Document:

EXHIBIT 4.1

THE SECURITIES  REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES
LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST  THEREIN MAY BE OFFERED,  SOLD,
HYPOTHECATED,  PLEDGED, OR OTHERWISE DISPOSED OF IN THE UNITED STATES OR TO U.S.
PERSONS  EXCEPT  PURSUANT  TO AN  EFFECTIVE  REGISTRATION  STATEMENT  UNDER  THE
SECURITIES  ACT AND  SUCH  LAWS OR AN  EXEMPTION  FROM  REGISTRATION  UNDER  THE
SECURITIES  ACT AND SUCH LAWS  WHICH,  IN THE OPINION OF COUNSEL FOR THE HOLDER,
WHICH  COUNSEL  AND  OPINION  ARE  REASONABLY  SATISFACTORY  TO COUNSEL FOR THIS
CORPORATION, IS AVAILABLE.

                                  JED OIL INC.

                      SENIOR SUBORDINATED CONVERTIBLE NOTE

US $20,000,000                                                  August 3, 2005
                                                                Calgary, Canada

     FOR VALUE RECEIVED, JED Oil Inc., a corporation incorporated under the laws
of the  Province of  Alberta,  Canada  (the  "Company"),  promises to pay to JED
Funding,  Ltd., a California  limited  partnership  (the "Holder") or registered
assigns,  the principal amount of US $20,000,000,  and to pay interest (computed
on the basis of a 360-day year) (a) on the unpaid  principal  amount at the rate
of ten percent  (10%)  quarterly in arrears  commencing  on November 1, 2005 and
thereafter on the first day of each February, May, August and November (each, an
"Interest  Payment Date") and (b) to the extent  permitted by law on any overdue
payment of the principal  amount at the rate of twelve  percent (12%) per annum.
Principal and accrued but unpaid interest  hereunder shall be due and payable on
demand on or after the  Maturity  Date (as defined in Section 5 hereof),  unless
converted by the Holder in accordance with Section 6 hereof.

     Payments of  principal  and  interest  shall be made in lawful money of the
United  States of  America  by check and  mailed to the  address  of the  Holder
specified in Section 10(d).

     This Note is subject to the following terms and conditions:

     (a)  Note  Subordination.  The  indebtedness  evidenced  by  this  Note  is
subordinate  and subject in right of payment as to principal and interest to the
prior  payment in full of all  principal,  premium,  if any, and interest on all
indebtedness of the Company, regardless of when incurred, including indebtedness
incurred after the date hereof, for money borrowed from the Company's  principal
banking  institution  ("Senior Debt"). Upon maturity of any Senior Debt, payment
in full must be made on such  Senior  Debt  before any  payment is made on or in
respect of this Note.  During the continuance of any default with respect to any
Senior Debt entitling the holder thereof to accelerate the maturity thereof,  or
if any such  default  would be caused by any payment  upon or in respect of this
Note,  no payment  may be made by the  Company  upon or in respect of the Notes.
Upon any distribution of assets of the Company in any  dissolution,  winding up,
liquidation or  reorganization  of the Company,  payment of the principal of and
premium,  if any,  and interest on the Notes will be  subordinated  to the prior
payment in full of all Senior  Debt.  (Such  subordination  will not prevent the
occurrence of any event of default, as set forth in section 2 below.)

                                      -1-
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     (b) Default.

          (i) Default. The occurrence of any one or more of the following events
shall constitute an event of default (an "Event of Default") hereunder:

               (1) if the Company shall  default in the punctual  payment of any
sum payable with respect to, or in the  observance or  performance of any of the
agreements, promises, covenants, terms and conditions of any of, the Notes.

               (2) if any  warranty,  representation  or  statement of fact made
herein by the Company is false or misleading in any material respect when made;

               (3) if the Company or any significant  subsidiary,  as defined in
Rule 405 of the  Rules and  Regulations  under the  Securities  Act of 1933,  as
amended  ("Significant  Subsidiary")  shall be  dissolved or  liquidated  or any
proceeding for  dissolution  or  liquidation  of the Company or any  Significant
Subsidiary is commenced or the Company or any  Significant  Subsidiary  fails to
maintain its corporate existence;

               (4)  if  the  Company  or  any  Significant   Subsidiary  becomes
insolvent  (however defined or evidenced) or makes an assignment for the benefit
of creditors (or similar arrangement under the laws of any province of Canada);

               (5) if there  shall be filed by or  against  the  Company  or any
Significant  Subsidiary any petition for any relief under the bankruptcy laws of
Canada or of the United  States  now or  hereafter  in effect or any  proceeding
shall be  commenced  with respect to the Company or any  Significant  Subsidiary
under  any  insolvency,  readjustment  of  debt,  reorganization,   dissolution,
liquidation  or similar law or statute of any  jurisdiction  now or hereafter in
effect  (whether  at  law or in  equity),  provided  that  in  the  case  of any
involuntary filing or the commencement of any involuntary proceeding against the
Company or any  Significant  Subsidiary  such  proceeding or petition shall have
continued undismissed and unvacated for at least 60 days;

               (6) if the  usual  business  of the  Company  or any  Significant
Subsidiary shall cease or be terminated or suspended;

               (7) if any proceeding, procedure or remedy supplementary to or in
enforcement  of judgment  shall be  commenced  against,  or with  respect to any
property of, the Company or any Significant Subsidiary; or

               (8) if any petition or application  to any court or tribunal,  at
law or in  equity,  be  filed  by or  against  the  Company  or any  Significant
Subsidiary for the appointment of any receiver or trustee for the Company or any
Significant  Subsidiary  or any  part  of the  property  of the  Company  or any
Significant  Subsidiary,  provided  that in the case of any  involuntary  filing
against  the  Company  or  any  Significant   Subsidiary,   such  proceeding  or
appointment shall have continued undismissed and unvacated for at least 60 days.

          (ii) Remedies  Upon  Default.  If any Event of Default shall occur for
any reason,  then and in any such event,  in addition to all rights and remedies
of the Holder under  applicable  law or otherwise,  all such rights and remedies
being cumulative, not exclusive and enforceable alternatively,  successively and
concurrently,  the Holder may, at its option,  declare any or all amounts  owing
under this Note, to be due and payable, whereupon the then unpaid

                                       -2-

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balance  hereof,  together with all interest  accrued  thereon,  shall forthwith
become due and payable,  together with interest accruing  thereafter at the then
applicable  interest rate stated above until the indebtedness  evidenced by this
Note is paid in  full,  plus  the  costs  and  expenses  of  collection  hereof,
including, but not limited to, attorney's fees and legal expenses.

          (iii) The Company's Waivers. The Company (i) waives diligence, demand,
presentment,  protest  and notice of any kind,  (ii)  agrees that it will not be
necessary for the Holder to first  institute suit in order to enforce payment of
this Note and (iii) consents to any one or more extensions or  postponements  of
time of payment,  release,  surrender or substitution of collateral security, or
forbearance or other indulgence,  without notice or consent. The pleading of any
statute of  limitations as a defense to any demand against the Company is hereby
expressly waived by the Company.

          (iv) Certain Obligors.  The Holder may proceed against the Company and
any  guarantors  or endorsees  hereof in such order and manner as the Holder may
choose.  None of the rights of the Holder shall be waived or  diminished  by any
failure or delay in the exercise thereof.

     (c) Covenants.  The Company covenants and agrees that, so long as this Note
is outstanding and unpaid:

          (i) Payment of Note.  The Company will  punctually  pay or cause to be
paid the principal,  premium, if any, and Interest on this Note at the dates and
places and in the manner specified herein. Any sums required to be withheld from
any payment of principal, premium, if any, or Interest on this Note by operation
of law or pursuant to any order, judgment, execution, treaty, rule or regulation
may be withheld by the Company  and paid over in  accordance  therewith.  In the
event any restriction is placed upon payment of principal,  premium,  if any, or
Interest by virtue of a currency or monetary  control law, rule or regulation of
Canada or of the United  States  Federal  Government,  as set forth in a written
notice  delivered to the Holder within thirty (30) days after the  imposition of
such a restriction, such payments shall be deposited to the account of the payee
in a bank, trust company or other financial institution in the United States, as
directed by the payee.  Such  payment or deposit  will be deemed  payment to the
Holder.

