposes (or as otherwise identified by the Exchange, from time to
time): (i) to conduct background checks; (ii) to verify the Personal
Information that has been provided about the Purchaser; (iii) to consider the
suitability of the Purchaser as a holder of securities of the Company; (iv) to
consider the eligibility of the Company to continue to list on the Exchange;
(v) to provide disclosure to market participants as the security holdings of
the Company’s shareholders, and their involvement with any other reporting
issuers, issuers subject to a cease trade order or bankruptcy, and information
respecting penalties, sanctions or personal bankruptcies, and possible
conflicts of interest with the Company; (vi) to detect and prevent fraud; (vii)
to conduct enforcement proceedings; and (viii) to perform other investigations
as required by and to ensure compliance with all applicable rules, policies,
rulings and regulations of the Exchange, securities legislation and other legal
and regulatory requirements governing the conduct and protection of the public
markets in the United States and Canada. 
The Purchaser also acknowledges that: (c) the Exchange may also collect
additional Personal Information from other sources, including securities
regulatory authorities or elsewhere, investigative law enforcement or self
regulatory organizations, and regulations service providers to ensure that the
purposes set forth above can be accomplished; (d) the Personal Information the
Exchange collects may also be disclosed to the agencies and organizations
referred to above or as otherwise permitted or required by law, and they may
use it in their own investigations for the purposes described above; (e) the
Personal Information may be disclosed on the Exchange’s website or through
printed materials published by or pursuant to the direction of the Exchange;
and (f) the Exchange may from time to time use third parties to process
information and provide other administrative services, and may share the
information with such providers.  Without
limiting the generality of the foregoing, Purchaser acknowledges that Personal Information will be delivered to
the Ontario Securities Commission (the “OSC”) and that
such personal information is being collected indirectly by the OSC under the
authority granted to it in securities legislation for the purposes of the
administration and enforcement of the securities legislation of Ontario. The
Purchaser authorizes such indirect collection of personal information by the
OSC, and acknowledges that questions about such indirect collection of personal
information should be directed to the OSC’s Administrative Assistant to the
Director of Corporate Finance, Suite 1903, Box 5520 Queen Street West, Toronto,
Ontario M5H 3S8 or to the following telephone number: (416) 593-8086.  Herein, “Personal Information” means any information about the
Purchaser required to be disclosed to a Securities Commission or the Exchange,
whether pursuant to a Securities Commission or Exchange form or a request made
by a Securities Commission or the Exchange.


6.14.        Reliance
on Canadian Prospectus and Registration Exemptions.


(a)           If the Purchaser is resident in the Province of Ontario
(an “Ontario Resident Purchaser”), it
has provided an address in the Province of Ontario either in the space
designated for the address for delivery of notices or the address for delivery
of the Notes on its signature page to this Agreement.


(b)           Each Ontario Resident Purchaser
acknowledges that the Notes may only be purchased by it through an Ontario
registered securities dealer.



 35















(c)           Each Purchaser, whether resident in
Canada, the United States, or elsewhere, is an “accredited investor” within the
meaning of NI 45-106 of the Canadian Securities Administrators, and has
indicated on Schedule IV attached the basis
upon which it so qualifies.


6.15.        Present Ownership of Securities.  The Purchaser has fully and accurately
disclosed to the Company its present ownership of securities of the Company by
completing the disclosure statement attached as Schedule
V to this Agreement, and acknowledges that the Company will rely
on the information entered on Schedule V
in completing its filings with TSX.


6.16.        Proceeds of Crime Legislation.  The funds
representing the Purchaser’s Aggregate
Purchase Price set forth opposite the Purchaser’s name on Schedule I affixed hereto will not
represent proceeds of crime for the purposes of the Proceeds of
Crime (Money Laundering) Act (Canada) (the “PCMLA”)
and the Purchaser acknowledges that the Company may in the future be required
by law to disclose the name of the Purchaser and other information relating to
this Agreement pursuant to the PCMLA.  To
the best of its knowledge (a) none of the funds representing such Aggregate Purchase Price for the
Notes, (i) have been or will be derived from or related to any activity that is
deemed criminal under the law of Canada, the United States of America, or any
other jurisdiction, or (ii) are being tendered on behalf of a person or entity
who has not been identified to the Purchaser, and (b) it shall promptly notify
the Company if the Purchaser discovers that any of such representations cease
to be true, and provide the Company with appropriate information in connection
therewith.


6.17.        Series B Note Offering.  The Purchaser acknowledges that the Company,
in addition to this offering of Notes, intends to complete the Series B Note
Offering


7.             Conditions to Closing.


7.1.          Conditions to the
Purchasers’ Obligations. The obligation of each Purchaser to purchase the
Notes at the Closing is subject to the fulfillment to the Requisite Holders’
reasonable satisfaction, on or prior to the Closing Date, of the following
conditions, any of which may be waived in writing by the Requisite Holders:


(a)           The representations
and warranties made by the Company in Section 5 hereof qualified as to
materiality shall be true and correct at all times prior to and on the Closing
Date, except to the extent any such representation or warranty expressly speaks
as of an earlier date, in which case such representation or warranty shall be
true and correct as of such earlier date, and, the representations and
warranties made by the Company in Section 5 hereof not qualified as to
materiality shall be true and correct in all material respects at all times
prior to and on the Closing Date, except to the extent any such representation
or warranty expressly speaks as of an earlier date, in which case such
representation or warranty shall be true and correct in all material respects
as of such earlier date.  The Company
shall have performed in all material respects all obligations and conditions
herein required to be performed or observed by it on or prior to the Closing
Date (including the delivery of the certificates representing the Notes in
accordance with Section 4 hereof).



 36
 









(b)           The Company shall
have obtained in a timely fashion any and all consents, permits, approvals,
registrations and waivers necessary or appropriate for consummation of the
purchase and sale of the Notes including, without limitation, the acceptance of
TSX and the approval of AMEX, and all of which shall be and remain so long as
necessary in full force and effect.


(c)           The Company shall
have executed and delivered the Registration Rights Agreement and the
Subordination Agreement to the Purchasers.


(d)           No judgment, writ,
order, injunction, award or decree of or by any court, or judge, justice or
magistrate, including any bankruptcy court or judge, or any order of or by any
governmental authority, shall have been issued, and no action or proceeding
shall have been instituted by any governmental authority, or self-regulatory
organization enjoining or preventing the consummation of the transactions
contemplated hereby or in the other Note Documents.


(e)           The Company shall
have delivered a Certificate, executed on behalf of the Company by its Chief Executive
Officer or its Chief Financial Officer, dated as of the Closing Date,
certifying to the fulfillment of the conditions specified in subsections (a),
(b), (d), and (h) of this Section 7.1.


(f)            The Company shall
have delivered a Certificate, executed on behalf of the Company by its
Secretary, dated as of the Closing Date, certifying the resolutions adopted by
the Board of Directors of the Company approving the transactions contemplated
by this Agreement and the other Note Documents and the issuance of the Notes
and the Common Shares upon conversion thereof, certifying the current versions
of the Notice of Articles and Articles of the Company and certifying as to the
signatures and authority of persons signing the Note Documents and related
documents on behalf of the Company.


(g)           The Purchasers shall
have received (i) an opinion from Hogan & Hartson L.L.P., the Company’s
U.S. counsel, dated as of the Closing Date, in the form attached hereto as Exhibit D-1; and (ii) an opinion from
Bull, Housser & Tupper LLP, the Company’s Canadian counsel, dated as of the
Closing Date, in the form attached hereto as Exhibit D-2.


(h)           No stop order, cease
trade order or suspension of trading shall have been imposed by any Person with
respect to public trading in the Common Shares.


(i)            The Common Shares to be issued upon
conversion of the Notes shall have been approved for inclusion on AMEX and
Toronto Stock Exchange and listed and admitted and authorized for trading on
AMEX and Toronto Stock Exchange. 
Satisfactory evidence of such actions shall have been provided to the
Placement Agents.


(j)            The Company shall have obtained the
consent of JPMorgan Chase Bank, N.A. with respect to the consummation of the
Private Placement and the transactions contemplated by the Note Documents and
shall have deliver a written copy of such consent to the Purchasers.


7.2.          Conditions to
Obligations of the Company. The Company’s obligation to sell and issue the
Notes at the Closing is subject to the fulfillment to the satisfaction of the 



 37
 









Company on or prior to the Closing Date of the
following conditions, any of which may be waived by the Company:


(a)           The representations
and warranties made by the Purchasers in Section 6 hereof shall be true
and correct in all material respects when made, and shall be true and correct
in all material respects on the Closing Date with the same force and effect as
if they had been made on and as of said date. 
The Purchasers shall have performed in all material respects all obligations
and conditions herein required to be performed or observed by them on or prior
to the Closing Date.


(b)           The Purchasers shall
have executed and delivered the Registration Rights Agreement and the
Subordination Agreement to the Company at or prior to Closing; provided,
that, this condition shall be satisfied with respect to each Purchaser
who has executed and delivered the Registration Rights Agreement and the
Subordination Agreement.


(c)           Each of the
Purchasers shall have delivered to the Company the Aggregate
Purchase Price set forth opposite
such Purchaser’s name on Schedule
I affixed hereto.


(d)           The Company shall
have obtained the acceptance of TSX and the approval of AMEX, and all of which
shall be and remain so long as necessary in full force and effect.


(e)           No judgment, writ,
order, injunction, award or decree of or by any court, or judge, justice or
magistrate, including any bankruptcy court or judge, or any order of or by any
governmental authority, shall have been issued, and no action or proceeding
shall have been instituted by any governmental authority, or self-regulatory
organization enjoining or preventing the consummation of the transactions
contemplated hereby or in the other Note Documents.


(f)            The Company shall have received from
each of the Purchasers duly and accurately completed disclosures as required
under this Agreement in the forms specified in Schedule
III, Schedule IV
and Schedule V to this Agreement.


(g)           The Company shall have obtained the
consent of JPMorgan Chase Bank, N.A. with respect to the consummation of the
Private Placement and the transactions contemplated by the Note Documents.


7.3.          Termination of Obligations to
Effect Closing; Effects.


(a)           The obligations of the Company, on
the one hand, and the Purchasers, on the other hand, to effect the Closing
shall terminate as follows:


(i)            Upon the mutual written consent of
the Company and the Requisite Holders;


(ii)           By the Company if any of the
conditions set forth in Section 7.2 shall have become incapable of
fulfillment, and shall not have been waived by the Company;



 38
 









(iii)          By the Requisite Holders if any of the
conditions set forth in Section 7.1 shall have become incapable of
fulfillment, and shall not have been waived by the Requisite Holders; or


(iv)          By any Purchaser (with respect to
itself only) if the Closing has not occurred on or prior to January 31, 2007;


provided,
however, that, except in the case of clause (i) above, the party seeking
to terminate its obligation to effect the Closing shall not then be in breach
of any of its representations, warranties, covenants or agreements contained in
this Agreement or the other Note Documents if such breach has resulted in the
circumstances giving rise to such party’s seeking to terminate its obligation
to effect the Closing.


(b)           Nothing in this Section 7.3
shall be deemed to release any party from any liability for any breach by such
party of the terms and provisions of this Agreement or the other Note Documents
or to impair the right of any party to compel specific performance by any other
party of its obligations under this Agreement or the other Note Documents.


8.             Covenants and Agreements of the
Company.


8.1.          Commercially
Reasonable Efforts. Each party shall use its commercially reasonable
efforts timely to satisfy each of the conditions to be satisfied by it as provided
in Sections 7.1 and 7.2 of this Agreement.


8.2.          Termination of
Certain Covenants.  The covenants set
forth in Section 8 shall terminate and be of no further force and effect
upon the date on which the Company’s obligations under the Registration Rights
Agreement to register and maintain the effectiveness of any registration
covering the Registrable Securities (as such term is defined in the
Registration Rights Agreement) shall terminate, unless such covenant is
required to satisfied at such earlier date.


8.3.          Reports.  The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in
securities of the Company.


8.4.          No Conflicting
Agreements.  The Company will not
take any action, enter into any agreement or make any commitment that would
conflict or interfere in any material respect with the obligations to the
Purchasers under the Note Documents.


8.5.          Insurance.  The Company shall not materially reduce the
insurance coverages described in Section 5.20.


8.6.          Compliance with
Laws.  The Company will comply with
all applicable laws, rules, regulations, orders and decrees of all governmental
authorities, except where such 



 39
 









non-compliance would result, either individually or in
the aggregate, in a Material Adverse Effect.