     Nothing in this Note or in any other  agreement  between the Holder and the
Company shall  require the Company to pay, or the Holder to accept,  interest in
an amount  which would  subject the Holder to any  penalty or  forfeiture  under
applicable law. In the event that the payment of any charges, fees or other sums
due under this Note or provided for in any other  agreement  between the Company
and the Holder are or could be held to be in the  nature of  interest  and would
subject the Holder to any penalty or forfeiture  under applicable law, then ipso
facto the obligations of the Company to make such payment to the Holder shall be
reduced to the highest rate  authorized  under  applicable law and, in the event
that the Holder  shall have ever  received,  collected,  accepted  or applied as
interest  any amount in excess of the maximum  rate of interest  permitted to be
charged by  applicable  law,  such amount which would be excess  interest  under
applicable  law  shall be  applied  first to the  reduction  of  principal  then
outstanding,  and,  second,  if such  principal  amount  is paid  in  full,  any
remaining excess shall forthwith be returned to the Company.

          (ii) Maintenance of Corporate Existence: Merger and Consolidation. The
Company will at all times cause to be done all things  necessary or  appropriate
to preserve and keep in full force and effect its  corporate  existence  and the
corporate existence of any

                                      -3-

<PAGE>

Significant  Subsidiary  and all of its  rights  and  franchises  and  shall not
consolidate  with or  merge  into  any  other  corporation  or  transfer  all or
substantially all of its assets to any person unless (i) the corporation  formed
by such consolidation or into which the Company is merged or to which the assets
of the Company are  transferred is a corporation  that expressly  assumes all of
the  obligations  of the Company under this Note and (ii) after giving effect to
such transaction,  no Event of Default and no event which, after notice or lapse
of time, or both,  would become an Event of Default,  shall have occurred and be
continuing.

          (iii) Maintenance of Properties.  The Company will reasonably maintain
in good repair, working order and condition,  reasonable wear and tear excepted,
its properties and other assets, and those of its Significant Subsidiaries,  and
from  time to time  make  all  necessary  or  desirable  repairs,  renewals  and
replacements thereto.

          (iv) Payment of Taxes. The Company will use its best efforts to pay or
discharge or cause to be paid,  set aside for payment or  discharge,  before the
same shall become delinquent,  all taxes,  assessments and governmental  charges
levied or imposed  upon the  Company or upon its  income,  profits or  property;
provided, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment,  charge or claim whose amount or
validity is being contested in good faith by appropriate proceedings.

          (v)  Compliance  with  Statutes.  The Company  will and will cause its
Significant  Subsidiaries to comply in all material respects with all applicable
statutes and  regulations of the provinces of Canada and of the United States of
America and of any state or municipality,  and of any agency thereof, in respect
of the conduct of business and the  ownership of property by the Company and its
Significant Subsidiaries;  provided, that nothing contained in this Section 3(e)
shall  require the Company or a  Significant  Subsidiary to comply with any such
statute  or  regulations  so long as its  legality  or  applicability  shall  be
contested in good faith.

          (vi) Reports;  Financial Statements:  No Adverse Change. The financial
statements  included in the Company's  filings (the "SEC  Filings")  with United
States  Securities and Exchange  Commission did not contain any untrue statement
of a  material  fact or omit to state a  material  fact  required  to be  stated
therein  or  necessary  to make the  statements  made  therein,  in light of the
circumstances in which they were made, not misleading.  The financial statements
included in the SEC Filings  (including the related notes and schedules)  fairly
present,  as of  December  31,  2004,  the  financial  position  and  results of
operations for the periods set forth therein (subject,  in the case of unaudited
statements,  to the omission of certain notes not ordinarily  accompanying  such
unaudited financial  statements,  and to normal year-end audit adjustments which
are not material in amount or effect), in each case in accordance with generally
accepted accounting principles  consistently applied during the period involved.
Since  December  31,  2004,  there has been no  material  adverse  change in the
Company's  or  a  Significant  Subsidiary's  business,   properties,   financial
condition or results of operations, except as disclosed in the SEC Filings.

          (vii)  Restrictions on Dividends,  Redemptions,  Etc. The Company will
not (i)  declare  or pay any  dividend  or make any  other  distribution  of the
Company,  except dividends or distributions  payable in equity securities of the
Company.

          (viii)  Transactions  with Affiliates.  Neither the Company nor any of
its  Significant  Subsidiaries  will  itself,  and will not  permit any of their
respective officers or directors,

                                      -4-

<PAGE>

or  holder  of 5% or  more of the  Company's  Common  Stock,  to  engage  in any
transaction  of any kind or nature  with any  affiliate  of the  Company  or any
Significant Subsidiary, other than transactions with any wholly-owned subsidiary
of the  Company or any  Significant  Subsidiary  or pursuant to the terms of any
agreement  existing as of the date hereof between the Company or any Significant
Subsidiary  and any  affiliate  of the  Company or any  Significant  Subsidiary,
unless  such  transaction,  or in the case of a course  of  related  or  similar
transactions  or  continuing  transactions,   such  course  of  transactions  or
continuing  transactions  is or are upon terms  which are fair to the Company or
any  Significant  Subsidiary  and  which  are  reasonably  similar  to,  or more
beneficial to the Company or any  Significant  Subsidiary  than the terms deemed
likely to occur in similar  transactions  with unrelated  persons under the same
circumstances.

     (d) No Prepayment. This Note may not be prepaid in whole or in part.

     (e) Maturity.  If this Note is not converted at the option of the Holder in
accordance with Section 6 hereof,  the principal  amount of this Note,  together
with accrued but unpaid interest, shall be due and payable on demand on February
1, 2008 (the "Maturity Date").

     (f) Conversion.  All, or any portion of the principal  amount of this Note,
together  with  accrued but unpaid  interest,  may be  converted  into shares of
Common  Stock (the "Note  Shares") at the option of the Holder at any time on or
prior to the Maturity  Date,  subject to the terms and  conditions  set forth in
this Section 6. Upon  conversion  into Note  Shares,  the  principal  amount and
accrued but unpaid  interest on this Note that are applicable to the Note Shares
that have been so converted shall be discharged.

          (i) Conversion  Price.  The number of Note Shares into which this Note
may be  converted  shall be  determined  by  dividing  the  aggregate  amount of
principal  and  accrued  but  unpaid  interest  outstanding  on this Note on the
Conversion  Date (as  defined  below) by thirty  dollars  ($30.00)  (subject  to
adjustment under certain circumstances) (the "Conversion Price").

          (ii)  Method of  Conversion.  Before the Holder  shall be  entitled to
receive Note Shares upon the conversion of this Note or any portion thereof, the
Holder shall surrender this Note and deliver a Notice of Conversion (in the form
attached  hereto as Exhibit A) to the  office of the  Company or its  designated
agent. The Notice of Conversion shall state therein the amount of the Note being
converted  into Note Shares and the  amount(s) in which the  certificate(s)  for
Note Shares are to be issued.  The time of conversion  (the  "Conversion  Date")
shall be the close of business on the first  business day  following the date on
which the Company receives the Notice of Conversion  Interest on Notes converted
ceases to accrue on and after the date of the Notice of Conversion.

          (iii)  Issuance  of  Note  Shares.  The  Company  shall,  as  soon  as
practicable  after  surrender  of  this  Note  and  receipt  of  the  Notice  of
Conversion, but in no event more than three (3) business days thereafter,  issue
and deliver to the  Holder,  a  certificate(s)  for the number of Note Shares to
which the Holder shall be entitled as aforesaid.

          (iv) No Fractional Shares. No fractional Note Shares shall be issuable
upon conversion of this Note or any portion  thereof.  If the conversion of this
Note would result in the issuance of a fractional  share of Common  Stock,  such
fractional  share shall be rounded up to the  nearest  whole share and issued to
the Holder.

                                      -5-

<PAGE>

          (v) Adjustment of Conversion Price; Merger.

               (1) If the  Company  at any time or from time to time  while this
Note is issued and outstanding shall declare or pay, without consideration,  any
dividend  on the  Common  Stock  payable  in  Common  Stock,  or shall  effect a
subdivision of the  outstanding  shares of Common Stock into a greater number of
shares of Common Stock (by stock split,  reclassification  or otherwise  than by
payment of a dividend in Common Stock or in any right to acquire  Common Stock),
or if the outstanding  shares of Common Stock shall be combined or consolidated,
by  reclassification  or  otherwise,  into a lesser  number  of shares of Common
Stock, then the Conversion Price in effect  immediately before such event shall,
concurrently with the effectiveness of such event, be proportionately  decreased
or increased,  as  appropriate.  If the Company  shall  declare or pay,  without
consideration,  any dividend on the Common Stock payable in any right to acquire
Common Stock for no consideration, then the Company shall be deemed to have made
a dividend  payable in Common  Stock in an amount of shares equal to the maximum
number of shares issuable upon exercise of such rights to acquire Common Stock.