8.7.          Listing of Common Shares and
Related Matters.  Promptly following
the date hereof, the Company shall take all necessary action to cause the
Common Shares to be issued upon conversion of the Notes to be approved for
listing on AMEX and TSX.  Further, if the
Company applies to have its Common Shares or other securities traded on any
other Eligible Market, it shall include in such application the Common Shares
issuable upon conversion of the Notes and will take such other action as is
necessary to cause such Common Shares to be so listed.  The Company will use commercially reasonable
efforts to continue the listing and trading of its Common Shares on AMEX and
TSX and, in accordance, therewith, will use commercially reasonable efforts to
comply in all respects with the Company’s reporting, filing and other
obligations applicable to issuers whose securities are listed on such
market.  The Company shall pay all fees
and expenses in connection with satisfying its obligations under this Section
8.7.


8.8.          Securities Filings.  The Company will make all filings required by
the laws, rules and regulations of the securities regulatory authorities in the
provinces and territories of Canada, as applicable, in connection with the sale
of the Notes, including with the securities regulatory authorities of the
Province of Canada.  The Company agrees
to file a Form D with respect to the Notes as required under Regulation D, and
Form 45-106F1 as required under Canadian securities laws, and to provide copies
thereof to the Placement Agents Counsel promptly after such filing.  The Company shall make all filings and
reports relating to the offer and sale of the Notes required under applicable
securities or “Blue Sky” laws of the states of the United States following the
Closing Date.


8.9.          Removal of Legends.  Upon the earlier of (i) registration for
resale of the Common Shares issued upon conversion of the Notes pursuant to the
Registration Rights Agreement and receipt by the Company of the Purchaser’s
written confirmation that such Common Shares have been disposed of in
compliance with the prospectus filed with such registration statement and the
prospectus delivery requirements of the 1933 Act or (ii) delivery to the
Company of a representation letter in customary form that Rule 144(k) has
become available, the Company shall, upon a Purchaser’s written request,
promptly cause certificates evidencing the Purchaser’s Common Shares issued
upon conversion of the Notes to be replaced with certificates which do not bear
the restrictive legend appearing in the first paragraph of Section 6.6(b).  The restrictive legend appearing in the
second paragraph of Section 6.6(b) may be removed at the time of a
transfer occurring on or after the date specified therein.  The restrictive legend appearing in the third
paragraph of Section 6.6(b) may be removed at such time as both the
first and second paragraphs have been removed or are eligible for removal.  When the Company is required to cause
unlegended certificates to replace previously issued legended certificates, if
unlegended certificates are not delivered to a Purchaser within three (3)
Business Days of submission by that Purchaser of legended certificate(s) to the
Company’s transfer agent together with a representation letter in customary
form, the Company shall be liable to the Purchaser for damages in an amount
equal to 1.0% of the Aggregate Purchase Price of the Notes evidenced by such
certificate(s) for each thirty (30) day period (or portion thereof) beyond such
three (3) Business Day that the unlegended certificates have not been so
delivered.



 40
 









8.10.        Consent of JPMorgan Chase Bank.  The Company shall use its commercially
reasonable efforts, acting diligently and in good faith, to obtain consent of
JPMorgan Chase Bank, N.A. with respect to the Private Placement and the
transactions contemplated by the Note Documents as soon as practicable.


8.11.        Shareholder Approval.  The Company shall provide each shareholder
entitled to vote at a special or annual meeting of shareholders of the Company
(the “Shareholder Meeting”),
which initially shall be promptly called and held not later than March 31, 2007
(the “Shareholder Meeting Deadline”),
a proxy statement, substantially in the form which has been previously reviewed
by the Purchasers and Placement Agents Counsel at the expense of the Company,
soliciting each such shareholder’s affirmative vote at the Shareholder Meeting
for approval of resolutions (the “Resolutions”)
providing for the Company’s issuance of all of the Notes and Common Shares upon
conversion thereof as described in the Note Documents in accordance with
applicable law and the rules and regulations of the Exchange (such affirmative
approval being referred to herein as the “Shareholder
Approval” and the date such approval is obtained, the “Shareholder Approval Date”), and the
Company shall use its commercially reasonable efforts to solicit its shareholders’
approval of the Resolutions and to cause the Board to recommend to the
shareholders that they approve the Resolutions.  The Company shall be
obligated to seek to obtain the Shareholder Approval by the Shareholder Meeting
Deadline.  If, despite the Company’s commercially reasonable efforts, the
Shareholder Approval is not obtained on or prior to the Shareholder Meeting
Deadline, the Company shall solicit Shareholder Approval at the annual
shareholders meeting each year and use its commercially reasonable efforts to
obtain such Shareholder Approval until Shareholder Approval is obtained.  Notwithstanding the foregoing,
in the event that Shareholder Approval is required in order to issue Common
Shares upon conversion of the Notes in excess of the Exchange Cap, then the
Company shall use commercially reasonable efforts to obtain such Shareholder
Approval on a quarterly basis, rather than annually, until Shareholder Approval
is obtained.


8.12.        Pledge of Securities.  The
Company acknowledges and agrees that the Notes or Common Shares upon conversion
thereof may be pledged by a Purchaser in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by the Notes
or Common Shares.  The pledge of such Notes or Common Shares shall not be
deemed to be a transfer, sale or assignment of the securities hereunder; provided
that Purchaser acknowledges that if the Company is deemed to be a PFIC (as
defined below) then such pledge will be a taxable disposition for U.S. tax purposes.  No Purchaser effecting a pledge of Notes or
Common Shares shall be required to provide the Company with any notice thereof
or otherwise make any delivery to the Company pursuant to this Agreement or any
other Note Document.  The Company hereby agrees to execute and deliver
such documentation as a pledgee of the Notes or Common Shares may reasonably
request in connection with a pledge of the Notes or Common Shares to such
pledgee by a Purchaser.


8.13.        Reservation of Common Shares. 
The Company shall take all action necessary to at all times have authorized,
and reserved for the purpose of issuance, no less than the sum of 130% of the
maximum number of Common Shares issuable upon conversion of the Notes (assuming
for purposes hereof, that the Notes are convertible at the Conversion Price).



 41
 









8.14.        No Future Integrated Offerings.  None of the Company, its Subsidiaries, their
Affiliates and any Person acting on their behalf will take any action or steps
referred to in Section 5.23 that would require registration of any of the Notes
or Common Shares (other than for resale) upon conversion thereof under the 1933
Act.


8.15.        Reporting Status. Until the later
of the date on which none of the Notes are outstanding or the Purchasers shall
have sold all the Common Shares upon conversion of the Notes (the “Reporting Period”), the Company shall
timely file all reports required to be filed with the SEC pursuant to the 1934
Act and with Canadian securities regulators pursuant to Canadian securities
laws, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would no longer require or otherwise permit such
termination. From and after the Closing Date, the Company shall take all
actions necessary to maintain its eligibility to register the Common Shares for
resale by the Purchasers on Form S-1 or whatever registration form is then
available to the Company and will register the Common Shares for resale in
accordance with the Registration Rights Agreement.


8.16.        Financial Information. The
Company agrees to send the following to each Purchaser during the Reporting
Period (i) unless the following are filed with the SEC through EDGAR and are
available to the public through the EDGAR system, within one (1) Business Day
after the filing thereof with the SEC, a copy of its Annual Reports and
Quarterly Reports on Form 10-K, 10-KSB, 10-Q or 10-QSB, any interim reports or
any consolidated balance sheets, income statements, stockholders’ equity
statements and/or cash flow statements for any period other than annual, any
Current Reports on Form 8-K and any registration statements (other than on Form
S-8) or amendments filed pursuant to the 1933 Act and (ii) copies of any
notices and other information made available or given to the shareholders of
the Company generally, contemporaneously with the making available or giving
thereof to the shareholders.


8.17.        Disclosure. Upon receipt or delivery by the Company of
any notice in accordance with the terms of this Agreement, unless the Company
has in good faith determined that the matters relating to such notice do not
constitute material, nonpublic information relating to the Company or its
Subsidiaries, the Company shall within one (1) Business Day after any such
receipt or delivery publicly disclose such material, nonpublic information on a
Current Report on Form 8-K or otherwise. In the event that the Company believes
that a notice contains material, nonpublic information relating to the Company
or its Subsidiaries, the Company so shall indicate to the Purchasers
contemporaneously with delivery of such notice, and in the absence of any such
indication, the Purchasers shall be allowed to presume that all matters
relating to such notice do not constitute material, nonpublic information
relating to the Company or its Subsidiaries.


8.18.        Assumption.
The Company shall not enter into or be party to a Fundamental Transaction
unless (i) the Successor Entity assumes (in addition to the Company, if the
Company then remains in existence) in writing all of the obligations of the
Company under this Agreement and the other Note Documents in accordance with
the provisions of this Section 8.18 pursuant to written agreements in
form and substance satisfactory to the Requisite Holders and approved by the
Requisite Holders prior to such Fundamental Transaction; and (ii) to following
the Fundamental Transaction, the Company shall be able to deliver to
Purchasers, 



 42
 









upon conversion of the Notes, securities that are
prescribed securities under Regulation 6208 of the Income Tax
Act (Canada).  Upon
consummation of the Fundamental Transaction, the Successor Entity shall deliver
to the Purchasers confirmation that there shall be issued upon conversion of
the Notes at any time after the consummation of the Fundamental Transaction,
either Common Shares or shares of common stock (or their equivalent) of the
Successor Entity, as adjusted in accordance with the provisions of this
Agreement.  The provisions of this Section 8.18 shall apply similarly and
equally to successive Fundamental Transactions and shall be applied without
regard to any limitations on the conversion of the Notes.


8.19.        Pre-Emptive Rights.


(a)           If the Company intends, directly or indirectly, to offer, sell, grant any option to purchase, or otherwise dispose of (or announce any offer, sale, grant or any option to purchase or other disposition of) any of its equity or equity equivalent securities, including without limitation any debt, preferred shares or other instrument or security that is, at any time during its life and under any circumstances, convertible into or exchangeable or exercisable for its Common Shares or securities convertible or exchangeable into its Common Shares, other than pursuant to the Series B Note Offering or Common Shares issued for strategic investments or bona fide acquisitions, firmly underwritten public offerings with gross proceeds in excess of US $50,000,000 and any Approved Shares Plan (any such offer, sale, grant, disposition or announcement being referred to as a “Subsequent Placement”), the Company shall have first complied with this Section 8.19.
(b)           The Company shall deliver to each Purchaser, so long as such Purchaser is then a holder of outstanding Notes, a written notice (the “Offer Notice”) of any proposed or intended issuance or sale (the “Offer”) of the securities being offered (the “Offered Securities”) in a Subsequent Placement, which Offer Notice shall (w) identify and describe the Offered Securities, (x) describe the price and other terms upon which they are to be issued or sold, and the number or amount of the Offered Securities to be issued or sold, (y) identify the persons or entities (if known) to which or with which the Offered Securities are to be offered, issued or sold and (z) offer to issue and sell to such Purchasers, so long as such Purchasers are then a holder of outstanding Notes, an aggregate amount representing thirty percent (30%) of the amount of the Subsequent Placement, to be allocated among such Purchasers (i) based on such Purchaser’s Allocation Percentage (the “Basic Amount”), and (ii) with respect to each Purchaser that elects to purchase its Basic Amount, any additional portion of the Offered Securities attributable to the Basic Amounts of other Purchasers as such Purchaser shall indicate it will purchase or acquire should the other Purchasers subscribe for less than their Basic Amounts (the “Undersubscription Amount”).
(c)           To accept an Offer, in whole or in part, such Purchaser must deliver a written notice to the Company prior to the end of the second (2nd) Business Day by 5:00 p.m New York City time after such Purchaser’s receipt of the Offer Notice containing the final definitive terms of the Subsequent Placement (the “Offer Period”), setting forth the portion of such Purchaser’s Basic Amount that such Purchaser elects to purchase and, if such Purchaser shall elect to purchase all of its Basic Amount, the Undersubscription Amount, if any, that such Purchaser elects to purchase (in either case, the “Notice Of Acceptance”). If the Basic Amounts subscribed for by all Purchasers are less than the total of all of the Basic Amounts, then each 

 43
 









Purchaser who has set forth an Undersubscription
Amount in its Notice of Acceptance shall be entitled to purchase, in addition
to the Basic Amounts subscribed for, the Undersubscription Amount it has
subscribed for; provided, however, that if the Undersubscription
Amounts subscribed for exceed the difference between the total of all the Basic
Amounts and the Basic Amounts subscribed for (the “Available Undersubscription Amount”), each Purchaser who
has subscribed for any Undersubscription Amount shall be entitled to purchase
only that portion of the Available Undersubscription Amount as the Basic Amount
of such Purchaser bears to the total Basic Amounts of all Purchasers that have
subscribed for Undersubscription Amounts, subject to rounding by the Company to
the extent its deems reasonably necessary.


(d)           If
the Purchasers, collectively, do not elect to purchase 30% of the Subsequent
Placement which may be purchased by such Purchasers pursuant to this Section
8.19, the Issuer may offer and sell the securities to which the Purchasers
were entitled to purchase hereunder, or the securities not purchasable by the
Purchasers hereunder, as the case may be, to a third party (which may include
any Purchaser), provided that such sale must occur within thirty (30)
days of the Subsequent Placement Closing Date and on the same terms and
conditions set forth in the Offer Notice. Any such sale made after such
thirty-day period, or on terms or conditions different than the terms set forth
in the Offer Note, must again be offered to the Purchasers in accordance with Section
8.19 above.  Each purchase of
securities by Purchasers pursuant to this Section 8.19 shall take place
on the Subsequent Placement Closing Date


8.20.        Change
of Control Repayment Right.


(a)           No sooner than fifteen (15) days nor later than ten
(10) days prior to the consummation of a Change of Control, but not prior to
the public announcement of such Change of Control, the Company shall deliver
written notice thereof via facsimile and overnight courier to the Purchasers,
which notice shall include an offer to repay the Notes for the Change of
Control Prepayment Price, as defined below (a “Change of Control  Notice”).
At any time during the period (the “Change
of Control Period”) beginning after a Purchaser’s receipt of a
Change of Control Notice and ending on the date that is twenty (20) Trading
Days after the consummation of such Change of Control, such Purchaser may
accept the Company’ offer to prepay all or any portion of such Purchaser’s
Notes by delivering written notice thereof (“Change of Control Prepayment Notice”) to the Company,
which Change of Control Prepayment Notice shall indicate the Conversion Amount
the Purchaser is electing to receive payment of. Any Notes subject to
prepayment pursuant to this Section 8.20 shall be prepayed by the
Company in cash at a price equal to the greater of (i) the product of (A) the
Change of Control Prepayment Premium and (B) the Conversion Amount being
prepayed and (ii) (1) the product of (A) the Conversion Amount being prepayed
multiplied by (B) the quotient determined by dividing (I) the aggregate cash
consideration and the aggregate cash value of any non-cash consideration per
Common Share to be paid to the holders of the Common Shares upon consummation
of the Change of Control (any such non-cash consideration consisting of
marketable securities to be valued at the higher of (x) the Closing Sale Price
of such securities as of the Trading Day immediately prior to the consummation
of such Change of Control, (y) the Closing Sale Price as of the Trading Day
immediately following the public announcement of such proposed Change of
Control and (z) the Closing Sale Price as of the Trading Day immediately prior
to the public announcement of such proposed Change of Control) by (II) the
Conversion Price (the “Change of Control
Prepayment Price”).



 44















(b)           The
Company shall, subject to the terms and conditions of any Senior Debt then
outstanding, make payment in cash of the Change of Control Prepayment Price
concurrently with the consummation of such Change of Control if such a Change
of Control Redemption Notice is received prior to the consummation of such
Change of Control and within five (5) Trading Days after the Company’s receipt
of such notice otherwise (the “Change of
Control Prepayment Date”). To the extent redemptions required by
this Section 8.20 are deemed or determined by a court of competent
jurisdiction to be prepayments of the Notes by the Company, such redemptions
shall be deemed to be voluntary prepayments.


(c)           Notwithstanding
anything to the contrary in this Section 8.20, until the Change of
Control Prepayment Price is paid in full, the Conversion Amount submitted for
Prepayment under this Section 8.20 may be converted, in whole or in
part, by the Purchaser into Common Shares, or in the event the Conversion Date
is after the consummation of the Change of Control, shares or equity interests
of the Successor Entity substantially equivalent to the Company’s Common Shares
pursuant to Section 4.1(b)(i).


(d)           The
parties hereto agree that in the event of the Company’s prepayment of any
portion of the Notes under this Section 8.20, the Purchaser’s damages
would be uncertain and difficult to estimate because of the parties’ inability
to predict future interest rates and the uncertainty of the availability of a
suitable substitute investment opportunity for the Purchaser. Accordingly, any
prepayment premium due under this Section 8.20 is intended by the
parties to be, and shall be deemed, a reasonable estimate of the Purchaser’s
actual loss of its investment opportunity and not as a penalty. In the event
that the Company does not pay the Change of Control Prepayment Price on the
Change of Control Prepayment Date, then the Purchaser shall have the option to,
in lieu of prepayment, require the Company to promptly return to such Purchaser
any or all of the Notes that were submitted for prepayment by such Purchaser
under this Section 8.20 and for which the applicable Change of Control
Prepayment Price (together with any interest thereon) has not been paid, by
sending written notice thereof to the Company via facsimile (the “Void Change of Control Prepayment Notice”).
Upon the Company’s receipt of such Void Change of Control Prepayment Notice,
(i) the Change of Control Prepayment Notice shall be null and void with respect
to those Notes subject to the Void Change of Control Prepayment Notice,
(ii) the Company shall immediately return any Notes subject to the Void
Change of Control Prepayment Notice, and (iii) the Conversion Price of such
returned Notes shall be adjusted to the lesser of (A) the Conversion Price as
in effect on the date on which the Void Change of Control Prepayment Notice is
delivered to the Company and (B) the lowest Weighted Average Price of the
Common Shares during the period beginning on the date on which the Change of
Control Prepayment Notice is delivered to the Company and ending on the date on
which the Void Change of Control Prepayment Notice is delivered to the Company.


8.21.        Tax Matters.  The
Company and, by its acceptance of the Note or a beneficial interest therein,
each Purchaser (and any person that acquires a beneficial interest in) a Note,
agree to treat the Notes for U.S. federal income tax purposes as indebtedness
of the Company that is not subject to the rules governing contingent payment
debt instruments under U.S. Treasury Regulations Section 1.1275-4.



 45
 









8.22.        PFIC Status.  The Company shall use commercially reasonable
efforts to ensure that it does not become a passive foreign investment company
(a “PFIC”) within the meaning of
Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.  If
the Company determines that it is a PFIC for any taxable year in which the
Notes are outstanding, it shall notify the Purchasers of such determination as
soon as reasonably practicable, but in no event later than the 45th day following
the close of such taxable year.  If the Company becomes a PFIC, the
Company agrees to provide all information requested by any Purchaser that is
necessary for such Purchaser to make a “qualified electing fund”
election.  The Company’s obligation under this Section 8.22 shall
survive until the 180th day following the close of the last taxable year of the
Company in which any Notes are outstanding


9.             Defaults and Remedies.


9.1.          Event of Default. An “Event of Default” shall be deemed to
have occurred at such time as any of the following events:


(a)           the Company defaults in the payment
when due of interest (and Additional Amounts, if any) on the Notes and such
default continues for a period of 30 days;


(b)           the Company defaults in the payment
when due of principal on the Notes when the same becomes due and payable upon
the earlier of:  (i) the Maturity Date,
or (ii) such other date as the Note becomes due and payable or purchasable or
redeemable pursuant to this Agreement;


(c)           the Company fails to observe or perform
any other covenant or other agreement in this Agreement (other than the
delivery of a Change of Control Notice as required by Section 8.20
hereof), the Notes or the other Note Documents for 30 days after notice to the
Company by the Purchasers of at least 50% in aggregate principal amount of the
Notes then outstanding;


(d)           the
entry by a court having jurisdiction in the premises of (i) a decree or order
for relief in respect of the Company or any Subsidiary of a voluntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (ii) a decree or order adjudging the
Company or any Subsidiary as bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or composition
of or in respect of the Company or any Subsidiary under any applicable Federal
or State law or (iii) appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or any Subsidiary
or of any substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or order for
relief or any such other decree or order unstayed and in effect for a period of
60 consecutive days;


(e)           the
commencement by the Company or any Subsidiary of a voluntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency, reorganization or
other similar law or of any other case or proceeding to be adjudicated a bankrupt
or insolvent, or the consent by it to the entry of a decree or order for relief
in respect of the Company or any Subsidiary in an involuntary case or
proceeding under any applicable 



 46
 









Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under any applicable Federal
or State law, or the consent by it to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the Company or any
Subsidiary or of any substantial part of its property, or the making by it of
an assignment for the benefit of creditors, or the admission by it in writing
of its inability to pay its debts generally as they become due, or the taking
of corporate action by the Company or any Subsidiary in furtherance of any such
action;


(f)            a
default occurs with respect to any Indebtedness of the Company or any of its
Subsidiaries, and any applicable grace periods in such Indebtedness with
respect to such event of default shall have expired and which default results
in the acceleration of such Indebtedness prior to its stated maturity; provided
that (i) if such event of default is waived by the holders of such Indebtedness
prior to any Purchaser taking any action pursuant to this Agreement, no Event
of Default under this clause (f) shall be deemed to have occurred, or (ii) the
principal amount of such Indebtedness under which the maturity has been so
accelerated exceeds US$500,000;


(g)           a
final money judgment for more than US$500,000 is issued and not discharged
within 60 days; or


(h)           the
Company fails to deliver a Change of Control Notice as required by Section
8.20 by the date that is ten (10) Trading Days after the consummation of
such Change of Control.


9.2.          Notice.  Within one (1) Business Day after the
occurrence of an Event of Default, the Company shall deliver written notice
thereof via facsimile and overnight courier (“Notice of Event of Default”) to each Purchaser. 


9.3.          Default Interest.  If any Event of Default has occurred and is
continuing, the holders of the Notes shall be entitled to receive, to the
extent permitted by applicable law, interest on the outstanding balance of,
overdue interest and Additional Amounts, if any, on the Notes at a rate per
annum equal to 12%.


9.4.          Acceleration.  If any Event of Default has occurred and is continuing
and subject to the Subordination Agreement, the Requisite Holders may, without
notice: (i) declare all or any portion of the Notes immediately due and
payable, all without presentment, demand, protest or further notice of any
kind, all of which are expressly waived by the Company and each of its
Subsidiaries; or (ii) exercise any other rights and remedies provided to
Purchasers under the Note Documents or at law or equity.


9.5.          Redemption Option Upon Event of
Default.


(a)           In
addition to all other rights of the Purchasers contained herein, after a Event
of Default, each Purchaser shall have the right, at such Purchaser’s option, to
require the Company to redeem all or a portion of such Purchaser’s Notes at a
redemption price per Note equal to the greater of (i) 110% of the Conversion
Amount and (ii) the product of (A)



 47
 









the Conversion Rate in effect at such time as such
Purchaser delivers a Notice of Redemption at Option of Purchaser (as defined
below) and (B) the greater of the Closing Sale Price of the Common Shares on
the Trading Day immediately preceding such Event of Default, the Closing Sale
Price of the Common Shares on the day immediately following such Event of
Default and the Closing Sale Price of the Common Shares on the date the
Purchaser delivers the Notice of Redemption at Option of Purchaser (the “Redemption Price”).


(b)           At
any time after the earlier of a Purchaser’s receipt of a Notice of Event of
Default and such Purchaser becoming aware of a Event of Default, any Purchaser
of Notes then outstanding may require the Company to redeem up to all of such
Purchaser’s Notes by delivering written notice thereof via facsimile and
overnight courier (“Notice of Redemption
at Option of Purchaser”) to the Company, which Notice of
Redemption at Option of Purchaser shall indicate the number of Notes that such
Purchaser is electing to redeem.


(c)           Upon
the Company’s receipt of a Notice(s) of Redemption at Option of Purchaser from
any Purchaser, the Company shall within one (1) Business Day of such receipt
notify each other Purchaser by facsimile of the Company’s receipt of such
notice(s). The Company shall, subject to the terms and conditions of any Senior
Debt then outstanding, make payment in cash on the fifth (5th) Business Day
after the Company’s receipt of the first Notice of Redemption at Option of
Purchaser of the applicable Redemption Price (the “Event of Default Redemption Date”) to
all Purchasers that deliver a Notice of Redemption at Option of Purchaser prior
to the fifth (5th) Business Day after the Company’s receipt of the first Notice
of Redemption at Option of Purchaser. To the extent redemptions required by
this Section 9.5 are deemed or determined by a court of competent
jurisdiction to be prepayments of the Notes by the Company, such redemptions
shall be deemed to be voluntary prepayments. If the Company is unable to redeem
all of the Notes submitted for redemption, the Company shall redeem a pro rata
amount from each Purchaser based on the aggregate principal amount of Notes
submitted for redemption by such Purchaser relative to the total number of
Notes submitted for redemption by all Purchasers. The Purchasers and Company
agree that in the event of the Company’s redemption of any Notes under this Section
9.5, the Purchasers’ damages would be uncertain and difficult to estimate
because of the parties’ inability to predict future interest rates and the
uncertainty of the availability of a suitable substitute investment opportunity
for the Purchasers. Accordingly, any redemption premium due under this Section
9.5 is intended by the parties to be, and shall be deemed, a reasonable
estimate of the Purchasers’ actual loss of its investment opportunity and not
as a penalty.