               (2) If the  Common  Stock  shall  be  changed  into the same or a
different  number of shares of any other  class or classes of stock,  whether by
capital reorganization,  reclassification or otherwise (other than a subdivision
or combination of shares provided for in Section 6(e)(i)),  the Conversion Price
then in effect shall, concurrently with the effectiveness of such reorganization
or reclassification,  be proportionately  adjusted so that the Note Shares shall
be  convertible  into, in lieu of the number of shares of Common Stock which the
Holder would otherwise have been entitled to receive, a number of shares of such
other  class or  classes  of stock  equivalent  to the  number of shares of Note
Shares  that would have been  subject to receipt by the Holder  upon  payment of
Note Shares on this Note immediately before that change.

               (3) In case of any  consolidation  or merger of the Company  with
any other corporation,  limited liability company or any other entity (each such
transaction,  a "Merger"), the corporation formed by the Merger shall succeed to
the covenants, stipulations, promises and the agreements contained in this Note.
In the event of a Merger, the Company shall make appropriate  provisions so that
the Holder  shall have the right  thereafter  to convert this Note into the kind
and amount of securities  receivable  upon such Merger by a Holder of the number
of securities into which this Note might have been converted  immediately  prior
to a Merger. The above provisions shall similarly apply to successive Mergers.

               (4) Upon the occurrence of each adjustment or readjustment of any
Conversion Price pursuant to this Section 6(e), the Company at its expense shall
promptly  compute such  adjustment or  readjustment in accordance with the terms
hereof  and  prepare  and  furnish  to the  Holder a notice  setting  forth such
adjustment  or  readjustment  and  showing  in detail  the facts upon which such
adjustment or  readjustment  is based.  (vi)  Reservation of Stock.  The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock,  solely for the purpose of effecting  the  conversion of
this Note into Note  Shares,  such number of its shares of Common Stock as shall
from time to time be  sufficient  to effect the  conversion of all of the Notes;
and if at any time the number of authorized but unissued  shares of Common Stock
shall not be sufficient to effect the  conversion of all of the Notes then,  the
Company  will take such  corporate  action as may be  necessary  to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose, including without limitation, engaging

                                      -6-

<PAGE>

in best efforts to obtain the  requisite  stockholder  approval of any necessary
amendment to its Articles of Incorporation or charter documents.

          (vii) Issue Taxes.  The Company  shall pay any and all issue and other
taxes that may be payable in respect of any issue or  delivery  of Note  Shares;
provided,  that the Company  shall not be obligated  to pay any  transfer  taxes
resulting from any transfer  requested by the Holder in connection with any such
conversion.

     (g) Registration: Registration of Transfer and Exchange of this Note.

          (i) The Company  shall keep or cause to be kept a note  register  (the
"Note Register") for the Notes in which, subject to such reasonable  regulations
as it may prescribe, the Company shall provide for the registration of the Notes
and the registration of transfers of the Notes.

          (ii) Subject to the  restrictions  on transfer set forth herein,  this
Note may be  exchanged,  at the option of each  Holder,  for other  Notes in any
authorized  denominations,  of a like aggregate principal amount, upon surrender
of this Note to be  exchanged  at the offices of the  Company or its  designated
agent (either, the "Registrar")

          (iii) All Notes issued upon any  registration  of transfer or exchange
of this Note shall be valid  obligations  of the  Company,  evidencing  the same
debt, and entitling the Holder to the same benefits under this Note.

          (iv) Every Note presented or surrendered for  registration of transfer
or exchange shall be duly endorsed by, or be accompanied by a written instrument
of transfer in form  satisfactory to the Registrar,  duly executed by the Holder
thereof or such Holder's attorney duly authorized in writing.

          (v) No  charge  shall  be made to a  Holder  for any  registration  of
transfer or exchange of Notes.

          (vi) Prior to due  presentment  for  registration  of  transfer of any
Note,  the Company may treat the person in whose name any Note is registered (as
of the day of determination) as the Holder for the purpose of receiving payments
of  principal  of and  interest  on such  Note and for all other  purposes,  and
neither the Company nor any agent of the Company  shall be affected by notice to
the contrary.

     (h) Other Provisions Relating to Rights of the Holder of this Note.

          (i) Rights of the Holder of this Note. This Note shall not entitle the
Holder to any of the rights of a shareholder of the Company, including,  without
limitation, the right to vote, to receive dividends and other distributions,  or
to receive any notice of, or to attend,  meetings of  shareholders  or any other
proceedings of the Company. This Section 8(a) shall not affect the rights of the
Holder in its capacity as a shareholder  of the Company upon  conversion of this
Note and issuance to the Holder of Note Shares pursuant to Section (6) hereof.

          (ii) Lost, Stolen,  Mutilated or Destroyed Note. If this Note shall be
mutilated, lost, stolen, or destroyed, the Company shall execute and deliver, in
exchange and substitution  for and upon  cancellation of a mutilated Note, or in
lieu of or in substitution for a lost, stolen, or destroyed Note, a new Note for
the principal amount of this Note so mutilated,

                                      -7-

<PAGE>

lost,  stolen, or destroyed but only upon receipt of evidence (which may consist
of a signed  affidavit of the Holder),  of such loss,  theft,  or destruction of
such Note,  and of the ownership  thereof,  and  indemnity,  if  requested,  all
reasonably satisfactory to the Company.

     (i) Securities Law Compliance: Registration Rights.

          (i)  Restrictions on Transfer.  The Holder and the Company  understand
that each of (i) the Holder's right to convert this Note and (ii) the ability of
the Company to issue the Note Shares and are subject to full compliance with the
provisions of all applicable securities laws and the availability  thereunder of
an exemption from  registration,  and that the certificates  evidencing the Note
Shares,  shall  bear a legend  substantially  to the effect of the legend on the
first page hereof.

          (ii)  Compliance  with  Laws.  The  Holder  agrees to comply  with all
applicable  laws,  rules and  regulations  of all federal  and state  securities
regulators  within  the  United  States,  including  but  not  limited  to,  the
Securities  and Exchange  Commission,  the National  Association  of  Securities
Dealers,  Inc.,  and  applicable  state  securities  regulators  with respect to
disclosure,  filings and any other  requirements  resulting  in any way from the
issuance of this Note.

          (iii)  Registration  of Note Shares Under  Securities Act of 1933. The
Company has agreed  promptly to file a  registration  statement  with the United
States  Securities and Exchange  commission under the Securities Act of 1933, as
amended (the  "Securities  Act") for the sale of all the Common Stock underlying
the Note under a Registration  Rights Agreement entered into between the Company
and the  Holder as of August  1,  2005  (the  Note and the  Registration  Rights
Agreement are together referred to as the "Transaction Documents").

     (j) Holder  Representations.  The Holder  hereby  represents,  warrants and
covenants to the Company as of the date hereof:

          (i) Requisite Power and Authority.  The Holder has all necessary power
and authority to execute and deliver the Transaction  Documents and to carry out
their  provisions.  All actions on the  Holder's  part  required  for the lawful
execution  and delivery of the  Transaction  Documents for which it has executed
and delivered have been taken prior to the date hereof.

          (ii) Investment Representations.  The Holder understands that the Note
and the Note Shares  have not been  registered  under the  Securities  Act.  The
Holder also  understands  that the Note is being offered and sold pursuant to an
exemption from  registration  contained in regulations  under the Securities Act
based in part upon the Holder's representations contained herein.

               (1)  Acquisition  for Own Account.  The Holder is  acquiring  the
Debenture  to be acquired by the Holder for its own  account,  or the account of
its  designated  assignee,  for  investment  only,  and not with a view  towards
distribution in violation of applicable securities laws.

               (2) Accredited  Investor.  Holder represents that it, and each of
its  partners  (limited or  general),  is an  "accredited  investor"  within the
meaning of Rule 501(a) of Regulation D as promulgated under the Securities Act.

                                      -8-

<PAGE>

               (3)  Financial  Experience.  The Holder and each of its  partners
(limited or general) has such knowledge and experience in financial and business
matters as to be capable of evaluating  the merits and risks of an investment in
the Note or Note  Shares to be  acquired  by the  Holder and is able to bear the
economic risk of loss of the entire investment.

               (4)   Information.   The  Company  has  provided  to  Holder  the
opportunity  to ask  questions  and  receive  answers  concerning  the terms and
conditions of the transactions  contemplated in the Transaction Documents and it
has had access to such  information  concerning the Company as it has considered
necessary or appropriate in connection  with its investment  decision to acquire
the Note and Note Shares.

               (5) Transfer  Restrictions.  Holder  agrees that if it decides to
offer,  sell or otherwise  transfer the Note or Note Shares,  it will not offer,
sell or otherwise transfer the Security directly or indirectly, unless:

                    (A) the sale is made  pursuant  to  registration  under  the
Securities Act;

                    (B) the  sale is made  pursuant  to the  exemption  from the
registration  requirements  under  the  Securities  Act  provided  by  Rule  144
thereunder and in accordance with any applicable  state securities or "Blue Sky"
laws; or

                    (C) the  Security  is sold in a  transaction  that  does not
require  registration  under the Securities Act or any applicable state laws and
regulations governing the offer and sale of securities, and it has prior to such
sale furnished to the Company an opinion of counsel  reasonably  satisfactory to
the Company.

               (6) Due Diligence. The Holder has been solely responsible for its
own "due diligence"  investigation  of the Company and its management,  business
and  financial  condition,  for its own analysis of the merits and risks of this
investment,  and for its own analysis of the fairness  and  desirability  of the
terms of the  investment;  (ii) in  taking  any  action or  performing  any role
relative  to the  arranging  of the  proposed  investment,  the Holder has acted
solely in its own  interest;  and (iii) neither the Holder nor any of its agents
or employees has acted as an agent of the Company, or as an issuer, underwriter,
broker,  dealer or investment  adviser relative to any security involved in this
investment.

               (7) Tax  Consequences.  Holder  understands and agrees that there
may be material tax  consequences to the Holder of an acquisition or disposition
of the  Note or  Note  Shares.  The  Company  gives  no  opinion  and  makes  no
representation  with respect to the tax  consequences to the Holder under United
States,  state,  local or foreign tax law of the  undersigned's  acquisition  or
disposition of the Note or Note Shares.

               (8) No General Solicitation.  The Holder confirms that the Holder
has received no general  solicitation or general  advertisement and has attended
no  seminar  or  meeting  (whose  attendees  have been  invited  by any  general
solicitation or general  advertisement) and has received no advertisement in any
newspaper,  magazine,  or  similar  media,  broadcast  on  television  or  radio
regarding the offering of the Note or Note Shares.

                                      -9-

<PAGE>

     (k) Other Matters.

          (i) Binding Effect;  Assignment.  The provisions of this Note shall be
binding upon and inure to the benefit of the parties  hereto and the  successors
and assigns of the Company.

          (ii) Further  Actions.  At any time and from time to time, the Company
and the Holder agree, without further consideration, to take such actions and to
execute  and  deliver  such  documents  as the other may  reasonably  request to
consummate the transactions contemplated in this Note.

          (iii)   Modification:   Waiver.   This  Note  sets  forth  the  entire
understanding  of the Company and the Holder with respect to the subject  matter
hereof and  supersedes  all existing  agreements  between them  concerning  such
subject  matter.  This  Note may be  amended,  modified,  superseded,  canceled,
renewed or  extended,  and the terms  hereof  may be  waived,  only by a written
instrument signed by the Company and Holders of at least fifty-one percent (51%)
in principal  amount of the Notes at the time  outstanding;  provided,  however,
that the consent of a Holder  shall be required to modify the terms of this Note
affecting the payment of principal amount of, or interest on, such Holder's Note
or the term of such Holder's  Note. Any waiver by the Company or the Holder of a
breach of any  provision of this Note shall not operate as or be construed to be
a waiver of any other  breach of such  provision  or of any  breach of any other
provision of this Note.  The failure of the Company or the Holder to insist upon
strict  adherence to any term of this Note on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict  adherence  to that term or any other term of this Note.  No delay on the
part of any party in exercising any right,  power or privilege  hereunder  shall
operate as a waiver  thereof or hereof,  nor shall any waiver on the part of any
party of any right,  power or privilege  hereunder preclude any other or further
exercise  hereof  or the  exercise  of  any  other  right,  power  or  privilege
hereunder.  Any waiver  must be in  writing.  The rights and  remedies  provided
herein are  cumulative and are not exclusive of any rights or remedies which any
party may otherwise have at law or in equity.

          (iv) Notices. Any notice or other communication  required or permitted
to be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt if to (i) the Company, to
JED Oil Inc., Suite 2600, 500 - 4th Avenue S.W., Calgary,  Alberta,  Canada, T2P
2V6,  and  (ii) the  Holder,  to JED  Funding,  Ltd.,  233  South  Orange  Grove
Boulevard,  Pasadena  California 91105, or to such Holder at its last address as
shown on the Note  Register  (or to such other  address as the party  shall have
furnished in writing in accordance  with the provisions of this Section  10(d)).
Any notice or other  communication given by certified mail shall be deemed given
at the time of  certification  thereof,  except for a notice  changing a party's
address which shall be deemed given at the time of receipt thereof.

          (v) Severability.  If any provision of this Note is invalid,  illegal,
or  unenforceable,  the balance of this Note shall remain in effect,  and if any
provision is inapplicable to any person or circumstance,  it shall  nevertheless
remain applicable to all other persons and  circumstances.  The rate of interest
on this Note is subject to any limitations imposed by applicable usury laws.

          (vi) Headings. The headings in this Note are solely for convenience of
reference and shall be given no effect in the construction or  interpretation of
this Note.

                                      -10-

<PAGE>

          (vii) Governing Law. This Agreement shall be governed by and construed
in all respects under the laws of the State of California,  without reference to
its  conflict  of laws rules or  principles.  Any suit,  action,  proceeding  or
litigation  arising out of or relating  to this  Agreement  shall be brought and
prosecuted in such federal or state court or courts  located within the State of
California,  County of Los  Angeles,  as  provided by law.  The  parties  hereby
irrevocably and  unconditionally  consent to the jurisdiction of each such court
or courts  located  within the State of California  and to service of process by
registered or certified mail, return receipt  requested,  or by any other manner
provided by applicable law, and hereby irrevocably and unconditionally waive any
right to claim that any suit, action,  proceeding or litigation so commenced has
been commenced in an inconvenient  forum.  The prevailing party in any such suit
or action shall be paid all costs of suit including fees of counsel, filing fees
and all other costs of bringing and pursuing the action.

          (viii) Due Authorization.  The execution and delivery of this Note and
the consummation of the transactions contemplated herein have been authorized by
the Board of  Directors  of the  Company and by any  necessary  vote or with the
consent of the shareholders of the Company.

          (ix) Due Authorization.  Each party hereto  acknowledges that Aaron A.
Grunfeld  and Resch  Polster  Alpert & Berger LLP  represent  only the Holder in
connection with the  negotiation  and preparation of the Transaction  Documents,
and the  consummation of the  transactions  contemplated by this Agreement.  The
Holder and the Company  acknowledge Aaron A. Grunfeld's prior  representation of
the Company and consent to his  representation of the Holder with respect to the
Transaction  Documents.  The parties  hereto also further  acknowledge  that Mr.
Grunfeld is a limited partner of the Holder.

     IN WITNESS WHEREOF,  the Company has caused this Note to be executed on its
behalf by its Chairman of the Board of Directors thereunto duly authorized.

                                   JED OIL INC.

                                   By /s/ Reginald J. Greenslade
                                      -----------------------------------------
                                       Reginald J. Greenslade
                                       Chairman of the Board of Directors
Attest:

/s/ Thomas J. Jacobsen
-----------------------------------
Thomas J. Jacobsen,
Chief Executive Officer

                     [SIGNATURE OF HOLDER ON FOLLOWING PAGE]

                                      -11-
<PAGE>

     IN WITNESS  WHEREOF,  the Holder has  executed  this Note this _____ day of
August, 2005.

JED FUNDING, LTD.

By
   ---------------------------------------
   ---------------------------------------
    General Partner

------------------------------------------
(Address)

------------------------------------------
(City/State/Zip Code)

------------------------------------------
(Area Code/Telephone Number)

                                      -12-
<PAGE>

                                    EXHIBIT A
                              NOTICE OF CONVERSION

     The undersigned being the holder of the attached  Convertible  Subordinated
Note(s) (the  "Note(s)")  due the Maturity  Date (as defined in the Note) of JED
Oil, Inc. (the  "Company"),  hereby  exercises the option to convert the Note(s)
into Note Shares (as defined in the Note(s)) in accordance with the terms of the
Note(s).