(d)           In
the event that the Company does not pay the Redemption Price within the time
period set forth in Section 9.5(f), at any time thereafter and until the
Company pays such unpaid applicable Redemption Price in full, a Purchaser shall
have the option to, in lieu of redemption, require the Company to promptly
return to such Purchaser any or all of the Notes that were submitted for
redemption by such Purchaser under this Section 3 and for which the applicable
Redemption Price has not been paid, by sending written notice thereof to the
Company via facsimile (the “Void Optional
Redemption Notice”). Upon the Company’s receipt of such Void
Optional Redemption Notice, (i) the Notice of Redemption at Option of Purchaser
shall be null and void with respect to those Notes subject to the Void Optional
Redemption Notice, (ii) the Company shall immediately return any Notes subject
to the Void Optional Redemption Notice, and (iii) the Conversion Price of such
returned Notes shall be 



 48
 









adjusted to the lesser of (A) the Conversion Price as
in effect on the date on which the Void Optional Redemption Notice is delivered
to the Company and (B) the lowest Weighted Average Price of the Common Shares
during the period beginning on the date on which the Notice of Redemption at
Option of Purchaser is delivered to the Company and ending on the date on which
the Void Optional Redemption Notice is delivered to the Company.


(e)           In
the event of a dispute as to the determination of the arithmetic calculation of
the Redemption Price, such dispute shall be resolved pursuant to Section
4.1(b)(iii) with the term “Redemption Price” being substituted for the term
“Conversion Rate”. A Purchaser’s delivery of a Void Optional Redemption Notice
and exercise of its rights following such notice shall not affect the Company’s
obligations to make any payments which have accrued prior to the date of such
notice. In the event of a redemption pursuant to this Section 9.5 of
less than all of the Notes represented by a particular Note tendered for
partial redemption, the Company shall promptly cause to be issued and delivered
to the Purchaser of such Notes a new Note representing the remaining principal
amount of the Notes which have not been redeemed, if necessary.


10.           Registration and Transfer of Notes.


10.1.        Note
Register.  The Company shall maintain
at its principal executive offices (or such other office or agency of the
Company as it may designate by notice to the Purchasers), a register for the
Notes, in which the Company shall record the name and address of the persons in
whose name the Notes have been issued, as well as the name and address of each
transferee. The Company shall treat the person in whose name any Note is
registered on the register as the owner and holder thereof for all purposes,
notwithstanding any notice to the contrary, but in all events recognizing any properly
made transfers.  The Company shall only
pay principal and interest to the registered owners of the Notes.


10.2.        Transfer and Conversion of Note.  Upon surrender of one or more Notes for
registration of transfer or for exchange to the Company at their principal
office with evidence that all applicable transfer taxes have been paid and that such transfer is in compliance with
applicable securities laws, the Company at their expense will execute
and deliver in exchange therefore one or more Notes in the aggregate unpaid
principal amount(s) of such surrendered Note(s).  Each such new Note shall be registered in the
name of such Person, or its nominee, as such Purchaser or transferee may
request, dated so that there will be no loss of interest on such surrendered
Note and otherwise of like tenor. Transfer of the Notes may be effected only in
accordance with the procedures set forth in this Section 10.2.


10.3.        Lost
or Stolen Notes. Upon receipt
by the Company of evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of any Notes, and, in the case of loss, theft
or destruction, of an indemnification undertaking by the Purchaser to the
Company in customary form and, in the case of mutilation, upon surrender and
cancellation of such Notes, the Company shall execute and deliver a new Note of
like tenor and date; provided, however, the Company shall not be
obligated to re-issue such new Note if the Purchaser contemporaneously requests
the Company to convert such Notes into Common Shares.



 49
 









11.           Survival
and Indemnification.


11.1.        Survival.  All representations, warranties, covenants
and agreements contained in this Agreement shall survive the Closing Date for a
period of twelve (12) months; provided, however, that the
provisions contained in Section 4.3 and Section 8 hereof shall
survive in accordance therewith and the representations contained in Section
5.12 shall survive until the expiration of the applicable statute of
limitations.


11.2.        Indemnification.  The Company agrees to indemnify and hold
harmless, each Purchaser and their respective Affiliates and the directors,
officers, employees and agents of each Purchaser and their respective
Affiliates, from and against any and all losses, claims, damages, liabilities
and expenses (including without limitation reasonable attorney fees and
disbursements and other expenses incurred in connection with investigating,
preparing or defending any action, claim or proceeding, pending or threatened
and the costs of enforcement hereof) (collectively, “Losses”) to which such Person may become subject as
a result of any breach of representation, warranty, covenant or agreement made
by, or to be performed on the part of, the Company under the Note Documents,
and will reimburse any such Person for all such amounts as they are incurred by
such Person.


11.3.        Conduct of
Indemnification Proceedings.  Promptly after
receipt by any Person (the “Indemnified Person”) of notice of any demand, claim or
circumstances which would or might give rise to a claim or the commencement of
any action, proceeding or investigation in respect of which indemnity may be
sought pursuant to Section 11.2, such Indemnified Person shall promptly
notify the Company in writing and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Person, and shall assume the payment of all fees and expenses; provided,
however, that the failure of any Indemnified Person so to notify the
Company shall not relieve the Company of its obligations hereunder except to
the extent that the Company is actually and materially prejudiced by such
failure to notify.  In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless: (i) the Company and the Indemnified Person
shall have mutually agreed to the retention of such counsel; or (ii) in the
reasonable judgment of counsel to such Indemnified Person representation of
both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. 
The Company shall not be liable for any settlement of any proceeding
effected without its written consent, which consent shall not be unreasonably
withheld, delayed or conditions, but if there be a final judgment for the
plaintiff, the Company shall indemnify and hold harmless such Indemnified
Person from and against any Losses by reason of such judgment.  Without the prior written consent of the
Indemnified Person, the Company shall not effect any settlement of any pending
or threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnity could have been sought hereunder by such Indemnified
Party, unless such settlement includes an unconditional release of such
Indemnified Person from all liability arising out of such proceeding.



 50
 









12.           Miscellaneous.


12.1.        Successors and
Assigns.  This Agreement may not be
assigned by a party hereto without the prior written consent of the Company or
the Purchasers, as applicable; provided, however, that a
Purchaser may assign its rights and delegate its duties hereunder in whole or
in part to an Affiliate or to a third party, that is an “accredited investor”
as defined in Rule 501(a) of Regulation D, as amended under the 1933 Act and is
an “accredited investor” within the meaning of Canadian securities laws, and
that shall agree in writing to be bound by the terms and conditions of this
Agreement.  The provisions of this
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties.  Except for the Placement Agents, which are
express intended third party beneficiaries of this Agreement, and except for
provisions of this Agreement expressly to the contrary, nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement.


12.2.        Counterparts;
Faxes.  This Agreement may be
executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.  This Agreement may also be
executed via facsimile, which shall be deemed an original.


12.3.        Titles and
Subtitles.  The titles and subtitles
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.


12.4.        Notices.  Unless otherwise provided, any notice
required or permitted under this Agreement shall be given in writing and shall
be deemed effectively given as hereinafter described on the earlier of (i) if
given by personal delivery, then such notice shall be deemed given upon such
delivery; (ii) if given by facsimile or electronic mail, then such notice shall
be deemed given upon receipt of confirmation of complete transmittal; (iii) if
given by mail, then such notice shall be deemed given upon the earlier of (A)
receipt of such notice by the recipient, or (B) three days after such notice is
deposited in first class mail, postage prepaid; (iv) if given by an
internationally recognized overnight air courier, then such notice shall be
deemed given one day after delivery to such carrier; and (v) upon actual
receipt by the party to whom the notice is required to be given.  All notices shall be addressed to the party
to be notified at the address as follows, or at such other address as such
party may designate by ten days’ advance written notice to the other party:


If to the Company:


Storm Cat Energy
Corporation


1125 17th Street;
Suite 2310


Denver, CO 80202


Attn: J. Scott
Zimmerman


Fax:  (303) 991-5075



 51
 









With a copy to:


Hogan & Hartson L.L.P.


One Tabor Center, Suite 1500


1200 Seventeenth Street


Denver, CO 80202


Attn: Richard J. Mattera


Fax:  (303) 899-7333


and to:


Bull, Housser
& Tupper LLP


Suite 3000 Royal
Centre


1055 West Georgia
Street


Vancouver, British
Columbia


Attn: David M.
Hunter


Fax: (604) 646-2634


If to any of the Purchasers:


to the addresses set forth on Schedule
I hereto.




With a copy to:


Banc of America Securities
LLC


9 West 57th Street


New York, NY 10019


Attn:  Raymond
Ko


Fax:   (212)
457-3745


and to:


Coker & Palmer, Inc.


3900 N. Causeway Blvd, Suite 860


Metairie, LA 
70002


Attn:  J. David
Coker


Fax:   (504)
799-3568


and to:


First Albany Capital Inc.


One Penn Plaza, 42nd Floor


New York, NY 10019


Attn:  Philip
Keating or James Hansen


Fax:   (212)
273-7320



 52
 









and to:


King & Spalding LLP


1185 Avenue of Americas


New York, NY 
10036


Attn: Christopher C. Paci


Fax:  (212)
556-2222


 


12.5.        Expenses.  The Company shall pay the reasonable fees and
expenses of Placement Agents Counsel in connection with the Private Placement
(the “Placement Agents Counsel Fees”),
but in no event in an amount to exceed, when aggregated with placements agents
counsel fees reimbursable under the Series B Note Purchase Agreement,
US$25,000.  The breakdown of Placement
Agents Counsel Fees between King & Spalding LLP and Osler, Hoskin &
Harcourt LLP shall be provided by Banc of America Securities LLC at least two
(2) Business Days prior to the Closing Date. 
The Placement Agents Counsel Fees shall be paid to Placement Agents
Counsel at the Closing.  Except as set
forth above, the Company and the Purchasers shall each bear their own expenses
in connection with the negotiation, preparation, execution and delivery of this
Agreement.  In the event that legal
proceedings are commenced by any party to this Agreement against another party
to this Agreement in connection with this Agreement or the other Note
Documents, the party or parties which do not prevail in such proceedings shall
severally, but not jointly, pay their pro rata share of the reasonable
attorneys’ fees and other reasonable out-of-pocket costs and expenses incurred
by the prevailing party in such proceedings.


12.6.        Amendments
and Waivers.  Any term of this
Agreement may be amended and the observance of any term of this Agreement shall
not be waived (either generally or in a particular instance and either
retroactively or prospectively), without the prior written consent of the
Company and the Requisite Holders; provided, however, that any
provision hereof which impairs the rights or increases the obligations of a
specific Purchaser disproportionately to other Purchasers shall not be amended
or waived without the prior written consent of the Company and that particular
Purchaser.   Any amendment or waiver effected in accordance
with this Section 12.6 shall be binding upon each holder of any Notes
purchased under this Agreement at the time outstanding, each future holder of
all such Notes, and the Company.