     The  undersigned  directs that the Note Shares be issued in the name of the
Holder  of the  attached  Note  and  delivered  as  soon as  practicable  and in
accordance with the provisions of the Note(s) to:

Full address:
             ------------------------------------------------------------------
             ------------------------------------------------------------------
             ------------------------------------------------------------------

Date:
      --------------------------------

By:
      --------------------------------
Name:
      --------------------------------

                                      -13-EXHIBIT 4.2

                          REGISTRATION RIGHTS AGREEMENT

     This  Registration  Rights Agreement (the  "Agreement") is made and entered
into as of this 3rd day of August 2005 by and among JED Oil Inc., a  corporation
incorporated under the laws of the Province of Alberta,  Canada (the "Company"),
and JED Funding,  Ltd., a limited  partnership formed in the state of California
("Investor").

     The parties hereby agree as follows:

     1.  Certain Definitions.

     As used in this  Agreement,  the  following  terms shall have the following
meanings:

     "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.

     "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.

     "Common  Stock" shall mean the  Company's  common  stock,  no par value per
share,   and  any  securities   into  which  such  shares  may   hereinafter  be
reclassified.

     "Convertible Note" shall mean the Company's Senior Subordinated Convertible
Note dated August 2, 2005 in the  principal  amount of US  $20,000,000,  bearing
interest at 10% per annum payable quarterly as due on February 1, 2008.

     "Investor" shall mean JED Funding,  Ltd., a limited  partnership  formed in
the state of California, that has lent $20,000,000 (US) pursuant the Convertible
Note,  and any Affiliate or permitted  transferee or transferees of the Investor
who is a subsequent holder of any Registrable Securities.

     "Prospectus"  shall  mean  the  prospectus  included  in  any  Registration
Statement, as amended or supplemented by any prospectus supplement, with respect
to the  terms of the  offering  of any  portion  of the  Registrable  Securities
covered  by  such  Registration  Statement  and  by  all  other  amendments  and
supplements  to the  prospectus,  including  post-effective  amendments  and all
material incorporated by reference in such prospectus.

     "Register," "registered" and "registration" refer to a registration made by
preparing and filing a  Registration  Statement in compliance  with the 1933 Act
(as defined  below),  and the declaration or ordering of  effectiveness  of such
Registration Statement or document.

     "Registrable  Securities" or "Registrable  Security" shall mean the Shares,
any other  securities  issued or issuable  with  respect to or in  exchange  for
Registrable  Securities;  provided,  that,  a  security  shall  cease  to  be  a
Registrable Security upon (A) sale pursuant to a Registration  Statement or Rule
144  under  the  1933  Act,  or (B) such  security  becoming  eligible,  and the
Company's  confirming  such  eligibility  in writing,  for sale by the  Investor
pursuant to Rule 144(k).

     "Registration  Statement"  shall  mean any  registration  statement  of the
Company  filed  under  the  1933  Act  that  covers  the  resale  of  any of the
Registrable Securities pursuant to the provisions of this Agreement,  amendments
and  supplements  to  such  Registration  Statement,   including  post-effective
amendments,  all  exhibits and all  material  incorporated  by reference in such
Registration Statement.

<PAGE>

     "Required  Investors"  means the Investor and others who are affiliates and
permitted  transferees  of the  Investor  holding a majority of the  Registrable
Securities.

     "SEC" means the U.S. Securities and Exchange Commission.

     "Shares"  means the shares of Common  Stock issued upon  conversion  of and
pursuant to the Convertible Note.

     "1933 Act" means the Securities Act of 1933, as amended,  and the rules and
regulations promulgated thereunder.

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

     2.  Registration.

          (a) Registration Statements.

          (i)  Promptly  following  the closing of the  purchase and sale of the
Convertible  Note (the "Closing  Date") but no later than ninety (90) days after
the Closing Date (the "Filing  Deadline"),  the Company  shall  prepare and file
with  the SEC  one  Registration  Statement  on  Form  F-1  (or on such  form of
registration  statement as is then available to effect a registration for resale
of the Registrable Securities),  covering the sale of the Registrable Securities
on their  issuance  in an amount at least equal to the number of Shares that the
Company  may issue at the  current  conversion  price of $30.00 per Share.  Such
Registration Statement shall include the plan of distribution attached hereto as
Exhibit A. Such Registration Statement also shall cover, to the extent allowable
under the 1933 Act and the rules  promulgated  thereunder  (including Rule 416),
such  indeterminate  number of additional  shares of Common Stock resulting from
stock  splits,  stock  dividends  or similar  transactions  with  respect to the
Registrable  Securities.  The Company shall use its  reasonable  best efforts to
obtain from each person who now has  piggyback  registration  rights a waiver of
those  rights  with  respect to the  Registration  Statement.  The  Registration
Statement  (and each  amendment  or  supplement  thereto,  and each  request for
acceleration  of  effectiveness  thereof)  shall be provided in accordance  with
Section 3(c) to the Investors'  counsel prior to its filing or other submission.
If a Registration  Statement  covering the  Registrable  Securities is not filed
with the SEC on or prior to the Filing Deadline,  the Company will make pro rata
payments to each  Investor,  as liquidated  damages and not as a penalty,  in an
amount equal to 1.00% of the aggregate amount invested by such Investor for each
30-day period or pro rata for any portion thereof  following the Filing Deadline
for which no  Registration  Statement is filed with  respect to the  Registrable
Securities.   Such   payments   shall  be  made  to  each   Investor   in  cash.
Notwithstanding the foregoing, such payments shall not constitute the Investor's
exclusive remedy.

          (ii)   F-3   Qualification.   Promptly   following   the   date   (the
"Qualification  Date")  upon  which  the  Company  becomes  eligible  to  use  a
registration  statement on Form F-3 to register the  Registrable  Securities  or
Additional  Shares, as applicable,  for resale,  but in no event more than sixty
(60) days  after the  Qualification  Date (the  "Qualification  Deadline"),  the
Company shall file a registration statement on Form F-3 covering the Registrable
Securities  (or a  post-effective  amendment  on  Form  F-3 to the  registration
statement  on  Form  F-1) (a  "Shelf  Registration  Statement")  and  shall  use
commercially reasonable efforts to cause such Shelf Registration Statement to be
declared effective as promptly as practicable thereafter.

                                      -2-

<PAGE>

          (b) Expenses.  The Company will pay all expenses  associated with each
registration,  including  filing and printing  fees,  the Company's  counsel and
accounting  fees and expenses,  costs  associated  with clearing the Registrable
Securities for sale under applicable  state  securities laws,  listing fees, and
the Investors'  reasonable  expenses in connection  with the  registration,  but
excluding  the  Investors'   legal  fees,   discounts,   commissions,   fees  of
underwriters,  selling brokers,  dealer managers or similar securities  industry
professionals with respect to the Registrable Securities being sold.

          (c) Effectiveness.

          (i) The Company shall use commercially  reasonable efforts to have the
Registration  Statement declared  effective as soon as practicable.  The Company
shall notify the  Investors  by facsimile or e-mail as promptly as  practicable,
and  in any  event,  within  forty-eight  (48)  hours,  after  any  Registration
Statement is declared effective and shall  simultaneously  provide the Investors
with copies of any related  Prospectus to be used in connection with the sale or
other  disposition of the securities  covered thereby.  If (A)(x) a Registration
Statement  covering the Registrable  Securities is not declared effective by the
SEC prior to the earlier of (i) five (5) Business  Days after the SEC shall have
informed the Company that no review of the  Registration  Statement will be made
or (ii) the  120th  day  after  the  Closing  Date or (B)  after a  Registration
Statement has been declared effective by the SEC, sales of Shares cannot be made
pursuant  to such  Registration  Statement  for any  reason  (including  without
limitation  by reason of a stop order,  or the  Company's  failure to update the
Registration Statement), but excluding the inability of any Investor to sell the
Registrable  Securities  covered thereby due to market  conditions and except as
excused pursuant to subparagraph (ii) below, then the Company will make pro rata
payments to each  Investor,  as liquidated  damages and not as a penalty,  in an
amount equal to 1.00% of the aggregate amount invested by such Investor for each
30-day  period or pro rata for any portion  thereof  following the date by which
such Registration  Statement should have been effective (the "Blackout Period").
The amounts  payable as liquidated  damages  pursuant to this paragraph shall be
paid  monthly  within  three  (3)  Business  Days of the last day of each  month
following the  commencement  of the Blackout Period until the termination of the
Blackout  Period.  Such  payments  shall  be  made  to each  Investor  in  cash.
Notwithstanding the foregoing, such payments shall not constitute the Investor's
exclusive remedy.