12.7.        Publicity.  No public release or announcement concerning
the transactions contemplated hereby shall be issued by the Purchasers without
the prior consent of the Company, which consents shall not be unreasonably
withheld, except as such release or announcement may be required by law or the
applicable rules or regulations of any securities exchange or securities
market, in which case the Purchasers shall allow the Company to the extent
reasonably practicable in the circumstances, reasonable time to comment on such
release or announcement in advance of such issuance.  On the trading day immediately following the
Execution Date, the Company shall issue a press release disclosing the
execution of this Agreement.  No later
than the fourth Business Day following the Execution Date, the Company will
file a Form 8-K, as applicable, attaching the press release described in the
foregoing sentence as well as copies of the Note Documents.  On the trading day immediately following the
Closing Date, the Company shall issue a press release disclosing the
consummation of the transactions contemplated by this 



 53
 









Agreement.  No
later than the fourth Business Day following the Closing Date, the Company will
file a Form 8-K, as applicable, attaching the press release described in the
foregoing sentence.  In addition, the
Company will make such other filings and notices in the manner and time required
by the SEC and the securities regulatory authorities in the provinces and
territories of Canada in which such filings and notices are required.  Notwithstanding the foregoing, the Company
shall not publicly disclose the name of any Purchaser, or include the name of
any Purchaser in any filing with the SEC (other than the Registration Statement
and any exhibits to filings made in respect of this transaction in accordance
with periodic filing requirements under the 1934 Act), AMEX, TSX, the
securities regulatory authorities in the provinces and territories of Canada or
any other regulatory agency, without the prior written consent of such
Purchaser, except as disclosed in Section 6.13 or otherwise in this Agreement
or such disclosure is required by law or trading market regulations.


12.8.        Severability.  Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.  To the extent
permitted by applicable law, the parties hereby waive any provision of law
which renders any provision hereof prohibited or unenforceable in any respect.


12.9.        Entire
Agreement.  This Agreement, including
the Schedules, Exhibits and the Disclosure Schedules, and the other Note
Documents, constitute the entire agreement among the Company and the Purchasers
with respect to the Private Placement and the subject matter hereof and thereof
and supersede all prior agreements and understandings, both oral and written,
between the Company and the Purchasers with respect to the Private Placement
and the subject matter hereof and thereof; provided, however, the
obligations of a Purchaser under any nondisclosure agreement or confidentiality
letter entered into by such Purchaser in connection with the offering of the
Notes shall continue to apply in accordance with the terms thereof.


12.10.      Further
Assurances.  The parties shall
execute and deliver all such further instruments and documents and take all
such other actions as may reasonably be required to carry out the transactions
contemplated hereby and to evidence the fulfillment of the agreements herein
contained.


12.11.      Governing
Law; Consent to Jurisdiction.  This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to any conflicts of law principles
that would result in the application of the laws of any other
jurisdiction.  Each of the parties hereto
irrevocably submits to the exclusive jurisdiction of the courts of the State of
New York located in New York County and the United States District Court for
the Southern District of New York for the purpose of any suit, action, proceeding
or judgment relating to or arising out of this Agreement and the transactions
contemplated hereby.  Service of process
in connection with any such suit, action or proceeding may be served on each
party hereto anywhere in the world by the same methods as are specified for the
giving of notices under this Agreement. 
Each of the parties hereto irrevocably consents to the jurisdiction of
any such court in any such suit, action or proceeding and to the laying of 



 54
 









venue in such court. 
Each party hereto irrevocably waives any objection to the laying of
venue of any such suit, action or proceeding brought in such courts and
irrevocably waives any claim that any such suit, action or proceeding brought
in any such court has been brought in an inconvenient forum.


12.12.      SUBORDINATION.


(a)           NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS
AGREEMENT OR ANY OTHER AGREEMENT, DOCUMENT, CERTIFICATE, OR INSTRUMENT GIVEN IN
CONNECTION WITH, RELATED TO OR AFFECTING THE NOTES, the Company’s obligation to
make, and the Purchasers right to receive, any interest payments or
distribution (whether in cash, securities (other than Common Shares issuable
upon conversion of the Notes) or other property) or any direct or indirect
payment of any kind or character (whether in cash, securities (other than
Common Shares issuable upon conversion of the Notes) or other property) in
consideration for or otherwise in connection the Notes, including, without
limitation, any amortization, retirement, purchase, redemption or other acquisition
of any Note, or any options, warrants or rights to purchase or acquire any
Notes or Common Shares of the Company (collectively, the “Restricted Payments”) are strictly
junior and fully subordinated to the right of payment held by the holders of the
Senior Debt (the “Senior Debt Holders”).
If a default (however defined) under any document, instrument, or other
agreement in any way related to the Senior Debt, whether such document,
instrument, or other agreement exists on the Closing Date or is entered into
after the Closing Date, exists at the time a Restricted Payment is to be made
or would exist as a result of such Restricted Payment being made, (i) the
Company shall not make, and no Purchaser is entitled to receive, any Restricted
Payment unless and until the “Payment in Full of the Senior Debt” (as defined
below); and (ii) no Purchaser shall be entitled to ask, demand, sue for, take
or receive from the Company or any of its Subsidiaries, directly or indirectly,
in cash or other property, or by set-off or in any other manner (including
without limitation from or by way of collateral) payment of any Restricted
Payment unless and until the Payment in Full of the Senior Debt.


(b)           The subordination of the rights of the Purchasers to the
Senior Debt Holders shall be effective both before and after the commencement
of any Insolvency Proceeding (as defined below). All references in this Section
12.12 to the Company or any of its Subsidiaries shall include such entity
as a debtor-in-possession and any receiver or trustee for such entity in any
Insolvency Proceeding.


(c)           As between the Purchasers and the Senior Debt Holders and
without releasing or affecting any of its senior rights as to the Purchasers,
any Senior Debt Holder may, one or more times, in its sole discretion, without
notice to or the consent of any Purchaser, take any action with respect to the
Company, any of its Subsidiaries or any of the Senior Debt, including, without
limitation, one or more of the following actions: (i) extend credit to the Company
or any of its Subsidiaries in such amounts as such Senior Debt Holder may
determine or withhold credit from the Company or any of its Subsidiaries; 
(ii) release, renew or modify the obligations of the Company or any of its
Subsidiaries or any other person or entity obligated on any of the Senior Debt;
(iii) release, exchange, modify, or surrender in whole or in part such Senior
Debt Holder’s rights with respect to any security for any of the Senior Debt; (iv)



 55
 









modify or alter the term,
interest rate or due date of any payment of any of the Senior Debt; (v) grant
any postponements, compromises, indulgences, waivers, surrenders or discharges
or modify the terms of its agreements with the Company or any of its
Subsidiaries; (vi) change its manner of doing business with the Company or any
of its Subsidiaries or any other person or entity; (vii) obtain additional
security for the Senior Debt; or (viii) impute payments or proceeds of any
security furnished for any of the Senior Debt, in whole or in part, to any of
the Senior Debt, or retain the payments or proceeds as security for the Senior
Debt without applying same toward payment of the Senior Debt. Each Purchaser waives and releases all claims and
defenses arising from any such actions by any holder of Senior Debt, including,
without limitation, claims and defenses relating to the inability to collect
any Restricted Payment. No Senior Debt Holder will be liable for any
action or failure to act under or in connection with any of the documents or
instruments evidencing or securing the Senior Debt, it being understood that
the decision of whether and when to act and the manner of proceeding under such
instruments and documents are within the sole discretion of such Senior Debt
Holders, and shall not be affected in any manner by the existence of the
Company’s obligations hereunder.


(d)           For purposes hereof, “Payment
in Full of the Senior Debt” means the satisfaction of all of the
following: (i) the passage of 90 days after the indefeasible and final payment
in full in cash of the Senior Debt, (ii) the termination of all hedging
transactions with any Senior Debt Holder, (iii) the termination or expiration
of all commitments of each Senior Debt Holder to advance funds or issue letters
of credit, and (iv) the termination or expiration and return of all letters of
credit issued by any Senior Debt Holder. For purposes hereof, “Insolvency Proceeding” means any
distribution of all or any of the assets of any entity to creditors of such
entity upon the dissolution, winding up, liquidation, arrangement,
reorganization, adjustment, protection, relief, or composition of such entity
or its debts, whether in any bankruptcy, insolvency, arrangement,
reorganization, receivership, relief or similar proceedings or upon an assignment
for the benefit of creditors or any other marshalling of the assets and
liabilities of such entity or otherwise.


(e)            In the event there is a conflict between the provisions
in this Section 12.12 and the provisions of the Subordination Agreement,
the Subordination Agreement shall control.


 


[Signature Pages to Follow]



 56














 


[Company Signature Page]


IN WITNESS WHEREOF, the undersigned has executed this
Series A Note Purchase Agreement or caused its duly authorized officers to
execute this Series A Note Purchase Agreement as of the date first above
written.


	
  

  	
  STORM CAT ENERGY CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Scott Zimmerman

  	
   

  
	
   

  	
  Name:

  	
  J. Scott Zimmerman

  
	
   

  	
  Title:

  	
  President and Chief Executive Officer

  
					



 











 


[Purchaser
Signature Page]


IN
WITNESS WHEREOF, the undersigned has executed this Series A Note Purchase
Agreement or caused its duly authorized officers to execute this Series A Note
Purchase Agreement as of the date first above written.


	
  Date:

  	
  January 22, 2007

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  IF AN INDIVIDUAL:

  	
   

  	
  IF A CORPORATION, PARTNERSHIP,

  
	
   

  	
   

  	
    TRUST,
  ESTATE OR OTHER ENTITY:

  
	
   

  	
   

  	
  Crestview Capital Master, LLC

  
	
   

  	
   

  	
  By Crestview Capital Partners, LLC

  
	
   

  	
   

  	
  Its Sole Manager

  	
   

  
	
  (Signature)

  	
   

  	
  Print name of entity

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Printed Name)

  	
   

  	
  By:

  	
    /s/
  Robert Hoyt

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Robert Hoyt

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
    Manager

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Notices:

  	
   

  	
  Address for Notices:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Delivery of Notes:

  	
   

  	
  Address for Delivery of Notes:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Taxpayer Identification Number:

  	
   

  	
  Taxpayer Identification Number:

  
	
   

  	
   

  	
   

  	
   

  
										



 


Aggregate
dollar amount of Notes committed 

to be purchased pursuant to the terms of the Agreement:  US$920,000.00











STORM
CAT ENERGY CORPORATION

SERIES A NOTE PURCHASE AGREEMENT SIGNATURE PAGE


IN
WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement or
caused its duly authorized officers to execute this Note Purchase Agreement as
of the date first above written.


	
  Date

  	
    19-JAN-2007

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  IF AN INDIVIDUAL:

  	
   

  	
  IF A CORPORATION, PARTNERSHIP,

  
	
   

  	
   

  	
    TRUST, ESTATE OR OTHER ENTITY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  GLG NORTH AMERICAN OPPORTUNITY FUND

  	
   

  
	
   

  	
   

  	
  Print name of entity

  
	
   

  	
   

  	
   

  
	
  (Signature)

  	
   

  	
  By:

  	
  GLG Partners LP

  	
   

  
	
   

  	
   

  	
   

  	
  As Investment Manager of GLG

  
	
   

  	
   

  	
   

  	
  North American Opportunity Fund

  
	
  Printed Name

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature:

  	
    /s/
  Victoria Parry

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Victoria Parry

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Senior Legal
  Counsel, GLG Partners LP

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Notices:

  	
   

  	
  Signature:

  	
    /s/
  Simon White

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Chief Operating
  Officer, GLG Partners LP

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Delivery of Notes:

  	
   

  	
  Address for Notices:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Taxpayer Identification Number:

  	
   

  	
  Address for Delivery of Notes:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Taxpayer Identification Number:

  
	
   

  	
   

  	
   

  	
   

  
											



 


Aggregate
dollar amount of Notes committed to be purchased pursuant to the terms of the
Agreement:  US$4,600,000.00











STORM
CAT ENERGY CORPORATION

SERIES A NOTE PURCHASE AGREEMENT SIGNATURE PAGE


IN
WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement or
caused its duly authorized officers to execute this Note Purchase Agreement as
of the date first above written.


	
  Date:

  	
   January 18, 2007

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  IF AN INDIVIDUAL:

  	
   

  	
  IF A CORPORATION, PARTNERSHIP,

  
	
   

  	
   

  	
    TRUST, ESTATE OR OTHER ENTITY:

  
	
   

  	
   

  	
    Capital Ventures International

  
	
   

  	
   

  	
  By Heights Capital Management, Inc., its 

  
	
  (Signature)

  	
   

  	
  authorized agent

  	
   

  
	
   

  	
   

  	
  Print name of entity

  
	
   

  	
   

  	
   

  
	
  (Printed Name)

  	
   

  	
  Signature:

  	
  /s/ Martin
  Kobinger

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Martin Kobinger

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Investment
  Manager

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Notices:

  	
   

  	
  Address for Notices:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Delivery of Notes: 

  	
   

  	
  Address for Delivery of Notes:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Taxpayer Identification Number:

  	
   

  	
  Taxpayer Identification Number:

  
	
   

  	
   

  	
   

  	
   

  
									



 


Aggregate
dollar amount of Notes committed 

to be purchased pursuant to the terms of the Agreement:  US$460,000.00











STORM
CAT ENERGY CORPORATION

SERIES A NOTE PURCHASE AGREEMENT SIGNATURE PAGE


IN
WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement or
caused its duly authorized officers to execute this Note Purchase Agreement as
of the date first above written.


	
  Date:

  	
   January 18, 2007

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  IF AN
  INDIVIDUAL:

  	
   

  	
  IF A
  CORPORATION, PARTNERSHIP,

  
	
   

  	
   

  	
    TRUST,
  ESTATE OR OTHER ENTITY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Iroquois Master Fund Ltd.

  	
   

  
	
  (Signature)

  	
   

  	
  Print name of entity

  	
   

  
	
   

  	
   

  	
   

  
	
  (Printed Name)

  	
   

  	
  Signature:

  	
   /s/ Joshua
  Silverman

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Joshua Silverman

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Authorized
  signator

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Notices:

  	
   

  	
  Address for Notices:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Delivery of Notes:

  	
   

  	
  Address for Delivery of Notes:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Taxpayer Identification Number:

  	
   

  	
  Taxpayer Identification Number:

  
	
   

  	
   

  	
   

  	
   

  
									



 


Aggregate
dollar amount of Notes committed 

to be purchased pursuant to the terms of the Agreement:  US$460,000.00











STORM
CAT ENERGY CORPORATION

SERIES A NOTE PURCHASE AGREEMENT SIGNATURE PAGE


IN
WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement or
caused its duly authorized officers to execute this Note Purchase Agreement as
of the date first above written.


	
  Date:

  	
  1/24/07

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  IF AN
  INDIVIDUAL:

  	
   

  	
  IF A
  CORPORATION, PARTNERSHIP,

  
	
   

  	
   

  	
    TRUST,
  ESTATE OR OTHER ENTITY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Kellogg Capital Group LLC

  	
   

  
	
  (Signature)

  	
   

  	
  Print name of entity

  	
   

  
	
   

  	
   

  	
   

  
	
  (Printed Name)

  	
   

  	
  Signature:

  	
  /s/ Nicholas
  Cappelleni

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Nicholas
  Cappelleni

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Director of
  Finance & Operations

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Notices:

  	
   

  	
  Address for Notices:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Delivery of Notes:

  	
   

  	
  Address for Delivery of Notes:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Taxpayer Identification Number:

  	
   

  	
  Taxpayer Identification Number:

  
	
   

  	
   

  	
   

  	
   

  
									



 


Aggregate
dollar amount of Notes committed 

to be purchased pursuant to the terms of the Agreement:  US$920,000.00











STORM
CAT ENERGY CORPORATION

SERIES A NOTE PURCHASE AGREEMENT SIGNATURE PAGE


IN
WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement or
caused its duly authorized officers to execute this Note Purchase Agreement as
of the date first above written.


	
  Date:

  	
   1/19/07

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  IF AN
  INDIVIDUAL:

  	
   

  	
  IF A
  CORPORATION, PARTNERSHIP,

  
	
   

  	
   

  	
    TRUST,
  ESTATE OR OTHER ENTITY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  William Herbert Hunt Trust Estate

  	
   

  
	
  (Signature)

  	
   

  	
  Print name of entity

  	
   

  
	
   

  	
   

  	
   

  
	
  (Printed Name)

  	
   

  	
  Signature:

  	
    /s/
  J.W. Beavers, Jr., Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  J.W. Beavers,
  Jr., Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Notices:

  	
   

  	
  Address for Notices:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Delivery of Notes:

  	
   

  	
  Address for Delivery of Notes:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Taxpayer Identification Number:

  	
   

  	
  Taxpayer Identification Number:

  
	
   

  	
   

  	
   

  	
   

  
									



 


Aggregate
dollar amount of Notes committed 

to be purchased pursuant to the terms of the Agreement:  US$2,300,000.00











STORM
CAT ENERGY CORPORATION

SERIES A NOTE PURCHASE AGREEMENT SIGNATURE PAGE


IN
WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement or
caused its duly authorized officers to execute this Note Purchase Agreement as
of the date first above written.


	
  Date

  	
      1/18/07

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  IF AN
  INDIVIDUAL:

  	
   

  	
  IF A
  CORPORATION, PARTNERSHIP,

  
	
   

  	
   

  	
    TRUST,
  ESTATE OR OTHER ENTITY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SANDELMAN PARTNERS MULTI-

  STRATEGY MASTER FUND, LTD.

  
	
  (Signature)

  	
   

  	
  By: Sandelman Partners LP, as

  Investment Advisor

  	
   

  
	
   

  	
   

  	
  By:

  
	
  Printed Name

  	
   

  	
  Signature:

  	
  /s/ Trevor
  Ganshaw

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Trevor Ganshaw

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Notices:

  	
   

  	
  Address for Notices:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Delivery of Notes:

  	
   

  	
  Address for Delivery of Notes:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Taxpayer Identification Number:

  	
   

  	
  Taxpayer Identification Number:

  
	
   

  	
   

  	
   

  	
   

  
									



 


Aggregate
dollar amount of Notes committed 

to be purchased pursuant to the terms of the Agreement:  US$1,380,000.00











STORM
CAT ENERGY CORPORATION

SERIES A NOTE PURCHASE AGREEMENT SIGNATURE PAGE


IN
WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement or
caused its duly authorized officers to execute this Note Purchase Agreement as
of the date first above written.


	
  Date

  	
  1/18/07

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  IF AN
  INDIVIDUAL:

  	
   

  	
  IF A
  CORPORATION, PARTNERSHIP,

  
	
   

  	
   

  	
    TRUST,
  ESTATE OR OTHER ENTITY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Summit Capital Partners, LP

  	
   

  
	
   

  	
   

  	
  Print name of entity

  	
   

  
	
  (Signature)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature:

  	
   /s/
  Matthew C. Rudolf

  	
   

  
	
   

  	
   

  	
   

  
	
  Printed Name

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Matthew C.
  Rudolf

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
    Principal,
  Summit Capital Partners I, LLC

  	
   

  
	
   

  	
   

  	
  General Partner, Summit Capital Partners, LP

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Notices:

  	
   

  	
  Address for Notices:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Delivery of Notes:

  	
   

  	
  Address for Delivery of Notes:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Taxpayer Identification Number:

  	
   

  	
  Taxpayer Identification Number:

  
	
   

  	
   

  	
   

  	
   

  
										



 


Aggregate
dollar amount of Notes committed 

to be purchased pursuant to the terms of the Agreement:  US$460,000.00











STORM
CAT ENERGY CORPORATION

SERIES A NOTE PURCHASE AGREEMENT SIGNATURE PAGE


IN
WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement or
caused its duly authorized officers to execute this Note Purchase Agreement as
of the date first above written.


	
  Date

  	
  January 18, 07

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  IF AN
  INDIVIDUAL:

  	
   

  	
  IF A
  CORPORATION, PARTNERSHIP,

  
	
   

  	
   

  	
    TRUST,
  ESTATE OR OTHER ENTITY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRAPEZE ASSET MANAGEMENT INC.

  	
   

  
	
   

  	
   

  	
  Print name of entity

  	
   

  
	
  (Signature)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature:

  	
   /s/
  Randall Abramson

  	
   

  
	
  Printed Name

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  RANDALL ABRAMSON

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Chief Executive
  Officer

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Notices:

  	
   

  	
  Address for Notices:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Delivery of Notes:

  	
   

  	
  Address for Delivery of Notes:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Taxpayer Identification Number:

  	
   

  	
  Taxpayer Identification Number:

  
	
   

  	
   

  	
   

  	
   

  
									



 


Aggregate
dollar amount of Notes committed 

to be purchased pursuant to the terms of the Agreement:  US$2,970,000.00











STORM
CAT ENERGY CORPORATION

SERIES A NOTE PURCHASE AGREEMENT SIGNATURE PAGE


IN
WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement or
caused its duly authorized officers to execute this Note Purchase Agreement as
of the date first above written.


	
  Date:

  	
  January 18, 2007

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  IF AN INDIVIDUAL:

  	
   

  	
  IF A
  CORPORATION, PARTNERSHIP,

  
	
   

  	
   

  	
    TRUST,
  ESTATE OR OTHER ENTITY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRAPEZE CAPITAL CORP.

  	
   

  
	
   

  	
   

  	
  Print name of entity

  	
   

  
	
  (Signature)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature:

  	
  /s/ Randall
  Abramson

  	
   

  
	
  Printed Name

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  RANDALL ABRAMSON

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  President

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Notices:

  	
   

  	
  Address for Notices:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Delivery of Notes:

  	
   

  	
  Address for Delivery of Notes:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Taxpayer Identification Number:

  	
   

  	
  Taxpayer Identification Number:

  
	
   

  	
   

  	
   

  	
   

  
									



 


Aggregate
dollar amount of Notes committed 

to be purchased pursuant to the terms of the Agreement:  US$730,000.00











STORM
CAT ENERGY CORPORATION

SERIES A NOTE PURCHASE AGREEMENT SIGNATURE PAGE


IN
WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement or
caused its duly authorized officers to execute this Note Purchase Agreement as
of the date first above written.


	
  Date

  	
  Jan. 19, 2007

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  IF AN
  INDIVIDUAL:

  	
   

  	
  IF A
  CORPORATION, PARTNERSHIP,

  
	
   

  	
   

  	
    TRUST,
  ESTATE OR OTHER ENTITY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  WOLVERINE CONVERTIBLE ARBITRAGE

  	
   

  
	
   

  	
   

  	
   FUND TRADING LTD

  	
   

  
	
  (Signature)

  	
   

  	
  Print name of entity

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Printed Name

  	
   

  	
  Signature:

  	
  /s/ James V.
  Harkness

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  JAMES V.
  HARKNESS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Director

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Notices:

  	
   

  	
  Address for Notices:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Delivery of Notes:

  	
   

  	
  Address for Delivery of Notes:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Taxpayer Identification Number:

  	
   

  	
  Taxpayer Identification Number:

  
	
   

  	
   

  	
   

  	
   

  
											



 


Aggregate
dollar amount of Notes committed 

to be purchased pursuant to the terms of the Agreement:  US$932,000.00











STORM
CAT ENERGY CORPORATION

SERIES A NOTE PURCHASE AGREEMENT SIGNATURE PAGE


IN
WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement or
caused its duly authorized officers to execute this Note Purchase Agreement as
of the date first above written.


	
  Date

  	
  1/22/07

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  IF AN
  INDIVIDUAL:

  	
   

  	
  IF A
  CORPORATION, PARTNERSHIP,

  
	
   

  	
   

  	
    TRUST,
  ESTATE OR OTHER ENTITY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  GPC LX, LLC

  	
   

  
	
   

  	
   

  	
  Print name of entity

  	
   

  
	
  (Signature)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Wolverine Asset Management, LLC,

  	
   

  
	
   

  	
   

  	
   

  	
  Its Investment Manager

  
	
  Printed Name

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature:

  	
  /s/ Andrew R.
  Sujdak

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Andrew R. Sujdak

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Trader

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Notices:

  	
   

  	
  Address for Notices:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Delivery of Notes:

  	
   

  	
  Address for Delivery of Notes:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Taxpayer Identification Number:

  	
   

  	
  Taxpayer Identification Number:

  
	
   

  	
   

  	
   

  	
   

  
												



 


Aggregate
dollar amount of Notes committed 

to be purchased pursuant to the terms of the Agreement:  US$103,000.00











STORM
CAT ENERGY CORPORATION

SERIES A NOTE PURCHASE AGREEMENT SIGNATURE PAGE


IN
WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement or
caused its duly authorized officers to execute this Note Purchase Agreement as
of the date first above written.