          (ii) For not more than twenty (20)  consecutive days or for a total of
not more than forty-five (45) days in any twelve (12) month period,  the Company
may delay the  disclosure  of material  non-public  information  concerning  the
Company,  by suspending the use of any Prospectus  included in any  registration
contemplated  by this Section  containing  such  information,  the disclosure of
which at the time is not, in the good faith opinion of the Company,  in the best
interests of the Company (an "Allowed Delay");  provided, that the Company shall
promptly  (a) notify the  Investors  in writing of the  existence  of (but in no
event,  without  the prior  written  consent of an  Investor,  shall the Company
disclose to such Investor any of the facts or circumstances  regarding) material
non-public information giving rise to an Allowed Delay, (b) advise the Investors
in writing to cease all sales under the Registration  Statement until the end of
the Allowed Delay and (c) use  commercially  reasonable  efforts to terminate an
Allowed Delay as promptly as practicable.

                                      -3-

<PAGE>

     3.  Company  Obligations.  The  Company  will use  commercially  reasonable
efforts to effect the  registration of the Registrable  Securities in accordance
with the terms hereof,  and pursuant  thereto the Company will, as expeditiously
as possible:

          (a) use  commercially  reasonable  efforts to cause such  Registration
Statement to become effective and to remain continuously  effective for a period
that will  terminate  upon the earlier of (i) the date on which all  Registrable
Securities covered by such Registration  Statement as amended from time to time,
have been sold, and (ii) the date on which all Registrable Securities covered by
such   Registration   Statement  may  be  sold  pursuant  to  Rule  144(k)  (the
"Effectiveness   Period")   and  advise  the   Investors  in  writing  when  the
Effectiveness Period has expired;

          (b) prepare and file with the SEC such  amendments and  post-effective
amendments to the Registration  Statement and the Prospectus as may be necessary
to keep the Registration Statement effective for the period specified in Section
3(a) and to  comply  with the  provisions  of the 1933 Act and the 1934 Act with
respect  to  the  distribution  of all of  the  Registrable  Securities  covered
thereby;

          (c) provide copies to and permit  counsel  designated by the Investors
to review each Registration Statement and all amendments and supplements thereto
prior to their filing with the SEC;

          (d) furnish to the  Investors'  legal  counsel (i) promptly  after the
same is prepared  and publicly  distributed,  filed with the SEC, or received by
the Company  (but not later than two (2)  Business  Days after the filing  date,
receipt  date  or  sending  date,  as the  case  may  be)  one  (1)  copy of any
Registration  Statement and any amendment thereto,  each preliminary  prospectus
and Prospectus and each amendment or supplement thereto, and each letter written
by or on behalf of the Company to the SEC or the staff of the SEC, and each item
of correspondence from the SEC or the staff of the SEC, in each case relating to
such  Registration  Statement  (other  than any  portion  of any  thereof  which
contains  information for which the Company has sought confidential  treatment),
and (ii)  such  number  of  copies  of a  Prospectus,  including  a  preliminary
prospectus,  and all amendments and supplements thereto and such other documents
as each Investor may reasonably  request in order to facilitate the  disposition
of the  Registrable  Securities  owned by such  Investor that are covered by the
related Registration Statement;

          (e) use commercially reasonable efforts to (i) prevent the issuance of
any stop order or other suspension of  effectiveness  and, (ii) if such order is
issued, obtain the withdrawal of any such order at the earliest possible moment;

          (f)  prior to any  public  offering  of  Registrable  Securities,  use
commercially  reasonable  efforts to register or qualify or  cooperate  with the
Investors and their counsel in connection with the registration or qualification
of such  Registrable  Securities for offer and sale under the securities or blue
sky laws of such  jurisdictions  requested by the  Investors  and do any and all
other  commercially  reasonable acts or things  necessary or advisable to enable
the distribution in such jurisdictions of the Registrable  Securities covered by
the Registration  Statement;  provided,  however,  that the Company shall not be
required in

                                      -4-

<PAGE>

connection  therewith or as a condition thereto to (i) qualify to do business in
any  jurisdiction  where it would not  otherwise  be required to qualify but for
this Section 3(f), (ii) subject itself to general  taxation in any  jurisdiction
where it would not  otherwise be so subject but for this Section  3(f), or (iii)
file a general consent to service of process in any such jurisdiction;

          (g) use  commercially  reasonable  efforts  to cause  all  Registrable
Securities  covered by a Registration  Statement to be listed on each securities
exchange,  interdealer  quotation  system  or  other  market  on  which  similar
securities issued by the Company are then listed;

          (h)  immediately  notify the Investors,  at any time when a Prospectus
relating to  Registrable  Securities is required to be delivered  under the 1933
Act,  upon  discovery  that,  or upon the  happening of any event as a result of
which, the Prospectus included in a Registration  Statement,  as then in effect,
includes an untrue  statement of a material  fact or omits to state any material
fact required to be stated therein or necessary to make the  statements  therein
not misleading in light of the circumstances  then existing,  and at the request
of any such  holder,  promptly  prepare and furnish to such holder a  reasonable
number of copies of a supplement to or an amendment of such Prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Registrable
Securities,  such Prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances then
existing; and

          (i) otherwise use commercially  reasonable  efforts to comply with all
applicable rules and regulations of the SEC under the 1933 Act and the 1934 Act,
take such  other  actions  as may be  reasonably  necessary  to  facilitate  the
registration of the Registrable Securities hereunder;  and make available to its
security  holders,  as soon as  reasonably  practicable,  but not later than the
Availability Date (as defined below), an earnings statement covering a period of
at  least  twelve  (12)  months,  beginning  after  the  effective  date of each
Registration Statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the 1933 Act,  including Rule 158  promulgated  thereunder (for
the  purpose of this  subsection  3(i),  "Availability  Date" means the 45th day
following the end of the fourth fiscal  quarter that includes the effective date
of such  Registration  Statement,  except that, if such fourth fiscal quarter is
the last quarter of the  Company's  fiscal year,  "Availability  Date" means the
90th day after the end of such fourth fiscal quarter).

          (j) With a view to making  available to the  Investors the benefits of
Rule 144 (or its  successor  rule) and any other rule or  regulation  of the SEC
that may at any time permit the  Investors to sell shares of Common Stock to the
public without  registration,  the Company covenants and agrees to: (i) make and
keep public information available,  as those terms are understood and defined in
Rule 144,  until the  earlier  of (A) six  months  after such date as all of the
Registrable  Securities may be resold  pursuant to Rule 144(k) or any other rule
of similar effect or (B) such date as all of the  Registrable  Securities  shall
have been  resold;  (ii) file with the SEC in a timely  manner all  reports  and
other documents required of the Company under the 1934 Act; and (iii) furnish to
each  Investor  upon  request,  as long as such  Investor  owns any  Registrable
Securities, (A) a written statement by the Company that it has complied with the
reporting  requirements of the 1934 Act, (B) a copy of the Company's most recent
Annual  Report on Form 10-KSB or Quarterly  Report on Form 10-QSB,  and (C) such
other information as may

                                      -5-

<PAGE>

be  reasonably  requested  in  order  to  avail  such  Investor  of any  rule or
regulation  of  the  SEC  that  permits  the  selling  of any  such  Registrable
Securities without registration.

     4. Due Diligence  Review;  Information.  The Company shall make  available,
during  normal  business  hours,  for  inspection  and review by the  Investors,
advisors  to  and  representatives  of the  Investors  (who  may  or may  not be
affiliated with the Investors and who are reasonably acceptable to the Company),
all financial and other records,  all SEC Filings (as defined in the Convertible
Note) and other  filings with the SEC,  and all other  corporate  documents  and
properties of the Company as may be reasonably necessary for the purpose of such
review,  and cause the Company's  officers,  directors and  employees,  within a
reasonable time period, to supply all such information  reasonably  requested by
the Investors or any such  representative,  advisor or underwriter in connection
with such Registration Statement (including,  without limitation, in response to
all questions and other inquiries  reasonably made or submitted by any of them),
prior to and  from  time to time  after  the  filing  and  effectiveness  of the
Registration  Statement  for the sole purpose of enabling the Investors and such
representatives,  advisors and underwriters and their respective accountants and
attorneys  to conduct  initial  and ongoing due  diligence  with  respect to the
Company and the accuracy of such Registration Statement.

     The  Company  shall not  disclose  material  nonpublic  information  to the
Investors,  or to advisors to or representatives of the Investors,  unless prior
to disclosure of such  information the Company  identifies  such  information as
being material nonpublic  information and provides the Investors,  such advisors
and  representatives  with the  opportunity  to accept or refuse to accept  such
material  nonpublic  information  for review and any Investor  wishing to obtain
such information enters into an appropriate  confidentiality  agreement with the
Company with respect thereto.

     5. Obligations of the Investors.

          (a) Each  Investor  shall  furnish  in  writing  to the  Company  such
information  regarding  itself,  the  Registrable  Securities held by it and the
intended  method of disposition  of the  Registrable  Securities  held by it, as
shall be  reasonably  required to effect the  registration  of such  Registrable
Securities and shall execute such documents in connection with such registration
as the Company may reasonably  request. At least five (5) Business Days prior to
the first  anticipated  filing date of any Registration  Statement,  the Company
shall notify each  Investor of the  information  the Company  requires from such
Investor  if such  Investor  elects  to have any of the  Registrable  Securities
included  in  the  Registration   Statement.  An  Investor  shall  provide  such
information  to the  Company at least two (2)  Business  Days prior to the first
anticipated  filing date of such Registration  Statement if such Investor elects
to  have  any  of  the  Registrable  Securities  included  in  the  Registration
Statement.

          (b) Each  Investor,  by its acceptance of the  Registrable  Securities
agrees to cooperate  with the Company as reasonably  requested by the Company in
connection  with  the  preparation  and  filing  of  a  Registration   Statement
hereunder,  unless  such  Investor  has  notified  the Company in writing of its
election to exclude all of its  Registrable  Securities  from such  Registration
Statement.

                                      -6-

<PAGE>

          (c) Each  Investor  agrees  that,  upon receipt of any notice from the
Company of either (i) the  commencement  of an Allowed Delay pursuant to Section
2(c)(ii) or (ii) the happening of an event pursuant to Section 3(h) hereof, such
Investor will  immediately  discontinue  disposition of  Registrable  Securities
pursuant to the Registration  Statement  covering such  Registrable  Securities,
until the  Investor's  receipt  of the  copies of the  supplemented  or  amended
prospectus filed with the SEC and until any related post-effective  amendment is
declared  effective  and, if so  directed by the  Company,  the  Investor  shall
deliver to the Company (at the expense of the  Company) or destroy  (and deliver
to the  Company a  certificate  of  destruction)  all  copies in the  Investor's
possession of the Prospectus covering the Registrable  Securities current at the
time of receipt of such notice.

     6. Indemnification.

          (a)  Indemnification  by the Company.  The Company will  indemnify and
hold  harmless  each  Investor and its  officers,  directors,  members,  limited
partners,  employees and agents,  successors and assigns, and each other person,
if any, who controls such Investor  within the meaning of the 1933 Act,  against
any losses, claims, damages or liabilities,  joint or several, to which they may
become subject under the 1933 Act or otherwise,  insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon: (i) any untrue  statement or alleged untrue statement of any material fact
contained in any  Registration  Statement,  any preliminary  prospectus or final
prospectus  contained therein, or any amendment or supplement thereof;  (ii) any
blue sky application or other document executed by the Company  specifically for
that purpose or based upon written information furnished by the Company filed in
any  state  or  other  jurisdiction  in  order  to  qualify  any  or  all of the
Registrable  Securities under the securities laws thereof (any such application,
document  or  information  herein  called a "Blue Sky  Application");  (iii) the
omission or alleged  omission to state  therein a material  fact  required to be
stated therein or necessary to make the statements therein not misleading;  (iv)
any violation by the Company or its agents of any rule or regulation promulgated
under the 1933 Act  applicable  to the  Company or its agents  and  relating  to
action or inaction required of the Company in connection with such registration;
or (v) any failure to register or qualify the Registrable Securities included in
any  such  Registration  in any  state  where  the  Company  or its  agents  has
affirmatively  undertaken  or agreed in writing that the Company will  undertake
such  registration or qualification  on an Investor's  behalf and will reimburse
such  Investor,  and each  such  officer,  director  or  member  and  each  such
controlling person for any legal or other expenses  reasonably  incurred by them
in connection  with  investigating  or defending any such loss,  claim,  damage,
liability or action;  provided,  however, that the Company will not be liable in
any such  case if and to the  extent  that  any  such  loss,  claim,  damage  or
liability  arises out of or is based upon an untrue  statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished  by  such  Investor  or  any  such   controlling   person  in  writing
specifically for use in such Registration Statement or Prospectus.

          (b) Indemnification by the Investors.  Each Investor agrees, severally
but not jointly, to indemnify and hold harmless, to the fullest extent permitted
by law, the Company, its directors,  officers, employees,  stockholders and each
person who controls the Company (within the meaning of the 1933 Act) against any
losses, claims, damages,  liabilities and expense (including reasonable attorney
fees) resulting from any untrue  statement of a

                                      -7-

<PAGE>

material  fact or any omission of a material  fact  required to be stated in the
Registration  Statement or Prospectus or preliminary  prospectus or amendment or
supplement  thereto or necessary to make the statements  therein not misleading,
to the extent,  but only to the extent that such untrue statement or omission is
contained  in any  information  furnished  in  writing by such  Investor  to the
Company specifically for inclusion in such Registration  Statement or Prospectus
or  amendment  or  supplement  thereto.  In no event shall the  liability  of an
Investor be greater in amount than the dollar amount of the proceeds (net of all
expense  paid by such  Investor in  connection  with any claim  relating to this
Section  6 and the  amount of any  damages  such  Investor  has  otherwise  been
required to pay by reason of such untrue statement or omission) received by such
Investor  upon  the  sale  of  the  Registrable   Securities   included  in  the
Registration Statement giving rise to such indemnification obligation.

          (c) Conduct of  Indemnification  Proceedings.  Any person  entitled to
indemnification hereunder shall (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit such
indemnifying  party to assume the defense of such claim with counsel  reasonably
satisfactory  to the  indemnified  party;  provided that any person  entitled to
indemnification hereunder shall have the right to employ separate counsel and to
participate  in the  defense of such  claim,  but the fees and  expenses of such
counsel shall be at the expense of such person unless (a) the indemnifying party
has agreed to pay such fees or  expenses,  or (b) the  indemnifying  party shall
have  failed to assume the defense of such claim and employ  counsel  reasonably
satisfactory  to such  person  or (c) in the  reasonable  judgment  of any  such
person,  based upon written advice of its counsel, a conflict of interest exists
between such person and the  indemnifying  party with respect to such claims (in
which case, if the person notifies the  indemnifying  party in writing that such
person  elects to employ  separate  counsel at the  expense of the  indemnifying
party, the indemnifying  party shall not have the right to assume the defense of
such claim on behalf of such person); and provided, further, that the failure of
any  indemnified  party to give notice as provided  herein shall not relieve the
indemnifying party of its obligations hereunder,  except to the extent that such
failure to give notice shall materially  adversely affect the indemnifying party
in the  defense  of any such  claim or  litigation.  It is  understood  that the
indemnifying  party shall not, in  connection  with any  proceeding  in the same
jurisdiction,  be liable for fees or expenses of more than one separate  firm of
attorneys at any time for all such indemnified  parties.  No indemnifying  party
will, except with the consent of the indemnified party,  consent to entry of any
judgment or enter into any settlement that does not include as an  unconditional
term thereof the giving by the claimant or plaintiff to such  indemnified  party
of a release from all liability in respect of such claim or litigation.

          (d) Contribution.  If for any reason the indemnification  provided for
in the preceding  paragraphs (a) and (b) is unavailable to an indemnified  party
or insufficient to hold it harmless,  other than as expressly specified therein,
then the  indemnifying  party shall  contribute to the amount paid or payable by
the indemnified  party as a result of such loss,  claim,  damage or liability in
such  proportion  as is  appropriate  to  reflect  the  relative  fault  of  the
indemnified  party and the  indemnifying  party,  as well as any other  relevant
equitable  considerations.  No  person  guilty of  fraudulent  misrepresentation
within  the  meaning  of  Section  11(f) of the 1933 Act  shall be  entitled  to
contribution from any person not guilty of such fraudulent misrepresentation. In
no event shall the contribution obligation of a holder of Registrable Securities
be greater in amount than the dollar amount of the proceeds (net of all

                                      -8-

<PAGE>

expenses  paid by such  holder in  connection  with any claim  relating  to this
Section 6 and the amount of any damages such holder has otherwise  been required
to pay by reason of such  untrue or alleged  untrue  statement  or  omission  or
alleged  omission)  received by it upon the sale of the  Registrable  Securities
giving rise to such contribution obligation.