	
  Date

  	
  Jan. 23, 2007

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  IF AN
  INDIVIDUAL:

  	
   

  	
  IF A
  CORPORATION, PARTNERSHIP,

  
	
   

  	
   

  	
    TRUST,
  ESTATE OR OTHER ENTITY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  UBS AG Canada Branch

  	
   

  
	
   

  	
   

  	
  Print name of entity

  	
   

  
	
  (Signature)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature:

  	
  /s/ James Estey

  	
   

  
	
  Printed Name

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  James Estey

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Principal
  Officer

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Notices:

  	
   

  	
  Address for Notices:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Delivery of Notes:

  	
   

  	
  Address for Delivery of Notes:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Taxpayer Identification Number:

  	
   

  	
  Taxpayer Identification Number:

  
	
   

  	
   

  	
   

  	
   

  
										



 


Aggregate
dollar amount of Notes committed 

to be purchased pursuant to the terms of the Agreement:  US$2,300,000.00
















 


SCHEDULE I


PURCHASERS


	
  Purchaser

  Name

  	
   

  	
  Address

  	
   

  	
  Registration

  	
   

  	
  USD Amount of

  Series A Notes

  
	
  Crestview

  Capital Master,

  LLC

  	
   

  	
  95 Revere Drive,

  Suite A,

  Northbrook, IL 60062

  Attn: Robert Hoyt

  Fax: 847-559-0060

  	
   

  	
  95 Revere Drive,

  Suite A,

  Northbrook, IL 60062

  	
   

  	
  $920,000.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GLG North

  American

  Opportunity

  Fund

  	
   

  	
  GLP Partners

  Attn: Jim O’Sullivan

  One Curzon Street

  London W1J 5HB

  United Kingdom

  Fax: 44 20 7016 7200

  	
   

  	
  GLP Partners

  Attn: Jim O’Sullivan

  One Curzon Street

  London W1J 5HB

  United Kingdom

  	
   

  	
  $4,600,000.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Capital

  Ventures

  International

  	
   

  	
  c/o Heights Capital

  Management, Inc.

  101 California St.,

  Suite 3250

  San Francisco, CA

  94111

  Attn: Sam Winer or

  Martin Kobinger

  Fax: 415-403-6525

  	
   

  	
  c/o Heights Capital

  Management, Inc.

  101 California St.

  Suite 3250

  San Francisco, CA

  94111

  	
   

  	
  $460,000.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Iroquois

  Master Fund

  Ltd.

  	
   

  	
  641 Lexington Avenue

  26th Floor

  New York, NY 10022

  Attn: Josh Silverman

  Fax: 212-207-3452

  	
   

  	
  641 Lexington Avenue

  26th Floor

  New York, NY 10022

  	
   

  	
  $460,000.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Kellogg

  Capital Group

  LLC

  	
   

  	
  55 Broadway

  4th Floor

  New York, NY 10006

  Attn: Nick Cappelleni

  Fax: 212-380-5665

  	
   

  	
  55 Broadway

  4th Floor

  New York, NY 10006

  	
   

  	
  $920,000.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  William

  Herbert Hunt

  Trust Estate

  	
   

  	
  Attn: David S. Hunt

  1601 Elm Street

  Suite 3400

  Dallas, Texas 75201

  Fax: 214-880-7101

  	
   

  	
  Attn: David S. Hunt

  1601 Elm Street

  Suite 3400

  Dallas, Texas 75201

  	
   

  	
  $2,300,000.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sandelman

  	
   

  	
  Citco Funds Services

  	
   

  	
  Citco Funds Services

  	
   

  	
  $1,380,000.00

  



 



 I-1
 









 


	
  Purchaser

  Name

  	
   

  	
  Address

  	
   

  	
  Registration

  	
   

  	
  USD Amount of

  Series A Notes

  	 

	
  Partners Multi-

  Strategy

  Master Fund,

  Ltd.

  	
   

  	
  Regatta Office Park

  West Bay Road

  Grand Cayman,

  Cayman Islands

  Fax: 212-299-7666

  	
   

  	
  Regatta Office Park

  West Bay Road

  Grand Cayman,

  Cayman Islands

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
  Summit Capital

  Partners, LP

  	
   

  	
  One Union Square

  Suite 2304

  600 University Street

  Seattle, WA 98101

  Attn: Matt Rudolf

  Fax: 206-447-6204

  	
   

  	
  One Union Square

  Suite 2304

  600 University Street

  Seattle, WA 98101

  	
   

  	
  $460,000.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Trapeze Asset

  Management

  Inc.

  	
   

  	
  22 St. Clair Ave East

  18th Floor

  Toronto, ON M4T 253

  Attn: Randall Abramson

  Fax: 416-867-9771

  	
   

  	
  22 St. Clair Ave East

  18th Floor

  Toronto, ON M4T 253

  	
   

  	
  $2,970,000.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Trapeze

  Capital Corp.

  	
   

  	
  22 St. Clair Ave East

  18th Floor

  Toronto, ON M4T 253

  Attn: Randall Abramson

  Fax: 416-867-9771

  	
   

  	
  22 St. Clair Ave East

  18th Floor

  Toronto, ON M4T 253

  	
   

  	
  $730,000.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Wolverine

  Convertible

  Arbitrage Fund

  Trading Ltd.

  	
   

  	
  c/o Wolverine Asset

  Management LLC

  175 West Jackson,

  Suite 208

  Chicago, IL 60604

  Attn: Andrew Sujdak

  Fax: 312-884-3831

  	
   

  	
  c/o Wolverine Asset

  Management LLC

  175 West Jackson,

  Suite 208

  Chicago, IL 60604

  	
   

  	
  $932,000.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GPC LX, LLC

  	
   

  	
  c/o Wolverine Asset

  Management LLC

  175 West Jackson,

  Suite 208

  Chicago, IL 60604

  Attn: Andrew Sujdak

  Fax: 312-884-3831

  	
   

  	
  c/o Wolverine Asset

  Management LLC

  175 West Jackson,

  Suite 208

  Chicago, IL 60604

  	
   

  	
  $103,000.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  UBS AG

  Canada Branch

  	
   

  	
  161 Bay Street

  Suite 4100

  Toronto, ON M5J 251

  	
   

  	
  161 Bay Street

  Suite 4100

  Toronto, ON M5J 251

  	
   

  	
  $2,300,000.00

  
										



 



 I-2
 









 


	
  Purchaser

  Name

  	
   

  	
  Address

  	
   

  	
  Registration

  	
   

  	
  USD Amount of

  Series A Notes

  	 

	
   

  	
   

  	
  Canada

  Attn: Dave Hanslip

  Fax: 416-364-1221

  	
   

  	
  Canada

  	
   

  	
   

  
											



 



 I-3















 


SCHEDULE II


THE COMPANY’S WIRE INSTRUCTIONS


American
National Bank 

3033 East First Avenue 

Denver, CO 80206 

(303) 394-5307


ABA:
107001232


Account Name: Storm Cat Energy Corporation 

Account Number: 70611319



 II-1















 


SCHEDULE
III


U.S. ACCREDITED INVESTOR CERTIFICATE


As
required by U.S. state and federal securities laws, the following information
must be obtained regarding the Purchaser’s accredited investor status under
U.S. federal securities laws for all Purchasers, including those located in
Canada.  All dollar amounts are
referenced in U.S. dollars.


If the Purchaser is an
individual, please answer the following items:


	
   

  	
   

  	
  o

  True

  	
   

  	
  o

  False

  	
   

  	
  (1)

  	
   

  	
  The
  Purchaser is a natural person whose net worth,(1) either individually or jointly
  with such Purchaser’s spouse, exceeds $1,000,000.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  True

  	
   

  	
  o

  False

  	
   

  	
  (2)

  	
   

  	
  The
  Purchaser is a natural person who had individual income in excess of
  $200,000, or joint income with such Purchaser’s spouse in excess of $300,000,
  in each of 2003 and 2004 and reasonably expects to reach the same income
  level in 2005.(2)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  True

  	
   

  	
  o

  False

  	
   

  	
  (3)

  	
   

  	
  The
  Purchaser is a director or executive officer of the Company.

  	
   

  



 


If the Purchaser is an entity
(not an individual), please check each applicable statement:


	
   

  	
   

  	
  

  	
   

  	
  o

  	
   

  	
  (4)

  	
   

  	
  The
  Purchaser is a bank as defined in Section 3(a)(2) of the Securities Act of
  1933 (the “Securities Act”), or a savings and loan association or other
  institution as defined in Section 3(a)(5)(A) of the Securities Act, whether
  acting in its individual or fiduciary capacity;

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  	
  (5)

  	
   

  	
  The
  Purchaser is a broker or dealer registered pursuant to Section 15 of the
  Securities Exchange Act of 1934;

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  	
  (6)

  	
   

  	
  The
  Purchaser is an insurance company as defined in Section 2(13) of the
  Securities Act;

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  	
  (7)

  	
   

  	
  The
  Purchaser is an investment company registered under the 1940 Act or a business
  development company as defined in Section 2(a)(48) of that Act;

  	
   

  







(1)             The
term “net worth” means the excess of total
assets over total liabilities.  In
calculating “net worth,” the Purchaser may
include the estimated fair market value of the Purchaser’s principal residence
as an asset.


(2)             In
determining “income,” the Purchaser should (i)
add to adjusted gross income any amounts attributable to tax exempt income
received, losses claimed as a limited partner in any limited partnership,
deductions claimed for depletion, contributions to an IRA or Keogh retirement
plan to the extent vested and any amount by which income from long-term capital
gains has been reduced in arriving at adjusted gross income and (ii) subtract
from adjusted gross income any unrealized capital gain.



 III-1
 









 


	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  

  	
   

  	
  o

  	
   

  	
  (8)

  	
   

  	
  The
  Purchaser is a Small Business Investment Company licensed by the U.S. Small
  Business Administration under Section 301(c) or (d) of the Small Business
  Investment Act of 1958;

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  	
  (9)

  	
   

  	
  The
  Purchaser is a plan established and maintained by a state, its political
  subdivisions, or any agency or instrumentality of a state or its political
  subdivisions, for the benefit of its employees, and such plan has total
  assets in excess of $5,000,000;

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  	
  (10)

  	
   

  	
  The
  Purchaser is an employee benefit plan within the meaning of Title I of the
  Employee Retirement Income Security Act of 1974 and (i) the investment
  decision is made by a plan fiduciary, as defined in Section 3(21) of such
  Act, which is either a bank, savings and loan association, insurance company,
  or registered investment adviser, or (ii) the employee benefit plan has total
  assets in excess of $5,000,000, or (iii) if a self-directed plan, the
  investment decisions are made solely by persons that are accredited
  investors;

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  	
  (11)

  	
   

  	
  The
  Purchaser is a private business development company as defined in Section
  202(a)(22) of the Investment Advisers Act of 1940;

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  	
  (12)

  	
   

  	
  The
  Purchaser is an organization described in Section 501(c)(3) of the Internal
  Revenue Code, a corporation, a Massachusetts or similar business trust, a
  partnership, or a limited liability company, not formed for the specific
  purpose of acquiring the Notes or the Common Shares in the Company, with
  total assets in excess of $5,000,000;

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  	
  (13)

  	
   

  	
  The
  Purchaser is a trust, with total assets in excess of $5,000,000, not formed
  for the specific purpose of acquiring the Notes or Common Shares in the
  Company, whose purchase is directed by a person who has such knowledge and
  experience in financial and business matters that such person is capable of
  evaluating the merits and risks of investing in the Notes and Warrants of the
  Company;

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  o

  	
   

  	
  (14)

  	
   

  	
  The Purchaser is an
  entity in which all of the equity owners qualify as an “accredited investor”
  under any of items (1) through (13) above. If the Purchaser qualifies under
  this “accredited investor” category only, list the equity owners of the
  Purchaser, their respective percentage interests in the Purchaser and the
  item number above under which each such equity owner qualifies as an
  “accredited investor” (including categories for individuals listed above) and
  include a completed copy of this Certificate for each such equity owner: 

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  (Continue on a separate
  piece of paper, if necessary.)

  	
   

  
													



 



 III-2
 









 


THE UNDERSIGNED ACKNOWLEDGES AND UNDERSTANDS THAT THE
COMPANY IS RELYING ON HIS, HER OR ITS REPRESENTATIONS AND WARRANTIES SET FORTH
ABOVE IN DETERMINING WHETHER PURCHASER WILL BE PERMITTED TO INVEST IN THE
COMPANY PURSUANT TO THE AGREEMENT.


IN WITNESS WHEREOF, the
undersigned has/have executed and made effective this U.S. Accredited Investor
Certification on this                 
day of                           ,
2007.