     7. Miscellaneous.

          (a)  Amendments  and Waivers.  This Agreement may be amended only by a
writing signed by the Company and the Required  Investors.  The Company may take
any action herein  prohibited,  or omit to perform any act herein required to be
performed by it, only if the Company shall have obtained the written  consent to
such amendment, action or omission to act, of the Required Investors.

          (b)  Notices.  All notices and other  communications  provided  for or
permitted  hereunder  shall  be  made  as set  forth  in  Section  10(d)  of the
Convertible Note.

          (c)  Assignments  and Transfers by Investors.  The  provisions of this
Agreement  shall be binding upon and inure to the benefit of the  Investors  and
their respective  successors and assigns. An Investor may transfer or assign, in
whole or from time to time in part, to one or more persons its rights  hereunder
in connection  with the transfer of  Registrable  Securities by such Investor to
such person,  provided  that such  Investor  complies  with all laws  applicable
thereto and provides  written notice of assignment to the Company promptly after
such assignment is effected.

          (d) Assignments  and Transfers by the Company.  This Agreement may not
be assigned by the Company  (whether by operation of law or  otherwise)  without
the prior written consent of the Required Investors, provided, however, that the
Company may assign its rights and delegate its duties hereunder to any surviving
or successor  corporation in connection  with a merger or  consolidation  of the
Company with another  corporation,  or a sale,  transfer or other disposition of
all or substantially all of the Company's assets to another corporation, without
the prior written consent of the Required Investors,  after notice duly given by
the Company to each Investor.

          (e)  Benefits  of the  Agreement.  The  terms and  conditions  of this
Agreement  shall  inure to the  benefit  of and be binding  upon the  respective
permitted  successors  and assigns of the  parties.  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,  except as
expressly provided in this Agreement.

          (f) 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.

          (g)  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.

                                      -9-

<PAGE>

          (h)  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  provisions  hereof  prohibited or
unenforceable in any respect.

          (i) 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.

          (j) Entire  Agreement.  This Agreement is intended by the parties as a
final  expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the  subject  matter  contained  herein.  This  Agreement  supersedes  all prior
agreements and  understandings  between the parties with respect to such subject
matter.

          (k) Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This
Agreement  shall be governed by, and construed in accordance  with, the internal
laws of the State of California  without  regard to the choice of law principles
thereof.  Each  of the  parties  hereto  irrevocably  submits  to the  exclusive
jurisdiction  of the courts of the State of  California  located in Los  Angeles
County and the  United  States  District  Court for Los  Angeles  County for the
purpose of any suit,  action,  proceeding or judgment relating to or arising out
of this Agreement and the transactions  contemplated hereby. 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 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. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO
REQUEST A TRIAL BY JURY IN ANY  LITIGATION  WITH RESPECT TO THIS  AGREEMENT  AND
REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

                                      -10-

<PAGE>

                  IN WITNESS WHEREOF, the parties have executed this Agreement
or caused their duly authorized officers to execute this Agreement as of the
date first above written.

The Company:                    JED OIL INC.

                                By:/s/ Thomas J. Jacobsen
                                   ----------------------
                                Name:   Thomas J. Jacobsen
                                Title:  Chief Executive Officer

The Investor(s):                JED FUNDING, LTD.

                                 By:_____________________________
                                 Name:
                                 Title: General Partner

                                      -11-

<PAGE>

                                                                       Exhibit A
                                                                       ---------

                              PLAN OF DISTRIBUTION

     The selling stockholder(s), which as used herein includes donees, pledgees,
transferees  or other  successors-in-interest  selling shares of common stock or
interests in shares of common stock received  after the date of this  prospectus
from a selling stockholder as a gift, pledge,  partnership distribution or other
transfer,  may, from time to time, sell, transfer or otherwise dispose of any or
all of their  shares of common  stock or  interests in shares of common stock on
any stock exchange, market or trading facility on which the shares are traded or
in  private  transactions.  These  dispositions  may  be  at  fixed  prices,  at
prevailing  market  prices  at the  time  of  sale,  at  prices  related  to the
prevailing market price, at varying prices determined at the time of sale, or at
negotiated prices.

     The selling stockholder(s) may use any one or more of the following methods
when disposing of shares or interests therein:

     -  ordinary   brokerage   transactions   and   transactions  in  which  the
broker-dealer solicits purchasers;

     - block trades in which the  broker-dealer  will attempt to sell the shares
as agent,  but may  position  and resell a portion of the block as  principal to
facilitate the transaction;

     - purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;

     - an exchange  distribution  in accordance with the rules of the applicable
exchange;

     - privately negotiated transactions;

     -  through  the  writing  or   settlement   of  options  or  other  hedging
transactions, whether through an options exchange or otherwise;

     -  broker-dealers  may  agree  with  the  selling  stockholders  to  sell a
specified number of such shares at a stipulated price per share; and

     - a combination of any such methods of sale.

     The  selling  stockholder(s)  may,  from  time to time,  pledge  or grant a
security  interest  in some or all of the shares of common  stock  owned by them
and,  if they  default in the  performance  of their  secured  obligations,  the
pledgees or secured parties may offer and sell the shares of common stock,  from
time to time,  under this  prospectus,  or under an amendment to this prospectus
under  Rule  424(b)(3)  or other  applicable  provision  of the  Securities  Act
amending the list of selling stockholders to include the pledgee,  transferee or
other successors in interest as selling stockholders under this prospectus.  The
selling  stockholders  also may  transfer  the  shares of common  stock in other
circumstances,  in which case the  transferees,  pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus.

<PAGE>

     The  aggregate  proceeds to the selling  stockholders  from the sale of the
common stock offered by them will be the purchase price of the common stock less
discounts or commissions,  if any. Each of the selling stockholders reserves the
right to accept and, together with their agents from time to time, to reject, in
whole or in part,  any proposed  purchase of common stock to be made directly or
through agents. We will not receive any of the proceeds from this offering. Upon
any  exercise of the warrants by payment of cash,  however,  we will receive the
exercise price of the warrants.

     The selling  stockholders also may resell all or a portion of the shares in
open market  transactions  in reliance upon Rule 144 under the Securities Act of
1933,  provided that they meet the criteria and conform to the  requirements  of
that rule.

     The selling  stockholders and any  underwriters,  broker-dealers  or agents
that  participate  in the sale of the common stock or  interests  therein may be
"underwriters"  within the meaning of Section 2(11) of the  Securities  Act. Any
discounts,  commissions,  concessions  or profit  they earn on any resale of the
shares may be underwriting  discounts and commissions  under the Securities Act.
Selling stockholders who are "underwriters"  within the meaning of Section 2(11)
of the Securities Act will be subject to the prospectus delivery requirements of
the Securities Act.

     To the extent  required,  the shares of our  common  stock to be sold,  the
names of the selling  stockholders,  the respective  purchase  prices and public
offering prices, the names of any agents, dealer or underwriter,  any applicable
commissions or discounts with respect to a particular offer will be set forth in
an  accompanying  prospectus  supplement or, if  appropriate,  a  post-effective
amendment to the registration statement that includes this prospectus.

     In order to comply with the securities laws of some states,  if applicable,
the common stock may be sold in these  jurisdictions  only through registered or
licensed  brokers or dealers.  In addition,  in some states the common stock may
not be sold unless it has been  registered or qualified for sale or an exemption
from  registration  or  qualification  requirements is available and is complied
with.

     We have advised the selling stockholders that the  anti-manipulation  rules
of  Regulation  M under  the  Exchange  Act may  apply to sales of shares in the
market and to the activities of the selling  stockholders and their  affiliates.
In addition,  we will make copies of this  prospectus (as it may be supplemented
or amended  from time to time)  available  to the selling  stockholders  for the
purpose of satisfying the  prospectus  delivery  requirements  of the Securities
Act. The selling  stockholders may indemnify any broker-dealer that participates
in transactions  involving the sale of the shares against  certain  liabilities,
including liabilities arising under the Securities Act.

     We have agreed to indemnify the selling  stockholders  against liabilities,
including  liabilities  under  the  Securities  Act and state  securities  laws,
relating to the registration of the shares offered by this prospectus.

                                      -13-

<PAGE>

     We have  agreed  with the  selling  stockholders  to keep the  registration
statement  of which  this  prospectus  constitutes  a part  effective  until the
earlier of (1) such time as all of the shares  covered by this  prospectus  have
been disposed of pursuant to and in accordance with the  registration  statement
or (2) the date on which the shares may be sold  pursuant  to Rule 144(k) of the
Securities Act.

                                      -14-

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