	
  

  	
  ACCREDITED INVESTOR:

  
	
   

  	
   

  
	
   

  	
   

  	
  If
  an entity:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If
  an individual or individuals:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Print
  Name)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Print Name)

  	
   

  
										



 



 III-3















 


SCHEDULE
IV


CANADIAN
ACCREDITED INVESTOR CERTIFICATE


To:          Storm Cat Energy Corporation


The undersigned Purchaser is
an “accredited investor”, as such term is defined in National Instrument 45-106
“Prospectus and Registration Exemptions” published by the Canadian Securities
Administrators and adopted by the Commissions (“NI 45-106”) and, as at the time
the subscription is accepted by the Issuer (“Closing”), the Purchaser will fall
within one or more of the following categories (Please check one or more, as
applicable)  All dollar amounts are
referenced in Canadian dollars


(Note: Unless
otherwise indicated, section references in this Appendix are references to
sections of NI 45-106.  Upon the request
of the Purchaser, the Issuer will provide the Purchaser with a copy of NI
45-106 as currently published by the Canadian Securities Administrators.)


	
  o

  	
   

  	
  (a)

  	
   

  	
  a
  Canadian financial institution, or a Schedule III bank,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (b)

  	
   

  	
  the
  Business Development Bank of Canada incorporated under the Business
  Development Bank of Canada Act (Canada),

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (c)

  	
   

  	
  a
  subsidiary of any person referred to in paragraphs (a) or (b), if the person
  owns all of the voting securities of the subsidiary, except the voting
  securities required by law to be owned by directors of that subsidiary,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (d)

  	
   

  	
  a
  person registered under the securities legislation of a jurisdiction of
  Canada as an adviser or dealer, other than a person registered solely as a
  limited market dealer under one or both of the Securities Act (Ontario)
  or the Securities Act (Newfoundland and Labrador),

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (e)

  	
   

  	
  an
  individual registered or formerly registered under the securities legislation
  of a jurisdiction of Canada as a representative of a person referred to in
  paragraph (d),

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (f)

  	
   

  	
  the
  Government of Canada or a jurisdiction of Canada, or any crown corporation,
  agency or wholly owned entity of the Government of Canada or a jurisdiction
  of Canada,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (g)

  	
   

  	
  a
  municipality, public board or commission in Canada and a metropolitan
  community, school board, the Comité de gestion de la taxe scolaire de l’île
  de Montréal or an intermunicipal management board in Québec,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (h)

  	
   

  	
  any
  national, federal, state, provincial, territorial or municipal government of
  or in any foreign jurisdiction, or any agency of that government,

  	
   

  



 



 IV-1
 









 


	
  

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (i)

  	
   

  	
  a
  pension fund that is regulated by either the Office of the Superintendent of
  Financial Institutions (Canada) or a pension commission or similar regulatory
  authority of a jurisdiction of,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (j)

  	
   

  	
  an
  individual who, either alone or with a spouse, beneficially owns, directly or
  indirectly, financial assets having an aggregate realizable value that before
  taxes, but net of any related liabilities, exceeds $1,000,000,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (k)

  	
   

  	
  an
  individual whose net income before taxes exceeded $200,000 in each of the 2
  most recent calendar years or whose net income before taxes combined with
  that of a spouse exceeded $300,000 in each of the two most recent calendar
  years and who, in either case, reasonably expects to exceed that net income
  level in the current,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (l)

  	
   

  	
  an
  individual who, either alone or with a spouse, has net assets of at least
  $5,000,000,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (m)

  	
   

  	
  a
  person, other than an individual or investment fund, that has net assets of
  at least $5,000,000 as shown on its most recently prepared financial
  statements,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (n)

  	
   

  	
  an
  investment fund that distributes or has distributed its securities only to:
  (i) a person that is or was an accredited investor at the time of the
  distribution; (ii) a person that acquires or acquired securities in the
  circumstances referred to in sections 2.10 [Minimum
  amount investment], and 2.19 [Additional
  investment in investment funds], or (iii) a person described in
  paragraph (i) or (ii) that acquires or acquired securities under section 2.18
  [Investment fund reinvestment],

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (o)

  	
   

  	
  an
  investment fund that distributes or has distributed securities under a
  prospectus in a jurisdiction of Canada for which the regulator or, in Québec,
  the securities regulatory authority, has issued a receipt,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (p)

  	
   

  	
  a
  trust company or trust corporation registered or authorized to carry on
  business under the Trust and Loan
  Companies Act (Canada)
  or under comparable legislation in a jurisdiction of Canada or a foreign
  jurisdiction, acting on behalf of a fully managed account managed by the
  trust company or trust corporation, as the case may be,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (q)

  	
   

  	
  a
  person acting on behalf of a fully managed account managed by that person, if
  that person: (i) is registered or authorized to carry on business as an
  adviser or the equivalent under the securities legislation of a jurisdiction
  of Canada or a foreign jurisdiction; and (ii) in Ontario, is purchasing a
  security that is not a security of an investment fund,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (r)

  	
   

  	
  a
  registered charity under the Income Tax
  Act (Canada) that,
  in regard to the trade, has obtained advice from an eligibility adviser or an
  adviser registered under the securities legislation of the jurisdiction of
  the registered charity to give advice on the securities being traded,

  	
   

  



 



 IV-2
 









 


	
  

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (s)

  	
   

  	
  an
  entity organized in a foreign jurisdiction that is analogous to any of the
  entities referred to in paragraphs (a) to (d) or paragraph (i) in form and
  function,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (t)

  	
   

  	
  a
  person in respect of which all of the owners of interests, direct, indirect
  or beneficial, except the voting securities required by law to be owned by
  directors, are persons that are accredited investors,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (u)

  	
   

  	
  an
  investment fund that is advised by a person registered as an adviser or a
  person that is exempt from registration as an adviser, or

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  (v)

  	
   

  	
  a
  person that is recognized or designated by the securities regulatory
  authority or, except in Ontario and Québec, the regulator as: (i) an
  accredited investor; or (ii) an exempt purchaser in Alberta or British
  Columbia after NI 45-106 comes into force.

  	
   

  



 


For the purposes hereof, the following definitions are included for
convenience:


“affiliate”
means an issuer connected with another issuer because


	
  

  	
   

  	
  (a)

  	
   

  	
  one
  of them is the subsidiary of the other, or

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)

  	
   

  	
  each
  of them is controlled by the same person or corporation;

  	
   

  



 


“beneficial” or “beneficially”, when used to describe an ownership
interest, includes


 


	
   

  	
   

  	
  (a)

  	
   

  	
  for the purposes of
  British Columbia law, when a person beneficially owns securities that are
  beneficially owned by

  	
   

  



 


	
   

  	
   

  	
   

  	
   

  	
  (i)

  	
   

  	
  an
  issuer controlled by that person, or

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (ii)

  	
   

  	
  an
  affiliate of that person or an affiliate of an issuer controlled by that
  person;

  	
   

  



 


“Canadian financial institution” means (a) an association governed by the Cooperative Credit Associations Act (Canada)
or a central cooperative credit society for which an order has been made under
section 473(1) of that Act, or (b) a bank, loan corporation, trust company,
trust corporation, insurance company, treasury branch, credit union, caisse
populaire, financial services cooperative, or league that, in each case, is
authorized by an enactment of Canada or a jurisdiction of Canada to carry on
business in Canada or a jurisdiction of Canada;


“control” occurs
if, for the purposes of British Columbia law,


	
   

  	
   

  	
   

  	
   

  	
  (i)

  	
   

  	
  voting
  securities of a first party (person or corporation) are held, other than by
  way of security only, by or for the benefit of a second party (person or
  corporation), and

  	
   

  



 



 IV-3
 









 


	
   

  	
   

  	
   

  	
   

  	
  (ii)

  	
   

  	
  the
  voting rights attached to those voting securities are entitled, if exercised,
  to elect a majority of the directors of the first party; and

  	
   

  



 


“director”
means, for the purpose of British Columbia law, a director of a corporation or
an individual occupying or performing, with respect to a corporation or any
other person, a similar position or similar functions;


“financial assets” means (a) cash, (b) securities, or (c) a contract of insurance, a
deposit or an evidence of a deposit that is not a security for the purposes of
securities legislation;


“foreign jurisdiction” means a country other than Canada or a political subdivision of a
country other than Canada;


“jurisdiction”
means a province or territory of Canada except when used in the term foreign
jurisdiction;


“local jurisdiction” means the jurisdiction in which the applicable securities regulatory
authority is situate;


“mutual fund”
includes an issuer of securities that entitles the holder to receive on demand,
or within a specified period after demand, an amount computed by reference to
the value of a proportionate interest in the whole or in a part of the net
assets, including a separate fund or trust account, of the issuer of the
securities;


“person” or “company” includes, for the purposes of British Columbia law, an individual,
corporation, partnership, party, trust, fund, association and any other
organized group of persons and the personal or other legal representative of a
person to whom the context can apply according to law;


“regulator”
means (a) the Executive Director, as defined under section 1 of the Securities Act (British Columbia), (b) the Executive
Director, as defined under section 1 of the Securities Act
(Alberta), and (c) such other person as is referred to in Appendix D of
National Instrument 14-101 — Definitions;


“related liabilities” means (a)
liabilities incurred or assumed for the purpose of financing the acquisition or
ownership of financial assets, or (b) liabilities that are secured by financial
assets;


“securities legislation” means securities legislation as such term is defined in National
Instrument 14-101 — Definitions;


“securities regulatory authority” means (a) the British Columbia Securities
Commission, (b) the Alberta Securities Commission, and (c) in respect of any
local jurisdiction other than British Columbia or Alberta means the securities
commission or other regulatory authority listed in Appendix C of National
Instrument 14-101 — Definitions;


“subsidiary” means an issuer
that is controlled directly or indirectly by another issuer and includes a
subsidiary of that subsidiary;



 IV-4
 









 


“voting security” means any security which (a) is not a debt security, and (b) carries a
voting right either under all circumstances or under some circumstances that
have occurred and are continuing; and


“$” means
Canadian Dollars.


The foregoing representation, warranty and certificate is true an
accurate as of the date of this certificate and will be true and accurate as of
Closing.  If any such representation,
warranty or certificate will not be true and accurate prior to Closing, the
undersigned will give immediate written notice of such fact to the Issuer.


IN
WITNESS WHEREOF, the undersigned Purchaser has executed this Canadian
Accredited Investor Certificate as of the         
day of                         ,
2007.


	
  If a Corporation, Partnership or Other Entity:

  	
  If an Individual:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name of Entity

  	
   

  	
  Signature 

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Type of Entity 

  	
   

  	
  Print or Type Name

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Signature of Person Signing 

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Print or Type Name and Tile of Person Signing

  	
   

  	
   

  	
   

  



 


 



 IV-5















 


SCHEDULE
V


PURCHASER’S CERTIFICATE REGARDING

PRESENT OWNERSHIP OF SECURITIES


(to
be completed by each Purchaser)


To:          Storm Cat Energy Corporation


The
Purchaser certifies that the information set out in this Certificate below
accurately describers the Purchaser’s presentation ownership of securities of
Storm Cat Energy Corporation.


The Purchaser either [check appropriate box]:


	
  o

  	
   

  	
  owns
  directly or indirectly, or exercises control or direction over, no common
  shares in the capital stock of the Company or securities convertible into
  common shares in the capital stock of the Company; or

  	
   

  
	
  o

  	
   

  	
  owns
  directly or indirectly, or exercises control or direction over,
                  
  common shares in the capital stock of the Company and convertible securities
  entitling the Purchaser to acquire an additional common shares in the capital
  stock of the Company.

  	
   

  



 


Insider Status


The Purchaser either [check
appropriate box]:


	
  o

  	
   

  	
  is
  an “Insider” of the Company as defined in the Securities Act (Ontario)(1);
  or

  	
   

  
	
  o

  	
   

  	
  is not an Insider of
  the Company.

  	
   

  







(1)             Under
the Securities Act (Ontario) the term
“insider” is defined to mean, if used in relation to the Storm Cat Energy
Corporation (the “Company”): (a) a director or senior officer of the Company;
(b) a director or senior officer of a person that is itself an insider or
subsidiary of the Company, (c) a person that has: (i) direct or indirect
beneficial ownership of, (ii) control or direction over, or (iii) a combination
of direct or indirect beneficial ownership of and of control or direction over
securities of the issuer carrying more than 10% of the voting rights attached
to all the Company’s outstanding voting securities (excluding, for the purpose
of the calculation of the percentage held, any securities held by the person as
underwriter in the course of a distribution); or (d) the Company itself, if it
has purchased, redeemed or otherwise acquired any securities of its own issue,
for so long as it continues to hold those securities



 V-1
 









 


EXECUTED by the Purchaser
at                                                   
this        day of                               ,
2007.


	
  If a corporation, partnership or other entity:

  	
  If an individual:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Print Name of Purchaser

  	
   

  	
  Print Name

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Signature of Authorized Signatory

  	
   

  	
  Signature

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name and Position of Authorized Signatory

  	
   

  	
  Jurisdiction of Residence

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Jurisdiction of Residence

  	
   

  	
   

  	
   

  



 



 V-2